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Money Concerns for Those Remarrying

money concerns for remarrying

What financial factors deserve attention?

Provided by TechGirl Financial

Some of us will marry again in retirement

How many of us will thoroughly understand the financial implications that may come with tying the knot later in life?

Many baby boomers and seniors will consider financial factors as they enter into marriage, but that consideration may be all too brief. There are significant money issues to keep in mind when marrying after 50, and they may be important enough to warrant a chat with a financial professional.

You might consider a prenuptial agreement

A prenup may not be the most romantic gesture, but it could be a very wise move from both a financial and estate planning standpoint. The greater your net worth is, the more financial sense it may make.

If you remarry in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin), all the money that you and your spouse will earn during your marriage will be considered community property. The same goes for any real property that you happen to purchase with those earnings. Additionally, these states often regard extensively comingled separate property as community property, unless property documentation or evidence exists to clarify separate origin or status.1

A prenuptial agreement makes part or all of this community property the separate property of one spouse or the other. In case of a divorce, a prenup could help you protect your income, your IRA or workplace retirement plan savings, even the appreciation of your business during the length of your marriage (provided you started your business before the marriage began).1,2

A prenup and its attached documents lay everything bare. Besides a core financial statement, the support documentation includes bank statements, deeds, tax returns, and (optionally) much more. The goal is to make financial matters transparent and easy to handle should the marriage sour.1,2

If one spouse discovers that the other failed to provide full financial disclosure when a prenup was signed, it can be found invalid. (A prenup signed under duress can also be ruled invalid.) If a divorce occurs and the prenup is judged worthless, then the divorce will proceed as if the prenup never existed.2

You should know about each other’s debts

How much debt does your future spouse carry? How much do you owe? Learning about this may seem like prying, but in some states, married couples may be held jointly liable for debts. If you have a poor credit history (or have overcome one), your future spouse should know. Better to speak up now than to find out when you apply for a home loan or business loan later. In most instances, laws in the nine community property states define debts incurred during a marriage as debts shared by the married couple.1


You should review your estate planning

Affluent individuals who remarry have often done some degree of estate planning, or at least have made some beneficiary decisions. Remarriage is as much of a life event as a first marriage, and it calls for a review of those decisions and choices.

In 2009, the Supreme Court ruled that the beneficiary designation on an employer-sponsored retirement plan account overrides any wishes stated in a will. Many people do not know this. Think about what this might mean for an individual remarrying. A woman might want to leave her workplace retirement plan assets to her daughter, her will even states her wish, but the beneficiary form she signed 25 years ago names her ex-husband as the primary beneficiary. At her death, those assets will be inherited by the man she divorced. (That will hold true even if her ex-husband waived his rights to those assets in the divorce settlement.)3

In the event of one spouse’s passing, what assets should the other spouse receive? What assets should be left to children from a previous marriage? Grandchildren? Siblings? Former spouses? Charities and causes? Some or all of these questions may need new answers. Also, your adult children may assume that your new marriage will hurt their inheritance.

Are you a homeowner planning to remarry?

Your home is probably titled in the name of your family. If you add your new spouse to the title, you may be opening the door to a major estate planning issue. Joint ownership could mean that the surviving spouse will inherit the property, with the ability to pass it on to his or her children, not yours.4

One legal option is to keep the title to your home in your name while giving your new spouse occupancy rights that terminate if he or she dies, moves into an eldercare facility or divorces you. Should any of those three circumstances occur, your children remain in line to inherit the property at your death.4


1 –nolo.com/legal-encyclopedia/marriage-property-ownership-who-owns-what-29841.html [3/17/16]
2 – blog.credit.com/2015/06/prenup-vs-postnup-which-is-better-117548/ [6/1/15]
3 – tinyurl.com/j8ncltt [9/7/11]
4 – usatoday.com/story/money/columnist/brooks/2014/05/20/retire-baby-boomer-divorce-remarry-pension/9171469/ [5/20/14]

College Funding Options

college funding options

You can plan to meet the costs through a variety of methods.

Provided by TechGirl Financial

How can you cover your child’s future college costs?

Saving early (and often) may be the key for most families. Here are some college savings vehicles to consider.

