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Accentuating the Positive

Accentuating the Positive

Retiring? Saving for retirement? Here’s some good news.

 

Provided by MidAmerica Financial Resources

 

Are 90% of articles written about retirement pessimistic? Sometimes it seems that way. Repeatedly, we are reminded that most baby boomers haven’t saved enough for the future.

     

There’s no denying this, but the media is giving short shrift to other, more positive developments that may be improving the economic and retirement outlook for many Americans. Here are a few worth noting.

     

401(k) savings have rebounded tremendously from Great Recession lows. For older savers, the recovery is especially pronounced. Fidelity just released its latest Quarterly Retirement Snapshot. Looking over account data from its retirement plans, it says that the average Q3 401(k) balance for employees who had contributed to their accounts for at least ten straight years was $241,800, compared to just $130,700 in Q1 2009 when the recession was ending. That’s an 85% increase.1,2

    

Data from Principal Financial Group points out similar gains.  Earlier this year, it noted that the average balance in its 401(k) plans had risen nearly 70% since the market trough of 2008. Also, new research from the Investment Company Institute shows that if an employee made consistent per-paycheck contributions to a 401(k) during 2007-12, the balance on such accounts increased an average of 6.8% annually (and this is not even considering the great year the market had in 2013).3,4

 

Incomes finally seem to be rising. This recovery has been marked by a lack of wage growth – a factor that has made it shallower than many analysts expected. That may be changing at last, as the Census Bureau's employment cost index increased 0.7% for Q2. That is solid, in fact it is the biggest quarterly boost seen in six years.4

     

Hiring has picked up in some crucial industries. ADP’s latest employment change report shows October payrolls swelling by 28,000 workers in the construction industry and 15,000 in the factory sector. There were 5,000 new hires at businesses with more than 500 workers, 102,000 new hires at small firms and 122,000 fresh hires at medium-sized companies.5

 

Americans aren’t living on margin as much as they once were. In 2008, total U.S. credit card debt reached $866 billion. In 2013, that fell to $660 billion.4

     

Fewer Americans are letting consumer debt linger. The Federal Reserve Bank of New York says the latest debt delinquency rates are the lowest in more than six years – the 90-day-plus delinquency rate was at 4.8% in Q2. During 2010, it reached 8.7%. Additionally, overall household debt declined $18 billion in the second quarter, and mortgage debt decreased $69 billion.4,6

   

Medicare spending didn’t rise in the last federal budget year. It was flat for FY 2012-13 and while that may not hold true in successive years, it is certainly interesting. According to Medicare actuaries, fewer Medicare recipients than forecast went to hospitals for care during that budget year, and many of those who did used cheaper services. (Per-beneficiary Part A spending fell for a second consecutive year in FY 2012-13; enrollment in Part C plans expanded.)7

 

This lack of an annual spending increase led Medicare’s trustees to adjust their forecast of when Medicare’s main trust fund might run dry. It is now projected to do so in 2030, four years later than previously estimated.7

    

Baby boomers may be in for a more enjoyable retirement than the media assumes. This summer, T. Rowe Price surveyed recent U.S. retirees and found that 89% were somewhat or very satisfied with their quality of life. This level of retirement satisfaction surfaced even though the average respondent was now living on 66% of his or her pre-retirement income, with 85% of respondents saying that they didn’t require as much money as they once did to maintain their standard of living.8

 

There you have it: a roundup of good news about the economy and the outlook for retirement. Stay positive and plan actively for your future.

