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On bright and sunny summer days, the allure of the water can be irresistible. If you live near a lake, river, or ocean, boating trips may be the perfect getaway when warm weather hits. But before you set sail, take some time to consider whether you and your passengers meet the required safety standards and are prepared for any unforeseen events.
Boating can be a lot of fun, but it can also be dangerous. The U.S. Coast Guard reported that last year, there were 4,168 accidents that involved 613 deaths, 2,559 injuries and approximately $55 million dollars of damage to property as a result of recreational boating accidents. The fatality rate was 5.2 deaths per 100,000 registered recreational vessels.
Fortunately, the Coast Guard statistics also reveal that the number of accidents and fatalities seems to be on the decline, as compared to previous years. To further this trend, the Coast Guard offers online boating safety tips at www.uscgboating.org, along with the opportunity to take online boating safety courses and earn certifications.
However, the potential for mishaps and liabilities has made boat owners increasingly aware of the need for boat owners insurance.
A typical boat owner’s policy can provide protection for your boat, motor, and equipment against damages incurred by weather, sinking, capsizing, stranding, explosion, fire, and theft.
A policy can also help safeguard boating equipment, which may include anchors, oars, fuel tanks, life jackets, dinghies, tools, and canopies.
Liability coverage is also offered as legal protection against damages inflicted by the use of your boat, and it may also cover medical treatment needed by your occupants as a result of an accident.
You may choose to add additional coverage to your policy. Some examples of endorsements include emergency services, such as towing and pre-hurricane haul-out.
Additional coverage add-ons could insure personal effects, fishing tackle, and replacement cost motor coverage.
In some cases, discounted policy rates may apply for owners who have taken boating safety courses or have good operating records; or if the age of the boat and the ages of all operators are deemed favorable.
When selecting a boat owner’s policy, ask questions. Some topics you might want to discuss include the following:
When applying for a boat owners insurance policy, be prepared to supply the following information:
Taking a few minutes to answer these questions can help determine the appropriate coverage that will protect both you and your loved ones. Routine safety checks should also be a part of your protection plan.
With the purchase of boat owner’s insurance, you may be a step ahead in protecting yourself from the sometimes unpredictable elements of the sea.
If you need to discuss your boat coverage options, talk to your financial advisor.
Job seekers and HR executives have known for decades that it’s not just about salaries – employee benefits programs are great recruiting and retention tools. But what is considered a great benefits package in 2021 is very different from what was considered a great benefits package 25 years ago.
In fact, with the pandemic disrupting businesses for most of last year and into this year, employers recognize that benefit plans need to adapt even further in order to compete for and retain the best talent.
Let’s examine a few trends to watch this year and next.
The Society for Human Resource Management reported that health insurance premiums have increased by a whopping 54% over the past decade. But employees have eaten most of the increase as they have been hit with about 70% of the increase in premiums. Given how disruptive COVID was to the employment landscape and incomes – plus the disruption to businesses – it is reasonable to assume that both employees and employers cannot afford rising premiums again this year.
So where can healthcare costs be reduced? By contracting directly with service providers rather than going through an intermediary. In other words, employers that have the ability to contract directly with service providers might do so versus going through multiple intermediaries.
For example, the concept of setting up a primary care clinic on site might make economic sense for larger employers, while providing convenience for employees.
COVID-19 forced individuals to utilize telehealth benefits for routine checkups as well as for more specialized care. And while most will say it took some getting used to, most might also admit that the convenience and treatment were both good.
Sure, it was not the same as meeting face to face with your healthcare provider, but telehealth did eliminate travel time and waiting times in doctors’ offices. And it was more efficient for care providers too.
As COVID recedes from our communities, telehealth will not.
Employees have recognized that allowing employees to customize their benefits can actually reduce costs, while allowing employees to feel special.
For example, an employer might offer everyone a basic health package along with a set amount of time off, but then allow employees to add options from a menu of benefits so that their overall package is tailored to their specific needs. These options might include pet insurance or access to legal services, for example. And employees are more likely to help cover the costs of a customized package versus a one-size-fits-all plan.
No doubt you have seen news reports of the increase in mental health challenges given the shutdowns to our nation’s schools and businesses. And the impact to our collective mental health will not simply disappear as more of us get vaccinated. So employers know that helping employees reduce stress will help their bottom line.
Going forward, you can expect to see more Employee Assistance Programs that encourage periodic mental health checkups.
Have you ever wondered how much life insurance is “enough”? One general rule of thumb says that you should buy an amount equal to five to seven times your annual income. Sure, it may be a reasonable guideline, but this method does not relate life insurance needs to your personal financial goals.
