Call 2015 the Year of Hope

As the calendar winds down, this past year has proven out to be much to do about nothing. A very long awaited, almost 3 years, hike in Fed interest rates came about with nothing more than a slight raise in the prime.  The new normal is certainly running the global economies. That normal is quantitative easing, currency manipulation, central bank liquidity, and Hope that all this will stabilize world markets.  There is great Hope that the Fed can normalize interest rates in time to prevent another global financial crisis.  It will be very difficult to accomplish if commodity price stay low and the dollar remains high.  Increasing domestic interest rates, with a low growth GDP, may cause deflation, therefore lowering values on all asset classes including equities and real estate.
   This interest rate increase is on uncharted waters. It is only a Hope that unemployment will fall and GDP will provide stable growth.  It is also a Hope that China remains at a growth level above 7%.  Many specialist predict that this may not be the case, and using voodoo economics, China is masking an industrial and consumption slowdown.
 The biggest Hope involves DEBT.  As interest rates rise, companies will use more cash flow to pay interest on highly leveraged balance sheets.  Sectors like energy and health care are already feeling the effects and cause a big ripple in the junk bond market. Many public companies are borrowing money to pay dividends to shareholders, this will also be an increased cost in 2016.  Stocks with good dividends are attractive to investors when markets are moving sideways and retirement portfolios are seeking yield.
There is another Hope, that is the Hope that we are not in an earnings recession.  It will take some time to determine, as many companies are using free cash to do stock buy-backs. This process will increase earnings per share, but it is hard to sustain if cash dries up.
We can HOPE for a few things; Blessings of health and happiness in 2016, good friends and family, good health and well-being for all.  Happy Holidays!  All the Best for 2016!

2013 Retirement Survey - Bracing for A Retirement Crisis

The annual EBRI retirement report was published this week and it has trends that are pointing to a retirement crisis in this country.  Even as the equity markets in the US are hitting all time high levels, the survey is reporting that Americans are just not prepared for the golden years.  The survey highlights that 28% of Americans have no confidence that they will have enough money to retire comfortably.  This is the highest level of non confidence that the survey has reported in its history.

Why is retirement confidence hitting all-time lows?

• Americans are living longer.
• Employment worries and delayed retirements.
• Worries about Social Security and Medicare Benefits and Costs.
• Lack of growth in Retirement Accounts.

The report is trending toward a delay in workers retirement date, citing the economy (22%) and lack of faith in Social Security and Government (19%) as the top reasons.  The trend is heading back to the all time high, as seen in 2009 after the credit crisis.  A downturn in the stock market could again force soon-to-be retirees into a holding pattern.  The report does not address the current low yield environment but does point out that  only 42% of retirees feel confident that their retirement account will grow.  

Expenses, Expenses, Expenses.....

The baby boomers are leaving the workforce in record numbers, estimated at 10,000 per day.  The EBRI report is pointing out that many have not identified the true cost in retirement.  The survey indicated that only 67% now feel they can confidently meet basic expenses in retirement, down from 80% last year.  The numbers are similar in the estimation of covering the cost of medical expenses, down 4% from the high of 71% in 2012.  Long term care cost seem to be the elephant in the room, with only 44% confident they have this problem covered in retirement.  

Failure to Plan is a Plan to Fail

Only 23 percent of workers and 28 percent of retirees report they have obtained advise from a professional advisor who was paid through fees or commissions. Of these workers, 27% followed all of the advise, but more disregard some of it and followed most (41%) or some(27%).  If this pattern was similar to following the advise of a doctor, retirement income would not be a big issue for most.  Take the time to consult professional advisors. Baby boomers have to plan for 25-30 years of guaranteed income, most not having defined benefit (pension) plan, debt free home, and inflation protected savings. 

To RetireSmart!:

• 45- 55 year old workers should be creating a supplemental income to Social Security, remember 2033 is coming and it is YOUR problem. 
• 55-60 year old workers should have an expense and income plan in place and in conservative investment or annuity programs.  
• 60-66 year old pre- retirees should have a housing plan, health care plan, income plan, Social Security Plan, LTC plan, tax plan, transition plan, and the important distribution plan.
• 66 plus - Follow the plan, if any questions, follow the plan!  Enjoy!

Call us today at 484-881-8899 and request our guide, "10 Things to Know about Planning YOUR Retirement"  Check our event schedule for a workshop in your area HERE.

BIG Changes Coming to YOUR 401(k) Plan

There has been a two year rumbling from 401(K) plan administrators for the new regulations coming from the Department of Labor.  These sweeping changes, currently scheduled for July 1st, will require a full disclosure of the fees associated with administration, management, and expenses of your 401(k) plan.  I say, currently scheduled, because this date has been moved several times over the past 18 months.
The new disclosures cover both the direct and indirect compensation administers receive, the indirect fees have often gone undisclosed.  These changes come at a time when participants have seen very low returns, yields on safe haven investments. It will prove to many in money market type plans, that they are actually loosing money over time.
Tune into RetireSmart Radio, with your host B Michael Shanley this week for an in depth look at these changes and special guest Anne Tergesen, journalist for the Wall Street Journal.  She has been on the forefront of reporting the DOL changes, and the implications of full disclosure to the average participant.
The fallout of expensive plans is expected as participants turn to plan sponsors for relief from diminished returns, with zero protection from market downturns.
401(k) plans, are defined contribution plans, became popular in the early 1980's, today there is over $4.3 trillion in these plans.  For more details on your impact, and those questions you may have about retirement planning, listen this Sunday March 11th, at 10:30 AM WDEL 1150AM.  Remember to turn your clock ahead an hour!

To Listen to the Show, click here