Your Business in a Post-Coronavirus World

Along with economic recovery plans, there comes some relief. However, every business owner can be confident in one thing – we live, work and manage uncertainty. As a “new normal” emerges, developing a post-pandemic business plan is paramount. We’ve seen the disruptive impacts of the pandemic as governments globally face the trade-off between public and economic health. It’s changed the way we live, work and conduct business and more challenges are expected. The second quarter Gross Domestic Product (GDP) is expected to shrink a phenomenal 30 to 35 percent annualized rate followed by growth in the last half of the year.

Below you will find some emergent trends and outlooks by small business Chief Executive Officers (CEOs) and a technique called “future-back” which can help us reposition as we emerge on the other side.

The Wall Street Journal (WSJ)/Vistage Small Business CEO Confidence Index dropped more than 50 percent in April reflecting the U.S. economic shutdown. The index had hovered in the 90 to 105 range since last October but fell to 41.7 percent. Nevertheless, the survey reflected a dichotomy of impacts, reactions and expectations.

Small and Midsize Business Statistics You Need to Know

Top Business Impacts

One third changed the products or services they offer

  • Cancellation of travel and events (81 percent)
  • Declining revenue (76 percent) – Majority (44 percent) reported declines of under 25 percent and a quarter reported no declines at all
  • Market impact (60 percent) and employee productivity (57 percent)
  • Delays in servicing customers (50 percent)
  • Disruptions in supply chain (39 percent) and factories or offices in affected areas (35 percent)
  • Increase in business and new opportunities (29 percent)

Concern of Inadequate Liquidity

One third of small/midsize businesses estimated having less than two months of reserves, 36 percent have three to five months, 17 percent have six to 12 months, and nine percent had over one year. As a result, financial assistance included:

  • Payroll Protection Program (PPP) (90 percent)
  • Line of credit via local bank (46 percent)
  • Small Business Administration’s Economic Injury Disaster Loan (EIDL) (38 percent)
  • Restructure/defer payments to creditors (29 percent)

Desire for a Stable Work Force

Sixty percent increased or maintained the same workforce, 17 percent of small/midsize businesses decreased by 10 percent and seven percent of small/midsize businesses decreased by 50 percent or more. Expectations over the next 30 days:

  • Remote working (62 percent)
  • Reduced hours or staff (30 percent)
  • Layoffs or furloughs (22 percent)
  • None of the above (17 percent)

Economic Outlooks

More than half (52 percent) expect the economy to stabilize in six months, a third say six to 12 months, and 11 percent more than a year. Expectations about their business:

  • Back to normal or stronger (38 percent)
  • Moderately weakened by gaining momentum (48 percent)
  • Significantly weakened and fighting to rebuild (14 percent)

One of the greatest surprises has been the speed of change. Major trends have steepened.

  • Remote work/ telecommuting/ video conferencing – Remote work has increased 91 percent over the past decade allowing teams to work in the office, from home or across the globe
  • E-commerce and digital payment
  • Global supply chains need repair or new construction
  • Healthcare delivery likely to change with telemedicine, wearable health monitors and more
  • Digital media

The environment emerging post-pandemic may be very different. Some may see changes in their fundamental business model including services, assumptions, and how we care for customers. Now may be the time to prepare. Think about how Apple started its transition from the computer with the iPod and iPhone during the dotcom bubble.

Refreshing your business

Mark Johnson and Josh Suskewicz detail a process to help business leaders review and redesign their business in their book Lead from the Future. The major steps include:

  • Envisioning your future – Where do you want to be after the crisis passes? What will be your core business? How will things change about customers, markets and operations? What won’t change?
  • Reverse engineer – Their term is “future-back.” A benefit of working backwards from the future to today and developing business benchmarks and milestones is having a clear slate.
  • Be prepared to learn and pivot – Anticipating and adapting to a changing world.
  • Rally your team around your vision – Missions and margins are highly correlated.

