Category Archives: Investing and fiduciary requirements

IRS Issues 403(b) Plan Fix-It Guide

March 12, 2013

On February 21, 2013, the Internal Revenue Service (IRS) added to its “self-help” resources a new “403(b) Plan Fix-It Guide
to provide guidance more specifically directed at 403(b) plan sponsors
that identify qualification or operational plan failures under their
403(b) plans.  Additionally, the IRS issued as a companion piece a
booklet entitled “Voluntary Correction Program Submission Kit,”
which provides more detailed directions to 403(b) plan sponsors on how
to complete and file a correction filing with the IRS specifically
relating to the failure to adopt a written 403(b) plan document.

This new “fix-it” tool addresses 10 potential errors (likely the most
common 403(b) plan errors), including, but not limited to, ineligible
organizations offering 403(b) plans, failure to adopt a written plan
document as required by the final 403(b) regulations, violation of the
universal availability rule, failure to appropriately limit elective
deferrals and failure to follow the underlying terms of the plan
document.  Although these types of failures are not necessarily new (i.e.,
they could have occurred in prior years), the IRS is slowly bringing
403(b) plans under more scrutiny as the dollars being contributed to
these types of plans continue to increase.  The IRS is developing more
expertise in this area and is training more agents to be able to
identify the particular differences between 401(k) plans and 403(b)
plans, and the specific nuances and legal requirements of operating
403(b) plans.  Since the 403(b) regulations were issued in 2007, this is
the first step in which the IRS is taking a more active role to ensure
compliance under these types of plans.
Revenue Procedures 2013-12 (Employee Plans Compliance Resolution
System, or EPCRS) may be used with respect to any 403(b) plan
corrections going forward.  It incorporates in greater detail the
“403(b) Plan Fix-It Guide.”  Although prior EPCRS guidance such as
Revenue Procedure 2008-50 was often applied to 403(b) plans by analogy
for correcting errors, new Revenue Procedure 2013-12 is drafted to be
directly applicable to 403(b) plans.  Consequently, given the IRS
movement toward greater scrutiny of 403(b) plans, tax-exempt
organizations that have not recently conducted any type of internal
compliance review are encouraged to review, at a minimum, the mistakes
highlighted in the “403(b) Plan Fix-It Guide” to determine whether
greater analysis is required with respect the compliance and operation
of their 403(b) plans.

The Market hates uncertainty?

“The market will not move until after the fiscal cliff, because the markets hates uncertainty.”

I hear this alot, and have even said it.  However, I no longer believe it, and have come to understand that the market loves uncertainty.  It’s what the market thrives on – you and I disagree on a stocks’ direction, we’re convinced we are right, and a deal is made to buy and sell.

Wall Street responds primarily to fear and greed, in the short term.  “Greed is good” has become an iconic line.  Everything goes up when the news is “good” until there is something to fear and then the market overreacts in the other direction.  When the fear is gone, it recovers.  It is primarily a forward looking animal so a good market is merely a forecast, not a fact.

This is completely different than Main Street- out in the real world, where 90% of all business are small businesses, its different.   A small businessman/woman makes decisions based on the day to day reality of their business-  I hire an employee because I have the demand and cash flow to do so, and expect it to continue at this level.  Not because of the bigger picture – the housing market, for example, has little direct affect on my hiring decisions.  In fact, its the other way around, really – the health of the underlying economy drives everything else.  If I can hire an employee, they can pay their bills, the government can stop supporting them, and maybe they can eventually save up enough to buy a house.

The public is different again.  I don’t find that the average American makes buying decisions based on the Market results for the day, or the housing crisis, student loan debt, Euro/Yen exchange rate, etc.  The overall economy has an effect, but they make decisions based on their budget and expectations, and delay purchases in bad times.  I find people tend to purchase when they are optimistic and don’t when they are pessimistic.

Private Sector Growth solves the economy!

 

 

 

More Than Half Of Student Loans Are Now Delinquent

Two credit agency studied this week show that delinquency rates on student loans are climbing.  From Forbes.Com

According to the more recent TransUnion study,
more than half of student loans are in deferred status where the loan
payment has been temporarily delayed. Deferred loans now represent 43.5%
of all student loan balances.

The study also showed that the balances on these deferred loans have
grown from $228 billion in 2007 to $388 billion in 2012, an increase of
70%. The average student loan debt per borrower grew 30% to $23,829
during those years.

