Millionaires don’t flee from ‘millionaire’s taxes’, by jhon o:
When anyone brings up new taxes on the rich, the big objections is that such taxes end up being counterproductive because the rich simply flee to places that don’t tax them. ...
A few years ago, New Jersey instituted a tax that raised rates on those making more than $500,000. Predictably enough, some clever academics swooped in to test the prediction that all the rich folks would leave. So how’d it fare? Poorly:
The study found that the overall population of millionaires increased during the tax period. Some millionaires moved out, of course. But they were more than offset by the creation of new millionaires.The study dug deeper to figure out whether the millionaires who were moving out did so because of the tax. As a control group, they used New Jersey residents who earned $200,000 to $500,000 — in other words, high-earners who weren’t subject to the tax. They found that the rate of out-migration among millionaires was in line with and rate of out-migration of submillionaires. The tax rate, they concluded, had no measurable impact.The study went on to conclude that “the policy effect is close to zero,” though if it exists for anyone, it’s for the over-65 crowd who live off their investments.
Jumat, 06 Mei 2011
Do High Income Households Relocate To Avoid Taxes? by jhon o
Rabu, 04 Mei 2011
Beware! Female Sexual Desire Not Controlled Due excitant by jhon o
Do not accept drinks any given number of men you've just met. The possibility of beverages that contain sexual stimulation and allows rapists target the target they want. Reported by The Star on Thursday (28/04/2011), a number of stimulants in the form of powder is often used by men in Kuala Trengganu, Malaysia.
Beware, when you receive an offer of a drink from stranger
A man named E (25) says the drink is very dangerous for women because it can arouse sexual desire shortly after consumption. "A friend of mine gave the drink to the woman he knew. Approximately 15 minutes, the woman took her intercourse without the need to be asked, "said the man.
According to him, these drinks make women unconsciously gave herself to the rapist because it was filled with desire desire for sex.
Beware, when you receive an offer of a drink from stranger
A man named E (25) says the drink is very dangerous for women because it can arouse sexual desire shortly after consumption. "A friend of mine gave the drink to the woman he knew. Approximately 15 minutes, the woman took her intercourse without the need to be asked, "said the man.
According to him, these drinks make women unconsciously gave herself to the rapist because it was filled with desire desire for sex.
Selasa, 03 Mei 2011
High income, low net worth could doom retirement by jhon o
Have you ever thought that if you were making $100,000 or more it would be easy to save money? Apparently it isn't, even for people making upward of $250,000. There's no shortage of high-income earners who have relatively little net worth.
t's not that they don't save; many max out their 401(k) plans religiously. But socking away $15,500, or $20,500 if they're eligible for catch-up contributions, annually isn't going to provide for their current lifestyle when they're retired.
"We've always referred to it in our practice as the 105 percent rule," says P.J. DiNuzzo, chief investment officer at DiNuzzo Investment Advisors in Beaver, Pa. "If they're making $100,000, they spend $105,000. If they're making $200,000, they're spending $210,000. They say they'll start making it up next year, and then next year turns into 10, 15 or 20 years down the road and they've wasted a tremendous opportunity to prepare for retirement."
The No. 1 reason earners in the $100,000 to $249,000 bracket give for slacking off on savings is that they need the money to pay bills, according to an HSBC Direct survey. And that would certainly seem to imply, as DiNuzzo indicates, they're living beyond their means.
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Spenders or savers?
Many of these high income earners who come up short at the savings game are entrepreneurs who excel at running a business or professionals who receive annual raises and bonuses that can mean a 10 percent annual increase in gross pay. They're bright, and it shouldn't be difficult for them to figure out that they're going to need a hefty nest egg to continue their lifestyle beyond their working years.
Many of these high income earners who come up short at the savings game are entrepreneurs who excel at running a business or professionals who receive annual raises and bonuses that can mean a 10 percent annual increase in gross pay. They're bright, and it shouldn't be difficult for them to figure out that they're going to need a hefty nest egg to continue their lifestyle beyond their working years.
Michael Prebenda, senior vice president at HSBC Direct, says people have belief sets that guide them to be spenders or savers. "You'll find people with low incomes who save a large percentage of their income because they believe strongly in savings. People who aren't inclined to save can't visualize the need to save for something that's 10, 20 or 30 years down the road. It's not tangible.
"It's often quoted that in the U.S. we have a negative savings rate. That's driven by 70 percent of the population that's spending well in excess of their income annually and 30 percent of the population, roughly, that's saving a heck of a lot of money. It's that 30 percent who have a good feel for cash."
Roth IRA: Switch now, pay tax later by jhon o
Roth IRA: Switch now, pay tax later
People with incomes above $100,000 are now eligible to convert to this tax-beneficial IRA. And the new rules have something sweet for lower earners, too.
