Friday Financial Five - August 14, 2015

Friday, August 14, 2015

Dan Forbes, GoLocalWorcester Contributor

Netflix offers a year of paid parental leave

Netflix, the streaming service threatening cable companies everywhere, has taken a bold stance on maternity and paternity leave for employees. Many of their employees will be eligible for a paid year of leave following the birth or adoption of a child. Much like the company that received huge publicity for raising their minimum wage to $70,000, the announcement began a national conversation about leave being mandated or a company perk. Many developed countries allow an extended period of time for parents to spend with children while still retaining employment.

No COLA expected for 2016 Social Security payments

Social Security recipients may get another unwelcome lack of pay raise for 2016, according to Mary Beth Franklin in Investment News. While the official announcement will come in October, the metric tied to any increase in benefits, the Consumer Price Index for urban wage earners (CPI-W), has actually declined in the first two quarters of 2015. As Franklin points out, many higher income retirees may face higher Medicare premiums in 2016, meaning they’ll have a net decrease in total retirement income.

Department of Labor hearing arguments about fiduciary standard

It’s interesting to see a snapshot of who falls on what side of the DOL’s proposed fiduciary rule. Proponents, such as the Financial Planning Coalition, want the rule implemented immediately to provide consumer protection. The Financial Services Roundtable says the rule is too complex and would adversely affect lower income households. Some companies, such as Metlife, contend the rule will eliminate their ability to work with clients. Met would have to choose between providing advice or creating, but wouldn’t feel comfortable doing both under a fiduciary standard.

Passing on IRAs with taxes in mind

Retirees with both a traditional IRA and a Roth IRA must prioritize which account to withdraw from. Those lucky enough to anticipate leaving some of this IRA money to heirs have taxes to consider. The conventional wisdom has been that bequeathing a Roth IRA is preferable to the traditional IRA, as beneficiaries can take tax free withdrawals from the Roth over their lifetimes. A strategy emerging is to focus on the person with the lowest tax rate paying the taxes on these distributions. For example, a parent with a higher tax bracket than his or her children would spend down the Roth first and leave the taxable IRA distributions subject to the children’s lower bracket. Prioritizing distributions this way may lead to more overall dollars between the two parties.

Student debt growth is slowed

In a sign that people may be getting wiser in the college decision process, a Federal Reserve Bank of New York report shows that the expansion of student loan debt is slowing. Between the second quarter of 2014 and the second quarter of 2015, outstanding student loan debt grew by $70 billion. That compares to $124 billion for the same time frame between 2013 and 2014. The reduction may be attributable to an improving economy or lower enrollment to for-profit institutions, which are more heavily dependent on student’s borrowing to cover tuition.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in East Greenwich, RI and can be reached at [email protected].

Related Slideshow: Massachusetts Business Rankings

See how Massachusetts stacked up.

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WalletHub

Massachusetts has 2015's 28th highest insurance premium penalties for high risk drivers, according to a WalletHub report.

Mass is behind Colorado and New Mexico who come in at 26 and 27 spots respectively while Mass is ahead of Tennessee and the District of Columbia who rank 29 and 30 respectively.

Massachusetts ranks 14th overall in the category of DUI conviction annual premium increase with an amount of $756.

Massachusetts ranks 20th overall in the category of speeding over 20 mph annual premium increase with a total of $261 while ranking 21 overall in the category of two accidents annual premium increase with a total of $1,364.

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WalletHub

Massachusetts has been ranked as the 5th most eco-friendly state in the country, according to a recent study by WalletHub.

Mass ranks tenth in environmental quality and fourth in Eco-Friendly Behaviors landing them in 8th overall.

Mass is behind Minnesota and New York who are in the fourth and third spots respectively, and in front of Washington and New Hampshire who come in at the six and seven spots.

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The Economist

Small Business Friendliness Grade: D+

The Economist grades states on an A+ to F grading scale for its small business climate. Massachusetts ranks near the bottom of the nation, joining New Mexico and New York in receiving D+ grades. 9 states scored worse than a D+ in the Economist rankings.

Overbearing bureaucracy and excessive licensing is stifling small business in America.

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CNBC

#25 CNBC

CNBC ranks each state in cost of doing business, economy, technology and innovation.

Massachusetts' unemployment rate as of May 2014 was 5.6 percent. The state added 9,100 jobs in the month of May.

Forbes

#13 Forbes

Forbes ranks each state in business costs, economic climate, and growth prospects.

The most damning in the commentary:

Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states—only Hawaii is higher—at 20% above the national average.

ChiefExecutive.net

#47 ChiefExecutive.net

ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.

The most damning in the commentary:

Taxation and regulation are always the key barometers. Massachusetts and Oregon are the worst.

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Tax Foundation

#25 Tax Foundation

Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.

Massachusetts ranked #49 in unemployment insurance tax.

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Wallet Hub

#10 Wallet Hub

Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.

Massachusetts ranked #49 in worst roads and bridges, but ranked #7 in overall government services.

ALEC

#41 ALEC

ALEC ranks each state in economic performance and outlook.

Although Massachusetts ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.

Kauffman Foundation

#29 Kauffman Foundation

Kauffman Foundation ranks each state in entrepreneurship.

Entrepreneurial activity generally is highest in Western and Southern states
and lowest in Midwestern and Northeastern states.

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Free Enterprise

#18 Free Enterprise

Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.

Massachusetts's reputation as a hotspot for science and technology endures in this year's rankings. The commonwealth is a center for STEM jobs and university research and development, ranking 4th and 2nd, respectively, in those two categories. It also ranks 6th as a center for high-tech establishments. Massachusetts is taking aggressive steps to bolster economic activity with high-impact university-industry R&D projects and new tools for tech-based startup companies.