Welcome to another installment of What Robin’s Reading — our regular feature that gives you an inside look at what the Robin S. Weingast & Associates team is focusing on to stay up-to-date with benefits and retirement planning news.
This month, we continue to monitor the impact of the Department of Labor’s Fiduciary Rule, but with graduation season upon us, we’re also reading up on the investment and benefit trends among the new crop of job seekers. A recent video by Tony Robbins caught our eye — it contains his opinion on a “must invest” for young professionals. Click here to hear what he has to say.
We also read “Millennials & Financial Literacy—The Struggle with Personal Finance,” a fascinating report on the personal finances of millennials. Based on research conducted by The Global Financial Literacy Excellence Center (GFLEC) at the George Washington University, the report uncovered eight key trends. When it comes to personal finance, millennials:
1. Have inadequate financial knowledge
When tested on financial concepts, only 24% demonstrated basic financial knowledge.
2. Aren’t happy with their current financial situation
When ranking satisfaction on a scale of 1-10, 34% were very unsatisfied.
3. Worry about student loans
When asked about their ability to repay their student loan debt, more than 54% of Millennials expressed concern.
4. Have debt across economic and educational lines
Among college-educated Millennials, a staggering 81% have at least one longterm debt.
5. Are financially fragile
Nearly 30% of Millennials are overdrawing on their checking accounts.
6. Are heavy users of Alternative Financial Services (AFS)
In the past five years, 42% of Millennials used an AFS product, such as payday loans, pawnshops, auto title loans, tax refund advances, and rent-to-own products.
7. Sacrifice retirement accounts
More than 20% of Millennials with retirement accounts took loans or hardship withdrawals in the past year.
8. Don’t seek professional financial help
Even with inadequate knowledge, only 27% of Millennials are seeking professional financial advice on saving and investment.
But the picture isn’t totally bleak for millennials. Another piece from CNBC outlines distinct advantages that the generation has when saving for retirement.
Whether you know a young professional who would benefit from advisement, or you want to make sure your own personal finances are in order, the Robin S. Weingast team is here for you. Contact us today for an appointment. Our team of experts is ready to make sure you and your loved ones are on track to meet your financial goals.
The Department of Labor’s announcement has raised many questions for people who will be affected by the new Fiduciary Rule. To help keep you informed and up-to-date, we’re providing a fact sheet from the DOL as our Resource of the Month. We hope you’ll find this helpful and a great place to get answers to any of your questions.
Click here to download the resource, and be sure to contact us with any questions.
Since March is Women’s History Month, we’re bringing you a special Need To Know post on women and retirement. The gender pay gap in the US and globally is well-documented and a frequent topic of conversation and advocacy. While there is work to be done to achieve compensation equality, women can —and should — take some key steps to ensure financial stable retirements for themselves.
The most important thing for women to do when it comes to retirement is to get informed. The Robin S. Weingast team believes when it comes to retirement planning, knowledge is more than just power — it’s peace of mind. The Women’s Institute for a Secure Retirement (WISER) has a helpful checklist that outlines what women need to know, what women should ask their employers, and what women should discuss with their spouses. Click here to look at their checklist.
Something important to note is that while retirement benefits are offered to more and more full-time employees, women are more likely than men to be working part-time, and so there may be fewer benefits available. The TransAmerican Center for Retirement Studies advises women to consider retirement benefits as part of overall compensation and to advocate for benefits if none are provided.
Once you’re informed about your benefits, it’s time to think big picture and come up with a long-term strategy. A 2015 survey by the TransAmerica Center for Retirement Studies found that almost 60% of all female respondents felt that they were “guessing” when they estimated their retirement needs. That same study found that women estimated their retirement financial needs to be much lower than men’s — even though women live longer than men. Guessing and incorrect estimations can have drastic consequences when it comes to retirement planning. This can mean the difference between being free to enjoy retirement or having to work longer than expected.
Women should make it a point to sit down and articulate their financial goals — including a realistic picture of how much money is needed for retirement — and then determine a savings plan to help achieve those goals. The plan should include your knowledge of your benefits, and should also take into consideration that women are more likely to take time away from the workforce to act as caregivers to children or elder relatives. This will have an impact on your retirement savings and may necessitate some catch-up retirement planning. Revisit our post on making up for lost time with retirement planning to see how you can offset any delays in planning.
Something else women should consider doing when it comes to retirement? Asking for help from a professional. Only 36% of all women polled in the TransAmerica study used a financial advisor, and of that 36%, 77% talked retirement planning with their advisors. A financial advisor is well-versed in the many avenues available when it comes to retirement planning and can help get you up-to-speed on how to maximize your benefits and other savings opportunities available to you.
