Monthly Archives: May 2013

IS IT TIME FOR LIFE INSURANCE? Important life events may call for it.

IS IT TIME FOR LIFE INSURANCE?

Important life events may call for it.

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BY GREG OLIVER

Just as many people between the ages of 30 and 50 lack a will, many also lack life insurance. A March 2011 survey from Genworth Financial and the University of Virginia’s Darden School of Business found that almost 70% of single parents and 45% of married parents were living without any coverage.1

Why don’t more young adults buy life insurance? Shopping for life insurance may seem confusing, boring, or unnecessary. Yet when you have kids, get married, buy a house or live a lifestyle funded by significant salaries, the need arises.

Finding the right policy may be simpler than you think. There are two basic types of life insurance: term and cash value. Cash value (or “permanent”) life insurance policies offer death benefits and some of the characteristics of an investment – a percentage of the money you spend to fund the policy goes into a savings program. Cash value policies have correspondingly higher premiums than term policies, which give you death benefits only and have terms of 10 years or longer. Term is a great choice for many young adults because it is relatively inexpensive. There is an economic downside to term life coverage: if you outlive the term of the policy, you and/or your loved ones get nothing back. Term life policies can be renewed (though many are not) and some can be converted to permanent coverage.2

The key question is: how long do you plan to keep the policy? If you don’t want to pay premiums on an insurance policy for more than 10 years, then term life stands out as the most attractive option. If you are just looking for a short-term hedge against calamity, that’s the whole reason behind term life insurance. If you’re getting into estate planning, then permanent life insurance may prove a better choice.

It may be cheaper than you think. Premiums on 10-year level guaranteed term policies are startlingly affordable. Just to give you a ballpark example, a 40-year-old woman could potentially line up $250,000 in coverage through one major insurer for a premium of $16 a month in August 2011.3

Confer, compare and contrast. Talk with a financial or insurance professional you trust before plunking down money for a policy. That professional can perform a term-versus-permanent analysis for you and help you weigh per-policy variables.

GREG OLIVER
Citations.
1 – mainstreet.com/article/moneyinvesting/insurance/study-70-single-parents-forego-life-insurance [3/25/11]
2 – money.msn.com/life-insurance/term-or-permanent-life-insurance.aspx [3/16/11]
3 – metlife.com/campaign/search/life-insurance-quote/index.html [8/4/11]

Massive Retirement Assumptions and Transformation Changing Financial World

Reassessing Retirement Assumptions
What makes financial sense for some baby boomers may not make sense for you.

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BY GREG OLIVER ofs@one.net

There is no “typical” retirement. Many baby boomers want one and believe that they will have one, and their futures may indeed unfold as planned. For others, the story will be different. Just as there is no routine retirement, there are no rote financial moves that should be made before or during this phase of life, and no universal truths about the retirement experience.

Here are some commonly held assumptions – suppositions that may or may not prove true for you, depending on your financial and lifestyle circumstances.

#1. You should take Social Security as late as possible. Generally speaking, this is a smart move. If you were born in the years from 1943-1954, your monthly benefit will be 25% smaller if you claim Social Security at 62 instead of your “full” retirement age of 66. If you wait until 70 to take Social Security, your monthly benefit will be 32% larger than if you had taken it at 66.1

So why would anyone apply for Social Security benefits in their early 60s? The fact is, some seniors really need the income now. Some have health issues or the prospect of hereditary diseases influencing their choice. Single retirees don’t have a second, spousal income to count on, and that is another factor in the decision. For most people, waiting longer implies a larger lifetime payout from America’s retirement trust. Not everyone can bank on longevity or relative affluence, however.

#2. You’ll probably live 15-20 years after you retire. You may live much longer, especially if you are a woman. According to the Census Bureau, the population of Americans 100 or older grew 65.8% between 1980 and 2010, and 82.8% of centenarians were women in 2010. The real eye-opener: in 2010, slightly more than a third of America’s centenarians lived alone in their own homes. Had their retirement expenses lessened with time? Doubtful to say the least.2

#3. You should step back from growth investing as you get older. As many investors age, they shift portfolio assets into investment vehicles that offer less risk than stocks and stock funds. This is a well-regarded, long-established tenet of asset allocation. Does it apply for everyone? No. Some retirees may need to invest for growth well into their 60s or 70s because their retirement savings are meager. There are retirement planners who actually favor aggressive growth investing for life, arguing that the rewards outweigh the risks at any age.

