It’s a common estate planning worry. Would a large inheritance squelch your children’s drive to carve their own paths in life? Billionaire Warren Buffett of Berkshire Hathaway has been suggesting for decades that you should leave your children enough money so they feel they can do anything, but not enough so they’ll do nothing.

It’s a conundrum many parents and grandparents will have to face in the coming decades. Over the next 25 years, a staggering $68.4 trillion in wealth is expected to transfer between generations, according to a 2018 report from research firm Cerulli Associates. 

Are the heirs prepared to handle all that money? There’s a lot to worry about. A nest egg intended to cushion kids’ lives could instead lead to failure to launch. Kids could spend their way through hard-earned fortunes in a few years. Too much comfort could sap their natural ambition. Also, they might be treated differently by people because of their money or fall victim to gold diggers and false friends. 

The best solution? Estate planners say a well-designed trust can provide families with plenty of protection against inheritance loss or inadvertently creating a stereotypical trust fund baby. 

Influencing Heirs from the Great Beyond

Estate planning attorney Tyler Britton says he’s noticed an interesting difference in the way baby boomers are now using trusts for the upcoming generation of millennial heirs. “As an estate planner, I am seeing an increase in the amount of conditions found in trust documents,” says Britton, professor of trust and wealth management at the Lundy-Fetterman School of Business at Campbell University in Buies Creek, North Carolina. 

The individuals creating the trusts want to set up guardrails that take into account the beneficiaries’ different lifestyles, priorities, and desires. These conditions allow a grantor to feel like he or she is still in control during his or her lifetime or after death. Perhaps it’s no surprise that the cohort that invented helicopter parenting would try various avenues to micromanage their survivors’ financial paths—even after they depart this life.

A trust is basically a legal agreement in which one party—called the grantor or trustmaker—puts assets (like real estate, cash, stocks, or bonds) in the care of another party, the trustee. The trustee manages the assets and carries out the instructions over time, for the benefit of a third party, the beneficiary, who could be a person or an institution. 

Doesn’t a last will and testament take care of all that? Only partially. 

A will gives instructions for distributing your property and is essential for naming guardians for minor children. But you typically can’t set specific conditions in a will, such as requiring your daughter to finish medical school in order to inherit your house. With a trust, you could make such a condition—or virtually any condition—giving you greater control over the distributions that are made.

The Flexibility of Revocable Living Trusts

There are many types of trusts, but the most common is a revocable living trust. It’s called “living” simply because it goes into effect while you’re alive, and “revocable” in that you are free to change the instructions you provide. 

“A trust allows a grantor to specify conditions for receipt of benefits, such as income or principal. Furthermore, a trust allows a grantor to spread trust income or principal over a period of time, instead of making a single, lump sum gift,” says Britton.

For example, you can set age-based payouts. “Twenty or 30 years ago, it was common for a grantor to specify that his or her heir could not access trust principal until the heir attained the age of 21 or 25,” says Britton. “With millennial heirs, some grantors are opting to set the age to receive trust principal to 30, 35, or even 40. Their reasoning varies from apprehensions about millennial spending, saving, and work ethic to concerns about creating trust fund babies.”

A trust can be set up for a specific number of years or for the child’s lifetime, for example. The trustee could manage the principal and use investment income to pay distributions to the child. A drawn-out payment schedule, such as a distribution every five years, can prevent the inheritance from being spent too quickly. 

“Other common conditions include postsecondary education requirements and drug testing,” says Britton. 

Irrevocable Living Trusts Provide Liability Protection

Irrevocable living trusts can’t be terminated and are very difficult to change. Such trusts can be used to reduce taxes or protect assets against creditors or lawsuits.

“A common use for an irrevocable trust is to provide asset protection for a grantor and his or her family. By placing assets into an irrevocable trust and naming an independent trustee, a grantor relinquishes control over and loses access to trust assets. Therefore, if structured properly, the assets in an irrevocable trust cannot be reached by a grantor’s creditors,” says Britton.

That doesn’t mean you can escape existing legitimate debts just by moving all your money into an irrevocable trust. 

“If a grantor conveys assets to an irrevocable trust in order to defraud or delay a legitimate creditor, a grantor is engaging in fraudulent conveyance. If a creditor can prove fraudulent conveyance, a court can reverse a grantor’s asset transfer to a trust and allow creditors to access trust property to satisfy judgments,” cautions Britton.

Spendthrift Trusts Protect Heirs from Themselves and Others

A spendthrift trust won’t turn your heirs into financial whizzes, but it can safeguard property in the trust from loss. “The term ‘spendthrift’ is often misleading. Not only does this type of trust protect heirs who lack proper judgment when it comes to spending money; this trust also protects financially responsible heirs from certain lawsuits and creditors,” says Britton. 

While money is in the trust, your heir can’t spend it, give it away, or lose it. “In other words, a beneficiary cannot spend or pledge his or her interest in a trust, and certain creditors cannot seize a beneficiary’s interest in the hands of a trustee,” says Britton. Once it’s paid out from the trust, however, the beneficiary can spend the money in any way he or she sees fit, and it would no longer be protected from creditors. 

Special Needs Trusts Protect Eligibility for Benefits

Another reason for an irrevocable trust would be to provide financial support for a child with a disability, while protecting his or her eligibility for public assistance. You can put money or property into a special needs trust and appoint a trustee to use the funds to purchase necessities for the beneficiary. The beneficiary doesn’t own the property in the trust, so it would not prevent the person from applying for government benefits. 

Trusts are traditionally associated with the very wealthy, but even middle-class families can take advantage of trusts to clarify how assets should be distributed after death. An estate planning professional can help you design a trust that best fits your particular situation. 

The next time your stomach is growling as you dash from one office building to the next, you might want to watch your step. There’s a new kind of street food craze sweeping the country, and its ingredients could be right under your feet. 

Urban foraging is an inside-the-city-limits version of the ancient practice of searching for and utilizing edible wild plants. And while it might seem surprising to think that a big-city environment could provide a between-conference-calls snack—much less the ingredients for a full meal—urban foraging has become wildly popular. 

Chefs are taking to the streets to add foraged greens to their dishes. Parks and nature preserves are offering guided wild edibles tours. And while many cities are beginning to regulate urban foraging in public spaces due to its growing popularity—more on that later—municipal areas still offer savvy foragers an opportunity to spice up their daily meals with highly nutritious wild foods. 

“Trying to survive on wild plants would be a serious challenge, but a diet made up of 10 percent wild foraged foods is as easy as can be,” says Mark Vorderbruggen, a Texas-based research chemist and edible wild plants expert who teaches urban foraging techniques at the Houston Arboretum and other Lone Star nature preserves. “And many of these plants are literally growing up around the sidewalk, so it’s mainly a matter of opening your eyes to what’s right there under your feet.”

Consider the redbud, a small flowering tree that grows on city streets across the country. It’s one of the earliest flowering trees, with stunning red-purple flowers that cling directly to the tree’s branches. Even if you don’t know the plant by name, it’s a good bet you’d recognize a redbud once it was pointed out.

And redbud is a prime urban foraging plant, says Vorderbruggen. In the spring, those striking flowers that turn the heads of passersby are delicious when plucked from the tree and eaten raw. They can be added to salads or used to top cupcakes and pies. And a few weeks after blooming, each of those flowers turns into a peapod. “Just like something you’d see in the grocery store,” Vorderbruggen says. “When they’re about a half-inch long, they are tender and delicious, and you can eat them raw or add them to a stir-fry dish.”

All from a common landscaping tree.

