By:
On:
In: Commentary
With: 0 Comments

Americans aren’t saving enough for retirement.

True, this has been a refrain for longer than many can remember. But now some disturbing numbers show exactly how bad it’s gotten. Two-thirds of all Americans don’t contribute anything to a 401(k) or other retirement account available through their employer.

Millions aren’t saving on the job because they either don’t have access to a workplace retirement plan or they do but aren’t putting money in it. Many just can’t spare the cash, but a new analysis shows there are other reasons, too.

Until now, the exact size of the problem has been unclear. Surveys can be unreliable: Small businesses are difficult to assess, and many workers just don’t know what plan options they have, especially if employers aren’t making much effort to sign them up. Information on a 401(k) may be part of a stack of paper handed out on their first day, that they don’t read or understand, and ultimately set aside and never think about again.

Now, U.S. Census Bureau researchers have come up with estimates that rely on tax data, which should be more reliable than surveys. Their conclusion: Only about a third of workers are saving in a 401(k) or similar tax-deferred retirement plan. Also, the gap is far wider than expected between the number of employers offering retirement plans, and the number of workers saving in them.

Source: Two-Thirds of Americans Aren’t Putting Money in Their 401(k) – Bloomberg

By:
On:
In: Around the web
With: 0 Comments

 

Apple [stckqut]AAPL[/stckqut], the totemic icon of high-tech’s promise of eternal growth, reports its first revenue decline in 13 years. The Eurozone is back from the brink. The U.S. economy may not be.

And let’s not forget the dollar, which just finished its worst week against the yen since 2008. Or the Dow Jones industrial average, which turned in its worst performance since “the February freakout,” as CNNMoney artfully put it.

Optimists like Gavyn Davies acknowledge that the world economy is underperforming its long-term average for the third year running, but Davies wrote in the Financial Times on Sunday, “Global growth is somewhat better, especially in the emerging economies.” He headlined his blog, “Fading risks of global recession.”

And Robert Shiller, a Yale economics professor, says what you and I think matters. “Recessions aren’t caused merely by concrete changes in the markets,” Shiller argued in The New York Times on Sunday. “Beliefs and stories passed on by thousands of individuals are important factors, maybe even the main ones, in determining big shifts in the economy.”

Shiller suggests there’s more to economic wisdom than statistics will ever give us. If he’s right, we had better pay attention to what we see and what we hear.

I doubt anyone can say with certainty whether or not we’re in for another global recession. But it seems perfectly certain that it will depend on decisions taken soon.

The global economy has been given all there is to get out of low to negative interest rates, and it’s necessary to stimulate one way or another. Now the moment’s upon us: It’s time to stop talking and take the steps.

Economists, policy planners, and politicians will all have something to say. It’s the last we should worry about most, given that ideological preconceptions have been so prominently on display in Washington, London, Brussels, and nearly everywhere you look.

Source: If Consumers Don’t Open Their Wallets, We’re In for Another Recession | The Fiscal Times

By:
On:
In: Commentary
With: 0 Comments

I have often contended that share buy-backs are not a great thing. I suggest that companies should focus on growing their top line revenue number with appropriate attention to the bottom line number. Focusing on number of shares as a way to control EPS is very expensive.

This article from the WSJ, tends to agree with my premise.

Citigroup analysts found 38 of the 50 retail and apparel companies they cover repurchased shares in fiscal 2015. The bank set out to determine how bullish that is for future performance, looking at buybacks across the group since 2011. It focused on instances of companies repurchasing 5% or more of their outstanding shares within a year.

Out of 71 such instances, on average, the stocks underperformed the S&P Retail Index by more than 10 percentage points in the year following the repurchase, Citigroup found. The companies’ stocks underperformed the index in the year following the repurchases in 44 of 71 instances, outperforming only 27 times.

That suggests companies may be buying back stock to cushion earnings per share the following year. Instead of applauding buybacks, investors might be better off questioning their motives.

Source: Retailers: What Happens When They Buy Back Their Shares

By:
On:
In: Commentary
With: 0 Comments

While budgeting is hard for many parents, it might actually be easier for teens. There are fewer spending categories to monitor and smaller sums of money to account for from a summer job, allowances and other sources.

The way to start the process is to record expenses. Keep a journal for one or two months of everything you buy, down to the penny. That means tracking not only gas in the tank but also the iced coffees and vending machine chips. Everything.

At the same time, record in a separate column the amount of money you’re bringing in from a paycheck (after taxes and other payroll deductions, of course), an allowance, birthday gift money and such.

Once you have numbers to work with, sort the information into at least four main categories:

  1. Savings – make sure the teen is saving at least 10% of after-tax income. You need to start this habit as early in life as possible.
  2. Required expenses – car insurance or gas could fall into required expenses and some will include church donations.
  3. Discretionary expenses
  4. Future expenses but don’t allow this to the “savings” category. It is for a big purchase that is over 6 months away (such as college).

Keep the following points in mind as you guide them.

  • Decide what’s important. Do you really need the polo shirt, the fitted baseball cap or the video game? Or are those wants?
  • Set goals. Kids need something concrete to work toward. Whether it’s a car, college or soccer shoes, teens will be more motivated to watch their dollars if there’s a reward at the end of the process. Remind your kids that saving for a rainy day is alive and well.
  • Be flexible. Allowing some discretionary spending — even an occasional $5 latte — can do wonders for a teen’s frame of mind. Just account for the luxury in the budget so it doesn’t become a “budget leak,” she said.
  • Be creative. Especially for teens living at home, never overlook the barter system. For example, trade lawn work or preparing a family dinner for gas money.

You may also need to have the painful talk that the teenager should do as you say but not as you do if your own budgeting skills are not well developed.

Source: Budgeting can help teens control their spending impulses | The Kansas City Star