Read Our Blog
We help individuals and families pursue their ideal retirements.
Household Budgeting for Retirement
April 15, 2022
If you have a partner, it’s important to recognize that you may have different goals. For example, a wife may want to travel more frequently to see family, whereas a husband is thankful he no longer has to commute to work every day and would rather enjoy reading and watching television. Some folks find they slip into bad habits after a few months into retirement — sleeping late, watching too much TV, not exercising or getting out of the house to see people. It may be worth considering some type of volunteer opportunity or part-time job to give your days more structure.1 Earning extra cash is not a bad idea, either.
The second stage of retirement is when people start to slow down and don’t get out as much, so they don’t spend as much money as they did before. Then there’s the final stage — when you need more money than ever to pay for things like large health care expenditures and help with assisted living.2
As you can see, developing a retirement plan is more complex than just accumulating money and then spending it throughout time. Consider positioning your assets so that you have multiple sources of reliable income. You may want to consider ways to maximize your assets in case you or your spouse lives to a very old age. If you’d like to discuss various insurance options for your retirement plan, please contact us.
One source of retirement income that most Americans enjoy is Social Security, which is guaranteed to continue until you pass away. However, even this government-sponsored benefit is under duress. There’s been a focus in recent months on legislation for infrastructure bills and ways to economically rebuild the U.S. back to pre-pandemic levels. In addition, retirees just received their biggest cost-of-living increase in Social Security benefits in years. The problem is that neither Congress nor retirees (and approaching retirees) are actively lobbying to fix the current Social Security program. If Congress doesn’t come up with a supplement plan, retirees will see a reduction of about 22% of their current benefits beginning in 2034.3
Another facet of retirement planning is having a contingency plan for when things don’t pan out quite the way you thought. For example, make sure your beneficiaries are up to date on all of your accounts, that they have the information necessary to access those accounts and contact information for your financial advisor or estate attorney, and consider buying long-term care insurance.4
Content prepared by Kara Stefan Communications.
1 Paul Schoenfeld. Herald Net. Feb. 20, 2022. “What are your plans for reaching retirement?” https://www.heraldnet.com/life/what-are-your-plans-for-reaching-retirement/. Accessed Feb. 21, 2022.
2 Dan Hunt. Morgan Stanley. Jan. 11, 2022. “What kind of retiree do you want to be?” https://www.morganstanley.com/articles/retirement-life-spending. Accessed Feb. 21, 2022.
3 Trina Paul. CNBC. Feb. 10, 2022. “Will Social Security run out of money? Here’s what could happen to your benefits if Congress doesn’t act.” https://www.cnbc.com/select/will-social-security-run-out-heres-what-you-need-to-know/. Accessed Feb. 21, 2022.
4 Ameriprise. 2022. “Unexpected events.” https://www.ameriprise.com/financial-goals-priorities/retirement/preparing-for-unexpected-life-events. Accessed Feb. 21, 2022.
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.
Consumers: College Enrollment: Downstream Effects of COVID, Inflation and Technology
April 8, 2022
The pandemic has influenced the perceived value of a higher education. However, this merely put the spotlight on an already growing trend. For instance, U.S. student loan debt increased by more than 100% from 2010 to 2020.1
Now, because of the limitations imposed on classroom and on-campus activities, augmented by online learning opportunities, many of America’s college students have become further disillusioned by their collegiate prospects. This is exemplified by nearly 1 million fewer students enrolled in college since the beginning of the pandemic.
On top of these woes, college campuses are having to increase tuition and fees to pay for higher inflation. With lower enrollments, universities still have to pay rising prices for food (on-campus dining options), energy (dormitory living) and much more. Today’s extremely competitive labor market is also requiring universities to raise wages and benefits for professors and non-academic staff. Some educators have even begun forming labor unions to demand higher income to keep up with the cost of living.2
Managing money is about choices. Sometimes we have no choice but to cut back on expenses, but we do have the choice on what expenses we reduce or eliminate. We also, to some extent, have choices when it comes to how much money we earn. Particularly in today’s employment market, many people have the option to at least explore other available jobs and consider any additional pay or benefits that would enhance their lifestyle and savings options.
