Are your retirement savings on track?

Reports vary. The Federal Reserve's Economic Well-Being of U.S. Households in 2023 report (tinyurl.com/4zy7m6k5), released in May 2024, indicated that only 34% of non-retirees said their retirement savings were on track. Another 19% said they were not sure. Those results are not reassuring.

On the other hand, the 2024 Retirement Confidence Survey, conducted by the Employee Benefit Research Institute and Greenwald Research, reported that 68% of 1,255 workers were "very or somewhat confident" they would have enough money for retirement. The workers (along with 1,266 retirees) were surveyed in January 2024 (tinyurl.com/54dyy6an).

A common concern reflected in these and other surveys? Inflation.

"[I]nflation remains a top reason for Americans' lack of confidence," the 2024 Retirement Confidence Survey stated. "Among those who do not feel confident, 31% of workers and 40% of retirees cite inflation as the reason why."

In addition, 78% of workers said inflation would stay high for at least the next 12 months (down from 86% answering the same question in the 2023 survey).

Thirty-five percent of those in the Federal Reserve survey self-reported inflation as being the main financial challenge, which was similar to 2022 (33%). In both years, "inflation" finished ahead of any other challenge.

Similar concerns have emerged elsewhere. A recent survey of 2,392 adults in early May by CNET Money, a digital media publication, found that 93% of adults are concerned about inflation (tinyurl.com/4xnzz38p).

Asked about the financial goals that have been postponed by those in the CNET survey, 38% said saving for long-term goals, and 24% said investing for long-term goals such as retirement or property.

There also is this: 63% of respondents said they worried more about running out of money than they did death, according to an Allianz Life Insurance Company of North America survey in February and March of 2024 of 1,000 individuals 25 and older (tinyurl.com/2s39akkr). The most common concern related to the worry about running out of money? High inflation, at 43%.

It's important to keep in mind that the Consumer Price Index, a measure of inflation, increased 6.5% between December 2021 and December 2022 (tinyurl.com/2n8u2nmh). However, the increase was only 3.3% from May 2023 to May 2024 -- the most recent report issued by the U.S. Bureau of Labor Statistics (tinyurl.com/bdch46a4). Yet despite the improving numbers, survey respondents still view inflation as a concern.

Another explanation for the concern? "Despite multiple indicators of improving economic conditions, the idea of a 'vibecession' -- which is defined as 'a period of widespread pessimism about the economy regardless of the actual economic situation' -- seemed to persist across the U.S. workforce," was cited in Fidelity Investments' "Building Financial Futures" (tinyurl.com/mr42tw5s).

The report also noted that "the percentage of Fidelity customers who felt optimistic about their finances, their health, and their work at the end of 2023 increased by double-digits from the end of 2022." However, "anxiety about the economy continued among Fidelity customers, with 75% indicating that they are stressed about higher prices and the increasing cost of living."

How do you view inflation these days? Do you feel that your saving for retirement is on track? No matter where you stand, consider how these Allianz Life survey responders are addressing their concerns about running out of money:

-- Increase retirement savings (41%)

-- Reduce current spending and save more (38%)

-- Put portion of retirement savings in a product that provides lifetime income payment (35%)

-- Work longer and retire later (35%)

All good suggestions. Consider whether these are realistic and practical options for you if you would like to improve your retirement preparedness. And let me know if you would like to talk more about this subject. Write to me (readers@juliejason.com) with questions I can answer in this column.

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So far, the IRS has processed 144 million tax returns through May 10, 2024 (tinyurl.com/5t59f7xm). Most (137,394 million) were e-filed either by the taxpayer or a tax professional.

The Free File program (tinyurl.com/4hsj7bnp), which involves private-sector partners teaming with the IRS to offer free online tax software to qualifying taxpayers, is still available for tax 2023 taxpayers on extension, and longer -- as the IRS announced a five-year extension of Free File through October 2029.

The Free File program, which is only available on IRS.gov, processed 2.9 million returns in 2024 as of May 11, which was up from 2.7 million returns filed during the same period last year (tinyurl.com/5t59f7xm).

There were eight private-sector firms that served as Free File partners in 2024. To qualify for using Free File, taxpayers had to have an adjusted gross income (AGI) of $79,000 or less in 2023. Those taxpayers with an AGI over $79,000 could still use the IRS Free File Fillable Forms.

Another program called Direct File (tinyurl.com/mryhy5cj), which is a "free, public electronic return-filing service option," will become a permanent option beginning with the 2025 tax filing season. Direct File is part of the IRS Inflation Reduction Act Strategic Operating Plan (tinyurl.com/5n6pnt58).

Tests through a 2024 pilot program were quite successful, with more than 140,000 "relatively simple" tax returns being filed through Direct File. The IRS program focused on full-time residents of 12 states. If a taxpayer had a tax situation that was not part of the scope of the program, he or she was directed to other options.

