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Jason Furman, Harvard professor and former chair of the White House Council of Economic Advisors, recently noted that “the first modern presidential race between two candidates with undergraduate degrees in economics hasn’t thrilled economists”.
Both candidates’ plans pose longer-term risks to the US economy by further expanding the Federal deficit, but regarding this measure of risk, the scales are currently tipped toward Trump.
Apart from a widening budget deficit, a major risk under the Harris proposal is that higher corporate tax rates could push businesses to relocate headquarters out of the US to save on taxes.
This activity, known as “corporate inversion”, has slowed meaningfully since the Federal corporate tax rate dropped to 21% from 35% in 2017.
A major risk under the Trump proposal is the re-ignition of inflation from higher prices that are likely to result from tariffs on imports and potential retaliation from other countries.
It is worth noting that estimates of the fiscal impact of the Democrat and Republican policy proposals vary widely.
For example, the Committee for a Responsible Federal Budget, a nonpartisan group that favors lower deficits, estimates an even larger negative fiscal impact from both red and blue party policy proposals than what the JP Morgan analysis shows.
A Republican sweep or a Democratic sweep of the executive and legislative branches would probably result in more caution in the markets, as investors wait to see the scope and speed of enactment of new policies.
But the most likely outcome in the coming election is some kind of split government.
If this were to happen, neither candidate’s proposals likely would be passed into law as currently articulated. And divided government tends to have fewer negative implications for investors.
Medicare Brief: What to Know Prior to Open Enrollment
Our colleague and MFA founder Susan Moore contributed the following update on Medicare.
Medicare open enrollment period starts October 15 and continues through December 7.
During the open enrollment period, Medicare enrollees can make certain changes in their coverage. Here are some of the changes you might consider during this enrollment period:
- If you’re enrolled in original (traditional) Medicare, change your Part D drug plan
- If you’re enrolled in Medicare Advantage, switch to a different Advantage plan
- Switch from original Medicare to Medicare Advantage
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Switch from Medicare Advantage to original Medicare - but note below that limitations apply in some states
This year’s enrollment period may be one of the more significant in Medicare’s 59-year history due to some of the changes that are coming. Here is what we know about Medicare changes and costs for 2025.
Medicare Part D
Most Advantage plans include drug coverage at no extra cost, but many people on original Medicare buy a stand-alone Part D plan for drug coverage. While the average projected monthly Part D premium will decrease to $46.50 from $53.95 in 2024, some plans have announced significant increases in premiums.
For this reason, it’s especially important this year to shop for your Plan D coverage. You may be able to lower your annual drug costs by switching to a different Plan D.
To compare plans, go to the Medicare.gov site and set up your account. In the “What do you want to do?” section, select “Open all options”, then “Find health & drug plans.”
One of the bigger developments for 2025 is a new, $2,000 cap on out-of-pocket drug costs. It applies to drug coverage through both stand-alone Part D and Advantage plans.
But it only applies to covered drugs, so it’s really important to make sure your plan covers the specific medications you take. Approximately 1.5 million Medicare beneficiaries have drug costs that exceed that amount, so this change will be a big help to them.
Switching to a Different Medicare Advantage Plan
Medicare Advantage plans are also seeing big changes. Insurers are facing increasing cost pressures, and many will push higher expenses onto members.
Enrollees may see changes in out of pocket costs. Although the average monthly premium for all Advantage plans is likely to drop slightly, it’s important to pay attention to changes in copays, deductibles, and other benefits (e.g., dental, vision, health clubs, etc.)
Switching from Medicare Advantage to Original Medicare
Some Advantage plans may even exit the market next year. If your Medicare Advantage plan is being eliminated, you must actively enroll in a new plan to stay in the Advantage program.
If you don’t make a choice, you will automatically be placed in traditional Medicare for 2025 and have the chance to buy a Medigap supplement plan without going through an underwriting process.
