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U.S. Supply Chain Crunch

Throughout the past 60 years, the microchip has influenced the manufacturing of a wide variety of products that touch nearly every consumer these days. From computers to cell phones to cars, the chip is now the most critical and costly component of modern-day electronic devices. However, the majority of chip production occurs overseas, which means that manufacturing and shipping delays caused by the COVID-19 pandemic have created a global shortage. Large corporations such as General Motors, Volkswagen and Samsung report that the current bottleneck in the supply chain could slow production for the rest of this year — or even longer.1

Delays due to the global pandemic have caused many supply chain problems in the past year. In a recent communication, big-box retailer Costco reported reduced deliveries of a number of popular products such as cheese, seafood, olive oil, furniture, sports equipment and gardening supplies. Basically, inventory shipping from overseas continues to be challenging due to freight container shortages and port delays. As a result, shipping costs have skyrocketed, with higher prices passed on to customers.2

In late March, the situation was exacerbated as the Japanese-owned container ship Ever Given got stuck in the Suez Canal for six days. This created a backup of more than 350 ships waiting their turn to sail through the narrow waterway. Freight vessels either had to wait in a holding pattern or reroute around the southern tip of Africa to get to their destinations.3

The Suez Canal sees approximately 10% of the value of global trade traverse its waters, which equals about $10 billion in goods per day. Economists say that the mere six-day holdup may lead to months-long further delays in the global supply chain. In the U.S., we may once again experience shortages of the universally coveted toilet-paper roll. While most imports from Asia to U.S. use the quicker travel route through the Pacific Ocean to California, parts that are shipped from Asia and assembled in Europe are likely to experience the delay of finished products delivered from Europe to the U.S.4

Fortunately, in response to global supply chain delays caused by the pandemic, President Biden issued an order for a 100-day review of the nation’s supply chains in February of this year. As part of his recently proposed infrastructure and jobs plan, Biden is looking to shore up reliable supply chains to help boost domestic manufacturing, especially for raw materials needed for advanced batteries, pharmaceuticals, critical minerals and semiconductors. The country’s current dependence on these imported goods poses both national security and economic risks. In response, Biden is looking to create more domestic raw material production opportunities and work with international suppliers to stabilize those supply chains.5

 If you are interested in discussing the global supply chain and its effects on your retirement, please give us a call. 

1 Ian King, Debby Wu and Demetrios Pogkas. Bloomberg. March 28, 2021. “How a Chip Shortage Snarled Everything From Phones to Cars.” https://www.bloomberg.com/graphics/2021-semiconductors-chips-shortage/. Accessed April 2, 2021.
2 Grace Kay. BusinessInsider. March 10, 2021. “Costco has a shortage of imported cheese thanks to shipping container constraints and delays at major US ports.” https://www.businessinsider.com/costco-cheese-shortage-shipping-containers-port-delays-supply-chain-2021-3. Accessed April 2, 2021.
3 Matt Leonard. SupplyChainDive. April 1, 2021. “Timeline: How the Suez Canal blockage unfolded across supply chains.” https://www.supplychaindive.com/news/timeline-ever-given-evergreen-blocked-suez-canal-supply-chain/597660/. Accessed April 2, 2021.
4 Paul Davidson. USA Today. March 27, 2021. “Suez Canal blockage could intensify shipping delays, lead to shortages of toilet paper, coffee and other consumer goods.” https://www.usatoday.com/story/money/2021/03/27/suez-canal-shipping-snarl-could-spark-toilet-paper-coffee-shortages/7030623002/. Accessed April 2, 2021.
5 Josh Boak and Tom Krisher. AP News. Feb. 24, 2021. “Biden orders a review of US supply chains for vital goods.” https://apnews.com/article/joe-biden-business-global-trade-health-coronavirus-pandemic-b08eb8f76932cc71049732ddd60a035d. Accessed April 2, 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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Social Security Proposals and Strategies

As the Social Security Trust Fund approaches its expiration date, many existing entities are offering helpful suggestions for funding alternatives. For example, the Association of Mature American Citizens (AMAC) recommends a combination of changing how cost of living adjustments are made, delaying retirement age and updating the delayed credit strategy. Among its proposals, the AMAC also advocates establishing a new “Social Security Plus” account — a personal retirement savings account that begins paying out at age 62. Specifically, this account would:1

