Terrorism & the Financial Markets

Wall Street has the potential to recover quickly from geopolitical shocks.

Provided by Ryan Maroney, CFP®

In the past few months, the world has seen several high-profile terrorist attacks. Incidents in the U.S., Belgium, Pakistan, Lebanon, Russia, and France have claimed more than 500 lives and injured approximately 1,000 people. Beyond these incidents, many other deaths and injuries have been caused by terrorist bombings that garnered less media attention.1,2

As an anxious world worries about the ongoing threat posed by ISIS, the Taliban, al-Qaeda, Boko Haram, and other terror groups, there is also concern about the effect of such incidents on global financial markets. Wall Street, which has had a trying first quarter, hopes that such shocks will not prompt downturns. Even in such instances, history suggests that any damage to global shares might be temporary.

While geopolitical shocks tend to scare bulls, the effect is usually short-term. On September 11, 2001, the attack on America occurred roughly at the beginning of the market day. U.S. financial markets immediately closed (as they were a potential target) and remained shuttered the rest of that trading week. When Wall Street reopened, stocks fell sharply; the S&P 500 lost 11.6% and the Nasdaq Composite 16.1% in the week of September 17-21, 2001. Even so, the market rebounded. By October 11, the S&P had returned to the level it was at prior to the tragedy, and it continued to rise for the next few months.3,4

In the U.S., investors seemed only momentarily concerned by the March 11, 2004 Madrid train bombings. The S&P 500 fell 17.11 on that day, as part of a descent that had begun earlier in the month; just a few trading days later, it had gained back what it had lost.5

Perhaps you recall the London Underground bombing of July 7, 2005. That terror attack occurred on a trading day, but U.K. investors were not rattled; the FTSE 100 closed higher on July 8 and gained 21% for the year.4

Wall Street is remarkably resilient. Institutional investors ride through many of these disruptions with remarkable assurance. Investors (especially overseas investors) have acknowledged the threat of terrorism for decades, also realizing that it does not ordinarily impact whole economies or alter market climates for any sustained length of time.

You could argue that the events of fall 2008 panicked U.S. investors perhaps more than any geopolitical event in this century: the credit crisis, the collapse of Lehman Bros. and the troubles of Fannie, Freddie, Merrill Lynch, and Bear Stearns snowballed to encourage the worst bear market in recent times.

When Hurricane Katrina hit in 2005, truly devastating New Orleans and impacting the whole Gulf Coast, it was the costliest natural disaster in the history of the nation. It did $108 billion in damage and took more than 1,200 lives. Yet on the day it slammed ashore, U.S. stocks rose 0.6% while global stocks were flat.4,6

The recent terror attacks in Belgium, Pakistan, and France have stunned us. Attacks like these can stun the financial markets as well, but the markets are capable of rebounding from their initial reaction.    

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.

Citations.

1 - nytimes.com/interactive/2016/03/25/world/map-isis-attacks-around-the-world.html [3/25/16]

2 - latimes.com/world/afghanistan-pakistan/la-fg-pakistan-lahore-children-20160328-story.html [3/28/16]

3 - tinyurl.com/pzwzrmb [11/14/15]

4 - moneyobserver.com/opinion/terrorism-terrorises-stocks-fishers-financial-mythbusters [10/22/15]

5 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F11%2F04&x=34&y=18 [11/14/15]

6 - cnn.com/2013/08/23/us/hurricane-katrina-statistics-fast-facts/ [8/23/15]

Consider an IRA Charitable Rollover

If you want a tax break and want to help a non-profit, this may be a good move.

Provided by Ryan Maroney, CFP®

Have you ever wanted to make a major charitable gift? Would you like a significant federal tax break in acknowledgment of that gift? If so, an IRA charitable rollover may be a good financial step to take.

If you are age 70½ or older and have one or more traditional IRAs, you may want to explore the potential of this tax provision, first introduced in 2006 and recently made permanent by Congress. In the language of federal tax law, it is called a Qualified Charitable Distribution (QCD) – a direct transfer of up to $100,000 from the IRA to a qualified charity.1,2

An IRA charitable rollover may help you lower your adjusted gross income. That may be a goal in your tax strategy, especially if your AGI is large enough to position you for increased Medicare premiums, greater taxation of your Social Security benefits, or exposure to the 3.8% investment income tax and the 0.9% Medicare surtax. If your AGI passes a certain threshold, you also lose the ability to itemize deductions.2

Up to $100,000 may be excluded from your gross income in the year in which you make the gift. The gifted amount also counts toward your Required Minimum Distribution (RMD).1,2

By the way, this $100,000 annual QCD limit is per individual. If you are married, you and your spouse may gift up to $200,000 in a year through IRA charitable rollovers. Imagine lowering your household’s AGI by as much as $200,000 in a tax year.2

A QCD will not afford you an opportunity for a charitable deduction. That would amount to a double benefit for the taxpayer making the gift, which is not something federal tax law allows.3

You need not be rich to do this. When many people first learn about the IRA charitable rollover, they think it is only for multi-millionaires. That is a misconception. Even if you do not think of yourself as wealthy, a QCD could prove a significant element in your tax strategy.

