Key Economic Indicators (end of Q2 2014)

Recently updated key economic indicators shown below with commentary for each. As always, economic data is provided for informational purposes only, is not real-time, is subject to revision, and its accuracy cannot be guaranteed. Please do not trade or make other financial decisions based on this data.

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Withholding On Bonuses & Other Supplemental Wages

When you receive a bonus from your employer, have restricted stock vest, have taxes collected on the cashless exercise of a stock option, or receive any other form of supplemental wages, you may have too much or too little tax withheld depending on your marginal tax bracket and the method your employer uses for tax withholding. On a normal (non-bonus paycheck), payroll withholding tables take the amount of taxable income you earn for the pay period and translate that to the amount of tax that should be withheld, using the marginal tax brackets for your filing status (from your W-4), the number of allowances you claim (from your W-4), and number of pay periods in a year. For example, if you claim “Single, with 0 allowances”, you earn $8k in a pay period, and you are paid bi-weekly (26 x per year), the withholding tables will determine the projected annual tax liability based on the Single tax brackets, $8,000 * 26 = $208,000 of projected taxable income for the year. Dividing by 26 gives the Federal withholding amount for the pay period.

From the example above, you should be able to see how wildly the withholding rate can vary if your paycheck varies from period to period, which is why it is so hard to accurately set your withholding and why you never seem to get the same refund or owe the same amount year after year. (Add in exemptions, deductions, and credits, and it gets even more difficult). If you receive bonus pay as part of your regular pay, your employer can combine the two and determine the withholding on that paycheck based on the extrapolated annual income if you earned that amount each pay period. In this case, your projected annual income and the withholding tax rate will be very high because 26 * your combined wage and bonus is a very large number. You’d therefore have more withholding than is necessary for the period and would accumulate that amount toward a tax refund when you file. The more typical scenario is that your bonus would be paid either as a separate paycheck, or as a separate line item on your regular paycheck but considered as supplemental wages. In both of these cases, a statutory 25% withholding rate is used for the supplemental wages. If your marginal tax bracket is actually higher than 25% (taxable income over about $90k as a single filer, or over $150k as a married couple), then you’d have less withholding than is necessary for the period. That would accumulate toward an amount you’d owe when you file your taxes. In an extreme example, let’s say that you earn $250k per year as a single filer (33% tax bracket), but that you have an windfall of an additional $250k (bonus, stock, whatever). That $250k windfall is taxed at 25% when it should be taxed at ~35%, meaning you’d stand to owe $25k in tax when you file for that tax year.

The moral of the story is to be careful whenever you receive a bonus (or earn some other form of supplemental income like vesting equity). If the following conditions exist, it may cause you owe a substantial amount of tax at the end of the year:

1) It is paid in a separate paycheck, as supplemental wages on your normal paycheck, or withheld automatically as part of an equity transaction

2) You earn more than $90k per year (single) or $150k per year married, including the bonus payment.

Note that the tax is the same whether it is appropriately withheld at the time of the bonus payment or if you pay it at the end of the year. The problem isn’t that you pay additional tax. The potential problem is that you may owe a lot of tax and may not have been prepared for it (e.g. you used the bonus for a downpayment on a house or to payoff debt, and don’t have the cash remaining to pay your tax). It’s always a good idea to keep 10-15% of your gross bonus tucked away to make sure you have it available for taxes if needed. If you need a more detailed estimate of the potential tax impact of a large bonus payment, contact your financial advisor.

Starting Salaries

A lot goes into figuring out what you want to be when you grow up. Money is far from everything, but it’s definitely a factor, especially if you know you’re going to be graduating with a substantial amount of student debt and need an income that will allow you to pay it back. For all the parents out there reading this, payscale.com ranks college majors by median starting salary and gives an indication of median mid-career salary as well (list included below for your reference). No surprise in that engineering, math, and science dominate the top of the list. Also on their site, you can find the Best Schools By Major, Best Schools By Region, advice on choosing a major, and a copious amount of other information. Check it out as just one more resource to help coach college bound seniors and younger children to make important choices that may determine their career, earning potential, and happiness in adulthood.

