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America’s Seesaw Wealth

It is interesting to evaluate how various economic events throughout time affect different demographics. For example, the 2007-2009 Great Recession saw higher losses in male-oriented jobs, such as construction and manufacturing. The pandemic-induced recession of 2020 was quite the opposite, affecting women to such a degree that the event spawned the term “she-cession.”1

There is no question that the COVID-19 pandemic has had a tremendous effect on a wide variety of sectors, leading to millions of job losses. What is remarkable is that while some industries – such as travel, hospitality, entertainment, and restaurants – have been sorely affected, others have gone largely unscathed. In fact, the quick transition from in-office work to working from home enabled some companies – and households – to actually save money. Couple those savings with a quick stock market recovery and impressive performance since the initial onset of the pandemic, and many Americans have actually flourished during this difficult period.

Regardless of whether your household has experienced negative or positive effects during the past year and a half, the pandemic has driven home a very important lesson: Be prepared. For many, having a three, six or 12-month emergency savings fund has been crucial to saving them from plundering retirement portfolios. Many investors have an impressive investment portfolio but few liquid assets. This is important – we can help you discover ways to remain invested but position certain assets to access if necessary. Contact us to learn more.

On the privileged side of the spectrum, Boston Consulting Group reports that in 2020, financial wealth worldwide reached a record high of $250 trillion. One of the biggest areas of growth was lending among investment portfolio brokerages. In other words, individual investors borrowed against their portfolios to spend money. As their investments increased, so did their securities-based loans or lines of credit. Be aware that this can be a risky endeavor, and that these loans generally cannot be used to purchase additional securities.2

A recent study by the National Bureau of Economic Research (NBER) revealed that between 2001 and 2016, the top 1% of U.S. households increased wealth by 49%, from $7.7 million to $11.5 million. At the top of the wealth spectrum, 0.01% of wealthy Americans gained 40% of their wealth from corporate equity and another 29% from the pass-through businesses such as partnerships, limited liability companies, and sole proprietors.3

That report was reiterated by the Spectrum Group’s newly released Market Insights 2021 Report, which found that the number of U.S. households with $1 million to $5 million in net worth (not including the value of their primary residence) increased by 600,000 in 2020. The number of households with a net worth between $5 million and $25 million increased by 324,000. And yet, despite these impressive increases in net worth, that same survey found that 30% of investors are still concerned that they may need to delay retirement.4

On the other end of the scale, the NBER reports that between 2001 and 2016, average wealth for the bottom 90% of American households grew by only 17% (compared to 49% of the top 1%). Their wealth is largely driven by pension income (63%) and home equity (23%).3

Titan Alon, Matthias Doepke, Jane Olmstead-Rumsey and Michèle Tertilt. VoxEU. Sep. 22, 2020. “The shecession (she-recession) of 2020: Causes and consequences.” https://voxeu.org/article/shecession-she-recession-2020-causes-and-consequences. Accessed Oct. 22, 2021. 2 Elizabeth Dilts Marshall. Reuters. Oct. 8, 2021. “U.S. banks see wealth management boom on borrowing, new assets.” https://www.reuters.com/world/us/us-banks-see-wealth-management-boom-borrowing-new-assets-2021-10-15/. Accessed Oct. 18, 2021. 3 Andrew Keshner. MarketWatch. Oct. 18, 2021. “How America’s 1% build their wealth.” https://www.marketwatch.com/story/how-americas-1-build-their-wealth-11634580173. Accessed Oct. 18, 2021. 4 InsuranceNewsNet.com. March 15, 2021. “Spectrem Study: Household Wealth Hit Record Levels In 2020.” https://insurancenewsnet.com/oarticle/spectrem-study-household-wealth-hit-record-levels-in-2020. Accessed Oct. 18, 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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The Rise of the Unicorn

This past August, close to 4.3 million Americans quit their jobs — the most ever in just one month (since the government began collecting data two decades ago).1 But there isn’t just one reason people are quitting their jobs. There are dozens. Some who had to juggle care for children or elderly relatives have chosen caregiving over a second income in the household. Many people reevaluated their lifestyles amid the safety concerns and loss of loved ones and decided to focus on a better quality of life rather than a higher salary. Many in those essential service industries — from food and retail to healthcare professionals — suffered from burnout and determined that the risk wasn’t worth the wage.

