1. finance
2. investing
3. funds
4. mutual funds

D4 Business |
2R
| SUNDAY, NOVEMBER 23, 2014
MutualFunds
ADVICE FROM JACK BOGLE,
INDEXING’S PATRON SAINT
Fund Tracker
down for 100 years and
ends up just where it start­
ed.
Chuck Jaffe
“So try to ignore these
Syndicated columnist
machinations and stick with
If stock
getting the underlying re­
market
turns that provide stocks as
flip­flops
a good investments,” Bogle
scare you,
said.
Jack Bogle
On how bond investors
has some
should look at the poten­
advice on
tial for interest rates to
how to
rise (several years ago,
tackle what’s about to hap­
Bogle warned of a build­
pen next: Close your eyes.
ing bond bubble): “When
Bogle, the founder of the you talk about bond inves­
Vanguard Group, the
tors getting hurt when bond
world’s largest investment
yields start to rise, the an­
company, and patron saint
swer to that is really yes and
of low­cost, long­term index no. Certainly yes, absolute­
investing, has not changed
ly, on a short­term basis, but
his tune in the 40­plus years you shouldn’t be investing
since he started the compa­ in bonds on a short­term
ny.
basis.
At age 85, Bogle’s not
“Use the intermediate
about to change his ways
maturity around 10 years
now, not because he’s past
exemplified by the high­
learning new tricks or ad­
quality 10­year U.S. Trea­
justing his thinking, but
sury note,” he added. “Basi­
because decades of being
cally today you are entering
right have created an un­
into a contract with the
shakable courage in his
Treasury to give you 2.2
convictions.
percent every year for the
Many of his disciples have next 10 years. The Treasury
that Bogle audacity, but he
will be good for that; there’s
laments the financial for­
no risk in that deal falling
tunes of all the people who
apart that I can see. The
haven’t gotten the message price of that Treasury
yet.
(note) will drop a lot if rates
Recently, Bogle did a
will go up, however if you
two­part interview on my
are reinvesting your in­
radio show moneylife­
come, you will have a high­
show.com, and while he did er total return over the
not break much new
10­year period. So in a
ground, it’s always worth
certain respect if you can
plowing important territory stand the pain, we all
with someone who knows
should want rates to go up.”
the lay of the land. Here are
On exchange­traded
some highlights:
funds: “They’re fine just so
On markets: “What’s
long as you don’t trade
going on in the market is
them,” Bogle said. “It’s the
domination of short­term
ability to trade that distin­
speculation over long­term guishes them (from a tradi­
investment,” he said. “Long­ tional index fund), and then
term investors simply are
there is the kind of Looney
not affected by the comings Tune section of the ETF
and goings of the market.
market pursuing things that
“As I have said before, the no investor should ever do.
daily machinations of the
... Anybody who plays that
stock market are like a tale
kind of game (using lever­
told by an idiot, full of
aged or niche products) is a
sound and fury, signifying
damned fool.
nothing,” Bogle added.
“The ETF is the greatest
“One of my favorite rules is
marketing innovation of the
‘Don’t peek.’ Don’t let all the 21st century so far. Whether
noise drown out your com­
it’s the greatest investment
mon sense and your wis­
innovation of the 21st cen­
dom. Just try not to pay that tury so far, I can’t imagine. I
much attention, because it
think it’s counterproduc­
will have no effect whatso­
tive.”
ever, categorically, on your
Advice for investors
lifetime investment re­
who can’t be satisfied with
turns.”
shutting their eyes, doing
On why investors
nothing and letting index­
should ignore the noise
ing work in their favor:
and just aim for the index “Divide your money into
return over a lifetime:
your long­term investment
“Returns are created not by account and your funny­
the stock market, they are
money account for short­
created by U.S. business,
term speculation. Guess on
our corporations,” he ex­
funds, guess on markets,
plained. “The formula I use guess on stocks if you want
for that is today’s dividend
to, because that gives you
yield, which is around 2
an opportunity to act on
percent, and the subsequent your speculative impulses.
