Author Archives: Tony Kendzior - Financial Planner

About Tony Kendzior - Financial Planner

I've lived happily, raised a family, and enjoyed a professional life in Gainesville for over 50 years. The next several years are full of promise. My goal is to find new clients, new friends and somehow share the wisdom I've accumulated over these many years. And when I have time, play a little golf and travel with my family. Cheers!

When to Take Social Security: The Complete Guide

My Comments: Social Security is a complicated issue for almost everyone in the retirement planning process. There are so many variables it’s hard to get your arms around what is in your best interest. Many people just say to hell with it and sign up at age 62.

And that can be a huge mistake. You’ll probably end up with less money over your lifetime, not because you’ll get less in total from the Social Security Administration, but because it may cause you to pay more in taxes. And if you have a surviving spouse, it could hurt them too.

What you pay in taxes cannot be used to pay your bills. And retirement is all about being able to pay your bills and enjoy your life.

By Amy Fontinelle | March 12, 2018

If you’re about to retire, you might be wondering if you should start claiming your hard-earned Social Security benefits. If you need the income and you’re at least 62 – the minimum age to claim – the answer is obvious. But if you have enough other income to keep you going until you’re older, how do you decide?

Benefit Amount
The size of your monthly benefit payment depends on the year you were born and your age when you start claiming, down to the month. You receive your full monthly benefit if you start claiming when you reach full retirement age. To find your full retirement age, see the chart below.

Let’s say your full retirement age is 66. If you start claiming benefits at 66 and your full monthly benefit is $2,000, you’ll get $2,000 per month. If you start claiming benefits at age 62, which is 48 months early, your benefit will be reduced to 75% of your full monthly benefit (also called your primary insurance amount). In other words, you’ll get 25% less per month and your check will be $1,500. You’ll receive that reduced benefit not just until you turn 66, but for the rest of your life (though it will go up slightly over time with cost-of-living adjustments). The easiest way to do the math for your own situation is to use the Social Security Administration’s (SSA) Early or Late Retirement calculator (scroll down the linked page to find it).

If you wait until you’re 70 to start claiming benefits, you’ll get an extra 8% per year, and in total, you’ll get 132% of your primary insurance amount, or $2,640 per month, for the rest of your life. Claiming after you turn 70 doesn’t increase your benefits any further, so there’s no reason to wait longer.

The SSA’s many retirement calculators can also help you determine your full retirement age, the SSA’s estimate of your life expectancy for benefit calculations, rough estimates of your retirement benefits, actual projections of your retirement benefits based on your work record and more.

The longer you can afford to wait, the larger your check will be. But you’ll also have no money coming in from Social Security during the months when you postpone claiming. Waiting as long as possible to start claiming benefits doesn’t necessarily mean you’ll come out ahead overall, though, for several reasons: expected longevity, spousal benefits, taxes, investment opportunity and health insurance.

Expected Longevity
So much of our strategizing about how to maximize Social Security retirement benefits depends on guesses about how long we’ll live. Any of us could die in a car accident or get a terminal cancer diagnosis next week. But putting aside these unpredictable possibilities, how long do you think you’ll live? What is your health like now, and what has your relatives’ longevity looked like? Have you had a physical and blood work lately? How are your blood pressure, cholesterol, weight and other markers of health? If you predict an above-average life expectancy for yourself, you may come out ahead by waiting to claim benefits. If not, you might want to claim as soon as you’re eligible.

To make an educated guess about how to come out ahead, you’ll need to do a break-even analysis. What do we mean by breaking even? It’s the point where your lifetime benefits are the same given different initial claim ages. The question is this: Will you be better off – that is, will you get a higher total lifetime payout – getting more checks for a smaller amount (by claiming at 62, for example), or fewer checks for a larger amount (by claiming as late as age 70)?

The Social Security website will tell you that regardless of when you start claiming, your lifetime benefits will be similar if you live as long as the average retiree. The problem is that most people will not have an average life expectancy, hence all the different claiming strategies.

Spousal Benefits
Being married further complicates the decision of when to take Social Security because of the program’s spousal benefits. Certain divorcees are also entitled to benefits.

Spouses who didn’t work or who didn’t earn enough credits to qualify for Social Security on their own are eligible to receive benefits starting at age 62 based on their spouse’s work record. As with claiming benefits on your own record, your spousal benefit will be reduced if you claim benefits before reaching full retirement age (though not at the same rate as claiming your own benefits early). The highest spousal benefit you can receive is half the benefit your spouse is entitled to at their full retirement age.

While spouses will get a lower benefit if they claim before reaching their own full retirement age, they will not get a larger spousal benefit by waiting to claim after full retirement age – say, at age 70. But a nonworking or lower-earning spouse can get a larger spousal benefit if the working spouse has some late-career, high-earning years that boost benefits.

