Personal Financial Satisfaction Dips Due to Market Volatility: AICPA

The Real Home Equity Per Capita Index, based on data issued for July, was 4.6% above the prior year value and 0.2% ahead of the previous quarter, but still 11.5% below its 2006 all-time high. The changes in value have been due to increases in the market value of real estate, which for the most recent reading came in just over 6% per annum.

Pain Index

Three factors that contribute to the pain index combined to drop the index 2.6 points to 39.3. The decrease from the preceding quarter was led by an 8.9 point drop in the inflation Index, which is now at its lowest rate since February 2018 and no longer the leading contributor to the pain index.

The fourth-quarter Inflation Index, which relies on the Federal Reserve’s November level, was 1.8%, still below the Fed’s 2% target for inflation.

Thanks in part to inflation’s quarterly decline, the Personal Taxes Index again became the leading contributor to financial pain — a title it has held eight of the last 10 quarters. However, compared with the year-earlier level, pain from taxes was down 4.5 points.

In the 2018 first quarter, the first to show the effect of the tax overhaul enacted in 2017, pain from personal taxes dropped 4.14 points from the 2017 fourth-quarter level. Since then, the 2018 quarterly level was approximately flat.

Among other statistics, the Personal Taxes Index uses information from the Bureau of Labor Statistics on income tax, tax on realized net capital gains and taxes on personal property.

“Early in 2018, the IRS updated the withholding tables as a result of the … tax rate changes,” Julie Welch, a member of the AICPAs’ personal financial planning executive committee, said in the statement.

“In many cases, the federal withholding decreased, which resulted in Americans seeing a bit more money in each paycheck. However, those that didn’t check their withholding may be surprised by smaller than usual refund, or worse yet, a balance due.”

Last year, Americans received an average tax refund of $2,899, according to the IRS. This year, with household debt at an all-time high of $13.5 trillion, more than a quarter of Americans plan to use their upcoming tax refunds to help pay off debt, the AICPA said.

“The government shutdown has brought increased attention to the need for an emergency fund as we are reminded that many Americans live paycheck to paycheck,” Welch said. “It’s a good idea to use at least part of a tax refund to pay down debt and start an emergency fund so if someone does happen to unexpectedly find themselves out of work or with an unexpected expense, they can help avoid negative financial consequences.”

The Loan Delinquencies Index dropped 2.4 points from the third quarter, with the improvement mostly related to mortgages. This factor’s current level is 18.7% lower than the prior year level, and is at its best level since the end of 2007.

Although the current reading of delinquencies on mortgages, 3%, is well below the peak delinquency rate of 11.3% set in the spring of 2010, it is still above the 2.1% that was typical between 1994 and 2003, the AICPA said.

The Underemployment Index, at 34, is 2.1 points lower than the prior year level and 1.1 point above the third quarter level. In comparison, its peak value was 84.3 in the fourth quarter of 2009. It is now 10% below its average value in the two years before the recession.