I recently had a conversation with a new client. He is the primary breadwinner and has been making most of the financial decisions for his family in recent years. We compared notes on growing up with parents who were boom and bust in their finances. We discussed the burdens of having to live up to societal expectations of the man being the breadwinner and sole decision maker regarding finances. It felt comforting to know that other men feel similar levels of pressure and stress to provide for their families. Of course, a small amount of stress or expectation pressure can be motivating. A significant amount of stress can be paralyzing and cause indecision or lead to poor decision making. This high income professional’s concerns are similar to those I’ve heard from others: Should I pay off student loans or prioritize saving for retirement? Am I saving enough to retire on the timeline I desire for my family? Is there enough cash or life insurance if something were to happen to me? What type of life insurance do I really need? My spouse and I have 7 different retirement accounts, can we get these more organized? Are my investments pulling enough weight for the risks I’m taking? As our conversation evolved, it became clear that this very smart individual was certainly capable of dealing with these issues. However, to do so, he would probably need to spend weekends creating excel spreadsheets with different scenario models and reading financial planning books. This would take precious time away from his children and wife. And, even though he could come up with a good decision after hundreds of hours of research, he, like most of the families I work with, would rather outsource that work to an expert. And, receive an opinion that the decision being made is the best one, or the most optimal decision, given his family’s resources and unique circumstances. The benefits of having a relationship with a trusted financial advisor include: When your company offers to repurchase stock, your advisor can give you a recommendation in a day or two in time to meet the tender decision timeline. And, they can advise about the tax consequences. If your company changes the 401k lineup, your advisor can sort through gobs of fund materials and tell you which ones to pick, thereby saving you an entire Saturday afternoon. If you have a question about whether to allocate cash flow to paying off student loans or saving for retirement, your advisor can let you know the pros and cons of each option. If you and your spouse are not in agreement on a major financial decision, your trusted advisor can help you reach a compromise. Even though he could come up with a good decision after hundreds of hours of research, he, like most of the families I work with, would rather outsource that work to an expert. You can sleep at night knowing that a coach for your personal finances is a phone call or email away. That way, you can turn off the noise of the markets, headlines, and watercooler chat and get back to doing what you love. Final thought. Do you have written financial goals? Is stress causing you to re-think your investment strategy? Are there significant changes happening in your life? Peak Wealth Planning meets with clients in Champaign and Chicago, Illinois, as well as in Colorado near Denver, Winter Park, and Fraser. If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 an ESOP participant, you may be wondering if your ESOP is a good retirement plan. Generally speaking, yes. As an employee at an ESOP company, you receive shares of the company annually at no cost to you. Then, during retirement, you will be able to convert those shares to cash that you will be able to spend. An employee stock ownership plan (ESOP) is an IRS qualified retirement plan — similar to a 401(K) plan — that holds company stock. It provides employees with an ownership stake in the company as well as an additional form of compensation directly linked to success of the company. ESOPs automatically assign ownership shares to eligible workers each year. This means employees receive company stock each year at no cost. In 2019, the NCEO analyzed current data and found the average ESOP participant received $6,420 each year in company stock contributions. To be clear, this is based on average participants in more than 6,200 ESOP companies throughout the United States. Some receive much more than the average stock contribution while others receive much less. So to truly understand if your ESOP will contribute meaningfully to a comprehensive retirement plan, then you should consider the following 4 questions. How do I know how much is in my ESOP? While employed, a worker doesn’t actually hold any shares of the company. They are kept in the trust fund and only disbursed once a vested employee is terminated, retired, disabled or otherwise leaves the company. Employees receive a statement each year showing the number of shares and value they own in the trust fund. What are the main benefits of an ESOP? From a worker’s perspective, walking away with cash for retirement is the main benefit of an ESOP. The workers who walk away with the most cash tend to be those who work at a company for 20 or more years while accumulating shares annually. Employees who work at companies where profits grow consistently will enjoy a corresponding ESOP value growth. Can ESOP make you rich? Peak Wealth Planning has worked with ESOP participants in their 50’s and 60’s with balances from $500,000 to $6+ million. These workers stayed at one company for 20 to 30 years and grew wealthy from the company’s annual stock contributions to their ESOP for retirement. Being an ESOP participant assisted these individuals in achieving wealth, and it may do the same for you. How much retirement income will $1 million in an ESOP generate? If we follow the 4% rule , a $1 million ESOP – after shares are sold back to the company and reinvested in a diversified investment portfolio – should generate $40,000 a year before taxes in your retirement. Final thought. Are you comfortable with your progress towards retirement? Are you confident you’ll know how to handle your ESOP diversification and distribution when the time comes? Do you need help visualizing how your ESOP can contribute to the retirement you visualize for your family? Peak Wealth Planning meets with clients in Champaign and Chicago, Illinois, as well as in Colorado near Denver, Winter Park, and Fraser. If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

The Employee Ownership Foundation examined nearly 1,000 companies – half ESOP and half traditionally owned. Their findings? Employee-owned companies have a higher employee retention rate than their counterparts. One key difference between employee-owned companies and those within the public sector is the retirement benefits given to its employees. While most offer the option of a 401k with company contributions, employee-owned companies provide retirement benefits with shares of the company going into an Employee Stock Ownership Plan (ESOP). Let’s examine the key differences between the ESOPs and the 401k. How is my ESOP different from my 401k? ESOPs and 401ks are designed to be long term retirement savings vehicles. They are not meant to fund your day to day living expenses during the years you are working. Instead, the investments provide a huge opportunity for compounded returns to grow your retirement nest egg. Most business owners with 100 or more employees offer a 401k plan as a benefit. In the United States, more than 6,200 companies offer ESOPs covering 14 million employees. The main differences between 401k plans and ESOP plans include: Who funds contributions to the retirement account, How much is contributed into the account, What investments are available in the retirement account, and When can you withdraw money from the account? Key differences are outlined in the table below. Assuming the accounts are not Roth, the main similarity between 401k and ESOP accounts is that investments grow tax-deferred with the intention of being used for retirement spending. This means that you do not pay tax until you withdraw the money for retirement. The primary feature of an ESOP is that your investment is in employer stock. Companies grant employees shares each year to motivate them to do what's best to make the company profitable. Whether that is saving on expenses or growing revenue, an employee-owner has a vested interest in seeing the company be successful. If the company does well, this benefits the company with profits and the employee by increasing their wealth. However there are some risks with an ESOP that are generally not present within a 401k. If your company falls on hard times and lays off employees, you could be looking for a job while the ESOP share price is down as well. If a company goes bankrupt, the ESOP portion of your nest egg for retirement could be wiped out. It’s important to contribute to your 401k and IRA in addition to your ESOP. This reduces the risk of all your eggs being in one ESOP basket for retirement. Think of a 401k as savings for your future with your employer helping out along the way. The majority of employers in the United States, about 86% , provide some type of savings incentive by offering a contribution match on their employee’s 401k plans. No matter what your company’s match program is, it’s important to strategize. Contribute enough annually to maximize your employer’s contribution and potentially max out your annual contributions too (pre-tax contribution limits for 2022 are $20,500 or $27,000 for individuals over 50). Within a 401k there are often a limited set of funds you can pick from with a mix of stocks, bonds, real estate, and international funds. You can pick the funds yourself or ask your employer’s 401k provider or your financial advisor with help selecting the funds. The earnings within a 401k are usually tax deferred. This means you get a tax deduction for contributions you make and you don’t pay tax on the account until you spend money during retirement. There is no vesting period for money added to your 401k. Once the funds are added, you have 100% ownership immediately. However, if you withdraw the funds prior to 55, you will face an early withdrawal penalty. Employee Stock Ownership Plans (ESOP) is a Fully Funded Incentive Program Employee Stock Ownership Plan (ESOP) is a savings vehicle for retirement. It is fully funded by the employer and offers the ability for employees to share in the company’s growth and profitability. The typical holding in an ESOP is company stock. This means that the employee’s income and wealth building from an ESOP are both tied to the company’s performance. Should you withdraw from your ESOP before retirement? Typically, you are eligible for diversification of your ESOP at age 55 or 60. This means you can take money out while you are still working. You can spend the money (after paying taxes and penalties) or reinvest it for retirement. The benefit of withdrawing before retirement is that you can pay off bills, fund a child’s college education, purchase a home, or take a trip to the beach. However, this may hurt your retirement nest egg. If you rollover the money to an IRA or another 401k account, this delays spending the funds in favor of retirement. It provides you the opportunity to diversify your investment (and risks common from concentrated employer stock), and continue to grow your wealth while deferring your tax payment. Depending on the investments you choose, a rollover to an IRA or 401k can be a good option to allow your nest egg to grow for the future. What about Roth? Some employers offer Roth 401k or Roth ESOP options. With a Roth option, taxes on contributions are paid up front by the employee. And, when the funds are available for retirement, both the growth in the account and the original contributions can be withdrawn and spent tax free. Are you an employee in an ESOP company? Do you have more in depth questions about your retirement savings and strategy? Or do you have comments about what you just read? I’d love to hear from you. Drop a comment below or schedule a call today . Final thought. Are you comfortable with your progress towards retirement? Are you confident you’ll know how to handle your ESOP diversification and distribution when the time comes? Do you need help visualizing how your ESOP can contribute to the retirement you visualize for your family? Peak Wealth Planning meets with clients in Champaign and Chicago, Illinois, as well as in Colorado near Denver, Winter Park, and Fraser. If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

