One Day You May Be Offered Ownership in a Medical Practice. Here are the Financial Questions You Need to Answer

By Michael Torney, CFP, J.D., LL.M.

Medical doctors working in a private practice may one day get the opportunity to become an owner of the business. When this offer is made, a physician needs answers to several questions, ranging from how the business is run, the cost to become a partner and how much more money they will earn.

To answer these questions, we recommend meeting with an attorney who specializes in healthcare mergers and acquisitions, and who has a high degree of experience and expertise. They can provide advice on the standard parts of the buy-in process, as well as what items can be negotiated. And, once several pieces of important information are collected, they can work with a financial planner to help guide you through the decision-making process.

You will want to gather information and understand the following:

• How the medical practice makes decisions on topics such as practice management, billing, hiring, finances and more.
• At least the most recent three years of financial statements and its cash flow. Ask the attorneys to review and provide you with a summary of their findings.
• If the practice owns any real estate. If so, will you also be an owner and in what proportion?  What is left on the mortgage and how are the payments made?
• If you will be responsible for your patients’ accounts receivable? If the practice doesn’t collect these payments, what does it mean?
• What does the cash flow of the practice look like each year?
• Whether there is any goodwill related to the practice that makes it more or less desirable?
• Finally, how much will you earn once you are a partner? Medical practices have different payment models. For example, some pay partners in equal shares and others pay partners on production (RVUs).  Some have a hybrid model.

Determining the Value of the Medical Practice

After receiving answers to these questions, the attorney can help you understand the value of the business.

There are three primary ways to value a medical practice. There is the price/earnings ratio; the discounted cash flow method, and the comparable sales model. There are other methods that the attorney can explain, but here is a short description of these three methods:

• The price earnings ratio, referred to as the P/E ratio, attempts to find a reasonable price to pay for earnings of the practice. This ratio shows the value of the practice based on its past or future earnings.
• The discounted cash flow model attempts to take current and expected earnings on the business and come up with a present value of future cash flows. However, the present value is the price you should be willing to pay.
• The comparable sales model reviews the sale prices for similar medical practices in recent years to establish a base price for your practice. We advise using more than one model to see if the price is similar under different valuation methods.

How to Finance Your Part of the Ownership

Once a sales price for your piece of the business is established, you may not have enough money to make a cash purchase. If that’s the case, you’ll need to finance the purchase over time. There are a few different ways to accomplish this goal:

• A bank loan in exchange for collateral.
• An internal agreement with the partners.
• Use equity payments you would otherwise be entitled to until your purchase price is paid.

Let’s use the equity payments as an example.  Assume you earn $300,000 now, but are projected to earn $450,000 as a partner with $150,000 profit distributions. If the purchase price to become a partner is $450,000, you would give up three years of the extra $150,000 of profit sharing distributions to finance the purchase. In year four, you would earn the full $450,000. This method also allows you to pay before your money is taxed, making it even more advantageous.

Becoming the owner of a medical practice is an exciting day for any medical doctor. By doing your research and employing professionals, this decision can propel your medical career to a new level and help you achieve financial security.

If you have questions about buying into a medical practice and want to discuss a strategy, our team can be reached at duffteam@monetagroup.com. We offer a free consultation to help discuss how we may be able to help accomplish a smooth purchase that is incorporated into your overall financial plan.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post One Day You May Be Offered Ownership in a Medical Practice. Here are the Financial Questions You Need to Answer appeared first on Moneta Group.

source https://monetagroup.com/blog/one-day-you-may-be-offered-ownership-in-a-medical-practice-here-are-the-financial-questions-you-need-to-answer/

Ask the CFP: What is a Stock Split and Why Do Companies Do Them?

 

Hello everyone and welcome to this month’s Ask the CFP segment. This month’s question is, “what is a stock split and why do companies do them?” Stock splits are a common strategy used by publicly traded companies. Some have made headlines, such as Alphabet, which is the parent company of Google, when they announced a 20-for-1 stock split. This means an investor with 1 share of Alphabet has 20 shares after the split. This may seem like a drastic change for shareholders, so why do companies initiate stock splits?

Stock splits often create more liquidity for shareholders. Imagine if a stock rose to $50,000 per share. You would need $50,000 just to buy one full share of that company. Because of the high limit to buy a single share, fewer people are likely to bid on the stock. Fewer bidders limits transactions for sellers, thus limiting liquidity. In the example of Alphabet, their share price was approaching $3,000 per share before the split. When most companies conduct stock splits, they use 2-for-1 or 3-for-1 splits. For Alphabet, they felt the price needed to be lower and in closer reach of smaller investors. Keep in mind, trading of shares often occurs in lots of 100. Smaller lots can be traded, but using round lots of 100 offers a greater likelihood of realizing the same share price for a market order. A “small investor” might be one that buys 100 or 200 shares vs. a single share.

When companies split their stock, the value of the stock doesn’t change. It’s like asking someone to split a $20 dollar bill for two $10 dollar bills. You have the same amount of money, but two bills. That’s a perfect example of a 2-for-1 split. The value stays the same even though the number of bills or shares increased. Also, stock splits generally don’t trigger taxation since shares aren’t being sold or converted. They’re simply being split into smaller pieces.

Sometimes stock splits can also work in reverse. A reverse stock split is just the opposite, where someone may start with 200 shares and end up with 100 shares after a 2-for-1 reverse split. This usually happens when a company’s share price has declined. Some stock exchanges will remove a stock once the price per share is less than one dollar. Right or wrong, stocks with low share prices are often seen as riskier. Companies that wish to avoid the stigma associated with a low share price may elect for a reverse stock split.

Overall, stock splits are fairly common, having occurred with companies such as Amazon, Microsoft, Apple, Disney, Caterpillar and Mastercard. They’re often seen as good news by investors but remember the $20 dollar bill example. The bills still add up to $20 dollars. If you have a question about this topic or have a question for next month’s video, please send it to dtroyer@monetagroup.com  Thanks for watching and we’ll see you next month.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Please speak with a qualified tax or legal professional before making any changes to your personal situation.

©2022, Moneta Group Investment Advisors, LLC. Trademarks and copyrights of materials referenced herein are the property of their respective owners. These materials have been prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Past performance is not indicative of future returns. You cannot invest directly in an index. These materials do not constitute an offer or recommendation to buy or sell securities, and do not take into consideration your circumstances, financial or otherwise. You should consult with an appropriately credentialed investment professional before making any investment decision.

The post Ask the CFP: What is a Stock Split and Why Do Companies Do Them? appeared first on Moneta Group.

source https://monetagroup.com/blog/ask-the-cfp-what-is-a-stock-split-and-why-do-companies-do-them/

Update article for new post

By Ryan Martin & Lauren Hunt, Senior Advisors

What is the right percentage of stocks, bonds and other investments I should have in my investment portfolio?

This is one of the most important questions each investor has – one we often hear, especially from people worried about any short-term drop in their portfolio’s value during periods of market volatility. Each person has different needs and objectives, so our answers will vary.  Yet the fundamental goal is generally the same — to build a diversified portfolio that can grow steadily with a reasonable amount of risk to generate and sustain wealth to meet your financial objectives.

To accomplish that goal, many people choose an investment portfolio consisting of some percentage of growth-oriented holdings (stocks and alternative investments) and some percentage of holdings meant to preserve capital (cash and bonds). The stocks will often include large-, mid- and small-cap US companies, as well as international companies, while the bonds may consist of short- to intermediate-term corporate, municipal and government bonds.

