News that is important to consumers is always something you can use in seminars. This repost is courtesy of seminarsforless.com
Bloomberg - Wholesale prices in the U.S. rose more than forecast in June, reflecting a jump in energy costs that is now abating.
The 0.4 percent increase in the producer price index followed a 0.2 percent drop in May, the Labor Department reported today. The median estimate in a Bloomberg survey of 69 economists called for an advance of 0.2 percent. Fuel costs climbed 2.1 percent, the biggest gain since February 2013.
Crude oil prices have dropped this month as concerns about supply disruptions ease, bolstering Federal Reserve Chair Janet Yellen’s view that recent increases were temporary. Smaller price increases indicate Fed policy makers can keep interest rateslow well into 2015. Full Story
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CNNMONEY - Taking a 401(k) loan can seem attractive for a few reasons: You don’t have to qualify. You can get the funds quite quickly. Plus the interest rate is typically around 4% to 5%, far below the typical credit card interest rate.
Most 401(k) plans allow you to borrow 50% of your balance up to $50,000, which you then must pay back (plus interest) through automatic payroll deductions. Typically, the loan must be repaid within five years.
Nearly half of all retirement savers who had taken a 401(k) loan said they had borrowed the cash to pay down debt, according to a recent survey from retirement provider TIAA-CREF.
But there are a lot of things that can go wrong.
“The 401(k) always appears to be a pretty good place to borrow from…” said Margaret Starner, senior vice president of financial planning at Raymond James & Associates. “But it’s a slippery slope.”
Not only are you raiding your current savings balance, but you will also miss out on the compound returns those funds would have gained over time.
Plus, like any other kind of borrowing, a 401(k) loan isn’t tax free. You’ll pay the loan back with after-tax dollars and then pay taxes again when you withdraw the savings in retirement.
And if you lose your job or switch to a new one, the timeframe to pay back the loan shrinks to as little as 60 days. If you’re unable to repay it by that deadline, you could be hit with another tax bill and a 10% early withdrawal penalty if you’re younger than 59 1/2.
If you’re still thinking of taking a loan to tackle debt, here are some things to consider.
What kind of debt is it? The only kind of debt you should even consider raiding your nest egg to pay down is extremely costly debt, such as high-interest credit card bills or a payday loan, said Bruce Cacho-Negrete, a certified financial planner who specializes in helping clients manage their debt.
That means that you wouldn’t want to use retirement savings to pay down loans with lower interest rates and longer time spans, such as student loans or mortgage debt.
Do you have other options? A 401(k) loan should be a “loan of last resort,” according to Cacho-Negrete. First consider your alternatives.
For example, if you have a good credit score, you might be able to pay down higher-interest credit card debt with a personal loan from a bank or credit union, said Sophia Bera, a Minneapolis-based certified financial planner.
Or if you think you’ll be able to tackle the debt in the next year, consider taking advantage of a 0% balance transfer offer to transfer the debt to a different credit card and pay it off without any additional interest payments.
Do you have a plan? Your retirement savings is not a piggy bank. So if you do take a loan, you’ll need a strategy to make sure you don’t make it a habit, said Dan Keady, director of financial planning for TIAA-CREF.
If it was overspending that forced you to raid your savings, for example, commit to a budget to make sure you don’t just run up the card all over again.
If possible, you should also try to continue contributing to your 401(k) plan up to at least your employer match, on top of paying back the loan. See the full story here
Seminars For Less will continue to repost interesting articles that will help you keep your prospective clients informed. Seminars are the best way to reach the local masses. seminarsforless.com
New York Times - Nearly every major asset market on earth is currently expensive by historical standards. You can read more about this phenomenon — the Everything Boom, or possibly the Everything Bubble — But what happens now? What does this simple fact, that globally prices are high and expected returns are low, mean for the future?
The answers fit into three broad categories: the good, the bad and the ugly. Here is what each possible outcome looks like.
The most hopeful outcome for the global economy — and global asset prices — is that the low price of capital will help unleash productive new investments that create higher growth in the future — and that the economy will in effect grow into the current market valuations.
