Tag Archives: financial advisor

Coming Soon: The Worst Investing Returns In 30 Years

changeaheadroadsignMy Comments: I found this several months ago and found it again this morning. It’s still very relevant.

As someone who attempts to help people make the transition from working for money, to retirement when the goal is money working for you, a big challenge is dealing with expectations.

Many advisors have spent the last few years expecting the markets to crash, not like they did in 2008-09, but suffer a significant decline. It hasn’t happened yet, and some credible thinkers are saying it won’t happen until 2018 at the earliest. I have my doubts.

But regardless of the timing, if you plan to live another 20 – 30 years beyond the date you retire, you better pay attention to the underlying economic and demographic dynamics that will define how much money you can afford to spend.

Alexandra Mondalek / Updated: Apr 28, 2016

Sorry, Millennials: Despite your best efforts to be prudent savers and big banks’ attempts to reel you in, financial markets have other ideas for your retirement plans.

The next 20 years are bad news bears for investors, especially young adults who are just starting to craft their retirement savings plans, says a new report from the McKinsey Global Institute. A 30-year-old today may have a retirement savings vehicle like a 401k or an IRA, thinking that’ll sufficiently grow over the next 30-plus years to sustain their retirement.

The truth is, it won’t, says McKinsey.

The research finds that U.S. equities will yield average inflation-adjusted returns of 4-5%, compared to nearly 8% in the last 30 years. In fixed income markets, returns will fall 400 basis points, reaching no more than 1%—if that.

That wonky bunch of numbers carries tangible consequences for the average Joe and his portfolio: It’ll mean saving more for retirement, delaying retirement age, and reducing consumption during retirement.

“To make up for a 200 basis point difference in average returns, for instance, a 30-year-old would have to work seven years longer or almost double his saving rate” in order to retire with the same nest egg, says the study.

The report outlines the economic and corporate horizon and finds that, over the next two decades, both equity and fixed income returns will be much lower than investors have grown accustomed to in the last 30 years. While the study didn’t examine returns on real estate or alternative investments, that would hardly have changed the bottom line, says Susan Lund, one of the report’s co-authors.

In fact, the worse-case model’s projections—which suggest that the next 20 years of investing will be worse than the last century altogether—are so dismal that Lund says those who are starting to build a nest egg for retirement may want to reevaluate their saving strategy altogether.

“What’s written about more in the press are the big crashes, and people think they’ve weathered those storms,” Lund says. “This is more urgent. The past is better than you thought it was and the future will be worse than you think it’ll be.”

News of a “retirement crisis” is hardly, well, news. Aside from problems with Social Security, American saving habits have plateaued, with most people indicating they’ve saved less than $25,000 for retirement, according to the Employee Benefit Research Institute. The EBRI also finds that the vast majority of workers have yet to take the most basic retirement planning steps.

The takeaway from all this dour news? Retirement planning requires an aggressive approach. While plenty of people DIY their retirement savings, it helps to have a financial planner if you’re not sure how to get started. Of course, you may be on the hook for some fees, but thanks to new aims at holding planners to the fiduciary standard—that is, putting your best interests first—you may be better off in the long-run.

Ryan Fuchs, CFP at Ifrah Financial Services in Little Rock, Arkansas, says that while people may be scared by findings that they’ll have to work even longer than they can imagine, there are steps investors can take now to lessen their workload.

“The best way to approach this is to underestimate your returns. If your retirement portfolio budgets for 6% returns and you end up with 8% in returns, you’ll be fine,” Fuchs says.

“There’s a happy medium here. Instead of doubling your savings rate, increase it by one and a half times and work four more years, or whatever the math works out to be. The earlier you start planning, the smaller the changes should theoretically have to be.”

Maintain a Level Playground

money mazeMy Comments: This is about a soon to be imposed rule that applies to those of us who provide professional advice about the money you are accumulating for your retirement. It’s called the Department of Labor Fiduciary Standard rule and it’s long overdue.

As a financial planner, my role is to identify the existential threats you face in retirement and help you find solutions. For this I get paid from time to time. It might be instructive to understand the reason why I believe the rule is needed and ultimately expanded. With Trump now in the White House, there’s going to be shouting all up and down Wall Street to get rid of it.