How does it work? Logistically speaking, an IRA charitable rollover is a trustee-to-trustee transfer: the IRA owner does not take possession of the money as the gift is arranged. Rather, the custodian or trustee overseeing the IRA writes a check for the amount of the gift payable to the charity. It is a direct transfer of funds, not a withdrawal.2

An IRA owner must be age 70½ or older to do this, and he or she must be the original owner of the IRA (an inherited IRA may not be used). The gifted assets must come from an IRA (or multiple IRAs) subject to RMD rules. SEPs and SIMPLE IRAs are ineligible if an employer contribution has been made for the particular year.4,5

Can you gift appreciated securities as well as cash? You can. Securities held within an IRA may be directly transferred from an IRA to a qualified charity in a QCD. You can claim an income tax deduction for the full fair market value of those securities.4,5

The charity or non-profit involved must pass muster with the IRS. It must be an entity that qualifies for a charitable income tax deduction of an individual taxpayer, and it cannot be a donor-advised fund, a private foundation that makes grants, or a supporting organization under Internal Revenue Code Section 509(a)(3). The charity must provide you with a letter of acknowledgement denoting that you received no goods, services, or benefits of any kind in exchange for your gift, and that you shall not receive any in the future as a consequence of your gift. If that letter is not quickly sent to you, be firm in requesting it.4,5

In case you are wondering, you can actually contribute more than your IRA RMD amount for a particular year through an IRA charitable rollover, as long as the gifted amount does not exceed $100,000. If you pledge a donation to a qualified charity or non-profit, an IRA charitable rollover can be used to satisfy your pledge.5

This tax break has been a boon to charities and IRA owners alike. Correctly performed, a charitable IRA rollover may help to lessen tax issues while benefiting qualified non-profit organizations.

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.

Citations.

1 - marketwatch.com/story/ira-charitable-rollover-provision-made-permanent-2015-12-25 [12/25/15]

2 - forbes.com/sites/jamiehopkins/2016/01/20/why-retirees-need-to-stop-writing-checks-to-charities/ [1/20/16]

3 - cof.org/content/analysis-ira-charitable-rollover-extension [12/22/15]

4 - wealthmanagement.com/retirement-planning/ira-qualified-charitable-contributions-reinstated-made-permanent [12/21/15]

5 - forbes.com/sites/berniekent/2015/12/20/should-you-make-a-charitable-contribution-from-your-ira/ [12/20/15]

A Most Challenging Year

 

2016 was off to a rocky start when trading opened on January 4, and that only served to sharpen the sense that investing will continue to face the pervasive challenges of the year before. A bad start to the year, of course, is not nearly the harbinger that too many hyperbolic news outlets would have us believe, but it does offer an opportunity to assess the past year with an eye toward what might lie ahead.

Without a doubt, 2015 was a difficult year for investing. Not difficult as in catastrophically or dramatically bad, such as 2008 and early 2009, or 2002. But unlike prior years, 2015 offered very few opportunities for positive returns in any asset class, especially liquid, traded assets.

According to analysis done by Societe´ Generale, 2015 was the hardest year to generate returns since 1937. In the 78 years since then, at least one asset class tended to boast returns of 10%. Another study found that a quarter of the time, there was one asset class that had returns of at least 30%, even if other assets were down by double digits.

In 2015, however, none of that pertained. Of the major stock indices in the United States, only the Nasdaq had a decently positive year, with greater than 5% returns. Everything else either was flat or down. The global picture was similar: developed markets were down about 3.5%, as measured by the MSCI EAFE, while emerging markets were down a whopping 18%. A few outliers posted positive returns: Japan (up more than 9%), New Zealand (up 13%), and China’s Shanghai exchange (up more than 9%). Some European exchanges were up as well, with Germany and France generating about 6% and 9%, respectively.

Bonds did not offer much as an alternative asset class.  Yields barely budged year over year in the United States, despite bouts of volatility as investors attempted to game when the Federal Reserve would at last raise rates (which it did by 25 basis points in its final meeting in December). US bond indices were down more than 1%, with many sub-categories, such as high-yield, down as much as 5%. Global bonds were considerably worse, ranging from emerging market bonds indices, down double digits, to developed markets sovereign and corporate bonds, down 5% to 10%.

And alternative asset classes, from hedge funds to commodities to precious metals, did nothing either: many hedge funds dropped by double digits as managers took on outsized bets in an attempt to generate outsized returns. The commodity and energy complex continued a massive price reset that resembled a slow-motion collapse as demand from China shrank rapidly, and too much supply came on line at precisely the same time. Even gold, the asset of choice for those with a defensive mindset who see great trouble in the world, performed quite poorly, declining more than 10%.

But in some respects, the picture was even worse than the tepid landscape charted above. Yes, the Nasdaq did well, but did so largely on the strength of a few stellar names such as Google/Alphabet, Amazon, Microsoft, Facebook, and Netflix. If you removed those, both the Nasdaq and the S&P 500 would have posted unequivocally negative returns for the year.

But if by chance you had been an asset allocator, a stellar portfolio that might have returned 10% or more was possible. It would have required crafting a portfolio composed predominantly of those five stock names, plus a significant exposure to Japan, Germany, New Zealand and France, and either avoiding emerging markets or shorting them. It also had to avoid global bonds and most US names as well, and steered clear of any commodity names (or shorted crude oil). And it needed to add some exposure to U.S.-listed real estate investment trusts (REITs).

It is safe to say, however, that almost no one (and in fact perhaps no one) had such an asset allocation strategy. That leaves the rest of the investing universe. Yes, some endowments and institutional investors can go further afield into private equity, venture capital, and direct investment in land and esoteric assets, such as timber. Some evidence suggests that private equity returns have surpassed those of publicly traded assets of late, along with select real estate deals in hot urban markets. But such investments are beyond the reach of the vast majority of investors, and hence offer, at best, a glimpse through the glass window: gaudy, but unobtainable. Even so, those investments are not the general case—deals have become ever pricier, sustained by higher levels of debt, and offer uncertain long-term prospects.

The net result is that 2015 was an astonishingly difficult year to make money for investors in almost every asset class. For asset allocators, who attempt to generate above-average returns by shifting the mix of equity, bonds, and alternatives, it was a year in which no asset class provided much in the way of ballast. Nearly everything was either flat, down, or down even more, and only the most astute (and lucky) tactical managers took advantage of technical signals to shift from cash to bonds to stocks at the right times. If you were a tactical strategist, who turned heavily to cash and away from equities over the summer, and then jumped right back into stocks in September, you were rewarded. But many of the managers who got that right in 2015 (and there were very few) did not exhibit the same acumen in 2014, 2013, or in prior years, raising the question of whether such perfect timing was a product of deep skill or shallow luck.

