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Do Recent Stock Market Highs And The Real World Economy Match Up?

Do Recent Stock Market Highs And The Real World Economy Match Up?

Imagine this — you’re on a cross-country road trip. You’ve mapped the 2,800-mile distance between San Francisco and Washington, D.C., charted your course, and now you’re on the open road, cruising along at 60 mph with the wind in your hair. Life is good, right?

Now imagine that you’re on the home stretch, with only 400 miles until your destination point, and traffic slows to a crawl. You drop from 60 down to 39 mph. It feels like a snail’s pace, and it’s going to be that way for the rest of your drive. Enter a longing for the 60 mph clip, and frustration for the remainder of the journey.

This is precisely how many Americans feel about our current economy. Yes, the overall economic picture in the U.S. is relatively good, but few would describe it as “gangbusters.” So as U.S. stock markets have continued to close at all-time highs, the ho-hum pace of economic growth has created a sense of unease for many investors due to this disconnect.

Over the past several months, I’ve continuously heard the following from investors, “Hey, Wes, the economy doesn’t seem to match the stock market.”

Before we look at where we are now, it’s important to also look at some economic history. From 1965 until 2008, the U.S. economy grew 3.1 percent per year on average. Since the Great Recession, we’ve been growing at 1.9 percent on average. While at first glance these numbers don’t seem exceptionally far apart, consider that they represent a 35 percent slowdown in what was a more than 40-year trend. Hence, our economic speed feels like 39 mph, down from 60 mph.

Where are we now? The most recent jobs report indicated that July ushered in 209,000 new jobs, and the unemployment rate fell to 4.3 percent. But wage growth is still stuck at the same modest, uneventful 1.5 to 2.5 percent annual growth rate since 2010.

These numbers could explain some of our frustration. While the unemployment rate is low, we aren’t seeing the accompanying wage growth of between 3 and 4 percent per year like we did for the three decades before the Great Recession.

We as humans don’t do well with uncertainty or stagnation. We expect something to happen. We expect things to get better. Or worse. Something. So when we’re entrenched in a slow growth economy — the 39 mph economy — our human psyche conjures up a sense of anxiety.

Sure, we know markets are hitting all-time highs, but most American families aren’t really buying it. The Dow is near an all-time high, but we don’t believe that business is the best it’s ever been. This disconnect is the culprit. The difference between how the stock market is faring and how we interpret the real world economy is what’s making us suspect.

From my experience, this is the state that a lot of folks are in — they’re uncomfortable with the disconnect between today’s “great market” and “just OK” real world economy. Factor in the market-related catastrophes we’ve lived through in the past 17 years (2000-2002 and 2007-2008), which feel like just yesterday, and no wonder we are unsettled.

But isn’t the stock market a barometer for how the economy is doing, and doesn’t it say we’re doing well? The short answer is yes, and yes. The stock market gives us a big numerical measure of corporate and economic health. But the less reported, more subtle tide of the economy matters more to most families.

For starters, we’re heading into the market correction months of August, September and October. Student loans are tipping in at $1.3 trillion. And then there’s the dual-income housing trap. Studies have shown that two-income families are more at risk than their single-income counterparts to fall short on their mortgage payments. Since 1975, the Equal Credit Opportunity Act has essentially encouraged dual-income households to take on bigger mortgage payments. As a result, more households are at risk of foreclosure if one earner loses their job.

And let’s not forget about the ongoing health care conundrum. We’re still staring into the unknown when it comes to the future of health care costs. If anything, the cost of care continues to rise.

Right now, you’re saying, “Wes, thanks for sharing all of the problems, but what’s a nervous investor to do?”

First, don’t panic. You have time. Investing is a marathon, not a sprint. I’ve said it before and I’ll say it again — we feel the 15/50 Stock Rule is a prudent way to view your long-term investment strategy. If you believe you have more than 15 years of living left to do, we believe your portfolio should consist of at least 50 percent stocks, and the remaining balance in cash and various bonds. This rule seeks to help investors strike a balance between risk and reward.

Second, remember to acknowledge there are a multitude of things happening in our economy that aren’t highly publicized, but make big statements nonetheless. Dividend increases are an example of this. Take, for instance, Caterpillar Inc. The company recently raised its quarterly dividend by a penny. This doesn’t sound like much, but let’s do the math.

Caterpillar has about 600 million shares. One penny per quarter equals 4 cents per share, which translates into a $24 million increase in what this company pays out to investors. That’s on top of the existing dividend. Today, the $3.12 per share price equates to almost $1.9 billion per year. A small increase like this is actually a very big deal.

Finally, remember the “Rich Ratio.” Your Rich Ratio is the amount of money you have in relation to the money you need to realize your dreams. In essence, this is a real number that can reassure you that you’re in a good place based on your income, investments and projected retirement needs. To calculate your Rich Ratio, take the amount of monthly income you should have or do have in retirement (Social Security + pension + any additional steady income streams), including what your nest egg should produce, and divide it by what you expect to spend each month to live the retirement you want. Your “have” divided by your “need.” Once adjusted for taxes, if your ratio comes in at over 1.0, you’re in good shape, no matter the ups and downs of the market and overall economy.

While uneasiness about our current stock market relative to the economy may reign supreme, it’s important for us to rein in our emotions. Remember, our economy has more storylines than “Game of Thrones.” Don’t get fixated on the dragons; look at the big picture as you take stock of your financial future.

 


 


 

2 Easy Ways To Step Up Your Security Game Before You Become A Cyber-Crime Statistic

Let’s face it. If you have a presence on the internet, sooner or later one (or more) of your accounts will get hacked. The resulting damage might be significant, or simply annoying. But there is a very high probability that it’s going to happen. Earlier this year, one million Gmail account passwords were stolen in just one hack attack.

That’s why it is absolutely critical to prioritize security in your digital activity, especially when it comes to banking and other money-related activity. Here are two ways to up your security game before you become a cyber-crime statistic.

