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133.48MDow Volume:
Avg Vol: 113.01M
Unchanged
201
Decliners
1922
Advancers
4480
Price Chg %Chg 1 Day
Range: 1 Day
  • 1 Day
  • 5 Days
  • 1 Month
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Dow
/quotes/zigman/627449/realtime 16,351 +293 1.82%
Nasdaq
/quotes/zigman/12633936/realtime 4,750 +114 2.46%
S&P 500
/quotes/zigman/3870025/realtime 1,949 +35 1.83%
GlobalDow
/quotes/zigman/629063/realtime 2,314 +1 0.02%
Gold
/quotes/zigman/662444/delayed 1,132 -1 0.11%
Oil
/quotes/zigman/2331095/delayed 46.21 -0.04 0.09%
FTSE 100
/quotes/zigman/3173262/delayed 6,083 +25 0.41%
DAX
/quotes/zigman/2380246/delayed 10,048 +32 0.32%
CAC 40
/quotes/zigman/3173214/delayed 4,555 +14 0.30%
FTSE MIB
/quotes/zigman/1482176/delayed 21,612 +161 0.75%
IBEX 35
/quotes/zigman/2759620/delayed 9,938 -55 0.55%
Stoxx 600
/quotes/zigman/2380150/delayed 354 +1 0.27%
Asia Dow
/quotes/zigman/6959860/realtime 2,708 +4 0.15%
Nikkei 225
/quotes/zigman/5986735/delayed 18,253 +157 0.87%
Hang Seng
/quotes/zigman/2622475/delayed 20,935 -250 1.18%
Shanghai
/quotes/zigman/1859015/delayed 3,160 -6 0.20%
Sensex
/quotes/zigman/1652085/delayed 25,705 +251 0.99%
Singapore
/quotes/zigman/1709939/delayed 2,900 +21 0.74%
Euro
/quotes/zigman/16008136/realtime/sampled 1.12 +0.00 0.04%
Yen
/quotes/zigman/16008150/realtime/sampled 120.40 +0.07 0.06%
Pound
/quotes/zigman/16008140/realtime/sampled 1.53 0.00 0.07%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.70 0.00 0.53%
DXY Index
/quotes/zigman/1652083/delayed 95.92 -0.07 0.07%
WSJ $ Idx
/quotes/zigman/41508961/realtime 88.63 +0.07 0.08%
U.S. 10yr
/quotes/zigman/15866666/realtime 2.17 -0.01 0.65%
German 10y
/quotes/zigman/15866409/realtime 0.78 -0.02 1.96%
Italy 10yr
/quotes/zigman/15866497/realtime 2.00 0.00 0.02%
Spain 10yr
/quotes/zigman/15866444/realtime 2.15 +0.01 0.45%
U.K. 10yr
/quotes/zigman/15866328/realtime 1.82 -0.01 0.55%
Japan 10yr
/quotes/zigman/15866525/realtime 0.40 +0.01 2.30%
Crude Oil
/quotes/zigman/2331095/delayed 46 0 0.09%
Gold
/quotes/zigman/662444/delayed 1,132 -1 0.11%
Corn
/quotes/zigman/7599553/delayed 366 -1 0.34%
DJIA F
/quotes/zigman/38649152/delayed 16,347 +17 0.10%
S&P F
/quotes/zigman/30356461/delayed 1,949 +2 0.10%
Silver
/quotes/zigman/3134148/delayed 15 0 0.15%

Quotes

Symbol Price Change % Change
FB /quotes/zigman/9962609/composite 89.89 2.66 3.05%
AAPL /quotes/zigman/68270/composite 112.34 4.62 4.29%
GOOG /quotes/zigman/30194416/composite 614.34 16.55 2.77%
BAC /quotes/zigman/190927/composite 15.85 0.32 2.06%
C /quotes/zigman/5065548/composite 51.75 0.81 1.59%
F /quotes/zigman/264304/composite 13.87 0.15 1.09%
T /quotes/zigman/398198/composite 32.82 0.50 1.55%
BP /quotes/zigman/247026/composite 32.20 0.06 0.19%
GE /quotes/zigman/227468/composite 24.57 0.69 2.89%
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5 yr CD
1.5%
2 yr CD
0.8%
1 yr CD
0.6%
MMA $10K+
0.3%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.62% 11.62% 11.53%
Business 12.85% 12.85% 12.85%
Student 13.14% 13.14% 13.14%
Balance Transfer 14.12% 14.12% 14.00%
Airline 15.10% 15.10% 15.15%
Reward 15.14% 15.14% 14.99%
Cash Back 15.27% 15.27% 15.26%
Instant Approval 18.00% 18.00% 17.93%
Bad Credit 22.73% 22.73% 22.48%
Source:CreditCards.com

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Encore
A blog about living in and planning for retirement

Should ‘the 47%’ pay income taxes? Part 2: Retirement

The main reasons that 47% of households do not pay federal income taxes are provisions in the tax code that (1) provide basic exemptions for subsistence-level income and (2) offer tax expenditures that wipe out any tax liabilities. These provisions mainly benefit senior citizens and low-income families with children, who account for the bulk of the non-tax-paying units.

