Is Working on www.erollover.com

$8,000 Tax Credit | Mortgage Rates Drop | Prices still falling

By Mike Rowan, www.erollover.com

The Real Estate market continues to be a driving force in undermining the economy, as politicians hope and pray the the stimulus package will provide some eventual relief. Here is a rundown of the top news stories in real estate.

First-time buyers get $8,000 tax credit in stimulus bill

Home buyers who hoped for a $15,000 tax credit to buy a new home, as promised by the Senate, will be disappointed. A proposed $35 billion credit to support home sales was jettisoned in favor of a more modest $2 billion to $3 billion provision.

The proposal would eliminate the repayment requirement in an existing tax credit for first-time home buyers, and raise the credit to $8,000 from $7,500. Congressional aides cautioned Wednesday that the credit’s size was still subject to negotiation.

Tim Shapleigh, a prospective home buyer, stated, “With all of the spending in the 2009 Stimulus Bill, I was quite hopeful that significant incentives for first time home buyers would be a priority. I guess that just isn’t the case.”

Foreclosures Push Home Prices to 5-Year Low

Prices of existing U.S. single-family homes dropped a record 12.4 percent in the fourth quarter from a year earlier to the lowest level since 2003, the National Association of Realtors said on Thursday.
The NAR said distressed sales, which includes foreclosures, accounted for 45 percent of transactions in that quarter, dragging down the national median price of existing single-family homes to $180,100.
The median is where half sold for more and half sold for less, and it was the lowest since the second quarter of 2003 when it was $177,900.
At the same time, existing-home sales rose in only six states from the fourth quarter of 2007, the NAR said.
In the fourth quarter, prices for single-family homes declined in 134 out of 153 metropolitan statistical areas from the same period in 2007, pulled down by active sales at the lower end that were driven by foreclosures, the NAR said.
The NAR said one metropolitan area was unchanged and 18 metropolitan areas reported price gains. The NAR’s data on metro area home prices dates back to 1979.

30 Year Fixed Mortgage Rates Drop to 5.16%

Rates on 30-year-fixed mortgages fell this week, offering homeowners a chance to refinance their loans, Freddie Mac said Thursday.

The average rate on a 30-year fixed mortgage dropped to 5.16 percent this week from 5.25 percent last week. A year ago, the 30-year, fixed-rate mortgage averaged 5.72 percent. Interest rates for 30-year fixed-rate mortgages are almost 1.5 percentage points below last year’s peak set in late July, offering many homeowners an incentive to refinance.

The new rate translates into a monthly payment savings of about $188 on a $200,000 loan.
Average rates for 30-year-fixed mortgages had been rising since hitting a record low of 4.96 percent a month ago, a decline attributed to the Federal Reserve’s move to buy $500 billion in mortgage-backed securities to spur lending by banks.

Spending cuts in the 2009 Stimulus Package

Whether we like it or not, the 2009 Stimulus Package has been accepted by both the Senate and the House, and will be heading our way soon. A coalition of Democrats and some Republicans reached a compromise that trimmed billions in spending from an earlier version of the Senate economic stimulus bill. We are still wondering where the government is going to come up with the money to pay this, but what you see is what you get.

This list, from a Democratic leadership aide, a list of some programs that have been cut, either entirely or partially:

Partially cut:

• $3.5 billion for energy-efficient federal buildings (original bill $7 billion)
• $75 million from Smithsonian (original bill $150 million)
• $200 million from Environmental Protection Agency Superfund (original bill $800 million)
• $100 million from National Oceanic and Atmospheric Administration (original bill $427 million)
• $100 million from law enforcement wireless (original bill $200 million)
• $300 million from federal fleet of hybrid vehicles (original bill $600 million)
• $100 million from FBI construction (original bill $400 million)

