If you are trying to figure out how much money you need to save for retirement, there’s an easy rule of thumb that you can use: simply multiply your expected annual expenses in retirement by twenty-five.
For example, if you expect to spend $100,000 annually once you’re retired, you’ll want to have a $2.5 million portfolio saved up. If you’d like to play around with the numbers to estimate your own retirement needs, you can use this simple retirement calculator.
This retirement savings rule of thumb is based on the 1998 landmark study conducted by Carl Hubbard, Philip Cooley and Daniel Walz, in their seminal study known as the Trinity Study. They built on the 1994 work of William Bengen, who originally coined the ‘4% Rule’.
The Trinity Study evaluated safe retirement withdrawal rates, and found that 4% was sufficient for the majority of retirees. A safe withdrawal rate simply refers to the amount of money that can be taken out of an account and allow you to reasonably expect the portfolio to not fail, or run out of money. In this case, the 4% withdrawal rate refers to the amount of money that will be withdrawn from the balance of the retirement portfolio in the first year of retirement. In subsequent years, the balance withdrawn will simply be an inflation adjusted number based on the total dollar amount withdrawn the year prior.
The Trinity Study has become so well-known, that it has been adopted by hopeful retirees from all walks of life, including those hoping to retire early. The FIRE movement (Financial Independence, Retire Early) is a lifestyle movement with the goal of allowing individuals to retire as early and quickly as possible.
However, one detail that the movement is getting wrong and completely missing, is the fact that the Trinity Study’s 4% rule of thumb was based on a 30 year retirement period. This time horizon was determined to be on the conservative end of retirements by the authors of the study. If you work until you’re 65, having a 30 year retirement seems pretty reasonable. I don’t think many would argue that living until the age of 95 is a short life by any means.
The problem arises due to the FIRE movement seeking a much longer retirement period. If you retire at 45 years old, you may need a portfolio that will survive another 45 to 50 years in order to avoid running out of money. In this case, making a judgement error could end up meaning re-entering the workforce at an advanced age. For this reason, relying on a 4% withdrawal rate is an extremely risky decision if you plan to retire early.
This begs the question of what a more appropriate withdrawal rate is if you plan to retire early. The answer is that it depends. In general, the study found that as the balance between stocks and bonds shifts towards equities, a portfolio is more likely to withstand the test of time. So inherently, your risk tolerance will need to be factored into the equation. If you are comfortable with 75%+ of your portfolio being in stocks (and stomaching the increased risk), you might be safe with a 3% withdrawal rate. If you prefer less volatile investments, a lower rate is more conservative.
This is bad news for a lot of you hoping to retire early.
For one, it would mean having to save an additional $833,000 if you hope to spend $100,000 annually like in the example above. Unless you are an exceptionally high earner, it’ll likely mean having to work for several additional years or having to continue to earn additional income even after retirement.
With the buzz surrounding the gig economy and the seemingly endless ‘side-hustle’ opportunities available, this seems like a surmountable hurdle. The deficit in retirement savings required also highlights the impact of having to save for retirement as efficiently as possible.
This means fully taking advantage of your 401(k), IRA, and other tax-advantaged accounts. It also means evaluating whether it makes sense to refinance your student loans or not. Avoiding credit card interest fees and other forms of high interest debt are a must. In addition, maximizing your earning potential will also help safeguard your nest egg from market turbulence and economic uncertainty.
To build wealth, you have more potential to increase income than cute expenses.
TheFinanceTwins.com
Just as important, you’ll also want to avoid making costly investment mistakes. One that comes to mind is erroneously viewing your vehicle as a sound investment. Another pitfall is picking individual stocks in lieu of index funds or ETFs. To set yourself up for success, minimizing fees and diversifying your investments is the name of the game.
Does all of this mean that the 4% rule is futile and should be completely ignored? Absolutely not. The authors of the Trinity Study ran simulations to find what the safe withdrawal rate would be for varying time horizons. But at the end of the day, they were just that: simulations. Even if you only had an expected 15 year retirement and used a conservative withdrawal rate, there is always the chance that your portfolio could fail. The same is true in the opposite direction: there’s always the chance that a 4% withdrawal could be sufficient for a 50 year retirement.
The question you have to answer is whether you are comfortable taking that risk. I know I’m not.
There are many financial gurus out there that tell you how much to save for retirement, but how did they come up with that number? Honestly they are all just using each others guesses, but as financial advisors we need to do better. While others guess that you should save 10, 12,15% for retirement we can actually figure out how much you should save…to the penny! The first thing we want to know is how much income are you looking for in retirement? Typically we say that you should aim to have 75% of your current income replaced for retirement. The reason is that social security and other savings may make up the difference. Today we will calculate how much a 30 year old couple should save for retirement given that they each have income of $50,ooo per year. We will adjust this to account for inflation and make some assumptions about their retirement age and life expectancy. After calculating this along with expected returns we can see that they need to save 11.9% of their income yearly to have 75% of their income in retirement. We love doing this for our clients and if you are considering a place for your retirement investments then we hope you will consider jazzWealth.com We’re an investing service that also helps you keep your dough straight. We’ll manage your retirement investments and, using NestEgg we can help you with every penny! —Ready to subscribe— https://www.youtube.com/jazzwealth?su… For more information visit: www.JazzWealth.com — Instagram @jazzWealth — Facebook https://www.facebook.com/JazzWealth/ — Twitter @jazzWealth Investment related questions 📧 Dustin@JazzWealth.com Business Affairs 📧Carolyn@JazzWealth.com
Are you wondering about those updated per diem rates? The new per-diem numbers are now out, effective October 1, 2019. These numbers are to be used for per-diem allowances paid to any employee on or after October 1, 2019, for travel away from home. The new rates include those for the transportation industry; the rate for the incidental expenses; and the rates and list of high-cost localities for purposes of the high-low substantiation method.