The implication of some of the ongoing political discussion is that the country would be better off if these provisions were changed and more units paid taxes. My blog post last week concluded that the current treatment of low-income families was probably about right. This blog post focuses on the elderly. It concludes that the current provisions do not make sense on a number of dimensions.

My recommended changes would hurt middle-income households and benefit those with higher incomes. These recommendations, however, should not be considered in isolation but rather as part of some comprehensive tax reform.

Like all taxpayers, the elderly are entitled to a standard deduction and to exemptions. Based on these provisions, a married couple in 2012 faces a filing threshold of $19,500 ($11,900, plus $3,800 multiplied by two). However, a couple in which both individuals are over 65 also receives an additional deduction of $1,150 each, raising the threshold to $21,800. Further, low-income elderly are entitled to a tax credit of $500.

In addition to the extra exemption, Social Security benefits are taxed in a peculiar fashion.  Under current law, individuals with less than $25,000 and married couples with less than $32,000 of “combined income” do not have to pay taxes on their Social Security benefits. (Combined income is adjusted gross income as reported on tax forms, plus nontaxable interest income, plus one half of Social Security benefits.)  Above those thresholds, recipients must pay taxes on up to 50% of their benefits.  If combined income exceeds $34,000 for an individual or $44,000 for a couple, up to 85% of benefits are subject to tax.

It seems to me that the taxation of the income of the elderly has three problems. The first is the additional deduction and the tax credit for those 65 and over. It is hard to justify why the tax thresholds should be higher for the elderly than for the non-elderly and why the elderly are entitled to further reduce their liability with a credit.

The second problem is the thresholds for the taxation of Social Security benefits. These thresholds were introduced as a political compromise in 1983 so that proponents could claim the taxation would not affect low-income households. The existing thresholds cause taxpayers to face very high marginal rates at the point that they enter the taxable zone. The thresholds are not indexed for growth in average wages or even for inflation, so in the future a significantly higher percentage of recipients will be subject to tax. These thresholds should be eliminated.

The third problem is the percentage of benefits subject to taxation. The percentage, which was 50% when first introduced in 1983, was raised to 85% in 1993. The notion was to make the treatment of Social Security benefits conform with the treatment of private pension benefits, where beneficiaries are taxed on the amount by which benefits exceed their own contributions. Social Security estimated that about 85% of the average benefit represents the amount in excess of the workers’ contributions.

In retrospect, this model was not particularly relevant since virtually no contributory defined benefit plans existed in the private sector. A model more consistent with today’s employer-provided pension system is the 401(k). Applying that model to Social Security, the portion of benefits based on the employer’s contribution, which is not taxed initially, should be treated like a conventional 401(k), so its full value would be taxable in retirement. The portion of benefits financed by the employee’s contribution, which comes from after-tax income, should be treated like a Roth 401(k) and be paid tax-free in retirement. Hence, the appropriate portion of taxable Social Security benefits should be 50% for all beneficiaries.

Thus, returning to the original question of whether the elderly should pay more in retirement, my answer is as follows. The low-income elderly should continue to be protected by the standard deduction and exemptions available to all households. No need for the extra deduction or a credit that applies only to the elderly. Such changes would probably move many households from nontaxable to taxable status.  The thresholds for the taxation of Social Security benefits should also be eliminated. Such a change is likely to increase the number of taxable units. Finally, the percentage of benefits taxable should be 50% for all households, having no effect on the number of households paying taxes.

Remember, this discussion considers the taxation of the income of the elderly in isolation. Nothing should be changed based on such a partial analysis. Changes should be made only in the context of comprehensive tax reform that maintains a progressive tax structure.

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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.

