Medicare is complex with many different moving parts involved. First and foremost, it is always beneficial to gain a solid understanding of your options. There are two main types of Medicare:

·       Original Medicare

·       Medicare Advantage (also called Part C)—Medicare Advantage is a Medicare-approved plan from a private company offering a replacement option for Original Medicare for your health and drug coverage.

·       There are also other types of Medicare health plans for interested parties.

 

Confucious once said, “To know what you know and what you do not know, that is true knowledge.” These are wise words to take to heart, especially when applied to navigating Medicare without being surprised by unexpected pitfalls.

Here are five tips to help you plan and prepare so you do not get caught off guard by the nuances of Medicare.

 

1.     Be aware of avoidable late fees or delays

Have you ever noticed that one or two couples always arrive late at a dinner party? Some people have a tendency of being late. The same is true when it comes to signing up for Medicare. Generally, if you are age 65 or older and receive Social Security benefits, you will automatically be enrolled in Part A. The nuance here, however, is if you don’t sign up for Part A (if you have to buy Part A, and you don’t when you are first eligible for Medicare) and Part B within your eligibility window, your enrollment could get delayed, and you could be subject to a late enrollment penalty.

 

2.     Know what is covered and what is not

Not everything is covered by Medicare. Services that aren’t covered by Part A or Part B will have to be paid for by yourself unless:

• You have a Medicare Advantage or Medicare Cost Plan covering the services.

• You have other coverage, such as, Medicaid.

It is critical to understand that Original Medicare doesn’t cover everything. Several of these services that are not covered include:

• Cosmetic surgery.

• Hearing aids and exams to fit them.

• Long-term care.

• Routine physical exams.

• Massage therapy.

• Eye exams (for prescription glasses).

• Covered items or services you get from an opt-out doctor or other provider (unless it is an emergency).

• Most dental care, such as routine cleanings, tooth extractions, fillings, and dentures. Although, in some cases, Original Medicare may cover some dental services related to specific medical procedures, such as organ transplants, cancer-related treatments, or heart valve repair or replacement.

 

3.     Avoiding HSA and other tax penalties

A health savings account (HSA) is a beneficial tool to have in your financial strategy belt. However, it is helpful to know that you are not eligible to make contributions to an HSA after you have Medicare. Being aware of this can help mitigate the risk of being subject to the “tax penalty.” It would help if you made your last HSA contribution the month before your Part A coverage begins. Pay attention to potential tax penalties for any other aspects of Medicare as well and, reach out to a qualified tax advisor to discuss your specific situation.

 

4.     Do research on ACOs

An ACO (Accountable Care Organization) consists of a group of hospitals, doctors, and other health care providers that have teamed up voluntarily to coordinate your health care. It is a part of Original Medicare and not a separate plan. ACOs are designed to hold providers accountable for the healthcare of their patients, guiding them through the complex healthcare landscape and working to help them save money by recognizing unnecessary tests and procedures. ACOs are not for everybody and its advisable to discuss the financial implications with your financial professional.

Several advantages and disadvantages of an ACO may include:

Advantages:

• Potentially more efficient coordination of care.

• Improved preventive care.

• Potential cost savings benefits.

Disadvantages

• The possibility of implementation challenges.

• Enlisting the help of providers that aren’t a good fit.

• The potential for misdirected incentives amongst the providers.

• Unexpected expensive or low-quality post-acute care.

 

5.     There is no shame in asking for help

Part of helping yourself move forward in the pursuit of your goals is seeking the help of a mentor or someone who has more knowledge than you. When it comes to your finances and how programs like Medicare could impact them, consider consulting a financial professional to determine how your decisions might affect your present and future goals and strategies.

 

Sources:

Medicare and You Handbook 2024

The Pros and Cons of Accountable Care Organizations | Med USA (medusarcm.com)

Top 5 Risks in Accountable Care Organization Models – CPA & Advisory Professional Insights (kaufmanrossin.com)

 

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

The Medicare website (medicare.gov) can be a valuable resource.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions.

LPL Tracking #600255

Do you know who in your business is considered a fiduciary of a company’s 401(k) plan?

Under ERISA guidelines, fiduciaries are anyone with discretionary authority or control over the management of the plan or its assets. This includes individuals with the following roles or titles:

• Plan Sponsors – Commonly the CEO, CFO, or Business Owner

• Plan Administrators – Typically a Benefits Manager, HR Director, or Controller

• Investment Committee Members – Often senior leadership such as Executive Officers or Finance Committee Members

• Trustees of the Plan – Usually Board Members or specially designated Trust Officers

As a fiduciary overseeing your company’s 401(k) or other employer-sponsored retirement plan, you carry significant responsibilities that directly impact the financial wellness of your employees and the compliance of your plan. Ensuring that you follow fiduciary best practices is essential for managing risk, optimizing plan performance, and safeguarding against costly errors or litigation.

With over a decade of experience in plan administration and ERISA compliance, I’ve seen firsthand the complexities and challenges fiduciaries face. Whether it’s making investment decisions, monitoring service providers, or ensuring that you meet regulatory obligations, each decision you make must align with the best interests of your plan participants.

Below is a comprehensive checklist designed to help you stay on track with your fiduciary duties. By following these steps, you can address risk, manage compliance, and provide a high-quality retirement plan for your employees.

 

Fiduciary Checklist

 

1. Basic Fiduciary Duties

 

• Plan Governance: Are you acting in accordance with the documents and instruments governing the plan? 

• Written Procedures: Do you have written procedures for key fiduciary decisions, such as selecting investments or hiring service providers?

• Investment Oversight: Have you established an Investment Policy Statement (IPS) to guide your investment decisions and monitor plan performance?

Your responsibility as a fiduciary means that you must always act in the best interest of your participants and beneficiaries. This includes developing a well-documented, prudent process for decision-making and ensuring that these processes are consistently followed.

 

2. Investment Oversight

 

• Responsibility: Do you clearly know who is responsible for making investment decisions within your plan?

• Policy Documentation: Is your IPS updated, and does it outline the plan’s investment processes and requirements?

• Fiduciary Records: Are you documenting all meetings, discussions, and decisions related to plan investments to demonstrate your adherence to a prudent process?

Your 401(k) plan’s investments should not only meet performance benchmarks but should also comply with fiduciary standards. A robust IPS and thorough documentation are critical for protecting both your plan and yourself from future scrutiny.

 

3. Service Provider Oversight

 

• Periodic Review: Do you regularly review your service providers to ensure they are meeting their performance standards?

• Fee Review: Have you assessed the reasonableness of service provider fees, and do you document any fee negotiations or conflicts of interest?

• ERISA Compliance: Are you familiar with Section 408(b)(2) of ERISA, which requires you to determine whether plan fees are reasonable in light of the services provided?

Regularly reviewing service providers is crucial for ensuring your plan participants receive the best value and service. Document these reviews thoroughly, as they provide important evidence that you are acting in the best interest of the plan.

 

4. Fiduciary Liability

 

• Process Documentation: Are you maintaining a well-documented fiduciary process, including showing that decisions were prudently made and acted upon?

• Legal Counsel: Have you consulted with legal counsel to ensure compliance with ERISA and other retirement plan regulations?

