The Insurance Doctor

Category: economy

  • Chocolate Prices Are Skyrocketing!

    Chocolate Prices Are Skyrocketing!

    I’m wishing a belated Happy Easter to ALL Financial Wave readers who celebrate!  Did you happen to notice the prices of those Easter bunnies, eggs, and baskets? 

    I consider myself a “Chocoholic!”  Indulging in a piece of chocolate has long been a source of comfort and delight for humans all around the world.  Recently, that pleasure has come with a bitter aftertaste as chocolate prices continue to soar to unprecedented heights.  

    A recent report from the Wall Street Journal noted that the price of cocoa (the main ingredient used to produce chocolate) has risen 123% in the first quarter of 2024!  In fact, since the year 2000, the cocoa price per metric ton has increased from $850 to $9900.

    Most of the world’s cocoa is produced in West Africa.  Ghana and the Ivory Coast account for 2/3rds of the harvested cocoa beans in the world!  Cacau trees can live for up to 100 years; however, they only produce cocoa for their first 20 years of life.

    The primary reasons for the skyrocketing prices of chocolate are:

    1. Climate Change:  Either droughts or heavy rains and too much sun in West Africa have adversely affected production.
    2. Aging Trees: As mentioned, cacao trees only produce cocoa for their first 20 years of life and many of their trees are now older.
    3. Pests and Disease: Pests and diseases like “Frosty Pod” and “Black Pod” continue to ravage the cacao trees further, diminishing harvests and causing a 22-year low in cocoa production supply.
    4. Global Supply Chain Disruptions:  The COVID-19 pandemic caused lockdowns, restrictions, and labor shortages and have all contributed to hindering the transportation and processing of cocoa.

    These issues put small businesses, chocolatiers, and confectionary companies in a difficult position, as they must balance quality with affordability amidst escalating prices.  Many are forced to reconsider recipes, portion sizes and marketing strategies to adapt to the rapidly changing market dynamics.

    Some ways to save money on chocolate include:

    1. Stock up on chocolate AFTER holidays:  Chocolate prices get discounted after holidays, including Valentine’s Day, Easter, and Thanksgiving.
    2. Buy in Bulk:  The larger the bar the less you pay per gram.  Also, chocolate can and will stay fresh longer if kept in Tupperware or your microwave oven, both of which are airtight.
    3. Eat Less: I took a chocolate-eating class a few years ago at Aigner Chocolates (my favorite) given by a health coach.  She explained the proper way to eat chocolate is to take a small piece and let it melt at the top of your mouth instead of chewing it.
    4. Opt for Store Brands: Store-brand chocolates are typically less expensive than big-name brands and often still offer good quality.
    5. Check online:  Look for sales and online coupons as sellers often have lower prices than brick-and-mortar stores.
    6. Kick the Habit:  If all else fails, consider not eating chocolate and substituting something else for your sweet tooth.
  • Inflation rocks the nation!

    Inflation rocks the nation!

    No matter where you go these days, the bank, supermarket, or daycare to pick up the kids the number one topic of conversation in our nation is rampant inflation!  This is also a major problem across the world.

    As of the writing of this article, the G7 leaders are meeting in Bavaria, Germany to discuss “global inflation” and the war in Ukraine.  The G7 leaders are Joseph Biden (USA), Mario Draghi (Italy), Boris Johnson (United Kingdom), Fumio Kishida (Japan), Emmanuel Macron (France), Olaf Scholz (Germany), and Justin Trudeau (Canada).  They represent 7 of the richest economies in the world, which are all being affected by skyrocketing inflation. 

    As per Wikipedia, “Inflation is a general increase in the prices of goods and services in an economy.  When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.”

    My regular “Financial Wave” readers will remember that 2 weeks ago I covered “Inflation and Shrinkflation.” Shrinkflation is charging the same price for a smaller amount of goods.   A good example of this is Gatorade phasing out their 32-ounce bottles replacing them with a taller and thinner 28-ounce bottle while trying to make it look the same size.

    If you are not a business owner, the odds are good that you are on a fixed income or a fixed salary.  This means that the purchasing power of your money is eroding.  This is not a revelation, as you can see the noticeable difference every time you run errands at the supermarket, convenience store or at the gas pump! 

    The 2021 inflation rate was 7%.  The inflation rate for the 2nd quarter of 2022 is expected to be 8.4%!  The question for advisors is, “Is there anything we can do about this?”

