Archive for Financial News

Environmental Investing: How Do I Invest in Global Warming?

Environmental Investing

Ski season is over for the Sullivan family and it was a warm one.  It was still fun, but we were skiing on slush as early as February.  Not to get political, but this global warming debate is all fun and games until it interferes with my winter recreation. So, now it’s time to turn my attention to Environmental Investing.

 

I DON’T give investment advice in this blog, but in case you were wondering, there are some investments that you can make to help Mother Earth.  These would not be areas where I would suggest putting a lot of money.  Maybe 5%-10% at most of your total portfolio should ever go into extremely specialized investments.

Is Environmental Investing a good idea?

 

Historically these environmental sector investments have not had a great risk-reward trade off.  In other words, much risk, not so much reward. However, some are starting to do better.  Okay, disclosures over.  Here are some interesting sector investments I found.

Guggenheim S&P Global Water ETF (CGW)

“Seeks to benefit from the development of new infrastructure, intended to ensure the efficient delivery and quality of water, by investing in companies spanning the water sector.” Quoted from the Guggenheim website.

VanEck Vectors Global Alternative Energy ETF (GEX)

“Index is concentrated in companies whose technologies are involved with solar power, bio energy, wind power, hydro power, and geothermal energy.” Quoted from the VanEck website.

PureFunds ISE Mobile Payments ETF (IPAY)

“The ISE Mobile Payments Index is designed to reflect the performance of companies involved in the mobile and electronic payments industry, including card networks, processors, infrastructure/software and solutions companies.” Quoted from zacks.com.

 

PowerShares Cleantech ETF (PZD)

“The Index is designed to track the leading cleantech companies, from a broad range of industry sectors that offer the best investment returns. The Cleantech Index is a modified equally weighted index composed of stocks (and ADRs of such stocks) of publicly traded cleantech companies. The Fund and the Index are rebalanced and reconstituted quarterly.”  Quoted from invesco.com.

 

Fidelity Select Environment and Alternative Energy Portfolio (FSELX)

“Investing primarily in companies engaged in business activities related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies, or other environmental support services.” Quoted from fidelity.com.

 

Vanguard FTSE Social Index Fund (VFTSX)

“This low-cost fund seeks to track a benchmark of large- and mid-capitalization stocks that have been screened for certain social, human rights, and environmental criteria. In addition to stock market volatility, one of the fund’s other key risks is that this socially conscious approach may produce returns that diverge from those of the broad market.” – Quoted from personal.vanguard.com.

Social Security and Numbers to Know in 2017

Social Security

Sorry, this is not like a fortune cookie where I reveal your lucky numbers (“Confucius says buy stocks on days 14, 28, 200, and 360 of the year.”).  Rather, here is a quick update on new retirement savings limits and other info you can use when planning your financial year.*  You are doing that right now, aren’t you?

 

Social Security Cost of Living Adjustment:  A whopping .3%. That’s $5 to the average Social Security recipient.

 

Social Security tax for high earners:  The amount you earn before Social Security tax stops being deducted from your paycheck goes up to $127,200.  It was $118,500 in 2016.

 

Higher earnings allowed for Traditional IRA deductions:  If you have a 401(k) at work, you cannot deduct your IRA contribution if you make above $72,000 in 2017 ($119,000 for married couples).  If you don’t have your own 401(k) but are married to someone who does, the earnings limit is $196,000.  If you don’t have access to a workplace retirement plan, there is no limit to how much you earn and still be able to deduct your traditional IRA contribution.

 

Higher Roth IRA earnings limit:  The maximum amount you can earn and still contribute to a Roth IRA is going up $1,000 ($2,000 for couples) to $133,000 and $196,000 respectively.  Note there are phase outs to the earnings limits for both IRAs and Roth IRAs, but that’s too many words for  this blog.

 

Last, if you are taking Social Security before your full retirement age, the amount of earned income you can have before having 50% of your benefit withheld for 2017 has gone up to $16,920.

