Weekly Economic Update – October 12th

SEPTEMBER FED MINUTES SHOW CAUTION

Minutes from last month’s Federal Open Market Committee meeting provided a bit more insight into the Federal Reserve’s decision not to tighten monetary policy in September. Fed officials opted to “wait for additional information” before making a move, noting that “recent global economic and financial developments may have increased the downside risks to economic activity somewhat.” Even so, most FOMC members thought it appropriate to raise rates “before the end of the year”, believing that slowing economies elsewhere had not “materially altered” the economic outlook for America.

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Should You Apply For Social Security Now…or Later?

When should you apply for benefits? Consider a few factors first.

Provided by Ron R. Richards

Now or later? When it comes to the question of Social Security income, the choice looms large. Should you apply now to get earlier payments? Or wait for a few years to get larger checks?

Consider what you know (and don’t know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren’t as foreseeable. You don’t know exactly how long you will live, so you can’t predict your lifetime Social Security payout. You may even end up returning to work again.

When are you eligible to receive full benefits? The answer may be found online at socialsecurity.gov/retire2/agereduction.htm.

How much smaller will your check be if you apply at 62? The answer varies. As an example, let’s take someone born in 1953. For this baby boomer, the full retirement age is 66. If that baby boomer decides to retire in 2015 at 62, his/her monthly Social Security benefit will be reduced 25%. That boomer’s spouse would see a 30% reduction in monthly benefits.1

Should that boomer elect to work past full retirement age, his/her benefit checks will increase by 8.0% for every additional full year spent in the workforce. (To be precise, his/her benefits will increase by .67% for every month worked past full retirement age.) So it really may pay to work longer.2

Remember the earnings limit. Let’s put our hypothetical baby boomer through another example. Our boomer decides to apply for Social Security at age 62 in 2015, yet stays in the workforce. If he/she earns more than $15,720 in 2015, the Social Security Administration will withhold $1 of every $2 earned over that amount.3

How does the SSA define “income”? If you work for yourself, the SSA considers your net earnings from self-employment to be your income. If you work for an employer, your wages equal your earned income.4

Please note that the SSA does not count investment earnings, interest, pensions, annuities and capital gains toward the current $15,720 earnings limit.4

Some fine print worth noticing. Did you know that the SSA may define you as retired even if you aren’t? (This actually amounts to the SSA giving you a break.) For 2014, the SSA considered you “retired” if you were under full retirement age for the entire year and your monthly earnings were $1,290 or less.5

If you are self-employed, eligible to receive benefits and under full retirement age for the entire year, the SSA generally considers you “retired” if you work less than 15 hours a month at your business.5

Here’s the upside of all that: if you meet the tests mentioned in the preceding paragraph, you are eligible to receive a full Social Security check for any whole month of a year in which you are “retired” under these definitions. You can receive that check no matter what your earnings total for all of that year.5

Learn more at socialsecurity.gov. The SSA website is packed with information and is quite user-friendly. One last little reminder: if you don’t sign up for Social Security at full retirement age, make sure that you at least sign up for Medicare at age 65.

Ron R. Richards may be reached at 208.855.0304 or ron@cir1daho.com.

www.cir1daho.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.    

Citations.

1 – socialsecurity.gov/retire2/agereduction.htm [11/6/14]

2 – socialsecurity.gov/retire2/delayret.htm [11/6/14]

3 – forbes.com/sites/janetnovack/2014/10/22/social-security-benefits-rising-1-7-for-2015-top-tax-up-just-1-3/ [10/22/14]

4 – ssa.gov/retire2/whileworking2.htm [11/4/14]

5 – socialsecurity.gov/retire2/rule.htm [11/6/14]

   

Weekly Economic Update – October 5th, 2015

142,000 NEW JOBS CREATED IN SEPTEMBER

Is a global slowdown impacting the U.S. economy? The latest Labor Department jobs report seemed to say yes. Hiring last month fell far short of the 200,000 total projected by economists in a MarketWatch survey. Moreover, job gains across July and August were revised down by 59,000. There was some good news – the U-6 (underemployment) rate declined 0.3% to 10.0%. The headline jobless rate stayed at 5.1%. After the report’s release, just 2% of futures investors on the Chicago Mercantile Exchange felt the Federal Reserve would raise interest rates in October; only 29% thought the Fed would do so in December.