    My answer is, yes, we can suggest investing in I-Bonds, also known as Inflation Bonds, backed by the U. S. Government!  The letter I stands for “Inflation Bonds,” which are specifically designed to fight inflation during these times. 

    You might not hear from your advisors about this because there are no commissions or fees to be made from selling I-bonds!

    My Lucky 7 Features and Benefits of I-Bonds:

    1. Definition: I-Bonds are savings bonds that earn interest based on combining a fixed interest rate and an inflation rate.  They are designed to earn a higher rate than the current inflation rate. 
    2. Security:  These bonds are secured by the U.S. government!
    3. Flexible Deposits:  You can deposit between $25 and $10,000 per year into an online treasury bond account.
    4. Online Accounts Only:  I-Bonds are ONLY purchased from the U.S. Treasury by internet online at www.TreasuryDirect.com
    5. Interest Rates Declared Twice Per Year: Every May 1st and November 1st, interest rates are declared, and your I-Bonds earn that declared and guaranteed interest rate for the next 6 months. 
    6. State Income Tax-Free:  I-Bond interest is protected by N.Y. State or your state of residence; hence, I-Bonds are state tax-free!
    7. Matures in 30 Years:  You can keep your money earning strong interest in your I-Bond account up to its maturity rate in 30 years.

    One of the reasons why I know so much about Inflation Bonds is because I purchased a significant amount of I-Bonds myself from the U.S. Treasury direct internet account this April.  This was after they announced the May 1st rates would be 7.11% from May 1st, 2022 to November 1st, 2022.

    A good advisor will ALWAYS look at the pros and cons when evaluating investment alternatives.  If you are looking to keep your I-Bond for over 5 years, there is NO drawback regarding liquidity.

    To explain, I will compare the withdrawal penalties/liquidity of I-Bonds vs. CDs, also known as Certificates of Deposit or Certificates of Disappointment in some circles.

    Year               I-Bonds                                 Bank 7-Year CD

    1                     Zero withdrawal 1-year interest penalty

    2-5                  3 mth interest penalty 1-year interest penalty

    6-7                  100% with no penalty 1-year interest penalty

    As you can see, as far as liquidity is concerned, I-Bonds compare favorably with bank CDs.  In case you were wondering, the current I-Bond interest rate is 9.62% which is guaranteed until the end of October 2022, before the rate changes again this November 1st!

    It is important to strategize with your advisors during these uncertain times of rampant inflation and a choppy stock market.  There are loopholes to being able to contribute more than that $10,000 per year from the treasury.  If you are interested in learning more, feel free to reach out to me at Rob@InsuranceDoctor.us.

  • Inflation & Shrinkflation!

    Inflation & Shrinkflation!

    We just broke an all-time USA record!  Unfortunately, it was a record for the national average for a gallon of gas breaking $5 for the first time ever last Saturday.  The price at the pump was up 30 cents over the last 3 days and increased $2.04/gal from 12 months ago.  According to Opis, a company that tracks gas prices for AAA (the American Association of Automobiles), Monday was the 16th straight day gas prices have increased.  Distillate fuel inventories, which include diesel, are a whopping 24% below our five-year average.

    The Google definition of inflation is: “A general increase in prices and fall in the purchasing value of money over time.” Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages.  A surge in demand for products and services can also cause inflation as consumers are willing to pay more for the same product.  In other words, a sudden imbalance in supply and demand can cause inflation to rise rapidly!

    As you have probably noticed, it is NOT just gas prices, as the prices of many other goods and services are on the rise.  The May 2022 CPI (Consumer Price Index) reports were just released, and it rose 8.6% over May of 2021, a 40-year high.  The CPI measures the cost of goods and services over time. 

    You might be asking yourself, “how did this happen” and “what does this all mean for me?”  Good questions!  This means if you are on a fixed income or salary, your money will not go nearly as far during these times of rampant inflation. 

    How did this happen?  I will give six reasons for the current gas quandary we are in, which I predict will go up another $1 per gallon over the next 30-90 days. 