For all these reasons and more, the United States is experiencing what one psychologist and professor at Texas A&M termed the “Great Resignation.”2

With the advent of the Great Resignation, there has been a dramatic increase in new business filings. Could this be the start of a rise in “unicorns?”3 In business, a unicorn — a phrase coined in 2013 — is a privately held startup company valued at over $1 billion. It refers to a successful startup, which traditionally has been considered as rare and far-flung as the mythical creature itself. However, there is evidence that in pure numbers alone, the rise of startups could see higher rates of success in the future.4

That’s because in the past, only about four unicorns reached fruition each year. And yet, already in 2021, there have been 264 that have reached that status. In fact, venture capitalists (VCs) are more interested than ever in investing in startups — to the tune of $240 billion invested so far this year alone. The largest investors tend to be private equity, hedge funds and corporations.5

If you don’t know the difference between an “accelerator” and an “incubator,” you can brush up on your startup jargon online at webpages such as The Glossary of Startup Jargon.6 Be aware, however, that this is not the first time startups have gained momentum only to suffer significant losses. The dot-com bubble of 1999 and 2000 comes to mind. Investors considering these high-risk ventures often hedge their risk by investing in several startups simultaneously, hoping that one good bet will compensate for other losses. If you’re interested in this type of investing, consult with us. We can help determine if this type of speculative investing would be an appropriate allocation for your portfolio.7

The United States is not the only country with an entrepreneurial streak. Globally, there are currently 817 unicorn startups. One of the most well known is TikTok, owned by Bytedance in China. India currently has nearly 70 unicorns, which makes it the third-largest startup ecosystem in the world.8

Even Japan, which is not known for its venture capital and startup success, is encouraging the entrepreneurial spirit via tax breaks and other government-sponsored initiatives. Much like in the United States, young Japanese are leaving traditional corporate jobs to start up their own ventures, with many receiving interest from major western VCs and other institutional investors.9

Knowledge@Wharton. Oct. 25, 2021. “Is the Great Resignation Giving Rise to the Entrepreneur?” https://knowledge.wharton.upenn.edu/article/is-the-great-resignation-giving-rise-to-the-entrepreneur/. Accessed Oct. 25, 2021. 2 Juliana Kaplan. Business Insider. Oct. 2, 2021. “The psychologist who coined the phrase ‘Great Resignation’ reveals how he saw it coming and where he sees it going ‘Who we are as an employee and as a worker is very central to who we are.” https://www.businessinsider.com/why-everyone-is-quitting-great-resignation-psychologist-pandemic-rethink-life-2021-10. Accessed Oct. 25, 2021. Knowledge@Wharton. Oct. 25, 2021. “Is the Great Resignation Giving Rise to the Entrepreneur?” https://knowledge.wharton.upenn.edu/article/is-the-great-resignation-giving-rise-to-the-entrepreneur/. Accessed Oct. 25, 2021. Arielle Pardes. Wired. Oct. 14, 2021. “Earth’s Unicorn Population Is Exploding.” https://www.wired.com/story/earths-unicorn-population-is-exploding/. Accessed Oct. 25, 2021. 5 Ibid. Angela De Luca. Science Center. May 13, 2021. “The Glossary of Startup Jargon.” https://sciencecenter.org/blog/the-glossary-of-startup-jargon. Accessed Oct. 25, 2021. Amit Kumar. Entrepreneur. Oct. 8, 2021. “Will the Unicorn Boom Lead to a Unicorn Bust?” https://www.entrepreneur.com/article/390109. Accessed Oct. 25, 2021. 8 Ibid. McKinsey & Company. Oct. 7, 2021. “Can Japan finally become a start-up power?” https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/can-japan-finally-become-a-start-up-power. Accessed Oct. 25, 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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Who Wants to Work?