Companies could use their ability to borrow money cheaply or issue new stock on favorable terms to finance new inventions, new factories, new workers. Governments could use their ability to borrow cheaply to invest in infrastructure and education, increasing the longer-term productive capacity of the global economy. High prices for real estate in some of the most economically productive cities on earth could lead developers to put up more buildings there.
If this future materializes, interest rates would presumably rise, meaning people who bought bonds at their current ultra-low interest rates could lose money. But that would probably happen gradually, and in the context of strong returns to stocks and other risky assets. After all, in this more prosperous future, corporate earnings would rise along with the economy.
In effect, this result would be one in which central banks’ efforts to stimulate growth through cheap money policies (finally) have their desired effect, and once strong global growth arrives, everything else takes care of itself.
People tend to assume that the current world of very low interest rates must be a short-term aberration. It’s not necessarily so. Just ask the Japanese; 10-year government borrowing rates have been below 2 percent almost continuously for the last 15 years (they edged above that level one day in May 2006).
There are different names and explanations for it — a liquidity trap, a secular stagnation — and one of the great macroeconomic debates of our age is why this might be happening and what policy makers could or should do about it. But whatever you want to call it and whatever you believe its origins to be, the effects on the economy and markets are clear. It means continued low to nonexistent growth, low interest rates and low inflation. And the Japanese experience shows that it can persist for quite a long time.
In other words, it could be that the era of low interest rates and low returns on investments doesn’t end with an economic boom or with a collapse. It doesn’t necessarily have to end at all. It may be that the world needs to buckle in for the kind of slow-growth, low-interest-rate world of the last few years for a long time to come.
The two outcomes above appear the most likely. But we are in uncharted territory in many ways, and it is possible that the world may not work the way standard Keynesian economic models suggest it will.
In those models, for example, inflation can become a problem only when the economy is overheating. But what if the unconventional tools that central banks have used over the last half a decade have different results, causing, for example, a spike in prices even as the economy remains depressed? Then you could see bonds fall in value, but unlike in the “good” scenario above, not be accompanied by a rising economic tide.
Or, perhaps the large deficits that the United States and other countries have run during the crisis years will one day cause a crisis of confidence in advanced nations’ debt. Interest rates could spike (and bonds could fall sharply in value, and probably other investments, too) not because the economy is recovering, but because of that loss of market confidence.
Or maybe some external force will result in an economic downturn, which world economic policy makers would have few tools to fight after exhausting most of them over the last few years. If that happened, what would in normal times cause a mild downturn might instead bring about something more dangerous, like a new depression and market collapse.
Which of these is most likely? For the last few years, many official projections — forecasts from government agencies and bank economic research shops, for example — have tended toward the “good” outcome, predicting a full-throated expansion as being just around the corner. Many commentators, particularly on cable financial television, have predicted an “ugly” one, full of out-of-control inflation, debt crises and collapse.
But the pattern of the last few years shows that the “bad” scenario has been closest to the reality. That doesn’t mean the rest of the bad script will continue in the years ahead, but it should prompt those predicting the first or third outcome to wrestle with why they have been wrong so far.
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CNBC - How do you tell a client she can’t retire yet? How do you tell another he can’t sustain his current lifestyle? Delivering bad news comes with the territory for financial advisors.
“A large amount of our time is spent counseling and supporting clients. We often become their support team for daily life decisions,” said Richard Colarossi, certified financial planner and accredited investment fiduciary with Colarossi & Williams.
It’s essential to deliver the bad news with hope and actions that can be taken to fix the problem, he added, recalling a recent situation. Colarossi was beginning the retirement income distribution process for a client with $5.5 million in assets, of which only $2 million were investible.
“She was living a very high lifestyle, withdrawing 10 percent per year, and I had to say to her, ‘It won’t work,’” he said. “She was stunned, and asked, ‘What do you mean?’”
The first thing Colarossi did was reassure his client that she’d been very successful and had accumulated a wonderful portfolio but did not have the income she needed.
