Who would have thought the market would be hitting all time highs, with the constant wall of worry that we are bombarded with. In just over 4 years since the market bottom in March 2009, the U.S stock market has appreciated 161%, or 27%/year.1 If you are not retired and have been regularly adding to your investments, your personal return will be similar. Admittedly the return is for U.S. stocks, and most of us also have more conservative bonds in our portfolio. On a whim I calculated our personal return, and it was a smidge below the market’s return, admittedly including additions to our portfolio. The bottom line –don’t try to time the market, and continue adding to your investments during good times and bad.
Some individuals are being furloughed as a result of the Federal sequester. If you are unfortunate enough to be on the list or expecting furloughs, start cutting your budget by 20% immediately. If the cuts don’t actually happen, you will be fortunate enough to have saved quite a bit of money, and maybe found areas where you have made cuts, but are not missing the items eliminated from your spending.
Will Social Security be there for Me?
Of all the entitlements that are up for possible changes, it seems Social Security is the one that may be hit first. First of all – Social Security will be there for all of us, but probably in a very different shape or form. In all probability if you are already claiming benefits, they will not be affected. The younger you are, the more time there is for tinkering with benefits. In all likelihood some of the following changes may be made:
- Higher taxes – we will have to contribute more to the Social Security fund.
- Cost of living allowances (COLA’s) may be reduced. This is the one change that
- may affect current retirees.
- Increasing the maximum taxable Social Security earnings limit. Currently, earnings below $113,700/year are taxable for Social Security.
- Reducing benefits for higher income earners in retirement. Basically those who really do not need Social Security.
- Increasing the ages for eligibility.
- Taxing more of the benefits received.
- Eliminating bells and whistles like claiming on a spouse’s record or filing and suspending benefits.
What can you do about it? Not much, except make sure you have enough saved for your retirement to make sure you are not too dependent on Social Security for your retirement financial security. In general, delaying benefits as long as possible will result in more benefits over your lifetime and for your spouse.
Increased Limits for 2013
With the New Year, there were a flurry of changes to the amounts you can save for retirement: 401k’s, 403b’s, 457b’s and the TSP now allow you to save $17,500/year. If you are 50 or better, limit goes up to $23,000. IRA’s and Roth IRA limits go up to $5,500/year or $6,500/year for those 50 and over. SIMPLE IRA salary deferral limit goes up to $12,000/year and with age 50 and older catch up limit goes up to $14,500. Make sure you increase your withholding/savings to ensure you max out your savings. If you have not made your 2012 IRA contribution yet, you have until April 15 to do so.
Who wants to Hire an Old Guy or Gal Like Me?
Frequently one of the options in my financial plans is the possibility to work longer or take on part-time work. A common answer is, “Who would want to hire me?” Don’t sell yourself short. With a career worth of experience under your belt, you are very marketable. You have a strong work ethic that the kids coming out of school are just learning about, a lifetime of skills that younger workers can only dream about and strong interpersonal skills that employers require. Don’t worry if you can’t type out a message on a smart phone as quickly as your grandchild. An interesting phenomenon of the recent recession is that certain employers are struggling to find skilled and drug-free employees. You may not be able to secure the pay and benefits that you had at your earning peak, but delaying the time you are drawing down your nest egg and delaying Social Security will improve your overall financial situation.
As I did not get around to writing a January newsletter (phew, we weren’t overloaded with another newsletter!), a lot has happened in the last 6 months. In October, we rode in the Day of the Tread (54 miles), with lovely weather to boot. This year’s Nutcracker Triathlon was held in much better weather than 2011’s event, although the young guy who was unloading his bike next to us, was not convinced!
In January we visited South Africa, spending time with family and a week in the Kgalagadi Transfrontier Park, with temperatures reaching 110 degrees. An amazing game reserve with thousands of native Gemsbok (or Oryx as we are familiar with in White Sands, NM).The highlights; the beautiful birdlife, seeing 3 separate families of cheetah as well as a stunning lion 3 yards away from the car just outside our camp. He serenaded the camp for most of the night!
Right now we are getting rid of the winter cobwebs and ramping up our fitness level to ride the Santa Fe Half Century again next month – hope the warm spring weather holds!
Please contact me for a review meeting if needed. This is a busy time for my business, so please plan early for setting up an appointment. Feel free to pass this newsletter on to whoever may be interested.
1Vanguard Total Stock Market ETF (VTI), according to Yahoo Finance Historical Prices, including