When one spouse dies, the surviving spouse is entitled to receive the higher of their own benefit or their deceased spouse’s benefit, but not both. That’s why financial planners often advise the higher-earning spouse to delay claiming. If the higher-earning spouse dies first, the surviving, lower-earning spouse will receive a larger Social Security check for life.

When the surviving spouse hasn’t reached full retirement age, he or she will be entitled to prorated amounts starting at age 60. At full retirement age, the surviving spouse is entitled to 100% of the deceased spouse’s benefit or to their own benefit, whichever is higher.

A claiming strategy called file and suspend used to allow married couples of full retirement age to receive spousal benefits and delayed retirement credits at the same time. This strategy, which ended as of May 1, 2016, helped some couples receive tens of thousands more from Social Security.

Here’s the next-best thing for older, dual-income couples: Individuals who turned 62 by January 1, 2016, can use a strategy called restricted application. Spouse A claims benefits first; spouse B claims spousal benefits. Once spouse B turns 70, spouse B claims their own benefit instead. Spouse A then claims spousal benefits, which are now higher than their own benefit because of how much spouse B’s benefit has grown by waiting to claim until age 70.

Taxes
Social Security benefits become taxable at rather low income thresholds. No matter how much you make, the first 15% of your benefit payments are not taxable. But income from interest, dividends and taxable retirement accounts such as 401(k)s and traditional IRAs can quickly push you over the tax threshold.
The Social Security Administration calculates your “combined income” as follows:

Your adjusted gross income
+ Nontaxable interest (for example, municipal bond interest)
+ ½ of your Social Security benefits
= Your “combined income”

If you file your federal tax return as an individual and your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $34,000, you may have to pay income tax on up to 85% of your benefits.

If you’re married filing a joint return and you and your spouse’s combined income is $32,000 to $44,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, you may have to pay income tax on up to 85% of your benefits.

Because the math isn’t at all straightforward, the best way to calculate your tax liability is to use a calculator like the Motley Fool’s Social Security tax calculator. It gives you a detailed breakdown of how the result is calculated after you enter your numbers.

Let’s say you receive the maximum Social Security benefit for a worker retiring at full retirement age in 2018: $2,788 per month. Your spouse receives half as much, or $1,394 per month. Together, you receive $4,182 per month, or $50,184 per year. Half of that, or $25,092, counts toward your “combined income” for the purpose of determining whether you pay tax on part of your Social Security benefits. Let’s further assume that you don’t have any nontaxable interest, wages or other income except for your traditional IRA’s required minimum distribution (RMD) of $10,000 for the year.

Your combined income would be $60,184 (your Social Security income plus your IRA income), which would make up to 85% of your Social Security benefits taxable because $60,184 is more than $44,000. Now, you’re probably thinking, 85% of $50,184, is $42,656, and I’m in the 22% tax bracket, so my tax on my Social Security benefit will be $9,384. Fortunately, that’s completely wrong. By using an online calculator, you’ll see that your tax will really be a mere $340. You can read all about the taxation of your Social Security benefits in IRS publication 915. A Roth conversion could help you lower your tax bill.

How do all of these tax calculations affect when you should apply for Social Security benefits? You’ll lose less of your Social Security benefits to taxes if you can wait until your income is lower to claim.

Investment Opportunity
Are you a disciplined, savvy investor who thinks you can earn more by claiming early and investing your benefit than by claiming later and receiving Social Security’s guaranteed higher benefit? Then you may want to claim early instead of waiting until age 70.

Most investors, however, are neither disciplined nor savvy. People take early benefit payments intending to invest the money, then use it to tour Europe instead. And even savvy investors cannot predict how their investments will perform over the first decade or two of their retirement.

If you claim early, invest in the stock market and average an 8% annual return – which is far from guaranteed – you will almost certainly come out ahead compared with claiming late, according to an analysis by Dan Caplinger, director of investment planning for Motley Fool. But if your returns are lower, if you receive reduced Social Security benefits because you continue working past age 62, if you have to pay taxes on your Social Security income or if you have a spouse who would benefit from claiming Social Security benefits based on your record, then all bets are off. Most people, in other words, will not benefit from this strategy – but it is a strategy to be aware of in case you’re one of the few who might.

Effect on Health Insurance
Here’s another factor to consider: Do you have a health savings account (HSA) that you want to keep contributing to? If so and if you’re 65 or older, receiving Social Security benefits requires you to sign up for Medicare Part A. The problem with signing up for Medicare Part A is that you’ll no longer be allowed to add funds to your HSA.

The Social Security Administration cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D. If you are still receiving health insurance from your employer, you might not have to enroll in Medicare yet.

The Bottom Line
You don’t have to take Social Security just because you’re retired. If you can live without the income until age 70, you will ensure the maximum payment for yourself and lock in the maximum spousal payment. Just be sure you have enough other income to keep you going and that your health is good enough that you are likely to benefit from the wait. When you’re ready, you can apply for benefits online, by phone or at your local Social Security office.

