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Strategies for Optimal Social Security Payouts

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Social Security benefits are typically synonymous with retirement income. It would be inefficient to create a retirement plan without first estimating how much you will receive from the government.1 According to a 2018 report, Social Security benefits represent approximately:2

  • 33% of elderly income
  • 50% or more of income for about half of elderly married couples
  • At least 50% of income for 71% of elderly singles
  • At least 90% of income for 23% of married couples and 43% of singles

In a recent survey, more than half of pre-retirees said they expect Social Security to be their primary source of retirement income.3 With so many people relying on Social Security payouts, it makes sense to explore strategies to receive the largest possible distribution. In some cases, this could mean tapping into your personal investment portfolio to delay drawing Social Security.

If you’d like to discuss various insurance and investment strategies to help supplement part-time income or bridge the gap between retirement and Social Security, please come talk to us.

The earlier you start drawing benefits, the lower the payout will be — and your payout level is locked in for life (with the exception of periodic cost of living adjustments). Unfortunately, the most common age that people start taking benefits is the first year they are eligible. If possible, it often makes sense to wait longer so that benefits can accrue.4

If you can wait until age 70, benefits will earn an additional 8 percent a year past full retirement age for a maximum boost of up to 32 percent. Delayed retirement credits are technically accrued on a monthly basis, so even if you don’t wait until age 70, every month you delay past full retirement age will increase your payout.5

Delayed retirement credits also apply toward surviving spouse benefits. In other words, should you pass away before drawing benefits, your spouse will receive the amount you qualified for as of the month of your death.6

Social Security benefit strategies are complex, but considering the importance this income is to most retiree households, it’s a good idea to learn as much as possible to help optimize benefits for your particular situation. This Social Security quiz is a good place to start.7

Content provided by Kara Stefan Communications.

1 Social Security Administration. 2018. “Retirement Estimator.” https://www.ssa.gov/benefits/retirement/estimator.html Accessed May 1, 2018.

2 Social Security Administration. 2018. “Fact Sheet.” https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf.

Accessed May 1, 2018.

3 Mary Beth Franklin. Investment News. April 25, 2018. “Future retirees expect Social Security to be main source of income.” http://www.investmentnews.com/article/20180425/BLOG05/180429953/future-retirees-expect-social-security-to-be-main-source-of-income. Accessed May 1, 2018.

4 Ray Martin. CBS News. April 30, 2018. “How to claim your Social Security benefits wisely.” https://www.cbsnews.com/news/how-to-claim-your-social-security-benefits-wisely/. Accessed May 1, 2018.

5 Rachel L. Sheedy. Kiplinger. February 2017. “Why Your First Social Security Check May Be Smaller Than Expected.” https://www.kiplinger.com/article/retirement/T051-C000-S004-when-delayed-social-security-credits-get-delayed.html. May 1, 2018.

6 Laurence Kotlikoff. Forbes. April 27, 2018. “Ask Larry: ​​​​​​What If Either Of Us Dies Before 70?”

https://www.forbes.com/sites/kotlikoff/2018/04/27/ask-larry-%E2%80%8B%E2%80%8B%E2%80%8B%E2%80%8B%E2%80%8B%E2%80%8Bwhat-either-of-us-dies-before-70/#6f18b1ea4081. Accessed May 1, 2018.

7 Mary Kane. Kiplinger. April 18, 2018. “Do You Really Understand Social Security?” https://www.kiplinger.com/quiz/retirement/T051-S009-do-you-really-understand-social-security/index.html.

Accessed May 1, 2018.

We are able to provide you with information but not guidance or advice related to Social Security benefits. 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 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.

Consider Having a Backup Plan

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When looking ahead in anticipation of Social Security benefits, many people expect to wait until an average age of 66 to make a claim.1

However, Nationwide Retirement Institute’s fifth annual Social Security survey found many retirees start drawing Social Security at the earliest possible age of 622 — frequently the result of being laid off or health issues.

Thirty-six percent of respondents reported health problems got in the way of living the retirement they expected, and of those, 80 percent say health problems occurred as many as five or more years earlier than expected.3

This tells us something we already know but are constantly reminded of: Life does not always go as planned. Many financial professionals tell their clients one of the most effective ways to help ensure enough income throughout retirement is to continue working through their 60s. This may not be preferable, but it’s an option.