Fully eliminated

• $55 million for historic preservation
• $122 million for Coast Guard polar icebreaker/cutters
• $100 million for Farm Service Agency modernization
• $50 million for Cooperative State Research, Education and Extension Service
• $65 million for watershed rehabilitation
• $100 million for distance learning
• $98 million for school nutrition
• $50 million for aquaculture
• $2 billion for broadband
• $100 million for National Institute of Standards and Technology
• $50 million for detention trustee
• $25 million for Marshalls Construction
• $300 million for federal prisons
• $300 million for BYRNE Formula grant program
• $140 million for BYRNE Competitive grant program
• $10 million state and local law enforcement
• $50 million for NASA
• $50 million for aeronautics
• $50 million for exploration
• $50 million for Cross Agency Support
• $200 million for National Science Foundation
• $100 million for science
• $1 billion for Energy Loan Guarantees
• $4.5 billion for General Services Administration
• $89 million General Services Administration operations
• $50 million from Department of Homeland Security
• $200 million Transportation Security Administration
• $122 million for Coast Guard Cutters, modifies use
• $25 million for Fish and Wildlife
• $55 million for historic preservation
• $20 million for working capital fund
• $165 million for Forest Service capital improvement
• $90 million for State and Private Wildlife Fire Management
• $1 billion for Head Start/Early Start
• $5.8 billion for Health Prevention Activity
• $2 billion for Health Information Technology Grants
• $600 million for Title I (No Child Left Behind)
• $16 billion for school construction
• $3.5 billion for higher education construction
• $1.25 billion for project based rental
• $2.25 billion for Neighborhood Stabilization
• $1.2 billion for retrofitting Project 8 housing
• $40 billion for state fiscal stabilization (includes $7.5 billion of state incentive grants

Dollar Cost Averaging | Benefiting your IRA, 401k, and Retirement

Dollar Cost Averaging | Benefiting your IRA, 401k, and Retirement

With the recent turmoil in the financial market this is a good time to look at Dollar cost averaging. The strategy is one that helps you actually benefit from market volatility as we see continuing in 2009.

You actually are better off with wild swings in stock prices, when you dollar cost average, than if they just went up .8% every single month (if both ended with stocks at the same price 20 years later). Really the wilder the better (the limit is essentially the limit at which the economy was harmed by the wild swings and people decided they didn’t want to take risk and make investments.

Here are two examples, if you invest $1,000 in a mutual fund and the price goes up every year (for this example the prices over 20 years: 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 22, 24, 26, 28, 30, 33, 36,39) you would end up with $40,800 and you would have invested $20,000. The mutual fund went from $10 a share to $39 over that period (which is a 7% return compounded annually for the share price). If you have the same final value but instead of the price going up every year the price was volatile (for example: 10, 11, 7, 12, 16, 18, 20, 13, 10, 16, 20, 15, 24,29, 36, 27, 24, 34, 39) you end up with more most often (in this example: $45,900).

You could actually end up with less if the price shot up well above the final price very early on and then stayed there and then dropped in the last few years. As you get close to retirement (10 years to start paying close attention) you need to adopt a strategy that is very focused on reducing risk of investment declines for your entire portfolio.

The reason you end up with more money is that when the price is lower you buy more shares. Dollar cost averaging does not guaranty a good return. If the investment does poorly over the entire period you will still suffer. But if the investment does well over the long term the added volatility will add to your return. By buying a consistent amount each year (or month…) you will buy more share when prices are low, you will buy fewer shares when prices are high and the effect will be to add to your total return.

Now if you could time the market and sell all your shares when prices peaked and buy again when prices were low you could have fantastic returns. The problem is essentially no-one has been able to do so over the long term. Trying to time the market fails over and over for huge numbers of investors. Dollar cost averaging is simple and boring but effective as long as you chose a good long term investment vehicle.

Investing to your IRA every year is one great way to take advantage of dollar cost averaging. Adding to your 401(k) retirement plan at work is another (and normally this will automatically dollar cost average for you).

Also, keep in mind that the BETA version is opening up next month for a few valued eRollover members to test. Make sure that you get a hold of your retirement!

Positioning your 401k or IRA for a Volatile Market

Sign up here

to get a BETA code for our new account aggregator when it becomes availiable!

Positioning your 401k or IRA for a Volatile Market

As I write this, the 2009 Stock Market is not looking to make any new friends in the 401k and IRA community. The DJIA is hovering right around 8000, and it looks like this recession is going to last longer than anticipated. Some pundits have said that it could be 2011 to see all of the economic stimulus finally work. We had the biggest Inauguration market drop in history when Barack Obama took the oath of office.

