Chris Tobey

Chris Tobey

Friday, 14 September 2018 17:57

Save & Invest Even if Money Is Tight

For millennials, today is the right time.

If you are under 30, you have likely heard that now is the ideal time to save and invest. You know that the power of compound interest is on your side; you recognize the potential advantages of an early start.

There is only one problem: you do not earn enough money to invest. You are barely getting by as it is.

Regardless, the saving and investing effort can still be made. Even a minimal effort could have a meaningful impact later.

Can you invest $20 a week? There are 52 weeks in a year. What would saving and investing $1,040 a year do for you at age 25? Suppose the invested assets earn 7% a year, an assumption that is not unreasonable. (The average yearly return of the S&P 500 through history is roughly 10%; during 2013-17, its average return was +13.4%.) At a 7% return and annual compounding, you end up with $14,876 after a decade in this scenario, according to Bankrate’s compound interest calculator. By year 10, your investment account is earning nearly as much annually ($939) as you are putting into it ($1,040).1,2

You certainly cannot retire on $14,876, but the early start really matters. Extending the scenario out, say you keep investing $20 a week under the same conditions for 40 years, until age 65. As you started at age 25, you are projected to have $214,946 after 40 years, off just $41,600 in total contributions.2

This scenario needs adjustment considering a strong probability: the probability that your account contributions will grow over time. So, assume that you have $14,876 after ten years, and then you start contributing $175 a week to the account earning 7% annually starting at age 35. By age 65, you are projected to have $1,003,159.2

Even if you stop your $20-per-week saving and investing effort entirely after 10 years at age 35, the $14,876 generated in that first decade keeps growing to $113,240 at age 65 thanks to 7% annual compounded interest.2

How do you find the money to do this? It is not so much a matter of finding it as assigning it. A budgeting app can help: you can look at your monthly cash flow and designate a small part of it for saving and investing.

Should you start an emergency savings fund first, then invest? One school of thought says that is the way to go – but rather than think either/or, think both. Put a ten or twenty (or a fifty) toward each cause, if your budget allows. As ValuePenguin notes, many deposit accounts are yielding 0.01% interest.3

It does not take much to start saving and investing for retirement. Get the ball rolling with anything, any amount, today, for the power of compounding is there for you to harness. If you delay the effort for a decade or two, building adequate retirement savings could prove difficult.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - nerdwallet.com/blog/investing/average-stock-market-return/ [2/28/18]

2 - bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx [7/26/18]

3 - valuepenguin.com/average-savings-account-interest-rates [7/26/18]

Monday, 27 August 2018 19:51

Leaving a Legacy to Your Grandkids

Now is the time to explore the possibilities.

Grandparents Day provides a reminder of the bond between grandparents and grandchildren and the importance of family legacies.

A family legacy can have multiple aspects. It can include much more than heirlooms and appreciated assets. It may also include guidance, even instructions, about what to do with the gifts that are given. It should reflect the values of the giver.

What are your legacy assets? Financially speaking, a legacy asset is something that will outlast you, something capable of producing income or wealth for your descendants. A legacy asset might be a company you have built. It might be a trust that you create. It might be a form of intellectual property or a portfolio of real property. A legacy asset should never be sold – not so long as it generates revenue that could benefit your heirs.

To help these financial legacy assets endure, you need an appropriate legal structure. It could be a trust structure; it could be an LLC or corporate structure. You want a structure that allows for reasonable management of the legacy assets in the future – not just five years from now, but 50 or 75 years from now.1

Think far ahead for a moment. Imagine that forty years from now, you have 12 heirs to the company you founded, the valuable intellectual property you created, or the real estate holdings you amassed. Would you want all 12 of your heirs to manage these assets together?

Probably not. Some of those heirs may not be old enough to handle such responsibility. Others may be reluctant or ill-prepared to take on the role. At some point, your grandkids may decide that only one of them should oversee your legacy assets. They may even ask a trust officer or an investment professional to take on that responsibility. This can be a good thing because sometimes the beneficiaries of legacy assets are not necessarily the best candidates to manage them.  

Values are also crucial legacy assets. Early on, you can communicate the importance of honesty, humility, responsibility, compassion, and self-discipline to your grandkids. These virtues can help young adults do the right things in life and guide their financial decisions. Your estate plan can articulate and reinforce these values, and perhaps, link your grandchildren’s inheritance to the expression of these qualities. 

