A good illustration of the long-term investing mindset comes from an unlikely source: the migration pattern and lifecycle of the monarch butterfly. In one of the most amazing feats of the natural world, each spring, these fragile insects migrate as much as 3,000 miles from a small mountainous region in central Mexico to as far north as the coastal Canadian province of New Brunswick. 

However, no single monarch makes the trip—it can take up to four generations to travel the entire distance. Individual insects contribute and play their small parts knowing that, although they may not see the conclusion of the journey, a future generation will arrive safely at their destination to restart the cycle. 

Environmental scientists have a term for this type of behavior: biological altruism. An organism is considered altruistic when its behaviors benefit its species at a cost to itself, as survival of the fittest makes way for the collective survival of the generous. 

This analogy can be applied to the mindset of long-term investors, whether a private investor or family whose goals may extend far beyond their own lifetimes or an institutional investor, such as an endowment, foundation, or perpetual benefit plan. Altruistic investors will frequently be tested by their emotions and market volatility as they seek to provide security and opportunity to future beneficiaries. 

The Long-Term Advantage 

The first step in developing a long-term mindset is to recognize the unique advantages and risks posed to investors with multigenerational investment objectives, then designing approaches to optimize the former and manage the latter. 

The long-term investor’s greatest advantage is his or her extended time horizon. This is particularly true when the investor has limited liquidity needs from the portfolio. Because such investors can focus on objectives measured over many decades, short periods of poor performance and market volatility have minimal impact and are barely noticeable. In this way, individual investors can learn from large institutional investors, such as university endowments, charitable foundations, and public and private sector benefit plans with long time horizons. 

In fact, because institutional investors are typically governed by investment policies that specify portfolio target weights and rebalancing methodology in an unemotional way, studies have shown that endowments tend to invest countercyclically during times of crisis by paring allocations to risk assets during the run-up to a crisis and increasing those allocations during periods of market stress.¹ 

One simple way that individual investors of all types can replicate this strategy is through the use of mental accounting. Instead of viewing and managing their investments as a single portfolio, investors divide their portfolios into several buckets with different risk, income, and liquidity profiles. For example, a three-bucket approach could include: 

• Liquidity—contains a comfortable amount of cash and other highly liquid short-term securities to provide for current cash or spending needs. 
• Income—a portfolio designed to satisfy near-term income needs via higher-yielding securities, such as credit-focused fixed income and dividend-oriented equity strategies, with an eye toward tax efficiency. 
• Growth—a portfolio with higher expected risk and return for long-term growth potential. Investors will often maintain several such buckets earmarked for different objectives, such as college savings, retirement, and lifetime giving, as well as longer-term legacy objectives. 

The presence of each bucket allows a longer-term perspective for each successive bucket. During times of market stress, the liquidity bucket provides the investor with the breathing room and time for recovery in the income bucket, and the income bucket reduces the liquidity required within the growth bucket. This strategy is also intended to be dynamic so that, over time, the relative weights of each bucket can be recalibrated to meet the investor’s current situation. 

Long Journeys Require a Map 

The annual monarch migration brings millions of butterflies, scattered across all corners of the North American continent, together to a few isolated mountains in the Sierra Madre range—a feat of navigation that biologists still don’t fully understand. Many (if not most) human beings, in contrast, require a map or smartphone app to navigate across town, let alone across long, never-before-traveled routes. 

Although long-term investors measure their journeys in years (or decades) instead of miles, they still require a road map. For long-term institutional investors, this guidance takes the form of a comprehensive investment plan called an investment policy statement (IPS). This document is a powerful tool that establishes a set of guardrails and guidelines for the long-term management of investment assets, including the roles and responsibilities of the various parties involved, clear definitions of success and risk, asset classes and investment types allowed within the portfolio, and the target, minimum, and maximum weights of each category. 

Individual investors can replicate this approach through the development of a comprehensive financial plan that considers all aspects of their financial lives, their near- and long-term goals, and how they will measure progress toward those goals. Such a plan should consider not only the preferences, constraints, and risk tolerance of the individual but also the nature of the risks that jeopardize long-term success, how sensitive the portfolio is to each of those risks, and how they can be managed. 

To succeed, investors need to clearly define their goals, have an objective analysis of the strategy needed to accomplish them, and then a detailed plan for execution and ongoing monitoring. 

Having such a plan also provides a systematic structure for managing emotions. Rebalancing to strategic targets allows investors to harvest gains, remain in balance when returns are strong, and add to positions when markets are challenged. 

The Importance of Teamwork 

Another example of animal altruism can be seen in the migration of Canada geese. While these birds may seem a bit mean-spirited and aggressive when encountered at a park or golf course, they exhibit incredible teamwork along their migration journeys. It’s well known that the key to their long-distance migration is the iconic V-formation that allows for much longer distances than any single bird could fly on its own. But when an individual bird is sick or injured, two other geese will fall from formation to help the injured bird until it either recovers and can rejoin the flock or dies. 

Teamwork is also an important element of successful long-term investing. Other advantages enjoyed by institutional investors, such as endowments and foundations, are the presence of a team of professional investment staff or investment consultants and the oversight of an investment committee. These teams provide a diversity of ideas and perspectives that can help reduce one of the greatest threats to the long-term success of individual investors: the risk of emotional investing. 

Teams of people provide a wide array of perspectives. Some members may be bullish and aggressive, while others may be more cautious. Some may seek specialized, alternative, or private investments in search of diversification and excess return, while others are laser-focused on keeping investment expenses low. The result in well-functioning committees is a diversification of emotions that helps temper the biases of any individual. 

Individual investors can replicate these benefits by surrounding themselves with capable teams of advisors and professionals who bring a diversity of views but are all on the same page with regard to goals and objectives. It can also be important to include family members as part of the team to help build awareness and alignment with long-term goals and strategies. 

Managing Long-Term Risks 

Managing emotions is, without a doubt, the greatest challenge faced by any investor. This is true when markets are on a tear—leading to the temptation to take additional risk—but is particularly important when markets face challenges. Long-term investors must avoid the temptation to alter their investment strategies based upon current conditions. In other words, avoid market timing. However, this doesn’t mean that long-term investors should turn a blind eye to the markets, set it and forget it, and bury their heads in the sand. 

Long-term investors should be far less interested in whether this year’s S&P 500 companies’ earnings estimates are 5 or 6 percent higher than last year’s or the current level of stock price valuations or investment-grade bond credit spreads. Rather, the focus should shift to structural changes within the markets and the economy that either pose risks to accomplishing their objectives or introduce new investment opportunities. 

Capital market assumptions. Although the asset allocation of long-term portfolios should remain relatively stable, material shifts in the long-term risk and return expectations of asset classes, levels of inflation, and economic growth may influence how portfolios are designed for maximum efficiency and can point to the kinds of investment strategies that provide the greatest opportunities for success. For example, investing in fixed income today—after the 40-year secular decline in interest rates illustrated in Figure Two—should be different from the approach taken decades ago. 

Figure Two: 10-Year U.S. Treasury Yield (1981—2021) 

Demographics. Perhaps no other economic force holds more power than demographic shifts. Consider the impact of the baby boom generation on the U.S. and global economy. Most of the largest countries are expected to see material declines in population in the second half of this century, along with major shifts in the age structure that may see the number of people over age 80 exceed those under age 5 by a ratio of two to one.2 More favorable demographic trends are expected to occur within emerging markets, albeit with heightened risks of political and economic instability. 

