Spring Slide Indicators Update

Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

Highlights

• In each of the past two years the stock market began a slide in the spring that lasted well into the summer months.

• This week we update the status of the 10 indicators we identified that foreshadowed the declines in 2010 and 2011.

• So far, about half of the 10 indicators are waving a red flag, while four are yellow for caution, and only one is green. On balance the indicators point to a significant risk of a repeat of the spring slide this year.

One month ago we provided our list of the 10 indicators to watch that seemed to precede the stock market declines in 2010 and 2011 and may warn of another spring slide. In both 2010 and 2011 an early run-up in the stock market, similar to this year, pushed stocks up about 10% for the year by mid-April. On April 23, 2010 and April 29, 2011, the S&P 500 made peaks that were followed by 16 – 19% losses that were not recouped for more than five months, a phenomenon often referred to by the old adage “sell in May and go away.” Now that the time the prior slides have begun has arrived it is time to revisit the status of the indicators.

So far, about half of the 10 indicators are waving a red flag, while four are yellow for caution, and only one is green. On balance the indicators point to a significant risk of a repeat of the spring slide this year. We will continue to monitor these closely in the coming weeks.

1. Fed stimulus – In each of the past two years, Federal Reserve (Fed) stimulus programs known as QE1 & QE2 came to an end in the spring or summer, and stocks began to slide until the next program was announced. The current program known as Operation Twist was announced on September 12, 2011 and is coming to an end. It is scheduled to conclude at the end of June 2012. The Fed’s communications in April appeared no closer to announcing QE3, raising the risk of a repeat of the spring slide.

2. Economic surprises – The Citigroup Economic Surprise index [Figure 1] measures how economic data fares compared with economists’ expectations. The currently falling line suggests expectations have become too high; this typically coincides with a falling stock market relative to the safe haven of 10-year Treasuries.

3. Consumer confidence – In 2010 and 2011, early in the year the daily tracking of consumer confidence measured by Rasmussen [Figure 2] rose to highs just before the stock market collapse as the financial crisis erupted. The peak in optimism gave way to a sell-off as buying faded. Investor net purchases of domestic equity mutual funds began to plunge and turned sharply negative in the following months. This measure of confidence is once again beginning to fall from the highs.

4. Earnings revisions – Last week was about earnings and the news was good. S&P 500 profits were up 7% (4.7% ex-Apple) from a year ago with 72% of companies beating expectations, relative to 68% in the past four quarters. However, strong first quarter earnings reported in April of 2010 and 2011 were not enough to avoid the spring slide. The first couple of weeks of the first quarter earnings season in April 2010 and April 2011 drove earnings estimates for the next 12 months higher, but as the second half of the earnings season got underway in May 2010 and May 2011, guidance disappointed analysts and investors as the pace of upward revisions began to decline. This year the earning revisions have followed a similar pattern, so far. It is too early to say whether this indicator is flashing a warning sign. We will be watching to see if estimates begin to taper off now that earnings expectations have risen on the initial reports.

5. Yield curve – In general, the greater the difference between the yield on the 2-year and the 10-year U.S. Treasury notes, the more growth the market is pricing into the economy. This yield spread, sometimes called the yield curve because of how steep or flat it looks when the yield for each maturity is plotted on a chart, peaked in February of 2010 and 2011 at 2.9%. Then the curve started to flatten, suggesting a gradually increasing concern about the economy, as the yield on the 10-year moved down to around 2%. This year the market is pricing a more modest outlook for growth, but we will be watching to see if the recent flattening in the yield curve continues with the yield on the 10-year having moved back to 2% during April 2012.

6. Oil prices – In 2010 and 2011, oil prices rose about $15 – 20 from around the start of February, two months before the stock market began to decline. This year oil prices have climbed back to the levels around $105 that they reached in April of last year. However, they have risen only about $10 since around the start of February 2012 and seem to have stabilized. A further surge in oil prices would make this indicator more worrisome.

7. The LPL Financial Current Conditions Index (CCI) – In 2010 and 2011, our index of 10 real-time economic and market conditions peaked around the 240-250 level in April and began to fall by over 50 points. This year, the CCI recently reached 249 and has started to weaken and currently stands at 224.

