Fiduciary Rule Survives for Now

The Labor Department cleared a landmark retirement-savings rule to take effect next month, ending a stretch of uncertainty for brokers and investors after President Donald Trump called for a review of the Obama-era regulation with an eye toward repeal or revision.

The so-called fiduciary rule—which aims to eliminate conflicts in financial advice and ensure that brokers put the interests of retirement savers first—was originally due to come online in April but was delayed for 60 days as part of the review. Labor Department Secretary Alexander Acosta surprised many across the brokerage and insurance industries by recommending, in a Wall Street Journal opinion piece late Monday, against a further delay in the rule.

While Mr. Acosta preserved the possibility of revision or repeal of the rule as the Labor Department continues its economic review, the decision to let the regulation come into effect June 9 effectively makes it harder to reverse later. This is because firms across the country have to communicate compliance changes to clients, including disclosures about how clients are charged and commitments to put customers’ interests first.

The so-called fiduciary rule, six years in the making and unveiled by the Labor Department last spring, holds brokers and advisers who work with tax-advantaged retirement savings to a fiduciary standard as opposed to the previous suitability standard. That means they must work in the best interest of their clients and generally avoid conflicts, which can come about with the commission-based compensation common among brokers and insurance agents.

Source:  Wall Street Journal

Trump Turmoil?

From an economic standpoint, we haven’t lost anything. The economy is growing, employment remains strong, and corporate earnings are on the rise. The fundamentals, which drive markets, are also strong. What we have lost is, possibly, a modicum of future expectations—not something we have now, but something we hoped for in the future. It’s not great, but it’s not a disaster either.
What makes this drop more worrying is that markets have been remarkably calm recently. With the news from Washington full of drama, with markets dropping, and with worries high, it is easy to fall into the old mantra I mentioned the other day: “When in danger or in doubt, run in circles, scream and shout.”
Looking at the big picture, based on sound fundamentals and continuing growth, the market should remain solid, despite short-term volatility. Looking at the big picture, today’s volatility—and today’s news—is noise. Looking at the big picture, to get a bigger and sustained drawdown, we need things we don’t have: a recession, spiking interest rates, or spiking oil prices. Looking at the big picture, conditions remain quite positive.
Yes, we might see a bigger drawdown, but it is likely to be both limited and reasonably short-lived. There will be a time to worry, but right now, despite the very real issues being debated, we are still in a good place as investors.
Remain calm and carry on.
Source:  Brad McMillan, Commonwealth Financial Network
 

Why US stocks shrug off political drama

The U.S. stock market has been resilient to the ongoing political drama in Washington DC and beyond.

Why?  The fundamental pillars of support for US stocks (earnings) are as strong as they’ve been in years. According to the earnings analysts at Factset, the estimated earnings growth rate for the S&P 500 is 9.1%. If 9.1% is the actual earnings growth rate for the quarter, it will mark the highest year-over-year earnings growth reported by the index since 2011.

With more Trump-related drama stealing all the headlines, U.S. stocks quietly power on to fresh all-time highs.

At the start of the week, 91% of the companies in the S&P 500 had reported their First Quarter 2017 (Q1) earnings, and if anything, profits are exceeding the already lofty early indications of six weeks ago. According to FactSet’s data, 75% of reporting S&P 500 companies have beat earnings per share (EPS) estimates and 64% have beaten revenue estimates (both figures are well above their 1- and 5-year averages). Impressively, the expected earnings growth for the S&P 500 is tracking at 13.6% year-over-year, which if realized, would be the strongest growth in earnings since Third Quarter 2011.

Of course, much of this growth is attributable to the energy sector, which actually reported a loss on a sector-wide basis in Q1 of last year. Still, even if the energy sector were completely excluded, the S&P 500 earnings growth would be tracking at a still impressive 9.4%. Revenue growth has been similarly strong, both with and without the energy sector.