Global conditions. One of the most significant trends of the past 50 years has been globalization and an increasing degree of global economic interconnectedness. This trend has contributed to corporate profitability and helped keep inflation low. However, it also presents increased risks of ripple effects of geopolitical or trade tensions, or economic, social, or political upheaval across the globe. 

Inflation. Perhaps the most potent risk to long-term investors is the preservation of purchasing power over long time horizons. Stable and modest inflation also represents an important precursor to economic stability and growth. 

Technology. Keeping an eye on technological shifts is critically important for long-term investors as a source of significant growth and obsolescence risk. Technology has permeated all aspects of our daily lives, and technology stocks now represent the largest component of the S&P 500 by market capitalization. This does not, however, imply that the long-term investor should chase every hot innovation. Indeed, many traditional, old-economy companies may see material benefits from improving productivity and efficiency through the application of new technology. 

Evolving to Succeed 

Not all animals are wired to demonstrate the same kind of altruism as the humble monarch butterfly. Some Antarctic penguins will shove their mates from the ice to ensure that the water is safe before taking the plunge themselves. Although this may improve the odds of group survival, it only works because penguins seem to lack the ability to hold a grudge. Another example can be found in the many species of animals that are known to eat their offspring—even species that, paradoxically, also care for their young. 

Although it’s hard to understand this behavior, we must recognize that Mother Nature—with a time horizon of hundreds of thousands or millions of years to evolve behaviors that improve the odds of survival—is the ultimate long-term investor. Even if investment goals are only a few decades away, maintaining the right mindset, building a team and a plan, and continually monitoring for environmental threats and opportunities represent the best approach to arrive at your destination.

¹ Chambers, Dimson, Kaffe. “Seventy-Five Years of Investing for Future Generations,” Financial Analysts Journal, vol. 76, no. 4, Fourth Quarter 2020 

² “Global population in 2100,” The Lancet, 2017

Q: Are criminals targeting retirement accounts? If so, what do I need to know to protect myself?

Attempts to steal from 401(k), 403(b), and other retirement accounts are, in fact, on the rise. But while it might feel like crooks always seem to be a step ahead of the good guys, you should know that stealing from a retirement account isn’t easy. 

Criminals try to steal from retirement accounts using both old-world and thoroughly modern techniques. They might try calling the plan’s recordkeeper and impersonating you or sending a faxed distribution request with your signature. 

That’s right—crooks can even lift signatures from other documents to create an initial online identity or steal the one you have in place through hacking. 

Each approach requires different knowledge about you, and there are several barriers in the way. In addition, 401(k) accounts are more difficult to steal from than typical bank accounts because they often require additional paperwork from the employer to access the money, but these retirement accounts can also be easily subject to fraud if the crook has the right information. 

Experts say criminals use a few common tactics. One is acquiring an account holder’s statement or website credentials and contacting the financial institution pretending to be the account holder trying to get his or her money out. 

The other way crooks make off with retirement savings is by using a technique called social engineering (which is what used to be called a con or a grift), persuading the account holder to transfer funds out of the account. 

Fortunately, there are some things you can do to protect yourself from frauds like these. Taking the following steps can help safeguard IRAs and retirement plan accounts like 401(k)s. 

Create an online account. Experts recommend setting up online account access even if you prefer paper statements. It’s easier for impersonators to take control of your account online if you haven’t claimed online access for yourself. 

Check in regularly. Check your retirement account, including your email and street addresses, at least monthly. Sign up for text alerts that notify you of changes or transactions, and use multi-factor authentication (MFA). MFA is a security enhancement that allows you to present something you know—like your password—with two credentials when logging into an account. Credentials fall into any of these three categories: something you know, like a password or PIN; something you have, like a smart card; or something you are, like your fingerprint. 

Practice good internet hygiene. Avoid public Wi-Fi, and never click on suspicious or unfamiliar links in emails, text messages, or instant messaging services seeking personal information, including passwords. 

Design good passwords. Choose unique passwords that you keep confidential. Long passwords are stronger, so make your passwords at least 12 characters. Try using a lyric from a song or poem, a meaningful quote from a movie or speech, or a passage from a book. 

Dispose of printed statements carefully. Shred printed statements along with other sensitive documents. Local office supply stores offer shredding by the pound in case you have lots of old statements to dispose of. 

If you see something, say something. If you are personally affected, immediately call your recordkeeper and employer and have a freeze put on your account. You may also want to report it to the Federal Trade Commission (FTC) at ftc.gov, the Treasury Inspector General for Tax Administration (TIGTA) at tigta.gov, and your local police department. 

Q: I’ve heard Congress might raise the age for taking RMDs. What do I need to plan for if the age moves to 73?

It is true. The age when Americans must start making withdrawals from traditional individual retirement accounts (IRAs), IRA-based accounts, and most employer-sponsored retirement plans could change again, and potentially soon. 

The proposed new legislation, nicknamed SECURE Act 2.0, would increase the required minimum distribution (RMD) age to 73 starting in 2022, then to 74 in 2029 and 75 in 2032. 

This change is expected to become law either by the end of this year or sometime in 2022. However, the potential impact of a higher age requirement on your RMD timing is mixed and depends on how quickly you need the money. 

The majority of retirees will not be impacted. According to the Internal Revenue Service (IRS), 79 percent of retirees take more than their RMD annually because they need the money. 

However, for the 20.5 percent who take only the minimum amount required, the extra years could provide more time to strategize. 

If you have income sources in addition to your IRA and company plan, waiting another one to three years can be a big plus because it allows your savings to grow on a tax-deferred basis for longer. 

Another big planning opportunity related to RMDs at 73 is that the SECURE Act leaves the eligible age for qualified charitable distributions, or QCDs, intact at 70 1/2. The QCD gives charitably inclined retirees the opportunity to make tax-free gifts using assets from their tax-deferred accounts. 

The mismatch between the QCD-eligible age (70 1/2) and the new RMD age of 73 provides an opportunity to use QCDs aggressively when first eligible with an eye toward reducing RMDs when they commence. However, it is a short window, and QCDs are limited to $100,000 per year. 

A delay in the RMD age is also an opportunity to convert more of a traditional 401(k) or IRA over time to a Roth IRA. 

While taxes are paid on the converted money, withdrawals down the road would be tax-free, unlike distributions from a traditional IRA or 401(k), which are taxed as ordinary income. 

Similarly, those post-retirement, pre-RMD years allow for tax-lowering maneuvers not directly related to the IRA. For example, tax-gain harvesting in taxable accounts can help reduce or eliminate capital gains taxes eventually due on those assets. 

While the first SECURE Act eliminated the stretch IRA for the majority of beneficiaries who inherited IRA assets in 2020 or later, it does provide a big opportunity for Roth IRA beneficiaries. 

Distributions from inherited Roth IRAs are almost always tax-free. A beneficiary could take no distribution until the tenth year after inheriting the account, leaving all the earnings in the inherited Roth IRA to grow tax-free. The account could then be emptied in the tenth year after years of tax-free growth with no tax bill for the beneficiary. 

If you are considering your estate plan and are thinking about how your beneficiaries will fare under the new rules, now may be a good time to consult with a knowledgeable tax or financial advisor. 