1. Have a person. It’s vitally important to have a relationship with a human being at your bank, brokerage house and other financial institutions where you conduct business. A contact who knows even a little bit about you will provide a powerful firewall against digital fraud.

Say, for example, someone steals your Gmail password and learns that you planning to build a retirement cabin. The hacker could email your financial planner and request that $10,000 be sent to “my new bank account” being used to fund the cabin project. If the planner knows you at all, he’ll arch an eyebrow and call you to make sure the requested transfer is legit.

2. Implement two-factor authentication – now. Passwords don’t provide enough security anymore. They are easy to steal (or guess), and once a hacker has that magic word, it’s open season on your data. Two-factor authentication makes your website accounts more secure by requiring both a password and a one-time-use code to log in. The code is generated by the website and sent to your cell phone or other mobile device. Yes, the extra step is a bit of a pain, but nothing compared to the potential agony of getting hacked.

Here are some popular sites/services that offer two-factor authentication. If you use any of these, you should activate the feature, asap.

– Google/Gmail: Google’s two-factor system sends a six-digit code via text message when you try to log in from a new computer, though it also works with the Google Authenticator app for Android, iOS, and BlackBerry. You can save each machine for 30 days.

– Yahoo! Mail:  Yahoo’s two-factor authentication delivers a six-digit code via text message when you try to sign in from an unknown device.

– Facebook: The social media site’s Login Approvals sends you a six-digit code via text message when you attempt to log in from a new machine. It also works with apps like Google Authenticator for Android, iOS, and BlackBerry. You can authorize a new machine from Facebook.com on a saved machine if you don’t have your phone available.

– LinkedIn: The professional networking site sends you a six-digit code via text when you attempt to log in from a new device.

– Microsoft accounts: Microsoft’s sends a seven-digit code via text message or email when you attempt to log in from a new device, though it also works with a number of authenticator apps.

– Apple: Apple’s system sends you a four-digit code via text message or Find My iPhone notifications when you attempt to log in from a new machine. You can enable it here, or check out Apple’s documentation for more info.

– Dropbox: The cloud storage service’s two-factor authentication sends you a six-digit code via text message when you attempt to log in from a new computer. It also works with Google Authenticator and some similar authentication apps.

– Evernote: Free Evernote users will need to use an authenticator app like Google Authenticator for Android, iOS, and BlackBerry, though premium users can also receive a code via text message to log into a new device.

– PayPal: PayPal’s system issues you a six-digit code via text when you attempt to sign in from a new machine.

 


Read the original article here.


 

3 Mistakes of Unhappy Retirees

What do we talk about when discussing retirement planning? One of the most deep-seated human fears, “Will my money ever run out?” Hence, much of the discussion and debate centers on saving and investing to build a retirement war chest that will fund our post-career years.

What is often overlooked, though, in this savings arms race is our quality of life in retirement. Will you be a happy retiree?

There’s much more to a happy retirement than simply having enough money tucked away. In fact, I’d even say some of those other things are more important than your savings level. Trust me, there are a lot of well-funded but unhappy retirees. How can you avoid an unhappy retirement, and what can we learn from unhappy retirees?

In an effort to answer that question, I conducted a comprehensive study that included more than 1,350 retirees across 46 states. My findings became the basis for my book, “You Can Retire Sooner Than You Think.” The research was focused not only on the financial situations of these people, but also their overall quality of life.

Bottom line: There are significant differences between how happy and unhappy retirees envision their retirement and spend their money.

Here are three major mistakes that the unhappy retirees in my study had in common:

1. Unhappy Retirees Can’t Define the Purpose of Their Money.

Too many people moving toward retirement years have the false impression that the money that they have saved is going to make them happy once the big day arrives. They have no vision for their retirement, no plans, no specific dreams they want to pursue.

The happiest retirees understand that the point of saving is to enable them to enjoy the things that they love during retirement. Whether it’s traveling, supporting causes, helping the grandkids attend college, or owning a lake house, happy retirees have a purpose for their money.

I would argue having a vision for retirement is as important as saving for it. It will determine not only how much money you really need, but how much joy that money and free time will bring to your life. If you don’t have a mental picture of your post-career years, start working on it tonight. It can start by simply dreaming with your spouse, but eventually you want to get it on paper. Sure, you can make changes over the years, but that document is every bit as important as your brokerage statements to creating a happy retirement.

2. Unhappy Retirees Have a “Rich Ratio” Under 1.

The Rich Ratio is simple: It is the amount of money that you have in relation to the amount of money that you need. (For purposes of illustration, note that this calculation should be done with after-tax, your “take home,” income amounts.)

It’s easy to calculate your Rich Ratio. Simply take the amount of monthly income you should have or do have in retirement (Social Security + pension + any additional steady income streams), including what your nest egg should produce, and divide it by what you expect to spend each month to live the retirement you want: Have / Need = Rich Ratio. Let’s compare two very different situations:

Brittany wants to travel in retirement, so she needs $8,000 a month. She has a small pension from her time working with a cable company ($1,000/month), plus Social Security at age 66 of $2,200/month. She has saved $1,000,000 in her 401(k).

Brittany’s Have = $1,000 (pension) + $2,200 (Social Security) + $3,750 (using an average income yield of 4.5 percent per year from her 401(k) withdrawn monthly) = $6,950

Brittany’s Need = $8,000

Brittany’s Rich Ratio = $6,950/$8,000 = 0.87

Brittany’s Rich Ratio is below 1, so we can’t consider her to be “rich,” and she unfortunately falls into our “unhappy” retiree group.

Now, let’s look at Jack.

Jack needs just $4,000 a month to retire comfortably. He has already paid off his house, so he’s living mortgage free. Jack also has a small pension of $1,300/month. He receives $1,800 from Social Security every month, and he has $500,000 in his 401(k).

