Various Types of “Economies”

As recently as five years ago, few people had heard of emerging businesses like Airbnb and Uber that allow proprietors to share their personal residences and cars to generate income. This business model is now commonly referred to as the “sharing economy.” 1

However, just as capitalism morphs, so does the concept of sharing. For example, some Uber drivers actually lease an upscale car to charge higher fares that compete with luxury driving services.2

The Great Recession played a hand in encouraging unemployed workers to find innovative sources of income when jobs were scarce, and the sharing economy has been seen as influential in our overall economy’s recovery. It’s worth considering how we can better prepare ourselves for potential economic declines via job innovation, vigilant savings habits and protecting a portion of our retirement assets through guaranteed insurance products. If you’d like help devising a strategy using a variety of insurance products to help you work toward your long-term retirement income goals, please call us to schedule a meeting.

In addition to the sharing economy, today’s world is home to a wide array of economic varieties, including:

Sharing Economy

As mentioned, this model focuses on sharing or renting under-utilized assets. One of the primary concerns with this model is trusting others to take care of your personal assets. Some proprietors require an upfront deposit to help defray the cost of breakage or stolen goods. Insurance companies also have gotten into this business by developing policies for reimbursement.3

On-Demand Economy

This model focuses on providing goods and services on an as-needed basis. For example, in situations where a short-term rental is cheaper than buying — such as owning a car in a large metropolitan city — it can be more cost effective and convenient to use Uber transportation rather than own a car. This is true in expensive cities including New York City, Chicago, Los Angeles, and others, particularly when including expenses like gas and insurance. 4

Peer Economy

This economic model is based on the creation of products, delivery of services, funding and more by peer-to-peer (P2P) networks. These peer-lending platforms can help bolster economic progress, particularly in a rising interest-rate environment. For example, a small business seeking capital may be able to use an online P2P lending platform that matches borrowers to lenders. This can help a business owner acquire a less expensive loan more quickly than through a traditional financial institution.5

Crowd Economy

The crowd economy enlists the larger population or a subset to generate funding, information, resources and more. This particularly interesting phenomenon has infinite applications. For example, the city of Akron, Ohio, is providing CPR training to the general public in hopes that crowd-sourcing certain emergency service skills will lead to more victims getting immediate help until paramedics arrive.6 Crowd-sourcing also is a good way to find undiscovered talent. Instead of hiring an advertising agency to produce promotional artwork for an annual film festival, the organizers may hold an open competition for the public, tapping local artists whose talent may otherwise go unnoticed.7

Statistics indicate that the sharing economy and its various iterations are producing big revenues. A recent U.S. study found that on-demand workers generated more than $110 billion in the 15 largest metropolitan areas, including New York City, Los Angeles, Miami, Chicago, San Francisco and Washington, D.C.8

Content prepared by Kara Stefan Communications.

1 April Rinne. World Economic Forum. Dec. 13, 2017. “What exactly is the sharing economy?” https://www.weforum.org/agenda/2017/12/when-is-sharing-not-really-sharing/. Accessed June 2, 2018.

Ibid.

Matthew Wall. BBC News. June 1, 2018. “’I bought my mum a flat just by renting out my camera kit.’” https://www.bbc.com/news/business-44301183. Accessed June 2, 2018.

4 Megan Rose Dickey. TechCrunch.com. May 30, 2018. “Here’s where it’s cheaper to take an Uber than to own a car.” https://techcrunch.com/2018/05/30/heres-where-its-cheaper-to-take-an-uber-than-to-own-a-car/. Accessed June 2, 2018.

5 Craig Asano and Michael King. The Globe and Mail. May 30, 2018. “Peer-to-peer lending will help small businesses stay afloat.” https://www.theglobeandmail.com/business/commentary/article-peer-to-peer-lending-will-help-small-businesses-stay-afloat/. Accessed June 2, 2018.

6 Doug Livingston. Akron Beacon Journal. May 31, 2018. “Akron is ‘crowd-sourcing’ CPR.” https://www.ohio.com/akron/news/akron-is-crowd-sourcing-cpr. Accessed June 2, 2018.

7 Michael Beiermeister. WBKB11.com. June 1, 2018. “Thunder Bay Film Society Crowdsourcing Cover Art for 2018 Sunrise 45 Film Festival.” http://www.wbkb11.com/thunder-bay-film-society-crowdsourcing-cover-art-for-2018-sunrise-45-film-festival. Accessed June 2, 2018.