    The following are 6 reasons for our current gas predicament:

    1. The Russian Invasion of Ukraine:  This sudden invasion with no warning dramatically decreased the amount of oil and gas available due to the NATO’s (North Atlantic Treaty Organization) immediate sanctions on Russian energy exports.
    2. A Shortage of Refineries to Convert Light Crude Oil to Gas, Diesel Fuel and Jet Fuel:  Nobody is talking about the high number of refineries that shut down during Covid-19 in 2020 and 2021.  If you remember, in the beginning of this pandemic, few people were driving; hence, demand shrunk almost overnight, causing many refineries to shut down. 
    3. The Shutdown of the Keystone Pipeline: This was the first major move of the Biden Administration as the Keystone Pipeline was 1-2 years away from completion.  This would have given us more control and significantly more reserves to stockpile for the exact situation we now find ourselves in.  
    4. Releasing Reserves Was a Band-Aid:  In an effort to reduce prices, we released significant reserves, which did not resolve the situation.
    5. Shipping Conglomerates Raised Prices:  When gas and oil demand goes up, so do the prices, and shippers have taken full advantage of the current situation.
    6. Summer Vacation Time:  Many Americans have been couped up for over 2 years and are taking that much-needed vacation or two this summer, despite the high gas prices.  This higher summer demand will push up gas and oil prices (Crude Oil Barrel is now over $120 from $100 a month ago) even further. This is why I am predicting another $1 increase over the summer.  I hope I am wrong!

    The combination of less refining capabilities and increased summer travel have exacerbated this imbalance between oil and gas supply and demand.  This causes major ripple effects.  Consider that as of 2019, the United States trucking industry has been responsible for transporting 70% of ALL goods in the USA.  Higher diesel gas and oil prices mean higher trucking costs, which lead to higher supermarket prices and airfares!

    Companies know that Americans are watching prices closely and have resorted to “sneaky measures” in my opinion, called “Shrinkflation!”  In economics, Shrinkflation is known as the process of items shrinking in size or quality, while their prices remain the same.  It is important to me that my “Financial Wave” column readers stay educated and ahead of the curve reducing your expenses by being smarter than non-readers!

    As per the NY Post, 5 Current Examples of Shrinkflation Include, but are Not Limited to:

    1. Gatorade is phasing out 32-ounce bottles in favor of taller and thinner 28-ounce bottles sold for the same price.
    2. Small Kleenex Boxes now have 60 tissues instead of 65.
    3. Chobani Flips Yogurts have shrunk to 4.5 ounces from 5.3 ounces.
    4. Cottonelle Ultra Clean Care toilet paper is down from 340 sheets to 312 sheets. 
    5. Folgers coffee downsized its 51-ounce container to 43.5 ounces but, still states it makes up to 400 cups.

    My takeaway is that it is important to keep track of trends and try to build a habit of reading and comparing labels and prices both for value and health purposes.  With all smartphones having a calculator, it doesn’t take long to calculate a cost per ounce even while at the supermarket or at home comparing prices to save big $$$.

    Do you have any additional examples of shrinkflation?  Feel free to email me at Rob@InsuranceDoctor.us.

  • 7 Money-Saving Tips at the Gas Pump!

    7 Money-Saving Tips at the Gas Pump!

    Due to a combination of events including Covid-19, the Suez Canal 2021 container ship backlog, and the current Russian invasion of Ukraine, there are gas supply-side issues that are driving up prices.  At one point, the U.S. was producing enough gas domestically to not have to import any gas from overseas. These are some reasons why we are in economic turmoil today! 

    During the past three months, we hit 40-year highs for inflation over a 12-month period.  From February of 2021 through February of 2022 the inflation rate was 7.9%. 

    What does this all mean?  To examine the rise in the annual inflation rate, we must first go back and examine the recent past.  Look at the annual inflation chart since 2017 below:

    Calendar Year                      Annual Inflation rate

    2017                                       2.1%

    2018                                       1.9%

    2019                                       2.3%

    2020                                       1.4%

    2021                                       4.7%

    2022                                       9.0?

    From February 2020 through February 2021, the overall inflation rate has been 7.9%.  Inflation is felt across our economy, starting at the supermarket as food prices have gone up by 8.6%.

    These days, pulling up to the gas pump is somewhat of an adventure and a major topic of conversation.  The cost of gasoline has gone up 38% since last February 2021.  There are significant ripple effects of these gas prices, as over 70% of our goods and services are trucked across the country. 

    Have you recently taken a cab ride from one of the airports?  Drivers from yellow cabs, Uber, and Lyft for the most part, use their own money to gas up their vehicles.  There are not enough vehicle charging stations (yet) available for cabs currently, so they must rely on gas-powered vehicles.  In order to earn a living, they must pass on the majority of their gas price increases to their ridership!

    As of this writing, California has the most expensive gas in the country.  Their average cost is $5.57 per gallon, the only state with an average cost of over $5.  More than one friend of mine texted me a photo of a Shell station in Los Angeles charging $6.99 per gallon of regular gas!  The states with the least expensive gas are Kansas and Oklahoma, both averaging $3.79 a gallon. 