If you’re ready to have a discussion about your retirement, it’s time to contact the Robin S. Weingast & Associates team. We’ve worked with clients for over 30 years to craft customized retirement and financial plans that will help you do more than just save money, they’ll help give you peace of mind. Contact us today to learn how we can help.
Life insurance has been around for thousands of years. It is believed that the Romans originated the product to fund burials of military personnel who were members of a burial club.
Over time, the reasons for owning life insurance grew more complex, such as to meet estate planning or business planning needs, in addition to personal protection. Product innovations and designs also occurred to meet varying factors, including economic concerns, investment market cycles, medical advances and increases in longevity.
Throughout that time, one proposition has remained constant: None of us know when we’re going to die. Whole life insurance is uniquely positioned to meet that proposition and, thus, has seen a resurgence in popularity because unlike term insurance, it is a permanent life insurance product. And unlike variations of universal life products, it is not subject to interest rate and market fluctuations provided the required premiums are paid.
Once thought of as an expensive form of death protection, whole life insurance lends itself well to various scenarios. Among them:
Scenario 1: Clients who want a higher return with lower risk.
Given current low interests, which are yielding minuscule returns on bank and fixed income financial products, whole life insurance’s cash value growth is now seen as a higher-yielding financial product with similar risk profiles. Yes, it is still life insurance, but the cash value element is often thought of as a bond or CD alternative.
Insurance carriers guarantee an interest rate in cash values. Mutual companies also often provide an annual dividend which is not guaranteed, (although most has paid a dividend every year). The dividend further increases cash values, all of which grows tax-deferred and can potentially be accessed income tax-free through withdrawals to basis and loans thereafter.
Scenario 2: Clients who want a healthy investment portfolio.
Whole life insurance is a non-correlated asset class in a healthy, diversified investment portfolio. For entrepreneurs and more aggressive investors, whole life insurance serves as a counter-balancing force against concentrated positions and aggressive investments.
Scenario 3: Clients who need permanent protection.
The average mortality rate has increased dramatically in recent times due to advances in medical technology, greater access to healthcare, and greater awareness of wellness. As a result, families often realize that there is no standard or finite period to maintain life insurance, such that when the period is over, the “need” or desire somehow goes away.
Other products and designs may not be able to guarantee death benefit coverage through advanced ages without:
• increasing premiums on existing coverage;
• adding to underwriting to get new coverage; and
• reducing coverage on existing policies to maintain the policy and/or premium.
The above shortcomings have led to a renewed awareness of whole life insurance. By design, the death benefit is guaranteed if the premium is paid, thus ensuring the policy will be there when protection is needed. Premiums have been amortized over the expected life of the product so as not to place sticker shock on those who are no longer actively employed but still want and need coverage.
Scenario 4: Clients who have business planning needs.
In business planning situations, advisors and clients have traditionally turned to term insurance to fund buy-sell agreements. Increasingly, however, business owners have discovered that the likelihood of dying while in the business is remote.
It is more likely that the business owner will become sick, injured or leave the business due to retirement or some other life event. As a result, the cash value buildup in a whole life policy is an attractive vehicle to create a sinking fund that will act as a down payment on an installment sale or to supplement a lifetime buyout, while the death benefit ensures funding in the unlikely event of death.
If death does not occur, then the policy can be re-purposed for personal planning use of the departing owner. A well-drafted business continuation plan can address this situation.
Scenario 5: Clients looking for a favorable cost structure.
Overall, costs of a whole life policy are too often misunderstood. As measured by premium outlay, there is no argument that whole life presents the highest premium. However, over a lifetime, whole life insurance generally provides both the highest IRR of premium to death benefit (measured at life expectancy) and also the best cost structure as measured by net present value of premiums relative to cash values.
Scenario 6: Clients who need a “forced” savings vehicle.
As increases in college tuition continue to outpace inflation, and as more individuals and families are realizing they won’t be saving enough in traditional retirement accounts to meet retirement expenses, whole life insurance and its cash value buildup are excellent supplemental sources to accumulate wealth while also protecting the family. The premium payments are often seen as a “forced” savings vehicle.
Thus, there are many reasons why whole life products have enjoyed a resurgence in popularity. For those advisors who don’t typically work with whole life, perhaps a fresh look is warranted. To take a fresh look, contact the Robin S. Weingast & Associates team today. We’re here to help!
Welcome to a new installment of “What Robin’s Reading,” our bimonthly feature that highlights what the Robin Weingast team is reading to stay current and up-to-date on the issues that will most impact our clients and their benefits planning.
