Articles for July 2014

How and When to Sign Up for Medicare

Breaking down the enrollment periods and eligibility.

Medicare enrollment is automatic for some.
For those receiving Social Security benefits, the coverage starts on the first day of the month you turn 65. Your enrollment is also automatic when you are under 65, disabled, and receiving benefits from Social Security for 24 months. The exception to this would be for people with Amyotrophic Lateral Sclerosis (ALS, perhaps better known as Lou Gehrig’s disease) for whom Part A and Part B begin the month disability benefits begin. Part A is hospital insurance; Part B is medical insurance. 1
If you’re getting Social Security checks and approaching age 65, you’ll get a Medicare card in the mail three months before your 65th birthday. If you are getting SSDI (Social Security Disability Insurance; regardless of your age), the card will arrive coincidental with your 25th month of disability.1
Oh yes, there is another important criterion: you must be a U.S. citizen or a permanent legal resident of this country. If so, you or your spouse must have earned sufficient credits to be eligible for Medicare, typically earned over 10 years.2

Some of us have to contact the SSA. If you’re coming up on 65 and not receiving Social Security benefits, SSDI or benefits from the Railroad Retirement Board, you can still apply for Medicare coverage. You can visit your local Social Security Administration office or dial (800) 772-1213 or visit www.socialsecurity.gov/medicareonly/ to determine your eligibility.1

When can you add or drop forms of Medicare coverage? Medicare has enrollment periods that allow you to do this.
*The initial enrollment period is seven months long. It starts three months before the month in which you turn 65 and ends three months after that month. You can enroll in any type of Medicare coverage within this seven-month window – Part A, Part B, Part C (Medicare Advantage Plan), and Part D (prescription drug coverage). As it happens, if you don’t sign up for some of this coverage during the initial enrollment period, it may cost you more to add it later.3
*Once you are enrolled in Medicare, you can only make changes in coverage during certain periods of time. For example, the open enrollment period for Part D is October 15-December 7, with Part D coverage starting January 1.4
*The Medicare Advantage Disenrollment Period occurs between January 1 and February 14 of each year. In this time frame, you have an opportunity to get out of a Medicare Advantage plan and either switch to original Medicare or a Medicare Cost plan with or without Part D coverage. If you do switch to original Medicare or a Medicare Cost plan without prescription drug coverage, you can elect to supplement that coverage with a separate prescription drug plan. If you enroll in Part D during this period, coverage starts on the first day of the month after the plan receives your enrollment form.3,4

Do you have questions about eligibility, or the eligibility of your parents? Your first stop should be the Social Security Administration (see the contact information in the fourth paragraph above). You can also visit www.medicare.gov and www.cms.gov.

Michael Moffitt may be reached at phone (641)-782-5577 or e-mail mikeM@cfg.com
website www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – medicare.gov/sign-up-change-plans/get-parts-a-and-b/get-parts-a-and-b.html#collapse-3101 [3/20/14]
2 – aarp.org/health/medicare-insurance/info-04-2011/medicare-eligibility.html [1/21/14]
3 – medicare.gov/Pubs/pdf/11219.pdf [10/12]
4 – medicare.kaiserpermanente.org/wps/portal/medicare/plans/learn/enrollment [2/20/14]

In Remembrance of Jim Wilson

It is with great sadness that we inform you of the passing of James (Jim) Wilson, the significant other of Ginny Fett. Jim and Ginny were together for almost twenty years and enjoyed living on a farm south west of Creston.

The visitation will be held at Pearson Family Funeral Service in Creston, IA., on Thursday, July 24th. Open visitation is 1-8 PM. The family will be present on Thursday 6-8 PM.

http://www.pearsonfuneralhomes.com/obituaries/obituary-listings?obId=170747#/celebrationWall

The funeral service will be held at Holy Spirit Catholic Church in Creston, IA on Friday, July 25th at 10:30 AM.

If you wish to send condolences to Ginny, you may do so by sending them to:
Cornerstone Financial Group
c/o Ginny Fett
604 W. Adams St, P.O. Box 111
Creston, IA 50801

Please note that our offices in Creston and West Des Moines will be closed on the day of the funeral. If you have an immediate business need on this day, please contact our Office of Supervisory Jurisdiction – Advantage Financial Group at (319) 366-7300.

