Stock Market Commentary
For the week of April 20, 2009
With first-quarter earnings reports underway, the markets found enough positive to continue its six-week rally. The rally marks the Dow’s biggest six-week gain since July 1938, and the S&P is enjoying its longest string of consecutive weekly gains in two years. GE and Citigroup posted losses but fell within analysts expectations, helping the markets overcome disappointing results from Intel Corp. and Google Inc. Stocks could see more fluctuations as earnings reports continue over the next two weeks. The Dow ended the week up 0.64 percent to close at 8,131.33. The S&P gained 1.54 percent to finish the week at 869.60, and the NASDAQ rose 1.24 percent to wrap up the week at 1,673.07.
Energy Efficient – Texas has the highest rate of energy generation from wind power, with a capacity of 7,118 megawatts. Iowa has edged out California for second place with a capacity of 2,791 megawatts compared to 2,517 megawatts. With a combined capacity of 25,300 megawatts, U.S. wind farms could generate about 73 billion kilowatt hours of power this year, enough for nearly 7 million homes, according to the American Wind Energy Association.
College Credit Card Slide – The average undergraduate student carried $3,173 in credit card debt in 2008, the highest level since Sallie Mae began tracking it in 1998. In the last study, conducted in 2004, students carried an average of $2,169 in credit card debt. Graduating seniors left college last year with an average of $4,138 in card debt, a 44 percent increase over 2004. The average for freshmen rose 27 percent to $2,038. Tuition and fees at public four-year colleges have increased 50 percent in the past 10 years to an average of $6,585, according to the College Board.
Multi-Billion Dollar Month – The total capitalization of the U.S. stock market increased by $700 billion to $9.4 trillion during the month of March. The value of the U.S. stock market was $10.6 trillion at the end of last year (Source: Wilshire, BTN Research).
Reduced Housing Inventory – The number of existing homes for sale has declined for seven consecutive months and was 3.8 million as of the end of February 2009. That number was 4.6 million at the end of July 2008 (Source: National Association of Realtors, BTN Research).
WEEKLY FOCUS – The IRA Turns 35
In 1974, Congress enacted the Employee Retirement Income Security Act (ERISA), which gave birth to the individual retirement account. The accounts, originally limited to workers who were not eligible for a qualified retirement plan from their employer, allowed a $1,500 tax-deductible annual contribution. In 1981, the Economic Recovery Tax Act broadened IRAs to all taxpayers under the age of 70½ regardless of their eligibility for a qualified plan and raised the contribution limit to $2,000 plus $250 for a nonworking spouse. Congress pulled back on the expanded participation in 1986 by phasing out the IRA contribution deduction for higher-earning workers covered by employer retirement plans for themselves or their spouses.
During the 1990s, Congress increased some of the limits on IRA contributions and created the Roth IRA accounts, which is funded by nondeductible contributions and allows tax-exempt withdrawals. The nonworking spouse limit increased to $2,000 in 1996, and in 1997, Congress increased the income threshold for the deductible contributions phase-outs. In 2001, Congress raised contributions limits and instituted catch-up contributions for those age 50 and older, a temporary provision made permanent by the Pension Protection Act of 2006.
While the term IRA has become practically synonymous to retirement planning, only about 14 percent of eligible U.S. households made a contribution in 2007. According to an AARP survey, almost one-third of adults aren’t sure whether they are eligible, and 40 percent are unaware that they can have an IRA and a 401(k) at the same time. In reality, almost anyone can contribute to some type of IRA, whether traditional, nondeductible or Roth. Contributions to nondeductible IRAs can supplement your retirement savings if you have maxed out your 401(k) and can help you make up ground if your employer has suspended its 401(k) matching contributions.
Are you and your loved ones making the most of your IRA eligibility? Now may be a good time to review your planned IRA contributions for 2009, particularly if your employer-based retirement plans have changed due to the economy. We’re available to help you ensure you are making use of all available retirement savings tools, and we’re always happy to assist your friends and family as well. Call our office for an appointment.
* 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. Written by Securities America. SAI# 296980