Do these simple things to turn your retirement savings into big money

There isn’t much about the future that I can predict, much less guarantee to investors.

But here’s one thing I can guarantee: If you achieve as little as 0.5% extra annualized return on your portfolio while you’re accumulating assets — and continue to do so while you’re retired — you will be many, many dollars ahead.

The difference can change your life as well as the lives of your eventual heirs. Much of your investment returns will be determined by things outside your control.

• Were you fortunate enough to be born into a family that provided you with a good education, good financial examples, and maybe even a trust fund?

• Or did you have to scramble for every dollar and every advantage?

• When you’re near retirement or when you finally do make the leap, does the market suddenly take a big turn for the worse and force you to say goodbye to a lot of the money you have saved?

Those and other major factors such as your health certainly shape your financial future.

But how well you do financially over a lifetime is also affected by how well you play whatever cards fate deals you. A good place to start is to grasp just how big a deal that paltry 0.5 percentage point of long-term really is in the long term.

Imagine you and your twin sister are celebrating your 21st birthday together. You decide you’ll each invest $5,000 at once and add the same amount on every subsequent birthday until you reach the “new” expected retirement age of 67.

Now imagine that — for whatever reason — your sister achieves an annual return of 8.5% for that whole period, while your own retirement money earns only 8%.

Let’s ignore taxes and assume you’ll each do this within a Roth IRA.

Your first investment occurs on your 21st birthday, your final one on your 66th birthday. Those 46 investments cost each of you $230,000.

On your 67th birthday, you and your sister compare notes as you prepare to take your first annual retirement withdrawal. You both agree that on this and every subsequent birthday, you’ll each take out 4% of the balance in your account.

If you have carried out this plan faithfully, your Roth IRA should be worth about $2,259,500; your sister’s should be worth about $2,657,300. Just that difference, nearly $400,000, is considerably more than all the annual savings that either of you added over the years.

Your sister’s higher portfolio value on your shared 67th birthday is the first of three financial results she gets for earning an extra 0.5% along the way. The other two are bigger.

You withdraw 4%, or $90,380, for the following year to supplement your Social Security (which we hope will be there) and the other resources you have to support your retirement.

Your sister’s first 4% withdrawal is $106,292 — giving her noticeably more for that first year of retirement. (Maybe she’ll pick up the bill the next time the two of you go to dinner!)

Let’s assume you and your sister are in good health and can expect to live another 30 years, until you’re 97. Let’s assume also that once you’re retired, you each scale back your investment portfolios to take less risk by investing more in bond funds and less in equities.

And (this is crucial) let’s assume your sister continues for whatever reason to earn 0.5% more than you during retirement.

If your Roth IRA earns 6% during retirement and you continue taking out 4% every year, by your 96th birthday you will have taken out a total of $3.54 million — a huge return on those $5,000 investments you made over the years.

This is the second of the three financial results from your long-term plan.

And your sister? She will have been able to take you out to dinner many, many times during retirement. Her total withdrawals will equal $4.48 million.

So far, that extra 0.5% return has been worth nearly $950,000 to her.

The third financial result from all this is the amount each of you has left on your 97th birthday when (for purposes of this example only) we will assume your lives end.

Your Roth IRA will be worth $3.81 million at that point, making your heirs very grateful for your long-term investment success.

Your sister’s account will be worth $5.16 million, amply rewarding her heirs for that extra 0.5% return over many, many years.

Here’s what could be considered the “final score” between these two portfolios:

• The total of all your retirement withdrawals plus what’s left is $7.35 million.

• The comparable total for your sister: $9.64 million.

That difference — about $2.3 million — resulted from just one thing: the extra 0.5% of return over a long lifetime.

I can’t guarantee you (or your sister, for that matter) will be able to achieve returns of 8.5% or 8% or 6.5% or 6%.

But I CAN guarantee that an extra 0.5% return will make an enormous long-term difference. And I can guarantee you’ll get at least that much extra return (and perhaps considerably more) from doing a few relatively simple things that are under your control.

Here are three places to get that 0.5% advantage.

• First, invest in mutual funds with lower expenses. A typical actively managed fund charges annual expenses of 1%. A typical index fund charges much less than one-half that amount. Check.