The entire Robin Weingast team believes that a key part of our responsibility is to understand what our clients value, what’s on their minds, and what they need to have peace of mind about their benefits and retirement planning. That’s why this month, some recently released studies have captured our attention.
The first is a study from the American Psychological Association that found that money is the leading cause of stress for Americans. This is probably not a surprise to most of us, since as the study indicates, most of us are stressed out about finances! What was surprising to us is that money anxiety crosses all socioeconomic lines. In fact, a recent survey of individuals “with a net worth of $1 million or more by UBS found that while millionaires derive significant satisfaction from the wealth they amassed, they also feel “ever-present fear of losing it all.” This fear and money anxiety take a toll on personal happiness and relationships, and sometimes trick us into making the wrong decisions about planning for our future.
Another recently released study indicates that Americans are saving more, “but the percentage of household savings that went into employer-sponsored retirements plans like 401(k)s fell 7 percentage points to 22 percent in 2014, and households participating in employer-sponsored plans declined to 56 percent last year from 60 percent in 2013.” What’s the reason for the decline? A focus on short-term, unexpected cash needs rather than long-term planning. In fact, there was an 8% increase in households reporting that their savings were being put aside specifically to deal with immediate emergencies that may arise.
We’ve spent time on our Need to Know blog discussing the dangers of not being prepared for retirement (Link 4), and our 30+ years of experience have shown us that a well-structured, attractive retirement plan is a win for everyone — you’ll attract the best staff and they’ll be more prepared for retirement. We also know that knowledge and support are the keys to alleviating anxiety, preparing properly, and achieving peace of mind.
This month’s readings have shown us that now, more than ever, the Robin S. Weingast team’s ability to provide Retirement Peace of Mind is vital. Don’t let anxiety about your future affect your present. Our team is here to help you take a deep breath, plan, and free you up to enjoy the results of your hard work. Whether you want to ensure that you’re on track to meet your future goals, or you want to make sure your retirement plan is structured to ensure that you and your staff are properly prepared for retirement, we can help. Contact us today to learn more.
This month, the Supreme Court issued its ruling on Obergefell v. Hodges, a case that was poised to determine the future of marriage equality in the United States. With their 5-4 ruling, the Court struck down state-level bans on same-sex marriages and mandated that all states must recognize a same-sex marriage, regardless of where it occurred. This means that all married same-sex couples are now entitled to full benefits under the law – in all 50 states (and US territories).
As marriage equality advocates rejoice nationwide, the Robin S. Weingast & Associates team is here to help you understand what this ruling means for planning:
–Healthcare: Someone in a same-sex marriage can no longer be excluded from their spouse’s healthcare, long-term care, or guardianship decisions.
– Taxes: Same-sex couples will now enjoy federal and state-level tax benefits. They can file jointly on the state level – which was not possible previously in states where same-sex marriage was either banned or not recognized – and are eligible to take full advantage of all tax breaks.
– Survivorship: This issue was at the core of Obergefell v. Hodges. Although federal-level benefits have been available to same-sex surviving spouses since 2013, with this ruling, a surviving same-sex spouse will be legally recognized and entitled to all benefits, including those on the state level. This is particularly important when considering governmental benefits, custody of children, and any other financial benefits.
– Intestacy: If a spouse dies without a legally recognized will (known as “intestacy”), the surviving same-sex spouse will have automatic spousal inheritance rights.
Understanding the new benefits available to same-sex couples is just the first step. As always, the Robin S. Weingast & Associates team recommends that all couples plan proactively and prepare themselves for all situations that may arise. Our team is here to work with you and make sure your wishes are followed out at all stages of your life. Contact us today to find out how we can help.
While most of the country was focused on decisions that would impact the Affordable Care Act as well as marriage equality, The Supreme Court’s unanimous ruling in Tibble vs. Edison International changes the amount of fiduciary responsibility that is expected from plan administrators.
The basic framework of the decision asserts “that fiduciaries who select investment options for 401(k) plans have a continuing duty under ERISA to monitor their selections and remove imprudent options.”
For many administrators in the industry, that statement seems fairly obvious; good plan advisors have an obligation to perform a routine evaluation of their investment choices and must make choices that will benefit those covered by the plan.
The piece of the decision that caught the eye of plan administrators nationwide was the justice’s further assertion that prior rulings from the court had “erred by applying a 6-year statutory bar based solely on the initial selection of the three funds without considering the contours of the alleged breach of fiduciary duty.” This has plan administrators wondering what will now be considered sufficient due diligence when it comes to monitoring and removing investment options. Will this decision “reset” ERISA’s six-year review clock?