In closing, we had two recent boosts. One was the announcement by Gilead Sciences about early positive results from a new coronavirus drug. The second was Federal Reserve Chairman Powell’s press conference which emphasized their commitment to deploying tools at their disposal in putting out the fires. May you too be successful in managing your challenges and emerging stronger on the other side.

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Three Actions to Take in Your 401(k) Plan for COVID-19

In the last weeks, millions of Americans have lost their jobs and there are growing concerns of a recession. Although we need to stay vigilant of our physical and financial health, we need to focus on what we can control. This article provides three key areas related to your 401(k) that I encourage you to review with your advisors.

Should You Withdraw Money Early from a Retirement Account?

Normally, retirement accounts are designed to encourage people to save for retirement. However, the CARES Act may enable access for individuals to coronavirus-related withdrawals of up to $100,000 (or vested account balance if less) from their 401(k) or IRA without the 10 percent penalty (under age 59-1/2). Income tax liability can be spread over three years with opportunity to “re-contribute” the withdrawn funds within three years. Also, some 401(k) plans permit borrowing. The CARES Act upped the loan limit to $100,000 (or 100 percent of your vested balance).

However, I advise you to use your retirement account as a last resort for a variety of reasons:

  • This is a time to prioritize survival and not maintaining one’s lifestyle.
  • It’s hard to save for retirement and even harder to put the toothpaste back in the tube.
  • Market declines become bad news if you have to sell.
  • Not all 401(k) plans permit withdrawals or loans.

Employers Might Suspend 401(k) Matching Contributions

Many plans provide a boost to retirement savings in the form of a match or safe harbor contribution. For example, the employer might match 50 percent of your contributions up to six percent. If you contribute six percent, the employer kicks an additional three percent. That’s a 50 percent return on your contributions.

Unfortunately, some employers are cutting back in this economy as they have in prior downturns. Willis Towers Watson estimates almost 20 percent of companies with at least 1,000 employees cut back or suspended matching contributions following the 2008 Crisis.

It may be disheartening, but don’t despair. You’re responsible for your future. Perhaps you’re going to inherit funds or can survive on Social Security benefits alone. And if those aren’t enough, keep saving. Think about how our budgets have improved – less dining out, travel, shopping and more. You might even have a 15 to 25 percent rebate from your auto insurance company. Remember the power of compounding – the earlier you save on a regular basis, the better.

Review Your Investment Strategy

It’s ill-advised to switch horses midstream. If this market sell-off got your attention, then work with your advisor and possibly ride out this financial storm. Make any big adjustments after the rebound because getting out often means missing out.

Other investors see this as an opportunity to rebalance their portfolios and buy things on sale. It might also be time to get projects done, your car repaired or even replaced.

The markets are likely to continue to be challenging. Earnings releases and guidance are coming. There may be efforts to reopen parts of the economy – which may trigger additional COVID-19 cases, or medical advancements may be better than expected and economic stimulus may reignite inflation and higher interest rates, and U.S. elections may lead to higher taxes. Meanwhile, the equity market (the S&P 500) has recovered about half its 34 percent decline from the February 19 high.

Life’s rich with uncertainty. If you wait for all uncertainty to go away, so do the opportunities. Have a plan and stick to it – and the second part is often the hardest. Secure your future wisely and stay healthy.

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A Guide to Small Business Relief and Stimulus Programs

When is the coronavirus pandemic going to end? No one knows for certain. Meanwhile, each of us has the job of staying healthy–not only physically and emotionally–but financially as well. COVID-19 continues to have an economic and financial impact on small businesses. Small business owners are struggling to keep their doors open while others have had to close their doors temporarily and some, indefinitely. Thankfully, not all hope is lost. This article is focused on recent economic relief and stimulus packages, and what they mean for small businesses.

