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Dec

2022

At What Age Should You File for Social Security? 62 vs 65 vs 67?

By Susan Lahey | Budgeting & Goals, money, Preparing for Retirement | Comments Off

Deciding when to apply for Social Security can be a complicated math problem, one that has a different answer for each person depending on their circumstances. The earlier you file, the lower your benefit amount, but the more payments you receive over time. The later you file, the higher the benefit, but the fewer payments you receive. If you have other income, the portion of your benefit could be taxed — up to 85%. And if you’re married, you may be able to stagger your individual Social Security retirement benefit applications for an optimal financial outcome.

Generally speaking, the main constant in this math problem is a person’s expected Social Security retirement benefit: the amount you would receive if you waited until full retirement age to claim your benefit. By creating an account at SSA.gov , you can see what your benefit is projected to be at each age from 62 on. But there are many other factors to consider when choosing your retirement date.

At What Age Can You Apply for Social Security

Here, you’ll learn more about selecting the right age to apply for Social Security, whether that’s 62 or older.

Applying for Social Security at Age 62

The earliest most people can apply for Social Security is age 62. The greater the difference between when you apply and when you reach full retirement age, the more the Social Security Administration will reduce the amount of your benefit. For those born in 1960 or later, full retirement age is 67. Taking retirement at 62 will cause your benefit to be reduced by about 30%.

If your benefit at full retirement would be $1,000 a month, and you file for benefits at 62, you will only receive about $700 or 70% of the amount you would have received at full retirement. For each month you wait past the age of 62, that amount rises a little bit. At $700 a month, if you lived to the average U.S. lifespan of about 80 years old, you would receive $151,200 over your lifetime.

Applying for Social Security at Age 65

Many people don’t want to wait for their full retirement age. In fact, the average retirement age is 64. If you were born after 1960 and you retire at 65, you can expect to receive 86.7% of your full retirement benefit. The Social Security Retirement Age Calculator shows when to apply for Social Security for maximum benefit with minimum waiting.

Applying for Social Security at Age 67

If you wait to apply for benefits until full retirement, you will get the full amount of your benefit. In the example used above, that would be $1,000 a month. In this scenario, if you live to age 80, you would receive $156,000 over your lifetime, which is $5,000 more than if you filed five years earlier.

Applying for Social Security at Age 70

Every month you delay applying for benefits causes the monthly benefit amount to grow, up until age 70. If you file at age 70, your monthly Social Security retirement payment is 30% higher than it would have been if you filed at full retirement. Rather than receiving $1,000 a month you would receive about $1,300 a month. If you live to age 80, that comes to $156,000 which is the same total amount you would receive if you filed at full retirement age. This brings into the equation one of the factors that influences at what age you may want to file for Social Security benefits: how long you expect to live.

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Other Factors That Drive When To Apply For Social Security

Now, here’s what you need to consider in terms of the other factors that impact when you apply for Social Security benefits.

How Long Will You Live?

Of course, no one knows for certain how long they will live. The Social Security Administration has a rather sobering life expectancy calculator that shows at what age a person born on your birthday can expect to die, on average. It’s based on your birthdate and doesn’t factor in health, genetics, or lifestyle. If you expect to live only to age 75, for example, you might be inclined to take your Social Security benefit early so that you could enjoy it for a longer time. But if you live until age 90, taking Social Security retirement benefits early could cost you a lot of money. Here’s how your lifetime benefit would be impacted by filing at different ages if your full retirement benefit is $1,000 a month:

• At age 62, you would receive a total of $235,000 over your lifespan.

• At age 65, you would receive $260,100.

• At 67 that jumps to $276,000.

• If you wait until age 70 it is $312,000.

So, if you expect to live a long life, waiting a few years to file could make a big difference in your total benefit.

Are You Married?

There are many myths around Social Security benefits, so it’s important to delve into your particular situation. Spouses are eligible for half of the benefit their spouse would receive at full retirement age. That amount is reduced if the primary beneficiary files early. For instance, if you apply for Social Security benefits before you reach full retirement age, you would automatically be deemed as applying for spousal benefits as well if your spouse is already receiving benefits. The maximum spousal benefit you can qualify for is typically 50% of your partner’s benefits calculated at full retirement age.

One option for spouses is to file for one spouse’s benefit early, say at 62, and postpone filing for the other spouse’s benefit until age 70. This can provide money now and more money later. If one partner dies, the surviving partner is automatically assigned the higher benefit between their own and their late spouse.

Do You Have Other Income?

You may wonder what is a good monthly retirement income for a couple. Keep in mind that the average couple in their 60s and 70s spends around $4,000 a month, or $48,000 a year.

