The Future of Globalization

There was a time, at the end of the 20th century, when globalization was celebrated. We became more connected with the rest of the world. We could communicate and share information in real time without cost, nations benefited from strong imports and exports, and companies could improve their bottom lines by utilizing lower-cost suppliers and workers throughout the world.

These days, perhaps not so much. Globalization has become a target for both opportunity and opposition, largely responsible for higher unemployment in developed nations and the protectionism movement. While exposure to different cultures, values and beliefs offers benefits, there is revitalized interest in intra-country government spending on infrastructure and employment.1

It’s easy to see why the topic of globalization would be divisive: what looks like a threat to some looks like opportunity to others. However, no matter what perspective you have, we are here for you. Let us help you stay focused on your long-term retirement income goals, regardless of global and local economic events.

It is likely that, moving forward, globalization will be downplayed but not eliminated. Rather, at least one observer purports that countries, including the U.S., may expend more effort and resources on “regionalization” with neighboring countries.2

One negative consequence of globalization, combined with the 2007-2009 recession, was higher unemployment in the U.S. This unfortunate circumstance hit young people particularly hard.3 But interestingly, the phenomenon of young adults moving back home with their parents also is characteristic of a global trend. According to one report, the following percentages represent 15- to 29-year-olds who live with their parents in various countries:4

  • Italy, 80.6%
  • Greece, 76.3%
  • Slovak Republic, 76.2%
  • Spain, 73.6%
  • Canada, 30.9%
  • Denmark, 34.3%
  • Sweden, 35.1%
  • United States, 32.1%5

On one hand, globalization has served to generate more jobs in certain disciplines. The phenomenon is, and will most likely continue to be, responsible for the growth of jobs for market research analysts, interpreters and translators, cartographers and customer service representatives.6

On the other hand, regardless of how many jobs renegotiated trade agreements may bring back to America, most authorities agree there won’t be nearly as many traditional manufacturing jobs as in the past. Since much assembly line work is now automated, the manufacturing jobs of the future are more likely to require technology degrees with IT skills and knowledge.7

 Content prepared by Kara Stefan Communications.

 1 Sebastian Mallaby. International Monetary Fund. December 2016. “Finance and Development: Globalization Resets.” Vol. 53, No. 4. http://www.imf.org/external/pubs/ft/fandd/2016/12/mallaby.htm. Accessed Feb. 27, 2017.

2 Jonathan Web. Forbes. Dec. 21, 2016. “2017 Will Be a Year of Regionalization, Not

Deglobalization.” http://www.forbes.com/sites/jwebb/2016/12/21/2017-will-be-a-year-of-regionalization-not-deglobalization/print/. Accessed Jan. 1, 2017.

3 Alex Gray. World Economic Forum. Nov. 11, 2016. “Still living with your parents? You’re not alone.” https://www.weforum.org/agenda/2016/11/why-do-so-many-young-adults-still-live-with-their-parents-in-these-countries. Accessed Jan. 1, 2017.

4 Ibid.

5 Drew Desilver. Pew Research. May 24, 2016. “In the U.S. and abroad, more young adults are living with their parents.” http://www.pewresearch.org/fact-tank/2016/05/24/in-the-u-s-and-abroad-more-young-adults-are-living-with-their-parents/. Accessed Jan. 1, 2017.

6 Rob Sentz. Forbes. Sep. 27, 2016. “Three Jobs That Are Growing Because of Globalization.” http://www.forbes.com/sites/emsi/2016/09/27/three-jobs-that-are-growing-because-of-globalization/#66d3c499648c. Accessed Jan. 1, 2017.

7 Scott Simon. NPR. Dec. 10, 2016. “Economist Says Manufacturing Job Loss Driven by Technology, Not Globalization.” http://www.npr.org/2016/12/10/505079140/economist-says-manufacturing-job-loss-driven-by-advancing-technology-not-globali. Accessed Jan. 1, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Take a Look at Life Insurance

Middle-aged adults have a plethora of middle-aged financial priorities. It’s hard to even call them priorities because each one is important; it’s just a matter of spreading the money you have across a variety of different needs.

In fact, a typical mid-life checking account might include payouts for a mortgage, college tuition, a savings account, an IRA, a life insurance policy, and a long-term care insurance policy — and that’s not even including the 401(k) contribution that is taken out of a paycheck before it gets deposited.

If you struggle with trying to figure out which financial priorities are most important or how to allocate a portion of your retirement savings among the many insurance product options, we can help. In fact, there are insurance products that can help with multiple priorities so you don’t have to spread your assets so thin.

