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Remember your goals; in times of good and bad

There’s no question that periods of increased market volatility can be unsettling for investors. However, the decisions you make now—choosing to stay the course or move to the sidelines—can have long-lasting implications. In fact, making emotionally-based decisions in regard to short-term market events is one of the fastest ways to derail your long-term investment strategy.

That’s because it’s impossible to accurately time the financial markets. As a result, investors tend to opt out at the worst time, when markets are falling, and buy back in at higher prices when markets begin to rise. On the other hand, those who remain invested and focused on their long-term investment goals, have an opportunity to buy additional shares at lower prices when stock prices drop, which helps to generate long-term portfolio growth.

A time-tested approach to managing investments through periods of uncertainty is to focus on asset allocation:

  • An appropriate asset allocation, aligned with your goals, timeframe, and tolerance for risk allows you to concentrate on your long-term objectives instead of getting sidetracked by short-term market fluctuations.
  • Helps eliminate the potential for emotional decision-making that could have an adverse impact on your long-term investment strategy.

If you’re concerned about the impact of current market conditions on your portfolio, We encourage you to contact PlanningWorks at 512 498-7526 to review your current allocation, and discuss your long-term goals and risk tolerance.
 

Asset allocation, which is driven by complex mathematical models, should not be confused with the much simpler concept of diversification. Asset allocation does not guarantee profit or protect against loss.

The Power of Compounding

Did you know that money saved today is more valuable than money saved tomorrow? That’s due to the amazing power of compounding. To determine how quickly your savings may double, simply divide 72 by your current annual rate of return for a rough estimate. For example, if you make a one-time investment of $7,500 today at an annual growth rate of 7.2%, based on the Rule of 72 (a simplified way to estimate how long an investment will take to double at a fixed annual rate), that one year of savings will potentially grow to:

After 10 years = $15,000
After 20 years = $30,000
After 30 years = $60,000
After 40 years = $120,000

That’s a compelling reason to begin saving early in life! Here’s another: a 40-year-old who begins saving $5,500 a year for retirement at a hypothetical 7.2% annual rate of return in a tax-deferred savings vehicle, like an IRA or 401(k), would accumulate $415,076 (vs. $312,914 in a taxable savings account) by age 65. A 25-year-old saving the same amount at the same growth rate would accumulate $1,328,204 (vs. $817,630 in a taxable savings account) by age 65. To reach the younger saver’s tax-deferred savings total, the 40-year-old would have to save about $17,600 a year—more than three times the annual savings amount of the investor who began saving at age 25.*

While the Rule of 72 is a reasonably accurate shortcut for estimating growth rates that fall between 6% and 10%; the higher the projected growth rate beyond 10%, the less accurate the calculation becomes. To calculate earnings growth rates above 10%, use an online compound interest calculator, or set up an appointment with PlanningWorks to discuss strategies for pursuing your long-term retirement savings goals. PlanningWorks can be reached at 512 498-7526 or info@planningworks.biz

Remember your goals; in times of good and bad

There’s no question that periods of increased market volatility can be unsettling for investors. However, the decisions you make now—choosing to stay the course or move to the sidelines—can have long-lasting implications. In fact, making emotionally-based decisions in regard to short-term market events is one of the fastest ways to derail your long-term investment strategy.

That’s because it’s impossible to accurately time the financial markets. As a result, investors tend to opt out at the worst time, when markets are falling, and buy back in at higher prices when markets begin to rise. On the other hand, those who remain invested and focused on their long-term investment goals, have an opportunity to buy additional shares at lower prices when stock prices drop, which helps to generate long-term portfolio growth.

A time-tested approach to managing investments through periods of uncertainty is to focus on asset allocation:

  • An appropriate asset allocation, aligned with your goals, timeframe, and tolerance for risk allows you to concentrate on your long-term objectives instead of getting sidetracked by short-term market fluctuations.
  • Helps eliminate the potential for emotional decision-making that could have an adverse impact on your long-term investment strategy.