A lot of that is spent on the typical retirement expenses of housing and healthcare. The average retirement benefit in May 2022 was $1,688. So an average couple would receive $3,376 in benefits. Consequently, many people have to rely on other forms of income including wages from a job, pensions, dividends, interest or capital gains in addition to their Social Security benefit. In fact, having access to other forms of income may impact when you can retire.

If you do have income besides your Social Security benefit, and most people do, you might want to delay claiming your benefit. If you earn income from working, and you claim your benefit before full retirement age, your benefit may be reduced. If you have other types of income, such as pensions or interest on the money you’ve saved in your retirement account, your benefit will not be reduced; these don’t count as earnings. However, you may have to pay taxes on it.

The Takeaway

For most people, their Social Security benefit is unlikely to sustain them through their retirement years; they need to have another source of income. The earlier they retire, the smaller their benefit will be and the more they may need a second or third source of income. Gaining that income through wages can reduce your benefit if you retire before full retirement age.

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Photo credit: iStock/FG Trade

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOBK0822045

Dec

2022

15 High Income Skills to Learn

By Rebecca Lake | Building Your Career, Life & Career, money | Comments Off

Want to boost your earning power? High income skills can translate to a bigger paycheck since employers or clients may be willing to pay a premium to workers who possess them. Generally, high paying skills are specialized skills that are considered to be in demand. They can include a mix of hard skills and soft skills.

What are the best high income skills to learn to bring in more cash? Here, you’ll learn about 15 high paying job skills, from IT to UX know-how, that may be worth picking up. They can hold the potential to help earn more money.

Why Learning New Skills Matters

Adaptability and the ability to learn can be invaluable, whether trying to land your first job or gig or one farther along in your career. Learning new skills can help you to better keep up with a changing job landscape. Here, some points to consider:

• Acquiring high income skills could make it easier to stand out among the crowd when competing for positions or freelance gigs. You may have a more diverse range of job options to choose from. Your skills may also translate to a larger paycheck if they’re sought-after by employers or clients.

• Some of the highest paying jobs are in the computer and information technology fields. If you’re able to learn the skills needed to get those jobs, either as a full-time employee or a freelancer, that could substantially boost your lifetime earnings.

• Relevancy is also a factor. If you’re up to date on the latest high-paying skills that could make you much more valuable in an employer or client’s eyes. Should the company or client need to cut back on staffing, your job could be secure if you hold a skill set that your colleagues can’t match.

Recommended: 25 High-Paying Trade Jobs

15 High-Income Skills to Learn

The best high income skills to learn are ones that can help you to increase your earnings while also doing work that you enjoy. Certain high paying job skills may require a college degree to learn, while others you might be able to pick up without going to school.

Here are some of the best high paying job skills to learn now, including remote job skills and tech skills.

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1. SEO Skills

SEO, or search engine optimization, involves knowing how to structure website content in order to push it to the top of search engine rankings. This skill is in high demand, and businesses are willing to pay well for it. The reason: Higher search rankings can translate to more clicks and more purchases.

It’s possible to find full-time SEO jobs, but you could also offer freelance SEO services if you’d like to be your own boss. Studying SEO experts and guides can be a good starting point for learning more about this skill.

2. Digital Marketing

Digital marketing is another way of describing advertising through digital channels. As people increasingly consume information online, digital marketers play an important role. They can help brands and businesses connect with current and prospective customers through social media, apps, and email marketing.

If you spend time online regularly, you might already have some knowledge of digital marketing and how it works. You could use that knowledge to your advantage to help clients make money on social media or target their ideal audience. There are also an array of courses you might take or certificates you might earn in this area.

3. Email Marketing

Email marketing is related to digital marketing but it focuses exclusively on advertising through email. For example, during the Black Friday season, stores may send out emails to customers that include coupons, promo codes, ads, or other special promotions. Those emails are written by an email marketer with the end goal of encouraging customers to click and make a purchase.

Becoming an email marketer is something you might consider if you have experience with marketing or the next high income skill that follows on this list.

4. Copywriting

Copywriting involves creating written content that’s intended to persuade. Similar to email marketing, copywriters help businesses and brands to sell their products and services.

Some of the ways you could leverage high income skills as a copywriter include writing website content, sales pages, marketing emails, sales brochures, or newsletters. Copywriting allows for further specialization if you’re focusing on a single niche. For example, you might write for petcare companies or companies in the beauty or wellness niche.

5. Video Editing

Video editors get paid to edit videos for social media, website content, and other channels. While written content still has high value among consumers, video is offering up strong competition, as evidenced by the growth of TikTok and YouTube.

