Archives for February 2018

How Changes in Spending Impacts Retirement

February 27, 2018 by Joe Lucey

Online shopping has become the norm in the Western part of the world. Experts say mature economies adopted e-commerce quickly because of its strong infrastructure and a trusting financial landscape.¹

In other words, consumers could count on receiving goods ordered, vendors knew they would get paid and any conflicts were protected by a reputable credit and court system. These things weren’t true in many developing countries, thus e-commerce was slower to gain traction there.

However, now that emerging markets have put a secure infrastructure in place, many expect online sales to soar — which could help bolster those waning economies. The global online market offers new prospects for struggling brick-and-mortar retailers in the U.S. Just about any retailer, large or small, that can adapt its sales model to a global e-commerce market could be poised for massive opportunity.²

That’s one of the interesting parallels between life and commerce — where some doors close, others open; we just need to see where opportunity awaits. The same can be true when planning for retirement. Please feel free to contact us to discuss creating retirement strategies through the use of insurance products that can help you work toward your long-term retirement income goals.

Interestingly, one of the biggest economic issues of the day comes from a social phenomenon: As older people are living longer, younger people are having less children. To be exact, the first of the baby boomer generation turned 70 last year while, at the same time, the fertility rate in the United States reached its lowest point since records began in 1909.³

The ramifications of this population shift will likely be widespread and long lasting. For example, retirees tend to contribute less to the consumer economy, with an average reduction of 37.5 percent in household spending. This, in turn, affects company revenues and, subsequently, returns in the investment market.⁴At the same time, retirees may be drawing down invested assets for income, further reducing available capital.

The elderly population boom also is expected to cause economic drains in targeted areas of the country. For example, states that have long been popular retirement havens, such as Florida, Arizona, Oregon and South Carolina, are among at least 14 states where the cost of elderly care is rising.⁵

In Florida alone, 20 percent of the population is over the age of 65; more than 40 percent is over 50. While it’s easy to write this off as the result of Florida being a retirement haven, that is no longer the case. Within about 10 years, the entire country will have a similar demographic composition — we will become “a nation of Floridas.”⁶

Another problem with the sizable gap between retirees and babies is an anticipated drop in the number of workers. The workforce may not be large enough to support the government programs older people are entitled to after years of contributing into the system. This issue is hardly isolated to America. Between 2025 and 2050, the number of people age 65 and older is projected to nearly double worldwide.⁷

To help mitigate the drain on resources, many are raising the eligible age for government-sponsored pensions and encouraging people to work well past traditional retirement age. Whether due to lack of retirement savings or the desire to work longer, the share of people working longer has grown during the past decade: a 6 percent increase in Germany, 10 percent in the U.K. and 18 percent in the U.S.⁸

Content prepared by Kara Stefan Communications.

¹ Knowledge@Wharton. Nov. 1, 2017. “Why Emerging Markets Are the Next E-commerce Frontier.” http://knowledge.wharton.upenn.edu/article/why-emerging-markets-are-the-next-e-commerce-frontier/. Accessed Nov. 22, 2017.

² Ibid.

³ Stephen McBride. World Economic Forum. Sept. 14, 2017. “Retiring baby boomers are going to have a huge impact on the economy.” https://www.weforum.org/agenda/2017/09/retiring-baby-boomers-are-going-to-have-a-huge-impact-on-the-economy. Accessed Nov. 22, 2017.

⁴ Ibid.

⁵ Sue Chang. Marketwatch. Nov. 8, 2017. “These maps show just how crazy fast the world is aging.” https://www.marketwatch.com/story/these-maps-show-just-how-crazy-fast-the-world-is-aging-2017-11-08?link=sfmw_tw. Accessed Nov. 22, 2017.

⁶ Joseph F. Coughlin. Time. Nov. 8, 2017. “There’s No Such Thing As ‘Old Age’ Anymore.” https://www.msn.com/en-us/news/other/theres-no-such-thing-as-old-age-anymore/ar-BBEJG0u. Accessed Nov. 22, 2017.

⁷ Suzanne Woolley. Bloomberg. Sept. 17, 2017. “Retirement, Delayed.” https://www.bloomberg.com/quicktake/retirement-redesigned?cmpid%253D. Accessed Nov. 22, 2017.

⁸Ibid.

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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How Losing Sleep Could Translate to a Loss of Money

February 20, 2018 by Joe Lucey

Some teenagers seem to sleep a lot. As parents and grandparents, we can find this rather aggravating. But the fact is, as we get older, our sleep patterns may change, and our sleep can be less restful.¹ Perhaps it’s a good idea to let young people sleep in peace while they still can.

