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Best Road Trips on a Budget

Summer is here and it’s time for getting out of town. However, you don’t want to set off on the open road without a plan. While there are an endless number of places to visit across the United States, here are a few road trips that are filled with natural parks, mountains and beaches, all of which are notably affordable, if not free.

From New York City to Charleston, South Carolina

First stop, Cape May, NJ, where you can hit Cape May Beach for some sun, then walk/bird watch for free at The Meadows. Next stop, Ocean City, MD, where there’s a 3-mile-long boardwalk with lots of arcades and fast-food joints (read: kid-friendly and affordable).

After that, head toward the fabled Outer Banks of North Carolina. Lots of adorable towns and free public beaches pepper this area, but you can’t miss Cape Hatteras. Should you want a break from the sand, you can take in all the critters at the Pea Island National Wildlife Refuge, then climb to the top of the Cape Hatteras Lighthouse – both free. Last stop, iconic Charleston, where the eye-popping architecture is complimentary, as is visiting The Battery, biking the Palmetto Trail and swooning over the miraculous Angel Oak Tree.

From Chicago, IL, to Santa Monica, CA, via Route 66

Starting in Grant Park, the official beginning of Route 66, you can walk and hike across lots of gorgeous tree-filled greens, bike along Lake Michigan, snap pics by Buckingham Fountain and check out sculptures and installations, all gratis.

Head next to Carthage, MO, to the 66 Drive-In, where you can watch one movie and get the second one for free. After this, make your way to bucket list-worthy national parks, including Yosemite, Grand Canyon and Petrified Forest National Parks. While they do charge entrance fees, they’re minimal and the jaw-dropping nature is priceless. Last stop, beachy Santa Monica, where the waves, the pier, the mountains – everything is waiting to greet you.

From Houston, TX, to Portland, OR

First stop is Dallas, where you can see the JFK Memorial and the Calatrava Bridge, both without charge. Next stop, Amarillo, where a must-see is the Cadillac Ranch, rows of old Caddies nose-down in the ground. Free and a great photo op.

Head to Denver, where Rocky Mountain National Park is just a heartbeat away. Stop by Red Rocks Park in the city for awesome natural formations (no charge), followed by the Denver Museum, which is free every first Saturday of the month.

After this, head to Boise, ID, where you can hike/walk in the Boise River Green Belt, hoof it around the Idaho State Capital Building, then get yourself back into nature at the Camel’s Back Park. Last stop, Portland, where a few free things of note include visiting Mill Ends Park, the world’s smallest park. The Vacuum Museum, (yes, you read that right), where you’ll see vintage vacuums. And then, of course, what you came here for, the nature stuff: Forest Park, where you can check out the Witch’s Castle. The Urban Waterfall at Ira Keller Forecourt Fountain Park and of course, Columbia River Gorge, for crazy gorgeous waterfalls and all kinds of outdoor fun.

These three road trips are just a sliver of the many routes that offer freebies along the way. But remember: head for the great outdoors. More often than not, you’ll see some memorable sites that won’t cost an arm and a leg.

Sources

https://www.nytimes.com/2003/03/21/travel/driving-heading-south-taking-it-slow.html

https://blog.esurance.com/6-must-see-roadside-attractions-along-route-66/

https://www.trippy.com/drive/Houston-to-Portland

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Small Business Survey: How Are Today’s SMBs Using Technology?

One way to reduce the overhead associated with hiring workers is to make efficient use of technology. According to a recent survey by CompTIA, 73 percent of midsize businesses and 56 percent of firms with fewer than 20 employees say technology is a primary factor in pursuing their business objectives.

Budgeting

According to the 4Q 2018 survey, the average small/midsize business (SMB) invests anywhere from $10,000 to $50,000 a year on technology. About half (52 percent) of small business owners think they’re not spending enough on business technology.

Upgrading

The largest share of small businesses (36 percent) say that in recent years they’ve focused their technology budget on infrastructure, such as laptops, desktops, servers, phones and storage. The second largest item in their tech budget was industry-specific software. Areas in which small businesses say they most need to improve technology include:

  • Integrating different applications, platforms and devices
  • Cyber and data security
  • Managing and using data effectively
  • Modernizing equipment and software
  • Improving ROI on technology purchases
  • Hiring skilled employees with experience working with newer technologies

Customer Service

One interesting find was that customer service is the biggest technology spending priority for SMBs going forward. Small business owners are looking to technology to help them renew existing customer accounts, identify new customer segments and markets, and innovate new products and services.

