Friday Financial Five – August 7, 2015
Friday, August 07, 2015
The Senate Finance Committee overwhelmingly approved 52 tax extenders. It will move to the Senate floor, while the House works on a separate version. If recent history serves as a guide, the bill won’t get resolved until December, but both sides of Congress would like to avoid that this year. The measures touch on a variety of initiatives, including tax-free IRA contributions to charity, renewable energy breaks, and the research and development credit. Why these particular breaks need to be reviewed and extended periodically instead of being made permanent remains a mystery.
Healthcare spending will grow over the next decade
For the years leading up to 2024, healthcare spending is expected to grow to 19.6% of GDP, according to a report from government actuaries. From 2014 to 2014, healthcare spending is expected to increase at an average rate of 5.8% and governments are expected to finance almost half of the cost, largely due to expansion of Medicaid. Private health cost increases are anticipated to settle at 5.4% by 2016 as bigger companies move to high deductible health plans.
Parents concerned about children’s financial wellness
Part of the parenting job description is to create a pathway for children to surpass the parents’ financial success. Overwhelming student debt and tough job market for graduates have created an environment where parents are no longer have confidence that this is attainable. According to Haven Life, only 13% of parents surveyed expect their children to be better off financially at career peak. This concern may lead to parents assuming more school loans in an effort to open up more opportunities. There may be longer periods of financial dependence on the parent. In the end, these factors may mean extending the parents’ projected retirement date.
CFPB releases insights from eClosing study
The Consumer Financial Protection Bureau introduced a pilot technology study of “E-closing", intended to make the mortgage process less cumbersome and more transparent. The CFPB came away with some important points of emphasis. Borrowers should review as much of their closing package as possible before the actual closing date. Those using a checklist were much more comfortable with the process than those that didn’t know what to expect.
$70k minimum wage has unintended consequences
Gravity Payments, a Seattle based credit-card processing company, made headlines when their CEO decided to raise wages in stages until everyone was paid at least $70,000. While the intent may have been noble, it’s taken only a matter of months for things to go wrong as a result of the increase. The CEO’s brother filed suit against him, alleging the move breached rights as a minority shareholder. More predictably, important members of the staff moved on to other opportunities, feeling it was unjust to overcompensate employees with less talent or responsibility. It appears to be a case of basic economics trumping good intentions.
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].
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