This week one of the very most cited documents and research results in the past couple of years has been questioned. Both furniture still produce the same bottom line: GDP development tends to diminish as debt-to-GDP increases. The difference is that the result isn’t as severe as the initial results of RR seemed to show.
The database used in the initial paper was from Reinhart and Rogoff’s excellent and many award-winning financial history book, This Time is Different. All these findings were highly receptive because they made a lot of logical sense. As was their financial contagion mechanism, and recommendations for policymakers. You can read their full response here and here.
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What are the implications of most of this? The first one is the standing of non-peer reviewed papers (like NBER working papers of AER proceedings) to be used for plan implications. On the other hand, since journal articles became more restrictive to information gain access to, it is no wonder working documents became a lot more wide-spread and attractive.
Couldn’t agree more, journal articles have a much higher influence on academic tenure than on spurring new ideas into debate, especially if the discussion is on financial policy. As for the policymakers using new financial research as their justification for austerity, I only wish they are so receptive. It’s been signaled by numerous research papers, discussions, op-eds, blogs, etc. that every European country is performing a wrong tax-based approach to austerity, but this hasn’t ceased the policymakers from doing this, hasn’t it? The reasons are politics solely, and also have little to do with economics (as I’ve summarized back in September). Finally, how have these new findings affected our feelings on the presssing issue of debts and the recovery? Well, very little. Debt is still bad.
Then there are those who find themselves self-employed or those who don’t have a 401k plan at their work. Fear Never, you may still find plenty of ways to get and begin building wealth – even as a beginner. The most well-known place to invest is inside your 401k plan. Exactly why is for matching 401k efforts from your employer.
If your employer offers a match, increase it! That is free money, and you have to work overtime to earn it don’t! Let’s say your employer matches 50 cents of the dollar for the first 6% of your salary. 1,500 of free money every year! Following the match is met by you, you may decide to make investments more. When you yourself have a good 401k plan, it’s worth investing more money. But, not all 401k plans are the same and some have some terribly high fees and incredibly lousy investment options. A great tool I personally use to check on for 401k (457,403b, 401a) fees is Blooom.
It’s a free checkup tool to show you how you how your fees may be affecting your nest egg. 10 per month when compared with the 1% management fee many advisors will charge. Another reason to invest in your 401k is the taxes benefits. You must pay taxes each year on your non-retirement account investments. However, that’s false with your 401k account. Having a pre-tax 401k, you will reduce your taxable income. Furthermore to bypassing income tax, your earnings grow tax-deferred; meaning you don’t pay taxes on the development.
The only time you pay fees is when you make a withdrawal after age group 59 ½ . Are There 401k Tax Disadvantages? How exactly we are in the cheapest tax environment in U.S. Her perception is that fees will someday go back to the same levels (higher) as they were when the 401k was created. Therefore, her argument is set up 401k is a good plan right now.
If fees do increase, then we would actually be preventing the lower taxes now to pay higher fees later. Unlike 401k plans, a ROTH 401k movements the fees from the relative back end to leading end. Rather than paying taxes when you withdraw the amount of money, today and then make investments into the ROTH 401k you pay taxes. Just like the 401k, your growth is also tax-deferred. Then, as it pertains time for you to withdraw your investment after age 59 ½ , your money won’t again be taxed.