Others may plan to work longer but end up retiring for reasons beyond their control. It’s good to have a contingency plan. As an independent financial services firm, we help people create retirement income strategies using a variety of insurance products to custom suit their needs and objectives. Give us a call if you’re interested in finding out more.

It’s important to have a backup plan because there are many challenges for people working longer. For example, as jobs move further into technology, artificial intelligence and automation, new job skills are constantly required. It’s good to challenge the brain, but young college graduates typically have a firmer grasp on today and tomorrow’s technology — it’s a steep learning curve.4

A Washington Post article recently referred to the “gray ceiling.” As women have faced the “glass ceiling” as an obstacle to career advancement, age discrimination is sometimes manifested in the hiring, continued employment, development and advancement of older workers.5

Fortunately, recent workforce trends have made it easier for older workers to continue earning income past traditional retirement age. Many employers have embraced the work model of the “gig economy,” staffing up (and down) as needed with independent contractors. Older workers have proven to be well-suited for this type of employment due to their laser-like experience in certain roles, reliability and stability. A recent study suggests older white-collar professionals are driving the growing demand for gig workers among businesses in certain industries.6

While employers may embrace the gig economy to add and drop staff as needed, remember workers can do the same. Establishing yourself as a freelancer or independent contractor gives you the freedom to work as much or as little as needed.7 You can take off a month to go on vacation, or six months to fly south for the winter. You can also take on work only when you have big bills coming up, like homeowner’s insurance or property taxes.

A 2017 survey found one-third of future retirees are planning part-time work to provide at least 25 percent of their household income. Besides income, many gig workers ages 51 to 70 say a primary reason for freelancing is simply to stay active in retirement.8

Content prepared by Kara Stefan Communications.

1 Nationwide Retirement Institute. April 2018. “Social Security 5th Annual Consumer Survey.” https://nationwidefinancial.com/media/pdf/NFM-17422AO.pdf. Accessed May 10, 2018.

2 Ibid.

3 Ibid.

4 James Manyika, Susan Lund, Michael Chui, Jacques Bughin, Jonathan Woetzel, Parul Batra, Ryan Ko and Saurabh Sanghvi. McKinsey Global Institute. November 2017. “What the future of work will mean for jobs, skills, and wages.” https://www.mckinsey.com/featured-insights/future-of-organizations-and-work/what-the-future-of-work-will-mean-for-jobs-skills-and-wages#part%205. Accessed May 1, 2018.

5 Susan Williams. Booming Encore. March 2018. “Older Workers Watch Your Head – Breaking Through the Gray Ceiling.” http://www.boomingencore.com/older-workers-watch-head-breaking-gray-ceiling/. Accessed May 1, 2018.

6 Valerie Bolden-Barrett. HR Dive. Oct. 3, 2017. “Older workers — not millennials — are driving the gig economy.” https://www.hrdive.com/news/older-workers-not-millennials-are-driving-the-gig-economy/506349/. Accessed May 1, 2018.

7 Elaine Pofeldt. Forbes. Aug. 30, 2017. “Why Older Workers Are Embracing the Gig Economy.” https://www.forbes.com/sites/elainepofeldt/2017/08/30/why-older-workers-are-embracing-the-gig-economy/#642f904a42ce. Accessed May 1, 2018.

8 Ibid.

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.

The Income Gap and the Economy

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The income gap between the wealthy and the poor is widening in the U.S.1 Why does that matter? Because there are studies that indicate a wide swathe of income differentiation is not good for economic growth.

In the years following the Great Recession, we often heard how slowly the economy was recovering. That was true for most Americans, but not for the wealthiest 10 percent. A recent analysis of wealth distribution finds that the richest Americans saw their net worth rise 27 percent between 2007 and 2016. However, the rest of the population saw a decline in net worth, from an average of 5 percent for those in the 80 to 89.9 income percentile to 29 percent for those in the lowest fifth of wealth.2

Perhaps one way to join the group of people who can thrive during economic declines is to be financially prepared ahead of time. That may not be easy to do if your prospects for a good education and a good job are poor. But even for those who don’t come from affluent households, there are ways to help put yourself on the path toward long-term wealth. Start investing early — preferably in an employer-sponsored retirement plan that offers a contribution match. Establish an emergency fund so that an unexpected expense does not drain your investments and savings, taking away the opportunity for compounded interest earnings and potentially adding an extra tax liability. Avoid credit card debt like the plague.