#4. The way most people invest is the way you should invest. Again, just as there is no typical retirement, there is no typical asset allocation strategy or investment that works for everyone. Your time horizon, your risk tolerance, and your current retirement nest egg represent just three of the variables to consider when you evaluate whether you should or should not enter into a particular investment.

#5. Going Roth is a no-brainer. Not necessarily. If you are mulling a Roth IRA or Roth 401(k) conversion, the big question is whether the tax savings in the end will be worth the tax you will pay on the conversion today. The younger you are – roughly speaking – the greater the possibility the answer will be “yes”, as your highest-earning years are likely in the future. If you are older and at or near your peak earning potential, the conversion may not be worth it at all.

#6. A lump sum payout represents a good deal. Some corporations are offering current and/or former workers a choice of receiving pension plan assets in a lump sum payout instead of periodic payments. They aren’t doing this out of generosity; they are doing it because actuaries have advised them to lessen their retirement obligations to loyal employees. For many pension plan participants, electing not to take the lump sum and sticking with the lifelong periodic payments may make more sense in the long run. The question is, can the retiree invest the lump sum in such a way that might produce more money over the long run, or not? The lump sum payout does offer liquidity and flexibility that the periodic payments don’t, but there are few things as economically reassuring as predictable, recurring retirement income. Longevity is another factor in this decision.

#7. Living it up in your 60s won’t hurt you in your 80s. Some couples withdraw much more than they should from their savings in the early years of retirement. After a few years, they notice a drawdown happening – their portfolio isn’t returning enough to replenish their retirement nest egg, and so the fear of outliving their money grows. This is a good argument for living beneath your means while still carefully planning and budgeting some “epic adventures” along the way.

Your retirement plan should be created and periodically revised with an understanding of the unique circumstances of your life and your unique financial objectives. There is no such thing as generic retirement planning, and that is because none of us will have generic retirements.

«representativename» may be reached at «representativephone» or «representativeemail».
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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 – www.forbes.com/sites/janetnovack/2011/02/15/the-big-decision-when-to-take-social-security/ [2/15/11]
2 – money.usnews.com/money/retirement/articles/2013/01/07/what-people-who-live-to-100-have-in-common [1/7/13]

GREG OLIVER -34-56-54-54-54-054-5y=-

Stocks struggle after data, Fed 2013: A First Quarter Review

2013: A First Quarter Review By GREG OLIVER

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2013: A First Quarter Review
A quick summary of economies & markets for you.