8. The VIX – In each of the past two years the VIX, an options-based measure of the forecast for volatility in the stock market, fell to a low around 15 in April before ultimately spiking up over 40 over the summer. Last week, the VIX declined once again to 16. This suggests investors have again become complacent and risk being surprised by a negative event or data.

9. Initial jobless claims – It was evident that initial filings for unemployment benefits had halted their improvement by early April 2010, and beginning in early April 2011, they deteriorated sharply. In 2012, April has again led to deterioration in initial jobless claims as they have jumped by about 30,000 to nearly 390,000 [Figure 4]. A continued climb this week would echo last year’s spike.

10. Inflation expectations – The University of Michigan consumer survey reflected a rise in inflation expectations in March and April of the past two years. In fact, in 2011, the one-year inflation outlook rose to 4.6% in both March and April. This year, inflation expectations also jumped higher in March, but receded a bit from the March jump that echoed what we saw in 2010 and 2011.

Finally, one issue not addressed specifically in the indicators, but important in the markets, is the rising European stresses — evident in the spring of 2010 and 2011. European policymakers including those at the European Central Bank, who meet later this week (May 3, 2012), have been facing a lot of pressure to act and do something about the renewed fears evident in the yields on Spanish and Italian debt and European stocks. European leaders have once again refocused away from unpopular austerity to talk of stimulating growth, at the expense of rising bond yields. If leaders continue to do little to address the market’s concerns it could again accelerate the bond market sell-off and begin to affect stocks here in the U.S. similar to the spring slides in 2010 and 2011.

This week most of the attention will be directed towards the Institute for Supply Management (ISM) and employment reports for April 2012. But as we pointed out a month ago, these measures did not deteriorate ahead of the market decline, but along with it. It is not that they are not important; it is just that they did not serve as useful warnings of the slide to come, while the above 10 indicators did.

The return of daily volatility in April 2012 and the fact that April 2012 ended up as a flat month for stocks after six months of strong gains may suggest we are near a turning point. Given this year’s double-digit gains and the possibility of another spring slide for the stock market, investors may want to watch these indicators closely for signs of a pullback.

To download a complete copy of the commentary click here

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guaran¬tee that strategies promoted will be successful. Stock investing may involve risk including loss of principal. The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The ISM index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Manage¬ment. The ISM Manufacturing Index monitors employment, production inventories, new orders, and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys. The VIX is a measure of the volatility implied in the prices of options contracts for the S&P 500. It is a market-based estimate of future volatility. When sentiment reaches one extreme or the other, the market typically reverses course. While this is not necessarily predictive it does measure the current degree of fear present in the stock market.

A Generation Needs Help To Keep Its Dreams Alive.
Presented by Rose Greene Financial

What do you think your retirement will be like? If you are like many baby boomers, you may be pessimistic about it. Look at the results of a recent poll conducted by the Associated Press and NBC’s LifeGoesStrong.com:

• Only 11% of boomers think they will retire to a comfortable lifestyle.
• 24% of boomers say they have no retirement savings.
• 64% feel that Social Security will be their main source of retirement income.
• 25% of boomers in the work force say they will never retire.
• 66% of working boomers intend to work part-time or full-time after they end their careers. Yet the most recent Social Security Administration figures (2008) show that less than 50% of Americans age 65-74 earned income from a job.1

Hopefully, you have reason for optimism. The poll found that about 1 in 10 respondents had more than $500,000 in dedicated retirement savings. Additionally, about half of those surveyed had retirement savings of more than $100,000.1

If you don’t, what can you do to save your dream? Retiring later may help – it will give you added years of earned income and group health coverage. You can also apply for Social Security later, which can result in substantially greater benefits.

Don’t want to retire later? Then you may want to pour as much as you can into your 401(k) or IRA. If you are 50 and have a Roth IRA balance of about $80,000, you could potentially wind up with more than $450,000 in that IRA at age 65 if you contribute $5,000 per year and realize a 9% annual return. A 50-year-old with a $250,000 401(k) balance could potentially end up with more than $1 million in that 401(k) by age 65 if he or she contributes $16,500 a year and gets an 8% annual return. (That’s not even factoring in employer matches and “catch-up” contributions after age 50.) However, note that this does not include trading commissions, account fees and inflation, which if taken into account, would lower these numbers.

Yes, tapping your home equity may prove useful – but tax reduction strategies and new income sources resulting from investments or insurance contracts might give you a little more breathing room so you don’t have to make that decision.

