iPad Resales Surge Over 700%

iPad Resales Surge Over 700%

By Quentin Fottrell

As soon as Apple unveiled the iPad mini Tuesday, the first thing many consumers did was sell their old iPads.

Two major resale sites reported eye-popping surges in business in the run-up to the iPad Mini launch. Some 140,000 devices were put up for sale on Gazelle.com Tuesday â€" a 700% spike from the day before, says Anthony Scarsella, chief gadget officer at the site. Half of that increase occurred in the hours just before the announcement, he says â€" and the most common model put up for sale was the ; “new iPad” released just six months ago. Another resale site, NextWorth.com, reported that trade-ins for iPads rose over 1,000% on Tuesday. (Nextworth declined to release actual numbers.) Gazelle and Nextworth are two of the biggest reselling portals, but industry experts say they represent only a small percentage of total trade-in traffic.

The $ 329 iPad Mini, which will hit shelves on November 2 in time for the holiday shopping season, is primarily aimed at competition from smaller, less expensive tablets such as Amazon’s Kindle Fire HD and Google’s Nexus 7, both of which cost $ 199. But, given the price difference between the mini and other 7-inch tablets and the spate of iPad trade-ins over the last 24 hours, experts say the 7.9-inch Mini’s big gest competitor may be the larger 9.7-inch iPad.

While some people are trading in first and second generation iPads, both Nextworth and Gazelle say that nearly 70% of their resellers are dumping the iPad 3. In fact, the third generation iPad 32-gigabyte with Wi-Fi is the most popular device being traded in, according to Gazelle.com. Why? “Consumers can fetch up to $ 495 for an old iPad,” Scarsella says. In other words, they can swap the used tablet for the mini and walk away with &# 111;ver $ 160.

Of course, some diehard fans could also be upgrading to the fourth-generation iPad because it has a processor with twice the speed, says e-commerce consultant Bryan Eisenberg. But others say that’s less likely given that it’s coming out just seven months after the third-generation model was announced. And as MarketWatch reported, 35% of iPad owners surveyed by deal aggregator TechBargains.com say they’d trade in their old model for a mini. The shrunken tablet is over 50% lighter than the iPad, Apple says, and nearly a quarter thinner.

iPad Resales Surge Over 700%

iPad Resales Surge Over 700%

By Quentin Fottrell

As soon as Apple unveiled the iPad mini Tuesday, the first thing many consumers did was sell their old iPads.

Two major resale sites reported eye-popping surges in business in the run-up to the iPad Mini launch. Some 140,000 devices were put up for sale on Gazelle.com Tuesday â€" a 700% spike from the day before, says Anthony Scarsella, chief gadget officer at the site. Half of that increase occurred in the hours just before the announcement, he says â€" and the most common model put up for sale was the ; “new iPad” released just six months ago. Another resale site, NextWorth.com, reported that trade-ins for iPads rose over 1,000% on Tuesday. (Nextworth declined to release actual numbers.) Gazelle and Nextworth are two of the biggest reselling portals, but industry experts say they represent only a small percentage of total trade-in traffic.

The $ 329 iPad Mini, which will hit shelves on November 2 in time for the holiday shopping season, is primarily aimed at competition from smaller, less expensive tablets such as Amazon’s Kindle Fire HD and Google’s Nexus 7, both of which cost $ 199. But, given the price difference between the mini and other 7-inch tablets and the spate of iPad trade-ins over the last 24 hours, experts say the 7.9-inch Mini’s big gest competitor may be the larger 9.7-inch iPad.

While some people are trading in first and second generation iPads, both Nextworth and Gazelle say that nearly 70% of their resellers are dumping the iPad 3. In fact, the third generation iPad 32-gigabyte with Wi-Fi is the most popular device being traded in, according to Gazelle.com. Why? “Consumers can fetch up to $ 495 for an old iPad,” Scarsella says. In other words, they can swap the used tablet for the mini and walk away with &# 111;ver $ 160.

Of course, some diehard fans could also be upgrading to the fourth-generation iPad because it has a processor with twice the speed, says e-commerce consultant Bryan Eisenberg. But others say that’s less likely given that it’s coming out just seven months after the third-generation model was announced. And as MarketWatch reported, 35% of iPad owners surveyed by deal aggregator TechBargains.com say they’d trade in their old model for a mini. The shrunken tablet is over 50% lighter than the iPad, Apple says, and nearly a quarter thinner.

