10 modern economic titles and what they mean for your money


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Editor’s note: This story originally appeared on NewRetirement.

With the summer over and the economy still operating again, there was a lot of important economic news. Here are 10 recent headlines and what each means for your money.

Some of these titles talk about the events that took place. Others predict future events. Each may have a significant impact on your wealth and security in the future.

1. Will Roth conversion opportunities be cancelled?

Ruth Iran
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Congress has sparked a backlash against the billion-dollar accounts of Roths held by some of the wealthiest Americans, causing it to take steps to limit everyone’s chances of saving Roths.

Here are some specific proposals in Congress regarding Roth’s calculations:

Contribution limits and RMDs for large IRAs

For single taxpayers with taxable income greater than $400,000 and married taxpayers with income greater than $450,000, Congress may limit additional contributions to a Roth or traditional IRA if the total value of an individual’s tax-granted accounts exceeds $10 million. dollar.

Furthermore, people with the above-mentioned income and account values ​​will be required to take the required minimum distributions, even if the account holder is younger than 72.

Income limits on Roth transfers

Beginning in 2032, Roth transfers will be eliminated for single taxpayers with taxable incomes greater than $400,000 and married taxpayers with incomes greater than $450,000.

Eliminate back door diversions

Congress is proposing to eliminate all backdoor Roth IRAs and massive backdoor Roth IRAs regardless of income levels.

what should be done?

It pays to think about your Roth chances before the end of this year. Look closely at the prospects for transformation over the next ten years. Use the NewRetirement PlannerPlus Roth Conversion Explorer to assess whether you will benefit from transferring money between now and 2032.

You may also want to start prioritizing Health Savings Account (HSA) contributions, which are another tax-efficient way to save.

2. September stock drop

Annoyed woman looking at her mobile phone.
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It’s important to note that stocks are up overall for the year – about 15% as of this writing. However, September saw a decline of about 5% from recent highs.

However, remember that asset prices will go up and down. Know your investment strategy and remember that short-term gains and losses are not a long-term reality unless you actually sell the asset.

It is very important to have an investment strategy, perhaps in the form of an investment policy statement, and to know under what circumstances you will sell or rebalance your portfolio.

3. Budget Adjustment

US Capitol Building
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At the end of September 30, the government was able to pass a short-term spending bill to avoid a government shutdown and the potential suspension of all government spending, including Social Security payments.

The legislation maintains government funding until December 3. This gives lawmakers some wiggle room to work on spending.

If you are dependent on government benefits or services in any way, this is something to watch. Chances of actual default are remote, but not impossible due to stalemate between political parties and the outcome could be very disastrous.

How disastrous? So disastrous that there is a mounting chorus of strong voices aiming to remove the entire debt ceiling.

4. High Mortgage Rates

expensive housing
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30-year fixed-rate mortgages are up more than 3%. Experts believe they will continue to rise.

An increase can affect the value of your home, flattening or reducing the sale price. In fact, Robert J. Schiller, a professor of economics at Yale University, told Yahoo Finance, “There is a possibility that we will see significant declines [in housing prices] in the next years “.

If you have an adjustable mortgage or line of credit, understand the implications of higher rates on your monthly budget.

5. Retirement savings mandates

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Part of the massive reconciliation package making its way through Congress is a provision that would make workplace retirement savings plans mandatory. All businesses will need to provide retirement savings opportunities for employees.

Employees will be automatically registered and obligated to contribute at least 6% of their income.

The plan is designed to boost the readiness of more Americans for retirement. Critics say low-income Americans cannot save and that small businesses cannot provide savings opportunities.

6. Potential capital gains and income tax increases for the wealthy

tax collection
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The wealthy are preparing to raise taxes. One proposal in Washington, D.C. would see an increase in capital gains taxes as well as an increase in the higher individual income rate for taxable incomes over $400,000. (Another proposal sees an increase only for those who make more than $1 million.)

Many wealthy taxpayers are looking to reduce increases by:

  • Sell ​​companies and stock investments now to avoid increased capital gains taxes in the future.
  • Push income into 2021 to avoid price hikes in 2022.
  • Look for Roth conversion opportunities in the near term.

7. Increase property taxes

businessman rich in money
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There is also a proposal to lower the estate and gift tax exemption limit to $5.85 million from $11.7 million. This means that more people will be subject to property taxes starting next year.

Granting assets before the end of the year is an opportunity to consider whether you expect to leave heirs of more than $5.85 million. You may also want to create a trust to protect your wealth from taxes.

8. Tax cuts for poor Americans

man lowers taxes
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One suggestion has the tax rate for those with incomes less than $40,000 at 24%.

9. Inflation may only be temporary

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And while inflation was trending higher, Federal Reserve Chairman Jerome Powell said on September 30 that high inflation was likely to dissipate next year.

He believes that the increase in prices is a temporary picture due to the disruption of the supply chain.

10. Social Security and Medicare in financial problems

Elderly woman with an empty wallet
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A new analysis shows that prominent US retirement benefit programs are in more financial trouble than previously expected. Social Security will run into a deficit in 2033 as Medicare reserves run out by 2026.

It’s possible that Congress will act to protect these programs, but no one can be sure.

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