529 plans

Offered by states and some educational institutions, these plans let you save up to $14,000 per year for your child’s college costs without having to file an IRS gift tax return. A married couple can contribute up to $28,000 per year. (An individual or couple’s annual contribution to the plan cannot exceed the IRS yearly gift tax exclusion.) These plans commonly offer you options to try and grow your college savings through equity investments. You can even participate in 529 plans offered by other states, which may be advantageous if your student wants to go to college in another part of the country.1,2

While contributions to a 529 plan are not tax-deductible, 529 plan earnings are exempt from federal tax and generally exempt from state tax when withdrawn, as long as they are used to pay for qualified education expenses of the plan beneficiary. If your child doesn’t want to go to college, you can change the beneficiary to another child in your family. You can even roll over distributions from a 529 plan into another 529 plan established for the same beneficiary (or for another family member) without tax consequences.1

Grandparents can start a 529 plan, or other college savings vehicle, just as parents can; the earlier, the better. In fact, anyone can set up a 529 plan on behalf of anyone. You can even establish one for yourself.1

529 plans have been improved for 2016 with two additional features. One, you can now use 529 plan dollars to pay for computer hardware, software, and computer-related technology, as long as such purchases are qualified higher education expenses. Two, you can now reinvest any 529 plan distribution refunded to you by an eligible educational institution, as long as it goes back into the same 529 plan account. You have a 60-day period to do this from when you receive the refund.3

If you have a 529 plan and received such a refund at any time during January 1-December 18, 2015, you have until Tuesday, February 16, 2016 to put that money back into your 529 plan. If you meet that deadline, the distribution will not be seen as a non-qualified one by the IRS (i.e., fully taxable plus a 10% penalty).3

“Investors should consider the investment objective, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer’s official statement, which should be read carefully before investing. A copy of the official statement can be obtained from a financial professional. Before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.”

Coverdell ESAs

Single filers with adjusted gross income (AGI) of $95,000 or less and joint filers with AGI of $190,000 or less can pour up to $2,000 annually into these tax-advantaged accounts. While the annual contribution ceiling is much lower than that of a 529 plan, Coverdell ESAs have perks that 529 plans lack. Money saved and invested in a Coverdell ESA can be used for college or K-12 education expenses. Coverdell ESAs offer a broader variety of investment options compared to many 529 plans, and plan fees are also commonly lower.4

Contributions to Coverdell ESAs aren’t tax-deductible, but the account enjoys tax-deferred growth and withdrawals are tax-free so long as they are used for qualified education expenses. Contributions may be made until the account beneficiary turns 18. The money must be withdrawn when the beneficiary turns 30 (there is a 30-day grace period), or taxes and penalties will be incurred. Money from a Coverdell ESA may even be rolled over tax-free into a 529 plan (but 529 plan money may not be rolled over into a Coverdell ESA).2,4


UGMA & UTMA accounts

These all-purpose savings and investment accounts are often used to save for college. When you put money in the account, you are making an irrevocable gift to your child. You manage the account assets. When your child reaches the “age of majority” (usually 18 or 21, as defined by state UGMA or UTMA law), he or she can use the money to pay for college. However, once that age is reached, that child can also use the money to pay for anything else.5

Imagine your child graduating from college debt-free

With the right kind of college planning, that may happen. Talk to a financial advisor today about these savings methods and others.


1 – irs.gov/uac/529-Plans:-Questions-and-Answers [8/24/15]
2 – time.com/money/3149426/college-savings-esa-529-differences-financial-aid/ [8/21/14]
3 – figuide.com/new-benefits-for-529-plans.html [1/13/16]
4 – time.com/money/4102891/coverdell-529-education-college-savings-account/ [11/9/15]
5 – franklintempleton.com/investor/products/goals/education/ugma-utma-accounts?role=investor [2/3/16]
6 – investopedia.com/articles/personal-finance/102915/life-insurance-vs-529.asp [10/29/15]

White House Proposes Changes to Retirement Plans

white house proposes changes to retirement plans

A look at some of the ideas contained in the 2017 federal budget.

Provided by TechGirl Financial

Will workplace retirement plans be altered in the near future?

The White House will propose some changes to these plans in the 2017 federal budget, with the goal of making such programs more accessible. Here are some of the envisioned changes.

Pooled employer-sponsored retirement programs

This concept could save small businesses money. Current laws permit multi-employer retirement plans, but the companies involved must be similar in nature. The White House wants to lift that restriction.1,2

In theory, allowing businesses across disparate industries to join pooled retirement plans could result in significant savings. Administrative expenses could be reduced, as well as the costs of compliance.

Would governmental and non-profit workplaces also be allowed to pool their retirement plans under the proposal? There is no word about that at this point.