Each person’s allocation decision should be based on their individual circumstances, but there are a few basic principles that anyone can apply. Here they are:

Choose an Allocation for Good and Bad Times

Deciding on the right allocation of stocks, bonds and other investments — and staying with this mix through thick and thin — means you are less likely to make decisions based on emotions when things go wrong. While a fairly evenly weighted portfolio (½ stocks and ½ bonds) will often provide for meaningful growth over a long period, there will probably be difficult years where your investments lose money. You may begin to question your mix of stocks and bonds during the tough times, but it’s critically important to stay the course in response to a short-term drop in your portfolio’s value.

The Standard & Poor’s 500 Index dropped 20.6 percent in the first six months of 2022. But the index also rose by a stunning 18.5 percent average annual rate of return during the previous five years, providing people with a significant increase in their wealth. Understand that the market is always moving; even if it’s in the wrong direction now, keep your long-term objectives as the goal.

Determine How Much Growth is Needed to Retire Comfortably

Whether it’s a comfortable retirement income, a vacation home, or an annual European vacation, a financial plan is needed to meet these objectives. That’s where an individual strategy comes into play.

A person who started investing later in life may need to take on more risk to achieve their goals. For example, if they would like to retire with $5 million at age 65, and have only $2 million at age 50, they may need to allocate a higher percentage of money into stocks unless they are able to save substantially more money.

On the other hand, someone with more than enough wealth to meet their objectives may not need such risk and doesn’t want to see their portfolio vacillate up and down.  While they may accept a lower rate of return as a tradeoff for less risk, they can do so based on their resources.  Going one step further, retirees with no concern about outliving their wealth may want to revise the allocation in their portfolio to leave more money for their heirs. For example, at age 80, if their portfolio is 60 percent stocks and 40 percent bonds, they may actually want to change their investment mix to generate higher returns. While this usually means taking on more risk, there may be little downside, as they may be able to live comfortably despite the outcomes. The objective is to generate more growth that can be passed on to their adult children and grandchildren.

Choose The Right Amount of Risk to Maximize Your Returns

In theory, you should be compensated for taking more risk with higher potential returns.  But how much risk are you willing to endure?  Because stocks often provide the highest returns over a long period, a person in their 30s or 40s will likely have more of their investments in stocks than the typical portfolio and they can accept a riskier mix of assets.

While some young investors have recently watched their investments drop in value, they shouldn’t be too concerned; they will have two or three decades to recover. They’ve also been presented with an unusual opportunity: buying many stocks at a discount to their value, enabling them to reap the rewards from any new investment in the years to come.

No matter what your age, it’s important to feel at ease with a certain level of volatility. One simple scenario to consider during the decision-making process is how did you react during the last downturn in the market?  Did this cause unrest, or did you pay little attention to the fluctuations and headlines?

Occasionally Change Your Allocation – But Not Often

People approaching retirement who are on track to meet their retirement goals will likely want to make some changes within their portfolio to take on less risk. After building wealth for decades, now is the time to protect assets.

At the same time, however, pre- and early retirees should maintain a portfolio that isn’t too conservative. Their investments should continue to outpace inflation – realizing that the current inflation rate is unusually high.

No matter your situation, plan to have enough money to last a lifetime. Even if you retire at age 65, understand that your money will possibly need to last for the next 25-35 years, depending on your circumstances.

We generally caution making allocation changes at presumably inopportune times – avoid getting more conservative after markets have dropped (selling stocks after a pullback) and getting more aggressive after a bull market run (getting greedy and buying more stocks after a period of good performance).

If you have questions or need to discuss your investment strategy, feel free to contact us at rmartin@monetagroup.com or lhunt@monetagroup.com. We offer a free consultation to discuss how a comprehensive financial plan can enable your business and personal wealth to grow.

© 2022 Moneta Group Investment Advisors, LLC is an SEC registered investment advisor and wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Index and/or Style returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. You cannot invest directly in an index. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Update article for new post appeared first on Moneta Group.

source https://monetagroup.com/blog/update-article-for-new-post/

new article for test

By Ryan Martin & Lauren Hunt, Senior Advisors

What is the right percentage of stocks, bonds and other investments I should have in my investment portfolio?

This is one of the most important questions each investor has – one we often hear, especially from people worried about any short-term drop in their portfolio’s value during periods of market volatility. Each person has different needs and objectives, so our answers will vary.  Yet the fundamental goal is generally the same — to build a diversified portfolio that can grow steadily with a reasonable amount of risk to generate and sustain wealth to meet your financial objectives.

To accomplish that goal, many people choose an investment portfolio consisting of some percentage of growth-oriented holdings (stocks and alternative investments) and some percentage of holdings meant to preserve capital (cash and bonds). The stocks will often include large-, mid- and small-cap US companies, as well as international companies, while the bonds may consist of short- to intermediate-term corporate, municipal and government bonds.

Each person’s allocation decision should be based on their individual circumstances, but there are a few basic principles that anyone can apply. Here they are:

Choose an Allocation for Good and Bad Times

Deciding on the right allocation of stocks, bonds and other investments — and staying with this mix through thick and thin — means you are less likely to make decisions based on emotions when things go wrong. While a fairly evenly weighted portfolio (½ stocks and ½ bonds) will often provide for meaningful growth over a long period, there will probably be difficult years where your investments lose money. You may begin to question your mix of stocks and bonds during the tough times, but it’s critically important to stay the course in response to a short-term drop in your portfolio’s value.

The Standard & Poor’s 500 Index dropped 20.6 percent in the first six months of 2022. But the index also rose by a stunning 18.5 percent average annual rate of return during the previous five years, providing people with a significant increase in their wealth. Understand that the market is always moving; even if it’s in the wrong direction now, keep your long-term objectives as the goal.

Determine How Much Growth is Needed to Retire Comfortably

Whether it’s a comfortable retirement income, a vacation home, or an annual European vacation, a financial plan is needed to meet these objectives. That’s where an individual strategy comes into play.

A person who started investing later in life may need to take on more risk to achieve their goals. For example, if they would like to retire with $5 million at age 65, and have only $2 million at age 50, they may need to allocate a higher percentage of money into stocks unless they are able to save substantially more money.

On the other hand, someone with more than enough wealth to meet their objectives may not need such risk and doesn’t want to see their portfolio vacillate up and down.  While they may accept a lower rate of return as a tradeoff for less risk, they can do so based on their resources.  Going one step further, retirees with no concern about outliving their wealth may want to revise the allocation in their portfolio to leave more money for their heirs. For example, at age 80, if their portfolio is 60 percent stocks and 40 percent bonds, they may actually want to change their investment mix to generate higher returns. While this usually means taking on more risk, there may be little downside, as they may be able to live comfortably despite the outcomes. The objective is to generate more growth that can be passed on to their adult children and grandchildren.

Choose The Right Amount of Risk to Maximize Your Returns

In theory, you should be compensated for taking more risk with higher potential returns.  But how much risk are you willing to endure?  Because stocks often provide the highest returns over a long period, a person in their 30s or 40s will likely have more of their investments in stocks than the typical portfolio and they can accept a riskier mix of assets.

While some young investors have recently watched their investments drop in value, they shouldn’t be too concerned; they will have two or three decades to recover. They’ve also been presented with an unusual opportunity: buying many stocks at a discount to their value, enabling them to reap the rewards from any new investment in the years to come.

No matter what your age, it’s important to feel at ease with a certain level of volatility. One simple scenario to consider during the decision-making process is how did you react during the last downturn in the market?  Did this cause unrest, or did you pay little attention to the fluctuations and headlines?

Occasionally Change Your Allocation – But Not Often

People approaching retirement who are on track to meet their retirement goals will likely want to make some changes within their portfolio to take on less risk. After building wealth for decades, now is the time to protect assets.