Video editing is one of the best high-paying skills to learn for another reason. It doesn’t require a college degree. It’s a skill you can pick up through online study, often with minimal investment required.

6. Software Development

Software developers create operating programs for computers and other devices. Becoming a software developer starts with learning the basics of coding, which is something you might be able to do through a trade school or online coding bootcamp. Developers earn a median wage of $109,020 per year, so this could be a good high income skill to learn if you’re hoping to earn a six-figure salary.

7. Web Development

Web development is similar to software development, but the focus is on creating websites and web applications. Web developers need to be knowledgeable about programming languages like CSS and JavaScript. They also have to be familiar with different website-building platforms, such as WordPress. A web developer may work with a web designer to create new sites for clients or redesign existing ones.

8. Project Management

Project managers oversee the completion of large-scale projects from start to finish, often in information technology (IT) or computer-related fields. The project manager’s primary duty is to help the company or client they’re working with achieve their end goals for the project. Project managers may require certain hard skills, such as coding knowledge, but they can also utilize soft skills, such as effective communication and the ability to direct a team.

9. IT Skills

The IT field can offer up numerous high paying job opportunities, depending on which skills you have. A broad range of IT skills can fall under the high income umbrella, including:

• Cloud computing skills

• AI skills

• Programming skills

• Cybersecurity skills

• Blockchain knowledge

Again, learning how to code can help you build a foundation for learning other valuable IT skills, which can be developed through specialized courses.

10. UX Design

UX refers to user experience, or how a person interacts with a product or service. It’s an important element of websites and apps, as well as physical products and services. When consumers visit a website or log in to their favorite apps, they want them to be fast and easy to navigate. Likewise, when someone purchases something or signs up for an online service, they want it to function the way they’re expecting it to. UX design experts help to iron out the kinds to deliver the best user experience possible. This can require specialized training, depending on whether UX design is delivered for a digital property or something more rooted in the offline world.

11. Content Marketing

Content marketing is related to copywriting, but it requires a different skill set. Content marketers create content that’s designed to draw traffic through search engines or social media, but it goes beyond sales pages or landing pages. A good example of content marketing at work is blogging. When executed effectively, blogging can build an audience and generate revenue through ads, product sales, services, or affiliate marketing.

12. Affiliate Marketing

Affiliate marketing means marketing another entity’s products or services and earning commissions each time someone makes a purchase. For example, a blogger who includes affiliate links to Amazon products in their web content might earn money if a reader clicks their links and buys something. Affiliate marketing could be an ideal high income skill to learn if you’re interested in generating passive income online.

13. Mobile App Development

Mobile apps are part of many people’s daily lives. They can offer convenience if you’re using them to log in to your bank account or manage your investments. Other apps can provide entertainment if you’re using them to watch videos, play games, or listen to music.

Companies can hire mobile app developers to create apps and test them before releasing them to the market. It’s possible that you could even try moonlighting work, and create your own mobile app and sell it, building a six- or even seven-figure business in the process.

14. Graphic Design

Graphic design skills could lead to a higher income if you’re creating designs for clients with big budgets or building a steady freelance business. Some of the ways you could make money as a graphic designer include designing logos, YouTube thumbnails, private label rights content, social media templates, or ebook templates. You could also apply your graphic design skills to create designs for a print-on-demand or Etsy shop.

Recommended: 15 Low-Cost Side Hustles

15. Soft Skills

Soft skills are a diverse professional toolkit. They’re based on a different sort of knowledge that doesn’t involve learning how to code or develop software. Examples of high paying soft skills include good communication skills, problem-solving skills, creative thinking, and time management skills. Employers and clients can value those skills just as much as some of the other high income skills on this list. These skills can be used in high level administrative, coordinator, and management positions.

Tips for Developing High-Paying Skills

There are several options for learning the high paying job skills you might need to succeed. Which one you choose can depend on the skills you want to learn and how much you know about them already. Some of the possibilities for developing high income skills include:

• Completing a two- or four-year degree program at a college or university

• Attending a trade school

• Utilizing online resources, like YouTube or blogs

• Taking paid online courses that are independent of a degree program

• Applying for internships or freelance jobs that could allow you to learn the skills you need

• Asking someone who already possesses your desired skill set to act as your mentor

Working with a professional coach to help you develop your skills.

Some of these options cost money; others don’t. If you’re on a tight budget, then you might want to start with free resources like well-rated YouTube tutorials. After that, you could consider what kind of investment you might want to make in a paid course or degree program.