    Unless the “Keystone Pipeline” project gets reawakened, I don’t see this issue subsiding anytime soon.  Windmill power is being developed and many years away, so me must reply on gas.  Gas prices can vary as much as 10-15 cents a gallon even a few blocks or miles away.  The savings add up over time!

    Heed My 7 Tips to Save Money at the Gas Pump:

    1. Wholesale Clubs: Members of wholesale clubs such as Costco, Sam’s Club and Krogers receive member discounts on gas!
    2. Pay with Cash:  There is a saying, “Cash is King!”  You can usually save between 5-10 cents a gallon when you pay in cash.  If you have a big truck or SUV, this adds up quickly.
    3. Loyalty Programs and Gas Cards: Nearly all gas stations have some type of loyalty program.  Most of us are creatures of habit and fill up at the same station or two.  Sign up at the stations you most often frequent or consider changing stations.
    4. Investigate Your Credit Card Rewards: Check to see if your credit card company has any deals on gas purchases, even if only in the short term.
    5. Time it Just Right: According to GasBuddy, the best day to save at the pump is Monday, the day that has the lowest gas prices in most of the country.  Do NOT fill up if you see the gas delivery truck leaving the station!  There are air bubbles that can temporarily negatively affect the gas quality until they have time to settle.
    6. Smart Phone Apps:  Downloading apps, such as GasBuddy, Gas Guru and the AAA mobile app, can be helpful, especially when traveling.  Also consider downloading CityMapper (a fluorescent green icon) which gives you the time it takes to get to your desired location by train, bus, citi bike or walking and it shows the estimated calories you will burn by doing so.
    7. Check the Internet:  Before embarking on a road trip, you can check in advance online where the cheapest gas is.  For example, www.NY1.com/gas is one site you can check in advance of road travel.

    Spring is officially here this Sunday and there will be more cars on the road.  The bottom line is, a little bit of reconnaissance can save lots of $$$$!  Let me know how it goes at Rob@InsuranceDoctor.us.

  • Inflation & Pizza

    Inflation & Pizza

    You will be hearing about inflation frequently during this holiday season.  The current administration forecasted a 2% inflation rate.  The Consumer Price Index numbers were just released, and from October 2020 to October 2021 the inflation rate was 6.2%!  This is the highest increase in the last 30 years!

    My friend Jay (originally from New Jersey) was in town from Maryland this weekend, and his favorite pizza is from New Park, so we had to go last Sunday before heading to Madison Square Garden for the Rangers vs. Devils game.  We were 3rd in line after 2 gentlemen who looked like they were in their late 60’s.  When the first man’s pie order came out, he asked, “how much do I owe you?”  The worker said $27 to the surprise of the man.  I said, “inflation just kicked in right now” and all 3 of us laughed. 

    Since the early 1960s, the price of a regular New York slice has almost matched the price of a subway token.  This was called the “Pizza Principle” or the “Pizza-Subway Connection!” 

    From New Park, I needed gas and paid over $4 per gallon for 91-octane on a credit card.  I have seen gas in Manhattan for $5 per gallon.  As per the Automobile Association of America, the national price of regular gas is currently $3.41 per gallon.  The New York State average is $3.56 per gallon.  The Manhattan average price is $4.33 per gallon. 

    This got me thinking about what has caused this inflation to be running rampant!  Basic economic supply and demand are what triggers inflation.  There are root causes for what is going on right now and we must adjust our budgets to cover these higher costs.

    The reasons include, but are not limited to:

    1. Government Covid Relief Bill: This bill disincentivized some people from returning to work. Now employers are seeking workers and paying higher salaries to hire them.  Increased wages cause inflation.
    2. Supply Chain Shortages and Delays:  The majority of US goods are trucked from coast to coast.  There is a shortage across of 80,000 truckers across America.  Long-haul truckers have gotten a raw deal over the years as working conditions have deteriorated.  According to the U.S. Bureau of Labor, the median trucker salary is only $47,000 per year, and adjusted for inflation, their purchasing power is down 30% from 1970-2020.
    3. Increased Costs of Raw Materials:  A combination of factors including increased gas and transportation costs and food shortages have driven up prices.  Your favorite Queens Pizzerias are paying more for tomatoes, cheese, basil, olive oil and cardboard boxes.  Some of these prices increases have been passed on to the consumer.
    4. Corporate America: When the pandemic first hit in 2020, corporations such as the airlines and automakers, went into survival mode and cancelled semiconductor orders, furloughed workers and slowed down production, which created supply shortages.  As the public had more disposable income, the demand increased faster than the bounce back in supply.  Unfortunately, this is not going away anytime soon.