New Trend

A new trend among SMBs is to use technology as a service or product that can be offered to customers. In fact, more than half (52 percent) of professional service firms such as accountants and lawyers introduced such a service last year. For example, an accounting firm might provide a cyber security audit or become a software reseller (buy at wholesale price and sell to customers for a profit). Among SMBs that have begun offering technology services, almost half say that revenue stream is growing faster than their regular business.

Preferred Tech Vendors

Where do the majority of SMBs buy technology? Pretty much the same places as individual consumers, namely online retailers such as Amazon and brick-and-mortar stores like Best Buy.

Priorities Compared to Two Years Ago

Another interesting finding from the study is that SMBs are not executing on their technology plans as well as they had hoped. The share of respondents who say they’ve achieved their vision and strategy dropped from 23 percent in 2016 to just 18 percent in 2018. The report asserts that, “Many firms are taking two steps forward and one back as they navigate these new learning curves.”

Emerging Technologies

Despite their sluggish success, more than half (53 percent) of SMBs believe that emerging technologies, such as Internet of Things (IoT) devices, artificial intelligence (AI) and drones will drive opportunities for them in the future. Thirty percent of SMBs say they’ve already incorporated some form of emerging technology into their business to:

  • Increase productivity: 63%
  • Meet customer demand: 47%
  • Enhance innovation: 42%
  • Boost sales: 42%
  • Differentiate themselves from the competition: 39%
  • Avoid obsolescence: 22%

Still, some SMBs are hesitant to invest in emerging technologies. Ten percent think it will trigger a negative impact on their business while 23 percent believe it’s soon to project the potential impact, especially given the cost of entry, the technical training required, and the time it would take to identify high-quality and cost-efficient vendors or suppliers.

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When Saving for Retirement in Taxable Account Is a Good Idea

Most people associate saving for retirement with tax deferred or non-taxable accounts: 401(k)s, 403(b)s, Traditional IRAs, Roth IRAs, etc. The tax benefits of these types of retirement accounts give individuals advantages over simply investing in a regular taxable brokerage account.  

Savings for retirement in a standard taxable account can also have its place – and the option shouldn’t be ignored. In this article, we’ll look at a handful of reasons why doing so might just be the best option.

Your employer doesn’t offer 401(k), 403(b) or similar type plan

Some employers, especially very small ones, don’t offer retirement plan options to their employees due to the cost or administrative burden. Others have restrictions on participation, such as waiting periods (sometimes up to one year) or cut out part-time employees.

In this situation, your options may be limited to opening an IRA, but contributions are limited ($6,000 or $7,000 per year, depending if under or over 50) so an IRA alone may not allow you to save enough to meet your goals. Savings in a taxable account can help bridge the gap between what the IRA allows and your target needs.

You have maxed out and still want to save more

Even if you have access to a tax advantaged savings plan, contributions are limited. For example, 401(k) plans limit contributions to $19,000 ($25,000 if age 50 or older) in 2019. Depending on your income or projected needs, this might not be enough.

Consider for example that many experts say a target savings rate of approximately 15 percent is needed to give a retiree sufficient income. Someone earning $200,000 a year should be putting away $30,000 per year using the 15 percent rule, considerably more than what a 401(k) permits.

Accessibility to your investments

Retirement accounts come with strings attached to those tax benefits. Taking money out of a 401(k), 403(b) or IRA early can trigger steep costs in terms of penalties and taxes.

If you’re someone who values options and access to long-term investment savings, a taxable account provides flexibility. You can add and remove money without limits, penalties or restrictions. You’ll also have more control in retirement as there will be no required minimum distributions later in life.

Benefits for your heirs

Passing on the balance of a 401(k), 403(b) or Traditional IRA to an heir puts him or her in a taxable situation. Typically, someone who inherits an IRA will have to pay taxes on the distributions as if they were ordinary income, just like the retiree during their lifetime. Generally speaking, someone who inherits a taxable account receives a step-up in basis (at the date of death or other depending on elections).

Let’s look at a simple example to understand this better. Assume you bought 1,000 shares of Apple for $20 ($20,000) and when you passed away it was worth $200 per share ($200,000). If you purchased this in your 401(k), then your heir would have to pay tax on the entire $200,000 as ordinary income as it’s distributed. If this investment was held in a taxable account, however, they could receive a step-up in basis. This means that while your basis was the $20,000 you originally paid, your heir’s basis would step up to the $200,000 value. This means he could sell the $200,000 worth of stock and pay zero in taxes.

Conclusion

As you can see, tax deferred and advantaged accounts offer many perks that make them excellent vehicles for saving; however, taxable accounts are often needed as well. The need to save beyond contribution limits or desire to pass on an inheritance in a tax-advantaged manner can behoove looking beyond 401(k)s and IRAs.

