Investing requires making judgments about the future. But from where we stand today, the future consists of a range of possibilities. Elroy Dimson’s popular definition of risk—more things can happen than will happen—encapsulates this idea very well. 

To deal with this uncertainty, most investors look backward to plot a forward course, connecting the historical dots to create a forward-looking story. However, we would caution that while this historical knowledge is valuable in making decisions about the future, it likely raises confidence more than predictive abilities. 

Nobel Prize-winning psychologist Daniel Kahneman explains, “Confidence is a feeling, one determined mostly by the coherence of the story … even when the evidence for the story is sparse and unreliable.” 

Because we enjoy the benefit of hindsight, we can weave together a forward-looking story that provides perfect clarity, giving us high conviction. However, that story may be based off a single path, providing a limited or, worse, a misleading picture. This is a very dangerous combination in the world of investing. 

So how does CAPTRUST position for the future while acknowledging the ubiquitous disclaimer that past performance may not be indicative of future results? First and foremost, we approach all decisions with a mindset of confident humility. We have views and opinions—often strong opinions—but we acknowledge that we also have biases and limited information. We incorporate these views within a framework of guiding principles that surround how we think, how we act, and how we react. 

1. Wisdom over Knowledge 

Words are no match for an experience. A child who burns his hand will undoubtedly have a better understanding of the painful consequences of touching a hot stove than a child only warned by a parent. It is impossible to fully learn from others’ experiences because lessons learned from words lack the emotional weight carried by experiences. 

The source of wisdom is often pain, and unfortunately, there are scars behind all these principles. Similarly, investing can only be learned by putting capital to work and experiencing the consequences of the decisions you make in an effort to grow capital. There is absolutely no way to simulate this learning. Real confidence—or “true intuitive expertise” as Kahneman describes it—stems from prolonged experience with quality feedback on mistakes. In the investment world, that feedback most frequently comes in the form of financial losses. 

The smartest investors are not the most knowledgeable but, rather, the ones who know the limits of their knowledge because the market humbles them every day. 

Inexperienced intelligence is a breeding ground for overconfidence because you have not learned what you do not know. 

2. Comprehensive over Complicated 

Most extreme investment errors occur when investors take simple concepts and add complexity. Financial experts can mathematically prove certain strategies have a high probability of success, but the complexity incorporated into these strategies frequently ends in catastrophe. 

Gilbert Keith (G.K.) Chesterton, famed English writer, perfectly captured this fundamental risk in his book Orthodoxy when he stated, “Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.” 

A ship that has its center of gravity above the water line can sail smoothly for years but suddenly capsize in rough seas. That’s what complexity and leverage can do to a simple investment strategy. 

Do not mistake complexity for comprehensiveness. Portfolios should be constructed utilizing understandable components combined to provide comprehensive exposure to a diversified set of economic return drivers (economic growth, real interest rates, inflation, credit, liquidity, currency, etc.). 

3. Predictable over Surprise 

Investing is an emotional roller coaster, and no one is spared from the ride. We all have bouts of anxiety and excitement, patience and impatience, and fear and greed. Successful investors find ways to control these emotions by managing their expectations. Psychologists theorize that surprises have a greater emotional impact than expected outcomes, especially negative surprises. This is called decision affect theory. 

There is a downside to every investment. Acknowledging and defining this downside is critical in constructing portfolios. Understanding the risk associated can help an investor manage emotions. For your investment advisor, explaining the risk affords the opportunity to provide proactive education. Conversely, reactive explanations should always trigger an immediate review, whether the outcome was better or worse than expected. 

Predictable outcomes allow for proactive education, which builds investor confidence. Conversely, surprises require reactive explanations, which can erode confidence. 

4. Preparing over Predicting 

Few people would ever find a guiding investment principle from the movie Roadhouse, starring Patrick Swayze. However, one line in the movie captures a critical element of how we approach the future. After one of the countless bar fights, Swayze’s character was asked if he ever lost a fight. His response: “A man looking for a fight is not as prepared as a man who is ready for one.” 

