In a 2011 New Yorker profile, Peter Thiel, tech-philanthropist and billionaire, surmised that probably the most extreme form of inequality is between people who are alive and people who are dead. While he may not be technically wrong, Thiel and other eccentric, wealthy tech-celebrities, such as Elon Musk and Mark Zuckerberg, have taken the next step to counteract that inequality by embarking on a quest to live forever.

Thiel and many like him have been investing in research on life extension, part of transhumanism. Drawing on fields as diverse as neurotechnology, artificial intelligence, biomedical engineering and philosophy, transhumanists believe that the limitations of the human body and mortality can be transcended by machines and technology. The ultimate aim is immortality.Some believe thisis achievable by 2045.

Of course, humans have long harnessed technology, from vaccinations to smartphones, to improve and extend our lives. But that doesnt admit you into the transhumanist club. Wanting to live forever, and possessing vast sums of money and time to research, does.

The hows and whens of transhumanism are matters of debate. Some advocatethe "Singularity" a form of artificial super-intelligence which will encompass all of humanity's knowledge, that our brains will then be uploaded to.Others believe in anti-ageing methods like cryonics, freezing your body after death until such a time when you can be revived.

Transhumanism is no longer a fringe movement either. Darpa, the US governments research arm into advanced weaponry, created a functional prototype of a super soldier exoskeleton in 2014, which will be fully functional in 2018, and is researching the possibility of an artificial human brain.

"Transhumanism doesn't have much to say about social questions. To the extent that they see the world changing, it's nearly always in a business-as-usual way techno-capitalism continues to deliver its excellent bounties, and the people who benefit from the current social arrangement continue to benefit from it," says Mark O'Connell, the author of To be a Machine, who followed various transhumanists in Los Angeles."You basically can't separate transhumanism from capitalism. An idea that's soenthusiastically pursued by Musk and Peter Thiel, and by the founders of Google, is one that needs to be seen as a mutationof capitalism, not a cure for it."

Silicon Valley is characterised by ablind belief in technological progress,a disregard for social acceptability and an emphasis on individual success. It's no surprise, then, that it is here that the idea of living forever seems most desirable.

Musk has publicly declared that we have to merge withartificially intelligent machines that overtake humanityin order to survive. Ray Kurzweil, the inventor and futurist who pioneered the Singularity, is now an engineer at Google. O'Connell points out that "you'd have to be coming from a particularly rarefied privilege to look at the world today and make the assessment, as someone like Thiel does, that the biggest problem we face as a species is the fact that people die of old age".

On an even more basic level,a transhumanist society would undoubtedly be shaped by the ideals of those who created it and those who came before it. Zoltan Istvan, the transhumanist candidate for governor of California,toldTech Insiderthat a lot of the most important work in longevity is coming from a handful of the billionaires...around six or seven of them.

Immortality as defined by straight, white men could draw out cycles of oppression. Without old attitudes dying off and replaced by the impatience of youth, social change might become impossible. Artificial intelligence has already been shown to absorb the biases of itscreators. Uploading someones brain into a clone of themselves doesnt make them less likely to discriminate. Thiel andMusk, for example, identify as libertarians and have frequently suggested that taxes are obsolete and that governmental military spending needs to be curbed (and put into life-enhancing technologies).

Thiel himself is a Donald Trump supporter. A one-timeassociateMichael Anissimov, previousmedia officer at Machine Intelligence Research Institute, a Thiel-funded AI think tank, has published a white nationalist manifesto. In a 2013 interview, Anissimov said that there were already significant differences in intelligence between the races, and that a transhumanist society would inevitably lead to people lording it over others in a way that has never been seen before in history. It doesnt take much to guess who would be doing the "lording".

"The first enhanced humans will not be ordinary people;they'll be the people who have already made those ordinary people economically obsolete through automation. They'll be tech billionaires," says O'Connell.

If those who form society in the age of transhumanism aremen like Musk and Thiel, its probable that thissociety will have few social safety nets. There will be an uneven rate of technological progress globally; even a post-human society can replicate the unequal global wealth distribution which we see today. In some cities and countries, inhabitants maylive forever, while in others the residents die of malnutrition.If people dont die off, the environmental consequences from widespread natural resource devastation to unsustainable energy demands would be widespread.

It would be remiss to tar all transhumanists with one brush. In 2014, Istvan claimed inThe Huffington Postthat the membership of transhumanist societies and Facebook groups has started to expand in number and in diversity, drawing in young and old people of all political persuasions and nationalities.

There are some prominent transhumanists who dont fit into the Silicon Valley mould. Natasha Vita-More, the former Chairman of the Board of Directors of Humanity+ , the globaltranshumanist organisation, has spoken about the potential for a posthuman society to address issues of economic justice. Other academics and philosophers have even spoken about the need to explicitly ground diversity and tolerance within posthumanism, such as Nick Bostrom, the head of the Future of Humanity institute and one of the original modern transhumanist thinkers.

