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Life at Home is Your Business

With a businessman running against a career politician in this year’s presidential race, one topic of discussion has been the pros and cons of running the country like a business. 

The idea has been broached before, with several past presidents boasting more business than public service experience. In fact, 2012 presidential candidate Mitt Romney once said, “I’d like to have a provision in the Constitution to say that the president has to spend at least three years working in business before he could become president of the United States.”1 

With that said, it may not be a bad idea to consider our own financial situation within the context of running a business.2 For example, you don’t want to carry more debt than your current income can cover, and always be mindful of cutting expenses as a means of increasing your savings. If you’re looking for ways to be confident about your financial future while maintaining your current lifestyle, we can explore insurance options to help you work toward that goal. 

Much like a business, most households possess two types of assets: Their own labor and financial capital. One of the keys is to convert the proceeds from today’s labor into capital to support the family — both now and after you retire.3 

During the recession, 15 percent of millennials were unable to find jobs, adding to the issues they faced while starting out adult life, including some with student loan debt. While many are now employed, millennials, in general, have learned early on the fundamentals of a balance sheet.4 

Regardless of whether they document their finances with a “profit and loss” statement, many are well aware of the necessity of managing incoming revenue against the costs and expenses of their day-to-day lives.5 

Having a constant understanding of where you stand financially is important in your professional and personal life, but in some ways, perhaps it’s better to run our businesses like our households instead of running our households like a business. In other words, have a bit more fun. Stop feeling like we have to earn more just to keep up with neighbors or colleagues, opting to live below our means and focusing on more humble and lower-cost desires. 

For many, wealth is defined by the richness of their lives, the depth of their relationships and the comfort of knowing that they have enough.6 

Content prepared by Kara Stefan Communications. 

1 Kara Ohngren Prior. Entrepreneur. Feb. 15, 2016. “8 U.S. Presidents Who Started as Entrepreneurs.” https://www.entrepreneur.com/slideshow/224122. Accessed July 28, 2016.
2 Ken Clark. Investopedia. 2016. “Run Your Personal Finances Like a Business.” http://www.investopedia.com/articles/pf/08/run-finances-like-business.asp. Accessed July 28, 2016.
3 Douglas McCormick. Knowledge@Wharton. July 14, 2016. “Family Inc.: Bringing Business Lessons Home.” http://knowledge.wharton.upenn.edu/article/family-inc-bringing-business-lessons-home/. Accessed July 28, 2016.
4 Mark P. Cussen. Investopedia. May 19, 2016. “Money Habits Of the Millennials.” http://www.investopedia.com/articles/personal-finance/021914/money-habits-millennials.asp. Accessed July 28, 2016.
5 Winnie Sun. Sun Group. March 31, 2016. “5 Surprising Millennial Money Stats.” http://sungroupwp.com/2016/03/31/5-surprising-millennial-money-stats/. Accessed July 28, 2016.
6 Libby Kane. Business Insider. July 26, 2016. “7 signs you’re rich, even if it doesn’t feel like it.” http://www.businessinsider.com/signs-youre-rich-even-if-it-doesnt-feel-like-it-2016-7. Accessed July 28, 2016. 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Entrepreneurs on the Rise

Entrepreneurship plays a vital role in the growth of the U.S. labor market. The number of jobs created from startups peaked in the late 1990s before declining steadily through the first 10 years of the 2000s.1 However, from the ashes of the recession comes a phoenix of entrepreneurship. 

In a recent study, 66 percent of American millennials reported wanting to start their own businesses.2 Admittedly, one of the best times to take risks is when you’re young and have little to lose, but inexperience and lack of capital make it tough to get a business off the ground. However, today’s “gig,” “on-demand,” online economy is highly conducive for startups. Recent estimates project the number of people working these types of independent jobs will rise to 7.6 million by 2020 — up from 3.2 million Americans today.3 

One major question budding entrepreneurs must answer is, “what do I want to be when I grow up?” Youth may be the time to take some risks, but few young adults have identified the means by which they intend to make their fortune and mark in the world. Alas, that sage advice to “do what you love” can take some time to figure out; many college grads don’t know what that is yet.4 

While out in the workforce gaining experience, their entrepreneurial efforts may span the range of freelance writing and graphic design to starting their own house cleaning, moving, landscaping or childcare business.5 

While jobs like this are popular starter options for people just entering the working world, they can also be attractive to recent retirees looking to stay busy. The appeal to both demographics is that they can make a little supplemental income without the strict, 40-hour-a-week schedule. 