If you’re concerned about the impact of current market conditions on your portfolio, we encourage you to contact PlanningWorks at 512 498-7526 to review your current allocation, and discuss your long-term goals and risk tolerance.

Asset allocation, which is driven by complex mathematical models, should not be confused with the much simpler concept of diversification. Asset allocation does not guarantee profit or protect against loss.

Getting the Most from Social Security

Social security is a critical component of retirement planning, and one that can be overwhelming and potentially costly if you are uninformed.

Principal Financial Group provides a great guide here to help you navigate the ins and outs of Social Security. Included in the guide is a worksheet that you can complete to help you create your retirement action plan.

If you have any questions or wish to discuss this further, please contact PlanningWorks to set-up an appointment.

Who will be hit the hardest by recent Social Security changes?

The Bipartisan Budget Act of 2015 shut down two popular Social Security claiming tactics that may adversely impact the amount of income many pre-retirees were counting on in retirement. The restricted-application and file-and-suspend strategies enabled married and divorced couples to receive spousal benefits while delaying and continuing to grow the higher wage earner’s benefits. While the Budget Act eliminated the restricted application effective December 31, 2015, eligible married couples and divorced spouses can still take advantage of the file-and-suspend tactic if they take action prior to May 1, 2016.

The file-and-suspend strategy is particularly advantageous for married couples with a non-working or lower-earning spouse, or a divorced spouse, who want to begin receiving a portion of Social Security income prior to reaching full retirement age. To be eligible to file-and-suspend before May 1, 2016, you must have been born after May 2, 1950, but before Jan. 2, 1954, and take action to file for and suspend benefits prior to May 1, 2016. But what if you’re not eligible? If you factored one of these claiming strategies into your retirement income planning projections, you may need to reevaluate and adjust your income projections. While you can still suspend your Social Security benefits at any time, no other beneficiary, including a spouse or child, will be able to continue receiving benefits during the time your benefits are suspended.

If you need assistance in determining your eligibility for the file-and-suspend tactic before it’s phased out effective May 1, 2016, or help with projecting or reassessing your income needs in retirement contact PlanningWorks for a consultation at your earliest convenience.

How Are Your Tax Dollars Allocated?

Have you ever wondered where your tax dollars have gone?

According to the Tax Foundation, a Washington, D.C. based think-tank, Americans worked until April 24, 2015 just to earn enough money to pay their federal taxes.

Wondering what you get in return for your hard work? Roughly 66% of the $3.5 trillion in federal spending for 2014 was used for Social Security, Medicare, defense, and related programs. Here’s how it breaks down:

24% - Social Security
24% - Medicare, Medicaid, CHIP, marketplace subsidies
18% - Defense and international security assistance
11% - Safety net programs
8% - Benefits for federal retirees and veterans
7% - Interest on debt
3% - Transportation infrastructure
2% - Education
2% - Science and medical research
2% - All other
1% - Non-security (international)

Source: Center on Budget and Policy Priorities, 2015

And, yes, for those of you paying close attention, those numbers add up to 102%. The Center on Budget and Policy Priorities notes that category percentages are estimates based on the most recent historical data released by the Office of Management and Budget for the 2014 federal fiscal year (October 1, 2013, to September 30, 2014).

The Election Effect on the Stock Market

 

The Election Effect on the Stock Market

Could the 2016 presidential election influence the direction of the markets?

Open the newspaper or turn on the TV and you know the 2016 presidential election cycle is in full swing. Whether it’s Donald Trump, Carly Fiorina, Hillary Clinton or the many other presidential hopefuls vying for their White House bids, there is one thing we know: history shows presidential election cycles have the potential to influence the direction of the economy and, in turn, the markets. Things like tax rates, budgetary decisions and investment policies all hang in the balance of the elected candidate’s decisions and beliefs. These are just a few reasons why investors have kept a close eye on the markets every four years.

