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April 2019 Market Commentary

April 2019 Market Commentary

Key Takeaways

    • 1st quarter GDP beat expectations at 3.2%, due in part to increasing net exports and inventories
    • The U.S. stock market reached new highs as economic data and corporate earnings were stronger than expected, though stock prices of companies with disappointing results have been punished
    • Despite slowing GDP in China and continuing budgetary and political challenges throughout Europe, economic growth overseas remains modestly positive
    • The Conference Board’s Leading Economic Indicators Index® increased in February and March, though is expected to weaken slightly going forward; new home sales and job growth beat expectations
    • Though central banks are on hold for now, interest rate ‘normalization’ will resume when inflation gains traction, which could happen later this year due to tight labor markets and rising commodity prices
  • Conclusion: Enjoy the party! Global stock markets have had a good run so far, and recent earnings announcements and economic data suggest a positive environment for the rest of the year.

The death of the U.S. economy has been greatly exaggerated.

1st quarter GDP beat expectations at 3.2%, due in part to increases in net exports and inventories. This strong growth came despite the consensus view earlier in the year that the U.S. economy was nearing a recession. In fact, the U.S. economy is still benefiting from several sources of stimulus such as low interest rates, 2017 corporate tax cuts, and deregulation. While it’s unlikely we’ll see such strong GDP numbers going forward, there’s no sign yet that these supportive factors have fully played themselves out.

Time to celebrate! The U.S. economy is not dead!

The strong GDP growth was also reflected in the U.S. stock market.  As of April 26, 77% of S&P 500 companies reporting actual earnings during the 1st quarter of 2019 were higher than expected. The chart below compares projected quarterly corporate earnings (gray bar) to actual earnings (blue bar) over the past few years. Actual earnings surpassed estimated earnings in the 4th quarter of 2018 and are looking to do the same in the 1st quarter of 2019. Add to this the size of the positive surprise so far in 2019 being larger than the historical average, and you have the U.S. stock market hitting new highs in April.

But it isn’t all roses and sunshine. The U.S. stock market has rewarded upward earnings surprises for sure, but has been unusually harsh with companies reporting disappointing earnings. According to the Wall Street Journal, the stock price of companies reporting actual earnings below estimates has fallen an average of 3.5% in the two days before and after their earnings announcement, compared to a historical average decline of only 2.5%. Investors don’t seem convinced that corporate profits are going to continue to grow.

One indicator of this lack of trust in the strength of the economy is very low bond yields. Despite decent earnings growth and high stock prices, the yield on the 10-year Treasury bond remains very low at about 2.5%, barely above inflation. The fact that investors are willing to buy bonds at this very low yield indicates skepticism about where the global economy is headed and how quickly we’re likely to get there.

Countries outside the U.S. are also facing economic uncertainty. Europe continues to struggle with trade tariffs and political unrest, and tensions between the U.S. and China remain unsettled. The U.K. hasn’t yet figured out how to exit the European Union gracefully, Italy missed its budget deficit target (again), and business sentiment in Germany is falling.

One bright spot is stronger-than-expected first quarter growth in China. But international investors are now worried that Chinese authorities will slow the pace of policy easing and the economy will fall back. While Europe and the U.K. seem to be navigating their challenges well enough, heaven help us if the expected resolution of the U.S.-China trade talks gets derailed! Given the uncertain state of global economies, skittish investors may run for the sidelines at the slightest negative news about escalating trade tensions.

But don’t let me be a ‘Debbie Downer’! Global stock markets are doing great so far this year.

If the year ends with no more gains than we already have, the S&P 500 return for the first four months of 2019 will be in the top third of historic returns for an entire year. As you can see in the graph below, developed and emerging global markets are also having a good run in 2019 (blue and red lines). Even bond market returns are positive, as shown by the green line at the bottom of the graph.

https://stockcharts.com/h-perf/ui

 

There is one cautionary note on the U.S. stock market, however: higher-than-average stock valuations. According to Factset, the forward 12-month Price/Earnings ratio for S&P 500 companies has risen to 16.8. This is higher than both the 15-year and 10-year average, and a signal that the market may not have much more room to run.

