“We were all shocked, except our granddaughters. They just said, ‘OK,’ in unison,” says Weaver. By throwing down the gauntlet—not only to the girls, but to himself—there was no option to back out. So he buckled into a climbing harness and started climbing, grabbing onto the color-coded plastic handholds and footholds on the wall. 

The funny thing is, Weaver was terrified of heights. 

“I would never have tried it if I hadn’t been so unwilling to chicken out in front of my granddaughters after my reckless dare,” he says. But, by the time the REI staffer holding his rope had belayed him safely to the floor, Weaver’s fear turned into a flood of exhilaration and accomplishment. 

Once a niche pursuit, rock climbing has become all the rage, culminating in the sport making its debut on the world stage at the Tokyo Olympics last summer. In recent years, TV shows like American Ninja Warrior and documentaries like The Dawn Wall and Free Solo have raised the profile of climbing and made celebrities out of some amazing elite climbers. One of the most famous is Alex Honnold, who in 2017 ascended the 2,900-foot sheer rock face of Yosemite National Park’s El Capitan without any ropes. 

Stupendous feats like Honnold’s, and the lightning-quick speed-climbing competitions from the Olympics (worth a watch on YouTube), can make rock climbing seem like the exclusive domain of the near-superhuman. That’s why it can be surprising to learn that almost anybody can enjoy a version of this adrenaline-pumping activity. 

Indoor rock climbing, in a gym with proper safety equipment, is the very opposite of death defying. In fact, it’s a wonderful activity for almost anybody, young or old. 

Safe Thrills 

Indoor rock climbing is very safe. In fact, the injury rate for participants in indoor climbing gyms stands at less than 1 percent of activities like tennis, basketball, and bicycling. 

Researchers in Germany, tracking 515,337 climbing gym visits over five years (participants aged eight to 80), recorded only 0.020 injuries per thousand hours of participation, according to the journal Wilderness & Environmental Medicine. That’s a significantly lower rate of injury than for many common activities, such as running (which had 3.6 injuries per thousand participation hours), training in a gym (3.1), bicycling (2.0), or even walking (1.2), according to the International Journal of Sports Medicine. 

In particular, top-rope climbing is even safer, registering only 0.005 injuries per thousand hours in the German study. In this climbing style, common for beginner and intermediate-level climbers in gyms, the climber’s harness is roped through an anchor at the top of the route and then through one or more carabiners to the belayer (the person who holds the rope). If the climber should fall, the belayer can easily stop the fall with the rope system. 

Indoor rock climbing is a fun and interactive activity that provides an excellent path to wellness for older adults. Here’s a look at more of the health benefits of rock climbing. 

Non-repetitive Exercise 

A safe yet challenging activity that’s easy on the joints, rock climbing offers mental and physical stimulation through the need for continual problem solving in a variety of situations. Lifting weights, participating in aerobics classes, or going to the gym can all get old and routine. Not so with rock climbing. 

“There are so many reasons why people fall off a fitness routine, and boredom is one of them. But climbing appeals to the child in you,” says Jon Meyer, chief technology officer at CAPTRUST, who has been an avid indoor rock climber for about eight years. “It’s like climbing on the jungle gym, a more adult version of the playground.” 

As your skills improve, it never gets boring because the routes are often changed around, and there’s always another challenge to try. 

Strengthening 

Climbing builds total body endurance, flexibility, and core strength. Many rock climbers who stick with it find that as their overall strength improves, many of the aches and pains associated with aging start to slip away. 

Adam Cork, 41, started rock climbing five years ago as a fun couples activity to do with his wife, Ericka. They both fell in love with climbing and find it makes them more adventurous. Before climbing, he was sometimes plagued by sciatica from an old sports injury that frequently had him in physical therapy. 

“I had sciatic pain running down my leg for years,” says Cork, a project manager in institutional client services with CAPTRUST. “In climbing, you use your upper body to take the weight off your back. You’re always moving your core. With the amount of core work involved, I cured my back with climbing.” 

Fall Prevention 

Balance and center-of-gravity awareness is a major part of climbing. “Climbers get a lot of very effective balancing practice right at the edge of their ability to balance. They also gain significant core, hip flexor, and leg strength, all of which help to prevent falls in their everyday life,” says Weaver. 

Cognitive Workout 

Standing at the bottom of the route and looking up, climbers face a mental puzzle of figuring out how to approach the handholds, and which is the best way to go. 

“People think rock climbing is not an intellectual sport, but it becomes an obsession. How do I move my body to solve this puzzle?” says Cork. 

“It’s cognitively relaxing,” says Meyer, 53. “All you can think about is the wall, the spatial relationships, and putting your body in different positions.” 

Social Benefits 

Conquering challenges in the company of others is a quick route to new friendships, especially considering the powerful trust that builds between a climber and a belayer. Climbing is also a rare activity that is naturally intergenerational. 

“A benefit for older people is just being around a bunch of twentysomethings who are climbing,” says Meyer. “To have a conversation and drink up the energy of younger people is a real positive.” 

For Weaver, at the time he scaled the REI climbing tower, he was not in good physical shape. He was overweight, plagued by asthma, and had swollen finger joints. Although he had been trying to get healthier, he found it too boring to work out with weights or gym machines. 

But his rock-climbing experience was different. After the rush he felt, Weaver pushed aside his fear of heights and signed up for a beginner class at a climbing gym. Unlike other exercises, climbing was engaging and motivating. He met other people. He had so much fun that he kept at it and soon began trying more difficult climbs. 

Life Changing 

The more he climbed, the better he got. The more weight he lost, the stronger he got and the more his joint strength improved. He ended up 60 pounds lighter, with strong fingers that were free from pain and a resting heart rate that was down to 60, from 80 in previous years. Endurance, balance, and flexibility all greatly improved. 

Weaver says discovering indoor rock climbing changed his life for the better, and he was inspired to share the gift. He has encouraged and taught many other older adults to try the sport. As something of a climbing evangelist, he enjoys being there to witness the transformation that occurs when people, especially formerly sedentary people, get into an activity they never imagined themselves trying. 

“In a sudden adrenaline-fueled rush, they realize that they still possess surprising reserves of power and courage. It’s hard to overstate how powerful and emotional this is for folks between 50 and 80 years old who may have never had a similar experience,” says Weaver. 

For thrill seekers of any age, trying an unusual and new activity— especially something that makes you feel a little bit of fear—can add something to your spirit that wasn’t there before. 

“I opened it, and it said that I’d been admitted to Villanova Law School, which was a huge surprise to me since I hadn’t applied,” he says. 

Dworetzky, who is now a second-career journalist for the Bay City News Foundation and a social and political cartoonist, had been telling people he was going to be a writer. And indeed, he had been writing since the age of about 16. There was just one problem. He was prolific and enthusiastic when it came to first sentences. After that, though, Dworetzky suffered from a lack of follow-through. He’d never actually written something that had an ending. 

Dworetzky had no interest in going to law school. He didn’t know anything about it. He didn’t even know any lawyers. His father had asked him to take the LSAT before he left the country and, receiving Joe’s score in the mail, had taken it upon himself to fill out an application on his son’s behalf—essays and signature included. 

Dworetzky didn’t give the offer much thought. He quickly wrote his father a note that said nope, not happening, and continued his travels. But by 1973, when he finally made his way back to Philadelphia, the thought of staying in one place and focusing on something interesting had gained some appeal. He agreed to try law school. For one week. 

Many people who embark on a second career eventually look back and realize they never felt truly fulfilled in pursuit of the first. Their hearts were never fully in it, or they felt too afraid to go after their real passions. But Dworetzky loved his first go-round as a lawyer. From that very first week of law school, he found the work stimulating and challenging, and he was exceptionally good at it. 

A Little Tickle 

Dworetzky worked as an attorney for 35 years, specializing in insolvency and enjoying the kind of illustrious career that likely raised some eyebrows when he eventually rearranged his resume to put journalism experience at the top. But the itch to write was always present: a little tickle just under the surface that Dworetzky was able to scratch by representing authors and other artists pro bono, serving as a reader for a novelist friend, and continuing to dabble in fiction writing during his free time. 

“I still wasn’t really finishing things,” Dworetzky remembers. “I was getting them started and thinking big thoughts about them but wasn’t really doing the hard work of making them come together.” 

Then, one day, Dworetzky did something different. He finished a story. 

