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
–>

The Market

Wall Street ended higher for the week on positive reports for retail sales and household wealth. February retail sales rose 0.3 percent over January, beating the 0.2 percent increase expected by economists surveyed by Briefing.com. February retail sales were 3.9 percent higher than the same month a year ago. American household net worth increased 1.3 percent to $54.2 trillion in the fourth quarter, the third consecutive quarter of gains. Stocks provided the biggest boost, rising in value by 4 percent from Oct. 1 to Dec. 31, 2009. Consumer sentiment has declined since the end of February from an index reading of 73.6 to 72.5 as of mid-March. Economists had expected a slight increase. The Federal Reserve meets this week and is expected to leave interest rates unchanged, according to the Associated Press. For the week, the Dow gained 0.68 percent to close at 10,624.69. The S&P climbed 1.06 percent to finish at 1,149.99, and the NASDAQ rose 1.78 percent to end the week at 2,367.66.

Results By State – The average home in the

U.S. has appreciated 1.7 percent (in aggregate, not per year) over the past five years (i.e., 2005-09). Homes in

Wyoming have performed the best, gaining 26.7 percent on average. Homes in

Nevada have fared the worst, losing 40.4 percent of their value (Source: Federal Housing Finance Agency, BTN Research). 

 

What Alan Watches – The yield on the 10-year Treasury note closed at 3.62 percent at the end of February 2010, down 0.22 percent from its 3.84 percent level on Dec. 31, 2009. Because of the close connection between the yield on the 10-year Treasury note and mortgage interest rates, former Fed Chairman Alan Greenspan said in a speech on Feb. 23, 2010, that the 10-year Treasury yield is the “one statistic that I watch every morning and every afternoon” (Source: Credit Union National Association conference, BTN Research).    

Our Part – Out-of-pocket medical spending by Americans (i.e., deductibles, coinsurance and copayments but not including monthly health insurance premiums) totaled $284 billion last year, 11 percent of our nation’s aggregate 2009 health care spending of $2.5 trillion (Source: Centers for Medicare and Medicaid Services, BTN Research). 

WEEKLY FOCUS – Help Your Family Plan Your Care 

Becoming increasingly dependent on others for the normal activities of daily life can be a harsh reality. It can be even harder to admit needing help. Creating a plan for how you, your family and your medical professionals will handle that possible scenario can alleviate misunderstanding and confusion when a crisis arises. Here are six tips to help you prepare:1.    Pick a point of contact. One sibling or other close relative should be in charge of communicating with doctors. This person should have a health care power of attorney for you.2.    Find a family-friendly primary doctor. You likely receive care from multiple specialists. Decide on or find one doctor to be the primary medical resource for your family. Make sure reports from specialists are being sent to the primary doctor. If you live a distance from your family, consider asking your doctor if he or she is willing to communicate via email.3.    Create a central storage place for vital documents, including medical records, Social Security number and health insurance policy

information. Hard copies should be duplicated and stored in at least two fire- and water-proof locations. Digital imaging and storage services offer a convenient place to access files remotely.4.    Talk to your family about long-term care insurance. Nursing home costs continue to rise faster than inflation and can quickly deplete your savings. Generally, long-term care premiums increase as you age, and you may not be approved for coverage at all. 5.    Create a care circle. A network of neighbors and friends can give you some reassurance that others will be in touch regularly and know how to contact your family in an emergency.6.    Discuss finances. The point-of-contact relative, or another relative equipped to deal with financial matters, should have a financial power of attorney. This person should know the location of your key accounts and policies and the names and phone numbers for your key advisors. 

A final word of advice: Don’t ask your family to make promises they can’t keep, like withholding

information from other family members or vowing not to place you in a nursing facility. Discussing such issues ahead of time can help you and your family avoid these situations. If you would like help in creating a plan for those times when you are unable to care for yourself, contact our offices. We are happy to include your family and your other professional advisors, including your attorney, accountant and insurance professional, in creating a comprehensive 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# 303643 

 

–>

The Market

The nation’s unemployment rate surprised Wall Street on Friday with a smaller than expected loss of jobs. The Labor Department reported 36,000 fewer jobs in February, compared to the 50,000 drop that analysts had expected, according to a Reuters poll. The unemployment rate remained steady at 9.7 percent, better than the 9.8 percent economists had predicted. Consumer borrowing rose by $4.96 billion, or 2.43 percent, in January after nearly a year of declines. The Federal Reserve, which reported the numbers, revised December’s consumer borrowing to a 2.23 percent drop. For the week, the Dow gained 2.33 percent to close at 10,566.20. The S&P climbed 3.12 percent to finish at 1,138.70, and the NASDAQ rose 3.94 percent to end the week at 2,326.35. 

