Stock Market Commentary
For the week of November 10, 2008
Wall Street enjoyed a record Election Day rally on Tuesday with the Dow and S&P both up more than 3 percent and the NASDAQ up more than 4 percent. The Labor Department unemployment report of 240,000 lost jobs came in lower than Goldman Sachs’ estimate of 300,000 but higher than the median forecast of 200,000. Investors will have more economic data to digest this week with readings on the labor market and trade deficit due Thursday and the October retail sales index coming out Friday. For last week, the Dow ended down 3.93 percent to 8,943.81. The S&P lost 3.78 percent to close the week at 930.99, and the NASDAQ lost 4.27 percent to finish the week at 1,647.40.
Medicare Open Enrollment – Open enrollment for Medicare begins Nov. 15 and continues through Dec. 31, 2008. During this time, anyone covered by the plan can make changes to coverage, including selecting a new plan for 2009. Medicare offers tools for comparing plans for cost, coverage and convenience on its website, www.medicare.gov.
Saving Up – Americans have increased their short-term savings even as their investments have fallen over the past three months. The average American saved $901 in September, up nearly 20 percent from $756 in August. They have also increased retirement contributions, from $560 in August to $863 in September, according to the survey by First Command Financial Services. First Command Financial Services’ Financial Behaviors Index surveyed 1,000 U.S. consumers between ages 25 and 70, with yearly household incomes of at least $50,000.
Two More Years – A two-year increase in the median retirement age over the next 10 years would increase U.S. gross domestic product (GDP) by $13 trillion over the next three decades and reduce by about half the number of boomers who are financially unprepared for retirement, according to research from McKinsey Global Institute.
Only The Biggest Estates – Only one out of every 106 deaths results in the payment of federal estate taxes (Source: CDC National Center for Health Statistics, Wall Street Journal, BTN Research).
Pension Limit – Participants in defined benefit pension plans will be able to fund their plans to provide an annual retirement benefit of $195,000 in calendar year 2009. Twenty years earlier (1989), the maximum annual pension benefit that could be funded was $98,064 (Source: IRS, BTN Research).
WEEKLY FOCUS – Bridging The Health Insurance Gap
Early retirement has become a part of the American dream, but the gap between employer-based health insurance and Medicare may become a nightmare without proper planning. According to The Retire Early Homepage, employers often pay 50 percent to 90 percent of the premiums for employees’ coverage. Individual plans can cost 50 percent to 100 percent more than equivalent group plans. How can a retiree absorb that cost? We’ve compiled some ideas to consider as you search for coverage.
Will your spouse still be working? If so, can you be covered under his or her employer group policy? This may be the cheapest option. Just remember to notify your spouse’s employer 30 days before you want to be covered by that plan.
Do you belong to a group – such as an alumni association, chamber of commerce or professional association – that offers group coverage? In some states, even a sole proprietor can purchase small group insurance, so hanging out the consulting shingle may give you a premium break. Be sure to factor in any dues or other fees you will pay for membership in addition to the premium.
Does your employer’s group policy allow you to convert to an individual policy without a medical exam? You’ll be paying the higher price for individual coverage, but any pre-existing conditions covered under the group plan may continue to be covered.
How close are you to age 65? The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows you to continue on your employer’s plan for 18 months after you retire. The catch is, you pay the entire premium, not just the portion you paid as an employee. This can be expensive, but again, it allows you to continue coverage for any pre-existing conditions.
Who else needs to be covered? Under your employer’s plan, you can typically choose coverage for yourself or for you and your dependents. Medicare will cover only you. Do you have a spouse, dependent parent or dependent child who will still need coverage when you turn 65? Some insurance companies base health insurance premiums on the age of the oldest individual covered. Check multiple companies and try different combinations of family members to get the best rate.
Because health care becomes a significant portion of your expenditures in retirement, selecting a plan to cover the years between your retirement and your Medicare eligibility can dramatically affect your finances. We can meet with you and your insurance specialist, or recommend a health insurance specialist to you. Risk management should be part of any retirement plan, and there’s no greater risk than the loss of your health. 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#289819