So far, so good…but for how long?

In mid-April the Conference Board announced its Leading Economic Indicators Index® (LEI) for the 1st quarter of 2019. The LEI posted a gain of 0.4% in March after increasing 0.1% in February, primarily due to strength in the labor markets, improved consumer outlook, and better-than-expected financial conditions. Eight out of the 10 LEI factors were positive in March, with 2 factors holding steady (average weekly manufacturing hours and building permits.) New home sales also rose unexpectedly in March, the third gain in a row. The three-month average sales rate is close to its best since December 2007.

Despite the recent strength in economic data, the trend in the LEI is leveling out, suggesting the U.S. economy will slow toward its long-term potential growth rate of about 2% by year end. This trend is reflected in the reduced pace of home price appreciation in March and a slight drop in labor participation.

The Fed echoed this ‘slow growth’ story in the statement released after the May 1st FOMC meeting. The committee highlighted a slowdown in household spending and business investment, as well as inflation below its 2% target, but indicated this weakness was probably “transient” and short term rates were appropriate at the current level.

All in all, the data continue to support the conclusion we’ve been talking about since late 2018 – the U.S. economy is slowing, but a recession is not imminent. In fact, the surprise that might spook investors later this year isn’t recession, but inflation.

With stronger than expected economic data so far in 2019, is inflation around the corner?

The tight labor market and increasing commodity prices might catch up with us later this year. As shown on the graph below, the cost of personal consumption has fallen recently but ticked up again in March (blue line). The Employee Compensation Index increased 0.7% for the quarter, though the 12-month growth rate slowed a bit (red line.) And the job report released in early May reported non-farm payrolls up 263,000, while the unemployment rate fell to 3.6%, the lowest level since 1969. It’s reasonable to expect higher wages to boost consumer purchases going forward, which may enable businesses to pass the increased labor cost on to consumers.

If you add increasing commodity prices such as oil (red line) and copper (blue line) to the rising wage trend, we may finally see the increase in inflation many of us have been watching for during the past few years of the economic recovery.

What is the end result? If commodity prices remain high and sales of goods and services absorb price pressure from increased labor and input costs (inflation), the Fed may have to revisit its mission to ‘normalize’ interest rates to keep the U.S. economy from overheating later this year. Market participants aren’t expecting this. Investors tend to react badly when caught by surprise, so we’re keeping a close watch on the data in the hope of being one step ahead of the crowd when the time comes to head for the exits.

Source: https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Conclusion: Enjoy the ride! (for now)

While we can’t predict when the party will end, that’s no reason not to enjoy ourselves in the meantime. A higher proportion of people are participating in the workforce than at any time since the 2008-2009 recession. Wages are rising, political tensions are easing, corporate profits aren’t as bad as feared, and interest rates remain low. What’s not to like?!

Just keep an eye out for warning lights as we get closer to the end of the year.

ASSET CLASS and SECTOR RETURNS as of APRIL 2019

Source: Morningstar Direct

Source: S&P Dow Jones Indices

 

Marcia Clark, CFA, MBA
Senior Research Analyst
Warren Street Wealth Advisors

Warren Street Wealth Advisors, a Registered Investment Advisor. The information contained herein does not involve the rendering of personalized investment advice but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. 

 

 

DISCLOSURES

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

 

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications.

Form ADV available upon request 714-876-6200

 

Market Volatility – “A Few Minutes with Marcia”

Volatility measures the frequency and magnitude of price movements, both up and down, that a financial instrument experiences over a certain period of time. The more dramatic the price swings, the higher the level of volatility.

Learn the basics of market volatility with Marcia Clark, CFA, MBA.

Watch:

For those who prefer to read!