This pooled retirement plan concept would offer employees new degrees of portability for their savings. A worker leaving a job at a participating firm in the pool would be able to retain his or her retirement account after taking a job with another of the participating firms. Along these lines, the White House will also propose new ways to make it easier for workers to monitor and reconcile multiple workplace retirement accounts.2,3

Scant details have emerged about how these pooled plans would be created or governed, or how much implementing them would cost taxpayers. Congress will be asked for $100 million in the new budget draft to test new and more portable forms of retirement savings accounts. Presumably, many more details will surface when the proposed federal budget becomes public in February.2,3

Automatic enrollment in IRAs

In the new federal budget draft, the Obama administration will require businesses with more than 10 employees and no retirement savings program to enroll their workers in IRAs. This idea has been included in past federal budget drafts, but it has yet to survive bipartisan negotiations – and it may not this time. Recently, the myRA retirement account was created through executive action to try and promote this objective.1,3


A lower bar to retirement plan participation for part-time employees

Another proposal within the new budget would allow anyone who has worked for an employer for more than 500 hours a year for the past three years to participate in an employer-sponsored retirement plan.2

A bigger tax break for businesses starting retirement plans

Eligible employers can receive a federal tax credit for inaugurating a retirement plan – a credit for 50% of what the IRS deems the employer’s “ordinary and necessary eligible startup costs,” up to a maximum of $500. That credit (which is part of the general business credit) may be claimed for each of the first three years that the plan is in place, and a business may even elect to begin claiming it in the tax year preceding the tax year that the plan goes into effect. The White House wants the IRS to boost this annual credit from $500 to $1,500.2,4

Also, businesses could receive an annual federal tax credit of up to $500 merely for automatically enrolling workers in their retirement plans. As per the above credit, they could claim this for three straight years.2


What are the odds of these proposals making it into the final 2017 federal budget?

 The odds may be long. Through the decades, federal budget drafts have often contained “blue sky” visions characteristic of this or that presidency, ideas that are eventually compromised or jettisoned. That may be the case here. If the above concepts do become law, they may change the face of retirement plan participation and administration.


1 – nytimes.com/2016/01/26/us/obama-to-urge-easing-401-k-rules-for-small-businesses.html [1/26/16]
2 – tinyurl.com/je5uj3r [1/26/16]
3 – bloomberg.com/politics/articles/2016-01-26/obama-seeks-to-expand-401-k-use-by-letting-employers-pool-plans [1/26/16]
4 – irs.gov/Retirement-Plans/Retirement-Plans-Startup-Costs-Tax-Credit [8/18/15]


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Why You Should Stay in Stocks in 2016

why you should stay in stocks in 2016 2

One bad trading day is not the year.

Provided by TechGirl Financial

The stock market has wavered recently

A lackluster year just ended, and this year has started inauspiciously. You may be wondering … should you really be invested in stocks right now?

Yes, you should be.

In moments like these, investors should not panic and overreact to the headlines. Instead, they should take the long view of stock market investing. Impulsive selling now can lead an investor to try and time the market later, and market timing usually leads investors to make mistakes.

Stock market investing is a long-run proposition

On a bad day, it may seem like the whole market is falling apart – but stock market performance is not measured only in days.

Consider the following statistics, which highlight some underpublicized truths:

**Even with their poor showing in 2015, stocks have advanced notably in the last three years. Across 2013-15, the Dow Jones Industrial Average gained 9.97%, the Nasdaq Composite 18.37%, the S&P 500 12.74%, and the small-cap Russell 2000 index 10.18%. The Dow Jones Internet index advanced 28.85% in those three years, the Nasdaq Biotech index 35.26%.1

**Just recently, the Dow gained 7.00% in a quarter. The Nasdaq rose 8.38% and the S&P 6.45% in the same interval. When did this happen? The fourth quarter of 2015. Yes, the same quarter that just ended with everyone talking about how sluggish the market was.2

**The S&P 500 did lose 0.73% in 2015 in terms of price return, but its 2015 total return (including dividends) was positive – a yearly gain of 1.38%.3

And now, some long-term historical perspective:

**Through the decades, the S&P 500 has recovered very well from many of its major one-day descents. Its January 4 plunge was comparable to its August 24 drop, when it was down more than 4% during the trading session and lost 3.2% on the day to close at 1,893.21. It took the S&P just three days to recover the entirety of that big loss. Before that, there had been 54 market days in the past 32 years in which the S&P had lost 3.5% or more. There were 45 year-over-year advances after such days, in contrast to 9 year-over-year retreats.4,5

**In the 88 market years from 1928-2015, the S&P had 63 profitable years with its average yearly gain being 21.5%. So across the rough equivalent of a human lifetime, the S&P 500 has advanced on an annual basis 72% of the time.6

**Looking at the 74 possible 15-year intervals of S&P performance occurring during 1928-2015, roughly 60% of these periods have seen the S&P post a compound return of 10% or better. During 1985-99, the index’s compound return was a striking 18.3%.6

Yes, there have been down years for stocks, severe ones among them – think of 2008. There have also been great years, and far more positive years than negative ones. You have to take the good years with the bad. It is simply part of stock market investing.