Competitive wages and benefits are key to attracting and retaining talent. That’s become increasingly clear to employers as record-low unemployment and a shortage of skilled workers make it difficult to fill openings. Along with health benefits, retirement savings vehicles have long been the most valued employer-sponsored perks. Administering such plans requires strict governance and oversight, however, and organizations face significant financial risk if they run afoul of their fiduciary responsibilities.

A fiduciary is anyone with decision-making power over the creation, management, or administration of an employee benefit plan. This could be the company itself, its directors and officers, plan administrators, and trustees. The Employee Retiree Income Security Act of 1974 (ERISA) created fiduciary liability for employers that offer employee benefits plans, leading to widespread availability of fiduciary liability insurance coverage in the mid-1970s. Such coverage protects the company and individuals against fiduciary-related claims of negligence, mismanagement, or other actions deemed not in the best interest of plan participants. 

ERISA Litigation

The number of ERISA lawsuits doubled from 2018 to 2020, according to Forbes. Such litigation began around 2005 and has been running rampant ever since, says Phyllis Klein, a senior director of retirement services for CAPTRUST. Fiduciary liability insurance is crucial not only because of the sheer number of lawsuits, but also because of the cost of litigation, which has been growing astronomically, Klein says.

According to Bloomberg Law, lawsuits alleging fiduciary breaches have garnered more than $430 million in settlements in recent years. Most of the suits have targeted plans in excess of $1 billion in assets and are related to excessive fees. And the settlements are meaningful:

• In July, Koch Industries agreed to pay $4 million to settle a lawsuit alleging the company allowed excessive recordkeeping fees to be charged to participants in its defined contribution plans.
• In 2020, Oracle Corp. settled a 401(k) lawsuit for $12 million. The suit alleged that Oracle breached its fiduciary duty to plan participants by including three investment options in the 401(k) plan that underperformed their benchmarks and charged excessive fees.
• In 2021 Cerner Corp. agreed to pay $4.1 million to settle allegations that the plan fiduciaries violated their ERISA duties by retaining poor-performing investments and charging excessive fees.

Rising Premiums

As litigation costs and settlements continue to rise, fiduciary insurance premiums are also increasing significantly. Double-digit increases are common, with some insurers charging double or triple their previous premiums. According to Pension & Investments, employers can expect even higher premium increases in 2022. And as Klein explains, costlier premiums may not be the only challenge companies face going forward.

“Because the insurers have paid out so much money to settle these cases, they are becoming selective in, not only the cost of the insurance, but how much they are willing to insure,” Klein says. “An employer may have been insured for $25 million, but now, they can’t find a single insurer willing to insure them for $25 million, so they have to look to multiple companies to build up to the level they are comfortable with.”

Regardless of the cost or the challenge of securing adequate coverage, Klein says fiduciary liability insurance is a must-have. Unfortunately, it may soon become difficult to obtain coverage at all, as some insurers may decide they don’t want to be in the fiduciary liability insurance business anymore because the risk of large settlements is just too great.

“We may start to see insurers just not want to insure anymore because it’s a constant payout,” says Klein. “Some of the settlements have been in the tens of millions of dollars, and insurers are asking whether the premiums are worth the risk.”

Managing Risk

In determining whether to offer coverage, insurers are increasingly asking probing questions to determine whether a company’s fiduciaries are practicing good governance. Do you meet regularly? Do you keep meeting minutes? Are you benchmarking your plan on a regular basis? Do you review your fees regularly? Do you have an investment advisor? Do you have company stock in the plan? Such questions are becoming commonplace, as insurers seek to determine the likelihood of a client being targeted for a class action suit.

Herein may lie the silver lining, as fiduciaries become more judicious about practicing good governance to satisfy insurance carriers and reduce the risk of facing a class action ERISA suit.

“Anyone can sue you, but if you have good governance and good processes in place, that will go a long way in helping to manage the risk,” says Klein. “You’re never going to get rid of the risk, but if you embrace your role as fiduciary, ask the right questions, and stay engaged, it will become more manageable.”

Studies show that employees are far more likely to save for retirement when they can participate in a retirement plan at work. But for small companies, the cost and resources required to start and maintain a retirement plan can be prohibitive.

In fact, only 53 percent of small business employees have access to workplace retirement plans. And with nearly half of all private sector workers employed by small companies, that means almost 30 million Americans are without retirement plan access.¹

Fortunately, Congress has taken notice. Recent legislation expanded tax incentives designed to make it more affordable for small businesses to establish retirement plans—and easier for Americans to save.

Startup Costs Tax Credit

Establishing a retirement plan can be costly, especially for small employers. The small-employer retirement plan startup credit helps reimburse some of the expenses required to create a new plan.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 increased these tax incentives. Now, small businesses can take advantage of a $250 credit per non-highly compensated (NHCE) employee. This includes a minimum credit of $500 and a maximum credit of $5,000 per year.

Small businesses can apply this credit to 50 percent of the costs related to plan administration and participant education. Businesses can claim this tax deduction for up to three years.

Automatic Enrollment Credit

Automatic enrollment is a plan feature that allows employers to enroll eligible employees in a retirement plan at a set contribution amount without direct permission. Participants can change the deferral amount or opt out at any time but do not need to take action to start saving.

Employee inertia is one of the major roadblocks to retirement savings. Thus, automatic enrollment has proven to enhance retirement plan participation—and retirement outcomes.

The SECURE Act incentivizes employers to add automatic enrollment to their plans by offering a tax credit of $500 per year, for up to three years. The credit is available to all new and existing small-employer plans that add an automatic enrollment feature. For new plans, it is in addition to the startup credit.

It is also important to note that the automatic enrollment tax credit is not limited to individual plans. Small employers that participate in a multiple employer plan (MEP) can also take advantage of the credit by adding automatic enrollment.

Who Is Eligible?

The small-employer credits are available to businesses with 100 or fewer employees. These employees need to have earned at least $5,000 in compensation in the prior year. Among them, there must also be at least one plan participant who is an NHCE. An NHCE must own less than 5 percent of the business or earn less than $125,000 annually.

Additionally, the employees cannot have received contributions or accrued benefits in another retirement plan sponsored by the same employer, a member of a controlled group that includes the employer, or a predecessor of either for the three tax years before the first year of eligibility.

On the Horizon

Concerns about Americans’ ability to successfully retire are widespread. But retirement plan access may help mitigate a potential crisis. Thus, expanding retirement plan coverage continues to be a legislative priority.

Some states have taken matters into their own hands. State-sponsored automatic individual retirement accounts (auto-IRAs) provide a retirement savings vehicle for workers without an employer-sponsored plan.

Proposed legislation like the Build Back Better Act—approved by the House Ways and Means Committee in September—seeks to mimic this on a national level. It would require employers that do not sponsor a retirement plan to automatically enroll their employees in an IRA or a 401(k)-like plan, starting in January 2023. Should this become law, it may motivate private employers to establish plans to avoid a government-run option.

Another piece of legislation, the Securing a Strong Retirement Act of 2021—known as the SECURE Act 2.0, seeks to further encourage small businesses to establish retirement plans. The SECURE Act 2.0 proposes an additional increase to the small-employer startup plan credit. It would also allow small employers that join an established MEP to take the startup credit for the first three years in the plan.