If you haven’t thought about that, now is a great opportunity to do so, given the number of available jobs. Another option is to work with us to find ways to add more financial confidence to your life. By positioning assets for reliable income in your future, you may be able to explore other options — in work or lifestyle — that you may not have thought were available to you. We would be happy to discuss your financial needs for both today and tomorrow.
One new study found that the positive correlation between a college degree and getting a good job depends on how much student debt a graduate is carrying. In other words, even a high-paying job cannot offset the long-term financial effect of paying off high student loans. The negative ripple effect still impedes that college graduate’s ability to build wealth through saving money, investing and buying a home.3
In fact, one downstream consequence of today’s job market is that employers are starting to take the college degree requirement out of their job listings. In short, “not having a college degree should not diminish your chances of securing a good job.”4 Today’s young adults also have a technology advantage, having grown up in the era of internet and smartphones. They can use their social media profiles and posts to convey their technology skills and knowledge, particularly in fields where they have specific passions and interests.
Consider another downstream detriment to colleges — having to reduce classes and degrees with low enrollments to trim costs. They will increasingly focus on high-demand classes, which may well include tech and media majors. These are skills and knowledge that can be learned through persistent exposure and interaction while still in high school. Combine inherent social uses with hybrid learning models, and many of today’s higher-level jobs may be filled by motivated and tech-savvy high school grads.
Content prepared by Kara Stefan Communications.
1 Abigail Johnson Hess. CNBC. Dec. 22, 2020. “U.S. student debt has increased by more than 100% over the past 10 years.” https://www.cnbc.com/2020/12/22/us-student-debt-has-increased-by-more-than-100percent-over-past-10-years.html. Accessed March 4, 2022.
2 John Marcus. NBC News. Feb. 6, 2022. “Tuition, fees continue to rise as pandemic inflation woes hit colleges.” https://www.nbcnews.com/news/education/tuition-fees-continues-rise-pandemic-inflation-woes-hit-colleges-rcna14292. Accessed March 4, 2022.
3 Chris Melore. Study Finds. Feb. 8, 2022. “College is no equalizer? Study finds student debt still holds low-income graduates back.” https://www.studyfinds.org/college-equalizer-student-debt/. Accessed March 4, 2022.
4 Jeff Mazur. Harvard Business Review. Aug. 11, 2021. “You Don’t Need a College Degree to Land a Great Job.” https://hbr.org/2021/08/you-dont-need-a-college-degree-to-land-a-great-job. Accessed March 4, 2022.
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.3/22-2085611B
Consumers: Buying Power in 2022
March 29, 2022
One of the biggest economic stories of the first quarter was the rising rate of inflation, as consumer prices reached a 39-year high by the end of 2021. In the first quarter, the inflation rate floated around 7%.
Higher prices tend to hurt low-income families the most since the majority of their spending is on necessary consumables. This is especially true now that child tax credits – representing $300 to $360 payments per child per month – have come to an end. That money was largely used for food, clothes, school supplies and other essentials, so it contributed to overall consumer spending that drives the economy.1
In contrast, households that don’t need government stimulus, such as the $600 and $1,400 checks that were issued during the first year of the pandemic, are more prone to save surplus assets. Instead of spending that money to help jump-start the economy, a lot of wealthier households used it to augment savings during the pandemic. In aggregate, U.S. households saved up an excess of $2 trillion during the pandemic.2 That can be helpful for individuals to bolster their emergency savings, but it doesn’t help stimulate the economy.
It is important for all households to have robust liquid savings they can tap into during times of hardship. However, retaining too much in low-interest-rate accounts means that money may not keep up with the rising cost of living. That is especially true now, in a higher interest rate environment. If you are looking for ways to secure your money but also give it the opportunity to grow, we have an array of insurance products that may fit the bill. Contact us for more information about what vehicles may best suit your needs.