For people who barely earn enough to live on, this can take great sacrifice. Even for people who have ample disposable income, it’s important to learn discipline in order to help maintain one’s financial situation in times of economic decline. If you would like help to establish savings and investment strategies, as well as asset protection strategies using insurance products, please give us a call.

One way to look at the issue of income differentiation is to evaluate where it currently exists, including, for example, between men and women. A recent survey found that 64 percent of women say their top financial priority is meeting daily living costs, compared to 60 percent of men who say that saving for retirement is their top financial priority.3 It seems unlikely that women are less concerned with how to provide for themselves in retirement. Instead, it would appear that many women, whose median annual earnings are $10,086 less than men’s, have more immediate concerns.4

Income disparity during earning years can create a big problem during retirement years. Retirees who were born during the Great Depression and World War II need to supplement only 27 percent of their retirement income with their own savings. However, that situation is expected to change dramatically by the time Generation X (those age 37 to 53) retires. Many will be without the “safety net” of employer pension plans, and they are expected to need to provide about 42 percent of their retirement income from their own savings.5 That means they must save a larger percentage of their pre-retirement income, which is easier to do if you’re financially stable, but it can be difficult when you live paycheck to paycheck.

There’s no question that the income gap has grown since the days when blue-collar workers could earn a good living at U.S. manufacturing jobs. In fact, from the end of World War II through the early 1970s, the U.S. experienced substantial economic growth and prosperity across all income levels. However, economic growth slowed after that, and the income gap widened, with lower- and middle-income families having sharply slower wage growth but top earners continuing to have strong growth.6

Some economists are coming to the conclusion that income inequality hurts growth. Researchers at the International Monetary Fund recently wrote, “If the income share of the top 20 percent (the rich) increases, then GDP growth actually declines over a medium term.” Possible solutions, however, such as welfare programs, higher taxes on the rich and redistribution of wealth, are controversial. Others believe the studies failed to prove the relationship between inequality and lower growth.7

There is a bright spot for lower- and middle-class workers: U.S. manufacturing jobs have increased by almost a million since 2010, although there still are 6 million fewer such jobs than in 1980. However, factories are increasing automation — which may threaten the jobs of humans.8

And although the “Tax Cuts and Jobs Act” gives most Americans a tax decrease, it’s still the wealthy who may benefit the most. A household making $40,000 a year will receive an average $330 tax cut in 2019, while Americans making more than $3.6 million a year will average an $85,640 tax reduction.9

Content prepared by Kara Stefan Communications.

1 Ryan Vlastelica. MarketWatch. April 6, 2018. “Why income inequality is holding back economic growth, in one chart.” https://www.marketwatch.com/story/why-income-inequality-is-holding-back-economic-growth-in-one-chart-2018-04-05. Accessed April 16, 2018.

2 Ibid.

3 Lee Barney. PlanSponsor. March 28, 2018. “Retirement Saving More of a Priority for Men than Women.” https://www.plansponsor.com/retirement-savings-priority-men-women/. Accessed April 16, 2018.

4 Sonam Sheth, Shayanne Gal and Skye Gould. Business Insider. April 10, 2018. “6 charts show how much more men make than women.” http://www.businessinsider.com/gender-wage-pay-gap-charts-2017-3. Accessed April 18, 2018.

5 Center for Retirement Research at Boston College. March 29, 2018. “Future Retirees Financially Fragile.” http://squaredawayblog.bc.edu/squared-away/future-retirees-financially-fragile/. Accessed April 16, 2018.

6 Chad Stone, Danilo Trisi, Arloc Sherman and Roderick Taylor. Center on Budget and Policy Priorities. Feb. 16, 2018. “A Guide to Statistics on Historical Trends in Income Inequality.” https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality. Accessed April 16, 2018.

7 Andreas Becker. Deutsche Welle. April 16, 2018. “Is inequality good or bad for the economy?” http://www.dw.com/en/is-inequality-good-or-bad-for-the-economy/a-43324466. Accessed April 18, 2018.

8 April Glaser. Recode. May 26, 2017. “Why manufacturing jobs are coming back to the U.S. — even as companies buy more robots.” https://www.recode.net/2017/5/26/15656120/manufacturing-jobs-automation-ai-us-increase-robot-sales-reshoring-offshoring. Accessed April 18, 2018.

9 Reuben Fischer-Baum, Kim Soffen and Heather Long. The Washington Post. Jan. 30, 2018. “Republicans say it’s a tax cut for the middle class. The biggest winners are the rich.” https://www.washingtonpost.com/graphics/2017/business/what-republican-tax-plans-could-mean-for-you/?utm_term=.cb6748a783ac. Accessed April 18, 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 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. 

