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The Labor Market in the Post-Pandemic Era

According to the most recent Future of Jobs Report by the World Economic Forum, 50% of employees will need new skills training by 2025 as the pace of technological innovation continues to grow. Among business leaders, 94% say they expect employees to learn new skills while on the job, compared to just 65% who made that claim in 2018.1

However, the amount of time it takes to reskill will depend on the industry, according to the online learning platform Coursera. For example, only one or two months is necessary to acquire skills in emerging professions such as content writing, sales and marketing; in contrast, it could take up to three months to expand skills in product development, data and artificial intelligence. Skills needed for roles in cloud computing and engineering could take up to four months. Among soft skills that will increase in demand, critical thinking and problem-solving top the list. But post-pandemic, skills in resilience, stress tolerance and flexibility also are highly valued.2

This recognition of the need for new skills training opens up avenues for all types of people, even retirees and middle-aged professionals who would like to change careers. After all, the acquisition of skills based on new technologies means no one will have a huge edge in terms of experience. Therefore, people with the ability to learn technical skills quickly – who already possess high-value soft skills – have strong potential to vie for a new career. If you’re thinking about making such a move, we’d be happy to review your financial portfolio to help make sure you are on the right path toward your retirement.

Another labor trend is the rise of remote work and its impact on employees’ lifestyles. With the pandemic clearing the way for many white-collar workers to work remotely, younger workers have been able to move to more affordable locales and buy their first homes. On the other hand, established homeowners can now consider relocating to wherever they’d like to retire, trading in their current home equity for their retirement home – with a plan to pay off that final mortgage while they’re still working. This way, they can move and start enjoying a retirement lifestyle near the beach, lake or mountains while still gainfully employed, albeit working remotely.3

 Unfortunately, low-skilled, blue-collar professions are on the other side of that coin. Many either lost jobs during the pandemic or were classified as high-risk “essential workers.” Just because grocery store clerks became essential, it doesn’t necessarily mean an increase in pay or benefits. While the debate over raising the national minimum wage continues in Washington, there’s little doubt that many low-paying jobs will always be necessary, but experienced workers in those positions are not necessarily low-skilled.4

For example, what is the value of caregivers who can skillfully attend to mobility-challenged people? Or workers who serve multiple tables of hungry and thirsty patrons who want their meal yesterday? Skills like patience and equanimity have not traditionally received the same level of pay as an office worker, but they are no less valued or necessary. It will be interesting to see, post-pandemic, if these types of jobs begin to translate into fair pay and good benefits.5

 After decades of steady decline, labor unions are hoping for greater respect and participation moving forward – based on support by President Joe Biden’s administration. Today, only one in five households has a union member, and the Economic Policy Institute estimates the decline of unions translates to an average loss of $3,250 per year for a full-time worker. Biden is advocating passage of the Protecting the Right to Organize (PRO) bill, which would abolish state laws that ban mandatory collection of dues as a condition of employment, penalize businesses that retaliate among union drives and extend federal labor rights to independent contract workers. So far, the House has approved the legislation, but it faces a more difficult path in the Senate.6

1 Kate Whiting. World Economic Forum. Oct. 21, 2020. “These are the top 10 job skills of tomorrow – and how long it takes to learn them.” https://www.weforum.org/agenda/2020/10/top-10-work-skills-of-tomorrow-how-long-it-takes-to-learn-them/. Accessed April 30, 2021.

2 Ibid.

3 Liam Dillon. Los Angeles Times. April 30, 2021. “The remote work revolution is transforming, and unsettling, resort areas like Lake Tahoe.” https://www.latimes.com/homeless-housing/story/2021-04-30/covid-wfh-boosts-palm-springs-lake-tahoe-housing-markets. Accessed April 30, 2021.

4 Annie Lowrey. The Atlantic. April 23, 2021. “Low-Skill Workers Aren’t a Problem to Be Fixed.” https://www.theatlantic.com/ideas/archive/2021/04/theres-no-such-thing-as-a-low-skill-worker/618674/. Accessed April 30, 2021.

5 Ibid.

6 Steve Matthews and Payne Lubbers. Bloomberg. April 15, 2021. “Biden Confronts Decades of Union Decline in Bid to Boost Pay.” https://www.bloomberg.com/news/articles/2021-04-15/biden-confronts-decades-of-union-decline-in-bid-to-boost-wages?sref=wFA4tJCq. Accessed April 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.

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How to Plan for Old Age

Thelma Sutcliffe turned 114 years old in April, making her the oldest living American and the seventh-oldest person in the world, according to the Gerontology Research Group. The Omaha, Nebraska, resident attributes her relative good health and longevity to the fact that she never had children, never smoked and made it a habit not to worry.1

Not many people make it to 114, but those who do outlive their friends and loved ones. That’s why it’s important to develop passions and hobbies you can enjoy for the rest of your life, no matter how long you live. It’s also a good idea to establish a plan that provides a confident retirement. That may include living below your means and casting a wide net of friends to help ensure you have close ones to grow old with. It also may include buying insurance policies that offer reliable income. If you’d like help planning, please give us a call.