After QE3 Ends

Can stocks keep their momentum once the Federal Reserve quits easing?

“Easing without end” will finally end.
According to its June policy meeting minutes, the Federal Reserve plans to wrap up QE3 (Quantitative Easing) this fall. Barring economic turbulence, the central bank’s ongoing stimulus effort will conclude on schedule, with a last $15 billion cut to zero being authorized at the October 28-29 Federal Open Market Committee meeting.1,2

So when might the Fed start tightening? As the Fed has pledged to keep short-term interest rates near zero for a “considerable time” after QE3 ends, it might be well into 2015 before that occurs.1

In June, 12 of 16 Federal Reserve policymakers thought the benchmark interest rate would be at 1.5% or lower by the end of 2015, and a majority of FOMC members saw it at 2.5% or less at the end of 2016.3

It may not climb that much in the near term. Reuters recently indicated that most economists felt the central bank would raise the key interest rate to 0.50% during the second half of 2015. In late June, 78% of traders surveyed by Bloomberg News saw the first rate hike in several years coming by September of next year.4,5

Are the markets ready to stand on their own? Quantitative easing has powered this bull market, and stocks haven’t been the sole beneficiary. Today, almost all asset classes are trading at prices that are historically high relative to fundamentals.

Some research from Capital Economics is worth mentioning: since 1970, stocks have gained an average of more than 11% in 21-month windows in which the Fed greenlighted successive rate hikes. Bears could argue that “this time is different” and that stocks can’t possibly push higher in the absence of easing – but then again, this bull market has shattered many expectations.6

What if we get a “new neutral”? In 2009, legendary bond manager Bill Gross forecast a “new normal” for the economy: a long limp back from the Great Recession marked by years of slow growth. While Gross has been staggeringly wrong about some major market calls of late, his take on the post-recession economy wasn’t too far off. From 2010-13, annualized U.S. Gross Domestic Product (GDP) averaged 2.3%, pretty poor versus the 3.7% it averaged from the 1950s through the 1990s.3

Gross now sees a “new neutral” coming: short-term interest rates of 2% or less through 2020. Some other prominent economists and Wall Street professionals hold roughly the same view, and are reminding the public that the current interest rate environment is closer to historical norms than many perceive. As Prudential investment strategist Robert Tipp told the Los Angeles Times recently, “People who are looking for higher inflation and higher interest rates are fighting the last war.” Lawrence Summers, the former White House economic advisor, believes that the U.S. economy could even fall prey to “secular stagnation” and become a replica of Japan’s economy in the 1990s.3

If short-term rates do reach 2.5% by the end of 2016 as some Fed officials think, that would hardly approach where they were prior to the recession. In September 2007, the benchmark interest rate was at 5.25%.3

What will the Fed do with all that housing debt? The central bank now holds more than $1.6 trillion worth of mortgage-linked securities. In 2011, Ben Bernanke announced a strategy to simply let them mature so that the Fed’s bond portfolio could be slowly reduced, with some of the mortgage-linked securities also being sold. Two years later, the strategy was modified as a majority of Fed policymakers grew reluctant to sell those securities. In May, New York Fed president William Dudley called for continued reinvestment of the maturing debt even if interest rates rise.7

Bloomberg News recently polled more than 50 economists on this topic: 49% thought the Fed would stop reinvesting debt in 2015, 28% said 2016, and 25% saw the reinvestment going on for several years. As for the Treasuries the Fed has bought, 69% of the economists surveyed thought they would never be sold; 24% believed the Fed might start selling them in 2016.7

Monetary policy must normalize at some point. The jobless rate was at 6.1% in June, 0.3% away from estimates of full employment. The Consumer Price Index shows annualized inflation at 2.1% in its latest reading. These numbers are roughly in line with the Fed’s targets and signal an economy ready to stand on its own. Hopefully, the stock market will be able to continue its advance even as things tighten.6

