Trust is in short supply these days, and not just in Washington.

Across American workplaces, confidence in leadership, information and intent has eroded, according to Gallup, in subtle yet deeply consequential ways. The result isn't just cultural discomfort; it's a direct hit to productivity, collaboration and performance.

Politics will grapple with the trust deficit in its own fashion. In business, however, the responsibility is more immediate and more actionable. Rebuilding trust isn't a messaging exercise: It requires a fundamental shift in how leaders show up, communicate and make decisions.

Why now? The ground has shifted. Employees operate in a more complex, skeptical information environment. The line between fact and fiction feels more blurred than ever.

Conflicting narratives and AI-driven deepfakes amplify this confusion. In this environment, trust is no longer assumed. It has to be earned — deliberately and consistently.

Adapting to an AI-integrated workplace hinges on one thing: Trust. Not the kind you frame on a wall, but trust that is built into the operational fabric of the organization. It shows up in how communication flows, decisions are made and how organizations learn at scale.

This is especially true now. People curate their own information streams and shape their own versions of reality, typically validating their existing world view. Inside and outside the workplace, individuals gravitate toward like-minded perspectives. Cliques reinforce these viewpoints.

Breaking through these filters requires leaders to be deliberate, consistent and credible, which requires them to go beyond traditional culture efforts.

The bottom line: Barriers are going up inside your organization. It's up to capable, forward-thinking leaders to break through them, earn buy-in, build confidence and make a clear, credible case for the path forward.

Fear of losing control

According to the 2026 Edelman Trust Barometer, a global survey of more than 33,000 people across 28 countries, 70% of people are now unwilling or hesitant to trust someone who differs from them in values, background, culture or approach to social issues.

This isn't polarization anymore. It's something more insidious: Insularity. And it's quietly destroying collaboration, productivity and innovation in workplaces everywhere.

The consequences are stark and measurable. Forty-two percent say they would rather switch departments than report to a manager with different values. Thirty-four percent say they would put less effort into helping a project team leader who has different political beliefs.

This isn't about office politics or personality conflicts. This is a fundamental breakdown of the social contract that underpins organizations' functioning.

When teams can't trust across differences, projects stall. Innovation dies. The best ideation is disrupted due to the lack of cognitive diversity and constructive conflict.

The result: People self-segregate into their ideological comfort zone.

Even within this environment, there's a clear path forward if leaders address the underlying dynamics head-on. Start with a simple reality: A meaningful segment of your workforce will be hesitant to embrace any change and specifically AI-driven change designed to boost productivity gains.

Why? It's not fear of change. It's fear of losing control.

AI, by its nature, makes people feel displaced in their own roles. According to a 2026 ADP research survey, only 22% felt their job was safe from elimination, with workers reporting feeling less certain about where they fit, how decisions are made and what remains in their hands.

That perceived loss of control fuels anxiety. The issue isn't the technology itself; it's the uncertainty it creates. When people feel they no longer have agency, resistance follows. Understanding that distinction is the first step to address it.

Leaders must recognize this fundamental shift in the workplace. Focus on empowering your people to expand their capacity to process everything happening. The only way to expand it is by raising their level of awareness.

The co-creation principle

There is a practical way through this: Involve people in building what comes next because people commit to what they help create.

As AI integration reshapes workflows, decision-making and expectations, employees' voices should be integrated into the design process. Let them help choose what tools are used, how processes evolve and what new norms take hold. Participation drives ownership, and ownership drives adoption.

That's why the age of AI isn't just a technology shift — it's a cultural one. And culture still does what it has always done: It determines whether strategy actually works. You can have the best AI roadmap in the world, but if the culture resists it, progress stalls.

In the past, organizations could operate with a baseline level of skepticism and still function. In an AI-driven workplace, that's no longer the case. Without trust, adoption slows, collaboration weakens and productivity suffers. Building that trust isn't optional. It's fundamental.

For organizations, the path forward requires discipline. Recognizing the environment you are actually operating in, not the one you wish existed. Then, take a hard look inward. Where are you misaligned between intention and execution, strategy and rewards, culture and compensation?

From there, move into action. Build human verification into AI workflows. Train your systems properly, because the old rule still applies: Garbage in, garbage out.

Just as important: Design environments that help people stay grounded and focused. Invest in practices that build resilience and expand capacity across the organization.

And through it all, engage your employees in the process. Give them a voice in shaping change.

I said it before and I will say it again, people commit to what they help create. In a low-trust, AI-driven workplace, that may be the most important advantage you have.

So take the lead: Invite your team to co-create. Organizations that figure this out won't just survive the age of insularity; they'll define what workplace success looks like on the other side.

Related Content

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

In these transactions, the rights and remedies available to shareholders in the minority vote vary widely across jurisdictions, shaped by each state's statutory framework and judicial interpretation.

In general, these protections may include the ability to dissent from the transaction, seek payment of the fair value of their shares and challenge the sale in cases involving fraud, self-dealing or other unfair conduct.

Many states provide some form of appraisal or dissenters' rights, though the scope, procedures and available remedies differ significantly.

For example, Florida law allows shareholders in the minority vote to demand the fair value of their shares to be paid to them based upon an appraisal determined as of the date before the objectionable action took effect. That value is often calculated using standard business valuation methods.

Shareholders in the minority vote should take the following initial steps to preserve their appraisal rights.

1. Review the relevant statutes

As the philosopher Francis Bacon famously said, "Knowledge is power." Understanding the law is the first step in protecting an investment. Even if a shareholder has no legal training, they should review the relevant statutes in their state that govern dissent and appraisal rights to understand both their rights and how to protect them should they choose to dissent from the action.

Familiarity with the law not only reveals where rights are being overlooked but also strengthens the shareholder's position when working with an attorney or engaging with the corporation.

2. Submit a timely written dissent

In most jurisdictions, a shareholder in the minority vote who wishes to dissent from a majority-approved sale of substantially all corporate assets must submit a timely written objection and follow the statutory procedures to preserve any right to seek the fair value of their shares.

For example, Florida statutes require the corporation to obtain the approval of its shareholders to sell all or substantially all of its property, and it must give notice to every shareholder of the meeting at which the disposition is to be submitted for approval, even those who are not entitled to vote. To preserve appraisal rights, a shareholder must not vote in favor of the transaction and must submit a timely written dissent in accordance with the applicable statutes.

Sometimes, statutes do not give a specific format for the dissent, but they consistently require that it be submitted in writing. If the statute or the corporate governing documents are silent, a good rule of thumb is to track the language of the relevant statute relating to notice of intent to demand payment or similar language.

The dissent should also strictly follow the procedures required and rights afforded by the corporation's governing documents, such as the bylaws or shareholder's agreement, which may have relevant information regarding dissent rights.

After the vote is effected wherein the proposed sale of substantially all the assets of the corporation has been approved and the shareholders in the minority vote have given their notice of dissent, the corporation must deliver a written appraisal notice to the dissenting shareholders.

If the corporation fails to do so, the dissenting shareholders should consult with a business lawyer experienced in working with closely held corporations to ascertain their rights. Legal counsel can help enforce the shareholders' rights.

3. Request key corporate records

If the corporation fails to deliver the appraisal notice or the shareholder disagrees with the corporation's assessment of the fair value of their shares, the shareholder may make a statutory demand for access to certain financial records from the corporation.

These documents assist a business valuator to perform an appraisal of the corporation, assess the company's true worth and, thereby, the fair value of the shareholder's ownership interest.

For example, Florida law recognizes a shareholder's right to inspect certain records. Under the state's statute, corporations must maintain basic records that shareholders are entitled to review.

In addition, the rule gives shareholders the right to inspect additional records, such as accounting documents, if the request is made in good faith, with specificity, and for a proper purpose related to their rights.

If the corporation refuses to comply, shareholders should consult with a business attorney who can enforce their statutory rights and, if necessary, seek court intervention to obtain the records.

Following these steps can strengthen a shareholder's ability to assert their dissent rights and to receive the fair value of their shares.

Lan Kennedy-Davis is a partner at RumbergerKirk with a diverse practice that spans corporate transactions, general and complex business litigation and family law.

Sandra Ferrin, special counsel at RumbergerKirk, provides legal representation to corporate clients and individuals in shareholder and partnership disputes, breach of contract, breach of fiduciary duty and business torts.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

You might think your side business is too small to warrant having a separate business bank account. Maybe you’re just starting out and it feels too soon to bother juggling multiple accounts. Maybe you’ve been freelancing for years and never even thought about separating business finances from your personal ones.

For many small businesses, however, a separate business bank account is required to maintain certain legal safeguards and avoid unexpected account closures. But even business owners who don’t need one for legal reasons can still benefit from having a checking account that was actually built for business.

With a business checking account provided through the fintech company, Mercury, for example, the added tools and features make it feel more like banking and financial planning software rolled up into one convenient platform. Keep reading to find out which business owners need a business account, how it differs from a personal account, and what you’ll need to set one up.

Do you need a business bank account for your small business?

Whether your business is made up of just yourself or has hundreds of employees, you probably need a business account. If you have an LLC or you incorporated your business, for example, you are required to have one to maintain the legal safeguards that come with that status.

If you don’t separate your personal account from your business account, your creditors could have grounds to hold you personally liable for your company’s debt.

Depending on which institution you use for personal checking, you may not be allowed to use your existing checking account for business, no matter what type of business you have.

With that said there are some situations where you aren’t required to open a separate business account. Many sole proprietors or freelancers, for example, can technically use a personal account, provided the deposit agreement doesn’t say anything about not using it for business purposes.

Whether you’re legally required to open a business account or not, there are plenty of ways that having one can make running your business easier. To start, maintaining separate accounts just makes it a lot easier to keep track of your business income and expenses. That’s handy for budgeting and accounting purposes, but also makes it a lot easier to accurately file your taxes come tax season.

Having a business account can also make it easier to apply for business loans. Not only does it add legitimacy to your company, but it also makes it easy to provide bank statements that only show business-related revenue and expenses.

What’s the difference between a business checking account and a personal one?

A business and personal checking account look similar at first glance. Both allow you to make deposits and spend your money using a debit card, writing checks or by making certain types of transfers. Both also may come with FDIC insurance protecting deposits up to $250,000.

In addition to those standard features of a checking account, business accounts often come with a few extra features like the ability to accept credit card payments and seamless integrations with accounting and tax prep software to make managing your business finances and tax planning easier.

Many also allow you to add users to your account while also limiting their access and spending. Unlike adding a joint accountholder to your personal account who will then have all the same permissions as you, a business account allows you to tailor specified roles and spending controls for each user.

Mercury Account Features for Your Small Business

As an example of how an actual business bank account can do more than a standard personal bank account, take a look at accounts provided through Mercury. The fintech company partners with FDIC-insured banks to provide a range of online banking services tailored to business of all sizes.

That includes the Mercury, Mercury Plus and Mercury Pro accounts. With no monthly fees or minimum balance requirements, the standard Mercury account is a great entry-level account for new or small businesses that need the added financial planning tools of a business account without the added cost usually associated with them. As your business grows, you can upgrade to Mercury Plus (which comes with a $35 monthly fee) or Mercury Pro (for a $350 monthly fee).

Here’s a quick look at some of the Mercury business banking features that go beyond a standard checking account:

• Accept payments via credit card, Apple Pay and Google Pay.
• Generate invoices directly from your account. With Mercury Plus or Pro, you can even set up recurring invoices and payment reminders.
• Automatically match payments you receive to invoices so you can easily keep track of paid and outstanding invoices.
• Issue corporate cards to your employees, with tailored permissions for each one. That includes making the cards only usable for payments to specific merchants as well as setting custom spending limits and authorization requirements. You’ll also be able to set company-wide spending rules that apply to all account users.
• Reimburse expenses for up to five users per month on the entry-level account. With Mercury Plus, that increases to 20 users per month and you can add additional users for $5 per user per month. With Mercury Pro, you get up to 250 users per month.
• Automatically spot duplicate subscriptions so you can curb unnecessary spending.
• Issue cash back credit cards that earn 1.5% cash back on every transaction, while still leveraging the control over spending limits and transaction types on those company credit cards.
• Sync your account to third-party business tools like QuickBooks, Xero, Stripe, Slack and more.
• Create your own rules for coding transactions and expenses to easily manage cash flow through your account.

How to open a business account

Opening a business account requires a bit more documentation than you’d need for a personal account. But the process is still easy and decisions are typically made in one to two business days, so you’ll have your account up and running quickly.

Here are the key requirements you’ll need to have on hand when you apply for a business account:

• Official company formation documents
• IRS-Issued Employer Identification Number document
• Copy of government-issued ID for each founder or majority owner
• A physical address for your business. This can be a residential address, as long as it is the primary location you do business out of.
• Your legal business name
• A description of your industry and what your business does
• Your company’s source of funds
• Details about current and future operations

Bottom line

A business account is required for many types of business, regardless of size. But even if you’re a sole proprietor or freelancer, the added tools that usually come with a business account like the ones offered through Mercury make it worthwhile even if you aren’t legally required to have one.

*Mercury is a financial technology company, not a bank. Banking services provided through Choice Financial Group, Column N.A., and Evolve Bank & Trust; Members FDIC.

**The IO Card is issued by Patriot Bank, Member FDIC, pursuant to a license from Mastercard®. To receive cash back, your Mercury accounts must be open and in good standing, meaning they cannot be suspended, restricted, past due, or otherwise in default.

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Whether you’ve decided to start a business in retirement or you’re making the leap to trade your day job to fulfill your passion, handling your small business’s finances can get complicated and messy fast if you don’t have the right tools. But which tools do you really need? How do you decide which ones to get?

To help you build a tech stack that works for your needs, look into adding these seven tech tools to manage your finances easily and accurately.

1. Business bank account

Not only is a business bank account required for most small businesses, it can often make your life as a business owner easier. With a tech-forward option like the business checking account provided through the fintech company Mercury, for example, you’ll get extra features like third-party integrations with your accounting software, payment processing service and other important business tools. It can even generate invoices, match incoming payments to those invoices and do dozens of other handy functions that streamline the financial side of your business.

Whichever business account you choose, make sure to check the fees, minimum balance and other requirements. Many banks charge fees, especially for accounts with more advanced tools and features. Accounts provided through Mercury come with no annual or hidden fees and no minimum balance requirements.

2. Accounting software

Almost as important as a business account, accounting software is integral for ensuring you’re accurately keeping track of your revenue and costs. This is also where you’ll be able to create and keep track of invoices, manage your bills and generate reports to analyze the financial health of your business.

With that said, there can be a lot of variation between programs, and between the tiered plans offered by each software. So it’s important to shop around and compare the features that come at each price point across a few different programs before you commit to any particular accounting software.

It also helps to have software that integrates with your business account. While not everyone offers this, Mercury business accounts integrate with QuickBooks and Xero, two of the leading accounting software options. Subscribers to Mercury's paid plan, Mercury Pro, also get access to NetSuite integrations. This can automate a lot of the data syncing and reporting needed to keep your accounting up to date and accurate.

3. Payment processor

Whether you sell a physical product or offer a service, you need a way to process various types of payments like credit cards and mobile payments. There are plenty of different payment processing services out there, with Stripe and Square being two of the more well known brands.

But the fee structure and account requirements vary significantly, so it’s important to take a close look at each one and estimate how much you’ll pay each month based on the types of transactions you process the most.

With a Mercury account, you’d be able to link Stripe to your checking account to take advantage of Mercury’s invoice generation features and set up transfers from your Stripe to your Mercury account. If you’re not sure where to start with choosing a payment processor, this is a convenient place to start.

4. Tax software

Getting your taxes right each year is as stressful as it is important. So working with a great tax prep software that caters to small businesses is key. Whether you want to hire a pro or file them yourselves, opt for tax prep software that at least offers the option to ask a live tax expert questions as you go.

Ideally, it should also integrate with your preferred accounting software, too. This just makes it easier to import your documents and lower the risk of errors as you fill out your tax return.

5. Payroll software

There’s more to paying your employees than cutting checks. With payroll software, you can easily calculate paychecks, withhold taxes and other deductions and keep up with evolving employment laws and compliance.

It also helps track time-off accruals and usage and provide an employee portal where your employees can easily check pay history, get pay stubs or change direct deposit information. Come tax time, payroll software can even help with generating W-2s to employees.

Overall, it’s an important way to cut down on the manual calculations and paperwork involved in paying employees. So if your business is made up of more than just you, this is a must.

If your team is still relatively small, though, look for software that’s scalable. That is, you want payroll software that offers a lower cost basic version so you’re not paying for robust tools that you don’t need yet or the ability to process payroll for hundreds of employees when you currently only have a couple of people on your staff.

6. Financial planning software

Financial planning software allows you to both track your past performance and plan for the future. It will include features like budgeting, forecasting and scenario planning that help you make data-driven decisions and set financial goals or projections for your business.

To start, you might want to keep costs down by opting for accounting software that includes at least a few basic financial planning features. But, as you grow, explore more advanced tools that offer things like automated identification of cost saving or growth opportunities.

7. Secure financial document storage

As a small business owner, you’ve got a growing pile of important documents to keep track of: Receipts, payroll records, permits and licenses, insurance and the list goes on. While you might not need to access all of these documents in your day-to-day, it’s important to store financial documents the right way so that you can easily find them when you do need them.

Both digital and physical storage options exist. But even with physical documents, it’s a good idea to save scanned copies in a secure digital location, just so you have a backup.

How to build the right tech stack for your small business

As mentioned earlier, integration is key. Having seven different financial tools that can’t talk to each other will force you to put in a lot of manual effort to keep the data synced across each one. So, whenever adding a new tool to your toolbelt, start by checking which third-party platforms your existing tools integrate with already.

But, even before looking at integrations, look for software that consolidates multiple tools into one. Even if you don’t need some of the more advanced features just yet, starting with an entry-level version of a software that offers optional add-ons or upgrades will make it much easier for your business to scale without having to overhaul your tech stack as you grow.

Say business is booming and manually generating invoices each month is getting tedious, compare the cost of buying new software to that of upgrading what you already have. For example, upgrading your Mercury business account to Mercury Plus (which offers recurring invoice generation, among many other things) is priced at just $35 per month.

That may be more cost-effective and easier than adding a brand new piece of software to your tech stack, especially when you factor in the other features that come with the upgraded account.

*Mercury is a financial technology company, not a bank. Banking services provided through Choice Financial Group, Column N.A., and Evolve Bank & Trust; Members FDIC.

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Another tariff hike could soon impact global trade and U.S. consumers.

Panama is slated to impose new tariffs this month for crossing ships seeking passage through the Panama Canal. Over 70% of traffic in the critical waterway comes from U.S. naval and merchant ships each year.

The canal’s tariff modifications come after an extreme drought substantially reduced water levels and limited the channel’s capacity for crossing ships. Due to the resulting revenue loss, authorities hiked the fees per vessel.

Separately, President-elect Donald Trump has proposed and continues to defend his plans to impose tariffs on all foreign goods entering the U.S., a campaign vow that economists warn would raise prices for U.S. consumers even further.

Trump has also recently expressed a desire to take control of the Panama Canal, claiming the waterway's control represents a strategic loss for American interests.

Here’s what you need to know about the Panama Canal's upcoming fee hikes and what they mean for you as a consumer.

Who operates the Panama Canal?

The Panama Canal is operated by the Panama Canal Authority (ACP), a Panama government agency that has been responsible for the canal's management for the last 25 years.

As mentioned, Panama is implementing a series of tariff modifications this year to relieve congestion at the canal following its severe drought.

• At one point, Panama authorities said ship crossings were cut by 36% due to low water levels.
• The Associated Press reported that this cost Panama between $500 million and $700 million in 2024.

The disruption caused a major problem for global trade: traffic jams.

This led to delays, higher shipping costs, inflationary pressure on goods, and overall growing uncertainty about the reliability of the Panama Canal’s transit system. Why is this a big deal?

The canal serves more than 144 maritime routes and connects 160 countries, reaching as many as 1,700 ports in the world. That’s not all: more than 70% of cargo ships crossing the 80-kilometer route are going or coming from the United States.

The updated fees, meant to ease congestion, will impact every nation using the Panama Canal, not just the U.S.

Some fees will impact transit reservations, for instance:

• A regular vessel will have to pay $12,000 starting January 1 to reserve the right of passage through the canal.
• Previously, the tariff was $10,500. Super vessels and large container ships will also face transit hikes.