Take life insurance, for example. There are many different kinds, and one of the main differences is between term and whole life. With a term policy, you purchase a death benefit amount and determine how long you want to hold the policy; it doesn’t pay out anything unless the owner passes away during the term. Whole life features a cash value account, which, over time, can build up a balance you can access, if needed.1

First and foremost, life insurance is there to help take care of your loved ones if you pass away. While many employers provide some life insurance coverage for employees, it may not be enough to avoid the long-term hardship of that loss of income. However, less than 40 percent of Americans have an interest in life insurance at all. It actually comes in seventh in terms of most people’s financial priorities.2

While a term life policy offers a death benefit for the selected term, a whole life policy can provide a death benefit that covers your entire life, as long as you keep paying the premiums. It’s worth mentioning that older policies may actually mature when the policy owner turns 100 and will pay out the death benefit while he or she is still alive. Newer policies, however, extend to a maximum age of 121.3

A whole life policy also offers certain tax advantages. While premiums may not be tax deductible, the cash value grows tax deferred, and distributions through the use of policy loans are generally tax free. The cash value can be accessed if the owner needs emergency funds or money to supplement his or her retirement income, or it can even be used to pay the annual premiums on the policy.4 This is all in addition to the death benefit. Please note that withdrawals or policy loans of any type may reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force.

Content prepared by Kara Stefan Communications

1 Amy Danise. NerdWallet. Jan. 5, 2017. “Life Insurance Explained in (Exactly) 250 Words.” https://www.nerdwallet.com/blog/insurance/life-insurance-explained-250-words/. Accessed Feb. 6, 2017.

2 BestLifeRates.org. Dec. 28, 2016. “2015 Life Insurance Statistics and Facts.” https://www.bestliferates.org/blog/2015-life-insurance-statistics-and-facts/. Accessed Jan. 10, 2017.

3 Michael Kitces. Nerd’s Eye View. March 2, 2016. “The Age-100 Tax Problem With Outliving the End of Life Insurance Mortality Tables.” https://www.kitces.com/blog/outliving-the-end-of-life-insurance-mortality-tables-the-age-100-tax-problem-when-life-insurance-expires/. Accessed Jan. 10, 2017.

4 Amy Bell. Investopedia. Aug. 21, 2014. “6 Ways To Capture The Cash Value In Life Insurance.” http://www.investopedia.com/articles/personal-finance/082114/6-ways-capture-cash-value-life-insurance.asp. Accessed Feb. 24, 2017.

 Life insurance policies are contracts between you and an insurance company. Guarantees and protections provided by insurance products are backed by the financial strength and claims-paying ability of the issuing insurer.

The content provided in this newsletter is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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The Science Behind Decision Making

In the 1940s, 90 percent of the stock market was owned by individual household investors. Today, with the widespread use of investment banking and mutual fund investing, individuals are responsible for trading only 20 percent of U.S. corporate equity.1

Do we no longer trust ourselves with investment decisions? You might think that, with so much information now accessible via the internet, more people would invest on their own. However, the fact remains that there’s really too much information now available, much of it from unreliable sources, and very little can be tailored specifically to individual financial situations.

That’s where we come in. Our job is to help you determine a mix of investment and insurance options for your financial goals, timeline for retirement and tolerance for market risk. Together, we can take this world of information and create a financial strategy designed to help you work toward your financial goals.

Interestingly, one of the hottest areas of research in recent years is behavioral finance. This is basically the study of why we make the investment decisions we do. But regardless of the reasons, this knowledge doesn’t necessarily change our decision-making style. Our decisions are reflections of who each of us is; perhaps they reflect our values, but just as often they may reflect our dispositions (which may not always be a good thing).2 This is another reason having an experienced financial advisor to run ideas by can help ground decision-making and keep us focused on long-term goals.

While biases may be inherent to our nature, it’s still a fascinating field to help us understand everyday behaviors of which we may not be aware. For example, one consultant got a firsthand look at natural human behavior when she underwent two hip surgeries. Over time, she relied on two crutches, one crutch and then a cane. During this time, people were far more willing to help by holding doors and carrying things for her when she was using a crutch as opposed to a cane. It’s worth considering how this bias reflects our feelings toward people with disabilities that appear temporary versus permanent.3

By the same token, we tend to make poor decisions when we’re under stress. One researcher explored this concept within the context of poverty: People living in impoverished conditions with constant financial stress tend to lack the capability, or “mental bandwidth,” to make better choices.4

Perhaps understanding our bias tendencies can help us recognize why other people make what we may judge to be consistently poor decisions.

Content prepared by Kara Stefan Communications

1 Michael Kitces. Nerd’s Eye View. Dec. 21, 2016. “How Behavioral Biases Lead To Hard-To-Capture But Sustainable Alpha.” https://www.kitces.com/blog/sustainable-alpha-from-behavioral-biases-paradox-of-skill-and-factor-investing/. Accessed Jan. 24, 2017.

2 Shana Lebowitz. World Economic Forum. Nov. 25, 2016. “Why is it so hard to overcome bias in decision-making? Because you’re human.” https://www.weforum.org/agenda/2016/11/why-its-so-hard-to-overcome-bias-in-decision-making-according-to-a-psychology-professor. Accessed Jan. 16, 2017.

