Friday Financial Five – September 11, 2015

Friday, September 11, 2015

Dan Forbes, GoLocalWorcester Contributor

Jobs report threatens rate hike

The decision about whether or not to hike rates approaches. The Fed got a relatively weak jobs report last Friday, which may supply the necessary data to leave rates unchanged. The economy is short of the 2% target inflation rate and the labor participation rate is still down. On the other hand, unemployment numbers are low, housing is stronger and GDP posted a strong second quarter. It would seem economic data favors a hike and it’s slightly disconcerting to think the economy can’t absorb a small rate increase but the group may proceed with extreme caution.

Retiring with mortgage debt

The Washington Post highlighted a CFPB report on the dangers of retirees with mortgage debt. The CFPB calculated that 30% of homeowners aged 65 had mortgage debt in 2011, a dramatic increase over the 22% holding a mortgage in 2001. For 72 year olds, the rate is up from 8.4% to 21.2%, while the median amount of debt has risen from just over $43,000 to $79,000. However, more seniors are working longer and many are living on predictable Social Security and pension income. While holding credit card debt or consumer loans at retirement isn’t advisable, retirees may just be more comfortable carrying extremely low interest mortgages than they were at the turn of the century.

Plan sponsors still need help with 401(k) oversight

The Government Accountability Office (GAO)’s report on 401(k) oversight calls for increased guidance for business owners, or plan sponsors. In 2007, the Department of Labor created a “safe harbor” which would limit plan sponsor liability if they provided certain investment selections for employees. For the majority of business owners, that means using target date funds. But according to the GAO, plan sponsors aren’t necessarily comfortable determining which of those funds employees should be using. The answer may be further DOL involvement or plan sponsors calling upon financial professionals for input.

The flip side of delaying Social Security

While strategies to maximize Social Security benefits are all the rage lately, retirees should consider all variables. The biggest reason for taking benefits as soon as possible is unknown mortality. While those who reach age 65 have a very good chance of living past the “break-even” point of delaying benefits, it’s still a risk. The oft-quoted 8% yearly increase in payments isn’t an actual return on that money, as the recipient has given up a year of small payments that must be accounted for. And Marybeth Franklin cites the affect a delay can have on increasing Medicare premiums.

Obamacare participants come down from peak

The number of people enrolled in exchanges resulting from President Obama’s healthcare laws have decreased from 10.2 million earlier in the year. As of June 30th, 9.9 million people are covered, which is still above the administration’s year-end target of 9.1 million. Meanwhile, jobs in the healthcare industry have hit an all-time high. Over 15 million people work in the health industry, thanks to increased coverage numbers for both private insurance and Medicare enrollees.

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].

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.