“She hadn’t been looking at the withdrawal percentage, just the dollar amount,” he said. “People do simple arithmetic, [and] she didn’t understand that the equilibrium rate—what her investible assets needed to earn—was 14 percent.”
Colarossi explained, “She was taken aback, questioning if I was right. But I quantified everything, and eventually she said, ‘I think you have a point.’”
His immediate prescription? In the short term, live within your means, scale back, and try to sell assets such as real estate in order to get more income-producing assets.
“It’s very important to look at the big picture—usually it’s not all bad. You can’t be dramatic. In reality, people usually know what they did,” said Helen Simon, certified financial planner, retirement management analyst and CEO of Personal Business Management Services.
Simon described some common scenarios in her practice where she’s had to deliver bad news:
- Spouse vs. spouse: “Often, one spouse doesn’t know what the other is doing. It’s usually the husband handling the investments, but he doesn’t want to admit what he’s doing or if he made a big mistake. So it’s my job to bring it to the forefront.”
- Keeping up with the Joneses: “The husband wants to give his wife everything she wants—but can’t afford it. He doesn’t want to admit that he doesn’t make as much as people think.”
- Waiting too long to save: “There are a lot of people in their 50s who decide, all of a sudden, [that they] need a financial advisor. But 15 years is not a long time—especially if you’re not saving an astronomical amount of money.”
- Severe market corrections: “You’ve got to show the client the big picture of the portfolio over time. Clients will be receptive if you prepare them the right way. You have to be somewhat [parental]: Explain to them that if they are diversified, they’ll have gains that make up for those losses.”
Since the kids will be moving out, maybe our clients will see their way clear to spend some of their retirement on themselves or make it grow more. Mentioning headlines like these in seminars give prospective clients reasons to invest with us. We’ll try to keep you well informed on news as it happens. seminarsforless.com
CNN Money – They really do want to move out, according to a study by Harvard’s Joint Center for Housing Studies, and by 2025 could form 24 million new households.
Some 11 million recent grads were living with a parent in 2012, according to Pew. The homeownership rate for those under age 35 was 36% in the first three months of 2014, down from a high of 43% in 2005, according to the Census. Three main factors have been holding them back, said the Harvard study: A weak job market for recent graduates. Student loans. And tight lending standards. But as the economy turns around, the obstacles have begun to fall. “When the job market recovers and their income recovers, they are going make their mark on this housing market,” said Christopher Herbert, research director at the Harvard division, in a panel discussion following the release of the Harvard report.
Buying by Millenials should give a boost to the overall housing market. “If somebody wants to move up from a starter house to a larger house, they need someone to sell the starter house to,” said Mike Calhoun, the president of the Center for Responsible Lending, at the panel. The report pointed out that some factors could restrain household formation. Despite economic news improving, Millennials face only slow economic gains. Unemployment is falling, but wage growth has been persistently stagnant. Plus, Millennials must still confront increasing student debt burdens and tight lending standards.
Instead of a mass exodus from their parents’ homes, the authors said Millenials’ might just trickle out, mirroring what Herbert called the economy’s “steady, slow recovery.”
The report also pointed out that borrowers of color, who are expected to see demographic growth that could help drive household formation and building, face mortgage denials at far higher rates than white counterparts, which might well imperil a housing surge.
Here’s a Nobel prize winner who says that 401k plan designers are not paying enough attention to income planning. That’s something that many producers have been addressing for several years. Seminars that stress income planning like our “Retirement for Boomers” seminar offer consumers an alternative planning method. Seminarsforless.com
Marketwatch.com – Since the dark days of 2008, employers have taken some steps to fix the 401(k), the backbone of the nation’s private retirement-savings system. But Nobel laureateRobert C. Merton says that in the rush to upgrade these plans, plan sponsors and administrators have overlooked one big problem: They are managing these plans with the wrong goal in mind.
