Surely one of the most curious–and potentially costly–monetary experiments is taking place right now in India, where Prime Minister Narendra Modi abruptly decided—without warning—that the 500- and 1,000-rupee notes in circulation were no longer valid currency, effectively turning 86% of his country’s paper currency into colorful scratch pads. The Reserve Bank of India is printing new replacement bills to restock its banking system, but reports say it will take five or six months before the money removed from circulation can be replaced—in a country where cash represents 98% of all transactions by volume, and 68% by value. Sales across the country have fallen by 20-30%, reducing estimates of India’s GDP growth this year.
Headlines told us that the U.S. economy added 178,000 jobs in November, dropping the unemployment rate to 4.6%—the lowest level since August 2007, and surely an improvement over the 10% rates of the Great Recession. Those numbers represent great news, and indicate that the country is in strong shape as President-elect Trump takes office.
One of the persistent issues of the 2016 U.S. Presidential campaign was the wide (and growing) divide between the “haves” and the “have-nots”—variously expressed as a rising sentiment against the “one-percenters,” or as laments against the “hollowing out of the middle class.”
You probably know that the IRS requires you to start taking mandatory distributions from your IRA when you turn 70 1/2, even if you don’t actually need the money. But can you do a Roth conversion at that late date, and thereby defer distributions forever?
In case you missed it, the contribution limits to your 401(k) plan, IRA and Roth IRA—set by the government each year based on the inflation rate—will not go up in 2017. Just like this year, you will be able to defer up to $18,000 of your paycheck to your 401(k), and individuals over age 50 will still be able to make a “catch-up” contribution of an additional $6,000. (The same limits apply to 403(b) plans and the federal government’s new Thrift Savings Plan.) Your IRA and Roth IRA contributions will continue to max out at $5,500, plus a $1,000 “catch-up” contribution for persons 50 or older.
By now, most voters have made up their mind about who they want to serve as their next President. But what can they look forward to, from an investment and tax standpoint, if their candidate wins or loses? How will the election affect their portfolio and future net worth?
If you think taxes are higher than their historical rates, well, it depends on how far back in history you’re comparing them to. Take a look at the accompanying chart, which shows tax revenue as a percent of total national income for four countries—France, Sweden, the United Kingdom and the U.S.—since 1868. The chart ends in 2008, and is taken from research by tax policy analyst Thomas Piketty.