Jack’s Have = $1,300 + $1,800 + $1,875 (using an average income yield of 4.5 percent per year from his 401(k) withdrawn monthly) = $4,975

Jack’s Need = $4,000

Jack’s Rich Ratio = $4,975/$4,000 = 1.24

Despite the fact that Jack has less money in his retirement account and a smaller net worth than Brittany, he is actually set up to be a much happier retiree than Brittany.

3. Unhappy Retirees are Burdened With Housing Debt

Happy retirees have typically either paid off their mortgage or will be within five years of doing so when they retire. Conversely, a large percentage of unhappy retirees have 10 or more years until their house will be paid off.

If you are going to move in retirement, it should be into a house that you can pay off completely so you aren’t saddled with extra years of mortgage payments. As you consider relocating, remember, too, that buying a new house may incur moving costs, new furniture, drapes, rugs, cable and TV hookups, etc.

The same way of thinking applies to home renovations. Don’t jump in too quickly. Before you remodel that kitchen or finish your basement, understand that each upgrade has an uncanny way of spurring on another project. Before you know it, you are in the middle of a significant remodel, and money that was supposed to last in perpetuity — that retirement war chest — is flying out the window.

Keep my two rules in mind if you even think you want to move or do home improvements:

  • If you are planning to move while in retirement, be sure that you can move into a new home without having a mortgage — essentially swapping your current home equity (or paid-off mortgage) for a home owned “free and clear.”
  • Similarly, if you really want to make some home improvements, try your best to take care of them before you stop working.

Retirement should be a time when you are able to fully devote your energy and finances to doing the things you love. You can make that happen by avoiding these, and the other mistakes made by unhappy retirees.

 


Read the original article here.

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.


 

2017 Second Quarter Market Recap

 

The First Half Sees Steady Rise For Stocks Coupled With Low Volatility

The second quarter played out in a similar fashion to the first — new market highs with little volatility. In fact, the first half of the year experienced the second smallest drawdown (peak to trough decline) in history. During the first six months of 2017, the largest S&P 500 decline came in at down 2.8%. The only year with a smaller decline happened during 1995 when stocks pulled back 1.7%. What does this mean for the second half? Well, it may mean nothing, but we looked at the 5 years with the smallest drawdowns just to see if any patterns would emerge. There’s good news and bad. We’ll start with the bad news – in every instance the second half of the year saw larger drawdowns. The worst being an over 15% correction in 2015. Now for the good news — in each year the market built on first half gains and finished higher during the second half as well despite the corrections.

We’re always reticent to rely too much on one-off stats, but in this case, it fits our current view of the market. We believe investor complacency exists and expect it to manifest itself in the form of elevated volatility over the coming quarters. Despite this, we continue to have a favorable outlook for stocks based on improving corporate profits, solid relative valuations and the prospects for fiscal policy tailwinds. 

A Similar Refrain: The US Economy Remains Resilient

At the risk of sounding like a broken record, we can find few cracks in the US economy despite being 96 months into the current expansion. The labor market is healthy with unemployment below 4.5%, jobless claims near all-time lows and 220,000 jobs added during June, a level above the post-crisis average. Wage growth is still hovering in the 2.5% range where consumers have more spending power and corporate profits can remain healthy. Confidence data taken from consumers, CEOs and small business owners all sit comfortably higher than a year ago, despite taking modest steps back from recent highs.

If we had to pick one area of clear slowing it would be auto sales. That said, the slowing in auto sales is not unexpected. The US has been running above its long-term average of 15.6 million cars sold annually since 2014 as customers re-entered the market following well below average purchases during and immediately after the recession. We expect the current rate of 16.6 million autos sold per year to decline further with an ultimate normalization around the long-term average. We don’t view this as a canary in the coal mine for the US economy. Rather, a natural progression coming on the heels of the worst financial crisis in roughly 100 years.

Second Half Likely To Experience A Bumpier Ride, But Outlook Positive

We’d be remiss if we didn’t touch on the Federal Reserve and its path to rate normalization as well as the gridlock in our nation’s capital. The Federal Reserve raised rates for the fourth time this cycle to a target range of 1.0%-1.25%. There is no way around the fact we’re currently investing in a tightening environment. But, let’s be clear, monetary policy can’t exactly be described as tight when real rates (adjusted for inflation) are still negative. The Fed is taking a very measured pace to this tightening cycle, which historically is a more favorable backdrop for stocks than fast tightening cycles.

Washington remains a mess. But this is nothing new. The Healthcare debate has led many investors to question whether the new administration will be successful in passage of its pro-growth policies. We don’t have a crystal ball on the legislation front. What we do know is legislation is always messy and there are things the President can do without Congress. Two immediate actions that have a high likelihood of success come to mind. One is less onerous financial regulations which could lead to faster EPS growth and higher levels of shareholder returns (dividends and share repurchases) for financial stocks. The second is more a lenient energy project approval process which could help MLPs grow assets at a faster clip. As far as legislation goes, we’d simply point out that it is always an arduous process and would not be too quick to dismiss the idea of tax reform occurring later in 2017 or early 2018. And if it does occur it would likely add more fuel to the fire driving corporate profit growth.

As we discussed, we expect a bumpier ride during the second half of the year for stocks after an extremely steady first half. The outlook, however, looks favorable to us. The economic backdrop is supportive and corporate profits have returned to growth mode following a “recession” during 2015 and early 2016. The biggest risk, in our view, for stocks are valuations which are on the high side of historical averages. The best cure for elevated valuations is old fashioned earnings growth, which we’ve started to witness. Additionally, when compared to the bond market which is being tested by less central bank accommodation around the world, stocks offer good value.

Please don’t hesitate to contact us with any questions or concerns you may have. We’re here to help.

Regards,

The Investment Committee

 

 

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.


 

Ignore Wall Street’s Retirement Numbers And Create Your Own

Fear is a powerful marketing tool. Yes, sex sells, but striking doubt or terror into the public’s heart can be even more effective. Need proof? Ask yourself how much you need to retire without eating cat food for dinner or greeting Wal-Mart shoppers at age 87.