Shippers will be charged 1% of the reservation tariff if they swap slots within 14 days or less. Additionally, any ship that arrives at the canal and needs a last-minute reservation will face even higher penalties. A regular vessel will face a $25,000 tariff, more than double the normal rate.

Those are just a few of the changes that will be in effect for all ships crossing the canal starting this year, according to the Panama Canal Authority.

Could Panama Canal tariffs spike U.S. consumer costs?

Panama’s tariff modifications will increase the shipping costs for U.S. merchant ships, which will impact American businesses and, as a result, may cost U.S. consumers more.

Businesses generally pass along tariff costs to their consumers by inflating prices. That’s mainly because tariffs may reduce business profits, so they must recoup those costs.

At the same time, Trump has remained firm in his pledge to increase tariffs on all imports entering the United States. The president-elect’s most prominent proposal aims to impose a universal 20% tariff and a 100% rate on Chinese imports.

As Kiplinger has reported, economists warn the across-the-board tariffs would drive shopping prices higher in 2025. Everyday items like clothes, toys, furniture, or other household appliances would all see steeper prices, shrinking your spending power.

Some U.S. states would also be hit harder by tariffs than others, as their economies rely more on imports.

Tariffs bottom line: What’s next for U.S. consumers

Tariffs will be a prominent topic in 2025 as the U.S. president-elect plans to impose steep taxes on all imported goods.

As mentioned, experts say that businesses usually pass along some of the costs of tariffs to consumers by hiking the price of goods. While Panama’s new tariffs on goods crossing its waterway are global, they may impact the price of some goods as businesses adjust to higher fees.

Separately, Panama is one of three countries without an inheritance tax, making it one of the top retiree-friendly countries in the world. Additionally, as reported by Kiplinger, many Americans see tax benefits of retiring in Panama. including a lower cost of living, lower property taxes, and tax breaks.

For now, stay tuned on how tariffs may come to impact your wallet in 2025.

More on Panama and Tariiffs

• Three Tax Reasons to Retire in Panama
• Which States Will Be Hardest Hit By Trump's Tariffs?
• How Tariffs Could Make Shopping Pricier This Year

Long dreamed of becoming your own boss? Now may be a good time to take the plunge. Today’s tech advances make everything from marketing to invoicing more manageable than ever.

The Small Business Administration and other entrepreneur-focused groups provide a plethora of free resources to support your growth. And with interest rates on loans ticking down, borrowing cash to fund your vision is getting cheaper.

Whether you’re thinking about freelancing, consulting or opening your own restaurant, many of the initial moves you should make as you start a business are similar. By getting an understanding of what’s needed, you can preserve your financial security, avoid unnecessary headaches and set yourself up for success.

Here are the key steps to go from idea to execution.

Validate your concept

Make sure there’s a demand for your product or service.

“Know the difference between an idea the market wants or needs and an idea that is a personal passion or a hobby,” says Kira Chereé Cobb, founder of Entrepreneur Business Basics, an organization that helps entrepreneurs launch and grow their businesses.

Carolyn Katz, a mentor at SCORE, a nonprofit organization that provides free advice and resources for entrepreneurs, is a proponent of “customer discovery,” which means having open-ended conversations with potential customers.

“Instead of asking, ‘Would you like red socks or blue socks?’ or ‘Would you pay $10 or $12?,’ you ask, ‘How do you feel about your socks?’ ” she says.

Online tools such as Google Forms and SurveyMonkey are helpful for getting feedback. However, Katz recommends in-person discussions when possible. If you’re thinking about opening a food truck, for instance, hang around existing food trucks and chat with customers there.

During your research, don’t rely on friends and family for validation. Focus on those who don’t have a vested interest in your success, not people who will say, “Honey, that’s a great idea,” Katz says.

While you are investigating the viability of your concept, be sure to analyze competitors and track industry trends. One useful approach is a SWOT assessment, which helps you examine the strengths, weaknesses, opportunities and threats related to your idea.

Gavin Escolar, founder of The Chaga Company, used a SWOT analysis soon after discovering the antioxidant and anti-inflammation benefits of Chaga mushrooms during an extended trip to Alaska. Inspired by the health benefits he experienced, Escolar remained in Alaska, selling Chaga-infused foods and beverages in Juneau.

After realizing the harsh Alaskan winter weather wasn’t for him, he decided to return to San Francisco. Using the SWOT framework to evaluate the mushroom-selling potential there, he discovered a promising market. The analysis panned out, and he has been successfully running the company from there since 2018.

He sells his products at farmers markets, fungus fairs, pop-ups and corporate events, as well as online.

Review your personal finances

Even with the best idea, it can take months to make money. “Businesses that are profitable out of the gate are the rare exception,” says Katz, who has a background in banking and venture capital.

With that in mind, it’s critical to build a solid financial cushion — preferably enough to support you for a year — before you launch. At the same time, make sure your personal credit is strong, because you may need to borrow.

“Whether it’s an Office Depot store card or a business Mastercard,” loan issuers will initially rely on an entrepreneur’s personal credit record when reviewing credit applications, says Cobb, who is also an affiliate representative with the Kauffman Foundation’s FastTrac entrepreneurship education program.

Also, review the benefits your employer provides to determine what you’ll need to replace. Start by examining your pay stub or Form W-2 to get a general understanding of your income. Then, add in employer-sponsored benefits such as health care contributions and insurance discounts that you’ll pay if you’re not eligible to join a parent or partner’s plan. In addition, while employers pay a portion of your payroll tax contributions for Social Security and Medicare, self-employed workers must pay the entire 15.3% tax. (However, you can deduct half of self-employment taxes on your tax return.)

Without access to an employer-sponsored 401(k), you’ll also need to set up your own retirement plan, such as a Simplified Employee Pension (SEP) IRA or solo 401(k), to be able to save money pretax. If your employer provides a matching contribution to your workplace plan, you’ll also lose that when you leave.

Keep in mind, too, that while you are employed, you’re typically paid when you’re out for sick days, federal holidays and that annual beach vacation. When you’re running your own business, you won’t get those perks.

Cobb recommends thinking through some scenarios to fully comprehend how your finances will fare if your business doesn’t succeed. Consider testing your concept as a side hustle or part-time work before leaving your job.

Create your business plan

Think of your plan as a blueprint for what you want to achieve. It will outline how you’d like to structure, operate and expand your business. A solid plan helps you stay focused and gives potential partners, lenders and investors a clear view of your vision and business model.

Every plan is unique — there’s no exact formula — but most include an executive summary and mission statement, company description, details on products and services, market analysis, organization structure, operations plan, financial plan, and marketing strategy.

With so many elements, creating a business plan can feel daunting. But help is available. The Small Business Administration and SCORE have detailed templates that guide you through each step.

You can find the SBA template at www.sba.gov/business-guide/plan-your-business/write-your-business-plan; SCORE’s template is available at www.score.org/resource/template/business-plan-template-a-startup-business.

You can also get personalized assistance from advisers at SBA district offices, Small Business Development Centers (SBDCs) and SCORE. (For more on these resources, see the box on the facing page.)

Figure out the funding

There are numerous avenues to consider for financing your business, including self-funding (also known as bootstrapping), small-business loans or microloans, venture capital, grants, lines of credit, crowdfunding, hitting up family and friends, or a combination of these funding sources.

The SBA has a range of loan programs, but it doesn’t lend directly. Instead, it works with institutions willing to extend credit to start-ups because the SBA guarantees a portion of the loan.

Whether it’s an SBA-backed loan or a crowdfunding campaign, remember that what worked for a friend’s or colleague’s venture doesn’t mean it’s the right approach for you. The best kind of funding is very specific to the company and the situation, Katz says.

The Chaga Company’s Escolar got a $3,000 loan from his mother to launch his business in San Francisco, and he agreed to pay interest if he didn’t reimburse her within six months. He was able to pay her back in full before that condition kicked in.

Entrepreneur Arnyce Foster-Hernandez, who recently opened Featuring, a café that sells coffee, tea, pastries, natural fruit juices, and other items in the Harlem area of New York City, initially looked into securing a loan but says the process was time-consuming and disheartening. Instead, she self-funded, using $70,000 of her and her husband’s savings to open the café, and now relies on a business line of credit as needed.

In September, the Federal Reserve cut interest rates for the first time in more than four years, giving small businesses that rely on SBA loans a financial boost. Some 80% of SBA loans are tied to the prime rate, which means about 200,000 small businesses were set to see reduced loan payments starting in early October, according to the White House. While rates on SBA loans are negotiated between the borrower and the lender, the SBA caps rates based on the size of the loan. Currently, the caps range from 11% to 14.5%.

Despite falling rates, some lenders may remain cautious as they balance new loan requests with challenges such as outstanding loans from businesses that survived the COVID-19 pandemic but are now struggling financially, says Katz. Those institutions are trying to make new loans work while cleaning up old loans, which can leave them overstretched and more hesitant to lend.

A well-prepared business plan with detailed financial projections can strengthen your application. To explore your loan options, you can use the SBA’s Lender Match tool at https://lending.sba.gov/lender-match, which connects businesses with nearly 1,000 SBA-approved lenders. Those not matched to lenders are connected to a network of free advisers who can help prepare them for future approval.

Organize your business finances

To avoid legal and financial complications — and simplify record-keeping — separate your personal and business finances. That means using a dedicated bank account and credit card for your business.

You’ll also need a system to track income and expenses, such as QuickBooks or FreshBooks software, or even a well-organized spreadsheet. Cobb recommends working with a bookkeeper early, as an experienced professional can provide invaluable guidance on areas such as paying yourself, tracking profit and loss, and categorizing expenses correctly. “Instead of waiting until you have a lot of money, start with one in the first six months,” she says. “They can help you set up your finances the right way from the very beginning.”

An accountant is another expert to work with as soon as possible. A CPA can explain which expenses are deductible and help you take advantage of tax breaks. An accountant can also guide you through calculating estimated quarterly tax payments, so you’re not caught off-guard at tax time or penalized for underpayment.

“You have to be really cognizant of taxes,” says Aditi Dussault, associate administrator for the SBA’s Office of Entrepreneurial Development. “I know people who start as sole proprietors, don’t pay their taxes quarterly, and then are shocked at how much money they owe the government when they actually file.”

To find an accountant or bookkeeper, ask for recommendations from trusted sources, such as a financial adviser, your bank, or local small-business organizations. Check with peers, mentors, or members of your networking groups for suggestions, too.

Select a business name

Choosing a name for your business can be just as meaningful as naming your child — yet it comes with much more legwork. It’s fine if there are three other Emmas in your kid’s fifth-grade class. But in business, you want a unique moniker.

After brainstorming your name shortlist, run each contender through your state’s business-name directory, which is often found on the website for your state’s secretary of state, to see whether it is already taken. Also, search the U.S. Patent and Trademark Office website at www.uspto.gov to see whether anyone else has claimed the trademark.

Plug the name into Google and other search engines to see what pops up. If you plan to launch a website, see whether a domain name is available to match your preferred name. If the name you want is available, you can buy it through a domain registration company, such as GoDaddy.com. Check popular social media sites to see whether your business name is available as a username. If it is, nab it.

Decide on a business structure

Your business’s structure can affect everything from taxes to liability, so it’s essential to go about this with care and, often, some expert advice. Many entrepreneurs start as sole proprietors, but that could make you personally liable for the debts and obligations of the business, Dussault says. Operating as a limited liability company (LLC), such as a single-member LLC, can better protect your personal assets.

You can file for an LLC by completing the necessary documents on your own, using an online do-it-yourself service such as LegalZoom, or you can seek the assistance of a lawyer, accountant, or member of your local SBDC. Other structures include partnerships, S Corporations, and C Corporations. Ownership rules, liability, taxes, and filing requirements for each can vary by state.

Also, on the paperwork front, you’ll need to get the proper insurance, licenses, and permits for your business.

Build a support network

Most new business owners don’t realize how lonely working for yourself can be. “Friends and family don’t want to hear how you spent the last four days trying to figure out your point-of-sale system,” Katz says. “And you can’t really talk about the frustration of running the business to your staff or customers. So you need a support system.”

Mentors, peers, and coaches can provide needed counsel and emotional support. Although putting yourself out there can be awkward and intimidating, building a business network is crucial for success, as it can help you find potential partnerships, land new customers and develop ideas for business growth.

There are plenty of ways to build your network, from attending chamber of commerce mixers to joining LinkedIn groups in your industry. You’ll need to proactively connect with others in person, via e-mail, and on social media. “Get comfortable with being uncomfortable,” Cobb says.

There’s also a wide range of specialized support groups, Dussault notes, such as communities for women, veterans, LGBTQ people, and Asian American entrepreneurs. “You can get very specific” to find a community that suits you and your needs, she says.

While connecting with new mentors and advisers can be invaluable, networking with fellow entrepreneurs can help you to find resources, such as competent, affordable legal and bookkeeping services.

“So many people feel as if they have to do it on their own in order to be a real entrepreneur. And that is not true,” Dussault says. “You want to protect your secret sauce and not give out that recipe, but trading notes on advisers and other resources can help accelerate your growth.”

Promote your brand

Thanks to relatively easy-to-use design platforms such as Canva, DIY web platforms such as Wix and Squarespace, and the ability of artificial intelligence to create everything from logos to social media posts, there is an abundance of marketing resources for today’s entrepreneurs. The trick is to focus on what works best for you and your goals.

“You need to have a strategy that’s organic to you and that works with your business and with your style,” says Katz.

When Escolar decided to launch his Chaga mushroom company in San Francisco, he sought out his target audience, which led him to the local Mycological Society of San Francisco Fungus Fair. His products sold out, validating his idea.

“I’ve been a small business ever since,” he says.

In addition to those in-person sales, Escolar has a website that offers everything from Chaga-infused chocolate to tea. He’s also active on Facebook and Instagram.

Although not every owner needs to be on social media, some sort of digital presence is crucial. You don’t have to be a digital marketing guru or spend thousands of dollars to get your message out there, says café owner Foster-Hernandez.

“You can Google ‘How do I market my business on social media?’ and you will find all of these free resources that will guide you step by step,” she says.

Foster-Hernandez set up free business accounts on Instagram, Facebook, and TikTok. In addition, she took advantage of free business tools, such as listing her business on Google Maps and Apple Maps so that her café comes up during a search. She’s learning about Google ads and experimenting with boosting social media content through paid promotions.

“A lot of marketing is fairly simple if you just have patience with yourself,” she says.

Adapt and grow

From the moment your business idea first comes to you until your very last day running your business, you’ll need to continually pivot to respond to market trends, customer desires, new opportunities, and your own professional and personal goals. You’ll likely outgrow certain clients, need to make staff changes, and revise and revamp your marketing. It’s all part of the entrepreneurial journey.

“It’s okay to pivot,” says Cobb. “You might need to change a client, shift your service offerings or realize what you initially wanted to do isn’t what you want now.”

It’s much better to find the courage to change course than to stick with a concept that no longer works.

“A lot of businesses hold on to this first dream, but then they go down with the ship because the idea may have been good at the moment, but it’s not what the market wants in another five years,” she says, citing the collapse of video rental store Blockbuster after digital competitors entered the market.

Dussault echoes this advice, saying it’s often best to cut your losses early rather than hang on. Sticking with a failing idea just because you’ve invested a lot of money and time in it can ultimately cost you more in the long run.

“You’re going to make mistakes, and you’ll never be fully prepared for every type of failure,” Dussault says. “Having self-compassion is really important. Forgive yourself and move on.”

Celebrate your successes

Being an entrepreneur is often one of the toughest career paths you can take. Late nights and early mornings are common. On any given day, you can juggle the roles of administrative assistant, sales executive, marketing manager, and CEO.

With so much at stake, it’s crucial to recognize and honor all the wins. “As business owners, we celebrate the major things, like landing a big contract. But we often forget to appreciate the small accomplishments, like filing your taxes on time,” says Escolar.

“Running a small business is a marathon. If you celebrate yourself, it will help you and, ultimately, your business as well, since you are a reflection of your business."

Don't go it alone

There’s a wealth of free and low-cost resources for budding small-business owners. Here are a few to get you started.

Small Business Administration (www.sba.gov). The SBA provides a wide range of support, from financial assistance to marketing and sales strategies. Go to www.sba.gov/local-assistance and enter your zip code to find support in your area. Each state has SBA district offices that can assist with planning, starting and expanding a small business. For more info, contact the SBA Answer Desk at 800-827-5722 or answerdesk@sba.gov.

SCORE (www.score.org). Since its founding in 1964, SCORE has assisted millions of entrepreneurs. Originally known as the Service Corps of Retired Executives, it provides one-on-one mentoring, along with workshops and other resources through its network of 10,000 volunteers.

Small Business Development Centers (www.sba.gov/sbdc). SBDCs offer counseling, training, technical assistance and more. There are more than 900 locations across the U.S. — often at colleges and universities.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Since 1993, the Family and Medical Leave Act (FMLA) has protected employees who need to take time off from work to care for themselves or others. The federal law requires employers to provide workers up to 12 weeks off for medical leave, for the birth of a child or placement of a child for adoption or foster care, or to care for an immediate family member with a serious health condition. The law also covers a spouse, child or parent who takes leave to care for a military member with a serious injury or illness or to make certain arrangements (such as for child care) while a service member is deployed. Your employer isn’t required to pay you for the time off, but the law protects your job, and your employer must continue to provide your benefits, such as health insurance.

Michelle Paggi, a gerontologist and licensed psychologist in New York City, remembers how helpful the FMLA was for her mother when her grandmother was diagnosed with terminal lung cancer. Paggi’s mom, a health unit coordinator at a hospital, needed to take time off to care for Paggi’s grandmother and feared losing her job. “It was very aggressive cancer, and my grandmother had a lot of appointments. She needed my mom there as her primary caregiver,” says Paggi. “My mom was only in her fifties, so she needed the health insurance and was in no position to quit her job.”

Paggi’s mother found out about FMLA protections from a coworker, and she started accumulating overtime hours so she could continue to get paid when she took time off from work. “The FMLA gave her the flexibility to take care of my grandmother and still be able to hold on to her job,” Paggi says.

While many people know they can use the FMLA to take time off after having a baby, they don’t realize that it can also help when caring for a sick or aging relative. The law “recognizes the fact that there are over 53 million Americans providing on-going complex care for a loved one with a serious illness or disability or who is aging and requires care,” says Jason Resendez, president and CEO of the National Alliance for Caregiving. “According to our data, over 60% of family caregivers are working while providing care. Of those employed caregivers, over 50% are working full-time. There’s a balancing act between providing care and needing to put food on the table and stay in the workforce. FMLA provides a basic safety net for those caregivers.”

FMLA leave is not guaranteed to everyone. You’re eligible only if you work for a public agency of any size or a private company with 50 or more employees, you have worked there for at least 12 months, and you worked at least 1,250 hours during that year (about 24 hours per week). That covers about 56% of employees, says Molly Weston Williamson, senior fellow at the Center for American Progress.

People who care for extended family members are also excluded. For example, the law doesn’t cover time off to care for an aunt or grandparent, Resendez says. When Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies, was in her forties, she asked her employer about using the FMLA to help care for her grandmother, who had suffered a stroke (her mother had passed away years earlier). That’s when she discovered that caring for a grandparent isn’t covered by the FMLA.

Fortunately, she was able to make a flexible work arrangement with her employer so she could keep her job while caring for her grandmother, and the company’s employee assistance program helped her find backup care. Her grandmother lived for five years after having the stroke.

If you aren’t eligible for FMLA protections, talk about your situation with your employer and find out whether it offers any benefits. “Learn what is available to you,” says Collinson.

State programs

Because of the FMLA’s limitations, many states have attempted to fill in some of the gaps. Some states have required smaller employers to offer the leave or expanded eligibility to workers who need to care for siblings, grandparents, in-laws and sometimes domestic partners, says Usha Ranji, associate director for women’s health policy for KFF, a nonprofit health-policy research, polling and news organization.

More significantly, a growing number of states have implemented paid-leave programs. Thirteen states and Washington, D.C., have passed laws that guarantee paid family and medical leave, which typically include the needs covered by the FMLA, Weston Williamson says. The programs in four of those states take effect in 2025 or 2026. (KFF provides a list of the states at https://tinyurl.com/y2twjss9.) The types of care that are covered can vary by state. Some states offer paid benefits only for medical leave, or for caregiving leave and/or parental leave, but not all three.