It remains the case, though, that the majority of the money invested inmaking transhumanism a reality comes from rich, white men. As the descendants of a species with a tendency to exploit thedowntrodden, any posthumans must guard against replicating thosesame biases in a new society. For some, potentially in the near future, death might become optional. For others, death will remain inevitable.

Read more from the original source:
The first men to conquer death will create a new social order a terrifying one - New Statesman

Hows this for putting a dent in your retirement savings plan? A 65-year-old couple retiring today will need an estimated $275,000 in todays dollars to cover anticipated health care expenses, according to Fidelity.

And if that wasnt shocking enough, consider this:

The 2017 estimate is 6% greater than last years figure of $260,000 (general inflation in 2016 was just 2% and health care inflation was 3.7% ). That means next years estimate all things being equal would be $291,500 and the year after that would be $308,990. It also means that health care costs for retirees are rising faster than for population at large.

The Fidelity estimate is a 70% increase since Fidelitys initial retiree health care cost estimate in 2002 of about $161,000. That works out to an average increase of $7,600 a year.

And three, some firms estimate the amount a 65-year-old couple would need earmarked for health care expenses in retirement to be even greater than $275,000.

Read the 2017 retirement health care data costs report

By way of background, Fidelitys 2017 estimate represents the present value of month expenses for Medicare premiums, Medicare copayments and deductibles and prescription drug out-of-pocket expenses. It assumes enrollment in Medicare health coverage but didnt include the added expenses of nursing home or long-term care, which could make the $275,000 number even higher.

So, what should preretirees make of Fidelitys estimate?

Most pay for health care as they go

Most retirees today dont have a pile of money socked earmarked specifically for health care expenses. Instead, they tend to pay for such expenses as incurred from a mix of income, including Social Security, personal assets, and earned income.

Recurring health care costs remain stable throughout retirement

Usage and expenses of recurring health care services remain stable throughout retirement, while usage of nonrecurring ones increase with age and tend to be more expensive, according to a report published by the Employee Benefit Research Institute (EBRI), a nonpartisan research institute based in Washington, D.C.

For instance, in 2011, average annual out-of-pocket health care cost for a household between 6574 years old was $4,383, which accounted for 11% of total household expenses. But that shoots up for households ages 85 and above to $6,603 a year, or 19% of total household expenses.

And its those nonrecurring unpredictable expenses such as surgery, hospitalizations and nursing home care that, in the absence of a plan to manage those costs, can wreak havoc on a households finances, according to EBRI.

By way of comparison, the EBRI report also suggests that a person with a life expectancy of 90 would require $40,798 not including expenses for any insurance premiums or over-the-counter medications at age 65 to fund his or her recurring health care expenses. And that number, call it $82,000 for a couple.

In another report, one that lumped all premiums for Medicare Parts B and D, premiums for Medigap Plan F, and out-of-pocket spending for outpatient prescription drugs, EBRI suggested that a couple with median prescription drug expenses would need $165,000 if they had a goal of having a 50% chance of having enough savings to cover health care expenses in retirement. And, if they wanted a 90% chance of having enough savings, they would need $265,000, according to an EBRI report.

Earmark Social Security to pay for health care

For some, it might make sense to use your entire Social Security benefit to pay for health care expenses, and use other assets and income to pay for all other living expenses in retirement. Consider, for instance, a report published by Michael Kitces, publisher of the Nerds Eye View in 2015 estimated the lump sum value of Social Security. And what he found was this: Given an average Social Security retirement benefit of $1,294/month (in 2014), a 10-year Treasury rate hovering somewhere around 2% (at the time of Kitces writing), assumed inflation of 3%, and a life expectancy (according to Social Securitys own 2010 Period Life Table) for someone whos already reached age 66 (full retirement age (FRA) for todays retirees) of approximately 17 years for a male and 20 years for a female, the average lump sum value of Social Security is about $280,000 for males and $335,000 for females. At a maximum Social Security benefit of $2,642/month (for those who maxxed out the Social Security wage base for 35 years), the value of Social Security amounts to about $572,000 for men and $683,000 for women.

In other words, the lump sum value of Social Security for a couple retiring at FRA would be $615,000, which is more than enough to cover the $275,000 Fidelity estimates that couple needs to pay for health care in retirement.

Of course, the trouble with this plan is that couples would need to make sure they have enough assets and income to cover all other expenditures in retirement, such as housing, food, transportation and the like. And that might be a push given that many even those who have been saving 30 years dont have enough saved to fund their desired standard of living.

