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Tax-friendly states for retirees. Do they exist?

February 8, 2011 | Filed Under Finance, Real Estate, Retirement Savings, Tax Articles | Comments Off

Looking for tax savings can be a full-time job these days. Whether it’s income tax, sales tax, estate tax and even taxes on your Social Security Benefits or Pension, we all could improve our financial picture by reducing the amount of taxes we pay out. Retirement brings a reduced income for most people, even with Social Security Benefits and Pensions to draw upon. That is all the more reason to look for legitimate ways to decrease your tax liability.

Reducing your taxes doesn’t always have to be complicated. Retirees have an advantage over the working class. That is, they aren’t tied down to any one spot because of a job. Freedom to pack it up, and move to greener pastures is one way that you could save on taxes.

I found this great guide to looking up which states are more favorable for reducing taxes. For instance, you can look up the 5 states with no sales tax, the 9 states with no income tax, states with the lowest sales and real estate tax. Particularly important for retirees, is the states that don’t tax your Social Security Benefits and that are Pension-Friendly. I recommend you take a look at the guide and see if perhaps a move is in your future.

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What Expenses Congress Should Cut

January 23, 2011 | Filed Under Finance, Retirement Savings, Tax Articles | Comments Off


The politics of spending has changed with the recent economic tide. There is an expectation among fiscally conservative voters; Republicans, Independents, Tea Partiers and even some Democrats, that the government tighten its financial belt, just as some Americans have been forced to do during this recession. The primary economic challenge in today’s economy is that our government spends too much money and it is money the government does not have. Nothing evidences this more than the $1.3 trillion annual deficit and a $14 trillion dollar national debt. The more insidious effects of this fiscal policy are (1) a debased dollar; (2) possible double-digit inflation; (3) massive unfunded liabilities such as Medicare and Social Security; and (4) a deterrent to hiring by employers.

Milton Friedman, a Nobel Prize winning economist, argued that the “real cost of government, the total tax burden, equals what government spends plus the cost to the public of complying with government mandates and regulations, as well as, the calculating, paying and taking measures to avoid taxes.” He added “anything that reduces that real cost, lower government spending, elimination of costly regulations on individuals and businesses and simplification of taxes” all mean tax reform. Tax reform is good for the taxpayer.

If Congress returned to the baseline spending before the supposedly “temporary stimulus bill” of 2009, $177 billion per year would be saved, according to the Congressional Budget Office (CBO). If spending went back to the 2007 baseline, the beginning of the first Pelosi Congress, $374 billion per year would be saved.
Other major sources for reduced spending include repealing ObamaCare and elimination of taxpayer funded bailouts, especially for Fannie Mae and Freddie Mac. Taxpayers have already contributed more than $127 billion to the bailout and they are on the hook for hundreds of billions more for Fannie Mae and Freddie Mac.

Entitlement programs comprise 56% of the annual budget and they are growing. They are the most difficult, but the most important programs to reform because the total unfunded liability tops $100 trillion for Social Security and Medicare alone. The federal government does not put these liabilities on the books, but serious budgeting requires that this ominous and looming problem be dealt with sooner rather than later.

Republican, Ryan Paul, the new chairman of the House Budget Committee, has designed a complete work on entitlement reform referred to as the “Roadmap of America’s Future”. This “Roadmap” combines a gradual slowing of Social Security benefit growth with optional personal accounts that seniors would own and control. He also converts the big 3 health care programs, Medicare, Medicaid and tax subsidies for employer sponsored health benefits, into capped contributions to individuals. This is a patient-driven approach, allowing individuals to take control of their own dollars. According to an analysis by the CBO, the “Roadmap” would reduce government spending by $370 billion a year by 2020.

There is some good news on the horizon. The New House rules enable Mr. Ryan to create the conditions for reform via enforceable spending caps on all domestic government spending, if Congress fails to produce a budget. He should use that authority to halt the current government spending binge.

Federal Reserve Rejecting State and Local Government Bailouts

January 23, 2011 | Filed Under Finance, Retirement Savings | Comments Off


In a recent Wall Street Journal article, Federal Reserve Chairman, Ben Bernanke “ruled out a central bank bailout of state and local governments strapped with big municipal debt burdens, saying the Fed has limited legal authority to help and little will to use that authority.” (Wall Street Journal: “Bernanke Rejects Bailouts”, Saturday/Sunday January 8-9, 2011).
This is the list of top 20 states with the most staggering debt and budget deficits for 2010:
1. California – last count was $42 billion dollar deficit;
2. Oklahoma – a drop in oil and gas prices caused this budget gap;
3. Arizona – this was one of the states worst hit by the housing crisis;
4. Illinois;
5. Hawaii;
6. New Jersey – the state has the third highest expected budget shortfall for fiscal year 2011, behind Arizona and Nevada:
7. New York;
8. Nevada – one of the states hardest hit by the housing crisis, but its legislature has already taken action to close its budget gap for 2011;
9. Colorado; and
10. Michigan – which entered the recession long before any other state due to the serious reduction in production in the auto industry. The unemployment rate is the worst in the nation at a record high of 14.7%.

