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Life insurance can be an important part of your financial plan, but do you know what kind of insurance is right for your needs? Insurance comes in many forms, and many people have the wrong type of insurance, and aren’t insuring their need in an efficient way. That means they may be needlessly overspending.

There are two basic types of life insurance: Permanent and Term. We’ll discuss each of these, how they may be best used, and how not to use them. 

Term insurance is temporary, and is intended to cover a temporary need. You can buy a policy which covers a duration from one to forty years. These policies typically include a level premium for the duration of the policy, so they are easy to budget since the premium will not increase during the term. 

Believe it or not, most needs for life insurance are temporary. Whether you need insurance to provide protection in the event you die before your children are grown, or you need insurance to replace income during your working years, these needs are both temporary since your career will one day end, and your children will, eventually, one hopes, leave the nest.

From a purely economic standpoint, once you stop earning money and your children are grown, the risk  that your death poses to your family may be none, meaning your need for insurance may end.

Most term insurance is also convertible to a form of permanent insurance at some point so, if your need becomes permanent, you can convert the policy to fill the changing need.

Permanent insurance includes Whole Life and Universal Life. You may also have heard them be referred to as “cash value life insurance,” because they include a savings component in addition to the death benefit. These policies are intended to cover permanent needs. 

Permanent needs for insurance are far fewer, but it is important to recognize and cover them. 

A common need for permanent insurance is an instance in which one spouse elects a single-life only pension. In other words, if that spouse dies, the pension would end. In this case, it may be necessary to buy a life insurance policy to replace the lost pension, and since we don’t know when that spouse will die, the risk continues indefinitely, and term insurance would likely be insufficient.

Creating a legacy at the death of you and your spouse can be another use of permanent insurance. In this case, we utilize a special type of insurance called second-to-die insurance, which pays out at the death of the second insured. Since the policy pays after the second death, this type of insurance is less expensive than insuring a single spouse alone. A permanent policy is important here, again, because we don’t know how long you both will live, and you need the insurance to be in-force whenever death occurs. 

For both the pension and estate needs, your concern is primarily surrounding the death benefit, so consider utilizing a permanent policy that provides a guaranteed death benefit, but no real cash value accumulation, since you’ll likely never want to access it. Just as with term, you want to pay for the utility of death benefit, since that is what life insurance is first and foremost - the only difference is duration of need.

As a financial advisor, too often I see clients with the wrong type of insurance to meet their needs. Most often, this means clients have permanent insurance policies when they only have a temporary need, sold under the premise that the cash value will be available to fund education or retirement goals. 

Adequately funding the “cash value” portion of a permanent policy can be very costly, leading many people to eventually underfund their policy. What may have been initially illustrated as a great vehicle for future savings, usually ends up an emaciated waste of premium dollars. Unless you have exhausted all other savings vehicles for retirement and education planning, it may be unwise to consider permanent insurance as a reasonable avenue for savings. 

As the saying goes, and unless you have a permanent need, “buy term, and invest the rest.”

The best piece of life insurance advice is to work closely with your independent financial advisor, and be sure that any life insurance strategy is based on a thorough understanding of your needs and budget. Keep it simple, and buy life insurance for its utility, first.

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial in Saratoga Springs and Rhinebeck.

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret Grant & Co., Inc., SEC registered investment advisors. Sterling Manor Financial and Cadaret Grant are separate entities.

This quarter marked ten years since the bottom of the recession, and the beginning of the current bull market. Since then, on any given day, you could turn on the television and find some pundit somewhere prognosticating the coming demise of the economy and the return of economic recession. I still imagine that somewhere in the basement of an NYU building, Nouriel Roubini is crouched behind a pallet of freeze-dried food and iodine tablets, waiting to be proved right. Somebody should check on him. 

The reality is that the American economy has grown out of the panic of the recession, against the expectation and, sometimes seemingly, the will of the doomsayers. Despite what some are once again preaching, we see no reason to believe the end is nigh.

Economies have inertia, and they will continue in one direction until acted upon by a force strong enough to counter their movement. In other words, cycles of economic expansion do not have a prescribed duration; they continue until they don’t – until something stops them. 

Two forces end expansionary cycles, like no other. 