Consider someone in their 60s who had participated in a 401(k) plan for 30 years had, at year-end 2015, an average account balance of more than $280,000 among participants in their 60s with more than 30 years of tenure, an amount that could be earmarked entirely for a couples health care costs. And the average 401(k) balance for someone in their 60s was $123,000, which is roughly what one person would need set aside to pay for health care costs in retirement.

Consider using an HSA

Some workers might have the luxury of using their health savings account (HSA) to fund health care expenses in retirement. HSAs are paired with high-deductible health plans (HDHP), which often have lower monthly insurance premiums than traditional health plan offerings, and, according to Fidelitys release, include these key tax benefits: contributions go in tax-free, balances and savings can be withdrawn tax-free for medical costs.

Read: Health care costs in retirement are only going up heres how to save

What else is worth knowing about Fidelitys study?

Most workers forget how much health care costs

Corporate employees are largely unaware of the costs they and their employers are paying for health care, said Michael Lonier, a retirement-income planner with Lonier Financial Advisory.

Much of the cost is hidden in their payroll deductions, he said.

Indeed, in 2015, the average company-provided health insurance policy totaled $6,251 a year for single coverage, according to ZaneBenefits. On average, employers paid 83% of the premium, or $5,179 a year. Employees paid the remaining 17%, or $1,071 a year.

For family coverage, the average policy totaled $17,545 a year with employers contributing, on average, 72% or $12,591. Employees paid the remaining 28% or $4,955 a year.

The first inkling some may get that health care is far more expensive than they were aware of is the COBRA notice they receive if they are laid off and now have to pay the full cost for their health insurance premiums, said Lonier. The period after corporate coverage but before Medicare eligibility for those who suffer a job loss can be a budget killer.

Medicare Part B can be expensive

Although Medicare part B premiums are a magnitude smaller than other insurance premiums, costs can still be high for those enrolled in Medicare who use health care services frequently, said Lonier.

For instance, you generally have to pay your deductible, coinsurance, and copayments. Plus, some of the items and services that Medicare doesnt cover include: long-term care (also called custodial care); most dental care; eye examinations related to prescribing glasses; dentures; cosmetic surgery; acupuncture; hearing aids and exams for fitting them; and routine foot care.

Read more about what Medicare doesnt cover

Whats more, even with a $0 premium Medicare Advantage policy, which, not surprisingly, are increasingly popular, the policy deductible/out-of-pocket limit plus part B premiums can be more than $8,000 a year per spouse, or over $16,000 a year for the household, said Lonier.

Over 20 years, even without the high inflation that has been persistent in health care for decades, that can reach a $320,000 lifetime total for those who spend the max out-of-pocket every year, said Lonier. With typical higher than CPI health care inflation, the number could easily double over the next 20 years.

Adopt a healthy lifestyle

No one gets to choose their DNA, and so for some, poor health comes with a high cost they cant avoid, said Lonier.

For everyone, it clearly pays to adopt a healthy lifestyle dont smoke, drink moderately, exercise, eat a very healthy diet, and actively manage stress, he said. Cut your out-of-pocket costs in half, and a $16,000 a year per household expenses becomes $8,000 a year or less. Just as mom always said, your health is your most valuable asset never truer.

One planners approach

So, how does one financial planner who has to build retirement plans for his clients, incorporate Fidelitys estimate into his practice, in real life?

The Fidelity estimate is a good reminder that there is a lot that we do not know about our future expenses, says Steven Schwartz, president of Wealth Design Services. I have tried to incorporate a published number such has the Fidelity estimate in my planning models, but I always end up feeling that I am imposing a spending constraint that is too artificial. The reason is that we really have no way of knowing whether those expenses will materialize for any particular individual or when those expenses will materialize.

Ultimately, the way Schwartz has come to think about health care costs is to frame the problem around the structure of insurance.

Most insurance policies create a choice around how we share expenses, he said. We can choose to pay a higher premium, higher copays, deductibles or co-insurances or higher maximum out-of-pocket costs. We do cash flow planning in our firm rather than goals-based planning and build these short-term known costs into our plans rather than trying to think about the overall long-term costs that are possible. We probably get to the same place because I think that those costs are what make up the Fidelity number. However, at least for me, this is a more concrete way to approach the problem.

Visit link:
How to plan for health care in retirement without going broke - MarketWatch

Its the question that keeps older people up at night: Will the recommended$1 million in retirement savings actually be enough?

The answer depends in part on where you live, according toa new GOBankingRates study.

The $1 million figure is thrown around by AARP and others as the amount of savings needed to replace between 70 percent and 80 percent of a persons work income. But thats a rough estimate and there are a lot of variables in retirement planning: How large is that income you hope to replace? How long will you live? Should you count your home equity as part of your savings if youre not planning on selling your home? How will taxes and investment returns affect your retirement income? How will inflation affect your expenses? What happens if you suffer a sudden or long-term incapacitating illness?