The year overall was hardly a disaster, but it was a poor year for almost everyone. For active allocators, it often was somewhat worse than the indices and benchmarks. Dynamic and tactical managers, like active fund managers, attempt to generate returns by, well, taking active positions distinct from strategic and static models. In some years, doing so yields returns above the norm; in 2015, for the most part, it yielded returns below the benchmarks.

It’s often said that the past is prologue. While that is always strictly true, what happened last year does not offer much in the way of guidance about what 2016 holds. Already, a slew of pundits predict that 2016 will offer more of the same for returns, with a distinct chorus suggesting that positive returns will be even harder to find. Human nature being what it is, people often predict a continuation of what has just happened; human history being what it is, that is often quite wrong.

What 2015 does show is that in a world of globalized investing, finding real outliers is ever more challenging, and distinctive theses may take some time to play out. Emerging markets, high-yield, one country’s equities versus another’s may be themes that mature over several years rather than one calendar year, even as the time frame to assess performance shrinks from annually to quarterly to monthly. So advisors and managers risk not only whipsaw performance, but also may be playing constant and futile catch-up if they take part in that game.

2015 may have been tepid, and 2016 may be as well, but that doesn’t mean that throwing in the towel and going to cash or going purely passive makes the most sense. Returns may be static, but the world most certainly is not. That is why continued attention to what is working, what is not, and what might be is the only way forward.

Making & Keeping Financial New Year’s Resolutions

What you might do (or do differently) in the months ahead?

Provided by Ryan Maroney, CFP®

How will your money habits change in 2016? What decisions or behaviors might help your personal finances, your retirement prospects, or your net worth?

Each year presents a “clean slate,” so as one year ebbs into another, it is natural to think about what you might do (or do differently) in the 12 months ahead.

Financially speaking, what New Year’s resolutions might you want to make for 2016 – and what can you do to stick by such resolutions as 2016 unfolds?

If you have merely been saving for retirement, save with an end in mind. Accumulating assets for retirement is great; doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year, which will make the “how” clearer as well.

Strive to maximize your 2016 retirement plan contributions. The 2016 limit on IRA contributions is $5,500, $6,500 if you will be 50 or older at some point in the year. Contribution limits are set at $18,000 for 401(k)s, 403(b)s, and most 457 plans; if you will be 50 or older in 2016, you can make an additional catch-up contribution of up to $6,000 to those accounts.1

If you want to retire in 2016, be mindful of the end of “file & suspend.” Social Security is closing the door on the file-and-suspend claiming strategy that married couples have used to try and optimize their Social Security benefits. If you are married and you will you be at least 66 years old by April 30, 2016, you and your spouse still have a chance to use the strategy. Starting May 1, that chance disappears forever for all married couples. (It will still be permitted on an individual basis.)2,3

Similarly, the opportunity to file a restricted application for spousal benefits has also gone away. This was another tactic retirees employed in pursuit of greater lifetime Social Security income.2

Can you review & reduce your debt? Look at your debts, one by one. You may be able to renegotiate the terms of loans and interest rates with lenders and credit card firms. See if you can cut down the number of debts you have – either attack the one with the highest interest rate first or the smallest balance first, then repeat with the remaining debts.

Rebalance your portfolio. If you have rebalanced recently, great. Many investors go years without rebalancing, which can be problematic if you own too much in a declining sector.

See if you can solidify some retirement variables. Accumulating assets for retirement is great; doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year – that may make the “how” and “how much” clearer as well.

The same applies to college planning. If your child has now reached his or her teens, see if you can get a ballpark figure on the cost of attending local and out-of-state colleges. Even better, inquire about their financial aid packages and any relevant scholarships and grants. If you have college savings built up, you can work with those numbers and determine how those savings need to grow in the next few years.

How do you keep New Year’s resolutions from faltering? Often, New Year’s resolutions fail because there is only an end in mind – a clear goal, but no concrete steps toward realizing it.

So, if your aim is to save $20,000 toward retirement this year, map out the month-by-month contribution to your retirement account(s) that will help you do it. Web tools like Level Money and Mint.com can help you examine your cash flow week-to-week and month-to-month – you can use them to keep track of your saving effort as well as other aspects of your finances.4

If you wish, you can let a loved one or a close friend in on your New Year’s financial resolutions. That loved one or friend may decide to adopt them. Even if he or she does not, sharing your resolution might increase your commitment to carrying it out. Dominican University of California did a study on this very subject and found that when people set near-term goals and kept those goals private, they achieved them about 35% of the time – but when they informed friends about them and sent weekly progress updates, the achievement rate surpassed 70%.4  

Lastly, you may want to automate more of your financial life. If you have not set up monthly money transfers to a retirement or investment account, 2016 can be the year this happens.

Ryan Maroney may be reached at 949-455-0300 or rmaroney@fmncc.com

www.fmncc.com

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.

Citations.

1 - money.usnews.com/money/retirement/articles/2015/10/26/how-401-k-s-and-iras-will-and-wont-change-in-2016 [10/26/15]

2 - money.usnews.com/money/retirement/articles/2015/12/04/say-goodbye-to-the-social-security-file-and-suspend-strategy [12/4/15]

3 - tinyurl.com/p3exq5s [12/18/15]

4 - forbes.com/sites/bethbraverman/2015/12/29/4-tricks-to-get-your-new-years-resolutions-to-actually-stick-this-year/print/ [12/29/15]

End of Year Financial Checklist

The end of the year is less than a couple of weeks away, but there is still time to handle some important financial tasks. Taking care of the items below will help you to have a more confident and financially successful 2016.

Rebalance your portfolio. Your investment strategy should start with an asset allocation that’s based on your goals, risk tolerance and time horizon. At the end of the year, you’ll probably find that market fluctuations have upset the weighting of each asset class in your portfolio. Rebalancing, like tuning up your car, re-sets your investments to their intended state. If your goals or tolerance for risk have changed, end-of-year rebalancing is a good time to work with your advisor on adjusting your asset allocation.