 

All contribution limits to 401(k)s and other retirement programs have stayed the same at $18,000 plus $6,000 catch up for those 50 and older.  IRA contribution limits also remain the same at $5,000 with a $1,000 catch up for those 50 and older.

 

There you are, Savers!  Now go forth and make good financial decisions!

 

*Source:  http://money.usnews.com/money/retirement/iras/articles/2016-11-07/how-retirement-benefits-will-change-in-2017

CNBC.com Quotes Kristi about 401(k)s!

Roth IRA

During the excitement that comes with taking a new job, make sure you don’t forget about the retirement money you socked away in your former employer’s 401(k) plan.

“People in their working years tend to switch jobs a lot and can lose touch with their [accounts],” said Kristi Sullivan, a certified financial planner and owner of Sullivan Financial Planning. “That can get messy after several job changes.”

Click here for more….

What About the Post-Election Stock Market?

Well it’s over, and whether you are deliriously happy or in the depths of despair, you may be concerned about how your investments will react post-election.

 

As I have been saying all along, elections happen often, our president is only temporary, and your investment plan is a decades long process.  The world economy is much bigger than one person, although, judging by international markets’ reaction to our election (negative), our temporary person seems pretty important to the world.

 

When the early results started pointing to a Trump win, US stock market futures plummeted.  Happily, they have come back from the panic and are hovering around -1.23% (S&P 500) and -1.24% (Dow).  Sure, no one likes a down day or market volatility, but in the grand scheme of things this isn’t too terrible.

 

Don’t forget, you also have bonds in your portfolio which may benefit from a “flight to safety” mentality and give you some lift.  Ironically, even when things look bad for the US, the world can’t see any safer investment than US treasuries, so demand those seem to go up in times of uncertainty.

 

My advice remains the same:  You are invested for the long term.  Don’t let short-term stock market drops make you lose sight of your long term investment plan.

 

Please e-mail me with any questions or concerns: kristi@sullivanfinancialplanning.com

Election Day is Coming! Are You Panicking About the Stock Market?

Well, another Election Day is coming up and I am thrilled.  Why?  Is it because I am SO excited about the two potential candidates that I can’t wait to cast my vote?  Not exactly.

 

The benefit of Election Day to all investment advisers is that hopefully for the next 3 ½ years we can get a break from people asking how I think the election will affect the stock market.  The answer is I don’t know and neither do all of these so called experts on TV making predictions.

 

For those of you who find comfort in numbers, here are some historical facts around elections, parties in power, and stock market returns as measured by the S&P 500:

  • Presidential Election Years: +7.4%
  • Incumbent Party Wins (doesn’t matter what party!): +14%
  • Incumbent Party Loses (ditto): -4.4%
  • Democrats Win: +4.3%
  • Republicans Win: 3%

 

The above returns are just one year numbers and, they are in a vacuum.  What about if the incumbent party is Democrat and the Republicans win, and of course, it’s a Presidential Election Year?  Will the stock market return 7.4%-4.4%+10.3% = 13.3%?  Who knows?

 

Here is another favorite topic of debate:  What political party is better for the stock market?  Again, there isn’t a very clear answer because it’s not just about who is President, but also who is controlling Congress.  And it’s probably not caused by either factor, but what is happening in the world economy at any given time.

 

Below are average annual returns of the S&P 500 from 1901-2016 in different political climates:

  • Democratic President/Republican Congress: +8.6%
  • Republican President/Democratic Congress: +2.4%
  • White House/Congress controlled by the same party: +7.1%
  • Democratic President/Split Congress: +10.4%
  • Republican President/Split Congress: -4.3%

 

How helpful is this information to helping you make investment decisions in an election year.  Not at all helpful!!  Since Congressional elections happen every two years in some form, these combinations of Presidents/Congress are constantly in flux.

 

Here is what you can do in an election year and all other years:

  • Have a well-diversified, low cost portfolio
  • Don’t try to time the market – stay the course through ups AND downs
  • Save, save, and save more
  • Control your spending and don’t go into debt buying elephant or donkey buttons

 

Special thanks to MFS Investments for the fantastic study that I quoted in this blog.  Click here for the whole thing.

