TDG Video: Retirement Planning

Everyone knows the "what's your number" commercial but who can actually answer the question? What goes into "my number?" How do I start to figure out what that number is? Here's a short minute and a half video on retirement income and tax planning: TDG Video on Retirement Planning

Evaluating Market Patterns

Americans have long relied on standards and averages to help them gauge the performance of everything from intelligence to athletics to the economy. So far, in 2014, American stock markets have been grinding along without making much progress in either direction and that has left many people looking for guidance about what they can expect in the future.

Last week, a writer at Barron's enlisted Jeremy Siegel, a finance professor at Wharton, to help explore the question by updating data used in a 2009 article. That piece had looked at the performance of the U.S. stock market over 142 years and found "below-average returns over five- and 10-year periods generally are followed by above-average returns in the next five and 10 years." In the new article, Siegel and his associates looked at rolling five-, 10-, 20-, and 30-year return periods through the end of 2013 and found:

"For the 60 months ended in April, the compounded annual real return was nearly 17 percent, well above the median 7.17 percent for all five-year periods. (Taxes and investment fees aren't included.) That suggests the next five years could run below the average.

While that might temper bullishness, in the 120-month period ended April, the compounded annual real return was just 5.58 percent, a full percentage point below the 6.64 percent median 10-year annual return for all the periods measured - again, since 1871."

Despite the mixed signals provided by long-term averages, Siegel told Barron's "the odds-on bet" is the Dow Jones Industrial Average will hit 18,000 by the end of the year (although there may be corrections along the way). His expectations are interest rates will remain lower than has been suggested and earnings will experience strong growth.

It's a good idea to take the esteemed professor's thoughts with a grain of salt. An eight-year study of market pundits found they were right about 47 percent of the time.

Data as of 5/16/14	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-0.2%	1.6%	13.8%	12.2%	15.6%	5.7%
10-year Treasury Note (Yield Only)	2.5	NA	1.9	3.2	3.2	4.7
Gold (per ounce)	0.8	7.5	-6.5	-4.9	7.0	12.9
DJ-UBS Commodity Index	-1.1	7.6	3.3	-5.3	2.5	-0.9
DJ Equity All REIT TR Index	1.9	14.9	0.3	11.3	22.6	10.7

Life Changing Events Are the Time to Call

The market isn't the only thing that can put a hitch in your financial plan's giddy-up. The overall rate of divorce in the United States trended lower between 2000 and 2011 (the latest dates the Centers for Disease Control has made available). In 2000, there were about four divorces or annulments per 1,000 Americans (total population). By 2011 that rate had fallen slightly to 3.6 per 1,000. As they often do, Baby Boomers bucked the trend. The divorce rate for Americans over age 50 has trended higher. The New York Times wrote:

"A half-century ago, only 2.8 percent of Americans older than 50 were divorced. By 2000, 11.8 percent were. In 2011, according to the Census Bureau's American Community Survey, 15.4 percent were divorced and another 2.1 percent were separated. Some 13.5 percent were widowed.

While divorce rates over all have stabilized and even inched downward, the divorce rate among people 50 and older has doubled since 1990, according to an analysis of census data by professors at Bowling Green State University in Bowling Green, Ohio. That's especially significant because half the married population is older than 50."

Anytime you experience a significant life change, such as a divorce late in life, it's important to let us know. We can offer strategies to help compensate for any cash flow disruption and tactics for managing taxes when splitting large assets, such as qualified retirement plans. In addition, we can help with essential (and often forgotten) steps, including reviewing and revising beneficiary designations (on retirement plans, investment accounts, and insurance policies) as well as modifying powers of attorney, named trustees, and other designations. We also can coordinate our efforts with those of your attorney and/or accountant.

Weekly Focus - Think About It

"Good judgment comes from experience, and a lot of that comes from bad judgment."

—Will Rogers, American humorist and commentator

Best regards,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

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