Investment Tax Planning

Posted on April 2, 2012 by admin

Introduction

Investment planning can be important for several reasons. However, any discussion of investment planning is incomplete without a thorough understanding of the applicable income tax ramifications. Tax planning can help you reduce the tax cost of your investments. Once you’ve created an investment plan to work toward your various financial goals, you should take advantage of the tax rules to ensure that you maximize the after-tax return on your investments. In other words, your goal is to select tax-favorable investments that are consistent with your overall investment plan.

In order to engage in investment tax planning, you need to understand how investments are taxed (including the concepts of capital gain income and ordinary income) and how to compare different investment vehicles. You also need to know how your own tax situation (i.e., your tax bracket, holding period, and tax basis) affects the taxation of your capital assets.

Caution:  Investment choices should not be based on tax considerations alone, but should be based on several factors including your time horizons and risk tolerance.

Caution:  Starting in 2013, a new 3.8 percent unearned income Medicare contribution tax will be imposed on the investment income of high-income individuals (generally, married individuals filing jointly with modified adjusted gross income (MAGI) exceeding $250,000, married individuals filing separately with MAGI exceeding $125,000, and single individuals with MAGI exceeding $200,000).

How does investment tax planning work?

Similar investments may carry substantially different tax costs. It is important to identify the differences and evaluate the costs. Consider the following points:
Investment earnings are taxed in different ways

A myriad of investment vehicles are available to you. For instance, you can invest in stocks, bonds, mutual funds, money market funds, real estate, commodities, or your own business. Investment earnings are taxed in many different ways. Consequently, some investments earn less after tax than others. By taking advantage of these differences, you may save money. In addition, your tax savings can preserve your investments and, as a result, enhance future investment growth.
Investment tax planning can maximize your wealth

Tax investment planning involves maximizing the after-tax return on your investments. This is beneficial because the wealth that remains after you pay your taxes is ultimately more important to you than the value of your investments. It’s the after-tax payout that enables you to finance a home, a child’s education, a vacation, or your retirement. Thus, one goal of investment tax planning is to maximize future wealth. To do so, you need to know a little bit about taxes. In particular, you need to know the following:

  • How your investments are taxed
  • The before- and after-tax rates of return on your investments
  • How to compare investments in light of after-tax return

How are your investments taxed?

In order to understand how investments are taxed, you first need to become familiar with the following basic concepts:

  • Capital gains and losses
  • Qualified dividends
  • Ordinary (investment) income
  • Investment expenses
  • Tax-exempt income
  • Tax-deferred income

Capital gains and losses

While you hold a capital asset (e.g., your home, stocks, bonds, mutual funds, real estate, collectibles), you will not pay taxes on any increase in value. However, when you sell or exchange the asset, you will realize a capital gain (if you sell it for a profit) or loss (if you sell for less than the asset’s cost). If you sell an asset after only a year or less, you will have a short-term capital gain. Short-term capital gains are taxed at ordinary income tax rates (i.e., your marginal income tax rate). If you own an asset for more than a year before you sell it, you will have a long-term capital gain.

Long-term capital gains tax rates are generally more favorable than ordinary income tax rates. Currently, the highest ordinary income tax rate is 35 percent whereas the highest long-term capital gains tax rate (for most assets) is 15 percent (for sales and exchanges on or after may 6, 2003). That’s a difference of 20 percent. Thus, holding an asset for long-term growth is a tax-saving strategy.

Caution:  The Jobs and Growth Tax Relief Reconciliation Act of 2003 (2003 Tax Act), the Tax Increase Prevention and Reconciliation Act of 2005 (2005 Tax Act), and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) reduced long-term capital gains tax rates for sales and exchanges made on or after May 6, 2003 and before January 1, 2013. These rates are 15 percent for taxpayers in marginal tax brackets higher than 15 percent, and 5 percent (zero percent in 2008-2012) for taxpayers in the 15 percent and 10 percent marginal tax brackets. In 2013, the rates revert to pre-2003 Tax Act levels–20 percent and 10 percent, respectively. Thus, investors may want to time the sale of highly appreciated assets to take advantage of the lower rates.

You may offset capital gains with capital losses (short-term losses against short-term gains and long-term losses against long-term gains). If you have more losses than gains in a given year, you may offset up to $3,000 of ordinary income ($1,500 if married filing separately). Any remaining losses can be carried forward into future tax years. Thus, timing losses to offset gains is a tax-saving investment strategy.

Tip:  You may also elect to include net capital gains from property held for investment as ordinary (investment) income. If you do so, such income will be taxed at ordinary income tax rates, not capital gains tax rates. This may be advantageous if you don’t have capital losses, but do have investment interest expenses. Investment interest expense may only be deducted to the extent of investment income (though it can also be carried forward to future years). This election must be specifically made–if you do not make the election, the IRS will classify the income as capital gain income.

Capital gain is computed by subtracting the sale price from the asset’s basis. Basis is your cost and includes the price you paid for the assets plus the cost of capital improvements. The higher your basis, the smaller your capital gain and the smaller your tax liability. Thus, you should keep careful records of the basis of an asset. This is especially important if you buy shares of stock in the same company at different times and different prices. This will allow you to control the tax consequences by picking particular shares to sell or hold.

Tip:  If you want to sell an asset now but defer the recognition of the gain until later tax years, you may be able to arrange an installment sale with the buyer (but not for stocks or bonds). That way, you report and pay tax on the income as you receive it.
Qualified dividends

Qualified dividends are dividends received during the tax year by an individual shareholder from a domestic corporation or a qualified foreign corporation. Under the 2003, 2005, and 2010 Tax Acts, effective for tax years 2003 through 2012, such dividends are taxable at the same rates that apply to long-term capital gains. This tax treatment applies to both regular tax and the alternative minimum tax. Absent further legislative action, dividend tax rates revert to pre-2003 Tax Act levels (i.e., they will be taxed at ordinary income tax rates) beginning in 2013.

Eligible dividends include dividends received directly from a domestic corporation or a qualified foreign corporation as well as qualified dividends passed through to investors by stock mutual funds, other regulated investment companies, partnerships, or real estate investment trusts (REITs). Thus, it may be advantageous to invest in vehicles that pay qualified dividends, especially if you need current income.

Distributions from tax-deferred vehicles, such as IRAs, retirement plans, annuities, and Coverdell education savings plans, do not qualify even if the funds represent dividends from stock. Thus, holding investments that pay qualified dividends within a tax-deferred plan may no longer be desirable.