With retirement plan access center stage, employers are likely to face continued pressure to provide employees with an option to save. Small businesses are wise to be proactive. 

Along with the current tax incentives—which combined can total up to $5,500 per year, or $16,500 for three years—employer-sponsored plans have business advantages. Retirement plans support employee wellness and retirement readiness. They also serve as a recruitment and retention tool. These benefits may be the competitive edge a small business needs to thrive.

^{1 “}2020 Small Business Profile,” U.S. Small Business Administration Office of Advocacy

Elevating diversity and closing inclusivity gaps are an absolute must for any successful organization, says Lanaya Irvin, president of Coqual, a nonprofit research organization that helps leaders create more diverse and inclusive workplaces.

“Diversity, equity, and inclusion is more than just the right thing to do, it’s actually better for business,” says Irvin. And she is not alone in her thinking.

Deloitte shows that when employees think their organization is committed to and supportive of diversity and inclusion, the companies report better outcomes. Specifically, Deloitte reports increases in the ability to innovate (83 percent), responsiveness to changing customer needs (31 percent), and team collaboration (42 percent).

And Cloverpop, a cloud-based platform to communicate, measure, and manage decision making across enterprises, has long associated diversity with better decision making and higher business performance. Cloverpop’s research bolsters the case that employers that build diverse and inclusive teams more often attain the desired outcome—whether that be increased revenue, bolstered employee wellness, or changes in infrastructure, to name just a few.

According to Cloverpop, gender diverse teams make decisions that give the best outcome for themselves and others 73 percent of the time. And as for teams that include an even wider range of ages and different geographic locations? They make better decisions 87 percent of the time! ¹

Moreover, according to Boston Consulting Group, companies that reported above-average diversity on their management teams also reported revenue from products and services launched in the past three years that was 19 percentage points higher than that of companies with below-average leadership diversity. ²

But does being inclusive matter for retirement plan committees? Yes, says Tim Irvin, a CAPTRUST institutional advisor based in New York City, New York. “When an employer cultivates diversity and inclusion among its retirement committee, it is far more likely to meet plan participant needs.”

According to Irvin, there are a few things employers may want to consider to ensure they have a diverse group of decisions makers leading their retirement plan committees.

Look around. Get started by simply looking around the room, says CAPTRUST’s Irvin. “Once you have a retirement plan committee made up of qualified experts who can effectively make decisions on behalf of participants and beneficiaries, the obvious—and often uncomfortable—starting point is to take stock of how visibly diverse the retirement plan committee is.”

Represent the whole. Make sure your committee’s demographics match your employee base, says CAPTRUST’s Irvin. “To build a highly effective retirement plan committee, the committee members need to be qualified and reflect the same characteristics as the plan participants,” he says. “What matters is that they are knowledgeable about the plan and representative of the institution.”

And once the right group of fiduciary-minded people are together, it’s time to set the tone, Irvin says.

Put it on the agenda. “Showing that diversity is important by keeping it on the retirement plan committee agenda is a good idea,” says Irvin. Committees can even go a step further, he says, by embedding diversity and inclusion into the organization’s overall strategy. This allows the retirement plan committee to prioritize the topic alongside other business key performance indicators (KPIs) and objectives.

To get started, define which diversity measurements will be monitored, says Irvin. For example, committees can look at who is using what benefits, and how often. Are more women participating in the plan versus men? How many participants identify with a race other than White? Which groups have lower contribution levels or higher loan usage?

Another important piece? Make the numbers visible to the retirement plan committee so that all are collectively held accountable, says Irvin.

The result: Retirement plan committees absolutely benefit from engaging people from different races, religions, genders, ages, and socioeconomic conditions, says CAPTRUST’s Irvin. “A homogenous group simply will not ask the same questions as a diverse group.”

Adopting an inclusive and diverse approach can bring a wide range of viewpoints on age, race, culture, and inclusivity, allowing the committee to better serve participants from all demographics.

CAPTRUST’s Irvin says he is very lucky to have a lot of clients where the retirement plan committee is a mix of different characteristics, races, and ages. “I work closely with institutional retirement plan committees that have really made a strong effort to have broad representation across gender, age, job classification, race, sexual orientation, and ethnicity.” As a result, he says, “the conversation is changing—more people have a voice.”

¹ “Hacking Diversity with Inclusive Decision Making,” Cloverpop, 2017

² Lorenzo, Voigt, Tsusaka, Krentz, Abouzahr, “How Diverse Leadership Teams Boost Innovation,” Boston Consulting Group, 2018

Missing participants are former employees who leave funds in an employer’s retirement plan but fail to keep their contact information current. These participants are no longer actively engaged in the management of their accounts—and the problems they cause for plan administrators are only increasing.

Missing participants do not receive important communications about their accounts. For example, they miss out on fee disclosures, fund changes, or communications about recordkeeper transitions. They may even forget about their accounts. Worse, with limited or no engagement, participants’ retirement readiness suffers. 

For plan sponsors, missing participants can increase plan costs due to their negative impact on average account balances. They may also pose a significant administrative burden and increase fiduciary risk, including the potential for Department of Labor (DOL) audits.

While most organizations struggle with missing participants, there plan sponsors can take steps to address the issue. In January, the DOL released guidance on locating missing participants. This new guidance expands on past bulletins that focused primarily on enforcement. Here are a few takeaways.

Finding Missing Participants

A plan’s recordkeeper or third-party administrator (TPA) can serve as a partner in locating missing participants. Plan sponsors can ask their TPAs which methods they utilize and consider implementing additional ones.

Plan sponsors should keep in mind that incorrect addresses often result in missing participants. For example, typos such as zip code errors, misspelled street names, or the omission of an apartment number can be enough to lose track of someone.

Plan sponsors looking for missing participants can search historical plan records and any related plan date and documents on file. Check benefit and employment records and alternative contact information. Public records for licenses, mortgages, and real estate taxes—or even the phone book—are other sources for contact information.

While sometimes viewed as an outdated approach, mail to the last known mailing address can work. The DOL recommends using certified mail through the U.S. Postal Service (USPS). Beyond that, plan sponsors should try email, telephone, text message, and social media. Engaging former colleagues or publishing a list of missing participants on the company intranet can also be successful. Another resource is the Social Security Death Index, a database of names and dates of birth and death for over 77 million Americans.

How to Prevent Missing Participants

To limit the number of future missing participants, plan sponsors have a few options. Consider rolling over terminated employees’ account balances of $5,000 or less to an individual retirement account (IRA). Also, talk to the plan’s recordkeeper or TPA and ensure undeliverable mail and uncashed checks get flagged for follow-up.

Engaging participants before they go missing helps, too. Plan sponsors should encourage employees to keep their retirement plan contact information current. Communicating this, along with cybersecurity best practices, such as regularly updating passwords, is good procedure for plan sponsors. Another proactive option is to conduct preventive searches on an annual or semi-annual basis for all terminated participants.

By making a good-faith effort to locate participants—and taking steps to prevent them from going missing in the first place—plan sponsors can help protect themselves and ensure all plan participants receive the retirement plan assets that they are entitled.

Q:  Bitcoin has received a lot of attention lately from the financial media and investors. What is it, and what are some of the risks?

Many of our readers have noticed the fierce debate over Bitcoin recently. Is it an investment, digital gold, a scam, a network of computers, or even the future of currency? If you’re wondering what all the fuss is about, here is a brief introduction explaining what Bitcoin is and what it isn’t and detailing some of this emerging asset’s unique characteristics. 

