The Market

Mortgage applications rose 13 percent for the week ended Aug. 14 as consumers took advantage of low interest rates. A 17 percent increase in refinancing loans made up for lost ground in home purchases. Disappointing reports on jobs and regional manufacturing fed continuing concern that the economic recovery has slowed, according to Reuters. The Dow and S&P fell for the second consecutive week, while the NASDAQ managed a slight gain. For the week, the Dow lost 0.74 percent to close at 10,213.62. The S&P fell 0.65 percent to finish at 1,071.69, and the NASDAQ rose 0.29 percent to end the week at 2,179.76.

 

They Earn, They Pay, They Spend – To rank in the top 5 percent of earners in the

U.S. required an adjusted gross income level of $160,000 or higher (data from 2007 tax returns). This group paid 61 percent of all federal income tax for the year and is estimated to account for 37 percent of all spending by consumers (Source: IRS, Moody’s, BTN Research).   

More Cash, Less Card – Revolving credit, which includes credit card debt, fell in June 2010, its 21st consecutive monthly decline. This total peaked in September 2008 and has fallen every month since then. The $826.5 billion of revolving credit nationwide as of June 30, 2010, has fallen back to almost the same level ($826.7 billion) that existed in the country as of Nov. 30, 2005 (Source: Federal Reserve, BTN Research).     

In The Year 2037 – Social Security announced on Aug. 6, 2010, that the trust fund backing the payment of Social Security benefits would be zero in 2037 and that the payment of benefits would drop to 75 percent of their originally promised levels through the year 2084 (Source: Social Security Administration, BTN Research).   

 

WEEKLY FOCUS – Emergency Cash Good Idea at Every Age 

A basic tenet of managing your finances is to have a cash reserve equal to three to six months of your basic fixed expenses – mortgage or rent, insurance premiums, car payment, etc. – as well as variable expenses such as food and gas, in the event that you lose your job, become ill or injured, or experience any other crisis that interrupts your ability to earn your salary. 

When you retire, your need for a cash reserve continues but the reason changes. Your income in retirement comes from assets you accumulated during those earning years, from Social Security (depending on your age), and possibly from a pension. So while you don’t have to worry about job loss disrupting your income stream, you may need cash to cover unexpected expenses such as car or home repairs and health needs that may not be covered by Medicare or your insurance, such as dental work, vision care, hearing aids or medical tests. 

If your retirement income depends heavily on your own accumulated assets, your investment takes into consideration the need for growth that keeps pace with inflation. That can be a double whammy in an emergency – you may not be able to liquidate the amount of assets you need quickly, and you may be forced to liquidate investments during a market downtown, getting less for them and creating a larger gap to recover when the market rebounds. 

Having a cash reserve – or the flexibility of instruments like a credit card or home equity line against which you can draw cash – plus paring expenses during an emergency can help you avoid withdrawals from your portfolio to meet unexpected costs during retirement. Your cash reserve needs can also change over time. If you or a loved one has had a change in circumstance that requires you to reconsider your emergency funds, please call our office to discuss potential options. 

 

 

* 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# 306436

The Market

Economic data out last week pointed to a slow down in the recovery, according to Reuters. After a sharp drop in July, consumer sentiment as measured by the Thomson Reuters/University of

Michigan Survey has stabilized, and business inventories rose slightly more than expected in June, according to the Commerce Department. Retail sales, along with the overall July Consumer Price Index, rebounded in July but at a more modest pace than in past months. Following its meeting on Tuesday, the Federal Reserve issued its statement that the recovery has indeed slowed, something it has only hinted at after previous meetings. Markets responded with their worst weekly performance in the past six weeks. The Dow lost 3.21 percent to close at 10,303.15. The S&P fell 3.71 percent to finish at 1,079.25, and the NASDAQ declined 5.02 percent to end the week at 2,173.48.

Planning Ahead – The national personal savings rate in the

United States was 6.4 percent in June 2010, its highest level since June 2009. The rate was just 1.8 percent in June 2007 (Source: Bureau of Economic Analysis, BTN Research).  

