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It's a harsh reality of modern retirement planning: Women live on average five years longer than men, yet they accumulate less for retirement. According to the 2019 Bank of America Merrill Lynch Workplace Benefits Report, women come to retirement with $70,000 less than men.

Are women worse savers? Hardly. According to research from Vanguard, women participate in retirement plans in greater numbers than men. The difference in savings boils down to wages.

First, there's the gender pay gap. Despite having more education than men, women still only earn 80% of what their male counterparts do.

Women also get penalized for motherhood, suffering around a 4% decline in wages for each child they have, according to think tank Third Way. Men, on the other hand, experience a "daddy bonus," seeing their wages rise about 6% with each child.

And because women are more likely to be caregivers, both for their children and elderly relatives, according to the Merrill Lynch survey, they are also more likely to take breaks from their careers, work part-time or participate in the gig economy. What they gain in flexibility, they also lose in access to employer-sponsored retirement plans.

In short, women must finance more years of living expenses, health care and long-term care, but they've got less money to do it with.

"Awareness of the issues is the single most important first step to addressing the issues," said Catherine Collinson, president and CEO of the Transamerica Institute and the Transamerica Center for Retirement Studies. "There are many things women can do [for their retirements] that are within reach."

Experts recommend these four steps.

At the beginning of your career, saving for retirement on top of food, rent, insurance and possibly student loan debt seems beyond daunting. But it's one of the most effective things you can do for the future. The earlier you start, the less you need to save, because compounding does a lot of the work for you.

Financial planners like Maria Bruno, head of U.S. wealth planning research with Vanguard, recommend putting aside 15% of your pretax salary for retirement. Can't swing 15%? Start small and build up. A little retirement savings is always better than nothing.

"Retirement savings isn't all or nothing," insisted Bruno. "Maybe at first you take advantage of your company's match so you only save 3%; then you increase your savings by 1% a year. By the time you're 30, you'll be at that 15% level."

More from Invest in You: The secret to financial success: Paying off debt These 3 steps will help you track where your money is going in 2020 How much you need to save every month to earn $60K a year in interest alone for retirement

Also, in the early years, be particularly mindful of your salary negotiations. Your early salary is the foundation for future earnings, so it behooves you to learn the art of negotiation.

"Know your worth and don't settle for the first offer," said Judith Ward, senior financial planner with T. Rowe Price Associates. "Do some research on your industry and position and be knowledgeable going into a salary negotiation."

No one likes to budget, but it's the clearest way to get a handle on your money. Being aware of where your money goes each month can help you identify which areas to cut back on and how much you can redirect toward retirement.

"You need to get smart about what your spending is," said Stacy Francis, a certified financial planner and president and CEO of Francis Financial. "What you earn is important, but what you spend is even more important,"

There are a number of apps like mint.com and YNAB (You Need A Budget) to simplify budgeting. A simple spreadsheet works, too. When you've figured out where to trim and how much to allocate to retirement, automate your savings. Many companies do this for employees through auto-enrollment features, but you can automate additional savings on top of that yourself.

"I say take [retirement savings] off the top and that forces you to live within your means with the remaining amount," said Bruno.

Who says 65 is the magic retirement age?

"The whole retirement thing is really outdated," said Kathleen Burns Kingsbury, a wealth psychology expert and founder of KBK Wealth Connection. "There's an upside to living longer and that's that you can have a really vibrant life well beyond 65."

Aside from staying engaged, working longer also lets you build up a bigger nest egg and maximize your Social Security.

"To think that you can work for 30 or 40 years and have enough money to fund retirement for 30 or 40 years doesn't add up mathematically," said Collinson of Transamerica. "We all need to think about extending our work lives."

More Americans are getting on board with delayed retirement. Pew Research reports that 29% of baby boomers age 65 to 72 are either in the workforce or looking for work, a much higher percentage than older generations were when they were that age.

"It doesn't mean you have to continue to work the way you did before," insisted Collinson. "You might shift from full-time to part-time, maybe seasonally. The idea is, you continue to work but with more freedom and flexibility."

The gig economy allows people to take on part-time or project-based work to bring in additional income.

While Social Security makes up 40% of the average person's retirement income, for women it plays a bigger role. Because it's such a valuable source of retirement income, it's important to maximize this benefit.

You are eligible to receive Social Security at age 62, but you'll get dinged for each month you collect before your normal retirement age, which for anyone born after 1960 is 67 years old. By the same token, you get a bonus of about 8% a year for waiting until age 70.