    In summary, this will really impact Americans this Thanksgiving and Holiday Season.  This is a good time to adjust budgets and control spending, as your dollar will not go as far as it used to. 

  • Biden’s Gift to New York!

    Biden’s Gift to New York!

    Last weekend, President Biden’s $1.2T infrastructure bill passed, in a bipartisan Senate and House of Representatives. This bill will have a disproportionately positive benefit for New York and Rockaway in particular!

    There is an old saying, “the squeaky wheel gets the oil,” and this is what is going to happen with New York since we have more infrastructure needs than every other state except California.  If initial estimates hold true, roughly $170B (over 14% of the total) would be earmarked for New York State infrastructure projects.

    The New York Funds Breakdown is as follows:

    1. $12.5B:  For Roads, Highways, Bridge Repair, Electric Vehicle Infrastructure.
    2. $1B: For our 3 Airports:  JFK, $300M, Laguardia, $150M and Long Island MacArthur, $21M.
    3. $58B: For Trains:  $22B for Amtrak Improvements (includes the Gateway Tunnel to NJ Project, $24B for Northeast Corridor Modernization and $12B for Intercity Passenger Rail, including a “High-Speed” Rail! In addition, completion of the 2nd Ave Q-train to 125th st. and installed handicapped-accessible elevators at all stations.
    4. $90B: For Water Infrastructure:  $14.7B for the EPA (Environmental Protection Agency) Drinking Water Revolving Fund (provides grants and loans for projects). $14.7B for the EPA’s Clean Water Revolving Fund (for water quality improvement) and $55.4B in Supplemental Emergency Appropriations. 
    5. $9.8B: For Clean Buses and Mass Transit.  

    While this bill is a “game-changer,” I have mixed feelings about it.  To use an insurance term, it is great to see that both parties can come to somewhat of a consensus by “unbundling” the bill and breaking it off the proposed $2+T “Social Spending” bill.  

    My top 5 benefits to the United States from this bill:

    1. It will create hundreds of thousands of jobs and get people off couches!
    2. This will be a boon to the “Steel Industry!”
    3. Additional Modern Roads Will Increase Trucking Efficiencies and Cut Back on Carbon Emissions!
    4. Increase Domestic job creation!
    5. Drinking Water Quality Will Improve, Which Will Improve American’s Health.  There is a Water Company Called “Heart Water” That Could Solve Our Water Problem if Given the Chance to Scale (keep a lookout for a future column on this).

    As we all know, Rockaway has been devastated by Super Storm Sandy. We have shown our resiliency building Rockaway back better over the past 9 years.  This splurge of money can be used to:

    1. Fix Rockaway’s roads, especially Beach Channel Drive.
    2. Develop Additional Transportation Methods from Rockaway to Manhattan.
    3. Continue Improvements for future storm resiliency.
    4. Create new jobs in Rockaway.
    5. Prices of electric vehicles will come down as auto makers introduce their new EV models.  I predict the 2023-2024 models will be the optimal time to buy electric!  Buying electric and adding charging stations will improve Rockaway’s air quality and reduce carbon emissions.

    The general public might not find It easy to grasp how much $1 Trillion dollars is, as we could have done this while spending less money.  According to www.USDebtClock.org, the current US Deficit sits at $28.8 Trillion or $86,637 per person.  The proposed $3.5T package (not yet passed) would be equivalent to over 12% of our current deficit.

    To give an example how we got ourselves into this deficit situation, look at the Federal deficit progression below:

    President: Debt at Start of Office                       Debt When Leaving Office

    George Washington (1789-1797)                       $82 Million:  211 years later

    William J. Clinton (1993-2001) $4.4T                 $5.8 Trillion

    George W. Bush (2001-2009) $5.8T                  $11.9T

    Barack Obama (2009-2017) $11.9T                   $20.2T

    Donald J. Trump (2017-2021 $20.2T                 $27T

    In summary, this is the largest investment in domestic infrastructure since the 1950s!  It is prudent to spend money on long-term projects with trickle-down effects that will improve this country and our quality of life.

