Gold Bugged: Contrarians Not Ready to Give Up Yet

 

 Published: Saturday, 29 Jun 2013 | 7:00 AM ET

 

By: Jeff Cox | CNBC.com Senior Writer

AP

 

Gold bugs, meet your falling knife.

With the metal hitting a succession of three-year lows recently, its proponents find themselves trying to catch the proverbial plunging dagger that comes with a collapse in prices.
Yet some traders have yet to give up, believing that gold's demise is nearing its end.


It's part of a broader contrarian view that figures investors are overestimating the factors colluding against precious metals. The bear market in gold has seen a 2013 price drop that approached 30 percent this week, falling below $1,200 for the first time since August 2010.

But gold bugs are a resilient species, and they aren't about to go down easy.

Gartman: Gold Probably 'Seen Its Worse'

 

Dennis Gartman, The Gartman Letter, explains why he is now sitting "on the sidelines" on the gold play, and why he thinks stocks are likely on an upward trend.

"Short gold futures positioning on COMEX is at an all-time high and nearly every broker is now negative gold," analysts at ETF Securities said in a report. "Therefore, while further downside in the short-term is possible, investors with longer-term time-horizons may start to look at the recent sell-off as a longer-term accumulation opportunity."
For most of 2013, though, investors have been running for the exits as fast as their trading platforms can carry them.

The SPDR Gold exchange-traded fund—a highly popular way for investors to get in on the trade without holding physical gold—has seen more than $18 billion in outflows this year, losing nearly 30 percent of its assets under management, according to IndexUniverse.

Some of the recent selling likely was related to fears that the Federal Reserve would begin decelerating the amount of money it was creating to buy bonds. The Fed currently spends $85 billion a month on the quantitative easing program, which has been accompanied by fears of inflation that have yet to materialize. Gold has long been thought of as an effective inflation hedge.
But even when Fed officials on Thursday said QE would not end as long as the economic data remained soft, gold continued to sell off despite a Treasury yield drop.

The gold proponents at ETF Securities say the softening economy will actually help gold prices because it will keep the Fed in the money-printing game.
"If this occurs, the Fed will likely step back from QE reductions. With gold positioning so negative, this has the potential to stimulate a strong short-covering gold price move," the report said.
The team at ETF Securities is not alone in sounding the gold resurgence theme.

Capital Economics predicted that gold will suffer more near-term troubles but "there are also still some plausible scenarios that could lead to explosive gains in the next few years."
MacNeil Curry, technical strategist at Bank of America Merrill Lynch, issued a plaintive "GOLD BEARS BEWARE" warning in a research note, saying proprietary models at his firm suggest a bottom is near.

BofA holds a strongly positive stance on gold, beginning 2013 with a $2,000 price target for year's end and $2,400 for 2014.

Curry said the price is likely to linger around $1,200 an ounce for a while, "but this decline is in its final stages."

A bullish case for gold would be made once the metal cracks $1,270.
However, Curry said in in email that the $2,000 target is no longer valid, though he didn't indicate where the new expectation lies.

"There is almost no way that will happen now," Curry said.

—By CNBC's Jeff Cox. Follow him

How to Plan for Retirement’s ‘Decumulation’ Dance

 Published: Thursday, 6 Jun 2013 | 10:25 AM ET

CNBC

 

By: Paul O'Donnell

RKO | Archive Photos | Getty Images

Fred Astaire and Ginger Rogers

 

As long as you've been saving for retirement, you've had your eye on "the number": the amount you need to save to get by. But once you decide to quit, there's another number you need to know—how much you plan on spending each month, and which retirement account it's going to come from.
Welcome to "decumulation," the process of unwinding the investments you've worked so hard to pile up over the course of your career.

How you spend your retirement accounts is as important as how you built them, and is subject to much the same forces that shaped your savings decisions: income, risk, and taxes. "You've got this dance between these three things," said Jennifer Landon, president of Journey Financial Services in Idaho Falls, Idaho.

But compared to the relatively straightforward process of saving, decumulating, to paraphrase the old saw about Ginger Rogers' dancing skills, can be like dancing backward, with higher stakes.
Traditionally, everyone's decumulation number was 4 percent — the percentage of your nest egg you could access each year and still stay flush. "With interest rates at an all-time low and volatility at an all-time high, the 4-percent rule no longer applies," said Landon.