Bitcoin is a digital asset (sometimes called a cryptocurrency) supported by a peer-to-peer Internet-based ledger system. It was launched in 2009 by an individual or group known by the pseudonym Satoshi Nakamoto. Unlike printed currency or minted coins, Bitcoin is not created or maintained by a government. Whereas Bitcoin has been talked about as a currency—to be used for buying and selling goods and services—today, it is thought of increasingly as an investment. 

It is not a security. Bitcoin is an asset—like a direct investment in real estate, such as a home, or an investment in physical gold bars. Bitcoin is not an investment like a mutual fund or exchange-traded fund (ETF), both of which are regulated securities. 

It is volatile. Over bitcoin’s history, its value has fluctuated wildly, with peak-to-trough drawdowns of greater than 50 percent in a single day. As speculation and confidence in bitcoin has ebbed and surged, this volatility has led to problems for people trying to make payments in bitcoins. At the beginning of 2017, one bitcoin was worth about $1,000. In March 2021, the price topped $60,000 for the first time. In between, bitcoin investors have been tested, over and over, by gut-wrenching price declines. 

It is difficult to manage. The decentralized nature of the Bitcoin system makes it more challenging to follow the flow of money and for governmental regulators to get a handle on it. Major bitcoin exchanges located around the world have been subject to trade disruptions and the potential for increased regulatory scrutiny. Also, unlike credit card charges, transactions are irreversible.

It is not insured. While securities accounts at U.S. brokerage firms are insured by the Securities Investor Protection Corporation (SIPC), and bank accounts at U.S. banks are insured by the Federal Deposit Insurance Corporation (FDIC), bitcoins held in a digital wallet or exchange do not have similar protections. 

It is vulnerable to security threats. Fraud, technical glitches, hackers, cyberattacks, or malware could cause bitcoin exchanges to stop operating or permanently shut down. Login information needed to access exchanges can be forgotten, lost, or stolen by hackers or phishers. Once access is denied, it cannot be restored, resulting in the loss of one’s bitcoin account. 

It may limit your recovery in the event of fraud or theft. If fraud or theft results in you losing bitcoins, you may have limited recovery options. Third-party wallet services, payment processors, and bitcoin exchanges that play important roles in the use of bitcoins may be unregulated or using developing technologies vulnerable to hacking. 

U.S. Treasury Secretary Janet Yellen has called Bitcoin “an extremely inefficient way of conducting transactions.” But she also said it makes sense for central banks to consider a digital dollar, which could lead to faster, safer, and cheaper payments—a statement that could open the door to regulations from the Federal Reserve, Treasury, or the U.S. Securities and Exchange Commission (SEC) in the coming years. 

The question of whether Bitcoin has a place in your portfolio is not an easy one to answer. At this time, Bitcoin is speculative, but it may become more desirable in the future and may provide a means of portfolio diversification. Overall, the universe of Bitcoin as an investment vehicle is small but could expand as consumers, Wall Street, and technology firms build momentum toward mainstream acceptance. 

If you’re considering investing in Bitcoin, be prepared to potentially lose much—if not all—of your investment. Proceed with caution, educate yourself, know the risks involved, and work with your financial and tax advisors to determine whether Bitcoin makes sense for your portfolio. Depending on how comfortable you are with volatility, it may be wiser to stay on the sidelines than to be on the field.

Q: My husband and I want to start transferring ownership of our family business to our children. We’ve heard about family limited partnerships. What are they, and how do they work? 

A family limited partnership (FLP) is an agreement between family members involved in a trade or business. It divides rights to income, appreciation, and control and can hold investments, real estate, cash, or other business assets. An FLP can be a good solution to help transfer ownership of the family business to the next generation during your lifetime—all while allowing you to retain control of the business. 

FLPs have two types of partners. General partners usually own the largest share of the business and oversee operations. They can gift as much as 99 percent of the limited partnership interests to the younger generation. Limited partners have no management responsibilities, and they are not liable for the debts of the FLP beyond their contributed capital. Limited partners, instead, buy shares of the business in exchange for dividends, interest, and profits the FLP generates. A powerful advantage of an FLP is that it can help cut federal gift and estate taxes. 

Leverage the annual gift tax exclusion and gift and estate tax applicable exclusion amount. Gifts of interests in an FLP are subject to federal (and state) gift tax. However, you can minimize your federal gift tax liability by taking advantage of the annual gift tax exclusion. Through 2021, gifts of limited partnership interest up to $15,000, per recipient, are free from gift tax. Further, every taxpayer has a federal gift and estate tax applicable exclusion amount equal to the basic exclusion amount of $11,700,000 in 2021. However, it is important to note that this amount could be reduced to a much lower level under the Biden administration. Transfers that do not fall under the annual gift tax exclusion will be free from gift tax to the extent of your available applicable exclusion amount. 

Take valuation discounts. By discounting the value of limited partnership interests, more FLP interests can be gifted tax free to the next generation, which results in more assets passing out of an individual’s taxable estate. 

Limited partners have very restricted rights, such as the inability to transfer an interest, withdraw from the FLP, and take part in management. These restrictions can result in a business value significantly less than the value of the underlying assets, and the valuation discounts can be considerable, totaling as much as 35 percent. Discounts applied may include the minority interest discount and the lack of marketability discount. 

Remove future appreciation from your estate. Business assets generally increase in value over time. Distributing your assets among family members through the FLP freezes the current value of your estate and keeps any future growth in value out of it later. You may have to pay gift tax now, but it will be less than the tax calculated on a higher future value. 

An FLP is a passthrough entity for income tax purposes. The Internal Revenue Service (IRS) does not recognize an FLP as a taxpayer, and income of the FLP passes through to the partners. So, you can shift business income and future appreciation of the business assets to other members of your family in a lower tax bracket. Through 2025, subject to various limits, an individual taxpayer can deduct 20 percent of domestic qualified business income (not counting compensation) from the FLP. 

Keep in mind, FLPs are subject to more restrictive rules than other forms of business entity to be valid in the eyes of states and the IRS. To determine whether an FLP is the right vehicle for your estate planning needs, consult with a qualified lawyer and tax accountant with experience in structuring FLPs.

Today’s graduates also face a very different environment from their older siblings, cousins, parents, and grandparents. Instead of the anxious yet still carefree final months on campus, many students endured a more solitary experience from their dorm rooms or apartments—or their parents’ basements. They will also enter a job market that is far from normal. The pandemic has altered the landscape for how and where work is done, and it’s unclear how many of these changes will persist once the crisis has passed.

Even so, there will be no shortage of financial wisdom showered upon new grads from commencement speakers, proud parents, well-wishing relatives, and friends on social media. The advice they receive will likely include financial rules of thumb that have, in many cases, been passed down through generations, like a battered, leather- bound portfolio or briefcase.

Rules of thumb are simple frameworks to help us make complex decisions based on limited information and imperfect knowledge of the future. Some, like the widely used rule of 72, are rooted in math, while others are

driven by behaviors. Either way, their value is that they don’t have to provide perfect predictions to be useful. Instead, they serve to nudge us toward more successful behaviors and provide simple frameworks to consider the long-term consequences of everyday decisions.

