There’s certainly been a lot going on lately. Unprovoked war. Oil spikes. Veiled nuclear threats. Inflation worries. Interest rate hikes. And, of course, public slapping! It’s almost too much. So, I’ll add to the list.
Let’s start with the housing market. The well-documented shift to remote work has truly disrupted the real estate market. Not only has this been witnessed locally, it has happened across the country.
The sudden jump in home prices is obviously unsustainable. The only question is how bumpy the return trip toward normalcy will feel. With rising mortgage rates making homes about 15% less affordable for many would-be buyers, it wouldn’t shock me to see outright price declines next year.
Let’s move on to Washington. It looks like Congress cares more deeply about enhancing people’s ability to retire some day than in plugging their own budget holes.
A sweeping bipartisan bill, known as the Secure Act 2.0, recently passed in the House and now it’s the Senate’s turn. Among the possible changes in the House bill is a shift in the required minimum distribution for IRAs to age 73 starting next year and eventually increasing it to age 75.
The Senate’s current legislation envisions moving to age 75 in one fell swoop. Regardless of which legislation eventually wins out, the federal government appears more than happy to wait longer for their tax dollars. Your gain is their pain, at least for now!
Speaking of pain, gas prices have jumped about $1 per gallon since the start of the year. If these prices stick, this equates to about $700 more per vehicle, per year.
Nearly simultaneously, Congress ended the automatic monthly deposits of the child tax credit that began last July with much fanfare. This is clearly a perfect case of imperfect timing. Restarting the deposits seems like an easy, no cost salve for high prices at the pump. But it’s an election year and inflation anxiety is a ready-made bludgeon for one political party.
Finally, it looks like the IRS is changing some rules two years into the game. I believe this next item deserves its own future article. Given the possible tax consequences for some, however, a short preview is in order.
As many know, if you inherited an IRA after 2019, you are no longer allowed to “stretch” your required distributions over your lifetime. Instead, new beneficiaries are required to completely drain their inherited IRA to zero within ten years. However, the pace of this draining process was thought to be left up to their discretion. Well, that’s at least what we believed for the past two years.
Now, under a newly-proposed IRS interpretation of the law, beneficiaries who inherit an IRA from someone who had already begun their own required minimum distributions might also be required to take IRA distributions every year during that ten-year window. While it’s not exactly a slap in the face, it feels just as unexpected!