In any environment, retirement can be disorienting. "People accumulate money in these different buckets—IRAs, 401(k)s, Social Security, securities—but they don't know how to transition from saving mode to 'Boom, we're retired,'" said Bill Smith, president of W.A. Smith Financial Group, near Cleveland.

Having a firm idea of how much you expect to spend will help determine how much money you will have to tap, which funds you'll tap, and in which order. (Not incidentally, it will also give you an idea if you really have enough money set aside.) "Knowing your number is critical," Smith said.
Your decumulation number is actually two numbers put together: your basic expenses for shelter, food, utilities and other routine bills, and what Smith calls "joy expenses": the money you need to travel, pursue your hobbies and generally find fulfillment. Financial advisors are often surprised at how few clients have even a ballpark idea of their number as they approach retirement.

Americans Aren't Saving Enough

 

CNBC's Mandy Drury Americans are saving too little for retirement. Debt levels are one of the reasons people have had such a hard time saving.

 

Once you have your expenses figured out, you match them against the income streams that come to you as fixed payments—a defined-benefit pension, your Social Security benefits (if you're taking them immediately), and other cash flow, like installments from the sale of a business. Any shortfall will need to be covered by withdrawals from retirement accounts. And that's where the dance begins.
Your primary consideration is taxation. Your retirement saving will be one of three types: tax-free, tax-deferred and taxable. The first of these types to take is taxable. "Our general philosophy is, if you're going to be taxed on it, you might as well take it," said Craig Brimhall, senior vice president at Ameriprise Financial. As a general proposition, too, financial experts agree the next stop should be a tax-free pool of funds—in most cases that means Roth IRAs, which contain after-tax money, municipal bonds.

That leaves the tax-deferred sources, chiefly traditional IRAs and 401(k)s, which, in many cases, have replaced retirees' homes as their greatest repository of wealth. They are also the most unwieldy. For one thing, as Landon pointed out, "Any time you put your hand in that big bowl of your IRA or other pretax assets, you're causing a tax effect." For a retiree in a 25 percent tax bracket, she adds, "$1 in an IRA is really worth just 75 cents." Put another way, you have to draw down 25 percent more of your savings each month to produce the same amount of revenue.
On the other hand, it's not advisable to save all of your tax-deferred money until you've drained most of your other resources. When you turn 70-and-a-half, and your IRAs or 401(k)s fall subject to "required minimum distributions"—IRS rules that mandate you withdraw a growing percentage each year—you not only lose control of your spend-down, you'll be exposing all of your income to higher taxes.

Most advisors recommend therefore that you deplete your tax-deferred funds each year, most wisely by converting them to a Roth IRA. Ameriprise's Brimhall suggests settling on a level of income tax that feels reasonable. "Let's say you don't want to go any higher than the 25 percent bracket," he said. "We'll take reportable income to that point, then shut that valve off and take tax-paid assets from there."

Market Moves the Needle on 401(k)s, Not Workers

Americans with savings in retirement plans have something to celebrate: Average 401(k) account balances rose 10 percent in 2012, to $86,212, according to mutual fund company Vanguard Group.

But only 11 percent of retirement plan participants saved the maximum of $17,000 ($22,500 for those over 50), and they tended to be older, male, high-income workers with already high account balances, said Vanguard, one of the largest retirement plan providers, with $2 trillion in mutual fund assets.
The average contribution rate in 401(k) plans, which grow tax-free until withdrawal, remained steady during the period, at 10.5 percent, according to Vanguard's 2013 How America Saves report.
Positive market returns in 2012 helped boost balances in the accounts, with the S&P 500 up 13 percent last year. However, account contributions have also grown since 2006, up to $4,845 per employee in 2012 from $4,402 in 2006, according to Vanguard's annual study of more than 3 million participants.

PICK A DATE
More retirement plan participants than ever are leaning on professionally managed investment options, Vanguard's data show. Thirty-six percent are invested in either a target-date fund, a balanced fund or a managed account advisory program, in which investments are selected and rebalanced without the participant having to take any action. Vanguard expects this number will rise to 55 percent by 2017.

