Required Minimum Distribution

For those near or in retirement, dates become increasingly important.  Not complying with certain IRS rules can lead to hefty penalties.  The Required Minimum Distribution (RMD) is the amount of money that one is required to begin withdrawing from their retirement accounts beginning in the year following the year they turn 70 1/2.  The 70 1/2 thing is what confuses most people.  If one does not withdraw the RMD from their retirement accounts each year, then a hefty penalty of 50% is applied to that money.

You must begin taking your RMD by what is called your Required Beginning Date ( RBD ), which is generally April 1 of the year following the year you turn age 70 1/2.  So, in my case, I will turn 70 on October 2, 2036.  This means I will turn 70 1/2 on April 2, 2037.  Which means, my "first distribution year" is considered to be 2037, but I would not be required to withdraw money until April 1, 2038 which is actually my Required Beginning Date ( RBD ).  My situation is a bit unique since my 70 1/2 birthday falls on almost the precise April 1 date.  I will need to gather more information regarding exactly how that 70 1/2 birthday is determined so I will know if it's just prior to April 1 or just after that date.

So, what types of accounts must you begin withdrawing money from ?  Basically, any account that has been exempt from annual taxes each year - this would include money in 401K plans, Tradional IRA, Roth IRA, Simple IRA and SEP IRAs.  Consult with a tax expert to get a full list of accounts that money will need to be withdrawn from.

The NewRMD.com RMD Calculator is a handy tool for determining your RMD.  The logic behind the calculator is based on the 2002 RMD Tax Law.

One other important retirement date is the year when you turn 59 1/2.  This is when you can begin withdrawing money from your retirement accounts.  You are not required to withdraw money at this time.  It is simply the age at which you can withdraw money from these accounts without incurring a penalty.

Track the Residential Construction Market

Below are more good links for tracking the Residential Contruction market.  I believe company stock will fall even further as the housing market continues to suffer.  There is a large oversupply right now of homes.

Yahoo! Industry Center

Construction Companies By Market Capitalization

Housing Starts

Home Builder Stocks

All the doom and gloom I've whined about the last several days regarding the subprime lending crisis will create real opportunity for many.  The current crisis in the real estate market will provide a super opportunity for folks to begin acquiring stock at some very reasonable prices.  You might want to consider Home Builder Stocks sometime in the near future.  The article highlights the following stocks...

DR Horton (DHI)

Lennar (LEN)

MDC Holdings (MDC)

Pulte (PHM)

Ryland (RYL)

Toll Brothers (TOL)

Predatory Lending

As I dig deeper into the subprime lending crisis, I have found it increasingly important for me to participate in disseminating information about predatory lending such that folks can avoid falling prey to this unfortunate practice.

Predatory mortgage lending practices strip borrowers of home equity and threaten families with foreclosure, destabilizing the very communities that are beginning to enjoy the fruits of our nation’s economic success.  Full Story

Predatory lending practices can leave victims homeless and defeated, stripped of self-respect and hope, their credit ruined.  Full Story

Seven signs of predatory lending.  Full Story

Subprime lenders made too many loans to borrowers who didn’t make enough money to make the monthly payments. In some cases, lenders didn’t even bother to verify borrowers’ incomes.  Full Story

Corrupt Mortgage Broker + Uninformed Low Income Home Buyer = Subprime Crisis

"If there is a fault line in the global financial system, it runs through the U.S. mortgage market" -- Mark Zandi, chief economist with Moody's Economy.com

Last year, 13.5 percent of mortgages originated in the U.S. were subprime, according to the Mortgage Bankers Association, compared to 2.6 percent in 2000. Overall, the subprime market was $600 billion in 2006, 20 percent of the $3 trillion mortgage market, according to Inside Mortgage Finance. In 2001, subprime loans made ups just 5.6 percent of mortgage dollars. -- CNNMoney.com

The scariest part of that statistic (the current foreclosure rate) is the fact that 2006 borrowers are still in their fixed-rate period. "What will they do when their payment starts to rise?" -- Glenn Costello of Fitch Ratings

In January, more than 14% of subprime mortgages were at least 60 days delinquent. -- MarketWatch.com

The subprime mess has reached crisis proportions as the widely cited Center for Responsible Lending reports that 4 percent of U.S. homeowners--or about 2.2 million--face the prospect of losing their homes. -- BuilderOnline.com

Predatory lending means that making a loan that the lender knows will have little chance of getting paid off without a host of penalties, and a high likelihood that the asset backing the loan will get confiscated at a nice profit for the lender. -- FoxNews.com

AND FINALLY, THE pièce de résistance...

California Mortgage Broker promises strawberry picker and mushroom farmer that they can afford a $720,000 home !!!

Final Equation...

Corrupt Mortgage Broker + Uninformed Low Income Home Buyer = Subprime Crisis

Foreclosures

A very big (and bad) housing crisis is looming.  Our lovely friends in the subprime lending industry have created a freakin mess that will reach deep into the overall national economy.

US Foreclosure Rate Surges to 47%
A Foreclosure Story

I found it very interesting in the second story how the subprime lender convinced the home buyer that with an interest-only loan that her tax return each year could be used to pay her mortgage principle.  These lenders had no business "approving" this woman for a loan on a $400,000 home.

