Joe Lucey

4 things you must know before you claim Social Security

June 14, 2019 by Joe Lucey

Most people don’t realize it, but claiming your Social Security benefits could be one of the most important financial decisions of your life. Here’s why.

If you’ve earned an average income throughout your career, you could receive several hundred thousand dollars in lifetime benefits. And if you earned an above-average income, you could receive more than a million dollars in benefits.

That’s enough money to get Warren Buffet’s attention.

But claiming your benefits is complicated and confusing. There are thousands of rules, and even more rules about those rules. And even the most sophisticated investors make mistakes that cost them a small fortune.

Below, are 4 things you must know before claiming your Social Security benefits.

#1 Don’t rely on a one-size-fits-all strategy

The timing of when you claim your benefits impacts more than the amount you receive in benefits. Your decision could also trigger higher taxes; double your Medicare premiums; and cause you to forfeit a small fortune in spousal benefits.

In some cases, claiming your Social Security benefits early could yield far more income when you consider your benefits, taxes, etcetera, which is contrary to traditional thinking.

#2 You could be taxed on as much as 85% of your benefits

This is one of the big social security “gotchas” that most folks never see coming. Depending upon how and when you claim Social Security, you could pay taxes on as much as 85% of your benefits. So, now the money you were counting on to help support you in retirement, could be a fraction of what you thought it was going to be.

#3 Your spousal benefits could be at risk

According to US News, “Most people don’t understand how to make the most out of their Social Security spousal benefits.” There are so many variables, it’s easy to lose out on thousands of dollars in benefits every year that are rightfully yours.

The bottom line – don’t make the decision to claim your benefits without considering the impact on your spousal benefits (even if you’ve been divorced).

#4 Don’t rely on the Social Security Administration for advice

The advice you get from the Social Security Administration is often wrong.

Forbes details a story about a successful businessman who reached full retirement age at 66. He filed for his benefits when Social Security Administration told him to. But this decision short-changed his wife “hundreds of thousands of dollars because he didn’t understand his options. They author went on to say, “I thought to myself, here is a smart, successful man who wanted to take care of his wife; if he can’t figure this out, who can?”

I wish this were an isolated case, but we hear similar stories all the time here in Minnesota.

Here’s how to ensure you make the most out of your benefits

This decision is a lot more complicated than most people realize. And it impacts many other aspects of your financial game plan.

Take the guesswork out of this critical decision by getting a customized Social Security analysis for your specific situation from a qualified financial advisor. And make sure they consider all implications of this decision including your benefits, taxes, Medicare premiums, spousal benefits, etcetera. If you want our help, we provide this customized analysis as a free service.

Let us know if you have any questions.

We’re always here to help! Just call us at (952) 777-1818.

The financial consequences of living a long life

May 14, 2019 by Joe Lucey

Kane Tenaka lives in Japan and loves playing board games, studying math, and practicing her calligraphy. But the most remarkable thing about Kane Tenaka is that she’s 116 years old, and was just recognized as the oldest living person in the world.

These stories are always a great wake-up call that we’re living longer than ever before.

In fact, the number of people who will live to 100 is projected to swell from 500,000 people today, to more than 3.7 million in the next 30 years.

Living a long and prosperous life is something we all wish for, but it also comes with four significant financial challenges …

#1 The longer you live, the more you’ll pay in healthcare and medical expenses.

According to the latest estimates, the total out-of-pocket spending for the average 65-year-old couple retiring today could be north of $400,000 when you factor in Medicare premiums, supplemental insurance premiums, deductibles, and copays. And those with known health issues could be on the hook for even more money!

#2 The longer you live, the greater the chance you’ll need some form of long-term care.

According to U.S. Department of Health and Human Services, “Nearly 70% of all people who live to age 65 will require some form of long-term care.”

And long term care doesn’t come cheap. According to Forbes, the average cost for an assisted living facility is $47,064 per year. A semi-private room at a nursing home with around-the-clock care is $91,615 per year.

#3 The longer you live, the greater the chance you’ll face major stock market corrections.

According to Kiplinger, “From 1926-2017, bull markets lasted an average of 9 years.” If you do the math, that means every decade (or so) your savings and investments could take a major haircut. And if you must withdraw money from your retirement accounts during these market downturns (to live on, or because of Required Minimum Distributions), the long-term effects could potentially be financially devastating.

#4 The biggest challenge of all: How do you pay for it?

The longer you live, the longer you have to make your money last in in retirement. And unfortunately, the greater the chances you have of running through your entire life savings far too soon.