You may also make gifts with a grandchild’s education or retirement in mind. For example, you could fully fund a Roth IRA for a grandchild who has earned income or help an adult grandchild fund their Roth 401(k) or Roth IRA with a small outright gift. Custodial accounts represent another option: a grandparent (or parent) can control assets in a 529 plan or UTMA account until the grandchild reaches legal age.3

Make sure to address the basics. Is your will up to date with regard to your grandchildren? How about the beneficiary designations on your IRA or your life insurance policy? Creating a trust may be a smart move. In fact, you can set up a living irrevocable trust fund for your grandkids, which can actually begin distributing assets to them while you are alive. While you no longer own assets you place into an irrevocable trust (which is overseen by a trustee), you may be shielded from estate, gift, and even income taxes related to those assets with appropriate planning.4

This Grandparents Day, think about the legacy you are planning to leave. Your thoughtful actions and guidance could help your grandchildren enter adulthood with good values and a promising financial start.

   

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - forbes.com/sites/danielscott1/2017/09/04/three-common-goals-every-legacy-plan-should-have/ [9/4/17]

2 - wealthmanagement.com/high-net-worth/key-considerations-preparing-family-legacy-plan [3/27/17]

3 - marketwatch.com/story/whats-next-after-planning-your-retirement-help-your-children-and-grandchildren-plan-for-theirs-2017-10-17 [10/17/17]

4 - investopedia.com/articles/pf/12/set-up-a-trust-fund.asp [1/23/18]

Wednesday, 11 July 2018 18:54

Who Is Your Trusted Contact?

This vital investment account question should be answered sooner rather than later.

Investment firms have a new client service requirement. They must now ask you if you want to provide the name and information of a trusted contact.1

You do not have to supply this information, but it is certainly welcomed. The request is being made, with your best interest in mind, to lower the risk that someone crooked might someday make investment decisions on your behalf.1

Financial scams rob U.S. seniors of more than $36 billion per year. As a CNBC article notes, 27% of these frauds represent abuse or exploitation committed by third parties; 23% are wrongdoings committed by family members or trustees.1

The trusted contact request is a response to this reality. The Financial Industry Regulatory Authority (FINRA) now demands that investment firms “make reasonable efforts” to acquire the name and contact info of a “trusted person,” who they can get in touch with if they feel fraud or financial exploitation is occurring or if they suspect the investor is suffering notable cognitive decline.2 

Investment firms may now put a hold on disbursements of cash or securities from accounts if they suspect the withdrawals or transactions amount to financial exploitation. In such circumstances, they are asked to get in touch with the investor, the trusted contact, and adult protective services agencies or law enforcement agencies if necessary.2

Who should your trusted contact be? At first thought, the answer seems obvious: the person you trust the most. Yes, that individual is probably the best choice – but keep some factors in mind.

Ideally, your trusted contact is financially savvy, or at least financially literate. You may trust your spouse, your sibling, or one of your children more than you trust anyone else; how much does that person know about investing and financial matters?

The trusted contact should behave ethically and respect your privacy. This person could be given confidential information about your investments. Is there any chance that, in receipt of such information, they might behave in an unprincipled way?

Your family members should know who the trusted contact is. That way, any family member who might be tempted to take financial advantage of you knows another family member is looking out for you, which may be an effective deterrent to elder financial abuse. The trusted contact can optionally be an attorney, a financial advisor, or a CPA.1

Your trusted contact is your ally. If you are being exploited financially, or seem at risk of such exploitation, that person will be alerted and called to action.

An old saying states that money never builds character, it only reveals it. The character and morality of your trusted contact should not waver upon assuming this responsibility. If given sensitive information about your brokerage accounts, that person should not sense an opportunity.

Now is the perfect time to name your trusted contact. You want to make this decision while you are still of sound body and mind. Choose your contact wisely.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - cnbc.com/2018/05/15/advisors-are-asking-their-clients-for-a-trusted-contact-choose-wisely.html [5/15/18]

2 - finra.org/newsroom/2018/new-finra-rules-take-effect-protect-seniors-financial-exploitation [2/5/18]

Thursday, 07 June 2018 17:52

A Retirement Gender Gap

Why a middle-class woman may end up less ready to retire than a middle-class man.