“Everything changed when, instead of just a fragment of something, I had a complete story and then another and another,” he says. “And I didn’t do anything with them. I didn’t send them out to be published and didn’t really even show many of them to people, but it changed how I felt about my ability to tell a story.” 

Soon, stories were filling up a three-ring binder, and Dworetzky had an even bigger idea. By then, he had four children. He wanted to write a book that would allow him to speak to them—to say things he knew they couldn’t really process if the words were coming out of their father’s mouth in real time. 

He started waking up at five in the morning to write until seven, when the routines and obligations of the day could no longer proceed without his attention. It took more than a year of drafting and even longer to edit, but finally, Dworetzky had a published young adult novel he was proud of. 

Kirkus Reviews reviewed Nine Digits, which Dworetzky wrote under a nom de plume. “A quote on the novel’s back cover compares it to Norton Juster’s 1961 classic The Phantom Tollbooth, and … Duret’s book really does begin to approach the witty, imaginative, and accessible brilliance of that genre-busting work.” The book’s success coincided with a major life change for Dworetzky, whose wife was offered an exciting professional opportunity in the San Francisco Bay Area. The couple and their two younger children moved across the country to start over on a new coast. 

Dworetzky allowed the fresh start to extend beyond his geography. He agreed to stay on with his law firm to continue ongoing work but carved out most of his days for writing. For the first time in his life, he was free to write full time—and he wanted to. 

Starting Over 

He began sending his writing out, navigating a brand-new world of solo creative work in San Francisco. At nearly 60 years old, he was starting over. 

“I didn’t really have many friends out here. I didn’t know anybody,” Dworetzky says. “So, it was like really starting at the very bottom of the ladder. A new discipline, a new city. No structured support.” 

The social capital he’d built as a lawyer in Philadelphia, where he had a large network of friends and acquaintances to call upon for various things—support, validation, distraction—was replaced by an unencumbered sense of freedom but also with a sense of aloneness and a large measure of rejection. Instead of feeling secure and confident each morning, hardly having to think about how to get things done, Dworetzky now felt unsure. He got up every day, went to his desk, and tried to figure out how to tell a story in a way that would interest other people and satisfy himself. 

“You’re in your head a lot,” he says. “You’re solving issues that nobody else knows about. They don’t make any sense to anybody. And so, you’re really just doing it yourself, and that isolation I thought was challenging.” 

But instead of letting the uncertainty best him, Dworetzky began joining writers’ groups and seeking out the company and counsel of other authors. With all the diligence and determination with which he had thrown himself into the study and practice of law, Dworetzky embarked on a serious quest to become a professional writer. 

For Dworetzky, writing was not a side hustle or a pastime. “I’ve always been terrified that people would think of my writing as a hobby,” he says. “I’ve always had very ambitious ideas for what I could do as a writer.” He told himself, if he was actually going to make a career switch at an age when many of his compatriots were wrapping up their professional pursuits, he had to go all in.

At the same time, Dworetzky was letting himself have fun with a far less staid pursuit. In working with an illustrator for Nine Digits, he had struggled to communicate the exact look and feel of the drawings to accompany the text. He started playing around with illustrating his own short stories. To enforce a bit of discipline, he committed to completing a drawing and posting it on his website every day. 

Dworetzky says that at first, his drawings were not that good. “In fact, they were so bad that I started putting a little line of text into the drawing, almost like a T-shirt kind of slogan, which I thought would distract a little bit from how bad the drawing was,” he says. “I had probably been doing it for three or four months before it occurred to me: Hey, this is a cartoon.” 

His cartoons weren’t nearly as bad as he thought. An editor at SF Weekly, an indie print newspaper in San Francisco, took interest in them, and soon Dworetzky was supplying three cartoons a week for publication. 

Armed with Ambition 

He got more serious about the medium as he moved into political cartooning, and later he was accepted as a fellow at Stanford University’s Distinguished Careers Institute, a non-degree-conferring experience for highly accomplished mid-life professionals who want to deepen their knowledge in a field or expose themselves to a new one. 

At Stanford, Dworetzky found the community he’d been craving. The narrative and sports writing courses he took also opened his eyes to the possibility of combining his interests in writing and cartooning with his experience as a lawyer and with the arts. A career as a journalist seemed to hit a sweet spot. 

After finishing the program, Dworetzky felt he had only scratched the surface of the training he’d need to be a working journalist. So, at 68 years old, he got an internship. 

Dworetzky started learning to write like a journalist as an intern on the Los Angeles Times’ Metro desk. For one assignment, he shadowed a wildlife ecologist with the National Park Service who was evaluating the health of red-legged frog populations following a devastating wildfire. 

“We hiked around and talked for a long time,” says Dworetzky. “That story ended up running on the front page, which seemed to me like the greatest thing in the world. Here I am talking to people, and they’re talking to me, which is great fun, and then I’m trying to translate this into a narrative that would be interesting to other people. And now look: All these people are seeing this story.” 

On the side of that burned canyon with his notebook, Dworetzky felt it. He was right where he was supposed to be: “It just seemed to me that this is the greatest thing ever. And I’ve had that feeling pretty much throughout the journalism I’ve done.” 

In the fall, Dworetzky walked into another classroom with a bunch of twentysomethings. He was a new master’s student at Stanford’s journalism school. 

Plenty of his classmates were more than a decade younger than Dworetzky’s first two children; he was three times as old as the youngest person in his graduate school class and twice as old as the oldest. But Dworetzky was pleasantly surprised to find that the kids in his program were as interested in getting to know him as he was in building relationships with them, and they shared a drive and a passion. “I found a bunch of people who just want to be friends,” he says. “And that really was amazing to me and great fun.” 

Out of 300 Distinguished Careers Institute alumni, Dworetzky is the only one to go on to earn a master’s degree from Stanford. He wrote and cartooned for the Stanford Daily, and after graduating, Dworetzky got an internship at Local News Matters, a community nonprofit newsroom that provides local news focused on the Bay Area to regional newswires reaching up to 8 million readers. He was soon offered a full-time position reporting on legal affairs, arts, and culture. He continues to post social and political cartoons to its website, Bay City Sketchbook. 

Doing Work That Matters 

“It is a bit of a surprise to me to be working full time,” he says. “I’m now 70. And I make this joke all the time, but I do believe I’m the oldest cub reporter in the United States.” Despite the deadlines and the demands of being an early-career journalist, Dworetzky doesn’t miss the lawyer life. He’s doing work that matters—not just to his clients but to himself. 

Dworetzky finally tells people that he is a writer. “I didn’t do that until pretty recently,” he says. “But I do think of myself that way. And that’s a change.” He’s relishing the opportunities to keep learning and exploring. And he has no intention of sitting down and looking back just yet. “I have a long ways to go,” Dworetzky says. “I have ambitious ideas about the work I’ll do.” 

Q: What’s a trusted contact? Should I name one for my investment accounts? 

Extra layers of security are excellent words to live by in these uncertain times. One easy step to take is adding a trusted contact person to your investment accounts. You may have received an email request from CAPTRUST to do just that, whether on a new account or one you’ve had for a while. So what in the world is a trusted contact, and should you have one? 

A trusted contact is simply a person you authorize your investment firm to get in touch with in case of any difficulty reaching you or suspicion of potential fraud or financial abuse affecting your account. This person could be a spouse, a relative, a professional like your attorney or accountant, or any reliable person of your choosing over age 18. 

Financial exploitation and fraud is rampant, and older Americans were scammed out of $1 billion in 2020, according to a report from the Federal Bureau of Investigation. As part of an effort to safeguard financial accounts, the Financial Industry Regulatory Authority (FINRA) introduced a rule in 2018 requiring financial institutions to ask clients to establish a trusted contact. Note that while a financial institution is required to ask you for this information, the choice is yours whether or not to provide a trusted contact. 

If it’s not required, should you bother? In this age of identity theft and synthetic identity fraud, both FINRA and the Securities and Exchange Commission’s Office of Investor Education recommend that you designate a trusted contact for your accounts. 

Imagine that your financial advisor has repeatedly tried to reach you without success for an urgent matter regarding your accounts. By having preauthorization to reach out to your established trusted contact, your advisor would have greater ability to help in a variety of situations, such as: 

• You’re on vacation. 
• You’re having health issues or are in the hospital. 
• You’ve been displaced by a fire or natural disaster. 
• You’re a victim of identity theft. 