Rising prices are a sign of a growing economy, but unless wages keep up with inflation, that’s going to hurt consumers. We have seen significant income growth over the past year, but nowhere near the current 7% inflation rate. However, some economists predict that inflation will retreat as far back as 2.9% by the fourth quarter of this year.3
The Federal Reserve has made it clear that it intends to raise interest rates. Again, rate increases are more likely to impact lower-income consumers than households with considerable assets. Higher interest rates can increase payments on mortgages with a variable interest rate. However, 90% of American mortgages are at fixed rates. In fact, mortgage loans represent 70% of household debt and another 10% is in auto debt (also generally locked in to a fixed rate). Therefore, higher interest rates will be most painful for people who retain a balance on credit cards and other variable-rate loans. Unfortunately, once again, lower-income households are more likely to maintain credit balances, so this consumer group will be the most affected by a rising interest environment.4
As for the consumer market for the rest of this year, inflation should tame as supply chain woes improve and inventories are restocked. No group is looking more forward to this scenario than potential car buyers. If they have to spend more money on higher prices, they are looking for better value. One survey found that 66% of Americans are considering purchasing an electric vehicle (EV) now that the new infrastructure bill will support nationwide charging stations and financial incentives.5
Millennials are expected to be one of the predominant consumer groups for the foreseeable future. They’ve come into their own with hard-fought experience they can exploit for higher wages and more flexibility in today’s job market. And with higher discretionary income, economists predict millennials will spend more money on travel, apparel and the housing market in 2022.6
Content prepared by Kara Stefan Communications.
1 Ellen Zentner and Sarah Wolfe. Morgan Stanley. Jan. 28, 2022. “New Challenges for The US Consumer.” https://www.morganstanley.com/ideas/thoughts-on-the-market-zentner?subscribed=true&dis=em_202222_wm_5ideasarticle&et_mid=318442&et_mkid=. Accessed March 2, 2022.
2 Lucia Mutikani. Reuters. Feb. 25, 2022. “Robust consumer spending, core capital goods orders highlight U.S. economic strength.” https://www.reuters.com/business/us-consumer-spending-beats-expectations-january-inflation-rises-further-2022-02-25/. Accessed March 2, 2022.
3 Ellen Zentner and Sarah Wolfe. Morgan Stanley. Jan. 28, 2022. “New Challenges for The US Consumer.” https://www.morganstanley.com/ideas/thoughts-on-the-market-zentner?subscribed=true&dis=em_202222_wm_5ideasarticle&et_mid=318442&et_mkid=. Accessed March 2, 2022.
4 Ibid.
5 CarPro. Feb. 2, 2022. “Cars.com: 2022 Auto Buying Trends.” https://www.carprousa.com/blog/cars.com-2022-auto-buying-trends. Accessed March 2, 2022.
6 Vijay Chandar. Morgan Stanley. Feb. 15, 2022. “Megatrends: Counting on the Long-Term Strength of U.S. Consumers.” https://www.morganstanley.com/articles/consumer-megatrends-spending-boom. Accessed March 2, 2022.
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.