The Multiplier Effect

The goals are to keep people and businesses afloat during unprecedented times–keep people employed and jump start a weakened economy. How does an additional $100 to a person stimulate the economy? Imagine that person spends $70 and saves the remainder, and that ratio continues. The next person receives $70, spends $49 and saves $21, and the next person spends $34 and saves $15. The $100 turned into $153 of spending (or consumption)–the multiplier effect. That in turn increases demand, business expands, unemployment drops, 401(k) balances grow, and the skies are blue again.

Coronavirus Preparedness and Response Supplemental Appropriations Act

The Act provided $8.3 billion in emergency funding for federal agencies to respond to the outbreak–75 percent went to research and development of vaccines and diagnostics, and state and local response. It also allowed $1 billion in loan subsides that could enable the Small Business Administration (SBA) to provide up to $7 billion in loans to help small businesses at 3.75 percent and nonprofit organizations at 2.75 percent. They offered long repayment terms of up to 30 years.

Families First Coronavirus Response Act (FFCRA)

The FFCRA is to assist covered employees and families through the end of the year with free coronavirus testing and food assistance. Areas affecting businesses include requiring some employers to provide paid sick and up to 10 weeks of family leave. It provides refundable employer payroll tax credits for the paid sick leave and Family and Medical Leave Act (FMLA), and health insurance costs. Those with fewer than 50 employees may be exempt if offering the leave would risk them going out of business.

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

The CARES Act is $2.1 trillion and intended to relieve the hardship from putting commerce on ice to help “flatten the curve” and public health. The law benefits seven main groups including big business, hospitals and public health, federal safety net, state safety net, state and local governments and education. I’ll focus on two other groups–small business and individuals–with selected highlights.

  • Paycheck Protection Plan ($350 billion) – Allows businesses to borrow enough to cover monthly payroll costs for up to 2.5 months. Portions used to maintain payroll, rent and existing debt could be forgiven as long as employees stayed employed through June.
  • Emergency Grants ($10 billion) – Provides for grants up to $10,000 to provide emergency funds to cover operating needs.
  • Extra Unemployment Benefits ($260 billion) – Increases benefits and broadens who is eligible. Adds $600 per week on top of state benefits and may last for four months.
  • Cash Payments to Individuals ($300 billion) – Income tax credit for up to $2,400 for couples filing joint, $1,200 for individuals, and $500 for children under 17. Adjusted Gross Income threshold amounts are Married Joint $150,000, Head of Household $125,000, and Singles $75,000. Rebate reduced $5 for every $100 over the threshold. Note: Intended benefits may be off target. Say your income in 2018 (or 2019) was high, but 2020 was low due to layoff. Your immediate credit may be small (due to prior year’s high income), and you must wait to file 2020 return for this year’s credit.

If you’re worried about your 401(k) plan balance–hang in there. Getting out means missing out and a reasonable investment strategy will likely mean recovery and then some. If you’re unemployed or a business owner, I hope this article gives you ideas to discuss with your trusted advisors who better know your situation, the laws’ specifics and can explore opportunities. Finally, if you’re considering one of the loan programs, run–don’t walk to your friendly banker. And more government plans are in the works as I write this.

It’s a grind. You may have a bad day today. It may be bad or worse tomorrow. But hang in there. We’ll get through this. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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Common Financial Questions Amid Coronavirus

Life’s a roller coaster and periodically, events occur that disrupt everyday life, business and markets – and it’s advisable to get help in navigating them. COVID-19 (Coronavirus) continues to spread and its impacts are significant. Aggressive efforts are underway to “flatten the curve” – to reduce its spread and not overwhelm the frontline healthcare professionals and emergency responders – and each of us has the responsibility of self-reliance and taking care of ourselves and family.

We don’t know how deep the impacts and how long they will run. However, at some point they will eventually end. Thus, we position first to survive, and second to prepare for the rebound. Below you will find answers to several common questions among our clients to help you navigate the challenges that exist and those that will develop. Hopefully, these questions will help trigger discussions you should have with your family, colleagues and trusted advisors regarding your specific situation.

