😁 Stocks hit a new high

and why avoid early Social Security payments

Morning Download 

Personal finance + economics + markets

Good morning investors! It’s probably time to change your investing strategy because rates are preparing to go down.

Today we cover:

  • Fed announces rate cuts for 2024.

  • Stocks hit a new high.

  • Why to avoid early Social Security payments.

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🔈 Audio version: Apple Podcasts | Spotify | YouTube

📊 Economy and News 

It’s official, rate cuts are coming in 2024

On Wednesday, the Federal Reserve maintained its primary interest rate unchanged for the third consecutive occasion and paved the way for numerous reductions anticipated in 2024 and beyond. The decision entails maintaining the benchmark overnight borrowing rate within the range of 5.25% to 5.5%.

In addition, official announced three rate cuts for the next year. This is lower than market expectations but higher than what the Fed had originally indicated. However, the market is anticipating 1.5 percentage points in reductions next year, twice the FOMC’s indicated pace.

This will end a cycle that has seen 11 hikes, pushing the rate the highest in 22 years.

What about later? We might see some more cuts in 2025, eventually pushing the rate down to between 2%-2.25%. 

Global hits:

📈 Stocks

S&P 500 4,707.09 (+1.37%)
DJIA 37,090.24 (+1.40%)
NASDAQ 16,562.37 (+1.27%)
BRENT CRUDE 74.69 (+0.66%)
* Prices as of Dec 14th, 12:20 AM UTC

Dow hits a new high

The Dow Jones Industrial Average jumped to a new high yesterday to close at 37,090.24 for the first time. The previous record was slightly under $37,000 set in January 2022.

But why? The central rate predicted three rate cuts next year, helping boost confidence in stocks. But, not all companies saw a new high. Some fell:

  • Shares of Pfizer fell after the drugmaker forecast 2024 revenue and profit below Wall Street’s expectations.

  • Etsy Updated its fourth-quarter guidance and is now expecting its adjusted EBITDA margin to be between 27% and 28%, up from previous guidance of 26% to 27%. This news, coupled with the company’s decision to fire 11% of its workers, pushed it down 2.16%.

Which of these statements is UNTRUE?

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đŸ’” Personal Finance

Here’s why you should not take early Social Security payments

The monthly benefit you receive from Social Security depends on various factors, including the amount you have contributed to the system throughout the years and the timing of your decision to begin collecting benefits.

The best option is to claim benefits at the ‘designated’ age (posted above) so you can receive your full benefit amount. But, it is possible to opt for early payments at 62 in exchange for lower benefits:

Most people opt for early payments because they don’t feel they’d love enough to enjoy full benefits or they need money. In fact, about 36% of eligible men and 39% of eligible women claimed benefits at age 62 in 2008.

Early payments, however, aren’t recommended due to these reasons:

  • You will receive reduced benefits for the rest of your life if you claim before the full age. For example, individuals born in the 1960s or later will receive 30% less each month if they choose to avail benefits at 62 compared to receiving benefits until attaining the full retirement age.

  • You’ll get less money due to the living adjustment concept that accounts for inflation. Beneficiaries will receive a 3.2% increase next year (8.7% in 2023). So how does it impact you? Look at numbers. Someone born between 1943 and 1954 who currently receives a full monthly benefit of $2,000, for example, will receive an extra $64 each month.

  • You will lose money if you earn more than the ‘designated’ amount. In 2023, you’ll lose $1 from your benefits for each $2 you earn above the limit that is $21,240 this year and will go to $22,320 in 2024. If you turn full retirement age in 2023 or 2024, it will deduct $1 from your benefits for each $3 you earn above $56,520 until your birthday month. Not many people consider it a con since since this money is returned once you reach the full retirement age, but it means less to spend in the meantime.

Is a reversal possible?

It is common for people to regret opting for early benefits. Fortunately, there is a way to reverse the situation. Called a withdrawal, this feature allows users to cancel an application for up to 12 months after becoming entitled to retirement benefits.

This option can be exercised just once and users will have the option to reapply for benefits at a later stage. However, remember that you will have to repay any Social Security benefits you received, including any money that was withheld from your benefits to pay Medicare premiums, if you choose to withdraw.

Check this video for more tips, including the dangers of delaying SS:

💰 Be a Better Investor

“Although it’s easy to forget sometimes, a share is not a lottery ticket
 it’s part-ownership of a business.”

Peter Lynch

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.