THE WEEK ON WALL STREET
Stocks were mixed last week as volatility dropped despite ongoing trade concerns and the Federal Reserve's update on short-term rates.
The Dow Jones Industrial Average added 0.16 percent, while the S&P 500 Index lost 0.47 percent. The tech-heavy Nasdaq Composite Index slipped 0.27 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 0.37 percent.
FACT OF THE WEEK
On May 12, 1965, the Rolling Stones finish the studio recording of “(I Can’t Get No) Satisfaction,” their first major hit. The song, which catapulted the ascendant British blues-rock group to global fame, had an unusual origin: Less than a week earlier, during the early morning hours, the band's bleary-eyed lead guitarist Keith Richards had bolted up from his bed, grabbed a tape recorder and laid down the song's opening riff, now considered one of the greatest pop hooks of all time.
He then promptly fell back to sleep. "I had no idea I'd written it," Richards wrote in his 2010 memoir Life.
“When I woke up in the morning, the tape had run out,” Richards recalled many years later. “I put it back on, and there’s this, maybe, 30 seconds of ‘Satisfaction,’ in a very drowsy sort of rendition. And then it suddenly—the guitar goes ‘CLANG,” and then there’s like 45 minutes of snoring.”
Though the Stones at the time were already midway through their third U.S. tour, their only bona fide American hits to date were “Time Is On My Side” and the recently released “The Last Time.” “Satisfaction” was the song that would catapult them to superstar status. Forty years later, when Rolling Stone magazine ranked “Satisfaction” #2 on its list of the “500 Greatest Songs of All Time,” it put the following historical perspective on the riff Keith Richards discovered on this day in 1965: “That spark in the night…was the crossroads: the point at which the rickety jump and puppy love of early rock and roll became rock.”
MARKET MINUTE
Stocks Go Sideways
Stocks dropped on Monday, ending the S&P 500's 9-day winning streak as the trade anxiety weighed on investors. Sentiment picked up midweek, however. In a widely expected move, the Fed held short-term interest rates steady but warned of lingering uncertainty around tariffs' effects on inflation and unemployment. On Thursday, the U.S.-U.K. trade deal sparked a slight rally, but stocks flattened as the week ended. Investors appeared to be risk-averse with U.S.-China trade talks scheduled for the weekend.
The Fed Fans Out
The Federal Reserve wanted to get its message out last week. Within 48 hours of the Fed’s decision to leave interest rates unchanged, nearly every Fed governor gave a solo speech or discussed the decision on a panel. One Fed official spoke about the benefits of long-term stability from an independent Fed. At the same time, another said the Fed was paying close attention to what consumers did—and not just what they said, suggesting that flagging consumer sentiment didn’t necessarily mean a slowdown in spending. The Fed seemed to focus on managing expectations. Perhaps more importantly, Fed officials spoke from a coordinated playbook, possibly designed to help settle financial markets.
FINANCIAL STRATEGY OF THE WEEK
Social Security: Maximizing Benefits
Most understand that waiting to claim Social Security benefits can result in higher monthly payments. However, many don't know that there are other ways to maximize their benefits, some of which depend on their marital status.
Understanding the strategies for maximizing your Social Security retirement income benefits should be prefaced with a review of the three basic forms of retirement benefits:
The Worker Benefit: This is the benefit you receive based on your own personal earnings history and for which you become eligible after 40 quarters of work.
The Spousal Benefit: This is the benefit paid to your spouse. For non-working spouses, this is 50% of the working spouse's benefit. For working spouses, it is the greater of the benefit earned from his or her earnings or 50% of the worker's benefit.
The Survivor Benefit: This is the benefit paid to the surviving spouse, which is paid at a rate equal to the greater of his or her own current benefit or, depending on the widow or widower's age, up to 100 % of the deceased spouse's current benefit.
The first and most obvious strategy for maximizing your Social Security benefit is to simply wait to reach age 70 before beginning to take benefits. By waiting until age 70 to receive benefits, your monthly payments may increase by 24%, not including any cost of living increases that may be added to this amount.
Benefit Maximization Strategies for Widows and Widowers
Remember, there is no spousal benefit for a widow/widower, but he or she does qualify for a survivor benefit that is equal to 100% of the deceased spouse's benefit (versus the 50% spousal benefit if the working spouse is still alive). This survivor benefit is available at age 60 or even earlier, depending on the widow/widower's disability status and whether or not they are caring for a child.
If you are widowed and also have worked for 40 quarters, you will have a worker benefit and a survivor benefit. This presents you with several choices. One choice is to file for the benefit that provides you with the greatest monthly benefit amount.
Another choice may be to start your worker benefit at age 62 and then switch to the survivor benefit once you reach full retirement age. This option is advantageous in instances where the widowed spouse did not accumulate the same level of benefits as the deceased spouse. Choosing this option allows the surviving spouse to take the higher survivor benefit amount. Because there are no delayed retirement credits earned on survivor benefits, there is no advantage to waiting past full retirement age to apply for survivor benefits.
A final choice is to consider starting the survivor benefit at age 60 and then switching to your own worker benefit at age 70. This strategy allows you to begin receiving income based on the survivor benefit as early as possible and provides you time to build up the maximum worker benefit.
As you can see, there are ways you can potentially raise your Social Security benefits. These strategies can help you maximize your benefits beyond what is available to those who simply delay retirement to age 70.
If you have questions about this topic or anything else, call the office and let's set up some time to talk. We are here for you.