3 Allison Rimm. Harvard Business Review. Dec. 30, 2016. “What I Learned About Helpfulness When I Used a Cane Instead of Crutches.” https://hbr.org/2016/12/what-i-learned-about-helpfulness-when-i-used-a-cane-instead-of-crutches. Accessed Jan. 16, 2017.

4 Knowledge@Wharton. Dec. 28, 2016. “Why Mental Bandwidth Could Explain the Psychology Behind Poverty.” http://knowledge.wharton.upenn.edu/article/bandwidth-explain-psychology-behind-poverty/. Accessed Jan. 16, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

 The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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What Corporate Citizenship Looks Like Today

The concept of corporate citizenship originally evolved from a responsibility to shareholders for directing the legal, ethical and economic goals of a company. Today, however, there are other factors that help shape a company’s culture and performance.

Now that the unemployment rate is lower, the job market is heating up and employers must compete for the best candidates. Normally that would mean beefing up compensation and benefit packages. However, that may not be enough to entice today’s idealistic young adults.

In fact, a recent survey found that 61 percent of young professionals consider a company’s engagement and reputation for corporate citizenship as part of their job decision. Seventy percent say they are far more likely to choose a company with strong community involvement. It’s not just about making money for millennials, they want their work to mean something and contribute to the greater good.1 Furthermore, millennials aren’t big on hierarchies, having been educated and trained to work in a team environment, and they insist on transparency.2

Bear in mind that millennials change jobs often and, if they’re not finding a work environment they like, they could become competitors to their former employers. According to one report, millennial-owned businesses are posting significantly higher revenue growth than their older counterparts.3

Now that the job market is coming around, this type of pressure to be the company that employees want to be proud of can be a powerful influencer on the corporate mission — and share price. But while there are many factors that tend to influence stock prices these days, most individuals would do well to stick with a long-term investment plan and not try to time trades in the market.4 After all, corporate citizenship is a long-term pursuit, so good companies are likely to perform well over time. Any time that you would like to discuss concerns about your financial strategy, please give us a call.

Today, corporations are at more risk than ever of falling prey to bad public relations due to the power of the “Tweet.” Whether it’s a disgruntled employee or a high-profile celebrity not happy with his service, stock prices can rise or fall on the power of a message on Twitter. On the other hand, a quick company response can cement customer loyalty.5

Another force that may influence corporate citizenship in the coming months and years is Donald Trump. He’s already threatened not to purchase new Air Force One airplanes from Boeing and tossed his weight around with car manufacturers. If the country doesn’t want to increase debt created by tax cuts and infrastructure spending, the private sector may have to step up its game in adopting and supporting local schools, sports and cultural venues that could be impacted  by lower government funding.6 This, however, is a good way for companies to enhance their corporate citizenship.

Content prepared by Kara Stefan Communications

1 David Coons. Insurance Journal. Dec. 19, 2016. “The Corporate Citizenship Mandate.” http://www.insurancejournal.com/magazines/ideaexchange/2016/12/19/435374.htm. Accessed Jan. 17, 2017.

2 Pratik Dholakiya. Entrepreneur. Jan. 17, 2017. “3 Tips for Creating a Millennial-Friendly Workplace.” https://www.entrepreneur.com/article/287201. Accessed Jan. 17, 2017.

3 Shubhomita Bose. Small Business Trends. Jan. 16, 2017. “Yelp Report: Is This the Year of Millennial and Minority-owned Businesses?” https://smallbiztrends.com/2017/01/minority-owned-business-statistics.html. Accessed Jan. 17, 2017.

4 James F. Peltz. Los Angeles Times. Jan. 16, 2017. “When Trump tweets, Wall Street trades — instantly.” http://www.latimes.com/business/la-fi-agenda-trump-tweets-stocks-20170116-story.html. Accessed Jan. 17, 2017.

5 Elizabeth Armstrong Moore. Fox News. Jan. 10, 2017. “After a Twitter Complaint, Elon Musk Makes a Rapid Fix.” http://www.foxnews.com/tech/2017/01/10/after-twitter-complaint-elon-musk-makes-rapid-fix.html. Accessed Jan. 17, 2017.

6 Jennifer Rubin. The Washington Post. Jan. 5, 2017. “How Business Can Survive the Know-Nothing Politics of Populism.” https://www.washingtonpost.com/blogs/right-turn/wp/2017/01/05/how-business-survives-the-know-nothing-politics-of-populism/?utm_term=.0c6ed57a1557. Accessed Jan. 17, 2017.

 We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Will Bank Changes Lead to Withdrawal From Human Interaction?

The investment banking struggles that contributed to the 2008 recession prompted stronger regulations for the finance industry. Unfortunately, some of the rules created to keep the larger banks in check also impacted smaller community banks, which have suffered as a result.1

However, the Trump administration’s goal to cut regulations by 70 percent to 80 percent in various industries could have an impact on banks of all sizes.2 This is just one more anticipated change for a banking industry that was already poised for substantial shifts.