“With the economy either in recession or slowly coming
out of it during the study period, we had expected that student loan
balances might increase as consumers frustrated with the job market went
back to school to work toward a different career path,” said Ezra
Becker, vice president of research and consulting in TransUnion’s
financial services unit. “However, the rate of growth we observed was
truly eye opening.”

One cause for the deferments may be that more than half of the
college graduates under the age of 25 are unemployed or underemployed,
according to the study’s analysis of government data.

The study also shows the disparity between federally backed student
loans–those guaranteed by the government–and private student loans.
Between 2007 and 2012, federal loan balances jumped 97% while private
loan balances only rose 4%. During that time, federal student loan
delinquencies rose 27%, while private loan delinquency rates actually
dropped 2%. The delinquency rate for federal loans was 12.31% as of
March 2012 while it was only 5.33% for private loans.

“While the focus in recent years has been on the mortgage market,
lenders will need to keep an eye on student loan portfolios–and on
customers who have student loan debt–as the high delinquency rates among
these borrowers can spell trouble across multiple products,” said
Becker.

Earlier this week, a FICO study revealed that student loan debt has
increased dramatically and the default rates on these loans are now much
higher than previous years. The study found that nearly 12 million
consumers had two or more open loans on their credit report in 2005.
That figure has more than doubled to 26 million in 2012. In 2005,
consumers with open student loans on file had an average student loan
debt of $17,233. In 2012, that debt had increased 58% to $27,253. The
percentage of consumers with student loan debt in excess of $100,000
quadrupled between 2005 and 2012 from 0.2% to 0.8%. Approximately 1.2
million more consumers had student loan debt in excess of $100,000.

Monthly Economic Update February 2013

THE MONTH IN BRIEF

The S&P 500 opened 2013 with its best month since
October 2011 – and its biggest January gain in percentage terms since 1997.
Analysts felt the year might start with a positive month, but few expected a
5.04% breakout for the definitive Wall Street gauge. In fact, stocks around the
globe had a great month – and so did oil. A fiscal cliff deal was signed into
law, and a battle over the debt ceiling was postponed. Poor monthly indicators
didn’t do much to hobble real estate’s rebound. Consumer confidence surveys
offered mixed signals and the unemployment rate increased, but data showed households
spending, saving and earning more.1

DOMESTIC ECONOMIC HEALTH

While the American Taxpayer Relief Act of 2012 did extend
the Bush-era tax cuts for the middle class, it also approved a 2% payroll tax
hike for all working Americans. Nevertheless, Wall Street cheered the deal with
a big rally on the year’s first market day, even as the wealthiest households
reached for their aspirin in the face of higher income, investment and estate
taxes. The ATRA put off the federal spending cuts planned for January 2 until
March 1. On January 31, the Senate approved a bill authored by House
Republicans to temporarily suspend the federal borrowing limit through May 18.2,3

If Americans felt relief from this, it wasn’t demonstrably
reflected in key surveys. January’s edition of the Conference Board’s consumer
confidence index dropped 8.1 points to 58.6 (the lowest level in 14 months) while
the University of Michigan’s final January consumer sentiment survey rose a
mere 0.9 points to 73.8.4
The jobless rate ticked up to 7.9% in January, even
though non-farm payrolls expanded by 157,000 positions. (The Labor Department simultaneously
announced revised hiring totals from November and December – it turned out that
job creation averaged a solid 221,000 in those two months.) Personal spending
rose 0.2% in December, and early dividend payouts (and other factors) prompted
a 2.8% rise in after-tax incomes. America’s personal savings rate reached 6.5%,
a peak unseen since May 2009.5,6

Retail sales were up 0.5% in December. Touching
on retail prices, the Consumer Price Index was flat in December, showing just a
1.7% rise for the year – well under the Federal Reserve’s inflation target. Wholesale
inflation fell 0.2% in December and only rose 1.3% for 2012, the smallest annual
advance in the Producer Price Index since 2008.7,8
January’s most stunning economic news actually
pertained to the fourth quarter. The initial Q4 GDP estimate from the Bureau of
Economic Analysis was -0.1%, with reduced defense spending, a drop in exports
and a smaller-than-expected increase in inventories being the major factors.5
However, two globally respected measures of the
manufacturing and service sectors – the purchasing manager indices at the Institute
for Supply Management – both showed expansion for January. Last month’s ISM
manufacturing PMI rose to 53.1 from December’s downwardly revised 50.2 (and backing
that reading up, overall durable goods orders had increased 4.6% in December). Early
in January, ISM released its service sector PMI for December, which came in at 56.1.6,9,10

GLOBAL ECONOMIC HEALTH

Faint signals of economic improvement could be
glimpsed in Europe. The Markit eurozone manufacturing PMI rose from 46.1 in
December to 47.9 in January, and Germany’s manufacturing PMI climbed to 49.8,
on the verge of expansion.