"For most women it pays to wait til age 70," said Francis. "If you start collecting at age 70, you could be collecting for the next 20 or 25 years at a higher rate."

To be sure, retirement is a heavy lift for most people. For women it's compounded by lower wages, caregiving responsibilities, breaks from the workforce and greater longevity. While you may not be able to solve all these societal issues on your own, there's a lot you can do to shore up your own retirement security.

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With less savings and longer lifespan, women must take 4 key steps to shore up retirement - CNBC

In your 20s, retirement seemed so far away.

By the time you hit 50, it's a reality that is a lot closer and one you may not feel prepared for. That may be especially true as fears over the coronavirus rattle the stock market and your investment portfolio.

Or, you may have nothing saved at all. In fact, a 2019 survey by the Insured Retirement Institute found that 45% of baby boomers have zero savings set aside for their golden years. The organization polled 804 Americans aged 56-72 in February of 2019.

Personal finance expert Suze Orman believes many Americans simply can't afford to retire.

"We have a crisis," the New York Times best-selling author said.

Yet, by making some savvy moves, you can get on track.

More from Invest in You: How to manage your 401(k) as the coronavirus upends the markets History of sudden market shocks shows the market is due for a big comeback Women must take 4 key steps to shore up retirement

The first thing you should do is stop dreaming of retiring by 55 or 60, said Orman, whose latest book is titled "The Ultimate Retirement Guide for 50+."

"You need to start thinking, '70 is when I want to retire,'" she added. "If you can just know that you're going to be working from 50 to 70, you have 20 more years for your money to grow."

Here are five strategies people 50 and over can employ to prepare for retirement, according to Orman.

"This is the time that you really need to look at your total financial situation, in terms of how much money are you spending, how much are you saving?" said Orman, host of the weekly podcast, Women & Money.

You should do everything you can to cut back on unnecessary expenses.

If you own a home and plan to stay in it, make sure you have a plan in place to pay off the mortgage by the time you retire.

You may love your home, but if it is larger than you need and you can make a profit selling it, do so. Then, move into something smaller and less expensive.

"I don't want you to wait till you're 60 or 70 to sell this home," she said. "I want you to downsize right now, so that you can start saving more money right now."

Now is the time to super-charge your emergency fund.

While many experts suggest setting aside three to six months' worth of living expenses, once you are over 50, Orman wants you to save two to three years worth.

That's because once it's time to start drawing from your retirement account, you want to avoid taking big losses if the stock market is down like happened last week when the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all fell more than 10%. It was their biggest weekly decline since October 2008.

"That's not when you want to be withdrawing from it," she said.

"If you have cash, you can live on that cash for two or three years until the market recovers."

Of course, you will still have to make your required minimum distributions the amount you must take out every year - from your traditional IRA or 401(k) if you are 72 or older.

Any new contributions you make into a retirement account should be in a Roth IRA, if you can, Orman said.

"Later on in life, you want to be able to take that money out tax free," she explained.

Roth IRA contributions are made after tax, so you aren't taxed when you take the money out during your retirement. On the other hand, when you put money into a traditional IRA, it isn't taxed but it is when you take it out.

However, your income will determine whether you can contribute to a Roth IRA. As a single person, you can do so if your modified adjusted gross income is under $139,000. If you are married and filing jointly, your income just be under $206,000.

Continued here:
Suze Orman: There is a retirement 'crisis.' Here are strategies for those 50 and over - CNBC

Failing to withdraw a required minimum distribution (RMD) from your own or an inherited IRA by the deadline results in a big tax code penalty: 50%. That's right. If you were supposed to take out a minimum of $4,000 and (oops!) did not do so, you have the privilege of writing the IRS a check for $2,000. It's important to remember that the rules related to RMDs changed on January 1, 2020

In case you're like most investors, you're probably trying to build a financial portfolio that is solid enough to guarantee a comfortable retirement. Among retirement financial planners, this is known as the "accumulation phase." In this stage, your objective is to carefully invest by selecting stocks with long-term potential for your retirement nest egg. For example, you might choose Evergy Inc (EVRG), which is a current top ranked dividend stock.

But that's just half of retirement planning. The second part, the "distribution phase," sometimes gets overlooked even though it can be more fun to think about. That's because the distribution phase is where you determine how to spend your hard-earned assets.

Making plans for the distribution stage involves deciding where you'll live in retirement, whether you'll travel, your proposed leisure activities, and more decisions that will affect your spending during your golden years.

In addition to these considerations, it is essential to take into account the RMD that applies to most retirement accounts. Basically, this is an IRS requirement that you withdraw a certain amount from your qualified retirement accounts once you reach age 72.