It’s the same with plants such as purslane and lambs- quarter, wild onion, and peppergrass. Urban environments around the country are chock-full of edible wild plants, from lesser known fruits such as persimmon to a virtual salad bar of greens that grow from sidewalk cracks to front yards to greenways. In the South, wax leaf myrtle is an oregano-like plant that adds a definite dash to lasagna. The tender leaves of common plantain have a nutty, close-to-asparagus taste and can be quickly stir-fried in olive oil. The young shoots of Japanese knotweed—a hated invader across much of the country—have a lemony, rhubarb-ish taste that’s led them to the kitchens of Manhattan chefs. 

In fact, many of what we consider weeds in North America are actually beloved garden plants brought over by European settlers that now grow wild. Sow thistle and dandelion, Vorderbruggen says, were cultivated as food plants. But since they don’t have pests and predator controls in the American environment, they’ve spread so quickly and far that we now consider them weeds.

And while toxic plants abound—making plant identification a critical foraging skill—these wild foods can be very healthy. Foraging experts point out that the plants tend to be denser with nutrients than many of their cultivated counterparts, thanks to growing in soils that haven’t been depleted over decades of farming. 

Collectors need to be aware of areas that have been sprayed with herbicides or pesticides, and stay away from older buildings with lead paint that can leach into soils. But many wild plants have dense root systems that tap minerals deep in the soil and transfer that bounty to delicious leaves, shoots, and flowers.

Every Rose Has Its Thorns

The growing interest in wild edibles has some cities working to make sure foragers don’t love a local park’s hedgerows to death. Cities such as Chicago and Washington, D.C., have outlawed foraging on public lands such as street rights-of-way and municipal parks. 

It’s not allowed in New York City, although guerrilla foragers are common in Central Park. So, it’s always suggested to check local foraging laws wherever you are. And where foraging on public lands is allowed, be sure to stay away from sensitive habitats, such as wetlands, and take no more than you can use in a single meal.

And the best approach, says Vorderbruggen, is an even more hyper-local strategy. “Start in your own yard and in your own neighborhood,” he says. “Begin at your doorstep and identify the plants you see every day, and you will be amazed at what’s edible.” Then move out from your own yard to your neighbors’ yards. 

When you walk the dog or ride a bike, figure out what plants look interesting, and you’ll likely see a few that can find a place on your plate. 

“This is so much easier than pulling out an identification guide and looking for a particular plant,” Vorderbruggen says. And you sidestep any regulations on plant collecting when you forage on lands nearby. “Just ask a neighbor, ‘Hey, do you mind if I weed your lawn?’” Vorderbruggen laughs. “And then tell them what you find. People just can’t believe all the food that’s right there in the front yard.” 

We have all heard the Chinese proverb: Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime. What if plan sponsors thought of retirement planning for their employees along the same lines?

Don’t get me wrong. The powerhouse trio that makes up the retirement auto-revolution—automatic enrollment, automatic escalation, and the widespread use of target date funds in the qualified default investment alternative (QDIA) slot—has had a positive impact on savings behavior, investment diversification, and potential participant outcomes. But even after the auto-retirement boom, the main concerns affecting defined contribution retirement plans remain largely the same.

In fact, plan sponsors may be lulling their participants into a false sense of security.

“Automated features only go so far if the plan falls short on adequately engaging participants with advice and education,” says Jennifer Doss, director of CAPTRUST’s Institutional Solutions Group. “The next step really does need to be reaching out to them one-on-one, educating them about what they have today, finding out what their goals and objectives are going forward, advising them on the right way to get there, and enacting change as needed.”

A Double-Edged Sword

While substantial progress has been made to help plan participants accumulate retirement savings, challenges remain. Participant inertia, which can work both in favor of and against participants and plan sponsors, continues to dominate as a top headwind for the retirement industry.

It was the 2006 passage of the Pension Protection Act (PPA) that spawned the auto-revolution. And just like that, the majority of defined contribution plan sponsors abandoned their 30-year ongoing battle against human inertia, choosing instead to embrace the powerful bias through the rapid expansion of auto-everything. The employees of these companies were suddenly able to start saving for retirement by simply doing nothing.

As they say, you have to take the good with the bad, and in this case, the downside of automatic features is participants commonly (and mistakenly) assuming their automatic retirement plan is good-to-go, as is, and doesn’t need anything else—no rebalancing, no asset-allocation review, no additional savings increases. The cruise control framework so helpful in overcoming inertia may actually be giving participants a false sense of security and, ironically leading them to pay less attention to their retirement accounts over time. Data bear this out.

According to Vanguard’s “How America Saves,” 92 percent of defined contribution plan participants did not initiate any exchanges within their accounts during 2017, and more than a third of participants surveyed in the report had zero contact with Vanguard during the year. This data tells us that participants are staying the course with their investment strategies—a good thing—but they are also not increasing their deferral rates or actively engaging in their plans—a concerning thing.

“What you see is that participants assume they’re saving and investing like they are supposed to, probably because their enrollment in the plan and their investment selections have been done for them. The setting of a savings rate and selection of an investment option by the plan sponsor creates this interesting endorsement effect with participants. Plan sponsors need to be aware that this perceived endorsement may actually serve to incent even more inertia,” says CAPTRUST’s Defined Contribution Practice Leader Scott Matheson.

Design to Win

“Too many plan sponsors are automatically enrolling employees at rates likely to result in inadequate retirement savings for many workers,” says Matheson.

Based on CAPTRUST independent research, just over half of all defined contribution retirement plans offer automatic enrollment—with 64 percent of those plans also offering the automatic escalation feature. 

While experts recommend saving 10 to 15 percent of compensation, more than three-fourths of automatically enrolled participants are defaulted at a rate of 5 percent or less, as evidenced below, in Figure One. On average, that means three-fourths of participants in this population are not even saving at a rate of half the amount likely needed to allow them to replace their income in retirement. Further, half of participants surveyed were defaulted at 3 percent or less and only 1 in 5 participants reported a deferral rate of 10 percent or higher.[1]

Figure One: Default Automatic Enrollment Deferral Rates in 2017

Source: “How America Saves,” Vanguard, 2018

“Most people see the initial contribution rate set by their employers as an endorsement of the right savings rate, such that it must be the appropriate amount to save for retirement. So why not harness human inertia and this perception of endorsement for yet another win and start people off at a rate that will more likely result in adequate savings for American workers?” says Matheson.

Studies show that plan sponsors fear upping their default contribution rates from the typical 3 percent because of concerns that it would negatively affect participation. However, the facts tell us this is not necessarily true.

Research from AARP concluded that higher default rates don’t dissuade participants. In fact, a company studied by AARP automatically enrolled participants at two different rates: 3 percent and 6 percent. The group offered the higher default rate had nearly the same level of plan participation—only a 5 percent difference.[2]

According to the same AARP research, a company surveyed with a 12 percent default contribution rate found that automatically enrolled participants stayed at this rate even though, in some cases, it resulted in savings that were higher than needed! In addition to illustrating the inelasticity of participant engagement to increases in the default savings rate, this type of behavior certainly validates the endorsement effect referred to by Matheson. 

Figure Two provides a summary of default automatic escalation caps. The default escalation cap for defined contribution plans with automatic escalation is predominantly set to max out at the 10 percent IRS limit. Moreover, 26 percent of these plans capped increases at rates below 10 percent—below the recommended savings rate of 10 to 15 percent of pay.[3]

This also works against participants who want to make the smart move of contributing up to the maximum amount allowed under the 402(g) limits. Not so surprisingly, only 13 percent of participants reached the maximum amount of contributions allowable in 2018, which was $18,500 plus, catch-up contributions up to $6,000, for those age 50 or older. This year the Internal Revenue Service has increased the maximum employee 401(k) contribution limit to $19,000 per year, plus $6,000 in catch-up contributions.

