BCFS News & Events

Archive for April, 2010

Market

Monday, April 26th, 2010

The Market

The Dow scored its eighth consecutive weekly increase last week, its longest winning streak since January 2004. The Commerce Department reported Friday that new-home sales increase by 27 percent in March after a record low in February. March annualized sales were the strongest since July 2009 and the month-over-month increase was the largest in 47 years. The approaching April 30 deadline to qualify for federal tax credits on home purchases likely fueled the increase. For the week, the Dow gained 1.71 percent to close at 11,204.28. The S&P increased 2.12 percent to finish at 1,217.28, and the NASDAQ rose 1.97 percent to end the week at 2,530.15.

Tax Rates and Taxes Paid – The last time the top individual marginal tax bracket increased was 1993. The maximum marginal tax rate of 31 percent in 1992 was raised to 39.6 percent in 1993. Individual income tax receipts were 17.5 percent of GDP in 1992 and were the same 17.5 percent of GDP in 1993. Gross domestic product (GDP) is the annual market value of all goods and services produced domestically by the

U.S. (Source:  IRS, White House, BTN Research).   

More Cash, Less Credit – Consumer borrowing (e.g., credit cards and auto loans but not including home mortgages and home equity loans) in the

U.S. totaled $2.45 trillion as of Feb. 28, 2010. That amount of indebtedness is 3.6 percent less than the $2.54 trillion of consumer credit as of Feb. 28, 2008 (Source: Federal Reserve, BTN Research).    

New or Repeat – Forty-seven percent of home buyers in calendar year 2009 were first-time buyers, an all-time record (Source: National Association of Realtors, BTN Research).     

 

WEEKLY FOCUS – A More Complete Retirement Plan 

Today’s retirees have a brighter future than prior generations, according to a 2009 report from the U.S. National Center for Health Statistics (NCHS). The report, which used data on trends in population, economics and health issues from 15 different federal agencies, concludes that Americans age 65 or older have an average net worth 80 percent higher than the same age group did 20 years ago. Life expectancy has also increased, with those reaching age 65 now expected to live, on average, 19 more years – seven years longer than those who turned 65 in 1900. 

On the surface, those trends look like the Holy Grail of retirement – live longer with more money. What they really point out is the need for a more comprehensive form of retirement planning, one that takes into account not only your financial resources but your physical well being. 

For example, greater longevity doesn’t necessarily mean better health. The NCHS research showed an increase in obesity, linked to serious chronic health conditions such as diabetes and heart disease. In a study conducted from 1988 to 1994, 27 percent of women age 65-74 and 19 percent of women over 75 were considered obese. In a 2005-2006 study, those age groups rose to 37 percent and 24 percent, respectively. Longevity provides little benefit if quality of life suffers because of poor health. 

Education may be part of the reason for increased net worth. The NCHS study found that 76 percent of Americans over 65 had high school diplomas, compared to 24 percent in 1965, and 19 percent had bachelor’s degrees, up from 5 percent. The increased earning opportunity that comes with higher levels of education will be important for a generation that will share a greater responsibility for its own retirement income with the decline of employer-paid pension programs. However, with the rising cost of health care and longevity extending the years retirement funds are needed, retirement planning must still consider how to avoid living longer than your money. 

A well rounded retirement plan explores your desired lifestyle and how best to achieve it while planning for contingencies. Whether you need to increase your contributions or decrease your waistline, starting early gives you the best opportunity for success. Call our office to begin or update your retirement plan for a more complete picture. 

 

* 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. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 304410 

 

 

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Market

Monday, April 19th, 2010

The Market

After six consecutive days of gains that pushed the Dow above 11,000 to its highest level in more than 18 months, the markets fell Friday after federal regulators filed civil fraud charges against Goldman Sachs. According to the Associated Press, analysts had been expecting a fall after two months of steady gains, and the Goldman Sachs news gave investors a reason to sell. In economic news, the Commerce Department reported housing construction at a 16-month high, although single-family home construction fell. The housing market may face another hurdle as the homebuyer tax credit expires this month. The Reuters/University of

Michigan consumer sentiment reading also fell unexpectedly. For the week, the Dow gained 0.19 percent to close at 11,018.66. The S&P fell 0.18 percent to finish at 1,192.13, and the NASDAQ rose 1.11 percent to end the week at 2,481.26.

Much Higher Today – The aggregate annual earnings of the S&P 500 companies are 79 percent higher today than they were just one year ago (Source: S&P, BTN Research). 