Key Tax Issues to Watch Post-Election

Key Tax Issues to Watch Post-Election

Whatever the outcome of the presidential election on Nov. 6, the next Congress and president will face a pile of unfinished tax business. Some of this stuff has been lying around since 2010, and dealing with it can’t be postponed much longer — just ask the beleaguered Internal Revenue Service personnel who can’t get any closure on what the 2012 tax forms will look like. Here’s Part 1 of the story on the mos ;t important unresolved personal tax issues — complete with fearless predictions.

Payroll Tax Holiday

For 2012, the so-called payroll tax holiday cuts the Social Security tax rate on salaries and self-employment income by 2%. The maximum tax-saving benefit for one person is $ 2,202 (2% x this year’s $ 110,100 Social Security tax ceiling on salary and self-employment income). A working couple could potentially save twice as much (up to $ 4,404). But the holiday is scheduled to end when the big ball comes down at Times Square. Next year’s Social Security tax ceiling will be $ 113,700, so the maximum tax savings from extending the hol iday through 2013 would be slightly bigger.

Prediction: Don’t be surprised if the holiday gets extended, regardless of who wins the election. Would that be harmful to Social Security’s long-term solvency? Of course. But leaving more cash in the hands of recession-battered consumers for one more year might take precedence.

Bush Tax Cuts on Ordinary Income

Without Congressional action and the president’s approval, the current 10%, 15%, 25%, 28%, 33%, and 35% rate brackets will be replaced in 2013 by the pre-Bush brackets of 15%, 28%, 31%, 36% and 39.6%. That would mean across-the-board rate hikes for American taxpayers.

Prediction: The existing 10%, 15%, 25% and 28% brackets will be retained at least through next year regardless of the election outcome. What happens to the top two brackets depends on the election.

Bush Tax Cuts on Long-Term Capital Gains and Dividends

The current 0% and 15% rates on most long-term gains will rise to 10% and 20% in 2011. The current 0% and 15% rates on dividends will be replaced by ordinary income rates, which are scheduled to be as high as 39.6%.

Prediction: The current preferential tax rates on capital gains and dividends will be extended through next year for everybody except those “rich folks” in the top two brackets. If Barack Obama wins, they might have to pay higher rates. Not so if former Massachusetts Gov. Mitt Romney wins and the Republicans retain the House.

Harsher Marriage Penalty

The Bush tax cuts include several provisions to ease the so-called marriage penalty. The penalty can cause a married couple to pay more in taxes than when they were single, which has never made any sense. Right now, the bottom two tax brackets for married joint-filing couples are exactly twice as wide as for singles. This helps keep the marriage penalty from biting lower and middle-income couples. Starting next year, however, the joint-filer tax brackets are scheduled to contract, causing higher tax bills for ma ny folks. Currently, the standard deduction for married joint-filing couples is double the amount for singles. But beginning next year, the joint-filer standard deduction will fall back to about 167% of the amount for singles.

Prediction: Because lots of middle-income income couples would face higher 2013 tax bills due to a harsher marriage penalty, the current more-taxpayer-friendly deal will be extended, regardless of who wins the election.

Personal Exemption and Itemized Deduction Phase-Outs

For 2010-2012, these unfavorable rules were themselves phased out, but they will come back with a vengeance starting next year unless changes are made.

Prediction: If Romney wins and the Republicans retain the House, the phase-out rules will stay away. If Obama wins, these stealth tax increases will probably be back–to the detriment of higher-income taxpayers.

Alternative Minimum Tax Patch

It’s become an annual ritual for Congress to “patch” the AMT rules to prevent millions more households from getting socked with this add-on tax. The patch job consists of allowing bigger AMT exemptions and allowing various personal tax credits to offset the AMT. However, we are still waiting for this year’s patch. Without it, lots of taxpayers will be unhappy early next year when their 2012 returns are ready to be filed.

Prediction: This year’s patch will be affixed in the post-election lame duck Congressional session regardless of who wins the election. If Romney wins and the Republicans retain the House, the AMT might be history after this year.

