• 5 investment ideas for small-business owners struggling to keep their finances liquid

    Three local financial experts share their advice.

    Andrew Hipple has advice on how small business owners (and individuals) can take advantage of the rise in interest rates.
    Andrew Hipple has advice on how small business owners (and individuals) can take advantage of the rish in interest rates. (photo credit: Steven M. Falk / Inquirer Staff Photographer)

    Written by Gene Marks

    Even as commercial lending rates have more than doubled in the last year, interest rates earned on checking, money market and savings accounts remain stubbornly low as banks seek to maintain their profitability.

    That’s not helpful for business owners, who need to earn money on their cash reserves while keeping enough liquidity to meet faily working capital needs. Options remain limited, but the environment is slowly changing, and a number of investment choices with minimal risks are emerging.

    Click here to read full article from the Philadelphia Inquirer, featuring Andrew Hipple CFP®, Partner at Lane Hipple Wealth Management Group.

  • Original Medicare vs. Medicare Advantage

    Understanding the Key Differences

    The second most important decision clients make with respect to Medicare—after they’ve decided to enroll in Medicare in the first place—relates to how they want to get their care. Faced with the choice of Original Medicare and Medicare Advantage, people often fail to understand that this decision can affect both the quality and cost of health care they receive both now and in the future.

    Original Medicare

    Thanks to aggressive marketing, Medicare Advantage plans have firmly established themselves as “the way to get your Medicare.” Completely lost in the shuffle is what Original Medicare actually is. It is health insurance, pure and simple, funded by the U.S. government. From its inception in 1965 Medicare Part B has always been based on the classic health insurance model where the insured pays a monthly premium (taken out of the Social Security check) and when a medical bill is incurred the patient pays an annual deductible plus 20% of the bill. The federal government pays the rest. Implicit in this is that the insured has complete freedom and control over how and where to get their health care. The only requirement is that the provider must accept as payment the amount Medicare has set for any given service (which may be less than what others will pay). Most providers do accept Medicare because it covers so much of the population.

    There has always been a place for private insurance in the Medicare world as a supplement to Medicare. Originally, these policies were designed mainly to cover prescription drugs. When Part D was instituted in 2006, an official public/private partnership was established specifically for drug coverage where private insurance companies offer various prescription drug plans with both the insurers and the federal government bearing the costs. Medigap policies remained viable, however, covering some of the key costs not covered by Medicare, mainly the Part A deductible and the Part B 20% coinsurance.

    A typical insurance plan under Original Medicare involves enrolling in Parts A and B, choosing a drug plan under Part D, and also choosing a Medicare Supplement (Medigap) policy. With Original Medicare a person is free to go to any doctor who accepts Medicare, and there are virtually no prior authorizations or denials of care. If a provider orders a service and Medicare covers it, it will be covered with little or no out-of-pocket costs to the patient.

    Medicare Advantage

    Medicare Advantage, originally called Medicare+Choice, was kicked off by the Balanced Budget Act of 1997. This expanded private health insurers’ involvement in Medicare and now encompassed the delivery of care, not just the payment of bills submitted by providers. Under Medicare Advantage, the government pays private insurers an annual “rate” theoretically equal to what it would cost to insure a person under Original Medicare. In exchange, the insurer promises to deliver all care under Parts A and B. This was deemed a cost-cutting and risk-mitigation effort by the federal government.

    The key difference for enrollees is that Medicare Advantage plans may offer additional benefits and lower premiums, but they also place restrictions on care. Patients must choose a provider within the plan’s network and many services and procedures must be authorized beforehand—and may even be denied.

    There is a lot to say, both good and bad, about how private insurers’ involvement in Medicare has evolved. Most people have an opinion about which is better, Original Medicare or Medicare Advantage, based on their own experience or what they’ve read. But it usually comes down to this:

    • If your main concern is high-quality care and you’re willing to pay higher premiums for the assurance of seeing the provider you want and getting the care you need, either now or in the future, go with Original Medicare.
    • If your main concern is costs and you’re willing to accept an insurer’s assessment of what you need in the way of care, go with Medicare Advantage, understanding that if your health worsens and you do need care, your costs could end up being higher.