We want to state up front that past stock market activity is not an actual indicator of future market activity* or of one political party’s prospects. That said, here are some interesting facts about previous presidential election cycles and their effect on the markets:

Election Effect #1: One common myth is that Republican candidates are better for stocks. Actually, a 2012 study by Adviser Perspectives newsletter found that since 1900, the Dow Jones Industrial Average gained about 8.7 percent annually under a Democratic president, compared with 5.7 percent under Republicans.1

Election Effect #2: According to the Stock Trader’s Almanac, historical analysis of past election years shows during the tail end of presidential election years, stocks tend to be on the bullish side, no matter what candidate wins.2 In fact, the Standard & Poor's 500 rose in the final seven months in 13 of the past 15 presidential election years from 1950 to 2011.3

Election Effect #3: Election years do not normally constitute a big loss for stocks. According to Ned Davis Research, since 1900, stocks grow 3.4 percent on average in the post-election year, compared with gains of 4.0 percent in the midterm year, 11.3 percent in the pre-election year and 9.5 percent in an election year.4

Election Effect #4: Looking back on past election years, the Stock Trader’s Almanac shows that when the current political party in power wins the office, which has happened 16 out of the past 27 elections (1901-2011), the Dow rose by about 1.5 percent in the first two quarters of the year before the election. Compared to the Dow’s activity, if the political party was ousted then the blue chip index lost about 4.6 percent in the first two quarters of the year before the election.5

Despite historic market trends, it’s best not to draw conclusions about the presidential election effect on stock market performance. Let us not forget 2008 when investors suffered one of the worst bear markets on record, despite it being an election year.

PlanningWorks advises going with tried and true investment advice: stay invested for the long-term and maintain a diversified investment portfolio that fits your investment style and goals. Please don’t hesitate to contact PlanningWorks to discuss your concerns.

* Past performance is not a predictor of future investment results. Investing involves risk including the loss of your principal. Prior to investing, you should consult with a financial advisor to discuss the risks, expenses and objectives of any investments.

1http://www.tampabay.com/news/business/markets/politifact-do-stocks-do-better-under-democratic-presidents/2240473
2http://www.usatoday.com/money/perfi/columnist/krantz/story/2011-12-11/stocks-during-presidential-election-years/51770758/1
3http://www.usatoday.com/money/perfi/columnist/krantz/story/2011-12-11/stocks-during-presidential-election-years/51770758/1
4http://abcnews.go.com/Business/story?id=6185252&page=1
5http://www.usatoday.com/money/perfi/columnist/krantz/story/2011-12-11/stocks-during-presidential-election-years/51770758/1

Tomb It May Concern

 

How To Not Blow Your Retirement Savings When The Markets Dip

This is a common scenario given recent stock market activity: Joe Smith, a 50-year-old executive saving for retirement, listens to the news every morning. One day, he watches the stock market take a tumble, and in a panic, quickly pulls his investments in stocks and switches to bonds - what he thinks is a safe alternative to protect his cash. A few days later, the market rebounds and the selloff Mr. Smith participated in eventually cost him a significant decrease in his retirement savings. That's because he sold too low and missed potential earnings in the rebound had he left his money where it was.

One of the common rules of investing is to buy low and sell high. When you sell during a market crash, you are essentially doing the opposite. There is no telling what the stock market will do from day to day - it may take a nosedive again or keep moving higher. In order to avoid making hasty decisions with your hard-earned retirement savings, here are some common investment rules to follow:

Rule #1: Remember, it's a long-term game. If you feel tempted to let emotions convince you to dump your investments out of panic, just repeat this mantra: This is long-term investing. The key to building wealth over time is to hold tight with a long-term investment perspective. Consider this: some individuals who stayed the course when the market bottomed out in 2009 have since seen their retirement investments nearly triple as the S&P 500 has gone up a whopping 220 percent since the recession low in March 2009.

Rule #2:

Market declines are an inevitable part of investing. The stock market is unpredictable and shifts happen. Historical data has shown that keeping your assets where they are can help outlive most market declines. Here's a recent history of ongoing market declines ranging from 1900 to December 2014 for the Dow Jones Industrial average.

