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The Markets
U.S. markets slipped last week as Congress struggled with whether to raise the nation’s debt limit in the face of potential defaults on Aug. 2 that could raise interest rates. The European Banking Authority reported that 82 of the 90 European banks passed stress tests, more than analysts had anticipated. Among companies issuing second quarter earnings results, both Google and Citi beat analysts’ expectation. For the week, the Dow dropped 1.40 percent to end at 12,479.73. The S&P lost 2.05 percent to close at 1,316.14, and the NASDAQ fell 2.45 percent to finish the week at 2,789.80.
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Returns Through 7/15/11
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1 Week
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YTD
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1 Year
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3 Year
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5 Year
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Dow Jones Industrials (TR)
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-1.40
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9.24
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23.66
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7.50
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5.86
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NASDAQ Composite (PR)
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-2.45
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5.16
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24.04
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7.98
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6.49
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S&P 500 (TR)
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-2.05
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5.74
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22.43
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5.03
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3.43
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BarCap US Agg Bond (TR)
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0.31
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3.73
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4.54
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6.56
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6.62
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MSCI EAFE (TR)
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-2.70
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2.12
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17.92
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-0.69
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1.77
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Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, BarCap US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.
Older And Older – The life expectancy of a newborn American male in 1900 was 46.3 years. The life expectancy of a newborn American male today is 75.3 years (source: National Center for Health Statistics, BTN Research).
All That I Need – Just 17 percent of American workers believe they should accumulate at least $1 million in savings and pre-tax accounts for their ultimate retirement needs (source: Employee Benefit Research Institute, BTN Research).
A Year Ago – The S&P 500 was up 6 percent YTD (total return) as of June 30, 2011. A year ago, the S&P 500 was down 6.7 percent YTD as of June 30, 2010, before gaining 23.3 percent in the second half of 2010 (source: BTN Research).
WEEKLY FOCUS – Weighing Credit Card Debt Against Retirement Savings
There is still much debate over what is more important when it comes to saving for retirement: steadily increasing your nest egg or paying off debts. One thing is for certain, you should pay off all your credit card debt before entering retirement to avoid continually paying high interest rates and fees.
“Fifteen percent of baby boomers will not get out of debt in their lifetimes,” the Annuity News Journal reported in June. “This presents a huge problem because many baby boomers will end up having to file for bankruptcy due to medical expenses or credit card debt.”
According to the Federal Reserve Bank of Boston and Creditcards.com, the average credit card debt per household is $14,687 with an average annual percentage rate just below 15 percent. In the fourth quarter of 2008, consumers over age 60 had an average of 5.6 credit cards compared to consumers in general, who had an average of 5.4 cards.
In August 2010, the American Bankruptcy Institute reported that 42 percent of all individuals filing for bankruptcy in 2007 were between the ages of 45 and 64, a number that has increased 65 percent from 2002. A study conducted by the University of Michigan Law School indicated that nearly two-thirds of Americans 65 and older who turn to bankruptcy protection as they enter retirement cite overwhelming credit card debt as their reason for filing.
While it may seem better to charge now and pay later so you can save as much as possible for retirement, you could easily end up spending much of that savings on credit card bills and interest once you reach retirement. By paying off your credit card debt before you enter retirement, you can avoid wasting money on high interest rates and use your savings to pay for retirement dreams debt-free. If you or someone you know needs help balancing debt reduction and retirement savings, contact our office today for a consultation or review.
This commentary brought to you by J. Graydon Coghlan, CRPC
and the team at Coghlan Financial Group, Inc.
4370 La Jolla Village Drive, Suite 630 San Diego, CA 92122
2603 Camino Ramon Suite 200 San Ramon, CA 94583
Phone: (858) 550-3960 Fax: (858) 550-3969 Toll Free: (800) 884-5121
www.cfgretire.com
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI#311440
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