Rural to Urban – In 1880 (i.e., 130 years ago), 72 percent of Americans lived on farms. In 1920 (i.e., 90 years ago), 50 percent of Americans lived on farms. In 2010, just 2 percent of Americans live on farms (Source: Social Security, Environmental Protection Agency, BTN Research).   

Low Rates – As of the end of July 2010, the yield on the 10-year Treasury note was 2.91 percent, less than half of the 6.04 percent yield from July 31, 2000, and almost one-third of the 8.36 percent yield from July 31, 1990 (Source: Treasury Department, BTN Research).    

 

WEEKLY FOCUS – Factoring Home Care into Your Long-Term Care Plan 

In working with clients on their retirement plan, we find that, understandably, many have a goal of staying in their own home for as long as possible before considering an assisted-living or nursing home. And that can make financial sense considering that the cost of in-home care is rising at a slower pace than assisted living or nursing care, according to a recent Genworth Financial study – 1.7 percent over the past five years, compared to 6.7 percent for assisted living and 4.5 percent for private room nursing care. 

At the same time, many states are facing severe budget cuts, and according to the Center on Budget and Policy Priorities, at least 25 states have cut programs for meal deliveries, housekeeping help and programs for family caregivers – the kinds of programs that allow seniors to stay in their homes longer. On average, states spend just 25 percent of their long-term care budgets on home and community-based care, according to a July 21, 2010, article in the New York Times. 

Clearly to meet the goal of staying independent as long as possible, retirees need to consider costs for in-home care and how to cover them. Long-term care insurance may be one option, yet a 2009 report from the American Association for Long Term Care Insurance found that many consumers associate long-term care primarily with nursing home care. While nursing home care definitely ranks at the high end of the long-term care cost spectrum, long-term care insurance (LTCI) may also help cover the cost of in-home services from nurses’ aides, home health aides and therapists or services in an assisted living facility. 

Health care costs, including long-term care services provided in the home or in an assisted or skilled facility, can greatly impact your retirement finances. A 2009 study from the Center for Retirement Research at

Boston College found that 47 percent of middle-income adults and 42 percent of high-income adults are at risk for a lower standard of living in retirement. Those rates would be even higher if they took healthcare and long-term care into account, the center said. Your retirement plans should include a thorough analysis of potential risks, including the risk of a health condition requiring long-term care for you or your spouse. Call our office to schedule an initial review or update of your retirement plan. 

 

* 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# 306332

The Market

The Labor Department’s monthly employment survey, issued Friday, showed the

U.S. lost 171,000 jobs in July but the unemployment rate remained steady at 9.5 percent. The Federal Reserve meets Tuesday, its fifth of eight meetings scheduled for 2010. As of Friday, Aug. 6, the Fed funds future market was priced to reflect a zero percent chance of a rate hike, according to the CME Group. The Fed has held interest rates near zero percent since December 2008. For the week, the Dow gained 1.90 percent to close at 10,653.56. The S&P rose 1.87 percent to finish at 1,121.64, and the NASDAQ increased 1.50 percent to end the week at 2,288.47.

 

Slower Rise – The cost of in-home care is rising at a slower pace than the cost of care provided in a nursing home or assisted living facility, according to a Genworth Financial study. In-home care expenses have increased 1.7 percent in the past five years, while assisted living costs have risen 6.7 percent and nursing home private rooms have risen 4.5 percent (Source: Genworth, Boomer Market Advisor). 

A Few Steps Behind – A recent survey by MetLife called the “Retirement Readiness Index” found that more than half of respondents (age 55-64) are behind in taking recommended steps toward retirement, and one-quarter said they were “significantly behind.” Thirteen percent said they had no retirement goals and 7 percent admitted they haven’t started saving (Source: MetLife, Boomer Market Advisor). 

Getting Better – A third of Americans in a recent MetLife study said they believe 2010 will be better than 2009. A fourth of respondents said this year will be worse for the nation’s economy and their personal financial situation (down from 44 percent in 2009) and 41 percent believe things will stay the same. Two-thirds of those surveyed said a full economic recovery is still three or more years away (Source: MetLife). 

