THE WEEK ON WALL STREET
Stocks fell broadly last week as domestic and foreign markets reacted to the White House’s tariffs. The S&P 500 Index declined 9.08 percent, while the Nasdaq Composite Index fell 10.02 percent. The Dow Jones Industrial Average dropped 7.86 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, lost 7.39 percent.
FACT OF THE WEEK
On April 8, 1983, David Copperfield performed one of his largest illusions: A live audience of 20 tourists was seated in front of a giant curtain attached to two lateral scaffoldings built on Liberty Island in an enclosed viewing area. Copperfield, with help from Jim Steinmeyer and Don Wayne, raised the curtain before lowering it again a few seconds later to reveal that the space where the Statue of Liberty once stood was empty. A helicopter hovered overhead to give an aerial view of the illusion, and the statue appeared to have vanished, with only the circle of lights surrounding it still present and visible.
MARKET MINUTE
Under Pressure
Stocks rallied the first half of the week as markets tried to anticipate the potential impact of tariffs previously announced by the White House. Soon after the closing bell on Wednesday, President Trump’s new tariffs surprised markets. Global markets reacted to the news overnight. Markets opened lower on Thursday, and the selling continued through Friday. Treasuries rallied in a flight to quality as investors moved to the sidelines. The yield on the 10-year Treasury note closed Friday at 4.0 percent. Bond yields generally fall when bond prices rise.
Powell’s Speech
Federal Reserve Chair Jerome Powell gave a previously scheduled and much-anticipated speech on Friday. He explained:
- The labor market is in good shape and not a significant source of inflation.
- Longer-term inflation expectations are “well anchored and consistent with our 2 percent inflation goal” – despite higher expectations for inflation over the short term.
- Regarding consumer sentiment, while consumers “may not feel great about the economy now, they still keep spending.” He added that the same happened during the pandemic.
- The Fed’s policy stance is “well positioned to wait for greater clarity… (on the likely effects of trade and fiscal policy, for example) before considering any changes in monetary policy.”
FINANCIAL STRATEGY OF THE WEEK
Retirement Realities
Expectations vs. Reality
Predicting exactly what your retirement will be like is about as possible as a meteorologist predicting the weather correctly every single time. In fact, few retirees find their financial futures playing out precisely as they assumed. But, understanding some of the more common assumptions about retirement may help you get closer to your goal than most.
Do retirees actually “outlive” their money?
Generations ago, as people retired, many lived in dire straits, sometimes “down to their last dime,” which led to the creation of Social Security. Today, Social Security is still around and a common supplement to one’s retirement strategy. True, health crises can sometimes impoverish retirees, but working with a financial professional may even help you prepare for this hard-to-anticipate cost.
Retiring on 70-80% of your end salary may not be feasible
A quick internet search reveals all sorts of sources instructing new retirees should strive to retire on 70-80% of their end salary, but it can be a tough one to achieve.
Most new retirees often want to travel, explore new pursuits, learn some hobbies, and finally get around to those things they had put off when they were too busy with work. So, in the first few years, some may spend roughly as much as they did before retirement.
For many retirees, median household spending increases on the way to a retirement transition. But, with a smart financial strategy, the annual median household spending in retirement tends to decline after age 65.
Practice makes perfect, even in retirement
On average, households headed by those older than 65 spend 28% less annually than younger households (a difference of more than $15,000). While healthcare spending increases in retirement, other household costs decline, particularly transportation and housing expenses.
Retirement may arrive earlier than expected
Most people retire closer to age 60 than age 70. Believe it or not, the average retirement age for current workers is 66. That means you could find yourself claiming Social Security earlier than you expected if only to avert drawing down your retirement savings too quickly.
Living the life you want
In general, American retirees seem to have it pretty good. A recent survey found that 7 in 10 retirees are confident they will have enough money saved to live comfortably throughout retirement.
Remain flexible in retirement
Your retirement may differ slightly or even greatly from the retirement you have imagined.
Do you have questions regarding your specific situation? Call my office, and let's set up some time to talk. We are here for you.