What is the retirement outlook for the average fifty-something working woman? As a generalization, less sunny than that of a man in her age group.

Most middle-class retirees get their income from three sources. An influential 2016 National Institute on Retirement Security study called them the “three-legged stool” of retirement. Social Security provides some of that income, retirement account distributions some more, and pensions complement those two sources for a fortunate few.1

For many retirees today, that “three-legged stool” may appear broken or wobbly. Pension income may be non-existent, and retirement accounts too small to provide sufficient financial support. The problem is even more pronounced for women because of a few factors.1

When it comes to median earnings per gender, women earn 80% of what men make. The gender pay gap actually varies depending on career choice, educational level, work experience, and job tenure, but it tends to be greater among older workers.2

At the median salary level, this gap costs women about $419,000 over a 40-year career. Earnings aside, there is also the reality that women often spend fewer years in the workplace than men. They may leave work to raise children or care for spouses or relatives. This means fewer years of contributions to tax-favored retirement accounts and fewer years of employment by which to determine Social Security income. In fact, the most recent snapshot (2015) shows an average yearly Social Security benefit of $18,000 for men and $14,184 for women. An average female Social Security recipient receives 79% of what the average male Social Security recipient gets.2,3

How may you plan to overcome this retirement gender gap? The clear answers are to invest and save more, earlier in life, to make the catch-up contributions to retirement accounts starting at age 50, to negotiate the pay you truly deserve at work all your career, and even to work longer.

There are no easy answers here. They all require initiative and dedication. Combine some or all of them with insight from a financial professional, and you may find yourself closing the retirement gender gap.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

  

Citations.

1 - forbes.com/sites/karastiles/2017/11/01/heres-how-the-gender-gap-applies-to-retirement/ [11/1/17]

2 - money.cnn.com/2017/04/04/pf/equal-pay-day-gender-pay-gap/index.html [4/4/17]

3 - forbes.com/sites/ebauer/2018/03/16/how-should-we-make-social-security-fairer-for-moms/ [3/16/18]

Wednesday, 16 May 2018 14:39

Avoid These Life Insurance Missteps

Shop wisely when you look for coverage.

Are you about to buy life insurance? Shop carefully. Make your choice with insight from an insurance professional, as it may help you avoid some of these all-too-common missteps.

Buying the first policy you see. Anyone interested in life insurance should take the time to compare a few plans – not only their rates, but also their coverage terms. Supply each insurer you are considering with a quote containing the exact same information about yourself.1

Buying only on price. Inexpensive life insurance is not necessarily great life insurance. If your household budget prompts you to shop for a bargain, be careful – you could end up buying less coverage than your household really needs.1

Buying a term policy when a permanent one might be better (and vice versa). A term policy (which essentially offers life insurance coverage for 5-30 years) may make sense if you just want to address some basic insurance needs. If you see life insurance as a potential estate planning tool or a vehicle for building wealth over time, a permanent life policy might suit those ambitions.1

Failing to inform heirs that you have a policy. Believe it or not, some people buy life insurance policies and never manage to tell their beneficiaries about them. If a policy is small and was sold many years ago to an association or credit union member (i.e., burial insurance), it may be forgotten with time.2

Did you know that more than $7 billion in life insurance death benefits have yet to be claimed? That figure may not shrink much in the future, because insurers have many things to do other than search for “lost” policies on behalf of beneficiaries. To avoid such a predicament, be sure to give your beneficiaries a copy of your policy.2

Failing to name a beneficiary at all. Designating a beneficiary upon buying a life insurance policy accomplishes two things: it tells the insurer where you want the death benefit to go, and it directs that death benefit away from your taxable estate after your passing.3

Waiting too long to buy coverage. Later in life, you may learn you have a serious medical condition or illness. You can certainly buy life insurance with a pre-existing health condition, but the policy premiums may be much larger than you would prefer. The insurer might also cap the policy amount at a level you find unsatisfactory. If you purchase a guaranteed acceptance policy, keep in mind that it will probably take 2-3 years before that policy is in full force. Should you pass away in the interim, your beneficiaries will probably not collect the policy’s death benefit; instead, they may receive the equivalent of the premiums you have paid plus interest.3