To hear Wall Street tell it (or sell it), you need to amass between $1 million and $2.5 million in retirement savings if you want an even remotely comfortable post-career life. Big numbers like these can terrorize even the most rational person.

But don’t let them cause panic or paralysis. As the old saying goes, figures don’t lie, but liars figure.

Yes, building a huge retirement nest egg is a great thing. I highly recommend it. But that’s not the only road to a happy, secure retirement. Another approach to retirement planning is my Fill the Gap (FTG) strategy, in which you create a financial formula that fits your individual retirement needs.

Before we get into the specifics of the FTG approach, let’s talk about Wall Street’s recommendations and motivations. It’s important to consider the source of the information. Remember, Wall Street’s viability relies on investors accumulating money. Because most of Wall Street is publicly traded, they need an ever-increasing stream of investor assets for their share prices to rise. The more you invest, the more Wall Street makes.

This explains every retirement planning study ever issued by Wall Street. As an example, news reports on a Legg Mason survey indicated that investors believe they need $2.5 million in retirement to enjoy their same quality of life. Legg Mason sells mutual funds. Clearly, this contention benefits their business.

So, if you base how much money you need for retirement on Wall Street’s numbers, you may never feel you have enough.

Now that we’ve dispensed with Wall Street’s one-size-fits-all, huge nest egg approach to retirement, we can turn to the highly workable, highly individualized FTG strategy.

FTG focuses on covering expenses that your Social Security benefit, pension and any other income streams won’t cover during retirement, i.e., “filling the gap.” The FTG strategy is based on a formula that first identifies your actual needs and lets you work backward from there.

Start by calculating your monthly retirement income. Add all of your guaranteed and semi-guaranteed income streams — Social Security benefits, pension payments, veterans benefits, rental income and part-time work — together. This number is your initial monthly income excluding your investment income from liquid assets (401(k)s, IRAs, brokerage accounts, etc.). Next, create a budget of your expenses to determine your monthly spending need. Once you’ve calculated all your expenses, subtract this number from this initial monthly income figure. This is your gap.

So, for example, if your initial retirement income each month will be $3,500, and your monthly expenses tally to $5,000, your gap is $1,500 per month. This is the perpetual gap that you’ll need to fill each month.

Now that you have a sense of your actual retirement numbers, you can plan on how to fill the gap. Here’s where your retirement savings portfolio comes into play. I go into more detail on this in my book, “You Can Retire Sooner Than You Think,” but just remember: With investing, there are the two prongs of wealth building.

Total Return = Growth + Income.

With income, we garner cash flow in the form of stock dividends, bond interest, and distributions that come from other areas of the market like REITs and pipeline companies. Conservative estimates say we can expect between 2.5 percent and 4.5 percent yield each year over time. Again, this is just the income piece of the equation.

Now let’s talk growth. Estimating overall growth is far less predictable than income, as it relies heavily on how well the stock market and economy fare in any given year. Again, let’s be conservative and aim for 3 percent to 4 percent growth each year. When we combine the numbers from growth and income, we get a range of between 5.5 percent and 8.5 percent.

Using those figures, we can work backward to find how much money we need to have invested to create a total return that will “fill the gap” in our monthly retirement income. Let’s use a 4.0 percent withdrawal rate to keep these numbers conservative. If you need $1,500 to fill your retirement gap, that’s equal to $18,000 per year. Divide that number 0.04 (4.0 percent) and you get $450,000.

$1,500 x 12 = $18,000

$18,000/0.04 = $450,000

That number is less than half of what Wall Street told us we need to have in liquid savings to retire! The best part is that with proper planning and strategy, you should be able to create this total return without dipping into your savings.

Does this “fill the gap” strategy account for the ever increasing cost and burden of inflation?

The answer is yes, it certainly aims to do so.  A critical variable to this approach is the potential for future capital appreciation and increased stock dividends as the securities you hold grow over time.  As the stock portion of your retirement grows over time, so should the amount of income it is able to produce.  Hence, I am a believer that investors’ best bet to hedge against inflation is to own stocks, particularly those companies that are able to increase or ratchet up their dividends over time. 

But what if the market slips and these averages don’t come to fruition? We all remember the havoc the market experienced during 2001-2002 and 2008-2009. But looking at historic averages, since 1926 the S&P 500 has come in close to 10 percent per annum. Feeling more optimistic? Good.

 


Read the original AJC article here.

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.


 

The Future Of The Grocery Industry – Jobs, Stores And Creative Destruction

I glimpsed the future of grocery shopping in America last week. It showed up at my front door in the form of smiling, energetic Rena, a personal shopper for an on-line grocery buying and delivery service called SHIPT.

With Rena, I was in good hands. She and SHIPT took great care of my family and our weekly food shopping. The experience left me with positive feelings from both a personal and economic perspective.

Amazon’s recently announced acquisition of Whole Foods sent a shockwave through the grocery industry with talking heads predicting the end of brick and mortar supermarkets as we know them. But, in fact, the deal simply accelerates a trend that was already underway. Long before Amazon made its move, Nielsen made predictions that by 2025, nearly a quarter of all grocery shopping will be done on-demand.

Like any massive change, this trend will have all sorts of ramifications – some good, some potentially bad. But on the whole, I believe the on-demand shopping trend will be a huge net positive. It’s positioned to make life easier for families while creating new wealth and new jobs. We’re talking lots of new jobs.

And, if they play smart, traditional grocers will not only survive but thrive in this brave new world.

Much of my enthusiasm for on-demand shopping comes from my first experience with SHIPT.

My family went all-in, ordering a full week of groceries for the Moss household. Think kale, hamburger meat, dinosaur-shaped chicken nuggets, beef jerky, La Croix peach-pear water, salad, Frosted Mini-Wheats, vanilla extract, cheese, peaches, Pink Lady organic apples. Our list went on and on. All total, we ordered $290 worth of groceries using the SHIPT app.