Eurozone annualized inflation moderated 0.2% to
2.0% last month – a low unseen since November 2010. Unemployment leveled off at
11.7% in the EU in December. All this aside, while the International Monetary
Fund projects global growth at 3.5% in 2013, it also forecasts an 0.2%
contraction in the eurozone economy this year following an 0.4% contraction for
2012.11,12
A late-January Reuters poll of 250 prominent
economists projected growth in the Asia Pacific region moderating in 2013, with
the economies of Hong Kong, Singapore, and South Korea all forecast for GDP downgrades
of 0.4-0.5%. However, China’s GDP was projected to improve 0.3% to 8.1% in 2013
– which would still represent its smallest annual growth since 2000. Looking at
the HSBC PMIs for the region, China’s hit a two-year peak of 52.3 last month
while India’s was at 53.2; Taiwan’s was at 51.5, Vietnam’s at 50.1. HSBC PMIs
for Indonesia (49.7) and South Korea (49.9) showed January contraction.
Australia’s AIG PMI fell 4.1 points to 40.2, in negative territory for an
eleventh straight month.13,14

WORLD MARKETS

Gains were prevalent around the world. In Europe, the DAX went +2.15%, the CAC 40 +2.51% and the FTSE 100 +6.43%. In Asia, the Nikkei 225 rose 7.48%, the Sensex 1.11%, the Hang Seng 4.40% and the Shanghai Composite 5.05%; the KOSPI pulled back 2.49%. Looking at other benchmarks in the Americas, the
Bovespa sank 1.95%, the Bolsa gained 3.60%, the TSX Composite rose 2.02% and the MERVAL soared an astonishing 21.31%.15
Among regional indices, the S&P Asia 50 was flat (actually losing 0.04%), the Euro STOXX 50 gained 2.54%, the MSCI World Index climbed 5.00% and the MSCI Emerging Markets Index advanced 1.31%.15,16
COMMODITIES MARKETS
Platinum was the hottest marquee commodity in January, rising 9.0% on the COMEX. Oil and
corn were also hot, both gaining 6.1%. Palladium
futures advanced 6.0%, silver futures 3.7% and copper futures 2.2%; gold
slipped 0.9% for the month. Other January performances: soybeans, +3.5%;
coffee, +2.2%; wheat, +0.2%; natural gas, -0.4%; cocoa, -1.4%; sugar, -3.7%. The
Thomson Reuters CRB Index had its best month since August, showing a 3.0% gain.
A 3.2% January ascent put the U.S. Dollar Index at 79.24 at the end of the
month.17

REAL ESTATE

Shrinking inventory (the smallest supply of houses on the
market since May 2005) contributed to a 1.0% slip in existing home sales in
December. However, residential resales were up 12.8% for 2012, with
foreclosures and short sales accounting for 24% of transactions (down 8% from a
year before). New home sales dropped 7.3% in December but were up 19.9% in 2012 (the best
year for new home buying since 1983). Pending home sales fell 4.3% for
December. November’s Case-Shiller Home Price Index showed a 5.5% annual gain
across 20 cities, beating forecasts. Construction spending was up 0.9% in
December and the NAHB/Wells Fargo Housing Market Index maintained a 6-year peak
last month.9,18,19

Home loans grew more expensive in January. At
month’s end, Freddie Mac had the average interest rate on the 30-year FRM at
3.53% and rates on the 15-year
FRM, 5/1-year ARM and 1-year ARM respectively averaging 2.81%, 2.70%
and 2.59%. In Freddie Mac’s December
27 Primary Mortgage Market Survey, the average interest rates on those loans
were respectively 3.35%,
2.65%, 2.70% and 2.56%.20,21
LOOKING BACK…LOOKING FORWARD

Bears all but hibernated last month. The four most-watched
U.S. indices all scored big gains in January, including the Russell 2000, which
cracked the 900 ceiling and ended the month at 902.09. When the Dow has had a
positive January, it has had a positive year 82% of the time. The S&P 500 wrapped
up January at 1,498.11, the Dow at 13,860.58 and the Nasdaq at 3,142.31.1,22

