Wednesday, June 24, 2015

June 22, 2015 Weekly Market Update from Maier & Associates Financial Group

The markets responded favorably following the Federal Reserve's announcement that interest rates would not be raised next month. Both the large-cap Dow and S&P 500 closed ahead of last week. But the biggest weekly gainers were the Nasdaq, which gained 1.3%, and the Russell 2000, which closed the week 1.55% better than last Friday's close. The national average for gas prices was $2.835 – up $0.055 from last week. Gold finished the week up $21 from last week, selling at $1,200.20.


June 22, 2015 Weekly Market Update from Maier & Associates Financial Group

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At Maier & Associates, we are committed to helping you manage your finances as you strive to achieve your financial goals today, tomorrow, and many years down the road. Your financial success is important to us, which is why we create a wealth management strategy designed to meet your personal financial goals and dreams. Visit our website at http://maierandassociates.com/ or simply give us a call at (800) 282-4503.

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Tuesday, June 23, 2015

Deadline for Planning a Truly Happy Retirement? 5 Years Before

Deadline for Planning a Truly Happy Retirement? 5 Years Before
If you’re looking to put the finishing touches on your retirement plans, a study from MassMutual has a suggestion on timing. “Retirees who expressed the highest levels of satisfaction in retirement are also those who took concrete steps to put both their emotional and financial lives in order at least five years or more before retirement.”

Unfortunately, only 31% of U.S. adults heading toward retirement “carefully research and plan every detail of their retirement plans,” MassMutual says. And only 11% map out “every detail” of their retirement, while 36% admit to “winging it” with their financial strategy. (MassMutual points out that U.S. adults are three times more likely to wing their retirement than their vacation plans.)

There is some good news for future retirees, who could use some at a time so many struggle to cobble together a decent retirement fund. A majority of retirees say they are happy in retirement and that pre-retirement anxieties about being bored or financially strapped are significantly overstated.

“Our research on retirees and pre-retirees tells us that retirement can be and should be an extraordinarily happy time in our lives as long as we start to strengthen our emotional bonds and exercise financial planning discipline well before we plan to retire,” says Elaine Sarsynski, executive vice president at MassMutual Retirement Services. “The happiest retirees provide us with a road map for success, which is especially instructive for those who are close to embarking on the journey.”

The study has more “lessons learned” from retirees on how they found happiness in retirement:
  • Retirees who took steps to “build stronger connections” to their loved ones and “pursued new interests” were far more likely to enjoy their post-career years.
  • Retirees who laid out a careful plan for the financial side of retirement (such as calculating the best time to start collecting Social Security), and who accelerated retirement savings as they neared retirement, appeared “most satisfied.”
  • The biggest good retirement surprises included having no time constraints, keeping busy, and having enough money; bad surprises included suffering an illness or weak health and having unexpected cash problems.

Maier & Associates Financial Group is here to help!

At Maier & Associates, we are committed to helping you manage your finances as you strive to achieve your financial goals today, tomorrow, and many years down the road. Your financial success is important to us, which is why we create a wealth management strategy designed to meet your personal financial goals and dreams. Visit our website at http://maierandassociates.com/ or simply give us a call at (800) 282-4503.

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Wednesday, June 17, 2015

June 15, 2015 Weekly Market Update from Maier & Associates Financial Group

Reports from this past week revealed that the number of job openings is increasing, and the federal deficit and crude oil inventories are shrinking, while consumers are spending more of their hard-earned money. Unfortunately, news out of Europe is that negotiations between Greece and its creditors are regressing with default seemingly inevitable. The Dow, which had crept above 18000 during the week, closed at 17898.84, while the S&P 500 moved very little from last week's close. The Nasdaq lost 0.34%, but remains ahead of the major indexes year-to-date. The Global Dow closed the week ahead of last week, while the euro remained relatively stable against the dollar, finishing the week at $1.1268. Crude oil closed ahead of last week at $59.94 as did gold, which reached $1180.50 as of the end of trading on Friday.


June 15, 2015 Weekly Market Update from Maier & Associates Financial Group

Maier & Associates Financial Group is here to help!

At Maier & Associates, we are committed to helping you manage your finances as you strive to achieve your financial goals today, tomorrow, and many years down the road. Your financial success is important to us, which is why we create a wealth management strategy designed to meet your personal financial goals and dreams. Visit our website at http://maierandassociates.com/ or simply give us a call at (800) 282-4503.

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Tuesday, June 9, 2015

June 8, 2015 Weekly Market Update from Maier & Associates Financial Group

The Federal Reserve may be on track to raise short-term interest rates later this year, as a favorable jobs report may be signaling the start of anticipated economic growth and inflationary expansion. However, other economic indicators have not been as positive, further enforcing the Federal Reserve's "wait and see" approach. Possibly in response to a seemingly impending rate hike, 10-year Treasuries jumped 28 basis points to 2.41%, while large-cap stock indexes continued to pull back, with the Dow (-0.90%) and S&P 500 (-0.69%) both sinking a little further compared to last week.