    The following table, contributed by Rich Arzaga, illustrates the choice in a simple manner:

    Good Health/Low MedsFair Health/More Meds
    Priority on saving moneyMedicare Advantage
    (save ~$1,000 per year in premiums)    		Medicare Supplement Plan
    Priority on the health care experienceMedicare Supplement PlanMedicare Supplement Plan

    So there you have it in a nutshell. I wish we could say that your decision would not be binding, that you could start with one form of Medicare and switch to the other if you’re not happy with your plan or if your health care needs change. And to some degree that’s true. There are on- and off-ramps for both of these options. But the one hard sticking point in most states is the Medigap Open Enrollment period. If you don’t buy your Medigap policy within six months of enrolling in Part B, you will be subjected to underwriting and may be denied a policy. So, starting out with a Medicare Advantage plan with the intent of switching to Original Medicare after a few years may not be feasible.

    References and further reading

    The History of Medicare Advantage: From Inception to Growing Popularity

    © 2024 Horsesmouth, LLC. All Rights Reserved.

  • SSA Sign-in Process to Change Soon

    In today’s digital age, managing your Social Security benefits has never been easier, thanks to the Social Security Administration’s (SSA) online services. Starting in September, they are transitioning to a new login system. Everyone who set up their Social Security accounts before September 2021 will need to log in with their username and password and follow the prompts to switch to a Login.gov account. People who already have a Login.gov account do not need to take any action.

    The Importance of Establishing an Online Account with the Social Security Administration

    Establishing an online account with the SSA offers numerous advantages that can simplify your financial planning and provide peace of mind. Here’s why it’s essential:

    1. Convenience and Accessibility

    Creating an online account allows you to access your Social Security information anytime, anywhere. Whether you’re at home, at work, or on the go, you can log in to view your benefits, update your information, and manage your account without needing to visit an SSA office.

    2. Real-Time Information

    With an online account, you can view your Social Security Statement, which provides a detailed record of your earnings history and an estimate of your future benefits. This real-time access helps you stay informed about your financial status and plan for retirement more effectively.

    3. Enhanced Security

    Having a Social Security account can also prevent fraud and identity theft, as only one account can be set up for each Social Security number. Once a person sets up their own Social Security account, it would be impossible for an imposter to set one up with the same number.

    4. Efficient Management of Benefits

    If you are already receiving benefits, an online account allows you to manage them efficiently. You can use it to access your benefit verification letter for loan applications or other purposes, update your direct deposit information, change your address, and even request a replacement Social Security card if needed. This streamlined process saves time and reduces the hassle of paperwork.

    5. Access to Additional Services

    Beyond managing your benefits, an online account provides access to a range of other services. You can apply for retirement, disability, and Medicare benefits online, check the status of your application, and receive important updates and notifications from the SSA.

    6. Educational Resources

    The SSA’s online portal offers a wealth of educational resources to help you understand your benefits and make informed decisions. From retirement planning tools to information on disability and survivor benefits, these resources are invaluable for anyone looking to maximize their Social Security benefits.

    Related: Social Security for Divorced Individuals

    7. Environmental Benefits

    By opting for online services, you contribute to environmental sustainability. Reducing the need for paper statements and forms helps decrease paper waste and supports eco-friendly practices.

    Conclusion

    Establishing an online account with the Social Security Administration is a smart move for anyone looking to manage their benefits efficiently and securely. The convenience, real-time access, enhanced security, and additional services make it an indispensable tool for financial planning. Take control of your Social Security benefits today by setting up your online account and enjoy the peace of mind that comes with having your information at your fingertips.

    my Social Security accounts are free, secure, and provide personalized tools for everyone, whether receiving benefits or not. People can use their account to request a replacement Social Security card, check the status of an application, estimate future benefits, or manage the benefits they already receive. For more information visit Create an Account | my Social Security | SSA.

    For more information about Login.gov, including their 24/7 customer phone and chat support, visit Help | Login.gov.

    Read the SSA press release here.

