Market Recap – 60-Day Rollover Requirement

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Market Digest – Week Ending 9/2

It was another boring week for markets. Domestic stocks bounced around a little, ending the week slightly higher after Friday’s weaker than expected jobs report dampened expectations for a September rate hike. Foreign stocks were also up, while gold and the dollar were relatively flat. Oil prices continued to fall after US government data showed supplies at the highest level in 20 years.

Weekly Returns:

S&P 500: 2,180 (+0.5%)
FTSE All-World ex-US: (+1.7%)
US 10 Year Treasury Yield: 1.60% (-0.03%)
Gold: $1,325 (+0.3%)
USD/EUR: $1.116 (-0.3%)

Major Events:

• Monday – Consumer spending and incomes increased 0.3% and 0.4%, respectively, in the month of July. Both were in line with expectations.
• Tuesday – Mondelez International officially dropped its pursuit of Hershey after its latest offer was spurned. Shares of the chocolate maker fell 11% on the news.
• Tuesday – The EU ordered Apple to pay $14.5 billion in owed taxes, stating the technology giant benefited from illegal tax benefits in Ireland.
• Wednesday – The US pending home sales index increased 1.3% in July, coming in ahead of expectations.
• Friday – US payrolls increased 151,000 in August, falling short of estimates and adding uncertainty to the timing of the Fed’s next rate hike.

Our take:

Labor Day weekend is upon us—the unofficial end of summer for most, and the beginning of summer for those in the Bay Area. But regardless of where you live, it’s a weekend of travel, leisure and relaxation.

However there was an important piece of news last week that didn’t receive much attention…For some, it might even provide an extra sigh of relief as we head into the three day weekend.
Last week the IRS issued Revenue Procedure 2016-47, which officially changed its rule on retirement plan rollovers. Previously, if you were rolling over a retirement plan and took possession of the assets, often in the form of a check, there was a 60 day deadline to get it into another retirement account. And there were NO exceptions. This means if you accidentally missed the deadline you had to pay ordinary income tax on the full amount, and you would lose the tax-deferred status of the account. Those under the age of 59½ would also be hit with a 10% penalty. Those are pretty severe consequences.

Well it appears the IRS now recognizes life can get in the way. They didn’t eliminate the 60 day deadline, but they are allowing it to be waived under certain circumstances. Some examples include a lost check or death in the family. You can find the full rule here: Waiver of 60-Day Rollover Requirement. Either way, this is a win for investors. Tax-deferred retirement accounts provide valuable compound growth over time. It’s a gift from the government you don’t want to lose.

Enjoy Labor Day weekend.

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Brendan Erne, CFA
Brendan Erne serves as the Portfolio Management Team Leader with Personal Capital Advisors. He has over 15 years of industry experience, spanning almost all levels of the investment process, including several years at Fisher Investments as an equity analyst covering the Technology and Telecommunications sectors. He also co-managed a large cap growth portfolio and co-authored Fisher Investments on Technology, published by John Wiley & Sons. Brendan is a CFA charterholder.
Brendan Erne, CFA

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