As a wealth manager specializing in helping employee-owners prepare for retirement, I regularly have individuals attending my webinars because they need clarity on how ESOP distribution happens. Their primary question that leads them to me is: I have an ESOP at work. How and when do I get paid? Individuals that spend a lifetime working for an ESOP company want to prepare 5 to 10 years before retirement, so they begin taking steps towards truly understanding what diversification and distribution of their ESOP share will look like for them . If you are in the same boat, you’ve found yourself in the right place to begin finding your answers. When will I be paid? Most employees who participate in an ESOP are eligible to get paid for their stock at age 55 and age 60 and then over a 5 year period for remaining share value when they retire. Employees receive a statement showing how much they can withdraw and a form to indicate whether to receive a check or rollover the funds to an IRA or their 401k. What happens to my ESOP benefits if my company is purchased by another company? When a company is owned by its employees and sold to another company, in most cases, the employees will receive a lump sum payment equal to the value of their ESOP shares. This windfall can be a life changing amount of money for some folks. If you receive $500,000, $1 million, or $3 million you may want to speak with a trusted financial advisor to receive help with investing that money for your future . The decisions you make can be life changing. If your company is sold and you do not receive a lump sum payment for your shares, there are two options. Your ESOP shares may be rolled over into your 401k at the acquiring company, or into new ESOP shares for you at the acquiring company. Who buys my ESOP shares? The company you work for repurchases the shares from the ESOP plan. Once those shares are repurchased you can reinvest the cash received in an individual retirement account (IRA) or 401k. Or, you can pay taxes (and penalties) to spend the cash immediately. What happens to my ESOP when I retire? 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 cash value of employee shares in substantially equal installments across five years beginning the year following your retirement date. That cash value can be spent after paying taxes, or rolled over into an IRA (individual retirement account) to invest in mutual funds or ETFs to provide a lifetime of income withdrawals. Can I access my ESOP before retirement? Most ESOP plans offer employees the ability to sell back a portion of their shares to the company at milestone ages such as 55 or 60. This allows the employee to rollover some of their company stock in the ESOP to a more diversified individual retirement account with mutual funds or ETFs. Or, the employee can cash the check and spend the money after paying any taxes or penalties due on the sale of company stock. What if I quit or am terminated? Depending on the ESOP plan document, you may be able to request payment for your ESOP shares all at once or across time depending on your plan’s governing documents. Consult with your human resources department. What are the benefits of reinvesting my ESOP cash distribution into an IRA or 401k? Your retirement nest egg will continue to grow when properly invested. You can spread your tax obligation to the IRS across time. If properly managed, your IRA investments can provide you with a lifetime of sustainable income. What are the benefits of spending my ESOP cash distribution immediately? You can use the money for any purpose after you pay taxes. Some examples are buying a home, paying off a mortgage, funding your children’s college, or purchasing a new vehicle. You may want to consider whether these expenses outweigh the benefit of reinvesting the cash distribution into your retirement nest egg. Final thought. Are you comfortable with your progress towards retirement? Are you confident you’ll know how to handle your ESOP diversification and distribution when the time comes? Do you need help visualizing how your ESOP can contribute to your retirement? Peak Wealth Planning meets with clients in Champaign and Chicago, Illinois, as well as in Colorado near Denver, Winter Park, and Fraser. If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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’re working in an ESOP, married to an ESOP participant, or thinking about a job with a company offering ESOP as one of its employee benefits, you are bound to hear the phrase “ESOP diversification and distribution” a time or two. But what does it mean? And, how will it impact you during your retirement planning? This article will cover the company’s obligation to offer diversification, what you should anticipate happening when you are eligible to diversify beginning at age 55, how much of your ESOP you can diversify, and the options available for your cash at the time of diversification What is diversification in ESOP? Within the world of employee ownership, diversification is the ability of a current employee stock ownership plan (ESOP) participant to exchange employer securities held in his or her ESOP account for cash or other investments. An ESOP participant typically qualifies for diversification when they have reached age 55 and completed ten years of service. It is your employer’s responsibility to keep track of who should be given the election to diversify ESOP shares. Your employer will calculate the portion of the account eligible for diversification and provide you with a notice along with the number and value of your shares. If your employer does not comply with this requirement, this may result in a breach of fiduciary duty and possibly jeopardize the ESOP’s tax-qualified status . ESOP Diversification According to the Internal Revenue Code, each eligible ESOP participant (“Eligible Participant”) must be provided the opportunity to diversify up to 25% of her company stock account each year over a five year period, then increasing to 50% during the sixth and final year. These percentages are cumulative over the entire election period – it is not 25% each year in the first 5 years and then 50% in the sixth year. An Eligible Participant is a current participant or former participant who has attained age fifty-five and completed at least ten years of participation in the ESOP. The Eligible Participant must be given the right to diversify within 90 days following the end of the plan year in which he or she is eligible to diversify. If the Eligible Participant elects to diversify his or her account, the shares of company stock must then be diversified within the 90 days following his or her 90-day election period. All shares of company stock previously diversified are included in calculating the required number of shares available for subsequent years. In other words, the shares of company stock previously diversified are added back into the account balance, then the applicable percentage (25%, or 50% if in the sixth year of the election period) is applied and the prior amounts are then subtracted from the result. Timing Issues Eligible participants who elect diversification should get paid within 180 days of the ESOP plan year’s end. Here’s how it works. Eligible Participants must make a decision whether or not to diversify a portion of their company stock account once they receive a notice from their employer. That notice should be sent by the employer within 90 days of the ESOP plan year’s end date. If the employee elects diversification, the trustee of the ESOP then has 90 days to diversify the Eligible Participant’s account. Satisfying the Diversification Requirement Most companies offer Eligible Participants the option to direct the ESOP to transfer (in cash) the portion of the account subject to the diversification election to one of the following: the company’s 401k plan, the participant’s IRA, receive a check the participant can cash. The trustee of the plan is responsible to make sure the diversification is completed according to the employee’s direction. Less Restrictive Diversification Nothing in the Internal Revenue Code prohibits reduced diversification requirements, i.e., requiring five years of participation instead of ten. The cash position and financial condition of the company may warrant more liberal diversification. For example, an employer may want to provide for more liberal diversification to manage or spread out its repurchase liability obligations. Repurchase obligation is the requirement that a company buy back shares from eligible ESOP participants. ESOP Plan Document Update If the employer decides to allow for more liberal diversification, the ESOP plan document must be updated so everyone knows the terms of the plan. A company cannot implement a less restrictive diversification requirement through administration of the ESOP without a formal plan update. Years of Participation Most companies define a “year of participation” under the ESOP as a year in which an individual has an account balance under the ESOP, regardless of whether he or she is actively employed in such year. Some companies have a more strict definition of participation which means working for at least 1,000 hours. Your company’s ESOP plan document should define how it determines participation. Employee owners should not rely solely on their ESOP for retirement. Doing so is the equivalent of putting all your eggs in one basket. Diversify your investments by funding your 401k, an Individual Retirement Account (IRA), and having cash available in savings accounts. Final thought. Are you comfortable with your progress towards retirement? Are you confident you’ll know how to handle your ESOP diversification and distribution when the time comes? Do you need help visualizing how your ESOP can contribute to your retirement? Peak Wealth Planning meets with clients in Champaign and Chicago, Illinois, as well as in Colorado near Denver, Winter Park, and Fraser. If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