The reality is that few retirees have saved anything close to $1 million. A 2016 BlackRock survey found that the average baby boomer between the ages of 55 and 65 had saved only $136,000 for retirement.

That means many people will need to stretch their savings and maybe relocate to the states where their money could last the longest.

GOBankingRates, a personal finance website, pegged Mississippi at the top of the list: In that state, $1 million could cover the needs of the average retiree for 26 years, 4 months. Hawaii is where youre likely to blow through those savings the fastest in 11 years, 11 months.

The website determined the average total annual expenses for people 65 and older (counting groceries, housing, utilities,transportation and health care) and then multiplied total expenses by each states cost-of-living index to calculate the state-specific yearly cost.Housing is generally the big ticket item.

The U.S. Census putsthe average retirement age at 63. At age 65, Americansaverage life expectancy is about 19 more years. So that leaves you with two decades during which savings, pensions, home equity and Social Security become your principal means of financial support.

If youve managed to sock away$1 million, here are the five states where GOBankingRates says it will last the longest:

Mississippi (26 years, 4 months)

Arkansas (25 years, 6 months)

Oklahoma (25 years, 2 months)

Michigan (25 years)

Tennessee (25 years)

And the seven states where it will disappear the fastest:

Hawaii (11 years, 11 months)

California (16 years, 5 months)

Alaska(17 years)

New York(17 years, 1 month)

Connecticut (17 years, 4 months)

Maryland (17 years, 4 months)

Massachusetts(17 years, 4 months)

How did your state fare? Check it out on the map below.

Read this article:
Here's How Long $1 Million In Retirement Savings Will Last In Your State - HuffPost

This research report was produced by Colorado Wealth Management Fund with assistance from Big Dog Investments.

Future retirees need to understand lifestyles play a major role in retiring. While some retirees may be just fine pulling in $30,000, others may be looking for significantly more. Here are a few things to consider when looking toward retirement:

These are very important questions when figuring out how to plan for retirement.

Maybe youre retired and only need to take into account your personal costs. If not, keep in mind any expenses which may occur:

These are all important questions and there are many more. Some retirees make it to retirement and haven't accounted for all the costs they would be taking on. Planning for retirement is essential for success.

Planning can be the difference between a $2,000,000 portfolio and having nothing. The number of people who arent investing in their future is heart-breaking. This isnt because they dont have the money to put aside. More often than not, its because they havent been taught to plan for their future, or in this case retirement. An investor who saves early and lives below their means may live lavishly in retirement, while someone making $120,000 a year before retirement may have nothing.

Trying to save for retirement and ordering pizza once a week? Stop it. Heres a chart from the University of Illinois:

Debt. That thing you shouldnt have in retirement. Find me someone who says they cant put money aside, and in almost every case Ill show you someone who is overspending (exclude single parents). Consequently, they are not saving as much money as they could. Credit card debt is an epidemic and retiring with it is generally a terrible idea. Pay off the highest interest rate and work down. Its sad to see so many people in debt and just ignoring massive interest rates. If a loan has an interest rate of 0.5% its a different story. High interest rate loans will eat into retirement income like cockroaches feasting during the middle of the night in a garbage can.

Planning on retiring at some point? It would be a good idea to take a year and pretend you are retired. During that year, track all your expenses. This should give a future retiree a good reference point for what income is needed. Also, make sure to be realistic about the returns you will get in a portfolio. Its much better to base your retirement on 3% to 4% a year according to the Trinity study. There is nothing wrong with targeting higher returns, but investors should build a suitable margin of safety.

But CWMF, you say 3% to 4% when the S&P 500 has seen massively higher annualized returns since inception. That is correct and should be a view for investors who are planning decades down the road. Once retired, retirees often cant sustain a significant drawdown. If youre retiring in 20 years, volatility is a smaller concern. If youre a retiree, you need to be more vigilant.

There will be some cases where portfolios are built around living off sustainable dividends. Most dividend champions will not see a cut to their dividend even in the event of a serious market panic.

There are several things to keep in mind when managing a portfolio. Here are a few:

Vanguard suggests investors consider long-term care insurance:

While you're considering your retirement health care coverage, give some serious thought to your needs 20 or 30 years down the road. There may come a time when you need ongoing care in a facility or at home.

Medicaid will only pay for long-term care once you've exhausted most of your financial resources. So if you hope to leave a legacy for your children or other loved ones, look into long-term care insurance.

The costs for these policies will increase as you get older, and you may not qualify at all if your health declinesso it's smart to consider buying a policy now.

