by Daniel Kittell | Accounting News, News, Retirement
A retirement withdrawal strategy can help you establish the appropriate amount of money to take out of your investment accounts each year. The amount you decide to make available to yourself will affect your quality of life in retirement, and you want to make sure your withdrawal strategy will protect against your savings accounts running dry. Below we discuss retirement withdrawal strategies that should ideally work together for an optimal distribution plan.
The 4% Rule
If you follow the 4% rule, you will withdraw 4% of your investment account balance in your first year of retirement. Theoretically, by increasing that amount each year in order to keep up with inflation and the rising costs of goods and services, you should have enough money available to maintain a 30-year retirement. The benefit of this approach is that it’s simple and keeps up with inflation. However, the best percentage for each retiree will vary person to person. This method also doesn’t support flexibility to adjust based on the performance of your investments.
Fixed Dollar Withdrawals
With fixed-dollar withdrawals you take the same amount of money out of your retirement account every month, quarter, or year for a set period. For example, you may decide to withdraw $2,000 monthly for the first three years of retirement and then reassess after that time to determine if this is still the best amount for your circumstances. The benefit of this distribution strategy is the predictable income, but it doesn’t account for inflation or a fund’s performance. Withdrawing a fixed dollar amount each month or year could cut into your account’s principal.
Systematic Withdrawals
Using this approach, you withdraw only the income your investments produce from interest or dividends, so your account’s principle remains intact. The benefit of this strategy is that you can be assured your account won’t run dry since the principle isn’t touched. However, your principal needs to be quite sizable to provide income for you to live on. Keep in mind that your income will vary from year to year, depending on market performance, which makes it challenging to create a financial plan.
Create a Floor
The simplified explanation of income flooring is to determine how much income you need to live comfortably for the rest of your life if you didn’t make another penny, and when that lifetime income should begin. First, you need to create your income floor, typically by building up accounts that provide guaranteed income on a regular schedule—Social Security, pensions, and annuities. By creating a strong financial floor, you can rest assured that you will be able to pay at least the necessary expenses in retirement, no matter the volatility of the markets.
Buckets
Implementing a bucket strategy means creating three separate sources of retirement income:
- A savings account that holds approximately three to five years’ worth of living expenses in cash
- Fixed-income securities, including government and corporate bonds or certificates of deposit
- Equity investments and growth funds
To use this approach, you draw from your savings account to cover your expenses and refill that “bucket” with funds from the other two sources of income. This allows you to refrain from selling assets at a loss. You can refill your savings account by selling stocks (as long as the market is up) or by selling your fixed income securities (as long as they’ve performed well). If both of these are down, continue drawing from your savings.
This approach allows you to potentially grow your investment account balance over time, but it can be time-consuming, and you need to use an additional method to figure out the amount you can afford to spend each year.
Account Sequencing
The goals with an account sequence strategy are to:
- Maximize the amount of money you can spend in retirement
- Receive a higher lifetime after-tax income
- Enhance the longevity of your portfolio
- Reduce taxes paid over the course of your retirement
- Eliminate or reduce Social Security benefits from being taxed
- Reduce Medicare premiums
Your tax bracket can heavily influence when to withdraw money from tax-advantaged funds, and the best approach may be to withdraw cash from a combination of savings and investment accounts. This is where the expertise of advisory firms can help you determine the best course of action.
by Daniel Kittell | Accounting News, Construction, Industry - Construction, News, Uncategorized
Last year 35% of contractors reported turning down work due to skilled labor shortages. Couple this with a lack of resources due to supply chain issues and an industry that doesn’t seem to be slowing down, despite a short stall at the beginning of the pandemic, and construction firms are finding themselves in a position of putting the focus on running a more efficient business. Ultimately, this focus can help determine ways to save money or ways to reinvest in either hiring or retention and training. Read on for some strategies that will ultimately help you save time and money.
Provide Consistency
Consistency across the span of a project builds client trust and customer satisfaction, and building the importance of consistency into staff training can produce cost-effective results.
- Be sure your employees work by your company’s mission and core values. They should serve as touchstones throughout the duration of the project, whether anticipating customer expectations or meeting any unforeseen circumstances, including a shortage of staff.
- Hold on to returning customers by training employees to be responsive, helpful, and consistent with their answers.
- Employees who have the most interaction with customers should be trained in a way that provides consistency in addressing any questions and issues throughout the project. They should be proactive, empathetic to concerns, and solutions-oriented.
Prioritize Communication
As a business owner, if you feel that you lack the communication skills necessary to see a project through to the end, consider outsourcing a service to answer incoming calls. This can save time, and you can focus your energy on more pressing matters. Also think about establishing a company website as a means of interacting with current and potential clients. Use extensions like live chat, interest forms for gathering contact information, and online sales and specials to hook new customers and drive sales.
