Chornyak & Associates supports NPR
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I firmly believe in giving back to the community. That's why I've chosen to contribute to Columbus's NPR station, WCBE, in its semi-annual fund drives for several years now. I hope you, the readers of this newsletter and clients of Chornyak & Associates, will follow my lead and give generously to upcoming drives. ( Click here or on the image above.)
Joe
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Retirement checklist: five steps to help you get back on track
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Although the painful recession may be in our rearview mirror, the aftermath may have you concerned that you won't have enough money to retire when the time comes. But you can still take control of your retirement, despite market declines and an uncertain economic climate. It all boils down to having a plan - and sticking to it. Creating a checklist can help improve your chances of attaining retirement readiness. Here are five key steps that can help you jump-start your planning or get you back on track. And, remember, when you participate in your workplace retirement plan, you've already taken a step in the right direction. 1. Review your contribution amount. Consider increasing your contribution rate to boost your retirement savings. (The IRS deferral limit for defined contribution plans is $16,500 in 2011 and $17,000 in 2012.) Even a small increase now can make a difference later. If your employer matches contributions, be sure to contribute enough to take full advantage of the match.
Try to direct any "newly found" assets toward retirement. For example, if you pay off a loan or pay down credit card debt, take the amount you were paying and redirect it to your retirement account. The additional contribution could have a positive impact on your savings.
If you are 50 or older, consider making an additional catch-up contribution (up to $5,500 into a defined contribution plan) in 2012. 2. Review your retirement progress and your lifestyle. Use the tools available on your plan's website to establish a savings target and monitor your progress toward it.
If it looks like you have a savings gap, you may need to consider working longer. If you're in good health and have the option to continue working, you may be surprised at how much you can accomplish by postponing retirement - even for just two or three more years.
Review your spending habits and consider making small lifestyle changes. It's essential to get back to the basics: save more, spend less, and get out of debt. Create a line item in your budget for "retirement savings" and make sure it gets "paid" every month. 3. Review and rebalance investments. It's important to check your portfolio regularly - at least once or twice a year - and make changes to keep up with your goals. As you get closer to retirement, you should check it more often. Has your tolerance for risk changed? If so, you may want to reduce your exposure to stocks. As markets rise and fall, asset allocations tend to shift. For example, a portfolio that has been divided evenly between stocks and bonds could have become unbalanced as a result of market activity. It may be time to evaluate your current positions and rebalance back to your original allocation.* *Diversification does not ensure a profit or protect against a loss.
4. Determine an appropriate withdrawal strategy, and consider postponing distributions.
Having a defined withdrawal strategy is important so you don't outlive your assets. You may even want to consider postponing withdrawals. Why? Because even after you retire, you can boost the long-term income power of your tax-advantaged accounts by tapping your taxable investments first and postponing withdrawals from your workplace plans and Traditional IRAs for as long as you can-up to age 701/2.
Even though there is a risk of losing additional principal by delaying retirement, for every year that you postpone withdrawals on your tax-advantaged accounts, you get another year of tax-deferred earnings potential. That might not seem like a big deal early in retirement, but the compounding effect over the course of a long-term retirement can be considerable. Remember, today's life spans and retirements are longer.
5. Don't go it alone - consult a financial advisor.
Uncertain economic times can sometimes lead to poor decision-making. It's often at the turning points - both market highs and lows - that individual investors can make the biggest mistakes, such as selling out when prices are low. Working with a financial advisor can provide you with an emotional buffer and help you stay focused on your long-term goals.
A financial advisor has the knowledge and experience to help you stay on track, regardless of what's going on in the markets. Coaching and support from an experienced professional can provide valuable perspective and help you make decisions with confidence.
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Chornyak & Associates Staff Profile
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We have a great team at Chornyak & Associates, all working together to help you realize your lifetime financial goals. I'm proud of our people, and I'd like to introduce one of our key players to you. For the first Chornyak & Associates personal profile, I've chosen a valued associate who's been with us for 25 years, Bob Mauk.
I think that what impresses me the most about Bob is his knowledge of the markets and the strategies that are required to make the best decisions for our clients. He cares about the people with whom he works, so much so that I can see the pain in his face when he's worried about market downturns.
Bob, who has held the Certified Financial Planner™ professional certification since 1991, has vast knowledge and experience that spans portfolio management, tax planning, and estate planning. He embodies the Chornyak & Associates' philosophy of diversification with proper asset allocation.