Not realizing that permanent life insurance policies expire. Have you read stories about seniors “outliving” their life insurance coverage? It can happen. Living to be 90 or 100 is not so extraordinary as it once was.3

Permanent life insurance products come with maturity dates, and for years, 85 was a common maturity date. If you live long enough, you could outlive your policy. The upside of doing so is that you will receive a payout from the insurer, which may correspond to the policy’s cash value at the maturity date. The downside of outliving your policy? If you want further insurance coverage, it may not be obtainable – or it could be staggeringly expensive.3

Take your time when you look for life insurance, and compare your options. The more insight you can draw on, the more informed the choice you may make.

  

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - smartasset.com/life-insurance/5-mistakes-to-avoid-when-buying-life-insurance [4/11/18]   

2 - kiplinger.com/article/saving/T063-C032-S014-could-unclaimed-money-be-yours.html [10/13/17]

3 - nasdaq.com/article/4-errors-to-avoid-with-your-life-insurance-cm868133 [10/30/17]

Wednesday, 04 April 2018 15:35

Wise Money Moves Young Women Can Make

Want a better financial future for yourself? Act now.

As a young woman, you have an opportunity to make some major financial strides. You truly have time on your side when it comes to investing, saving, and harnessing the power of compounding. Now is the time to pay yourself first and do those things that could make you wealthy in the future.

Your first move should be debt reduction. This frees up money for the other moves you can make and lessens the amount of money you pay to others, instead of yourself, each month.

Consider attacking your highest-interest debts first rather than your largest debts. If you have big credit card balances, high-interest car loans, or similar financial obligations, that borrowed money may be extremely expensive. Credit bureau Experian says that monthly household credit card balances in this country hover around $6,375. According to personal finance website NerdWallet, the average interest rate on a credit card right now is 14.87%, and the average U.S. household pays out $904 a year just in credit card interest. A constant debt of $6,000 is bad enough, but having to pay roughly another $1,000 a year just for the opportunity to borrow? That really hurts.1

Whether your major debts are larger or smaller, think of the progress you could possibly make by devoting thousands of dollars you pay to others to yourself. Say you direct $3,000 you would otherwise pay to creditors during a year into an investment account returning 6%. Say you do this for 10 consecutive years. At the end of that 10-year period, you are looking at $47,287, not simply $30,000. That is what compound interest – the best kind of interest – can do for you financially.2

Across longer time periods, compound interest has a proportionately greater positive effect. Stretch the above example out to 35 years and those annual $3,000 investments at a 6% return grow to $377,421. (Keep in mind, you may be able to save and invest considerably more than $3,000 annually as you earn more money per year.)2    

Save or invest whatever you can. Setting aside a little cash for yourself is good, too. You want to build some kind of emergency fund with money you can touch; money you can get at right away if you need it quickly.

Many retirement savings vehicles offer you tax breaks. The common workplace retirement plan or IRA is tax favored: money within the account grows tax free, and it is subtracted from your paycheck before taxes. You only pay taxes on the money when it is withdrawn. In addition, many employers will partially match your contributions if you meet a certain minimum. Roth IRAs and workplace plans allow both tax-free growth and tax-free withdrawals, provided Internal Revenue Service rules are followed. While you get no up-front tax break for contributing to a Roth account, you also have the potential to withdraw the money tax free for retirement, which is a great thing.3

Not using these saving and investing accounts could be a big mistake. Some people are skittish about Wall Street investments, but largely speaking, those are the kinds of investments that have the potential to return better than 5% a year (think about the scenario from a few paragraphs earlier). In fact, the S&P 500, the broad benchmark of the stock market, gained an impressive 19.42% last year.4

Parking too much money in cash and avoiding all risk can come with an opportunity cost you may not be able to afford. Sallie Krawcheck, the former president of the investment management division of Bank of America and CEO of Ellevest, estimates that a woman making $85,000 annually who puts 20% of her yearly pay into a bank account rather than an investment account could effectively forfeit more than $1 million after four decades of doing so.5

Now is the ideal time to plan to get ahead financially. Think about your future, and make the wise money moves that give you the potential to make it bright.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

  

Citations.

