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.

Notes on U.S. Infrastructure

The American Society of Civil Engineers has given the U.S. an overall infrastructure grade of D+. Throughout the next decade, it will take more than $4.5 trillion to fix our aging infrastructure — including upgrades to roads, mass transit, wastewater treatment plants and the electrical grid.1

We’ve reached the mission-critical stage. One industry analyst observed, “We’re at the point where our infrastructure is becoming an impediment to productivity and long-term economic growth.”2

The idea of national infrastructure may remind us of personal retirement preparation. If you are still working and thinking about retirement options, consider your own “infrastructure” situation. First, are you considering relocating or downsizing, or are you committed to aging in your own home? If you prefer the latter, it’s a good idea to check out your home from top to bottom to see whether you need any major repairs or maintenance while you’re still earning a paycheck.

This inspection should include considering a new roof, checking for mold buildup in your crawl space and researching new windows or other energy-efficient features that can help lower your utility bills. Even replacing older appliances could impact your household budget once you’re living on a fixed income.

Given our dramatic weather pattern swings, we should also prepare for the possibility of a natural disaster that could affect our daily living. Consider how you might plan for a long-term disruption in power or clean water supplies, such as installing a generator, solar panels, tiles and/or a battery pack. While it may seem farfetched, remember that the citizens of Puerto Rico probably never thought they would have to adapt for long-term power outages, as seen after Hurricane Maria.3

One way the U.S. is trying to address some of these issues is by incorporating green stormwater infrastructure (GSI) in sewer overflow control and integrated wet-weather plans. The idea is to evaluate the performance of GSI systems for future development.4

With all the discussion about funding at the federal level, one little-known fact is how much infrastructure is controlled at the local level. In fact, 40 percent of the nation’s bridges and 46 percent of all public roads are owned and maintained by counties. Furthermore, counties help fund one-third of the nation’s airports and 78 percent of public transportation programs.5

The news isn’t all bad. According to the World Economic Forum, the U.S. international ranking for overall infrastructure quality improved from 25th to 12th place last year out of 138 countries. However, when it comes to specific categories, we show mixed results — the U.S. ranks second in road infrastructure spending but ranks 60th for road safety. The U.S. also lags behind other developed countries when it comes to infrastructure resilience and future sustainability.6

Content prepared by Kara Stefan Communications

1 Merrill Lynch. 2018. “Getting a Bigger Bang for the Infrastructure Buck.” https://www.ml.com/articles/getting-a-bigger-bang-from-the-infrastructure-buck.html#financial-research-and-insights. Accessed April 20, 2018.

2 Ibid.

3 Camilla Domonoske. NPR. April 18, 2018. “Puerto Rico Loses Power — Again.” https://www.npr.org/sections/thetwo-way/2018/04/18/603569966/puerto-rico-loses-power-again. Accessed April 20, 2018.

4 Water Environment Federation. April 4, 2018. “Data analyses confirm GSI value in overflow control.” http://stormwater.wef.org/2018/04/data-analyses-confirm-gsi-value-overflow-control/. Accessed April 20, 2018.

5 Mary Scott Nabers. Infrastructure USA. April 9, 2018. “County government — a critical component of America’s greatness.” https://www.infrastructureusa.org/county-government-a-critical-component-of-americas-greatness/. Accessed April 20, 2018.

6 Hiba Baroud. PBS News Hour. Feb. 18, 2018. “Measuring up U.S. infrastructure against other countries.” https://www.pbs.org/newshour/nation/measuring-up-u-s-infrastructure-against-other-countries. Accessed April 20, 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.

AE05185051B

Artificial Intelligence: Innovation for Today’s World

Artificial intelligence (AI) is rapidly changing the way businesses build products and even provide customer service. We now have automated virtual assistants and “chatbots” answering customer service calls.1 We even have self-driving cars being tested for pizza delivery.2

These quantum leaps in technological advances present both opportunities and challenges. For example, the way we have adopted online financial transactions over the past 10 to 15 years has made everything from banking and paying bills to applying for a mortgage so much more convenient. However, as the recent Equifax security breach impacting more than 145 million people demonstrates, housing that much data in one central location creates a single-entry point for would-be hackers.3

That’s one reason we believe it’s important to work face to face with financial advisors you know and trust. Regardless of where technology takes us, there’s really no substitute for personal interaction, particularly when it comes to planning for your family’s insurance, higher education and retirement income needs. We appreciate the value of combining human intelligence with empathy and understanding, and we know our clients do as well. In this rapidly advancing world of artificial intelligence, it’s important to offer both convenience and personal service.