Here’s some deep background. The greatest economic threats to the health and welfare of the world I leave to my grandchildren will come from income inequality or the disparity between the haves and the have-nots. I’ve written about this before and will again.

This income inequality is pervasive across the planet. I believe it’s the root cause of almost all conflicts between countries and their respective societies. If the disparity is great enough, economic incentive to succeed diminishes and society unravels. Why go on jihad and kill a bunch of infidels if you already have a good job, have plenty to eat and a home in which to raise your children?

Early last century, a political movement surfaced that we called communism. It arose in Russia and the Soviet Union and said ‘to each according to his needs’. It was a rejection of free enterprise and capitalism, which at the time said every individual has the ability to rise above others and have ‘more than what he needs’.

However, the intervening years proved that without an economic incentive, individuals rarely rise to any level, never mind enough to satisfy their needs. Without the ability to dream of success, people simply fail if there is no motivation to excel.

The other side of the argument says capitalism provides an unfettered ability to ‘succeed’, and at the extreme, allows total disregard for the aspirations and dreams of others playing the same economic game. Any barrier imposed by society to limit unfettered ability is deemed contemptible and must be removed.

But society, by definition, includes rules that we’ve come to accept as being in the best interest of society. We have no issue being required to drive on one side of the street, as opposed to whichever side we like on any given day. We have rules against stealing and causing bodily harm. These rules are accepted and no one argues against them. But suggest that bankers and stock-brokers be required to act in their clients best interest, with rules and regulations and penalties if you don’t and before you know it, the wailing starts.

A fiduciary standard says you are legally required to provide advice that is in your clients’ best interest. It’s not about denying some the opportunity to succeed any more than it’s about making sure none of us ‘has more than we need’. I should not be allowed to steal from you by giving you advice that is in my best interest and not your best interest. I may not ‘earn’ quite as much, but I will not suffer either.

This new rule is but one step on the playground of life that I hope will work to diminish the economic disparity I spoke about above. That effort has to start with a level playing field. It’s in the best interest of society and can happen within the context of a capitalist framework.

Theo Anderson | December 29, 2016

The income gap between the classes is growing at a startling rate in the United States. In 1980, the top 1 percent earned on average 27 times more than workers in the bottom 50 percent. Today, they earn 81 times more.

The widening gap is “due to a boom in capital income,” according to research by French economist Thomas Piketty. That means the rich are living off their wealth rather than investing it in businesses that create jobs, as Republican, supply-side economics predicts they would do.

Piketty played a pivotal role in pushing income inequality to the center of public discussions in 2013 with his book, “Capital in the Twenty-First Century.” In a new working paper, he and his co-authors report that the average national income per adult grew by 61 percent in the United States between 1980 and 2014. But only the highest earners benefited from that growth.

For those in the top 1 percent, income rose 205 percent. Meanwhile, the average pre-tax income of the bottom 50 percent of workers was basically unchanged, stagnating “at about $16,000 per adult after adjusting for inflation,” the paper reads.

It notes that this trend has important political consequences: “An economy that fails to deliver growth for half of its people for an entire generation is bound to generate discontent with the status quo and a rejection of establishment politics.”

But the authors also note that the trend is not inevitable or irreversible. In France, for example, the bottom 50 percent of pre-tax income grew by about the same rate — 32 percent — as the overall national income per adult from 1980 to 2014.

The difference? In the United States, “the stagnation of bottom 50 percent of incomes and the upsurge in the top 1 percent coincided with drastically reduced progressive taxation, widespread deregulation of industries and services, particularly the financial services industry, weakened unions and an eroding minimum wage,” the paper reads.

President-elect Donald Trump’s administration promises at least four years of policies that will expand the gap in earnings. But a few glimmers of hope are emerging at the local level.

The city council of Portland, Oregon, for example, recently approved a tax on public companies that pay executives more than 100 times the median pay of workers. The surtax will increase corporate income tax by 10 percent if executive pay is less than 250 times the median pay for workers, and by 25 percent if it’s 250 and over. The tax could potentially affect more than 500 companies and raise between $2.5 million and $3.5 million per year.

