August, 2022
Stocks Rally on Earnings
It was an inauspicious start to last week after a big-box retailer missed earnings and reduced forward guidance on Tuesday, sparking a broad market retreat.
But sentiment improved following mega-cap technology company earnings that proved better than expected. Enthusiasm gathered steam in the wake of the Fed’s 0.75% rate hike, boosted by Fed Chair Powell’s comments following Wednesday’s Federal Open Market Committee meeting. Powell indicated that it might become appropriate to slow the pace of future hikes, and he didn’t believe the economy had entered into recession. Stocks on Thursday shrugged off news of a second-consecutive quarter of negative economic growth to build on Wednesday’s gains as fresh earnings continued to comfort, if not impress, investors.1
Economy Contracts
Real GDP fell 0.9% in the second quarter, marking the U.S. economy’s second straight quarter of decline. Weakness was broad-based with slowdowns in inventory rebuilding, residential and non-residential construction and capital spending. This was marginally offset by gains in consumer spending and trade; however, with higher inflation eroding Americans’ purchasing power, higher mortgage rates slowing down the housing market and a higher US dollar hurting exports, growth is likely to stay subdued this year.
While two consecutive quarters of negative GDP growth may lead some to jump to the term “recession”, we are not there yet according to the definition used by the National Bureau of Economic Research (NBER), the de facto scorekeepers of U.S. recessions. NBER’s definition is much broader, encompassing declines in employment, industrial production, household income and trade. Take employment as the prime example here. In 2Q, we saw average nonfarm payroll growth of 375K/month while the unemployment rate held at 3.6%. This strong of a labor market seems to contradict NBER’s definition. However, it will be important to monitor the labor market in the second half of 2022 to look for any signs of deterioration and the possible start of a recession.
While the gloomy GDP print will reinforce pessimism concerning the health of the U.S. economy, it does present a slight silver lining. The growth slowdown in the first half of 2022 shows that the Fed’s aggressive hiking cycle is delivering on its intended consequences – higher rates are slowing demand and growth, which should help alleviate some inflationary pressure in the second half of 2022.
Source: J.P. Morgan Asset Management
Managing the Risk of Outliving Your Money
"What is your greatest retirement fear?"
If you ask some pre-retirees this question, "outliving my money" may be one of the top answers. In fact, 42% of workers say they fear outliving their savings and investments.2
Retirees face greater "longevity risk" today.
The Census Bureau says that Americans typically retire around age 63 for women and 65 for men. Social Security projects that today's 63-year-olds will live into their mid-eighties, on average. This is a mean life expectancy, so while some of these seniors may pass away earlier, others may live past 90 or 100.3,4
If your retirement lasts 20, 30, or even 40 years, how well do you think your retirement savings will hold up? What financial steps could you take in your retirement to try and prevent those savings from eroding? As you think ahead, consider the following possibilities and realities.
How will Social Security work in the future?
For decades, Social Security took in more dollars per year than it paid out. That ongoing surplus - also known as the Social Security Trust Fund – may face funding challenges as early as 2034. Congress may act to address this financing issue before then, but the worry is that future retirees could get slightly less back from Social Security than they put in. It's critical that pre-retirees estimate the amount of Social Security benefits they are expected to generate in the future.5
Preparing for out-of-pocket health care costs.
You can enroll in Medicare at age 65, but how do you handle the premiums for private health insurance if you retire before then? Striving to work until you are eligible for Medicare makes economic sense and so does setting aside money to pay for health care costs. A healthy couple retiring at age 65 can expect to pay nearly $208,000 in lifetime out-of-pocket healthcare expenses, even if they have additional coverage such as Medicare Part D, Medigap, and dental insurance.6
Luck is not a plan, and hope is not a strategy.
Those who are retiring unaware of these factors may risk outliving their money. Creating a strategy can help you better prepare for retirement, and that is what we are here to help with. We work with all of our clients to improve their confidence about their financial future.
When Should My Child Get a Debit Card?
Teaching financial responsibility to children is a foundational goal that most parents have, but it can be hard to know where and when to start. Particularly given how technology has fundamentally changed the way we make purchases and track them, you can't exactly recycle the same money talk your parents probably gave to you.
Gone are the days of sitting down at the kitchen table to balance a checkbook, so when should your child be entrusted with the 'buying power' of a debit card?
When to Get Started
Currently, the average age for an American teenager to open a checking account is 17 years. Many experts say it should be sooner.7 Waiting until your child is just about to leave home for college does not give them very much time to learn and practice managing money under a caring adult's supervision.
