There are so many reasons to be thankful. We would like to take a moment to say thank you and give you our warmest wishes to you and your family.
Season’s Greetings, with a happy, healthy, and prosperous 2016!
With today’s opening of “The Force Awakens”, Ryan Neal has a great piece on “Star Wars” lessons for financial planning. Here are some excerpts and adaptions to help you answer the perennial question, Is my financial advisor a Jedi Master?
The Power of Holistic Planning
As young Skywalker’s advisor, Obi Wan Kenobi teaches him that the Force, an energy field created by all living things that binds the galaxy together, is the source of his power. For financial advisors to truly unlock their potential, they need to have a holistic view of their clients’ financial lives, as well as a mastery of investment strategy. By understanding how various accounts, needs and goals all connect together, an advisor can be a truly powerful guide for their clients.
Sticking to the Plan
While Luke is a neophyte just learning the ways of the Force, Han Solo is a hardened skeptic, disregarding advisors like Obi Wan Kenobi and instead preferring the lifestyle of a risk taker, which has led him to real problems with debt. When Luke gets distracted by Solo’s taunts, Kenobi reminds him to trust in his plan instead of making knee-jerk reactions. While things get rocky along the way, Luke eventually reaches his goal of becoming a Jedi Knight. It’s a good reminder for when the markets get rough: Trust in the plan, mitigate short-term emotional reactions, and focus on long-term goals. Han may call it luck, but advisors know there’s no such thing.
The Quick and Easy Path Leads to the Dark Side
We learn more about the Force in the 1980s’ “Empire Strikes Back,” when Jedi master Yoda teaches Luke about the Dark Side. Like a good advisor, he tells Luke that chasing instant gratification, like investing heavily in a hot stock, can lead to ruin. When Luke ignores the advice, he’s almost defeated by Darth Vader. Yoda reminds us that patience is key with investing, not adventure or excitement.
Know Your Advisor’s True Value
Though his investment strategy might be questionable, Han Solo does understand value. Luke is shocked when Solo initially discloses his fees to pilot them across the galaxy in the Millennium Falcon. Luke says he could buy and pilot his own starship for less, but Obi Wan Kenobi knows expertise can command a fair price and even offers to spend more to ensure results. It turned out that Luke didn’t know flying through hyperspace from dusting crops, and Solo’s experience came in handy.
It’s Not Just About Money
Though Han Solo told Princess Leia that he doesn’t care about her or the rebellion, he becomes a true hero after he realizes that there’s more to life than money. Advisors are worth more than just allocating assets and providing returns; they can be even more valuable to clients by helping them navigate important milestones in life, like buying a home, sending kids to college, and retiring comfortably. Remember what Leia told Han: “If money is all that you love, then that’s what you’ll receive.”
Don’t Judge by Appearances
“Judge me by my size, do you?” Yoda may be small, but his power with the force is great. Similarly, many investors often think bigger is better and don’t realize that small boutique firms can provide superior guidance.
Source: WM
More than 42 million Americans owe a total of $1.1 trillion in student debt, making it the second-largest liability on the national balance sheet. A generation ago, student debt was a relative rarity, but for today’s students and recent graduates, it’s a central fact of economic life that we don’t know much about. Mapping Student Debt is changing that. The maps below show how borrowing for college affects the nation, your city, and even your neighborhood, giving a new perspective on the way in which student debt relates to economic inequality.
Click for the full, interactive map
Source: Mapping Student Debt
The scatter plot above charts the global relationship between Gross Domestic Product (GPD) per person (horizontal axis) versus financial literacy (vertical axis). Each dot represents one of the 93 countries surveyed. The color of the dot encodes the gender gap between the financial literary of men and women in each country (deep blue = men score 20% higher than women; dark pink = case where women score 5% higher than men; white = case where men and women are the same).
Key observations:
Source: The Economist
This year’s turkey dinner will cost you an extra $0.70 or 1.4% compared to last year. The average cost of a classic Thanksgiving Dinner for 10 people is $50.11 according to the American Farm Bureau Federation’s survey. The relative price stability of the turkey index mirrors the government’s Consumer Price Index for food eaten at home which increased 0.7% compared to last year.
The bird soaks up the lion’s share of the budget at 46% of the meal’s cost. The 16-pound turkey came in at $23.04 this year or $1.44 per pound. The biggest year-over-year change on a percentage basis was milk which cost decreased 13.6% year-over-year. The turkey contributed the biggest percentage and dollar increase at +6.4% and $1.39.
The average cost of a turkey dinner has hovered around $49 since 2011. This year’s survey totaled over $50 for the first time since the survey began 30 years ago.
Happy Thanksgiving!
Source: AFBF
Barry Ritholtz lays bare the myth…
Deep down inside, you already know this: There ain’t no such thing as a free lunch, financially or otherwise.
Of so many free lunches, this is the hard truth:
Source: BR
A new budget bill passed by Congress last week will end a lucrative maneuver that retiring couples have used to maximize their Social Security benefits. The file-and-suspend and restricted application option that has been available since 2000 will go away in 2016. Smart use of this strategy can add tens of thousands of dollars to a couple’s lifetime retirement income by permitting one spouse to claim as many as four additional years of spousal benefits. The cornerstone of this approach is the advantage of accessing delayed retirement credits which increase earned benefits by 6% to 8% for each year the claim is deferred.
Social Security will no longer allow family members to submit a new claim for spousal benefits on a suspended benefit starting 6 months after the budget bill goes into effect. If you are 66 or older now or will turn 66 within the next 6 months, you should consider the potential benefit in filing and immediately suspending your benefit. Also, if you turned 62 this year or are older, you will still be able to file a restricted application when you turn 66. Families already using the strategy will be grandfathered and their benefits won’t change.
The devil is in the details so reach out to your financial advisor for assistance in evaluating your options.
Going forward college aid will computed based on “prior prior year” income instead of “prior year”. This means that current high-school sophomores who will graduate in 2018 will 2016, not 2017, as the base year in reporting family income on their first FAFSA form (Free Application for Federal Student Aid). Since student financial aid generally increases as family income decreases, the idea is to strategically manage family taxable income lower.
Families with Class of 2018 students will want to consider the following:
The most important driver of wealth creation is investor behavior, not investment performance. Taking their queues from research in behavior finance, big companies are helping steer investors to make good decisions and help secure their financial future.
New data reported by the Vanguard Group shows that
These three actions — auto-enrollment, auto-increase, and target-date fund default investment — are considered best-in-class behaviors for employers and they’re becoming more prevalent.
Source: WSJ
Not so great news for the 65 million retirees and others that receive Social Security benefits. For the first time in 5 years, there will be no annual raise in Social Security benefits. There’s no cost of living adjustment or COLA going into 2016 because falling gas prices have kept inflation low. According to the Social Security Administration’s calculations, inflation is down 0.6% for the past 12-month period that ended in September. This decline is largely driven by the 30% drop in gas prices.
Automatic benefits increases, also known as cost-of-living adjustments or COLAs, have been in effect since 1975. In the current process. the COLA is computed at the close of September and goes into effect with January’s benefit checks. Here’s complete list of COLAs received 1975-12016:
