Stock Market Commentary
For the week of November 30, 2009
With U.S. markets closed Thursday for Thanksgiving and closed three hours early on Friday, the major indexes moved only slightly during the week on light trading volume. News on Wednesday of a possible debt default by Dubai World and Nakheel, a state-owned conglomerate, combined with investors seeking to lock-in year-to-date gains, caused a broad sell off early on Friday that eased back before the markets closed. For the week, the Dow ended down 0.01 percent to close at 10,309.92. The S&P rose 0.06 percent to finish the week at 1,091.49, while the NASDAQ fell 0.99 percent to end the week at 2,138.44.
50-Year Average – The average annual total return for the S&P 500 over the past half-century (i.e., the 50 years from 1959-2008) is 9.2 percent per year. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market (Source: BTN Research).
A Little Help – The size of the U.S. economy grew by 3.5 percent in the third quarter 2009 (i.e., change measured from the end of the second quarter to the end of the third quarter then restated as an annualized number), the first positive gain reported since mid-2008. An estimated 2.2 percent (of the 3.5 percent rate) came in the areas of 1) vehicle purchases and 2) residential construction, categories that have been assisted by government legislation (e.g., “cash for clunkers” and the first-time home buyer tax credit) (Source: Commerce Department, BTN Research).
Lots of Money Pumps – Income received by Americans that are at least age 65 is derived from multiple sources: 1) 39 percent of their income is from Social Security, 2) 26 percent comes from job wages, 3) 20 percent is from defined benefit pension plans, 4) 13 percent is income generated from assets the seniors own, and 5) the remaining 2 percent of income is from other sources (Source: Congressional Research Reports, BTN Research).
WEEKLY FOCUS – Long Term Care Insurance: Beyond Nursing Home Needs
A 2009 report from the American Association for Long Term Care Insurance found that many consumers associate long-term care primarily with nursing home care. While nursing home care definitely ranks at the high end of the long-term care cost spectrum, long term care insurance (LTCI) may also help cover the cost of in-home services from nurses’ aides, home health aides and therapists or services in an assisted living facility.
LTCI may alleviate the potential burden of you or your spouse becoming the primary caregiver for the other in the event of chronic illness or disability. If you have hereditary conditions that may be passed on to your children, purchasing LTCI for them when they are younger may help prevent them from being ineligible for coverage later in their lives.
According to the IRS, premiums paid for qualified LTCI policies can be deducted as medical expenses up to the 7.5 percent of adjusted gross income (AGI) cap. The policy must: 1) be guaranteed renewable, 2) not provide for a cash surrender value or other money that can be paid or borrowed, 3) provide that refunds, other than on insured’s death or cancellation of the contract, and dividends be used only to reduce future premiums or increase future benefits, and 4) generally not pay or reimburse expenses that would be reimbursed under Medicare.
The amount of qualified long-term care premiums you can include is limited. You can include the following amounts as medical expenses on Schedule A (Form 1040), according to the IRS:
Health care costs, including long-term care planning services provided in the home or in an assisted or skilled facility, can greatly impact your retirement finances. A 2009 study from the Center for Retirement Research at Boston College found that 47 percent of middle-income adults and 42 percent of high-income adults are at risk for a lower standard of living in retirement. Those rates would be even higher if they took healthcare and long-term care into account, the center said.
Your retirement plans should include a thorough analysis of potential risks, including the risk of a health condition requiring long-term care for you or your spouse. Call our office to schedule an initial review or update of your retirement plan.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common
stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 301744