Tip:  Though qualified dividends are taxed at long-term capital gains tax rates, they cannot be offset by capital losses. However, as with capital gains, you can elect to include these dividends in investment income. If you do so, such income will be taxed at ordinary income tax rates, not capital gains tax rates. This may be advantageous if you have investment interest expenses in excess of investment income. Investment interest expense may only be deducted to the extent of investment income (though it can also be carried forward to future years). This election must be specifically made–if you do not make the election, the IRS will classify the income as net capital gain.
Ordinary (investment) income

Ordinary investment income consists of any investment income that is not capital gain income, qualified dividends, or tax-exempt income, and is taxed at ordinary income tax rates. Investment income is generated by investment property such as bonds and bond mutual funds. Examples of ordinary investment income include interest and dividends that are actually interest (and therefore don’t qualify for taxation at long-term capital gains tax rates).

Generally, ordinary income tax treatment is not as favorable as long-term capital gains tax treatment.
Investment expenses

If you borrow money to buy investment property, you probably pay investment interest. Investment interest may be used to offset investment income only. Excess investment interest may be carried forward to future years. Other investment expenses (e.g., commissions, fees) are deductible as an itemized deduction on Schedule A and are subject to the 2 percent limit.
Passive income and losses

A passive activity is an investment in a business in which you are not an active participant. Rental real estate and limited partnerships are two common examples. Income generated by a passive activity and gain from the sale or exchange of a passive activity is included in passive income and taxed at ordinary income tax rates. Generally, losses from passive activities may offset income from passive activities only–they cannot be used to offset ordinary income or capital gain income. However, excess losses in a given year can be carried forward into future tax years.
Tax-exempt income

There are a number of tax-exempt investment vehicles. One of the more common vehicles is the municipal bond. Usually, interest paid on municipal bonds is not subject to federal or state tax (at least not in the state of issue). When deciding whether to invest in taxable bonds or tax-exempt bonds, it is important to compare the after-tax rate of return on municipals with that on taxable bonds with similar risk.

Caution:  While the interest on municipal bonds is tax exempt, capital gains tax may be imposed when you sell the bonds.

Caution:  The interest on U.S. Government bonds is not exempt from federal income tax. However, the interest on federal securities is tax exempt at the state level.

Tip:  Roth IRAs, although technically vehicles for holding investments and not truly investments themselves, should be discussed under the heading of tax-exempt income. A Roth IRA is a vehicle in which you can invest a limited amount of money each year for retirement and certain other limited purposes (assuming that you satisfy certain criteria including adjusted gross income (AGI) limits). The income and gains on the account are not taxed at all as long as you follow all applicable rules. Be aware, though, that if all applicable rules are not followed, withdrawals will not only be subject to tax, they may also be subject to a penalty. Tax-free growth is clearly one of the most powerful investment tools available for creating wealth. However, you must use after-tax dollars to make the initial investment and subsequent contributions. No IRA deduction is allowed for contributions to Roth IRAs.
Tax-deferred income

Tax-deferred investments produce earnings that are not taxed until withdrawn. These earnings are reinvested and continue to fuel investment growth. This is one of the most powerful investment tools available. First, there is a time-value of money advantage. The longer you can keep the money in your own pocket and out of the hands of the IRS, the greater the potential benefit will be to you. Second, since our income tax rates are progressive, you may find yourself in a lower tax bracket in the year the earnings are finally taxed. If so, the actual amount of tax paid on those investment earnings will be less. On the other hand, if you find yourself in a higher tax bracket in the year the earnings are finally taxed, the amount of tax paid on the earnings will be higher (assuming all else is equal).

Caution:  Many retirement vehicles are designed to provide tax-deferred growth. The downside of this benefit is that all distributions from the retirement plan are taxed at ordinary income rates rather than at capital gains rates. This can result in potentially higher taxation in light of the progressively higher ordinary income tax rates.

What are before- and after-tax rates of return?

To compare investments, you must understand before- and after-tax rates of return. Ultimately, you want to compare the after-tax rate of returns of similar investments. The rate of return is the ratio of the annual amount an investment earns compared to the cost of the investment. Thus, if an investment cost you $10 and earned $1, the rate of return is 10 percent.
Before-tax rate of return

The before-tax rate of return is the annual market-rate of return. For example, a $10 bond that pays $1 per year in interest and is sold for $10 earns a 10 percent before-tax rate of return.
After-tax rate of return

The after-tax rate of return is the ratio of the after-tax income and gain to the amount invested. With the exception of tax-free investments, this rate is always lower than the before-tax or market rate of return. What do you need to know to compute the after-tax rate of return? Generally, you need to know the following:

  • What is the tax treatment of your investments (ordinary income, capital gains, tax exempt, tax deferred)?
  • What is your tax situation (your marginal tax rate, your holding periods, whether you’ve invested in tax-deferred retirement accounts)?

How do you comparison shop for investments?

Comparison shopping for investments allows you to compare the after-tax return on two similar investments. In order to effectively make this assessment, you must consider two other issues:

  • Tax classification of the investment
  • Your tax situation

Tax treatment of the investment

You need to know whether the investment vehicle generates capital gains, ordinary income, tax-free, or tax-deferred income. There are two components to the after-tax rate of return: the portion attributable to earnings (such as interest) and the amount derived from a subsequent sale. You also need to know whether any capital gains will be treated as long-term or short-term capital gains.

Special rules can apply to certain kinds of investments such as wash sales, qualifying small business stock, short sales, installment sales, like-kind exchanges, and others. In addition, you may wish to know about market discount rules, anti-conversion rules, and tax shelters.
Your tax treatment

Your investment tax situation depends on several factors. In particular, you’ll need to know the adjusted tax basis of your capital assets, the sale price of the assets, the holding period, the amount of the capital gain or loss, the amount of your ordinary investment income or losses, and your marginal tax bracket.

 

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached atwww.theretirementgroup.com.

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Working During Retirement 3/29/2012

Posted on March 29, 2012 by admin

Working During Retirement  3/29/2012

Planning on working during retirement? If so, you’re not alone. An increasing number of employees nearing retirement plan to work at least some period of time during their retirement years.

Why work during retirement?