With that said, we work to keep up with innovations and their applications for today’s world, especially when they may create potential investment opportunities. There are all kinds of innovative things to report. The use of connected devices such as wearables, residential electric and gas meter readers, drones and business self-checkout terminals is expected to grow by 31 percent this year over 2016. Today’s number of 8.4 billion devices in use is projected to grow to 20.4 billion connected devices by 2020.4

AI devices, such as drones, are being adapted for all kinds of creative uses. Researchers in Australia have developed flying drones capable of doing three things:5

  1. Identifying sharks near swimmers and surfers
  2. Amplifying warnings to beachgoers via an on-board loudspeaker
  3. Sending out electrical impulses that irritate sharks and deter them from entering populated areas

One way AI can be more effective than the human brain is its capacity to access and analyze vast more stores of data. As humans, we possess memory and recall, but AI machines can be loaded with an infinite amount of data that can be scanned and identified quickly. Farmers are using this technology via smartphone to take photos of ailing crops, from which AI can pinpoint disease with up to 98 percent accuracy.6

In the construction industry, AI is being used to help project managers track the most egregious potential malfunctions based on plan specifications, phase timing and severity. This helps keep projects on time and on budget with a laser-like focus on safety and quality.7

AI is also having an impact in the retail industry. British fashion icon Burberry requested and uploaded scores of data regarding their clients’ buying habits. This enables frontline retail clerks to make immediate recommendations to complement client selections based on what customers purchased in the past. The intelligence has created a type of personalized shopping service that has proven enormously successful.8

Moreover, the retailer has been able to cut down on counterfeit sales by developing technology that can detect if an item is a Burberry “bootleg” product by analyzing a photo of it.9

Content prepared by Kara Stefan Communications.

1 Shep Hyken. Forbes. July 15, 2017. “AI and Chatbots Are Transforming The Customer Experience.” https://www.forbes.com/sites/shephyken/2017/07/15/ai-and-chatbots-are-transforming-the-customer-experience/#31527b2941f7. Accessed Oct. 13, 2017.

2 Amar Toor and Tamara Warren. The Verge. Aug. 29, 2017. “Domino’s and Ford will test self-driving pizza delivery cars.” https://www.theverge.com/2017/8/29/16213544/dominos-ford-pizza-self-driving-car. Accessed Oct. 13, 2017.

3 Bloomberg. Oct. 2, 2017. “Equifax Says 2.5 Million More Americans May Be Affected by Hack.” https://www.bloomberg.com/news/articles/2017-10-02/urgent-equifax-2-5-million-more-americans-may-be-affected-by-hack. Accessed Oct. 2, 2017.

4 Liam Tung. ZDNet. Feb. 7, 2017. “IoT devices will outnumber the world’s population this year for the first time.” http://www.zdnet.com/article/iot-devices-will-outnumber-the-worlds-population-this-year-for-the-first-time/. Accessed Oct.13, 2017.

5 Charlotte Edmond. World Economic Forum. Sept. 4, 2017. “Meet Australia’s beach-protecting, AI-powered shark drones.” https://www.weforum.org/agenda/2017/09/australia-shark-drones-artificial-intelligence/. Accessed Oct. 2, 2017.

6 Jamie Condliffe. MIT Technology Review. Oct. 2, 2017. “OK, Phone: How Are My Crops Looking?” https://www.technologyreview.com/the-download/609028/ok-phone-how-are-my-crops-looking/. Accessed Oct. 2, 2017.

7 Zach Mortice. Redshift. Oct. 2, 2017. “Machine Learning Eases Construction Project Management—and Prevents Catastrophes.” https://www.autodesk.com/redshift/machine-learning-construction-project-management/. Accessed Oct. 2, 2017.

8 Bernard Marr. Forbes. Sept. 25, 2017. “The Amazing Ways Burberry Is Using Artificial Intelligence and Big Data to Drive Success.” https://www.forbes.com/sites/bernardmarr/2017/09/25/the-amazing-ways-burberry-is-using-artificial-intelligence-and-big-data-to-drive-success/#24388a014f63. Accessed Oct. 2, 2017.

