Weekly Market Update 10/16/23

Oct 16, 2023 | Weekly Market Update

Week of 10/16/23 – Markets Were Resilient

 

Last week, investors had a lot to process – geopolitics, inflation, consumer sentiment, the possibility of government shutdown – and markets were volatile. Toward the end of the week, some investors were reassured when earnings season kicked off with reports showing major banks posted stronger-than-expected profits during the third quarter.1 Here’s a brief look at what happened during the week:

War in Israel. Hamas terrorists attacked Israel, and Israel declared war. The human toll has been high and continues to increase. The conflict has potential to spread across the region. While economics is a lesser concern, the war may disrupt energy supplies, keeping inflation – and interest rates – higher for longer, according to Ziad Daoud, Galit Altstein and Bhargavi Sakthivel of Bloomberg.2

U.S. inflation proved persistent. In September, the Consumer Price Index (CPI) showed prices rose 3.7 percent year-over-year. When volatile food and energy prices were excluded, inflation was 4.1 percent year-over-year.3 Inflation has fallen a long way from its June 2022 peak of 8.9 percent, but the decline has stalled, and inflation remains well above the Federal Reserve’s two percent target.4 That reinforces the idea that the U.S. Federal Reserve may leave rates higher for longer, reported Chris Anstey of Bloomberg.5

Consumers were less optimistic. Inflation is affecting the finances of individuals and businesses, according to the University of Michigan’s Surveys of Consumers Director Joanne Hsu. The October consumer sentiment survey found, “Assessments of personal finances declined about 15%, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19%. However, long-run expected business conditions are little changed, suggesting that consumers believe the current worsening in economic conditions will not persist.”6

U.S. budget negotiations remained stalled. Congress has about a month left to negotiate and pass the appropriations bills necessary to fund the U.S. government for fiscal 2024. However, the House of Representatives currently cannot proceed without an elected Speaker of the House. On November 17, stop-gap funding measures end. Without additional funding measures a government shutdown is possible, reported David Morgan, Richard Cowan, and Moira Warburton of Reuters.7

Banks did well in the third quarter. Earnings season got off to a good start last week. Major U.S. banks were the first to report, and some saw profits rise significantly in the third quarter.1 One large bank reported its profit was 35 percent higher, year-over-year.8

Major U.S. stock indices finished a volatile week higher.9 Bond markets produced mixed results with yields on longer maturities of U.S. Treasuries moving lower.10

Weekly Market Update
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

NOT A CORNERSTONE CLIENT?

If you have questions about your financial plan please contact us today to schedule a complimentary, no obligation review with one of our advisors. Call 605.357.8553 or email cfsteam@mycfsgroup.com.

 

Sources

1 https://finance.yahoo.com/news/nasdaq-sinks-dow-edges-up-after-healthy-big-bank-earnings-stock-market-news-today-164152139.html

2 https://www.bloomberg.com/news/features/2023-10-12/israel-hamas-war-impact-could-tip-global-economy-into-recession?srnd=markets-vp 

3 https://www.bls.gov/news.release/pdf/cpi.pdf

4 https://fred.stlouisfed.org/graph/?g=rocU

5 https://www.bloomberg.com/news/articles/2023-10-12/us-cpi-report-september-2023-5-key-takeaways-on-inflation-core-measure

6 http://www.sca.isr.umich.edu

7 https://www.reuters.com/world/us/us-house-republicans-seek-unite-around-new-speaker-2023-10-11/

8 https://www.cnbc.com/2023/10/13/jpmorgan-chase-jpm-earnings-3q-2023.html

9 https://www.barrons.com/market-data (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/10-16-23_Barrons_Data_9.pdf)

10 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202310

* These views are those of Carson Coaching, and not Raymond James, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with Raymond James.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider
whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is
accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* Raymond James financial advisors do not render advice on tax or legal matters. Discuss any tax or legal matters with the appropriate professional.