Wall Street’s bulls figured stocks were ready for a breakout in 2013, and that is exactly what happened in the first quarter. The Dow finished March at 14,578.54, its highest close ever. The S&P 500 ended the quarter with a record close: 1,569.19. The S&P, Dow and Russell 2000 all gained 10% or more in the opening three months of the year. Bullish sentiment was backed up by impressive economic indicators – in real estate, in the manufacturing and service sectors, in consumer spending and retail sales. New anxieties in Europe and sluggish projections of global growth couldn’t halt the rally. The quarter was flat-out spectacular for equities, from small caps to blue chips – in fact, it was the Dow’s best first quarter since 19981
Domestic economic health. The Dow jumped nearly 2% on January 2 as President Obama signed a bill into law to avert the “fiscal cliff” – the combination of tax hikes and expiration of Bush-era tax cuts presumed to throw the economy into recession. While the legislation raised estate taxes, hiked the top tax bracket to 39.6% and ended the payroll tax holiday (resulting in a 2% reduction in take-home pay for each working American), it did preserve the Bush-era cuts for the bulk of taxpayers and extended numerous tax breaks and long-term jobless benefits.2
The unemployment rate – 7.8% at the end of 2012 – ticked up to 7.9% in January yet fell to 7.7% in February. Still, hiring was picking up. Non-farm payrolls added 236,000 workers in February, capping off a three-month stretch in which the employment ranks grew by an average of 191,000 jobs a month. From June-August 2012, the pace of hiring averaged only 135,000 jobs per month.3,4
Gasoline grew costlier – rising 35¢ in February alone – and that was a big influence in Q1 gains in consumer spending and retail sales. As the Commerce Department noted, personal spending rose 0.4% in January and 0.7% in February; personal wages recovered from a 3.7% plunge in January to advance 1.1% in February. (Household wages dropped in January partly because of a rush by corporations to issue dividends in December, ahead of the assumed fiscal cliff.) Consumer prices rose 1.6% in January, and 2.0% in February, according to the Bureau of Labor Statistics. Even so, retail sales rose in both months – 0.2% in January, 1.1% in February. February’s gain was the largest in five months and brought the annualized gain to 4.6%, more than twice the rate of inflation.5,6,7
Results from America’s two major consumer confidence polls varied notably. The Conference Board’s monthly survey came in at 58.4 in January, 68.0 in February, and 59.7 in March; the University of Michigan’s consumer sentiment survey went from 73.8 to 77.6 to 78.6 across the first three months of 2013.8,9
In late March, the Bureau of Economic Analysis made its last appraisal of Q4 GDP – just +0.4%. The recent boost in consumer spending hints at improved growth for Q1, as do the twin PMIs of the Institute for Supply Management. ISM’s manufacturing index rose in each month of the quarter (it had contracted in November), hitting a high of 54.2 in February, but then 51.3 in March; its service sector PMI was at 56.0 in February, then 54.4 in March. In other business indicators, overall hard goods orders recovered from a 3.8% dip in January to increase 5.6% in February; producer prices rose 0.2% in January and 0.7% in February.10,11,12,13
As Congress and the White House could not arrive at a deal to postpone federal spending cuts scheduled for March 1, the last month of the quarter saw the start of a phase in which $85 billion would be trimmed from the budgets of federal agencies this year. The Pentagon faced a 13% cut, while non-defense programs stared at a 9% cut. Against expectations, Congress passed a stopgap budget bill that would keep the federal government funded until October 1 six days ahead of a deadline. As the quarter ended, Federal Reserve Chairman Ben Bernanke reaffirmed that interest rates would remain at historic lows until the economy showed more than “temporary improvement”. There would be no near-term end for the Fed’s quantitative easing effort, though the amount of its monthly bond purchases could vary in response to improvements in the unemployment rate.14,15,16
