January 15, 2018

Tax cuts imperil US economy, Fed's Dudley says

So you're looking forward to a meager cut in your federal income taxes in the coming few years. Please realize that means cuts in government spending which may affect you. Further, states will have to raise taxes or cut programs as a result.
A serious challenge to the Republican's tax legislation comes from the head of the Federal Reserve Bank of New York. 
"The US tax law puts the economy on an unsustainable fiscal path and endangers stability, Federal Reserve Bank of New York President William Dudley said." (Retirement Security Smartbrief)  "In the long run, ignoring the budget math risks driving up longer-term interest rates, crowding out private-sector investment and diminishing the country's creditworthiness," he said.
As quoted by Michael S. Derby in The Wall Street Journal:
"Mr. Dudley noted concern over the impact of the tax overhaul, whose Republican authors believe will unleash stronger economic growth and higher wages. Mr. Dudley warned that the tax law is likely to drive the deficit up over time."
“The current fiscal path is unsustainable,” Mr. Dudley said. “In the long run, ignoring the budget math risks driving up longer-term interest rates, crowding out private-sector investment and diminishing the country’s creditworthiness.”

January 12, 2018

Health Savings Accounts provide a triple tax advantage

"Most people don't think of health savings accounts, aka HSAs, as retirement savings accounts. However, an HSA can actually be a better retirement savings account then any IRA or 401(k). That's because HSAs are the only accounts that enjoy a triple tax advantage: Contributions to an HSA are tax-deductible, the money inside the account is exempt from capital-gains and dividend taxes, and the distributions you take from the account are also tax-free if you spend the money on qualified medical expenses. What's more, once you hit age 65, you can spend your HSA money on anything -- not just healthcare -- without incurring a tax penalty (though you'll pay income tax on the withdrawal).
That's why it's such good news that the contribution limits for HSAs are going up in 2018. The new limits are $3,450 per year for self-only HSAs and $6,900 for family coverage HSAs." Thanks to The Motley Fool: https://www.fool.com/retirement/2018/01/11/5-changes-to-retirement-savings-for-2018.aspx

Tax credit for low- to moderate-income earners investing for retirement

Saver's Credit income limits

"The Saver's Credit (more formally known as the Retirement Savings Contributions Credit) is a tax credit that you may be able to claim for making retirement savings contributions. In order to qualify for this tax credit, you need to be below certain income limits for the year. Those income limits have now gone up slightly for 2018 to $63,000 for married-filing-jointly taxpayers, $47,250 for heads of household, and $31,500 for single and married-filing-separately taxpayers."
Saver's Credit could be worth up to $1,000. Get the details at: The Saver's Credit: https://www.fool.com/retirement/2017/10/22/the-2018-savers-tax-credit-free-money-to-save-for.aspx 

January 10, 2018

Don’t make New Year’s resolutions this year. Redesign your life instead

Designing Your Life: How to Build a Well-Lived, Joyful Life

A repeat suggestion from last year: "In their new book, “Designing Your Life: How to Build a Well-Lived, Joyful Life,” Stanford professors, Bill Burnett and Dave Evans, provide tools for how we can initiate meaningful changes when we’re feeling stuck without overhauling our whole lives."

CBO: Tax legislation could trigger $25B in Medicare cuts next year

Congressional Republicans' tax bill, which is forecast to increase the federal deficit by $1.5 trillion over 10 years, could trigger a $25 billion cut to Medicare next year, according to the Congressional Budget Office. "Without enacting subsequent legislation to either offset that deficit increase, waive the recordation of the bill's impact on the scorecard, or otherwise mitigate or eliminate the requirements of the [pay-go] law, OMB would be required to issue a sequestration order within 15 days of the end of the session of Congress to reduce spending in fiscal year 2018 by the resultant total of $136 billion," the CBO wrote. (Retirement Security SmartBrief)

Why is health care so expensive in the US? It's the prices, Stupid!

"Uwe Reinhardt, an economist whose keen, caustic and unconventional insights cast him as what colleagues called a national conscience in policy debates about health care," died in November 2017. 
What we can learn about U.S. health care costs from the New York Times obituary (quoted below; bold added):
Professor Reinhardt argued that what drove up the singularly high cost of health care in the United States was not the country’s aging population or a surplus of physicians or even Americans’ self-indulgent visits to doctors and hospitals.
“I’m just an immigrant, so maybe I am missing something about the curious American health care system,” he would often say, recalling his childhood in Germany and flight to Canada and apologizing that English was only his second language.
Then he would succinctly answer the cost question by quoting the title of an article he wrote with several colleagues in 2003 for the journal Health Affairs: “It’s the Prices, Stupid.”
What propelled those prices most, he said, was a chaotic market that operates “behind a veil of secrecy.”
That market, he said, is one in which employers “become the sloppiest purchasers of health care anywhere in the world,” as he wrote in the Economix blog in The New York Times in 2013.
It is also defined by the high cost of prescription drugs, he said, and the astronomical amounts that hospitals spend in dealing with a maze of insurers and health maintenance organizations.
Our hospitals spend twice as much on administration as any hospital anywhere in the world because of all of this complexity,” he told Managed Care magazine in 2013.
If the nation cut the cost of health care administration in half, he said, the savings would be enough to insure everyone.
Professor Reinhardt’s prescription for a more sensible system included imposing penalties on the uninsured so that people would not postpone buying policies until they got sick. That idea, the so-called individual mandate, requiring most people to purchase health insurance, became an integral component of the Affordable Care Act, otherwise known as Obamacare. Republicans in Congress are now seeking to repeal that provision as part of a tax overhaul.
Professor Reinhardt also advocated providing government subsidies so that low-income families could afford mandated insurance, another feature of Obamacare.
His ideal model was the German system in which insurers negotiate with health care providers to set common binding prices in a specific region.
“I believe it is still the best model there is, because it blends a private health care delivery system with universal coverage and social solidarity,” he told The Times in 2009. “It’s inexpensive and equitable. Coverage is portable. You’re never uninsured in Germany. No family goes broke over health care bills.”

