The federal funds rate is the interest rate at which banks lend funds to each other from their deposits at the Federal Reserve (the Fed), usually overnight, in order to meet federally mandated reserve requirements. Basically, if a bank is unable to meet its reserve requirements at the end of the day, it borrows money from a bank with extra reserves. The federal funds rate is what banks charge each other for overnight loans. This rate is referred to as the federal funds effective rate and is … [Read more...]
Building Confidence in Your Strategy for Retirement
In 2018, 64% of workers surveyed were either somewhat or very confident in their ability to afford retirement, up from 60% in 2017. Among retirees surveyed in 2018, 75% were confident, down from 79% in 2017. Source: 2018 Retirement Confidence Survey, EBRI Each year, the Employee Benefit Research Institute (EBRI) conducts its Retirement Confidence Survey to assess both worker and retiree confidence in financial aspects of retirement. In 2018, as in years past, retirees expressed a … [Read more...]
Tax Benefits of Homeownership After Tax Reform
“Recent tax reform legislation may have reduced the tax benefits of homeownership for some by (1) substantially increasing the standard deduction, (2) lowering the amount of mortgage debt on which interest is deductible, and (3) limiting the amount of state and local taxes that can be deducted. On the other hand, the tax benefits of homeownership may have increased for some because the overall limit on itemized deductions based on adjusted gross income has been suspended. You generally can … [Read more...]
Have You Made Any of These Financial Mistakes?
As people move through different stages of life, there are new financial opportunities — and potential pitfalls — around every corner. Have you made any of these mistakes? Your 50s and 60s Raiding your home equity or retirement funds.It goes without saying that doing so will prolong your debt and/or reduce your nest egg. Not quantifying your expected retirement income.As you near retirement, you should know how much money you (and your spouse, if applicable) can … [Read more...]
I received a large refund on my tax return this year. Should I adjust my withholding?
You must have been pleasantly surprised to find out you'd be getting a refund from the IRS — especially if it was a large sum. And while you may have considered this type of windfall a stroke of good fortune, is it really? The IRS issued over 112 million federal income tax refunds, averaging $2,895, for tax year 2016.1 You probably wouldn't pay someone $240 each month in order to receive $2,900 back, without interest, at the end of a year. But that's essentially what a tax refund is — a … [Read more...]
Going Public: An IPO’s Market Debut May Not Live Up to the Hype
The IPO process is important to the financial markets because it helps fuel the growth of young companies and adds new stocks to the pool of potential investment opportunities. An initial public offering (IPO) is the first public sale of stock by a private company. Companies tend to schedule IPOs when investors are feeling good about their financial prospects and are more inclined to take on the risk associated with a new venture. Thus, IPOs tend to reflect broader economic and market … [Read more...]
What is the difference between a tax deduction and a tax credit?
Tax deductions and credits are terms often used together when talking about taxes. While you probably know that they can lower your tax liability, you might wonder about the difference between the two. A tax deduction reduces your taxable income, so when you calculate your tax liability, you're doing so against a lower amount. Essentially, your tax obligation is reduced by an amount equal to your deductions multiplied by your marginal tax rate. For example, if you're in the 22% tax bracket … [Read more...]
Quiz: Financial Facts That Might Surprise You
If you have a penchant for financial trivia, put your knowledge to the test by taking this short quiz. Perhaps some of the answers to these questions will surprise you. Questions 1. The first organized stock market in New York was founded on Wall Street under what kind of tree? a. Maple b. Linden c. Buttonwood d. Elm 2. Who invented the 401(k)? a. Congress b. Ted Benna c. The IRS d. Juanita Kreps 3. Which three U.S. bills together account for 81% of the paper … [Read more...]
Investing to Save Time Boosts Happiness Returns
"Time famine" is the feeling of being overwhelmed by the demands of work and life. Also known as time scarcity and time stress, this pressure is a "critical factor" in the rising rates of obesity. Source: "Buying Time Promotes Happiness," PNAS, July 24, 2017 The more money you make, the more valuable you perceive your time to be — and the more time-strapped you may feel, according to University of British Columbia psychology professor Elizabeth Dunn.1 So wouldn't it stand to … [Read more...]
What is gross domestic product, and why is it important to investors?
GDP, or gross domestic product, measures the value of goods and services produced by a nation's economy less the value of goods and services used in production. In essence, GDP is a broad measure of the nation's overall economic activity and serves as a gauge of the country's economic health. Countries with the largest GDP are the United States, China, Japan, Germany, and the United Kingdom. GDP generally provides economic information on a quarterly basis and is calculated for most of the … [Read more...]
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