Start now, because procrastination is your greatest enemy. Meet with a financial professional – one with significant experience in retirement planning. You may have more options than you realize. Fight for your retirement dream!

Rose Greene  may be reached at (310)399-1200 or rose@rosegreene.com. www.rosegreene.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. Citations.

1 – msnbc.msn.com/id/42436897/ns/business-personal_finance/t/poll-reveals-baby-boomers-retirement-fears/ [4/5/11]
2 – investopedia.com/articles/retirement/08/catch-up.asp [5/19/11]

LPL Financial Model Wealth Portfolios Awarded Advisory Solutions Product of the Year by Money Management Institute Advisory Platform Honored for Innovation That Drives Industry Growth

Wednesday, 18 May 2011 | 9:00 AM ET

BOSTON, May 18, 2011 /PRNewswire via COMTEX/ — LPL Financial, the nation’s largest independent broker-dealer* and wholly owned subsidiary of LPL Investment Holdings Inc. (NASDAQ: LPLA), today announced that its Model Wealth Portfolios (MWP) platform has been awarded the Advisory Solutions Product of the Year by Money Management Institute (MMI), the leading national organization for the advisory solutions industry.

This prestigious industry award is granted to the firm that launched the most innovative advisory platform that contributed to the growth of the industry.

This year, LPL Financial was selected out of nearly 30 nominees, all of which in turn participated in a competitive selection process.

First launched in 2008, the MWP platform is one of the three centrally managed fee-based platforms offered to advisors by LPL Financial. Model Wealth Portfolios offers client-centric theme-based investment portfolios for a broad range of investor preferences including, among many others, risk aware, income generation and tax conscious investing.

Each portfolio combines professionally designed asset allocation strategies and disciplined mutual fund and ETF selections that are aligned with the unique investment goals of each advisor’s client. Additionally, the MWP platform features strategies from LPL Financial Research and three industry-leading ETF strategists including BlackRock, Cougar Global Investments and Quantitative Advantage. Each of the strategists brings unique investment philosophies, knowledge and expertise to MWP, enabling advisors to execute a turnkey approach to asset allocation, investment selection and implementation.

Importantly, the MWP platform also offers financial advisors discretionary control over all aspects of portfolio model construction and the management process, as well as significantly greater efficiency in how they operate their practices through an asset oversight versus day-to-day asset management approach.

John Moninger, LPL Financial Executive Vice President of Advisory and Brokerage Consulting Services, said, “We are grateful to Money Management Institute for their recognition of our MWP platform. The role this platform has played in the industry is due to the collaborative approach of our asset management partners, and our advisors, who have helped drive the ideas around its development. Our receipt of this award reflects the combination of scale-driven platform innovation and advisor focus that we emphasize as an organization.” Christopher Davis, President of Money Management Institute, said, “We congratulate LPL Financial on their receipt of the Advisory Solutions Product of the Year. Advisory platform innovation that directly supports greater efficiency in asset management is central to the continued growth of our industry. We are proud to support and recognize the leading companies who are building the top platforms in this space.” In just three years, Model Wealth Portfolios has become one of the fastest growing fee-based platforms at LPL Financial. Reflecting this growth, advisory assets as of the end of the first quarter of 2011 were $99.7 billion, an increase of 23.1% from $81 billion of advisory assets from the year-ago reporting period in 2010, shortly before the introduction of ETF strategies to the MWP platform. Total advisory and brokerage assets as of the end of the first quarter of 2011 were $330.1 billion.

About LPL Financial LPL Financial, a wholly owned subsidiary of LPL Investment Holdings Inc., is an independent broker-dealer. LPL Financial and its affiliates offer proprietary technology, comprehensive clearing and compliance services, practice management programs and training, and independent research to over 12,500 financial advisors and over 750 financial institutions. Additionally, LPL Financial supports approximately 4,000 financial advisors who are affiliated and licensed with insurance companies with customized clearing, advisory platforms and technology solutions. LPL Financial and its affiliates have over 2,600 employees with employees and offices in Boston, Charlotte, and San Diego. For more information, please visit http://www.lpl.com/.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC *Based on total revenues, Financial Planning magazine, June 1996-2010 LPLA-C LPL Financial Media Contacts Joseph Kuo Michael Herley LPL Financial Kekst and Company (704) 733-3931 (212) 521-4897 media.inquiries@lpl.com KEYWORD: FIN

What effect could the results have on stocks and taxes?

