Permanent Value

Week in Review 01/09/2016

Bruce Doole
January 9th, 2017

Rising Student Debt Among Seniors Threatens to Wreck Their Retirement (part 1)

The CFPB reports that 60 and older is the fastest growing age segment with student debt, and nearly 40% of borrowers 65 and older are in default

Financial advisors may be surprised to learn that the fastest growing age segment of student loan borrowers are those 60 and older, and nearly 40% of student loan borrowers 65 and older were in default on student debt in 2015.

These are just two of the startling statistics disclosed in a new report from the Consumer Financial Protection Bureau.

The loans are both public and private, and about three-quarters were taken to finance a child’s or grandchild’s college education as a borrower or co-signer. The remaining portion were used for the education of the borrower or his or her spouse.

No matter who the beneficiary is, these loans are a burden for seniors in or near retirement, many of whom also hold other debt, such as a mortgage, auto loan or credit card debt.

For example, heads of households aged 50 to 59 who had outstanding student loan debt saved less for retirement that their counterparts who didn’t have such debt, according to Federal Reserve stats quoted in the report.

In 2013, the median 401(k) savings balance was $65,000 for those consumers without student loans but $55,000 for those with such loans. The gap was even greater for IRAs: a median $56,000 balance for those without student loans versus just $31,000 for those with student loans.

Advisors usually counsel clients to make saving for retirement a priority over saving for college, but having outstanding student debt apparently can also impact retirement saving.

Co-signing a student loan is also a risk for parents and grandparents, says Sommer. He suggests others ways to finance a child’s college education including choosing a community college for at least for the first two years of a college education as well as work study and student loans owed by only the student with no co-signer.

The latter are usually more available with government, rather than private, loans but there are limits to what can be borrowed.

Source: Bernice Napach


  • FOMC Minutes revealed a wait-and-see theme as members expressed caution in evaluating the economic outlook given uncertainty on how federal spending, tax and regulatory policies would unfold under the incoming Trump administration.
  • U.S. jobless claims fell by 28,000 to 235,000 for the week ended Dec. 31, continuing a trend that suggests a solid job market.
  • EIA Petroleum Status Report showed crude oil inventories down 7.1 million barrels in the Dec. 31 week to 479 million, which is 6.2% above the level in the same period of the prior year.
  • Eurozone/European Union economic sentiment saw its fourth successive monthly rise in December, up 1.2 points to 107.8.
  • U.S. employment rose a lower-than-expected 156,000 (nonfarm payrolls) in December.
  • U.S. international trade deficit widened sharply in November to a higher-than-expected $45.2 billion. Exports fell 0.2%, while imports rose 1.1%.
  • U.S. factory orders fell 2.4% in November but were actually up 0.1% when excluding transportation equipment and a 94% monthly downswing in commercial aircraft orders.

Source: Ivy Weekly

Week in Review 01/03/2017

Bruce Doole
January 3rd, 2017

9 Ways to Save on Taxes in Retirement (6/9)


If you’re taking required minimum distributions from one or more traditional IRAs, and if you don’t need that money to live on during the year, you can wait until December to take it – and at the same time ask the IRA sponsor to hold back enough to pay the IRS not just for the estimated tax on the RMD, but also to cover the taxes on your other taxable income.

Estimates tax payments are considered to be made when you send the IRS a check, but amounts withheld from IRA distributions are considered paid throughout the year, even if you make them in a lump sum at the end of the year.

So if your RMD is well-enough funded to pay your whole tax bill, the money can stay sheltered for most of the year and still not expose you to the underpayment penalty.


You may not realize, after years of an employer automatically deducting your taxes, that you have a choice about when to fork over the money.

But, of course, that comes with pitfalls.

Since taxes are due when income is earned, if you stall on sending tax payments till the April 15 after you receive income, you’re going to find an astonishing array of penalties and interest await you.

But you can control, to an extent, tax payments- through withholding from regular payments from a company pension or annuity, or from an IRA. In fact, you’d have to file a Form W-4P to stop it.

