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What Does It Mean to Be House Poor?
If youâre an existing homeowner or an aspiring one, you may have heard the phrase âhouse poor,â typically uttered by an overextended borrower. It may also serve as a warning to a first-time home buyer from a seasoned homeowner, especially right now with home prices so high. The Definition of House Poor Buying too much… Read More »What Does It Mean to Be House Poor?
The post What Does It Mean to Be House Poor? appeared first on The Truth About Mortgage.
Donât Move to Another State Just to Reduce Your Taxes
We know lots of friends who are considering moving from a high-tax state, such as New York, to a state with low or no state income taxes. They think they will end up with more money, although they are torn because they may also be moving away from family and friends just to escape state taxes.
- SEE MORE 5 Things to Do Before You Retire
What I advise them to do is think about spendable income â the amount theyâll have to spend after taxes â and not just low or zero tax rates. If you have more money to spend after paying the tax bill wherever you currently live, you might as well stay where you are, if itâs closer to the grandkids. You may be able to pay for at least one warm-weather winter trip, too.
Design a Smarter Retirement Income Plan
Before making life decisions about moving (or downsizing, purchasing insurance, etc.) retirees ought to know their number for their total starting income, and have a plan for retirement income that includes a projection of income and savings, and all planning assumptions.
The income plan ought to cover:
- Starting income
- Inflation protection
- Beneficiary income protection
- Spousal income (if applicable)
- Plan management (when plan assumptions are not realized)
- Market risk to plan (when markets fluctuate)
- Legacy passed on to beneficiaries or heirs
All these subjects are covered in articles on Kiplinger.com. In one article, How to Generate an Extra $20,000 a Year in Retirement, we examined the income from our favorite investor (a 70-year-old woman with $2 million of savings, of which 50% is in a rollover IRA). We saw a large before-tax income advantage from Income Allocation planning. Even if she invests a portion of that to meet her legacy objective, she still has a $20,000 advantage in spendable annual income.
The question is whether she gives back that advantage in federal and state income taxes in her home state of New York.
Reducing your Combined Federal/State Retirement Tax %
You may have heard that New York is a high-tax state, and thatâs true. It ranks No. 5 on Kiplingerâs list of the 10 least tax-friendly states for middle-class families.Â
Importantly, most states exclude Social Security income from taxation, as well as a portion of IRA distributions and employer pension plans. Together with interest on state and local bonds that is not taxed, a retiree has a head start in reducing state income taxes.Â
- SEE MORE 2 Alternatives to Required Minimum Distributions
But the question remains how much of that advantage is eaten up in New York state income taxes. The key for our Go2Income planning is that annuity payments are treated the same in both the New York and federal tax returns, meaning the tax benefits carry over. And with some of the adjustments at the state level mentioned above, the favorable tax treatment of annuity payments may be even more valuable.
Let me share with you the high-level elements of our 70-year-old investorâs federal and New York state tax filing.
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Courtesy of Jerry Golden
Benefits and Cost from this Planning
For our investor the income taxed by New York would be around $67,500 â or about 40% of her total gross income. As a percentage of total income, the state income tax is a little more than 2%. Even after adding federal taxes, her Retirement Tax Rate is less than 15%. That leaves her a big advantage in spendable income. A traditional plan without annuity payments and with lower income actually pays more in total taxes â with a combined tax rate of over 18%.
So, our plan produces more cash flow from savings, much of it tax-favored, and gives our retiree the freedom to live where she prefers.
And the cost? The primary one is that annuity payments donât continue at your passing even before the premium has been recovered.Â
You can elect a beneficiary protection feature that makes sure total annuity payments will equal the premium at a minimum. However, that choice will reduce the level of guaranteed annuity payments and some of the tax benefits. Or you can use the higher annuity payments to purchase some life insurance. And those planning choices arenât the only options you will have in terms of beneficiary protection.Â
What if the lure of zero state income taxes is too great? Our retiree could move to Florida, save the $3,500 in New York taxes, adopt a Go2Income plan for her circumstances â and pay for the kidsâ trips to visit her.
So be with the kids, live where you want and possibly leave less at your passing if itâs early in retirement. Bottom line: Donât follow the crowd. Do your own research. And rely on resources at Kiplinger.
At Go2Income, we can provide you with a complimentary personalized plan that delivers both a high starting income and growing lifetime income, as well as long-term savings.Â
- SEE MORE Choppy Market Impacting Your Retirement Income Plan?
Understanding How Direct Stafford Loans Can Help Fund Your Education
Direct Stafford Loans (or simply Stafford Loans or Direct Loans) are the most common federal student loans available for students seeking financial aid for college. While there are Stafford Loan limits, most students who fill out the Free Application for Student Aid (FAFSA®) can receive some amount of financial aid, whether those Stafford Loans are […]
The post Understanding How Direct Stafford Loans Can Help Fund Your Education appeared first on SoFi.
