What Story Is the Price to Earnings Ratio Telling?

If you’re trying to get an inside edge on Wall Street, you’re probably paying attention to an array of stats and measurements. But there’s one indicator you might be overlooking.

I’m talking about the price-to-earnings ratio. P/E ratio divides a company’s stock price by its earnings per share. You also can get a P/E ratio for a stock market index, like the Standard & Poor’s 500.

On July 8, the predicted or “future” 12 month P/E ratio of the S&P 500 was 16.3, coming in below the five-year average of 18.6 but above the 20- year average of 15.5.¹

Does this mean stocks are undervalued? Perhaps based on the five-year average, but not so much according to the 20-year stat. Potato, potahto. One thing is clear: the P/E ratio tells us that stocks were more expensive late last year than they are today.

One of my favorite sayings is, “Time in the market beats timing the market.” Keep following your established strategy and try not to overthink current events.

How Retirement Spending Changes With Time

New retirees sometimes worry that they are spending too much, too soon. Should they scale back? Are they at risk of outliving their money? This concern may be legitimate. Some households “live it up” and spend more than they anticipate as retirement starts to unfold. In 10 or 20 years, though, they may not spend nearly as much.

By The Numbers

The initial stage of retirement can be expensive. The Bureau of Labor Statistics figures show average spending of $60,076 per year for households headed by pre-retirees, Americans age 55-64. That figure drops to $45,221 for households headed by people age 65 and older.¹

When retirees are well into their 70s, spending often decreases. The Government Accountability Office data shows that people age 75-79 spend 41% less on average than people in their peak spending years (which usually occur in the late 40s).

Spending Pattern

Some suggest that retirement spending is best depicted by a U-shaped graph — It rises, then falls, then increases quickly due to medical expenses.

But in a 2017 study, the investment firm BlackRock found that retiree spending declined very slightly over time. Also, medical expenses only spiked for a small percentage of retirees in the last two years of their lives.²

What’s the best course for you? Your spending pattern will depend on your personal choices as you enter retirement. A carefully designed strategy can help you be prepared and enjoy your retirement years.

3 Tips for the Second Half of 2022

With half the year behind us, now is a great time to consider what the remainder of 2022 may hold. However, with inflation and economic uncertainty causing many of us to delay or cancel vacations, large purchases, and more, it can be challenging to know where to start.

Here are a few tips to help make the rest of the year as smooth as possible:

Deflate Inflation – Travel-related costs have skyrocketed, causing many to delay or cancel vacation plans. But are you overreacting to current headlines? Let’s talk if you’re wavering on a scheduled trip.

Embrace Uncertainty – If you’ve delayed a major purchase lately, you’re not alone. Economic uncertainty has caused many to rethink their expenditures. When your net worth declines, the “wealth effect” tells consumers to rein in spending. But our portfolio strategy takes into account periods of market volatility.

Practice Patience – The need to take action can push even the most seasoned investors into questionable territory. Instead, try to take a long view of the markets. Remaining patient and taking a break from watching the markets closely may help weather the storm.

Let us know if you ever want to chat about your future goals or current economic conditions. We’re always ready to help.

Qualifying For Medicare Under Age 65

When you are under 65, you become eligible for Medicare if:

1. You have received Social Security Disability Insurance (SSDI) checks for at least 24 months
2. Or, you have been diagnosed with End-Stage Renal Disease (ESRD)

Eligibility for Medicare due to a disability

You may qualify for Medicare due to a disability if you have been receiving SSDI checks for more than 24 months, also known as the two-year waiting period. The two-year waiting period begins the first month you receive an SSDI check. You will be automatically enrolled in Medicare at the beginning of the 25th month that you receive an SSDI check.

If you receive SSDI because you have Amyotrophic Lateral Sclerosis, or ALS, Medicare automatically begins the first month that your SSDI benefits start. You do not have the two-year waiting period.

Social Security—not Medicare—makes the determination of whether you qualify for SSDI checks and administers the program that provides the checks. For more information on the Social Security Disability Insurance program, it is recommended that you contact your local Social Security Administration (SSA) office.

Note: Railroad workers should contact the Railroad Retirement Board for information about disability annuity and Medicare eligibility.

Eligibility for ESRD Medicare

You may qualify for ESRD Medicare if you have been diagnosed with kidney failure and you:

• Are getting dialysis treatments or have had a kidney transplant
• And:
  • You are eligible to receive SSDI
  • You are eligible to receive Railroad Retirement benefits
  • Or, you, a spouse, or a parent have paid Medicare taxes for a sufficient amount of time as specified by the Social Security Administration

If you are under 65 and have ESRD, when your Medicare benefits begin depends on your specific circumstances, including when you apply for Medicare, whether you receive dialysis at home or at a facility, and whether you get a kidney transplant. If you are eligible for ESRD Medicare, you can enroll in Parts A and B together at any time. Part A will be retroactive up to 12 months, but it cannot start earlier than the first month you were eligible for ESRD Medicare.

Note: If you are a railroad worker with ESRD, you must contact Social Security—not the Railroad Retirement Board—to find out if you are eligible for Medicare.

Because Social Security and Medicare eligibility rules are complex, it is recommended that you call Social Security at 800-772-1213 to get the most accurate information regarding your particular situation.

Consider Keeping Your Life Insurance When You Retire

Do you need a life insurance policy in retirement?
One school of thought questions this decision. Perhaps your kids have grown, and the need to help protect the household against the loss of an income-earner has passed.

If you are thinking about dropping your coverage for either or both of those reasons, you may want to ask yourself a few additional questions before moving forward.

Remember that several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Does your policy have a cash value?
If you have a whole life policy, it may have built a cash value over time. Whole life insurance is designed to remain in force for your whole life, as long as you remain current with your premiums. Before surrendering a whole-life policy, be certain you understand the policy’s features and limitations.

This article is for informational purposes only and is not a replacement for real-life advice, so you may want to consider asking for guidance from a financial professional before modifying your life insurance strategy. Life insurance is not insured by the FDIC (Federal Deposit Insurance Corporation). It is not insured by any federal government agency, bank, or savings association.

Do you anticipate paying estate taxes?
If the value of your estate exceeds federal or state estate tax thresholds, you may owe estate taxes. Life insurance proceeds may help your heirs manage the tax situation, and could prevent the need to sell other assets. Estate tax laws are constantly changing, so you may want to consider speaking with a legal professional, who can provide information on potential legislative changes.

Are you carrying a mortgage?
If you borrowed to purchase your home or have refinanced and are carrying a mortgage, the proceeds for a life insurance policy may help your heirs manage the mortgage payments.

How SECURE 2.0 Might Change Retirement

The SECURE Act of 2019 represented the biggest update to retirement law in over a decade. Now, Congress is deliberating on what “SECURE 2.0” legislation might entail.

In March, the House passed the Securing a Strong Retirement Act with a bipartisan 414-5 vote. The Senate is still weighing numerous proposals for their version, the Rise & Shine Act.

Proposals under consideration include:

• Raising the Required Minimum Distribution (RMD) age to 73
  (eventually 75)
• Increasing catch-up contributions to $10,000
• Creating Roth versions of SIMPLE and SEP IRAs

Reconciling these bills will take time, but it’s clear that SECURE 2.0 could bring about another raft of significant changes for business owners and
employees. As always, I’m keeping an eye out for what you need to know
and will be in touch as events develop.