Estate Tax

For those who pass away this year, we have a relatively generous $ 5.12 million federal estate tax exemption. Estates worth less than that figure will owe nothing to the government. Estates worth more will owe a flat 35% tax on the excess. Next year, however, the estate tax exemption is scheduled to plummet to only $ 1 million, and the maximum tax rate is scheduled to rise to 55%. That’s pretty alarming when you remember that the value of your estate for tax purposes includes all your assets plus proceeds from insurance policies on your own life (unless you’ve set things up so you’re not considered to own the policies). So as things now stand, the estate tax would pummel the heirs of lots of decidedly not-so-wealthy people who happen to die next year instead of this year.

Prediction: Regardless of the election outcome, the 2013 estate tax exemption will be somewhere in the $ 3 million to $ 5 million range, and the maximum tax rate will be somewhere between 35% and 45%. If Obama wins, this might be an over-optimistic forecast. If Romney wins and the Republicans retain the House, they will probably push to completely repeal the estate tax, starting next year. That would set up an epic political fight with a very uncertain outcome.

Gift Tax

Through the end of this year, the federal gift tax exemption is a relatively generous $ 5.12 million. Cumulative lifetime gifts in excess of that figure are taxed at a flat 35% rate. Next year, however, the exemption is scheduled to drop to only $ 1 million, and the maximum gift tax rate is scheduled to be 55%.

Prediction: The politicians will tie the gift and estate tax exemptions and rates together at levels that most folks will find acceptable (see above). Once again, if Obama wins, this might be an over-optimistic projection. If Romney wins and the Republicans retain the House, they will probably push to completely repeal the gift tax, starting next year.

The Last Word

Next week’s column will tell Part 2 of the story on Washington’s unfinished tax business.

3 Finance Topics the Romney-Obama Debates Ignored

3 Finance Topics the Romney-Obama Debates Ignored

By IAN SALISBURY, JONNELLE MARTE and ANNAMARIA ANDRIOTIS

The first two debates between President Obama and former Massachusetts Gov. Mitt Romney haven’t been without excitement. In fact, if Romney wins most pundits will probably credit the televised face-offs with changing the course of the election.

In a campaign season often lacking in specifics, the two candidates have even managed to cover a lot of ground. If you’re an autoworker, Medicare recipient or small business owner, you’ve heard your concerns addressed head on. (Even if you didn’t necessarily like the answers.) But there are a number of pocket-book issues the candidates never gave much airtime to, and since the theme for Monday night’s third and final debate is foreign policy, they may have missed
16;heir chance. Here are three Main Street financial topics SmartMoney would still like to see the candidates take on:

Real Estate

You would think that the housing crisis, the principal cause of the economic downturn, would be one of the central topics of debate. But to a large extent, the candidates sidestepped real estate. “It turns out to be a lose-lose issue for both candidates and therefore gets ignored,” says John Vogel, adjunct professor of real estate at Dartmouth’s Tuck School of Business.

In the first debate, Obama said that housing has begun to rise and Romney didn’t contest the statement. But while prices and sales are picking up in many areas, roughly 22% of homes with a mortgage on them–or nearly 11 million properties–are underwater, meaning the homeowner owes more on the property than it’s worth, according to the latest data by CoreLogic. Another 2.3 million homeowners have less than 5% equity in their home, meaning that if home values drop in the
05;r neighborhood by even a little, they could fall underwater as well. And nearly 950,000 homes are in the beginning of the foreclosure process, according to RealtyTrac.com.

The president during the first debate talked about risky lending practices of the past as evidence of why regulation is needed. Romney agreed on the need for mortgage regulation, but little else was discussed.

Here’s what we do know: To date, the president has pushed for refinancing programs that help struggling homeowners get into more affordable home loans and mortgage modification programs for homeowners to hold onto their houses. The president’s campaign says he wants to expand refinancing efforts so that “no responsible borrower is locked out of today’s low interest rates.” The president also wants to roll out more protections for borrowers, the campaign says, including a clear mortgage disclosure form that the Cons umer Financial Protection Bureau is developing. Romney’s campaign site mentions several ways he plans to end the housing crisis, but few specifics, including new regulations to hold banks more accountable and to boost lending to borrowers in good credit standing, as well as reforms to the quasi-government agencies Fannie Mae and Freddie Mac.

The Romney campaign did not respond to a request for comment.