Rena, our SHIPTshopper, told me the job is perfect for her because she loves grocery shopping. She does as many as six to eight full-scale shops per day, earning both wages and significant tips.

It makes sense; this is a fairly “high value” job. Personal grocery shoppers are selecting and handling something precious and expensive. Americans are particular about their food. This is especially true of their groceries. Mini-Wheats and Ritz crackers are no big deal, but when it comes to fruit, and produce, and steak, I need the selection be perfect. These types of items are expensive and I’m particular about them.

Talking to Rena, I couldn’t help but think that we have similar jobs – she handles food shopping for people while I take responsibility for their money. Both are crucial, emotional aspects of a family’s life. Doing both jobs requires skill, passion, training, and top-notch people skills.

Currently, SHIPT and rival on-demand grocery services employ roughly 5,000 shoppers. Five thousand. That’s a real number of jobs. With the rise of personal grocery shoppers, we’re truly watching the birth of a new industry and a new employment category. Widely available, high-value personal food/nutrition shopping seems like a welcomed new convenience that folks will invite into their homes and ask to stay for awhile.

And if over time, busy families switch to this new grocery model, it could create millions of new personal shopper jobs. Millions.

Kroger and Publix would be wise to hop on board quick. Big name grocers like these should stop with the unrealistic Leave It To Beaver era ads. Instead, they need to embrace the new American family – the family that’s busy, running on tight schedules, and hungry for convenience.

If you ask me, traditional grocery stores would be wise to refocus on partnering with or buying food delivery companies like SHIPT and Instacart. The Krogers and Publixes of America need to step up and show that they can compete with the likes of Whole-Amazon. Soon.

Job Creation And Destruction

So, what does all this mean for grocery workers? In my book, this would be a classic case of “creative destruction” – where cutting edge innovation would take away existing jobs and replace them with more technology-geared counterparts. The end result? New jobs consisting of new opportunities.

Automatic Teller Machines provide a perfect example of the phenomenon of creative destruction. ATMs hit the banking scene way back in the 1970s. But between 1995-2010, the number of ATMs quadrupled from 100,000 to 400,000. What happened to traditional bank teller jobs? We all know they weren’t rendered extinct.  But instead of evaporating, as we may expect, ATM innovation had the opposite effect on bank teller jobs.

The number increased from 500,000 to 550,000. Why? Because ATM’s reduced the cost to operate a branch by reducing the number of tellers required. So, banks opened more branches, tellers became “relationship managers,” and these employees saw a shift in their jobs, as they had more time to spend with customers. All of these changes occurred when ATMs were implemented to handle routine transactions.

Check Out: Why You Need To Prepare For The Retirement “Grey Zone”

Looking back at how we buy our groceries, according to the Bureau of Labor Statistics, today there are about 2.7 million jobs in the grocery industry. Let’s assume that Nielsen is in the ballpark, and let’s assume that a conservative 20% of all grocery shopping will be done online by 2025. Under our scenario, let’s further assume that the drop in traditional food shopping results and resulting store contraction results in a loss of 15% of the current grocery workforce. Here, we’re talking about positions ranging from executives to managers, from deli counter worker to stockers to cashiers. All total, this translates into roughly 400,000 fewer jobs.

Take it a step further and assume cashiers jobs across the board see a reduction of 40%. Right now, the number of cashiers comes in at about 750,000. Subtract 40%, and we’re left with 450,000. So, a loss of 300,000 additional jobs. Tally it with the number above, and we could be staring down the barrel of a nationwide industry contraction that cuts 700,000 jobs.

But, remember the rise of ATMs. The moral of that story was that when it comes to creative destruction, there’s always light at the end of the tunnel. And job reduction doesn’t always spell a permanent void; new jobs rise from the ashes of the old ones.

We already know what the new job creation looks like with on-demand grocery shopping. It looks like Rena – personal shoppers to handpick your groceries so you don’t have to.

Let’s run some numbers on the impact of the Whole-Amazon deal to the grocery industry.

Today, there are approximately 120 million households in America. If 20% use on-demand grocery shoppers in place of going to the store, that’s 24 million households. If one full-time shopper can average eight major house deliveries per day, then they’re serving 40 households per week. Calculate out 24 million households by 40 home deliveries each week, and we’re looking at about 600,000 full-time delivery jobs needed to fulfill this demand for one year.

Job creation doesn’t stop there. This new innovation will need the infrastructure to deliver, likely in the form of new warehouses and grocery hubs. It seems safe to assume that new, more efficient warehouse hubs will replace some of the lost traditional grocery stores. They will have a few key differences from the previous tenants, like no in-house marketing (because the most popular items will be purchased online), fewer cashiers, and less stocking.

In theory, these hubs could be staffed by approximately half of the workforce of traditional grocery stores. Under this conservative estimate, to balance the 700,000 jobs that fade away, we could see the emergence of 350,000 new, revamped warehouse or grocery hub jobs.

Bring the numbers together, and we’re looking at a potential creation of 600,000 on-demand grocery shopper jobs and 350,000 warehouse grocery hub jobs. This brings the grand total of the post-Whole-Amazon deal grocery industry to almost 1 million jobs. To be exact, 950,000.  Not too shabby.

I think here, a reminder of one key economic truth is in order. While the face of grocery shopping may be changing, food consumption won’t decline. Americans will continue to eat the same amount of food. And, in fact, will grow along with our country’s population expansion.

So will the post Whole-Amazon grocery world bring these numbers to life? Will Americans see this level of massive job creation? Maybe. And then again, maybe not. As with any area that undergoes creative destruction, old jobs will fall and new will rise. But as you walk the aisles of your local grocer or click and add items to your virtual cart, keep the AMT revolution in mind. The lesson there makes clear that we shouldn’t be terrified of change.

 



 

The Dangers Of An Early Retirement

Comedian George Burns used to say, “Retirement at sixty-five is ridiculous. When I was sixty-five I still had pimples.” Okay, it’s great for a laugh, but many people are ready to move on to their next life chapter around this time. And these days, others aim to retire even earlier, like in their 50’s, 40’s, or even late 30’s. I’m guessing Burns would’ve said these folks are still in diapers.