Retirees could maximize their lifetime benefits from social security if they knew how long they would live. Generally speaking, retirees should wait as long as possible to claim if they believe they will live past 80. If they do not expect to reach 80, then they should file early. All of the complicated math can be boiled down to those simple estimates. However, investors should not delay Social Security payments while making payments on high interest rate loans. The growth rate for Social Security payments is generally in the 6% to 9% range for each additional year the benefits are delayed.

Colorado Wealth Management Fund and Big Dog Investments built two strong portfolios in this dividend stocks article. Given the criteria was that the companies must pay a dividend, these are good options for most retirees and investors with a long-time horizon.

Here are the portfolios:

Big Dog Investments

CWMF

1

(PM)

Philip Morris International Inc

(MO)

Altria Group, Inc.

3

(KO)

Coca-Cola Company

(TGT)

Target Corporation

4

(WMT)

Wal-Mart Stores, Inc.

(NNN)

National Retail Properties

5

(O)

Realty Income Corporation

(STOR)

STORE Capital Corporation

6

(JNJ)

Johnson & Johnson

(SKT)

Tanger Factory Outlet Centers,

7

(HD)

Home Depot, Inc. (The)

(TAP)

Molson Coors Brewing

8

(IBM)

International Business Machines

(VZ)

Verizon Communications Inc.

9

(T)

AT&T Inc.

(XOM)

Exxon Mobil Corporation

10

(AAPL)

Apple Inc.

(CVX)

Chevron Corporation

11

(ABBV)

AbbVie Inc.

(GD)

General Dynamics Corporation

12

(V)

Visa Inc.

(MA)

MasterCard Incorporated

13

(MMM)

3M Company

(LMT)

Lockheed Martin Corporation

14

(GM)

General Motors Company

(TSN)

Tyson Foods, Inc.

15

(KHC)

The Kraft Heinz Company

(GIS)

General Mills, Inc.

16

(DG)

Dollar General Corporation

(K)

Kellogg Company

17

(CSCO)

Cisco Systems, Inc.

See the article here:
How To Retire Early With Money - Seeking Alpha

An American couple retiring this year should expect to spend $275,000 in health care costs throughout retirement a number that has risen 6% since last year, and will continue to rise indefinitely.

The number assumes the individuals are enrolled in Medicare, but does not include expenses associated with a nursing home or long-term care, according to Fidelity Investments, the Boston-based financial services firm that analyzed these health care costs. Instead, the $275,000 includes monthly expenses that come with health coverage premiums, copayments and deductibles and out-of-pocket expenses for prescription drugs. The expected cost of health care has grown 70% since Fidelity first started tracking health care costs in 2002, and will continue to rise in the future, Adam Stavisky, senior vice president of Fidelity Benefits Consulting. Medicare is wonderful, but by design it doesnt cover everything, Stavisky said.

See: Whats the matter with health care?

Americans are anxious as it is for retirement the image of those golden years has shifted considerably in recent decades, where people are relying on their own savings instead of a pension plan, and many are choosing to work part or full time in their older years. Almost half of Americans are not confident about reaching their retirement goals, partially because of how expensive health care is: 71% of the more than 1,000 adults in a survey by the American Institute of Certified Public Accountants said they were anxious about health care costs, and another 68% said their concern was over the uncertainty around health care costs.

On top of how expensive health care is, and the pressure to save for it, many Americans dont understand the details of various plans and insurances. Health care is unfortunately complex and most people will shut down before they try to unravel the complexity, Stavisky said. Health care legislation is also in limbo Senate Republicans failed to agree on a reformed health care bill, which would have reduced Medicaid spending (the health care plan for low-income families and those with disabilities or few resources), and both parties are fighting over the fate of the Affordable Care Act, also known as Obamacare. For now, however, the ACA is still in tact.

See also: Heres how Republicans and Democrats can come together to fix health care

In the meantime, its on Americans to ensure their security in retirement, and that means funding health care costs. We may not want to talk about it, but the obligation exists nonetheless, Stavisky said. One increasingly popular way to do that is by funding a health savings account (HSA), where assets are deposited, invested and withdrawn tax-free and help Americans pay for qualified medical expenses. HSAs accounted for about $37 billion in assets at the end of 2016, and to more than $41 billion in January, according to Devenir, a Minneapolis-based HSA adviser and consultancy firm. The average investment account holder has a balance of almost $15,000, and overall the number of HSA accounts has grown 20% between December 31, 2015 and December 31, 2016.

HSAs are attached to a high-deductible health insurance plan, and have a contribution limit in 2017 of $3,400 for individuals and $6,750 for families. In 2018, those limits will increase to $3,450 and $6,900, respectively. There is an additional catch-up contribution of $1,000 allowed per year for individuals 55 and older. Alternatively, Americans can use a Flex Spending Account to accompany their health care coverage, but must spend it all or lose any remaining money in the account at the end of the year. Though they can be beneficial, and many experts recommend them, individuals interested in opening an HSA should consider fees and initial costs associated with the plans, and understand their nuances for example, once someone signs up for Medicare, contributing to an HSA is no longer an option. Alternatives to an HSA would be a traditional employer-sponsored retirement plan, such as a 401(k) plan, or a traditional or Roth Individual Retirement Account.

