For the week of December 31, 2007
Wall Street continued its now familiar pattern of ups and downs last week, with the Dow dropping 192.08
points on Thursday after news of the death of Pakistani opposition leader Benazir Bhutto followed the
Commerce Department’s report that new home sales fell 9 percent in October. The markets got a
glimmer of hope from the Midwest manufacturing sector, which posted a stronger-than-expected
increase for December. For the week, the Dow was down 0.63 percent to close at 13,365.87. The S&P
dropped 0.37 percent to end the week at 1,478.49, and the NASDAQ ended the week down 0.65
percent to close at 2,674.46.
Source: Morningstar.com. * Past performance is no guarantee of future results. Indexes are unmanaged and
cannot be invested into directly. Three and five-year returns are annualized. The S&P, excluding “1 Week”
returns, is a reflection of return to an investor, by reinvesting dividends after the deduction of withholding tax.
Refund Delay – An 11th-hour move by Congress to freeze growth of the alternative minimum tax (AMT)
will save millions of tax payers from a higher 2007 tax bill but may delay refunds for more than 3 million
filers. The IRS said last week that processing of five AMT-related forms can’t begin until February when
programming changes have been made and tested. Last year, more than 3 million Americans filed their
returns in January using AMT forms.
A Million Bucks – An individual earning $75,000 per year in salary and deferring 6 percent (done
monthly) into a 401(k) plan will need to grow his/her assets by 10 percent annually to accumulate $1
million (pre-tax) after 30 years (assuming 3 percent annual pay increases). If the same individual was
able to defer 10 percent into a 401(k) plan each month, the assets would need to grow by only 7 percent
annually to accumulate $1 million after 30 years. This mathematical calculation ignores the ultimate
impact of taxes on the account which are due upon withdrawal, is for illustrative purposes only and is not
intended to reflect any specific investment or performance. Actual results will fluctuate with market
conditions and will vary (Source: BTN Research).
Part D Shrinkage – Medicare Part D recipients may want to double check their prescriptions to ensure
they are still covered. For 2008, the 10 Part D insurers with the largest enrollment cut an average of 26
percent of the drugs on their 2007 approved list. Medicare itself decreased the number of drugs it will
pay for, and insurers have culled their lists for drugs no longer manufactured, pulled by the FDA or
deemed by the FDA to be less than effective.
Bulls During A Bear Marketing – Even during the 2½ year bear market (2000-02) in which the S&P
500 fell 49 percent, the stock index still experienced three separate bull runs while in the throes of the
longer-running bear market. Each of the three “up periods” produced gains of at least 19 percent. The
bull runs were short-lived as two of the three lasted less than 1½ months each (Source: BTN
WEEKLY FOCUS – Counting Billions of Chickens
According to a USA Today/Gallup poll, 15 percent of
Americans believe they will receive a future inheritance of
$500,000 or more, but only 3 percent of Americans have
actually received such a bequest. Pseudo-celebrity Paris
Hilton, her sister Nicky and brothers Barron and Conrad
may be among the disappointed, as their grandfather
Barron Hilton announced last week that he would donate
his $1.2 billion (yes, that’s billion with a B) from the sale of
Hilton Hotels Corporation to the Conrad N. Hilton
Foundation named for his father, the founder of the Hilton
Upon his death, Barron Hilton plans to donate 97 percent
of the value of his estate at his death to the Hilton
Foundation. No word yet on whether Richard Hilton, Barron’s son and the father of Paris and her siblings,
plans to follow suit.
Although Paris won’t be left in the cold – she makes a considerable amount from her “famous for being
famous” empire that includes perfume, music, movie appearances, paid private appearances and
endorsements – many less wealthy Americans could be caught by surprise when that half-million dollar
inheritance doesn’t materialize. In addition to the rising role of philanthropy in estate plans, longer life
spans have been eating into potential retirement excess. As a result, 64 percent of workers in an AXA
Financial survey expect to completely deplete their life savings during retirement, leaving nothing for their
At first blush, it may seem like simply not counting on an inheritance would save Americans from
disappointment or financial difficulties. In the event a person is in line for a sizable bequest, however, the
tax implications could be costly. The best plan is for parents to discuss their estate plans with adult
children to eliminate any surprises, and for adult children to continue saving and investing as if that
inheritance may not manifest itself.
Whether you are a parent considering estate plan options or a child wondering if a potential inheritance
could trigger a tax nightmare, we can help you initiate inter-generational discussions about family
finances. Call our office today for an appointment.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of
the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded
blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter
common stocks traded on the National Association of Securities Dealers Automated Quotation System. The
Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely
recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies
representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all
dividends. WMCSAI# 264609
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