After a rough all-around 2018, equities of all kinds are enjoying a tremendous first quarter. Real estate, small cap stocks, international and emerging are all up over or around double digits. Fixed income has also been positive, with rates decreasing over the last 6 months and the Fed hitting the pause button on any future increases.
Budgets, 401(k) contributions, and credit cards
The first step of any financial planning process involves grasping the budget, as detailed on the CFP website. There are other recent developments to consider as well. The auto enrollment of workers into 401(k) accounts is producing an uninteded consequence: increased consumer debt. Employees to make sur ehte money taken from their paycheck for retirement doesn't drive them into spending deficits. To help track expenses, consolidating bank accounts and credit cards might help. Earlier in the year, several credit card companies made 2018 spending history available to cardholders. These reports break down spending by month and category and can be invaluable for those without the time or inclination to stay on top of it.
Tax help for the individual
Businesses appear to be the big winners in the tax law changes but there are some nuggets for individual taxpayers. One strategy is to "group" deductions in one year in order to surpass the increased standard deduction. That might included making higher charitable contributions, possibly into a donor-advised fund (DAF) or medical expenses in one year instead of splitting it between two. In addition, Roth conversions will benefit from lower income tax rates.
Keeping an eye on inflation
2019 might finally be the year that inflation concerns materialize. The CPI (Consumer Price Index) is at the Fed's target of 2 percent. Low unemployment has not lead to a dramatic demand for higher wages, though there are some indications that wages are increasing. That would be the first domino to fall. From an investment perspective, Treasury Inflation-Protected Securities (TIPS) are returning close to 3 percent for the year, indicating the bond investment market anticipates some inflationary pressure.
NBER paper connects retirement and mortality
While there is anecdotal evidence that retirement might correlate with mortality, the National Bureau of Economic Research attempted to quantify the relationship. Citing that one in ten people retire the month they turn 62, those retiring might then need to cover health insurance until Medicare kicks in at age 65, while living on a reduced income. Meanwhile, many retiring at 62 are doing so due to poor health. With these factors all playing a part, research concludes there's a roughly two percent increase in mortality for those retiring at 62.
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