Welcome to A Few Minutes with Marcia. My name is Marcia Clark, Senior Research Analyst at Warren Street Wealth Advisors. Today we’re going to talk about the 4th quarter 2018 stock market dive and 1st quarter 2019 rebound in an attempt to understand more about market volatility.

Prior to 2018, the stock market had experienced 2 years of unusually low volatility, despite a few bumps along the way. After a mixed start to 2018, the Dow Jones Industrial Average looked like it was back to its winning ways, then came the 4th quarter tumble. Investors were caught by surprise by the huge swings in market prices – volatility – and started selling stocks like crazy. To better understand these market dynamics, let’s put the recent activity into context.

You may have heard of a common measure of market volatility called the ‘VIX’ – the Chicago Board Options Exchange volatility index. The VIX measures expected future volatility by evaluating the prices of put and call options traded on the exchange. If you’re looking at the slideshow, you can see how much calmer the VIX index was during the quiet years of the stock market, especially in 2017. As the market swooped up in late 2017, expected future volatility spiked shortly thereafter – remember that volatility can spike when prices go up as well as down.

When the market gave back some of its gains in early 2018, the volatility index fell back as well. Then came the market tumble in late 2018. The VIX index starts jumping around like a Richter scale during an earthquake. As we move into 2019, even with the recent pick up in volatility the graph shows that the VIX is at a pretty normal level compared to prior years. We’re just not used to ‘normal’ volatility anymore.

Where do we go from here? No one knows for sure, and if anyone says they can predict the future they’re kidding themselves and their clients. What we can say is that financial markets react to rumors and headlines, many of which don’t fundamentally change the financial landscape. This ‘knee jerk’ reaction causes market volatility, and this volatility is normal. In fact, active investment managers appreciate market volatility, because market dips based on headlines rather than fundamental changes in the economic landscape give investors with a strong stomach and an evidence-based outlook the ability to buy good assets at cheap prices. If all goes well, those assets will recover their value plus more over time, and patient investors will be rewarded.

 

Marcia Clark, CFA, MBA
Senior Research Analyst
Warren Street Wealth Advisors

Warren Street Wealth Advisors, a Registered Investment Advisor. The information contained herein does not involve the rendering of personalized investment advice but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. 

 

 

DISCLOSURES

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications.

Form ADV available upon request 714-876-6200

The IRA and the 401(k)

The IRA and the 401(k)

Comparing their features, merits, and demerits. 

How do you save for retirement? Two options probably come to mind right away: the IRA and the 401(k). Both offer you relatively easy ways to build a retirement fund. Here is a look at the features, merits, and demerits of each account, starting with what they have in common.

Taxes are deferred on money held within IRAs and 401(k)s. That opens the door for tax-free compounding of those invested dollars – a major plus for any retirement saver. (1)

IRAs and 401(k)s also offer you another big tax break. It varies depending on whether the account is traditional or Roth in nature. When you have a traditional IRA or 401(k), your account contributions are tax deductible, but when you eventually withdraw the money for retirement, it will be taxed as regular income. When you have a Roth IRA or 401(k), your account contributions are not tax deductible, but if you follow Internal Revenue Service rules, your withdrawals from the account in retirement are tax-free. (1)  

Generally, the I.R.S. penalizes withdrawals from these accounts before age 59½. Distributions from traditional IRAs and 401(k)s prior to that age usually trigger a 10% federal tax penalty, on top of income tax on the withdrawn amount. Roth IRAs and Roth 401(k)s allow you to withdraw a sum equivalent to your account contributions at any time without taxes or penalties, but early distributions of the account earnings are taxable and may also be hit with the 10% early withdrawal penalty.1  

You must make annual withdrawals from 401(k)s and traditional IRAs after age 70½. Annual withdrawals from a Roth IRA are not required during the owner’s lifetime, only after his or her death. Even Roth 401(k)s require annual withdrawals after age 70½. (2)

Now, on to the major differences.

