Will the Post-Election Stock Rally Last?

Stock indexes staged a broad, post-election rally, as investors pushed aside their concerns about a potential global trade war and a clampdown on immigration, and instead bet that President-elect Trump’s promise of infrastructure spending would propel profits at large industrial companies and his tax cuts would boost the economy. (Irony alert #1: Congressional Republicans have argued that the financial crisis stimulus (the $787B American Recovery and Reinvestment Act) did not work and fought against subsequent infrastructure spending plans as a way to boost economic growth.) While most believe that infrastructure spending would help the economy, the total impact would be largely determined by its size. At one point during the campaign, candidate Trump promised to spend about $550 billion over five years. If there is general agreement on the positive aspects of infrastructure spending, there is little consensus on Trump’s potential tax plan, which in its current form would disproportionately favor wealthier Americans.

According to the Tax Policy Center, by 2025, 51 percent of Trump’s tax reductions would go to the top one percent of earners (those earning more than about $700,000). Yes, the plan would raise the after tax income of middle class Americans by about 1.8 percent, but the top 0.1 percent would see a tax cut of more than 14 percent of after tax income. (Irony alert #2: The Trump tax plan would likely exacerbate income inequality that already exists and could be a surprise to those Trump voters who said that they felt left out of US economic progress.)

Economists caution that there are two other problems with the Trump tax plan: (1) rich people do not tend to spend their tax cuts; rather they redirect the savings into their investment accounts—that’s good for financial markets, but not so hot for the overall economy and (2) the tax cuts would cause a spike in federal debt levels – the plan would increase the federal debt by $5.3 trillion over ten years, according to the nonpartisan Committee for a Responsible Federal Budget. (Irony alert #3: Taken together, the spending and the tax cuts could balloon the national debt to more than 100 percent of GDP within a few years. How will fiscal conservatives make peace with that potential?)

Trump’s spending and tax cuts could help stimulate the economy in the short term, though the combination of those policies could also spur inflation and prompt the Federal Reserve to raise interest rates at a faster pace than currently expected. Under normal monetary policy, a faster rate hike cycle might snuff out a recovery. But some economists are more concerned that under President Trump, there would be a change in the composition of the Federal Reserve Board. (There will be a couple of vacancies next year and Fed Chair Janet Yellen’s term ends in February 2018.) A less disciplined Fed might accept more inflation, leading to higher long-term interest rates and a weak US dollar. A glimpse of how these policies could impact the bond was seen last week: more than $1 trillion was wiped off the value of bonds around the world.

Another area that could see big changes under President Trump is regulation. In addition to easing up on environmental rules, most expect to see a watering down of the Dodd Frank Wall Street reform, which had attempted to reign in the excesses, which contributed to the financial crisis. (Irony Alert #4: A populist President, put in office by an electorate that hates banks, would make life easier for the financial services industry. Financial sector stocks increased by 11 percent last week.)

Under Trump, the Consumer Financial Protection Bureau (CFPB), which was created out of the Dodd-Frank Act, will likely get diluted. In October, a federal appeals court ruled that the CFPB was “unconstitutionally structured” and as a result, the agency should be treated like others, where the president can supervise, direct and change the director at any time. Current CFPB chief Richard Cordray is unlikely to keep his job.

And finally, the big investment firms, which fought tooth and nail NOT to put clients’ interests first, are ready to resurrect their battle to water down the consumer-friendly Department of Labor Fiduciary Rule set to go into effect in April 2017.