For those taking on the responsibility of a startup company, the environment is promising. Today’s top five industries for startups are technology services, advertising and marketing, business products and services, health and software. Fortunately, today’s young companies are growing fast, with more companies reaching 50+ employees within the first five years and new firms have added about 200,000 more jobs to the economy than last year.6 

Content prepared by Kara Stefan Communications. 

1 U.S. Bureau of Labor Statistics. April 28, 2016. “Entrepreneurship and the U.S. Economy.” http://www.bls.gov/bdm/entrepreneurship/entrepreneurship.htm. Accessed July 14, 2016.
2 Jared Meyer. Forbes. July 20, 2016. “Millennials Want To Be Entrepreneurs, So Why Aren’t They Starting Businesses? Part 1.” http://www.forbes.com/sites/jaredmeyer/2015/07/20/millennials-entrepreneurship-starting-businesses/#1c92f54421f9. Accessed July 14, 2016. (Paste link into browser to access article.)
3 Alex Chriss. Entreprenuer.com. Jan. 7, 2016. “Why the Self-Employed Will Finally Have a Bigger Voice in 2016.” https://www.entrepreneur.com/article/254656. Accessed July 14, 2016.
4 Paula Di Rita Wishart. Inside Higher Ed. July 11, 2016. “Cultivating a Career Calling.” https://www.insidehighered.com/advice/2016/07/11/how-identify-your-career-calling-essay. Accessed July 14, 2016.
5 Rose Leadem. Entreprenuer.com. May 19, 2016. “9 Low-Cost Business Ideas for College Students.” https://www.entrepreneur.com/slideshow/278674. Accessed July 14, 2016.
6 Lydia Dishman. Fast Company. May 19, 2016. “This Is The State Of Entrepreneurship In 2016.” http://www.fastcompany.com/3060037/the-future-of-work/this-is-the-state-of-entrepreneurship-in-2016. Accessed July 14, 2016. 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 

 

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What’s New With Social Security?

Before the Bipartisan Budget Act of 2015 passed, the Social Security Disability Insurance Trust Fund was projected to be depleted sometime this year. 

Congress shifted tax revenues from the Old Age and Survivors Insurance Trust Fund to keep disability benefits fully funded. However, Social Security still faces long-term shortfalls under currently scheduled funding and expenditures.1 

While Social Security disability benefits are a good backstop, you may wish to consider purchasing your own disability insurance, particularly if you’re self-employed. And since government disability benefits don’t kick in for at least five months (and even a private insurance policy may have a waiting period), you also should consider setting aside an emergency fund. 

If you’ve retired and are taking Social Security benefits, but also have other substantial income such as wages, self-employment, interest or dividends, you may owe federal income taxes on Social Security benefits. Joint return taxpayers with a household income between $32,000 and $44,000 could pay income taxes on up to 50 percent of benefits. If reported income is more than $44,000, you may have to pay taxes on up to 85 percent of your benefits.2 

If you’re receiving Social Security benefits but have not yet reached full retirement age, earning extra income could result in some of your benefits being withheld. For example, if you earn more than $15,720 a year, $1 in benefits will be withheld for every $2 in earnings above that limit. The year you hit full retirement age, both your earnings limit and benefit amount increase, and in the following years, there’s no limit on earnings.3 

Last April, two strategies that had long helped married couples optimize their Social Security benefits came to an end: 

  • File and suspend – file for spouse but earn delayed credits on their own benefit
  • Restricted application – full retirement age beneficiary files for spouse only benefits 

However, the suspend strategy remains intact for divorced couples: If an ex-husband or wife decides to suspend his or her benefit, the ex-spouse can still apply for a derivative benefit if eligibility requirements are met.4 

In other Social Security news, on July 7, Rep. Walter B. Jones (R-NC) introduced H.R. 5670: Social Security Guarantee Act of 2016. This bill, which was assigned to a congressional committee for consideration, is designed to guarantee the right of individuals to receive Social Security benefits in full with an accurate cost-of-living adjustment each year.5 

Talk to a financial professional and a tax advisor about how Social Security benefits can fit into your complete retirement income strategy. We are able to provide you with information but not guidance or advice related to Social Security benefits. Our firm is not affiliated with the Social Security Administration or any governmental agency. 

