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New Status on Pension Plans

Financial professionals and economists have been talking about the “graying of America” and the retirement crisis for at least a couple of decades. Now, it seems, things have reached a tipping point.

Even labor union workers, largely beneficiaries of rich benefits and pension plans, have been hit hard. Throughout the past century, unions set up multiple-employer pension plans so that unionized workers in the trucking, trade, construction, ironworking, carpentry and other industries could change employers throughout their career while staying with the same union and continue accruing pension benefits from job to job.1 Despite that effort, more than 1,400 multiemployer pension plans covering about 11 million U.S. workers have fallen into a financial hole.

For example, a worker who retired in 2009 with 37 years paid into his pension fund was due $4,265 per month for life. However, in 2015 his pension benefit was slashed to $2,217 per month due to underfunding.2

This problem doesn’t just affect pensioners, it affects the nation’s overall economy. According to the National Institute of Retirement Security, each $1 spent on pension benefits supports $2.19 in economic output. In some coal-mining areas, entire towns are supported by union pensioners. In Detroit, nearly a third of income comes from pensions, union retiree health, Medicare and Social Security. If pension plans fail, communities throughout the heartland, including Ohio, Kansas, Pennsylvania, Michigan and Indiana, will suffer immeasurably.3

Union pensions are not the only plans under financial pressure. According to the 2020 Social Security Trustee report, the Social Security retirement trust fund was scheduled to run out of money by 2034. But that estimate was before the pandemic when unemployment and suspended FICA payroll taxes significantly reduced Social Security revenues while at the same time millions of people retired early and began tapping their benefits. The new trustee report, due in a few months, will likely update that depletion date to 2032 or sooner. Without changes, Social Security benefits soon will be funded solely by current payroll taxes, which would reduce benefits by as much as a quarter of previous estimates.4

It may be a good time to review your individual retirement plan to shore up any gaps that may be affected by reduced pension and government benefits. Feel free to contact us to discuss your situation and explore tax-efficient ways to provide more financial confidence to your retirement plans.

The recent $1.9 trillion stimulus bill took a first step to help stabilize pension plans. It authorized funding by the Pension Benefit Guaranty Corporation (PBGC) for eligible multiemployer plans to enable them to pay benefits at plan levels and remain solvent. The funding is being paid out from general revenues of the U.S. Treasury.5

1 Chris Farrell. Marketwatch. March 15, 2021. “The new stimulus bill will help shore up some shaky pension plans.” https://www.marketwatch.com/story/the-new-stimulus-bill-will-help-shore-up-some-shaky-pension-plans-11615586775?mod=home-page. Accessed March 22, 2021.
2 Teresa Ghilarducci. Forbes. March 15, 2021. “What Is The Pension Provision In The Stimulus Package? An Explainer.” https://www.forbes.com/sites/teresaghilarducci/2021/03/15/what-is-the-pension-provision-in-the-stimulus-package-an-explainer/?sh=7fdbc4c257d1. Accessed March 22, 2021.
3 Ibid.
4 Bob Carlson. Forbes. Feb. 22, 2021. “Changes Must Come To Social Security.” https://www.forbes.com/sites/bobcarlson/2021/02/22/changes-must-come-to-social-security/?sh=44501abc15e4. Accessed March 22, 2021.
5 Pension Benefit Guaranty Corporation. March 12, 2021. “American Rescue Plan Act of 2021.” https://www.pbgc.gov/american-rescue-plan-act-of-2021. Accessed March 22, 2021.
6 Jory Heckman. Federal News Network. Feb. 24, 2021. “USPS 10-year plan looks to redefine ‘unachievable’ service standards.” https://federalnewsnetwork.com/agency-oversight/2021/02/usps-10-year-plan-looks-to-redefine-unachievable-service-standards/. Accessed March 22, 2021.
7 Govtrack. Feb. 2, 2021. “H.R. 695: USPS Fairness Act.” https://www.govtrack.us/congress/bills/117/hr695. Accessed March 22, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
 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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Warren Buffett’s Annual Shareholder Letter

Every year, Berkshire Hathaway’s Chairman and CEO Warren Buffett sends a thoughtfully crafted letter to the company’s shareholders from which the investment industry gleans whatever newfound wisdom possible. Given that 2020 was an unusual year by economic, social and financial standards, there is much to glean.