The council cited Piketty’s “Capital in the Twenty-First Century” in the ordinance creating the tax. Steve Novick, the city commissioner behind it, recently wrote that “the dramatic growth of inequality has been fueled by very high compensation of a few managers at big corporations, as illustrated by the fact that 60 to 70 percent of people in the top 0.1 percent of income in the United States are highly paid executives at large firms.”

Novick said that he liked the idea when he first heard about it because it’s “the closest thing I’d seen to a tax on inequality itself.” He also said that “extreme economic inequality is — next to global warming — the biggest problem we have in our society.”

Investing in children

There is also hopeful news in the educational realm. James Heckman, a Nobel Laureate in economics at the University of Chicago who has spent much of his career studying inequality and early childhood education, recently published a paper that lays out the results of a long-term study.

In “The Life-cycle Benefits of an Influential Early Childhood Program,” Heckman and others report that high-quality programs for children from birth to age 5 have long-term positive effects across a range of metrics, including health, IQ, participation in crime, quality of life and labor income.

Predictably, perhaps, the effects of the programs weren’t limited to children. High-quality early childhood education also allowed mothers “to enter the workforce and increase earnings while their children gained the foundational skills to make them more productive in the future workforce,” a summary of the paper reads.

“While the costs of comprehensive early childhood education are high, the rate of return of [high-quality programs] imply that these costs are good investments. Every dollar spent on high quality, birth-to-five programs for disadvantaged children delivers a 13 percent per annum return on investment.”

The research is important because early childhood education has bipartisan support. Over the summer, the Learning Policy Institute released a report that highlighted best practices from four states that have successful early childhood education programs. Two of them — Michigan and North Carolina — are swing states in national politics. The others are Washington and a solidly red state, West Virginia.

Although it isn’t a substitute for other policy tools to address inequality, like progressive taxes, early childhood education has strong bipartisan support because it produces measurable payoffs for both children and the economy. One study found, for example, that the economic benefit of closing the educational achievement gaps between children of different classes would be $70 billion each year.

Early childhood education fosters an “increasingly productive workforce that will boost economic growth, provide budgetary savings at the state and federal levels, and lead to reductions in future generations’ involvement with the criminal justice system,” the Economic Policy Institute recently noted. “These benefits will, of course, materialize only in coming decades when today’s children have grown up. But the research is clear that they will materialize — and when they do, they are permanent.”

How To Maximize Your Social Security Benefits

My Comments: Sometimes simple is better, much better. I found these words recently and am sharing them here since so many people are now making the transition to retirement. It’s a stressful time for a lot of reasons and the more you understand the financial dynamics involved, the less stressed out you’ll be.

January 11, 2017 / MoneyTips Staff

Retirement approaches, and you are struggling to figure out how to make the most of your Social Security benefits. The rules are hard to decipher and the Social Security Administration does not generally give case-specific advice. We cannot decipher Social Security in a few hundred words — not even the Social Security Administration can do that — but we can offer the following helpful secrets to maximize your Social Security benefits.

Time your filing appropriately — You have the option of drawing benefits as early as age 62 or as late as 70. Most advisors suggest delaying filing for benefits until age 70, because your monthly benefits will increase by 8 percent annually for every year you wait past your full retirement age (FRA). Conversely, filing early will decrease your monthly benefits by up to 30 percent.

How long will you live? — Your expected lifespan is the key to your choice. If you file early, you will get less in each check — but you will be receiving checks for more years. Delaying only works if you live long enough and can afford to wait to draw your benefits. Also, delaying only increases benefits on your own record, not spousal or survivor benefits.

Change your mind (once) — If you decide you have made the wrong choice in filing for benefits, you have a one-time opportunity to change your mind within the first 12 months of receiving benefits. However, you will have to repay any benefits you and your family received, as well as any amounts withheld from your benefits for payments like Medicare premiums.

