Schwartz
Financial Weekly Commentary
April
28, 2014
The Markets
Newton’s third law says for every action
there is an equal and opposite reaction. Since things became tense between
Ukraine and Russia, we’ve been getting a primer on the relative strength of diplomatic,
economic, financial, and military actions and reactions.
Taking things over isn’t anything new for
Russian President Vladimir Putin. A decade ago, he nationalized Yukos (a large
publicly held Russian oil company) after jailing its founder for tax evasion
and fraud. The financial repercussions of the takeover are still rippling
through the global economy. In 2012, Russia lost a lawsuit filed by foreign
shareholders of Yukos Oil and was ordered to pay damages.
Not long after the Yukos debacle, Putin
lamented the demise of the Soviet Union was the greatest geopolitical
catastrophe of the century. In 2014, he annexed Crimea – the first time a
European nation has taken territory from another European nation since World
War II – justifying the action in many ways, including by saying the Crimean
peninsula should have been returned to Russia in 1991 when the Soviet Union
dissolved. The West responded by imposing sanctions.
Today, Russia’s economy is in distress in
part because of sanctions, according to Bloomberg
BusinessWeek. Just last week, Standard & Poor’s knocked the country’s
debt rating down to one level above junk, and Russia’s central bank raised
rates for the second time since March significantly increasing the cost of
borrowing for businesses and individuals. Inflation is high in Russia – above
seven percent – although, as one economist pointed out, raising rates had
little to do with inflation and much to do with supporting the ruble and discouraging
the flight of capital from Russia. During the first quarter of 2014, $50 billion
was pulled out of Russia, and estimates suggest that amount could rise to $200
billion by year-end depending on what happens in Ukraine.
The Russian central bank wasn’t the only
one taking action last week. On Thursday, despite threats of further economic
sanctions, Russia placed thousands of troops along the Ukrainian border for
military exercises. Additional sanctions are likely to be imposed on Russia
this week. We’ll soon have more insight into which actions speak the loudest.
Escalating tensions affected stock markets
around the world last week, and many indices finished the week lower than they
started.
Data as of
4/25/14
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
-0.1%
|
0.8%
|
17.5%
|
11.8%
|
16.8%
|
5.1%
|
|
10-year
Treasury Note (Yield Only)
|
2.7
|
NA
|
1.7
|
3.4
|
2.9
|
4.4
|
|
Gold
(per ounce)
|
0.2
|
8.3
|
-10.3
|
-4.6
|
7.5
|
12.6
|
|
DJ-UBS
Commodity Index
|
0.3
|
9.8
|
4.1
|
-7.5
|
4.9
|
-0.6
|
|
DJ Equity
All REIT TR Index
|
0.3
|
10.8
|
0.3
|
10.0
|
23.1
|
10.0
|
S&P 500, Gold,
DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay
a dividend) and the three-, five-, and 10-year returns are annualized; the DJ
Equity All REIT TR Index does include reinvested dividends and the three-,
five-, and 10-year returns are annualized; and the 10-year Treasury Note is
simply the yield at the close of the day on each of the historical time
periods.
Sources:
Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance
is no guarantee of future results. Indices are unmanaged and cannot be invested
into directly. N/A means not applicable.
how long will you live? Life expectancy
plays an important role in financial planning. It influences decisions about
how much to save, invest, and/or insure to cover retirement, healthcare,
long-term care, and other needs that may crop up over the course of a lifetime.
Of course, there are some important nuances to life expectancy.
First
and foremost, life expectancy changes throughout your lifetime. In 2010,
according to the Centers for Disease
Control and Prevention, the average life expectancy for a newborn was 78.7
years, while a 65-year-old could expect to live to about age 84 and a
75-year-old to age 87.
Second,
during the past two centuries, life expectancy increased by leaps and bounds.
In the 1900s, most people didn’t live past age 50, according to the National
Institute on Aging. By the end of the first decade of the 21st century,
people were living beyond age 70. Not everyone’s life expectancy has increased
at the same pace. A 2012 Brookings Institute article said:
“Analysts have long recognized the powerful
association between personal income and expected life spans. People with higher
incomes tend to live longer than people with lower incomes. Statistical
tabulations suggest that the relationship is nonlinear. A $10,000 increase in
annual income does more to lift the life expectancy of someone who lives on a
meager income than it does to boost the life span of someone who is already
well off.”