June 8, 2015 Weekly Market Update from Maier & Associates Financial Group

Maier & Associates Financial Group is here to help!

At Maier & Associates, we are committed to helping you manage your finances as you strive to achieve your financial goals today, tomorrow, and many years down the road. Your financial success is important to us, which is why we create a wealth management strategy designed to meet your personal financial goals and dreams. Visit our website at http://maierandassociates.com/ or simply give us a call at (800) 282-4503.

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Wednesday, June 3, 2015

June 1, 2015 Weekly Market Update from Maier & Associates Financial Group

After experiencing positive gains the past few weeks, the short holiday week closed with all the major indexes experiencing losses. Both the S&P 500 and the Dow ended the week in the red, as did the small-cap Russell 2000 and Nasdaq, although each of the latter performed a little better than their large-cap peers. Favorable economic news may have driven the market decline in response to fears that the Federal Reserve would be raising interest rates sooner rather than later.


June 1, 2015 Weekly Market Update from Maier & Associates Financial Group

Maier & Associates Financial Group is here to help!

At Maier & Associates, we are committed to helping you manage your finances as you strive to achieve your financial goals today, tomorrow, and many years down the road. Your financial success is important to us, which is why we create a wealth management strategy designed to meet your personal financial goals and dreams. Visit our website at http://maierandassociates.com/ or simply give us a call at (800) 282-4503.

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Tuesday, June 2, 2015

4 Dangerous Assumptions That Could Hurt Your Retirement Plan

4 Dangerous Assumptions That Could Hurt Your Retirement Plan

As inveterate watchers of sitcom reruns (and a real-life Felix/Oscar combination), my sister and I loved The Odd Couple while we were growing up. One of our favorite episodes featured a courtroom sequence in which Felix (Tony Randall) berates a witness to “never assume,” and proceeds to use the chalkboard to demonstrate what happens when you do. More years later than I care to admit, the mere mention of the word “assume” makes me smile.

But assumptions aren’t always a laughing matter, and that’s certainly true when it comes to retirement planning, where “hope for the best, plan for the worst” is a reasonable motto. Incorrect—and usually too-rosy—retirement-planning assumptions are particularly problematic because, by the time a retiree or pre-retiree realizes her plan is in trouble, she may have few ways to correct it; spending less or working longer may be the only viable options.

What follows are some common—and dangerous—assumptions that individuals make when planning for retirement, as well as some steps they can take to avoid them.

Dangerous Assumption 1: That stock and bond market returns will be rosy
Most retirement calculators ask you to estimate what your portfolio will return over your holding period. It may be tempting to give those numbers an upward nudge to help avoid hard choices like deferring retirement or spending less, but think twice.

To be sure, stocks’ long-term gains have been pretty robust. The S&P 500 generated annualized returns of about 10% in the 100-year period from 1915 through the end of last year, and returns over the past 20 years have been in that same ballpark. But there have been certain stretches in market history when returns have been much lower than that; in the decade ended in 2009, for example—the so-called “lost decade”—the S&P 500 actually lost money on an annualized basis.

The reason for stocks’ weak showing during that period is that they were pricey in 2000, at the outset of the period. Stock prices aren’t in Armageddon territory now, but nor are they cheap. The Shiller P/E ratio, which adjusts for cyclical factors, is currently at 27, versus a long-term mean of 17. Morningstar’s price/fair value for the companies in its coverage universe is a not-as-scary 1.04, meaning that the typical company is 4% overpriced relative to our analysts’ estimate of intrinsic value. But that slight overvaluation surely isn’t a bullish signal, either.

What to do instead: Those valuation metrics suggest that prudent investors should ratchet down their market-return projections somewhat just to be safe. Morningstar equity strategist Matt Coffina has said that long-term real equity returns in the 4.5% to 6% range are realistic. Vanguard founder Jack Bogle’s forecast for real equity returns is in that same ballpark.

Investors will want to be even more conservative when it comes to forecasting returns from their bond portfolios. Starting yields have historically been a good predictor of what bonds might earn over the next decade, and right now they’re pretty meager—roughly 2% or 3% for most high-quality bond funds. That translates into a barely positive real (inflation-adjusted) return.

Dangerous Assumption 2: That inflation will be mild or nonexistent
In a related vein, currently benign inflation figures—CPI measured less than 1% in 2014—may make it tempting to ignore, or at least downplay, the role of inflation in your retirement planning. Like robust return assumptions, modest inflation assumptions can help put a happy face on a retirement plan. But should inflation run hotter than you anticipated in the years leading up to and during your retirement, you’ll need to have set aside more money and/or invested more aggressively in order to preserve your purchasing power when you begin spending from your portfolio.