Weekly Market Update 10/9/23

Oct 11, 2023 | Weekly Market Update

Week of 10/9/23 – Financial Markets Lost Ground in Q3

 

–  While year-to-date returns for the Standard & Poor’s (S&P) 500 Index remain above the historic average, which was 10.24 percent, including dividends, from 1973 to 2022,1 the rally in U.S. stocks stalled during the third quarter of 2023, reported Lewis Krauskopf, Ankika Biswas and Shashwat Chauhan of Reuters.2

Early in the quarter, U.S. stocks gained, driven higher by better-than-expected corporate earnings, falling inflation and optimism that the Federal Reserve (Fed) might be near the end of its rate-hiking cycle. Since March of 2022, the Fed has lifted the Federal Funds effective federal funds rate from near zero to 5.33 percent3 and reduced its bond holdings by $1 trillion through quantitative tightening, reported Michael S. Derby of Reuters.4

The Fed’s actions are designed to bring inflation lower by slowing economic growth and reducing demand for goods and services. However, the U.S. economy continues to hum along. The labor market has been particularly resilient. Last week’s employment data showed number of jobs created in September was almost double the Dow Jones consensus estimate, reported Jeff Cox of CNBC.5 The U.S. unemployment rate remained near historically low levels, and the labor force participation rate increased over the quarter.6

The strong economy has been a source of significant uncertainty. Some economists believe it is an indication the Fed has engineered a soft landing and inflation will reach targeted levels without a recession, although 60 percent of the economists surveyed by Bloomberg continue to say a recession is ahead, reported Rich Miller, Molly Smith and Kyungjin Yoo.7

Government turmoil also has created uncertainty. In early August, Fitch Ratings surprised financial markets by lowering its rating on U.S. Treasuries from AAA to AA+. The company indicated that “a high and growing general government debt burden, and the erosion of governance” were the impetus for the downgrade.8

In September, when Congress debated whether to approve the necessary appropriations bills to fund the U.S. government for fiscal 2024, Moody’s Investors Service – the only remaining major credit rating agency to award U.S. Treasuries a AAA rating – warned that a government shutdown would be a “credit negative” event, reported Matt Phillips of Axios.9 Congress temporarily avoided a government shutdown by passing a continuing resolution that provides funding through mid-November.10

By the end of the quarter, optimism that the end of the Fed’s tightening cycle was near had faded amid uncertainty about the strength of the economy, the possibility of a government shutdown, and a growing number of labor disputes. In late September, the Fed released its economic projections, making it clear that an additional rate hike was possible in 2023, and rate cuts were unlikely before 2024.11

The Fed’s hawkish outlook helped push stock and bond markets lower. In late September, the S&P 500 Index was down about 7 percent from its July high.2 From August through September, the yield on the 10-year U.S. Treasury note rose from 4.05 percent to 4.59 percent.12 Bond prices fall as yields rise.

Last week, despite the strong jobs report bolstering the likelihood of another Fed rate hike, the S&P 500 and Nasdaq Composite Indices moved higher. The Dow Jones Industrial Index lost ground.13 Yields on U.S. Treasuries generally moved higher over the week.12

Weekly Market Update
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

NOT A CORNERSTONE CLIENT?

If you have questions about your financial plan please contact us today to schedule a complimentary, no obligation review with one of our advisors. Call 605.357.8553 or email cfsteam@mycfsgroup.com.

 

Sources

1 https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

2 https://www.reuters.com/markets/us/futures-climb-treasury-yields-ease-ahead-key-inflation-data-2023-09-29/

* These views are those of Carson Coaching, and not Raymond James, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with Raymond James.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider
whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is
accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* Raymond James financial advisors do not render advice on tax or legal matters. Discuss any tax or legal matters with the appropriate professional.

5 Considerations for a Successful Social Security Strategy

Sep 20, 2023 | Financial Planning, Retirement Planning

5 Considerations for a Successful Social Security Strategy

Considerations for a Successful Social Security Strategy

When it comes to deciding when to claim your benefits and plan your Social Security strategy, there are several key factors to consider. These factors can greatly impact the amount of benefits you receive and your overall financial security in retirement. In this article, we will explore five essential elements that should be a part of your Social Security strategy: age, employment, marital status, taxes, and needs. Understanding how these factors come into play can help you make informed decisions about your Social Security benefits.

