income, protection, retirement, risk management

5 Tips to Make Your Retirement Savings Last

The statistics are troubling…
10,000 Americans begin their retirement every day.

The Social Security Administration has said the SS Trust Fund will become exhausted by 2035, unless benefits are reduced, the retirement age is raised, or other solutions are put into action. (1)

76% of Baby Boomers are not confident they have saved enough for retirement. (2)

One third of retirees retire with mortgage debt. (2)

Women live substantially longer then men and yet have much less saved for retirement. (3)

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economy, income, interest rates, retirement, risk management, Taxes

Trick or Treat? Revisiting The Potential Downside of Tax Reform for Investors

There is an old story that goes “beware what you wish for…” Things don’t always turn out as expected. Two years ago the President proposed and Congress approved a huge tax cut plan… the Tax Cuts and Jobs Act (TCJA). The results have been controversial.

Along those lines I watched a fascinating interview of Tom Lee, head of research at Fundstrat, on Bloomberg two years ago. His insight proved very valuable and accurate. (1)

His feeling is that a Tax cut, as it was being discussed, could be negative for investors long term. “There’s two reasons; First, when cutting tax rate you raise the after tax cost of debt. Leverage becomes a problem for a lot of businesses. Second, because you are cutting tax rates you are effectively giving cash to all businesses, even businesses where you want to reduce allocation.“

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economy, income, interest rates, retirement, risk management

Economic Fears and Managing Risks

The economy continues to slow and is having an effect on markets. Incoming ECB President Christine Lagarde stated the US trade war with China has “dented global economic growth.”

“You can’t adjust to the unknown. So, what do you do? You build buffers. You build savings. You wonder what comes next. That’s not propitious to economic development,” said Lagarde.

“It means less investment, less jobs, more unemployment, reduced growth. So of course, it has an impact,” she said.

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economy, income, retirement, risk management

Investing with Stocks at Record Levels

I have talked to many clients. I have read and listened to many economists and Chief Investment Officers who are nervous about investing hard earned savings when markets and indexes are making new highs.

Many people feel the market is “due for a correction”; they worry about a “bubble bursting like 2008”; they look at the political environment and feel confused by what is happening in Washington DC.

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economy, income, interest rates, retirement, risk management

Recession Risks Rise

In a recent presentation to investors, Doubleline CEO Jeffery Gunlach stated he sees a 75% chance of a recession by 2020. (1)

Many signs are popping up that point in the same direction.

In August 2019 the yield curve inverted. (2) An inverted yield curve is seen within the financial industry as a reliable leading indicator for recessions.

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income, interest rates, retirement, risk management

Being Too Fearful Can Hurt Financial Security

I have spoken to many people in the past year who are fearful in the current market environment… High market valuation, trade war fears, warnings from pundits, Fed policy moves, volatility… Because of fear, many people have decided to sit in cash or even liquidate their retirement savings.

In a recent study the World Economic Forum examined the savings shortfall around the world… the situation where due to increasing longevity people are expected to outlive their savings. One of the key findings was the demonstration that Japanese savers are extremely conservative in their investing style, avoiding equities and only using cash and bond equivalents for saving. The result is Japanese women face a savings shortfall of 20 years compared to American women who have a savings shortfall of 10.9 years. A lack of growth in assets hurts financial security. (1)

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economy, income, interest rates, retirement, risk management

Negative Yielding Bonds and Risk

Bonds are traditionally used within investment portfolios to reduce equity risk and generate income through the yields they carry. For example, a 10 year bond with a face value of $10,000 with a 5% yield generates $500 in income. Most recently the US 10 year yield was 2%.

However, over the past few years central banks in Europe and Japan have experimented with Quantitative Easing and driven rates below zero%. In late June 2019, the amount of negative yielding bonds reached over $12 trillion. Yields in Europe continue to fall as the ECB in June indicated its plans to lower the discount rate further in upcoming meetings. A slow-down in the European economy and low inflation has left businesses and economists frustrated. (1)

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income, interest rates, retirement, risk management

Closing the Retirement Savings Gap

A new report from World Economic Forum shows that retirees could outlive their savings by a decade or more due to higher life expectancy. “Women should prepare to bear the brunt of such shortfalls, going without retirement savings for at least two years longer than their male counterparts.” (3)

“The size of the gap is such that it requires action,’ says report co-author Han Yik. (1)

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income, retirement, Taxes

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

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

To prepare us for retirement the government 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.

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economy, income, interest rates, retirement

Bond Yields are Moving Higher

On October 3rd, 2018 the 10-year yield moved dramatically higher increasing 3.3% in a single day. Pundits have listed many reasons for rates and bond yields to move higher… a strengthening economy, decreasing unemployment, rising oil prices signaling inflation, a Federal Reserve committed to further rate increases into 2019. (3)

 

These pressures have been building for some time and signal a good economic environment.

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