Seventeen percent of assets were in target-date funds, which have investment plans geared toward a specific retirement date. That was up from 14 percent in 2011 and 3 percent in 2006, the first year these funds gained traction.

As target-date funds gain favor, investors are moving away from holding their own employer's stock. Those holdings were only 9 percent of invested assets at the end of last year, Vanguard said, down from 10 percent in 2006.

Diversified equity funds made up the bulk of accounts at 40 percent, for an overall equity allocation of 66 percent. Cash accounted for 15 percent of investors' portfolios. In 2006, by contrast, participants had 23 percent in cash.

Bonds accounted for 10 percent and other balanced funds for 9 percent.
There was a 3 percent decline in new loans against 401(k)s in 2012. Overall, 18 percent of investors had loans outstanding, with the average balance at $9,000, Vanguard said.

Top 1% Control 39% of World's Wealth

 Published: Friday, 31 May 2013 | 11:30 AM ET

By: Robert Frank

  CNBC Reporter & Editor

 

 

Digital Vision | Getty Images

 

The wealthiest 1 percent now control 39 percent of the world's wealth, and their share is likely to grow in the coming years, according to a new report.
The world's total private wealth grew 7.8 percent last year to $135 trillion, according to the Boston Consulting Group's Global Wealth report. The top 1 percent control $52.8 trillion, and those worth $5 million or more control nearly a quarter of the world's wealth.
That concentration is likely to increase in the coming years as the wealth of the wealthy grows faster than overall global wealth. The number of millionaires in the world surged by 10 percent year, reaching 13.8 million. The study predicts that global wealth will grow around 4.8 percent a year over the next five years—though millionaires will see their wealth grow nearly twice as fast.

Those worth $5 million or more will see their wealth grow 8 percent, while those worth more than $100 million will see their wealth grow 9.2 percent. The $100-million-plus group will see their share of global wealth grow to 6.8 percent in 2017 from the current 5.5 percent.
What's driving the wealth of the wealthy? It depends on the country. In the developed world—the U.S. and Europe— it's mainly stocks. And stocks have been on a tear this year in the U.S., which has mainly benefited the top 5 percent, who own 60 percent of all individually held stocks.

 
In developing markets, the main wealth creator is economic growth and savings. Yet the amount of wealth held in stocks and in offshore wealth (again mainly held by the wealthy) in developing countries is also growing. The amount of wealth held in equities in Asia (excluding Japan) surged by 21.9 percent in 2012.

 

—By CNBC's Robert Frank. Follow him on Twitter @robtfrank.

Putting Family First Robs Women of Retirement

Why There Is a Gender Gap in Retirement Savings

 

 Published: Monday, 13 May 2013 | 2:38 PM ET CNBC.com

By: Sharon Epperson

  CNBC Senior Commodities Correspondent & Personal Finance Correspondent

Hola Images | Getty Images

 

The "gender gap" in retirement savings may be explained, in part, by differing financial goals.
While the top financial priority for men is to "maintain lifestyle in retirement," for women, the number one goal is to "not become a financial burden to loved ones," according to a 2012-2013 study by Prudential. But putting family first can be a setback to accumulating savings.

Like many women looking toward retirement, entrepreneur Lorin Palmer says figuring out how to juggle family and personal finances has been an important lesson for her to learn over the years. Palmer, a 56-year-old funeral home owner in Sumter, South Carolina, finds making final arrangements for other families is instructive, underscoring the importance of ramping up planning for her own financial future.

"I have learned that in this business just as families pre-plan, they come in and they make funeral arrangements and they pay for them in advance. Likewise that same principle applies with retirement planning," Palmer says.

 

 

Markets vs. Retirement Confidence

 

Despite record highs in the markets, recent studies show Americans are still worried about their retirement savings, reports CNBC's Sharon Epperson.