1. AGE

Age is crucial in your Social Security strategy. Your monthly benefit depends on lifetime earnings and when you claim. Early claims reduce payments while waiting until age 70 increases them with delayed retirement credits and cost-of-living adjustments. Full Retirement Age (FRA) varies by birth year and serves as the benchmark for receiving your full, unreduced benefit. Planning your Social Security strategy around your FRA can help you make informed decisions about when to claim benefits based on your individual circumstances and financial goals.

2. EMPLOYMENT STATUS

One of the most critical considerations when planning a Social Security strategy is the impact of working while claiming benefits. Understanding the earnings limitations is paramount; claiming benefits before reaching full retirement age (FRA) while earning above the limit can result in reduced Social Security payments, affecting your overall income. Moreover, working can influence your lifetime benefits, with the potential for both temporary reductions due to earnings limits and increases through delayed retirement credits if you continue to work past your FRA. Working while claiming Social Security benefits is a complex but crucial consideration when planning your retirement strategy. It requires a careful balance between income needs, tax considerations, and your long-term financial goals.

 3. MARITAL STATUS

Marital status plays a pivotal role in planning for Social Security benefits, with significant differences in how benefits are calculated and accessed. Married individuals often have access to spousal and survivor benefits, which can bolster their combined retirement income. Coordinating when and how each spouse claims benefits becomes crucial to optimizing the household’s Social Security strategy. Conversely, single individuals have no spousal benefits to consider but may have more control over their claiming decisions. Divorced or widowed individuals also have unique considerations, as they can often claim benefits based on their ex-spouse’s or deceased spouse’s work record. Overall, understanding these distinctions in marital status is essential for tailoring a Social Security plan that aligns with your individual and family financial goals and needs in retirement.

4. TAXES

Including tax considerations in your Social Security strategy makes a difference. Taxes can significantly impact your benefits, depending on your modified adjusted gross income (MAGI). This can potentially push you into a higher tax bracket. Careful planning is essential to minimize this tax burden, so be sure to assess the tax implications before claiming benefits. While taxes shouldn’t solely dictate your timing, understanding their impact on your after-tax retirement income is vital. Exploring strategies like early voluntary withdrawals from retirement accounts to manage tax thresholds can help align your Social Security strategy with your unique financial circumstances and goals.

5. FINANCIAL NEEDS

Considering your financial needs is another key aspect of your Social Security strategy. To determine the right retirement timing, assess the cost of sustaining your desired lifestyle without full-time work. Calculate income from external earnings, Social Security, and investments to cover your expenses. Consider factors like inflation, emergency funds, healthcare costs, and long-term care provisions to ensure your financial plan is robust and adaptable to changing circumstances.

 

Find Support for Your Social Security Strategy

Jill Mollner, MBA, CFP®

Your Social Security strategy should be a well-thought-out plan that takes into account your age, employment, marital status, tax considerations, and financial needs. Each of these factors plays a significant role in determining the optimal time to claim your benefits and ultimately influence your financial well-being during retirement. Your financial advisor can help you thoughtfully evaluate your situation and determine a strategy to optimize your Social Security benefits. 

Contact our office for further guidance and insights.

Call 605-357-8553 or email cfsteam@mycfsgroup.com.

Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional.

Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

7 Rules for Inherited IRAs

Sep 11, 2023 | Estate Planning, Investment Management, Retirement Planning, Tax Planning Strategies

7 RULES FOR INHERITED IRAS

Cornerstone is pleased to bring you this article by Ed Slott and Company, LLC, an organization providing IRA education and analysis to financial advisors, institutions, consumers, and media across the country. Our association with this organization helps us stay up to date on the latest developments in IRA and tax law. As always, give us a call if you’d like to discuss!

By Sarah Brenner, JD
Director of Retirement Education, Ed Slott and Company, LLC

Many IRA assets will ultimately go to nonspouse beneficiaries. When these beneficiaries inherit the funds, special rules kick in. Inherited IRAs are not like your own personal IRA account.

Seven rules for inherited IRAs that may surprise you if you are a nonspouse beneficiary:

1. You cannot contribute to your inherited IRA. You cannot make contributions to an inherited IRA. If you do have your own IRA, you cannot add those funds to the Inherited IRA or vice versa.