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Monthly Economic Report – September 2015

THE MONTH IN BRIEF
The Federal Reserve left interest rates alone in September, but that did little to calm investors. Growth worries took the market south again – the S&P 500 lost 2.64% for the month as more disappointing economic news filtered out of China. Perceptions of reduced demand for crude oil and other raw materials led to monthly losses in the commodities sector. America’s economic indicators looked good by comparison, but encouraging consumer spending and consumer confidence numbers failed to distract Wall Street during a gloomy end of summer for equities.

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How Do You Know When You Have Enough to Retire?

There is no simple answer, but consider some factors.

Provided by Ron R. Richards

You save for retirement with the expectation that at some point, you will have enough savings to walk confidently away from the office and into the next phase of life. So how do you know if you have reached that point?

Retirement calculators are useful – but only to a point. The dilemma is that they can’t predict your retirement lifestyle. You may retire on 65% of your end salary only to find that you really need 90% of your end salary to do the things you would like to do.

That said, once you estimate your income need you can get more specific thanks to some simple calculations.

Let’s say you are 10 years from your envisioned retirement date and your current income is $70,000. You presume that you can retire on 65% of that, which is $45,500 – but leaving things at $45,500 is too simple, because we need to factor in inflation. You won’t need $45,500; you will need its inflation-adjusted equivalent. Turning to a Bankrate.com calculator, we plug that $45,500 in as the base amount along with 3% annual interest compounded (i.e., moderate inflation) over 10 years … and we get $61,148.1

Now we start to look at where this $61,148 might come from. How much of it will come from Social Security? If you haven’t saved one of those mailers that projects your expected retirement benefits if you retire at 62, 66, or 70, you can find that out via the Social Security website. On the safe side, you may want to estimate your Social Security benefits as slightly lower than projected – after all, they could someday be reduced given the long-run challenges Social Security faces. If you are in line for pension income, your employer’s HR people can help you estimate what your annual pension payments could be.

Let’s say Social Security + pension = $25,000. If you anticipate no other regular income sources in retirement, this means you need investment and savings accounts large enough to generate $36,148 a year for you if you go by the 4% rule (i.e., you draw down your investment principal by 4% annually). This means you need to amass $903,700 in portfolio and savings assets.  

Of course, there are many other variables to consider – your need or want to live on more or less than 4%, a gradual inflation adjustment to the 4% initial withdrawal rate, Social Security COLAs, varying annual portfolio returns and inflation rates, and so forth. Calculations can’t foretell everything.

The same can be said for “retirement studies”. For example, Aon Hewitt now projects that the average “full-career” employee at a large company needs to have 15.9 times their salary saved up at age 65 in addition to Social Security income to sustain their standard of living into retirement. It also notes that the average long-term employee contributing consistently to an employer-sponsored retirement plan will accumulate retirement resources of 8.8 times their salary by age 65. That’s a big gap, but Aon Hewitt doesn’t factor in resources like IRAs, savings accounts, investment portfolios, home equity, rental payments and other retirement assets or income sources.2

For the record, the latest Fidelity estimate shows the average 401(k) balance amassed by a worker 55 or older at $150,300; the Employee Benefit Research Institute just released a report showing that the average IRA owner has an aggregate IRA balance of $87,668.2

Retiring later might make a substantial difference. If you retire at 70 rather than at 65, you are giving presumably significant retirement savings that may have compounded for decades five additional years of compounding and growth. That could be huge. Think of what that could do for you if your retirement nest egg is well into six figures. You will also have five fewer years of retirement to fund and five more years to tap employer health insurance. If your health, occupation, or employer let you work longer, why not try it? If you are married or in a relationship, your spouse’s retirement savings and salary can also help.

Can anyone save too much for retirement? The short answer is “no”, but occasionally you notice some “good savers” or “millionaires next door” who keep working even though they have accumulated enough of a nest egg to retire. Sometimes executives make a “golden handshake” with a company and can’t fathom walking away from an opportunity to greatly boost their retirement savings. Other savers fall into a “just one more year” mindset – they dislike their jobs, but the boredom is comforting and familiar to them in ways that retirement is not. They can’t live forever; do they really want to work forever, especially in a high-pressure or stultifying job? That choice might harm their health or worldview and make their futures less rewarding.