Source article: Read it HERE!

Advertisements

Retiring Soon? Plan for Market Downturns

My Comments: Are you nervous yet? If you have 20 years or so until you retire, you may not need to be nervous. But if retirement is just around the corner, then you need to start being defensive, if you’re not already.

There are a number of pressures building in the markets. This gives you a few steps to offset them. Personally, I think the average annual returns over the next decade are going to be significantly less that what they’ve been since 2009.

The author’s syntax is a little confusing but you’ll get the message.

By Anne Tergesen | Sept. 21, 2018

For every year by which a bull market persists, staff change into likelier to retire. However those that depart the workforce now—the ninth yr of the longest U.S. bull market—are probably setting themselves up for a tricky stretch that might check their portfolio’s long-term resilience.

Why? When the inventory market turns into traditionally costly, as some metrics recommend it’s at present, analysis reveals it’s typically a harbinger of below-average future returns. This may be particularly painful for retirees with lengthy life expectations as a result of withdrawals mixed with poor returns will depart much less in an account to compound over many years.

Take, as an illustration, a 65-year-old who retires when his or her portfolio is price $1 million. If the retiree withdraws 4%, or $40,000 within the first yr, and the portfolio loses 40% of its worth quickly after, she or he can have simply $576,000 left to fund a retirement that might final 30 or extra years. Any subsequent withdrawals will make it even tougher for the portfolio to get better.

Returns in “the primary 5 to 10 years of retirement matter most,” says Wade Pfau, a professor of retirement revenue on the American Faculty of Monetary Companies in Bryn Mawr, Pa. Early declines can “lock a portfolio right into a downward spiral.”

That doesn’t imply that individuals on the cusp of retiring ought to cancel their plans. For one factor, it’s notoriously tough to foretell the arrival, length and severity of bear markets. And if you’re prepared to go away your job, sticking round might undermine your well being and happiness.

The excellent news: There are steps you possibly can take to restrict withdrawals from shares when they’re down and partly shield your portfolio. Simply make sure to perceive the trade-offs.

1. Construct a money cushion

This technique sometimes includes setting apart one to 5 years of dwelling bills in money so that you received’t must promote shares at depressed costs.

Retirees with money buffers typically react extra calmly to market declines, decreasing the percentages that they are going to panic and bail out of the market fully, says Ross Levin, a monetary adviser in Edina, Minn.

The issue, Mr. Levin says, is that the low returns on money typically cut back a portfolio’s long-term returns. “If in case you have 80% in shares and 20% in bonds with a three-year money place, that’s a worse technique from a returns standpoint than having 70% in shares and 30% in bonds,” and nothing in money, he says. A money buffer “lets you handle a shopper’s psychology throughout dangerous instances, however it’s not an optimum technique.”

To unravel that drawback, some advisers as a substitute use bonds as a buffer. A $1 million portfolio with 60% in shares and 40% in bonds successfully holds eight years of dwelling bills in bonds, Mr. Pfau says.

But when shares sink and a retiree must liquidate bonds to cowl dwelling bills, the buffer is more likely to shrink.

To stop purchasers from promoting shares at depressed costs to replenish their bonds, many advisers advocate ready till the shares get better their losses to take action. However an investor who used such a method in 2008—when the monetary disaster slammed U.S. shares—would have had to attract down his or her bond buffer for about 5 years earlier than beginning to construct it again up, a nerve-racking expertise for all however the least risk-averse, Mr. Pfau says.

2. Rebalance

A greater technique, many say, is to spend money on a diversified portfolio—resembling 60% in shares and 40% in bonds—and rebalance it after main market strikes.

Retirees who accomplish that will use their winners to cowl at the very least a few of their bills. For instance, in 2008, when the S&P 500 misplaced about 37%, investment-grade bonds gained about 5.25%. Consequently, somebody who had 60%, or $600,000, in shares and 40%, or $400,000, in bonds earlier than the crash had 47%, or $378,000, in shares and 53%, or $421,000, in bonds afterward.

If a retiree with such a portfolio wanted $40,000, he would begin by withdrawing the $21,000 of bond income. As a result of bonds comprise considerably greater than 40% of the post-crash portfolio, the investor would whittle them additional, by withdrawing the extra $19,000 in spending cash he wants. To re-establish the specified 60% stock-40% bond allocation, he would then switch $77,400 extra to shares from bonds.

In distinction to holding a “money buffer,” this method “systematically ensures” that an investor sells holdings which have appreciated most whereas additionally shopping for issues which have declined and are comparatively low cost, says Michael Kitces, director of wealth administration at Pinnacle Advisory Group Inc. in Columbia, Md. By shifting cash into belongings which are crushed down, rebalancing helps a portfolio get better quicker when a turnaround lastly arrives, he provides.