Energy Trends for 2022
March 14, 2022
One of the biggest trends in energy today is the retirement of some coal-fired power plants in favor of renewable energy sources. According to the Energy Information Administration (EIA), nearly 90 gigawatts of coal power have been retired since 2011, and it projects another 65 gigawatts will retire between now and 2030. In its place, U.S. renewable energy is expected to provide 50% of the energy mix by 2030 — that’s up from just under 20% in 2020.1
Some of the funding to support this transition to renewable energy sources will come from the Infrastructure Investment and Jobs Act, recently passed by Congress. The infusion of this federal money will speed up infrastructure upgrades and help fund additional technology development. But the shift in energy trends is not being driven by the government. Already, nearly every auto manufacturer has introduced plans to mass-produce electric vehicles (EVs) in 2022. In 2021, battery-electric EVs and plug-in hybrids represented one in every 10 cars purchased — twice the numbers sold in 2020.2
To be sure, traditional forms of energy, including oil and gas, will continue to fuel our cars, homes and businesses. One industry analyst writing for Forbes sees oil production in the United States rising for the first time in three years. At the same time, he says, the solar sector — which increased by triple digits over the past five years — will continue to grow.3
When we think of financial safety nets, it’s often in terms of emergency funds and insurance benefits for loved ones. However, over a long retirement, it’s also important to consider inflation safety nets. In other words, over the next 10 years, how much do you expect your household energy bills to rise? It’s important for your retirement sources of income to keep up with the cost of inflation. Give us a call if you’d like to discuss ways your savings can keep pace with your expenses during retirement.
At the local level, state agencies, utility companies and other businesses are investing more money toward clean energy to meet decarbonization goals. The entire country is seeing a rapid deployment of renewable energy, storage and electric vehicles. One of the reasons diversifying energy sources is important is that the United States remains vulnerable to breakdowns in its power grid — be it through natural disasters or cyberattacks. While the likelihood of a mass-scale cyberattack on the U.S. power grid is low, recent estimates forecast that the economic impact of such an event could cost the United States anywhere from $243 billion to $1 trillion.4
As extreme weather events continue to ravage all regions of the country, utility companies are faced with the challenge of “hardening” their infrastructure as well as navigating federal and local agency funding resources in an effort to avoid passing on additional expenses to their customers. In fact, research from Ernst & Young LLP (EY) found that 86% of consumers (including almost 100% of millennials) are interested in generating their own electricity. One of the challenges of utility companies is to help accommodate this demand by finding ways to make it reliable and affordable while mitigating potential climate impacts.5
Content prepared by Kara Stefan Communications.
1,2 Teresa Hansen. EnergyTech. Jan. 4, 2022. “New Year’s Forecast: Top Five Energy Industry Trends for 2022.” https://www.energytech.com/home/article/21213191/new-years-forecast-top-five-energy-industry-trends-for-2022. Accessed Feb. 2, 2022.
3 Robert Rapier. Forbes. Jan. 16, 2022. “Energy Sector Predictions For 2022.” https://www.forbes.com/sites/rrapier/2022/01/16/energy-sector-predictions-for-2022/?sh=2ece3d513bec. Accessed Feb. 2, 2022.
4 Kavya Balaraman, Ethan Howland, Robert Walton and Iulia Gheorghiu. Utility Dive. Jan. 18, 2022. “2022 Outlook: Top US power sector trends to watch.” https://www.utilitydive.com/news/2022-outlook-top-us-power-sector-trends-to-watch/611691/. Accessed Feb. 2, 2022.
5 Karen Felton, Jaideep Malik and Jeffrey Miller. EY. Dec. 20, 2021. “Five utility trends to watch in 2022 as energy transition accelerates.” https://www.ey.com/en_us/power-utilities/five-utility-trends-to-watch-in-2022. Accessed Feb. 2, 2022.
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.
Tax Notes
March 3, 2022
This year, the official start date for filing 2021 income tax returns was Jan. 24, and the season ends on April 18 for most filers. According to the IRS, the typical period for refunds is three weeks or less. Be aware that you can speed up the process by filing electronically and submitting your direct deposit information. Two of the biggest issues related to 2021 returns are likely to be reconciling last year’s stimulus and advance child tax credit payments.1
When it comes to tax season, we’re rather stuck with many of the decisions we made (or failed to make) during 2021. That’s why it can be beneficial to analyze your return this year and see how you might better position your finances, income, payouts and investment trade activity to help minimize your tax burden for next year. If you’d like to discuss various strategies tailored for your circumstances, please contact us for a consultation.
