Whether you are worth $3 million or $30 million, I’ve got good news and bad news for you. The good news is that you can probably live comfortably for the rest of your life and leave some money to your grandkids or your favorite charity. The bad news is that in order to live comfortably, you may need to stay on top of your spending… or have your financial advisor work with your accountant to stay on top of your spending if you prefer to outsource. What is this live comfortably concept? Well, I mean you are living a lifestyle that you can afford and enjoy. But, you also have the peace of mind that you will never run out of money. I mean, if you have $3 million or $30 million you probably worked very hard to accumulate that level of wealth. Usually as your wealth and income grows, your lifestyle, the things you like to do with friends or family changes. You may take an extra vacation or two each year, or you may purchase a vacation home , or if you are in the $30 million category you may buy a small estate, start racing cars, or buy a jet card. Alternatively, you may decide to start a major giving program to your church or alma mater. All of these things are great and can bring you enjoyment and satisfaction. For most individuals, their current lifestyle is one they would like to maintain, or they just want a little more. Either way, in order to assess whether you can maintain your current wealth and meet your lifestyle spending, you need to know how much you are spending today and how much additional income your investments (whether stocks, real estate, or a business) can generate. And, you have to account for taxes . Once you know how much income you have and you compare that with your annual spending, you have three potential outcomes: you can maintain your lifestyle as it is today, you need to cut back a little on your lifestyle to maintain your wealth, or you know with certainty you can afford that jet card or the third estate. Seriously, it is that simple. If you want some help working through this issue, talk with your financial advisor. Or, contact the Peak Wealth Planning team to learn about our concierge services. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Guest post by Kristina Adams Smith Heart healthy eating is possible regardless if you have years of unhealthy eating or you just need to fine tune your diet. Making small changes to diet and lifestyle can have big impacts on your health while lowering risk factors of heart disease. Knowing which foods can increase your risk of heart disease is important to opening yourself to the opportunity of changing the eating habits holding you to an unhealthy lifestyle. Once you know which foods to eat more of and which foods to limit, leading a heart healthy lifestyle can be much easier to manage. There are 5 simple rules for eating a heart healthy diet: focus on fiber, cut out saturated fats, limit sodium, manage portion sizes, and chose to cook at home more often. 1. Focus on Fiber Fiber is found in fruits, vegetables, whole grains, seeds, nuts, and beans. If it is grown and edible, it is most likely a fiber. Some fibers reduce the risk of heart disease by blocking the absorption of fats and cholesterol. These foods reduce blood sugar levels and LDL (“bad”) cholesterol too. Other fibers support a healthy digestive system and insulin sensitivity, which contributes to reducing the risk of diabetes ( Healthline, Norris) . Eating a variety of foods rich with fiber contributes to a lower risk of heart disease and stroke, prevents some types of cancer, lowers the risk of eye and digestive problems, and has a positive effect upon blood sugar” ( Harvard, TH Chan ). Health Tip #1: Make access to fruits and vegetables easy. Keep fruit bowl in sight on counter at home and even at work Keep plenty of vegetables cut up and ready to eat in the refrigerator, ready to grab for snacks Health Tip #2: Make a conscious choice regarding which grains enter your home. Choose high fiber breakfast cereals – about 5 grams per serving or more Substitute white bread for a whole grain or brown rice for white rice Increase intake of oatmeal, oats and oat based products, like Cheerios 2. Cut out saturated fats and trans fats Of all the diet changes you can make, cutting out saturated fats and trans fats is possibly the most important. Both of these fats raise LDL cholesterol , which is more often known as “bad” cholesterol because it collects in the walls of your blood vessels and increases the risk for heart attack and stroke . Trans fat is a double whammy. This non-natural, factory produced fat not only increases “bad” cholesterol but lowers HDL cholesterol (ie. the “good” cholesterol). Health Tip #3: Incorporate healthy proteins into your diet. Choose low-fat proteins like fish, skinless chicken, and trim visible fat from meat. Add nuts and seeds to your meals. Saute into a stir-fry, sprinkle on some yogurt, or just snack on a handful of almonds. Health Tip #4: Perform food swaps and substitutions. Choose flavored water over cola Exchange coconut cream for heavy cream Use 2 egg whites instead of one whole egg Purchase plain yogurt -- instead of flavored yogurt -- and sweeten with honey or fruits Use avocado as a spread (in lue of butter) on top of whole grain toast Use nuts to replace croutons in salads and soups. Health Tip #5: Increase your awareness by reading labels. Look for ‘partially hydrogenated’, which means there are trans-fat (example: microwave popcorn, snack foods, chips, crackers) 3. Limit Sodium The human body requires a limited amount of sodium to function. It helps conduct nerve impulses, contract and relax muscles, and maintain the proper balance of water and minerals. But too much sodium in the diet can lead to high blood pressure. High blood pressure is known as the “ silent killer ” because its symptoms are not always obvious. It’s one of the major risk factors for cardiovascular disease, the No. 1 killer worldwide. American Heart Association recommends no more than one teaspoon of salt per day for an adult. Health Tip #6: Season with other spices. When cooking, use salt-free spices to increase the flavor and complexity of your recipe. Add salt last. Health Tip #7: Avoid processed foods. Reduce the use of canned foods and processed foods, which use salt as a preservative. Look on labels for reduced or low sodium 4. Manage portion sizes How much you eat is just as important as what you eat. Overeating, particular fat-heavy foods, contributes to excessive calorie intake and leads to weight gain. Excess weight means your heart must work harder. This often leads to high blood pressure, which as you know, is a major cause of heart disease. Health Tip #8: It is all about moderation. (Spend a week understanding portion size.) Use measuring cups and other visual triggers to help control portions (ie. a 3-oz serving of lean beef, pork, or poultry is about the size of a standard deck of playing cards). When eating out, share an entree with your significant other. 5. Choose to cook at home. We all love convenience. And at the end of a hectic day, eating out or ordering in might feel the easiest option. However, the convenience of restaurants and processed foods can take a major tool on your mood and health. These foods are typically more energy dense with higher fats, chemical additives, sugar, salt, and calories as well as containing lower nutritional value. This combination is a dangerous one that contributes to heart disease, high blood pressure, and diabetes ( Cambridge University Press, Wolfson ). When you prepare your own meals, you have more control over the ingredients. You can ensure you and your family eat fresh, wholesome meals that are rich with fiber, incorporate healthy fats, limit sodium, and are a healthy portion for everyone sitting at your table. Plus, cooking it is a great way to manage stress and spend time with others. Health Tip #9: Cooking at home doesn’t have to be complicated or elaborate. Create meals that require only one dish Loading a slow cooker with meat and vegetables in the morning allows you to come home to a piping hot meal at night, with minimal preparation and little cleanup. Bulk Cook -- Make more than you’ll eat and store portion size meals into reusable containers to have all week long Health Tip #10: Adopt heart healthy cooking methods Invest in heart healthy cookbooks or magazines for new recipes Bake, broil, grill, roast, lightly stir fry or sauté; limit fried foods Health Tip #11: Trick yourself into more nutritional cooking Make healthy substitutes – choose 1% milk vs whole milk Add more vegetables and legumes (beans) to entrees at home, such as meat loaf, casseroles and soups Cook with healthy fats/oils – canola, olive or safflower oils instead of butter Once you start incorporating these tips into your life you will find that a heart healthy lifestyle will be both doable and enjoyable. Final thought. Making healthy choices today to improve your heart health will have a positive impact on your overall quality of life and wealth. If you enter your golden years with good eating habits and a healthy relationship with food, you’ll see your benefits in several ways. The insurance rates -- both health insurance and life insurance costs -- are more likely to be lower. Healthy diet choices correlates to longer life expectancy and better quality of life. The longer you are healthy and the longer you can have your investments work for you, the longer your time horizon. Cooking is also very enjoyable. Try one of my favorite chili recipes! My Turkey Chili takes only 11 ingredients and 30 minutes to prepare. Plus, it's ready in an hour and can feed 8 (so invite some guests over or eat chili for a couple of days. When you try it, message me. I’d love to hear your thoughts. Looking to see whether your investments will last as long as your healthy body. I’d be happy to forecast your growth as a client of Peak Wealth Planning. - - - - - - - - - - - - - - - About the Author Kristina Adams Smith -- founder of Sliced Right Nutrition , a nutrition consulting business -- is a registered dietitian with over 20 years experience working with patients in clinical settings at both Carle Clinic and Sara Bush Lincoln. She received her graduate degree in dietetics from Eastern Illinois University. She served as a media representative for the Eastern Illinois Dietetic Association for 9 years, and has been featured in many television segments, cooking demonstrations and print news articles. Kristina’s main areas of expertise include: weight management, culinary nutrition, diabetes, heart disease and overall wellness. You can follow her on Facebook , Instagram , and Twitter , as well as contact her on LinkedIn . About Peter and Peak Wealth Planning Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

