What are some areas we should review to start the year?

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Question of the week:  What are some areas we should review to start the year?

Answer: This is a somewhat annual question of the week that we answer to begin a new year. Over the next few weeks, or months depending on your particular situation, you will be gathering statements, forms, and information to prepare your tax returns. While you have all this information in the same place it is a good time to also review various areas of your economic life to see what may need updating, or changing.

Here are some of the areas I suggest you review:

  • Retirement Did you alter your retirement withholding in 2020?  Do you need to increase or decrease your deductions for your 401(k)?  The maximum contribution remains the same in 2021 as it was in 2020, up to $19,500 for individuals. If you are over 50 the “catch up” contributions also remain the same at $6500 for a total contribution (pre-tax) of $26,000. 

Are you self-employed or work for an employer who does not have a retirement plan so you contribute to some type of IRA? Review your 2020 income and contributions and determine based on estimated income in 2021 whether you need to adjust your monthly or quarterly contributions to your IRA. If you do not make regular contributions to your IRA I strongly recommend it so you can take advantage of “dollar cost averaging.” Those who did so in 2020 with their contributions saw higher gains than those who wait until April 2021 when their taxes are prepared to make their annual retirement contribution.

With the Dow Jones Industrial Average climbing around 16% in 2020 those who invested in their 401(k) throughout the year saw a nice gain in their retirement savings. Those who started contributing early in the year to their self-directed retirement accounts we able to see excellent gains on early contributions, reiterating what is stated above.

  • Insurance Is your hazard insurance policy current and accurately reflecting the replacement value of your home?  Is your life insurance coverage adequate? Are you home, auto, life insurances with the same company allowing you to take advantage of bundled discounts?
  • Estate Planning Do you have an estate plan?  Is it current and reflective of your current assets and wishes?  Do you own property but do not think you need any family planning because you are single?  Everyone with assets should have an estate plan, especially if they own real estate in California (or any other state with inheritance taxes). If you have an estate plan and family trust when was the last time you had it reviewed? Have your children become adults since the trust was last reviewed and amended? What about your wishes for you when you pass on to the next dimension, are they the same as they were when you initiated your trust?
  • Debt Have you increased your debt in the past twelve months?  Do you have a plan to pay it down and off?  Can you restructure your debt to lower the overall interest rates being charged or the monthly cash flow required to manage the debt and keep payments current? Was your 2020 resolution to pay down/off debt but were unable to do so? Call me and we can discuss potential plans to help you achieve this goal in 2021.
  • Mortgage Do you need a review of your current mortgage and options?  Call me!

These are not fun or sexy issues for most people to be tackling, but like changing the batteries in your smoke detectors you need to regularly review and update these critical areas of your home economics.  If you have any questions or looking for qualified professionals to assist you please do not hesitate to contact me.

Have a question? Ask me!

Fed will continue buying mortgages and U.S. Treasury debt. In the minutes released this week from its last meeting, the members of the Federal Reserve Open Market Committee (FOMC—group that sets policy for the Fed on buying and selling assets, and setting its benchmark interest rate) voted to continue its current policy of rates near zero percent and purchasing $40 billion per month of both Mortgage Backed Securities and U.S. Treasury bills and bonds. The news is mortgage rate friendly as it reduces any upward pressure having a set demand for loans.

The Labor Department released jobs data for December this morning. Many analysts had been predicting the economy to add jobs for the ninth month in a row, instead the data showed that 140,000 jobs were lost in December. Restaurants and bars shed 372,000 jobs nationwide due to many areas shutting them down as Covid-19 cases spiked in the month. Overall jobs were added to most sectors of the economy, with the exception of businesses that depend on crowds, and as mentioned food and beverage service. The news is mortgage rate friendly as it delays economic growth even longer.

Rates for Friday January 8, 2021: Rates bounced around a little bit during the two-week Christmas and New Year’s period and a bit of upward pressure this week as investors put money into equities following Democrats taking both Senate races in Georgia. This gives the party control of Congress and the White House, which has most thinking more stimulus funds and government spending is on the way. As a result we have seen MBS securities prices slipping this week as stock prices have risen.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30 year conforming                                         2.50%   Up 0.125%

30 year high-balance conforming                   2.625%    Flat         

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

I hope everyone had an enjoyable Christmas and New Year’s. We were busier than usual during the two-week period as, like us, most families were not taking vacations. This led to calls to their friendly mortgage professional to see how they could start the new year with mortgage savings or paying down debt. Thank you!

I think what we missed most about the break was not seeing movies. Our annual tradition has been to leave town the Saturday after Christmas for either Scottsdale or Palm Desert. While out of town, besides the ladies going shopping to spend gift cards, playing games, taking hikes, we also see a lot of movies. We did watch Wonder Woman 1984, but not the same on the television, even with lights dimmed and sound-bar turned up.

With vaccines slowing being provided across the region and country we, like most, are hopeful we can return to movie theaters, ball games and other crowd events in the not-too-distant future. We will be among the first in line when it is our turn to get the shots.

Stay safe and have a great week,

Dennis

Past Weekly Rate & Market Updates can be found on my blog page at my website www.DennisCSmith.com/my-blog