You typically apply for paid family leave through your state’s department of labor or paid family leave agency. Workers and employers usually pay into an insurance system, which covers the benefits when workers take leave, Weston Williamson says. You may get a percentage of your salary, up to certain limits — 60% to 80% is typical, says Ranji.

How to take family leave

Start by contacting your employer’s human resources department. Although in many cases the need comes up at the last minute, you generally must provide advance notice of 30 days for scheduled events, such as a new baby or planned surgery.

A health care provider typically must complete medical certification to support the need for leave, which can be for several weeks at a time or up to the equivalent of 12 weeks per year. The law allows employees to take intermittent blocks of time for a single reason, such as flare-ups of chronic conditions or recurring caregiving responsibilities, says Maria Medina, HR knowledge adviser for the Society for Human Resource Management. Examples of situations in which the FMLA can be used continuously include a serious medical condition that requires recovery time, pregnancy that entails bed rest, or inpatient treatment for mental health conditions. For more information, see the Department of Labor’s FMLA resources at www.dol.gov/agencies/whd/fmla.

More Help: Some states offer paid family caregiver programs

In response to the COVID-19 pandemic, the federal government allowed states to use Medicaid funds to pay family caregivers, says the National Alliance for Caregiving's Resendez. More than 40 states expanded their ability to provide direct compensation to family members, although some scaled back their programs after the COVID public health emergency ended.

The person receiving the care generally needs to be eligible for Medicaid, and the family member may need to register with a home health agency to get paid for providing the care, says Alice Burns, an associate director of the Program on Medicaid and the Uninsured for KFF, a nonprofit health-policy research organization.

Eligibility varies by state. Some states cover care only for family members with developmental disabilities, while other states limit the program to relatives age 65 and older or with physical disabilities.

For more information, go to www.kff.org/medicaid or contact your state Medicaid program. Burns also recommends contacting an Area Agency on Aging near you to find out about state programs for older relatives. You can search by your zip code or city and state at https://eldercare.acl.gov.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Thinking of unretiring? You're not alone. Returning to work after calling it quits is still part of the regular routine for many older adults. In 2024, 37.3% of people age 55+ were employed, up from 31.5% in 2000. So much for basking away the hours under the sun.

By comparison, in 1983 the labor force participation rate for people age 65 or over was just 19%, according the the U.S. Bureau of Labor Statistics (BLS).

Today, however, older workers are re-entering the workforce at unprecedented numbers. Although the reasons vary, we can thank inflation, the rising cost of living, current market volatility and overall uneasiness over what the future may hold — among other things.

LinkedIn quoted a recent un-retiree as saying, “Depending on when you plan to retire, you may have another 30, 40, 50 or more years of life — and that’s a long time to drift aimlessly,”

What are the motivating factors? 

First, people are living longer. According to a United Nations estimate, the world had just 27,000 centenarians in 1970. Now, global centenarians top 722,000 and could reach 3.5 million in 2050. Advances in medicine, improved public health measures, better nutrition and healthier lifestyles all likely contribute to a long life.

Second, Social Security benefits. Working in retirement may help put a little extra cash in your pocket. That is unless you exceed $23,400 per year in 2025 (up from $22,320 in 2024) and you're under full retirement age (FRA), per the Social Security Administration. That means, if you go back to work and you haven't reached your FRA, for every $2 in earnings above the $23,400 limit, $1 in benefits is withheld.

This is called a retirement earnings test exempt amount. However, this only applies if you are under your full retirement age (FRA). If this is the case, one of two different exempt amounts apply — a lower amount in years before the year you reach your FRA and a higher amount in the year you attain FRA.

On the plus side, any benefits withheld while you continue to work are not lost. Once you reach your FRA, your monthly benefit will increase permanently to account for any benefits withheld.

Third, money. More than half, or 53% of respondents of a 2024 CNBC and SurveyMonkey poll say they are behind on retirement planning and savings. In a recent update from Resume Builder, one in eight retired seniors are likely to return to work in 2025. The top reason? An increase in the cost of living. And, although you might be able to live off Social Security as your only source of income, it probably won't be enough to replace your pre-retirement standard of living.

Fourth, making connections. Financial planner Judith Ward said many retirees consider rejoining the workforce because it’s a “powerful way to make social connections and reestablish a sense of purpose.” George Jerjian echoed her sentiment. “Sure, money is a concern, but the biggest retirement challenge that no one talks about, in my experience, is finding purpose.”

Where are unretirees working?

Mark Walton said in his book “Unretired: How Highly Effective People Live Happily Ever After,” that older workers are part of a big change in the American economy. While many can afford to retire, many seniors have no interest in powering down their ambitions to play pickleball, garden, go on a cruise or dabble in hobbies for the next 30 years. Instead, they are finding work in less physical and less stressful jobs. And, employers are benefiting as well from the deep expertise that comes with years of experience.

Most of the 60.3% of baby boomers who held a job in the last year were employed full-time, according to LinkedIn data. The remainder (39.7%) were self-employed. Many boomers also found jobs in the Sun Belt — a favorite region for retirees with sunshine and low taxes that stretches across the southern U.S., from Florida to California.

Besides location, AARP Vice President Carly Roszkowski says, “Many older Americans are “starting their own businesses or driving for Uber or DoorDash — jobs that didn’t exist 15 to 20 years ago.”

As far as mobility, 30% of seniors who have returned to work or are considering going back to work say they would prefer to be fully remote, while 4% would rather do hybrid work and 31% say they would prefer to work in-person. The remaining 35% have no preference.

Proceeding with caution

Retirees who decide to return to work, however, must be careful with their Medicare coverage. That’s because both Medicare Part B and Part D premiums are based on your income. Your premium costs could increase if you begin making more money.

Medicare coverage also comes into play if you go back to work for a company that offers a health care plan that qualifies as primary coverage. If so, you can drop your Medicare Part B and re-enroll later without penalty. Once you're done working, you have eight months to re-enroll or you may incur a late enrollment penalty.

It may also be possible to have both Medicare and private health insurance through your new employer — one will be your primary coverage, and the other will be secondary. If you do have both, you can't put money into a health savings account (HSA) through your employer without facing a tax penalty.

Another consideration before unretiring is the possibility of changes in your taxes. The extra cash you make may push you into a higher tax bracket. This is especially true for anyone with additional income from a pension, retirement account or Social Security.

According to Kiplinger, there are ways around this. You can consider converting some of your tax-deferred retirement accounts into Roths, You'll pay taxes upfront, but you won't pay income tax when you withdraw your money because you already paid the tax on your contributions.

You also don’t have to take minimum distributions from these accounts. That means you aren’t unnecessarily adding income that might push you into a higher tax bracket. A financial adviser may be able to help you understand the big picture while also finding ways to lower your tax burden should you decide to unretire.

How to unretire

If you’re one of the many retirees going back to work, but you're not sure where to start, Kerry Hannon, a workplace author and columnist, recommends focusing on upskilling and cultivating your network. “Getting your wider community involved in your job search — not just family or close friends — will help the most,” she said. “It’s the people who participate in your same hobbies who you don’t know as well who might keep you in mind when they hear of opportunities.”

Unfortunately, getting your foot in the door can be a little more daunting when you're older. "Many older workers fear age discrimination will hurt their chances of landing a role," AARP’s Roszkowski said. “Include your credentials, but don’t include college graduation dates.”

You might also consider semi-retiring, or inching into retirement slowly. You can keep working, but also spend more time on those activities you enjoy. If done well, semi-retirement can be beneficial both financially and psychologically, and it gives you a chance to take a step back and ease into retirement rather than stopping abruptly.

Does the workforce need older workers?

Baby boomers and some of the eldest members of Gen X, who turned 59 1/2 beginning on July 1, 2024, bring a lifetime of experience and skills to the table. Boomers are the generation least likely to feel burned out on the job, according to a recent LinkedIn survey. A separate survey from Bain research showed that they feel more loyal to their employers than other generations. And teams that span generations can generate stronger overall performance and more productive collaboration than those that don't, according to research featured in Harvard Business Review.

Recent findings from LinkedIn’s Workforce Confidence survey also show that more than half of Gen Zers and millennials in the U.S. say they could use a mentor at work. Mentoring relationships can help mentees develop their careers and allow mentors to cultivate a greater sense of purpose and meaning. A win-win for everyone.

Note: A version of this item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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To help you understand how interest rates are impacting small businesses, and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

Higher interest rates hurt all borrowers. But they hit small businesses extra hard. Unfortunately, for small companies, higher borrowing costs are unlikely to ease much anytime soon. So, many small firms will cut back on plans to hire, expand or invest in new capital equipment.

Just how much costlier is credit these days? In 2019, the prime rate, the benchmark rate for loans to small borrowers, was 5.5%. Now, it’s up to 8.5%. Small firms are paying 9.1% on average, per the National Federation of Independent Business. And even that may be an understatement.

Owners of small businesses often depend on credit cards or personal loans, which carry rates far higher than corporate bank loans usually do. Interest costs are nearing 7% of revenues for small-business borrowers. In 2021, they were 6%. If rates hold steady, the figure will hit 8% by 2030.

Credit has gotten notably tighter, too. Just 13% of small-business loan applications to large banks are getting approved these days, roughly half the rate back in 2019.  Smaller banks and credit unions are now approving 20% of small business applications, vs. 40%-50% in 2019.

Large companies face tougher standards, too. But many of them can borrow directly by issuing bonds or commercial paper, albeit at the highest yields in many years. For many small businesses, there’s no choice but to cut back — fewer hires, delayed purchases of needed equipment, holding off on moving to a bigger space, etc.

Business, overall, is OK, but many small companies can’t finance the investments to grow. (If you sell to small firms, you’re already seeing this belt-tightening. Unfortunately, there’s little hope of it ending anytime soon. If anything, expect more retrenchment.)

One upside of higher rates: Some small firms can earn more on their cash if they carry significant cash balances. The days of 0% on savings accounts are over. There are also some alternate credit sources small firms may be able to tap: Loans and loan guarantees from Uncle Sam, in particular. 

Various programs run by the Small Business Administration aim to help small companies access credit. For example, the SBA 7(a) loan program provides loans that can be used for working capital or to buy a business at the prime rate plus a margin the borrower and lender agree to. SBA 504 loans can be used to purchase owner-occupied commercial properties.

The Department of Agriculture provides loan guarantees to small businesses in rural areas through its Business and Industry Loan Guarantees Program. A wide range of loans are eligible, with guarantees of up to 80% of the amount borrowed for many purposes. 

Even some private grants are available to small companies. For instance, Verizon offers $10,000 awards plus consulting via its Small Business Digital Ready program.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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Robyn Dochterman has owned a chocolate shop in Marine on St. Croix, Minn., since 2010 and has spent a lot of those 13 years putting chocolate in molds and flipping them out. 

This repetitive motion has damaged her hands, and although she has had a few procedures and an operation to fix the problem, it keeps returning. For the past several years, Dochterman, 61, has been trying to figure out how she can keep working and manage her pain. 

“I own my own business and if I had to be here till 2 a.m., no big deal,” she says. “But now I have to dole out the hours to myself and make sure I don't overwork because I can't come back from that. It’s a sort of asset management.”

Many older workers are facing the same dilemma as Dochterman. Those 55 and over now make up 24% of the workforce, up from 12% 25 years ago, says Richard Johnson, a senior fellow at the Urban Institute think tank. According to a 2022 study in the journal Research on Aging, one in four workers who are still healthy in their mid-fifties will experience a disability in the next few years, making working more difficult. This includes both blue- and white-collar employees.

The disability can be caused by a sudden medical problem, such as a heart attack, a neurological disease such as Parkinson’s, mental health challenges or, like Dochterman, chronic wear and tear.

The journal study also found that three-fourths of workers with new disabilities in their late fifties or early sixties left the workforce before full retirement age; that compares to one-third of those who didn’t have a disability.

But many can’t or don’t want to give up their jobs. So how can they cope with their disability and continue working?

Support for disabled employees 

Under the Americans with Disabilities Act, employers must provide “reasonable” accommodations to those with substantial impairments, which include problems hearing, seeing, speaking, breathing, performing manual tasks or caring for oneself. Reasonable is defined as not causing “undue hardship” for the company. Companies with fewer than 15 employees, religious organizations and private clubs are exempt from the law’s requirements.

Accommodations can include modifying equipment—even something as simple as a different chair, desk or keyboard—or changing work schedules or  job restructuring. More information is available on the website of the U.S. Equal Employment Opportunity Commission. Click on the tab for employees and job applicants and over on the right, under the section for “discrimination by type,” select “disability.” 

About half of workers with disabilities receive accommodations from employers, Johnson says, but “a lot of people don’t pursue it. To get accommodation, self-advocacy is really important. You have to be aggressive and pursue an accommodation with an employer.”

One great boon for workers with disabilities has been the move toward remote work since COVID. That is true for Peter Winkelstein, 66, a pediatrician who suffers from a degenerative muscular disease called inclusion body myositis, for which there is no treatment.

Winkelstein, of Buffalo, N.Y., received the diagnosis when he was 60 and now walks with crutches; it is likely he will be in a wheelchair within 10 years. His hands are getting weaker, making it more difficult to type. He runs out of energy much sooner than he used to.

While the diagnosis was devastating, the timing was fortunate. Winkelstein had recently retired from clinical practice to become the chief medical informatics officer for Kaleida Health, the largest health system in western New York. He is also the executive director of the University at Buffalo Jacobs School of Medicine and Biomedical Science Institute for Healthcare Informatics.

“There’s no way I could do clinical practice now,” Winkelstein says.

Then COVID hit, and remote became the new norm. It stayed that way for Winkelstein after the pandemic waned. 

“It takes me a long time to get ready in the morning, and although I can still drive, if I had to go in to work full-time, it would be really hard for me,” he says. 

Working with your employer 

Winkelstein decided to tell his human resources department early about his disability — before it was obvious — and was glad he did. He got support, and the company received information that, in certain circumstances, could be life-saving. For example, if there is  a fire in the building, there is now a plan for how to get him out since he wouldn’t be able to use the stairs.

No one is legally required to disclose a disability to their company unless requesting a workplace accommodation, says Ellen Dichner, a New York City labor lawyer. There are pros and cons to telling human resources, managers or colleagues about health challenges, experts say. Many people fear teasing or harassment, or that their coworkers and bosses will view them differently and that their career may stall. 

When people can hide their disabilities — such as mental health issues — they often do, but that can become an emotional burden. Before his health challenge became obvious, Winkelstein says, he was reluctant to ask his colleagues for any kind of accommodation—even simply for a higher chair in a meeting room to make it easier for him to sit down and stand up.

But once it was more public, Winkelstein says, it proved a relief. 

“You start discovering all the other people who have invisible disabilities who want to talk to you,” Winkelstein says. “So it's kind of a mini-support network.” He has also started a general support group for inclusion body myositis in the upstate New York area, which has been very helpful, he says. 

Trying to keep workers on the job

Of course, some people want or need to leave their jobs due to their infirmities; this is often where Social Security Disability Insurance comes into play. 

But there are numerous restrictions, and monthly payments average just $1,489. If you are able to work, you can earn $1,049 monthly on top of the disability payment, but most people don’t work, Johnson says.

“The disability procedure is complicated and only half the people who apply are accepted on the first round,” he adds. “And because the process is so long, once people are on, they don’t try to come off.” In other countries, he notes, people can be considered partially disabled and receive payments, but in the U.S. it is all or nothing.

The issue of keeping workers with health issues on the job is a major concern to both employees and employers; so much so that the U.S. Department of Labor’s Office of Disability Employment Policy launched a pilot program, RETAIN (Retaining Employment and Talent after Injury/Illness Network), in 2018 in a handful of states. The goal is  to investigate early intervention strategies to ensure mid-career workers with disabilities can stay at or return to work.

One impetus for the program, says Yonatan Ben-Shalom, a principal researcher with the research and consulting organization Mathematica, is the lack of coordination between medical providers, employees and employers to ensure that as much as possible, people can return to work even with some sort of health problem.

While staying at a current job may be difficult in the long run for those with progressive disabilities, it’s important to figure out what aspects of your occupation you enjoy and might be able to pursue in the future. Winkelstein knows there will be a time when he will have to leave his present position, so he is taking a one-year course to earn a leadership coaching credential, something he can see doing part-time and fully remote. 

A challenge for small business owners 

Since Dochterman, as a small business owner, is boss, employee and human resource department rolled into one, she has turned to a career coach for help thinking through how to continue working with a disability.

The coach challenged Dochterman to work 20 hours a week for three or four months. Dochterman’s usual work week is 50 hours, up to 70 hours during the holiday rush, which can last from December to May and includes Christmas, Hanukkah, Valentine’s Day and Mother’s Day.

She managed to scale down to 30 hours during the slower summer season and learned to say, “My  thumb says ‘enough.’ I’ve got to go home.” As easy as this may appear, she says doing it was a challenge. “I cannot overstate how difficult it is to make that switch in my thinking.”

She has one full-time employee and a few part-timers, and she says she is training them to help in more ways than in the past.

“When you're a small business owner, it’s pounded into you, you can do it all. But I can't hold that mindset anymore,” she says. “Not only can I not do it all, but it would be a bad business decision to try to do it all.”

What you can do if you have a disability

If you have any type of physical or mental health challenge that is affecting your work:

Research what your rights and options are 

A good place to start is with the Job Accommodation Network. Go to the tab at the top labeled “individuals,” and you’ll find a wealth of resources about how, if and when to ask for accommodations as both a job seeker and employee. It also provides helpful information for employers that you can share.  

Find out more about the federal Family and Medical Leave Act 

With some restrictions, the law requires an employer to give 12 weeks of unpaid leave for a serious health condition. Eleven states—California, Colorado, Connecticut, Delaware, Massachusetts, Maryland, New Jersey, New York, Oregon, Rhode Island and Washington—and the District of Columbia offer paid leave, and some companies do as well. For more information on the federal law, go to www.dol.gov/agencies/whd/fmla. 

Weigh the pros and cons of informing your employer 

Consider telling your human resources department or a trusted manager about your situation. Remember that hiding a disability can be an emotional as well as a physical drain. 

Find others in your situation 

Joining an online or in-person support group for your particular disability can provide much-needed information and advice. Start one if one doesn’t exist in your area. Peter Winkelstein, the pediatrician with the degenerative muscular disease inclusion body myositis, first called the The Myositis Association to ask if there was a support group in his geographical area. When he discovered there wasn’t one, he asked if he could start one. The association offered him some training and support; he figured out the rest through his own research. 

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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Diversity, equity and inclusion (DEI) efforts have been around since the 1960 civil rights movement, but DEI became a major focus across many industries in the past few years. In the summer of 2020, protests against racial injustice following the murder of George Floyd prompted employers and employees alike to put a focus on equity throughout hiring processes and in the course of daily work.

DEI trainings were held, and in some cases, DEI leaders and professionals were hired to help maintain a standard amongst corporations, businesses, and office structures. According to Glassdoor, there were 55% more DEI job openings in August 2020 as compared to June 2020. 

However, as early as 2021, efforts were already beginning to deteriorate in the workplace. DEI positions were being eliminated at a faster rate than other roles, according to Revelio Labs. Despite this drop off, most Americans still agree DEI is important in the workplace, but the numbers reveal fewer workers believe it’s important in their workplace.

How do employees feel about DEI efforts?

According to a February 2023 survey conducted by the Pew Research Center, 56% of employed Americans say that increasing DEI efforts is a good thing. That’s just a little over half of the 4,744 workers polled, and the opinion varies drastically depending on gender, race, age and other factors. 

While workers agree overall that DEI efforts in the workplace are a good thing, just 32% of the same people polled said that it’s personally important to them to work in a place that hires an ethnically diverse mix of employees. When it comes to how old their coworkers are, 28% said it’s important to them to have a variety of people from different generations of ages in the workplace. 

Answers vary based on gender and ethnicity.

Overall, women are more likely to value DEI efforts at work than men. About 61% of women polled said increasing DEI efforts at work was a good thing, as opposed to 50% of men who said the same thing. Around 78% of those polled who identify as Democrats or Democrat-leaning said DEI efforts at work were a positive thing, whereas 30% of Republicans polled shared the same sentiment. 

