Owners of family-founded and family-run businesses in Arizona face a variety of challenges while building and growing their business. Remaining competitive, staying ahead of market trends, and constantly adapting to the changing demands of consumers can keep business owners busy. The day-to-day demands on an owner’s time may cause succession planning to take a back seat to more pressing priorities.

Although it may not seem like an urgent task to deal with right away, beginning to think about succession planning years in advance can contribute to a much smoother transition when it is time to pass the torch. Taking steps to avoid some of the common challenges can enhance your peace of mind today and make retiring a more enjoyable and far less contentious proposition.

Family businesses often lack a formalized and detailed succession plan. It’s simply not top of mind for many entrepreneurs in the initial years of operating their business. Most small businesses fail within five to 10 years, and transitioning operations to a successor isn’t typically a pressing concern for founders until the business is durable, sustainable and possesses growth potential.

However, it’s not uncommon for successful small business founders to get so caught up in growing their thriving business that they don’t think much about passing their business on.

Many small business owners who are nearing or past 65 years of age are reluctant to step down, especially if there’s no clear successor. Settling on successors and beginning to coach and prepare the future owners and managers early can lead to a more successful transition.

Familial relationships can complicate the transition process if the founder and current owner has not established a transparent succession plan. Differing opinions within the family, sibling rivalries, disagreements over roles, and conflicts regarding business direction can create tension that spills over into personal lives. These disputes can make the successful transition of a family business particularly difficult.

Many founders take pride in passing their business on to their children or grandchildren. Keeping the business in their family may even be 

. It can be difficult to pass a business on to other family members if they don’t possess the necessary skills or experience to take over and smoothly continue operations.

Gaps in leadership development, training or mentorship can hinder transitions. This can also create disunity within the business, especially if long-time and experienced employees are passed over for family members with little experience or proven ability to run the business.

Clearly differentiating between ownership and management roles can be particularly important, especially in situations where long-time employees are more suited to manage than family members. Some family members may benefit more from ownership without being involved in daily operations, while others may prefer (or feel entitled to) leadership roles within the business.

Deciding on roles in advance and holding to plans can be vital for owners during the transition. Transparency and clear expectations can potentially decrease animosity if some interested parties are disappointed with the outcome.

Balancing Family and Non-Family Employees

Many small businesses have key non-family employees who possess institutional knowledge, unique skills, and sometimes many years or even decades of experience in management. The business’s increased valuation and continued success may be due in large part to these non-family employees, and the continued success of the business may be dependent on them.

Family business owners need to carefully balance their succession plans to ensure key employees aren’t lost due to bitterness or disappointment with decisions. It’s also possible for family members who are given ownership or management roles to face resentment or have difficulty managing employees who feel passed over.

Assigning value to a business can be difficult and lead to disputes among family members who want to sell their share or exit the business. Accurate and clear accounting and forecasting can help ensure every interested party is on the same page regarding valuation.

Founders often have strong emotional ties to the business they founded and built. They may be hesitant to retire or pass the business they built onto their family members if they are concerned their legacy won’t be respected and preserved. Alternatively, they may be reticent about the new generation making significant changes or adopting a different approach to operations.

Addressing the Challenges of Succession Planning

There aren’t always easy or straightforward solutions for some of the common challenges facing business owners during succession planning. Owners who clearly communicate with stakeholders, listen to concerns, and clearly explain their preferences and reasoning may experience more dependable succession outcomes.

Consulting with external advisors, including 

 and attorneys, may increase the likelihood of a smooth and successful transition. Business owners in Phoenix who are seeking guidance on retirement and succession planning can schedule a free consultation with the team at Fullerton Financial Planning by calling 

Challenges Faced by Family Businesses and Closely Held Enterprises in Transitioning Ownership and Management to the Next Generation

Asset protection trusts, which are usually irrevocable trusts, can be used to protect assets from creditors and legal judgments. The irrevocability is often crucial in this regard, as the grantor is essentially giving up their legal ownership of the assets to put them out of reach of creditors.

Arizona does permit the creation of Domestic Asset Protection Trusts (DAPTs), which allow the trust creator to also be the beneficiary.

Strict DAPT limitations and reporting requirements are enforced to prevent abuse of these specialized trusts. For example, Arizona DAPTs have a period in which creditors may be able to challenge transfers of funds into the trust in order to reclaim debts. If a creditor claim arises after the assets have been transferred into the trust and the waiting period has ended, they may not be able to reach those assets.