 

WEEKLY FOCUS – Anti-Scam Tips for Surviving Spouses 

Newspaper obituaries provide a service in notifying a large number of people in a short period of time about the death of a community member. Unfortunately, they also provide a list of potential victims to scam artists and thieves looking for emotionally vulnerable and, during memorial services, physically absent targets. A few simple guidelines can help you or your loved one avoid most of the common scams. 

The most immediate vulnerability will be an empty house. Through an obituary, a thief can ascertain when the family will be away, and with friends and relatives coming and going, neighbors may assume the person going in while the family is gone has permission to do so.  Ask a friend or neighbor to house sit – not just watch from next door – during visitations and services. (This rule also works well for weddings and anniversary parties that have been announced in the newspaper.) 

Treat anything from an unknown party with suspicion. Invoices, calls regarding orders for products or services, investment opportunities and claims for money owed can all be scams looking to part distracted grieving survivors with their money. Pay those bills you know to be legitimate – mortgage, utilities, credit cards, car payments. Set everything else aside. If you don’t have caller ID on your phone, consider getting it so you know before you answer who is on the line. And remember that companies that pressure you to make decisions or send money during a difficult time probably don’t have good reasons for doing so. 

Consider a checks-and-balances approach to decision making, especially regarding finances. Ask a family member, friend or trusted advisor such as an accountant, attorney or financial professional to review invoices and other claims before you send money. You will still have control of your money, and you’ll have a second opinion from someone you trust. 

Surviving spouses generally fall into two groups – those who believe they have plenty of money and those afraid they don’t have enough. We can work with attorneys and accountants to help review the surviving spouse’s finances, including any lump sum payments from life insurance or a 401(k). Please contact our office if you or a loved one needs financial assistance during your bereavement.  

* 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# 306212

For the week of August 2, 2010 

The Market

The Dow and S&P marked their best months in a year, rising nearly 7 percent for July. Strong quarterly earnings reports throughout the month offset less encouraging economic indicators, particularly slow growth in jobs creation. Stocks had been moving lower since April on concerns over the European debt crisis and signs of a slowing economy, according to CNNMoney.com. The nation’s gross domestic product, which measures economic activity, rose in the second quarter at a 2.4 percent annualized rate, down from 3.7 percent in the first quarter and slightly less than the 2.5 percent predicted by economists in a Briefing.com survey. For the week, the Dow gained 0.40 percent to close at 10,465.94. The S&P fell 0.07 percent to finish at 1,101.60, and the NASDAQ declined 0.65 percent to end the week at 2,254.70.

Going Down? – More than half of retired Americans surveyed (56 percent) believe that in their lifetime Social Security will be forced to reduce the promised level of benefits scheduled to be paid to them (Source: Gallup, BTN Research).   

Want My Business? – The three best states to conduct business in each of the last two years (i.e., 2009 and 2010) are Texas, Virginia and

Colorado. The three worst states to conduct business in the same two years are Hawaii, Rhode Island and

Alaska. The study used a subjective analysis of 40 different measurements (Source: CNBC, BTN Research).   

Big Banks – The three largest banks in the

U.S. have 54 percent of the $12.1 trillion of assets controlled by all domestic commercial banks (Source: Federal Deposit Insurance Corporation, BTN Research).   

WEEKLY FOCUS – Stemming the Information Spill 

For months, we’ve watched the spreading disaster of the oil spill in the Gulf and its impact on the environment, the economy and the financial well being of individuals in the area. The clean-up effort now seems to be making progress, with the placement of a cap over the remains of the well, but the contamination will take years to undo. 

Unlike oil in the Gulf, the spill of financial information continues to spread, and it can contaminate the ability of investors to make decisions about their finances. Certainly freedom of information is an important part of our nation’s structure, but like all of our freedoms, with it comes responsibility. And in today’s world, with its constant flow of information from sources both credible and crank, that responsibility may include placing our own cap over the flow. 

Kiplinger magazine recently discussed a research experiment by behavioral economist Richard Thaler in which the subjects “managed” a hypothetical college endowment consisting of two investments over 25 years. The subjects could choose how often they received performance information and how often they could trade. As Kiplinger summarized, “The results revealed an information paradox: Less can be more. Participants who received information once every five years, and could trade only that often, earned returns that were more than twice those of participants who were updated monthly and could trade that frequently.” 