The big question for February: can the Dow and
S&P reach all-time highs? On February 1, the DJIA rallied to close above
14,000 for the first time in over five years. On February 4, the Dow descended
nearly 130 points with new worries about higher sovereign bond yields in Spain
and Italy a big factor. The question analysts have pondered in the wake of the
market’s breakout is an old one: what exactly is validating the rally?
Unemployment has not lessened; the GDP reading from the fourth quarter was a
letdown. Still, real estate looks better, consumer spending has not tailed off,
the manufacturing and service industries seem to be expanding, and the Federal
Reserve is doing its part to provide continuing stimulus to the economy. There
is strong anticipation (some might even call it expectation) that the Dow and
S&P will close at all-time highs in the near term. Some analysts insist a
pullback is due, and warranted. Bulls counter with the argument that if the
market retreats this month, the biggest factor will simply be the psychology
that stocks should retreat, that this advance is simply too good to be true. In
the best-case scenario, the Dow reaches an all-time high this month attributable
to market fundamentals as well as confidence and excitement.28
UPCOMING ECONOMIC RELEASES: The February
calendar unfolds like so … ISM’s January non-manufacturing index (2/5), December
wholesale inventories (2/8), January retail sales and December business
inventories (2/13), January industrial production and the University of
Michigan’s preliminary February consumer sentiment survey (2/15), February’s NAHB
housing market index (2/19), the January PPI, the January 30 Fed minutes, and reports
on January housing starts and building permits (2/20), January’s CPI and
existing home sales and the Conference Board’s January Leading Economic
Indicators index (2/21), January new home sales, the Conference Board’s
February consumer confidence poll and the December Case-Shiller home price index
and FHFA housing price index (2/26), January durable goods orders and pending
home sales (2/27), and the second reading on Q4 GDP (2/28). Reports on January
consumer spending and vehicle sales and the final February University of
Michigan consumer sentiment survey arrive March 1, as does the February ISM
manufacturing index. February’s unemployment rate won’t be announced until
March 8 – that is when the Bureau of Labor Statistics issues its next monthly
report.

 

«RepresentativeDisclosure»
 
This material was prepared by
MarketingLibrary.Net Inc., and does not necessarily represent the views of
the presenting party, nor their affiliates. Marketing
Library.Net Inc. is not affiliated with any broker or brokerage firm that may
be providing this information to you. 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 not a solicitation or
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. The Dow Jones Industrial
Average is a price-weighted index of 30 actively traded blue-chip stocks. The
NASDAQ Composite Index is an unmanaged, market-weighted index of all
over-the-counter common stocks traded on the National Association of
Securities Dealers Automated Quotation System. The Standard & Poor’s 500
(S&P 500) is an unmanaged group of securities considered to be representative
of the stock market in general. It is not possible to invest directly in an
index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New
York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the
Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a
leading provider of securities listing, trading and market data products and
services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s
largest physical commodity futures exchange and the preeminent trading forum
for energy and precious metals, with trading conducted through two divisions
– the NYMEX Division, home to the energy, platinum, and palladium markets,
and the COMEX Division, on which all other metals trade. The DAX 30 is a Blue
Chip stock market index consisting of the 30 major German companies trading
on the Frankfurt Stock Exchange. The CAC-40 Index is a narrow-based, modified
capitalization-weighted index of 40 companies listed on the Paris Bourse. The
FTSE 100 Index is a share index of the 100 companies listed on the London
Stock Exchange with the highest market capitalization. . Nikkei 225 (Ticker:
^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei
average is the most watched index of Asian stocks. BSE Sensex or Bombay Stock
Exchange Sensitivity Index is a value-weighted index composed of 30 stocks
that started January 1, 1986. The Hang Seng Index is a freefloat-adjusted
market capitalization-weighted stock market index that is the main indicator
of the overall market performance in Hong Kong.  The SSE Composite Index is an index of all
stocks (A shares and B shares) that are traded at the Shanghai Stock
Exchange. The KOSPI Index is a capitalization-weighted index of all common
shares on the Korean Stock Exchanges. The Bovespa Index is a gross total
return index weighted by traded volume & is comprised of the most liquid
stocks traded on the Sao Paulo Stock Exchange. The Bolsa Mexicana de Valores,
or BOLSA, is Mexico’s only stock exchange. The S&P/TSX Composite Index is
an index of the stock (equity) prices of the largest companies on the Toronto
Stock Exchange (TSX) as measured by market capitalization. The price-weighted
MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most
important index of the Buenos Aires Stock Exchange. The S&P Asia 50 is an
equity index drawn from four major Asian markets – Hong Kong, Singapore,
South Korea, and Taiwan. The EURO STOXX 50 Index, Europe’s leading Blue-chip
index for the eurozone, provides a blue-chip representation of supersector
leaders in the eurozone. The MSCI World Index is a free-float weighted equity
index that includes developed world markets, and does not include emerging
markets. The MSCI Emerging Markets Index is a float-adjusted market
capitalization index consisting of indices in more than 25 emerging
economies. The
US Dollar Index measures the performance of the U.S. dollar against a basket
of six currencies. Additional risks are associated with international investing,
such as currency fluctuations, political and economic instability and
differences in accounting standards. All information is believed to be from
reliable sources; however we make no representation as to its completeness or
accuracy. All economic and performance data is historical and not indicative
of future results. Market indices discussed are unmanaged. Investors cannot
invest in unmanaged indices. 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.
 