2. You can move your inherited IRA. If you are unhappy with the investment choices or the custodian, you can move your inherited IRA to another custodian, and you can select different investment options. However, you must move the account by direct transfer, and the new account must be an inherited IRA as well. As a nonspouse beneficiary, you cannot take a distribution and then roll it over within 60 days.

3. You may be able to do a QCD. If you are charitably inclined, you may be able to take advantage of a qualified charitable distribution (QCD) and move up to $100,000 of your IRA funds (annually) directly to the charity of your choice in a tax-free transfer. To do a QCD you must be 70 ½ or older.

4. You cannot convert your inherited IRA. Many times nonspouse beneficiaries are interested in having a Roth IRA. Unfortunately, the rules do not allow nonspouse IRA beneficiaries to convert inherited IRAs to Roth IRAs.

5. You may be subject to annual required distributions, or the 10-year rule at a minimum. You can’t keep the funds in your inherited IRA forever. If you inherited the IRA funds in 2020 or later, as a nonspouse beneficiary you will most like be subject to a 10-year payout-period, possibly with annual RMDs during the 10 year period. Certain eligible designated beneficiaries who inherit in 2020 or later and those beneficiaries who inherited prior to 2020 may be still be able to stretch RMDs over life expectancy.

6. Your distributions may be taxable, but there will be no penalty. Inherited IRAs are never subject to the 10% early distribution penalty. However, if you inherit a traditional IRA, it is likely that the distributions you take will be taxable. If you inherit a Roth IRA, you are more fortunate from a tax perspective. Distributions from an inherited Roth IRA will most likely be tax-free.

7. You should name a successor beneficiary. When you inherit an IRA, it makes sense to name a beneficiary. If you don’t, the default provisions in the IRA document are likely to apply. In many cases this would mean the funds would go to your estate which can mean more taxes and the time and expense of probate.

Gordon Wollman and Ed Slott

Gordon Wollman, Founder and President of Cornerstone Financial Solutions, and Raymond James Wealth Advisor, with Ed Slott at the 2023 Spring workshop for members of Ed Slott’s Elite and Master Elite IRA Advisor Group℠.

Membership in Ed Slott’s Elite IRA Advisor Group(TM)  is one of the tools our advisors use to help you avoid unnecessary taxes and fees on your retirement dollars. Gordon attends in-depth technical training on advanced retirement account planning strategies and estate planning techniques. And semiannual workshops analyzing the most recent tax law changes, case studies, private letter rulings, Congressional action and Supreme Court rulings help keep attendees on the cutting-edge of retirement, tax law and IRA distribution planning. Through his membership, Gordon is immediately notified of changes to the tax code and updates on retirement planning, and he has 24/7 access to Ed Slott and Company LLC to confer with on complex cases.

This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. Changes in tax laws or regulations may occur at any time and could substantially impact your situation.

ACKNOWLEDGMENT: This article was published in The Slott Report on irahelp.com by Ed Slott and Company, LLC, an organization providing timely IRA information and analysis to financial advisors, institutions, consumers, and media across the country and is distributed with its permission. Copyright ©2023, Ed Slott and Company, LLC Reprinted from The Slott Report, September 06, 2023, with permission https://www.irahelp.com/slottreport/rules-inherited-iras-may-surprise-nonspouse-beneficiaries. Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Raymond James is not affiliated with and does not endorse the opinions or services of of Sarah Brenner, JD, The Slott Report, ED Slott, Ed Slott and Company, LLC, IRA Help, LLC, irahelp.com, or Ed Slott’s Master Elite IRA Advisor Group. Members of Ed Slott’s Elite IRA Advisor Group(SM) train with Ed Slott and his team of IRA Experts on a continuous basis. These advisors passed a background check, complete requisite training, attend semiannual workshops, webinars, and complete mandatory exams. They are immediately notified of changes to the tax laws.

Avoiding Spousal Beneficiary Mistakes

Jul 6, 2023 | Estate Planning, Investment Management, Retirement Planning, Tax Planning Strategies

AVOIDING SPOUSAL BENEFICIARY MISTAKES

5 Easy Steps

Cornerstone is pleased to bring you this article by Ed Slott and Company, LLC, an organization providing IRA education and analysis to financial advisors, institutions, consumers, and media across the country. Our association with this organization helps us stay up to date on the latest developments in IRA and tax law. As always, give us a call if you’d like to discuss!

