Friday Financial Five–August 9th, 2013
Friday, August 09, 2013
The Obamacare “Cadillac tax”
Implementing a huge national program, such as health care, is sure to be fraught with issues and surprises. The latest consists of a forecast that public sector unions will get hit with a sizeable “Cadillac tax” in the early 2020’s. The norm has been for health benefit premiums to be exempt from taxation. Under Obamacare, premiums have a cap ($10,200 for individuals and $27,500 for families in 2018) in terms of exclusion from income and payroll tax. Anyone receiving premium benefits over these caps will be hit with a rather punitive 40% excise tax.
Calculating the marriage penalty
The repeal of DOMA brings up an interesting question regarding marriage. Does it make sense from a financial perspective, given the existence of a “marriage penalty”? The marriage penalty occurs when two spouses pay more in taxes filing jointly than they would filing individually. Studies have shown that two married workers with similar incomes are most likely to suffer the penalty, which is supposed to be phased out by 2017. In terms of determining if a penalty exists, there’s no easy way to do it. It’s a matter of completing a joint return and two individual returns to determine the tax differential.
Bank of America jacks up their brokerage fees
Merrill Lynch, the brokerage arm for Bank of America, may see some customers walk after the latest attempt to generate increased revenue. According to the Wall St Journal, customers on the newest Merill Lynch platform will be charged a minimum fee based on account size. Estimates are that some investors could see a 50% increase in the amount they pay for financial services.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTStock buyback–better for company or investor?
We frequently hear of “stock buyback”, where companies repurchase shares of outstanding stock at a premium. Shareholders are paid higher than the current stock price to incentivize the sale. Should investors tender shares at the premium price when given the opportunity? Conventional wisdom states that companies willing to buy back their shares expect continued growth, so that should be considered. There’s an S&P 500 Buyback Index that tracks the 100 companies in the index with the highest buyback ratio over the last year. Locally, Hasbro participates in and greatly benefitted from a 2011 stock repurchase. The company recently authorized another buyback for $500 million.
Almost back to school for Rhode Island’s teachers
Teachers are gearing up for the new school year, and that means revisiting the Rhode to Retirement retirement plan. New enrollees will automatically be placed in a target date fund, but there are also several individual funds available for selection. TIAA-CREF has a very user friendly website to make adjustments. Those teachers that have excess funds after putting 10.75 percent of their paycheck into the pension and 401A can also utilize a separate 403B account.
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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