(Bloomberg) — The U.S. Treasury Department is sending a message to states and cities that the billions in aid from the American Rescue Plan should provide relief to residents, not their governments’ debt burdens.
The department on Monday released guidance on how state and local governments can use $350 billion in funding from President Joe Biden’s $1.9 trillion rescue package. The funds are intended to help states and local governments make up for lost revenue, curb the pandemic, bolster economic recoveries, and support industries hit by Covid-19 restrictions. In a surprise to some, these funds can’t be used for debt payments, a potential complication for fiscally stressed governments that had already etched out plans to pay off loans.
Illinois Governor J.B. Pritzker had suggested using some of the state’s $8.1 billion in aid to repay the outstanding $3.2 billion in debt from the Federal Reserve’s emergency lending facility and to reduce unpaid bills. Illinois was the only state to borrow from the Fed last year, tapping it twice. On Tuesday, Jordan Abudayyeh, a Pritzker spokesperson, said the administration is “seeking clarification” from the Treasury on whether Illinois can use the aid to pay back the loan from the Fed.
The rule could also affect New Jersey, which sold nearly $3.7 billion of bonds last year to cover its shortfall during the pandemic. Assembly Republican Leader Jon Bramnick, a Republican, in April had called for Governor Phil Murphy, a Democrat, to use some of the federal aid to pay down the state’s debt.
Retiring early seems to be on everyone’s minds these days. The growing popularity of the so-called FIRE movement — short for financial independence, retire early — is a testament to how much everyone seems to be craving a slice of “the easy life.” The good news is that in many U.S. states, what most people would call an “early” retirement is within reach. Although “full retirement age” for Social Security purposes isn’t until age 67, the average retirement age in every single state — with the exception of the District of Columbia — is below 67. On average, retirees in the U.S. hang up their work boots at age 64, according to Money Talks News.
Of course, to truly live a comfortable retirement takes more than desire — it also takes a large chunk of cash.
If nothing else, this study proves two things. First, the state in which you live can play a big role in how early you can retire, as evidenced by the low average retirement ages across wide swaths of the South and Midwest. Next, it takes more than $1 million to have a comfortable retirement in any state in America — or over $2 million in the case of Hawaii and the District of Columbia — so it’s important to work with a retirement advisor or the best 401(k) providers to help boost your savings as much as possible.
Two of Australia’s largest pension funds moved a step closer to creating a A$200 billion ($155 billion) giant as the world’s fourth-biggest pension pot consolidates.
QSuper and Sunsuper Pty. have signed a deal to merge, the two funds said in a joint statement Monday. The Brisbane-based funds will combine by September to create the country’s second-largest pension fund.
QSuper has about A$120 billion in funds under administration and looks after the retirement savings for Queensland state government employees. Sunsuper has about A$80 billion in savings for employees of corporations including Unilever Plc and Virgin Australia.
Biden also wants other big tax changes, such as a higher business tax rate and higher rates for households earning more than $400,000. But he might want to start with capital-gains and estate taxes because they’re easier to target at the wealthy. The top 1% of earners capture 69% of long-term capital gains, while the top 20% of earners earn 90% of the capital gains. That shareholder class has benefited most from fiscal and monetary stimulus that has propped up the stock market for the last 11 months and helped with a decade of generous gains. If anybody can afford it, they can.
As for the estate tax, only about 1,900 U.S. estates are subject to any federal tax, which is less than one-tenth of 1% of the Americans who die in a given year. The number of estates subject to this tax was three times higher in 2009, the last year the exemption threshold was $3.5 million. Since Biden wants to return to that ceiling, assume he’d triple the number of families having to pay some estate tax. It still remains a vanishingly small number. Plus, unlike the wealth tax, it has been the law before, and there’s no question of whether it would work.
Italy is making its first foray into the green bond market, the latest major debt issuer to tap into one of the fastest-growing sectors of finance.
The nation is selling debt maturing in 2045 via banks, an unusual tenor that is expected to draw interest from domestic investors as well as specialist environmental funds. European nations are piling into the market as they seek to finance a greener recovery from the pandemic.