Being prepared for multiple outcomes is suboptimal because the eventual path will always outperform the aggregate collection of potential paths. So why is positioning so important? Because it protects you from what you do not or cannot see. 

In a blog post titled “Risk Is What You Don’t See,” published in January 2020, Morgan Housel noted, “How risky something is depends on whether its target is prepared for it. A big event people have time to prepare for can be handled without much fuss. A smaller one out of the blue can be deadly.” 

Portfolio positioning should emphasize out-planning the market by preparing portfolios for the future rather than attempting to outsmart the market with short-term market-timing predictions. 

5. Probability over Magnitude 

Napoleon Bonaparte once said, “The greatest danger occurs at the moment of victory.” This “danger” is caused by successful outcomes raising confidence and higher confidence resulting in a new definition of “victory.” 

Investors are notorious for constantly changing their definitions of success. When outcomes are better than expected, they rarely dial risk back and increase the probability of success. Rather, they move the victory bar higher and overconfidently continue down their paths, focused on what can go right without stopping to question what can go wrong. However, as mentioned previously, investing is an emotional roller coaster, and like a roller coaster, the slow grind higher can often be followed by a sudden terrifying freefall. 

It is critical for investors to clearly define what success looks like in their portfolios. It is even more critical for investors to stop the game and celebrate if they are fortunate to be able to declare victory. Though, being content with your definition of success while watching others run the score up often requires a herculean effort. 

Every decision should have a clear definition of success, and the focus should be on maximizing the probability of success, not the magnitude of success. 

6. Net over Gross 

Every investment decision contains multiple layers of costs. While the direct financial costs are most obvious, the emotional costs are often the most expensive. The financial cost of investing in stocks depends on the approach, but every equity investor pays the emotional price: volatility. 

Portfolios typically represent historical sacrifices—trips not taken, cars not purchased, experiences not experienced—in the hope of a better future that includes retirement, a child’s education, or support of charitable causes. Consequently, witnessing those portfolios decline in value has a high emotional price. Unfortunately, it is impossible to know whether this emotional price is too high until after you’ve paid it. The cost associated with turning a potentially temporary decline into a permanent loss because the emotional price was too high can be exponentially higher than a management fee, but they are all costs. 

Investment success can only be measured over time, net of all costs, including direct costs (e.g., transaction and management fees), indirect or frictional costs (e.g., timing and taxes), and often most impactful, emotional costs. 

7. Portfolio over Pieces 

The 2006 USA Basketball roster included numerous NBA All- Stars—LeBron James, Dwyane Wade, Chris Paul, etc.—and was led by legendary coach Mike Krzyzewski. This collection of the best of the best was the overwhelming favorite to bring home the championship. Despite the dramatic talent advantage, the U.S. lost to Greece, a team with no NBA players, in the semifinal. Countless examples exist in which teams with dramatic talent advantages are defeated by less-skilled players who play as a team rather than a collection of individuals. 

Portfolios are similar. Far too often, investors focus on the individual pieces, trying to populate every portfolio position with the absolute best investment option in a certain asset class. However, like in sports, in which the better team has a collection of complementary players, portfolios should be constructed with complementary pieces to ensure appropriate diversification. Some pieces are for offense; other pieces are for defense. At times, a specialist may be needed to capture a specific opportunity. 

When it comes to investing, it’s difficult to make definitive statements because the landscape is always evolving. However, there is one phenomenon that we are confident will always prevail: cycles. If everything in a portfolio is performing well at the same time, my greatest concern is how that portfolio will perform as the cycle turns. 

An optimal portfolio is not necessarily a collection of the best individual pieces. Rather, it’s a collection of the right individual pieces. 

8. Committee over Individual 

We believe that CAPTRUST has a unique but extremely powerful competitive advantage. Over the course of our history, we have folded in more than four dozen successful firms. While we all share a common culture, each firm took a different path to success. As a result, we all have our unique scars of wisdom. 

CAPTRUST is not a firm of firms. Rather, we are one unified practice. Under the CAPTRUST umbrella, we benefit greatly from this diversification of wisdom, increasing the confidence in our collective decisions. 

None of us are better than all of us. 

