Bond Funds are Hotter Than Tesla

Tesla Inc.’s (TSLA) stock isn’t the only hot asset. Nearly four decades into a bull market for bonds, investors still have a ravenous appetite for them, even though interest rates are near historic lows around the world. Much of the influx into bonds has come from individual investors. But that doesn’t make them the “dumb money,” especially because many giant institutions are investing just as avidly. The move into bonds by individual investors is a long-term migration, not a stampede. It’s prudence, not folly.

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How to apply for Social Security

What is the social security retirement age?

The age when you can claim your full Social Security benefit varies depending on your birth year. The full retirement age is 65 for those born in 1937 or earlier, 66 for baby boomers born between 1943 and 1954, and 67 for people born in 1960 or later. Those born in 1938 to 1942 and 1955 to 1959 have an even more specific retirement age. For example, the full retirement age is 65 and 10 months for people born in 1942 and 66 and 4 months for boomers with birth dates in 1956. Those who sign up for Social Security between age 62 and their full retirement age get smaller monthly payments, while delaying claiming can increase your benefit up until age 70. "Just because you are 62, you don't necessarily have to take it," says Rianka Dorsainvil, founder and president of Your Greatest Contribution in Lanham, Maryland. "Each year you delay taking Social Security from your full retirement age up until age 70, your benefit increases by 8% each year."

From 2000 through 2009, bond funds made up 26% of the $3.5 trillion in total inflows. Over the 10 years just ended, however, 74% of the total $2.68 trillion that investors added went into bond funds. In January 2020, the inflow to bond ETFs exceeded 2% of assets, bringing their total capital to approximately $850 billion, according to State Street Global Advisors. That was the fifth month in the past year when net inflows to bond ETFs were greater than 2% of total assets. Some areas were hotter. At the end of 2019, municipal-bond funds commanded $861 billion in total assets. More than $105 billion poured in during 2019, Morningstar estimates. That inflow to muni funds surpassed the previous annual record, set in 2009, by more than 40%. One-eighth of all the assets held by municipal-bond funds arrived in the past year alone. That’s remarkable, considering that muni funds have been around since 1976. According to Morningstar, Vanguard Tax-Exempt Bond (VTEAX), available as both a mutual fund and an ETF (VTEB), took in $2.7 billion—growing by more than two-thirds in a single year. There is method to this madness. The 2017 federal tax overhaul “capped the state and local tax deduction, which made tax-exempt municipals one of the remaining areas for investors to shelter income above the cap,” says Natalie Cohen, president of National Municipal Research Inc. in New York. And, although yields on munis have fallen as prices have risen, many tax-exempt bonds aren’t valued wildly out of line with historical standards. Other factors also add up. “Tremendous inflows are still coming in” from investors selling stocks to buy bonds, says Mr. Rieder of BlackRock. And no wonder: With inflation quiescent, the Federal Reserve and most other central banks look unlikely to raise interest rates soon. What’s more, the U.S. stock market was up 31.5% last year, including dividends. More and more investors and financial advisers have been setting an asset-allocation target—say, 60% in stocks, 40% in bonds—and rebalancing, or adjusting to restore that ratio, over time. That means selling some of the best-performing assets, buying some of the laggards, or both. And, to reduce the fluctuations and increase the income in their portfolios, people sell some stock and buy more bonds as they age, says Shelly Antoniewicz, a senior economist at the Investment Company Institute, a fund-industry trade group. “Investors are being smart in how they do their rebalancing,” she says. “They do it gradually, not in a sudden move, and the bulk of the money isn’t going into long-term bond funds” vulnerable to the biggest losses if interest rates eventually rise. As of the end of 2018, fund investors in the aggregate had 62% of their assets in stocks, and 31% in bonds and money-market funds, estimates Ms. Antoniewicz. The U.S. stock market did so well in 2019 that they would have ended up with 66% in stocks and only 27% in bonds and cash at year-end unless they rebalanced by buying bonds, she says. Of course, there’s always some dumb money somewhere. Investors chasing overheated assets like high-yield emerging-market debt could end up scalded. “Stretching to get the kinds of returns you got last year,” when the bond market returned almost 9%, “is imprudent,” says Mr. Rieder. So don’t load up on shaky low-grade debt or long-term bonds that can get whacked if rates rise unexpectedly. And remember that bonds aren’t the only game in town for income. (As of this week, dozens of online banks offered one-year certificates of deposit yielding at least 2%, according to DepositAccounts.com.) But you shouldn’t feel any shame in adding some high-quality bonds, especially with the stock market defying gravity—for now.

When can I apply for social security?

You can get a personalized estimate of your future Social Security benefit by creating a My Social Security account at ssa.gov/myaccount and viewing your Social Security statement. Your statement lists how much you are likely to receive in retirement if you continue working at your current salary until your full retirement age, age 62 and age 70. "If you look at your Social Security statement today, your estimated benefit is based on your previous year's income," says Ross Menke, a certified financial planner and founder of Lyndale Financial in Nashville, Tennessee. "If you do stop working earlier, that will have an impact on what you would be eligible to receive as a Social Security benefit." The statement also lists how much you will qualify for if you become disabled and what family members might receive if you pass away. Social Security statements are mailed to workers age 60 and older who don't have a My Social Security account.

How much social security will I get?