Mike Moffit may be reached at phone# 641-782-5577 or email: mikem@cfgiowa.com
website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – marketwatch.com/story/fed-plans-to-end-bond-purchases-in-october-2014-07-09 [7/9/14]
2 – telegraph.co.uk/finance/economics/10957878/US-Federal-Reserve-on-course-to-end-QE3-in-October.html [7/9/14]
3 – latimes.com/business/la-fi-interest-rates-20140706-story.html#page=1 [7/6/14]
4 – reuters.com/article/2014/06/17/us-economy-poll-usa-idUSKBN0ES1RD20140617 [6/17/14]
5 – bloomberg.com/news/2014-07-07/treasuries-fall-after-goldman-sachs-brings-forward-fed-forecast.html [7/7/14]
6 – cbsnews.com/news/will-the-fed-rate-hikes-rattle-the-market/ [7/10/14]
7 – bloomberg.com/news/2014-06-17/fed-will-raise-rates-faster-than-investors-expect-survey-shows.html [6/17/14]

Apply for Social Security Now … or Later?

 

When should you apply for benefits? Consider a few factors first.

Now or later? When it comes to the question of Social Security income, the choice looms large. Should you apply now to get earlier payments? Or wait for a few years to get larger checks?

Consider what you know (and don’t know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren’t as foreseeable. You don’t know exactly how long you will live, so you can’t predict your lifetime Social Security payout. You may even end up returning to work again.

When are you eligible to receive full benefits?
The answer may be found online at socialsecurity.gov/retire2/agereduction.htm.

How much smaller will your check be if you apply at 62? The answer varies. As an example, let’s take someone born in 1952. For this baby boomer, the full retirement age is 66. If that baby boomer decides to retire in 2014 at 62, his/her monthly Social Security benefit will be reduced 25%. That boomer’s spouse would see a 30% reduction in monthly benefits.1
Should that boomer elect to work past full retirement age, his/her benefit checks will increase by 8.0% for every additional full year spent in the workforce. (To be precise, his/her benefits will increase by .67% for every month worked past full retirement age.) So it really may pay to work longer.2

Remember the earnings limit. Let’s put our hypothetical baby boomer through another example. Our boomer decides to apply for Social Security at age 62 in 2014, yet stays in the workforce. If he/she earns more than $15,480 in 2014, the Social Security Administration will withhold $1 of every $2 earned over that amount.3

How does the SSA define “income”? If you work for yourself, the SSA considers your net earnings from self-employment to be your income. If you work for an employer, your wages equal your earned income. (Different rules apply for those who get Social Security disability benefits or Supplemental Security Income checks.)4
Please note that the SSA does not count investment earnings, interest, pensions, annuities and capital gains toward the current $15,480 earnings limit.4

Some fine print worth noticing. If you reach full retirement age in 2014, then the SSA will deduct $1 from your benefits for each $3 you earn above $41,400 in the months preceding the month you reach full retirement age. So if you hit full retirement age early in 2014, you are less likely to be hit with this withholding.4
Did you know that the SSA may define you as retired even if you aren’t? This actually amounts to the SSA giving you a break. In 2014 – assuming you are eligible for Social Security benefits – the SSA will consider you “retired” if a) you are under full retirement age for the entire year and b) your monthly earnings are $1,290 or less. If you are self-employed, eligible to receive benefits and under full retirement age for the entire year, the SSA generally considers you “retired” if you work less than 15 hours a month at your business.2,4
Here’s the upside of all that: if you meet the tests mentioned in the preceding paragraph, you are eligible to receive a full Social Security check for any whole month of 2014 in which you are “retired” under these definitions. You can receive that check no matter what your earnings come to for all of 2014.4

Learn more at socialsecurity.gov. The SSA website is packed with information and user-friendly. One last little reminder: if you don’t sign up for Social Security at full retirement age, make sure that you at least sign up for Medicare at age 65.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
website: cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – socialsecurity.gov/retire2/agereduction.htm [2/26/14]
2 – socialsecurity.gov/retire2/delayret.htm [2/26/14]
3 – socialsecurity.gov/cola/ [2/26/14]
4 – http://ssa.gov/pubs/EN-05-10069.pdf [2/26/14]

The Troubling National Debt

It is projected to grow even larger. What does that imply for the economy?