Down, Then Up – The

U.S. economy shrunk in size by 2.4 percent in 2009, its first year-over-year decline since 1991. In the 10-years after that previous contraction (i.e., 1992-2001), the

U.S. economy grew in size by an average of 3.5 percent per year (Source: Commerce Department, BTN Research).   

Separate From Medicare – A 65-year old couple would need to set aside $250,000 today (i.e., a present value amount) to pay for their out-of-pocket health care expenditures during retirement (Source: Fidelity, BTN Research).   

When Interest Rates Go Up – The last time the Federal Reserve began a series of interest rate hikes was almost six years ago. Over the two-year period from June 30, 2004, to June 29, 2006, the Federal Reserve raised short-term interest rates 17 separate times. The S&P 500 gained 15.5 percent (total return) over the two years beginning June 30, 2004 (i.e., aggregate total return for the two-year period, not per year) (Source: BTN Research).    

WEEKLY FOCUS – Some ‘Free’ Credit Reports Aren’t Free 

Those companies offering free credit reports have gotten marketing savvy, using humor and catchy songs to attract consumers into using their services. The problem is that the “free” credit report offered by these companies is often just bait to get you to buy a subscription credit monitoring service. 

The Credit Card Act of 2009, most of which went into effect in February, contains new requirements for credit reporting companies to disclose what they’re up to. Requirements for websites of these companies went into effect April 2. Watch for new disclosures on their TV and radio ads coming in September.  

You really can get one free credit report per year from each of the major credit reporting bureaus – Equifax, Experian and Trans-Union. You can request all three from annualcreditreport.com, the only free credit report source authorized by federal law. You can also call 877-322-8228. Companies must post a disclosure notice about the government resource across the top of any web page that offers “free” credit reports.  

Even if you’re not in need of borrowing money, you should make the most of the government’s offer for free annual credit reports. Your credit score impacts not only your ability to get a loan for a home or car, but also your ability to purchase insurance or services like a cell phone at a reasonable price. You may also need access to quick credit in unexpected events like an emergency, disaster or catastrophic illness. 

Identity thieves can do considerable damage to your credit rating in a short amount of time. Closely review and monitor your credit card and bank accounts, including any mail they send you, and consider signing up for text or email alerts. Catching identity thieves early can help minimize the damage to your finances, including your credit score. 

If you’d like more

information about credit reports or identity theft, please contact our office. It is our pleasure to be your resource for any financial questions you may have. 

 

* 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. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America.   SAI# 304255

 

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Market

Wednesday, April 14th, 2010

The MarketThe Dow momentarily rose above 11,000 in the last five minutes of trading on Friday before settling just below the psychological milestone. The Dow has risen for the past six weeks, although analysts question the sustainability of those gains because trading volume has been relatively low – an indication that many investors have not yet re-entered the market, according to the Associated Press. The markets did get positive news this week that the European Central Bank would assist

Greece in its debt crisis. In addition, the Commerce Department reported gains in wholesale inventories and wholesale sales, a sign that retailers are increasing orders to meet gaining consumer demand. For the week, the Dow gained 0.71 percent to close at 10,997.35. The S&P climbed 1.43 percent to finish at 1,194.37, and the NASDAQ rose 2.14 percent to end the week at 2,454.05.

Too Expensive – When Medicare was signed into law by President Johnson in 1965 (former President Harry Truman was the first enrollee into Medicare), the projected annual cost of Medicare in 1990 (i.e., 25 years in the future) was $12 billion. The actual cost of Medicare was $13 billion just 10 years later (1975) and was $98 billion in 1990, more than eight times as large as the original 1965 forecast (Source: Office of Management and Budget, BTN Research).     

More Claims – Social Security anticipates that it will receive an average of 63,000 applications for disability benefits every week during the current fiscal year that ends on Sept. 30, 2010. The actual number of weekly disability applications was 50,000 in the prior fiscal year (Source: Social Security Administration, BTN Research).   

Anyone Home? – The Census Bureau anticipates that 40 percent of the 120 million census forms that were mailed out earlier this month will not be returned, forcing temporary workers earning $20 per hour to visit each address that did not return the document (Source: Census Bureau, BTN Research).   

 WEEKLY FOCUS – The Gift of Financial Literacy 

Congratulations! April is Financial Literacy Awareness Month, and you’ve already given yourself the gift of reading this newsletter to expand your knowledge about the financial markets and related topics. Unfortunately, you may be in the minority. Statistics from a 2008 study of college students sponsored by the National Association of Retail Collection Attorneys showed a somewhat depressing picture of our nation’s financial literacy: 

§  31 percent of students polled do not worry about debt, believing they can pay it back once they are out of school and earning a regular paycheck§  23 percent of students polled choose to ignore overdraft penalties§  Less than half (46 percent) always keep records of their spending and receipts 

Researchers agree children should begin learning money lessons early and that those lessons should be appropriate to the child’s age and development. For example, kindergartners learn how to identify and count currency and coins, so it’s a good time to start a piggy bank and, regardless of whether the money comes from gifts, an allowance or chores, to emphasize the concept of saving. Introduce new concepts every few years – how interest works around fifth grade, budgeting in junior high, the dangers of debt by the end of high school. 

