By Edward Leone Jr. DMD MBA CFP RFC
Contact Information leonee@vzw.blackberry.net
I have discussed the unpredictable geopolitical events in the past that may influence financial markets. Is the issue in Crimea with Russian activity going to be added to the list? Is Putin posturing to just as Hitler did in the 1930s, do an extensive land grab to promote the Russian economy and impose Russian culture? Will the U S government and other allied governments sit by and do nothing as they did 75 years ago until conditions become so bad for Baltic States and Eastern Europe that we find ourselves in a global conflict? What do you think?
On a more regional issue, a Gallop Pole identifies the following states as ones from which citizens want to move due to poor job opportunities or high taxes and the high cost of living: Illinois, Connecticut, Maryland, Nevada, Rhode Island, New Jersey, Massachusetts, Louisiana, and Mississippi. It is interesting to note that the following cities had the highest influx of residence in 2013: Austin, Raleigh, San Antonio, Denver, Charlotte, Nashville, Oklahoma City, Houston and Dallas. HMM!!
Many of us are planning our retirement or beginning to engage in this status of life. It appears to me that the imposition of factors which are institutional whether from government or industry are having less influence on the when and how decisions. Defined benefit pension plans have been on the slide for quite some time while governments clearly cannot continue on the promises they have made due to lack of funding as discussed in previous blogs. Is retirement as we have know it up to now an artificial finish line? Successful aging is the focus rather than growing old while meaningful pursuits are more the focus for many than pursuing means. The Financial Advisor News in an article authored by Mitch Anthony, also points out that 60% of those who retire will have part time jobs. For some these are economic issues, but for many, social, intellectual and personal challenge factors are prime drivers. To get ready for retirement, an individual or couple must examine the following: define what retirement will look like, take inventory of assets, evaluate health issues, plan the timing on collecting Social Security benefits, build a social network, set up a retirement budget with the potential to continue some work if necessary and have a plan to deal with the unexpected! The unexpected may revolve around longevity, health and financial markets.
A risk which many have not fully examined is the affects of inflation. Since 1970 the median annual inflation rate has been 3.37% while the average inflation rate due to high inflation experiences in 74,79 and 80 is 4.27%. Considering the average inflation factor of 4.27%, if you had $100 in 1970, you would need $629 to have the same purchasing power today!! WOW! Another risk factor is the tax code. The new highest marginal rate is 39.6% along with capital gains rate increases to 20% and the new medicare tax of .9% along with the 3.8% investment income tax will hit some of us pretty hard. The Section 179 expensing for businesses has been reduced to $25,000 from $500,000. It is no wonder that our economic recovery is slow since people just do not have the discretionary dollars to spend and invest as in the past.
Prudential is telling us in their trade news letters, that many employers will be moving to a defined contribution health and benefits model where employees will get a fixed dollar benefit to buy coverages and other benefits they desire. We will have to see where that goes. It is important to note that HSA limits for contribution in 2015 are at $3,350 for an individual and $6,650 for a family.
Do your best to share all of this very important information as it will influence much of what all of us do in planning and execution of life and work.
For the Record:
DJIA 16583.34
NASDAQ 4071.87
S&P500 1878.48
Suggested Reading: “The Black Swan”by N N Taleb
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