Pros and Cons: Fewer Regulations in the U.S.

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One of the current administration’s persistent themes has been deregulation — cutting through the red tape in the rules of doing business. In one instance, Donald Trump was filmed standing beside mounds of paperwork to symbolize the amount of regulation the government has implemented since 1960.1

Perhaps the same can be said for the paperwork associated with our financial accounts, from bank statements to investment prospectuses to insurance policies. It’s important to recognize regulations often have two goals: To protect the consumer, and to protect the company providing the product or service.

We understand that sometimes the paperwork associated with your investments and insurance policies can be overwhelming, so please don’t hesitate to ask questions. We are here to help you fully understand your financial choices.

One such controversial regulation — currently being debated in Congress — is a rollback of the Dodd-Frank Act that was passed in 2010 to tighten rules on the banking system. Now that the economy has recovered from the recession, many legislators are in favor of loosening the banking rules, especially those affecting small community banks. Those who oppose reducing regulations fear the country will fall into the same bad practices and history will repeat itself. 2

Some regulations are so imbedded in our society that the affected industries now believe repealing them could cause more problems than keeping them. The most recent example was the EPA’s announcement to roll back emission standards for U.S. cars. However, the initiative has fallen flat with at least one auto manufacturer, stating it plans to implement the vehicle-emissions rules enacted under Barack Obama to continue addressing global warming considerations. Others think rolling back these regulations would increase their costs, especially if California implements its own emissions standards, which could lead to court battles.3

U.S. farmers are closely watching some of the regulations that have added extensive costs and delays to their businesses. They’re particularly interested in the Waters of the U.S. rule, although the EPA has postponed that rollback for two years. However, the Secretary of Agriculture announced that the USDA has identified 27 final rules that it plans to eliminate, saving $56 million per year.4

Content prepared by Kara Stefan Communications.

1 Michael Kranz. Business Insider. Dec. 17, 2017. “Trump cut literal red tape while standing next to a massive pile of paper to make a point about big government.” http://www.businessinsider.com/trump-stood-next-to-a-huge-pile-of-paper-showing-big-government-2017-12. Accessed April 27, 2018.

2 Sylvan Lane. The Hill. April 26, 2018. “House chairman eases demands on Dodd-Frank rollback.” http://thehill.com/business-a-lobbying/385066-house-chairman-eases-demands-on-dodd-frank-rollback. Accessed April 27, 2018.

3 Justin Worland. Time. April 5, 2018. “Scott Pruitt’s Rollback of Emissions Standards Is a Big Deal. Here’s Why the Rollout Fell Flat.” http://time.com/5228979/why-scott-pruitt-rollback-of-emissions-standards-fell-flat/. Accessed April 27, 2018.

4 Jacqui Fatka. Farm Futures. March 1, 2018. “Trump keeping regulatory rollback promises.” http://www.farmfutures.com/farm-policy/trump-keeping-regulatory-rollback-promises. Accessed April 27, 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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A Look at How America Ranks

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In his first year in office, President Trump has promoted his “America first” philosophy. This new focus, with its trade protectionism and tough stance on immigration, has somewhat changed the U.S. narrative on a world scale.1

Considering this new emphasis on America first, perhaps it’s worth looking at how the U.S. ranks on the world stage, according to various lists measuring financial health, happiness, education and more.

One of the most watched rankings for financial health is the annual World Economic Forum Global Competitiveness Report, which covers 137 economies and ranks the U.S. as No. 2. The Global Competitiveness Index measures national competitiveness, which includes a variety of institutions, policies and factors that determine each country’s level of productivity. The following are the top 10 countries ranked by the 2017-2018 Global Competitiveness Index:2

  1. Switzerland
  2. United States
  3. Singapore
  4. Netherlands
  5. Germany
  6. Hong Kong
  7. Sweden
  8. United Kingdom
  9. Japan
  10. Finland

According to the recently released “2018 Best Countries” listing from U.S. News & World Report, America is ranked No. 8 behind Switzerland, Canada, Germany, the U.K., Japan, Sweden and Australia.3 The Best Countries rating is based on opinions of over 21,000 people from 36 countries in a wide variety of categories, including business friendliness, entrepreneurship, citizenship, power, quality of life, cultural influence and more.4