earnings growth which
But they will hurt you a
could be around 5 percent
lot so I recommend you
— we’re not sure, but that’s
have a funny­money ac­
probably not a bad guess — count of no more than 5
and that’s a 7 percent nomi­ percent of your portfolio. I
nal rate of return on stock in also recommend that after
terms of fundamentals.
five years, check it out. Has
“If you go back and look
it done better than the long­
at the history of American
term investment or worse?
business over the last centu­ I’d be astonished if at least
ry, you will find the (price/
95 percent of those funny­
earnings) effect of stocks is
money accounts don’t do
zero. All of the returns are
worse.”
created as investment re­
Chuck Jaffe is senior columnist for
MarketWatch. He can be reached
turns, dividend yields and
at cjaffe@marketwatch.com or at
earnings growth, and P/E
P.O. Box 70,
effect — the speculative
Cohasset, MA 02025­0070.
return — goes up and goes
Copyright 2014, MarketWatch
down and goes up and
Winners and losers: A mutual­fund scorecard
Your Funds
Hedge­fund firm hit hard
by Fannie, Freddie news
Weekly spotlight on mutual fund performance
Fund Wkly % YTD %
obj return return
Biggest funds
American Funds A AmcpA p
American Funds A AMutlA p
American Funds A BalA p
American Funds A BondA p
American Funds A CapIBA p
American Funds A CapWGA p
American Funds A FdInvA p
American Funds A GwthA p
American Funds A IncoA p
American Funds A ICAA p
American Funds A N PerA p
American Funds A SmCpA p
American Funds A WshA p
BlackRock Instl StrIncoOpp
BlackRock Instl EquityDv
BlackRock Instl GlbAlloc r
Dimensional Fds EmMCrEq
Dimensional Fds EmMktV
Dimensional Fds USLgVa
Dodge&Cox Balanced
Dodge&Cox Income
Dodge&Cox IntlStk
Dodge&Cox Stock
DoubleLine Funds TRBd I
FPA Funds FPACres
Fidelity Freedom FF2020K
Fidelity Freedom FF2030K
Fidelity Invest Balanc
Fidelity Invest Contra
Fidelity Invest GroCo
Fidelity Invest LowP r
Fidelity Invest Puritn
Fidelity Invest TotalBd
Fidelity Spart Adv 500IdxAdv
Fidelity Spart Adv TotMktAd r
Frank/Temp Frnk A IncomA p
Frank/Tmp Frnk Adv GlbBdAdv
Harbor Funds CapApInst
Harbor Funds Intl r
Loomis Sayles LSBondI
MFS Funds I ValueI
Metro West Fds TotRtBdI
Oakmark Funds I EqtyInc r
Oakmark Funds I Intl
Oakmark Funds I Oakmark
Oppenheimer Y DevMktY
PIMCO Instl PIMS AlAsetAut r
PIMCO Instl PIMS AllAsset
PIMCO Instl PIMS TotRt
PIMCO Funds Instl Income
Price Funds BlChip
Price Funds CapApp
Price Funds EqInc
Price Funds EqIndex
Price Funds Growth
Price Funds MidCap
Price Funds N Horiz
Price Funds N Inc
Price Funds Ret2020
Price Funds Ret2030
Price Funds Value
Schwab Funds S&P Sel
Vanguard Admiral 500Adml
Vanguard Admiral GNMA Ad
Vanguard Admiral HlthCr
Vanguard Admiral ITAdml
Vanguard Admiral ITGrAdm
Vanguard Admiral LtdTrAd
Vanguard Admiral MCpAdml
Vanguard Admiral PrmCap r
Vanguard Admiral STIGrAd
Vanguard Admiral SmCAdm
Vanguard Admiral TtlBAdml
Vanguard Admiral WellslAdm
Vanguard Admiral WelltnAdm
Vanguard Admiral WdsrIIAd
Vanguard Fds TotIntBInv
Vanguard Fds DivdGro
Vanguard Fds STAR
Vanguard Fds TgtRe2015
Vanguard Fds TgRe2020
Vanguard Fds TgtRe2025
Vanguard Fds TgRe2030
Vanguard Fds TgtRe2035
Vanguard Fds TgtRe2040
Vanguard Fds TgtRe2045
Vanguard Idx Fds TotlIntl
Claren Road Asset Man­
agement’s clients asked to
pull about a quarter of the
firm’s $7.3 billion in assets
after it posted its biggest
monthly loss in October on
Fannie Mae and Freddie
Mac investments, said two
people familiar with the
firm.