What to do instead: Rather than assuming that inflation will stay good and low in the years leading up to and during retirement, conservative investors should use longer-term inflation numbers to help guide their planning decisions; 3% is a reasonable starting point. And to the extent that they can, investors should customize their inflation forecasts based on their actual consumption baskets. For example, food costs are often a bigger slice of many retirees’ expenditures than they are for the general population, while housing costs may be a lower component of retirees’ total outlay, especially if they own their own homes.

The possibility that inflation could run higher than it is today also argues for laying in hedges in your retirement portfolio to help preserve purchasing power once you begin spending your retirement assets. That means stocks, which historically have had a better shot of outgaining inflation than any other asset class, as well as Treasury Inflation-Protected Securities and I-Bonds, commodities, precious-metals equities, and real estate. The good news is that most of these asset classes—apart from stocks—are arguably trading cheaply today.

Dangerous Assumption 3: That you’ll be able to work past the age of 65
Never mind how you feel about working longer: The financial merits are irrefutable. Continued portfolio contributions, delayed withdrawals, and delayed Social Security filing can all greatly enhance a retirement portfolio’s sustainability. Given those considerations, as well as the ebbing away of pensions, increasing longevity, and the fact that the financial crisis did a number on many pre-retirees’ portfolios, it should come as no surprise that older adults are pushing back their planned retirement dates. Whereas just 11% of individuals surveyed in the 1991 Employee Benefit Research Institute’s Retirement Confidence Survey said they planned to retire after age 65, that percentage had tripled—to 33%—in the 2014 survey. In 1999, just 5% of EBRI’s survey respondents said they planned to never retire, whereas 10% of the 2014 respondents said that.

With that in mind, there appears to be a disconnect between pre-retirees’ plans to delay retirement and whether they actually do. While a third of the workers in the 2014 survey said they planned to work past age 65, just 16% of retirees said they had retired post-age 65. And a much larger contingent of retirees—32%—retired between the ages of 60 and 64, even though just 18% of workers said they plan to retire that early. As Morningstar.com assistant site editor Adam Zoll discusses here, the variance owes to health considerations (the worker’s or his or her spouse’s or parents’), unemployment, or untenable physical demands of the job, among other factors.

What to do instead: While working longer can deliver a three-fer for your retirement plan—as outlined above—it’s a mistake to assume that you’ll be able to do so. If you’ve run the numbers and it looks like you’ll fall short, you can plan to work longer while also pursuing other measures, such as increasing your savings rate and scaling back your planned in-retirement spending. At a minimum, give your post-age-65 income projections a haircut to allow for the possibility that you may not be able to—or may choose not to—earn as high an income in your later years as you did in your peak earnings years.

Dangerous Assumption 4: That you’ll receive an inheritance
Here’s the good news: While it’s a convention in movies for children to be crestfallen when their parents don’t leave them an inheritance, a recent study showed such surprises to be relatively rare. In fact, the study found that just the opposite scenario is common: More parents intend to leave their children an inheritance than children expect to receive one. A Fidelity survey found that adult children underestimate the value of their parents’ estates, to the tune of $300,000, on average.

But that doesn’t mean there’s no potential for some adult children to receive less than they expected to. Increasing longevity, combined with long-term care needs and rising long-term care costs, means that even parents who intend for their children to inherit assets from them may not be able to ensure it. Alternatively, the parents may not be inclined to give at all, even if they have the money: A U.S. Trust survey found that wealthy baby boomers are less likely than other generations to believe in leaving money to their heirs; just 53% of those boomers surveyed said they believe that leaving an inheritance is important, whereas 68% of high-net-worth investors over age 69 said that it’s important to them to do so.

Adult children who expect an inheritance that doesn’t materialize may be inclined to overspend and under save during their peak earning years. And by the time their parents pass away and don’t leave them a windfall—or leave them much less than they expected—it could be too late to make up for the shortfall.

What to do instead: Don’t rely on unknown unknowns. If you’re incorporating an expected inheritance into your retirement plan, it’s wise to begin communicating about that topic as soon as possible. Alternatively, if you don’t want or need an inheritance but suspect that your parents are forgoing their own consumption to give you one, you can have that conversation, too.

Maier & Associates Financial Group is here to help!

At Maier & Associates, we are committed to helping you manage your finances as you strive to achieve your financial goals today, tomorrow, and many years down the road. Your financial success is important to us, which is why we create a wealth management strategy designed to meet your personal financial goals and dreams. Visit our website at http://maierandassociates.com/ or simply give us a call at (800) 282-4503.

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