While China, Japan, Germany, and other major economies are grappling with a decline in their working-age population in the decades ahead, the U.S. working-age population is expected to grow. Since growth in the size of the labor force is one of the two determinants in economic growth, it's a key fundamental factor that will shape the future of financial markets. This is a key fundamental affecting long-term personal financial plans. It's important and it has practical consequences on retirement portfolios.
Put yourself through this brief lifeboat drill, to prepare for things suddenly going wrong. Everything may be fine right now, in the eleventh year of the economic expansion. That's a sensible time to test your ability to muster the resources to respond to a range of emergency scenarios.
The leading economic indicators (LEI) are part of this picture, but this quiz will help you see the forest for trees. Just like this picture of change, the economic picture is always changing right in front of us, making it hard to see even the most obvious trends unfolding in front of us.
If you're in your 50s or 60s and own an interest in a business or professional corporation, knowing the answers to these four questions can lower your 2019 federal tax bill sharply, while jumpstarting a tax-advantaged retirement income plan.
Doctors, dentists and business owners with more than $321,400 of 2019 adjusted gross income have one last chance not to pass up on this tax and retirement planning opportunity.
The Fed cut rates again on October 30th, for the third time in 2019. What's it mean to your long-term financial plan?
It's notable that the stock market in 2019 has not suffered a 10% correction on worries about the China trade confrontation, the manufacturing slump or concerns about the U.S. political situation - three bad-news narratives currently haunting markets.
When you are halfway through your 70th year on the planet, U.S. law says you must start taking money out of IRAs, SEPs and SIMPLE plans, as well as 401(k), 403(b) and other U.S. Government qualified retirement plans. Only a Roth IRA account, which you fund with after-tax dollars, is exempt from federally-required minimum distributions (RMDs).
How much should you withdraw from your tax-deferred 401(k) or IRA, and in what form? Here's a brief summary of four retirement income withdrawal methods to help you optimize the decumulation of your retirement income portfolio prudently.
The American Opportunity Credit (for college students) and the Lifetime Learning Credit - for undergrad, graduate and vocational students - are the two education tax credits available from the federal government. Students can claim either of the two credits for schooling costs, or their parents can - provided they don't opt for married filing separately.
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Staying Realistic About Investing Amid Volatile Market Swings
Despite the way securities traditionally are sold and what you hear in the media, the stock market confoundingly defies prediction. Look at the two quarters ended March 30th, 2019: The 19.8% plunge in the Standard & Poor's 500 index in the fourth quarter of 2018 was a flash bear market; in the first quarter of 2019, a recovery was just as swift, a snapback gain of 13% gain. If whipsaw emotional shifts from fear to greed make it harder to stay realistic about what to expect from a prudently-designed retirement portfolio, this chart offers a way to know what to expect based on historical data.
This chart shows the returns of four asset classes as well as a portfolio invested in a mix of the four. The returns are based on the average annual return of each asset in the 93 years from 1926 through 2018. Of the four assets, the best performing were large-company stocks, as measured by the Standard & Poor's 500 index, which averaged a total return of 9.9% annually over the 93 years.
Each group of bars shows how often the four asset classes and the diversified portfolio achieved or bettered the long-term return of that particular asset class — 9.9% for large-cap US stock, 11.08% for small-cap US stock, 5.24% for US bonds, 3.39% for US cash, and 9.23% for a 4-asset portfolio — over rolling periods of five years versus 10, 15, 20, and 35 years.
For example, large cap stocks gained 9.99% or more in 92% of the 59 35-year rolling calendar-year periods that occurred between 1926 and 2018. In comparison, the 9.99% return for large cap US stock was only achieved in 57% of the 89 rolling five years periods from 1926 through 2018.
The longer holding periods are the tallest bars, showing that the longer your time horizon, the more likely you were to achieve a long-run return.
Craig Israelsen, Ph.D., who compiled the data in this chart, has taught thousands of college students as well as financial professionals about low-expense portfolio design, says he would be the first to admit that what is happening now may not be your experience in the near future. But, over long periods of time, certain asset classes generally deliver their "mean" return.
"Investors are reminded always that past performance is never a guarantee of your future results," says Craig Israelsen, Ph.D., who compiled the data in this chart. "Yet, having just been through an emotional whiplash, investors get important perspective in knowing a diversified 4-asset portfolio averaged a 9.23% return or higher in 86% of the 59 rolling 35-year periods from 1926 through 2018 with just 76% of the volatility of large-cap US stock."
Performance of US Large Stock represented by S&P 500 Index (TR), US Small Stock represented by S&P Small Cap 600 Index (TR). US Bonds are represented by Barclays US Aggregate Bond Index TR USD, and Cash by USTREAS Stat US T-Bill 90 Day TR. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss.
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