Why does the IRS require you to start taking your money out? It's simple - they want to make sure they get their tax. If this rule didn't exist, people could live off other income and never pay tax on their retirement investment gains. Then, that money could be left to family or friends as an inheritance without the IRS collecting any taxes from you.

What You Need to Know About RMDs

Which types of accounts have RMDs? Qualified retirement accounts such as IRAs, 401(k)s, 457 plans, and other tax-deferred retirement savings plans like a TSP, 403(b), TSA, SEP, or SIMPLE IRA plan require withdrawals in retirement.

When does it become necessary to begin taking distributions? Your first distribution must be taken by April 1 of the year following the calendar year that you turn 72 (for most accounts). Also, if you retire after that age, you must take your first RMD from your 401(k), profit-sharing, 403(b), or other defined contribution plan by April 1 of the year after the calendar year in which you retire.

For each year after your required starting date, you must take your RMD by December 31. Note that you don't need to take an RMD on a Roth IRA since you covered taxes before contributing. Other varieties of Roth accounts require RMDs. But, there are approaches to avoid them - for instance, you can roll your Roth 401(k) into your Roth IRA.

What happens if don't take my RMD? The penalty for not taking a required minimum distribution, or if the distribution is not large enough, is a 50% tax on the amount not withdrawn in time.

How much cash do I need to withdraw? To figure out a particular RMD, you should divide your earlier year's December 31st retirement account balance by a "distribution period" factor dependent on your age.

Here's an example to give you an idea of the amount: Ann is 71 and will take her first RMD in the year following the year she turns 72. Her IRA balance at the end of the prior year was $100,000. Her "distribution period" factor is 27.4. Dividing $100,000 by 27.4 equals $3,649.63. This is how much Ann is required to withdraw for her first RMD.

Learning about the "distribution phase" is just one aspect of preparing for your nest egg years.

To learn more about the tax implications of retirement spending - and much more about retirement planning - download our free guide: Retirement Made Easy.

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Know These 3 Facts to Avoid Paying Half Your Retirement Income to the IRS - March 05, 2020 - Nasdaq

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A large number of American workers closing in on retirement are showing anxiety not just over how much theyve saved but also over how to manage their different income sources during their post-career lives.

A new study by Charles Schwab found that most pre-retireesdefined as those within five years of retirementhave at least one fear about their income in retirement. The findings were gleaned from a survey last summer of 1,000 Americans aged 55 and older with $100,000 or more in investable assets, half of whom fell into the pre-retiree cohort.

Seventy-two percent of the studys 500 pre-retiree respondents said they are worried about running out of money after they retire. Thats the most popular worry, but its not the only: 64% say they are overwhelmed by not being able to maintain their current lifestyle or quality of life after they retire, while 60% worry about not getting a regular paycheck in retirement.

We talk a lot about investors saving for retirement, but that transition to retirement and that time right before retirement is often the most stressful, says Rob Williams, vice president of financial planning, retirement income, and wealth management at Schwabs research arm.

Thats because there are so many moving parts and there are so many pieces, he adds.

While knowledge wont solve every retirement problem, understanding the rules and how theyll affect you can save you some stressand moneyas you prepare to retire. These are the two most common pre-retiree income blindspots, according to the Schwab survey.

Taxes

Of the pre-retirees Schwab surveyed, 70% said they knew nothing or not a lot about the tax implications of retirement withdrawals. Thats a problem since traditional individual retirement accounts are tax-deferred, not tax-free, Williams adds.

Contributions to a traditional IRA or 401(k) are pre-tax, meaning investors can use the accounts to shrink their annual taxable income and benefit from returns generated by pre-tax income.

But its important to remember that the investments you make in your traditional IRA or 401(k) arent tax-free forever. Investors must pay income tax once the money is withdrawn. (This doesnt apply to Roth IRAs, which are post-tax investment accounts.)

Because traditional IRA distributions help determine ones tax bracket, many retirees plan their distributions to minimize their tax bill using tools like charitable contributions or Roth conversions. To start estimating how IRA withdrawals could affect your tax bill, you should have a plan for when you will retire and how much you can sustainably withdraw. A common rule of thumb suggests retirees can sustainably withdraw 4% to 5% of their retirement accounts each year, though investors should research the best approach for their particular circumstances.

Required Minimum Distributions

Seventy percent of those Schwab surveyed said they knew little or nothing about annual required minimum distributions, or RMDs, from tax-deferred accounts. That could lead to an unwanted surprise after their 72nd birthdays, when retirees are obligated to start taking RMDs. (That age is up from 70.5 thanks to a recent change in the Secure Act.)