1 - tinyurl.com/ybxskou6 [2/19/18]

2 - bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx [2/22/18]

3 - fool.com/retirement/2017/05/20/taxable-vs-tax-advantaged-savings.aspx [5/20/17]

4 - ycharts.com/indicators/sandp_500_return_annual [2/22/18]

5 - money.cnn.com/2017/03/08/pf/financial-moves-sallie-krawcheck/ [3/8/17]

Wednesday, 07 February 2018 19:24

Bad Money Habits to Break in 2018

Behaviors worth changing for the New Year.

Do bad money habits constrain your financial progress? Many people fall into the same financial behavior patterns year after year. If you sometimes succumb to these financial tendencies, the New Year is as good an occasion as any to alter your behavior.

#1: Lending money to family & friends. You may know someone who has lent a few thousand to a sister or brother, a few hundred to an old buddy, and so on. Generosity is a virtue, but personal loans can easily transform into personal financial losses for the lender. If you must loan money to a friend or family member, mention that you will charge interest and set a repayment plan with deadlines. Better yet, don’t do it at all. If your friends or relatives can’t learn to budget, why should you bail them out?

#2: Spending more than you make. Living beyond your means, living on margin, whatever you wish to call it, it is a path toward significant debt. Wealth is seldom made by buying possessions; today’s flashy material items may become the garage sale junk of 2027. That doesn’t stop people from racking up consumer debts: a 2017 study conducted by NerdWallet determined that the average U.S. household carries $15,654 in credit card debt alone.1

#3: Saving little or nothing. Good savers build emergency funds, have money to invest and compound, and leave the stress of living paycheck-to-paycheck behind. If you can’t put extra money away, there is another way to get some: a second job. Even working 15-20 hours more per week could make a big difference. The problem of saving too little is far too common: at the end of 2017, the Department of Commerce found the U.S. personal savings rate at 2.9%, a low unseen since 2007.2

#4: Living without a budget. You may make enough money that you don’t feel you need to budget. In truth, few of us are really that wealthy. In calculating a budget, you may find opportunities for savings and detect wasteful spending.

#5: Frivolous spending. Advertisers can make us feel as if we have sudden needs; needs we must respond to, needs that can only be met via the purchase of a product. See their ploys for what they are. Think twice before spending impulsively.

#6: Not using cash often enough. No one can deny that the world runs on credit, but that doesn’t mean your household should. Pay with cash as often as your budget allows.

#7: Gambling. Remember when people had to go to Atlantic City or Nevada to play blackjack or slots? Today, behemoth casinos are as common as major airports; most metro areas seem to have one or be within an hour’s drive of one. If you don’t like smoke and crowds, you can always play the lottery. There are many glamorous ways to lose money while having “fun.” The bottom line: losing money is not fun. It takes willpower to stop gambling. If an addiction has overruled your willpower, seek help.

#8: Inadequate financial literacy. Is the financial world boring? To many people, it is. The Wall Street Journal is not exactly Rolling Stone, and The Economist is hardly light reading. You don’t have to start there, however: great, readable, and even entertaining websites filled with useful financial information abound. Reading an article per day on these websites could help you greatly increase your financial understanding if you feel it is lacking.  

#9: Not contributing to IRAs or workplace retirement plans. Even with all the complaints about 401(k)s and the low annual limits on traditional and Roth IRA contributions, these retirement savings vehicles offer you remarkable wealth-building opportunities. The earlier you contribute to them, the better; the more you contribute to them, the more compounding of those invested assets you may potentially realize.

#10: DIY retirement planning. Those who plan for retirement without the help of professionals leave themselves open to abrupt, emotional investing mistakes and tax and estate planning oversights. Another common tendency is to vastly underestimate the amount of money needed for the future. Few people have the time to amass the knowledge and skill set possessed by a financial services professional with years of experience. Instead of flirting with trial and error, see a professional for insight.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 -.bizjournals.com/boston/news/2017/12/12/five-things-you-need-to-know-today-and-why-were.html [12/12/17]

2 - reuters.com/article/us-usa-economy/strong-u-s-consumer-business-spending-bolster-growth-picture-idUSKBN1EG1J2 [12/22/17]

Wednesday, 17 January 2018 17:03

Should We Reconsider What "Retirement" Means?

The notion that we separate from work in our sixties may have to go.

