Medicare Costs

The average married coupe will need an estimated $283,000 to cover their out-of-pocket healthcare costs during retirement.

Did you know healthcare expenses typically account for 13% of income after age 65? Give us a call if you have any retirement or investment questions, we're always happy to help.

Market Mayhem

Correction? The Dow Jones Industrial Average lost about 6 percent last week. That puts the benchmark index about 10 percent below its record high on May 19, 2015, according to Barron's. A drop of that magnitude from a new high may be a correction - a brief but jarring drop in value that often causes investors to reassess the state of the market and the health of the companies they hold. If investors judge markets and holdings to be sound, a correction may represent a buying opportunity. Of course, there is a chance markets could fall further. A drop of 20 percent or more is considered a bear market. The Standard & Poor's 500 Index lost about the same amount as the Dow last week and is down almost 8 percent from its May high. Technically, it's not yet in correction territory. A dip greater than 5 percent and less than 10 percent is a pullback. Many factors contributed to U.S. stock markets' performance last week. Concerns about global recovery were top of mind for many investors. China's slowdown may significantly reduce demand for commodities, and emerging markets that are dependent on commodity exports are struggling. CNN Money reported: "China's economic slowdown and currency devaluation have investors worried that things could get worse as the year goes on. Developing countries like Brazil and Russia are struggling to revive their economies as their currencies depreciate dramatically against the dollar. Brazil's currency value has declined over 20 percent and Russia's over 40 percent, hurting imports and everyday citizens. It's also a huge worry for America's biggest companies. About 44 percent of the revenues from S&P 500 companies come from outside the United States." Currency depreciation (not to be confused with devaluation, which is a government's deliberate downward adjustment in currency value) is market-driven and sometimes causes investors to pull assets out of a country, which can put more pressure on the currency. Uncertainty about the timing of a rate hike in America didn't help matters. CNBC reported, after the minutes of the July Federal Open Market Committee meeting were released last week and indicated "almost all members" had some concerns about the strength of U.S. economic growth, the CME FedWatch barometer put the likelihood of a September increase at 24 percent - a 45 percent drop from the prior day. FROM ABSTRACT TO REALITY: THE POTENTIAL EFFECTS OF RISING RATES. When the economic data align, and the Federal Reserve pulls the trigger on tighter monetary policy, rising interest rates may affect everything from mortgage rates to bond yields to economic growth. Here are a few of the possible consequences: * Higher demand for short-term bonds. When interest rates rise, bond values fall, and vice versa. However, changes in bond values will be influenced by the speed and magnitude of the rate change. A sharp increase over a short period would have a greater effect than a gradual rise over a longer period. To date, the Fed has indicated the fed funds rate will rise gradually. Experts cited by The Wall Street Journal suggest shorter-term bonds and cash will be more attractive than longer-term bonds for a period of time. * Less attractive loan terms and credit card incentives. By raising the fed funds rate, the Fed will increase borrowing costs. That's likely to affect mortgage rates as well as automobile and other consumer loan rates. The Journal cautioned homebuyers to be wary of adjustable-rate mortgages and indicated zero percent introductory offers on credit cards may disappear. * Slow improvement in savings account returns. Over the longer term, rising rates may prove to be a boon for savers, but there is likely to be little immediate change in the yields offered on savings accounts. That's because banks set these rates. In general, banks raise rates to attract deposits and few banks need to do that right now, according to an expert cited by The Wall Street Journal. While it seems counterintuitive, tightening monetary policy will not affect interest rates equally across all markets. Weekly Focus - Think About It "The individual investor should act consistently as an investor and not as a speculator." --Benjamin Graham, American economist

Who Should Pay for College?

Should parents pay for their child's college education?

The message you send can be a lesson in itself.

As The Wall Street Journal columnist Sue Shellenbarger once wrote, "Do student loans teach responsibility or foster a lifelong over-reliance on debt? Are parents who pay their kid's way through college modeling self-sufficiency or martyrdom? Does requiring a student to get a job during the academic year instill work ethic or workaholism?"  