The hedge­fund firm,
which is majority owned by
Carlyle Group, is facing
$1.9 billion in redemptions
for the end of the year,
according to the two sourc­
es, who asked not to be
named because Claren
Road is private.
Its main fund slumped
9.7 percent last month
primarily because of an
investment in the preferred
shares of the U.S. mortgage
companies. The securities
lost more than half their
value last month after a
court case went against
investors.
The firm has more than
enough cash on hand to
meet the withdrawals,
according to the sources.
“We believe strongly in
our investment approach,
which has produced gains
every year since our found­
ing in 2005, and look for­
ward to helping our clients
achieve their investment
goals,” Claren Road said in
an emailed statement, with­
out commenting on the
redemption figures.
A U.S. judge on Sept. 30
threw out a lawsuit that
would have forced the gov­
ernment to share the Fannie
Mae and Freddie Mac’s
profits with shareholders,
causing the shares to plunge
and inflicting losses on
investors.
+1.0
+1.4
+0.9
0.0
+0.9
+1.1
+1.0
+0.9
+0.8
+1.4
+0.6
+0.5
+1.0
+0.1
+1.1
+1.0
+1.3
+1.3
+1.5
+0.7
+0.1
+1.7
+1.0
NA
+1.0
+0.5
+0.7
+0.8
+0.5
+0.7
+1.1
+0.8
0.0
+1.2
+1.1
+0.4
+0.7
+0.3
+1.8
+0.3
+1.2
+0.1
+1.0
+1.2
+1.0
+1.3
NA
NA
+0.4
+0.5
+0.4
+0.8
+1.2
+1.2
+0.2
+1.2
+0.2
0.0
+0.7
+0.8
+1.9
+1.2
+1.2
+0.1
+1.5
+0.1
0.0
+0.1
+1.5
+0.9
0.0
+0.6
+0.1
+0.5
+0.8
+1.4
+0.2
+1.4
+0.7
+0.6
+0.7
+0.8
+0.8
+0.9
+1.0
+0.9
+0.9
+13.0
+13.1
+8.9
+5.0
+8.1
+6.7
+9.6
+10.3
+9.4
+14.4
+4.3
+1.4
+11.6
+3.5
+8.9
+3.6
+3.8
+0.9
+10.5
+8.6
+5.3
+4.7
+10.1
NA
+6.7
+6.0
+6.7
+10.5
+9.2
+13.1
+7.1
+10.5
+5.3
+13.7
+12.2
+6.7
+4.2
+10.8
­3.1
+6.0
+9.5
+5.4
+7.0
­4.3
+11.5
+3.9
NA
NA
+4.7
+8.2
+9.8
+12.0
+7.7
+13.4
+9.5
+12.2
+4.5
+5.4
+6.7
+7.2
+12.9
+13.6
+13.7
+6.2
+27.2
+6.5
+5.4
+2.0
+13.2
+17.7
+2.0
+6.2
+5.2
+7.8
+9.9
+11.9
+7.3
+11.7
+7.8
+6.8
+7.4
+7.6
+7.8
+8.0
+8.1
+8.1
­0.4
+16.3
+14.5
+12.4
+4.4
+9.5
+9.8
+14.1
+14.3
+11.8
+14.3
+11.2
+12.2
+15.5
+6.0
+13.2
+7.0
+4.4
+1.9
+17.7
+13.2
+5.2
+9.3
+16.1
NS
+10.9
+8.9
+10.2
+12.2
+15.5
+18.7
+16.4
+12.1
+5.4
+15.9
+16.3
+10.9
+6.6
+15.5
+6.6
+9.2
+14.7
+6.9
+10.3
+10.6
+16.8
+8.2
NA
NA
+5.0
+12.4
+17.7
+13.6
+14.0
+15.7
+16.9
+18.4
+22.5
+4.3
+10.9
+12.3
+16.5
+15.9
+16.0
+4.0