• Liability Management: Have you obtained fiduciary liability insurance to help protect against litigation costs and hired a 3(38) Investment Fiduciary for the plan?

Fiduciary liability is a serious concern. By keeping thorough records, seeking expert advice when necessary, ensuring that you have the appropriate liability insurance, and hiring a 3(38) Investment Fiduciary, you can help mitigate these risks.

 

5. Plan Administrator Responsibilities

 

• Compliance Calendar: Do you have a compliance calendar to track key deadlines, such as filing Form 5500 and nondiscrimination testing?

• Plan Documents: Have you reviewed your plan documents to ensure they reflect current practices and recent regulatory updates?

• Benchmarking: Do you periodically benchmark your plan’s fees and services against industry standards to ensure they remain reasonable?

 

Effective administration is the backbone of a successful retirement plan. Keeping your plan compliant and well-documented helps ensure that you are meeting your fiduciary obligations and protecting both the plan and its participants.

 

6. Employee Support and Education 

 

• Participant Communication: Are you providing ongoing communications about the plan’s investment options, features, and any regulatory changes?

• Educational Programs: Do you offer educational meetings or materials to help employees make informed decisions about their retirement savings?

• Automatic Enrollment: Have you implemented automatic enrollment with a qualified default investment alternative (QDIA) to simplify participation for your employees?

 

A well-designed plan also supports your employees’ financial literacy and encourages participation. Providing educational resources and clear communications helps participants make the most of their retirement savings.

Feeling Overwhelmed by Responsibility?

 

If you’re uncertain about your fiduciary responsibilities or feel behind on these tasks, you’re not alone. Managing a retirement plan is complex, and mistakes can be costly. At Gatewood Wealth Solutions, we specialize in providing ERISA 3(38) Investment Manager services. A 3(38) Investment Fiduciary takes on the responsibility for plan investments and helps ensure your plan operates in compliance with all regulatory requirements.

As a Certified Plan Fiduciary Advisor (CPFA®) with years of experience in retirement plan management, I can help you navigate these responsibilities and help ensure that your plan is positioned for success. Whether you need assistance with investment oversight, compliance, or participant education, our team is here to support you.

Let’s schedule a time to discuss how we can assist you in managing your plan and protecting your business. Reach out today for a complimentary consultation.

 

 

---

Important Disclosures:

This information was developed as a general guide to educate plan sponsors but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

The 401(k) plan is an excellent way for HENRYs, high earners not rich yet, to save for retirement. Hitting the maximum contribution limit is a goal many work toward to reap the benefits of this tax-deferred saving strategy fully.

But what happens after you have maxed out your 401(k) contributions? What are your other options for saving for an independent and comfortable retirement? This article provides additional investment strategies for HENRYs seeking to elevate their retirement savings outside their 401(k) plan.

Additional retirement savings strategies

IRAs

One of the most common options when you’ve maxed out your 401(k) is contributing to an Individual Retirement Account (IRA). An IRA offers similar tax benefits to 401(k), where your contributions grow tax-deferred.

Roth IRA

The Roth IRA differs significantly from traditional IRAs and employer-sponsored 401(k)s, which are funded with after-tax dollars. The benefit of a Roth IRA comes at retirement, as you are able to withdraw funds, both contributions and accumulation, without incurring additional taxes, which is beneficial if you anticipate being in a higher tax bracket upon retirement.

To qualify for a Roth IRA, your income must fall within certain limits, which are adjusted annually. HENRYS must talk to a financial professional to determine if they can invest in a Roth IRA based on their income.

Health Savings Account (HSA)

An HSA is another great supplemental retirement saving strategy. These accounts are used with high-deductible health plans, giving individuals the advantage of triple tax benefits: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. After age 65, non-medical withdrawals are taxed at the regular income tax rate, turning the HSA into a supplemental retirement income account.

Taxable brokerage account

Investing in a taxable account is another saving strategy when you’ve maxed out your 401(k). Although these accounts don’t offer the same tax benefits as 401(k)s and IRAs, they provide increased flexibility in withdrawal times and without penalties. A balanced mix of stocks, bonds, and mutual funds in brokerage accounts can offer substantial accumulation over time.

 

Alternative investments

Suppose you have already maxed out your 401(k) and these above savings strategies. In that case, it may be time to consider alternative investment strategies, like buying a rental property or investing in real estate investment trusts (REITs) or private investments.

These alternative investments can provide a steady source of income and potential appreciation. However, HENRYs must conduct due diligence by consulting financial and tax professionals to ensure these strategies are appropriate for your situation as they come with risks.

Maxing out your 401(k) is a significant achievement toward securing an independent financial future. However, several other investment strategies offer tax advantages and asset accumulation potential so you can continue investing toward your retirement savings goal.

Whether you invest in an IRA, HSA, a taxable brokerage account, real estate, or private investments, the key is maintaining a diversified portfolio to spread risk and increase growth and asset accumulation opportunities. Consider enlisting the help of a financial professional to help navigate these decisions in line with your specific circumstances and objectives.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Alternative investments may not be suitable for all investors and should be considered as an investment for the risk capital portion of the investor’s portfolio. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #597501

Sources:

https://www.investopedia.com/ask/answers/111015/can-you-have-both-401k-and-ira.asp#:~:text=Yes%2C%20you%20can%20have%20both%20accounts%20and%20many%20people%20do,and%20IRA%20each%20tax%20year. 

https://www.bankrate.com/retirement/using-your-hsa-as-a-retirement-plan/#:~:text=If%20you’re%20looking%20to,(k)s%20or%20IRAs

Micah Alsobrook, CPFA®, MBA

Retirement Plan Consultant

Introduction

As competition for talent intensifies in 2024, retirement plan benefits like 401(k) plans are increasingly considered a critical part of employee retention strategies. While salaries and other perks may initially attract employees, retirement plans that align with their long-term financial needs can potentially foster loyalty and engagement.

The SECURE 2.0 Act introduces several key updates to 401(k) plans, aiming to expand access to retirement savings and provide more flexibility for a diverse workforce. This article outlines some of these changes and how they could influence employee retention.

1. Automatic Enrollment: Encouraging Early Participation

Under SECURE 2.0, many new 401(k) plans are required to automatically enroll eligible employees at a contribution rate between 3% and 10%. This provision helps employees begin saving for retirement without needing to take action upon eligibility.

Potential Impact on Retention: Research suggests that automatic enrollment increases plan participation. While this feature may demonstrate a company’s commitment to employees’ long-term financial health, the ultimate impact on retention would depend on various factors, including overall benefit packages and job satisfaction.

2. Minimum Distribution Age: Adjusting for Older Workers

The SECURE 2.0 Act increases the required minimum distribution (RMD) age, allowing individuals to delay withdrawals from their retirement accounts. The age increases from 72 to 73 in 2023 and will further rise to 75 by 2033.

Potential Impact on Retention: For older employees who may continue working past traditional retirement age, this provision may offer more flexibility in managing their retirement funds. However, the extent to which this flexibility influences retention may vary based on individual financial circumstances and career goals.

3. Part-Time Employee Eligibility: Expanding Access

Starting in 2025, part-time employees will become eligible to participate in 401(k) plans after two consecutive years of service, down from the previous three-year requirement under the SECURE Act of 2019.