As interest-rate jitters supercharged a meltdown in the world’s biggest bond market, Sam Sicilia barely blinked.
“The markets are wrong” about inflation expectations, said Sicilia, chief investment officer of the A$56 billion ($43 billion) Host-Plus Pty pension fund in Melbourne. “Deflationary forces are bigger. Interest rates are going to stay at effectively zero.”
With governments around the globe still adding to trillions of dollars of stimulus to ride out the pandemic, pension fund managers who are trying to discern the long-term effects are posing the question: Will inflation make a comeback? If it does, more than $46 trillion of global pension assets would be affected as central banks pivoted toward sustained higher interest rates.
The Senate parliamentarian approved provisions in Joe Biden’s $1.9 trillion pandemic-relief bill aiding multi-employer pensions and providing laid-off workers with health-care premium subsidies.
Senate parliamentarian Elizabeth MacDonough has found that provisions bailing out multi-employer pensions and providing laid-off workers with health-care premium subsidies are eligible for the simple-majority process Democrats are using to pass the pandemic-relief bill.
“This economic crisis has hit already struggling pension plans like a wrecking ball, and the retirement security of millions of American workers depends on getting this package across the finish line,” Senate Finance Chair Ron Wyden said in a statement after his office said the parliamentarian made the two approvals.
Aid to states and cities. Cost: $350 billion. This money would offset lost tax revenue and help mayors and governors “mitigate the fiscal effects stemming from the public health emergency,” according to draft legislation. it’s clearly related to the pandemic, so it counts as relief, but it might also be more than states and cities need, since government revenue has held up better than expected during the last 12 months.
Pension relief. Cost: $74 billion. This money would address longstanding problems at roughly 1,400 underfunded pensions covering 10 million workers and retirees, most of them belonging to unions. A government agency called the PBGC is supposed to backstop pensions that run short of money, but it, too, is drastically underfunded and poised to collapse in coming years. The money in the House bill would bail out the riskiest pensions, but it’s controversial because it’s not paired with needed reforms—and it’s not specifically related to problems caused by the pandemic. This could be one provision that doesn’t survive the Senate.
Spain is hoping to entice people to prepare for retirement with a voluntary saving plan as it tries to wean them off relying solely on state pensions.
The aim is to set up a fund run by private investment companies by the end of the year, offering Spaniards an affordable alternative to supplement their public pension. But unlike some other countries, the system will require workers to opt in rather than being automatically enrolled.
“We think there’s a group of middle- and low-income Spaniards who will be interested in a boost to their lifetime savings, which can complement their public pension,” Jose Luis Escriva, the social security minister for Spain’s Socialist-led government, said in an interview.
Global institutional pension fund assets in the 22 largest major markets (the P22) continued to climb in 2020 despite the impact of the pandemic, rising 11% to $52.5 trillion at year-end, according to the latest figures in the Global Pension Assets Study conducted by Willis Towers Watson’s Thinking Ahead Institute.
The seven largest markets for pension assets (the P7) — Australia, Canada, Japan, the Netherlands, Switzerland, the U.K. and the U.S. — account for 92% of the P22, unchanged from the previous year. The U.S. remains the largest pension market, representing 62% of worldwide pension assets, followed by Japan and the U.K. with 6.9% and 6.8%, respectively.
The self proclaimed “Wolf of Wall Street,” Jordan Belfort, expects the Robinhood trading platform to go out of business over the GameStop (GME) trading controversy. “I really believe the lawsuits are going to be very problematic,” Belfort told Yahoo Finance Live.
Belfort was the founder of the defunct Stratton Oakmont brokerage. He plead guilty in 1999 to running an illegal “pump and dump” stock scheme that cost his clients more than $100 million. Belfort served 22 months in federal prison and later authored a memoir, “The Wolf of Wall Street,” which became a film starring Leonardo DiCaprio.
GameStop shares soared more than 1,600%, in three months, hitting $483 last week and that surprised Belfort. “When I first looked at it I said, ‘Yeah, it’s a modified pump and dump,’” he said.