Posts By Scott Weiss, CFP

Market and Economic Update for The First Quarter of 2017

The year started with a bang as both US and international stock markets roared ahead in the first quarter. Bonds were much more muted as investors grappled with the potential upward nudging of rates by the Fed.

1Q.2017.graphic

The Markets & The Economy: A Look Back

As we pass the eighth anniversary of the turning of the markets and economy it is useful to look back and think about just how far we’ve come over that time. Things were looking pretty grim back in the spring of 2009 and almost all of us had been scarred in one way or another by the significant downturn in the economy that some call the Great Recession. On the business front some pretty big names had simply disappeared, tipped over into liquidation by that tumultuous series of events and families across the country were struggling to hold onto their jobs and their homes.

The Economy Today

Fast forward to today and things look a lot different. We have reached “full employment” and rather than a surplus of folks looking for work we now have many positions being unfilled. Businesses are healthy, the economy is chugging along and the stock market is breaking new records as corporate earnings move upwards and as investors increasingly feel comfortable with paying more for a dollar of earnings that they did a year or so ago.

Politics & The Market

It is an interesting time for certain. The change in the political landscape has been significant and markets and businesses have responded, seeing the potential for growth in the economy seemingly enhanced by the promise of lower taxes and less regulation. We’ve seen this most directly in the action of the stock market whose advance since the election has been robust but anecdotally we hear of businesses beginning to put capital to work and laying the plans for future expansion.

Future Assumptions

It’s important to remember that capital markets (stock, bond and other) look ahead and incorporate assumptions about what the world might look like 6 months or a year hence into the price movements of today. That market rise last quarter isn’t about what is so much as what will (or could) be. Should that vision of the future not turn out quite the way it might be expected to, then adjustments will be made in outlooks and be incorporated into the market levels of tomorrow.

Market Valuations

Over the long term, of course, stock prices are based on economic growth, the level of interest rates (as they set the bar for investment alternatives to stocks) and current market valuations, i.e. what investors are willing to pay for a dollar of current or future earnings. That last factor is a key one, and one that we employ regularly when looking at the relative attractiveness of the various components of our portfolios. Absolute valuations for the market as a whole (for instance “the market is too high”) are quite hard to make meaningful judgments about in the near and intermediate term as markets that are getting a bit pricey may continue to do so for some time and vice versa! We can however use relative valuations to see which segments of the market are starting to overheat or look very attractively priced and we review these data points on a continual basis as we think about constructive changes in our portfolios.

Looking Forward

Looking forward, markets will continue to be influenced by a number of economic factors. Corporate earnings are key of course and the direction of the economy is perhaps the major contributing factor to successful growing companies and to jobs and opportunities in communities throughout the country. So far so good on that score, we’re seeing continued economic growth coupled with low unemployment and the Conference Board’s leading economic indicators continue to point in the right direction.

Interest Rates

Interest rate increases, which folks expect more of this year, can have a moderating influence on markets in a number of ways but a measured pace of increases is not terribly worrisome as they reinforce the notion of strength in the broader economy. A significant difference over time in rates will also wiggle itself into the valuation equation however, which brings us back to, you guessed it, valuations!

What’s Next?

As we talked about earlier, trying to judge the valuation of the market as a whole is very difficult save perhaps in those times when valuations are near extremes of their range (think May of 2000 on the upper end and March of 2009 on the other end). Valuations have been creeping up over the last 8 years and we’re higher now than average certainly but perhaps not in the nosebleed territory as yet. These higher metrics could certainly provide, coupled with some other sort of economic uncertainty, an excuse though for the next market correction but that is just as it should be as market corrections do happen fairly frequently and their effects are naturally mitigated to some degree by our overall portfolio diversification.

In the meantime it’s spring, the days are longer and, thankfully, our televisions and computers have an “off” switch we can use to moderate the barrage of political and financial news that can be so unsettling at times. It’s the economy that will be the prime driver of the markets and the political parties have a lot less to do with that than one might be led to believe.


