Friday, January 4, 2013


Market Watch

Well, I have to say the politicians certainly didn’t disappoint me.  Just as I thought would happen, the “political leaders” of our fair land waited until the last possible moment to reach a quite wimpy, less than grand bargain to avoid careening the economy over the fiscal cliff.  While I am pleased they were able to take time from their endless blame game to craft a compromise, I am extremely angry at the complete disregard for working people and retirees exhibited by these so called leaders. 

While they played out their silly drama, the markets relinquished several percentage points worth of gains, which will be reflected as lower returns on the IRA and 401k statements of the average working people they purport to represent.  Although the agreement did spark a triple digit gain on the 31st of December when the Senate passed its compromise, the returns for the year could have been much better had they gotten their act together a month ago.  Alas, we all knew that wasn’t happening.

Fortunately, while the markets were quite skittish during the period between Thanksgiving and the end of the year, we were able to hold onto most of the upside in the market for 2012 and wind up with some respectable gains.  The Dow Jones Industrial Average* finished at 13,104.14 clocking a 7.25% gain for the year.  The S&P 500* closed at 1,421.19 which was a 13.41% annual increase.  The NASDAQ*  ended the year at 3,019.51 adding 15.89%.  Overall, not a bad year to be invested in equities.
If the first day of trading in the new year is any indication of the type of year we are going to have, and we all know it is considered to be a positive indicator, then we are certainly off to a rousing start.  The market has been on an upswing since it bottomed out in March of  2009, and the economy has been on the mend since Gross Domestic Product began growing again in July 2009.  This represents three years and six months of recovery and expansion in the economy, albeit at a less than stellar pace.  I have been saying for some time now this could be a longer than average economic cycle, due to the fact we are growing slowly.  If the politicians can just begin to grasp the concept that the markets like the idea of compromise, perhaps they will start to actually take some problem solving steps toward making Social Security solvent and Medicare sustainable.
Although I’ve been a bit perturbed by the recklessness of Congress and the Administration, the statistics regarding housing, unemployment, retail sales, manufacturing, and GDP lead me to the conclusion there is room for this expansion to continue.  The financial turmoil we have witnessed has been referred to as a “black swan” event, meaning a random, unexpected debacle that deviates beyond what is normally expected of a situation and that would be extremely hard to predict.  However, many people have been so affected by it psychologically, they don’t recognize the improvement and seem to be waiting for the next catastrophe to happen. 
While I am not advocating unabashed enthusiasm for the current situation, I do think the spending cuts needed, which have been deferred for two months, will be enacted.  Hopefully, the politicians will again manage to compromise on the cuts and increase the debt ceiling, which also must be addressed at the same time.

The problems are not insurmountable if addressed.  We will survive as a country, but the politicians will be tarnished by not compromising for the greater good.
2013 Contribution Limits Raised For Many Retirement Plans
There have been some changes in the contribution limits for retirement plans for 2013.  Participants in 401k, 403b and most 457 plans can contribute $17,500, while the catch up contribution for those 50 & older remains at $5,500.  The limit for IRA and ROTH IRA contributions rises to $5,500 and the catch up for 50 and older remains $1,000. 
Contributors to a SIMPLE IRA can contribute $12,000 to their plan in 2013, up from the current level of $11,500.  The catch up for those 50 and older remains $2,500. 
These are a few of the changes the IRS announced, due to statutory triggers being met by an increase in the cost of living index.  All of the changes can be reviewed at the following link:
No inflation, huh?

Update on the Patient Protection and Affordable Care Act
In 2014, under the Patient Protection and Affordable Care Act of 2010, the states are supposed to set up insurance marketplaces or exchanges where individuals and small businesses can go to shop for health insurance policies.  As of the December 14, 2012 deadline, only 17 states and the District of Columbia had established the exchanges.  Seven other states have opted to establish Partnership Exchanges with the Federal Government.  This means the Feds will be involved in running the exchanges in over half of the states.
While this could change going forward, in the states where the Feds are running the exchanges, the chances are there will be a “one size fits all” approach to health insurance.  This would result in exchanges which are less flexible than exchanges tailored to meet challenges specific or unique to each state.  It is hoped the exchanges will create competition between insurance companies and drive down the cost of insurance.
Companies with fewer than 25 employees are not required to offer health insurance, so it is a fairly safe bet the companies that currently don’t offer insurance will continue to not offer it.  Those that do provide health insurance coverage to their employees will have an incentive to drop coverage, which will help the bottom line.  This means employers and employees in companies that employ less than 25 workers will probably be going to the exchanges, despite the convoluted tax credits which are available, provided the insurance and the company qualifies.  Hopefully, the options provided by the exchanges will be more affordable for these individuals.
Businesses with less than 50 employees are also not required to provide health insurance and have no consequences for not providing coverage.  Again, there are tax credits if coverage is provided, but attempting to qualify for them may be an effort many employers with less than 50 employees are not willing to make.  Many companies at this employee level may also choose to simply discontinue health care coverage and utilize the exchanges.
Finally, if a company has 50 or more workers, it is required to provide health insurance for its employees, starting in 2014.  Failure to provide coverage will result in an assessment of $2,000.00 per full time employee, after the first 30.  Furthermore, coverage must meet the definition of affordable, meaning the employer must pay for 60% of the premium and the worker can’t be required to pay more than 9.5% of family income, before deductions and adjustments, for coverage offered by employers.  The policy offered by the employer must also meet a minimum standard for “essential health benefits”.  The outline of this “comprehensive policy” can be found on the website:

Company Information

Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J.  08226
Phone:  609 827 0194
Fax:  609 861 9257
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL  33758-9053
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advisors
 Third Party Administration and Insurance
Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J.  08226
Phone:  609 827 0194
Fax:  609 861 9257
All opinions expressed in this newsletter are solely those of John Kaighn and Jersey Benefits Advisors.

* The S and P 500, the DJIA and the NASDAQ are unmanaged indexes that are widely used as indicators of Market Trends. 
* Past performance does not guarantee future results.  The performance of these indexes does not reflect fees and charges associated with investing.  It is not possible to invest directly in an index.

* Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment.  Saving a portion of our pay each month is very important.  Company sponsored pension plans are one method to save and should be used for retirement.  Other systematic investment accounts, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES  can also be opened, and debited directly from your checking or savings account. For more information, just call to set up an appointment. REFERRALS ARE ALWAYS WELCOME. 
John H. Kaighn