+20.8
+4.6
+6.2
+2.1
+18.4
+17.2
+3.0
+18.1
+4.0
+9.6
+11.6
+14.6
NS
+14.9
+10.5
+9.3
+10.1
+10.7
+11.3
+12.0
+12.3
+12.3
+5.4
Best performers
Direxion Fds LatAmBull
ProFunds Inv Cl UltLatinAm
ProFunds Inv Cl UltEmMkt
BlackRock A LatAA r
Price Funds LatAm
Deutsche Trust LatAmrEq
Fidelity Invest LatAm
Voya Funds Cl A RussiaA p
Direxion Fds NatRBull2X
ProFunds Inv Cl PrecMetal
Deutsche Trust Gold&Prc
Oppenheimer A Gold p
USAA Group PrecMM
Rydex Investor PrecMet
Direxion Fds EmgMBull p
Fidelity Selects Gold r
Vanguard Fds PrecMtls r
Amer Century Inv GlGold
Invesco Funds A GoldPrec p
Frank/Temp Frnk A GoldPrM A
Invest Managers EuroPGld A
GAMCO Funds GoldAAA
NewAlt
Tocqueville Fds Gold t
OCM Funds GoldInv t
ProFunds Inv Cl BasicMatls
ProFunds Inv Cl Oil&Gas
Invest Managers HardAsset
SunAmerica Funds IntlEqA p
First Eagle SGenGld p
Worst performers
+1.1 +12.2 +16.2
+1.2 +13.7 +16.0
+1.1 +12.4 +16.4
Fund Wkly % YTD %
obj return return
5­yr %
return
SQ +19.0 ­5.2 ­12.6
SQ +14.8 ­13.5 ­13.5
SQ +7.8 +13.6
­5.4
LT +7.6 +3.3
­2.0
LT +7.3 ­0.8
­3.3
LT +6.7 +0.6
­1.5
LT +5.9 ­4.2
­3.6
EM +5.7 ­20.8
­2.9
SE +5.6 ­2.6 +4.2
SQ +5.5 ­20.9 ­23.6
AU +5.1 ­7.8 ­15.5
AU +5.1 ­9.6 ­13.5
AU +4.9 ­1.2 ­14.2
AU +4.8 ­10.9 ­14.9
SQ +4.7 ­1.1
­3.5
AU +4.7 ­1.5 ­15.0
AU +4.6 ­6.9 ­10.5
AU +4.5 ­4.6 ­14.2
AU +4.5 +0.2 ­10.9
AU +4.5 ­1.6 ­13.8
AU +4.4 ­5.9
NS
AU +4.4 +5.2 ­12.3
SE +4.3 +8.1 +5.3
AU +4.2 +4.5
­9.0
AU +4.0 +0.6 ­11.8
SQ +3.9 +10.6 +11.4
SQ +3.8 ­1.4 +12.2
NR +3.5 ­12.4
NS
IL +3.4 ­1.9 +0.7
AU +3.3 +2.3 ­10.5
Fund Wkly % YTD %
obj return return
Neubrgr&Berm Fds GtChinEq I
Berkshire Funds Focus
Dreyfus GrChinaA r
Columbia Class A GrChinaA
Matthews Asian China Inv
Oberweis Funds ChinaOpp
ProFunds Inv Cl InternetUlt
Shelton Funds GrtrChina
Rydex Dynamic InvSP5St H
Jacob Funds Internt Inv
Aegis Funds HighYield x
ProFunds Inv Cl UltBear
Buffalo Funds MicroCp t
Hennessy Funds Japan Inv
Fidelity Invest JpnSm
Hussman Funds StrIntlEq
EPChinaA p
Dimensional Fds AsiaPcSCp
RidgeWorth Funds AggrGrI
BlackRock Instl PacI r
Price Funds Japan
Westcore IntlFrntr r
Fidelity Invest PcBas
Wells Fargo Adv A TradSCGrA
Fidelity Invest Japan r
PerritUMic
Wasatch SmCapV
Frank/Temp Frnk A MicValA p
Rydex Dynamic InvNasdSt H
JPMorgan Sel Cls ChinaSel
PR
XG
PR
PR
PR
PR
SQ
PR
SQ
TK
HC
