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- IRS Finalizes RMD Regulations for 10-Year Rule, Releases New Secure 2.0 Proposal
IRS Finalizes RMD Regulations for 10-Year Rule, Releases New Secure 2.0 Proposal
More rules to come
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Happy Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.
Today we’re covering the new Required Minimum Distribution regulations that the IRS and Treasury Department just released, what they mean for financial planners, and what more to expect as the impacts of 2022’s Secure 2.0 Act get clearer.
So, let’s get into the Industry Chatter!
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INDUSTRY CHATTER
The Internal Revenue Service and Treasury Department have released final regulations updating required minimum distribution (RMD) rules for beneficiaries under the 10-year rule. These regulations, stemming from the SECURE and SECURE 2.0 Acts, confirm that most IRA beneficiaries must take distributions annually over the 10-year period following the account holder's death.
Key points from the final regulations include:
Non-eligible designated beneficiaries subject to the 10-year rule must take RMDs each year.
Beneficiaries of individuals who started required annual distributions must continue these distributions, even if the account balance is fully distributed within 10 years.
No Game-Changer, Just More Complexity
Ben Henry-Moreland, senior financial planning nerd at Kitces.com, notes that while these rules aren't game-changing for planning, they make retirement accounts "even more insanely complicated." For instance, spousal beneficiaries now have three different options for treating their deceased spouse's retirement account, each with its own RMD calculation.
Jeff Levine, lead financial planning nerd at Kitces.com, highlights that annual distributions during the 10-year rule are required if death occurred on or after the required beginning date (RBD). However, due to previous IRS notices, this rule won't apply until 2025.
The IRS and Treasury also issued proposed regulations addressing additional RMD issues under the SECURE 2.0 Act. They are soliciting public comments on these proposed rules, which cover other changes related to RMDs.
More Regulations Are Coming
Experts note that while these regulations clarify many issues, they also add complexity to retirement account management. Advisors will need to stay informed about these intricate rules to provide valuable guidance to clients navigating retirement planning and inherited accounts.
The financial planning community is now anticipating further guidance on other SECURE 2.0 provisions, such as rollovers of unused 529 plan funds to Roth IRAs.
These new regulations underscore the evolving landscape of retirement planning and the increasing importance of specialized knowledge in navigating complex tax rules for retirement accounts.
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MARKET RECAP
In a week packed with global breaking events, both the S&P 500 and the Nasdaq 100 indices marked their worst weekly performance in three months, predominantly driven by a broad-based selloff in chipmakers.
A a drop in major equity averages at the end of the week might have escalated significantly if last weekend’s events in Butler, Pennsylvania, had not ended as they did. During a Donald Trump rally, a sniper attempted to assassinate the Republican candidate, narrowly grazing his ear but missing a potentially fatal target.
According to prediction markets, the betting-implied odds of a Trump victory spiked to 75% before dropping to 65% on Friday as Kamala Harris gained traction over Biden.
A black Wednesday hit the semiconductor sector after reports the the U.S. administration is considering accelerating export restrictions if companies continue to ship advanced chips to China. This move mainly targets the Dutch chipmaker ASML Holding N.V. (ASML) and the Japanese Tokyo Electron.
On Friday, a global tech outage triggered by a CrowdStrike Holdings Inc.‘s (CRWD) software update affecting Microsoft Corp. (MSFT) systems sparked worldwide disruptions among airports, banks, stations, ports, media companies and service-related businesses.
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Powell Lays Groundwork
Fed Chair Jerome Powell affirmed that recent inflation reports have boosted confidence toward the 2% target, a key condition for lowering interest rates. Investors increased their wagers on a September rate cut move, with CME Group's FedWatch tool showing 100% odds for a cut that month after retail sales data showed stagnation in June.
Unemployment Claims Rise
Unemployment claims rose more than expected last week, with new claims reaching 243,000 and continuing claims hitting 1.867 million, the highest since November 2021. This increase reinforces hopes for Federal Reserve rate cuts as signs of a cooling labor market emerge.
Mortgage Rates Drop
Anticipation of Federal Reserve rate cuts has lowered 30-year fixed mortgage rates to 6.87%, the lowest in four months. The improvement in borrowing conditions led to a 3.9% rise in mortgage applications and a 15% increase in refinancing demand last week, with latter soaring to the highest levels in nearly three years. Experts predict a Trump reelection could spark a significant refinance boom and record home sales.
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THE WEEK AHEAD
Economic Data
Monday: Germany’s retail sales, Chicago Fed’s national activity report
Tuesday: Existing home sales for June
Wednesday: New home sales for June, S&P’s measures of global business sentiment
Thursday: U.S. quarterly GDP
Friday: U.S. Core PCE inflation numbers
Earnings
Monday: Verizon Communications (VZ), NXP Semiconductors (NXPI), Alexandria Real Estate (ARE)
Tuesday: Alphabet (GOOGL), General Motors (GM), Tesla (TSLA), Coca-Cola (KO)
Wednesday: Ford Motor (F), AT&T (T), Chipotle Mexican Grill (CMG)
Thursday: Stellantis (STLA), Unilever (UL), AstraZeneca (AZN)
Friday: Charter Communications (CHTR), 3M (MMM)
Click here for the full calendar of economic data and earnings reports.
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