Last year 58% of voters approved the tax but that fell short of the requirement. This year there only needs to be a vote of more than 50% for approval, but the time is running out to inform voters before the election.

Last year the tax was sold as a way to fund police patrols which we all know is important and was likely the reason the tax recieved such support. But in the grand scheme of things it is a way to tax indivudal households very little (just 2.5% of cell phone plans in addition to the existing tax that taxes land lines) in order to maintain the high level of services and community support that the city has provided.

If you are interested in learning more or helping to get the word out please join the Yahoo group that I set up under: RCUtiltiesUserTax. The group can act as a forum for everyone to give their thoughts. Anyone can join so feel free to pass this information on to your friends and neighbors.

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How much are you contributing? It is imports to contribute enough money each pay period to allow you to reach your retirement goals using reasonable rate of return assumptions. Retirement contributions are also often tax deductible and may allow you to claim an income tax credit for retirement savings. Therefore, increasing your contribution to your retirement plan could increase your tax refund for next year.

Are you maximizing your employer’s contribution? Many employers match their employee’s retirement contributions up to a given percentage of the employee’s salary. For example, an employer may contribute one-half of a percent of an employee’s salary for every one percent of salary the employee contributes to the retirement plan up to a maximum of three percent. If your employer offers a retirement matching program you should contribute at least the amount needed to get the full amount of the match.

How are your funds invested? It is important to review how your retirement account money is allocated among the available investment options. Your investment allocation should reflect your retirement goals, age and the number of years you have until retirement, and should be diversified to reduce your overall investment risk.

Who is the beneficiary of your retirement plan? Most retirement plans allow you to list an account beneficiary. This is the person or persons who will get the money when you die. It is important to keep your beneficiary designation up to date to make sure that the money goes to the person you want should you pass away.
Your employer can often answer questions about your retirement plan and will help you make changes to your contribution amount, investment allocation, and beneficiary designation. If you have a retirement account with a previous employer or one that you set up independently you may want to consult a financial planner to discuss your options.

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Basic economics dictates that prices are determined by supply and demand. A large amount of supply coupled with low demand will lead to lower prices, which has been the case in the housing market. Conversely, recent data shows that the supply of homes for sale has decreased in recent months while demand has increased slightly.

The total number of single family homes for sale nationwide has decreased 12.5% in the first three months of 2009. The number of months of inventory (homes for sale divided by monthly sales) decreased by over 6% from 11.4 months in December 2008 to 10.7 months in March 2009, and by over 14.4% from the high of 12.5 months in January 2009. Houses for sale in the western United States, which has been one of the hardest hit areas, posted an even larger decline of 18% in the first three months of 2009.

Increased demand may also be having a positive impact on home prices. The average price of a single family home in the US fell 1.9% in the first three months of 2009, but increased 5.7% from $244,000 in January to $258,000 in March. The increase in prices is likely in part due to an increase in demand that is the result of increased affordability due to lower prices and a drop in mortgage rates. The contract interest rate for a 30 year fixed rate conventional mortgage has decreased from 5.51% in December 2008 to 5.05% in March 2009. This, combined with tax incentives for first-time home buyers, may continue to fuel demand.

The local market is also showing signs of improvement. A press release by Lyon Real Estate showed that sales in the Sacramento area increased 3% in April compared to the previous year. Meanwhile, the number of homes for sale dropped 42% during the same time period. The inventory of bank owned homes is now below one month supply and non-bank owned inventory is at four months supply, down from nine months in April 2008.

The housing market has traditionally been very cyclical, with more homes sold in the summer than in the winter. With activity increasing as we enter the summer months, we may be seeing the initial signs of a recovery ahead, which could help to stabilize or improve housing prices.

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The last two weeks have been filled with positive news about the economy. It all started when several of the major banks announced that they generated a profit during the first two months of this year. Then, General Motors announced that it would not need to take the $2 billion bailout loan from the government that was scheduled for March. The economic data also turned positive as housing starts, existing home sales, and new home sales all increased last month and the initial claims for unemployment compensation decreased.