An executive transitions into a consulting role at age 62 and stops working altogether at 65; then, he becomes a buyer for a church network at 69. A corporate IT professional decides to conclude her career at age 58; she serves as a city council member in her sixties, then opens an art studio at 70.

Are these people retired? Not by the old definition of the word. Our definition of “retirement” is changing. Retirement is now a time of activity and opportunity.

Generations ago, Americans never retired – at least not voluntarily. American life was either agrarian or industrialized, and people toiled until they died or physically broke down. Their “social security” was their children. Society had a low opinion of able-bodied adults who preferred leisure to work.   

German Chancellor Otto von Bismarck often gets credit for “inventing” the idea of retirement. In the late 1800s, the German government set up the first pension plan for those 65 and older. (Life expectancy was around 45 at the time.) When our Social Security program began in 1935, it defined 65 as the U.S. retirement age; back then, the average American lived about 62 years. Social Security was perceived as a reward given to seniors during the final years of their lives, a financial compliment for their hard work.1  

After World War II, the concept of retirement changed. The model American worker was now the “organization man” destined to spend decades at one large company, taken care of by his (or her) employer in a way many people would welcome today. Americans began to associate retirement with pleasure and leisure.

By the 1970s, the definition of retirement had become rigid. You retired in your early sixties, because your best years were behind you and it was time to go. You died at about 72 or 75 (depending on your gender). In between, you relaxed. You lived comfortably on an employee pension and Social Security checks, and the risk of outliving your money was low. If you lived to 81 or 82, that was a good run. Turning 90 was remarkable.

Today, baby boomers cannot settle for these kinds of retirement assumptions. This is partly due to economic uncertainty and partly due to ambition. Retirement planning today is all about self-reliance, and to die at 65 today is to die young with the potential of one’s “second act” unfulfilled. 

One factor has altered our view of retirement more than any other. That factor is the increase in longevity. When Social Security started, retirement was seen as the quiet final years of life; by the 1960s, it was seen as an extended vacation lasting 10-15 years; and now, it is seen as a decades-long window of opportunity.   

Working past 70 may soon become common. Some baby boomers will need to do it, but others will simply want to do it. Whether by choice or chance, some will retire briefly and work again; others will rotate between periods of leisure and work for as long as they can. Working full time or part time not only generates income, it also helps to preserve invested retirement assets, giving them more years to potentially compound. Another year on the job also means one less year of retirement to fund.

Perhaps we should see retirement foremost as a time of change – a time of changing what we want to do with our lives. According to the actuaries at the Social Security Administration, the average 65-year-old has about 20 years to pursue his or her interests. Planning for change may be the most responsive move we can make for the future.2

     

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.   

   

Citations.

1 - dailynews.com/2017/03/24/successful-aging-im-65-and-ok-with-it/ [3/24/17]

2 - ssa.gov/planners/lifeexpectancy.html [11/21/17]

Tuesday, 05 December 2017 20:42

Is Your Company's Retirement Plan as Good as It Could Be?

Many plans need refining. Others need to avoid conflicts with Department of Labor rules.

At times, running your business takes every ounce of energy you have. Whether you have a human resources officer at your company or not, creating and overseeing a workplace retirement plan takes significant effort. These plans demand periodic attention.

As a plan sponsor, you assume a fiduciary role. You accept a legal responsibility to act with the best financial interests of others in mind – your retirement plan participants and their beneficiaries. You are obligated to create an investment policy statement (IPS) for the plan, educate your employees about how the plan works, and choose the investments involved. That is just the beginning.1

You must demonstrate the value of the plan. Your employees should not merely shrug at what you are offering – a great opportunity to save, invest, and build wealth for the future. Financial professionals know how to communicate the importance of the plan in a user-friendly way, and they can provide the education that “flips the switch” and encourages worker participation. If this does not happen, your employees may view the plan as just an option instead of a necessity as they save for retirement.

You must monitor and benchmark investment performance and investment fees. Some plans leave their investment selections unchanged for decades. If the menu of choices lacks diversity, if the investment vehicles underperform the S&P 500 year after year and have high fees, how can this be in the best interest of the plan participants?