Palmer - the third generation in her family to own this funeral business - believes careful planning is critical not only for her own nest egg, but her son's financial future as well.
But like many women, she says staying on track hasn't been easy.
"I've been through a divorce. I've raised a son as a single parent. I have educated my son," she says. All of these milestones have taken a toll on her savings. Many more women face similar challenges.
A recent study by the State Farm Center for Women and Financial Services at the American College found that about 64 percent of all women say that their family's needs are really impeding their ability to save for retirement and only 42 percent of women say they save a certain amount each month.

Since women generally make less money than men, how much money they'll be able to save is affected by those factors as well. According to the latest figures from the U.S. Labor Department, white women earn about 81 cents for every dollar white men earn. Black women earn 67 percent of what white men earn and Latino women earn only 60 percent.
 
Women also spend 12 years out of the workforce on average to care for their families, according to the American College study, further impacting their retirement savings . Caregiving for children and parents, possible layoffs, disability are all factors that can derail women's savings.
"We have to take a look at the things that could happen that would prevent the retirement date that you want, health issues, divorce, losing a family member," says financial advisor Deborah Breedlove with Ameriprise Financial. However, considering these issues early and how they could impact finances can encourage some women to start to save more.

Breedlove says using 401(k)s, IRAs, Roth accounts and diversifying investments within those portfolios can help many clients reach their intended goals.

Palmer says she wishes she had saved more for retirement, but she realizes it's not too late. She believes she now has an effective plan in place. She is putting herself first, so she can leave a legacy for her son and her family.

—By CNBC's Sharon Epperson; Follow her on Twitter: @sharon_epperson

See more at DonaldJLester.com 

Attention Boomers: The Economy Needs You to Work Past 70

 Published: Thursday, 9 May 2013 | 12:11 PM ET

By: Steve Yoder

 

Melanie Stetson Freeman | The Christian Science Monitor | Getty Images

 

A senior citizen works as a sales associate at Home Depot in the lumber department.

If you imagine that age 81 means shuffleboard, golf carts, and sitting on the beach, David Mintz will make you reconsider. The founder and CEO of food brand Tofutti, Mintz works 15-hour shifts, sometimes driving 500 miles a day to visit his factories. He sleeps four or five hours a night and works out every morning. "I'm working harder now than 20 years ago," he says.
Mintz and others like him are leading a shift toward working later into life. Just 11 percent of people older than age 65 were still working in 1993, according to the Bureau of Labor Statistics. Today, that figure has reached almost 18 percent – and it's climbing.

Most of these workers are not just putting in a few hours: A 2008 study of people age 50 and older who retired and then went back to work found that 54 percent were employed full time and 19 percent worked more than 41 hours a week.

All of this could mean good news for the larger economy. As baby boomers move into their later years, the 65-and-over population will grow from about 13 percent in 2010 to a projected 20 percent by 2030. The rising population of seniors who work will bring stronger economic growth – if companies can retool to accommodate an older workforce, say economists and experts.
But if companies fail to plan ahead, they might also see costs mount: By one estimate, health insurance premiums for workers age 65 and older cost companies almost three times as much as those age 25.


People working in their later years could help with the country's fiscal problems, says Gary Burtless, a Brookings Institution economist who is finalizing a study on the issue. Every additional year that a person stays on the job brings more revenue to the federal treasury in income taxes. If current trends continue, working seniors will have a positive, if small, impact on federal deficits under the most plausible budget projections.

Reinforcing the Nest Egg

More working seniors also could lower demand for social services by cutting the number of Americans who don't have enough money in retirement. In 2008, the federal and state governments spent nearly $15,000 per elderly person on income security and tax credits, according to a report earlier this year from the Urban Institute. Every year that a person delays taking Social Security past his or her full retirement age (anywhere from age 65 to 67, depending on the date of birth), the check amount grows by 8 percent, says Sara Rix, who focuses on the economics of aging at AARP's Public Policy Institute.

That continues up to age 70, when everyone must draw a check. "You're not going to get that [8-percent] return anywhere else… and it's a guarantee," Rix says.

It may be hard to imagine with unemployment at 7.5 percent, but more seniors on the job could help alleviate a labor shortage in the years ahead. That's because the U.S. population is aging: While the proportion of seniors is growing, the percentage of those in their prime working age is stagnating, says Richard Johnson, an economist who directs the Urban Institute's retirement policy program. By 2030, if people retire at age 65, the number of workers per retiree will drop from 4.5 to 3, according to a 2010 study by the Rand Corporation.