The value of DEI efforts is most greatly seen as a positive in the workplace by Black employees. Some 78% of Black employees polled said a focus on DEI is a good thing, with 72% of Asian workers and 65% of Hispanic workers also in agreement. Fewer than half of white employees polled (47%) overall said that it was a good thing. 

Black workers are also the most likely to value DEI efforts in their personal workplace, as 53% of Black workers polled said it was “extremely or very important” to them to work in a place where this was commonplace. In comparison, 43% of Asian workers, 39% of Hispanic workers, and 35% of white workers agreed.

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At any given time, entrepreneurs are juggling many tasks, especially in the early days of launching a business. 

If you’re an entrepreneur in the startup phase of your journey, you’re busy bringing your idea to life and strategically planning to enter the market. But as you do so, it’s vital to establish the right financial structures for your venture. Managing startup finances is easier when you prioritize doing so at the beginning. What’s more, a 2023 survey by online loan marketplace company Lendio found that small business owners “are primarily facing challenges related to the economy (23%), inflation (21%) and other financial concerns (14%).” By getting a head start on your startup finances, you’ll be better prepared to navigate these challenges (such as the next recession) as they arise.  

Common mistakes 

When it comes to managing startup finances, Eric Kala, the CEO of Avid Wealth Partners, a San Antonio, Texas-based wealth management and financial planning firm, has often seen entrepreneurs make four common mistakes.

First, they fail to establish the correct business entity or structure to financially and legally protect them down the line. This can limit their flexibility in the future. Regarding the specific structure or entity you should pursue, Kala recommends starting by forming an LLC. However, he stresses that you should always consult professional help catered to your unique situation before you take that step. 

“It creates a clear delineation between individual and business finances,” says Kala. “We’re not filing under your name, per se. We’re setting things up as a business, which allows us to be more nimble. For the $500 to $1,000 it costs to set up an LLC, it allows the entrepreneur to file as a partnership or an S-corporation later on relatively easily.” 

Additionally, according to Kala, that delineation can give entrepreneurs certain legal and creditor protections, putting them in a stronger position to weather tough circumstances. For instance, if you form an LLC and your business gets sued, your personal assets are protected in most cases. 

That lack of delineation between personal and business finances ties into another of the most damaging mistakes Kala has seen some entrepreneurs make: using their business accounts as second lifestyle accounts and writing off luxury expenses such as boats and planes.

If audited, these business owners will likely face legal and financial repercussions. Separating your personal and business accounts helps you avoid these murky situations. 

Kala has also noticed that some entrepreneurs often don’t audit-proof their business by keeping good books and records as they set up their finances. Some entrepreneurs don’t implement the most essential tools, such as accounting software, to help them track their expenses and spending. Without accurate records, they can’t unlock their full tax benefits when it’s time to file. 

But Kala emphasizes that having the right tools is not enough. Entrepreneurs sometimes don’t classify their financials correctly, which costs them later. For instance, they will write off certain items, such as furniture and computers, as expenses rather than depreciating assets. This erroneous classification makes the company seem like it has more expenses than it actually has, which will unfavorably impact its EBITDA (earnings before interest, taxes, depreciation and amortization). 

“When the company has continued growth and wants to expand and inevitably goes to a bank, those bankers aren’t going to look at backing those depreciable expenses out,” says Kala. “They’re just going to say, ‘Well, you have a lot of expenses, and your revenue isn’t really where we want it to be.’” 

Initial steps   

Once you have your business plan in place, Kala advises, you should start vetting experts to guide you, namely, a business lawyer with expertise in your industry, a CPA and a financial advisor. 

“As you’re going through and vetting, it’s really about having conversations,” says Kala. “The advisors you work with on a consistent basis need to have not only knowledge based off of their academic studies, but also based off of their work experiences and previous clientele.” 

Kala explains that once you have the right professionals in your corner — ones you trust and feel comfortable around — you should set up your business entity or structure. Next, open business operating and money market accounts. After those accounts are in place, work with your CPA to get reliable accounting software and start logging your expenses and depreciable items correctly.  

Contingency plans  

In business, things don’t always go as planned. Kala stresses that every entrepreneur should be prepared for worst-case scenarios. 

“Really think about contingency planning,” says Kala. “Examine things like buy-sell agreements and your loan documents.”

Entrepreneurs, he explains, should ask detailed questions when reviewing their documents. For instance, if you’re an entrepreneur with a business partner, you should find out whether or not a loan your business partner signed would get called by the bank in the event that they pass away. If you have a family business, you should create a succession plan in the event of your passing. If you don’t have a family business, you should plan how you’d like your business to continue if you pass away (or, if you have a business partner, if they pass away).

Other worst-case scenarios to prepare for include injuries, recessions, industry disruptions and natural disasters. The better prepared you are, the better off you will be. Kala recommends that entrepreneurs speak with their trusted advisors to create action plans that can help them overcome such challenges.

Looking ahead  

There's no need to panic if you’re already well into your business and haven’t taken all or some of these steps, says Kala. 

“The things that have happened in the past are in the past,” he notes. “Look forward and correct the situation.” Ultimately, Kala says, the difference between successful and unsuccessful businesses often comes down to not just hard work, but establishing the right amount of financial discipline.

Investment advice is offered through Avid Wealth Partners LLC, a registered investment adviser. Insurance products are offered through Avid Risk Management LLC. Avid Wealth Partners is the dba marketing name for Avid Wealth Partners LLC, Avid Risk Management LLC, Avid Consulting LLC, and Avid Capital LLC. 

The information contained herein is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. Always seek professional advice.

“Mr. Beaver, I manage an insurance brokerage in the Pacific Northwest. We have 15 employees, and ‘Frank’ was a recent hire. While excellent at his job, he is creating a never-ending sense of things being wrong and upsetting everyone over minor issues, and in addition, he is a gossip mill! The term ‘drama king’ comes to mind, as I do not know any other way to describe his behavior, taking small, non-issues and making them sound like the end of the world. He seems to love chaos. I do not know what to do or how to deal with him. Do you know of any credible resource that might help me understand and address these issues? Thanks, Albert.”

Drama Addicts Thrive on Chaos

“Your reader is describing the characteristics of a drama addict,” observes clinical psychologist Dr. Scott Lyons, author of the new release Addicted to Drama: Healing Dependency on Crisis & Chaos in Yourself & Others.

I had the most interesting chat with Dr. Lyons, and he provided useful insight into this real psychological problem that impacts drama addicts and all those affected by the chaos they manufacture.

Drama Addicts Make Mountains Out of Molehills

“When we say, ‘Wait. What just happened?’ with someone who makes mountains out of molehills and reacts in ways that instantly escalate — becoming big all of a sudden, leaving us wondering, ‘Whoa! What? Where did that come from?’ or ‘What just happened?’ — this is usually a good indication there is some inclination toward an addiction to drama,” he points out.

He described common traits drama addicts exhibit:

Intensity. What seems like nothing becomes something big. Things get blown out of proportion, as if they were pouring gasoline on a fire.

Conflict creators. Very common at work where the drama addict gets into coworkers’ business, stirs things up and then backs away, making an environment that should radiate stability now feel tense. This tension is something they thrive on, often grew up with and is normal to them, even if it is disturbing to others.

“Safe” is coupled with “chaos.” Often raised in environments dominated by havoc, that’s what they seek to re-create, as it makes them feel safe. Because of turmoil in their childhood, when they exhibited signs of distress at, for example, school, teachers would pay attention to them. It’s this attention the drama addict seeks and creates on an unconscious level.

An inability to tolerate calm, stable environments. The drama addict projects their familiar ecosystem onto wherever they are. In a calm, professional workplace — which is boring to drama addicts — they tend to “spice it up” by fomenting tension through gossip, overreacting to things that do not need a high level of attention and pitting one person against another while considering themselves a victim.

A denial by the drama addict of their desire to create havoc. If challenged and told, “You are going out of your way to upset people! Why?” the drama addict — like any addict — will say something like, “Oh, I hate the drama, but the world is always against me. There is something always going on, but I am the one who has to come to the rescue of everyone else.”

They do not recognize that they were creating hostility, then coming in to rescue the situation, which gives them a sense of relief.

Signs for HR That You Are Dealing With a Drama Addict

“HR staff need to be aware of employees who cause trouble for no apparent reason,” Dr. Lyons underscores, adding, “Does it feel like they are stirring things up? Is their personal workspace a mess and chaotic? Do they tend to do a lot of gossiping and making up stories? That’s a big one! They will take a little bit of information and fill in the gaps with their paranoia — inventing stuff and believing it!”

Here’s an example: “Rudy just texted me. He’s thinking of firing me.”

“The drama addict reaches this conclusion with no factual basis and then tells people around them, ‘The boss is going to fire me.’ As they share their stress, it becomes contagious — upsetting those nearby — because our stress responses are biologically contagious. So, if I am anxious, highly activated, very exuberant in my behavior and intensity, everyone else around me starts to have a biological response that puts them in a similar, anxious state. ‘Your stress makes me stressed.’”

Danger of Gossip: Want to Know My Secret?

If you have ever wondered just how dangerous gossip can be and how it relates to drama addicts, Dr. Lyons gives us the answer:

“Dennis, if I say, ‘Let me tell you a secret,’ what do you do?”

“I pay attention.”

“That’s right, and when I tell you that secret, you are part of something. You belong, and we now share a power dynamic. We have power and belonging. That’s what gossip does. It gives us the belief that we know or have something that others do not, no matter if it is true or not — and provides the drama addict a false sense of meaning, belonging, connection, relationship — we are the ‘in group.’ They are the ‘out group’ because we know something they don’t.

“So, by creating gossip, the drama addict becomes a danger to the organization, and management needs to be aware of how destructive this can be.”

So, how can HR or a manager deal with that mentality? First, managers, company owners and family members need to avoid being drawn into the drama. Here are some tips recommended by Dr. Lyons:

• In the moment, discuss with the drama addict that they appear to be making the task more difficult than it really is and ask, “How can I help?”
• Encourage them to take breaks — even go for a walk with them to change the environment and slow down.
• Have an HR person who is skilled in discussing workplace challenges meet with them and elicit things that they would like to discuss so they feel paid attention to.
• Model efficiency for employees (and we mean the drama addicts) who are overcomplicating tasks.
• Suggest that employees — all who wish to, so you are not singling out this one person — keep journals for what is going well at work, thereby focusing on the positive. You could call it “a work gratitude journal.”

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Who: Jeff Gietzen

What: Hardware store owner

Where: Glen Arbor, Mich.

How long have you owned your store? My wife, Georgia, and I acquired our business, Northwoods Hardware, Home, Gift and Nursery, 11 years ago. Our background before that was 35 years in supermarkets, in the Grand Rapids/greater western Michigan area. The business was Georgia’s family’s business, started by her grandfather, and the family ended up selling it to the wholesaler. The hardware store here had been for sale for about a year and a half, and we ended up buying it and moving here.

Does your wife work for the business? Yes, Georgia does our home-goods and décor buying and merchandising. Full-time, we have about six people, and then in the summer we typically add another four to six people. Our daughter, Gillian, also works with us here at the hardware store.

Who are your clientele? A mix of year-round people, who are mostly retired, and some business owners, plus seasonal homeowners and a lot of tourists. In the summer, it’s a more upscale area. Glen Arbor is in Leelanau County, which is partly surrounded by Lake Michigan. There is a national park here called Sleeping Bear Dunes. People come from western Michigan, Chicago, St. Louis, Indianapolis, Cincinnati, Pittsburgh, Dayton, Detroit. A lot of people venture north for the summer. Our customers are also the contractors who end up taking care of the homes and condominiums that need work.

How has the pandemic affected business? There was a period in spring 2020 when we shut the doors, but we did curbside sales and delivery. Once we all started to understand the virus, we opened the hardware store back up, but we required masks, did multiple daily cleanings and posted a sign for social distancing. We did apply for the first round of PPP loans and were awarded that as an offset to what initially was a lack of sales. But ironically, if we look at the first year of COVID, our sales ended up rather substantially because many of the people that have second homes here relocated here. Everybody started to get bored, so they wanted projects to do.

How has the supply-chain disruption impacted your business? Initially, there wasn’t really too much of an impact. But we were affected as businesses started to reopen—especially some of those businesses with manufacturers that had shut down and had a hard time getting their plants back online quickly. Then a lot of products were held up—and probably are still held up, in some cases. We are starting to slowly see some areas improve, and our wholesaler continues to do a good job of sharing the status of the suppliers and the supply chain. But prices have gone up significantly. Metal products and paint are categories where there have been a lot of price increases.

What products have been most disrupted by supply-chain issues? Anything metal-related or plastic-related. Normally, we would get most of our grills for the upcoming summer season in December, but there’s a good portion that we have not yet received, and probably won’t until March or April.

You’re expanding your store. Business must be good. We are a small hardware store, so we’re not going to be able to compete on price with the big-box stores. Our strength is customer service and attention to detail. Also, we’re very involved in the community, helping others and nonprofits. We try to greet every customer who comes in the store. Many of them I know by name. We really have tried to go above and beyond in our commitment to customers.

As they recover from the economic fallout from the pandemic and seek to attract and retain employees, 97% of large companies are planning to boost salaries. The average raise is expected to be 3% next year, up from 2.7% in 2021, according to a survey by Willis Towers Watson, a human resources consulting company.

Executives, management and professional employees should expect to see an average salary increase of 3%, and the average increase for a production and manual labor employee is expected to be 2.8%. Pay hikes will also vary by industry. While salary increases in the oil and gas industry are expected to be significantly lower next year, increases will be higher in media, health care and financial services. Employees at high-tech, pharmaceutical, manufacturing and semiconductor companies will see the largest average increase, Willis Towers Watson projects.

As the labor market tightens, the actual raises may be even higher than the projected amount, says Adrienne Altman, managing director of Willis Towers Watson. Nearly one-third of companies are expected to increase their projections, the survey found.

Negotiate for a bigger raise. The increase in pay raises comes at a time when many workers believe they’re not paid enough. More than three-fourths of workers think they’re underpaid, according to a survey by Business.org, a website targeted at small businesses.

If you fall into that category, there are several strategies that could help you negotiate for a bigger paycheck. Consider asking your employer for a cost-of-living adjustment to your salary, says Andres Lares, managing partner of Shapiro Negotiations, a company that helps clients negotiate business transactions. That’s an effective tactic because it points to an objective standard, Lares says. You’ll also want to consider whether the company has faced economic difficulties, such as a drop in revenues.

Being flexible may also help. If you’re willing to take a bonus instead of a salary increase, let your employer know that’s an option. And while it’s important to have a number in mind when you make your request, you may want to avoid mentioning a precise figure until you’ve talked about your performance, Lares says.

The fall open enrollment season for employees is upon us, which means millions of American workers will need to make a number of complex decisions when it comes to their benefit selections. In fact, typically the average employee may have to make decisions on over 17 benefits.

(1)

That’s a lot of decision-making responsibility — especially when you add the stress of trying to protect the financial well-being of your family as the pandemic continues.

Plus, this process will likely not get any easier this fall, as many employers plan to make changes to their benefit line-ups as a result of COVID-19. Therefore, to help navigate the maze of decisions employees will need to make during open enrollment, below are four tips to help maximize your workplace benefits.

Tip No. 1: Don’t be scared off by high-deductible health plans

The two most common types of health plans that employees have access to through their employers are preferred provider organization (PPO) and high-deductible health plans (HDHPs). The PPO option typically has a lower deductible with higher premiums, while the HDHP option typically has higher deductibles with lower premiums and is commonly paired with a tax-advantaged health savings account (HSA) — a powerful savings and spending vehicle.

To help understand why American workers choose the health plans they do during open enrollment, Voya launched a study last fall in partnership with SAVVI Financial. Interestingly, the research reveals employees often have a bias against HDHPs when compared to more traditional PPO health plans. In one part of the study, participants were presented with two different plans and told to think of them as identical in quality of care, access to care and all other features beyond cost. The only differences in the HDHP vs. PPO plans were the premiums and deductibles. Almost two-thirds of study participants (65%) selected the PPO plan — despite the fact that the study was purposefully designed so the HDHP would always be the optimal financial choice. As a result, depending on how much they used their benefits, the average employee was overspending on their health care plan by $500 to $2,500 through the year — which is money a person could be saving for retirement or putting aside for an emergency.

The study identified several reasons why employees are biased against HDHPs, and interestingly the naming of the health plan had a big impact. For example, participants were almost twice as likely to choose a PPO plan over an HDHP when the words “high deductible” were used in the plan name (65% PPO vs. 35% HDHP). This preference noticeably lessens when the plan names are unbranded (53% PPO vs. 47% HDHP).

The bottom line is that when it comes to selecting the best health plan for your family, there’s never a universal, one-size-fits-all solution. Therefore, it’s important to keep an open mind — or you could potentially end up overspending on your health plan.

Tip No. 2: Tap into the power of HSAs

COVID-19 has underscored the need for American workers to be better prepared for health expenses. A health savings account can offer several benefits for both short- and long-term health care savings. For anyone enrolled in a high-deductible health plan, HSAs can help you address immediate health costs as well as the ones you’ll have later in life when you retire.

Faced with a short-term, unexpected need — such as paying for an ER visit — many people might be tempted to dip into their retirement savings. Fortunately, funds in an HSA can double as an emergency savings account for qualified health care expenses. HSAs have the potential to offer triple tax benefits:

• Contributions are not taxed.
• Investment gains are not taxed.
• And withdrawals for qualified medical expenses are not taxed, either.

Plus, when enrolled in a HDHP and HSA, you can choose to leave your funds in your HSA and, instead, cover a medical bill “out of pocket.” This strategy is one way HSAs can serve as a potential emergency savings vehicle for unexpected health care costs in the future. Additionally, since HSA funds roll over each year, many HSAs offer the opportunity to potentially grow your account balance by investing in long-term investment funds, such as stocks.

As a result of these features, HSAs have increased in popularity during the pandemic. Industry research shows that assets in HSAs increased 25% and the number of new HSAs increased 6% in 2020 — which brings the total number of HSAs to approximately 30 million in the U.S. For 2022, the IRS has also increased HSA contribution limits to $3,650 per year for individuals and $7,300 for families. Individuals who are 55 and older are eligible for an additional $1,000 catch-up contribution.

Tip No. 3: Don’t overlook group life insurance

The pandemic has caused many people — both young and old — to reflect on their own mortality. As a result, the number of life insurance policies sold during the first half of 2021 increased 8% compared to last year. This is the highest policy sales growth recorded since 1983, according to LIMRA’s Second Quarter U.S. Individual Life Insurance Sales Survey.

Unfortunately, individuals with serious medical conditions typically don’t qualify for individual life insurance, or the cost of a policy may not be affordable. Given the recent interest in life insurance coverage, this is where group life insurance provided by your employer might be a benefit worth exploring during this fall’s open enrollment period.

Since group life insurance is sponsored by your employer, it’s often a cost-effective way to help protect those who rely on your income. In many cases, it doesn’t require a medical exam for coverage — which is typically cited as a barrier for purchasing life insurance. Additionally, employees can often take their group life insurance policy with them if they leave their employer. They just need to continue paying the insurer directly for the coverage, but it will still be at a cost-effective group rate. Your spouse or kids may also be eligible, which provides another layer of protection for the entire family.

How much life insurance coverage do you need? It’s a personal decision and one that needs to be carefully considered. When calculating the amount of life insurance you want to purchase, one rule of thumb is that your death benefit should equal five to 10 times your annual income. While this is a simple formula, it’s important to remember that it doesn’t consider individual factors, and the financial protection your family may need can change over time — for example, when your children finish school or when you pay off major debt, such as your mortgage. If you need help, there are online calculators that do a great job providing personal guidance, or you can speak with a financial professional.

Tip No. 4: Voluntary benefits are becoming less ‘voluntary’

Typically, when employees prepare for open enrollment, they spend most of their time focused on their core workplace benefits: medical, dental and vision. While these benefits are important, Voya’s customer data shows that more than four in 10 retirement-plan participants (44%) have protection or insurance gaps in their coverage.

(2)

This could put you in a challenging financial situation if you get hit with an unexpected medical expense. For example, the average cost of one day in the hospital in the U.S. is around $2,400, with the average patient staying more than four days.

