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 

 

 

–>

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 

 

 

–>

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 

 

 

–>

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
–>

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 

 

 

–>

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

 

–>

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
–>

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
–>

The MarketAssurance from European leaders that Greece would receive assistance with its debts took the market higher early on Friday, but the Dow ended up just 9 points as investors worried that light trading volume meant a handful of buyers were driving it higher. The major indexes still managed a fourth straight week of gains, something the Dow hasn’t seen since August. The Dow and the S&P could post their strongest first quarter since 1999. This week sees the release of consumer confidence figures on Tuesday, a manufacturing report on Thursday and March employment numbers on Friday. It will be a short week for the markets, which will be closed for Good Friday. For the week, the Dow gained 1.01 percent to close at 10,850.36. The S&P climbed 0.59 percent to finish at 1,166.59, and the NASDAQ rose 0.87 percent to end the week at 2,395.13.

College Costs – The cost of tuition, fees, room and board at an average in-state public college has risen 6.2 percent per year over the past 20 years, reaching $15,213 for the 2009-2010 school year. If college costs had instead risen only by the rate of inflation (using the CPI) over the past 20 years (2.8 percent per year), then a year of college would cost $7,889 during the current school year. The consumer price index (CPI) is a measure of inflation compiled by the U.S. Bureau of Labor Studies (Source: College Board, Department of Labor, BTN Research).   

Government In Action – The average processing time for an individual awaiting a decision from Social Security with regard to a disability claim is 442 days (Source: Social Security, BTN Research).    

The Wealthiest – The top 10 percent of U.S. households (when ranked by total net worth) have a median net worth of $1.9 million (Source: Federal Reserve Survey of Consumer Finance, BTN Research).   

 

WEEKLY FOCUS – Helping Your Child Buy A Home 

If your children or grandchildren have turned the corner on thinking you know something (generally they learn in their 20s, but some get it earlier or later), they may be asking you for advice – or outright financial help – in purchasing their first home. And you may be asking yourself if they’re ready for such an important financial commitment. Here are some questions you should ask your child or grandchild before committing to more than sage advice.

Do they have a budget, and know how to use it? In addition to the house payment itself, ownership means insurance, utilities, property taxes and upkeep. Have they analyzed the full financial impact of those ongoing expenses? 

Do they have a reliable source of income? Consistency is key. If their employment situation or amount of income seems to fluctuate, a home may be too big a burden at this time. 

Is their debt under control? Banks look at total debt, including mortgage, credit cards and student loans. If those account for more than about 40 percent of total wages or salary, they may not qualify for enough money. Rule of thumb is no new debt for six months to a year before taking on a mortgage. 

Do they have emergency money? That Boy Scout motto still applies – be prepared. A three- to six-month cushion should be enough to cover mortgage payments in the event of disability, job layoff or natural disaster. 

How’s that credit report? A healthy credit report can translate to a better interest rate. Your children or grandchildren should get in the habit, if they haven’t already, of requesting their credit report annually. 

Should you help with the down payment? That’s the million-dollar question. Whether you want to help your children out or make them go it alone, you should determine the impact that it will have on your own financial situation. 

We can help you determine how helping could affect your big picture and give you ideas for structuring that down payment as a gift or an advance in the child or grandchild’s inheritance. Call our office for more

information. 

 

 

* 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# 303917
–>

The Market - The Dow closed Thursday at its highest level since Oct. 1, 2008, even as investor concerns rose regarding Greek debt and India’s central bank raising interest rates to fight inflation. The U.S. central bank left interest rates unchecked at its meeting on Tuesday, citing tame inflation, slight job market improvement and increased business spending on equipment and software. For the week, the Dow gained 1.11 percent to close at 10,741.98. The S&P climbed 0.87 percent to finish at 1,159.90, and the NASDAQ rose 0.29 percent to end the week at 2,374.41.

More Rolling Over – A new study by Charles Schwab of its 401(k) plans found that 69 percent of plan participants roll over their 401(k) account when changing jobs. Of that group, 80 percent moved their savings to an IRA, 8 percent moved the money to their new employer’s plan, and 10 percent took cash distributions. A similar study in 2008 found only 57 percent of 401(k) plan participants rolled over their accounts. (Source: Financial Planning) 

Deep Pockets – If Medicare projections of health cost increases hold true, median annual out-of-pocket costs will double over the next 30 years, according to a survey from the Urban Institute. The study found that almost 10 percent of people 65 and older will spend more than $14,000 on health care annually by the time the youngest boomers reach age 76 in 2040. With household income expected to grow more slowly, the percentage of wealth that a household spends on health care will increase from 10 percent to 19 percent over the next three decades. (Source: Boomer Market Advisor) 

Retirement Home – The decline in home-equity valuations may wind up being a bigger blow to future retirees than the stock market turmoil of 2008 and 2009. According to the Center for Retirement Research (CRR), the drop in home equity has put more than 60 percent of U.S. households’ retirements at risk. CRR’s National Retirement Risk Index, which is based on conservative assumptions, is a percentage gauge of how many working Americans are at risk of being unable to maintain their standard of living during retirement. (Source: Financial Advisor, Center for Retirement Research)  

WEEKLY FOCUS – A New Mindset For Income Distribution 

In terms of your finances, your preretirement earning years focus on accumulation and growth of your money. You earn money from your job or business to pay for your current living expenses. You set some aside for emergencies and for future needs like college and retirement. Your goal is to accumulate as much as possible by earning it and investing it. After retirement, you typically no longer have money earned from your job or business to pay for your living expenses. You need safety and liquidity to ensure available funds for day-to-day costs of living, along with growth to help ensure your funds last your lifetime. The growth-oriented portfolio structure of your earning years may no longer apply as you enter into retirement, and you may have to change the way you evaluate your portfolio’s performance. 

In fact, in an effort to help reduce risk and protect principal, many retirees move their assets to more conservative investments. Such a portfolio is designed to provide higher rates of current income and less volatility. Put another way, your need to preserve what you have now typically outweighs your need to grow your money at the same rate as the stock market, although you still need enough growth to ensure inflation doesn’t reduce your purchasing power during retirement. A retirement distribution plan seeks to find that middle ground between reduced risk and greater return, taking into consideration all income streams (i.e., Social Security, wages, pensions, investment income, annuity income, etc.), assets, inflation risk, investment risk and tax exposure. Numerous variables can come into play, so each factor must be evaluated based on each individual’s circumstances. 

Creating a retirement distribution plan can be complex and requires a thorough understanding of investment products and strategies and their associated risks. We can help you create a plan designed to efficiently and effectively use the assets you’ve accumulated to fund your retirement. Call our office if you have questions.

 * 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# 303816
–>