8 Benjamin Mann. JD Supra. May 24, 2018. “The Gigs Get Bigger: Recent Data Shows the On-Demand Economy is Growing Into New Areas.” https://www.jdsupra.com/legalnews/the-gigs-get-bigger-recent-data-shows-85361/. Accessed June 2, 2018.

Guarantees and protections provided by insurance products including annuities are backed by the financial strength and claims-paying ability of the issuing insurer.

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.

For Some Retirees, Home is Where the Debt is

Today’s pre-retirees and retirees tend to have far more debt than those in years past. In addition to factors like credit card payments and medical expenses, this generation is seeing the effects of higher home prices and easily obtained low down-payment mortgages in the early 2000s.1

Between 2003 and 2016, Americans 60 and older nearly tripled their household debt — composed of mortgages, home equity loans, auto loans, student loans and credit cards.2 According to the Employee Benefit Research Institute, households headed by a person age 75 or older held an average debt load of $36,757 in 2016.3

If you’re still carrying a fair amount of debt and nearing retirement, we can help you review your household budget to help plan for a more confident retirement. Please give us a call if you’d like to schedule a meeting.

One of the challenges in the new tax law is the interest-cap deduction on mortgage loan payments, meaning homeowners with high mortgage balances may be required under the new law to deduct less mortgage interest. The mortgage limit on new homes purchased is $750,000, while the limit on mortgages purchased before Dec. 15, 2017, remains $1 million. These numbers are important if downsizing is part of your debt-reduction strategy.4

Another major contributor to debt is the rising cost of sending children to college. Of the 3.5 million Americans who owe an average of $24,000 in Parent PLUS student loan debt, about half of them are parents older than age 50. Worse yet, the number of parents with student loans is rising at a faster rate than students.5 Unfortunately, all those debt payments could be used to save for retirement.

The No. 1 reason individuals file for bankruptcy is medical debt.6 Whether nearing retirement or already there, unexpected health care costs can seriously curtail retirement funds. It’s a good idea to work with a financial professional to develop a strategy for paying potential health care costs down the road.

Content created by Kara Stefan Communications.

1 Rebecca Moore. PlanAdvisor. Jan. 10, 2018. “Debt Causing Financial Vulnerability for Pre-Retirees.” https://www.planadviser.com/debt-causing-financial-vulnerability-pre-retirees/. Accessed May 11, 2018.

2 Michelle Singletary. The Washington Post. Feb. 26, 2018. “Should you retire your debt before retiring?” https://www.washingtonpost.com/news/get-there/wp/2018/02/26/should-you-retire-your-debt-before-retiring/?noredirect=on&utm_term=.d3d26dc8cda2. Accessed May 11, 2018.

3 Annie Nova. CNBC. May 9, 2018. “Almost half of Americans don’t expect to have enough money to retire comfortably — but there’s some good news.” https://www.cnbc.com/2018/05/09/almost-half-of-americans-dont-expect-to-have-enough-money-to-retire-comfortably–but-theres-some-good-news.html. Accessed May 11, 2018.

4 Anthony P. Curatola. MarketWatch. May 10, 2018. “Watch for these pitfalls if you want to deduct mortgage interest under the new tax law.” https://www.marketwatch.com/story/watch-out-for-these-pitfalls-if-you-want-to-deduct-mortgage-interest-under-the-new-tax-law-2018-05-09. Accessed May 11, 2018.

5 Kathy A. Bolten. Des Moines Register. April 2, 2018. “Thousands of Iowa parents are going into debt to pay for their kids’ college (and they probably shouldn’t).” https://features.desmoinesregister.com/news/parent-plus-student-loans-college-debt/. Accessed May 11, 2018.

6 Sharon Epperson. CNBC. Nov. 16, 2017. “Don’t let surprise medical bills drain your retirement.” https://www.cnbc.com/2017/11/15/dont-let-surprise-medical-bills-drain-your-retirement.html. Accessed May 11, 2018.

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.

Medicare News

Earlier this year, Congress passed a last-minute budget deal that included provisions affecting Medicare benefits. Specifically, one provision will permit certain therapies to continue beyond the previous caps, subject to conditions. All therapy (physical, speech and occupational) must continue to be classified as “reasonable and necessary to treat the individual’s illness or injury.” 1

There had been ambiguity in the past as to whether Medicare would continue paying for sessions without measurable improvement. Now, however, therapy sessions may continue per the provider’s recommendation. Retroactive for this year, once therapy billing has reached $2,010 (about 20 sessions at $100 per visit), a provider must add an extra billing code to ensure payment. However, if total expenses subsequently pass a $3,000 threshold, they may be subject to medical reviews and audits.2

The federal budget agreement also accelerated the share-cost reduction during the so-called “doughnut hole” period in Medicare drug plans. Starting one year earlier — in 2019 — Medicare beneficiaries will pay 25 percent (instead of 35 percent) of drug expenses once they reach the stated annual limit (currently $3,750 in 2018).3

Medicare rules are always changing. It’s a lot like trying to make retirement planning decisions throughout your career — the bar is a moving target. One potential solution is to over-plan and overfund your share of expected health care expenses in retirement. If you’re looking for ways to help plan for possible increased health care expenses in the future, contact us.  We’d be happy to discuss your options based on your unique situation.

