Broker Check

June 30, 2015

Date, Mate, and Impregnate Cont’d

          Six years after the recession ended in 2007, the nation’s birthrate began to climb in 2013.  This is only partially good news.  The nation’s total fertility rate, a statistical measure of how many children each woman is likely to have over her lifetime, also rose slightly to 1.862 children up from 1.858.  That remains below the 2.1 children needed to keep the U.S. population stable, not counting immigration.

          The number of births increased 6% for Asian women compared with 1% for non-Hispanic, white, black, and Hispanic women.

          Higher fertility is positive for the economy because it means more workers in the future to propel growth and pay for the social benefits of the elderly (Social Security, Medicare, etc.).  It also means more people to consume the nation’s goods and services.

          Kenneth Johnson, a University of New Hampshire demographer has estimated 2,300,000 more babies would have been born if America’s prerecession birth rate had continued.  That may create the potential for a “baby bounce” as Americans who had put off having children due to the financial toll of the recession play catch up.  Wall Street Journal 6/17/15 p. A6.

Move On Over

          There are 59,000,000 Social Security beneficiaries today.  That number is expected to grow to 78,000,000 in 2025 and almost 100,000,000 in 2040. Where will the money to pay them come from? Congressional Budget Office.

Retirees are Millionaires?

          The maximum benefit paid by Social Security to an individual retiring in 2015 at the full retirement age of 66 is $2,633 per month.  $3,200,000 invested in a pre-tax account earning 1% annually on a tax-deferred basis would generate $32,000 per year or $2,667 per month of taxable income.  Social Security Administration.

IRS Hacked

          Your personal income tax data is not secure.  That is the lesson taxpayers learned after the IRS reported a breach of its tax system by sophisticated hackers.  Tax information on 104,000 filers was stolen by scammers in the past few months.  Hackers used IRS’s Get Transcript Web Tool in order to gain unauthorized access to taxpayer information.  Armed with Social Security numbers stolen elsewhere, they answered several personal verification questions in order to access filers’ tax return transcript.  The scammers took the stolen information and filed phony tax returns in the victims’ names.  They sent in 36,500 fake returns and up to 13,000 of these get pas the IRS’s fraud detection system totaling around $39,000,000 in false refunds.

          We were one of those affected.

          The IRS says they will strengthen authentication procedures in light of the hack.  The Kiplinger Tax Letter Vol 90 #12.

IRS Will Not Rule on IDGTs

          A standard feature of estate tax planning is to create an intentionally defective grantor trust.  Several times a year we are shown these trusts created for a client’s parents.  This is where a trust is created in which the grantor is treated as the owner for income tax purposes but the assets are not included in the grantor’s estate at death.  Tax advisors differ on whether the excluded assets get a stepped-up basis when the grantor dies.  The IRS now says taxpayers will not be able to seek rulings on the basis adjustment issue.  Some tax professionals are worried that the IRS’s reluctance to rule is a sign that the agency believes there is no step-up which could hinder the use of this popular estate planning technique.  The Kiplinger Tax Letter 6/9/15.

          As always, if you have any questions about these or any other matters, do not hesitate to call us.

          Remember, We’re Here For You!