Monday, April 26, 2010

Medicare Tax Hike on High Income Earners

Source: The Tax Foundation

Tax Foundation Report: Examples of Medicare Tax Hikes Faced by High-Income Taxpayers

Tax Foundation Outlines How Two New Medicare Taxes in Health Care Reform Bill Would Affect Various High-Income Taxpayers

Washington, DC, March 23, 2010 -- The health care reform legislation passed by the House Sunday contains several tax increases, including two new Medicare tax hikes on high-income taxpayers scheduled to go into effect in 2013. A new Tax Foundation report outlines eight examples of how the new tax would affect taxpayers of various income levels and sources as well as filing statuses.

The health care bill calls for an additional 0.9% Medicare Hospital Insurance Tax on earned income exceeding $200,000 for single taxpayers ($250,000 for married couples) and an "Unearned Income Medicare Contribution" of 3.8% on investment income for taxpayers with adjusted gross incomes (AGI) in excess of $200,000 for single filers ($250,000 for married filers).

Read more.

Thursday, April 22, 2010

The 4% Saving for Retirement Rule

Source: Journal of Investment Management (via Stanford Graduate School of Business News)

The 4% Rule—At What Price?

Jason S. Scott, William F. Sharpe, and John G. Watson

Saving for retirement is hard enough. It turns out, though, that spending intelligently during retirement is difficult as well. The soon-to-be-retired person has to make a range of decisions about spending that will have real consequences for as long as he or she lives.

Sadly, though, “the 4% rule,” which is the most commonly offered spending advice proffered by investment professionals and the popular press, can ultimately be harmful to the interests of people who heed it, according to recent research by Nobel Laureate William Sharpe, Professor of Finance, Emeritus, at the Stanford Graduate School of Business.

Simply put, the rule suggests that the retiree spend an inflation-adjusted 4% of his or her retirement assets each year, while keeping the balance of those assets in a portfolio that typically includes both stocks and bonds. That might be a reasonable strategy in a world where stocks aren’t risky. But they are, of course. Moreover, there’s more wrong with the rule than simply that it discounts the downside of investing in instruments that have an element of risk.

Read more.

New Rules for Gift Cards

Source: Board of Governors of the Federal Reserve

New Federal Reserve rules provide important protections when you purchase or use gift cards. Here are some key changes that apply to gift cards sold on or after August 22, 2010:

Read more.

Thursday, April 15, 2010

On the Bright Side, You are Already Past Tax Freedom

If you bear the average tax burden, on this April 15th you might rejoice. After all, you have already made it past Tax Freedom Day.

Source: The Tax Foundation

Tax Freedom Day will arrive on April 9 this year, the 99th day of 2010, according to our annual calculation using the latest government data on income and taxes. Americans will work well over three months of the year—from January 1 to April 9—before they have earned enough money to pay this year's tax obligations at the federal, state and local levels.

Read more.

Wednesday, April 14, 2010

The most and least expensive states for car insurance in 2010


The most and least expensive states for car insurance in 2010’s new national survey of car insurance rates reveals that Louisiana has the highest average rates in the nation, followed by Michigan. Maine can boast the lowest average rates.

The results came from a study that collected average auto insurance rates for more than 2,400 vehicles, based on 10 ZIP codes per state and rates from six large carriers, with averages calculated nationally and for each state. This allows you to compare auto insurance prices among the states.

Louisiana is the most expensive; Maine is the least expensive.

2010 Bundle Report: How America Spends

This site is a little confusing, but it contains some interesting interactive graphs that let you compare your spending with others.

Got to

Tuesday, April 13, 2010

Uncertain Income in Uncertain Times

Source: Brookings Institution

The Income Rollercoaster: Rising Income Volatility and its Implications
By Karen Dynan

Millions of U.S. households have suffered devastating income disruptions as a result of the recent economic downturn. As of late 2009, eight million jobs had been lost to the recession, and one in ten workers was out of work, putting the unemployment rate at its highest level since the early 1980s. Although a variety of indicators suggest that the recession is now over, most analysts foresee a slow and gradual economic recovery and consequently a long, uphill climb back to full employment. Thus, it may be a number of years before the incomes of many families are back to normal. Policymakers have already taken some steps to support these families and stimulate job creation, and they continue to deliberate about what additional steps are still needed.

Read more.