Mr. Bernanke testified before the Senate Budget Committee stating “we have no expectation or intention to get involved in state and local finance.”
The Fed only has legal authority to buy muni debt with maturities of six months or less that is directly backed by tax or other assured revenue, which makes up less than 2% of the overall market. Moreover, the Dodd-Frank financial regulation law enacted last year further ties the Fed’s hands by barring the central bank from lending to insolvent borrowers or pursuing bailouts of individual borrowers.
States may attempt to persuade Congress on enacting laws that will help bailout of the individual states: however, lawmakers also are setting financial boundaries and senior House Republicans say they will oppose any state requests for money. “If we bail out one state, then all of the debt of all of the states is almost explicitly put on the books of the federal government” House Budge Committee Chairman Paul Ryan said. Democrats seem to be wary of state bailouts as well.
In 2010, there were 5 municipal bankruptcy filings, down from 10 filings in 2009, according to a report from Bank of America Merrill Lynch. On a recent broadcast of “60 Minutes”, a banking analyst who recently turned to analyzing state and local finances, said the U.S. could see “50 to 100 sizable defaults” in 2011 amounting to hundreds of billions of dollars. This is a bleak outlook for many states with substantial budget deficits.

The New Estate Tax Law and Gift Tax Exemption

January 11, 2011 | Filed Under Finance, Investment, Retirement Savings, Tax Articles | Comments Off

As most people are aware, Congress passed a new estate tax law just prior to the end of calendar year 2010. Not only was the estate tax law changed, so was the lifetime gift tax exemption, as well as the generation skipping transfer tax exemption.

First, the estate tax exemption was increased to $5 million per person from the prior law, which was scheduled to sunset and be reduced to $1 million dollars. This is a $4 million dollar increase in the amount of wealth that an individual can die with, before the federal estate tax law applies to an estate. There is no way to describe this law change other than it is a windfall to taxpayers. Very few people have estates that are subject to estate tax and most of these people either reside on the east coast or west coast, due in large part to real estate values. Although this is a tremendous windfall to taxpayers, the counterargument is that the reduction in estate tax revenue to the federal government will hinder the government’s ability to decrease the federal deficit that is currently spiraling out of control.

The estate tax exemption is also now portable between spouses. This means that if spouse #1 dies and doesn’t need or use all of his or her $5 million exemption, the unused portion is portable or transferable to the surviving spouse. For example, husband dies and has an estate worth $3 million. His surviving widow can aggregate the unused $2 million exemption of her late husband and add it to her $5 million exemption, so she now effectively has a $7 million exemption. This provides for huge tax planning opportunities for wealthier people. Amounts passing to a US citizen spouse and to charity don’t count against the exemption amount.

Second, the lifetime gift tax exemption and the federal estate tax are once again unified; meaning both are set at a $5 million dollar exemption amount for 2011 and 2012 and are tied together. This concept is confusing for many people, so hopefully this will add clarity to the subject. Each year, you may gift up to $13,000 to any person (unlimited in number). This is referred to as the annual gift tax exclusion amount. If the amount of the gift is over $13,000, then it is subject to gift tax and reduces the amount of one’s lifetime gift exemption of now $5 million dollars. The reduction in the lifetime gift tax exemption also reduces the estate tax exemption because the system of gift and estate tax is designed to limit the amount of wealth that can be transferred either during lifetime or upon death. However, tremendous gift planning opportunities are available, without paying a gift tax, to reduce the size of an estate so that an estate tax will not apply upon death.

Lastly, the generation skipping transfer tax exemption, which is an additional tax imposed on transfers of assets to a “skip generation”; generally, one to grandchildren when the parents are still alive, is $5 million, up from $1 million in 2009. When this $5 million GST exemption is leveraged with advanced wealth transfer techniques, such as a grantor retained annuity trust or an installment sale to a trust, wealthy clients will be able to transfer vast sums, tax free, to trusts for their children, grandchildren and generations beyond.

With these new tax law changes, it is critically important to revisit your estate plan. Planning opportunities abound for people with substantial wealth.