I know, that sounds complicated. But it’s intended to keep things simple. The Internal Revenue Service (IRS) allows the use of per diem (that’s Latin meaning “for each day” – remember, lawyers love Latin) rates to make reimbursements easier for employers and employees. Per diem rates are a fixed amount paid to employees to compensate for lodging, meals, and incidental expenses incurred when traveling on business rather than using actual expenses.
Here’s how it typically works: A per diem rate can be used by an employer to reimburse employees for combined lodging and meal costs, or meal costs alone. Per diem payments are not considered part of the employee’s wages for tax purposes so long as the payments are equal to, or less than the federal per diem rate, and the employee provides an expense report. If the employee doesn’t provide a complete expense report, the payments will be taxable to the employee. Similarly, any payments which are more than the per diem rate will also be taxable.
The reimbursement piece is essential. Remember that for the 2019 tax year, unreimbursed job expenses are not deductible. The Tax Cuts and Jobs Act (TCJA) eliminated unreimbursed job expenses and miscellaneous itemized deductions subject to the 2% floor for the tax years 2018 through 2025. Those expenses include unreimbursed travel and mileage.
That also means that the business standard mileage rate (you’ll find the 2019 rate here) cannot be used to deduct unreimbursed employee travel expenses for the 2018 through 2025 tax years. The IRS has clarified, however, that members of a reserve component of the Armed Forces of the United States, state or local government officials paid on a fee basis, and certain performing artists may still deduct unreimbursed employee travel expenses as an adjustment to income on the front page of the 1040; in other words, those folks can continue to use the business standard mileage rate. For details, you can check out Notice 2018-42 (downloads as a PDF).
What about self-employed taxpayers? The good news is that they can still deduct business-related expenses. However, the per diem rates aren’t as useful for self-employed taxpayers because they can only use the per diem rates for meal costs. Realistically, that means that self-employed taxpayers must continue to keep excellent records and use exact numbers.
As of October 1, 2019, the special meals and incidental expenses (M&IE) per diem rates for taxpayers in the transportation industry are $66 for any locality of travel in the continental United States and $71 for any locality of travel outside the continental United States; those rates are slightly more than they were last year. The per diem rate for meals & incidental expenses (M&IE) includes all meals, room service, laundry, dry cleaning, and pressing of clothing, and fees and tips for persons who provide services, such as food servers and luggage handlers.
The rate for incidental expenses only is $5 per day, no matter the location. Incidental expenses include fees and tips paid at lodging, including porters and hotel staff. It’s worth noting that transportation between where you sleep or work and where you eat, as well as the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings, are no longer included in incidental expenses. If you want to snag a break for those, and you use the per diem rates, you may request that your employer reimburse you.
That’s good advice across the board: If you previously deducted those unreimbursed job expenses and can no longer do so under the TCJA, ask your employer about potential reimbursements. Companies might not have considered the need for specific reimbursement policies before the new tax law, but would likely not want to lose a good employee over a few dollars – especially when those dollars are important to the employee.
Of course, since the cost of travel can vary depending on where – and when – you’re going, there are special rates for certain destinations. For purposes of the high-low substantiation method, the per diem rates are $297 for travel to any high-cost locality and $200 for travel to any other locality within the continental United States. The meals & incidental expenses only per diem for travel to those destinations is $71 for travel to a high-cost locality and $60 for travel to any other locality within the continental United States.
You can find the list of high-cost localities for all or part of the calendar year – including the applicable rates – in the most recent IRS notice. As you can imagine, high cost of living areas like San Francisco, Boston, New York City, and the District of Columbia continue to make the list. There are, however, a few noteworthy changes, including:
The following localities have been added to the list of high-cost localities: Mill Valley/San Rafael/Novato, California; Crested Butte/Gunnison, Colorado; Petoskey, Michigan; Big Sky/West Yellowstone/Gardiner, Montana; Carlsbad, New Mexico; Nashville, Tennessee; and Midland/Odessa, Texas.
The following localities have been removed from the list of high-cost localities: Los Angeles, California; San Diego, California; Duluth, Minnesota; Moab, Utah; and Virginia Beach, Virginia.
The following localities have changed the portion of the year in which they are high-cost localities (meaning that seasonal rates apply): Napa, California; Santa Barbara, California; Denver, Colorado; Vail, Colorado; Washington D.C., District of Columbia; Key West, Florida; Jekyll Island/Brunswick, Georgia; New York City, New York; Portland, Oregon; Philadelphia, Pennsylvania; Pecos, Texas; Vancouver, Washington; and Jackson/Pinedale, Wyoming.
You can find the entire high-cost localities list, together with other per diem information, in Notice 2019-55 (downloads as a PDF). To find the federal government per diem rates by locality name or zip code, head over to the General Services Administration (GSA) website.
Years ago, I found myself sitting in law school in Moot Court wearing an oversized itchy blue suit. It was a horrible experience. In a desperate attempt to avoid anything like that in the future, I enrolled in a tax course. I loved it. I signed up for another. Before I knew it, in addition to my JD, I earned an LL.M Taxation. While at law school, I interned at the estates attorney division of the IRS. At IRS, I participated in the review and audit of federal estate tax returns. At one such audit, opposing counsel read my report, looked at his file and said, “Gentlemen, she’s exactly right.” I nearly fainted. It was a short jump from there to practicing, teaching, writing and breathing tax. Just like that, Taxgirl® was born.
Per Diem is one of the largest tax deductions available to owner-operator truck drivers. Effective October 1, 2018, the daily rate was increased. In this video, we discuss Per Diem and how it will affect owner-operators.