Potential Impact on Retention: Providing access to retirement benefits for part-time employees may encourage participation, but the overall effect on employee retention will likely depend on how these benefits are integrated with other factors such as wage structure and job stability.

4. Emergency Access to Funds

Beginning in 2024, employees will have the option to make penalty-free withdrawals of up to $1,000 annually from their retirement accounts for emergencies. This feature could provide financial relief during difficult times.

Potential Impact on Retention: While this provision may reduce financial stress for employees, its direct influence on retention is uncertain. Offering access to emergency funds may support employees in times of need, but broader financial well-being initiatives and job satisfaction will likely play a larger role in long-term retention.

5. Small Financial Incentives for Participation

The SECURE 2.0 Act allows employers to offer small financial incentives, such as gift cards or bonuses, to encourage employee participation in retirement plans.

Potential Impact on Retention: These incentives could potentially drive greater engagement with retirement savings, though whether they significantly influence retention remains to be seen. Incentives may create short-term interest, but sustained retention may depend on broader organizational culture and benefits.

6. Roth Matching Contributions

Starting in 2024, employers can offer matching contributions to employees’ 401(k) accounts on a Roth (after-tax) basis. Previously, matching contributions were only allowed on a pre-tax basis.

Potential Impact on Retention: Offering Roth matching contributions provides employees with additional tax-planning flexibility. This option may be appealing to certain employees, particularly younger workers, but the overall effect on retention will depend on individual preferences and financial planning strategies.

7. Student Loan Matching Contributions

Beginning in 2024, employers can match employees’ student loan payments with contributions to their 401(k) plans, even if the employee is not directly contributing to the 401(k).

Potential Impact on Retention: This provision may be attractive to employees burdened by student debt, particularly younger employees who might otherwise prioritize debt repayment over retirement savings. While it could be a helpful tool in employee retention efforts, its effectiveness will vary based on individual circumstances and broader compensation strategies.

8. Catch-Up Contributions for High Earners

SECURE 2.0 mandates that employees aged 50 and older who earn more than $145,000 annually must make catch-up contributions on a Roth basis starting in 2024.

Potential Impact on Retention: High earners and older employees may find this change useful for tax planning, but the overall impact on retention is unclear. This provision primarily affects higher-income individuals, and other retirement plan features are likely to play a larger role in retention decisions.

9. Expanded Catch-Up Contributions for Older Workers

Beginning in 2025, employees aged 60 to 63 will be eligible to make larger catch-up contributions to their retirement plans. The limit will increase to the greater of $10,000 or 150% of the regular catch-up contribution amount.

Potential Impact on Retention: This may provide added value for older employees looking to maximize their retirement savings in the final years of their careers. Whether this provision directly influences retention may depend on how employers communicate the benefit and integrate it into broader compensation strategies.

10. Long-Term Care Insurance Funding

Starting in 2024, SECURE 2.0 allows employees to use up to $2,500 annually from their retirement savings to pay for long-term care insurance premiums without incurring a 10% penalty for early withdrawals.

Potential Impact on Retention: This feature addresses a growing concern for older employees and may offer some peace of mind. Its role in retention is likely to be tied to how it complements other retirement planning options and employee support initiatives.

Conclusion: Monitoring the Long-Term Effects

While the provisions introduced by SECURE 2.0 offer new opportunities for both employers and employees, their ultimate impact on employee retention will depend on how they are implemented and communicated within the broader context of total compensation and job satisfaction. Employers seeking to align their 401(k) offerings with retention goals may benefit from ongoing reviews of plan performance and employee feedback.

At Gatewood Wealth Solutions, we specialize in helping employers navigate the evolving landscape of 401(k) plans, including the latest SECURE 2.0 updates. If you have any questions or need guidance on implementing these changes, our team is ready to assist. Feel free to reach out—we’re here to ensure your retirement plan is optimized for both compliance and employee engagement.

Micah Alsobrook, CPFA®, MBA, is a Retirement Plan Consultant at Gatewood Wealth Solutions. He specializes in helping employers optimize their 401(k) plans to reduce liability, improve employee satisfaction, and stay compliant with evolving regulations.

—

 

This material is being provided as a general template for plan sponsor review. Plan sponsors should seek legal guidance in developing a document specific to their plan. In no way does advisor assure that, by using this template, plan sponsor will be in compliance with ERISA regulations.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

 

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

 

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

LPL Tracking #626475

Most people looking forward to retirement anticipate years of relaxation and fulfillment after decades of hard work. But the reality of retirement is often far different. For many people, retirement may bring financial stress, uncertainty, and the fear of outliving their savings. It’s crucial to understand the current state of retirement preparedness to secure your own comfortable future.

The Stark Reality of Retirement Preparedness

According to the Economic Policy Institute, nearly half of all working-age families don’t have anything saved in retirement accounts.1 Meanwhile, the median retirement account balance for all working-age families is only $5,000. This isn’t nearly enough to sustain even a modest lifestyle in retirement.

The Social Security Administration also reports that about half of all married couples (and seven in 10 single retirees) receive at least half of their income from Social Security.2 But with more people claiming benefits and fewer workers earning them, the long-term future of these benefits is uncertain. This means that for those without a backup plan, placing all one’s eggs in the Social Security basket can be risky.

Meanwhile, people are living longer than ever. This is a positive trend in the abstract, but it means that retirement savings also need to last longer. Many financial experts recommend planning for 20 to 30 years of retirement; but if you retire at 60 or 65, 20 years may not be enough.

Avoid Becoming a Statistic

Start Saving Early

You can’t overestimate the power of compound interest. The earlier you start saving, the more your money can grow over time. Even small contributions can accumulate significantly over decades as long as you stay consistent.

Maximize Retirement Accounts

Take full advantage of tax-advantaged retirement accounts like 401(k)s and IRAs. Be sure to contribute enough to get any employer match, since this is essentially free money.

Diversify Your Investments

Diversifying your investments can help manage risk and improve returns. Consider a mix of stocks, bonds, and other assets tailored to your risk tolerance and time horizon. As you get closer to your target retirement date, you’ll want to gradually shift to more conservative investments to protect your savings from market volatility.

Create a Retirement Budget:

Estimate your retirement expenses, including housing, healthcare, travel, and leisure. Compare this with your projected income from savings, Social Security, and other sources. Adjust your savings goals and investment strategy as needed to bridge any gaps.

Seek Professional Advice:

A financial professional can provide personalized guidance and help you create a comprehensive retirement plan. This person can assist you with investment strategies and tax planning, and address that you stay on track to meet your goals.

In Closing

Retirement should be a time for you to relax and enjoy time with loved ones, not spend sleepless nights worrying about your finances. While the statistics on retirement preparedness are sobering, taking proactive steps now can help you avoid financial strain. Secure your future today, so you can enjoy the retirement you deserve tomorrow.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #600792

 

Footnotes:

1 “The State of American Retirement,” Economic Policy Institute, https://www.epi.org/publication/retirement-in-america/

2 ”The Importance of Social Security Benefits to the Income of the Aged Population,” Social Security Administration, https://www.ssa.gov/policy/docs/ssb/v77n2/v77n2p1.html

A 529 is a tax-advantaged savings plan that gives you incentives to save money to pay for college or other higher education expenses. Pursuing your savings goal may mean the difference between a dorm with central air conditioning or experiencing sweltering summers. Here are some points to keep in mind when navigating your 529 plan.