Normally in most states (except during a narrow period when you first enroll in Medicare,) when someone switches from Advantage to original Medicare, they must pass underwriting to buy a Medigap supplement plan. (MA, CT, ME and NY do not allow Medigap insurers to require underwriting for those who switch.)
If you switch from Medicare Advantage to original Medicare because your insurer exited the market, you will not have to undergo underwriting in order to obtain a Medigap plan.
Some people switch from Medicare Advantage to original Medicare because they don’t like the restricted network of an Advantage plan, or because frequent copays for services have become expensive.
If you make this change and you want drug coverage, be sure to sign up for a Medicare stand-alone prescription drug plan (Plan D), unless you have creditable drug coverage from another source. If you do not, and you decide to sign up for Part D coverage later, you may face a penalty for late enrollment.
And if you want a Medicare Supplement Plan (or Medigap Plan, which covers most out of pocket costs) you’ll need to sign up for that then, too.
In most states (except MA, CT, ME, and NY) Medigap insurers are not required to sell you a policy after your first year on Medicare if you don’t meet the medical underwriting requirements. In that situation, they can deny coverage or charge higher premiums.
Medicare Part B
Everyone who has Medicare coverage (original Medicare or Medicare Advantage) gets Medicare Part A free, but pays for Medicare Part B.
The Centers for Medicare & Medicaid Services (CMS) hasn’t said yet how much the base cost of Part B will be in 2024, but the annual Medicare Trustees report in March forecast the monthly price to rise from $174.70 to $185.00, a 6% increase, in 2025.
Income-Related Monthly Adjustment Amount (IRMAA)
Some people pay more in IRMAA charges for Medicare Part B and Part D based on income.
Your tax return for 2023 will be used to determine whether you will be subject to an IRMAA charge for 2025. If you retired in or after 2023, or had another life-changing event (e.g., marriage, divorce, death of spouse, etc.) you can file form SSA-44 to request that your IRMAA amount be reduced or eliminated.
IRMAA charges have not been released yet for 2025, but are expected to be about 6% higher than in 2023.
If you have questions or would like help evaluating your Medicare options, please let us know.
Paying For College: The Landscape Looks a Lot Different Today (Even When Compared to a Few Years Ago)
Our colleague and college specialist Donna Cournoyer contributed the following update for college planning, as a follow-up to her April article, Shifting the “Dream School” Mindset
There are many factors that shape the philosophies, policies, and practices of colleges throughout the US. However, the overarching key factor is this: colleges are businesses that need revenue to exist.
Most of this revenue comes in the form of tuition and housing fees that families pay each year. And of course, fundraising and building upon existing endowments are significant contributors, too.
Endowments are permanent funds, used as a self-sustaining funding source for the school’s mission, including funding for scholarships and grants for students.
However, endowments are invested funds and only a small portion is consumed each year. In many cases most universities spend only the interest that accrues annually from the investments.
The need for colleges and universities to enroll a certain number of students each year, in order to stay within their operating budgets, drives institutional goals and determines how the schools market to students they want to attract.
The Enrollment Cliff
Another factor driving the enrollment policies of universities is the significant decline in the number of college-bound students expected in the years ahead.
This drop in predicted enrollment is a function of a declining birth rate; fewer high school graduates choosing to go to college (related to price and value perception, among other reasons); and predicted lower high school graduation rates.
This puts a lot of pressure on colleges and universities to meet their enrollment goals each year, in an environment where it’s getting harder and harder to do.
How Colleges Entice Students
Marketing is a large expense at many colleges and universities. Schools want to entice students by creating beautiful grounds, building new dorms, providing the latest technology in classrooms, and guiding families on tours where they aim to make an emotional connection with the student.
Schools market to all students and families on the tours – even the ones who cannot afford to attend.
Think about this: as has been a common practice for decades, many families create a list of schools based on perceived elite status, reputation, location, aesthetics, amenities, and, of course, academic programs. Sometimes, price is considered before visiting. But often it isn’t.