In April, the Centers for Medicare & Medicaid Services (CMS) issued a final ruling with updates for Medicare Advantage (MA) plans to provide more choices. Specifically, the rule expands the definition of “primarily health-related” benefits to cover products and services not considered direct medical treatments. Examples include air conditioners for people with asthma, healthy groceries, rides to medical appointments and home-delivered meals. Paid benefits also may include home modifications for mobility and balance, such as installing a wheelchair ramp or bathroom grab bars. Plans may offer benefits to help pay home aides who help with dressing, eating and other personal, daily-living care. MA plans must submit their bids for CMS approval by June 4 to begin offering these benefits in 2019.4

The new CMS rule also includes initiatives to address the national prescription opioid epidemic. Specifically, Medicare Part D plans now limit new opioid prescriptions for acute pain management to no more than a seven-day supply. The Overutilization Monitoring System (OMS) is expanding, increasing pharmacist accountability for patients already taking opioids.5

The CMS rule is part of a hardline approach to combating the opioid crisis. The White House has established a Safer Prescribing Plan initiative with specific goals that include cutting nationwide opioid prescription fills by one-third within three years.6

Content created by Kara Stefan Communications.

1 Judith Graham. Kaiser Health News. March 29, 2018. “Scrutinizing Medicare Coverage For Physical, Occupational And Speech Therapy.” https://khn.org/news/scrutinizing-medicare-coverage-for-physical-occupational-and-speech-therapy/. Accessed May 4, 2018.

Ibid.

3 Susan Jaffe. Kaiser Health News. March 14, 2018. “Lifting Therapy Caps Is A Load Off Medicare Patients’ Shoulders.” https://khn.org/news/lifting-therapy-caps-proves-a-load-off-medicare-patients-shoulders/. Accessed May 4, 2018.

4 Bruce Japsen. Forbes. April 5, 2018. “How Trump’s New Medicare Rules Boost Amazon And Walmart.” https://www.forbes.com/sites/brucejapsen/2018/04/05/how-trumps-new-medicare-rules-boost-amazon-and-walmart/#600a42d6786c. Accessed May 4, 2018.

CMS. Fact Sheets. April 2, 2018. “2019 Medicare Advantage and Part D Rate Announcement and Call Letter.” https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2018-Fact-sheets-items/2018-04-02-2.html. Accessed May 4, 2018.

6 The White House. Fact Sheets. March 19, 2018. “President Donald J. Trump’s Initiative to Stop Opioid Abuse and Reduce Drug Supply and Demand.” https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-initiative-stop-opioid-abuse-reduce-drug-supply-demand/. Accessed May 4, 2018.

We are able to provide you with information but not guidance or advice related to Medicare. 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 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.

Generation Fun

When we talk about planning for retirement, we’re usually referring to financial objectives and income strategies. These things are important, but they’re not the only ways to adequately prepare for retirement. In addition to creating an income strategy, consider developing a specific plan for what you want to do — day in and day out — for a retirement that could last 20 to 30 years.

After all, knowing what you want to do in retirement can help put a number on how much money you’ll need to save. For example, a retiree with big travel plans will likely need a larger nest egg than someone cultivating a vegetable garden. Give us a call; we’d love to meet with you to discuss your specific goals and begin drafting a detailed retirement income strategy.

For many people, retirement is a time to do all the things they never had time to do before. Merrill Lynch found that people between ages 65 and 74 reported having more fun than any other age group. However, it’s easy to sink into daily routines that can lead to boredom and lethargy.1

To help maximize your enjoyment in retirement, plan to have a plan. For example, carve out time for your passions or develop a new interest. Get out of the house regularly to discover places you’ve always wanted to visit — a local museum or restaurant, a neighboring city or a far-flung exotic locale. The top criteria retirees use when seeking new adventures are the arts, fine dining, learning, volunteering, outdoor water activities, outdoor land activities and — in its own category — golf.2


1 William P. Barrett. Forbes. July 14, 2017. “25 Great Places To Follow Your Passions In Retirement In 2017.” https://www.forbes.com/sites/williampbarrett/2017/07/14/great-places-to-follow-your-passions-in-retirement-in-2017/#3d003f0c92df.