These nine guiding principles help shape how we think, how we act, and how we react. However, the most important piece to the success equation must also be factored in. That piece is time. 

9. Time Horizon over Everything Else 

Leo Tolstoy famously said, “The two most powerful warriors are patience and time.” From an investment perspective, the importance of time cannot be overstated. Time can be an investor’s biggest risk and biggest risk reducer. Too much time can provide financial challenges; too little time can and has been a major source of permanent value destruction. Time is not diversifiable, and what you do with it often defines investment success. 

A physician friend of mine once told me that a doctor’s primary job is often to buy enough time to let the body heal itself. The application to investing is obvious. Appropriately diversified portfolios may experience bouts of weakness, but with sufficient time, our confidence is high they will recover. 

Understanding how time impacts the risk profile of an investment decision ensures proper alignment between investment and portfolio time horizons. 

There are no silver bullets, magic formulas, or crystal balls that can eliminate uncertainty about the future. All we can do is create a context for thinking, establish a framework for acting, be disciplined with our reactions, and allow time to heal any short-term wounds. 

But when it was over, he says, he felt a huge letdown. “I felt like, What’s next? I’ve done it all. I’ve reached the summit. And now it’s all just downhill.” Shapiro, 65, says he experienced a late-life crisis. 

As Shapiro and his coauthor Richard Leider wrote in their recent book Who Do You Want to Be When You Get Old?, the late-life crisis differs from the better-known mid-life crisis—and not just because it happens at a later age. “Whereas the mid-life crisis is typically about the loss of opportunities, the late-life crisis is more about the loss of relevance,” say Shapiro and Leider. 

It’s a crisis, they write, “characterized by dissatisfaction; a loss of identity; an expectations gap; and the feeling that life has peaked, so it’s all downhill from here.” 

While the mid-life crisis has been a topic of debate among social scientists for many decades, the idea of a late-life crisis is newer and less studied. One small study in the UK found that one-third of older adults reported such a crisis in their 60s. The researchers, led by psychologist Oliver Robinson of the University of Greenwich, found that bereavement and life-threatening illnesses were common triggers. But so was retirement. The common denominator, the researchers wrote, was “a sense of loss.” 

Shapiro says he emerged from his crisis with the help of a mentor: Leider, who is a well-known life coach, author, and speaker, and the founder of Inventure – The Purpose Company. He also emerged with his own new sense of purpose, which included writing the book, the latest of six that he and Leider have authored together. 

If you are in a late-life crisis—or fear you could be headed for one—Shapiro and Leider have some advice. 

Recognize Early Signs 

We all have days when we wonder, is this all there is? But a late-life crisis is different because it lingers. It may begin gradually or suddenly. For example, Shapiro says, a new retiree suddenly may realize that he or she literally has “no reason to wake up in the morning.” Or perhaps “one day you can’t do the yoga pose that you did yesterday or take that hike that you always took,” he says, and you instantly feel old and decrepit. The death of a loved one, a friend, or even a pet can shake your world, making you painfully aware of your own mortality. 

Or there may not be a big triggering event. “It can be a kind of creeping crisis that sort of sneaks up on you as well,” Shapiro says. 

Who’s Most Vulnerable 

Not surprisingly, people who build their identities around their jobs can be especially vulnerable to a crisis after retirement. “When we no longer have that what—Oh, I’m a college professor, or an accountant, or an executive—the question of who I am emerges more strongly,” Shapiro says. “When the container of one’s job is no longer containing us, many people feel a loss of identity and a sense of what’s my purpose in the world?’’ 

Isolation can trigger or worsen a late-life crisis. That’s one reason that people who move during retirement can be vulnerable. “People with stronger community connections and stronger friendships are less likely to suffer,” Shapiro says. 

Also vulnerable, he says, are people who “feel less of a connection to something larger than themselves.” That something can be a traditional religious sense of “the divine,” he says, or “something more like a connection to the divine through nature.” Some people feel that connection when they pray; others find it while meditating or walking through a forest. 

Look to the Past 

While it might seem counterintuitive, Shapiro says, looking to your past—not to lament, but to learn—can help. “We encourage people who find themselves experiencing a late-life crisis to delve into their past, not in a nostalgic way, but rather in an investigative way and see what you can learn.” 