The structuring of these trusts can be complicated, and they aren’t available to everyone. In order to open an Arizona DAPT, at least one of the trustees is required to be an Arizona resident and maintain some assets in the state. Adherence to strict documentation and reporting requirements is vital to maintain the legality of the trust.

It is important to discuss your asset protection needs and trust formation plans with an estate planning attorney. They will be able to explain what a DAPT can and cannot do for you.

Timing Is Important for a DAPT to Be Effective

Domestic Asset Protection Trusts are not intended to be a reactive way to dodge legal judgments or creditors, which is why they have look-back periods in which transfers can be scrutinized and even reversed. Creditors can bring challenges, potentially even years after a DAPT’s creation, if they suspect a debtor or defendant in litigation sought to hinder, delay or defraud them through the creation of a trust.

DAPTs are designed to be established far in advance of any legal or creditor actions to offer proactive protection against future claims, lawsuits or bankruptcies. They’re a form of safeguarding assets from unforeseen future risks rather than immediate or short-term anticipated liabilities.

When Might Someone in Arizona Open a DAPT?

Any professional in an industry where malpractice insurance is required due to a high risk of litigation, like doctors and lawyers, might seek to pursue asset protection through a DAPT. These trusts can be an effective way to shield assets from unforeseen future malpractice claims or lawsuits.

People taking risks in a new business venture or those concerned with facing liabilities due to their business activities in the future may be able to shield their personal assets from claims arising from business bankruptcies, contractual disputes or other business dealings.

Individuals with a high net worth may want to protect their assets separately through a DAPT. The creation of a DAPT prior to marriage may also make the division of property in the event of a divorce more straightforward.

 DAPTs may be utilized as part of a broader estate planning strategy to ensure an individual’s wealth is preserved for future beneficiaries. A DAPT can also be used to protect assets from creditors in the future as well as regulate the disposition of assets to heirs to prevent irresponsible spending.

Financial privacy in wealth preservation: 

The structure of DAPTs can help shield some details of asset ownership and keep information out of the public record while also safeguarding future inheritance or earnings from unforeseen future threats.

Are Your Assets or Retirement Savings Being Properly Managed and Protected?

Safeguarding and growing retirement savings and assets can be extraordinarily complicated. There are many potential estate planning and asset management tools that can potentially be leveraged to meet your goals. The team at 

 can advise you on your options and help you understand which combination of 

 might help you reach your desired retirement and asset preservation destination.

What Is an Asset Protection Trust?

Employee Retirement Income Security Act (ERISA)

 protects 401(k)s from creditors after a bankruptcy. One of the provisions of the Act prevents creditors from liquidating your retirement savings. This usually applies regardless of the amount held in the account, meaning even high-net-worth individuals with large 401(k)s won’t have them seized and sold off to pay back creditors.

The ERISA does not explicitly extend to self-funded traditional and Roth IRAs. Instead, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) 

 as of 2023. This limit changes periodically, and there are additional rules pertaining to rollover IRAs.

 to extend the full bankruptcy protection of ERISA to IRAs as well. People filing for bankruptcy who are concerned about shielding their retirement savings from creditors should consult with a bankruptcy attorney to learn more.

Why Are 401(k)s Exempt From Bankruptcy Liquidation?

The ERISA was passed to safeguard employee benefit plans and beneficiaries. It primarily deals with imposing fiduciary responsibilities on plan managers and setting minimum standards to protect the interests of people who would rely on those funds in retirement.

The government has an interest in safeguarding these types of plans because it means people will be less likely to rely solely on the government for income and benefits in retirement. Ensuring those plans are a safe haven for assets, including providing some protections from creditors, helps accomplish this goal. 

The added protection against creditors can potentially lead to abuse, which is why there are contingencies built into ERISA’s bankruptcy protections. Retirement savings accounts cannot be legally used reactively to shield assets from creditors for the purpose of avoiding the repayment of debt.

The Exceptions for Retirement Savings and Bankruptcy Vulnerabilities 

There are two primary scenarios in which a bankruptcy filer’s 401(k) may not be protected under the ERISA. These are:

Who Determines Whether Contributions Were Excessive or Fraudulent Conveyance?