Trade school can be more affordable than a four-year college or university for learning certain skills. What is trade school good for learning about? Web development, web design, coding, and video editing are just a few high paying skills you could brush up on. Community colleges and continuing ed programs at universities may also offer affordable classes that will allow you to develop your talents.

If you’re considering applying high income skills to start a freelance business, it’s also a good idea to give some thought to the financial side. Financial planning for freelancers includes things like budgeting for irregular income, learning how to set your rates, filing taxes, and saving for retirement.

The Takeaway

If your goal is to earn more money, learning some new high income skills can definitely be worthwhile. From content marketing to UX design to copywriting, there are many avenues to pursue as you build the expertise that can help you earn more money.

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FAQ

What are high demand skills?

High demand skills are job skills that are highly sought-after by employers and clients. Examples of high demand skills can include knowledge of coding and HTML, SEO expertise, and digital marketing experience. Employers may be willing to pay more for high demand skills if there’s a smaller pool of available workers who have them.

What are the top skills you should learn for the future?

Many of the skills that are likely to be in-demand in the future are connected to computers and technology. Understanding of artificial intelligence (AI) or blockchain technology, for example, may be desirable as more companies focus on these types of innovations.

How can I land a high paying job?

Learning some high income skills could help you to land a high paying job, if those skills are in-demand and there are fewer qualified candidates to fill the available jobs. Other ways to increase your income include asking for a raise, taking on a second job, or starting a profitable side hustle.

Photo credit: iStock/nensuria

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOBK1122001

Dec

2022

What Are Labor Market Indicators?

By Michael Flannelly | invest, Life & Career | Comments Off

The labor market is a key component of the economy, as it represents the supply and demand for workers and their respective wages. Labor market indicators are statistics that reflect the state of the labor market, providing information about employment levels, wage growth, and other factors that can impact the overall economy.

A wide range of analysts, from economists to investors to business owners to policymakers, pay close attention to various labor market indicators to help gauge the state of the economy. These data can play a critical role in determining how investors and businesses make investment decisions and how policymakers shape laws and regulations that affect society.

What Is the Labor Market?

The labor market, also known as the job market, is where workers and employers come together to find jobs and workers, respectively. It is critical to the economy because the supply and demand for labor determines wages and other employment-related issues.

The labor market is influenced by various factors, including the overall health of the economy, the level of education and training of the workforce, and government policies that impact employment and wages. The labor market can also be affected by broader economic trends, such as globalization and technological change.

Strong employment levels, low unemployment, and rising wages characterize a healthy labor market. These developments may indicate a robust economy and can lead to improved living standards for workers and their families. On the other hand, a weak labor market can signal economic difficulties, like a recession, and result in lower wages and higher levels of unemployment.

The labor market plays a crucial role in the functioning of the economy. By paying attention to the labor market and labor market indicators, investors can better evaluate the health and well-being of the economy, which may help inform investment strategies.

Common Labor Market Indicators

Investors, economists, and policymakers use several common economic indicators to evaluate the state of the labor market. These indicators, most of which are released by the Bureau of Labor Statistics (BLS) , can provide valuable information about employment levels, wage growth, and other factors that can impact the economy.

Some of the most common labor market indicators include:

Unemployment Rate

One of the most closely watched labor market indicators is the unemployment rate, which is the percentage of the labor force that is not currently employed but is actively seeking work. This number can give insight into the overall health of the economy, as a high unemployment rate can indicate a sluggish economy. A low unemployment rate may signal a strong economy where most workers can find jobs.

The unemployment rate is calculated by dividing the number of unemployed workers actively seeking work by the total number of individuals in the labor force (which includes both employed and unemployed workers). The unemployment rate is expressed as a percentage. For example, if there are 100 unemployed workers and 500 individuals in the labor force, the unemployment rate would be 20% (100/500 = 0.20).

Nonfarm Payrolls

Nonfarm payrolls, also known as nonfarm employment or total nonfarm payrolls, measure the number of people employed in the United States. The nonfarm payrolls number is derived from the monthly Employment Situation report (also known as the Jobs Report), which is based on a survey of nonfarm establishments. This survey excludes farm workers, private household workers, employees of nonprofit organizations, and other types of businesses.

The nonfarm payroll number is considered an essential indicator of the state of the labor market, as it provides information about employment levels across a wide range of industries. A rising nonfarm payroll number can indicate a strong labor market and a growing economy, while a falling number can signal economic difficulties.

Average Hourly Earnings

Average hourly earnings is a measure of the average wage earned by workers. Along with the nonfarm payrolls report, it is released monthly by the BLS and is considered an important indicator of wage growth and the well-being of workers.