Companies that have ESOPs tout them as a great wealth building tool for employees. If you participate in an ESOP, here are the questions you should ask your employer. 1. What % of my salary will be contributed to the ESOP each year? This amount can vary from year to year, but ESOPs that have been around for a while should be able to provide you an estimate. You can ask your HR department or fellow employees what they have received each year. The higher percentage of salary contributed to your ESOP, assuming the company does well, the quicker your retirement nest egg will grow. 2. What has been the share price appreciation for the past ten years? While no one can predict the future, if you have an idea of the average annual growth in value of company stock shares during the past decade, you can use that rate to estimate future share price growth. This will impact your overall wealth and retirement nest egg. 3. How long do I need to work here to be vested in my ESOP shares? Most companies have a minimum number of years you have to work for the value of shares to remain with you as a participant in the ESOP plan. 4. At what age(s) am I eligible to diversify a portion of my ESOP shares? Many companies will allow you to sell back up to 25% of your shares at age 55, another 25% at age 60, and the remaining shares over five years when you actually retire from the company. Companies spread out buying shares back from employees so they can plan to have the correct amount of cash available to buy back shares. 5. At what age can I retire and sell back my remaining shares? The IRS requires that ESOP plans allow participants to retire no later than age 65. Many companies spread share repurchases over several years following retirement to manage the cash obligation across time. 6. Will my ESOP fund my retirement? ESOP participation can be a great wealth building tool. If your company meets its share repurchase obligations, you could wind up with a significant nest egg for retirement. However, you should not rely solely on the ESOP to fund your retirement. It is important to also fund your IRA and 401k in case the company runs into financial difficulties or you change careers. The graphic below shows a hypothetical retirement income of $40,000 a year before tax from $1 million of accumulated ESOP, IRA, and 401k balances. You should consult with your trusted financial advisor to forecast your retirement income. Final thought. Do you have written financial goals? Is stress causing you to re-think your investment strategy? Are there significant changes happening in your life? Peak Wealth Planning meets with clients in Champaign and Chicago, Illinois, as well as in Colorado near Denver, Winter Park, and Fraser. If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

As a business owner, you face unique challenges and opportunities when building a financial future. This month’s posts provide insights on mistakes to avoid and steps to take when building the retirement you desire—while managing your myriad responsibilities. Small-business owners are an essential component of America’s economy. In the United States, 99.7% of all firms are small businesses with 500 or fewer employees . Too often, however, a small-business owner spends so much time and energy building their company that they neglect their personal financial future. Our goal is to show business owners how to maximize the value of their companies with strategies that may also help them prepare for retirement. If you own a business it is important to work with a financial advisor to create a retirement roadmap. Strategy #1: Create a Retirement Roadmap Building, running, and growing a company is tough. Business owners have countless responsibilities and too few hours in the day. Often, in the midst of fulfilling your professional priorities, you end up putting your personal financial life on the back burner. If you have not prepared for your retirement, you are not alone. Many entrepreneurs think growing a business is all they need to retire. However, just having a business does not automatically mean you have a retirement strategy in place. Without a documented roadmap — one that goes beyond the hope of simply selling your business or passing it to your family — you could end up pushing back your ability to retire. In one survey, 34% of respondents said that they have no retirement strategy, while 12% have no plans to retire at all. Both of which are likely short-sighted. Delaying retirement is not always an option, though. Life often brings surprises, and you cannot always control when you will retire. For example, you may retire early because of certain challenges, such as health problems or a disability. In 2020, only 28% of retirees were very confident in their ability to cover medical expenses during retirement. To help ensure that you can experience retirement on your terms—rather than reacting to what life or the business world throws your way—you need to proactively address these items… today. There are 3 Steps to Creating Your Retirement Roadmap: 1. Visualize your Retirement - Where are you going and what are you doing? How much income will you need? 2. Identify your Resources - What savings vehicles do you have? Are they going to meet your needs? How should you continue saving in the future? 3. Create a Succession Plan - You have equity in your business. How will you access this? Do you know what the company is worth? Who may be interested in purchasing it? What To Do Now Begin by defining your ideal retirement. Clarify when you want to retire and what lifestyle you hope to enjoy. Then build strategies to address your retirement goal. In the process of doing this you will need to determine the actions needed to fill the gaps between your current assets and the income you will need to support your desired retirement. Finally, hold yourself accountable or hire a trusted financial advisor to assist. Do not let the busy life of business ownership keep you from staying on track toward the retirement you desire. Final thought. Running a successful small business requires a number of skills—from delivering your product or service to managing employees and growth. Accustomed to shouldering a vast number of responsibilities, many business owners seem to forget they do not have to do it alone. Hiring outside help not only gives you access to experienced professionals who can apply their experience to your specific needs, but it can also save you significant time. If you need help with your retirement roadmap, 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 .

For many business owners, the idea of selling their companies for top dollar or passing them down to future generations is a retirement dream. Many entrepreneurs, however, are not doing the work necessary to turn this dream into a reality. Studies show that 50% of business owners plan to leave their businesses in the next decade. However, fewer than 30% have a business succession plan. Nearly one-third of U.S. businesses survive to the second generation — and only 13% are successfully passed down to the third generation. What’s Your Retirement Timeline? No matter how long you want to work and how much you love your business, a clear exit strategy is necessary to help foster the company’s longevity and preserve your financial health. If you want to be able to retire when and how you would like—and have your business last beyond your career — you need an exit strategy for accomplishing that goal . One-third of business owners plan on their retirement to begin sometime between their mid-fifties and mid-sixties. There are 3 steps you’ll need to take for a successful exit strategy. 1. Define your ideal exit strategy. Do you want to sell your business outright? Pass it to the next generation? Find an outside successor? Sell to your employees? Compare your options and decide when you want to sell. 2. Determine the real value of your business. Hire a qualified professional to provide a clear valuation of your company as it is today. Depending on how far you are from retirement or exiting, you might need to revisit this valuation in the future. 3. Create a strategy—and stick to it. Your exit strategy might require you to hire new people, adjust your services, or implement a number of other changes. Consider locating an advisor that can help you prepare your business for its new owner and maximize your after tax sale proceeds. Final thought. Hiring outside help not only gives you access to professionals who can apply their experience to your specific needs, but it can also save you significant time and energy. Consider putting together an advisory board made up of your financial advisor, banker, CPA, attorney, and an industry peer to begin defining your exit strategy. Your plan may include milestones and change across time. But, having an initial plan is significantly better than leaving the outcome to chance. If you have put off planning your exit, the Peak Wealth Planning team can help put an advisory board together and start the process. Schedule a call to learn more today . - - - - - - - - - - - - - - - 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 .

