The Center for Retirement Research at Boston College published a brief saying public pension plans should avoid tailoring their investment strategies to satisfy calls for political, social and environmental justice, known as ESG (environmental, social and governance) investing.

The movement toward more socially and environmentally activist investing has gained traction in recent years and some investors are using it as a strategy to increase returns based on political, social and environmental movements.

According to CRR, The mechanism apparently must work through a decline in the value of stocks at bad companies and an increase in the value of stocks at good companies thereby encouraging more companies to adopt good behaviors.

However, CRR found that states adopting an ESG mandate for public pension plan investments earned lower returns than traditional investment strategies, often by a considerable margin, the authors wrote.

Even assuming that divestment and ESG inclusion were effective mechanisms to stop terrorism and slow the rise in the earths temperature and that state legislatures and pension fund boards are the right bodies to make foreign and climate policy, pension funds are not an appropriate vehicle for social investing, the CRR report states.

To put this finding in context, plans with state mandates have had them for an average of 10 years, the authors wrote. So the average annualized return for those with a state mandate would be 20 basis points lower than for those without a mandate.

Part of the problem is that ESG investing involves a number of different issues, ranging from guns and carbon emissions to the more nebulous social justice, which can all be distinct from each other.

Secondly, the researchers found that ESG investing is unlikely to affect the price of either the good or the bad companies. The report also noted that fees related to ESG investing tend to be significantly higher than traditional counterparts.

Connecticut manages over $37 billion through its Connecticut Retirement Plan Trust Fund investments, and in 2006 Connecticut was a signatory to the United Nations Principles for Responsible Investment, which gives guidelines to selecting investment partners based on ESG issues.

In a press release issued by the UN, former State Treasurer Denise Nappier said Financial markets tend to focus too heavily on short-term results at the expense of long-term and non-traditional financial fitness factors that could affect a companys bottom line. For many institutional investors it is the long-term that matters and in this context environmental, social and governance issues take on new meaning.

According to the 2019 Investment Policy Statement for Connecticuts retirement fund, which was authored by State Treasurer Shawn Wooden and approved by the Investment Advisory Council, the state is also taking a more active role in ESG investments.

Article VIII of the Investment Policy Statement says Connecticut will Integrate the potential risk and value impact that environmental, social, and governance (ESG) factors may have on CRPTFs investment program.

A main driver behind the integration of ESG into the investment process is the desire to identify and select investment partners and money managers that carefully review the effect of ESG on companies and to use appropriate criteria to invest in better managed companies to improve on invested capital, the policy statement says.

The statement continues to indicate that part of that ESG criteria will be to afford more opportunities to emerging, minority and women-owned and Connecticut-based investment partners.

In 2020 Wooden announced the Connecticut would divest roughly $30 million from civilian gun and ammunition manufacturers, part of Woodens Responsible Gun Policy.

According to the CRR, ESG has its roots in the 1970s when states moved to divest from tobacco, alcohol and gambling stocks, as well as divesting from companies who did business with South Africa which, at the time, had a policy of apartheid.

The investment movement has since moved on to encompass terrorist states, Iran, gun manufacturers and fossil fuel companies.

According to CRR, public pension plans applied ESG to at least $3 trillion in assets, which represents more than half of all assets in public pension funds.

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Center for Retirement Research: Public pension plans should avoid investing based on social and environmental movements - Yankee Institute

If youve been following the stock market news lately, youve probably heard about TeslaTSLA being ... [+] added to the S&P 500 Index a few times a day. But having a newsworthy change to an index may not mean its a good investmentit may just mean the opposite.

If youve been following the stock market news lately, youve probably heard about Tesla TSLA being added to the S&P 500 Index a few times a day. But having a newsworthy change to an index may not mean its a good investmentit may just mean the opposite.

Lets talk about what index funds are and whether theyre a good choice for your retirement portfolio.

Index funds are a type of mutual funda portfolio of stocks or bonds designed to match or track the performance of a particular market index. Unlike some mutual funds which allow managers to have some discretion to select underlying holdings and to determine when to buy or sell them, index funds are designed to track the performance of a market index such as the S&P 500 Index, the Russell 2000 Index, and the Willshire 5000 Total Market Index.

There are some attractive features to these funds.

Since index funds are passive management, managers are not actively picking securities, which means low costs for investors. Also, low portfolio turnover means modest tax impacts. Theyre the cheapest means to buy equity exposure, but that may not mean theyre the best option.

The S&P 500 includes 500 market-cap-weighted stocks. While this sounds like built-in diversification, theres actually a huge amount of concentration in favor of the biggest names because securities with a higher market capitalization value account for a greater share of the overall value of the index.

Currently, the top five stocks in the S&P 500 index make up over 20% of the holdings. These are Apple AAPL (AAPL), Microsoft MSFT (MSFT), Amazon AMZN (AMZN), Facebook FB (FB) and Alphabet (GOOGL). The top 50 stocks account for over 54% of the fund balance (Source). That means that more than half of the indexs return is linked to just ten percent of the stocks in the portfolio.

In terms of your portfolio, while you will own small pieces of 500 different stocks, your portfolio will be weighted in just those big names. That may not be the diversity you expected.

The manager of an index fund has less flexibility in terms of what to buy, what to sell or when to make the transactions.

Lets look at Tesla (TSLA). This year, there was tremendous talk about the possibility of Tesla joining the S&P 500 Index. That drove up the stock price. Since the beginning of 2020, the value of Tesla stock has grown more than 600%.

Tesla will be joining the index later in December. Managers will be forced to establish positions in Tesla stock, and theyre buying the shares at a grossly inflated price.

If you own the S&P 500 Index, youre about to own a lot of Tesla stockbut only after its price has been escalated to all-time highs.