Obviously, if you work during retirement, you’ll be earning money and relying less on your retirement savings–leaving more to potentially grow for the future and making your savings last longer, as shown in the example below:

Assumptions:

  • Retirement savings   $1,000,000
  • Earnings rate   6%
  • Preretirement income   $150,000
  • Social Security   $2,000/month
  • Desired income replacement   80% ($120,000/year, $10,000/month)
Without working, you’ll need to use $8,000 ($10,000 desired income minus $2,000 Social Security) of retirement savings per month, and your savings will last 16 years.
But if you earn this amount monthly: for 3 years, your savings will last: for 5 years, your savings will last: for 10 years, your savings will last:
$1,000 17 years 18 years 19 years
$2,000 18 years 19 years 22 years
$3,000 19 years 21 years 26 years
$4,000 20 years 23 years 32 years
$5,000 22 years 26 years 39 years
This is a hypothetical example and is not intended to reflect the actual performance of any specific investment, and does not take into account the effect of taxes and inflation.

If you continue to work, you may also have access to affordable health care, as more and more employers are offering this important benefit to part-time employees.

But there are also non-economic reasons for working during retirement. Many retirees work for personal fulfillment–to stay mentally and physically active, to enjoy the social benefits of working, and to try their hand at something new–the reasons are as varied as the number of retirees.

How working affects Social Security

If you work after you start receiving Social Security retirement benefits, your earnings may affect the amount of your benefit check. Your monthly benefit is based on your lifetime earnings. When you become entitled to retirement benefits at age 62, the Social Security Administration calculates your primary insurance amount (PIA), upon which your retirement benefit will be based. Your PIA is recalculated annually if you have any new earnings that might increase your benefit. So if you continue to work after you start receiving retirement benefits, these earnings may increase your PIA and thus your future Social Security retirement benefit.

But working may also cause a reduction in your current benefit. If you’ve reached full retirement age (65 to 67, depending on when you were born), you don’t need to worry about this– you can earn as much as you want without affecting your Social Security retirement benefit.

If you haven’t yet reached full retirement age, $1 in benefits will be withheld for every $2 you earn over the annual earnings limit ($14,640 in 2012). A special rule applies in your first year of Social Security retirement–you’ll get your full benefit for any month you earn less than one-twelfth of the annual earnings limit, regardless of how much you earn during the entire year. A higher earnings limit applies in the year you reach full retirement age. If you earn more than this higher limit ($38,880 in 2012), $1 in benefits will be withheld for every $3 you earn over that amount, until the month you reach full retirement age–then you’ll get your full benefit no matter how much you earn. (If your current benefit is reduced because of excess earnings, you may be entitled to an upward adjustment in your benefit once you reach full retirement age.)

Not all income reduces your Social Security benefit. In general, Social Security only takes into account wages you’ve earned as an employee, net earnings from self-employment and other types of work-related income, such as bonuses, commissions, and fees. Pensions, annuities, IRA distributions, and investment income won’t reduce your benefit.

Also, keep in mind that working may enable you to put off receiving your Social Security benefit until a later date. In general, the later you begin receiving benefit payments, the greater your benefit will be. Whether delaying the start of Social Security benefits is the right decision for you, however, depends on your personal circumstances.

One last important point to consider: in general, your Social Security benefit won’t be subject to federal income tax if that’s the only income you receive during the year. But if you work during retirement (or receive any other taxable income or tax-exempt interest), a portion of your benefit may become taxable. IRS Publication 915 has a worksheet that can help you determine whether any part of your Social Security benefit is subject to federal income tax.

How working affects your pension

If you work for someone other than your original employer, your pension benefit won’t be impacted at all–you can work, receive a salary from your new employer, and also receive your pension benefit from your original employer. But if you continue to work past your normal retirement date for the same employer, or if you retire and then return to work for that employer, you need to understand how your pension will be impacted.

Some plans will allow you to start receiving your pension benefit once you reach the plan’s normal retirement age, even if you continue to work. Other plans will suspend your pension benefit if you work beyond your normal retirement date, but will actuarially increase your payment when benefits resume to account for the period of time benefits were suspended. Still other plans will suspend your benefit for any month you work more than 40 hours, and will not provide any actuarial increase–in effect, you’ll forfeit your benefit for any month you work more than 40 hours.

Some plans provide yet another option–”phased retirement.” These programs allow you to continue to work on a part-time basis while accessing all or part of your pension benefit. Federal law encourages these phased retirement programs by allowing pension plans to start paying benefits once you reach age 62, even if you’re still working and haven’t yet reached the plan’s normal retirement age.

If your pension plan calculates benefits using final average pay, be sure to discuss with your plan administrator how your particular benefit might be affected by the decision to work part-time. In some cases, reducing your hours at the end of your career could reduce your final average pay, resulting in a smaller benefit than you might otherwise have received.

How working affects health benefits

Many individuals work during retirement to keep their medical coverage. If working during retirement for you means moving from full-time to part-time, it’s important that you fully understand how that decision will impact your medical benefits.

Some employers, especially those with phased retirement programs, offer medical coverage to part-time employees. But other employers don’t, or require that you work a minimum number of hours to be benefits eligible. If your employer doesn’t offer medical benefits to part-time employees, you’ll need to look for coverage elsewhere. If you’re married, the obvious option is coverage under your spouse’s health plan, if your spouse works and has coverage available. If not, you may be eligible for COBRA.

COBRA is a federal law that allows you to continue receiving medical benefits under your employer’s plan for some period of time, usually for 18 months, after a qualifying event (including loss of coverage due to a reduction in hours). But it’s expensive–you typically have to pay the full premium yourself, plus a 2% administrative fee. (COBRA doesn’t apply to employers who have fewer than 20 employees.) Another option is private health insurance, but that will also be very expensive.

Of course, once you turn 65, you’ll be eligible for Medicare. You’ll want to contact the Social Security Administration approximately three months before your 65th birthday to discuss your options.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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Stretch IRAs 3/27/2012

Posted on March 27, 2012 by admin

Stretch IRAs 3/27/2012

The term “stretch IRA” has become a popular way to refer to an IRA (either traditional or Roth) with provisions that make it easier to “stretch out” the time that funds can stay in your IRA after your death, even over several generations. It’s not a special IRA, and there’s nothing dramatic about this “stretch” language. Any IRA can include stretch provisions, but not all do.

Why is “stretching” important?