In keeping with latest analysis, which checked out 140 mixtures of funding methods, withdrawal charges, and buffer-zone sizes over successive 30-year durations from 1926 to 2009, traders got here out forward with cash-buffer methods in solely three cases. In distinction, with rebalanced portfolios, they got here out forward in 70 simulations, stated co-author David Nanigian, affiliate professor of finance within the Mihaylo Faculty of Enterprise and Economics at California State College, Fullerton. Within the remaining 67 mixtures, the methods carried out the identical, he stated.

How typically must you rebalance? Some traders accomplish that quarterly or yearly. Cameron Brady, an adviser in Westlake, Ohio, says he acts when his purchasers’ portfolios drift by 5 proportion factors from goal allocations.

3. Use one other kind of buffer

What in case you like the concept of a money buffer, however don’t wish to tie up a portion of your portfolio in an asset that’s certain to earn low returns?

To supply purchasers with a supply of money within the occasion of a market meltdown, some advisers advocate utilizing home-equity traces of credit score or reverse mortgages, which permit folks ages 62 and older to transform their house fairness into money.

Each cost upfront charges. For instance, the upfront “mortgage insurance coverage premium” many debtors pay on reverse mortgages is now 2% of the house’s worth, capped at $13,593.

With a home-equity line of credit score, Mr. Pfau says, debtors should make month-to-month repayments. (Reverse mortgages should be repaid when the borrower dies, strikes, or fails to pay property taxes or house owner’s insurance coverage.) Each cost curiosity.

Mr. Pfau recommends that individuals with everlasting life insurance coverage, together with entire life and common life insurance policies, take into account tapping the money worth in these insurance policies throughout market crises. You may withdraw premiums tax-free and in addition borrow from the money worth to get extra tax-free revenue, he says.

“You’ll cut back the loss of life profit,” he provides, “however by serving to to protect the portfolio, you’re in all probability higher off.”

[ Wall Street Journal ]

The Biggest Risk Retirees Face Right Now

My Comments: On TV and in murder mysteries, there’s often a reference to ‘being in the wrong place at the wrong time’. Well, it can happen to any of us planning to retire, but instead it reads this way: ‘being born at the wrong time…”.

These words from Michael Aloi from earlier this year show what this means. And it has special meaning for any of you planning to retire in the next twelve months or so. We’re close to the end of an historic bull market and for some of us, it will be painful. Look at the two respective totals in the chart below.

Michael Aloi, CFP | March 23, 2018

Those planning to retire face many risks. There is the risk their money will not earn enough to keep up with inflation, and there is the risk of outliving one’s money, for example. But perhaps, the biggest risk retirees face now is more immediate: Retiring in a bear market.

To put this in perspective, First Trust, an asset manager, analyzed the history of bull and bear markets from 1926-2017 and found bull markets — which are up or positive markets — lasted on average nine years. If that is the case, this bull market should be ending right about now, as it just turned 9 on March 9, 2018. Consider also the study found that the typical bear market lasts 1.4 years, with an average cumulative loss of 41%.

Not to be all doom and gloom, but the chart below illustrates why the biggest risk retirees face right now is a bear market. It shows what happens to two identical $1 million portfolios, depending on the timing of bad stock market years.* Adjusted for 3% inflation

Mr. Smith and Mrs. Jones start off with the same $1 million portfolio and make the same annual $60,000 annual withdrawal (adjusted for 3% inflation after the first year). Both experience the same hypothetical returns, but in a different sequence. The difference is the timing. Mrs. Jones enjoys the tailwind of a good market, whereas Mr. Smith’s returns are negative for the first two years.

The impact of increasing withdrawals coupled with poor returns is devasting to Mr. Smith’s long-term performance. In the end, Mrs. Jones has a healthy balance left over ($1,099,831), whereas Mr. Smith runs out of money after age 87 ($26,960).

With stock market valuations higher and this bull market overdue, by historical averages, retirees today could be faced with low to poor returns much like Mr. Smith in the first few years of retirement. However, retirees like Mr. Smith still need stocks to help their portfolios grow over time and keep up with the rising costs of living. Unfortunately, no one knows for sure what the equity returns will be in the next year or the year after.

This is the dilemma many retirees face. The point is to be aware of the sequence of return risk, illustrated in the chart above, and take steps now if retirement is in the immediate future.

Here are two of the many planning possibilities retirees today can use to avoid the fate of Mr. Smith:

1. Use a “glide path” for your withdrawals

In a study in the Journal of Financial Planning, Professor Wade Pfau and Michael Kitces make a compelling argument to own more bonds in the first year of retirement, and then gradually increase the allocation to stocks over time. According to the authors’ work, “A portfolio that starts at 30% in equities and finishes at 60% performs better than a portfolio that starts and finishes at 60% equities. A steady or rising glide path provides superior results compared to starting at 60% equities and declining to 30% over time.”

