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PROVISE WEBINAR – LAYING THE FOUNDATION: UNDERSTANDING THE LANDSCAPE OF EDUCATION COSTS

For those who missed our webinar series on navigating the complexities of funding your child’s or grandchild’s education, please visit our website to watch a recording of the first of three sessions or click on this LINK. Oscar Skjaerpe, CFP®, shares practical ways to save, invest, and maximize financial aid for higher education.

 

40,000 IS JUST A NUMBER

Over the past two weeks, the Dow Jones Industrial Average (Dow) closed above 40,000 for the first time in history. Whenever a “major” number is breached, people get excited, and somehow that exuberance shows up in the moment’s magic. But 40,000 is just a number, no different from 39,999 or 40,001.

Let’s look back at other “major” numbers. The Dow closed above 10,000 in November 1995 and continued pretty much straight up over the next four years ultimately passing 20,000 in October 1999. It was an amazing run for the Dow, representing an average annualized return of over 18%. It peaked at about 20,300 and then tumbled to about 13,150 in September 2002, near the end of the dot.com bust.

It struggled back to 20,000 in July 2007. Then all heck broke out with the Great Recession, and it retreated to approximately 10,400 in February 2009. As the world recovered, the Dow again crossed 20,000 in April 2013. It took another four years before it crossed 30,000 in November 2017 and then went backward to about 26,600 in March 2020.

It crossed and closed above 40,000 this May. As you can see, the stock market is volatile, but it has been one of the best builders of wealth over time. It is not the time you are out of the market that makes a difference; it is the time one stays in the market.

 

RETIREMENT ACCOUNTS ARE UP,UP,UP

Fidelity recently released its quarterly report on savings within 401(k) and IRA plans. Fidelity reports plan balances increasing, boosted by high savings rates and a good equity market over the past 12 months. Fidelity recommends investors save 15% of their income, and during the current quarter, it was 14.2% when you include matching contributions from employers. Interestingly, the number of people who invested in their 401(k) for 15 consecutive years increased by 7.2%.

Gen Z is starting to recognize the importance of saving for retirement as they increased contributions by 71%. Over the past 10 years, the average IRA account increased to $127,745, a 29% jump, and 401(k)s did even better, rising to $125,900, a 42% jump. The number of 401(k) millionaires increased to 422,000, a 43% gain over the past 12 months. It’s never too early to start saving for retirement, and it is never too late to start.

 

A VALUABLE BOOST TO MARKETS IS PICKING UP STEAM

There are many ways that public companies can choose to spend the profits they generate, but they generally fall into two categories. One is to reinvest in the company by expanding operations, funding new research and development, or paying down debt. When a company still has leftover profits after funding business needs, its next option is to return those profits to shareholders. The most popular method is paying out dividends, which gives investors cash flow and provides a more stable investment experience. The other way companies commonly return profits to shareholders is by buying back their own stock. This has the effect of lowering the outstanding share count and thereby increasing the value of remaining shares.

Companies opt for a stock buyback when they believe their shares are undervalued in public markets, and it is a sign to investors of management’s confidence in the company’s future prospects. Share repurchases offer companies more flexibility relative to dividends as the plans are usually shorter-term in nature and can fluctuate over time. Ultimately, markets will reward large share buyback plans of healthy companies that are growing profits and not using the strategy to artificially lift their stock prices in the short term.

Share buybacks have historically been a major contributor to shareholder returns.  Stock repurchases were down in 2023 relative to 2022 as concerns about the economy heading into a recession led management teams to be more defensive with their profits. That trend has reversed course this year with better economic prospects. Buybacks are expected to reach record levels in 2025, surpassing $1.0 trillion in share repurchases for the first time. A resilient U.S. economy with companies growing earnings and returning capital to shareholders through dividends and share buybacks provides an attractive environment for investors.

 

CHOOSING YOUR PATH: METHODS OF FACILITATING DIVORCE

When a couple decides to divorce, they have options other than traditional litigation. They may decide to explore two types of arbitration: mediation or collaborative divorce. These approaches are less combative and encourage communication and cooperation. Mediation involves hiring a neutral third party to facilitate negotiations, while collaborative divorce requires attorneys trained in collaborative law techniques. Both methods can be faster and less expensive than traditional litigation.

When a divorce is complex or highly contentious, traditional litigation is necessary. Traditional litigation involves a formal court process where the judge issues final decisions. Although it ensures enforceable outcomes, litigation can be time-consuming, expensive, and stressful. On the other hand, arbitration offers a binding resolution through an arbitrator, providing a quicker and more private alternative to court but with limited appeal options.

For couples with uncontested divorces, a Do-It-Yourself (DIY) divorce is cost-effective and efficient, allowing them to manage the process without legal representation. However, uncontested divorces require both parties to agree and know enough to handle legal documentation fully.

Understanding these methods and their advantages and disadvantages can help couples navigate their divorce more clearly and confidently. 

Mediation (americanbar.org)

Divorce Mediation vs Litigation: Which Is Right for You? | DivorceNet

16 Biggest Advantages and Disadvantages of Mediation – Vittana.org

What Is A Collaborative Divorce? – Forbes Advisor

Find a Certified Divorce Financial Analyst (CDFA) Professional (institutedfa.com)

FIVE SECRETS TO A HAPPY RETIREMENT

Late last year, ProVise Founder, Ray Ferrara, was quoted in an article by John Waggoner on behalf of AARP (http://www.aarp.org) that was recently reprinted. Here is a summary of the article:

Secret No. 1 – Money isn’t everything. While money isn’t everything, it is important. People rarely run out of money unless it is about health issues. Instead, they adapt (reduce) their lifestyle as cash diminishes. Happiness can be found in doing the simple things.

Secret No. 2 – Prioritize your health. Who cares how much money they have if they don’t have good health and access to great health care? Make exercise a habit, along with avoiding smoking, drugs, excess alcohol, and unhealthy eating.

Secret No. 3 – Relationships matter. People with a strong family structure and friend network are generally healthier and happier. A rich social life is important to your happiness. 

Secret No. 4 – Hone your vision. Do you see retirement in a good or bad light? Those who see only the negatives are those who hate retirement and often die earlier than those who envision and embrace the positives. Visualize your retirement and then save for everything you want to do.

Secret No. 5 – Find your purpose. In those early years of retirement, you work on the things you didn’t have time for while working – travel, golf, catch up on reading, and fix everything at home.  But what happens next?  Volunteering, going back to work, or caring for another family member? As Ray said in the article, “Retirement can be freedom to do what you always wanted to do but never had the chance to do.”

We hope you continue to stay safe and well.

Proudly and successfully serving our clients for over 38 years. As always, we encourage you to call or email us if you would like to discuss anything.

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