At the same time, however, pre- and early retirees should maintain a portfolio that isn’t too conservative. Their investments should continue to outpace inflation – realizing that the current inflation rate is unusually high.

No matter your situation, plan to have enough money to last a lifetime. Even if you retire at age 65, understand that your money will possibly need to last for the next 25-35 years, depending on your circumstances.

We generally caution making allocation changes at presumably inopportune times – avoid getting more conservative after markets have dropped (selling stocks after a pullback) and getting more aggressive after a bull market run (getting greedy and buying more stocks after a period of good performance).

If you have questions or need to discuss your investment strategy, feel free to contact us at rmartin@monetagroup.com or lhunt@monetagroup.com. We offer a free consultation to discuss how a comprehensive financial plan can enable your business and personal wealth to grow.

© 2022 Moneta Group Investment Advisors, LLC is an SEC registered investment advisor and wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Index and/or Style returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. You cannot invest directly in an index. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post new article for test appeared first on Moneta Group.

source https://monetagroup.com/blog/new-article-for-test/

What is the Right Asset Allocation for You? Consider These 4 Guidelines

By Ryan Martin & Lauren Hunt, Senior Advisors

What is the right percentage of stocks, bonds and other investments I should have in my investment portfolio?

This is one of the most important questions each investor has – one we often hear, especially from people worried about any short-term drop in their portfolio’s value during periods of market volatility. Each person has different needs and objectives, so our answers will vary.  Yet the fundamental goal is generally the same — to build a diversified portfolio that can grow steadily with a reasonable amount of risk to generate and sustain wealth to meet your financial objectives.

To accomplish that goal, many people choose an investment portfolio consisting of some percentage of growth-oriented holdings (stocks and alternative investments) and some percentage of holdings meant to preserve capital (cash and bonds). The stocks will often include large-, mid- and small-cap US companies, as well as international companies, while the bonds may consist of short- to intermediate-term corporate, municipal and government bonds.

Each person’s allocation decision should be based on their individual circumstances, but there are a few basic principles that anyone can apply. Here they are:

Choose an Allocation for Good and Bad Times

Deciding on the right allocation of stocks, bonds and other investments — and staying with this mix through thick and thin — means you are less likely to make decisions based on emotions when things go wrong. While a fairly evenly weighted portfolio (½ stocks and ½ bonds) will often provide for meaningful growth over a long period, there will probably be difficult years where your investments lose money. You may begin to question your mix of stocks and bonds during the tough times, but it’s critically important to stay the course in response to a short-term drop in your portfolio’s value.

The Standard & Poor’s 500 Index dropped 20.6 percent in the first six months of 2022. But the index also rose by a stunning 18.5 percent average annual rate of return during the previous five years, providing people with a significant increase in their wealth. Understand that the market is always moving; even if it’s in the wrong direction now, keep your long-term objectives as the goal.

Determine How Much Growth is Needed to Retire Comfortably

Whether it’s a comfortable retirement income, a vacation home, or an annual European vacation, a financial plan is needed to meet these objectives. That’s where an individual strategy comes into play.

A person who started investing later in life may need to take on more risk to achieve their goals. For example, if they would like to retire with $5 million at age 65, and have only $2 million at age 50, they may need to allocate a higher percentage of money into stocks unless they are able to save substantially more money.

On the other hand, someone with more than enough wealth to meet their objectives may not need such risk and doesn’t want to see their portfolio vacillate up and down.  While they may accept a lower rate of return as a tradeoff for less risk, they can do so based on their resources.  Going one step further, retirees with no concern about outliving their wealth may want to revise the allocation in their portfolio to leave more money for their heirs. For example, at age 80, if their portfolio is 60 percent stocks and 40 percent bonds, they may actually want to change their investment mix to generate higher returns. While this usually means taking on more risk, there may be little downside, as they may be able to live comfortably despite the outcomes. The objective is to generate more growth that can be passed on to their adult children and grandchildren.

Choose The Right Amount of Risk to Maximize Your Returns

In theory, you should be compensated for taking more risk with higher potential returns.  But how much risk are you willing to endure?  Because stocks often provide the highest returns over a long period, a person in their 30s or 40s will likely have more of their investments in stocks than the typical portfolio and they can accept a riskier mix of assets.

While some young investors have recently watched their investments drop in value, they shouldn’t be too concerned; they will have two or three decades to recover. They’ve also been presented with an unusual opportunity: buying many stocks at a discount to their value, enabling them to reap the rewards from any new investment in the years to come.

No matter what your age, it’s important to feel at ease with a certain level of volatility. One simple scenario to consider during the decision-making process is how did you react during the last downturn in the market?  Did this cause unrest, or did you pay little attention to the fluctuations and headlines?

Occasionally Change Your Allocation – But Not Often

People approaching retirement who are on track to meet their retirement goals will likely want to make some changes within their portfolio to take on less risk. After building wealth for decades, now is the time to protect assets.

At the same time, however, pre- and early retirees should maintain a portfolio that isn’t too conservative. Their investments should continue to outpace inflation – realizing that the current inflation rate is unusually high.

No matter your situation, plan to have enough money to last a lifetime. Even if you retire at age 65, understand that your money will possibly need to last for the next 25-35 years, depending on your circumstances.

We generally caution making allocation changes at presumably inopportune times – avoid getting more conservative after markets have dropped (selling stocks after a pullback) and getting more aggressive after a bull market run (getting greedy and buying more stocks after a period of good performance).

If you have questions or need to discuss your investment strategy, feel free to contact us at rmartin@monetagroup.com or lhunt@monetagroup.com. We offer a free consultation to discuss how a comprehensive financial plan can enable your business and personal wealth to grow.

© 2022 Moneta Group Investment Advisors, LLC is an SEC registered investment advisor and wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Index and/or Style returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. You cannot invest directly in an index. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post What is the Right Asset Allocation for You? Consider These 4 Guidelines appeared first on Moneta Group.

source https://monetagroup.com/blog/what-is-the-right-asset-allocation-for-you-consider-these-4-guidelines/

Demo Article for Multiple teams

Kevin Ward, Advisor

For many, retirement increasingly represents a meaningful share of our lives—the benefit, partly, of the miracles of modern medicine which have extended our lifespans. But without a daily job to go to, many can feel adrift, the years stretching before them shrouded in uncertainty—about how to spend their time and replace the sense of meaning that often accompanies a professional occupation. In a prior introductory piece, we explored two broad buckets for consideration when approaching retirement: financial considerations and lifestyle and emotional considerations. Herein, we will closely examine the lifestyle and emotional considerations. And while hardly a replacement for meaningful conversations with your family, friends, and other advisors or confidants, we hope this piece provides you with a starting point for approaching retirement ready to embrace its changes and evolution productively and joyfully.

One of retirement’s most significant lifestyle shifts is how you will spend much of your time. Most professionals spend anywhere between 40 and 80+ hours each week dedicated primarily to work. The sudden shift to zero hours can be jarring, particularly if you were passionate about your work. Fortunately, you don’t necessarily have to slam quite so hard on the brakes if you don’t want to. Perhaps your employer is willing—even eager—to retain your services part-time. Your years of experience are undoubtedly valuable—if not to your last employer, then perhaps to another who recognizes the value a seasoned professional could provide their staff. Maybe there are opportunities to mentor younger employees. Such an approach—partially stepping away and decreasing but not eliminating the hours you spend at the office—could help you ease out of full-time employment.