1. Types of 529 Plans

There are two types of 529 plans, which are college savings plans and prepaid tuition plans.

 

College Savings Plans

These let you save funds in an investment account that has the potential to grow tax-free until you use them for most qualified education expenses incurred when attending a college or university that has accreditation.

Prepaid Tuition Plans

These let you lock in tuition at today’s rates at in-state public universities. Some private and out-of-state colleges also offer guaranteed admission.

2. Tax Advantages

Contributions to a 529 plan enjoy tax-free growth and withdrawals for qualified expenses are also totally tax-free. If your state allows them, tax deductions or credits might be available when you contribute to a 529 plan, so check your state’s rules.

3. Contribution Limits

Incremental post-birth contribution limits vary by state but may be large, up to $300,000 per beneficiary and beyond. Contributions to a 529 plan fall within the annual gift tax exclusion ($18,000 in 2024 per beneficiary)1, and you may make larger contributions (up to $85,000) in a year and elect to treat them as though they were made over five years for lower gift taxes.

4. Investment Options

College savings have a variety of investment mixes, including age-based portfolios that get more conservative when the beneficiary nears college age. Check portfolio performance regularly and adjust as appropriate to the risk tolerance and investment goals.

5. Qualified Expenses

Qualified expenses consist of tuition and fees, course materials (including books, supplies, and equipment), and the expenses of transporting the student to and from the institution. Room and board are qualified expenses if the beneficiary is enrolled at least half-time.

Additionally, K-12 tuition of up to $10,000 a year may be paid at private, public or religiously associated schools. Finally, a 529 account may pay up to $10,000 (over the lifetime of the policy) to repay the designated beneficiary’s or their siblings’ student loans.

6. Changing Beneficiaries

If you have other qualifying family members in mind for the 529 plan, you may make a change to the plan’s beneficiary at any time without penalty. Alternatively, if you want to keep the account open for a future child, you are allowed to change the beneficiary to yourself.

As you know, using any saving vehicle is only valuable as long as you understand how it works. Take the time to read the 529 plan statement and understand your investment options – and then periodically check back to be sure that your plan and investments are still in sync with what works for your needs.

Important Disclosures:

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #600725

Footnotes

1 Gift Tax

https://smartasset.com/estate-planning/gift-tax-explained-2021-exemption-and-rates

Even if you are already retired, it doesn’t mean you should stop trying to grow your savings. Inflation, unexpected medical bills, and changes to your lifestyle or family may result in the need for additional income than you initially anticipated when planning your retirement. While investing is one of the quickest ways to grow your savings, the process may look slightly different when you’re actually actively trying to balance income and savings.

Below are some investment options you might want to consider to make sure your income keeps on growing.

1. CDs

A Certificate of Deposit (CD) is a safe investment tool insured by the FDIC for up to $250,000 and offers a fixed rate of return if held to maturity. To invest in a CD, you would lend your money to a financial institution for a specified period. At the end of the timeframe, you will receive your money back along with interest. While the interest gained is often less than stock investments, it is a great way to safely earn additional money on savings you are not currently using.2

2. Treasury Bills

Treasury bills are another protected investment and are considered one of the safest options in several countries. They are backed by the full faith and credit of the United States, meaning that any funds will be honored no matter the circumstances. The only drawback is if you cash them out before they completely mature, you may lose out on some interest.2

3. High-Yield Savings Accounts

If you have money you would like to earn interest on, but want these funds to be accessible when you need them, then a high-yield savings account may be a smart option. Unlike CDs, you will be able to take out money at any opportunity, and will still earn a high interest rate. In some cases, these accounts will have higher interest rates than CDs.2

4. Fixed Annuities

A fixed annuity only carries a heavy penalty if you withdraw before age 59 1/2. So investing in them in your senior years is a good option. The insurance company that issues them will guarantee the investment, making it safer as long as the company’s financial status is sound. Interest will continue to be paid until your death, which will help you supplement your income.1

5. Money Market Accounts

A money market account is a great way to earn extra on your money without restricting its use. It is a hybrid between a savings and a checking account. It will pay the interest you would get with a savings account, but you will be allowed to access it through checks, debit cards, or both. They are considered safe and FDIC insured, like CDs or savings accounts.1

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05372230

Footnotes:

1 How Can I Make My Retirement Savings Last?, Forbes, https://www.forbes.com/advisor/retirement/make-retirement-savings-last/

2 8 Safe Investments for Seniors, Yahoo Finance, https://finance.yahoo.com/news/8-safe-investments-seniors-200020846.html

If you’re someone who loves nothing more than spending a relaxing day at the beach, you likely hope your retirement plans will let you spend much more time there. By applying ‘beach day’ lessons toward your investment strategies, you’ll be well on your way toward a sunny, sandy future. Below, we discuss several strategies to make investing feel just as stress-free as a beach vacation.

Managing risk

Bodies of water aren’t without their hazards—rip tides, dangerous aquatic life, and potentially harmful UV rays. There are ways to manage or reduce these risks, but it’s important to remain conscious of them and avoid becoming complacent.

Similarly, when choosing investment strategies and vehicles, you need to know what risks are present and how to mitigate them. There is no such thing as a risk-free investment, but by doing research and talking to a financial professional, you’ll be well-prepared for any potential hazards that might try to sneak up.

Planning and preparing

Before you head to the beach, you need a plan—where to go, where to park, and what to bring to make the most of your day. The same holds true for investing. You need to know what you want to accomplish when you want to achieve it, and what resources you need to take you there. This is another area in which discussing your plans with a financial professional can give valuable insight.

Being flexible and patient

Beach conditions can quickly change with weather and tide patterns. Often, this means you must adapt plans at the last minute. Economic and market conditions can also shift quickly, requiring you to adjust your investment strategy to avoid locking in losses.

The same goes for patience. Whether you’re waiting for the perfect wave or holding onto investments during market fluctuations, patience, and persistence are both keys to success.

Learning from your experiences

Every day at the beach—and every investment—can teach something new. You’ll learn strategies that work and don’t work and when to call it quits on a certain approach. Learning from successes and failures will help improve planning and investing skills over time.

By recognizing the parallels between investing for retirement and spending a day at the beach, you can approach both with a common state of mind: careful planning, risk management, and fun along the way.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.

Although many teens are loath to admit it, they rely heavily on advice from trusted adults in their lives—especially their parents. As these teens begin moving out and heading to college, it becomes even more important to set them on a good financial path. Below are seven key pieces of advice every college student should hear from their parents.

You Need a Budget

Encourage your child to create a budget to track their income and expenses. Help them understand the importance of living within their means and prioritizing essential expenses like tuition, housing, food, and transportation.

Avoid Consumer Debt

Without a solid budget, it can be easy to fall into the consumer debt trap—paying with plastic just doesn’t have the same impact as handing over hard-earned cash. With rising costs of food, housing, and college tuition, it’s increasingly easier for young people to take on too much debt when striking out on their own.