First is the Fed. A lot of people don’t understand what all the fuss is about when it comes to The Fed, so let me boil it down. The Fed controls interest rates. In other words, the Fed controls the price of money. When rates are low, money is cheap, and consumers and businesses are willing to borrow money to make capital investments. 

You may borrow money to renovate your home or buy a new one; businesses may borrow money to build a new factory. These investments stimulate growth across a broad range of sectors. A miner needs to pull ore from the ground so a smelter can harvest it into the various metals needed for everything from wires and nails, to faucets and appliances. A lumberjack needs to harvest wood from a sustainable woodlot, so a mill can turn it into the studs that a carpenter will use to frame your home. 

The simple act of a single capital investment triggers a cascade of positive economic activity. But, when interest rates rise, and the cost of money is too high, people and businesses become unwilling to make those capital investments, and the economy can begin to stall. This is why you hear people talk about The Fed so often.

Historically speaking, and relative to the current level of economic growth, we feel interest rates are still on the low side. Even with recent increases, Fed rates are not yet at a level high enough to stifle growth, and we don’t think they will be until they are closer to 3.5-4 percent.  In fact, while many are beginning to talk about a cut in interest rates, we still believe that there will likely be at least one increase this year. 

The other force that kills economic expansion is the government. It’s an unfortunate truth that the government’s knee-jerk reaction to any failure of government is more government. I think Ron Swanson has that on a tee shirt. 

From the bottom of the recession to 2016, the economy grew at a very slow average of 2 percent per year, as the government piled on new regulation after new regulation in order to show constituents that it was doing something to cure its prior failures. 

Effectively, it’s like killing the patient to cure the disease. “Congratulations, we cured your husband.” “But he’s dead.” “Yes, but so is his virus!”

The effect of new, and often redundant, regulations is an enormous cost of compliance. Every dollar that businesses and individuals spend on complying with government regulations is a dollar that isn’t being put toward some capital investment. 

There is a line between regulation and over regulation, and we believe that everyone benefits when the government knows its role and regulates appropriately. 

The Federal Register, which is a list of all of the Federal regulations and, therefore, a decent measure of the regulatory burden topped out in 2016 at over 95,000 pages. Since then, over 30,000 pages have been cut as regulations have been rolled back. 

We can debate, endlessly, which of those regulations constituted government overreach, but that’s not the point. The point is, a reduction in the number of regulations results in a reduction in the cost of compliance. The ability to reallocate those funds toward things like technological innovation and hiring new workers is, at least partially, responsible for our continued economic success.

The rate of technological innovation has never been faster that it is today, and it will probably never again be this slow. When businesses are free to invest in technology that allows each worker to be more productive we all benefit.

Today, businesses are continuing to show increases in profits, and wages are now 3.2 percent higher than they were this time last year. 

In the last two years, the economy has grown at about 3 percent per year. While that may not seem like a lot, consider that’s 50 percent more growth than in the average of years since the recession. 

Add this all up, and what does it mean? We think the economy still has plenty of room to run and, barring any unforeseen geopolitical event, we don’t see any signs of recession in the foreseeable future. The only major contributors to possible economic slowdown – The Fed and government overreach -  both seem to be in-check for now. 

They say to make hay while the sun is shining, and the sun continues to shine on the US economy.

Stephen Kyne is a Partner at Sterling Manor Financial in Saratoga Springs, and Rhinebeck.Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret Grant, SEC registered investment advisors. Sterling Manor Financial and Cadaret, Grant are separate entities. This article contains opinion and forward-looking statements which are subject to change. Consult your investment advisor regarding your own investment needs.

It’s the time of year when many people sit down with various degrees of trepidation and being to prepare their annual tax return. Ultimately, once the results are revealed, the question becomes, “what could I have done differently last year to decrease this bill?” Managing your tax liability today, and creating a taxwise strategy for accessing funds in retirement, begins with a basic understanding of the savings vehicles which are available to you, and the ways in which they are taxed. 

All qualified retirement plans generally fall into two categories for the purpose of taxation. 

The first category includes those accounts in which you’ll get a tax break on your contributions, but everything those contributions grow to become will be taxable to you as if it was any other income in retirement.  In other words, the “seed” money is tax-free, but the “harvest” grows to be fully-taxable when you withdraw it in retirement. We call these tax-deferred accounts. These accounts include Traditional IRAs, 401(k)s, 403(b)s, SEPs, SIMPLE IRAs, 457 Deferred Compensation plans – generally the non-Roth plans available to you through your employer. These accounts are useful for lowering your tax bill in the current year, but won’t be very helpful for controlling taxes in retirement. 