What’s at stake: If new policies aren’t implemented but a low rate environment continues, it could take as long as three to five years for a full housing recovery to occur, says Vogel. But in the meanwhile, millions of struggling homeowners hang in the balance as they wait to see if new programs will be rolled out to help them any sooner.

Investor Protections

Investors fled the market during the financial crisis and haven’t returned. Even as stocks rocket ahead, they’re still yanking money out of stock mutual funds — nearly $ 60 billion so far this year — a key indicator of Main Street investors’ confidence. While that certainly has something to do with the weak economy, high-profile events like 2010′s flash crash have also taken a toll. Given all the charges and counter charges on the economy and Americans’ wealth, it’s surprisingly difficult to say p recisely what either of the candidates will do to level the playing field for small investors.

While it’s generally assumed that Romney favors a lighter regulatory approach than Obama, during the first debate he seemed to go out of his way to soften this stance, proclaiming, “You can’t have a free market without regulation.” Romney went on to criticize the centerpiece of the Obama Administration’s economic reforms the Dodd-Frank bill — but focused on its treatment of big banks and didn’t have much to say on its provisions that more directly affect consumers, lik ;e the proposal to hold financial advisers to a tougher ethical standard or the controversial creation of the Consumer Financial Protection Bureau.

For Obama’s part, the frustrations of small investors play easily into a narrative that pits Wall Street as the villain in the economy. Among his targets in the first debate: Banks “churning out products that the bankers themselves didn’t even understand.” But it’s not clear what, beyond hurting investment bankers’ feelings, the president plans to do about these products if he wins four more years.

During Obama’s first term, Securities and Exchange Commission Chairman Mary Schapiro has struggled to accomplish some of her biggest priorities like implementing the above-mentioned fiduciary standard, addressing the risks posed by high-frequency trading, and even reforming money-market funds, something that garners support from liberals and conservatives alike.

What’s at stake: Experts say that unless Romney can show that promoting “free markets” isn’t just a code word for letting big business lobbyists get their way in Washington, more investors will come to suspect the stock market is a game that’s rigged against them. Obama has to make the case he can steer Washington’s machinery including Congress and regulators like the SEC more effectively than he has in during his first term.

Retirement Savings

While the candidates briefly sparred in the second debate about the size of their respective pensions — something fewer and fewer Americans can relate to — the candidates barely paid any lip service to the most common retirement savings vehicle: the 401(K) plan.

Seven in 10 large U.S. employers now only offer 401(k) retirement plans to new salaried workers, up from 43% in 2006, according to an analysis by consulting firm Towers Watson. But when left to their own devices, many workers fail to put away enough cash and are unsure of how to invest their savings, says Kevin Wagner, a consultant with Towers Watson. Sixty percent of workers report having less than $ 25,000 in savings and investments, according to the Employee Benefit Research Institute. Employers 7;re trying to boost savings by automatically enrolling workers in retirement plans and automatically increasing how much workers contribute, but critics say savers need better guidance and a deeper understanding of how much they’re paying in fees.

To be sure, investors started getting more information this year thanks to new regulations requiring fund providers to better break out and explain their fees, and that increased transparency has led some fund firms to lower their costs. But some critics say more reform is needed. Many people are often either too conservative or too bold with thei ;r retirement savings, and many savers don’t know how to pace their withdrawals in a way that it lasts them their entire retirement, advisers say.

Part of the reason these issues have been put on the back burner is that retirement plan fees and conflicts of interest don’t get as much attention when the market is rising, says Mike Alfred, co-founder of the co-founder and chief executive of BrightScope, a company that tracks retirement plans and financial advisers. (The Dow Jones Industrial Average has more than doubled since its March 2009 low.) “Going forward, one of the most critical policy issues i& #115; how we help retirees create sustainable income with their 401k assets,” says Alfred. “I don’t expect the issue to get much play this election because it is not front of mind for the candidates.”

What’s at stake: Two-thirds of workers say they are behind schedule when it comes to saving for retirement, and with baby boomers on the verge of retiring, many experts say the problem could is likely to get worse.

Should Stay-at-Home Spouses Get Their Own Credit Cards?

Should Stay-at-Home Spouses Get Their Own Credit Cards?

By AnnaMaria Andriotis

An effort to loosen credit-card standards for stay-at-home spouses would seem to benefit millions of consumers, but critics say the change could actually push some families deeper into debt and derail their finances.