Perhaps most importantly for forward-thinking investors, analyst projections are optimistic for the rest of the year as well and for all of 2017, analysts are projecting earnings growth of 9.9% and revenue growth of 5.3%.

While valuations for U.S. stocks are stretched […]

The #1 money mistake

If your outflow exceeds your income, then your upkeep will be your downfall.
The first step to gaining wealth is spending less than you earn — it’s vital to making any financial progress. So when you over-spend, you’re doing the most damage possible to your finances.

Here’s what the book “Stop Acting Rich” says about the issue:

“Most people will never earn $10 million in their lifetime, let alone in any single year. In fact, most households (97%) are unlikely to ever earn even $200,000 or more annually. So what if you are unlikely to become rich by generating an extraordinarily high realized income? The only way you will become rich is by being like those millionaires at the other end of the continuum: by living well below your means, by planning, saving, and investing.”

There are two types of over-spending that can ruin your finances:

• Over-spending on the little things – the small amounts that seep out of your pockets here and there and eventually become large.

• Over-spending on the big things – homes, cars, boats, cottages, and so on.

The top complaint from people who don’t have balanced budgets is, “I don’t make enough money.”

In the vast majority of cases (probably 95% or more), it’s not the amount these people make – but the amount that they spend that’s the problem. (In some cases it’s true that people simply don’t make enough money to save, invest, etc. As such, they need to concentrate on increasing their income as much as they need to control over-spending.)

The author writes:  ”My wife and I once counseled a guy who made $130,000 a year. This was back in the early ‘90’s, so $130,000 was worth something (it’s still pretty good today.) […]

Paying taxes on my Social Security income

Nearly 90% of individuals over age 65 rely on Social Security income to pay for a large portion of living expenses throughout their retirement years. The federal government makes this benefit available to those who have worked and contributed to the system for a certain number of years, but the total monthly benefit varies from person to person. Although Social Security is an inevitable part of most individuals’ retirement planning, retirees may not be fully aware of how and when those benefits are taxed.
When Social Security Is Not Taxable
For retirees who receive Social Security income with little to no supplemental influx of cash, either from retirement plan distributions or other earnings, most likely those benefits are not taxable. The average benefit received is just under $1,300 each month, totaling $15,600 annually, and benefits are only taxable when combined income exceeds $25,000 for single retirees or $32,000 for couples filing joint tax returns. Individuals who are able to sustain the type of lifestyle they need or want on that level of income do not pay taxes on their Social Security benefits.
Taxable Social Security Income
For Social Security benefits to be taxable, individuals must have income above the threshold. This is based on total combined income, calculated as an individual’s adjusted gross income plus nontaxable interest earnings and half of his or her Social Security benefit. If combined income for a single individual is above $25,000 but below $34,000, or above $32,000 but below $44,000 for married couples, 50% of Social Security benefits are taxed. Combined income above these maximum amounts results in benefits taxed up to 85%. At this time, there is no income level that creates a situation where Social Security benefits are 100% taxable for retirees.
Avoiding Tax on Benefits
The simplest way to keep […]

Increase Your Online Financial Security

In an increasingly digital world, security of personal information remains in the forefront of our concern. Great emphasis should be placed on keeping your information safe and secure when navigating the internet. There are many benefits to conducting business online, but it is important to be aware of the risks involved and how to protect yourself from identity theft, phishing and fraud. The weakest link is often the individual user, so here are 6 tips to help you protect your information online and reduce the risk of financial fraud.

Keep your network secure
When setting up your wireless internet connection at home, make sure you secure it. By setting up security features such as password encryption you can deter would be hackers. When accessing the internet in a public space, such as the library or your local coffee shop, know that the connection is often not secure. It is generally best to refrain from accessing sites that contain sensitive personal information on such a connection as it can lead to others being able to access your information as well.

Set up banking alerts
In addition to the benefit of just keeping track of expenses to make sure they are in line with your budget, setting up bank alerts can be a way to detect fraudulent charges. Go through your bank and credit card transactions at least monthly to verify all transactions were authorized by you. You can also set up email and text message alerts that are sent to you every time a card is swiped.

