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January 2017 - In This Issue:
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GREAT EXPECTATIONS
LIMITED MEDICARE INCREASE
THE RETIREMENT “TRYOUT”
ARTICLES OF INTEREST
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I am happy to share that John M. Bonk has joined Kurt Talke in our Lebanon, NJ office as a Senior Vice President and Trust Officer. Kurt shared,” John brings to Garden State Trust over 46 years of experience and leadership and I am proud to say that he and I have worked together for 26 of those years. Always putting the client first, his commitment, honesty and loyalty fits in perfectly with our organizational values and I am obviously pleased that he has joined me in our Lebanon Office.” John added, “I am an avid proponent of client communication and delivery of individualized services in a coordinated manner. I was attracted to the Company’s culture that embraces the importance of this coordination.”
We couldn’t agree more. Welcome John to the Garden State Family!
Speaking to that commitment to customer service and communication, years ago, before I boarded the EE subway from Forest Hills to the Wall Street area for my job I would buy The Wall Street Journal. Every so often Harry Gray, the then CEO of United Technologies would purchase the entire back page of the Journal to share his timeless advice. One particular back page caught my attention and has remained with me my entire career. With thanks to Mr. Gray,
DON’T PROMISE WHAT YOU CAN’T DELIVER
“I’ll have your parts in two weeks.”
Four weeks later the parts arrive.
“I’ll put it in your hand the minute you walk in the door.”
But all you get when you walk in is a handshake.
“Dinner will be at 6:00.”
But as you dip your spoon in the soup, the clock strikes 7:45.
“The doctor will see you in five minutes.”
35 minutes later you’re greeted cheerfully: And how are we today?”
Avoid a lot of grief and inconvenience for the
People you deal with.
Think before you announce how long something
will take –
and then deliver what you promised.
On time.
I have always encouraged my team members to try and follow this bit of advice. Not a bad New Year’s Resolution!
Here’s to a Healthy, Happy and Prosperous 2017!
Sincerely,
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January 3—After getting off to a very poor start—the Dow Jones Industrial Average lost 6.2% in the first five trading days of 2016—stocks overall finished the year well into the black. This was not an outcome that many experts saw coming. Most predicted severe negative economic repercussions when British voters chose to leave the European Union in the Brexit vote. Similarly, some saw the election of Donald Trump as most likely to throw the financial markets into uncertainty, if not panic. The opposite has happened.
Most of the growth in stock prices occurred in the second half of the year, with the
DJIA gaining 8% just since election day. Apparently, investors are optimistic that a Trump administration will provide sufficient regulatory and tax relief, coupled with new infrastructure spending, to boost GDP growth above the 3% mark in the coming year, a level not seen in many years.
Consumers have shared the surge in confidence. The Conference Board reported in December that its index of consumer confidence jumped from 109.4 in November to 113.7 in December. That’s the highest level for this indicator since August 2001, when it stood at 114.
Can the optimism be sustained? In part, that will depend upon how well a President Trump is able to deliver the promises made during the Presidential campaign. Also important for stock prices will be the corporate earnings reports. Earnings for the companies in the S&P 500 grew 3.1% in the third quarter of the year from the year-earlier period, and they are estimated to be up 3.2% for the fourth quarter. Solid earnings reports will be needed to justify the current price/earnings ratios of many stocks.
HOUSING
Nobel laureate Robert Shiller, co-creator of the Case-Shiller housing index, is not quite ready to forecast a boom in housing, where the growth in prices has remained steady at about 5%. But he does suggest that change could be coming. Shiller told Bloomberg News in December that “I think we’re at a turning point. The numbers that we’re reporting today are October, before the Trump election, and everything looks different now. There might be a Trump boom coming.”
INTEREST RATES
Rising interest rates could put a damper on those rising home prices, despite optimism about the economy generally. The Federal Reserve Board raised short-term rates a quarter-point in December, a move that had been expected earlier in the year. Should the economy demonstrate more robust growth, the Fed may be expected to nudge interest rates back to their normal range. This will be seen as great news by savers and investors, many of whom have suffered during the prolonged interest rate drought.
But rising interest rates will pose a dilemma for the new Trump administration. As rates go up, so does the cost of servicing the national debt. Those increased costs may crowd out hopes for new spending or dramatic tax cuts. At the least, they could make political compromises more difficult.
It looks like 2017 will be a very interesting year.
© 2017 M.A. Co. All rights reserved.
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LIMITED MEDICARE INCREASE
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The standard monthly Part B premium for Medicare rose about 10% this month, to $134. However, roughly 70% of Medicare beneficiaries will be paying an average premium of just $109. These are the people who have their Medicare premiums deducted from their Social Security benefits each month. They are protected by a “hold harmless” provision in the event that Medicare costs rise faster than can be covered by the annual cost-of-living adjustment (COLA) in Social Security benefits. An annual Medicare premium increase can’t be larger than the increase in cash benefits for the year. The COLA has been less than 2% in each of the last four years, and it was just 0.3% for 2017.
The shortfall is passed on to those who are not protected by the hold harmless provision, so the gap between the two groups has been getting wider.
Who are the unlucky 30% who pay the higher rate? Those who join Medicare in 2017 will pay the full freight, as well as those on Medicare who haven’t started their Social Security benefits. Beneficiaries who qualify for Medicaid have their premiums paid by state agencies, and the states do not get the benefit of the hold harmless provision. Finally, about 5% of higher-income retirees pay a premium-related surcharge, in addition to the $134 per month. The monthly surcharges range from $53.50 to $294.60. They begin to apply to singles with income above $85,000 and marrieds filing jointly at $170,000.
© 2017 M.A. Co. All rights reserved.
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Retirement is sometimes defined in terms of what one is leaving behind—a career, difficult clients, job stress, the daily commute, the grind. But for retirement to be fully satisfying, according to many experts, one needs to retire to something, not just from something. Defining that “to” and giving it a tryout is what we mean by “pretesting” your retirement. Here are some examples.
Donate your time and expertise. An attorney acquaintance of ours spent most of his career as in-house counsel for a major oil company. As he approached his retirement years, he arranged to be allowed to do pro bono legal work for immigrants. He found the experience so rewarding that after he started drawing his oil company pension, he founded a law firm specializing in such pro bono work.
The “soft launch” of a retirement consultancy. Another acquaintance thought his years of experience in the banking business might be valuable in creating a marketing consultancy for financial services firms. Before he retired, this person tried out some of his ideas with the advertising agency that his bank used. Both sides found the experience valuable, and a basis was created for the individual’s new marketing firm. He was able to have a clear financial path to follow once his regular full-time employment ended.
Try a month’s vacation. It would be a shame to retire to a quiet, secluded life-style, only to find it boring after a few months. Many retirees report that they miss the camaraderie of their working lives after they retire. Before deciding upon retirement relocation, it can be helpful to spend an extended period of time in the possible new location, to see what day-to-day life would be like there.
As you conduct these tryouts, you should monitor your finances, noting any adjustments that may be required. You may find that your spending needs change or vary from your expectations, and that may influence your choice of a retirement start date.
Testing the water early can head off unpleasant surprises after one enters retirement. By then, many decisions have become irreversible. If you’d like a professional review of your financial readiness for retirement, we’d be pleased to give you our evaluation.
© 2017 M.A. Co. All rights reserved.
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Toms River, NJ
Lebanon, N
Cherry Hill, NJ
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732-255-5000
908-287-7188
856-251-1300
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2016. All rights reserved.
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