FTC: Tips on Settling Your Credit Card Debts

Source: Federal Trade Commission

If you’ve maxed out your credit cards and you’re getting deeper and deeper in debt, chances are you’re feeling overwhelmed. How are you ever going to pay it down? Now imagine hearing about a company that promises to erase your debt for pennies on the dollar. Sounds like the answer to your problems, right?

The Federal Trade Commission (FTC), the nation’s consumer protection agency, says slow down, and consider all the steps that can get you out of the red without spending a whole lot of green.

Read more.

Sunday, April 11, 2010

The Pending Crisis for State and Local Pension Funds

Source: Center for Retirement Research at Boston College

The Funding of State and Local Pensions: 2009-2013

by Alicia H. Munnell, Jean-Pierre Aubry, and Laura Quinby


The financial crisis reduced the value of equities in state and local defined benefit pensions and hurt the funding status of these plans.  The impact will become evident only over time, however, because actuaries in the public sector tend to smooth both gains and losses, typically over a five–year period.  The first year for which the crisis will have a meaningful impact on reported funding status is fiscal 2009, since in most cases the fiscal 2008 books were closed before the market collapsed.  After 2009, the funding picture will continue to deteriorate to the extent that years of low equity values replace earlier years of high values.  The current and future funding status of state and local pensions is crucially important, as state and local governments are facing a perfect storm: the decline in funding has occurred just as the recession has cut into state and local tax revenues and increased the demand for government services.  Finding additional funds to make up for market losses will be extremely difficult...

For full paper in PDF

Saturday, April 10, 2010

Roth IRA conversion calculator

Thinking of converting a traditional IRA to a Roth IRA? Examine the tax implications with the Vanguard Roth IRA conversion calculator.

Vanguard: The Animated Yield Curve

Vanguard has a nice animated explanation of the yield curve.

The yield curve: What it is and what it means

Friday, April 9, 2010

Investment Returns for Early and Late Baby Boomers

Source: Center for Retirement Research at Boston College

Returns on 401(k) Assets by Cohort

by Alicia H. Munnell and Jean-Pierre AubryMarch 2010


The impact of the financial crisis on the retirement savings of the Early Baby Boomers has received considerable attention.  Indeed, from the peak of the market in 2007 to the trough in March 2009, these Early Boomers lost a lot of money – $1 trillion.  But they have already recovered roughly half of these losses with the ensuing rebound in the equities market, and those with balanced portfolios may have recovered fully.  More important, over their full working careers, the Early Boomers have actually been treated quite well by the financial markets, measured against two benchmarks: lifetime returns on retirement assets and the experience of the Late Boomers and Generation Xers.  The cohort at the greatest risk appears to be the Late Boomers, who have experienced a less favorable investment environment over their careers and will need extraordinary returns just to end up as well off as the Early Boomers are today.  Generation Xers, given their shorter careers, have faced the worst environment, but they have more time to catch up...

For full brief


FTC Issues 2010 Fair Debt Collection Practices Report to Congress

Source: Federal Trade Commission

At a time when many consumers are facing debt problems, the Federal Trade Commission has issued its annual report detailing the steps the agency has taken to protect consumers from unfair, deceptive, and abusive debt collection practices and educate the public on the subject. The 32nd Annual Report to Congress on the Fair Debt Collection Practices Act presents, for 2009, an overview of the types of consumer complaints received by the FTC, descriptions of the agency’s debt-collection law enforcement actions, and a summary of its consumer and industry education efforts and research and policy initiatives.

Federal Trade Commission Enforcement of the Fair Debt Collection Practices Act: The Thirty-Second Annual Report to Congress: Commission Initiatives During 2009 To Curtail Illegal Debt Collection Practices, Including Summaries of the Types of Consumer Complaints Received, Recent Developments in Commission Law Enforcement, and Commission Consumer and Industry Education and Policy Initiatives (March 2010)

The Recession Drags On

Source: Bureau of Labor Statistics

The labor market in 2009:recession drags on

In 2009, the unemployment rate reached double digits, the employment-population ratio fell sharply, and the numbers o unemployed, discouraged workers, and involuntary part-timers rose.