MARKETS:

• DJIA: 18,847, up 5.4% on week, up 8.2% YTD (best week of 2016, biggest weekly gain since Dec 2011)
• S&P 500: 2164, up 3.8% on week, up 5.9% YTD
• NASDAQ: 5237, up 2.8% on week, up 4.6% YTD
• Russell 2000: 1282, up 10.2% on week, up 12.9% YTD
• 10-Year Treasury yield: 2.12% (from 1.77% week ago)
• British Pound/USD: 1.2593 (from 1.2518 week ago)
• December Crude: $43.41, down 1.5% on week, 3^rd consecutive weekly loss
• December Gold: $1,224.30, down 6.2% on week, lowest close since early June and worst weekly loss since June 2013
• AAA Nat'l avg. for gallon of reg. gas: $2.18 (from $2.22 wk ago, $2.20 a year ago)

THE WEEK AHEAD:

Mon 11/14:

Tues 11/15:

Home Depot

8:30 Retail Sales

8:30 Empire State Manufacturing

8:30 Import/Export Prices

Weds 11/16:

Cisco, Lowe’s, Target

8:30 PPI

9:15 Industrial Production

10:00 Housing Market Index

Thursday 11/17:

Wal-Mart, Staples

8:30 CPI

8:30 Housing Starts

8:30 Philly Fed Business Outlook

10:00 E-Commerce Retail Sales

Friday 11/18

10:00 Leading Indicators

#297 How Does Trump Win Affect Your Money?

We talk about President-elect Donald Trump and what it means to you and your money plus some financial planning advice with guest Paul Auslander.

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Whew, what a week.  Trump beat Clinton.  Stocks tanked.  Trump spoke in the wee hours of Wednesday morning.  Stocks rallied.  And continued to rally throughout the week.  Which led to me being inundated with questions from readers/listeners/viewers, the most common one being, "what should I do with my retirement account?"  Yes, I have the answer...but come on now, it's not gonna be that easy...you'll have to listen to the show for the answer!

Now, as we near the end of 2016, it's a good time to take a crash course in financial planning.  Who better to teach it than Paul Auslander, Director of Financial Planning at ProVise Management Group.

For nearly 30 years Paul has been designing and implementing strategies for his clients with one goal in mind...to help them worry less about their financial futures.  While trying to help our listeners worry less, Paul touched on a variety of topics, including:

• The implementation of the fiduciary standard for retirement accounts
• Commission based products
• Fee only planners
• Likelihood of the Fed raising rates
• Low return environment for 2017

A little bit of something for everyone!

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how to contact us:

• Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

• Send an email: askjill@jillonmoney.com 

• Tweet us: @jillonmoney and @MTalercio

Trump Wins: What Should Investors Do Now?

Defying the polls and odds, Donald J. Trump won the Presidential Election. As the results became clear on the evening of November 8th, financial markets around the world reacted swiftly: stocks plunged (at one point during the overnight session, US futures were down 5 percent, indicating a more than 800 point wipe out for the Dow Jones Industrial Average), the Mexican peso cratered by 13 percent, the US dollar tumbled and safe havens like gold, US Treasury bonds and the Japanese yen, jumped. Then a strange thing happened: as Mr. Trump spoke in the wee hours after capturing enough Electoral College votes to win, markets started to reverse course, as investors seemed to take some comfort in his conciliatory tone. By the time they rang the opening bell on the day after the election, stocks had steadied and actually closed higher on the session. So much for predictions of stock market crashes, at least in the short term!

So what happened over the course of 18 hours? It could be that investors may have learned a lesson from the UK Brexit vote. After that unexpected outcome in June, US stocks were down 5 percent in the subsequent two trading sessions, but then slowly marched back up, as investors concluded that it would take a long time to figure the impact of Great Britain’s departure from the European Union.

While investors had been concerned about some of candidate Trump’s campaign rhetoric on trade and immigration, in the immediate aftermath of the election, it was hard to measure the impact on the US and global economy as well as what future policies could mean for corporate earnings. Still, hours after the results came in, I was inundated with reader/listener/viewer questions that went something like this: “What should I do with my retirement account?” The answer for long-term investors is clear: ABSOLUTELY NOTHING!

Unexpected events can create market volatility—both to the upside and the downside, which can lure you into feeling like you should do something. Try to resist that urge by reminding yourself that you are not investing for the next four weeks, four months or even four years--you are trying to build your nest egg beyond those time frames. And even if you were planning on retiring at the end of this year, you aren’t likely to pull all of your money from your account at once – you need it to last for decades in the future. In other words, you are not investing to retirement; rather you are investing through retirement.