Previously in your life, when have you found yourself in similar situations, what have you done? What sort of connections have you made earlier in life that are meaningful? How can you rediscover and retell the stories of your life in a way that addresses the crisis you are experiencing? 

The idea is not to look to what you “could have, should have, would have done” differently but to look at the wisdom you gained, Shapiro says. He and Leider urge people to pursue the kind of self-reflection that leads to action, not the kind of self-absorption that leads to more despair. 

For many people, writing about past and current challenges in a journal can be helpful. If you don’t like to write, use a voice recorder instead. 

Connect across Generations 

Just as young adults benefit from mentors, older adults can benefit from getting to know “paragons of elder virtue” living meaningful lives, Shapiro says. Make an effort to seek them out in your community. Try to connect with younger people too. Spending time with people of multiple generations can build a “sense of connection over time” that puts your life into a broader context, Shapiro says. Grandchildren, he says, very much count. 

Just Do It 

Once you have some ideas for pursuing a life of greater purpose, take a first step or two. “It can sound a little glib to say, just start meditating, start journaling, start volunteering,” Shapiro says, but “taking the first step is the hardest part.” If you are struggling, try enlisting a friend to explore new pursuits with you and keep you accountable. 

Keep Asking Questions 

In your journal, or in conversation with your peers or mentors, try asking yourself some of these questions, Leider and Shapiro suggest: Why do I get up in the morning? What are my core values? How can I grow a little bit today? Am I living a default life—one that just happened to me—or a life of my choosing that reflects my core values? If not, how can I move toward that vision? How do I want to be remembered? 

In the process, investors were challenged to absorb yet another set of inputs into their already complex market views. This included a post-COVID-19 inflation surge driven by rising energy prices and supply chain issues and the likelihood of rising interest rates in the U.S. and abroad. 

Markets react when a new uncertainty arises, and market participants need time to recalibrate as they seek to understand the practical impacts of a new reality. This is true of all markets: stock and bond markets around the world as well as currency and commodity markets. The uncertainty could be political, economic, natural, or geopolitical, like Russian troops invading Ukraine.

History Doesn’t Repeat 

While no two geopolitical events are the same, the past can sometimes offer clues about the present or future. Mark Twain reportedly said, “History doesn’t repeat itself, but it often rhymes.” Assuming that’s true, what can past geopolitical events and their impacts on the capital markets, specifically the stock market, tell us about what’s going on today? 

Looking at a litany of geopolitical events starting with World War II and running up through the Russian bombing of Syria in 2017, a total of 31 events, we see a wide range of short-term stock market impacts. For example, U.S. stocks fell in the one-month period following the German invasion of France (May 1940) and the U.S. embassy bombings in Africa (August 1998). They rose following John F. Kennedy’s assassination (November 1962) and at the beginning of the Gulf War (January 1991). Meanwhile, one month after the Japanese bombing of Pearl Harbor (December 1941), Kent State shootings (May 1970), and 9/11 attacks (September 2001), U.S. stocks had barely budged. 

After one month, on average, these events tend to be stock market nonevents, with a mean return of 0.1 percent. But what about the longer term? Looking at the same roster of events, after six months and one year, the stock market is positive 81 percent and 84 percent of the time, with average returns of 7.5 percent and 16.3 percent. 

The Big Picture 

Why does this happen? A negative surprise on top of an expensive market could be the catalyst for an immediate market pullback, resulting in more pain than the event alone would dictate, says CAPTRUST Senior Director and Portfolio Manager Jim Underwood. But while these geopolitical events may be significant in many ways, they are not all surprises. To the extent that the markets anticipate them, their impact may already be baked into market prices by the time the event occurs. 

“The financial markets are remarkable in their ability to foresee negative and positive events,” says CAPTRUST Principal and Financial Advisor Justin Pawl. “I don’t think that the stock market trading higher, on average, six months and 12 months later is that unusual given that markets tend to appreciate over time.” This is especially true following a sharp selloff. 

