Welcome! Login | Register
 

Midnight Basketball League Tips Off July 7—Mayor Jorge Elorza's Midnight Summer Basketball League starts…

5th Annual Luxe Burger BYOB Contest Kicks Off on July 15—5th Annual Luxe Burger BYOB Contest

Newport Police Officer Waives Band’s Parking Ticket—Newport Police Officer Waives Band's Parking Ticket

Moore: Mello Takes Over a Fire Department In Turmoil—Moore: Mello Takes Over a Fire Department In…

Memorial Doctor Part of Research Team to Lower Hispanic Childhood Obesity—A team of researchers including a doctor from…

Jeffrey Osborne Foundation To Host Comedy Event At PPAC—The Jeffrey Osborne Foundation will host a Celebrity…

Route 24 Bridge In Tiverton Faces Restrictions, Temporary Closure—The Rhode Island Department of Transportation has temporarily…

Converse and Newport Folk Festival Partner To Offer Recording Opportunities—Converse Rubber Tracks and the Newport Folk Festival…

Public Invited To Meet Delegation From Shimoda, Japan In Newport—The public is invited to meet a delegation…

College Admissions: 10 Western Colleges Worth the Trip This Summer—Put this college road trip on your summer…

 
 

Friday Financial Five – October 19th, 2012

Friday, October 19, 2012

 

New home construction continues to rise . . . .

Social Security with a minimal increase

No one likes going to the boss’ office to learn there will be no raises that year. Since that’s been the case for Social Security as recently as two years ago, the 1.7% increase recently announced is better than nothing. The increases are based on adjustments to the consumer price index (CPI), but many would argue the CPI doesn’t truly encapsulate real world inflation. The task at hand is to fortify this entitlement so retirees can enjoy more favorable adjustments going forward.

Avoid the Rhode Island estate tax

Unless you enjoy giving money to the state government, you should take a close look at the value of your estate. If it’s over roughly $893,000, including life insurance proceeds, your beneficiaries might be subject to the Rhode Island estate tax at your death. Consider moving your life insurance to an Irrevocable Life Insurance Trust (ILIT) or redoing the policy and having the ILIT own it. This avoids the three year look back period. The bad news here is that you do in fact have to die to recognize the tax savings.

The truth about GDP

We expect October 26th’s report on Gross Domestic Product growth to remain low, but why exactly does that matter? GDP measures the activity of our economy by factoring in consumer spending, corporate spending, government spending and net exports. The latest growth was revised down to 1.3% and the next report should be around 2% on an annualized basis. Increased government spending has been carrying the load, but the engine that needs to get revving is on the consumer side. Consumers start buying, businesses start hiring, tax revenues increase, and the dreaded deficit you hear so much about should go down.

Investment spotlight: Ginnie Mae Bonds

With such low treasury yields, where else can investors look for yield while enjoying the safety of government guarantees? The Government National Mortgage Association (also known as GNMA or Ginnie Mae) issues bonds representing part ownership in a pool of mortgages backed by the Veterans Administration and other federal sources. There is prepayment risk. As interest rates decrease, people refinance and the projected yield in the fund may decrease.

The rise of reverse mortgages

More banks are offering reverse mortgages as a retirement income product. It’s a loan against the home that doesn’t have to be repaid until the owner sells, moves out for a year or dies. There are fees that you need to consider and some horror stories that have surfaced. One example would be a wife dissuaded from including her name on the deed of the house. If her husband passes away, she could be looking at paying a hefty sum to buy back the house or be forced to move out. Reverse mortgages do have a place in a small percentage of retirees’ financial plan but should be employed with caution.

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 Articles

 

Enjoy this post? Share it with others.

 
 
:)