Today, there’s no one-size-fits-all approach to retirement. People operate on the timeline that works for them. While retirement is an individual goal, there is some universal advice that rings true no matter how old you are when you say farewell to work. That advice? Even if you unplug from your career, stay plugged into things you enjoy and that give you purpose.

As a case in point, in my profession, I’ve spent time with ready-to-be-retirees across all age groups. Often I’ll talk with clients in their early 40’s looking to clock out for the last time around age 45. While the main focus of our conversations is financial happiness, I also like to talk with clients about overall life happiness.

What I try to impart to folks is that we have to set realistic expectations. When you’re going 90 miles per hour in your career, you can’t retire and find happiness in dropping down to 5 miles per hour. It just doesn’t work that way.

Sure, retirement gives us an abundance of freedom. Our time isn’t on someone else’s watch, so we’re free to travel, spend more time with family and friends, and explore interests beyond what we were doing in our careers. All of these things are positives associated with the huge life change of retirement. But shouldn’t we also consider the potential downsides?

The Pitfalls Of Early Retirement

Like what? I’m glad you asked. One of the pitfalls of early retirement is something that researchers have termed “mental retirement,” and it’s not a good thing. New science shows that there is a link between cognitive decline and retirement. According to recent studies, this phenomenon may hit early retirees the hardest.

Data were collected from participants aged 60 to 64. Among the participants, some worked, while others were retired. Researchers found a linear relationship between continuing to work and performance on memory tests. From the findings, the longer people kept working, the better they did on the tests.

The studies didn’t stop there. Researchers wanted to investigate the relationship between cognitive decline and early retirement. To see if a correlation existed, scientists employed the memory test experiment to people in different countries – countries where people are encouraged to retire earlier and countries where people retire later. Their findings showed that early retirees scored significantly worse than later retirees.

Why would early retirement dampen our cognition? Researchers explain that when we stop working, the level of mental stimulation we get on a day-to-day basis naturally decreases. When your brain loses a level of stimulation it’s become used to, the mind can start to slow down.

For younger retirees, this is especially dangerous. As an example, if you retire at age 40, by the time you hit 60 your cognition will be much more impaired than it would have been if you had put off retirement to age 50. It’s a kind of “use it or lose it” scenario. Couple this with the fact that it’s easier to learn new things when we’re younger, and it’s a double blow to keeping our brains healthy and active.

And that’s not all. Even the simple act of calendaring our retirement date could slow our brains down. If we’re 45 and know we’re going to retire in five years, will we really step up to the task of learning new skills and taking on difficult projects? Researchers say probably not. So the risk of mental retirement can kick in before we actually enter into true retirement.

How To Keep Your Mind Active

So what’s the antidote? Staying active. This doesn’t mean you have to stay active in the workforce, but it may be something you want to consider. Perhaps you leave your career to work part-time for a cause you’re passionate about. Or maybe you try transferring your talents into a new line of work. Researchers point to other key ingredients, like tapping new and varied skills, shying away from our comfort zone, and learning from our mistakes. However it looks for you, the key is to stay engaged, with body and mind.

After all, we become accustomed to certain rhythms in our days. Mental stimulation is one of them. As humans, we also crave our core pursuits – our individual passions and purpose. While retirement often seems like the gateway to happiness, it’s not automatic. We have to work at it. If we don’t cultivate passions and purpose in these years, we could end up slowing down more than we planned.

 



 

How Whole Foods-Amazon Deal May Impact Grocery Industry Jobs

I recently glimpsed the future of grocery shopping in America. It showed up at my front door in the form of smiling, energetic Rena, a personal shopper for an online grocery buying and delivery service called SHIPT. Rena and SHIPT took great care of my family and our weekly food shopping. The experience left me with a positive outlook for the future of how we consume food in America and what it might mean for our rapidly changing economy.

Amazon’s recently announced acquisition of Whole Foods sent a shockwave through the grocery industry. News reports predicted the end of brick and mortar, and the grocery industry saw a massive cut in value. In fact, Kroger’s stock market value fell by nearly 30 percent. After all, Amazon is known for ushering in sweeping changes whenever it steps into a market. There were seismic moves to the industry when Amazon began competing head-on with traditional retailers.

But this new deal simply accelerates a trend that was already underway. Long before Amazon made its move, Nielsen made predictions that by 2025, nearly 20 percent of all grocery shopping will be done on-demand.

 

Like any massive change, the trend toward online shopping for groceries will have all sorts of ramifications. On the whole, however, I believe a rise in on-demand shopping could actually be a net positive. It’s positioned to make life easier for families while expanding an entirely new segment of the job economy.

And, if they play smart, traditional grocers will not only survive, but thrive in this brave new world.

Part of my enthusiasm for on-demand shopping comes from my recent experiences with SHIPT, Uber Eats, and Zifty — all companies that specialize in on-demand food delivery. I recently put SHIPT to the test to see if it could tackle a full Moss weeklong family grocery list. We went all in. Think kale, hamburger meat, dinosaur-shaped chicken nuggets, you name it. All together, we ordered $290 worth of groceries through SHIPT.

Rena, our SHIPT shopper, explained her job to me. She does as many as six to eight full-scale shops per day, earning both wages and significant tips. For Rena, it’s a perfect fit because she loves grocery shopping.

With the rise of personal grocery shoppers, we’re truly watching the birth of a new industry and a new high-value employment category. According to SHIPT, they already employ tens of thousands of shoppers across the nation. And if, over time, busy families buy in to this new grocery model, it could be a significant number of new jobs.

So where does this leave traditional grocery store employees? I find our current scenario a classic case of “creative destruction” — where cutting-edge innovation slices away existing jobs and replaces them with more technology-geared roles. The result is the creation of new jobs with new opportunities and responsibilities.

