Family Business Considerations

Family businesses that manage to survive generation after generation leave not only a family legacy, but also the potential for tremendous wealth. For example, Arkansas-based Walmart is presently the largest business in the world in terms of revenue, earning more than $485 billion in 2017. In 1992, founder Sam Walton passed away and left his retail empire in the hands of seven heirs.1

Presently, the Walton family business outranks the wealth of the Koch Industries energy group, which is the second-largest privately owned company. Next in line in terms of individual wealth of business founders are Jeff Bezos (Amazon), Bill Gates (Microsoft) and Warren Buffett (Berkshire Hathaway).2

These are just samples of the scope of wealth an entrepreneur can amass. However, most small business owners do well just to keep their heads above water. For those who would like to pass their business on to family members, there are basic business management strategies to keep in mind.3 If we can help you develop an insurance strategy to help protect your business, your key executive staff or your legacy, please give us a call.

On a day-to-day basis, successful family-owned entities generally follow some well-honed principles to keep family politics out of the business. For example, the patriarch and his four daughters who run the six-generation family-owned business D.G. Yuengling & Son Inc. have many varying opinions. To keep the business humming, they agree that it’s OK to disagree: “Diversity of opinion is what keeps family businesses strong and spurs collaboration.”4

It’s also a good idea to keep family and business separate. This means scheduling regular, in-office staff meetings so that family dinners can focus on just that — family. It’s important, too, that everyone has distinct roles and responsibilities. It’s difficult enough when duties overlap among workers, but in a family business this can lead to an all-out sibling brawl. When jobs and job titles are doled out to family members based on their natural strengths and interests, each employee can take ownership and be held accountable, as well as enjoy the pride and satisfaction for their individual contributions.5

For some families, entering the family business may take time. Even beyond a formal education, it may be important to first seek non-family job experience before “boomeranging” back to the fold. This scenario worked well for the three generations that run Cleaver Farm and Home — a building-supply distributor in Kansas. The business has managed to expand as each generation of family members took charge. For the current generation of brothers, launching their own career paths allowed them to return to their family roots and give their own children the sort of childhood they enjoyed.6

Bear in mind, too, that younger generations can bring new skill sets to the family business.

For example, a 17-year-old prodigy whose family has owned a metalworking company since the late Middle Ages has introduced technology to the fold. Anton Klingspor added exponential growth in his family’s business through various technological tools like LinkedIn Lead Builder and Facebook Workplace to improve team collaboration and communication.7

As a business grows larger and more complex, the family may need to look outside the fold for specific skills and experience. It’s important to engage knowledgeable professionals and establish formal business and family governance systems to help manage risks and enjoy a more sustainable foundation for future success.8

Content prepared by Kara Stefan Communications.

1 Lianna Brinded. Quartz. May 14, 2018. “The richest family in the world beat the Koch brothers, Bezos, Gates, and Buffett.” https://qz.com/1276872/the-richest-people-in-the-world-walton-family-koch-brothers-bill-gates-jeff-bezos-warren-buffett/. Accessed May 28, 2018.

2 Ibid.

Hilary Sheinbaum. Forbes. April 30, 2018. “How The 4 Yuengling Sisters Manage The Family Business.” https://www.forbes.com/sites/hilarysheinbaum/2018/04/30/how-4-sisters-manage-the-family-business-and-still-get-along-and-you-can-too/#198c9d0262ca. Accessed May 28, 2018.

4 Ibid.

5 Amy George. Inc. Jan. 17, 2018. “How to Build a Family Business That Lasts for Generations, According to Bravo TV Star Tabatha Coffey.” https://www.inc.com/amy-george/how-to-build-a-family-business-that-lasts-for-generations-according-to-bravo-tv-star-tabatha-coffey.html. Accessed May 28, 2018.

6 Raney Rapp. Farm Talk. May 15, 2018. “Cleaver Farm and Home celebrates three generations of family business.” http://www.farmtalknewspaper.com/news/cleaver-farm-and-home-celebrates-three-generations-of-family-business/article_7796c170-584b-11e8-8ed6-27bc3ee8f20b.html. Accessed May 28, 2018.