When a stock is announced to be joining an index, the managers of the funds mirroring that index have no choice but to buy shares. But a lot of institutional and individual investors buy up the shares before those managers can, so index funds often buy at an elevated price on the way in.

The same thing is true in reverse. An index fund may have less flexibility to react to price declines in the securities within the index. If a stock gets kicked out of an index, the managers have to sell the shares whether they want to or not. That will drive the price down.

To have a successful outcome for an investment, an investor should choose what to buy, when to buy it and when to sell it. Getting any of those three components wrong can hurt returns, and index fund managers dont get to select any of the variables on their own merits.

In my opinion, the newsworthiness of a stock joining or leaving an index almost always leads to a public buying or selling frenzy and then a lousy deal for the index fund holders.

When constructing a portfolio, asset managers look at various measures, including those known as alpha, beta and standard deviation.

Alpha is a measure of the fund managers selection skill. A positive alpha can add value to the fund. A negative alpha can detract value.

Index funds have no alpha because there is no control over selectionits all predetermined by the index, so it sets its own benchmark. You can never get excess performance on the upside or downside, so you can never do better than the benchmark.

Beta is the measure of risk. A beta of 1.00 means youre taking the exact amount of risk as the benchmark, in this case the S&P 500. If a beta is higher than 1.00 youre taking more risk than the benchmark and if its less than 1.00 youre taking less risk than the benchmark.

An index fund always has a beta of 1.00.Youre not creating any additional defense against risk.

With no alpha or beta, the standard deviation will be higher for an equity index fund than you may want for your portfolio because it cannot play any defense.

If the S&P index is up 40%, so is your portfolio. If its down 40%, so is your portfolio.

The best way to manage a portfolio is to reduce that downside. The force of the downside is double the force of the upside.

Lets say you make a hypothetical investment of $10,000 into an index and hold it for two years. In the first year, the fund gains 50%. In the second year, the fund loses 50%. The average annual rate of return is zero, but you still lost money. After year one, you had $15,000. After year two you had $7,500.

The same is true in reversethe sequence doesnt matter. If you lost 50% in the first year and gained 50% in the second year, youre still coming up with less than you put in.

Cheaper or inexpensive is not always the better choice when investing.

Passive asset management for widely traded asset classes may make a ton of sense, but you dont have to buy an index to be passive. All you need is fund thats primarily buy-and-hold and has low turnover. This wont be as cheap as an index fund, but it can still be inexpensive. It also has a chance to increase alpha and to reduce beta by avoiding some of the higher standard deviation positions in the index.

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Tesla Fever: Understanding Index Funds And How They May Hurt Your Retirement - Forbes

Grand Forks school administrators are studying ways to reduce the districts budget by $3.2 million next year, as directed by the boards Finance Committee.

Brenner outlined the process and the timeline for making budget reduction decisions at the boards regular meeting Monday, Dec. 14.

Taking into account inflation and other factors, we are really faced with an 8 to 12% gap between revenue and expenses for the next two years, Brenner said. With a current expense budget of about $112 million, realizing a $10 million reduction in expenses is going to be a heavy lift, because about 85% of the districts expenses are tied to salaries, he said.

District administrators are using a tiered approach to identifying budget savings, with Tier 1 being attrition; Tier 2, low-enrollment courses; and Tier 3, positions.

We want to stay as far away from Tier 3 as possible, Brenner told the board.

Recent discussions with local state lawmakers have indicated that no increase in per-pupil aid in year 1 and a 1% increase in year 2 are possible, said Scott Berge, business manager for the district.

Per-pupil funding (accounts for) about two-thirds of our total revenue, so its a significant portion, Berge said.

District administrators plan to gather input from Grand Forks Education Association members, teacher-leaders and classified staff members Jan. 12-20 and present budget reduction concepts to the School Board for feedback at its Jan. 25 meeting, Brenner said.

During a discussion about possibly rescinding the districts early retirement policy, several teachers urged the board to retain the policy, maintaining that to do so would, over time, save the district money.

The long-standing policy allows teachers who have been employed for a certain number of years and who are qualified, to apply for early retirement benefits, which are paid out in equal portion annually over four years.

Fifty-six teachers qualify to apply for the benefit this year; among them, 13 have become eligible to apply this school year, according to Melissa Buchhop, GFEA president.

The application deadline is Jan. 15.

Three teachers have already submitted paperwork for the benefit, Buchhop said. It is not fair to long-term teachers to rescind the policy at this time.

Penny Tandeski, who has worked for the district for 31 years and has submitted her retirement notice, said It seems loyalty means nothing and urged the board to find other ways to solve budget woes.

To rescind the policy now is like ripping the rug right out from under me, she said, and doing so with basically no warning, to say is crushing is an understatement.

Said Berge: We have a lot of difficult decisions ahead of us (including possibly cutting) individual classes, entire programs, staffing facilities, along with other adjustments we may have to make.

(During a time when) we have a shortage of teachers, it doesnt make sense to encourage teachers to retire, said Doug Carpenter, member of the boards Finance Committee.

We may have to look at each persons application and ask, Is that a hard-to-fill position? Thats another way of doing this.

Originally posted here:
Grand Forks School Board weighs budget reduction, early retirement concerns - Grand Forks Herald

CENTENNIAL, Colo.--(BUSINESS WIRE)--Arrow Electronics, Inc. (NYSE:ARW) today announced that Andy King is retiring from the company as president of the global components business, effective December 31, 2020.

Andy has been an instrumental part of driving the growth and success of Arrow during his 34 years at the company, said Michael J. Long, chairman, president, and chief executive officer of Arrow. He has been a valuable member of our leadership team, and we wish him all the best in his well-deserved retirement.