Teach a Man to Fish 

Figure Two: Default Automatic Escalation Caps in 2017

Source: “How America Saves,” Vanguard, 2018

Whether participants go it alone or get the help of a financial advisor, taking time to slow down and focus on goals and make a plan is the first and most important step for plan participants.

Yet oftentimes, people are just overwhelmed. According to Allianz Life Insurance, more than 64 percent of Gen Xers—those between the ages of 35 and 48—say the lingering cloud of uncertainty that accompanies retirement planning keeps them from taking any action to help secure their financial futures.[4]

“Engagement is the key to success. But sometimes it’s partly about waiting for participants to reach a point, or experience an event, that makes them realize they need to start taking an active role in their financial future,” says Doss. 

A recent analysis of 401(k) participants found that engaging in planning, either with a representative or using online tools, helped people identify opportunities to improve their plans and take action. And, roughly 40 percent of the people who took the time to look at their plans decided to make changes to their saving or investing strategies.[5]

Plan sponsors may still be underplaying their role, however. The vast majority of retirement savers want to receive suggestions from their employer or plan sponsor on how much they should be putting away for retirement. According to recent research from Principal, shown in Figure Three, plan participant demand for workplace advice and education is high. More than half of employees would like workplace education that will help them improve their financial well-being, and 35 percent would welcome their employer to push them to save more. 

Figure Three: Not Only Do Employees Need Help—They Want It and Are Asking for It         

Source: “Is your retirement plan working?,” Principal, 2018 

Boosting Financial Wellness

It isn’t only plan participants who lose out when they are not adequately engaged in their plans. Employers also feel the strain of a workforce burdened by financial stressors and uncertainty around retirement planning.

Gallup estimates the cost of America’s disengagement crisis at a staggering $300 billion in lost productivity annually. When people don’t care about their jobs or their employers, they don’t show up consistently, they produce less, or their work quality suffers.[6]

So, it should come as no surprise that an ever-growing number of plan sponsors are investing in ways to boost employee engagement. They are doing this through company-wide courses, lunch-and-learns, workshops, contests, and, most importantly, one-on-one advice.

Currently, 17 percent of large companies offer financial-wellness programs that incorporate online tools and 42 percent offer one-on-one consultations, up from 9.2 percent and 35.7 percent, respectively, in 2015, according to a recent benefit consulting firm study.[7]

It’s important for plan sponsors to understand that participants need and want to be nudged and reminded to engage in their plan.

“In my experience, the one thing that drives results the most is the one-on-one meetings because they’re completely customized,” says Doss. “I can’t overstate how important the interaction is with advice given specifically for that participant, specifically for where they are at in their life.”

Employers can ensure their workers are getting individualized information they can trust by partnering with third-party advisors, according to CAPTRUST Wealth Solutions Senior Manager Nick DeCenso, who says, “offering that kind of benefit sends a clear message to employees.”

“Working with a recordkeeper or an outside firm is one way for plan sponsors to show their employees that they take a serious interest in this,” says DeCenso. “Because most companies are not in the business of providing financial wellness advice to their employees, they’re in the business of something else.”

Keep On Nudging

Different channels of engagement, such as print communications, online tools, one-on-one meetings, or workshops can impact employees to varying degrees, and plan sponsors should strive to measure each method to determine effectiveness and make necessary changes.

A high-touch communication strategy built around milestones makes for a good way to get your participants attention, according to Matheson. “Consider sending targeted communications engaging participants to take an action. For example, a reminder to increase deferrals, timed to coincide with annual pay increases. The right message at the right time will drive positive participant behavior.”

Plan sponsors can stack the odds of success in the favor of participants by implementing automatic plan design features combined with comprehensive engagement-focused participant campaigns. This, along with technology enhancements, will move the dial forward, making it easier for plan sponsors to help participants mindfully reach their destinations.

Lastly, I’m not sure if just anyone can create a proverb, but I am going to try. Here goes. Enroll an employee at 3 percent and give them something that’s better than nothing; enroll an employee at 15 percent with immediate, engaging advice and education, and give them a dignified retirement.

[1] “How America Saves,” Vanguard, 2018

[2] John, David C., Shiflett, William R. “Higher Initial Contribution Levels in Automatic Enrollment Plans May Result in Greater Retirement Savings: A Review of the Evidence,” AARP Public Policy Institute, 2017

[3] “How America Saves,” Vanguard, 2018

[4] “Why Generation X Isn’t Planning for Their Retirement,” TheStreet, 2018

[5] “6 habits of successful investors,” Fidelity, 2019

[6] Amabile, Teresa, Kramer, Steven “Do Happier People Work Harder?,” The New York Times, 2011

[7] Tergesen, Anne, “401(k) or ATM? Automated Retirement Savings Prove Easy to Pluck Prematurely,” The Wall Street Journal, 2018

In February, CAPTRUST’s Cathy Seeber spoke to Financial Advisor magazine about substance use disorder. In the article, titled “Advisor Helps Clients Break Financial Drain Of Addiction”, Seeber shares that she, too, is the mother of a former heroin and alcohol addict.

The article calls out that, according to the National Institutes of Health, living in poverty is a risk factor for abuse of opioids and other substances. But Seeber wants readers to know that addiction doesn’t discriminate.

With growing numbers of high-net-worth families afflicted by the opioid epidemic, Seeber goes on to say, “It’s easier for wealthy individuals to continue to access legal opioids, and they’re better able to hide their addiction because it’s not as physically obvious as heroin, a less expensive substitute.”

Seeber comments how important it is to learn to recognize the signs, ask the right questions, and listen patiently if you suspect someone you care about has a problem with addiction.

To view the article in its entirety, please click here.

About CAPTRUST

CAPTRUST Financial Advisors is an independent investment research and fee-based advisory firm specializing in providing investment advisory services to retirement plan fiduciaries, endowments and foundations, executives, and high-net-worth individuals. Headquartered in Raleigh, North Carolina, the firm represents more than $313 billion in client assets with 38 offices located across the U.S.

When it comes to spending and investment policies, it’s a bit of a chicken-and-egg scenario for nonprofits. How a nonprofit chooses to invest portfolio assets and the amount of grants it plans to award are complimentary decisions, so it’s basically impossible to say which of these decisions comes first.

What we can say with certainty is that endowments and foundations need both an investment policy that documents how portfolio assets are deployed and a spending policy that outlines how much of the portfolio is earmarked for grants. We also know that stakeholders who do not tie spending to investments create significant potential for a decline in portfolio assets and the financial means to award grants in the future.

It should, therefore, come as no surprise that organizations that craft incompatible spending and investment policies may jeopardize a nonprofit’s future and may violate their fiduciary duties under the Uniform Prudent Management of Institutional Funds Act (UPMIFA). In fact, UPMIFA specifically indicates that organizations must factor in the investment policy of the institution and the expected total return from income and the appreciation of investments when determining spending rates.

Successfully fulfilling the mission of a nonprofit depends on careful control and planning around both spending policy and investment strategy.

The Role of a Spending Policy

An organization’s spending policy is a tool that guides the charitable spending and investment trade-off. Spending rules are ultimately designed to advance the mission of an organization and its multiple goals. “A nonprofit institution’s spending approach should be unique to the goals, financials, and risk profile of the organization; it’s not a one-size-fits-all approach,” says CAPTRUST Senior Manager James Stenstrom.

