Thursday, December 31, 2009

WSJ Video on Disappearing Estate Tax

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.

Read Alert by Wilmer Hale

Update on Real Estate Settlement Procedures Act Takes Effect Jan. 1

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.

Read more.

Tuesday, December 29, 2009

Luxury Goods Make You Selfish or The More You Have, The More You Want

The Devil Wears Prada? Effects of Exposure to Luxury Goods on Cognition and Decision Making

November 25, 2009

Paper Released:
November 2009

Roy Y.J. Chua and Xi Zou

Executive 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.

Read more.

Center for Housing Policy Finds Housing Affordability Declining

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.

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2009 National Financial Capability Study

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.

Read more.

Tuesday, December 22, 2009

Congress Extends COBRA Subsidy

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.

Read more.

FAQs For Employees About COBRA Continuation Health Coverage

Tuesday, December 8, 2009

IRS Announces 2010 Standard Mileage Rates

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:

  • 50 cents per mile for business miles driven
  • 16.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

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.

EBRI Releases Brief on Target Date Funds

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

Social Security Claiming Guide

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.

Read more.

Student Debt for the Class of 2008

The Project on Student Debt has updated data for the class of 2008 by state and educational institution. Link here.

Kaiser Examines 2010 Medicare Advantage Plans

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. 

Read more.

Americans Accumulate Substantial Retirement Assets in IRAs

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.

Read more

Wednesday, December 2, 2009

US News Lists America’s Best Health Plans

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 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 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.

Riding Public Transit Saves Individuals $9,190 Annually

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.

Read more.

The PNC Christmas Price Index

From the PNC media release:


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.

View the video.