Earnings in an IRA grow tax deferred. Over time, this tax-deferred growth can help you accumulate significant retirement funds. If you’re able to support yourself in retirement without the need to tap into your IRA, you may want to continue this tax-deferred growth for as long as possible. In fact, you may want your heirs to benefit–to the greatest extent possible–from this tax-deferred growth as well. But funds can’t stay in your IRA forever. Required minimum distribution (RMD) rules will apply after your death (for traditional IRAs, minimum distributions are also required during your lifetime after you reach age 70½). The goal of a stretch IRA is to make sure your beneficiary can take distributions over the maximum period the RMD rules allow. You’ll want to check your IRA custodial or trust agreement carefully to make sure that it contains the following important stretch provisions.

Key stretch provision #1

The RMD rules let your beneficiary take distributions from an inherited IRA over a fixed period of time, based on your beneficiary’s life expectancy. For example, if your beneficiary is age 20 in the year following your death, he or she can take payments over 63 additional years (special rules apply to spousal beneficiaries).

As you can see, this rule can keep your IRA funds growing tax-deferred for a very long time. But even though the RMD rules allow your beneficiary to “stretch out” payments over his or her life expectancy, your particular IRA may not. For example, your IRA might require your beneficiary to take a lump-sum payment, or receive payments within five years after your death. Make sure your IRA contract lets your beneficiary take payments over his or her life expectancy.

Key stretch provision #2

But what happens if your beneficiary elects to take distributions over his or her life expectancy but dies a few years later, with funds still in the inherited IRA?

This is where the IRA language becomes crucial. If, as is commonly the case, the IRA language doesn’t address what happens when your beneficiary dies, then the IRA balance is typically paid to your beneficiary’s estate. However, IRA providers are increasingly allowing an original beneficiary to name a successor beneficiary. In this case, if your original beneficiary dies, the successor beneficiary “steps into the shoes” of your original beneficiary and can continue to take RMDs over the original beneficiary’s remaining distribution schedule.

What if your IRA doesn’t stretch?

You can always transfer your funds to an IRA that contains the desired stretch language. In addition, upon your death, your beneficiary can transfer the IRA funds (in your name) directly to another IRA that has the appropriate language.

And if your spouse is your beneficiary, he or she can also roll over the IRA assets to his or her own IRA, or elect to treat your IRA as his or her own (if your spouse is your sole beneficiary). Because your spouse becomes the owner of your IRA funds, rather than a beneficiary, your spouse won’t have to start taking distributions until he or she reaches age 70½. And your spouse can name a new beneficiary to continue receiving payments after your spouse dies.

Stretching your IRA–a case study

Jack dies at age 78 with an IRA worth $500,000. He had named his surviving spouse, 69-year-old Mary, as his sole beneficiary. Mary elects to roll over the funds to her own IRA. Mary names Susan, her 44-year-old daughter, as her beneficiary. At age 70½, Mary begins taking required minimum distributions over a period determined from the Uniform Lifetime Table. (Mary is allowed to recalculate her life expectancy each year.) At age 79, Mary dies and Susan begins taking required distributions over Susan’s life expectancy–29.6 years (fixed in the year following Mary’s death). Susan names Jon, her 30-year-old son, as her successor beneficiary. Susan dies at age 70 after receiving payments for 16 years, and Jon continues receiving required distributions over Susan’s remaining life expectancy (13.6 years). (See assumptions below.)

Year 1 Mary becomes owner of Jack’s IRA
Year 3 Mary begins taking distributions at age 70½ over her life expectancy
Year 12 Susan begins taking distributions the year after Mary’s death over Susan’s life expectancy
Year 28 Jon begins taking distributions over Susan’s remaining life expectancy
Year 40 All of Jack’s IRA funds have been distributed

Under this scenario, total payments of over $2 million are made over 40 years, to three generations.

Note:   Payments from a traditional IRA will generally be subject to income tax at the beneficiary’s tax rate. Qualified distributions from a Roth IRA are tax free.

Assumptions:

  • This is a hypothetical example and is not intended to reflect the actual performance of any specific investment portfolio, nor is it an estimate or guarantee of future value.
  • This illustration assumes a fixed 6% annual rate of return; the rate of return on your actual investment portfolio will be different, and will vary over time, according to actual market performance. This is particularly true for long-term investments. It is important to note that investments offering the potential for higher rates of return also involve a higher degree of risk to principal.
  • All earnings are reinvested, and all distributions are taken at year-end.
  • The projected figures assume that Mary takes the smallest distribution she’s allowed to take under IRS rules at the latest possible time without penalty.
  • The projected figures assume that tax law and IRS rules will remain constant throughout the life of the IRA.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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Market Week: March 19, 2012

Posted on March 20, 2012 by admin

Market Week: March 19, 2012

The Markets

Between the relative calm over Greece, the Fed’s stand-pat
stance, and a tiny bit of easing on the oil front, investors felt comfortable fleeing the low yields of U.S. Treasuries. That sent yields soaring, particularly at the shorter end of the spectrum; as bond prices fell, the benchmark 10-year yield hit a level not seen since last August. Equities benefitted across the board. The S&P 500 had its best week of the year and closed above 1,400 for the first time since May 2008, while the Dow recaptured 13,000 and tied its 2012 weekly record.

Market/Index 2011
Close		 Prior
Week		 As
of 3/16		 Week
Change		 YTD
Change*
DJIA 12217.56 12922.32 13232.62 2.40% 8.31%
Nasdaq 2605.15 2988.34 3055.26 2.24% 17.28%
S&P
500		 1257.60 1370.87 1404.17 2.43% 11.65%
Russell
2000		 740.92 817.00 830.18 1.61% 12.05%
Global
Dow		 1801.60 1979.18 2033.09 2.72% 12.85%
Fed.
Funds		 .25% .25% .25% 0 bps 0 bps
10-year
Treasuries		 1.89% 2.04% 2.31% 27 bps 42 bps

 

*Equities data reflect price changes, not total return.

Last Week’s Headlines

•No news is good news: The Federal Reserve continued to stay the course on both interest rates and its Operation Twist bond purchases. The statement said the Fed expects higher gas prices to boost inflation temporarily but not long term, and that global financial markets have eased but continue to pose significant downside risks.

