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The Risks of Bonds 

The Risks of Bonds 

If you’re a conservative investor nearing retirement, a large chunk of your portfolio probably consists of bonds. You may believe your money is safe, and that you’re guaranteed to make money from your investment. While bonds are generally safer than stocks, they are by no means risk-free. In fact, bond investments are a lot riskier than you may have been led to believe. With the combination of default risk, interest rate risk, inflation, and low rate of return, your investment, and your retirement, could be in jeopardy.  

The bond market is changing, here’s what you need to know. 

What is a bond? 

A bond is an agreement between you as the lender and another party as the borrower. That borrower could be a government, a corporation, or even a municipality. To simplify bonds, let’s think about them in terms of an investor loaning money to a company. That company will give the investor regular interest payments for a period of time, typically 10 or 20 years. At the end of that time period, the investor receives their original money back. 

Things get a bit more complicated when bonds are openly traded on the public market. When you go to buy a market bond, that bond is priced according to what the market will bear. These bond prices will rise and fall as interest rates rise and fall. 
 

Interest Rate Risk of Bonds 

Interest rates and bond prices are inversely related. When interest rates decrease, bond prices increase. For the past 20 years, interest rates have been falling, causing bond prices to go up. However, experts argue that we may be at the bottom of this trend. As the federal reserve tries to combat inflation by raising interest rates, bond prices will go down. This will decrease the value of the bonds you hold. 

There’s a rule in the financial services industry called the 10-1-10 Rule. A ten-year duration bond with a 1% interest rate movement causes a 10% price movement in the opposite direction. For example, if you bought a 10-Year Disney bond for $1000, and interest rates move up 1%, tomorrow the value of your bond will now only be worth $900, which is a 10% loss. 

This may not seem like a huge problem if you only have a few bonds of low value. But, if you’re retiring soon and have a million-dollar portfolio full of bonds, you could be in serious trouble. Rising interest rates, paired with the low rate of return bonds tend to have, could mean you’re taking a lot of risk for very little reward. 

If you consider yourself a conservative investor, be wary. The bond market is changing second by second. 
 

Default Risk of Bonds 

Many conservative investors believe that their individual bond investments are completely safe, but that isn’t the case. There is always a chance that the borrower will not be able to repay the loan. This is called default risk. 

Take this story for example. In 2011 General Motors needed a bailout. The government stepped in and essentially forced the bondholders to take zero for the money they had in that individual bond. The bondholders got nothing for their investment and lost their capital. 

Some bonds have greater default risk than others. Many consider government bonds to be the highest rated, with nearly zero risk of being defaulted on. However, corporate bonds are a bit riskier. 

One way to avoid default risk is to invest in a bond fund. This way, your money is spread out, not in one company. However, avoiding this risk comes at a cost – administrative costs specifically. Many bond funds have costs and fees built into them that clients may not be fully aware of.  

Alternatives to Bonds 

So, how can you avoid all these risks while still getting a good return on investment? There are many alternatives available to individual bonds and bond funds, including floating rate funds, REITS (Real Estate Investment Trusts), ETFs (exchange-traded funds), and life insurance policies. The qualified financial advisors at DuPont Wealth Solutions are able to discuss your options with you and help you avoid the risks associated with bonds. Give us a call at 614-408-0004 for a complimentary investment analysis. 

How to Prepare Your Child for College

How to Prepare Your Child for College

The United States has long been known as a world leader in education. Our universities are some of the best in the world, and our public school system is also highly regarded. Because of the importance of education in our society, many high school students decide to go to college and pursue a degree. If you’re a parent looking to help prepare your child for college, we have some tips for you.

If you’re lost at where to start with preparing for college, we recommend investing in some kind of college savings account, filing out the FASFA, and helping your child research schools and programs.

How to Save for College

The sooner you start saving for your child’s college tuition, the better. Many families wait until their child is in high school to save, and effectively limit the choices their child will have. If you’re looking for ways to save for your child’s college tuition, here are two common options.

  • A 529 Plan is an investment account that offers tax benefits when used for qualified education expenses. The downside to using a 529 plan is that if your child chooses not to go to college, or if they end up not needing all the money in the account, you will pay a tax penalty on the money withdrawn.
  • Some universal life insurance policies allow you to use the cash value component for expenses, including education. Instead of using student loans to pay for college, you can borrow from your own savings and not have to pay interest.

We do not recommend putting college savings in a standard bank savings account, as these accounts earn very little interest.

How to Save on College Tuition

One of the biggest expenses we face in life is college tuition. Luckily, there are a few ways you can save money on your tuition costs.

First, you should consider applying for financial aid. There are a variety of different types of aid available, and you may be eligible for more than you think. The first step is filling out the FASFA with your child. The FASFA will give you an ‘expected family contribution’ number, that is the amount you will be expected to pay out of pocket. It will also tell you what federal aid you may be eligible for. You’ll also want to look into scholarships and grants that can help you cover your costs. Scholarships are offered through many different avenues. Look to see if local businesses or organizations offer scholarship programs and contests.

Another way to save money on your tuition is to take advantage of tuition discounts. Many colleges and universities offer tuition discounts for students who meet certain criteria, such as being a member of a certain organization. It’s also important to remember that in-state tuition is often less expensive than out-of-state tuition.