“Of course, these events don’t happen in isolation, and preexisting conditions will have an impact on the market both before and after the event,” says Pawl. Where are we in the business cycle, and where are macroeconomic factors like job growth, corporate earnings, and interest rates trending? And are stocks overvalued or undervalued at the time of the event? 

Today, investor emotions are running high, given the many uncertainties associated with Federal Reserve interest rate decisions in the face of seemingly persistent inflation. Now, blend in a war in Ukraine and a spike in oil prices. This could explain the recent bout of volatility we are experiencing. Regardless, it can be difficult to untangle what’s causing market behavior, positive or negative. 

It’s Different This Time 

Often, when we are in the middle of a market selloff driven by a geopolitical event or some other cause, it’s hard to find perspective and make good decisions, including the decision to do nothing. Because history only rhymes, it can make us feel like it really is different this time. 

“I have a general assumption the market will break about once a decade, but because it typically breaks in new and unpredictable ways, the financial fear feels different every time,” say Underwood. “Add in a physical fear—like COVID-19 or the threat of a broader-scale war—and the emotional reaction can be significantly higher.” 

Once we’re in a fearful state, these feelings can be further fueled by two behavioral biases: recency bias and confirmation bias. “Recency bias comes into play as investors focus on the immediate negative impact of the event and project its effects into the future,” says Pawl. “Often, the immediate reaction overstates the longevity and, therefore, the magnitude of the negative impact.” What may turn out to be a short period of volatility turns into a potential market meltdown in our minds. 

Confirmation bias—the tendency to pay more attention to information that confirms existing beliefs—only makes matters worse. “Its impact is likely more prominent than ever due to the availability of information via the Internet and 24/7 news cycles,” says Pawl. “The Internet is a wonderful technology that serves many useful purposes in modern society, providing a platform to disseminate different ideas on countless topics; however, with that variety of views, we can always find information that supports our personal stance, thus reinforcing it.” That’s not helpful during times of heightened anxiety. 

A Bias Toward Action 

Amid one of our turbulent periods, because we also suffer from action bias—the tendency to favor action over inaction (even if there’s no evidence that it will lead to a better outcome)—we are tempted to act. That may mean selling our worst- or best-performing holdings or going to cash. That’s not wise should the selloff turn into a market rally, as history suggests. 

“The best line of defense is recognizing that these emotions and associated behavioral biases are pervasive,” says Pawl. “Professional investors are not immune to emotional responses, but successful investors have a firm understanding of how these emotions translate into behavioral biases that impact their decision-making processes.” 

What can individual investors do? “Beyond the normal risk management tools, including diversification and maintaining plenty of liquidity, from an emotional perspective, the best way to manage emotions is to write down why you are taking risks,” says Underwood. “Friedrich Nietzsche said, ‘He who has a why to live for can bear almost any how.’ I love that quote and feel if an investor can define why they are taking a risk, they can get through just about any adversity,” he says. 

The decisions made during these brief periods of anxiety can have a disproportionate impact on long-term results, so it’s important to get through them. “I tell investors who adopt a risk profile that feels right but who fail to define why they are taking a risk that they will inevitably experience a moment when it feels very wrong,” says Underwood. “In that moment, there will be nothing keeping their emotions from turning a temporary decline into a permanent loss.” 

“Fortunately, investors are not confronted with these environments very often,” says Underwood. 

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

The funny thing is, Weaver was terrified of heights. 

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

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

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

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

Safe Thrills 

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

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

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

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

Non-repetitive Exercise 

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

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

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

Strengthening 

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

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

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

Fall Prevention 

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

Cognitive Workout 

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

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

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

Social Benefits 

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

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

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

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

Life Changing 

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

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

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

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

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

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

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

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

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

A Little Tickle 

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

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

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

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

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

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

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

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

Starting Over 

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

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

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

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

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

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

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

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

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

Armed with Ambition 

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

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

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

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

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

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

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

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

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

Doing Work That Matters 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Samantha Harris: Learning to Ride the Waves 

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

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

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

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

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

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

Paul Brands: Cancer Is Now Part of My Life 

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

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

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

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

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

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

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

Lisa Masteller: I Was Just So Low 

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

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

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

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

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

Jay Middleton: You Have to Adapt 

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

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

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

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

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

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

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

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

Sole Proprietorship

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

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

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

Partnerships

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

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

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

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

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

Limited Partnerships

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

Limited Liability Partnership

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

Corporations

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

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

C Corporations

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

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

S Corporations

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

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

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

Limited Liability Company

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

Choosing the Best Form of Ownership

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

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

Source: Broadridge Investor Communication Solutions, Inc.