• Second, bump up your portfolio’s equity allocation by 10 percentage points. Over the past half a century, for example, a switch from 50% in equities to 60% has added more than 0.5% in extra return. Check.

• Third, invest in the S&P 500 index
but add equity asset classes that have long histories of outperforming that index with little or no extra risk. Here’s an easy and very effective way to do that. And here’s an even simpler way.

That third step is called diversification, and it’s one of the smartest things investors can do.

Just these three simple steps, all completely within your control, will make a huge difference in the long term. As these numbers show, little things can mean a lot. Guaranteed.

Richard Buck and Daryl Bahls contributed to this article.

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Why your first five years of retirement are critical

If you’re a glass half full person, here’s some good news: About half of retirees are able to maintain their spending levels—in other words, their lifestyles—during their first five years of retirement. 

That’s according to a study by the federal government’s Consumer Financial Protection Bureau (CFPB), which looked at retiree spending habits over a 22-year period ending in 2014.

Obviously, retirees are like snowflakes: no two are alike. Yet the study says most tend to have one important thing in common: They usually spend more in their first five years of retirement than at other times, and then it begins to decline. For example, if you’ve dreamed of traveling the world, checking things off from your bucket list and so forth, you’re more likely to do so in the early stages of your golden years than the latter ones, when you may be slowing down.

And it’s not just splurging in Italy or taking the grandchildren to Disney World. The CFPB cites an external study by the Employee Benefit Research Institute, which notes that retirees also tend to buy fewer clothes, fewer home furnishings and other things as time goes by. 

Read: I want to retire to a rural location with four seasons that gets me out of New York state — so where should I go?

But there’s something else you need to know about why spending declines after a few years, and it’s important. More on that below. 

Naturally, being able to maintain spending is easier for some than others. The CFPB report says that 27% of retirees were able to spend based solely on income from pensions, Social Security, annuities and other sources of income. Another 24% wear able to so by dipping into savings and selling off investments, in addition to the above things. 

But remember: if you dip too deeply into these things—your principal—it raises the chances of you running out of money later on. There’s a common rule of thumb that you should never take more than 4% of your principal a year, but this is something you should discuss with a trusted financial adviser.

So the first five years are telling, and can reveal how the rest of your life, financially, is likely to go. 

Perhaps you’ve heard that a sound retirement is best compared with a three-legged stool: One leg is a pension, one is Social Security, and the third is personal savings. But the stool has gotten wobblier over the years. Fewer companies have defined pension plans than ever before, shifting responsibility to employees to save through 401(k), IRA and other plans. But tens of millions of Americans, for a variety of reasons, haven’t saved much, if anything: Nearly 70% have less than $1,000 stashed away, according to a 2019 survey by GOBanking rates. Countless other studies say pretty much the same. 

Read: My retirement income is $95,000 a year, and I want a walkable, affordable beach town to spend the winter. Where should I retire?

This leaves Social Security, which was never meant to be a primary source of income, yet for millions, that’s exactly what it is. According to the Social Security Administration, “50% of married couples and 70% of unmarried persons receive 50% or more of their income from Social Security.” Even worse: “21% of married couples and about 45% of unmarried persons rely on Social Security for 90% or more of their income.”

If you’re already in retirement, you know where you stand. If you only have one or one-and-a-half of those legs of the stool, chances are you’re still working (or trying to in this economy), and chances are you’ve downgraded your standard of living. It very well could be that Social Security is just about all you’ve got. 

However, for younger workers, perhaps 10 to 15 years away from retiring, the CFPB study offers data that could help strengthen your finances as your career winds down. 

It showed that homeowners (59%) are more likely to be able to maintain spending in retirement than renters (30%). And not surprisingly, homeowners who paid off their mortgages before retiring were in even better shape. Think about that: No monthly payment to anyone.

If this isn’t you, you might want to consider the cost advantages of downsizing. If you’re still working and can’t relocate, can you at least find something smaller and/or cheaper? I recognize that this may be difficult, and perhaps painful, but if it helps you get a better grip of your finances, it may be worth considering. 

