We’re well into September now and it seems the market has carefully tiptoed around its current worst fears: inflation, recession, and expensive oil. The Federal Reserve apparently pleased investors when it stopped raising interest rates last month, giving the bond market a chance to breathe as well. It will be interesting to see how the Fed proceeds from this point forward. It’s my feeling that the retail season may be fairly strong this year, especially if a barrel of oil can stay in the $60 range. Remember, some people aren’t overly dependent on oil (such as city dwellers), but others spend a lot of money on gasoline both for heating their homes and powering their cars. If corporate earnings are strong in October and throughout the holiday season, the stock market may start hitting some fresh highs. Some of the major indexes have already closed in on multi-month highs this week, a good sign for September, which is traditionally not a great month for the stock market.
The Pension Protection Act was signed into law on August 17th. The Act aims to fix the underfunded pension problem surrounding the private sector. It also has provisions to increase enrollment and contributions to retirement plans such as IRAs and 401ks. Below is an outline of the key reforms to fix outdated pension laws, strengthen workers’ retirement security, and reduce the prospect of a future multi-billion dollar taxpayer bailout:
• The Act establishes an interest rate to accurately calculate pension liabilities to ensure corporations fund their promised worker pensions.
• The Act gives employers incentives to help build up a cushion in their worker pension plans during good economic times, raising the maximum deductible amount for pension plan contributions.
• The Act closes funding loopholes and reduces volatility by ensuring employers make adequate and consistent cash payments to their plans.
• The Act ensures workers and retirees are given timely, accurate, and straightforward information about the health of their pension plans.
• With hundreds of significantly underfunded pension plans across the country, the Act includes reasonable restrictions to ensure employers and union leaders cannot dig the pension hole even deeper by promising extra benefits.
• The bill helps resolve legal uncertainty to ensure hybrid plans such as cash balance pensions, which offer portable benefits that allow workers to earn more generous benefits steadily throughout their careers, remain a viable part of the defined benefit system.
• In addition to reforming the laws governing traditional private pensions, the Act contains provisions to help workers save through defined contribution plans (IRA, 401k, 403b). It will remove barriers that prevented companies from automatically enrolling their employees in these savings plans.
• It will make permanent the higher contribution limits set up through 2006 on 401k, 403b, and IRA plans that were set to expire after 2010. This is a huge tax advantage for employees stashing away pre-tax dollars into retirement plans.
The average consumer spends 15% more in December than they do in other months . Part of this has to do with the holiday shopping season, the other part with vacations. Try to cut back in October and November so you don’t feel the “January pinch.”
Here at Premier Financial Advisors we’re encouraging clients to come to us with financial questions. Too many people procrastinate when it comes to planning their futures or running budgets and retirement scenarios. Feel free to make a phone call or come in for an appointment anytime.
Premier Financial Advisors
14 E. 60th St. #402
New York, NY 10022
Securities and certain investment advisory services offered through: FIrst Allied Securities, Inc., a registered Broker/Dealer. Member: NASD & SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.