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Trump pushes forward with plan for 25% tariff on imports of steel and a 10% tariff on aluminum.
The Markets
You could almost hear the spurs jingling.

Trade tensions ratcheted higher last week as the United States and China staked new positions on the not-so-dusty main street of trade. It was the latest round of posturing in what has the potential to become a trade war between the world’s largest economies. Barron’s explained:

“The trade battle has escalated since President Trump announced steel tariffs in March. China retaliated to those tariffs with its own duties, and the resulting back and forth resulted in announced tariffs on $50 billion worth of goods on both sides. Late on Thursday, Trump also directed the U.S. trade representative to identify $100 billion more in potential tariffs on Chinese goods.”

It was unwelcome news in financial markets where one-upmanship created uncertainty and unnerved investors. Distress in stock and bond markets may have been exacerbated by analysts’ warnings about worst-case scenarios, including the possibility of China reducing its $1.2 trillion position in U.S. Treasuries and diversifying its foreign exchange reserves into other nation’s currencies, according to Financial Times.

American manufacturing businesses have concerns about supply chain and other issues that may be created by tariffs, reported Forbes. In addition, farmers are bracing for the impact of a potential trade war. The New York Times wrote:

“China’s aggressive response to Mr. Trump’s tariffs is aimed squarely at products produced in the American heartland, a region that helped send him to the White House. A trade war with China could be particularly devastating to rural economies, especially for pig farmers and soybean and corn growers. Nearly two-thirds of United States soybean exports go to China.”

Major U.S. indices finished lower last week for the third time in four weeks. The Dow Jones Industrial Average was down 10.1 percent from its January closing high. Technically, that puts the Dow in correction territory.
Have you ever wondered how students select colleges? Economic theory suggests, “Models of college choice typically assume that high school students are fully informed and choose to apply to and eventually attend a school that maximizes their expected, present discounted value of future wages less the costs associated with college attendance.”

It’s a good theory, if you’re an economist who believes people act in perfectly rational ways. Of course, there aren’t many high school students (or parents) who can explain the present discounted value of something, much less use it as a tool to choose a college. 

The filters on college search tools include criteria that may be more relevant to the decision. College Board’s BigFuture online interactive guide asks students to consider their test scores – as well as a college or university’s geography, size, type, cost, diversity, and support services – among other factors.

Those other factors include college sports. As it turns out, the success of a school’s sports teams plays a significant role in the college selection process for some students. The Journal of Sports Economics published ‘Understanding College Application Decisions: Why College Sports Success Matters.’ It’s the work of economists at the University of Chicago (UC) who found:

“A school that is invited to the NCAA basketball tournament can on average expect an increase in sent SAT scores in the range of 2 percent to 11 percent the following year depending on how far the team advances in the tournament. The top 20 football teams also can expect increases of between 2 percent and 12 percent the following year.”

Having a sports team make it to the Final Four is roughly equivalent to a college adjusting tuition or financial aid by 6 percent to 32 percent or moving halfway up the list on the U.S. News College Rankings, according to UC researchers.

Weekly Focus – Think About It 

“They say that nobody is perfect. Then they tell you practice makes perfect. I wish they'd make up their minds.”
--Wilt Chamberlain, American basketball player

How Much You Should Have Saved For Retirement Throughout Your Life

Retirement Income: the 80% Rule
Most experts say your retirement income should be about 80% of your final pre-retirement salary. That means if you are making $100,000 annually at retirement, you will need income of at least $80,000 per year to have a comfortable lifestyle after leaving the workforce. This amount can be adjusted up or down depending on other sources of income, such as Social Security, pensions and part-time employment, as well as your health and your desired lifestyle.

Total Savings: The 4% Rule
To determine the amount you will need to have saved to generate the retirement income you want, one easy-to-use formula calls for dividing your desired annual retirement income by 4%. To generate the $80,000 cited above, for example, you would need a nest egg at retirement of about $2 million. This assumes a 5%  return on investments  (after taxes and inflation), no additional retirement income (Social Security) and a lifestyle similar to the one you would be living at the time you retire.

Multiples of Your Salary
To figure out how much you should have accumulated at various stages of your life, thinking of a percentage or multiple of your salary at that time can be a very useful tool. Fidelity suggests you should have 50% of your annual salary in accumulated savings by age 30. This requires saving 15% of your  gross salary  beginning at age 25 and investing at least 50% in stocks. Additional savings benchmarks are as follows:
  • Age 40 – two times annual salary
  • Age 50 – four times annual salary
  • Age 60 – six times annual salary
  • Age 67 – eight times annual salary

Another Multiple Formula
Another formula holds that you should save 25% of your gross salary each year, starting in your 20s. The 25% savings figure may sound daunting, but it includes a combination of  401(k)   withholding,   employer match , cash savings and even debt repayment. Following this formula should allow you to accumulate your full annual salary by age 30. Continuing at the same average savings rate should yield the following:
  • Age 35 – two times annual salary
  • Age 40 – three times annual salary
  • Age 45 – four times annual salary
  • Age 50 – five times annual salary
  • Age 55 – six times annual salary
  • Age 60 – seven times annual salary
  • Age 65 – eight times annual salary

How Much Can You Save?
Based on figures provided by the Bureau of Labor Statistics (BLS) in its 2015 “Consumer Expenditures Survey,” the percentage of income left over for workers between the ages of 25 and 74 averages 19.8% on a  pretax  basis. This figure is well above the 15% savings formula above and potentially within the 25% figure, depending on how much comes from things like employer matching and debt repayment. Following is the average pretax percent of income left over after expenditures by age group:
  • 25 to 34: 19%
  • 35 to 44: 23%
  • 45 to 54: 27%
  • 55 to 64: 22%
  • 65 to 74: 8%

The Bottom Line
Given the nearly 20% of gross income savings potential and an actual savings rate of less than 5% of disposable income, most Americans likely have room to increase savings at most stages of their lives.

Whether or not you try to follow the 15% or 25% savings guideline, chances are your actual ability to save will be affected by life events. Sometimes you will be able to save more, sometimes less. What’s important is to get as close to your savings goal as possible and check your progress at each benchmark to make sure you are staying on track.
Best Regards,
Don's Email Signiture
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