While the amount any retiree must withdraw from their taxable IRA varies based on IRS calculations, the penalty for failure to withdraw it is the same. The 50% fee on the unwithdrawn RMD amount is one of the largest fees I can think of, other than, I suppose, breaking the law, Williams says. You can estimate your RMD on Schwabs website.While retirees must start withdrawing from taxable accounts at age 72, that timing isnt perfect for everyone, Williams says. There are plenty of strategies for managing RMD income you dont needsuch as Roth IRA conversions or qualified charitable donationsbut Williams recommends speaking to an advisor for a personally tailored RMD plan.

Write toShaina Mishkin atshaina.mishkin@dowjones.com

Original post:
Seniors Are Stressed About Income in Retirement. What To Do. - Barron's

Contributing as much money as possible to retirement savings is essential -- especially with so many people having too little saved for the future.

But while you need to invest for your later years, you may not want to devoteall your spare cash to this goal if you haven't checked a few other items off your to-do list first.In particular, there's two tasks you may want to undertake before you max out your retirement accounts.

Image source: Getty Images.

If you have high-interest debt, chances are good you're paying far more in interest to your creditors than you could reasonably expect to earn by investing. Your interest costs will also eat up the cash available to you, making it harder for you to invest what you need to retire comfortably.

It's best to take care of this debt ASAP so you don't have this obligation hanging over your head and so you don't continue wasting money on interest. Rather than maxing out your retirement accounts, contribute only enough to your 401(k) to get the employer match and then devote every extra dollar to getting rid of the debt you owe.

You should do this only if you're serious about getting out of debt and staying out of debt. Once you're done with paying off your creditors, reallocate some of the money you were sending them to shoring up your retirement account balances.

If you're living paycheck to paycheck without any savings, you could find yourself making difficult choices when unexpected expenses come up. You could be forced to borrow and find yourself with high-interest consumer debt you have to pay back. Or you could end up pulling money out of your retirement accounts to cover the emergency costs, which could lead to penalties and taxes.

You don't want to lock up all of your money in a retirement account that you can't easily make withdrawals from if you don't have an emergency account to rely on when something goes wrong. So, again, contribute enough to get your employer match and put any additional spare cash into an emergency fund.

Once you have enough saved to cover several months of living expenses -- around three to six months is advised by most experts -- you can get more serious about trying to max out your retirement savings accounts with your extra funds.

If you're like most people, you have only a limited amount of spare cash -- so making smart choices about what to do with it is essential.

You definitely want to contribute enough to your 401(k) to get the full employee match. But beyond that, if you don't have an emergency fund or if you're in a lot of debt, devoting some of your money to these goals just makes sense rather than maxing out your retirement plans.

Once you have paid down your debt and have cash saved for emergencies, you can redirect the extra money toward supercharging your savings -- and you'll be in a much better financial position as you save for the future.

See more here:
2 Things to Do Before Maxing Out Your Retirement Savings - The Motley Fool

Having $1 million in the bank has often been considered the gold standard of retirement savings.

In some places, that kind of stash can stretch over 40 years. But in higher-priced cities, it may only last a decade or less.

Considering thatAmericans, as a whole, aren'tsaving nearly enough for retirement, GoBankingRates measured how far $1 million in savings could go in cities across the countryby comparing average expenses for people age 65 and older, including groceries, housing, utilities, transportation and health care.

The personal finance sitethen ranked the 50 biggest cities based on data from the Labor Department's 2018 Consumer Expenditure Survey and cost of living indices from Sperling's Best Places.

Overall, dollars stretched the farthest in cities like Memphis, Tennessee; El Paso, Texas; and Wichita, Kansas, where annual expenditures were around $40,000 a year.

However, retirees couldblow through $1 millionconsiderably faster in hot spots such as New York, San Jose and San Francisco, where it costs upward of $100,000 a year just to get by.

More from Personal Finance: Retiring early? These 10 cities could be your best bet The 10 safest countries for retirement The best places in the U.S. to buy a vacation home

On average, Americans believe they need as much as$1.7 million to retire, according to a separate survey fromCharles Schwab, which looked at 1,000 401(k) plan participants nationwide.

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How long $1 million in retirement lasts in cities across the U.S. - CNBC

For lots of people, saving up for retirement is intimidating. How can you be expected to set aside money that you wont see for years, especially if youve got debts to pay off now?

According to the Federal Reserve, nearly a quarter of Americans dont have any retirement savings at all.