“The seeds of an investment crisis have been sown,” the MIT professor of finance writes in an article in the July-August issue of Harvard Business Review, which was published Tuesday. “The only way to avoid a catastrophe is for plan participants, professionals, and regulators to shift the mind-set and metrics from asset value to income,” writes Merton, who won the Nobel Prize in Economics in 1997.
In recent years, employers have tried to improve 401(k)s by introducing features such as automatic enrollment and products including target-date funds. But in his article and in a recent interview with Encore, Merton said these moves weren’t likely to be sufficient. To fix the 401(k), he argues, employers and the financial services companies that manage these plans must get past the ongoing obsession with two things: Account balances and annual returns. These metrics, Merton says, are far less important than one other: The amount of sustainable income an employee can expect to receive in retirement.
By disclosing annual income, instead of (or in addition to) an account balance, Merton says, employers will help employees quickly and easily calculate how much of their annual salary they can expect to replace in retirement, together with Social Security. As a result, employees will be better able to take action to ensure they are on track to retire as planned.
But that’s only half the battle. In order to accurately calculate how much retirement income a participant’s 401(k) balance will purchase, the plan sponsor must assume the money will be invested in an inflation-adjusted deferred annuity or long-termU.S. Treasury bonds. These investments, Merton writes, ensure “spendable income” that’s “secure for the life” of the bond or annuity and are “the very assets that are the safest from a retirement income perspective.”
That’s not to say that 401(k) money shouldn’t be invested in stocks. In fact, Merton says, 401(k) investment managers should invest participants’ savings in a mixture of “risky assets,” including equities, and “risk-free assets,” such as long-term U.S. Treasuries and deferred annuities. Moreover, the investment manager should shift the investment mix over time to optimize the likelihood of success.
Employers, he says, should begin by asking employees not about their tolerance for investment risk, but about their expectations for income needs in retirement.
If the investments are managed well, the employee – upon retirement—should have enough money to buy a deferred, inflation-indexed annuity that (together with Social Security) will replace his or her salary in retirement. Retirees who don’t want to buy an annuity don’t have to. But once they achieve their retirement income goal, he says, they’d be foolish to leave their money at risk in the stock market.
“Think of risk as a tool,” he writes. “When you don’t need it, get rid of as much of it as you can because it’s costly. When we take a risk, it’s generally for a good reason. You wouldn’t normally put yourself in harm’s way for no reason.”
Merton has also been working with mutual fund manager Dimensional Fund Advisors to turn his ideas about 401(k) reform into a commercially viable strategy. For more on those efforts see this recent Forbes article by Matt Schifrin.
That’s because there’s a serious shortage of spots large enough to hold the luxury vessels. It’s a simple issue of supply and demand: the number of mega yachts has gone up, but the number of marinas in which they can dock has stayed the same, according to industry publication The Superyacht Report.
This means that yacht owners are forced to do the unthinkable — dock further out to sea and take a smaller boat into port.
Bloomberg - Grandma’s much-anticipated Arctic cruise becomes a slow drift away on an ice floe. Grandpa mortgages his kidneys to pay for a new heart. Social Security is deader than disco and “IRA” only refers to guys named Ira.
That bleak vision is only a slight exaggeration of the catastrophes foretold by many experts, the media and financial firms. It’s a scare tactic that’s moved the tone of the U.S. savings and retirement conversation from a constructive call to action to an alarmist frenzy. No one argues that building a solid financial future is easy — wages are stagnant, markets have been disappointing and Americans are getting older and living longer. Still, retirement isn’t going the way of the carrier pigeon. Innovative retirement plans and new policies and products point to a future richer than many workers imagine.
Fear is a poor motivator, as those who advocate exercise and smoking cessation know.
Environmentalists have also figured this out. One study found that the more catastrophic the prediction about climate change, the more skeptical listeners became. Dire scenarios often cause people to give up, throwing up their hands in the face of a seemingly insurmountable challenge. It’s something Erik Carter, who travels around the country for financial education firm Financial Finesse, sees all the time. When he speaks with workers about retirement, pessimists far outnumber optimists: “They’re discouraged to take any action, because they just don’t think they’re going to retire.”
