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How to make do with $1 million
Who qualifies as rich?
Occupy Wall Street has its 1 percent answer. A consulting firm that studies the wealthy has a broader definition, based on millionaire status. Financial planners have a third answer: that appearances — and account balances — can be deceiving, and you might not be as rich as you think you are.
If Occupy Wall Street’s 1 percent label were applied to assets, the line between the 1 percent and everyone else would be $8.4 million.
Based on its research, the consulting firm Spectrem Group said about 8.6 million American households had a net worth of at least $1 million last year, not including their equity in a home — just more than 7 percent of the 117 million American households.
George Walper Jr., president of Spectrem, estimated most of those in the low end of the millionaire class did not have most of their assets in formal retirement funds.
“A lot of it is in other places,” he said, even if it is intended for retirement. Many
Monday Map: State Income and Sales Tax Deductions
Today’s Monday Map shows which states benefit from the federal income tax deduction for state taxes. Taxpayers can elect to deduct either state income or sales taxes, but not both; in most states, the income tax deduction is worth more. New Yorkers deducted state taxes worth 6.16% of their income, to take the top spot. Alaska, where state income and sales tax deductions amounted to only 0.26% of the state’s income, comes in last. (Alaska has no income tax, no state sales tax, and small local sales taxes.)
Click on the map to enlarge it.
View previous Monday maps here.
Generations X & Y: You’re a product of your experiences
The baby boomers are having a tough time. They’re retiring or nearing retirement in a prolonged low interest rate environment and may not be seeing as much accumulated savings as they expected. But the boomers still hold vast amounts of wealth, and as they age, they will be passing it to the next generation. According to the Money Across Generations IISM study, this hasn’t necessarily prompted the adult children of boomers (predominantly members of Gen X and Gen Y) to feel any more confident about their financial future than their parents – but maybe they should be. Throughout my career, I’ve had financial conversations with many different types of people, and I noticed a theme. I learned that the way a person invests and manages their money can generally correspond with which generation they’re a part of, and what experiences they went through while they were young. For examp Read more…
Analysis: It’s not a bad idea to get a big tax refund
CHICAGO — Getting a big tax refund is supposed to make you feel guilty.
Financial planners say it means you’ve had too much withheld from your paychecks. You let the government keep your money and failed to collect interest for all those months. You also deprived yourself of the opportunity to earn an even greater return.
Technically, they’re right.
In a perfect world, your withholding would be exact and you and Uncle Sam could just call it even. And you would put all the extra dollars in every paycheck to work instead of waiting for a fat check the following year.
But if you count on a refund, don’t feel bad. It doesn’t necessarily make you a lousy money manager, especially in these challenging, low-interest-rate times.
And you have lots of company.
Even with increasingly sophisticated tax software that makes it easier to calculate proper withholding, most people choose to come out way ahead at tax time. A
Massachusetts Tax Carve-Outs Exceed Total Tax Revenues by $4 Billion
A preliminary draft report issued by the Massachusetts Tax Expenditure Commission shows that state tax expenditures are expected to reach $26 billion in 2013, a number $4 billion larger than the projected revenues of $22 billion. In short, as the Massachusetts Department of Revenue put it, “the Commonwealth collects less in revenue than it has chosen to forgo.”
The Massachusetts General Laws define tax expenditures as state tax revenues lost as a direct result of exemptions and deductions from, or credits against, taxes. These carve-outs are not very different from direct government expenditures, but unlike many direct expenditures which are downward redistribution, tax expenditures often represent upward redistribution.
Why it’s madness to buy an annuity now – but many sadly have no choice
Who in their right mind would buy a pension annuity today?
After all, rates are at rock bottom, gilt yields are repressed because of the impact of quantitative easing and someone buying an annuity today would lock into a lifetime income 25 per cent lower than they would have done if they had bought an annuity three and a half years ago.
Unfortunately, life is not so simple. For many people, they have no choice over when they can purchase an annuity. They simply can’t afford to delay.