Friday Financial Five - August 29, 2014
Friday, August 29, 2014
States where you can stretch a dollar
The Tax Foundation has put together a helpful state by state comparison to show how far $100 goes in each state. In the analysis, D.C., Hawaii, New York and California are all among the states where $100 has a lower purchasing power. Money is able to go the furthest in Mississippi, Arkansas, and Missouri. The Foundation also correlates higher incomes and higher prices. This relationship is excepted in North Dakota, where income is high and so is purchasing power, providing the best of both worlds.
Burger King deserves a tax break today
Stealing a page from the old McDonald’s ad campaign, “You deserve a break today”, Burger King is putting itself in a more favorable tax position with the recent Tim Horton’s acquisition. By moving their headquarters to Canada, the restaurant chain may benefit from a tactic called “inversion”. This practice, slammed recently by President Obama, occurs when a company relocates to another country to take advantage of a lower tax rate. While the highest corporate tax rate in the U.S. is 40 percent compared to Canada’s 26.5 percent, Burger King is anticipating a smaller tax benefit based on the company’s current effective tax rate.
Additional 401(k) options upon separation
While many who leave a company roll their 401(k) over to a new plan or an IRA, there are other options available. Those younger than age 59 ½ might be subject to a penalty for a standard early withdrawals, but there are exceptions. First, those age 55 or older when they’re fired, quit, or retire are protected from the penalty. The exception doesn’t apply for those younger than 55 who separate from service, leave their money in the 401(k), and then withdraw. Another option is the substantially equal payment exception which anyone can utilize. The 72(t) withdrawal provides payments for at least 5 years or age 59 ½, whichever is longest, and is based on life expectancy.
Politician’s financial aptitude test
Lawyers must take and pass the bar exam. Realtors have to pass a test to be licensed to sell real estate. With elections upon us, is it completely absurd to ask those running for office to pass a standardized test proving a basic understanding of finance? As it stands, elected officials can take office without ever having worked on a budget or demonstrating an understanding of economic projections. Voters should demand that candidates prove they have a grasp on how revenue will be generated and spent, as well as how any pensions they oversee might work.
Another celebrity estate planning lesson
The aftermath of Robin Williams’ passing provided yet another lesson for those planning their estate. Part of Williams’ estate plan, including trusts, was made public. Those handling the estate claim these documents aren’t current, but most people, famous or not, create trust documents to avoid any public spotlight. In this case, two irrevocable trusts named a co-trustee who passed away in 2008. The trust didn’t name a successor, forcing the remaining trustee to petition the court to appoint a co-trustee and make the trusts public.
Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected].
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