Source:

  1. Prepared by LSA Portfolio Analytics

3 Steps To Get Your Financial Documents In Good Order for Your Loved Ones

Wondering what paperwork you need have at the ready for your spouse or children so that when you pass you don’t leave behind a collection of mysteries for them to solve? Here’s what you’ll need:

 STEP #1
Create a Financial File

Function is More Important Than Form

Many heirs spend days, weeks, or months searching for a decedent’s financial and legal documents. They may even discover a savings bond, a certificate of deposit, or a life insurance policy years after their loved one passes. So, your first step is to create a financial file. Maybe it is an actual accordion or manila folder; maybe it is a file on a computer desktop; or maybe it is secured within an online vault. Clients of Weiss Financial Group can use their Secure Client Portal. The form matters less than the function. The function this file will serve is to provide your heirs with the documentation and direction they need to help them settle your estate.

STEP #2
Put The Right Stuff in The File

Your Heirs Will Need to Supplement the File

Now that you’ve chosen your filing system, it’s time to start putting the right stuff in it. Here’s what should go it in it…

Your Financial File Contents:

  • Your Will
  • Durable Power of Attorney
  • Healthcare Proxy
  • Trust Instruments
  • Insurance Policies
  • List of Financial Accounts
  • Usernames & Passwords
  • Contact info for your financial professionals

Your heirs will want to supplement your “final file” with contributions of their own. Perhaps the most important supplement will be your death certificate. A funeral home may tell your heirs that they will need only a few copies. In reality, they may need several – or more – if your business or financial situation is particularly involved.

STEP #3
Tell Your Heirs About the File

It Will Do No Good if Nobody Knows About It!

Be sure to tell your heirs about your “final file.” They need to know that you have created it and they need to know where it is. It will do no good if you are the only one who knows those things when you die.


Sources:

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. marketwatch.com/story/13-steps-to-organizing-your-accounts-and-assets-2016-03-03 
  3. reuters.com/article/us-retirement-death-folder-idUSKBN0FK1RW20140715

How Much Can You Contribute to Your Retirement Plan in 2017?

A new year brings new opportunities to try and max out your retirement savings. Here’s a rundown of the 2017 contribution limits:

IRAs

For 2017 they remain the same as 2016: $5,500 for IRA owners who will be 49 and younger this year, $6,500 for IRA owners who will be 50 or older this year. These limits apply to both Roth and traditional IRAs. What if you own multiple IRAs? The total combined contributions cannot exceed the maximum allowed

401(k)s, 403(b)s, & 457s

Each of these workplace retirement plans have 2017 contribution limits of $18,000, $24,000 if you will be 50 or older this year. Now, If you are a participant in a 457 plan and within three years of what your employer deems “normal” retirement age, you can contribute up to $36,000 annually to your plan during the last three years preceding that “normal” retirement date.

2017.Contribution.Limits

High Earners

High earners may find their ability to make a full Roth IRA contribution restricted. This applies to a single filer or head of household whose modified adjusted gross income (MAGI) falls within the $118,000-133,000 range, and to married couples with a MAGI of $186,000-196,000. If your MAGI exceeds the high ends of those phase-out ranges, you may not make a 2017 Roth IRA contribution. (For tax year 2016, the respective phase-out ranges are $117,000-132,000 for single and $184,000-194,000 for married)

SIMPLE IRAs & SEP-IRAs

In 2017, the contribution limit for a SIMPLE IRA is $12,500; those who will be 50 or older this year may contribute up to $15,500. Federal law requires business owners to match these annual contributions to at least some degree; self-employed individuals can make both employee and employer contributions to a SIMPLE IRA. Both Business owners and the self-employed can contribute to SEP-IRAs. The annual contribution limit on a SEP-IRA is very high – in 2017, it is either $54,000 or 25% of your income, whichever is lower.


Sources

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. fool.com/retirement/2017/01/17/roth-vs-traditional-ira-which-is-better.aspx
  3. money.usnews.com/money/retirement/iras/articles/2016-12-19/how-saving-in-an-ira-can-reduce-your-2016-tax-bill
  4. forbes.com/sites/ashleaebeling/2016/10/27/irs-announces-2017-retirement-plans-contributions-limits-for-401ks-and-more/ 
  5. fool.com/retirement/2016/12/19/457-plan-contribution-limits-in-2017.aspx 
  6. money.cnn.com/2017/01/13/retirement/ira-myths/

Smart Strategies for Sticking With Your Financial Resolutions This Year

Have you already forgotten about your New Year’s resolutions? Like many of us, we start the new year with good intentions. The question is, how do we keep our New Year’s resolutions from faltering? Often, our New Year’s resolutions fail because there is only an end in mind – a clear goal, but no concrete steps toward realizing it. Mapping out the incremental steps can make the goal seem more achievable.