Invest in Software for Efficiency
Technology in the construction industry has the power to save time, improve workflow, attract skilled labor, and provide optimal customer service. Because efficiency in customer scheduling has proven to be a challenge for many construction firms, consider investing in software that focuses on customer and project management. Technology that can provide efficiency and capture project details can have a positive overall effect on your business.
Construction firms in today’s economy are faced with widespread labor shortage and supply chain issues, as well as skilled workers aging out of the workforce. This all culminates in an industry-wide lack of resources that is only growing. For an industry that is no stranger to labor turnover, focusing on consistency, time investment, and customer attention is paramount, and will allow you to run a more efficient operation and save money in the long run.
by Daniel Kittell | Accounting News, News, Retirement, Retirement Savings, Social Security
While Social Security typically plays a role in planning for retirement, it’s important to be clear on the specifics of this benefits program. It definitely can be a source of financial support, but there are a few realities to be aware of so you’re not caught off guard when the time comes to make use of these benefits.
Social Security Benefits Fall Far Short of Replacing Income
In fact, Social Security replaces only about 40% of pre-retirement income. When you retire it’s generally advised to have enough money coming in to replace at least 80% of pre-retirement income in order to avoid a major drop in quality of life. Income from sources such as a pension or savings will be needed to fill the gap.
Your Benefits Could Be Taxed
Approximately 50% of retirees pay some federal taxes on their Social Security benefits. This is because their combined income from Social Security and other sources bumps them above the thresholds for taxes to kick in. These thresholds—$25,000 for single people and $32,000 for married joint filers—aren’t indexed to inflation. Due to natural wage increase, more and more people are going to end up with provisional incomes above the stated thresholds, so the percentage of Americans who are required to pay some taxes on Social Security benefits is expected to increase over time.
Medicare Premiums Are Deducted from Your Social Security
If you receive Social Security benefits and you are enrolled in Medicare Part B (the portion of Medicare that provides standard health insurance), the premiums for Medicare are typically automatically deducted from Social Security payments.
Claiming Benefits Early Could Result in Smaller Monthly Checks
If you opt to begin receiving Social Security before your full retirement age, you will not get your standard benefit amount. Full retirement age differs by birth year, but it ranges between 66 and 2 months and 67 years old. Depending on how far you are from your full retirement age when you start claiming benefits, you could fall short of your benefit rate by as much as 30%.
by Daniel Kittell | Business Growth, Industry - Nonprofit, News, NonProfit
As we begin to see the light at the end of the tunnel in regards to Covid-19, it’s helpful to review the basic strategies of working with individual donors to raise major gifts. Below is an overview of how to strategize raising major gifts in a post-pandemic world.
What Is a Major Gift?
Simply put, a major gift is one of the largest—if not the largest—donation an organization receives. The amount that defines “major gift” can vary by organization. These donations are typically used to fund specific projects, meet fundraising goals, or supplement general programs that help an organization succeed in its mission.
The Major Gift Fundraising Touchstones
The four touchstones of major gift fundraising are identification, cultivation, solicitation, and stewardship. Let’s break these down step-by-step.
Donor Identification
Step number one is to identify potential donors. You can do this by checking your database of supporters, which should include donor history. As you review your database, you want to identify your largest donors as well as your most loyal donors. Your loyal donors may only give a small gift each year, but consistent donations likely mean they are invested in the mission of your organization, so they will be your best giving prospects. Create a list of the top 20 donors who meet these criteria (largest donor or loyal donor), and concentrate on fostering relationships with them.
Cultivation
This next step entails building relationships on trust and commonality before launching into a pitch for donations. Some of the individuals on your list you may already know. They might be board members, volunteers, or involved with your organization in other ways. Be careful not to take these relationships for granted. When it comes to any prospective donor, you need to consider the best approach to get them to think about supporting your organization with a major gift. This requires a plan for each person on your list. While these plans certainly can have similar frameworks, you’ll want to adjust them according to your particular relationship with each individual. You can build strong relationships by:
- Organize a face-to-face meeting. You want to keep it intimate, but a board member and the executive director and/or development director can join. You’ll want to ask them a series of open-ended questions to get to know them—and their connection to your organization—better, as well as to encourage them to think deeper about their involvement in the mission of your organization. What do they love about your organization? How did they originally become involved? Why is your organization’s mission important to them? Do they have any suggestions for improvements?
- Invite them to take a tour, visit a program, or attend an event. Given what you know of individual prospects, try to choose something that may move them, or have a powerful impact on them.
- Encourage them to volunteer. Inform them of all the ways your organization utilizes the help of volunteers. There may be a role they’d be interested in that they were never aware of before. Volunteering draws people closer to your organization and its mission because they become involved in a more personal way.