•Spiking gas prices translated into spiking consumer
inflation in February. According to the Bureau of Labor Statistics, most of the 0.4% increase was the result of a 6% jump in gas prices during the month; excluding food and energy, costs were up only 0.1%. Meanwhile, wholesale prices were up 0.4%, with energy once again accounting for the bulk of the increase. However, the 3.3% wholesale increase since February 2011 was the smallest yearly figure since August 2010.

•Dramatically reduced exports helped create China’s largest monthly trade deficit in two decades. According to China’s General Administration of Customs, a 40% increase in imports helped push February’s trade deficit to $31.5 billion, though China’s lunar New Year holiday in January also may have affected the monthly figures.

•The Federal Reserve’s March surveys of manufacturing in the
Philadelphia and New York regions showed continued expansion at a moderate pace. Meanwhile, the Commerce Department said a manufacturing slowdown and lower natural gas extraction kept U.S. industrial production relatively unchanged.

•Fifteen large banks passed the Federal Reserve’s stress tests and will be able to increase dividends or institute stock buy-backs, which some have announced plans to do. However, four others–Ally Financial,
SunTrust Banks, MetLife, and Citigroup–must resubmit plans that show they have sufficient capital reserves to handle a financial crisis.

•February’s retail sales were up 1.1% from the previous month and 6.3% higher than February 2011, according to the Commerce Department. Not surprisingly, gas prices were up the most, but car dealers, clothing and department stores, and building/garden supplies dealers also saw 1%+ increases; building/garden materials and equipment were up 13.8% from the same time last year.

Eye on the Week Ahead

With conditions in place for Greece to make its bond payments on Tuesday, domestic housing data could suggest whether the relatively
benign housing statistics of recent months were produced by mild weather or the beginning of a genuine recovery.

Key dates and data releases: housing starts, Greek bond payments due (3/20); home resales (3/21); new home sales, weekly new jobless
claims (3/23).

Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but not warranty or guarantee is made as to its accuracy or completeness. Neither the
information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted
index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ
stock exchange. The Russell 2000 is a market-cap weighted index composed of2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named
Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.  

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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Weekly Economic Update March 19, 2012

Posted on March 19, 2012 by admin

John Jastremski Presents:

Weekly Economic Update March 19, 2012

PRICES RISE MOST IN TEN MONTHS

Consumer prices were up 0.4% in February according to the
Commerce Department, yet core inflation rose only 0.1%. A 6% jump in gasoline prices represented 80% of the Consumer Price Index’s biggest gain since April, while food prices were flat for the first time since July 2010. Economists polled by Bloomberg expected a 0.5% rise in CPI for the month. Producer prices also rose 0.4% last month, but prices for finished products were up but 0.1%. Annualized inflation was at 2.9% in February; annualized core CPI was at 2.2%.1,2

AN ILLUMINATING STATESIDE STRESS TEST

Applying a hypothetical “doomsday” scenario of the Dow
losing half of its value, joblessness at 13% and home prices at 1996 levels, the Federal Reserve put 19 major U.S. banks through its annual stress test last week and found that 15 passed: American Express, Bank of America, Bank of New York Mellon, BB&T, CapitalOne, Fifth Third, Goldman Sachs, JP Morgan Chase, Keycorp, Morgan Stanley, PNC, Regions, State Street, U.S. Bancorp and Wells
Fargo. Four lenders did not pass – the Fed concluded that Citigroup, SunTrust, Ally and MetLife would lose enough assets under the stress test scenario to pose systemic risk.3

CONSUMERS BUY MORE, SHOW LESS CONFIDENCE

The Census Bureau noted a 1.1% rise in retail sales for
February and revised the January gain north to 0.6%. Elsewhere, the initial University of Michigan consumer sentiment survey for March showed a slight dip to 74.3 from 75.3 in late February.4,5

BEST WEEK FOR U.S. EQUITIES SINCE DECEMBER

The NASDAQ? It went +2.24% on the week to settle Friday at
3,055.26. The Dow? Up 2.40% in five days to end the week at 13,232.62. The S&P 500? +2.43% to 1,404.17 at Friday’s close. More good news: the CBOE VIX settled below 15 Friday after touching a 5-year low. Crude oil was down 0.32% for the week to $107.06, gold down 3.25% last week to $1,655.80.2,6

THIS WEEK: Monday, Adobe Systems issues Q4 results. Tuesday,
February housing starts figures complement earnings from Tiffany, Krispy Kreme, Oracle and Cintas, and Fed chairman Ben Bernanke speaks at George Washington University. Wednesday, existing home sales figures are out for February as well as Q4 earnings from General Mills and Discover Financial. Thursday brings around round of initial claims, the Conference Board’s February leading indicators index and earnings from Nike, FedEx, Dollar General, Accenture and GameStop. Friday, we get data on February new home sales plus earnings from Darden Restaurants and KB Home.

 

% CHANGE

Y-T-D

1-YR
CHG

5-YR
AVG

10-YR
AVG

DJIA

+8.31

+13.94

+1.85

+2.47

NASDAQ

+17.28

+16.75

+5.75

+6.35

S&P 500

+11.65

+11.72

+0.25

+2.04

REAL YIELD

3/16
RATE

1 YR
AGO

5 YRS
AGO

10
YRS AGO

10 YR TIPS

-0.09%

0.85%

2.16%

3.48%

 

Sources: cnbc.com, bigcharts.com, treasury.gov,
treasurydirect.gov – 3/16/126,7,8,9

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor
Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.  


The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may
be reached at www.theretirementgroup.com.

 

 

 

 

 

 

 

 

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Managing Expenses During the College Years

Posted on March 19, 2012 by admin

Introduction

For most parents, paying for a child’s college or graduate school education is a major event. For some parents, it rivals only the purchase of a home in number of dollars spent. As the cost of college continues to rise, it’s little wonder that parents view their ability to pay college costs with some apprehension. Yet, in all but the most affluent families, paying for college does not involve a 100 percent out-of-pocket contribution from parents. Rather, the average family uses a combination of strategies to pay higher education costs–savings, financial aid, education tax credits, out-of-pocket contributions, and other creative solutions.
Savings

Hopefully, you’re one of the parents who have been saving money for their child’s college education on a regular basis. If so, now’s the time to use those funds. But in many cases, this won’t be enough to cover all the bills.
Financial aid

The majority of college-bound students qualify for some type of need-based financial aid (as opposed to merit-based financial aid like athletic scholarships), and this can supplement your savings. The largest provider of need-based financial aid is the federal government, followed by colleges.