Many families have no alternative but to rely on student loans, part-time college jobs, and student and parental savings. What about those who can afford to pay for college? Does paying the bill really produce entitled children? Eileen Gallo offers the following advice.

Meet periodically with your adult child to establish a clear understanding - preferably in writing - of the economic arrangement. Some of the issues that should be covered include: Will the parents require a minimum grade point average? What is the student's financial contribution to his/her education and how will the student earn money? The Gallos strongly recommend the student work part-time, but no longer than 15 hours per week. Alternatively, the student could work full-time during the summer.

In conclusion, be aware of the messages and values that parental decisions send to the college-age child. What message are you sending?

WMC: What Does the Future Hold?

Stock markets in the United States got off to a good start last week, heading higher before stumbling over China's currency news. 

China, which has one of the world's largest and fastest growing economies, is experiencing a slowdown in economic growth. The Economist reported data released last week showed, "...an 8 percent fall in Chinese exports in July and a 5.4 percent drop in factory-gate prices. Output prices have fallen for 41 straight months, a symptom of overcapacity in much of China's heavy industry." MarketWatch suggested China may be in (or on the verge of) recession.

In an effort to slow its slowdown, China announced an unexpected devaluation of its currency, the renminbi, last week. Don't confuse the terms renminbi and yuan. Renminbi is the name of China's currency. Yuan describes a unit of that currency. For instance, when shopping in China, you would not ask how many renminbi you owed, you would ask how many yuan you owed.

Barron's questioned whether China's relatively small currency adjustment would be enough to help its economy and speculated last week's devaluation could be the tip of the iceberg:

"One wonders what a 3 percent adjustment in the yuan will do to spur China's economy... To a longtime observer of finance ministers and central bankers, the claim that the initial moves to tweak currencies will suffice is a familiar refrain. The larger the underlying imbalance, the larger the eventual exchange-rate adjustment."

A Fed spokesman told The Wall Street Journal China's new currency policy has significant implications for the world economy and it probably won't affect the Fed's impending rate hike.

The currency devaluation didn't have a sustained affect on U.S. stock markets last week. Major U.S. stock markets finished the week higher. China's benchmark national index was up for the week, too.

What Does the Future Hold?

It's not stuff most of us think about every day, but we may soon be a lot more familiar with terms likebrain organoids, megascale desalination, Internet balloons, liquid biopsies, and more. At least, that's what the MIT Technology Review reported in Breakthrough Technologies 2015:

"Not all breakthroughs are created equal. Some arrive more or less as usable things; others mainly set the stage for innovations that emerge later, and we have to estimate when that will be. But we'd bet that every one of the milestones on this list will be worth following in the coming years."

Here are a few of the items included on the list:

• Brain organoids: In greatly oversimplified terms, these are miniature brains that can be grown from an adult's cells. They may help researchers better understand brain disorders and develop effective treatments.
• Megascale desalinization: The world does not have enough fresh water. One solution is seawater desalination. Thanks to engineering improvements, reverse-osmosis desalination has become cost-effective.
• Internet balloons: Imagine 15-meter helium balloons with solar-powered electronics hovering 20 kilometers in the air (far above commercial airline flights) and making the Internet available to people who currently have no access.
• Liquid biopsies: Someday soon, annual blood tests may help diagnose cancer early. Gene sequencing machines decode millions of fragments of DNA in the bloodstream, looking for specific DNA patterns that indicate cancer. Knowing the DNA mutation behind a cancer may also help physicians choose the most effective treatments.

It's important to keep track of developing technologies because they have the potential to disrupt industries and change the way business is done.

Weekly Focus - Think About It

"Any sufficiently advanced technology is indistinguishable from magic."