Depending on how you spent your career and how eager you are for a new professional challenge, there might also be an opportunity to start your own business. Many professionals spend years learning the inside baseball of their industry and their specific company. You undoubtedly have some insights into how to do things more efficiently, profitably, etc., which could form the basis of a valuable second career as a consultant—either on your own or with an existing consulting company. A significant benefit to pursuing this type of occupation is you call more of your shots—you control how much time you spend working and which clients you take on. This also means you can better balance a sense of purpose with other occupations or interests you may want to pursue in retirement.

Many of us are drawn to particular causes because of personal experiences or a desire to give back. Serving on a board can be an excellent way to support your preferred cause while continuing to exercise the professional muscles you spent years developing and strengthening. For example, many retired executives or professionals find their accumulated experience and wisdom useful on boards, both for-profits, and non-profits.

On the other hand, maybe your career was never your life’s passion, and you’re ready for an entirely new chapter. In which case, assuming you’ve planned accordingly financially, the world is your oyster. You could take courses in which you’re interested at a local college. You could take up a new hobby and take classes to develop your skills and meet others who share your interest. Maybe your piano has sat neglected in your living room for too long, and it’s time to refresh your skills, take some lessons, and rekindle your love of music. Others prefer to scratch the athletic itch, join golf or tennis clubs, and stay active.

Many also choose to spend more time traveling during retirement—whether touring the US in an RV or flying to far-flung destinations. Provided you’ve saved enough to support your travel dreams, retirement can be a wonderful time to explore whatever part of the world takes your fancy.

Another significant lifestyle shift in retirement could be where you live. While some of these decisions are likely tied to financial considerations:

• Is your home paid off?
• Is it expensive to maintain?
• Is it in a costly location, like a major city?

Some of it is undoubtedly emotional, too. Perhaps you and your spouse raised your family in your current home, and you’ve always envisioned grandchildren running around the backyard during summer visits. Or maybe the house feels too big now, and you’d prefer to move into a more manageable home.

If moving is in your plans, location is the next big question. And the considerations here are many:

• What kind of climate would you prefer?
• What cost of living?
• Rural or urban?
• Condo or townhome?

Maybe you’d prefer to be in a high-rise downtown in a major city, with public transportation to cultural events and nice restaurants. Or perhaps you’d prefer to buy the small farmhouse that needs some tender, loving care on a reasonable piece of land.

The key to many of these emotional and lifestyle shifts is considering them in advance and critically discussing them with your loved ones. Changes in your life will equally impact your spouse. Presumably, you will be spending more time together. How will that look? Would you like to do things together, or would you prefer to have your own interests to pursue, or somewhere in between? Aligning your visions of the future will help you both make the transition successfully and, ideally, joyfully. Retirement is a tremendous reward for a life dedicated to work and responsibility. Planning ahead and communicating with your family can ensure you fully capitalize on all the benefits it can offer.

Also important is communicating these preferences and dreams to your financial advisor so that you can live them out in a financially responsible way. The last thing you want is to retire, having dreamed of traveling the world without financial care, only to find out you can’t afford it. So, communicate with everyone who will be impacted by your retirement early and often—and make sure your financial advisor is among them. Then, get ready to enjoy the journey, wherever it takes you.

If you have more questions, please reach out to our team at breckenridgeteam@monetagroup.com.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Demo Article for Multiple teams appeared first on Moneta Group.

source https://monetagroup.com/blog/demo-article-for-multiple-teams/

Did You Earn $500,000 in 2021? You May Still Have Time to Reduce 2021 Taxes and Set Up a Long-Term Retirement Savings Plan

By Maggie Rapplean, CFP®, Senior Advisor, Moneta

Solo entrepreneurs, business owners and professionals often work days, nights and weekends. They may not have time to put together a financial plan that would save a significant amount of their income for retirement while also cutting their taxes by possibly tens of thousands of dollars each year. But it’s often easy to do – and there is still time to do this and file your 2021 taxes on time if you filed an extension.

Consider this scenario:

You work as a medical doctor, attorney, real estate professional or tech company owner and earned $500,000 in 2021. If you are married and file a joint return, you and your spouse will pay a marginal income tax rate of 35 percent in federal income taxes alone on part of your earnings. At a 35 percent marginal tax rate, a $50,000 retirement contribution would save you $17,500 in federal income taxes.

If you have a calendar-year partnership or S Corporation and filed an extension, you have until September 15 to file the 2021 federal business return. If you have a Schedule C on your Form 1040 and filed an extension, you have until October 15 to file your 2021 federal income tax return. You still have time to start one or more new retirement savings plans – a way to build long-term wealth – while potentially making a huge dent in your tax bill.

Here’s a quick summary of some of the retirement plans available to you:

A Simplified Employee Pension (SEP). A SEP allows a small business owner to set up and contribute to a SEP Individual Retirement Account (SEP IRA). Contributions to a SEP are limited to approximately 20% of your net earnings from self-employment (or 25% of your W-2 wages if you have an S Corporation) with a limit of $58,000 for 2021 and $61,000 for the 2022 tax year. Business owners who haven’t yet filed their 2021 returns still have time to contribute to one of these plans until the extended due date.

A Solo 401(k) Retirement Plan. This is a retirement account designed for self-employed business owners with no other employees (besides a spouse). While the deadline has passed to make an “elective deferral” contribution for the 2021 tax year, there is still time to make an election to adopt a plan for the 2021 tax year, which would allow the “employer” contribution for 2021.

If you were paid a sufficient salary or had sufficient net earnings from self-employment (depending on entity type), the “employer” can contribute up to $58,000 for the 2021 tax year and $61,000 for the 2022 tax year. In future years when an “elective deferral” is possible, a catch-up contribution of an extra $6,500 is available for those 50 or older.

Cash Balance Plans. These plans give one more option for retirement and tax savings for solo business owners with high incomes – such as those already maximizing the 401(k) plan or SEP IRA. If you extended your return, you have until September 15 to still make contributions to a cash balance plan for the 2021 tax year (a Schedule C does not get an extra month like the other plans).

These plans are different from SEPs and 401(k)s because they are defined benefit plans instead of defined contribution plans and will require a contribution each year. The maximum amount you can contribute is dependent on your age and the terms of the plan (you work with an actuary to determine the contribution), but over time may allow larger and larger contributions. These plans can be combined with a 401(k) to allow even higher contributions, though you will have to coordinate the overall contributions between the plans.

With a combined plan, you could be contributing more than $100,000 annually to retirement (and sometimes much more). In addition to helping a solo owner quickly build wealth, a cash balance plan has other benefits. For example, once the owner retires, they have the option of taking these savings in an annuity spread out over several years or as a lump sum, which can be invested.

It’s clear that by contributing to one or more of these plans, entrepreneurs and solo small business owners can likely generate the savings and investment returns they will need to comfortably retire. Generally, I recommend to my clients that they contribute at least 10-15 percent annually, enabling them to accomplish that goal.

If you are a small business owner, medical doctor, attorney, or real estate professional with questions or would like to discuss a strategy for retirement and tax savings, please contact me at MRapplean@monetagroup.com. We offer a free consultation to discuss how a comprehensive financial plan can serve you well now and during retirement.

© 2022 Moneta Group Investment Advisors, LLC is an SEC registered investment advisor and wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax, or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

 

The post Did You Earn $500,000 in 2021? You May Still Have Time to Reduce 2021 Taxes and Set Up a Long-Term Retirement Savings Plan appeared first on Moneta Group.

source https://monetagroup.com/blog/did-you-earn-500000-in-2021-you-may-still-have-time-to-reduce-2021-taxes-and-set-up-a-long-term-retirement-savings-plan/

For Business Owners Looking to Sell, Does an ESOP Make Sense?

By Michael Torney, CFP, J.D., LL.M.