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How Will Increased Business Productivity Impact Business Earnings Reports?

During the first three months of 2019, non-farm labor productivity grew 3.6 percent, according to the U.S. Bureau of Labor Statistics. This is coupled with a 4.1 percent increase in output, along with hours worked increasing by one-half of one percent. Comparing the rates from 2019’s Q1 to the first three months of 2018, productivity grew by 2.4 percent, year over year. Looking at the trend over 12 months, the BLS reported a 3.9 percent uptick in output and a 1.5 percent uptick in hours worked. 

With the BLS defining the non-farm business sector accounting for nearly four-fifths (77 percent) of America’s gross domestic product, it’s still noteworthy to see what it doesn’t include. It doesn’t account for government entities, households, farms and non-profits that deal with individuals.

Understanding the Measure of Productivity

The BLS defines a few terms relevant to how it can and will impact a business’ profitability. When it comes to labor productivity – alternately defined as hourly production – this measure is determined by taking an index of real output and dividing it by a pre-determined number of hours from employees, business owners and non-compensated family workers.

Specifically, unit labor costs dropped by 0.9 percent for the non-farm business sector during Q1 of 2019, despite growing 0.1 percent during the past 12 months. This, the BLS notes, is the slowest four-quarter increase – compared to 2013’s 1.7 percent drop in the fourth quarter.

The federal department looks at unit labor costs as how much individuals are paid per hour compared to how much they produce per hour. The more individuals are paid, the higher the unit labor costs, while higher output per hour lowers this ratio.

The BLS provides an interesting illustration of past improvements in labor productivity and what it might mean for the future of work. In the piece, “What can labor productivity tell us about the U.S. economy?” it mentions that Americans clocked in 194 billion hours in both 2013 and 1998. This figure is noteworthy because in the 15-year time frame, with the U.S. population growing by 40 million, the American economy added $3.5 trillion in increased output, despite the same number of hours worked.

An example from the BLS shows how a car factory goes from making 30 cars an hour compared to a previous 20 per hour capacity, resulting in a 50 percent gain. This increase in efficiency comes from a factory upgrade and additional employee training, which translates into labor productivity growth.

The December 2016 White House report titled “Artificial Intelligence, Automation and the Economy” explains how increased productivity has impacted workers and business owners over time.

The report found that beginning in the mid-1970s, the lowest 90 percent of American households saw their incomes drop from two-thirds to 50 percent of all U.S. income. While American workers became more productive, the report found that for low- and middle-income American workers, wages didn’t increase accordingly.

Beginning in about 2000, it found profits of corporations growing as a percentage of GDP. In contrast, workers’ share of GDP started to fall, albeit reversing very recently. The report found in 2016 corporate profits were just under 65 percent of GDP, compared to approximately 58 percent of GDP for the non-farm labor share.

While innovation and using technology for greater efficiency is nothing new and artificial intelligence (software and smart machines) becomes more capable of assisting less skilled workers increase labor productivity, this signifies an overall trend to make jobs less complex, and therefore able to command less compensation.

Examples could include entry level accounting professionals using tax software (supervised by certified professionals) or medical imaging technicians aided by software (supervised by radiologists) to make diagnoses, saving time to complete bulk work. While software and artificial intelligence engineers are on the higher end of the workforce, it’s expected that more work in the future will be deskilled, and result in lower pay.  

If these trends are predictive of the future, the U.S. economy will see greater efficiency and bigger corporate profits. 

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How to Make the Most of Margins and Markups

When it comes to gross margins and the American economy, they vary widely throughout the country’s industries. When New York University’s Leonard N. Stern School of Business recently compiled gross margin statistics for January 2019, they found the low end includes the Auto and Truck industry with a gross margin of 11.45 percent and the Oilfield Services/Equipment industry with a gross margin of 10.70 percent. On the top end, the General and Diversified Real Estate industry saw a gross margin of 73.08 percent and the Investments and Asset Management industry saw a 70.67 percent gross margin. While these gross margins are divergent, understanding more about gross margins gives better context for understanding this measure.

Why Gross Margins Matter

One way to understand gross margins better is to understand how it’s calculated. As the U.S. Small Business Administration (SBA) explains, the gross margin is expressed as a percentage. It’s determined by taking the Costs of Goods sold from the company’s overall revenue. The resulting figure is then divided by the original revenue number. It’s also done over a specific time frame such as a single quarter, a calendar year or an internal fiscal year.

