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Ponderings For the Week of March 20 to 26, 2017

Stocks Rise Despite Rate Rise

Perhaps it should come as no surprise that U.S. stocks managed to post modest gains in a week when the Federal Reserve Board announced an immediate increase in short-term interest rates with a promise of more hikes to come later this year. The expected reaction in the face of higher interest rates is to sell stocks and buy bonds. True, investors added to their bond holdings last week, but also showed strong interest in dividend-paying stocks, particularly utilities and real estate. Wall Street observers thought the reason for this conundrum was relief that the Fed suggested that the move toward higher interest rates will be accomplished very gradually, thus averting a stampede out of stocks. Foreign stocks enjoyed a very strong week, advancing over 2%.  

This will be a relatively quiet week for economic data, but fireworks may be set off in the nation’s capital with congressional hearings on Supreme Court nominee Gorsuch and on alleged Russian tampering with the U.S. election, not to mention the ongoing rumblings over proposed health care changes.




Four for the (Retirement) Money

Whether you’re 24 or 64, here are four matters to keep in mind as you plan for retirement, or for that matter, if you’re already retired.


1st – make sure your investments are well-diversified so that you can earn attractive lifelong returns despite the occasional bumps in the road.

2nd – make the most of your home. Paying off the mortgage by the time you retire can be enormously beneficial to your retirement prospects. Also, consider the possibility of eventually downsizing your domicile to free up money for retirement purposes.

3rd – prepare an estimate of your retirement budget. You may be able to retire on a lot less money than you have been led to believe. But don’t forget to include the inevitable “budget busters” in your budget, like car replacement, home maintenance, and the dreaded major dental bills.

4th - decide where and when you want to retire. Retiring to a less expensive locale can work wonders on your budget. Delaying retirement can have a very positive impact on your retirement lifestyle as well. For example, delaying retirement by just three years can increase your lifetime retirement income by 25%.




Smart Money Tips

  • If you are planning to purchase an LTC policy.  Keep in mind that, unlike other kinds of insurance whose premiums rarely change very much, long-term care (LTC) insurance policies can increase premiums with the approval of the state insurance commission. Neither the company nor the insurance agent is likely to be very clear explaining this, but you should ask whether and by how much the company has raised premiums in the past. Also, be wary of a policy that is considerably cheaper than similar policies. It may be a prime candidate for a big increase. Most importantly, before buying a policy, you need to look well into the future to see if you can afford the possibility – indeed, the probability – that your premiums could rise substantially. I recommend that you consider a worst-case scenario in which your premiums could rise by 50% or even double between the times you sign up for the policy and when you’re likely to receive benefits. In other words, don’t buy a policy that is so expensive in relation to your household budget that you couldn’t afford a big premium increase. It would be unfortunate to have to drop a policy or severely curtail your coverage later on, just before you need the benefits.


  • Store unused valuables in a safe deposit box. If you have some valuable jewelry or other baubles that you don’t use very often if at all, store them in a safe deposit box. They’re safer there and they’re a lot cheaper to insure. And yes, you should insure any valuables that you keep in a safe deposit box, because the bank doesn’t provide insurance coverage. Don’t forget to prepare a list of what’s held in the safe deposit box. A worthy alternative to a bank safe deposit box is a home safe, but it should be fire resistant and bolted down so that burglars can’t carry it off.






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