This isn’t to say that investors should remain blissfully ignorant about investment trends and their own finances. It does show, however, that having frequent access to a glut of information does not necessarily result in better decision making. For that reason, we advocate meeting with you at least annually to review your circumstances and progress toward your financial goals. We also recommend being selective about the information you gather. And feel free to contact us any time you have a question. 

* 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# 306073

The Market

The S&P broke through 1,100 on Friday for the first time in a month, propelled by General Electric’s announcement that it would raise its dividend by 20 percent. According to Morningstar, as of the end of last week, the NASDAQ has erased its losses for the calendar year, while the S&P stands just below flat and the Dow has gained 1.47 percent since Jan. 1. For the week, the Dow gained 3.27 percent to close at 10,424.62. The S&P climbed 3.57 percent to finish at 1,102.66, and the NASDAQ increased 4.15 percent to end the week at 2,269.47.

Who Would Have Thought? – In the July 6, 2009, issue of Barron’s (i.e., just over one year ago), the magazine asked 10 leading Wall Street economists to predict where interest rates would be as of June 30, 2010. Eight of the 10 forecasted that the yield on the 10-year Treasury note would be at least 3.85 percent. Only two individuals believed that the yield on the 10-year note would be at or below 3 percent. The actual yield as of June 30, 2010, was 2.94 percent (Source: Barron’s, BTN Research).  

Can’t Retire – Forty-seven percent of Americans currently between the ages of 56-62 would run out of the funds necessary to pay for basic retirement expenditures if they retire at age 65 (Source: Employee Benefit Research Institute, BTN Research). 

Half and Half – There are 154 million Americans in the civilian labor force (i.e., either currently working or seeking work). An estimated 156 million Americans are either too young to work or are retired (Source: Department of Labor, BTN Research). 

WEEKLY FOCUS – Lose a Tax, Gain a Tax 

Last week, we looked at the impact the lapsed estate tax potentially has on the estate of George Steinbrenner – and the loss of revenue it represents to the government. But rarely does the tax law giveth without also taking away. The temporary repeal also took away a law that actually reduced red tape for heirs.  

A provision called “step up basis” allowed heirs to calculate capital gains tax on the appreciation of the asset based on its value at the time of the benefactor’s death, rather than on the value at the time of the original purchase. For example, if your parent paid $50,000 in 1975 for a house that is today worth $200,000, the capital gains you pay when you sell the house is based on today’s value rather than the original value. So in five years, if the house sold for $250,000, you would pay capital gains on the $50,000 gain from the date your parent died, rather than on the $200,000 gain from the original date of purchase. (This example is incredibly simplified – there are any number of other factors that can affect the amount of capital gains tax.) 

The current law does allow the executor to increase the basis for certain property by $1.3 million, and property passing to a surviving spouse can be increased by another $3 million. Certain property cannot be increased, including retirement plans, IRAs, annuities, U.S. savings bonds, deferred compensation plans and uncollected installment sale payments. A number of other special rules apply, and executors who are also heirs may face unforeseen challenges in allocating the basis increase to specific assets. One of the biggest headaches, though, will be establishing the original cost basis on assets purchased decades ago. Your parent likely still has the papers on the purchase of the house, but does he or she still have statements or confirmations for the 500 shares of IBM? 

These issues may or may not warrant changes to a person’s will or estate plan, although if you expect to inherit assets before the end of the year, you may face some unexpected tax consequences. We can meet jointly with your accountant and estate attorney to determine how best to mitigate any unforeseen liabilities you may encounter. Please call our office at any time for assistance or to schedule a meeting. 

* 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# 305936

  

The Market

A decline in the number of new unemployment applications for the third week in the past month could not offset a lower-than-expected consumer sentiment reading and a decline in the consumer price index. The Labor Department reported Thursday that new unemployment claims for the week ending July 10 dropped to their lowest level since August 2008. The Thomson Reuters/University of

Michigan consumer survey fell far more than expected to 66.5, from a revised June reading of 76.0. The Consumer Price Index fell 0.1 percent in June, a weaker reading than economists’ prediction of no change, according to Reuters. For the week, the Dow lost 0.95 percent to close at 10,097.90. The S&P fell 1.20 percent to finish at 1,064.88, and the NASDAQ declined 0.79 percent to end the week at 2,179.05.