Some experts project bank tellers may soon be replaced by more cost-efficient artificial intelligence,3 and e-banking is expected to displace as many as one-third of brick-and-mortar branches in the next decade.4

While technology, and possibly even artificial intelligence, certainly has its place in the financial world, it’s unlikely to entirely replace the necessity for human assessment, guidance and recommendations. One reason is that it’s important to trust the person who is helping you work toward your retirement income goals. As financial professionals, that’s something we strive to provide for our clients. Please feel free to contact us to discuss how we can help you create retirement strategies using a variety of insurance products to custom suit your needs and objectives.

Of course, it’s still important to embrace technology, with the hope that companies go about it the right way. Another concern as technology becomes more prevalent is the battle over private data. In recent years, many apps and websites have encouraged consumers to input financial data regarding bank and credit card accounts to help manage their money.

Banks have started pushing back to restrict sharing of this kind of data with technology companies, but with the growing political trend toward deregulation, the sale and purchase of personal financial data may soon become more common.5

 It’s important to be aware of financial regulations and how they can help protect consumers. If you have questions about your rights concerning bank accounts, credit cards or mortgages, you can check out the Federal Deposit Insurance Corporation’s fact sheet for answers to frequently asked questions.6

Our firm is not affiliated with the U.S. government or any governmental agency.

 Content prepared by Kara Stefan Communications

 1Joyce M. Rosenberg. The Morning Call. Feb. 8, 2017. “Community Banks Hopeful as Lawmakers Target Financial Rules.” http://www.mcall.com/business/finance/mc-community-banks-hopeful-as-lawmakers-target-financial-rules-20170208-story.html. Accessed April 28, 2017.

2 Moira Vetter. Forbes. Jan. 31, 2017. “Saving Community Banks and Their Borrowers by Gutting Regulation.” http://www.forbes.com/sites/moiravetter/2017/01/31/saving-community-banks-and-their-borrowers-by-gutting-regulation/#60f6848672fe. Accessed March 28, 2017.

3 Luke Graham. CNBC. March 17, 2016. “Man vs Machine: A.I. Could Put You out of a Job.” http://www.cnbc.com/2016/03/17/man-vs-machine-ai-could-put-you-out-of-a-job.html. Accessed April 18, 2017.

4 MarketWatch. March 28, 2017. “Why the Bank of the Future Will Look Like an Apple Store.” http://www.marketwatch.com/video/sectorwatch/why-the-bank-of-the-future-will-look-like-an-apple-store/109B928E-1BA3-4DFB-8ABD-D0E43FB95B72.html. Accessed April 28, 2017.

5 Nathaniel Popper. The New York Times. March 23, 2017. “Banks and Tech Firms Battle Over Something Akin to Gold: Your Data.” https://www.nytimes.com/2017/03/23/business/dealbook/banks-and-tech-firms-battle-over-something-akin-to-gold-your-data.html. Accessed March 28, 2017.

6 FDIC. Winter 2017. “From the FDIC Inbox: Our Answers to Common Financial Questions.” https://www.fdic.gov/consumers/consumer/news/cnwin17/commonquestions.html. Accessed March 28, 2017.

 This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Potential Reasons to Put the Retirement Countdown on Hold

Retirement is still something most people look forward to, but over the years, some of the reasons for anticipation have dwindled. During the industrial age, more people worked jobs requiring manual labor that were hard on the body.

By mid-century, many rank-and-file workers could look forward to a pension waiting for them upon retirement. Workers simply had to accumulate enough credits to retire knowing that a pension would provide income for the rest of their lives.

Now, physically demanding jobs are more of a rarity for pre-retirees, and modern-day ergonomic training is available to help ease the aches and pains of the daily grind. Pensions are also more uncommon, giving way to employee-contribution retirement vehicles like 401(k)s. Instead of looking forward to retiring, working longer can enable employees to save and invest longer.1

Workers today understand they may have to provide for a substantially greater share of their retirement income thanks to longer average lifespans. There’s also the possibility retirement could last multiple decades, and some retirees might miss the daily intellectual and social engagement a job provides.

This makes retirement income planning different than, say, college planning. When saving for a child’s education, parents have the advantage of knowing when the student will go to college and generally how many years he or she will be there. The “when” and “how long” are unknown factors when it comes to retirement.

As financial professionals, these are the types of variables we help address when advising clients. It is important to have the experience of helping clients make financial decisions and contingency plans throughout their retirement — experience we can use to guide the financial strategies we help our clients create every day.

Here are some other reasons today’s workers may be inclined to keep working past the traditional retirement age:

Increase Savings

According to a recent survey, the most common financial reasons older employees work in retirement are to:2

  • Give their nest egg more time to grow (19%)
  • Earn “fun money” for discretionary purposes (31%)
  • Leave a better legacy to heirs or charities (6%)

Increase Social Security Benefit

Sometimes it’s necessary for retirees to start taking Social Security benefits early, but that doesn’t mean they can’t continue or go back to work; nor does it mean they necessarily lock into a lower benefit for life. If you earn more than $16,920 in 2017 while receiving benefits prior to full retirement age, Social Security will deduct one dollar in benefits for every two dollars in earnings above $16,920.3 However, once you reach full retirement age, your benefit will be increased to account for benefits withheld due to earlier earnings and working once you reach full retirement age doesn’t affect your benefits. The agency will also recalculate your benefit based on your “new” highest 35 years of annual earnings, which could increase your overall benefit.4

Company Benefits

Some seniors continue to work because their employer’s health insurance is better and less expensive than Medicare.5 Please note that even if you have coverage through a current or former employer, you may still need to make some important Medicare enrollment decisions.