That’s why you have created a diversified portfolio, based on your goals, risk tolerance and time horizon - because over the long term, this strategy works. Yes, the unknown is scary and can lead to market volatility, but you have to refrain from being reactive to short-term market conditions. It’s not easy to do, but sometimes the best action is NO ACTION.

If you were freaked out when you saw big numbers on the downside, maybe your portfolio has too much risk. If that’s the case, you may need to readjust your allocation to better align with your risk tolerance. If you do make changes, be careful NOT to jump back into those riskier holdings after markets stabilize. Conversely, if you were kicking yourself for not being fully invested as stocks swung back to the upside, you might need to hold your nose and get back in. Battling emotions is something every investor encounters-one way to help you out is to establish auto-rebalancing for your accounts, which can help take fear and anxiety out of the investment process.

Here are some (early) potential financial/regulatory outcomes that could arise from the 2016 Election:

• Markets: Volatility will continue until there is greater clarity on the Trump Administration’s priorities
• Trade: The Trans Pacific Partnership is likely a dead deal, but how Trump “renegotiates” NAFTA or goes after China as a currency manipulator will be key in determining whether or not he could ignite a global trade war.
• Taxes: Trump’s plan will come under closer scrutiny, because his trillions of dollars worth of tax cuts could balloon the national debt to more than 100 percent of GDP within a few years. How will fiscal conservatives make peace with that potential?
• Federal Reserve: On course to raise interest rates at the December meeting, but some Governors might step down after that occurs. President Trump can make appointments to the FRB to fill vacancies, but he is stuck with Chair Janet Yellen until her term ends in February 2018.
• Consumer Financial Protection Bureau (CFPB): In October, a federal appeals court ruled that the CFPB was “unconstitutionally structured” and as a result, the agency should be treated like others, where the president can supervise, direct and change the director at any time. Current CFPB chief Richard Cordray is unlikely to keep his job.
• Dodd Frank: Would be one of the great ironies to have a populist President, put in office by an electorate that hates banks, lighten up the regulatory impact stemming from the financial crisis.
• Department of Labor’s Fiduciary Rule: The rule is set to go into effect in April 2017. Get ready for big investment firms, which fought tooth and nail NOT to put clients’ interests first, to resurrect the battle and to water down this consumer-friendly rule.

Financial Coaching

What have we learned since the financial crisis and Great Recession? Not so much, according to research from the FINRA Investment Education Foundation (“FINRA”). In its study, “Financial Capability in the United States 2016,” the percentage of respondents who were able to answer at least four out of fine financial literacy quiz questions correctly, has fallen slightly since 2009. The questions covered what FINRA thought respondents might run across in their day to day lives, like concepts involving interest rates and inflation, principles relating to risk and diversification, the relationship between bond prices and interest rates, and the impact that a shorter term can have on total interest payments over the life of a mortgage.

And the survey says? Only 14 percent of respondents were able to answer all five questions correctly and just 37 percent answered at least four questions correctly. Despite those disappointing results, there was another odd finding: people overestimated their financial knowledge. 76 percent of respondents gave themselves high marks, but “less than two-thirds (64 percent) are able to do two simple calculations involving interest rates and inflation, and only 40 percent are able to correctly calculate compound interest in the context of debt.”

You might think that the answer to these dismal results is to amp up financial literacy efforts, but research suggests education alone may not lead to better financial choices. A separate study commissioned by the Consumer Financial Protection Bureau and conducted by the Urban Institute, found that “many consumers need more than access to information-they may also need someone to help them to identify and achieve their financial goals. A financial coach can serve as a capable and trusted guide to help consumers navigate those decisions.”

With that said, consider me your financial coach, ready to explain a couple of basic financial concepts. The most vexing question for respondents of the FINRA survey related to the amount of time it would take for debt to double, “illustrating that many Americans simply do not understand the potential power of compounding.”