“Our experience has shown us that having clearly defined spending rules instills a higher level of accountability into the budgeting and financial oversight process,” says Stenstrom.

Developing an appropriate spending policy is one of the more challenging steps in the nonprofit planning process. “The institution’s spending policy is usually one of the most important investment strategy inputs,” says Stenstrom. Interestingly, as shown in Figure One, 12 percent of CAPTRUST’s 2018 Endowment and Foundation Survey respondents do not have a formal documented spending policy.

Figure One: Endowments and Foundations with a Documented Spending Policy

Source: CAPTRUST’s 2018 Endowment and Foundation Survey results.

However, a poorly understood or implemented spending policy may be worse than not having one at all. It is important to have an established spending policy in good order and accessible to key decision makers. Furthermore, decisions about implementing a spending policy should be formally documented so context is maintained as stakeholders change over time.

A formal spending policy is an important component of any audit trail. It provides the context necessary to understand drivers of past success or failure. Lastly, a formal policy accompanied by documented compliance may be the best defense against the potential for declined ability to award grants for future generations.

The Big Balance 

For key decision makers, balancing current and future spending can involve difficult, even painful, trade-offs. Officials must balance the expected life of the programs to be funded against the desired life of the organization and the intent of the original charitable gift. This involves the management of three broad trade-offs: spending, investment risk, and investment return.

There are no easy answers.

“Nonprofits must carefully orchestrate the trade-offs between sustainability and predictability in the present and the future. The more a spending policy varies with fluctuations in asset values, the more sustainable—but less predictable—it is,” says CAPTRUST’s Stenstrom.

A high rate of spending requires a relatively aggressive and riskier portfolio or more fundraising to support that spending. Conversely, committees that prefer more conservative investment approaches may need to reduce spending. Stenstrom explains that the spending rate should be coordinated with overall average portfolio returns to ensure spending and investment returns are well balanced.

“Spending more than generated returns on an ongoing basis is a recipe for a decline in assets, regardless of other features of the spending rule,” says Stenstrom. “The perpetual struggle is to decide how much of the available assets should go to those worthy causes currently knocking at the door and what should be invested for future needs.”

When endowments and foundations invest too aggressively, their portfolios may be decimated by both spending and portfolio declines. But if they invest too conservatively, their portfolios may not provide enough growth to keep up with inflation. High levels of spending may require aggressive investment strategies, but these strategies may lead to greater uncertainty in returns, making a spending policy less sustainable.

Given these uncertainties, it’s in the best interest of nonprofits to carefully coordinate overall fund goals with spending and investment decisions. Further, it is critical that decision makers understand the impact that spending decisions can have on their investment portfolio.

Different Types of Spending Policies

An endowment or foundation’s spending policy might be based on current asset value, trailing-average asset value, past spending, income from assets, portfolio returns, or some combination of these. But the right spending policy plays a significant role in an institutions’ ability to achieve its objectives.

A well-thought-out spending policy should balance the current and future needs of the organization while creating a practical and predictable level of spending. A sound policy must also consider the organization’s other sources of funds, such as fundraising, grants, and government support, and how they correlate to the financial markets and spending needs. And finally, a good spending policy maintains the original donor’s intent where applicable.

Evaluating strategies across multiyear market scenarios allows more flexibility in the types of spending policies that can be considered and provides the ability to emphasize different goals over different investment horizons.

“Most often, we see moving-average-based spending policies—where an organization spends a fixed percentage of its portfolio’s average market value over a set time period,” says CAPTRUST Senior Director Grant Verhaeghe. “12 or 20 quarters are commonly used periods.”

But while moving average policies tend to strike a good balance between preserving portfolios and sustaining future spending, we see nonprofits using a variety of spending policy types as shown in Figure Two.

Figure Two: Spending Policy Usage Among Nonprofits

Source: CAPTRUST’s 2018 Endowment and Foundation Survey results.

There is no way to conclude if one policy is superior to any other policy on a general basis, since each has its merits in different situations.

A thorough review of a nonprofit’s goals, objectives, and needs is a staple in both the initial and ongoing part of establishing your nonprofits spending policy. As the decisions made around spending help drive asset allocation and investment manager selection decisions, establishing these rules can be one of the most important and pressing choices a nonprofit board, spending, or investment committee will make.

Excuse Me, Young Brother, I Just Did

In the late 1960s, Eddie Joseph was a high school honor student, slated to graduate early and begin college. That path took a detour. A long one. Impassioned to resolve the social, economic, and political wrongs he saw in his Bronx community and the nation, 15-year-old Eddie was drawn to the ideology of the Black Panther Party, which was just gaining a national presence.

He remembers riding the subway to the Panther office in Harlem with two friends to offer his services, enraged by the recent assassination of Dr. Martin Luther King Jr. He was ready to fight, even kill if necessary, to serve the cause.

At the Panther office, a leader called the earnest teen up front. As Joseph stood by his side, the leader pulled open a desk drawer and reached far into it. Joseph’s heart pounded. He was prepared to be handed a gun—the power for social change.

Instead, he was handed a stack of books, such as The Autobiography of Malcolm X and The Wretched of the Earth, Frantz Fanon’s 1961 work on the cultural foundations of social movements. Taken aback, Joseph said, “Excuse me, brother, I thought you were going to arm me.” The Panther’s reply: “Excuse me, young brother, I just did.”

By 16, Eddie—now called Jamal—learned that the militant group the FBI declared to be “the greatest threat to America” was a multifaceted entity. The Party’s 10-point program called for fair housing, education, justice, and peace. They put those ideals into action with free breakfasts for school children. Free medical clinics for those who could otherwise not afford health care. Neighborhood patrols to protect citizens threatened by street violence and police brutality. The guns were just there to establish authority and prevent law enforcement obstruction to the primary mission: liberation.

“Freedom and liberation are really abstract concepts,” says Joseph a half century later, speaking with a temperate grace that belies the radical fervor of his younger self. What it means depends on where you are on Maslow’s hierarchy of needs. “To a person who is hungry, freedom is a meal. To someone who is homeless and cold, liberation is a safe, warm, dry place to sleep. To a person who is sick, political power is a doctor, nurse, and medicine. So, in a day in the Panther Party, you probably saw or touched a gun 5 percent of the time, but spent 95 percent of the time working in the community.”

The Panthers Joseph saw organizing free services in their communities stood in striking contrast to the menacing, gun-toting criminals he saw on television. He saw that true empowerment is not the product of violence but of empathy.

Joseph has carried with him a lifelong lesson from the late Afeni Shakur, a fellow Panther and big sister figure. “She said, ‘You know Jamal, the real goal of the Panther Party is not to have every person in Harlem or the black community become a member of the Black Panther Party. The goal of the Panther Party is to lead by example and show the people the possibilities of struggle for emancipation and liberation—to lead by possibility and to make ourselves obsolete.’”

“Imagine that pearl of wisdom on a 15-year-old kid,” Joseph says. “If you think you’re going to be a Panther, know that real leadership and service is to make yourself obsolete because the people are empowered because they get it, and they get it for them.”

Serve the Time, or Let the Time Serve You

If violence did not top the Black Panther Party’s tenets, it was undeniably part of the implementation. By 16, Joseph’s devotion to the cause landed him in prison on infamous Rikers Island, charged with a bombing conspiracy as part of the Panther 21 in one of the most emblematic criminal cases of the 60s. When exonerated, he became the youngest spokesperson and leader in the Panthers’ New York chapter. In one of his more renowned oratories, he urged Vietnam war protestors to burn down the Columbia University campus.

