Friday Financial Five – April 11th, 2014
Dan Forbes, GoLocalProv MINDSETTER™
Friday Financial Five – April 11th, 2014
April 15th is almost here, but there’s still time to fund a traditional IRA, a Roth IRA, or a non-deductible IRA. Contributions are limited to $5,500 for those that have earned at least that much and are under the age of 50. For those 50 and over, the limit is increased by $1,000. Married couples may see the deductibility of their Traditional IRA contributions phased out as their MAGI (Modified Adjusted Gross Income) increases. There is no income limit for converting an IRA to a Roth, allowing those above the allotted MAGI to make non-deductible IRA contributions followed by a Roth conversion.
Tax Court ruling on IRA rollovers
An important decision was handed down by the United States Tax Court as it pertains to IRA rollovers. The ruling, which doesn’t pertain to IRA transfers, clarified the IRS position on the act of rolling over separate IRAs in the same twelve month period. If an individual has two IRAs and rolls over distributions from each one within a year, only one of the rollovers is valid. The other would be considered a taxable distribution.
Tax foundation favors lowing capital gains tax
The debate over the consequences of tax policy continues. The Tax Foundation in Washington, D.C. recently issued a report that finds the current capital gains rate “places a heavy tax bias against saving and investment”. Those in the top bracket face a long-term capital gains rate of 20 percent, plus a 3.8 percent tax on unearned income to fund the Affordable Care Act. The state where the individual resides can add additional tax, such as the additional 13 percent Californians face. Meanwhile, the Tax Foundation calculates the average top capital gains rate in the industrialized world to be just over 18 percent.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBig banks will have higher “leverage ratio”
The facelift for big banks continues, as federal regulators approved a seismic shift in holding requirements for banks over $700 billion. By 2018, the eight largest banks will have to increase capital held against all assets from 3 percent to 5 percent, an increase amounting to almost $68 billion. These are dollars that must be held in the event of financial disaster, but it also means the banks will have reduced assets to put to work or pay out in dividends. Further restrictions may be in store in a continued effort to curtail risky activity such as the use of credit default swaps.
The best countries for retirement
For those able to project a retirement date, attention shifts to where that retirement will take place. Florida and Arizona rank high as attractive destinations, but for the second year in a row, the United States as a whole ranks 19th as a country in the Natixis Global Retirement Index. Eight of the top ten countries are European, with Switzerland coming in first. The index measures countries for twenty indicators, including the quality of health and financial services and the ability to live in a safe and clean environment.
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] .
10 Historically Bold Moves Made By Big Companies
10. RJ Reynolds
The Smokeless Cigarette
LOSE
In 1988, long after the American public wised up to the dangers of cigarettes, RJ Reynolds launched the Premier cigarette. They called it a “smokeless nicotine delivery mechanism that looks and feels like a premium cigarette.” It didn't. Smokers said it tasted like charcoal, and drug users quickly figured out how to use it to smoke crack. It has been reported that RJ Reynolds lost $1 billion on the product.
9. McDonald's
The McLobster
LOSE
The alleged lobster roll – no one's sure there was ever any real lobster in there – from McDonald's was about as successful in New England as their McCrabcake was in Maryland. It looked bad, tasted worse, and was shunned by even the most die hard Golden Arches fans. (Unlike the McRib, which continues to have a bewildering trance on McDonald's fans.) The sandwich is still available in some Canadian franchises and occasionally in Maine.
8. Yahoo
Bans Employees From Working at Home
WIN
7. Sony
Backs Betamax
LOSE
6. Tesla
Enters the Auto Market with High End Electric
WIN
5. Apple
Fires Steve Jobs
LOSE
One of the world's most famous college drop outs, Steve Jobs founded Apple, helped it grow into a billion-plus public company, and launched the Macintosh. He was also ousted by Apple's Board of Directors in 1985. The popular take is that the board was stupid to fire Jobs as the leader of the Mac division, because Apple would have more quickly become the company it is today. A new take on the decision posits that the then-30-year old Jobs was disruptive and incompetent in that role. After 12 years away from the company he founded, he learned the skills and discipline required for Apple's rebirth.
4. Microsoft
Takes on Sony + Nintendo in the Console Gaming Market
WIN
Microsoft has one person to thank for its console gaming success, and that person isn't even real. Master Chief is the hero of the insanely popular "Halo" franchise, which was first released was a launch title with the original Xbox. The game revolutionized First Person Shooters on consoles, and sold millions of consoles along the way. At the time, Microsoft was known as primarily a software company. They may have took a bath on those early consoles, but they now join Sony as one of the two major console makers left standing. (Sorry, Nintendo. The Wii U is going to sink you.)
3. Netflix
Changes Pricing Plan
LOSE
Netflix is back on top now, but it almost went under in 2011 when it mishandled its pricing changes and attempted to slice off it DVD business under the name Qwikster. As they did with the New Coke launch, customers responded with immediate anger, leading Netflix CEO Reed Hastings to apologize. The company reverted to its $7.99 streaming plan and has never looked back.
2. Ford
Opts out of Government Loans
WIN
After Detroit’s automakers went to Washington in 2008 asking for emergency loans to keep their enterprises afloat, the big bus oval was the only one to opt out of the bailout. Ford decided to mortgage all of its assets to raise operating funds instead. Taxpayers eventually spent $80 billion to rescue General Motors Corp. and Chrysler Corp. Ford focused on efficiency and increasing sales without using government bailout money - thus avoiding the federal tinkering that Chrysler and GM had to accept as a part of their deals. The company has since kept pace with GM, the country's largest automaker.
1. Coke
New Coke
LOSE
Perhaps the most famous brand misstep since Ford's Edsel, New Coke is the Titanic of corporate miscalculation. In the 1970s and early 80s, the soft drink giant faced increased competition from Pepsi and other products. To stay on top, Coke executives stopped production of the classic formula and introduced New Coke with tremendous fanfare. The public's responded with immediate outrage. Coca-Cola re-launched its original formula – called Coca-Cola Classic – almost immediately. Today, unopened cans of New Coke go for hundreds on eBay.