"We really need older people to stay in the labor force to provide the workers that the economy needs to continue to grow," says Johnson. In an April 2012 survey of 430 human resource professionals, 72 percent said the loss of talented older workers poses a problem or potential problem for their organization.

If younger people worry that older colleagues staying on the job might cut into their opportunities, those fears aren't supported by recent data. A study last fall by the Pew Economic Mobility Project found that from 1977−2011, every one percentage-point increase in the employment rate of older workers was associated with a slight decline in youth unemployment. That's partly because employed older workers also create jobs by starting businesses themselves, or offer skills that allow companies to expand operations.

But other experts worry that later retirement could shrink company bottom lines if the workers who stay do so because they don't have enough retirement savings. The typical household, age 55-64, had only $120,000 in their 401(k) or IRA account in 2010, according to a study last summer from Boston College's Center for Retirement Research. The report also noted that 13 percent of those ages 60-64 had no retirement account at all.

Those who feel obligated to keep working tend to have worse health and work in jobs that are more strenuous, compared with older knowledge workers who choose to keep going. Susan Conrad of Plancorp Retirement Plan Advisors says that among this group, health care, workers' compensation, and disability costs are higher than for others, while productivity is lower. A study by MassMutual Financial Group calculated that for companies with more than a thousand employees, increasing the portion of their workforce of those over age 60 from 10 percent to 30 percent hiked their health care and disabilities costs by about $2 million. Johnson also estimates that a company spends an average of about a thousand dollars more per year for an older worker.

Johnson argues, however, that there's not much evidence that older workers are less productive – their productivity simply takes different forms. They may make fewer creative breakthroughs and process information more slowly, in general, but their knowledge and experience improve with age. An older telephone salesperson might make fewer calls, for example, but sell more by drawing on years of experience, he says.
 
A possible worker shortage in some fields is causing a number of companies to retool their operations to retain older workers. The shortage of nurses, for example, has led hospitals to redesign layouts so that work stations are closer to patients, says Jacquelyn James of Boston College's Sloan Center on Aging & Work. And the shortage of truck drivers has some companies redesigning vehicles to create more comfortable sleeping spaces, she says. Other firms are changing work schedules: The April 2012 survey of human resource professionals found that about a quarter of companies are offering more flexible work arrangements and part-time positions to attract older workers.

With U.S. birth rates dropping and the population getting older, encouraging more companies to create incentives for older workers to delay their retirement parties could benefit us all, says Johnson.

Full Article:  http://www.cnbc.com/id/100724186

Health Concerns Top List of Americans' Retirement Worries: Study

Stigur Karlsson | E+ | Getty Images

 

Health problems and the cost of healthcare are the biggest concerns for those entering retirement, according to a study released on Monday from Bank of America's Merrill Lynch.
The findings, part of a larger study focused on how people are feeling about and preparing for retirement, were based on a survey of more than 6,300 individuals aged 45 and older across the United States.

When asked what their biggest worry was about living a long life, 72 percent of retirees surveyed said serious health problems. Among other concerns cited by respondents were running out of money to live comfortably and not being a burden on their family.

The study, co-conducted with research firm Age Wave, divided respondents into those that have more than $250,000 in investible assets and those that have less than $250,000.

When asked what their top financial worries for retirement were, 52 percent of those surveyed in the affluent population group and 37 percent in the latter - ranked healthcare expenses as their biggest concern.

Other concerns included outliving their money, lack of personal savings, social security and company pension.

The study cited worries about the long-term stability of government healthcare programs, such as Medicare, and unexpected medical expenses as reasons why healthcare costs topped the list of concerns for retirees.

"It requires that people give some thought to what other contingencies" they have in place to prepare for those unexpected expenses, said David Tyrie, head of personal wealth and retirement at Merrill.
Health problems were also listed as the top reason for early retirement, rather than financial success, with 34 percent of retirees surveyed ranking it first. Sufficient financial resources came in as a second reason, with 27 percent of retirees surveyed listing it as their top reason.

Read More Here.   http://www.cnbc.com/id/100712038