Following Mr. Kings retirement, David West, senior vice president of worldwide supplier marketing and engineering for Arrow, will be named president of the global components business, reporting to Mr. Long. David has held wide-ranging leadership positions during his 22 years at Arrow, overseeing all critical aspects of our components segment, said Mr. Long. I look forward to seeing the business continuing to thrive and innovate under Davids direction.

Arrow Electronics guides innovation forward for over 175,000 leading technology manufacturers and service providers. With 2019 sales of $29 billion, Arrow develops technology solutions that improve business and daily life. Learn more at fiveyearsout.com.

Continued here:
Andy King to Retire From Arrow Electronics, Inc. - Business Wire

Americas best-selling vehicle gets better, more advanced and more fuel efficient. Detroit Free Press

Thechief manufacturing and labor affairs officer at Ford Motor Co., a manpraised by union leaders for a negotiating style that helped avert strikes during contract talks in the U.S. in 2019 and Canada in 2020, is retiring, the company announced Tuesday.

Gary Johnson, 56, will end his career at Ford on Feb. 1. He began with the automaker in 1986 as a paint-shop supervisor at the Flat Rock Assembly Plant. He leaves as head of operations for every Ford assembly, stamping and powertrain plant. Previously, Johnson led manufacturing inAsia Pacific. Heoversaw construction of 12 manufacturing plants.

Gary Johnson, chief manufacturing and labor affairs officer, will retire on Feb. 1.(Photo: Ford Motor Co.)

Johnson played a key role in responding to the coronavirus pandemic and rapidly manufacturingpersonal protective and healthcare equipment, while directing a safe return toglobal manufacturing.

Hes been central to expanding and modernizing our operations to produce high-quality vehicles, our exceptional partnership with the UAW, and this past year leading our people and production through the coronavirus pandemic," said Kumar Galhotra, president, Ford Americas and International Markets Group.

From left, Ford engineering specialist Shaunise Williams, Gary Johnson, CEO Jim Farley, Dearborn Truck Plant Manager Debbie Manzano and launch team member Edana Jones discuss a machine operation in September. Johnson, chief manufacturing and labor affairs officer, will retire on Feb. 1.(Photo: Ford Motor Co.)

One day before the announcement,IndustryWeek named Johnson2020 Manufacturing Technology Leader of the Yearfrom what wasdescribed asanespecially competitive field of candidateschallenged byCOVID-19 disruption.

The UAW praised Johnson's ability to find common ground.

"Over the past year, as Ford and the U.S. auto industry faced unprecedented challenges over the coronaviruspandemic, Gary Johnson worked tirelessly with the UAW and our members to address the serious health and safety issues in our workplace with collaboration, honesty and real concern," Gerald Kariem, UAW vice president of the Ford Department, said Tuesday."Although we had differences at the bargaining table, Gary always understood that ultimately UAW members were his family too and it was reflected in the way he approached bargaining."

Ronald Green, left, is a 43-year Kansas City Assembly Plant worker who talked with John Savona, Ford North America Manufacturing vice president in October after a company celebration. They're standing in front of a 2021 F-150 pre-production prototype. Savona was promoted Tuesday.(Photo: Amanda Wilhite)

John Savona, 52, will succeedJohnson in overseeingworldwide manufacturing strategywhile continuing to leadmanufacturing in North America.

The UAWsaid it looked forward to working with Savona.

He joined Ford in 1989 as a security guard at the Wayne Assembly Plant after serving in the U.S. Army. Savonahas led manufacturing operations in North America since 2018 and currently serves as executive champion for the Ford Veteran's Network. He will report to Lisa Drake, chief operating officer, North America

These and other executive changes are part of an ongoing management overhaul since CEO Jim Farley took the helmOct. 1.

More: Ford hires global CMO from eBay amid shakeup in tech, vehicle launches

More: Ford CFO replaced in management shake-up on Day 1 of new CEO

More: Ford CEO Jim Hackett to retire; Chief Operating Officer Jim Farley will take helm

Johnson is one of two topFord executives retiring who will be succeeded by colleagues, "while assignments for two Product Development and Engineering leaders areevolving with the companys intense focus on connectivity and electrification," Ford said in a news release.

The changes "will assure consistency and capability as Ford works through next-level changes in its plan to transform, modernize, disrupt and grow its automotive business," Ford said.

Mark Ovenden, 56, president of Fords International Markets Group, is retiring effective Feb. 1 after 35 years at the company. He is credited with improving business in 100 markets including Australia, India, the Middle East, South Africa and Southeast Asia. He coordinated global demand for the Ranger pickup. Previously, Ovenden waspresident, Middle East and Africa; vice president, Marketing, Sales and Service, Asia Pacific; led transformation of Fords joint-venture company in Russia, and was chairman and managing director of Ford of Britain.

Mark Ovenden, 56, president of Fords International Markets Group, is retiring effective Feb. 1 after 35 years at the company.(Photo: Ford Motor Co.)

Mark has been on the leading edge of expanding the worldwide reach and stature of the Blue Oval, Galhotra said in prepared remarks. He has sharp understanding of and been a strong and constant advocate for customers in places that were newer for Ford.

Dianne Craig, 56, who has for the past two years beenCEO of FordDirect, a digital marketing joint venture with Ford and Lincoln dealers, will succeedOvenden as president, International Markets Group and become a corporate officer. She willreport to Lyle Watters, president, South America and International Markets Group.

Dianne Craig, who has for the past two years beenCEO of FordDirect, a digital marketing joint venture with Ford and Lincoln dealers, has been promoted to president, International Markets Group.(Photo: Ford Motor Co.)

Craig, whohas been at Fordsince 1986, was director, U.S. Sales, and president and CEO of Ford of Canada.

