How Can CIA Help You?

Request Consultation
Ask an Advisor
Financial Tools
Request Consultation
Ask an Advisor
Financial Tools
Money Matters with Wes Moss | March 20, 2016

Money Matters with Wes Moss | March 20, 2016

Wes Moss covers important deadlines for major changes coming into law for social security and other updates on oil prices, minimum wage rates, and more.

March 20, 2016 Hour 1

March 20, 2016 Hour 2

Wes Moss, Chief Investment Strategist, at Capital Investment Advisors is the host of “Money Matters,” a weekly radio show offering financial advice to callers and listeners. The show’s producer, Ryan Ely, is a fellow investment advisor. Listen live on Sundays at 9am on or subscribe to our iTunes Money Matters podcast updated weekly.


 

A Retirement Chart Sure To Give You Anxiety

I love how easily two-step charts are able to relay information to us. You look left, look right and then find your corresponding data point that reveals your answer. If only we could answer all of life’s tricky questions through a quick two-step chart.

The other day I shared JP Morgan’s 2015 Guide to Retirement chart on my Facebook page, and judging by the traffic, it clearly struck a chord. This particular chart tells you how to calculate how much money you should have saved for retirement based on your age and income level.

Taking a quick look at the chart, you might say, “Okay, I’m 35 years old and making $100,000, so I need to multiply $100,000 by 1.4. That’s a total of $140,000 that I should have saved (already). Good thing I started saving early and often”

An alternative ending to this might be, “Wait, WHAT!?! How am I already so far behind!?!”

According to Vanguard’s study released in 2014, How America Saves, their median participant retirement account balance was $31,396. The median participant age was 46 with an income of $75,000. According to JP Morgan’s chart, those participants should be clocking in with over $165,000 in savings already. That’s a difference of over $100,000!

Clearly there’s a disconnect between where the financial planning community says people should be, versus where people actually are.

Back in the real world, we’re seeing that most people are still struggling to save for retirement. According to a study released by the National Institute on Retirement Security in March 2015, 62 percent of working households between the ages of 55 – 64 have retirement savings worth less than their annual income. According to JP Morgan’s calculations anyone making above $50,000 a year should have at least three times their annual income saved for retirement by the age of 55!

In fact, this same study says that the median retirement account balance for households nearing retirement is $14,500. That’s truly terrifying!

Now after looking at both sides of this spectrum of savings, I have good news. There is hope!

There are plenty of surveys and financial planning articles that say that you’re supposed to have $1 million or even $2.5 million put away for retirement. While having either of these amounts would likely set you up for a comfortable retirement, the reality is that there’s no set number that everyone needs to reach for retirement. Just hearing numbers like this can be disheartening.

The real issue with retirement savings in America is that people are constantly bombarded with large savings goals that they “have” to reach to retire comfortably, so instead they just don’t save anything.

When doing the research for my book, You Can Retire Sooner Than You Think, I found that it was important for “happy retirees” to reach a minimum threshold of $500,000 in retirement savings. With that said, though, ultimately the real deciding factor in how much you need to retire depends on how much you need for spending each year once you stop working.

JP Morgan’s chart says that if you are currently making $400,000 a year while working, by the time you retire at age 65 you should have $6,640,000 in your retirement accounts. That’s assuming that during retirement you’ll still need 80 – 90 percent of that $400,000 forever.

What the chart seems to miss, is that by the time you retire you’ll hopefully own most of your larger assets outright; like your home, car, boat, and whatever else that you’re planning to enjoy in retirement. If that’s the case, then it’s pretty unlikely that you would need such a high percentage of your peak income year after year to be comfortable in retirement. It also means you don’t need to have that $6.6 million saved before retiring.

While I wish planning for retirement was as simple as following a chart, it’s better to actually know how much you plan on spending on a yearly basis in retirement. From there you can create your own retirement salary. A quick and easy way to do this is to head over to yourwealth.com, and use one of my favorite retirement calculators.

Don’t panic when people throw out crazy numbers in regards to what your nest egg should look like. Your own personal situation will have its own uniqueness with its own twists and turns. That’s why they call this personal finance, and why it will never be as simple as looking at a chart.

Read the original article here.