SQ
SG
PR
PR
IL
PR
PR
XG
PR
PR
IL
PR
SG
PR
SV
SC
SV
SQ
PR
­3.2
­3.0
­2.8
­2.7
­2.6
­2.5
­2.5
­2.5
­2.4
­2.4
­2.3
­2.3
­2.3
­2.0
­1.9
­1.9
­1.9
­1.8
­1.8
­1.7
­1.7
­1.7
­1.7
­1.6
­1.6
­1.6
­1.5
­1.5
­1.5
­1.5
+8.2
+0.4
­8.6
+5.4
­3.9
+2.6
+0.5
+4.4
­26.0
+3.1
­8.9
­26.0
­10.2
+8.2
­7.5
­5.3
+2.3
­3.8
+3.8
­0.4
­6.2
­14.2
+2.6
­2.2
­4.7
­7.2
+7.0
­4.4
­34.3
+4.2
5­yr %
return
NS
+20.1
­0.9
+4.7
+2.0
+9.7
+28.7
+3.0
­32.3
+15.9
+4.4
­32.8
+21.4
+13.8
+11.2
NS
+5.1
+5.1
+15.5
+7.2
+8.1
+10.8
+12.6
+15.7
+5.4
+15.9
+16.9
+14.5
­38.2
+5.2
Footnotes: e: Ex capital­gains distribution. f: Previous day{rsquo}s
quote. n or nl: No upfront sales charge. p: Fund assets are used to
pay for distribution costs. r: redemption fee or contingent deferred
sales load may apply. s: Stock dividend or split. t: Both p and r. x: Ex
cash dividend. NE: Data in question. NS: Fund did not exist at the
start date. NA: No information available.
Key to abbreviations and footnotes:
Fund objectives: AB: Long­term top­grade corporate and govern­
ment bonds. AU: Gold oriented. BL: Balanced. EI: Equity income.
EM: Emerging markets. EU: European region. GL: Global (includes
U.S.). GM: General municipal bond. GT: General taxable bond. HB:
Health and biotech. HC: High­yield taxable bond. HM: High­yield
municipal bond. IB: Intermediate­term investment­grade corporate
bond. IG: Intermediate­term Treasury/government debt. IL:
International (outside U.S.). IM: Intermediate­term municipal bond.
LC: Large­cap core. LG: Large­cap growth. LT: Latin American. LU:
Long­term Treasury/government debt. LV: Large­cap value. MC:
Mid­cap core. MG: Mid­cap growth. MP: Mixed portfolio (stocks and
bonds). MT: Mortgage. MV: Mid­cap value. NM: Insured municipal
bond. NR: Natural resources. PR: Pacific region. SB: Short­term
investment­grade corporate bond. SC: Small­cap core. SE: Sector
(specific industries). SG: Small­cap growth. SM: Short­term munici­
pal debt. SP: S&P 500. SQ: Specialty diversified equity. SS: Single­
state municipal debt. SU: Short­term Treasury/government debt.
SV: Small­cap value. TK: Science and technology. UN: Unclassified.
UT: Utility. WB: World bond. XC: Multi­cap core. XG: Multi­cap
growth. XV: Multi­cap value
5­year % return: Annualized performance over the past five years.