The money contributed each year into an HSA doesnt have to be used in that year, and unspent money will roll over year after year to become another nest-egg in retirement, if the individual chooses, said Chad Wilkins, president of HSA Bank, a Milwaukee-based health savings account administrator.

Some experts suggest paying all health care expenses out of pocket and saving HSA funds for health care costs in retirement (or, for whatever purpose after turning 65, when those assets are no longer only for medical expenses and the account is treated like a 401(k) plan nonmedical expenses will incur income taxes, though). Individuals can also use the money to reimburse themselves for a medical expense (with a receipt) from years prior, Wilkins added.

Original post:
Health care costs in retirement will only grow here's how to save - MarketWatch

Trustees for the Employees Retirement System of Texas voted Wednesday to decrease earnings assumptions for its $26 billion trust fund, a rare move that could have major implications for the state budget and the retirement systems beneficiaries.

In a 4-2 vote, the board cut the funds expected annual rate of return from 8 percent to 7.5 percent, reflecting gloomier market conditions and other factors straining the system. The board also voted to revisit the rate in two years.

Agency staffers and some trustees had pushed for a rate as low as 7 or 7.25 percent, but the board settled on the slightly higher projection.

Retirees and advocates fear the Legislature will respond by shifting more financial burdens onto the systems beneficiaries, either by forcing current employees to chip in more for their future pensions, cutting benefits or closing off the fund to future retirees.

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The Employees Retirement System handles benefits for about 240,000 active and retired state employees, elected officials, law enforcement and prison officers and judges. On average, beneficiaries receive $1,600 per month, a figure that hasnt been adjusted for the soaring cost of living since 2001.

Lowering the expected rate of return will not affect how much money flows into the retirement system, but it will dramatically alter its long-term balance sheet.

Under current assumptions, the fund is projected to grow large enough tocover its liabilities within 35 years.Under a 7.5 percent expected rate of return, the fund would never be expected to grow large enough to provide full benefits to retirees into the future, and without intervention, would be depleted by 2070.

Retirees in recent weeks flooded trustees with emails expressing anxieties about their future benefits and urging trustees to protect the status quo on expected rates of return. Several voiced their concerns in public comments ahead of Wednesdays vote.

I have nothing to lose but retirement money, said Pamela Scott, a retiree who spent 17 years working for the formerly named Texas Commission for the Blind and saw her salary peak at $31,000.We were promised when I went to work: Yes, our salaries are low, but youd have good benefits and good retirement.

Trustees said they understood retirees concerns, and they were only lowering expectations to protect the long-term health of the system.

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Craig Hester, an investment manager and the boards chair, described a perfect storm of factors putting pressure on the retirement system over the past two decades, including a national recession, an aging workforce, benefits changes and chronic legislative underfunding.

A host of other states have recently lowered their predicted rates of return for public pension funds, a change some financial analysts say is needed, largely because low interest rates have limited earnings for the type of low-risk investments that pension funds generally favor.

Hester and other trustees agreed that the Legislature had shortchanged the retirement systems fund and Texas workers more broadly over the years and could struggle to recruit talent if they fail to boost salaries or benefits.

We would all agree that the people who have sacrificed for the state have never been fairly compensated, said Cydney Donnell, a trustee. You need to be at the Legislature voicing concerns.

Donnell said she doubted that current retirees would be affected by any looming adjustments to benefits.

I think their anxiety should be reduced, she said. I think most people who are really going to be impacted by it are in the longer term.

Texas tended to fully fund the Employees Retirement System throughout the 1990s. But a turn-of-the-century recession triggered a long streak of chronic legislative underfunding that strained the system. In 2015, lawmakers sought to shore up the retirement systemby increasing state and employee contributions by roughly 2 percent each.

Texas law says state pension funds cant adjust for cost of living unless the funds are actuarially sound that is, they have enough money available to cover all liabilities even after increasing retiree payments. Even under an earnings projection of 8 percent, that wouldnt have happened for 35 years.

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Labor advocates have pushing for a lump-sum cash infusion that could more backfill plug the funding gap and potentially allow for the cost-of-living adjustment. But even that could be tricky.

The Texas Constitution says the state's contributions to pension funds cant eclipse 10 percent, and the state is near that threshold. Legal experts disagree about whether such an infusion would count toward pushing Texas over that cap, and the idea is a nonstarter around the Capitol.

There is one other option: Gov.Greg Abbottcould declare the unfunded liability an emergency, giving lawmakers clear permission to chip in more money.