Citations.
1 – blogs.barrons.com/stockstowatchtoday/2013/01/31/dow-sp-500-see-best-january-since-1990s/
[1/31/13]
2 – www.cbsnews.com/8301-250_162-57561752/obama-signs-fiscal-cliff-bill-into-law/
[1/3/13]
3 – www.usatoday.com/story/news/politics/2013/01/31/senate-debt-limit-extension-approved/1881191/
[1/31/13]
4 – www.bloomberg.com/news/2013-02-01/u-s-michigan-consumer-sentiment-increase-may-boost-spending.html
[2/1/13]
5 – www.businessweek.com/articles/2013-02-01/januarys-strong-jobs-report-trumps-a-decline-in-gdp
[2/1/13]
6 – www.bloomberg.com/news/2013-01-31/consumer-spending-in-u-s-climbed-in-december-as-incomes-surged.html
[1/31/13]
7 – www.usatoday.com/story/money/business/2013/01/16/consumer-price-index-december/1838907/
[1/16/13]
8 –
news.morningstar.com/articlenet/article.aspx?id=581091 [1/15/13]
9 – briefing.com/investor/calendars/economic/2013/01/28-01
[2/1/13]
10 – www.ism.ws/ISMReport/NonMfgROB.cfm
[1/4/13]
11 – online.wsj.com/article/SB10001424127887323701904578277370700712726.html
[2/1/13]
12 – money.cnn.com/2013/01/23/news/economy/europe-economy-imf/index.html
[1/23/13]
13 – www.reuters.com/article/2013/01/23/us-economy-asia-poll-idUSBRE90M0EZ20130123
[1/23/13]
14 – www.globalpost.com/dispatch/news/afp/130201/asia-manufacturing-eases-january
[1/30/13]
15 – bloomberg.com/markets/stocks/
[1/31/13]
16 –
mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html
[1/31/13]
17 – reuters.com/article/2013/01/31/markets-commodities-idUSL1N0B0IBT20130131
[1/31/13]
18 – www.usatoday.com/story/money/business/2013/01/22/existing-home-sales-december/1854563/
[1/22/13]
19 – www.sfgate.com/business/bloomberg/article/New-Home-Sales-Decline-Blemishes-Best-Year-Since-4223610.php
[1/25/13]
20 – www.freddiemac.com/pmms/index.html?year=2012
[2/4/13]
21 – www.freddiemac.com/pmms/ [2/4/13]
22 – money.cnn.com/quote/quote.html?symb=RUT
[1/31/13]
23 –
montoyaregistry.com/Financial-Market.aspx?financial-market=an-introduction-to-the-stock-market&category=29
[1/31/13]
24 –
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F31%2F12&x=0&y=0
[1/31/13]
24 –
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F31%2F12&x=0&y=0
[1/31/13]
24 –
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F31%2F12&x=0&y=0
[1/31/13]
24 –
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F31%2F03&x=0&y=0
[1/31/13]
24 –
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F31%2F03&x=0&y=0
[1/31/13]
24 –
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F31%2F03&x=0&y=0
[1/31/13]
25 – www.bloomberg.com/markets/stocks/
[12/31/12]
26 –
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll
[2/4/13]
27 – treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm71002.pdf
[1/10/03]
28 – www.usnews.com/news/business/articles/2013/02/04/us-stocks-fall-after-dows-rally-to-14000
[2/4/13]
 
 

 

MAKING RETIREMENT SAVINGS LAST

As you retire, there are variables you can’t
control; investment performance and fate are certainly toward the top of the
list. Your approach to withdrawing and preserving your retirement savings,
however, may give you more control over your financial life.