A long term investment strategy is a plan for your future. It aligns with the chapters of your memoir yet to be lived. Like that of making any plan, you first need to determine what will be written on the pages of your memoir. To get started, visualize what you desire from your golden years. The desires can be as simple as not worrying about cash flow when you retire with your loved ones. Or, they may be more ambitious. You may want to learn how to fly a plane. Or, if you enjoy vacationing with extended family, you purchase a vacation home off the coast of Lake Michigan to enjoy with future generations of family. If you like to dream further ahead, you can even plan to pass on the property to your children in a trust. This will allow your grandchildren and children to continue to build memories long after you’ve left this beautiful planet. Now that you have a few goals, the next step is to create a plan to reach each goal . This process requires your dedication, proper funding, as well as some maintenance costs. If you decide to take up flying, you may have to sign up for lessons. But, you may want to start investing now to purchase a plane. The journey to meeting your goals may require more than merely funding your 401k plans and IRAs. It involves understanding future insurance needs , planning for tax obligations, reviewing asset allocations and diversification of investment portfolios. It should also include creating a strategy for your years without employment or passing the family business to your heirs. Throughout the month of March, we will touch upon the different items you should address in your 40s, 50s, and 60s. For this week, we consider 7 accounts that can help maximize your savings toward the future. As a bonus for our loyal readers, you can download our checklist that will guide you in answering What Accounts Should I Consider If I Want to Save More? 7 Accounts to Optimize Saving When you find yourself a need to invest towards the future, there are various accounts to consider. Foundational Savings Typical advice for an emergency savings fund is to have 6 months of liquidity available at all times. There are factors that may move this milestone. For example, if you’ve a spouse or partner and both of you have secure full-time positions then you may need only 3 months of living expenses available in a savings account. If you own a business with uncertain cash flows, 12 months might be more appropriate. Healthcare Savings If you’ve access to a Flexible Savings Account (FSA) or Health Savings Account (HSA) consider making a contribution. These are tax-deductible savings vehicles. Most FSA require funds to be spent or lost, while an HSA can be carried over year to year. With health costs being one of the most expensive costs incurred during retirement, it is well worth it to take advantage of an HSA. Retirement Savings If you’ve a retirement plan offered through your employer make sure you are contributing enough to maximize the amount of any match offered by the employer . Afterwards, contribute to an IRA (traditional if you need to lower your taxes today and Roth if you’d like to lower future tax payments). Employer-provided Benefits If your employer offers an employee stock purchase plan (espp) or an employee stock ownership plan (esop) consider participating and review your selling strategy in advance. Lowering your tax bill and diversifying your esop to create a steady stream of retirement income are important objectives. Speak with your financial planner or CPA to create a plan. Business Owner Savings If you are a business owner you can contribute up to $58,000 ($64,500 if age 50 or over) in a 401k. And if you’ve children, offering them paid positions within the business can allow them to learn responsibility, save on their own and be taxed at their lower income bracket. Accounts To Help Future Generations If children or grandchildren are part of your family, consider giving them funds towards their 529 college savings plan each year. If you are interested in funding activities such as starting a business or learning a new skill for future generations, then consider a dynasty trust. A dynasty trust is created to pass wealth from generation to generation without incurring transfer taxes, such as estate and gift taxes. Tax-Deferred Insurance Options Have you considered the benefits of an annuity ? Earnings on the premium paid can grow tax-deferred until the money is withdrawn. Have you looked into the benefits of buying a cash value life insurance policy ? Death benefits are not taxable to your heirs and may be used to pay estate taxes. Other Account Considerations If you have maximized your tax-deferred accounts, and still are looking for additional wealth building opportunities, consider the benefits of a taxable brokerage account. And if you are charitably inclined, look into a Donor Advised Fund . Final thought. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

If you missed out on becoming a multi-millionaire overnight with GameStop, chances are you may still need some investment advice. I specialize in preparing individuals for retirement. Throughout the month of March I am offering investment strategies and financial planning advice based on where you are at in your lifecycle. Last week's article focused on individuals in their 40’s while this article will be focusing on those who are in their 50's. Am I on Track? When you are in your 50’s, you have probably entered your peak earnings years. This means that your ongoing income should be significantly higher than your expenses, making this the time in your life you can continue to enjoy significant savings and investment capacity. There are three important questions: What are you saving for? How should you invest your excess money each month or year? Do you have sufficient funds saved for a comfortable retirement? As an example, if you are age 50, saving for retirement and making $250,000 a year, ideally you should have $1.7 million saved toward retirement. If you know someone who needs a quick checkup, please share the chart below or link them to this document: Retirement: Am I On Track? Pro Tip: If you have goals such as college savings, saving to start a business, or a vacation home, you should direct separate funds to those goals while also saving for retirement. Stocks for the long haul Having just turned 50, living into my 80’s seems like a reasonable goal. To that end, I’m working hard to eat more fruits and vegetables , drink less bourbon, and continue my regular exercise . Given that I plan to live at least another 30 years, I have a long investment time horizon . If you are 50, you likely have a long time horizon. This means your investments need to grow and earn a healthy enough return to overcome inflation. With bonds paying around 1 or 2% today, the best way to overcome inflation is to invest in appreciating assets such as stocks or real estate. Even if you are risk averse, you should consider having 60% to 80% of your retirement portfolio invested in the stock market. If you are nervous about stock market fluctuations or whether GME trading will disrupt the markets, set aside 6 months of living expenses or more (maybe $100k) in a savings account. When the market drops 20 or 30% causing gut wrenching headlines, you will sleep well knowing you can make your SUV and house payments. Drill down on diversification Within the stock and bond portions of your retirement funds, your money should be further diversified across asset classes. For equities that means having exposure to large, small and mid-size companies, established and emerging international markets, and real estate. With bonds it’s allocating money in short-, mid- and long-term U.S. and international bonds. Below is one example of a diversified portfolio with 70% stocks and 30% bonds. If you have company stock or you participate in an ESOP (employee stock ownership plan), find out when you can sell your ESOP shares or company stock. If your wealth has grown dramatically from this concentrated stock, it is a good idea to develop a plan to diversify those holdings . Diversification of concentrated stock holdings can protect your retirement nest egg. Before you sell ESOP shares, discuss the benefits of an IRA rollover with your financial advisor. If selling company stock grants or options, consult your CPA or financial advisor to determine whether you will owe capital gains tax. Diversify your tax bill With unprecedented recent stimulus spending by the US federal government to fight Covid 19, tax rates will likely be much higher in the future . If you have the option to save money in a Roth IRA, Roth 401k at work, or do a Roth conversion , this may be a good time to pre-pay the tax on your retirement nest egg. Once the tax is paid, you will enjoy tax free growth within your Roth account and enjoy withdrawals free from federal tax starting at age 59 1/2. You may pay less total tax during retirement if you have retirement savings in a mix of tax deferred (IRA, 401k), taxable brokerage, and Roth IRA accounts instead of having all your savings in tax deferred accounts. Paying less tax during retirement leaves you more money to spend on travel and taking care of your family. Review your debt Mortgages , college loans , credit cards. They all add up. Have your financial advisor calculate your total outstanding debt and your monthly payments on that debt. If you are on track for retirement with your monthly investments and feel comfortable your nest egg will be adequate, then you may want to consider allocating excess cash flow to paying off your debt. Start with the highest interest rate payments first and work your way down from there. A good financial advisor can help you plan what to pay off and over what time period. Many folks sleep better at night knowing they have no debt during retirement. Final thought. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

With folks living longer and the advance of medical technology as well as improved self care, 60 may be the new 40. This means you could have 30 more years to live and enjoy time with friends and family. If you are in your 60’s and planning to retire or change jobs, here are six tips to prepare for your Go-Go Years. 1. Review your Insurance Coverages Your goals and priorities will probably change as you edge closer to retirement. Along with them, your insurance needs may change too. Consider the following issues. Life Insurance --- Can you reduce the value now that you are wealthy? Or, will you need it to pay estate taxes? Health Insurance -- Sign up for Medicare at age 65 and decide on a supplemental plan. Umbrella Liability Insurance -- Should you increase coverage to protect your nest egg ? Disability Insurance -- Can you drop your disability insurance when you stop working or change jobs? Long Term Care Insurance -- Review your coverage levels , including inflation protection and waiting periods. While you are reviewing insurance policies, review your beneficiaries to make sure they are up to date and consistent with your estate plan. 2. Develop a Strategy to Maximize Social Security Benefits By waiting until you are 70, you could wind up with 40% more monthly income than if you draw benefits starting at age 62. Have questions about social security? Review our F.A.Q. on Social Security . Then talk to your financial advisor about whether you can bridge the gap between when you stop working (or switch careers) and waiting until age 70. 3. Review your Investment Asset Allocation Asset allocation is the mix of stocks, bonds, real estate, cash and sub asset classes such as international, small-cap, and mid-cap stocks. Many individuals are invested in target date retirement funds that reduce risk across time. However, with bond yields ultra low today and longer life expectancy, these target date funds may be too conservative for some investors . This is especially true for investors who have pension, social security, or rental property income during retirement . 4. Diversify Concentrated Stock A single stock from an ESOP or publicly traded company may have made you wealthy . But if 60 or 80% of your net worth is in one firm, this is a great time to sell some of that concentrated stock and move your assets to a more diversified portfolio. A more diversified portfolio can help preserve your wealth and provide for sustainable retirement income withdrawals for decades to come. 5. Organize Your Accounts and Streamline Your Financial Picture Many wealthy individuals have brokerage accounts, 401k accounts, 403b accounts, SEP IRAs, IRAs, Roth IRAs, and other investment accounts. You may have old accounts at different employers. I’ve actually had a client call me up and say, "I received a statement in the mail with $80,000 I forgot I had at a former employer". Your financial advisor can help you blend your accounts together in a tax neutral manner. This will simplify record keeping and make it easier to track beneficiary designations. Fewer accounts will reduce the amount of time you spend checking for fraudulent activity. 