Are We Going to Be Okay?

Anxiety is high and it’s okay to be scared. Fight or flee is part of our DNA and there is an urge to “do something” in times of stress. “Being okay” is different for everyone. Yes, it’s scary when wealth temporarily goes into hiding as markets correct, or when your employment may be at risk. Now is a good time to focus on why you’re investing. Your goals might include to retire and stay retired, have choices and options, spend more time doing the things you love, or being financially independent and not being a burden to anyone. Often the discussion then shifts from a stressful financial or investment concern to become one about getting more comfortable again, that eventually things are going to be okay, and the action plan is relevant to those goals.

Should I Move to Cash?

Distinguish between the need for liquidity and the urge to bail out to stop the pain. If it’s because your job is in jeopardy or there’s a buy opportunity because your item goes on sale, then that’s why you have emergency reserves safely socked away in a Federal Deposit Insurance Corporation (FDIC) insured account. On the other hand, if it’s the fear that the markets will go to zero then take a moment and reflect. Assuming your goals haven’t changed, why toss out a well thought out investment plan? History tends to repeat itself – bull runs last longer than bear markets and getting out often means missing out. And despite the pain, the U.S. equities market still stands some 3-1/2 times higher than the low coming out of the 2008 Crisis (S&P 500). However, if you had the wrong investment plan to achieve your goals or to allow you to sleep at night, then consider waiting until we hit dry land again – may be bad timing to abandon the life raft (hopefully of diversification) and to jump into the water.

Is It Time to Buy?

The cable news was on one screen showing the world on fire. The other computer screen had analysts excited with exceptional companies selling at cheap prices. Aristotle’s concept of the golden mean says that the truth may lie somewhere in the middle. While there are plenty of uncertainties including the coronavirus, economic recovery, U.S. presidential election, and more – low prices may offer a good entry point for investable cash. Less than a month ago, the equity markets were selling at all-time highs and the economy was relatively solid. Banking cures are in place following the ’08 Crisis, households are less leveraged, and unemployment was low.

Other Issues? We Are All In this Together

These include business adjustments (supply shifts, cancellations, postponements, or other demand shifts), working remotely, and job security to name a few. Self-isolation and social distancing also generate other issues. Stay connected socially (healthy dosage of phone conversation); it’s okay to turn off the news, and take walks in the sunshine.

Most importantly, don’t forget to wash your hands, often and thoroughly. If you spread anything, spread help, compassion and humor. Don’t panic. Like all outbreaks, this too will eventually end. Wishing you safety and shields. Secure a healthy future both personally and financially.


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Should I Revisit My Investment Portfolio Amid the Coronavirus Pandemic?

The Coronavirus pandemic is a main topic of conversation whether you’re at work, with friends or at a family dinner. And while there’s plenty of speculation of how it began or when it will stop, there are concerns of deceleration of economic production, with declines in China (the second largest economy) and travel, and disruption to non-Chinese markets.

So, when is this coronavirus pandemic going to end and is this an investment opportunity or a time to run to safety?

The S&P 500 Index and Dow Jones Industrials fell around 11-12 percent in the course of six days – the last decline of that size took about three months at the end of 2018. Then we had two of the highest single day point gains in history as of mid-week of Super Tuesday. In addition, there’s been a flurry of action for containment from healthcare and pharmaceuticals, travel restrictions, and governments and agencies, including the Federal Reserve Board’s surprise 50 basis point interest rate cut.

Downturns are not fun. Many people want to know if they’re going to be ok financially. While it’s too early to tell the course and severity of COVID-19, history and experience provide valuable lessons that can help you manage through this and future pull backs or declines.

Revisit Your Game Plan

What was your response–to panic sell into a double-digit market drop or did you follow your plan? The investment plan is only one spoke of your personal financial plan. The others include cash flow management, tax reduction, estate planning, risk management (insurance), and using your business and employee benefit programs. Also, changes in the investment plan are driven by your goals and financial plan – not driven solely by market conditions.