 

Ebola and the Economy

Just last week I did a quick 24-hour round trip from Atlanta to New York City. Thursday was the first day that a case of Ebola was reported in New York.  Friday morning I tweeted a selfie “warm NY welcome photo” of me holding a copy of the New York Post with the headline “Ebola Here!”

Nerves will certainly continue about Ebola’s potential impact but so far here are the real effects that I’ve been able to measure:

So far, no impact on economic activity. Last week in New York my hotel was completely booked, both of my Delta flights were completely full, and New York City despite the past several weeks of Ebola news including Thursday’s reported case was as bustling as I’ve ever seen it. According to NYC & Co. (NY’s official tourism group) occupancy at hotels is still close to 90 percent. Those numbers were as low at 65 percent following the 9-11 terrorist attacks. Restaurants are still packed, flights still seem full, and the economy appears to be completely resilient to the threat.

However, the stock market has proven to be much more sensitive. Despite a strong week last week in the market, from mid-September to mid-October travel and hospitality related stocks suffered tremendously, even compared to the overall stock market decline we saw. From mid-September until mid-October the broad S&P 500 dropped about 9 percent at its worst measurement. However, travel and hospitality stocks fared far worse. Delta at one point was down nearly 25 percent, Southwest nearly 18 percent, Intercontinental Hotels 15 percent, and Royal Caribbean cruises down nearly 20 percent.

A very real impact for stocks, while the actually economic activity is seeming unscathed. Remember, fear of what could happen is usually much scarier than what will happen.  I want to remind you of this as you will continue to hear more about Ebola, and see continued sensationalism around the topic.

I personally sometimes get challenged for my lack of sensationalism and pessimism. When I talked about the Perfection Misconception a few weeks ago and the fact that we are not in a recession anymore and have not been since 2009 (which 72 percent of people in the US apparently didn’t even realize), I actually received emails, phone calls and online comments saying that I was crazy to say the economy is in good shape. Here’s the thing, though; I’m looking at facts. After looking at economic data points day after day, year after year and watching the stock market rise nearly 200 percent over the last five and a half years it’s difficult for me not to be optimistic about the economic repair we have experienced since 2009.

I think it’s time that we look at those cold hard facts, and take a step away from the pessimism of the media to really evaluate the risk of Ebola in the US. I’m clearly not a doctor, but from everything that I have read and researched, Ebola is only transferable through blood or bodily fluid and is not the kind of disease that would spread rapidly in the US.   However, almost every article you read about Ebola seems to include a small,almost innocent side note that goes something like, “Ebola is a tragedy and terrible and scary but it really shouldn’t be a problem for us here in the US…unless it becomes airborne and spreads.”

When a reporter or an economist gives their “disclaimer” about how bad things could get if Ebola becomes “airborne” they make you pause and question just how likely that is to happen. Could Ebola suddenly mutate and spread through the air like in the Dustin Hoffman and Rene Russo movie Outbreak? Does the author of the article know something that we don’t know?

The answer is no.  The reporter very likely doesn’t have some super secret knowledge on this disease that has not already been shared with us. It’s similar to the reporter saying, “You’re safe to sleep in your own home and your own bed tonight…unless you get swallowed by a sink hole that’s possibly lurking under your house.” Wait a minute; does the reporter know something that I don’t know?  When you hear this disclaimer, you might get scared into thinking, “Should I be worried about a sinkhole under my house?” Sound familiar when reading articles and disclaimers about Ebola “going airborne”?

An American man was killed a few weeks ago by a camel on a beach in Mexico. When you hear about Mexico now, you probably aren’t hearing a warning to stay away from camels. That’s because even though a guy was killed by one there recently, it’s still so unlikely that people aren’t disclaiming a spread of kicking camels in Mexico.

It’s important to remember that anything could happen, whether it’s the stock market crashing, a sink hole appearing under your house, a camel killing you on a Mexican beach, or Ebola even becoming airborne. Just because it could happen doesn’t mean it will, so don’t let media disclaimers, pessimism, or sensationalism scare you into quarantining yourself from the world.   It’s better for your mental health and your wallet in all these situations to remember the Perfection Misconception, and not let these possibilities dominate your life.

 

Read the original article here.


 

Get Started Today

Request Consultation
Ask an Advisor
Retirement Calculator
Retirement Calculator
Social Security Optimizer
eBook