Need-based financial aid consists of loans, grants, scholarships, and work-study jobs. Loans eventually need to be repaid by you or your child, while scholarships and grants do not. Work-study jobs are paid jobs performed by students and are subsidized by the federal government or the individual college.

Every college that accepts a student will try to create a financial aid package for that student. Typically, loans make up the biggest portion of any financial aid package (approximately 60 percent), though the exact percentage will vary by student. Most students take out at least some student loans, which lessen the financial burden on their parents.,

All students should apply for federal financial aid, even if they’re not sure they’ll qualify, because eligibility criteria may change slightly from year to year and filing the federal government’s aid application (called the FAFSA) is often a prerequisite for obtaining other types of aid, such as college aid.

After you become savvy about the financial aid process, you can learn about legitimate steps to take to position your income and assets to enhance your child’s financial aid eligibility. Though it’s best to become familiar with these steps while your child is still in high school (allowing time to implement them), you can also take advantage of these suggestions while your child is in college because financial aid must be reapplied for every year.

One final note: graduate students may not have the same breadth of financial aid programs available to them, or, conversely, they may have certain programs available to them that are not available to undergraduates. For example, the federal government’s grant programs are limited to undergraduates, but universities may offer special grant programs to graduate students that are not available to undergraduates.
Education tax credits and deductions

There are several education tax credits and deductions that can help families weather college costs, including the American Opportunity credit, the Lifetime Learning credit, and the student loan interest deduction. All of the education tax credits/deductions have income limits. For more information, see IRS Publication 970, Tax Benefits for Education.
Out-of-pocket contributions

Your child is eligible for financial aid, she has chosen an accelerated program that allows her to graduate in three years, and you will qualify for the Hope credit during her freshman year. But even with these cost-cutting measures, many parents will need to pay a portion of the college or graduate school bill (sometimes a substantial portion) from their own pocket.

The way you pay the bill from your own pocket can range from the simple to the complex. It may mean tapping funds from any number of sources–your current weekly paycheck, your savings and investments, your IRA or employer retirement plan, your home equity, other loan sources such as banks or brokerage houses, or other assets such as cash value life insurance. The commonality is that the money comes from you and is a drain on your financial net worth.

An important reminder: Paying for college out of pocket can conflict with other important financial goals, most notably saving for your retirement. It can be hard to manage both goals, but it is possible to save for college and retirement.
Other creative solutions

Finally, there are other creative ways for parents to lower their college costs by lowering the actual cost of school. For example, a student could choose an accelerated program and graduate in three years instead of four; a cooperative education where education is interspersed with paid internships; or a live-at-home arrangement where money is saved on room-and-board costs.

 

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached atwww.theretirementgroup.com.

Posted in Economic Report, Financial Planning, Investing and the Markets, Investment, John Jastremski, netbenefits, Retirement Planning, The Retirement Group John Jastremski, The Retirement Group LLC, Types of Investment, Why Investment | Tagged , , , , , , , , , | Comments Off

Fidelity Netbenefits

Posted on March 16, 2012 by admin

FIDELITY NETBENEFITS


Whether you are three months or three years away from retiring, The Retirement Group has and will strive to provide you with the best possible service in retirement planning.  A major benefits administrator that The Retirement Group works with is Fidelity’s Netbenefits.   Fidelity Netbenefits  is a widely trusted provider in retirement services and offers a variety of tools to achieve an individual’s retirement needs. The retirement Group is  neither associated nor endorsed by Fidelity or Netbenefits but we feel we  are experts on the site’s functions and can readily assist clients in accessing their employee savings plans.

 

Netbenefits offers a multitude of valuable resources to help prepare for retirement or any other important investment objectives you may hold. Some resources include account management, personal finance education, and portfolio planning. Investors can instantly check their current rates of return, view performance summaries, and check online statements up to 24 months prior. Along with that, investors can make adjustments to their paycheck deductions and change future contributions without difficulty.

Netbenefits provides planning tools such as myPlan® Retirement Quick Check and Retirement Income Planner. MyPlan® lets you estimate how much you may need to save in order to meet your financial goals. Retirement Income Planner creates an income plan to help ensure your assets will last throughout your lifespan.  The retirement Group is not associated or affiliated with myPlan.

 

As the trend grows for retirement planning, a number of financial organizations(ATT, Bank of America,  Alcoa, Verizon, Home Depot, GM, Merck) have launched websites to aid investors in managing their accounts independently. Fidelity Netbenefits created an easy to use site to help users view and manage their 401(k) savings plans. By logging on the Netbenefits, netbenefits.fidelity.com, investors have access to: explore online resources, review current investments, manage accounts, and access planning tools and learning resources.

Fidelity Netbenefits (http://netbenefits.fidelity.com) is a user-friendly online site that helps Fidelity Investment members view and manage their 401(k) retirement accounts.  This site allows the investor to control all aspects of their 401(k) plan from the comfort of their own home.

 

 

The Personal Finance Education resource offers specialized e-Learning workshops that tailor to help investors meet their retirement savings goals. Informative topics such as diversification, allocation, and investment options are also addressed in online seminars.

 

Netbenefits offers other valuable resources to help prepare for retirement or any other important goals you may hold. The Account Management resource allows users to view balances, current investment option details, and payment history. They can also perform transactions and receive e-statements.  Within this resource you can check fund performance, request exchanges among current investment options, receive fund quotes, chart portfolios, and make changes to contribution elections.

 

The Portfolio Planning resource is where an investor can learn more about potential expenses and how their income can cover these expenses throughout retirement. Simply utilize the site’s Retirement Income Planner. This function creates an income plan to help ensure that retirees won’t outlive their assets.

 

Other valuable resources that Netbenefits provides are articles and workshops relating to financial planning. A calculator is at hand to help you estimate your net pay, expenses, payments, etc. With the complexity of present-day 401(k) plans, all of these resources from Netbenefits are central factors to consider when planning your retirement.