Content prepared by Kara Stefan Communications. 

1 Social Security Administration. 2016. “A Summary of the 2016 Annual Reports.” https://www.ssa.gov/oact/trsum/. Accessed Aug. 5, 2016.
2 Social Security Administration. 2016. “Benefits Planner: Income Taxes and Your Social Security Benefits.” https://www.ssa.gov/planners/taxes.html. Accessed July 12, 2016.
3 Social Security Administration. 2016. “Fact Sheet.” https://www.ssa.gov/news/press/factsheets/colafacts2016.pdf. Accessed July 12, 2016.
4 Rachel L. Sheedy. Kiplinger. February 2016. “Government Spells Out New Social Security Rules.” http://www.kiplinger.com/article/retirement/T051-C000-S001-government-spells-out-new-social-security-rules.html#. Accessed July 12, 2016.
5 Congress.gov. July 7, 2016. “H.R.5670 – Social Security Guarantee Act of 2016.” https://www.congress.gov/bill/114th-congress/house-bill/5670/text. Accessed July 12, 2016. 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 

 

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America’s Founders: Entrepreneurs and Opportunists

Our nation’s forefathers were reputed for their progressive views, business-minded principals and pursuit of independence through the establishment of a new government. It might help to consider these tenets as we aim for our own goals in our careers and retirement. 

Earlier this year, author Edward Lenge published a book based on the writings of America’s first president. The book, titled “First Entrepreneur: How George Washington Built His — and the Nation’s — Prosperity,” offers tremendous insights into how this former military general and entrepreneur approached his job as “CEO” of the country. For example:1 

  • His mom infused in him the principle that industry and morality should work in concert.
  • He approached running the United States as if he were running a business, with the goal of long-term success and sustainability.
  • When he first became President, there was much political division, uncertainty and fear. Washington’s priorities were to build up the nation’s credit, establish a stable currency, build the national infrastructure and keep the peace.
  • One of his first tasks was to eliminate the country’s international debt, then equivalent to trillions in today’s dollars.
  • To tackle the debt issue, he hired Alexander Hamilton to work with him in a capacity much like today’s Federal Open Market Committee. Washington set the goals and strategy, while Hamilton developed many of the concepts for implementing economic policy.
  • Washington advocated free trade, believing that interconnected reliance would help various factions realize common interests and work together for peaceful relations.
  • Washington grew to oppose slavery, believing that oppression restricted motivation and innovation, which would hold back the nation in the long run.
  • He was a fan of gathering, classifying and disseminating information about business and experimentation, with an emphasis on transparency (he would have loved the internet).
  • He opposed the development of political factions, believing they would be detrimental to national peace.

It’s no coincidence that Washington and our other forefathers enjoyed success in a variety of fields. After helping to obtain our nation’s independence, our earliest Presidents and political leaders have an impressive list of accomplishments, and not just in the political realm.

Our second President, John Adams, became an extremely successful lawyer after he defended the perpetrators of the Boston Massacre. His top-notch client list included wealthy merchants, politicians and the country’s elite.2

Our third President, Thomas Jefferson, created dozens of inventions designed to simplify farming on his estate in Virginia. These included the iron plow, the dumbwaiter, a Great Clock, a pasta roller to make macaroni and contributions to early versions of the polygraph machine.3

John Hancock was not just a wealthy merchant but also a well-known smuggler. Part of his motivation for the American Revolution was to avoid excessive taxes levied by the British government. He later became a politician in an effort to effect change on a more political and diplomatic level.4

Among dozens of other inventions, Benjamin Franklin is the father of insurance in America. In 1752 he co-founded The Philadelphia Contributionship, the first mutual fire insurance company in America.5 The company was responsible for setting new standards for housing construction to help eliminate fire hazards.6

Although the nation has changed in countless ways over the past couple centuries, some of the core values America was founded on remain the same. There are more opportunities than ever available to those who work hard and maintain an entrepreneurial mindset.

Content prepared by Kara Stefan Communications.

