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Welcome to AVZ
Fitch Affirms U.S. at AAA
by Burton Frierson
Reuters
Dear Friend,
Fitch Ratings said on Tuesday it affirmed the United States' top-notch credit rating at AAA, giving the world's largest economy a reprieve after it was downgraded by Standard & Poor's little more than a week ago.
Fitch said the outlook for the rating was stable.
However, it warned that the United States was falling behind its peers among the AAA-rated nations on fiscal matters and the country had to show tangible results in its efforts to reduce the budget deficit.
It said it would review its fiscal projections at the end of November and medium-term economic outlook by the end of the year.
"The affirmation of the US 'AAA' sovereign rating reflects the fact that the key pillars of US's exceptional creditworthiness remains intact: its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base," Fitch said in its statement.
"Monetary and exchange rate flexibility further enhances the capacity of the economy to absorb and adjust to 'shocks'."
Financial markets showed little reaction to the news, which also coincided with the release of industrial output data.
U.S. government bonds pared some price gains slightly and the dollar edged up to the day's highs against the yen.
However, Fitch warned the outlook for the rating depended on the economy and the ability of the political process in Washington to reduce the public debt.
"S&P had a very specific basis for their concern which was that there was no long-run plan for budget control," said Pierre Ellis, senior economist, Decision Economics, New York.
"Fitch certainly is correct with respect to the breadth of the United States' potential revenue sources...it is putting a little more faith in the common sense of Congress and the Administration with respect to getting the budget situation under control."
Fitch said an upward revision to medium- to long-term projections for public debt either as a result of weaker than expected economic recovery or failure of the joint committee to agree on at least $1.2 trillion in deficit reduction would likely put the United States on negative outlook.
"The rating action would most likely be a revision of the rating Outlook to Negative, which would indicate a greater than 50 percent chance of a downgrade over a two-year horizon. Less likely would be a one-notch downgrade," the statement said.
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Getting Your Retirement Back On Track
by Kelly Greene
The Wall Street Journal
If you are on the verge of retirement, the past few weeks must have seemed like a horror movie. Just when you thought you had emerged from the wreckage of 2008 with your savings intact, another market storm erupted.
Lynette Robinson, a 65-year-old executive director of a consortium of colleges, was planning on retiring this November -until her investments took a hit this past week.
"The really sad thing is that I am back where I was after the 2008 crash," says Ms. Robinson, who lives in Boston. Now she is considering other alternatives, including working longer or taking on work as a consultant.
"It's scary because you are going along one path and then suddenly you have to shift your plans," she says.
The worst thing you can do now is panic. Hitting the "sell" button on your stock portfolio, after the Dow Jones Industrial Average has fallen 11.1% in three weeks' time, could hurt you more than anything else. Not only would you be locking in losses prematurely to preserve capital you might not need for years, but you also would miss out on any future rally.
"If what this crisis has done is focus your attention on the fact that stocks are risky, make a note to act on that knowledge later," says Alicia Munnell, director of the Boston College Center for Retirement Research. "But don't sell now."
That doesn't mean you should sit tight, however. If you are consumed by worries, there are other steps you can take right away, from ramping up on "alternative" investments and annuities with guaranteed payments to restocking your cash accounts and rethinking your budget.
Here's what to do now.
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Five Tax Friendly States for Retirees
2011
by Mary Beth Franklin
Kiplinger.com
Where's the best state for you to retire? Here's a good place to start your search: These five impose the lowest taxes on retirees in the contiguous U.S., according to our research. All these retiree tax heavens exempt Social Security benefits from state income taxes. Many of them exclude government and military pensions from income taxes, too, or offer blanket exclusions up to a specific dollar amount for a wide variety of retirement income.
Although relocating to an income-tax-free state such as Florida or Texas may sound appealing, sometimes the best retirement destination is a state that imposes an income tax but offers generous exemptions for retirement income.