(3)

Voluntary benefits offered through your employer can provide additional protection, and it’s encouraging to see that employees are now increasingly turning to their employers for solutions. New Voya research shows that the majority of working Americans (75%) want help navigating an unexpected life event, such as a critical illness or accident. Some of the voluntary benefits and services that some employers are offering include hospital indemnity insurance; critical illness insurance coverage; and student loan guidance, refinance and repayment, to name a few.

Employees should not disregard these types of voluntary coverage when selecting their workplace benefits during open enrollment. For example, if you are expecting a baby in the coming year or perhaps are worried about getting COVID-19 and being hospitalized for an extended period, hospital indemnity insurance can help, and typically costs less than what most people expect. Hospital indemnity insurance averages between $250 and $300 per year — that’s less than $1 per day.

(4)

Plus, some voluntary benefits can be particularly useful for more than medical bills. Accident insurance, for example, can be used to pay for anything from living expenses — utility bills, pizza delivery or dog walking — to rides to your next doctor’s appointment. When you experience a qualified accident, that benefit payment is yours to spend how you like and need.

Final thoughts

If we look at lessons learned from last year’s open enrollment period, a Voya consumer survey shows that nearly six in 10 American workers (56%) spent more time reviewing the benefits offered by their employer during their open enrollment period. As we enter yet another fall open enrollment season in the midst of the COVID-19 pandemic, I would strongly encourage everyone to make this time investment once again.

While I realize it might feel like a maze of decisions to navigate, if you get lost, your HR team is there to help guide you and can likely provide links to online tools and resources. Besides, you’ve already taken the important first step to putting yourself on the path to success, and that’s spending time educating yourself.

1) For illustration purposes only. Number of benefits decisions will depend on employer offering

2) Voya book of business data as of 12/31/19

3) The Kaiser Family Foundation Health Stats; Nov. 2014 study. Reviewed and updated 11/20/19

4) Voluntary Hospital Indemnity and Supplemental Medical Products SpotlightTM Report, Eastbridge Consulting Group, Inc., 2019 (average annual premium cited is for group products only)

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When employees sign up for open enrollment this fall, many will see an expanded menu of benefits, ranging from pet insurance to legal services. A survey by consulting firm Willis Towers Watson found that 94% of employers believe that voluntary benefits—which typically aren’t subsidized but are offered to workers at a group rate discount—are important to their employees, up from 36% in 2018.

Lydia Jilek, senior director of voluntary benefits solutions at Willis Towers Watson, says the pandemic and an increasingly diverse workforce have accelerated calls for benefits that meet employees’ differing needs. And faced with a labor shortage, employers are feeling pressure to offer benefits that will attract and retain employees.

Voluntary benefits appeal to employers because “they’re able to give their employees significantly more choice than they may have otherwise had, but there is a limited out-of-pocket cost,” Jilek says.

Among the fastest-growing voluntary benefits are those that protect workers against criminals seeking to steal their personal information, Jilek says. Driven by a rise in unemployment fraud, 78% of employers surveyed will offer identity theft protection by 2022, up from 53% currently offering the benefit. Other high-growth offerings include pet insurance, legal benefits and critical illness coverage, which provides supplemental health insurance following, for example, a heart attack or cancer diagnosis.

Stephanie Creary is assistant professor of management at the Wharton School at the University of Pennsylvania, where she is an identity and diversity scholar. She has researched workplace diversity practices at a variety of organizations, including corporations, hospitals and the U.S. Army.

Why should investors care whether a company has a diverse board of directors? McKinsey & Co., a management consulting firm, has found that companies with diverse boards outperform their peers. There’s also a lot of academic research that has analyzed the relationship between the composition of top management teams and financial performance. For example, a recent study from the University of Texas at Dallas found that firms that were diverse in upper and lower management performed better than other firms. Their workers were more pro­ductive, too. That’s good for the bottom line.

Won’t some companies be tempted to add a token woman or minority to their board? How can that be avoided? First, if you’re a company, you don’t just pick any person of color or woman. You pick people you believe in who will help contribute to the gaps in expertise that you have. And you don’t pigeonhole them into being a single-issue director.

Next, you need to have other players hold corporations accountable. For example, State Street, a major investment management firm, has said that it will vote against board members of companies that fail to disclose the racial and ethnic makeup of their boards. And Nasdaq recently proposed requiring that every company listed on its stock exchange have at least one woman on its board and one board member who is an underrepresented minority or LBGTQ. The firms that don’t meet the standard will be required to explain why they can’t. That’s holding companies accountable.

In 2019, the Business Round­table, which is made up of the chief executives of the largest U.S. companies, issued a statement encouraging members to take into account the interests of employees, customers and their communities when making business decisions. Have major corporations embraced this philosophy, particularly when it comes to minorities? Yes they have, but one size doesn’t fit all. Target is a good example. After the protests in Minneapolis over the death of George Floyd, the company decided to reopen a store that was damaged by the riots. Target’s approach was to have conversations with people in the community, not just community leaders, about how the store could address their needs. JPMorgan Chase and Citigroup announced last fall that they are changing their lending practices to make sure that people of color have access to mortgages. JPMorgan Chase also said it’s going to tackle the lack of diversity in its own workforce.

When can investors expect to see the results of these initiatives? Investors tend to measure company progress quarterly, but that’s very short-term. A better benchmark is one year from an announcement that a company has changed the composition of its board or has made a com­mitment to any other social justice movement.

One of my early memories is when my dad taught me how to interpret the share price tables in the business section of the newspaper. My main task was to look up prices of Oppenheimer Funds and write them down in a ledger. I learned to appreciate the simplicity of how the numbers told a story about value. Yet of deeper importance was learning how to consider patience and timing to match the funds’ performance with a life plan.

So when I was drafted by the Chicago Cubs in 1991, I had a plan for my signing bonus. First and foremost was my parents’ recommendation that I retain a broker. Soon after, I would work with an adviser at Butcher & Singer, which through many mergers became Wells Fargo Advisors. My broker was, and still is, outstanding.

But there has been some troubling news about Wells Fargo, the main home for my financial life. This news revealed a track record of deceptive dealings with its customers, including settlements for both racially driven, exploitative lending and discriminatory hiring practices. Then came insensitive comments from Wells Fargo CEO Charles Scharf that he made on a call with employees this summer, which he reiterated in a memo: “While it might sound like an excuse, the unfortunate reality is that there is a very limited pool of black talent to recruit from.”

Reaching for a future. This comment hit me hard, because wealth depends on trust in those who take care of my money. Money is not simply of quantifiable value; it has immeasurable qualitative value. It holds a future.

As a Black man, I seek more depth to leadership’s understanding of what reaching for a future truly means to a man of color. The “unfortunate reality” Scharf should have been speaking of is our nation’s legacy of systemic racism and how it has shaped opportunity.

It should matter if the returns we enjoy are reaped by discriminating against a people or if the culture that provided those returns views Black talent as charity, regardless of their qualifications.

Wells Fargo and other giants of the financial world are supposed to shun such destructive biases to allow the color of green to prevail over the color of skin. Yet they often do not. This explains the report by Citigroup that estimated that our economy lost $16 trillion over the past two decades due to discriminatory practices and sanctioned racial inequity.

We often forget that those who have power create what defines the word qualified—a word that is highly subjective, laced with nepotistic practices, and rife with compounding advantage for those of privilege. Like the success of Hamilton: An American Musical, there are countless examples of how candidates of color can be successful inside the talent blind spot of corporate hiring templates.

The real danger is having algorithms of predictive success and not understanding how much they drip with bias. This often occurs because leadership is not representative of all, and many of those in the room who represent the diversity have no real power.

We also must not assume that representation means welcoming inclusion. It is nice to get the job, but the culture around the job is more consequential to making sure that people advance fairly and are not harassed, ignored or treated as if they do not deserve that opportunity in the first place.

Scharf has apologized, saying he made an “insensitive comment reflecting my own unconscious bias.” He expressed a commitment to work for more diverse leadership. Yet I still feel compelled to consider other options for my family’s money, even with our nearly 30-year relationship. I hope Wells Fargo decides to define talent differently, not just in one image but in all of our images.

My father passed away on the day I got the 1,000th hit of my Major League career—a career that was critical to building wealth. I came to understand that inside those share prices in my portfolio are people, many of whom are people of color reflecting the dream that brought my father to the U.S. from Trinidad and my mother out of the Jim Crow South. Their legacies are important to preserve, too. And to do so, we must face some unfortunate truths about the role of racism, truths that have nothing to do with talent and everything to do with opportunity.

Doug Glanville is a baseball commentator and former player who teaches a course on sports and society at the University of Connecticut.

At age 59, Nancy A. Shenker changed her life. She gave away most of her belongings, moved to Arizona from New York, and began to focus on writing and public speaking in addition to the marketing consulting that had dominated her professional career. She wanted to create a more intentional life, with flexibility for travel, exercise, education and visits with her grandchildren. She calls it “pretirement.”

Then last year, a client dumped a huge project on her just as she was heading out of town to see her family, which overshadowed the entire trip.

“I’ll never get that time back,” says Shenker, now 64. “Balancing work and life is still a challenge, even though I’m not part of the corporate hamster wheel anymore.”

Whether fully or partially retired, some people are busier in their later years than when they were working full time. Where is that sense of leisurely ease retirees anticipated their entire working life? How can they make the most of precious hours and days that seem to fly by faster the older they get?

“Managing an abundance of time is as challenging as managing a scarcity of time because it requires you to ask what matters to you,” says Laura Vanderkam, author of 168 Hours: You Have More Time Than You Think (Portfolio, $18) and Off the Clock: Feel Less Busy While Getting More Done (Portfolio, $25).

Productivity and time management experts like Vanderkam say you can reclaim your retirement with these nine tips for managing time better.

Before retirement, most people find meaning in their accomplishments. They equate staying busy with significance and importance, and may start to question their identity or value if their days aren’t full.

“There’s this existential vacuum for some retirees,” says Emily Esfahani Smith, Washington, D.C.-based author of The Power of Meaning (Crown, $25). “So many of their old roles and identities are either shifting or being taken away. It’s (losing) all these things at once that leaves life feeling emptier.”

Instead, there’s a tendency to re-create the experience of being busy by multitasking, which simply stresses the brain. “It’s a huge source of low-level chronic stress,” which takes a much bigger toll on our health and well-being by our 40s and 50s, says Christine Carter, a senior fellow at U.C. Berkeley’s Greater Good Science Center and author of The Sweet Spot: How to Accomplish More by Doing Less (Ballantine Books, $17).

Multitasking burdens your brain with cognitive overload, which Carter calls a “gas guzzler” for burning oxygen and blood sugar. Although that generates the emotional experience of productivity, “it’s toxic for the brain,” she says. “As we age, we want to challenge the brain, but we don’t want to tax it.”

For brain health in your older years, you should learn new things and practice recall, but do them one at a time so that you can focus deeply and more enjoyably on the task at hand. When you’re multitasking, your brain stops accessing the hippocampus, where memories are created and stored.

“If you think you have memory loss, maybe you’re just multitasking too much,” Carter says.

Retirement is the time to make a difference, so assess the meaning and value you have for other people. Then prioritize doing what matters most.

Every week Adela Crandell Durkee of Oakwood Hills, Ill., considers how she can put her priorities—family, faith, a writing career and being a good global citizen—first. “It’s so important, or my life can be taken over by tasks,” says Durkee, 69.

Vanderkam recommends listing 100 dreams of things you’d like to do. Some could be bucket-list-worthy, such as visiting Africa, while others may be more mundane, like arranging a family photo shoot. You’ll have to dig deep to list 100 different ideas, which is the point.

It’s one thing to list those 100 things and another to do all of them. “You could challenge yourself to do one every two weeks, a big one every two months,” Vanderkam says.

As you prioritize the things that matter, you’ll naturally find that there’s less time for you to squander on the more mundane or workaday items.

“We can spend time mindlessly at any phase of life, and that’s the biggest problem.” Asking yourself how you would like to spend your time increases the chances that you’ll spend it the way you want, she says.

You may find that doing something regularly, like volunteer work or a hobby, provides necessary structure to your days and weeks. Or, as you become involved in your church or a nonprofit community, seeing the same people regularly nurtures new relationships, which contribute meaning.

“As people are living longer and living healthier lives, there are these decades in the last third or quarter of life that can be very productive. This stage of life can be defined by play and exploration and giving back to the community,” Smith says

Don’t fill your entire week with commitments. You want to create that sense of leisure, which is your payoff after a long career, by blocking out some downtime on your calendar.

Durkee likes to let her mind wander on long walks, gardening and bike rides. “Daydreaming tends to be a very nourishing activity for me.”

A whole new level of fulfillment can come just from slowing down, Smith says. “Sometimes that means embracing boredom or embracing empty time.”

Rest is especially important as our bodies age and we need more restorative time.

“When I can really rest and pause, I can hear what my body is asking of me,” says Mia Birdsong, Oakland, Calif.-based author of How We Show Up: Reclaiming Family, Friendship, and Community (Hachette Go, $17).

The flip side of saying yes to your priorities is setting limits on the things you dislike. Create a massive to-do list and include all your obligations, Carter suggests. Then cross out everything you don’t want to do or dread doing.

“For the things you dread but must do, like laundry, see if you can delegate it to someone else,” she says.

Maybe you can trade tasks with a family member. Or if all else fails, pair the dreaded item with an enjoyable one, like folding laundry while listening to an audiobook. (You don’t experience the cognitive overload associated with multitasking if you combine a physical task with a cognitive one.)

Consider assigning a limited window of time—perhaps one day a week—for the humdrum but necessary chores of life, like renewing your driver’s license or calling vendors.

“Try to push that stuff to one block of time so you don’t feel it’s always an option, so you don’t feel guilty,” Vanderkam says.

Think through your ideal daily and weekly schedule. How often do you want to be social? What time do you want to be home and in bed so you feel refreshed the next day? Honor your own boundaries by setting and sticking to them. “Be aware of what makes you feel really good,” says Carter.

Remember that we’re all socialized to believe our value lies in how much we can produce and get done. Retirement is a good time to let go of that lie.

“We don’t have to demonstrate our value. Our value is inherent to who we are,” Birdsong says.

Brace yourself for disappointing people who want to see you more than you’d like or ask you to do things that don’t interest you.

“You’re not responsible for other people’s emotions,” Carter says. “You’re making choices based on your own well-being.

Whether the upcoming presidential election is a battle for the soul of the nation or the way to keep America great is a question we will leave to you to answer. But the election will have important ramifications for your financial well-being, and we’re all over that agenda. How will each of the candidates help steer the economy? What might your tax bill be? Is your portfolio headed for gains or losses? For those questions, the person living at 1600 Pennsylvania Avenue for the next four years matters.

At the start of the year, a sound economy, rock-bottom unemployment rates and a roaring bull market made it Donald Trump’s election to lose. Then came the coronavirus pandemic, exacting a vast and tragic human toll, putting a dramatic end to the longest economic expansion and bull market on record, and robbing tens of millions of Americans of their livelihood.

It remains to be seen whether voters will renew President Trump’s lease on the White House in November, but former Vice President Joe Biden became a more formidable contender over the summer, if you believe the polls and the betting markets. In early July, policy analysts at investment firm Raymond James gave Biden a 55% chance of winning the presidency.

But it bears repeating that the circumstances surrounding the 2020 election are unique, and for insights into who will ultimately claim victory, you might be better off asking an epidemiologist than a political consultant. Each of the presidential candidates faces “significant challenges,” according to analysts at Wells Fargo Investment Institute. “Voter perception of how President Trump manages the pandemic and economic reopening is key to his reelection bid.”

What is clear is that the country has rarely been more polarized. “The U.S. presidential election [is] set to take place against the most tumultuous domestic backdrop since 1968,” write analysts at BlackRock Investment Institute in their 2020 Midyear Outlook. “The two parties are as far apart on policy as they have ever been, making the result consequential for markets.”

Taxing matters. Taxes will be front and center. A Biden administration would target the 2017 corporate tax cuts for a partial rollback and float the possibility of higher rates on capital gains and dividends, as well as an expansion of payroll taxes for wealthy Americans. That would nick corporate profits and possibly dampen the animal spirits of investors, especially high-net-worth taxpayers, but would be at least partially offset by aggressive economic stimulus, says Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management. A Trump 2.0 administration would be incrementally positive for economic growth and the stock market, Marcelli says, counterbalanced by the risk of a re-escalation of trade wars.

Although the presidential candidates loom large during election season, Congress holds the key to big policy shifts. “A clean sweep, whether red or blue, makes a big difference,” says Marcelli. “In a divided government, enacting tax and spending legislation becomes more difficult. As a result, regulatory and trade policy become the main policy drivers.”

The chances of a blue sweep were rising midsummer, with Raymond James giving Democrats a 50% chance of taking back the Senate and a 95% chance of keeping the House. Republicans are defending 23 seats in the Senate; Democrats, 12. Democrats need to net four seats (or three seats plus the presidency) to flip the Senate. The toss-up Senate races as of July included Arizona, Colorado, Maine and North Carolina.

Expect some heated rhetoric and volatile markets in the run-up to Election Day.

Sandra Block, Lisa Gerstner, Nellie S. Huang and Anne Smith contributed to this story.

Across the U.S., companies that sent their workers home in March to protect them from the coronavirus pandemic are gradually reopening. Most are implementing a long list of precautions, from requiring workers to wear masks to limiting capacity on elevators. But with coronavirus cases still rising in some parts of the country—and a vaccine months away—some workers are reluctant to go back to the office.

Which raises the question: If you don’t feel safe, can your employer require you to return to work? The answer depends on a number of factors, but your individual circumstances are most important, says Alison Green, founder of the Ask a Manager website and author of Ask a Manager: How to Navigate Clueless Colleagues, Lunch-Stealing Bosses and Other Tricky Situations at Work.

If you have a medical condition that puts you at high risk should you get COVID-19 (such as diabetes, heart disease or COPD), you have some protections under the American with Disabilities Act, which prohibits employers from discriminating against employees who are disabled. According to the Equal Employment Opportunity Commission, employees with disabilities that put them at high risk for complications from the pandemic can request telework as a “reasonable accommodation” to reduce their chances of infection.

That doesn’t mean your employer is required to allow you to work from home, Green says. Your supervisor could suggest an alternative, such as putting you in an isolated part of your office. Your employer can also reject telework if you can’t perform your duties at home—if you’re a waiter at a restaurant, for example. But at the very least, the ADA requires your employer to consider alternatives that will reduce your risk of becoming ill.

Working parents whose kids’ schools remain closed are also facing challenges this fall. Your employer isn’t required to allow you to work from home to take care of your children, Green says. You have a couple of options, although they’re not ideal: The Coronavirus Aid, Relief, and Economic Security (CARES) Act stimulus package signed into law in March requires employers with fewer than 500 employees to give workers an additional 10 weeks of time off at two-thirds of their regular pay if they need to stay home to care for a child whose school is closed due to the pandemic. If you’re forced to quit to take care of a child (or children) whose school was closed due to the pandemic, you’re eligible for unemployment benefits.

Making your case. If you’re asking to work from home because you have an underlying medical condition, send an e-mail to your boss or human-resources department and put in the subject line “official request for accommodation under the Americans with Disabilities Act.” Note in the e-mail that the Equal Employment Opportunity Commission has specifically said that employees with disabilities that put them at high risk for complications of COVID-19 may request telework as a reasonable accommodation to reduce their chances of infection.

The ADA doesn’t protect you if you want to work from home because someone in your household has an under­lying medical condition, Green says. But that doesn’t mean you can’t ask to telework. “Try to negotiate with your employer to see if there’s something you can work out,” she says.

You might be reluctant to return to the office even if you don’t have an underlying medical condition, child care responsibilities or a vulnerable member of your household. A survey by Morning Consult, a market research firm, found that nearly one-third of workers would prefer to work at home until a COVID-19 vaccine is available. (The survey also found that three-fourths of workers would like to continue working from home at least a couple of days a week even after the pandemic is under control.)

If you fall into that category, speak up, Green says. Ideally, get together with other coworkers who share your concerns, she says, because there’s strength in numbers.

If you’ve been working from home for several months, you’ve got a track record you can point to in making your case, Green says. Show your employer what you’ve accomplished while working from home to prove that your productivity won’t suffer. Although many workers now say they’d like to work from home permanently for at least a few days a week, you’ll probably have better luck suggesting a temporary telework arrangement.