Provided by Rose Greene

GOP picks up 60 seats in the House, 6 in the Senate. The 2010 midterm elections are over and frustration has prompted change on Capitol Hill. Republicans will control the House with at least 239 seats; Democrats will retain a narrow majority in the Senate with at least 51 seats.₁

Here comes gridlock. “We’re determined to stop the agenda Americans have rejected and to turn the ship around,” Senate Minority Leader Mitch McConnell (R-KY) told the press after the election.₂ So will President Obama’s health care reforms be rolled back? Will federal spending be severely reduced?

Through 2012, you may not see much change at all. With Republicans controlling the House, Democrats controlling the Senate and President Obama’s veto pen at the ready, you can expect plenty of legislative stalemates.

Could gridlock benefit the markets? It could be bullish for stocks. With a conservative majority in the House, Wall Street could breathe a collective sigh of relief over the next two years, feeling less regulatory pressure and seeing fewer threats and a more business-friendly environment.

On the other hand, history suggests otherwise. Standard & Poor’s database reveals that since 1900, the S&P 500 has gained an average of just 2.0% in years featuring a split Congress. Since World War II, the average gain in such circumstances has been 3.5%.₃ Here’s hoping past performance is no indicator of future results.

What can the lame-duck Congress accomplish? Republicans don’t become the majority party in the House until January … so what will happen with the Bush-era tax cuts and the estate tax?

A compromise could be in the works on the estate tax. Neither party wants to see estate taxes reset to 2001 levels. With death taxes poised to top out at 55% next year, both parties may emerge from the limbo of 2010 and reach a consensus. A CNN report suggests the maximum estate tax rate will be set somewhere between 35-45% for 2011, with the federal exemption ranging anywhere from $3.5-$5 million.₄ 

Both parties want to preserve the Bush-era income tax cuts. Analysts now think Congress may act to extend the EGTRRA/JGTRRA tax cuts through at least 2011.₄ Will they be extended for all Americans, as Republicans want? Or just to households with incomes of less than $250,000, as Democrats want?

Two (lame duck) Democrats have proposed extending these tax cuts for all but the really rich. Senate Banking Chairman Chris Dodd (D-CT) would like them extended for households making less than $500,000; Sen. Blanche Lincoln (D-NE) has proposed setting the break at $1 million. In September, 31 House Democrats wrote a letter to their party’s leaders urging the extension of the cuts for all Americans.₅ 

Other matters to tackle. Currently, the unemployed can qualify for up to 99 weeks of federal unemployment benefits. The Tier V unemployment extension is set to expire at the start of December, and if it does, about 2 million Americans will lose that cushion. Additionally, the Medicare reimbursement rate for doctors will be reduced by 21% if Congress doesn’t apply its usual annual “doc fix” by the end of November, and the Alternative Minimum Tax needs its annual patch.₄

It is possible that one broad year-end tax bill could address all of the above issues.  

What if the economy needs another stimulus? Given the mid-term election results, it is pretty clear that Federal Reserve will have to “ride to the rescue” instead of Congress. The GOP wants to block any new spending that adds to the federal deficit, so any initiative President Obama might propose to pump up the housing market or job market will likely be small-scale. It is hard to imagine another federal stimulus package making it through Congress between now and 2012, though a tax-cutting move might stand a chance.

Obama appeals to the business world. One last item of interest: in the wake of the “shellacking” his party took this week, President Obama spoke of mending fences with America’s business community. He now says he wants to undo Section 9006 of the health care reform law – the section that would require all businesses to issue 1099 tax forms notifying the IRS of purchases exceeding $600 starting in 2012.₆

Rose Greene may be reached at http://www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The publisher is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional. petermontoya.com, montoyaregistry.com, marketinglibrary.com.

