The Wealth Chronicle

Issue: # 53

MAY 2013

Dear ,

Welcome to May 2013 issue of The Wealth Chronicle!

Am I on Track for Retirement?

As a financial advisor the two questions I get asked most are:

What is the market going to do?
Am I on track for retirement?

To answer question 1 I usually take out my crystal ball.

There are a couple of ways to answer question 2. One of my favorites is a technique that I read about in Your Money Ratios: 8 Simple Tools for Financial Security a book by Charles Farrell. In his book, Charles addresses this question with something he calls The Capital to Income Ratio (CIR). A good estimate is that you will need to accumulate capital worth about 12 times your gross annual income at age 65. This should put you in a position to live on about 80% of your retirement income.

You start out with zero capital when you are young, save a portion of your income each year, and ultimately try to accumulate capital worth 12 times your pay. The Capital Income Ratio can help tell you how much capital you should have accumulated at various points between ages 25 and 65, so that you stay on track to reach 12 times pay at retirement.

Figuring out your CIR

To begin, look up your age and the corresponding Capital to Income Ratio figure in the chart below. Then multiply your household income by the Capital to Income Ratio. This tells you how much capital you should have accumulated at your age.

An Example:

Let's assume that you are 40 and have a household income of $100,000. The Capital to Income Ratio at age 40 is 2.4. This means you should have 2.4 times your income in savings or $240,000 saved. Now add up what is in your 401k, IRAs, savings, and investment accounts and compare it to that figure. This will tell you if you are ahead or behind in your goals. If you are not on track, you can make adjustments and get back on track in a few years.

Your Age - Capital to Income Ratio (the multiple of your annual income you should have accumulated)

25 - 0.1

30 - 0.6

35 - 1.4

40 - 2.4

45 - 3.7

50 - 5.2

55 - 7.1

60 - 9.4

65 - 12.0

3 Drivers of the Market

In May the S&P 500 continued its ascent upwards. It has risen for almost 200 days without a five percent pullback. When trying to explain recent gains in the stock market, people usually point to things like corporate earnings, unemployment and housing numbers. Here are a couple of reasons that stocks are rising that are flying below the radar

Rising Margin Levels
Low interest rates and a rising stock market has encouraged tempted speculators to buy shares on margin. Margin levels are approaching historic highs. The margin requirement is currently set at 50% which means that someone can by common stock by putting up only half the money of the purchase price.

Corporate Share Buybacks

Corporate boards have authorized $286 billion in share buy backs so far this year. This is almost 90% more than the year ago period. Some analysts estimate that share buy backs have boosted the stock market by 40% more than it would have otherwise risen. Share buy backs support prices as any buying would, but in addition, they reduce the supply of stock.

Follow the Money

Interest rates are so low that income starved investors are starting to put money back into the stock market chasing yield with equities such as dividend paying stocks, REITs, and MLPs.

The stock market is based on supply and demand and when you factor these three things into the equation they are a big chunk of why the stock market has been rising.

Rely on My List of Pros

I really believe in the process of referrals, and so part of the service I provide is to be sure to refer my clients and associated to other qualified businesspeople in the community

The following is a list of areas in which I know very credible, ethical, and outstanding professionals, If you're looking for a professional in a specific area that I've listed, please feel free to contact me. I will be glad to put you in touch with the people I know who provide these services.

For the Home and Office

Realtor
Mortgage Banker
Title Insurance
Security and Phone Systems
Heating & Air Conditioning
Graphic Designer
Website Development
Video Marketing
Bookkeeper
Jeweler
Physical Therapist

To keep Financials in order

Attorneys
Banker
CPA
Estate Attorney
Payroll Company
Property and Casualty Insurance
Health Insurance

Periodically Checking your Social Security Statement

I received an email this week from Social Security reminding me to retrieve my online annual statement.

We'd like to remind you to review your Social Security Statement online. The Statement has important Social Security information and, if applicable, estimates of your future benefits.

If you are working, we encourage you to check your Statement yearly to make sure your earnings record is correct. The Statement also will help in planning your financial future.

To view your most recent Statement, please visit www.socialsecurity.gov/signin and sign into your account.

Please do not reply to this E-mail, as we are unable to respond to messages sent to this address.