Worried workers can take some consolation in the knowledge that many employers, both large and small, are in no hurry to require employees to return to the office. Companies ranging from Twitter to Zillow have announced policies allowing employees to work from home permanently. In a recent e-mail to the 118 employees of Kiwanis International and the Kiwanis Children’s Fund, executive director Stan Soderstrom said working from home would be the global volunteer organization’s primary work arrangement “for the foreseeable future.” In particular, Soderstrom says, employees who believe they or someone in their household is at risk, or need to stay home to care for their children, have been encouraged to continue working from home.

“We have people who have worked for us for more than a decade,” he says. “They’ve demonstrated their loyalty to us, and I’m going to return that same loyalty.”

Lauryn Williams is a certified financial planner with Worth Winning, in Dallas, and an adviser for Student Loan Planner, which provides consulting and refinancing services for borrowers. She is a three-time Olympic medalist in track and field and the two-woman bobsled, and the first U.S. woman to medal in both the Summer and Winter Games.

What led you to become a certified financial planner? I didn’t get the kind of service I wanted from either one of the two financial advisers I had during my time as an Olympian. They didn’t help me with my budget. We didn’t have conversations about my short- or long-term goals or savings. I was earning more than $200,000 in sponsorships before I was old enough to drink. I knew I needed more information to be better equipped to handle my finances. As I started educating myself, I thought I could help other people.

What got you interested in finance? I was always in­terested in math and very entrepreneurial. And I was always looking for a way to earn money. I raked leaves, sold candy in sixth grade, worked at a catering company on the weekends when I was 8, and started working at Wendy’s on my 16th birthday. When I got to college and browsed through majors, I asked someone about finance. They said that it dealt with math and money, and I love both of those things. So it was easy from there.

African Americans take out student loans at higher rates and have higher default rates than their peers. What can be done to close the wealth gap, not just for borrowers but for African Americans in general? A lot of African American students are the first in their family to go to college. Their parents may not be familiar with all of the options available to fund higher education. Students are signing on the dotted line for loans because they don’t know the difference between loans, grants and scholarships, but they know education is important to continue to move forward in the future. Technical schools that prey upon low-income students shut down and leave the borrower high and dry. High school students need to have discussions with their parents about the most cost-effective way to receive an education before making a decision about where to go to school. If student loans are a part of the decision, they need to discuss how they’ll pay them back.

What can the financial industry do to bridge the racial wealth divide? We’re in a unique time in history right now in which the conversation on race, racism and the racial wealth divide is happening at a level that has never happened before. And we’ve started having conversations about diversity in the financial industry. The financial planning industry right now is only made up of 3.5% people of color, of which 2.2% are African American. Financial advisers should consider going into diverse high schools to get students interested in financial planning.

Mentoring people of color currently in the financial industry is important, too. If you’re an employer hiring African Americans, create an environment where they can flourish and feel welcome. You can’t just hire a minority planner to check a diversity box. You need a plan and strategy to retain them.

For small business owners who scored a loan through the Paycheck Protection Program (PPP), not having to pay back what they borrowed is a huge bonus. Under the CARES Act (as modified by the Paycheck Protection Program Flexibility Act (PPPFA) in June), the PPP lets small businesses borrow up $10 million without collateral, personal guarantees, or fees. The loan doesn't have to be repaid to the extent it's used to cover the first 24 weeks (eight weeks for those who received their loans before June 5, 2020) of the business's payroll costs, rent, utilities and mortgage interest. However, at least 60% of the forgiven amount must be used for payroll. Small-business owners have until August 8, 2020, to apply for PPP loans and until December 31, 2020, to use the funds.

To have their PPP loans forgiven, small-business owners must first submit an 11-page application to the bank or lender that approved their initial loan request. The application, along with other recently released guidance from the SBA, answers a lot of questions about repaying loans that were on the minds of small-business owners. Here are 8 important tips and warnings on PPP loan forgiveness gleaned from the application and new SBA guidance. Hopefully, this information will help prop up the bottom line for a lot of small businesses.

Since the 24-week covered period doesn't always align with a business's payroll cycle, the SBA is offering an "alternative payroll covered period" for borrowers with a biweekly or more frequent payroll schedule. As a result, borrowers may calculate eligible payroll costs using the 24-week period that begins on the first day of the pay period after loan disbursement, rather than the first day of disbursement.

Example: If a hair salon received its PPP loan proceeds on Monday, June 8, and the first day of its first pay period following its PPP loan disbursement is Sunday, June 14, the first day of the alternative payroll covered period is June 14 and the last day of the alternative payroll covered period is Sunday, November 29.

Borrowers are eligible for forgiveness of payroll costs paid and incurred during the 24-week covered period (or the alternative covered period). However, payroll costs incurred, but not paid, during the borrower's last pay period of the 24-week period are eligible for forgiveness only if they're paid on or before the next regular pay period.

Eligible non-payroll costs must be paid or incurred during the 24-week coverage period. For expenses incurred but not paid during this period, they must be paid on or before the next regular billing date, even if that date is after the 24-week period. That said, the SBA has reiterated that no advance payments of interest on mortgages will be eligible for loan forgiveness, but it hasn't specifically addressed whether the prepayment of payroll costs, rent, and utilities are forgivable.

The CARES Act defines the term "payroll costs" broadly to include compensation in the form of salary, wages, commissions, or similar compensation. As a result, employee bonuses and hazard pay are eligible for loan forgiveness as payroll costs, as long as the employee's total compensation does not exceed $100,000 on an annualized basis. These payments constitute a supplement to salary or wages and, therefore, are a similar form of compensation.

The amount of a PPP loan that is forgiven is generally reduced if the borrower cuts back on the number of "full-time equivalent" (FTE) employees during the 24-week covered period. However, the CARES Act does not define an FTE employee.

Since this is an important omission, the SBA has determined that an FTE employee is an employee who works 40 hours or more, on average, each week.

For employees who were paid for less than 40 hours per week, borrowers can choose to calculate the full-time equivalency in one of two ways. First, borrowers can calculate the average number of hours the worker was paid per week during the 24-week covered period and divide the number by 40. For example, if an employee was paid for 30 hours per week on average during the 24-week period, the employee would be an FTE employee of 0.75. Second, a borrower can elect to use a full-time equivalency of 0.5 for each employee who on average worked less than 40 hours per week during the 24-week period. Borrowers can select only one of these two methods and must apply it consistently to all their part-time employees.

There are a few exceptions to reduction of loan forgiveness when a small business decreases the number of FTE employees during the 24-week covered period. First, according to the SBA, a borrower will not be penalized for FTE reductions for employees who were fired for cause, voluntarily resigned, or requested a reduction of their hours.

A borrower is also exempt from the loan forgiveness reduction rules if it lowered FTE employee levels between February 15 and April 26, 2020, but restored the FTE employee level by December 31, 2020, to the level that existed during the pay period that included February 15, 2020. Employees that are laid off after April 26, 2020, will result in an FTE reduction even if they are rehired by the end of 2020.

There's also an exemption based on employee availability that runs from February 15 to December 31, 2020. Under this exemption, the FTE reduction is eliminated if a business can document, in good faith:

• An inability to either rehire former employees or hire similarly qualified employees for unfilled positions by December 31, 2020; or
• An inability to return to the same level of business activity at which it was operating before February 15, 2020, because of compliance with OSHA, CDC or HHS guidance during the period beginning on March 1, 2020, and ending on December 31, 2020.

Finally, small businesses will not see a reduction in the loan amount forgiven if workers turn down their old jobs. To qualify for this exemption, the borrower must "have made a good faith, written offer of rehire, and the employee's rejection of that offer must be documented by the borrower." Within 30 days of an employee's rejection of the offer, a business seeking loan forgiveness must notify state unemployment offices of the worker's refusal to return to work.

There's another way that loan forgiveness can be limited – by a reduction in paid salaries or wages of more than 25%. However, there's an exception to this rule.

If there are salary or wage reductions of greater than 25% between February 15 and April 26, 2020, the borrower is exempt from the loan forgiveness reduction rule if the salary or wage reductions are restored by December 31, 2020.

The SBA announced that it can review PPP loans of any size at any time. Borrowers must retain their PPP documents for at least six years after the date the loan is forgiven or paid in full.

The coronavirus has become a sneak attack in slow motion on the American workforce. Fear has become the operative word, not only of falling ill, but the impact this virus is having on our economy, on jobs.

Employment law attorneys are swamped by calls from business owner clients, wondering what they are allowed to do in an effort to keep their employees safe and their doors open.

I ran the following questions by two attorneys in Bakersfield, Calif., who specialize in employment law: Dan Klingenberger and Jay Rosenlieb. They provide a global perspective to these issues challenging American businesses today.

Can a business require workers and/or customers to wear masks?

Question: I believe wearing a mask should be a personal choice. I don't believe in them myself, and I don't want people telling me what to do. Can I refuse to wear a mask?

Rosenlieb: With respect to employees, in the absence of a medical condition or religious objection, which is subject to reasonable accommodation with alternative PPE, an employer can require the wearing of a face mask. Customers can be required to wear masks and other PPE. These requirements are based on current CDC, OSHA and EEOC guidance.

Klingenberger: You can make your personal choices based on your beliefs after you leave work. While you are on the clock, your employer can set rules and expectations at its discretion so long as the employer is within the bounds of the law. Beware, however, that even off-duty conduct can sometimes have work-related consequences.

A forklift operator named Antoine from Troy, Mo., can attest to that. You may have seen video of a huge Memorial Day pool party at Lake of the Ozarks in Missouri attended by crowds of partiers, most of whom were not wearing masks. Antoine — who was interviewed on the Today show the Friday after the party and asked that his last name not be used — was at that party. Now his employer has told him to stay home from work for 14 days to quarantine ... without pay.

Can a business order employees NOT to wear masks?

Question: Believe it or not, my employer doesn't want workers to wear masks. We have been told it makes customers uncomfortable and that it projects the wrong image. What should I do?

Klingenberger: You may want to have a one-on-one discussion with your boss to express your concern. It is likely other employees share your concern. Masks are so common these days that I don’t think wearing a mask makes others feel uncomfortable, but your boss is entitled to her/his opinion. You could show your employer information regarding the use of masks that have been published by the CDC and OSHA, but that is a judgment call you will have to make on your own.

Rosenlieb: Employers must follow the directives of local and state public health authorities.

Can my boss monitor me when I’m working from home?

Question: I'm working from home and have learned through the grapevine that my company is using some kind of tracking software to monitor me and my co-workers. There are rumors that they are even accessing the cameras on our company laptops. Is that legal?

Rosenlieb: Maybe. The subjects of privacy and monitoring of communications, movements and productivity (in the traditional office setting and in the “work at home” setting) are much debated and sometimes hotly contested. Restrictions and prohibitions on monitoring of employees vary from state to state and are subject to the federal National Labor Relations Act. An employer, outside of an investigation of suspected criminal activity, will find the greatest success in these areas by advising employees in advance of steps that are being taken to monitor all forms of communication (e.g. emails, voicemails, phone conversations), movement (e.g. GPS trackers on delivery vehicles), and productivity (e.g. software that tracks productivity). All of these steps are generally legal, subject to restrictions. Policy announcements, acknowledged by employees, are generally the best form of communication. Employees should never learn of these issues through the “grapevine.” This is a complex area and employers are well-advised to consult with legal counsel in their state before moving forward.

Klingenberger: Employers have the right to monitor the use of business equipment, computers and vehicles, as well as the use of employee time. Most, but not all, privacy rights individuals enjoy outside of work do not exist at work. However, statutory and constitutional rights regarding privacy have been imposed and upheld in some instances by the courts. Those rights will vary from state to state. To the extent an employee has an expectation of privacy, whether well-founded or not, employers can reduce or eliminate that expectation by implementing clear policies that communicate to the workforce that the employer reserves the right to surveil, search, track and/or monitor. Privacy issues can become more complicated for employers who telework. A colleague recently showed me a picture of her long-retired mother’s home computer with a piece of paper taped over the camera lens. Apparently, she is nervous about an unknown source spying on her through the camera. Doing something similar on your computer might make Zoom meetings less interesting but could flush out the IT folks as to whether the camera is being used without your knowledge. That’s not legal advice, just random musing.

I want to keep working from home: Can I insist?

Question: The company I work for is opening up again. I've been working from home for weeks and can do my job fine from there. I want to keep working from home (mostly for convenience, but also because I'm nervous about the virus), but my boss is requiring me to come back to the office. Can I refuse?

Rosenlieb: Assuming that public health authorities have cleared the specific place of work for re-opening, absent an underlying medical condition (supported by a note from a health care provider) or specific childcare/school issues, an employer can require employees to return to their regular place of work. Teleworking may be considered to be a reasonable accommodation of a disability. This is a complex area, and employers are well-advised to consult with legal counsel in their state when a request for teleworking is made by an employee because of a disability.

Klingenberger: It is nice that you have enjoyed working from home, but all good things must come to an end. On the bright side, the request to return to work in the office is likely a sign of optimism that your region is past the worst of the pandemic. I agree with Jay that the employer has the right to require an employee to work at his/her normal work location. Employers must keep in mind that the protections included in the Families First Coronavirus Response Act (FFCRA) continue to apply through the end of 2020, including time off for COVID-19 related medical conditions and the need to care for others for COVID-19 related reasons. The FFCRA also authorizes the employer to obtain verification that the employee is taking time off for reasons allowed under the statute. Although it is understandable why people continue to be nervous, given the number of illnesses and deaths that have occurred across the country, that nervousness is not enough to insist on continuing to work from home. As employees are brought back to work, employers are well-advised to implement COVID-19 related safety protocols in the workplace. Many recommendations have been published by the CDC and OSHA on the subject.

Do workers have a right to be provided with protective equipment on the job?

Working at home is not an option in my line of work. My employer isn’t providing the workers with gloves or masks: We have to bring our own. Do workers have a right to be provided with protective equipment on the job?

Rosenlieb: Yes. The federal OSHA General Duty Clause requires that an employer provide their employees with a workplace free from recognized hazards likely to cause death or serious physical harm — this includes injury from infectious diseases such as COVID-19. (OSHA-approved state plans will have similar or more protective standards.) Employers are obligated to provide their workers with personal protective equipment (PPE) needed to keep them safe while performing their jobs. It should be noted that an employee cannot demand specific PPE or PPE that is not deemed appropriate for the exposure.

Klingenberger: The OSHA general duty clause certainly creates an obligation for employers to provide a safe workplace and to provide necessary personal protective equipment (PPE). However, it is not entirely clear how those obligations apply in the context of the COVID-19 pandemic. An employer’s obligations may vary depending on the work being performed. Health care workers, for example, likely need a higher level of protection than a retail worker, although both are extremely important and both are providing services in a critical time.

Guidance from OSHA during the past few weeks recognizes that difference in protection needed for various industries. The OSHA COVID-19 Guidance for Retail Workers provides tips for employers “in the retail industry (e.g., pharmacies, supermarkets, and big box stores)” to “help reduce your employees’ risk of exposure to the coronavirus.” The tips include: “Allow workers to wear masks over their nose and mouth to prevent them from spreading the virus.”

Why did OSHA choose the word “allow” rather than “require” in the tips for retail workers? The choice likely reflects several considerations:

• First, very few masks or face coverings would actually filter out coronavirus. Masks and face coverings primarily serve the purpose of avoiding spread by the person wearing the mask. Assuming that is true, masks, and perhaps gloves, may protect the customers, but would not accomplish the objective of protecting the employee and, therefore, may not be PPE.
• Second, other practices are better served to protect the employee, e.g. social distancing, frequent hand washing, do not touch face, and disinfecting work area.
• Third, obtaining masks and gloves for employees may be very difficult due to high demand.

I don't feel safe at work: Can I speak up without worry?

The company, where I work, doesn’t seem to be taking this crisis seriously enough. There have been no real efforts made to ensure social distancing in the workplace, other than some signs and tape marks on the floor, which are not enforced. It doesn’t feel safe, but I fear retaliation if I speak up. What should I do?

Rosenlieb: An employer is obligated to take such steps as are required by OSHA or an OSHA approved state plan, not more. In other words, an employee who doesn’t “feel” safe has little basis to demand further protection if, in fact, the employer is fully compliant with its state and federal safety obligations. In the event that the employer has policies in place, but the policies are not followed, the employee will have a basis for a complaint.

Klingenberger: I agree. Oftentimes employees would like to see more done by an employer when the employer is actually fully compliant. As has been said many times, these are unprecedented times. Business owners and each of us as individuals are making decisions in a world of uncertainty. On a personal, local and national scale we are asking, have we done enough? Sometimes, there is strength in numbers. If some of your co-employees share your concerns, consider going with another employee to express those concerns about safety in a professional manner to your employer. Offering ideas on solutions may help the conversation.

Can I refuse to work overtime?

I’m in an industry where demand is currently skyrocketing, and workers are being pushed to the brink. Can I refuse to work overtime?

Rosenlieb: No. There are, however, a couple of exceptions. First, if a lack of sleep or fatigue creates demonstrable safety concerns, the employee may refuse to work if he or she has a good faith belief that the conditions create an imminent risk of serious injury or death. Second, if the employee is part of a workplace covered by a collective bargaining agreement, the employee may be excused from working “mandatory” overtime.

Klingenberger: Jay’s answer is spot on. Unfortunately, we are in situation where some employees are working far more than they would like and others who would love to be back at work in any capacity.

Can your employer force you to go to work?

Klingenberger: The answer would depend on the circumstances. If there has been evidence of spread in the workplace, for example, someone has it, an employer could not force the other employees to come to work in that environment, as there is a direct threat of contamination. But with no evidence of exposure, or the exposure does not impact all employees, then, the employer can insist that people come to work.

Rosenlieb: In the event of an immediate or imminent danger, the Occupational Safety and Health Administration (OSHA) provides that an employee can refuse to work. Further, the National Labor Relations Act (NLRA) protects concerted activity by employees. Concerted activity includes a refusal to work because of unsafe working conditions.

Can you be fired/disciplined if you refuse to go to work?

I asked, “What if there is no legitimate reason to not come to work, but an employee still refuses to show up. Could this result in discipline?”

Klingenberger: Yes, that is possible, but in today’s COVID-19 environment, an understanding employer could tell an employee, ‘If you do not want to come to work for the time being, you may use vacation, sick leave or other time-off benefits,’ if that is a benefit the employer offers. The employer also has to balance other considerations, such as fairness to other employees and the need to get the work done.

Rosenlieb: While an employer could take more serious action, those who care about their employees should work with them to address their concerns and find alternatives to being present at the office, if possible. And we are seeing that with a large increase in people working from home, telecommuting.

What should you do if an employee comes to work sick because they need the money?

Klingenberger: If an employee comes to work who is obviously ill and showing symptoms of coronavirus, the employer should send the employee home because of the risk to others. If the employee misses work because of having the virus or must be quarantined, many states, including California, have made unemployment insurance benefits available for days missed or reduced hours that might not normally be available.

Rosenlieb: An employee who presents at work with symptoms of a contagious illness can be sent home. The employer is not obligated to provide work to an employee who presents with symptoms of a contagious disease. On the other hand, an employer cannot send an employee home simply because the employee is a member of a high-risk group — someone who is 65 years old and older or has underlying health conditions. This would be discrimination on the basis of protected class status.

Can you turn away a customer who is coughing?

Both lawyers agree there is no obligation to serve everyone, unless you are avoiding someone for clearly illegal reasons, such as race, religion or national origin. They equally believe a polite way of dealing with a customer who is coughing would be for restaurant employees to say, “We are concerned, given what is going on with the coronavirus. If you will please step outside, I will bring you the food.”

Do you have a legal responsibility to inform people you have come into contact with if you later test positive?

While neither attorney was aware of a legal obligation to personally inform people that you have been tested positive, they observed that health departments ask every person infected to list all the people they have been in close contact with.

And while I do not know of a legal duty in the United States of self-reporting to others, it is not much of a stretch to compare their silence now with that of people who have been jailed for knowingly spreading herpes and AIDS.

To me, knowingly exposing those around you to the virus could be seen as an assault and battery. History proves that correct with the story of Typhoid Mary, an Irish cook believed to have infected 51 people with typhoid fever, several of whom died.

If you are not familiar with her story, it is worth looking up, as you will find a cast of characters right out of a horror movie, including Mary herself, who was aware of the danger she posed to others and yet continued to work as a cook, literally killing people.