However, America gets lower marks in the rankings of countries with the happiest residents. The U.S. came in 19th in the 2017 World Happiness Report; Norway was No. 1. This study measures countries by ways they support happiness, such as quality of work, health care and social foundations.5

Perhaps one of the reasons Americans aren’t as happy as some other nations’ citizens has to do with our infrastructure — particularly relating to transportation. One global study of vehicular traffic found the U.S. is home to 10 of the top 25 worst cities for traffic. The study, composed of 1,360 cities in 38 countries, measures the cost of sitting in traffic due to factors such as loss of worker productivity, wasted fuel and the high cost of transporting goods in traffic. Overall as a country, the U.S. ranked fifth.6

The results are mixed when it comes to education rankings. One of the latest rankings placed U.S. 15-year-olds at 38th out of 71 countries in math and 24th in science.7

However, the U.S. ranks highest in “QS World University Rankings by Subject.” The most recent rankings place U.S. higher education institutions at No. 1 in 34 of 48 categories.8

And finally, there is one category in which America excels in vast numbers: The largest number of billionaires. Presently, the world’s billionaires account for a record $9.1 trillion combined, which is up 18 percent from a year ago.9 Seven of the top 10 billionaires in the world call the U.S. home:10

  1. Jeff Bezos (Amazon, U.S.)
  2. Bill Gates (Microsoft, U.S.)
  3. Warren Buffett (Berkshire Hathaway, U.S.)
  4. Bernard Arnault (LVMH, France)
  5. Mark Zuckerberg (Facebook, U.S.)
  6. Amancio Ortega (Zara, Spain)
  7. Carlos Slim Helu (telecom, Mexico)
  8. Charles Koch (Koch Industries, U.S.)
  9. David Koch (Koch Industries, U.S.)
  10. Larry Ellison (software, U.S.)

Content prepared by Kara Stefan Communications.

 1 Griff Witte and Michael Birnbaum. The Washington Post. Jan. 20, 2018. https://www.washingtonpost.com/world/a-year-of-trumps-america-first-agenda-has-radically-changed-the-us-role-in-the-world/2018/01/20/c1258aa6-f7cf-11e7-9af7-a50bc3300042_story.html?utm_term=.aa4bcbfc56c0. Accessed March 22, 2018.

2 Klaus Schwab. World Economic Forum. 2017. “The Global Competitiveness Report

2017–2018.” Page ix. http://www3.weforum.org/docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017–2018.pdf. Accessed March 9, 2018.

3 U.S. News & World Report. 2018. “Overall Best Countries Ranking.” https://www.usnews.com/news/best-countries/overall-full-list. Accessed March 22, 2018.

4 Deidre McPhillips. U.S. News & World Report. Jan. 23, 2018. “Methodology: How the 2018 Best Countries Were Ranked.” https://www.usnews.com/news/best-countries/articles/methodology. Accessed March 22, 2018.

5 United Nations. 2017. “World Happiness Report 2017.” http://worldhappiness.report/ed/2017/. Accessed March 9, 2018.

6 INRIX, Inc. Feb. 5, 2018. “Los Angeles Tops INRIX Global Congestion Ranking.” http://inrix.com/press-releases/scorecard-2017/. Accessed March 22, 2018.

7 Drew Desilver. Pew Research Center. Feb. 15, 2017. “U.S. students’ academic achievement still lags that of their peers in many other countries.” http://www.pewresearch.org/fact-tank/2017/02/15/u-s-students-internationally-math-science/. Accessed March 9, 2018.

8 Patrick Atack. The Pie News. Feb. 28, 2018. “QS World University Rankings show US still top, but Asia rising.” https://thepienews.com/news/qs-world-university-rankings-show-us-still-top-but-asia-rising/. Accessed March 9, 2018.

9 Luisa Kroll. Forbes. March 6, 2018. “Forbes Billionaires 2018: Meet the Richest People on the Planet.” https://www.forbes.com/sites/luisakroll/2018/03/06/forbes-billionaires-2018-meet-the-richest-people-on-the-planet/#5256507f6523. Accessed March 9, 2018.

10 Forbes. 2018. “The World’s Billionaires.” https://www.forbes.com/billionaires/list/#version:static. Accessed March 9, 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.

 

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Putting a Value on Real Property

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Real property generally refers to land, but it also can include structures, bodies of water and machinery.1 It typically denotes property of significant value, which is why state and local governments choose to impose taxes on our homes.