7 John White. Inc. Sept. 7, 2017. “How This 17-Year-Old Used an Entrepreneurial Mindset to Grow His Family Business to $300-Million.” https://www.inc.com/john-white/lessons-from-a-gen-zer-on-how-to-grow-a-200-year-o.html. Accessed May 28, 2018.

8 Marleen Dielemen. Forbes. May 25, 2018. “4 Types Of Family Businesses You’ll See In Asia And How To Govern Each Effectively.” https://www.forbes.com/sites/nusbusinessschool/2018/05/25/4-types-of-family-businesses-youll-see-in-asia-and-how-to-govern-each-effectively/#5147434e659f. Accessed May 28, 2018.

Guarantees and protections provided by insurance products 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. 

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.

Vanishing Deductions

Money-Saving Tips

Beginning with the 2019 tax season, filing income-tax returns will no longer be “business as usual.” Some people may be happy to see their 2018 tax return streamlined and receive a higher refund to boot. However, others may lament lost deductions that had previously helped reduce their tax liability.1

The good news is that the standardized deduction will nearly double. Individual filers will receive a $12,000 deduction while married couples will get $24,000. However, in exchange for the simplicity, many itemized deductions will go away. The following are some of the more common ones.2

  • Dependent exemption — Taxpayers will no longer be able to subtract $4,050 from their taxable income for each dependent they claim. The newly doubled $2,000 child credit may help offset the loss of that deduction for some, but not for those whose children are in college.
  • SALT — Deductions for state and local taxes (SALT) will be capped at $10,000. This will mostly affect those who live in areas with high property tax areas, such as in South Florida, New York and
  • Mortgage interest deduction — Deductible interest will be capped for new mortgages valued at $750,000, down from $1 million.
  • Miscellaneous itemized deductions — Expenses such as unreimbursed employee-education expenses, tax-preparation services, investment fees and professional dues, among others, are no longer deductible.
  • Moving expenses — This deduction is completely eliminated for everyone except members of the armed forces.
  • Natural disasters — In the past, expenses not reimbursed by insurance or other relief programs could be deducted on your tax return. Now this deduction is available only to taxpayers in a presidentially designated disaster zone, typically made on a county-by-county basis.
  • Alimony — These payments are no longer deductible from federal taxes for any divorce that is executed after Dec. 31, 2018. However, there is no change in the tax treatment of alimony payments for divorces finalized before 2019.3

The content provided in this newsletter is designed to provide general information on the subjects covered. Neither our firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

1 Maryalene LaPonsie. US News & World Report. Feb. 9, 2018. “10 Tax Deductions That Will Disappear Next Year.” https://money.usnews.com/money/personal-finance/taxes/articles/2018-02-09/10-tax-deductions-that-will-disappear-next-year. Accessed May 29, 2018.

Ibid.

3 Bill Bischoff. Marketwatch. Jan. 26, 2018. “New tax law eliminates alimony deductions — but not for everybody.” https://www.marketwatch.com/story/new-tax-law-eliminates-alimony-deductions-but-not-for-everybody-2018-01-23. Accessed May 29, 2018.

Deducting Home-Loan Interest

Planning Tip

The new tax law still allows a deduction for interest on a home equity loan, line of credit or second mortgage as long as the loan is used to buy, build or substantially improve the taxpayer’s primary or second home. Specifically, the interest is deductible only if the loan meets all three of the following criteria:1

  • The debt is secured by the underlying residence
  • The total of the refinanced debt is not greater than the cost of the residence
  • The proceeds are used to improve or expand the residence

However, the applicable loan is subject to a new $750,000 debt limit ($375,000 for a married taxpayer filing a separate return). This limit applies to the combined total of loans used to buy, build or improve the taxpayer’s main home and second home. If you have an existing home equity loan that does not qualify under these three criteria, the interest may no longer be deducted.2

 The content provided in this newsletter is designed to provide general information on the subjects covered. Neither our firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

 1 IRS. Feb. 21, 2018. “Interest on Home Equity Loans Often Still Deductible Under New Law.” https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law. Accessed May 29, 2018.

