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U.S. Housing Market Update

The 30-year fixed mortgage rate rose from 3.5 percent to 4.25 percent after the presidential election. While higher rates might deter potential homebuyers — particularly young first-timers — residential real estate is expected to continue being a seller’s market throughout 2017.1

Meanwhile, the fate of Fannie Mae and Freddie Mac remains unclear. These government-sponsored enterprises have been managed by a federal agency since the housing slump in 2008. Trump’s pick for Treasury secretary, Steven Mnuchin, has indicated that his top priority is to privatize these mortgage giants.2

The real estate market bodes particularly well for retirees who have paid off their mortgage. While many retirees prefer to stay put in their longtime homes, it may be worth considering downsizing to a smaller place that is easier to maintain. Today’s market provides a wide range of potential homebuyers willing to pay top dollar for homes in areas with low inventory.3

Many retirees looking to downsize are in the same boat as other homebuyers: Plenty of motivation but not enough options from which to choose. In this situation, many are considering new construction, including the lower-cost “tiny house” trend.4

Those in the market for a new home can even custom build a smaller home designed to make life easier as they age, featuring no stairs, wide hallways, easily accessed storage areas and some of the new smart-home technological conveniences to help them stay in touch with loved ones.5

For those who haven’t retired, or aren’t prepared to downsize just yet, one possibility may be purchasing a smaller home now and using it for rental income until they’re ready.6

Be sure to consult with a professional real estate agent or broker to help decide what’s best for your unique situation.

Content prepared by Kara Stefan Communications

1 Diana Olick. CNBC. Dec. 13, 2016. “How rising mortgage rates may not matter for housing.” http://www.cnbc.com/2016/12/13/how-rising-rates-may-not-matter-for-housing.html. Accessed Feb. 8, 2017.

2 Holden Lewis. Bankrate.com. 2017. “What’s in store for housing market in 2017?” http://www.bankrate.com/finance/mortgages/housing-trends-1.aspx. Accessed Jan. 24, 2017.

3 Yuqing Pan. Realtor.com. Jan. 16, 2017. “Sold Out: These 10 U.S. Cities Have the Biggest Housing Shortages.” http://www.realtor.com/news/trends/top-10-housing-markets-constrained-by-tight-inventory/. Accessed Jan. 24, 2017.

4 Kiplinger. 2017. “10 Great Tiny Homes for Retirees.” http://www.kiplinger.com/slideshow/retirement/T010-S001-great-tiny-homes-for-retirees/index.html. Accessed Jan. 24, 2017.

5 TD Bank. Realtor.com. Sept. 18, 2015. “Is New Construction for You?” http://www.realtor.com/advice/buy/is-new-construction-for-you/. Accessed Jan. 24, 2017.

6 Bankrate. Aug. 2, 2016. “Funding retirement with rental income.” http://www.bankrate.com/finance/retirement/funding-retirement-with-rental-income-1.aspx. Accessed Feb. 22, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Prescription for Retail Therapy

How much do you use of what you buy? Research reveals that Americans throw away 30 percent to 40 percent of the food they purchase.1 That’s just food, most of which you see daily and toss out regularly as it goes bad. But what about the things that don’t go bad — the sports equipment in the hall closet, the coat you bought for one trip or the shoes you love but never wear?

Why do we buy so much?

Maybe it’s because shopping carts are bigger. That’s right; today’s average shopping cart is three times as big as when they were first introduced in 1938.2 Here’s another interesting tidbit: Customers buy more impulse items when they grab a handheld shopping basket instead of a cart.3 Perhaps that’s because we go into a store knowing we want only one or two items but get a higher sense of fulfillment if we add just one or two more to the basket — because there’s room, and we can.

Retailers conduct research on how to encourage consumers to spend more money. There’s an entire industry devoted to studying shopping habits. Therefore, the more you know, the better you can identify retail traps. It’s not that you shouldn’t buy things; it’s that you shouldn’t buy things you don’t want or need, so it’s good to identify when you’re about to fall into a retailer’s trap. After all, the less you buy, the more you save. And the more you save, the better we can help you explore ways to create a retirement income strategy that you can have confidence in.

One nice perk some stores offer is a place to sit and rest. It’s good for bored children, patient spouses and weary shoppers laden with packages. But you should know that some stores, such as IKEA, set up displays of items that aren’t selling that well near these sitting areas.4 Apparently, staring at an item long enough while in repose can trigger an interest in buying it.