Trying to build retirement savings, while you foster your business, can be challenging. With only so many dollars to go around and an endless list of professional expenses, you might rather reinvest in your company. However, even if you are ready to sell your business at retirement, you need to have savings that are completely separate from your business. The reality is that solely relying on the value of your business to carry you into retirement is a risky approach, which can easily backfire. Not only can industries change, and companies falter, but many baby boomers are selling their businesses right now, which could potentially make a sale tougher in some markets. Would you and your family be able to enjoy a comfortable retirement without your current income or profits from selling your business? If the answer is no, now is the time to start building your savings. In one survey, 61% of respondents claimed that preparing for retirement makes them feel stressed . If you are allowing stress to postpone your retirement planning, allow this to be the moment you commit to creating a strategy. What To Do Now 1. Balance your personal and business finances. When deciding how to invest your available assets or what salary to draw, make sure you focus on addressing both sides of your financial life. 2. Explore available retirement-savings tools with your financial professional. With the passage of the SECURE Act, many rules regarding retirement plans have changed, making this a great time to evaluate your strategy. 3. Review your budget and create a disciplined savings approach. Identify ways you might be able to trim your current expenses or save on your tax liabilities. Also, establish a habit of regularly contributing to your personal retirement savings. Final thought. Launching and growing a small business is a challenging, time-consuming endeavor that is not for the faint of heart. As experienced financial professionals, Peak Wealth Planning is here to help you overcome the obstacles that business owners often face and seize the opportunities before you. Are you ready to add a financial professional to your advisory team? Schedule a call today to learn if Peak Wealth Planning will be a good fit for you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

As part of my work with clients, I routinely assess ways to simplify their financial record keeping and plans for retirement income. One area is looking for opportunities to consolidate retirement accounts from prior employers. This spring, I had the opportunity to take my own advice and documented the experience in a Spring Housekeeping Series. Employer plan sponsors periodically change the funds available to participants. The reason for this may include offering target date funds which adjust the mix of stocks, bonds and corresponding risk and return as an individual moves closer to retirement. Or, limiting the number of choices available to participants to simplify their decision making process for retirement. In some instances, these fund changes work well for participants. However, they may have unintended consequences and create an additional burden for the participant. As a participant in the University of Illinois voluntary State of IL 457 plan as well as the University of Illinois 403b for the past 15 years, I used those accounts to complement and build upon the savings in my primary retirement vehicle which is the SURS Retirement Savings Plan (formerly known as the self managed plan). I left the University of Illinois System during August 2020 after managing the Treasury Operations for two decades. Because I view the SURS RSP as my core retirement holding, I made some portfolio tilts in my 403b plan invested with Fidelity toward healthcare, pharmaceuticals, and the pacific basin region. I felt these sectors may have better growth potential than the overall market. Unfortunately, at the end of 2021 the plan sponsors decided to eliminate more than a hundred fund options and dump all of my money into index funds. This eliminated the work I had done researching and selecting those funds. If I desired my portfolio tilts away from a growth heavy market weighted index, I would need to move my funds elsewhere. At the beginning of 2022, I was notified by the State of IL 457 plan that they too were changing their fund lineup. Rather than wading through the new fund documents including holdings, performance and fees, I decided it was time to simplify my retirement savings and rollover my 457 account and my 403b account into a single IRA that I have with Charles Schwab. I have had this IRA for many years and was able to combine three accounts into a single account. Benefits of Consolidation I created a new asset allocation for my Schwab IRA account and will manage the account using low cost exchange traded funds in line with my retirement goals and timeline. I do not have to worry about the plan sponsors changing the fund lineup without my permission or at inopportune times. An added benefit of consolidating to a single IRA is that I can easily evaluate each year whether to do Roth conversions from the Charles Schwab IRA to my Charles Schwab Roth IRA. I like the idea of pre-paying some of my federal tax liability with cash flow while I’m still working before retirement. Finally, when I do reach age 72, managing my required minimum distributions will be a lot easier with a single IRA account. Final thought. If you have recently left the University of Illinois or another employer and have multiple retirement accounts with more than $2 million saved, schedule a discovery call with the Peak Wealth Planning team to see how we can help simplify your retirement planning. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

Most people are familiar with life insurance, but the role this product plays for small-business owners often is more complex than for the typical individual. Of course, sufficient life insurance can help protect your family’s financial security if you were to pass away. A business owner, though, could have an extra liability: business loans. If you take out loans to support your business, using personal assets as collateral, and you pass away, your family members may be on the hook for that debt, which could jeopardize their financial standing. Life insurance provides a major layer of protection for your loved ones. In an effort to save money, some small-business owners are underinsured or don’t carry any insurance at all. What are the risks of being an underinsured business-owner? Business owners who are underinsured are exposed to financial or legal risks on a daily basis. If a business is underinsured, their insurance claim payout might only cover a portion of the claim, with the business or owner having to cover the rest of the amount out of pocket. Having the right insurance coverage should be viewed as a business investment that ultimately brings peace of mind. How much life insurance does a business owner need? Your life insurance needs are as unique as you are. Contact your trusted financial advisor to assess your specific needs. Here is an example to get you thinking about the amount of life insurance you may need. If you draw $200,000 a year from your small business, you should consider $5 million dollars of life insurance at a minimum , especially if you have children or a spouse you’d like taken care of if you were to pass away. If you pledged your home or retirement account to backstop business loans, you’ll want to add the amount of your business loan to that $5 million number. So, if you borrowed $500,000 on business lines of credit, then you should consider $5.5 million of life insurance. Keep in mind that this article is for informational purposes only. It’s not a replacement for real-life advice, so make sure to consult your legal or tax professional before considering using personal assets as collateral. Can I get life insurance? It is important to determine whether you are insurable before implementing a strategy involving life insurance. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments. Your financial advisor can help you choose a company with a good credit rating. What To Do Now 1. Analyze your current life insurance coverage. Do you have the right protection? Do you have unrecognized gaps? 2. Address your family’s life insurance needs. Calculate your total debts, loan guarantees, and expenses to find the amount your family would need if you were to pass away prematurely. 3. Uncover the opportunities life insurance may bring to your business. Work with a professional to determine how life insurance might be able to help support both your business needs and retirement goals. If this seems overwhelming, consider asking your trusted financial advisor for help getting started. Final thought. Running a successful small business requires a number of skills—from delivering your product or service to managing employees and growth. Accustomed to shouldering a vast number of responsibilities, many business owners seem to forget they do not have to do it alone. Embrace the benefit of outside professionals. Your financial advisor and other professionals are there to help support your needs with their guidance. Let them provide the insight you need and take the weight off your shoulders. If you need help understanding your life insurance needs and options, the Peak Wealth Planning team can assist. Schedule a call to learn more today . Call today to discuss your specific needs. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. You may also be interested in reading: Life Insurance Explained: Term vs Whole Life Should I Have Life Insurance? Who Should Be Your Life Insurance Beneficiary? Why is Insurance an Important Investment for Protecting Personal Wealth? What do I Need to Know about Disability Insurance? When Should I Review My Insurance Plans? - - - - - - - - - - - - - - - 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 .