  • Mid-Year Retirement Planning Checklist

    Revisit, Revise, and Strengthen Your Financial Plan for the Remainder of 2024

    Planning for retirement demands a lot from us – and it’s not a one-time job. Whether it be our time, energy, or financial resources, our retirement needs are always evolving, and we must nurture our savings consistently over the years. If you’ve been taking a more hand-off, set-and-forget approach recently, the middle of the calendar year offers a timely opportunity to reflect, reassess, and make any necessary changes so that you can strengthen your financial foundation for the next six months and beyond. If you’re unsure where to start, try using this mid-year retirement planning checklist to kickstart the process.

    Mid-Year Retirement Planning Step #1. Know Where You Stand

    The first step of this retirement planning checklist isn’t focused specifically on retirement. That’s because, before you can strengthen your retirement plans, you must first gain a clear understanding of your overall financial situation. This can be a great source of anxiety, especially if you haven’t closely examined your finances in a while. However, you’ll feel better once you know exactly where you stand. Begin by collecting all relevant documents pertaining to your bank accounts, outstanding loans, debts, and any other elements contributing to your financial landscape. This will help you to compile a detailed list of your assets and liabilities, forming the cornerstone for subsequent steps in our retirement planning checklist.

    Mid-Year Retirement Planning Step #2. Clarify Your Retirement Goals

    Now that you know where you’re starting from, it’s time to determine your desired destination. That means you’ll need to clearly outline your retirement goals. Ask yourself questions such as when you plan to retire, what type of lifestyle you envision, and which activities you want to pursue. Establishing specific and measurable goals will help tailor your savings and investment strategies to meet your unique retirement objectives.

    Mid-Year Retirement Planning Step #3. Review and Adjust Your Budget

    If the first two steps were about determining where you’re beginning and ending, this step is dedicated to constructing a roadmap that will lead you to your final destination – your dream retirement! Regardless of how financially secure you believe yourself to be, adhering to a budget is imperative to remain on the right path to achieving your objectives. If you find yourself uncertain about where to begin or concerned about staying disciplined, there are numerous helpful apps and online resources available to assist you through each stage of the process.

    Mid-Year Retirement Planning Step #4. Maximize Account Contributions

    Now that you’re on your way, be sure that you’re taking advantage of any employer-sponsored retirement plans, such as 401(k)s or 403(b)s, by contributing the maximum amount allowed. These contributions not only reduce your taxable income but also grow tax-deferred until withdrawal. If you’re self-employed or your employer doesn’t offer a retirement plan, consider opening an Individual Retirement Account (IRA) and contributing regularly. Even if you think you have your contributions set, use this step in the retirement planning checklist to assess whether you can contribute more to max-out your options.

    Mid-Year Retirement Planning Step #5. Rebalance Your Portfolio

    While investing is one of the best ways to build wealth, it doesn’t come without risk. Take some time now to diversify your investment portfolio to mitigate risk. Consider a mix of stocks, bonds, and other assets that align with your risk tolerance and retirement timeline. Don’t forget to periodically rebalance your portfolio to maintain an optimal asset allocation and adjust it as needed based on changing market conditions and your risk profile. A financial advisor can be helpful as you navigate this step in the retirement planning checklist.

    Related: New Year, New Goals: Planning Your Money Moves for 2024

    Mid-Year Retirement Planning Step  #6. Fortify Your Emergency Fund

    No matter how prepared you are, there’s always the chance that something unexpected could happen, leaving you with a bill that you weren’t ready to pay. To help protect your retirement savings, it’s important that you have a solid emergency fund set aside. Generally, you want to aim to have at least three to six months’ worth of living expenses set aside in a liquid and easily accessible account. This fund will serve as a financial safety net, preventing you from dipping into your retirement savings in times of unexpected expenses.

    Mid-Year Retirement Planning Step #7. Plan for Healthcare Costs

    Health expenses often increase in retirement, making them one of the biggest threats to retirees’ financial security, so it’s crucial to plan for healthcare costs. Review your current health insurance coverage and consider supplemental insurance, such as long-term care insurance, to provide additional protection. If you’re not yet eligible for Medicare, use this step in the retirement planning checklist to explore other healthcare options to bridge the gap.

    Mid-Year Retirement Planning Step #8. Get Serious About Your Debt

    High-interest debt can erode your retirement savings, so strive to enter retirement debt-free or with minimal debt. To achieve this, develop a plan to pay off outstanding debts, focusing on high-interest debts first. This will free up additional funds for retirement savings and ensure a more stable financial future.