You can also save money on your tuition by taking advantage of credit exchange programs. These programs allow students to exchange their tuition credits for credits at another school. For example, in Central Ohio many students choose to take classes at Columbus State Community College, and then use those credits to transfer to The Ohio State University. Through this approach, your student can stay home while going to college, allowing them to save money on room and board.

Tips For Families on Their First College Application Process

The college application process can be daunting, especially for families who are new to the process. It’s important to talk to your child about the application process, and work through it together. Here are a few things you can do to make the process less overwhelming and more efficient.

  • One of the best things you can do is to start early. The earlier you start, the more time you’ll have to research schools, visit campuses, and complete applications. You’ll also have a better chance of getting financial aid if you start the process early.
  • Another tip is to be organized. Create a list of deadlines and requirements for each school your child is interested in, and make sure you meet all the deadlines.
  • Finally, don’t be afraid to ask for help. There are several resources available to help you through the college application process. Don’t hesitate to reach out to your child’s guidance counselor.

Keep in mind that in most cases, you will have to pay a small fee for each college application you submit. If you can only afford to apply to a few schools, make sure you let your child know that. Have your child thoroughly research schools they are interested in, and narrow down choices from there.

Why Parents Should Be Involved in Their Children’s College Application Journey

The college application process is an important time for parents to be involved in their children’s lives. There are several reasons why parents should be involved in the process.

  • One of the most important reasons is that parents can provide support and guidance during what can be a stressful time. The college application process can be overwhelming and having the support of parents can make a big difference.
  • Another reason why parents should be involved in their children’s college application process is that they can offer financial assistance. Many families cannot afford to pay for their child’s entire college education, so having the help of parents can be a big relief. Additionally, parents can often negotiate better financial aid packages for their children.
  • Finally, parents can serve as a sounding board for their children during the college application process. It can be helpful for students to run their ideas by their parents and get feedback. Parents can also offer advice and guidance when it comes to choosing a school or major.

The college application process is an important time for parents to be involved in their children’s lives. If you’re a parent of a teenager, make sure you’re checking in with them throughout this stressful time.

Are you wondering, “what’s the best way to save for college”? We would love to help you find that out. Every family’s situation is different, and we’re eager to create a unique plan for you. Schedule a consultation with the financial advocates at DuPont Wealth Solutions by calling 614-408-0004.

How To Start a Business During Retirement

How To Start a Business During Retirement 

Many retirees are finding that starting a business is the perfect way to stay active and engaged after leaving their full-time job. Staying afloat and being financially secure during retirement is a must for us to survive in this world. A perfect way to keep the money coming in your mature days is to start a business!

Tips for Starting a Business During Retirement

If you’re considering starting a business during retirement, there are a few things you should keep in mind.

  1. Make sure you have enough money saved up. Starting a business can be expensive, so you’ll need to make sure you have enough money set aside to cover the costs.
  2. Consider your health. Starting a business can be demanding, so it’s important to make sure you’re physically and mentally up for the challenge.
  3. Choose a business that interests you. Retirement is the perfect time to pursue something you’re passionate about, so choose a business that you’ll enjoy working on. Oftentimes, you can monetize a hobby you currently have, like woodworking or cooking. However, don’t just start a business because you enjoy it, do market research, make sure that there a people willing to pay you for your business.
  4. Get help from others. Don’t try to go it alone – reach out to family and friends for help and advice. Consider reaching out the Small Business Administration SCORE business mentoring volunteers.
  5. Plan for the future. Retirement is often seen as the end of one chapter, but it can also be the start of a new and exciting one. Make sure you have a solid plan in place for your business so you can enjoy success for years to come.

By following these tips, you’ll be well on your way to starting a successful business during retirement. So, what are you waiting for? Get started!

Register Your Business

To become a legitimate business in Ohio, you’ll need to take certain legal steps.

  • Register your business with the Ohio Secretary of State. You’ll need to choose what type of business you want to be (an LLC, S-corp, etc.).
  • Obtain a federal Employer Identification Number (EIN) through the IRS.
  • Open a business bank account, using your new EIN.
  • Register with the Ohio Department of Taxation. The department also offers a training program so you can learn more about Ohio tax laws and requirements for small business owners.
  • Report new hires to the Ohio New Hire Reporting Center (including yourself).
  • Apply for worker’s compensation insurance. This is required if you have one or more employees.
  • Determine if you need to establish an Unemployment Compensation Tax Account through the Ohio Department of Jobs and Family Services.
  • Obtain any necessary licenses and permits. Many specialized services, such as construction and food, need to obtain special local and state permits to do business in Ohio.

How Can I Get a Business Loan?

Many first-time business owners choose to apply for a SBA-backed loan. The Small Business Administration helps small businesses get funding by setting guidelines for loans that lending partners provide.

There are many types of SBA-backed loans, including:

  • 7(a) loans, the SBA’s most common loan program. 7(a) loans provide financial help to small businesses – with special requirements. 7(a) loans can be used for real estate, short- and long-term working capital, refinancing current business debt, and purchasing supplies.
  • 504 loans, which are long-term fixed-rate loans. They can be used to help finance, purchase, or repair real estate, equipment, machinery, or other assets.
  • Microloans provide $50,000 or less to help businesses start up or expand.

Check Your Eligibility Before Obtaining a Business Loan

When evaluating your small business loan application, local lenders will likely consider four primary factors. However, requirements for business loans can vary among lending institutions.