Money begets money

Money begets money, right?  We've all heard the expression "you must have money to make money".  Very true.  But, many people simply say they can't "make" enough money for this statement to be valid for them.  So many are caught up in the thought that only rich people who have inherited money can apply this principle.  However, we can ALL make this happen with some discipline.  I really like the following quote from Richard Templar...

"You have to set aside money for breeding purposes.  If you ran a rabbit farm and killed and ate all your rabbits, you wouldn't have any left to keep going.  Instead of a rabbit farm, start a money farm and breed your money.  You can then reinvest some and spend some, but you can't spend it all, or you'll have no more rabbits."

The Rules of Money

There are so many bad books out there that I rarely recommend them.  I did, however, pick up The Rules of Money at the library today and have found some useful information in it.  It's a nice concise little book with 100 simple financial rules to live by.  A couple rules that the author mentions that are always helpful are...

Don't envy what others have

Spend less than you earn

Don't borrow money, unless you really must

Property, in the long run, will not outpace shares

Only buy shares (or anything) you can understand

Think long-term

Control spending impulses

Perform regularly scheduled finance health checkups

Don't try to get rich quickly

Make your money work for you

Don't spend it before you've got it

Never borrow from friends or family

College Station Regional

This year has been a good sports year for Texas A&M.  The trend continues with our baseball team.  We're currently just two games behind Texas.  Rivals currently has us hosting the College Station Regional.  Let's hope the momentum continues.

Morgan's First Birthday

Today was a big day for Morgan.  Not only was it her birthday, but she also had her 12 month appointment with her pediatrician, Dr. Mayberry.  I'll be updating the growth tracker shortly, but Morgan is now 30 inches long and weighs 19 lbs 9 ounces.  Unfortunately, Morgan had to endure 3 shots during this visit to the Dr's office.  Dr. Mayberry is well liked by Morgan.  According to the doctor, Morgan is doing just perfect.  We also had the privilege of sharing Morgan's big day with my parents who drove up from Austin.  We could all see the joy in mom and dad's eyes as they had the opportunity to interact with Morgan.  It's always special to have family around to be a part of Morgan's life.

Morgan's First Birthday

Kentucky Derby 2007 Contenders

Kentucky Derby 2007 Contenders

We're ALL fat!!!

Dayna harassed me about my last blog entry.  She said, "uh, are you going to write anything along with that picture?".  I retorted that the graph was self-explanatory.  Evidently, she didn't think it was funny, nor self-explanatory.  So, here goes...basically, we're ALL fat !!!  I'm all for having goals, but the BMI scale simply does not work in many cases due to the amazing variety of body types.  Don't believe me?  Check out this list of celebrities/athletes who exceed 25 on the BMI scale...

Mel Gibson 5'9": 214 pounds: 32

Matt LeBlanc: 5'11": 218 lbs: 30

Steve McNair: 6'2": 235 lbs: 30

The Rock (Dwayne Johnson): 6'5": 275 lbs: 33

Arnold Schwarzenegger: 6'2": 257 lbs: 33

Sylvester Stallone: 5'9": 228 lbs: 34

Barry Bonds: 6'2": 228 lbs: 29

Tom Brady: 6'4": 225 lbs: 27

President Bush: 5'11": 191 lbs: 26

Nic Cage: 6'1": 210 lbs: 28

George Clooney: 5'11": 211 lbs: 29

Tom Cruise: 5'7": 170 lbs: 26

Matt Damon: 5'11": 187 lbs: 26

Johnny Depp: 5'7": 190 lbs: 27

David Duchovny: 6'0": 212 lbs: 29

Vin Diesel: 6'2": 200 lbs: 26

Harrison Ford: 6'1": 218 lbs: 29

Richard Gere: 5'11": 187 lbs: 26

Ethan Hawke: 5'9": 172 lbs: 25

Hugh Jackman: 6'2": 210 lbs: 27

Lebron James: 6'8": 240 lbs: 26

Dale Jarrett: 6'2": 200 lbs: 26

Bobby Labonte: 5'9": 170 lbs: 25

Nick Lachey: 5'10": 180 lbs: 26

Karl Malone: 6'9": 259 lbs: 28

Dr. Phil McGraw: 6'4": 240 lbs: 29

Mark McGuire (playing weight): 6'5": 250 lbs: 30

Donovan McNabb: 6'3": 240 lbs: 30

Yao Ming: 7'6": 310 lbs: 27

Brad Pitt: 6'0": 203 lbs: 28

Keanu Reeves: 6'1": 223 lbs: 29

Cal Ripken: 6'4": 210 lbs: 27

Andy Roddick: 6'2": 197 lbs: 25

Will Smith: 6'2": 210 lbs: 27

Sammy Sosa: 6'0": 220 lbs: 30

Denzel Washington: 6'0": 199 lbs: 27

Bruce Willis: 6'0": 200 lbs: 29

Billy Zane: 6'2": 210 lbs: 27

BMI

Morgan's Gallery

April is here.  I've added the April 2007 web page to Morgan's Gallery.  Morgan's hair is really starting to fill in, but it's at an awkward stage.  Dayna and I are trying to figure out how to deal with it.  Is it too early for a haircut at a salon?  Probably, but we'll have to do something soon to get it under control.