Citations
1 – latimes.com/news/politics/election/la-election-results-map,0,4890426.htmlstory [11/3/10]
2 – marketwatch.com/story/republicans-to-challenge-obama-after-victory-2010-11-03 [11/3/10]
3 – marketwatch.com/story/gridlock-is-no-good-for-stocks-2010-11-02 [11/2/10]
4 – money.cnn.com/2010/11/01/news/economy/lameduck_agenda/ [11/1/10]
5 – money.cnn.com/2010/10/13/news/economy/bush_tax_cuts_possible_compromise/index.htm [10/13/10]
6 – money.cnn.com/2010/11/03/news/economy/Obama_business/index.htm [11/3/10]

Contact: Helena Ruffin
                  310-399-1200
                  helena@rosegreene.com

Rose Greene, CFP© ATTENDS LPL FINANCIAL 2010 NATIONAL CONFERENCE, A LEADING FINANCIAL SERVICES EVENT FOCUSED ON INCREASING VALUE TO INVESTORS

Santa Monica, CA – August 17, 2010—Rose Greene of Rose Greene Financial Services in Santa Monica recently attended focus10, a leading financial services industry conference hosted by LPL Financial, an independent broker-dealer.  Rose Greene Financial Services is associated with LPL Financial.

Held in Boston from July 28 to July 31, 2010, focus10 was one of the industry’s largest gatherings of independent financial advisors, and remains the industry’s premier sales and education event. Approximately 4,500 attendees from around the country assembled for the opportunity to learn new strategies and skills, expand knowledge in numerous product areas and network with peers and industry experts. They also heard from influential speakers who addressed current events and financial industry trends. The speakers included Bill Clinton, 42nd President of the United States; Jack Welch, former chairman and CEO of General Electric; and Benjamin Zander, conductor of the Boston Philharmonic.

Additionally, through the hundreds of business sessions, technology training sessions and continuing education classes at this event, LPL Financial advisors gained valuable knowledge to help them continually improve the service they offer to clients and operate their independent practices more efficiently.

Bill Dwyer, president of National Sales and Marketing for LPL Financial, said, “The theme of our focus10 event, A Focus on the American Dream, clearly resonated with the current mood of Main Street U.S. investors.  Supporting our independent advisors as they help their clients achieve the American Dream on their terms remains our overarching mission at LPL Financial.”

About  Rose Greene Financial Services
Rose Greene Financial Services, founded in 1986,  is an independent and unique, entrepreneurial financial advisory practice. As an independent representative of LPL Financial, Rose Greene Financial Services provides unbiased investment advice and services including wealth management; retirement planning; college planning; life, health and long-term care insurance services; Medicare planning; estate planning and charitable giving. Her client base is highly diverse with a concentration in the baby boomer market, gay and lesbian community and entertainment industry. With more than 27 years in the industry, Rose Greene Financial Services has extensive experience serving clients through difficult market environments including the past six bear markets, as well as experience in helping near-term and current retirees plan for retirement income distributions. Her investment philosophy is rooted as much in strategies for managing downside risk as it is in building upside growth potential. Rose Greene Financial Services is located in the Santa Monica area of Los Angeles. For more information, visit www.rosegreene.com.

About LPL Financial
LPL Financial is an independent broker-dealer with over 2,500 employees and offices in Boston, Charlotte, and San Diego.  LPL Financial and its affiliates offer proprietary technology, comprehensive clearing and compliance services, practice management programs and training, and independent research to over 12,000 independent financial advisors and financial advisors at financial institutions.  Additionally, the company supports over 4,000 financial advisors who are affiliated and licensed with insurance companies with customized clearing, advisory platforms and technology solutions.  For more information, please visit www.lpl.com.

Securities and financial planning offered through LPL Financial, member FINRA/SIPC.

Planning for retirement is a lifelong process defined by distinct phases: the Accumulation Phase, represented by your working years; and the Distribution Phase, which you enter when you retire or begin tapping into your retirement savings. By implementing some basic planning steps during each of these phases, you can achieve your financial goals for retirement without undue stress. Following are some simple guidelines for your consideration.

The Accumulation Phase
During your working years, it is important to “set the stage” for a financially secure retirement by determining your retirement income needs. This task involves identifying your potential retirement expenses, as well as estimating the amount you might receive from each potential source of retirement income – e.g., Social Security, pensions, personal investments and employment earnings.

Doing this calculation will give you an idea of how much you may need to accumulate to finance a comfortable retirement. Don’t be surprised if the numbers add up to be a large sum – after all, this money may need to support you for 20 or 30 years. Fortunately, there are ways to leverage your dollars.