All of this positive news does not mean that we are out of the woods just yet. There has been plenty of bad economic data reported recently as well. However, it may be a sign that the recession will not be as long or as severe as many people predicted. Therefore, this may be a good time to review what you can do to prepare your finances for an economic recovery. 

1. Refinance your mortgage. Interest rates typically decline during an economic recession and increase after an economic recovery. Mortgage rates for conforming mortgages are currently near all-time lows. This may be a good time to refinance before the economy improves and rates begin to increase.
2. Keep contributing to your retirement accounts. Economic recessions and stock market declines tend to go hand-in-hand. Unfortunately, when many people see the economy weaken and their account values decline they stop contributing to their retirement plans. This causes them to miss out on the opportunity to buy into the stock market while prices are low.
3. Go shopping. When the economy is in recession many companies cut prices in an effort to entice their customers to buy. This could mean big savings if you are in the market for a car, television, furniture, or other big ticket items and have saved the money to pay for them.
4. Convert your traditional IRA to a Roth IRA. The unfortunate reality of the current recession is that many people will earn less income this year than they did last year. The good news is that lower income likely means less income tax. If your income is likely to decrease this year you may be eligible to convert the money that is currently invested in your traditional IRA to a Roth IRA and pay little or no tax.
5. Sell your gold. Many investors view gold as a safe-haven investment. They purchase gold during recessions and then sell when the economy recovers. During the current recession the price of gold has increased substantially, possibly making this a good time to sell.
6. Find a qualified financial planner. An economic recession can be a good time to seek the services of a well qualified financial planner. You want a planner who will be there for you in good times and bad. So why not hire a planner when you need one most, during the bad times. A good financial planner will be able to help you assess your current financial situation and plan for the future, which includes preparing for an economic recovery. You can find a financial planner near you here by clicking “Find a Planner”.

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This announcement represents an expansion of the Federal Reserves strategy for combating the current economic and financial issues facing the US economy. The new strategy involves the government purchase of mortgage backed bonds in an effort to lower mortgage rates and provide new money for the purchase or refinance of residential real estate. The goal is to provide homeowners with access to funds and to support the housing market by making loans cheaper and easier to get.

Following the Federal Reserve announcement in December mortgage rates began to fall rapidly. Private investors began purchasing mortgages backed bonds in anticipation of the Government making large purchases and pushing up the prices of these bonds. This has caused large sums of money to flow into the mortgage market pushing rates significantly lower in the span of a few weeks. Rates are near the lows of the Summer of 2003 with a conforming 30 year fixed mortgage now below 5%.*

Mortgage rates may continue to fall in the coming weeks and months as the Government and investors continue to invest money in the mortgage market.  However, as rates fall, private investors will become less likely to continue to move large money into mortgage bonds. This is because the potential return to private investors is decreased as rates trend lower and at some point Government will have achieved its goal of lower mortgage rates and may stop purchasing mortgage bonds.

It is very difficult to predict mortgage rates into the future. But we do know that current rates are low by historical standards. This may offer homeowners and homebuyers an opportunity to lock in low rates.
*Non-conforming loans (over $417,000), currently are at much higher rates than conforming loans.

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During the Great Depression 50% of all homes were foreclosed on. While it might feel like we are approaching these levels now the reality is that less than 4% of all homes in the US have been foreclosed in this year. According to the Wall Street Journal approximately 16% of all homes are currently worth less than the amount that is owed. This is something to be concerned about but still far less then depression levels.

During the Great Depression the unemployment rate ballooned to 25%. At last report the unemployment rate in the US was 6.1% which is close to the historically average. Even the most pessimistic economist predict that the unemployment rate may get as high as 8 or 9%, no where near the levels of the Depression.

During the Great Depression the size of the US economy shrank by 33%. During the first 6 months of this year the US economy has grown at an average rate of 2.1%. Some economists have predicted that the US economy will shrink in future months due to the current credit problems, however, the predictions are that the economy will shrink by a relatively tame 2-3%.

