Friday Financial Five – October 31st, 2014

Friday, October 31, 2014

Dan Forbes, GoLocalProv MINDSETTER™

Strong GDP numbers and the end of easing

Two positive developments this week include the apparent end of Quantitative Easing and better than expected Gross Domestic Product in the third quarter. QE spanned six years with three separate commitments, as the Fed has pursued a bond-buying program to flood the American economy with money. With improved employment numbers and productivity, the hope is this is the end of the practice. As for GDP, the third quarter number of 3.5 percent annualized follows a stellar second quarter, thanks to more favorable trading and increased government spending.

Retirement contributions to increase in 2015

In one of the more exciting times on the financial calendar, the IRS released the newest contribution limits for retirement plans in 2015. The maximum contribution for 401(k) and 403(b) plans will get bumped to $18,000, with those 50 and older able to contribute another $6,000. For some reason, IRA contributions will remain at $5,500, with a $1,000 catch up provision. The phase out for Traditional IRA and Roth IRAs were increased slightly. Full details can be found here.

The 2015 business tax climate

The Tax Foundation has projected the business tax climate for the 50 states in 2015. For those at the top of the list, the Foundation notes that each is missing one of the three major taxes: the sales tax, the individual tax, and the corporate tax. The Northeast again dominates the bottom of the list with New York and New Jersey at the very bottom, and Vermont, Rhode Island, and Connecticut finding spots in the bottom ten. Wyoming and South Dakota sit at the top of the list. North Carolina improved in all areas, zooming 28 spots in the rankings from last year thanks to the reformation of the individual tax calculation and a reduction in the corporate tax rate.

The long term unemployed

With overall employment numbers improving statistically, policy focus is shifting to increasing job wages and encouraging the hiring of the long term unemployed. The White House is pushing initiatives to drive the long term unemployed number down from 1.9 percent, including federal grants and fair treatment by employers. The White House is also working with a coalition of 80 of the nation’s largest companies to promote hiring of those that have been out of work for a long time.

Annuities in the 401(k)

The U.S.. Treasury is now encouraging 401(k) savers to use annuities within their plans, including their use as a default option. The purpose is to create a more predictable retirement income while for those that want it, while allowing those unfamiliar with investing to seek a safer alternative. With the increase in 401(k) lawsuits and judgments against employers, this may result in protection on both sides of the employment retirement equation.

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.