These levies could be considered a progressive tax, in that people who own more expensive homes likely will pay higher property taxes.

For many retirees, their homes are among their most valuable assets, but they are just one piece of the financial picture. We can help you create a financial strategy that takes into account all your retirement assets and sources of income. Give us a call if you’d like to learn more about the use of investment and insurance products to help you pursue your retirement goals.

The way real property is valued can offer advantages and disadvantages to owners. During the 2008 recession and its real estate market decline, many home sellers and buyers experienced a substantial discrepancy between the appraised value and the market value of their homes.

Appraised value is how much a licensed appraiser believes your home is worth, while market value is determined by just that — the market. In other words, it’s whatever buyers are willing to pay for the property. If the market value is lower than the appraised value, owners become “upside down” on their mortgages, which means they owe more than the home is worth.2

Then there’s the case of assessed value, which is usually conducted on behalf of the county or municipality that imposes property taxes.3 This value may be less than the market or appraised value, based on a calculation of various factors. A lower assessed value generally equals lower taxes, so there’s an advantage to the assessment not increasing — particularly for retirees planning to stay in their homes for the duration of their life.

Real estate appears to be a popular asset for many affluent investors, thanks to its finite supply and the fact that demand will generally continue to grow as the population increases. A recent survey of the portfolios of affluent investors revealed:4

  • The principal residence of an affluent investor typically represents up to 30% of his or her total assets
  • Beyond the principal residence, between 4-6% of assets are in real estate
  • Among all investors, 20% own a second or vacation home
  • Among ultra high net worth investors ($5 million to $25 million), 32% own a second or vacation home

Factors that may have some impact on property values in the future relate to transportation. For example, the rise of driverless cars could have an impact on the real estate market. Transportation experts say they could make public transit less necessary to commuters, thus affecting property values near train stations and other public transit.5

Another interesting trend is in commercial real estate. You may have noticed vast, empty parking lots sitting aside malls and shopping plazas where storefronts are empty. As the country shifts more toward buying online, brick-and-mortar stores are being abandoned. Lower demand for retail shopping spaces could lower rents or require landlords to rethink how they use the space.6

Content prepared by Kara Stefan Communications.

1 Investopedia. “Real Property.” https://www.investopedia.com/terms/r/real-property.asp. Accessed April 6, 2018.

2 Angela Colley. Realtor.com. Jan. 22, 2015. “What Is a Upside-Down Mortgage?” https://www.realtor.com/advice/finance/what-is-upside-down-mortgage/. Accessed April 6, 2018.

3 Chris Seabury. Investopedia. “How property taxes are calculated.” https://www.investopedia.com/articles/tax/09/calculate-property-tax.asp. Accessed April 6, 2018.

4 Spectrem Group. 2018. “How Investors Appraise Real Estate.” https://spectrem.com/Content/-how-investors-appraise-real-estate.aspx. Accessed March 15, 2018.

5 Ely Razin. Forbes. March 11, 2018. “How Driverless Cars Could Disrupt The Real Estate Industry.” https://www.forbes.com/sites/elyrazin/2018/03/11/how-driverless-cars-could-disrupt-the-real-estate-industry/#61039ab013c1. Accessed March 15, 2018.

6 Richard Kestenbaum. Forbes. May 30, 2017. “This Is What Will Happen To All The Empty Stores You’re Seeing.” https://www.forbes.com/sites/richardkestenbaum/2017/05/30/this-is-what-will-happen-to-all-the-empty-stores-youre-seeing/#58aea44bb78b. Accessed April 6, 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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Download the Top 10 Mistakes That Increase Your Taxes

In this free report, you’ll learn…

  • Why being passive and having no plan of action for your taxes can kill your retirement.
  • The amount of money you can save with tax planning. (HINT: It’s often at least 5 figures.)
  • What the top 10 most common tax mistakes people make are and how you can avoid making them.

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Danielle Christensen

Paraplanner

Danielle is dedicated to serving clients to achieve their retirement goals. As a Paraplanner, Danielle helps the advisors with the administrative side of preparing and documenting meetings. She is a graduate of the College of St. Benedict, with a degree in Business Administration and began working with Secured Retirement in May of 2023.

Danielle is a lifelong Minnesotan and currently resides in Farmington with her boyfriend and their senior rescue pittie/American Bulldog mix, Tukka.  In her free time, Danielle enjoys attending concerts and traveling. She is also an avid fan of the Minnesota Wild and loves to be at as many games as possible during the season!