Average hourly earnings are calculated by dividing the total wages paid to workers by the number of hours worked. This number is then expressed in terms of an average hourly wage. For example, if the total wages paid to workers are $100,000 and the total number of hours worked is 2,000, the average hourly earnings would be $50 per hour (100,000/2,000 = 50).

Average hourly earnings can provide valuable information about the state of the labor market and the well-being of workers. Rising average hourly earnings may indicate that workers are seeing their wages increase, which may signify a strong labor market and a growing economy. However, rising wages may be a cause of inflation. On the other hand, falling average hourly earnings may signal economic difficulties and stagnant wages.

Employment-to-Population Ratio

Another critical labor market indicator is the employment-to-population ratio, which is the percentage of the population that is currently employed. This indicator is calculated by dividing the number of employed individuals by the total population.

The employment-to-population ratio can give a sense of the extent to which the labor force is being utilized. A high employment-to-population ratio can indicate a strong labor market, while a low ratio can signal economic difficulties. Additionally, this ratio can also be used to compare the employment levels of different groups within the population. For example, analysts may use the ratio to compare the employment levels of men and women or to evaluate the employment levels of different age groups.

Labor Force Participation Rate

The labor force participation rate (LFPR) is the percentage of the population that is either employed or actively seeking work. It is calculated by dividing the number of individuals in the labor force (which includes both employed and unemployed workers) by the total population and is expressed as a percentage. The LFPR can provide information about the availability of workers in the labor market and can be used to evaluate trends in the workforce.

JOLTs

JOLTS, or the Job Openings and Labor Turnover Survey, is a monthly survey conducted by the BLS. It provides data on job openings, hiring, separations (including layoffs, discharges, and quits), and other labor market dynamics in the United States.

The JOLTS data can provide insight into employment and job growth trends and can also be used to identify potential labor shortages or surpluses. For example, a high number of job openings and quits can indicate a strong labor market, while a low number can signal a weak labor market.

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Initial Jobless Claims

Initial jobless claims, also known as new unemployment claims or jobless claims, measure the number of individuals who have filed for unemployment benefits for the first time. This number is released weekly by the United States Department of Labor (DOL).

The number of initial jobless claims is a measure of the pace of layoffs in the economy. A rising number of initial jobless claims can lead to a weak labor market and a slowing economy. In contrast, a falling number can signal a strong labor market and a growing economy.

Continuing Jobless Claims

Continuing jobless claims, also known as continuing unemployment claims or continuing claims, is a measure of the number of individuals who have filed for unemployment benefits and have yet to find a job. Like initial jobless claims, this indicator is released weekly by the DOL.

The number of continuing jobless claims provides information about the number of individuals who have been unable to find work after filing for unemployment benefits. A high number of continuing jobless claims can indicate a weak labor market, suggesting that many workers are struggling to find employment. On the other hand, a low number of continuing jobless claims can signal a strong labor market, as it suggests that most workers can find jobs.

The Takeaway

Labor market indicators are an important tool for understanding the state of the economy and the health of the labor market. By tracking these indicators, you can better understand the factors that drive employment, wage growth, and the economy and make more informed decisions about your investments. Depending on the data, labor market indicators may show a strong economy, which may be a positive sign for your portfolio, or vice versa.

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Dec

2022

Annual Report: The Key Info Companies Provide in Theirs

By Michael Flannelly | Growing Wealth, invest, Investing | Comments Off

An annual report is a document that provides insight into a company’s operations and financial performance over the previous year. While annual reports are primarily associated with large, publicly traded companies, small businesses and non-profit organizations may also release yearly reports.

Companies issue annual reports to provide shareholders, potential investors, employees, and other interested parties with a comprehensive overview of the company’s financial position. Companies also use annual reports to inform investors about the company’s performance and prospects for the future. Annual reports can be an essential tool for investors to make informed decisions about their investments.

What Is an Annual Report?

As noted above, an annual report is a document that publicly traded companies are usually required to issue each year to share information about their financial performance and activities with their shareholders. These reports typically include quantitative and qualitative details about the company’s revenue, expenses, profits, losses, and plans for the future.

Companies send annual reports to their shareholders before they hold annual meetings, often to assist in the shareholder voting process. Additionally, reporting companies will post their annual reports on their websites.

A company’s annual report is typically prepared by the company’s management team, with input from other members of the organization, such as the finance department and the board of directors.

The individuals and teams preparing the annual report can vary depending on the company and the information it wishes to include. It is typically a collaborative effort involving many different people within the organization. In some cases, a company may also enlist the help of external parties, such as auditors or consultants, to assist with preparing the annual report.

