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Sound Advice: September 22, 2021

Four Things You Need To Know About Social Security   When to Start? One of the most common questions about Social Security is when to start receiving benefits.   The earliest age to begin is 62, although there are significant trade-offs when doing so.   First, your benefits will be permanently reduced by 25.8% from those payable at Full Retirement Age (FRA) over the course of your lifetime.   Second, your benefits will be reduced if you earn more than $18,960 a year.   The reduction will be $1 for every $2 you earn over that limit.   The limit rises every year, but by a modest amount.   For those considering part-time work during retirement, this may not be a problem, but for folks planning to continue full-time employment, this reduction could wipe out the benefits they would receive. For those who wait until FRA, there is no limit on earned income and no penalty.   Full retirement age is now 66 years and two months.   It increases by two months every year. To get the highes
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Sound Advice: September 15, 2021

What’s a Safe Withdrawal Rate in Retirement? If you are already retired or planning to retire soon, one of your biggest concerns will be having sufficient income from your investments (and Social Security) to cover your ongoing expenses without running out of money.   Another concern will be how you will spend your time, preferably in a satisfying manner.   The financial part of the equation can be tricky since there are several variables that can change the outcome dramatically.  Those with children often are concerned about leaving a substantial inheritance.  Those without heirs can draw down the earnings on their assets and take distributions from the principal amount. The former situation has a heightened emphasis on the prospective returns on assets invested and the ongoing flow of expenses.  The usually suggested withdrawal rate is 4% of assets in Year One, adjusted each year thereafter for inflation.  When inflation rises, the withdrawal increases . . . and vice-versa. V

Sound Advice: September 8, 2021

Wall Street Lingo Translated – Part II Beta The beta is a measure of market sensitivity (volatility) relative to the Standard & Poor’s 500 Index, which has a beta of 1.00.  A stock that moves 20% more than the S&P in either direction would have a beta of 1.20.  A well-constructed portfolio aimed at delivering worthwhile returns while managing sensitivity (a.k.a., risk) would have an average beta below 1.00 Bid and Asked Prices There are actually two prices for each stock.  One is the bid price, which is the price a trader (usually an exchange specialist who handles huge quantities of shares) will pay to buy a stock from an investor. The other is the asked price, which is the price a trader will sell a stock for.  The difference between the bid and asked prices is known as the spread, which tends to be quite narrow in the case of actively traded stocks. The situation with bonds is similar, though spreads tend to broaden when the trade involves a relatively small number o

Sound Advice: September 1, 2021

It’s All About The Earnings   For stocks, the key driving force is EPS, earnings per share. EPS is the same thing as profit or net income per share.  Over time, when a company’s earnings are rising, its stock will follow.  The two are not always in lockstep, but most assuredly they will move in the same direction. There are nuances that impact current stock movements and probable price action ahead.  Among the most important is the price-earnings ratio.  It’s also known on Wall Street as the P/E, the price-earnings multiple, the multiple, the valuation rate, and the capitalization rate. The P/E is derived from a simple calculation.  The P stands for the price of one share of stock.  The E stands for earnings per share, which is the company’s net income divided by the number of shares outstanding.  EPS and P/E information is available on many financial websites including Yahoo! Finance and MarketWatch. By itself, the P/E is not helpful.  What’s missing is the historical range of

Sound Advice: August 25, 2021

Wall Street Lingo Translated For most people trying to get a handle on the world of Wall Street, the task of working one’s way through the mass of available information is difficult enough, but when most of it comes with terminology that’s anything but obvious, the task can be overwhelming.   With that said, here are a few plain English explanations to help you understand. Bubbles When the market averages appear to be rising well above historical valuation ranges, this is referred to as a bubble.   The best-known bubble of recent decades was that of the dot.com era at the turn of the millennium.   That was a time when concepts were viewed as more important than underlying progress in sales and earnings.   Not surprisingly, the follow-up to the dot.com bubble was a decade in which the market averages gained little ground, allowing increasing corporate profits to climb sufficiently to return valuations to normal. Bull Market and Bear Market The acknowledged definition of these

Sound Advice: August 18, 2021

  Scam Alert One of the most concerning problems these days is scams, whether by email, text or telephone.   Not only are most people bombarded by robocalls and junk email, they are also the prey of scam artists seeking to steal their identities or their assets. Messages through the various communications channels appear to come from the IRS, the Social Security Administration, the FBI, banks, credit card companies, those who would have you believe they are friends, royalty from Nigeria and other countries, and even Facebook. None of the government agencies will contact you in this fashion.   If they need to be in touch with you, they will do so through the U.S. mail.   In all cases, these messages are seeking your personal information.   Email messages of this sort always have a link to click on that theoretically will provide you with additional information about the ostensible topic being addressed.   The reality, however, is that it usually provides an opening for some vers

Sound Advice: August 11, 2021

Cryptocurrencies, Bitcoins, and the like The most talked-about quote at the late July AICPA ENGAGE conference in Las Vegas came when keynote speaker David Kelly, Chief Global Strategist of J.P. Morgan, was asked about bitcoin.   He said he believes that bitcoin “is more of a cult than a currency.” Kelly went on to say that real currencies are transparent and stable.   Bitcoin is neither of those.”   He also pointed out that there’s some additional risk to crypto holdings that aren’t related to the markets.   “Some 22% of the total bitcoins are out of circulation, because people either lost the passwords to their digital wallets or died and the password was lost,” he said.   This, of course, is in addition to the hacking that the crypto exchanges are constantly reporting.   Plus, there is no help desk you can call to get your money back. The more pressing question is whether investors should invest in crypto as a diversifier, buy crypto at all or just forget about it.   Sensible i