Then families visit their chosen schools, where tour guides aim to make that highly charged emotional connection with the student (and the student’s family). They are often very successful. When you come down to it, this is the process of the sale, and tour guides are selling the school to the student.
What happens next?
The student makes a snap decision to attend one of the visited schools based on feeling and emotion (I have seen this many times in my experience working at a university) and ultimately the family agrees.
Cost might not even have factored into the decision, and this can have far-reaching financial implications for the student and parents.
Consider this: the four-year sticker price for many schools now totals nearly $400,000, which is very close to the current median price for existing-home sales in the US, according to the National Association of Realtors.
In a Bloomberg article from September 26, columnist Charlie Wells said something that resonates with me as a college planner and financial advisor:
“Financial advisers say having a budget and setting expectations is crucial to avoiding disappointment — or mountains of debt — later. (Just think: Would you let your 16-year-old decide which house you were going to buy after one walk-through? School choice is not so different.)”
Looking at a family’s plan to pay for college is intertwined with many factors including the ways in which colleges aim to attract and solidify commitments from students to attend their school.
When planning your strategy for choosing and paying for college, remember these key points:
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Rankings: Some of the factors that have been touted for years about U.S. News and World rankings, for example, are starting to take a back seat as many people no longer believe they are relevant to deciding on a college.
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Elite Status: Studies have shown that WHERE a student goes to college is not a significant factor in their success.
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Apply to Competing Schools: This may give you a chance to leverage offers from one school to gain additional funds from another, as many schools will “match offers” to get a student to commit.
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Set Financial Expectations: Have a Financial Plan and start early. Discuss together as a family what are the realistic and agreed upon financial strategies: How much are parent(s) willing and able to contribute? Will anyone need to borrow? What is the student’s responsibility? Do this BEFORE visiting and applying to schools.
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Merit Scholarships and Financial Aid: Research the financial health of the school, along with their policy and average amounts of aid and merit scholarships. This is not always transparent so call the Admissions staff to ask for average, if necessary.
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Appeals: While not everyone’s favorite process, often students may benefit from appealing their offer. Remember, schools need to make their enrollment, so offering additional incentives is a way in which they aim to do so.
One of my goals as a college financial planner is to help shift how parents perceive “what is the best school for my student”.
I’ve observed that families with well-planned strategies that consider the current landscape of college admissions are more likely to conclude their college search confidently, and are more successful in ensuring that, in the end, their college dollars are well-spent.
CTA Deadline Is Near for Business Owners
The Corporate Transparency Act (CTA) is a new federal law that aims to curtail money laundering and other illegal activities by making it clear who the individuals behind a particular business entity are.
The CTA was enacted in early 2021 and requires “reporting companies” to file information by January 1, 2025.
If you are a small business owner or own a corporate entity, such as an LLC, you likely will be required to report your company’s beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) bureau, which is a division of the US Department of the Treasury.
We encourage all of our clients who think that they might be subject to the CTA to contact their CPA or attorney to determine if they are subject to CTA reporting and to assist in handling the filing.
Below are links to resources so that you can learn more about the CTA if you think you might be required to file.
Key CTA Resources:
Moore Financial Advisors cannot give specific CTA advice or assist with actual filing. We will provide a more extensive note on this topic in coming days.
Everything Apple
In a newsletter from your financial planner, you’d probably expect an apple excerpt to be something to do with a California-based technology company. But given we’ve just turned the calendar into October, and being based in New England, fruit rather than phone is top of mind.
The six New England states collectively produce about 150 million pounds of apples annually. And there are more than 200 varieties of apples grown locally.
If you’re an apple (emphasis on lower case “a”) lover, a great resource is New England Apples, a non-profit association founded in 1935 by a group of wholesale growers from the region.
Have a look at the site and enjoy a brief history of apples in the US, which includes lots of videos shot at the orchard, and even some great recipes.
How do you like them apples?
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