In the 15 months following the 1929 stock market decline, which is often considered to be the beginning of the Great Depression, 1,300 banks failed. In the last 15 months a total of 14 banks have failed in the US.

The economy is clearly on the edge of a recession. Most economists predict that the US economy will slip into a shallow recession over the next several months and will recover some time in mid 2009. While this is a reason to be concerned for many people who are struggling to pay their bills and worried about keeping their jobs, it is not an indication of an impending depression.

Submitted by Chase Armer. Chase is a partner at Planned Solutions, Inc. in Rancho Cordova.

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Check Your Tax Withholding

Many people pay too much in federal and state taxes each paycheck and then have the money returned to them as a tax refund the following year. If you normally receive a large refund and yet are struggling to make your mortgage payment, you need that money now, not next year.

A tax professional can help you calculate the proper amount of tax withholding and help you complete the necessary forms. Some homeowners may be able to increase their monthly cash flow by as much as $500 a month.

Perhaps you saw your interest rate adjust upward in recent months, causing your payment to increase. Because the increase in your payment is the result of higher interest charges, it is likely to be tax deductible. This could cause you to owe less in income taxes and may allow you to decrease your tax withholding now.

Request a Rate Reduction

Mortgage lenders have taken substantial losses in the past year due to the increase in foreclosures and the decrease in real estate values. Many of these lenders already have hundreds or even thousands of homes that they are trying to unload. Contrary to popular belief, the last thing that a lender wants is to put another home in foreclosure. This has made many lenders willing to negotiate the terms of the loans that they service in order to keep the borrower in the home and making the payments.

If you have a mortgage that is currently above the market rate for new mortgages but don’t have enough equity to refinance, you should contact you lender to negotiate a reduction in your interest rate or an increase in the term of your loan, both of which will lower your monthly payment. Remember, it never hurts to ask. It is in both your and your lenders best interest to find a way for you to be able to afford your monthly payment.

Have Your Home Re-Assessed

One of the biggest expenses for many local homeowners is their annual property tax bill. This is especially true for homeowners who purchased their home in 2005 or 2006 when prices were much higher.

If the value of your home has declined since you purchased it, you may benefit from contacting the county to request that they re-assess your property value. If the county agrees that your home is worth less than the assessed value on your property tax statement, they will adjust their records and reduce the amount that you are required to pay. For some Rancho Cordova homeowners, this could equal a savings of as much as $250 a month.

Is a Reverse Mortgage an Option

A number of our community’s senior citizens who are living on a fixed income were coaxed into refinancing their homes in order to access money to do home improvements, pay medical bills, or pay off other debt. Unfortunately, many of these individuals were only able to qualify for a loan with a low teaser rate that has now adjusted upward. In some cases the new monthly payment exceeds the homeowner’s monthly income.

If this is the situation that you are in, a “reverse mortgage” may be a solution. A reverse mortgage is a loan on your home that does not require you to make monthly payments. Instead the amount that you owe increases over time based on the interest rate of the loan and is paid off when the house is sold. This could allow you to use your monthly income to pay for living expenses rather than mortgage payments and still live in your home.

Ask for Help

It is estimated that more than 60% of the homeowners who have gone into foreclosure in the past year have not asked anyone for help. Ignoring a problem and hoping it will go away is never a good financial strategy. There are many financial experts who want to help homeowners who are struggling to pay their mortgage.

If you are concerned about your ability to pay your mortgage, there are numerous resources available to you. The City of Rancho Cordova has posted several forms on its website that are designed to help homeowners organize their financial information and contact their lender to negotiate a possible solution to their mortgage problems. On a national level, Hope Now is an organization dedicated to helping distressed homeowners explore their options. You can learn more at www.hopenow.com. If you would like to talk to a professional on a one-on-one basis, you can find a local financial planner by going to the Financial Planning Association website at www.fpa.org and clicking on planner search.

Submitted by financial planner, Chase Armer of Planned Solutions Inc. in Rancho Cordova.

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