CRS: Veterans’ Benefits: Pension Benefit Programs

Source: Congressional Research Services

Veterans’ Benefits: Pension Benefit Programs

The Department of Veterans Affairs (VA) administers several pension benefit programs for veterans as well as their surviving spouses and dependent children. The most current pension programs available (for those meeting the eligibility criteria on or after January 1, 1979) are the Improved Disability Pension for certain low-income veterans and the Improved Death Pension for certain low-income surviving spouses or children of veterans. There is also a special pension for Medal of Honor recipients. This report describes these programs, including the eligibility criteria and current benefit levels. This report will be updated as needed to reflect legislative activity and changes to benefits or eligibility requirements.

Monday, April 5, 2010

FRB Issues Final Rules on Gift Cards

Source: Federal Reserve Board

Release Date: March 23, 2010

The Federal Reserve Board on Tuesday announced final rules to restrict the fees and expiration dates that may apply to gift cards. The rules protect consumers from certain unexpected costs and require that gift card terms and conditions be clearly stated.

The final rules prohibit dormancy, inactivity, and service fees on gift cards unless: (1) the consumer has not used the certificate or card for at least one year; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees. Expiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.

The Board's rules generally cover retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and network-branded gift cards, which are redeemable at any merchant that accepts the card brand.

The final rules are issued under Regulation E to implement the gift card provisions in the Credit Card Accountability Responsibility and Disclosure Act of 2009.

The notice that will be published in the Federal Register is attached. The final rules are effective August 22, 2010.

Attachment (333 KB PDF)

Highlights of Final Gift Card Rule (13 KB PDF)

2010 Banking and Consumer Regulatory Policy

Who Selects Adjustable Rate Mortgages?

Source: Harvard Business School Working Papers

Who Selected Adjustable-Rate Mortgages? Evidence from the 1989-2007 Surveys of Consumer Finances (PDF; 527 KB)

We find evidence that households selecting adjustable-rate mortgages (ARMs) during the recent decade were disproportionately those who were less suspicious or who may have had difficulty understanding complicated ARM features that became commonplace prior to the financial crisis.

OTS on What to Expect When You Apply for a Mortgage Loan

Source: Office of Thrift Supervision

Washington, D.C. — The Office of Thrift Supervision (OTS) issued information today in support of Financial Literacy Month to educate consumers about a new mortgage process required by the Real Estate Settlement Procedures Act and about the impact of a consumer’s credit score on the interest rate of a mortgage loan. What To Expect When You Apply for a Mortgage Loan, issued to commemorate Financial Literacy Month, describes key changes in the mortgage loan process and conveys information about the importance of credit scores in the lending process.

FTC Institutes Fee Credit Report Rule

Source: Federal Trade Commission

For Your Information: 04/01/2010

Amended Free Credit Reports Rule Helps Consumers Avoid 'Free' Offers That Cost Money

Starting tomorrow, a new Federal Trade Commission rule will help consumers avoid confusing ads for “free credit reports” – which often require them to buy credit monitoring or other services – with the federally mandated no-strings-attached credit reports available, or 877-322-8228. Under the Federal Trade Commission’s amended Free Credit Reports Rule, ads for these “free” offers must have clear disclosures. For example, Web sites offering free credit reports must have a disclosure, across the top of each page that mentions free credit reports, with links to and The amended Rule also requires nationwide consumer reporting agencies – Equifax, Experian, and TransUnion – to delay advertising for products or services on until after consumers get their free credit reports. The amended Rule is effective on April 2, 2010, except for the wording of disclosures for television and radio ads, which takes effect on September 1, 2010.

Information in credit reports may affect whether consumers can get a loan or a job, so it is important for consumers to check their reports and correct any inaccurate information. Each of the nationwide credit reporting companies is required to provide consumers with a free copy of their credit reports once every 12 months upon request. Consumers can learn more about their right to a free credit report under federal law at

Using Health Savings Accounts to Save for Retirement

Source: Employee Benefit Research Institute

'The Use of Health Savings Accounts for Health Care in Retirement,' and 'Tax Expenditures and Employee Benefits: Estimates from the FY 2011 Budget'

April 2010, Vol. 31, No. 4
Paperback, 12 pp.
PDF, 371 kb
Employee Benefit Research Institute, 2010

Download Notes PDF pdf

This research shows that while HSAs can be used to save for health care expenses in retirement, the maximum savings that can be accumulated in an HSA will be far from sufficient to fully cover the savings needed in retirement for insurance premiums and out-of-pocket expenses.