2 Ibid.  

Content prepared by Kara Stefan Communications.

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.

Filing Your 2018 Tax Return

Next year, taxes must be filed on or before April 15, 2019. For the last few years, that iconic date was extended because it fell on a legal holiday or a weekend, but it lands on a Monday in 2019.1 While there’s been significant debate regarding how the new tax law will affect Americans across the income scale, we should then have a better idea of how we may be personally impacted by the changes.

Highlights of the new tax law include:2

  • Lower individual tax rates
  • Increased standard deduction ($12,000 single; $24,000 married filing jointly)
  • Increased child tax credit ($2,000)
  • Elimination of dependent and personal exemptions
  • Elimination of some itemized deductions
  • $10,000 cap on the combined deduction for state income taxes, sales and local taxes, and property taxes
  • 20 percent deduction for “pass-through” entities (e.g., sole proprietorship, partnership, S corps)

In light of these changes, it’s a good idea to conduct a midyear review to see if there are ways to take advantage of the new changes or discover any potentially negative situations. If you’re not sure how you might be affected, consult with a tax professional. It may be worth reviewing your 2017 return to consider what new rules may affect your unique situation.

The content provided in this newsletter is designed to provide general information on the subjects covered. Neither our firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

1 TimeAndDate.com. April 24, 2018. “Tax Day in the United States.” https://www.timeanddate.com/holidays/us/tax-day. Accessed May 29, 2018.

2 TurboTax. April 24, 2018. “How Will Tax Reform Affect My Refund Next Year?” https://blog.turbotax.intuit.com/tax-reform/how-will-tax-reform-affect-my-refund-next-year-33055/. Accessed May 29, 2018.

 

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.

Money Saving Tips

Reining in Impulse Purchases

Try as we may to be responsible, almost all of us end up spending money frivolously at one point or another. It’s good to recognize this and perhaps set aside money in your budget for discretionary purchases. However, on a day-to-day basis, it’s important to remain vigilant about spending habits and be aware of when those purchase impulses are likely to hit. The following are some tips to help you stay on track.1

  • Plan meals for the week, including what nights it would be most convenient for your schedule to dine out or pick up takeout. Break out your favorite slow cooker recipe and freeze the leftovers so you always have a meal on hand. Maintain a garden to grow fresh herbs and produce.
  • Don’t buy more than you plan to eat — with no more than one additional meal of leftovers. Too often, we think a large dish will last us all week, but we forget that we’ll get tired of eating it. Be realistic, and don’t waste money on food you may end up throwing away.
  • Don’t fool yourself into thinking that an impulse purchase is a reward. If you’re working toward a goal, budget a treat for yourself once you achieve it. That’s a reward. If you find something you suddenly can’t live without, don’t dream up some reason why you deserve to buy it. That’s a justification.
  • Don’t wait until you’re living well within your means to start saving and/or investing in a retirement account. Saving a little today can yield far better results than waiting to save more, years down the road — for some people that day never comes. Just tighten the belt a little more and start saving today. You may even feel good enough about the move that you don’t miss the money in your daily budget.
  • Don’t engage in “retail therapy” to make yourself feel better. A brisk walk in nature can yield the same results at far less cost.
  • Review your bank and credit card statements. Check to make sure you don’t have any incorrect charges, fraudulent purchases or penalty fees. In today’s environment of computer hacking, these things are far more common and can happen to anyone.
  • Don’t try to keep up with the Joneses. Establish your own goals and don’t let friends’ and neighbors’ new purchases distract you. When you try to keep up with others, you’re less likely to meet your own goals.

1 Nancy L. Anderson. June 22, 2016. “10 Expensive Habits You Can, And Should, Break Today.” https://www.forbes.com/sites/nancyanderson/2016/06/22/10-money-habits-you-need-to-break-today/#5255d64c31e8. Accessed Dec. 7, 2017.

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.

