Friday Financial Five – February 6th, 2015

Friday, February 06, 2015

Dan Forbes, GoLocal24 Contributor

The 2016 Fiscal Year Budget

The most recent budget proposal was released this week, and the message seems to be pretty clear. With an improving economy, the government is focused on ending austerity in several areas, while attempting to plug several perceived loopholes within the tax code. Notably, the budget aims to restrict Roth IRA conversions to pre-tax dollars while also imposing Required Minimum Distribution rules to Roth IRAs. Many that have utilized Roths over the years opted to do so specifically to avoid that requirement. The government will also attempt to impose a “cap” on tax favored retirement savings.

Roth IRAs and the Five-Year Period

Prior to 2010, higher income individuals wanting to convert to Roth IRAs were prevented from doing so. In 2010, that income restriction was removed. This year marks the first time that 2010 converters can meet the five year requirement and take qualified distributions from their Roth IRAs. Qualified distribution requirements include a Roth owner reaching age 59 ½ or taking up to $10,000 for a first time home purchase. By waiting the five years and meeting the qualified requirements, the distribution avoids penalties, as well as any income taxes.

Fannie Mae’s New Appraisal Review

The housing market is still in recovery mode, and regulators are mindful of factors that could lead to crisis, including inaccurate home appraisals. Fannie Mae has introduced a new appraisal review program, called Collateral Underwriter. The purpose of the program is to provide an automated risk assessment of the appraisals that banks use when lending. Identifying properties that may have an “overvalued” appraisal may delay some closings but is ultimately intended to minimize negative equity and loan losses.

Supreme Court Decision May Lead to Retiree Health Changes

A recent Supreme Court ruling could have major consequences for some retirees’ health care benefits. The heart of the dispute stems from the treatment of agreements that don’t specify how long health benefits are supposed to last. The Yard-Man inference (from a 1983 decision) has long maintained the “presumption of vesting of retiree medical benefits in the absence of a termination provision in a collective bargaining agreement.” This week, the Supreme Court decision held that “when a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life.” There could be major changes for groups operating under an unspecified agreement

Financial Aspects of the Super Bowl

The Super Bowl, considered the biggest sporting event of the year, continues to have eye-popping financial implications. The economy of the ticket sales took most brokers by surprise. This led to many people flying to Arizona thinking they had a ticket, only to be told by their broker that tickets were unavailable. Price Waterhouse estimated over $200 million in total spending was generated in the Phoenix area including entertaining, lodging and transportation. Companies spent upward of $4.5 million to feature 30 second commercials, money that Nationwide may want back after a highly criticized advertisement.

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].