Remember Why You Invest – Keep the Big Picture in View

There is no one-size-fits-all financial or investment plan. It should be tailored to your goals including maintain your lifestyle or protect your loved ones – keep them in mind as you make decisions. If your goals are achievable by playing it safe – burying savings in the backyard or bank accounts – then do so. However, if you need to earn a decent return, then you’ll have to take on risk and manage it accordingly. If you can’t sleep at night with that risk, then downshift your goals. It’s pretty simple – life has its tradeoffs.

Retirees – Market Declines Become Bad News if You Have to Sell

Savers should love declines – it’s an opportunity to buy at cheaper prices. But retirees may feel otherwise. Consider fine-tuning your investment plan such that you have plenty of liquidity, investment earnings and cash to fund two or three years of withdrawals. That way you’re prepared for bear markets – your equities will have time to recover and you harvest those gains later. Always consult your investment fiduciary.

We’re in correction territory. If you need to adjust your investment strategies, it’s better to make them before market corrections occur – avoid switching horses midstream. Rather than focusing or worrying about things you cannot control; focus on those that you do. Don’t underestimate the power of human grit and ingenuity. We’ll figure this out and another ‘end of the earth’ crisis du jour will be avoided. Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal

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6 Smart Ways to Make the Best Use of Your Tax Refund

When tax season comes around – one of the most common questions on a taxpayers’ mind is whether they’ll get a tax refund or owe the Internal Revenue Service (IRS) money. This year, the IRS expects around 150 million individual tax returns to be filed. Last year, about seven out of 10 returns filed received a refund with the average being about $2,900. The amount of refund, or balance owed, is dependent upon many factors. Many Americans love getting refunds even though the overpayments are interest-free loans to Uncle Sam. They may consider it part of their annual savings plan or spend it as a treat. Some have less predictable income – such as business owners and salespersons – and they’re glad they don’t owe the government more money.

Here are six smart ways to use your tax refund this year:

1. Invest in Your “Rainy Day Fund”
Discipline and a budget are key. It’s recommended that you have at least three to six months’ living expenses in cash reserves. Retirees might even feel better with a bigger cushion of up to one to two years. This protects you in emergencies and gives you flexibility such as switching jobs or relocating.

2. Payoff Debt
The average American owes $29,800 in personal debt (excluding mortgages). According to a 2019 study by Northwestern Mutual, 15 percent of Americans believe they’ll be in debt for the rest of their life. Credit card and mortgages are tied as the main sources of debt for one out of five. Nearly a third pay more than 15 percent interest on cards and 12 percent say they “always” pay only the minimum required payment (covering interest without paying any principal). Paying off an 18 percent credit card is better than leaving a money market balance earning 1.75 percent.

Tip: Free yourself from debt – List your debts and pay off the smallest balances first (it could be a quicker “victory” for you than attacking the highest interest rates).

3. Save and Invest
Fund your goals such as retirement, college or trade school, home purchase and others. About one in five Americans have less than $5,000 saved for retirement and 56 percent don’t know how much they’ll need to retire comfortably. Participate in your employer’s retirement plan at a minimum to get the “free money” match. Invest savings to match the time horizon – if money is needed in two years for a house, then it may be better to avoid stock funds (volatility) or investments with surrender charges.

4. Protect Yourself
Close the gaps on risks you cannot afford to assume. Are you properly insured (life, disability, umbrella, long-term care, etc.) and is it time to update your will and estate plan? Meet with your general insurance agent and attorney as needed.

5. Treat Yourself
Stop and enjoy how far you have traveled. The refund might not cover a major makeover, but will it cover some repairs for your home or car? Or really treat yourself with a family vacation, enroll in a quilting conference at Asilomar, hire a personal trainer, or see the Aurora Borealis by snowmobile.