 --Arthur C. Clarke, British science fiction writer

Surprising Errors in Credit Reporting

According to a 2013 study from the Federal Trade Commission, more than 25 percent of consumers who took the time to check their credit reports identified errors that might affect their credit scores.

This might partially explain why, according to an article in Time magazine, a whopping 56 percent of Americans have subprime credit. Looks like more people should be taking advantage of their free yearly credit reports.

The Fair Credit Reporting Act requires each of the three nationwide credit reporting companies - Equifax, Experian and TransUnion - to provide a free copy of your credit report once every 12 months, upon your request.  

Are You Overwhelmed at Work?

Back to school...back to higher interest rates?

 

After a solid July jobs report arrived on Friday - 215,000 new jobs were created and unemployment remained at 5.3 percent - analysts were pretty confident there would be ample support for a Federal Reserve rate increase (a.k.a. liftoff) in September. Bloomberg reported the odds of a September liftoff shot from 38 percent to 52 percent just last week.

 

The pending rate increase was not a surprise, but investors were ruffled and U.S. stock markets moved lower. According to Barron's, the Dow Jones Industrial Index has lost value for seven days - its longest losing streak in four years.

 

However, nobody was reaching for a panic button:

 

"...The decline in U.S. stocks has raised few alarms in part because it's been gradual and doesn't seem tied to any fundamental flaws in the economy. The natural drift of the market now is lower because, frankly, there are few obvious catalysts to lift stocks higher. Large-company U.S. stocks fetch valuations well above their historical averages and their earnings aren't growing. Paying more for these stocks ahead of a Fed rate increase equates to "fighting the Fed," a prospect investors look upon almost as favorably as sticking their fingers in an electrical outlet."

 

The Fed rate increase is expected to be slow and gradual, but no one is certain what will happen after it begins. Russ Koesterich, Chief Global Investment Strategist at BlackRock, expects, "Short-term bonds will be most affected by higher rates, while longer-term bond yields should inch up at a gentler pace. High-dividend stocks that have served as "bond market proxies" are also likely to suffer, but overall, stocks' reaction to liftoff should be relatively tempered."

 

Are You Overwhelmed at Work?

Last year, the most popular chapter in Deloitte University Press' Global Human Capital Trends 2014report was titled, "the overwhelmed employee." It's not all that hard to understand when you consider just these facts from the 2015 report:

• 100 billion emails are exchanged every day.
• About 14 percent of those emails are vitally important.
• One-fourth of the average workday is spent reading and answering email.
• We check mobile phones 150 plus times each day, on average, for work/personal information.
   

In addition to technology and round-the-clock work demands, the complexity of workplace practices, processes, and jobs contribute to employee inundation. According to Deloitte, approximately three-fourths of survey participants said their workplaces were complex or highly complex.

 

Now, a new wind is blowing. It's simplification. The Global Human Capital Trends 2015 report found 10 percent of companies surveyed have programs in place to simplify work practices and another 44 percent plan to put these programs in place.

 

It's a trend that could have an effect on companies that aren't taking action. The bottom line, according to the report:

 

"Technology, globalization, and compliance needs continuously add complexity to work. Left unaddressed, this can lead to an organizational environment that damages employee engagement, lowers quality, and reduces innovation and customer service."

 

Companies that are reducing complexity and focusing on what really matters may gain a competitive edge, said Deloitte.

Weekly Focus - Think About It

 

"In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497."

--Warren Buffett, legendary investor

Retirement vs. College Fund

A comfortable retirement or the best head start for your kids? It could be the modern American family's most agonizing financial quandary. No one wants their kids to commence adult life towing hefty college debt, and everyone wants the healthiest nest egg possible.

Thankfully, you will find a range of savings vehicles designed to accommodate both. It comes down to making the most intelligent savings decisions for your family. 

And regardless of your account "formula," the sooner you start the better. 

Putting your money to work not only improves the likelihood of a prosperous financial future - for you and your kids.