Once a year the Social Security Trustees report to Congress on the status of the Social Security system. They reported that the Trust funds gained $3 Billion in 2018. The net effect of that gain is that the combined asset reserves of the Social Security system is now projected to become depleted one year later than was projected at the end of 2017. Additionally, the Trustees project that the system will be able to pay 80% of benefits once depletion occurs – which is a 5% improvement over the 2017 report.
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I like to learn from others. Why not? Why repeat mistakes that can be avoided? The author of this article does a good job of pointing out things he has experienced and noticed since he retired.
I think his points #1, 5, and 6 in the link below are most important to consider and deal with before retirement.
Retirement brings on a significant change of life. Schedules change. Routines change. Responsibilities change. As a result, we can feel a lack of purpose and loss of daily contact with those with whom we worked. Add to all those changes, a significantly increased amount of time with your spouse. The linked article below offers some good ideas for preparing for increased time together and not letting all of the other changes in your life change what is most important.
For anyone who has funded college costs, you know that the costs have soared for years. In fact, over the past 30 years, college tuition has risen a whopping 400%, with annual growth rates far exceeding the rate of inflation.It seems as though market forces have caused colleges to become more competitive in their pricing as last year’s increase was more in line with inflation at 1.9%. For many, college has become unaffordable, and many are quickly ruling out choices based on price, and considering a more affordable institution.
You can read more here… https://www.wsj.com/articles/in-reversal-colleges-rein-in-tuition-1500822001
All gave some, some gave all. As we honor our fallen heroes today, let’s remember their sacrifice that allowed us to live a life in the greatest nation there has ever been.
As I wrote in my blog post on 11/22, there are two early-proposals afloat for cutting individual taxes. Here is an interesting excerpt from Barrons discussing how one might act now to benefit the most from these expected tax cuts.
“Given the potential changes to income-tax rates, what should individuals be doing now?
We’re recommending the same things we recommended back in 1986 when the Tax Reform Act lowered individual rates. The smartest thing to do is accelerate deductions into the current year when they will be deductible at higher tax rates and defer income until future years when it will be taxed at lower rates. Specifically, you should think about accelerating charitable contributions and prepaying state and local taxes. Pay them in December rather than in January. If you have stock-market losses, you ought to take them in 2016. You want to accelerate those losses and you want to defer gains.
How would you approach long-term capital gains?
While long-term gains are preferentially taxed, you still want to defer them until next year because, under the House plan, they will be taxed at even lower rates.”
Note: This should not be considered as tax advice. Every situation is different. You should consult with a qualified tax advisor before taking any action.
Can the financial markets give a clue as to whether the incumbent or challenger has the better chance of winning a Presidential election? The answer is: probably!
Financial blog Zero Hedge published a study this week that showed that market performance in the 3 months leading up to a Presidential Election has displayed “an uncanny ability to forecast who will win the White House”. Since 1928 there have been 22 elections. In 14 of them, the S&P 500 index was up during the 3 months prior to the election. The incumbent won in 12 of those 14 instances. Conversely, in 7 of the 8 elections where the S&P 500 was down in the 3 months prior to the election, the incumbent party lost.
The market has thus been correct 86.4% of the time in forecasting the election. With the S&P 500 down about -4% in the last 3 months, this measure says the incumbents – the Democrats – will lose.
But we’ll just have to wait to see.
Everyone is probably aware that we have historically low interest rates. The low rate environment affects not only what you pay for a new mortgage or car loan, but also affects the returns provided by bonds. Most 401(k) investors have a portion of their portfolio invested either in bonds, or target date funds which includes bonds as part of the portfolio. Those investments have done well over the last few years as I’ll explain below.
The reason we have low rates worldwide is the result actions by Central Banks – in the US, it is known as the Federal Reserve (Fed). In an effort to stimulate the economy, the Fed lowered rates to encourage borrowing and growth. The Central Bank in many other developed countries, have lowered their rates so low that they now pay a negative rate of interest on the bonds issued by their government.
The Fed raises interest rates from time-to-time to curb inflation and prevent runaway inflation. It has been a frequent news item that the Fed has been considering raising interest rates for some time now. Many feel that that won’t happen in November, but could well happen in December.
The reason that bonds have been good investments over the last several years is that the value of bonds and interest rates have an inverse relationship. In other words, when interest rates go down, the value of bonds typically goes up. So, as interest rates have fallen to record lows over the last several years, the value of bonds in your 401(k) have gone up – and nicely!
Conversely, when interest rates go up, the value of bonds typically go down. So the gains you have achieved through the rising value of bonds over the last several years could well disappear over the next several weeks or months as interest rates are increased.
Bonds are commonly thought of as being safer than investing in stocks. While it’s true that bonds have less volatility than the stock market, one shouldn’t think that they can’t lose money by having bonds in their portfolio.
A poll by Wells Fargo and Gallup reveals that most investors do not understand the impact of rising interest rates. http://www.gallup.com/poll/183812/investors-anxious-hopeful-interest-rates.aspx. Take a look at the chart below and see for yourself how bond prices can fall and the effect that can have on your portfolio.
Bonds are not immune to loss. You should review your 401(k) and determine the risk of having bonds as part of your portfolio. A bond measurement known as duration provides an indication of how a rise in interest rates will affect the value of a bond holding. If you are not familiar with these concepts, I would encourage you to visit with a financial advisor.
Many aspire to have wealth. But sudden wealth has positive as well as negative aspects. Here is an interesting article of the negative aspects of sudden wealth.
On April 22, a few days after watching the Golf Channel documentary “Arnie,” Adam, 21, a keen golfer himself, wrote a letter to Palmer on behalf of his younger brother Nate, asking if he “could possibly write Nate a letter wishing him good luck in college and providing him some advice along the way.”
He could not have known that he would get so prompt a response from a man who receives thousands of requests annually, eventually responding to all of them. The letter he sent to Nate was dated May 23, one month later.