Bankruptcy trustees are typically responsible for examining the debtor’s actions leading up to the bankruptcy filing. If the trustee doesn’t notice discrepancies, but creditors find signs of excess contributions or fraudulent conveyance, they can raise objections in bankruptcy court.

The ultimate decision on whether either occurred is up to the bankruptcy court, which is responsible for examining evidence, the debtor’s alleged motives and determining whether retirement funds should be seized or exempted.

What About Funds Rolled Over From an ERISA Account Into a BAPCPA Account?

Technically, under federal law, funds rolled over from an account shielded by ERISA, like a rollover IRA, should continue to receive full ERISA protection rather than the more limited BAPCPA protection. However, it’s important to consult with a bankruptcy or tax attorney to understand the full implications and ensure actions aren’t interpreted to be fraudulent conveyance.

Exemptions, Withdrawals and Tax Implications

Legally shielding assets in bankruptcy can be complicated. Debtors filing for bankruptcy are required to thoroughly claim and document all the exemptions they seek to utilize. Mistakes can potentially leave some assets vulnerable to creditors.

Money that is withdrawn from an exempt retirement savings plan will no longer be protected by state or federal law.

Seeking to avoid bankruptcy by withdrawing retirement savings to cover debt could end up being counterproductive.

There can also be serious tax ramifications for early withdrawals. Before making any decisions regarding early withdrawals, it’s likely in your best interest to seek professional advice from a qualified bankruptcy lawyer.

Client-Centric Retirement Savings Guidance in Phoenix

Retirement savers in Phoenix who are seeking 

 services can speak with the financial advisors at Fullerton Financial Planning by calling 

. People in all types of financial situations deserve a secure retirement, and our advisors are here to help. 

Is Your 401(k) Protected in Bankruptcy?

The list depends on the account or property type as well as the attributes of your trusts and estate. Some assets and financial accounts of value are designed to automatically sidestep probate by going straight to named beneficiaries. This can include all types of retirement accounts, like IRAs and 401(k)s, as well as life insurance policies.

Although these types of accounts are designed to make the change in ownership seamless after the passing of the original holder, there may still be scenarios where it’s beneficial to name a trust as the beneficiary for tax purposes.

Vehicles – unless they’re collectibles or of particularly high value – are another example of assets that likely don’t need to be included in a trust. The speed with which vehicles depreciate makes them dissimilar from the types of assets stored in trusts, which typically have the potential to gain value over time.

Everyday personal property also doesn’t usually need to be put into a trust, like the books on your bookshelf (unless they’re collectibles) or your dishes and cutlery. The total value of those types of everyday items isn’t normally high enough to have tax implications and there’s less likely to be serious disputes over the distribution of this type of personal property.

In most cases, families struggle to decide what to do with this type of personal property rather than fight over who gets household items after a loved one’s passing. 

It’s best to discuss your unique circumstances with an estate planning attorney experienced with trust strategies before deciding exactly what should or shouldn’t be included in your trusts.

Why Trust Structure May Influence Your Decisions

The features of revocable and irrevocable trusts may influence your decisions regarding what types of property should be included in the trust.

Revocable trusts are those in which the grantor (the person who establishes the trust) can alter, amend or revoke the trust. In other words, they retain control over the assets and can essentially function as the trustee. A revocable trust may become irrevocable on the grantor’s death.

High-value personal property, like collectibles or art, real estate and investment accounts may be ideal assets for a revocable trust because they can pass to beneficiaries on the grantor’s passing without probate. The downside is that the continued control of the assets by the grantor means they are still considered part of their estate during their life, which can have negative tax implications.

Irrevocable trusts can’t be easily changed or revoked during the grantor’s lifetime. They essentially relinquish control over the assets placed in the trust, which can have tax planning, Medicaid planning and asset protection benefits.

Certain death benefits, like life insurance policies, can be removed from the grantor’s taxable estate via an irrevocable trust, as can other high-value assets.

Many assets you might not put in your typical revocable or irrevocable trust may fit better in a specialized trust. You might also want to use different types of trusts tailored to your family situation or personal long-term goals.

For example, you may establish a special needs trust if you have a child or dependent who has a disability. Assets held in the trust won’t affect the beneficiary’s eligibility for means-tested government assistance.

When Might It Be Necessary to Put Accounts With Named Beneficiaries Into a Trust?