Scientists say young adults require about nine hours of sleep a day, on average. If they get less than eight hours, they may have a harder time paying attention. Full-grown adults, on the other hand, need an average of seven and a half hours. Unfortunately, studies show about one-third of adults in Western societies get less than that on a regular basis.²

A recent study by the University of Zurich and the University Hospital Zurich found a correlation between chronic lack of sleep and increased risk-seeking behavior. Scientists trace the link to the brain’s right prefrontal cortex, which is directly connected with higher risk-seeking behavior. The researchers theorize that when a person persistently does not get enough sleep, this area of the brain does not recover properly, which prompts behavioral changes. Interestingly, the researchers found that study subjects did not notice they engaged in riskier behaviors and therefore were not cognizant of this relationship with sleep patterns.³

The study’s authors observed that sound sleep, of the appropriate duration, is critical for good decision making — especially for political and economic leaders whose daily decisions impact the larger society.⁴ This advice is also worth pursuing in our own lives. In other words, avoid making important decisions when you haven’t been sleeping well.

As financial professionals, we are here to help guide you. We’ll give your retirement income goals our full attention; just give us a call to set up an appointment to discuss how we can help you create a retirement income strategy through the use of insurance products.

Although we often hear that everyone needs a full eight hours of sleep each night, the actual amount varies by individual — usually between seven and nine hours.⁵Just one night of insufficient sleep can make us cranky and too tired for healthy activities — like engaging in exercise or preparing a nutritious meal.⁶

Over time, sleep deprivation can increase the risk of developing a variety of chronic health problems, including obesity, diabetes, high blood pressure and heart disease. It may make us more vulnerable to getting sick when exposed to a cold virus. Chronic lack of sleep also can make us more susceptible to experiencing depression and anxiety.⁷

Women are 40 percent more likely to suffer from insomnia or symptoms of insomnia compared to men, but the reasons for this are unclear. Some researchers hypothesize that women’s traditional role in society as caregivers could be a contributing factor. Furthermore, single parents who serve as both caregivers and financial providers are at higher risk of insomnia. Some scientists speculate the sleep circuitry for women could be different from men and, when combined with social roles as both worker and caregiver, this may result in a higher risk for sleep disorders.⁸

While the length and quality of sleep is a personal matter, it cumulatively has an impact on the economy. According to a study by RAND Europe, the United States loses approximately $411 billion a year due to workers who sleep less than six hours a night — which represents around 2.28 percent of U.S. gross domestic product. However, if those poor sleepers got one extra hour of sleep each night, the data suggests about $226.4 billion could be added back to the economy.⁹

Content prepared by Kara Stefan Communications.

¹National Sleep Foundation. “Aging and Sleep.” https://sleepfoundation.org/sleep-topics/aging-and-sleep. Accessed Dec. 29, 2017.

² ScienceDaily. Aug. 28, 2017. “Chronic lack of sleep increases risk-seeking.” https://www.sciencedaily.com/releases/2017/08/170828102725.htm. Accessed Dec. 19, 2017.

³ Ibid.

⁴ Ibid.

⁵ William Kormos, M.D. Harvard Medical School. May 2016. “Ask the Doctor: The right amount of sleep.” https://www.health.harvard.edu/staying-healthy/ask-the-doctor-right-amount-of-sleep. Accessed Dec. 19, 2017.

⁶ Julie Corliss. Harvard Medical School. July 2017. “The health hazards of insufficient sleep.” https://www.health.harvard.edu/staying-healthy/the-health-hazards-of-insufficient-sleep. Accessed Dec. 19, 2017.

⁷ Ibid.

⁸ MedicalXpress. Dec. 18, 2017. “New guide aims to unmask unique challenges women face in getting healthy sleep.” https://medicalxpress.com/news/2017-12-aims-unmask-unique-women-healthy.html. Accessed Dec. 19, 2017.

⁹ Sandee LaMotte. CNN. Sept. 27, 2017. “Sacrificing sleep? Here’s what it will do to your health.” http://www.cnn.com/2017/07/19/health/dangers-of-sleep-deprivation/index.html. Accessed Dec. 19, 2017.

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Evolution of the 401(k)

February 13, 2018 by Joe Lucey

When employer-sponsored 401(k) plans were introduced in the 1980s, an unexpected consequence occurred: Pensions stopped being the norm. One reason is that companies found 401(k) plans less expensive than traditional defined benefit plans.¹

At the time, 401(k) plans were touted as an opportunity for greater earnings and a richer retirement lifestyle. While it’s true that potential exists, it has not come to fruition for many of America’s workers. Analysis of data compiled by The Pew Charitable Trusts indicates that only about half of American workers participate in an employer-sponsored retirement plan, including 401(k) plans.²

As a result, many Americans are woefully short on retirement funds and savings. According to recent data from the Economic Policy Institute, households in which wage earners are between ages 50 and 55 years old have a median savings of only $8,000. It’s somewhat better — $17,000 — for those ages 56 to 61. Worse yet, a 2016 GOBanking Rates survey found that 35 percent of all U.S. adults have only a few hundred dollars in their savings account; 34 percent have none at all.³

These are averages, of course, but the numbers are bleak. Thirty percent of baby boomers will start retirement with less than $50,000 in savings — indicating many will rely almost exclusively on Social Security benefits.⁴ If you could use some retirement planning advice, please give us a call. We help our clients make decisions about generating retirement income, using both funds accumulated in employer plans and through individual portfolios, as well as insurance products.