Tax-Loss Harvesting. Rebalancing is a good time to identify securities you can sell at a loss in order to offset a capital gains tax liability. A simple example: Selling a stock position that has lost $1,000 allows you to erase the capital-gains tax liability on an investment that you sell for a $1,000 profit. You can use up to $3,000 a year in losses to cancel out gains on investment or ordinary income and roll over unused losses to future years.

Be charitable but smart. Consider giving appreciated investments rather than cash when you make charitable gifts this season. This allows you to minimize capital gains taxes while getting a tax deduction for the full market value of the donated investment. 

Take required minimum distribution. You must take RMDs from 401(k)’s and traditional IRAs by December 31 or be penalized 50% of the amount that should have been withdrawn. The only exception: your first RMD, which you can delay until April 1 of the year that follows the year you turn 70½.

Use your FSA dollars. Money in a flexible savings account must be used by December 31 or you will lose it. One new rule does allow an employer to let you roll $500 or give you an additional two and a half months to use it—but that’s not required. A health savings account is different: Funds in HSAs don’t have to be used by yearend.

Beware of mutual fund distributions. Buying mutual funds in taxable accounts is hazardous this time of year. If you’re not careful, you could end up paying taxes on gains you didn’t earn. Most funds distribute their interest, capital gains and dividends to shareholders in December. Those who buy shares before then are subject to the whole tax bill even though they don’t receive the full payout. For that reason, it’s important to make sure a fund has already made its yearly distribution before you buy shares.

Max out retirement contributions. You can stay on track for retirement and save taxes by contributing the maximum to your tax-advantaged retirement accounts. For 2015, you can contribute up to $18,000 to your 401(k), plus a $6,000 catch-up amount if you’re at least 50. IRA's have until April 15th to contribute, but you can stash up to $5,500 in a traditional IRA, plus a $1,000 catch-up contribution if you're 50 or older. If you’re self-employed, you can deposit up to 20% of your income into a SEP-IRA, up to $53,000.

Review and update beneficiaries. A lot can happen in the course of a year, including births, adoptions, deaths, marriages and divorces. It’s important to review your beneficiary designations to ensure your assets, from retirement accounts to insurance proceeds, will go to the people you want to have them.

If you think you’re too busy buying gifts to check off these items, think of them as a gift to yourself—the gift of peace of mind. And remember that we’re here to help you with all of it

Your Best Protection Against a ‘Godzilla El Nino’?

Your Best Protection Against a ‘Godzilla El Nino’? Flood Insurance.
It’s hard to imagine needing flood insurance in a drought‐stricken state like California but with the National Weather Service’s forecast of an El Nino of epic proportions, many homeowners may find themselves the victims of unexpected flooding. That’s because when parched earth meets torrential downpour, the results are often catastrophic. Most homeowner policies don’t offer flood protection – which is why it’s important to talk with a P&C Specialist about all of your options to get the flood insurance policy that’s right for you. ‘Godzilla’ is right around the corner, and flood policies take effect in 30 days. Call 949‐455‐0300 or email our P&C Specialist today to get started.

The Fed Decides to Wait-In a tough time for equities, it elects not to roil the markets.

On Thursday, the Federal Reserve postponed raising short-term interest rates. Citing “global economic and financial developments” that could “somewhat” impair economic progress and lessen inflation pressure, the Federal Open Market Committee voted 9-1 against a rate hike, with Richmond Fed President Jeffrey Lacker being the lone dissenter.1

This spring, a September rate hike seemed probable – but during this past week, assumptions grew that the central bank would put off tightening. On Wednesday, the futures market put the likelihood of a rate hike at less than 30%.2

The latest economic indicators did not suggest the time was right. The August Consumer Price Index retreated 0.1%, and the core CPI ticked up only 0.1%. In annualized terms, core CPI was up 1.8% through August while the Federal Reserve’s own core Personal Consumption Expenditures (PCE) price index was only up 1.2%. Retail sales advanced a mere 0.2% in August, 0.1% minus auto sales. Industrial production slipped 0.4% last month. The healthy labor market aside, none of this data was particularly compelling.3,4

Additionally, central banks have eased across the board the last few years. The Bank of Japan, the Reserve Bank of India, the People’s Bank of China, the Bank of Canada, the European Central Bank – none of them have begun tightening. Fed officials may have worried about the global impact had the FOMC elected to start a rate hike cycle.

Some institutional investors hoped the Fed would tighten. Royal Bank of Scotland researcher Alberto Gallo recently surveyed 135 influential market participants and found that a majority wanted a September rate hike; 80% called for the Fed to make an upward move by the end of 2015. (Just 42% thought a September rate hike would occur, however.)2

That may seem like an odd viewpoint, but another response to the RBS survey helps to explain it: 63% of these institutional investors felt central banks had been too accommodative to equities markets, to the point where their credibility was slipping and exits from easy money policies appeared difficult.2

We may be witnessing a hawkish pause. The Fed uses a dot-plot chart to publish its forecast for the key interest rate, and the latest dot-plot projects the federal funds rate at 0.40% by the end of 2015. In other words, the Fed more or less told investors to get ready for a rate hike on either October 28 or December 16, the dates of its next two policy meetings.1,5

At the press conference following Thursday’s FOMC policy statement, Fed chair Janet Yellen acknowledged that a rate hike could happen in October. (She noted that if it did, the Fed would arrange a press conference following that FOMC meeting.) Yellen said that the central bank wanted “a little more confidence” that annualized core inflation would approach its 2% target before adjusting rates. She also commented that the recent global equities selloff and the strengthening dollar do “represent some tightening of financial conditions.”6

On the whole, investors reacted positively to the news. In the wake of the announcement, the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 were all up more than 1%, with the S&P cresting the 2,000 mark and the Nasdaq approaching the 5,000 level. The CBOE VIX quickly dipped under 20.6

In one respect, it was a day of reassurance for investors – but it was also a day that brought signals that the Fed would soon start the process of normalizing monetary policy.