Those who sell when the market is down often buy back in well after the market recovers. Selling low and buying high is a formula for disappointment. Staying invested through market downturns positions you to buy quality shares when they are cheaper, and when stocks rally, you are in the market and ready to benefit.

A particular headline or economic indicator may jolt the market on a particular day, but you are not invested for one day – you are investing for a lifetime. We have many positive signs in our economy – solid hiring, appreciable wage growth, steady consumer spending, a strong housing market – and they may lead to better corporate earnings in 2016. So be patient; better days may be ahead for the market.

1 – wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [12/31/15]
2 – wsj.com/mdc/public/page/2_3022-quarterly_gblstkidx.html [12/31/15]
3 – stockcharts.com/articles/chartwatchers/2016/01/do-dividends-matter.html [1/2/16]
4 – tinyurl.com/oksgh26 [8/25/15]
5 – tinyurl.com/jmams7p [1/4/16]
6 – marketwatch.com/story/understanding-performance-the-sp-500-in-2015-02-18 [2/18/15]

Women Have Assume a Larger Role in Family Finance

news 07

The change has been gradual but notable & carries over to retirement planning.
Provided by TechGirl Financial

More women have become the primary wage earners in their households

Generations ago, life and financial roles were cut and dried according to gender. Man: breadwinner. Woman: homemaker. Those stereotypes have, thankfully, shattered. According to the Bureau of Labor Statistics, 38% of women in heterosexual marriages now earn more than their husbands. Thirty years ago, less than one-quarter did.1

The Great Recession of 2007-09 may have contributed to this shift

In June 2010, Department of Labor data showed that nearly 22% of American men aged 25-65 were unemployed. In addition, 16.6% of all Americans were in the “underemployed” population, either jobless or working less than 40 hours per week; it is reasonable to assume that men made up roughly half of that demographic.2

So, in mid-2010, perhaps a quarter of American men aged 25-65 had no full-time job, and, in millions more American households, the woman of the house had become the primary wage earner.

As the economy improved, households with women breadwinners were in good shape

A 2013 Pew Research Center study of Census Bureau data found that, by 2011, the median total family income of such households was $80,000, compared to the national median of $57,100 for all families with children. Furthermore, the PRC analysis determined that 40% of households with children younger than age 18 were headed by women breadwinners in 2013, an all-time high. That compared to 10% in 1960.3,4

Wives who earn more than husbands often control family money

Author Farnoosh Torabi (When She Makes More: 10 Rules for Breadwinning Women) conducted her own study on heterosexual households with women breadwinners in 2015, interviewing more than 1,000 women in the process. The key finding? When a woman is the top earner in a household, she is more likely to handle financial tasks and decision making.4
Women who made more than their husbands were 62% likely to pay the bills and 56% likely to initiate family or spousal conversations about money. Respectively, that compares to 43% and 43% when the woman makes less than the man.4
Significantly, 44% of breadwinning women Torabi interviewed made investment decisions for their households (compared to just 27% when the man earned more). On top of that, 54% of breadwinning women took on the task of retirement planning for their households, as opposed to 31% when the male was the breadwinner. These findings are very encouraging, as so many financial professionals urge women to take an active role in saving and investing for retirement.4
One study suggests more women are focusing on retirement planning
Financial Finesse, a provider of financial education for large employers, puts out an annual survey called The Gender Gap in Financial Literacy. The 2015 edition (released last fall) showed a 4.2% rise from 2012 in the percentage of women who said their retirement planning was on course. The percentage of women who had an asset allocation plan for their investment portfolios also rose 4.2% in that interval.5
If you ask some financial professionals, they will tell you that they find women more open to financial education, with fewer entrenched beliefs and presumptions. Women are often quick to realize how much they don’t know, how much they can learn, and how much needs to be done. Coming to the realization that you need to do more for retirement is a good thing. Many pre-retiree households could do much more: according to a BlackRock survey, the average “leading edge” baby boomer (age 55-65) has $136,200 in a retirement savings account, which would produce retirement income of roughly $9,100 a year.6
With retirement accounts and retirement dreams at stake, it isn’t surprising that high-earning women are taking the lead for millions of families – and asking for all the financial education they can get.
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.
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, MemberFINRA/SIPC. Investment advisory services offered through Cambridge Investment Research Advisors, a Registered Investment Advisor. TechGirl Financial and Cambridge Investment Research, Inc., are not affiliated companies.
1 – fivethirtyeight.com/datalab/how-many-women-earn-more-than-their-husbands/ [2/5/15]
2 – marketwatch.com/story/the-three-biggest-lies-about-the-us-economy-2010-06-29 [6/29/10]
3 – businessinsider.com/women-continue-rising-as-breadwinners-2013-5 [5/29/13]
4 – businessinsider.com/breadwinning-women-control-family-money-2015-3 [3/16/15]
5 – nextavenue.org/the-unexpected-news-about-women-men-and-retirement/ [9/16/15]
6 – seattletimes.com/business/workers-need-more-help-making-retirement-cushion/ [5/28/16]