Retirement plans established under Section 401(k) of the Internal Revenue Code, commonly referred to as 401(k) plans, have become one of the most popular types of employer-sponsored retirement plans.

What is a 401(k) plan?

A 401(k) plan is an employer-sponsored retirement savings plan that offers significant tax benefits while helping you plan for the future. You contribute to the plan via payroll deduction, which can make it easier for you to save for retirement. One important feature of a 401(k) plan is your ability to make pre-tax contributions to the plan. Pre-tax means that your contributions are deducted from your pay and transferred to the 401(k) plan before federal (and most state) income taxes are calculated. This reduces your current taxable income — you don’t pay income taxes on the amount you contribute, or any investment gains on your contributions, until you receive payments from the plan.

For example, Melissa earns $50,000 annually. She contributes $5,000 of her pay to her employer’s 401(k) plan on a pre-tax basis. As a result, Melissa’s taxable income is now $45,000. She isn’t taxed on her contributions ($5,000), or any investment earnings, until she receives a distribution from the plan.

You may also be able to make Roth contributions to your 401(k) plan. Roth 401(k) contributions are made on an after-tax basis, just like Roth IRA contributions. Unlike pre-tax contributions to a 401(k) plan, there’s no up-front tax benefit — your contributions are deducted from your pay and transferred to the plan after taxes are calculated. But a distribution from your Roth 401(k) account is entirely free from federal income tax if the distribution is qualified. (See the section below on income tax consequences for more detail.)

How Much Can I Contribute?

In 2025, if you’re under 50 years old, you can contribute up to $23,500 to a 401(k) plan ($70,000 for the combined employer and employee contributions). Workers between the ages of 50 and 59 and those who are 64 or older can contribute up to an additional $7,500 for the year, bringing their total individual contribution limit to $31,000. Employees between the ages of 60 and 63 have an even higher catch-up contribution limit ($11,250 instead of $7,500), bringing their total individual contribution limit to $34,750.

If your plan allows Roth 401(k) contributions, you can split your contribution between pre-tax and Roth contributions any way you wish.

Keep in mind that if you also contribute to another employer’s 401(k), 403(b), SIMPLE, or SAR-SEP plan, your total contributions to all of these plans — both pre-tax and Roth — can’t exceed $23,500. It’s up to you to make sure you don’t exceed these limits if you contribute to plans of more than one employer.

When Can I Contribute?

While a 401(k) plan can make you wait up to a year to participate, many plans let you to begin contributing with your first paycheck. Some plans also provide for automatic enrollment. If you’ve been automatically enrolled, make sure to check that your default contribution rate and investments are appropriate for your circumstances.

Can I Also Contribute to an IRA?

Yes. Your participation in a 401(k) plan has no impact on your ability to contribute to an IRA (Roth or traditional). You can contribute up to $7,000 to an IRA in 2025 ($8,000 if you’re age 50 or older) if you have at least that much in earned income. Your ability to make deductible contributions to a traditional IRA may be limited if you participate in a 401(k) plan, depending on your salary level.

What are the Income Tax Consequences of Contributing to a 401(k) Plan?

When you make pre-tax 401(k) contributions, you don’t pay current income taxes on those dollars. But your contributions and investment earnings are fully taxable when you receive a distribution from the plan. In contrast, Roth 401(k) contributions are subject to income taxes up front, but qualified distributions of your contributions and earnings are entirely free from federal income tax. A distribution is qualified if it meets the following requirements:

• It is made after the end of a five-year waiting period
• It is made after you turn 59½, become disabled, or die

The five-year waiting period for qualified distributions starts on January 1 of the year you make your first Roth contribution to the 401(k) plan. For example, if you make your first Roth contribution to your employer’s 401(k) plan in December 2025, your five-year waiting period begins January 1, 2025, and ends on December 31, 2030.

