WEEKLY STOCK MARKET COMMENTARY 4 7 2008

0
152

STOCK MARKET COMMENTARY
For the week of April 7, 2008

THE MARKET
The major indexes finished the week higher, despite a government report showing the economy lost 80,000 jobs in March and unemployment rose to 5.1 percent. The relatively mild reaction to the news may indicate that Wall Street had expected worse – some analysts had predicted job cuts of 150,000 – and that stock prices had already built in the possibility of disappointing economic news. For the week, the Dow gained 3.24 percent to finish at 12,609.42. The S&P rose 4.22 percent to end the week at 1,370.40, and the NASDAQ increased 4.86 percent to close the week at 2,370.98.

WEEKLY STOCK MARKET COMMENTARY 3 31 2008
Source: Morningstar.com. * Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three and five-year returns are annualized. The S&P, excluding “1 Week” returns, is a reflection of return to an investor, by reinvesting dividends after the deduction of withholding tax.

2041 Is the Year – Social Security Trustees announced in 2006 that the trust fund backing the payment of Social Security benefits would be zero in 2040. In April 2007, the annual report determined the trust fund will be gone in 2041, an addition of one year. On March 25, the 2008 report again stated that the trust fund, worth $2.0 trillion on Dec. 31, 2007, will be gone in 2041. A zero trust fund does not mean the payment of Social Security benefits would also go to zero, but rather would drop to 78 percent of their originally promised levels (Source: Social Security Administration, BTN Research).

Long-Term Issue – The estimated Social Security shortfall as of today (i.e., a present value number) between the future taxes anticipated being collected and the future benefits expected to be paid out over the next 75 years is $4.3 trillion. The entire deficit could be eliminated by either an immediate 14 percent increase in Social Security taxes or an immediate 12 percent reduction in Social Security benefits (Source: Social Security Administration, BTN Research).

A Bundle of Joy/Dollars –
An upper-class American family that had a baby in calendar year 2007 will spend $299,000 (i.e., a present value amount stated in 2007 dollars) to raise the child until his/her eighteenth birthday, not counting any college education costs. The actual dollars projected to be spent (i.e., using future dollar totals and not a present value calculation) is $393,000 (Source: Department of Agriculture, BTN Research).

Making the Funds Last – $1 million in retirement savings (i.e., in a pre-tax account) will last 28.6 years while producing a static monthly withdrawal of $6,000 (gross withdrawal before taxes), assuming the savings continue to earn 6 percent. If the funds earn 1 percent less or 5 percent, the withdrawals would last 23.3 years or a reduction of more than five years. This mathematical calculation ignores the ultimate impact of taxes on the account which are due upon withdrawal, is for illustrative purposes only and is not intended to reflect any specific investment or performance. Actual results will fluctuate with market conditions and will vary (Source: BTN Research).

WEEKLY FOCUS – A More Complete Retirement Plan

Today’s retirees have a brighter future than priorgenerations, according to a new report from the U.S. National Center for Health Statistics (NCHS). The report, which used data on trends in population, economics and health issues from 15 different federal agencies, concludes that Americans age 65 or older have an average net worth 80 percent higher than the same age group did 20 years ago. Life expectancy has also increased, with those reaching age 65 now expected to live, on average, 19 more years – seven years longer than those who turned 65 in 1900.

On the surface, those trends look like the Holy Grail of retirement – live longer with more money. What they really point out is the need for a more comprehensive form of retirement planning, one that takes into account not only your financial resources but your physical well being.

For example, greater longevity doesn’t necessarily mean better health. The NCHS research showed an increase in obesity, linked to serious chronic health conditions such as diabetes and heart disease. In a study conducted from 1988 to 1994, 27 percent of women age 65-74 and 19 percent of women over 75 were considered obese. In a 2005-2006 study, those age groups rose to 37 percent and 24 percent, respectively. Longevity provides little benefit if quality of life suffers because of poor health.

Education may be part of the reason for increased net worth. The NCHS study found that 76 percent of Americans over 65 had high school diplomas, compared to 24 percent in 1965, and 19 percent had bachelor’s degrees, up from 5 percent. The increased earning opportunity that comes with higher levels of education will be important for a generation that will share a greater responsibility for its own retirement income with the decline of employer-paid pension programs. However, with the rising cost of health care and longevity extending the years retirement funds are needed, retirement planning must still consider how to avoid living longer than your money.

A well rounded retirement plan explores your desired lifestyle and how best to achieve it while planning for contingencies. Whether you need to increase your contributions or decrease your waistline, starting early gives you the best opportunity for success. Call our office to begin or update your retirement plan for a more complete picture.

* 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. WMCSAI# 273615

LEAVE A REPLY

Please enter your comment!
Please enter your name here