Here are my 6 tips for making and keeping your financial resolutions this year:

TIP# 1
MAXIMIZE YOUR PLAN CONTRIBUTIONS

Contribution limits are set by the federal government each year so be sure to find out what the limits are for your retirement plan. If you will be 50 or older you’ll be able to make an additional catch-up contribution. Here’s a link to our key financial data report for 2017 which includes the dollar amounts for contribution limits: 2017 Key Financial Data.

TIP #2
SET UP AUTOMATIC CONTRIBUTIONS

There are two excellent reasons for doing this. One, time is on your side – in fact, time may be the greatest ally you have when it comes to succeeding as a retirement saver and an investor. An early start means more years of compounding for your invested assets. It also gives you more time to recover from a market downturn. Two, scheduling regular account contributions makes saving for retirement a given in your life.

TIP #3
REVIEW & REDUCE YOUR DEBT

Look at your debts, one by one. You may be able to renegotiate the terms of loans and interest rates with lenders and credit card firms. See if you can cut down the number of debts you have – either attack the one with the highest interest rate first or the smallest balance first, then repeat with the remaining debts.

TIP #4
REBALANCE YOUR PORTFOLIO

Many investors go years without rebalancing, which can be problematic. Rebalancing is crucial for the smart investor.

TIP #5
SOLIDIFY SOME RETIREMENT VARIABLES

Accumulating assets for retirement is great;  doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year – that may make the “how” and “how much” clearer as well.

TIP #6
SOLIDIFY YOUR COLLEGE PLANNING

If your child has now reached his or her teens, see if you can get a ballpark figure on the cost of attending local and out-of-state colleges. Even better, inquire about their financial aid packages and any relevant scholarships and grants. If you have college savings built up, you can work with those numbers and determine how those savings need to grow in the next few years.

Good luck with your financial resolutions. If you need help feel free to reach out, or download a copy of my free eBook, The Pre-Retirement Toolkit.


Sources:

  1. This material was prepared in part by MarketingPro, Inc.

5 Smart Money Moves to Make When You Are in Your 50’s

So you are in your 50’s? Here are the smart financial moves you should be making right now:

RETIREMENT RED ZONE

At this point in your financial life you’re in what I would call the Retirement Red Zone. You are getting close, but you’re not quite there yet and you still have some important work to do.

SMART MOVE #1

PICK A DATE

TIP: Start Thinking About an Approximate Retirement Date

Will you work 5 more years? 10 years? 20? You need to have a rough idea of when you may stop working so you can plan accordingly. The longer you work the less you’ll need in retirement savings and vice versa.

SMART MOVE #2

RAMP UP SAVINGS

TIP: Take Advantage of Catch-Up Contributions

Ramp up your savings if you can and take advantage of catch-up contributions. For the current catch-up contribution allowances click here.

A Catch-Up Contribution is a type of retirement savings contribution that allows people over 50 to make additional contributions to their 401(k) and/or individual retirement accounts.

SMART MOVE #3

REDUCE DEBT

TIP: Retiring With Major Debt Isn’t Good for Your Financial Health

Aim to reduce your debt as much as possible by the time you retire. Retiring with major debts won’t be good for your retirement and can prove to be extremely stressful for both you and your spouse.

SMART MOVE #4

CONSIDER LONG TERM CARE INSURANCE

LTC = Long Term Care Insurance

Long Term Care Insurance is coverage that provides nursing-home care, home-health care, personal or adult day care for individuals above the age of 65 or with a chronic or disabling condition that needs constant supervision.

LTC is a smart move for most of us, but can be too costly for many to purchase. If you have the means to purchase it, now is the time to do it.

If you buy a policy in your 40’s you risk paying too much over the life of the policy. On the flip side if you wait until 60’s or later the premiums skyrocket and you may not even get the coverage. So, your 50’s is the sweet spot to make that purchase.