Are Gen Xers Planning for Retirement the Right Way?

are gen xers planning for retirement the right way

Some are planning wisely, but others are beset by mistakes.

Provided by TechGirl Financial

Generation X has become the new “sandwich” generation

Many Americans born during the years 1965-80 are finding themselves caring for aging parents and growing kids at once, with little time to devote to their personal finances or their retirement planning.

Broadly speaking, that time shortage has hindered their retirement saving and planning efforts. Some members of Gen X are on track to reach their retirement money goals; others are making mistakes that may greatly undermine their progress. What kind of mistakes, specifically?




In a recent survey of 36- to 49-year-olds commissioned by the Transamerica Center for Retirement Studies, 39% of respondents said they would prefer to tackle retirement investing when they were nearer to retirement age.1

If you are in your thirties or forties, this is a mistake you cannot afford to make. When it comes to retirement saving, time is your friend – perhaps the best friend you have – and the earlier you start, the more years of compounding your invested assets can receive. That is not to say all hope is lost if you start saving and investing at forty, however. You just have to save considerably more per month or year to catch up.

A very simple compounding example bears this out. Let us take a 25-year-old, a 35-year-old, and a 45-year-old. From this day forward, each will contribute $1,000 a month for a 10-year period to a retirement account yielding 7% annually. At the end of those ten years, they will stop contributing to those accounts and merely watch that money grow until they turn 65 (not recommended, but again this is a simple example). Under these conditions, the person who saved for just ten years starting at age 25 has $1,444,969 at 65. The person who saved for ten years starting at 35 has but $734,549, the person who saved for ten years starting at 45 only $373,407.2


Raiding the retirement fund

Think of your retirement fund as your financial future, or at least a large part of it. Many instances may tempt you to draw it down: your children’s education expenses, student loan debt, eldercare costs. Refrain if at all possible. Work on creating an emergency fund so you can avoid this (if you already have one, great).

Every loan you take from a workplace retirement account leaves you with fewer invested dollars, fewer dollars that may grow and compound faster than inflation via the equities markets. Your forties, in particular, represent a prime time to ramp up your saving effort as your salary and/or compensation presumably increase.

Undervaluing catch-up contributions

Beginning in the calendar year you turn 50, you are permitted to contribute an extra $1,000 to your IRA per year, and an extra $6,000 per year to a typical 401(k), 403(b) or 457 plan. An extra $1,000-$6,000 per year may not sound like much, but if you have both an IRA and a workplace retirement plan, this gives you a chance to save an additional $50,000-$100,000 (or more) for retirement between now and when you presumably wrap up your career. Those dollars can benefit from compounding as well. Even the opportunity to direct an additional $1,000 into an IRA each year should not be dismissed. Sadly, some savers will enter their fifties not knowing about catch-up contributions or not valuing them enough – but you will consistently make them, right?3

Not planning with the “end” in mind

Many Gen Xers are saving for retirement without defined financial objectives. They do not yet know how large their nest egg needs to be in order to generate worthwhile retirement income. They have not really thought about what they want their money to accomplish. Even using a free online retirement calculator (there are some really good ones) might yield some food for thought.

Foregoing consultations with financial professionals

One of the demerits of DIY investing is the learning curve. Investing for retirement without any help is akin to trying to find a street address without help from a map: you might get close, you might get there, but most of the time you may not know how close or far away you are from your goal. A meeting with a financial professional can lead to an overview of where you stand, and give you a firm idea of what you need to do as you pursue your retirement goals further.