Joe
Providing value to clients
Bob studied business, with a major in finance, at The Ohio State University. He tells us that during his first assignment after graduation, he helped a colleague solve a difficult financial planning issue and that began a rewarding career advising people how to "take a pot of money and grow its value" into a sustainable retirement income.
During his career, he has witnessed bull and bear markets come and go, but he maintains that the basics of good financial advice have not changed. "There is no reason to jump onto fads because they rarely work," he says. The tax laws are the most susceptible to change, but the Internet makes tax advisory easier because of easy access to up-to-date information and the ability to download forms.
Balancing career and family
Bob maintains that he's just an average guy, but his successful career and dedication to family make him exceptional from any point of view. When asked what is important to him in life, he cites his family and educating his three children who are now in school from first grade through freshman year of college. He spends his leisure time coaching volleyball, soccer, and basketball.
We enjoy having Bob as a colleague. Wouldn't you?
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What's happening now
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Tempted by the Amazon Fire update of the Kindle? Trade in your first or second-generation Kindle or maybe your iPad for $28 to $330 (iPad 2). Click here.
T. Rowe Price estimates that parents and grandparents who set aside an annual $2,000 Roth IRA contribution for five years, starting when the recipient is at age 13, are putting a teen in line to receive $10,000 of annual retirement income from that original seed money. Click here for more information.
Cincinnati's Kroger corporation tops The Chronicle of Philanthropy's annual list of companies donating a significant chunk of their profits to charity. In 2010 Kroger gave away 10.9% of its $589 million in 2009 pre-tax profits, amounting to $64 million. Click here.
Taking advantage of today's beaten down home prices and record-low rates, baby boomers are buying their dream retirement homes - years before leaving the workforce.
What do the nation's pets wear on Halloween? See the cat Cleopatra and the Chihuahua Queen Elizabeth by clicking here.Steve Job's new biography reveals his advice to U.S. presidents. What did he think of Bill Clinton's dalliances? |
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This communication is strictly intended for individuals residing in the States of: AL, AR, AZ, CA, CO, CT, FL, GA, IA, IL, IN, KY, LA, MA, ME, MI, MT, NC, NY, OH, PA, SC, TX, VA WI, WV. No offers may be made or accepted from any resident outside these States due to various state requirements and registration requirements regarding investment products and services. Securities and Advisory Services Offered Through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser Fixed - insurance products and services offered by Chornyak & Associates, LTD are separate and unrelated to Commonwealth. This informational e-mail is an advertisement. To opt out of receiving future messages, follow the Unsubscribe instructions below. |
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November 2011
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I've had some positive feedback from you regarding our videos in which I speak directly to you. This month's message has to do with charitable giving, which as you may know, I support whole-heartedly. Please take time to view my video at the left and let me know what you think. Our feature article this month has some important factors to consider in reviewing your plans for retirement. Make sure you check out all items in the list to make sure you've got all bases covered. Bob Mauk has been an integral part of Chornyak & Associates for nearly 25 years. I'm sure you'll be interested to learn more about his motivations and personal aspirations in the first of our staff profiles. Finally, we've introduced a new feature in this month's e-newsletter, "What's happening now." This column will give short introductions and a link to articles that you can read in full to get more information. I'm interested in learning more about the types of information that interests YOU, our most important asset. Please contact me at 614-888-2121 (or toll free 877-389-2121), e-mail: chornyak@chornyak.com. Sincerely, Joe
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Market Update
| | September slowdown
September was a challenging month for financial markets, ending what was also a difficult quarter for investors. It is hard to find an asset class that moved higher during the month, as almost every broad type of risk investment sustained losses. Markets traded with high volatility, reacting to exogenous stresses across the globe. European debt troubles helped drive international markets lower, and fears of an economic slowdown added to negative pressures.
When all was said and done, the selling left the Dow Jones Industrial Average 11.49 percent lower for the quarter; it declined 5.91 percent in September alone. The S&P 500 Index lost 13.87 percent for the quarter and 7.03 percent for the month. As a result of these recent losses, the Dow is now down 3.9 percent for the year, and the S&P 500 has lost 8.68 percent over the same time frame.
International markets suffered even larger losses, as fears of a global economic slowdown hurt stock prices. The MSCI EAFE Index lost 19.01 percent for the quarter and is now down 14.98 percent for the year. The riskier MSCI Emerging Markets Index lost 23.19 percent for the quarter and has given up 23.53 percent this year.