Even if the current environment is very different from the past, there is always value in learning from people who have survived and thrived amid any number of challenges, shocks, and prior tectonic shifts in how we live and work. Many of the financial tips offered to graduates 50 years ago remain just as true today—while others have likely changed.

Budget

What hasn’t changed. The most fundamental driver of lifelong financial success is the ability to set and keep to a budget. You can only save or invest what you don’t spend, and this simple truth forms the basis for perhaps the most famous financial axiom of all time: Pay yourself first.

This phrase, coined in a 1926 book on personal finance, titled The Richest Man in Babylon, has certainly stood the test of time and has been expanded over the years with additional parameters. The 80/20 rule, for example, suggests spending 80 percent of take-home pay on needs and wants, with the remaining 20 percent aimed toward savings or debt reduction. This provides a useful, simple framework for the budget-savvy.

But after the initial shock subsides—Wait, you want me to reduce my paycheck by 20 percent? —the natural next question is what to do with that money. There is no shortage of competing and worthwhile priorities, including paying down college debt, saving for retirement, or building toward a down payment on a home. But the experienced advice-giver will have a ready answer: The rainy day fund. Conventional wisdom calls for three to six months of living expenses kept safe in a savings or money market account that may be just a little inconvenient to access, thereby reducing the temptation to raid the piggy bank.

This is sound advice indeed, and what’s great about the second tip is that it requires knowledge of the first. After all, you can’t plan for six months of living expenses until you know what those expenses are.

What may have changed. Fortunately, today there are many tools, apps, and services to simplify and automate the process of creating a budget. Instead of legal pads or spreadsheets, a smartphone app will scan accounts to track and categorize spending. Other apps will round purchase amounts up, turning spare change into gradual progress toward the rainy day fund. But as for the size of that fund, today’s environment may call for a more customized approach to the standard six-month target.

Even before the pandemic, there was already a shift underway toward more flexible, independent work arrangements—the so-called gig economy. And all else being equal, gig workers probably need an even larger emergency fund for two reasons: to smooth out the more variable nature of their income and to protect against events (illness or even a flat tire) that prevent work. And as many experienced during the pandemic, unemployment benefits for gig workers are also less clear.

Workers in more traditional jobs may also need to adjust the six-month target to the current environment. A contemporary and clever twist on the six-month rule is to take the current unemployment rate (in percentage points) and keep that number of months’ expenses in reserve, at a minimum. But with a recent unemployment rate of 6.1 percent, this takes us right back to where we started: a six-month target. Things may not be so different, after all.

Debt and Credit

What hasn’t changed. As with budgeting, the most basic advice with respect to debt management is both simple and timeless: Live within your means. Whether drawn from a philosophical basis—such as the belief that money doesn’t buy happiness—or from the practical recognition that debt reduces flexibility and limits future choices,

debt management is a key to financial wellness.

In addition to the stress that accompanies a high level of debt, debt carries tangible costs. Establishing a solid credit history and high credit scores can lead to far more attractive loan terms.

Credit decisions can also influence career paths, both directly and indirectly. Increasingly, employers include credit checks as part of their preemployment background checks. Just as importantly, keeping debt levels under control can mean the difference between being forced to remain in an adequately paid but miserable job or one with limited potential for future growth versus having the flexibility to pursue opportunities that sometimes require a nonlinear path toward a more rewarding career.

What may have changed. For today’s graduates, there are two important factors that are different from those of prior generations: the prevalence of student loans and the historically low interest rate environment. Over the past decade, the amount of student loan debt outstanding has reached more than $1.7 trillion—an amount far above both credit card and auto loan balances.[1]

Another difference is the current interest rate environment. Over the past three decades, the overall level of interest rates (as measured by the benchmark 10-year U.S. Treasury yield) has steadily declined. As shown in Figure One, rates for consumer borrowers have generally followed suit, aside from credit cards, which have retained their steep premiums.

In the short term, low rates represent a boon to those early in their careers, as they reduce the monthly maintenance cost of debt. And unlike savers later in their careers, the opportunity cost of low interest rates on savings or money market balances is typically low. The risk is that low debt service costs lead to overextension, particularly if borrowers make decisions on how much of their car, house, or even graduate school degree they can afford based solely on the current, historically low monthly payment. Although we don’t know what interest rates will look like a decade from now, they’re unlikely to be significantly lower.

Homeownership

What hasn’t changed. When we think of debt, the natural next topic is homeownership and the classic bit of financial advice that forms the very cornerstone of the American dream: Save 20 percent toward a down payment and buy your first house as soon as you can.

The fundamental financial case for homeownership has not changed. Owners build equity in an asset that they can use, enjoy, and improve with sweat equity, in addition to the potential tax benefits. This is in addition to the less-tangible, nonfinancial benefits such as a greater ability to personalize a home to the owner’s needs, the

notion of putting down roots, establishing a stable home base for raising a family, and enjoying a greater sense of community.

What may have changed. Even with mortgage rates at historically low levels, soaring home prices have pushed home affordability out of reach for many potential buyers.

One contributor to this delay may be that people are forming households later in life than previous generations. Dual incomes can be important for many first-time buyers.

Holding aside these financial aspects, the current reality is that homeownership may not be right for everyone. Today’s workers are far more mobile than they were in prior generations. A 2019 Department of Labor study reported that workers held 5.7 jobs on average from ages 18 to 24 and an additional 4.5 jobs from 25 to 34.

However, it is important to note that this study only included individuals born between 1957 and 1964 and therefore may underrepresent the degree of mobility in today’s younger workforce. And the 2020 pandemic may have only accelerated this trend. Another recent survey conducted by Harris Poll exclusively for Fast Company showed that the majority (52 percent) of U.S. workers are considering a job change in 2021, and as many as 44 percent have plans to do so.

Considering the up-front costs of buying a home, another common rule of thumb is that buyers should plan to remain in their homes for at least five to seven years just to break even. Unless the home’s location could support four to six job changes, on average, during that period, renting could be more attractive than buying.

Even so, delayed homeownership doesn’t eliminate the need to save for the eventuality of buying a home, and the key is to begin to accumulate equity elsewhere. Home prices (and, therefore, down payments) are likely to increase over time, and without accumulating liquid savings that can grow at a similar rate, a purchase five or ten years hence becomes that much more difficult.

Investing For Retirement

What hasn’t changed. Saving and investing for retirement have long been fertile grounds for financial wisdom. And for good reason. For those in their early 20s, retirement is maybe 40 or 50 years away. With such a long period before the payoff is realized, it’s even more difficult to make sacrifices today.

The gold standard retirement savings rule of thumb is to save 15 percent of pre-tax income, including any employer contributions. For those who are able, this sets an excellent trajectory that can dramatically increase the likelihood of retirement success. But with the competing priorities already discussed—student loans, credit card payments, and building a rainy day fund—it can be difficult for many new graduates to hit this target right out of the gate. But all is not lost. Experienced advice-givers have a few more go-to tidbits to pass along:

Maximize the match. Even if you can’t hit the 15 percent target, do everything you can to maximize your employer’s contributions, even if this means slowing down your progress toward other savings or debt reduction goals.

Set yourself on autopilot. Many 401(k) and 403(b) plans offer automatic escalation features that increase paycheck deferrals by, for example, 1 percent each year—a level hardly noticeable for most people.

