Last Week's Headlines

• New housing starts rose slightly in September, but permits for new construction fell 1.2%. Both are still roughly 28% below last year's figures.
• Driven largely by a 2.4% drop in energy prices, inflation at the wholesale level was down 0.6% in September from the previous month. That means wholesale prices have fallen 4.8% in the last year, though core inflation, which excludes food and energy, is up 1.8% since last September.
• The Conference Board's index of leading economic indicators saw its sixth straight month of improvements, rising 1% in September. The six-month increase is the strongest since 1983. Average workweeks and building permits were the only two negative components of the index.
• The looming expiration of the first-time homebuyer tax credit helped push sales of existing homes to their highest levels in two years, according to the National Association of Realtors (NAR). Resales rose 9.4% during September after falling in August, and were up 9.2% from last September. And the preliminary results of a separate NAR survey showed that almost half of sales were first-time home buyers. The bad news? Of those transactions, 29% were distressed properties.
• Oil hit a new one-year high on reports that, despite weak demand, oil inventories were building less rapidly than expected. The euro traded above $1.50 for the first time in 14 months.
• The federal government took steps to restrict executive compensation at seven large companies that have received taxpayer assistance, and the Federal Reserve Board proposed tighter regulatory supervision of pay packages that might encourage risky banking practices.
• A tale of two economies: Chinese officials forecast that third-quarter growth figures due Thursday would accelerate to 9% from the previous quarter's 7.9%. However, the UK's economy shrank 0.4% in the third quarter (5.2% from a year ago).

Eye on the Week Ahead

Thursday's U.S. GDP figure will be closely watched to see if it manages to turn the corner and show growth. However, earnings reports will continue to be scrutinized for clues about whether current stock prices have already anticipated potential future good news.

Key data releases: Home prices, consumer confidence (10/27); durable goods, new home sales (10/28); Q3 gross domestic product (10/29); personal income and spending (10/30).

Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

In many cases, because the law was passed so late in 2008, and because many individuals and plan sponsors were confused about how to comply with the new rules, IRA owners and plan participants received RMDs they weren't required to take, and which they didn't want. Individuals who received such RMDs were allowed to roll them into an IRA or eligible retirement plan (even though RMDs aren't usually eligible to be rolled over). Some individuals failed to complete their rollovers within 60 days, or weren't aware of their ability to roll over the funds. In some cases, employees who received RMDs as part of substantially equal periodic payments, which are also generally ineligible for rollover, were uncertain whether a rollover was allowed.

In Notice 2009-82, the IRS provides relief to plan participants and IRA owners who have already received an unwanted 2009 RMD, and for whom the 60-day rollover period has expired. Under the Notice, these individuals will generally have until November 30, 2009, to complete a rollover. For employer-sponsored plans, the relief applies to any payment that is equal to the 2009 RMD, and to any substantially equal periodic payments the employee received during 2009 that included RMDs. This relief applies to IRA owners, plan participants, and spouse beneficiaries. (Note: this special rule does not apply to RMDs received in 2009 for 2008.)

The Notice cautions that the one-rollover-per-year rule still applies to IRAs. Under this rule, which applies separately to each IRA, only one rollover from a particular IRA can be made to any other IRA in a 12-month period. Roth conversions do not count as a rollover for purposes of this rule.

The Notice also provides additional guidance to taxpayers and plan sponsors in the form of Q&As, including the following:

• The deadline for an employee or a beneficiary that had until the end of 2009 to choose between receiving RMDs under the 5-year or the life expectancy rule is extended until the end of 2010.
• In plans that permit a nonspouse beneficiary to directly roll over a deceased participant's account balance, the nonspouse designated beneficiary has until the end of 2010 to make the direct rollover and use the life expectancy rule with respect to an employee who died in 2008.
• In general, the rollover can be back to the same plan that made the distribution (if the plan permits such rollovers).
• The 2009 RMD waiver does not apply to substantially equal periodic payments taken in order to avoid the 10 percent early distribution tax on distributions prior to age 59½, even if the individual is using the "RMD method" to calculate those payments.

You can find a copy of Notice 2009-82 here.

Market Summary

After a few head fakes in both directions over the course of the week, the equity markets settled down a bit--literally--after four straight weeks of gains. The S&P 500 ended the week still clinging to the 1000 mark, but the Nasdaq reversed last week's push above 2000. The Global Dow remained in positive territory (barely), aided by reports of higher than expected growth in Germany and France. Though corporate spreads widened slightly, the bond markets were generally heartened by benign inflation data and strong demand at auctions of $75 billion of Treasuries.

529 Qualified Tuition Plans

One of the most popular numbers in the college planning world is Five Two Nine (or 529). That is because section 529 of the internal revenue code vastly expanded the number of tax-advantaged plan options available to parents to help save for the increasing costs of college education.

In addition to numerous tax law changes under 529, Qualified Tuition Plans (or QTP's for short), were granted tax-exempt status if they were created, sponsored, and maintained by the 50 individual states.

The term "529 plans" is basically synonomous with the term "QTP's." The plans that I will discuss in the coming paragraphs then are sub-types of 529 plans and each possesses their own unique advantages and disadvantages.

The purpose of this post is to establish the precise plan definitions, rules, and regulations. In later posts, I will relate specific plan types to specific possible instances where the use of the plan would be advantageous.

But for now, lets just focus on the Raw Essentials! ...

While its true that the tax credit is expiring 4 months from now, you need to start looking today if you hope to receive the real estate tax credit. Most of the buy side transactions I have seen have taken extremely long to close sometimes up to 4 months, just because so many factors have been added to closing on property this year.

A long line of short-sellers, loan modification requests, and foreclosures have left banks understaffed and new regulations on who receives money has made it quite diffcult for even the best of borrowers to get a loan in a timely fashion.

Still, there is time to get the $8000.00 tax credit if you start today. I have prepared these tax credit rules on some research I did on the subject a few months back.

Kevin went on to say, "What the heck is $4.00 bucks for a baller like me, right?"

As I am about to show you, a cup of coffee costs a whole lot more than just $4.00.

Its Time To Rollover

If you have been recently laid off or are otherwise leaving your current employer, you will need to rollover your retirement plan money to a new plan. It is important to understand what your current retirement plan is, in order to know which type of plan you can roll your money into.

The most common rollover is the 401(k) to traditional IRA rollover, but as you can see from the chart below, there are actually several other types. The are pros and cons to each type of retirement plan so before you rollover, be sure to consult a financial advisor on the different rules, advantages, and limitations.

The equity markets ended a remarkable July on a high note. Even though the sharp increases of the previous two weeks leveled off a bit, the direction was still positive, helped along by some key economic and housing statistics. The Dow saw its best month since October 2002, and the S&P 500 racked up its fifth straight month of gains. The Nasdaq continued to add to its year-to-date lead over other markets.

Major Index Data as of 7/31/2009

To understand why it would be advantageous to convert a traditional IRA to a ROTH IRA, we must first understand how a traditional IRA works and how it usually comes into existence.