Yellen Opens Door for 2016 Rate Hike

The Federal Reserve kicked off its annual monetary policy meetings in Wyoming today.  In the past, Fed officials have used this meeting to review and adjust their current monetary policies.  Financial markets have been fixated on every move the Fed makes (or doesn’t make) so the outcome of this meeting has been highly touted.  This morning, Fed Chair Janet Yellen issued prepared remarks and said, “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.”  These remarks re-opened the possibility that a rate hike could happen as soon as the next Fed meeting, scheduled for September 20th and 21st.  This means the Labor Department’s August jobs report will be crucial; if the jobs gain for August is very strong, the Fed will likely have the green light to raise interest rates.  However, if we see another weak month (like we did in May), the hike will be delayed.  The Labor Department is scheduled to release its data on September 2nd, the Friday before a long weekend, meaning the data will have plenty of time to be digested by market participants.

Should the Fed keep rates unchanged in September, we expect that Yellen will make remarks to leave the possibility open for a rate hike in the next two meetings in 2016, which are in November and December.  All told, it is becoming increasingly likely that we will see a rate hike in 2016.  After Yellen spoke this morning, the “odds” of a rate hike in 2016 went from 42% to 56%.  Remember, after the Brexit vote in June, the rate hike odds were less than 10%.

 

Existing Home Sales Fall:

The National Association of Realtors released a report yesterday showing existing home sales declined in July month over month for the first time since February.  This was largely a result of rising prices and a limited supply of available homes.  Overall, existing home sales decreased 3.2% to an annualized 5.39 million.  Strangely, the hottest markets were the ones that saw the biggest decline in sales as buyers shunned rising prices in markets like Denver and California.  Meanwhile, the inventory of existing homes for sale continues to fall, creating what the Realtor group considers a very tight market, supply-wise.  On the flip side of that coin, the limited supply helped fuel a 5.3% year-over-year gain in the median home price to $244,100 in July.

 

Prepaid Funeral Expenses:

One of the most expensive events for individuals is one that they don’t even get to enjoy. The funeral. It’s a topic that many would prefer to avoid, much less discuss with family members and loved ones, but leaving the planning decisions up to your survivors can be an overwhelming experience during their time of mourning for your loss.

One way to relieve your families of these decisions is to prepay for the funeral and designate your preferences.  Many don’t take into consideration the cost of a funeral, but according to the National Funeral Directors Association, the average cost of a funeral is about $6,500. This number doesn’t include flowers, cemetery fees, obituaries, or a hearse, so oftentimes the cost can end up being well above $10,000. This is why doing some comparison shopping between funeral homes can save your loved ones both time and money. Many funeral homes will offer packages that are priced at a premium. The directors are required by the Federal Trade Commission to provide itemized pricing, which means that you don’t have to buy every service that they offer you, just the ones you want.  If left up to your survivors to choose, often times the closest funeral home and the expensive package deal is the easiest choice.  If the thought of going from one funeral home to another for pricing is too daunting, funeral directors are required to provide pricing over the phone.

Prepaying a funeral home can make sense, but keep documentation in the event a funeral home goes out of business or the ownership changes hands, as well as understanding how these events impact you.  It is also important to be sure your loved ones know that you have already made arrangements, otherwise they may not be carried out.  You should also be aware of where your money goes when prepaying for these expenses.  Some states require that a percentage of prepaid money goes into a trust fund or a life insurance policy for the expenses to be paid to the funeral home in the future.   But some states offer little protection at all.  Also, be mindful of a funeral home’s refund and cancellation policy. Many states do not require the home to give a full refund should you withdraw. If they do not reimburse you completely, find out what percentage you will receive back. Also inquire if your money can be transferred to a different home in the event that you move to a new area.  Some packages may include a final fee at the time of the funeral.  The most important thing to remember is to get it in writing and read the fine print.

Another option instead of prepaying directly to a funeral home is to set aside your own money specifically for these costs. There are POD accounts (payable-on-death) that you can establish to save your money and upon your death, they will pay out to a beneficiary of your choosing. The beneficiary then uses that money for your funeral expenses without having to deal with probate. But you must be sure they have some way of knowing your wishes for the funeral.  It is recommended to give a copy of your funeral wishes to trusted family members, including the beneficiary, as well as an attorney.

Prepaying a funeral home or setting aside savings, as well as planning for your own funeral, are not things that most people want to think about. But it could potentially help your family while they mourn your passing, as well as allowing you to provide your input on how you would like your loved ones to celebrate your life, and also potentially preserve a portion of assets for your heirs.

 

This publication is provided as a service to our clients and associates of PFA solely for their own use and information.  The material is derived from sources believed to be reliable but its accuracy and the opinions based thereon are not guaranteed and have not been verified.  The content in this publication is for general information only and not intended to serve as individual investment advice.  You should seek independent advice from a professional based on your individual circumstances.