The glidepath strategy flies in the face of conventional wisdom, which says people should stay balanced and gradually conservatize a portfolio later in retirement.

The glidepath strategy is a like a wait-and-see approach: If the stock market craters in the first year of retirement, be glad you were more in bonds. Personally, I would only recommend this strategy to conservative or anxious clients. My concern is what if markets go up as you are slowly increasing your stock exposure — an investor like this could be buying into higher stock prices, which could diminish future returns. An alternative would be to hold enough in cash so one does not need to sell stocks in a down year per se.

Though not for everyone, the glide path approach has its merits: Namely not owning too much in equities if there is a bear market early on in retirement, which coupled with annual withdraws, could wreak havoc on a portfolio like Mr. Smith’s.

2. All hands on deck

The second planning advice for Mr. Smith is to make sure to use all the retirement income tools that are available. For instance, if instead of taking money out of a portfolio that is down for the year, Mr. Smith can withdraw money from his whole life insurance policy in that year, so he doesn’t have to sell his stocks at a loss. This approach will leave his equities alone and give his stocks a chance to hopefully recover in the next rebound.

The key is proper planning ahead of time.

The bottom line

Retirees today face one of the biggest conundrums — how much to own in stocks? With the average retirement lasting 18 years, and health care costs expected to increase by 6%-7% this year, retirees for the most part can ill afford to give up on stocks and the potential growth they can provide. The problem is the current bull market is reaching its maturity by historical standards, and investors who plan on retiring and withdrawing money from their portfolio in the next year or two may be setting themselves up for disaster if this market craters. Just ask Mr. Smith.

There are many ways to combat a sequence of poor returns, including holding enough cash to weather the storm, investing more conservatively in the early years of retirement via a “glide-path” asset allocation, or using alternative income sources so one doesn’t have to sell stocks in a bad market.

The point is to be mindful of the risk and plan accordingly.

Successful Retirement Secrets™

My Comments: I have just now joined the ranks of internet publishers!

Almost four years in the making, it’s an internet course to help you process retirement information leading to a SUCCESSFUL RETIREMENT.

Among other things, it’s about investment skills and getting the most from Social Security.

In TWO FREE PREVIEWS, I reveal the SECRET.

An enrolled student will develop a system that works in the background, helping someone retire with more money and not less money.

To the first 100 people who enroll before November 1, 2018, I’m offering 50% off the published price.

Click on the link below or the image above, and watch a FREE PREVIEW. Then decide if it would help to have a system to build your road map to a SUCCESSFUL RETIREMENT…

https://successfulretirementsecrets.com/

Civility Has Its Limits

My Comments: Instant gratification, or the desire for it, is the norm in 21st Century America. It may be OK when you discover you’re hungry and have no need to go into the woods and shoot something, or instead of waiting days for the mail to arrive, you simply go to your phone and look for a text message. But…

As a society, we’re experiencing a massive shift in thinking and it’s going to take time, years even. But it is coming. Just as women in the early 20th Century were finally allowed to vote, and before that, years of agony for immigrants from Africa to shake off the shackles of slavery. And here we are 150 years later, still not fully responding to that seminal upheaval of what was then ‘normal’ arrangements in society.

The recent societal and political chaos involving the Supreme Court will be seen in years to come in the same light. This article by Peter Beinart helped me come to terms with what happened and will allow me, hopefully, to move on and resume my ‘normal’ life. I’ll continue to resist, but I now have a positive goal of eventual gratification.

by Peter Beinart on Monday, October 8, 2018

When it comes to Brett Kavanaugh, there are three camps. The first believes it’s a travesty that he was confirmed. The second believes it’s a travesty that he was smeared. The third believes it’s a travesty that the process was so divisive.

David Brooks is in camp number three. The Kavanaugh hearings, he wrote on Friday, constituted an “American nadir.” You often hear such phrases from people who think the biggest problem with the Kavanaugh battle is that the participants weren’t more courteous and open-minded. Jeff Flake said that in debating Kavanaugh, the Senate “hit bottom.” Susan Collins called it “rock bottom.” Think about that for a second. For most of American history, Supreme Court nominees—like virtually all powerful men—could sexually assault women with complete impunity. Now, because allegations of such behavior sparked a raucous, intemperate political fight, America has hit “rock bottom,” a “nadir.”  How much better things were in the good old days when sexual-assault allegations didn’t polarize the confirmation process because sexual-assault victims were politically invisible.