Often a company’s creative and communications teams will be involved in preparing the report, as they contribute to the narrative text, graphics, and photos that may be in an annual report. By making it visually appealing, companies can make it easier for readers to digest the information.

A publicly traded company’s annual report is related to, but different from, the Form 10-K annual report that they must file with the Securities and Exchange Commission (SEC). The Form 10-K annual report may contain more detailed information about the company’s earnings and financial condition than the annual report. Companies may send Form 10-K to their shareholders instead of – or in addition to – providing them with a separate annual report.

What Information Is Contained In an Annual Report?

The main components of an annual report typically include an overview of the company’s operations and financial performance, financial statements, and information about the company’s management and board of directors.

The specific components of an annual report can vary depending on the company and the information it wishes to share with its shareholders. In addition to the main features outlined below, the contents of an annual report may also include other information, such as details about the company’s corporate governance practices, its environmental and social impact, and any additional information that the company feels is important for shareholders to know.

Letter from the CEO

Annual reports usually start with a letter from the chief executive officer (CEO) or chairman of the board that provides an overview of the company’s performance and highlights any significant events or developments that have occurred over the past year.

Performance Overview

Companies often provide a review of the company’s operations, including information about its products or services, market position, and any important milestones or achievements that have occurred over the past year, in an annual report.

Financial Statements

Financial statements, such as the balance sheet, income statement, and statement of cash flows, providing detailed information about the company’s financial performance and position, are a critical part of an annual report.

Corporate Leadership Overview

Annual reports include information about the company’s management and board of directors, including biographies and details about their backgrounds and experience. The reports may also have detailed information about executive compensation.

Future Outlook

A discussion of any risks or uncertainties that the company faces and how it plans to address them in the future is often included in the annual report. This can be helpful for shareholders and potential investors to gain an understanding of the company’s possible performance in the future.

Example of an Annual Report

Annual reports can vary depending on the company, its industry, and whether it is a publicly traded or privately held firm.

For example, an annual report for a company in the retail industry might include information about the company’s same-store sales over the past year. Additionally, the report may provide details about the products it sells, a breakdown of its inventory, an overview of its financial position, and information about the company’s management team and any potential risks or challenges it faces in the coming year.

To find out more about a specific company’s annual reports, you can usually find them under the investor relations portion of the company’s website or through the SEC’s EDGAR database .

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Who Can Benefit From Reading an Annual Report?

Several groups of people may benefit from reading an annual report. For example, the company’s shareholders are usually interested in an annual report to use the information to understand the company’s financial performance and make more informed decisions about their investments.

Other groups who may find annual reports useful include potential investors, who can use the information in the annual report to assess the company’s financial health and determine if it is a good investment opportunity. In addition, analysts, customers, journalists, and other stakeholders may find annual reports to be a valuable source of information about a company and its operations.

The Takeaway

An annual report is a crucial document that provides a comprehensive overview of a company’s performance and financial position. These documents can be a critical resource for investors to make informed investment decisions. It is important to understand the information contained in the report and to analyze the information critically. By doing so, investors can make informed decisions about their investments as they build a wealth-building portfolio.

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Dec

2022

Business Cycle Investing

By Laurel Tincher | Growing Wealth, invest, Investing | Comments Off

Investors often pay attention to the ups and downs of economic activity – fluctuations known as the business cycle – and readjust their investments accordingly. With this business cycle investing strategy, investors typically adjust their exposure to various sectors with stocks or bonds in their portfolios. Some industries outperform during economic expansions, while others do better during contractions.

Business cycle investing is not an exact science, and past performance isn’t indicative of future returns. But historically, specific industries have prospered during each stage of the business cycle. Here’s a rundown of the different business cycle stages and which industries have been more favorable to invest in during each phase.

What Is a Business Cycle?

A business cycle refers to the periodic expansion and contraction of a nation’s economy. Also known as an economic cycle, it tracks the different stages of growth and decline in a country’s gross domestic product (GDP), or economic activity.

Worker productivity, population growth, and technological innovations are all factors that can contribute to whether an economy is going through a period of boom or bust. Such elements play a role in how many goods and services a nation’s businesses produce and how much its consumers purchase.

Other factors, such as wars, pandemics, natural disasters, and political instability, can also influence the economy. These can cause a recession to happen sooner or otherwise shift the economic environment of a nation or the world.

In the U.S., the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) announces whether the economy is in a recession or a new iteration of the business cycle. Policymakers attempt to manage the business cycle by adjusting fiscal and monetary policies, such as taxes, stimulus packages, or interest rates.