6. Good Karma
What can you do to help make this a better place, or make a difference for others? Mother Teresa said, “If you can’t feed a hundred people, then just feed one.” You might not have any debt and giving away a couple hundred dollars might not impact your savings. So, if you’re feeling generous, donate to a charity of your choice or help out a friend in need.

These are some thoughts not only for your tax refund but also for planning ahead. And by the way, bring a latte or bouquet of flowers to your tax preparer or CPA. This is that time of year they’re busy sifting through your boxes of receipts and their families are left to fend for themselves. Albert Einstein once said, “The hardest thing in the world to understand is the income tax.” Secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

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The SECURE Act – Planning Opportunities for Your Retirement

Tax legislation affecting retirement savings happens about every ten years, but how effective are they in getting people to better prepare for their future? The new Setting Every Community Up for Retirement Enhancement (SECURE) Act was designed to expand options for retirement savers. The SECURE Act represents one of the most significant updates to retirement plan legislation since the Pension Protection Act of 2006. New legislation may sound exciting, however, as in most cases, the details are more complicated than what they seem. There are many unanswered questions and we await Internal Revenue Service (IRS) regulations to better tell us how the new laws will work. Nevertheless, this article is to provide a brief summary of key provisions that you should consider discussing with your trusted advisors as well as your tax professionals.

Cast a Wide Net

Encouraging access to workplace plans and expand retirement savings.

  • There are provisions to encourage small employers to adopt plans. For example, an employer may adopt a new plan after year end but before the due date of their tax return. This provision might enable 401(k) adoption by Sept. 31 (extension deadline for corporate returns). However, you may be unable to make deductible employee contributions for that year if Dec. 31 has already passed and payroll is closed.
  • Part-timers (working more than 500 hours) may be eligible to participate in a 401(k). However, it appears there’s no cost to employers (e.g. matching contributions, profit sharing, etc.).
  • There is no age limitation for making individual retirement account (IRA) contributions for those who work later in life (past age 70-1/2). Also, the age for making required minimum distributions (RMD) has been pushed back to age 72 (unless you turned 70-1/2 in 2019).

Disclosure and Information

Providing more information and timely reporting.

  • The Lifetime Income Disclosure Act starting next year is intended to inform the participant what their accumulated 401(k) balance might be worth on a monthly or annual basis. The methodology has yet to be determined, however, we understand it to be a single life, annuity payment without a cost of living adjustments.
  • Penalty for late filing of benefit returns has substantially increased tenfold.

A Hook

Congress wants IRAs and other tax-advantaged accounts for retirement, and not for passing wealth to heirs.

  • Removal of “stretch” IRA provisions for inherited IRAs has been eliminated for most beneficiaries (excluding surviving spouses, minor children up to majority, disabled and chronically ill individuals and individuals not more than 10 years younger than the IRA owner). For example, if your adult children are IRA beneficiaries, they would need to withdraw all funds from the inherited IRA (taxable to them) within 10 years. They can no longer stretch the distributions over their lifetime. This may obliterate IRA trust planning and may encourage unnecessary Roth IRA conversions. For example, do you want to pay your kids’ taxes if they’re likely to inherit your IRA? Also, this may be another reason to revisit the naming of charities versus your loved ones as IRA and Trust beneficiaries.

It’s debatable whether the SECURE Act will move the needle in making more Americans retirement ready. Roughly a third of America has inadequate savings but will small modifications to savings plans be a solution to those with spending problems or rising living costs? It may help those who are responsible and prioritize saving and clearly, this is a nod to product providers. Nevertheless, let’s control what we can control. Secure your future wisely.

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The Top Three Financial Pursuits for 2020

How will your finances change for you this year? There are many paths you can take to reach the peak of your financial goals. A common area of discussion with our clients is managing and living with uncertainty. Financially and in life, you can make assumptions, leave room for a margin of error, set goals, review progress and make adjustments along the way. However, in some situations, uncertainty can paralyze one from taking any kind of action. Although lack of action can be good or bad depending on the situation, it’s often beneficial to think things through with your circle of trusted advisors. This way, you’ll have the opportunity to hear different perspectives, learn from those with more expertise and calculate objectivity.