While these accounts can often bypass probate thanks to having a named beneficiary, they are still considered part of the decedent’s gross estate. This means the government will calculate those assets when determining whether the estate is subject to estate taxes.

Life insurance typically isn’t taxed like income for beneficiaries, but the death benefit is still calculated into the decedent’s estate value. This can potentially be avoided with an irrevocable life insurance trust.

Retirement accounts are a little more complicated in that the proceeds will be subject to income tax for the beneficiaries. Whether the retirement savings account is a traditional IRA or 401(k) or Roth account will also influence the tax implication for beneficiaries, as accounts funded with after-tax contributions will still provide tax-free distribution (although specific disbursement rules often apply).

Consult With a Phoenix Estate Planning Expert and Financial Advisor on Your Trust Options

Our team at Fullerton Financial Planning work closely with 

 services to Phoenix retirement savers and 

If you’d like to learn more about our comprehensive retirement planning services, call us at 

Which Assets Should or Should Not Be in a Trust?

Which sectors are best for your investment dollars in 2024 will be highly dependent on who you ask and how the year progresses. If you have questions about how to optimize and diversify your portfolio in the upcoming year, it’s likely in your best interest to speak with experienced 

investment managers and financial advisors

There's continued interest in technology, particularly in the realm of generative AI. This sector includes companies developing and 

. The focus may shift from big tech companies to those specializing in growth sectors like semiconductors and hardware, as well as small and mid-cap companies that offer 

Many companies may also be forced to invest in improving things like cybersecurity and digital infrastructure to counteract greater bandwidth demand and the increasing capabilities of bad actors. 

 a strong candidate for investment, especially companies that provide essential services and equipment. Funding in the healthcare space is expected to return, particularly when it comes to medical equipment and analytical tools. There's also growing interest in companies involved 

 and medical tech advancements, as well as novel treatments for diseases like Alzheimer's​​​​.

 from an end to the Federal Reserve's hiking cycle or a decline in rates in 2024. This sector might see increased demand for rental housing, making companies involved in home leasing and apartment investments attractive​​​​.

Companies in the basic materials sector, which produce essential components used across various industries, could see growth as they come out of a 

. This sector includes firms specializing in chemicals, metals and other fundamental materials​​.

Traditional players in the semiconductor space, particularly those involved in memory and personal computing, are 

. Companies that produce industrial-type semiconductors could become leaders if 2024 leads to inventory corrections​​.

If the U.S. avoids a recession and achieves a soft landing, cyclical sectors like materials, industrials and consumer discretionary could lead. Conversely, if a recession occurs, defensive sectors like healthcare, utilities and consumer staples might be more favorable​​. Investors should be cautious when making assumptions when there are still many unknowns about the upcoming year.

Depending on how 2024 progresses, there could potentially be growth in the service sector. This could include industries like entertainment, hospitality and leisure, where consumer spending can significantly impact company performance.

Companies involved in the construction, engineering and maintenance of infrastructure projects could benefit from large investments in infrastructure in the United States and globally. This sector covers a range of activities from transportation infrastructure to urban development.

You may have seen the term “cardboard box recession” occasionally thrown around in 2023, as well as worries on how it may have been a forbearer of reduced consumer purchases (things typically shipped in cardboard boxes). Potential improvements in cardboard boxes may hint toward strengthening manufacturing companies in 2024, 

. As with all sectors, growth is never guaranteed, and it will be necessary to watch how the next year unfolds for manufacturing.

Economic Performance May Significantly Influence Your Preferable Course of Action

The best markets for your portfolio may change as 2024 progresses and economic conditions change. There are a variety of macroeconomic factors that influence the performance of different sectors, including things like consumer spending, inflation and interest rates. While 

 can influence these factors, only time will tell what is going to happen.

For instance, technology and consumer discretionary sectors might thrive if the economy continues to grow, while more defensive sectors like healthcare and utilities could gain favor in a slowing economy. It's also crucial to consider emerging trends, such as advancements in artificial intelligence or shifts in energy sources, which could impact specific industries.

Investors who manage their own portfolios will need to stay informed about these trends and consider how different sectors might respond to ongoing economic changes. This kind of sector analysis can be a valuable tool for making informed investment decisions and diversifying portfolios.

Providing Guidance for Retirement Savers and Investors in Phoenix

Whether you’re a retiree, nearing retirement or busy with everyday life, closely following the health and performance of sectors and making quick, informed decisions might not be the way you prefer to spend your time. Making big investment decisions can have a significant impact on your future, and it’s often beneficial for investors to have an informed and knowledgeable professional in their corner for assistance and guidance.