As the SBA explains, gross margins show what portion of the overall sales a business keeps after accounting for the Cost of Goods Sold, or whatever direct costs the good or service took to get ready for sale. Naturally, the higher the percentage, the more profitable the product or service. Regardless of the percentage, it’s important to perform this analysis because it can show where there are efficiencies or inefficiencies in the good or service.

The SBA points out that gross margin is an important factor in determining how to price a product or service to ensure its profitability. For example, with recent developments on steel and aluminum tariffs, businesses that use these two raw materials would likely have to recalculate their costs and therefore gross margins, due to tariff rate changes.

With Section 232 tariffs no longer imposed on aluminum and steel from Canada and Mexico as of May 19, 2019, according to U.S. Customs and Border Protection, companies using this steel would need to see how this impacts their Cost of Goods Sold, and therefore gross margin.

There are many factors beyond this to account for when determining the final price for wholesale or retail. The SBA gives examples of what also influences a business’ pricing strategy, such as transportation costs, seasonal demand, how customers see the worth of a product or service and how badly a company wants to make a name for itself against other business’ products or services.      

While the SBA’s general target for a gross margin is 45 percent (meaning the retail price of the good or service covers the Cost of Goods Sold, plus a 45 percent premium), it can act as a general guide. In addition, there are strategies that businesses can employ to work around various economic conditions.

Increase Efficiency

Increasing efficiency can take the place of investing in technology. With the advent of self-checkout technology and using mobile apps, we have reduced the need for cashiers in the retail/grocery industry. Over the long term, this will reduce the costs for labor. While this might not contribute to the cost of goods or services directly, it can reduce overhead in the long haul for retailers, offsetting a lower gross margin.

Maintain Current Prices (at least temporarily)

In the case of steel and aluminum tariffs, companies can benefit. With tariffs recently lifted on imported metals from Mexico and Canada, companies will be able to maintain current retail prices in the short term, thereby increasing margins.

While each industry has different gross margins, doing a financial analysis will give a business its true financial picture.

Sources

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html

https://www.sba.gov/blogs/understanding-gross-margin

https://www.cbp.gov/trade/remedies/232-tariffs-aluminum-and-steel

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Social Security: News, Tips and Trends

There are a number of threats that both retirees and pre-retirees are facing right now when it comes to drawing Social Security benefits. For example, there’s a new scam this year. Seniors are being solicited by callers who claim to be with the Social Security Administration (SSA). The caller says he regrets to inform that the elderly person’s Social Security payments have been suspended. The caller says it’s either because the beneficiary has been involved in a crime or there has been suspicious activity related to their benefit. Here’s the interesting part: the caller then requests that the senior repay a certain amount of his benefit to Social Security by gift card. The scammer is then able to use this money quickly with no paper trail.

If that sounds absurd, consider that over the span of just two months Social Security beneficiaries collectively lost upward of $6.7 million by falling prey to this a new, highly effective scam. Even if an elderly person is suspicious or knows the call is fraudulent, he may acquiesce anyway for peace of mind. Seniors who rely on Social Security as their primary source of income are of no mind to mess around when that income is threatened. If you or anyone you know is in this situation, be aware that the SSA does not make direct phone calls, does not threaten to stop paying benefits, and certainly does not ask to be refunded payments by gift card.

From a longer-term perspective, Social Security payments could be threatened by – ironically enough – the current administration’s strict immigration policy. The former chairman of the Federal Reserve, Alan Greenspan, recently noted that in 2010 alone, unauthorized foreign workers paid about $12 billion in tax revenues that went directly into Social Security’s coffers. Because many immigrants pay FICA taxes whether they are documented or not, this revenue source has been a mainstay to our Social Security, Medicare and Medicaid programs for as long as they’ve been in effect. Based on 2016 government data, even before the recent immigration policies were implemented, Pew Research reports that the number of unauthorized immigrants had dropped to its lowest level (10.7 million) since its peak (12.2 million) in 2007.

The unfortunate consequence of fewer immigrants is that payroll taxes may have to increase and/or Social Security benefits reduced in coming years. One economist projected that if we continue down this current path of highly restrictive immigration policies, Social Security benefits would need to be cut by nearly 25 percent.

To make the most of their benefits, many retirement planners recommend that retirees wait as long as possible to begin drawing Social Security income. The longer you wait, the higher the benefit. However, those in poor health or diagnosed with a terminal illness (only two to four years to live) may be better advised to begin taking benefits. However, there is a caveat to this strategy that should be considered. Delaying benefits not only ensures a higher payout for the primary beneficiary, but also for the surviving spouse. When the primary breadwinner takes Social Security before full retirement age, his monthly benefits are permanently reduced – that is, the amount his widow will be stuck with for the rest of her life. If you don’t actually need the income, it might be worth delaying benefits to increase the amount a dependent spouse receives upon your death.