Business owners considering selling their companies usually have a few options – such as selling to a local competitor, family member(s), a large chain, or a private equity firm. But another lesser-known option is selling the business to your employees through an Employee Stock Ownership Plan (ESOP).

ESOPs are a type of qualified retirement plan. One of the most significant differences compared to selling to a third party is that it allows employees to buy stock in the company. It’s also a way for an owner to keep ownership among people you know and trust. In addition, you may be able to keep part ownership while maintaining a role in management.

While not the most common form of company ownership, ESOPs have found a niche. According to the National Center for Employee Ownership, as of 2019, there were approximately 6,500 ESOPs in the U.S., holding total assets of over $1.6 trillion.

How an ESOP Works

Under an ESOP, the new company sets up a trust funded with either newly issued shares of the company or cash to buy shares of the company. The ESOP holds the company shares in trust as an investment for the ESOP participants’ benefit. The money can come from the company directly or through a loan.

There are plenty of reasons to sell your business to an ESOP – but there are also many reasons to sell to a third party. Here are some of the key issues to consider.

The Selling Price of the Practice. Under federal law, an ESOP can only pay a fair market price for your business. However, a competitor or other outside buyers are allowed to pay more than the appraised value of the practice. The winner will likely be willing to pay a premium to acquire it if there are multiple bidders for your business. If the owner stands to make considerably more money by selling to a third party, it’s certainly worth considering this option.

Taxes: Many third-party sales may be treated as a combination of ordinary income and capital gain. ESOP transactions, on the other hand, are taxed as capital gain. Certain ESOP transactions will allow the seller to defer and potentially eliminate the capital gains taxes.

How You Will be Paid. An outside bidder tends to offer a larger up-front payment and make the remaining payments over a short period. On the other hand, ESOPs often pay the seller through a note payable over many years.

Impact on Your Employees and Your Business. Considering a sale to an outside company means that any potential bidder will have access to your financial statements and other confidential documents. So, if you decide not to sell to one or more competitors, they may now have detailed information about your business.

Next, suppose an outside company is an eventual buyer. In that case, they could decide to place their own people in key positions and lay off several current employees. And for the employees who remain, there are other potential problems.

These third-party sales agreements often pay the employees in the form of “earn-outs,” which is a future payment if the business meets certain financial goals. The employees will likely be required to take a “rolling equity” in the business, which means they must roll a portion of their ownership into the business after it is acquired instead of receiving cash.

On the other hand, since an ESOP consists of the current employee base, those employees will likely be interested in maintaining the business practices and culture you have established over the years. The workforce will be motivated to continue to perform well and grow since many are now part owners.

For owners who want to continue to stay involved, there is this benefit: they can be designed to retain control of the business and its management.

Other Issues for ESOPs

Financing must be lined up if you decide to form an ESOP. And once the ESOP is up and running, someone needs to administer it.

The good news is that financing is often available at attractive terms. An ESOP also has tax benefits that an outside, third-party buyer often can’t match.

Your business may be able to take income tax deductions up to the total amount of the ESOP sale price, and you may also be able to eliminate any capital gains taxes. There are also benefits for your employees, who can roll their ESOP stock sale proceeds into another qualified retirement account.

ESOP Drawbacks

There are some issues to navigate that require constant oversight:

• ESOPs are complex. Once up and running, an ESOP requires someone to administer its multiple expenses, ranging from trustee fees, annual valuations, plan administration, and legal fees. This may include monitoring and paying any shareholders who sold their shares to provide part of the financing for the sale.
• ESOPs are best suited to companies with predictable cash flow. Since most ESOPS are financed with loans (i.e., a leveraged ESOP), a highly cyclical business might not be a good candidate.
• An owner must be confident that the next generation of leadership can effectively run the company after their retirement. If the current owner wants to retire quickly and no clear successor is ready to take over, an ESOP might be the wrong solution.
• An ESOP doesn’t provide as large of an upfront cash payment that private equity or a strategic buyer typically offers. A third-party sale might be a better fit if the owner requires most of the cash upon closing.
• An ESOP competes for company revenue. If the company needs that revenue for other business needs, the ESOP transaction must be carefully analyzed before moving forward to ensure the business continues to operate smoothly.

Take some time to meet with the right advisors

Before deciding on how to pursue a sale, the right team should be called in to discuss the pros/cons of the ESOP. Typically, that team consists of a CPA, financial advisor, valuation company, ESOP attorney, and investment bank that can help lay out the economic benefits and drawbacks of an ESOP. With that information, you can determine if it’s the right course for you.

If you have questions about buying into a medical practice and want to discuss a strategy, our team can be reached at duffteam@monetagroup.com. We offer a free consultation to help discuss how we may be able to help accomplish a smooth purchase that is incorporated into your overall financial plan.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. Examples contained herein are for illustrative purposes only based on generic assumptions.  These materials do not take into consideration your personal circumstances, financial or otherwise. Past performance is not indicative of future returns. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision.

The post For Business Owners Looking to Sell, Does an ESOP Make Sense? appeared first on Moneta Group.

source https://monetagroup.com/blog/for-business-owners-looking-to-sell-does-an-esop-make-sense/

Inflation and Interest Rates Reach New Records

Aoifinn Devitt | Chief Investment Officer
Chris Kamykowski CFA®, CFP® | Head of Investment Strategy & Research

The second quarter was dominated by the Fed finally moving to interest rate “lift-off” and beyond, growing inflation fears and a lackluster market backdrop.

Inflation remained stubbornly high over the quarter, reaching another 40 year high of 9.1% annualized in June. The core inflation (the inflation level with the typically more volatile prices of energy and food stripped out) was higher too, at 5.9%, having essentially remained flat for the best part of the last 30 years. This stark shift in both inflation expectations and realized pricing shook markets and forced the Fed to take a more assertive stance than previously. When it comes to inflation expectations though, while they remain elevated in the short run, in the long and medium term they are somewhat more muted, suggesting that many market participants believe some of the drivers of inflation remain transitory, or that the economy will contract in the medium term to bring it into check.

The inflationary waves were felt globally, particularly in Europe, which is experiencing not only the imported inflation effect of a weaker currency (which briefly fell through parity with the US dollar in July) but also acute uncertainty regarding its energy supply, given its reliance on Russia for natural gas supplies. As summer turns to fall and winter, the question of energy supply and the potential for rationing and steeper prices is casting a pall over European area growth outlooks.

Inflation creates tremendous uncertainty for corporate outlooks too, and earnings releases have been laden with caution and inklings of demand weakening for many months now. This uncertainty was felt universally in the second quarter, across all sectors, although certain sectors such as financials, consumer discretionary, technology and communication services led in terms of negative returns, which is particularly interesting given the rising rate environment. The energy sector was slightly weaker due to the decline in oil prices, but it remained robust relative to the bulk of the market.

As noted previously, the Federal reserve hiked rates twice over the quarter, with hikes of 50 and 75 bps in May and June, respectively, in a stark reversal to its previous near-complacency about rising inflation. A new “highly attentive” positioning is the norm, although at mid-year it is unclear how long the current trajectory will last.

Given the interest rate backdrop, the first start to the year was an exceptionally poor one for traditional balanced portfolios, due to the decline in bonds as well as equities. In fact, the second quarter was the worst quarterly return for a 60/40 blend over the past 50 years with an average return of only -11.8%, and negative returns for a quarter have only occurred 22% of the time.

Economic indicators continue to be mixed, with the labor picture continuing to buck the trend of softening economic signals. Just in the past few weeks there have been some anecdotes from companies that hiring is slowing and some layoffs waves have been announced. The strength of labor is a key indicator to watch as it relates to economic health and the levels of consumer confidence. As the charts below show, consumer sentiment has recently dipped, although household debt to total disposable income remains below average, suggesting some resilience and staying power despite rising rates and prices.