Implying, as Brooks, Flake, and Collins do, that America’s real problem is a lack of civility rather than a lack of justice requires assuming a moral equivalence between Brett Kavanaugh’s supporters and Christine Blasey Ford’s. “What we saw in these hearings,” writes Brooks, “was the unvarnished tribalization of national life.” The term “tribe” implies atavistic, amoral group loyalty: Huns vs. Franks, Yankees vs. Red Sox, Hatfields vs. McCoys. There are no larger principles at stake. “There was nothing particularly ideological about the narratives,” laid out by Kavanaugh and Blasey Ford, Brooks declares, “nothing that touched on capitalism, immigration or any of the other great disputes of national life.”

But gender is indeed one of the “great disputes of national life.” The Kavanaugh fight pitted people who worry that #MeToo hasn’t changed America enough, that it’s still too easy for men to get away with sexual assault, against people who fear that #MeToo has changed America too much, that it’s become too easy for women to ruin men’s lives by charging them with sexual assault. That’s not a tribal struggle; it’s an ideological one. It involves competing visions of the relationship between women and men.

Describing Democrats and Republicans as warring tribes has become a political cliché, but it’s wrong. If tribal implies unthinking or inherited group loyalty, then Democrats and Republicans were actually more tribal in the mid-20th century. Back then, when being a Democrat or a Republican signified less about your view of the world, party identity was more a function of regional or ancestral ties. Whether or not they supported civil rights or higher taxes or the Korean War, Irish Catholics from Boston were mostly Democrats; Presbyterians from Kansas were mostly Republicans. Today, party identity is more a function of what you believe. The parties are so bitterly polarized not because they’ve become more tribal but because they’ve become more ideological.

But for Brooks, depicting the supporters of Kavanaugh and Blasey Ford as tribes is useful because it doesn’t only suggest moral equivalence, it also implies an equivalence of power. The “tribalization” of American politics, Brooks argues, “leads to an epidemic of bigotry. Bigotry involves creating a stereotype about a disfavored group and then applying that stereotype to an individual you’ve never met. It was bigotry against Jews that got Alfred Dreyfus convicted in 1894. It was bigotry against young black males that got the Central Park Five convicted in 1990. It was bigotry against preppy lacrosse players that led to the bogus Duke lacrosse scandal.”

This is misleading. There is no equivalence between the “bigotry” faced by preppy lacrosse players and that faced by black males. There’s no equivalence because preppy lacrosse players, in general, enjoy far more privilege and power and thus, the stereotypes people hold of them don’t generally land them in jail or dead. Similarly, there is no equivalence between the “bigotry” faced by men accused of sexual assault and the “bigotry” faced by women who suffer it. There’s no equivalence because men wield far more power. If you don’t think that matters, try imagining Kavanaugh getting confirmed by a Senate comprised of 79 women.

The struggle over Kavanaugh was, at its core, a struggle between people who want gender relations to change and people who want them to remain the same. And throughout American history, whenever oppressed groups and their supporters have agitated for change, respectable moderates have warned that they were fomenting incivility and division. In April 1963, seven white Alabama ministers and one rabbi wrote a letter to Martin Luther King. The letter articulated no position on segregation and the right to vote. It assumed, instead, a moral equivalence between blacks that wanted race relations to change and whites who wanted them to remain the same. Both sides held “honest convictions in racial matters.” Both “our white and Negro citizenry” should “observe the principles of law and order and common sense.”

The real danger, the authors claimed, was “friction and unrest.” Averting it required “forbearance” and “restraint” on both sides. King, whose Birmingham campaign was titled “Project C”—for confrontation—was purposefully fomenting such friction and unrest through marches, sit-ins, and boycotts. While “technically peaceful,” the ministers and rabbi warned, the “extreme measures” adopted by King and his supporters “incite to hatred and violence.”

In his response, written from jail, King argued that the white clergymen were mistaking symptom for disease. The problem wasn’t “friction and unrest” between Birmingham’s two tribes. It was centuries of oppression, which there was no frictionless way to overcome. “I am not afraid of the word ‘tension,’” King explained. “We must see the need of having nonviolent gadflies to create the kind of tension in society that will help men to rise from the dark depths of prejudice and racism to the majestic heights of understanding and brotherhood.”

Even as Bull Connor’s men savagely beat black protesters in the streets, King recognized that Birmingham was not hitting “rock bottom.” It was rising from an almost century-long nadir in which white supremacy—no matter how murderous—was barely even a subject of political controversy, in which black powerlessness was the foundation on which comity between two America’s white-dominated political parties rested.

The problem that the Kavanaugh struggle laid bare is not “unvarnished tribalism.” The problem is that women who allege abuse by men still often face male-dominated institutions that do not thoroughly and honestly investigate their claims. That problem is not new; it is very old. What is new is that this injustice now sparks bitter partisan conflict and upends long-standing courtesies. Rape survivors yell at politicians in the Senate halls. The varnish—the attractive, glossy coating that protected male oppression of women—is coming off. Brooks, Collins, and Flake may decry the “tension” this exposes. But, as King understood, the “dark depths of prejudice” can’t be overcome any other way.

