Yearly Archives: 2015


2016 Economic Forecast


glass globe business. Global Market

2016 Economic Forecast

The October 2015 World Economic Outlook update from the International Monetary Fund (IMF) highlights the complex forces that currently weigh on global growth and will likely continue in the coming year.

Global growth is projected at 3.3 percent in 2015, marginally lower than in 2014, with a gradual pickup in advanced economies and a slowdown in emerging market and developing economies. In 2016, growth is expected to strengthen to 3.8 percent.

In emerging-market economies, the growth slowdown in recent years reflects several factors, including lower commodity prices and tighter external financial conditions, structural bottlenecks, rebalancing in China and economic distress related to geopolitical factors. A rebound in activity in a number of distressed economies, including Russia and the Middle East, is expected to result in a pickup in growth in 2016.

The distribution of risks to global economic activity is still tilted to the downside. Near-term risks include increased financial market volatility and disruptive asset price shifts, while lower potential output growth remains an important medium-term risk in both advanced and emerging market economies.

Lower commodity prices also pose risks to the outlook in low-income developing economies after many years of strong growth.

United States

Underlying drivers for acceleration in consumption and investment in the United States – wage growth, labor market conditions, easy financial conditions, lower fuel prices and a strengthening housing market – remain intact, according to the IMF report.

Charles Plosser, former president of the Federal Reserve Bank of Philadelphia, concurred with this assessment during a recent economic forum at Arizona State University (ASU). He noted the economy is on a firm foundation with consumer finances in much better shape than they have been in a long time. Strong consumer spending has contributed to solid growth for the last two years, growing above 3 percent in all but two of the last eight quarters.

Plosser does expect, however, that real business investment will continue to remain soft in 2016 relative to historical experience due to overall and policy uncertainty.

“Monetary policy is arguably more accommodative today than it was at the height of the financial crisis or deepest point of the recession. Fortunately, the U.S. economy is no longer in crisis and it has come a long way from the depths of the recession,” he said. “It is time to get on with moving policy from crisis levels. The U.S. economy is well-positioned to withstand a modest increase in rates, which is consistent with the historical record of Fed policymaking and with the rules that have been found to provide good policy outcomes across a wide range of theoretical models.”


Closer to home, a variety of indicators point to an improving Arizona economy.

“The gains we experienced in 2015 are setting the stage for continued advances in the year ahead,” said Lee McPheters, director of ASU’s JPMorgan Chase Economic Outlook Center. “Relative to the majority of other states in the nation, Arizona’s economy will appear quite solid. But compared to long-term historical growth during past decades, the gains will be somewhat below average.”

McPheters’ research indicates personal income in 2016 is projected to exceed 5.0 percent growth for the first time since 2011 as wages, employment and population all continue to increase. Arizona’s non-farm employment is expected to grow 2.6 percent and, the state will be on track to finally replace all jobs lost during the recession. The mix of employment in 2016 will be different, however, with knowledge jobs (professional and business services, health care and finance) accounting for nearly half of the new jobs, while manufacturing and government employment is expected to barely grow.

By |December 28th, 2015|Current Affairs, Investing|

New Retirement Savings Account Option

Senior Couple Sitting Together at BeachThe U.S. Treasury recently announced the full rollout of myRA, a new retirement savings account designed for people who don’t have access to a retirement savings plan at work or lack other options to save.

It is geared toward small savers. Contribution limit is $5,500 per year ($6,500 if over age 50). The money can stay in the account until it hits a maximum balance of $15,000 or 30-year lifespan, at which time it will be rolled into a Roth IRA.

There is no cost to open a myRA and there are no fees. The account allows savers to safely accumulate savings in government savings bonds until they can transition to a private sector Roth IRA, where they have more investment options and opportunities to continue to grow their savings.

Individuals have been able to open myRA accounts and fund them through payroll deduction since December 2014. Starting November 4, people now also have the option of setting up recurring or one-time contributions to their myRA from a personal account, such as a bank or credit union checking or savings account.

Additionally, myRA account holders now have the option of directing all or part of their federal tax refund to their accounts when they file their taxes.

Deduct Home Sale Gains from Income Tax

Selling your home? You may be able to deduct home sale gains from income tax.

For U.S. federal income tax purposes, you may be able to exclude from income any gain up to $250,000 for a single taxpayer and $500,000 for a married couple filing a joint return. Generally, to exclude the gain, you must have owned and lived in the property as your main home for two of the five years prior to the date of the sale. If you lose money on a sale, the loss is not tax deductible.

Adjusted Basis

A dollar amount known as your adjusted basis determines whether you experience a gain or a loss. If you purchased or built your home, your initial cost basis typically is the cost to you at the time of purchase. If you inherit a home, the cost basis is the fair market value on the date of the decedent’s death or on a later valuation date selected by a representative of the estate.

The formula for determining your gain or loss is as follows:

selling price – selling expenses = amount realized

amount realized – adjusted basis = gain or loss

The cost basis may be adjusted over time due to a number of conditions. For example:

  • Additions and other improvements that have a useful life of more than one year and that add to the value of your home (e.g., swimming pool, heating and air conditioning systems, interior improvements). Repairs that keep your house in good condition do not apply.
  • Money spent to restore damaged property.
  • Payments for granting an easement or right-or-way.
  • Depreciation if the home was used for business or rental purposes.


By |December 2nd, 2015|Real Estate, Taxes|

Social Security Spousal Benefit Option Update

Camargo-webNew U.S. Budget Deal Brings Changes to Social Security Spousal Benefit Option

In July, I wrote about file and suspend, an advantageous Social Security benefits claiming strategy for married people. Unfortunately, this option has been eliminated by the new budget bill passed by Congress and signed into law by President Obama on November 2. While the bill will help reduce Social Security budget deficits, it will also impact some individuals’ financial plans.

Click here to read my previous post on this Social Security spousal benefit option.

First, let’s briefly revisit how these strategies work. A person who is at least full retirement age files for benefits and then suspends them. His or her spouse then files a restricted application to collect a spousal benefit and can later switch to his or her own benefit, which will have grown 6 percent to 8 percent annually because of Delayed Retirement Credits. This would allow the couple to receive income from Social Security, while also taking advantage of the growth in their own accounts.

Under the new law, this strategy will no longer be an option going forward. If you already receive these benefits, you are grandfathered in under the old rules. The new law will require that you begin your own benefits (no longer being able to suspend them) in order for your spouse to qualify for spousal benefits.

Last Opportunity for Some 

As of May 1, 2016 (180 days after the bill became law) no one will be allowed to voluntarily file and suspend. This grace period provides one last chance for some to utilize the strategy and be grandfathered. If you turn 66 years of age before May 1, are married and have not started benefits, you can still file and suspend, which would allow your spouse to begin benefits when he or she turns at least 62.

Divorced or Widowed 

Currently, single-divorced individuals who are 66 or older and were married at least 10 years could claim a benefit on their ex-spouse’s earnings record, while letting their own benefit grow. Under the new law, only those who have turned 62 years of age or older this year will be allowed to take advantage of an ex-spouse benefit and switch to their own benefit by age 70. Younger divorced people will have to choose the benefit of either the ex-spouse’s earning or their own.

Widow and widower benefits were not included in these changes. They may continue to file a restricted application for only widow benefits and later switch to their own earned benefits, if they choose.

By |November 19th, 2015|Current Affairs, Estate Planning, Financial Planning, Retirement|