As you can see, the trusted contact should be someone who is able to reach you easily to convey a message. This person might need to confirm your health status, confirm the identity of someone with power of attorney for your account, or confirm the identity of an executor or trustee who is working on your affairs. 

A trusted contact is not the same as a power of attorney. The trusted contact does not have any authority to: 

• make trades or execute transactions; 
• act on your behalf; or 
• engage in activity on your account. 

You’d have to separately authorize this person to allow any such actions. However, the financial institution does have the ability to place a temporary hold on disbursements from the account if financial exploitation is suspected. 

Adding a trusted contact is a bit like turning on two-factor authentication on your phone—an extra step that might make all the difference in protecting your account from fraud or scams. 

Q: I have been hearing about stagflation. What is it, and is it something to be concerned about? 

Stagflation is about as fun as it sounds, especially if you remember the 1970s, with its steep oil prices, runaway inflation, and terrible joblessness. No investor wants to suffer through that again, but the Federal Reserve’s coming actions to curb inflation that’s the highest it’s been in many years are causing some anxiety about the potential for stagflation. 

The Fed has signaled that it will act aggressively by raising interest rates to get control over inflation, which has been over 8 percent over the past 12 months. Its goal is to raise rates just the right amount to shrink consumer demand somewhat, gently tapping the brakes on the economy and tamping down inflation. But this maneuver will be hard to get perfect. If the Fed overshoots and cools the economy too much, it could trigger a recession and many lost jobs. 

With the blunt instruments it has, the Fed can only try to rein in demand; it has no tools available to increase the supply side of the equation. A series of external blows—COVID-19 lockdowns, global supply chain problems, and the war in Ukraine—have severely limited the supply of some goods, which is why prices are going up. Unfortunately, the Fed can’t control whether any more supply-side shocks, like more pandemic lockdowns, are still to come. Further supply-side problems could cause prices to continue to rise and trigger stagflation. 

However, we are not in a period of stagflation yet. The technical definition of stagflation involves the triple threat of: 

• elevated inflation; 
• slowing economic growth; and 
• high unemployment. 

Unemployment currently is nowhere near high. In fact, the opposite is true. Because of the extraordinarily tight labor market, the current economy doesn’t meet the criteria for stagflation. Companies everywhere are having great difficulty hiring enough workers, as evidenced by the Great Resignation and rising wages. 

The fact that there are unfilled jobs in the system gives the Fed some latitude. The perfect scenario would be for the Fed to slow the economy at just the right pace to remove six million excess jobs, relieving wage inflation, and bringing down price inflation. The danger is, if Fed actions remove too many jobs, rising unemployment could result. 

These uncertainties have driven the stock market down some 15 to 30 percent in various sectors. For investors, it’s certainly challenging to position your portfolio for stagflation. The best approach is to make sure you’ve got ample liquidity to let the market work through this period of volatility. The key to success is to buy enough time with your liquidity bucket to ensure that you are not forced to turn a temporary decline into a permanent loss. You don’t want to have to sell until you identify a good time to exit. 

As always, diversification is your friend. Stay patient and try to keep emotion out of your investment decisions. Reactive emotional decisions can erase decades of good decisions, wreaking havoc on a sound financial plan. 

For a brief, dark period, she says, everything changed. She suffered crushing anxiety over her diagnosis, her difficult treatment decisions, and her family’s future. 

Eight years later, Harris, 48, is in a much brighter place, enjoying a new career as a certified health coach and a life that is “more productive, more energetic, and happier” than ever, she says. Harris is one of nearly 17 million cancer survivors living in the U.S., according to the American Cancer Society (ACS). Those millions include recently diagnosed patients and people many months or years past diagnosis. The number is expanding as the population grows and ages and as early detection and better treatment extends survival for more people with cancer, the ACS says. 

Not everyone emerges from a cancer diagnosis feeling as well, physically and mentally, as Harris does. Cancer survivors are a diverse group, medically, psychologically, and otherwise, says Laura Makaroff, the ACS’s senior vice president for prevention and early detection. She says that some people complete initial treatment, get a clean bill of health, and never look back. Others have lingering health effects from chemotherapy, radiation, surgery, or other treatments. Some need ongoing treatment to keep cancer at bay or prevent recurrences. And many struggle with the mental health fallout of what’s often a life-threatening experience. 

“It’s common for people who’ve been through an active cancer experience to have some anxiety or worry or concern about what the future will look like,” Makaroff says. “It’s a pretty intense experience … so getting support for mental health and mental well-being is so important.” The bottom line is that finding a new normal takes time and is different for everyone. 

Here are stories of survivors and how they found their way forward in the years after a cancer diagnosis. 

Samantha Harris: Learning to Ride the Waves 

Fear, anxiety, a loss of control. Harris says she endured waves of despair in the early days after her cancer diagnosis. “I knew I couldn’t keep feeling that way,” she says. So, she says, she started looking for the light. 

As she went through a double mastectomy and breast reconstruction, she focused on the good in her situation, including the strong support of friends and family. She started focusing on ways she could improve her health as a survivor. Her goal was not only to prevent a recurrence but also to ward off other health problems. She also wanted to be an example for others, including her daughters. 

While she’d always stayed thin on a low-fat and low-sugar diet, she learned that she felt better on a diet rich in healthy fats, from foods like nuts, seeds, and avocados, and plenty of organic greens, berries, and other fruits and vegetables. She looked for ways to cut toxins from foods, makeup, and household products. She revamped her workouts, learning to adapt her moves to her changed body. She found ways to improve her relationships and reduce stress. 

“I made sweeping changes with one tiny, small step at a time,” says Harris, who lives in Los Angeles with her husband and two daughters, now 11 and 14. As a certified health coach and fitness trainer, she helps other people make those kinds of changes through her subscriber community at yourhealthiesthealthy.com. Many of her clients are fellow cancer survivors. 

For the most part, she says, cancer is “in the rearview mirror.” The most disruptive remaining reminders, she says, are night sweats caused by tamoxifen, a medication she will take for two more years to prevent recurrences. But, she says, she’s learned to deal with them, like everything else about her cancer. 

Living well after cancer, she says, means “learning to ride the waves.” 

Paul Brands: Cancer Is Now Part of My Life 

Paul Brands, 66, is a retired human resources professional who enjoys traveling with his wife, spending time with his grown sons, golfing, and working as an executive coach. Outwardly, he says, he’s living much the same life he expected to live before he was diagnosed with prostate cancer and then kidney cancer at age 63. 

Surgery cured his kidney cancer, caught on a scan he had after he was diagnosed with prostate cancer. His prostate cancer, found early thanks to a routine test for a prostate-specific antigen, was successfully treated with radiation and hormone injections. 

“You would not know if you saw me that I’m a cancer survivor,” says Brands (not his real name), who lives in Charleston, South Carolina. But, he says, cancer did change him. For one thing, he says, he has a greater appreciation for life. The idea that “life is short, so you should enjoy it” has real meaning for him now. 

The flip side of that awareness is a heightened sense of mortality. Brands says he’s much more likely to notice and brood a bit when he sees news reports about someone famous and young dying of cancer. He feels the most intense anxiety, he says, when he has an upcoming scan to check for cancer recurrences. 

He repeatedly envisions the scene in which his doctor calls him in from the waiting room after a scan, “and my life could be changed in that one second.” But he also says that he relishes the “adrenaline rush” and gratitude he feels after every clean scan. 

For the most part, he says, he focuses on positive feelings. “I was healthy. I am healthy. It was an episode in my life, and I’m probably going to be OK.” 

But, he says, “Cancer is now a part of my life … for the rest of my life.” 

Lisa Masteller: I Was Just So Low 

Lisa Masteller had just finished the last of four rounds of chemotherapy for breast cancer when she hit an emotional low point. “I was done,” she says. “I was just so low.” Alone in her bedroom one morning in Raleigh, North Carolina, she appealed to God: “I just pretty much had a desperate talk with God. And I said, ‘God, I don’t know what the heck to do with my life.’” 

Masteller says she saw God’s hand in what happened the next day when she was offered a big role in a project that got her back to work as a designer. She had her first meeting with her new clients while still bald from treatment. 

That job, she says, was a crucial part of her healing. “That catapulted me into real life with real problems and challenges that I had to face. It was a huge gift,” says Masteller, now 53 and continuing to run her business, Sassafras Studios. But Masteller says that bouncing back from cancer isn’t a one-time thing. It’s a process, one she is still working through, nearly seven years after finishing chemotherapy and five subsequent surgeries. 