Who is a spouse beneficiary?

 

A spouse beneficiary:

    • Must be married to the account owner at the time of the account owner’s death, and
    • Must be named on the beneficiary form (or inherit directly through the document default provisions).

 As a spouse beneficiary you have unique options:

1. Split the inherited account if necessary. As a spouse beneficiary, you can take advantage of the special spousal rules if you are the sole beneficiary of an IRA account.

If other beneficiaries have been named, the spouse can still take advantage of these special provisions by transferring their portion of the inherited IRA to a separate account by December 31st of the year following the year of the IRA owner’s death.

2. Will you need money prior to age 59½. If so, you will likely want to remain a beneficiary of the inherited account. Death is an exception to the 10% early distribution penalty. So, by staying as a beneficiary you can avoid paying the 10% penalty.

The account should be retitled as a properly titled inherited IRA. As a spouse that remains a beneficiary you do not need to take RMDs from the account until the year the deceased spouse would have turned 73.

3. Transfer the inherited IRA into a spouse beneficiary’s account. As a spouse beneficiary you should generally roll the inherited IRA into your name. Once a younger spouse beneficiary reaches age 59½, there’s no advantage to remaining a beneficiary, and a spousal rollover or transfer should be done.

NO other beneficiary has this option. By doing this rollover or transfer, a surviving spouse ensures that eligible designated beneficiaries will be able to stretch distributions over their own life expectancies.

4. Name new beneficiaries. As the surviving spouse you should name your own beneficiaries. If no beneficiaries have been named and the surviving spouse dies, the remaining assets will pass according to the default provisions in the custodial document. This is frequently the estate of the now deceased spouse, which could require a shorter payout period for beneficiaries or add unnecessary time and expenses by tying the assets up in probate.

5. Consider a disclaimer. Before taking any action regarding an inherited IRA, as a surviving spouse you should evaluate whether a full or partial disclaimer would be advantageous. By using a disclaimer, some or all of the inherited IRA can be passed to contingent beneficiaries, potentially extending the stretch IRA and reducing the future impact of estate taxes for eligible designated beneficiaries.

Gordon Wollman and Ed Slott

Gordon Wollman, Founder and President of Cornerstone Financial Solutions, and Raymond James Wealth Advisor, with Ed Slott at the 2023 Spring workshop for members of Ed Slott’s Elite and Master Elite IRA Advisor Group℠.

Membership in Ed Slott’s Elite IRA Advisor Group(T)  is one of the tools our advisors use to help you avoid unnecessary taxes and fees on your retirement dollars. Gordon attends in-depth technical training on advanced retirement account planning strategies and estate planning techniques. And semiannual workshops analyzing the most recent tax law changes, case studies, private letter rulings, Congressional action and Supreme Court rulings help keep attendees on the cutting-edge of retirement, tax law and IRA distribution planning. Through his membership, Gordon is immediately notified of changes to the tax code and updates on retirement planning, and he has 24/7 access to Ed Slott and Company LLC to confer with on complex cases.

This information, developed by an independent third party, has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. ACKNOWLEDGMENT: This article was published by Ed Slott and Company, LLC, an organization providing timely IRA information and analysis to financial advisors, institutions, consumers, and media across the country and is distributed with its permission. Copyright 2023, Ed Slott and Company, LLC. Raymond James is not affiliated with and does not endorse the opinions or services of Ed Slott or Ed Slott and Company, LLC.

 Raymond James is not affiliated with and does not endorse the opinions or services of ED Slott, Ed Slott and Company, LLC, IRA Help, LLC, or Ed Slott’s Master Elite IRA Advisor Group. Members of Ed Slott’s Elite IRA Advisor GroupSM train with Ed Slott and his team of IRA Experts on a continuous basis. These advisors passed a background check, complete requisite training, attend semiannual workshops, webinars, and complete mandatory exams. They are immediately notified of changes to the tax laws.