You know that when you take money from IRAs, you have 60 days to put that amount of money in the same or a different IRA or other qualified retirement plan. If you miss the 60-day deadline, you have to treat the amount as a distribution and include it in gross income. The IRS could waive the 60-day deadline, but in the past it made it difficult to apply for a waiver and granted waivers under limited circumstances.
Yesterday the IRS issued new rules that make it easier and cheaper to receive a waiver. The waivers still are limited to 11 situations. To claim a waiver, the delay in meeting the 60-day deadline can’t be your fault.
But in Revenue Procedure 2016-47, both issued and effective today, the IRS has created a new “self-certification” procedure that allows someone who misses the 60 day deadline to avoid the expense and delay of obtaining a private letter ruling. Instead, a taxpayer submits a model IRS letter to the new retirement account custodian, checking in that letter one of 11 acceptable excuses for missing the deadline. This isn’t an unconditional pass—the IRA custodian will report the letter to the IRS and should the taxpayer be audited, the IRS can still determine he didn’t quality for 60 day relief.
The annual Fidelity Retiree Health Care Cost Estimate is published. Fidelity Benefits Consulting estimates that a 65-year-old couple retiring now will pay $260,000 out of pocket for medical expenses through retirement.That’s a $15,000 increase from last year, and the highest level since Fidelity’s been doing the estimate.
Of course, there are a lot of assumptions in that estimate. Some assumptions are the couple will belong in traditional Medicare and each will live exactly to life expectancy, 85 for the man and 87 for the wife. Fidelity uses data that determine an average expenditure to develop the estimate. The estimate also doesn’t include long-term care. It also doesn’t include expenses not covered by Medicare, such as over-the-counter medications and dental care. The estimate was down to $220,000 for 2013 and 2014.
I’ll be in San Francisco for the MoneyShow most of the week, so there will be limited updates to the blog.
This article discusses how long-term anxieties often ruin retirement. It says that many people are able to cope with or hide them for most of their adult years. Also, researchers now believe that anxieties might become worse as we age. It says many people let anxieties ruin their retirements, because they don’t recognize them or seek help.
Parker’s fear of heights — small, enclosed spaces also made him nervous — is not unusual. About 12 percent of US adults have struggled at some point in their lives with a specific phobia, an often paralyzing fear of such things as spiders, flying, or driving over bridges or through tunnels, according to the National Institute of Mental Health.
But as the population ages, researchers are realizing they have long underestimated the reach of these hidden anxieties among older adults. Anxiety disorders are now believed to be more prevalent than dementia in people over age 65.
Yet Parker’s decision to seek help last spring, at the age of 71, is out of the ordinary. Only about one-third of those struggling with a phobia get treatment, government data show.
In 2008 and 2009 the federal government bailed out and restructured the U.S. auto industry. The actions were controversial, but they didn’t receive a lot of attention from most people, because they were busy dealing with other aspects of the financial crisis. There’s a new documentary, based on a book, that provides details and some unconventional perspectives on the bailout.
“Live Another Day” picks up where “The Big Short” left off, showing how the housing crisis and the Lehman Brothers’ collapse led directly to the auto industry’s downfall.
By casting a new light on the saga, Burke and Pietri challenge conventional wisdom, including the widely held belief that Ford, by avoiding bankruptcy and a government bailout, was the better company. “People think Ford was smart,” said Pietri. “Ford was more messed up in 2007 than either GM or Chrysler. They just showed up at the bank teller’s window before the bank teller ran out of cash. If they’d waited six months, they would have ended up in the same situation” as GM and Chrysler.
Investors were scared early in 2016, and many analysts expressed concern that the global economy was going to turn down sharply during the year. The opposite happened. This article shows that the global economy has been much better than expected (using a global economic surprises index), and this article uses another economic surprises index to show the U.S. economy is performing better than expected. That explains a lot of the recent rise in global stock prices.
