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Dollars and Sense


Dollars and Sense - January 4, 2017

Question:  Is it possible to put more than 6% of your paycheck in your 401K retirement plan?


Answer:  Yes, you can put as much in as you want. However, you won't be able to deduct anything over6% for tax purposes. The amount you put in over that percentage will be taxed. For us who arenow senior citizen status, this is probably the biggest and best tax break we have ever seen inour lifetimes. Being able to set aside up to 6% of your paycheck and not pay tax on it until youretire is a huge benefit to working individuals. Unfortunately, you will pay tax on it when you     start drawing money from your 401K but, probably at a smaller tax rate. As for putting more inthan the 6% allowable, I'm not sure there is much of a benefit to doing so. You could just aseasily put the additional amount in a regular savings plan and it would accomplish the same thing. However, if having more withheld from your paycheck for your 401K is the easiest and most efficient way to save money, that's fine.


Question:  How did someone with no political experience, like Donald Trump, get elected as President?


Answer:  I think you answered your own question. The fact that he has no political experience is exactlywhy he won.  Most Americans were just sick and tired of politicians wasting our tax dollars and  being more concerned with staying in office than doing the right thing. Trump may not be a  likeable person because of the things he says but he is not a politician. He is a businessman and  the hopes of millions of Americans is that we now have someone who can protect our tax dollars from being thrown away on useless programs. It remains to be seen if it will work. However, electing politicians every four years certainly hasn't worked so what do we have to  lose? Although I didn't ever think it would happen but I have often said that we need someone  leading our country that will run it like a business and spend our money wisely. Maybe he isn't  a smooth person when he talks but, I couldn't care any less. I'm only concerned about what he may accomplish for our country. Regardless of what side of politics you are on, we should all  be hoping for the best.


Question:  How can our country reduce our financial deficit just by lowering taxes?


Answer:  Lowering our tax rates is going to help but, it won't be enough. The theory behind loweringtax rates is that people will spend the extra money they have in their pockets which will helpour economy grow. However, as much as I like the idea of lowering taxes, there is somethingelse that will reduce our deficit quicker and that is cutting useless expenditures. It is the most senseless things you can imagine. One expense I read about is $200,000 to build a soccer field   for inmates in a U.S. prison.  Another $300,000 was granted to study video games and the  effect on adults who play them. How about $175 million to maintain empty and abandonedgovernment owned buildings not in use for years. Then of course you have the program thatstudies on line dating which our tax dollars funded in the amount of $236,000. There arehundreds if not thousands of programs like this that cost a lot more than these examples. It'ssickening how much money is wasted to get answers on something no one cares about.

Dollars and Sense - December 21, 2017

Question:  Are there any new allowable tax deductions I should know about for 2016?

Answer:    Tax codes change frequently but this is a question for your tax accountant. Most individuals depend on their tax preparer to keep up with changes in the tax code. I'm fairly familiar withthe standard deductions but, I don't normally read the tax codes each year to see if there is anything new in the way of deductions. If you prepare your own return, you can try to go on-line and do some research. However, that may or may not be enough to insure you are not missing something. Making sure that nothing is overlooked is part of the price for hiring a  professional tax preparer which I highly recommend. I know there are some who prefer to cutcorners on expenses but it is taking a big risk of overlooking something important. It may be inyour favor or result in a higher tax bill. It doesn't matter which way it goes. It's important toget it right.

Question:  I was criticized for buying something out of town. Should I have been?

Answer:  I would hope that everyone feels some obligation to at least try to shop locally. However, merchants also have an obligation to be as competitive as they can. No one expects you to paydouble for something to keep it local.  Also, I think sometimes we expect things to be higher inprice locally when in fact, they may cost the same or less. The convenience factor and the cost  of fuel to go out of town should be considered. I think we should always give local merchants achance. If their pricing is reasonable, we should purchase locally. If their prices are way out of line with out of town competition, you can't be faulted for buying elsewhere. However, in  fairness to local merchants, the big chain operations are buying in more volume so they are  paying less for their product. Keep this in mind when checking for competitive pricing.   

Question:  I made a bet with someone that larger banks offer more insurance coverage on deposits thansmaller banks offer. Am I right?

Answer:   I hope your bet was not for a lot of money because you lose. It doesn't matter whether you  are doing business with a $100 million dollar bank or a $5 billion dollar bank. The maximum coverage allowable is the same amount. There are a few ways to increase your coverage usingdifferent names within your family but, those same tactics can be used regardless of the size of  the financial institution.   Certain things like lending limitations are established by the amount of capital a bank has but, on the deposit side, there is nothing a large bank can do for you that  a small bank can't do when it comes to FDIC insurance. The cost of insurance to the bank might  change from bank to bank but that has no bearing on your coverage. It's the same at everybank.

Dollars and Sense - December 14, 2016

Question:  Do you think we are better off financially than we were when the current President of the

                    U.S. took office?


Answer:  One answer does not fit all people in America. Our country as a whole is not better off than we

                  were 8 years ago but, that does not mean that certain segments of the population aren't

                  better off.  Those living on public assistance are better off because of the many new subsidies

                  that were created. However, I don't think that is true for the average American tax payer. This

                  is not a political statement. It's just a fact. Whether intentional or not, the current  

                 administration has created an environment that does not favor the working class American but

                 instead makes it easier for individuals to not work for what they receive. Subsidies have never

                 been more plentiful and the percentage of Americans taking them has never been higher. It's a

                 very disturbing environment that has been created and I'm not so sure it can be corrected.

                  However, Social Security payments to millions of Americans who paid into the system while

                 working is not a subsidy. Don't ever let anyone tell you that it is. You paid for it.


Question:  Don't you think we have earned the right to receive government subsidies if we need them?


Answer:  People do not earn the right to receive subsidies. They are supposed to be given to those who

                 are physically unable to provide for themselves and I don't have a problem with that. However,

                  it's been well documented that the majority of individuals who are receiving subsidies are not

                 sick and could work if they wanted to. I read an article recently and the author said, "Becoming

                 a welfare recipient is hereditary". Research done on this concluded that someone abusing the 

                  system by receiving all the subsidies the government offers, probably learned this from their

                 parents and possibly their grandparents. This is not always the case but much of the time it is.

                  Unfortunately, it will be very difficult for our elected officials in D.C. to make the necessary

                  changes to turn this around. How do they suddenly discontinue monthly benefits to millions of

                  people without destroying our economy? There may be a desire to change the requirements

                 for subsidies but it won't be easy regardless of who the  President is. It's a mess to untangle.



Question:  I've seen many articles on taxes in your column. Why are people so obsessed with this topic?


Answer:  You are correct. Over the years I have responded to a lot of questions on things related to

                 taxes. The reason is, we have no control over what we pay and we have no control over how it

                  is spent by our government. That makes it a very frustrating issue. Just about everything else in

                   our lives we have some level of control over when it comes to money. I think most individuals

                 would agree there has to be a tax on our income. However, what most people say is "we just

                  want it to be fair." There are too many people at all income levels that take advantage of the

                 system and end up paying very little or even nothing. This is why I, along with a lot of other

                  people, would prefer to see a flat tax at all income levels. I don't think this approach will be

                  happening because there is too much political pressure placed on politicians to vote against it

                  if it ever came to a vote. I can't think of anything that would be more fair than for everyone to

                 pay the same percentage of tax on their income regardless of what their income is.


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