Periodically checking your estimated Social Security benefits is usually a good thing: it helps you understand what your projected monthly benefit will be during retirement and it allows you to check for and correct errors.

If you didn't receive the email you can still retrieve your statement by doing the following:

Go to https://www.socialsecurity.gov/myaccount/
Click on my Social Security box.
Create an account under New Users section. It will ask you for information to create an account.
Once you have an account created and log in there will be a link on the first page to Print / Save your full statement.

Your statement includes a record of the earnings on which you've paid taxes and an estimate of the benefits you will receive at various retirement ages: 62, 67, and 70. It's always wise to check the SSA's numbers. Some government watchers estimate that SSA makes mistakes on at least 3% of the total official earnings records it keeps. If you are self employed pay special attention.

If you have evidence of your covered earnings in the year or years for which you think Social Security has made an error call Social Securities helpline at 800-772-1213 or you could make an appointment with the local Social Security office.

If you would like more information on how to plan for Social Security benefits check out a chapter from my book on Social Security planning or make an appointment with me and I'll walk you through different scenarios to see when it makes the most sense to start collecting and how best to coordinate your benefits with your spouse.

May is Disability Awareness month

May is also Disability Awareness Month. Read my latest blog post on why protecting your income is critical to your financial success

Do I need disability insurance?

When it comes to becoming too sick or hurt to work, many people think, "It won't happen to me." But are you willing to risk your dreams and your family's financial security by betting the odds?

Do I need Income Protection

1 in 4 of today's 20 year olds will become disabled before they retire

The average long-term disability absence lasts over two and a half years. How would you pay your bills if you didn't have a paycheck for two years or longer?

How much is at stake?

A 30 year old earning $50,000 a year could earn more than $1.5 million by the age of 65. Disability insurance is not only for big paycheck earners

Your income pays for the big things: Home, Car, Retirement.
It also pays for the little things: Gym membership, smartphone, children's dance lessons.

If you become too sick or hurt, you could lose them all

Am I protecting what's most important

People protect their homes, cars, lives and even identities with insurance. But often don't think to protect their incomes

People are 240 times more likely to become disabled than to suffer a fatal injury

Aren't I already protecting my income?

You may think you're covered, but the protection you have likely won't be enough. Group long-term disability coverage typically only covers 60% of your gross income, and the benefits are usually axable (and capped at a certain amount). This means your take-home pay is further reduced

Workers Compensation: Less than 5% of disabling accidents and illnesses are work related; the other 95% would not be covered

Social Security: of the 2.8 million workers who applied for Social Security disability benefits in 2011, 65% were denied.

Can I afford income protection:

The premium for individual disability income insurance is typically just 1% - 3% of what you earn.

If you are earning an income and can't afford to retire tomorrow, you need disability income insurance.

Please contact me if you have any questions about the articles above or about your personal or business finances.

Sincerely,

Marc Bautis
Wealth Manager

office: 201-842-7655

cell: 201-221-6895

fax: 201-754-9760

marc@bautisfinancial.com

Disclaimer:The information contained in this newsletter is for information purposes only and may not be suitable for your specific financial situation. You should consult a financial advisor before making any investment decisions relating to the information contained in this newsletter

What's Inside?

Am I on Ttrack for Retirement?

3 Drivers of the Market

Rely on My List of Pros

Social Security Statement

May is Disability Awareness Month

MEET MARC

Marc Bautis is a Wealth Manager specializing in working with young families as well as retirees and those nearing retirement. He understands that everyone wants to not only protect their principal, but also be sure that their money lasts. He is committed and proud to deliver independent advice, always in the interest of his clients.

Marc is the creator of the Retirement Fitness Challenge™, a program designed to be sure his clients enjoy the retirement years as they have always envisioned them. Marc's program is designed to prevent outliving your money but also to minimize expenses during retirement and find the best time to start taking Social Security benefits. Marc is also the author of a recent book The Retirement Fitness Challenge: Shape Up Your Finances and Make Your Money Last a Lifetime, which is available on Amazon.com.

Marc is a graduate of Seton Hall University. He is a Bergen County native, from Lyndhurst, where much of his extended family still resides. He currently lives in Hasbrouck Heights with his wife Katie, new daughter Charlotte and Old English Bulldog, Winnie.

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