  • Credit score. A business loan lender will use your personal and business credit scores to help assess the likelihood that you’ll repay your loan. Generally, a high credit score means more chances of loan approval and a lower interest rate.
  • Collateral and/or personal guarantee. Lenders may require that you put up collateral, or something of value such as equipment or inventory, which they can take if you don’t repay the loan. Some lenders also ask for a personal guarantee, which means you have to secure the loan with personal assets like your savings account balance, home equity, or other valuable belongings.
  • Time in business. If you’ve been operating your business for less than one year, don’t despair. Some online lenders will still approve qualified applicants who have only been in business for six months. While a traditional bank usually requires a company to have already been running for two years before they’ll lend money, an online lender often only needs proof that the business has existed for twelve months.
  • Annual revenue. Another important deciding factor is your total annual sales. Make sure to check with the lender about their requirements before starting the application process and take a look at your business finances to see if you qualify.

Using Retirement Accounts to Fund Your Business

For some people, using their 401(k) or IRA to start their business may be a better option than a traditional loan. Here are a few options:

  • Borrow money from your 401(k). If you need money, you can take out a loan from your retirement account instead of withdrawing the funds outright. If you have a 401(k) account, you can usually borrow up to 50% of your total funds, or $50,000, whichever is less. Repayment terms require that all borrowed money be repaid to your 401(k) within five years on a quarterly payment schedule. You’ll also need to pay interest on the loan – which is usually around 1 percent – back into your 401(k).

    Be sure to talk to your accountant and 401(k) administrator before pursuing this option.
  • Invest IRA and/or 401(k) funds directly into your business. If you’re forced to dip into your retirement funds, tax law permits you to do so without penalty or interest rate if you adhere to some specific rules. These rules are complex, but in short, you will need to establish your business as a “C corporation” that will disperse all of its stock and transfer it over to a new 401(k) profit-sharing plan in trade for the cash already in the plan. Getting this process started will require support from either a tax attorney or an accountant who is experienced with incorporating businesses and setting up new retirement plans.
  • Withdraw directly from your 401(k). This should be a last-resort option. You’ll have to pay taxes on any funds you withdraw, and you could face a hefty penalty depending on your age (10% if you’re 59-1/2 or younger).

There are many ways you can obtain the money you need to start your business. Our financial advocates are here to help you every step of the way, from registering an LLC to applying for business loans. Call us today at 614-408-0004 to get started.

Need inspiration? Listen to Episode 37 of our podcast, Your Financial Advocate, where Dr. Bimbo Welker talks about his journey from “working for the man” to starting his own veterinary practice.

How to Minimize the Impact of Income Taxes on Your Finances 

How to Minimize the Impact of Income Taxes on Your Finances 

No one likes to pay taxes, but they are a necessary part of life. The good news is that there are ways to mitigate the impact of income taxes on your finances. In this blog, we will discuss some of the best ways to do just that!

What are income taxes?

Income taxes are levied on the income of individuals and businesses. The amount of income tax that you owe depends on your income level and filing status. Income taxes are used to fund public services, such as education and infrastructure.

How can I reduce my income taxes?

Whether you are an active or passive income earner, here are several ways that you can reduce your income taxes. Some of the most common methods include:

  • Taking advantage of tax deductions and tax credits: There are many different deductions and credits that you may not realize you can obtain. By taking advantage of these, you can lower your taxable income and owe less in taxes.
  • Investing in a retirement account: Retirement accounts, such as a 401(k) or Traditional IRA, can help reduce your taxable income. This is because the money that you contribute to these accounts is not taxed until you withdraw it in retirement. You can also choose to invest in a Roth IRA, and pay the taxes now, but none when you withdraw the money in retirement.
  • Giving to charity: Donating money to a qualified charity can also help reduce your taxes. This is because you can deduct the amount of your donation from your taxable income.

The Trump Tax Cuts

The Trump tax cuts are a series of tax cuts that were enacted by the Trump administration in 2017. The most notable changes include a reduction in the corporate income tax rate from 35% to 21%, and a reduction in the top marginal income tax rate from 39.60% to 37%.

While the Trump tax cuts have reduced income taxes for many people, there are some negative impacts as well. The most notable of these is the increased standard deduction reducing the value of certain itemized deductions.

What does this all mean for you?

Income taxes are a necessary part of life, but there are ways to reduce their impact. By taking advantage of deductions and credits, investing in a retirement account, and giving to charity, you can minimize the amount of taxes that you owe. The Trump tax cuts have also reduced income taxes for many people. However, this reduction is schedule to end in 2025 and with the national debt skyrocketing, many people expect additional increases in the future. When it comes to your finances, it is important to consider both the short-term and the long-term impact of income taxes.

Ways To Mitigate the Impact of Income Taxes

When it comes to your finances, knowledge is power. Stay informed and be sure to consult with a tax advisor if you have any questions. With careful planning, you can minimize the impact of income taxes on your finances!

Use these tips to help you make the best decisions for your financial future.

  • If you are in a low tax bracket, consider investing in a Roth IRA. With a Roth IRA, you pay taxes on the money you contribute now, but all future withdrawals are tax-free.
  • Consider contributing to a traditional IRA if you are in a higher tax bracket. With a traditional IRA, you pay taxes on the money you withdraw in retirement.
  • Consider investing in tax-advantaged accounts such as a 401(k) or 403(b). The money you contribute to these accounts is deducted from your taxable income.
  • If your employer offer’s a Roth 401k plan, consider paying a bit more in taxes now and contributing to that plan instead of the traditional 401k.
  • Take advantage of tax deductions and credits. There are many deductions and credits available that people are unaware of that can reduce your tax bill.
  • Talk to a tax professional. They can help you identify ways to reduce your taxes.