Taking Control – Thirty-seven percent of American workers age 45-59 have increased their retirement savings percentage and anticipate working longer before retirement as a result of the 2007-09 bear market for stocks (Source: Center for Retirement Research, BTN Research).   Prediction – Five years ago last week (March 2, 2005), then Fed Chairman Alan Greenspan told the House Budget Committee that the U.S. government needed to undertake “major deficit-reducing actions.” Greenspan said, “I fear we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver” (Source: House of Representatives, BTN Research).   

Hard Worker – The average productivity of the American worker (defined as output per hour of work) has increased 30 percent over the last decade (i.e., 2000-2009). Mathematically, this means the quantity of work done in 1999 during a 40-hour work week could now be completed in less than 31 hours (Source: Department of Labor, BTN Research).    

WEEKLY FOCUS – Treat Your Career As A Valuable Resource The current recession has some retirees considering at least a part-time job to supplement their portfolio drawdown. Many near-retirees have decided to continue working a few more years to allow their portfolios to recover from the market declines. The labor market, however, has put a monkey wrench into those admirable plans. With many Americans underemployed, part-time work has become scarce, and even those still working full-time may find their employment jeopardized by workforce reductions. 

Hardest hit may be those in their 50s who have long years of tenure in their jobs. Companies looking to reduce labor costs often look to get employees with long service records off the books, in favor of new employees. Many of these workers have insufficient funds to retire early, even with a severance or early retirement package from their employer, as they haven’t hit several important retirement milestones: age 59 ½ to start taking qualified plan or IRA distributions without penalty, age 62 to start receiving Social Security benefits, and age 65 to qualify for Medicare. Keeping skills and credentials up to date has never been more important for this group. Make yourself more valuable to your current employer or more attractive to a prospective one by earning a new certification to help in your job, expanding your education into a complementary or related field or learning a computer application more expected of the “kids” at the company. 

Staying connected to colleagues and peers outside your company can also prove worth the time if you find yourself looking for work. If you don’t belong to a professional group, join one, and if you haven’t been active, get back in touch. Networking helps more unemployed professionals land new jobs than any job posting website. Treat your career as the valuable resource it is. The ability to work as long as you are able is one of your most important assets for preparing for retirement. If you need help creating a “plan B” for keeping your retirement plan on track if you become unemployed, call our office for an appointment. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific

Basin countries and includes reinvestment of all dividends. 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# 303558

–>

The Market

The Dow and the S&P ended February with their best gains since November, climbing 2.6 percent and 2.9 percent respectively, while the NASDAQ had its best month since December, gaining 4.2 percent. All three indexes had small declines for the week, however, as existing home sales recorded an unexpected drop in January and consumer sentiment fell in February. Those signs of the economy’s ongoing struggle to recover were offset slightly by a revised gross domestic product report from the Commerce Department, which showed the economy grew at a 5.9 percent annualized rate in the fourth quarter, compared to the 5.7 percent pace previously reported. For the week, the Dow lost 0.69 percent to close at 10,325.26. The S&P fell 0.37 percent to finish at 1,104.49, and the NASDAQ declined 0.25 percent to end the week at 2,238.26.

Paper or Plastic? – Over the 25 years from Dec. 31, 1983, to Dec. 31, 2008, outstanding credit card balances in the

U.S. grew by 10.5 percent per year, reaching $957 billion. From the end of 2008 to the end of 2009, outstanding credit card balances fell by 9.5 percent to $866 billion. The government has tracked credit card data since 1968. Last year’s drop in the outstanding credit card balances nationwide was the first time ever that the year-over-year change was negative (Source: Federal Reserve, BTN Research). 

We Are Saving More – The national personal savings rate in the

U.S. was 4.6 percent as of Dec. 31, 2009, the highest year-end rate since Dec. 31, 1996. As recently as March 31, 2008, the national personal savings rate was 1.2 percent. As of Dec. 31, 1984 (i.e., 25 years ago), the rate was 10.4 percent (Source: Bureau of Economic Analysis, BTN Research).  

