Friday Financial Five – November 28th, 2014
Friday, November 28, 2014
Recent data releases slightly negative
It’s a busy time for the economic calendar, with some slightly negative indications looking forward. GDP for the third quarter will be revised upward to 3.9, but the fourth quarter isn’t expected to be as strong. Consumer confidence took an unexpected dip, dropping from 94.1 to 88.7 based on a less than optimistic employment outlook. Initial filings for unemployment benefits topped 300,000 for the first time in over 2 months, but that may also be a result of the holidays approaching. For those interested in the scheduled release of economic data, Bloomberg provides a helpful calendar.
Possible tax deal in the works
Congress is discussing an extensive tax deal to address many expiring provisions for individuals and businesses. Business owners would again be able to write off certain expenses and research credits would become a permanent part of the code. The deal, as currently constructed, doesn’t address the Earned Income Credit and the child tax credit, which both expire at the end of 2017. According to the IRS commissioner, an agreement will have to be in place soon for tax refunds to be processed in a timely manner next year.
GAO offers guidance on multimillion dollar IRAs
Large IRA accounts are very much on the government’s radar, the thought being the IRS never intended for huge sums of money to be sheltered from taxation. The Government Accountability Office presented guidance to the IRS on ways to crack down, including a limit on the amount that can be accumulated and still receive preferential tax treatment. The report, using 2011 numbers, estimates roughly nine thousand IRA holders with assets above $5 million and a thousand people with $10 million or more. The large majority of people with IRAs, over 42 million, have $1 million or less in their account.
Continued strength in the rental market
The Wall Street Journal released details on the state of the rental market, which has exceeded the recovery of single family home construction. The building of multi-family housing with five or more units is at the strongest 12 month pace since 1989. An amazing 93 percent of multi-unit new construction is being built as rental units. Meanwhile, the building of single family homes is keeping pace or nominally higher than last year.
HUD issues new reverse mortgage details
Effective March 15, 2015, there will be further changes to the Home Equity Conversion Mortgage, or reverse mortgage. Housing and Urban Development (HUD), which oversees the program, continues to tinker with the financial assessment requirements at it tries to get a grasp on the proper way to underwrite this type of loan. Despite changes implemented in the beginning of 2014, it’s apparent that HUD is still paying more in claims than anticipated. The new financial assessment process may mean the mortgage company sets aside a higher portion of the loan for property taxes and insurance.
Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in East Greenwich, RI and can be reached at [email protected].
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