You can also encourage your child’s or grandchild’s school to place a greater emphasis on financial literacy and offer your help with extra projects or events that focus on money lessons. Groups like Boy Scouts or Girls Inc. often welcome help from adults in teaching children valuable life lessons. You can find a wealth of information and materials for teaching finances to kids at www.jumpstartcoalition.org. 

We often view our legacy as what we leave behind for our children and grandchildren. Financial literacy is a legacy you can begin imparting today to prepare your loved ones for the monetary gifts you may leave them in the future. If you need help talking to your kids, grandkids or other family member (child or adult) about money, please feel free to call our office. 

* 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. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 304177
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Market

Monday, April 5th, 2010

The MarketThe Dow rose for a fifth consecutive week, its longest string of gains in nearly a year, and on Wednesday ended its strongest first quarter since 1999. The Labor Department reported Thursday that new unemployment claims fell the prior week, and on Friday issued its report showing the addition of 162,000 jobs in March, compared to a loss of 14,000 jobs in February. The unemployment rate remains unchanged at 9.7 percent. Manufacturing in the

U.S. increased at the fastest pace in more than five years, and consumer spending rose in February for the fifth consecutive month. For the week, the Dow gained 0.83 percent to close at 10,927.07, its highest level since September 2008. The S&P climbed 1.10 percent to finish at 1,178.10, and the NASDAQ rose 0.22 percent to end the week at 2,402.58.

Getting Older – Life expectancy at birth of Americans has increased by 10 years in the past 60 years, reaching 78.3 years today. Thus since 1950, life expectancy at birth has increased by 2 months every year (Source: Center for Disease Control, BTN Research).      

Less Than Half – Only three in 10 retirees are “very confident” that they have done a good job preparing financially for their retirement years (Source: 2010 Retirement Confidence Survey, Employee Benefits Research Institute, BTN Research).    

Not Everyone Has It – The deduction Americans receive for the home mortgage interest expense they pay reduces tax receipts taken in by the Internal Revenue Service by $70 billion a year. Citizens of Canada and

Britain do not have a deduction for home mortgage interest expense paid (Source: IRS, Newsweek, BTN Research).     

WEEKLY FOCUS – Happy Tax Freedom Day! 

The Tax Foundation each year calculates the date on which the average American has earned enough money to pay his or her tax obligation for the year. This year, “Tax Freedom Day” arrives on April 9 – one day later than in 2009 but more than two weeks earlier than 2007. When looking at the state tax burden, Alaska and Louisiana got to celebrate tax freedom on March 26 thanks to lower incomes and low state and local taxes, while

Connecticut, with the highest income per capita in the country, will be the last to celebrate on April 27. 

Three factors have driven the move to lower taxes and an earlier Tax Freedom Day in the past three years, according to the Tax Foundation:   The recession has reduced tax collections faster than it has reduced income.   The federal government has enacted large, albeit temporary, tax cuts for 2009 and 2010, as the previous administration did in 2008.   Previous legislation repealed two significant tax laws for 2010 – the estate tax and the so-called PEP and Pease income tax provisions. 

The lower tax burden, however, doesn’t reflect the growing deficit, which has to be financed at some point. Since Tax Freedom Day was first calculated in 1948, the difference between government spending and tax collections has increased to its highest point in 2009 and 2010. If the $1.3 trillion federal budget deficit were included in the calculations, it would take Americans an additional 38 days of work to cover their tax burden, pushing Tax Freedom Day to May 17 this year.  

The deficit burden could push Tax Freedom Day later in future years. Already, Americans will pay more in taxes in 2010 than they spend on food, clothing and housing combined. Taxes as a percentage of income have grown from just 5 percent a century ago to nearly 27 percent today, peaking at 33 percent in 2000. 

Analysis and estimations of future tax trends and their impact on your earnings and savings have a significant impact on planning for your retirement. While no one has a crystal ball to predict tax levels during your retirement years, we can work closely with your accountant to manage your tax burden today, analyze various scenarios for the future and make recommendations for positioning your portfolio to mitigate tax impact. Call our office today to schedule a joint appointment with your tax professional. 

 

* 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. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 304059
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