October 2013 - NorthStar Capital Advisors

Social Security Benefits To Increase 1.5% in 2014

The federal government announced Wednesday that the social security benefits for almost 63 million retirees and disabled people will increase by 1.5% next year.

This will be one of the smallest annual increases since automatic cost-of-living adjustments (COLA) began in 1975. The sluggish U.S economic recovery has kept inflation in check and limited businesses’ ability to raise prices of goods and services.

The COLA is calculated by comparing consumer prices in July, August and September each year to prices in the same three months from the previous year. If prices go up over the course of the year, benefits go up, starting with payments delivered in January.

The benefit increase for 2014 comes after a 1.7% gain for 2013. Besides 2010 and 2011, when there were no increases, next year’s rise will be the smallest since 2003, when benefits went up by 1.4%.

Social Security pays retired workers an average of $1,272 a month. A 1.5% raise comes to about $19.

Your Projected Medical Costs in Retirement Will Surprise You!

It’s important to be aware of what healthcare costs will look like in your future retirement budget.

The following statistics effectively guarantee the need to emphasize portfolio growth as opposed to income for many investors:

According to an AARP study released early this year, titled “What are the Retirement Prospects of Middle-Class Americans,” rising out-of-pocket medical costs are the prime factor threatening retirement security.

The report notes that median out-of-pocket medical expenses for 70-year-olds currently come to $2,800, or 8.2% of annual income.

For middle-income workers aged 45 to 54 in 2012, that figure should rise to $5,600, or 15.3% of income, when they reach 70,

while for those between ages 25 and 34, those expenses are likely to rise to $11,000, or 20% of income.

With those rising medical outlays, the AARP study concluded “future retirees are less likely than current retirees to maintain their standard of living during retirement.”

The takeaway for this is that the real risk for many future retirees will not be volatility – it will be the real threat of running out of money before running out of life. To combat this, it’s prudent to build up your pre-retirement savings and assure you have sufficient stock holdings even during retirement.

Source:
Not Your Father’s Retirement

Best & Worst Investing Advice During the Government Shutdown

Dan Solin wrote a good piece this week at the Huffington Post. Here are some key excerpts.

This is a busy time for financial journalists and advisers. The government shutdown and the looming prospect of an unprecedented default by the U.S. Treasury in meeting its obligations have rattled investors.

When looking for advice about investment-related subjects, it’s important to keep in mind the different obligations of the person providing it. Here’s a summary:

Brokers have an obligation to provide advice that’s merely “suitable” for their clients. They don’t have to act solely in the best interest of their clients. For example, a proprietary mutual fund may be “suitable,” even though it has a much higher expense ratio (management fee) and a lower expected return than a comparable, less expensive index fund.

Registered Investment Adviser firms have a fiduciary duty to always act in the best interest of their clients. In the example discussed above, advisers with an RIA firm would violate their fiduciary duty if they recommended the proprietary fund.

The financial media have no legal obligation to viewers or readers other than what is imposed by common law (such as laws relating to libel, slander and defamation).

The financial media’s lack of a high legal standard explains the wide swing in the quality of the information it disseminates.

Here’s the underlying problem. Many investors are unable to distinguish between sound, evidence-based advice disseminated by Swedroe (and others such as Carl Richards, Jason Zweig, John Wasik, William Bernstein and John Bogle) and the wacky entertainment provided by Cramer. Especially in times of crises, those who succumb to Cramer’s nonsense may find their retirement dreams seriously affected. For CNBC and Cramer, it’s apparently of little concern, as long as those advertising revenues keep rolling in.

Read more of this great short article here.

“Cockroaching” — 5,000 Stockbrokers from Expelled Firms Still Selling Securities

More than 5,000 stockbrokers who were still licensed to sell securities earlier this year after working for one or more firms that regulators expelled between 2005 and 2012, according to The Wall Street Journal.

The pattern of brokers moving from one problem firm to another, according to a former broker, is sometimes called “cockroaching.”

The Journal’s analysis reveals some of the nationwide migratory patterns of brokers associated with firms having troubled regulatory records. These brokers often remain in the industry after working at firms expelled by regulators, in some cases after the brokers accrued numerous arbitration claims or declared multiple bankruptcies.

58% of brokers from at least two expelled firms have at least one black mark on their records. This is much higher than the 13% average for all brokers.

Always check the background of any financial professional before doing business with him or her. It takes only a few minutes and can save you a lot of trouble.

Research brokers or brokerage firms here:
http://brokercheck.finra.org/Search/Search.aspx

Research investment advisors here:
http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx

Women Choosing Lower-Paying Jobs

Three weeks ago we wrote about The Most and Least Lucrative College Majors. An interesting aspect on this topic is the propensity for women to select lower-paying jobs. NPR’s Lisa Chow covered the story recently (Why Women (Like Me) Choose Lower-Paying Jobs).

Women are overrepresented among majors that don’t pay very well (psychology, art, comparative literature), and underrepresented in lots of lucrative majors (most fields in engineering).

Social Security Benefits To Increase 1.5% in 2014

Your Projected Medical Costs in Retirement Will Surprise You!

Best & Worst Investing Advice During the Government Shutdown

“Cockroaching” — 5,000 Stockbrokers from Expelled Firms Still Selling Securities

Women Choosing Lower-Paying Jobs

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