I advise clients to review their estate documents every other year to confirm the executor, trustee, and agents for their will, trust, and powers of attorney for healthcare and property. This spring, I completed this exercise for my family and documented the experience and discoveries in a Financial Housekeeping Series. I have made a commitment to get this completed by the end of June. I find if I don’t set goals with dates for administrative issues like this, they tend to fall to the bottom of my list. What is a Revocable Living Trust? A revocable living trust is a written document that determines how your assets will be handled after you die. Assets can include real estate, valuable possessions, bank accounts and investments. The person who creates a trust is the trust-maker while the person who will manage the trust when you no longer can is known as the trustee. I keep my assets in an revocable living trust because it simplifies my estate and avoids the expense and probate time in the State of Illinois. Imagine what it would be like for your children or grandchildren to have their support decisions made by a suited corporate bureaucrat instead of your thoughtful lifelong friend who has children of his own and shares your core values about hard work and integrity. Why Reviewing Your Named Trustee Occasionally is Important? Your Trustee is the person you rely upon to manage your affairs including financial matters and the disposition of real estate and other assets once you have passed away. This may include taking care of extended family members’ needs or providing for philanthropic endeavors. In many cases Trust documents once prepared go in a drawer and are not looked at until they are truly needed. Imagine what it would be like for your children or grandchildren to have their support decisions made by a suited corporate bureaucrat instead of your thoughtful lifelong friend who has children of his own and shares your core values about hard work and integrity. If your friend is your named Trustee, and something were to happen that would impair his ability to serve in that capacity, it is important that you take the time to identify a new Trustee rather than automatically defaulting to a corporate option . When I Reviewed My Trustees I realized that my primary trustee had some life changes which may have prevented her from serving. And, my backup trustee had passed away. I knew I needed to address this and it was in the back of my mind. However, I hadn’t dealt with it since I didn’t want to take time and sit down to think about who else would be a good candidate. After discussions with my partner, Jerome, as well as several friends, I selected revised individuals as primary and backup trustees and executors. In my new documents I decided to name three folks in each role to reduce the likelihood of needing to make changes in the future. Many folks will name a bank as successor trustee and an attorney as executor once they have exhausted their list of individuals. What I Discovered About Powers of Attorney I learned that my friend who passed away was named as my backup agent for property power of attorney. I decided to name my partner to serve as my primary power of attorney for property and identified two folks to serve as backup successor agents. I also reviewed my agents for healthcare power of attorney and affirmed they were up to date. Final Steps Now that I have my revised list of trustee, executor, and agents for property power of attorney, I plan to pass this information to my attorney and have her update my documents. I have made a commitment to get this completed by the end of June 2022. I find if I don’t set goals with dates for administrative issues like this, they tend to fall to the bottom of my list. I would rather be working out in the garden or out skiing. Final thought. Do you have someone to hold you accountable to complete a review of your estate plan? Are you comfortable with your progress towards helping future generations meet their financial goals? If you have more than $2 million saved and need help from a wealth manager, the Peak Wealth Planning team can assist. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

At Peak Wealth Planning, we encourage clients to review their retirement account and life insurance beneficiaries each year. This spring, I reviewed my account beneficiaries and what I discovered cemented my beliefs on the importance of this practice. Several years ago I set up a trust and believed I had updated my beneficiary designations on my retirement accounts and life insurance to name my partner as the primary beneficiary and my trust as the contingent beneficiary. This is what my attorney had recommended. What I learned surprised me. For my SURS RSP, my partner was named primary beneficiary, but my revocable living trust was not named as the contingent beneficiary. An incorrect contingent beneficiary was named. I was able to login to the SURS website and fix that oversight. I did verify that both beneficiaries were properly named on my IRA account. I discovered there was a life insurance assignment mix up. I have a large term life insurance policy. Several years ago I had a lot of debt as a real estate investor and insurance was required as a condition for borrowing by my bank. They wanted insurance to pay off the loans in case I passed away. I sold the properties back in 2009 and decided to keep the insurance since the premium was quite low. I called the life insurance company and they confirmed my beneficiaries were listed correctly. But, I was surprised to learn an assignment of the policy’s value made to my old real estate LLC in 2005 was still in place. This meant that the LLC would be first in line to receive my life insurance, even before the primary beneficiary. I checked my records and told the life insurance company that the manager of the LLC had mailed a letter in 2015 requesting a release of the assignment. The representative said the insurance company had in fact received the letter, but that the release was supposed to be on a company specific form. The representative emailed me the form. Now I need to locate the manager of the LLC and have him sign the proper release form. Fortunately, this will be smooth since he lives here in town. I believed all of this had been resolved in 2015. Had I not called to verify my beneficiaries, the assignment would stay in place and create a tangled mess for my executor if I were to pass away. Final thought. Have you reviewed your life insurance beneficiaries recently? Major life changes, like marital status or birth of a child, are typical triggers for reviewing these types of documents. But if it has been a couple years, it delivers peace of mind to sit down for 20 minutes and call your insurance provider. You never know what you may discover. Peak Wealth Planning works with individuals with $2 million or more saved and need help from a wealth manager. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

Having an estate strategy puts you in charge of life’s important decisions. Here are four parts to consider. 1. Write a “Cheat Sheet” letter. A cheat sheet is not a legal document, but a letter that can help your beneficiaries locate important papers and outlines your financial wishes. Here are a few ideas and concepts that may be included: The location of important legal documents, such as your will, insurance policies, titles to automobiles, deeds to property, etc. A list of financial assets, including savings and checking accounts, stocks, bonds, and retirement accounts. Be sure to include account numbers, PINs, and passwords where applicable. A list of pensions or profit-sharing plans, including the location of their explanatory booklets. The location of your latest tax return and Social Security statements. The location of any safe deposit boxes and their keys. 2. Set up a living will. Living wills, also known as advance directives, address the medical care that you want to receive. Typically, living wills address whether you desire life-saving medical measures, but they can address other medical wishes. Review your advance directives with your doctor and your health care agent to be sure you have filled out forms correctly. When you have completed your documents, you need to do the following: Keep the originals in a safe but easily accessible place. Give a copy to your doctor. Give a copy to your health care agent and any alternate agents. Keep a record of who has your advance directives. Talk to family members and other important people in your life about your advance directives and your health care wishes. By having these conversations now, you help ensure that your family members clearly understand your wishes. Carry a wallet-sized card that indicates you have advance directives, identifies your health care agent and states where a copy of your directives can be found. Keep a copy with you when you are traveling or in your cloud drive. 3. Think about a living trust. Living trusts are created and funded by assets you put into them while you’re alive. The assets in the trust then pass to a beneficiary after your death. The living trust offers a number of potential benefits, including: Avoid Probate - Assets are designed to transfer outside the probate process, providing a seamless, private transfer of assets. Manage Your Affairs - A living trust can be a mechanism for caring for you and your property in the event of your physical or mental disability, provided that you have adequately funded it and named a trustworthy trustee or alternative trustee. Ease and Simplicity - It is a simple matter for a qualified lawyer to create a living trust tailored to your specific objectives. Should circumstances change, it is also a straightforward task to change the trust’s provisions. Avoid Will Contests - Assets passing via a living trust may be less susceptible to the sort of challenge you might see with a will transfer. 4. Establish Powers of Attorney A power of attorney lets another person execute personal and legal matters on your behalf. A medical power of attorney designates who will make health care decisions for you in an emergency. The person you designate as a power of attorney doesn’t have to be an attorney. Anyone you trust, such as a family member or friend, can serve in this role for you. You can even designate more than one person, assigning different responsibilities to each. There are many types of POAs, and understanding them will help you choose one that’s the best fit for you. Below is a breakdown of some of the most common varieties. 1. General Power Of Attorney – An agent under this agreement can serve any and all needs, as your state allows. They can do things like sign checks, sell property, and more. 2. Limited Power Of Attorney – An agent under this agreement can serve specific legal needs for limited timeframes. For example, you may choose to designate a loved one to manage only your retirement accounts for a few years. 3. Durable Medical Power Of Attorney – A durable medical power of attorney for health care agreement authorizes someone to make medical decisions on your behalf. Like the living will and the power of attorney, it may not need to go through any additional legal proceedings. Final thought. Preparing your estate is part of a sound financial strategy. If it’s been a while since you looked at your estate strategy or had a life change, like a marriage or divorce, it may be time for a review. Do you have someone to hold you accountable to complete a review of your estate plan? Are you comfortable with your progress towards helping future generations meet their financial goals? If you have more than $2 million saved and need help from a wealth manager, the Peak Wealth Planning team can assist. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