SMART MOVE #5

UPDATE YOUR WILL

Nearly ½ of All Americans Over 50 Don’t Have a Will!

According to AARP nearly half of all americans over age 50 don’t have a basic will, so make sure you have one.

For more info on the importance of having a will watch this video:


Sources

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. http://www.investopedia.com/

3 Smart Financial Tasks to Start Off The New Year Right

Here are 3 things to do in January to help keep your financial life on track this year:

TASK #1

Set Up Your Budget

Set up your budget for the new year. Review your spending habits from the previous year and create a saving and spending plan for the current year. You can use online tools to help with this. I use http://bit.ly/FirstStepCashManagement when working with clients but you also check out http://www.YouNeedABudget.com or http://www.Mint.com

TASK #2

Get A Credit Report

Get a copy of your credit report. You should be checking this three times throughout the year. You are entitled to one free report every year from all three agencies Experian, Transunion, Equifax. So, spread out your requests over the year. Pick one agency to obtain report from now. You want to look for anything that doesn’t seem right on the report and take action if you need to. Go to http://www.annualcreditreport.com

TASK #3

Review Retirement Plan Contributions

If you aren’t already maxing out your retirement plan contributions consider increasing the amount you contribute by 1% this month. Since you’ll be looking at your budget this month make sure you work savings into your plan. Keep increasing your contribution by 1% every 6 months until you’ve at least reached the 10% mark.


Sources:

  1. http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
  2. http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
  3. http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

3 Things To-Do in December to Keep Your Financial Life On Track

Here are 3 great year end tasks you should seriously considering doing this month:

TIP #1

Review Your Accounts

The end of the year is a great time to take a look at all your investment accounts to determine if you need to rebalance in the new year. Over time your portfolio can deviate from your intended allocation due to market fluctuations. If you are working with and advisor they will most likely be doing this for you.

TIP #2

Tax-Loss Harvest

Determine if you should do any tax-loss harvesting. What’s that? Tax-loss harvesting is the practice of selling a security that has experienced a loss. By realizing, or “harvesting” a loss, investors are able to offset taxes on both gains and income. In your taxable accounts, if you sold any capital assets for a gain this year, now may be a good time to sell off some of your investment dogs so that you can offset those gains with losses. If you are working with an advisor they can help with this. TIP: Your accountant can help you determine if you should take any capital gains or losses

TIP #3

Reflect on the Year

Take this month to reflect on your financial life this year. What went right and what went wrong? Make note of the good things and try to keep that going. For the things that didn’t work out see if there is any room for improvement next year.


Sources:

  1. http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
  2. http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
  3. http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

5 Smart End-of-the-Year Money Moves You Could Make Right Now

As the year comes to a close, here are 5 things you can do to help keep your financial life on track:

Ask yourself these 5 questions and then take action!

Question #1

What has changed for you in 2016?

Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and the new year begins. Even if this year has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can plan to save some taxes and/or build a little more wealth.

Question #2

Do You Practice Tax-Loss Harvesting?

Tax-loss harvesting is the art of taking capital losses (selling securities worth less than what you first paid for them) to offset your short-term capital gains. If you fall into one of the upper tax brackets, you might want to consider this move, which directly lowers your taxable income. Keep in mind this strategy should be made with the guidance of a financial professional you trust.(1)

Question #3

Do You Itemize Deductions?

If you do itemize deductions, great! Now would be a good time to get the receipts and assorted paperwork together. Besides a possible mortgage interest deduction, you might be able to take a state sales tax deduction, a student loan interest deduction, a military-related deduction, a deduction for the amount of estate tax paid on inherited IRA assets, an energy-saving deduction. There are so many deductions you can potentially claim, now is the time to meet with your tax professional to strategize to claim as many as you can.

Question #4

Are You Thinking of Gifting?

How about donating to a charity or some other kind of 501(c)(3) non-profit organization before 2016 ends? In most cases, these gifts are partly tax-deductible. Keep in mind, you must itemize deductions using Schedule A to claim a deduction for a charitable gift.(2)

Question #5

What Can You Do Before You Ring in The New Year?