The team at Fullerton Financial Planning is committed to helping all types of investors navigate the uncertainties of 2024. Don’t hesitate to call us at 

 Investment Sectors to Watch in 2024 


Even the most financially stable households frequently struggle with debt, often because of life factors that are entirely out of their control or necessity. Things like medical debt are sometimes unavoidable. Other types of debts, like auto loans, home loans or student loans, are necessary to achieve life goals and maintain the lifestyle you want.

Being proactive about debt before it accrues and developing a plan to manage existing debts can help restore your peace of mind and protect your retirement dreams. 

Budgeting is maybe the most powerful tool households have for avoiding debt in the first place or getting it under control once it’s been incurred. Precisely knowing your monthly monetary inflows and outflows allows you to craft a budget and pay down debt at a pace that works for you. 

Conveniences of modern life – like streaming and subscription services – have complicated budgeting. Many households forget about some of their recurring monthly payments or simply have so many it’s difficult to keep track. A variety of tools and trackers have been developed specifically to 

 their paid subscriptions. Going through the past six months of your credit card and checking statements may also help you develop a clear picture of your income and expenses. 

Sit down with your significant other or family members and have an honest conversation about your debt elimination goals and where you can make sacrifices. If you’re like most people, you have some subscriptions you hardly use or can live without. Seemingly small sacrifices (like making your own coffee instead of going to Starbucks every morning) will add up. 

Emergency expenses are one of the most common sources of unavoidable debt. Medical debt is often one of the first things that come to mind for people, especially if you have a high-deductible plan or require care that’s not covered by your health insurance, but health emergencies are far from the only kind that can leave you in debt. Plumbing emergencies, roof failures and car accidents are just a handful of examples of common, unexpected and large expenses that often force people to rely on high-interest financing. 

Emergency funds are great to have if you or your spouse ever lose a job – but they’re also a relief if you ever have a house, health or vehicle emergency that might result in unexpected five-figure expenses. Having the liquid capital to avoid a loan can help you dodge debt. 

Think Carefully About Your Credit Card Strategy 

You might see some debt avoidance or elimination “experts” speak in absolutes about credit cards. How credit cards affect your debt situation is entirely dependent on how you use them and whether you pay them off each month. Responsible credit card use can help bolster your credit and makes it easier to track expenses. Irresponsible credit card use, or simply forgetting to make a payment one month, can cause ripples that turn into tsunamis if you’re not vigilant. Automating payments and making a habit of checking your statements can help you avoid some of the pitfalls and benefit from the convenience of credit cards. 

Not all debts are made equal. There may be compelling reasons to pay down high-interest debts first or smaller debts before moving on to larger, more long-term debts. Your loan repayment strategy may be unique to you and your income or life situation. Discussing your debts with a financial planning or retirement planning professional can be beneficial in this regard. They can explain the advantages and potential disadvantages to certain strategies so you can make an informed decision about how you want to tackle your debts. 

Many people nearing retirement age and those recently retired are living in the same home in which they raised their family. They’re also usually empty nesters. Emotional attachment, community, neighbors and memories are all compelling reasons to stay put – but those factors might not outweigh the benefits of downsizing. You might want the extra rooms so your children and grandchildren will feel incentivized to visit – but in a city like Phoenix there are literally dozens of hotels and resorts in every price point, and a family visit once or twice a year might not justify the added expense (and work) of living in more home than you currently need. 

Homes aren’t the only things that can be downsized. Do you need two vehicles? Are there work-related expenses you’re still paying for? Take a holistic look at your expenses and identify opportunities to downsize – you might find relief by embracing less.

Work With an Estate Planner or Retirement Planner on a Healthcare Plan 

Healthcare debt and ongoing expenses (like at-home care or memory care) often represent the largest expense for older retirees. These types of health-related costs can quickly drain retirement savings or grow debt. There are a variety of potential Medicare or Medicaid strategies and estate planning tools that can help you prepare for these costs and avoid debt without negatively impacting your current quality of life. At Fullerton Financial Planning, we’ve embraced an approach that combines estate planning and retirement planning to help ensure our clients maintain their quality of life regardless of what the future holds. 