In the Business of Health – The five largest U.S. health insurance companies had combined profits in 2009 of $12.2 billion, up from $7.8 billion of profits in 2008 (Source: Health Care for America Now, BTN Research).  

 

WEEKLY FOCUS – Identity Theft: Deter, Detect, Defend 

The Federal Trade Commission (FTC) reported last week that for the first time since it started tracking identity theft a decade ago, the number of complaints it received dropped in 2009. Even with a 10 percent decline, however, the FTC still logged 278,078 reports of identity theft. Other types of fraud jumped by 24 percent in 2009, possibly due to the economy. Debt collection fraud topped the “other” list, accounting for nearly 10 percent of all complaints. Reports of credit card fraud more than tripled in 2009. 

These numbers reflect only consumers who self-reported the fraud to the FTC. Of all fraud complaints reported, nearly half (48 percent) of victims say their first contact with the perpetrator came through    the Internet, with another 12 percent making contact through a website and 10 percent through a phone call. 

The FTC recommends that consumers use an approach of deter, detect and defend. Deter identity theft by safeguarding your Social Security number and other personal

information, shredding financial documents, deleting unsolicited emails and avoiding easy-to-guess computer passwords. Detect identity theft by watching for unexpected account statements or bills that do not arrive as expected, denials of credit for no apparent reason, and calls or letters about purchases you did not make. Monitor your credit card report and your financial statements closely. 

Defend against identity theft as soon as you suspect it by placing a fraud alert on your credit reports, closing any accounts that may be at risk, filing a police report and reporting the incident to the FTC. 

Protecting your personal

information is important to us. We will never send confidential

information such as account numbers, balances or statements to you by email. Once your account has been opened, we should never need to ask for your Social Security number by phone. If you ever doubt that a person claiming to represent our firm actually does work for us, please don’t hesitate to end the call and then call our office directly to verify. We’re your partner in ensuring only you have access to the assets you’ve working so hard to attain. 

 

* 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# 303418

 

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The Market

The Federal Reserve announced late Thursday that it would increase its discount rate, charged to banks for emergency loans, by a quarter point to 0.75 percent. The Fed cited improved conditions in financial markets that have decreased the need for government help as the reason for the surprise increase. The Fed said it would leave interest rates affecting consumer loans unchanged. Core inflation – which excludes food and energy costs – fell in January for the first time since December 1982. Overall inflation increased just 0.2 percent. The Commerce Department will release its January durable goods report on Thursday and its revised fourth-quarter gross domestic product report on Friday. For the week, the Dow gained 3.12 percent to close at 10,402.35. The S&P rose 3.19 percent to finish at 1,109.17, and the NASDAQ increased 2.76 percent to end the week at 2,243.87.

Health Cost – Total U.S. health care spending was $2.5 trillion in calendar year 2009, equal to $6.85 billion of spending a day (Source: Centers for Medicare and Medicaid Services, BTN Research).    

More Paid By The Top Group – In 1980, the top 1 percent of taxpayers paid 19.1 percent of all federal income tax (FIT), and the bottom 50 percent of taxpayers paid 7.1 percent of FIT. In 2007, the top 1 percent of taxpayers paid 40.4 percent of all FIT, and the bottom 50 percent of taxpayers paid 2.9 percent of FIT. Thus since 1980, the top 1 percent of taxpayers has gone from paying nearly three times the FIT of the bottom 50 percent of taxpayers to nearly 14 times as much (Source: Tax Foundation, BTN Research).     

Middle Age – If you divide the U.S. population of 309 million into five-year increments (i.e., 0 to less than 5 years old, 5 to less than 10 years old, etc.), there are more Americans age 45-49 years old than any other five-year age group. The 23 million Americans just short of their 50^th birthday comprise a group that is slightly larger than the 22 million Americans age 50-54 (Source: Census Bureau, BTN Research).   

 

WEEKLY FOCUS – Watch Your Credit Card’s Fine Print 

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act’s final provisions take effect today. The law, enacted last May, sought to limit or eliminate many of the worst offenses by credit card issuers, such as retroactively raising interest rates on existing balances and double-billing cycles. Because issuers had almost nine months to digest the new rules, they’ve had plenty of time to look for creative ways to replace the lost revenue streams. To protect yourself, pay close attention to any mailings or statement enclosures from your credit card issuer that might contain the following pitfalls. 