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.

Citations.

1 - marketwatch.com/story/federal-reserve-keeps-interest-rates-unchanged-but-forecasts-hike-this-year-2015-09-17 [9/17/15]

2 - msn.com/en-us/money/markets/stocks-rise-as-fed-hike-odds-fade/ar-AAenA97?li=AA9ZWtY [9/16/15]

3 - briefing.com/investor/calendars/economic/2015/09/14-18 [9/17/15]

4 - forbes.com/sites/greatspeculations/2015/09/16/why-the-fed-will-not-hike-rates-this-year/ [9/16/15]

5 - dailyfx.com/calendar/bank-calendar.html [9/17/15]

6 - blogs.marketwatch.com/capitolreport/2015/09/17/live-blog-and-video-of-fed-decision-and-janet-yellen-press-conference-2/ [9/17/15]

"This is just how 2008 felt.....I think"

In light of recent volatility in global markets and the steep sell-off of over the past week, we want to share a few comments that we hope will prove helpful in shaping your own views.

1.    A little perspective is always valuable
It is worth noting that although the US hasn’t seen a stock market decline of this magnitude in quite some time, market corrections are a normal and healthy part of market movement. While our market regime indicators (as well as those of most of our investment strategists) are elevated, they have not yet been triggered indicating this correction to be the next 2008. For this reason, we are reluctant to characterize today as either a buying or a selling opportunity. Instead we believe the next few days, or maybe weeks, will tell us whether the future of market prices will be driven by fundamental values or by fear. 

2.    In general, investors should not sell when a correction seems based on fundamentals
Historically, this type of decline has been limited in depth. In addition, fundamental corrections have tended to recover more quickly than the fear-driven market dislocations that take place when valuations become irrelevant and investor behavior is driven by anxiety.  At this time, markets have not become “irrational” in their pricing. While US stocks were down almost 4% for the day on Monday, the decline was much worse at the open before buyers who saw attractive valuations stepped in and brought the market well above its morning lows. 

3.    Fundamentals still look promising for US and European economies
While the challenges faced by China and emerging markets more broadly will slow growth in developed markets, there is little reason to believe these challenges will result in a global recession. The US and European economies still appear poised for growth, albeit slow growth. 

4.    They won’t ring a bell at the top: In reviewing the persistent market concerns, it’s important to remember that while they are worrisome, they are not a reason to panic and move to 100% cash. Over the course of our 30-year history, we’ve never tried to time market tops and we don’t have to. That’s because bull market peaks are usually slow, rounding affairs that take time to develop and are accompanied by increasing bearish warning flags. Unlike V-shaped market bottoms, tops give us a longer period to assess the weight of evidence and adjust the portfolio accordingly.  Even in the “crash” of 2008, investors had at least nine months surrounding the peak to step up defenses.

5.    The Fed may clarify its position on interest rates, boosting investor confidence
Beyond China, another factor in domestic investor anxiety is uncertainty about a Fed interest rate increase in September and what impact higher rates might have on the stock market. Last week's sharp sell-off in the US and global equity markets may encourage the Fed to delay raising interest rates until December or March, since the rate hike is not necessitated by inflation but rather a desire by the Fed to reload some monetary ammunition to stimulate the economy in the event of an economic slowdown. An indication from the Fed that it will delay raising rates might motivate buyers on the sideline. Conversely, even if rates rise, the certainty of the Fed’s move will provide investors greater confidence than the anxiety caused by the unknown.

6.    Market volatility helps show the value of a managed, diversified portfolio of investment styles
The past week only strengthens our conviction that diversified portfolios have higher likelihood of helping you stay on track. History has shown us that the opportunity cost of sitting in cash for long periods (waiting for the "all clear") far outweighs the losses associated with staying invested through a full market downturn. It is for this reason that we generally like to recommend a portion of most portfolios be allocated to tactical strategies with a discipline for when to reduce and when to add back equity market exposure.

At the hallmark of our investing process at FMN is the concept of diversification, both in what you own and in the strategy that is used to manage risk.  We’ll continue to use some of the most widely used methods of risk management; diversification, asset allocation, hedging, and the use of uncorrelated assets (investments that don’t move in lock step with the market).  If this correction proves to be similar to those seen in 2011 and 2012, we’ll certainly be looking to purchase at that time.  This is the only way to “buy low and sell high”, at some point you have to rebalance and actually purchase on these dips when the opportunity presents itself.  We’re not there yet, but we may be soon.

What does Puerto Rico’s debt crisis mean for investors?

While the world’s eyes were on Greece, Puerto Rico Governor Alejandro García Padilla announced last Sunday that the commonwealth could not pay its $72 billion in public debt. After decades of very slow growth and recession, the island’s central government is at the breaking point and wants the debt either deferred or renegotiated; analysts think it might run out of cash later this month.1

The municipal bond market is being noticeably impacted by this development. Mutual fund investors have long been attracted to Puerto Rico’s bonds, which offer sizable yields while being exempt from federal, state and local taxes. In 2014, the initial yield on Puerto Rico’s general-obligation bonds was 8.7%. According to Morningstar, 298 of 565 U.S. muni bond funds currently have some percentage of their assets in Puerto Rican debt.1,2  

Puerto Rico’s Public Finance Corporation owes $94 million it must pay by July 15 and its central bank must pay $140 million in bond principal by August 1. Governor Padilla and his administration are quickly exploring their options – including the possibility of filing for Chapter 9 bankruptcy, a choice available only to cities under current U.S. laws.1,3

If the federal government does not permit a Chapter 9 bankruptcy for Puerto Rico, small investors and cities, counties and states that want to fund infrastructure projects will have to deal with some troubling question marks. Its bondholders may not be able to recoup some of their losses (not the case when Detroit and certain California cities filed for bankruptcy). The percentage of insured Puerto Rican bonds is unknown.1,3

