Expenses are often much different in retirement than they are during working years, but they are still incredibly important to the overall plan.
Often, clients will spend more in the early years of retirement, see expenses dip in the middle, then rise as they near the end of their lives and medical expenses climb.
Also, NOT all Expense Categories grow at the Same Rate of Inflation, and this needs to be considered when forecasting long-term expenses.
On Friday, August 22, the S&P 500 closed @ 1988, and that was...
+7.3% ABOVE its 12-Month moving average which stood @ 1853.
+5.9% ABOVE its 40-Week moving average which stood @ 1878.
+1.3% ABOVE its 10-Week moving average which stood @ 1963.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
The role of Social Security in the retirement planning process is changing as concerns grow over the availability of benefits for future generations.
According to the Annual Report of the Board of Trustees, RESERVES for Social Security will be fully depleted in 2033, which is not too far away.
While it's impossible to predict what will happen to the system, planners and their clients need to consider the impact of potential reductions to payments.
Excerpt:
"Vanguard
predicts a most likely case of a +5.7% real annual returns for stocks, but other
experts are more cautious.
In his new book, Rational
Expectations, William J. Bernstein predicts a +2% real return for large-cap stocks and
+3% for small-cap stocks over the
next decade.
Rob Arnott, chairman of Research Affiliates, forecasts a
+3% real return over the next
decade."
My own opinion is that the future is even more uncertain than the ranges
shown in the Vanguard model — especially on the downside.
And as I see it, the
world is a less predictable place than ever before.
Read the entire report here...
Vanguard Capital Markets Model: 10-Year Investing Forecast
On Friday, August 15, the S&P 500 closed @ 1955, and that was...
+5.8% ABOVE its 12-Month moving average which stood @ 1848.
+4.4% ABOVE its 40-Week moving average which stood @ 1873.
-0.2% BELOW its 10-Week moving average which stood @ 1958.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
There are various Social Security claiming strategies that help to maximize the benefits for an individual or couple.
The breakeven age where you would be better off delaying benefits typically occurs between your late 70s and early 80s, depending on how long you wait and other factors.
The +8% per year increase from full retirement age to age 70 is compelling, and once a client crosses that breakeven age, the benefit grows exponentially.
Strategies such as "file and suspend" can be used to fully maximize Social Security benefits, especially for married couples.
The bull market for the S&P 500 is in its 66th month.
Since bottoming on 03/09/09 (i.e., 65 months ago), the S&P 500 has gained +220% (total return) through the close of trading last Friday, 08/08/14.
The average bull market for the S&P 500 since 1950 has lasted 58 months.
On Friday, August 8, the S&P 500 closed @ 1932, and that was...
+4.7% ABOVE its 12-Month moving average which stood @ 1845.
+3.4% ABOVE its 40-Week moving average which stood @ 1868.
-1.3% BELOW its 10-Week moving average which stood @ 1958.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
While estate planning is less important for federal estate tax reasons, with the increase in the exemption amounts to over $5 million per person, the non-financial aspects of estate planning are still critical.
Making sure clients have a power of attorney updated and in place, and addressing the need for health care documents like a health care power of attorney and advance directive can be very important.
Trustee designations and naming the proper beneficiaries are often missed or not changed when life circumstances change.
On Friday, August 1, the S&P 500 closed @ 1925, and that was...
+4.4% ABOVE its 12-Month moving average which stood @ 1844.
+3.3% ABOVE its 40-Week moving average which stood @ 1864.
-1.5% BELOW its 10-Week moving average which stood @ 1957.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
Long-Term Care costs are increasing -- as is the percentage of the population that will need this kind of care at some point in their lives.
Looking broadly at how to fund these costs is important, whether that means self-insuring if you have enough assets or buying some form of Long-Term Care insurance (LTCi).
Back in March, bond guru Jeffrey Gundlach was warning that margin debt, which reflects the dollar volume
of securities investors have purchased through borrowed money, was in "the scary
zone." At the time, NYSE margin debt surged to $465 billion.
After dipping for a few month, margin debt is back on the rise. As of June, NYSE margin debt
is just short of those all-time highs.
For longtime market observer
Dennis Gartman, this means the stock market is ripe for a correction.
"...since ’09 margin debt has risen
from $200 billion to nearly $475 billion as of two months ago and historically
margin debt actually begins to weaken from its highest levels before stock
prices begin to turn downward," he writes. "If the highs were made a few months
ago in margin debt, the market is more vulnerable now than it was, if history is
prologue to the future. Although past performance by mutual and hedge fund
managers is not, according to the SEC, indicative of future performance, when it
comes to margin debt the past truly is a guide to the future."