Markets had an exceptionally poor start to the year, with the S&P 500 (-16.10% for the quarter, -19.96% ytd) showing its worst first half to the year in 100 years, with only emerging markets slightly bucking the trend by delivering a slightly less negative -17.63% for the year, and -11.45% for the quarter. Bonds shed -4.69% (US Aggregate) bringing their year-to-date return to -10.35%, while high yield and investment grade were even more negative. Bonds displayed one of their worst starts to the year since 1990.

Alternatives such as MLPs and infrastructure equities remained true to their defensive orientation to protect capital somewhat, although their performance was still negative (-7.38% and -7.66%, respectively), while REITS sold off more dramatically (-18.1% for the quarter) given the worsening outlook for real estate as mortgage rates rose and economic indicators faltered.

Final Thoughts

As we look to the second half of the year, the Biden administration looks poised to have achieved a legislative success with the passing of the CHIPs+ bill as well as the likely passing of an iteration of the former Build Back Better initiative, which will be encouraging to a market jaded by the appearance of political gridlock. The mid-term elections and their uncertainty continue to loom, and it is reasonable to expect more market volatility in their wake.
As the summer draws to a close, the frenzy of a surge in travel, staffing shortages and delays should ebb and as “back to school” beckons the real state of the economy may gather more scrutiny. The stark correction in equities as well as attractive bond (and even cash) yields have forced investors to take another look at the return expectations for various asset classes.

We are settling in to our post-Covid normal and while much uncertainty remains, we are starting to see the shape of how our work-lives might look. Perhaps Covid has given us some immunity – to shocks, uncertainty and the unexpected. As markets cope with a new set of records in terms of inflation and interest rate rises, perhaps that resilience will come to the fore. It will be a crucial, testing time, but, as always, we don’t believe in timing markets nor that calling a “bottom” or inflection point is possible. Our advice remains to retain a broad-based diversified exposure with a solid asset class mix, including inflation hedging assets such as real estate, real assets and infrastructure. We believe in preparation and not prediction.

 

Definitions & Disclosure

Alerian MLP Index: The Alerian MLP Index is a capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities.

The S&P 500 Index is a free-float capitalization-weighted index of the prices of 500 large-cap common stocks actively traded in the United States.

Emerging Markets are represented by the MSCI Emerging Markets Index, a float-adjusted market capitalization index that consists of indices in 21 emerging economies.

The Bloomberg U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds, investment grade corporate debt securities and mortgage-backed securities.

Investment grade bonds are represented by the Bloomberg US Corporate Bond Index, which measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD-denominated securities publicly issued by US and non-US industrial, utility, and financial issuers.

High yield bonds are represented by the Bloomberg US Corporate High Yield Bond Index, which measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on the indices’ EM country definition, are excluded.

Master Limited Partnerships (MLPs) are represented by the Alerian MLP Index, which is the leading gauge of energy infrastructure Master Limited Partnerships (MLPs). The capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities, is disseminated real-time on a price-return basis (AMZ) and on a total-return basis (AMZX).

Real Estate Investment Trusts (REITs) are represented by the FTSE Nareit All Equity REITs Index, which is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs. Constituents of the index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

Infrastructure is represented by the S&P Global Infrastructure Index, which provides liquid and tradable exposure to 75 companies from around the world that represent the listed infrastructure universe. The index has balanced weights across three distinct infrastructure clusters: Utilities, Transportation, and Energy.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The Core Consumer Price Index (CPI) is an aggregate of prices paid by urban consumers for a typical market basket of consumer goods and services, excluding food and energy.

The New York Fed, one-year ahead expected inflation rate, is the median expectation from all respondents to the New York Fed Survey of Consumer Expectations when asked for their expectations for inflation/deflation over the next 12 months.

The New York Fed, three-year ahead expected inflation rate, is the median expectation from all respondents to the New York Fed Survey of Consumer Expectations when asked for their expectations for inflation/deflation over the next 36 months.

The five-year breakeven inflation rate represents a measure of expected inflation derived from 5-Year Treasury Constant Maturity Securities and 5-Year Treasury Inflation-Indexed Constant Maturity Securities. The latest value implies what market participants expect inflation to be in the next 5 years, on average.

The 60/40 blend is a hypothetical portfolio constructed as 60% S&P 500 TR USD and 40% Bloomberg Government/Credit.

The US Index of Consumer Sentiment (ICS), as provided by University of Michigan, tracks consumer sentiment in the US, based on surveys on random samples of US households. The index aids in measuring consumer sentiments in personal finances, business conditions, among other topics.

The Consumer Confidence Index (CCI) is a survey, administered by The Conference Board, that measures how optimistic or pessimistic consumers are regarding their expected financial situation.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. Moneta Group Investment Advisors, LLC is an SEC registered investment advisor and wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index and/or Style returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. You cannot invest directly in an index. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Inflation and Interest Rates Reach New Records appeared first on Moneta Group.

source https://monetagroup.com/blog/inflation-and-interest-rates-reach-new-records/

Does an ESOP Make Sense?

By Michael Torney, CFP, J.D., LL.M.

Business owners considering selling their companies usually have a few options – such as selling to a local competitor, family member(s), a large chain, or a private equity firm. But another lesser-known option is selling the business to your employees through an Employee Stock Ownership Plan (ESOP).

ESOPs are a type of qualified retirement plan. One of the most significant differences compared to selling to a third party is that it allows employees to buy stock in the company. It’s also a way for an owner to keep ownership among people you know and trust. In addition, you may be able to keep part ownership while maintaining a role in management.

While not the most common form of company ownership, ESOPs have found a niche. According to the National Center for Employee Ownership, as of 2019, there were approximately 6,500 ESOPs in the U.S., holding total assets of over $1.6 trillion.

How an ESOP Works

Serious mature couple calculating bills to pay, checking domestic finances, middle aged family managing, planning budget, expenses, grey haired man and woman reading bank loan documents at home

Under an ESOP, the new company sets up a trust funded with either newly issued shares of the company or cash to buy shares of the company. The ESOP holds the company shares in trust as an investment for the ESOP participants’ benefit. The money can come from the company directly or through a loan.

There are plenty of reasons to sell your business to an ESOP – but there are also many reasons to sell to a third party. Here are some of the key issues to consider.

The Selling Price of the Practice. Under federal law, an ESOP can only pay a fair market price for your business. However, a competitor or other outside buyers are allowed to pay more than the appraised value of the practice. The winner will likely be willing to pay a premium to acquire it if there are multiple bidders for your business. If the owner stands to make considerably more money by selling to a third party, it’s certainly worth considering this option.

Taxes: Many third-party sales may be treated as a combination of ordinary income and capital gain. ESOP transactions, on the other hand, are taxed as capital gain. Certain ESOP transactions will allow the seller to defer and potentially eliminate the capital gains taxes.

How You Will be Paid. An outside bidder tends to offer a larger up-front payment and make the remaining payments over a short period. On the other hand, ESOPs often pay the seller through a note payable over many years.

Impact on Your Employees and Your Business. Considering a sale to an outside company means that any potential bidder will have access to your financial statements and other confidential documents. So, if you decide not to sell to one or more competitors, they may now have detailed information about your business.

Next, suppose an outside company is an eventual buyer. In that case, they could decide to place their own people in key positions and lay off several current employees. And for the employees who remain, there are other potential problems.

These third-party sales agreements often pay the employees in the form of “earn-outs,” which is a future payment if the business meets certain financial goals. The employees will likely be required to take a “rolling equity” in the business, which means they must roll a portion of their ownership into the business after it is acquired instead of receiving cash.

