This video from the Wall Street Journal discusses the consequences of the lapse in the estate tax in 2010. Can choosing when to die be an estate planning tool?
On Jan. 1, the one-year halt to the estate tax begins. And never before has so much money hinged on the time of death, WSJ's Laura Saunders reports in a News Hub extra.
New rules governing disclosures on settlement cost for home loans take effect in the new year.
HUD is requiring that loan originators provide borrowers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs and that closing agents provide borrowers with a new HUD-1 settlement statement. New RESPA regulations were published November 17, 2008 and are scheduled to take full effect on January 1, 2010. The "New RESPA Rule FAQs" were comprised from industry questions and are posted to facilitate implementation of these new requirements.
The Devil Wears Prada? Effects of Exposure to Luxury Goods on Cognition and Decision Making
Published:
November 25, 2009Paper Released:
November 2009Authors:
Roy Y.J. Chua and Xi ZouExecutive Summary:
Gandhi once wrote that "a certain degree of physical harmony and comfort is necessary, but above a certain level it becomes a hindrance instead of a help." This observation raises interesting questions for psychologists regarding the effects of luxury. What psychological consequences do luxury goods have on people? In this paper, the authors argue that luxury goods can activate the concept of self-interest and affect subsequent cognition. The argument involves two key premises: Luxury is intrinsically linked to self-interest, and exposure to luxury can activate related mental representations affecting cognition and decision-making. Two experiments showed that exposure to luxury led people to think more about themselves than others. Key concepts include:
- Luxury does not necessarily induce people to be "nasty" toward others but rather causes them to be less concerned about or considerate toward others.
- Experiment 1 showed that when primed with luxury, people are more likely to endorse self-interested business decisions (profit maximization), even at the expense of others.
- Experiment 2 further demonstrated that exposure to luxury is likely to activate self-interest but not the tendency to harm others.
- Exposure to luxury goods may activate a social norm that it is appropriate to pursue interests beyond a basic comfort level, even at the expense of others. It may be this activated social norm that affects people's judgment and decision-making.
- Alternatively, exposure to luxury may directly increase people's personal desire, causing them to focus on their own benefits such as prioritizing profits over social responsibilities.
From the Executive Summary
A close look at the data shows that rather than improving, housing affordability actually worsened slightly between 2005 and 2008. The share of U.S. households spending more than half of their monthly income for housing (including utilities) increased from 14 percent in 2005 to 15 percent in 2008. The same pattern held for the working households that are the principal subject of this report; the share of working households spending more than half their income on housing increased from 20 to 21 percent over the three-year period. Part of the blame for worsening housing affordability can be attributed to home utility costs – which rose by nearly 23 percent, or more than double the rate of overall inflation, but broader housing market trends during these three years also influenced owner and renter costs.
FINRA has published the initial results from a comprehensive survey of how Americans manage their finances. Additional data will be forthcoming.
The National Financial Capability Study established a baseline measure of the ability of Americans to manage their money, benchmarking four key indicators of financial capability and evaluating how these indicators vary with underlying demographic, behavioral, attitudinal and financial literacy characteristics.
From National Underwriter
President Obama has signed H.R. 3326, a defense appropriations bill with a provision that will let involuntarily terminated workers seek the temporary 65% federal health benefits continuation subsidy up until Feb. 28, 2010. The Consolidated Omnibus Budget Reconciliation Act benefits continuation subsidy provision also will extend the period when terminated workers can get the subsidy to 15 months.
IR-2009-111, Dec. 3, 2009
WASHINGTON — The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.
Investment Behavior of Target-Date Fund Users Having Other Funds in 401(k) Plan Accounts
WHY TARGET-DATE FUNDS ARE IMPORTANT: Target-date funds (TDFs) are designed to simplify retirement plan asset allocation as an “all-in-one” investment option, which automatically rebalances the account to a mix of asset classes that are more conservative as the investor ages. Because of recent legislative and regulatory inducements, they are rapidly growing as an investment in 401(k) retirement plans, and about 7 percent of all 401(k) assets are currently invested in TDFs.
MIXED TDF USERS: As TDFs grow, a new class of 401(k) investor is emerging: “mixed” target-date fund users who hold the funds in combination with other non-TDF funds in the plan menu.
LACK OF UNDERSTANDING OF TDFS: This study shows that some mixed TDF investors apparently fail to understand either the purpose or the benefit of a TDF designed as an “all-in-one” portfolio solution. However, holding TDFs with other funds could lead to an unexpected result of ending up with a potentially inferior portfolio in terms of risk/return tradeoff from more assets allocated to some sectors than the designers of the target date funds had planned.
December 2009, Vol. 30, No. 12
Paperback, 16 pp.
PDF, 707 kb
Employee Benefit Research Institute, 2009
The Social Security Claiming Guide is available from the Center for Retirement Research at Boston College. It contains simple and clear information you should have before deciding when to begin your Social Security retirement.