Cut In Half – The average interest rate nationwide on a 30-year fixed rate mortgage was 4.57 percent on July 8, 2010, half of the nationwide average of 9.15 percent from January 1995 or 15½ years ago. (Source: Freddie Mac, BTN Research).   

Not A Baby Anymore – “Baby Boomers” are traditionally defined as the 78 million Americans born between 1946 and 1964. The oldest “boomers” will turn 65 years old in 2011 (Source: BTN Research).  

Not Enough Tenants – The national vacancy rate for apartments was 7.8 percent as of June 30, 2010, down from 8 percent as of March 31, 2010. The first quarter vacancy rate was the highest level achieved in the past 30 years (Source: Reis Inc., BTN Research).   

WEEKLY FOCUS – Reason to Rally a Retroactive Estate Tax? 

With the potential loss of an estimated $500 million in taxes on the estate of George Steinbrenner, the New York Yankees baseball owner who died on July 13, the Senate may be wishing it had worked a little harder to pass a bill last year that would have extended the 2009 rates rather than letting the tax expire in 2010. 

In fact, two days after Steinbrenner’s death, two senators introduced a proposal to permanently set the estate tax rate at 35 percent, with a $5 million exemption indexed for inflation and phased in over 10 years. The bill would also provide a “stepped-up basis” for inherited assets, meaning capital gains on future sales would be taxed on the value of the assets at the time of the owner’s death not the original value when the owner purchased them. 

If Congress takes no action, the federal estate tax in 2011 will be 55 percent and a $1 million exemption. The 2009 rate was 45 percent with a per-person exemption of $3.5 million. Applying 2009 rates to Steinbrenner’s $1.1 billion estate (as estimated by Forbes magazine), his heirs may have forfeited almost $500 million in taxes. Even without a current estate tax, Steinbrenner’s heirs must pay capital gains tax when they sell their inherited assets. Using the current top capital gains rate of 15 percent, if his heirs sold the assets immediately, they would pay about $165 million (depending on how much the assets have appreciated since Steinbrenner bought them). 

That’s a difference in tax of about $328 million – or, as the Associated Press put it, about 10 times Alex Rodriguez’s salary of $32 million.  With so much about uncertainty around the estate tax, many Americans are finding it difficult to plan their legacy. We welcome the opportunity to help you analyze your current situation in conjunction with your estate attorney and tax professional. Please call our office to schedule a joint 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# 305838

Market CommentaryFor the week of July 12, 2010 

The Market

The markets shook off the pessimism of the end of the second quarter with their highest weekly gains in almost a year last week. The Dow and S&P had their best weeks since July 13, 2009, while the NASDAQ had its biggest gain since Oct. 5, 2009, according to the Associated Press. Earnings reports begin Monday, with Thomson Reuters expecting an increase in second-quarter profits of 27 percent over last year. During the shortened trading week (markets were closed Monday, July 5, for Independence Day), no further negative news came from Europe, while

China decided to renew Google’s license to do business there. For the week, the Dow gained 5.35 percent to close at 10,198.03. The S&P rose 5.47 percent to finish at 1,077.96, and the NASDAQ increased 5.00 percent to end the week at 2,196.45.

 

Who Is Buying What – Foreigners bought a net $223.5 billion of U.S. stocks and bonds in March and April 2010 (i.e., the difference between the amount that foreigners bought in American securities vs. the amount that Americans bought in foreign securities), the second largest back-to-back monthly total ever recorded. This record amount may suggest confidence in the

U.S. economy by foreign investors. The government has tracked this data since May 1978 (Source: Treasury Department, BTN Research).     

Better Than Expected – The

U.S. government had anticipated that it would be able to borrow money through the sale of 10-year Treasury notes during the 2010 calendar year at an average yield of 3.90 percent. The yield on the 10-year Treasury note ended 2009 at 3.84 percent but had fallen to 3.10 percent by June 25, 2010 (Source: Office of Management and Budget, BTN Research).   