For more information on mitigating the impact of income taxes, listen to Episode 36 of our podcast Your Financial Advocate. This episode features special guest Jason Pueschel, Founder and Managing Director of Alternative Wealth Management.

How to Defer and Reduce Capital Gains Taxes on Investments 

How to Defer and Reduce Capital Gains Taxes on Investments 

The federal deficit is at an all-time high, and the government needs to find new ways to raise revenue. One of the main ways they do this is to increase taxes. In fact, according to the Bureau of Labor Statistics, about 40% of a person’s income goes to some form of taxes! Tax breaks and tax advantages are few and far between. So, when one comes along, it’s in your best interest to take advantage of it. There are several strategies you can use to defer, reduce, and eliminate capital gains tax on real property and other assets. 1031 Exchanges, Delaware Statutory Trusts, Opportunity Zone Funds, and Installment Sales are just a few options to discuss with a trusted financial advisor.

What Are Capital Gains Taxes?

Capital gains are the profits you make from the sale of a property or investment. If your property or investment has increased in value since you bought it, you’ll likely have to pay a capital gains tax. This usually falls within the 15-20% range.

There are two types of capital gains taxes, short-term and long-term. Short-term is defined as a property or investment held for one year or less, while long-term is anything over a year. Different rates apply to each.

Short-Term Capital Gains Tax Rates

If you hold a property or investment for less than a year before selling, your capital gains tax rate will be your marginal income tax bracket. Marginal tax brackets are the tax rates applied to your last dollar of income. So, if you’re in the 20% marginal tax bracket, you’ll pay a 20% capital gains tax rate on any short-term profits.

Long-Term Capital Gains Tax Rates

The long-term capital gains tax rates are 0%, 15%, or 20%, depending on your taxable income and filing status. They’re much lower than short-term rates because the government wants to encourage people to invest for the long haul.

How to Defer, Reduce, and Avoid Capital Gains Taxes

There are a few ways you can defer, reduce, or avoid your capital gains taxes. The best strategy will depend on the type of asset in question.

How to Defer Capital Gains Tax on Real Estate

In the crazy real estate market we’re in right now, it seems like you just can’t win. If you’re selling property, you’re likely getting a great profit. However, you’re also setting yourself up for a huge tax. Luckily, there are tax planning strategies you can use to protect your real estate capital.

1031 Exchange

If the asset you’re selling falls under the real estate category, a 1031 exchange can help you reduce, and potentially even eliminate, the capital gains tax. However, you must follow specific rules to take advantage of this tax code.

  • First, the property you’re selling can only be an investment or business property. You cannot perform a 1031 exchange on a primary residence or vacation home.
  • To qualify for 100% tax deferment, the market value of the property you’re purchasing must be of equal or greater value than the property you’re selling.
  • The property you’re selling and the property you’re buying must be of “like-kind”. As defined by the IRS, a like-kind property must be “of the same nature or character, even if they differ in grade or quality”. This doesn’t mean you have to exchange an apartment building for an apartment building, but rather an investment property for an investment property.
  • Both the property being sold and the property being bought must be purchased by the same party.
  • From the day you sell the property, you have 45 days to choose 3 potential replacement properties.
  • You must complete the exchange within 180 days of selling the property.

There are more rules to 1031 exchanges than we can list here. Be sure to speak with a trusted financial advisor before attempting to make a 1031 exchange.

As a real estate owner, you can continue to defer tax as long as you keep doing 1031 exchanges. For example, you can sell a condo and purchase a duplex, then sell that and purchase an apartment building, then sell that and purchase a commercial building, etc. As long as you follow the above rules.

If you pass away, your beneficiaries get a step up in cost basis. This essentially permanently eliminates the tax.

Delaware Statutory Trust (DST)

A Delaware Statutory Trust can be a great solution for real estate owners that no longer want to manage their properties. A DST is a type of business trust where the trustee is a professional management company. The trust holds a piece of property and allows investors to pull their capital so they can acquire properties they otherwise couldn’t afford. Because DSTs are professionally managed, it effectively makes them a passive income tool.

Another benefit of a Delaware Statutory Trust is the ability to diversify. With a DST, you can own a small piece of many different properties. This limits your risk because if one property tanks, the others may not be impacted.

Investing in a DST can help you avoid capital gains tax.

Installment Sale Method

If you’re selling real estate property in 2022, you’re likely selling for a large profit. However, you’re also setting yourself up for a huge capital gains tax. An installment sale can help lessen the tax burden while the real estate market cools off.

The installment sale method utilizes a third party, called a qualified intermediary, to whom you sell your assets. Then, they pay you installments over a certain period. Because the large profit never directly hits your bank account, you won’t have as big of a tax burden.

How to Defer Capital Gains Tax on Businesses and Other Assets

Many investors who have held stocks or business interests for a long period are sitting on a tax time bomb. There are several strategies you can use to defer, discount, and avoid capital gains tax on these assets.

Qualified Opportunity Zone Fund

Qualified opportunity zones were created in 2017 under the Tax Cuts and Jobs Act. They are meant to encourage investment in areas that the state has targeted for economic redevelopment.