Last week, the Consumer Financial Protection Bureau proposed loosening regulations to make it easier for the nation’s more than 16 million stay-at-home spouses to qualify for credit cards, largely undoing more stringent requirements put into place in October 2011. Prior to then, consumers could sign up for a credit card by stating their household income, even if all of that income came from their spouse. But the Credit Card Accountability Responsibility and Disclosure Act required & #116;he Federal Reserve to amend several lending provisions for credit card issuers, including a new rule that issuers had to ask for individual income on a credit card application, and could no longer rely on household income.

If enacted, the CFPB’s proposal would allow credit card issuers to ask card applicants 21 and over for income to which they have a “reasonable expectation of access,” which could include a spouse’s salary. The bureau says it’s aware of several issuers that have denied card applications from otherwise creditworthy individuals based on the applicant’s stated income.

While this change could help stay-at-home spouses who pay their bills using their working spouse’s income and are financially sound, it could also cause a problem for indebted families. Odysseas Papadimitriou, chief executive at credit-card comparison site CardHub.com, points to the following example: If a working spouse with $ 100,000 in income and $ 100,000 of debt in his or her name applies &# 102;or a credit card, that individual would be denied by the card issuer. (Card issuers check applicants’ credit reports for outstanding debt before deciding whether to approve them for a card.)

But if the current rule is undone, that person’s stay-at-home spouse could be approved for a credit card: that person could claim $ 100,000 in income, but when the card issuer checks the applicant’s credit report it would find zero dollars of debt. “It’s half the story and it’s completely deceiving,” Papadimitriou says.

Not everyone agrees that this problem would outweigh the benefits. Some say the old rules were more fair for consumers. “Stay-at-home parents shouldn’t be penalized because they don’t personally bring in income,” says Scott Bilker, founder of DebtSmart.com.

Wealthy Home Buyers Return to Risky ARMs

Wealthy Home Buyers Return to Risky ARMs

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Goldman Sachs bails on BRIC funds

Goldman Sachs bails on BRIC funds

By Ian Salisbury

Goldman Sachs is known for its emerging-markets acumen. But that doesn’t seem to have helped its effort to peddle mutual funds targeting these stocks.

On Thursday, the company which coined the term “BRIC” as an acronym for “Brazil, Russia, India and China,” filed with the Securities and Exchange Commission detailing plans to shutter mutual funds focused on stocks in two of those countries: Brazil and India. Goldman also plans to close another fund targeting South Korean stocks, according the filing, first highlighted by Morningstar.

Goldman launched all three funds, along with a fourth China fund that doesn’t appear to be affected, last year. (The company didn’t respond to a call for comment Friday afternoon.)

As a group, emerging-markets funds have remained popular, with investors pouring more than $ 18 billion into such funds this year, according to Morningstar. None of the four Goldman funds have managed to grab more than $ 10 million, however. Goldman’s more broadly focused emerging-markets funds, including one that targets the BRIC companies as a group, have proven more popular. That fund, the Goldman Sachs BRIC Fund (GBRIX) holds about $ 400 million, and is up 11% this year.

What gives? One possible explanation is cost. The Goldman Sachs India fund (GNAIX), for instance, charges annual fees of $ 150 per $ 10,000 invested for the cheapest share class. By contrast, one popular competitor, the $ 1.1 billion WisdomTree India Earnings ETF (EPI) levies just $ 83.

Investors that do own shares of the three Goldman funds will get their money handed back at the end of November, the filing indicates.

401(k) Plan Perks Grow, but Savings Still Lag

401(k) Plan Perks Grow, but Savings Still Lag

By Jonnelle Marte

Workers are getting a little more help from their employers when it comes to retirement saving, but many are still falling short in building their nest eggs.

After suspending or slashing their matches of employees’ 401(k) contributions  during the recession, most companies have restored them. In 2011, the percent of companies making those matches increased to 95.5%, up from 91% in 2010, according to survey results released this month by the Plan Sponsor Council of America, a nonprofit association that services plan sponsors.

But while more companies are contributing to retirement accounts, they aren’t as generous as they were before the financial crisis. The average company contributed 4.1% of pay in 2011, up from 3.7% in 2010, but still below the peak of 4.7% seen in 2006.