Despite the difficulties the U.S. has experienced in managing the COVID-19 virus, Buffett has one sustaining message: “Never bet against America.” He also is a man who aligns his money with his beliefs. Presently, Berkshire Hathaway owns the highest value of U.S. business assets – comprised of property, plants and equipment – than any other company in the country.1

Berkshire is a conglomerate of disparate companies, and Buffet spends much time in his letter imparting what he’s learned about being a majority shareholder versus running a business. He says that “owning a non-controlling portion of a wonderful business is more profitable, more enjoyable – and far less work.”2

Fortunately, that’s also what it can be like to be an individual investor. While we may not be major shareholders, investors are often rewarded with a slice of the profit pie when we choose a well-run and profitable business. The key, of course, is to pick the right ones. Short-term investors may look to trade high risk for a quick profit, while longer-term investors may seek more reliable performance and give a company plenty of time to deliver. Sometimes it’s a matter of first figuring out what it is you want to accomplish with the money you make and then develop a strategy from there. Let us know if we can help.

One concept Buffett often reiterates is the need to hold a margin of safety when investing. Millions of people who lost their jobs during the pandemic learned just how narrow that margin of safety was within their own households. For those lucky enough to continue working, they may be even better off than before – simply because the pandemic shut down normal spending activities. That means many households are now in a position to reduce their debt and financial risks, and create an emergency fund they may not have had previously.3

Another hallmark move Buffett made in 2020 was an outsized buyback of Berkshire Hathaway’s own shares. The total 2020 tab came to $24.7 billion – compared to the combined total of $6.4 billion from the two prior years. Buffett noted that while he normally shies away from repurchases, the strategy offered “a simple way for investors to own an ever-expanding portion of exceptional businesses.” The strategy proved to be appropriate for an unpredictable year such as 2020.4

And finally, another key component of the shareholder letter was that Buffett admitted to making a big mistake in the past that came to a head in 2020. In 2016, Berkshire purchased aerospace parts manufacturer Precision Castparts for $37 billion. While he still believes the company is the leader of the aerospace industry and will generate solid returns in the future, Buffett cops to an earnings miscalculation that led him to pay too much for the company. 5

1 Yun Li. CNBC. Feb. 27, 2021. “Warren Buffett says ‘never bet against America’ in letter trumpeting Berkshire’s U.S.-based assets.” https://www.cnbc.com/2021/02/27/warren-buffett-says-never-bet-against-america-in-letter-trumpeting-berkshires-us-based-assets.html. Accessed March 8, 2021.
2 Warren Buffett. Berkshire Hathaway. Feb. 27, 2021. “To the Shareholders of Berkshire Hathaway Inc.” https://www.berkshirehathaway.com/letters/2020ltr.pdf. Accessed March 8, 2021.
3 Chris Farrell. Star Tribune. March 6, 2021. “Take advantage of this rare opportunity to reduce financial risk.” https://www.startribune.com/take-advantage-of-this-rare-opportunity-to-reduce-financial-risk/600031093/?refresh=true. Accessed March 8, 2021.
4 Aparna Narayanan. Investor’s Business Daily. Feb. 27, 2021. “Warren Buffett’s Key Investment Strategy Rests On These ‘Family Jewels’.” https://www.investors.com/news/warren-buffett-annual-letter-signals-maintaining-berkshire-hathaway-strategy-2021/. Accessed March 8, 2021.
5 James Leggate. Fox Business. Feb. 27, 2021. “In Warren Buffett’s annual letter he admits making this ‘big’ mistake.” https://www.foxbusiness.com/markets/warren-buffett-admits-making-this-big-mistake-in-annual-letter-to-investors. Accessed March 8, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
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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Anticipation: What Will You Do?

If you’ve been cooped up, masked and socially distanced for the last year, what’s the first thing you want to do to celebrate post-pandemic freedom? Plan a dinner party? Go on a trip? Hug your grandchild? Do your plans involve spending money – like buying a new car or remodeling your kitchen?