Annual contribution limits for IRAs and 401(k)s differ greatly. You may direct up to $18,500 into a 401(k) in 2018; $24,500, if you are 50 or older. In contrast, the maximum 2018 IRA contribution is $5,500; $6,500, if you are 50 or older. (1)

Your employer may provide you with matching 401(k) contributions. This is free money coming your way. The match is usually partial, but certainly, nothing to disregard – it might be a portion of the dollars you contribute up to 6% of your annual salary, for example. Do these employer contributions count toward your personal yearly 401(k) contribution limit? No, they do not. Contribute enough to get the match if your company offers you one. (1)

An IRA permits a wide variety of investments, in contrast to a 401(k). The typical 401(k) offers only about 20 investment options, and you have no control over what investments are chosen. With an IRA, you have a vast range of potential investment choices. (1,3)

You can contribute to a 401(k) no matter how much you earn. Your income may limit your eligibility to contribute to a Roth IRA; at certain income levels, you may be prohibited from contributing the full amount, or any amount. (1)

If you leave your job, you cannot take your 401(k) with you. It stays in the hands of the retirement plan administrator that your employer has selected. The money remains invested, but you may have less control over it than you once did. You do have choices: you can withdraw the money from the old 401(k), which will likely result in a tax penalty; you can leave it where it is; you can possibly transfer it to a 401(k) at your new job; or, you can roll it over into an IRA. (4,5)

You cannot control 401(k) fees. Some 401(k)s have high annual account and administrative fees that effectively eat into their annual investment returns. The plan administrator sets such costs. The annual fees on your IRA may not nearly be so expensive. (1)

All this said, contributing to an IRA or a 401(k) is an excellent idea. In fact, many pre-retirees contribute to both 401(k)s and IRAs at once. Today, investing in these accounts seems all but necessary to pursue retirement savings and income goals.


J Rucci

Justin D. Rucci, CFP®
Wealth Advisor
Warren Street Wealth Advisors

 

 

 

Justin D. Rucci is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. The information contained herein does not involve the rendering of personalized investment advice but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented.

This material was prepared by Marketing Pro, Inc. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of the content, those securities held may change over time and trades may be contrary to outdated posts.

Citations.

1 – nerdwallet.com/article/ira-vs-401k-retirement-accounts [4/30/18]
2 – irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions [5/30/18]
3 – tinyurl.com/y77cjtfz [10/31/17]
4 – finance.zacks.com/tax-penalty-moving-401k-ira-3585.html [9/6/18]
5 – cnbc.com/2018/04/26/what-to-do-with-your-401k-when-you-change-jobs.html [4/26/18]

Tax Deductions Gone in 2018

Tax Deductions Gone in 2018
What standbys did tax reforms eliminate?

Are the days of itemizing over? Not quite, but now that H.R. 1 (popularly called the Tax Cuts & Jobs Act) is the law, all kinds of itemized federal tax deductions have vanished.

Early drafts of H.R. 1 left only two itemized deductions in the Internal Revenue Code – one for home loan interest, the other for charitable donations. The final bill left many more standing, but plenty of others fell. Here is a partial list of the itemized deductions unavailable this year.(1)

Moving expenses. Last year, you could deduct such costs if you made a job-related move that had you resettling at least 50 miles away from your previous address. You could even take this deduction without itemizing. Now, only military servicemembers can take this deduction.(2,3)

Casualty, disaster, and theft losses. This deduction is not totally gone. If you incur such losses during 2018-25 due to a federally declared disaster (that is, the President declares your area a disaster area), you are still eligible to take a federal tax deduction for these personal losses.(4)

Home office use. Employee business expense deductions (such as this one) are now gone from the Internal Revenue Code, which is unfortunate for people who work remotely.(1)

Unreimbursed travel and mileage. Previously, unreimbursed travel expenses related to work started becoming deductible for a taxpayer once his or her total miscellaneous deductions surpassed 2% of adjusted gross income. No more.(1)