Starting Jan. 1,Dave Filipe, 53, will become vice president, Vehicle Hardware Modules, andChuck Gray, 56, vice president, Vehicle Embedded Software and Controls.

"Both represent shifting responsibilities within the new Ford operating model that CEO Jim Farley introduced in October," Ford said.

Filipe and Gray continue as officers of the company and reportto Hau Thai-Tang, chief product platform and operations officer.

Despite being seasoned veterans at Ford, their roles are new aspart ofrestructuring.

"They will support the companys aggressive push to raise overall product quality and employ a new approach that will scale the innovative battery-electric vehicle platforms and deliver its first fully networked vehicles and services," Ford said.

More: Ford wants to cut 1,400 salaried jobs in U.S.: Who is targeted

More: Ford cuts contract workers effective immediately, declines to say how many

Filipe, who has been vice president, powertrain engineering, for the past three years, will now lead hardware development and systems integration of exterior, interior, underbody, internal-combustion powertrain and electrified modules. Previously,he was vehicle line director for North America trucks; director of Global, Engine Engineering; and director, Transmission and Driveline Engineering. Filipe has been with Ford since 1992.

Dave Filipe will become vice president, Vehicle Hardware Modules, at Ford on Jan. 1.(Photo: Ford Motor Co.)

Gray will be "responsible for transforming the in-vehicle service experience for Ford customers through embedded software, including those that enable over-the-air updates, vehicle controls, embedded connectivity technology, advanced driver-assist technologies and systems, and vehicle cybersecurity," Ford said.

Since 2019, Grayhas been vice president, Vehicle Components and Systems. Earlier, Gray, who joined Ford in 1991, was director of Fords Core Electrical team and also led Transmission and Driveline engineering.

Chuck Gray will become vice president, Vehicle Embedded Software and Controls, starting on Jan. 1 at Ford.(Photo: Ford Motor Co.)

With this new structure, our engineering teams will be even more agile, to capitalize on emerging trends and opportunities and the speed of innovation, Thai-Tang said in prepared remarks. Instead of focusing on components, we will use a systems view of technology and its integration at scale to unlock innovation for customers and Ford.

Contact Phoebe Wall Howard at 313-222-6512or phoward@freepress.com. Follow her on Twitter @phoebesaid. Read more on Ford and sign up for our autos newsletter.

Read or Share this story: https://www.freep.com/story/money/cars/ford/2020/12/15/ford-savona-gary-johnson-uaw-farley-retirement/3901848001/

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Top Ford labor negotiator Gary Johnson to retire after 34 years - Detroit Free Press

Northam will propose to pay off the debt at the end of the current fiscal year on June 30. He also will propose to reduce the liabilities for other post-employee benefits, such as retiree health credits, which are currently underfunded and require higher ongoing contributions by state and local governments.

The lower we can push down these liabilities, the better it is for everybody, Layne said.

VRS officials say the payment will not affect employer rates in the current two-year budget, but will result in lower costs in the next budget.

The extra money coming in will essentially moderate future rates, said Rory Badura, senior staff actuary for the retirement system.

The proposed payments also would partly offset the higher rates that the state and local governments already have begun to pay since the VRS decided last year to lower its expected long-term annual return on investments from 7% to 6.75% a year.

The decision reflected diminished expectations for investment income that pays for most of the retirement costs for almost 750,000 active, retired or inactive employees in the $85 billion system.

The lower the investment income, the higher the contributions that state and local governments must pay in their annual budgets. The lower investment return is estimated to cost $216 million a year in contributions from public employers, including about $94 million a year from the state general fund budget, which relies on state taxes to pay for core government services.

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Northam to spend $100 million to reduce teacher retirement liabilities - Richmond.com

Beware these 15 worst states for taxes on your retirement

Maybe you want to spend your retirement somewhere sunny. Or maybe a view of the mountains is more your style.

But before you start making plans, its worth looking at the tax situation in any state youre considering. Some places impose significantly harsher taxes on retirees than others.

Our rankings take into consideration how much tax each state imposes on retirement income, any state-imposed estate or inheritance taxes, and the Tax Foundations estimates for average state and local sales taxes and the average, effective property tax. We also highlight some of the tax credits and exclusions seniors may qualify for.

An expert can help you look at your options. Certified financial planners who are "fiduciaries" have strategies just for retirees and they're bound by law to put your interests first.

Here are the 15 worst states when it comes to taxing retirees, counting down to the state where seniors face the worst tax burdens.

Tax on retirement income: Yes

State income tax: 5% flat rate

Average property tax: 1.15% of home value

Average state and local sales tax: 6.25%

Massachusetts does not tax Social Security benefits or government pension income, but most other retirement income is taxed at a flat rate of 5%.

The Bay State has the 18th-highest average property tax rate in the country, with owners of a $350,000 house paying roughly $4,025 in tax per year.

Fortunately, residents over the age of 65 who earn less than a certain amount (for the 2020 tax year, thats $61,000 for individuals and $92,000 for married couples who file jointly) are eligible for a property tax credit of up to $1,150.

Massachusetts also has an estate tax a tax on the fair market value of your assets after you die ranging from 0.8% to 16% on estates worth over $1 million. This $1 million threshold is tied with Oregon's for the lowest in the country.

Tax on retirement income: Yes

State income tax: 0% to 4.797% (highest rate applies to incomes over $217,400)

Average property tax: 1.62% of home value

Average state and local sales tax: 7.17%

The Buckeye State does not tax Social Security benefits, although income from most other retirement accounts is taxed as regular income.

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Seniors aged 65 or older can claim a retirement income credit of up to $200 per year on sources of income other than their Social Security, as well as a senior citizen tax credit of $50.