Hold off on divorce — Had enough after nine years of marriage? Hang on for at least one more year to improve your benefit options. You can still file for spousal benefits on an ex-spouse’s income history if you were married for at least 10 years.

Spousal vs. widow/widower benefits — Widow/widower benefits have one big advantage over spousal benefits — widows/widowers can start drawing benefits on their own earnings history and switch to survivor’s benefits later, or use the reverse order and draw survivor’s benefits first and draw on their own history later, even when the widow/widower files before his or her FRA.

Work at least 35 years — The calculation of benefits is quite complex, although online calculators are available to help you estimate your own Social Security benefits. The key is to have at least 35 years of work experience prior to retirement. Social Security is based on the highest-earning 35 years of your career. If you only worked 33 years, two zeroes will be included in your benefit calculations — so hanging on for a few extra years can disproportionately increase your benefits.

Keep in mind that your early earning years are indexed for annual changes in average wages, so a seemingly lower salary twenty or thirty years ago may be comparable with your current salary in adjusted terms.

Seek SSDI representation — Any watcher of daytime TV will find many ads for lawyers offering help for Social Security Disability Insurance (SSDI) cases. Should you become disabled, it is wise to seek legal representation at the time of your initial application. The process is not always straightforward and an initial denial can take significant time to reverse.

We offer one final piece of advice that is not a secret: It is very difficult to retire comfortably on Social Security benefits alone. Maximize your benefits to the extent that you can, but make sure that you save separately for your retirement as well. Social Security is a lot less stressful when you can consider it as supplementary income.

Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing you.

The 16 countries with the world’s best healthcare systems

Cost-of-careMy Comments: With all the crap going on in Washington about repealing the ACA, it might be helpful to know (or maybe not) where we stand on the global stage when it comes to health care. A London based think tank created a Global Prosperity Index, and among their results is a ranking on health care. Below are the first 16 out of 150 countries on the relevant scale, counting down from Canada as #16.

On the aggregate index, the US ranks #17, but on the healthcare index, we rank #32. For those of you who want to make America great again, you need to look way beyond the politics of this. Unless you simply want to die early and in pain.

The guiding metric is the relative cost of care, and medical outcomes. For a country that prides itself on being a world leader, health care outcomes per dollar spent in this country, is pathetic.

Will Martin / January 13, 2017

The Legatum Institute, a London-based research institute released its 10th annual global Prosperity Index in November, a huge survey that ranks the most prosperous countries in the world.

The organization compares 104 variables to come up with its list, splitting those variables into nine subindexes. One of the big components of the ranking is how healthy a country’s people are.

Health is measured by three key components by the Legatum Institute: a country’s basic mental and physical health, health infrastructure, and the availability of preventative care.

Perhaps unsurprisingly, the countries that have the best scores in the Prosperity Index, and therefore rank as the world’s healthiest, are generally big, developed economies with large amounts of resources.

Britain — whose NHS pioneered free at the point of use healthcare globally — misses out on this list, finishing 20th in the Legatum Institute’s health sub-index.

