Our daily roundup of retirement news your clients may be thinking about.
Opinion: This is the chart that stock bulls dont want you to see
A higher than usual cyclically adjusted P/E ratio may mean a bigger drawdown in the next five years, according to this article on MarketWatch. A Wellershoff & Partners study showed that CAPE levels lower than 15 were associated with a less 10% average decline over five years, but CAPE readings as high as 25.69 were linked to a decline of between 30% and 35%.-- MarketWatch
3 Lessons from S&P 2000
Standard & Poor's 500 finally reached the 2000 milestone on Tuesday after 16 years in the 1000-range level. Energy stocks, not technology stocks, are the biggest winners in the market, with an almost 11% average return rate over the last 16 years, according to Time Money. The market milestone should serve as a reminder for investors, particularly those who buy and hold stocks, that market indexes such as S&P 500 do not include dividends. -- Time Money
Getting a read on mortgage REITs
Mortgage real estate investment trusts offer one of the biggest yields in the securities market, but investors should remember that putting money on these investment vehicles comes with financial risks, according to Morningstar. One of the pitfalls of mortgage REITs is their sensitivity to changes in interest rates. The protection offered by Fannie Mae and Freddie Mac only covers residential mortgage REITs, leaving commercial mortgage REITs vulnerable to some credit risk. -- Morningstar
Tax-Free Savings for Precollege Education Expenses
Coverdell education savings accounts are more flexible than traditional 529 college-savings plans, as it allows parents to tap funds for both public and private school expenses tax-free, including costs for primary and secondary education, according to this column on Kiplinger. Coverdell funds could be used for supplies, tutoring, equipment, and costs for special needs children. Coverdell contributions this year require a gross income of less than $110,000 for singles and $220,000 for joint filings.
Picking the right annuity is a lifestyle choice
Deciding on the type of life annuity is more of a matter of lifestyle than income, according to an article on MarketWatch. Clients need not look at life annuities as investments and should not determine the return on investment, as there can be no ROI until they die and what concerns them more should be the income guarantee every month to support their lifestyle, which the products provide. When buying annuities, clients should ensure that the insurer will be around long enough to guarantee the income. -- MarketWatch
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