Source: https://www.theatlantic.com/ideas/archive/2018/10/has-american-politics-hit-rock-bottom/572452/

4 Financial Life Stages and How to Plan for Them

My Comments: As a financial planner, I’ve described the three primary phases most of us travel through in life: childhood, adulthood, and retirement. As a child, we’re dependent on others to maintain our lives; as adults we’re dependent on our ability to fend for ourselves and typically work for money; in retirement we’re dependent largely on our earlier ability to set aside resources and have money work for us.

These words from Sunita Abraham break down ‘adulthood’ into four financial stages and they are worth noting. Even if you’ve already retired, you may find it interesting for yourself and others in your family.

by Sunita Abraham \ October 10, 2018

Having a different financial planning strategy for different stages of one’s life cycle can help simplify the task of investing for various tenures

If the laundry list of “things to do” puts you off financial planning, then here is a way to make it easier. The elements that form part of the financial planning exercise include budgeting to generate savings, investing for goals, securing , protecting income through life and general insurance, managing debt and planning for the transfer of wealth.

While each element plays an important part in securing your finances, not all of them are equally significant at every stage in the life-cycle. Categorize the activities as critical, important, urgent and optional in each phase of your life. Focus your resources on those activities that are identified as critical and important that need immediate attention. Consider activities that are labelled as urgent only if they are also seen as essential. For example, while you may consider holding off increasing contribution to the retirement corpus in favor of paying life insurance premium, you should not consider doing it to fund a holiday even if it is urgent.

We tell you the four critical stages in a life cycle and how different financial planning approaches and tools can fit into each to make it a smooth ride for you.

The first income stage

When you first begin earning an income, budgeting is the critical financial skill that you need to master. Develop a suitable budget and build the discipline to live within your income so that you don’t fall into a debt trap. Once you learn to contain your expenses to available income, start building savings into your budget. The emergency fund will have the first claim on your savings and this is an urgent and important task.

Initiating some investments for retirement is an important task at this stage even though the goal may seem too much in the future to be relevant now. Investments for other goals are optional at this stage and can commence once your income and savings stabilize.

Unless you have dependents on your income, life insurance is optional at this stage and you need not assign scarce funds for life cover. However, a basic health insurance is important, particularly if you don’t have a health cover from your employee. Other products such as auto insurance and personal accident insurance should also be included as required. Servicing debt that you may have, such as student loan, is an important element, as is controlling debt use and building your credit history. A misstep can have long-term consequences on your borrowing ability in the future.

Estate planning is optional at this stage and you can consider it in the future when wealth has been created.

The dependents stage
This is the phase that is the most demanding since many of the elements of financial planning need to be serviced. You are likely to have dependants on your income and, therefore, life insurance is a critical element for security. Consider term insurance which gives you the required protection at the most efficient cost. Expand health insurance to cover your family too.

Your income and expenses would have both expanded and you should be better at budgeting and saving by this stage. Living by the budget is critical to be able to find the savings for the many short-, medium- and long-term goals you are likely to have at this stage. Revise and fine-tune your budget periodically to reflect your income and need for savings. Invest the savings to construct a portfolio that is aligned to growth, income or liquidity needs of goals.

Use a professional to help you do this efficiently if you find yourself procrastinating. Build basic estate planning into your finances by making clear nominations on your investments and insurance.

Debt management is a critical function at this stage given that your needs are likely to be more than availability of funds. Keep your ability to repay in mind while adding debt and ensure you do not harm your credit score or credit history. You should not have to meet debt repayment obligations at the cost of your retirement savings, insurance protection and essential goals like housing. Borrow primarily for appreciating assets where it will help grow your net worth over time.

The growth stage
If you have managed your personal finances prudently so far, then this will be the golden stage for your finances. Your income would be high and seeing an upward growth trend, while your expenses would have stabilized resulting in growing savings. Being mindful of expenses is important even at this stage and the focus of budgeting would be to maximize savings.

Managing investments is critical in this period. Many of your goals would be close to being funded and the investments have to be rebalanced to reflect this. This is also the time to catch up on important goals like retirement with the excess savings being assigned to this. Where the goals are well in the future, the investments should reflect the ability to take risk to earn higher returns.

Life and health insurance should be updated and aligned to your situation.

Now that you have accumulated wealth, take time to plan how you would like to distribute your estate and formalize a Will. Make sure that the assets and investments do not have nominations that are contrary to what you have decided in your Will.

Servicing debt should not be difficult at this stage given the high income. But consider the funding needs of your other goals before you add to your debt burden.

The retirement stage
Budgeting becomes the focus of finances once again during retirement. The object now is to control expenses to stay within the available income. Managing the investments to generate income and protect the corpus from inflation becomes the primary investment activity at this stage.