The long-term implications of the decision are unclear, and some legal analysts are critical that the decision is not that practically applicable and signals a new era of judicial involvement in plan administration.
– A regular review of investments is required with the nature and timing contingent on the circumstances
– A systematic review of investments must occur at regular intervals
– An investment review is to be done in a manner that is reasonable and appropriate to the particular investments, courses of action and strategies involved
– If investments are inappropriate, they must be disposed of within a reasonable time
As plan administrators, The Robin S. Weingast & Associates team takes fiduciary responsibility seriously. Our goal is to be thorough in our review process while being nimble enough to respond what’s happening in real-time. We have the experience and expertise to strike the perfect balance between being fiscally responsible, timely, and cognizant of our client’s business goals.
If you have questions about what this decision means for your plan, please contact the Robin S. Weingast & Associates team today.
Congratulations on making it through April and the ever-busy tax season! It’s hard to believe that 2015 is almost half over, but in a few months we’ll be talking year-end wrap ups and 2016 planning. Before the year gets away from us, the Robin Weingast & Associates team wants to focus on an important, time-sensitive topic that impacts everyone: timely retirement planning.
The general rule of thumb is that earlier is better when it comes to retirement planning. But that’s not always an easy rule to follow. Just last month, expert testimony to the US Senate’s Special Committee on Aging revealed that “nearly half (45%) of Americans have no retirement savings…[and] the median retirement-account balance is only $3,000 for working-age households and only $12,000 for households approaching retirement. In two-thirds of working households with earners between ages 55 and 64 years, at least one earner has saved less than one year’s income for retirement.”
If you suspect that you – or your employees – are unprepared for retirement, there are things you can take to get on track. Before you can properly plan, you need to understand where you actually stand. This is the most important step you can take, because it will determine what comes next for your retirement planning. Use this tool from the AARP; it compiles information about you, your spouse, and your current savings and projects what you will need for retirement and if you’re prepared.
Based on what you find out, it’s time to make some potentially tough decisions. Think about where you can trim expenses and how you can cut down on more significant costs – are you at the stage in life where you can downsize your home or apartment? If you need to make significant decreases to your monthly expenses, try using a tool like this, which walks through standard monthly expenses and gives you tips on how to cut costs. Also consider if you’re maximizing your earning potential. Are there part-time or freelance opportunities that can help you close the gap?
A key part of catching up is making sure you understand your current retirement plan and making sure you’re taking full advantage of what’s available to you. Whether you’re an employee who isn’t fully aware of what retirement benefits your company offers, or a manager who wants to make sure your team understands the full details of a retirement plan, it’s wise to keep the lines of communication open. Schedule regular meetings with HR to make sure that you’re making the most beneficial choices.
Having a team always helps. You can count on the Robin S. Weingast & Associates team for the most effective retirement planning strategies at any stage. Contact us today to see how we can help achieve your goals.
In our final post, let’s look at some other key factors to consider when thinking about adopting a Cash Balance Plan:
1) Profit Sharing Plans on their own allow flexibility for contributions to vary from year to year depending on profitability. Cash Balance Plans require amendment in order to accommodate the need for different levels of contributions. There is a restriction on the frequency of amendments unless a valid economic reason exists.
2) If profits are not expected to support its Cash Balance Plan contribution, then the plan can be amended to accommodate either a lower level of contribution or no contribution at all.
3) Any amendment reducing or freezing contributions must be adopted 30 days before employees complete 1,000 hours. Amendments for increases to contributions must be adopted within two-and-a-half months following the end of a plan year.
4) Qualified plans’ assets are protected from creditors in the event of bankruptcy. The anti-alienation provision of ERISA states that “each pension plan shall provide that benefits provided under the plan may not be assigned or alienated,” which means that the assets in a qualified plan are not available to creditors. Since professionals and business owners often consider asset protection a premium, it is very advantageous to accrue retirement savings in an asset-protected vehicle, like a qualified plan. These plans provide a means for business owners and partners to move assets from their businesses to a pension plan. Once in the qualified plan, these assets are then protected from creditors as a “nest egg” for retirement or to pass on to heirs.
As you can see from our series, Cash Balance Defined Benefit Plans can enhance the effectiveness of your retirement program, but only if they are designed thoughtfully and using state-of-the-art technology and processes. They must also include effective communication and education for your employees.
If you are considering a Cash Balance Defined Benefit Plan, The Robin Weingast & Associates team of enrolled actuaries and certified pension and employee benefit consultants are essential partners who can help you develop and get the most out of a Cash Balance Defined Benefit Plan as part of your retirement program. Contact us today for more information.