According to a recent article from MarketWatch … “40% of Americans are at risk of going broke in retirement.” Most people assume this will just impact the people with little means. But that’s not the case. It could also happen to people who are middle class, and even those who are wealthy. Nobody’s exempt.

Conclusion

The last place you want to be is 85 or 90 years old, full of life and flat broke.

Your best defense to ensure you don’t run out of money in retirement is to have a thorough and comprehensive financial game plan. This includes maximizing your Social Security benefits; reducing your taxes; generating income (that lasts as long as you do); a plan to protect you from the skyrocketing cost of healthcare and long term care; and managing your risk.

Why Diversifying Your Income is Critical in Retirement!

May 1, 2019 by Joe Lucey

Here are some recent headlines from The Wall Street Journal, MarketWatch and Investment News that should get your attention …

“Medicare trust fund will be exhausted in 2026.”
“Social Security to Tap into Trust Fund for the First Time in 36 Years.”
“Stock Market Returns Over the Next Decade Will be Well Below Historical Norms.”
And “The Pension Hole for U.S. Cities and States is the Size of Germany’s Economy.”

Social security, Medicare, pensions, and stock market returns are all critical components of your retirement. But their financial stability is now in question. If you’re counting on any of these things to help support you, you have good reason to be concerned.

In a best-case scenario, this could have a serious impact on your lifestyle in retirement. In a worst-case scenario, it could force you back to work.

This underscores one very critical thing. You can’t rely on just one source of income in retirement. You must have a diversified number of income sources.

We will be covering why diversifying your income sources in retirement could help you avoid a financial disaster, as well as how to navigate the critical challenges ahead with Medicare and social security, your options to generate income today – no matter what’s happens next on Wall Street, and more.

Successful retirements are not built on assets, or the amount of money you’ve saved, they’re built on your ability to generate income in retirement. Stock markets go up and down, but your income is the backbone of your retirement game plan. You need a plan to make your money break a sweat.

Generating income is tougher today than ever before. Traditional “go-to” options for generating income are dead. Pensions are all but history. Although interest rates are on the rise, they are still historically low, meaning rates on CD’s and savings accounts are a joke. $500,000 in a one-year CD today will only fetch roughly $700 a month. And that’s before taxes! And it doesn’t look like these rates are going to significantly change anytime soon. Bond yields aren’t any better, and people still fear investing in a stock market that remains at near highs. Historically speaking, we are well overdue for a bear market.

According to a recent Kiplinger – From 1926-2017, bull markets lasted on average nine years. If that is the case, this bull market should be ending right about now, as it just turned 9 on March 9, 2018. Also, the typical bear market lasts 1.4 years, with an average cumulative loss of 41%. This mean trouble is on the horizon (just look at the recent volatility).

Show me someone who lives in constant fear of running out of money, and I’ll show you someone who doesn’t have a plan to generate income. It’s that simple. However, you can’t just have an income plan, you need a diversified income plan. It’s risky to rely on one source of income in retirement. The following are some potential sources of income, but this is where you should use your expertise to go over these topics in detail.

Dividend stocks – Most mature companies pay a recurring dividend to shareholders. In most cases, these dividends are paid quarterly to shareholders who owned the stock on the date of record. Typical yields for most dividend focused ETFs are 2-3%.

Investment grade corporate bond fund – has bond holdings from highly-rated companies in a proportion that is meant to mimic the indices they track.

Municipal bonds – debt obligations issued by states or other municipalities to fund projects. Some, but not all municipal bonds are exempt from federal tax for all investors and exempt from state tax if the investor lives in the state of the municipality issuing the bond.
REIT – Real estate investment trusts own a portfolio of real estate, the purchase of which is financed by debt and the issuance of securities to investors. A REIT can be public or private and open-end or closed-end.

Reverse mortgages – the bank pays you, you keep your home, and it remains part of your estate. Essentially, you are putting your home equity to work for you.

Commercial/residential/multi-unit real estate – Buying a rental property is a rather straightforward proposition, especially if you know the local market well that you’re investing in.

Annuities – insurance products that pay out over your lifetime, no matter how long you live. And these products have come a long way over the last few decades.

However, the specific strategies that will be used for you will be totally different than anyone else, because even a minor difference in your age, assets, risk tolerance, or life expectancy could trigger a major shift in strategy.

Various Types of “Economies”

July 31, 2018 by Joe Lucey

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.

²Ibid.

³Matthew 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

July 24, 2018 by Joe Lucey

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.²For 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.

²Ibid.

³Jacob 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.

⁴Michael 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.

⁶Adam 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.

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Family Business Considerations

July 10, 2018 by Joe Lucey

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.

³Hilary 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.

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