He later landed back in prison, sentenced to 12 years in Leavenworth for harboring a fugitive in an armed robbery. Despite the dangers and despair of life in a federal penitentiary, Joseph credits this time for resetting his life’s compass.

“An older prisoner, Mr. Cody, gave me life-changing advice,” Joseph recalls. “He said, ‘Young blood, let me tell you some-thing. You can serve this here time, or you can let this here time serve you.” As Malcolm X said, ‘The penitentiary has been the university for many a black man.’”

While in prison, Joseph earned college degrees with honors in psychology and sociology, wrote poetry and his first play, and founded a groundbreaking theater company that brought together prisoners formerly divided by race, culture, and violence.

Joseph didn’t start out with the idea to develop a theater company. Some inmates—most notably Mr. Cody—challenged him to do a play for Black History Month. “I couldn’t find anything in the library, so I wrote a play and had black brothers rehearsing,” Joseph recalls. Parole by Death was based on the true story of a young prisoner stabbed to death two weeks before his parole date.

“Then some Latinos showed up to a rehearsal,” Joseph says. “We thought something must be really upsetting them. One came up and said, ‘I’ve got to talk to you.’ I thought, oh damn, it’s me. He said, ‘I’ve been watching this for about 10 minutes, and that guy, he’s not feeling his character.’ So I rewrote the play to include Latino characters. Then some white brothers showed up and wanted to be in the play, so we ended up having this multicultural experience.”

“These were groups that stood in different areas of the yard in the voluntary segregation that happens in prison. You stay in your own section of the yard. I thought, this is amazing.” This cultural bridge epitomized the Black Panther Party’s slogan of “power to all the people” across racial lines. There were just 12 to 15 men in the play, but more than 2,000 in the audience giving them a standing ovation, a profoundly unifying moment.

“I saw men change, not only in how they communicated with each other, but in starting to realize that they could act, they could write, they could sing. They wrote letters home, poetry. I saw the transformative and healing power of the arts, and I started thinking this was the work that I wanted to do.”

“I was still a prisoner, but I’d found a new kind of freedom.”

From Prison to a War Zone

Released from prison on Christmas Eve 1987, Joseph returned to a Harlem that looked like the aftermath of a World War II bombing raid—block after block of devastation and decay, punctuated by nightly gunfire at the height of the crack epidemic. He had a family to consider: his wife, Joyce Walker, an actress and model who was the first African-American woman on the cover of Seventeenmagazine, and his young son, Jamal Jr. It would have been so easy to leave. Go somewhere safe.

Instead he stayed and tapped the social activism that had drawn him to the Panthers decades earlier. He immersed himself in projects and making ends meet. On his résumé he listed his Black Panther affiliation and time in prison under “Other Experience.” His candor and street cred earned him a role at the Harlem campus of Touro College, where he worked seven years as a counselor, professor, and director of student activities.

From there, he accepted an invitation to teach a semester of screenwriting at Columbia University, which led to another, then a steady climb up the academic ranks to full professor and a five-year term as chair of the film school. As the first African-American head of any department in the school of the arts, Joseph worked to increase diversity of thought and perspective, both in the faculty and student body.

In the midst of his ascent at Columbia, Joseph’s life took another turn. A 16-year-old neighbor was killed at a party. The boy had confronted a young gunslinger who had disrespected his sister. The youth shot him.

“When Andre’s mother received the news, her apartment was too small to contain her grief,” Joseph recalls. “She ran out into the street and wailed.” Joseph was still mourning the death of his godson, Afeni Shakur’s son, Tupac, who had been killed in Las Vegas a year earlier.

The what-ifs haunted him. Was there more he could have said or done for Tupac? For Andre? “I was helping run a youth program in Manhattan. Why not in Harlem, where I live, I thought? If Andre, or the boy who shot him, were in a creative arts workshop instead of out partying or doing drugs on the street, then maybe Andre would still be alive. These pointless deaths had to stop. I knew I had to do something. And I knew what my weapons would be.”

Making an Impact

Joseph approached Voza Rivers, executive producer of Harlem’s New Heritage Theatre, with a vision to bring arts to Harlem youth, to create a refuge from the streets and help kids make sense of their world.

The IMPACT Repertory Theatre began in a community center basement with nine students—including Joseph’s three children. Within a year, 75 kids had joined. Since then, more than 2,000 young people have been part of IMPACT in New York. Of those who stayed with IMPACT through high school, 75 percent have gone on to college. Thousands more have participated in IMPACT-led workshops in New York, Philadelphia, and Atlanta.

The repertory company performs in front of more than 25,000 people a year at venues ranging from the United Nations headquarters to New York City Hall, hospitals, public schools, and, yes, penitentiaries.

More than a performing arts troupe, IMPACT is based on a mission statement of SOS—safe space, outstanding effort, and service to family, friends, and community. Prospective members go through an intensive 12-week boot camp where they learn the fundamentals of leadership, service, and public speaking—and forge indelible connections.

IMPACT members visit nursing homes, clean up city blocks, and organize food and clothing drives. They serve meals, participate in sharing circles with elders, register voters, and fundraise for charity. “We teach young people that they can be socially active and make a difference,” Joseph says. “There’s no start date for activism, and there’s no expiration date for your dreams.”

Young people audition for the program, but it’s not a pass-or-fail proposition. It’s a chance to find each one’s best niche. Will this person dance, sing, write, or work as a stage manager behind the scenes? “We know we can’t get every kid on stage, but we sure want to get every kid to college,” says Joseph. “If we can teach not only creativity but community and commitment, then we will help them become better people. If they become better singers, dancers, or writers, that’s great, we’re cool, but if you’re a mediocre singer, dancer, or writer but you become a better person, then we’ve done our job, and you will see us jumping for joy.”

The kids write or co-write their own material and choreography, and Joseph is very vested in them. He gets choked up and a little teary-eyed watching them perform, whether in the borrowed rehearsal space or on stage at the 2008 Academy Awards, telecast to a billion viewers. “The kids say, ‘Are you okay Uncle Jamal?’ I say, ‘I have some allergies.’ I’m good at allergies.”

An Enduring Legacy

Alumni from the program come back to share their stories. Now in their 20s and 30s, they are educators and social workers, professionals in medicine, law, and arts management. Many have graduate degrees. Two are PhD candidates.

Count Joseph’s own children in that number. Eldest son Jamal, 36, has a Master of Fine Arts in film from Columbia. Middle son Jad, 30, a Brown University graduate and activist, is passionate about restorative justice and campaigns for progressive candidates. Daughter Jindai, 27, a Columbia University grad, is director of operations and creative producer at a Harlem-based advertising and marketing firm as well as a talented musician. All three were IMPACT kids.

From Revolutionary Artistic Activism

In addition to creating IMPACT and inspiring a generation of Columbia students to tell their stories in film, Joseph is a wellspring of creativity. He published Tupac Shakur Legacy, a biography of his godson, and the autobiographical Panther Baby. He was nominated for the Academy Award for Best Song in 2008 for a song he co-wrote for the film August Rush.

He is co-founder and faculty advisor of FOCUS—Filmmakers of Color United in Spirit—which promotes diversity and inclusion in community work, mentoring, and storytelling through film.

He is working on Peace Warriors, a musical about anti-bullying and anti-violence that has original monologues, poetry, music, and dance by IMPACT members. A documentary on a Harlem-based civil rights lawyer is in the works. So is a television series based on Panther Baby.