An important economic driver for America — working consumers — is dwindling. For example, the Denver International Airport recently hosted a concessions job fair to fill around 1,000 openings at the airport for jobs at stores, restaurants, and other businesses. Only 100 people attended the fair.1

Money could be one issue. In Georgia, Kentucky, and Idaho, more than 4% of workers voluntarily left their jobs in August — the highest rates in the country. They also happen to be three states with the nation’s lowest minimum wage: $7.25 an hour. States with higher baseline wages tended to have a lower quit rate. One such district in Washington, D.C., boasts one of the highest minimum wages in the country at $15.20 an hour. In August, Washington lost only 1.7% of workers, which was the lowest state quit rate.2

For retirees thinking of supplementing their income for the long-term, now might be a good time to pick up a part-time job. Especially during the holidays, retailers and other local businesses are hiring in droves. It’s a good time to “try out” a job since higher wages during the holidays are not likely to drop once an employee is hired. However, if you feel the work isn’t worth the extra income, you can always drop the job later on. Working a bit to offset household expenses early on in retirement is a good way to create financial security over the long haul. If you’d like other ideas on how to create a retirement income stream, please give us a call.

Research has found that money isn’t the only driver for keeping people in the workforce. A recent survey of 5,000 employees in the United States and the U.K. discovered that the biggest interests are in career growth, flexible hours and working for a company that prioritizes mental health and wellness benefits.3 The latter concern may well have originated from the pandemic, in which many employers showed their true colors as to how much concern they had for workforce health.

Moving into 2022, be aware that the job market may evolve somewhat from its pre-pandemic norms. For one thing, many employers have replaced full-time jobs with temp workers — with a greater focus on skill sets and productivity levels. In other words, individual contributors may become more valuable than executives. For example, a programmer may be more necessary than a vice president. In certain white-collar jobs, labor analysts expect a more hybrid work environment in which people have the opportunity to work from home at least part of the time. Under this scenario, it would be far easier to prove one’s value based on productivity rather than the ability to manage people.4

One sector likely to attract young adults is the green industry. According to LinkedIn data, in 2015 the ratio of U.S. oil and gas jobs to green jobs was 5:1. However, last year that ratio shrank to 2:1. Interestingly, green jobs are likely to emerge in all industries, not just companies that generate renewable sources of energy. In fact, green skills may become more valued than university degrees.5

Today, some of the fastest-growing green jobs are in fields such as ecosystem management, environmental policy, and sustainable procurement. In the future, we are more likely to see green expertise moving into areas such as healthcare, agriculture, transportation, construction and manufacturing, finance, fashion technologies, and transport. These are areas in which salespeople, designers, and stylists will develop knowledge of sustainable fashion and pollution prevention.6

 Emma Colton. Fox Business. Oct. 24, 2021. “Denver airport’s jobs fair hoped for 5K visitors – only 100 people showed up.” https://www.foxbusiness.com/economy/denver-airport-job-fair-low-turnout-staffing-shortages. Accessed Oct. 25, 2021. Aimee Picchi. CBS News. Oct. 25, 2021. “3 states lead the U.S. in the rate of workers quitting their jobs.” https://www.cbsnews.com/news/quitting-job-great-resignation-georgia-kentucky-idaho/. Accessed Oct. 25, 2021. Marcel Schwantes. Inc. Oct. 25, 2021. “Why Are People Quitting Their Jobs, Exactly? It May Come Down to 4 Reasons, According to 5,000 Employees.” https://www.inc.com/marcel-schwantes/why-are-people-quitting-their-jobs-exactly-it-comes-down-to-4-reasons-according-to-5000-employees.html. Accessed Oct. 25, 2021. Maryalene LaPonsie. U.S. News & World Report. Oct. 25, 2021. “5 Things Job Seekers Need to Know for 2022.” https://money.usnews.com/careers/articles/job-market-outlook. Accessed Oct. 25, 2021. Karin Kimbrough. World Economic Forum. Sept. 23, 2021. “These are the sectors where green jobs are growing in demand.” https://www.weforum.org/agenda/2021/09/sectors-where-green-jobs-are-growing-in-demand/. Accessed Oct. 25, 2021. 6 Ibid.
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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Single Finances

Pew Research Center reported that in 2019, about 38% of adults ages 25 to 34 in the U.S. were not married or living with a partner, up from 29% in 1990.1 While marriage and even long-term relationships are growing less prevalent, the data shows that single people tend to be less financially stable than those with a partner.