In 1978, Congress passed the Revenue Act of 1978, which included a provision for Section 401(k) plans, offering a means for employees to defer compensation from bonuses or stock options from current taxes. The law went into effect in 1980. The following year, the IRS issued rules permitting workers to make tax-deferred contributions to their 401(k) plans directly from wages, which is when their popularity began to explode. By 1983, almost 50 percent of large employers were offering or developing plans.⁵

It was an easy sell. Employers liked them because they were cheaper to fund with matches, and the expense was more predictable than indefinite pension payments. Employees felt they were in the driver’s seat and could make better investment decisions for higher earnings. These projections turned out well for companies, but perhaps not as well for many employees, as 401(k) accounts rise and fall with the financial markets.⁶

Automatic enrollments in 401(k) plans, as well as automatic contribution increases each year, appear to have the potential to help Americans save more. According to a study by J.P. Morgan:⁷

Among workers who automatically enrolled in their 401(k) plans, only 1% opted out and 96% were happy with the feature. Nearly a third of those surveyed said they would not have enrolled in the plan without the automatic enrollment feature.
Among those whose contributions were automatically increased each year, 97% were satisfied, and 15% said they likely would not have increased contributions on their own.

In 2006, a new rule allowed employers to offer Roth 401(k) plans, either as a separate plan or as part of their retirement program. The Roth 401(k) is funded with already taxed income, the earnings grow tax-free and qualified withdrawals made during retirement are not taxed.⁸

For now, 401(k) plans are a primary retirement savings vehicle for American workers. However, one of the caveats is that those tax-deferred income contributions and earnings deprive the government of revenues that could be used to reduce the deficit or for new spending programs. With new deficit concerns on the horizon, the tax status of 401(k) funds could be subject to greater scrutiny in the future.⁹

Content prepared by Kara Stefan Communications.

¹Kelley Holland. CNBC. March 23, 2015. “For millions 401(k) plans have fallen short.” https://www.cnbc.com/2015/03/20/l-it-the-401k-is-a-failure.html. Accessed Dec. 29, 2017.

² The Pew Charitable Trusts. January 2016. “Who’s In, Who’s Out.” http://www.pewtrusts.org/~/media/assets/2016/01/retirement_savings_report_jan16.pdf. Accessed Jan. 11, 2018.

³ Ester Bloom. CNBC. June 13, 2017. “Here’s how many Americans have nothing at all saved for retirement.” https://www.cnbc.com/2017/06/13/heres-how-many-americans-have-nothing-at-all-saved-for-retirement.html. Accessed Dec. 19, 2017.

⁴ Suzanne Woolley. Bloomberg. Dec. 13, 2017. “Retirement, Delayed.” https://www.bloomberg.com/quicktake/retirement-redesigned. Accessed Dec. 19, 2017.

⁵ Kathleen Elkins. CNBC. Jan. 4, 2017. “A brief history of the 401(k), which changed how Americans retire.” https://www.cnbc.com/2017/01/04/a-brief-history-of-the-401k-which-changed-how-americans-retire.html. Accessed Dec. 19, 2017.

⁶ Ibid.

⁷ Dan Kadlec. Money. July 27, 2016. “The 401(k) Features Employers Can No Longer Ignore.” http://time.com/money/4422533/401k-features-employers-can-no-longer-ignore/. Accessed Dec. 19, 2017.

⁸ Denise Appleby. Investopedia. Nov. 30, 2015. “Roth 401(k), 403(b): Which Is Right for You?” https://www.investopedia.com/articles/retirement/06/addroths.asp. Accessed Dec. 14, 2017.

⁹ Suzanne Woolley. Bloomberg. Nov. 15, 2017. “Why Republican Lawmakers Are Eyeing 401(k)s for Their Tax Plan.” https://www.bloomberg.com/news/articles/2017-11-16/why-senate-tax-cutters-have-an-eye-on-big-401-k-s-quicktake-q-a. Accessed Dec. 29, 2017.