Billions – Using the Treasury Department’s projection of $3.72 trillion of spending, the

U.S. government is anticipating spending of $10.2 billion every day during fiscal year 2010 (i.e., the 12 months ending Sept. 30, 2010). There are 371 Americans (out of our total population of 310 million) that are worth at least $1 billion. One billion seconds is equal to 31 years, 8½ months (Source: Treasury Department, Forbes, BTN Research).     

 

WEEKLY FOCUS – Who Needs Your Social Security Number? 

Because Social Security numbers (SSN) are unique to each individual, many businesses have made them the method of choice for establishing identity on customer accounts. That’s why having your SSN makes it so easy for an identity thief to set up bogus accounts in your name – and why you should push back on businesses who demand it from you. 

Who really needs your SSN? Your employer and your bank or financial service company may require it to comply with federal law, and if you use Medicare or Medcaid, your doctor’s office will need your SSN to file claims for those charges. Beyond that, few others actually need your SSN. What they do need is some form of identification. A driver’s license, state-issued identification or passport is usually preferred, and some companies will ask for a second piece of ID to confirm your license. This can often take the form of a birth certificate, credit card bill, bank statement, pay stub or company security badge. Just make sure none of those documents contain your SSN. 

Be prepared to offer these forms of identification when you decline to give your SSN. You may be told that you cannot conduct business with the company without divulging your SSN. Ask for a supervisor – and keep asking, on up the chain of command until you find someone who understands the importance of guarding your SSN and agrees to accept other forms of identification. If that doesn’t work, consider paying cash rather than establishing credit or billing account – or find another company to do business with. 

On average, victims of identity theft spend 60 hours and $1,180 cleaning up the damage, according to the Federal Trade Commission. Take the first step in protecting yourself by giving your SSN only to those who truly – by law – need that

information. If you have questions about how we use and protect your SSN or when a requirement to provide your SSN is legitimate, please feel free to contact our office at any time. 

 

* 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# 305716

The Market

The Dow continued its decline through this past Friday, its longest losing streak since October 2008. According to the Associated Press, employers added 83,000 jobs last month while analysts had forecasted 112,000. For the week, the Dow lost 4.47 percent to close at 9,686.48. The S&P declined 4.99 percent to finish at 1,022.58, and the NASDAQ dipped 5.92 percent to end the week at 2,091.79.

Get a Job – Thirty-nine percent of CEOs of large

U.S. companies say they plan to increase payrolls in the second half of 2010, according to a survey by the Business Roundtable. That’s the highest percentage since the second quarter of 2007. The recession that began in the fourth quarter of 2007 has cost the nation’s economy about 8 million jobs, with unemployment peaking at 10.1 percent in October 2009, according to the Associated Press. 

Stay Home, Save Money – A recent study by Genworth Financial found that the cost of in-home care is rising at a slower rate than the cost of care in a nursing or assisted living facility. Home care costs have risen just 1.7 percent in the past five years, while assisted living has increased 6.7 percent and private room nursing home care has increased 4.5 percent. In an earlier Genworth survey, 78 percent of respondents said they would prefer to receive care in their own home. 

Public Speaking, Outliving Savings and Death – The old saw about most adults fearing public speaking more than death may have a new twist. According to a recent survey by Allianz Life Insurance Co. of North America, two-thirds of boomers fear outliving their savings more than they fear dying. Unfortunately, that doesn’t seem to be motivating them to plan ahead. Thirty-one percent aren’t sure how much their retirement expenses will be and 36 percent said they have “no idea” how long their retirement income will last.  

 

WEEKLY FOCUS – Passing On Your Vacation Home 

The U.S. Census, currently underway, was intended as the basis for allotting congressional representatives in each state (and subsequently, representation for city, state and other government entities). In its current form, the census gathers much more information. For example, the last census in 2000 found Americans own more than 3.5 million vacation homes, often passed from parents to children. 

If your estate plan includes gifting or bequeathing a second home to your children, you may not be doing them a favor. Your heirs will be responsible for paying for maintenance, insurance and property taxes on a gift they may not use often enough to justify the ongoing expense. If you have multiple children sharing in the property, the decision to keep or sell can be contentious, especially if one child can afford the expenses and another cannot. 