Take a look at the top 16 countries below:
16. Canada — Canada’s 1984 Health Act entrenches in law the country’s system of free at the point of access healthcare, known as Medicare. Canada’s system is not perfect however, and in recent years the number of Canadians going south for private care in the USA has grown.
15. Qatar — The best standards of health in the Middle East can be found in the wealthy nation of Qatar. The nation has recently taken steps to implement a universal healthcare system across the entire country.
14. France — Famed for the quality of its health services, it is not surprising to see France close to the top of the pile. The country’s average life expectancy is 82.
13. Norway — Norway, along with its Scandinavian counterparts, often comes close to global quality of life rankings, and one reason is the health of its citizens. The country’s healthcare system is free for children under 16, but adults must pay for services. The country spends more per person on healthcare than any other country on earth.
12. New Zealand — New Zealand is one of the most active countries in the world, with the nation punching well above its weight in international sporting competitions. It has an average life expectancy of 81.6 years.
11. Belgium — With an average age of 81.1, Belgium’s life expectancy is just outside the world’s top 20. The country has universal healthcare, but also requires mandatory health insurance for all citizens.
10. Germany — Despite a love of beer and sausages, Germans are some of the world’s healthiest people. The country’s average life expectancy is 81.
9. Israel — Israel is the highest ranked of any Middle Eastern state on the Legatum Institute’s health sub-index, and the country has the 8th highest life expectancy on the planet, 82.5 years.
8. Australia — With great weather and low pollution, it is not surprising that Australia is ranked as the healthiest nation in the southern hemisphere. Its average life expectancy is 82.8, the 4th highest in the world.
7. Hong Kong — The tiny city-state of Hong Kong has 11 private and 42 public hospitals to serve its population of just over 7.2 million people. In 2012, women in Hong Kong had the longest average life expectancy of any demographic on earth.
6. Sweden — As with most quality of life and health rankings, northern European countries like Sweden score highly. Swedish men have the 4th highest life expectancy of any nation, living to an average of 80.7 years.
5. Netherlands — In 2015 the Netherlands gained the number one spot at the top of the annual Euro health consumer index, which compares healthcare systems in Europe, scoring 916 of a maximum 1,000 points
4. Japan — The country’s life expectancy — 83.7 — is the highest on the planet. That has caused demographic issues in the country, with its population aging rapidly.
3. Switzerland — Rich, beautiful, and incredibly healthy. Switzerland has pretty much all anyone could want from a country. Its healthcare service is universal and is based upon the mandatory holding of health insurance by all citizens.
2. Singapore — Another small city-state to make the top of the Prosperity Index’s health sub-index. Singapore’s 5.6 million citizens have an average life expectancy of 83.1 years old.
1. Luxembourg — Nestled between Belgium, France, and Germany, the wealthy nation of Luxembourg tops the Legatum Institute’s health sub-index. The country’s average life expectancy is 82.

What To Do If Social Security Is Your Primary Source of Retirement Income

SSA-image-3My Comments: There is talk in Washington that future Social Security benefits will be cut. How real this is I have no idea. But the fact it’s even talked about suggests the threat today is higher than before. I’m not talking about what might happen in 2035, but in 2017.

If you are not yet 62, much less a few years away from your Full Retirement Age (FRA) you better consider that your future benefits from Social Security will not be as robust as you were led to believe.

Henry K. Hebeler | January 3, 2017

Here’s a do-it-yourself plan for low savers, but be aware than not even a professional planner can foresee all the financial surprises that occur in all of our lives that can come from such things as an elderly parent or other relative who needs help, a collapsing stock market, high inflation, disability, or living beyond our original estimate of life expectancy.

The list of unknowns is large, so we counter that by making a new plan as needed, just as a commander does when the enemy changes tactics. We’ll also cover some common ways to enhance retirement income. That said, a professional planner can add perspective and help on investments, insurance, estate planning and annual budgeting. Click through to see what you need to know.

Determine how much emergency money you will need
A fair estimate might be one year of your Social Security payments. The most likely use of much of this will be for uninsured dental, hearing and sight expenses.These are not covered by Medicare and most Medi-gap policies. Other emergency uses include replacement and maintenance of autos, plumbing, furnace, appliances and furnishings. Emergency funds might be a source to help a relative, make a sudden trip, and other things which might otherwise be unaffordable.

It’s not good to use credit for such items when retired. If you do not have an emergency fund, start building one, perhaps with a part-time job or make an allowance in your retirement budget to build one within a reasonably short number of years. Retirement debts are negative investments — mostly with higher interest rates than the rates retirees get from their portfolio.

I believe it’s good to retire without a mortgage, but if your interest rates are modest and the years to pay off the mortgage are not more than a decade away, I’d not use savings to pay the remaining mortgage. When it does gets paid, they’re be some extra funds available to compensate for inflation, the constant need for home maintenance and ever increasing medical costs.

Calculate the amount of your savings that can be used for annual income

To get that, start with your current savings. Then subtract emergency funds, any debts other than your mortgage, and any known commitments for large cash outlays. Further subtract any savings you would use to reach the age you will start Social Security.

To calculate the annual income you can get from the residual savings, divide the net savings by your remaining retirement life expectancy. You can get a personal life-expectancy estimate from sites such as http://www.livingto100.com.