  • Why a 2022 Social Security boost may not be enough

    Why a 2022 Social Security boost may not be enough

    The Social Security Act (SSA) was signed into law by then-President Theodore Roosevelt on August 14th, 1935. In addition to several provisions for the general welfare, the new Act created a social insurance program designed to pay retired workers aged 65 or older, a continuing income after retirement. 

     As per SSA.gov taxes were collected for the first time in January of 1937, and the first one-time lump-sum payments were made that same month. What many people did not know at the time is the average life expectancy in 1935 for men and women was 59.9 and 63.9 respectively. Roosevelt must have figured few people would live long enough to collect.

    Social security is indexed for inflation, which is currently running rampant. It is hard to not notice the prices of goods and services have been rising. Comparing September 2020 to September 2021, for example:

    1.   Gas has increased an average of 42%

    2.   Eggs have gone up 35%

    3.   Bacon had a 28% increase

    4.   Used or Pre-Owned cars are up 24%

    5.   Kids shoes up 12%

    6.   Food on average is up 12% and

    7.   Furniture is up 11% over the last 12 months

    inflation CPI cost of living
    The rapid rise of consumer goods outpaces income for many

    When inflation surges like this, older Americans are the ones who are affected the most. Many seniors are on a fixed income and have their money invested conservatively, such as bank accounts and bank CDs (which I call Certificates of Disappointment!) This time of high inflation and super-low interest rates compounds the problem for many senior retirees.

    The good news is that it was just announced that Social Security recipients are slated to receive a 5.9% cost of living adjustment (known as COLA) in 2022! This benefit increase would be the largest in nearly 4 decades. 

    Based on my 7 examples above, the 5.9% increase will still not be sufficient to offset the skyrocketing increase of goods and services. In addition, there is the federal Social Security tax bite of 50% for individuals earning between $25,000 and $34,000 and 85% for single tax filers earning over $34,000 per year.  For joint tax filers, income between $32,000 and $44,000 would pay a 50% tax on your benefits. Couples earning over $44,000, up to 85% of your benefits may be taxable. Certificates of Deposit (CD’s) compound the issue because the taxable interest they earn (even though you don’t withdraw it) counts against your income.

    Other than repositioning assets and investments, older Americans have few options to increase their cash flow to absorb price hikes outside of returning to work or increasing hours of employment should they still be working. 

    See my tips below on options to help you offset inflation eating away at your purse or wallet:

    1.   Consider Credit Unions or Internet Banks: Both credit unions and internet-only banks will usually pay higher interest rates than brick and mortar banks.

    2.   Consider Transferring CDs to Fixed Annuities: Fixed annuities (issued by insurance companies) help in 3 ways. They typically offer higher interest rates than CDs.  The interest is tax-deferred, which lowers Social Security taxes, and most CD’s allow for a 10% per year no-fee withdrawal. If you withdraw (break) CD money before maturity, you lose ALL of the interest accrued. 

    3.   Consider Selling Your Life Insurance Policy if Not Needed: For older Americans, (especially in poor health) a life insurance settlement could make sense. We have been able to help clients obtain 2-5 times their life insurance cash-values (lump sum with usually no tax) by selling their no longer needed life policy, as well as saving them money they were paying in monthly premiums.

    4.   Consider a Reverse Home Mortgage:  Homeowners could be sitting on an inflation hedge by tapping into their home’s value with a reverse mortgage. This is not for everyone. It is wise to consult with a professional. Homeowners with no mortgage balance could set up monthly payments or a line of credit that can be tapped as needed. Those who are currently making mortgage payments would immediately see a boost in monthly cash flow by refinancing into a reverse mortgage; hence, eliminating their required monthly mortgage loan payments. 

    A great mentor of mine used to say, “the situation is the boss.” Each situation is different. There are other options like series I-savings bonds too numerous to mention. The worst possible decision is to DO NOTHING!

  • Covid Briefing #21

    Covid Briefing #21

    There is an old saying, “Ignorance is Bliss!”  My new saying during this Covid-19 era is “Ignorance is Super-Expensive!”  In my 30-year career, I have never seen more advisor ignorance and malpractice.  Keep this in consideration if this is the first you are hearing about this.