In fact, research suggests that kids as young as 7 years old can already develop their habits and attitudes towards money, and that basic financial concepts such as budgeting and saving will be in place.8 Given that most 7-year-olds don't have a lot of money to manage, and most financial institutions have a minimum age requirement to issue a debit card, consider using those early years between the ages of 7-13 as a time to use actual cash to help children become comfortable with money.8
Once your child reaches the age of 14-16, you can probably find a bank that would allow for you to open a checking and savings account for them, perhaps jointly owned by you, or the bank may require you to act as a custodian on the account. Opening an account might coincide nicely with other milestones in your child's life - starting high school, getting their first part-time job, or gaining their independence with a driver's license. Ultimately the decision should be based on the amount of maturity and responsibility they display, and perhaps a good track record of not losing their wallet.9
Educational Opportunities
With proper guidance, a child's first debit card can serve as a positive educational tool that will teach them to:
- Build money confidence
- Gain independence with managing a budget
- Learn to save money
- Decipher the difference between their wants and needs
- Practice tracking expenses with banking apps, online tools, and text alerts
- Provide encouragement to take responsibility for earning their own money and making their own spending choices.7,8
Things to Watch Out For
One aspect of strong goal setting is preparing for possible barriers or setbacks to success. While the mood when getting your child's first debit card should be primarily optimistic, be sure to take the time to warn them of potential downfalls and risks associated with their newfound responsibility:
- Avoid falling for scams - always protect login information and account numbers, even if another adult asks for it.
- Keep their card safe - losing a debit card may incur replacement fees, and worse, if the card falls into the wrong hands they may become the victim of fraud.
- Learn to say no - friends can quickly drain the funds in the account of an innocent and kind-hearted youngster if they have not yet developed the ability to say no when asked to "share the wealth" or buy everyone lunch.
- Watch out for overdraft fees - you may want to find an account that can prevent overdraft fees, or perhaps it could serve as an opportunity to learn from mistakes to prevent them from happening in the future.8,9
Bottom Line
At the end of the day, a debit card is just one aspect of modern financial management, but it is a great tool that should not be avoided until your child absolutely needs one because they are 'flying the nest'.
Before you head to the bank, consider using these points above as a conversation-starter about what expectations you may have for your child to operate their own budget, save money, track their spending, and set age-appropriate financial goals. Remember to keep the lines of communication open about your own financial habits as well to help build their comfort-level of talking about money.8
Staying in Balance
We here at GTS Financial are big proponents of living a balanced life, and that should extend to your physical balance!
According to Dr. Adam M Cramer, a physical therapist and balance specialist, "Everything we do relies heavily on our ability to balance, yet maintaining physical balance skills is one of the most underrated aspects of well-being and one of the easiest to improve upon."10
Whether you are sitting upright in a chair, walking, riding a bike, or floating on a paddle board, physical balance will only improve your experiences of daily life and help keep you safe.
No matter your age, read on for the 3 main reasons to prioritize balance (can it actually make you smarter?!), and tips on how to get started on improving your balance.
Injury Prevention
Whether you are a world-class athlete or a grandparent on the go, improving your balance is essential for staying healthy. For athletes, regular balance work can help you be more efficient in your movement and decrease your risk of an ankle sprain by nearly 40% and keep you enjoying the activities you love.11
For people aged 65 and older, improved balance could prevent a fall, which is the cause of over 90% of hip fractures.11 Falls cost our healthcare system an estimated $500 million per year,10 not to mention the potential for life-altering (or even life-span shortening!) costs associated with a bad fall for an individual and their family.
Performance Enhancement
Having good muscle control and coordination reduces the energy demand on your body to complete all sorts of physical tasks.10 Beyond injury prevention, this can translate to improved agility, quicker reaction times, and endurance for athletes and non-athletes alike.11 Whether your aim is to contribute more to your recreational soccer team or forgo the use of a cane on short trips, improved balance is the path to take you there.
Full-Body (and Brain!) Benefits
When you practice balancing, you are awakening muscles from your head to your toes to work in coordination with each other. Learning (or re-learning) how to use your muscles synergistically can help improve you posture and even reduce your chances of dealing with long-term health consequences such as arthritis and back pain.11
Balance exercises can help improve your bone density, circulation, and even your brain functioning.10 That's right, in a study involving elderly women with concerns of memory problems and confusion, incorporating balance training into their program resulted in significant cognitive function improvements!11
How To Get Started
It is important to take into consideration your personal comfort-level with balancing and find tasks that provide a realistic challenge for you. Whether you're a 'beginner' or an 'expert', aim to perform your balancing exercises for periods of 30 seconds to 1 minute, and repeating each exercise 3 to 5 times. Make sure you practice on both legs equally.11
Balance for Beginners
Start by balancing on two legs, on a stable surface, and within reach of something sturdy for support. As you improve, you can choose to rely less on your support, moving your feet closer together, closing your eyes, and perhaps eventually balancing on just one leg at a time.
Balance for Experts
Start by balancing on one leg, and then progress towards more challenging variations such as closing your eyes, hopping on one foot, playing catch with a partner while standing on one foot, or standing on more uneven surfaces. You can even incorporate more balance practice into your strength training with single-leg squats, and lifting dumbbells over your head while standing on one foot. The possibilities are endless, so have fun with it!11
The Power of Vulnerability
For many of us, vulnerability is a scary thing. We all have insecurities about ourselves and may think if others find out who we truly are, they might reject us. So, in our attempts to connect with others, we try to project the best version of ourselves to the world.
What we don't realize, however, is that pretense has the opposite effect on our relationships - it distances us.
Click below to watch researcher and author Brené Brown speak on the subject and perhaps gain some insight into how being authentically you can strengthen your relationships and foster a belief within yourself that you are worthy of deep connection with others.
“Vulnerability is the core of shame and fear and our struggle for worthiness, but it appears that it’s also the birthplace of joy, of creativity, of belonging, of love.” - Brené Brown12