Over the past few years, societal impact has been growing as an area of interest for businesses. Business leaders, myself included, have voiced the belief that businesses should have a purpose beyond profits, and uphold a responsibility to society and the environment.
Although this school of thought is sometimes met with skepticism from those who doubt the commitment of businesses to do good, there is new research suggesting that businesses are actually taking significant action to improve their impact on society and the environment.
According to a new report from Deloitte Global, societal impact has become the most important factor organizations use to evaluate their annual performances, outranking financial performance and employee satisfaction. These findings are based on a survey of more than 2,000 C-suite executives across 19 countries. This shows a shift, even just from last year’s survey report, in which executives expressed uncertainty about how they could influence the direction of Industry 4.0 and its impact on society.
What is driving this change? There is no one answer. Almost half of executives surveyed (46 percent) reported that their efforts have been motivated by the quest to create new revenue streams, and a similar percentage said that initiatives that have a positive societal impact are necessary for sustaining or growing their businesses. An organization’s cultures and policies were also cited as motivation (43 percent).
External pressure continues to be a major driver as well. According to Deloitte Global’s series of inclusive growth surveys, some of this drive comes more from public sentiment, which is increasingly influencing business leaders’ decisions related to societal impact by encouraging them to reevaluate their strategies.
Purpose in action
When it comes to societal impact, businesses are beginning to put actions behind their words. Seventy-three percent of surveyed CXOs report having changed or developed products or services in the past year to generate positive societal impact. What’s more, 53 percent say they successfully generated new revenue streams from these socially conscious offerings.
While some leaders have started to see profits from positive societal goods and services, there is disagreement over the question of whether initiatives meant to benefit society also benefit bottom lines. Fifty-two percent see societal initiatives as generally reducing profitability; 48 percent said that such initiatives boost the bottom line.
Despite these concerns, leaders report a commitment to initiatives that benefit society. There’s probably a short term vs longer term element in this regarding the sustainability of business which may have influenced the answers.
Strategically integrated
Beyond products, services, and new revenue streams, leaders are integrating societal impact into their core strategies. Executives say they have been particularly effective preparing for the impact that Industry 4.0 solutions will have on society. They’re also building external partnerships and joint ventures, and strengthening ecosystem relationships to make a greater impact.
Whether driven by finding new sources of revenue, or the need to respond to external pressures, businesses across all industries seem to be moving towards improving their societal impact. It is heartening to see that leaders are incorporating these considerations into their strategies, as well as operations. When societal impact is seen to be an integral part of a business’s makeup, the most meaningful results can be achieved.
David Cruickshank was elected into the role of Chairman of Deloitte’s global organization, Deloitte Touche Tohmatsu Limited, in June 2015 having served on its Global Board for eight years from 2007. Prior to this, he was Chairman of the UK member firm from 2007-2015. He is a Chartered Accountant and a graduate in business and economics from the University of Edinburgh. David is co-chair of the World Economic Forum’s Partnering Against Corruption Initiative and a Board Member of the Social Progress Imperative.
Today, many firms are active on social media, but not all of them are experiencing transformational change and return on investment. Why do some businesses succeed, while others fail? Join us for a fireside chat on why Social Business has become too important to delegate completely to a junior social marketing team and why going forward, CEOs, CMOs, management teams, and boards must personally own and drive Social Business strategy and re-architect traditional business models and client engagement models.
Fireside chat with Clara Shih, CEO and Co-Founder, Hearsay Social and Kristin Lemkau, CMO, JPMorgan Chase.
A little less than two-thirds of Americans want to start their own business. Perhaps surprisingly, this is true among both younger and older workers. Like the drive to write a book ( 81% of Americans) or work as a full time freelancer (soon to be half of all workers), starting your own business is a widely shared dream.
For good reason. People who work for themselves tend to love it. Although it comes with the complexity of having to manage every piece of an operation, as well as the stress of knowing that success rides completely on your own shoulders, there’s nothing quite like being your own boss.
Once you have your idea set, you need to do your research.
Starting your business will inevitably be a learning experience, but you want to get as much information as you can beforehand. So take some time to study your planned market. Ask questions like:
• What kind of competition will you face?
• Who is your target consumer?
• Where will you locate your business?
• What are the logistical and practical concerns about that location?
• What do consumers like and dislike about the existing market for your product?
• What do consumers say they want right now?
• What kind of spending power does your target consumer have?
Your market will be different depending on the nature of your business venture. A corner store has entirely different demographics and challenges than a web-based service vendor. In both cases, though, it pays to know your audience. Literally.
2. Write a Business Plan
The business plan is the blueprint for your company. It’s where you’ll apply your research and planning into one document that describes in detail the who, what, when, where, how and why of your new business. In it you will address issues such as:
• Who you will market to;
• What you plan to sell;
• When you anticipate hitting certain benchmarks, your timeline for development;
• Where you will locate this business, whether online or brick and mortar;
• How you will operate this business day-to-day;
• Why this business, what opportunity did you see in the market.
Your business plan should also address critical issues such as:
• Monetization and cash flow. How do you anticipate making your money and turning a profit?
• Specific challenges you anticipate and how you will overcome them.
• What will it take, step by step, to operate this business and create this product?
The business plan article linked above goes into more detail, and the Small Business Association has a template here. Both are worth reading in further detail, because starting a business without a business plan is like setting off on a road trip without a map or GPS.
And, of course, don’t forget to pick a terrific name.
3. Get Feedback
Now stop.
Writing your business plan should be exhausting. This should be a detail-oriented document that takes a hard look at your planned venture and how, precisely, it will work. If you’ve done it right, by now you should be ready to tear into the building phase of your new business.