The good news? Gen Xers are making a solid effort to save

In the aforementioned Transamerica survey, 83% of Gen X respondents said they were building up a retirement fund, and 20% of them had amassed more than $250,000 in retirement savings prior to age 50.1

1– forbes.com/sites/nextavenue/2014/08/28/7-retirement-mistakes-gen-x-is-making/print/ [8/28/14]
2 – moneyunder30.com/power-of-compound-interest [2/27/15]
3 – shrm.org/hrdisciplines/benefits/articles/pages/2016-irs-401k-contribution-limits.aspx [10/22/15]

The Fed Makes Its Move

Wall Street rallies as interest rates rise for the first time since 2006.

Provided by TechGirl Financial

U.S. monetary policy officially changed course Wednesday

Federal Reserve officials voted to raise the federal funds rate by a quarter of a percentage point, ending an unprecedented 7-year period in which it was held near zero. Nearly ten years had passed since the central bank had adjusted interest rates upward.1

The Federal Open Market Committee voted 10-0 in favor of the rate hike. It also raised the discount rate by a quarter-point to 1.0%.1

Addressing the media after the FOMC announcement, Federal Reserve chair Janet Yellen shared the central bank’s viewpoint: “With the economy performing well, and expected to continue to do so, the committee judged that a modest increase in the federal funds rate target is now appropriate, recognizing that even after this increase, monetary policy remains accommodative.”2

Equities started the day with minor gains, then advanced further

The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite respectively advanced 1.28%, 1.45%, and 1.52% Wednesday. The yield on the 2-year Treasury hit a 5-year high of 1.021%. Gold rose $15.20 to close at $1,076.80 on the COMEX.3,4

As a December rate increase was widely expected, the real curiosity concerned the following press conference. Would Janet Yellen offer any hints about monetary policy in 2016?
She offered one: she said she doubted that any interest rate hikes in 2016 would be “equally spaced.” Aside from that remark, no new insights emerged; Yellen reemphasized that the Fed does not plan to raise rates aggressively.2

Investors gained more insight from the Fed’s latest dot-plot chart, which expresses the Federal Open Market Committee’s opinion on where the benchmark interest rate will be at near-term intervals. The new dot-plot forecasts four rate hikes during 2016, with the federal funds rate climbing toward 1.5% by the end of next year (the median projection is 1.4%).5

The dot-plot revealed benchmark interest rate targets of 2.4% for the end of 2017 and 3.3% for the end of 2018, slightly lower than the previously stated targets of 2.6% and 3.4%.5

That corresponds with the consensus of analysts surveyed by CNBC. Their expectation was for three quarter-point rate hikes across 2016, taking the federal funds rate toward 1%.6

Some analysts wonder if the next rate hike might occur at the FOMC’s March meeting. Nothing could be gleaned about that from Yellen’s press conference or the new FOMC announcement.6


With more tightening seemingly ahead, what is in store for the bull market?

Bears may want to wait before making any gloomy pronouncements. While rising interest rates are commonly assumed to impede a bull market, this is not always the case. In fact, the S&P 500 advanced 15% during the last round of tightening (2004-06).7

Could higher interest rates decrease inflation pressure?

That is a distinct possibility, and that would hurt wage growth and business growth. The Fed would like to see inflation in the vicinity of 2%, yet the Consumer Price Index is up only 0.5% in the past 12 months, held in check by a 14.7% annualized retreat in energy prices and a 24.1% annualized fall in gas prices. On the other hand, the Core CPI (minus food and energy prices) is up 2.0% in the past year.6

The Fed may have made just the right move at the right time

If it had waited until 2016 to tighten, a collective “uh-oh” might have been heard from pundits and analysts, with comments along the lines of “Does the Fed know something about the economy that we do not?”