Doug Short, who published the data to which Gartman refers, is a bit more
sanguine. He notes that the data are already several weeks old when published,
so we can't say for sure whether we're seeing a
major shift in margin debt.
Some also believe margin debt levels are a more
benign coincident indicator whose recent movements are merely reflecting
the increasing presence of hedge funds.
For his part,
Gundlach said it may actually be difficult to
tell whether the surge is a cause or effect of the broader market rally.
But it's clearly something investors are watching closely.
On Friday, July 25, the S&P 500 closed @ 1978, and that was...
+7.8% ABOVE its 12-Month moving average which stood @ 1836.
+6.4% ABOVE its 40-Week moving average which stood @ 1860.
+1.2% ABOVE its 10-Week moving average which stood @ 1904.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
“Extreme Greed” is the dominant emotion that is currently driving the stock market, a Bearish Omen.
On Friday, July 18, the S&P 500 closed @ 1963, and that was...
+7.7% ABOVE its 12-Month moving average which stood @ 1836.
+6.7% ABOVE its 40-Week moving average which stood @ 1854.
+1.8% ABOVE its 10-Week moving average which stood @ 1944.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
On Friday, July 11, the S&P 500 closed @ 1968, and that was...
+8.4% ABOVE its 12-Month moving average which stood @ 1835.
+7.4% ABOVE its 40-Week moving average which stood @ 1847.
+3.1% ABOVE its 10-Week moving average which stood @ 1934.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
A Perfect Track Record For Forecasting U.S. Recessions
There are very few market indicators that can predict recessions without sending out false positives.
The Yield Curve is one of them.
Recently, LPL Financial's Jeffrey Kleintop noted that the yield curve inverted just prior to every U.S. recession in the past 50 years.
"That is 7 out of 7 times — a perfect forecasting track record," he reiterated.
The yield curve is INVERTED when short-term interest rates (e.g. the 3-year Treasury) are HIGHER than long-term interest rates (e.g. the 10-year Treasury yield).
"The yield curve inversion usually takes place about 12 months before the start of the recession, but the lead time ranges from about 5 to 16 months," wrote Kleintop in a recent note.
"The peak in the stock market comes around the time of the yield curve inversion, ahead of the recession and accompanying downturn in corporate profits."
The Federal Reserve has been signaling that tighter monetary policy is on its way, which means short-term interest rates should move higher. Is this something we should be worried about? Kleintop offered some context:
"How far the Fed must push up short-term rates before the yield curve inverts by 0.5% depends on where long-term rates are. Even if long-term rates stay at the very low yield of 2.6% seen in mid-June 2014, to invert the yield curve by 0.5% the Fed would need to hike short-term rates from around zero to more than 3%. Based on the latest survey of current Fed members that vote on rate hikes, they do not expect to raise rates above 3% until sometime in 2017, at the earliest..."
Lots of economic and market factors drive what happens with interest rates. So the shape of the yield curve is definitely worth paying attention to.
"The facts suggest the best indicator for the start of a bear market may still be a long way from signaling a cause for concern," he said.
As of June 30, the current bull market for the S&P 500 is 5.3 years in duration.
The longest running bull market for the stock index since 1950 lasted 9.5 years.
During that 9.5 year bull market, the S&P 500 gained +111% through 5.3 years, then gained another +145% after 5.3 years.
On Friday, July 4, the S&P 500 closed @ 1985, and that was...
+8.1% ABOVE its 12-Month moving average which stood @ 1836.
+7.5% ABOVE its 40-Week moving average which stood @ 1847.
+2.6% ABOVE its 10-Week moving average which stood @ 1935.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
As of June 30, 2014, the S&P 500 has gone exactly 1,000 calendar days (from 10/03/2011 through and including 6/29/2014) without a -10% or greater drop in the index, the 5th longest stretch without a double-digit pullback in the last 50 years.
If the S&P 500 is able to avoid a -10% correction through 11/04/2014, this run will move into 4th place, replacing a 1,127 day streak within the 1984-87 bull.
On Friday, June 27, the S&P 500 closed @ 1961, and that was...
+8.3% ABOVE its 12-Month moving average which stood @ 1811.
+7.0% ABOVE its 40-Week moving average which stood @ 1833.
+2.2% ABOVE its 10-Week moving average which stood @ 1918.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
On Friday, June 20, the S&P 500 closed @ 1963, and that was...
+8.4% ABOVE its 12-Month moving average which stood @ 1811.
+7.4% ABOVE its 40-Week moving average which stood @ 1827.
+3.1% ABOVE its 10-Week moving average which stood @ 1904.
Therefore, the INTERMEDIATE-Term trend is NEUTRAL
and the LONG-Term trend is UP.