Some people refer to business cycles and market cycles interchangeably. However, the business cycle measures the entire economy, while market cycles refer to the ups and downs of the stock market. Although the two can be correlated, they aren’t the same.

How Does the Business Cycle Work?

The business cycle works by alternating between periods of economic growth and decline. During the expansion phase, economic activity grows, and the economy is relatively healthy. A period of economic expansion is typically characterized by low unemployment, rising wages, and increasing consumer and business confidence.

Eventually, the economy will reach its peak and start to contract. This is typically characterized by slowing economic growth, rising unemployment, and declining consumer and business confidence. As businesses see a decline in demand, they may lay off workers or reduce production, leading to a downward spiral of declining economic activity.

The trough phase is the lowest point in the business cycle. Economic activity is at its weakest, and unemployment is at its highest. This phase is also known as the recession bottom. From here, the economy begins to recover, and the business cycle starts over again.

How Reliable Is the Business Cycle?

The business cycle is a reliable pattern of economic activity observed over time, but it is not always predictable. Business cycles tend to follow a similar pattern, with periods of expansion followed by periods of contraction, but each phase’s timing, length, and severity can vary significantly.

Stages of the Business Life Cycle

There are four stages of the business cycle, which fall into two phases: a growth phase of expansion and a declining phase of contraction. A business cycle can last anywhere from one year to 10 or more years. Since 1945, there have been 12 business cycles.

Stage 1: Recession

The recession phase is the lowest point in the business cycle. Also known as the contraction phase, a weak economy and high unemployment define this period.

GDP, profits, sales, and economic activity decline during this stage. Credit is tight for both consumers and businesses due to the policies set during the last business cycle. It’s a vicious cycle of falling production, incomes, employment, and GDP.

The intensity of a recession is measured by looking at the three Ds:

• Depth: The measure of peak-to-trough decline in sales, income, employment, and output. The trough is the lowest point the GDP reaches during a cycle. Before World War II, recessions used to be much deeper than they are now.

• Diffusion: How far the recession spreads across industries, regions, and activities.

• Duration: The amount of time between the peak and the trough.

A more severe recession is called a depression. Depressions have deeper troughs and last longer than recessions. The only depression that has happened thus far was the Great Depression, which lasted 3.5 years, beginning in 1929.

Recessions generally lead to shifts in monetary policy and government spending that lead to a recovery phase.

Stage 2: Early Cycle

Following a recession, the economy enters an expansion phase, where there tends to be a sharp recovery as growth begins to accelerate. The stock market tends to rise the most during this stage, which generally lasts about one year. Because of loose monetary policy by the central bank, interest rates are low, so businesses and consumers can borrow more money for growth and investment. GDP begins to increase.

Just as a recession is a vicious cycle, recovery is a virtuous cycle of rising income, employment, GDP, and production. And similar to the three D’s, a recovery period, which includes Stages 2-4, is measured using three P’s: how pronounced, pervasive, and persistent the expansion is.

Stage 3: Mid-Cycle

The mid-cycle phase is generally the longest phase of the business cycle, with moderate growth throughout. On average, the mid-cycle phase lasts three years. Monetary policies shift toward a neutral state: interest rates are higher, credit is strong, and companies are profitable.

Stage 4: Late Cycle

At this stage, economic activity reaches its highest point, and while growth continues, its pace decelerates. Monetary policies become tight due to rising inflation and low unemployment, making it harder for people to borrow money. The GDP rate begins to plateau or slow.

Companies may be engaging in reckless expansions, and investors are overconfident, which increases the price of assets beyond their actual value. Late cycles last a year and a half on average.

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What Industries Do Well During Each Stage?

Historically different industries have prospered during each stage of the business cycle, depending on whether they are cyclical or non-cyclical stocks.

When money is tight and people are concerned about the economy, they cut back on certain purchases, such as vacations and fancy clothes. Also, when people anticipate a recession, they tend to sell stocks and move into safer assets, causing the market to decline.

Industries do better or worse depending on supply and demand, and the need for specific products shifts throughout the business cycle. In general, the following sectors perform well during each stage of the business cycle:

Recession

During the recession phase, the lowest point in the business cycle, economic activity is at its weakest, and unemployment is at its highest. Many industries may struggle during this phase, especially those dependent on consumer spending or business investment.

However, certain industries are able to weather the storm during a recession because they offer products and services that people need no matter how the economy is performing. These industries include healthcare, consumer staples, and utilities.