On the other hand, since an ESOP consists of the current employee base, those employees will likely be interested in maintaining the business practices and culture you have established over the years. The workforce will be motivated to continue to perform well and grow since many are now part owners.

For owners who want to continue to stay involved, there is this benefit: they can be designed to retain control of the business and its management.

Other Issues for ESOPs

Financing must be lined up if you decide to form an ESOP. And once the ESOP is up and running, someone needs to administer it.

The good news is that financing is often available at attractive terms. An ESOP also has tax benefits that an outside, third-party buyer often can’t match.

Your business may be able to take income tax deductions up to the total amount of the ESOP sale price, and you may also be able to eliminate any capital gains taxes. There are also benefits for your employees, who can roll their ESOP stock sale proceeds into another qualified retirement account.

ESOP Drawbacks

There are some issues to navigate that require constant oversight:

• ESOPs are complex. Once up and running, an ESOP requires someone to administer its multiple expenses, ranging from trustee fees, annual valuations, plan administration, and legal fees. This may include monitoring and paying any shareholders who sold their shares to provide part of the financing for the sale.
• ESOPs are best suited to companies with predictable cash flow. Since most ESOPS are financed with loans (i.e., a leveraged ESOP), a highly cyclical business might not be a good candidate.
• An owner must be confident that the next generation of leadership can effectively run the company after their retirement. If the current owner wants to retire quickly and no clear successor is ready to take over, an ESOP might be the wrong solution.
• An ESOP doesn’t provide as large of an upfront cash payment that private equity or a strategic buyer typically offers. A third-party sale might be a better fit if the owner requires most of the cash upon closing.
• An ESOP competes for company revenue. If the company needs that revenue for other business needs, the ESOP transaction must be carefully analyzed before moving forward to ensure the business continues to operate smoothly.

Take some time to meet with the right advisors

Before deciding on how to pursue a sale, the right team should be called in to discuss the pros/cons of the ESOP. Typically, that team consists of a CPA, financial advisor, valuation company, ESOP attorney, and investment bank that can help lay out the economic benefits and drawbacks of an ESOP. With that information, you can determine if it’s the right course for you.

If you have questions about buying into a medical practice and want to discuss a strategy, our team can be reached at duffteam@monetagroup.com. We offer a free consultation to help discuss how we may be able to help accomplish a smooth purchase that is incorporated into your overall financial plan.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. Examples contained herein are for illustrative purposes only based on generic assumptions.  These materials do not take into consideration your personal circumstances, financial or otherwise. Past performance is not indicative of future returns. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision.

The post Does an ESOP Make Sense? appeared first on Moneta Group.

source https://monetagroup.com/blog/does-an-esop-make-sense/

Portal new prod test – by QA

Testing QA for prod

The post Portal new prod test – by QA appeared first on Moneta Group.

source https://monetagroup.com/blog/portal-new-prod-test-by-qa/

Navigating the Complex Universe of Executive Compensation Plans

What is Lorem Ipsum?

Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum.

Why do we use it?

It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy. Various versions have evolved over the years, sometimes by accident, sometimes on purpose (injected humour and the like).

Where does it come from?

Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old. Richard McClintock, a Latin professor at Hampden-Sydney College in Virginia, looked up one of the more obscure Latin words, consectetur, from a Lorem Ipsum passage, and going through the cites of the word in classical literature, discovered the undoubtable source. Lorem Ipsum comes from sections 1.10.32 and 1.10.33 of “de Finibus Bonorum et Malorum” (The Extremes of Good and Evil) by Cicero, written in 45 BC. This book is a treatise on the theory of ethics, very popular during the Renaissance. The first line of Lorem Ipsum, “Lorem ipsum dolor sit amet..”, comes from a line in section 1.10.32.

The standard chunk of Lorem Ipsum used since the 1500s is reproduced below for those interested. Sections 1.10.32 and 1.10.33 from “de Finibus Bonorum et Malorum” by Cicero are also reproduced in their exact original form, accompanied by English versions from the 1914 translation by H. Rackham.

Where can I get some?

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The post Navigating the Complex Universe of Executive Compensation Plans appeared first on Moneta Group.

source https://monetagroup.com/blog/navigating-the-complex-universe-of-executive-compensation-plans-2/

New Article for QA 2

Kevin Ward, Advisor

As life expectancies have extended and as wealth in many developed countries has grown exponentially over the last century-plus, retirement not only has increasingly become a reality for many, but it also may represent a relatively significant share of your lifespan. How you will spend it and what it will look like are increasingly relevant—and weighty—questions. In a prior introductory piece, we explored two broad buckets for consideration when approaching retirement: financial factors, and lifestyle and emotional factors. In the following paragraphs, we will dive deeper into some financial factors that can materially impact your retirement reality.

Among retirement’s primary financial considerations are health insurance, income sources, living arrangements, and financial goals. Health insurance, often paid for partly or fully by employers, understandably represents a meaningful line item on many retirement budgets. For retirees 65 years and older, Medicare can be one of the more affordable means of obtaining insurance and can possibly help you recoup some of the years of taxes you paid into the program. But Medicare isn’t a one-size-fits-all plan—rather, it’s an umbrella term for four different parts, including Part A, Part B, Part D, and Medicare Supplemental Insurance, or Medigap. Further complicating things are two additional broad terms: original Medicare and Medicare Advantage.

Original Medicare is provided by the federal government and includes Parts A, which is hospital coverage, and B, which is medical coverage. It does not include prescription drug coverage or any additional coverage like vision and dental. In contrast, Medicare Advantage is offered through private providers. It has not only Parts A and B but also often Part D, which is prescription drug coverage, and additional coverage like vision and dental.

In addition to these coverage differences, costs will also differ, as will the network of available doctors. With Original Medicare, you can typically see any doctor you’d like. In contrast, with Medicare Advantage, you must see an in-network doctor, much as you likely did under the insurance plan you had through your employer.

If those weren’t enough options to digest, there are more: You don’t have to purchase a Medicare plan at all—you can also purchase an insurance plan through the federal marketplace, through your state insurance exchange, or through a private insurance provider—though in many cases, a Medicare option will likely prove most affordable. The health insurance landscape is broad and complex, and the nuances can be tremendously important, given they can impact your health care options. The keys are doing your research, asking critical questions, and sufficiently weighing your current and future potential health situation.

Given the significant budget item health insurance represents, a natural question is: How will I replace my income in retirement? As with health insurance, the possibilities are many and varied, giving you flexibility. If you’re 62 years or older, you are likely eligible to collect Social Security—though your payments may not fully cover your living costs. Fortunately, the savings you accrued during your working years could yield passive income, which can help supplement Social Security or other pension-like payments. For example, dividend and interest payments can provide monthly cash flow. If you establish these payments as monthly or bi-monthly transfers into your checking account, you can even create your own paycheck replacement program, which can help you maintain your standard approach to monthly budgeting.

Nor are dividends and interest your only passive income possibility—maybe you have an investment property generating positive cash flow. Or perhaps you have an opportunity to invest in a piece of property that could generate income for you.

Then, too, maybe you’re not ready to rely primarily or entirely on passive income. Depending on your plans for how you’ll spend your time—which we discuss more in our lifestyle-related deep dive—maybe some part-time work appeals to you. There could be opportunities to either maintain a part-time affiliation with your employer or start your own business to generate some income monthly. Such a path may not fully cover your expenses, but every bit contributes to—maybe enhances—your ability to live the lifestyle you’ve envisioned.