For example: $300,000 savings less $100,000 for emergency funds, credit-card debt and delayed Social Security leaves $200,000. If you take $200,000 net savings divided by a life expectancy of 20 years, you would get an annual inflation-adjusted budget from savings of $10,000 if you can invest with a return equal or greater than inflation.

If you will get a pension, calculate the annual value accounting for whatever reductions come from choosing a survival benefit for your spouse
If it is not a cost-of-living-adjusted (COLA) pension, multiply the annual amount by your current age divided by 100. This is an approximate way of making a COLA adjustment because you then will be setting aside part of your pension to be used later to compensate for inflation. Example:$20,000 annual fixed-payment times 65 for this retirement age divided by 100 = $13,000 pension for this do-it-yourself calculation.

Get your annual Social Security income from http://www.ssa.gov. If you have a spouse, add the spouse’s Social Security income which you can get from the same site with both of your Social Security numbers.

The primary earner must file before a spousal benefit is payable. Usually a lower-earning spouse gets 50% of the primary earner’s full-retirement-age benefit if the spouse starts at the spouse’s full retirement age and less if starting earlier.

Add the annual amounts you can get from savings, pension and Social Security
This is your pre-tax annual source of retirement funds from which you can determine a budget based on the retirement conditions you foresee. Unlike the federal government, you cannot spend more than this, so figure out a budget distribution that fits your income level. If it’s at all possible while still working, try living on this budget for six months to refine the numbers.

The bad news
One of the major differences between budgets when working and retirement is health insurance because employers have paid the lion’s share for you. Now you will have to pay for Medicare, a Medigap policy and the uninsured charges — usually dental, ear and eye-care costs as well as what might be a large deductible before the insurance will pay anything. Fidelity estimates that the total retirement costs for health insurance, Medicare and uninsured bills will be $260,000. This does not include long-term-care, which Fidelity says average $130,000 per couple. This often leads to Medicaid for those who have spent their assets down to a few thousand dollars. Not all doctors and facilities for the aged will accept Medicaid, so if this looks like part of the journey you may have to take, do some detailed research on welfare for your location and dentists willing to do pro bono work.

There’s some hope for low savers

Part-time jobs are a common source of additional income, but become more difficult for the elderly.

Home downsizing, done early rather than late, can add to retirement savings as well as reduced-living costs. Some live with relatives or even friends to reduce cash outflows. Moving to another location might have lower costs and benefit from a nearby relative that might provide some assistance.
By far, the best thing that low-saving people can do is to delay the start of Social Security payments, whether it be by working longer or using savings to support the delay. It is virtually impossible to count on investments to beat the lifetime benefits from the 6% to 8% increase each year of Social Security delay plus an inflation boost, especially when the generous spousal and survivor benefits are included. The primary earner gets a 67% lifetime boost in Social Security income when starting at 70 instead of 62. Further, it’s impossible to beat Social Security’s longevity benefits with insurance. And Social Security benefits from a lower tax rate.

Few people know that even after you have started Social Security, you can suspend Social Security payments as long as you are more than your full-retirement age, but less than 70 years old. Each year of suspension will increase benefits by 8% from the payment amounts the year suspension began. And each of those years will bring lifetime inflation increases. See www.ssa.gov for more information.

Getting 88% More from Social Security

SSA-image-3My Comments: 88% seems like an irrational number. Whether it is or not, and depending on how you want and expect your life to play out, the dollars you get from Social Security are likely to contribute greatly to your financial peace of mind and standard of living down the road. If you don’t make sure you understand how this works, you are likely to have regrets before it’s all over.

Jean Folger | December 7, 2016

If you could get 88% more from Social Security benefits, then you would, right? As the majority of Americans rely – at least to some degree – on Social Security benefits to fund their later years, it seems like a no-brainer. To do it, however, you need a basic understanding of how benefits work and the steps you can take to maximize them.

The biggest danger – and opportunity – comes if you’ve had a gap in your life that means you don’t have 35 years of earnings on your record when you’re planning to start your benefits. That’s the important finding of a new working paper from the Center for Retirement Research at Boston College.