As cohabitation has grown mainstream, it also appears that unmarried couples who live together tend to be more financially secure than their single peers. Yet, married adults still fare better than singles, regardless of relationship status, perhaps because high-earning men are typically more likely to get married. And, interestingly, men’s earnings tend to rise even higher once married.

That might have made more sense half a century ago, but today’s young adult couples tend to have two full-time incomes. Women in relationships are better educated than in the past and work at rates on par with single women. They also fare better economically by virtue of sharing expenses with a partner.

In fact, both unpartnered men and women earn less, on average, than their counterparts in relationships. In 2019, single men earned median earnings of $35,600 while partnered men made $57,000. Across the aisle, single women earned a median of $32,000 while their attached peers  made $40,000.2

If you think singlehood is tough during your career, note that it doesn’t get any easier in retirement. Single retirees are on the rise as well. Among U.S. adults ages 50 to 64, 28% are unmarried and unattached; and 36% of those age 65 and up.3

If you are single and likely to remain so, you may want to step-up your retirement planning efforts. In addition to simply saving more money, consider resources for caregiving assistance as you age. Many single adults have no children, so it’s important to strengthen relationships among siblings, nieces, nephews and friends (including those younger in age). Consider the advantages of moving into a senior community – not just for better value in living and caregiving expenses, but also to establish a strong social network as you age. Please contact us for personalized ideas in creating a reliable stream of income with a growing savings component.

A study by TD Ameritrade found that more singles are becoming aware of their financial insecurity, especially those aged 37 and older. Notably, lifelong singles are at a disadvantage in that they tend to earn less than their married counterparts, and therefore have lower savings and less money to invest.4

If this sounds like you or someone you know, consider the following tips for managing finances:

  • Save up an emergency fund of between three months to a year’s worth of living expenses. This can save you from wiping out your long-term investments if you’re unemployed for a significant amount of time.
  • Try to save 10% to 15% of your income, starting with a work retirement plan if your employer offers matching contributions.
  • Make your money work harder for you. One study found that while women tend to save more money than men (41% versus 35%), they also invest in less risky assets offering higher return opportunities (25% versus 32%).5
  • Brainstorm ways to save money. For example, binging Netflix for a month can cost less than one night at a movie theater.
  • Set specific goals, such as saving for a down payment on a home. Owning a home is one of the most effective ways to build wealth via equity.
  • Also, be realistic when buying a home – do you really need more than two bedrooms?
  • Don’t have money to spare? Consider moonlighting – take a second job a few days a week or turn a hobby into an income source.
  • Getting a roommate can cut your housing expenses in half. Consider doing this even just periodically, like whenever friends need a place to stay for a few months after a breakup.
1 Juliana Kaplan. World Economic Forum. Oct. 8, 2021. “What is the financial impact of being single in the U.S.?” https://www.weforum.org/agenda/2021/10/what-is-the-financial-impact-of-being-single-in-the-united-states. Accessed Oct. 17, 2021. 2 Ibid. 3 Principal. 2021. “Single and over 50? Here’s how to prepare for retirement.” https://www.principal.com/individuals/build-your-knowledge/single-and-over-50-heres-how-prepare-retirement. Accessed Oct. 17, 2021. 4 Donna Freedman. The Simple Dollar. Aug. 31, 2020. “13 Ways to Beat the Single-Person Penalty.” https://www.thesimpledollar.com/financial-wellness/13-ways-to-beat-the-single-person-penalty/. Accessed Oct. 17, 2021. 5 Karen Gilchrist. CNN. March 8, 2021. “Here are 3 ways women can manage their personal finances – and make money.” https://www.cnbc.com/2021/03/08/personal-finance-money-advice-for-women-how-to-start-investing.html. Accessed Oct. 17, 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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