September 25, 2006
The Markets
Is the glass half-empty or half-full? Investors are having
a hard time deciding, and the markets are reflecting their
indecision.
Investors were happy mid-week. On Wednesday, the Federal
Reserve decided to give the economy a breather and leave
interest rates alone. Soon after that news was announced,
the Dow Jones Industrial Average moved within 100 points
of its January 2000 all-time high, according to Yahoo! Finance.
The Fed’s decision also benefited bond investors. As
markets started to price in investors’ expectations
that the Fed will begin to lower rates next year, Treasury
yields fell to their lowest levels in six months, according
to Barron’s Online, increasing bond values for investors
who own them.
By the end of the week, though, evidence that the economy
may be slowing faster than expected had captured investors’ attention
and the markets lost ground. On Thursday, the Philadelphia
Federal Reserve’s September business activity survey
reported a negative reading for the first time in more than
three years—signaling slower manufacturing activity
in the mid-Atlantic region. In addition, investors interpreted
the removal of the word “gradually” from the
Fed’s statement about the cooling housing market as
a caution sign.
The focus has shifted from concern about inflation to worry
that the economy may slow down too fast for investors’ tastes.
| Returns through 9/22/06 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Dow Jones Industrials |
-0.5 |
7.4 |
10.5 |
6.6 |
6.1 |
7.0 |
| Nasdaq Composite |
-0.8 |
0.6 |
4.8 |
6.0 |
8.3 |
6.3 |
| Standard & Poor's 500 |
-0.4 |
5.3 |
8.2 |
8.9 |
5.7 |
6.8 |
Source: Yahoo! Finance, Barrons
Past performance is no guarantee of future results. Indices
are unmanaged and cannot be invested into directly.
Three-,
5-, and 10-year returns are annualized. Assumes dividends are
not reinvested.
WHAT DOES RETIREMENT SECURITY MEAN TO YOU? For many
people who are close to retirement, and those who are already
retired, retirement security means having a sizeable nest
egg squirreled away. While it’s true that it’s
important to save for retirement, it is also essential to
manage your debt effectively. Often, that means minimizing
your debt burden as you near retirement—a time when
you may be living on a less flexible income and be less able
to pay off debt.
Unfortunately, some Americans seem to be unaware of the
potential impact debt could have on their retirement security.
New
research from the Employee Benefits Research Institute has
found that American families whose heads of household are
age 55 or older are taking on more debt- often by tapping
the equity in their homes. What does that mean to their future
retirement security? Not only will they be paying down debt
during retirement, they may have put one of their most important
assets at risk—their homes.
| |
1998 |
2001 |
2004 |
| |
Families with debt |
Average debt |
Families with debt |
Average debt |
Families with debt |
Average debt |
| Age 55-64 |
76.3% |
$71,839 |
76.2% |
$69,405 |
76.3% |
$84,477 |
| Age 65-74 |
51.9% |
$32,420 |
57% |
$37,187 |
58.5% |
$36,508 |
| Age 75 or older |
25% |
$9,058 |
29% |
$9,549 |
40.3% |
$20,234 |
| Source: EBRI Notes, September 2006, Vol.
27, No. 9, Debt of the Elderly and Near Elderly, 1992-2004,
p. 2 |
Another area of concern is a significant increase in the
number of families with debt whose heads of household are
age 75 or older. The amount of debt owed by these families
has also risen significantly. They are taking on more debt
during a time when they may not have the ability to return
to work or the additional resources available to pay off
additional debt. As your retirement draws near, make sure
you evaluate your debt levels and make a sound plan for reducing
debt before you retire. If you would like to learn more,
give us a call.
Weekly Focus – Draw four straight lines that
pass through the nine dots. Each line must start where the
last one ended. Don’t lift your pencil off the page.
(Hint: You need to think outside the box for this one.)
 Best Regards,
Ken Ford
P.S. Please feel free to forward this commentary to family,
friends, or colleagues.
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