But even if you havent put aside a cent, its still possible to increase your savings and ensure that your retirement will be just as enjoyable as all those commercials for senior vitamins make it out to be.

Here are five steps you can take to maximize your retirement savings.

If your employer matches contributions into a retirement savings plans like a 401(k), find out your company's maximum match usually 3% to 6% of your annual salary and contribute the same amount.

If youre not taking full advantage of of your employer's 401(k) matching policy, youre basically throwing away free money.

Though the IRS puts limits on the maximum contribution you can make each year to your 401(k), employer-match contributions dont count towards your limit.

Ideally, you should put as much into your 401(k) as the taxman allows, but even if you can contribute only 1% more than your company's matching contribution, it will make a huge difference.

For example, if you make $50,000 a year and your employer matches your contribution up to 4%, after 30 years with a 5% rate of return youll have saved $144,843. And if you contribute just 1% more each week, youll save an extra $34,818. Not too shabby!

If you arent lucky enough to have a retirement plan, or if your employer doesnt offer a 401(k) match, dont worry there are other ways you can save.

Facet Wealth can put you in touch with a certified financial planner who will help you build a personalized retirement plan to fit your lifestyle.

Got credit card debt? No judgment here it happens to the best of us. But mounting debt can be a huge stumbling block when youre trying to save up for your retirement.

The best way to prevent your credit card bill from standing in the way of your retirement savings is to work with a company like Fiona.

Fiona will show you the best lending options to refinance or consolidate your debt and can save you thousands of dollars in interest charges.

Fiona will match you with a loan of up to $100,000 based on your credit score, with a fixed interest rate as low as 3.84%. Your loans repayment plan can range from 24 to 84 months.

Lets say you ran up $12,500 in debt on a store credit card with a punishing 22.99% interest rate. If you were to trade in that debt for an 84-month personal loan at 5% interest, youd save $10,400 in interest.

Just think about how many early-bird breakfasts that will pay for when you retire.

Comparing rates on Fiona wont hurt your credit score, so even if youre just curious about your options its worth taking a look.

One of the hardest parts about saving for your retirement can be knowing what you should prioritize when it comes to paying your bills.

Everyones strategy for improving their credit score is different. For example, some people just do nothing and hope their scores will just work themselves out. This is not a good strategy. At all.

If youre one of those people, or if youre not exactly sure whether youre on the right track, Credit Sesame can help.

Credit Sesame is a free service that will monitor your credit and give you personalized recommendations on which bills to pay off first and what other steps you can take to improve your credit score.

Theyll also make sure your credit isnt being affected by mistakes in your credit report. Youd be surprised how often those can crop up according to the Federal Trade Commission, one in five credit reports contains errors.

By finding and correcting credit errors, Credit Sesame may be able to boost your credit score by hundreds of points and make saving for your retirement a lot more manageable.

When youre saving for retirement, every penny counts. So why are you overpaying for car insurance?

You should be shopping for car insurance rates at least twice a year. Thats right, every six months.

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It may sound like an endeavor, but the savings will be worth it.

And with the help of a company like Assurance, comparing quotes from multiple insurance companies is a breeze. In just minutes youll know whether youre getting the lowest rate possible, and which insurer you should switch to if youre not.

Making sure that you have enough stashed away for when you retire is one thing, but you also should think about what your family would do if you were taken from them by a serious accident or illness. It probably wont happen anytime soon, but its smart to be prepared.

Taking out a life insurance policy is a great way to ensure that your family will be financially secure after youre gone.

If youre worried that setting up a life insurance policy will be time-consuming, pricey, and maybe even a bit awkward, dont be. Quotacy lets you compare insurance rates without sharing your personal data.

In just minutes, Quotacy will give you three rates that are customized to your needs. Depending on your age and your home state, you can get an insurance policy offering $1 million in coverage for less than $7 a week. If that doesnt give you peace of mind, nothing will.

See more here:
5 Moves That Can Seriously Boost Your Retirement Savings - Yahoo Finance

(Source: imgflip)

What an interesting few weeks it's been for investors.

Outside of single-day corrections (like Oct 19th, 1987 when S&P fell 20% in a single session), we've seen the fastest correction since the Great Depression.

That included an 11% decline in the S&P 500 and a 13.6% crash in the Dow during the final week of February. That was the worst week since 2008 and the 5th worst of all time.

Then on Monday, global central banks came out and said they would slash rates and provide "ample liquidity" to avert or at least mitigate a recession caused by the COVID-19 virus. That sent stocks up 4.8%, their best one day gain since 2008.