So how close are you to retiring? A chat with a financial professional on this topic might be very illuminating. In discussing your current retirement potential, an answer to that question may start to emerge.

Ron R. Richards may be reached at 208.855.0304 or ron@cir1daho.com.

www.cir1daho.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

Citations.

1 – bankrate.com/calculators/savings/simple-savings-calculator.aspx [5/30/13]

2 – marketwatch.com/story/how-to-know-if-you-have-enough-to-retire-2013-05-25 [5/25/13]

Weekly Economic Update – September 28th, 2015

A BIT MORE OPTIMISM AS SEPTEMBER ENDS

The University of Michigan’s consumer sentiment index advanced slightly in the past couple of weeks, rising to a final September mark of 87.2 from its initial reading of 85.7. Regardless, this was the index’s poorest final monthly reading since October 2014. It did surpass the expectations of analysts polled by Bloomberg, who expected a final number of 86.5.

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Creating a Budget For Retirement

It only makes sense – yet many retirees live without one.

Presented by Ron R. Richards

The importance of budgeting. You won’t be able to withdraw an unlimited amount of money in retirement, so a retirement budget is a necessity. Some retirees forego one, only to regret it later.

Run the numbers before you retire. Years before you leave work, sit down for an hour or so and take a look at your probable monthly expenses. Perhaps you decide that you’ll need about 75-80% of your end salary in retirement. Perhaps closer to 65-70%. There’s no “right” answer for everyone. Online calculators may help you get at least a basic understanding initially, but remember – a qualified financial professional is likely going to be able to take more into account for you than a simple calculator could.

You first want to look for changing expenses: housing costs that might decrease or increase, health care costs, certain taxes, travel expenses and so on. Next, look at your probable income sources: Social Security (the longer you wait, the more income you may potentially receive), your assorted IRAs and 401(k)s, your portfolio, possibly a reverse mortgage or even a pension or buyout package.

While selling your home might leave you with more money for retirement, there are less dramatic ways to increase your retirement funds. You could realize a little more money through tax savings and tax-efficient withdrawals from retirement savings accounts, by reducing your investment fees, or by having your phone, internet and TV services bundled from one provider.

Budget-wreckers to avoid. There are a few factors that can cause you to stray from a retirement budget. You can’t do much about some of them (sudden health crises, for example), but you can try to mitigate others.

* Supporting your kids, grandkids or relatives with gifts or loans.

* Withdrawing more than your portfolio can easily return.

* Dragging big debts into retirement that will nibble at your savings.

Budget well & live wisely. A carefully thought-out budget – and the discipline to stick with it – may make big difference in the long run.

Ron R. Richards may be reached at 208-855-0304 or ron@cir1daho.com .

www.cir1daho.com

 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Weekly Economic Update – September 21, 2015

September 21, 2015

FED POSTPONES RATE MOVE, SIGNALS ONE SOON

The September interest rate hike Wall Street had long anticipated did not occur, as the Federal Open Market Committee voted 9-1 against raising the federal funds rate Thursday. In their September 17 policy statement, Federal Reserve officials noted that recent “global economic and financial developments” had “somewhat” impeded the U.S. economy and reduced inflation pressures, lessening the need to tighten. The central bank’s latest dot-plot chart projected the benchmark interest rate at 0.40% by the end of 2015 – hinting that an upward move might come as early as October.1

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Monthly Economic Report – August 2015


THE MONTH IN BRIEF

Fears about the health of China’s economy rocked Wall Street and other stock markets last month. The Dow Jones Industrial Average lost 6.57% in August, and other major U.S. equity indices followed it into correction territory. Not one consequential foreign benchmark posted an August gain. The anxiety also sent prices of oil and other commodities lower; oil rebounded before the end of the month, but many other commodity futures did not. The housing sector and a few encouraging U.S. economic indicators offered bright spots, but they were not enough to divert attention from concerns about China’s economic woes.1

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