A better method may be to implement a “needs analysis.” This process helps you determine the future short-term and long-term financial needs of you and your family. Once your needs have been identified, you can design a plan to help assure that money will be available to meet those objectives.
Needs analysis is not the highly technical financial planning associated with business ownership or planning for the conservation, distribution, and coordination of wealthy individuals’ assets. Rather, it is appropriate for everyone. By assigning a specific dollar value to each item or “need” you want to provide for, needs analysis zeroes in on what may still be required, in terms of additional capital, to get the job done.
Through specific questions designed to identify areas of concern, you will be able to establish your financial priorities. Here are some examples:
For most people, needs typically revolve around attaining and maintaining a comfortable lifestyle. This often translates into a good home, the advantages of a college education for your children, enough income left over for leisure activities, and last but not least, a retirement income sufficient to maintain your lifestyle when your working years are over.
While saving and investing will undoubtedly be part of your overall planning strategy, it takes time to accumulate a pool of capital. One advantage of life insurance is that it creates an instant estate, which helps assure that money will be available to aid in meeting specific goals in case an untimely event (such as an early death) deprives you of the time required for wealth accumulation.
A complete needs analysis helps determine what is important in creating and protecting the lifestyle you and your family enjoy. Even if current income doesn’t stretch far enough to satisfy all of your future financial objectives, the needs analysis process will help you establish and focus on your priorities.
Your insurance professional can guide you through this comprehensive analysis to identify your goals and to show you how life insurance can help to meet each of your objectives. By initiating a plan of action, you can create an estate that will provide financial assets should you no longer be able to do so yourself.
Members of the military have a lot of special financial challenges that most people don't encounter. However, they have access to many benefits, tax breaks and legal protections that can make a huge difference in their families' personal finances. My husband was an Army doctor for 21 years and was deployed three times; many of these resources and benefits helped our family a lot over the years.
Here are ten of the top financial benefits available to service members and how to make the most of them to improve your family's financial future.
Service members have access to one of the lowest-cost retirement savings plans around. The Thrift Savings Plan (TSP) charges an annual expense ratio of just 0.038% of assets - whereas annual fees and expenses for 401(k) plans range, on average, between 1% and 2%.
The TSP lets you choose one of five index mutual funds or a target-date fund, which automatically becomes more conservative as your retirement date gets closer. You can invest up to $18,000 annually in the TSP in 2017, and if you're receiving tax-free income while deployed you can boost your contributions to $54,000 for the year. And now you have access to a Roth TSP, too, which is like a
Roth IRA but without the income restrictions. See www.tsp.gov for details.
The military's Savings Deposit Program (SDP) allows deployed service members to invest up to $10,000 in the program each time they deploy. You receive 10% annual interest, compounded quarterly; the program lasts for up to three months after your return.
Your take-home pay increases while you're receiving tax-free income during deployment, which can help you afford to stash extra money in the SDP. For more information, see the Savings Deposit Program page at the Defense Finance and Accounting Services
web site.
For most people, contributions to a Roth IRA are not shielded from taxes. But for service members receiving tax-free combat-zone pay, your money goes into the Roth tax-free, and your contributions as well as your earnings come out tax-free, a double tax benefit that's tough to beat.
You can contribute up to $5,500 to a Roth in 2017 if your income doesn't exceed certain limits. If your spouse doesn't work, you can contribute up to the maximum on his or her behalf, too.
The Post-9/11 GI Bill covers the full cost of in-state tuition and fees at public colleges for up to 36 months (four academic years), or up to $21,970 per year for private colleges and foreign schools. You'll also get a housing stipend and money for books and tutoring.
The money may be used for undergraduate or graduate programs, or for certain programs at vocational and trade schools. And one of the best features of the Post 9/11 GI Bill is that longtime service members may transfer their benefits to a spouse or children. Get more details on the Post-9/11 GI Bill at the Department of Veterans Affairs website.
Service members have access to one of the lowest-cost life insurance programs available. Service members' Group Life Insurance costs only 7 cents per $1,000 of coverage per month, or $336 a year for the maximum $400,000 -- regardless of your age, health or likelihood of being deployed. (The lowest rate that a healthy 40-year-old man could get for a private $500,000, 20-year term insurance policy would range from $350 to $450.)
Service members can also get $100,000 in coverage for a spouse for as little as $60 a year if he or she is under age 35 (more for older spouses). See the Department of Veterans Affairs site for more information.
