Friday Financial Five – September 26, 2014

Friday, September 26, 2014

Dan Forbes, GoLocalWorcester MINDSETTER™

The Walmart Bank is coming

Walmart will soon add banking services (called GoBank) to their list of offerings. After years of trying to break into the financial industry, the company announced that they will provide checking accounts to those 18 or older with a valid ID at a cost of $8.95 per month. Their partner, Greendot, is a bank holding company best known for providing prepaid debt card products. These checking accounts focus on the under banked and are expected to be rolled out by the end of October.

Clarification on 401(k) after-tax contributions

It’s nice when the IRS clarifies the treatment of certain financial decisions instead of leaving the public to take action and get taxed later. A recent decision concerns the rolling over of after-tax money from a 401(k). For those that have the option available, this is money that was contributed to an employer plan without tax benefit. The IRS ruling clarified that the after-tax contributions can be rolled over to a Roth IRA, while the pre-tax money would be rolled over to a Traditional IRA.

Treasury targeting inversions

The White House indicated inversions are a target, and the Treasury Department has taken steps to dissuade companies from moving headquarters overseas for tax purposes. There is a new prohibition on “hopscotch” loans that allows companies to access foreign money without paying taxes in the United States. Companies with pending inversions may find the tax consequences are much less favorable. Those that have moved outside of the country prior to the implementation of the rule don’t appear to be subject to the stricter tax enforcement retroactively.

Home builders excited on a national level

Home builder sentiment is typically a good indicator of the health of the housing market. The latest NAHB (National Association of Home Builders) calculated index is 59, the highest level in almost 9 years. The national number would have been higher if not for continued pessimism of builders in the Northeast. While the rest of the country registered a more positive 3 month average in the mid-50’s or higher, the Northeast’s index rose to 41, meaning more builders find the new housing market poor as opposed to good.

Social Security paper statements make a comeback

People stopped receiving mailed Social Security statements in 2011 and might have figured Social Security was simply out of money. In reality, the department was trying to reduce costs by moving to an online account structure. Now, the SSA will move to a plan of sending statements every five years to those ages 25 to age 60, but they are still encouraging workers to register for a My Social Security profile. Once workers reach age 60, they’ll receive a statement every year.

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.