And you should bear in mind that IRA withholding is at a flat rate of 10%, unless you either block it or request a different rate. If you have to pay taxes on Social Security benefits, you’ll need to file a Form W-4V, since Social Security doesn’t withhold taxes by default.


Just because one of you is retired doesn’t mean the other has to stop saving for retirement.

If you’re half of a couple and one of you is still working and at least 50 years old, he or she can contribute up to $6,500 a year to an IRA that you own. Traditional IRAs allow spousal contributions up to the year you hit age 70½, while there are no age limits on a Roth.

As long as your spouse has enough earned income to fund the contribution to your account (and any deposits to his or her own), you can continue to save to boost your retirement funding levels. For both 2016 and 2017, that $6,500 cap applies.
Source: Marlene Y. Satter


  • U.S. consumer confidence in December reached its highest level since August 2001, the Conference Board said.
  • Japan’s industrial output rose 1.5% in November, boosted by growth in electronics and automotive parts.
  • U.S. pending home sales fell 2.5% in November, after rising slightly in October, on a sudden increase in mortgage rates and limited inventory.

Source: Ivy Weekly

Week in Review 12/28/2016

Bruce Doole
December 28th, 2016

9 Ways to Save on Taxes in Retirement (3/9)

While you probably won’t have to worry about the federal estate tax — unless, that is, you have more than $5.49 million to pass to your heirs in 2017 (married couples can pass on double that amount) — you still might want to use the annual gift tax exclusion, especially if it looks as if you could get stuck for that estate tax.
The gift tax exclusion lets you give up to $14,000 every year to as many people as you want without having to pay gift tax on it.
So if you need to get money out of your estate, and, say, you have three married children, each with two kids, you could give away 12 times $14,000 in 2016 and 2017 — for a total of $168,000 — and never even have to file a gift tax return.
If you’re married, your spouse can do the same, and the money given under the protection of the exclusion can’t be taxed as part of your estate after your death.

For the profit from the sale of a home to be tax free (up to $250,000 in profit tax free; $500,000 if married and filing jointly), it must be your principal residence and you must have owned and lived in it for at least two of the five years leading up to the sale.
But if you’ve sold your principal residence and moved into a vacation home you’ve owned for years, as long as that vacation home becomes your principal residence for at least two years, part of the profit on the sale will be tax free.
Kiplinger said in the report, “To determine what portion of the profit qualifies as tax free, you need to compare the amount of time you owned the property before 2009 and after you converted it to your principal residence to the amount of time, starting in 2009, that it was used as a vacation home or rental unit.
“Assume you bought a vacation home in 1998, convert it to your principal residence in 2015 and sell it in 2018. The post-2008 vacation-home use is seven of the 20 years you owned the property. So, 35% (7 ÷ 20) of the profit would be taxable at capital gains rates; the other 65% would qualify for the $250,000/$500,000 exclusion.”

Yes, you read that right — when you turn 65 the IRS increases the amount of the standard deduction you’re entitled to.
While a single 64-year-old in 2016 is entitled to claim a standard deduction of $6,300 (in 2017 it will be $6,350), a 65-year-old gets $7,850 (which increases to $7,900 in 2017).
If that extra $1,550 puts you into the range of taking the standard deduction instead of itemizing, and if you’re in the 25% bracket, that larger deduction will save you almost $400.
Couples get bigger deductions, too, if one or both spouses are age 65 or older. For instance, if both spouses are 65 or older, the standard deduction on 2016 joint returns is $15,100, going to $15,200 for 2017.
Source: Marlene Y. Satter


  • Germany PPI finally moved back into positive territory with a stronger-than-expected 0.3% monthly rise in November.
  • Switzerland Merchandise Trade was 3.64 billion in November, up from a marginally smaller revised 2.66 billion in October.
  • France PPI continued to rise in November with a 0.8% monthly increase.
  • U.S. Existing Home Sales rose by 0.7% in November to a 5.61 annualized rate, which is a cycle high.
  • U.S. GDP rose to an inflation-adjusted 3.5% annualized rate for the best showing in two years.
  • U.S. Jobless Claims rose 21,000 in the Dec 17 week to a much higher-than-expected level of 275,000.

Source: Ivy Weekly