Automated teller machines provide a perfect example of this phenomenon. ATMs hit the banking scene back in the 1970s, and between 1995-2010, the number of ATMs quadrupled from 100,000 to 400,000. What happened to traditional bank teller jobs?

Instead of evaporating, as we may have expected, the number of bank teller jobs actually increased from 500,000 to 550,000. Why? When ATMs were implemented to handle routine transactions, they reduced the cost to operate a branch by reducing the number of tellers required. Banks responded by opening more branches, tellers became “relationship managers,” and there was a shift in this job. This is what creative destruction looks like.

Turning back to how we buy our groceries, let’s run some numbers on the predicted economic impact on the market and jobs. Consider these points:

  • According to the Bureau of Labor Statistics, today there are about 2.7 million jobs in the grocery industry.
  • Nielsen predicts that 20 percent of all grocery shopping will be done online by 2025.
  • Assume traditional food shopping drops, with store contraction resulting in a loss of 15 percent of the current grocery workforce (from executives to managers to stockers), and we have roughly 400,000 fewer jobs.
  • Let’s further assume cashier jobs across the board see a reduction of 40 percent. Right now, cashier jobs come in at about 750,000, calculating to a loss of 300,000 additional jobs.
  • In total, we’re talking about a nationwide industry contraction that cuts 700,000 jobs.

But remember the rise of ATMs and the moral of the story. When it comes to creative destruction, there’s light at the end of the tunnel. And job reduction doesn’t always spell a permanent void; new jobs rise from the ashes of the old ones. We already know what the new job creation looks like with on-demand grocery shopping. It looks like Rena — personal shoppers to handpick your groceries for you.

Now let’s run some numbers on the potential impact of the online, on-demand grocery industry:

  • There are approximately 120 million households in America.
  • If 20 percent switch to on-demand grocery shoppers, that’s 24 million households.
  • One full-time shopper can average eight major house deliveries per day, thereby serving 40 households per week.
  • Calculate it out, and we need about 600,000 full-time delivery jobs to fill the demand.

And consider this: Job creation doesn’t stop there. This new innovation will need infrastructure to deliver, likely in the form of new, smaller warehouses and grocery hubs. In theory, these hubs could be staffed by approximately half of the workforce of traditional grocery stores.

  • To balance the 700,000 jobs that fade away, we could see the emergence of 350,000 new warehouse or grocery hub jobs.
  • Bring the numbers together, and we’re looking at a potential creation of 600,000 on-demand grocery shopper jobs and 350,000 warehouse grocery hub jobs.
  • The grand total of job creation in the post-Whole Foods-Amazon deal? Almost 1 million jobs. To be exact, 950,000. Not too shabby.

But will the post-Whole Foods-Amazon grocery world bring these numbers to life? Maybe. And then again, maybe not. As with any area that undergoes creative destruction, old jobs will fall and new jobs will rise. But as you walk the aisles of your local grocer or click and add items to your virtual cart, keep the ATM revolution in mind. The lesson there makes clear that we shouldn’t be terrified of change.

 


 


 

Does The Stock Market High Spell Danger

Despite the fierce political environment in Washington, Wall Street (and Main Street) have had a solid 2017 so far. In recent weeks, all three major stock indexes have scored record closes. Although we’re in the midst of a bull market, some investors are leery. The question on their minds: Does the market at all-time highs signal danger? Why the hand-wringing? We are, after all, still living in the wake of the market devastation wrought during 2000-2002 and 2007-2009. From March 2000 to October 2002, the S&P dropped almost 50 percent, and the Nasdaq dropped almost 80 percent. Ouch. In the 2007-2009 financial crisis, the S&P 500 at one point had lost over 55 percent. Ouch again.

But these “bubbles of the past” aren’t necessarily a glide path for today’s market highs. Today’s healthy market doesn’t always spell tomorrow’s devastating tumble. When markets rise, often investors will act out of exuberance, trying to hop the equities train to unreasonable returns. Think tech stocks in 2001 and real estate in 2006. In these climates, a bubble inevitably forms, then bursts. But that’s not what we’re seeing today. Investors aren’t piling into stocks like it’s 1999. Instead, stock investors have remained measured and cautious over the past several years.

Much of this caution stems from the aforementioned crisis periods, which have imprinted a permanent wall of worry in investors’ psyches. This residual market hangover affects how people invest today. Think of the mindset the Great Depression created in our grandparents. They knew what it was like to live with virtually nothing, so they adopted a mindset of frugality, often for the rest of their lives. People today have an analogous mentality — invest with care.

As the market goes up, it is only natural that people are skeptical. What’s important to remember, though, is that the stock market is simply an odometer reading of how companies are progressing in any given economic environment. In this case, however, instead of miles, the odometer measures a group of companies and their ability to continue to earn profits.

In addition to earnings, investors also expect to pay a certain price or “market multiple” for profits. So the market’s odometer reading, or overall level, is a function of two important ingredients. First, aggregate earnings — a profit number for companies as a whole. Second, the multiple that people are willing to pay for the rights to future profits. This second ingredient also refers to how “cheap” or “expensive” the market is. Historically, paying 10 times profits is considered inexpensive, while paying 30 times profits is considered expensive.

Let’s look at earnings for 2017. For illustration, the S&P 500 is expected to earn about $135 this year. This $135 figure can be multiplied by the number of times people are willing to pay for those earnings (the “multiple”). Today, this multiple is about 18. Multiply 135 by 18, and you have 2430. This past week, the S&P 500 hit 2,440. So numerically, markets are technically at a reasonable level. And a multiple of 18 is considered well within the “safe zone” (i.e., not overly expensive). For instance, in 1999, the multiple skyrocketed to 36 — that’s bubble territory.