6. Create Your Retirement Income Strategy Whether you have $5 million, $10 million, $20 million, or more put away, it is a good idea to have a plan for aligning your retirement expenses with your nest egg assets. For some folks, this means using social security to pay property taxes and health insurance, while using IRA withdrawals to fund household expenses. They might use growth from a brokerage account to fund activities such as family vacations and gifts to grandchildren. For others, this may mean using steady income from the family business to fund lifestyle expenses, but letting trust funds compound and grow for the next generation. Aligning your needs, wants and desires with your income sources can bring you peace of mind. Bonus tip: If it has been more than 5 years, review your estate plan. If your wealth has grown dramatically, you may need to bulletproof your wealth to protect it for the next generation . Final Thought. If you are 60 or over, have $2 million or more in investments, and think you may need assistance with any of the areas above, the Peak Wealth Planning team can assist. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Your company’s retirement plan mentions ESOP. You have heard your colleagues or HR talk about it for a moment. You are curious and want to know more. During the month of April, I have a series of articles that explore the basics of ESOP, the benefits of ESOP, the risk of concentrated stock ownership and how to reduce it, and explore tax strategy related to ESOP. Let’s dive right into the overview of ESOP - Employee Stock Ownership Plan. What is ESOP? An Employee Stock Ownership Plan (ESOP) is a type of retirement plan that invests primarily in company stock and holds its assets in a trust for employees. The shares within the ESOP may represent 100% of the company stock, or may represent a portion of the company stock. ESOP participants (employees) accrue shares in the plan over time. Participants are paid out by having their shares bought back, typically when they leave the company. Many ESOP participants utilize their shares as part of their retirement investments. Keep in mind that an ESOP is more than a retirement plan. An ESOP brings benefits to multiple stakeholders within the company and aligns their interests together. Let’s explore a bit more. Succession Plan for Retiring Business Owner An ESOP is usually formed to facilitate succession planning in a closely held company by allowing employees the opportunity to accumulate stock over time. Instead of selling the company to a private equity firm or a competitor, a retiring owner sells to employees using an ESOP transaction . ESOPs are used by companies of all sizes including a number of large publicly traded corporations. See this NCEO infographic on how an ESOP transaction works. Retiring business owners can sell all or part of their company to their employees. This may allow for an owner to continue to be involved in the company while reducing his or her concentration of wealth and reward the employees who made the company successful. Retirement Accounts for Employees An ESOP enables employees to own part of the company they work for. Employees accumulate shares in their retirement accounts over time, and they can sell or ‘cash in’ those shares when they resign or retire. Yet the ESOP shares employees own never costs them a dime. Incentive for Employee Owners Since ESOP shares are part of the employees' compensation package, companies use ESOPs to keep employees focused on profitability and share price appreciation. Compared to 401K plans where the money is invested in other mutual funds, employees with an ownership interest are motivated to do what's best for shareholders. Having workers with a significant stake in the company can improve productivity and attitudes toward the company which may translate into better performance and more profits. When the company does well, the ESOP participants do well. Companies often provide employees with stock at no cost to the individual. The company may hold the granted shares in a trust for safety and growth until the employee retires or resigns from the company. The company may not distribute stock equally. Many companies only provide voting rights to particular shareholders. Companies may also give senior employees the benefit of more shares compared to new employees. When Do ESOP Employees Get Paid? Companies typically tie stock distributions to vesting—the proportion of shares earned for each year of service. Full vesting usually takes three or six years depending on the company plan. After becoming fully vested, the company "purchases" the vested shares from the retiring or resigning employee. The money from the purchase goes to the employee in a lump sum or equal periodic payments, depending on the plan. Employees can receive the sum and pay tax on the value. Or, employees can roll the funds into a tax deferred IRA or 401k. Diversification Options Employees who are 55 or older and have participated in the ESOP for at least 10 years are legally required to have the option of diversifying up to 25% of their ESOP account shares. Diversification happens when companies buy back employee shares in exchange for cash. This diversification option continues until age 60 at which time the participant must have the option of diversifying up to 50% of his or her shares. What happens at retirement or separation? ESOP plans are required to allow employees to retire at age 65, but some allow for earlier retirement. At the time an employee declares his or her retirement, most ESOPs distribute the value of remaining shares in substantially equal installments across five years beginning the plan year following your retirement date. This means distributions could start very soon or within two years depending on timing. It is important to consult with your financial advisor and human resources department to plan accordingly, especially if you are counting on distributions to fund living expenses. If you leave for some other reason than retirement (such as quitting or being terminated), distributions of the value of your shares must begin no later than six years after the plan year in which you left. Companies may pay you out in a lump sum or over a 5 year period. Continue learning more about ESOP diversification and distribution. Click here to access the Peak Wealth Planning ebook The Employee Owner's Guide to Diversification and Retirement Planning . Are you comfortable with your progress towards retirement? If you are uncertain or would like a second opinion regarding diversification of your company holdings, the Peak Wealth Planning team can assist. Continue learning about ESOP: How Peak Wealth Planning helps ESOP participants Our Collection of Resources Specifically for ESOP participants - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

If your company benefit plan includes ESOP contributions, you may be one step closer to growing wealthy. As you near retirement, it is in your best interest to fully understand the benefits and risks ESOP contributions have for your retirement planning strategy. An employee stock ownership plan (ESOP) is a benefit plan that gives workers ownership interest in the company. Workers receive company stock that can grow tax deferred until retirement. Who participates in Employee Ownership? As of 2021, the NCEO estimates there are 6,500 employee stock ownership plans (ESOPs) in the United States covering more than 14 million participants. A list of the 100 largest employee owned companies appears here . The ESOP is designed to benefit employees who remain the longest and contribute the most to an employer’s success. What behaviors do ESOP encourage? An ESOP can provide an employee with significant retirement assets when he or she works at a company for a long period of time and the stock has grown in value. The ESOP is designed to benefit employees who remain with the employer the longest and contribute most to the employer’s success. Stock is granted to each employee’s ESOP account by the company. The employee bears no cost for this benefit. The stock allows employees to share in the profitability and growth of the company. How Much Do Employees Benefit? According to a 2010 NCEO analysis of ESOP company government filings in 2008, the average ESOP participant receives about $4,443 per year in company contributions to the ESOP and has an account balance of $55,836. People in the plan for many years could have much larger balances. Some participants become multi-millionaires. More than half of ESOP companies have an additional employee retirement plan such as a 401k . There is no cost to the employee for company stock. ESOP vs. Restricted Stock Units (RSUs) Many modern companies grant RSUs to employees as part of the bonus/performance plan. RSUs are stocks given to the employees and normally have a vesting period (3-5 years) for a portion of the RSUs each year. Both RSUs and ESOP make employees owners of the company. However, there is a major difference between ESOP and RSUs. While RSUs may be sold as soon as they vested, ESOP stock must be held as a long term investment. Long Term Investment Contributions to an ESOP are designed to be a long term investment vehicle for the employee. ESOPs are not set up for immediate withdrawal of the contributions by the company. Each year employees receive a statement with the number of ESOP shares and the value of those shares. If the company does well, the value of employees’ shares should increase over time. The long term nature of ESOP wealth building helps companies retain valuable employees and reduces the cost of turnover and training. In return, employees are motivated through their ownership interest to help the company be profitable and grow. If the company does well, an employee’s wealth grows. Retirement Benefits When employees resign or retire, they are entitled to their share of the account according to a schedule in the ESOP plan document. Many plans allow for distributions beginning at age 55. The majority of ESOPs are privately held companies such as Amsted Industries or Publix . As a result, ESOP distributions are made as a check directly to participants or paid to their IRA or 401k designated account. The participant can cash the check (and pay taxes) or do a rollover into a retirement account. Depending on the value of a participant’s shares, ESOP distributions can play a significant role in building wealth and generating retirement income. Continue learning more about ESOP diversification and distribution. Click here to access the Peak Wealth Planning ebook: Them Employee Owner's Guide to Diversification & Retirement Planning . Final thought. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Continue learning about ESOP: How Peak Wealth Planning helps ESOP participants Our Collection of Resources Specifically for ESOP participants - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