And here’s a no-brainer: Stay out of nonmortgage debt. It’s awfully hard to live well in retirement if you’re saddled with car loans, credit card or even student loans—yes, some retirees still have student loans. Get this stuff off your books as fast as you reasonably can. Focus on paying off whatever has the highest interest rate first. 

Finally, remember how I said there’s something else you need to know about why spending declines after a few years? Many people, forced into a corner financially, have no other choice. The CFPB found that retirees who couldn’t maintain their standard of living wound up slashing spending by 28% over their first five years in retirement. Of that number, 17% cut spending by more than half. 

This is sobering data. Nobody wants to cut their spending—their lifestyle—by half. But if retirement is still on the horizon for you, consider taking steps now to bolster your situation—before you’re forced to later. 

Now my question (s) of the month: If you are eyeing retirement what are you doing now to strengthen your finances? And if you are already in retirement, have you been forced to make any changes? Tell me your stories. Write to me—Paul Brandus—at Thanks and I hope you’re staying safe this summer. 

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Here’s the revenue hit Facebook will take as Diageo and Starbucks join the list of companies pulling ads from platform

Diageo and Starbucks just became the latest companies to halt advertising on social-media platforms over ineffective policing of hate speech.

Shares of Facebook Inc.
which operates Instagram and WhatsApp in addition to its namesake platform, erased early losses to rise 0.6% in midday trading, while Twitter Inc. shares

rallied about 2%. Both stocks took big hits Friday after other advertisers paused spending.


strives to promote inclusion and diversity, including through our marketing campaigns. From 1 July we will pause all paid advertising globally on major social-media platforms. We will continue to discuss with media partners how they will deal with unacceptable content,” the U.K.-based spirits and beers maker said in statement.

On Sunday, coffee giant Starbucks

said it was “pausing” advertisements on all social-media platforms, and would “continue discussions internally, with our media partners and with civil-rights organizations in the effort to stop the spread of hate speech.” On Friday, Unilever


said it would halt U.S. advertising on Facebook and Twitter through year-end. Its Ben & Jerry’s ice-cream unit had previously announced a Facebook ad pullout.


said on Friday that it would “pause paid advertising on all social-media platforms globally for at least 30 days.” On Saturday, another iconic American brand, Levi Strauss & Co.
announced on Twitter that it, too, it would pause ads on Instagram and Facebook:

Late Friday, Facebook Chief Executive Mark Zuckerberg announced policy changes, during a “virtual town hall,” to hide or block content considered hateful or that could harm voting, with no exception for politicians, an approach Twitter has previously applied to the high-profile account of President Donald Trump and others. Twitter hasn’t been as consistently a target of the boycott call but has come under a new wave of scrutiny, and shares have fallen alongside those of Facebook.

“We invest billions of dollars each year to keep our community safe and continuously work with outside experts to review and update our policies,” a Facebook spokesman said Monday. “We know we have more work to do.”

The spokesman added that the company will continue to work with civil rights groups and other experts “to develop even more tools, technology and policies to continue this fight.”

Twitter’s vice president for global client solutions Sarah Personette said in a statement that the company’s mission “is to serve the public conversation and ensure Twitter is a place where people can make human connections, seek and receive authentic and credible information, and express themselves freely and safely.” She added that Twitter is “respectful of our partners’ decisions and will continue to work and communicate closely with them during this time.”

Read:Facebook’s Zuckerberg was reportedly talked out of making moves against Trump as far back as 2015

The boycotts stem from a #StopHateforProfits campaign announced by a coalition of civil-rights and other groups, including the Anti-Defamation League and the National Association for the Advancement of Colored People, which has asked Facebook advertisers to show that they won’t support companies that prioritize profits over safety.

Since the launch of the campaign, the list of companies opting to pause advertising is growing, but Facebook is still looking at less than a 5% hit to revenue, said Rohit Kulkarni, executive director at MKM Partners, in a note to clients.

Firstly, he said Facebook makes the bulk of its revenues from mobile direct ads and small-business marketing. “FB has more than 160 million registered businesses globally and 8 million paying advertisers,” said Kulkarni, who noted that Ad Age’s 100 biggest advertisers spend less on a proportionate basis with Facebook.

