Friday Financial Five – July 31, 2015
Friday, July 31, 2015
The initial estimate on the second quarter’s Gross Domestic Product, the main measure of economic productivity, came in lower than expected at 2.3%. Residential investment and consumer spending remained strong, while business spending fell. Estimates for the 2nd quarter ranged anywhere from 2.5% to 3%, so lower productivity may mean a drag on the third quarter number as well. The Fed met this week and left rates unchanged but cited optimism for economic conditions, setting the stage for an impending rate hike.
Millennials love the Roth IRA
The flexibility offered by the Roth IRA has made it increasingly popular with the younger generation, according to the Investment Company Institute. Roth users tend to be younger than traditional IRA investors and fund their accounts through contributions as opposed to rollovers. The Roth is popular with good reason. The most attractive feature is the absence of Required Minimum Distributions, but it’s also gaining steam as an education funding tool. The account isn’t included in the EFC (Expected Family Contribution) for financial aid purposes and contributions can be withdrawn without tax or penalty. This also applies to Roth conversions that have aged for five years.
President Obama pushes state 401(k)s
President Obama tried to build on the myRA premise, pushing the Department of Labor to work with individual states to create retirement savings programs. At this point, Washington and Illinois have state-run automatic savings programs in place. The president would like to see nationwide expansion to offer retirement savings for those without an option at work. Labor Department Secretary Tom Perez will be tasked with creating the set of rules for states to follow to create these programs.
Comparing auto insurance premiums more frequently
One of the easiest parts of the budget to review are basic insurance costs, including auto premiums. Despite the ease of looking into savings on this cost, the number of people that fail to review auto insurance expense is pretty startling, according to a survey from Insurancequotes.com. Almost 25% of respondents had been with the same insurer for more than 16 years. Over one-third of those responding have never compared pricing. Loyalty to a company is great and many people like the service their company provides, particularly during the claims process. But there needs to be a periodic assessment of all costs, especially for those living on a fixed retirement income.
Football player Freeney has BOA lawsuit dismissed
Dwight Freeney’s $20 million lawsuit against Bank of America was dismissed, primarily due to problems with how the complaint was filed. The original complaint stemmed from advisors who allegedly defrauded Freeney and stole $8.5 million starting in 2010. The basis for the dismissal, which Freeney’s team hopes to correct and refile, is that the complaint should have been filed against Merrill Lynch instead of Bank of America. The sad irony is that Freeney came to Bank of America after bad prior financial experiences and was seeking a larger, more established firm.
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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