The Market

Financial stocks responded positively Friday after the Senate on Thursday passed the most sweeping overhaul of the nation’s financial system since the 1930s, according to the Wall Street Journal. Although the bill would establish new regulatory bodies and restrict financial firms, the markets responded positively to the end of months of uncertainty as Congress debated the reform. For the week, the Dow lost 3.92 percent to close at 10,193.39. The S&P fell 4.17 percent to finish at 1,087.69, and the NASDAQ declined 5.02 percent to end the week at 2,229.04.

More to the Insureds – The health care reform legislation signed into law by President Obama on March 30, 2010, included a provision requiring health insurance companies to maintain a “medical loss ratio” of at least 85 percent, i.e., 85 percent of the premiums collected by a health insurance company must be paid out for medical claims submitted by insured individuals (Source: Senate, BTN Research).   

Nationwide – Over the past 20 years (i.e., Dec. 31, 1989, to Dec. 31, 2009), the value of assets owned by Americans tripled in value to $68 trillion, but the value of the total liabilities owed by Americans quadrupled in value to $14 trillion. Thus the net worth of Americans as of Dec. 31, 2009, was $54 trillion (Source: Federal Reserve, BTN Research).   

Pensions – In 1987, the present value of assets backing defined benefit pensions in the private sector was 7 percent larger than that of assets backing plans in the public sector (i.e., government). At the end of 2009, private sector pension plan assets were 47 percent less than that of public sector pension plan assets (Source: Investment Company Institute, BTN Research).   

Old Age – One in four Americans currently age 65 years old will live to at least age 90 (Source: Social Security Administration, BTN Research).   

 

WEEKLY FOCUS – Retirement for Two 

Couples may agree on the uncontrollable financial issues that will affect them most in retirement – primarily health care expenses, inflation risk to their savings and Social Security reductions – but fewer couples have completed retirement plans to help them address those risks, according to a 2009 study by Fidelity Investments. 

The study tested communication, knowledge and agreement between husbands and wives about finances and retirement planning issues. It found that compared to 2007, 10 percent fewer couples said they had completed critical steps such as creating a retirement plan, estate plan or will.  

Retirement today lasts much longer than for previous generations. According to the Social Security Administration, one in four Americans currently 65 years old will live to at least age 90. For couples, that means even more years of enjoying retirement together, but the transition from working years to semi-retirement or full retirement can also be challenging for couples. Yet, according to the Fidelity study, only 38 percent of couples jointly discuss investment decisions for retirement savings. In addition, 60 percent of couples don’t agree on their respective retirement ages, 44 percent are not in agreement on whether they will work in retirement, and 42 percent have different ideas about their retirement lifestyle. 

Our retirement planning process encourages frank discussion between you and your spouse and helps you build a plan that you can both feel good about. Call our office to schedule an appointment to talk about what each of you wants in your retirement – and how you can get there together. 

 

 

* 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# 304948 

 

 

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The Market

Wall Street achieved its biggest weekly percentage gains in the past 10 weeks, mostly because of big increases on Monday as markets settled down from the prior Thursday’s still unexplained drop of nearly 1,000 points. On Friday, the Senate’s approval of limits on fee charges for credit and debit card transactions, combined with news that New York Attorney-General Andrew Cuomo had opened investigations on several major banks, brought financial stocks lower. And despite strong retail indicators in April, several retailers issued lower-than-expected forecasts. For the week, the Dow gained 2.42 percent to close at 10,620.16. The S&P rose 2.30 percent to finish at 1,135.68, and the NASDAQ climbed 3.58 percent to end the week at 2,346.85.

Bills to Pay – Two out of every three college students (67 percent) graduates with an outstanding loan. Of those students that finish college with loans, the average debt to be repaid is $23,200 (Source: The Project on Student Debt, BTN Research).      

Stocks and Recessions – The two best years ever on a total return basis for the S&P 500 took place in 1933 (up 53.9 percent) and 1954 (up 52.6 percent). The

U.S. was in a recession during the first three months of 1933 and during the first five months of 1954 (Source: BTN Research).     

The Biggest Worry – More American workers (17 percent) identify the rising cost of health care insurance as the economic risk that concerns them the most as they approach their retirement years.  Other perils ranked high on the list included inflation fears, the cost of long-term care, the ability to maintain a desired standard of living and failing to leave an inheritance to heirs (Source: Society of Actuaries, BTN Research).   

