Friday Financial Five – March 21st, 2014

Friday, March 21, 2014

Dan Forbes, GoLocalWorcester MINDSETTER™

CBO advocates near term entitlement change

The Congressional Budget Office (CBO) exists in an attempt to provide non-partisan guidance to Congress to help direct budget policy. This week, Director Doug Elmendorf (http://www.c-span.org/video/?318350-2/2014-economy-summit-douglas-elmendorf) spoke of the threat presented by inaction on Social Security and healthcare programs. As we approach the year 2020, the CBO estimates entitlement spending will increase dramatically, while the rest of expenses will slightly decrease as a percentage of GDP. The choices to fix Social Security aren’t all that popular: change who can receive it and when or increase tax revenue to pay for the program as currently constituted. Elmendorf suggests that adjusting the framework now will allow individuals to plan ahead and should be a top priority.

Contribution deadlines approaching

For Roth IRAs and Traditional IRAs, the date for establishing and funding them is April 15^th of this year for tax year 2013. This deadline holds fast even if filing an extension. While SIMPLE IRAs need to be established by October 1^st of the applicable tax year, SEP-IRAs can be established and funded by the employer’s tax filing date, including extensions.

Millionaires continue to increase

Economists continue to debate the effect income inequality has on the economy. For those concerned about the wealthier end of that equation, take comfort that the number of millionaires has increased considerably since 2009. The Spectrem Group, which has been conducting this survey for the last decade, estimates that the total number of millionaires in the U.S. is now up to 9.6 million. The mass affluent, or those with over $25 million, has also increased significantly since 2008 from 84,000 to 132,000.

Keeping an eye out for bubbles

Bonds issued by companies, or corporate debt, now has the investment world’s attention. The total amount of corporate debt has reached almost $10 trillion and is more than the mortgage backed debt of 2007, which preceded a financial crisis. This century has experience with inflated asset prices, and some investors argue against a buy-and-hold investment philosophy using bubbles as part of the logic. However, they would have to concede that recent market advances have taken place with plenty of former investors in cash due to fear created by the events of 2008. Unfortunately, there’s no hard fast rule to determine the optimal time to get back into the market once you sell out.

More advisors under scrutiny

Adding another black eye to the financial industry, the SEC recently charged a group of brokers with using terminally ill hospice patients as pawns. This scheme involved the sale of $80 million worth of variable annuities. The charges contend the brokers used fraud to obtain the dying patients’ info and use them as annuitants. The brokers then marketed these annuities to wealthy clients, generating a hefty commission in the process.

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: 2014 Auto Insurance Rates in Central MA

Using a defined set of criteria, GoLocal utilized the Auto Insurance Premium Comparison tool from the Massachusetts Office of Consumer Affairs and Business Regulation to compile and rank the cities and towns of Central Massachusetts with the highest auto insurance premiums - lowest to highest.

The Criteria

Vehicle: 2008 Honda Civic LX

Policy: Single Vehicle, Single Operator Licensed 14 Years

Driving Record/Behaviors:

Driver Licensed in Massachusetts: Yes
Date of last accident or traffic violation: 5 years ago
Days lapse in coverage during the previous 3 years: None
Commutes to work: Yes
Annual miles vehicle driven in past year: 15,000
Years at current residence: 2
Years with current agent: 3
Years with current company: 2
Discrepancies on Application: 0
Subscriber to a Roadside Assitance Organization: No
Policy Eligible for a Group Discount: No
Premium paid in full at inception: No
Companion insurance products purchased: None

Coverage:

$20,000/$40,000 Bodily Injury Liability
$20,000/$40,000 Uninsured Motorists
$20,000/$40,000 Underinsured Motorist
$25,000 Property Damage Liability
$8,000 Personal Injury Protection ($0 deductible)

Friday Financial Five – March 21st, 2014

Related Slideshow: 2014 Auto Insurance Rates in Central MA

71. Templeton

70. Upton

69. New Braintree

68. Millville

67. Hubbardston

66. Holland

65. West Boylston

64. Ashby

63. Westminster

62. Lunenburg

61. Townsend

60. Northborough

59. Orange

58.East Brookfield

57. Barre

56. Warren

55. Ware

54. Winchendon

53. Petersham

52. Sterling

51. Brimfield

50. Ashburnham

49. North Brookfield

48. Shirley

47. Brookfield

46. Uxbridge

45. Northbridge

44. Gardner

43. Ayer

42. Athol

41. Sturbridge

40. Topsfield

39. Charlton

38. Sutton

37. Hopkinton

36. Oakham

35. Hudson

34. Douglas

33. Harvard

32. West Brookfield

31. Paxton

30. Boylston

29. Bolton

28. Dudley

27. Palmer

26. Royalston

25. Oxford

24. Westborough

23. Millbury

22. Hardwick

21. Milford

20. Marlborough

19. Leominster

18. Clinton

17. Auburn

16. Hopedale

15. Lancaster

14. Southbridge

13. Rutland

12. Fitchburg

11. Princeton

10. Holden

9. Leicester

8. Mendon

7. Southborough

6. Webster

5. Spencer

4. Blackstone

3. Grafton

2. Shrewsbury

1. Worcester

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