One of the easiest ways to think about compounding is to review the “Rule of 72,” a way to figure out the number of years required to double your money at a given interest rate. For example, if you want to know how long it will take to double your money at six percent interest, divide 72 by six and you get 12 years. You can also use the Rule of 72 to think about debt. If you pay 15 percent interest on your credit cards, the amount you owe will double in 72/15 or 4.8 years.Top of Form

Although compounding was tough for respondents, the worst performance on the FINRA study was a question about how bond prices respond to rising interest rates. Only 28 percent of people answered that one correctly.

You may have heard that “bond prices move inversely to interest rates” – here’s why. If you own a 10-year US government bond that is paying 5 percent, it will be worth more now, when new bonds issued by Uncle Sam are only paying 1.8 percent. Conversely, if your bond is paying 2.5 percent and your friend can purchase a new bond paying 5 percent, nobody will be interested in your bond and the price will fall. That’s why bond prices move in the opposite direction of prevailing rates, regardless of the bond type. So, if interest rates are on the rise, it is likely that your individual bond or bond mutual fund will drop in value.

If you need more financial concepts explained, send them over to your financial coach…askjill@jillonmoney.com!

Election Surprises and Stock Markets

Last week (What Would Spook Markets?), I focused on recent research conducted by economists Eric Zitzewitz and Justin Wolfers, which concluded that a Trump victory would “reduce the value of the S&P 500, the UK, and Asian stock markets by 10-15 percent...and would significantly increase expected future stock market volatility.” There may be some proof to this thesis: As Trump’s numbers have improved, stocks have responded in kind by dropping: the S&P 500 has dropped for nine consecutive sessions, for a total of a 3.1 percent slide. The numbers still favor Clinton, but this has been a strange year, so it is worth looking back to other presidential shockers. 68 years ago, Republican Thomas Dewey was thought to be the favorite and according to analysts at Capital Economics, “the polls caused the stock market to rally in the weeks leading up to the election. However, the shock re-election of incumbent President Harry Truman caused the S&P 500 to fall by more than 10 percent over the next two weeks.”

Finally, given Trump’s vow to fight the results, if the race is close, it is instructive to consider how a contested election result might play out for investors. In 2000, when the country had to wait for the Supreme Court to weigh in on a recount, there was a clear negative market reaction: stocks dropped by almost 5 percent during the week after the election and remained volatile during the 36-day period after polling day.

October Jobs Report:The labor market recovery continued in October, as the economy created 161,000 jobs and the unemployment rate edged down to 4.9 percent, mostly in line with expectations. Beyond the headlines, there were three positive data points in the report: the August and September results were revised higher, bringing the average monthly gain for 2016 to 181,000 jobs; average hourly earnings rose, pushing up the annual increase by 2.8 percent, the fastest monthly growth since June 2009 and an especially impressive number, considering that inflation is running at about 2 percent; and the broader measure of unemployment, which includes those who have stopped looking for jobs and those working part-time for economic reasons fell to 9.5 percent, the lowest level since April 2008. (Note: Although a lot of Americans are working part time, almost all of the 11 million jobs added since the recession officially ended in mid-2009 have been full-time positions.)

At the Federal Reserve policy meeting last week, the central bankers noted that “the case for an increase in the federal funds rate has continued to strengthen, but decided, for the time being, to wait for some further evidence of continued progress toward its objectives.” Consider the October jobs report as further evidence that will help bolster the Fed’s case for a quarter-point interest rate increase at the December 13-14 meeting. Traders are betting on it…according to the futures markets, there’s a 75 percent chance of that outcome.

MARKETS:

• DJIA: 17,188 down 1.5% on week, up 2.7% YTD
• S&P 500: 2085, down 1.9% on week, up 2% YTD (9 consecutive losing sessions, longest losing streak since Dec 1980)
• NASDAQ: 5046, down 2.8% on week, up 0.8% YTD
• Russell 2000: 1163, down 2% on week, up 2.4% YTD
• 10-Year Treasury yield: 1.77% (from 1.85% week ago)
• British Pound/USD: 1.2518 (from 1.2186 week ago)
• December Crude: $44.17, down 9.5% on week
• December Gold: $1,306.90, up 2.2% on week
• AAA Nat'l avg. for gallon of reg. gas: $2.22 (from $2.22 wk ago, $2.21 a year ago)