Ohios property taxes are the ninth-highest in the country, but seniors who earn less than a certain amount ($33,600 during the 2020 tax year) may qualify for the homestead exemption, which exempts up to $25,000 of their homes market value fromlocal property taxes.

Calculate how much more you need to save each month to reach your retirement nest egg goal.

Tax on retirement income: Yes

State income tax: 2% to 5.75% (highest rate applies to incomes over $250,000)

Average property tax: 1.04% of home value

Average state and local sales tax: 6.00%

Although Maryland is known as the Free State, dont expect much in the way of freebies if youre planning to retire there. While Social Security benefits are not subject to state income tax, most other forms of retirement income are.

On the bright side, residents 65 or older may qualify for an exclusion of up to $31,100 on distributions from 401(k), 403(b), and 457 plans and income from public and private pensions.

In addition to a state income tax of 2% to 5.75%, Marylands 23 counties and Baltimore City also levy local income taxes ranging between 2.5% and 3.2% of residents taxable income.

Property taxes in Maryland also are fairly high, with the owner of a $350,000 home paying around $3,640 a year. Maryland also is the only state in the country to charge both an estate tax and an inheritance tax: Estates are taxed, and so are the heirs who receive a deceased persons assets.

Tax on retirement income: Yes

State income tax: 5.80% to 7.15% (highest rate applying to incomes over $52,600)

Average property tax: 1.27% of home value

Average state and local sales tax: 5.50%

Retiring in the Pine Tree State is not all bad: Maine doesnt tax Social Security benefits, and retirees can deduct up to $10,000 of eligible pension income.

However, all other forms of retirement income are subject to state income tax rates as high as 7.15%, with the highest rate applying to anyone with an income of more than $52,600.

Maines property taxes are also pricey, plus Maine charges an estate tax ranging from 8% to 12% on estates valued above $5.7 million. Fortunately, the sales tax in the state is lower than average, and Maine does not allow cities or towns to impose any local sales tax.

To get reach retirement faster, consider building your nest egg through an fee-free investment app.

Tax on retirement income: Yes

State income tax: 1% to 13.30% (highest rate applies to incomes over $1,000,000)

Average property tax: 0.74% of home value

Average state and local sales tax: 8.66%

Lets start with some good news: If youre planning to retire in the Golden State, your Social Security benefits are exempt from state income taxes.

Unfortunately, all of your other retirement income is fully taxable, and at the highest tax rate in the country if you earn more than $1 million a year. (If thats the case, well done.)

Another bright spot for retirees is that the average property tax rate in California is quite low; on a home worth $350,000 youll only pay around $2,590. However, its worth noting that California has the highest state sales tax in the country at 7.25%, and the cost of living is 18% higher than the national average.

If you need a bit of help navigating California's complex tax rules, work online with a certified financial planner who can tailor you a tax-light retirement plan.

Tax on retirement income: Yes, but deductible up to $20,000

State income tax: 4% to 8.82% (highest rate applies to incomes over $1,077,550)

Average property tax: 1.40% of home value

Average state and local sales tax: 8.52%

Social Security benefits and military pensions are exempt from state taxes in New York. But the Empire State has the 14th highest property tax rate in the country, with the average taxes on a $350,000 house costing around $4,900.

The good news is that tax breaks are available for seniors at the local level. Local governments and school districts have the option to reduce the assessed value of a seniors home by up to 50%, depending on the seniors income.

Some seniors may also qualify for a School Tax Relief (STAR) exemption, in which the first $66,800 of their home value is exempt from school property taxes. In order to be eligible, youll need to be at least 65 years of age and have had an annual household income below a certain threshold ($86,300 or less during the 2019-2020 school year).

In addition to property taxes, retired New Yorkers also have to consider the combined state and local sales tax, which is the 10th highest in the country, as well as an estate tax of 3.06% to 16% on estates worth $5.9 million or more.

Tax on retirement income: No

State income tax: 4.95% flat rate

Average property tax: 2.05% of home value

Average state and local sales tax: 9.08%

Retirees planning to settle down in the Land of Lincoln had better start saving their pennies (or start taking photos of their grocery receipts), because Illinois has the second-highest average property tax rate in the country.

An owner of a $350,000 house pays roughly $7,175 a year in property taxes, although some seniors in Illinois may qualify for a homestead exemption of up to $8,000, depending on which part of the state they live in.

Aside from the high property taxes, Illinois residents are also subject to the sixth-highest combined state and local sales tax in the U.S., as well as an estate tax ranging from 0.8% to 16% on estates above $4 million.

On the bright side, the states flat 4.95% income tax rate is quite low, and income from most retirement plans including Social Security benefits is exempt from state taxes.

Tax on retirement income: Yes, but minimal below $60,000

State income tax: 1.40% to 10.75% (highest rate applies to incomes over $5 million)

Average property tax: 2.21%

Average state and local sales tax: 6.60%

For retirees in the Garden State, property taxes are the biggest weed in the flower bed. New Jersey has the highest average property tax rate in the country: The owner of a $350,000 home has to shell out around $7,735 each year.

New Jersey provides some relief for retirees through its Senior Freeze program, which reimburses eligible seniors for property tax increases. Additionally, senior citizens with an annual household income of $10,000 or less qualify for a property tax deduction of $250.

Most Americans can cushion the blow from high property taxes by cutting costs on their home insurance many people overpay by $1,100.

Social Security benefits are not taxed in New Jersey, but while the state eliminated its estate tax in 2018, it still charges an inheritance tax of 11% to 16% on inherited property worth $500 or more.

Tax on retirement income: Yes

State income tax: 3.75% to 5.99% (highest rate applies to incomes over $148,350)

Average property tax: 1.53% of home value

Average state and local sales tax: 7.00%

Rhode Island may offer scenic views of the Atlantic, but you can expect to be hit with a tidal wave of taxation if you decide to retire in the Ocean State. All retirement income is fully taxable, including Social Security benefits, as long as it is also taxed federally.