According to the paper, 46% of women and 15% of men could replace a zero-income year by working until age 63 instead of 62, if they’d been planning to retire early. And if late-career income can replace a zero in your benefits calculation, you could lock in a higher benefit. The benefit becomes staggering if you also work – and wait to collect – until you are 70.

Women vs. Men
Spending an extra year at work to ensure that you have a full 35 years of earnings on your record can boost your benefits in two ways: You’ll have more earnings factored into the Social Security calculation, plus you’ll delay receiving benefits for one more year. If you start receiving payments before your normal retirement age (which falls between age 65 and 67, depending on the year you were born), your benefits will be permanently reduced. What’s more, every year you wait beyond normal retirement age until you turn 70 increases your benefit by 8%.

According to the Center for Retirement Research paper, a woman could boost her benefit by as much as 88% by replacing a zero-income year (by working an additional year) and by waiting until age 70 to collect. For men, a similar scenario would result in an 82% bump.

“Women stand to benefit most from working longer because they tend to have more zeroes in their earnings records,” Matthew Rutledge, a research economist and author of the paper, told CNBC. On average women spend 29 years in the workforce, compared with 38 years for men. The difference? Women take an average of five-and-a-half years away from work to care for children and another 1.2 years to care for an older adult.

As the paper explains, if late-career earnings increase your average indexed monthly earnings (AIME) by $1 (AIME is the average of the highest 35 years of wage-inflation-indexed earnings, divided by 12), your benefit will increase by 90 cents if you have very low career earnings, by 32 cents if you’re like most workers, and by 15 cents if you’re a higher earner.

Particularly likely to benefit are stay-at-home parents, those who have suffered a long-term illness or injury, and those who otherwise have gaps in their careers. “We were really surprised at how many people have zeroes in that top 35, especially women,” said Rutledge to CNBC.

Women vs. Men
Spending an extra year at work to ensure that you have a full 35 years of earnings on your record can boost your benefits in two ways: You’ll have more earnings factored into the Social Security calculation, plus you’ll delay receiving benefits for one more year (remember, your benefit goes up 8% each year that you wait past normal retirement age).

According to the Center for Retirement Research paper, a woman could boost her benefit by as much as 88% by replacing a zero-income year (by working an additional year) – and by waiting until age 70 to collect. For men, a similar scenario would result in an 82% bump.

“Women stand to benefit most from working longer, because they tend to have more zeroes in their earnings records,” said Rutledge to CNBC. On average women spend 29 years in the workforce, compared with 38 years for men. The difference? Women take an average of five-and-a-half years away from work to care for children and another 1.2 years to care for an older adult.

Should You Wait to Collect?
Even if you don’t have a zero-income year, waiting to collect can pay off. Of course, delaying won’t be the right choice for everyone, and a number of factors must be considered before making any decisions, including:
• Current cash needs
• Health and family longevity (how long you expect to live)
• Other sources of retirement income
• Work plans during retirement
• Future financial obligations
• Potential Social Security benefit amounts

The Bottom Line
To know where you stand, get a copy of your Social Security statement to review estimates of your future retirement benefits, your earnings to verify the amounts on record and an estimate of the Social Security and Medicare taxes you’ve paid. The statement lists your earnings by year, so you’ll be able to count the number of years you have on record to help you determine if spending an extra year or two in the workforce would boost your Social Security benefits during retirement. Pay particular attention to how many zero-income years you have, if any.

Keep in mind, though, that you may have access to benefits based on your spouse’s (or ex-spouse’s) earnings record – which could be larger than you would be entitled to even if you worked those couple of extra years.

There are two Donald Trumps and two very different market outcomes

moneyMy Comments: These could be described as exciting times. Personally, I’d prefer a little less excitement.

Patti Domm talks about comments made by a Bob Doll. Many years ago I met Bob when he was a senior player with a well known mutual fund company. He impressed me then and does today. You don’t reach his level of influence in this industry without serious chops, and he has them.

For those of you with money in the markets, whether in a trading account or simply money you are depending on for retirement, paying attention these days may mean peace of mind for you down the road.