Accessed May 10, 2018.

Ibid.

Retirement Conversations: What Do You Do?

We spend a lifetime working, building a career, raising a family, etc. Then we retire, and some unsuspecting acquaintance asks, “What do you do?” It’s a whole new ballgame now.

This can be a difficult question for new retirees. Our gut instinct is to identify ourselves by our occupations — “I’m a lawyer,” I’m an office manager,” “a teacher” or a “stay-at-home mom.” When you spend that much time in one role, it becomes a part of who you are. But is that still who you are once you retire? Some people might say, “I used to be a lawyer.” After a while, they may get used to simply saying, “I’m retired.” Yet this process of figuring out how to respond may be directly correlated to how long it takes to figure out who we are in retirement.1

Some people spend years dreaming about what they’ll do when they retire, so they might answer, “I’m now an amateur golfer.” Or gardener. Or grandchild-babysitter. It’s worth taking some time to build a retirement identity for yourself; not just to answer that question, but to establish your own purpose for getting up in the morning. One of the keys to the retirement you desire is aligning your lifestyle goals with your retirement income.  Please feel free to contact us to discuss creating retirement strategies through the use of insurance products that can help you work toward your long-term retirement income goals.

A recent study conducted by Humana found that the more optimistic people are by nature, the younger they feel. In fact, the most optimistic retirees also rated high in areas of good health, getting enough sleep, feeling confident and overall happiness. The study concluded that working on a more positive attitude is important to retirees’ overall health and well-being.2

But what if you aren’t naturally optimistic? One tip for achieving optimism is to practice. Work on identifying negative thoughts and replacing them with positive ones. The general idea is to “fake it until you make it.”3

Researchers at Stanford University analyzed a longevity study of 60,000 diverse U.S. adults between 1990 and 2011 in areas such as demographics, medical history, physical exam and physical activity data. One of the more interesting findings was that people who perceived themselves as “a lot less active” than peers had a higher risk of death — regardless of how much they exercised or other health risk factors such as smoking or obesity. Apparently, it’s not just our health that matters, but also how we feel about ourselves.4

If we believe we are less active than everyone else — and are stressed and depressed about that — it can negatively impact our health. This is an important issue for physicians to consider, because warning about dangerous behaviors such as smoking, inactivity or overeating apparently can actually worsen the problem.5

Perhaps one way to foster optimism is to create a plan for how to spend your days. For example, start a new venture. It doesn’t matter if it’s for profit or not; the main incentive is to provide a purpose. Maybe follow up on a good idea that no one in your area is doing or find a need you can fulfill. When people retire, they often find they have time to do things that they never got to do before, and they also may have time to do things that need to get done — that no one else has time to do.

For the first time in history, there are about to be more people over age 65 than under age five.6 Furthermore, we have a shortage of care providers. Of course, not everyone will need a full-time caregiver; some may just need a little help — perhaps with remembering to turn off appliances or going to doctor appointments. Companies are currently looking at artificial intelligence for more ways — more gadgetry — to help address these issues and allow people to age longer at home.7

But for now, small, kind and oh-so-helpful gestures may be all some people need. Life is full of these types of opportunities — ways to feel good, help others and get the exercise we need without going to a gym. Here’s one idea: Some elderly people have a hard time getting their trash can to the curb for pickup, so perhaps that’s a volunteer job that provides purpose and exercise for a younger retiree while helping others.

Look around. See how you can contribute. And the next time someone asks you what you do, create yourself a brand-new identity title.

Content prepared by Kara Stefan Communications.

1 Joe Casey. Booming Encore. “Answering in Retirement: So, What Do You Do?” http://www.boomingencore.com/retirement-what-do-you-do. Accessed Nov. 13, 2017.

2 Humana. Oct. 4, 2017. “Survey: Sense of Optimism Linked to the Perceived Mental and Physical Health of Seniors.” http://press.humana.com/press-release/current-releases/survey-sense-optimism-linked-perceived-mental-and-physical-health-sen. Accessed Dec. 5, 2017.

3 Susan Williams. Booming Encore. “The Relationship Between Optimism, Health and Aging.” http://www.boomingencore.com/relationship-optimism-health-aging/. Accessed Nov. 13, 2017.