Just in time
With federal budget deficits expected to top $9 trillion over the next 10 years, it's a safe bet that income taxes will increase to deal with the rising sea of red ink. Upper-income Americans are likely to bear the brunt of future tax hikes. That makes a compelling argument for converting assets in traditional individual retirement accounts, which will be fully taxed when you tap them in retirement, to tax-free Roths.The catch is that you must pay income taxes at your current rate on any amount you convert. Plus, if you're younger than 59 1/2, your Roth must be open at least five years before you can tap the converted amount penalty-free. The five-year rule does not apply to taxpayers older than 59 1/2. Once you reach that age, you can withdraw converted amounts from your Roth without penalty.If you run through the entire converted amount and begin dipping into earnings before you pass the five-year point, the earnings would be taxed, though no penalty would apply if you're at least 59 1/2.
- Calculator: Should you convert?
No payments for a while
If you convert to a Roth in 2010, you're entitled to extra time to pay your taxes. Although you will be taxed on the entire amount you convert, you can spread out the payments, reporting half of the conversion on your 2011 tax return (due in April 2012) and the balance on your 2012 return (due in April 2013). That gives you a lot of time to come up with the cash to pay your tax. This is not an all-or-nothing deal. You can convert a portion of your IRA at any time and pay the taxes as you go. But the option to spread the tax bill over two years is available only if you convert in 2010.More from MSN Money and Kiplinger
The sooner, the better
You owe taxes on the value of the IRA as of the conversion date. So making the switch early in 2010 will save you money if the account value continues to grow throughout the year. And if the Roth's value declines later, there's a way out. You can convert the account back to a traditional IRA -- also known as a recharacterization -- without paying income tax. (See "4 steps to undo a Roth IRA conversion.")You have until Oct. 15, 2011, to make a final decision on any 2010 Roth conversion.You could hedge your bets
You might divide the converted amounts among multiple Roth IRAs according to asset class. Say your stock funds soar but your bond funds tank. You end up with a bargain tax bill on the winning stock portfolio, and you can recharacterize the losing bond account without a tax liability. One note of caution: If you convert a large amount of money to a Roth, it could boost your taxable income substantially, and you might need to pay quarterly estimated tax in 2011 and 2012 to avoid an underpayment penalty.No undo button
No need to worry that Congress will one day eliminate the tax-free Roth after you've paid your taxes. The taxes collected on Roth conversions are a moneymaker for the strapped U.S. government. If Congress were to kill the Roth, existing accounts would likely be grandfathered. Otherwise, lawmakers would face a taxpayer revolt.Why Even High-Income Earners Are Not That Far From The Edge of Poverty by jhon o
Despite earning more than $100,000 in household income many people still feel that they are living month-to-month and that a loss of employment or medical emergency could easily move them from upper middle class to low income earners. This feeling of being on the “edge” of poverty, given the level of income, seems a bit ridiculous but it really comes down to bad financial habits, a lack of discipline and peer group pressures.
Many of these high income earners tend to be corporate or self-employed professionals and usually have a considerable advantage when it comes to making money. Thanks to managerial jobs, graduate level education backgrounds and stock portfolio’s, many command six figure incomes. In theory, these high incomes should make it easier to stay out of debt, save more, potentially take on some calculated risks in a fairly manageable way (if desired), and generally accumulate wealth more quickly. But is that what happens? No.
I know from past personal experience that I would have fallen into this group of poor-rich people, but thanks to improving my personal finance habits (this blog being evidence of that change) and having a long term savings/investment plan in place I was able to leverage my higher than average household income to actually create a much more stable future. But there are many reasons why those with ample earning power may feel on the edge of poverty.
- Keeping up with the Joneses. As a group high income workers are generally competing with each other. Both for career advancement and other materialistic items like the biggest house, best car or latest gadget. There is a perception in our society, correctly or incorrectly, that the more you earn the more you should spend. Look at those Wall Street workers as an example or the level of excess before the recent recession. Keeping up with the Joneses is an expensive proposition and unfortunately the cost of materialism eventually catches up.
- Easy Credit. Even in today’s tough economy, for those with six figure incomes credit is easy to come by. Credit companies may have cut back offerings to those in lower income brackets thanks to the recently enacted credit card reforms, but there seems to be little or no impact to high income earners who are heavily courted by premium credit card companies like American Express and Discover. The availability to this “easy” credit gives a false sense of security that makes these people spend way more than their incomes can afford. That is why they rack up credit card debt faster than average and thinking it would be easy and quick to pay off. But due to high interest rates and compound interest this theory is quickly debunked as the amount of debt grows much faster than income.