Switch Jobs, Work Longer

Some people retire because they dislike their job. However, a new study revealed that when workers take the initiative to switch to a more enjoyable position say, in their 50s, they tend to work longer — increasing both their income potential and job satisfaction. That’s no small improvement on both fronts.6

Feel Valued

Retirees have been known to go back to their old jobs because they get bored. At least one retiree observed that returning to work in a part-time capacity not only led him to enjoy the job more, but he felt better valued by his employer.7 We all know that sometimes we don’t appreciate what we have until it’s gone, and that can certainly apply to employers.

Content prepared by Kara Stefan Communications

1 Kim Blanton. Center for Retirement Research at Boston College. May 25, 2017. “Fewer Older Americans Work Part-time.” http://squaredawayblog.bc.edu/squared-away/fewer-older-americans-work-part-time/. Accessed July 10, 2017.

2 Emily Brandon. U.S. News & World Report. Feb. 17, 2017. “8 Reasons to Work in Retirement.”

https://money.usnews.com/money/blogs/planning-to-retire/articles/2017-02-17/8-reasons-to-work-in-retirement. Accessed July 10, 2017.

3 Social Security Administration. 2017. “Fact Sheet: 2017 Social Security Changes.” https://www.ssa.gov/news/press/factsheets/colafacts2017.pdf. Accessed Aug. 7, 2017.

4 ElderLawAnswers.com. April 1, 2016. “Incentives to Keep Working While You Collect Social Security.” https://www.elderlawanswers.com/incentives-to-keep-working-while-you-collect-social-security-15312. Accessed July 10, 2017.

5 Jean Chatsky. CNBC. Jan. 20, 2017. “Retirement doesn’t have to be the end: How working longer benefits you.” http://www.cnbc.com/2017/01/20/retirement-doesnt-have-to-be-the-end-how-working-longer-benefits-you.html. Accessed July 10, 2017.

6 Kim Blanton. Center for Retirement Research at Boston College. March 23, 2017. “The Benefits of Late-career Job Changes.” http://squaredawayblog.bc.edu/squared-away/the-benefits-of-late-career-job-changes/. Accessed July 10, 2017.

7 Kim Blanton. Center for Retirement Research at Boston College. April 20, 2017. “A Californian’s ‘Retirement’ is Part-Time.” http://squaredawayblog.bc.edu/squared-away/a-californians-retirement-is-part-time/. Accessed July 10, 2017.

We are able to provide you with information but not guidance or advice related to Social Security and Medicare benefits. Our firm is not affiliated with the U.S. government or any governmental agency.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Retirement: The New Status Symbol

A lack of savings among many U.S. households could mean a change in the perception of retirement. It used to be a foregone conclusion that once you were too old to work, you retired. That’s not always the case anymore.

More than a third of U.S. households in prime earning years or later have no retirement savings and no access to a traditional pension.1 It’s become increasingly uncommon for people to retire in their early 60s, and those who fail to plan ahead for their future retirement income needs could end up with a retirement lifestyle worse than the one they had while working.

This doesn’t mean these middle-aged households are broke. Retirement income planning may just not be a priority yet. No matter your age, it’s never too late to start building strategies so you can enjoy your post-working years, and as financial professionals, that’s what we’re here for.

It takes diligence and focus to create a retirement income plan. Dwight D. Eisenhower once said, “Plans are worthless, but planning is everything.”2 This reiterates the point that planning for retirement should be strategic and committed, while at the same time fluid and flexible. Nobody knows what will happen in the future, but we can help you create a retirement income strategy designed to help meet your specific goals.

It can be difficult in the moment, but turning your back on pricey, impulse purchases, such as an expensive car, an outdoor kitchen or backyard pool, can help improve the prospects of your retirement down the road. Many people with good credit can borrow money to purchase these things, but good credit doesn’t fund a long retirement.3

Some workers might argue it’s not worth giving up indulgences today for a better (and earlier) retirement lifestyle. It’s a matter of examining individual priorities. One grandmother did just that when her 8-year-old grandson asked if she would be around when he got married. She had to rethink her priorities for what it might take to accomplish that goal. This led to a stronger pursuit of healthier living, including wholesome food, daily exercise and supportive social connections.4

While it may sound daunting to put in the years of hard work it takes to reach retirement, in some ways long hours at the office is a status symbol of its own. In Italy, the leisure class is perceived to have a higher status than the working class. But in the United States, there’s a certain prestige associated with working long hours and constantly being busy.5

Some people work 70+ hour weeks, not to earn more money and buy more things, but because that is what the working elite do.6 While this may not be the way all people wish to align their priorities, it does offer the distinct advantage of being able to save more money for retirement. For some, retiring is the ultimate status symbol.