Instead, take a step back and solicit feedback. Call friends, family and colleagues who might have some knowledge of the industry you’d like to enter. Seek out mentors or professional guidance if possible. Get their opinion of your business plan. They might have questions you didn’t think of or notice something that slipped by you.
Hopefully this business will be around for years to come. You can afford a small delay while you get a few more eyes on your proposal.
4. Find the Money
Cards on the table, this is the hardest part for most entrepreneurs.
Not every business needs a lot of startup capital, but you will almost certainly need some. How much will depend a lot on what you want to do. A web-based services firm might require very little in the way of funding, while a retail store can require a substantial amount of cash to pay for rent, inventory and staff.
This is something every entrepreneur faces, and small business owners turn to a variety of sources for startup capital. No matter where you get funding, expect to invest at least some of your own money. Lenders and investors will want to see that you have “skin in the game,” to use industry speak. Beyond your personal accounts, called self-funding, small business owners also rely on:
Bank Loans
Many businesses start with a small business loan from local banks.
You will need to have all of your paperwork in order to pursue a loan. Expect the institution to ask for details from your business plan, including monetization strategy and financial projections. If you have trouble securing a loan, you can turn to the Small Business Association which runs a loan guarantee program to help make this type of financing more accessible.
Personal Loans
While not an option for every entrepreneur, many people do rely on loans from family and friends.
If possible this is typically better than securing a loan through the bank. You’ll likely pay little interest and will have more generous terms in case of default. However, it also depends on knowing people who have that kind of cash lying around.
Grants
While not lavishly funded, programs such as Grants.gov operate small business grants for entrepreneurs.
Investment
Professional investors typically look for potentially large-growth business opportunities. Depending on the nature of your intended company, this could be a good fit for you.
A venture capital firm is unlikely to sink money into a small legal practice or restaurant. These tend to be low-growth relative to the returns that they seek. However, someone looking to launch a new product or web-enabled service, something with high potential scalability, might be a good fit for the private investment model.
Local angel investors, such as those found through AngelList, are more likely to invest in a regionally focused business. While beyond the scope of this article, you can learn more about finding private investors here.
Crowdfunding
Crowdfunding has become an increasingly common source of startup capital for small businesses. This model tends to reward retail style projects (someone looking to create a specific thing that catches the public’s eye). It can also be an excellent way to hone your sales pitch to a general audience.
For more information on financing, the SBA has a comprehensive information sheet on common sources of funding here.
5. Choose a Location
Where you locate may determine some of your legal obligations and paperwork, so it’s best to get that done at this step.
As much as possible you should try and do this with specificity. While you’re not ready to sign a lease just yet, the closer you can come to a specific address the better. Meanwhile, if you’ll be starting this company online, now’s the time to pick up your domain if you haven’t already.
Pay attention to local laws! We cannot overemphasize this. The best location can be killed off by a zoning ordinance that makes your business illegal on that particular street corner. Municipal laws can be petty and confusing, so make absolutely sure your business is street legal.
6. Establish Legal and Tax Structures
If at all possible, at this step you should retain the services of a lawyer and/or accountant. You will absolutely want professional advice. Otherwise, you run the risk of missing details that come back to bite you down the road. We also must note that nothing here constitutes legal advice. This is just a general primer on what you need to know.
Now is when you’ll actually begin forming your business and filling out the necessary paperwork with federal, state and local governments. This can involve (but is not limited to):
Choosing Your Corporate Structure
There are many types of businesses you can form, including LLCs, S-Corporations, partnerships, sole proprietorships and more. Those listed here are the most common corporate forms for a small business. The right one for you will depend on issues like cash flow, number of participants and how you want to structure potential liability. You can read more about this issue here and here.
Register Your Business
How you have to register, and with who, will depend on your specific corporate form. However, if you have formed a corporation of some sort you will have to file articles of incorporation to create this legal structure. For more information on registering your business, see this resource.
Register With State and Federal Tax Agencies
You will need a tax number and may need an employer ID number. The SBA has a guide to finding and filling out your appropriate tax forms here.
Determine Any Licenses and Permits That You Need
Depending on the nature of your business, you may need a license to operate. The SBA has a database of federal and state licensing requirements here.
Be certain to also look up zoning and location-based regulations. You may need additional permits based on where you’ve chosen to operate your business. These are typically a city-level concern.
7. Open Bank Accounts and Sign Leases
Once your business has been properly formed you can begin to act in its name. Now is when you can start actually executing on many of the opportunities you’ve already lined up.
Open bank accounts in your new business’ name. Take out a corporate credit card and, if your bank offers it, work to pre-establish a line of credit. You will find this easier to do now that your company exists and has established funding, although it may not become an option until you have operated for some time.
Go out and actually get the funding you secured earlier, because now you have someplace to put it. You should have already gotten the “yes” by now from someone, but you don’t want to deposit corporate seed money into your personal checking account. This may technically constitute a felony that rhymes with “schmembezzlement,” and is poor form either way.
With the money in hand and a functional checkbook, now is when you sign the necessary leases on real estate.
8. Take Care of Little Details
Once again step back and take stock, because the best ideas can be broken by the smallest details.
Make sure your business has comprehensive insurance for issues ranging from fire to property damage and legal liability. Many business owners overlook that last issue, and it can be a career killer if someone slips and falls or even just decides they don’t like you.
If you will hire employees put a documented process in place for hiring and firing. Have your workers compensation and unemployment insurance paperwork filed and in order.
If you haven’t already, talk to both a lawyer and an accountant. This is especially critical if you will employ people. Even if you don’t formally retain an attorney, buy a few hours of an employment lawyer’s time to make sure you have your bases covered. Figure out how your business will do its accounting and have that system set up and operational, whether you’ll do it yourself or have hired a professional.
