For the Week of August 28, 2017

The Markets

Wall Street started Friday off strong after the President’s chief economic adviser, Gary Cohn, said the White House would turn its attention to tax reform this week. Federal Reserve Chairwomen Janet Yellen’s silence on future rate hikes during an anticipated speech also helped indexes close slightly higher. For the week, the Dow rose 0.71 percent to close at 21,813.67. The S&P gained 0.75 percent to finish at 2,443.05, and the NASDAQ climbed 0.79 percent to end the week at 6,265.64.

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

Another Rate Hike? — The next Federal Reserve meeting that has at least a 50 percent chance of resulting in a hike to short-term rates will occur on March 21, 2018. The Federal Reserve has raised rates four times since Dec. 16, 2015 (source: CME Group, BTN Research).

Sixfold — Foreign holdings of U.S. Treasury Securities have increased from $1 trillion in 2000 to more than $6 trillion in 2017 (source: St. Louis Federal Reserve Bank, BTN Research).

Not the United States — There are 10 countries, including Canada and Germany, currently maintaining the top credit rating from each of the three major credit rating agencies (source: Trading Economics, BTN Research).

WEEKLY FOCUS – Phased Retirement a Viable Option for Reluctant Retirees

How do you envision your entry into retirement? Will you jump – or slide gradually into retirement waters? More and more workers, whether from want or need, are opting for the latter. Some will leverage their skills in consulting, others will pick up non-career-related part- time jobs or dive into the gig economy. But many would like to dip their toes into retirement while still working with their present employer through a phased retirement, gradually cutting back on the number of hours worked.

Many human resource professionals see formal phased retirement plans as a viable option for the future, when most baby boomers will be of retirement age and leave the workforce in large numbers. But such programs are still uncommon. Most phased retirements are informally worked out between worker and company, and arrangements are specific to each situation. Benefits, like health care, may or may not be part of the agreement, but there is usually a cut in pay. When considering a phased retirement, understand it could affect your tax bracket, pension plan, Social Security benefits and existing retirement plan; it’s a decision you should make with counsel from your financial planner.

If you want a phased retirement with your company, but they don’t have a formal program, you can always pitch the idea, stressing the value to the employer. Phased retirement can benefit not only the worker but also the company. A recent GAO study found several employer-focused benefits, including retention of knowledgeable, highly skilled workers and transfer of knowledge to younger co-workers. These are good reasons on which to develop your presentation.

Here is a good way to start the conversation. Offer to mentor. Companies with formal plans are often concerned about losing too many skilled workers too quickly. With training budgets generally cut in recent years, companies are doing more with less, making mentoring very valuable. Since you know your industry and the best practices for your job, who better than you to train younger workers? Also, suggest a probation period, with regularly scheduled reviews. Consistent communication can eliminate failed expectations, minimize doubts and cut off conflicts before they happen.

Call our office today. We’ll help you work through the question of whether or not to retire gradually and develop a sound financial plan that supports it.

* 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, Copyright August 2017. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#1882129.1

For the Week of August 21, 2017

The Markets

Stocks fell Thursday amid the President’s controversies related to the Charlottesville violence. They came back Friday with news of the resignation of Steve Bannon, the White House chief strategist and economic nationalist. At the close of Friday’s volatile session, the major indexes rolled over to close slightly lower. For the week, the Dow fell 0.77 percent to close at 21,674.51. The S&P lost 0.58 percent to finish at 2,425.55, and the NASDAQ dropped 0.64 percent to end the week at 6,216.53.

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

Since November 2016 — The S&P 500 gained 15.9 percent (total return) in the 190 trading days since the Nov. 8, 2016, election of President Donald Trump (source: BTN Research).

Not so Hot — Of the 24 stocks in the S&P 500 index that gained at least 45 percent in calendar year 2016, 10 had a negative return YTD through July 31 (source: BTN Research).

Perception — Of 1,019 Americans surveyed in April 2017, 63 percent believed upper-income taxpayers pay too little in federal income tax. For tax year 2014, the top 1 percent of taxpayers (1.4 million returns) paid $543 billion in federal income tax. The bottom 95 percent of taxpayers (132.6 million returns) paid $550 billion in federal income tax (source: Gallup, Internal Revenue Service, BTN Research).

WEEKLY FOCUS – Social Security’s Cloudy Future

This month 82 years ago, President Roosevelt signed the Social Security Act to supplement retired individuals’ savings. Unfortunately, a cloud hangs over its anniversary. Thanks to millions of baby boomers retiring, longer life expectancies, lower birth rates, slow wage growth and the government borrowing from the Social Security (SS) trust fund for years, future shortfalls are certain unless action is taken.