Patti Domm – Thursday, 24 Nov 2016

Closely watched investing strategist Bob Doll says there are more reasons to like stocks since Donald Trump was elected president, and certainly fewer reasons to like bonds.

But Doll told CNBC that while stocks should be higher at the end of both this year and next year, there are still many unknowns about President Trump versus candidate Trump that could send the market into a tail spin.

“The main thing is we just don’t know. There will be a lot of trial balloons. For the market to have a serious problem, it’s going to have to be convinced the protectionist Donald Trump is showing up more than the growth Donald Trump. We elected both Donald Trumps, but I think the growth one is going to win out,” said Doll, chief equity strategist at Nuveen Asset Management.

Stocks have rallied since Trump was elected president in a surprise upset over Hillary Clinton. Trump’s promise of a big stimulus package, tax cuts and less regulation has boosted the dollar and triggered a selloff in the bond market.

“That’s part of the Trump rally. The markets assume we elected pro-growth Donald Trump. He was the guy who was going to cut taxes and roll back regulation, but he also talked about tariffs and tearing up trade deals — things that are anti-growth. Where did that president-elect go?” he said. “Part of the market going up is Donald Trump is not doing scorched earth on all kinds of stuff which he kind of implied he would while he was campaigning.”

Doll said some of the negative side of Trump could emerge, and that would cause a selloff in stocks and buying in bonds.

“I’m not convinced it’s a one-way street. We’ll get some of those days. Under the surface, the trend has changed. Whatever you thought about stocks before the election, you have to like them a little more, and whatever you think about bonds, you have to like them a little less,” he said.

Doll notes that the economy was already improving before the election, and rates were already moving higher. But the fact that Trump is trying to spur growth has made stocks more appealing, even in a rising interest rate environment.

“We don’t know what policies are going to pass or how long it will take to enact them, or how good they will be,” he said. Trump’s tax overhaul would be the first big tax cut package since the Reagan era, Doll said.

Stocks should continue to gain, and the bull market could be extended particularly if there is higher growth.

“We’re probably heading into a period where bonds go down and stocks are up — not tons, because the P/E rate is not going to go up if interest rates are going up,” he said.

As for the market’s performance next year, “the default would be we’re up some more and that’s my best guess, but I don’t know if it’s a lot or a little. There is more uncertainty … If he shuts the borders because the anti-trade Trump comes out, we’ll have a recession and the market will go down. If that side stays quiet and he cuts taxes, it could be up a lot,” he said.

The S&P 500 is about 3 percent higher since the election, and all major indices have hit new highs. The 10-year Treasury yield has risen as high as 2.40 from 1.80 percent.

The “Trump trade” has become the reflation trade, with investors buying cyclical stocks and selling bonds. Financials have benefited as well as industrials.

“Technically, we’ve come a long way in a short period of time. If you’ve got too many bonds and not enough stocks, maybe today is not the day to do the reversal. I would say any rally in bonds, you trim them, and any pull back in stocks and cyclicals, you buy them,” he said.

Doll said stocks should see a year-end rally. “With seasonality, more likely it’s going to be higher than where we are. I hesitate because we’ve run so hard for the last couple of weeks. Maybe we take a breath and then we come on with a year-end rally. I don’t know. But I can’t believe it would (go) straight up to the end of the year,” he said.

The stock market could see better gains with Trump as president than if Clinton had won the election, Doll said. Her policies were not so aimed at jump-starting growth, but during the election, the market did better when it was perceived Clinton was winning.

“The market was saying we like certainty, and we don’t like uncertainty and Donald Trump is more uncertainty than Clinton. There are going to be more good things and more bad things and we’re going to see what happens,” he said. “Underneath a lot of this, the economy is dong a little better and we can’t lose sight of that.”

Doll said there is a chance growth could be better, and that could also feed a rally.

“For the last few years, the search for yield, perceived safety and low volatility has been an investor’s dream, and billions and billions and billions have gone into those things,” he said. “That is over and done and it’s unwinding. That is because the economy is doing better and inflation is picking up a bit.”