The second category includes those accounts in which only your contributions are taxed, before being contributed, but everything those contributions grow to become will be tax-free to you in retirement.  In other words, only the “seed” money is taxed, yet the entire “harvest” grows tax-free. These accounts include a Roth IRA, Roth 403(b) and Roth 401(k) – the word “Roth” should be your clue. These types of accounts won’t generally reduce your tax liability today but, since you have tax-free access to the growth in retirement, they can go a long way to reduce your future tax liability at a time when making your assets last will be your biggest concern.

It’s important to remember that diversification doesn’t just mean a mixture of types of stocks and bonds anymore, it is equally important to diversify the way your retirement income will be taxed in order to have more control over your tax liability in retirement, to help ensure your retirement assets last a lifetime. Contributing to a mixture of retirement accounts can help accomplish this goal. It may be tempting to forego the future tax savings of Roth-type accounts, for the immediate tax deduction available through non-Retirement accounts, but it is important to have a sense of balance.

Here are some general rules of thumb to keep in mind when saving your hard-earned dollars:

1. If your employer offers you a match on retirement plan contributions, always try to contribute to the match. For example, if your employer will match your contributions up to 3 percent of your salary, try to contribute 3 percent. Regardless of the taxation in this account, where else will you be able to double the value of your contribution in one year? Take the free money.

2. Once you’ve contributedto the match, contribute to a Roth IRA if you’re eligible. Your contributions to a Roth IRA can be up to $5,500 with an extra $1,000 as a catch-up contribution if you’re over age 50. Contribution limits are more restricted for Roth IRAs because the impact of tax-free growth is so high. In short, the growth is money the government won’t be taxing in the future, so it’s in the interest of the government to limit how much you can contribute.

3. If you’ve contributed to the match in your employer-sponsored plan, and you’ve maximized your eligible Roth IRA contributions, then you should consider contributing more to your employer-sponsored tax-deferred plan. Contribution limits range from $12,500 (with a $3,000 catch-up) for SIMPLE plans, to $18,500 (with a $6,000 catch-up) for 401(k)s, 403(b)s, 457 Deferred Compensation plans, SARSEPs. Certain plans could even accept contributions of more than $200,000

4. If your employer offers Roth and non-Roth retirement plan options, consider making a portion of your contributions into each type, if possible. This will help give you the benefits of both, and more choice in the future.

Of course, these are just guides, so consult with your independent financial advisor and tax advisor during one of your regular strategy meetings to determine the balance that’s right for you. Having the option to choose between tax-free and taxable income in retirement might make the difference between whether or not your retirement will be sustainable. 

Don’t let another tax year go by without taking control!

Stephen Kyne is a Partner at Sterling Manor Financial, LLC in Saratoga Springs, and Rhinebeck. 

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, an SEC registered investment advisor or Cadaret Grant & Co., Inc. Sterling Manor Financial and Cadaret, Grant are separate entities.

2018 MAY BE OVER, but for many of us, the books are not completely closed. As we open the tax filing season, options may exist to sock extra funds away and keep a little more of your hard-earned money away from Uncle Sam.

You may not realize but you may be able to make contributions to your Roth IRA for 2018 up until the earlier of your tax filing date, or April 15.  If eligible, the contribution limit is $5,500 ($6,500 for those age 50+), but don’t be discouraged if you are not able to fully fund your account for the year. Every bit you can save will help provide for your lifestyle in retirement, so a partial contribution is better than no contribution at all. 

Just because one spouse may be a homemaker or already retired, doesn’t mean that they can’t take advantage of a Roth IRA.  IRS rules also allow for contributions to an account for a homemaker or retired spouse, as long as the working spouse has sufficient earned income, even if the spouse is older than 70 ½.

Since Roth IRAs provide tax-free distributions and are not subject to Required Minimum Distributions at age 70 ½, they can be an extremely beneficial retirement funding option!

One last point on your Roth IRA: Contribution limits have been raised for the first time in several years, for 2019. New limits are $6,000, plus an extra $1,000 catch-up for those age 50+. As you budget your savings for the new year, remember to increase your contributions to keep up with the new limits.