As JPMorgan Private Bank chief U.S. investment strategist Kate Moore told CNNMoney this week, “Keeping interest rates at zero is enforcing the idea that the U.S. economy is fragile.” Years of easing certainly helped the bull market, though: Wednesday morning, the S&P 500 was 202% above its March 9, 2009 bear market low.2,7

Ultimately, the central bank felt the time had come for tightening

At Wednesday’s press conference, Yellen commented that data had led the Fed to raise rates – it had not made its move in response to any shifts in public opinion. “Consumers are in much healthier financial condition” than they once were, she remarked. The rate hike certainly expresses confidence in the economy, which could strengthen further in 2016.2

1– marketwatch.com/story/federal-reserve-lifts-interest-rates-for-first-time-since-2006-2015-12-16 [12/16/15]
2 – blogs.marketwatch.com/capitolreport/2015/12/16/live-blog-and-video-of-the-fed-interest-rate-decision-and-janet-yellen-press-conference/ [12/16/15]
3 – cnbc.com/2015/12/16/us-markets-fed.html [12/16/15]
4 – reuters.com/article/usa-bonds-idUSL1N1452HC20151216 [12/16/15]
5 – marketwatch.com/story/federal-reserve-dot-plot-still-signals-4-interest-rate-hikes-in-2016-2015-12-16 [12/16/15]
6 – latimes.com/business/la-fi-federal-reserve-rate-hike-20151216-story.html [12/16/15]
7 – money.cnn.com/2015/12/15/investing/stocks-markets-fed-rate-hike/ [12/15/15]

Bad Spending Habits That Can Be Corrected

bad spending habits that can be corrected

A little frugality may lead to a lot of financial progress.

Provided by TechGirl Financial

Americans have a great deal of disposable income relative to many other nations, yet our free spending can take us further and further away from the potential for financial freedom. Some people fall into crippling spending habits and injure their finances as a consequence.

Bad habit: failing to save

Saving – saving even $50 or $100 a month – isn’t that hard under most financial conditions. Even so, some households don’t put much of a priority on building a cash reserve of some kind, a portion of which could be used for equity investment.

When you don’t make saving a goal, you don’t have any money to withdraw in a pinch – so if you need to get ahold of some money, where do you find it? Basically, you have three options. One, turn to friends or Mom or Dad. Two, divert money that would go toward a core need (food, rent, the heating bill) toward the sudden crisis. Three, charge your credit card. (There are other options, but they are best not explored.)


Good habit: save just a little, then a lot

You can start a savings campaign by saving “invisibly” – that is, just spending $10 or $15 or $20 less on a regular expense each month. Maybe two or three, even. That’s less than a dollar a day per expense. When your earnings climb further above your financial baseline, you can increase the amount you save/invest.


Bad habit: buying things on a whim

The correlation between impulsive spending and credit card use isn’t too hard to spot. Spending money you don’t have on material items that will soon depreciate doesn’t put you ahead financially.


Good habit: set a budget when you shop

As you arrive at the market, the mall or the local power center, arrive with a limit on what you will spend on that shopping trip and stick to it. Take an hour (or a day) to mull over any big buying decisions – are you buying something you really need? Lastly, use cash whenever you can.


Bad habit: living on margin

Living above your means, charging this and that credit card – this is a path toward runaway debt. You may look rich, but you’ll carry a big financial burden that risks being “out of sight, out of mind” in between credit card statements.


Good habit: strive for lasting affluence, not temporary bling

Possessions symbolize wealth to too many Americans. Real wealth is measured in accumulated assets. They aren’t usually visible, but you can count on them in the future, in contrast to ever-depreciating luxury goods.


Bad habit: buying unnecessary services

Cable subscriptions, extended warranties, service contracts for highly reliable items, health club memberships that translate into little more than an alternate place to shower – they all add up, they all siphon some of our dollars away each month. In many cases, we pay for options rather than necessities.


Good habit: evaluate who benefits most from those services

Are they benefiting the provider more than the consumer? Are they entrees to a “main course” – a steady, long-range financial exploitation?


Go against the norm – it might leave you a little wealthier

In April, Gallup found that 62% of Americans liked saving money more than spending it. Just 34% liked spending more than saving. This appreciation of frugality is relatively new. As recently as 2006, 50% of Americans told Gallup that they enjoyed saving more than spending with 45% preferring spending.1

If we love saving money, a key statistic doesn’t reflect it. According to the Commerce Department, the typical U.S. household was saving 4.8% of its disposable personal income in May. The personal savings rate for 2013 was 4.5%, the least in any year since 2007. Compare that to 6.7% across the 1990s, 9.3% across the 1980s and 11.8% during the 1970s.1,2

Perhaps many of us want to save but can’t due to financial pressures. Perhaps the economic rebound is encouraging personal consumption over saving. Whatever the reason, Americans on the whole don’t seem to be saving very much. That’s the status quo; going against it might help you build wealth a little more easily.