Over the years, she says, she’s struggled with body image as she’s adapted to her reconstructed breasts and grappled with her weight. It’s a bit higher than she’d like because of a medication she takes to prevent cancer recurrence. Her husband, three grown children, and three grandchildren help her to stay grounded and grateful, she says. But, she says, she also now sees a therapist to help her deal with the fallout from cancer and other challenges, including childhood memories of losing her father to cancer. 

Masteller says she does not struggle with fear of recurrence. She has always felt confident, she says, that her cancer “was going to be part of the story but not the end of the story.” 

Jay Middleton: You Have to Adapt 

A decade ago, Jay Middleton underwent major surgery for stage-three esophageal cancer, a disease that his doctors said he had a 7 percent chance of surviving. In the aftermath of the surgery, which involved the removal of most of his esophagus and a third of his stomach, he had to use a feeding tube for several weeks. He remembers it as a “challenging” experience. 

But the retired insurance sales representative and Navy veteran from Ocean Isle, North Carolina, also remembers the day that the feeding tube came out. He was with his wife in Florida and insisted on going out with friends to a restaurant where, instead of settling for applesauce or Jell-O as a first meal, he ordered a dozen raw oysters. 

As he slurped them down, he says, “My friends were looking at me like, are you crazy?” I said, “No, I’m celebrating.” 

Middleton, 74, says he’s managed to maintain his joy for life ever since. He travels, volunteers at his church, and has helped raise money to fight cancer. He also rides a motorcycle and, as a Vietnam veteran, participates in the Rolling Thunder veterans’ organization. 

The father of two and grandfather of three says he’s grateful for his family, his friends, his faith community, and his medical providers. “It’s not that I didn’t appreciate life before,” he says. “But I certainly do appreciate it more now.” 

Cancer changes lives, he says, “but you have to adapt to it.” In his case, that means eating less than he’d like and giving up spicy foods because of his altered digestive tract. For years, it meant showing up for follow-up scans, at three-month and then six-month and then one-year intervals. 

At his last appointment, his oncologist told him he didn’t need to come back. “That was a great relief,” he says. But every day, he says, brings something to celebrate, even if it’s just “being glad to see the sun come up.” 

Now that you’ve decided to start a new business or buy an existing one, you need to consider the form of business entity that’s right for you. Basically, three separate categories of entities exist: partnerships, corporations, and limited liability companies. Each category has its own advantages, disadvantages, and special rules. It’s also possible to operate your business as a sole proprietorship without organizing as a separate business entity.

Sole Proprietorship

A sole proprietorship is the most straightforward way to structure your business entity. Sole proprietorships are easy to set up–no separate entity must be formed. A sole proprietor’s business is simply an extension of the sole proprietor.

Sole proprietors are liable for all business debts and other obligations the business might incur. This means that your personal assets (e.g., your family’s home) can be subject to the claims of your business’s creditors.

For federal income tax purposes, all business income, gains, deductions, or losses are reported on Schedule C of your Form 1040. A sole proprietorship is not subject to corporate income tax. However, some expenses that might be deductible by a corporate business may not be deductible by a business structured as a sole proprietorship.

Partnerships

If two or more people are the owners of a business, then a partnership is a viable option to consider. Partnerships are organized in accordance with state statutes. However, certain arrangements, like joint ventures, may be treated as partnerships for federal income tax purposes, even if they do not comply with state law requirements for a partnership.

A partnership may not be the best choice of entity for a business that anticipates an initial public offering (IPO) in the near future. Although there are publicly traded partnerships, most IPO candidates are organized as corporations.

In a partnership, two or more people form a business for mutual profit. In a general partnership, all partners have the capacity to act on behalf of one another in furtherance of business objectives. This also means that each partner is personally liable for any acts of the others, and all partners are personally responsible for the debts and liabilities of the business.

It is not necessary that each partner contribute equally or that all partners share equally. The partnership agreement controls how profits are to be divided. It is not uncommon for one partner to contribute a majority of the capital while another contributes the business acumen or contacts, and the two share the profits equally.

Partnerships are a recognized entity in the sense that the entity can obtain credit, file for bankruptcy, transfer property, and so on. However, the partnership itself is generally not subject to federal income taxes (it does, however, file a federal income tax return). Instead, the income, gains, deductions, and losses of the partnership are generally reported on the partners’ individual federal income tax returns. The allocation of these items among the partners is governed by the partnership agreement, subject to certain limitations.

Limited Partnerships

A limited partnership differs from a general partnership in that a limited partnership has more than one class of partners. A limited partnership must have at least one general partner (who is usually the managing partner), but it also has one or more limited partner. The limited partner(s) does not participate in the day-to-day running of the business and has no personal liability beyond the amount of his or her agreed cash or other capital investment in the partnership.

Limited Liability Partnership

Some states have enacted statutes that provide for a limited liability partnership (LLP). An LLP is a general partnership that provides individual partners protection against personal liability for certain partnership obligations. Exactly what is shielded from personal liability depends on state law. Since state laws on LLPs vary, make sure you consult competent legal counsel to understand the ramifications in your jurisdiction.

Corporations

Corporations offer some advantages over sole proprietorships and partnerships, along with several important drawbacks. The two greatest advantages of incorporating are that corporations provide the greatest shield from individual liability and are the easiest type of entity to use to raise capital and to transfer (the majority stockholder can usually sell his or her stock without restrictions).

A corporation can be taxed as either a C corporation or an S corporation. Each has its own advantages and disadvantages.

C Corporations

A corporation that has not elected to be treated as an S corporation for federal income tax purposes is typically known as a C corporation. Traditionally, most incorporated businesses have been C corporations. C corporations are not subject to the same qualification rules as S corporations and thus typically offer more flexibility in terms of stock ownership and equity structure. Another advantage that a C corporation has over an S corporation is that a C corporation can fully deduct most reasonable employee benefit costs, while an S corporation may not be able to deduct the full cost of certain benefits provided to 2 percent shareholders. Virtually all large corporations are C corporations.

However, C corporations are subject to income tax. So, the distributed earnings of your incorporated business may be subject to corporate income tax as well as individual income tax.

S Corporations

A corporation must satisfy several requirements to be eligible for treatment as an S corporation for federal income tax purposes. However, qualification as an S corporation offers a potential tax benefit unavailable to a C corporation. If a qualifying corporation elects to be treated as an S corporation for federal income tax purposes, then the income, gains, deductions, and losses of the corporation are generally passed through to the shareholders. Thus, shareholders report the S corporation’s income, gains, deductions, and losses on their individual federal income tax returns, eliminating the potential for double taxation of corporate earnings in most circumstances.

However, many employee benefit deductions are not available for benefits provided to 2 percent shareholders of an S corporation. For example, an S corporation can provide a cafeteria plan to its employees, but the 2 percent shareholders cannot participate and receive the tax advantages that such a plan provides.

It is important to note that S corporation treatment is not available to all corporations. It is available only to qualifying corporations that file an election with the IRS. Qualifying corporations must satisfy several requirements, including limitations on the number and type of shareholders and on who can own stock in the corporation.

Limited Liability Company

A limited liability company (LLC) is a type of entity that provides limitation of liability for owners, like a corporation. However, state law generally provides much more flexibility in the structuring and governance of an LLC as opposed to a corporation. In addition, most LLCs are treated as partnerships for federal income tax purposes, thus providing LLC members with pass-through tax treatment. Moreover, LLCs are not subject to the same qualification requirements that apply to S corporations. However, it should be noted that a corporation may be a better choice of entity than an LLC if an IPO is anticipated.

Choosing the Best Form of Ownership

There is no single best form of ownership for a business. That’s partly because you can often compensate for the limitations of a particular form of ownership. For instance, a sole proprietor can often buy insurance coverage to reduce liability exposure, rather than form a limited liability entity.

Even after you have established your business as a particular entity, you may need to re-evaluate your choice of entity as the business evolves. An experienced attorney and tax advisor can help you decide which form of ownership is best for your business.

Source: Broadridge Investor Communication Solutions, Inc.

When you contribute to a 529 plan, you’ll not only help your child, grandchild, or other loved one pay for school, but you’ll also remove money from your taxable estate. This will help you minimize your tax liability and preserve more of your estate for your loved ones after you die. So, if you’re thinking about contributing money to a 529 plan, it pays to understand the gift and estate tax rules.

