A few weeks ago, I wrote about whether the pending impeachment inquiry would–or could–impact the markets. While I do tend to stay away from talking about things like the Fed or politics, I may make some exceptions over the next year or so, especially as we move towards next year’s elections. As you may well know, the Fed lowered interest rates again last week, which was the third time they’ve done so since July. This move will impact the markets, but by the time you figure out what that impact will be, the markets will already have reacted and you’ll be well behind that. Instead, don’t get too worried about Fed policies and decisions and focus on making decisions that work for you. That means focusing on your own risk appetite and investing companies that you truly believe will help you meet your goals. The same can be said for following politics, especially in an election year. Candidates from both parties will say a lot of things regarding economic policies and plans–some of which may impact the markets–but you shouldn’t let that sway your retirement plans here and now. Yes, you can pay attention to what they are saying, but you shouldn’t use that information to make investment or retirement plan decisions. With all that said, I am encouraging you to be informed, but to also be aware that what you hear doesn’t need to be acted upon.
There’s a lot of fine print on any paperwork associated with a financial account. Whether it’s a bank account or an IRA, the amount of legal jargon and required information can be pages long and mind-boggling to understand. However, that should not stop you from knowing what you can and cannot do with your financial accounts. This is particularly important when it comes to your retirement accounts and beneficiaries. First off, you want to make sure that you designate beneficiaries and update that information as needed. Next, you will want to know what your beneficiaries can and cannot do with your account and adjust accordingly. Certain accounts allow beneficiaries to do certain things. If you find that your account doesn’t allow your beneficiary to, say, place the money in an particular type of account when they inherit it, then you may want to consider putting your money in an account that allows that. Another important thing to understand with retirement accounts is the custodian policies involved. Each custodian may have varying policies depending on the state they operate in or their own personal preference. Knowing such policies can save both you and your beneficiaries headaches in the future. Believe it or not, there are certain circumstances when the custodian can dictate what happens with your money when you pass on. Such situations can make a tough time all the more difficult for friends and family who might be working to probate or distribute your estate. Furthermore, custodial policies can affect your ability to transfer money between your retirement accounts and can make what you think is a simple transaction really frustrating. Now, it might be overwhelming to have to sit down and read pages or legal mumbo-jumbo, but it’s worth it. Furthermore, you may find that you have questions after reading such documentation. I encourage you to reach out to your custodian to ask those questions and make sure you are satisfied with the answers.
Over the next 365 days, policymakers–at both the state and federal levels–have the potential to shape retirement for many for decades to come. Some such policy opportunities may be straightforward in impact while others may be more subtle and long-term. For example, how politicians and regulators go about handling any current economic issues could have affects on how people save currently as well as what future retirement costs may be. Another example might be whether a more liberal-leaning House of Representatives combined with similarly-situated state legislatures may turn their sights on programs such as Social Security and Medicare and look to shore up such programs so that they can continue to serve current and future generations. On the flip side, other legislatures with more conservative leanings may seek to cut into such programs, which may lead to higher future retirement costs and expenses. However, one area that there seems to be bipartisanship is expanding opportunities for American workers to save for retirement through the use of employer retirement accounts. Much of these efforts have focused on opening doors for small businesses to offer retirement savings accounts to employees that were in the past considered to costly for such employers. These are just a few of the ways that politicians and policymakers could impact retirement for you and those of younger generations. This post is also intended to encourage you to remain knowledgeable as to what is happening in both state and national legislatures and to understand how policies may impact you so that you can make the best decisions regarding your finances and retirement plans.
If you follow Constitutional law closely and are a U.S. Supreme Court nerd (yes, they’re out there!), you may have heard about a recent case involving life insurance beneficiaries called Sveen v. Melin. In the decision, the Supreme Court upheld a Minnesota law that automatically removed ex-spouses as beneficiaries on life insurance policies upon divorce. It involved a man who took out a life insurance policy who named his then-wife as the primary beneficiary of the account and his children from a previous marriage as the contingent beneficiaries. The man and his wife then got divorced about ten years later and the man died a few years after that without updating his life insurance policy. His ex-wife argued against the Minnesota statute–which was not enacted at the time the policy was purchased–and the children argued that the statute should rule. It wound its way all the way up to the U.S. Supreme Court which ruled 8-1 in favor of the statute being Constitutional and, thus, the children getting the insurance policy proceeds. So how is this important to you? Well, first off, it’s a reminder to update your beneficiaries every time a major life event occurs. Whether it’s a marriage, a divorce, the birth of a child, or whatever life throws at you, take the time to review your policies and make sure the people you want to get your leftover assets are properly assigned them. It’s usually pretty easy to change beneficiaries on an IRA or retirement account, so make sure things are up-to-date. Secondly, this is a reminder that laws may change over time and the state you live in may just have a similar law that goes beyond just insurance policies and may cover retirement accounts. You may want to speak with an estate planning attorney is you have questions about the laws and how they can affect your probate plans as well as who you name as beneficiaries of any policies or accounts you have. When was the last time you checked your beneficiary information?