In 1835, something financially remarkable happened: the federal government paid off the national debt.1

It hasn’t happened since. Through myriad presidential administrations and economic cycles, the national debt has persisted. Wars, depressions and recessions have all helped send it higher, and while it can shrink in the short term, it isn’t going away. Currently it stands at $17.6 trillion, with $12.6 trillion of it held by the public.2

The big picture is disconcerting. In fall 2013, the non-partisan Congressional Budget Office said that the national debt amounted to 73% of U.S. Gross Domestic Product (GDP). The CBO sees it declining to 68% of GDP by 2018, but then increasing to 71% by 2023 as a consequence of rising interest rates and spending boosts for Social Security and health care. CBO projections have the country’s debt equaling 100% of its annualized growth by 2038 – a milestone best not reached or approached.3

If the national debt should grow over the next decade, what would the impact be? It would be felt subtly, but it would be notable.

The greater the U.S. debt-per-capita, the greater the default risk for the federal government – meaning that newly issued Treasuries would need to have higher yields to appeal to investors. A bigger percentage of federal tax revenue would go toward paying the interest on the national debt, leaving fewer tax dollars for federal services and programs. Consequently, borrowing for economic enhancement projects would become harder, with a reduced standard of living for American households as a possible byproduct.4

Higher Treasury yields have three distinct implications. They can lessen appetite for risk; if the yields on Treasuries start to look pretty good compared to the returns on equities or corporate securities, investors may run to the “risk-free” Treasuries. Indirectly, this could encourage more inflation: higher Treasury yields could prompt yields on corporate securities to rise, which would force those corporations to hike prices on goods and services, i.e., inflation. Lastly, mortgages would become costlier as their interest rates are linked to Treasury yields and the short-term interest rates established by the Federal Reserve. Costlier mortgages imply fewer homebuyers, which in turn leads to lower home prices and reduced net worth for homeowners.4

Under current projections, what might happen by 2038? If America reaches to a point where its debt does roughly equal its GDP, a considerable economic price could be paid. In addition to a loss of confidence on the part of foreign investors, you would have a loss of flexibility on the part of the federal government.

Other nations might lose faith in our ability to pay our debt obligations. If that happens, we would find it harder or more expensive to borrow money. More and more federal borrowing could discourage private investment (although incomes and inflation-adjusted output could still rise). If the federal government needed to spend ever-increasing amounts of money to pay down the interest on the nation’s debt, shifts in fiscal policy and significant tax law changes would no doubt occur. The greater the percentage of federal spending given over to the national debt, the less capable the federal government would be to respond to an economic, geopolitical or environmental crisis.

The CBO’s forecast has sounded an alarm, and some view the national debt crisis as an emerging national security issue.

We incur some debt to foster economic expansion. Take the recent federal stimulus programs, for example. Taking on debt of that kind can be worthwhile as a step toward economic recovery. It is the other kind of debt – debt in response to today’s consumption – that risks handing future generations dilemmas.

While an ever-increasing national debt is a problem, a manageable national debt we can live with. We can’t turn back the clock to 1835. Andrew Jackson’s early struggles with debt as a land speculator led to his dream of a debt-free America with a federal government that didn’t need any credit. By selling off huge chunks of federal land and vetoing every spending bill that came his way, the seventh President cut the federal deficit from $58 million to $0 in six years. Coincidentally or not, a lengthy depression soon began.1

Michael Moffitt may be reached at phone: (641) 782-5577 or email: mikem@cfgiowa.com
website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

The Congressional Budget Office is a non-partisan arm of Congress, established in 1974, to provide Congress with non-partisan scoring of budget proposals.

Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption government outlays, investments and exports less imports that occur within a defined territory.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – npr.org/blogs/money/2011/04/15/135423586/when-the-u-s-paid-off-the-entire-national-debt-and-why-it-didnt-last [4/15/11]
2 – treasurydirect.gov/NP/debt/current [6/19/14]
3 – cbo.gov/publication/44521 [9/17/13]
4 – investopedia.com/articles/economics/10/national-debt.asp [10/11/13]