Friday Financial Five – January 23rd, 2015
Friday, January 23, 2015
Financial ramifications of the White House plan
President Obama’s State of the Union address stressed the economy’s improvement but kept income and wealth inequality front and center. The White House plan involves again increasing capital gains tax on high earners but also implementing a capital gains tax on inherited investments. The president also mentioned a tax on financial institution liabilities to discourage excessive debt. These increased taxes would help fund the “free” community college initiative, currently estimated to cost $60 billion over ten years. Many analysts agree that the chances of pushing through a higher tax agenda with a Republican-led Congress are slim.
U.S. dominates list of richest people
Speaking of wealth inequality, Oxfam’s recent study stipulates that the richest 1 percent in the world control forty eight percent of global wealth. The United States plays the largest role, comprising nearly 30% of the 2014 Forbes billionaires list and eight of the top ten wealthiest people in the world being American. If this global trend continues, the top one percent will have more wealth than the other ninety-nine percent of the population within two years.
The Securities and Exchange Commission’s priority list
The SEC has released the list of priorities for the year and protecting individual investors continues to be the focus. With nearly $16 trillion in defined contribution plans, the regulatory group will be looking for rollovers that move funds from lower cost retirement plans into products that might have higher fees. Along with suitability, the SEC will also be looking at “alternative” investment companies and private equity companies in terms of structure, fees, and marketing.
Hiding money can create problems
There’s a recent report by Creditcards.com that estimates over 7 million people are hiding financial accounts from their spouses or partners. Plenty of couples keep separate finances, so that’s not uncommon. “Hiding” money can present a problem because of the possibility that the hider dies and no one knows about the hidden money or debt. For those committing “financial infidelity” as it’s called, it’s important to create an estate plan and make sure the executor is aware of all funds, including the hidden ones.
Tax break for nursing Moms
Although not a new piece of legislation, there’s a push to remind breastfeeding mothers that pumps and lactation supplies may have tax benefits. According to the IRS Publication 502, pre-tax money can be used from flexible spending accounts for these expenses. For those that don’t have an FSA, the costs may be deducted if the taxpayer itemizes deductions and if total unreimbursed medical expenses exceed 7.5 percent of AGI.
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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