Daily Archives: November 2, 2015

Heads Up!

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President Obama expected to sign into law a Federal Budget which will close Social Security Loopholes.

Recent budget legislation that came through in the midnight hours at the end of last week impacts Social Security planning for many retirees by closing what is deemed to be loopholes for those reaching Full Retirement Age (FRA) such as: 1) certain benefits for filing and suspending an application for one’s own benefit while opening the window for family members to file on that same record and 2) filing a restricted application for benefits on a spouse’s record. These strategies available to those who are FRA and do not need the benefits for cash flow needs allow delayed credits which amounts to an increase of benefits of 8% per year.

It all started back in 2000 when Congress passed the Senior Citizens Freedom to Work Act which allowed voluntary suspension of Social Security benefits. This may have been applicable if a worker changed their mind and decided to go back to work. When a worker suspended their own benefit at FRA, they were still eligible to file for a spousal benefit while building up their own benefit.

As of this writing the President has not yet signed the legislation but the following is a summary as we understand it at this time.

  • Anyone who is already collecting Social Security on their own record or on a spouse’s record, will not be affected.
  • Six months from the legislation being enforced, recipients will no longer be able to file restricted applications for just spousal benefits. Exception: The new limits to restricted applications will not apply to anyone who is already age 62 or older in 2015; they can still file a restricted application for spousal benefits when they turn Full Retirement age over the next four years.
  • Suspending your own benefit will also suspend benefits to others, such as spouses or dependent children, eligible for benefits on the same earnings record. Exception: Anyone currently utilizing file and suspend will be grandfathered. Beyond the six months of enactment, filing and suspending will have limited purposes such as when someone begins to file and then changes their mind.
  • 180 days after enactment, benefits earned during suspension will no longer be eligible for a lump sum payout should the recipient “unsuspend.”
  • Survivor benefits have not changed. They are still allowed to file a restricted application for survivor benefits while delaying their own.

For more information, contact Valley National’s Senior Vice President Laurie Siebert CPA, CFP®, AEP®.

The “Heat Map”

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Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: This grade equals B+ (very favorable). Gasoline prices continue to drop. Imports have become cheaper due to the strength of the U.S. dollar. Low interest rates will help real estate, an important component for the consumers’ wealth effect. These trends put more money in the pockets of Americans coming into the all-important Holiday shopping season.

THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices. The FED kept interest rates unchanged last month. The next big milestone is the Fed (Open Market Committee) meeting which will occur December 16 – 17.

BUSINESS PROFITABILITY: This factor’s grade is a C (average). The third-quarter earnings season is past the halfway point, with results in line with expectations. Based on reports from 341 companies in the S&P 500 index, profits are down 1% and revenue off nearly 5%, according to Sheraz Mian, director of research at Zacks. Leaving out the energy sector, profits are up 6.1% and revenue 1.5%.

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.

The Numbers

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Last week, .S. Stocks increased. Foreign Stocks and Bonds declined. During the last 12 months, STOCKS outperformed BONDS.

Returns through 10-30-2015

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

-.3

1.1

2.0

1.6

3.0

4.7

US Stocks-Standard & Poor’s 500

.2

2.7

5.2

16.2

14.3

7.9

Foreign Stocks- MS EAFE Developed Countries

-.3

 2.1

0.0

8.0

4.8

4.8

Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.

“Your Financial Choices”

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The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week, Laurie and guest hosts Valerie Lane, President of United Way of the Greater Lehigh Valley’s Women’s Leadership Council and Marci Ronald, Executive Vice President of United Way of the Greater Lehigh Valley, will discuss: “Making a difference in the community financially and progressively”

Laurie, Valerie, and Marci will take your calls on these topics and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area– or listen to it online from anywhere on the internet.  For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.

The Markets This Week

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For investors, October was a treat. Stocks finished the week and the month on a high note. The market rose 0.2% in light trading last week, fuelled in part by short-covering and continued merger activity.

The Dow Jones Industrial Average soared 8.5%, and the Standard & Poor’s 500 index 8%, in October, for both the best monthly gain in four years. On the week, after a late Friday swoon, the Dow finished up 0.1%, or 16, to 17,663.54, while the S&P 500 index rose four points to 2079.36. The Nasdaq Composite moved up 0.4% last week to 5053.75.

There wasn’t much “plain vanilla” buying from institutional investors, says Tom Carter, a trader at JonesTrading. With market short-interest levels at the highest they’ve been in years, last week’s Federal Reserve news pushed shorts to cover, he adds.

Wednesday, the Fed’s Federal Open Market Committee meeting statement specifically—and unusually—emphasized the potential for a rate hike at its next meeting, Dec. 15-16.

The Fed futures market shows that investors now think a rate hike is a toss-up in December, up from a 33% chance before the meeting. Though the initial market reaction to the statement was negative, shares turned decidedly positive by day’s end.

The market appears to be toggling back and forth on the desirability of a Fed hike, says Terri Spath, chief investment officer for Sierra Investment Management.

There will be numerous opportunities for continued confusing signals from various Fed officials, in speeches and the like before its December meeting. Chair Janet Yellen testifies in Congress Dec. 3. That likely means more volatility.

Chris Gaffney, president of EverBank World Markets, says what the Fed does in December doesn’t matter as much as what it does after. The central bank has said the path to higher rates will be gradual, he says, not hard to believe given the prognosis of more tame U.S. economic data.

Spath adds: “The possibility of a one-and-done by the Fed is higher than a lot of people think.” Though the market has recovered most of its losses since August, “it’s a muddle-through [U.S.] economy and there’s not a lot of room for price/earnings multiple expansion,” she adds. “We’re not poised for a big run from here.”

(Source: Barrons Online)