Equity Update – Domestic Stock Markets
The Dow pierced through 24,000 towards the end of November as optimism about tax reform passage intensified. A primary emphasis to reduce both corporate tax rates and small business rates accelerated equity prices higher as optimism grew with the realization of passage.
The relationship between corporate taxes and equity valuations have been signed with the anticipation of a lower corporate rate, which has been elevating stocks ever since the election. The reduction in the corporate rate from 35% to 20% is expected to benefit certain companies more than others as tax rates vary among sectors.
Further, public companies are at their most profitable on record as earnings have increased nearly 19% in the past year. While the economic news is good, please bear in mind that corrections – and bear markets – are normal and natural and will occur without warning. Investing is a long-term endeavor.
Sources: Dow Jones, S&P, Bloomberg
Social Security Payments Increasing By 2% – Retirement Planning
Social Security recipients are due to receive the largest increase in benefits in six years. But for many recipients, the increase in payments will go towards higher Medicare costs. The Social Security Administration announced a 2% increase in benefit payments effective in late December 2017 for disability beneficiaries and in January 2018 for retired beneficiaries. The 2% increase is the largest increase since a 3.6% increase in 2012. However, many are concerned that the 2% increase may not cover expenses that are rising at a faster rate, including other essential items such as food and housing. And in a ” catch -22″ scenario, the latest increase also affects the premiums for Medicare Part B, which covers doctor visits and outpatient care. Medicare premiums are expected to increase at the beginning of the year, minimizing net increases in Social Security payments.
The establishment of Social Security occurred on August 14, 1935, when President Roosevelt signed the Social Security Act into law. Since then, Social Security has provided millions of Americans with benefit payments. The payments are subject to automatic increases based on inflation, also known as cost-of-living adjustments or COLAs which have been in effect since 1975. Over the years, recipients have received varying increases depending on the inflation rate. With low current inflation levels, increases in benefit payments have been subdued relative to years with higher inflation. The COLA adjustment for 2018 is 2.0%, a steep increase from the 2017 adjustment of only 0.3%.
As of October 2017, over 66.7 million Americans currently receive Social Security benefit payments, with 46.3 million aged 65 or older. The Social Security Administration estimates that Americans will receive over $931 billion in Social Security benefit payments in 2017. In many ways, social security is an IDEAL retirement income vehicle: Very few investments offer predictable income, inflation increases and death benefits. But is it enough?