9. Start Making Things
Now, at long, exhaustive last, we get to the fun part. It’s time to start actually making things.
You have the money, you have the location. You have all of your paperwork filed and are legally bulletproof. Now begin making your product.
How you do this will, obviously, depend entirely on what you specifically do. A manufacturing company will need to source suppliers for raw materials and the necessary machinery. (Because you took our advice and checked out all the local laws you won’t need to worry about any noise complaints from the neighbors.) A retailer will source vendors and set up an inviting, fun storefront. A consultant will finish making her office look tasteful and professional.
A restaurateur should stock the kitchen, buy appliances and write out a menu.
The details of getting to work depend entirely on your industry and profession. Fortunately, you’ve got a well written business plan for figuring out what those details are. Whatever you do, though, now’s the time to start actually doing it.
10. Scale and Hire
Your business is operational. Now’s the time to think about how to keep the lights on.
Some businesses will require employees from the very beginning. A cafe, for example, is almost impossible to run alone. Those employees are part of your startup costs and will be with you from the very beginning. As your business grows you may have the luxury of hiring more people to take some of the work off your plate.
Now is also the time to begin marketing.
To be fair, this is something you should be considering all along. You should always think about how to get your business’ name out into the community. Don’t let up once the doors open. Look to social media, advertising, foot traffic and local networking to get people in. Talk with other businesses in the area about collaboration efforts.
This is where you get to be creative. This is the fun part of being an entrepreneur. If you’re at step 10 you’ve earned it. So enjoy, because this is your business.
Recently, I had the occasion to observe a group of employees who were working in a toxic work environment. I witnessed the decline of self-esteem in each one of them as they endured month after month of poor leadership and dysfunction in their workplace. I was truly amazed at the change to the countenance of each of these employees as their situation continually grew worse.
If one could have taken a before photo of these employees prior to their being in a toxic environment and then an after photo when they were months into it, the physical manifestations of the negativity they endured would be staggering. Slowly, I observed each of these employees reach their breaking point and one by one resign from the company. Each of them had good paying jobs with fabulous benefits, but the toxicity they dealt with each day was so unbearable that no amount of money would have made it worth the cost to their own self-worth.
They left their jobs without having new jobs lined up because they recognized that the toll the toxic environment was taking had become far too great to stay another day.
Many of you may not be in such an extreme toxic work environment that you are willing to quit your job before having secured a new one, but most will have the occasion to deal with some level of toxicity in the workplace and could benefit from a few tips on how to cope with it when it occurs.
I believe the most important thing is to recognize when working in a toxic environment is that it is NOT a reflection of who you truly are. Often times in a toxic workplace there is an abundance of tearing others down, passive aggressive leadership, destructive gossip, conniving politics, and abundant negativity. When you are surrounded by this daily it can really start to affect your own self-worth. It is imperative that you learn to separate the negativity you are swimming in daily from the reality of who you truly are. I personally think this demoralizing effect is the biggest danger to staying long-term in any toxic environment, and to combat this you will have to find ways to daily remind yourself that you are not a reflection of your current surroundings. Placing positive and uplifting quotes on the wall of your office or cubicle that will help keep your spirits lifted can be very helpful in these circumstances. Also, taking time out each workday to take a short walk by yourself is a great way to detach and allow for positive self-talk to remind yourself of the qualities you possess that make you amazing. Find ways to remind yourself of who you truly are.
Another important coping step is to realize that you cannot control what other people say and do, you can only control your own actions and reactions. The sooner you accept that the better for your own mental well-being. This realization allows you to let go of owning other people’s negative behavior and it empowers you to focus on improving yourself. The more you can focus on improving yourself in a negative environment the better, because when you finally get the opportunity to escape the situation you are in, you will get to take all the personal growth you have made along with you. No doubt that growth will help you to be even more successful as you move forward.
Finally, try to focus on turning your bad situation into a good learning experience. Most often our strongest personal growth comes from living through our most difficult situations. When you are working in a toxic environment, try to pay close attention to the lessons you can take away from the experience. Perhaps you can learn the qualities in a leader that you never want to emulate. Perhaps you can learn the management mistakes that you would not want to repeat if the opportunity for management ever comes your way. In every bad situation there is something you can learn that will help you become a better person, so focus on each lesson you are learning.
As difficult as a toxic work environment may be, never allow yourself to become less than who you are meant to be out of anger or spite for your current employer. Always conduct yourself with integrity and always put in your very best effort toward the job you were hired to do. It is easy to fall into the trap of giving up on the job, but the bottom line is that as long as you are taking a paycheck you have an obligation to give an honest day’s work.
Don’t allow yourself to justify personal bad behavior on the failures that exist your company’s leadership. I realize that at times it feels like the only way is to fight back in a toxic situation, but the reality is that doing so only hurts your own integrity. Know that your reputation will continue far beyond the company you are with today, and nothing is worth trading your integrity over.
Do your absolute best every day at your job and the word will get out to other companies of your incredible character and work ethic. People talk far more in the business world than you may realize, and the word of your positive or negative behavior will spread farther and wider than you may think, so never do anything that you need to be ashamed of.
Continue to search diligently for a better work environment to switch to, and be sure to let others know that you are interested in new opportunities for work. Then give your very best at work up to the very day when you can joyfully hand in your resignation letter and move on to bigger, better, and happier things.
~Amy Rees Anderson I share my insights as an entrepreneur turned mentor & angel investor (twitter: @amyreesanderson)
How comfortable are you with how much risk you’re taking in your 401(k)? Does your employer offer a Roth option? Are you getting the full employer match? Those are some of the pertinent questions you should be asking about your workplace retirement account, says Denis Higgins, a CPA with Edelstein Wealth Management in Boston.