At what age should you begin claiming Social Security benefits? If you’re approaching retirement, it’s the most important financial decision you’ll likely make. The Social Security Claiming Guide sorts through all the options near-retirees need to consider. Presented in an easy-to-read, colorful format, the Claiming Guide shows you where to begin, spells out how much you can get, and answers frequently asked questions about how the claiming process works.
Download an electronic copy of the Social Security Claiming Guide. Single copies of the Social Security Claiming Guide can be made for personal use without additional permission.
The Project on Student Debt has updated data for the class of 2008 by state and educational institution. Link here.
Medicare Advantage 2010 Data Spotlight: Plan Availability and Premiums
This data spotlight examines changes in the availability and premiums of private Medicare Advantage options for Medicare beneficiaries in 2010 as the annual open enrollment period begins.
From the Investment Company Institute:
IRA Ownership Widespread Across U.S. Population
Washington, DC, November 23, 2009 - Americans are accumulating significant resources in individual retirement accounts (IRAs) through rollovers from employer-sponsored retirement plans and contributions, according to a new report published today by the Investment Company Institute. At year-end 2008, IRAs accounted for one-quarter of all U.S. retirement wealth and 8.5 percent of total U.S. household financial assets.
The report, The Evolving Role of IRAs in U.S. Retirement Planning, found that changes in law and the evolution of employer-sponsored retirement plans have elevated the importance of IRAs for many U.S. households. IRA ownership was widespread across many different demographic dimensions, including age, income, and educational attainment, with 40.5 percent of U.S. households owning some type of IRA.
U.S. News Media Group and NCQA Release 2009-10 Rankings of America’s Best Health Insurance Plans
Source: U.S. News Media Group and the National Committee for Quality Assurance (NCQA)U.S. News Media Group and the National Committee for Quality Assurance (NCQA) today released the fifth annual edition of America’s Best Health Insurance Plans on USNews.com. Published at the start of open-enrollment season, when Americans nationwide prepare to select their health coverage, the 2009-10 Best Health Insurance Plans guide provides consumers with comprehensive rankings and important detailed information for over 600 commercial, Medicare, and Medicaid health plans.
The full rankings of America’s Best Health Insurance Plans are online today at www.usnews.com/healthplans. The highest-scoring 50 commercial plans, 25 Medicare plans, and 25 Medicaid plans, as well as the “Honor Roll” plans at the top of the rankings, will be featured in the December issue of U.S. News, available on newsstands on Tuesday, December 1, 2009.
Please note that the savings calculated by the APTA includes the cost of ownership and operations.
Yearly Transit Savings over $250 Higher Than This Time Last Year
WASHINGTON, DC – Individuals who ride public transportation can save on average $9,190 annually based on the November 9, 2009 national average gas price and the national unreserved monthly parking rate. Over the last year, an individual riding public transportation would have saved an additional $255 due to the 41 cent increase of gasoline per gallon since November 2008.
From the PNC media release:
RECESSION GIVES TRUE LOVES SOMETHING TO BE HAPPY ABOUT: PNC CHRISTMAS PRICE INDEX SHOWS MODEST 1.8 PERCENT INCREASE
Cost of "The Twelve Days of Christmas" Song Items Reflect Consumer Inflation Trends; Interactive Web Site Provides Teachers and Students with Insights on U.S. Economy
PITTSBURGH, Nov. 30, 2009 — Thanks to the weak economy in 2009 the PNC Christmas Price Index increased by a modest 1.8 percent compared to last year in the whimsical economic analysis by PNC Wealth Management based on the prices of gifts in the holiday classic, "The Twelve Days of Christmas."
According to the 26th annual survey, the price tag for the PNC CPI is $21,465.56 in 2009, just $385.46 more than last year. It is the smallest increase since 2002, when the index fell 7.6 percent.
The PNC CPI exceeds the U.S. government’s Consumer Price Index, the widely used measure of inflation calculated by the Bureau of Labor Statistics, which is down 1.5 percent this year.
Among the 12 gifts in the Index, three items fell measurably from last year while five increased in cost and four remained steady.
As part of its annual tradition, PNC Wealth Management also tabulates the “True Cost of Christmas,” which is the total cost of items gifted by a True Love who repeats all of the song’s verses. This holiday season, very generous True Loves will receive a bargain and pay $87,402.81 for all 364 gifts, a mere 0.9 percent increase compared to last year.
The sharp rise in gold prices proved to be the main contributor to the dramatic 42.9 percent jump to $499.95 for the Five Gold Rings. Typically when the value of the dollar decreases, as it has in the last year, investors buy more gold driving up prices.
The cost of the Seven Swans-a-Swimming, which generally provide the biggest swings from year to year in the PNC CPI, fell this year by 6.3 percent to $5,200 following last year’s eye-opening 33.3 percent rise. As the most volatile item in the Index, the swans are removed to determine the underlying inflation or core PNC CPI, which pushed the rate up 4.8 percent this year.
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