Friday Financial Five - August 14, 2015

Friday, August 14, 2015

Dan Forbes, GoLocalProv Contributor

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Netflix offers a year of paid parental leave

Netflix, the streaming service threatening cable companies everywhere, has taken a bold stance on maternity and paternity leave for employees. Many of their employees will be eligible for a paid year of leave following the birth or adoption of a child. Much like the company that received huge publicity for raising their minimum wage to $70,000, the announcement began a national conversation about leave being mandated or a company perk. Many developed countries allow an extended period of time for parents to spend with children while still retaining employment.

No COLA expected for 2016 Social Security payments

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Social Security recipients may get another unwelcome lack of pay raise for 2016, according to Mary Beth Franklin in Investment News. While the official announcement will come in October, the metric tied to any increase in benefits, the Consumer Price Index for urban wage earners (CPI-W), has actually declined in the first two quarters of 2015. As Franklin points out, many higher income retirees may face higher Medicare premiums in 2016, meaning they’ll have a net decrease in total retirement income.

Department of Labor hearing arguments about fiduciary standard

It’s interesting to see a snapshot of who falls on what side of the DOL’s proposed fiduciary rule. Proponents, such as the Financial Planning Coalition, want the rule implemented immediately to provide consumer protection. The Financial Services Roundtable says the rule is too complex and would adversely affect lower income households. Some companies, such as Metlife, contend the rule will eliminate their ability to work with clients. Met would have to choose between providing advice or creating, but wouldn’t feel comfortable doing both under a fiduciary standard.

Passing on IRAs with taxes in mind

Retirees with both a traditional IRA and a Roth IRA must prioritize which account to withdraw from. Those lucky enough to anticipate leaving some of this IRA money to heirs have taxes to consider. The conventional wisdom has been that bequeathing a Roth IRA is preferable to the traditional IRA, as beneficiaries can take tax free withdrawals from the Roth over their lifetimes. A strategy emerging is to focus on the person with the lowest tax rate paying the taxes on these distributions. For example, a parent with a higher tax bracket than his or her children would spend down the Roth first and leave the taxable IRA distributions subject to the children’s lower bracket. Prioritizing distributions this way may lead to more overall dollars between the two parties.

Student debt growth is slowed

In a sign that people may be getting wiser in the college decision process, a Federal Reserve Bank of New York report shows that the expansion of student loan debt is slowing. Between the second quarter of 2014 and the second quarter of 2015, outstanding student loan debt grew by $70 billion. That compares to $124 billion for the same time frame between 2013 and 2014. The reduction may be attributable to an improving economy or lower enrollment to for-profit institutions, which are more heavily dependent on student’s borrowing to cover tuition.

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: RI Business Rankings in US

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Friday Financial Five - August 14, 2015

Related Slideshow: RI Business Rankings in US

WalletHub

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WalletHub

WalletHub

WalletHub

Gallup

Forbes

Tax Foundation

WalletHub

Thumbtack/Kauffman

The Economist

CNBC

Forbes

ChiefExecutive.net

Tax Foundation

Wallet Hub

ALEC

Kauffman Foundation

Free Enterprise

The Pew Charitable Trusts

Gallup

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