Housing | Tax Rules | FOMC and Doritos

Housing Market Price Out: Middle-class Americans are most affected by the Covid-19 housing shortage. According to a study from the National Association of Realtors released last week, the surge of home prices and a sharp decline in the number of homes for sale have made home buying difficult for many Americans compared with two years ago. By December 31, 2021, there were 411,000 fewer homes on the market that were considered affordable by those in the $75,000-$100,000 salary range.

New Tax Rules and IRAs: The trend of tax-favored retirement plans isn’t quite as popular as it used to be. In the past, Americans focused on how to get money into these accounts. According to the Investment Company Institute, total assets in traditional and Roth IRAs, 401(k)s, and similar tax-sheltered retirement vehicles grew $22 trillion in 2020 from $3 trillion in 1995. As reported in the Wall Street Journal, “Now there’s new guidance from the Internal Revenue Service on required withdrawals for heirs of these accounts. The proposed regulations, issued in late February, would speed up required payouts and add paperwork for many heirs of traditional IRAs but not for heirs of Roth IRAs. They also won’t affect most spouses who inherit retirement accounts.” The problem? The faster money has to come out of retirement accounts, the less tax-deferred growth there is. There are many other changes, and we’d be happy to chat through them with you if you’re interested. Reach out to your advisor today!

529 Surplus: If you find yourself in the unusual position of having extra funds in your 529 after your student graduates, here are some ideas on how to use the funds (and perhaps eases your mind about overfunding a 529 account): (1) Transfer funds to another beneficiary, (2) save for future educational needs, (3) use to make student loan payments, (4) save additional funds for a future grandchild, (5) take advantage of penalty-free scholarship withdrawals, and (6) use the money for non-qualified expenses. As a reminder, we can set you up with accounts at My529 with zero fees and an easy-to-navigate platform.

Business Briefing:

• March FOMC Meeting—an FOMC meeting has rarely loomed larger than the upcoming one in which the Federal Reserve Board will likely initiate the first of several hikes of the Fed Funds rate. The thought is that Powell and his team of Fed governors will hike 25 basis points or .25% at a minimum. The number would probably have been larger without Russia’s invasion of Ukraine. Now, however, if the market saw an increase of 50 basis points, it likely would not react very favorably.
  Here’s a link to see how the schedule of meetings looks through YE2022.
• Oil and Gas Prices—After Russia-Ukraine talks failed last week, oil prices surged, and U.S. stock futures struggled to rebound as Russia’s invasion of Ukraine continued to fuel market volatility. Oil futures rebounded early Friday after pulling back from recent surges, remaining near their highest level in years. (The Wall Street Journal)
• February Inflation Surge—U.S. consumer prices surged in February to an annual rate of 7.9%, the biggest such increase in 40 years, the Labor Department reported Thursday. With annual inflation now nearly four times the Federal Reserve’s target rate of 2 percent, the U.S. central bank is expected to start raising its target interest rates Wednesday at the close of its two-day March meeting. (Reuters)
• Goldman Sachs Exits Russia—Goldman Sachs is shutting down its operations in Russia due to Moscow’s invasion of Ukraine, the company announced Thursday. Many large companies, including Starbucks and Coca-Cola, have suspended their operations in Russia, but Goldman Sachs is the first big Wall Street bank to pull out. “Goldman Sachs is winding down its business in Russia in compliance with regulatory and licensing requirements,” a company spokesperson told NPR in a statement. “We are focused on supporting our clients across the globe in managing or closing out pre-existing obligations in the market and ensuring the wellbeing of our people.” Goldman has an estimated $940 million in exposure in Russia, including $650 million in credit. (NPR, CNBC)

Doritos and Inflation: If your bag of Doritos has seemed suspiciously lighter, you’re not alone. Frito-Lay confirmed that it decreased the number of chips you get by five whole delicious triangles in 2021 in order to account for inflation. A representative of the company said, “Inflation is hitting everyone … we took just a little bit out of the bag so we can give you the same price, and you keep enjoying your chips.” For 200 million bags of chips, that means “the total amount saved is … upwards of $50 million,” Time explained in a report.