1 Knowledge@Wharton. April 19, 2016. “George Washington: America’s First Entrepreneur.” http://knowledge.wharton.upenn.edu/article/ed-lengel-george-washington-myths-book/. Accessed July 8, 2016.
2 John Adams Historical Society. 2016. “After the Boston Massacre.” http://www.john-adams-heritage.com/after-the-boston-massacre/. Accessed July 8, 2016.
3 FamousInventors.org. 2016. “Thomas Jefferson.” http://www.famousinventors.org/thomas-jefferson. Accessed July 8, 2016.
4 EpicTimes.com. Jan. 23, 2016. “John Hancock’s Critical Role in the American Revolution.” http://www.epictimes.com/01/23/2016/john-hancocks-critical-role-in-the-american-revolution/. Accessed July 8, 2016.
5 The Philadelphia Contributionship. 2016. “Company History.” http://www.contributionship.com/history/index.html. Accessed July 8, 2016.
6 Andrew Beattie. Investopedia.com. Sept. 11, 2014. “The History of Insurance in America.” http://www.investopedia.com/articles/financial-theory/08/american-insurance.asp. Accessed July 8, 2016. 

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Will New Health Care Provisions Hold Up Long Term?

New incentives and physician payment updates put in place by the Medicare Access and CHIP Reauthorization Act have helped fix short-range physician payment issues, but as the Boards of Trustees for Medicare noted in its June 22 report, these changes raise some long-term concerns.1 

The board is concerned these measures will not adjust for economic conditions such as inflation, or for the normal upward trend of physician costs. In addition, the board questions how much the Patient Protection and Affordable Care Act will help in the long run. 

The act contains 165 provisions designed to reduce costs and improve the quality of care delivered through the Medicare program. The Trustees believe the cost-reduction measures will continue to work if health care providers are able to realize productivity improvements at a faster rate than experienced historically. However, it’s their opinion that if the health sector can’t transition to the more efficient models of care delivery currently being tested, the availability and quality of health care for Medicare beneficiaries may suffer.2

The good news is that, since 2008, national health spending growth in the U.S. has been below historical averages, even when you factor in that more people now have health insurance coverage.3 

That said, even a healthy 75-year-old can expect to spend upward of $5,000 per year in out-of-pocket medical expenses.4 Naturally, that number is much higher for any retirees who suffer a chronic condition at some point. 

One thing to consider when planning for retirement is how you will pay for possible increased health care expenses. Some insurance products, such as life insurance and annuities, provide various options you may want to consider. We’d be happy to discuss your options based on your unique situation.

As more baby boomers transition from private health care plans into the Medicare system, Medicare Advantage (MA) — the managed-care version of the program — has grown exponentially. More than half of those MA beneficiaries are covered by the four largest insurers in this space: UnitedHealth Group, Humana, Kaiser Foundation Health Plan and Aetna.

This demographic has provided MA insurers with significantly more taxpayer-funded revenue, which many are investing to improve the quality of their plans. For example, UnitedHealth projects that 80 percent of its Advantage members will in 4- to 5-star plans by 2018.5 

Likewise, Medicare is continuing to improve with initiatives for quality care, including its recent announcement of a new Oncology Care Model. The new payment program encourages greater collaboration and information sharing among health care providers, while at the same time lowering costs.6 

Medicare and its partner insurance companies have led the charge to reduce costs and improve care via these types of values-based payment programs. It is projected that 90 percent of all Medicare payments will be tied to quality/value criteria by 2018.7 The goal of this criteria is to base physicans’ pay on their ability to achieve better clinical outcomes for their patients, and not waste money doing it. That’s something from which we can all benefit. 

Content prepared by Kara Stefan Communications. 

1 The Boards of Trustees for Medicare. June 22, 2016. “2016 Medicare Trustees Report.” https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2016.pdf. Accessed July 1, 2016.
2 Ibid.
3 Ibid.
4 Robert Berger. U.S. News & World Report. Jan. 29, 2016. “Retirement Spots With Affordable Health Care.” http://money.usnews.com/money/blogs/on-retirement/articles/2016-01-29/retirement-spots-with-affordable-health-care. Accessed July 1, 2016.
5 Bob Herman. ModernHealthcare.com. March 26, 2016. “Largest Medicare Advantage plans bulk up even more.” http://www.modernhealthcare.com/article/20160326/MAGAZINE/303289995. Accessed July 1, 201