Discuss the dangers of taking on excessive debt, including student loans, credit card debt, or personal loans. Encourage your child to minimize the amount they have to borrow at a young age. Your child should also explore any available alternatives, like scholarships, grants, part-time work, or community college, to reduce the need for student loans and credit debt.

Build Credit Responsibly

Teach your child about the importance of building and maintaining good credit. The easiest way to do this is by paying all bills on time, keeping any credit card balances low, and avoiding unnecessary debt. If you have good credit, you can add your child as an authorized user on one of your cards to start building their credit history.

 

Save for the Future

Encourage your child to start saving for their future goals as early as possible. Discuss the benefits of compound interest and the power of regular contributions over time.

Invest in Career Development

Emphasize the value of investing not just in an education but in a lifelong career. The college years are the perfect time for your child to increase their future earning potential and expand the universe of job opportunities. Encourage your child to explore internships, co-op programs, volunteer opportunities, and networking events to gain valuable experience and skills.

Understand Financial Aid

Teach your child how to fill out the Free Application for Federal Student Aid (FAFSA). Filling out the FAFSA accurately and on time will maximize their eligibility for financial aid. You and your child should also understand their financial aid options, including grants, scholarships, work-study programs, and student loans, so you can make the most informed decisions about the cost of attendance.

Protect Personal Information

Teach your child the importance of safeguarding their personal and financial information, especially Social Security numbers, bank account numbers, and passwords. Remind them to be suspicious about being asked to share information online. Your child can also sign up for programs and services that will monitor their accounts for suspicious activity, including identity theft.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article was prepared by WriterAccess.

LPL Tracking #588335

Money management and investment strategy are critical areas that deserve undivided attention, particularly for HENRYs – High Earners Not Rich Yet. This demographic often earns a significant income but has yet to amass substantial wealth due to various lifestyle choices or financial obligations. Moreover, they are usually in the early or middle stages of their careers, which leaves them vulnerable to market volatility and other uncertainties. Here, we outline eight vital tips for HENRYs on money management and investing in a volatile market.

Understand your financial situation.

The first step towards effective money management is understanding your financial status. Money management includes knowing your salary, savings, investments, debts, monthly expenses, and future financial responsibilities. Once you know your financial situation, you can work with a financial professional to create a plan responsive to changing market conditions.

 

Create an emergency fund.

An emergency fund is not just a financial safety net; it’s a source of security and peace of mind. It’s there to support you in case of job loss, medical emergencies, or unexpected expenses. Financial professionals recommend having at least three to six months’ worth of living expenses saved in an easily accessible account. This fund can provide you with confidence and financial stability, even during times of economic downturn or market volatility.

 

Manage debt.

Managing debt is a crucial aspect of financial responsibility for HENRYs. While they may have a significant income, it’s important to avoid accumulating debt without a clear plan for repayment. A high income doesn’t guarantee timely debt payment if it isn’t managed appropriately, which can lead to unnecessary financial stress.

 

Diversify investments.

One of the tried-and-true strategies for weathering a volatile market is diversification. Diversifying your investment portfolio across different asset classes, such as stocks, bonds, real estate, and commodities, can mitigate risk and improve returns. Diversification is not just about spreading your money across different investments; it should also consider geographical regions and sectors.

 

Manage risk.

Investing involves a certain level of risk. However, understanding and managing this risk is crucial, especially in volatile markets. To help manage risk, work with your financial professional to establish a risk tolerance level that helps guide your investment decisions. Always remember that high-risk investments can lead to high returns but can also result in substantial losses.

Another type of risk management to consider is having appropriate insurance coverage, such as property and casualty, liability, health, life, etc. Insurance coverage is imperative to protecting assets and avoiding premature liquidation if an unforeseen event occurs.

 

Keep a long-term perspective.

While short-term market fluctuations can be unnerving, HENRYs should maintain a long-term perspective as they work toward their goals. History has shown that markets tend to rebound over the long term, so emotion-driven reactions to market volatility can harm an investment portfolio.

 

Stay informed.

Staying informed about market trends, financial news, and economic indicators can help make informed financial decisions. Numerous online resources are available to learn more about personal finance and investing. Also, working with a financial professional can help HENRYs stay informed regarding how market volatility may impact their portfolio and goals.

 

Practice patience and discipline.

Finally, patience and discipline are pivotal in managing money and investing, particularly in a volatile market. It’s essential to stick to your long-term strategy and resist the temptation of short-term gains or panic selling.

 

In conclusion, HENRYs have a unique opportunity to accumulate wealth despite market volatility. By implementing these tips and working with a financial professional, HENRYs can navigate market volatility and set sail toward financial independence.

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

 

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

 

Past performance is no guarantee of future results.

This article was prepared by Fresh Finance.

LPL Tracking #588887

If you’re a high earner, you may be interested in partnering with someone with similar education, income, and goals. Becoming a financial “power couple” can help you both achieve your goals sooner. Because money disputes are one of the leading causes of divorce, finding someone with whom you’re financially compatible can smooth the path of your relationship¹. Below, we discuss a few tips to help guide your joint journey.

Open communication is the gold standard for any relationship. But it becomes even more important when both partners have high incomes (especially if those jobs involve high stress). It’s not uncommon for one partner to feel insecure or jealous about another partner’s earning capacity, especially in times of uncertainty. You can build trust with your partner by getting all your emotions—even the negative ones—out on the table.

2. Set Mutual Goals

You and your partner may want to set financial goals that you both aspire to, such as saving for a house, paying off debt, investing for retirement, or starting a business. First, break down these goals into smaller, actionable steps. You can then decide who is best suited to perform each step and hold each other accountable along the way.

3. Create a Budget

One of the biggest advantages of a dual-income household is the ability to save a significant percentage of your salary—expenses like rent or a mortgage don’t double just because two people live there instead of one. This makes it easier to avoid lifestyle creep, which is discussed below.

4. Live Below Your Means

Living below your means allows you to free up funds for savings and investments. Prioritize spending on things that bring value and happiness, not just instant gratification. One rule of thumb when contemplating large purchases is to wait a week and see if you’re still thinking about it. This can help you avoid impulse buys.

5. Maximize Income

You’ll build an unshakable partnership by supporting your partner’s career goals and aspirations and celebrating each other’s successes along the way.

6. Manage Debt Wisely

Work together to manage and pay off any debts like student loans, credit card debt, or mortgage payments. Each dollar that goes toward servicing high-interest debt is a dollar that can’t be used to support your lifestyle or save for retirement, so the quicker you knock out this debt, the better.

7. Protect Your Assets

For many high earners, especially those early in their careers, their biggest asset is their earning ability. This means protecting your assets by getting enough insurance coverage is crucial. This can include life insurance, health insurance, disability insurance, and long-term care insurance. You may also want an umbrella liability policy to protect yourself against claims that exhaust your other insurance coverage options.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

Becoming a parent is a life-changing experience filled with joy, excitement, and new responsibilities.

Amidst the preparations for welcoming your little one, it’s crucial to review and update your various insurance policies. This can potentially provide peace of mind and financial security for your growing family.

