For the week of April 21, 2008
With corporate earnings reports mostly meeting or beating expectations so far, the major indexes each
showed gains of more than four percent for the week. It was a quiet week for economic news, allowing
investors to focus on good news from Google Inc., JPMorgan Chase & Co., Intel Corp. and Coca-Cola
Co. The Dow ended the week up 4.30 percent to 12,849.36. The S&P rose 4.33 percent to 1,390.33,
and the NASDAQ gained 4.92 percent to close the week at 2,402.97.
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 S&P, excluding “1 Week”
returns, is a reflection of return to an investor, by reinvesting dividends after deduction of withholding tax.
Rebalance or Not? – If you allocated $100,000 in a pretax account on Jan. 1, 1983, between stocks
(60 percent) and bonds (40 percent) and never rebalanced the portfolio, the account would be worth
$1.51 million on Dec. 31, 2007. That equates to an 11.5 percent annualized total return over the 25-year
period. Annual rebalancing back to the original 60/40 allocation would have generated $1.46 million or
an annualized total return of 11.3 percent. The S&P 500 was used as the stock proxy. The Lehman
Brothers Aggregate bond index, calculated using 6,000 publicly traded government and corporate bonds
with an average maturity of 10 years, was used as the bond measurement. This mathematical calculation
ignores the ultimate impact on the account of taxes, which are due upon withdrawal. It is for illustrative
purposes only and is not intended to reflect any specific investment or performance. Actual results will
fluctuate with market conditions and will vary (source: BTN Research).
Investing In Itself – The companies in the S&P 500 stock index bought $589 billion of their own stock in
calendar year 2007, an all-time record for stock buybacks. The total is more than the combined stock
buybacks for all 500 companies during the four consecutive years of 2001-04. The S&P 500 is an
unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock
market (source: S&P, BTN Research).
Harder Than A Diet – More Americans believe it is harder to start planning for their retirement (30
percent of those surveyed) than it is to begin a diet (28 percent). Twenty-three percent of the 1,000
people surveyed have done no retirement planning (source: Bank of America, BTN Research).
Mids And Bigs – Mid-cap stocks have gained 15.3 percent per year over the past 20 calendar years
(1988-2007), 3.5 percent greater per year than the 11.8 percent annual return of large-cap stocks. The
S&P 400 Mid-cap, used as the mid-cap proxy, is an unmanaged index consisting of 400 domestic
stocks chosen for market size, liquidity and industry group representation. Investing in mid-cap stocks
involves riskier investments based upon price volatility, less liquidity and the threat of competition. The
S&P 500 was used as the measurement for large-caps (source: BTN Research, S&P).
Edna Parker of Shelbyville, Ind., the oldest living person
in the world as recognized by Guinness World Records,
celebrated her 115th birthday this past Sunday.
According to the U.S. Census Bureau, Edna is one of
approximately 64,000 citizens age 100 and over (total
as of July 1, 2004).
If we consider the possibility that Edna retired at age 65,
she has spent 50 years in retirement. In contrast, when
the Social Security retirement age of 65 was enacted in
1932 (when Edna was just 38 years old), the average
mortality age for a man was 64 – meaning half of
American men weren’t expected to even live until
What do mortality tables tell us about today’s retirees? A 65-year-old person has a mortality age of 85,
meaning half of men that age will die before age 85. For a couple age 65, there is a 50 percent chance
one will live to age 92 and a 25 percent chance one will live to 97. Now take into consideration that
mortality tables are based on the entire population. Those who receive above-average nutrition and
health care increase their odds of joining Edna in the ranks of centenarians.
That health care, however, comes with a price tag. A 2003 issue brief from the Employee Benefit
Research Institute estimated that a 65-year-old retiring with employer-provided health coverage and
Medicare would need $37,000-$750,000 to cover premiums and out-of-pocket expenses. Those without
access to an employer health plan who instead relied on Medigap coverage would need $47,000-$1.5
million for those expenses. And that does not include any long-term care expenses.
Ensuring you will have enough to fund your retirement – no matter how long it lasts – requires planning for
accumulation, distribution and risk management, including the risk that your life lasts longer than your
assets. It also requires periodic review of your plan, especially if you or your spouse experience changes
in your health or, if you are still working, in your ability to earn income and accumulate assets. Contact our
office to review your existing plan or to start planning today for those years between now and your 115th
* 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. SAI# 274905
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