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Strong U.S. Economy

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The U.S. economy is strong and growing.  The job growth numbers have been good over the past several months and unemployment remains at the lowest rate in five decades for all Americans, including African-Americans and Hispanics.  Wages for non-supervisory workers are increasing and inflation rates continues to hover below two percent. The financial markets are at all-time high record levels.  Additionally, the likelihood for an U.S. economic recession in calendar year 2020 appears more unlikely.

Despite all the positive U.S. economic news, there are multiple areas of  concerns expressed my many Americans regarding the strong economy.  They point to structural changes in the economy, growing inequality between the upper and lower classes, and an uneven economic recovery in the wake of the Great Recession.  Essentially, the benefits and opportunities created by the strength of the U.S. economy have failed to filter down equally to every American.

Many Americans are feeling further economically marginalized and left behind by the changes in the economy and workforce.  You hear frequently from financial news and social media that there are not enough skilled workers to fill the job openings that exist in corporate America. Many high paying unskilled manufacturing jobs that existed two decades ago have migrated overseas to countries like Mexico, China and Vietnam.

The wealthiest Americans, especially those owning assets and large stock portfolios, have realized the most benefits from the strong economy and seemily never ending bull market.  This dichotomy of whom has benefited most from the strength in the economy is driving the widening rift between the haves and haves not within the country.

America must find away to ensure all Americans, not just the wealthy and elite, benefit from the strong economy and bullish equity financial markets.  Essentially, the prosperity of the counntry must truly lift all boats and avoid leaving some stuck in the mud.  

Porsche Experience Center in Atlanta

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Spent a fabulous rainy November Friday driving a 420 max horsepower 911 Carrera S at the Porsche Experience Center in the ATL. The experience was tremendous navigating the Porsche 911 Carrera S through hairpin curves, kick plate skids, controlled spins and at high speeds around the 1.6 miles of connectable track.

Enjoyed driving the one-mile handling course which is designed to mimic a winding country road with challenging curves and a straight roadway that allows the driver to achieve maximum speed. 

Must say that the best part of the ninety (90) minute Porsche driving experience was the wet, low-friction circle that tests a driver’s expertise to handle the vehicle during induced spinouts. A close second was the thrill experienced launching the Porsche from zero to sixty (60) mph plus in less than three (3) seconds. Handling the 911 Carrera S through a variety of dynamic and initiated spinouts, and launching was thrilling and challenged one’s skill to control the vehicle.

Was not sure what to expect or how much I would enjoy the experience of driving a high performance Porsche, especially in the rain, since I am not a “car guy”. I prefer to invest my money in appreciable assets such as stocks or real estate instead of in luxury, high performance vehicles. But, the thrill and delight derived from pushing the limits of the Porsche 911 Carrera S was an experience I shall relish.

John Bogle – The 7 Rules For Successful Stock Market Investing

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Stay the course.

Regardless of what happens in the markets, stick to your investment program. Changing your strategy at the wrong time can be the single most devastating mistake you can make as an investor. (Just ask investors who moved a significant portion of their portfolio to cash during the depths of the financial crisis, only to miss out on part or even all of the subsequent eight-year—and counting—bull market that we have enjoyed ever since.)

“Stay the course” is the most important piece of advice Jack Bogle can give you.

John Bogle, founder of the Vanguard Group, provides his seven investing rules for successful stock market investing.

— Read on www.valuewalk.com/2017/06/john-bogle-7-rules-successful-stock-market-investing/amp/

Market Minute | TD Ameritrade

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U.S. consumer activity remained robust and employment continued to set records – hence the many critics and even a few Fed dissenters of the “mid-cycle adjustment.” Now, Treasuries are selling off with some momentum the last two months as the economy stabilizes.

It’s not that our economy is vastly improving – it’s that it’s stabilizing with the rest of the world while geopolitics are looking less dire. So rates are a little topsy-turvy, going up without real economic acceleration.
— Read on mail.tdameritradenetwork.com/H/2/v40000016e6519f5f6b372a96e965fc958/67faea12-ef19-46a7-9842-7bf7e98df4dd/HTML

First Trust Economics Blog – The Antidote to Conventional Wisdom

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Favorite economic parables is the Fish Story, from Paul Zane Pilzer’s 1990 book, “Unlimited Wealth.”  It is an excellent tool for thinking about wealth creation, inequality and redistribution.
— Read on www.ftportfolios.com/retail/blogs/economics/index.aspx

Self-Care Is Not An Indulgence. It’s A Discipline. | Forbes

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Self-Care is a Discipline. It takes discipline to do the things that are good for us instead of what feels good in the moment. It’s takes even more discipline to refuse to take responsibility for other people’s emotional well-being. And it takes discipline to take full and complete responsibility for our own well-being.

Self-care is also a discipline because it’s not something you do once in awhile when the world gets crazy. It’s what you do every day, every week, month in and month out. It’s taking care of yourself in a way that doesn’t require you to “indulge” in order to restore balance. It’s making the commitment to stay healthy and balanced as a regular practice.