 

WEEKLY FOCUS – Timing Long-Term Care Coverage 

Buried in the pages of the health care overhaul was an idea that Senator Edward M. Kennedy and his staff had been working on since 2003 – the Community Living Assistance Services and Support Act (CLASS Act), the nation’s first plan to help Americans who have no insurance for long-term care.   

On May 3, the New York Times published an excellent summary of the act, which became law in March but doesn’t take effect until Jan. 1, 2011. The following

information was taken from this summary, which you can read in full at: http://www.nytimes.com/2010/05/04/health/policy/04land.html. 

Working Americans are eligible for the plan, including part-time employees who earn enough to pay Social Security taxes. Participants pay premiums for a vesting period of five years before they can receive benefits, and they have to work for at least three of those years. The law prohibits the use of tax dollars to fund the program. The law also prohibits excluding those with pre-existing conditions such as diabetes, so as long as you can work three years, you are eligible. 

The Congressional Budget Office (CBO) estimated back in November that the average monthly premium would be $123. If your employer participates, you are automatically included unless you decline, or “opt out.” The cash benefit, which has not been finalized, was estimated by the CBO at $75 a day, and the law states the average minimum benefit must be at least $50 a day. Benefits will rise with inflation. You can begin receiving benefits when you need help with at least two activities of daily living – eating, bathing, dressing, transferring from bed to chair to wheelchair, or continence care – or the equivalent amount of assistance required due to a cognitive impairment. 

The CLASS Act is not intended to pay the full cost of full-time in-home or nursing facility care. According to the New York Times article, $50 a day would pay for most of the cost of an adult day program ($67 per day) and $75 a day would cover about 75 percent of the average cost of an assisted-living facility ($37,572 per year). For that reason, private long-term care insurance may still be your best option, depending on your age, health and risks. 

For more

information on the impact long-term care costs could have on your retirement plans, contact 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# 304838 

 

 

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The Market

Stocks fell on heavy volume Friday as exchanges and traders tried to determine what caused Thursday’s Dow plunge of nearly 1,000 points. Greek debt continued to loom large over the equities markets just as an apparent series of computer triggers put the markets into a panic, according to CNNmoney.com. The resulting sell off overshadowed Friday’s Labor Department report showing that the U.S. added 290,000 jobs in April, its fastest pace in four years. Unemployment rose slightly to 9.9 percent on an expanded labor force, according to Reuters. For the week, the Dow lost 5.61 percent to close at 10,380.43. The S&P declined 6.34 percent to finish at 1,110.88, and the NASDAQ dropped 7.95 percent to end the week at 2,265.64.

Might Run Out – Fifty-eight percent of American workers surveyed (i.e., individuals that have not yet retired) are concerned that they will completely deplete their life savings during retirement before they die (Source: Society of Actuaries, BTN Research).   

Twice as Much – For the 17 years from 1965-1981, the top individual marginal tax bracket paid by American taxpayers was 70 percent, double the 35 percent top rate for 2010 (Source: Internal Revenue Service, BTN Research).    

The Biggest – The size of the

U.S. economy at the end of 2009 ($14.3 trillion) was larger than the combined size of the three countries ranked 2-3-4 in the world. The collective size of Japan, China and

Germany was $13.2 trillion as of Dec. 31, 2009 (Source: International Monetary Fund, BTN Research).   

Large Estate – One out of every 143 deaths in the U.S. in calendar year 2008 ultimately resulted in the payment of federal estate taxes by the estate of the decedent (Source: Center for Disease Control, Bloomberg BusinessWeek, BTN Research).   

 

WEEKLY FOCUS – Emergency Financial Preparedness 

Ever had a morning when you can’t find your car keys or your wallet? Now imagine that you’ve been told by a state police officer that you have 30 minutes to evacuate your home due to an impending disaster – such as the recent floods in

Tennessee. Could you, in just half an hour, gather all your important papers and documents? 