The law allows service members to maintain legal residence in one state even if they are stationed in another. So if your legal residence (also called domicile) is a state that has no income tax, you can be shielded from taxes if you move to another state while on active duty.
A spouse who has the same domicile as a service member can also maintain that legal residency if the couple moves to a new state under military orders.
The Service Members Civil Relief Act provides special legal benefits for service members, including an interest-rate cap of 6% on any loans you took out before you were called to active duty. This cap is especially helpful for members of the Reserves who are called to active duty and have to take a pay cut when they leave their regular jobs.
You have to apply to the lender for this benefit, which is intended to help you if your ability to pay is affected by military service. The law also gives you the right to terminate an apartment lease if you have orders for a permanent change of station or are deployed to a new location for 90 days or more. The Armed Forces Legal Assistance Office can help with these requests.
Members of the military have access to Veterans Administration loans, which are now one of the only ways to get a house with no money down (and no private mortgage insurance). See the Veterans Administration site for more information. However, if you put little or no money down, you could end up being upside down on your home if prices drop and you have to move.
For help dealing with underwater homes, see Fannie Mae's advice at the KnowYourOptions.com Military Options page, the government's Home Affordable Foreclosure Alternatives (HAFA) program.
Another big perk for service members is the tax-free housing allowance, a monthly subsidy covering all or part of your monthly rent or mortgage payment as long as you're in the military.To see the value of the subsidy (which varies by your rank, where you live and whether you have dependents), check your Leave and Earnings Statement (your military pay stub) for your Basic Allowance for Housing and other special benefits, or look it up by rank and zip code at the Department of Defense's BAH calculator.
Each branch of the military has an emergency-relief fund that offers small, interest-free loans for emergencies. Contact the community-service office at your base for details, or visit Army Emergency Relief, Navy-Marine Corps Relief Society, Air Force Aid Society or Coast Guard Mutual Assistance. Credit unions on base also offer short-term loans at reasonable interest rates. Some even offer small emergency loans to members of the military with little or no credit check.
However much you make or save now doesn’t promise you a bright financial future. Life is unpredictable.
Follow these 10 tips to help prevent you and your family from money troubles.
See a lawyer and make a will.
If you have a will, make sure it is current and valid in your home state. You and your spouse should review each other’s will – ensuring that both of your wishes can be carried out. If you are divorced and remarried, update your beneficiary designations. Provide for guardianship of minor children, and establish education and maintenance trusts.
Pay off your credit cards.
Almost 40% of Americans carry credit card debt. This is not good for your financial future. Create a systematic plan to pay down your balances. Don’t fall into the “0% balance transfer game” - moving debt from a higher-interest credit card to a lower-interest one. It hurts your credit score, making it harder to get loans and insurance at a good rate. You can avoid an unpleasant increase in your insurance rates by managing your credit wisely.
Buy term life insurance equal to six to eight times your annual income.
Also consider purchasing disability insurance think of it as “paycheck insurance.” This is primarily true for younger folks who have financial obligations to cover with future income. Stay-at-home spouses need life insurance, too. Most people don’t need a permanent policy, such as whole life or universal life, but each family’s needs are different. You should review your situation carefully with an insurance professional (preferably two or more) before making decisions.
Build a 3-to-6-month emergency fund.
This keeps you from having to charge up your credit cards when life’s emergencies strike. In the interim, before you build up your fund, you can establish a home equity line of credit, which allows you to borrow money against your house – this can take the place of part of your emergency fund.
Since projections show that Social Security is only able to pay 77% of promised benefits after 2033, you should adjust what you expect to receive, especially if you are younger than 50. Make up for this by funding your individual retirement account every year. If you don’t fund these accounts annually, you lose the opportunity to increase your tax-deferred savings. Fund an after-tax Roth IRA over a traditional IRA if you qualify.
If offered, contribute to your 401(k), 403(b) or other employer-sponsored saving plan.
Just the same as with your IRA, these are opportunities you should take advantage of to defer funds. In addition, if you don’t participate, you lose the chance to receive any matching funds from your employer.
Use your company’s flexible spending plan to leverage tax advantages.
A flexible spending account allows you to pay for health-care and dependent care expenses with tax-free dollars. You lose the tax advantages for that year if you don’t use your flex plan annually.
Buy a home if you can afford it and maintain it properly.
With every mortgage payment, the equity in your property grows. You’ll have much more to show for your money spent than a box full of rental receipts. The benefits are more than financial – studies show that home ownership adds to peace of mind and improves quality of life.
Use broad market stock index funds to reduce risk and minimize costs.