At the heart of their fear is the fate of the financial safety net we subsidize with every paycheck.
Just 6 percent of the millennial generation expect to get their full benefits from Social Security,according to the Pew Research Center. Half believe they’ll get nothing at all. The trust fund built up to pay for Baby Boomer retirements does run out in 2033, but even then Social Security should be able to pay 77 percent of benefits. And that’s assuming politicians can’t find extra revenue for what is arguably the government’s most popular and effective program. Pew finds more than 80 percent of all generations, including millennials, support Social Security and Medicare.
The situation for Medicare and health care in general is shakier, but there are signs that the growth in costs is slowing down. The federal government’s ten-year spending projection for health care hasfallen $900 billion since 2011.
If Social Security survives, or even expands, that covers only the barest necessities. The rest will need to come from savings invested in a market that just loves surprises, often unpleasant ones. Again, the long view provides comfort. Even baby boomers have time on their side, with decades more to save and plan. Small changes now — paying more attention to fees and setting up automatic savings accounts, for example — pay off later. And the fees we pay to save for retirement have dropped tremendously over the last generation. Some predict they’ll fall almost to zero.
Credit all the negativity for one thing:
Most policymakers and companies now admit there’s a problem with a retirement system that asks everyone to structure their own financial futures without any help.
More workplaces are offering financial wellness programs and advice from independent advisers. Workers are being saddled with less paperwork and fewer decisions. Retirement plans are automatically signing employees up for 401(k)s, gradually increasing their savings rates, and putting them in target-date funds that give them the right asset allocations for their age.
Once retired, Americans will likely find it easier to plot out their budgets. Policymakers and retirement plan providers are working on ways for workers to convert savings into a stream of “lifetime income” that also makes planning simple. While historically low interest rates mean annuities and longevity insurance are expensive now, they should become a better deal when rates inevitably rise. Reverse mortgages, which earned a deservedly bad reputation in an earlier incarnation, might also help. And new spending and investing models from firms including Morningstar, Inc. and JPMorgan Chase & Co. take a more efficient approach to spending and investing, offering personalized plans that adjust dynamically when market conditions change.
There’s another way to improve the odds you’ll save enough, says Harvard Business School Professor Michael Norton. Instead of thinking about retirement savings as this dreary thing that “will sustain you until you die,” he suggests focusing on specific things you’re saving for. How many times a week do you want to eat out when you retire? How about a summer in Paris, or a world tour? Think of your spending in terms of opportunity cost. Forgo new swimsuits this summer, book the savings, and you’re that much closer to adding a pool to your retirement dream house.
Setting those kinds of goals makes saving much more enjoyable. “You’re rewarding yourself when you retire,” Norton says, “rather than just taking from yourself now.” Financial Finesse’s Carter says early retirement is a particularly motivating goal. He insists retiring early is often an eminently achievable goal as long as workers make small, gradual adjustments to savings rates now.
All of this is not to whitewash the challenges of retirement. It’s to point out that there are simple steps to take to make retirement years more relaxing than restless.
Here’s my current article in national Underwriter magazine. Seminarsforless.com is my company and will help you get more clients. Kim Magdalein
National Underwriter – When Jean Luc Picard, the captain of The Starship Enterprise, decided the next destination and speed, he would tell his helmsman to “make it so.” That is really what ourprospective clients want from us. They want us to make it so. They really want to be the captain of their own ship no matter how large or small. They just want us to navigate.
Your ability to get the captain to his or her destination will determine the success of your practice. What capabilities does your practice exhibit? Are your resources capable of getting your clients to their desired destination? Every prospect is different, but their basic goals are much the same. If retirement is a targeted event, the prospects’ resources will, of course, determine much of the outcome.