Starting to save early and contributing as much as possible to employer-sponsored retirement plans and IRAs may help you to potentially accumulate more money. Why? Because investing in these tax-advantaged accounts means your money will work harder for you. The longer the money sits untouched, the more it can potentially compound.

Another important step to take during the accumulation phase is to craft an appropriate asset allocation. The term asset allocation refers to the way you divide your investment nest egg among stocks, bonds and cash. The combination of assets you choose should reflect your financial goals, tolerance for investment risk and time horizon. Be aware that your asset allocation will need to be adjusted periodically in response to major market moves or life changes.

The Distribution Phase
Once you are nearing retirement, it will also be necessary to craft a solid strategy for the distribution of your assets. For example, did you know that one of the greatest risks retirees face is the possibility of outliving their money? That is why it is essential to determine an appropriate annual withdrawal rate. This amount will be based on your overall assets, the estimated length of your retirement, an assumed annual rate of inflation and how much your investments might earn each year.

Another consideration: After age 70½, you will have to begin making an annual withdrawal from some tax-deferred retirement accounts, including traditional IRAs.1 This is known as a required minimum distribution, or RMD. Preparing for this phase ahead of time may help reduce your tax burden, especially if your annual RMD may push you into a higher tax bracket.

Likewise, this is the time to make sure your final wishes are accurately documented and estate strategies are well underway to minimize the tax burden of your heirs.

Your Planning Checklist
Following is a list that can help you along the way. Find the category that best describes you. After answering the questions, bring the list to your financial advisor who can help make sure your retirement plan is on target.

Saving for Retirement

• Have you performed a comprehensive retirement needs calculation?
• Are you contributing enough to potentially reach your financial goal within your desired time frame by maximizing contributions to tax-advantaged retirement accounts, such as your employer-sponsored retirement plan and an IRA?
• Is your asset allocation aligned with your retirement goal, risk tolerance and time horizon?
•  Have you determined if you might benefit from contributing to a traditional IRA or a Roth IRA?₂
• Do you review your retirement portfolio each year and rebalance your asset allocation if necessary?

Nearing Retirement

• Do you know the payout options available to you (e.g., annuity or lump sum) with your employer-sponsored retirement account, and have you reviewed the pros and cons of each option?
• Have you considered your health insurance options, (i.e., Medicare and various Medigap supplemental plans or employer-sponsored health insurance), out-of-pocket medical expenses and other related health care costs?
• Have you contacted Social Security to make sure your benefit statement and  relevant personal information are accurate?
• Should you purchase long-term care insurance? If so, have you investigated which benefits are desirable?
• Is your asset allocation properly adjusted to reflect your need to begin drawing income from your portfolio soon?
• Have you determined an appropriate withdrawal rate for your assets to help ensure that your retirement money might last 20, 30 or more years?
• Have you figured the amount of your annual required minimum distribution (RMD) and developed a strategy to reduce your tax burden once you’re required to begin taking RMDs?
• Have you appointed a health care proxy and durable power of attorney to take charge of your health and financial affairs if you are unable to do so?
• Have you reviewed all your financial and legal documents to make sure beneficiaries are up-to-date?
• Are you making effective use of estate planning tools (such as trusts or a gifting strategy) that could reduce your taxable estate and pass along more assets to your heirs while also benefiting you now?

To download a pdf of this article click HERE

1Withdrawals will be subject to taxation upon withdrawal at then-current rates. In addition, early withdrawals before age 59½ may be subject to a penalty tax.

2Restrictions, penalties and taxes may apply. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

This article was prepared by Standard & Poor’s Financial Communications and is not intended to provide specific investment advice or recommendations for any individual. Consult your financial advisor or me if you have any questions.

Create a pool of healthcare dollars that will grow in any market.
Provided by Los Angeles Financial Planner, Rose Greene, CFP®

Your premium payments buy you access to a large pool of money which can be used to pay for long term care costs. By paying for LTC out of that pool of money, you can preserve your retirement savings and income.

The cost of assisted living or nursing home care alone could motivate you to pay the premiums. Genworth Financial conducts a respected annual Cost of Care Survey to gauge the price of long term care in the U.S. The 2010 report found that

Why procrastinate? The earlier you opt for LTC coverage, the cheaper the premiums. This is why many people purchase it before they retire. Those in poor health or over the age of 80 are frequently ineligible for coverage.

