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Friday Financial Five – May 29th, 2015

Friday, May 29, 2015


Supreme Court rules on 401(k) fees

Tibble vs Edison was originally filed in 2007 and represented one of the first cases of employees seeking damages against employers for offering high fee funds in their retirement plan. In an extremely important decision, the Supreme Court ruled that 401(k) sponsors have a fiduciary responsibility to keep fees low in the plans. Employers and their advisors are responsible for seeking low-cost investment options for employees to choose from. As a result, the retirement plan industry may head heavily towards the use of index funds or exchange traded funds. 

Banks have a nice 1st quarter

Recent news for banks has hardly been all positive but they are still making money, despite the low interest rate environment. The FDIC reports that income for their insured banks was almost $40 billion in the first quarter, a 7 percent increase from a year earlier. Community banks saw a net income of nearly $5 billion, a16% rise over the first quarter in 2014. The report notes that asset quality continues to improve and the number of problem banks has decreased but also warns that low interest rates continue to pressure banks’ net interest margin.

Strategic 529 withdrawals

While many aren’t using 529 plans to fund college entirely, the vehicles should still be maximized to the extent possible. For those within certain income limits, the American Opportunity Tax Credit may be an option. By spending the first $4,000 of qualifying education expenses from personal accounts, the first $2,000 can be deducted from income and 25 percent can be deducted on the remaining $2,000. In terms of dispersing the funds from the 529, it’s best to send directly to the school when possible. Having the funds dispersed to the owner, usually a parent, may require verification of the expenses to the IRS.

$12.4 million mistake in Social Security payments

Social Security faces several decisions to protect future solvency, so stories about unwarranted payments aren’t going to be well received. Mary Beth Franklin details one such story, as the Office of the Inspector General of the Social Security Adminstration uncovered $12.4 million in improper payments. In this case, beneficiaries were paid despite being subject to Government Pension Offset rules. Had the error not been discovered or properly addressed, it would have resulted in $2.5 million per year in improper benefits going forward. With so many rules governing the program, one has to wonder what other improper payments have yet to be identified.

But will you take $495 million?

A new home in Los Angeles with an asking price of $500 million is noteworthy for many reasons. If it sells for that price, it would be more than double the most expensive home ever sold. Is there a bare minimum price, such as $480 million, that the seller simply won’t go under? Do prospective buyers show up with a bank account statement or do they actually get pre-approval letters from their bank for this purchase? It would seem some of the normal rules governing real estate transactions would have to be suspended. If you’re one of the people bidding on this property, just remember that you don’t necessarily want to have the most expensive house on the block. 

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: Oregon Business Rankings in US

See how Oregon stacked up against the other states in the U.S.

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Oregon gets a C+ for small business friendliness from Thumbtack, in conjunction with the Kauffman Foundation.

According to the ranking:

Overall friendliness C+

Ease of starting a business B
Ease of hiring D+
Regulations D
Health & safety D
Employment, labor & hiring D
Tax code D+
Licensing C-
Environmental D
Zoning D+
Training & networking programs B+

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CEO Magazine

CEO magazine was not kind to Oregon.

The state ranked in the bottom ten states at #42.

Oregon get lumped by CEO's as being California like - too much regulation.

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The 2015 rankings puts Oregon in the top 20. Oregon ranks #18 in the United States. 

NY ranks one spot ahead at #17 and Florida ranks after Oregon.

#1 in the United States: Utah

#50 in the United States: Mississippi

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Oregon has been ranked as the 2nd most eco-friendly state in the country, according to a recent study by WalletHub

Oregon ranks eighth in environmental quality and first in Eco-Friendly Behaviors landing them in second overall. 

Oregon is behind Vermont and ahead of New York and Minnesota who land in the third and fourth spots respectively. 

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The Economist

Small Business Friendliness Grade: C+

The Economist grades states on an A+ to F grading scale for its small business climate. Oregon is one of 4 states that earned a "C+"

Overbearing bureaucracy and excessive licensing is stifling small business in America. 

Read More About The Economist Grade Here

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#22 CNBC

CNBC ranks each state in cost of doing business, economy, technology and innovation.

Read More About CNBC Ranking Here

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Wallet Hub

#28 Wallet Hub

Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.

Read More About Wallet Hub Ranking Here

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#38 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.

Read More About Kauffman Ranking Here

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#19 Forbes in 2014

Forbes ranks each state in business costs, economic climate, and growth prospects.

Read More About Forbes Rankings Here


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