A survey conducted by Groupon in the early days of the pandemic found that people were eager to support community businesses. Two-thirds said that even after the pandemic ended, they were planning to spend $100 a week buying local to help the recovery.¹ Is that something you’re planning now, even in the wake of so many new opportunities to shop online?

For many, the simple pleasure of browsing in a store for nothing in particular is an activity they previously took for granted. Given how long many people have resisted going into stores, there is value in simply thinking about where you’d like to go and what you’d like to buy. Experts say there are positive benefits to the simple act of anticipating – whether it’s buying a new pair of shoes or daydreaming about visiting another country. In fact, those uplifting feelings arise by simply buying tickets to a concert or booking a flight for a vacation.²

Similar feelings of anticipation come with retirement planning. Thinking about what you want your retirement to look like and how you’ll spend your days can be both uplifting and motivating.

Despite the challenges we’ve faced throughout the past year, some folks developed good habits they may want to continue even after things return to normal. For example, reading more books, watching more movies, doing daily workouts, walking and riding bikes with family members.

In fact, here are some interesting pandemic statistics that would be great to continue:3

  • From breakfast through lunch, we are more likely to eat with others
  • Lunch is a bigger deal, generally involving more cooking and less microwaving
  • We are cooking at home more and trying out new recipes
  • Increased eating at home has led to eating more healthily

Another new trend in the travel industry is staying longer at destinations. This has occurred for a couple of reasons. First, while many people have been empowered to work from home, many have decided not to stay at home. Instead, they have traveled to different places where they can blend work with a vacation in places they’ve always wanted to visit. Second, some states and countries require new visitors to quarantine for up to two weeks before they can move about freely in public. Obviously, this means staying in that new locale longer than they may have otherwise. As a result, the CEO of Airbnb reports that monthly rentals have become one of the fastest-growing sectors of its business.4

Even fashion purchases seem to be changing due to the pandemic. Retailers say customers have moved away from trendy items and are buying more classic, timeless apparel. They’ve also shown greater interest in brands that tout inclusive and sustainable products in development, manufacturing and/or by contributing a portion of sales to charitable organizations.5

However, some people aren’t seeking to consume more goods and services once the pandemic is over. In fact, their bucket list has taken a more personal turn. The following are some of the things Americans are looking forward to the most, according to a recent survey by The New York Times:7

  • Sitting in a classroom full of students for the chatter, jokes, laughter and even the background noise]The impromptu camaraderie and guidance of life in the office
  • Shaking hands
  • Going on a date
  • Hugging an elderly family member or someone in a healthcare field who has remained in quarantine when not at work
  • Game night; having friends over for pizza; watching a ballgame together
  • Engaging with people not in their immediate family or social circle
1 Groupon. May 20, 2020. “Groupon Survey: Consumers Optimistic About Post-COVID Recovery.” https://www.groupon.com/merchant/working-with-groupon/groupon-in-the-news/states-reopening-post-covid-optimism-survey-groupon. Accessed March 8, 2021.
2 Kat Lonsdorf. NPR. Feb. 20, 2021. “A Bicycle. A Trip. Or Just Pants: The Things We Buy When Pining For Normal Times.” https://www.npr.org/sections/coronavirus-live-updates/2021/02/20/968671326/a-bicycle-a-trip-or-just-pants-the-things-we-buy-when-pining-for-normal-times. Accessed March 8, 2021.
3 Pat Melgares. Drovers. Aug. 12, 2020. “How COVID-19 Changed America’s Eating Habits.” https://www.drovers.com/news/how-covid-19-changed-americas-eating-habits. Accessed March 8, 2021.
4 Marketplace. March 8, 2021. “Airbnb CEO Brian Chesky says post-pandemic, cities might actually want the company around.” https://www.marketplace.org/shows/marketplace-tech/airbnb-ceo-brian-chesky-says-post-pandemic-cities-might-actually-want-the-company-around/. Accessed March 8, 2021.
5 Amy de Klerk. Harper’s Bazaar. Feb. 10, 2021. “Are trends no longer in fashion?” https://www.harpersbazaar.com/uk/fashion/a35436082/how-relevant-are-fashion-trends/. Accessed March 8, 2021.
6 Sara Aridi. The New York Times. Jan. 2, 2021. “What’s the First Thing You Will Do When the Pandemic Ends?” https://www.nytimes.com/2021/01/02/at-home/post-pandemic-firsts.html. Accessed March 8, 2021.
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.
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Changing Infrastructure