Qualified opportunity zones provide(d) three major tax benefits:

  • Deferral of capital gains tax: You can defer paying capital gains tax on the sale of an asset if you reinvest the proceeds into a qualified opportunity zone fund within 180 days. Under current law, tax is deferred until 2026. However, there is current legislation being pushed through Congress to extend this deferral to 2028.
  • Step up in cost basis: Unfortunately, this benefit was sunsetted at the end of 2021. However, there is current legislation being pushed through Congress to reinstate this benefit. Under the step up in cost basis, if you were in an opportunity zone fund for five years you got a 10% step up. If you were in it for seven years, you received a 15% step up.
  • Flexibility: The actual investments made within these opportunity zones are typically real estate developments, but they can also be new companies.

If you feel like you’re stuck in a capital gains problem, all hope is not lost! You can greatly reduce your tax burden by working with a qualified financial advisor. The professionals at DuPont Wealth Solutions are ready to discuss your goals and help transform your financial future. Call 614-408-0004 today to schedule a free assessment.

Interested in learning more about how to preserve capital? Listen to Episode 35 of our podcast, Your Financial Advocate.

What Are My Long-Term Care Options? 

What Are My Long-Term Care Options?

Many people equate the term ‘long-term care’ with being in a nursing home. However, there are many different forms of long-term care including assisted living, at-home care, and care in the community such as an adult day care center. It’s not unlikely that you will need long-term care at some point during your life. About 52% of people over 65 will require long-term care services.

Long-term care refers to a variety of services that help meet both the medical and non-medical needs of people who cannot care for themselves for long periods. There are several different types of long-term care options available, each of which is best suited for different individuals.

Here are just a few of your options:

Home Health Aides (national median cost – $5,148/per month)

Home health aides are health care professionals. The responsibilities of a health aide include assisting with daily living activities such as cleaning and cooking, monitoring a client’s physical and mental condition, and handling health emergencies.

The biggest benefit of a home health aide is they work in the client’s home. Hiring a home health aide can be a great choice for those who wish to stay in their own home and do not want to be moved elsewhere.

Adult Daycare (national median cost – $1,690/per month)

Adult daycares serve as a place to for older people to spend the day and receive care if needed. They differ from traditional senior community centers. Community centers typically offer social and entertainment services while an adult daycare can offer medical services along with social and entertainment services.

Adult daycares are great options for elders who are feeling lonely. They will have a chance to socialize with their peers and alleviate any isolation and loneliness. An adult daycare will also give the family caretaker a break during the day. Alleviating tension and stress for all parties.

Assisted Living Facilities (national median cost – $4,500/per month)

Assisted living combines the comforts of a residence with personalized assistance. These types of residences provide seniors help with activities of daily living such as bathing, dressing, and eating. Most assisted living facilities will also include social activities and laundry and cleaning services.

Assisted living is a good solution for elders who want to maintain their independence but need some help with daily activities.

Nursing Homes (national median cost – $9,034/per month)

A nursing home is a facility that provides around-the-clock care for those who are unable to care for themselves. Along with supportive medical services, nursing homes also provide social and recreational activities.

Nursing homes are typically the most expensive long-term care option but they also offer the highest level of care. Nursing homes are best suited for those who need constant medical attention and cannot be cared for at home.

Many seniors who need long-term care services may struggle to keep up with their finances. There are many bill paying services available for them. Pairing these services with a Financial Power of Attorney document can help ensure that bills are paid accurately and on time.

Deciding what type of care is right for you or your loved one can be tricky. Making sure you have the money to fund these services is even trickier. The key to being able to provide for yourself during retirement is by planning ahead. Meet with a financial advisor to discuss how you can plan for your future and the possibility of long-term care. They can help you maximize funds and alleviate the stress of saving for the unknown.

For more information on long-term care options and their financial impact listen to episode 34 of our podcast Your Financial Advocate.

 

5 Questions to Ask Your Financial Advisor Before a Recession

5 Questions to Ask Your Financial Advisor Before a Recession

While the U.S. is not currently in a recession, it is a very likely future. This is rightfully making many families feel nervous. The U.S. has not faced a serious recession since 2008. During that time, many people lost their jobs and homes.  

Working with a trusted financial advisor is one of the best ways to get through a recession unharmed. They should be able to guide you through this tough time with minimal losses. In order for them to do so, you both need to know what your expectations and goals are. Here are 5 important questions to ask your financial advisor that will help spark conversation. 

What is the strategy? 

First and foremost, what is the plan? This is not the time for making risky moves. Work with your financial advisor to figure out what to do with your money and why. Your advisor should also be looking for opportunities. With every problem, there is still opportunity. For example, one of the problems right now is the federal government raising interest rates. The opportunity is you can move money into a high yield savings account and take advantage of the high interest rates. 

Ask you financial advisor about what opportunities are out there and incorporate them into your plan. 

What does the future look like? 

No one has a crystal ball that can predict the future, including financial advisors. But, they should be able to tell you what could happen. Ask your advisor to model out for you what will happen to your assets in a bear market, in a bull market, in times of volatility, etc. Many advisors will show you what’s called a ‘Monte Carlo’ analysis. Essentially, it is a probability graph with outlying possibilities on the side and more likely possibilities in the middle. 

Don’t settle for this. What concrete tools does your advisor have to handle a recession? You deserve an easy-to-understand explanation. 

What changes should I make to my portfolio? 