Indexes are a simple way to diversify. Most importantly, they’re cheap. If you have limited options, for example in your 401(k) plan, make sure that you diversify across a broad spectrum of investments by getting a low-cost index.
Don’t be over-weight in any one security, especially your employer’s stock.
As a rule of thumb, keep exposure to any single stock to less than 5% of your overall portfolio. If you over-expose to a single stock and that company goes bankrupt, you lose a significant portion of your portfolio. It can happen easily. History is littered with good companies that went bad.
As tax season comes to a close, you realize exactly how much you paid in taxes and naturally will ask the question, “what can I do to reduce my taxes next year?”
The very short and simple answer to this question is to consider a portfolio of low-fee, thoughtfully constructed, index mutual funds or exchange-traded funds. Yet not all of them do the job for you. Here’s how to find the right ones.
An index mutual fund is a passively managed fund that tracks the performance of a certain index, such as the Dow Jones Industrial Average, or a broad bond or commodity index.
An ETF is similar to an index mutual fund, but is traded on the stock exchanges, just like a stock. Rather than buying all of the stocks in the Dow Jones Industrial Average or Standard & Poor’s 500, you can simply own an ETF that tracks that index.
Because index mutual funds and ETFs are not actively managed, their fees are generally low – or lower than actively managed mutual funds. Also, their low turnover – how frequently stocks are bought and sold within a portfolio – can provide additional tax benefits as excess trading activity creates the potential for more taxable events.
Consider these three aspects before buying an index fund or ETF:
Decide what you want to own. This is obvious, but not simple. Choosing from the broad number of stock index providers can be overwhelming (the Dow, S&P 500, Russell 2000, MSCI, FTSE, etc.). Therefore, it’s important to understand what markets, countries, regions, industries, sectors and stocks the index fund you buy contains.
Is your goal to own large stocks, small stocks or both? Do you want U.S. stocks, international, emerging market or all of the above?
Just as important, the fund you choose should closely adhere to its benchmark index. The more closely the investment matches that of the desired exposure, the better.
Like actively managed mutual funds, every index fund and ETF has management fees. These fees range from more than 1% to as low as 0.00% per year.
That is not a typo – there are index funds that have zero management fees. And of course, the lower your investment fees, the more of the returns you keep.
Another factor affecting cost is liquidity, or put simply, how easy it is to buy and sell the investment. With mutual funds, this is not an issue because they are bought or sold at the end of each day. For ETFs, which are traded like stocks, their liquidity is a more important issue. If an ETF is thinly traded, to buy or sell, it may be more costly.
This measures how much the taxes you pay on distributions reduce a fund’s return. The lower this number, the better. Morningstar, an industry leader in tracking investments, offers this information for free.
Here is a great explanation taken directly from Morningstar:
“Like an expense ratio, the tax cost ratio is a measure of how one factor can negatively impact performance. Also like an expense ratio, it is usually concentrated in the range of 0-5%. 0% indicates that the fund had no taxable distributions and 5% indicates that the fund was less tax efficient.
For example, if a fund had a 2% tax cost ratio for the three-year time period, it means that on average each year, investors in that fund lost 2% of their assets to taxes.
If the fund had a three-year annualized pre-tax return of 10%, an investor in the fund took home about 8% on an after-tax basis. (Because the returns are compounded, the after-tax return is actually 7.8%.).”
Now that you know what you should keep in mind before investing in index mutual funds or ETFs, here is the tricky part:
And when you add the number of mutual funds to the number of U.S.-based ETFs, that number is over 10,000.
Talk to your financial advisor to find the right ones, along with the right combination, to fit your desired asset allocation and financial plan.
In today’s business climate, it may be more important than ever for companies to operate at maximum efficiency and with a keen awareness of the potential impact of changes in their industry and the economy. Using a SWOT analysis to take a closer look at your company’s internal operations, as well as its position in the marketplace, may help you avoid costly mistakes, improve your management practices, and refine your long-term strategic goals.
The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is a strategic planning tool designed to assist an organization in identifying the internal and external factors likely to affect its ability to achieve its objectives. It can also be used to help management formulate ways to enhance processes and prepare for potential challenges. While some businesses regularly conduct these assessments, a SWOT analysis can be especially helpful prior to making a major strategic decision.
To conduct a SWOT analysis, start by evaluating where your company currently stands in each of the four categories. Under the heading “strengths,” list the areas where your business currently performs exceptionally well or possesses certain competitive advantages. Your company may, for example, have experienced and committed employees, a long history in the community, or products and services that have been shown to be effective. Under the heading “weaknesses,” make a list of areas where your company could show improvement. These weaknesses may include, for example, cash flow problems, high levels of debt, a key employee who is about to retire, or inefficient and aging IT systems.
