Friday Financial Five – May 1st, 2015
Friday, May 01, 2015
The folks over at the AARP Public Policy Institute have developed a tool to measure livability to help guide the aging community. The index is on a 100 point scale and is comprised of seven categories: housing, neighborhood, transportation, environment, health, engagement, and opportunity. There is flexibility that allows the user to place higher emphasis on one category over others, while also allowing comparison of different addresses, cities or states. For example, Providence gets a score of 55, Boston gets a score of 65, and Los Angeles checks in at 47.
Former Fed Chair Bernanke joins PIMCO
Prominent government figures often parlay their name recognition into positions within the private sector. PIMCO, which did suffer some outflows in the wake of Bill Gross’ departure, again has some star power in a name that people recognize. Former Federal Reserve chairman Ben Bernanke has been named a senior advisor for the firm. Bernanke will provide consulting services for PIMCO, along with his full time duties at the Brookings Institute and consulting position at Citadel hedge fund. He has stated that he would not engage in lobbying efforts for any of the companies.
The fiduciary fight rages on
2015 continues to see a push for expansion of fiduciary responsibility. The White House and Department of Labor targeted 401(k) advisors and the advice they provide to retirement plan participants. Now Senator Elizabeth Warren is highlighting annuity providers and the perks their sales representatives receive for selling annuity products. Rewards range from diamond rings to cruises and iPads. Warren sent a letter to the 15 biggest annuity retailers, positing that perks might incentivize representatives to put clients in products simply to receive the aforementioned perks.
In-plan Roth Conversion
There may be a huge opportunity for 401(k) participants to capitalize on recently revised tax law, allowing non-deductible contributions up to the single year defined contribution limit ($53,000 or $59,000 for those 50 and over). To consider this course of action, a 401(k) plan’s provisions must have a Roth 401(k) component, allow conversions and allow discretionary after-tax contributions. For those with the available means, this could mean transforming a huge amount of after tax money into a tax-deferred vehicle that isn’t currently subject to income tax upon withdrawal. For those that meet the criteria, consult tax and retirement specialists before taking action.
Possible changes to 529 plans
The Financial Services Institute is urging the U.S. Senate to pass a bill that will change the way 529 plans are treated. The bill, which has already passed in the House, would eliminate some taxes and penalties, such as those when students unexpectedly drop out of school. Another provision would add computers as a qualified education expense. The purpose of the bill is to add flexibility, making the 529 more attractive for parents in the saving 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 East Greenwich, RI and can be reached at [email protected].
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