- Provide updates twice per year. Whether by phone, email, hand written note or thank-you card, or at an in-person meeting, sending regular updates pertaining to your organization’s programs and services keep prospective donors in the loop.
Solicitation
It’s time to start actively requesting major gifts. Make a list of your top few prospective donors and schedule meetings with them. Once those meetings are in the books, schedule meetings with the next few prospective donors on your list, and so on.
To be clear, your prospects should not feel surprised or misled by your request for a donation. Depending on the trust you’ve built thus far, they might even ask beforehand if this meeting is in regards to money. Be honest and say that you’d like to discuss how they might contribute to your organization in a more impactful way.
Be sure to discuss who will be in attendance at the meeting. This should be a small and select group—typically the development director, executive director, and a board member—and be sure that your donor has met everyone more than once. After all, your organization should be cultivating relationships, not merely conducting business transactions.
Ideally, a board member will be the one to ask for a donation. This is called peer-to-peer fundraising. As a volunteer, the board member is simply pointing to the time and money they’ve already contributed and asking your donor to consider doing the same. As for the actual asking, approach the topic with a specific amount in mind for a specific project, program, or service.
Stewardship
As the final step in fundraising, stewardship is the “thank you” in response to a donation. You want your donor to know the impact they’ve had on your organization. Think about how many different ways you can express your gratitude: a handwritten note; a phone call; a mention in your newsletter, annual report, and website; an update on how their gift is being implemented; and a follow-up meeting. Any combination of these can be done, and by multiple people, but be sure you have a plan in place so the stewardship is strategic, appreciative, and informative but not overwhelming for your donor.
Maintain Your Major Gift Fundraising Program
Devote time each week to holding meetings with your development team where you discuss your organization’s list of prospective donors. Is there someone on your list with whom your organization can cultivate a more meaningful relationship? Who on your list do you feel might be ready to donate in a bigger way? Who is going to schedule that meeting, and what is your target amount to ask for? Finally, regarding any recent outreach efforts to other potential donors, do any follow-up inquiries need to be made?
by Daniel Kittell | Accounting News, Business Growth, Industry - Professional Services, News, Professional Services
Professional services organizations were already doing their best to embrace the challenges of ever-evolving technology developments when COVID-19 hit, forcing remote work, which in turn affected project delivery and resource management. Read on for growing trends that will support and enable growth and profitability for professional services businesses long after the disruptions of the pandemic have passed.
Implementing Automation and Artificial Intelligence
Extensive data-analysis is the most effective way to provide useful business solutions to clients, but it is a time-consuming process that is sensitive to human errors. Enter smart technologies enabled by artificial intelligence and machine learning. By decoding real-time data and systematizing large chunks of data into usable information, the process becomes simpler and less laborious. Utilizing past data can also help generate strong and clear data-driven insights for the client.
Look for organizations to start using emerging technologies to automate back-end tasks, which will allow employees to focus on specific roles within the company and grow in individual skill sets and abilities.
Increasing Remote Work and Virtual Offices
The pandemic pushed us into a virtual world overnight, and now that we know video-conferencing and collaboration tools are vital information-sharing resources, remote work has become an integral part of the work culture. Additionally, managers can keep track of project progress and employee performance across diverse geographic boundaries through resource management software. Virtual offices allow companies a wider reach of clientele, who have the opportunity to vet companies based on reputation and work portfolios, regardless of location.
Enforcing a Value-Driven Revenue Model
Some professional services charge clients by the hour, but this method excludes the value generated out of each task. For example, when an accountant saves a client 10% in taxes after an hour of billable work, the client is still invoiced based on the employee’s charge out rate instead of on the task’s value. Not only does this decrease profit margins for firms, but clients may not recognize the benefits realized. However, with the adoption of a value-driven revenue model, invoices to clients can reflect the benefits and profits made over the duration of the project (e.g., tax savings, ROIs, and insurance claims), which will increase earnings for firms.
Adopting a Hybrid-Talent Model
In order to reduce project resourcing expenses, professional services firms are embracing the use of digitized project management tools that predict resource demand ahead of time. This provides firms with the opportunity to draft a hiring plan based on project costs and demands. As such, many firms are moving toward a hybrid-talent model—a team comprised of contractors, freelancers, etc., as well as full-time employees. Not only does optimizing resource allocation help to prevent employee burnout, but it also controls project financials and helps to increase profitability.
Establishing a Tech-Supported and Connected Team
Research suggests that highly engaged and connected teams experience greater productivity, improved performance, and enhanced team morale. Moreover, an engaged team produces greater profitability. However, if some or all of your team is working from remote locations, encouraging team engagement can be challenging. By investing in a tech-enabled work culture with the use of collaboration tools, employees can communicate, problem-solve, and share important information in real-time.