Another significant financial consideration of retirement is where you will live—which admittedly straddles the financial and emotional realms. We touch on the emotional in our companion piece on lifestyle considerations. But from a strictly financial perspective, the primary considerations are related, unsurprisingly, to your budget. What do your home and its maintenance currently cost? And can you afford those costs? Think not just about the monthly bills, like water and gas, but about how much you spend on repairs or yard care. When might the house need a new roof or a coat of paint? And when those expenses come, how will you cover them? It’s also worth estimating how much equity is in your home. Maybe it makes sense to sell your current home to unlock your accrued equity and downsize into something less expensive to maintain. Or perhaps you have the option to keep your existing home but rent it out and live full-time elsewhere. Importantly, these decisions have tax implications, so as with all financial-related matters, it’s good to involve a well-informed financial advisor to help make sure you’re factoring in all the right variables.

Additionally, consider whether and how your financial goals may shift once you officially retire. The good news is that you’re no longer aiming at retirement, but the next question is: Now what? Are you striving for new financial goals, and what are they? Would you like to help pay for children’s continuing education or grandchildren’s primary education? Would you like to travel? Own a second home in a dream location? Or perhaps you’d like to plan to leave a legacy—whether on behalf of your alma mater or a cause about which you are passionate. Now that you have retired and presumably put sufficient planning into paying for your day-to-day living expenses, other options for your money are open to you, and you can begin planning for those.

Retirement represents a monumental shift—but one from which you can eliminate much of the uncertainty with planning and foresight. Obviously, no one has a crystal ball, so you can’t anticipate every twist or turn your life may take, either while you’re working full-time or once you’ve stepped away. But thinking through the various scenarios and their probabilities can help mitigate some of the discomforts accompanying such a significant life change. You can share your thoughts, ideas, goals, and plans with your family and an experienced financial advisor who can help ensure you’re asking all the right questions and turning over the right rocks. With all that advanced work, you can shift your focus to retirement’s lifestyle-oriented considerations, which we tackle in our companion piece.

If you have more questions, please reach out to our team at breckenridgeteam@monetagroup.com.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post New Article for QA 2 appeared first on Moneta Group.

source https://monetagroup.com/blog/new-article-for-qa-2/

New Article for QA Test

Kevin Ward, Advisor

As life expectancies have extended and as wealth in many developed countries has grown exponentially over the last century-plus, retirement not only has increasingly become a reality for many, but it also may represent a relatively significant share of your lifespan. How you will spend it and what it will look like are increasingly relevant—and weighty—questions. In a prior introductory piece, we explored two broad buckets for consideration when approaching retirement: financial factors, and lifestyle and emotional factors. In the following paragraphs, we will dive deeper into some financial factors that can materially impact your retirement reality.

Among retirement’s primary financial considerations are health insurance, income sources, living arrangements, and financial goals. Health insurance, often paid for partly or fully by employers, understandably represents a meaningful line item on many retirement budgets. For retirees 65 years and older, Medicare can be one of the more affordable means of obtaining insurance and can possibly help you recoup some of the years of taxes you paid into the program. But Medicare isn’t a one-size-fits-all plan—rather, it’s an umbrella term for four different parts, including Part A, Part B, Part D, and Medicare Supplemental Insurance, or Medigap. Further complicating things are two additional broad terms: original Medicare and Medicare Advantage.

Original Medicare is provided by the federal government and includes Parts A, which is hospital coverage, and B, which is medical coverage. It does not include prescription drug coverage or any additional coverage like vision and dental. In contrast, Medicare Advantage is offered through private providers. It has not only Parts A and B but also often Part D, which is prescription drug coverage, and additional coverage like vision and dental.

In addition to these coverage differences, costs will also differ, as will the network of available doctors. With Original Medicare, you can typically see any doctor you’d like. In contrast, with Medicare Advantage, you must see an in-network doctor, much as you likely did under the insurance plan you had through your employer.

If those weren’t enough options to digest, there are more: You don’t have to purchase a Medicare plan at all—you can also purchase an insurance plan through the federal marketplace, through your state insurance exchange, or through a private insurance provider—though in many cases, a Medicare option will likely prove most affordable. The health insurance landscape is broad and complex, and the nuances can be tremendously important, given they can impact your health care options. The keys are doing your research, asking critical questions, and sufficiently weighing your current and future potential health situation.

Given the significant budget item health insurance represents, a natural question is: How will I replace my income in retirement? As with health insurance, the possibilities are many and varied, giving you flexibility. If you’re 62 years or older, you are likely eligible to collect Social Security—though your payments may not fully cover your living costs. Fortunately, the savings you accrued during your working years could yield passive income, which can help supplement Social Security or other pension-like payments. For example, dividend and interest payments can provide monthly cash flow. If you establish these payments as monthly or bi-monthly transfers into your checking account, you can even create your own paycheck replacement program, which can help you maintain your standard approach to monthly budgeting.

Nor are dividends and interest your only passive income possibility—maybe you have an investment property generating positive cash flow. Or perhaps you have an opportunity to invest in a piece of property that could generate income for you.

Then, too, maybe you’re not ready to rely primarily or entirely on passive income. Depending on your plans for how you’ll spend your time—which we discuss more in our lifestyle-related deep dive—maybe some part-time work appeals to you. There could be opportunities to either maintain a part-time affiliation with your employer or start your own business to generate some income monthly. Such a path may not fully cover your expenses, but every bit contributes to—maybe enhances—your ability to live the lifestyle you’ve envisioned.

Another significant financial consideration of retirement is where you will live—which admittedly straddles the financial and emotional realms. We touch on the emotional in our companion piece on lifestyle considerations. But from a strictly financial perspective, the primary considerations are related, unsurprisingly, to your budget. What do your home and its maintenance currently cost? And can you afford those costs? Think not just about the monthly bills, like water and gas, but about how much you spend on repairs or yard care. When might the house need a new roof or a coat of paint? And when those expenses come, how will you cover them? It’s also worth estimating how much equity is in your home. Maybe it makes sense to sell your current home to unlock your accrued equity and downsize into something less expensive to maintain. Or perhaps you have the option to keep your existing home but rent it out and live full-time elsewhere. Importantly, these decisions have tax implications, so as with all financial-related matters, it’s good to involve a well-informed financial advisor to help make sure you’re factoring in all the right variables.

Additionally, consider whether and how your financial goals may shift once you officially retire. The good news is that you’re no longer aiming at retirement, but the next question is: Now what? Are you striving for new financial goals, and what are they? Would you like to help pay for children’s continuing education or grandchildren’s primary education? Would you like to travel? Own a second home in a dream location? Or perhaps you’d like to plan to leave a legacy—whether on behalf of your alma mater or a cause about which you are passionate. Now that you have retired and presumably put sufficient planning into paying for your day-to-day living expenses, other options for your money are open to you, and you can begin planning for those.

Retirement represents a monumental shift—but one from which you can eliminate much of the uncertainty with planning and foresight. Obviously, no one has a crystal ball, so you can’t anticipate every twist or turn your life may take, either while you’re working full-time or once you’ve stepped away. But thinking through the various scenarios and their probabilities can help mitigate some of the discomforts accompanying such a significant life change. You can share your thoughts, ideas, goals, and plans with your family and an experienced financial advisor who can help ensure you’re asking all the right questions and turning over the right rocks. With all that advanced work, you can shift your focus to retirement’s lifestyle-oriented considerations, which we tackle in our companion piece.

If you have more questions, please reach out to our team at breckenridgeteam@monetagroup.com.

© 2022 Moneta Group Investment Advisors, LLC. All rights reserved. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information and opinions contained herein are subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post New Article for QA Test appeared first on Moneta Group.

source https://monetagroup.com/blog/new-article-for-qa-test/