The following is a list of items to reduce income:

• If you have kids, and you want to help to pay for their college, plan to have more of it funded by 529 accounts. If you have to sell investments or draw down from tax-deferred accounts, that increases your MAGI.
• Pay off mortgage if possible to eliminate income requirement. Again, same thing as college funding, if you have to sell investments or draw down from tax-deferred accounts, that increases your MAGI. Without a mortgage, you have less need to realize capital gains or draw down from tax-deferred accounts.
• Derive income for ongoing expenses from tax exempt bonds (tax exempt income does not figure into MAGI).
• Use a short term tax exempt fund to hold non-immediate cash needs instead of a high yield savings account. Perhaps top up the checking account once or twice a month. This reduces the amount of interest payments reported in MAGI.
• Shift equity investments into lower yield equivalents, while still keeping the general composition of the portfolio reasonably unchanged. One potential candidate would be to invest in US LargeCap Growth instead of US LargeCap Blend. Does not work for US SmallCap (US SmallCap Growth has a poor historical record).
• Invest in rental property and use rental income to fund ongoing expenses (rental income is typically offset by property depreciation).
• Look into MLP investments that shield income for as long as the investment is not sold (you can control when to sell if necessary).
• Delay signing up social security.

Even though it looks like I could potentially benefit from the healthcare reform if I retire early, I don’t agree with the changes. They simply penalize people who are successful and are a disincentive to work. This can’t be good for the economy. But that is another story.

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• January 26, 2011 — Substitute Dividend Payments in Margin Accounts (0)
• July 30, 2009 — Squeezing out more tax efficiency from my portfolio (1)
• July 22, 2008 — Running out of tax-deferred space (2)
• January 31, 2008 — Tax harvesting from 529 plan? (0)
• February 9, 2007 — Sell mutual fund with short term CG after distributions (0)

One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller’s office concedes is a “substantial decline.” On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year — even at higher rates.

No doubt the majority of that loss in millionaire filings results from the recession. … And the Maryland state revenue office says it’s “way too early” to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It’s easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: “Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it’s easy for them to change their residency.”

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• January 26, 2011 — Substitute Dividend Payments in Margin Accounts (0)
• March 27, 2010 — Reducing income during retirement to qualify for healthcare subsidy (1)
• November 2, 2009 — Reduce your California tax withholding to avoid an IOU next April (0)
• July 30, 2009 — Squeezing out more tax efficiency from my portfolio (1)
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Many agents I spoke to try to convince me that now is a very good time to buy. They cite the following:

1. Inflation and interest rates are going up, but it is still at historical lows. You get more house for the same payment if you buy now.
2. Jumbo loans are hard to come by. The higher conforming loan limits (of up to $729k) will expire at the end of 2008. You need to buy now to get these loans. (Note: Jumbo loans are almost a necessity for home buyers in the bay area because a house in a reasonably good area costs in the range of $1m.)

My arguments to them are as follows:

1. Stated simply, interest rate predictions are just predictions, and not a fact. Many fund managers and professionals, sitting in front of their state-of-the-art mathematical models and computers everyday, cannot accurately predict interest rates. If interest rates can be predicted accurately, one should simply short the various interest-rate sensitive ETFs and make a fortune with no risk.
2. Now that the Housing and Economic Recovery Act of 2008 has been signed into law, we know that the conforming loan limits will not drop from $729k to $417k in next year. I think at worst, it will drop to $625k. This is because, the way this limit is set is that it is 1.5x that of the GSE Single Family Loan limit of $417k. This GSE limit has not increased for the past 3 years (the historical GSE limits are shown in the table below) and is, in my opinion, due for an increase in 2009 (in spite of stagnant house prices).

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To the new house buyer, it would appear that the house is a new listing when in fact it is not. I don’t know if this is considered as advertising under false pretense. Anyhow, the following is an article discussing the re-listing of houses — Buyer Beware: Unsold Homes Are Often ‘Re-listed’:

Here’s how it works: Niece cancels house listings when they reach 70 days on the market, and then re-lists them as new, with 0 days on the market.

“So, when the buyer says, ‘Well, how long’s this one been on the market?’ And he looks at a report that normally an agent or a buyer would have when they’re showing houses, it only shows the current time on the market,” Niece said. “So a buyer’s going to be way more positive as they look through a home that says 25 days versus 125 days.”

Niece believes that re-listing is an important marketing tool in tough periods like this, because first impressions are crucial.