What it pays for. Some people think LTC coverage just pays for nursing home care. That’s inaccurate. It can pay for a wide variety of nursing, social, and rehabilitative services at home and away from home, for people with a chronic illness or disability or people who just need assistance bathing, eating or dressing.₃

Choosing a DBA. That stands for Daily Benefit Amount – the maximum amount that your LTC plan will pay per day for care in a nursing home facility. You can choose a Daily Benefit Amount when you pay for your LTC coverage, and you can also choose the length of time that you may receive the full DBA on a daily basis. The DBA typically ranges from a few dozen dollars to hundreds of dollars. Some of these plans offer you “inflation protection” at enrollment, meaning that every few years, you will have the chance to buy additional coverage and get compounding – so your pool of money can grow.

The Medicare misconception. Too many people think Medicare will pick up the cost of long term care. Medicare is not long term care insurance. Medicare will only pay for the first 100 days of nursing home care, and only if 1) you are getting skilled care and 2) you go into the nursing home right after a hospital stay of at least 3 days. Medicare also covers limited home visits for skilled care, and some hospice services for the terminally ill. That’s all.₂

Now, Medicaid can actually pay for long term care – if you are destitute. Are you willing to wait until you are broke for a way to fund long term care? Of course not. LTC insurance provides a way to do it.

Why not look into this? You may have heard that LTC insurance is expensive compared with some other forms of policies. But the annual premiums (about as much as you’d spend on a used car from the late 1990s) are nothing compared to real-world LTC costs.4 Ask your insurance advisor or financial advisor about some of the LTC choices you can explore – while many Americans have life, health and disability insurance, that’s not the same thing as long term care coverage.

If you would like a complimentary quote, please call our Director of Insurance, Helena Ruffin, who would be delighted to help you develop a plan for your long-term care insurance needs.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, 310-399-1200 or rose@rosegreene.com.

Citations.
1 genworth.com/content/etc/medialib/genworth_v2/pdf/ltc_cost_of_care.Par.85518.File.dat/Executive%20Summary_gnw.pdf  [4/10]
2 – aarp.org/families/caregiving/caring_help/what_does_long_term_care_cost.html [11/11/08]
3 – pbs.org/nbr/site/features/special/article/long-term-care-insurance_SP/ [11/11/08]
4 – longtermcare.gov/LTC/Main_Site/Paying_LTC/Private_Programs/LTC_Insurance/index.aspx [6/25/09]

The economic challenges that Europe has been facing recently has made investors nervousness about the health of the global economy, has created an opportunity for homeowners here in the US.  Investors have been fleeing riskier securities and moving to the perceived safety of U.S. Treasury securities.  This has created a significant demand for US Treasury securities which  has bid up the price of these securities and in turn driven down interest rates to historical lows.

The average rate on a 30-year fixed rate mortgage nationwide dropped to 4.92 percent at the end of May, from 4.96 percent the previous week, the lowest level since Bankrate.com began keeping track 25 years ago.

Rates have been hovering in the 5 percent to 5.5 percent range for some time. They last touched above 6 percent in November 2008, just as the U.S. financial crisis was unfolding.

Refinancing out of risky adjustable loans or lowering existing fixed rate loans is something every homeowner should be looking into right now.  There have been many changes to lender underwriting guidelines and we know property values are lower than they were several years ago.  Not everyone will be able to take advantage of these lower rates but it costs nothing to at least find out if refinancing is an option so don’t wait until rates start trending back up, make a call today and find out.

Don’t overreact to stock market’s ups and downs

By David Pitt

The Associated Press

updated 9:22 am PT, Mon., June 7, 2010

Highlights:
Understand the market

Part of learning to ignore the swings is understanding that some amount of market volatility is normal. The key is to understand that it can be caused by different factors.

Today’s market fluctuation is nothing like 2008 when credit markets were collapsing, banks had little liquidity and the economy was on the verge of a meltdown, said Rose Greene, a Los Angeles financial adviser.

“It may have nothing to do with North Korea, China or Europe,” she said. “If you know that, you can incorporate that into your thinking and you can breathe.”