Content prepared by Kara Stefan Communications

1 Stan Choe. The Denver Post. Nov. 18, 2016. “Easy retirement for Americans? It’s only for a privileged few.” http://www.denverpost.com/2016/11/17/easy-retirement-privileged-few/. Accessed July 10, 2017.

2 Jonathan Look. NextAvenue. June 23, 2017. “What I Did to Stop ‘Awfulizing’ Retirement.” https://www.forbes.com/sites/nextavenue/2017/06/23/how-i-stopped-awfulizing-retirement/#1d5429451baf. Accessed July 10, 2017.

3 Holly Johnson. Club Thrifty. May 15, 2017. “My Plan to Achieve the Ultimate Status Symbol.” http://clubthrifty.com/my-plan-to-achieve-the-ultimate-status-symbol/. Accessed July 10, 2017.

4 Jane E. Brody. The New York Times. April 20, 2016. “Thriving at Age 70 and Beyond.” https://well.blogs.nytimes.com/2016/04/25/thriving-at-age-70-and-beyond/. Accessed July 10, 2017.

5 Lisa Tolin. NBC News. April 3, 2017. “The Busy Trap: How Keeping Busy Became a Status Symbol.” https://www.nbcnews.com/better/careers/busy-trap-how-keeping-busy-became-status-symbol-n742051. Accessed July 10, 2017.

6 Ben Tarnoff. The Guardian. April 24, 2017. “The new status symbol: it’s not what you spend — it’s how hard you work.” https://www.theguardian.com/technology/2017/apr/24/new-status-symbol-hard-work-spending-ceos. Accessed July 10, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Global Trade: Problems and Potential Solutions

Global trade and investment have increased dramatically over the past 30 years.1 On one hand, importing lower-cost goods from other countries has saved Americans money. On the other, it has cost American jobs.

How many jobs? About 6 million from the manufacturing sector alone between 1999 and 2011, according to the Bureau of Labor Statistics. However, while outsourced jobs to China explains 44 percent of the decline in U.S. jobs from 1990 to 2007, automation and more efficient processes have also played a role.2

Some experts claim innovation, automation and new technology are responsible for up to 80 percent of manufacturing job losses over the past two decades.3 There are also economists who believe global trade is crucial to American prosperity and disagree with Donald Trump’s plans to implement tariffs or cut down trade with countries like China and Mexico.4

Thanks to the digital revolution, smaller companies have the capacity to compete on a global level, but comparatively few are doing so. It is estimated that fewer than 1 percent of the nearly 30 million U.S. companies registered to sell abroad actually engage in global sales.5 This means more U.S. firms have the potential to expand growth and productivity to global markets.

Digitization makes it easier for small startups to reach global customers; consider how eBay and Amazon got their start.6

Global expansion advocates say the U.S. government could play a role in connecting individual cities and smaller companies with foreign investors. It also could introduce more policies and funding to help job losses with reinvestment in affected communities.7

In one of his first acts as president, Trump signed an executive order to withdraw the U.S. from the 12-nation Trans-Pacific Partnership trade pact. This withdrawal gives China — not a participant in the TPP — the opportunity to forge leadership in Asian trade agreements. The president has indicated that he is interested in negotiating individual trade deals with TPP countries in order to procure better terms for the U.S.8

Some analysts believe the U.S. should renegotiate agreements to lower tariffs and other regulatory barriers to encourage various nations to specialize in certain exports in which they have operational expertise.9

Presently, the U.S. imports about $500 billion more than it exports.10 However, the U.S. remains the world’s largest economy and, despite the loss of manufacturing jobs to other countries, its share of global gross domestic product has remained relatively consistent over the past 36 years, ranging from 26 percent in 1980 to 25 percent in 2016.11

Content prepared by Kara Stefan Communications

1 Gary Pinkus, James Manyika and Sree Ramaswamy. Harvard Business Review. Jan. 10, 2017. “We Can’t Undo Globalization, but We Can Improve It.” https://hbr.org/2017/01/we-cant-undo-globalization-but-we-can-improve-it. Accessed Feb. 12, 2017.

2 Mark Broad. BBC. Jan. 25, 2017. “Will Donald Trump mean the end of global trade?” http://www.bbc.com/news/business-38731812. Accessed Feb. 5, 2017.

3 Kirtika Suneja. Economic Times. Feb. 8, 2017. “WTO provides the means to deal with trade concerns: Roberto Azevedo.” http://economictimes.indiatimes.com/opinion/interviews/wto-provides-the-means-to-deal-with-trade-concerns-roberto-azevedo/articleshow/57033349.cms. Accessed Feb. 12, 2017.