Follow these three financial pursuits to secure your future wisely:

Solve Your Puzzle

Setting up realistic financial goals is key. If you don’t have any goals, it can lead you somewhere you didn’t want to be. Likewise, setting unrealistic goals can also lead you astray. If you’re unsure how much you’ll need to maintain a comfortable retirement, don’t just estimate based on a wild guess. Not only is that unrealistic, it’ll bring financial stress because you may never achieve your goal.

Successful people plan for the future and adapt as needed. Recall the last time you built a jigsaw puzzle. The box cover served as a guide, the puzzle pieces were spread on the table, and a group – often friends or family – helped you assemble the puzzle. Your puzzle today might be how to reduce debt, save for retirement, exit your business, or care for an aging loved one. Your challenges may be difficult, but if your goals haven’t changed, then stick to your plan. Or perhaps you need to rethink your goals, re-map your action plan, or bring new resources to the table to assist you. Adversity strikes, but the persistent prevail.

Retire Later

The question of when to take Social Security retirement benefits can be complicated. There are generally three key ages for consideration – reduced benefits as early as age 62, 100 percent of benefits at your full retirement age (generally between 66 and 67 depending when you were born) and higher benefits if you defer to age 70. However, it’s estimated that 57 percent of retirees elect to take Social Security early, thereby permanently reducing their benefits from then on.

Consider retiring later. You’re projected to get more money – the estimated lifetime benefit of collecting Social Security at full retirement age is about 20 percent greater than benefits at age 62, and about a third higher if you wait until you’re 70-years-old. Second, the survivor benefits for your spouse could be higher (in the event of your death, your spouse may be entitled to half of your benefit or their own retirement benefit, whichever is greater). And third, your retirement savings may last longer because you’re not touching them until later.

Keep Your Balance

There’s an old saying that says, “Money can’t buy you happiness, but it does bring you a more pleasant form of misery.” Consider balance in two main areas: First, your financial plan is more than celebrating a double digit return on your 401(k). It’s about the tens of thousands of dollars you might save by refinancing your home to a lower rate, shorter term loans or by paying off your credit card and student loan debt. It’s also about:

  • Having the right amount of insurance
  • Naming the proper beneficiaries, guardians, co-trustees and powers of attorney
  • Tax and retirement planning opportunities for you from the new SECURE Act
  • Exit planning for your business
  • Revisiting your philanthropy

A comprehensive personal financial plan helps weave and coordinate many areas of your life. Don’t forget about balancing your career, relationships, well-being, spiritual and personal goals.

May the new year be an opportunity to get things right. Expect the best, plan for the worst and prepare to be surprised. Secure your future wisely.

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Financial Resolutions for 2020

The majority of Americans are setting financial resolutions now. According to a survey by Fidelity Investments, the most popular resolutions are saving more money (53 percent of respondents), paying down debt (51 percent) and spending less (35 percent). Whether you take New Year’s Resolutions seriously or deem them as folly, here are some ways to review and refresh your personal finances along with some lessons I’ve learned over time.

5 Planning Areas

Your financial goals are unique. However, there are general planning areas that apply to most people. Here are five that were outlined in a recent planning article called “New Year’s Financial Resolutions: Get Your Finances in Shape for 2020” and some specific planning implications for you to explore with your family and advisors.

1. Creating a budget for life

Set a budget and create a balance sheet annually to hold yourself accountable. Also, establish cash reserves for big expenses that happen infrequently throughout the year (property taxes and car insurance), planned expenditures (vacations or home improvements) and emergency funds (car repairs or a broken arm).

Implication: How will your budget change as you move through various life cycles or patterns of saving and spending?