- No real budget. Many higher income earners feel like they are making lots of money now, and they believe that they will continue to make lots of money going forward. This may reduce their feeling that they need to watch their money carefully now. Hand-in-hand with that, many in this group probably believe that they are making more money than they really are— or said another way, the money they make will go farther than it really does. Many young professionals who are earn good incomes don’t come from particularly privileged backgrounds; and their reference point may be that they are making twice as much (or more) than their parents were – so they spend like that as well. They don’t factor in the effect of inflation over many years which means that the cost of living is much higher than in our parent’s generation. Further the more you earn the more you pay in taxes. Rather than focusing on after tax incomes, many high income earners only look at the top line figures. A $100,000 income after tax is only about $75,000 in real terms.
- Time Poor. Many professionals work long 60+ hour work weeks in stressful environments. The last thing they want to do is come home and deal with boring personal finance things such as budgeting, 401K plans, cutting coupons etc. I remember a few years ago my life was work-sleep-partying on the weekend and then back to work. This was exacerbated when kids came into the picture. Looking back this was a poor excuse to let my finances slip, but it happened as I am sure was the case for many other professionals.
- Speculating rather than investing : My portfolio had over 20 stocks that I bought without real purpose and truth to be told I think I lost much more money than I made investing (knowing what I know now, I called what I use to do speculating). I was just chasing the next stock rather then following some kind of investment strategy. Retirement was a far away thing and the thought of putting a away 10% of my pay check for 30 years seemed ridiculous. Sadly, after the tech boom I lost most of my investment portfolio and most of my savings with it.
How to get out of this rut to finally become financially stable?
In most cases it takes a certain adverse event or stark realization to turn one’s financial life around. For me the catalyst was getting laid off from work and realizing that I only had about one month of savings – despite having earned a six figure income for more than 2 years. One of the lowest points in my life ended up being the best thing that happen to me.
After this it takes focus, the desire to learn/improve and discipline to have the paradigm shift that allows one to become “financially savvy”. The road to financial freedom is not easy but the general steps to get out of debt and build a solid future are actually quite basic – save more than you spend and invest for the future. They key is having the right attitude and be willing to have the right habits (like being frugal is not being a cheapskate). I feel that I have come to terms with my personal finances and am much more in control of my financial destiny than I ever was. Sure the recession has knocked my investments off their intended target, but thanks to being well diversified, in time I’ll make back those losses and then some.
No matter how much earn, we can all fall for the same personal finance traps. The key for high income professionals is to ensure that they realize this, learn good personal finance habits and not waste the opportunity they have. After all if our parents and their generations could make it earning much less than $50,000 a year – why can’t we given all the resources we have.
Budget: High income earners targeted by tax grab Chancellor announces a double blow to high flyers with 50 per cent income tax and personal allowance cuts by jhon o
Around 700,000 high earners will be hundreds of pounds worse off because of a hike in income tax to be introduced in April next year.
In a surprise move the Chancellor announced a change to the personal allowance which will mean that anyone earning over £112,950 will be around £3,000 worse off from April 2010.
In another blow to top earners, he announced that those earning over £150,000 will be taxed at 50 per cent from next April.
The change in the personal allowance alters a plan announced in November's pre-Budget report. At the time Alistair Darling said that taxpayers will suffer a reduction to their personal income tax allowance by £1 for every £2 of earnings above £100,000, up to a maximum of half the personal allowance. People earning more than £140,000 would suffer a further cut in the personal allowance until it was removed completely at £146,500.
In today's speech the Chancellor announced that the plan to take away the personal allowance will be simplified. The personal allowance will disappear at £1 for every £2 of earnings, with no floor.
That means the personal allowance will disappear completely for anyone earning £112,950 or over. Therefore, if the standard personal allowance in 2010 is £6,505 this will cost someone earning £113,000 a total of £2,602.
Together, the measures mean that someone earning £200,000 will be around £8,000 worse off.
Toby Ryland partner at Blick Rothenberg, the accountant, said:"Individuals earning over £100,000 will see significant income tax increases either through withdrawal of their tax free personal allowance or, for those earning, over £150,000 a 10 per cent increase in their income tax rate. It is not just the fat cats who will suffer, it is people like GP's and headteachers."
Who are the high income earners? by jhon o
From the New York Times this article, Lure of Great Wealth Affects Career Choices, caught my attention. It talks about a two-tier income stratum within professional jobs. Rather than earning the typical six-figure income under $400,000 there are people making millions due to:
. . . people [who] latched onto opportunities within their fields that offered significantly higher incomes [or] have moved to different, higher-paying fields — from academia to Wall Street, for example — and a growing number of entrepreneurs have seen windfalls tied largely to expanding financial markets, which draw on capital from around the world…Three decades ago, compensation among occupations differed far less than it does today.
Among these high income earners you can find:
- Partners in Hedge funds and private equity firms
- Real estate developers
- Lawyers
- Dot-com entrepreneurs
- Scientists/entrepreneurs who sell their discoveries
- Owners of ordinary businesses who sell them
- CEOs
- Wall Street investment bankers
- Sports stars and celebrities
and the children of the super-rich
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