For those who are self-employed, and don’t have access to a retirement plan through an employer, you may think you’re being disadvantaged when it comes to saving for retirement. The opposite, however, may be true. As a self-employed person, you could have the options of contributing up to $56,000 to a retirement plan for 2018, and deducting the full contribution!

Anyone whose earned income is reported to them on a form 1099, K1, or other similar non-employee form, may be eligible to establish and fund a retirement plan for 2018. The IRS rules allow this to be done up until the filing deadline (including extensions) for the previous year. Popular plan options include a SEP IRA and Individual 401k. 

A SEP IRA can allow you to contribute up to 25 percent of your income with a maximum contribution of $56,000, and can be appropriate for workers with high income and no employees. Because of the 25 percent limitation, your income would need to exceed $224,000 in order to fully contribute.

An Individual 401k has the same funding limit of $56,000 for 2018; however, there is not a 25 percent limitation. In other words, a self-employed worker (with no employees) earning $56,000 may be eligible to contribute all of their income to an Individual 401k without being limited by the 25 percent cap. So, if you have a working spouse, or other means of making ends meet, an individual 401k may be a great option for supercharging your family’s retirement savings!

Individual 401ks require more in the way of record keeping and compliance, so they can be more expensive and cumbersome than a SEP IRA. Remember, you don’t have to be able to fully fund a plan for it to still make sense. Don’t rule out an Individual 401k because you can “only” afford to contribute $30,000 to it.

As a point of disclosure: Your circumstances are unique and tax regulations can be very complex. Before implementing any tax strategy, we recommend working closely with your independent financial advisor and tax preparer to determine eligibility and funding limits, and to ensure your retirement funding and tax strategies comply with all appropriate regulations. 

Stephen Kyne is a Partner at Sterling Manor Financial, LLC in Saratoga Springs, and Rhinebeck. 
Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, an SEC registered investment advisor or Cadaret Grant & Co., Inc. Sterling Manor Financial and Cadaret, Grant are separate entities.

SARATOGA SPRINGS – When Matt Cummings, 32, and his graphic design business partner, Mike Miakisz, 31, put together a logo for American Pharoah this spring; the 3-year old colt had just dominated the Arkansas Derby, a key prep race for the Kentucky Derby. Little did they know they were designing what would become one of the most popular t-shirts of the summer racing season.

“He was one of the best 2-year olds last year,” said Cummings, co-owner of Ascot Creative with Miakisz. “Then he had a small injury and missed the Breeders Cup. When they brought him back this year and we watched him win a couple races, we knew that was the horse.”

Cummings and Miakisz, who have known each other since grade school, are Saratoga natives with a natural love for horseracing. Both went to college for design, settled into steady careers, and Miakisz started a family, but they both wanted just a little bit more from their American Dream. So over the last couple of years, they began a small entrepreneurial venture on the side, Ascot Creative, designing apparel for horseracing fans that would feature a particular horse or stable on t-shirts, hats and other items.  

“We kinda know which are the popular horses in the horseracing fan base,” said Miakisz, “so we try to reach out to their owners and set up a licensing agreement to sell merchandise with their horses and stables on it. It benefits us, the owner, the stable, and horse racing fans in general.”

The two lifelong friends had no idea when they reached out for the licensing agreement on American Pharoah that they were creating a design for the horse that would win the Triple Crown for the first time in 37 years. Ascot Creative sales went up after the Kentucky Derby, then American Pharoah won the Preakness, sales went up again, and the rest is history, both for the horse and the entrepreneurs. 

“There’s no comparison to what we did last year,” said Cummings. “I didn’t think going into the Kentucky Derby that we’d sell a hundred shirts, and didn’t even know what to expect. We had to come up with a new design after he won the Triple Crown, but we’re at about 600 for him and still going. Not only that, we are selling other shirt designs and hats, like Texas Red.”

The sales are all derived online at AscotCreative.com, through promotions on Facebook and Twitter. “It’s really amazing,” Cummings said. “We’ve even gotten orders from Australia, Japan and England.” 

Both men feel good about the future of their design business. “This year we’ve established a relationship with some big-time owners,” said Miakisz, “which gives us some credibility with other owners, something we didn’t have before. And [American Pharoah’s] win has gotten our name out there to horseracing fans. We’ve had a great response.”