4 Monique Tello. Harvard Health Publishing. Aug. 14, 2017. “Mind over matter? How fit you think you are versus actual fitness.” https://www.health.harvard.edu/blog/mind-over-matter-how-fit-you-think-you-are-versus-actual-fitness-2017081412282. Accessed Nov. 13, 2017.

5 Ibid.

6 Elena Holodny. Business Insider. May 16, 2016. “We’re about to see a mind-blowing demographic shift unprecedented in human history.” http://www.businessinsider.com/demographics-shift-first-time-in-human-history-2016-5. Accessed Dec. 5, 2017.

7 Ian C. Schafer. Software Development Times. Nov. 7, 2017. “IBM expands AI research to support an aging population.” https://sdtimes.com/ibm-expands-ai-research-support-aging-population/. Accessed Nov. 13, 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.

Investing for the Long Term

What does the phrase “long term” mean to you? For children, long term can mean waiting for Christmas or summer vacation that feels like a million years away. For young adults, long term may reference how long it takes to pay off student loans. As we get older, we begin to understand that long term can be a really long time – even decades. We may wonder where the years went. Suddenly we’re in our 50s, 60s, 70s or older. Long term tends to be a subjective phrase depending on what stage you have reached in life and what your goals are.

When it comes to investing, its meaning is only marginally clearer. In other words, if we’re encouraged to invest for the long term, how long is that – 10 years, 20, 30? It largely depends on what your financial goals are – a house, college tuition for the kids, retirement and so on. We take the time to help clients define their financial goals and then create strategies using a variety of investment and insurance products to custom suit their needs and objectives. Give us a call so we can work with you to help you pursue your long-term goals.

It’s worth noting that even an experienced investor can’t say for sure whether they’ve got the right mix of investments for the long term. Take, for example, Jack Bogle, the founder of The Vanguard Group. He recently responded to a question he received from a young investor concerned about how potential catastrophes would impact his portfolio. Bogle replied by sharing his own portfolio mix (50/50 indexed stocks and short/intermediate bond indexes) but said that half the time he worries that he has too much in equities, and the other half that he doesn’t have enough. “We’re all just human beings operating in a fog of ignorance and relying on our common sense to establish our asset allocation,” he wrote to the investor. 1

The S&P 500 has nearly quadrupled in annualized returns since its low in 2009.2 Several prominent market analysts and investment firms suggest this means it’s about time for a market downturn.3 The question is, if you’re a long-term investor, do you sell in anticipation of a correction? After all, if the point is to buy low and sell high, it makes sense to take gains while prices are at their highest before they begin to drop. Or does it?

That’s not what long-term investing is about. The reason returns over 30 years tend to outperform those from, say, five years, is that time is what typically smooths out those periods of volatility. If we continue investing automatically, we may end up buying during those periods of price drops and we can potentially make stronger gains as prices rise again.4

If we base our investment decisions on when the market will take a turn for the worse, we could end up missing out on the future gains that could have been made. Long-term investing may involve patience, unlike children who anxiously await the holidays.

Investing involves risk, including the potential loss of principal.  No investment strategy can guarantee a profit or protect against loss in periods of declining values. It’s important to consider any investment within the context of your own goals, risk tolerance, investment timeline and the composition of your overall portfolio. This information is not intended to provide investment advice.

Content prepared by Kara Stefan Communications.

1 Andy Clarke. Vanguard Blog for Advisors. July 12, 2017. “Stocks and the meaning of “long term.” https://vanguardblog.com/2017/07/12/stocks-and-the-meaning-of-long-term/. Accessed Oct. 12, 2017.
2 Joe Ciolli. Business Insider. Sept. 15, 2017. “An investing legend who’s nailed the bull market at every turn sees no end in sight for the 269% rally.” http://www.businessinsider.com/laszlo-birinyi-interview-investing-legend-bull-market-sage-2017-9. Accessed Sept. 19, 2017.
3 Paul J. Lim. Money. Sept. 19, 2017. “ ‘Unnerved’: These 5 Big Wall Street Players Are Predicting a Downturn.” http://time.com/money/4943479/wall-street-prediction-stock-market-downturn/. Accessed Sept. 19, 2017.
4 Maya Kachroo-Levine. Forbes. Sept. 18, 2017. “Should You Invest As Usual When Stocks Are This High?” https://www.forbes.com/sites/mayakachroolevine/2017/09/18/should-you-invest-as-usual-when-stocks-are-this-high/print/. Accessed Sept. 19, 2017.