RANK MAJOR STARTING SALARY MID-CAREER SALARY
1 Petroleum Engineering $103,000 $160,000
2 Actuarial Mathematics $58,700 $120,000
3 Nuclear Engineering $67,600 $117,000
4 Chemical Engineering $68,200 $115,000
5 Aerospace Engineering $62,800 $109,000
6 – tie Electrical Engineering (EE) $64,300 $106,000
6 – tie Computer Engineering (CE) $65,300 $106,000
8 Computer Science (CS) $59,800 $102,000
9 Physics $53,100 $101,000
10 Mechanical Engineering (ME) $60,900 $99,700
11 Materials Science & Engineering $62,700 $99,500
12 Software Engineering $60,500 $99,300
13 Statistics $52,500 $98,900
14 Government $43,200 $97,100
15 Economics $50,100 $96,700
16 Applied Mathematics $52,800 $96,200
17 Industrial Engineering (IE) $61,100 $94,400
18 Management Information Systems (MIS) $53,800 $92,200
19 Biomedical Engineering (BME) $59,000 $91,700
20 Civil Engineering (CE) $54,300 $91,100
21 Environmental Engineering $49,400 $89,800
22 – tie Construction Management $51,500 $88,800
22 – tie Mathematics $49,400 $88,800
24 Electrical Engineering Technology (EET) $57,900 $87,600
25 Computer Information Systems (CIS) $50,800 $87,400
26 Information Systems (IS) $51,900 $87,200
27 Finance $49,200 $87,100
28 International Relations $41,700 $85,700
29 Geology $46,100 $85,300
30 – tie Chemistry $44,100 $84,100
30 – tie Information Technology (IT) $49,900 $84,100
32 – tie Biotechnology $48,700 $84,000
32 – tie Mechanical Engineering Technology (MET) $54,100 $84,000
34 – tie Supply Chain Management $52,800 $83,700
34 – tie International Business $43,800 $83,700
36 Industrial Design (ID) $44,800 $82,200
37 Industrial Technology (IT) $50,800 $81,500
38 Telecommunications $43,100 $81,200
39 Food Science $45,200 $80,500
40 Occupational Health and Safety $50,500 $80,300
41 – tie Biochemistry (BCH) $42,900 $80,200
41 – tie Marketing Management $42,100 $80,200
43 Civil Engineering Technology (CET) $49,200 $79,700
44 Advertising $40,000 $79,400
45 Philosophy $39,700 $78,300
46 Marketing & Communications $40,200 $77,600
47 Fashion Design $39,400 $77,100
48 Political Science (PolySci) $41,700 $77,000
49 Linguistics $39,700 $76,800
50 Molecular Biology $40,400 $76,400
51 Architecture $41,900 $75,800
52 Accounting $45,300 $74,900
53 Agriculture $38,500 $73,600
54 Microbiology $40,800 $73,400
55 Global & International Studies $39,600 $73,200
56 Urban Planning $41,100 $72,200
57 Nursing $55,400 $71,700
58 Environmental Science $41,300 $71,500
59 English Literature $40,800 $71,400
60 – tie Business Administration $43,500 $71,000
60 – tie History $39,700 $71,000
62 Film Production $38,200 $70,900
63 Biology $40,200 $70,800
64 Health Sciences $38,400 $70,500
65 Hotel Management $40,600 $69,800
66 Communication $40,000 $69,600
67 Forestry $40,000 $69,400
68 American Studies $41,400 $69,000
69 Broadcast Journalism $32,700 $68,800
70 Landscape Architecture $41,200 $68,700
71 Speech Communication $39,400 $68,100
72 Journalism $38,100 $67,700
73 Zoology $37,400 $67,600
74 Geography $40,800 $67,200
75 Public Administration $40,600 $66,900
76 French Language $40,900 $66,700
77 English Language $38,700 $65,200
78 German Language $41,400 $65,000
79 Human Resources (HR) $38,800 $63,900
80 Public Relations (PR) $37,400 $63,300
81 Hospitality & Tourism $35,700 $62,600
82 Humanities $37,900 $61,800
83 Anthropology $36,200 $61,400
84 Multimedia & Web Design $41,600 $61,300
85 Psychology $36,300 $60,700
86 – tie Medical Technology $48,900 $60,500
86 – tie Liberal Arts $36,600 $60,500
88 – tie Kinesiology $35,600 $60,400
88 – tie Visual Communications $37,300 $60,400
90 Organizational Management $41,900 $60,300
91 Interior Design $36,000 $59,300
92 – tie Nutrition $41,300 $59,100
92 – tie Fashion Merchandising $39,100 $59,100
94 Art History $36,900 $59,000
95 Sociology $37,400 $58,800
96 – tie Health Care Administration $39,300 $58,600
96 – tie Theater $36,200 $58,600
98 Criminal Justice $35,300 $58,400
99 Radio & Television $37,900 $58,300
100 Fine Arts $37,400 $58,200
101 Religious Studies $34,900 $57,900
102 Sports Medicine $39,300 $57,400
103 Art $36,100 $57,100
104 Classics $38,700 $57,000
105 Dietetics $44,200 $56,600
106 Public Health (PH) $35,900 $56,500
107 – tie Physical Education Teaching $34,900 $56,300
107 – tie Drama $35,600 $56,300
109 Graphic Design $37,000 $56,000
110 Photography $36,200 $55,500
111 Sports Management $37,000 $55,400
112 – tie Education $37,400 $55,200
112 – tie Animal Science $33,600 $55,200
114 Social Science $37,300 $54,800
115 Interdisciplinary Studies (IS) $37,600 $53,400
116 Paralegal Studies $35,000 $53,000
117 Theology $34,000 $52,200
118 Recreation & Leisure Studies $35,000 $51,900
119 Music $35,700 $51,400
120 Culinary Arts $34,800 $51,100
121 Exercise Science $32,600 $51,000
122 Horticulture $35,200 $50,900
123 Biblical Studies $35,400 $50,800
124 Special Education $33,800 $49,600
125 Human Development $35,900 $48,000
126 Athletic Training $34,800 $46,900
127 Social Work (SW) $33,000 $46,600
128 Elementary Education $32,200 $45,300
129 Child & Family Studies $30,300 $37,200