To read the full article click HERE

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Main Street’s anger over Wall Street reaches the Senate floor.
Provided by Financial Planner, Rose Greene, CFP®

Another reform bill is now making its way through the Senate – a bill that would reregulate the financial services industry with a few goals in mind:

1) Preventing failures of large banks and financial services firms, or at least insulating taxpayers and the economy in such an emergency
2) Creating a new financial watchdog agency to protect consumers
3) Tightening regulations on derivatives
4) Banning banks from proprietary trading (with the “Volcker Rule”)
5) Increasing transparency_1,2,3

Anger on Main Street, while palpable, won’t pass these reforms. In the Senate, Democrats are largely driving them; Republicans want to see them altered. Let’s look at them briefly.

The bailout issue. The bill introduced by Senate Banking Committee Chairman Chris Dodd (D-CT) would set up an “orderly liquidation fund” – $50 billion deep – to help the federal government wind down any big banks that threaten to go belly up.₃ Senate Republicans argue that this would amount to a permanent “bailout fund” that would implicitly encourage federal bank rescues. Some Republicans think it perpetuates the “too big to fail” mentality.

A group of Congressional Democrats have introduced the S.A.F.E. Banking Act, which would cap bank size: no U.S. bank or bank holding company could hold more than 10% of the country’s insured deposits. The S.A.F.E. Act would also hold the amount of non-deposit liabilities at financial institutions at 2% of GDP for banks, and set a 6% leverage limit for bank holding companies.₄

The bill introduced by Senate Banking Committee Chairman Chris Dodd (D-CT) would set up an "orderly iquidation fund" - $50 billion deep - to help the federal government wind down any big banks that threaten to go belly up.

The proposed new Bureau. The reform bill proposes creating a Bureau of Consumer Financial Protection, possibly as an offshoot of the Federal Reserve. It would watch over banks and credit unions with $10 billion or more in assets, as well as major investment firms and mortgage lenders apart from the banking industry. In addition to trying to protect people from predatory or discriminatory practices, the BCFP would also seek to better inform consumers via an Office of Financial Literacy.₂ Skeptics see this as another multibillion-dollar layer of bureaucracy, a “fifth wheel” whose mission could just as well be handled by an augmented Fed.

Crackdowns on derivatives & proprietary trading. Ah yes, derivatives – those investments no one really understood. Or watched closely. The reform bill would require banks to build a wall between their derivatives trading and their commercial banking operations – in other words, the “Volcker Rule” would be the law. Well, banks do make a lot of money through proprietary trading in their own accounts. In late April, JP Morgan analysts concluded that if the Volcker Rule went into effect, the six biggest global investment banks would need $85 billion more to capitalize the new investment banking divisions they would need to create. According to the JPMorgan scenario, Deutsche Bank would have to grab $26 billion alone and BNP Paribas would have to come up with $21.1 billion.₅

A better understanding for all? If the reforms become law, regulators would work to make the “fine print” that comes with a credit card, a mutual fund or a mortgage product clearer, so that fees and other quietly assessed charges would become easier to understand. Hedge funds would have to register with the federal government. Certain Democrat-driven amendments would even demand more transparency at the Federal Reserve. As Sen. Bernard Sanders [I-VT] remarked in late April, “During the bailout, the Fed lent trillions of dollars at zero or near-zero interest rates to large financial institutions. During the Budget Committee hearing, I asked Chairman Bernanke who received that money, [and] he refused to tell us.”

A new chapter, or a whole new book? You could argue – convincingly – that a loosely regulated Wall Street caused or least exacerbated the “Great Recession”. In the aftermath of that downturn, we may see the biggest rewrite of financial rules and regulations since the Great Depression coming before 2010 ends.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. petermontoya.com, montoyaregistry.com, marketinglibrary.net

Citations
1 – msnbc.msn.com/id/36770907/ns/business-us_business/ [4/27/10]
2 – csmonitor.com/USA/Politics/2010/0429/Financial-reform-bill-101-what-it-means-for-consumers [4/29/10]
3 – csmonitor.com/USA/Politics/2010/0428/Financial-reform-four-sticking-points [4/28/10]
4 – memphisdailynews.com/editorial/Article.aspx?id=49660 [4/29/10]
5- reuters.com/article/idUSN2924718120100429 [4/29/10]
6 – csmonitor.com/USA/Politics/2010/0428/Republicans-relent-clear-financial-reform-bill-for-debate/%28page%29/2 [4/28/10]