Global economic health. Like a campfire that had been inadequately doused, the financial crisis in Europe flared up anew. Cyprus needed a bailout by March, so the European Central Bank offered it €10 billion to rescue its banking system. The Cypriot parliament at first rejected the plan (which would have taxed bank accounts up to 10%), then accepted it with modifications. Adding to the drama, Italy’s February national election resulted in a parliamentary stalemate which may not be resolved until July; at the end of March, Italian bond yields were again rising dangerously. Eurozone unemployment was 12.0% by the end of the quarter.17,18,19
China tried to ward off a real estate bubble during the quarter by levying a 20% capital gains tax on home sales. Its central bank set a growth target of 7.5% for 2013 and an inflation target of 3.5%. By March, Markit PMIs showed expanding manufacturing sectors in the PRC (51.6), Taiwan (51.2), South Korea (52.0), Vietnam (50.8), India (52.0) and Indonesia (51.3). Also notable: Japan’s embrace of “Abenomics”, the stimulus-driven economic policy of prime minister Shinzo Abe. Aimed at lifting Japan out of its current recession, it drove Japanese stocks significantly higher and gave business sentiment a shot in the arm.20,21,22
World markets. The Nikkei 225 had another amazing quarter, rising 19.27%. Other Q1 performances in the Asia Pacific region: Pakistan’s KSE 100, +6.17%; Australia’s ASX, +6.83%; the PSE Composite in Manila, +17.80%; Hang Seng, -1.58%; Sensex, -3.04%; Shanghai Composite, -1.43%. In the Americas, the Bovespa sank 7.55% on the quarter while the TSX Composite rose 2.55%; Argentina’s MERVAL climbed 18.45%. In Europe, the FTSE 100 gained 8.71% in Q1, the DAX 2.40% and the CAC 40 2.48%; Ireland’s ISEQ topped all indices in the region with a 16.53% Q1 advance. The MSCI Emerging Markets Index dropped 2.14% in Q1 2013; in contrast, the MSCI World Index rose 7.18%.23,24
Commodities markets. Metals prices were mixed on the COMEX for the first quarter. Gold fell 4.8%, copper 6.0%, and silver 6.3%; platinum advanced 2.1% and palladium rose 9.2%. The U.S. Dollar Index gained 8.1%. U.S. crude futures rebounded 5.7% in the quarter, while natural gas logged a 20.1% advance. Crop futures had it rough in Q1: sugar lost 9.5%, coffee 4.6%, cocoa 3.0%, corn 0.4%, soybeans 1.0% and wheat 11.6%.25,26
Real estate. The sector was plainly on the way back. In March, the National Association of Realtors noted that pace of existing home sales had improved 10.2% in the 12 months ending in February, with the median price up 11.6%; pending home sales were up 5.0% across 12 months as well. The Census Bureau said new home sales had risen 12.3% in that same period, and it also reported much more groundbreaking and considerably more projects in the pipeline: a 27.7% 12-month gain in housing starts, a 33.8% annualized gain in building permits. The latest edition of the S&P/ Case-Shiller Home Price Index (January) posted its largest annual rise since 2006 (8.1%) with 19 of 20 cities showing gains.27,28,29,30
Broadly speaking, mortgages grew more expensive in the quarter. In Freddie Mac’s last 2012 Primary Mortgage Market Survey (December 27), the average interest rates for mortgage varieties were as follows: 30-year FRMs, 3.35%; 15-year FRMs, 2.65%; 5/1-year ARMs, 2.70%; 1-year ARMs, 2.56%. In the March 28 PMMS, the rates looked like this: 30-year FRMs, 3.57%; 15-year FRMs, 2.76%; 5/1-year ARMs, 2.68%; 1-year ARMs, 2.62%.31,32
Looking back … looking forward. As the final trading day of the first quarter ended on March 28, the Dow (14,578.54) and S&P 500 (1,569.19) eclipsed their all-time closing highs. They had a spectacular quarter, and so did the small caps. The Russell 2000 reached new heights, gaining 12.03% in Q1 and settling at 951.54 on March 28. The NASDAQ ended the quarter at 3,267.52. Some S&P 500 trivia for you: the broad U.S. benchmark wrapped up the quarter 132% above where it was on March 9, 2009 (the day it bottomed out in the last, dreadful bear market). In terms of total return, the index has set 33 records since April 2 of last year.1,33
% CHANGE Q1 CHG 2012 1-YR CHG 10-YR AVG
DJIA +11.25 +7.26 +11.06 +7.90
NASDAQ +8.21 +15.91 +5.24 +13.86
S&P 500 +10.03 +13.41 +11.64 +8.17
REAL YIELD 3/28 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.64% -0.11% 1.13% 2.09%

