A thousand-point drop just isn't what it used to be. When the Dow traded at 20,000 about three years ago, a 1000 point decline was a 5% loss. With the widely-watched index recently breaking 30,000, a 1,000-point decline is a 3.3% loss. A decade ago, the Dow traded at 10,000 and a 1000-point drop was equivalent to a 10% loss in value. So discount the frightening reports about point drops.
With tens of millions of Americans desperately seeking security in retirement, Uncle Sam should have been more careful about how he named the new tax law, known as the SECURE Act. Instead of co-opting the names of federal laws for marketing purposes, the U.S. government should be able to figure out how to name a new law that skirts the standards in federal truth-in-advertising regulations.
The coronavirus has focused renewed attention to the risk of investing in China, but China may pose a hidden risk to retirement investors holding emerging markets funds.
Whatever your views on income inequality, the trend toward a larger and wealthier middle class is good for consumer spending, which drives 70% of the economy. For investors, that's positively fundamental.
Yet another new tax reform law went into effect in 2020 under the SECURE Act. In addition to ultra-high-net-worth individuals, the many millions of mass affluent Americans are likely to be impacted by the 470-page SECURE Act's retirement income tax provisions. The SECURE Act is a sweeping and substantive effort to make retirement income tax more sensible, a rare legislative action to win bipartisan support in Congress and the president's signature.
The U.S. Tax Code has been reformed more and more over the past few decades. From 1940 to 1979, 24 major tax laws were enacted, compared with the 40 years from 1980 to 2019, when 63 major tax revisions were enacted.
Americans over age 65 are staying in the labor force more often than expected, brightening the U.S. economic forecast and the outlook for U.S. stocks.
Wall Street firms spend a great deal of time and money trying to forecast relative performance of stock sectors, styles, markets and asset classes, and on convincing investors to buy their advice. However, a comprehensive new study indicates Wall Street's tactical approach is unwise.
2% U.S. Growth & Low Rates. The latest indication of what to expect on interest rates and economic growth came on December 17th, 2019, in an interview with Robert S. Kaplan, President and Chief Executive Officer, Federal Reserve Bank of Dallas. "We expect, again, 2%-plus growth, 2% growth for next year, unemployment rate around 3½%.," Mr. Kaplan told the Council on Foreign Relations. "We'll have some firming in inflation gradually toward 2%. And I think with that profile, I think the right-at 1 ½-1 ¾ fed funds rate, I think the right thing for us to do is stay right where we are unless something changes materially on the upside or the downside." In addition, on December 11th, the Federal Reserve released its latest expectations for growth, inflation, and unemployment for 2020, which are highlighted in the chart.
We've warned about the SECURE Act's effects on retirement income planning in previous articles over the past nine months, and this is a final call to action. If you're in any of the following four retirement income planning situations, you have one last chance to reduce your tax bill by acting before January 1st, 2020:
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Say Goodbye To Stretch IRAs And Get A New Plan
Bid adieu to stretch IRAs! A new tax law widely expected to become law by the end of 2019 will kill this strategy for passing on your IRAs to the next generation while minimizing the amount that goes to Uncle Sam. Adoption of the legislation is not sure, but it is highly likely, making it wise to plan now for the demise of the stretch technique.
If you previously planned to enable your IRA beneficiaries — this does not include your spouse — to inherit your IRA and stretch out distributions over their lifetime, your plan for minimizing the tax impact to your heirs is likely to become obsolete on January 1, 2020.
To be clear, if you die after 2019 and your children are your IRA beneficiaries, you'll need to rethink your plan for minimizing their tax payments. The new law will require your IRA to be distributed by your heirs over 10 years instead of their actuarial life expectancy.
If you previously set up a conduit trust for your IRA beneficiaries, it will be important to amend your plan, or your beneficiaries may face an unexpected tax bill and sudden cash drain.
Exceptions are carved out in the new law for the disabled and minors as well as surviving spouses. However, the new tax bill will make it wise for more individuals to convert to a Roth IRA and employ other tax planning strategies that require individual advice to minimize your taxes in passing IRA accounts to the next generation.
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