Would adding more lanes to the nation’s freeways solve our traffic problems? Consider that the Katy Freeway in Houston has 26 lanes at its widest point, and it still bottlenecks during rush hour.1

Transportation Secretary Pete Buttigieg, the former mayor of South Bend, Indiana, and a 2020 presidential candidate, is President Biden’s pick for addressing the nation’s transportation issues. He recently began discussions pertaining to dismantling less effective highway systems while reimagining mass transportation opportunities – all geared toward building systems that help people without cars get to better jobs.2

One of the innovations that has emerged during the COVID crisis is transportation solutions. In large metropolitan areas relying heavily on subway and metro systems, sanitation and social distancing restrictions have limited access and left workers stranded. In its place, cities such as Milan, Paris, Berlin and Budapest have developed cycling and pedestrian infrastructure to make it safer for walking, bicycling and using electric scooters. New innovations include pop-up bike lanes and free bicycle repair stations located along busy boulevards.3

Would Americans ever give up their cars? Probably not. But the current landscape may make it easier to spend less time driving. For example, with opportunities to work remotely, millions of Americans may stay at home and reduce congested commutes. For those wanting to save money, not owning a car for a few years might be a good solution. After all, the savings in gas, insurance and maintenance could yield several thousand a year – money that could be directed toward your goals and overall retirement income solutions. Let us know if you’d like to learn more.

 Mexico City is looking upward rather than at street level to solve its transportation problems. The city recently launched its first cable-car line – similar to the ones you normally see at ski resorts – to  help serve the poorer outskirts of town. The large, indoor, windowed cars holding 10 passengers each are considered easier and quicker to build than highway and below-ground subway systems. Plus, they can cut straight across the city to get people to their destinations much faster.4

 Above ground, but not quite that high, Miami has erected a 25-mile elevated transportation system to all parts of the city, including the airport, and it has free Wi-Fi for riders.5 Similar to the monorail system used in the Disney parks, the Miami metro just finished a 10-mile, 120-acre landscaped park and urban trail that runs underneath the transport system.6 

1 Abigail Rosenthal. Houston Chronicle. Feb. 12, 2021. “It’s not just you: The Katy Freeway is scientifically awful.” https://www.chron.com/news/houston-texas/article/It-s-not-just-you-The-Katy-Freeway-is-15945843.php. Accessed March 9, 2021.
2 Sam Mintz. Politico. March 8, 2021. “How Biden is betting on Buttigieg to drive a new era of racial equity.” https://www.politico.com/news/2021/03/08/biden-buttigieg-acial-equity-473928. Accessed March 9, 2021.
3 Michelle Watt and Maya Ben Dror. World Economic Forum. June 19, 2020. “For resilient, sustainable city mobility after COVID-19, these trends must continue.” https://www.weforum.org/agenda/2020/06/resilient-sustainable-city-mobility-trends-after-covid-19/. Accessed March 9, 2021.
4 Fox News. March 6, 2021. “Mexico City opens cable car line designed to stretch 6 miles, the latest in Latin America.” https://www.foxnews.com/travel/mexico-city-cable-car-line-6-miles-cablebus. Accessed March 9, 2021.
5 Lori Kahn. Greater Miami Convention & Visitors Bureau. March 18, 2021. “All you need to know about Miami metrorail.” https://www.miamiandbeaches.com/plan-your-trip/transportation/all-you-need-to-know-about-miami-metrorail. Accessed March 9, 2021.
6 Jesse Scott. Conde Nast Traveler. Feb. 26, 2021. “Miami’s Coolest New Hangout Spot Is Under the Metrorail Train Tracks.” https://www.cntraveler.com/story/miamis-underline-first-phase-open. Accessed March 9, 2021.

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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