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Archives for July 2018

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.

2 Ibid.

3 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.

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Market Trends

Fueled by more plentiful jobs, the U.S. residential real-estate market is skyrocketing. In some areas, particularly major metropolitan cities, buyers are struggling to either find or afford a home. Those lucky enough to find the right place have to move quickly — gone are the days of extensive deliberation on whether a house fits every needs.1

According to Zillow, houses in 2017 sold in a median of 81 days, including the time to negotiate contracts and close, meaning many homes were on the market for less than a month.2 For homeowners thinking about downsizing in retirement, this may be the time to take advantage of the current housing price bubble. If you are in the market to sell your home, many real estate experts recommend selling before 2020 when another recession is expected.3

trends come and go. Whether you’re considering changes to your financial strategy or living circumstances, it’s a good idea to take a long-term perspective despite current trends. The ages of retirees range from 50 to 100+, so we understand off-the-shelf, cookie-cutter advice just doesn’t cut it.4

Today’s planning focus is often goals-based, rather than performance-based, with a customized financial strategy rather than just an investment portfolio.5 If we can help you develop a long-term financial strategy designed to meet your goals, with the flexibility to take advantage of current market trends, please give us a call.

While some wealth managers caution that the current long-running bull market is due for a correction, at least two Wall Street strategists claim this trend of rising stock prices could last a total of 20 years. But take caution; even in this optimistic scenario, investors should expect periodic volatility and corrections of up to 10 percent.6

Today’s market environment — characterized by rising inflation, the strengthening dollar and a less predictable global market for multi-national corporations — lends itself to a rise in small-cap stocks. So far this year, the Russell 2000 Index has outperformed the S&P 500 Index’s large-cap stocks.7

The price of oil is another market trend ready to skyrocket, which could increase the average gas price in the U.S. above $4 per gallon — about 40 percent higher than today. While the average household may feel the pinch, businesses can offset the capital expense with additional spending, and shale-productive areas like New Mexico and Texas are poised for higher growth.8

Content prepared by Kara Stefan Communications.

1 Noah Buhayar. Bloomberg. April 17, 2018. “Home Hunters, Get Ready to Make Your Offer—Faster Than Ever.” https://www.bloomberg.com/news/articles/2018-04-17/home-hunters-get-ready-to-make-your-offer-faster-than-ever. Accessed May 28, 2018.

2 Ibid.

3 Jacob Passey. MSN. May 24, 2018. “Thinking of selling your home? Do it before 2020, economists say.” https://www.msn.com/en-us/money/realestate/thinking-of-selling-your-home-do-it-before-2020-economists-say/ar-AAxEbqH?li=BBnbfcN. Accessed May 28, 2018.

4 Michael Finke. ThinkAdvisor.com. Feb. 5, 2018. “Goals-Based Investing and 4 More Trends for Advisors to Watch.” https://www.thinkadvisor.com/2018/02/05/goals-based-investing-and-4-more-trends-for-adviso. Accessed May 28, 2018.

5 Ibid.

6 Adam Shell. USA Today. March 7, 2018. “Market trends: Bull run could last 20 years, optimists say.” https://www.usatoday.com/story/money/markets/2018/03/07/market-trends-bull-run-could-last-20-years-optimists-say/401610002/. Accessed May 28, 2018.

7 Michael Brush. Marketwatch.com. May 27, 2018. “All other things being equal, you’re more likely to find high growth at small companies than big ones for a simple reason: Many large companies can’t grow as much because of their sheer size.” https://www.marketwatch.com/story/six-small-cap-stocks-that-may-speed-ahead-as-the-economy-slows-2018-05-23. Accessed May 28, 2018.

8 Matthew C. Klein. Fidelity. May 11, 2018. “How rising oil prices will affect the U.S.” https://www.fidelity.com/insights/markets-economy/oil-prices-economy-may-2018. Accessed May 28, 2018.

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

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

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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.

3 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.

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Retirement Investing

Retirement planning looks much different than it did a century ago. With lifespans and retirements lasting longer, it’s not just about planning for a financial future; we must also create a post-career strategy that takes into account emotional, intellectual and quality of life challenges during later years.