One key factor to consider is where you want to live in retirement, particularly during the later years when you may need help. Paying for full-time care in your own home can be very expensive. However, COVID-19 has caused some hesitation moving to assisted living and nursing homes due to the potential for disease outbreaks in the future. You may want to start thinking and talking with family members about the possibility of moving in with them later in life, if necessary. You could even use proceeds from the sale of your home to build an accessory dwelling unit (ADU) next to their home. Also known as a backyard cottage or granny flat, an ADU can help cut expenses to pay for in-home care – so there is less burden on family members.2

Some ADU floorplans even feature two bedrooms, so you could hire a full-time caregiver and provide room and board. Later, your heirs can use the ADU for rental income or to plan for their own long-term care.

Apart from financial and housing plans, consider developing hobbies you can enjoy later in life. You may cultivate a love of history, art or music early in retirement through volunteer efforts. For example, work as a docent, usher or fundraiser for a local museum, art gallery or concert hall. A heartfelt appreciation of the arts has a way of eliciting joy, even if you develop mobility or cognitive issues.

1 Leah Asmelash. CNN. April 29, 2021. “She just became the oldest living person in the US and all she wants is to be able to eat meals with her friend again.” https://www.cnn.com/2021/04/29/us/oldest-living-american-trnd/index.html. Accessed May 3, 2021.

2 Zillow. March 18, 2021. “What is an Accessory Dwelling Unit (ADU) – and Tips for Building One.” https://www.zillow.com/resources/stay-informed/2021/03/18/how-to-build-accessory-dwelling-unit-adu/. Accessed May 3, 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.

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How Infrastructure Spending Affects Municipal Bonds

According to the American Society of Civil Engineers, the 10-year tab to meet the country’s basic infrastructure needs is about $6 trillion. The report, published in March, includes $125 billion needed for bridge repairs, $435 billion for roads and $176 billion for the nation’s transportation systems.1

For more than 200 years, municipal bonds have been used as public financing instruments in the U.S. Today, two-thirds of infrastructure projects such as schools, hospitals, highways and airports are financed by municipal bonds.2

In addition to providing revenue for infrastructure projects, muni bonds offer an attractive investment opportunity. They provide tax-advantaged yields for current income, stable credit quality and a risk-averse allocation for an investment portfolio. One way to diversify municipal bond investments is through a municipal bond fund or ETF. Given the potential for increased interest and investment in infrastructure in the foreseeable future, we’re happy to discuss opportunities suitable for your portfolio. Give us a call if you’d like to learn more.

President Joe Biden recently proposed a $2.3 trillion plan to invest in the nation’s infrastructure. One funding option Congress may consider is the Build America Bonds (BAB) program, which was introduced during the Great Recession as a means to fund recovery efforts through infrastructure repairs and development. BABs were originally structured for states, cities, schools, airports, mass transit agencies and other public entities to sell for a limited time. They were particularly attractive because the federal government kicked in 35% of interest costs.3

Stimulus packages over the past year have benefited the municipal market by making funds available to state and local governments to make up for lost sales tax revenues due to lockdowns and the beleaguered economy.5 Now, with more revenue available, local public agencies may be inclined to issue debt for capital purposes.

Bonds backed by states and cities tend to have high credit ratings and low default risk, and the federal government underwriting municipal debt makes them even more attractive. Historically, muni bonds have offered rates as high as 7% or more.Furthermore, given the potential that an expensive infrastructure bill may be supported by an increase in income tax rates, municipal bonds offer an opportunity for investors to shield income from taxation.7

1 Thomas Franck. CNBC. March 26, 2021. “Build America Bonds may be key to financing Biden’s infrastructure plans.” https://www.cnbc.com/2021/03/26/build-america-bonds-may-be-key-to-financing-bidens-infrastructure-plans.html. Accessed May 5, 2021.

2 Jenna Ross. Visual Capitalist. Nov. 4, 2019. “From Coast to Coast: How U.S. Muni Bonds Help Build the Nation.” https://www.visualcapitalist.com/municipal-bonds-build-nation/. May 5, 2021.

3 Karen Pierog. Reuters. March 31, 2021. “Build America Bonds may stage a comeback in Biden’s infrastructure plan.” https://www.reuters.com/article/usa-biden-infrastructure-bonds/build-america-bonds-may-stage-a-comeback-in-bidens-infrastructure-plan-idUSL1N2LR1UZ. Accessed May 5, 2021.

5 Sanghamitra Saha. Nasdaq. April 7, 2021. “4 Factors Why Muni Bond ETFs Could Rally.” https://www.nasdaq.com/articles/4-factors-why-muni-bond-etfs-could-rally-2021-04-07. Accessed May 5, 2021.