    There have been MAJOR CHANGES in tax deadlines and proposed changes in tax, gifting, and estate planning rules, proposed on March 29th by Bernie Sanders, which I will review below.  My “Elite 8” list of changes to be concerned about are:

    1. The Federal CARES Act One Year Hiatus on Required Withdrawals from IRA’s and Most 401k’s is Over in 2021:  This means the RMD (required minimum distribution) must be taken in 2021.  The amount is based on the age of the account holder.  For example, a 72-year-old with an $100,000 IRA must withdraw $3,906 this year.  A 75-year-old is required to withdraw $4,367 this year. 
    2. Obamacare Health Insurance Exchange Enrollment Date Extended Again: This means the health insurance open-enrollment period now is extended to Sunday, August 15th for those individuals who want to enroll.
    3. The Federal and New York State Income Tax Return Deadline was Extended: These 2 deadlines were extended from April 15th to Monday, May 17th. 
    4. Stimulus Payments Were Deemed Not Taxable: This is major news for Americans who have received one or more stimulus payments.  They are technically considered an advance on a tax credit known as The Recovery Rebate Credit.
    5. What Happens if You Missed a Stimulus Payment? You can recover it through the Recovery Rebate Credit when filing your 2020 tax return.  It can be found on line 30 of Form 1040 or 1040-SR.  Consult with your CPA or tax advisor on this.
    6. The PPP (Paycheck Protection Program) Application Deadline Extended: Eligible business owners may apply for needed funds through Memorial Day, Monday, May 31st.  For questions regarding the PPP, email me at Rob@InsuranceDoctor.us.  We can assist and connect you to banks who want to help at no cost for my Wave readers!
    7. The CDC (Centers for Disease Control) Extended the Eviction Moratorium Date: The nationwide ban on certain residential evictions was extended to at least Wednesday, June 30th!
    8. On March 25th, 2021, Senator Bernie Sanders Introduced the “For the 99.5 Percent Act”: These sweeping changes, if enacted into law, would change the way families pass money down to their children, and dramatically increase the taxes children must pay within 9 months from their parents’ death!  Proposed changes include but are not limited to: A. Reducing the current $15,000/ per person unlimited gift tax exclusion to a maximum of $20,000 per year in total.  B. Reducing the current $11,700,000 per person estate tax exclusion to $3,500,000 per person. C. Limiting lifetime gifts to $1,000,000 per person in total.

    Are you confused yet?  There has never been a more important time to rely on your advisors.  Reach out now to your CPA, Attorneys, Insurance Broker, Investment Advisor and Financial Planner to review these monumental changes.  This is what you pay them for, and your money-moves now will have an impact on your family for many years to come!  Feel free to reach out to me for guidance at Rob@InsuranceDoctor.us.

    Be Positive, Test Negative and Keep the Faith!

  • The American Rescue Plan

    The American Rescue Plan

    On Thursday, March 11th, President Joe Biden signed The American Rescue Plan into law almost a year to the day when it was acknowledged that Covid-19 had hit the USA, and it was deadly!

    This is the 3rd stimulus program since the pandemic has begun, and the question on most people’s minds is “Where is My $1,400 Check?” This third round of economic stimulus will be based on the taxpayer’s last processed tax return, from either 2020 or 2019.  That includes anyone that used the IRS’s non-filers tool last year or submitted a special simplified tax return.  The $1,400 is per adult.  The boost to the child tax credit will give eligible parents a total of $3,600 for each child under age 6 and $3,000 for each child under age 18 for 2021.  Until now, the credit was up to only $2,000 per child under age 17.  For large families who qualify, this can be a windfall!

    The US Treasury claims that almost 85% of Americans will qualify, based on income:

    1. $1,400 for a Single Filer: Individuals earning up to $75,000 AGI (adjusted gross income) would receive $1,400, which would be reduced by 20% for every $1,000 earned between $75,000-$80,000.  In other words, someone who earned $76,000 receives $1,120 ($1400-20% or $280) and one earning $77,000 receives $840 etc.
    2. $2,800 for a Married Couple Filing Jointly: Couples earning up to $150,000 would receive $1400 each but would lose 10% for every $1,000 up to $160,000.  Couples (filing jointly) would be ineligible if earning over $160,000. 
    3. $1,400 for Heads of Household: A head of household earning up to $112,500 would qualify for the full amount.

    There are different opinions on the new $1.9 Trillion American Rescue Plan as no Republicans voted “yes” in either The Senate or House of Representatives.  To give you a frame of reference, our current national debt is roughly $22 Trillion, meaning we are printing up to 9% of our national debt in new paper.  In 2020, we increased the money supply by 24% with the two 2020 stimulus payment packages. 

    This recovery package is designed for our country to bounce back with money set aside for the child tax credit, small businesses, restaurants, closed venues, extended unemployment, and state and local governments, to name a few. Only 9% of the $1.9T is going directly to Covid-19 relief. 