Fixing Social Security is far more important than reducing income taxes

We've just suffered through a lengthy partisan debate about income taxes. The result is lower taxes for corporations which are already doing great as evidenced by soaring stock prices. Even before the newly passed tax reduction, many corporations have so much extra cash that they are buying back shares rather than buying new equipment or hiring more employees. The ultra wealthy got a huge tax reduction in terms of raising the amount of wealth exempt from the estate tax. This increase in the estate tax exemption helps wealthy families maintain their dynasties, further increasing the great divide between the top 1% and the rest of Americans.
The small tax cuts for the middle class will expire and the deficit is ballooning, meaning Congress will start talking about cutting benefits for lower and middle income families. See:
GOP Laying Groundwork To Cut Future Social Security, Medicare, Welfare Outlays
What we really need Congress to do is to "fix" Social Security to ensure its long term viability! "The Social Security Trust Fund is currently projected to deplete its surplus in 2034, and policymakers of all stripes know a reckoning is coming." For some SENSIBLE ideas on how to act, check out the latest from the Center for Retirement Research:
How Social Security Gets Fixed Matters: http://squaredawayblog.bc.edu/squared-away/how-social-security-gets-fixed-matters/

January 9, 2018

GOP Laying Groundwork To Cut Future Social Security, Medicare, Welfare Outlays

Now that the tax bill has been passed, ensuring a skyrocketing federal deficit, you can be sure that federal programs that benefit low and moderate income families are in the gun sights of the Republicans.
"Republican lawmakers aim to make cuts to Social Security, Medicaid and welfare programs, saying such cuts are necessary to pay for tax reform and to reduce the budget deficit. Sen. Marco Rubio, R-Fla., recently gave a broad outline of how the cuts could take shape, saying, 'We don't need to reduce benefits on current retirees or even near-term retirees, but we can make changes for future generations such as mine, and do so in a way that people can prepare for, so the changes will barely be felt.'"
Get details from: 
December 6, 2017

Less Phone, More Nature: 34 Resolutions For a Better 2018

One of my favorite investment writers, Jason Zweig, who writes The Intelligent Investor column for The Wall Street Journal, Shares his suggestions for New Year's resolutions (12/29/17). Zweig advises: "Make all your resolutions in public. The fear of social pressure, whether it materializes or not, will help you keep your word, since you are pledging not just to yourself but to others."
Some of my favorites:
  • Listening to what someone else is saying without hearing what you already think is one of the hardest challenges for the human mind. When you listen, listen as if your life depends on it. Otherwise, you’ll just hear your own words coming out of someone else’s mouth.
  • Be more judgmental about ideas and less judgmental about people.
  • If you think you’re the smartest person in the room, you must not have talked to everybody in the room yet.
  • Never try to get other people to change their minds without first trying to understand why they think the way they do. Never do that without being open to the possibility that the mind that might need to change the most could be your own.
  • Try to take your work more seriously, and yourself less seriously. The more seriously you take your work, the easier it will become to take yourself less seriously; the constant reminders of your ignorance should never cease to amaze you.
  • Tweet less; read more.
  • Talk less; listen more.
Especially the last two!

Read the full list at: http://on.wsj.com/2lsq4Vt

What lies ahead for investors in 2018?

Wall Street Journal columnist Jason Zweig wrote this about the stock market on Jan. 5 in "sure things to happen in 2018":  "long-term returns are likely to be distorted this year. In September and October 2008, the depths of the financial crisis, U.S. stocks fell 9.1% and 16.9%, respectively. This fall, those apocalyptic months will finally be more than 10 years behind us — and, as a result, the long-term return on equities will go up like a rocket."
"In fact, the S&P 500’s 10-year cumulative return would leap from 82.1% at the end of 2017 to 198.3% at the end of this coming November — even if stocks go absolutely nowhere for the first 11 months of 2018, says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
That would nearly double the average 10-year gain to 11.5% annually from 6.2%, without even counting dividends."
"Stocks will then look much more attractive in the rear-view mirror, even though nothing will have changed but the calendar. Don’t believe the hype."
Zweig sure knows how to provide perspective on investing!
Source: "Four Things Sure to Happen in Markets During 2018"
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