Delta Variant… Jobs…. The Fed

It’s certainly not a secret that we’re witnessing a Covid-19 Delta variant case spike in many areas, mostly being blamed on those not vaccinated.  So far, the markets are believing this is not an issue that will derail or slow down the current pace of our economic and market recovery. We apparently have 49% of the United States population “fully vaccinated”.

Companies such as Google, Netflix, Disney, Walmart, Morgan Stanley and others are requiring portions of their workforce to be fully vaccinated prior to returning to their respective offices.

Perhaps our Federal Reserve is viewing this recent issue as a reason to NOT lighten up on the liquidity throttle.  The market is now believing the Fed may not even announce a “taper plan” until late this year or early next year!  The risk, is if inflation ends up not being as temporary or transitory as the Federal Reserve insists.

The job market recovery will certainly add into the economic recovery, market and inflation picture.  Many are believing that once the extended unemployment benefits end in early September and school starts, those not employed will be forced back to work.  I wish I could accurately predict the September and October Jobs reports due in October and November!  I do hope the consensus desire is accurate.

Down the shore this weekend, we attempted to order take-out from a fairly nice restaurant. When I called and said I’d like to order take-out, I was placed on hold.  When the person came back on the phone, they apologized as they are temporarily not offering take-out orders because of the labor shortage.   Enough said, however I was not surprised.

Markets — a rare, “down” week

 Last week most major US Stock market indexes were down with the Dow dropping (.36%), the S&P 500 (.35%) and the Nasdaq Composite (1.10%).  Small caps bucked the downturn last week rising .76%.

Bond yields remain near historic lows, with the 10 Year US Treasury yield finishing last Friday @ 1.24%.

The yield on the 10 Year started the year at .91%, increased to 1.75% on 3/31, then 1.44% on 6/30.

Over the pond, foreign stocks were up .62% with Emerging market stocks losing (2.48%). This week the corporate earnings deluge continues and on Friday we’ll hear the July employment report, which is expected to suggest we added 900,000 jobs.  Also, on Friday it will be interesting to see the current path of the spike in cases along with CDC and government announcements.

Inherited IRA Changes

Over the last several years (prior to 2020), we’ve assisted several IRA beneficiary’s establish Inherited IRAs.  When an IRA owner passes away, and funds pass to a non-spouse, the beneficiary was typically eligible to take distributions over their life expectancy.  I’ve witnessed many beneficiaries treat these accounts correctly, only withdrawing the small required minimum each year and sometimes a little more.  The preservation of the tax-deferred benefit is a significant benefit from a tax standpoint as well as a responsibility standpoint (not simply just spending the money).

The SECURE Act, which stands for Setting Every Community Up for Retirement Enhancement changed the law for those IRA holders who pass away on or after January 1, 2020.  Now, a non-spouse beneficiary who is more than 10 years younger than the decedent, will have to drain the IRA completely after 10 years, after the year of death. Distributions are not required during the 10-year period, as long as the account is emptied by the end of the 10th year, after the year of death.  Even though the tax benefit still exists, it’s significantly less because of the limited number of years of tax-deferred growth.

A surviving spouse, a disabled person(s), a chronically ill person(s), or a beneficiary NOT more than 10 years younger than a decedent are exceptions to this rule. The decedent’s minor children are also an exception, however only to the age of majority.

It’s definitely time to begin discussing your estate plan.  Many people have $1-million plus in IRA’s that will ultimately be impacted.  If other Estate laws change… such as stepped-up basis and the overall exemption amounts, advisors and estate attorneys are certainly going to be busy.  There is no one size fits all solution!  The specifics of your situation will determine your options.  We will certainly be proactively addressing this issue with clients during the normal course of portfolio reviews.

If you are not yet a client and would like to discuss how the SECURE Act may impact your estate plan, please give us a call (856-354-3200 ext. 202), or send us an email for a complimentary consultation!

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Paul Levin CFP®, ChFC®, RICP®

Retirement Income Certified Professional®