Miscellaneous unreimbursed job expenses. Continuing education costs, union dues, medical tests required by an employer, regulatory and license fees for which an employee was not compensated, out-of-pocket expenses paid by workers for tools, supplies, and uniforms – these were all expenses that were deductible once a taxpayer’s total miscellaneous deductions exceeded 2% of his or her AGI. That does not apply now.(2,5)

Job search expenses. Unreimbursed expenses related to a job hunt are no longer deductible. That includes payments for classes and courses taken to improve career or professional knowledge or skills as well as and job search services (such as the premium service offered by LinkedIn).(5)

Subsidized employee parking and transit passes. Last year, there was a corporate deduction for this; a worker could receive as much as $255 monthly from an employer to help pay for bus or rail passes or parking fees linked to a commute. The subsidy did not count as employee income. The absence of the employer deduction could mean such subsidies will be much harder to come by for workers this year.(2)

Home equity loan interest. While the ceiling on the home mortgage interest deduction fell to $750,000 for mortgages taken out starting December 15, 2017, the deduction for home equity loan interest disappears entirely this year with no such grandfathering.(2)

Investment fees and expenses. This deduction has been repealed, and it should also be noted that the cost of investment newsletters and safe deposit boxes fees are no longer deductible.  In some situations, investors may want to deduct these fees from their account balances (i.e., pre-tax savings) rather than pay them by check (after-tax dollars).(5)

Tax preparation fees. Individual taxpayers are now unable to deduct payments to CPAs, tax prep firms, and tax software companies.(3)

Legal fees. This is something of a gray area: while it appears hourly legal fees and contingent, attorney fees may no longer be deductible this year, other legal expenses may be deductible.(5)

Convenience fees for debit and credit card use for federal tax payments. Have you ever paid your federal taxes this way? If you do this in 2018, such fees cannot be deducted.(2)

An important note for business owners. All the vanished deductions for unreimbursed employee expenses noted above pertain to Schedule A. If you are a sole proprietor and routinely file a Schedule C with your 1040 form, your business-linked deductions are unaltered by the new tax reforms.(1)

An important note for teachers. One miscellaneous unreimbursed job expense deduction was retained amid the wave of reforms: classroom teachers who pay for school supplies out-of-pocket can still claim a deduction of up to $250 for such costs.(6)

The tax reforms aimed to simplify the federal tax code, among other objectives. In addition to eliminating many itemized deductions, the personal exemption is gone. The individual standard deduction, though, has climbed to $12,000. (It is $18,000 for heads of household and $24,000 for married couples filing jointly.) For some taxpayers used to filling out Schedule A, the larger standard deduction may make up for the absence of most itemized deductions.(1)


 

Cary Warren Facer

Founding Partner
Warren Street Wealth Advisors

 

 

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. 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. 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 neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Warren Street Wealth Advisors, LLC is a Registered Investment Advisor. The information posted here represents opinion and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional.  Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

Citations.

1 – forbes.com/sites/kellyphillipserb/2017/12/20/what-your-itemized-deductions-on-schedule-a-will-look-like-after-tax-reform/ [12/20/17]
2 – tinyurl.com/y7uqe23l [12/26/17]
3 – bloomberg.com/news/articles/2017-12-18/six-ways-to-make-the-new-tax-bill-work-for-you [12/28/17]
4 – taxfoundation.org/retirement-savings-untouched-tax-reform/ [1/3/18]
5 – tinyurl.com/yacz559c [1/8/18]
6 – vox.com/policy-and-politics/2017/12/19/16783634/gop-tax-plan-provisions [12/19/17]

The Value of Double-Checking Your Retirement Strategy

the value of double checking your retirement strategyAs you approach your “third act,” does it need to be adjusted?