   

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com.

www.mid-america.us

   

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. 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. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - istockanalyst.com/business/news/7063858/fidelity-s-quarterly-retirement-snapshot-average-balances-increase-year-over-year-record-contributions [4/29/14]

2 - blogs.marketwatch.com/encore/2014/04/29/older-savers-pull-ahead-in-the-401k-race/tab/print/ [4/29/14]

3 - blogs.marketwatch.com/encore/2014/06/03/survey-401k-savings-rates-spiked-in-2013/ [6/3/14]

4 - bloomberg.com/news/2014-08-05/how-to-stay-optimistic-about-retirement-read-this-article.html [8/5/14]

5 - thestreet.com/story/12941709/1/adp-report-shows-hiring-picking-up-job-growth-in-right-places.html/ [11/5/14]

6 - newyorkfed.org/microeconomics/hhdc.html#2014/q2 [11/4/14]

7 - bloomberg.com/news/2014-07-28/medicare-s-financial-condition-improves-on-reduced-costs.html [7/28/14]

8 - news.investors.com/investing/073014-711065-people-adjust-to-lower-income-in-retirement.htm [7/30/14]

 


6 Steps to Get Out of Debt

6 Steps to Get Out of Debt
 

Why not plan to lighten your financial burden 

Provided by MidAmerica Financial Resources

 

Positive moves to counteract negative cash flow. The financial analysis website nerdwallet.com keeps track of the various debts common to the U.S. household. As of April 2014, they’ve found an average mortgage debt of $154,365. They have also discovered an average household has $7,087 in debt from credit cards, but when the numbers are revised to only look at American households already in debt, the average more than doubles to $15,191. When you add this to the average student loan debt of $33,607, it paints a rather bleak picture.1

Every day, people draw on money they don’t actually have – via credit cards, various loans, home equity lines of credit, and even their 401(k)s. Many of them end up making minimum payments on these high-interest loans – a sure way to stay indebted forever.

If this is your situation, you may be wondering: how do I get out of debt? Here are some ideas.

*Make a budget. “Where does all the money go?” If you are asking that question, here is where you learn the answer. You might find that you’re spending $80 a month on gourmet coffee, or $100 a week on lousy movies. Cable, eating out, buying retail – costs like these can really eat at your finances. Set a budget, and you can stop frivolous expenses and redirect the money you save to pay down debt.  

*Get another job. I know, this doesn’t sound like fun. But having more money will aid you to reduce debt more quickly. A family member who isn’t working can work to help reduce a shared family problem.

 

*Sell stuff. The Internet has proven that everything is worth something. Go to eBay, craigslist or some other online marketplace – you’ll be amazed at the market (and the asking prices) for this and that. What people collect, want and buy may surprise you. Don’t be surprised if you have a few hundred dollars – or more – sitting around your house or in your garage. You might be able to pay off a couple of credit cards – or even a loan – with what you sell.

  

*Ditch the big car payment and drive a cheaper car that gets good MPG. You’ve likely been thinking about saying goodbye to your current car if it gets terrible mileage. Get a car that makes sense instead of a statement. Your wallet will thank you.

 

*Pay off all debts smallest to largest. The benefits are psychological as well as financial. Knock off even a small debt, and you have an accomplishment to build on – encouragement to erase bigger debts. Also, every debt you have incurs its own interest charge. One less debt means one less interest charge you have to pay. 

 

*Or, pay off your highest-interest debts first. Take a minute to figure out which of your debts hits you with the highest interest rate. Pay the minimum amounts toward each of your other debts, and apply all the extra money you can toward paying off the debt with the highest interest. This will have a cumulative effect. Your highest-interest debt will become smaller, meaning you will be saving some dollars on interest charges on the balance because the balance is lower. If the balance is lower, you should be able to pay off the debt faster. When you say goodbye to that debt, you can start paying down the debt with the next highest interest, and so on.

 

Keep the real goal in mind. Building wealth, not reducing debt, should be your ultimate objective. Some debt reduction and debt consolidation planners obsess on getting you out of debt, but that is only half the story. Minimizing debt is great, but maximizing wealth is even better.

 

You can plan to build wealth and reduce debt at the same time. If you have a relationship with a financial advisor, you might be able to do it in the same unified process. Why just keep debt at bay when you can leave it behind? Do yourself a favor and talk with a good financial advisor who can show you ways toward financial freedom.

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com.

www.mid-america.us

   

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. 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. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 – nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/ [5/8/14]`

 

 

 

 





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