1– gallup.com/poll/168587/americans-continue-enjoy-saving-spending.aspx [4/21/14]
2 – bea.gov/newsreleases/national/pi/pinewsrelease.htm [6/26/14]

How Women Can Narrow the Retirement Saving Gender Gap

how women can narrow the retirement saving gender gap

Steps toward saving more & revitalizing your retirement strategy.

Provided by TechGirl Financial

When it comes to retirement saving, many women lag behind many men

Historically, that has been the case. The 2015 edition of Financial Finesse’s annual survey, The Gender Gap in Financial Literacy, offers more evidence of the problem – along with a few encouraging signs that women may be catching up. (Financial Finesse is a financial education provider for more than 600 large U.S. companies sponsoring retirement plans.)1



Deep in the report, some disturbing statistics emerge

They concern the pace of retirement saving in mid-career. Using data from Vanguard and the Employee Benefit Research Institute, Financial Finesse found that the median IRA and workplace retirement plan savings balance for a 45-year-old woman was $43,446. For a 45-year-old man, it was $63,875.1

Obviously, you cannot retire on that. So Financial Finesse then gauged the additional amount of savings that the median 45-year-old male employee and the median 45-year-old female employee would need to replace 70% of pre-retirement income and pay for estimated medical expenses (long term care not included.) It found a 26% disparity: the median male employee saver needed $212,256 to reach that goal, while the median female employee needed $268,404.1


A gap in some aspects of financial literacy was also notable

Just 67% of pre-retiree women responded that they had a general knowledge of investment classes compared to 84% of their male peers. While 78% of men surveyed said that they had an emergency fund, merely 67% of women did. Just 34% of women were confident about the way their portfolios were allocated, versus 48% of men.2


How many women are able to work full-time at age 65?

Some women hope to keep working into their seventies, but that may not happen. Earlier in this decade, MetLife studied “leading edge” baby boomers born in 1946 as they turned 66 in 2012. It found that 52% were already retired, and 43% had claimed Social Security earlier than they anticipated.3


How can women plan to address this?

Here are a few positive steps you can take …


Find out where you stand in terms of savings now

A simple retirement planning calculator (there are many available online) can help you see how much more you need to save, per year and over the course of your career.


Save enough to get the match

If your employer will match a percentage of your retirement plan contributions per paycheck, strive to contribute enough to your plan each paycheck so that the match occurs.


Ask about automatic escalation

Some workplace retirement plans have this option, through which you can boost your retirement contributions by 1% a year. This is a nice “autopilot” way to promote larger retirement nest eggs.


Ask for a raise

You probably should be paid more than you currently are. A higher salary means more money to put toward your savings effort.


Cut credit card debt

Reduce it and you give yourself more money to save.


Make tax efficiency one of your goals

Consult a financial professional about this, for there are potential advantages to having your money in taxable, tax-deferred, and tax-exempt accounts. For example, when you contribute to a traditional IRA or a typical employer-sponsored retirement plan, you make tax-deferred contributions. This lowers your taxable income today, although the distributions from those accounts will be taxable in retirement. You defer after-tax dollars into Roth IRAs; those dollars are taxable today, but you will eventually get tax-free growth and tax-free withdrawals if you follow IRS rules. Taxable investment accounts may seem less preferable, but they too can potentially help you pursue financial goals.4


Determine an appropriate “glide path”

Many financial professionals caution retirement savers to gradually reduce the risk in their portfolio as they age – to “glide” from a portfolio mainly invested in equities to one less invested in them. (Some retirement plan accounts will actually adjust your investment mix for you as you age.) Glide paths are different for everyone, however. If you really need to accelerate your retirement savings effort, then you may need to accept more risk in your portfolio in exchange for the possibility of greater returns. (Again, this is a good topic for a conversation with a financial professional.)


In some ways, women are narrowing the retirement saving gender gap

Financial Finesse found that 4.2% more women had adopted an investment strategy in the 2015 survey compared to the 2012 edition, and 2% more had done a basic retirement savings projection. In passing, it also noted that the percentage of women who said they were on track to meet their retirement savings goal rose 4.2% from 2012 to 2014.2


1– 2015_Gender_Gap_report_final_brief_v2.pdf [12/3/15]
2 – forbes.com/sites/nextavenue/2015/09/17/the-unexpected-news-about-women-men-and-retirement/ [9/17/15]
3 – metlife.com/mmi/research/oldest-boomers.html#graphic [12/3/15]
4 – nerdwallet.com/blog/advisorvoices/prioritize-key-retirement-savings-steps/ [12/1/15]

Lean In To Retirement

Check out TechGirl Financial's Article Series on how to "Lean In To Retirement".

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