After all, we don’t just stop enjoying life after age 65, 75, 85 or older. As long as we’re alive, we want to enjoy the things that make us happy. When you start the retirement planning process, it’s important to think about things you’ll want at each stage of your golden years — from the active stage, to the slowing down stage, and even the periods when you can reasonably expect to have health and/or mobility challenges.

Savings, investments and insurance are at the crux of retirement planning — providing income now and for loved ones who may survive you. If you’d like help developing financial strategies for each stage of retirement, please give us a call.

Among the first things to consider in retirement investing’s earliest considerations is regular contributions and the power of compounded interest. Obviously, the earlier you start, the better your chance of accumulating earnings. There’s also the added advantage of getting a current income tax deduction on tax-deferred contributions to qualified retirement accounts.

However, by mid-career it’s also important to consider the value of tax diversification. It can be a burden to pay taxes on plan distributions once you’re retired, so it’s worth considering strategies that diversify your retirement portfolio in terms of account types and tax obligations to help avoid a huge tax bill on your retirement income.1

It’s also important to consider how much market risk you should take on during retirement. On one hand, you don’t want to lose long-accumulated earnings to a market decline. On the other hand, living 20+ years in retirement requires continued growth opportunities. It’s a good idea to work with a financial advisor to help establish a mix of retirement investments for your circumstances, taking into account your goals, risk tolerance, investment timeline and the composition of your overall portfolio, as well as including a high-yield savings account for emergencies.2

A Roth IRA can help address tax diversification through long-term compounding and access to funds in retirement. The Roth allows you to withdraw original contributions tax-free and penalty-free at any time for any reason. Any money in a withdrawal that exceeds the amount of your original contributions is considered “earnings” and is subject to possible penalties and taxes. To withdraw earnings without paying taxes or penalties, you must follow very specific rules. Not only do you not pay taxes on qualified distributions from a Roth IRA, but that income doesn’t count when calculating taxes on Social Security payments.3

Converting to a Roth IRA may be beneficial to those approaching retirement who are concerned about the potential tax liability on their qualified assets. Individuals can use their current income to help pay the inevitable income taxes on the conversion throughout a number of years. However, they’ll enjoy freedom from income taxes on qualified Roth distributions during retirement.4 Again, this strategy should be considered within the context of one’s overall retirement portfolio, and we’re happy to help you assess if this would be a good fit for your unique circumstances.

Since the post-career period is generally longer these days, retirees also need to pay attention to the current economic environment when making financial decisions. For example, recent and expected hikes in interest rates by the Federal Reserve Bank, CDs and other fixed income vehicles offer a conservative option for retirement funds. While growth is important in the long-term, retirees may need to strike a balance between preserving the funds they have now and what they may need to earn for the future.5

Content prepared by Kara Stefan Communications.

1 Aaron Brask. Apha Architect. April 19, 2018. “Quantifying the Value of Retirement Accounts.” https://alphaarchitect.com/2018/04/19/quantifying-value-retirement-accounts/. Accessed June 2, 2018.

2 Craig Stephens. U.S. News & World Report. May 18, 2018. “6 Low Risk Investments to Build Retirement Income.” https://money.usnews.com/money/blogs/on-retirement/articles/2018-05-18/6-low-risk-investments-to-build-retirement-income. Accessed June 2, 2018.

3 Nathan Slaughter. Nasdaq. May 11, 2018. “The Simplest Move To Reduce Your Tax Bill.” https://www.nasdaq.com/article/the-simplest-move-to-reduce-your-tax-bill-cm962117. Accessed June 2, 2018.

4 Larry Light. Forbes. May 15, 2018. “Does Switching To A Roth IRA From A Regular One Still Make Sense?” https://www.forbes.com/sites/lawrencelight/2018/05/15/does-switching-to-a-roth-ira-from-a-regular-one-still-make-sense/#2a16f2664436. Accessed June 2, 2018.

5 Brian O’Connell. Insurance News Net. May 20, 2018. “Investors Perk Up As Bank CD Rates Near 3 Percent.” https://insurancenewsnet.com/innarticle/investors-turn-flirtatious-eye-toward-bank-cds. Accessed June 2, 2018.

Neither our firm nor its agents or representatives may give tax advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.

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

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

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