Gender
plays an important role, too. While it’s true women have lived longer than men
for decades, the gap has been closing. Since 1980, men’s life expectancy at
birth has increased from 70 years to 76.2 years – a gain of more than six
years. Women’s life expectancies at birth have increased from 77.4 years to 81
years – a gain of less than four years.
Life
expectancy isn’t the only thing that can have a significant effect on your
financial plans. If your plan hasn’t been thoroughly reviewed in the past year
or so, you may want to contact your financial professional. It’s time for a
planning checkup!
“One looks back with
appreciation to the brilliant teachers, but with gratitude to those who touched
our human feelings. The curriculum is so much necessary raw material, but
warmth is the vital element for the growing plant and for the soul of the
child.
--Carl Jung, Swiss
psychotherapist
Value
vs. Growth Investing (4/25/14)
|
-0.19
|
1.18
|
-0.42
|
4.13
|
20.25
|
14.04
|
19.55
|
|
|
-0.07
|
1.27
|
0.01
|
4.44
|
19.50
|
14.33
|
18.51
|
|
|
-0.12
|
2.26
|
-0.10
|
5.51
|
18.57
|
16.54
|
19.48
|
|
|
0.06
|
-0.50
|
-0.86
|
1.88
|
22.68
|
14.55
|
19.13
|
|
|
-0.16
|
2.20
|
1.05
|
6.17
|
17.31
|
11.96
|
17.04
|
|
|
-0.44
|
1.66
|
-1.19
|
4.02
|
22.27
|
13.50
|
22.29
|
|
|
-0.26
|
2.85
|
-1.05
|
4.66
|
21.08
|
14.12
|
22.78
|
|
|
-1.27
|
-1.14
|
-3.08
|
0.34
|
19.56
|
10.47
|
20.83
|
|
|
0.31
|
3.63
|
0.77
|
7.55
|
26.54
|
16.06
|
23.27
|
|
|
-0.71
|
-1.15
|
-2.74
|
1.14
|
22.19
|
12.39
|
22.05
|
|
|
-0.72
|
0.35
|
-2.66
|
3.11
|
22.24
|
11.47
|
21.15
|
|
|
-1.46
|
-5.56
|
-4.72
|
-3.56
|
22.42
|
11.19
|
21.17
|
|
|
-0.01
|
1.71
|
-0.92
|
3.82
|
21.90
|
14.57
|
23.77
|
|
|
-0.19
|
2.24
|
-0.47
|
5.17
|
19.32
|
15.71
|
20.32
|
|
|
-0.31
|
-0.96
|
-1.56
|
1.21
|
22.01
|
13.47
|
19.67
|
|
|
-0.06
|
2.45
|
0.86
|
6.28
|
19.50
|
12.97
|
18.74
|
©2004 Morningstar, Inc. All Rights Reserved.
The information contained herein: (1) is proprietary to Morningstar; (2) is not
warranted to be accurate, complete or timely. Morningstar is not responsible
for any damages or losses arising from any use of this information and has not
granted its consent to be considered or deemed an “expert” under the Securities
Act of 1933. Past performance is no guarantee of future results. Indices are unmanaged and while these indices
can be invested in directly, this is neither a recommendation nor an offer to
purchase. This can only be done by
prospectus and should be on the recommendation of a licensed professional.
Office Notes:
Take No Social
Security payments
Until You’ve Learned How to Maximize Them
Over the past few
months, I’ve sent you several articles about some of the critical mistakes
people can make in retirement. Another
one of those mistakes is failing to maximize your Social Security benefits.
Why is this a
mistake? After all, you may have heard
that Social Security is broken, or that it won’t be around by the time you
retire. But the truth is that Social
Security is nothing less than a guaranteed stream of income, something no retiree should ever neglect. Even better?
There are ways to maximize your Social Security benefits. In other words, you may have the ability to
increase your post-retirement income.
For these reasons, Social Security should and will play a large part in
your retirement plan. Failing to give
your Social Security benefits the attention they deserve is basically just a
way of denying yourself money for retirement.
To help you avoid
this mistake, here are …
Three Ways to Potentially Increase Your Social Security
Benefits
1.
Delay collecting
your benefits
Too many people
rush to collect their Social Security benefits as soon as they retire. This is sometimes a mistake, especially if
you retire early. Technically, you can
begin receiving benefits as early as age 62, but if you do so; your benefits
will be reduced significantly. For
example, if you were born between 1943 and 1954, your payouts would be reduced
by 25%. And the reduction isn’t
temporary. It’s permanent.