However, residents earning a certain amount or less ($85,150 for individuals and $106,400 for joint filers in 2019) are exempt from paying state tax on their Social Security benefits.

Property taxes in Rhode Island are the 10th highest in the country, although homeowners 65 or older whose income is $30,000 or less are eligible for a state tax credit. And if you're still carrying a mortgage, you could be due for a money-saving refinance.

Rhode Island also has an estate tax ranging from 0.8% to 16% on estates worth more than $1.6 million, making it one of only a few states that tax estates valued at under $2 million.

Tax on retirement income: Yes

State income tax: 3.35% to 8.75% (highest rate applies to incomes over $204,000)

Average property tax: 1.80% of home value

Average state and local sales tax: 6.22%

If you retire in Vermont, the government will tap your income just like one of the states maple trees. The Green Mountain State taxes all forms of retirement income at rates between 3.35% and 8.75%, and that includes Social Security benefits.

However, individuals who earn an adjusted gross income of $45,000 or less, and joint-filing couples who earn $60,000 or less, are eligible for full exemptions from state Social Security tax.

Vermont also charges a flat 16% estate tax on any estate that exceeds $2.8 million in value. And, property taxes are quite pricey, with the average tax on a $350,000 house coming to around $6,300.

Fortunately, some retired homeowners may qualify for Vermonts Elderly and Permanently Disabled Tax Credit, which is worth 24% of the federal credit for elderly and permanently disabled individuals.

Tax on retirement income: Yes

State income tax: 5.35% to 9.85% (highest rate applies to incomes over $164,401)

Average property tax: 1.44%

Average state and local sales tax: 7.46%

Minnesota taxes all forms of retirement income including Social Security benefits with the exception of military pensions.

However, thanks to the North Star States progressive tax system, households earning less than $23,900 are exempt from paying state taxes on their Social Security benefits. The state also offers a special income tax deduction for seniors who make $61,080 or less, or $78,180 or less for couples who file jointly.

Property taxes in Minnesota are the 13th highest in the country, with owners of a $350,000 home paying around $5,040 a year.

The state's residents also are subject to an estate tax of 13% to 16% on estates valued at more than $3 million, although assets left to a surviving spouse are exempt.

Tax on retirement benefits: Yes

State income tax: 4% to 7.65% (highest rate applies to incomes over $263,480)

Average property tax: 1.73% of home value

Average state and local sales tax: 5.46%

Although all Social Security benefits and income from government pensions are exempt from state taxes in Wisconsin, any other retirement income is fully taxable at rates ranging from 3.86% to 7.65%.

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Beware these 15 worst states for taxes on your retirement - Yahoo Finance

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One of the biggest challenges of retirement is saving for it. But another challenge is that you only do it once.

When you've done something once, you have an idea of how to do it again for example, once you've bought your first home, buying your next home feels a lot less intimidating. But retirement isn't like that it's not something you have another shot at later on.

Luckily, lots of people have retired comfortably and are willing to share the steps they took to do so. Here, we've compiled the best advice from four retired people for anyone who's looking forward to a long and happy retirement.

Business Insider contributor Sean, of The Money Wizard, didn't find out that his grandfather was a millionaire until he was comfortably retired.

For years when Sean was growing up, his grandfather drank the cheapest beer, pinched pennies, and drove older-model cars. His grandfather brought in an average salary and never earned a college degree while raising five children. But eventually, Sean found out his grandfather had a retirement account worth $1.2 million.

"My grandpa eventually let me in on his secret: Wealth doesn't mean earning a lot of money. Nor does it mean spending a lot of money. Instead, wealth is all about investing inincome-producing assets,"Sean writes.

One of the biggest factors in building wealth through investing is how long investments can stay in the market. He learned early that investing consistantly and earning average stock market returns could help him grow his savings over his long career.

"He only needed to invest about $8,000 per year for his portfolio to grow from nothing to $1.2 million," Sean writes. And he focused on buying assets and investments instead of things.

Sean says that his grandfather's advice has helped him get on track to hit $6.8 million at age 60, or retire early.

Writer Michelle Jackson's grandmother only started saving for retirement 10 years before she retired. Jackson's conversations with her grandmother confirmed that it's never too late to start saving.

Jackson's grandmother started saving 10% to 15% of her paychecks in her 50s. And it all worked out she retired comfortably in her 60s. And she's happy, Jackson writes. "In observing my grandmother's financial habits, I found myself realizing that she feels quite wealthy. She has enough. Enough money for the things she enjoys."

Like Sean of The Money Wizard, Business Insider contributor Eric Rosenberg didn't know his grandfather was a millionaire until later in his life. Rosenberg's grandfather using a simple buy-and-hold investment strategy to reach millionaire status, while similarly not flaunting it.

Buying and holding shares is exactly as it sounds: buying shares of stock and keeping them for years. While it isn't the most glamorous way to invest, Rosenberg's grandfather is proof that it works. "Picking good companies and sticking with them can pay off very well in the long run. He didn't follow some get-rich-quick scheme," Rosenberg writes. "He picked solid companies and held on as they grew in value over time."

While Rosenberg's grandfather built his portfolio by buying into Walmart very early on, it's also possible to use ETFs to invest in multiple companies at once and see growth. "Buying a low-cost S&P 500 ETF and investing more steadily over time gives you investment exposure to 500 of the biggest stocks in the United States. If history continues to repeat itself, chances are good you would do well with that type of investment over time," he writes. Index funds can also be used, which track individual industries the way S&P 500 tracks the largest 500 companies.

Buy-and-hold investing doesn't require much maintenance when stocks simply sit and grow over many years. It's a relatively simple strategy that's a great option for anyone who still has many years before retirement.