Overview of Gift and Estate Tax Rules

If you give away money or property during your life, you may be subject to federal gift tax (these transfers may also be subject to tax at the state level).

Federal gift tax generally applies if you give someone more than the annual gift tax exclusion amount, currently $16,000, during the tax year. (There are several exceptions, though, including gifts you make to your spouse.) That means you can give up to $16,000 each year, to as many individuals as you like, federal gift tax free.

In addition, you’re allowed an applicable exclusion amount that effectively exempts around $12,060,000 in 2022 for total lifetime gifts and bequests made at death.

Note: State tax treatment may differ from federal tax treatment, so look to the laws of your state to find out how your state will treat a 529 plan gift.

Contributions to a 529 Plan Treated as Gifts to the Beneficiary

A contribution to a 529 plan is treated under the federal gift tax rules as a completed gift from the donor to the designated beneficiary of the account. Such contributions are considered present interest gifts (as opposed to future or conditional gifts) and qualify for the annual federal gift tax exclusion. In 2022, this means you can contribute up to $16,000 to the 529 account of any beneficiary without incurring federal gift tax.

So, if you contribute $25,000 to your grandchild’s 529 plan in a given year, for example, you’d ordinarily apply this contribution against your $16,000 annual gift tax exclusion. This means that although you’d theoretically need to report the entire $25,000 gift on a federal gift tax return, you’d show that only $9,000 is taxable. Bear in mind, though, that you must use up your federal applicable exclusion amount (about $12,060,000 in 2022) before you’d actually have to pay gift tax.

Special Rule If You Contribute a Lump Sum

Section 529 plans offer a special gifting feature. Specifically, you can make a lump-sum contribution to a 529 plan of up to five times the annual gift tax exclusion ($80,000 in 2022), elect to spread the gift evenly over five years, and completely avoid federal gift tax, provided no other gifts are made to the same beneficiary during the five-year period. A married couple can gift up to $160,000.

For example, if you contribute $80,000 to your grandchild’s 529 account in one year and make the election, your contribution will be treated as if you’d made a $16,000 gift for each year of a five-year period. That way, your $80,000 gift would be nontaxable (assuming you don’t make any additional gifts to your grandchild in any of those five years).

If you contribute more than $80,000 ($160,000 for joint gifts) to a particular beneficiary’s 529 plan in one year, the averaging election applies only to the first $80,000 ($160,000 for joint gifts); the remainder is treated as a gift in the year the contribution is made.

What about Gifts from a Grandparent?

Grandparents need to keep the federal generation-skipping transfer tax (GSTT) in mind when contributing to a grandchild’s 529 account. The GSTT is a tax on transfers made during your life and at your death to someone who is more than one generation below you, such as a grandchild. The GSTT is imposed in addition to (not instead of) federal gift and estate tax. Like the basic gift tax exclusion amount, though, there is a GSTT exemption (also about $12,060,000 in 2022). No GSTT will be due until you’ve used up your GSTT exemption, and no gift tax will be due until you’ve used up your applicable exclusion amount.

If you contribute no more than $16,000 to your grandchild’s 529 account during the tax year (and have made no other gifts to your grandchild that year), there will be no federal tax consequences—your gift qualifies for the annual federal gift tax exclusion, and it is also excluded for purposes of the GSTT.

If you contribute more than $16,000, you can elect to treat your contribution as if made evenly over a five-year period (as discussed previously). Only the portion that causes a federal gift tax will also result in a GSTT.

Note: Contributions to a 529 account may affect your eligibility for Medicaid. Contact an experienced elder law attorney for more information.

What If the Owner of a 529 Account Dies?

If the owner of a 529 account dies, the value of the 529 account will not usually be included in his or her estate. Instead, the value of the account will be included in the estate of the designated beneficiary of the 529 account.

There is an exception, though, if you made the five-year election (as described previously) and died before the five-year period ended. In this case, the portion of the contribution allocated to the years after your death would be included in your federal gross estate. For example, assume you made a $50,000 contribution to a 529 savings plan in Year 1 and elected to treat the gift as if made evenly over five years. You die in Year 2. Your Year 1 and Year 2 contributions of $10,000 each ($50,000 divided by 5 years) are not part of your federal gross estate. The remaining $30,000 would be included in your gross estate.

Some states have an estate tax like the federal estate tax; other states calculate estate taxes differently. Review the rules in your state so you know how your 529 account will be taxed at your death.

When the account owner dies, the terms of the 529 plan will control who becomes the new account owner. Some states permit the account owner to name a contingent account owner, who’d assume all rights if the original account owner dies. In other states, account ownership may pass to the designated beneficiary. Alternatively, the account may be considered part of the account owner’s probate estate and may pass according to a will (or through the state’s intestacy laws if there is no will).

What If the Beneficiary of a 529 Account Dies?

If the designated beneficiary of your 529 account dies, look to the rules of your plan for control issues. Generally, the account owner retains control of the account. The account owner may be able to name a new beneficiary or else make a withdrawal from the account. The earnings portion of the withdrawal would be taxable, but you won’t be charged a penalty for terminating an account upon the death of the beneficiary.

Keep in mind that if the beneficiary dies with a 529 balance, the balance may be included in the beneficiary’s taxable estate.

Note: Before investing in a 529 plan, please consider the investment objectives, risks, charges, and expenses carefully. The official disclosure statements and applicable prospectuses, which contain this and other information about the investment options, underlying investments, and investment company, can be obtained by contacting your financial professional. You should read these materials carefully before investing. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated. Investment earnings accumulate on a tax-deferred basis, and withdrawals are tax-free as long as they are used for qualified education expenses. For withdrawals not used for qualified education expenses, earnings may be subject to taxation as ordinary income and possibly a 10 percent federal income tax penalty. The tax implications of a 529 plan should be discussed with your legal and/or tax professionals because they can vary significantly from state to state. Also be aware that most states offer their own 529 plans, which may provide advantages and benefits exclusively for their residents and taxpayers. These other state benefits may include financial aid, scholarship funds, and protection from creditors.

Source: Broadridge Investor Communication Solutions, Inc.

529 plans are tax-advantaged education savings vehicles and one of the most popular ways to save for education today. Much like the way 401(k) plans revolutionized the world of retirement savings a few decades ago, 529 plans have changed the world of education savings.

An Overview of 529 Plans

Congress created 529 plans in 1996 in a piece of legislation that had little to do with college—the Small Business Job Protection Act. Known officially as qualified tuition programs, or QTPs, under federal law, 529 plans get their more common name from section 529 of the Internal Revenue Code, which governs their existence. Over the years, 529 plans have been modified by various pieces of legislation.

529 plans are governed by federal law but run by states through designated financial institutions who manage and administer specific plans. There are actually two types of 529 plans—savings plans and prepaid tuition plans. The tax advantages of each are the same, but the account features are very different. 529 savings plans are far more common.

529 Savings Plans

A 529 savings plan is an individual investment account, similar to a 401(k) plan, where you contribute money for college or K-12 tuition. To open an account, you fill out an application, where you choose a beneficiary and select one or more of the plan’s investment options. Then you simply decide when, and how much, to contribute.