The cost of tuition at public universities has almost tripled in the past 20 years. College students and their families have taken on more debt, and they are taking longer to pay it off . Up to 67% of the average borrower’s total cost of repayment is interest on the loan. Remember how long it took you to pay off your student loan? Imagine it took 20 years and you were obligated to pay $460 each month. This is the reality for the average college graduate . Imagine what it will be like in 10 or 20 years. What if you flipped the script and used compounding interest to your family’s advantage for your future student? A 529 plan is an investment account designed to pay education expenses for your future student. I'm going to explain how a 529 college saving plan can be used to set aside funds for your future student. I will explain the benefits, who is eligible, and when you can take 529 distributions. A 529 savings plan may be a good savings vehicle for your family’s education goals and allows you to segregate funds from your own retirement needs. Benefits of a 529 Plan There are multiple benefits to funding future college expenses with a 529 plan, including: 1. The funds are dedicated to education expenses. Separately saving for education reduces the temptation to spend money for other needs and allows your family to track progress toward the college savings goal. 2. Compounded earnings growth. This means you will earn interest on the original investment as well as the interest earned over time. By making investments early on, it gives the money time to compound and grow. 3. Withdrawals for education are tax free. Growth within the account will not be taxed when the money is taken out to pay for qualified education expenses. Who can open a 529 Plan? Just about anyone can open a 529 plan. These college savings plans have become a popular choice for families because they’re easy to use, they offer tax-free investment growth and, in some cases, you can claim a state tax deduction for your contributions. 1. Parents: 529 plans can only have one owner, and that person is often the Mom or Dad of a future student. Parents can open a 529 plan when their child is very young, or even before they are born, giving their account plenty of time to grow. 2. Grandparents: Parents should not neglect their own retirement savings in order to fund their children’s education. Many grandparents enjoy helping out their children by investing for their grandchildren’s future education. 3. Friends or Relatives: Relatives and friends of f uture students may open a 529 plan for the student. Or, they may make contributions to a 529 plan opened by a parent or grandparent. Eligible Expenses Educational expenses may include tuition, fees, books, supplies, and equipment required for enrollment. Room and board, K-12 tuition, and other fees may also qualify. Check with your 529 plan provider in the year before incurring such expenses so you can make a withdrawal plan to pay for eligible expenses. Since the passing of the SECURE Act , 529 plan holders are able to withdraw up to $10,000 tax-free to put toward their own student loan debt, or that of their children, grandchildren, or spouses. 529 Withdrawals It is important to know how much your qualified education expenses will be before withdrawing the funds. If you withdraw too much, you may face a 10% IRS penalty. Keep good records of qualified educational expenses paid by the account owner or the beneficiary. It is very important that your expense records line up with the amount of 529 withdrawals during the same calendar year. A withdrawal request form through your 529 plan provider may be completed online, by telephone or by mail. Plan for College Expenses Is education one of the goals for your children? Due to the high cost of college, setting aside funds specifically for education each month should be part of your regular budget. If you can start saving when your children are young, you get the benefit of compounded investment returns on 529 plan contributions. Tracking your college savings each year, whether in a 529 plan or another investment account, can provide confidence in your family’s ability to meet the hopes and dreams for your future student. Separating investment accounts and budget items for each goal allows you to track progress towards each goal. What about your retirement? It is important to create an investment and savings plan that sets aside funds for your own retirement and your future student’s education goals. Separating investment accounts and budget items for each goal allows you to track progress towards each goal. This can provide confidence in your ability to meet your own retirement needs as well as the education needs of your child. While you may feel that putting off your retirement for a few years is an acceptable trade-off, you should not sacrifice your retirement savings to put your children through college. Remember that student loans are federally available. While you may not want your child to assume such a financial burden, you could always help with repaying the loan later. Also, by giving your child a portion of that responsibility, they may experience a greater understanding of, and appreciation for, the value of their education. Final thought. From the moment your little one takes root in your heart, you work to build them a better future. Education is without a doubt an important part of that future. And while some debt is okay for new graduates entering the workforce, preparing for that future comes at a cost. With a little planning, though, you’ll be able to help your future student achieve their academic goals without sacrificing your own retirement goals. If you are looking for a way to contribute to future education costs for a loved one in your life, a 529 College Savings plan may be the right direction for you. Is your family prepared to support your children’s education expenses? Do you wonder if you will have enough money for retirement spending and children or grandchildren’s education? If you have a net worth of $2 million or more and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 important component of a wealth building strategy is protecting the nest egg you have created. For individuals who are in their early 50’s, it is a good idea to review your projected wealth level and budget to determine whether you want to self-insure or purchase long term care insurance. Long term care encompasses services designed to meet a person’s health or personal care needs over a period of time. It may include helping with everyday activities like dressing, bathing, housekeeping, and taking medications. Long term care services may be provided by family or friends out of your own home so you may maintain your overall independence as long as safely possible. And when it is no longer safe to live independently, long term care may be provided through assisted living and nursing facilities. Many folks believe Medicare covers long term care and it does not. Medicare is a federal program and Medicaid a state run program. Medicaid will cover long term care, but Medicaid requires you to spend down your nest egg before paying for long term care. Many folks are not comfortable spending down their nest egg to almost nothing to pay for long term care. In this article, I'm going to explain how a long term care plan may protect your wealth. I will explain what a long term care plan is, what it covers, and payment options. Plus, I will help you identify if a long term care plan is a good investment vehicle for your wealth building journey. Addressing the potential risks of extended or long term care expenses may be one of the biggest financial challenges for individuals who are developing a retirement strategy. The U.S. Department of Health and Human Services ( HHS ) estimates that 70% of people over age 65 can expect to need extended or long term care services at some point in their lives. So understanding the various types of extended care services – and what those services may cost – is critical as you consider your retirement approach. What Is Long Term Care? Long term care is not a single activity. It refers to a variety of medical and non–medical services needed by those who have a chronic illness or disability – most commonly associated with aging. Long term care can include everything from assistance with activities of daily living – help dressing, bathing, using the bathroom, or even driving to the store – to more intensive therapeutic and medical care requiring the services of skilled medical personnel. Long term care may be provided at home, at a community center, in an assisted living facility, or in a skilled nursing home. And long term care is not exclusively for the elderly; it is possible to need long term care at any age. How Much Does Long Term Care Cost? Long term care costs vary state by state and region by region. The 2020 national average for care in a skilled care facility (single occupancy in a nursing home) was $105,850 a year . The national average for care in an assisted living center (single occupancy) was $51,600 a year. Home health aides cost a median $24 per hour or around $40,000 a year (30 hours a week), but that rate may increase when a licensed nurse is required. What Are the Payment Choices? Often, long term or extended care is provided by family and friends . Providing care can be a burden, however, and the need for assistance tends to increase with age. Individuals who would rather not burden their family and friends have two main choices for covering the cost of long term care: they can choose to self-insure or they can purchase long term care insurance. Many self-insure by default – simply because they haven’t made other arrangements. Those who self-insure may depend on personal savings and investments to fund any extended care needs. Estimates of self insurance for long term care range from $250,000 to $500,000 for an individual depending on the type and length of care needed. The other approach is to consider purchasing extended or long term care insurance, which can cover all levels of care, from skilled care to custodial care to in-home assistance. When it comes to addressing your extended or long term care needs, many look to select a strategy that may help them protect assets, preserve dignity, and maintain independence. If those concepts are important to you, create a plan for long term or extended care expenses. Long Term Care Insurance Long term care insurance is something folks in their late 40’s to 50’s should begin investigating. Long term care policies can be designed with many different features and coverages. For example, some policies cover a minimal amount of care for a couple years, while others cover multi-year stays in a facility or pay for in-home care. There are plans that only reimburse for out-of-pocket expenses you have incurred, or that will pay you cash directly each month. The latter provide you with flexibility to determine whether you want formal or informal care in your home, or formal care in a facility. Long term care premiums are costly – they can vary from a few thousand dollars a year to almost ten thousand dollars a year. The premiums can be paid in one large lump sum, paid over 10 years, or paid until age 65, or across your lifetime. Some plans will provide coverage for spouses, while many require a separate policy for each individual. It is important to work with your financial advisor to determine the type of coverage most suitable for your family’s needs, as well as coverage that fits your financial situation. Final thought. Are your investments prepared to support your long term care needs? Do you wonder if you will have enough money for retirement spending and your long term care needs? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