Posted in 401(k), Estate Planning, Financial Planning, Investment, The Retirement Group LLC, Why Investment | Comments Off

WEEKLY ECONOMIC UPDATE March 12th 2012

Posted on March 13, 2012 by admin

John Jastremski Presents:

WEEKLY ECONOMIC UPDATE March 12th 2012

227,000 NEW JOBS, BUT JOBLESS RATE STILL AT 8.3%

While unemployment levels remained unchanged in February,
Labor Department data showed that nonfarm payrolls expanded by more than 200,000 positions for the third straight month. The private sector added 233,000 jobs in February, so it was basically responsible for the impressive net job gain. The underemployment rate (representing the jobless plus those settling for less than a 40-hour workweek) was 14.9% in February, a 1.8% drop from a year before. With such consistent job growth, the Federal Reserve faces
less pressure to roll out another monetary stimulus.1

SERVICE SECTOR GROWS IN FEBRUARY

The Institute for Supply Management’s service sector PMI
climbed to 57.3 for February, seeing a half-percent gain. A 3.1% jump in business activity/production and a 1.8% rise in new orders were nice highlights.2

OIL, GOLD END WEEK WITH MODERATE GAINS

From Wednesday to Friday, gold futures rose $39.50 and oil
futures $2.70. For the week, gains were actually modest: oil advanced but $0.70 on the NYMEX to $107.40 a barrel, while gold racked up a $2.10 gain to end Friday’s COMEX session at $1,710.90 per ounce. The price of unleaded gas was $3.76 a gallon nationally on Friday per AAA’s survey.1,3

LITTLE VOLATILITY AFTER GREEK BOND SWAP

On Wall Street, March 5-9 mirrored the week before: the Dow
pulled back (-0.43% to 12,922.02) and the NASDAQ (+0.41% to 2,988.34) and S&P 500 (+0.09% to 1,370.87) advanced. The market was still wary of the debt deal out of the EU – last week, 86% of investors holding Greek bonds agreed to swap securities issued by the Greek government for replacement ones worth less, and collective action clauses will force about 10% more of these bondholders to do so. While this seemingly opens the door for a new €130 billion EU/IMF rescue package for Greece, it could be the last bailout Greece
receives.1,4

THIS WEEK: In addition to what goes on in Europe, we have a
lot of stateside data. Monday, Urban Outfitters and Burger King issue Q4 results. On Tuesday, a Fed policy meeting concludes and February retail sales figures arrive. Wednesday, Fed chairman Ben Bernanke speaks in Nashville and Guess and Youku (China’s equivalent of YouTube) provide Q4 earnings. Besides new initial claims figures, Thursday offers February’s PPI and earnings from Ross Stores and Dole. Friday, February’s CPI arrives plus the initial March consumer sentiment survey from the University of Michigan; the iPad 3 also hits
the shelves.

% CHANGE Y-T-D 1-YR
CHG		 5-YR
AVG		 10-YR
AVG
DJIA +5.77 +5.80 +1.05 +2.22
NASDAQ +14.71 +8.60 +5.03 +5.49
S&P 500 +9.01 +3.86 -0.46 +1.77
REAL YIELD 3/9
RATE		 1 YR
AGO		 5 YRS
AGO		 10
YRS AGO
10 YR TIPS -0.24% 0.98% 2.25% 3.48%

Sources: money.msn.com, bigcharts.com, treasury.gov,
treasurydirect.gov – 3/9/121,5,6,7,8

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your
Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon,
ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

 

 

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Market Week: March 5, 2012

Posted on March 6, 2012 by admin

Market Week: March 5, 2012

The Markets

The small caps of the Russell 2000 took it on the chin last
week, while the other indices more or less held their own. The Dow finally
managed to close above 13,000, which it hasn’t done since May 2008, but
couldn’t hang on through the end of the week. Meanwhile, the Nasdaq continued
to outpace its domestic peers.

Market/Index

Market/Index 2011
Close		 Prior
Week		 As
of 3/2		 Week
Change		 YTD
Change*
DJIA 12217.56 12982.95 12977.57 -.04% 6.22%
Nasdaq 2605.15 2963.75 2976.19 .42% 14.24%
S&P
500		 1257.60 1365.74 1369.63 .28% 8.91%
Russell
2000		 740.92 826.92 802.42 -2.96% 8.30%
Global
Dow		 1801.60 2000.96 1999.88 -.05% 11.01%
Fed.
Funds		 .25% .25% .25% 0 bps 0 bps
10-year
Treasuries		 1.89% 1.98% 1.99% 1 bps 10 bps

*Equities data reflect price changes, not total return

Last Week’s Headlines

•The U.S. economy grew at an annual rate of 3% in Q4 2011, a
more rapid pace than the 2.8% previously estimated. According to the Bureau of
Economic Analysis, inventories, consumer spending, and commercial construction
were major contributors to the increase.

•European Union leaders (other than those of the United
Kingdom and the Czech Republic) signed a treaty intended to impose greater
fiscal discipline in the EU. Meanwhile, the German parliament voted to support
the second Greek bailout and eurozone finance ministers agreed to release new
funds for the permanent European Stability Mechanism that will handle financial
assistance efforts. Also, European banks refinanced almost €530 billion worth
of loans as part of the European Central Bank’s second long-term refinancing
operation (LTRO) to maintain liquidity in the financial system.

•Orders for durable goods such as autos, appliances, and
furniture fell 4% (3.2% if transportation is excluded) in January after three
straight monthly increases. The Department of Commerce said transportation
equipment, especially orders for commercial aircraft, fell the most (-19%).
However, declines also were seen in computers and heavy machinery, both down
more than 10%, while orders for cars were up 0.9%.

•U.S. manufacturing continued to expand in February for the
31st straight month, though at a slightly slower pace. The Institute for Supply
Management said new orders, production, and employment also grew.

•Recent increases in housing sales didn’t translate into
higher prices in December. The S&P/Case-Shiller national index showed home
prices at their lowest level since mid-2006; the index was down almost 34% from
its Q2 2006 peak.

Eye on the Week Ahead

Global markets will watch to see whether at least 30% of
Greece’s bondholders formally accept its bond swap offer on Thursday. U.S.
unemployment numbers and eurozone GDP data also will be of interest.

Key dates and data releases: factory orders, U.S. services
sector (3/5); labor productivity/costs (3/7); unemployment/payrolls, balance of
trade (3/9).