THE WEEK AHEAD:

Mon 11/7:

3:00 Consumer Credit

Tues 11/8: Election Day

CVS, News Corp

6:00 NFIB small-business optimism index

10:00 Job Openings and Labor Market Turnover (JOLTS)

Weds 11/9:

Viacom, Wendy’s

Thursday 11/10:

Kohl’s, Macy’s, Walt Disney

Friday 11/11: Veterans Day: Bond Markets and Banks CLOSED, Stock markets OPEN

10:00 Consumer Sentiment

#296 Boost Your Savings Account Rates

Sick of low interest rates for your safe money?  DepositAccounts.com founder Ken Tumin joins us to explain how to find better rates.

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Tired of your money earning little to no interest as it sits in the bank?  Us too!  That’s why after years of referencing DepositAccounts.com, we thought it was a good time to actually chat with the man behind it all.  Ken Tumin!

Ken founded the site in 2005, originally as a blog and a side hobby. Little did he know that the blog would go gangbusters, allowing him to leave his full-time job and focus on helping you, the user, get the most bang for your buck.  Along with in-depth reviews, the site displays nearly 300,000 rates for savings accounts, checking accounts, CDs, IRAs and more.  Ken and his team cover it all by tracking national banks, regional and local banks and credit unions.  Do yourself a favor and check it out, chances are you'll find a better option in just a few clicks.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how to contact us:

• Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

• Send an email: askjill@jillonmoney.com 

• Tweet us: @jillonmoney and @MTalercio

Obamacare 2017 Update

Open enrollment has started for individual health care coverage under the Affordable Care Act, aka “Obamacare,” making now a good time to check in on the program. As a reminder, most Americans are insured through their employers (150 million), Medicare (57 million), Medicaid/CHIP (nearly 73 million) or through Veterans Affairs (6.7 million). However, if you are one of the 11 million people who are covered by ACA or plan to purchase coverage, here are some important dates:

• Nov 1, 2016: The first day you can enroll, re-enroll, or change health plans for 2017.
• Dec 15, 2016: Deadline for coverage starting Jan 1, 2017.
• Jan 31, 2017: Last day to enroll in or change a 2017 health plan. After, you can enroll or change plans only if you qualify for a Special Enrollment Period.

By now you have probably heard that the average premium for a mid-level Obamacare plan is set to spike by an eye-popping 22 percent in 2017. The increase should not significantly affect the more than 80 percent of enrollees who qualify for premium tax credits to make coverage more affordable. (To qualify, income must be between 100 percent ($24,300 for a family of four) and 400 percent ($97,200 for a family of four) of the Federal Poverty Level. These are the 2016 amounts-2017 will not be available until January).

Even if you did not qualify for a premium credit last year, you should check again this year. According to HHS, “of the nearly 1.3 million HealthCare.gov consumers who did not receive tax credits in 2016, 22 percent have benchmark premiums and incomes in the range that may make them eligible for tax credits in 2017. In addition, an estimated 2.5 million consumers currently paying full price for individual market coverage off-Marketplace have incomes indicating they could be eligible for tax credits.”

Why are premiums rising by so much?

(1) Not enough young, healthy people have enrolled. When conceiving the plan, the government aimed to enroll a large portion of 18-to-35 year olds to help keep premiums lower. The goal was to have over a third of participants in the ACA plans in this cohort, but currently, they represent just over a quarter of the marketplace. Part of the issue may be that the penalty for not carrying insurance (the “individual mandate”) is too low. Yes, you read that correctly – too low! For 2016, the annual fee for not having insurance is $695 per adult, up from $295 in 2015 and $95 in 2014. For many young people, paying the fee may still be cheaper than the cost of health care insurance and deductibles.

(2) Those who did enroll, regardless of age, needed more care than anticipated. This is known as “adverse selection”, which occurs when buyers have better information (i.e. “I know that I am unhealthy and need lots of medical services”) than sellers, which results in the highest cost consumers purchasing more insurance.