Some Projected Growth for 2011

December 15, 2010 | Filed Under Finance | Comments Off

The outlook for US economic growth for 2011 has grown more optimistic, according to the latest Wall Street Journal forecasting survey of 55 responding economists. Meanwhile, the odds of a double dip recession have been reduced to 15% from 22% in September. “The majority of respondents said there is a better chance the economy will outperform their forecasts than that it will underperform.” (Wall Street Journal, December 13, 2010, “Economists Predict Growth in 2011”) The data used to make these forecasts appears to be looking better. This data includes trade, retail sales, consumer sentiment and manufacturing. Economists are also encouraged by the news of the tax-cut compromise expected to pass the Senate in the near future. The extension of the Bush tax-cut in combination with the payroll tax cut is expected to provide further stimulus to the economy and boost growth, as well as jobs. However, there are still problems that can hold growth at bay: the unemployment rate ticked up for the first time in three months and the housing market is in trouble with excess foreclosures and very restrictive lending parameters for potential home buyers.

Lenders Still Tightening Credit in the Housing Markets

December 15, 2010 | Filed Under Finance, Investment, Real Estate, Retirement Savings | Comments Off

The housing market may be headed for another downturn, according to some economists, because mortgage lenders continue to tighten the already restrictive lending standards for home loans.

Earlier this year, the housing market was buoyed by the home-buyer tax credits, but sales have plunged in the second half of the year after the tax credits expired. New and existing home sales were down by more than 25% in October from a year ago.

Even though mortgage rates are at the lowest in 60 years, mortgage applications are hovering near their lowest levels in more than a decade. Housing economists are very concerned that tight credit at the bottom of a housing cycle could result in continued retardation of the hoped for recovery. An expanding housing market will usually help lift an economy as it exits a recession, but in this current market, it appears the glut of foreclosures will continue to hit the market without buyers who can qualify for home loans due to restrictive lending parameters. Because the lending standards have increased significantly, the housing market will not be propping up the economy in the near future. Economists say lending standards typically ease at this point in the business cycle as banks look for new business. Banks are not looking for new business at this point, could it be because they are flush with cash from the Troubled Asset Relief Program (TARP monies)? If banks were not in possession of the TARP cash, would they be looking for new business? Did the TARP money to banks interrupt the normal business cycle which will lead to prolonged financial difficulties for consumers? It appears the more big government spends, the more consumers experience financial woes.

European Debt Crisis and Inflation

December 8, 2010 | Filed Under Uncategorized | Comments Off

News media and the general public have been closely watching the European debt problems, especially those countries in crisis like Greece and now Ireland. However, the debt crisis, banking problems and currency valuation issues are not the only concerns. There are serious worries about inflation that could spread to global concerns, if the economies in specific Asian countries continue to keep interest rates inappropriately low. The following countries have these inflation rates, according to the Wall Street Journal:

India 8.6%
China 4.4%
S. Korea 4.1%
Thailand 2.8%
Philippines 2.8%
Indonesia 5.8%
Malaysia 2.0%
Singapore 3.5%
Australia 2.8%

By comparison, the United States has an inflation rate of 1.2% for 2010. The US government went so far as to declare the reason that there is no increase in Social Security payments in 2010, for the first time since 1975, is because the index upon which increased payments are based had a negative inflation factor. Will the low interest rates controlled by the Federal Reserve Bank in the US, also cause similar inflation as what these other countries are experiencing? Couple inappropriately low long term interest rates with the massive printing of currency in our country and imagine where the inflation will be next year at this time.

Big Banks Recovering and Profiting While Small Banks Still Struggling

December 2, 2010 | Filed Under Finance | Comments Off

“A report released by the Federal Deposit Insurance Corporation (FDIC) showed that the nation’s largest financial institutions are recovering from the financial crisis at a far faster pace than that of their smaller rivals…  The number of banks on the FDIC’s list of problem institutions climbed to 860 at the end of September, the highest level since March 1993, while the average size of those banks dropped to $440 million from the $486 million.” Wall Street Journal November 24, 2010.

There are diverging fortunes between small and large banks, which could have long term consequences for the banking industry.  Only a few national banks dominate the industry with mortgages, small business loans and checking accounts.  For example, Wells Fargo Company’s acquisition and merger with Wachovia Bank, has recently resulted in Wells Fargo Company reporting third quarter profits of 19%.  The larger banks are not necessarily depositor friendly, as they tend to pay lower interest rates to keep their costs to a minimum.  Some smaller banks are seeking out mergers as they struggle to survive financially.  The FDIC chairman, Sheila Bair, recently said that “commercial real estate continues to weigh heavily on community banks’ balance sheets.”

