January 2017
Re: The Eighth Wonder of the World
I learn so much from our children. Recently, Nancy and I had the privilege of celebrating
Thanksgiving with half of them – the girls. Kate is 25, recently married and teaching first
grade for the third year in a row. Meg is delaying her inevitable entrance in the
workforce by attending graduate school. You all know my passion regarding preparing
for retirement, so it should come as no surprise that this topic came up during our time
together. Kate is a young “millennial”, conscientious and concerned about saving for her
and her husband’s future. Meggie is the competitive one - and will not be left behind
when it comes to anything, let alone saving, even though her only current source of
income is from “Rover.com.” Over the years, I have strongly encouraged saving.
Honestly, I’ve even stooped to bribing them to save. An impactful part of our
conversation, that occurred over Thanksgiving dinner, is as follows: “If you save $5,000
a year from age 25 until you’re 65, you will have a million dollars.”(1) That is, $200,000
turns into $1,000,000 - 500% more than the original investment. This exponential
increase in value is due to compound interest. Albert Einstein had an interesting take on
the concept: “Compound interest is the eighth wonder of the world. He who understands
it, earns it….he who doesn’t….pays it.” These young ladies challenged me with some
really good questions, mostly regarding “how much is enough?” to save. We talked
about factors that influence the answer to that question, such as, when they plan to retire,
how long they live and the lifestyle they strive for. The girls were intrigued by that
example - I hope that with our encouragement, they’ll be disciplined enough to do it.
The truth is, a million dollars is probably not enough. Kate and Meg were on the right
track, asking me “how much a million would be worth 40 years from now?” - when they
need to be ready for retirement. Factoring in an increased cost of living, using a 3%
inflation rate, one million dollars, 40 years from now, will have the spending power of
$306,000.(2) I’ve seen how Kate and Meg like to live and am fairly certain that amount of
money will not provide them with the lifestyle they desire.
I enjoy the end and beginning of years. I relish the chance to look back at how events
unfolded. I also look forward to strategizing, setting new goals and planning for the
coming year. Over the past eight years I have monitored a New Year Financial
Resolutions Study.(3) Looking back, 45% said they are in a better financial situation this
year as compared to the same time last year. Looking forward 70% predict that they will
be better off, financially, in 2017. The number of people planning to ring in the New
Year with a “financial resolution” is holding steady, for a second year in a row, at 36%.
If you are not a resolution maker, you might want to reconsider, as the study offers some
good reasons why making a “financial resolution”, can improve your bottom line. People
who made “financial resolutions” at the start of 2016 are(3):
 More optimistic – 52% feel strongly they will be better off financially in 2017
 More debt-free – 45% say they are less in debt this year compared to last year
 More financially secure – 52% say they are in a better financial situation this year
than last
Of those who did not make a “financial resolution,” only 37% strongly agreed that they
will be better off financially in 2017.
I know not everyone is keen on making resolutions. So, I’d like to make you an offer. I
will help you make your “financial resolution.” You deserve financial security and
independence. Let’s get together and review your financial situation, so you can have
peace of mind in good markets and bad. This can be done via what I call a financial
check-up. Why not get a financial check-up? I’ll do the heavy lifting. You simply need
to schedule a time and location that is convenient for you. This check-up will help you
know where you stand and how you can improve, financially. I likely have most of the
information necessary to conduct a comprehensive review. Please contact me, or Shea, to
schedule your check-up soon!
Some fun facts regarding a “million”:
 Benjamin Disraeli first used the word millionaire in his 1826 novel, Vivian Grey.
 Who Wants to Be a Millionaire is an American television game show where
contestants attempt to win a top prize of U.S. $1,000,000 by answering a series of
multiple-choice questions of increasing difficulty. The program has endured as one
of the longest running (18 seasons) and most successful, currently hosted by Chris
Harrison.
 Currently, 9% of U.S. households are millionaires.
 A million grams of salt is only a gallon of salt.
 A million inches is only 15.7 miles.
 A million dollars’ worth of $100 bills weighs only 22 pounds and a million dollars’
worth of pennies weigh 246 tons.
 A million U.S. one dollar bills, would be 361 feet tall and weigh one ton.
 A million minutes is only 1.9 years.
Tax Update
It is time to begin thinking about taxes again. As a result of previous legislative changes,
allowing for more time to issue certain 1099 tax forms, and in an effort to minimize the
number of corrections to those forms, we will be mailing tax information summaries
(Form 1099) in three different waves. The first wave (if applicable to you) goes out by
February 15th. For most clients, a corrected (second wave) of revised 1099s will be
completed by March 1, 2017. MLP K-1 tax forms are usually mailed and available
online at www.taxpackagesupport.com, typically by March 15th. I encourage you to
consider waiting as long as possible to file your taxes as quite often companies
reclassify dividends and make accounting adjustments that cause corrected 1099s to
be re-issued.
The enclosed 2017 Outlook – Navigating a World in Transition report, takes a trip
around the globe, detailing key important economic and investment themes as well as the
portfolio implications from investing in a changing world. Investors in 2017 are facing a
world in transition. The result of the U.S. presidential election and the earlier vote by
British citizens to the leave the European Union potentially reflect populist sentiment that
could well be challenging the decades – long march of globalization.
I like to provide concise, easy to understand, market oriented reports. I have enclosed
two copies of a summary outlook for 2017, titled “2017 Outlook ― Navigating a World
in Transition.” Please pass along the extra copy to a friend or family member. Within
the report are single pages highlighting;
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Political, Economic Uncertainty Signal a World in Transition
Dividend Income Is Hard To Find - Consider Searching Overseas
Sure, Rates Have Been Low for a Long Time- Expect More of the Same
With Election Behind Us - U.S. Consumer Leads Recovery Onward
I encourage you to consider focusing a bit more, this year, on your family’s finances. I
look forward to working with you in 2017. If you have questions about the enclosed, or
any investment matter – please feel free to contact me.
In appreciation of your continued business,
Mike Gegen
Senior Vice President – Private Wealth Management
(1)
Michael G. Gegen
Source: J.P. Morgan Asset Management. Assumes a 7% annual return. The actual
amount would have been $1,142,811.
(2)
By Jeff Desjardins, November 22, 2016, “$1 Million Isn’t Worth What It
Used To Be.”
(3)
Fidelity Investments – 2017 New Year Financial Resolutions Study. December 13
2016.