Drawing retirement income without draining your
savings is a challenge, and the response to it varies per individual. Today’s
retirees will likely need to be more flexible and look at different withdrawal
methods and tax and lifestyle factors.

 

Should you go by the 4% rule?

For decades, retirees were cautioned to withdraw no more than 4% of their retirement
balances annually (adjusted north for inflation as the years went by). This
“rule” still has merit (although sometimes the percentage must be increased out
of necessity). T. Rowe Price has estimated that someone retiring with a typical
60%/40% stock/bond ratio in their portfolio has just a 13% chance of depleting
retirement assets across 30 years if he or she abides by the 4% rule. A 7%
initial withdrawal rate invites an 81% chance of outliving your retirement
assets in 30 years.1
That sounds like a pretty good argument for the 4% rule in itself. However, while
the 4% rule regulates your withdrawals, it doesn’t regulate portfolio
performance. If the markets don’t do well, your portfolio may earn less than
4%, and if your investments repeatedly can’t make back the equivalent of what
you withdraw, you will risk depleting your nest egg over time.
Or perhaps the portfolio percentage method? Some retirees elect to withdraw X% of their
portfolio in a year, adjusting the percentage based on how well or poorly their
investments perform. As this can produce greatly varying annual income even
with responsive adjustments, some retirees take a second step and set upper and
lower limits on the dollar amount they withdraw annually. This approach is more
flexible than the 4% rule, and in theory you will never outlive your money.
Or maybe the spending floor approach? That’s
another approach that has its fans. You estimate the amount of money you will
need to spend in a year and then arrange your portfolio to generate it. This
implies a laddered income strategy, with the portfolio heavily weighted towards
bonds and away from stocks. This is a more conservative approach than the two
methods above: with a low equity allocation in your portfolio, only a minority
of those assets are exposed to stock market volatility, and yet they can still
capture some upside with a foot in the market.
Attention has to be paid to tax efficiency. Many
people have amassed sizable retirement savings, yet give little thought as to
the order of their withdrawals. Generally speaking, there is wisdom in taking
money out of taxable accounts first, then tax-deferred accounts and lastly tax-exempt
accounts. This withdrawal order gives the assets in the tax-deferred and
tax-exempt accounts some additional time to grow. A smartly conceived
withdrawal sequence may help your retirement savings to last several years
longer than they would in its absence.2
Keeping healthy might help you save more in two ways. Increasingly,
people want to work until age 70, or longer. Many assume they can, but their
assumption may be flawed. The 2012 Retirement Confidence Survey from the
Employee Benefit Research Institute found that 50% of current retirees had left
the workforce earlier than they planned, with personal or spousal health
concerns a major factor.3
When you eat right, exercise consistently and see
a doctor regularly, you may be bolstering your earning potential as well as
your constitution. Health problems can hurt your income stream and reduce your chances
to get a job, and medical treatments can eat up time that you could use in
other ways. Good health can mean fewer ER visits, fewer treatments and fewer
hospital stays, all saving you money that might otherwise come out of your
retirement fund.
Fidelity figures that a couple retiring now at age
65 will spend $240,000 (in 2012 dollars) on retirement health expenses across
their remaining years. That $240,000 doesn’t even include dental,
over-the-counter drug and long term care costs (and as a reminder, many eye,
ear and dental care costs are not even covered under Medicare or by Medigap
policies). Every year you work may mean another year of health insurance
coverage as well as income.4

Reeve Conover can be reached at 877-423-9990 or reeve@reevewillknow.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
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of a competent professional. This information should not be construed as
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service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.

 

 

Citations.

1 – individual.troweprice.com/staticFiles/Retail/Shared/PDFs/retPlanGuide.pdf
[5/10]

2 – online.wsj.com/article/SB10001424052748703529004576160693310435366.html
[3/7/11]

3 – www.dailyfinance.com/2012/09/03/postponing-retirement-70-not-the-new-65/
[9/3/12]

4 – www.marketwatch.com/story/good-health-means-more-retirement-money-2012-12-06
[12/6/12]

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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