Month: February 2022

protection, retirement, risk management

How to Deal with Being Laid Off: 5 Strategies To Prepare For Job Change

James Cox

Each day we read reports that the economy is booming.

“U.S. housing and consumer are strong” (1)

“Factory output is poised to speed up.”

“Stronger global growth expectations and a weaker dollar should help.”

“The stock market hits record highs…”

With that being the case, you might find it surprising that several large corporations have recently announced they will be laying off large numbers of employees, especially managers. (2)

Companies which are facing an increasingly tough business environment are being forced to “slash costs and stabilize”. (3) Some companies find themselves at a disadvantage because of the move away from fossil fuels. (4) Some companies have failed to innovate in order to remain competitive. Some companies have to carry legacy costs that newer competitors, especially those in the technology or e-commerce space do not have. Many companies are struggling to keep up with commodity and wage costs that are rising with inflation.

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income, retirement, Taxes

RMD: What are the Risks and How Can We Address Them?

James Cox

Several recent studies show peoples number one fear is running out of money during retirement. (1)

To prepare us for retirement the IRS gives workers the ability to set up qualified accounts in order to save for retirement and get tax deferred growth. By deferring taxes money saved can grow faster. You put money away, not paying taxes now, but paying taxes on the money when you pull it out during retirement.

When you get to retirement, you can start pulling money from your account. In the past it has been considered good practice to not draw more than 4% from an account during retirement in order to make sure you don’t outlive your money. In the past bond yields have been 5-7% and that makes a 4% draw down possible. Now over the past 5 years bond yields have been around 2-3% and because many retirees rely on bonds to deliver income to their portfolio, many economists and advisors have been advising clients to withdraw less from their IRAs; this is so retirees don’t run out of money when they are older.

Now what if I told you there was a tax law that requires you to draw more income from your account, without any consideration for how long you or your spouse will live, and without regard for whether you will run out of money or not.

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interest rates, retirement, risk management

Feb Jobs Day… “Buckle Up”

James Cox

It has been a turbulent week…

Price of gasoline rose to the highest since 2014 at $3.43/gallon. Brent crude is at $93 per barrel.

Inflation number to be released next week is expected to rise to 7.3%, from 7.1% in January

On Thursday, the ECB announced it would pull back from QE faster than expected after their meeting on 2/3/22. ECB pivoted away from their policy of “lower rates for longer”. As a result, Italian yields are up dramatically. Yields of Italian bonds started the week at 1.2%… by Friday yields were over 1.7%. Negative yielding debt is at lowest level since 2018.

At a meeting in the UK, Bank of England Governor Bailey called on unions to hold off on demands for pay increases. Union officials called it “a sick joke”.

In equity markets Facebook (Meta) fell 25% and lost over $200billion in value overnight due to slower growth. The next day Amazon rose 15% and gained over $150billion in value on earnings and price hikes. These are massive flows of capital.

On Wednesday, ADP released numbers this week showed a decline of 301,000 jobs due to Omicron and a worsening in economic conditions due to rising bond yields. The question is how much of the drop is due to Omicron which is fading, and how much is due to a slowdown in the economy which could worsen as the Fed raises rates starting in March.

The White House warned “the January jobs number will be ugly”.

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interest rates, retirement, risk management

What do rising rates mean for investors? In 2018, in 2020… and today in 2022

James Cox

In January of 2022 markets sold off as investors came to grips with the realization that the Fed was committed to end Quantitative Easing (QE), raise rates by March of 2022, and begin selling assets from its balance sheet. After years of “easy money” monetary policy, the Fed had been forced to change direction due to rising inflation worries. (1)

“The market is significantly overvalued, which works okay when interest rates are at record lows,” said Mark Zandi, chief economist at Moody’s Analytics. “But when rates rise, valuations become a real issue, so the market is adjusting to the new interest rate reality.”

To understand how this affects your portfolio and retirement savings a bit of historical context can be helpful.

So first… a history lesson…

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