This material is intended to provide general information to help you understand basic financial planning 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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Ways to Help Increase Retirement Savings and Reduce Your Tax Liability

As we head into the homestretch of this year, two things individuals may be seeking are ways to help maximize retirement savings and minimize 2017 tax liability.

One way to help do so is by contributing as much as possible to an employer-sponsored retirement plan. Many employers match worker contributions up to a certain point, so that’s just “free” money going into the account. Plus, the more you contribute, the less taxable income you will have to claim. For 2017, the maximum contribution limit for a 401(k) plan is $18,000; $24,000 for people age 50+.1

If you’re already set up to max out your account, you might consider opening and/or contributing to an IRA. Even if you don’t get to claim a tax deduction for IRA contributions (although IRA contributions can also be made pre-tax, subject to certain limits), you can still benefit from additional retirement savings and tax-advantaged compounding. In 2017, the maximum for an IRA (Roth, Traditional or both combined) contribution is $5,500; $6,500 for people age 50+.2

Here’s a little-known benefit available only for active duty military widows: They can contribute all or part of the service member’s $400,000 life insurance death benefit, and even an additional $100,000 for a combat-related fatality, to a Roth IRA within one year of receiving the payout. Because life insurance proceeds are tax-free, this benefit allows the money to be transferred to a tax-free retirement savings account, which also benefits from tax-free growth.3

Another option for those who are already contributing large amounts to a 401(k) and/or an IRA is to consider purchasing an annuity. An annuity also enables tax-deferred growth, and there typically are no contribution limits.4There is a wide variety of immediate, fixed rate, fixed index and variable annuities from which to choose. We’d be happy to evaluate your financial situation and recommend  if an annuity may suit your needs and objectives.

One more tax-related bit we ran across: If you’re considering relocating during retirement to a low/no tax state, or even just wonder where your state gets its tax revenues, check out this breakdown compiled by Pew Charitable Trusts.5

Content prepared by Kara Stefan Communications

1 Brighthouse Financial. July 21, 2017. “5 Tips for Tax-Smart Investing.” https://www.brighthousefinancial.com/education/tax-smart-strategies/tax-smart-investing-strategies. Accessed Sept. 4, 2017.
Ibid.
3 Jeff Benjamin. Investment News. June 26, 2017. “Military benefit allows widows to put $500K into Roth IRA at once.” http://www.investmentnews.com/article/20170626/FREE/170629938/military-benefit-allows-widows-to-put-500k-into-roth-ira-at-once. Accessed Sept. 4, 2017.
4 CNN. 2017. “Ultimate guide to retirement.” http://money.cnn.com/retirement/guide/annuities_basics.moneymag/index4.htm. Accessed Sept. 4, 2017.
5 Mary Beth Quirk. Consumerist. July 5, 2017. “Should You Move? See How Your State Gets Its Tax Money.” https://consumerist.com/2017/07/05/should-you-move-see-how-your-state-gets-its-tax-money/. Accessed Sept. 4, 2017.

The content provided in this blog 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.

Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs.

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. Investing involves risk, including the potential loss of principal.

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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Goals-Based Investing

There’s a difference between monitoring an investment and checking its performance on a daily basis. Rather than being concerned about short-term volatility in the market, consider the future purpose or goal of what you want your money to pay for. This is the fundamental idea behind goals-based investing. You don’t just seek out investments that will yield a certain average annual return; you identify other factors that may matter more.1

In goals-based investing, it’s not about how much your investment earns; it’s about how much you need your investment to yield. For example, let’s say you need about $50,000 to pay for your child’s college education. You save diligently from the time he or she is 10 years old through his or her last year in college – 12 years. During that time, you save $37,000. Your investment needs to earn an additional $13,000. There are a lot of factors here that will determine your return, but the point is that your investment need not be overly aggressive to achieve the return you desire. It should reflect how much risk you’re willing to take to yield the amount you’ll need to pay for your child’s education. Not necessarily more. Preferably no less.

If the investment earns more, you can put those additional earnings in your retirement savings bucket. If it earns less, you may need to tighten the belt on your finances and use more current income to pay for expenses during those college years, or get aggressive about applying for loans and scholarships. The point is, an investment should align with a goal – including its timeline for when you’ll need the money. The timeline can help you determine how aggressively to invest. The longer you have to invest, the more risk you may be able to take.

Just as the timeline matters, so does your age. Young investors with a longer investment timeline usually can be more flexible at choosing riskier investments – as long as those risks are aligned with their goals.2

However, let’s say your last child came later in life. If you will turn 60 before he or she goes to college, you could consider saving for his or her college education via tax-deferred retirement plans. You can start tapping these funds after age 59 ½ and no longer be subject to an early withdrawal penalty, but keep in mind that distributions will be subject to income taxes at that point.