Top 5 mutual funds by objective, year­to­date % return
Emerging markets
Price Funds
Price Funds
Virtus Funds I
WM Blair Fds Inst
WM Blair Fds Inst
Equity income
Invesco Funds A
Federated Instl
Touchstone Family
BMO Funds
AAM
Rydex Investor
Fidelity Selects
Fidelity Adv Foc A
Frank/Temp Frnk A
Price Funds
Utilities p
StrValDvIS
PrYldEq Y
DivInco Y
B&GInGr I
Biotech
Health
HlthCrA r
BioDisA p
HlthSci
Global
Lazard Instl
Cohen & Steers
Vanguard Fds
Guinness Atkinson
Brookfield Fds
GblInfra I
GblInfra I
GblMnV Inv
GlblInno
GblLstInf Y
International
Fidelity Invest
Guggenheim Funds
Wasatch
Virtus Funds I
First Investors A
Canada
WldEqIncA
IntlOppt r
ForOppI
IntlA p
Large­cap core
Vanguard Fds
Vanguard Admiral
JPMorgan Sel Cls
Vanguard Instl Fds
Sterling Capital
YTD %
return
InstAX­fd r +17.1
AME Fd
+16.3
EmMktI +12.3
EmMkGrI r +8.5
EmMLdrGr +7.9
Health | biotech
Bloomberg News
XC
LV
BL
IB
BL
GL
LC
LG
BL
LC
GL
GL
LC
GT
EI
MP
EM
EM
LV
BL
IB
IL
LV
MT
MP
MP
MP
BL
LG
XG
MC
BL
IB
SP
XC
BL
WB
LG
IL
GT
LC
IB
BL
IL
LC
EM
MP
MP
IB
GT
LG
BL
EI
SP
LG
MG
SG
IB
MP
MP
LV
SP
SP
MT
HB
IM
IB
SM
MC
LC
SB
SC
IB
BL
BL
LV
WB
EI
BL
MP
MP
MP
MP
MP
MP
MP
IL
XC
SP
XC
Vanguard Idx Fds TotStk
Vanguard Instl Fds InstIdx
Vanguard Instl Fds InsTStPlus
5­yr %
return
PrmcpCor
PrmCap r
IntrdAmer
StlCPlus
LgCValDv I
Mid­cap core
Mid Cap
ActMidA
SmCap
IntpdMCp
MCpAdml
Stewart Capital
Dreyfus
Longleaf Partners
JPMorgan Sel Cls
Vanguard Admiral
YTD %
return
Small­cap core
+14.5
+14.3
+14.3
+14.0
+13.7
Hennessy Funds
Invesco Funds A
Lazard Instl
Forum Funds
Vanguard Fds
YTD %
return
Natural resources
+29.8
+29.3
+28.8
+28.6
+28.2
Oppenheimer A
Invest Managers
Invest Managers
Oppenheimer Y
Center Coast
YTD %
return
Pacific region
+16.7
+13.5
+13.0
+12.6
+12.2
Matthews Asian
Frank/Temp Frnk A
Eaton Vance A
Guinness Atkinson
Price Funds
YTD %
return
Science | technology
+8.9
+6.7
+6.2
+6.2
+5.4
YTD %
return
Sector
+14.4
+14.4
+13.9
+13.6
+13.2
Fidelity Selects
Fidelity Selects
Fidelity Selects
Fidelity Selects
ICON Fds
YTD %
return
Balanced
CorGrow O +11.6
SmallC p
+9.9
USSmMid I +9.8
GoldenSCC +8.6
StrSCEqInv +8.2
StlpthAlpha
MLP&Engy
MLP&EnI I
Alpha Y
MLPFoc I
Fidelity Selects
Fidelity Advisor I
Price Funds
Columbia Class A
Columbia Class A
YTD %
return
Gold oriented
+18.1
+17.7
+16.0
+15.7
+15.6
GAMCO Funds
Tocqueville Fds
First Eagle
OCM Funds
Invesco Funds A
GoldAAA
Gold t
SGenGld p
GoldInv t
GoldPrec p
Trans
Air
ConStap
CstHo
ConsStapl
IdxAstAll A
DivCapBldr
CapApp
Balan
ClassBalA
Intermediate bond
+20.2
+20.1
+19.5
+15.7
+14.2
Invest Managers
CutwSelInc
MorganStanley Inst CorPlsFxI
Dimensional Fds
ITExQual
Western Asset
CorePlus I
BMO Funds
CorpInco I
YTD %
return
Long­term bond
Vanguard Idx Fds
Vanguard Admiral
GuideStone Funds
Del Inv Instl
Lord Abbett A
+29.4
+20.7
+15.4
+14.6
+12.8
YTD %
return
YTD %
return
IndiaInv r +63.7
IndiaGrA p +45.6
GrIndia t +43.4
AsiaPacDv r +10.4
N Asia
+10.3
Electr
Electronic
GlbTech
SelComm A
GlobTech
Wells Fargo Adv A
Wells Fargo Adv A
Price Funds
St FarmAssoc
Pioneer Funds A
YTD %
return
LTBnd
LTGrAdml
ExtDrGS4 x
ExtDurI e
IncomeA
+15.7
+13.8
+12.0
+10.5
+10.5
YTD %
return
+8.1
+7.4
+7.3
+7.2
+7.1
YTD %
return
+15.8
+14.5
+14.3
+13.7
+7.6
YTD %
return
Long­term U.S.