Joseph’s critically acclaimed 2017 film, Chapter & Verse, tells the story of a reformed gang leader who struggles to adapt to a changed Harlem after serving an eight-year prison sentence. “I’m very proud of the film as a filmmaker because I was able to artistically make a film that people appreciate.”

Chapter & Verse represented the perfect confluence of Joseph’s worlds. It showcases the talents of present and former Columbia students and IMPACT kids in front of and behind the camera. Joseph is shooting film, not bullets, in Harlem to tell a story that personally resonates—how to find hope and relearn the joys of life and living, “despite an outwardly bedeviled society.”

Now Joseph is raising funds for his next dream—a space in Harlem so IMPACT can have a permanent home and expand offerings with its own dance space, theater space, recording studio, and multimedia center to create digitally enhanced stage experiences. It’s a natural extension of the community-based social activism he learned decades ago as a Panther. “We knew back then that we had bright minds questioning the world,” he says. “Now I want to create a space for the best and the brightest minds of this generation.”

Even with his career and community successes, Joseph can hardly believe he has been at Columbia University for 20 years. He came in thinking he was going to teach one course for one semester. He was stunned to be asked back for a second semester.

“I’m reminded of the irony of this turn of events whenever I walk by the large statue of Alma Mater that stands in front of the Low Library in the middle of the Columbia campus,” Joseph says. “She looks down at me with a look that says, So it’s Professor Joseph now, huh? I remember when you were a young Panther, and all you wanted to do was burn this damn place down or die trying. Well, we both survived, and here we are. Maybe there’s a future after all.”

Just about everything in the sprawling 91-year-old Dutch colonial in Bexley, Ohio, is, in fact, there by design—and part of an experiment in four-generation living Lisa Cini and her family launched in 2014.

Cini, who specializes in designing senior living facilities, used her talents to create an unglamorous but functional 4,300-square-foot home for herself, her husband, and their then-teenaged children to share with her parents and her maternal grandmother, then 92.

Cini’s grandmother, Gerline Lilly, passed away recently from Alzheimer’s disease at age 96. “She lived a phenomenal life and at the end, got to live with my kids, and my mom and dad, and us,” Cini says. “We’ve all benefited.”

Cini describes the experiment in her book Hive: The Simple Guide to Multigenerational Living. It’s an experiment that, in one form or another, more of us are trying.

A New Multigenerational Normal

A record 64 million Americans—20 percent of the population—lived in multigenerational homes in 2016, according to the Pew Research Center. The count includes young adults living with their parents, elders living with their grown children, and grandparents living with grandchildren.

Such households are, of course, common around the world. They are part of our history, too. In 1940, more than two-thirds of people over age 85 lived with extended families, as did one-third of adults ages 25 to 29, according to Pew.

But those numbers plunged after World War II, as a housing and economic boom normalized the nuclear family home. Young adults were expected to set up their own households as quickly as possible, and elders were expected to live independently or among their peers, in senior communities, assisted living facilities, and the like. By 1980, just 12 percent of Americans lived in multigenerational homes.

But during the Great Recession a decade ago, multigenerational living surged back. And it shows no sign of receding now, despite the improved economy, experts say.

In many cases, “people may have come together by need, but they’ve stayed together by choice,” says Donna Butts, executive director of Generations United, an advocacy group that works to strengthen intergenerational connections.

Along the way, she says, attitudes toward such families have changed. Stories about beleaguered baby boomers unable to rid themselves of boomerang kids and needy elders have increasingly given way to more positive narratives, she says, about families choosing to live with and care for one another.

For people who choose the multigenerational lifestyle, “it’s not a sign of weakness,” Butts says. “It’s really a sign of strength for people to admit they enjoy being together. For many families, it’s really a wonderful thing.”

Cini says there may still be some stigma—or fear of stigma—attached to setting up a multigenerational home.

“After I did this, people would come up and say, ‘I want to do this too,’ but it was almost like a dirty little secret,” she says. In the case of people taking in aging parents, she says, “part of it was that they didn’t want people to think they couldn’t afford to put their parents somewhere else.”

And, for many families, financial considerations do still play a role in decisions to double or triple up—even if they are doing it in gleaming new homes or smartly repurposed or remodeled digs, some experts say.

In the San Francisco area, young adults are coming back to live with their parents not because they cannot find jobs, but because their perfectly respectable jobs do not pay enough to cover the high costs of housing there, says Fran Halperin, a Bay Area architect specializing in accessibility and aging in place.

For some, “there’s a lack of confidence that the economy will stay good. I hear a lot of people referring to the next recession,” says Joanne Theunissen, chair of the National Association of Home Builders (NAHB). Theunissen builds and remodels homes in and around Mount Pleasant, Michigan.

That kind of thinking, she says, leads clients to think about how to get the most from their homes—which means thinking about their extended families’ needs in the future.

“I’m building a house right now for a single woman with a daughter,” she says. “Her daughter is in college. Her parents live in Ohio. But she wants a suite for her parents to come and live in in the next few years and another room for her daughter when she comes home.”

New Kinds of Homes

The multigenerational living trend has created a market for new homes built expressly for shared lives. Lennar, the nation’s largest homebuilder, has for the past several years offered a line of what it calls Next Gen® homes—homes designed with attached one-bedroom units that have their own entrances, kitchenettes, and parking but can open into the main house.

Promotional videos at the builder’s website show the sorts of families the homes might attract. There’s a family with a grandmother and another with a developmentally disabled adult daughter, each living semi-independently in their attached suites.

Of course, not everyone plans ahead for multigenerational living.

“Often, there’s some kind of family crisis. Grandma falls and breaks a hip or junior loses his job and has to move back in with the family,” says Northern California remodeler Michael Litchfield, author of In-Laws, Outlaws, and Granny Flats: Your Guide to Turning One House into Two Homes.

Such renovations are the solutions that many families seek if they have the resources. Those resources include not only money, but a house and lot that can accommodate added rooms, ideally with their own entrances, cooking and bathing facilities, and outdoor spaces, Litchfield says.

Another essential: local zoning laws and planning officials that will permit your plans to become reality. That’s far from a given. Many neighborhoods built for single-family living are hostile to changes that might bring in too many people and cars, Litchfield says.

That is changing, though, in many communities trying to address housing shortages. New laws in California, for example, give cities more flexibility to promote the building of so-called “accessory dwelling units.”

Adding such a unit can be a smart financial move, especially in communities that allow them to be used as rentals, says Halperin, the Bay Area architect.

“I personally think they are great for resale. There are so many potential uses. If you don’t have elderly adults or adult children, you might want to rent it out or Airbnb it,” she says—though she notes neighbors often complain about such uses, even when laws allow them.

Another idea: Some people envision moving into their own in-law suites or cottages after their elders or grown children are gone—and renting out their larger home, Halperin and Litchfield say. That, they say, can allow people to travel but keep a base of operations in their old stomping grounds.

Thinking About the Future—with Flexibility

Cini says she does not know what comes next for her family. For now, her grandmother’s first-floor suite stands empty. Her parents, Libby and John Miller, still taking the stairs at 78 and 80, are comfy in their second-floor suite. In fact, Cini thinks the stairs have helped keep her parents young. So has the stimulation of living in a bustling household, where that dorm-style family room, with its multiple sofas, is often full of friends and family, she says.

“They are in better shape than they were five years ago,” Cini says. She notes that her father still works at a furniture dealership, and her mother, with the help of the entire household, was able to be her own mother’s primary caregiver in the older woman’s final years.

“There have also been enormous payoffs for my kids,” Cini says, including lessons in empathy and caregiving.