Increased Signup Bonuses on American Express Hilton Cards of up to 130,000 Points + $130
American Express is offering increased sign up bonuses on three of the Hilton credit cards
Stock Market Today: Wall Street Rallies Around Reassuring Retail Data
The stock market enjoyed a broad rebound Tuesday as fresh economic data suggested the U.S. consumer is still shopping strong.
The U.S. Census Bureau said today that April retail sales improved by 0.9% over March. Though that was slightly less than the 1.0% expected, there was a show of strength in the significant upward revision to March’s numbers, to 1.4% growth from 0.5% originally.
- SEE MORE The 22 Best Stocks to Buy for 2022
“To the extent that markets are worried about a growth slowdown, this is good news, but it is also a further catalyst for the Fed to raise rates even higher to get inflation under control,” says Chris Zaccarelli, chief investment officer for registered investment advisor Independent Advisor Alliance.
While Zaccarelli joins other names in believing a recession is unlikely in 2022, “the Fed is going to need to raise interest rates to a point where they are likely to cause a recession in 2023 or 2024, and that gives us cause for concern,” he says.
Despite the promising retail data, success in retail stocks wasn’t a gimme.
Walmart (WMT, -11.4%) plunged after delivering a mixed quarterly report. Revenues improved 2.4% year-over-year to $141.6 billion to easily top expectations, and Walmart lifted its full-year sales outlook. However, that windfall is coming from cost-conscious consumers flocking to its grocery aisle, which has lower margins than its other offerings. This, as well as supply-chain problems and other headwinds, caused Walmart to report profits of $1.30 per share that were well short of estimates, and to lower its income forecast for 2022.
Home Depot (HD, +1.7%) fared better, however, after delivering record fiscal first-quarter sales and upgrading its full-year outlook.Â
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“Walmart’s report this week basically confirmed all the negative scenarios that you would expect given inflationary pressures and rising interest rates,” says David Keller, chief market strategist at StockCharts.com. But he added that “Home Depot’s report had a much more encouraging tone as consumers fueled a strong earnings win for the company.”
- SEE MORE 37 Ways to Earn Up to 9% Yields on Your Money
Other pockets of strength Tuesday included airline stocks such as American Airlines (AAL, +7.7%) and Delta Air Lines (DAL, +6.7%), which were boosted by United Airlines’ (UAL, +7.9%) higher second-quarter revenue outlook. Semiconductor stocks including Micron Technology (MU, +5.7%) and Qualcomm (QCOM, +4.3%) also rallied around Piper Sandler’s upgrade of Advanced Micro Devices (AMD, +8.7%).
The Nasdaq Composite was tops among the major indexes Tuesday, up 2.8% to 11,984. The S&P 500 delivered a 2.0% gain to 4,088, while the Dow Jones Industrial Average improved 1.3% to 32,654.
YCharts
Other news in the stock market today:
- The small-cap Russell 2000 surged 3.2% to 1,840.
- U.S. crude oil futures slumped 1.6% to $112.40 per barrel.
- A retreat in the U.S. dollar helped gold futures tick 0.3% higher to $1,818.90 per ounce.
- Bitcoin improved by 1.7% to $30,058.48. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- Twitter (TWTR, +2.5%) made some gains despite a potential deal with Tesla (TSLA, +5.1%) CEO Elon Musk looking increasingly unlikely. Musk insisted today that he would back out of his $44 billion bid to buy the social platform unless Twitter proved that fewer than 5% of its users are bots. He tweeted that “20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher” without providing proof. Numerous analysts have now said they believe Musk’s sudden interest in Twitter’s bot numbers is either an attempt to escape his deal, or lower the $54.20-per-share price tag.
Buffett’s Latest Buys Are In!
A number of other stocks were driven higher Tuesday by their newfound inclusion into a prestigious order: the equity portfolio of Warren Buffett’s Berkshire Hathaway.
- SEE MORE The 15 Best Value Stocks to Buy Right Now
Berkshire filed its quarterly Form 13F with the SEC yesterday afternoon, revealing that after more than a year of heavy selling, Warren Buffett was finally eager to buy. Paramount Global (PARA, +15.4%) and Celanese (CE, +7.5%) were just two of the eight new positions Berkshire entered during the first quarter, and among the top beneficiaries of earning Buffett’s seal of approval.
We recently mentioned that inflation has been a major driver of many of Buffett’s purchases of the past few months, but it’s not the only story.
Read on as we explore each and every one of Buffett’s 22 moves from the first quarter of 2022, including what likely drew the Oracle of Omaha (or his lieutenants) to the position.
Kyle Woodley was long AMD as of this writing.
- SEE MORE 2022’s Best Mutual Funds in 401(k) Retirement Plans
How to Get the Most Out of Your Airline Miles and Points
Stock Market Today: Stocks Finish Lower as Traders Mull Recession Odds
The potential for the U.S. to slip into recession was the topic du jour Monday as stocks kicked off the week with a wobbly, uneven session.
Over the weekend, former Goldman Sachs chief Lloyd Blankfein told CBS’ Face the Nation that recession was “a very, very high risk factor.” That opinion was met by a number of other calls Monday morning.