Building a financial emergency kit helps ensure you have the

information you need to keep yourself and your family safe, clothed and fed during and after a disaster. For some items, your bank safe deposit box will suffice. Just make sure your key is in the kit, along with the following other items suggested by About.com:§  Copies of driver’s license, Social Security card, birth certificate and insurance card for every family member, along with a photo ID and/or passport§  Checkbook(s), a supply of cash and change, and copies of the front and back of credit cards and debit cards§  Contact

information for your bank, financial advisor, insurance agent and employer, plus websites, usernames and passwords for financial sites you use§  Insurance policies, living wills and advance directives§  Marriage certificate, citizenship papers, divorce or separation papers, real estate deeds§  Certificates of deposit, stock certificates and IRAs§  Photo or video inventory of personal property such as jewelry, art and antiques§  Contact

information for your utility, phone, cable and cell phone companies§  Keys to your house, cars, garage, storage unit, etc. 

The Federal Emergency Management Agency (FEMA) created a tool that helps you organize your financial and contact

information. You can download the Emergency Financial First Aid Kit, or complete it online and store it electronically, at http://www.operationhope.org/smdev/lf1.php?id=187. 

If you need help in compiling your important documents to create an emergency financial kit, please contact our office. We’re happy to work with your tax, legal and insurance advisors to make sure you have everything you need to recover from a disaster. 

 

* 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# 304692 

 

 

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The MarketContinued signs of economic recovery pushed the markets to a third straight month of gains. Last week, the Labor Department reported that job claims had fallen to the lowest level in four weeks, the Conference Board reported the consumer confidence index hit its highest level since September 2008, and the Commerce Department said the economy grew at a 3.2 percent pace in the first quarter. Corporate earnings reports have been strong as well, with almost 80 percent of the S&P 500 companies beating estimates so far, according to Reuters. The major indexes fell last week amid fraud charges against Goldman Sachs and concerns over sovereign debt defaults in Greece, Spain and

Portugal. For the week, the Dow lost 1.71 percent to close at 11,008.61. The S&P declined 2.49 percent to finish at 1,186.69, and the NASDAQ dropped 2.73 percent to end the week at 2,461.19.

TARP – The Emergency Economic Stabilization Act of 2008, the bill that established the Troubled Asset Relief Program (TARP), was signed into law by President Bush on Oct. 3, 2008, or 1 ½ years ago. The $700 billion government rescue plan was originally designed to buy toxic (i.e., troubled) mortgages and securities. Just over a month later (Nov. 12, 2008), the Treasury Department reversed course and decided to instead accelerate its plan to inject capital directly into financial companies. The total cost of TARP has since been revised downward to $117 billion or just 17 percent of the original $700 billion cost (Source: Treasury Department, Congressional Budget Office, BTN Research). 

Another Baby Boom – The total number of births in

America in 2007 was 4.3 million, the highest number of births ever in our country for a single calendar year. The total surpassed the previous high set in 1957 (Source: National Vital Statistics Report, BTN Research).  

What to Do? – Two out of every three American workers (66 percent) who are employed by corporations that provide a pre-tax retirement plan believe they could work and save funds until age 65 and still not have sufficient assets accumulated to provide their desired retirement lifestyle (Source: Transamerica Retirement Survey, BTN Research).    

 

 

WEEKLY FOCUS – Is 70 the New 65? 

When Sun Life Financial issued the results of its latest retirement attitudes survey late last year, the number of respondents who said they plan to work full-time past age 67 reached a new high of 28 percent – compared to 19 percent the prior year. The biggest reason was to earn enough money to maintain their lifestyle in retirement (84 percent). Staying mentally engaged and loving their career, however, also ranked high at 81 percent and 65 percent respectively. 

For the past decade or longer, we’ve been hearing “50 is the new 40” or “60 is the new 50” – pick your measurement – meaning that thanks to improved health care, Americans are living longer and maintaining their activity levels later in life. With that increased longevity comes the concern of a longer retirement requiring more assets to sustain a quality of life. Consider that when Social Security was created and the full-retirement age set at 65 for a man, the average life span for men was less than 65 years. 

Try as our nation might, the burden of stretching the Social Security dollars of today’s workers across the growing needs of today’s retirees has reached unsustainable levels. Faced with longer retirement, many Americans have stepped up their plans for saving – and those plans will increasingly include working longer than the traditional retirement age. And as unpopular as it might be, increasing the retirement age to 70 or even older remains one possibility for improving Social Security’s viability. 

Definitions of “working longer” span the spectrum, from remaining in the full-time career you’ve been in for decades to seeking perhaps a less stressful or more rewarding job in another field to working part-time or as a consultant to add some flexibility to your schedule. We can help you explore the impact each of those options may have on your retirement planning. Call our office to schedule 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. 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# 304560
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