4 Jason Margolis. PRI. July 21, 2016. “Trump’s trade policies are worrying economists.” https://www.pri.org/stories/2016-07-21/trump-s-trade-policies-are-worrying-economists. Accessed March 9, 2017.

5 Gary Pinkus, James Manyika and Sree Ramaswamy. Harvard Business Review. Jan. 10, 2017. “We Can’t Undo Globalization, but We Can Improve It.” https://hbr.org/2017/01/we-cant-undo-globalization-but-we-can-improve-it. Accessed Feb. 12, 2017.

6 Ibid.

7 James Manyika, Gary Pinkus, Sree Ramaswamy, Scott Nyquist, Jonathan Woetzel and Arvind Sohoni. McKinsey Global Institute. November 2016. “Can the US economy return to dynamic and inclusive growth?” http://www.mckinsey.com/global-themes/employment-and-growth/can-the-us-economy-return-to-dynamic-and-inclusive-growth. Accessed Feb. 12, 2017.

8 Fox News. Jan. 24, 2017. “What Trump’s trade and geopolitical moves mean for China.” http://www.foxnews.com/world/2017/01/24/what-trump-trade-and-geopolitical-moves-mean-for-china.html. Accessed Feb. 12, 2017.

9 Peter Morici. Fox News. April 25, 2016. “How to fix free trade.” http://www.foxnews.com/opinion/2016/04/25/how-to-fix-free-trade.html. Accessed Feb. 12, 2017.

10 Ibid.

11 Bob Davins. Fox Business. Nov. 9, 2016. “Trump Will Need to Leverage Power of U.S. Economy to Remake Global Trade.” http://www.foxbusiness.com/politics/2016/11/09/trump-will-need-to-leverage-power-u-s-economy-to-remake-global-trade.html. Accessed Feb. 12, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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A 100-Year Lifespan: Ways to Help Increase Enjoyment

The average life expectancy of a baby born in the U.S. today is 80 years. However, this prediction assumes prevailing patterns of mortality at the time of birth stay the same throughout a person’s life.1

In reality, patterns of mortality improve over time thanks to discoveries and innovations in nutrition and medical science. If you extrapolate the data to represent the same pace of mortality improvement in the future, people up to age 30 today can reasonably expect to live to an average age of 100.2

However, just as important as how long you live is how well you live. Below are some ideas on steps you can take to help ensure you enjoy your retirement years.

One way to prepare for an active retirement is to engage in work-life balance early in life. Many people work long hours and don’t take enough vacation time. Over time, this can lead to mental and physical exhaustion. If we don’t take care of ourselves when we’re younger, we have less chance of enjoying a higher quality of life when we’re older.

Or, consider your perspective – are you pursuing your own happiness or trying to find meaning in life? Studies have demonstrated that the pursuit of happiness may not be as good for our well-being as the pursuit of a more meaningful life. In other words, being directed and motivated by valued life goals, which often can take more effort and cause more stress, may be more rewarding. To illustrate, consider the rewards of raising children versus embarking on a series of exotic vacations. Researchers have found that, over the long term, people who pursued more meaning and purpose were more deeply satisfied than those chasing temporary happiness.3

Another study even found a correlation between greater engagement in day-to-day life with a higher degree of financial success, possibly because this type of person tends to place a high value on pursuing long-term goals.4

Exercise is also key. According to the Centers for Disease Control and Prevention, about 32 percent of older adults do not engage in any physical exercise. Understandably, people who don’t prioritize exercise when they’re younger are not likely do so in retirement, so it’s important to make it a habit early on.5

It’s also important to choose activities you can continue as you age. Classes growing in popularity among the over-50 set include dance, strength training, gentle yoga, “gentle stretch,” “Pilates fusion,” ballet barre and tai chi. According to the American College of Sports Medicine, programs for older adults are among the top 20 fitness trends for 2017.6

Retirees may be familiar with the SilverSneakers program, celebrating its 25th anniversary. The program is free for adults over age 65 who are covered by Medicare Advantage, Medicare Supplement and many other plans.7

In addition to things you should do to enrich a 100-year life, there are things that would make it less enjoyable. One of those things is dementia. While there are many risk factors for dementia, including age, alcohol use, smoking, diabetes, hypertension and genetics, a recent study discovered a few other common triggers that can increase the risk of cognitive decline:8

  • Taking anticholinergic drugs, which includes over-the-counter sleep aids, sedating allergy meds (e.g., Benadryl), sedating pain meds (e.g., Tylenol PM) and prescription meds such as some antidepressants and urinary incontinence treatments. The study also found that once people stop taking these meds, their risk dropped back to normal levels.
  • Lack of vitamin D
  • Heartburn medications with proton pump inhibitors (PPIs) such as Prilosec and Prevacid (complete list here)

We can help you prepare for longer life expectancies by utilizing insurance products within your overall retirement income strategy. Please feel free to contact us to discuss how we can help.

