Bits and Pieces – August 20, 2013

money mazeDOW DIPS – Familiar story behind a fall in stocks: fears that the Fed is about to begin a taper off of its bond-buying program. The indexes moved lower as St. Louis Federal Reserve President James Bullard said there could be risk of excessive inflation in the future. Yesterday, Atlanta Fed President Dennis Lockhart lifted markets higher when he downplayed the possibility of a tapering to start next month. On the economic front today, the Labor Department reports that producer prices excluding food and energy rose 0.1% in July. In June the reading was up 0.8%.

OUT-OF-POCKET DELAY – The administration has delayed until 2015 a significant consumer protection in the ACA that limits how much people may have to spend on their own health care. The limit on out-of-pocket costs was not supposed to exceed $6,350 for an individual and $12,700 for a family. But under a little-noticed ruling, federal officials have granted a one-year grace period to some insurers, allowing them to set higher limits, or no limit at all on some costs, in 2014. See The Virtual Assistant’s latest Affordable Health Care Life Guide.

HOUSING PRICES UP, DELINQUENCIES DOWN – U.S. housing data continue to build on a strong foundation. Two reports confirmed a national average annual price increase of roughly 12%. Home prices in June were 11.9% above their year-earlier mark, according to a CoreLogic report. And the median existing-home price rose 12.2% in the second quarter from a year earlier, as reported by the National Association of Realtors. A lack of supply is a key reason for the continued rise in prices, along with an improving labor market. Existing home supply averaged 5.1 months’ worth in the second quarter, down from 6.4 months a year ago. And the healthier economy is helping to ease the overall mortgage delinquency rate, which fell to 6.96% from 7.58% a year earlier, according to the Mortgage Bankers Association.

DON’T MORTGAGE YOUR FUTURE – According to Aon Hewitt, the percentage of people taking 401(k) loans has declined, but 1 in 8 people still did so during the slow recovery last year. This is not wise…the loss of compounded tax-deferred growth, lower contribution rates among those who have loans and potential job loss. Some suggest you consider all other possibilities first, including home-equity loans, personal loans and even credit cards.

BUT THEY STILL BORROW – Transamerica reports more than one-third of people who define themselves as underemployed or who are out of work have taken withdrawals from their retirement accounts. A full 80% of retirement-account participants said they were aware of the penalties that result from such withdrawals. “This leakage from retirement accounts was more likely out of necessity vs. a lack of awareness of the consequences.”

WOMEN’S GOALS – The Credit Union National Association finds that women, especially those in their 50s and 60s, consider saving for retirement a key financial goal. In fact, 84% of women 54 to 63 are focused on building a retirement nest egg.

TAKE THE MONEY AND RUN – An Employee Benefit Research Institute found that when deciding between taking a lump sum or annuitizing their pensions, about 75% of workers took the lump sum. The study also found that younger workers were more likely to take a lump-sum distribution and those in cash-balance plans were more likely to take a lump sum than were those in defined-benefit plans.

LUMP SUM OR INCOME – The Labor Department is preparing a rule, with broad insurance industry support, requiring 401(k) employers to provide participants with lifetime-income illustrations. Many financial planners are offering new tools for calculating a “safe withdrawal rate” and showing how much savings are required to generate needed retirement income. Click here for more information. Another good article is available here. If you are a Virtual Assistant subscriber, see the Savings Distribution Calculator.

INHERITED ANNUITIES – The IRS released a Private Letter Ruling (PLR 201330016) that enables the beneficiary of an inherited annuity to use a tax-free Section 1035 exchange to move the funds to an annuity that better reflects the beneficiary’s needs and investment objectives. More detail is available in this article from ThinkAdvisor.com.

ACA PREMIUM STUDY – The Kaiser Family Foundation released a study estimating that roughly half of families currently buying their own coverage will be eligible for tax credits next year, averaging $5,548 per family, which are likely to offset any “rate shock.” Those who earn too much, however, could end up paying more. More information is available at LifeHealthPro.com.

CELL PHONE TAX – Look for a new tax on your monthly cell phone bill to pay for a plan to put WiFi in more classrooms. Getting American consumers to cough up the billions needed for the “ConnectEd” initiative doesn’t depend on Congress or anything so tedious as winning bipartisan support. The initiative instead rests on the nomination and approval of Tom Wheeler, a telecommunications lobbyist and Obama campaign bundler, to head the Federal Communications Commission.

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