529 savings plans offer a unique combination of features that no other education savings vehicle can match:

• Federal tax advantages: Contributions to a 529 account accumulate tax deferred and earnings are tax free if the money is used to pay the beneficiary’s qualified education expenses. (The earnings portion of any withdrawal not used for qualified education expenses is taxed at the recipient’s rate and subject to a 10 percent penalty.) This is the same tax treatment as Coverdell education savings accounts (ESAs).
• State tax advantages: States are free to offer their own tax benefits to state residents. For example, some states exempt qualified withdrawals from income tax or offer a tax deduction for your contributions. A few states even provide matching scholarships or matching contributions. (Note: 529 account owners who are interested in making K-12 contributions or withdrawals should understand their state’s rules regarding how K-12 funds will be treated for tax purposes as not all states may follow the federal tax treatment.)
• High contribution limits: Most plans have lifetime contribution limits of $350,000 and up (limits vary by state).
• Unlimited participation: Anyone can open a 529 savings plan account, regardless of income level. And you don’t need to be a parent to open an account. By contrast, your income must be below a certain level if you want to contribute to a Coverdell ESA.
• Simplicity: It’s relatively easy to open a 529 account, and most plans offer automatic payroll deduction or electronic funds transfer from your bank account to make saving even easier.
• Wide use of funds: Money in a 529 savings plan can be used to pay the full cost (tuition, fees, room, board, books, supplies) at any accredited college or graduate school in the United States or abroad; for certified apprenticeship programs (fees, books, supplies, equipment); for student loan repayment (there is a $10,000 lifetime limit per 529 plan beneficiary and $10,000 per each of the beneficiary’s siblings); and for K-12 tuition expenses up to $10,000 per year.
• Professional money management: 529 savings plans are managed by designated financial companies who are responsible for managing the plan’s underlying investment portfolios. Plans typically offer static portfolios that vary in their amount of risk and where the asset allocation in each portfolio remains the same over time, and age-based portfolios, where the underlying investments gradually and automatically become more conservative as the beneficiary gets closer to college.
• Plan variety: You’re not limited to the 529 savings plan offered by your own state. You can shop around for the plan with the best money manager, performance record, investment options, fees, and customer service.
• Beneficiary changes and rollovers: Under federal rules, you are entitled to change the beneficiary of your account to a qualified family member at any time as well as roll over (transfer) the money in your account to a different 529 plan (savings plan or prepaid tuition plan) once per calendar year without income tax or penalty implications. This lets you leave a plan that’s performing poorly and join a plan with a better track record or more investment options.
• Accelerated gifting: 529 savings plans offer an estate planning advantage in the form of accelerated gifting. This can be a favorable way for grandparents to contribute to their grandchildren’s education while paring down their own estate, or a way for parents to contribute a large lump sum. Under special rules unique to 529 plans, a lump-sum gift of up to five times the annual gift tax exclusion amount ($16,000 in 2022) is allowed in a single year, which means that individuals can make a lump-sum gift of up to $80,000 and married couples can gift up to $160,000. No gift tax will be owed, provided the gift is treated as having been made in equal installments over a five-year period and no other gifts are made to that beneficiary during the five years.
• Transfer to ABLE account: 529 account owners can roll over (transfer) funds from a 529 account to an ABLE account without federal tax consequences if certain requirements are met. An ABLE account is a tax-advantaged account that can be used to save for disability-related expenses for individuals who become blind or disabled before age 26.

529 Prepaid Tuition Plans

A 529 prepaid tuition plan lets you save money for college, too. But it works quite differently than a 529 savings plan. Prepaid tuition plans are generally sponsored by states on behalf of in-state public colleges and, less commonly, by private colleges. For state-sponsored prepaid tuition plans, you are limited to the plan offered by your state. Only a handful of states offer prepaid tuition plans.

A prepaid tuition plan lets you prepay tuition expenses now at participating colleges, typically in-state public colleges, for use in the future. The plan’s money manager pools your contributions with those from other investors into one general fund. The fund assets are then invested to meet the plan’s future obligations. Some plans may guarantee you a minimum rate of return; others may not. At a minimum, the plan hopes to earn an annual return at least equal to the annual rate of college inflation for the most expensive college in the plan.

The most common type of prepaid tuition plan is a contract plan. With a contract plan, in exchange for your up-front cash payment (or series of payments), the plan promises to cover a predetermined amount of future tuition costs at a particular college in the plan. For example, if your up-front cash payment buys you three years’ worth of tuition at College ABC today, the plan might promise to cover two and a half years of tuition in the future. Plans have different criteria for determining how much they’ll pay out in the future. And if your beneficiary attends a school that isn’t in the prepaid plan, you’ll typically receive a lesser amount according to a predetermined formula.

The other type of prepaid tuition plan is a unit plan. With a unit plan, you purchase units or credits that represent a percentage (typically 1 percent) of the average yearly tuition costs at the plan’s participating colleges. Instead of having a predetermined value, these units or credits fluctuate in value each year according to the average tuition increases for that year. You then redeem your units or credits in the future to pay tuition costs; many plans also let you use them for room and board, books, and other supplies.

Note: It’s important to understand what will happen if your prepaid plan’s investment returns don’t keep pace with tuition increases at the colleges participating in the plan. Will your tuition guarantee be in jeopardy? Will your future purchases be limited or more expensive?

What Are the Drawbacks of 529 Plans?

Here are some drawbacks of 529 plans:

• Investment guarantees: 529 savings plans don’t guarantee your investment return. You can lose some or all of the money you have contributed. And even though 529 prepaid tuition plans typically guarantee your investment return, plans may announce modifications to the benefits they’ll pay out due to projected actuarial deficits.
• Investment flexibility: With a 529 savings plan, while you can choose among a variety of investment portfolios offered by the plan, you can’t direct the portfolio’s underlying investments. And if you’re unhappy with the investment performance of the portfolios you’ve chosen, you can only change the investment portfolios on your existing contributions twice per calendar year or upon a change in the beneficiary. (However, you can also do a same beneficiary rollover to another 529 plan once per calendar year without penalty, which gives you another opportunity to change plans and investment options.) With a 529 prepaid tuition plan, you don’t pick any investments—the plan’s money manager is responsible for investing your contributions.
• Nonqualified withdrawals: If you use the money in your 529 plan for something other than a qualified education expense, it’ll cost you. With a 529 savings plan, you’ll pay a 10 percent federal penalty on the earnings portion of any nonqualified withdrawal and you’ll owe income taxes on the earnings, too (state income tax and a penalty may also apply). With a 529 prepaid plan, you must either cancel your contract to get a refund or take whatever predetermined amount the plan will give you (some plans may make you forfeit your earnings entirely; others may give you a nominal amount of interest).
• Fees and expenses: There are typically fees and expenses associated with 529 plans. Savings plans may charge an annual maintenance fee, administrative fees, and an investment fee based on a percentage of your account’s total value. Prepaid tuition plans may charge an enrollment fee and various administrative fees.

Note: Before investing in a 529 plan, please consider the investment objectives, risks, charges, and expenses carefully. The official disclosure statements and applicable prospectuses, which contain this and other information about the investment options, underlying investments, and investment company, can be obtained by contacting your financial professional. You should read these materials carefully before investing. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated. Investment earnings accumulate on a tax-deferred basis, and withdrawals are tax-free as long as they are used for qualified education expenses. For withdrawals not used for qualified education expenses, earnings may be subject to taxation as ordinary income and possibly a 10 percent federal income tax penalty. The tax implications of a 529 plan should be discussed with your legal and/or tax professionals because they can vary significantly from state to state. Also be aware that most states offer their own 529 plans, which may provide advantages and benefits exclusively for their residents and taxpayers. These other state benefits may include financial aid, scholarship funds, and protection from creditors.

Source: Broadridge Investor Communication Solutions, Inc.

When President George W. Bush signed the Pension Protection Act of 2006 (PPA) into law, its primary intent was to shore up the U.S. pension system by making defined benefit plan sponsors more accountable for plan funding. However, PPA also included a number of other changes that ushered in a new framework for defined contribution plans and participants.

Prior to PPA’s passage, requiring workers to make proactive choices about enrolling in their employer’s retirement plan was the norm. It was also normal to require them to make their own investment decisions. While plan features such as automatic enrollment and automatic contribution increases existed prior to enactment of PPA, plan sponsors were mostly hesitant to use them.

PPA created a path to plan sponsor safe harbor for these features. It also created the qualified default investment alternative (QDIA), which allowed plan sponsors to invest participants in risk- and age-based investment options, like target-date funds, when they do not make their own choices. Previously, plan sponsors primarily defaulted participants who didn’t make investment elections into stable value or money market funds.

“PPA was seen as a triumph of behavioral finance that would harness workers’ inertia to both get them into defined contribution plans and get them invested appropriately for the long term,” says CAPTRUST Defined Contribution Practice Leader Jennifer Doss. “Combined with automatic contribution increases, this new framework put many Americans on a path toward retirement security.”

The Rise of Target-Date Funds

While target-date funds had been around—and had been on plan investment menus—for more than a decade at that point, they had not yet caught fire. PPA—specifically, the legitimization of automatic enrollment and creation of the QDIA—provided a boost that drove mainstream adoption. These age-based asset allocation funds quickly became the QDIA of choice for many plans as PPA’s requirements went into effect.