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

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Financial Planning to Care for the Caregivers

February 6, 2018 by Joe Lucey

If you picture yourself receiving long-term care at some point, you likely envision a medical professional sitting bedside, tending to your needs. However, the bulk of long-term care in the U.S. is actually provided by family caregivers.¹

According to a recent Merrill Lynch study, 20 million Americans become caregivers each year. Moreover, family caregivers collectively spend $190 billion a year of their own money on adult care recipients. And the toll doesn’t end there. In addition to 92 percent of caregivers using their own money and/or coordinating or managing finances to aid loved ones:²

98% provide emotional support
92% provide household support
79% provide care coordination
64% provide physical care

Women usually do more caregiving than men, the study found, averaging six years of caregiving in their lifetime compared to four for men. As a result, caregiving can bring more of a financial burden for women because of the time they may need to take away from their careers to care for loved ones.³

The financial burden of caregiving, for both men and women, should not be underestimated. The study shows 53 percent of respondents have made financial sacrifices as caregivers, and 21 percent have dipped into their savings.⁴

If you’re in a similar situation and are concerned about having enough income in retirement, please contact us. We work with clients to create retirement strategies through the use of insurance products that help them work toward their long-term retirement income goals.

Increasing attention is also being given to the psychosocial burden experienced by family caregivers. The responsibility and stress can contribute to their own physical conditions, including chronic diseases caused by unhealthy eating habits, sleeping poorly and not getting enough physical activity.⁵

Caregivers have twice the incidence of heart attack, arthritis, heart disease and diabetes compared to non-caregivers. Their chronic stress can even lead to cognitive reduction such as short-term memory loss and attention deficits. To cope with their complex lives, caregivers also may be prone to develop dependence on alcohol, smoking, prescription drugs and psychotropic drugs for mood enhancement. Caregivers also tend to have higher obesity rates.⁶

To help family members who are caring for a loved one with cancer, the Memorial Sloan Kettering Cancer Center in New York developed a support program that included webcasts with staged therapeutic interactions between therapists and informal caregivers, and a message board where study participants could post responses to experiential exercise questions. Initial results found that program participants experienced reduced symptoms of depression.⁷

Technological advances may also help ease caregiving challenges. For example, wearable devices can monitor heart rate and blood pressure, among other vitals. These devices can be linked to mobile phone apps, alerting a caregiver of any changes that might trigger a serious health issue.⁸

Some wearable devices use GPS and geofencing technologies to track patients, allowing them more mobility while also helping caregivers monitor patients’ locations. Newer devices use artificial intelligence to recognize trends in vital signs or movement that can lead to health or injury concerns.⁹

Regardless of what innovations the technology industry creates to aid caregivers, there is some comfort in knowing that the primary skills necessary in a caregiver cannot be replicated by artificial intelligence or a robot. Human caregivers not only offer compassion, empathy and the ability to meet retirees’ emotional needs, but these soft skills can be learned and improved — which will prove to be a critical sector of our workforce in years to come.¹⁰

Content prepared by Kara Stefan Communications.

¹ Advisor News. Nov. 1, 2017. “92% Of Caregivers Are Financial Caregivers.” https://insurancenewsnet.com/oarticle/92-caregivers-financial-caregivers#.WgOptLaZOfU. Accessed Dec. 4, 2017.

² Ibid.

³ Ibid.

⁴ Ibid.

⁵ Kathy Birkett. Senior Care Corner. “How Are YOU, Family Caregiver — Are You Caring for Yourself?” http://seniorcarecorner.com/family-caregiver-caring-for-yourself. Accessed Dec. 4, 2017.

⁶ Ibid.

⁷ Meg Barbor. The ASCO Post. April 25, 2017. “Attrition High but Positive Trends Observed in Web-Based Intervention Addressing Caregiver Burden.” http://www.ascopost.com/issues/april-25-2017/attrition-high-but-positive-trends-observed-in-web-based-intervention-addressing-caregiver-burden/. Accessed Dec. 4, 2017.

⁸ 1-800-HomeCare. Oct. 12, 2017. “What Are the Top Emerging Tech Trends for Home Care In 2017?” https://www.1800homecare.com/homecare/new-tech/. Accessed Dec. 4, 2017.

⁹ Ibid.

¹⁰ Harry Welchel. ChirpyHire. July 31, 2017. “Senior Care and The Future of Work.” http://blog.chirpyhire.com/senior-care-and-the-future-of-work/. Accessed Dec. 4, 2017.

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Archives for February 2018

Want a Retirement Free From Financial Stress? Book Your Free TaxSmart™ Financial Review Today.

We’ll review your finances and tell you what you can do immediately to get on the right track for retirement.

Download the Top 10 Mistakes That Increase Your Taxes

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Want a Retirement Free From Financial Stress?
Book Your Free TaxSmart™ Financial Review Today.