Treasuries-one of the only bright spots for investors
Interestingly, one of the few asset classes that saw gains was U.S. Treasuries, particularly on the long end of the curve. For the month, the Barclays Capital U.S. Treasury 20+ Year Index returned 12.37 percent, and it climbed 29.2 percent for the quarter. Much of the gains were attributable to the Federal Reserve's (the Fed's) newly announced program, which the media dubbed "Operation Twist." This program looks to keep long-term rates at extremely low levels by buying longer-term Treasuries while selling shorter-dated maturities. It is yet another initiative designed to stimulate economic activity, but, like other recent Fed actions, it has been met with skepticism by some economists.
On the other end of the spectrum, credit-sensitive corporate bonds came under selling pressure on fears that a slowing recovery might negatively impact companies. Losses were exacerbated in the riskier high-yield sector, resulting in the Barclays Capital U.S. Corporate High Yield Index losing 4.2 percent in September and leading to an 8.4-percent drop for the quarter. This was particularly frustrating for investors because many had favored "spread" sectors over Treasuries, whose low yields and sensitivity to interest rates made them appear unattractive.
A slight rebound of the economy
After a slow August, the economy did not experience a strong bounce-back in September. But a small rebound may be occurring, and it looks as if a fall off a cliff has thus far been avoided.
Consumer confidence rose very slightly between August and September, though it remained at low levels not seen since the first half of 2009. The general lack of confidence in the economy, both on the part of business managers and consumers, continues to be an issue. Businesses are reluctant to deploy cash and hire workers, and consumers are spending more cautiously. At some point, this pent-up demand could be a positive for growth, but macro worries are keeping both groups on the defensive.
Manufacturing, which had been leading the broader economy earlier in the year, now seems to be idling just above neutral. The nationwide ISM Manufacturing index managed to rise a bit in September, after falling in August. But the Philadelphia and Empire State Manufacturing surveys confirmed continued regional weakness, suggesting that a turnaround could take time.
Meanwhile, housing, which had been struggling at the beginning of 2011, has finally shown signs of stabilization. The S&P/Case-Shiller 20-City index of home prices rose slightly in both June and July. The Federal Housing Finance Agency report also supported the notion that home prices are evening out.
The unemployment rate for September is expected to remain stubbornly high, at the same 9.1-percent level we saw in August. Total nonfarm payrolls, which didn't rise at all in August, are expected to increase by only 56,000 jobs. Interestingly, growth of private payrolls has outpaced growth of total nonfarm payrolls every month since November 2010. The difference has been continued layoffs in the public sector. This trend is likely attributable to cost cutting on the part of federal, state, and local governments, which are trying to cope with budget deficits.
A series of global shocks
Markets appear to be in a rather profound negative feedback loop, reacting unfavorably to a plethora of global news items. Over the past year, markets have experienced four major shocks that have put pressure on global economic growth and unnerved investors.
First, market turmoil arose from the Arab Spring and the conflicts that have caused widespread regime change in North Africa and the Middle East. Second, the Japanese earthquake and tsunami disrupted markets and hampered trade and economic growth. Third, the European debt situation resurfaced, as investors worried about the debt burden of eurozone countries and the solvency of European banks. Lastly, there has been a broader slowdown in the U.S. and global economy, caused in part by the first three shocks.
In the first half of the year, markets bounced back from each event. Now it appears that the pressures of a slowing recovery and the headline risks from the European debt situation have finally put sustained stress on financial markets. We have entered a phase where investors are looking more at the "risk-off" trade than the "risk-on" trade, focusing more on downside risk.
Investment outlook
The question on the lips of most investors is, "What do I do now?" U.S. markets are off almost 20 percent from their yearly highs and have been making new lows week after week. The conundrum for many is whether to sell or not, given the market downturn and the difficulty in predicting where markets will go from here. As we continually discuss in our commentaries, it is best for investors to avoid the impulse to sell financial assets after prices move lower and buy again after prices move higher.
It is likely that we will see further volatility in markets and perhaps even further selling pressure. But markets are dynamic, and good investors often look for opportunity in times of stress. Many managers are selectively buying in sectors that have been beaten down, looking for chances to gain should markets rebound. Oftentimes, those who are in a position to capitalize on these opportunities are successful over the long term. That said, each investor must keep in mind his or her personal risk profile and maintain levels of risk that are reasonable, taking into account current market fluctuations.
Authored by Simon Heslop, CFA�, director of asset management, at Commonwealth Financial Network.
Go to our web site to read the complete market update.
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