RIDING THE WAVE
The market started declining last Friday with another big fall yesterday. How do you feel? If you have a conservative portfolio, down 3.41% since Friday, you probably aren't feeling the same pain as someone with an aggressive portfolio, down 7.19%...more than double. Those who do have more conservative portfolios, because that best suits both their risk tolerance while still meeting all their financial goals, can take heart. Even though they missed out on ...some of the huge gains of 2017, they will also miss out on some of the huge losses. For those who want or need a more aggressive portfolio, stick to your guns. Now is NOT the time to sell (for anyone) and, if you are really as aggressive as you think, you may want to buy while prices are down (caution: they can go lower and did in the Great Recession...much lower). Whatever your style, this is not the time to change style but it may be time to re-balance to your target portfolio mix. Then turn away from the noise.
OPPORTUNITY FOR A REAL CHANGE ON HEALTHCARE COSTS?
I did a plan for a 60 year old the other day. Her core spending will double over her retirement period with inflation of 2.5%. But it looks like her healthcare expense, which I inflate at 6.5% (!!!! but could be more) goes up SIX FOLD!!!!! Perhaps these very smart gentlemenn can make a difference with their new plan. Arguing over who pays is not the solution. Lowering the cost of healthcare is.
TEACH YOUR KIDS ABOUT MONEY
The best way to start is by setting a good example. But there are other things you can do. As they get older start turning over money decisions to them and let them make some mistakes when the consequences are negligible. You can start as early as 5 (give them a set amount of money a week and let them know you won't be buying anything for them in the check out aisle). Then increase their responsibility as they age. By the time they are in high ...school you might give them a lump sum at the beginning of every semester and let them buy their own clothes, entertainments, gifts, etc. When the money is gone it is GONE. And when they are older, let them know about the family finances. Some people don't want their children to know specifics but they already know a lot from what kind of home you live it, what cars you drive, and what you spend on eating out and entertainment. So why not show them the utility and insurance bills as well as the mortgage and car payments? Be sure to contact us for additional suggestions. One of the best things to prepare for your own retirement is to raise money smart kids.
HOW WELL DID YOUR INVESTMENTS DO IN 2017?
Many people will hear that the Dow was up 28.11% and the S&P 500 was up 28.24% and they will wonder why they didn't do as well. The answer is fairly simple. You probably own a well diversified portfolio that has different kinds of stocks than those just held in those two indexes (examples: International, small company) as well as some fixed income and cash. The latter will never do as well in a bull market but will serve as a neede...d anchor when stocks decline. When looking at your own portfolio, comparing your performance to similar model portfolios is a much better measure. Let's look at the Morningstar models:
Aggressive (95% stocks) - 21.95%
Moderately Aggressive (80% stocks) - 18.89%
Moderate (60% stocks) - 14.66%
Moderately Conservative (40% stocks) - 10.86%
Conservative (20% stocks) - 7%
This was a year when there were big differences depending on how you invested. Now, this doesn't mean you should run out and get an Aggressive portfolio just because it was the best performer last year. What goes up will come down. So use a portfolio that will provide for all of your needs with as little risk as possible. That will make for a good night's sleep.
WHERE SHOULD YOU GET YOUR NEEDED RETIREMENT INCOME? This article shows how it might make more of a difference that you thought. The new simplified tax system still isn't very simple. This article provides a great example.
HERE’S A GOOD TIP FOR NON-CASH DONATIONS
It’s a great time of year to take your old clothing and household items to Goodwill or your favorite charity. This is especially true this year as some of you might not itemize next year. Whenever I take non-cash items to a charity I set them all out and, before I pack them up, I take pictures. It’s great back up for the taxman. So go give big to a cause you care about, items OR cash OR your time.
BEWARE OF SPENDING TOO MUCH AFTER CHRISTMAS
Many overspend before Christmas. Now is not the time to let your guard down. Retailers who want to dump excess inventory will be offering some very attractive deals this coming week. Of course, if it was a purchase you were planning or something you REALLY need, by all means take advantage of a bargain. DO NOT buy something just because it is on sale. We all love a deal. But, bottom line, if you don't need, it don't buy it.
THE COST OF CARE AS YOU AGE
Many people we talk with have misconceptions about what care will cost as they age. And this is understandable especially as it varies a lot by location. Genworth has prepared a great interactive site that will let you see the average cost of various types of service. Why not check out your area? Or even where your parents live. https://www.genworth.com/…/industry-exper…/cost-of-care.html
FINDING HAPPINESS IN THE BEDROOM
Unless you are living in poverty, quadrupling your income will not significantly increase your happiness. But a recent study from Oxford Economics has determined what will: good sleep and sex. And, unless you are paying for the sex, they are free! So think about spending some more time in the bedroom. Oh, and sleep nude. Studies show that that will help you sleep better and using heavy blankets will actually reduce your anxiety.
Great article on a real problem. Why don't you start culling your stuff now and refuse to replace it with just more stuff? So liberating.
How to dispose of a lifetime of memories and keepsakes? These days, it pays to ask a professional, not your heirs.
GROW THE ECONOMY NOT THE DEBT
The non-partisan Peterson Foundation recently listed some good goals to be considered during the coming tax reform discussions:
1. Fiscally Responsible.
Tax reform should not increase federal deficits or debt. ...
Reforming taxes in a way that worsens our fiscal condition is counter-productive because increasing our national debt harms economic growth. Ideally, lawmakers should pursue policies that improve our already unsustainable fiscal outlook over the short and long run.
Tax reform should support economic growth, productivity and competitiveness.
This can be done by eliminating market-distorting loopholes and improving incentives to work and invest.
Tax reform should be evaluated with realistic assumptions.
Lawmakers should use non-partisan CBO scoring and consensus economic assumptions, wait for full scoring before voting, and avoid gimmicks that obscure the true fiscal and economic impact of legislation.
Reform should be comprehensive – tax cuts are not tax reform.
Lawmakers should seize the rare opportunity to reform our outdated tax code by enacting comprehensive changes to both individual and corporate taxes that can have a significant positive effect on the economy. Well-designed reform would pair rate reductions with the elimination or modification of tax expenditures to make the code more supportive of economic growth and improve our fiscal outlook.
The benefits of tax reform should be widely shared, with the most economically vulnerable protected.
Our tax code is riddled with preferences that help some constituents while hurting others – reform can level the playing field and eliminate unfair distortions.
Tax reform should increase simplicity.
Our tax code is overly complex. Lawmakers can reduce the burden of compliance while increasing efficiency and transparency.
Reform should enact permanent changes to the tax code.
American companies and individuals depend on certainty, predictability and permanency in the tax code to make important operating and investment decisions. Policymakers should not sidestep the “Byrd Rule” by proposing fiscally irresponsible policies that sunset before the 10-year budget window.
Bipartisan tax reform would be more durable and long-lasting.
CONSUMER GURU CLARK HOWARD GIVES HIS ADVICE ON HOW TO DEAL WITH IDENTITY THEFT. (re: recent Equifax breach)
Clark is the man and he knows his stuff. He cautions readers NOT to use the free Equifax service as they obviously aren't that good at monitoring their own systems. He suggest using Credit Karma's free credit monitoring (link in the article) AND placing a freeze on your accounts with all 3 credit bureaus. Understand that a freeze can be a hassle for some so be sure to read the guide that is linked in the article.
YES YOU DO
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