While company stock is a good source for saving toward retiremen t, it should not be your only source. Risks for ESOP participants include an over-concentration of wealth in company stock and company performance or economic cycles can dramatically impact your ESOP account value. Diversify your wealth. If the shares in your ESOP are doing well, you probably have a large concentrated stock position within the company. If everything goes well, you should enjoy substantial payouts from the ESOP share value when you are eligible for retirement. However, it is a good idea to be prepared if something happens with your company or its industry. Take the travel industry as an example. During the Covid pandemic, the travel industry was hit quite hard. According to research conducted through the U.S. Travel Association , travel spending totaled a mere $679 billion in 2020. This was an unprecedented $500 billion annual decline from 2019, with international travel and business travel suffering the sharpest declines. If you have investments in travel related employer stock, it may be several years until values fully recover. A company’s financial circumstances affect the value of its stock, thus lowering the value of employee’s ESOP accounts. Take the example of Hobbico in Champaign, IL. Hobbico was one of the largest employers in Champaign county, with 330 employees when it filed for bankruptcy in 2018. The company, formed in 1985, filed for Chapter 11 because it had added too much debt and ran into issues with suppliers. In 2017, employees learned that the value of the company's employee stock-ownership program declined by more than 80 percent, and the U.S. Department of Labor opened an investigation into deferred ESOP payments. Every year businesses fail , but when a company is backed by an ESOP the losses are compounded throughout the community. Protect Yourself If you are solely invested in company stock, you risk losing all your retirement funds in the event your company fails or falls on hard times. You’ll not only be looking at the prospect of losing your job, but also losing money on the company stock. It’s an example of putting too many eggs in one basket. Remember if a company with an ESOP is struggling financially and has to lay off workers, it may have to cash out workers’ shares in the ESOP. This could create more cash flow problems and more layoffs, creating a death spiral that could ultimately sink the company and the value of your ESOP account. According to the Pension Rights Center, best practices for people with ESOPs are: Transfer ESOP balances out of employer stock into other investments, particularly when the value of the employer’s stock is too large a portion of the total retirement plan investments, such as more than 10 or 20 percent. If an ESOP is also part of a 401(k) plan, participants are entitled to diversification rights, which include the right to transfer out of publicly-traded employer stock after three years of service. If the stock is privately traded or if the ESOP is not part of a 401(k) plan, participants only receive these diversification rights after reaching age 55 and participating in the ESOP for at least 10 years. Consider receiving any payouts in the form of cash that is directly rolled over into an IRA or 401(k) plan to avoid incurring tax penalties and so that the money can be invested in diversified funds rather than in a single stock. Work with your financial advisor to understand and take advantage of the diversification options available to protect your hard earned ESOP wealth. In addition to taking advantage of diversification options, consider the strategies below to grow your wealth and protect your financial well being. Cushion the Blow: Emergency Savings & 401k Contributions Set aside money in a savings account and a 401k in case you need to change jobs. This diversifies your investments and protects you from being wiped out in the event of a company bankruptcy. Invest in a diversified mix of stock and bond funds within your 401k instead of only investing in company stock. If you save money in your 401k, some plans allow you to borrow money or take a hardship withdrawal. If you have an emergency such as a serious illness with unexpected medical bills or high tuition bills, a 401k can be a lifesaver. A 401k coupled with a savings account for emergency funds can allow you to sleep better at night. At a minimum, I recommend having six months of emergency savings in the bank in addition to your 401k. If you’ve maximized your 401k contributions and have a healthy emergency fund established, you may want to look into other accounts to optimize your savings . Final thought. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

An Employee Stock Ownership Plan (ESOP) is a type of retirement plan, with tax treatment similar to a 401(k) plan. ESOPs invest primarily in company stock and hold assets in a trust for employees. ESOP participants accrue shares in the plan over time. Shares are allocated to an account for each employee. Companies use ESOPs as a strategy to motivate employees to be more productive, enhance company profits, and help employees grow their nest egg. Employees get paid the value for their shares when they resign or retire from the company. A well planned tax strategy could allow you to increase your wealth . Tax benefits for ESOP participants are similar to those with 401k plans. Shares within the ESOP can grow tax deferred until funds are withdrawn for retirement. There are additional financial benefits for ESOP participants whose companies are doing well. No Cost or Tax on Shares Granted Shares are granted to employees at no cost to the employee. And, at the time ESOP shares are put in the retirement account, employees are not taxed on the value. This is similar to an employer match made to a 401(k) plan. Once in the account, the shares granted can grow tax deferred in the employee’s account. If the company does well and the value of shares increase across time, an employee may enjoy significant growth tax free until withdrawal. Withdrawal may occur during a diversification period or at retirement. Withdrawal Windows Diversification period : Employees who are 55 or older and have participated in the ESOP for at least 10 years are legally required to have the option of diversifying up to 25% of their ESOP account shares. Diversification happens when companies buy back employee shares in exchange for cash. This diversification option continues until age 60 at which time the participant must have the option of diversifying up to 50% of his or her shares. Retirement or separation: ESOP plans are required to allow employees to retire at age 65, but some allow for earlier retirement. At the time an employee declares his or her retirement, most ESOPs distribute the value of remaining shares in substantially equal installments across five years beginning the plan year following your retirement date. This means distributions could start very soon or within two years depending on timing. It is important to consult with your financial advisor and human resources department to plan accordingly, especially if you are counting on distributions to fund living expenses. Getting Paid: Anticipating Your Tax Obligations Employees have two options when paid the value of shares. The option is usually selected on a form or website received from the company HR department or ESOP plan administrator. 1. Your employer can issue a check directly to you. When paid directly, you will have to pay tax on the value you receive. This means you will owe regular federal income tax, and possibly state tax, on the value you receive. You can spend your cash, put it in a savings account, or reinvest in a taxable brokerage account. 2. Your employer can issue a check to your 401k or IRA account. This option is known as a “rollover”. The benefit of a rollover is that the cash can be re-invested in the funds in your IRA or 401k. This allows your nest egg to continue to grow until you withdraw distributions for living expenses. By investing in a tax deferred IRA or 401k, you can manage the tax due on your distributions each year with some planning. Your financial advisor or CPA can help you plan withdrawals each year and assist with tax bracket management . A well planned tax strategy could allow you to increase your wealth, generate sustainable retirement income, and pay a lower overall tax bill on your ESOP distributions. What About State Income Taxes? When you take your IRA or 401k distributions, you will be taxed on withdrawals by your state. However, if you live in one of the following eleven states, your retirement income will not be taxed: Illinois Florida Pennsylvania New Hampshire Mississippi Tennessee South Dakota Wyoming Texas Nevada Washington Are you comfortable with your progress towards retirement? A well planned tax strategy could allow you to increase your wealth , generate sustainable retirement income, and pay a lower overall tax bill on your ESOP distributions. If you need help forecasting your post tax retirement income consider working with a financial advisor or your CPA . He or she can also help you address whether to take your ESOP diversification directly or roll into your IRA or 401k. If you are uncertain with your progress towards retirement or would like a second opinion regarding diversification of your company holdings, schedule a call with the Peak Wealth Planning team. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

If you work for an employee owned company, your ESOP balance could be a large part of your wealth or a small part of your wealth. Either way you should consider the value of your investment accounts to forecast how much income it may be possible to create. Add up the value of your ESOP, 401k, IRA and other investments. Once you know that value, you can work with a financial advisor or use an online calculator to project your retirement income . Below is an example of the total retirement savings, with a value of $4 million. One strategy is to use the annual growth / interest as your annual expense. Assuming the growth rate is 4% a year, you will have $160,000 as your annual income when you retire. The income estimate above is only a guideline forecast using the 4% rule of thumb . Many factors could change your retirement income including a change in the value of your ESOP, how much is added to your IRA or 401k each year, the number of years left until retirement, the mix of assets (stocks, bonds, cash, real estate) in each of your investment accounts and the investment returns or losses in each account. Track your investment account values each year. Let’s take a closer look at each investment type that can help you replace your income during retirement. It is important to have multiple sources in case one of your investments has a challenge. How do I replace my income in retirement? How long your retirement income will last depends on the sources of the income you will have at your disposal. Below are common sources of retirement income. Social security (and a pension if you are lucky enough to have one): One of the major benefits of social security is it will be paid until you pass away. At age 67 or 70 you should receive somewhere on the scale of $1,500 to $3,000 per month in social security benefits. If you take social security early at age 62, your benefit will be dramatically reduced. Head to the SSA website to begin estimating your Social Security Benefits . Annuity: Perhaps you have been paying into an annuity contract for 20 years, you may be able to receive a stream of monthly income when you retire. You can also buy a single premium lifetime annuity that pays you income for life and potentially to your spouse. With a single premium annuity you will need a large lump sum payment to generate substantial monthly income during retirement. Not sure whether an annuity fits in with your retirement income strategy, consult your financial advisor to learn more. 401k, IRA, Brokerage Accounts, or ESOP: For every $500,000 in your investments accounts, anticipate approximately $1,500 to $2,000 per month in steady retirement income. So if you have $1.5 million, you should be able to generate about $3,800 to $6,000 a month before income taxes. Your situation will vary, work with your financial advisor to confirm these amounts. Inheritance: Each $500k of funds you inherit could generate approximately $1,700 a month (pre-tax) in income during retirement. This assumes a 4% withdrawal rate and how long the money lasts will depend on how you invest the $500k. Real estate or family business : If you inherit or own rental real estate or a family business, your income could be greatly enhanced. Peak Wealth Planning can give you a full picture of what you have now and what your continued contributes will generate in retirement income. Call today to find out if you qualitfy for our our Retirement Income Forecast . Final thought. How much you have saved and your retirement lifestyle (budget) are the leading factors to determine how long your money will last. I always tell my clients to make a commitment to paying yourself first while working, be strategic in your investments, and be realistic with your budgeted spending. By doing all three, you will be able to live your retirement vision. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Your mental wellbeing is important. Which is why I’ve dedicated this month’s blog posting towards Mental Health Awareness. Today’s topic addresses natural cognitive decline, more specifically how your brain needs exercise. Before retirement, work provides much of the stimulation it needs to stay sharp. But once you retire, you’ll need to begin a new regiment to maintain your sharp wit. -- Peter As you get older, your memories may become more difficult to recall. Names may slip your mind, learning a new skill may take more time, and you may forget what you entered a room for. And retirement living can contribute towards this memory loss. Studies show that the earlier people retire, the more quickly their memories decline. According to Susann Rohwedder and Robert Willis, authors of Mental Retirement , there is a correlation between the age you enter retirement and cognitive decline. Rohwedder and Willis studied participants from countries where it is culturally more likely to retire early and compared them to individuals from countries where it is more likely to retire later in life. American participants, for instance, scored nearly twice as well as Spanish participants. In the U.S., more than 20 percent of people over the age of 64 are still in the workforce; in Spain, only 2.5 percent of that age group are still working. But there is hope of slowing this “mental retirement”, and that is by engaging in activities that include lots of thinking and problem solving. Here are some ways to stay mentally sharp without going to work every day. 1. Put Your Skills to Use You’ve spent your working years developing and improving your skill set. Keep those skills sharp by applying them even during retirement. Volunteer at a local organization that could benefit from your skills. Research found multiple benefits to volunteering, including greater life satisfaction, higher mental function, and a stronger social network. If you were an entrepreneur consider volunteering with SCORE to help budding business owners. 2. Develop a New Skill Learning new skills stimulates neurons in the brain, which forms more neural pathways and allows electrical impulses to travel faster across the brain. Plus, the more you learn the denser the white matter of your brain becomes, improving learning performance. Make learning social by enrolling in a course. Many colleges and universities offer reduced college tuition or the opportunity to audit courses to senior citizens (typically adults 60 and up). 3. Read Reading is a complex task that requires multiple parts of the brain to work together. It improves memory and strengthens language processing regions of the brain. Plus, if you make reading before bed a daily ritual , it will help you sleep better as well. Bring a social element to your reading habit. Join a book club or create a profile on Good Reads (this will connect with your Facebook profile so you can see what your Facebook friends are currently reading as well). 4. Write Frequently When you write by hand you are giving your brain’s encoding process a supercharge. Handwriting’s combination of touch sensation, visual perception, and motor skills reinforces the natural learning process. Essentially, writing by hand focuses the brain to process information in a more detailed fashion, helping to solidify information into your memory bank. Write to-do lists, jot down your goals or thoughts, begin outlining your memoirs, or record important notes. When you write these thoughts down, you will find you often will remember them without ever reading them again. However, another benefit of this tactic is the information is always right there when you need it. 5. Play Cards Playing cards boosts math and strategic thinking skills. Card games -- such as spades , bridge, poker, and blackjack -- can be cognitively demanding, exercising the part of the brain that processes information, evaluates data, and makes decisions. Playing cards also brings a social element to your game play regardless of this being online or in person. This interaction encourages friendly competition and conversation, which will combat loneliness. 6. Exercise Physical activity increases the amount of oxygen in the brain while also releasing dopamine and endorphins in your brain. These feel-good brain chemicals improve moods and reduce stress. It is not necessary to run marathons or do anything strenuous. Take a brisk walk daily, garden , bicycle around your neighborhood, hike a near-by trail, or do any other physical activity. 7. A Sound Night’s Sleep It’s normal for sleeping difficulties to emerge with age, but insufficient sleep can impair memory and learning. Going to bed and waking up at the same time can help. However, if you have a sleep disorder, consider seeking qualified assistance. Make lifelong learning a priority. Building and preserving brain connections is an ongoing process. Your brain is filled with your experiences, treasured memories, and the very essence of who you are. By maintaining a regular routine filled with mental stimulation well into your retirement years, you and your family will be able to enjoy your sharp wit and life experiences for decades to come. Other Useful Resources: Freakonomics Ep. 225 “Am I Boring You?” -- Excellent explanation of how being understimulated (ie. bored) leads to cognitive decline. Is my fading memory a sign of Alzheimer’s disease? -- It is important to note that the article above is meant to assist those with normal cognitive decline. Alzheimer’s impacts the brain very differently. Final thought. Are you comfortable with your progress towards retirement? Have you properly allocated funds towards future health costs? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

When it comes to phishing, it is possible to lose everything with just one click. Phishing scams in the United States caused a loss of $19.7 billion in 2020. The scammers manipulate our emotions. As the capstone article for our Mental Health Awareness contributions, I want you to be informed so you can protect yourself and your lifestyle. -- Peter When you heard that someone was scammed $12,000 on the internet, what might have gone through your mind? Victim was gullible, greedy, or both? Someone may not be very good with technology? Or perhaps you may think that you will never fall victim to such a scam. Read on to learn the tactics scammers use. Doing so will empower you to recognize their strategies and avoid the situation in the first place. What is phishing? Scams begin with phishing - an email, text message, or phone call pretending to be from a reputable source (e.g. Amazon, Microsoft, Paypal, etc…) in order to convince you to reveal personal information. In the example laid out by Mark Rober in Glitterbomb Trap Catches Phone Scammer , it was an Amazon email telling the receiver they had an uncollected credit, and the company wants to refund it. But in reality, the scammer is trying to connect with you to obtain your personal information such as a bank account or credit card number. Or, you may receive an unexpected check for $8,000 in the mail. After you’ve deposited the money, someone will call and ask for your bank account information so they can retrieve their $8,000. Next thing you know, your bank account is completely empty. How to Protect Yourself From Phishing Scams Scammers are constantly repackaging new ways to perpetrate old ploys. Whether you’re contacted by phone, mail, email, text, or in-person, the following tips provide advice on how to spot a scam. A Generic Greeting: Since phishing emails are sent out in bulk, they often use generic greetings with no personalization (like “Dear User”) or may skip the greeting all together. A Deceptive Email Address: Carefully review the sender’s email address, because a phishing attack can be off by even just one letter. For example, an email may be from “ returns@amazan.com ” in an attempt to fool you into thinking it’s a legitimate message from the Amazon support team. Remember, your brain will fill in missing letters for you -- something these scammers are counting on. Misspellings or Grammatical Errors: Many phishing emails come from cybercriminals in foreign nations. If the language in any email seems awkward or just not in the normal tone of the assumed sender, treat it with caution. Request to Update or Verify Account Information: Scammers will often generate emails that prompt you to verify your account information, spoofing well-known and trusted institutions. When you click the link, it goes to a fake login page that is generated to seal your credentials. If you receive a message like this, contact the company directly and not with the information found in this particular email. A Sense of Urgency: The goal of a phishing attack is to trick you into clicking on a bad link or attachment. Using social engineering tactics, scammers create messages that elicit an emotional, immediate response. This urgency is a major red flag. Deceptive URL’s: The linked text in an email doesn’t have to represent the true destination. To check the link without clicking on it, hover over the text and the actual destination URL will appear. In phishing emails, the URL may still closely resemble an authentic site so be on the lookout for extra dots or a missing letter. An Attachment: In the age of phishing, all attachments should be approached with caution, particularly if you were not expecting an attachment. Contact the sender directly before opening. If an email seems odd or out of character, it is best to exercise caution. Do not click on any links or attachments. If you receive a phone call requesting your bank account, credit card number, or personal information, do not share this information over the telephone. Ask them where they are calling from. Then, do your own research to contact the company directly. Do not use the phone number given to you by the caller. If you suspect there may be foul play, contact your local law enforcement. What to Do After Recognizing Warning Signs If you see any of the warning signs above then it's best not to engage with the scammer at all. If you have concerns about whether a request is legitimate, speak to a trusted friend, family member, or local law enforcement. If in doubt or if emotions are high, take a pause and get a second opinion from a trusted advisor. There is no harm in waiting a few days so you don’t react and share information with a criminal. Reporting Resources: Anti-Phishing Working Group (APWG). The APWG is an international coalition unifying the global response to cybercrime. You can help their efforts! If you got a phishing email, forward it to the Anti-Phishing Working Group at reportphishing@apwg.org. If you got a phishing text message, forward it to SPAM (7726). National Fraud Information Center . Fraud.org is a project of the National Consumers League. This organization reports fraudulent activity to the federal government and maintains detailed records of fraud incidents. It also provides links concerning whom you can contact within your state for assistance. Federal Trade Commision Fraud Reporting (FTC). You can report phishing attacks to the FTC. Your report is shared with more than 3,000 law enforcers. Internet Crime Complaint Center. The FBI and the National White-Collar Crime Center run a site called the Internet Crime Complaint Center. It features many tips and other helpful information about avoiding email scams and what to do if you fall victim to one. It also offers a link for filing a claim against a third party who stole your identity or made an attempt. Getting Scammed Can Impact Your Mental Health The repercussions of financial scams and identity theft -- the two primary goals of phishing scams -- can be long lasting. From financial loss to closing compromised accounts and restoring your credit score to working with institutions like the IRS, the stress can be overwhelming. Low self-esteem, anxiety, and feeling out of control are just some of the emotions victims of phishing scams can experience. One of the contributing factors that elongate these emotions long after a financial crime occurs is the fear of revictimization. Victims of identity and financial fraud may experience revictimization because their personal information has already been compromised, so there’s a chance that their names are still available on the black market. Avoid these financial and emotional impacts of fraud by taking preventative measures to protect your personal information from scammers. View emails, text messages, and phone calls from individuals you do not know with a heightened level of scepticism. Look for red flags, monitor your accounts, and seek help if anything seems off. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Many of us have undertaken remodeling projects during Covid-19. If you are like most homeowners, you love selecting the fixtures, fabrics, and paint colors of your home improvement project. But there is one very important item that you may overlook—making certain you are properly insured. Why Proper Insurance Matters You may need to review your insurance before beginning any home improvement project since it can expose you to additional financial risks. If you choose to act as your own general contractor (in other words, you organize and order supplies while hiring subcontractors for the work), you may be opening up yourself to additional liability (such as an injury to a worker or third party) that may not be fully covered by your current homeowners insurance policy. Whether it’s an extra room or an updated bathroom, many home improvement projects will increase the value of your home. However, too many homeowners fail to review their current policy’s replacement value limits, which may no longer be high enough to cover any losses that occur after your home improvement. Obtaining additional coverage shouldn’t wait until you’ve completed the remodeling. After all, at any point in the process, you will have supplies and completed work that may not be covered under your existing policy. Ask your insurance agent about increased limits, liability insurance, and workers’ compensation. To ensure that you are properly covered, meet with your insurance agent before starting your projects and discuss with him or her any need for modifying your current insurance coverage. Final thought. Insurance is a complex topic. If you need guidance to understand what you need to protect what you have spent a lifetime building, consider reaching out to me and gain some peace of mind. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Many of you know that I’m a real estate investor at heart. At a very young age, whenever we traveled with my family on vacation, I would always grab a copy of the local real estate books and pour over the properties. Often, they seemed out of reach financially. But, I tried to remind myself that we were only there for a week and it was better to enjoy the trip instead of obsessing over how to find, locate, and purchase a well priced property. Several of my clients have indicated that they might want to own a vacation home. Further, they believe it may turn out to be a good secondary source of income. The purpose of this article is to compare my experience of owning a vacation rental near Winter Park, Colorado, with renting a condo for a month in Key West, Florida. Due to Covid-19, my partner -- who works in pharmaceuticals -- had the flexibility to work remotely in late 2020. We decided to look somewhere warm in the U.S. where we could get some work done with reliable internet but also go to the beach and do some snorkeling when the workday ended. We plunked down $6,000 for a month-long rental in December 2020 in the Florida Keys. Our condo had two bathrooms, two bedrooms (for whomever is snoring), plus a pool and hot tub right outside our door. There was never anyone at the pool, so it felt like our own private oasis. Further, we could easily bike to snorkeling spots in Key West and hike to Fort Zachary to hang out. I remember thinking that $6,000 was a lot of money to plunk down on rent, but while at the unit, I had some interesting feelings about renting this condo. I noticed that despite its good condition, the condo had a number of small items that needed to be fixed: the wood front door needed refinishing, knob came loose on the laundry door, the kitchen cabinets were beginning to show their age, and there was a bit of rust on the Sub-zero refrigerator from the salt air. Having remodeled a number of homes, I notice the little things. And, I accidentally broke a dish in the kitchen. For a second, I paused to make a list of items that would need attention. And, I started imagining how much they might cost. To get high dollar rental amounts, you or your property manager have to constantly reinvest in keeping your unit pristine. An Epiphany Then, I remembered, this beautiful Key West condo isn’t my property. I don’t have to worry about these nagging little details. When Jerome and I leave, we simply turn in the key and have fond memories of sitting by the pool after work, reading on the couch, sipping bourbon and walking to Louie’s Backyard for dinner. Contrast this to when I visit our home in Colorado, I keep a running list of items we need to improve, fix or replace. I said to Jerome the other day that we should probably have someone refinish the bathtubs to make them look new. And, we are constantly checking with our cleaning person to make sure the water is shut off so it doesn’t freeze. Yes, we have plenty of insurance, but a burst pipe would probably mean that we couldn’t use or rent our home for a year given the scarcity of reliable contractors in our small mountain town. Rent three years in a row in the same location before you commit to a purchase. Try It Out First If you are thinking about buying a vacation home to rent out, my strong suggestion would be to rent at that location for at least three years in a row and rent for at least a full month each year. That way, you get to meet the locals, see what you will really do when you are not in vacation mode, and determine what the traffic, restaurant, shopping, and activity scene is all about. Whether you do yoga, fish, ski, volunteer, work from home, hike, bike, golf, or have other hobbies, you will want to make sure you are not bored or too isolated from what you enjoy doing. Remember a few days vacation is very much different than being at a place for months at a time. Vacasa, a popular vacation home rental property lists the top 25 markets for vacation homes to purchase. Consider test driving one of these communities for several years in a row before you commit to ownership. Final thought. Do you have interest in real estate investing? Reach out to me to discuss your real estate ideas and how they fit into your wealth management goals. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

An estimated 721,000 vacation homes sold last year. If you are one of the many folks sharing your second home with family and friends or generating rental income, don’t overlook protection of your new asset. When it comes to insuring your second home, you may find that the coverage you need is quite different from what you have on your primary home. The Unique Risks of a Second Home Your current homeowners policy may allow for coverage of two properties under one policy, but because there are unique risks with a second home, a separate policy may be more conducive to obtaining the coverage you need. Here are some of the special risks you may need to cover. 1. Long Periods without Occupation An unoccupied home can invite trouble. Without a presence, there is no one to fix a leak, respond to weather damage, or even report a fire. It also may become a target for burglars. 2. Isolated Location While seclusion may be a top priority for a vacation home, it also means that you may be far removed from the services that can prevent larger losses, such as a fire hydrant or fire department. 3. Renters Renting out your home when you’re not using it may be a good idea to offset the costs of ownership. However, having renters (or even guests) may increase your liability to any damage or injury associated with their stay. Be sure to work with your insurance agent to secure the right coverage. The decision to do short or long term rentals may dictate the type of coverage best for your vacation home. Protect your Wealth Discuss the benefit of raising your personal liability coverage to protect you from risk to your wealth that may come with offering your home to guests and renters. In addition to proper insurance, you may want to consider titling your rental home in a corporate entity to protect you from liability or a lawsuit. Your attorney can help evaluate the pros and cons of a corporate entity. Consult with your realtor or neighbors in your vacation home community to locate a reputable property management company to perform maintenance and look in on your home if you will be away for extended periods. Being properly insured helps, but preventing a claim in the first place is the best strategy. Final thought. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Homes are hot right now. According to realtor.com, the April national median listing price for active listings was $375,000, up 17.2% compared to last year. If you are selling your primary home or vacation home for a profit, be aware of the tax rules. The rules do vary for primary and vacation homes. Primary Home Sale If you owned and lived in your home for two of the last five years before the sale, then up to $250,000 of profit may be exempt from federal income taxes. If you are married and file a joint return, then it doubles to $500,000. To qualify for this exemption, you cannot have excluded the gain on the sale of another home within two years to this sale. Please consult a professional with tax expertise regarding your individual situation. This profit would be excluded from your taxable income. In fact, the sale may not need to be reported unless you receive a Form 1099-S or do not meet the above requirements. If you sold your home at a loss, unfortunately, you can’t deduct the loss. There Are Exceptions Even if you do not meet the above requirements, you may qualify for the exclusion on primary home capital gains if you meet one of the criteria below. If you receive the house in a divorce settlement If you are able to count short-term absences as time lived in the house If a surviving spouse who has not remarried can count the time that the deceased spouse lived in the house. The five-year test period can also be suspended for up to ten years in cases where any spouse has served on “qualified official extended duty” as a member of the military, foreign service, or federal intelligence agencies. Even if you don’t pass the five-year rule test, a reduced exclusion may be available if you have a change in employment or health, or because of unforeseen circumstances, such as divorce or multiple births from a single pregnancy. Have a discussion with your tax-preparer to learn more. Vacation Home Sale You may be obligated to pay capital gains and other taxes on the sale of a vacation home. If you own the home for more than a year, you’ll pay long-term capital gains taxes, and the tax rate depends on your income level. If you own the property for less than a year, you’ll pay short-term capital gains taxes, and the rate is the same as your ordinary income-tax rate. For most taxpayers, it’s advantageous to wait at least a year after purchasing a second home before selling. If you use your vacation home as a rental property, the taxes are more complex. You may have to pay taxes on depreciation you have previously written off. An introduction can be found in the article Selling a Vacation Home: Understanding Capital Gains on the Sale of a Second Home on Zillow. Taxes on the sale of a vacation rental are complicated. Please speak with a knowledgeable tax professional regarding your situation. Contact me if you are thinking about selling your home and would like to have a discussion about reinvesting the proceeds in real estate or another asset. Final thought. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Have you worked hard to grow your family business? If so, your efforts are integral to the economy and keeping more than half the US workforce employed. Whether you suffered or prospered during Covid-19, concerns about continuing to operate your business may have crossed your mind. According to the Conway Center for Family Business, family businesses account for 64% of the U.S. Gross Domestic Product (GDP), yet 57% of family businesses have no formal succession plan. While the number may shock you, it is not surprising that many small business owners are consumed by the myriad responsibilities of running their businesses. Nevertheless, owners ignore succession preparations at their peril and possibly at the peril of their heirs, customers, and employees. There are a number of reasons for owners to consider a business succession structure sooner rather than later. Let's take a look at two of the reasons business owners need to prioritize their business's succession structure. The first reason is taxes. Upon the owner’s death, estate taxes may be due, and a proactive strategy may help to better manage them. Failure to properly prepare can also lead to a loss of control over the final disposition of the company. A company may need to be sold to pay estate taxes depending on the financial situation. Second, the absence of a succession structure may result in a decline in the value of the business in the event of the owner’s death or an unexpected disability. Succession options may include an outright sale, a planned transfer of ownership to family members, or selling to employees. Working with your advisors on a plan for succession can avert a crisis and bring you and your family peace of mind. The process of business succession is comprised of three basic steps: 1. Identify your goals. When you know your objectives, it becomes easier to develop a plan to pursue them. For instance, do you want future income from the business for you and your spouse? What level of involvement do you want in the business? Do you want to create a legacy for your family or a charity? What are the values that you want to ensure, perhaps as they relate to your employees or community? 2. Determine steps to pursue your objectives. There are a number of tools to help you follow the goals you’ve identified. They may include buy/sell agreements, gifting shares, establishing a variety of trusts, or even creating an employee stock ownership plan if your desire is that employees have an ownership stake in the future. 3. Implement the strategy. The execution step converts ideas into action. Once it's implemented, you should revisit the strategy regularly to make sure it remains relevant in the face of changing circumstances, such as divorce, changes in business profitability, or the death of a stakeholder. Keep in mind that a fundamental prerequisite to business succession is valuing your business. Our next blog post will discuss the key value drivers, benefits, and process to obtaining a professional valuation of your business. As you might imagine, business succession is a complicated exercise that involves a myriad of tax rules and regulations. Before moving forward with a succession, consider working with legal, financial, and tax professionals who are familiar with the process. Final thought. Peak Wealth Planning cares deeply about its clients and wants to preserve continuity in the extremely unlikely event I were unable to continue with the firm. We have put in place a formal succession plan. If you know a business owner who can use help with succession planning, the Peak Wealth Planning team can assist. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Guest post by Shaun McGehee, Director at Prairie Capital Advisors, Inc There are several paths a business owner can take when it comes to transitioning ownership. For example, an owner may sell to a strategic buyer (competitor), to a financial buyer (private equity firm or employee stock ownership plan) or to the company’s management team (management buyout). The owner may also decide that a full or partial sale is several years in the future, but is interested in exploring gift and estate tax planning strategies or buying out another owner. Whether a business owner is selling all or a portion of the company or engaging in a transaction that requires a valuation, knowing what the company is worth is critical. Obtaining a business valuation, or appraisal of the company’s worth, will give the owner a competitive edge. This is because valuation is the heart of business transactions and corporate decisions. By going through the valuation process, an owner will come to understand the drivers that positively and negatively impact value. Armed with a valuation, an owner can make intelligent business decisions. Key Value Drivers Business owners should know the value of their business and what factors drive value. Most business owners understand that private businesses are typically priced as a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA serves as a proxy for cash flow, the lifeblood of any business. Companies with higher growth potential and greater free cash flow (discretionary cash flow available to owners) typically command higher multiples of EBITDA. Generally, multiples increase as the company’s size increases. In other words, a company with $20 million in revenue and $2 million in EBITDA will likely be valued at a greater multiple than a company with $10 million in revenue and $1 million in EBITDA. In addition to a company’s size, there are internal and external factors that affect value. External drivers include market conditions such as the range of multiples that publicly-traded companies in the same or similar line of business command. Lending conditions, industry specific factors and government regulation are also examples of external market conditions that may positively or negatively impact value. A business owner typically has little to no control over the market conditions that affect value, but does have control over the internal value drivers. Internal value drivers include the company’s margins, management team depth and experience, customer concentration, business plans and growth strategies. Generally, companies with experienced and deep management teams and solid growth command higher valuations. The aforementioned key value drivers are a few of the factors that impact valuations. It has often been said that valuation is an art and a science, and business owners should, at the very least, have a basic understanding of the theory and application of business valuation. The Valuation Process 1. Identify Business Owner’s Objectives. The first step in the valuation process is scoping the engagement. This critical first step outlines various administrative issues such as identifying the goals and objectives of the business owner, the valuation process and the standard of value to be employed in the valuation. Business owners should recognize that like beauty, value is in the eye of the beholder. That is, the same business interest may have a materially different value depending on the standard of value assumed in the valuation. Just a few of the various standards of value include: Fair Market Value Fair Value Investment Value Use Value Book Value The most common standards of value are fair market, fair value and investment value. The standard of value applied in the valuation is specific to the goals and objectives of the business owner and should be discussed at the outset of the engagement process, prior to conducting any valuation analysis . In certain circumstances such as selling to an ESOP or for gift and estate tax reporting, the standard of value is mandated by law. In those instances, if the business owner desires to sell shares to the ESOP or gift shares to family members, trusts or to charity, the appropriate standard of value is fair market value, which is the price between a willing buyer and seller, with each having reasonable knowledge of all relevant facts and neither under compulsion to buy or sell. The standard of value applied in the valuation is specific to the goals and objectives of the business owner and should be discussed at the outset of the engagement process, prior to conducting any valuation analysis. 2. Data Gathering. Once the valuation assignment is scoped out, the valuator will begin the second step which is the collection of data. During this phase, the valuator will conduct initial due diligence which includes, among other things, the collection of financial data, background and history of the enterprise, budgets, customer lists, business plans, and other important documents. 3. Due Diligence and Management Discussions. Step three is a continuation of the second step, with the difference being that step three is far more detailed as the valuator actively engages in detailed discussions with the business owner and dives deep into the inner workings of the business. This step usually includes an on-site due diligence meeting with the business owner and/or key members of the management team. 4. Build a Valuation Model. After the valuation analyst conducts in-depth due diligence, he or she begins step four, building the valuation models. In conducting the valuation portion of the analysis and developing the concluded work product, the valuation analyst typically considers various valuation approaches deemed to be appropriate in estimating the value of the company. The generally accepted approaches and methods may include: Income Approach – Discounted Cash Flow Method – Analyzes the company’s forecasted cash flow stream, estimates its future economic returns and “converts” those returns into a value estimate. Market Approach – Guideline Publicly Traded Company Method – The guideline publicly traded company method looks at the market pricing multiples of comparable companies in the industry that are adjusted against the earnings of the subject company. 5. Review Draft with Owner. Step five in the valuation process entails reviewing preliminary schedules with the business owner. Depending on the valuation assignment and the terms and conditions outlined in the engagement letter, the preliminary schedules may or may not communicate all of the assumptions and value conclusions. This may be to protect independence, but in all cases this serves as a quality-control measure. 6. Presentation of Results. Step six is when the valuation analyst formally prepares the report and ultimate deliverables to the client. Part of the deliverable is a formal presentation to the client. This includes an oral presentation of the report and detailed explanation of the conclusions reached. Parting Thoughts It is never too early to start planning the transition of a business. Ideally, business owners should discuss their goals and options with their financial advisors years before any ownership transition transaction. There are usually complex issues to address, such as tax implications, management succession and owner’s legacy. Business owners should understand the key value drivers and engage in active discussions with their financial advisors to implement a strategy to meet their goals. - - - - - - - - - - - - - - - About the Author Shaun McGehee joined Prairie Capital Advisors in 2004. He has extensive experience advising middle-market companies, shareholders and trustees on employee stock ownership plan (ESOP) transactions, fairness opinions, leveraged buyouts, capital raising, mergers and acquisitions (M&A) and other strategic advisory engagements. Shaun is also instrumental in the training process for all employees on technical and strategic initiatives, both as part of the onboarding process and as employees advance in their careers at Prairie. Further questions about this topic may be directed to Steve Ryan . Steven joined Prairie Capital Advisors in 2018. He specializes in new business development initiatives for Prairie. He has over 25 years of new business and banking experience with clients throughout the country. You may email questions to sryan@prairiecap.com or call him directly at 630-657-8157. - - - - - - - - - - - - - - - About Peter Newman and Peak Wealth Planning Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