Talk with a financial or tax professional now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.


Sources:

  1. fool.com/retirement/2016/11/09/1-smart-tax-move-to-make-before-the-end-of-2016.aspx
  2. irs.gov/taxtopics/tc506.html
  3. This material was prepared, in part, by MarketingPro, Inc.

How Trump’s Proposed Tax Changes Could Affect You

Trump has been pretty clear about wanting to simplify our tax code. I sat down with CPA Steven Stern to help explain these proposed changes. So, here are where things currently stand and how they might affect you:
Here’s list of the of the items discussed in the video, but be sure to watch the video for to learn how these changes specifically affect you:

CHANGE #1 

Shift From 7 Income Tax Brackets To 3

Current (Married Filing Jointly):

  1. 10% bracket: $0 to $18,550
  2. 15% bracket: $18,550 to $75,300
  3. 25% bracket: $75,300 to $151,900
  4. 28% bracket: $151,900 to $231,450
  5. 33% bracket: $231,450 to $413,350
  6. 35% bracket: $413,350 to $466,950
  7. 39.6% bracket: $466,950 or more

Proposed (Married Filing Jointly)

  1. 12% bracket: $0 to $75,000
  2. 25% bracket: $75,001 to $224,999
  3. 33% bracket: $225,000 or more

CHANGE #2

Increasing the Standard Deduction

Trump proposes increasing the standard deduction from $12,600 to $30,000 for joint filers (from $6,300 to $15,000 for singles), and capping itemized deductions at $200,000 (joint) or $100,000 (single) and scrapping AMT.

CHANGE #3

Eliminate 3.8% Affordable Care Act Tax

The 3.8% Affordable Care Act tax on the lesser of net investment income or the amount by which your AGI exceeds $200,000 would also be eliminated.


Source: Bob Veres

7 Important Ages To Be Ready For In Retirement

Getting ready to retire or have you just started your retirement? Here are 7 important ages you should to be ready for:

 

AGE  55

Can Make Withdrawals Without 10% Penalty if Retired

At age 55 you can withdraw from your 401(k) or 403(b) plan without the 10% penalty if you retire or get fired. Also, if your employer offers a pension you may be eligible for full retirement benefits, if you meet the plan requirements.

AGE  59 1/2

Can Make Withdrawals Without 10% Penalty

This is an important age to remember. Once you turn 59 ½ you can withdraw money from IRA’s and deferred annuities without paying the 10% penalty for early withdrawal.

AGE 62

Can Start Reduced Social Security Benefits

This is another big year. At age 62 you can start receiving Social Security benefits. However, keep in mind your benefits will be reduced since you will not have reached full retirement age. The other thing is that at age 62 you may be eligible for full pension benefits if applicable to your situation.

AGE 65

Qualify for Medicare Benefits

This is when you qualify for medicare benefits. Also, with most pension plans you become eligible for your full benefits.

AGES 66 & 67

Eligible for Full Social Security Benefits

Ok, I have two ages here. But, they are pretty much for the same thing so I lumped them together. At age 66 you become eligible for full social security benefits, if you were born between 1943-1954. Everyone born after 1954 follows this table:

screen-shot-2016-11-13-at-6-16-49-pm

AGE 70

Your Social Security Benefits Max Out

Once you hit 70 you should start collecting your social security benefits if you haven’t already done so because your benefits will be maxed out. Waiting to collect benefits until age 70 can actually be a great strategy if you are trying to max out social security benefits or are concerned about longevity.

AGE 70 1/2

Must Start Your Required Minimum Distributions (RMD’s)

Finally, age 70 ½ . When you turn 70 ½ you will be required to start withdrawing specified amounts from your 401(k)’s and IRAs. This is called your Required Minimum Distribution or RMD for short. You must begin these withdrawals once your turn 70 ½ but you actually have until April 1st of the year following the year you actually turn age 70 1/2 . I know, confusing right? Let me give you an example. Let’s say you turn 70 ½ in January 2016, you will need to take your RMD by April 1st, of 2017. Now, you can take it in 2016 but you don’t have to. Going forward, every year after your first RMD you will be required to take the distribution buy December 31st.


Source:

  1. Planning Retirement Income