Seek Professional Advice on Debt Avoidance and Debt Elimination in Phoenix

Even burdensome debt can be managed and eventually eliminated through financial discipline, but it can’t happen over night. If you want to get out of debt before you begin saving for retirement in earnest or you just want to enter retirement without interest payments eating into your nest egg, the financial planners at Fullerton Financial Planning are here to help. 

 Strategies to Avoid Unwanted Debts 

When it comes to planning for your financial future, you can work with a variety of professionals. Two of the most common are financial planners and retirement planners. While both can help you achieve your financial goals, they have different areas of expertise and focus.

Financial Planners Guide You Through Major Life Events

A financial planner is a professional who helps individuals and families create a comprehensive financial plan that covers all aspects of their finances. They typically work with clients over many years to help them achieve their financial goals. A financial planner can help you with a wide range of financial topics, including:

It’s good to meet with your financial planner before any large life change, like a wedding, the birth of a child, receiving an inheritance or changing jobs. Financial planners use their expertise to analyze your financial situation and make recommendations on how to make decisions to reach your unique goals.

Financial planners may help you create a budget, invest your money or plan for retirement. They can also help you navigate complex financial situations, such as buying a home or starting a business.

Retirement Planners Help You Achieve an Independent Lifestyle After Work

A retirement planner, on the other hand, is a professional who focuses specifically on helping clients plan for retirement. They help individuals and couples create a retirement plan to address their financial needs as they approach, enter and enjoy retirement. This includes analyzing your current financial situation, determining your retirement income needs and creating a plan to help you maintain those funds.

Retirement planners can help you with a wide range of retirement planning matters, including:

Retirement planners use their expertise to help you plan for the unique financial challenges you may face in retirement. They can help you determine how much you need to save for retirement, what types of accounts to use and how to manage your retirement income. They can also help you plan for unexpected events, such as a medical emergency or the death of a spouse.

Key Differences between Financial Planners and Retirement Planners

While both financial planners and retirement planners can help you achieve your financial goals, they have different areas of expertise and focus. Here are some key differences between the two:

 Financial planners focus on your overall financial situation, while retirement planners focus specifically on your retirement needs, like Social Securing planning, Medicare and retirement income.

 Financial planners can help you with a wide range of financial matters, while retirement planners focus primarily on retirement planning — especially a strategy to make sure your retirement savings last throughout your retirement.

 Financial planning is a long-term process that can span many years, while retirement planning is typically focused on a shorter time frame, usually the five to fifteen years leading up to and during retirement.

 Financial planners have expertise in a wide range of financial matters, while retirement planners have specialized knowledge of retirement planning strategies, tax planning, estate planning and related savings products (annuities, life insurance, etc.).

Which One Should Phoenix Investors and Retirement Planners Choose?

When it comes to choosing between a financial planner and a retirement planner, it depends on your individual needs and goals. If you need help with a wide range of financial matters, such as investing, budgeting and estate planning, a financial planner may be the right choice for you. If you are close to retirement or are already retired and need help specifically with retirement planning matters, a retirement planner may be the better option.

Working with the right company can ensure you don’t have to choose between one or the other. Fullerton Financial Planning offers a variety of services, including financial planning, investment management, retirement planning and Medicare planning.

 Regardless of which type of planner you choose, it's important to work with someone who is qualified, experienced and trustworthy. Fullerton Financial Planning is committed to helping you maintain the independent lifestyle you want throughout your retirement. To find out more call us today at 

 Do You Need a Financial Planner or a Retirement Planner? 

Potentially yes – in two important ways. First, the extra income you earn during those final working years can go toward savings and help sustain you in retirement. Properly invested, those dollars can continue growing long into the future. Second, you can put off drawing on benefits and retirement savings, allowing them to last longer.

Some retirement savings accounts, like 401(k)s, do have required minimum disbursements (RMDs) starting at age 72. Even if you continue working past 72, you will still be required to take the RMD. However, there is no age restriction for 401(k) contributions, so you can continue adding to your 401(k) even after you start taking RMDs.

Whether it’s in an older worker’s best interest to continue working and contributing to their retirement savings plan depends on their current savings and tax planning strategy. There is a truly diverse array of potential retirement savings and tax strategies that savers with unique situations may leverage, so there’s no one right answer to the question.

As a basic truth of savings, especially for people who are worried they haven’t saved enough during their working years to maintain their quality of life for potentially decades of retirement, saving more and waiting to draw down on those savings is generally a good thing.