How Does the Election Affect Your Portfolio?

Well, another Election Day is coming up and I am thrilled.  Why?  Is it because I am SO excited about the two potential candidates that I can’t wait to cast my vote?  Not exactly.

 

The benefit of Election Day to all investment advisers is that hopefully for the next 3 ½ years we can get a break from people asking how I think the election will affect the stock market.  The answer is I don’t know and neither do all of these so called experts on TV making predictions.

 

For those of you who find comfort in numbers, here are some historical facts around elections, parties in power, and stock market returns as measured by the S&P 500:

 

  • Presidential Election Years: +7.4%
  • Incumbent Party Wins (doesn’t matter what party!): +14%
  • Incumbent Party Loses (ditto): -4.4%
  • Democrats Win: +4.3%
  • Republicans Win: 3%

 

The above returns are just one year numbers and…they are in a vacuum.

 

What about if the incumbent party is Democrat and the Republicans win, and of course, it’s a Presidential Election Year?  Will the stock market return 7.4%-4.4%+10.3% = 13.3%?  Who knows?

 

Here is another favorite topic of debate:  What political party is better for the stock market?  Again, there isn’t a very clear answer because it’s not just about who is President, but also who is controlling Congress.  And it’s probably not caused by either factor, but what is happening in the world economy at any given time.

 

Below are average annual returns of the S&P 500 from 1901-2016 in different political climates:

 

  • Democratic President/Republican Congress: +8.6%
  • Republican President/Democratic Congress: +2.4%
  • White House/Congress controlled by the same party: +7.1%
  • Democratic President/Split Congress: +10.4%
  • Republican President/Split Congress: -4.3%

 

Now, how helpful is this information to helping you make investment decisions in an election year?

 

Not at all helpful! 

 

Since Congressional elections happen every two years in some form, these combinations of Presidents/Congress are constantly in flux.

 

Here is what you can do in an election year and all other years:

 

  • Have a well-diversified, low cost portfolio
  • Don’t try to time the market – stay the course through ups AND downs
  • Save, save, and save more
  • Control your spending and don’t go into debt buying elephant or donkey buttons

 

Special thanks to MFS Investments for the fantastic study that I quoted in this blog.  Click here for the whole thing.

World Events and the Stock Market – What Should You Do When the Unexpected Happens?

Does anyone remember the old Saturday Night Live skits with Gilda Radner as Rosanna Rosanna Danna?  Her famous line was, “It’s always something.”  Keep this in mind when the headlines scream about some unexpected world event (Brexit, anyone?) and the stock market takes a hit for a few days.

Even if the event itself is new, the economy has 100 years of surprises behind it.  Yes, the stock market hates uncertainty, but it also gets over it and moves on.  Investors need to learn to do the same.

Some examples:

  • June 23, 1950 – Outbreak of the Korean War – Immediate reaction:  12% drop, 6 months later:  19% gain
  • November 21, 1963 – Assassination of JFK – Immediate reaction: 3% drop, 6 months later:  15% gain
  • May 1, 1970 – Kent State Shootings – Immediate reaction:  14% drop, 6 months later:  20% gain
  • Sept. 15, 1992 – ERM United Kingdom Currency Crisis – Immediate reaction:  4.6% drop, 6 months later:  9.2% gain
  • Sept. 11, 2001 – 9/11 Terrorist Attacks – Immediate reaction: 14% drop, 6 months later:  24% gain

So as you can see, bad stuff happens every year.  Stock markets move in cycles regardless of the latest crises.  Stick to your diversified investment plan and tune out the noise of the news and you will be in better shape than those who panic and sell every time a new headline pops up.

More on the new Social Security rules

Thanks to alert reader and good friend Cameron Morgan of A&I Financial for sending me another good recap of the new Social Security rules.

 

Again, the new rules affect people who intended to use the File and Suspend method to claim Social Security benefits, but have not already done so.  If you have already started this method of payment, the new rules do not affect you.