The two young people, Jacob and Adellina, now in their early 20s, have just graduated from college. Both are exploring options. If they end up living at home, Cini says she will be thrilled. If they end up far away, that will be fine, too, she says—but might mean it will soon be time to move on from what she calls “our minivan house.”

Maybe, she says, she and her husband, Greg, 52, will buy a smaller duplex with her parents—and they will all retire and travel together.

“No matter what, my parents are going to be close to me,” she says. “Flexibility has to be key. You can’t get caught up in doing it one way, because you just don’t know what life holds.”

Kim Hunter once owned a popular Korean restaurant in a trendy area of downtown Raleigh before making the decision to close and take her food to the streets. She enjoyed owning a successful restaurant, but she wanted more flexibility. Her stationary restaurant found itself susceptible to a constantly evolving downtown, and with this comes traffic changes, construction, and parking challenges. Hunter now avoids these rapid disruptions with her mobile eatery, Umma Foods.

Many chefs like Hunter are deciding to forego traditional brick-and-mortar establishments in favor of a traveling restaurant—with far less overhead and restraints. With this shift in dining options, hungry customers are taking advantage of the convenience, variety, and novelty of food trucks to experiment with foods from around the world.

“Having a food truck allows more flexibility, both in my personal life and in where we can connect with customers. We aren’t constrained to a particular location,” Hunter says.

Hunter often finds herself parked in one of the many Triangle breweries, such as Trophy Brewing and Bond Brothers Beer Company. She’s also been booked to park her truck and cater weddings, birthdays, and corporate parties. With her mobile kitchen, she’s able to introduce her international cuisine to a larger area of the city.

One of the perks to operating in such a small space with few staff is the connection between chef and customer.

“On the truck, I am directly involved in every interaction—from greeting the guest, talking with them about the menu, taking their order, and cooking it. I enjoy that level of interaction,” Hunter says.

The Traveling Restaurant Trend

The food truck evolution has changed the way people eat out. So much so that it no longer appears to be a trend. Those seeking a quick and convenient international experience, instead of spending hours at a traditional restaurant, are finding themselves drawn to experimenting with different cuisines at food trucks.

“Enjoying food is about the experience. And people are interested in finding unique experiences and trying new cuisine. Food trucks come from the idea of international street food and, when done well, food trucks give people that sense of being on a street or festival in a town in a faraway place,” Hunter explains.

While food trucks might not create the same ambiance people get with a sit-down restaurant, Hunter says there are ways to create a unique and special atmosphere. Her Umma Foods truck brings a Korean vibe into the experience through the signage and menu, customer service, plating, the locations or setting where the truck is parked, and, of course the food itself.

Take Your Taste Buds on an Adventure

Jeff Clement has been a food truck enthusiast for years. He enjoys waiting among fellow foodie comrades in long lines to try a new and popular food truck. He’s particularly interested in foods with an international flair. Clement enjoyed chasing after food trucks so much that when it came time for him to retire from the advertising agency world, he decided to join his friend—and food truck owner—this past summer to travel throughout St. Paul feeding hungry Minnesotans.

“What I like best about international trucks and doing international foods as specials is it creates a perfect environment and intersection where consumers can try new foods with limited risk or commitment,” Clement explains.

When Clement helped his friend on the food truck, Signature on Wheels, his goal was to enjoy and immerse himself in his passion for cooking and introduce people to the delicious foods he’s tasted while traveling the world with his family. Some of his favorite dishes to prepare were peri peri chicken from South Africa, Goan shrimp and tandoori cauliflower from India, Korean barbeque beef tacos, and Croatian lamb kabobs.

While Clement might be retired from advertising, the practice is still ingrained in the way he thinks. Not only did he help create interesting foreign specials for Signature on Wheels, he branded them World Food Adventures. He even created a Facebook page and the website worldfoodadventures.com, with the goal of eventually expanding to partnerships with other food trucks.

If you can’t find a food truck offering a variety of cultural cuisines, like Signature on Wheels, attending a food truck festival or event where multiple trucks are parked allows for even more freedom to experiment, with minimal risk and cost to the customer. If you’re with a large group, it can sometimes be a challenge choosing a restaurant to please everyone; a festival could cut down on conflict. Also, if you don’t like what you’ve just eaten, you can move along to a different truck without the regret of putting all your hopes into one dish and having to leave hungry.

A Chef’s Advantage

The risks chefs face when trying to decide on menu options might become less risky when operating out of a food truck because they have a direct and immediate connection with the customer. They can see how they’re interacting with their food, and depending on the reaction, they’re able to adjust their menus accordingly.

Cooking from a food truck can also offer a level of satisfaction they might have missed out on, if stuck in a busy kitchen without a visual of their customers. Chefs wouldn’t have to rely on an intermediary, such as a waitress or waiter’s observation.

Dining at a food truck lends itself to comingling with strangers while waiting in line, versus if you were at a traditional restaurant. And since there’s no hostess to provide separate seating, you could find yourself sitting family style at a picnic table or side by side on a street curb, among new friends, enjoying a shared international cuisine experience.

Track a Truck

The thrill of the hunt is part of the attraction to food trucks. Discovering where your favorite trucks are going to be parked next adds an additional element of excitement to the dining experience. It can also take you to new locations you might never have journeyed to.

Social media has played a large part in the popularity of the food truck revolution. After all, following a food truck via Facebook or Instagram and the actual act of eating at a food truck are inherently more of a community experience.

On the ride home from a meeting with their financial advisor, Sophie tells her husband Rob that she’s been thinking a lot more about how their money is invested. “Getting a good return is nice, but I also want us to make sure we consider the bigger picture.”

Sophie starts by explaining to Rob that she doesn’t want to invest in companies with a reputation for being careless—whether it’s with employees, the environment, or with her personal data. “I want to make sure we’re not enabling the wrong organizations.”

“What do you mean?” said Rob.

“I think how we invest matters—or at least it should,” she said. “I’d like to go to sleep at night, knowing we’re not invested in companies that do objectionable things, like pollute the environment, exploit workers, or kill animals. Don’t you agree?”

Rob thinks Sophie’s suggestions sound like nice ideas but wonders if it makes financial sense. “It would be nice to know that the companies we own a piece of are doing the right thing—or at least aren’t doing the wrong thing. But we also need to make sure we are getting a good return.”

An Important Discussion

Talking about personal finances, including how to best invest your wealth as a couple, can be challenging. In fact, almost half of Americans would rather discuss religion, politics, or dying than personal finance with a loved one. Like Sophie and Rob, you may find it difficult to discuss and resolve financial differences and the many questions that need to be answered when jointly investing.

How do you make investment decisions together? Do you solely look at financial return on investments, or do you also factor in nonfinancial returns such as your core values, the environment, and responsible corporations? And when there is a difference in mind-sets, how do you design a portfolio that respects and appreciates both of your goals and objectives?

Finding the answers to these questions may not be easy, but they are a key part of the financial planning process. So make a commitment to engage in this important dialogue with your partner. In doing so, you will increase the financial harmony in your home, improve your relationship, and help your advisor develop a strategy and plan that meets both your needs. The following are a few tips for talking with your partner about values, investments, and making decisions together.

Focus on Shared Values

Begin by focusing on what you two have in common, not your differences. By first highlighting areas of agreement, you set the stage for acting as a team in deciding when, where, and how to invest. Begin the dialogue by asking your partner to name two or three core values and how these principles are honored when making monetary decisions. Listen carefully to the response before sharing your thoughts or reactions. The goal of this part of the conversation is mutual understanding and finding shared values that you might use in the context of investing. For example, Rob and Sophie both value friendly environmental practices and gender parity. They got stuck on where they differ—how much to factor these values into their portfolio—and lost sight of how much they agree on core issues.