Withdrawals from pre-tax accounts before you are age 59½, and non-qualified withdrawals from Roth accounts, will be subject to regular income taxes and a 10 percent penalty tax, unless an exception applies.

What about Employer Contributions?

Employers don’t have to contribute to 401(k) plans, but many will match all or part of your contributions. Your employer can match your Roth contributions, your pre-tax contributions, or both. But your employer’s contributions are always made on a pre-tax basis, even if they match your Roth contributions. That is, your employer’s contributions, and investment earnings on those contributions, are always taxable to you when you receive a distribution from the plan.

Try to contribute as much as necessary to get the maximum matching contribution from your employer. This is essentially free money that can help you pursue your retirement goals.

Should I Make Pre-Tax or Roth Contributions (If Allowed)?

If you think you’ll be in a higher tax bracket when you retire, Roth 401(k) contributions may be more appealing, since future withdrawals, assuming they’re qualified, will generally be tax free. However, if you think you’ll be in a lower tax bracket when you retire, pre-tax 401(k) contributions may be more appropriate because your contributions reduce your taxable income now. Your investment horizon and projected investment results are also important factors.

What Happens When I Terminate Employment?

When you terminate employment, you generally forfeit all contributions that haven’t vested. (Vesting means that you own the contributions.) Your contributions and the earnings on them are always 100 percent vested. But your 401(k) plan may require up to six years of service before you fully vest in employer matching contributions and associated earnings (although some plans have a much faster vesting schedule).

When you terminate employment, you can generally leave your money in your 401(k) plan, although some plans require that you withdraw your funds once you reach the plan’s normal retirement age (typically age 65). Your plan may also “cash you out” if your vested balance is $5,000 or less, but if your payment is more than $1,000, the plan generally must roll your funds into an IRA established on your behalf, unless you elect to receive your payment in cash. [This $1,000 limit is determined separately for your Roth 401(k) account and the rest of your funds in the 401(k) plan.]

You can also roll all or part of your Roth 401(k) dollars over to a Roth IRA, and your non-Roth dollars to a traditional IRA. You may also be able to convert your non-Roth dollars to a Roth IRA, but income taxes will apply to any tax-deferred amounts in the year of conversion. You may also be able to roll your funds into another employer’s plans that accepts rollovers.

Finally, you may also be able to take a cash distribution of your contributions and earnings, as well as any vested employer amounts. However, keep in mind that any tax-deferred funds will be subject to income taxes and a possible 10% penalty tax if you’re under age 59½, unless an exception applies.

When considering a rollover, to either an IRA or to another employer’s retirement plan, you should consider carefully the investment options, fees and expenses, services, ability to make penalty-free withdrawals, degree of creditor protection, and distribution requirements associated with each option.

What Else Do I Need to Know?

• If your plan allows loans, you may be eligible to borrow up to one half of your vested 401(k) account (to a maximum of $50,000) if you need the money.
• You may also be able to make a hardship withdrawal if you have an immediate and heavy financial need. But this should be a last resort — hardship distributions are generally taxable to you.
• Distributions from your plan before you turn 59½ (55 in some cases) may be subject to a 10% early distribution penalty unless an exception applies.
• You may be eligible for an income tax credit of up to $1,000 for amounts you contribute, depending on your income.
• Your assets are generally fully protected in the event of your, or your employer’s, bankruptcy.
• Most 401(k) plans let you direct the investment of your account. Your employer provides a menu of investment options (for example, a family of mutual funds). But it’s your responsibility to choose the investments most suitable for your retirement objectives.

Source: Broadridge Investor Communication Solutions, Inc.

At any age, health care is a priority. When you retire, however, you will probably focus more on health care than ever before. Staying healthy is your goal, and this can mean more visits to the doctor for preventive tests and routine checkups. There’s also a chance that your health will decline as you grow older, increasing your need for costly prescription drugs or medical treatments. That’s why having health insurance is extremely important.

