Financial Planning Tidbits – Fourth Quarter 2016

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The Election – What Happens Next:  We don’t know what the new administration will bring to the table.  However, so far the stock market is voting a resounding yes to the possibility of lower taxes and fewer regulations, and therefore more vibrant economic growth.  This rosy economic picture could change fast subsequent to a trade war, partisan gridlock, and/or more acts of terrorism or further outbreaks of war or other geopolitical surprises.  In the meantime, feelings remain strong on both ends of the political spectrum.  However, there is reliable non-partisan agreement on one point: that the first part of next year will be very interesting. Regarding your finances, we are not recommending shifts in financial planning or investment strategy. Financial plans that rest on thoughtful risk management and clarity of purpose and strategy are already well positioned for a range of possible economic environments. If substantive changes in tax law do unfold next year, we will be strong advocates of updating your planning accordingly.

Social Security Planning – Still An Embarrassing Public Policy Confusion:  A recent GAO report documents low Social Security literacy in the population and a high frequency of bad advice offered by Social Security representatives.  Ouch. Despite the fact that Social Security representatives are not supposed to offer any advice at all, they are giving bad advice to clueless consumers. As a result, most people continue to draw retirement benefits early even though that is not usually not the best choice except for those who cannot afford to wait until benefits are maximized at age 70 or for those for whom longevity is known to be short.

Financial Planning – Managing Longevity Risk: This infographic , from a Society of Actuaries committee on which Paula served, illustrates that you might live much longer than you think.  It also highlights that it is not just luck or genes that determine how long you will live.  Factors over which you have control and that are consequential for your longevity include personal health and safety habits, social connections, compliance with medical advice, and education.  It’s not just about how long your parents lived! The planning implication is to realize that how long you live is unknown and that the consequences of outliving your financial wealth are severe. Having a portion of your wealth positioned for supporting you far beyond average life expectancy is a core strategy for savvy investors.

Cybersecurity: Credit Cards Hacked: The holiday season is a good time to double-check credit cards for fraudulent charges. During the holiday season, it is hard for you and also for credit card company security programs to identify oddball, fraudulent expenses without closer review. It’s a pain for sure if your card is hacked.  But there is also a benefit.  Having to get a new card makes you consider each automatic charge with fresh eyes.  An easy way to cancel an automatic charge is simply to not update the credit card number for that merchant.  Think of your hacked credit card as a serendipitous opportunity for some financial early spring cleaning!

Public Health Issues – Impacting Most Families: Financial illiteracy and the nexus of diabetes and obesity are well known public health issues as is drug addiction and specifically opioid abuse.  Loneliness, because of its prevalence and documented negative impact on health and well-being, is a next up public policy concern, for which Britain has some innovative public policies.

Holiday Season – Great ‘Get Rid of It’ Ideas: Goodwill has an interesting offer for those of us who shop mainly online.  Fill those empty Amazon boxes with goods you are ready to donate; Goodwill offers free pick up and shipping. Then, consider Good Riddance Day, which happened on 12/28/16 in NYC.  People were invited to write on a piece of paper and then dump into a shredder what they are ready to get rid of for the coming year, a nagging habit, a painful memory, etc.  What a great idea! What would you like to get rid of before the New Year begins? Do it!

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