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Volume 3, Issue 7, October 2005

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What Happens to You When the Federal Reserve
Raises Interest Rates?

Well, that’s a good question. Sometimes it seems as though such interest rate hikes are given way too much attention on the nightly news…after all, how much do they really affect us? And what can we do about it anyway?

What you can do is be informed, plan ahead, and understand how those much-publicized interest rate increases really do affect you. Because any increase in the Federal Reserve’s (Fed) interest rate will affect what kinds of interest you earn on various savings accounts, or what your bank charges you in interest on home mortgages, business loans, or home equity loans. The interest rates charged for these kinds of loans are tied to the bank’s prime rate, which fluctuates in concert with the Fed’s interest rate. If your loan has an adjustable rate, your monthly payment will increase if the interest rate charged on your loan increases.

Do you have credit cards? They too are affected by increases in the Fed’s interest rate, and given that the interest rates for credit cards are currently averaging between 13 – 15%, it’s best to limit your use of credit cards and focus on paying off any balances you may be carrying. As the Fed raises their rate, the banks and credit card companies can also raise the interest rate they charge you on any balances.

The good news? Well, if you have put money into savings accounts, certificates of deposit, or money market accounts, you will see increased earnings due to higher interest rates on those accounts. If you would like to increase your savings, or need to discuss how rising interest rates might affect your personal or business finances, contact us today. We can’t make the rates go up or down, but, we can help you understand what happens to you when they do.

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Do You Qualify for the Earned Income Tax Credit?

Originally approved by Congress in 1975, the Earned Income Tax Credit (EITC) is a Federal income tax credit provided to help low-income working individuals and families. When the taxes an individual owes exceed the EITC, they are eligible for a tax refund. Unfortunately, many people who are eligible for the EITC fail to claim the credit.

In order to qualify for the EITC, you must have earned income, have a valid social security number, and meet the following low-income requirements:

In addition, to qualify for the EITC, your investment income cannot be more than $2,650, you may not file “married filing a separate return,” and your qualifying child cannot be used by more than one person to claim the EITC.

If you qualify for the EITC, you may also be able to receive EITC payments in advance, with each paycheck, instead of waiting to receive it when you file your tax return. In order to receive EITC advance payments, you must work and receive taxable income and have at least one qualifying child.

Understanding the qualifications for receiving the EITC can be complicated. If you have any questions about the Earned Income Tax Credit or any other tax-related issue, contact the professionals at Kemper CPA Group LLP today.

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Retirement Planning and Social Security

Are you expecting to receive a significant portion of your retirement income from Social Security? Because you have paid into the fund for so many years while working, you would logically expect that money to be there for you once you stop working. And you have probably heard or read about how the Social Security program will be impacted once the large number of baby boomers retire. But you’ve paid into the fund – that money should be there for you, so, how does that impact you?

Consider that the number of people paying into Social Security has actually declined by a large number since the late 1940s. In 1945, each person actually receiving Social Security benefits was supported by 41.9 active workers. However, as of the year 2000, that number has dropped to only 3.4 workers! This drop in the number of workers paying into the fund has put a significant strain on the system, because the number of people receiving benefits has increased. Why? We are in better health in this country, and we’re living longer, which means qualified retirees need benefits for a longer period of time than in the past.

We are also, for the most part, making more money now than we did in the 1940s. This means that Social Security will replace a proportionally smaller amount of our income than it did in the past, further lessening the impact that check from the government will have each month after you retire. If you were planning on Social Security benefits being a large portion of your retirement income, you might want to make alternative plans. We can help you determine whether you are saving enough now for a comfortable retirement – contact the friendly professionals at Kemper CPA Group LLP today!

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Loose Change

The September/October 2005 issue of the "Loose Change" Newsletter includes the following articles:

Contact us today for all of your investing needs.

Investment advisory services offered by KCPAG Financial Advisors LLC, a registered investment advisor. Securities officered through Securities America, Inc., a registered broker/dealer. Member NASD/SIPC. Thomas A. Moore, John D. Porter, Polly Reynolds, Shawna D. Horne, Jeffery C. Holt, CA insurance Lic. #0E38034, Jessica Daugherty, Sheila R. Lautenbacher, Joseph M. Mendes, CA Insurance Lic. #0C62535, Regina S. Hughes, Gregory Meador, Marcia Elder, Registered Representatives. Insurance services offered through KCPAG Insurance Services LLC. Kemper Capital Management LLC and its subsidiaries are not affiliated with Securities America.

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Property Tax Investment Deduction

If you have been waiting for the right time to make technology investments at your business, now may be that time.

The State of Indiana recently enacted a Property Tax Investment Deduction, which establishes a deduction from the assessed value of certain personal and real property investments (other than inventory). This deduction applies to real property development, redevelopment, or rehabilitation and the purchase of personal property that occurs after March 1, 2005, and before March 2, 2009. The deduction is available for personal property only if the property (1) increases assessed value, (2) was never before used by its owner for any purpose in Indiana, and (3) creates or retains employment.

Under the legislation, there is a 75 percent deduction on the increase in assessed value of new property acquired in 2006 (limited to $2 million). The deduction will drop to 50 percent in 2007 and 25 percent in 2008. The Property Tax Investment Deduction is available for businesses of all sizes but is intended to spark growth through the use of technology in smaller businesses.

The professionals at Kemper Technology Consulting are dedicated to helping businesses of all sizes with their technology needs. We offer a variety of consulting services tailored to your needs and can assist you in implementing new technology so that you can take full advantage of the Property Tax Investment Deduction incentive as you seek to better your business.

For more information on what Kemper Technology Consulting can do for your business, contact us today.

Kemper Technology Consulting
Robinson, IL
618-546-5633
www.kempertc.com
Evansville, IN  •  Indianapolis, IN  •  Paducah, KY

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Please be advised that, based upon current Internal Revenue Service (IRS) rules and standards, the advice herein is not intended to be used, nor can it be used, as the sole basis for decisions. Additional issues may exist that could affect the treatment of the individual transactions, and this narrative does not provide a conclusion with respect to all such issues.

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