Broker Check

The RFG Weekly Wealth Report

October 17, 2016
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'Tis the season!

Third quarter earnings season, that is.

Every quarter, companies report earnings to let investors know how profitable the companies were during the quarter. When profits grow, a company's share price may move higher. When profits decline, a company's share price may move lower.

For five consecutive quarters, the Standard & Poor's 500 Index (S&P 500) has been in an earnings recession - the earnings for the companies in the index have declined every quarter. Another earnings decline is expected for the third quarter. As of September 30, analysts estimated a -2.0 percent earnings decline for the third quarter, according to FactSet.

A negative estimate doesn't necessarily mean all S&P 500 companies will do poorly. Certain sectors of the market have been performing a lot worse than others. Of the 11 sectors in the S&P 500, only three - Energy, Industrials, and Telecommunication Services - were expected to have negative earnings.

Fourth quarter offers a brighter earnings outlook. S&P 500 companies are expected to see profits increase. Analysts' current estimates suggest earnings will be up 5.3 percent during the period.

MAYBE MORE AMERICANS SHOULD STUDY COMMUNICATIONS. Parents aren't all that comfortable talking with their children about certain topics. The T. Rowe Price 2016 Parents, Kids & Money Survey found that sex and death are at the top of the list, followed closely by family finances. That's right: family finances. Parents are more comfortable talking about terrorism, drugs, and bullying than they are talking about money!

A shortage of conversation may be at the root of some financial misunderstandings. For instance, when it comes to paying for college, 62 percent of children (ages 8 to 14) expect their parents to cover the entire cost of any college the child chooses. Yet, just 12 percent of parents said they would be able to pay the full cost of college. In addition, 67 percent of children said their parents are setting money aside so they can attend college. However, only 58 percent of parents reported they are saving money to pay for their children's college.

The disconnect between children's expectations and parents' reality may explain why 16 percent of parent respondents said they had used retirement savings to pay for college expenses and 11 percent expect to do so.

Remarkably, college isn't the only non-retirement expense where parents have spent their retirement savings. Funds earmarked for retirement have been used to pay for vacations (17 percent), holidays (15 percent), day-to-day expenses (13 percent), and weddings (8 percent).

Communication is critical. If you haven't talked with your children about money, it may be a good time to start. There are a lot of resources available to help you.

Additionally, if you have been using retirement assets for other purposes, it may be time to implement and adhere to a financial plan. Doing so may help you arrive at retirement with enough money to live comfortably.

Quote of the Week

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

--Warren Buffett, CEO of Berkshire Hathaway

Golf Tip of the Week

Judge Distances Correctly

If you don't know how to judge distances well, your short game will suffer. Here's a great drill for improving your depth perception: Tee up a ball a moderate distance away from the hole. Evaluate the shot and set up as you normally would. Then, close your eyes and walk toward the hole with your putter in your hand. Stop and point at where you think the hole is. Did you get close? If not, repeat the drill until you can accurately judge the distance.

Financial Question of the Week

Why do I need an estate plan?

The biggest reason to have an estate plan is to make sure that your personal values about both medical and financial matters are honored in the event that death or incapacity prevents you from acting for yourself. In addition, tax minimization is a further and very important goal of estate planning for persons with taxable estates. To create an estate plan for yourself or update an existing plan, you will most likely need the services of an estate planning attorney.

When you consult with an estate planning attorney, the attorney considers how you want assets distributed to heirs, what taxes your estate might be liable for and whether there are tax-minimization strategies that would be appropriate and appealing; what your preferences and values are with respect to the management of medical and financial affairs in the event of incapacity; and any complicating family issues. To deal with these issues, we often work with you and your attorney to help provide full and accurate information about you.

When an estate plan is formulated, be sure you understand what the attorney is saying. Estate planning ideas can be elusive, but strive for a working knowledge of the material presented for your consideration.

Please contact my office if you or someone you know would like help getting the estate planning process underway.