2. Managing your debt

Maintain an appropriate and affordable level of debt, and develop the right debt reduction plan.

Implication: Is debt consolidation right for you? Use caution with “consolidating” a five-year car loan and a new refrigerator into a 30-year home refinance or using adjustable rate loans in a rising interest rate market.

3. Optimizing investment portfolios

Have a prudent investment strategy and rebalance investment accounts periodically.

Implication: How to use tools available to you in your 401(k) plan (e.g. savings calculators, “off-the-shelf” target date or life cycle funds, and automatic rebalancing versus customized strategies)?

4. Being prepared for the unexpected

Maintain the right insurance protection including health, life and disability, and casualty coverage.

Implication: Are you reviewing your coverage for adequacy and price competitiveness? How does your income protection change (life and disability) over time? Should you get umbrella liability coverage?

5. Protecting your estate

Update beneficiary designations for retirement accounts and insurance; and review your will, powers of attorney, trusts and titling of assets.

Implication: Planning for death is one thing. How are you planning for living with dignity and independence as you age?

And finally, some lessons I have learned over time:

  1. You’ve got to be the most serious person on the planet about your personal finances.
  2. Run your personal finances like a business.
  3. Time and health are infinitely more valuable than money.
  4. Don’t be afraid of saying “I don’t know” and stay within your circle of competence.
  5. Diversification protects us from the inability to predict the future.
  6. Learn to love what you do (versus doing what you love).
  7. Be humble or life will find a way to humble you.

And I’ll close with one of my favorite quotes from Denis Waitley: “Expect the best, plan for the worst and prepare to be surprised.”

May the new year be a turning point for you. Secure your future wisely.

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Financial New Year’s Resolutions for 2020

The tradition of making New Year’s resolutions originated with the ancient Babylonians about 4,000 years ago. Promises were made to their gods to pay debts and return all borrowed objects. If these promises were kept, they believed their gods would grant them favorable health in the new year. They were also the first to host New Year’s celebrations with a 12-day festival called Akitu when they planted their crops – although their new year began mid-March. As we wait to ring in 2020, I recommend those of us who have not yet retired to save more and follow the teachings of Arkad in George S. Clason’s book titled The Richest Man in Babylon – a classic personal finance book made up of a collection of ancient Babylonian parables. In his book, Clason states that saving at least 10 percent of your earnings is one of the cornerstones of financial independence.

Clason’s book highlights the following Five Laws of Gold:

Save – Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.

Make money work for you and compound – Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

Be cautious and seek expert advice – Gold clingith to the protection of the cautious owner who invests it under the advice of men wise in its handling.

Don’t invest in something you don’t understand – Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.

All that glitters is not gold – Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers.

New Year’s Budgeting Resolutions

Budgeting is a valuable life skill. There are numerous methods including putting pen to paper, creating spreadsheets, and using software. Some of the most popular personal budget software programs include You Need A Budget (YNAB), Quicken, Mint, Acorns, and Every Dollar, among others. The key is to find one that matches your needs and that you will consistently use.

As an example, here are four rules of budgeting used by YNAB:

  1. Give every dollar a job – Where does the money you earn need to go versus where it goes when you emotionally spend?
  2. Save for a rainy day – Debt is not the only option. Set goals for your big and infrequent expenses, including holiday gifts, vacations, property taxes, etc., and fund them monthly.
  3. Roll with the punches – Overspending in some categories does occur. Be flexible and move funds from other categories.
  4. Live on last month’s income – You’ll break the paycheck-to-paycheck cycle by following the other rules. This way, it’ll be easier to pay your bills as they come in.

As you begin to set your financial goals for 2020, we hope you consider saving as one of the top priorities on your list. May your list of worries be shorter than your New Year’s resolutions.

Secure your future wisely.

Posted in Personal Financial Planning, Planning Tips and Goals | Comments Off on Financial New Year’s Resolutions for 2020