At Peak Wealth Planning, we continue to encourage our clients to take proactive steps in protecting their credit, and one of the most effective ways to do that in 2024 is by placing a fraud alert on your credit file. In today’s digital world, It is nearly impossible to prevent your personal information, such as your Social Security number, from being exposed or compromised. A fraud alert provides an extra layer of security by instructing creditors to verify your identity before processing any credit application in your name. Best of all, this service is free!  A fraud alert provides an extra layer of security by instructing creditors to verify your identity before processing any credit application in your name. Best of all, this service is free! What does a fraud alert do?  A fraud alert adds an additional verification step to the loan application process, helping to prevent criminals from opening accounts or taking out loans using your information. When a lender requests access to your credit report from one of the national credit bureaus (Experian, TransUnion or Equifax), a fraud alert prompts the lender to confirm your identity before proceeding. Once you place a fraud alert with any one of the three major credit bureaus, it will automatically apply to all three. There are several types of fraud alerts available depending on your situation: Initial Fraud Alert. This type lasts one year and can be renewed as often as needed. It is a great option if you suspect your information has been exposed but don’t have confirmation of identity theft. Active-Duty Fraud Alert. This is designed for active-duty service members and also lasts for one year. It offers extra protection while deployed or away from home. Extended Fraud Victim Alert. If you have been a victim of identity theft and have filed an official report, you can apply for this seven-year alert by submitting your identity theft report to the credit bureaus. How does a fraud alert affect your credit?  The great news is that placing a fraud alert will not impact your credit score or the information on your credit report. However, it may affect the ability to get instant approval for certain credit offers, such as those you encounter online or in stores, as the automated systems may require additional identity verification.  While this extra step may delay approval for instant credit, it will not prevent you from being approved; it simply adds a verification process to help keep your information safe.   When should you set up a fraud alert?  If you have reason to believe that your personal information, such as your Social Security number or credit card details, have been compromised – whether due to a data breach, theft, or phishing scams  – a fraud alert is a wise precaution. Even if you haven't been directly affected, taking this step can provide peace of mind and protection from future threats.  In today’s environment, where cybersecurity threats are increasing, setting up a fraud alert should be part of your annual financial check-up. It’ s quick, free, and can significantly reduce your exposure to identity theft.   How to set up a fraud alert  Setting up a fraud alert in 2024 is easier than ever. You can do so by visiting any of the three major credit bureaus. Once you place an alert at one bureau, it will be applied to your reports at all three bureaus: Experian: Visit Experian’s Fraud Alert Center  to follow their step-by-step guide and upload the required documents, such as your government-issued ID and proof of address. Equifax:  Call Equifax at 1-800-685-1111 or visit Equifax’s Fraud Alert page . TransUnion: Go to TransUnion’s Fraud Alert page  and follow the instructions to activate your alert. Protect yourself in 2024  A fraud alert is a smart and simple way to protect your financial identity from scammers and unauthorized access. With the rise of data breaches and identity theft, it’s more important than ever to take steps to safeguard your credit. Placing a fraud alert is an easy way to give yourself peace of mind without major inconvenience. We recommend setting a reminder to renew the fraud alert annually to ensure that your personal information remains protected. Final thought. Are you confident in your financial security as you approach retirement? If you have accumulated more than $2 million and are looking for expert wealth management guidance, the Peak Wealth Planning team is here to help. Schedule a call to learn more today  to learn more about how we can assist you in reaching your financial goals. - - - - - - - - - - - - - - - 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 .