% Decline

Average Occurrence

Last Occurrence

-5% or more

3x a year

December 2014

-10% or more

1x a year

October 2011

-15% or more

1x every 2 years

October 2011

 

When you work with a financial professional on our team, you know your money is invested where it needs to be based on your goals, risk tolerance and years until retirement. Leave your investments alone. Although it may make you cringe to watch your assets dip from time to time, corrections will happen and your savings will keep on growing.

Rule #3: Move your money only when it makes sense. Over the last 100 years, the most common market declines are just 5 percent or less. Knowing this statistic may help minimize your fears and avoid abandoning a long-term investment philosophy. There are a few occasions, however, when we may advise you to consider moving your money:

- Your asset mix is not meeting your retirement saving goal and/or timeline.

- Your risk profile has changed and you may not be able to handle as much risk today as when you first invested.

- You haven't re-balanced your portfolio in more than a year.

- You are planning to retire sooner than expected.


(As a reminder, if you visit our website and click on "Free Portfolio Risk Analysis" at the top right, it will take you to a link to our risk tolerance questionnaire. The questionnaire takes on a purely quantitative approach to understanding what risk you are comfortable taking for potential rewards using real dollar amounts).

Otherwise, if you feel your portfolio mix is on target, your level of risk is adequate and you've re-balanced once or even twice a year, then keep your money where it is.

 

Millennial Lingo

A little blurb to fill you in on what your kids and grandkids are talking about.  

  

Bitmoji: your own personal "emoji". You can create an expressive cartoon avatar and pick everything from hair color, face shape, eye color, earrings (you  name it)... and use it right from your keyboard! If you have an iPhone just go to your iTunes store and download the app Bitmoji. Your kids will never see it coming.

Citations

How To Not Blow Your Retirement Savings When The Market Dips: https://s3.amazonaws.com/static.contentres.com/media/documents/915d0a6c-222e-488e-9f5a-78f40d63a31f.pdf

Table 1: https://www.americanfunds.com/individual/planning/market-fluctuations/past-market-declines.html

TURBULENCE, PERSPECTIVE AND OPPORTUNITY: AN INVESTOR’S GUIDE

 

Though there's no foolproof way to handle the ups and downs of the stock market, there are several things you can do to help you stay on track with your long-term goals.

Read more about how you can stay committed to your plan even in times of economic uncertainty.

Please feel free to give PlanningWorks a call if you have any questions.

Retire Wise September 2015

FIVE SIGNS YOUR RETIREMENT SAVINGS STRATEGY IS SPOT ON
Growing up, we thrived on praise from our parents or teachers for our accomplishments. “Good job on that drawing” or “great work on your report card.” Saving for retirement is a large task that begs for feedback. You need signs that point to the all-important question, “Am I saving enough for retirement?” To ensure your retirement savings strategy will be enough to fund your golden years, look to the following five key signs.

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PREPARING FOR RETIREMENT IN YOUR FINAL WORKING YEAR
You can see it now. The alarm clock suddenly silenced, no rat race to follow and all the time you want to…well, do whatever you want to do! Are you rounding the corner to retirement and need some last-minute guidance to make sure you’re on the up-and-up with your savings? Before clocking out for good, here is a checklist of dos and don’ts to make sure you’re on solid financial ground before exiting the workforce.

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CONTACT US: 2700 Via Fortuna Suite 100 • Austin, TX 78746 • (512) 498-7526
Toll Free (800) 234-8043 • Fax (512) 684-8519 • info@planningworks.biz

Investment Advisory services offered through, Waterloo Capital Management, LLC a SEC Registered Investment Advisor. Securities offered through Calton & Associates, Inc. Member FINRA/SIPC OSJ 2701 N. Rocky Point Dr., Suite 1000, Tampa, FL 33607 (813) 605-0918 Waterloo Capital Management, LLC, PlanningWorks, Inc. and Calton & Associates, Inc. are separate entities.

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