Understand Key Gender Differences

When it comes to how people invest and think of wealth, gender often comes into play. Gender differences are based on research, and there are always exceptions to these findings, but appreciating your partner’s gender lens can be helpful in understanding his or her investment selection criteria. Ask your partner for their definition of wealth and how they evaluate risk. Notice any variations in your viewpoints that may be influenced by your genders.

Sophie, like a large percentage of women investors, views wealth more holistically. She wants to invest her money in a socially and environ-mentally responsible way. Financial performance is important, but not the only factor in her decision-making process. Rob’s perspective is indicative of the more traditional male investor. He values financial performance over other investment objectives. Neither of these gender lenses is wrong or faulty; they are just different.

Define Investment Success

It is common for partners to define investment success using different criteria. Different risk profiles, money personalities, and experience with investing all factor into the equation. Ask your partner to tell you about his or her biggest financial success and what they learned from the experience. Then inquire about his or her greatest financial mistake and what lessons he or she learned from this experience. Remember to suspend any judgment and simply listen to his or her responses.

Once you have each had a chance to explain your history and definitions of success, create a joint statement that spells out the types of success you want to include when evaluating your portfolio. Sophie and Rob did this exercise and discovered that together, their definition of success was more robust and factored in both values and performance.

Celebrate Diversity

It is rare that two partners or spouses agree on all aspects of investments. Stop trying to convince your partner that your way is the best way to proceed. Instead, take a deep breath and ask for more data. Your diversity is not a sign of weakness; it is actually your superpower. For instance, Sophie takes longer to make an investment decision, takes calculated risks with her money, and is very philanthropic. Rob is aggressive in his approach and, therefore, tends to tolerate more risk. If they capitalize on these differences, they will create a diverse portfolio that is likely to perform better in the long run.

It is not always easy to communicate about finances, but it is a valuable skill that brings with it positive rewards. For Sophie and Rob, what started off as a financial conflict ended in a meaningful money talk about core values, risk and rewards, and the purpose of wealth in their lives—all worthwhile topics no matter how they decide to invest in the future.

Gloria Gladd, 63, has been active her whole life but has never loved solo exercise. She shudders remembering a free visit to one gym that looked like “a graveyard of equipment” for lonely treadmillers and weight lifters.

Instead, she goes five or six times a week to a Fitology club in State College, Pennsylvania, where she might join a group spin class one day, an intense whole body group workout the next, and a group weight-lifting session the day after that.

She’s always trying new things, Gladd says, and working out with others makes that easier. She remembers the day she got new spin shoes and struggled to attach them to her bike: “Three people jumped off their bikes to help me,” she says.

Gladd likes the idea that if she doesn’t show up for classes, people will ask where she’s been. “There are a lot of regulars, so there’s a lot of accountability,” says the just-retired medical office assistant.

Gladd has discovered something well supported by research. When we exercise alone, we can get a good workout—but when we exercise in a group, many of us get an added boost.

“We are greatly influenced by the company we keep,” and when our exercise mates push us to do one more squat or sweat for five more minutes, that can be a very good thing, says Cedric Bryant, president and chief science officer of the American Council on Exercise (ACE).

Benefits of a Group

A group can drive us to work out harder—perhaps because we want to measure up or do our part for the team. It’s an example of the well-known Köhler effect, seen in everything from business to mountain climbing. When working on a task with others, many of us will put in extra effort.The effect is named after German industrial psychologist Otto Köhler, who first demonstrated it in experiments with rowing teams in the 1920s. But working harder is not the only benefit of working out in a group. Studies have suggested that:

That’s right. A recent study of nearly 8,600 people in Denmark found that all varieties of exercise, as expected, were associated with longer lifespans. But the biggest boosts—ranging from five to 10 years of extra life—were seen in people who choose activities that are typically social, rather than solo, with tennis, badminton, and soccer players outliving runners, swimmers, and cyclers (and exercisers of any sort outliving couch potatoes).

The study did not prove that exercising in pairs or groups made the difference in longevity, but it did account for income, education, age, and other factors that might skew results. The findings held up even when the researchers looked only at college graduates, reducing the odds that the results merely reflect the advantages of those who play certain sports, says study co-author James O’Keefe.

“I really think the social aspect of it may be the most important part,” says O’Keefe, who is director of preventive cardiology at the Mid America Heart Institute at Saint Luke’s Health System in Kansas City. To get the most out of exercise, including the most fun, he says, “we need to embrace our identities as very social creatures.” In other words, O’Keefe says, we need to “play with our friends.”

Not All Groups Are Equal

If you have ever been to an exercise class where everyone walks in, takes a spot, and then wordlessly follows along with an instructor—then you’ve been to a class with a low level of what researchers call groupness.

On the other hand, if you’ve been to a class where participants set goals together, work as teams, cheer one another on, and bond in other ways, you’ve been to a class with a high level of groupness—and probably better results, researchers say.“

What the recent research has shown is that the higher the level of groupness, the higher the level of exertion, enjoyment, and satisfaction. And the higher the intention to do it again,” says Jinger Gottschall, an associate professor of kinesiology at Pennsylvania State University. Gottschall also founded the Fitology club in State College and is a scientific advisor to ACE, the exercise council.

Gladd, who has taken fitness classes from Gottschall, describes the ideal “group vibe” this way: “It’s like being at a sporting event, but you’re participating in it.”

The bonding in a group class can begin even before anyone starts sweating, says John Ford, a New York City personal trainer who works with individuals, couples, and small groups. In a cohesive group, people might be “touching, high-fiving, giving pats on the shoulder” as they greet one another, triggering the release of “feel-good hormones” that can give people more energy and make exercise more enjoyable, he says.

And the bonds can last beyond class, Ford says. That’s why he offers corporate team-building sessions where co-workers might crawl, lunge, and shuffle through a relay competition and perform push-ups in waves—seeing how long they can keep the fun going.

And, Ford emphasizes, the group activity should be fun and conducted in a way that no one gets hurt, physically or otherwise. If not, it can be counterproductive, souring people on exercise. In a country where just one in five adults meets recently updated physical activity guidelines, no one wants that.

Different Workouts for Different Folks

JC Cassis, a 35-year-old musician and podcast producer who lives in Brooklyn, spends much of each day working alone in her house. At some point, she very much needs to get out and see people, and a trip to a nearby gym for some Pilates, yoga, or high-intensity interval training is a way to combine exercise and social contact, she says.

“I’m definitely an extrovert, so the actual human contact is non-negotiable for me. This is the way I’m wired,” she says. “I love seeing the same people over and over again.”

But not everyone likes to exercise in a crowd—and that’s just fine, Gottschall says. “Some people like to go for meditative walks in the woods by themselves,” she says. “And I know some moms who are like, ‘I just want to go for a jog by myself—it’s my me time.’”

“People who have had bad experiences with group exercise in the past—who felt humiliated in high school gym classes or sports settings, for example, can lack the confidence to try again,” Ford says. “But finding a trainer or a group with a positive, supportive vibe can make all the difference,” he says.

Among other ideas for people who are shy, short on time, or living in areas with limited options: virtual exercise partners and online classes.

There are now apps that connect real runners, bikers, and others with online buddies who can share stats and compete. Researchers also are working to improve digital “exergames” to make them more like working out with supportive friends (ideally, friends who motivate you by being just a little fitter or faster than you are). And some exercise studios now offer live streaming classes along with recorded classes on demand. “There really is something for everyone,” Gottschall says.