At the time, the nascent target-date fund market was dominated by five providers—Wells Fargo/BGI, Fidelity, T. Rowe Price, Vanguard, and Principal. But it didn’t take long for other asset managers to jump into the fray, kicking off a burst of innovation, as they sought to differentiate themselves in a rapidly crowding market.

Some asset managers differentiated via the use of active, passive, or a combination of underlying funds, volatility management tools, or addition of diversifying asset classes. Some differentiated via their glidepaths—their changing asset allocations over time—sparking a debate about the superiority of to- versus through-retirement funds. Still others developed collective investment trust (CIT) products and custom target-date programs.

Today, the Plan Sponsor Council of America’s 64th Annual Survey of Profit Sharing and 401(k) Plans reports that 85 percent of plans have a QDIA, and more than 86 percent of plans that have a QDIA use target-date funds as their default investment option.

Further, according to the same survey, among plans that offer target-date funds, 50.5 percent of plans use actively managed target-date funds, 34.4 percent use passively managed, and 15.3 percent are a mix of the two. More than 40 percent of plans are using target-date funds made up of non-proprietary funds (funds not managed by their recordkeepers), 30.6 percent are using a mix of proprietary and non-proprietary funds, and 29 percent are using proprietary funds. About an even split, depending on plan size. In all, target-date funds represent almost 31 percent of plan assets.

“The initial post-PPA exuberance about target-date funds has certainly cooled in recent years,” says Scott Matheson, managing director and head of CAPTRUST’s Institutional Group. “The market seems to have achieved something of a steady state, with significant assets flowing into target-date funds, despite a slowdown in innovation.”

A few nuggets from Morningstar’s 2022 “Target-Date Strategy Landscape”:

• Target-date strategy assets grew to $3.27 trillion as of the end of 2021, up from $2.8 trillion at the end of the prior year.
• CIT-based strategies saw 86 percent of net inflows last year and will soon overtake mutual funds as the most popular vehicle.
• While the asset management leaderboard has changed since the early days of PPA, the market remains very concentrated, with the top five players commanding 80 percent of target-date fund assets.
• Investors have benefited from all this innovation and competition and are, on average, paying less. The average asset-weighted fee for target-date funds fell to 0.34 percent, down from 0.51 percent five years ago.

Target-Date Downsides

This data paints a rosy picture of target-date funds, and to be fair, overall, they are a good vehicle for those participants with less complicated financial situations. They do, however, have their drawbacks.

“Target-date funds are designed as standalone one-size-fits all investments; they assume that everyone of the same age has the same financial situation and risk tolerance,” says Doss.

In other words, a fund with a target date of 2035 is geared to a 52-year-old investor planning to retire in or near 2035. They assume that the investment needs of all 52-year-olds are the same when, in fact, some may have above or below average incomes, significant (or nonexistent) savings, or different risk tolerances.

Target-date funds typically use proprietary funds selected by the funds’ manager, which the plan sponsor has no control over. There is no opportunity to determine what asset classes are included or align the underlying managers with the plan’s core menu. This means that you may end up with some subpar funds in your plan and there’s not much you can do about it.

Lastly, some target-date fund providers do not manage their asset allocations after retirement age and, instead, maintain a static asset allocation from age 65 and up. This ignores the participant challenges of managing a retirement portfolio during retirement drawdown or decumulation.

What Next?

While target date innovation may have slowed down, interesting things are happening elsewhere in the world of QDIAs. Specifically, the rise of cost-effective, flexible managed account programs has the potential to disrupt the target date oligopoly and replace a good and convenient QDIA option with something much better in the coming years.

Managed accounts have, of course, been around for some time, available from the likes of Edelman Financial Engines, Morningstar, and others. According to Vanguard’s “How America Saves 2021” report, nearly 40 percent of all plans offered managed account advice in 2020, and more than seven in 10 larger plans offered the service. However, only 10 percent of plan participants take advantage of the offering.

There are two main reasons behind this meager uptake. First, “typically, managed account programs are bolted onto a plan and simply made available to participants,” says Matheson. “They are not widely promoted, nor understood.”

More importantly, despite their ability to be used as QDIA, only 3.7 percent of plans use them for that purpose despite, arguably, being a better product.

What’s the disconnect? “Many plan sponsors’ impressions of managed accounts are rooted in the past and don’t consider the current state of the art,” says Doss. Given plan sponsor inertia and the work involved in changing a plan’s default investment option, they may not seem so exciting. But managed accounts have been on their own evolutionary journey over the past two decades, and, over that time, they have become much more appealing—and worthy of consideration as a QDIA.

The first thing to note is that the next generation of QDIA is likely to be a hybrid of target-date funds for younger participants and managed accounts for older participants.

“The rationale being that younger people’s asset allocation should be more aggressive; they’ve got lots of time and human capital at that stage of their lives,” says Doss. From their 20s into the mid- to late 40s, a target-date fund may be perfectly appropriate for them.”

However, as they age, participants’ financial circumstances start to diverge. That’s when the managed account kicks in. Instead of using only age—or time until retirement—to drive asset allocation, the managed account can use a dozen or more data points to create much more personalized advice and portfolios. Data points such as salary, account balance, pension or other plan savings, savings rate, and sponsor match provide the basis for a much more personalized portfolio and are easily accessed via recordkeeping systems.

“That means that even defaulted and disengaged participants can receive personalized advice,” says Doss.

This personalized portfolio can take them the last leg of their journey to retirement and beyond. Along the way, they can engage by adding further information about their financial situation, such as outside assets, actual retirement age, expected income needs, and Social Security filing dates, for even more tailored advice that includes how to take withdrawals to fund their expenses on top of asset allocation.

“Even if they don’t engage, older participants will receive a much more bespoke experience,” says Matheson. And that’s important in today’s tight labor market. Employees are looking for something extra from their employers.”

“What’s nice about this hybrid QDIA approach, as we call it, is that it doesn’t require revolutionary change,” says Doss. “All the necessary parts are available and already in place for many plans. It’s really just a reframe of how they are being used.”

Of course, other due diligence boxes must be checked. The cost of the program from the early target-date fund years into retirement must be reasonable given the services provided along the way. Plan sponsors will want to understand the underlying investment methodologies—as they would when picking a target-date fund series.

They will also need to monitor the program over time, which will require a mindset shift from traditional investment benchmarks to an outcome orientation that focuses on retirement readiness.

“Longer term, this hybrid approach lays the tracks for further innovation that could, for example, include incorporating retirement income strategies or guaranteed income products like in-plan annuities,” says Doss. With more participants keeping their money in plans after they retire, services like this may become increasingly desirable.

While the jury is out on whether PPA had its desired effect on pension plans, the changes it brought to defined contribution plans have been game changing in several ways—higher participation, higher balances, and better investment options for defaulted participants. As importantly, it kicked off more than a decade of innovation that creates a lot of possibilities for plan sponsors. For many, it might be time to reassess their QDIA to see if the time is right for what’s next.

Looking for a way to set your teenagers up for financial success down the road? Get them off to a good—and early—start by opening Roth individual retirement accounts (IRAs) for them as soon as they start working. Put the power of time and compounding to work on their behalf. You’ll be surprised at the result.

Mike Gray is a dad who thinks ahead. Far ahead. When his son and daughter were teenagers, he set up wonderful tax-free gifts for them to help secure their financial futures.

When his kids got their first jobs, he opened Roth IRAs for them. Gray, a financial advisor in CAPTRUST’s Raleigh headquarters office, put in an amount matching their modest earnings. He continued contributing to those accounts for years.

Retirement accounts for teens? It may sound premature until you consider that the golden rule of retirement savings is to start early so the savings have more time to grow. Financial advisors often point out that 20-somethings who start saving a little each month gain a big-time advantage over those who wait till their 30s or 40s to get started.

By the same reasoning, why not help your child reap the benefits of an extra-long investment time horizon of 50 years or more? A Roth IRA, funded with after-tax dollars and that grows tax-free, is well-suited to help with this goal.

Eligible with a First Job

Just like adults, kids of any age are permitted to contribute to Roth IRAs as long as they have wages or compensation within Internal Revenue Service limits. In 2022, the maximum contribution is $6,000 or the amount earned, whichever is less.

Minors need a parent, grandparent, or other adult to open custodial Roth IRAs in their names. And it’s fine for an adult to make the contributions on the child’s behalf.