 

File and Suspend allows a spouse to file for his/her Social Security benefits upon reaching full retirement age and immediately suspend payment.  However, since he/she has filed, the spouse can now start receiving a spousal benefit on the worker’s earnings record.  The first filer can then delay his/her payments until age 70, getting an 8%/year bump in benefits.

 

The new rules state that those who turn 62 in 2016 or later cannot use the File and Suspend technique.  Those who have reached full retirement age already or will before the end of April still have time to use the old techniques, but you must apply before the deadline.

 

Other strategies that are being eliminated under the budget act:

  • Individual File and Suspend to get a Lump Sum Retroactive payment
  • Claim Now and Claim More Later for dual income married couples
  • Claim Now and Claim More Later for divorced ex-spouses

 

For more information on these changes, check out the website of Michael Kitces, an authority on retirement planning, at www.kitces.com.

 

 

If these topics sound like they would be of interest to your employees, sales conference, or professional organization, contact me at 303-324-0014 or kristi@sullivanfinancialplanning.com for more information.

Social Security File-and-Suspend Option Ending in 2016

I hate to say I told you so (okay, I actually LOVE saying I told you so), but as I postulated in an earlier blog, the Social Security file-and-suspend option is going away for new filers after May 2, 2016.

The file-and-suspend option allows one spouse to file for his benefits at full retirement age but suspend receiving the actual checks.  The filer would wait until age 70 to receive a larger payout, but his/her spouse could then file for the spousal benefit and receive a check during the wait.  Eventually, the person receiving the spousal check could switch to his/her own work benefit.

The change, signed into law as part of a larger budget deal, means that the spouse can only choose on or the other benefit to claim:  spousal or his/her own.  He or she won’t be able to switch to a different benefit later on.

This benefit seemed mostly to benefit higher earning dual-career couples and not the poverty-line people that Social Security has always been intended to help.  Plus, if a bunch of couples do it, that would be expensive for an already strained system, so it’s not surprising that the option is being taken away.

If you are already using file-and-suspend, don’t panic.  Those who are already using the strategy or start before May 2016 will be grandfathered in.  There are other exceptions, as well.  A good Q&A is in this article from the Washington Post:  https://www.washingtonpost.com/news/get-there/wp/2015/11/09/what-you-need-to-know-about-the-lucrative-social-security-strategy-thats-going-away/

Also, the Social Security website has surprisingly articulate answers (better than talking to representatives sometimes) to common questions about benefits.  www.ssa.gov.

 

If these topics sound like they would be of interest to your employees, sales conference, or professional organization, contact me at 303-324-0014 or kristi@sullivanfinancialplanning.com for more information.

Charitable Giving Exceeds Pre-Recession Levels

Now, this is the kind of news I like to see.  Charitable giving from all sources was $358 billion in 2014, the highest amount since its 2007 peak.  Fifty four percent of the year over year growth from 2013 was driven by individuals.  See, we don’t all have to be Bill and Melinda Gates to make a difference in our communities.

Americans are among the most generous citizens in the world, with charitable donations currently about 2.1% of gross domestic product.  As an affluent nation, can we do more?  Probably.  According to the 2012 World Giving Index (which takes into account monetary donations, volunteering time, and helping a stranger), the US ranks 5th on its index score.   Who is doing better?  Australia, Ireland, Canada, and New Zealand.

Talking to your financial adviser, estate planning attorney, and children about your charitable intent is important.  Planned giving throughout life and after you passing will give you great joy and allow you to demonstrate your values to the next generation.

 

Sources:

Charitable Giving Rises Past Pre-Recession Mark by Diane Cardwell, New York Times, June 16, 2015, http://www.nytimes.com/2015/06/16/business/charitable-giving-rises-past-prerecession-mark.html?_r=0

World Giving Index 2012, Charities Aid Foundation, December 2012, http://www.cafamerica.org/wp-content/uploads/WorldGivingIndex2012WEB.pdf

 

If these topics sound like they would be of interest to your employees, sales conference, or professional organization, contact me at 303-324-0014 or kristi@sullivanfinancialplanning.com for more information.

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