Friday Financial Five – February 7, 2014

Friday, February 07, 2014

Dan Forbes, GoLocalWorcester MINDSETTER™

Dissecting the latest CBO report

The Congressional Budget Office (CBO) released their latest report this week on the country’s economic outlook, and most of the national attention is on the projected effects of Obamacare. There is a focus on the reduction in total work hours, but the report does anticipate overall employment and compensation to increase over the next decade. There is plenty of other interesting information as well, including a drastic reduction in the federal budget deficit from just five years ago. However, federal debt held by the public is still very high historically, and the CBO doesn’t anticipate a reduction over the next ten years. Near term GDP growth is expected to be strong while the labor market will remain weak. Finally, the report projects 9 percent increases in tax revenue in both 2014 and 2015.

A benefit for Veteran business owners

With the majority of business formation being small businesses, it’s good to stay on top of useful new programs. Money saved through the reduction of financing fees is available to keep the company afloat. The SBA (Small Business Administration) provides such an opportunity for small businesses majority owned by a qualified veteran. The “SBA Veterans Advantage” removes the customary 3% up-front guaranty fee for loans between $150,001 and $300,000. The program started at the beginning of this year and is expected to run until the end of September.

FACTA deadline won’t be moved

The Foreign Account Tax Compliance Act (FACTA) requires foreign financial institutions, including banks and insurers, to provide the IRS information about Americans' offshore accounts worth more than $50,000. There have been several delays since the act was signed into law in 2010, but the IRS recently announced that the July 1^st deadline for compliance will not be changed. This regulation is an attempt to minimize taxable wealth being held outside of the country’s borders, resulting in many billions in lost federal tax revenue. Foreign companies that don’t comply with the act risk being shut out of the U.S. capital markets.

BOA’s mortgage settlement gets stalled

Bank of America’s recent $8.5 billion settlement agreement may be the victim of an ill-timed promotion. The judge who approved most of the settlement last week was replaced after moving to the Appellate Division of the Supreme Court. This week, the replacement judge decided against finalizing the agreement, instead setting a February 19^th date to hear further arguments. That leaves open the possibility of continued litigation and a much higher settlement amount, which could have ripple effects for the rest of the banking industry.

LTC insurance pricing varies in 2014

Recent changes in how companies rate Long Term Care policies will result in higher premiums for females and lower pricing for males, according to the 2014 Long Term Care Insurance Price Index. Rates vary across carriers, but the recent estimate is that two-thirds of LTC claimants are female. Pricing on these policies continues to be a major issue. Current policy holders unable to afford recent price increases should contact their insurer for options. Policies with compounding interest may have a large increase in available benefits. There also may be an option to place the policy on paid up status, meaning funds are available for Long Term Care needs but premium payments are no longer necessary.

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] .