Some parents may have the wherewithal to fund a trust specifically to cover the ongoing expenses of the home. Others, especially those already pressed to pay the mortgage on the second home, may want to consider a life insurance policy whose settlement can be used for property expenses. Another option is to specify in the will that the second home must be sold and the proceeds divided among the heirs. 

Some heirs may not want fixed assets or real estate of any kind, viewing it as not only a financial burden, but an emotional one. An adult child may cherish the memories of family time spent at a vacation home, but the realities of his life today may make it unfeasible to continue that tradition with his own children. Guilt ensues over paying upkeep on a property he cannot use or selling the vacation home his parents valued so highly. 

Before including a vacation home or other real estate in your estate plan, you should consult with your children about their willingness and ability to handle the ongoing financial responsibility. Our office can work with your estate attorney to help you examine your options and broach the often difficult subject of money with your heirs. Call us for a family appointment. As always, we are happy to include your accountant or attorney. 

 

* 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# 305603

The Market

The Federal Reserve’s Open Market Committee ended its two-day meeting on Wednesday by leaving the federal funds rate unchanged at zero to 0.25 percent, where it has been for the past 18 months. The Fed’s statement about financial market conditions, which it described in April as “improved,” showed concern this time as it stated, “Financial conditions have become less supportive of economic growth on balance, largely reflecting of developments abroad. Bank lending has continued to contract in recent months.” Manufacturing activity has been increasing, however, and businesses are spending more, leading Fed Chairman Ben Bernanke to express confidence that the country will not face a “double-dip” recession. Markets will be closed Monday, July 5, in observance of Independence Day. For the week, the Dow dropped 2.94 percent to close at 10,143.81. The S&P declined 3.63 percent to finish at 1,076.76, and the NASDAQ fell 3.74 percent to end the week at 2,223.48.

Stocks Down, Bonds Up – Since 1976, the S&P 500 has had a negative total return in seven separate calendar years. In each of the seven years when the stock index was down, the bond market (using the Barclays Aggregate bond index as the benchmark) produced a positive total return (source: BTN Research).   

Summer Travels – Every 1-cent reduction in the price of gasoline saves Americans $3.4 million a day.  The national average price of gasoline peaked on July 16, 2008, at $4.11 a gallon. As of June 18, 2010, the national average price of gasoline had fallen to $2.72 a gallon (source: AAA, BTN Research).     

Where Did The Extra Hours Go? – The productivity of the average American worker over the 10 years ending Dec. 31, 2009, is up 31.2 percent or 2.75 percent per year. That means the workload that would have taken an average employee 40 hours to complete in 1999 in a single week can now be done in 30 ½ hours (source: Department of Labor, BTN Research).

 

WEEKLY FOCUS – Protecting Seniors From Scams and Swindles 

Like the financial markets, money scams run in cycles. Resurfacing last year was the grandparent scam, in which a caller poses as an elderly person’s grandchild in distress, usually involving an arrest or car accident while traveling in Canada. The “grandchild” asks the grandparent to wire a few thousand dollars and to please not to tell mom and dad. 

A recent survey by the Investor Protection Trust, an independent group that promotes investor education, found that more than 7.3 million older Americans – about one in five – has been swindled, with above a third of adults over age 65 saying they receive phone and mail solicitations for money or participation in money-making schemes. 

Adult children tend to be unaware of the prevalence of scams aimed at the elderly. In the same survey, only 19 percent thought their parents had been approached by a swindler. While most were confident their parents would tell them immediately if they lost money in a scam, 16 percent thought their parents would be too ashamed to tell, and 35 percent said they wouldn’t be able to determine a scam had taken place if their parent didn’t disclose it. 

Elderly Americans can be particularly vulnerable following the death of a spouse, particularly if the deceased handled the couple’s finances. Scams at this time often come in the form of callers claiming the deceased spouse had entered into a contract or agreement for services that the surviving spouse must now pay. 

Approaching elderly parents about their finances and their ability to continue making rational and informed decisions can be difficult for adult children. We can help by creating nonthreatening opportunities to help educate your parents about potential dangers and encouraging them to take steps now to prevent future problems. Call our office to schedule a multi-generational 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#305496