Your portfolio should be a dynamic and changing thing. It should not be stagnant. As the market changes, so should your portfolio. During a recession, it may be time to scale back on some of your more risky stocks and look into getting more bonds or cash equivalents. 

Specifically, ask your advisor if you should increase any liquid savings in case of a job layoff or business downturn. You can also ask for a timetable on when your investment portfolio should recover. 

How does your firm manage a bear market? 

A bear market refers to a 20% or more drop in the stock market. In other words, a flat or low-growth economy. This can be a scary time for many investors. Many people will lose money during this time and it can be difficult to recover. Your financial advisor should have a strategy for how to manage your portfolio during a bear market. They should also be transparent with you about what they are doing and how they are doing it.  

Does this change my retirement or income plan? 

For many, the reason for having a financial advisor is to have a successful retirement.  This is a valid goal and one that you should continue to pursue even during a recession. An advisor might examine whether clients are on track to retire and what delaying retirement by six months to a year would do to boost savings. An advisor can evaluate a variety of options, including pushing back retirement, taking up part-time work, or considering other possibilities for extra income. 

You may need to make some changes to your retirement plan but they should not be drastic. If they are, this is a red flag. A good advisor will help you stay the course and weather the storm. 

Asking your financial advisor these five questions before or during a recession will help you get a better understanding of their strategy and how they plan to help you through this tough time. It is important to be an active participant in your financial future and to make sure you are comfortable with the decisions being made. 

For more information on how to weather a recession and how to best utilize your advisor during this time listen to Episode 33 of our podcast Your Financial Advocate

3 Things Pre-Retirees Must Know About Cryptocurrency Investments

3 Things Pre-Retirees Must Know About Cryptocurrency Investments

A good retirement investment portfolio should have diversity in asset classes in order to mitigate risk. One way many pre-retirees are diversifying their assets is by investing in cryptocurrencies. This year it was recorded that 31% of near retirees (between ages 55 and 64) were invested in crypto. If you’re considering investing in crypto to diversify your retirement portfolio, here are some things you should know. 
 

Are cryptocurrencies a profitable investment?

Cryptocurrencies are highly volatile. Harvard University senior fellow Timothy Massad explains how compared to other asset classes, they are also not regulated by any federal authorities which is why there are unique risks attached to crypto. He noted that “investor protection is much, much weaker on these big exchanges than it is in our securities markets or our futures market.” This makes cryptocurrency a high-risk investment, especially for retirees who could lose a lot and not have the time to regain their lost assets. If investing in cryptocurrency is only a small part of your retirement portfolio and you have a long-term plan then the risk does decrease. Investing in crypto can be profitable, but retirees carry the added risk of a shorter reaction and recovery time. 
 

How are cryptocurrencies taxed? 

As the IRS classifies cryptocurrencies as property, transactions are taxable by law. These transactions involve any event where you make gains through selling, trading, or disposing of any cryptocurrencies. This is why buying crypto on its own is a taxable purchase. And if, for instance, you buy crypto at $2,000 and sell it later on for $3,000, then you’ll need to pay taxes on the profit of $1,000. 
 
Because cryptocurrencies are taxed differently from other asset classes those who invest in them need to be very careful. Maryville University states that crypto taxes are never fixed, so retirees must make the effort to keep clear records so the taxes they paid are never questioned if audited. If you’re not confident with documenting your own record, get a professional accountant to bookkeep. Remember: failure to pay proper taxes could result in hefty penalties. 
 

Which retirement accounts allow crypto investments?

Depending on the type of retirement account that you hold, you might not be able to include cryptocurrencies in your retirement investment portfolios. Many 401(k) accounts, which are opened through your employer, often work with pre-selected funds and might not consider cryptocurrencies as an asset you can invest in. You may be able to work around this, though, if you own a self-directed 401(k) account. The good news is that NPR reports that some 401(k) brokerages like Fidelity, however, have begun to welcome Bitcoin as an investment option. 
 
If you have individual retirement accounts (IRAs), which you open, fund, and manage on your own, then it’s best to consult an advisor before making crypto investments. Most IRAs are managed by banks or broker-dealers, but self-directed IRAs allow you to control what’s in your account — including crypto if it’s allowed by the brokerage. Moreover, self-directed IRAs can help defer or eliminate capital gains taxes for regular crypto investments. 
 
 
Cryptocurrencies can be a strong investment to include in your portfolio. They can also be risky, so a good rule of thumb should be that you only invest what you can afford to lose. With how volatile the crypto market it, it’s quite possible you could lose up to 50% of what you invest.  As long as you equip yourself with the necessary knowledge and practice care, then cryptocurrencies could be a great asset to explore. 

Article written by Remy Judson 
Exclusively for DuPont Wealth Solutions 

5 Real Estate Niches You Need to Know About

5 Real Estate Niches You Need to Know About

When you think of real estate your first thought is probably a family home. The truth is there is so much more to the real estate world. Investing in real estate is a common way to increase your income. You can be as involved or uninvolved as you want depending on the properties you invest in. There are many different real estate niches that you can explore. Finding the one that is right for you is the key to a successful investment!

Here are 5 real estate niches you should know about.

Apartment Real Estate

Often people will invest in a property with the intent to rent it out. There are many benefits to investing in this type of real estate. One of the biggest advantages is the tax benefits apartments and rentals provide. You may be able to depreciate the value of your property for tax purposes and significantly reduce the amount of taxes you pay each year. Another big advantage is that you have the potential to make a consistently large profit from rent. Rent prices have gone up drastically in recent years due to the scarcity of apartments available coupled with an increased demand. Many people also use leverage to recoup equity from the properties without selling.