She was the first person in the United States identified as an asymptomatic carrier of the disease. Considering they did not have disability insurance in place in those years to give her an income, she could not stop working as a cook — exposing others to the disease. She was twice forcibly isolated by authorities, and died after a total of nearly three decades in isolation.

What is your legal responsibility if you start to get an inkling that you are getting symptoms?

Klingenberger: I am not aware of a requirement in OSHA or various federal safety laws where someone is required to make this disclosure. Employees are always encouraged to disclose those things, and especially on-the-job injuries. There can be ramifications if they don’t. For example, they hurt their back and do not disclose it for six months, their workers’ compensation claim could be denied for a failure to report it in a timely fashion.”

Rosenlieb: While not a violation of a law, if the company had a policy requiring employees who become ill with the flu, even the common cold, to report this to HR, and if that were violated, it could result in discipline for violation of an order.

What happens if the governor or president orders you to shut your business? Do you have any options other than to follow the order?

Note: Not only has the president issued executive orders, which have shut down many businesses in the country, but state governors are also issuing similar mandatory orders. Constitutional lawyers will tell you that the government has an inherent power and duty to protect the population, especially in areas of health.

Klingenberger: The imposition of quarantine, shelter in place and business closure orders are examples of the state’s ability to exercise its police power. Failure to comply may be a misdemeanor and subject the company to fines. Time will tell whether tax and other forms of relief will be granted to help deal with the enormous financial losses.

Rosenlieb: There is no choice but to follow those mandatory orders or face fines.

Say you are ordered to stay home – quarantined – by the health department. What would happen if you disobeyed?

Both attorneys agree that the employee could face termination.

What if you know people who are doing risky things on the job, exposing co-workers to harm. Do you have a responsibility to do something about it?

And, once more, there was agreement by both Klingenberger and Rosenlieb as to what employers and employees need to do when faced with a co-worker who cares little for his or her colleagues.

“We all should hope that concerned co-workers would report dangerous behavior of whatever type, physical or health-wise,” commented Klingenberger.

“Today we all have a duty to each other to act prudently and safely. Any employee who puts co-workers in harm’s way should face potential termination. Our country is facing one of its greatest health threats in over a century. We need to watch out for each other more so than at any other time in memory,” Rosenlieb strongly maintains.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

You’ve just discovered that an employee has been stealing cash and you want every cent back. To recover that money, several options are available, but one could get you in big trouble. We’ll tell you what it is in a moment, but first meet “Jill,” who runs her own résumé-writing service in a Northern California university town.

“Most of our clients are about to graduate and need a reasonably priced, attention-getting résumé. Our $75 ‘Builder’ package lets them complete a questionnaire, select a style, and walk out with a CD Rom or flash drive containing a one-page résumé , cover and thank you letters, all that is needed for entry-level job applications,” she explained.

“We are cash only. Seeing hundreds of dollars pass through her hands was too great a temptation for ‘Taylor,’ who worked for us about two years and comes from a prominent family that can trace its roots to the founding of the university.

“CCTV security video shows Taylor repeatedly stuffing customers’ cash into her purse, and our data reveals no accounting entry for dozens of résumés which were created during a one-month time frame when she was the only person working. The loss comes to $3,500.

“She lives with her parents and I want to send her and them a letter, along with a CD rom video clip, giving an opportunity to repay the loss or I will go to the police. My boyfriend reads your column and felt it best to ask you before doing anything.”

Where common sense collides with the law

We ran our reader’s question by Jane and Riley Parker, both California licensed private investigators. “If Jill sends that letter,” Jane warns, “she opens herself up to being charged with blackmail, or extortion as it is sometimes called, which is a felony.”

“Blackmail?” you are probably thinking, “Isn’t blackmail like threatening to expose someone’s affair unless they pay up? Jill is just giving the girl or her family a chance to make it right before going to the police. That’s fair, it’s the right thing to do, and it’s just plain common sense, so how could it be blackmail?”

“Yes,” Riley agrees, “You would think that it is common sense, but in this instance, common sense and the law collide. It is the first thing private investigators warn clients not to do when employee theft is discovered,” adding, “They are usually frustrated and find this to be counter-intuitive, until we read them the legal definition of blackmail.”

All states define blackmail and extortion just about the same way. In California, Penal Code section 518 makes it illegal to use force or threats to compel someone to give you money or other property. This includes threats to accuse the targeted person of a crime, to reveal a secret or to expose the person to embarrassment.

Go to the police - Just don’t threaten to unless paid

So, Jill can go to the police and request that criminal charges are filed against Taylor, but she cannot use that as leverage to get the embezzler to cough up the $3,500. Think of this another way; you have the legal right to do something, but can’t threaten to do it unless your money or property is returned.

Let’s say that Jill wants to give Taylor a chance to make things right. What could she — or better yet, her lawyer — state in such a letter to Taylor and not get in trouble?

“In our experience, we’ve found that an embezzling employee isn’t going to be motivated by a phone call or letter from the employer. Instead, an attorney’s letter advising of legal consequences should the money not be repaid bring this to a higher level in the crook’s mind and is always worth the small expense,” the Parkers strongly maintain.

Be careful whom you tell

A moment ago you just read the words, “in a letter to Taylor.” We did not say, “To Taylor and her family.” Why?

“Dennis, you do not want to be the victim of embezzlement and then sued by the former employee for defamation, but we have seen this happen far too often. What if the employer is wrong? What if there is a reasonable explanation for what looked like theft?

“Do not contact family, friends and neighbors. Unless instructed by your attorney, you should not discuss your investigation with other employees as you might not know their relationship. And whatever you do, don’t offer special favors to co-workers if they will snitch on the suspected embezzler.

“We have seen employers who sought to crush a former employee instead be forced to pay fortunes to defend themselves. Some battles are not worth fighting,” Jane and Riley Parker concluded.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Vanguard founder Jack Bogle started the debate of active versus passive investing when he created the first index fund in 1975. Hundreds of additional index funds, countless studies, and one historic recession later, passive investing has become a household concept and is accepted as the preferred method of investing for millions of investors.

You’ve seen the headlines and stats by now:

Billions of dollars are flowing from active to passive funds.

Ninety percent of active stock managers fail to beat their benchmarks.

If you’ve been following this debate for years as I have, you’ve also probably seen the counterarguments, of which there are many.

This is the wrong discussion. The reality is, when it comes to managing investments, there’s room for both philosophies.

Diplomatic, I know.

First of all, when we talk about active versus passive investing, we’re really having two separate discussions. The first is asset allocation, the second is what you do within that allocation. Here’s how I think about each.

Managing Your Allocation

There are several internal factors that dictate how you allocate your portfolio. The evolution of these variables (age, net worth, risk profile, etc.) over time will also change where you fall on the active-passive spectrum.

For many investors, the best solution very well might be robo-advisers. If you have a smaller net worth or don’t require much financial planning, the diversified investment options provided by robo-advisers is as cost-efficient and passive as you’re going to get.

A higher net worth individual, on the other hand, is likely to have more needs. Optimizing a portfolio for complexities like estate planning and tax efficiency will require a more active approach to how assets are allocated. The high net worth clients I work with typically require a more diversified allocation beyond stocks, bonds and cash into assets such as real estate, insurance, private equity and other alternatives.

And then, of course, you have to consider the external factors (i.e., market conditions) when thinking about an active versus passive approach. Historically, active strategies tend to perform better in down markets while passive strategies outperform in up markets. Morgan Stanley found that over the last 20 years, the top 25% of portfolio managers significantly outperformed their benchmarks in years when the market was down.

The period from 2009-today has been one of the longest U.S. equity bull markets in history — save for a couple of brief pauses — so it’s no surprise that passive investing has become the predominant philosophy over the last decade. If the volatility in U.S. equities continues in 2019, it would stand to reason that money would flow back into actively managed funds as investors try to improve their risk-adjusted returns.

Drilling Down

Let’s get to the second part of the equation — determining how active or passive you want to be in managing your specific allocations to various assets. This largely comes down to the asset in question.

Research suggests that active managers are more likely to outperform their benchmarks on a net-of-fee basis in certain asset classes. This is true in international equities, where the median active fund manager outperforms by over 1.5 percentage points per year. That’s a return well worth the customary fees of active management, and the same holds true in small-cap investing.

But there are some asset classes — such as large-cap equities — where the median manager historically can’t beat the benchmark. Add in fees on top of that, and active management becomes hard to justify.

Active fund manager performances don’t stay constant, either. For example, Bank of America found that nearly half of U.S. large-cap equity fund managers outperformed their benchmarks in 2017, the best rate since 2009. Keeping an eye on these trends — this is one area where advisers can help — can be the determining factor in what kind of approach you take for a specific asset in your portfolio.

The Bottom Line

Investing is not a world of absolutes. Whoever decided one approach to investing is universally better than others was wrong.

I’m a big believer in building a portfolio that takes both active and passive approaches into account. But I’m a bigger believer in the idea that no two investors require the same approach. Every one of the clients I work with has different sets of needs and goals. It’s my job to find that balance.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Are the money-management fees I pay for my IRA still tax-deductible under the new tax law? - G.R., Darien, Conn.

Investment management fees are no longer tax-deductible under the new law. But there is still a tax-advantaged way to pay these expenses: You can take money from your IRA to pay the fees without incurring taxes or early-withdrawal penalties. This can be a good strategy for a traditional IRA, but it doesn’t provide any extra break for a Roth IRA.

Give credit where it’s due. Tesla Inc. (TSLA, $300.84) CEO Elon Musk, through sheer willpower and persistence, has mainstreamed the idea of electric vehicles. EVs were a fringe project taken on by only a handful of organizations a few years ago; now, every major automaker has entered the EV market. Tesla, meanwhile, has become synonymous with this kind of car, and TSLA stock has firmly grabbed Wall Street’s attention.

But Tesla’s journey hasn’t always been pretty. Sometimes, it has been downright ugly. Musk has led Tesla to the EV fore … but also into operational challenges and publicity headaches. He often overpromises and underdelivers. He’s distracted by leading his other companies, Boring and SpaceX.

Never even mind his penchant for getting Tesla ever deeper into debt, and his company’s extreme difficulties in turning a profit.

On the upside, Tesla’s earnings report on Wednesday, Aug. 1, hints that the company and Musk finally are moving in a healthier direction. In his quarterly comments to shareholders, Musk said that in the second half of this year, he expects Tesla “to become both sustainably profitable and cash flow positive.” Wall Street was encouraged, driving TSLA stock almost 10% higher before the next day’s trading commenced.

Here's a look at seven of Tesla’s potential pitfalls that deserve closer inspection. Just one of these issues could prove to be the company’s undoing. A more plausible outcome is that a combination of these impasses slowly chips away at Tesla’s current leadership of the electric vehicle market. If nothing else, even the most ardent bulls should be aware of these factors as potential risks.

Data is as of Aug. 1, 2018.

Overwhelming debt can be a company killer. Indeed, it may be the No. 1 concern of investors and corporate managers.

It’s a particularly potent threat to Tesla, however, as the company’s debt load and corresponding interest expense continue to rise, leading the company to ever rising losses. Last quarter, Tesla made $163.6 million worth of interest payments, pushing the company to a record-breaking GAAP loss of $717.6 million for the same quarter.

Debt in and of itself isn’t a death sentence. It takes money to make money, and early investors of Tesla’s bonds and equity knew it was a long-term project. But Tesla’s debt headache may be on the verge of becoming very ugly.

Of the $9.5 billion in long-term debt currently on the books (and $9.1 billion in current liabilities), $230 million of it matures in November, and $920 million expires in March of next year. Tesla has the funds it needs on the books, but that could leave it cash-strapped after last quarter’s cash burn; after paying interest on debt, TSLA had negative free cash flow of $889.9 million, according to S&P Global Market Intelligence. And with Moody’s recently lowering the company’s debt from B2 to B3, new debt becomes even more expensive for Tesla to handle.

If Tesla doesn’t start creating the cash flow that it hinted at in its Q2 report, illiquidity could turn into a debilitating problem.

Superficially speaking, the decision to build at least few Model 3 vehicles in a huge tent behind its production facility in Fremont, California, was more about meeting a specific pace of output before the end of June than an indication of logistical sloppiness. Even so, it’s a subtle sign that Musk – who has no other real automobile manufacturing experience – might be winging it as he goes instead of scaling up with a deliberate production plan.

Doug Kinsey, partner with Cincinnati-based money management firm Artifex Financial Group, says, “He’s had trouble executing on the Model 3, while companies like Volvo are moving forward on very competitive products, like the Polestar 1. Tesla will have an increasingly difficult time competing with established car brands who understand the nuances of manufacturing.”

The company’s track record affirms Kinsey’s view.

The Model S (the P85D version, in particular) garnered rave reviews back in 2015 when it was the organization’s focal point. Consumer Reports scored it at 103 … on a scale that tops out at 100! But that review didn’t measure reliability. Shortly after the initially glowing look, the Model S displayed too many quality problems to retain a positive recommendation from Consumer Reports.

That was when Tesla was cranking out just more than 4,000 vehicles per month. Now it’s making almost 7,000 cars per week, but the rush appears to have exacerbated quality problems – especially with the Model 3.

While Tesla may be the undisputed pace-setter among companies entering the electric vehicle fray, other players are catching up. And there are a lot of them – all taking aim at Tesla.

Artifex’s Kinsey says, “Volvo is going to be a real problem for Tesla.” John Engle, President of Illinois-based venture capital firm Almington Capital, argues that threats are zeroing in from all angles. He says, “(Tesla) did all the hard work of normalizing electric cars in the luxury and mainstream and now the legacy automakers are out to eat its lunch. At the premium level, Porsche and Jaguar are pushing hard. In entry level luxury, BMW is ramping up. And at the mass-market level, GM, Ford and Kia are all moving in for the kill.”

Those other players, individually or collectively, still have plenty of work to do.

Despite the Model 3’s woes, it still outsold the nearest competing EV (Toyota’s Prius Prime) through July by a ratio of more than 2-to-1 in the U.S. Securing the No. 3 and 4 best-selling EV spots year-to-date are the Model S and Model X, respectively. Tesla is no slouch overseas, either.

But the lack of competition thus far has mostly been the result of a lack of unwillingness from major manufacturers to give electric vehicles their due attention. That’s changing now; at the start of 2018, the industry had earmarked $90 billion in funding for the development of EVs.

The knee-jerk response to the unveiling of the Model 3 was nothing less than incredible. More than a quarter of a million people put down a refundable $1,000 deposit right out of the gate; by the end of that month, the number had grown to 373,000. A few months later, Musk claimed there were more than 500,000 deposits on future purchases of the vehicle.

Things have changed considerably in the meantime.

Pre-order tallies are starting to shrink, and not just because those buyers have been taking deliveries. Needham and Co. analyst Rajvindra Gill, discussing Tesla's stock, recently opined that refund requests were now rolling in faster than new reservations were being submitted. Gill believes one out of every four depositors are asking for their money back, citing “extended wait times, the expiration of the $7,500 credit, and unavailability of the $35k base model.”

Tesla disputes Needham’s presumptions. But even if the numbers aren’t perfectly accurate, the underlying logic is. Two years ago, Tesla generated lots of excitement and customers had few alternatives. Now there’s less of the former and more of the latter.

In addition to the risk of existing debt, TSLA might also be running out of options for future funding – which most everyone except Musk is convinced the company will need a great deal of sooner than later.

“A rumor that began in comment threads and backroom discussions among analysts is starting to be mentioned in reputable investing publications,” Almington Capital’s Engle says. “Namely, it is the specter of something blocking the capital raise everyone but Elon Musk acknowledges needs to happen. What that something is remains to be seen.”

Although Musk alluded to self-sufficiency during the conference call, not all investors are convinced that’s possible just yet. Prior to Tesla’s quarterly report, Goldman Sachs suggested the company may need as much as $10 billion in fresh funding by 2020. Even if Tesla manages to drive more fiscal success beginning in this year’s second half, that still leaves significant potential for a funding shortfall. And investors are increasingly uneasy about the prospect of throwing away good money after bad.

Before EVs became mainstream, most investors thought little of lithium and cared even less about neodymium. The former is salt, essentially, and the latter is a rare-earth metal that can be turned into a super-magnet. Cobalt is yet another element that meant practically nothing to investors until recently.

All three are not only necessary but critical for the functioning of an electric vehicle. Lithium is the basis for the powerful batteries required to power an EV’s motors. Cobalt is used in the electrodes of these batteries. Neodymium is Tesla’s rare-earth element of choice to make its super-powered motors.

None of these elements is proving cheap to source, and the mining industry still isn’t ready to meet the kind of demand the advent of electric vehicles has created for them. For perspective, cobalt now sells for $30.50 per pound, down from June’s peak above $40, but well above 2013’s average price near $15. The ask on neodymium oxide is $69 per kilogram, up 45% from two years earlier. Lithium prices have effectively tripled within the past three years. That’s largely a result of the ramp-up in EV production.

Some experts believe the price increases for all three commodities are overblown and ready to reverse. Jeffrey Christian, managing director of commodities market research firm CPM Group, told Financial Post, “I don’t even look at the current prices because I think both cobalt and lithium are basically overvalued. They’ve been bid up by the expectation of a more rapid move into electric vehicles than is going to occur.” The outlook, however, may not fully account for all the other carmakers turning up the heat on their EV ventures.

Given his history and increasingly antagonistic demeanor, one can’t help but wonder if Elon Musk eventually is going to cross a line that the market can ignore.

Case(s) in point: In July, after offering to send a mini-submarine to help find and rescue children trapped by rising water in Thailand cave, he went on to refer to one of the workers as a “pedo” (as in, pedophile). His April Fool’s Day tweets were equally eyebrow-raising. His refusal to even address a question about future capital needs during the Q1 conference call – he simply responded, “Excuse me. Next. Boring, bonehead questions are not cool. Next?” – is downright alarming.

Investing.com Senior Stock Analyst Clement Thibault says, “As some aspects of Tesla’s business look grim, namely it’s debt and production issues, the inevitable questions that Musk deems as ‘boring’ must be asked. And he must have the patience to answer them, such his is duty to Tesla’s many investors.”

Just because Musk may refuse to remain calm and act like a CEO, however, doesn’t mean Tesla can move on to another one. Thibault continues, “Tesla and its investors must put up with Musk’s shenanigans because they have a financial incentive to do so. Should Musk announce his departure from Tesla sometime in the future, we’ll see a selloff of Tesla like we’ve never seen before.”

There is a recent glimmer of hope here, however. On the Aug. 1 conference call, Musk showed contrition numerous times for his behavior, and a KeyBanc Capital Markets analyst called one particular apology “maybe the most valuable apology of all time.”

If it’s a lasting change of character, that could bode well for TSLA stock. But if he falls back to a lack of accountability and consequence for the things he says, investors again could be put in an uncomfortable position.

It’s never too early to start teaching kids about money. It will enable them to make smart decisions as they become young adults. Apps for smartphones and tablets on how to handle money can make the learning process more enjoyable.

Teaching Financial Literacy to Kids

Financial literacy is an important skill set that we need to acquire in order to make sound financial decisions. The goal: having enough resources for any emergencies or opportunities that arise and planning for important milestones, such as college and retirement.

Financial literacy is about more than just understanding the basic concepts of investing. It’s about demonstrating a firm grasp on all the different aspects of personal finance, including real estate, retirement planning and tax filing. Understanding these concepts will allow us to navigate the financial world.

How can we teach financial literacy to kids?

Most schools do not teach kids how to manage money properly, so parents have to fill this gap — the sooner, the better. However, for many kids, money is an abstract topic, especially when they are not in control of their own finances. This poses a real challenge. Fortunately, there are many apps for smartphones and tablets that aim at teaching kids and young adults about money management.

Here are my top 10 financial literacy apps for kids:

1. Savings Spree

• Available for iOS
• For kids ages 7+

Savings Spree has earned a Parents' Choice Award in the category of Mobile Apps. It's an engaging, fun and educational app with beautiful artwork that's easy to use and age appropriate.

During practice sessions, kids learn about earning, spending and saving money. They also gain knowledge about short- or long-term savings, as well as the risk associated with impulse purchases. Savings Spree also explains concepts such as charitable giving and investing. Kids can play to earn imaginary money by making smart financial decisions, but also lose some of their imaginary savings when making a wrong choice.