Sources: cnbc.com, bigcharts.com, treasury.gov – 3/28/131,34,35,36
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

What is next for Wall Street? Will the “sell in May” philosophy encourage mere profit-taking, or will stocks descend more than bulls expect this spring? Some analysts see the market peaking in the near term as latecomers to the rally buy high and grow impatient or disappointed. Others cite steady inflows, arguing that we are not near the top and that stocks look supremely attractive compared to other asset classes. They also point to all the good news emerging in the U.S. economic data stream, the ongoing easing being practiced by central banks on three continents, and (fingers crossed) the lack of a wild card from overseas to upset the advance. Right now, confidence seems to be winning out over anxiety. We can only hope this trend will continue as the new quarter plays out.

I will offer a review of market performance and domestic and global economic developments from Q2 2013 in early July. Should you have any financial questions or concerns in the meantime, feel free to contact me at ofs@one.net

GREG OLIVER -034835-08345-013485134-056834-058234-05824-0582-49

Citations.
1 – www.cnbc.com/id/100600350 [3/28/13]
2 – www.cnn.com/2013/01/02/politics/fiscal-cliff [1/2/13]
3 – www.ncsl.org/issues-research/labor/national-employment-monthly-update.aspx [4/1/13]
4 – www.mercurynews.com/business/ci_22746707/us-adds-236k-jobs-unemployment-falls-7-7 [3/8/13]
5 – www.nytimes.com/reuters/2013/03/29/business/29reuters-consumer-spending.html [3/29/13]
6 – www.tradingeconomics.com/united-states/inflation-cpi [4/2/13]
7 – articles.marketwatch.com/2013-03-13/economy/37663667_1_retail-sales-retail-report-prices [3/13/13]
8 – www.tradingeconomics.com/united-states/consumer-confidence [4/2/13]
9 – www.bondbuyer.com/issues/122_61/final-march-u-of-mich-index-1050205-1.html [3/29/13]
10 – www.ism.ws/ISMReport/MfgROB.cfm [4/1/13]
11 – www.ism.ws/ISMReport/NonMfgROB.cfm [3/5/13]
12 – www.foxbusiness.com/economy/2013/03/26/durable-goods-orders-big-ticket-items-durable-goods/ [3/26/13]
13 – www.bls.gov/news.release/ppi.nr0.htm [3/14/13]
14 – www.reuters.com/article/2013/03/01/us-usa-fiscal-idUSBRE91P0W220130301 [3/1/13]
15 – www.cbsnews.com/8301-250_162-57575622/congress-finally-averts-fiscal-crisis-with-time-to-spare/ [3/21/13]
16 – www.sfgate.com/news/article/Bernanke-Stimulus-hinges-on-sustained-improvement-4370751.php [3/20/13]
17 – www.telegraph.co.uk/finance/financialcrisis/9951858/Cyprus-bailout-timeline.html [3/28/13]
18 – www.ft.com/cms/s/0/841fbed6-993f-11e2-8dc6-00144feabdc0.html#axzz2PL76rfg0 [3/30/13]
19 – epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ [4/2/13]
20 – online.wsj.com/article/SB10001424127887324178904578339643109572734.html [3/4/13]
21 – economictimes.indiatimes.com/news/international-business/asian-manufacturing-picks-up-in-march-data-shows/articleshow/19319865.cms [4/1/13]
22 – www.foxbusiness.com/news/2013/03/31/japan-business-mood-improves-as-market-reacts-to-abenomics/ [3/31/13]
23 – online.wsj.com/mdc/public/page/2_3024-m_globalstockindexes.html?mg=inert-wsj [4/2/13]
24 – mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [3/28/13]
25 – bullionpricestoday.com/bullion-prices-mixed-in-first-quarter-2013-gold-silver-coins-mixed/ [3/29/13]
26 – www.reuters.com/article/2013/03/28/markets-commodities-idUSL2N0CK14Y20130328 [3/28/13]
27 – www.realtor.org/news-releases/2013/03/existing-home-sales-and-prices-continue-to-rise-in-february [3/21/13]
28 – www.census.gov/construction/nrc/pdf/newresconst.pdf [3/22/13]
29 – www.csmonitor.com/Business/2013/0329/Strong-rise-in-consumer-spending-caps-good-week-in-economic-news [3/29/13]
30 – www.inman.com/news/2013/03/26/home-prices-make-largest-year-over-year-jump-in-6-years [3/26/13]
31 – www.freddiemac.com/pmms/ [4/1/13]
32 – www.freddiemac.com/pmms/index.html?year=2012 [4/1/13]
33 – blogs.barrons.com/stockstowatchtoday/2013/03/28/sp-500-breaks-record-closing-high/ [3/28/13]
34 – www.cnbc.com/id/100346272 [12/31/12]
35 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F28%2F12&x=0&y=0 [3/28/13]
35 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F28%2F12&x=0&y=0 [3/28/13]
35 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F28%2F12&x=0&y=0 [3/28/13]
35 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F28%2F03&x=0&y=0 [3/28/13]
35 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F28%2F03&x=0&y=0 [3/28/13]
35 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F28%2F03&x=0&y=0 [3/28/13]
36 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [4/1/13]