ProVise Bullets

  • We are very pleased to announce that ProVise was recently recognized by the Tampa Bay Business Journal as the 12th largest investment services firm ranked by assets under management for 2013. When you stop to realize that many of the top ten are large investment firms like Raymond James, TransAmerica, etc., we can’t help but feel a little proud. Our thanks, as always, goes to each and every client, as well as to our team who work hard every day to serve those clients.
  • As we approach 2014 and ObamaCare starts to kick in, many people are thinking that the healthcare issues in our country will be solved in short order. Only time will tell what the impact of ObamaCare will be. In spite of the Republican Party’s continued talk about repealing the law, in the unlikely event repeal were to occur, the aspects of ObamaCare that have already been put in place would continue. In other words, it’s hard to go backwards.
  • If we turn for a moment to Medicare, the dollars spent are going to rise dramatically over the next eight to ten years as the initial wave of Baby Boomers are reaching the qualifying age of 65. A 27% increase is expected over the next eight years, increasing the Medicare roles from 52 to 66 billion participants. However, the dollars spent are projected to go up by 67%, rising from about $600 million in 2013 to $1 trillion in 2021.
  • Healthcare financial problems continue to persist. It will take continued vigilance on the part of retirees to evaluate the costs of healthcare. In talking with our clients, particularly those who are still working, they are surprised how expensive Medicare can be. Recently, we worked with a 65 year old who was trying to decide between remaining with his current insurance provider or switching to Medicare. He was surprised to learn that Medicare was only slightly less expensive, and the perceived benefits were less than the current insurance policy through work. Thus, while he continues to work he decided to remain with his current private plan as opposed to changing to Medicare. Having said that, we still advised him to sign up for Medicare Part A (Hospital) as it is free. It is personal insurance that acts like a supplement for a hospital stay. For those getting close to Medicare age, don’t wait until the last minute to begin your investigation. Start the process at least six months before you turn age 65. Your initial enrollment period covers the three months before your birth month, your birth month, and the three months after your birth month – in other words, seven months. If you fail to enroll during that time period, it is possible your Medicare premiums will be higher throughout your lifetime. While ProVise does not provide any health insurance, including Medicare supplements, for our clients, we would be happy to introduce you to people we believe have the competence and ethics to serve our clients well in this arena. (Sources: Medicare; Counsel of State Government)
  • As a result of a surprisingly high collection of taxes in April, the government had a surplus of $113 billion which was the largest monthly surplus in five years. Yes, there were previous surpluses, including in January 2013 which saw a $3 billion surplus. A surplus surprises people because, for the last five years, we have had an annual deficit of over $1 trillion. The $470 billion collected by the Treasury this past April was the largest monthly total ever. After we discussed the declining deficit for the current fiscal year in the previous Bullets, we got an interesting take from one of our readers. He said that the lower deficit is a temporary mirage as many wealthy people and corporations advanced income into 2012 to avoid the higher tax rates of 2013 and beyond. There is certainly a great deal of credence to this discussion in view of all the special dividends that were paid by some corporations, high paid executives taking their deferred compensation earlier, etc. However, we cannot ignore the 2% increase in the payroll tax (Social Security) nor higher quarterly filings based on the Tax Act that passed in January. We fully expect, however, that as the economy continues to improve, there will be lower deficit numbers in the future. Nonetheless, Congress has to address the entitlement issues and the longer they wait to address these important programs, the more difficult it will be to solve the long-term issues. (Source: U.S. Treasury)