Vacation Rentals

Vacation rentals such as Airbnb’s and VRBO’s have been popping up everywhere recently. This type of investment can be even more profitable than a residential rental. Vacation rentals are usually charged on a nightly basis rather than the typical monthly rent. Not to mention, you have the potential to make even more money during peak season. Vacation rentals can also be less work for you. Most vacation rental websites do all the bookings and payments for you. You are only reasonable for the upkeep of your property. If you hire a cleaning company to do this that is even less work for you! Some people even develop strategies based upon renting properties and then making them available for VRBO and Airbnb rental.

Assisted Living Facilities

Assisted living facilities are designed for people with disabilities or the elderly who need help with daily activities. These properties can provide great income while also giving back to the community. Much like a vacation rental, you can own the property and have staff run the actual facility for you. You don’t have to invest a lot of money in a large-scale facility either. You could turn a house into a residential assisted living building. This can be a passive investment if you choose it to be. Another great thing about assisted living facilities is that the demand for them will only continue to grow as our population ages.

Commercial Real Estate

Commercial real estate refers to buildings or land intended to generate a profit, either from capital gain or rental income. One of the biggest advantages of investing in commercial real estate is the tenants will likely be more responsible than the average residential resident. Retail tenants know they have public eyes on their property, so they are more inclined to better maintain the property. With commercial properties, you can also create a triple-net lease. A triple net lease is an agreement between the tenant and landlord in which the tenant agrees to pay all property-related expenses on top of the rent. These expenses include things like insurance, taxes, and common area maintenance fees. This leaves you with very little management as the tenants are responsible for the upkeep of the property.

Equestrian Facilities

Equestrian facilities are a unique type of real estate that can be quite profitable. These properties are perfect for horse lovers who want to make money from their passion. One of the best things about equestrian facilities is that you can charge for boarding, riding lessons, and even competitions. If you have the land and the love for horses, then this could be a great opportunity!

Real estate investments can be incredibly profitable. It is important to do your research and talk to a trusted financial advisor to figure out which type of investment is right for you. For more information on unique real estate niches (specifically assisted living facilities, Airbnb’s, and equestrian facilities) listen to Episode 32 of our podcast Your Financial Advocate. This episode features special guest Richard Davis who is an experienced realtor and provides plenty of insight to listeners.

How to Best Utilize Human Capital Based on your Generation

How to Best Utilize Human Capital Based on your Generation

It’s no secret that the economy is heading towards a recession. And, it’s likely that things will only get worse before they get better. That is why it’s important to start thinking about ways to prepare. One of the best ways to do this is by investing in your own human capital. Human capital is the value of a worker’s skills, knowledge, and experience. It’s what makes you valuable to employers and helps you earn a higher salary. 

From time to time, companies are forced to make cuts. The one thing they can’t cut is the need for skilled workers. This is where human capital comes into play. If you have the skills and experience that employers need, you’re more likely to keep your job, and even negotiate a higher salary. 

If your current occupation is just not cutting it, leveraging your human capital to find a new job can result in a higher-paying and more fulfilling career.  

Human Capital Matters Now More than Ever 

You’re probably wondering why we are going into so much detail about human capital when there are plenty of other forms of economic capital to leverage. The truth is: the economy is showing signs of going downhill, probably into another recession. Inflation has become very apparent and interest rates are rapidly rising. 

The traditional routes people used to aid themselves during a recession are just not cutting it anymore. Bonds will not give back the way they once did, real estate is subject to high-interest rates, and investments are tied to inflation and not as reliable.  

Cash has proven to be the most stable and profitable way to withstand a possible recession. The best way to get cash is by utilizing your human capital within the workforce. 

 

How You Can Utilize Human Capital 

Everyone is at a different spot in their career, meaning everyone is at a different point in their retirement plan. A possible recession and a longer lifespan (due to medical advancements) can have an impact on your retirement plan. 

Retirees 

For years the norm was to retire comfortably around 65 with ample savings. However, this is no longer the norm and for many is not as achievable. Medical advancements have extended the average life expectancy. This means the typical 15 year retirement may now extend to 30 plus years. The normal retirement savings amount will no longer be enough. 

To prepare for this you could stay in the workforce longer in your current field. If you have been in this field for a while you have most likely accumulated a comfortable salary. Try to leverage your human capital for an even higher salary or transfer to a field that is more enjoyable to you.  

Gen X and Younger 

For those who are farther from retirement, your workplace may be hit hard by a recession and as a result, need to make cuts or layoffs. You can use your human capital to navigate new or current careers. 

Much like retirees, you have the ability to negotiate a higher salary with your employer. Use your human capital to show how valuable your skills are to the workforce. Currently, many companies are experiencing a labor shortage You can use this to your advantage and find a new, more fulfilling career. Those with the proper skill set can pick and choose the job they want. 

This will not only give you more cash to handle a possible recession but will also better prepare you for a longer retirement. 


Human capital is an important factor in both economic growth and recession. During the good times, human capital can help drive the economy forward by providing skilled labor and innovation. During the bad times, human capital can be a useful tool to help withstand the unstable economy. 