You must provide enrollment paperwork and plan notices in a timely way. Often, this duty falls to a person that has many other job tasks, so these matters get short shrift. The plan can easily fall out of compliance with Department of Labor rules if these priorities are neglected.

You must know the difference between 3(21) and 3(38) investment fiduciary services. The numbers refer to sections of ERISA, the Employment Retirement Income Security Act. Most investment advisors are 3(21) – they advise the employer about investment selection, but the employer makes the final call. A 3(38) investment advisor has carte blanche to choose and adjust the plan’s investments – and he or she needs to be overseen by the plan sponsor.2

To avoid conflicts with the Department of Labor, you should understand and respect these requirements and responsibilities. Beyond the basics, you should see that your company’s retirement plan is living up to its potential.

We can help you review your plan and suggest ways to improve it. An attractive retirement plan could help you hire and hang onto the high-quality employees you need. Ask us about a review, today – you need to be aware of your plan’s mechanics, fees, and performance, and you could face litigation, fines, and penalties if your plan fails to meet Department of Labor and Internal Revenue Service requirements.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - cnbc.com/2017/08/23/qualified-retirement-plan-sponsors-are-fiduciaries.html [8/23/17]

2 - tinyurl.com/ycrqheey [4/7/17]

Thursday, 09 November 2017 14:16

Questions After the Equifax Data Breach

Consumers may be at risk for many years.

How long should you worry about identity theft in the wake of the Equifax hack? The correct answer might turn out to be “as long as you live.” If your personal data was copied in this cybercrime, you should at least scrutinize your credit, bank, and investment account statements in the near term. You may have to keep up that vigilance for years to come.

Cybercrooks are sophisticated in their assessment of consumer habits and consumer memories. They know that eventually, many Americans will forget about the severity and depth of this crime – and that could be the right time to strike. All those stolen Social Security and credit card numbers may be exploited in the 2020s rather than today. Or, perhaps these criminals will just wait until Equifax’s offer of free credit monitoring for consumers expires.

Equifax actually had its data breached twice this year. On September 18, Equifax said that their databases had been entered in March, nearly five months before the well-publicized, late-July violation. Its spring security effort to prevent another hack failed. Bloomberg has reported that the same hackers may be responsible for both invasions.2

Should you accept Equifax’s offer to try and protect your credit? Many consumers have, but with reservations. Some credit monitoring is better than none, but those who signed up for Equifax's TrustedID Premier protection agreed to some troubling fine print. By enrolling in the program, they may have waived their right to join any class action lawsuits against Equifax. Equifax claims this arbitration clause does not apply to consumers who sought protection in response to the hack, but lawyers are not so sure.1

Should you freeze your credit? Some analysts recommend this move. You can request all three major credit agencies (Equifax, Experian, TransUnion) to do this for you. Freezing your credit accounts has no effect on your credit score. It stops a credit agency from giving your personal information to a creditor, which should lower your risk for identity theft. The only hassle here is that if you want to buy a home, rent an apartment, or get a new credit card, you will have to pay a fee to each of the three firms to unfreeze your credit.1

Three other steps may improve your level of protection. Change your account passwords; this simple measure could really strengthen your defenses. Choose two-factor authentication when it is offered to you – this is when an account requires not just a password, but a second code necessary for access, which is sent in a text message to the accountholder’s mobile device. You can also ask for fraud alerts to be placed on your credit reports, but you must keep renewing them every 90 days.1

What other tools can help watch over your statements? If your bank, credit union, or credit card issuer does not offer identity theft protection and credit monitoring, consider free apps such as Credit Karma, Credit Sesame, and Clarity Money. Apart from simply protecting your credit and bank accounts, programs like EverSafe, Identity Guard, and LifeLock have the capability to scan the “dark web” where personal information is sold in addition to monitoring your credit reports. (You may be able to take advantage of a free, 30-day trial.)1

When a pillar of worldwide credit reporting has its data stolen twice in five months, the trust of the public is shaken. The lesson for the consumer, as depressing as it may be, is not to be too trusting of the online avenues and vaults through which personal information passes.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - time.com/money/4947784/7-questions-you-must-keep-asking-about-the-equifax-hack/ [9/20/17]

2 - bloomberg.com/news/articles/2017-09-18/equifax-is-said-to-suffer-a-hack-earlier-than-the-date-disclosed [9/18/17]

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