Strengthen your passwords
These can be difficult to remember. Most of us have passwords on multiple accounts at various websites and it is often just easier to set them all to be the same. […]

Compulsive buying habits?

About 6% of Americans are compulsive buyers, according to research published in the American Journal of Psychiatry a decade ago. And many believe the advent of online shopping has exacerbated the problem further.

“Excessive spending is the number one barrier to saving for retirement,” said Tia Lee, director of wealth planning at Spectrum Management Group.

She has a novel approach to helping clients after years of trying to get them to simply stay within a traditional budget usually failed.

Now she has compulsive spenders “budget their lives, not their money,” she said.

Ms. Lee used such an approach with one woman who was racking up $12,000 a month shopping for clothes and other things online.

After examining a year’s worth of her spending habits revealed lots of small purchases, Ms. Lee directed her client to put as many items as she wanted in her electronic cart during the week. But the client was only allowed to purchase them on Fridays.

The woman saved $5,000 a month because her own internal spending limits kicks in before she hits send on Fridays and so she removes some items from the cart before purchasing.

In another case, Ms. Lee had clients who spent too much on dinners in expensive restaurants so she told them to limit their nights out to four a month.

“The number of times you’ve been out is easier to keep track of than budgeting the amount you spend,” she said.

Source:  Liz Skinner, Investment News

National Tax Freedom Day® 2017

National Tax Freedom Day® 2017 – the date when the nation as a whole has earned enough money to pay its total tax bill for the year – was April 23.  Americans will pay $3.5 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of more than $5.1 trillion.  Americans will collectively spend more on taxes in 2017 than they will on food, clothing, and housing combined.

This year, Americans will work the longest—46 days—to pay federal, state, and local individual income taxes. Payroll taxes will take 26 days to pay, followed by sales and excise taxes (15 days), corporate income taxes (10 days), and property taxes (10 days). The remaining six days are spent paying estate and inheritance taxes, customs duties, and other taxes.

Source:  Tax Foundation

Don’t be distracted

Don’t make the mistake of reacting to each news story as it hits the wires. Markets always anticipate what will happen in the near future and move before the event. That’s why it pays for investors to read the market’s mood and ignore their Twitter feeds.

The news changes all the time—but the market’s own signals are much better at forecasting stock market movements. Investors should keep with their individual asset allocation strategies based on their life situations  and not let the news of the day be the reason you make investment decisions.

Derived from:  Michael Kahn, Barron’s

Run out of money in retirement? Don’t make these mistakes

Being newly retired is definitely a reason to celebrate — and spend — some of the hard-earned money you’ve saved over the years.

Yet with Americans living longer, experts say you need to plan for a retirement that could last 30 years or more. Add in ever-rising medical costs, mostly stagnant Social Security checks and all of a sudden that pile of cash doesn’t look so big.

The issue of outliving your money is a real threat. To avoid having that happen don’t make these classic new-retiree mistakes.
Spending too much too soon

Making the transition from earning money to spending money when you first stop working is tricky. Especially if you’re healthy and eager to enjoy all that new free time.

“We get this all the time, where recently retired clients will do a trip to Europe or Asia, then spend four weeks in Caribbean, saying, ‘When we get older we’ll slow down,’” said Chris Schaefer, who leads MV Financial’s Retirement Plan Practice Group, Bethesda, Maryland. “They’re eating so much of principal in early retirement that they don’t have enough to last.”

Schaefer suggests that working with a financial planner to create a withdrawal strategy for your retirement accounts is key. He says a good starting point is taking out no more than 4 percent of your total nest egg a year.

Overspending on the house

Wanting to be debt free is an admirable goal and one that works for many retirees. However if you haven’t paid off the mortgage yet, rushing to do so may not be your best move.

As long as you have the cash flow to comfortably make the payments, Schaefer says don’t sacrifice your retirement savings by using a big chunk to pay it down. Instead keep […]