- SEE MORE The 22 Best Stocks to Buy for 2022
Wells Fargo Investment Institute, for instance, says “our conviction is that the chances of an outright recession in 2022 remain low” but believes odds are growing that 2023 could see an economic contraction. UBS strategists say the chances are different depending on where you look â their global economists say “hard data” points to a sub-1% chance of recession over the next 12 months, but the yield curve implies 32% odds.
“There’s no crystal ball to predict what’s next, but historical trends can come into play here. With the [S&P 500] closing 15% below its weekly record, there’s only been two times in the past 60-plus years that the market didn’t fall into bear territory after a similar drop,” adds Chris Larkin, Managing Director of Trading at E*Trade. “This doesn’t mean it’s bound to happen, but there is room for potential downside.”
Larkin says to keep an eye on major retail earnings this week â which will kick off in earnest with Walmart’s Tuesday report â to get a pulse check on the American consumer.
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Monday itself was a fairly quiet affair. Exxon Mobil (XOM, +2.4%) and Chevron (CVX, +3.1%) were among a number of plays from the energy sector (+2.7%) that popped after U.S. crude oil futures jumped another 3.4% to $114.20 per barrel.
Twitter (TWTR, -8.2%) shares dropped after Tesla (TSLA, -5.9%) CEO Elon Musk spent the weekend questioning how much of Twitter’s traffic comes from bots. Wedbush analyst Daniel Ives said the move feels more like a “‘dog ate the homework’ excuse to bail on the Twitter deal or talk down a lower price.” TWTR stock has now given up all its gains since Musk announced his stake in the social platform.
- SEE MORE The Best Vanguard Funds for 401(k) Retirement Savers
The major indexes finished an up-and-down session with mostly weak results. The Dow Jones Industrial Average managed to eke out a marginal gain to 32,223, but the S&P 500 declined 0.4% to 4,008, while the Nasdaq Composite retreated 1.2% to 11,662.
Also worth noting: Warren Buffett’s Berkshire Hathaway will file its quarterly Form 13F soon. Check back here tonight as we examine what Buffett has been buying and selling.Â
YCharts
Other news in the stock market today:
- The small-cap Russell 2000 closed out the session with a 0.5% dip to 1,783.
- Gold futures gained 0.3% to settle at $1,814 an ounce.
- Bitcoin was off 1.6% to $29,551.92 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
- JetBlue Airways (JBLU, -6.1%) ramped up its hostile takeover attempt of Spirit Airlines (SAVE, +13.5%) on Monday, urging SAVE shareholders to vote against a buyout offer from fellow low-cost air carrier Frontier Group Holdings (ULCC, +5.9%). JBLU last month offered to buy Spirit Airlines for $33 per share â a premium to the $21.50 per share ULCC offered in February â but SAVE’s board of directors rejected the bid citing concerns over regulatory approval. JBLU followed up in early May with an “enhanced superior proposal,” including paying a $200 million, or $1.80 per SAVE share, reverse break-up fee should regulators block the deal.
- Warby Parker (WRBY) fell 5.3% after the eyeglass maker reported a loss of 30 cents per share in its first quarter. This was much wider than the per-share loss of 3 cents the company reported in the year-ago period and missed the consensus estimate for breakeven on a per-share basis. Revenue of $153.2 million also fell short of analysts’ expectations. WRBY did maintain its full-year revenue guidance of $650 million to $660 million. “We remain cautiously optimistic on shares as WRBY continues to show ability to grow the top line, open new stores, and is recession resistant as a lower cost option for non-discretionary spend,” says CFRA Research analyst Zachary Warring (Buy). “We see the company leveraging SG&A to become profitable in the second half of 2022.”
Check Out Europe’s Dividend Royalty
If you’re seeking out more stable opportunities amid an uncertain U.S. market ⦠well, the rest of the world is admittedly looking pretty shaky, too. But that doesn’t mean there aren’t a few morsels worth a nibble.Â
- SEE MORE 37 Ways to Earn Up to 9% Yields on Your Money
BCA Research notes that while there’s negative news around the globe, “European benchmarks already discount a significant portion of the negative news.” And looking ahead, inflation there is expected to peak over the summer “as the commodity impulse is decelerating” â that should help stagflation fears recede and help European shares.
Graham Secker, Morgan Stanley’s chief European and U.K. equity strategist, chimes in that his firm remains “overweight [European] stocks offering a high and secure dividend yield.”
We’ve previously highlighted our favorite European dividend stocks, which on the whole tend to produce higher yields than their U.S. counterparts.
But we’d also like to shine the spotlight on Europe’s twist on an American income club: the Dividend Aristocrats. The S&P Europe 350 Dividend Aristocrats have somewhat different qualifications than their U.S. brethren, but in general, they’ve proven their ability to provide stable and growing dividends over time.
Read on as we look at the European Dividend Aristocrats.
- SEE MORE The 22 Best ETFs to Buy for a Prosperous 2022