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Despite significant volatility, stocks ended last week higher after a finalized Greek bailout deal and some upbeat domestic economic data. For the week, the S&P 500 gained 0.67%, the Dow grew 0.60%, and the NASDAQ added 0.09%.1
Greece finally clinched a third bailout from creditors when its parliament approved the deal and Germany backed off its opposition to the terms. The deal isn’t perfect and the International Monetary Fund is refusing to participate until there is an agreement on debt relief from Greece’s Eurozone creditors.2 However, U.S. investors greeted the news that Greece will remain in the monetary union with a sigh of relief. Is the Greek drama finally over? Probably not for long.
China added significant uncertainty last week when the Chinese government unexpectedly devalued the yuan against the dollar by the largest amount in two decades. While China claims that the move isn’t designed to lower export prices and boost demand, the move came after a series of depressing export reports that suggest China’s economy is in trouble. At any rate, China has been under immense pressure to devalue its currency as part of market reforms. Investors are worried that a currency war could put pressure on the dollar and hurt U.S. manufacturers.
Despite panicky media headlines that claimed that the sky is falling, the devaluation really isn’t a big deal.
The Chinese yuan dropped about 3.5% against the dollar in the past year. However, the Euro is down 16.4%, the Canadian dollar is down 15.8%, and the Japanese yen is down 17.0%.3 All told, the U.S. dollar has gained significant ground against the currencies of most of our trading partners. A stronger U.S. dollar means that Americans can afford to buy more foreign products. As First Trust’s chief economist says, “The idea that the Chinese devaluation is going to send ripples of catastrophe across the world is nothing more than a Chicken Little story.”4
A cheaper yuan is like a sale on Chinese goods. Right now, the Chinese economy is showing weakness, and a cheaper currency will hopefully help stoke growth in the world’s second-largest economy. If the move is successful in boosting growth, it will be a big help to the global economy. A more expensive dollar relative to the yuan means that Chinese consumers might end up importing fewer U.S. goods (potentially causing some U.S. firms to suffer in the short term). However, if it’s a sign that China may be allowing the market (instead of its central bank) to set the value of its currency, it’s a net win for global consumers in the long term.
Looking at the week ahead, all eyes will be on China to see whether last week’s currency devaluation will continue. Analysts will also be digging through the official minutes from the latest Federal Reserve Open Market Committee meeting for more hints about how the Fed plans to handle potential threats to economic growth.5
You may have seen Chinese currency called the yuan or the renminbi in media reports and wondered if there was a difference. They are essentially interchangeable terms. Renminbi (meaning “people’s currency” in Mandarin) is the formal term used by Chinese officials, while the yuan is the actual unit of the currency.
There really is a new way to look at retirement.
When our parents’ generation retired, they retired for good. They may have retired at 62 and passed away at 66. Today, we are living longer, healthier lives. Our parents and grandparents were also part of the manufacturing generation. They had to work very hard and the body could only last for so many years. Today, we have transitioned into a service economy where people can work much longer. It’s not uncommon to see people work in their 80’s and 90’s. Now enter ‘serial retirement’ — a name I came up with for those who have several retirements in their lifetime. The fact is, most retirees do not have a plan to go back to work, but after a year or so, some get itchy to do something.
I have seen retirees call it quits at 60, then at 62 go back to help a son’s/daughter’s business for a few years, retire again, a year later get involved in a small business and repeat. I have had clients retire 3 or 4 times with this ‘serial retirement’.
I am not suggesting you have to do this, just be aware that many people are doing this now. However, their 2nd ‘act’ is something they love doing and happen to get paid for it.
In my last book, “Can I Retire?” I talked about how a lot of people are still really unsure about when they can retire and what they need to make it happen. Most people spend a long time just being upset and worrying about the mere thought of retirement. Some people even told me they’d wake up in a sweat wondering whether they’ll ever have enough money to support them through their retirement years. The only real answer to that question is a projection – working out your income in the future; looking at your assets and how you could draw income from those assets.
Saving for retirement is one of the most important tasks you will undertake in your adult life. This book aims to help you achieve this goal by showing you how you can effectively work with your assets and make the most of your years before and after retirement.
While retirement used to be considered by many as the final stage of their lives, it’s actually just the beginning of a new stage of your life. This new stage in life should bring fulfillment. Maybe it’s time for you to travel to places that you’ve never before had the time or means to visit, or indulge in hobbies that were impossible to enjoy because of time restraints. (Please ask about our companion workbook that covers this topic in great detail).
Maybe you’ll even think of it as an opportunity to spend longer hours with your family and friends. Most likely, though, it’s a combination of all of these things.
What retirement should NOT be is a time for worrying about whether or not you can afford travelling to all those places you’ve always wanted to visit, enjoying that hobby you never had time for before, or worst of all, being unsure of whether or not you can afford to retire and live comfortably.
Whether we like to admit it or not, money is just as important during retirement as it is during your working life—maybe even more so actually, since you will no longer have a regular stream of income coming in from your job.
I’m not saying that your income is supposed to stop. On the contrary, by the time you finish reading this book you should have a clear-cut plan as to what you want to do with your life after retirement, including a plan to have various sources of income so that you can enjoy this stage of your life.
By planning ahead, you can ensure that you are financially able to have the lifestyle you want. By considering your goals and your potential financial resources, you’ll be giving yourself the best possible chance of succeeding.
If you are one of the 76 million baby boomers that have recently retired, or soon will, the odds are good that your prime earning years are already behind you, or will be soon.
So now it’s time to focus your financial planning on the distribution years.
The best thing about having a well-thought out plan for your future is that it gives you the luxury of enjoying today and feeling secure that your retirement years are being provided for. It’s about being able to strike a balance between living for today and preparing for tomorrow.
“The willingness and ability to live fully in the now eludes many people. While eating your appetizer, don’t be concerned with dessert.”
A recent study shows that people spend more time planning their own one-week vacation than they do planning for their retirement. Isn’t that crazy? It’s true! People spend more time planning vacations, getting on the Internet, browsing sites like Tripadvisor.com, speaking to/Facebooking their friends, really planning out a nice itinerary, places they want to see, restaurants they want to go to, sites they want to visit. Yet, they don’t have the same enthusiasm when it comes to planning for retirement. Why? After all, what is retirement if not a very long vacation?
I think planning for your vacation is definitely a smart thing to do, having your days planned out and leaving some time out for spontaneity when it comes to a vacation. I haven’t met anyone who doesn’t enjoy planning his or her vacations; it’s a fun activity.
Yet when it comes to retirement planning, people get the heebie jeebies. They don’t want to sit down and plan it, or even think about it, because they are scared. Why not focus that same enthusiasm, that same excitement of planning a vacation on their retirement planning? I always tell people to start off with your destination.
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