Higgins looked at a new client’s 401(k) and saw he wasn’t getting the full employer match money because he frontloaded his contributions and the employer didn’t have a true-up provision to make him whole. There was nothing that could be done for that plan year, but management at the small healthcare company where he worked added a true-up provision for the next plan year, so the exec got thousands more in employer match money in his 401(k) account.
There’s no check engine light that goes on, so it’s easy to ignore a poorly tuned 401(k). Easy, but hazardous to your retirement wealth.
Here are some things to check for under the hood.
Check your plan documents. “Know that the plan rules are the rule book,” says Ed Slott, a retirement plan expert and CPA in Rockville Centre, New York. You should download a copy of your 401(k)’s summary plan description (SPD) so you have it to double-check what HR tells you. Does your plan have a brokerage window (you can invest in more than just what’s on the limited plan menu)? Does it allow in-service distributions where you can take penalty-free withdrawals at age 59 ½ even if you’re still working? Does it let you delay required distributions if you work past age 70 ½? Does it allow for traditional aftertax contributions that can help you (combined with your employer) save up to $56,000 a year? These are all provisions that the law allows for, but your employer plan might not.
Fine tune your contributions level. If you are relatively new on the job, you may have been automatically enrolled in your 401(k), with contributions set at just 3% of salary. That’s not enough to fund retirement and might not be enough to capture your full employer match. If money is tight, raise your contributions when you get your next raise. Check if your employer offers automatic escalation, which increases your contribution level for you. If you’re able to save big, aim to contribute the legal max: That’s $19,000 if you’re under 50 and $25,000 if you’re 50 or older (you usually must separately choose to make all or part of the $6,000 catch-up contribution).
Look into the Roth option. Check if your employer offers a Roth option. Instead of making pretax salary deferrals, you contribute on an aftertax basis. Roth money grows tax-free and comes out tax-free, giving you tax flexibility when you start taking money out.
Reassess your asset allocation. If you were automatically enrolled, your money is probably in a target date fund, which reduces your exposure to stocks as you age. That’s not a bad choice, if fees are reasonable. If you’re older and picked your own investments years ago, the bull market may have left you more heavily in stocks than you want. Use an asset allocation tool provided by your plan or a free one such as PersonalCapital.com.
Rebalance. Higgins recommends the auto-rebalancing feature that more employers are offering. “It takes out the emotional decisions,” he says. Otherwise, get quarterly statements and rebalance at least annually to keep on track. At the same time, you should reassess your risk level, taking into consideration any life changes, he adds.
Confirm your beneficiary designations. Remember it’s your beneficiary form—not your will or living trust—that controls who gets your 401(k) when you die. Make sure to name both primary and contingent (alternate) beneficiaries.
Run a lifetime income illustration. Have you modeled how long your 401(k) balance will last over your lifetime? “The challenge a lot of people are having is that they’ve built up this war chest and don’t have any idea what to do next,” says Joseph Adams, an employee benefits lawyer with Winston & Strawn in Chicago. Some employer plans include lifetime income illustrations on your statement. If not, run one on your own. Vanguard has a free retirement income calculator here.
Fees. Some target date funds charge less than 0.10% of assets a year, while others charge more than 1%. You can see how the fees in your company’s 401(k) compare overall at Brightscope.com. Analyze your own fund fees at Personal Capital or FeeX.com.
Author’s note: This is an updated version of an article that ran in 2017.
I’m an associate editor on the Money team at Forbes based in Fairfield County, Connecticut, leading Forbes’ retirement coverage. I manage contributors who cover retirement and wealth management. Since I joined Forbes in 1997, my favorite stories have been on how people fuel their passions (historic preservation, open space, art, for example) by exploiting the tax code. I also get into the nitty-gritty of retirement account rules, estate planning and strategic charitable giving. My favorite Forbes business trip: to Plano, Ill. to report on the restoration of Ludwig Mies van der Rohe’s Farnsworth House, then owned by a British baron. Live well. Follow me on Twitter: http://www.twitter.com/ashleaebeling Send me an email: aebeling@forbes.com
I know this is a bold, and possibly controversial title, but retirement planning is broken and leaving people broke.
The destructive narrative is, “work hard, save money in a retirement plan, wait and it will all work out in the long run.”
The reality is, without the ingredients of responsibility and accountability, there is no easy solution for retirement. Meaning, if we just work hard and set money aside, we are putting money into a market we have no control over.
The institutions are winning though. Taking fees along the way. Convincing us to separate ourselves from our hard earned money, encouraging us to take it out of the business we know and put it into investments we don’t.
Low interest rates are great for those borrowing money, but terrible for those wanting to take income from a retirement plan. Those low interest rates are not providing enough cash flow, so that even if you’re a millionaire on paper, you still may be living like a pauper. For example, if you could find 4% interest in a fixed income account, that is only 40,000 dollars a year per million in your retirement account. Oh, and that income is taxable if it isn’t coming from a Roth IRA.
The concept of retirement has robbed the public of the responsibility and accountability required with personal finance. It has become too easy to hand money over to so-called experts due to the busyness of business, kids, hobbies, and other obligations competing for our time.
Future-Proofing The Workforce: Why Digital Literacy Is Key
The reality is, we have more opportunity for time now than ever. For thousands of years people were limited and constrained with the monumental duty of providing for their family by having to hunt, farm or provide shelter with less technology, efficiency and access to resources. We have become addicted to saying yes to things less important than financial stability and freedom…..
Challenge: Make a 60-year-old hamburger chain into something cool. Daniel Schwartz accepted that assignment six years ago after 3G Capital took over Burger King and named Schwartz chief executive. He was 32.