“Procter & Gamble

is the largest advertiser in the world, but we think it accounts for less than 0.50% of FB’s revenues,” Kulkarni said. Due to COVID-19, he said MKM had already expected leading advertisers to scale back on spending in the second half of this year, “implying a lower marginal headwind” for Facebook. Wall Street is estimating 1% year-over-year growth in the second quarter and 7% in the third. “We believe near-term Street estimates are reasonable and that there is upside potential given ad market recovery.”

He said Snapchat parent Snap Inc.

could benefit from “near-term uncertainty with advertiser policies related to [Alphabet-owned


YouTube] and Instagram.”

Tim Rostan contributed to this report.

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Is the stock market closed Friday? For 4th of July, here’s everything investors need to know about trading hours and closures

Independence Day falls on Saturday this year, meaning that U.S. financial markets will be closed on Friday.

The New York Stock Exchange and Nasdaq will be shuttered at the conclusion of regular trade Thursday, while the bond market will close an hour early, at 2 p.m. Eastern on Thursday, and will remain closed over the Fourth of July holiday, per the recommendation of the Securities Industry and Financial Markets Association, a brokerage-industry trade group that sets procedures for trading in bonds like the 10-year Treasury note

Trading for U.S. oil

on the New York Mercantile Exchange and

on Comex also will be closed for settlements on Friday.

The holiday this year may carry a unique significance to markets and an economy that have been rocked by a pandemic that has claimed the lives of more than a half-million people worldwide and infected 10.5 million thus far. The deadly coronavirus outbreak has provided the backdrop for the eruption of civil unrest in the U.S. following the killing of George Floyd on May 25 by a Minneapolis police officer.

Calls for social justice ensued for Floyd and others, and this Independence Day may, for some, provide a time of somber reflection if not celebration.

On July 2, 1776, the Continental Congress voted in favor of independence against Britain, and two days later delegates from the 13 colonies finalized the Declaration of Independence.

The Fourth of July was enshrined as a federal holiday by Congress on June 28, 1870. However, independence for many Americans, whose efforts under bondage would eventually make the nation a superpower, wasn’t achieved until the Emancipation Proclamation in 1863, marking the end of slavery. Even then, it wasn’t until June 19, 1865 that most American slaves learned of the proclamation; and then a century later before other hard-fought liberties were obtained by Black Americans.

Read: Macy’s launches ‘unannounced’ July 4th fireworks this week — but who’s behind the surprise fireworks boom across the country?

Back in 1776, the euphoria for freedom and change from under the tyranny of Britain compelled civilians in lower Manhattan to tear down a statue of King George III. Similarly, in scenes repeated across the U.S., citizens protesting racial injustice have been leveling statues with ties to racism and white supremacy.

Last month, protesters tore down a bust of Ulysses Grant and “Star-Spangled Banner” writer Francis Scott Key, because they owned slaves at points during their lives. Protesters have also, at times, targeted Founding Fathers such as Thomas Jefferson, one of the key signatories of the Declaration of Independence, who owned slaves.

So far, the business community has seen an outpouring of support for social justice from a number of corporations, but it is unclear how this groundswell, along with the effects of the virus, will shape the future.

For its part, the stock market has been trying to power through the numerous issues that have cropped up in an unusually turbulent period in history.

The Dow Jones Industrial Average

and the S&P 500 index

have gained nearly 40% since touching a late-March low as the COVID-19 pandemic roiled investor confidence, and the Nasdaq Composite

has gained nearly 50% over the same period.

Early efforts to restart business activity have been uneven and been met by reversals of social-distancing restrictions in a number of Southern and Western U.S. states, including Florida, Texas and California. Still, trillions of dollars in aid from the Federal Reserve and the U.S. government have helped to embolden buyers of assets considered risky on Wall Street.

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19 California counties, New Jersey and New York City paused indoor dining — why is it so dangerous?

Restaurants in New Jersey were set to reopen for indoor dining on Thursday, but on Monday Gov. Phil Murphy said that it won’t happen. New York Gov. Andrew Cuomo however only halted indoor dining in New York City, which was set to reopen next week, and not across the state.