The bad news is that with 94,301 cases in 82 countries, this is now a pandemic that has escaped initial hopes of early containment.

The good news is that, as seen by China's daily new cases falling to a steady 100 per day in the past week, the COVID-19 virus is NOT a doomsday bug that will likely sweep the globe and kill millions.

(Source: Johns Hopkins) orange = China cases

China was the 51st most prepared country in the world for an epidemic according to a study by Johns Hopkins.

Yet even in Wuhan, where this outbreak began, Just 1 in 10,000 people have contracted the virus.

Of course, that doesn't mean that the global economy won't feel a short-term impact from this. Already over 220 S&P 500 companies have warned that supply chain disruption and lower demand from overseas (mostly China itself) will impact Q1 and thus 2020 earnings.

China's efforts at containing the outbreak, which appears to be succeeding, involved quarantining 60 million people and placing travel restrictions on 600 million.

(Source: Bloomberg)

The result of basically shutting down the country for a few weeks has been the sharpest contraction in manufacturing and services ever recorded.

The Harvard Business review just put out the following note:

Reports on how the Covid-19 outbreak is affecting supply chains and disrupting manufacturing operations around the world are increasing daily. But the worst is yet to come. We predict that the peak of the impact of Covid-19 on global supply chains will occur in mid-March, forcing thousands of companies to throttle down or temporarily shut assembly and manufacturing plants in the U.S. and Europe. The most vulnerable companies are those which rely heavily or solely on factories in China for parts and materials. The activity of Chinese manufacturing plants has fallen in the past month and is expected to remain depressed for months." - HBR (emphasis added)

How long will the supply chain disruption last?

According to David Iwinski, a local Chinese business consultant, We think August, September, this will be a memory.

The good news is that the maximum impact from supply chain disruption is likely to be mid-March. China reports that 96% of state-owned companies are already back to 91.7% capacity.

In other words, March 2020 is likely to see a temporary and peak hit to the US economy and companies. After that, a gradual recovery through September is likely, based on the best available data we have today.

We're already seeing signs of a supply chain recovery out of China. According to National Retail Federation CEO Matt Shay

A number of the larger companies have started to indicate that the signs that theyre getting from the Chinese market are some of the production is coming back online."

But this brings me to the reason for this article, the first emergency rate cut since 2008.

(Source: FOMC)

Monday the market was pricing in 100% probability of a March 50 bp rate cut. The Fed delivered that two weeks early. Stocks initially rallied 1.5% and then proceeded to decline a startling 5% at their peak in a matter of hours.

Bond yields cratered at a rate that even veteran bond traders found startling. The 3-month yield, which tracks the Fed Funds rate (and anticipates what it does in the future) fell 20%... in a single day. Today it's down about 25% more.

The 10-year yield, the proxy for long-term term rates, fell to an intra-day low of sub 1% for the first time in history.

(Source: CNBC) as of 2:15 PM EST 3/4/2020

The bond market is now anticipating even more rate cuts (since the COVID-19 pandemic is likely far from over). This explains why stocks are soaring (apparently due to Biden winning Super Tuesday) yet bond yields continue to fall.

Note the 3-month yield is falling the fastest, uninverting the yield-curve which is now at +28 bp and implying about 26% probability of a 2021 recession according to the Cleveland Fed/Haver analytics model.

Mark Zandi, Moody's Chief Economist, estimates that COVID-19 supply/demand shocks raise the risk of a 2020 US recession to about 40%, up from 20% a few months ago.

Normally, recession risk is higher the longer the time frame. However, since supply shock recessions are brief, mild and only last as long as the shock, in this case, the opposite is true.

Recession risk is higher this year than next year because the pandemic is likely to be over by the end of 2020.

(Source: CME Group)

Basically, bond yields are falling because bond investors are pricing in an 83% probability of at least one more rate cut this year.

But some, like JPMorgan, have far more dramatic expectations:

"I would not be surprised if within the next few months the Fed went back down to zero." said David Kelly, chief global strategist at JPMorgan Funds.

The bank's US economics research team told clients Tuesday they now see a 50% chance of a return to zero this year." - CNN (emphasis added)

That brings me to the six high-yield stocks I bought during Tuesday's emergency rate cut meltdown.

Why do I believe so strongly in these six companies that I chased them down 28 times via limit orders so far?

(Source: imgflip)

As I've already explained, recession risk is being badly mispriced by the stock market right now, with financials and media companies being valued as if they will see permanent negative growth.

Reward/Risk Ratio

I am now paying under six times earnings on these companies which according to the Graham/Dodd fair value formula implies about -6% CAGR forever. My average cost basis implies -5% CAGR long-term growth.

