Friday Financial Five – June 13th, 2014

Friday, June 13, 2014

Dan Forbes, GoLocalProv MINDSETTER™

Bill to lower student loan interest rates defeated

Elizabeth Warren’s bill to reduce interest rates on federal educational loans failed to reach the 60 votes needed in the Senate. This was an attempt to refinance current debt for many borrowers, many of whom are borrowing at over 7 or 8 percent. With $1.2 trillion estimated in outstanding student loans, a tough economy for young people, and a roughly 15 percent default rate, something will need to be done eventually. This particular bill was defeated due to the inclusion of the “Buffet Rule”, included to offset the roughly $50 billion in lost loan interest. The majority of Senate republicans opposed the rule, which would tax higher wage earners a minimum income tax of 30 percent.

Survey confirms the shift toward renting

Last week’s article presented a calculator to compare the costs of renting and buying. Data from a recent “How Housing Matters Survey” by the McArthur Foundation confirms that people are still uneasy about purchasing a house, with 51 percent still feeling the country is in the middle of a crisis. Sixty-four percent felt that it is less likely today than 20 years ago that a family will build wealth and equity through ownership. Just over half of respondents found owning less appealing than it once and an even higher percentage believe that “renters can be just as successful as owners at achieving the American Dream.”

Health and housing a headwind for seniors

Healthview Services has a scary projection for senior healthcare cost. According to the company, couples retiring in 10 years will spend 98 percent of the average Social Security income on healthcare. With so many retirees dependent on Social Security as the primary or only source of income, this is especially concerning. In addition, according to the Consumer Financial Protection Bureau, seniors also face a hurdle with increased costs associated with housing. There’s been a fivefold increase in the delinquency rate to 4.96 percent for those ages 65 to 74 and the median mortgage held by seniors has increased to roughly $79,000.

Metlife announces $1 billion in share buybacks

For the first time since 2008, the world’s largest life insurance company by assets will begin buying back shares of stock. When all is said and done, Metlife intends to buy back roughly $1 billion in stock . The company is still waiting to see if it will be classified a “Systematically Important Financial Institution” (SIFI) by the financial oversight body created in Dodd-Frank. This follows a recent announcement by Prudential, who will commence a $1 billion buyback of their own next month.

NBA advisor sentenced to 18 months in prison

In another intersection of professional sports and advisors behaving badly, Joseph Lombardo was sentenced to 18 months in prison for creating a fake contract with the NBA players’ union. Lombardo’s firm managed $250 million of the union’s assets, while also providing financial services for professional basketball players. The falsified contract, “signed” by an individual who was deceased at the time, was created due to Lombardo’s fear that his firm was about to be fired.

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].

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.