For many people, retirement is lasting longer. Personally, I learned about the benefits of long-term care insurance, a type of insurance that can help pay for assisted living and in-home care later in life, from my grandmother, as I've previously written.

When my parents could no longer care for my grandmother full-time, my grandma's experience moving into an assisted living facility taught me just how important long-term care insurance is, especially for women who tend to live longer. Typically, this type of insurance is most affordable to purchase between ages 52 and 64.

Now in her 90s, my grandma had a long and comfortable retirement before moving into the facility. But, having that coverage helped to make sure she could afford to do so, and continue to live comfortably in her later years.

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4 pieces of advice to help you retire comfortably, according to people who have done it - Business Insider

Investors have been challenged like never before in 2020 as the pandemic took the market from the record highs that marked the start of the year, to the brink of a depression by the end of March, and back to record highs.

And if daily headlines about Covid-19 and its economic impact werent enough, many investors are grappling with conflicting emotions: boredom and anxiety, hope and fear, gratitude and guilt. These emotions can be particularly debilitating to retirement savers, whose decisions today can have a lasting impact on their ability to amass enough for a decadeslong retirement.

It can be difficult to make sound, emotion-free investment decisions in even the most typical of times, but the environment today could be a case study in bad behavior. We are just constantly stressed in a way that were not used to, and in an environment that is so uncertain and ambiguous, says Maria Konnikova, an author with Ph.D. in psychology who specializes in decision making. (Please see our conversation with Konnikova.)

Yet as the stock markets round trip has shown, the biggest influence on our retirement savings might not be what we hear on the news or read on social media. Its how we respond to it.

And how have we responded?

When markets tanked in March, many investors did exactly what they were supposed to dostayed the course and in many cases increased their retirement contributions. Still, a large share of investors cashed out or remained on the sidelines, fearing that the worst was yet to comeand who can blame them? Losing money, especially if youre counting on this cash to cover near-term expenses, is perhaps more painful than missing out on market gains.

Investors generally grapple with two elements of decision making: the impact of the decision and the emotion that comes with it. Fear of future regret probably drives more behavior than anything, says Denise Shull, a former trader and CEO of the ReThink Group, a decision-making and performance consultancy.

Its impossible to know what the future holds, but there are strategies for avoiding the biggest behavioral mistakes. In fact, by focusing more on the process for making decisions and less on whether a decision is good or bad, you have a better chance for successand a lower probability of driving yourself crazy.

The Covid-19 pandemic has given rise to all kinds of new habits and behaviors, and that includes what Charles Schwab chief investment strategist Liz Ann Sonders calls a new breed of day trader. With new apps such as Robinhood and Webull at their disposal, investors of all ages have taken to trading individual stocks and even options.

Daily trading volume driven by individual investors has averaged 20% this yeardouble what it was in 2019and approached 25% on peak days, according to Citadel Securities. Meanwhile, options premiums paid by individuals reached an all-time high in August, and after declining in late October, they are up again. There is more volume in single-share options than there is in the actual shares themselves, Sonders says.

Is it any wonder that many investors have a newfound interest in the stock market? Rising stocks can offer a nice dopamine hit in the absence of good newsand the market has continued to reach new highs as the news has been largely bleak.

Ive never had so many friends and family members so interested in investing, says Sarah Newcomb, a behavioral economist for Morningstar. She points to a combination of factors: many people have more time on their handsand more money in their pockets. Trading stocks was among the more common uses for the $1,200 stimulus cash, according to Envestnet Yodlee, a software and data-aggregation company.

Its a perfect storm for DIY investors, Newcomb says.

In fact, one of the unusual things about the Covid-19 market is that while the selloff was fast and extreme, so was the recovery. We have seen an entire market cycle condensed into an incredibly short span of time, says Sonders, explaining that investor sentiment is affected by both the severity and the duration of bear markets. This helps explain the lack of pervasive despair that investors typically have in a deep bear market.

The payoff for staying invested came quickly, and for investors who stayed put or bought on the dips, the markets return reinforced their beliefs. I think peoples recollections of 2000 and 2009how in hindsight it was a good time to stay invested or enter the marketdid play a role in turning the market around, says George Lowenstein, a professor of economics and psychology at Carnegie Mellon University. Now it seems to be fueling itself.

Confirmation bias, or the tendency for people to hear what they want to hear, is running rampant. There seems to be an asymmetric reaction to news, says Lowenstein, explaining that any bit of good news sends the market higher, while bad news seems to have little impact.

Advice: The conventional wisdom from most experts on trading individual stocks or options is simple: Dont do it. While options can be a tool for managing risk, speculating with options can be risky and costly. If you must buy individual stocks, wager only with money youre prepared to loseand that means money you might have otherwise spent on travel or other entertainment, not retirement.

Set a budget for buying individual stocks and create a dedicated account. Next, write out your investment processfor example, your logic for buyingand your exit strategy on when to take profits on winners or unload losers. You need to articulate exactly why you are buying a stock and under what parameters you will get out, ReThinks Shull says.

A key part of the process, she adds, is deciding which experts to follow. Theres so much information out there, much of it conflicting, she says. Identify a few smart sources that resonate with you, she says, and tune out the others.

Investors who stayed invested or upped the ante on equities have, in many cases, been rewarded. But now investors need to make sense of a market that seems at odds with the current economic reality. This was what prompted some investors to cash out during the March selloff and never get back in, or put their contributions on hold while they wait for a signal that the coast is clear or confirmation that they made the right decisions.

People look at the apparent disconnect and it becomes a reason to justify not being in the market, says Jurrien Timmer, Fidelitys director of global macro.

