What does the world of finance hold in store for you next year?
• A fall in the stock market. “Don’t be surprised if the stock market falls from its current record levels because many analysts feel that the market is overvalued,” Clouse said.
“Corporate earnings and economic growth numbers are not supporting the high stock market values. It is the Fed’s quantitative easing that has pushed the market upward. When this program is tapered in 2014, we’ll need to see continued GDP growth to support the high stock market values. If the GDP growth rate in early 2014 doesn’t reach 3 percent — a more than 50 percent increase over 2013’s GDP growth rate of about 2 precent — then the stock market will fall.”
• The effects of the Affordable Care Act. “We are just now beginning to see some of the impacts of the Affordable Care Act, or Obamacare, on insurance availability and cost. There will be many more surprises in 2014,” Clouse said.
“If you currently are covered by an insurance plan, ask how your plan may change due to the new Obamacare implementation. You don’t want to be surprised.”
• Retirement planning remains crucial. “Spend more time on retirement planning and invest more dollars for retirement. Do not rely only on Social Security,” Clouse said.
“As Congress and the President look for ways to reduce our budget deficits, it is likely that we will see cutbacks in payments to future Social Security recipients. It is also likely that the age at which you can begin to receive payments will be increased.”
• Lessons learned from the recent recession on budgeting. “One lesson that all individuals should have learned from our recent recession is the importance of planning and budgeting,” says Clouse.
“What will your income be each month? How will it be spent? How much is your mandatory spending for things like mortgages, car loans, insurance, utilities, food, etc.? How much will you have for discretionary spending each month? Again, budgeting and planning can help prepare you for any surprises that might occur in 2014.”
• Watch for changes in the tax laws. “There is talk about tax reform and tax law changes,” Clouse says. “Be sure to know about new tax credits, expiring tax credits, changes in tax deductions, and changes in tax rates. All of these will impact the amount of your after-tax income in 2014.”