(3) Insurers likely underpriced the plans initially. That may have been an actuarial error based on expectations of who would enroll (see 1 and 2), but regardless, it has led to some insurers exiting the program all together, especially in low-population areas.

The combination of the three issues has led to a smaller overall plan with rising costs. In these early years of Obamacare, what is clear is that more Americans have health coverage – the uninsured rate has fallen to the lowest rate on record. What remains unanswered is whether the government can rejigger incentives (increase the mandate, keep more insurers in the plan) to keep a lid on costs.

Halloween Special: What Would Spook Markets?

With Halloween looming, what might spook markets during the last two months of the year? Let’s start with this week’s Federal Reserve policy meeting. Investors believe that there’s about a zero chance that the central bank will increase rates this week, especially given that the two-day confab occurs less than a week before the presidential election. (The futures market implies a 75 percent chance of a December rate hike.) That said, there could be an argument that the stronger than expected 2.9 percent annualized gain in third-quarter GDP growth confirms that the economy has recovered smartly from the little over one percent rate seen in the first half of the year and could easily absorb another quart-point hike. In minutes from the September FOMC meeting, “Members generally agreed that the case for an increase in the policy rate had strengthened” and the advance reading of Q3 GDP only adds to that case. A surprise November rate hike would quell Donald Trump’s rhetoric that the fed does “political things” and that fed officials are “not doing their job” and it would also underscore Chair Janet Yellen’s assertion, “that partisan politics plays no role in our decisions about the appropriate stance of monetary policy”. While a November rate hike is unlikely, its occurrence would be a major-league negative shock to the markets.

Another factor that could spook markets would be a significant downshift in job creation. This week’s employment report is expected to show that the economy added 175,000 new jobs in October, slightly ahead of September’s 156,000. Over the past year, there have been nearly 2.5 million jobs created and the unemployment rate has hovered around 5 percent. The reason the rate has not dropped more significantly is because of a concurrent increase in the labor force over the past 12 months. However, if the employment landscape dims in the final two reports of the year, it is likely to cause stocks to tumble and it would also increase the chatter about a looming recession.

By far, the biggest near term risk to markets is a different outcome to the presidential election than what is expected. In other words, a Trump victory may cause a significant selloff, according to recent research conducted by economists Eric Zitzewitz and Justin Wolfers. In their paper, “What do financial markets think of the 2016 election?” the authors looked at currency, stock, bond and options markets globally, and concluded “Given the magnitude of the price movements, we estimate that market participants believe that a Trump victory would reduce the value of the S&P 500, the UK, and Asian stock markets by 10-15 percent...and would significantly increase expected future stock market volatility.” To put that into perspective, the day after the surprising Brexit vote, the Dow Jones Industrials fell by over 3.4 percent, or 611 points, before recovering ground. A ten percent drop in the Dow based on Friday’s close would mean a plunge of more than 1800 points! That’s about as spooky an outcome as any investor might imagine.

Proof of the thesis was seen on Friday afternoon. After news emerged of a renewed FBI investigation into Clinton's e-mails, US stocks dropped, the Mexican peso tumbled and the safe haven of gold gained ground.

MARKETS:

• DJIA: 18,161, up 0.09% on week, up 4.2% YTD
• S&P 500: 2126, down 0.7% on week, up 4% YTD
• NASDAQ: 5190, down 1.3% on week, up 5% YTD
• Russell 2000: 1187, down 2.5% on week, up 4.6% YTD
• 10-Year Treasury yield: 1.85% (from 1.74% week ago)
• British Pound/USD: 1.2186 (from 1.2227 week ago)
• December Crude: $48.66, down 4.2% on week, first loss in six weeks
• December Gold: $1,282.10, up 0.7% on week
• AAA Nat'l avg. for gallon of reg. gas: $2.22 (from $2.22 wk ago, $2.19 a year ago)

THE WEEK AHEAD:

Mon 10/31:

8:30 Personal Income and Outlays

9:45 Chicago PMI

10:30 Dallas Fed Mfg Survey

Tues 11/1:

Coach, Pfizer

Motor Vehicle Sales

FOMC Meeting Begins

9:45 PMI Manufacturing Index

10:00 ISM Mfg Index

10:00 Construction Spending

Weds 11/2:

Clorox, Fitbit, Time Warner, Whole Foods

8:15 ADP Private SecotrEmployment Report

2:00 FOMC Policy Announcement

Thursday 11/3:

CBS, GoPro, Kraft Heinz, Starbucks

8:30 Productivity and Costs

9:45 PMI Services Index

10:00 Factory Orders

10:00 ISM Non-Mfg Index

Friday 11/4:

8:30 October Employment Report

8:30 International Trade

#295 Clinton vs Trump, By the Numbers

With just over a week until the election, it's time to take measure of Clinton vs. Trump, by the numbers. Thankfully our guest Jeffrey Levine, Chief Retirement Strategist and Director of Retirement Education with Ed Slott’s Elite IRA Advisor GroupSM as well as CEO and Wealth Advisor with BluePrint Wealth Alliance, helped us sort through the candidates' plans.

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• Download this week's show (MP3)

Medicare/Social Security: Both candidates want to slow the pace of health care costs by allowing Medicare to negotiate with drug manufacturers, but similarities stop there.

Although Trump called for privatizing Social Security in the past, he recently said he wants to keep the government plan in place because he believes it would be “honoring a deal.” He plans to address “the tremendous waste, fraud, and abuse in the program. But we’re not going to hurt the people who have been paying into Social Security their whole life and then all of a sudden they’re supposed to get less.” Trump's stance has generally been that he will do everything in his power to avoid touching Social Security – a position that doesn’t actually jive with that of many other Republicans – but he postulates that he will be able to do this my merely cutting waste and growing the economy. This would seem to be an incredibly difficult, if not impossible task, even using the most optimistic of projections.

Clinton wants to create a caregiver credit “that prevents penalizing those who are out of the workforce due to caring for others,” which sounds great in theory, but Levine has some serious questions as to how it would actually work in the real world. To beef up the SS retirement system, Clinton “opposes raising the full retirement age, privatization of Social Security, and any reduction in benefits or cost-of-living adjustments (COLAs)."  Levine notes that when Social Security was established, the average life expectancy was far less than what it is today, and yet the full retirement age has only increased by one year over that time. Consider that in 1940, roughly 54 percent of men and 61 percent of women surviving to age 21 lived to reach age 65. Fast forward 50 years and, by 1990, about 72 percent of men and nearly 84 percent of women could expect the same results. Under a Clinton administration, the Social Security Wage Base (currently $118,500 in taxable earnings), would increase.

Historically speaking, roughly 90 percent of earned income was subject to Social Security taxes. As the wealth and income gaps have widened in recent years though, that number has dropped closer to 83 percent. To restore that mark closer to historical norms, Clinton would need to raise the Social Security earnings cap to about $250,000 – a massive increase from where we stand today. It should be noted that even with no cap whatsoever, other changes would still have to be made to keep Social Security solvent over the long run. Clinton also seeks to make income other than earnings subject to Social Security taxation. This too, would represent a major change.

Taxes The following are tax plans to date according to the candidate’s websites and the Associated Press.

Under a Trump administration, the following tax changes have been suggested:

• Reduce the seven tax brackets to just three, at 12 percent, 25 percent and 33 percent, and cut the top income tax bracket to 33 percent from its current level of 39.6 percent.
• Cut the corporate rate from 35 percent to 15 percent, also cutting taxes on “pass-through” business income for small businesses to 15 percent.
• Eliminate the estate tax, which, as of 2016, has a $5.45 million exemption ($10.9 million for married couples) and a 40 percent tax.
• Steepen the phase-out of itemized deductions under the existing Pease limitation, which currently phases out deductions at 3 percent for every dollar that adjusted gross income exceeds $300,000 ($250,000 if single).
• According to the Tax Policy Center, Trump’s tax proposals would add a $11.2 trillion to the national debt over the next decade. Trump has largely disputed such estimates, citing that under his leadership, economic growth would double to about 4 percent, leading to more workers,. better paying jobs, and thus, more revenue.