Retirement—Your Changing Health Insurance Needs

If you are 65 or older when you retire, your worries may lessen when it comes to paying for health care—you are most likely eligible for certain health benefits from Medicare, a federal health insurance program, upon your 65th birthday. But if you retire before age 65, you’ll need some way to pay for your health care until Medicare kicks in. Generous employers may offer extensive health insurance coverage to their retiring employees, but this is the exception rather than the rule. If your employer doesn’t extend health benefits to you, you may need to buy a private health insurance policy (which may be costly), extend your employer-sponsored coverage through COBRA, or purchase an individual health insurance policy through either a state-based or federal health insurance Exchange Marketplace.

But remember, Medicare won’t pay for long-term care if you ever need it. You’ll need to pay for that out of pocket or rely on benefits from long-term care insurance (LTCI) or, if your assets and/or income are low enough to allow you to qualify, Medicaid.

More about Medicare

As mentioned, most Americans automatically become entitled to Medicare when they turn 65. In fact, if you’re already receiving Social Security benefits, you won’t even have to apply—you’ll be automatically enrolled in Medicare. However, you will have to decide whether you need only Part A coverage (which is premium-free for most retirees) or if you want to also purchase Part B coverage. Part A, commonly referred to as the hospital insurance portion of Medicare, can help pay for your home health care, hospice care, and inpatient hospital care. Part B helps cover other medical care such as physician care, laboratory tests, and physical therapy. You may also choose to enroll in a managed care plan or private fee-for-service plan under Medicare Part C (Medicare Advantage) if you want to pay fewer out-of-pocket health-care costs. If you don’t already have adequate prescription drug coverage, you should also consider joining a Medicare prescription drug plan offered in your area by a private company or insurer that has been approved by Medicare.

Unfortunately, Medicare won’t cover all of your health-care expenses. For some types of care, you’ll have to satisfy a deductible and make co-payments. That’s why many retirees purchase a Medigap policy.

However, it’s illegal for an insurance company to sell you a Medigap policy that substantially duplicates any existing coverage you have, including Medicare coverage. You don’t need and can’t buy a Medigap policy if you’re enrolled in a Medicare Advantage (Part C) plan, and you may not need it if you’re covered by an employer-sponsored health plan after you retire or have coverage through your spouse.

What Is Medigap?

Unless you can afford to pay for the things that Original Medicare (Parts A and B) doesn’t cover, including the annual co-payments and deductibles that apply to certain types of care, you may want to buy some type of Medigap policy when you sign up for Medicare Part B. There are eight standardized plans available to individuals new to Medicare (except in Massachusetts, Minnesota, and Wisconsin, which have their own standardized plans). Each of these policies offers certain basic core benefits, and all but the most basic policy (Plan A) offer various combinations of additional benefits designed to cover what Medicare does not. Although not all Medigap plans are available in every state, you should be able to find a plan that best meets your needs and your budget.

When you first enroll in Medicare Part B at age 65 or older, you have a six-month Medigap open enrollment period. During that time, you have a right to buy the Medigap policy of your choice from a private insurance company, regardless of any health problems you may have. The company cannot refuse you a policy or charge you more than other open enrollment applicants.

Thinking about the Future—Long-Term Care Insurance and Medicaid

The possibility of a prolonged stay in a nursing home weighs heavily on the minds of many older Americans and their families. That’s hardly surprising, especially considering the high cost of long-term care.

Many people in their 50s and 60s look into purchasing LTCI. A good LTCI policy can cover the cost of care in a nursing home, an assisted-living facility, or even your own home. But if you’re interested, don’t wait too long to buy it—you’ll need to be in good health. In addition, the older you are, the higher the premium you’ll pay.

You may also be able to rely on Medicaid to pay for long-term care if your assets and/or income are low enough to allow you to qualify. But check first with a financial professional or an attorney experienced in Medicaid planning. The rules surrounding this issue are numerous and complicated and can affect you, your spouse, and your beneficiaries and/or heirs.

Source: Broadridge Investor Communication Solutions, Inc.