Some people use shopping like comfort food, as a way to temporarily make them feel better after a bad day or stressful situation. This is affectionately called “retail therapy.”5 In fact, studies show that about 62 percent of Americans tend to self-soothe by shopping. Scientists say we feel better because our brain releases a chemical called dopamine when we encounter something novel or exciting. However, it’s worth mentioning that dopamine levels spike higher when you anticipate making a purchase, and lower after you’ve made it.6 In other words, you can get a good feeling by shopping but not always when making a purchase. Good to know.

It’s also interesting to note the difference between impulsive shopping and compulsive shopping. Impulsive is shopping or buying on a whim, whereas compulsive is more planned out and designed to accomplish a goal, if only to feel better. Compulsive shoppers are more likely to get into financial trouble by shopping too much or too often.7 Interestingly, people tend to shop more compulsively when they are with friends as opposed to relatives.8 This could be indicative of shopping for approval or to fit in with your friends, versus trying not to be judged by your relatives.

 

Content prepared by Kara Stefan Communications

1 United Nations Environment Programme. 2017. “Food Waste: The Facts.” http://www.worldfooddayusa.org/food_waste_the_facts. Accessed Jan. 16, 2017.

2 Ali Newton. Display Centre. Dec. 14, 2016. “5 Display Tricks Supermarkets Use To Sell More.” http://displaycentre.co.uk/5-tricks-supermarkets-use-sell-blog/. Accessed Jan. 16, 2017.

3 Ibid.

4 Quentin Fottrell. MarketWatch. Dec. 10, 2016. “10 Psychological Retail Tricks That Make You Spend More Money.” http://www.marketwatch.com/story/10-retail-tricks-that-make-you-spend-more-2013-12-04. Accessed Jan. 16, 2017.

5 Marianna Glynska. The Huffington Post. May 10, 2016. “Going Shopping: Stress Relief or Necessary Burden?” http://www.huffingtonpost.com/marianna-glynska/going-shopping-stress-rel_b_9875532.html. Accessed Jan. 16, 2017.

6 Paula Cookson, LCSW. Inpathy Bulletin. Dec. 21, 2016. “Retail Therapy.” http://insightbulletin.com/retail-therapy/. Accessed Jan. 16, 2017.

7 Elizabeth Hartney, PhD. VeryWell.com. Apr. 18, 2016. “Compulsive vs. Impulsive Shopping.” https://www.verywell.com/difference-between-compulsive-and-impulsive-shopping-22336. Accessed Jan. 16, 2017.

8 Tomas Chamorro-Premuzic. The Guardian. Nov. 26, 2015. “The Psychology of Impulsive Shopping.” https://www.theguardian.com/media-network/2015/nov/26/psychology-impulsive-shopping-christmas-black-friday-sales. Accessed Jan. 16, 2017.

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

 

 
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Take a Look at Life Insurance

Middle-aged adults have a plethora of middle-aged financial priorities. It’s hard to even call them priorities because each one is important; it’s just a matter of spreading the money you have across a variety of different needs.

In fact, a typical mid-life checking account might include payouts for a mortgage, college tuition, a savings account, an IRA, a life insurance policy, and a long-term care insurance policy — and that’s not even including the 401(k) contribution that is taken out of a paycheck before it gets deposited.

If you struggle with trying to figure out which financial priorities are most important or how to allocate a portion of your retirement savings among the many insurance product options, we can help. In fact, there are insurance products that can help with multiple priorities so you don’t have to spread your assets so thin.

Take life insurance, for example. There are many different kinds, and one of the main differences is between term and whole life. With a term policy, you purchase a death benefit amount and determine how long you want to hold the policy; it doesn’t pay out anything unless the owner passes away during the term. Whole life features a cash value account, which, over time, can build up a balance you can access, if needed.1

First and foremost, life insurance is there to help take care of your loved ones if you pass away. While many employers provide some life insurance coverage for employees, it may not be enough to avoid the long-term hardship of that loss of income. However, less than 40 percent of Americans have an interest in life insurance at all. It actually comes in seventh in terms of most people’s financial priorities.2

While a term life policy offers a death benefit for the selected term, a whole life policy can provide a death benefit that covers your entire life, as long as you keep paying the premiums. It’s worth mentioning that older policies may actually mature when the policy owner turns 100 and will pay out the death benefit while he or she is still alive. Newer policies, however, extend to a maximum age of 121.3

A whole life policy also offers certain tax advantages. While premiums may not be tax deductible, the cash value grows tax deferred, and distributions through the use of policy loans are generally tax free. The cash value can be accessed if the owner needs emergency funds or money to supplement his or her retirement income or it can even be used to pay the annual premiums on the policy.4 This is all in addition to the death benefit. Please note that withdrawals or policy loans of any type may reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force.