In the meantime, many investors are wondering, “What should I do during these difficult market times?” Many are even afraid to open their 401k statements for fear of the paper losses on hand.

Asset Allocation is a must for your 401k or IRA

I can’t stress enough that a proper asset allocation is vital for your 401k or other retirement plan. This limits your downside in volitale markets, and helps to position your 401k to rebound when the market decides that it doesn’t want to be in the 8000 range any longer. Here is a quote from the Washington Post that I found extremely troubling.

“A Washington Post piece today about Bernard Madoff says an AllianceBernstein survey showed nearly 40% of investors without an advisor didn’t have an approach for allocating and rebalancinginvestments. Some 55% of those people reported they never got around to doing it!

Most startling: 70% of investors, including those with an adviser, said they’re prone to change their hairstyle more frequently than rebalance their portfolios!”

Your 401k or IRA is not going to benefit from sticking your head in the sand. A smart investor MUST identify the funds that are not performing well and get rid of them. This helps you to MAKE MORE MONEY in the long term. Please feel free to use eRollover’s free asset allocator to review and set up your portfolio by clicking here.

Pretty amazing stats and fodder. eRollover’s account aggregator is coming very soon, and will it be simple enough to use eRollover for many of these 401k and Retirement needs. Make sure that you sign up today to become a Beta tester when this feature becomes available. After all, we want to provide you with the tools to “Help you achieve your Retirement Dream!”

Help your Retirement! | Qualify for a Beta Code for our Account Aggregator! It only takes 1 Minute! Sign up Today!

Changing your Roth IRA back to a Traditional IRA

Sign up here

to get a BETA code for our new account aggregator when it becomes availiable!

Changing your Roth IRA back to a Traditional IRA

Named for Senator Roth (R-Del.), the new Roth IRA does not allow a deduction when contributions are made, but allows tax-free withdrawals of both contributions and earnings. Thus, unlike regular IRAs, which only defer taxes, the Roth IRA allows the tax-free accumulation of wealth. If the Roth IRA account has been established for five years and (1) the owner is at least age 59, (2) the owner is deceased or disabled or (3) the distribution will be used for first-time homebuyer expenses
The ability to “unconvert” or reverse a Roth IRA conversion provides the key to identifying which IRA assets you might opt to convert to a Roth and the key to saving taxes. Technically, the correct term is to “recharacterize” a Roth IRA back to a traditional IRA.

First we need to understand the regulations governing recharacterizations. Then we will provide several examples of situations that can take advantage of those regulations.

Rules Governing Recharacterizations

The IRS permits IRA owners to recharacterize Roth IRA contributions from one type of IRA (i.e. Roth or traditional) to the other. This applies to both the ordinary annual contributions and the conversion contributions. The deadline for recharacterizing a contribution or conversion is the extended due date of your tax return for the year of contribution or conversion. This would normally be April 15 following the year of contribution or conversion, or October 15, of this subsequent year if you have filed for and obtained an extension.

There are also rules limiting the frequency of conversions, recharacterizations, and reconversions. You may not make a Roth conversion, “unconvert” it and reconvert the same IRA money in the same year. Even if you straddle different calendar years, you must still wait 30 days before reconverting a Roth IRA that you had previously converted and “unconverted.”

Procedure for Recharacterizing a Converted Roth IRA Back to a Traditional IRA

Notify the Trustees of both IRAs involved on or before the transfer date that you want to “unconvert” or recharacterize a particular Roth IRA as a traditional IRA. If the person making the conversion dies before notifying the Trustees, the executor, administrator, or other person responsible for filing the decedent’s final tax return can notify them.

The notification must contain the following information:

• the type and amount of the conversion to the Roth IRA to be recharacterized;
• the date on which the conversion was made and the tax year for which it was made;
• a direction to the trustee to transfer, in a trustee-to-trustee transfer, the amount of the conversion and any net income allocable to it to the trustee of the recipient IRA; and
• any additional information needed to make the transfer, including the names of the trustees involved.

If both of your IRAs are maintained by the same trustee, simply redesignating the first IRA as the second IRA will be treated as a trustee-to-trustee transfer. You must also report the recharacterization on the tax return for the tax year in which you made the original Roth conversion.

Please visit our site for more Retirement, 401k, and Insurance information:
www.erollover.com