The Recovery
After a tumultuous year in 2008 and a two-year recession, the global economy has begun to recover. People naturally are impatient with the slow pace and worried that the future is murky. No one knows whether the economy will slip into another recession or we’ll have a sluggish and jobless recovery. But it’s also possible that the recovery that has been sneaking up on us may turn out to be a strong and durable one.
What we do know for sure is that the stock market has not yet discounted a robust future. The Dow is no higher than it was 11 years ago. The market has not even climbed back to the levels of the dark period of last fall. If the historical trend of 10 percent annual growth had taken place over the last decade, the market should be more than double the current level. Over the last decade, we have had the worst stock market returns since reliable data became available in 1926. The market returns this decade are worse even than the ones during the Great Depression in the 1930s. The good news is that frequently the stock market does well following bad periods.
Value Based Financial Planning: An Hour to Change Your Life
It’s important to think about the big picture, but you can’t control the global economy. You can, however, control how you handle your personal financial situation and that’s what we do at Lexington Avenue Capital. It’s common not to have a plan for your financial future and little idea of exactly what your goals are. Most investment portfolios are a hodgepodge of accounts and securities. Frequently spouses fail to communicate on their finances. With value based financial planning, we try to bring order to this chaos. Everyone has unique needs and desires and resources. We help you clarify your goals, understand the trade offs and develop a financial road map to help you reach your most important objectives with the highest probabilities of success. While we want to help you define the big picture, we’ll handle the little details too so we can lower your stress and spare you some worries.
Taking Social Security Seriously
Frequently we work with people approaching retirement and we find that until they are actually on the threshold of filing for Social Security benefits, they don’t take it seriously. For most people, Social Security will be an important part of their income in retirement. Making sure that both spouses maximize benefits can be a complicated process and people should begin understanding the ramifications in their 50s. At that age, it’s still not too late to influence their individual Social Security formula, which is based on an adjusted 35-year earnings history. Recently we posted an article on our blog that goes into more detail about this. http://luxenberginfo2.blogspot.com/2009/12/taking-social-security-seriously.html
Year End Actions to Lower Taxes
Before year-end, it’s sometimes possible to take actions to lower taxes. One possibility given the big bear market, is to realize tax losses on securities. This can be done by selling individual securities or mutual funds, which may be lower in price than when they were purchased. These losses can offset capital gains on other securities or be saved for future years. Also, $3,000 of such losses can be used each year to offset ordinary income.
Roth IRAs in 2010 – One Time Only Conversion Opportunity
Soon we will be hearing a lot about the opportunity to convert retirement savings to Roth accounts in 2010. In one of the earlier tax bills, Congress approved a one-year opportunity for high bracket earners to convert portions or all of some retirement accounts into Roths. In doing so, people will have to accelerate the taxes due on these accounts but the payments can be divided between payments in 2011 and 2012. Once accounts are converted to Roths and held for five years, no taxes will be owed when the money is distributed. Also, unlike ordinary IRAs, there are no required distributions from Roths so they are a good estate planning vehicle. This shift is especially beneficial if one has money outside of retirement accounts to cover the taxes. This opportunity should be evaluated on an individual basis and we are geared up to help with that decision.
Lexington Avenue Capital Management
Unbiased, fee-only advisors working with individuals to help them develop sound financial strategies to reach their most important goals. Call us today for a complimentary Financial Road Map planning session or other financial questions.
Larry Luxenberg
luxenberg@lexingtonave.com
845-708-5306
www.lexingtonave.com
Investment Advisory Services provided through Partnervest Advisory Services LLC, a Registered Investment Advisor. Past performance is not indicative of future returns. Products with issuer guarantees carry the risk of issuer default.