The app also teaches kids about unexpected costs by adding in surprising life events to simulate financial shocks.

2. Renegade Buggies

• Available for iOS and Android
• For kids ages 6+

Renegade Buggies designed by the National Center for Families Learning (NCFL) has earned a REVERE award, which honors "high quality resources that educate learners of all ages, in all media, and in all educational environments."

The dynamic, fast-paced game teaches financial literacy with a focus on saving as much money as possible while grocery shopping. Smart consumer strategies, such as comparing unit sizes and buying in bulk, are implemented into the game.

3. Bankaroo

• Available for iOS and Android
• For kids ages 7+

The inspiration behind Bankaroo is 11-year-old Danielle Gafni, an honor student who was looking for an easy way to track her pocket money. The app serves as a virtual bank for kids without being tied to an actual bank account. It teaches about money and its value in a subtle way.

Bankaroo features multiple currencies, such as dollar, euro and British pound, and you can even set goals — such as saving for a new bike, drum set or special trip with your family.

4. Celebrity Calamity

• Available for iOS
• For kids ages 7+

Celebrity Calamity is another award-winning financial literacy app for kids that features celebrities and their spending habits. As the player, you manage the finances of your favorite celebrities and prevent them from spending more money than they have.

Living within your means gets rewarded, while spending recklessly will lead to hefty bills that must be paid somehow at the end of the day. All in all, the game is exciting and teaches how to properly manage money.

5. Green$treets: Unleash the Loot!

• Available for iOS
• For kids ages 5 to 8

It was Neale Godfrey's goal to entertain and educate kids at the same time when she created her famous Green$treets kids cartoon characters. First her characters appeared in books, later the app Green$treets: Unleash the Loot! was developed.

The app is all about rescuing, feeding and playing with endangered animals to finally release them back into their natural habitat. Money can be earned by planting gardens and spent by buying food and decorations for your own treehouse. Different characters come with different financial challenges. The app teaches concepts including budgeting, making donations and setting financial goals.

6. FamZoo Family Finance

• Available for iOS and Android
• For kids ages 13+

FamZoo has been featured in The Wall Street Journal, The New York Times and Money magazine, among other publications. It allows older kids to take more responsibility for their own personal (real-life) spending. The goal is to understand how money works, how to budget and how to save.

Each family member is issued a card that is linked to the app. Parents act as bankers, kids as customers. Their bank accounts record all transactions. All in all, a monitored environment to learn from first-hand financial experience.

Some of the additional features:

• Learn how to prevent credit card debt
• Purchase items safely online
• Track chores and odd jobs
• Full parental control
• Handle money requests between family members

7. PiggyBot

• Available for iOS
• For kids ages 6+

Simply put, PiggyBot is a virtual piggy bank. As we all know, piggy banks have been teaching kids the value of saving for a long time. PiggyBot is a great tool to visualize and track kids' allowances in three different categories: Spend-It, Share-It and Save-It.

Users can set goals of what they would like to buy in future. An image option provides extra motivation. On top of that, the app will automatically calculate how much money still needs to be saved and how long it will take to reach a specific goal.

8. Star Banks Adventure

• Available for iOS
• For kids ages 7+

Star Banks Adventure is an app that combines puzzle solving with tricky quiz questions to teach kids about fundamental financial concepts, so they can save the planet of Polaria from drowning in financial chaos.

With the coins they save, they can purchase in-game upgrades, which will help reach different financial goals all while having fun and learning important lessons about:

• Financial planning
• Saving
• Investing
• Asset allocation
• Inflation

According to the developers, all educational content was created by financial professionals. After all, you don't want your kids to adopt the wrong behavior.

9. The Game of Life

• Available for iOS and Android
• For kids ages 7+

The Game of Life developed by Marmalade Game Studio is based on the eponymous and highly popular board game (Hasbro). It provides a great educational experience for kids to learn about paying for college and buying a family home.

Beautiful graphics and a multiplayer feature are only two of the reasons why this fantastic app has been downloaded and installed more than 100,000 times.

Please be aware that there are in-app purchases, which can start to add up quickly. This seems like another valuable lesson to teach right at the start.

10. iAllowance

• Available for iOS
• For kids ages 7+

iAllowance has been featured by Money magazine and is a helpful tool for you to manage your kids’ allowances — using real money if you want. Key features allow you to create incentives and use push notifications to remind your kids to finish their duties in time in order to receive their money.

As the parent, you are in full control of all finances and, in addition, you can pay special rewards for when your kids are following the rules while saving and spending.

The app can be synced with an unlimited number of banks using more than 150 different currencies. It also allows you to make scheduled payments, but probably the best feature is the ability to keep track of your kids' balance.

Financial Literacy Can Be Fun

If you thought that learning about financial literacy as a kid can't be fun, you were wrong! These apps and their tens of thousands of young users are living proof that you only have to find the right angle to approach this important topic. It's time for your kids to dive into the world of money — with responsibility and care.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Passively managed mutual funds have been all the rage in recent years. They’ve taken market share from their active counterparts across the board, with $662 billion in inflows worldwide in 2017, according to Morningstar's 2017 Global Assets Flow Report released on May 21, 2018.

However, as with any fund or asset, investors must do more than just follow the crowd. They need to understand the differences between “passive” and “active” mutual funds so they can make informed decisions moving forward.

First, some definitions

Passively managed index funds use an algorithm to give the investor a return – positive or negative – based upon an index, minus the fee. Examples of the indexes used in passive funds include the S&P 500 index (top 500 companies in the U.S.), European stock indexes such as STOXX Europe 600, government bond indexes, etc. There are dozens of different indexes fund companies can use to construct a portfolio.

No human being is making a judgment as to the quality of the investment. For example, a computer knows that Apple makes up approximately 4% of the total value of the S&P 500 index, and your investment in the index mirrors that. Therefore, if you have $10,000 invested, you have $400 invested in Apple.

The beauty of this investment path is typically low costs, as it does not require hands-on management by an adviser. According to Investopedia, index funds typically charge around 0.25% on total investment, where a $100,000 investment would typically charge $250 per year. But such expenses often vary significantly between funds.

Actively managed funds work on the premise that experienced professionals can evaluate investment options and craft a portfolio that can strive to outperform an index. Because there is a hands-on stock picker involved, though, these types of funds typically entail greater fees. Investopedia estimates that “a good, low expense ratio is generally considered to be around 0.5%-0.75% for an actively managed portfolio, while an expense ratio greater than 1.5% is considered on the high side.” So, with a $100,000 investment, a 1% fee would amount to $1,000. In terms of how it works, while the passive indexed fund has no choice but to buy 4% of the $10,000 in Apple, the actively managed fund may decide that more or less (or none) should be invested in Apple.

The growth in investor interest in passive funds has come at the expense, to some extent, of active funds: Morningstar’s 2017 Global Asset Flows Report also estimates that U.S. investors in 2017 pumped $470 billion into passive funds even as they pulled out $175 billion from actively managed funds. Several factors are driving this, including investor desire for lower-fee products and services, as well as perceptions that actively managed funds actually underperform against the indexes. For example, according to the S&P Indices Versus Active (SPIVA) funds scorecard, over the five-year period ending Dec. 29, 2017, 84% of large-cap funds underperformed relative to the S&P 500.

That may appear to be a scathing indictment of active management, but I would suggest the active-versus-passive debate is not an all-or-none proposition – there are, after all, active funds (16%, if we go by SPIVA’s statistics) that do outperform the indices.

As with any investment decision, working with an adviser to evaluate your options and tailor a customized strategy will help you make the right decision for your circumstances.

My discussions with clients

For example, a client recently shared with me her employer’s 401(k) investment options. Conveniently, each asset category provided both a passive and active fund, but she said she planned to move all her allocations to the passive funds because they have lower fees, and she “read that is what she needs to do.” I explained, however, that the active funds her employer provided have actually been quite productive over the past five to 10 years, and maybe they have earned her business. I assured her no one can guarantee solid performance will continue, and many of the passive apostles would suggest it cannot, but long-term performance is always important to consider.

Ultimately, every investor has the choice to invest assets in both types of funds – and as with any investment strategy, diversification is key.

The moral of the story is do your homework. Be open-minded. Do not place blind faith in any strategy, and do not assume everything you read is definitive. Life, and investing, can be a little gray.

Jamie Letcher is a financial adviser of CUNA Brokerage Services Inc. member FINRA/SIPC, a registered broker-dealer and investment adviser.

The opinions expressed those of the author and do not necessarily represent the opinions of CUNA Brokerage Services Inc. or its management.

This article is provided for educational purposes only and should not be relied upon as investment advice.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The sun was setting on a warm fall evening when the guests sat down for dinner in the boardroom of the Vanguard Group’s Malvern, Pa., campus. The attendees, executives and board members of the giant fund complex and the principals of Primecap Management Co., visiting from Pasadena, Calif., were celebrating the 30th anniversary of Vanguard Primecap Fund. And what a fund worth toasting: A $10,000 investment in Primecap three decades ago would be worth nearly $500,000 today, more than double what you would have earned in an index fund that tracks the overall stock market. “That’s stunning wealth accumulation for investors,” says Dan Newhall, a Vanguard principal who attended the dinner.

Tool: Our Mutual Fund Finder

And yet Primecap Management, the adviser behind the fund, is hardly a household name. That’s partly by design; the firm rarely, if ever, talks to the press. We can’t say it declined our request for an interview because we never got far enough to ask. The firm’s receptionist said she had been instructed not to pass along any calls or messages from reporters. Photos of the managers seem to be nonexistent; a Google search for images turns up zilch. It’s as if the firm’s leaders were hiding under Harry Potter’s invisibility cloak.

The mystery grows when you learn that the four men who run Vanguard Primecap—Theo Kolokotrones, Joel Fried, Alfred Mordecai and M. Mohsin Ansari—also manage five other top-notch funds. But only two, Primecap Odyssey Growth (POGRX) and Primecap Odyssey Stock (POSKX), are open to new investors, though the well-heeled clients of Vanguard Flagship and Vanguard Asset Management Services can open accounts in the three Vanguard-labeled Primecap funds: Primecap, Primecap Core and Capital Opportunity.

All told, Primecap manages $77 billion in mutual funds, plus $17 billion more in pension and endowment money for big outfits such as General Motors and the Metropolitan Museum of Art. But it isn’t gunning for more assets. The firm has 25 clients, and it is not eager to acquire more. “The managers want to limit the number of clients they have to a manageable number so they don’t have to deal with a lot of client interaction and sales-type stuff, because that would be a distraction,” says David Kathman, a Morningstar analyst who has followed the firm and its funds since 2006.

How they do it. And that’s just as well. Instead of building an empire, Primecap’s leaders focus on building wealth for their clients. They do this by applying the same strategy to all of their funds: Invest in growing companies that trade at bargain prices. And they look for a catalyst—say, the introduction of a new product, arrival of new executives or a restructuring—that they think will push a stock higher over the next three to five years. “The managers are buying stocks that other people are selling,” says Dan Wiener, editor of the Independent Adviser for Vanguard Investors newsletter and a longtime Primecap fan (see Why Vanguard's Actively Managed Funds Are a Better Bet).

Primecap’s founders learned the process at Capital Group, the publicity-shy firm behind the American Funds. The trio—Howard Schow (who died in 2012), Mitch Milias (who stepped down from day-to-day management duties in 2014) and Kolokotrones—left Capital Group in 1983 to start Primecap Management.

Their strategy has produced strong long-term results. Thanks largely to health care stocks bought on the cheap in the mid 2000s, every Primecap-managed fund landed in the top 20% of its peer group over the past five years through November 4. Vanguard Primecap was in the top 9% of funds that focus on large, growing firms; Primecap Odyssey Aggressive Growth, which is closed to new clients, landed in the top 1% of funds that concentrate on growing midsize companies.

The firm’s 2014 results have been especially impressive. In a year when most actively run funds have lagged the broad market, Primecap’s managers have shone. Five of the firm’s six funds beat Standard & Poor’s 500-stock index year-to-date through November 4. A hefty weighting in the stock market’s top-performing sectors in 2014—health care and technology—boosted results. So did some smart bets on airline stocks. Odyssey Growth lagged by a smidge, and that’s because it skews more toward small and midsize companies, which trailed their big-company brethren in 2014.

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In the end, patience may be the key to Primecap’s success. The firm’s biggest fund, Vanguard Primecap, with $45 billion in assets, has a turnover ratio of 5%, which means stocks stay in the fund for 20 years, on average. By contrast, the typical large-company fund has a turnover ratio of 62%, suggesting an average holding period of 19 months.

Big winner. The Primecap team first invested in Biogen, a biotech firm, in 2003. (Biogen would soon merge with Idec Pharmaceuticals.) The stock was down 50% from its all-time high at that time of about $70. Thanks to its effective treatments for multiple sclerosis, Biogen Idec (BIIB) has prospered, and its stock has climbed 850%, to $322. It is now one of the five biggest holdings in four of the funds.

Another long-term holding, BlackBerry (BBRY), hasn’t been as successful. Odyssey Aggressive Growth invested in the phone maker in 2005, when it was known as Research in Motion. The shares performed well for a few years but have been awful since 2008, plunging 96% from peak to trough. Manager Fried was “beside himself for having so much money in the stock when it was in the toilet,” says Wiener. But Fried’s bet that text messaging in the developing world would revive BlackBerry has begun to pay off, and the stock soared 41% in the first 10 months of 2014.

In addition to low turnover, all Primecap-managed funds share some other traits. Annual expense ratios of between 0.45% and 0.65% are well below average. Each fund holds 130-odd stocks, and at least half of each fund’s assets are currently invested in a combination of health care and technology companies.

But the funds have slightly “different flavors,” says Vanguard’s Newhall. Of the two Odyssey funds still open to new investors, Growth is more aggressive than Stock. One-third of Growth’s assets are in small and midsize companies, compared with 20% in Stock. Growth’s holdings are expected to generate slightly faster earnings growth than Stock’s.

Recent years have seen change at the top, with Schow’s death and Milias in retirement. But the firm is grooming new talent. It hires one or two new analysts a year—most from elite colleges and business schools, such as Harvard and Stanford.

In their understated offices in Pasadena (the firm only recently replaced decades-old conference room chairs), managers and analysts meet each morning to discuss news on portfolio holdings. They also meet after the market closes on Tuesdays and Fridays to discuss all of their holdings.

But the funds are not run by consensus. In fact, Primecap avoids groupthink: Each portfolio manager runs his own portion of each portfolio independently. The 13 analysts—three are women—manage 5% of each fund. Prove yourself a good stock picker and you’ll get bigger bonuses. And eventually you’ll move up—like Ansari, who became a comanager in 2007 of the Vanguard-labeled funds. These days, says Morningstar’s Kathman, all eyes are on an analyst named James Marchetti, a graduate of the Massachusetts Institute of Technology who joined the firm in 2005 and is behind the selection of many of the biotech stocks that have boosted the funds’ results in recent years.

But performance has no impact on the fees that Primecap Management collects for running its six funds. “Primecap is paid a percentage of assets, period,” says Wiener.

Regardless, the firm is doing just fine. Wiener estimates that Primecap earns about $128 million a year in fees from the Vanguard funds alone. It’s an impressive number, especially when you consider that Primecap’s leaders initially rejected Vanguard’s invitation to start a fund. The story goes that in 1983, when Vanguard founder John Bogle offered Primecap the chance to run a Vanguard fund, the firm said no. Luckily for future investors, Primecap changed its mind.

Are you counting on a public pension and Social Security to fund your retirement? In the past, retirees with a public pension were not entitled to receive their full Social Security benefit, but that has changed with the passage of new legislation.

The passage of the Social Security Fairness Act ensures that when you retire, you'll get your public pension, and your full Social Security benefit.

Who are the retirees entitled to both a public pension and Social Security? Typically, those who had two careers, having worked both for the government and for the private sector. Perhaps, in one job, you were a government employee whose earnings were exempt from the Social Security payroll tax. In another job, you worked in the private sector, paying into the Social Security system. As a result, you were entitled to a pension and Social Security Benefits. But previously that would have meant that your benefits would have been reduced, due to the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

Legislation to fully repeal the WEP and the GPO, H.R.82 - Social Security Fairness Act of 2023, was signed into law on January 5, 2025, and applies retroactively to benefits payable for months after December 2023. So far, 85% of eligible retired public sector employees or 2.4 million retirees have received their retroactive payment to reflect higher benefits owed for 2024/2025 and saw their monthly benefit increase take effect in April when they received their March payment.

The repeal comes with a price tag. The Old-Age and Survivors Insurance (OASI) Trust Fund is less than 10 years from insolvency. The Congressional Budget Office (CBO) expects that the bill will advance the exhaustion date for the combined trust funds (the OASI and Disability Insurance (DI) Trust Funds) by roughly a half a year, according to its Cost Estimate of the legislation. In total, the CBO estimates that repealing the WEP would increase off-budget direct spending by $101 billion over the 2024-2034 period.

"At a time when we’re already borrowing $2 trillion a year and retirees are already slated to see a 21% benefit cut – an average of $16,500 for a newly retiring couple in 2033 – in just nine years, why would we make it a 22%, $17,300 cut in eight and a half years instead?" said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

The CBO did identify some savings coming from the repeal. It projected that increased benefits for some recipients would disqualify them for the Supplemental Nutrition Assistance Program (SNAP) and decrease on-budget spending by by $2 billion over the 2024-2034 period.

How the Social Security Fairness Act of 2023 works

Previously, the WEP reduced benefits for retired or disabled workers with fewer than 30 years of employment in which they paid into the social security system, if the workers also received non-covered pensions. A non-covered pension is a pension paid by an employer that does not withhold Social Security taxes from your salary, typically, state and local governments.

The GPO reduced the spousal or surviving spousal benefits of people who receive pensions based on non-covered employment. The Social Security Fairness Act has repealed both reductions.

Social Security benefits are calculated by applying three different percentages to a person's lifetime average indexed monthly earnings (AIME) and adding them up to obtain the worker's monthly benefit (primary insurance amount (PIA) at full retirement age. The WEP PIA replicates the regular PIA but scales down the first percentage from 90% to 40% in increments of five percentage points for workers with less than 30 years of paying into the SS system.

The Social Security Fairness Act repeals the WEP PIA that would reduce monthly benefits for non-covered employees and raises the first factor to the standard 90% for all workers.

The public pension "penalty" has been eliminated

To understand how the WEP worked, you need to know how Social Security calculates benefits. Social Security looks at the average monthly earnings for the years a person paid into the system. Benefits are intended to replace a percentage of a worker's pre-retirement earnings. Lower-income workers get a larger percentage of their earnings replaced than higher-income workers.

Until the mid-1980s, the Social Security Administration used a formula that treated government employees, who may have contributed to the system for only a few years, as low-wage workers. As a result, public employees received a disproportionately large Social Security benefit — plus their government pension. In 1983, Congress ended this windfall.

However, the windfall provision never applied to government pensioners who paid into the Social Security system for 30 years or longer. Nor did it apply to workers who received a military pension or a private pension.

Also, a government pensioner who applied for a spousal or survivor benefit based on his or her spouse's Social Security earnings record will face cuts thanks to the Government Pension Offset (GPO). Typically, a spousal benefit is about 50% of a husband or wife's benefit if that's more than the spouse would receive based on his or her work record. A survivor generally receives 100% of a deceased spouse's benefit. When the government pension offset applied, your Social Security spousal or survivor benefit would have been reduced by two-thirds of your government pension.

How much more money can you expect?

The CBO estimates that eliminating the WEP would increase monthly benefits in December 2025 by $360, on average, for 2.1 million Social Security beneficiaries, or about 3 % of all Social Security beneficiaries.

By eliminating the GPO, the CBO estimates monthly benefits in December 2025 will increase by an average of $700 for 380,000 spouses and by $1,190 for the 390,000 surviving spouses.

Where to find more details

Read Social Security Fairness Act Payments Checklist: Nine Things to Know to find out more about the payments and go the dedicated SSA webpage for updates.

If you are receiving a public pension and are now interested in filing for benefits, you may file online or apply in person.

Related Content

• How to Apply for Social Security Online or In Person
• Using Your 401(k) to Delay Getting Social Security and Increase Payments
• 457 Plan Contribution Limits for 2024
• Lawmakers: Nix Social Security Offsets For Seniors In Student Loan Default