…

“The issue here is that when a re-listed home is sold, it skews the market transaction data,” he said. “When an agent typically says they can sell a home in 30 or 60 days, is that really true? If they’ve re-listed a home, that might not necessarily be true.”

“The most common outcome is probably that a buyer overpays for a home,” he said. “I think it’s only a matter of time before a buyer who buys a home under these false pretenses realizes it and perhaps sues the real estate agent for misrepresenting a house.”

…

Across the country in Sacramento, California, the problem got so bad that Michael Lyon, CEO of Lyon Real Estate, blew the whistle after he noticed that one third of all “new” listings were re-listings. “This is just silliness,” he said. “I’m sorry, but you can’t pull the wool over the buyer’s eyes.”

Lyon forced his regional listing service to set a new standard. “We let people see all the previous listings, period, there are no secrets,” he said. “We want the buyer to know everything about all the times it was listed, so we can allow them to truly investigate the home.”

The Sacramento listing service also requires a material change in the house if it is to be re-listed. Other regional listing services have gone one step further, forcing sellers to take their home off the market for 30 days before posting it again. But because listing services are local agencies, each makes its own rules.

The National Association of Realtors says it hasn’t seen a need for regulation on re-listing because it is not aware of a problem. Lyon says buyers should ask their agents to get the entire listing history.

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To be sure, the public debt of the U.S. is huge in absolute dollars, but we need to take into account the economic capability of the country when evaluating the public debt. For example a $10k-debt is much more inflicting to a person earning $30k a year compared to another person earning $300k a year.

To this end, let’s look at the percentage of a country’s public debt to its gross domestic product. The figure below, which I obtained from Wikipedia, illustrates this.

The numbers for the top 58 countries are given below.

The U.S. is ranked 35 on the public debt / gross GDP scale, at 64.7%. Interestingly, Singapore is ranked the 11th most public-debt-versus-gross-GDP nation at 102.9%. And its neighbor Malaysia, has less than half of Singapore’s debt ratio, at 46.2%.

All numbers are estimates for 2005.

Source:

[1] CIA – The World Factbook.
[2] Wikipedia.

The finance is the key to everything today whether it is about buying, selling, studying or insuring your valuables. There are many companies and banks that are providing financial services of all types. The consolidation loan is a type of loan that is used for strengthening the business. There are special consolidation loans for the students too, to bear the fee package of higher education. There are many banks that offer consolidation loans to its consumers who want to expand their business and progress. If you are looking for information on free insurance quotes, travel insurance, home loans, and mortgage refinancing you can easily find it on the web with a click of a mouse. Now insurance companies are looking for all types of customers and they have different quotes for them. Many travel insurance companies merge with other tour agencies to make direct contact with customers.

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The following is an article from Economist.com, titled Venturesome Consumption, “in praise of America’s fearless consumers of new ideas and products”.

For a growing number of economists and policymakers, however, the greatest fear of all—not least because its long-term consequences may be so deep—is that America is losing its global lead in technology. In the battle to invent and innovate, China and India, in particular, with their gazillion-strong cohorts of engineering and science graduates, will soon overwhelm the dullards and liberal arts students churned out by America’s education system.

…

The most important part of innovation may be the willingness of consumers, whether individuals or firms, to try new products and services, says Mr Bhidé. In his view, it is America’s venturesome consumers that drive the country’s leadership in innovation. Particularly important has been the venturesome consumption of new innovations by American firms. Although America has a lowish overall investment rate compared with other rich countries, it has a very high rate of adoption of information technology (IT). Contrast that with Japan (the original technology bogeyman from the East) where, despite an abundance of inventive scientists and engineers, many firms remain primitive in their use of IT.

One reason why American firms are able to be so venturesome is that they have the managers capable of adapting their organisations to embrace innovation, says Mr Bhidé. Pressure to be venturesome may have come from America’s highly competitive markets. And America’s downstream firms are arguably the world’s leaders in finding ways to encourage consumers to try new things, not least through their enormous marketing arms and by ensuring that there is a lavish supply of credit.

PS. The title of this post is inspired by post 52278 from the Diehards forum.

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Consistent with recent work by Ang, Piazzesi, and Wei (2005) on forecasting growth, I have found that there is more information in the shape of the yield curve about the likely odds of a recession than that provided by the term spread alone. Probit models forecasting recessions that use both the level of the federal funds rate and the term spread give better in-sample fit, and better out-of-sample predictive performance, than models with the term spread alone.

Link HERE.

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