The financial advocates at DuPont Wealth Solutions can help you navigate through the ever-changing economy. Give us a call at 614-408-0004 to schedule a free assessment. 

And to hear more about what human capital is and how you can best utilize it, listen to Episode 30 of our podcast, Your Financial Advocate.  

A Warning from the 1970s

A Warning from the 1970s

The United States has had 35 recessions since we first started collecting economic data in 1854, and it looks like we’re heading into another one soon. 

According to the National Bureau of Economic Research’s Business Cycle Dating Committee, a recession can be defined as a significant decline in economic activity that is spread across the economy and lasts more than a few months. The Great Depression of the 1930s is regularly taught in schools and most people are aware of the Great Recession that occurred in 2008. However, unless they lived through it, not many people know much about the Great Inflation of the 1970s. 

How it Happened 

The 1970s were a period of high inflation, high unemployment, and high-interest rates that is thought to be as equally transformative as the 1930s or 2008. The impact of these three factors together was called stagflation – a time marked by low growth and high inflation. The road to stagflation began with the passage of the Employment Act of 1946. The act declared that the federal government had a responsibility to promote maximum economic growth through high employment, production, and purchasing power. It was meant to facilitate greater coordination between economic policies. In 1946, and the decade following, the U.S. was enjoying the post-war economy and trying desperately to avoid the unprecedented unemployment rates of the 1930s. As a result, the US economy adopted a Keynesian economic policy. The focus of this policy centered around managing aggregate spending through fiscal and monetary policies. It was seen as a quick way to change the economy and saw government intervention as necessary.  

The combination of Keynesian economics and the Employment Act of 1946 presented an exploitable relationship between unemployment rates and inflation. Policymakers believed lower unemployment rates could be manipulated by higher rates of inflation. This relationship became known as the Phillips Curve and would become very damaging to the United States’ economic well-being. 

How it Impacted Americans 

In reality, policymakers were not able to control the Phillips Curve. People and businesses anticipated rising inflation. As a result, both inflation and unemployment became incredibly high. By 1974 stagflation had officially begun with inflation over 12 percent and the unemployment rate above 7 percent. 

Americans lost an immense amount of purchasing power during this time. Many families faced economic instability and there was an ever-looming threat of losing savings. It became very difficult to plan ahead for long-term purchases or even week-to-week purchases. During this time, inflation diminished the average standard of living that many families were accustomed to. 

How the Great Inflation Ended 

By the late 1970s fighting inflation was absolutely necessary. The ability to fight it would come with a change in leadership. In 1979, Paul Volcker became chairman of the Federal Reserve Board. Volcker was determined to end inflation.  

It was not an easy fight, to say the least. The introduction of the Monetary Control Act (1980) allowed for more restrictive management of the federal reserve and the introduction of credit controls. Following the act, interest rates rose, causing a brief recession in 1981. The 1981 recession was just as difficult as the 1970s economy but proved to be what needed to happen in order to end the Great Inflation. 

Why Does This Matter? 

You’re probably wondering why we are bringing up the 1970s economy in 2022. It’s because many economists see the United States possibly going down a very similar path that could result in another recession. 

Our current economic situation is not an exact copy and paste of the 1970s. Unlike the 1970s, current unemployment rates are at their lowest point in decades. However, we are beginning to see inflation rates rise to a point that could impact the average standard of living. The origins of the situation are much different than the 1970s. The economy of the 1970s can largely be accredited to poor choices made by policymakers. However, today’s economy has been largely impacted by the COVID-19 pandemic and the Russian-Ukrainian conflict. Both of these have wreaked havoc on the supply chain and caused inflation to spike. 

The good news is the world is learning from the 1970s and governments are attempting to fight a recession ahead of time. Economists do not think the impending recession is imminent. (Although consumers should still expect rising costs.) Many are giving the economy 12-18 months before there are any major consequences. This means there is over a year to prepare and some countries have already begun preparations. Across the globe, central banks appear to be altering interest rates in an effort to combat inflation. The US central bank recently announced its highest increase in rates since the early 2000s. Governments appear to be committed to fighting this recession before it can even begin. 

What Can I Do? 

Now, this does not mean we are completely out of the woods. A recession is still a very real possibility within the next few years. While the government has its own way of preparing, there are a variety of ways you can prepare and protect yourself from a recession. 

Have an Emergency Fund 

Having an emergency fund is good practice for any household. The best way to store your fund is in a high-interest savings account that is FDIC insured. This gives you easy access to your funds when you need it. 

An emergency fund allows you to be dependent on yourself and your own funds rather than borrowing from creditors. 

Live Within you Means 

This is one of the best ways to prepare for a recession. Making a point to live within your means during times of economic stability means you are less likely to go into debt when the economy becomes unstable. You’ll be able to more easily adjust your budget and resist taking out loans or depending on a credit card. 

Keep a High Credit Score 

Speaking of credit cards, it is vital to maintain a high credit score. During a recession, credit availability tends to decrease. Those with excellent credit scores are then the ones being approved for new loans or credit cards. 

The easiest ways to increase your credit score are paying bills on time, keeping old cards open, and maintaining a low debt-to-income ratio. 

Hire a Pro 

A financial advisor can help you make the most of the good times while preparing for the bad times. The experienced financial advocates at DuPont Wealth Solutions can help prepare you for any economic future. Call us at 614-408-0004.  

To learn more about what you can expect in our future economy listen to Episode 29 of our podcast, Your Financial Advocate.