If you and/or your spouse aren’t sure when to start claiming your Social Security benefit, you may want to read our 

. This is an incredibly complicated subject, and regardless of what you decide, you shouldn’t make the choice on a whim without considering the advantages and disadvantages of your choice.

There is a significant percentage of older workers who benefit greatly from working a few extra years to permanently bolster their Social Security payments via Delayed Retirement Credits. This is an especially powerful tool if your work history over the past several decades has gaps, or you have concerns about being able to maintain your quality of life based on your current estimation of your SS benefit.

These Delayed Retirement Credits accrue for every month you delay collecting your Social Security retirement benefit up to the age of 70. If you were born in 1943 or later, you can get an eight percent per year rate of increase (.66 percent increase per month) for four years if you forego collecting your full benefit at age 66 or the reduced benefit earlier.

 of birth years to rate of increase on the Social Security Administration’s website.

Whether work is actually good for you depends largely on how much you enjoy your job, your outlook on the value of staying busy and your physical activity level. If your job is sedentary, stressful and it makes you unhappy, this “benefit” might not apply to you at all.

However, some potential risks of retirement are isolation and a steep drop in regular physical activity, both of which can have negative effects on retirees mentally and physically. If work is keeping you active, engaged and stimulated, it may have a net positive impact on your overall health and wellness.

Can the Mental Stimulation of Work Slow Cognitive Decline?

 “cognitively stimulating work and activities” can 

 cognitive decline and some types of dementia. People are unique in all respects, including brain health, hereditary risks, mental acuity and cognitive function, but the common consensus among medical professionals seems to be that mental stimulation and physical activity is a net benefit for cognitive function.

Work is far from the only activity that can help in this regard, and mental stimulation alone is not a miracle cure for cognitive decline. Seniors who have fully retired can engage in many non-employment-related mentally stimulating activities, such as reading, playing games or learning a new skill to lower their risk of developing cognitive impairment or dementia. Still, if you are worried about cognitive function, delaying your retirement may be one way to combat it.

Staying healthy both mentally and physically may also reduce your need to spend your retirement savings on health care. The longer you can put off things like assisted living, memory care and expensive medical interventions, the better off you will be financially. 

Older workers in Phoenix who are looking at their retirement savings options may benefit from the assistance of 

 would be happy to discuss the potential advantages and disadvantages of delaying retirement based on your unique financial circumstances and goals. Call us at 

 Can Delaying Your Retirement Actually Benefit You? 

Contract agreements and commodity deliveries for a specific date can be bought and sold on special auction markets known as futures markets. These “futures” are bought and sold at a specific price today for delivery in the future. People can make money on futures by buying something today for less than what it will be worth in the future when the delivery is due. 

Agricultural producers, like farmers, often take advantage of futures to secure stable revenue. Locking in a sale price at today’s rate may insulate them from instability or price drops in the future.

However, futures trading is not a risk-free proposition. The opposite can occur, with the value of the crop being higher when it’s delivered, resulting in a loss of potential profits. 

What Does It Mean to “Go Long” on a Futures Trade?

Going long on a futures trade means you’re making a bet that the price of a commodity or equity will be higher at a future date. For example, you buy a single near-month NYMEX Brent Crude Oil Futures contract at $90. Next week the price of crude oil goes up, causing your single futures contract value to increase to $95. You could sell the contract for a $5 profit. If the price of crude oil goes down instead of up and your contract is only worth $85, you will lose $5 if you exit your position.

Futures contracts have greater potential for profit and risk for loss than traditional equity trading due to leveraging. An investor might be able to open a futures contract position for 1,000 barrels of oil by “depositing” just 30 percent of the contract’s value. This means you can open a $50,000 futures position with just $15,000. The profits you would take (or the loss) would be based on the full $50,000, not just your $15,000 deposit. This is what’s known as “leverage,” and it can be a powerful tool of wealth creation or destruction depending on how it's used. 

Businesses Can Use Futures to Hedge Against Risks Like Price Fluctuations 

Crude oil is a good example of a commodity that experiences sometimes rapid price fluctuations. These fluctuations can make it difficult for companies that use or produce crude oil in large quantities to accurately predict business performance. Oil producers may use futures to hedge against price changes:

By selling the futures at today’s price, the oil company can lock in their revenue. It may turn out that in 12 months the cost of crude will have gone up, not down, but the company may value predictability over the risks posed by unpredictability. 