Burger King was a tired outfit, with a confusing menu and sales going sideways. Its restaurants averaged half the revenue of McDonald’s. But where there is underperformance, there is opportunity. Schwartz slashed overhead at the Miami headquarters. He streamlined food preparation. He dished out stock to middle managers. He shrank the payroll and the capital budget by selling company-owned stores to franchisees.
In the years since, Burger King has become Restaurant Brands International (following some more classic 3G dealmaking). Restaurant Brands is now a growth stock. Burger King opened up 1,000 restaurants around the globe last year, to 600 for McDonald’s. McDonald’s stores still have a bigger average volume, but Burger King’s are gaining on them; in the U.S., BK boosted its average volume per outlet by 30%, to $1.4 million, while McDonald’s had a gain of only 20%. All of Burger King’s success is, of course, in stark contrast to what’s going on at Kraft Heinz, another 3G turnaround that went the other way. In February, Kraft Heinz said it was taking a $15.4 billion write-down, a signal that its classic food brands were losing value.
The situation is different at Burger King. At the parent-company level, where revenue consists mostly of franchise fees, Restaurant Brands took in $5.4 billion last year, up 17% from 2017. McDonald’s revenue was off 8%.
“How many companies that have been around since the 1950s grow the top line at 10%?” says Schwartz, 38.
For a fast-food conglomerate that oversees 26,000 locations with combined sales of $32 billion, Restaurant Brands is quite agile. Three months ago the company introduced the Whopper Detour promotion, in which Burger King offered its signature item for a cent if the customer ordered food on the BK phone app within 600 feet of a McDonald’s location. In February came the 45-second Super Bowl ad featuring historic footage of Andy Warhol slowly unwrapping and methodically eating a Whopper. The BK app topped the charts in Apple’s App Store during the campaign; throughout the Super Bowl, “Andy Warhol” was the most searched term on Google.
Maybe Schwartz can even make his hamburger chain cool enough for New Age customers. Plans are under way to introduce a plant-protein patty from Impossible Foods, the startup backed by investors like Bill Gates and the venture capital arm of Alphabet. This is a big deal for Impossible, with an expected rollout in 7,000 Burger Kings soon.
The past decade has been a whirlwind for Schwartz, who combined a certain amount of luck—in the right place at the right time—with a large amount of energy. A lanky guy who has a big smile and a tendency to speak with his hands, Schwartz left Cornell in 2001 with a degree in applied economics. Four years later, he landed a job at 3G Capital, the private equity firm that became famous for engineering the Anheuser-Busch InBev merger (and later infamous for the sickly Kraft Heinz merger).
Schwartz became a 3G partner at 27. “The group believes in investing in young people and giving them opportunities,” he says. “I worked hard and proved that I really cared. More so than anything else, I put the business and the firm ahead of myself.” His wife tolerated the long hours, perhaps because, as a physician in residency, she worked late too.
McDonald’s has ruled as America’s top burger for decades, but Burger King is making gains with newly refurbished locations made to resemble this conceptual drawing.
Schwartz went hunting for deals. Burger King looked intriguing. “I’d ask my wife or my mom, ‘If McDonald’s is worth $70 billion, what do you think Burger King is worth?’ They’d say, ‘$30 billion?’ ” Schwartz recalls.
Paying a 46% premium for the publicly traded shares, 3G acquired the chain for $4 billion, including debt. Schwartz then raised his hand to help run it. “I wanted to be part of this. And I didn’t want to just sit in an office and get monthly reports.”
At 29, Schwartz became BK’s chief financial officer. He sold the corporate jet. He told employees to use Skype to make free international calls. And to get a feel for the whole business, he worked shifts off and on at Miami Burger Kings, cleaning toilets, cooking burgers and manning the drive-thru.
Focused as he was on selling hamburgers, he hadn’t left behind his deal-making instincts. Rechristened Restaurant Brands, his company acquired Canadian coffee chain Tim Hortons in 2014. In 2017 it spent $1.8 billion in cash to get the Popeyes chicken chain.
Warren Buffett is a fan, having put up $3 billion in equity to help finance the Hortons deal. So is Bill Ackman, whose Pershing Square hedge fund owns 5% of the stock; 3G owns 41%.
The second-largest shareholder: the employees, with more than 5% of stock. Thanks to a match for those who invest their bonuses in RBI shares, nearly all 300 middle managers (average age: 37) own shares; at least 100 have become millionaires. Schwartz is sitting on about $100 million in stock and options.
“I’m comforted as an owner when all of the key employees own a lot of stock,” Ackman says. “It makes them much less focused on short-term things. They’re much more focused on ‘Will this make the business more valuable in five years, ten years?’ ”
Recently, Schwartz was moved up to executive chairman, and longtime Burger King exec Jose Cil, 49, became CEO. “We take bets on people,” Cil says. “When they are ambitious and willing to work harder than anybody because they’re driven by something beyond a paycheck, they want to do something big.”
Schwartz lives in Florida with his wife and three kids. He has been working out of RBI offices in Miami and Toronto, but now he’s going to be spending more time at the 3G office in New York, with assignments that range beyond the restaurant chains. “I’m not gonna be CEO at another company,” he says. “But we aspire to do more, and over time we can buy another business down the road.”
Or perhaps repair some of the businesses that 3G already owns. Could someone who has engineered a turnaround at Burger King work some magic on old ketchup and cheese brands? His diplomatic answer: “Maybe you could ask me that question in six months, when I hopefully get a little bit closer to the business of Kraft Heinz.”
3G’s business is as much about building as buying and selling. Schwartz says: “Most traditional investment firms, if they were in our shoes, probably would have sold [RBI] many years ago. Not only did we not sell, we bought more brands along the way. We are building this into a big company with a long-term mindset.”
