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One step per month brings you closer to retirement

2018 calendar

Workers in their fifties are headed toward eventual retirement but aren’t there quite yet. However, this is the time to start seriously preparing for an eventual departure from the full-time workforce. Decisions made now will have a positive or negative impact in five or ten years when it is time to retire. Here is a monthly guide for 2018 that will help you take steps now to ensure a comfortable retirement later. January: The holiday hubbub is behind you and now you can spend some time daydreaming about what you want out of retirement. Do you want to stay in your current home and community and travel? Do you want to downsize to a smaller home? Or do you want to move to another part of the country? Picturing your ideal retirement will help you take specific steps over the coming years to help you realize your dream. February: Check up on...

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Bitcoin buyers should prepare for disappointment


I’ve sometimes fantasized that every investor should have a mental version of the robot from the 1960s television series “Lost in Space,” so that when the investor gets a bright idea the robot can wave its arms and yell “Danger Will Robinson, Danger!” That robot is frantic today but few are listening. Instead, they are pouring money into bitcoin, the now-famous crypto-currency whose incredible gain in value may prove to be one of the biggest financial follies of the last 100 years. In case you don’t read through to the end of this story, let’s make the point up-front:  Bitcoin’s meteoric rise this year has all the hallmarks of the classic speculative bubble that could burst and wipe out lots of individual buyers. Investors are suddenly interested in bitcoin AFTER it has gained over 1,700% since the beginning of the year. Where were they in January? I don’t believe this is an extreme...

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Nobel economics prize recognizes the financial impact of irrational behavior


We may think we are making a considered, sober decision when buying a stock, taking out a home mortgage, or deciding how much to save for a future purchase. It’s not necessarily so, according to voluminous research in the burgeoning field of behavioral economics. This year the Nobel Prize committee decided to honor the work of one of the pioneers of the field, Richard H. Thaler of the University of Chicago. Previously it had awarded the same prize to Daniel Kahneman of Princeton University. Both economists have made it their life work to explain how human beings are generally irrational decision-makers. The rest of us should pay attention to their research before making our next big financial decision. Thaler was recognized for developing the theory of “mental accounting,” which argues that we try to simplify decision-making by creating separate accounts in our minds, which allows us to focus on the narrow impact...

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Social Security benefits rise by most in three years


Social Security recipients have a rare surprise to look forward to in 2018: a 2% increase in benefits, the Social Security Administration announced this month. It will be the biggest increase in benefits since 2011, when those collecting Social Security benefits saw a 3.6% increase. Benefit hikes are tied to changes in a measure of prices for food, housing, clothing, transportation, energy, medical care, recreation, and education. The increase of about $27 a month will boost the average retired worker’s benefit to $1,404, Social Security said. That will be a welcome change compared to the last two years: benefits were unchanged in 2016 and went up by just 0.3% this year. Increases in Social Security benefits have been relatively modest since U.S. consumer inflation was tamed in the mid-1980s. Before that there were several double-digit increases, with the biggest being a 14.3% jump in benefits in 1980. Social Security said another change will affect...

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Most stocks don’t even beat Treasury Bills


Stocks outperform bonds over the long-term, right? Isn’t that the message every investing article has been drilling into us for many years? The answer is, yes, it’s true, but only in the aggregate: most individual stocks have not beaten the low, short-term interest rates offered on U.S. Treasury Bills. The stock market has done better than T-Bills over the years, but that’s only because a handful of stocks have had disproportionately spectacular returns, found a study by a professor at Arizona State University. “The entire net gain in the U.S. stock market since 1926 is attributable to the best-performing 4 percent of stocks, as the other 96 percent collectively matched one-month Treasury Bills,” wrote Hendrik Bessembinder, a finance professor in the W. P. Carey School of Business. Unfortunately, some investors draw the wrong conclusion from this research. They argue Bessembinder’s findings suggest that investors should actively search for the few stocks that will...

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The Federal Reserve’s inflation dilemma


The Federal Reserve Board slashed short-term interest rates repeatedly during the 2008 financial crisis, finally reaching an unprecedented low of 0.25% for the post World War II period. The standard theory said that low interest rates would stimulate borrowing and growth, helping the United States to recover from a severe recession. The interest rate cuts and other actions taken by the Fed during that crisis seem to have worked, albeit at a snail’s pace. Ten years after the recession economic output has hit respectable levels, although it remains weak by the standards of previous decades. Unemployment has dropped sharply. The second part of the standard theory of interest rates, economic output, and inflation suggests that the Fed should be raising interest rates steadily at this point in order to keep the economy from overheating and causing out-of-control inflation. But something funny happened along the way: inflation refused to cooperate. It has remained stuck...

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Don’t make these five common estate planning mistakes


Estate planning sounds complicated and forbidding to many people. They sometimes end up rushing the process or ignoring it altogether, leading to one or more of these common mistakes.   Failing to plan: Estate planning is not just for elderly rich people. Anyone over the age of 18 should have something in place. Are you young and single with few assets? You still want to appoint the right person to take care of your pet and decide who gets your car and controls your digital accounts at death (see below). You should make plans for potential disability. If you are a little older and have children, you absolutely need a will to appoint their guardians and a trust to handle assets you leave to them. Do you own a house? You should consider a will or a life estate to pass it on to children or other heirs (joint ownership with someone...

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Retirees get significant tax benefits in New York State


New York State has long been known as the “land of taxes.” Higher-than-average real estate, income, and sales taxes have been a reality for many years. However, New York offers some significant tax breaks to older residents, making it less onerous to retire and remain in the state.   Here are some of the major tax breaks a retiree in New York can look forward to:   Taxes on Social Security: The good news here is that all Social Security income is tax-free in New York, regardless of your income or the size of your Social Security benefit. The federal government may tax some of your Social Security benefit if your income is above certain guidelines, but New York will take a pass. This is an important benefit and a bonus for New Yorkers since 12 other states levy income taxes on Social Security benefits if their residents pay federal income taxes on the...

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