Data sources: Includes data provided by Brounes &
Associates. All information is based on sources deemed reliable, but no
warranty or guarantee is made as to its accuracy or completeness. Neither the
information nor any opinion expressed herein constitutes a solicitation for the
purchase or sale of any securities, and should not be relied on as financial
advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted
index composed of 30 widely traded blue-chip U.S. common stocks. The S&P
500 is a market-cap weighted index composed of the common stocks of 500 leading
companies in leading industries of the U.S. economy. The NASDAQ Composite Index
is a market-value weighted index of all common stocks listed on the NASDAQ
stock exchange. The Russell 2000 is a market-cap weighted index composed of
2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index
of 150 widely traded blue-chip common stocks worldwide. Market indexes listed
are unmanaged and are not available for direct investment.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and
does not necessarily represent the views of John Jastremski, Jeremy Keating,
Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent
Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This
information should not be construed as investment advice. Neither the named
Representatives nor Broker/Dealer gives tax or legal advice. All information is
believed to be from reliable sources; however, we make no representation as to
its completeness or accuracy. The publisher is not engaged in rendering legal,
accounting or other professional services. If other expert assistance is
needed, the reader is advised to engage the services of a competent
professional. Please consult your Financial Advisor for further information or
call 800-900-5867.  

The Retirement Group is not affiliated with nor endorsed by fidelity.com,
netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING
Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon,
ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America,
Alcatel-Lucent or by your employer. We are an independent financial advisory
group that specializes in transition planning and lump sum distribution. Please
call our office at 800-900-5867 if you have additional questions or need help
in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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MARKET MONTH: FEBRUARY 2012

Posted on February 29, 2012 by admin

MARKET MONTH: FEBRUARY 2012

The Markets

The Nasdaq came on strong for the second month in a row
(though at a somewhat slower pace than in January) as it briefly hit 3,000 for
the first time since 2000. An agreement on a second Greek bailout helped the
Global Dow continue to heal; its year-to-date performance is now second only to
the Nasdaq’s. Meanwhile, the Dow Industrial Average finally managed to close
above the 13,000 level–at least for one day–and recorded its fifth straight
month of gains, while the Russell 2000 lagged the large caps for the month.

After regaining some of the ground it lost late last year,
gold celebrated the month’s extra day by falling to just over $1,700. Fueled in
part by tensions with Iran, oil prices soared as much as 12% at one point
before ending the month at $107 a barrel, raising concern about prices at the
pump and the potential impact on economic recovery. The euro hit $1.34 at one
point–its highest level since Thanksgiving–as eurozone interest rates
stabilized a bit, while the yield on 10-year Treasuries nudged upward.

 

Market/Index 2011
Close		 Prior
Month		 As
of 2/29		 Month
Change		 YTD
Change*
DJIA 12217.56 12632.91 12952.07 2.53% 6.01%
Nasdaq 2605.15 2813.84 2966.89 5.44% 13.89%
S&P
500		 1257.60 1312.40 1365.68 4.06% 8.59%
Russell
2000		 740.92 792.82 810.94 2.29% 9.45%
Global
Dow		 1801.60 1915.01 1997.44 4.30% 10.87%
Fed.
Funds		 .25% .25% .25% 0 bps 0 bps
10-year
Treasuries		 1.89% 1.83% 1.98% 15 bps 9 bps

 

 

The Month in Review

•The Bureau of Labor Statistics said U.S. payrolls added
243,000 jobs in January, bringing the unemployment rate down to 8.3%. It was
the fifth straight month of lower unemployment.

•The U.S. economy grew at an annual rate of 3% in Q4 2011, a
more rapid pace than the 2.8% initial estimate. Once again, the Bureau of
Economic Analysis said inventories were a major contributor, though consumer
spending and commercial construction also were up.

•Eurozone finance ministers agreed to the terms of a second
bailout for Greece, worth €130 billion, after the country’s coalition
government approved additional austerity measures and private bondholders
(i.e., banks) agreed to swap their Greek sovereign bonds for ones worth almost
54% less. However, the G-20 nations postponed committing more resources for the
International Monetary Fund’s contribution to the bailout effort, saying they
want to see how European rescue efforts progress.

•Moody’s slapped new credit rating downgrades and/or
negative outlooks on several European countries, including the United Kingdom
and France, because of their exposure to the more troubled countries’ debt.

•Congress agreed to extend through the end of 2012 both the
2% payroll tax reduction and long-term unemployment benefits.

•Though housing starts, new residential construction, and
home resales all improved during the month–they were up 1.5%, 1.5%, and 4.3%
respectively–the good news didn’t extend to home prices. The
S&P/Case-Shiller national index of home prices hit its lowest point since
its mid-2006 peak.

•Manufacturing data was mixed. The Commerce Department said
durable goods orders fell, mostly because of a drop in orders for commercial
aircraft, but the Fed’s surveys of the New York and Philadelphia regions hit
their highest levels in months.

•Inflation at the wholesale level rose 1% in January,
putting the rate for the past 12 months at 4.1%. However, not all the increases
made their way to the consumer level; according to the Bureau of Labor
Statistics, consumer inflation was up 0.2% for the month and 2.9% for the last
year. Meanwhile, the Commerce Department said retail sales rose a modest 0.4%
in January.

Eye on the Month Ahead

Any suggestion of bailout package problems that might spell
trouble for the Greek bond payments due March 20 could spook global markets.
Investors also will watch to see if leadership in the equities markets remains
with companies that benefit most from the early days of a recovery, and whether
that recovery will pick up steam.

Key dates and data releases: auto sales, personal
income/spending, U.S. manufacturing, construction spending (3/1); factory
orders, U.S. services sector (3/5); labor productivity/costs (3/7);
unemployment/payrolls, balance of trade (3/9); retail sales, Federal Open
Market Committee announcement (3/13); import/export prices (3/14); wholesale
inflation, international capital flows, Philadelphia Fed/Empire State
manufacturing surveys (3/15); consumer inflation, industrial production,
quadruple witching options expiration (3/16); housing starts (3/20); home resales
(3/21); new home sales (3/23); home prices (3/27); durable goods orders (3/28);
final Q4 GDP (3/29); personal income/spending (3/30).

This material was prepared by Broadridge Investor Communication Solutions, Inc., and
does not necessarily represent the views of John Jastremski, Jeremy Keating,
Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent
Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This
information should not be construed as investment advice. Neither the named
Representatives nor Broker/Dealer gives tax or legal advice. All information is
believed to be from reliable sources; however, we make no representation as to
its completeness or accuracy. The publisher is not engaged in rendering legal,
accounting or other professional services. If other expert assistance is
needed, the reader is advised to engage the services of a competent
professional. Please consult your Financial Advisor for further information or
call 800-900-5867.  

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John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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