Under a Clinton administration, the following tax changes have been suggested:

• Increase several taxes on wealthier Americans, including a 4 percent surcharge on incomes above $5 million, effectively creating a new top bracket of 43.6 percent.
• Imppose a minimum 30 percent tax rate on income above $1 million a year
• Cap deductions for wealthier taxpayers.
• Increase the estate tax exemption to former 2009 parameters of 3.5 million ($7 million for married couples), with the tax rate of 45 percent.
• Maintain current tax levels for the bottom 95 percent of taxpayers, which according to the Tax Policy Center and the most recent income and tax data released by the IRS and reported by the Tax Foundation, would mean those who earn income of $179,760 or less annually. That said, the Clinton campaign has said taxes would not rise for those making less than $250,000.
• Clinton has proposed expanding the child tax credit by doubling the credit to $2,000 per child.
• Clinton's tax proposals – when viewed in isolation – are estimated to reduce the national debt by $1.2 trillion over the next decade. However, when adding in other proposals, the national debt would increase by more than $10 trillion.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how to contact us:

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Overlooked Corporate Benefits

It’s open enrollment season for employee benefits, but if you are like most people, you will probably default to what you did last year. That’s a shame, because spending some time with your various plan options can help you save money and take advantage of your company’s buying power. Here are some overlooked and underused corporate benefits: Health Insurance: For the 150 million Americans, who participate in employer-sponsored health insurance plans, there is some good news. A recent Kaiser Family Foundation survey found that the average family premium costs increased by just 3 percent between 2015 and 2016, to $18,412, a continuation of a trend that has been going on for the past 15 years.

Unfortunately, the news is not all good. Employees are shouldering a larger part of overall health care expenses, due to sizable increases in deductibles, which have soared by 49 percent since 2011 to an average of $1,478. Some of that big jump is due to the use of high deductible health insurance plans, which can help families decrease their monthly premium payments.

With out of pocket expenses moving higher, not enough people are using Health Savings Accounts (HSAs), which allows you to pay for those unreimbursed costs, with Uncle Sam’s assistance. HSA contributions are either pre-tax or tax-deductible; you control how the contributions are invested; earnings and interest are tax-free; and withdrawals for qualified medical expenses are tax-free. And unlike flexible savings accounts, HSAs have no “use it or lose it” clauses, so you can rollover your contributions year after year, regardless of where you are working. Plus, once you reach age 65, all non-medical withdrawals are taxed at your current tax rate.

Insurance: Many companies offer affordable group rates for life, disability and long term care insurance, so you should definitely explore these options. This is a case where the buying power of a big group can help you find coverage that may not be available in the open market, especially when it comes to disability and long term care insurance, both of which are notoriously expensive in the private market. The most important thing to determine is whether the coverage is "portable", which means that you can take the policy with you, if you leave the company.

Retirement: More than half of large employers offer Roth 401ks to plan participants, yet only about 10 percent of employees are using them. With a Roth, workers make contributions using after-tax dollars and then they are able to take tax-free withdrawals at retirement. Roth 401ks are great for those who expect their tax brackets to rise in the future and higher income employees as well, because, Roth 401ks are not subject to minimum distribution requirements after age 70½, as long as they are rolled over to a Roth IRA.

Miscellaneous benefits: Only about 5 percent of employees use stress and mental health counseling services called Employee Assistance Programs (EAPs). The reasons that workers steer clear include: they don’t think EAPs are confidential, even though they have robust privacy protections under HIPAA; they feel there is a stigma associated with reaching out for help; they erroneously think they have to ask permission from the company; or they don’t know the services exist.

Anther valuable benefit that is going unused is company-based reimbursement for continuing education expenses for undergraduate, graduate and certificate classes. The time commitment necessary for extra coursework, as well as the requirement that workers’ earn at least a “B” to qualify for reimbursement from many companies, scares off a slew of would-be academic part-timers. Finally, corporate discounts and partnerships may help you save on cell phone contracts, computers and even on tickets to local events.