  • Be funded on a strictly voluntary basis by both employees and employers
  • Be owned by the individual
  • Provide a tax deduction for employer contributions
  • Allow after-tax contributions by employees with tax-free withdrawals (similar to a Roth IRA)
  • Be funded via payroll deduction

Alicia Munnell, director of the Center for Retirement Research at Boston College and a respected individual in the retirement income field, advocates a long-term approach to solving the pending Social Security shortfall. While she does not advocate cutting benefits, Munnell believes that the only way to fund full benefits for the next 75 years is to raise current payroll taxes.2

Those who have already retired are less likely to be affected by changes to the Social Security system than those who are currently preparing for retirement. It’s important to have your own plan for an independent retirement income stream, separate from government benefits, to ensure your needs will be covered. Feel free to reach out to learn more about current income vehicles that can help secure your financial future.

In a recent proposal for funding Social Security, President Biden proposed:

  • Raising the guaranteed minimum benefit to 125% of the federal poverty level
  • A 5% increase for retirees who have been drawing benefits for at least 20 years
  • Enhancing payouts to surviving spouses by 20%
  • Boosting the annual cost-of-living adjustment for benefits

Biden proposes paying for benefit increases by levying FICA taxes on workers who earn more than $400,000 a year. Other proposed ideas include imposing FICA taxes on income above $142,800 (which is currently the limit for this tax), gradually increasing the payroll tax rate from the current 12.4% to 14.8%, reducing benefits for those with higher lifetime incomes, reducing cost-of-living adjustments, and limiting benefits for spouses and children of higher-income earners.3

Those are all proposals that, in some form, may likely change the future Social Security landscape. Those nearing retirement can utilize a couple of strategies now that may not be as lucrative once proposed changes are made.

One option is the delayed credit that accrues if you wait until age 70 to draw benefits. Now that people are living longer, this accrual strategy, which was implemented by the Social Security Administration back in the 1950s, produces a substantially higher advantage for retirees who delay drawing benefits and then live to a ripe old age. In fact, waiting until age 70 can make lifetime benefits worth 76% more than claiming them at age 62. This actuarially enhanced perk is available only until benefits are adjusted to match to today’s longer life expectancy.4

Also be aware that widows and widowers do not necessarily have to wait until age 62 to begin taking Social Security benefits based on the earnings of an eligible spouse who passed away. A surviving spouse can begin drawing the deceased spouse’s benefit at age 60, then switch to his or her own benefit later (if higher). They can even wait until age 70 for the delayed credit and begin taking the enhanced benefit at that point.5

1 Association of Mature American Citizens. 2021. “The Combined Social Security Guarantee and Social Security Plus Initiative.” https://amac.us/social-security/. Accessed March 30, 2021.
2 Jane Wollman Rusoff. ThinkAdvisor. March 14, 2021. “Alicia Munnell: Biden’s Social Security Tax Hike Plan Falls Short.” https://www.thinkadvisor.com/2021/03/19/alicia-munnell-bidens-social-security-plan-falls-short/. Accessed March 30, 2021.
3 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=50094aa115e4. Accessed March 30, 2021.
4 Investopedia. Dec. 21, 2020. “How Much Can I Receive From My Social Security Retirement Benefit?” https://www.investopedia.com/ask/answers/102814/what-maximum-i-can-receive-my-social-security-retirement-benefit.asp. Accessed April 14, 2021.
5 Social Security Administration. 2021. “Receiving Survivors Benefits Early.” https://www.ssa.gov/benefits/survivors/survivorchartred.html. Accessed March 30, 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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Banking Industry Trends

The prodigious bank ledger used to be one of most important components of America’s financial system. Hand-written entries detailed every account holder’s deposits, withdrawals, loans and payments.

