Investor Blog

Social Security Claiming Strategies - And Congress Just Changed The Rules

Social Security Claiming Strategies – and Congress Just Changed the Rules When to claim your Social Security benefits has become a popular topic the last few years, and for good reason – too many people leave money on the table and/or file for benefits too soon.  Social Security plays a surprisingly big role in lessening the risk of running out of money – and thereby whether retirees will enjoy a more tranquil retirement.  Unfortunately, Congress recently amended the ...

Posted On: Feb 25, 2016

Investment Markets Remain Volatile

Ruminations on long-term wealth building and retirement-income strategies

Investment Markets Remain Volatile

At times, it can be very difficult to stay the course as an investor, because we must periodically endure retreating and sideways securities prices.  U.S. stock prices “corrected” about 12% from May to August-September, and – as of this writing – are retreating again.  Stocks have struggled this year, and there are many areas that look like they will finish substantially down for 2015.  Those areas include emerging markets, “value” and dividend-paying stocks (especially utilities and transportation), certain areas of the bond market, gold mining stocks, and the energy sector, which has really been hit hard.  While corrections are painful when they are happening, we should be thankful that they do, in fact, occur because if investment prices did not periodically correct, then you could not reasonably expect to earn a higher return over time versus holding investments (or savings) that have little or no volatility.

Remember that the financial media is not your friend when stocks are correcting.  The media is always eager to stir up your emotions.  Given the “collective car crash” that markets endured in 2008, you can be excused if your emotions have been pulling at you lately to lose sight of your long-term goals and satiate the short-term need “do something” with your investments.  The media likes to use terms like “soar” and “plunge” when referring to stock prices – and lately, oil prices.  Stocks on any given day might move 1-2%, sometimes more, but do they really “soar” and “plunge”?  I could perhaps understand the use of the term “plunge” if stock prices dropped, say, 30% in a day…but 1-2%??  Can you imagine getting on an elevator, and your button choices are “plunge” and “soar”? 

The financial media doesn’t know you, isn’t familiar with your financial goals, and certainly doesn’t care about you.  You will be a better investor if you tune out the media and stay focused on matching your investments to your goals in a financial plan.  What they care about is selling you more media by keeping you addicted to the next news “event” that they believe is moving markets.  Have you ever wondered why they always provide a reason why stock prices go up or down each day?  Maybe there were simply more sellers than buyers that day.  Maybe more college tuition bills came due that day, or more cars and homes were purchased, or retirees needed a little more money to fund their retirement lifestyle.  Why is it that “investors” would be “dumping” shares of American companies because of “growth concerns” in China or the Federal Reserve raising the short-term interest rate, gulp, a whopping ¼ of 1 percent?  Some traders undoubtedly are doing this, but investors tune out this garbage.[1] 

Despite the media hyperbole, the correction to U.S. stocks prices last summer was tame by historical standards.  Peak to trough from May 21st to August 25th, the S&P 500 was down 12.4%.[2]  The average intra-year decline since 1981 in the S&P 500 is 14.2%.[3]  If you are still saving for retirement, then periodic stock price declines work to your advantage because you are buying more shares for the same amount of money when they “go on sale”.  On the other hand, if you have retired, more caution must be exercised.  But there are retirement strategies to protect against such difficult periods…a topic for another time.

Stock prices are up about three times where they were in March of 2009 – a very steep increase.  It’s hard to know when a bull market like this will end, but in general, bull markets typically end when investors feel euphoric and lose sight of risk.  This isn’t happening.  The week of August 25th (when stocks were correcting the most), we saw the greatest one-week outflow of funds from equity investments on record.[4]  That is clearly not an indication of euphoria - investors still feel plenty of fear, most likely from 2008.  Surprises happen, and I could be wrong in the short-term.   But interest rates remain low, energy is cheap, the labor force continues to expand, S&P 500 dividends have increased 10.6% January through September this year versus 2014,[5] and investors appear to be fairly risk averse.  As such, by historical metrics it seems this bull market should have more room to run.   

In the meantime, consider what opportunities might arise the next time stocks prices go down.  What additional funds or cash might you contribute to your long-term financial goals?  Would it make sense to convert a traditional IRA to a Roth IRA? – remember you will pay less tax on a lower valuation when converting.  Thereafter, as markets recover, stock prices recover inside a tax-free vehicle.  Lastly, don’t forget to consider taking losses inside taxable accounts this year on areas that have performed poorly – and rebalance inside your IRAs.      

Bottom Line:  Stay invested, my friends – but we might continue to see difficult markets into 2016.

Posted On: Feb 19, 2016

Is the Bull Market in Stocks Ending

Readers of this newsletter know that I have been relentlessly optimistic on stocks since 2009. And while I remain in the optimist camp, there are certainly reasons to think that the road will be more difficult going forward. In fact, it’s been difficult in many areas of investment markets since last year – gains certainly have not been near uniform across markets. I don’t see meaningful signs of an imminent recession or a bear market in stocks (generally considered a 20+ percent decline in stock prices). But surprises undoubtedly can and will happen – therefore, caution should be exercised going forward.

Posted On: Feb 05, 2015

Have an Employer Pension Plan? Then It’s Decision Time…

Most employers have transitioned over to 401(k) plans, but many people in their 50s and 60s still have the older defined-benefit pension plans. And they’re understandably confused when it comes time at retirement to decide which option to select. Unfortunately, I’ve seen some inaccurate, unhelpful, and even misleading information from respectable sources on this topic. If the alleged experts are confused, one can easily imagine that pension participants are confused, too.

Posted On: Jan 26, 2015

The 2015 Cost of Long-Term Care

Genworth updated it annual cost of long term care across the United States. The annual costs for Denver, Colorado are as follows:

Home Health Care



Assisted Living Facility



Nursing Home Private Room



I continue to believe that this is an evolving risk area for clients. A significant and sustained period of long-term care can be devastating to a financial plan and/or to the health of a family caregiver. The statistics on the health of caregivers – who tend to be women - are grim. Sales of traditional long-term care policies are in decline due to the high premiums costs (and high claims costs!). Many of your top insurance companies have exited the market because they don’t believe it is a profitable line of business for them. The government continues to tighten the rules on qualifying for Medicaid to pay for long-term care expenses. And the demographic trends with the Baby Boomers clearly point to a worsening problem going forward.

Posted On: Jan 15, 2015

Has the World Gone Mad?

“A madman will defend his own illusions because in them he sees his own salvation. Thus, he will attack the one who tries to save him from them, believing that he is attacking him.” – A Course in Miracles.

Yes, I would say the world is most likely mad – and don’t tell bondholders that they’re mad…your safety could be in danger!

Posted On: Jan 15, 2015

BB King and Elder Abuse

Being a longtime blues guitar player myself, I was saddened to hear of B.B. King’s recent passing in May. The blues world lost one of its legends. Unfortunately, a cloud of elder abuse and fraud hang over King’s death and his estate. King’s daughters are claiming that King’s longtime business manager, Laverne Toney, siphoned off money from King’s accounts, neglected his health, and kept relatives from accessing King during his final days.

Posted On: Jan 15, 2015