While pursuing strategies that minimize your tax bill is a good idea, false reporting and fraudulent shortcuts are not. The last thing you want is to be audited by the IRS. One thing to note is that the likelihood of getting audited rises significantly as your income increases. However, it’s also interesting that the IRS proactively spreads out its auditing activities across all income brackets to ensure fairness.
With that said, the IRS reports that people who earn $10 million or more tend to have higher audit rates (8.16% from 2010 through 2015) than those in lower-income categories. As a general rule, among taxpayers who earn less than $1 million, less than 1% of filers get audited each year.2
The IRS will generally conduct a tax audit within three years of when a return was filed. Higher-income tax returns can take longer if they are more complex, and they tend to include at least three different tax years. Those returns also are audited by the most highly trained and experienced IRS agents.
On the low-income scale, one of the most common mistakes that triggers an audit involves the refundable earned income tax credit (EITC). Out of the 25 million taxpayers who claim the credit, the IRS audits about 300,000 each year. About 50% of EITC claims are incorrect, which results in more than $17 billion in improper payments each year.3
The following were four of the top 10 IRS audited tax cases in 2021:4
- Two sisters who operated a tax preparation business filed more than 16,000 false tax returns for clients from 2012 to 2016 for a total estimated loss to the IRS of $25 million. They were sentenced to between four and eight years in federal prison.
- A Russian bank founder failed to report large stock gains after his company became a multibillion-dollar, publicly traded company. He had to renounce his U.S. citizenship and pay more than $248 million in back taxes, as well as time-served and one year of supervised release.
- An ex-pastor lured and defrauded investors who thought they were investing money (more than $33 million) to fund church entities. He was sentenced to 14 years in federal prison and ordered to pay $22.66 million in restitution to his victims.
- Another man was convicted for perpetrating a Ponzi scheme involving the sale of thousands of manufactured mobile solar generator units (MSGs) that didn’t exist. He was sentenced to 30 years in federal prison and forfeited $120 million in assets to the U.S. government for victim restitution.
Here’s an interesting tidbit: Any revenues earned from stolen goods and illegal activities should be reported on your tax return. While that rarely happens, people who are being investigated or indicted for illegal activities may want to do so in order to avoid also being prosecuted and fined for tax evasion. In fact, if a convicted felon is required to pay restitution for his or her crimes, those amounts qualify as a deduction.5
Pro Tip: One way to avoid tax fraud is to file early. Once your return is received under your name, it’s harder for a fraudster to succeed at filing a false return using your identity. If a scammer files first, it can take a year or more to rectify the situation with the IRS.6
Content prepared by Kara Stefan Communications.
1 Kate Dore. CNBC. Jan. 10, 2022. “IRS to open 2021 tax-filing season on Jan. 24.” https://www.cnbc.com/2022/01/10/irs-to-open-2021-tax-filing-season-on-jan-24.html. Accessed Jan. 11, 2022.
2 Sunita Lough. IRS. Nov. 2, 2021. “IRS audit rates significantly increase as income rises.” https://www.irs.gov/about-irs/irs-audit-rates-significantly-increase-as-income-rises. Accessed Jan. 11, 2022.
3 Ibid.
4 Gray Reed. JD Supra. Jan. 10, 2022. “IRS-Criminal Investigations Counts Down the Top 10 Cases of 2021.” https://www.jdsupra.com/legalnews/irs-criminal-investigations-counts-down-5383621/. Accessed Jan. 11, 2022.
5 Bob Popken. NBC News. Dec. 29, 2021. “Don’t forget to declare income from stolen goods and illegal activities, IRS says.” https://www.nbcnews.com/business/taxes/dont-forget-declare-income-stolen-goods-illegal-activities-irs-says-rcna10345. Accessed Jan. 11, 2022.
6 Yaёl Bizouati-Kennedy. GOBankingRates. Jan. 7, 2022. “Want to Avoid Tax Fraud? File Early.” https://www.gobankingrates.com/taxes/filing/want-to-avoid-tax-fraud-file-early/. Accessed Jan. 11, 2022.
