Retirees get significant tax benefits in New York State

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New York State has long been known as the “land of taxes.” Higher-than-average real estate, income, and sales taxes have been a reality for many years. However, New York offers some significant tax breaks to older residents, making it less onerous to retire and remain in the state.   Here are some of the major tax breaks a retiree in New York can look forward to:   Taxes on Social Security: The good news here is that all Social Security income is tax-free in New York, regardless of your income or the size of your Social Security benefit. The federal government may tax some of your Social Security benefit if your income is above certain guidelines, but New York will take a pass. This is an important benefit and a bonus for New Yorkers since 12 other states levy income taxes on Social Security benefits if their residents pay federal income taxes on the...

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Investing in the markets vs. saving at the bank

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The difference between putting your money in an insured bank savings account and investing it in the stock market seems obvious. Money at the bank doesn’t fluctuate in value, assuming there are no fees on the account. Money in the stock market fluctuates minute by minute, and there is no guarantee you will get out what you put in. But there is another big difference that savvy investors understand: saving large amounts of money at the bank allows the bank to take advantage of your hard-earned money. Investing in stocks allows you to earn all of the potential profits from your investment, rather than having to share them with someone else. Put your money in the bank and it will guarantee the principal and pay you interest. Sounds like a sweet deal, but you have to realize the banks are not charities. They are profit-making enterprises. They are willing to pay you...

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Interest rates flash a warning

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It is a common misperception to think the stock market is a good predictor of things to come. Savvy investors know that the bond market and current bond interest rates are important indicators to monitor. You’ll hear experts talking about the “yield curve,” which is simply the shape of the line on a chart of interest rates, ranging from short-term rates offered on one-month Treasury Bills to those offered on 30-year Treasury Bonds. Normally, short-term interest rates are lower than long-term rates, and the yield curve slopes upward left to right. In that case, investors are betting the economy will grow and prices will rise over time. In order to protect themselves against inflation, longer-term investors demand higher interest rates. This year, that upward curve has been flattening out: even though the Federal Reserve has raised short-term interest rates to 1%, long term rates in recent weeks have dropped slightly, rather than increased....

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Will Rising Higher Interest Rates Hurt the Stock Market?

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After many years of keeping short-term interest rates at zero to help the economy recover from the 2008 recession, the Federal Reserve Board is slowly nudging rates up. It has implemented several quarter-point increases and says it intends to push rates up to the 3% range over the next several years. This is good news for conservative bank savers who may finally get paid some interest on their capital, and potentially bad news for bond holders who may see the value of their bonds fall in the short-term as new bonds with higher interest rates are issued. But what will rising rates mean for stock investors? Accepted wisdom says higher interest rates hurt stocks, because investors now have more choices for guaranteed higher yields on fixed income products like bonds, money market funds, and the bank. Dimensional Fund Advisors decided to test that wisdom by taking a statistical look at what has...

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Domestic investors miss a world of opportunity

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Over the past few years international stock markets have trailed the U.S. stock market by big margins. Faster growth in U.S. corporate profits, coupled with a strong dollar, meant that domestic investors were rewarded for keeping their money here. That dynamic changed this year as foreign stocks in aggregate began to outpace American stocks with average returns overseas running as much as 50% higher than U.S. returns. Once again, investors are being reminded that it’s not good to concentrate their money in one market, even if that market is the biggest in the world. There are some 10,000 non-U.S. stocks listed on foreign exchanges and their market capitalization accounts for about 48% of the world’s stock market value, says Dimensional Fund Advisors (DFA). That means a domestic-only investor misses out on almost half of the available stock market opportunities. Even though the U.S. market did well in the three years leading up to...

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Stock markets make money, individual stocks often don’t

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You’ve heard this statement many times before: the stock market’s returns beat that of low-risk investments many times over. Well, it’s true: since 1926, when comprehensive stock market statistics began to be gathered in the United States, the stock market’s annualized return has run a little over 10% a year, three times greater than the returns on one-month U.S. Treasury Bills. But individual stocks often don’t do as well as the stock market, says a new research paper by Hendrik Bessembinder, a finance professor at Arizona State. He found that returns on most individual stocks have not surpassed T-Bill returns. In fact, most of the stock market’s outperformance is due to just 4% of listed stocks; “The other 96% collectively matched one-month Treasury bills,” he wrote. More than half of U.S. stocks over the period were beaten by T-Bills, he found. Even worse, the most common net total return for a single stock...

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Do I Need a Financial Advisor? Top 10 signs that say you do

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How do you answer the question "Do I need a financial advisor?" Here are some warning signs that we see when new clients come to us: You don’t seem to be getting anywhere. Money comes in and goes out, you don’t save, and your credit card balances never go down. Your employer offers a 401k or other tax-favored retirement savings plan, but you don’t contribute. You contribute something to your employer’s plan, but have no idea what you are invested in. You have multiple retirement accounts at former employers and don’t know what to do with them. You’ve inherited a much larger amount of money and investments than you are used to dealing with. You aren’t sure how much money you’ll need to generate an adequate retirement income. Or, even worse, you think Social Security will take care of all your needs. You aren’t sure how your family will get by if you die or become disabled...

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Is The Trump Rally a Myth?

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All too often investors make the mistake of projecting onto the stock market their hopes and fears relating to current events. It’s almost as if they view the market as a reflection of the national zeitgeist: if we are feeling good about current events, we buy stocks and markets go up, while they drop when we are feeling worried or depressed about the daily news. This phenomenon has manifested itself of late in talk of a “Trump Rally” in U.S. stocks. According to this theory, stocks have been gaining in value since Trump’s election because investors are happy to have a business-friendly, regulation-hating president who has vowed to cut taxes and spend big on infrastructure. Investors are buying stocks in anticipation of economic growth that will follow from the new administration’s initiatives, the argument goes. This is not consistent with how the markets actually operate. It has long been known that political...

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The Retirement Savings Crisis

Source:U.S. Census Bureau

Financial advisors routinely advise American workers to save as much money as they can for retirement, preferably in a tax-deferred savings plan. Social Security will only fund about one-third of the average worker’s retirement income needs, and few workers these days are covered by old-fashioned pension plans. Just 10% of workers over age 22 have traditional pensions, found a recent Pew Charitable Trusts analysis. Unfortunately, a new study by the U.S. Census Bureau says that only about one-third of workers are contributing to an employer-sponsored 401k plan or other tax-deferred savings plan. Even worse, the research indicates only about 14% of employers offer any type of savings plan. Although large companies tend to offer plans, the many employees working for employers with 100 or fewer employees may have no plan available to them, the research found. When it comes to employers that offer tax-deferred plans, only 41% of workers are taking advantage of...

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