The MSCI World Index is up around 10% since its post-Brexit low on June 27. In the U.S, stocks have notched several all-time highs in recent weeks while European stocks are hovering near their highest levels for the year.
According to Deutsche Bank, stronger economic momentum around the world, measured by the surprise index, explains 66% of that rally. The bank attributes the rest to moves in bond yields and the dollar.
Howard Marks of Oaktree Capital, in his latest investor letter, has a wide-ranging discussion of today’s political situation and how it aligns with economic reality. He starts discussing the Brexit vote in the U.K. and continues with a discussion of the U.S. It’s wide-ranging and interesting, with plenty for each person to agree and disagree with.
These words do an excellent job of summing up current conditions. But Schlesinger, who died in 2007, obviously didn’t write them for that purpose, but rather in 1960, to describe the Great Depression. The populism we’re seeing today is not a unique phenomenon, but rather a standard occurrence in periods of economic difficulty. Populism has a record of giving rise to very destructive leaders and movements.
The combination of productivity improvements and foreign competition has been very hard on unskilled and semi-skilled labor – what’s called “the working class.” People employed in uncompetitive industries at the time globalization takes place are particularly disadvantaged. Their incomes decline at a minimum, and they may lose their jobs and be unable to find new ones. Society should cushion the blow on these people.
According to one paper and others cited in this article, a lot of the growth in business profits in recent decades is derived from playing the regulation game instead of better management and products. It says the most regulated industries often are the most profitable.
Looking at both intangible investments and political activities to explain the 20 percent rise in Tobin’s q in the U.S. since 1970, a new working paper by James Bessen from Boston University concludes that activity associated with increased federal regulation is the most important explanatory factor, especially after 2000. In fact, spending on R&D and other intangibles has fallen, relative to conventional assets, since 2000.
Noting that operating margins for these firms have also risen since 1990 by over 2 percent in aggregate, Bessen’s study also found that variables associated with regulation and corporate campaign contributions account for about half of this increase.
Central banks aren’t tightening policy, but regulations and other factors are, says David Kotok. He points to market action as evidence that the other factors are raising market rates and tightening liquidity even when the central banks are trying to keep policy loose. Because of that, his firm has become much more conservative with its bond investments.
What we do know is that the rates in LIBOR and related metrics are rising faster than the central bank’s policy rate. Example: the Fed has raised its policy rate one time and by 25 basis points during the last year. Meanwhile, 3-month LIBOR was about 30 a year ago and is now over 80 and rising. LOIS was 20 basis points two months ago; it is now over 40. “Japanese banks face dollar funding pressure,” Joe Abate of Barclays observed on August 11. That pressure is about $100 billion in size. Australian, Canadian, Swiss, and US banks fund themselves with CP in the hundreds of billions.
So all these rates are rising, which means that the cost of funding to lending institutions is rising, as is the pass-through of that cost to the borrowers.
Here’s an interesting piece from Bloomberg.com discussing sectors of the market that are vital to its operations but little-known to most investors. The bottom line is that for all investments that aren’t among the most widely-traded, it can be tough for a seller to find a buyer. Trading desks from banks, brokers, and other firms are for the most part regulated out of the business. That’s created openings for investments firms that want to step in, but it also makes life harder for sellers.
The bond dealers and investment banks that make up the sell side were once the lords of fixed-income markets. They would have snapped up that Rent-A-Center paper before McClain had spotted it. Prior to 2008 they maintained large warehouses of bonds and were the first port of call for investors looking to add or offload securities. They also took debt onto their own balance sheets, made bets with their own money, and spearheaded developments in trading and technology.
Today, post-crisis regulations intended to make banks safer and discourage risk-taking are eroding their profits and forcing dealers to rethink their business model. Banks are pulling back from market-making and shedding assets, business units, and employees. The dealer has essentially been demoted from maitre?d’—deciding where everyone sits and recommending dishes—to a waiter taking orders. These changes have created a vacuum in the bond market and made trading much trickier.