“This is a New York City only modification because frankly, it’s a problem that is most pronounced in New York City,” Cuomo said during a briefing held Wednesday. “New York State is doing great, but I feel that there are storm clouds on the horizon,” he added.

Hours later, California Gov. Gavin Newsom ordered 19 counties in the state to “close indoor operations” for restaurants as well as wineries and movie theatres.

“Outdoor dining has worked very well all across the state, New York City included,” Cuomo said in a prior briefing held on Monday. That said, “there have been no major outbreaks related to indoor dining,” a New York Department of Health spokesman told MarketWatch.

“We have seen spikes in other states driven in part by the return of patrons to indoor dining establishments where they are seated and without face coverings for significant periods of time,” Murphy said during a briefing held Monday.

‘There’s nothing magical about six feet. That’s about that average distance respiratory droplets can travel, so being further apart from people is always better.’

— Ryan Malosh, an infectious disease epidemiologist at the University of Michigan School of Public Health

So what makes indoor dining riskier?

For starters, it can be much harder to space tables further apart when you’re inside. Even though six feet is the widely publicized distance people should maintain from one another to avoid potentially coming in contact with respiratory droplets that can transmit coronavirus, there’s scientific evidence that these droplets have the ability to travel well beyond six feet.

“There’s nothing magical about six feet,” said Ryan Malosh, an infectious disease epidemiologist at the University of Michigan School of Public Health. “That’s about that average distance respiratory droplets can travel, so being further apart from people is always better.”

On top of that, air filtration is generally better outdoors than indoors because particles have more room to be dispersed, Malosh said. “Outdoors, a light breeze can disperse particles with no constraint on the distance they can then travel.”

Diners don’t tend to wear masks outdoors. If people wear masks indoors, however, that can significantly lower the chances of dispersing virus-containing particles, said Thomas Russo, chief of the division of infectious disease at the University at Buffalo.

‘It’s already going to be dicey going into the school year and getting elementary students to wear masks is going to be hard, but it’s an important activity that’s much different than going into restaurant indoors.’

— Thomas Russo, chief of the division of infectious disease at the University at Buffalo

In fact, over 140 clients who visited a hair salon based in Springfield-Greene County, Mo. where two stylists tested positive for coronavirus did not contract the virus themselves. The county’s Director of Health, Clay Goddard, cited the “value of masking” as the reason 140 clients and six other employees at the salon did not contract coronavirus.

Meanwhile, more than 100 cases of coronavirus were traced back to one bar in East Lansing, Mich. which reopened on June 8. Malosh used this as an example of the increased risk of dining indoors.

The bar, Harper’s Restaurant & Brew Pub, has since closed down to install “air purifying technology,” according to a statement made on Facebook

on June 22.

(Harper’s did not immediately respond to MarketWatch’s request for a comment.)

Even though malls and movie theaters in some states’ reopening plans are allowed to reopen after restaurants can reopen for indoor dining, Russo said indoor dining poses greater risks.

Related: How COVID-19 could spread on college campuses. Will students be safe?

“Whenever there’s a scenario where everyone can wear masks at all times the risk is lower,” Russo said. “When eating you physically can’t wear a mask but you can minimize that risk by popping it back on between bites.”

States like New York and Jersey which have been hit particularly hard by the virus, are also planning to reopen schools in the fall and “want to start off the school year with the best possible conditions,” Russo told MarketWatch.

“It’s already going to be dicey going into the school year and getting elementary students to wear masks is going to be hard, but it’s an important activity that’s much different than going into a restaurant indoors.”

Thus far, New York has had the most deaths from COVID-19 in the U.S. (32,040), followed by New Jersey (15,035), Massachusetts (8,053), Illinois (6,923), Pennsylvania (6,649), Michigan (6,193) and California (6,089). Texas has reported 2,455 deaths from the virus.

The COVID-19 pandemic, which was first identified in Wuhan, China in December, had infected 10,538,577 people globally and 2,658,324 in the U.S. as of Wednesday. It had claimed at least 512,689 lives worldwide, 127,681 of which were in the U.S., according to Johns Hopkins University.

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