Adequate health insurance is critical since health costs can throw your income off rails. Life insurance may be relevant only if it is required to protect retirement income for the spouse and debt should not be a big part of your finances at this juncture.

An important activity at the beginning of retirement is to simplify finances. This would include cutting down on multiple accounts and investments, organizing documents, updating details and consolidating investments to a few relevant ones. Make sure all your financial documents are updated and accessible.

Make optimum use of limited time, funds and energy by concentrating on the activities that are important and critical at each stage in your life. Over time you will find that you have knit together all the elements without finding the whole exercise too intimidating.

Source: https://www.livemint.com/Money/r946kZa4ZiqNghWh6GUP1H/4-financial-life-stages-and-how-to-plan-for-them.html

Listen to the IMF’s new warning, economist says, and cut your exposure to US stocks

My Comments: The International Monetary Fund (IMF) is an international organization headquartered in Washington, D.C., consisting of “189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”

They recognize that market crashes happen from time to time, and that influences the amount of money they have in reserve to deploy around the world.

I see a parallel between their need to preserve their ability to deploy money under their mandate, with your ability to pay your bills in retirement. I encourage you to pay attention and position your money with this in mind.

by Holly Ellyatt @ CNBC

U.S. markets are “going it alone” and investors are underestimating the amount of risk in the economy, the chief investment officer at Danish investment bank Saxo Bank, told CNBC on Wednesday.

“What we’re saying (to investors) at a bare minimum, is do acknowledge the fact that the U.S. is expensive by reducing (exposure to) the U.S.,” Steen Jakobsen told CNBC Europe’s ‘Squawk Box.’

“And if you don’t want to reduce overall equity exposure go to the MSCI World (a global equity index that represents just over 1,600 large and mid-cap companies across 23 developed markets countries) or take a little bit of risk in emerging markets.”

“For now, we’re pretty much saying to customers, be aware that the market is underestimating risk,” he added.

Jakobsen’s comments were made of the same day the International Monetary Fund (IMF) warned that “a further escalation of trade tensions, as well as rising geopolitical risks and policy uncertainty in major economies, could lead to a sudden deterioration in risk sentiment.”

If that happened, the fund said in its latest ‘Global Financial Stability Report,’ it could trigger “a broad-based correction in global capital markets and a sharp tightening of global financial conditions.”

U.S. markets are fretting but concerns are centered on rising U.S. interest rates, particularly this week after a strong set of economic data last week that could prompt the U.S. Federal Reserve to hike rates further and faster.

Volatility is ‘artificially low’

Jakobsen, who’s known for his bearish view on the U.S. economy, said it was “very prudent and right of the IMF to do this warning.” “It’s very rare that I (hold) sway with any policy institute globally but I absolutely think they’re (the IMF) right,” he said.

“We have three drivers of tighter monetary conditions, one being the price of energy, of course with this bi-product of inflation risk, but we also see the price of money…and the quantity of money, globally, is collapsing. So, in other words, the credit keg is lower so it’s absolutely prudent of the IMF to do this.”

Jakobsen believed that U.S. markets were buoyant because of tax changes introduced by President Donald Trump which lowered corporate taxes and incentivized companies to repatriate overseas profits, with a one-time repatriation tax. The changes were also criticized for increasing the U.S. budget deficit, however.

Saxo Bank’s economist said the tax reforms had enabled U.S. companies to initiate share buyback programs, in which a company purchases its own stock from the marketplace, reducing the number of available shares and thus increasing its share price. Goldman Sachs said in August that U.S. companies are expected to buy back $1 trillion worth of shares in 2018.

Jakobsen said this scenario meant the U.S. market was diverging from the rest of the world, “going it alone.”

“I think they’re (the IMF) pointing to, especially in the Stability Report that just came out, the fact that the U.S. market is on its own, and the reasons it’s on its own is because the tax plan in the U.S. has meant a massive amount of repatriation into the U.S. economy,” Jakobsen said.

“The buyback program in the U.S. this year is $1 trillion and that is basically $1 trillion used to reduce the amount of floating stocks in the world. Why is that relevant? Because it makes the volatility artificially low in the U.S. stock market. It’s (the U.S. market) is almost going it alone,” he said, adding;
“So what the IMF is really doing is just pointing out that, if you exclude the U.S., the world is already moving to the brink. Whether we go beyond the brink I think is more an issue of how fast the Fed, and how insistent the Fed is, on having this projectory of higher rates,” he said.

He believed the Fed was ignoring the inflows as a result of tax reforms and could be hiking rates too quickly. “For my part, I think the Fed is doing a mistake by ignoring this massive inflow on the back of the tax plan in the U.S. and doing so, they do a policy mistake.”

Source: https://www.cnbc.com/2018/10/10/listen-to-the-imfs-new-warning-economist-says-and-cut-your-exposure-to-us-stocks.html