Check progress regularly. Even if your goal is still several decades away, set milestones and checkpoints to measure and celebrate success. This can take the form of retirement planning sessions with a qualified retirement plan advisor. If this kind of service isn’t available, even simple measuring guidelines can make progress feel much more tangible and attainable. Figure Three shows one such benchmark based on target retirement balances by age.

Look, but don’t touch. Given the job-switching behaviors already discussed, younger workers will face the temptation to take a distribution instead of a rollover when leaving a job. Such premature distributions are a common mistake that should be avoided whenever possible. What seems like a small sum of money can have massive implications on long-term success, particularly after early withdrawal penalties.

What may have changed. Given workforce trends already discussed, one piece of advice many of us may have once received is becoming less and less applicable: Find a good company, build your career there, and retire with a comfortable pension. Today, it’s estimated that only 15 percent of private-sector workers have access to a traditional pension plan, according to U.S. Bureau of Labor Statistics.

Another common, but outdated, rule of thumb for retirement investing is the rule of 100—investors should subtract their age from 100 to set the percentage of their portfolio to hold in stocks. Over the past two decades, the industry has invested massive resources in studying the best approach to asset allocation over a retirement saver’s career. The rule of 100 may leave retirement savers underexposed to equities both at the beginning of their career and toward the end, when their accumulated balance must support several decades of spending.

A more modern approach is, once again, to take advantage of automation. Many retirement plans today offer age- based target date funds or other solutions that offer diversified portfolios with set-it-and-forget-it convenience. In addition to eliminating the need for manual adjustments, these solutions may also reduce investors’ temptations to make changes in response to short-term bouts of volatility.

Finally, most retirement plans today offer a Roth option—the ability to save after-tax dollars today and receive qualified distributions tax-free in retirement. Although everyone’s tax situation (and view around future taxes) is different, a simple rule of thumb is that if your current tax rate is lower than you expect in retirement, you should direct at least some retirement savings toward Roth. If nothing else, the ability to choose between taxable and nontaxable buckets can be a powerful planning tool.

Those in the position to offer financial advice to those just setting out can make a huge impact—assuming, of course, that the advice is heard, understood, and relevant to the current environment.

Ambitious young readers of Fortune magazine’s 1956 article, “Twenty Minutes to a Career … Or Not,” were advised to consider the standard 20-minute job interview as an event that would settle their careers for life and that they should consider a job offer in terms of a lifetime career. Simply considering the number of bankruptcies, corporate mergers, and acquisitions since then, it is unlikely that many of the class of ’56 retired from their first jobs.

The best advice is always good advice that is followed. And often, it’s the stories of our own struggles and mistakes that have the greatest impact. No matter our level of success, there are always things that we would have done a little differently—and these are likely the most impactful lessons to pass along to the next generation.

[1] 2024 Student Loan Debt Statistics: Average Student Loan Debt – Forbes Advisor

The point of the exercise: making sure each spouse would know what to do if the other were not there—especially if one of them died. 

“I think a lot of people are afraid to think about those situations,” says Brennan, a former hedge fund manager who quit her job to start the financial education website smartmoneymamas.com. 

But thinking about a spouse’s death is something every married couple should do because not thinking about it can leave you unprepared for one of life’s most difficult transitions. When a spouse dies, money is not the only thing on your mind, but it can be more or less of a burden depending on what you do before and after the loss. 

Couples who discuss and plan for every possible scenario, including dying together or separately, soon, or far in the future, after a long illness or quite suddenly, are less likely to be blindsided by the financial fallout, says Mike Gray, a CAPTRUST wealth management advisor working in Raleigh, North Carolina. 

“When you do this kind of planning, you have to put on the dark glasses, not the rose-colored glasses,” he says. “The bad stuff, even though it’s remote, might happen.” 

And when it does happen, knowing exactly what to do about money, at least, can make a horrible situation just a bit more manageable. 

Before a Spouse Dies 

Most people know the basics of estate planning: You draft and sign wills and set up trusts, perhaps along with letters of intent to make sure your wishes are fully understood. You also assign powers of attorney to those who would handle financial and healthcare decisions if you became incapacitated. Likewise, when you sign up for life insurance or open a new 401(k) account, you name beneficiaries for those funds in the event of your death. 

But if the documents detailing your last wishes are sitting in physical or digital files somewhere, gathering real or virtual dust, that is a problem in and of itself. 

For example, a spouse you expected to act as executor of your estate may no longer be suited for that role years later if he or she develops cognitive impairment. An adult child who you thought was too immature when you first drew up the documents might be a better choice. 

Divorces, new marriages, deaths, births, and estrangements can also change your intentions. That’s why it’s so important to review your estate planning documents at least every few years, Gray says. 

That includes often overlooked details, such as naming beneficiaries on pensions, insurance, and investment accounts. Many people don’t realize that named beneficiaries will almost always get the designated funds, even if the deceased expressed different wishes in a will. 

“There are horror stories out there about former spouses who are named beneficiaries and who get money intended for a new spouse or children,” Gray says. 

But updating your directive documents is not enough. It’s also important to talk with your spouse often about what is going on in your financial life and what should happen if you die or become incapacitated. 

Some people go as far as insisting their family and, sometimes, business associates run a dress rehearsal of sorts, says Mark Chamberlain, a CAPTRUST wealth management advisor in Chesterton, Indiana. 

Chamberlain says he heard of one executive who called his family and associates together one day and announced: “My plane just disappeared, and I’m dead. What’s next?” 

In about three hours, Chamberlain says, the group put together a draft document that would guide their actions if the death had actually happened.

Couples who try the same thing might learn that the wife does not know the passwords for her husband’s bank and credit card accounts or that the husband does not know how his wife pays the water and phone bills online, Chamberlain says. 

Experts recommend putting such vital information, including contact information for key people such as employers, attorneys, and financial advisors, in a single, safe place. 

Smartmoneymamas.com founder Chelsea Brennan recommends compiling a family emergency binder containing everything from bank and email passwords to military records and memorial service wishes. 

One more consideration: When a crisis hits, neither of you may be around nor fully capable, so besides making sure each other knows where all this stuff is, make sure someone else does too, Gray says. 

After a Spouse Dies 

In the days and weeks after a spouse’s death, financial and other logistical tasks can seem overwhelming. 

“When it happens, take a deep breath and realize you need to grieve and most of this stuff doesn’t have to happen the day after or the week after you lose your spouse,” Gray says. 

“I think you need to understand that you are going to feel literally like someone has put you on a raft and dumped you in the middle of the Pacific Ocean,” says Marie, a 61-year-old attorney who lost her husband a few years ago. “I felt completely set adrift in a sea of uncertainly and confusion.” 

But Marie, who had been married for 11 years, says the fact that she and her husband had shared complete transparency and complete trust about their finances gave her confidence as she went through the settlement of his estate. “As insecure as I was, had I not known that I was financially secure, it would have been even worse,” she says. 

Not everyone is as fortunate. Jan Warner, 70, a retired mental health professional who started a Facebook group for grieving spouses after her own husband died in 2009, says that surviving spouses sometimes find unpleasant financial surprises: “There are people out there who think their net worth is in the millions, and they find out they are bankrupt.” 

Warner, of New York City, says she was blindsided by her own late husband’s decision to leave about $1 million she was expecting to other family members. While the decision did not leave her destitute, it added pain to an already painful time, she says. 