Fear is obviously a big driver, and understandably. Investors shouldnt discount fear, says Shull, but neither should they blindly trust it. Instead, she recommends going through the exercise of whats the worst that can happen. Not only can this help identify blind spots in a plan or important precautions to take, it can also help investors take more appropriate amounts of risk.

People often go straight to the worst possible outcome, but if they really think through it logically they realize that the worst case isnt that bad, and it changes their willingness to tolerate the feeling of risk, Shull says. So much of that is tolerating your feelings; separating valid information from the irrelevant impulses.

Advice: Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, says one way to address this fear is to do an analysis of what a sustained downturn would do to your portfolio, and how that affects your retirement timeline or income. In many cases, weathering the downturn is better than missing out on long-term gains.

It can help investors feel more comfortable with risk, he says. They understand that even under some of the worst scenarios, their nest egg will be protected and they can make it through.

For investors who are still anxiety-ridden, Ric Edelman, founder of Edelman Financial Engines, has a few suggestions. First, his firm is counseling clients of all ages to increase their emergency savings to cover up to two years of living expenses so they dont have to worry about selling assets in a down market.

The next move is to consider reducing equity exposure, he says. Going from a 60% stock allocation to 50%, for example, will be less detrimental than cashing out entirely.

For clients who cant stomach any exposure to stocks right now, he offers this compromise: Go to cash but with a concrete plan to dollar-cost-average back into the market within a predetermined period of time, such as six months to a year.

This might be the most common mistake investors makeand unlike speculating on individual stocks or sitting on too much cash, its a mistake that is a little harder to pin down.

When the market was at its most volatile earlier this year, investors did not run for the hills but they were making changes to their accounts, says Cory Clark, chief marketing officer of Dalbar, which found that nearly a third of investors working with traditional or robo-advisors reallocated their assets during the Covid market crisis.

Notably, they shifted from passive funds to more active strategies. They also shifted between sectors, such as by increasing exposure to technology and precious metals. The decisions seem rational at first glance, but did they work? We saw a lot of bouncing around but didnt see greater alpha, Clark says, referring to Wall Street parlance for excess returns.

Barrons brings retirement planning and advice to you in a weekly wrap-up of our articles about preparing for life after work.

During times of uncertainty, making changes in a portfolio offers a sense that you are actually able to make decisions about risk that you cant make in your daily life anymore, says Dan Egan, managing director of behavioral finance and investing at robo-advisor Betterment. One of the things we know is that people hate doing nothing when they are in an anxiety-provoking situation.

It might feel good in the moment, but the data show that over time the odds are stacked against investors who try to time the top or the bottom or rotations in styles or sectors. Myriad studies have shown that active traders tend to have subpar results over time, while buy-and-hold investors earn the highest returns over time.

Take heart. Even professionals grapple with this. The quintessential challenge is how can you be fully engaged but detached, says Fidelitys Timmer, who points out that markets are in a 10% correction about 50% of the time. You have to do what you can to keep that separation or balance. I go on very long bike rides. I try not to overread short-term market commentary. I barely watch news on television, even though Im on the shows.

Advice: Its an old saw, but this is why having a plan is critical, the experts say. A plan can also help to articulate all of the factors behind your decisions. Professional investors refer to this as their processground rules for why and when they buy or sell a security.

The best way to prevent your emotions from dictating your behavior is to establish a rules-based strategy, says Edelman, who adds that these issues are compounded when spouses have opposing views. While youre calm and contemplative, you can establish a set of guidelines that you agree to follow.

The upshot: You cant control everything that is going on in the world, but you can control your process for making decisions. Your focus has to be on process, says Konnikova, the psychologist and decision-making expert, because thats the only thing you can control.

Write to us at retirement@barrons.com

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Common Mistakes That Could Derail Your Retirement and How to Avoid Them - Barron's

One of the most important investing decisions you'll need to make is exactly where to put your money. Index funds are a great option for retirement because they're a relatively safe choice that can limit your risk.

But can you retire a millionaire by investing in index funds? It's possible, if you have a strategy in place.

Image source: Getty Images.

Index funds are large collections of stocks that track a particular stock market index, such as the S&P 500 or the Dow Jones Industrial Average. Like any investment, there are pros and cons for index funds:

Advantages

Disadvantages

Despite the downsides, index funds can be a great investment when saving for retirement. And if you start saving early enough, you may be able to retire a millionaire.

Because index funds offer slow but steady growth, you'll ideally need to invest for several decades to accumulate $1 million. But if you save consistently, index funds can be a reliable way to build a healthy retirement fund.

Say, for example, you have 30 years before you retire and you want to save $1 million. The S&P 500 has experienced an average annual return of around 10% since its inception, and if your index funds also earn a 10% annual return, you'd need to save just over $500 per month over 30 years to reach the million-dollar mark.

Exactly how much you'd need to save each month will depend on your age, the amount you currently have saved, as well as how many years before you retire. For instance, if you only have 20 years left to save but are still earning a 10% annual return, you'd have to save a whopping $1,500 per month to reach $1 million. So the more time you have to save, the easier it will be to achieve your goal.

Investing in index funds requires patience, because it will take years or even decades to see substantial growth. But because of their diversification and ability to recover from market crashes, they are one of the safest investment options, which can be perfect for investors looking to limit their risk.

Keep in mind, too, that no matter where you choose to invest your money, it's wise to take a long-term investing approach. So even if you invest in individual stocks rather than index funds, you should still aim to buy solid stocks and keep your money invested for as long as possible.

Your goal when investing in the stock market shouldn't be to get rich quickly. So be prepared to stay invested for the long haul no matter where you put your money. If you choose to invest in index funds, starting early and saving consistently can help you retire a millionaire.

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Can You Retire a Millionaire With Index Funds? - The Motley Fool