6 Ibid.

7 Franklin Templeton. March 18, 2021. “Stimulus and Infrastructure: Boon for Muni Bonds?” https://www.franklintempleton.com/investor/tools-and-resources/investor-education/talking-markets-podcast/stimulus-and-infrastructure-boon-for-muni-bonds. Accessed May 5, 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.

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Why Buy an Annuity When the Market is Up?

Perhaps you are familiar with an annuity. The basic premise is that you convert a lump sum of money into a stream of income. Unlike an investment, once you commit a fixed amount of money to the insurance company, that company is contractually obligated to provide you a minimum level of income with the option to continue receiving it as long as you live. All guarantees are backed by the financial strength of the issuing insurance company.

An annuity is similar to Social Security benefits or a company pension plan in that it generates income from money over which you have little or no control. However, an annuity gives you many options to design your own income plan. It can offer flexibility in terms of how much income you’ll receive, as well as how much and how long, based on the premium you pay and the terms of the annuity. Additionally, many annuities offer features that enable access to funds for emergencies, health concerns, a surviving spouse and even beneficiaries. That said, it’s generally not a good idea to put all of your eggs in this basket. Think of an annuity as a guaranteed source of income in a well-diversified financial strategy.

Annuities include many options, ranging from immediate annuities to fixed, fixed index and longevity annuities. Each policy varies by issuer, and many can be customized with optional features and riders, which may require an additional fee. Keep in mind that annuities are designed for retirement or other long-term needs. They provide guarantees of principal and credited interest, subject to surrender charges. That’s why it’s important to work with an experienced financial professional to help determine which option is appropriate for your situation.

A common question among those planning for retirement is: Why purchase an annuity when the market is performing well? Remember the adage: What goes up must come down. If and when the market experiences a decline, your potential profit is reduced and your income may drop. If you sell out of the market before it goes down, that’s some pretty good market timing. The problem, however, is that to take advantage of a subsequent market recovery, you might have to buy back in when prices are on the rise – which means you’ll lose some of that profit you earned.

The bottom line: Economic factors and the stock market fluctuate, but a guaranteed income annuity does not. Once you lock in income payments, that’s what you get. They are unaffected by market fluctuations. If you are near or in retirement, an annuity can help provide the income you need without your having to be concerned with day-to-day market moves that could potentially impact both your short- and long-term retirement income.

It’s also worth considering that when you purchase an annuity using profits from stocks sold when the market is up, you’ll have more money to purchase the annuity, thus yielding higher income in retirement. If you’re going to buy an annuity, that may be a good time to do so.

An annuity can also help provide income protection at the beginning of retirement. That’s because if you retire earlier than expected, converting a portion of your assets to an immediate annuity will enable you to begin taking income right away. In doing so, the rest of your retirement portfolio has the opportunity to continue growing and you may be able to delay drawing Social Security benefits so they continue accruing. This is important to consider because research reveals that 37 percent of older workers retired earlier than they had planned.1

An annuity also can provide income for loved ones after your death. One way you can do this is by choosing a “period certain” option. For example, instead of lifetime income, you may choose to receive income for 30 years. This means that even if you pass away after 10 years, your designated beneficiary would continue receiving that income for another 20 years.

An annuity can offer the flexibility to address several different needs, including retirement income, access to emergency funds (some annuities allow you to withdraw a certain percentage each year without a penalty), payouts to assist with the costs of long-term care, and even inheritance proceeds. With an annuity, these options can be included as part of the contract’s guaranteed structure at the time you purchase it. While an investment portfolio may be able to pay for these needs, you might have to sell when the market is in a decline. In such a case, you would lose both money initially and the opportunity to recover lost gains on those sold assets.

Many of those in the financial industry recognize the value of an annuity within a broader retirement strategy. One study found that by purchasing an annuity contract, a retiree can improve the chances of his portfolio lasting to age 95 by nearly 20 percentage points when compared to a pure investment portfolio.2 Another study found that a 401(k) plan investor with at least $65,000 would be better off if he put 10 percent of those assets into a deferred annuity.3

Keep in mind that with an annuity, it’s all about the guarantees. If you’re a planner and you want to know how much guaranteed income you can count on in retirement, purchasing an annuity may make sense for you.

If you’d like to learn more about how an annuity could fit within your overall financial strategy, please feel free to give us a call.

Alicia H. Munnell. Marketwatch. Feb. 27, 2019. “Why do 37% of older workers retire earlier than planned?” https://www.marketwatch.com/story/why-do-37-of-older-workers-retire-earlier-than-planned-2019-02-27. Accessed May 9, 2019.

Michael Finke, Ph.D., CFP®, and Wade Pfau, Ph.D., CFA®. Principal. “It’s more than money.” https://landing.principal.com/more-than-money. Accessed May 24, 2019.

Olivia S. Mitchell. Knowledge@Wharton. May 2, 2019. “Can Annuities Help Grow Your Retirement Nest Egg?” https://knowledge.wharton.upenn.edu/article/annuities-retirement-income/. Accessed May 9, 2019.

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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