Content prepared by Kara Stefan Communications

1 Amy Danise. NerdWallet. Jan. 5, 2017. “Life Insurance Explained in (Exactly) 250 Words.” https://www.nerdwallet.com/blog/insurance/life-insurance-explained-250-words/. Accessed Feb. 6, 2017.

2 BestLifeRates.org. Dec. 28, 2016. “2015 Life Insurance Statistics and Facts.” https://www.bestliferates.org/blog/2015-life-insurance-statistics-and-facts/. Accessed Jan. 10, 2017.

3 Michael Kitces. Nerd’s Eye View. March 2, 2016. “The Age-100 Tax Problem With Outliving the End of Life Insurance Mortality Tables.” https://www.kitces.com/blog/outliving-the-end-of-life-insurance-mortality-tables-the-age-100-tax-problem-when-life-insurance-expires/. Accessed Jan. 10, 2017.

4 Amy Bell. Investopedia. Aug. 21, 2014. “6 Ways To Capture The Cash Value In Life Insurance.” http://www.investopedia.com/articles/personal-finance/082114/6-ways-capture-cash-value-life-insurance.asp. Accessed Feb. 24, 2017.

 

Life insurance policies are contracts between you and an insurance company. Guarantees and protections provided by insurance products are backed by the financial strength and claims-paying ability of the issuing insurer.

 

The content provided in this newsletter is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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The Future of Globalization

There was a time, at the end of the 20th century, when globalization was celebrated. We became more connected with the rest of the world. We could communicate and share information in real time without cost, nations benefited from strong imports and exports, and companies could improve their bottom lines by utilizing lower-cost suppliers and workers throughout the world.

These days, perhaps not so much. Globalization has become a target for both opportunity and opposition, largely responsible for higher unemployment in developed nations and the protectionism movement.While exposure to different cultures, values and beliefs offers benefits, there is revitalized interest in intra-country government spending on infrastructure and employment.1

It’s easy to see why the topic of globalization would be divisive: what looks like a threat to some looks like opportunity to others. However, no matter what perspective you have, we are here for you. Let us help you stay focused on your long-term retirement income goals, regardless of global and local economic events.  

It is likely that, moving forward, globalization will be downplayed but not eliminated. Rather, at least one observer purports that countries, including the U.S., may expend more effort and resources on “regionalization” with neighboring countries.2

One negative consequence of globalization, combined with the 2007-2009 recession, was higher unemployment in the U.S. This unfortunate circumstance hit young people particularly hard.3 But interestingly, the phenomenon of young adults moving back home with their parents also is characteristic of a global trend. According to one report, the following percentages represent 15- to 29-year-olds who live with their parents in various countries:4

  • ·         Italy, 80.6%
  • ·         Greece, 76.3% 
  • ·         Slovak Republic, 76.2%
  • ·         Spain, 73.6%
  • ·         Canada, 30.9%
  • ·         Denmark, 34.3%
  • ·         Sweden, 35.1%
  • ·         United States, 32.1%5

On one hand, globalization has served to generate more jobs in certain disciplines. The phenomenon is, and will most likely continue to be, responsible for the growth of jobs for market research analysts, interpreters and translators, cartographers and customer service representatives.6

On the other hand, regardless of how many jobs renegotiated trade agreements may bring back to America, most authorities agree there won’t be nearly as many traditional manufacturing jobs as in the past. Since much assembly line work is now automated, the manufacturing jobs of the future are more likely to require technology degrees with IT skills and knowledge.7



Content prepared by Kara Stefan Communications.

1 Sebastian Mallaby. International Monetary Fund. December 2016. “Finance and Development: Globalization Resets.” Vol. 53, No. 4. http://www.imf.org/external/pubs/ft/fandd/2016/12/mallaby.htm. Accessed Feb. 27, 2017.

2 Jonathan Web. Forbes. Dec. 21, 2016. “2017 Will Be a Year of Regionalization, Not

Deglobalization.” http://www.forbes.com/sites/jwebb/2016/12/21/2017-will-be-a-year-of-regionalization-not-deglobalization/print/. Accessed Jan. 1, 2017.

