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!

101 Chicken Recipes for Baby Boomers on Social Security

The administration has put into play a change that will affect all baby boomers headed toward an inflation protected retirement.  The budget released Wednesday backs replacing the Consumer Price Index (CPI-W) to a variant known as the “Chained CPI.”  This is reported to slow the growth of the social security benefits to present and future beneficiaries.  The administration says that it is a more accurate measure than the current formula, put in place in 1974, to offset the effects of inflation on the benefits.  They claim that the CPI-W is not a good measure and the revised “Chained CPI” would take into account price increases of goods, and peoples behavior toward purchasing lower priced goods, or less of them.   This bi-partisan conversation over the past few years should put Baby Boomers and Seniors on notice that your benefits are going to be reduced over time.  It is hard to predict how a behavior based index could perform, as it has no history.  The Wall Street Journal recently reported, according to the labor department, that the “Chained CPI” would follow the pattern on the historic CPI-W, but in back-testing, falls about 5% less in benefits from 2002-2012.  Does not seem like a lot, until you take the compounding effect into consideration for those that will live past age 85.  The administration is estimating that it will reduce benefits $180 billion over a decade. 

Why do you need 101 Chicken recipes?  The “Chained CPI” is set up to assume that when a consumer is faced with the choice of a high priced item, or a item that has increased in price, they will always choose the lower priced good or service.  So, on your trip to MegaMarket in 5 years, when you see a prime rib selling for $14.99 per pound, to combat the effects of inflation, you are going to bypass that delicious aged prime rib, and opt for the split breast of chicken selling for $3.99 per pound!  Always.  Every-time, every-day!  I expect the Perdue family is pretty excited at this new proposal, and at least for the consideration should be handing out a thick recipe book to all baby boomers heading to claim social security!  The effect on your retirement plan?  You need to make certain that you understand and outpace the rate of inflation.  Historically, the rate averages about 2.8% per year.  Or better understood, a dollar next year only purchases, $0.97 of product and services.  Ten years from now, that dollar buys $0.80 of goods, and twenty years from now, $0.60 of goods.  If we are tied to a “chained CPI” estimated to reduce the inflation rate index by 5% , twenty years from now you have $0.58 of buying power.  If you cannot change this, at least understand it and plan for it. 

I agree with the position of the AARP, telling administrators and congress that Social security cuts are not, and should not be the focus of deficit reduction.  The oldest and poorest Americans will feel the full effects of a “Chained CPI.” 

I cannot advise baby boomers enough about the fight for CPI, and at least understand CPI as it relates to planning for a healthy and happy retirement. 

And if you do not want to listen, I have a recipe for you.  This is my favorite “ Superfood” chicken recipe that includes Apples, Goji Berry, Kale, Olive Oil!  Stay Healthy! Stay Organic!

INGREDIENTS

·                                 1 cup apple, such as Gala or Golden Delicious, cored, peeled, and chopped

·                                 1/4 cup goji berries or cranberry (goji can be found at Wegmans and Whole foods)

·                                 2 teaspoons grated fresh ginger root

·                                 2 tablespoons brown sugar

·                                 2 tablespoons cider vinegar – pure organic

·                                 1/8 teaspoon salt

·                                 4 large boneless, skinless chicken breasts (6 ounces each), trimmed of excess fat

·                                 4 slices prosciutto, trimmed of excess fat

·                                 2 tablespoons olive oil, divided

·                                 1 large bunch kale (about 10 ounces), chopped

PREPARATION

In a small saucepan, place the apple, goji berries, ginger, brown sugar, vinegar, and salt. Bring to a boil, then reduce to a simmer and cook about 20 minutes, until most of the liquid has evaporated and a thick chutney starts to form. Remove from the heat and set aside. 

Heat the over to 400° F. Wrap each chicken breast in one slice of prosciutto. Heat a large, oven-safe skillet over medium-high heat. Add tablespoon of the olive oil. Add the chicken breasts and cook 1 minute, turning once to brown the prosciutto. Transfer to the over and bake 10 minutes, or until the chicken is cooked through. 

In a second large, oven-safe skillet, warm the remaining olive oil over medium heat.  Add the kale and cook 1 to 2 minutes, turning often, until the kale starts to soften. Slide the skillet into the over and bake 5 minutes, or until the kale starts to crisp. Remove both skillets from the oven and place the chicken and kale on plates. Top with chutney and serve immediately.

ENJOY and STAY INFORMED!  Only 100 more recipes to find!

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.

Whats Ahead for Long Term Care Protection?

The news this week is not new, but very consistent and concerning for baby boomers facing retirement. Prudential announced that effective at months end, it would no longer accept applications for long term care protection.  This is the tenth of the top twenty sales companies to discontinue policies to individuals for the important care policies.  The company cited low yields on bonds and higher then expected policy payments for this product line.
On RetireSmart Radio Show this Sunday, B Michael Shanley will discuss this problem, its impact on your retirement, and some hybrid ideas to get the best of the needed insurance, for an affordable price.  Tune in to WDEL 1150 AM at 10:30 AM Sunday March 25th for this important information.
Michael Shanley is the President and Senior Retirement Advisor for the Brandywine Valley Advisors Group with offices in West Chester and Wilmington.  Consider your options with the professional advise you need to make a  custom retirement plan for your family.  You can contact Michael at 484-881-8899

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