Monday, July 7, 2014

What’s next for the markets and the world?

As we wrap up the Fourth of July festivities, and as someone who appreciates American history, I cannot recall a more divided nation since my youth in the 1960s.

All around the world there are hot spots that could ignite into major violence at any moment. Here at home, it’s difficult to have much confidence in our government. There’s been a never-ending parade of scandals, incompetence and what appears to me as arrogance from our elected officials when they’re questioned about such issues.

In conversations with friends and clients, I continue to hear people wonder what happened to our country, and express serious concern as to what lies ahead. It’s clear to me that people are both worried and skeptical about the direction in which our nation is headed.

Meanwhile, the investment world appears to be cautiously watching the overseas conflicts without too much reaction. While sentiment hasn’t sent it in a downward direction, investors seem to be reluctant to put new money into the stock market. This is supported by the influx of scared money coming into America from overseas and finding its way into the relative safety and security of real estate and U.S. Government bonds.

Domestically, although the stock market remains high, the volume of trading on Wall Street is down significantly. In other words, if stock trading were a game, only a few are showing up to play. So, while the big players may still be active, the moms and pops throughout the country appear to be content to just stand on the sidelines.

Is this the calm before the storm? Or will the investment world continue to move up quietly and leave a lot of people behind? It’s not easy to predict the future, but right now confidence is definitely lacking throughout the world.

With all that’s happening overseas and scandals dominating our domestic news, it was easy to miss a recent U.S. Supreme Court decision that could impact not only my readers, but also everyone that owns an Individual Retirement Account.

On June 12, the Supreme Court ruled that inherited IRA accounts do not qualify as retirement funds and, as such, do not receive creditor protection.

Before panic sets in, keep in mind that this ruling pertains only to inherited IRA accounts. Your existing IRA accounts, those to which you make contributions, are still protected from creditors, as is your Social Security.

In most instances, inherited IRA accounts are those that are passed down to someone other than a spouse. The Supreme Court ruling was based on their interpretation that “retirement funds are funds set aside for the day an individual stops working.”

In fact, that’s the very reason why IRA funds are protected from creditors. However, the Supreme Court stated that inherited IRAs “represent an opportunity for current consumption, not a fund for retirement savings.”

In non-legal terms, this means that when your son or daughter or grandchild inherits your IRA after you and your loved one are gone, they still maintain control, but the funds are no longer considered sacred, and therefore not protected from creditors.

Ultimately, there will likely be plenty of scrambling by estate planning attorneys to modify various documents. An already confusing and complex financial world just became a bit more so.

No comments:

Post a Comment