I cover all things food and drink as a staff writer at Forbes, from billionaires and ag tech startups to CPG entrepreneurs and wine. I head up the 30 Under 30 Food an
Many entrepreneurs seem to struggle with following what they are passionate about, versus creating startups just for the money.
Mohit Aron went with passion, co-founded a company that successfully completed an IPO with a valuation of more than $6 billion today, and has raised more than $400 million for a second venture which has already surpassed the billion dollar valuation.
After getting his Ph.D. from Rice University in Houston, Mohit made the move to the Valley. After a stint at Google where he was one of the early employees, he has gone on to create highly impactful ventures that have become a large part of the DNA of our tech today.
In a recent appearance on the DealMakers podcast, he shared his take on following your gut, when to go solo (and not), why you should sleep more, how to incubate a winning startup idea and the algorithm for hiring great leaders (listen to the full podcast episode here).
Google, Hyper-Convergence & Taking Time to Think
Mohit was one of Google’s early tech guys and received, as a result, Google shares at $2 per share. He was responsible for managing a team that had the goal of innovating in the file storage space. Selling those shares gave him financial freedom, and refusing just to stay comfortable he ventured out into building companies from the ground up himself.
Mohit takes a very different approach to cultivate startup ideas than most. Rather than jumping on the first idea, running with it and then getting an office, he has taken the time to build the architecture of those ideas and really get clarity before diving in.
For Nutanix, which became one of the early unicorns, hitting a $6 billion valuation and going public, he first rented office space just to develop and crystallize the idea.
Again, avoiding the seductiveness of getting too comfortable, he began working on his next venture, Cohesity, even before his previous company went public. There he repeated the brainstorming process before creating a new tech success, which raised $15 million in Series A funding from Sequoia in just two days.
Cohesity, a modern data management company, empowers enterprises to back up, manage, store and derive insights from their data and apps, has now raised more than $400 million, including $250 million from its latest Series D round. Investors in the company include Accel, Sequoia, Battery, Cisco Investments, Hewlett Packard Enterprise, Google Ventures, Foundation Capital, Trinity Ventures, Qualcomm Ventures, and the SoftBank Vision Fund to name a few.
The Algorithm for Hiring Great Leaders
Cohesity just celebrated hitting 1,000 employees. Mohit has found huge respect for the recruiting process and putting teams of great leaders in place.
He went into Nutanix with cofounders and then went solo on his second venture, a move he only recommends after you’ve had the experience of launching a startup with others.
Still, he admits it was a steep learning curve, especially when it came to hiring. Most notably there is a big difference in hiring technical and business staff. Today, he says if he started a new venture he would raise $1 million, and use the first $300k of that to use an executive recruiter to source three great executives.
Mohit says he learned the hard way on how to hire leaders. Now he uses a three-tiered process that starts with a comprehensive checklist. This outlines who you want from a resume perspective, the type of leader you need for this stage in your company, and the experience they should have. Maybe you want the person coming from a startup. Maybe you want a person who has done zero to $200 billion in revenue before. Then you have a list of candidates that meet your pre-interview checklist.
Then you go through an interview looking for specific things and asking specific questions. One thing you look for in an interview is that this leader is a great people-person and is a great culture fit. Once the person meets at least 80% of the checklist you have formed for the interview, then comes the post-interview checklist.
The post-interview checklist is all about references. Specifically from either people who reported to that leader or people who’ve been peers of that leader, because those are the one who tells you the truth. They will tell you any red flags.
Go with Your Gut
Mohit warns that “when you hire the wrong person, especially when that person is a wrong leader, that sets the company back at least six months if not more. The damage done is immense.”
He believes the body has a way to tell you if something bad is about to happen, and strongly recommends people listen to their gut. If everything else is pointing in one way, but your gut is saying something else, he says listen to your gut. Don’t hire the leader, and go with your gut and look for the next one. Conversely, sometimes the gut says that this is a great hire, and that’s where, as long as they’ve sort of met the checklists and there’s not a huge red flag there, then go with the gut.
Look at their enthusiasm. Look at the person’s willingness to learn. Those bets can be very rewarding.
What Do You Do With All That Wealth?
Mohit no longer does companies for money. He does it for passion. Along the way, he says it ’s also very gratifying to give back. That starts with what you’ve learned. He says “knowledge is free. Knowledge should not be for sale. So, I freely distribute to anyone who comes to me for advice on how to do companies.”
He gives lectures to share this information. The other part of giving is just financially. He’s given to charitable organizations. He and his wife have a structure set up that when they pass away, a bulk of their wealth is actually going to go into a charity.
As a company, his firm gives to a local foundation in San Jose that takes care of providing jobs to young people. He’s also given to Rice University and the Institute of Technology in Delhi which he attended.
He says “life is about giving, and I think giving brings you pleasure. Unlike what people believe, accumulation isn’t always very pleasing, but giving can be very fulfilling.”
Listen in to the full podcast episode for all the details, as well as how to contact him directly with your ideas and questions (listen to the full podcast episode here).
Alejandro Cremades is a serial entrepreneur and author of best-seller The Art of Startup Fundraising, a book that offers a step-by-step guide to today‘s way of raising money for entrepreneurs.
I am a serial entrepreneur and the author of the The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star Barbara Corcoran, and published by John Wiley &…
Carin Taylor, chief diversity officer at Workday, shared some of the results during a Business Leader Forum at the most recent Workday Rising. Nearly 40 percent of all respondents indicated that unfairness or mistreatment played a major role in their decision to leave a company; 30 percent of women of color felt they had been passed up for a promotion; and a large percentage of Asian and Caucasian men and women felt they were treated unfairly by leadership and management…………