Content prepared by Kara Stefan Communications

1 Peter Vanham. World Economic Forum. Sept. 15, 2016. “You’ll Probably Live to Be 100. Here’s How You Need To Prepare For It.” https://www.weforum.org/agenda/2016/09/you-ll-probably-live-to-be-100-here-s-how-you-need-to-prepare-for-it/. Accessed March 3, 2017.

2 Ibid.

3 Emily Esfahani Smith and Jennifer Aaker. New York Magazine. Dec. 30, 2016. “In 2017, Pursue Meaning Instead of Happiness.” http://nymag.com/scienceofus/2016/12/in-2017-pursue-meaning-instead-of-happiness.html. Accessed March 3, 2017.

4 Drake Baer. New York Magazine. Jan. 4, 2017. “Living with Purpose Yields a Longer Life and Higher Income.” http://nymag.com/scienceofus/2017/01/living-with-purpose-yields-a-longer-life-and-higher-income.html. Accessed March 3, 2017.

5 Lynn Langway. Next Avenue. Jan. 30, 2017. “Boomers Took Fitness and Made It Their Own.” http://www.nextavenue.org/boomers-fitness-trends/. Accessed March 3, 2017.

6 Ibid.

7 Ibid.

8 Beth Levine. Next Avenue. May 25, 2016. “3 Surprising Things That Raise Your Dementia Risk.” http://www.nextavenue.org/3-surprising-things-raise-dementia-risk/. Accessed March 3, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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What is a “safe” retirement withdrawal rate?

In an investment portfolio, the withdrawal rate is the monetary percentage from which a retiree draws from his account each year.  A “safe” withdrawal rate is a fixed percentage distributed as a systematic withdrawal that reasonably expects portfolio funds to last throughout the retiree’s lifetime. When determining your personal retirement withdrawal rate, it’s important to include adjustments for inflation and the portfolio’s ability to generate earnings throughout a specific time frame, ensuring the account isn’t entirely depleted.1

These are the basic parameters for calculating a “safe” withdrawal rate, but your specified rate can vary, depending on the total portfolio value, safeguards against market risk and inflation, living expense requirements and life expectancy. We’re here to help you determine your retirement withdrawal rate for your individual situation.

The “safe” withdrawal rate strategy was originally based on financial planner William Bengen’s research in the 1990s. At the time, a prevailing theory was if an investment portfolio generated an average annual return of 7 percent, then that was the percentage that could be withdrawn each year. However, Bengen introduced the “sequence of returns risk” concept, recognizing that an average annual return represents a series of higher and lower returns. If an individual experiences significantly low returns early in retirement, the portfolio would be too depleted to sustain a high withdrawal rate, even if that rate is justified by a higher average annual return during a 15-year time period. Bengen concluded at that time that 4 percent is generally considered a “safe” withdrawal rate.2

Other financial advisors assert that if the returns sequence is favorable in early retirement, retirees could theoretically be able to increase their spending rate. In some scenarios, the 4 percent rule could even double or triple a retiree’s wealth by the end of retirement because his conservative withdrawal rate would not spend the bulk of his portfolio gains during that time period.3

Another point to consider is that the original 4 percent guideline was based on retirees spending the same amount each year throughout retirement. However, recent research has shown that retirees tend to decrease spending as they get older. Based on this decreased spending premise, analysts have determined that the 4 percent rate could be underestimated by 0.32 to 0.75 percent. In other words, because spending tends to decrease throughout retirement, the “safe” withdrawal rate guideline may be closer to a 4.5 percent.4

When developing a retirement withdrawal rate, remember that an investment portfolio should be sufficiently diversified to allow for growth opportunity paired with risk-mitigation financial vehicles.5

 Content prepared by Kara Stefan Communications

1 Bogleheads.org. Jan. 10, 2017. “Safe Withdrawal Rates.” https://www.bogleheads.org/wiki/Safe_withdrawal_rates.

Accessed March 3, 2017.

2 Wade Pfau. Forbes. April 19, 2016. “The 4% Rule and The Search for a Safe Withdrawal Rate.” https://www.forbes.com/sites/wadepfau/2016/04/19/the-4-rule-and-the-search-for-a-safe-withdrawal-rate/#772ae67f5a10. Accessed March 3, 2017.

3 Michael Kitces. Nerd’s Eye View. June 3, 2015. “The Ratcheting Safe Withdrawal Rate – A More Dominant Version Of The 4% Rule?” https://www.kitces.com/blog/the-ratcheting-safe-withdrawal-rate-a-more-dominant-version-of-the-4-rule/. Accessed March 3, 2017.

4 Derek Tharp. Nerd’s Eye View. Feb. 22, 2017. “The Impact of Decreasing Retirement Spending on Safe Withdrawal Rates.” https://www.kitces.com/blog/safe-withdrawal-rates-with-decreasing-retirement-spending/. Accessed March 3, 2017.

5 Fidelity. “Diversify Your Portfolio.” https://www.fidelity.com/learning-center/investment-products/fixed-income-bonds/diversify-your-portfolio. Accessed April 10, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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