Wealth and Wisdom: Week of June 10, 2024

There’s a serious disconnect happening right now – one that seems to be impacting retirees but has implications for anyone planning to retire someday.

On one hand, U.S. companies are paying out cash dividends at a record pace (see Item #2 below). In fact, I read an article in the Wall Street Journal last week saying that Americans earned about $3.7 trillion from interest and dividends in the first quarter of 2024 alone. That’s 26% more income than just four years earlier – far outpacing the rate of inflation over those same four years.

Yet at the same time we’re seeing this surge in investment income taking place, we also note that nearly a third of current retirees are now seriously considering returning to the workplace because inflation has driven up their cost of living (see Item #4). And here’s the irony: economists worry that more income will lead to more spending, which will keep inflation at elevated levels.

So, how is it that America’s retirees can be hurt so much by inflation when their investment income is rising faster than their costs? Simple. A huge percentage of those retirees stopped working without sufficient savings. And even some who could afford to retire invested their life’s savings in ultra-conservative fixed-income vehicles or annuities with fixed payouts that will never increase. They’re trapped in a rising-cost retirement with investments that can’t protect them. It’s back to work.

The answer – as I’ve preached in this very resource for more than a decade – is to invest in things that not only pay a consistent income, but that increase that income over time. That’s exactly what we discussed in last Saturday’s seminar, and it’s a theme that runs through much of this week’s Wealth and Wisdom.

A rare (and bullish) sign for stocks

It’s unusual to see corporate earnings grow while the economy is slowing – but it’s happening now. (Reading time: 2 minutes)

Dividends are at record levels...

U.S. companies have never paid more dividends than they are today – after a 7% jump in the first quarter of 2024 alone. (Reading time: 3 minutes)

…and they’re rising even faster than inflation

Dividends are responsible for more than a third of equity market returns since 1940 – and increased nearly twice as fast as inflation. (Reading time: 2 minutes)

Inflation is pushing many retirees back to work...

After three years of sharply rising expenses, nearly a third of retired Americans are considering a return to the workplace to make ends meet. (Reading time: 3 minutes)

…and some of them are fine with it

Hear about one retiree’s decision to return to work after two and a half years – and the five reasons he did it. (Reading time: 5 minutes)

6 financial milestones to hit by age 60

To have a financially successful retirement, try to have these boxes checked by the time you reach age 60. (Reading time: 4 minutes)

Why Social Security is crucial for women

Women typically earn less, save less, and live longer than men – which makes Social Security decisions even more important. (Reading time: 4 minutes)

Can AI beat Wall Street analysts at picking stocks?

A new study says ‘yes’. But there’s a lot more to financial success than picking investments. (Reading time: 3 minutes)

Dave Ramsey’s advice is raising eyebrows

His books and radio show have helped millions become better off financially – but some of his key recommendations simply don’t hold water. (Reading time: 7 minutes)

4 Priceless Money Lessons for Kids

Summer is a great time to start teaching the next generation about how to handle money. Here’s how to get started. (Reading time: 3 minutes)

Words to the Wise

“How far you go in life depends on your being tender with the young, compassionate with the aged, sympathetic with the striving, and tolerant of the weak and strong. Because someday in your life you will have been all of these.”

– George Washington Carver

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Links are being provided for informational purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brown Family Wealth Advisors and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Expressions of opinion are as of this date and are subject to change without notice. Past performance does not guarantee future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. There is also a risk that these plans may lose money or not perform well enough to cover education costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.
Unless certain criteria are met, Roth IRA owners must be 59 ½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.
Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Brown Family Wealth Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services.
These policies have exclusions and/or limitations. Guarantees are based on claims paying ability of the issuing company. Long Term Care Insurance or Asset Based Long Term Care Insurance Products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59 ½ may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income. The cost and availability of Long Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. Please consult with a licensed financial professional when considering your insurance options.
Dividends are not guaranteed and must be authorized by the company’s board of directors.
Roth 401(k) plans are long-term retirement savings vehicles. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Unlike Roth IRAs, Roth 401(k) participants are subject to required minimum distributions at age 72 (70 ½ if you reached 70 ½ before January 1, 2020).