This week, Padilla announced that the commonwealth would attempt to meet with bondholders and negotiate a years-long moratorium on debt payments. As Puerto Rico’s debt is worth about eight times as much as Detroit’s, state and local governments could soon be staring at higher borrowing costs if Puerto Rico pushes for debt relief.3,4

On a positive note, Puerto Rico’s government did pay off $1.9 billion in debt due July 1. So far, analysts have not noticed the kind of dramatic outflows from muni funds that would roil the municipal bond market. A sustained outflow would probably begin with these funds selling off some of their more liquid holdings, impacting high-grade bond prices to start.4,5

Jeffrey Lipton, head of municipal bond research and strategy at Oppenheimer and Co., told CNBC this week that there could be a “short-term municipal market dislocation” should a default or major restructuring of Puerto Rican debt occur. Barring those events, he said he did not foresee "a longer-term systemic threat to the municipal market.”4

On July 29, the Obama administration said there would be no bailout for Puerto Rico. It could be that Congress makes an exception for Puerto Rico and allows it to file for Chapter 9 bankruptcy. If not, then its government could try to convince bondholders to give it a reprieve by exchanging the bonds they now hold for long-term bonds at lower interest rates. There is no easy solution, and that means more anxiety for the world’s debt markets.6

1 - fortune.com/2015/06/29/puerto-rico-economy-crisis/ [6/29/15]

2 - blogs.wsj.com/moneybeat/2015/06/30/puerto-ricos-crisis-deals-a-blow-to-municipal-bond-funds/ [6/30/15]

3 - csmonitor.com/Business/2015/0629/Puerto-Rico-can-t-pay-its-debt-governor-says.-How-will-it-impact-investors-video [6/29/15]

4 - tinyurl.com/pjhugou [6/30/15]

5 - fortune.com/2015/07/01/puerto-rico-avoids-default/ [7/1/15]

6 - newyorker.com/business/currency/why-congress-should-let-puerto-rico-declare-bankruptcy [7/1/15]

Headwinds from Greece Shouldn't Prompt You to Sell

by: Ryan Maroney, CFP®

Right now, you may be watching financial websites and wondering:

how badly will the headwinds from Greece rattle Wall Street this month?

So far, the damage has not been disastrous. The S&P 500 lost 2.09% on June 29; in the six market days that followed, it saw everything from a 1.7% descent to a couple of advances exceeding 0.6%. This volatility suggests that while Wall Street is certainly anxious, it is eyeing the situation in Greece with at least some degree of composure. (The selloff in Chinese stocks has also weighed heavily on global markets.)1

Greece has a very unpleasant choice to make: it can agree to a severe new bailout deal by July 12, or leave the European Union and contend with bankruptcy.2

It is coming down to a battle of wills. The EU desperately needs Greece to stay in the euro. A “Grexit” will send the message that EU membership is optional and reversible, hardly the signal the EU wants to send to its other debt-riddled members (Portugal, Italy, Spain). In the best outcome for the EU, Greek Prime Minister Alexis Tsipras and his Syriza party throw in the towel and capitulate to the demands of the new bailout – meaning more austerity cuts, humiliation for Tsipras, and the preservation of the eurozone ideal. Alternately, the situation could drag on for weeks with delays and re-negotiations.

Still, this appears to be a short-term headwind for U.S. equities. Stateside, fundamental indicators are much stronger than they were in the fall and winter. A new earnings season is underway, and it may provide big upside surprises. You could argue that two other headwinds affecting stocks – dollar strength and the gradual tightening of Federal Reserve monetary policy – have lessened somewhat, with the U.S. Dollar Index losing 2.92% in the second quarter and futures markets now betting that the Fed makes its first move with interest rates in December rather than September.3,4

Investors with long-term horizons should definitely stay the course here. If there is a “Grexit,” there are reasons to believe the U.S. markets could withstand the shock reasonably well.

Greece only accounts for 0.3% of the world economy to begin with, and its largest creditors are the European Union and International Monetary Fund, not private-sector banks. Foreign investment in Greek banks at the end of 2014 was 15% of what it had been four years earlier. Most Greek bonds are owned by other European countries.5      

When investors respond to market moves with fear, they sell impulsively rather than rationally and set themselves up to buy high (and sell low) when conditions normalize. Any deal might send markets rallying in Europe, and that rally might turn into a global one, meaning you want to be invested when it occurs.

Whatever occurs in the next month, quarter or the balance of the year should not sway you from your retirement saving strategy or your long-term vision for building and enhancing wealth. Over the years, the equities markets will run through bull and bear cycles and experience all manner of upsets. In the big picture, selloffs, corrections, and even bear markets are short-term, and your investing is long-term. Headwinds arise, but they also cease. Do not be surprised if stocks ride through these Greek headwinds and gain momentum.  

FMN financial advisors may be reached at 949-455-0300 or requests@fmncc.com

www.fmncc.com

1 - investing.com/indices/us-spx-500-historical-data [7/8/15]

2 - usatoday.com/story/money/2015/07/07/greece-eurozone-meeting/29804091/ [7/7/15]

3 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [7/5/15]

4 - washingtonpost.com/blogs/wonkblog/wp/2015/06/17/federal-reserve-rate-hike-likely-before-year-end/ [6/17/15]

5 - money.cnn.com/2015/07/05/investing/what-to-expect-market-greece-vote/ [7/5/15]

Getting It All Together for Retirement

Where is everything? Time to organize and centralize your documents.

Provided by Ryan Maroney, CFP®

Before retirement begins, gather what you need. Put as much documentation as you can in one place, for you and those you love. It could be a password-protected online vault; it could be a file cabinet; it could be a file folder. Regardless of what it is, by centralizing the location of important papers you are saving yourself from disorganization and headaches in the future.