Now, let me debunk the notion that today's low rates mean quality financial companies such as these can't grow.

Here is how UNM, OZK, CMA, and LNC have performed over the past decade when financial regulations have been stricter and interest rates their lowest in history.

Quality Financial Companies Can Overcome Low Rates

(Source: Ycharts)

Whether you look at book value, EPS or dividends, all four have performed admirably which is why I trust their competent management teams to overcome temporarily reduced rates.

By no means do I expect short term or long-term rates to ever go back to 4%, 5%, or 6%. The bond market is pricing in long-term inflation of about 1.6% to 1.8% over the next 10 to 30 years. That lines up with most economists (and the Fed's) 2% GDP growth forecast for the US and 2.5% long-term interest rates (10-year yield).

Even IF COVID-19 leads to a mild supply shock recession, that contraction will likely be brief and interest rates will likely rise as soon as it's over.

The time to buy quality financials is when the market hates them most, to the point of allowing you to buy a blue chip insurer like UNM at under 4 times earnings.

A 24.3% earnings yield -risk premium on UNM represents a 6.6 times greater reward/risk ratio than the S&P 500's 3.7% average since 2000.

Private equity companies are paying about 12 times earnings/cash flow for illiquid companies, often ones that require 5-10 year turnarounds.

The average Shark Tank deal is for 7.0 times earnings/cash flow, again for small, private companies with far higher growth uncertainty.

So let's take a look at the fundamentals of these six companies, to see why buying them for an average PE of under 6 is not just a great deal, but what Chuck Carnevale calls "buying opportunities of a lifetime unless the business models completely implode."

(Source: Dividend Kings Valuation Tool)

Fundamental Stats On These 6 Companies

Fundamentally, what I'm trying to do with these six companies is to be greedy when others are fearful so I can, in the words of Joel Greenblatt, buy "above-average quality companies at below-average prices."

(Source: imgflip)

Except that I'm not buying at just below-average prices, I'm buying these companies at an average discount to their approximate market-determined fair values of 52%.

That makes them anti-bubble stocks, as seen by the fact that, according to Graham/Dodd, the founders of company analysis and value investing, they are priced for -6% CAGR long-term growth while analysts expect them to grow 9.2% CAGR over time.

Am I worried about a short-term interest rate collapse? Absolutely not. Not only because it would be temporary (time arbitrage is the game all value investors play) but because even if they don't grow as expected, I'm likely to earn strong returns. All while enjoying fat, safe and growing yields.

What A Potential Buying Opportunity Of A Lifetime Looks Like

(Source: F.A.S.T Graphs, FactSet Research)

For example, here's the kind of return potential generated if UNM grows as expected and returns to the mid-range of its historical fair value (PE of 9.0).

UNM has a great track record of meeting or beating EPS forecasts, within a 10% and 20% margin of error over 12 and 24-month periods.

But the idea behind anti-bubble stocks is that you don't require any growth at all in order to make good and often market-beating long-term returns.

VIAC Long-Term Total Return Potential If It Grows At Zero

(Source: F.A.S.T Graphs, FactSet Research)

UNM Long-Term Total Return Potential If It Grows At Zero

(Source: F.A.S.T Graphs, FactSet Research)

FL Long-Term Total Return Potential If It Grows At Zero

(Source: F.A.S.T Graphs, FactSet Research)

LNC Long-Term Total Return Potential If It Grows At Zero

(Source: F.A.S.T Graphs, FactSet Research)

CMA Long-Term Total Return Potential If It Grows At Zero

(Source: F.A.S.T Graphs, FactSet Research)

OZK Long-Term Total Return Potential If It Grows At Zero

(Source: F.A.S.T Graphs, FactSet Research)

Keep in mind that these are the returns potential if each of these companies grows at zero for the next five years.

Now contrast these return potentials to the expected returns of the S&P 500 based on 6% to 8.5% CAGR long-term growth expectations (depending on the asset manager model).

Original post:
My Retirement Portfolio Just Backed Up The Truck On 6 High-Yield Stocks - Seeking Alpha

It has been a rough week on Wall Street, one of the roughest since 2008.

The S&P, the Dow and the NASDAQ are all way down, largely on coronavirus fears. And its not just Wall Street. Markets are down across the globe.

But and chances are youve heard this before if you have money in the market and are starting to get stressed, the prevailing wisdom is: dont panic, ride it out. And maybe for your sanity dont obsessively check your 401(k).

What if youre retired, though, or are getting close to retirement, does that same advice still apply?