Do you have plans for cashing out of your business through a company sale? You have worked many years to grow the business and serve your customers. It is successful and generates a good lifestyle. Most of your net worth is tied up in your business. You have a well trained team of employees and a growing customer base. Now you are considering exit options. You may be thinking about: Reducing your involvement in the day-to-day operations A complete exit to start your next chapter in life Reduce your concentration of wealth with a full or partial exit Rewarding employees who helped grow the business Invest proceeds to generate income for you today and generations to come Which option should you choose to exit your business? Understanding your priorities will help balance the PROS and CONS of your exit plan. This article will summarize the following four exit strategies: Sale to Strategic Buyer Sale to Private Equity Minority Equity Investment aka Partial Sale to Family Office Sale to Employees (ESOP) Outright Sale: Private Equity or Strategic Buyer If you want to maximize your wealth, consider a sale to a private equity (PE) firm or a strategic buyer. You have the option for an outright 100% business sale to a private equity firm or to a strategic buyer (usually a competitor). With an outright sale, you can achieve a full exit, meaning you get all your cash to spend or invest after the sale and paying taxes. And, with an outright sale you can completely exit, removing business risks from your life and start your next chapter. Alternatively, some buyers may ask you to stay on with a rollover of part of your equity and incentivize you with additional compensation if the company flourishes under a new buyer. Rollover equity is not a good choice if you want to walk away completely, but it may be a great choice if you want to diversify your wealth by selling a significant portion of the company. If you rollover equity, it is very important that you evaluate the new decision makers and decide whether you can ‘get in bed’ with them and work well together. One of the downsides of a sale to a strategic buyer or a private equity firm is that there may be management or employee turnover after the sale. And, most private equity firms will sell the company again within 5 to 10 years. If you sell to a strategic buyer or a PE firm you are giving up decision making authority. If you are considering an outright sale of your company, make sure to factor taxes and the payoff of debt into calculating how much cash you will have after the transaction. One of the benefits of selling today is that capital gains tax (in 2021) are at a historically low rate. Many experts think capital gains rates will increase in the near term. Partial Sale: Family Office Perhaps you love working in your company and want to keep growing it for the next 10-20 years. However, you recognize that most of your wealth and financial risk comes with owning and working at the company. There are several family offices that will consider allowing you to run your business indefinitely but provide you with a partial buyout of up to 50% equity today. Family offices like stable well run businesses that generate steady income and aren’t subject to the whims of Wall Street noise. If you find a family office whose values and vision align with yours, that may be a good option to ‘take some chips off the table’. After you receive the cash, you can work with a financial advisor to reinvest in a diversified pool of investments . It is important to work with your bank, attorney, and financial advisor to look at debt structure and debt guarantees before finalizing a minority equity sale. One of the benefits of a minority equity sale is that you can continue to participate in the profits of the business for the equity you retain. The typical strings associated with a minority equity investment have to do with taking on lots of debt or making major strategic decisions. If you do sell part of the business to a family office, in the future if you desire a full exit, most family offices will be pleased to accommodate you when the time comes. The benefits of a partial sale to a family office may come with a lower sale price than if you sold to a strategic buyer or PE firm. Partial Sale: ESOP Another way to partially exit your business is to sell to your employees. This can be done with an Employee Stock Ownership Plan or ESOP. The benefits of an ESOP include partial (or full) liquidity for you and the option to continue to be involved in the business. Rewarding employees who have helped take care of your customers and grow the firm may be one of your goals. For certain company owners, rewarding employees who may be like family could be your top priority. With an ESOP transaction, management can continue to own part of the business and participate in its growth and profitability while helping employees improve their own financial lives with equity ownership in retirement accounts. An ESOP transaction can be more complicated than an outright sale as the selling shareholder(s) are often asked to take back a portion of the debt on the sale or retain equity for a period of time. So, for those wanting a full and immediate exit, this may not be the best choice. Our next article in this series ‘What will be your legacy’ further explores the benefits of an ESOP as an exit strategy. If you are thinking about selling a successful business, there are many options available. It is important to consider the following criteria before getting too far down the road to a sale. 1. Is your goal to maximize cash today? 2. How important is it to take care of your employees? 3. Do you want to walk away from the business completely? 4. How much of your net worth is tied up in the business? 5. How much business risk and responsibility do you want in the future? Final thought. Selling a business can be one of the most important events in your life. If you, or a friend, is interested in starting a conversation about business exit strategies, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .

If you are concerned about being able to retire, you are not alone. Many Americans worry about whether their retirement savings will be enough to live comfortably. In fact, when Americans think about retirement, the top concern for many is a fear of running out of money — which they fear even more than death . The decision to retire is a very personal one that depends on a number of important factors, such as your age, financial circumstances, health, and family situation. You also need to know whether you are eligible to collect a retirement benefit from your pension or sponsored retirement plan. Be aware that many traditional pension plans have both age and service requirements you must meet before you can start collecting a retirement benefit. If you work for the University of Illinois (including UIS , UIC , or UIUC ) or another state retirement system and have questions about your eligibility, be sure to speak to your financial advisor about your specific circumstances. Know Your Unique Needs Today’s retirement culture demands that retirees develop personalized retirement strategies that reflect their unique financial life. From using online calculators for estimating withdrawals to creating a retirement strategy with a financial advisor, you can approach retirement planning in many ways. As you look ahead, you will need to understand how various factors such as life expectancy, wealth, income needs, risk, and market environment affect your calculations. With these details in place, you and your advisor can develop a strategy designed to balance your current cash flow while preserving your long term income needs. If you have run the numbers and think you may have a retirement-income shortfall, do not panic. Several strategies can help you increase your potential retirement income or reduce your expenses. Know How to Address Any Retirement Gaps Increasing your savings rate may allow you to make up your retirement shortfall. Contribute as much as you can to tax-advantaged retirement plans, and consider opening a Roth IRA or taxable investment (brokerage) account. If you are 50 or older, use catch-up provisions to boost your retirement contributions. Delaying retirement can help you buy time. By working longer and adding to your savings, you will have more time to grow your assets, increase Social Security benefits (if you are younger than 70 and qualify to receive these funds in your state), and shorten the amount of time your savings must last. University of Illinois employees do not contribute to Social Security, so that will likely reduce your retirement income. Downsizing your home and living expenses can help you decrease the income you will need in retirement. Many retirees are empty nesters who can reduce their expenses by moving into smaller home s. This can save you money on maintenance, insurance, and property taxes. And, it will provide you more funds and time to travel, visit with friends, and enjoy unique experiences. Working during retirement can create extra income while keeping you active and doing something you love. Many educators retire but continue teaching part time. Senior administrators become consultants and professionals. Other retirees pursue passions for gardening, lecturing, or writing. Keep in mind, though, that working while collecting payments may affect your Social Security benefits if you are younger than your full retirement age. Managing Social Security and Pension limitations can help you prepare to have the retirement income you need. At least 15 states do not offer Social Security to professors, teachers or administrators, and not every educator qualifies to receive pension benefits . If you work in public education and do not pay Social Security taxes at the government job that provides your pension, the Government Pension Offset (GPO) may reduce your Social Security spouse, widow, or widower benefits by up to one-half . Further, if you do receive Social Security and are eligible for a pension based on earnings that your Social Security does not cover, the Windfall Elimination Provision (WEP) may reduce your benefits . To manage your retirement gaps, you need to know your specific restrictions and opportunities. A financial advisor can take a look at your overall circumstances and help you design a strategy with the goal of maximizing your retirement income. Your advisor will be able to help you design strategies to address any gaps or additional planning challenges in your Social Security or pension benefits. With their support, you also will be able to develop tactics that help balance the need for growth against your risk appetite, time horizon, and future goals. Final thought. Are you comfortable with your progress towards retirement? How about helping future generations meet their financial goals? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. - - - - - - - - - - - - - - - About the Author Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind. Peak Wealth Planning offers personalized concierge services  to meet your wealth management needs, including  financial planning, investment management, ESOP diversification, retirement income, i nsurance, and estate planning. As a fee-based  financial advisor based in Chicago, Peak Wealth Planning serves a select group of clients in Illinois and across other states .