 

Health

Before welcoming your baby, review your existing policy to ensure it covers things like maternity care, and assess what coverage you’ll need for pediatric services and subsequent checkups for your baby. Having a child is a qualifying life event, so you’ll be able to add them as a dependent and adjust or upgrade your coverage as needed. Just make sure to check with your provider about deadlines and specific requirements.

Life

Life insurance is a vital component of financial planning for new parents. The primary purpose is to provide a financial safety net for your family in the event of an untimely death. So if you don’t currently have a life insurance policy, now is the time to get one. Assess finances to ensure you purchase a policy, whether it whole or term, that adequately covers the obligations you would leave behind, including mortgage or rent, student loans, and other debts.

Homeowners or renters

With the addition of baby-related items or home upgrades, your home becomes even more valuable. Update your homeowners or renters insurance policy so it covers the increased value of your possessions and property, and be sure to add any new items, including baby gear, furniture, and electronics, to your personal home inventory. Additionally, evaluate your liability coverage to protect against potential accidents or injuries that may occur on your property, such as those involving pools, trampolines, or playground equipment.

Auto

If you’re considering upgrading your vehicle to better accommodate your growing family, make sure to check with your insurance provider about premiums. Depending on the age and size of the car you purchase, your monthly cost could end up being higher or lower. It’s also a good idea to review your current auto insurance policy to ensure it provides adequate liability, collision, and comprehensive coverage, especially if you plan to partake in carpools in the future. And you’ll want to check that your policy provides coverage for a car seat, meaning your insurance provider would likely pay for the cost of a replacement should you ever be involved in an accident.

Disability

Disability insurance can help replace a portion of your income if you become unable to work due to an illness or injury. This can be a valuable tool for new parents since your ability to earn a living is crucial for supporting your child. You can purchase short-term or long-term disability insurance, either of which can go a long way toward helping you and your family through any challenging circumstance.

As new parents, it’s incredibly important to protect your growing family’s financial security. Consider consulting with an insurance professional or financial advisor who can provide valuable guidance in choosing the right policies and coverage amounts for your family’s specific needs, allowing you to better focus on the joys of parenthood without unnecessary financial worries.

 

Important Disclosures

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

This article was prepared by ReminderMedia.

LPL Tracking #1-05374815

For those unfamiliar with the “baby boom,” it is the period that stretches from 1946 to 1964, children born at the tail end of the trials and tribulations of World War II right up to the start of the Vietnam War. It is true that baby boomers are working longer than before; however, as they retire, the impact may be noticeable across the economy.

As baby boomers retire and leave the labor force, their departure could impact the economy in several ways, including:

·       Productivity rates could decrease

·       There could be a shortage of workers

·       The costs associated with an aging population may put a strain on the economy

·       Their exit may create a “talent gap” as decades of industry experience go out the door with them.

 

Despite the uncertainties of the economic future, baby boomers with retirement on the horizon are not sitting idle. They are taking proactive steps to prepare for this new phase of life. Here are a few measures they are implementing:

 

1.      Postponing their retirement

It is becoming more common for baby boomers to put off retiring for a few years to put a little bit more money away. The uncertain economic landscape leaves many wary of how long their money can stretch if faced with unforeseen financial surprises like a recession or depression, consistently rising cost of living, and high interest rates.

 

2.      Create a retirement spending budget

One way of managing your spending in retirement is to determine how much you could have on the date you want to retire. Then, determine how much you can comfortably spend versus your household income after you stop working, such as Social Security benefits, your pension (if you get one), withdrawals from a retirement account, and any other sources of income. You have a number that for your future expenses, you can focus on working toward a lifestyle where you can make that work, for example, downsizing and reducing expenses like utilities, lawn service and landscaping, excessive HOA fees, and more.

 

3.      Review your investment portfolio

As you near retirement, there is a good chance you will have a nest egg built up. You may have a significant amount of that money in a traditional savings account, for example, but you have been interested in something that provides a higher interest rate. Consider reviewing your investment portfolio and modifying it if necessary in pursuit of your financial goals. There is no guarantee that you will earn the returns you anticipate, as all investments have risk.

 

4.      Establish an emergency fund if you don’t have one

It is impossible to predict the future and medical care for people after retirement can be expensive. Having an emergency fund and cash available when needed can help mitigate the risk of insufficient money to cover costs such as medical events. According to Bankrate, more than 1 in 5 Americans have no emergency savings. An estimated one in three had some emergency savings but not enough to cover three months of expenses.

 

5.      Consulting with their financial professional

Nearing retirement can be stressful, especially during uncertain times with a perceptively unstable economy. Whether you feel confident that you saved up enough over the course of your working years or not, consider consulting a financial professional to help you redesign your retirement and savings strategy and stay aligned with your long-term goals.

 

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

 

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

 

Sources:

Bankrate’s Annual Emergency Fund Report | Bankrate

Boomers’ Thoughts About Money? It’s All Going to Be OK (investopedia.com)

1 in 5 Boomers are Delaying Retirement Due to Concerns of Recession | Kiplinger

As Boomers Slow Down, Will the Economy Follow? (investopedia.com)

 

This article was prepared by LPL Marketing Solutions

 

LPL Tracking # 577572

In golf, as in finances, there are a few rules of thumb that may improve your game: keep a level head, avoid traps, practice before trying something new and stay the course. Applying lessons from the golf course to your financial life and vice versa may help you improve your game in both arenas. Here are three tips that may help you work toward success on and off the golf course.

Avoid Hazards

Getting bogged down in a sand or water trap may cause frustration and add many strokes to your ultimate score. While it may not be possible to avoid financial hazards, it is important to do your due diligence before making new investments or any major changes. Before taking a financial step, consider the potential outcomes and the probabilities of each. It may make sense to take several smaller steps toward your goal in some situations instead of taking a long shot that could put everything at risk. In other circumstances, the potential upside of hitting the green on the first shot might overcome the risk of missing.

Find a Good Caddie

When you are on the course, your focus should be on the game with no distractions. Just like a caddie may help you keep your gear safe and accessible and provide you with sage advice on how to work toward your goals, a financial professional might be your partner on your journey in seeking to build wealth. Consider using their assistance for things like rebalancing your portfolio, analyzing your risk tolerance and asset allocation, preparing financial statements, tax documents and other key tasks. Having the help of a financial professional may free up your time to focus on what matters, like playing more golf.

And just like with a golfer and caddie, compatibility between you and your financial professional is the key to a successful relationship. You may need to interview several financial professionals before you find one whose style and methods match well with your own.

Do Not Let a Bogey Send You Off-Course

In life and golf, mistakes are inevitable. But it is important not to let one bogey (or even one bad game) send your attitude into a tailspin. Complications inevitably arise, whether it is an investment that soured, an interruption in income, or a sudden unexpected expense that sends your budget off the rails. What matters is that these problems do not take you away from your short- and long-term goals.

Whenever you encounter a financial bogey, consider what led to it, what it means, and what actions you may take to prevent similar situations from occurring in the future. In some cases, these slips may occur due to no fault of your own, and there may not be much you may do to prevent their recurrence. Instead, you may need to plan and prepare for it. In other cases, there may have been red flags or other warning signs leading up to the mistake, which you may be better able to spot and avoid in the future.