3 Alex Gray. World Economic Forum. Nov. 11, 2016. “Still living with your parents? You’re not alone.” https://www.weforum.org/agenda/2016/11/why-do-so-many-young-adults-still-live-with-their-parents-in-these-countries. Accessed Jan. 1, 2017.

4 Ibid.

5 Drew Desilver. Pew Research. May 24, 2016. “In the U.S. and abroad, more young adults are living with their parents.” http://www.pewresearch.org/fact-tank/2016/05/24/in-the-u-s-and-abroad-more-young-adults-are-living-with-their-parents/. Accessed Jan. 1, 2017.

6 Rob Sentz. Forbes. Sep. 27, 2016. “Three Jobs That Are Growing Because of Globalization.” http://www.forbes.com/sites/emsi/2016/09/27/three-jobs-that-are-growing-because-of-globalization/#66d3c499648c. Accessed Jan. 1, 2017.

7 Scott Simon. NPR. Dec. 10, 2016. “Economist Says Manufacturing Job Loss Driven by Technology, Not Globalization.” http://www.npr.org/2016/12/10/505079140/economist-says-manufacturing-job-loss-driven-by-advancing-technology-not-globali. Accessed Jan. 1, 2017.

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Sleep and Other Surprising Economic Factors


As a result of all modern society’s demands, researchers say people are sleeping less than ever. Common sleep inhibitors include stress, alcohol consumption, smoking, lack of physical activity and excessive electronic media use.1

Sleep deprivation may be detrimental to one’s health, but there’s an economic toll as well. One recent study found that as much as 3 percent of our gross domestic product (GDP) is lost due to the collective impact of worker sleep loss (and hence, productivity).2

Another factor impacting our economy is timing. It may sound oversimplified, but the concept of “what goes up must come down” often applies to business cycles. For example, Barack Obama took office during one of the lowest points of the business cycle, so regardless of his policies there was generally no way to go but up.3

This is an interesting point, especially in a new year with a new presidential administration. Presidents are going to come and go. Business cycles are going to flourish and decline. And people are going to work and retire.

There is also a correlation between happiness and economic output, but not in the way you might think. One 2016 index showed many Western countries with high GDPs actually ranked low on the scale of happiness. There are no European countries in the top 10, the U.K. ranks 34 and the U.S. comes in at a dismal 108. What are the factors that lead to long-term happiness among citizens? Costa Rica, which is in first place, got rid of its military back in 1949 and reallocated all of that funding toward education and health care. It also produces 99 percent of its electricity from renewable sources.4

Speaking of quality of life, some cities that struggled post-recession have come to realize that beautifying their environs can improve talent recruitment for local companies. Perhaps that’s why mid-sized and small cities in the South and West that have invested in building green parks, bike lanes and cultural venues have attracted more college-educated young people.5 After all, a happy employee is usually a productive one, and productive companies produce a higher GDP.

Our goals for a confident financial future shouldn’t change based on who’s in the White House, or even if the economy is moving up or down.  Please feel free to contact us to discuss creating retirement strategies through the use of insurance products that can help you work toward your long-term retirement income goals.


Content prepared by Kara Stefan Communications.

1 Rand Corporation. 2016. “Why Sleep Matters: Quantifying the Economic Costs of Insufficient Sleep.” http://www.rand.org/randeurope/research/projects/the-value-of-the-sleep-economy.html. Accessed Dec. 30, 2016.

2 Ibid.

3 James DePorre. The Street. November 2016. “Rev’s Forum: 3 Factors That Will Drive the Market Action in 2017.” Dec. 28, 2016. http://realmoney.thestreet.com/articles/12/30/2016/revs-forum-3-factors-will-drive-market-action-2017. Accessed Dec 30, 2016.

4 Bert Oliver. Thought Leader. Dec. 30, 2016. “The ‘happiest’ nations in the world – what do they have in common?” http://thoughtleader.co.za/bertolivier/2016/12/30/the-happiest-nations-in-the-world-what-do-they-have-in-common/. Accessed Dec 30, 2016.

5 Richard Florida and Andrew Small. CityLab. Dec. 28, 2016. “Why Quality of Place Matters.” http://www.citylab.com/design/2016/12/why-quality-of-place-matters/509876/. Accessed Dec. 30, 2016.

 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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For the Health of Marriage