Friday Financial Five – June 17, 2016
Friday, June 17, 2016
Dan Forbes, GoLocal Contributor
Obamacare premiums expected to rise
The Affordable Care Act was meant to stem premium increases that were wreaking havoc with participants’ budgets. According to a study by Kaiser Family Health, 2017 will see the opposite result for many insurers’ plans. “Silver plans” are lower cost and are the most common plans selected. According to the study, the two lowest cost Silver plans are increasing by an average of ten percent. (Providence happens to be one city expecting a sizeable decrease). This double digit percentage rise doubles the five percent increases in 2016. Fewer insurers are expected to participate next year, with United Health the most publicized company exiting many exchanges.
Gift tax break for 529 plans
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For those wondering about maximum contributions to 529 plans, each state has its own ceiling. When contributing on behalf of a child or grandchild, the transfer is subject to gift tax rules. The current annual gift tax exclusion is $14,000 per recipient, or $28,000 for a joint gift by a married couple. Gifting more than that amount will reduce your lifetime exemption from gift and estate taxes. Fortunately, tax rules allow a one-time contribution to a 529 plan that is treated as if the money was given over five years. A person can contribute the equivalent of five years' worth of contributions in one year (up to $70,000 or $140,000 from a couple) without gift tax issues. There can be no additional funds given for five years without affecting gift and estate tax exemptions, but those amounts might cover a large percentage of a beneficiary's education costs.
Congress mulling 529 flexibility
The BOOST Saving for College Act was proposed by two senators and appears to have bipartisan support. The bill incentivizes lower income families to save for college. Within income limits, lower earners would be able to take an income tax credit and employers could match up to $1,000 without that match counting as gross income. Most importantly, excess 529 savings could be rolled into a Roth IRA for the participant or the beneficiary, as long as the account is ten years old.
Brexit decision looms
In less than a week, Britain will hold a referendum on whether to “leave” the European Union or “remain”. Those favoring “leave” are against immigration and the EU’s expanding bureaucracy. The “remain” crowd believes leaving would weaken the value of the pound and stunt economic growth, taking over a decade to recover. It could be a situation where undecideds come out strong in the end to keep the status quo and remain in the EU.
CFP Board promotes Father’s Day financial literacy
While being adored by children and spouses this weekend, dads are encouraged by the CFP Board to do their part to promote financial literacy to children. The concepts discussed seem pretty rudimentary, but the country continues to lag in mastering even the most basic financial principles. This includes the concepts of saving and spending, as well as differentiating the use of credit from having the funds available in the bank to purchase. The CFP Board also suggests making money fun by allowing kids to plan a part of a family vacation within a budget, forcing decisions to come from financial awareness.
Dan Forbes, a CFP Board Ambassador, is a regular contributor on financial issues. 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
See how Rhode Island stacked up.
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WalletHub
Rhode Island has 2015's eighth highest insurance premium penalties for high risk drivers, according to a WalletHub report.
Rhode Island ranks fifth overall in the category of speeding over 20 mph annual premium increase at $482. While ranking third overall in the category of 2 accidents annual premium increase at $2,721.
Rhode Island ranks ninth overall under the reckless driving annual premium increase at $749.
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WalletHub
Rhode Island has been ranked as the 8th most eco-friendly state in the country, according to a recent study by WalletHub.
Rhode Island ranks third in environmental quality and 16th in Eco-Friendly Behaviors Ran landing them in 8th overall.
RI is behind Washington and New Hampshire who are in the six and seven spots respectively, and in front of Connecticut and Hawaii who come in at the nine and ten spot.
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WalletHub
Rhode Island is 2015's 4th Worst State to be a taxpayer, according to a recent WalletHub report.
Rhode Island ranks 48th of 51 with an average state and local tax price of $7,159 which is good for a 27% difference from the national average.
The states that are directly behind Rhode Island are Wisconsin at $7,159, Nebraska at $7,298 and Illinois at $7,719 for a 37% difference from the national average.
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WalletHub
Rhode Island has the highest vehicle property taxes in the country, paying an average of $1,133 according to a report from WalletHub.
Virginia and Kansas are the two states just ahead of Rhode Island in the 49 and 50 spots, paying $962 and $905 respectively.
RI also ranks 42nd in average real estate tax, paying an average of $2,779, according to the WalletHub report.
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Gallup
Providence-metro ranks at the bottom for job creation in 2014
Rhode Island has been ranked amongst the worst in job creation, according to a recent survey done by Gallup.
Gallup gives the Prov-metro area an index score of 23, the lowest score is the New York- New Jersey area with 20.
Salt Lake City, Utah and Austin-round Rock, Texas rank the highest with a score of 37.
See the rest of the rankings here.
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Forbes
The 2014 state rankings by Forbes has just been released and Rhode Island moved up two spots from #48 in 2013 to #46 in 2014.
What does Forbes say about RI's business environment"
After Michigan and Illinois, Rhode Island has experienced the third worst net migration out of its state in the country over the past five years. With a recent unemployment rate of 7.6%—lower than only Georgia and Mississippi—residents are leaving the state in search of jobs. Rhode Island has been stuck in the bottom five overall for six straight years. One plus: labor costs are 5% below the national average, which stands out in the expensive Northeast.
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Tax Foundation
Findings from The State Business Tax Climate Index were released this morning by Tax Foundation which found Rhode Island to have the 45th best tax climate for businesses for 2015. The state's rank has not changed since last year after The Index analyzed 100 different tax variables in multiple categories.
Read more about the report here
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Thumbtack/Kauffman
Providence is the second worst city in America for small business, according to a new survey conducted by Thumbtack.com and the Kauffman Foundation.
More than 12,000 small businesses in 82 cities across the country participate in the survey. Providence received an overall "F" grade for small business friendliness.
Full Survey Results Here.
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The Economist
Small Business Friendliness Grade: F
The Economist grades states on an A+ to F grading scale for its small business climate. Rhode Island is one of just 6 states to earn an "F" grade.
Overbearing bureaucracy and excessive licensing is stifling small business in America.
Read More About The Economist Grade Here
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Forbes
Forbes ranks each state in business costs, economic climate, and growth prospects. RI is third worst in 2013.
The most damning in the commentary:
After Michigan, Rhode Island has experienced the second worst net migration in the country over the past five years.
Read More About Forbes Ranking Here
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Tax Foundation
#46 Tax Foundation
Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.
Rhode Island and the other states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.
Read More About Tax Foundation Ranking Here
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ALEC
#47 ALEC
ALEC ranks each state in economic performance and outlook.
Although Rhode Island ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.
Read More About ALEC Ranking Here
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Kauffman Foundation
#50 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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Free Enterprise
#47 Free Enterprise
Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.
Rhode Island has continued to feel the direct impact and ripples from the recent recession—it ranks 47th overall in economic performance. However, positive rankings of 15th in talent pipeline and 16th in innovation and entrepreneurship suggest the existence of a foundation on which to build the future.
Read More About Free Enterprise Ranking Here
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Gallup
10th Worst in Gallup's Annual Ranking of State Job Markets 2014
Rhode Island has been ranked 10th worst for job creation in Gallup's annual ranking of state job markets in 2014 with a job creation index number of 21
Rhode Island is one of two (Connecticut) states to rank in the bottom ten each year since 2008.
The 2014 State level findings have were drawn from 201,254 interviews with employed adults across the nation.
See the full list of rankings here.
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