Ponderings For the Week of June 28 to July 4, 2021

Progress on the Infrastructure Deal Spurs Record Highs for Some Indices

Stocks finished their strongest week in several months. The advances were not stupendous, but it doesn’t take much to move the needle into record territory these days. Stocks moved higher on Thursday with news of bipartisan and White House support for a $1.2 trillion infrastructure deal (that’s $1,200,000,000,000). Value stocks outperformed growth stocks on the basis that a growing economy benefits the profits of value companies compared with growth companies.

Inflation data was somewhat higher than had been estimated. One key measure used by the Federal Reserve Board rose 0.5% in May, bringing the year-over-year increase in key consumer goods prices to 3.4%, the highest since 2008. But the serendipitous run up in equity prices persists, leading investors to continue as if nothing can go wrong.

Helping But Not Enabling Younger Generation Family Members

One of the best ways to teach children, grandchildren, nieces, and nephews about the importance of saving for retirement and investing is to help them fund their retirement plans. Anyone who has job income, even from summer or part time jobs, can contribute to an IRA, even if they are minors. Once a younger generation family member gets a “real job,” you might be able to afford to help him or her contribute to a retirement savings plan at work. I know this is a good investment for the youngster. But it may also be a good investment for you insofar as the sooner you can teach younger generation family members about financial responsibility, the better chance of your not having to help them out later on.

Nevertheless, despite your good efforts, you may need to provide financial help to a young adult in need. Whether you are already helping or may want to in the future, keep these two caveats in mind. First, can you easily afford the outlay? I have received a number of disturbing emails from parents who themselves are living on the edge financially, but still feel compelled to help out their kids. While this may be a natural inclination, you don’t want to impair you own financial future. As callous as it may sound, you may simply have to say that you can’t afford to help. Second, if you are providing financial assistance, don’t let temporary aid turn into an annuity for the family member. You have to draw the line somewhere or otherwise you will end up enabling the child who may come to view the periodic assistance as an entitlement. If that’s what you want to do and can afford to send money indefinitely, so be it, but still be wary of how this might adversely affect your child’s or other relative’s initiative and self-esteem.  


Smart Money Tips 

  • Save for a house or save for retirement?  People who are saving for a home often have to decide whether to cut back on IRA and other retirement plan contributions in order to boost the amount of money that will be needed for the down payment. Temporarily suspending retirement plan contributions to build up your housing fund should not be taken lightly, but buying a home is still such a smart financial move for most that it may be justified. Before dropping your contributions entirely, keep in mind that it’s possible to tap into almost all types of retirement savings plans to help finance a home purchase, including:

    -    Traditional IRAs
    -    Roth IRAs
    -    Workplace retirement plans, including 401(k), 403(b), tax sheltered annuity (TSA), and federal thrift savings (TSP) plans

    Depending upon the plan, money can either be withdrawn (taxes will probably need to be paid) or borrowed for purposes of buying a first home.

  • Put time on your side when investing. Investing for long periods means you have a long time to ride out the downs in the stock market while still being able to participate in the ups. Past studies have shown that most investors sell after the market has declined and buy after it has risen. In other words, their timing is terrible. So long as you don’t need the money for at least several years, however, you’re better off sticking with your investment plan.








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