Posts

Showing posts from February, 2012

Goals Tending

Image
The bad news is that times are still tough for many Americans—and surveys suggest that even those with jobs are nervous about their prospects for the future. The good news is that the current level of economic uncertainty seems to have brought about—at least for some—a heightened awareness of the need to set money aside for a rainy day, perhaps even those rainy days in retirement. That said, the weak economy has certainly constrained the ability of many to save. In fact, a recent national survey found that an increasing number of Americans are having difficulty saving to meet goals ranging from meeting emergencies to affording retirement. The survey—released as part of America Saves Week(1)—noted that over the past three years, there has been a decline in the number of people who spend less than their income and save the difference, are building home equity, have adequate emergency savings, and think they are saving enough for retirement. However, the survey also revealed that havi

“Short” Comings

Image
In this business you are frequently asked “how much should people save for retirement?” Some try to answer that question with a degree of specificity that can be somewhat simplistic. Let’s face it, even if those close enough to retirement to have a sense of what their pre-retirement income level is (and, flawed as that can be, most projections start from that assumption as a baseline for what you’ll want/need to spend in retirement—see “Replacement” Window ), most struggle to turn that into a real savings figure. Ultimately, of course, a reliable answer to that retirement savings question requires an understanding of the individual’s goals and/or financial needs—and, predicated on certain assumptions, there are any number of tools that can help individuals set a target and (based on that) establish a savings plan. However, the planning question that almost never gets asked is: “And how certain do you want to be of achieving that target?” Asked that question, I suspect most ind

Road "Construction"

Image
The Senate Finance Committee is positioned to pass a highway bill, funded at least in part by changing the tax treatment on retirement accounts. Specifically, the modified chairman’s mark of the proposed Highway Investment, Job Creation and Economic Growth bill would require that age 70-1/2 account distributions be treated, for tax purposes, as distributed within five years of the death of the account holder (unless the beneficiary is the account holder’s age, a child with special needs, or older than 70). Under current law, holders of IRAs and 401(k)-type accounts are required to begin taking taxable distributions from those accounts once they reach age 70-1/2, though if the account holder dies, the taxation of the account is spread over the life of the beneficiary. According to a Senate Finance Committee press release , this particular provision is estimated to raise $4.648 billion over 10 years. The bill’s prospects in the Senate remain unclear, and the Wall Street Journal no

Above “Average”

Image
Every so often an industry survey will come out with an “average” 401(k) balance (1) . The specific numbers vary, but they are consistently less than even the most optimistic would see as sufficient to provide a financially viable retirement. Now, in fairness, the validity of an “average,” while mathematically simple, depends heavily on its components. Most are no more than the total of all the balances of those in the 401(k), from those just entering the workforce (and thus, by definition, with negligible balances) – and with decades to go to retirement – to those who are perhaps just days away from that point. Looking at no more than the “average,” you can’t tell how many are in which category. So, while the average can, over time, provide a sense of the direction in which things are moving, it tells you very little about the adequacy of that savings to fund an individual retirement. One way to help provide a more meaningful measure is to segment those balances by specific ag

Pats or Giants? Your Portfolio May Care

Image
There could be a lot more riding on Sunday’s Super Bowl than you think. If the results of the Super Bowl exert any influence on the markets – as proponents of the so-called Super Bowl Theory claim – then 2012 could prove to be truly tumultuous. For the "uninitiated," the theory (invented/popularized by the late New York Times sportswriter Leonard Koppett) says that a win by a team from the old National Football League is a precursor to rising stock values for the year (at least as measured by the S&P 500), but if a team from the old American Football League (AFL) prevails, stocks will fall in the coming year. This year we have a team from the old NFL (the NY Giants) taking on one from the old AFL (the New England Patriots, who once were the AFL’s Boston Patriots). So, if the Giants prevail, 2012 should be a good year for stocks – and if things go the Patriots’ way, well… On the Other Hand… Of course, as even loyal proponents will admit, this theory used to work