The SURS Retirement Savings Plan (SURS RSP), which was formerly known as the SURS Self Managed Plan (SURS SMP), is one of three pension options you may select as an employee in the SURS system. The primary benefit of the SURS self managed plan was that you were able to pick your mix of stock, bond, and other mutual funds in line with a risk and return profile that could grow your account and leave you with the decision of what to do with your money at retirement. At retirement as a SURS SMP participant myself, I planned to review my account balance at age 55 or older and decide whether to buy an annuity and receive lifetime health insurance. Or, roll the money to an IRA and manage my own periodic withdrawals but forgo the health insurance. With the previous Self Managed Plan (SMP) – the way I had set my allocations – SURS did not change my stock, bond mix each year, or automatically move a portion of my money into a higher fee annuity account each year. That has all changed with the SURS Retirement Savings Plan (SURS RSP). In this article, I'm going to explain how the SURS Retirement Savings Plan has changed and how these changes will impact SURS members. I will share the pros and cons of the SURS Secure Income Portfolio as well as provide you with an alternative investment strategy of self selecting core funds. Lastly, I’ll provide you with an opportunity to benefit from my expertise and gain a complete financial picture for you and your spouse. Asset allocation with the SURS RSP Lifetime Income Strategy The new SURS RSP Lifetime Income Strategy by default steps down your retirement funds from 95% stocks at age 50 to 50% stocks at age 65 by increasing its allocation to bonds (fixed income securities) each year. It does this by moving 1/15th of your account each year into the Secure Income Portfolio. The Secure Income Portfolio is one-half stocks and one-half bonds. Within the stock allocation, 40% of the stocks are international and 60% are domestic stocks. Fixed income securities generally work well for preserving assets during a stock market downturn but may not keep up with inflation in today’s market environment. SURS Secure Income Portfolio - Guaranteed Income with a Price Tag The new SURS RSP automatically shifts 1/15th of your retirement funds each year from the Lifetime Income Strategy between ages 50 and 65 into a 1.18% annual fee Secure Income Portfolio that is invested in a 50% stock/50% bonds portfolio. The purpose of the Secure Income Portfolio is to provide insurance for participants to take guaranteed monthly withdrawals in retirement regardless of your retirement portfolio's actual value. The benefit of purchasing guaranteed income with a little slice of your SURS RSP account each calendar quarter between age 50 and 65 is dollar cost averaging into different guaranteed withdrawal rates across the 15 year period. For a 50 year old, withdrawal rates have been running 3.4 to 4.8% during the past couple of years. These withdrawal rates (for the 60 quarters between age 50 and 65) will be blended at your retirement to reduce the risk of converting your entire account balance to an annuity at a single point in the future. Like most annuities, the Secure Income strategy promises lifetime income. In other words, you can’t run out of money before you die. And, if there are funds left in your account when you die, the Secure Income strategy includes a survivor benefit for your named beneficiary. The downside of purchasing this income protection relatively early (between age 50 and 65) is that your retirement account balance might be lower at age 65 due to the higher fees associated with the income protection insurance. This could result in a reduced SURS RSP account value at age 65 when you begin receiving an annuity. Assuming you have a long time horizon to invest (10 or more years), the trade off of dollar cost averaging your guaranteed withdrawal rates may not be worth the potential reduction in the value of your account. A lower SURS RSP balance means a lower monthly retirement income at age 65. I have spoken with SURS participants near retirement who were surprised at how low their expected monthly from the Secure Income Portfolio would be. On the other hand, a significant benefit of the Secure Income Portfolio is the potential for increases in monthly income unlike a regular annuity. If the value of your 50% bond/50% stock Secure Income portfolio increases each year after age 65, your monthly income could go up. Set Your Own Asset Allocation Using Core Funds With careful navigation of the SURS Voya website , you could opt out of the SURS Lifetime Income strategy and avoid the automatic shift to the SURS Secure Income Portfolio by placing your money in the SURS Core funds. Several of the core funds are listed here: US Core Bond Index Fund Multi Sector Bond Fund US Large Cap Equity Index Fund US Small-Mid Cap Equity Index Fund US REIT Index Fund Non US Equity Index Fund By moving your SURS RSP to lower cost core funds, you can avoid the higher fee Secure Income portfolio. If you prefer an 80/20 or 60/40 mix of stocks and bonds, you can maintain a static asset allocation until you annuitize at your chosen retirement age. Be aware that if you take this approach you will be at risk for the asset allocation you set and the available annuity rate at the time you begin to draw income. A Hybrid Approach RSP participants could consider maintaining 50% of your Retirement Savings Plan in the SURS Lifetime Income Strategy and allow that portion of your money to move 1/15th each year into the corresponding Secure Income Portfolio purchasing the guaranteed income. And you could take the remaining 50% of your Retirement Savings Plan and allocate it to the core funds with a mix of stocks, bonds and real estate that is in line with your preferred investment strategy and risk tolerance. Maintain Your Health Insurance If you are a SURS RSP participant over age 55 with more than 20 years of service, you can convert your retirement account to guaranteed income and receive paid lifetime health insurance using one of the options below. buy an annuity from Principal using 100% of your SURS RSP, or shift 50% or more of your SURS RSP into the Secure Income portfolio, or remain in the default strategy where 100% of your SURS RSP moves into the Secure Income portfolio. Take Informed Action Before deciding the best course of action for your SURS RSP participation, it’s a good idea to attend a SURS webinar on the Retirement Savings Plan. Participants may want to use the tools on the SURS website to forecast your retirement income and have a conversation with the folks at SURS and Alliance Bernstein before deciding on whether to participate 100%, 50%, or not at all, in the Secure Income Portfolio. Need Professional Advice If you need assistance allocating your core funds in the Retirement Savings Plan, Peak Wealth Planning is offering a $5,000 consultation to understand your complete financial picture including your savings outside of SURS, your spouse or partner’s situation, and your time horizon to retirement. Once we understand your full financial picture, we can advise you on whether to stay in the default Lifetime Income Strategy and Secure Income Portfolio or help you create an asset allocation by choosing the core funds appropriate to your personal risk tolerance and unique situation. - - - - - - - - - - - - - - - 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 half the year behind us, now is a great time to consider what the remainder of 2024 may hold. However, with inflation and economic uncertainty causing many of us to delay or cancel vacations, large purchases, and more, it can be challenging to know where to start. Here are a few tips to help make the rest of the year go as smoothly as possible. 1. Deflate Inflation Travel-related costs have skyrocketed, causing many to delay or cancel vacation plans. But are you overreacting to current headlines? Let's talk if you're a Peak Wealth client who is wavering on a scheduled trip or a home remodel. Continue learning more about how the federal reserve fights inflation and a strategy you can use to do the same. 2. Embrace Uncertainty If you’ve delayed a major purchase lately, you're not alone. Economic uncertainty has caused many to rethink their expenditures. When your net worth declines due to stock market fluctuations, the "wealth effect" tells consumers to rein in spending. Peak Wealth’s portfolio strategy takes into account periods of market volatility. Learn more about the trade offs of risk and return in our post on investment risk tolerance . 3. Revisit Goals During times of uncertainty, you might question the benefits of investing. To stay on course it’s good to focus on the outcomes you desire. Imagine living a certain lifestyle during retirement, paying for a child’s education, or building your vacation home. Put up photos that remind of your goals. This will inspire you to maintain behaviors that move you forward. By revisiting what’s important, you can ignore negative headlines and continue making progress toward your goals. Continue learning more about using goal-setting to realize your dreams with Peak Wealth Planning. 4. Practice Patience The need to take action can push even the most seasoned investors into questionable territory. Instead, try to take a long view of the markets. After all, daily market changes are the price to achieve long term stock returns. Remaining patient and taking a break from watching the markets closely may help weather the storm. It’s best to focus on the expected long term returns from your investments. Final thought. Are you comfortable with your progress towards future goals? Does the current economic condition have you rethinking your investment strategies? If you have a net worth over $2 million and need help from a wealth manager, the Peak Wealth Planning team can assist you. Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future. - - - - - - - - - - - - - - - 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 .

Retiring early sounds like a dream come true -- cutting the cord of the 9:00 to 5:00 routine and having all the time in the world to pursue your passions. But before you take the plunge, it’s important to take a good, long look at the facts of early retirement. Retiring early requires enough income to be comfortable. Do you want 70% of your pre-retirement annual income, or does 85% sound better? Many folks find they spend the same amount of money they were earning in the years leading up to retirement. This may be the result of working through a ‘bucket list’ or supporting an elderly parent or struggling child. Consider the following 7 important items to make an early retirement a reality. Take stock of your current investments and how much you are saving each year. Estimate the size of your nest egg at retirement and determine how much you might be able to comfortably withdraw each year. Identify all sources of steady income you may have. This may include: Social Security, an annuity, rental property income, or a pension if you are lucky. Keep in mind that pensions, annuities, and social security often penalize you for retiring early. Understand the tax consequences of withdrawing funds from your retirement nest egg. Many folks overlook the impact of taxes on their retirement income. Health care costs tend to rise with age. You should evaluate health care costs if you’re retiring early. For some, COBRA may bridge that gap for a small amount of time. But it can be expensive. If retiring early is your dream, make sure you have a plan for health insurance prior to age 65 when you become eligible for Medicare. Forecast your expenses during retirement. Where will you live? Will you have a mortgage? How will you spend your time? Will you spend more or less money on travel or hobbies? Don’t forget to account for inflation and increased health insurance costs. Most importantly, make sure your retirement income adequately covers your forecasted expenses. And, be sure to have a cushion for unexpected surprises. It helps to have a strategy for retirement living. One study found that nearly 20% of those surveyed were bored in retirement. Finding a hobby or volunteering can help. Final thought. Like any other financial goal, achieving your vision of an early retirement requires a savings rate aligned with your time horizon. The best way to reach your financial goals is to stay focused on what you want for your future. Curious how you make the dream of early retirement a reality? If you have more than $2 million saved and need a financial plan to reach your goals, the Peak Wealth Planning team can assist. You may also be interested in learning: How much you can withdraw from retirement nest egg How to invest when you enter retirement - - - - - - - - - - - - - - - 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 .