    HERE ARE MY 4 TIPS ON HOW TO MONITOR RECEIVING YOUR PAYMENT AND IN WHAT FASHION IT WILL BE RECEIVED:

    1. Complete Your 2020 Tax Return As SOON As Possible: If you earned more money in 2019 than 2020, the $1,400 check qualification is based on your 2019 return unless you get your 2020 tax return processed as soon as possible.
    2. Consult Your CPA or Enrolled Agent: If you did not receive the last stimulus check and should have qualified, you can pick it up as a discount on your 2020 tax return.
    3. Get Familiar with the IRS Website www.IRS.gov:  The IRS has updated their website with their “GET MY PAYMENT TOOL.”  You can go to www.IRS.gov/coronavirus/get-my-payment.  The “get my payment” button requires you to input your full social security number/tax ID, date of birth, street address and zip code.  This tool will be updated only once/day, usually overnight.
    4. Be Patient and on the Lookout: For those that received the first 2 stimulus checks and did NOT receive the checks by direct deposit, The Treasury will be mailing you a check or debit card.  Both Chase Bank and Wells Fargo are already having delays.  These types of payments are sent out in groups called “Tranches.”  If your address has changed, the easiest way to update it is to file your 2020 tax return with your new address.  Stimulus payments will be sent out through the mail as a check, debit card or via direct deposit, if you are already set up.

    In the coming weeks, more “Tranches” (batches) of payments will be sent via direct deposit, or through the mail as a check or debit card.  Some people have cut their stimulus debit cards thinking it was a sales promotion.

    Stay Positive, Test Negative and Keep the Faith!

  • “BIDENOMICS!”

    It now appears Joe Biden will be taking over the reins of power in January. I feel this is a good time to address some changes he might make based on his platform.  The question is, what does “BIDENOMICS” mean to your wallet or purse?

    Over the years, I have found that politicians’ actions are often incongruent to their words.  Here are some of his proposed changes:

    1. People Making Under $400,000 Will Be Unaffected: His proposal is to leave those earners alone and add a “Social Security Increase Tax” of 6.2% on ALL income earned over $400,000.  Social Security is in jeopardy as baby boomers (10,000 people turn 65 every day) born from 1946-1964, are withdrawing Social Security benefits faster than working Americans are contributing; hence, the affluent would be bridging the Social Security gap. 
    2. Income Earners Over $1,000,000 Would Incur Higher Capital Gains Taxes: Americans with over $1 million in total income would see income brought in from dividends, as well as capital gains taxed like their wages.  In this scenario, if you had a stock or business sale, your capital gains tax doubles from 20% to roughly 40%.  This would change many business and investment decisions.  It would not be a bad idea to consider making those sales now as usually these changes are “Grandfathered.”
    3. Corporate Tax Rates Would Be Increased:  His proposal would increase corporate tax rates from 21% to 28%, a 33% increase.  This is a big change that would have corporations reevaluate moving or setting up subsidiaries overseas. 

    In essence, his proposals would be taxing the rich and protecting the middle class.  Based on our current national and state budget deficits, I do see the middle class paying more taxes eventually; however, not in the beginning.

    President-Elect Biden has vastly different viewpoints on many issues than President Trump, especially on energy, climate change, health care and infrastructure.  The “Green New Deal” was a centerpiece in Biden’s campaign.

    Some areas where President-Elect Biden said he would concentrate on include:

    • Traditional Infrastructure
    • Digital Infrastructure
    • Electric Cars
    • Cannabis
    • Telemedicine
    • Green and Clean Energy

    There has been much unhappiness and angst over the fact that Congress has not yet passed an additional stimulus package since the one that ended on July 31.   Many believe that there is a possibility that another stimulus package may be passed either just before, or shortly after the inauguration on January 20, 2021.

    Keep in mind that it appears there will remain a split in control in the Senate and House of Representatives, so the next stimulus package might not be as large as people hope.  These “checks and balances” are, in my opinion, why the stock market has reacted so favorably thus far.

    I see the next stimulus including:

    • Extended Unemployment Benefits
    • Emergency Renters Assistance
    • A 2nd Stimulus Check
    • Some Type of a State-Level Aid Package
    • Additional Triple P (Paycheck Protection Program) Funding

    If you are interested in being added to our monthly e-newsletter list, email “Add Me” to Rob@InsuranceDoctor.us. 

    Be Positive, Test Negative!

    By:

    Robert C. Intelisano CLU, CSA, LUTCF

    The Insurance Doctor