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.
Replenish Emergency Funds
February 25, 2022
Americans have largely been on one of two tracks since the beginning of the pandemic: Those who suffered income and net worth losses and those who gained wealth. A good example of this was the result of relief checks mailed out by the federal government. For some households, that money helped keep food on the table and utility bills paid. For others, their savings rates increased substantially — as high as 34% in April 2020.1
Since the economy has reopened and people are back to going out and spending money, savings rates have gone down. People who were out of work for just a few months may have relied on savings to get them through a challenging period. But given that it’s a new year, this is a good time to reconsider your savings habits. If you used some of the funds in your emergency savings account, draft a plan on how to replenish it.
In 2020, a Bankrate survey revealed that less than half (41%) of Americans had enough savings to pay for a $1,000 emergency expense out of pocket. Moreover, more than a quarter (29%) reported facing a financial emergency that cost $5,000 or more.2
The following are some tips to bear in mind for funding emergency savings:
- You should have an actual cash account, not just an available balance on your credit cards. Borrowing money for a large emergency expense doesn’t get you out of hot water; it just delays and extends it.
- Consider using a basic savings or money market account that can be linked to your checking account for quick, emergency access.
- Avoid accounts that charge annual fees.
- Look for accounts that offer a nominal interest rate, for growth.
- You should aim for savings that would pay for a minimum of three to six months of expenses. If you have a family and only one income, you may want to save eight months up to a year, and be sure to keep paying health and disability insurance premiums so that you don’t dig an even deeper hole of debt.
- One good way to save regularly is to set up an automatic transfer of $100 or so a month, or from each paycheck, into the emergency savings account.
- Tap this account only for true emergencies, such as a major auto repair, catastrophic home repair, medical bill or job loss.
- Once you’ve withdrawn money from the account, make it a priority to replenish it as soon as possible (because when it rains, it can pour).
If you need to cut expenses to create a savings stream, consider giving up regular staples that are a bit indulgent. The obvious example is the proverbial $4 gourmet coffee, five days a week — that alone will yield about $80 to $100 in savings each month. Scale back one week out of each month for no-frills, necessities-only spending, and see how much that garnishes.3
Also, take a look at your broader spending habits to see if there are things you pay for but don’t use very often, such as gym fees, magazine subscriptions (both mail and electronic) and streaming services. If you pay for a channel you seldom watch, see if you can pay for one month only if there’s a show you’d like to binge each season. Another good tactic is to make it harder to spend your money. For example, delete your credit card from online shopping sites to make it difficult to mindlessly click your way into buying more stuff.4
Content prepared by Kara Stefan Communications.
1 Kim Blanton. Center for Retirement Research at Boston College. Dec. 14, 2021. “Is Americans’ Savings Buffer Wearing Thin?” https://squaredawayblog.bc.edu/squared-away/is-americans-savings-buffer-wearing-thin/. Accessed Jan. 3, 2022.
2 Amina Mogaji. Morgan Stanley. Jan. 26, 2021. “Six steps to creating an emergency fund.” https://www.morganstanley.com/articles/emergency-funds. Accessed Jan. 3, 2022.
3 Lisa Rowan. Forbes. Jan. 6, 2021. “8 Savings Challenges To Help You Reach Your Money Goals This Year.” https://www.forbes.com/advisor/personal-finance/savings-challenges/. Accessed Jan. 3, 2022.
4 Cosmopolitan. Dec. 22, 2021. “14 easy money saving tips to try in 2022.” https://www.cosmopolitan.com/uk/worklife/a48177/easy-money-saving-tips/. Accessed Jan. 3, 2022.
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.
Ready to take
THE NEXT STEP?
For more information about any of the products and services listed here, schedule a meeting today or register to attend a seminar.
- Or give us a call today at 888.435.7899.