    Mid-Year Retirement Planning Step #9. Choose a Social Security Benefits Strategy

    Social Security benefits can significantly boost your income in retirement, especially when you get strategic about how you claim them to begin with. For instance, delaying the start of your benefits can lead to higher monthly payments. So, take some time to familiarize yourself with Social Security benefits and strategize the optimal time to claim them based on your financial situation. You’ll want to consider factors such as your health, life expectancy, and overall financial situation when deciding.

    Mid-Year Retirement Planning Step #10. Reassess Your Estate Plans

    Estate planning helps you make certain that your assets are distributed according to your wishes, minimizing potential complications for your loved ones. Don’t forget to update or create essential estate planning documents at this point in your retirement planning checklist. This includes wills, trusts, and powers of attorney. Life changes quickly at times, so it’s important that you regularly review and designate beneficiaries for your retirement accounts and life insurance policies.

    Remaining Hands-On with Your Retirement Plan Throughout the Years

    Retirement planning is a continuous process that requires careful consideration and adjustment. By taking time mid-year to use a comprehensive checklist, you lay the groundwork for an enjoyable retirement. If this list gives you anxiety and you would like assistance, reach out to us at Lane Hipple. This checklist is part of our Client Review process, and we are happy to review it alongside you. Remember, the key to successful retirement planning is proactive and informed decision-making.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

  • Navigating College Savings: Exploring 529 Plans and Coverdell ESAs

    A Comprehensive Guide to 529 Plans and Coverdell ESAs for Education Savings

    Navigating college savings is a significant concern for many families. With rising tuition costs and the increasing necessity of higher education for career advancement, parents and guardians are keenly focused on finding effective ways to set aside funds for their children’s educational future. Two popular options for saving are 529 Plans and Coverdell Education Savings Accounts (ESAs). This article will delve into the features, benefits, and limitations of both, helping you make an informed decision based on your family’s needs.

    1. Understanding 529 Plans

    As you begin researching your options for navigating college savings, you’re likely to come across this popular option. Let’s dig into the details.

    What is a 529 Plan?

    A 529 Plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Legally known as “qualified tuition plans,” 529 Plans are sponsored by states, state agencies, or educational institutions. They are authorized by Section 529 of the Internal Revenue Code.

    Types of 529 Plans

    There are two main types of 529 Plans:

    • Savings Plans work much like a retirement account, where investments can grow tax-deferred and distributions to pay for the beneficiary’s college costs are federally tax-free.
    • Prepaid Tuition Plans let savers purchase units or credits at participating colleges and universities for future tuition and mandatory fees at current prices for the beneficiary.

    Advantages of 529 Plans

    • Tax Benefits: Contributions grow tax-deferred, and withdrawals for qualified education expenses are exempt from federal tax. Some states also offer tax benefits such as deductions or credits for contributions.
    • High Contribution Limits: Most plans allow contributions until all account balances for the same beneficiary reach $235,000 to $500,000.
    • Flexible: Account owners can choose from a variety of investment options and can change the beneficiary if the original beneficiary does not need the funds for college.

    Considerations

    • Investment Options Limited: Investment options in 529 Plans are often limited to those selected by the plan.
    • Penalty for Non-Qualified Withdrawals: Non-qualified withdrawals are subject to income tax and a 10% federal penalty on earnings.

    Related: College Costs Are Rising 5x Faster Than Inflation

    2. Exploring Coverdell Education Savings Accounts (ESAs)

    Now, let’s discuss another common option you might consider as you’re navigating college savings.

    What is a Coverdell ESA?

    A Coverdell ESA is a tax-advantaged savings account designed to pay for the beneficiary’s educational expenses, from elementary to post-secondary.

    Benefits of Coverdell ESAs

    • Tax Advantages: Similar to 529 Plans, the earnings in a Coverdell ESA grow tax-free, and withdrawals for qualified education expenses are also tax-free.
    • Wide Range of Investment Choices: Unlike 529 Plans, Coverdell ESAs can be used for a range of investments, similar to those available in IRAs.
    • Use for K-12 Expenses: Funds can be used not only for college expenses but also for elementary and secondary education, including tuition, books, and uniforms.