  • As everyone knows, short-term interest rates have been at historically low rates for several years. In the last Treasury auction, the interest rate was actually 0.00%, as reported in the previous issue of the Bullets. The 10-Year Treasury has been waffling between 1.7% and 2.1% since the first of the year. The overall blended interest rate being paid for all of the government debt as of April 30, 2013 was 2.64%. This is about half of the blended interest rate paid on December 31, 2007 when it was averaged 4.38%. One of the great concerns is that with all of the additional debt we have piled up over the last five and a half years, this will add to the deficit on a go forward basis when interest rates rise. There is a lot to be said for that. However, as interest rates rise, don’t expect them to rise equally. If you go back to June 30, 2004 when short term interest rates were at 1%, they rose over the next two years to 5.25%, but the 10-Year Treasury Note only rose from 4.62% to 5.22%. Right now the government is doing much of its financing on a short-term basis, but is still issuing 30 year bonds and doing so at relatively low interest rates. Thus, the overall impact of rising interest rates on the deficit may not be as great as some people are currently projecting. (Sources: Federal Reserve; U.S. Treasury)
  • Most people know that when it comes to filing taxes there is a statute of limitations of three years for any mistakes or issues, except those regarding fraud, in which there is no statute of limitation. However, the three-year time clock starts from the time you file a return. It does not matter how far back one goes. If a tax return was never filed, then the clock never starts ticking. Thus, even if a tax might not be owed, it may make sense to file a gift tax return anyway.
  • Over the past several years health savings accounts (HSA) have become increasingly popular. It appears that in 2014 HSA owners with single coverage will be able to contribute $3,300 and those with family coverage $6,550. For those born before 1960, an extra $1,000 can be put into the plan. However, just as the amount that can be set aside is going up, so are the limits on out of pocket costs for deductibles, co-payments, etc. It will increase to $6,350 for an individual and $12,700 for family coverage. (Source: Institute for Healthcare Consumerism)
  • Retirement for the Baby Boom and Gen Xers may not be as good as their parents and grandparents. A recent study by Pew Charitable Trust called “Retirement Security across Generations: Are Americans prepared for their golden years?” examined the wealth of five generations from 1989 to 2010. The early Boomers (born between 1946 and 1955) show a ratio of assets to debt of eight to one. The late Baby Boomers born between 1956 and 1965, showed a ratio of assets to debt of only four to one, and the Gen Xers (born between 1966 and 1975) show assets only twice as big as their debt. As a result, it may be necessary for the later Baby Boomers and the Gen Xers to actually downgrade their lifestyle in retirement. Most financial planners recommend at least replacing 70% of spendable income in retirement with the ideal being 100%. These two generations are going to find it hard to do so because it appears that they will only be able to replace 60% and 50%, respectively, of their existing incomes. In the alternative, it is likely that this age group will not be able to look at a traditional retirement at age 65 but will have to work perhaps until age 70 to overcome these deficiencies. There seems to be a trend in that direction anyway as more people are feeling younger and healthier than the previous generations at the same age.
  • The past seven months have seen an incredible run in the market. Not only did the market finish 2012 on an upbeat note with positive months in November and December, but it has gone up dramatically during the first five months of 2013. While there were a few minor bumps along the way, as soon as the bumps occurred the market seemed to quickly reverse itself. In fact, it was not until just last week that the market experienced a three day down streak. In order to accomplish that feat, it took the Federal Reserve minutes from their previous meeting, along with some weaker retail numbers, to make investors wonder just where the market was headed. The bears came crawling out from their den and were ready to declare that the economy was going in the tank and that the markets would soon follow. It is much easier to be a naysayer than it is to look past the trees to see the forest. The world is generally an optimistic place, notwithstanding all of the issues it faces. At the end of the day, the human spirit is hard to break. Even though the bears started to reappear last week, they became disappointed this week, as the market held its own to mark the seventh straight month of gains. Those who touted the “sell in May and go away” philosophy, are currently disappointed. Perhaps in the short run, they will be right, but fundamentally, we see the economy continuing to grow, earnings increasing, and thus, the market continuing an upward trend. At some point, there will be a correction, which will shake out some of the weak investors, and that’s a good thing. But overall, the American economy is moving in a positive direction and this should translate into better earnings and eventually into higher stock prices.

As always, we encourage you to give us a call if you would like to discuss anything further. We will visit again soon. Proudly and successfully serving our clients for over 26 years.

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