International companies may take similar actions with currency futures, allowing them to lock in predictable exchange rates. 

How Is Hedging Different Than Speculation? 

“Hedge” funds don’t always hedge in the way a farmer or oil company might. They often make money by “speculating” with futures contracts. They can make use of leverage to actively trade futures contracts at a high volume based on the expertise of their traders. These traders have extensive experience predicting markets by looking for signs and trends that point to movement in the price of futures. They make highly leveraged long or short bets based on whether those futures will increase or decrease in value. 

Yes – investors can make futures bets on how the stock market will perform. Index futures, like S&P 500 futures, are particularly popular. The idea is basically the same as commodity futures where investors are making a bet that the index will increase or decrease in value by a given date. 

If you’re a Phoenix worker or soon-to-be retiree seeking help growing your retirement savings, Fullerton Financial Planning is here to help. Our advisors put our clients’ interests first and have extensive experience crafting risk management and investment strategies for Phoenix retirement savers.

Schedule a consultation with our financial planners by calling us at (623) 974-0300.

 What Is Futures Trading? 

A 401(k) is a retirement savings plan facilitated by an employer and managed by a third-party financial institution. Employees choose what percentage of their income they want their employer to contribute on their behalf. The money is deducted from the employee’s paycheck just like tax withholding. 

This method of retirement savings has helped millions of American workers prepare for retirement. It is far easier to save when you don’t have to make a conscious effort to do it on a regular basis. This set-it-and-forget-it approach to retirement savings (and investing) frequently leads to better outcomes in the long run. 

What Is a Tax-Advantaged Retirement Plan? 

Many retirement accounts offer some kind of tax advantage, including 401(k)s. Workers who use traditional 401(k) plans are making pre-tax contributions. That means the percentage of your income that’s being deposited into your 401(k) doesn’t have any taxes removed from it. At the end of the year, you don’t have to pay taxes on your 401(k) contributions, even though technically all those contributions come from your income. 

Everyone eventually does have to pay tax on their 401(k) disbursements (distributions) and withdrawals, but those aren’t intended to start until you’re 59 ½ at the earliest. Technically, you can withdraw money from your 401(k) whenever you like, but there is a steep IRS penalty on top of normal income taxes.

Although there are exceptions that will exempt you from early withdrawal penalties, they won’t exempt early withdrawals from income taxes. 

Although there are self-directed 401(k)s that can be used like any other brokerage account or IRA, most retirement savers who use 401(k)s are most likely to be given a handful of potential investment choices. 

Before making decisions regarding 401(k) investment picks, it’s important to understand one’s own risk tolerance. Some investment options carry significantly higher risk but also more growth potential. Others are quite low risk but will also grow at a slower pace than the riskier investment options. 

As a rule of thumb, most young retirement investors start out with high-risk investment strategies and gravitate to lower-risk options the closer they get to retirement. Protecting the value of your 401(k) is often more important than growth by the time you reach retirement. 

Most 401(k)s allow you to invest in specific mutual funds. These funds often include an S&P 500 fund, a large-cap fund, a mid-cap fund, a small-cap fund, international investment funds and funds specifically intended to be large-growth and high-risk as well as low-growth and low-risk, among others. 

Many 401(k) providers also offer more hands-off investment options where you simply choose a preferred 

, and the company manages the rest. For example, you may be able to set your retirement age and adjustments will be made to your 401(k) portfolio without the need for you to ever intervene. These options automatically alter your risk exposure and grow your money without you ever needing to rebalance your fund allocations. 

Welcome to Our Financial Tips Blog

Challenges Faced by Family Businesses and Closely Held Enterprises in Transitioning Ownership and Management to the Next Generation

What Is an Asset Protection Trust?

Is Your 401(k) Protected in Bankruptcy?

Which Assets Should or Should Not Be in a Trust?

Investment Sectors to Watch in 2024

Strategies to Avoid Unwanted Debts

Do You Need a Financial Planner or a Retirement Planner?

Can Delaying Your Retirement Actually Benefit You?

What Is Futures Trading?

Understanding 401k and the Affects It Has on Your Financial Future

Deciding Who Should Inherit Your Wealth When You Die

Should You Retire with High-Yield Dividend Equities in Your Portfolio?