Instead, experts say some employers are throwing in another perk that often doesn’t cost them anything: 401(k) advice. Many retirement plans administered by Charles Schwab, for example, let employees chat with Schwab representatives to discuss their needs and get help comparing mutual funds available to them, says Steve Anderson, head of Schwab Retirement Plan Services.  Those workers who take advantage of the advice tend to save more and be more diversified than those who don’t use &# 116;he service, says Anderson.  (Schwab’s administrative costs for running the 401(k), which are often evenly divided among a plan’s participants, stay the same whether a company decides to offer advice or not, he says.)

Despite the return of matching contributions, financial advisers and other experts say workers still aren’t saving enough.  For instance, about two-thirds of investors surveyed by T. Rowe Price said they contributed 10% or less of their salaries into their 401(k) plans, according to results released this week. And nearly a third said they were not sure how much they were saving. Christine Fahlund, senior financial planner at T.Rowe Price, recommends workers save closer to 15% to 20% o&# 102; their incomeâ€"or more if they don’t start saving until their 40s or 50s. (To gauge whether you’re on pace to afford retirement, check our online planner: http://www.smartmoney.com/retirement/planner/).

Those lower savings rates mean many workers will have to delay retirement, take on part-time work, or spend significantly less during retirement, says Fahlund.  Indeed, while the economy has bounced back, workers’ confidence hasn’t: Just 14% of Americans are confident they will have enough money to live comfortably in retirement, only up slightly from the low of 13% reached in 2009, according to a 2012 survey by the Employee Benefit Research Institute.  And 37% of workers expect they will hav&# 101; to work past age 65, compared to 11% in 1991.

Some advisers say the company match may be â€" at least partly â€" to blame, pointing out that some workers see little reason to contribute beyond what their employer matches. For instance, many workers will contribute no more 6% of their pay if their employer only matches up to 6% of their salary, says Steve Vernon, a financial adviser and author of “Money for Life:  Turn Your IRA and 401k Into A Lifetime Retirement Paycheck.” “Don’t take the design of t
04;e plan as a signal as to how much you should save,” he says.

Some companies are trying to change that by matching up to a higher portion of a worker’s salary, but lowering the amount matched per dollar, he says. For instance, a company could go from matching up to 5% of pay dollar for dollar, to matching up to 10% of pay, but only contributing 50 cents for each dollar the employee puts in. That would increase the total contribution to 15% of pay from 10% for workers who max out their company contribution, says Vernon, but the total amount contributed by the company would stay the same.

Other companies are trying to boost savings by making the process automatic. The percentage of plans with an automatic enrollment feature increased to 45.9% in 2011, up from 23.6% in 2006, according to the Plan Sponsor Council of America. And 55.2% of plans had a component for automatically increasing the amount contributed, up from 31.2% in 2006.Savers can use these step-up programs, which typically increase the percent allocated by one or two percentage points each year, as a way to work up
16;o the target 15% or 20% savings rate, says Fahlund.

A Bicycle Built for the 2%

A Bicycle Built for the 2%

By LINDA LACINA

The Conundrum

Two-wheeling may be a healthy and fuel-efficient way to cruise the city streets -- but as a fashion statement, it can be rather pedestrian. Enter Italian style titan Gucci, which has partnered with bicycle maker Bianchi to produce a $ 14,000 urban and off-road bike. The 11-speed carbon fiber model was designed by Frida Giannini, Gucci's creative director, and includes practical features like disc brakes, as well as aesthetic flourishes such as a frame decorated with the label's trademark stripes (the Gucci logo is, naturally, stitched into the bike's custom leather seat). To complete the look, a line of accessories is also available, including a matching helmet ($ 890) and $ 105 water bottle.

The Reality

More show horse than workhorse, this bike doesn't offer suspension to handle potholes and other urban-riding hazards, says Jim Papadapoulos, a bicycle researcher at Northeastern University. It also lacks fenders to prevent the "skunk stripe" of dirt wheels can kick onto a rider's back, says Shannon Holt, an organizer for Oregon Manifest, a bike-design challenge held in Portland. At four times the price of Bianchi's next-most-costly off-roading bike ($ 3,500), Holt calls it merely a "basic bike prettied up with a high-end brand." Gucci declined to comment. Bianchi says it chose not to use the suspension fork to save on weight and that the fender is unnecessary for an "urban bike."

Gucci.com