If you have trouble developing an objective assessment of your strengths and weaknesses, imagine that you are viewing your business from a variety of perspectives, such as that of a client, a vendor, a staff member, or an investor. The comments you have received from others about your business can help you to determine more accurately the areas in which your group excels, as well as those in which improvement is needed.
Next, take stock of the external environment by evaluating potential opportunities and threats. When compiling a list of “opportunities,” think about the possibilities, both large and small, for expanding your offerings or creating new funding streams. These may include, for example, partnering with another business, adding new products, or intensifying marketing efforts in a new target demographic. Under the heading “threats,” list all of the outside influences that could prove detrimental, such as downturns in the economy, shifts in client demand, changes in the legal or political landscape, or natural disasters.
After compiling your own SWOT list, convene a meeting of members of your management team, professional advisors, and a representative group of employees. When discussing strengths and weaknesses, focus especially on where your company stands in each of these areas relative to competitors, the company’s capacity to grow and to take on new challenges, and how your company’s strengths and weaknesses make it more vulnerable—or more resilient—in the face of outside threats.
Once you and your team have compiled a thorough SWOT list, this information can be used by the company to streamline practices and formulate new strategies. A SWOT analysis can help your company build upon its current strengths, make plans to improve areas of weakness, and prepare to avert or cope with potential problems. Besides helping you hone your strategy and strengthen your position in the marketplace, a SWOT analysis can be useful when approaching investors and in improving your relations with board members, employees, and other stakeholders. A thoughtfully prepared inventory of your assets and liabilities, coupled with a strategic plan to act on those findings, can serve as tangible evidence of your management skills and willingness to take the action necessary to ensure that your business continues to meet or exceed its goals.
May 29th marks the nationwide celebration of 529 Day, an opportunity to highlight the many benefits of 529 college savings plans.
As higher education costs continue to soar, many parents find themselves faced with the nagging question, “Will I have enough money to pay for my child’s college education?” One often overlooked savings option is a state-sponsored 529 plan.
These plans offer great tax benefits, while allowing you to contribute substantially higher sums than other savings alternatives.
529 plans generally come in two forms. The first form – prepaid tuition programs – allows participants to lock in tuition rates at eligible state colleges or universities with a lump-sum investment or monthly installment payments. In some states, a portion of the contract value may also be applied to private or out-of-state schools.
The second form – college savings programs – allows contributions to vary. The full value of the account can be applied at any accredited institution of higher education nationwide. Since 529 plans operate under individual state laws, costs and details vary by state.
Some states allow you to set aside over $500,000 per beneficiary (with no income limitations or age restrictions), compared to $2,000 annually per beneficiary for a Coverdell Education Savings Account (formerly known as an education IRA).
Although contributions are not deductible, earnings in a 529 plan grow federal tax-free and are not taxed when the money is taken out to pay for college. Often times, the 529 account must be open for at least 12 months before any money can be withdrawn, so read the fine print. Further, various states may also offer their own tax breaks.
One unique feature of 529 plans is that they allow you to move up to $15,000 out of your estate ($30,000 per couple) annually.
Another unique feature of 529 Plans is that you can make a lump-sum contribution to a 529 plan of up to five times the annual gift tax exclusion ($75,000 in 2020), elect to spread the gift evenly over five years, and completely avoid federal gift tax, provided no other gifts are made to the same beneficiary during the five-year period.
The donor generally retains control of the account and may be assessed a penalty for “nonqualified” withdrawals.
Professional Management. 529 plans offer a “hands-off” savings approach: Funds invested in the plan are professionally managed.
Penalty for Refunds. You will be subject to a federal 10% penalty on the earnings portion of a nonqualified withdrawal. In addition, the earnings on nonqualified withdrawals are taxed at your tax rate and not the student’s. However, you may be able to avoid a nonqualified withdrawal by rolling over the account to a new beneficiary.
Effect on Financial Aid. Any investment may affect a student’s eligibility for financial aid. Earnings withdrawn from a 529 plan are treated as income to the child and will show up on the following year’s financial aid application. Thus, you may want to reserve 529 funds for use in a student’s later years.
Keep in mind, there is no guarantee that any investment portfolio will achieve its investment goals. The value of your 529 account will fluctuate as the value of the mutual fund shares in which it invests fluctuates, so that your investment, when it is withdrawn, may be worth more or less than its original cost. Also, be aware that out-of-state plans may have in-state income tax ramifications.
For more complete information on 529 plans, contact your financial advisor.