Friday Financial Five – April 11th, 2014
Friday, April 11, 2014
Still time for IRA funding
April 15th is almost here, but there’s still time to fund a traditional IRA, a Roth IRA, or a non-deductible IRA. Contributions are limited to $5,500 for those that have earned at least that much and are under the age of 50. For those 50 and over, the limit is increased by $1,000. Married couples may see the deductibility of their Traditional IRA contributions phased out as their MAGI (Modified Adjusted Gross Income) increases. There is no income limit for converting an IRA to a Roth, allowing those above the allotted MAGI to make non-deductible IRA contributions followed by a Roth conversion.
Tax Court ruling on IRA rollovers
An important decision was handed down by the United States Tax Court as it pertains to IRA rollovers. The ruling, which doesn’t pertain to IRA transfers, clarified the IRS position on the act of rolling over separate IRAs in the same twelve month period. If an individual has two IRAs and rolls over distributions from each one within a year, only one of the rollovers is valid. The other would be considered a taxable distribution.
Tax foundation favors lowing capital gains tax
The debate over the consequences of tax policy continues. The Tax Foundation in Washington, D.C. recently issued a report that finds the current capital gains rate “places a heavy tax bias against saving and investment”. Those in the top bracket face a long-term capital gains rate of 20 percent, plus a 3.8 percent tax on unearned income to fund the Affordable Care Act. The state where the individual resides can add additional tax, such as the additional 13 percent Californians face. Meanwhile, the Tax Foundation calculates the average top capital gains rate in the industrialized world to be just over 18 percent.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBig banks will have higher “leverage ratio”
The facelift for big banks continues, as federal regulators approved a seismic shift in holding requirements for banks over $700 billion. By 2018, the eight largest banks will have to increase capital held against all assets from 3 percent to 5 percent, an increase amounting to almost $68 billion. These are dollars that must be held in the event of financial disaster, but it also means the banks will have reduced assets to put to work or pay out in dividends. Further restrictions may be in store in a continued effort to curtail risky activity such as the use of credit default swaps.
The best countries for retirement
For those able to project a retirement date, attention shifts to where that retirement will take place. Florida and Arizona rank high as attractive destinations, but for the second year in a row, the United States as a whole ranks 19th as a country in the Natixis Global Retirement Index. Eight of the top ten countries are European, with Switzerland coming in first. The index measures countries for twenty indicators, including the quality of health and financial services and the ability to live in a safe and clean environment.
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] .
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