A lot has changed since then. In fact, in just the last decade, banking has become as much a technological innovation as it has a money manager. Even 21st century holdovers like checks and debit cards are gradually being replaced by more immediate transactions. Moving forward, we can expect increased activity in the areas of automation (bill paying, auto saving), personalization (fraud alerts, apps for budget tracking, spend forecasting) and real-time payments (Zelle, Venmo, CashApp).1

If you’re not keeping up with banking trends, now may be a good time to get on board. Not only do “set and forget” functions make it easier to pay bills and save regularly, but these things become even more important when we retire. For example, if you are a “snowbird” with homes in different states, online banking and e-bills can help you stay current without having your mail forwarded. The same is true if you decide to travel extensively. Even abroad, you can pay your bills anywhere that provides a secure Wi-Fi connection. Moreover, today’s banking innovations provide ways to ensure we don’t forget to pay bills or overdraw on our accounts. If you’re looking for other ways to consolidate and simplify your financial activities in retirement, we may be able to help.

If you decide to “retire” your investments and consolidate cash accounts, bear in mind that both the National Credit Union Administration (NCUA) and the Federal Deposit Insurance Corp. (FDIC) insure deposits up to $250,000 per account holder — per each qualified account type — per each insured institution. This means that even if your bank were to fail, the federal government insures that your money is protected.2

After the Great Recession, Congress passed legislation that required banks to hold more capital on reserve for account holders. However, during the pandemic, the Federal Reserve loosened those requirements for lending purposes, allowing a greater cash infusion to help boost the economy. Now that the U.S. is on the road to recovery, the Fed announced in March that it would not extend the relaxed requirements past March 31.3

1 Liz Frazier. Forbes. March 22, 2021. “Digital Banking Trends Evolve In 2021, But Customer Needs Stay The Same.” https://www.forbes.com/sites/lizfrazierpeck/2021/03/22/digital-banking-trends-evolve-in-2021-but-customer-needs-stay-the-same/?sh=2dc8b9d91cd3. Accessed March 23, 2021.
2 Melissa Lambarena and Chanelle Bessette. NerdWallet. Dec. 7, 2020. “How NCUA Insurance Works.” https://www.nerdwallet.com/article/banking/ncua-insurance-keeps-credit-union-deposits-safe. Accessed April 14, 2021.
3 The Tribune. March 19, 2021. “Fed to end relaxed capital requirements for large banks.” http://www.tribtown.com/2021/03/19/ap-us-federal-reserve-bank-regulation/. Accessed March 23, 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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A Shot for Economic Improvement

According to the Organisation for Economic Co-operation and Development (OECD), the ongoing distribution of vaccines combined with the latest government stimulus is expected to jumpstart economic activity in the U.S. However, projections for sustainable growth are not equitable among various countries and business sectors. Faster and more effective vaccination deployment across the world is critical. The OECD emphasizes that the key to global recovery is widespread inoculation conducted at a faster rate than variant strains of the virus are mutated.

Not only does the unequal vaccination rate restrict productivity worldwide, but the lack of certainty regarding economic recovery will fuel negative consumer and business confidence. Because the rate of infection caused by new variants is competing with the rate of vaccination rollouts, time will decide if and when economic growth and job creation becomes sustainable.1 The U.S. relies heavily on raw materials and manufacturing in other countries, so the continued spread of the virus worldwide affects our own job growth and economic viability, and will continue to restrict global business and consumer travel.

Clearly, spending is key, and households that have reduced activities in the past year likely have the capacity (and pent-up desire) to venture out and spend, travel, dine out and enjoy entertainment venues. Since we’ve all learned how to (inadvertently) tighten the belt throughout the past year, reworking your budget for increased saving and disciplined spending might interest you if your situation allows it. If you’d like some assistance in assessing your retirement income strategy and how insurance products may fit into that strategy, we’re here to help.

One economist observed that delays in the immunization program mean the difference between a quick recovery and long-term labor market “scarring.” In other words, high unemployment could lead to more defaulted loans, bankruptcies and shuttered businesses. This economist projects that if the vaccinated share of the population hits 92% by August, the U.S. should experience 5.2% growth for the year. If vaccinations are at 68%, we can expect about 3% growth for 2021.2

An interesting dilemma that many employers face is whether to require workers to get vaccinated. Not only do unvaccinated workers put each other and customers at higher risk, but by not reaching herd immunity, every company is likely to suffer revenue losses. According to the Equal Employment Opportunity Commission (EEOC), employers can institute a policy that requires workers to be vaccinated against COVID-19, under the following guidelines:3

  • The vaccine must be generally available to the entire employee population.
  • Exceptions can be made for individuals who cannot obtain a vaccine due to a personal health or disability reason.
  • Employees can be excused for a sincerely held religious belief that prohibits the vaccine.
  • Labor union members may object to a mandatory vaccine policy based on provisions in the National Labor Relations Act.