9 Ibid.

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.

AE10175119C

Travel Tips

Anthony Melchiorri, the host of the Travel Channel show “Hotel Impossible,” says he prefers to stay in a roadside motel over a luxury hotel – as long as it has good online reviews. In his opinion, the mom and pop ownership model often leads to painstaking efforts for cleanliness, fresh flowers and a home-cooked meal – not to mention personal recommendations for uniquely local places to visit in the area.1

After all, the accommodation industry is all about hospitality, and hospitality is about personal service. It doesn’t get more personal than running your own business. We feel the same way about working with our clients. We know you want to talk to familiar people when you call for information. At the end of the day, we’re all looking for that extra touch, the human connection, something that sets service above the rest. Please contact us anytime. We are here to help you with your retirement income strategy questions.

This desire for the personal touch remains true whether you’re at home or traveling. In a recent interview, Mr. Melchiorri offered some interesting advice for planning a vacation. For example:2

  • If you’re booking a hotel, check out its most recent reviews online at sites like TripAdvisor and Yelp. Even large chains get bad reviews, and some of those roadside motels get charming It pays to check before you book.
  • While you may want to use one of those shop-and-compare websites to find a hotel, once you make a selection go to the hotel’s actual website to make your reservation. The hotel website is guaranteed to offer the lowest rate – Melchiorri says a website like Expedia is not allowed to have a lower rate than the hotel. In addition, when you book through a third party, it can be more difficult to get your money back.
  • Remember that hotels and motels are in the hospitality industry, and the good ones want to ensure you are pleased with your stay. Melchiorri encourages travelers to ask for things they want – an upgrade, a poolside room, to be upstairs or downstairs, bottled water or fresh flowers in their room. If hotel staff can accommodate you, they most likely will.
  • If you encounter a problem, he suggests you first make a polite complaint, then escalate to a more direct aggressive complaint, and finally, express your displeasure with a scathing online review.

One way to save money on accommodations is on parking. Many hotels charge for onsite parking or valet service. Consider downloading an app to your smartphone to help you find less expensive parking options. These apps look for parking based on your location and show the least expensive options, which can yield as much as 50 percent in savings. Other apps can find all available transportation options between your current location and your destination, so you can choose the most convenient with the best price.3

If you want to learn about the history of an area you’re visiting, check out local museum deals. Some places offer free entrance either on certain days or all the time. For example, the Smithsonian in Washington D.C. and nearly every museum in London offer free admittance year-round.4

If you’re traveling abroad, before you leave home, make copies of your passport and driver’s license; leave one with a friend and tuck another into your bag. It’s also a good idea to take photos of them on your smartphone and load them up to a password protected cloud storage site. Having copies of important travel documents can alleviate a lot of hassle if the originals are lost or stolen.5

You also may want to spread your cash in a few different places, such as your wallet, in zipper pockets and in your hotel safe. Should you lose your billfold or get robbed, you won’t be left totally without cash.6

Content prepared by Kara Stefan Communications.

1 Beth J. Harpaz. Washington Times. Sept. 6, 2017. “Why ‘Hotel Impossible’ star likes a good roadside motel.” http://www.washingtontimes.com/news/2017/sep/6/why-hotel-impossible-star-likes-a-good-roadside-mo/?utm_source=RSS_Feed&utm_medium=RSS. Accessed Oct. 2, 2017.

2 Ibid.

3 Talia Avakian. Travel and Leisure. Sept. 30, 2017. “These 18 Easy Tips Can Save You a Fortune on Your Next Trip.” http://www.travelandleisure.com/travel-tips/save-money-while-traveling. Accessed Oct. 2, 2017.

4 Ibid.

5 Mike Shubic. Travelocity. Oct. 2, 2017. “12 Genius Travel Planning Tips.” https://www.travelocity.com/inspire/12-genius-travel-planning-tips/. Accessed Oct. 2, 2017.

6 Ibid.

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.

AE10175119B

Assessing Risk

It is common to have a very traditional interpretation when we think of investment risk, such as the belief that stocks are seen as a risky investment, and bonds less so. But many issues have come to light in the past decade that cause us to think about risk differently. For example, there’s the risk of outliving your retirement savings, which is often cited as one of the primary concerns of today’s retirees.1

And that’s just today’s retirees. If you’re still in saving mode, your retirement could be even longer than today’s average retirement.2 Given this potential reality, it may be time for all of us to re-evaluate how we assess risk.