Donnell said suggested lawmakers would be wise to chip in resources sooner than later, so they could grow over time.

Small check now, big check later, she said. If they dont put money into the system now, it doesnt earn anything.

Read related Tribune coverage:

The Employees Retirement System of Texas is considering lowering its earnings assumption for the $26 billion trust fund. Labor advocates fear the move would push lawmakers to cut benefits or require current workers to chip in more. [Full story]

Advocates for state employees hope that lawmakers approve substantial pay raises including for state workers who don't work at an agency that's facing a high-profile crisis. [Full story]

The House unanimously approved a Dallas pension bill aimed at preventing first responders' retirement fund from becoming insolvent within a decade. [Full story]

Read more here:
Employees Retirement System of Texas lowers expectations, worrying workers - Texas Tribune

A bear market just as you enter retirement couldnt come at a worse time if youre forced to sell securities after prices have plunged. Certainly, many investors today worry about how long the bull market can keep running.

That's where the bucket system can help. Basically, you divide your money among different kinds of investments based on when you'll need it.

Jason L. Smith, a financial adviser in Westlake, Ohio, and author of The Bucket Plan, uses the system with clients, splitting their assets among three buckets: Now, Soon and Later.

The Now bucket holds what you'll need in the short term. Smith recommends setting aside enough so that, when added to Social Security or a pension, it will cover your basic expenses for up to a year.

It should also have enough for major expenses that are likely to crop up over the next couple of years, such as paying for a new roof or that once-in-a-lifetime trip around the world, plus cash for unexpected emergencies.

Money in the Soon bucket will be your source of income for the next 10 years. Smith recommends investing in a fixed annuity (not an immediate annuity, which locks you into monthly payments) or high-quality short-term bonds or bond funds. As the Now bucket is depleted, you withdraw money from the annuity or sell some of the fixed-income investments in the Soon bucket to replenish it.

The assets in the Later bucket aren't meant to be tapped for more than a decade into your retirement, so they may be invested more aggressively in stock funds, which provide greater growth potential, and alternative investments such as REITs. This bucket can also include life insurance or a deferred-income annuity, which pays income later in life.

Consider selling securities in the Later bucket to replenish the Soon bucket starting about five years before it runs out of money.

If the market is in a downward spiral, you can wait, knowing you still have a few years before the Soon bucket will be empty.

Eileen Ambrose is a senior editor at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com.

Read more from the original source:
Bucket plan could be lifesaver in retirement - Chicago Tribune

U.S. business investment is catching a second wind after years of wobbly performance.

Companies are ramping up orders for computers, machinery and electrical appliances, a sign businesses are growing more confident in the economic outlook eight years into an economic expansion.

Durable goods orders fell 6.8% in July, but the decline was driven by aircraft orders, which had surged the month before. Stripped of the volatile transportation category, orders were up 0.5% from a month earlier and up 5.6% from a year earlier.

Orders for core capital goods, which exclude aircraft and defense and which many economists use as a proxy for broader business investment, rose 0.4% in July. They were up 3.5% in July from a year earlier. They bottomed in June 2016 and have risen six times in seven months. That pickup in business investment marks the best run since 2010, when the U.S. was coming out of recession.

Business investment is now rising at a faster rate than overall economic growth for the first time since late 2014, evidence of momentum in an eight-year-old economic expansion that has been restrained by slow productivity growth which is sometimes the result of underinvestment. U.S. business investment rose at a 5.2% pace during the second quarter, following a 7.2% increase in the first quarter.

"Business equipment investment is on track to post another big gain in the third quarter," said Michael Pearce, U.S. economist at Capital Economics, in a note to clients.

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The rise in spending comes after particularly weak investment from 2014 to 2016, resulting from a confluence of factors including weak global demand and falling energy prices. Now, with the unemployment rate hovering near a 16-year low, businesses are likely incentivized to shift from spending on labor -- which was relatively inexpensive for many years during the expansion -- to capital.

Outside of a rebound in the oil-and-gas sector, solid fundamentals -- including strong manufacturing activity -- are further propelling companies to pour money into technology, research and development and new buildings.

Target Corp. executives noted in a second-quarter earnings call earlier this month that the company had increased spending in a rollout of hundreds of remodeled stores.

"The remodels, where they will really help us...is our ability to optimize that backroom more efficiently to drive more productivity as we ship from the store," said Chief Operating Officer John J. Mulligan in a call with analysts.

Manufacturing data has signaled a positive growth trajectory for the overall economy. U.S. factory activity expanded for the 11th consecutive month in July, according to the Institute for Supply Management.

The Business Roundtable's gauge of chief executive plans for capital spending and hiring and projections for sales over the next six months reached its highest level in three years in the second quarter.