Countless solutions have been proposed, but Congress has largely ignored them because most are politically risky. Here are a few basic ideas:

1) Raise the full retirement age from 67 (for those born in 1960 or later) to 69. In light of extended life expectancies, this seems reasonable for those who are able to keep working. But health issues already prevent many individuals from working until their full retirement age.

2) Either cut cost-of-living adjustments (COLA) for wealthy individuals or for everyone. But benefits already don’t keep pace with seniors’ rising expenses since the COLA is based on the general Consumer Price Index and doesn’t reflect the disproportionate rate at which housing, medical expenses and health insurance are increasing.

3) Raise the cap on earnings taxed by Social Security. Actually, the wage cap already increased from $118,500 to $127,200 in 2017. Because SS benefits are capped at $2,687 at full retirement age, higher earners would not get more back.

4) Increase payroll taxes for everyone. Since the actuarial deficit for Social Security was 2.66 percent in 2016, this would mean employees and employers would each pay an extra 1.33 percent.

5) Wait until Social Security’s reserves are depleted (around 2034) and cut benefits by up to 21 percent or dramatically raise taxes. Since solving the shortfall will become more difficult as time goes by, voters should press their representatives to work on a better solution soon.

We all may face future circumstances beyond our control. But as the old adage says, “You do what you can do.” That includes prudently saving and wisely investing. Call our office if you’d like to review your retirement 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, Copyright August 2017. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#1876497.1

For the Week of August 14, 2017

The Markets

Wall Street showed some cracks last week after months of rallies. Following three days of losses, the major indexes closed higher Friday. While disappointing earnings results decreased odds of further interest rates increases, growing tensions between the United States and North Korea kept investors nervous. For the week, the Dow fell 0.91 percent to close at 21,858.32. The S&P lost 1.37 percent to finish at 2,441.32, and the NASDAQ dropped 1.50 percent to end the week at 6,256.56.

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

Long Ago — The last year when the high close for the S&P 500 occurred during August was 30 years ago in 1987. Since 1987, the high close for the index has occurred in December 16 times (source: BTN Research).

Through July — The S&P 500 was up 11.6 percent YTD (total return) through July 31, making it nine consecutive months of gains (and 16 of the last 17 months) by the $22 trillion index. The last time the S&P 500 was up in each of the first seven months of a year was 1995 (22 years ago). In 1995, the index produced 11 months of positive returns and a 37.6 percent gain for the entire year (source: BTN Research).

The Economy, National Debt and Market Capitalization — On June 30, the size of the U.S. economy was $19.227 trillion; the size of the U.S. national debt was $19.845 trillion; and the market capitalization of the S&P 500 stock index was $21.832 trillion (source: BTN Research).

WEEKLY FOCUS – Retirement Planning for Couples With Age Gaps

Planning for retirement can be tricky when there’s an age gap of 10-plus years between spouses. Rather than a scenario where they exit their careers at roughly the same time, a June-November couple will probably end up with staggered retirement dates. When the older spouse retires years before the younger, it takes a different approach to secure the financial future of both spouses. Some of the strategies involved address Social Security and health care.

When the older spouse will draw on Social Security is an important decision. If they pass away, they’ll want the death benefit for the surviving spouse as high as possible, which is achieved by delaying Social Security benefits. This is especially important when the younger spouse is the wife, as women typically live longer and often have lower earned benefits. If the older spouse waits until age 70 before taking benefits, they lock in the maximum benefit rate not just for themselves but also for their surviving spouse – for life.

While delaying Social Security payments on the surface favors the younger spouse, there is an added benefit for the older spouse. Today, it’s not so much dying early that’s a concern, it’s living longer. Deferring Social Security benefits as long as possible can help reduce the anxiety of outliving their savings.

Health care for the younger spouse can be a challenge when the retiring older spouse carries the couple’s health insurance. At age 65, the older spouse qualifies for Medicare. But the younger spouse may have several years before they’re eligible. One solution to this challenge is a triple-tax-advantaged HSA. Although they are tied to high deductible insurance plans, HSAs have several benefits. Contributions are tax-deductible, and capital gains, dividends and interest accumulate tax-free. Withdrawals for qualified medical expenses are tax-free. Beginning at age 65, money can be withdrawn from an HSA for nonmedical spending without penalty (though it’s taxed as ordinary income). And if a medical bill pops up that exceeds what they’ve saved, they can make a once-in-a-lifetime, IRA to HSA transfer – tax-free.

Whether or not you’re retiring together, planning for retirement should begin as soon as possible. Call our office to explore all the options available in planning for a staggered-age retirement. We can help you map out a workable road map to get you there.

* 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, Copyright August 2017. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#1871121.1