As financial advisors, we spend countless hours helping people develop a financial strategy for the future. That means we continuously research and discuss risk factors, and we understand how to apply them to each individual’s situation. Please contact us if you’d like help assessing what risk factors you need to consider in regard to your long-term financial goals.

Some people are naturally risk averse, and others are enthusiastic risk-takers. Most fall somewhere in between, with attitudes toward risk changing, depending on where they are in in their lives. It’s not uncommon for individuals to take more risks in their younger years, when they have more time to rebound from market setbacks, and then take a more conservative approach as they near retirement.3

If we pursue a strict risk/reward investment strategy, we can still come up short in meeting retirement goals. For example, say you are extremely risk-averse, so you invest all of your money in 10-year Treasury notes in order to generate around $56,500, which is the average annual household income. These securities, which are considered low risk because they are backed by the U.S. government, were paying out around 2.25 percent in October, so you would need to have $2.26 million invested to earn that much – even more if you factor in long-term inflation.4 In this particular scenario, we might say that such a level of risk-aversion is a luxury many of us cannot afford.

Let’s look at another type of risk. As a general rule of thumb, risk-averse U.S. investors are more comfortable investing in domestic stocks versus those in other countries. This year, that’s working out pretty well, when you consider that the S&P 500 boasted a 14.86 percent year-to-date return as of Nov. 2, 2017.5 However, a lot of countries are doing well these days, so diversifying to include foreign stocks could help improve a portfolio’s overall return while adding the risk-mitigation factor of broader diversification. To put this in perspective, consider that the MSCI World ex USA Index has yielded 15.51 percent and the MSCI Emerging Markets Index is at 25.08 percent for the year as of Sept. 27, 2017.6

It’s also important to evaluate different kinds of risk beyond that associated with individual holdings. There’s the potential risk of not keeping pace with long-term inflation’s impact on the purchasing power of our savings. There’s what’s called “sequence of returns” risk, which means your average annual return over a long timeline may be good, but if you experience declines during the beginning of your retirement years, the risk of loss is much higher.7

There’s also the risk of having significant health problems and needing long-term care. Some people experience this while others don’t, but there’s no way to be sure which camp we’ll fall into – so that’s a potential risk.

While many retirees may believe that their greatest risk is not accumulating a certain amount of money by the time they retire, we believe their goal should be to create a financial strategy that reflects their needs and objectives instead of chasing an arbitrary monetary amount.

Content prepared by Kara Stefan Communications.

1 Catey Hill. MarketWatch. July 21, 2016. “Older People Fear This More Than Death.” http://www.marketwatch.com/story/older-people-fear-this-more-than-death-2016-07-18. Accessed Oct. 24, 2017.

2 Jeff Stimpson. Forbes. Sept. 5, 2017. “How to Balance Investment Risk and Reward in Retirement” https://www.forbes.com/sites/nextavenue/2017/09/05/how-to-balance-investment-risk-and-reward-in-retirement/#629608b96ec4. Accessed Sept. 28, 2017.

3 Walter Updegrave. CNN Money. June 21, 2017. “How much investing risk should you take in retirement? http://money.cnn.com/2017/06/21/pf/retirement-investing-risk/index.html. Accessed Oct. 24, 2017.

4 Bruce McCain. Forbes. Sept. 20, 2017. “Seeking Financial Security When Life Changes Strike.” https://www.forbes.com/sites/brucemccain/2017/09/20/seeking-financial-security-when-life-changes-strike/#589a300c2f0a. Accessed Sept. 28, 2017.

5 CNN Money. Oct. 24, 2017. “S&P 500 Index.” http://money.cnn.com/data/markets/sandp/. Accessed Nov. 2, 2017.

6 eTrade. Sept. 28, 2017. “International calling.” https://us.etrade.com/knowledge/markets-news/commentary-and-insights/international-calling?ch_id=S&s_id=Twitter&c_id=ESOC. Accessed Sept. 28, 2017.

7 Dana Anspach. The Balance. Aug. 14, 2017. “Learn How Sequence Risk Impacts Your Retirement Money.” https://www.thebalance.com/how-sequence-risk-affects-your-retirement-money-2388672. Accessed Oct. 24, 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.

AE10175118C