Ninety percent of more than 15,000 Direct File users who participated in a survey said that they ranked their experience with Direct File as being excellent or above average, as detailed in the "IRS Direct File Pilot: Filing Season 2024 After Action Report" (tinyurl.com/2muyvtz8). Also, 86% of those surveyed said their experience with Direct File increased their trust in the IRS.

Nearly half of Direct File users "reported paying for tax preparation the previous year," IRS Commissioner Daniel Werfel stated in the report, adding that "the Treasury Department estimates that Direct File users saved $5.6 million in tax preparation fees."

Keep in mind that statistics published in the instructions for IRS Form 1040 for tax year 2023 indicate that non-business taxpayers, who make up 72% of all tax returns, spend roughly nine hours and $150 in preparing their taxes each year (tinyurl.com/y8hays3r).

Direct File also "issued more than $90 million in tax refunds and collected $35 million in tax balances due," Werfel said. Overall, the IRS distributed more than $269 billion through May 10, 2024.

The IRS pointed out in its statement that Direct File "will continue to be one option among many from which taxpayers can choose. It is not meant to replace other important options by tax professionals or commercial software providers, who are critical partners with the IRS." The IRS added that it "remains committed to the ongoing relationship with Free File Inc."

Other IRS free filing options for qualifying taxpayers include the Volunteer Income Tax Assistance program and the Tax Counseling for the Elderly program (tinyurl.com/34jbmdxz), with 2.6 million returns prepared through those options.

Expect to hear more details about an expansion of Direct File in the coming months, according to the IRS.

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Say you own the stock of a company whose earnings increased dramatically over the last quarter. Expecting a nice bump up in price, you see the stock price heading in the opposite direction.

What happened? How could good news suddenly become bad news?

This is where analysts enter the picture.

Analysts offer a glimpse into future earnings. "The stock market is forward looking. That is, stock prices are established on the expectations that prospective investors have for the future earnings power of the firm," states an article from the American Association of Individual Investors, a nonprofit organization that seeks to educate individual investors (tinyurl.com/vcjwh5z3).

The analysts' research "often involves modeling out forecasts for how a given company might perform in the future," explained Yahoo Finance's Brian Cheung (tinyurl.com/2yj6ahyu). "Using their own math, analysts will publish estimates for figures like revenue and [earnings per share]."

Those estimates are then collected and published as 'consensus' estimates by aggregators (Bloomberg, FactSet, S&P Capital IQ and Refinitiv). When a reporter talks about beating or missing expectations, that's the source of their information.

"Earnings estimates embody investors' opinions of factors such as sales growth, product demand, competitive industry environment, profit margins and cost controls," explained the AAII staff in "Earnings Estimates and Their Impact on Stock Prices". "Stock prices adjust as these expectations change or are proven wrong."

The AAII offered some main points to keep in mind when considering earnings estimates:

-- "Firms with high expected earnings growth tend to underperform the market because it is difficult to meet the market's high expectations. Companies with low earnings expectations tend to do better than expected."

-- "Realize that the stock price already reflects the general consensus about future earnings. Be aware that if a stock is highly touted, the basis for the recommendation should be an earnings forecast significantly above the prevailing opinion."

It turns out that the majority of S&P 500 companies do beat estimates. Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, wrote in 2023 that about 78% of companies in the S&P 500 Index had "beaten their estimates on a quarterly basis since 2020" (tinyurl.com/32nd9vk4).

Frederick added that "Company executives -- who provide the earnings guidance that analysts use to create their estimates -- are loath to disappoint investors. Just as airlines can pad flight times to avoid being considered late, company executives can issue conservative earnings guidance so it's easier to meet or beat analysts' expectations."

How else can analysts affect prices? Take this Wall Street Journal story from May 8, 2024, titled "Heard on the Street: Why Lyft's Stock is Pulling Ahead of Uber's" (tinyurl.com/45amkynh).

Reporter Dan Gallagher pointed out that "Lyft has buy ratings from only 21% of the analysts covering the shares ... a sharp contrast to the 90% of analysts who rate arch-rival Uber as a buy, according to FactSet data."

However, Gallagher wrote, "low expectations can also be a blessing. Lyft's stock jumped 7% Wednesday following its results, which showed gross bookings for the first quarter of about $3.7 billion, 3% ahead of analysts' estimates." As for Uber, the first-quarter results "showed gross bookings of $37.65 billion, which was about 1% below Wall Street's target." Gallagher went on to note that "Uber's stock slipped nearly 6% on Wednesday."

As you might expect, consensus estimates are not an exact science. Plus, consensus "may not capture what the best analysts think about a company's prospects. A few analysts tend to make remarkably accurate earnings forecasts, while others can miss them by a mile," quoting Ben McClure of Investopedia.

McClure goes a step further by telling investors to search for analysts with the best track records for accurate forecasts (tinyurl.com/48j93umj).

Expectations do play a role in stock prices when earnings are released. But, in the end, it's buyers and sellers that actually set prices through millions of buy and sell orders.

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