    Limitations

    • Contribution Limits: Contributions are limited to $2,000 per beneficiary per year, regardless of the number of accounts set up in the beneficiary’s name.
    • Income Restrictions: Eligibility to contribute to a Coverdell ESA phases out at modified adjusted gross incomes between $95,000 and $110,000 for single filers and between $190,000 and $220,000 for joint filers.
    • Age Restrictions: Funds must be used by the time the beneficiary turns 30, with some exceptions for special needs beneficiaries.

    3. Choosing Between 529 Plans and Coverdell ESAs

    When deciding between a 529 Plan and a Coverdell ESA, consider the following factors:

    • Contribution Amounts: If you plan to save a significant amount, a 529 Plan may be more suitable due to its higher contribution limits.
    • Investment Flexibility: If you prefer more control over your investments, a Coverdell ESA offers more flexibility.
    • Use of Funds: If you need savings for K-12 expenses, a Coverdell ESA is advantageous.
    • State Tax Benefits: Many states offer tax benefits for contributing to a 529 Plan, which might not be available with a Coverdell ESA.

    Navigating College Savings: Determining the Right Approach for Your Family’s Needs

    Navigating college savings options and choosing the right one for you involves weighing the benefits and limitations of each type of account. By understanding the differences between 529 Plans and Coverdell ESAs, you can tailor your college savings strategy to fit your financial situation and educational goals for your beneficiary. Careful consideration of the features of each option will guide you in preparing for the educational expenses ahead.

    Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.

  • The One-Day Trade Settlement: What It Means for Investors

    Introduction

    On May 28th, 2024, a seemingly inconspicuous trade settlement change swept through the financial markets in the United States. While it might have gone unnoticed by many, this update holds significant implications for investors, both individual and institutional. Let’s delve into the details of what transpired and explore its impact on the world of investing.

    The Trade Settlement Period: A Crucial Aspect

    Before we dive into the recent change, let’s understand the concept of trade settlement. When you buy or sell a security (such as stocks, bonds, or exchange-traded funds), the actual transfer of ownership and funds doesn’t happen instantaneously. Instead, there’s a lag between the trade execution and the settlement—the moment when ownership officially changes hands and funds are exchanged.

    Traditionally, the settlement period for U.S. and Canadian securities traded on U.S. exchanges was two business days after the trade date. In other words, if you sold a stock on Monday, the settlement would occur on Wednesday. This delay allowed time for various administrative processes, including verifying the trade details, transferring shares, and ensuring the funds were available.

    The Latest Update

    As of May 28th, 2024, the trade settlement period for U.S. and Canadian securities traded on U.S. exchanges was shortened to one day after the trade date.

    The Impact on Individuals

    • Faster Processing Time – For individual investors, this change translates into speed. When you sell a security, you’ll receive the proceeds in half the time. No more waiting for two days; your cash will be available sooner. Whether you’re reallocating your portfolio, taking profits, or rebalancing, the reduced settlement period enhances your agility.

    • Reduced Transaction Risk – Imagine you’re selling a stock to fund an important life event—a down payment on a house, your child’s education, or retirement expenses. With the shorter settlement window, there’s less exposure to market fluctuations. The risk of unexpected price movements impacting your transaction diminishes significantly.

    The Institutional Perspective

    Institutions—brokerages, mutual funds, and pension funds—also benefit. The streamlined settlement process reduces operational complexities. It simplifies back-office tasks, minimizes reconciliation efforts, and enhances overall efficiency. For large-scale trading operations, this adjustment is a game-changer.

    Conclusion

    The seemingly subtle shift from a two-day settlement to a one-day settlement is anything but trivial. It aligns with the digital age’s need for speed, efficiency, and risk reduction. As investors, we welcome this change—one that empowers us to act swiftly and confidently. So, the next time you execute a trade, remember that behind the scenes, the wheels are turning faster than ever.

    For a more detailed analysis of the institutional impact, you can explore the SEC’s fact sheet. Additionally, if you have any questions or need personalized guidance, our team at Lane Hipple is here to assist you.