AE09175108C

Economic Growth Prospects for the Future

Are life-changing innovations a thing of the past in the United States? While today’s technology seems to advance in leaps and bounds, one economist believes it won’t change the fabric of the average American’s life the way inventions like electricity, indoor plumbing and the elevator did in the 20th century.1

Yes, the internet is an amazing resource, and smartphones are nearly ubiquitous, but in terms of economic growth and productivity, they have not contributed as much as you might expect. Social media and infinite sources of information actually may serve to reduce our productivity both at home and at work.2

Nearly everyone can think of ways innovations have increased productivity, whether it’s looking up information online rather than consulting the library or using modern kitchen appliances that make cooking prep and cleanup much easier. However, this increased technology and efficiency may not translate to any improvement in one’s financial situation. While technology and online tools can allow you to better monitor your finances, please feel free to contact us for help in assessing your current retirement income strategy. As an independent financial services firm, we help people create retirement strategies using a variety of insurance products to custom suit their needs and objectives.

Today, two of the fastest-growing industries in the U.S. are construction and computer systems design.3 While both of these disciplines certainly have the capacity to improve people’s lives and productivity, they are not likely to present the quantum leap of, say, refrigeration.

One industry poised for rapid growth is satellite manufacturing. While costly in its upstart, prices are likely to align with greater demand for navigation, transportation management, disaster management, military intelligence and telecommunication applications.4

Some say the advancement of automation will replace jobs, but proponents are quick to point out that automation can help the American workforce become more productive. Amazon is a good example of a company that has embraced automation yet continues to offer more new jobs.5

What’s interesting is that while we measure economic growth on a national scale, contributions are not balanced. Certain regions, states and metropolitan areas contribute more substantial gains to the U.S. growth rate than others. For example, the labor force in Massachusetts is currently growing at the fastest rate in the country, having added 300,000 more jobs in the past 10 years. This is primarily because the state is home to a variety of strong and growing industries such as health care, financial services, high-tech manufacturing and higher education.6

And while controversial in its mix of documented and undocumented workers, the Latino population is considered a major contributor to U.S. GDP. Between 2010 and 2015, the Latino workforce increased by about 2.5 million while non-Latino workers shrank by about 4,000. This may be explained in part by the willingness of this demographic to pursue a higher education. Latino college graduates grew by 40.6 percent in that same timeframe, compared to 13.6 percent for non-Latinos.7 Economists tend to agree that the better educated the workforce, the higher a country’s economic growth prospects.

Content prepared by Kara Stefan Communications

1 Knowledge@Wharton. Feb. 3, 2016. “Are America’s Best Years of Innovation Over?” http://knowledge.wharton.upenn.edu/article/dazzling-yet-disappointing-why-u-s-growth-productivity-will-underperform-the-past/. Accessed Sept. 4, 2017.
2 Ibid
3 Mary Ellen Biery. Forbes. April 9, 2017. “The 10 Fastest-Growing Industries in The U.S.” https://www.forbes.com/sites/sageworks/2017/04/09/the-10-fastest-growing-industries-in-the-u-s/#56fdb5471ef2. Accessed Sept. 4, 2017.
4 Business Insider. Sept. 4, 2017. “Satellite Bus Market Worth $13.64 Billion USD by 2022.” http://markets.businessinsider.com/news/stocks/Satellite-Bus-Market-Worth-13-64-Billion-USD-by-2022-1002306432. Accessed Sept. 4, 2017.
5 Steve Cousins. TechCrunch. Sept. 4, 2017. “Can robots help the U.S. get its economic mojo back?” https://techcrunch.com/2017/09/04/can-robots-help-the-u-s-get-its-economic-mojo-back/. Accessed Sept. 4, 2017.
6 Shira Schoenberg. MassLive.com. Sept. 4, 2017. “Study: Massachusetts has fastest growing labor force in US.” http://www.masslive.com/politics/index.ssf/2017/09/study_massachusetts_has_fastes.html. Accessed Sept. 4, 2017.
7 Mark Bloomfield. The Hill. Aug. 14, 2017. “Look to Latinos to drive US economic growth.” http://thehill.com/blogs/pundits-blog/economy-budget/346464-latinos-could-lead-us-out-of-economic-malaise. Accessed Sept. 4, 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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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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