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Early Cycle

During the early cycle expansion phase, when economic activity is growing and the economy is healthy, many industries tend to do well. These can include consumer-oriented sectors, such as retail and leisure, as well as industries that benefit from increased business investment, such as construction and manufacturing. Other sectors that benefit from increased borrowing due to low interest rates include financial services, real estate, and household durables.

Mid-Cycle

During the mid-cycle phase, when the economy is operating near full capacity, some industries may start to see slowing growth or declining profits. These can include industries sensitive to changes in consumer demand or highly competitive, such as technology and media. However, some industries perform well during the mid-cycle, like information technology and energy, because companies in these areas deploy capital that helps them grow.

Late Cycle

During the late cycle, economic activity slows down and the labor market shows signs of weakness. Additionally, the economy may face inflationary pressures due to the previous period of economic growth and low unemployment. While this inflationary pressure and economic slowdown negatively impact many industries, utilities and energy companies may do well during this period. Additionally, investors could research stocks that do well during volatility.

Who Should Invest With the Business Cycle?

Business cycle investing involves trying to anticipate changes in the business cycle and buying or selling assets based on the expected performance of those assets during different phases of the business cycle. For example, an investor following a business cycle investing strategy might buy stocks when the economy is expanding and sell them before the peak in anticipation of a downturn.

However, this active investing strategy is not suited for everyone. Investing and rebalancing a portfolio with the business cycle is difficult because timing the market is easier said than none. Business cycle investing is best for investors who have the time to stay up to date with the latest economic indicators and stock market news while also having the risk tolerance to time the market.

In contrast, some investors prefer a long-term buy and hold strategy, in which they don’t try to time the market and make few changes to their portfolio.

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Pros and Cons of Business Cycle Investing

Business cycle investing involves trying to anticipate and profit from changes in the business cycle. The goal is to buy assets likely to do well during certain business cycle phases and sell them before the next phase begins.

However, investors should note that the business cycle is not always predictable, and there are no guarantees that a business cycle investing strategy will be successful. Thus, it’s good to consider the pros and cons of business cycle investing.

Pros

The advantages of using a business cycle investing approach include the following:

• The ability to potentially profit from changes in the business cycle: By anticipating and acting on changes in the business cycle, investors may profit from the upswing of a recovery or the downtrend of a recession.

• A framework for decision-making: The business cycle provides a framework for analyzing economic trends and making investment decisions. This can help investors make more informed decisions about buying or selling assets.

• Diversification: Business cycle investing can help investors diversify their portfolio by adding assets likely to do well in different phases of the business cycle.

Cons

The disadvantages of using a business cycle investing approach include the following:

• Difficulty in predicting the business cycle: The business cycle is not always predictable, and it can be difficult to anticipate changes in the economic environment. This can make it challenging for investors to implement a business cycle investing strategy successfully.

• Market volatility: Business cycle investing can involve buying and selling assets at different points in the business cycle, exposing investors to stock volatility.

• Opportunity cost: By focusing on the business cycle, investors may fail to take advantage of opportunities to invest in assets that are not correlated to the business cycle but may still provide strong returns.

Investing With SoFi

No business cycle is identical, but history shows there can be a rough pattern to which industries do better as the economy expands and contracts. Investors can take cues from which stage of the business cycle the economy is in order to allocate money to different sectors.

One way to invest and keep track of the market is by using an online investing app like SoFi Invest®. With a SoFi online brokerage account, you can stay up-to-date with the latest financial market news, and trade stocks, exchange-traded funds (ETFs), and more with no commissions. Plus, you’ll have access to educational resources to support you as you continue to learn about the markets.

Take a step toward reaching your financial goals with SoFi Invest.

FAQ

What is an investment cycle exactly?

An investment cycle is a pattern of investment activity that occurs over time, usually in conjunction with the business cycle. It is typically characterized by periods of rising prices followed by periods of declining prices. The length and severity of the investment cycle can vary, and various factors, including economic conditions, market trends, and investor sentiment, can influence it.

How long are investment cycles?

The length of investment cycles can vary significantly, depending on economic activity and investor sentiment. Some investment cycles may last only a few months, while others may last several years or more.

What are the 4 stages of investment cycles?

The four stages of an investment cycle are expansion, peak, contraction, and trough. During the expansion phase, economic activity grows and investor confidence is high. Prices of investments, such as stocks and real estate, tend to rise, and demand for assets is strong. The peak phase is the highest point in the investment cycle. Prices of investments have reached their highest point, and demand for assets may start to wane. During the contraction phase, economic activity slows down and investor confidence may decline. Prices of investments tend to fall, and demand for assets may decrease. The trough phase is the lowest point in the investment cycle. Prices of investments have reached their lowest point, and demand for assets is at its weakest.