Daily Bullets…..for August 28, 2014

·         “Unretirement”….what if you can’t do it? The article below discusses going back to work after retirement as a way to improve one’s probability of success in retirement (i.e. maintaining a relatively consistent living standard after one retires).

What’s the point? The article makes some interesting points and, as financial planners, we agree this is a good option for many individuals. However, it’s a little unrealistic in that many people will not be in a position to “go back to work” after they retire for a variety of reasons. There a number of things we feel as planners that people can do if they are concerned about their preparedness for retirement. Here are a few. Try to anticipate and head off financial problems before retirement. This involves careful assessment of assets, income sources and living expenses at least several  years before retirement. Increase expense budget discipline and seek ways to reduce costs, particularly large fixed costs. Analyze your social security options to maximize this income source. If you own a home, a reverse mortgage can be an option, albeit expensive, to extract cash that can be invested to supplement retirement income. Also, taking on or increasing a mortgage can, in certain cases, help improve one’s chances of success in retirement if the capital is invested appropriately. Restructuring one’s investments to generate more income is an option to supplement income. Annuities, in certain cases, are also an option, however, they are a very expensive way to generate income, and a measure we would consider more of a “last resort” option. If one is uncomfortable or highly uncertain about facing this or working through the process, a  trusted advisor or financial planner is also a good way to get help with this process.

Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140828&id=17890081

·         Q2 GDP revised up…….Commerce Dept. this morning issued upwardly revised estimate of
Q2 GDP growth of 4.2%. This is above expectations of 3.9%. Many indicators of the economy’s health were looking strong in Q2, including business and consumer spending, domestic demand, and domestic income.

What’s the point? Another in a continuing string of data over the past several months indicates the U.S. economy continues to gain momentum and strength. It is positive for corporate profit growth, which is a key driver of stock prices. A concern for investors is whether stronger growth causes the Fed to accelerate the timing of its interest rate increase. Based on recent comments by Janet Yellen, Fed Chairwoman, it does not appear the Fed will move to accelerate its interest rate increases. While market valuation can no longer be considered “cheap” on an absolute P/E basis, it remains cheap relative to bonds; and even when the Fed begins to raise rates, raising Fed fund to the 1-2% level would still be very low from an historical perspective (some may even call it “accommodative”). Therefore, as of now, we are not overly concerned that accelerating economic growth will result in an unexpected acceleration in Fed interest rate increases. Of course, this bears watching, and one concern we do have is the fact that there has not been a market correction in nearly three years. As always, September and October should be interesting months.

Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140828&id=17890191