Once you narrow your search to a few key states, zero in on local taxes. Municipalities can impose hefty property taxes or other assessments, or they may layer local sales taxes on top of statewide levies. Federal taxes? If you claim the standard deduction, they'll be the same no matter where you live. But if you itemize your deductions, you'll be able to write off real estate taxes and state income taxes, reducing your federal tax bill and easing some of the pain.
#1 Wyoming
State Income Tax: None
State Sales Tax: 4%
Estate Tax/Inheritance Tax: No/No
Thanks to the abundant revenues that Wyoming collects from oil and mineral companies, its residents have one of the lowest tax burdens in the nation, according to the Tax Foundation, a nonprofit research group in Washington, D.C. There is no state income tax. The state sales tax is 4%, and counties in the Equality State can only add up to 1% in additional levies -- a very low ceiling. Plus, prescription drugs and groceries are exempt from state sales taxes. For most property, only 9.5% of market value is subject to tax, so a home worth $100,000 is taxed on $9,500 of assessed value.
#2 Mississippi
State Income Tax: 3%-5%
State Sales Tax: 7%
Estate Tax/Inheritance Tax: No/No
Mississippi offers a sweet income-tax deal for retirees. It not only exempts Social Security benefits from state income taxes but also excludes all qualified retirement income -- including pensions, annuities, and IRA and 401(k) distributions. Remaining income is taxed at a maximum 5%. In addition, the Magnolia State is home to some of the lowest property taxes in the nation. Residential property is taxed at 10% of assessed value, and seniors qualify for a homestead exemption on the first $75,000 of value. The statewide sales tax is 7%, and counties and cities may add up to 3% to the state rate. But prescription drugs and health care services are exempt.
#3 Pennsylvania
State Income Tax: Flat rate of 3.07%
State Sales Tax: 6%
Estate Tax/Inheritance Tax: Yes/Yes
True to its Quaker roots, Pennsylvania extends a friendly hand to retirees. It offers unusually generous exclusions from state income tax on a wide variety of retirement income. Pennsylvania does not tax Social Security benefits or any type of public or private pensions. Nor does it nick distributions from 401(k)s, IRAs, deferred-compensation plans or other retirement accounts. Remaining income is taxed at a low, flat rate of 3.07%. Food, clothing and medicine are exempt from state sales taxes. Property taxes can be high in the Keystone State, especially near larger cities, but rates vary widely. One caveat for the wealthy: Your heirs won't get off so easily. Pennsylvania is one of the few states to have both an inheritance tax, paid by the heirs, and an estate tax -- though it applies only when an estate is large enough to trigger federal estate taxes ($5 million or more).
#4 Kentucky
State Income Tax: 2%-6%
State Sales Tax: 6%
Estate Tax/Inheritance Tax: No/Yes
The home of the Kentucky Derby is a good bet for retirees. It exempts Social Security benefits from state income taxes, and it allows residents to exclude up to $41,110 per person in retirement income from a wide variety of sources, including public and private pensions and annuities. Personal income-tax rates range from 2% to 6%. A 6% sales tax is imposed at the state level only. Homeowners 65 and older qualify for a homestead provision that exempts part of the value of their property from state taxes. The Bluegrass State has an inheritance tax, but immediate family members are exempt.
#5 Alabama
State Income Tax: 2%-5%
State Sales Tax: 4%
Estate Tax/Inheritance Tax: No/No
Alabama is a tax haven for retirees. Social Security benefits, as well as military, public and private defined-benefit pensions, are excluded from state income taxes. Remaining income is taxed at the state's low rates, which range from 2% to 5%. Alabama also has some of the lowest property taxes in the U.S. Homeowners 65 and older are exempt from state property taxes, but some cities assess their own property tax. The only downside is sales taxes. Although the statewide rate is just 4%, cities and counties in the Yellowhammer State can impose their own levies, and together the taxes can add up to a whopping 10% or more in some cities. Food is taxed, but prescription drugs are not.
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