Warner, who wrote a book called Grief Day by Day, says her advice for new widows and widowers is to set some goals but cut themselves some slack. 

“I gave myself a chore for the day. One of them was paying my bills. I really didn’t have the capacity to do much of anything.” Warner says she found inspiration from a wall plaque that said, “Have an Adequate Day.” 

Many bereaved spouses find that activities such as meetings with probate attorneys actually make them feel better, Gray says. Such professionals “have been through this dozens of times,” Gray says. “They know what to do and where to go. The conversation can give the bereaved a lot of comfort. There are people there to help you.” 

Funeral directors also offer more help than many people realize. For example, they often notify Social Security of the death and order death certificates. Other essential early tasks include notifying employers and insurers and making sure bills get paid. But some tasks, such as updating names on deeds and titles, can wait a bit. 

Once you have more immediate tasks handled, it’s important to meet with both a tax professional and your financial planner to assess your new situation and make plans for your future, Gray says. Meeting with a planner to go through assets, income, and a forward-looking investment strategy gives many people “a huge chunk of peace of mind,” he says. “It helps them see that they are going to be OK.” 

“It turned out he was my upstairs neighbor. Pretty soon, we got together to share food, and I met his wife and their best friends,” says Varalli. Before long, the group was boating, snorkeling, and enjoying other adventures together.

The fact that her neighbor was 83, and that his wife and their friends were in their 60s, wasn’t a problem—it was a bonus, Varalli says. 

“I have plenty of really close friendships with folks who are in their 60s, 70s, and 80s,” says Varalli, a high school Spanish teacher living in Honolulu while on sabbatical from her job in San Francisco. Friends of varying ages, she says, share perspectives and stories that broaden her horizons and make life more fun. 

Varalli and others who seek out intergenerational friendships are on to something, say social scientists, mental health advocates, and others working to break down artificial age divides. 

Finding Common Ground 

A dozen years ago, the word intergenerational was unknown to most people, says Elly Katz, of Los Angeles. Back then, Katz, now 70, was a graphic designer working in Boston and itching to do something new and meaningful. She had a vague idea that she wanted to combat ageism. 

Her epiphany came one day when she was driving her 16-year-old son to school: What if, she thought, she could get teens to share their phenomenal energy with older adults? 

The result was a matching program called Sages & Seekers, which Katz started with one private school in Boston and later expanded to Los Angeles. The program now includes college students, as well as high schoolers, paired with adults aged 60 and above. And because the pandemic forced it to go online, participants now come from all over. 

The program brings small groups of younger and older people together for brief gab sessions and then allows self-selected pairs to bond in longer sessions over several weeks. There are no mentors or mentees—the idea is to encourage friendship and understanding among equals, Katz says. 

Older people often come to the program believing that “kids are disrespectful and not interested in doing anything off their phones,” Katz says. Teens and young adults often expect to have nothing in common with elders, she says, but both groups are regularly proven to be wrong. 

That was the case for Nita Bryant-Azmar, 76, of Los Angeles, and Mrudula Akkinespally, 19, a pre-med student at UCLA who lives in San Diego. Bryant-Azmar, a retired nurse and administrator, says that after some negative experiences in the workplace and elsewhere, “I had decided that people under age 30 were not my cup of tea.” Akkinespally says she thought people over age 40 were lazy and boring. 

But over the course of their online chats this winter, Akkinespally learned that Bryant-Azmar had celebrated her last birthday with a 76-mile bike ride, liked some of the same TV shows she did, and had once struggled with college chemistry, just as she did. Bryant- Azmar learned that Akkinespally was thoughtfully planning a 25th anniversary party for her parents and was a sympathetic listener when Bryant-Azmar talked about missing her late husband. Bryant-Azmar, who has participated in the program four times now, says she’s learned that “there are some young people out there who are just wonderful.” 

Akkinespally says she’s found a new role model in Bryant-Azmar, who skis, hikes, and travels widely. “When she told me how active she was, my mind was totally blown,” the younger woman says. “She has inspired me to take my health more seriously because I want to be as active as Nita is when I’m her age.” 

Michelle Cavelier, 18, an American of Colombian descent, who just finished her last two years of high school in Bogota, and Clif de Cordoba, 76, a retired educator from Los Angeles, who has Puerto Rican roots, say they also formed a true connection in their video chats. They chose to speak entirely in Spanish and spent a lot of time discussing struggles with their cultural identities, the two say. 

“I never expected in my wildest dreams that I would connect with someone that young about these things I’d been going through these umpteen years,” de Cordoba says. 

Cavelier says: “It doesn’t matter the age; you can connect with anyone, as long as you are able to open your heart.” 

Expanding Your Friend Zone 

Most of us, of course, don’t meet our friends through a formal matching program. When we are young, we meet friends at school and through activities. Later, we make friends at work, in our neighborhoods, and through our various roles: Parents meet parents, retirees meet retirees, worshipers meet other worshipers, and golfers meet other golfers. 

Often, those paths lead us to form friendships almost exclusively with people of our own approximate age, says social scientist Kasley Killam, founder of Social Health Labs, San Francisco. “People don’t even think to diversify the ages of their friends.”

Irene Levine, a psychologist and journalist who writes The Friendship Blog (thefriendshipblog.com), agrees: “Unfortunately, there is a natural tendency to seek out friends who look, act, and talk like us. Being open to intergenerational friendships and other differences expands the potential pool.”

Thinking outside the age box comes naturally to some but takes more effort for others. 

“There are so many wonderful opportunities if we just think about them,” says Colby Takeda, a senior manager with Blue Zones Project by Sharecare, an organization that promotes healthy communities. 

Takeda, based in Honolulu, says any outing in your neighborhood is an opportunity to seek out new faces of various ages—not just the other stroller pushers, power walkers, or whoever looks the most like you. “When you are in the community garden and see the lady in the plot next to you, just say, ‘Hello,’” he suggests. 

Likewise, when you are looking for groups to join and activities to pursue, consider whether they might attract people of various ages. And, Takeda says, don’t dismiss a group you think is only for older or younger people. 

Varalli had that kind of open mind when, during her first months in Hawaii, she joined a bicycling group called the Red Hot Ladies Cycling Club. Originally formed for women over age 50, it now includes women and men with an age range of 27 to 78, says co-founder Patricia Johnson. 

Johnson, who happens to be the oldest member, says she started cycling herself in her early 60s, to connect with young tech workers when she was a personal development consultant in California. “The young people were not using golf as a way to connect,” she says.

She now helps lead weekly rides in which participants, regardless of age, can break into self-selected groups that ride at various speeds and challenge levels. The slower groups “are not necessarily older,” she says—something that helps break age stereotypes and makes the rides more fun and interesting. She and Varalli often ride in the same easy-going group.

“Cycling definitely is a place where age doesn’t make much of a difference,” Johnson says. 

Riding with younger people has helped keep her connected with the broader world, Johnson says. For example, during the early months of the pandemic, members who were healthcare workers talked about the stresses of their jobs; other working adults in the group shared their financial worries. Those are perspectives a group composed entirely of retirees would have missed, Johnson says.

Varalli says she is convinced that having friends across the age spectrum just makes life richer. 

“When we segregate by age, we tend to start segregating in other ways,” she says, “and putting ourselves in very small boxes.”