The Centers for Disease Control and Prevention (CDC) has provided guidelines to help employers encourage inoculating their workforce voluntarily. Recommendations include hosting on-site vaccination opportunities, mobile vaccination clinics and employer-sponsored temporary vaccination clinics.4 

1 Organisation for Economic Co-operation and Development. March 3, 2021. “OECD Economic Outlook. Interim Report March 2021” https://www.oecd.org/economic-outlook/march-2021/. Accessed March 22, 2021.
2 Howard Schneider. Reuters. Jan. 12, 2021. “Jabs equal jobs? Fed sees possible economic boom if vaccine gets on track.” https://www.reuters.com/article/usa-economy-vaccines/jabs-equal-jobs-fed-sees-possible-economic-boom-if-vaccine-gets-on-track-idUSL1N2JJ28N. Accessed March 22, 2021.
3 JD Supra. Feb. 8, 2021. “Employment Issues And The COVID-19 Vaccine.” https://www.jdsupra.com/legalnews/employment-issues-and-the-covid-19-2739205/. Accessed March 22, 2021.
4 Centers for Disease Control and Prevention. March 16, 2021. “Workplace Vaccination Program.” https://www.cdc.gov/coronavirus/2019-ncov/vaccines/recommendations/essentialworker/workplace-vaccination-program.html. Accessed March 22, 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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Building Wealth and Income

Spectrem Group’s recent Market Insights Report found that millionaire investors in the U.S. achieved a new record last year. The number of households with a net worth ranging between $1 million and $5 million (excluding primary residence) increased by 600,000, reaching 11.6 million in 2020.

In addition:1

  • The number of households with a net worth between $100,000 and $1 million increased by 500,000.
  • The number of households with a net worth between $5 million and $25 million increased by 324,000.
  • The number of households with a net worth of more than $25 million increased by 214,000.

While many households have accumulated a substantial net worth, a way to finance your retirement is how you convert that wealth into income. According to the chief financial analyst at Bankrate, your chances of success are better if you are producing multiple streams of income at the same time. He lists consulting or other part-time income, rental properties and business ventures as ways to diversify your income streams.2

Real estate is another income-producing asset. Even if you finish paying off your own mortgage by retirement, another option is “buy to rent.” While renting and building equity via real estate has produced many millionaires, remember that the job of a landlord requires a variety of skills, from navigating tenant law to plumbing repairs. It’s also important to evaluate your financing options – including whether to mortgage a property or buy it outright. If mortgaging, your interest rate needs to be low enough to establish a competitive market rental fee that covers expenses and still yields revenues.

Be aware that interest rates on investment properties tend to be higher than for a primary residence. Also, rents charged need to cover more than the mortgage; they need to also pay for homeowner insurance, property taxes, potential HOA fees, ongoing maintenance and repairs. There’s also landlord insurance to consider, which can cover property damage, lost rental income and liability protection.3

1 SpectremGroup. March 15, 2021. “New Spectrem Study Reveals US Household Wealth Climbed to Record Levels in 2020 After Rebounding from the March Pandemic-Related Market Crash.” https://spectrem.com/Content_Press/spectrem-press-release-march-15-2021.aspx. Accessed March 15, 2021.
2 James Royal. Bankrate. March 4, 2021. “14 passive income ideas to help you make money in 2021.” https://www.bankrate.com/investing/passive-income-ideas/. Accessed March 15, 2021.
3 Tim Parker. Investopedia. Sep. 17, 2020. “15 Tips for Buying Your First Rental Property.” https://www.investopedia.com/articles/investing/090815/buying-your-first-investment-property-top-10-tips.asp. Accessed March 15, 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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