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A monthly newsletter to educate and help you reach your financial goals

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Market Update and Social Security

Markets in-and-out of 'correction' territory
        I normally don't like to write about what is going on in the stock market because it has little affect on your long-term goals.  This recent correction, however, has everyone talking because of how fast it happened.  On July 20th, the Dow Jones Industrial Average closed at 18,100.  A month later, on August 24th, the DJIA hit an intra-day low of 15,370 for a drop of 15% during that short time frame.  
      The widespread selling of stocks was due to a fear of a global economic slowdown, especially out of China, the second largest economy behind the U.S.  These global concerns, topped with the assumed near term interest rate hikes by the Federal Reserve painted a gloomy picture and broke the channel that stock prices had been riding all year near all time highs.
       Don't let the short term drop in your retirement accounts scare you away from long-term investing.  As of this morning, August 27th, the DJIA opened at 16,285, up 6% from the intra-day low on Monday.  
     The market seems to be bouncing back nicely.  China is doing everything they can to prop up their economy including devaluing their currency, pumping government money into the economy, and lowing interest rates.  News out this morning reported a revised GDP number which means the economy was growing faster than expected for the 2nd quarter.  Also out this morning, less people filed for jobless claims than expected.  Although the Fed will eventually increase rates, economists predict that the slow but steady strengthening  of the economy, led by the housing recovery and lower gas prices for consumers, can with stand the incremental increases. 
      Despite the recent volatility, I encourage you to stick with your long-term strategy of regular contributions towards your diversified portfolios.
What you need to know about Social Security
     On August 14th, 1935 (80 years ago), President Franklin D. Roosevelt signed into law the Social Security Act as an insurance policy to protect elderly citizens from running out of money.  Social Security benefits are adjusted for inflation and provide lasting income, making it the centerpiece to most people's retirement.  Claiming Social Security at the right time is a very complex decision with several options as it relates to you and your spouses retirement income.  The article below from the Wall Street Journal gives some great advice and links to other sites to help you determine when and how much you will receive from Social Security.  But first, I'd like to highlight a few key points as they relate to your Social Security benefits.
     In order to receive your full benefit from Social Security, you must be 66 years of age.  You can access your benefit at age 62, but your monthly benefit will be reduced by 30%.  Down the road, the government intends to increase this age to account for people living longer, and more importantly to reform the program so the pool doesn't dry up.
      Secondly,  http://www.ssa.gov has a lot of information at your disposal including 'my Social Security' which will show you your estimated benefit.  However, they are not equip to offer personal advise on claiming strategies and how to receive the maximum benefit for you and your spouse.  Private companies like http://www.SocialSecuritySolutions.com are stepping in to help retirees navigate their options for a small fee.
      Lastly, it is important to look at the tax implications of claiming SS compared with disbursements from your retirement accounts.  I am not a tax professional, but in most cases, it is prudent to delay claiming benefits and draw down your savings instead.  That's because your benefit will increase by 7-8% each year you wait, so you will end up not needing to deplete your retirement accounts as much in the long run.  How long of a run you have is the key question.  The average person lives over a third of their lifetime in retirement, so start preparing now by saving and educating yourself about the different filing options available.

http://www.wsj.com/articles/what-you-don-t-know-about-social-securitybut-should-1403470474
The Social Security Trust Fund: Where do we go from here? by Ron Copley, Phd, CFA
     Are you worried there won't be any more money left in Social Security once you retire?  A recent Gallup Poll survey reports that 66% of Americans believe the Social Security program is in a crisis and 51% of non retired Americans doubt they will receive a benefit from Social Security.  
    The Social Security Administration projects that the system can support payments until 2034, a year short of its 100th anniversary.  The good news as that there is time for our Government to make changes to preserve the benefits.
    Read Ron Copley's article detailing how Social Security works, how much money is left, and some of the  solutions to fixing the problem.


http://www.copleyinvestmentmanagement.com/wp-content/uploads/2012/03/The-Social-Security-Trust-Fund.pdf

http://www.gallup.com/poll/184580/americans-doubt-social-security-benefits.aspx
 
I hope you enjoyed this month's newsletter.  Feel free to contact me with any questions and topics of interest for next months newsletter. Thank you.
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Justin Burgess
Investment Advisor
Copley Investment Management
5025 B Wrightsville Ave
Wilmington, NC 28409

CIM's goal is to provide quality financial advice at an economical cost. Whether investing for retirement or the next generation, you can rest assured that we are paying attention. Our professional credentials, independence, experience, integrity, and transparent business model qualify us to accomplish this goal.

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