Gray’s daughter got her first real job at a summer camp at about age 14. She earned less than $2,000 that year, he recalls. She was allowed to keep her paychecks and spend the money as she liked. Gray opened the Roth IRA in her name and made a contribution in the amount she earned. Every year she had a job, he matched the amount. “I’ve made contributions for eight or nine years now, in whatever amount her earnings were,” says Gray. “She has a real job now, as a nurse, so I put in the full Roth amount each year.”

When his son turned 15 and got a job as a lifeguard, Gray opened a Roth IRA for him, too.

His kids are in their 20s now, and he hasn’t told them yet.

Lots of Time for Investments to Grow

Here’s why an early start is a gift in itself. Say you gave your 25-year-old child $5,500 to invest. After thirty years, the money would grow to $41,867, assuming 7 percent growth, compounded monthly.

But you could double the impact of your gift by giving it to your child at age 15. After forty years, assuming the same rate of return, the $5,500 would grow to $82,360.

Consider what would happen if your 25-year-old child funded a Roth IRA for 10 years, then stopped making contributions. After 30 years, the account would be worth $314,643 (assuming equal monthly contributions adding up to $5,500 a year and a 7 percent annual return, compounded monthly).

What if you helped your child make the same investment a decade earlier, at age 15? The difference would be huge. After 40 years, at the same rate of return, the sum would grow to $618,951.

“Getting started that early is really powerful as far as the value of compound growth. It’s pretty amazing the effect of another 10 years,” says Gray.

Kid-Friendly Tax Rates

Roth IRA rules are great for young people. Kids generally pay little or no taxes, so it makes sense to use after-tax dollars in a Roth rather than tax-deferred dollars in a traditional IRA. Decades down the line, all withdrawals from the Roth IRA after age 59 1/2 will be completely tax-free, barring a change to Roth IRA tax treatment.

Non-Retirement Uses of Roth IRA Funds

Roth IRAs work best if the money is left to grow undisturbed until retirement. However, the rules are flexible enough to allow funds to be tapped under some circumstances.

Contributions have already been taxed, so they can be withdrawn at any time.

Earnings, or investment returns, are treated differently. Prior to age 59½, early distributions of earnings are generally subject to income tax, a 10 percent penalty, or both—with some important exceptions:

• Funds for a first home—A Roth IRA could help your child buy a first home, a goal that escapes many young adults. Homeownership is near 20-year lows among millennials, according to the Brookings Institute, a nonprofit public policy organization. Your child could use Roth IRA funds, within limits, toward a down payment when it comes time to buy a first home. He or she could withdraw up to $10,000 of the earnings, without tax or penalty, provided the account has been open for at least five years. Before the five-year mark, income tax would apply, but not the penalty.
• Funds for college—Roth IRA contributions can be pulled out for any reason, including college expenses. When your child goes to college, he or she could also withdraw earnings without penalty if they are used toward college tuition, room and board, or other qualified higher education expenses. Earnings would be subject to income tax.
• Funds for emergencies—In bad times, Roth IRAs can become emergency funds. In addition to contributions being accessible, IRS rules allow earnings to be withdrawn without penalty for specific emergencies. These include becoming disabled, having to pay for health insurance premiums while unemployed, and having high medical expenses.

Gray plans to reveal his children’s Roth IRAs to them one day, though he hasn’t decided when. It might be when the balances reach a nice, round number, like $50,000, or some kind of special occasion. “Marriage might be something that triggers it. It’s a gift, but it comes with caveats,” he says. The big news will come with a serious discussion about using the money wisely.

For now, those gifts that date back to their summer camp and lifeguarding years continue to grow, tax-free.

Even with the obstacles of the past few years, charitable giving is on the rise. In fact, The National Philanthropic Trust says that 86 percent of affluent households maintained or increased their giving in 2020, despite uncertainty about further spread of COVID-19. Charitable donations are up 5.1 percent overall, according to Giving USA. But we’re not just talking about simple cash donations. 

When it comes to giving, Eric Bailey, head of endowments and foundations at CAPTRUST, says he sees a focus on tax-efficient methods of giving. There are several ways to support a nonprofit and reap the tax benefits. “We’re initiating creative tactics with our wealth management clients who are thinking about a cash contribution,” Bailey says. “We’ll go through different scenarios to help the donor understand other ways to give, rather than just writing a check.”  

Donating Appreciated Securities  

Donating appreciated securities—stocks or bonds that have increased in value since purchase—can provide major benefits to both the donor and the nonprofit. “Gifting shares of a stock can be more efficient than writing a check,” Bailey says, “because the donated stock is typically free of capital gains taxes.” This could mean savings of tens of thousands of dollars of capital gains taxes, depending on the stock’s value, and could help maximize the value of your gift.   
 
For example, a stock with a current value of $50,000—originally purchased for $8,000—could result in $12,000 in capital gains taxes when sold (assuming a 28% tax rate), leaving only $38,000 for the nonprofit. But when the stock is donated instead of sold, capital gains tax is avoided on the gift, allowing the full $50,000 to help the nonprofit fulfill its mission.  

Donating appreciated securities can result in giving more money to the organizations you care about.   

Donor-Advised Funds 

When you donate money to a donor-advised fund (DAF), the funds are set aside in a 501(c)(3) account with a third party. The money is then available to distribute at your discretion to your charities of choice. The National Philanthropic Trust’s 2021 Donor-Advised Fund report notes that the number of DAFs has increased 36.4 percent from 2016 to 2020.  

“A donor-advised fund is a qualifying charity, so you can immediately take that deduction before it’s distributed,” says Steve Morton, principal and financial advisor at CAPTRUST. Relocating assets like appreciated securities, property, or cash into a donor-advised fund—depending on the amount donated—may allow you to itemize deductions, which may lower your tax bill.  

With a DAF you can be more strategic by considering the timing of your donations to maximize your itemized deductions. Bunching charitable donations into a single year could provide an itemized deduction when you need it most. Then, the money is there to distribute on your time and at your discretion. “I find it easier to give from a donor-advised fund, because you don’t think about it as your money anymore,” says Bailey. 

Moving money into a DAF lets you take a charitable tax deduction of the donation’s full market value. It’s important to note that the amount of your donation’s deduction is based on your adjusted gross income (AGI), and any unused deduction can be carried up to five additional years.  

Donor-advised funds can be especially helpful for clients nearing retirement. “It could be beneficial to put assets into a DAF and take the tax deduction when you are at your highest earning potential,” says Morton, “typically when someone is close to retirement.” 

Morton says many of his clients like to make anonymous gifts. “With a donor-advised fund, the gift is acknowledged directly to the third party that holds the account. It’s much easier to make an anonymous gift that way.” 

Qualified Charitable Distribution

Over 72 years old? If so, you must make annual withdrawals, known as required minimum distributions (RMDs), from your individual retirement account (IRA). Using your RMDs to fund qualified charitable distributions (QCDs) to your favorite charities is a tax-friendly method of giving, eliminating the income tax while simultaneously satisfying some or all of your yearly RMD. 

“Retirees typically don’t have a lot of itemized deductions. The standard deduction is so high that most can’t deduct their charitable donations,” says Morton. Instead of a traditional charitable deduction, you can utilize QCDs in your tax-saving strategy.   

“Many clients aren’t ready at 72 to take their required distributions from their IRAs and don’t want to pay taxes on them. QCDs are an easy solution and something to consider.” 

Keep in mind that the 2022 maximum donation from your RMD is $100,000 per person, and the gift must come directly from the IRA to the charity.  

Charitable Remainder Trust

Funding a charitable remainder trust (CRT) is another option for tax-efficient giving. Assets gifted into a CRT create income for you and your beneficiaries. Plus, the leftover is eventually donated to one or more nonprofits that you support. Income from the CRT and the ultimate gift to the charity can appreciate based on how the assets are invested within the CRT. 

“A charitable remainder trust is a great strategy for appreciated assets,” Morton says, because you receive a partial tax deduction based on the assets gifted into the CRT, depending on a number of factors. 

The assets remaining in the CRT must go to a qualifying nonprofit after the income distribution term ends. This time period can cover either the lifetime of the beneficiaries or up to 20 years. 

“Designating a charity as a beneficiary through a CRT is a perfect way to give back,” says Morton. “There are tax benefits for you now, and down the road a charity gets money as well. It’s a win-win.” 

 Everyone’s situation is different, so consult your tax and financial advisors for the best option for your charitable giving. Have a nonprofit in mind that you want to support? Talk with their team about their preferred way to receive a donation.