 

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

Asset allocation does not ensure a profit or protect against a loss.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

This article was prepared by WriterAccess.

LPL Tracking #1-05244868

Small business owners face many challenges, which may become even more significant during inflation. As inflation hit new highs in recent years, small business owners are being tested and challenged by high costs and high interest rates that have caused some to close their doors. So, how do small business owners weather the storm of inflation? Here are a few tips to help you get through it.

1. Know Your Numbers

One of the most important tips for small business owners is to know your numbers. As a small business owner, you should know the numbers on your financial statements and balance sheets and understand your cash flow. You also should always have budgets and projections, so you have a basis for comparison and should spot when things start going askew before it is too late to get back on track.1

2. Optimize Your Goods and Services

When costs and interest rates are high, supply chain issues may occur. Managing your goods and services to make a solid profit is vital. Take the time to calculate the revenue and costs of each product and service you offer to determine their gross margin and net profit. Find any poor performers and consider eliminating them so you don’t waste valuable time, material, and resources on products and services that yield little profit.1

3. Know How Inflation Might Impact Other Areas Outside Your Business

Your business is likely to be your top priority, but it is equally important to understand that inflation also affects other areas outside your business. Inflation may affect your ability to borrow, lead to a business slowdown, and drastically affect your pricing models for your products and services. Understanding all the peripheral areas affected by inflation may make your business more resilient and better able to withstand the ups and downs.1

4. Know the Difference Between Strategic and Non-Strategic Spending and Cost-Cutting

In times of disruption, it is easy for business owners to panic and begin cutting costs or spending without developing a plan to either lower company costs or outdo the competition. In either case, spending or cutting costs without following a strategy may lead to severe problems, especially during times of inflation. Always do your due diligence before implementing new spending or cost-cutting measures to ensure they align with the company’s goals and needs.2

5. Automate if Possible

The more work you automate, the more efficiently you can run your business. Perform a time study of each operation in your business. If any operations take longer than they should, or if there would be a more time-saving way to automate them, see if the cost would be worth the time it would save. You may even want to look at your daily tasks to see if there are ways to automate some of your processes to free up time to develop more business for your company.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking # 553066

Footnotes

1  How Small Business Owners Can Navigate Inflation and High Interest Rateshttps://www.uschamber.com/small-business/how-small-business-owners-can-navigate-inflation-and-high-interest-rates

2 6 Strategies to Help Your Company Weather Inflation

https://hbr.org/2021/09/6-strategies-to-help-your-company-weather-inflation

Investing is not just about the numbers; it’s about understanding yourself. Two key factors to consider are one’s ability to take risks and willingness to take risks. While both play pivotal roles in shaping your investment strategy, they cater to different aspects of your financial life.

Ability is an objective measure based on financial standing, while willingness is a subjective reflection of personal comfort and experiences. This blog aims to demystify these concepts, offering insights and a self-assessment tool to help you gauge your own risk profile.

The Ability to Take Risks: A Financial Assessment

Your ability to take risks is determined by your financial resilience—the capacity to absorb losses without derailing your financial independence or lifestyle. It’s influenced by several key factors:

• Debt Levels: High debt can constrict your ability to weather financial storms, as obligations may necessitate the premature liquidation of investments at a loss.
• Emergency Savings: Adequate emergency reserves provide a financial buffer, allowing you to endure investment volatility without needing to cash out investments, especially during down markets.
• Time Horizon: The length of time until you need to access your invested funds can significantly affect your ability to take risks. A longer horizon allows more time for recovery from market downturns.
• Insurance Protection: Proper insurance coverage (health, life, disability) shields against unforeseen financial hits, indirectly supporting a higher risk capacity.
• Income Stability: Consistent and reliable income bolsters your ability to take on investment risks, providing regular contributions to offset potential losses.

Illustrating Ability with Real-World Examples

Consider Anna, a young professional with minimal debt, substantial emergency savings, and a long-term investment outlook. Her stable job and comprehensive insurance coverage position her with a high ability to take investment risks.

In contrast, Brian, nearing retirement with significant debt and limited savings, faces a constrained ability to absorb financial volatility.

Willingness to Take Risks: The Psychological Dimension

Willingness to take risks reflects your psychological comfort with the uncertainty and potential for loss in your investments. It’s shaped by:

• Investment Experience: Familiarity with market dynamics can temper fear, potentially increasing your risk tolerance.
• Financial Knowledge: Understanding how markets operate can empower you to take calculated risks.
• Personal Experiences: Past financial successes or traumas significantly influence one’s comfort with risk.
• Risk Perception: Your view of the current economic and market conditions can sway your willingness to invest aggressively or conservatively.

 

Personalizing Willingness Through Stories

Jennifer, an experienced investor who has weathered several market cycles, possesses a high willingness to take risks, trusting in the market’s long-term growth.

Conversely, Jack, who suffered significant losses in a past downturn, exhibits a cautious approach despite having a solid financial foundation.

Finding Your Equilibrium: Balancing Ability & Willingness

An effective investment strategy aligns your ability and willingness to take risks. Discrepancies between the two can lead to discomfort or missed opportunities. Striking a balance ensures that your investment choices resonate with both your financial reality and your personal comfort level.

Self-Assessment Questionnaire: Gauging Your Risk Profile

To better understand your own risk tolerance, consider the following statements and rate your agreement on a scale of 1 (low) to 3 (high):

1. My debt-to-income ratio is low, giving me financial flexibility.
2. I have emergency savings that cover at least six months of living expenses.
3. My need to withdraw from my investments is more than 10 years away.
4. I have comprehensive insurance coverage to protect against significant financial losses.
5. My income source is stable and expected to remain so.
6. I am comfortable with the potential of losing money in the short term for the possibility of higher returns in the long term.
7. I have experienced market downturns before and remained calm.
8. I actively seek to expand my financial knowledge and understanding of investments.

 

Scoring Risk Tolerance:

• Ability to Take Risks: Sum scores from questions 1–5.
• Willingness to Take Risks: Sum scores from questions 6–8.

 

Interpreting Your Scores:

• High Ability and Willingness: You’re suited for potentially higher-return, higher-risk investments.
• High Ability but Low Willingness: Consider educating yourself on risk management to possibly become more comfortable with taking calculated risks.
• Low Ability but High Willingness: Focus on strengthening your financial base to align your investment strategy with your risk appetite.
• Low Ability and Willingness: Conservative investments might be more aligned with your current financial situation and risk comfort.

Conclusion

Understanding the distinction between your ability and willingness to take risks is crucial for crafting a personalized investment strategy. By assessing both aspects through honest self-evaluation, you can navigate the investment world with confidence, making decisions that align with both your financial objectives and personal comfort level.

A seasoned advisor can offer expertise, perspective, and customized solutions that cater to your unique circumstances. At Gatewood Wealth Solutions, we stand ready to assist you in understanding and striving to optimize your risk profile.

Our team of experienced advisors is equipped to analyze your financial situation comprehensively, taking into account both your ability and willingness to take risks. We work collaboratively with you to develop a robust investment strategy that aligns with your goals and comfort level. Whether you’re seeking to maximize returns or prioritize capital preservation, we’re committed to helping you seek to achieve financial success.

