Posted by Wyatt on July 22, 2025

Behavior Tidbits

There are no style points when investing.
There is no bonus for degree of difficulty. As investors, our goal is to increase our probability for success.
One of the biggest problems for individual investors just starting out is that they try to pursue the grail of earning higher returns with lower risks without the proper understanding of how hard it truly is to obtain.
They want to try to beat the market by using sophisticated strategies, but they don’t have the resources or knowhow to do it. In this case, trying to be above-average leads to below-average performance.
As individuals, we are much more emotionally invested in our portfolios because it’s our money.
Investing doesn’t have to be about beating others or beating the market. It’s about not beating yourself.
Patience will always be the great equalizer in the financial markets.
For many doing something, anything, is much easier because it gives you the feeling of control.
Trying harder does not mean doing better in the financial markets. In fact, trying harder is probably one of the easiest ways to achieve below average performance.
Posted by Wyatt on July 22, 2025

Floating Rates

What are floating rates?

A floating interest rate, also known as a variable interest rate, is an interest rate that is continuously moving with the rest of the market. Floating rates refer to any debt instrument, including loans, bonds, mortgages, or credits, that do not have a fixed rate of interest over the payback period. The rate varies over the duration of the debt obligation compared to a fixed interest rate, which is a rate that stays constant for the duration of the debt obligation. Floating interest rates will change based on a reference rate, typically an Index.

How do they work?

The rate on a floating rate debt instrument is typically referred to as a spread or margin over the base rate. To calculate the rate, you add the spread/margin defined by the lender plus the rate that is determined by the index tied with the debt instrument.
Debt instruments with floating rates will typically cost less than fixed rate loans. Because the borrower is paying a lower loan rate in the beginning, they are taking on interest rate risk, which is the risk that rates will go up in the future.

Mortgages with Floating Rates

Adjustable-rate mortgages (ARMs), which are mortgages that utilize floating interest rates, have rates that change based on a preset margin and a major mortgage index, such as Libor, or with the monthly treasure average (MTA). So when a borrower takes out an adjustable-rate mortgage based on1 1% margin based on Libor, and Libor is at 3% when the mortgages rate changes, the rate of the mortgage will reset at 4%, the sum of the margin and the index.
Floating rate mortgages are uncommon in the United States, although they are still popular in Europe and other foreign places. Loan officers believe they are risky for the consumer because taking out a mortgage is a long term commitment and is a large investment. When a home owner is taking out a loan they need to plan for the future and taking a floating rate mortgage is too unstable to help them plan for future expenses.

Credit cards with floating interest rates

There are many credit cards that utilize floating interest rates. These rates are tied to an index, usually the current prime rate, the rate that reflects the interest rate set by the Fed.

Advantages

An appealing factor of taking a debt instrument with a floating interest rate is that the initial rate is lower than taking a fixed rate tool. With a floating rate instrument the borrower also may pay less in future interest payments if their interest rates decrease. While paying less for their current interest payments they can keep their savings on each payment for if and when the interest rates increase.
What makes adjustable-rate mortgages to home purchasers is that the interest rates in the beginning are lower than fixed rate mortgages. Borrowers who plan to sell the property and repay the loan quickly, before there is much change in rates, will often to choose ARMs.

Disadvantages

The fact that the rates are constantly changing also works as the key disadvantage to floating rates. If interest rates increase in a period, then the borrower will be required to pay a larger interest payment. Interest rates tend to volatile because of their dependence on the market. The market is typically volatile and unpredictable, meaning a borrower has a fair chance of having larger interest payment in the future than if they locked in a certain rate at the beginning of the payback period.
Posted by Wyatt on July 22, 2025

Social Security milestone: what happens when clients turn 66

Financial Planning
A baby boomers’ 66th birthday means more than blowing out a lot of candles.
As far as Social Security is concerned the date is a landmark, and many of the program’s critical features and benefits are linked to this age. Accordingly, advisers and their clients need to understand the options and choices available in order to maximize Social Security benefits and retirement income plans.
There are three milestone ages in the Social Security retirement program: 62, 66 and 70. The earliest age at which one is eligible to file for benefits is 62. Workers can’t delay filing for benefits past age 70.
Between these two dates is the all-important Full Retirement Age (FRA), which for the vast majority of baby boomers is 66. For those born before 1955 FRA will be exactly on their 66th birthday. For those born between 1955 and 1959 it will be later in their 66th year.
Here are four important program features that hinge on age 66:
Basic Benefit
Regardless of the age at which a person files for benefits, their actual benefit amount is calculated based on the age 66 FRA value.
File for early benefits (between 62 and 66) and clients will see their benefit amount calculated as a reduction from the age 66 value. File later (delay filing) and their age 66 benefit is increased by 2/3 of 1% for each month beyond their 66th birthday that they wait before filing.
Earnings’ Test
The earnings’ test both confuses and irritates beneficiaries of Social Security. This feature may cause a portion (or even all) of retirement benefits to be withheld if the Social Security beneficiary is younger than FRA and is still working.
Here’s how it works. $1 of Social Security benefits are withheld for every $2 of earned income over $16,920 for clients between ages 62 and 65. $1 of benefits is withheld for every $3 of earned income over $44,880 in the year that a client turns 66. When a recipient reaches full retirement age (66) the earnings’ test goes away and no benefits are withheld regardless of income earned.
One important caveat is that any withheld income is actually paid back in the future. An actuarial adjustment will be made at age 66 increasing a client’s benefit in order to distribute the withheld income.
Beware that some beneficiaries still will not be satisfied since they don’t perceive the value of the adjusted benefit paid out over the remaining lifetime as equivalent to the recently withheld benefits.
Do Over
At 66 beneficiaries have a new option to second-guess their filing choices.
Some clients regret their decision to file for early benefits. They may have gained a new source income or assets, perhaps through an inheritance. They may have learned more about the mechanics of the Social Security system and realized the potential benefits of delaying filing and collecting a higher lifetime benefit. In either event, they may wish to change their decision to file. There are two mechanisms by which they can suspend benefits which have already started.
The first choice is available only during the initial 12 months after benefits begin. During that time beneficiaries may withdraw their application for benefits but must repay all benefits collected. At that point their future potential benefits will continue to grow as if they had never filed before.
The second choice is only available once a person reaches age 66. At age 66 or later one can suspend benefits. In this case no repayments are required. Future benefits will then grow at 8% per year, based on the benefit value when it was suspended, until age 70 years.
Restricted filing
Perhaps the most widely discussed feature unique to age 66 is the ability to use the Restricted Filing option. This special option is being phased out for younger applicants but is still available to anyone born before Jan 1, 1954.
Once a client is at least 66 they can file for Social Security benefits restricted to spousal benefits only. This is a benefit based solely on the work history of their spouse. Simultaneously the Social Security benefit based on their own work history continues to accrue valuable delayed retirement credits of 8% for each year until as late as age 70.
This powerful strategy can provide both higher family lifetime benefits for a couple and, very importantly, maximizes the benefit that the survivor will receive when the first spouse passes away.
Many consequential Social Security choices hinge on the pivotal age of 66. Keep these in mind and help your clients take full advantage of these important options.
– Article from Financial-Planning.com