1. Annual fees – According to Lowcards.com, about 20 percent of credit cards have an annual fee, but that will likely increase. Many issuers have already added annual fees to formerly free cards, and you may not even be aware that you’re paying them.

 

2. New fees – The CARD Act eliminated some fees, such as those charged to a card holder for being over the card’s limit. Look for issuers to recoup the lost revenue by increasing other fees – like balance transfers, cash advances and late fees – and to introduce new fees, like account inactivity or paper statement fees. (CARD eliminated an issuer’s ability to charge extra for payments made via phone or web.)

 

3. Variable rates – The CARD Act limits the amount and reasons that issuers can increase fixed interest rates, but it doesn’t limit increases in rates tied to a variable like the prime rate. Watch for your fixed rate card to switch to a variable rate. In addition, CARD limits only interest rates on existing card holders; new credit cards are not subject to rate limits.

 

4. Devaluing rewards – Just like subprime home loans, free money is a thing of the past. Discover has already lowered its cash-back program from 1.5 percent of purchases to 1.25 percent. American Express has limited reward points accruals on late-paying accounts, unless the card holder pays a $29 fee.

 

Credit cards can be an important source for emergency funds, but they should never be a resource for daily living expenses. Like any financial instrument, you need to be an

informed and aware consumer. Take the time to read any notices or communications from your card issuer. If you have questions about how credit card balances can impact your lifestyle, please call us. We’re always happy to help.   

 

 

* 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# 303317

 

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The Market

Wall Street ended a four-week losing streak with modest gains last week. Signals from China that it would move to control inflation in its burgeoning economy along with concerns about debt problems in several European countries have kept investors guessing. The Labor Department reported Thursday that U.S. non-farm productivity rose at a 6.2 annual rate during the fourth quarter and ended 2009 with an increase of 2.9 percent over 2008, the largest increase since 2003. For the week, the Dow gained 1.02 percent to close at 10,099.14. The S&P rose 0.97 percent to finish at 1,078.51, and the NASDAQ increased 1.98 percent to end the week at 2,183.53.

Retail Rise – Retail sales rose more than expected in January, according to a report issued by the Commerce Department on Friday. Retail sales increase by 0.5 percent, beating economists’ predictions of 0.3 percent. The increase was the largest since November. 

Needing Help – A 60-year old American has a 40 percent chance of requiring nursing home care at some point during his/her remaining lifetime (Source: MetLife Mature Market Institute, BTN Research).    

The Best and the Worst – In the past half-century (i.e., the 50 years from 1960-2009), the largest percentage gain day for the S&P 500 (up 11.6 percent on Oct. 13, 2008) and the second largest percentage loss day (a drop of 9.0 percent on Oct. 15, 2008) occurred within two days of each other. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market (Source: BTN Research).     

Thanks a Lot – Of those Americans that work at least 50 hours a week, 56 percent believe technology has increased the stress of their job as opposed to alleviating tension (Source: Money Magazine, BTN Research).   
 

WEEKLY FOCUS – Are Mom and Dad in Debt? 

If you thought your college-bound child’s credit card to be your biggest debt concern, you may want to look at mom and dad’s expenses, too. According to the Employee Benefits Research Institute, the average debt load for households of people age 75 and older grew 160 percent to an average of $20,234 between 1992 and 2004. Research by professors from Ohio University, Harvard Law School and the University of Texas at Austin indicate that people age 65 and older represent the fastest-growing group filing for personal bankruptcy. 

While a few of those debt-burdened seniors may have overextended their credit in pursuit of retirement dreams, most turned to debt in crisis, usually when a medical problem hits for which they have no cash and no insurance coverage – even from Medicaid, a much more limited resource than most Americans think. Living on a fixed income, most seniors have few avenues to increase cash flow to cover unforeseen expenses. Some make attempts to pay off utilities, medical and other bills individually, others resort to a credit card, quick loan or line of credit. 

Just as a child or spouse who runs up a credit card or line of credit may be embarrassed about coming clean, elderly parents may also shy away from sharing that information. However, as part of helping ensure estate documents and arrangements are in order, your parents need to be honest with you and their advisors about their debt. The alternative may be family heirlooms being sold to pay outstanding bills. 

Encourage your parents to share their full financial picture with you and recommend they meet with a financial professional to ensure proper risk management and estate planning. We’re always available to help you with those conversations and the financial analysis that goes with them. Call our office for help or 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# 303236

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