Take the first step toward a more confident financial future. Reach out to Gatewood Wealth Solutions today to schedule a consultation with one of our knowledgeable advisors. Let us guide you toward a path of confidence and prosperity in your investment journey.

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal.  No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Jared Freese, CFP®, CLU®, ChFC®, CEPA

Certified Exit Planner & Wealth Advisor

 

INTRODUCTION

 

Meet John Carter, a seasoned business owner contemplating the sale of his successful tech startup. For over two decades, John has nurtured his business from a fledgling company into a major player in the tech industry. Recently, he’s been contemplating selling his company. While the thought of cashing in on his years of hard work is appealing, it’s mingled with a cocktail of uncertainty, nostalgia, and fear of the unknown. Selling his business isn’t just a financial decision—it’s a personal one, tied deeply to his identity and future lifestyle.

 

THE EMOTIONAL JOURNEY

 

The thought of letting go of his life’s work can be unsettling. John wonders if he is ready to part with his business and whether the sale will support his desired lifestyle. The mix of emotions is overwhelming, making it clear that selling his business is a life-altering decision that extends beyond financial gain.

 

KEY QUESTIONS TO ASSESS READINESS TO SELL YOUR BUSINESS

 

1.       Why am I selling my business? Understanding the underlying reasons for selling-whether for retirement, pursuing other interests, or financial necessity-helps clarify goals and expectations.

 

2.       Is now the right time to sell? Assessing market conditions, industry trends, and the current state of the business can determine whether it’s a favorable time to sell.

 

3.       What is my business truly worth? A professional valuation is essential to set a realistic price and understand the factors that contribute to the business’s value.

 

4.       What are the tax implications of selling my business? Consulting with tax professionals can help minimize tax liabilities and maximize net proceeds from the sale.

 

5.       How will the sale affect my personal financial situation? Understanding how the proceeds from the sale will impact personal finances, retirement plans, and lifestyle is critical.

 

6.       Who should be on my advisory team? Having the right team, including a business broker, investment banker, accountant, financial advisor, and attorney, can guide the process and ensure that all aspects are handled professionally.

 

7.       What information will buyers want to see? Preparing thorough and transparent documentation about the business’s financial health, operations, and market position is crucial for due diligence.

 

8.       How will I find the right buyer? Identifying whether the buyer should be an individual, a competitor, a strategic buyer, or a financial buyer influences the marketing approach and the negotiation strategy.

 

9.       What are my plans after selling the business? Considering life post-sale, including potential new ventures, hobbies, or retirement activities, is important for a smooth transition.

 

10.   How will the sale impact my employees and customers? Planning for the transition to maintain continuity for employees and service for customers can affect the legacy of the business and its continued success under new ownership.

 

HOW GATEWOOD WEALTH SOLUTIONS CAN HELP

 

At Gatewood Wealth Solutions, we understand the complexities involved in selling a business. Our team of Certified Exit Planners, Attorneys, Certified Financial Planner Professionals, and Chartered Financial Analysists are equipped to guide business owners like John through every step of the selling process.

 

SERVICES PROVIDED BY GWS

 

Our team of professionals provide:

 

·       Pre-Sale Financial Planning: Aligning business and personal finances with post-sale goals.

 

·       Business Valuation: Professional analysis to determine and justify your business’s market value.

 

·       Tax Planning: Strategies to minimize taxes before, during, and after the sale.

 

·       Letter of Intent Analysis: Professional review and analysis of LOI proposed deal structures.

 

·       Investment Education: Demystifying the stock market and creating tailored investment strategies.

 

·       Investment Management: Designing investment portfolios focused on preservation of purchasing power and income distribution.

 

·       Emotional and Lifestyle Transitioning: Support in transitioning to life after business, maintaining an identity, and striving to achieve new goals.

 

OVERCOMING RELUCTANCE TO INVEST CASH POST-SALE

 

John Carter, like many business owners, harbors a deep-seated reluctance to invest in the stock market—a realm he perceives as volatile and beyond his control. His comfort zone has always been his business, where he could influence outcomes and directly see the impact of his decisions. This transition from a controlled, familiar environment to the unpredictable nature of the stock market is daunting.

 

EMPOWERING INVESTING THROUGH EDUCATION

 

At Gatewood Wealth Solutions, we understand the trepidation business owners feel about entering the stock market. We tackle this by educating John about investment fundamentals, crafting personalized strategies, and managing investments to generate stable income, ensuring his family’s lifestyle is maintained. Our approach is rooted in education and transparency. We provide:

 

·       Educational Workshops and Resources: We demystify the stock market by explaining its mechanisms, the role of diversification, and the importance of asset allocation. This knowledge empowers our clients to make informed decisions.

 

·       Tailored Investment Strategies: Recognizing that each client’s risk tolerance and financial goals are unique, we craft personalized investment strategies. These strategies are designed not just to preserve wealth but to generate income that supports your family’s lifestyle.

 

MANAGING INVESTMENTS FOR SUSTAINED INCOME

 

Post-sale, the income that once flowed from the business needs to be replaced to maintain the lifestyle John and his family are accustomed to. Our team Chartered Financial Analysts (CFA®’s) and Investment Committee at Gatewood Wealth Solutions manage investments utilizing our cash management and distribution strategy with a keen focus on generating reliable income distributions while remaining confidently invested in the market.

 

COMPREHENSIVE FINANCIAL PLANNING WITH FORECASTS & BENCHMARKS

 

To further instill confidence in the investment process, we develop a comprehensive financial plan for each client. This plan includes:

 

·       Financial Forecasts: We project future growth and income based on current assets and investment strategies, allowing clients to see potential financial scenarios.

 

·       Benchmarks: Regular benchmarks are set to monitor progress and make necessary adjustments. This helps our clients remain on track to meet their financial goals and can adapt to changes in the market or personal circumstances.

 

Our detailed financial plan with forecasts and benchmarks provides John with a clear vision of his family’s financial future, including potential growth and income from investments.

 

SCORING SYSTEM & CALL TO ACTION

 

To help you gauge your preparedness for selling your business, Gatewood Wealth Solutions offers a comprehensive readiness assessment. This assessment scores your readiness across several critical areas, helping you identify gaps and plan effectively.

 

WHY CHOOSE US?

 

Gatewood Wealth Solutions isn’t just a financial advisor; we’re a team of experienced credentialed professionals who care about you and your family. We want to be your partner in this pivotal transition. With our holistic approach, we work so no stone is left unturned in preparing you for a successful sale and a fulfilling transition into your next life’s chapter.

 

ARE YOU READY TO TAKE THE NEXT STEP?

 

Contact Gatewood Wealth Solutions today. Let us help you navigate the complexities of selling your business, ensuring you work towards accomplishing your financial goals and transition smoothly into the next phase of your life.

 

 

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal.  No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

 

Business value estimates are not an official appraisal of a businessʼs value and may not be provided to a third party or used for lending or third party sales. A Business Value Estimate is intended to be used as part of the business planning or personal financial planning process. Business Value Estimates are provided by a third party such that LPL makes no representations regarding the accuracy of the illustrations. LPL does not independently verify the accuracy of the information you provide or of the illustrations presented (149-LPL).

LPL Tracking #577270