Ironically when you truly care for yourself, exercising all the discipline that requires, you are actually in a much stronger place to give of yourself to those around you. You will be a happier parent, a more grateful spouse, a fully engaged colleague. Those who take care of themselves have the energy to take care of others joyfully because that caregiving doesn’t come at their own expense. And those who take care of themselves also have the energy to work with meaning and purpose toward a worthy goal. Which means they are also the people most likely to make the world a better place for all of us.
— Read on www-forbes-com.cdn.ampproject.org/c/s/www.forbes.com/sites/tamiforman/2017/12/13/self-care-is-not-an-indulgence-its-a-discipline/amp/

Retiree Taxes: Pitfalls, Overlooked Deductions, Social Security Withholding – Barron’s

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Retirees preparing to file their taxes for this year should be aware of a number of common pitfalls, often-overlooked deductions, and changes that stem from the tax overhaul two years ago.
— Read on www.barrons.com/articles/retiree-taxes-pitfalls-overlooked-deductions-social-security-withholding-51572696002

Retirement Savings and Investments | AAII

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Retirement can be a time of joy, but it can also be a time of challenge. Not only does your lifestyle change, but so does your source of income. Retirees who successfully live off of their retirement savings and investments share a few traits:

  • They started saving early and continuously put money away. They considered their options and developed a plan.
  • They used accounts with tax-advantaged status.
  • They never let the short-term fluctuations of the market deter them.
  • They determined a sensible portfolio allocation and stuck with it.

How much retirees need to save for retirement depends on two essential elements:

  • You must know how much you need, and
  • You must know when you will need it.

There are several variables you will need to determine when planning for retirement:

  • The number of years you will spend in retirement,
  • The number of years until you retire,
  • Your total current savings,
  • Your desired annual income in retirement, and
  • The investment returns you expect on your savings.

THE FOUR BASIC SOURCES

For most individuals, there are four basic retirement income sources: Social Security, employer-sponsored defined-benefit plans (pensions), defined-contribution plans (e.g., 401(k) plans) and personal savings.

SOCIAL SECURITY

The first retirement income source for most working individuals (and their spouses) is Social Security, which began during the late 1930s as a supplement to one’s savings. It has since grown to represent, for many people, a sizeable part of retirement income.  Benefits come in the form of monthly payments, based on your final years’ salary and number of working years.

PENSION PLANS

Employer-sponsored defined-benefit retirement plans—commonly called “pension” plans—are being offered by fewer employers now, but are still a key source of retirement income for many people. Benefits received under these plans are in the form of monthly payments, based on the employee’s years of service and final years’ salary. Monthly retirement benefits from defined-benefit plans may be paid either directly by the company, or from annuities purchased by the company.

DEFINED-CONTRIBUTION PLANS

The more common employer-sponsored retirement plan is the defined-contribution plan. Better known by their tax code designations, such as 401(k) and 403(b), these plans specify an amount the employer will contribute to employee savings. Under these plans, employees invest pretax money in various investment alternatives chosen by the employer. Employers are not required to match an employee’s contribution, although many do match part or all of what an employee puts into the plan.

PERSONAL SAVINGS

Individual retirement accounts (IRA) give more flexibility on how savings are invested. These accounts allow a person to invest without incurring capital gains and dividend taxes, as long as the tax rules are not violated. A traditional IRA is funded with pretax dollars; withdrawals are taxed at ordinary income rates, however. A Roth IRA is funded with after tax dollars; withdrawals are not taxed. Roth IRA contributions can be made as long as modified adjusted gross income does not exceed certain thresholds. Starting in the year a person turns age 70½, withdrawals must be made in accordance with the required minimum distribution (RMD) rules.

There are two other often overlooked sources of retirement savings.

  • Your home. You could sell your house and use the difference between the sales proceeds and the cost of your new home; up to $500,000 of gain for married couples filing joint returns can be excluded from taxes.
  • The cash value of a life insurance policy.
Here are some points to keep in mind when developing a retirement savings plan:
  • First, develop an investment plan for all of your investable assets, based on your own needs and tolerance for risk.
  • There are two important concepts regarding time and money. The first is the power of compounding. When money is invested, it produces earnings that can then be reinvested, so that you receive earnings on your earnings in addition to the earnings on your original investment. This added boost is the power of compounding, and the longer the money is invested, the more powerful are its effects.  The second important concept concerns the value of a dollar today versus tomorrow. Over time, inflation erodes the worth of money, so that a given amount buys less in the future than it can today. When you are planning for the future, you need to put dollars on an equal purchasing-power footing and the dollar amounts will always be stated in terms of today’s dollar equivalent.
  • A commitment of at least 50% – 80% in stocks will most likely be needed in any portfolio to provide growth and prevent loss in real terms of the value of your portfolio. However, the stock portfolio must be adequately diversified and include some commitment to the stocks of smaller firms, as well as international stocks.
  • Downside risk is a good way to judge risk tolerance, but keep in mind that some downside risk must be tolerated to allow a growth component in your portfolio.
  • Bonds provide income but no growth component. They also produce some downside risk. This downside risk can be reduced by keeping maturities on the shorter end (five to seven years) of the spectrum.
  • Cash should be used to provide enough liquidity so that you are not forced to sell investments at inopportune times.  Cash can also be used to moderate the downside risk introduced by a large stock component.
  • Try to shelter investments with the highest returns in tax-deferred retirement accounts, such as IRAs, Roth IRAs and 401(k).  Taxes in tax-deferred accounts are deferred until the assets are withdrawn, at which time they are taxed as income at ordinary income tax rates. In the case of investments with capital gains, the advantage of the lower capital gains tax rate is lost if the asset is placed in a tax-deferred account.
  • Investments with lower returns should be relegated to the taxable portion of your portfolio.
  • Investments with built-in shelters, such as municipal bonds, and short-term liquid investments that are set aside for emergencies should never be placed in a tax-deferred retirement account.

Source:  Profitable Retirement Planning, American Association of Individual Investors (AAII), https://www.aaii.com/o/profitableretirementplanning?a=member