Provided by: Warren Street Wealth Advisors

 

Motivational speaker Denis Waitley once remarked, “You must stick to your conviction, but be ready to abandon your assumptions.” That statement certainly applies to retirement planning. Your effort must not waver, yet you must also examine it from time to time.1

 

For example, the level of risk you chose to tolerate at 35 or 40 may not be worth tolerating at 55 or 60. Additionally, you may realize that you will need more retirement income than previously assumed. With those factors and others in mind, here are some signs that you may need to double-check your retirement strategy.

 

Your portfolio lacks significant diversification. Many baby boomers are approaching retirement with portfolios heavily weighted in equities. As many of them will have long retirements and a sustained need for growth investing, you could argue that this is entirely appropriate. If your retirement is near at hand, however, you might want to consider the length of this bull market and the possibility of irrational exuberance.

 

The current bull has lasted about twice as long as the average one and brought appreciation in excess of 200%. It could rise higher: as InvesTech Research notes, two-thirds of the bull markets since 1955 have gained 20% or more in their final phase. Few analysts think a “megabear” will follow this historic rally, but even a typical bear market brings a reality check. The lesser bear markets since 1929 have brought an average 27.5% reversal for the S&P 500 and lasted an average of 12 months.2

 

A poor quarter makes you anxious. You start watching the market like a hawk and check up on your investments more frequently than you once did. Some of this vigilance is only natural as you near retirement; after all, you have far more at stake than a millennial investor. Even so, this is a sign that you may be uncomfortable with the amount of risk in your portfolio. A portfolio review with a financial professional could be in order. A semi-annual or annual review is reasonable. One bad quarter should not tempt you to abandon a strategy that has worked for years, only to examine it in the face of sudden headwinds.

 

You find yourself listening to friends & pundits. Your tennis partner has an opinion about when you should claim Social Security. So does your dentist. So does a noted radio personality or columnist. Their viewpoints may be well-informed, but they are likely expressing what they would do as they share what they feel you should do. If you seem increasingly interested in the financial opinions of friends, acquaintances and even total strangers, or the latest “hot tip” on the market, this hints at anxiety or restlessness about your financial strategy. Perhaps it is warranted, perhaps not. It may be time to reexamine some assumptions.

 

You wonder about the demands your lifestyle may make on your finances. You want to travel, golf, and have fun when you retire, and those potential lifestyle expenses now seem larger than they once were. Here is another instance where you may want to double-check your retirement savings and income strategy.

 

You see what were once “what-ifs” becoming probabilities. You sense that you or your spouse might face a serious health issue in the not-so-distant future. It looks as if you may end up raising one of your grandchildren. It seems likely that you will provide eldercare for a sibling who may move in with you. These life events (and others) may prompt a new look at your financial assumptions.

 

You think you will retire to another state. Say you retire to Florida. There is no state income tax in Florida. So your retirement tax burden may decrease with such a move (though some states have higher property taxes to offset the lack of state taxes). To what degree will geographic considerations affect your retirement income, or need for income? Such geographic factors are worth considering.3

 

You wonder how deeply inflation will impact your retirement income. A recent Morningstar analysis of retiree spending data compiled by the federal government noticed something interesting: for the typical retiree, spending declines in inflation-adjusted terms between age 65 and age 90. So the assumption that retirees increase household spending over time in light of inflation may be flawed. Of course, inflation has been mild for the past several years. If inflation spikes, however, that assumption might prove wholly valid.3

 

Looking at your retirement strategy anew has merit. As the years go by, priorities change and needs arise. New questions call for appraisals of old assumptions. Reviewing your approach to investing and saving at mid-life is only rational, for your retirement strategy must suit the objectives you now have before you rather than those you set in your past.

 

Warren Street Wealth Advisors

190 S. Glassell St., Suite 209

Orange, CA 92866

714-876-6200 – office

714-876-6202 – fax

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. 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. 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 neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Citations.

1 – quotes.lifehack.org/quote/denis-waitley/you-must-stick-to-your-conviction-but/ [4/16/15]

2 – fortune.com/2015/04/16/taming-the-bear-market/ [4/16/15]

3 – tinyurl.com/odyle9s [12/25/13]