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Markets »

133.48MDow Volume:
Avg Vol: 113.01M
Unchanged
201
Decliners
1922
Advancers
4480
Price Chg %Chg 1 Day
Range: 1 Day
  • 1 Day
  • 5 Days
  • 1 Month
  • 3 Months
  • 6 Months
  • 1 Year
  • 2 Years
Dow
/quotes/zigman/627449/realtime 16,351 +293 1.82%
Nasdaq
/quotes/zigman/12633936/realtime 4,750 +114 2.46%
S&P 500
/quotes/zigman/3870025/realtime 1,949 +35 1.83%
GlobalDow
/quotes/zigman/629063/realtime 2,314 +0 0.02%
Gold
/quotes/zigman/662444/delayed 1,132 -1 0.11%
Oil
/quotes/zigman/2331095/delayed 46.22 -0.03 0.06%
FTSE 100
/quotes/zigman/3173262/delayed 6,083 +25 0.41%
DAX
/quotes/zigman/2380246/delayed 10,048 +32 0.32%
CAC 40
/quotes/zigman/3173214/delayed 4,555 +14 0.30%
FTSE MIB
/quotes/zigman/1482176/delayed 21,612 +161 0.75%
IBEX 35
/quotes/zigman/2759620/delayed 9,938 -55 0.55%
Stoxx 600
/quotes/zigman/2380150/delayed 354 +1 0.27%
Asia Dow
/quotes/zigman/6959860/realtime 2,708 +4 0.15%
Nikkei 225
/quotes/zigman/5986735/delayed 18,253 +157 0.87%
Hang Seng
/quotes/zigman/2622475/delayed 20,935 -250 1.18%
Shanghai
/quotes/zigman/1859015/delayed 3,160 -6 0.20%
Sensex
/quotes/zigman/1652085/delayed 25,705 +251 0.99%
Singapore
/quotes/zigman/1709939/delayed 2,900 +21 0.74%
Euro
/quotes/zigman/16008136/realtime/sampled 1.12 +0.00 0.04%
Yen
/quotes/zigman/16008150/realtime/sampled 120.40 +0.07 0.06%
Pound
/quotes/zigman/16008140/realtime/sampled 1.53 0.00 0.07%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.70 0.00 0.53%
DXY Index
/quotes/zigman/1652083/delayed 95.92 -0.07 0.07%
WSJ $ Idx
/quotes/zigman/41508961/realtime 88.63 +0.07 0.08%
U.S. 10yr
/quotes/zigman/15866666/realtime 2.17 -0.01 0.65%
German 10y
/quotes/zigman/15866409/realtime 0.78 -0.02 1.96%
Italy 10yr
/quotes/zigman/15866497/realtime 2.00 0.00 0.02%
Spain 10yr
/quotes/zigman/15866444/realtime 2.15 +0.01 0.45%
U.K. 10yr
/quotes/zigman/15866328/realtime 1.82 -0.01 0.55%
Japan 10yr
/quotes/zigman/15866525/realtime 0.41 +0.01 2.40%
Crude Oil
/quotes/zigman/2331095/delayed 46 0 0.06%
Gold
/quotes/zigman/662444/delayed 1,132 -1 0.11%
Corn
/quotes/zigman/7599553/delayed 366 -1 0.34%
DJIA F
/quotes/zigman/38649152/delayed 16,347 +17 0.10%
S&P F
/quotes/zigman/30356461/delayed 1,949 +2 0.10%
Silver
/quotes/zigman/3134148/delayed 15 0 0.15%

Quotes

Symbol Price Change % Change
FB /quotes/zigman/9962609/composite 89.89 2.66 3.05%
AAPL /quotes/zigman/68270/composite 112.34 4.62 4.29%
GOOG /quotes/zigman/30194416/composite 614.34 16.55 2.77%
BAC /quotes/zigman/190927/composite 15.85 0.32 2.06%
C /quotes/zigman/5065548/composite 51.75 0.81 1.59%
F /quotes/zigman/264304/composite 13.87 0.15 1.09%
T /quotes/zigman/398198/composite 32.82 0.50 1.55%
BP /quotes/zigman/247026/composite 32.20 0.06 0.19%
GE /quotes/zigman/227468/composite 24.57 0.69 2.89%
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Rates »

5 yr CD
1.5%
2 yr CD
0.8%
1 yr CD
0.6%
MMA $10K+
0.3%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.62% 11.62% 11.53%
Business 12.85% 12.85% 12.85%
Student 13.14% 13.14% 13.14%
Balance Transfer 14.12% 14.12% 14.00%
Airline 15.10% 15.10% 15.15%
Reward 15.14% 15.14% 14.99%
Cash Back 15.27% 15.27% 15.26%
Instant Approval 18.00% 18.00% 17.93%
Bad Credit 22.73% 22.73% 22.48%
Source:CreditCards.com

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  • /quotes/zigman/32032597/composite IMPR-0.20%
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