Short answer: yes.

Slightly longer answer: yes, mostly, but it depends a little on how your money is invested and how soon youre going to need it.

For retirees the big thing is just make sure they have their immediate cash needs ready to go, said Shashin Shah, a managing director at SFMG Wealth Advisors in Plano, Texas. Theres not any amount of risk that would make sense if theres money thats needed this year or the year after. And its important to map that out quite a bit.

Beyond those immediate cash needs say, the next year or two, maybe three Shah said hed tell older people pretty much the same thing hed tell younger people: hang in, ride it out, the market will bounce back.

That is the advice from financial planners and retirement experts across the board.

Rita Cheng, a certified financial planner in the D.C. area, said she reminds her clients all the time, not just on weeks like this, that the market is volatile, that thats something they need to expect and be prepared for. She gets, though, that it can be stressful to see these kinds of sharp drops, especially for people who are no longer working.

For someone who has just retired or who is planning to retire in the near future it can be unsettling because 2007 to 2009 is not that long ago, Cheng said. What I do, and what I encourage clients in this situation to do, or even investors, is to remember first, just because you may be 60 or 65, you are still a long-term investor.

That is a critical point, Cheng and Shah and other advisors point out. Even those who are retired are still playing the relatively long game.

Anyone approaching retirement has to think in terms of decades, not in terms of next year or the year after, Shah said. Otherwise everyone would go straight to cash the minute they retire.

Thats a really, really important point is that you dont need 100% of your money on your first month in retirement, said Alicia Munnell, director of the Center for Retirement Research at Boston College. Its a long period of time, 25, 30 years, and so youre probably not going to be cash-constrained immediately because of a precipitous drop in the stock market.

Ideally, if youre retired or on track to retire in the next few years, you already have a good plan in place for these kinds of inevitable market fluctuations. And if you dont, now is still probably not the moment to be moving things around too much, right in the middle of a big drop.

I think this is a teaching moment in one regard, not that people should panic and sell when the stock market goes down 6% or 7%, but rather that as people approach retirement, they should be shifting out of equities and into a safer asset, Munnell said. People as theyre approaching retirement should be protecting themselves from being exposed to the harm that can be done by this kind of precipitous drop in the market.

The key word, for people nearing retirement, now and always, is plan.

Have a financial plan, a financial plan that takes into account that not everything will be the market going up, well also have markets that go down, and wildly go up and down from time to time, said Dan Keady, chief financial planning strategist for TIAA. Its kind of like if you got in your car and you were going for a long ride and you didnt have any GPS and you didnt have any map. I think almost all of us would be panicked. And thats what happens to too many people.

And the last thing you want is to be making big financial decisions purely based on emotion.

Because our emotion that goes back to prehistoric times is you want to run when you see this kind of, for lack of a better word, danger, Keady said. And you need to be able to get past that. And the way to do that really is to have a good plan.

Cheng talks about that as the bucket approach to money: having a short-term bucket, a medium-term bucket, and a long-term bucket.

I always make sure that my pre-retirees and retirees have money that they can access in the short term that will not be subject to market volatility, she said. And then I can keep them invested in the long term because if they have confidence knowing that theyre going to be okay for one, two, three years, they are more likely to stay invested.

And more likely, then, to reap the benefits when the market bounces back. Which it will, sooner or later.

The economy is basically strong, Munnell said. I think this is really a reaction to the virus, and that will play itself out. And I think that the best guess is that the market will recover.

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What to do when the markets plummet and youre nearing retirement - Marketplace

Home Affairs Minister K. Shanmugam told Parliament that the retirement age of uniformed officers would be raised gradually to 58 by 2030, up from 55 currently (Retirement age for uniformed officers to be 58 by 2030, March 3).

Presently, the mandatory retirement at 55 years of age is a waste of the experience and expertise acquired by uniformed officers over many years.

According to Mr Shanmugam, extending the retirement age has two benefits:

It would enable the Ministry of Home Affairs (MHA) to tap the enormous experience of the more mature officers.

It would help the officers secure another job as a meaningful second career.

Perhaps the Government could consider giving MHA uniformed officers the option to retire at 55 years, while making the mandatory retirement age 60.

The chances of them securing a job after they leave the force would be greater if they were to retire at 55 than at the age of 58.

As for officers who might not be interested in looking for another job after leaving MHA, the proposed mandatory retirement at 60, instead of 58, would provide them with two more years of employment.

Pavithran Vidyadharan

Read more from the original source:
Forum: Consider optional retirement at 55 for uniformed officers - The Straits Times