Some of the dominant banks have recently passed a new round of regulatory stress tests administered by the Federal Reserve.  This could result in the banks returning to dividend payouts to shareholders in the near future.

Spending Increase May Not Be a Savings Grace

December 2, 2010 | Filed Under Finance | Comments Off

Consumer spending has had a slight increase in the third quarter of this year, over last year at this time.  October and November are showing signs of increased spending by consumers, but at what cost?  According to a recent article in the Wall Street Journal on November 24, 2010, “the personal savings rate is expected to fall in October for the fourth consecutive month, to below 5.3%.  That means consumers are spending more of their incomes and saving less.”

One of the positive outcomes of the recent recession is that it has caused people to “tighten their financial belts” which resulted in less spending and more saving.  Putting money in savings is a good habit that former generations of Americans practiced regularly.  The Baby Boomers and Generation X have been much less diligent in their savings habits, that is until the recent recession.  Hopefully, if there is an upturn in the economy, it will be because consumers are both spending, as well as saving,  as this would be the best possible outcome.  We can learn a lot from the financial habits of former American generations that lived on less, saved more and did not rely on credit for daily living.

Tips On Reducing Your Current Debt

November 20, 2010 | Filed Under Finance | Comments Off
By: Tim Gorman

Nobody enjoys being up to their eyeballs in debt. I mean let’s face it life is hard enough without having to worry about how you’re going to pay bills that seem to keep piling up all around you. If you’re feeling this way I can assure you it’s not just you. Sadly millions of people suffer from having to pay a large financial obligation due to an enormous amount of debt they have accumulated over time. Just doing a quick search on Google shows that there are over 16,000,000 million web pages that use the term debt reduction which explains the hundreds of debt reduction programs that are offered online. Stop and take a breather for a second because this article will give you several ways you should be able to reduce your debt.

Debt Reduction Tip Number 1 – Consolidate Your Credit Cards
Credit cards, credit cards and still more credit cards. Millions of people carry them with a large portion of that group overusing them to an extreme resulting in high interest and a large accumulation of credit card debt. If you are suffering from high credit card debt then one method to alleviate that stress would be to consolidate all of your credit cards onto a lower interest rate or zero interest rate card. This should allow for one central payment at a lower rate then several payments too many different cards at a higher percentage interest rate. Do your online research and find a card that offers a lower rate and then transfer all of your balances over to that new card and don’t use the now debt free credit cards again.

Debt Reduction Tip Number 2 – Consider a Debt Consolidation Loan
On the surface this sounds like a bad idea but in reality this can be a way to relieve yourself of several payments at different rates and terms. The key here would be to find a debt consolidation loan with favorable rates which will most likely be based on whether or not you have a steady income from employment and a fairly decent credit score.

Debt Reduction Tip Number 3 – Consider an Estate Sale
Depending on the amount of debt you need to relieve yourself from it could be possible to sell some items you have laying around your house for a few extra dollars. This could be jewelry you no longer wear, that hot tub you no longer use or that third car that collects dust in the garage month after month. Use any money gained from this sale to immediately be put to use paying off any credit card debt you may currently have.

Debt Reduction Tip Number 4 – Consider a Second Job
Nobody enjoys having to work more then one job to make ends meet but if your financial security and future is at risk then perhaps you should reconsider. After all wouldn’t you rather go through the pain of working a second part time job now instead of bankruptcy and poverty at a future date? Use all income gained from this second form of employment to pay down any of your outstanding debt starting with the higher interest debt first. Once things have settled down for you and you have your financial future back under control you can always part ways with your second job.

Debt Reduction Tip Number 5 – Look For Another Way Out
Even if you’re piled under a mountain of debt that doesn’t mean you have to roll over and take it. Let your mind relax and become creative in ways you can earn money to pay off your debt. Look at other methods of acquiring funding to pay off your bills – such as tapping into a home equity loan (if you own a home). Maybe you have some stocks you can sale or a little bit of cash stashed away for a rainy day. You as a last resort could even consider bankruptcy but this has a drastic effect on your credit score and may not be worth it if you think you can salvage a way to pay off your high interest debt.

This article wasn’t intended to provide a debt reduction plan. Instead I wanted to pass along a few tips that I’ve seen other people use successfully to rid themselves of high interest debt in order to regain their financial freedom. If they can do so can you. Do some additional research and see what you can come up with in order to eliminate your debt.

Author Bio
Timothy Gorman is a successful Webmaster and publisher of

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