Waiting till your
“full retirement age” is probably a better option—it means you won’t face any
reduction. What is your “full retirement
age?” It’s the age at which a person may
first become entitled to “full” or “unreduced” retirement benefits.1 The following chart gives you the specifics:
|
Year of Birth
|
Full Retirement
Age
|
|
1943-1954
|
66
|
|
1955
|
66 and 2 months
|
|
1956
|
66 and 4 months
|
|
1957
|
66 and 6 months
|
|
1958
|
66 and 8 months
|
|
1959
|
66 and 10 months
|
|
1960 and later
|
67
|
The latest you can begin collecting
benefits is at age 70, and there’s good reason to hold off until then if you
can afford it. Benefit payments go up 8%
for every year you wait after you
reach your full retirement age up to age 70.
In other words, the longer you can keep your hand out of the cookie jar,
the more sweets you’ll eventually receive.
2.
Claim spousal
benefits
This topic is very
intricate—too intricate for a single letter.
So for now, it’s more important that you simply be aware of your options. Another way to potentially maximize your
Social Security is to claim a spousal benefit.
Married individuals can claim Social Security based on either their
personal earnings record (in other words, their own work history) or on their spouse’s earnings
record. If a married individual chooses
the latter, they would receive up to 50% of their spouse’s benefit.
Why would you
choose to claim Social Security based on 50% of your spouse’s earnings record
rather than your own? It’s simple:
because you can claim whichever number is higher. Be aware, however, that you cannot claim a
spousal benefit until your spouse has filed their own claim.
3.
Claim survivor
benefits
Imagine a
hypothetical couple, John and Mary.
Let’s say that both claimed Social Security based on their own earnings
records. Now let’s say that John dies of
a heart attack, leaving Mary behind.
Under certain circumstances, Mary can file to receive John’s benefit, or increase her own benefit to the same
amount that John enjoyed, if John’s number is greater.
There are other
ways to potentially maximize your Social Security benefits, too. To learn about these, or more about the
methods listed here, please feel free to give my office a call at 215-886-2122,
or e-mail me at mike@schwartzfinancial.com.
I’d be happy to speak with you about your options.
Whatever you do,
remember: Social Security is a guaranteed stream of income, and should figure
highly into your retirement plan. Don’t
deny yourself the chance to earn more money for retirement!
Regards,
,
Michael L. Schwartz, RFC®, CWS®, CFS
P.S. Please feel
free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list,
please reply to this email with their email address and we will ask for their
permission to be added.
Michael
L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and
advisory services through Independent Financial Group, LLC., a registered
broker-dealer and investment advisor.
Member FINRA-SIPC. Schwartz Financial and Independent Financial Group
are unaffiliated entities.
This
information is provided for informational purposes only and is not a
solicitation or recommendation that any particular investor should purchase or
sell any security. The information contained herein is obtained from sources
believed to be reliable but its accuracy or completeness is not
guaranteed. Any opinions expressed
herein are subject to change without notice.
An Index is a composite of securities that provides a performance
benchmark. Returns are presented for
illustrative purposes only and are not intended to project the performance of
any specific investment. Indexes are
unmanaged, do not incur management fees, costs and expenses and cannot be
invested in directly. Past
performance is not a guarantee of
future results.
* The Standard &
Poor's 500 (S&P 500) is an unmanaged group of securities considered to be
representative of the stock market in general.
* The DJ Global ex US
is an unmanaged group of non-U.S. securities designed to reflect the
performance of the global equity securities that have readily available
prices.
* The 10-year Treasury
Note represents debt owed by the United States Treasury to the public. Since
the U.S. Government is seen as a risk-free borrower, investors use the 10-year
Treasury Note as a benchmark for the long-term bond market.
* Gold represents the
London afternoon gold price fix as reported by the London Bullion Market
Association.
* The DJ Commodity
Index is designed to be a highly liquid and diversified benchmark for the
commodity futures market. The Index is composed of futures contracts on 19
physical commodities and was launched on July 14, 1998.
* The DJ Equity All
REIT TR Index measures the total return performance of the equity subcategory
of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the
source for any reference to the performance of an index between two specific
periods.
* Opinions expressed
are subject to change without notice and are not intended as investment advice
or to predict future performance.
* Past performance does
not guarantee future results.
* You cannot invest
directly in an index.
* Consult your
financial professional before making any investment decision.
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