Another little known fact about Social Security is that you can have a do-over. If you retire, start drawing benefits and then decide to go back to work, you can actually stop taking the payout and let it continue to accrue until you’re ready again. Of course, there are restrictions in place. First, you must be under age 70. Second, you have to alert SSA of this plan by submitting the appropriate form within 12 months of applying for benefits. And third, you must pay back all the money you’ve received to date. The good news is that you can reapply later and enjoy a higher benefit as if you were drawing it for the first time.

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Enhanced Funding for Shooting Practice and Bulletproof Vests

Target Practice and Marksmanship Training Support Act (H.R. 1222 – The Pittman-Robertson Act, passed in 1937, imposes an excise tax on the sale of firearms, archery gear and ammunition. Those proceeds are used to fund hunter education programs, land acquisition and improvement of wildlife habitat. This new bill allocates a higher portion of these federal funds to cover the cost for construction and expansion of public target ranges. The act is designed to encourage states to develop additional shooting ranges for marksmanship training. It was introduced on Feb. 14 by Rep. Ron Kind (D-WI), passed in both the House and Senate and was signed into law by the president on May 10.

To Reauthorize the Bulletproof Vest Partnership Grant Program (H.R. 2379) – This bill would reauthorize federal funding to help state and local law enforcement agencies purchase bulletproof vests for officers working in the field. It was introduced by Rep. Bill Pascrell (D-NJ) on April 29, passed in the House and Senate and is currently waiting to be enacted by the president.

A bill to make technical corrections to the computation of average pay under Public Law 110-279. (S. 1436) – Introduced by Sen. Sherrod Brown (D-OH) on May 13, this bill becomes part of the 2008 Public Law that authorized specified Senate Restaurant employees who became employees of a food services contractor the option to continue coverage of federal benefits, including retirement benefits, life and health insurance, annual and sick leave balances and accrual rates, and transit subsidies. This new bill makes technical corrections to the Public Law, which prohibited the basic pay of these employees from dropping below the rate paid to that worker when he was employed by the government. The bill has been passed by both the House and the Senate and is awaiting the president’s signature.

The Equality Act (H.R. 5) – Reintroduced on March 31 by Rep. David Cicilline (D-RI), this bill prohibits discrimination based on sex, sexual orientation and gender identity in public accommodation areas and facilities (e.g., restrooms, locker rooms, dressing rooms), as well as the education, federal funding, employment, housing, credit and jury systems. It includes gender, sexual orientation and gender identity as prohibited categories of discrimination or segregation. This bill represents the first of its kind to protect LGBT rights and would expand the Civil Rights Act of 1964 and other laws that collectively ban discrimination. The legislation passed in the Democrat-controlled House on May 17, but is not expected to be presented for a vote in the Republican-controlled Senate.

National Flood Insurance Program Extension Act of 2019 (H.R. 2578) – This bill would reauthorize the National Flood Insurance Program through September 30 (roughly, the bulk of hurricane season). The present legislation is set to expire on May 31. The bill was introduced by Rep. Maxine Waters (D-CA) and passed in the House on May 14. The bill is currently with the Senate.

Gold Star Family Tax Relief Act (S. 1370) – This bill would amend the Internal Revenue Code to treat certain military survivor benefits as earned income for purposes of the Child’s Investment and Other Unearned Income Tax (also known as the “kiddie tax”). The legislation was introduced on May 8 by Sen. Bill Cassidy (R-LA). It was passed in the Senate on May 21 and is currently with the House of Representatives.

Alaska Remote Generator Reliability and Protection Act (S. 163) – This bill instructs the Environmental Protection Agency (EPA) to revise regulations regarding particulate matter emissions standards for nonemergency stationary diesel engines in remote areas of Alaska. The objective of the legislation is to prevent the shutdown of remote diesel power engines due to emission control devices. The act, which was introduced on January 17 by Dan Sullivan (R-AK), passed in the Senate on May 20 and is under consideration by the House.

Supporting and Treating Officers In Crisis Act of 2019 (S. 998) – Introduced by Sen. Joshua Hawley (R-MO) on April 3, this bill would amend the Omnibus Crime Control and Safe Streets Act of 1968 to expand support for law enforcement officer family services, stress reduction, suicide prevention and other purposes. The bill was passed by the Senate on May 16 and is awaiting consideration in the House.

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