What should go in the vault, cabinet or folder(s)? Crucial financial information and more. You will want to include...

Those quarterly/annual statements. Recent performance paperwork for IRAs, 401(k)s, funds, brokerage accounts and so forth. Include the statements from the latest quarter and the statements from the end of the previous calendar year (that is, the last Q4 statement you received). You no longer get paper statements? Print out the equivalent, or if you really want to minimize clutter, just print out the links to the online statements. (Someone is going to need your passwords, of course.) These documents can also become handy in figuring out a retirement income distribution strategy.

Healthcare benefit info. Are you enrolled in Medicare or a Medicare Advantage plan? Are you in a group health plan? Do you pay for your own health coverage? Own a long term care policy? Gather the policies together in your new retirement command center, and include related literature so you can study their benefit summaries, coverage options, and rules and regulations. Contact info for insurers, HMOs, your doctor(s) and the insurance agent who sold you a particular policy should also go in here.

Life insurance info. Do you have a straight term insurance policy, no potential for cash value whatsoever? Keep a record of when the level premiums end. If you have a whole life policy, you need paperwork communicating the death benefit, the present cash value in the policy and the required monthly premiums.

Beneficiary designation forms. Few pre-retirees realize that beneficiary designations often take priority over requests made in a will when it comes to 401(k)s, 403(b)s and IRAs. Hopefully, you have retained copies of these forms. If not, you can request them from the account custodians and review the choices you have made. Are they choices you would still make today? By reviewing them in the company of a retirement planner or an attorney, you can gauge the tax efficiency of the eventual transfer of assets.1

Social Security basics. If you have not claimed benefits yet, put your Social Security card, your W-2 form from last year, certified copies of your birth certificate, marriage license or divorce papers in one place, and military discharge paperwork and a copy of your W-2 form for last year (or Schedule SE and Schedule C plus 1040 form, if you work for yourself), and military discharge papers or proof of citizenship, if applicable. Take a look at your Social Security statement that tracks your accrued benefits (online or hard copy) and make a screengrab of it or print it out.2

Pension matters. Will you receive a bona fide pension in retirement? If so, you want to collect any special letters or bulletins from your employer. You want your Individual Benefit Statement telling you about the benefits you have earned and for which you may become eligible; you also want the Summary Plan Description and contact info for someone at the employee benefits department where you worked.

Real estate documents. Gather up your deed, mortgage docs, property tax statements and homeowner insurance policy. Also, make a list of the contents of your home and their estimated value – you may be away from your home more in retirement, so those items may be more vulnerable as a consequence.

Estate planning paperwork. Put copies of your estate plan and any trust paperwork within the collection, and of course a will. In case of a crisis of mind or body, your loved ones may need to find a durable power of attorney or health care directive, so include those documents if you have them and let them know where to find them.

Tax returns. Should you only keep your 1040 and state return from the previous year? How about those for the past 7 years? Have you kept every one since 1982 or 1974? At the very least, you should have a copy of returns from the prior year in this collection.

A list of your digital assets. We all have them now, and they are far from trivial – the contents of a cloud, a photo library, or a Facebook page may be vital to your image or your business. Passwords must be compiled too, of course. 

This will take a little work, but you will be glad you did it someday. Consider this a Saturday morning or weekend project. It may lead to some discoveries and possibly prompt some alterations to your financial picture as you prepare for retirement.

FMN financial advisors may be reached at 949-455-0300 or requests@fmncc.com

www.fmncc.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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.

Citations.

1 - fpanet.org/ToolsResources/ArticlesBooksChecklists/Articles/Retirement/10EssentialDocumentsforRetirement/ [9/12/11]

2 - cbsnews.com/8301-505146_162-57573910/planning-for-retirement-take-inventory/ [3/18/13]

Are Your Kids Delaying Your Retirement?

Some baby boomers are supporting their “boomerang” children.

Are you providing some financial support to your adult children? Has that hurt your retirement prospects?

It seems that the wealthier you are, the greater your chances of lending a helping hand to your kids. Pew Research Center data compiled in late 2014 revealed that 38% of American parents had given financial assistance to their grown children in the past 12 months, including 73% of higher-income parents.

The latest Bank of America/USA Today Better Money Habits Millennial Report shows that 22% of 30- to 34-year-olds get financial help from their moms and dads. Twenty percent of married or cohabiting millennials receive such help as well.

Do these households feel burdened? According to the Pew survey, no: 89% of parents who had helped their grown children financially said it was emotionally rewarding to do so. Just 30% said it was stressful.

Other surveys paint a different picture. Earlier this year, the financial research firm Hearts & Wallets presented a poll of 5,500 U.S. households headed by baby boomers. The major finding: boomers who were not supporting their adult children were nearly 2½ times more likely to be fully retired than their peers (52% versus 21%).

In TD Ameritrade’s 2015 Financial Disruptions Survey, 66% of Americans said their long-term saving and retirement plans had been disrupted by external circumstances; 24% cited “supporting others” as the reason. In addition, the Hearts & Wallets researchers told MarketWatch that boomers who lent financial assistance to their grown children were 25% more likely to report “heightened financial anxiety” than other boomers; 52% were ill at ease about assuming investment risk.

Economic factors pressure young adults to turn to the bank of Mom & Dad. Thirty or forty years ago, it was entirely possible in many areas of the U.S. for a young couple to buy a home, raise a couple of kids and save 5-10% percent of their incomes. For millennials, that is sheer fantasy. In fact, the savings rate for Americans younger than 35 now stands at -1.8%.

Housing costs are impossibly high; so are tuition costs. The jobs they accept frequently pay too little and lack the kind of employee benefits preceding generations could count on. The Bank of America/USA Today survey found that 20% of millennials carrying education debt had put off starting a family because of it; 20% had taken jobs for which they were overqualified. The average monthly student loan payment for a millennial was $201.

