Planning for Retirement? Don't Overlook These Milestones With millions of Americans owning tax-advantaged retirement accounts, totaling $28 trillion in assets, in many types of accounts—such as a 401(k), 403(b), 457, and an IRA (Roth, traditional, SIMPLE, SEP, SAR SEP, rollover, inherited, etc.), each with their own rules—it’s little surprise that slip-ups and or oversights occur all too frequently. Misunderstanding or outright ignoring a number of key dates, for example, can be costly—in terms of financial penalties and/or lawyers and accountant fees, not to mention considerable time to amend the errors. [+] Read More

Trade Wars: Don't Panic, Prepare Trade tensions are here to stay. Even without a full-blown trade war, escalating frictions could weigh on business confidence – and growth. Economic fundamentals are still running strong and underpinning our risk-on view in the short term, but we advocate building increased resilience into portfolios as macro uncertainty rises. Economic tensions between China and the U.S. have shot up, confirmed by our BlackRock Geopolitical Risk Indicator. This has coincided with an out performance of quality stocks, as the chart shows. Investors appear to be heeding risks, trade included. Trade risks are not limited to China. The prospects of a North American Free Trade Agreement (NAFTA) deal have deteriorated. The European Union (EU) and others have retaliated against U.S. steel and aluminum tariffs, while the U.S. has threatened to impose tariffs on cars imported from the EU. [+] Read More

While Last Week Was Very Eventful, Investors Shrugged Off Most of the Developments That Drove Headlines President Trump’s comments at the G7 meeting the previous weekend generated a lot of criticism, but investors mostly ignored any possible implications. Similarly, the U.S./North Korea summit appeared to open the way for further dialogue, but did not move the markets. Likewise, the Federal Reserve’s interest rate increase last week had already been baked into market expectations. Stock prices did decline on Friday in reaction to the U.S. announcing it would impose tariffs on Chinese goods, but equity markets were mostly flat to mixed for the week as a whole. Highlights Investors mostly ignored the U.S./North Korea summit and last week’s Fed meeting. But rising trade risks are weighing on sentiment. U.S. growth is accelerating, as is inflation. This should prompt the Fed to continue increasing rates. We see several possible risks to stocks, but believe equities should continue to outperform bonds over the next year. [+] Read More

Here’s the nitty-gritty on naming a trust beneficiary, plus insights on trust mechanics and taxation, and why bequeathing a Roth IRA appeals to many investors. Owners of a 401(k) plan or IRA account, depending on their estate and legacy-planning goals, have the option to name a trust as a beneficiary instead of an individual (e.g., spouse, child, grandchild, etc.). In last week’s column, I covered the strict, complicated, and cumbersome IRS rules to be followed so that the oldest trust beneficiary can use his/her own life expectancy to determine post-death payouts, including the requirement that the trust qualify as a “look-through.” So long as the trust qualifies, the “stretch” technique (whereby payments can be “stretched” out over a period of time) can be utilized. Instead, assuming the trust qualifies as a “look-through,” you must use the life expectancy of the oldest trust beneficiary for required minimum distributions (RMDs). For this reason, anyone naming multiple trust beneficiaries ideally should see that they are close in age. Further, if any of the trust beneficiaries is not an individual (e.g., estate, charity), there would be no designated beneficiary for distribution purposes, even if the trust qualifies as a look-through; thus, trust beneficiaries would not be able to stretch post-death RMDs over the life expectancy of the oldest beneficiary. If the trust fails to qualify as a look-through, then it has no life expectancy. Generally, the entire account must be distributed to the trust within five years. [+] Read More

Such a strategy can be beneficial, but be sure to consult an experienced attorney and tax professional to navigate the maze of rules. In the first of a two-part series, money manager Lord Abbett tackles some of the complexities of designating a trust as an IRA beneficiary. Increasingly, clients are relying on their advisors for advanced beneficiary-planning strategies, such as naming a trust as the beneficiary of a retirement account. Designating a "look-through" trust as an IRA beneficiary can be tricky and complicated, with potentially serious tax consequences if done incorrectly. Advisors and their clients need to be aware of the nuances and appropriateness of these arrangements. Typically, qualified retirement plans and IRAs are not subject to probate. Instead, retirement assets are distributed according to account owners’ current beneficiary designation. Naming rules are very liberal, thus offering IRA owners a number of options in designating a beneficiary; in fact, any individual and/or non-individual (charity, estate, or trust) can be a named beneficiary. But if IRA assets are moved into the trust, either while the account owner is alive or at death, a distribution subject to income tax has occurred. Tip: Never move IRA assets into the trust. Doing so will result in a taxable event on the entire IRA balance. Instead, name a trust as beneficiary on the IRA beneficiary form. Why would the owner of an IRA want or need to name a trust, rather than a person, as his or her beneficiary? [+] Read More

Investing on your own in fixed income markets can be extremely challenging. Unlike the stock market where equities trade thousands of times throughout the day on a public exchange, the bond market is notoriously difficult to navigate because trades are not placed on an exchange, they are instead placed over the counter and even the most liquid bonds available may only change hands a few times per day. Even if an investor is able gain a grasp on the fair value of a particular bond, building out a diversified portfolio of bonds is an entirely different challenge given that the minimum investment for one particular bond could be $10,000 (or more). And even if you think you’ve found the perfect bonds for you it can be challenging and time consuming to find sellers willing to sell those bonds to you at your preferred price. Investing in Fixed Income via Mutual Funds and ETFs Investing in fixed income through a mutual fund or traditional ETF solves many of these problems. Rather than purchasing an individual bond, a mutual fund or ETF buyer is purchasing a basket of bonds. By making one purchase they gain exposure to hundreds or even thousands of bonds. [+] Read More

Equities Prices Are Likely to Continue Churning, But Should Eventually Move Higher Equity markets struggled to gain clear direction last week. Investors focused on geopolitical issues, particularly U.S./China trade negotiations and the on-again-off-again prospects for a summit with North Korea. Other issues included the sustainability of the U.S. and global economic expansions, rising bond yields, the spike in oil prices and Federal Reserve policy. The S&P 500 Index rose 0.3% for the week. Income-oriented sectors, technology and consumer discretionary led the way, while energy and materials were laggards. Treasury markets also gained ground as the 10-year Treasury yield fell back below 3%. [+] Read More

Taking Stock of Trends, Opportunities, and Risks At first glance, the current environment remains rather favorable for equity investors. Profitability is strong and continues to rise around the world, interest rates are still very low in most countries and valuations don’t yet look excessive, for the most part. But after an exceptionally positive 2017 and a rip-roaring start to 2018, investors have become more nervous, fearing that a breakdown in international trade relations or a monetary policy mistake could bring this economic cycle to an end. Volatility has returned to markets, with investors more inclined to punish perceived disappointments rather than celebrate successes. [+] Read More

An Unusual Earnings Season With many developed market firms having reported first-quarter results, we can say without doubt it’s been an unusual earnings season. Strong beats were met with little investor cheer. The worry: Earnings are close to a peak. Yet we see more room for earnings to climb this year and next, and reaffirm our overweight to U.S. equities. [+] Read More