However, many clients could improve their asset size if you at least have the ability to do so. Many advisors lower the clients’ expectations so much that they just give up and accept a fate of underperforming, while other advisors are helping their clients’ assets grow. Remember, as an advisor, registered rep or insurance agent, our job is to help them reach their destination, period. An insurance license may allow us to protect principal, but it may not allow us to advance them into a more secure position, with more assets due to growth. The strength and capability of a practice will definitely affect prospecting. Always remain open to methods of improving performance.
Many insurance agents have found that a securities license allows their practice to gain more clients through greater value.
The series 65 license allows a producer to legally offer advice on investments. As an investment advisor representative, you will be able to reach those who wish to remain in the market for potentially greater performance. Many agents have acquired the series 65 just so they can talk about securities from a negative viewpoint, so they can sell more annuities. I don’t believe that serves a majority of the clients well. I know that it is blasphemy among annuity salespeople, but taking a very honest and realistic assessment is important.
By affiliating with an excellent investment advisor who manages assets in a way that consistently beats market performance, you will have a very marketable practice. If an RIA is matching or just keeping slightly ahead of the market, he’s not valuable. There are advisors that beat the market by as much as 10 percent consistently on average, including spike years and down years. They may be hard to find, but they are out there. You need an advisor who is enthusiastic about taking on new reps. If they seem indifferent, maybe they don’t care enough.
Some states allow a solicitors agreement. In that case you can refer business to an RIA and even receive a fee. This arrangement requires a great working relationship with the RIA and the solicitor must stay in his lane and not give securities advice. Let the RIA give all the advice. The insurance agent will be comfortable knowing that his client will be protected and the conservative portion of the assets can be placed in an annuity. The referred client stays in the family and everyone comes out a winner.
Splitting assets between securities and annuities can be a great combination. Using 100 minus age as a model usually makes for a good starting point, and most clients will like that split. A 65-year-old will have 65 percent of the assets in an annuity and 35 percent in securities if total assets are under $500,000. With larger asset sizes, the greater portion may be in securities with the RIA. The client now has secure, moderate growth and an excellent opportunity to grow with suitable liquidity. Remember, the client is the captain. This makes a great story and a great marketing opportunity.
Just make sure your clients arrive safe and secure. Make it so!
Results from successful seminars build large practices.
Remaining informed will help the advisor inform clients. Seminars that are informative create more clients. Seminarsforless.com
In a speech Tuesday, Federal Reserve Bank of New York President William Dudley laid out three key reasons why the Fed may keep its short-term interest rate — the federal funds rate — below historic averages for the long haul. That rate is important, because it impacts rates for mortgages and loans.
Listen up, because Dudley is a top decision maker at the central bank and closely aligned with current Fed Chair Janet Yellen.
1) The economy remains weak: Like it or not, the economy is still disappointing on several fronts, and that may not change anytime soon.
“Economic headwinds seem likely to persist for several more years,” Dudley said in a speech to the New York Association of Business Economics
He notes that the Great Recession “scarred households and businesses,” which is likely to dampen their spending and investment for a long time.
Meanwhile, the housing sector is facing “several significant headwinds,” he said.
Take these three, for example: Mortgages are still hard to come by for homebuyers with all but the most pristine credit histories. High levels of student debt are delaying young people from becoming first-time home buyers. Finally, housing supply remains limited.
2) Our future potential is declining: Remember the economic good times? Say, the Clinton years or the mid-2000s? In the future, the U.S. economy has lower potential to grow at the strong rates it did in the 1990s and 2000s, mainly because a huge portion of the population is retiring. (Yes, we’re talking about you, baby boomers!)
Lower economic potential implies interest rates will have to remain low, even after the economy starts revving up again, Dudley said.
3) Bank regulation: Following the massive crash in 2008, banks these days are required to hold a larger cushion of cash on the sidelines for emergencies. While these higher capital requirements are “essential in order to make the financial system more robust,” Dudley said, this is likely to cause the Fed to keep low interest rates in place in the future.
Why? Traditionally, banks make their money by taking in your deposits and paying you a certain interest rate, but then lending that money out to someone else at a higher rate. If banks are forced to hold more cash on the sidelines, they may become less profitable and may slow their lending.