Since 2007, the inflation-adjusted median wage for Americans aged 25-34 has declined in nearly every major industry (health care being the exception). Wage growth for younger workers is 60% of what it is for older workers. The real shocker, according to Federal Reserve Bank of San Francisco data: while overall U.S. wages rose 15% between 2007-14, wages for entry-level business and finance jobs only rose 2.6% in that period.

It is wonderful to help, but not if it hurts your retirement. When a couple in their fifties or sixties assumes additional household expenses, the risk to their retirement savings increases. Additionally, their retirement vision risks being amended and compromised.

The bottom line is that a couple should not offer long-run financial help. That will not do a young college graduate any favors. Setting expectations is only reasonable: establishing a deadline when the support ends is another step toward instilling financial responsibility in your son or daughter. A contract, a rental agreement, an encouragement to find a place with a good friend – these are not harsh measures, just rational ones.

With no ground rules and the bank of Mom and Dad providing financial assistance without end, a “boomerang” son or daughter may stay in the bedroom or basement for years and a boomer couple may end up retiring years later than they previously imagined. Putting a foot down is not mean – younger and older adults face economic challenges alike, and couples in their fifties and sixties need to stand up for their retirement dreams.

Ryan Maroney, CFP® may be reached at 949-455-0300 or requests@fmncc.com 

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.

Citations.

1 - pewsocialtrends.org/2015/05/21/5-helping-adult-children/ [5/21/15]

2 - newsroom.bankofamerica.com/press-releases/consumer-banking/parents-great-recession-influence-millennial-money-views-and-habits/ [4/21/15]

3 - marketwatch.com/story/are-your-kids-ruining-your-retirement-2015-05-05 [5/5/15]

4 - amtd.com/newsroom/press-releases/press-release-details/2015/Financial-Disruptions-Cost-Americans-25-Trillion-in-Lost-Retirement-Savings/default.aspx [2/17/15]

5 - theatlantic.com/business/archive/2014/12/millennials-arent-saving-money-because-theyre-not-making-money/383338/ [12/3/14]

6 - theatlantic.com/business/archive/2014/07/millennial-entry-level-wages-terrible-horrible-just-really-bad/374884/ [7/23/14]

The Economic Journey of Your Morning Coffee

This morning 130 million Americans began their day in the same way—drinking their first cup of coffee.¹ Few, if any, took a moment during this morning ritual to contemplate or marvel the complex journey that brought their coffee from farm to kitchen table.

Coffee is the U.S.’s largest food import.² It wields an economic impact that starts with farmers from Brazil to Vietnam and ends with the barista at your local coffeehouse, involving hundreds of truckers, shippers, roasters and retail workers in between.

The beans brewed for your morning coffee may have changed hands up to 150 times. And the original bean farmer can expect between 10 to 12 cents of every dollar spent on retail coffee.³

Like many agricultural enterprises, coffee is grown on large plantations and small farms alike. Harvests are purchased by coffee mills located proximate to coffee growing regions, either directly from the plantation and farm cooperative, or via a trader who buys from the farmer in the hopes of re-selling at a higher price.

The mills take these “cherries”—so called because the beans are red—and brings them through a milling process that dries them and removes their husks to reveal the inner green bean.

The green beans are brought into the U.S. by importers and sold to roasters and major coffee brands whose roasting facilities are typically located in coastal cities with seaports that can receive the coffee shipments.

Once roasted, coffee will be ground (or left as whole beans), packaged and shipped to distribution centers around the country for eventual delivery to retail outlets.

Coffee’s journey to your table may travel a different path given the rise of specialty roasters and a growing connection between coffee retailers and farmers that removes many of these middlemen.

1. Coffee Universe, July 15, 2013.
2. Globalexchange.org, May 8, 2014
3. PBS.org, May 2014

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG, LLC, to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2014 Faulkner Media Group.

Withdrawals in Retirement - Clear and Wrong?

Many of us grew up with the concept that regular, periodic contributions to our retirement account was a sound investment strategy. The idea was that in a fluctuating market a regular schedule of a set investment amount, generally speaking, would mean that we bought more shares when prices were low and less shares when prices were high.¹ 

Does this mean that taking regular, periodic withdrawals during retirement makes similar good sense? 

Actually, it can be quite problematic. 

Systematic withdrawals do the precise opposite of systematic investments by selling fewer shares when the price is high and more shares when the price is low. This, in effect, reduces the number of shares that may be able to participate in any subsequent market recovery. 

Here’s an example

In the accumulation phase, if a portfolio falls by 25%, it will require approximately a 33% return to get back to its pre-decline value.² 

In the distribution phase, if you withdraw 5% of your portfolio for income and suffer the same 10% market decline, you would need to see an 18% market rebound to get back to pre-decline value.² 

Sequence of Returns

In the accumulation phase, investors tend to focus on average annual rates of return, less on the sequence of the returns. If you’re a buy-and-hold investor, ignoring short-term fluctuations may be a sound long-term approach. 
If you are in retirement, however, you absolutely care about the sequence of the annual returns. 

For instance, comparable portfolios might deliver the same average annual return over a 20- or 30-year period, but have radically different consequences to how long your savings may last. Generally speaking, negative returns in the early years of your retirement can potentially reduce how long your assets can be expected to last. 

American writer H.L. Mencken once remarked that, “For every complex problem there is an answer that is clear, simple, and wrong.”³ 

Anticipating a lifetime of withdrawals from a defined asset pool over an indefinite period of time is a complex challenge for which there is no simple solution. Pursuing this challenge can require creative approaches and persistent vigilance. 

Sources: Dollar-cost averaging does not protect against a loss in a declining market or guarantee a profit in rising market. Dollar-cost averaging is the process of investing a fixed amount of money in an investment vehicle at regular intervals, usually monthly, for an extended period of time regardless of price. Investors should evaluate their financial ability to continue making purchases through periods of declining and rising prices. The return and principal value of stock prices will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost. 
This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments. 
BrainyQuote, June 2013 

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2013 FMG Suite.