Defining each goal you want to achieve can help guide your investment strategy, which can include the type of account in which you invest, such as a tax-advantaged college savings account or a tax-deferred retirement account. Different goals may call for different types of accounts, so you may need to create an investment strategy for each individual goal and monitor several different types of investments.3

This is where we can help. We’ll work with you to define each goal, establish which type of plan is most appropriate and what types of investments suit your timeline and tolerance for market risk. Then, we’ll help monitor how well those investments stay on track as you work toward your financial goals.

When all of these factions are aligned, you can be less concerned about day-to-day fluctuations. If you think you need to save more, you might want to consider different ways you can generate additional income sources that will allow you to save and invest more.

Perhaps one of the most significant benefits to a goals-based approach is that it makes us think about what we want in life in very tangible terms. Suppose you want to retire to a coastal community. That’s your goal, and how early you get started saving and investing and at what age you’ll want your money can help determine your investment allocations. The return on that investment will ultimately decide how much house you can afford when retiring to your coastal destination. When creating your financial strategy, you should also consider the sort of lifestyle you want to provide your family and how expensive a college you want your children to attend. As with investment risk, trade-offs may need to be made in order to pursue your financial goals.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. It’s important to consider any investment within the context of your own goals, risk tolerance, investment timeline and the composition of your overall portfolio. This information is not intended to provide investment advice.

Content prepared by Kara Stefan Communications.

1 Michael Finke. The American College. June 19, 2017. “The Philosophy of Goal-Based Investment Planning.” http://knowledge.theamericancollege.edu/blog/the-philosophy-of-goal-based-investment-planning. Accessed Aug. 30, 2017.
2 Amy Kemp and Dorsey Wright. NASDAQ. Aug. 3, 2017. “The Next Generation of Investors.” http://www.nasdaq.com/article/the-next-generation-of-investors-cm826808. Accessed Aug. 30, 2017.
Sunder R. Ramkumar and P. Brett Hammond. Forbes. April 10, 2017. “Goals-Based Investing: From Theory to Practice.” https://www.forbes.com/sites/pensionresearchcouncil/2017/04/10/goals-based-investing-from-theory-to-practice/#462b4018459d. Accessed Aug. 30, 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.

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 Type of Investor Are You?

Each person is unique. We are composed of many variables, such as genetics, family influence, geographic influence and even the birth order among siblings – a veritable combination of the forces of biology and society.1 So when it comes to managing your finances, the debate isn’t about nature versus nurture; it’s both.

For example, consider two siblings raised in the same household: same socio-economic background, same parental influence, even the same level and type of education. Yet one sibling is a saver while the other is a spendthrift. Why is that?

We can’t always control whatever personal characteristics drive our needs, desires and indulgences, but we can learn to manage them responsibly. One way to pursue your financial goals is to work with an objective and knowledgeable financial advisor, a role we’re proud to fill for our clients. We can research and analyze your financial needs and objectives to help match appropriate investment and insurance products for your financial situation.

While self-knowledge is important, so is investor knowledge. Knowing how and where to invest isn’t an instinct we’re born with, but takes time and effort. If you’re wondering where you currently stand with financial literacy, consider taking the investor quiz at the Financial Industry Regulatory Authority (FINRA).2

Investors tend to fall into various personality types. According to psychologists who study financial psychology, financial personality types can run the gamut from hoarder to social value spender to the ostrich (i.e., the proverbial “head in the sand”).To help counteract any obstacles that may be driven by your financial personality, one strategy is to focus on your goals. We may have very tangible components that influence our financial goals, such as the timeline for needing specific funds, the amount we’ll need and our personal tolerance for market risk. These three factors are instrumental in determining where and how to invest your money.4

When it comes to investing with the goal of creating retirement income, designing your retirement plan may become even more complex. Not only should we take into consideration our household budget and all the travel, philanthropic and expensive items on our bucket list, but we also must weigh the potential impact of additional factors, such as:

  • How long we expect to live
  • How long we expect our spouse to live
  • Whether or not our children or grandchildren might need financial help
  • Whether we’ll experience significant health care expenses
  • Whether we’ll need full- or part-time assistance as we age

The point is, even if we are natural savers, ongoing students of financial education, experienced investors or obsessive planners, there are still plenty of unknowns that can potentially knock us off course.

But the more we know, the better prepared we can be.

Content prepared by Kara Stefan Communications.