Most workers pay 6.2% of their earnings into the Social Security system, and employers match this amount. Self-employed workers contribute 12.4% of their paychecks. However, earnings that exceed $137,700 in 2020 are not taxed by Social Security or used to calculate retirement payments. Workers who earn more than $137,700 will see a bump in their paycheck when Social Security taxes stop being withheld. Your Social Security payments might also be taxed in retirement. If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit exceeds $25,000 ($32,000 for couples), federal income tax could be due on part of your Social Security benefit. If these income sources exceed $34,000 ($44,000 for couples), up to 85 percent of your Social Security payments may be taxable. There are also several states that tax Social Security benefits.

What is the social security tax limit?

You can work and collect Social Security benefits at the same time. However, if you haven't reached your full retirement age, part or all of your Social Security payments could be temporarily withheld. Social Security beneficiaries who are younger than their full retirement age can earn up to $18,240 in 2020 before they will lose one benefit dollar for each $2 earned above the limit. The earnings limit jumps to $48,600 for those who turn their full retirement age in 2020, and the penalty decreases to $1 withheld for every $3 earned above the limit. However, once you turn your full retirement age, your benefit will be recalculated to give you credit for your withheld benefit and continued earnings. You can earn any amount without being subject to Social Security withholding after you turn your full retirement age.

What is the social security wage limit?

Social Security payments to retired workers averaged $1,478 per month in November 2019. The average spousal payment is about half that amount, or $773. Widows and widowers receive survivor's payments worth an average of $1,199 monthly.

What is the average social security benefit?

The maximum possible Social Security benefit changes depending on the age you retire. A worker who retires at full retirement age in 2020 could be eligible for up to $3,011 per month. The maximum benefit declines if you start collecting payments before your full retirement age, while someone who delays retirement until age 70 can collect a higher monthly benefit. To qualify for these large payments, you need to maintain a high income throughout a career of 35 years or more. "Those who receive the maximum benefit possible are those who've earned at or above the highest taxable wage base all of the years that are used in the benefit calculation," says William Meyer, founder and managing principal of Social Security Solutions, a company that analyzes Social Security claiming strategies. "That person would have exceeded the maximum taxable earnings in each of the highest 35 years."

What is the maximum social security benefit?

Many U.S. citizens with a driver's license or state-issued identification card can use their My Social Security account to apply for a replacement Social Security card online. You can also fill out a paper application and mail it in or take it to your local Social Security office.

How do I get a new social security card?

Most Americans contribute 6.2% of their earnings to the Social Security system, and employers pay a matching amount. Those who are self-employed pay 12.4% of their income into Social Security. Workers who have sufficiently paid into the system can collect retirement benefits beginning at age 62 or older. You may also be eligible to collect benefits if you become disabled, and your family members might qualify for survivor's payments after you pass away.

How does social security work?

If you have a medical condition that significantly limits your ability to work and perform basic activities such as walking or remembering, you might qualify for Social Security disability payments. Be prepared to provide medical records documenting your condition and why it prevents you from working. Social Security disability payments won't start until six months after your disability began. There's also a several-month wait time to process disability applications.

How do I qualify for social security disability?

Social Security beneficiaries are required to sign up for electronic payments. Social Security benefits can be directly deposited into a bank or credit union account or loaded onto a prepaid debit card. The payment dates vary based on your date of birth. If your birthday falls on or before the tenth of the month, you will receive your payment on the second Wednesday of each month. Those born between the 11th and 20th get their payments on the third Wednesday, and people born late in the month get their direct deposits on the fourth Wednesday.

When will I receive my social security check?

Last year, flows into U.S. sustainable funds more than tripled, marking the fourth year of record flows, according to Morningstar. Talking about sustainability “is a way to build better relationships with clients. And it’s material to returns,” says Catherine Banat, managing director of responsible investing at RBC Global Asset Management. One beneficiary will be impact investing strategies—where people seek specific outcomes from their portfolios—many of which are aligned with the U.N. Sustainable Development Goals. In 2019, according to the Global Impact Investing Network, assets in this market totaled around $500 billion, based on surveys with 1,300 impact investors. That will happen in mutual funds too: According to Morningstar, the largest impact funds include the $4.8 billion TIAA-CREF Social Choice Bond (TSBBX), the $2.4 billion Community Reinvestment Act Qualified Investment (CRAIX), the $1.2 billion Domini Impact International Equity (DOMIX), and the $1.2 billion AB Sustainable Global Thematic (ALTFX).

12. Flows will keep surging

Particularly of people who are great at building computer models and handling large data sets, and who are thick-skinned when dealing with corporate executives and officers. “There’s a global hiring war in ESG right now,” says Manulife’s Chew.

13. Expect more hiring in the sustainability industry...

“You’re seeing an epic supply-demand imbalance,” says Rick Rieder, chief investment officer for global fixed income at BlackRock Inc. (BLK) “But I’m very far from thinking that this is a bubble in rates.” Yes, individual investors have been buying bonds like never before. Last year, taxable-bond mutual funds and exchange-traded funds took in a record $414 billion, estimates Morningstar Inc. Meanwhile, investors sold $72 billion in mutual funds and ETFs holding U.S. stocks. This shift, under way for years, has become gargantuan. From 1990 through 1999, bond funds and bond ETFs accounted for only 10% of the cumulative $2.37 trillion that flowed into funds, according to the Investment Company Institute.

A close look at the low-rate environment Interest rates are stuck at historic lows. Is that good for risk assets, or are they down because economic growth is on the wane?