Still, people are often surprised and unsettled by all-time highs. But let’s consider this point in a different light. Imagine a hypothetical where we are operating in a vacuum, and the price to earnings ratio (P/E) remained static. Under this scenario, while the economy and earnings are both growing every day, little by little, eventually we would reach an all-time high. This outcome isn’t a surprise so long as earnings are growing. Instead, it’s the expected outcome. So where we are now is expected. Even though it may feel surprising, it isn’t.

If we were able to forecast what earnings would be over the next year, we’d still only be halfway to forecasting where markets will be. Even though we may have a good read on what companies will earn over the next year, it’s absolutely impossible for anyone to know where the multiple will fall. Even if the multiple makes only a small shift, say from 18 to 16, the result on the market is significant. This slight multiple drop would produce a substantial 11 percent drop in the market’s level.

But, unlike our hypothetical, the real world doesn’t operate in a vacuum. Earnings expectations are certainly not always up. And variables like investors’ emotions move the market’s multiple around.

So where does that leave us? From all appearances, it leaves us living in a thriving bull market that’s unloved by investors, right now. How the market moves depends on myriad factors, like investor confidence, interest rates, inflation and (back to the bubble) people’s exuberance or pessimism. Like so much in life, boil it down and our emotions are huge drivers. Not only do they influence how we invest our money, acting together investors’ emotions affect how the market fares.

The takeaway is that, today, the market isn’t standing on a precipice waiting to fall. Crashes don’t simply happen because the market gets too high. Crashes happen if the future of earnings turns bleak. There’s no hint of that on the immediate horizon. Crashes also happen when investors get too exuberant. But the data shows us that we’re not there yet; domestic equity mutual funds have seen net outflows of $150 billion in the past 8 1/2 years.

Put another way, as stocks have climbed a wall of political and economic worry over the past 8 1/2 years, investors have remained skeptical of stocks — exactly the opposite of irrational stock exuberance or chasing stock returns. Instead, about $1.6 trillion has made its way into bond funds, showing investors still have a high appetite for stability and modest returns versus higher potential returns accompanied by higher volatility that comes with stocks.

With today’s 24/7 news cycle, it’s natural to stay in a permanent state of worry. So the next time you hear the words “all-time high,” remember the earnings odometer, which is more than just a number.

_______________________________________________________________

Read the original AJC article here.

Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.


 

What Age Is Best To Claim Social Security?

No retirement plan is complete without considering Social Security benefits. The biggest decision retirees have when planning around this monthly check is when to enroll.

As with most questions in life, the answer is, it depends.

Sure, it can be tempting to cash in as soon as you’re eligible – for most people, that’s age 62. And why not? After all, you’ve been paying into the system for much of your working life, and the guaranteed monthly income is nice to have.

But that can be a costly move, and retirees should look closely at their particular financial situation before jumping in. There are distinct advantages associated with both taking Social Security benefits as soon as you can, and waiting until later to claim.

Social Security provides a financial safety net to millions of retirees, but the amount of each recipient’s benefit depends on a complex calculation that adjusts 35 years of monthly income into today’s dollars. For your specific projected payment, log in to the Social Security Administration’s (SSA) website. Most folks will receive a benefit of somewhere between $800 and $1,800 per month according to the chart below. Knowing your benefit’s dollar amount at certain ages is the first step in making an informed decision about when to claim your Social Security.

benefit-levels

One important fact to remember about your Social Security benefit is that it isn’t designed to keep you at the income level you had when you were working.  Rather, the benefit provides the average person with about 40% of their pre-retirement pay in benefits. To put this figure into perspective, the average retired worker is collecting just $1,360 per month in Social Security income in 2017.

So, Social Security alone doesn’t necessarily guarantee financial security in your retirement. But according to the SSA, 21% of married couples and 43% of single retirees rely on their monthly benefit for 90% of their annual income. That’s a big chunk of the population. Whether your Social Security check will be supplemental or sustenance for your financial well-being, it’s a good idea to run the numbers and think about how to make the program work for you.

Consider this: if you start taking Social Security at age 62, rather than waiting until your full retirement age (FRA), you can expect up to a 25% reduction in monthly benefits. The SSA only pays out 100% of your benefit if you claim at your full retirement age. These days, FRA is no longer age 65; it ranges from 66 to 67, depending on the month and year in which you were born. And your annual cost-of-living adjustment (COLA) is based on your benefit. So if you begin Social Security at 62, you start with reduced benefits, meaning that your COLA will be lower over the years too.

Alternatively, waiting to claim benefits until after you reach your full retirement age means more money monthly. The SSA rewards those who wait to claim with delayed retirement credits for every month they put off claiming; your benefit grows by about 8% annually for every year you delay claiming until you reach age 70. For instance, a person with an FRA of 66 who claims at age 70 can receive 132% of their initial FRA benefit.

receiving-benefits

At first glance, this extra amount for waiting to claim until age 70 appears to make the wait worth it. However, a key point to remember is the amount paid out in benefits over a lifetime is calculated to be the same, regardless of what age you are when you claim. By delaying your claim until 70, you may produce bigger checks than if you had claimed early, but you’ll collect fewer checks over your lifetime.

If longevity is in your family tree, waiting could mean you to come out ahead. But assuming the average life expectancy, collecting more, smaller checks could be best, especially if you can invest some of the money. If you have ample income from other sources, it might make the most sense to embrace this claim-early-and-invest strategy.

breakeven

Overall, the decision about when to claim your Social Security benefits should focus less on total lifetime benefit expectations than on personal matters. Someone who is healthy and enjoys their work might decide it’s smarter to wait to claim benefits so that they can pocket bigger checks. On the other hand, someone who is less healthy or needs to stop working might find it’s wisest to claim benefits at 62. Other key points to consider include the health of your spouse and your individual retirement goals.

The bottom line is that the decision about when to claim your Social Security benefits is one of the most complex, and important, choices you’ll face ahead of retirement. And there’s no one-size-fits-all approach in deciding when to collect. If you tailor your decision to your individual circumstances and account for life changes as well as financial changes, you’ll be well on the road to a happy retirement.

 

 

Charts courtesy of Motley Fool



 

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