1 Martha C. While. Money. April 8, 2016. “Blame Your Brothers and Sisters for Making You Messed-Up About Money.” http://time.com/money/4279788/siblings-money-attitudes/. Accessed Aug. 18, 2017.
FINRA. 2017. “Investor Knowledge Quiz.” http://www.finra.org/investors/investor-knowledge-quiz. Accessed Aug. 18, 2017.
3 Naomi Rovnick. Financial Times. Jan. 12, 2017. “Six financial personality types — which one are you?” https://www.ft.com/content/5e8da24c-bb09-11e6-8b45-b8b81dd5d080. Accessed Aug. 18, 2017.
4 Michael Finke. ThinkAdvisor. July 3, 2017. “What’s the Point of Investing?” http://www.thinkadvisor.com/2017/07/03/whats-the-point-of-investing?slreturn=1503255710&page_all=1. Accessed Aug. 18, 2017.

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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Monitoring Insurance Needs Is a Good Policy

Life insurance is something you purchase, then hopefully don’t need to use until many years down the road. But that doesn’t mean you should stop paying attention to it. As you age, it’s important to monitor the policies you own.

Some policies may no longer be needed, while others may be needed now more than ever. It’s a matter of evaluating your personal situation as you move through life. Since insurance is meant to help protect us from major financial loss, it’s important to continually assess how our goals and needs change over time, and determine if our insurance coverage is aligned with them.1

If it’s time for you to get a customized insurance review, please give us a call.

Many people may assume they no longer need life insurance during retirement. For some, this may be true. Once children are out on their own, retirees who feel they have saved enough to provide income for both spouse’s lifetimes are likely to drop their policies.However, before making this decision, it’s important to review your retirement and legacy goals. Some people decide to keep life insurance during retirement in order to provide a tax-free death benefit for their beneficiaries when they die. This can free up other assets for use in retirement without concerns about whether they will have money to leave to their children.

For large estates, policy owners may use life insurance proceeds to help pay state and federal inheritance taxes. Still others may want life insurance to provide the surviving spouse with additional funds for unexpected expenses.3

In some cases, it may be appropriate for retirees to purchase life insurance for the death benefit, as well as a complementary strategy for additional retirement income. Some permanent life insurance policies offer a cash value account that grows over time and can be used to supplement retirement income, typically through the use of policy loans. At the same time, the policy can provide tax-advantaged proceeds to help protect loved ones upon the owner’s death.Please note that policy loans and withdrawals will reduce the available cash value and death benefit.

Retirees who stop paying premiums for policies they determine they no longer need can use that excess money to help pay for the policies they may need during retirement, such as long-term care insurance.5 This is even true of policies we often take for granted, such as homeowners and auto insurance. If you downsize to a less expensive home, your homeowners premium will likely drop as well. If you downsize to one car or, eventually, no car at all, you can free up extra cash, which can help defray any new transportation costs.

Content prepared by Kara Stefan Communications.

1 Lisa Brown. Kiplinger. June 2017. “Rethink These 3 Financial Strategies Every Decade (or sooner!)” http://www.kiplinger.com/article/retirement/T023-C032-S014-rethink-these-3-financial-strategies-every-decade.html. Accessed Aug. 20, 2017.
2 Tim Grant. Times-Union. Aug. 12, 2017. “Rethink dropping life insurance.” http://www.timesunion.com/business/article/Rethink-dropping-life-insurance-11813300.php. Accessed Aug. 20, 2017.
3 Cheryl Winokur Munk. The Wall Street Journal. July 5, 2017. “Should Retirees Have Life Insurance?” https://www.wsj.com/articles/should-retirees-have-life-insurance-1499261075?utm_campaign=Q32017%20Thought%20Leadership. Accessed Aug. 20, 2017.
4 Jacob Alphin. Forbes. May 11, 2017. “How To Use Life Insurance In Your Retirement Planning.” https://www.forbes.com/sites/forbesfinancecouncil/2017/05/11/how-to-use-life-insurance-in-your-retirement-planning/#85e67b469cff. Accessed Aug. 20, 2017.
5 Jennifer Fitzgerald. Betterment. March 3, 2016. “3 Important Types of Insurance to Have When Preparing for Retirement.” https://www.betterment.com/resources/retirement/planning-ahead/3-important-types-of-insurance-when-preparing-for-retirement/. Accessed Aug. 20, 2017.

Life insurance policies are contracts between you and an insurance company. Life insurance product guarantees rely on the financial strength and claims-paying ability of the issuing insurer. If properly structured, proceeds from life insurance are generally income tax free.

 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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