YTD %
return
+29.1
+28.6
+25.6
+21.4
+20.0
Vanguard Instl Fds ExDurTreas
Wasatch
USTryFd
Vanguard Admiral LTsyAdml
Fidelity Spartan SpLTTrAd r
PIMCO Instl PIMS LTUSG
+34.5
+24.5
+19.7
+19.7
+19.2
YTD %
return
Mortgage
YTD %
return
+5.2
+4.5
+2.3
+0.6
+0.2
Managed Acct Srs
Legg Mason A
AMG Managers
Vanguard Admiral
Deutsche Trust
US MrtgInst
WAMtgBkA
IntDurGv
GNMA Ad
GNMA S
+7.2
+6.2
+6.2
+6.2
+6.2
WHEN
DEFERRING
BENEFITS
BEATS
WORKING
Investing
Scott Burns
Syndicated columnist
Q: It is
difficult to
find de­
tailed and
accurate
informa­
tion on this
specific
question:
• If I delay taking Social
Security until age 70, I
would receive amount A
per month.
• If I start Social Security
before age 66, I would get
amount B per month.
• If I start before age 66
and get B dollars per
month, during periods
when I am working, the
amount I receive will be
below B per month.
However, that also in­
creases the amount to B
plus X per month during
the time when I am not
working.
The question is: How is X
calculated?
How does taking early
Social Security and having
periods of work affect
benefits as compared to
delaying until age 70?
If one starts Social Secu­
rity early and then has
periods of work, can the
future monthly benefit
amount B plus X ever ap­
proach or exceed A?
Or is there a penalty
such that one cannot ap­
proach amount A?
I cannot find anyone
with the answer to this.
The city of Seattle senior
citizens resource office
does not know, and with
all of the budget cuts at the
Social Security Adminis­
tration, they can’t find
anyone at the SSA office
who knows.
I know someone whose
wife is a lawyer with the
SSA, and she doesn’t
know. There is nothing on
the AARP website explain­
ing this.
— L.S., Seattle
A: Posing something as
an algebra problem isn’t
the best way to get an
answer from Social Securi­
ty.
Between age 62 and full
retirement age (currently
66), wage income over
certain amounts will work
to reduce your benefit
during the period you are
working.
You may also have to
pay income taxes on the
benefit.
So there isn’t a lot of
incentive to take benefits
early and keep working.
Between age 62 and full
retirement age, deferral of
benefits works to increase
your eventual benefit by
nearly 8 percent a year.
After full retirement age,
deferral of benefits works
to increase your benefit by
exactly 8 percent a year.
This is a high rate of
increase.
That’s why the deferral
of benefits has received a
massive amount of press
coverage in recent years.
Taking benefits at age 62
and doing intermittent
work until age 70 is unlike­
ly to increase your benefit
very much.
Your ultimate benefit is
based on your highest 35
years of earnings.
So if you have already
worked 35 years, your
benefit will only increase if
a new year with higher
earnings displaces an
earlier year with lower
earnings.
That isn’t likely to hap­
pen with intermittent
earnings or part­time jobs.
Even if your earnings
record is incomplete, and
an additional year of inter­
mittent labor can replace a
blank year, the benefit gain
will be less than the gain
from deferring the same
year.
Basically, additional
work time is a “can’t get
there from here” problem.
Questions:
scott@scottburns.com
Copyright 2014,
Universal Press Syndicate