In light of the drop in markets recently, we shared the following note Bob Veres sent out which perfectly captures Oak Street Advisors' thoughts on the recent market pullback. The Awful Feeling of a Market DownturnOkay, is it all right to start panicking now?
Many investors are asking themselves this question as the markets go through another bumpy ride. Market pundits who, just a few weeks ago were telling us that there would be a market surge, are now predicting a bearish decline. Others are saying the obvious: companies and traders don’t like the anticipated effect of new tariffs on the American business community. The tariffs are the story of the day, as they basically throw sand in what had been smoothly-functioning global supply chains for U.S. manufacturers. The long-term goal is to make it painful for manufacturing companies to outsource work to other countries, and (secondarily) to make American-manufactured goods cheaper compared with tariff-ed imported products. We can’t know what the longer-term impact will be, but companies like Apple, Nike, Ford and General Motors, are suddenly looking at higher costs, diminished profits and perhaps also lower sales in the short term. Adding to the uncertainty is the fact that virtually all of the countries targeted with new tariffs are contemplating what must be plainly named as revenge duties on American goods and services. Interestingly, the actual tariff calculation on the U.S. side seems not to be precisely targeted at manufacturing, but a somewhat simplistic formula where the U.S. trade deficit with another country is divided by that country’s exports to the U.S. As an example cited by one economist, the U.S. experienced a $17.9 billion trade deficit with Indonesia last year, and Indonesia exported $28 billion worth of goods and services to the U.S. market. Divide $17.9 by $28 and you come up with the shockingly enormous 64% additional tariff announced on Indonesian imports. For most investors, the fine details are irrelevant; market downturns cause a sinking feeling in the pit of the stomach that is one part fear, one part dread, and one part an unhappy calculation that 2% of the value of a portfolio can be lost in a single day. We want that awful feeling to go away, and the easiest way to do that is to sell everything so that further declines are irrelevant to our pocketbooks and (often more importantly) our emotional stability. But of course there is another awful feeling, what people experienced when they sold during the steep decline associated with the Covid pandemic and stayed on the sidelines, feeling comfortably insulated from further declines while the markets unexpectedly zoomed back upward. The lost opportunity comes at an emotional as well as monetary cost. If we could know for certain that the markets will continue to decline and by how far, and if we could know for how long, and if we could know when to get back in so as not to miss the inevitable recovery (based on history, there has always been one), then the course of action would be very straightforward. Unfortunately, no person alive can tell you with certainty the answer to any one of these variables, much less all three. The markets have been very generous the last few years, and the markets tend to take back some of their generosity from time to time. The tariffs have triggered another give-back period, and the markets today seem to be speaking directly to the White House. One way or another, the American economy will get through this period, and the trade war, like all wars, will end. Our only real decision at this point is: should we follow the investing course that has always been long-term generous in the past? Or should we abandon the only strategy that has worked over time because we don’t want any longer to wake up with that feeling in the pit of our stomachs? Panic if you must, but don’t let emotions rule your financial decisions.
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The Social Security Fairness Act, signed into law in January 2025, repealed the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), restoring full Social Security benefits for public sector employees and their spouses. This repeal eliminates longstanding reductions in benefits for workers with government pensions and opens up new eligibility for spousal and survivor benefits. Affected individuals are encouraged to contact the SSA to explore restored benefits, retroactive payments, and the implications for their financial planning. This landmark legislation addresses decades of financial inequity experienced by public sector employees and their families, marking a significant victory for fairness and advocacy efforts led by groups such as teachers' unions and public employee associations. When originally implemented, the Windfall Elimination Provision adjusted the Social Security benefits for individuals who received pension benefits from jobs not covered by Social Security. This group consists mainly of teachers and certain government workers whose jobs did not withhold Social Security funds from their paychecks or require their employers to make matching employer Social Security contributions. Instead, those funds were directed to the pension plans for those workers. The benefit calculation for Social Security is typically computed using a formula that applies different percentages to a person’s Average Indexed Monthly Earnings (AIME). For most people, the formula is:
For those affected by WEP, the first percentage was reduced from 90% to as low as 40%, depending on the number of years they paid into Social Security. Example 1: For an individual with an AIME of $1,000, the standard benefit calculation would be 90% of the first $1,000, resulting in $900. Under WEP, this could be reduced to 40%, resulting in a $400 per month benefit. The Government Pension Offset was established to avoid so-called “double dipping” where the employee received both a government pension and Social Security benefits. The GPO reduced Social Security spousal or survivor benefits by two-thirds of the amount of the individual’s government pension. Example 2: If someone received a monthly government pension of $3,000, their Social Security spousal or survivor benefit would be reduced by $2,000 (two-thirds of $3,000). The reduction could be significant, sometimes reducing the Social Security benefit to zero, depending on the size of the government pension. Example 3: If an individual receives a government pension of $2,400 per month, their Social Security spousal benefit of $1,200 would be reduced by two-thirds of the pension amount ($1,600), resulting in a reduced benefit of $0. The effects of these provisions also impacted the spouses of the affected workers, denying or reducing the spousal benefits offered by the Social Security system. With repeal, spouses who previously had been denied benefits due to GPO can now receive full spousal benefits. Widows and widowers may also be eligible for survivor benefits that previously had been reduced or eliminated. The Social Security Fairness Act not only restores benefits to those directly impacted by WEP and GPO but also holds the potential for retroactive payments. While the specifics of retroactive payments are still being clarified, affected individuals should inquire about how far back these payments may go and any potential limitations. BROADER IMPLICATIONS ON FINANCIAL PLANNINGThe repeal of WEP and GPO has significant implications for financial planning. Individuals who now qualify for restored benefits should account for the additional income in their retirement planning. This might include:
STEPS TO TAKEWith the passage of the Social Security Fairness Act, it is important that affected individuals contact the Social Security Administration (SSA) to see if they now qualify for benefits or if their spouse may be entitled to additional benefits. Here are some steps you can take:
CLOSING THOUGHTSThe repeal of these provisions is a historic step in ensuring fairness for public sector employees and their families. According to advocacy groups, millions of retirees across the nation stand to benefit from the changes. If you or someone you know might be affected, take the time to explore your potential benefits and secure what you’ve earned.
By understanding the implications of the Social Security Fairness Act, you can take proactive steps to ensure you and your loved ones receive the benefits you deserve. Last month, Bryan Taylor was featured in two articles published by MoneyGeek, a website dedicated to personal finance content. Experts' Insights on Basic Life Insurance |
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