Jeff McGahey, general manager at Harry's Saw Shop in Augusta, Ga., said the power-equipment company moved into a 17,000-square-foot facility in February 2016 after outgrowing its previous location. The move, which tripled the size of Harry's showroom, has been a boon to business.

Mr. McGahey said the business is buoyed by customers' appreciation for hands-on demonstrations. "Everything has grown," Mr. McGahey said. "As growth calls, you have to grow with it or else go home."

Of course, not all companies are boosting their capital investments, and many retailers are re-evaluating their investment strategies in light of a shift to digital selling. Foot Locker Inc. plans to reduce next year's capital spending, and J.C. Penney Co. closed 127 stores in the latest quarter, joining competitors such as Macy's Inc. and Sears Holdings Corp., in a move to cut costs.

Martin Richenhagen, chief executive of farm-equipment maker AGCO Corp., said the company doesn't plan to build new factories in the coming two or three years, but is looking to ramp up investment in research and development.

"We kept investment stable at around $315 million during the last three years, and this year we might maybe invest about 10% more than in previous years," Mr. Richenhagen said.

Write to Sarah Chaney at sarah.chaney@wsj.com

(END) Dow Jones Newswires

August 25, 2017 12:48 ET (16:48 GMT)

Read more:
Business Investment Gains Renewed Momentum -- Update - Fox Business

A big question also looms over the $80 billion in pending Chinese outbound deals, some of which don't comply with new regulations on the kinds of acquisitions allowed. Real estate, for instance, is now on a restricted list of sectors along with entertainment, sports, and film studios. But property investments represent the biggest proportion of pending deals, accounting for 38 percent, according to Dealogic data.

If those fall apart, that's not positive news for the global real estate industry. "It takes out a class of buyers that could potentially buy at higher prices," Tal said.

China's overseas direct property investment has already fallen 82 percent in the first half of 2017. Analysts forecast the downward trend will continue, leading to a "material slowdown," with transaction volume and prices expected to come under pressure, according to a Morgan Stanley report.

It's not all bearish news. Going forward, "some of the money that would have been deployed offshore could now be deployed onshore, and that could be a positive for the Chinese market," said Nicholas Holt, head of Asia Pacific research at real estate consultancy Knight Frank.

But here's the catch: China's domestic property market is historically volatile, and trying to control the real estate bubble has long vexed authorities. So that's yet another way Beijing's crackdown on overseas investment could lead to unintended consequences.

The government's curbs have dramatically slowed outbound deals from China. They're down 40 percent in the first six months of the year to $74 billion. But experts anticipate the tide to eventually turn as Chinese companies keep looking for ways to invest abroad.

"There's been such a relaxation after the whole world was awash with Chinese money in these deals ... [but] there is still a lot money sitting in China, and Asia in general, looking for diversification," Tal said.

"The reasons to get the money out are still there when there's a lot of money that needs to move, it finds a way."

More here:
China may be crippling some of its largest companies with a crackdown on investment - CNBC

Happy Friday, MarketWatchers! The weekend is here. Start with these top stories in personal finance.

Check your internal logic: A lawyer and instructor in business ethics looks at whether the ethical right to protest without career-ending consequences is the same in both cases.

On the surface, the changes to the document might seem straightforward. But as with many things in life, theres always the chance of slip between cup and lip.

If financial advisers arent careful when comparing managers for their clients, they can inadvertently end up comparing apples to oranges.

You dont have to break the bank to stay abroad.

Four of them are in the NFL.

Google is rolling out a feature this week that helps test for the mood disorder.

How many tweets will Trump send that day? Will McGregor throw a kick? People outside the U.S. can place their bets.

For starters, any income you receive is taxable.

An Italian-made liqueur is getting plenty of buzz.

Treasury Secretary Steven Mnuchin says hes hopeful about getting a tax-code overhaul done by the end of this year after flatly stating he was wrong about finishing a deal by August.

Durable-goods orders dropped 6.8% in July, the biggest drop in almost three years, the government reported Friday.

The Dodd-Frank law and regulations put in place since the financial crisis have made the financial system substantially safer, Federal Reserve Chairwoman Janet Yellen said Friday in a ringing defense of the rules now under fire from President Donald Trump and J.P. Morgan CEO Jamie Dimon.

President Donald Trump fired back at Sen. Bob Corker for questioning his competence for office, said John Kelly is doing a fantastic job as chief of staff and again pressed Senate Republicans to get rid of the filibuster for legislation.

A pair of governorsone Democrat, one Republicanis reportedly mulling teaming up in 2020 for a White House bid on a unity ticket.

Former White House chief strategist Steve Bannon isnt any less of a controversial figure now that hes on the outside of the Trump administration.

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Why measuring investment performance is tricky and 5 ways to live abroad for free - MarketWatch