Planning for Our Fur Babies

Whether your family includes loved ones you birthed, adopted, or who birthed you, it’s important to remember that our pets need as much financial and estate planning as our babies who lack the benefit of genetic-based clothing. Now, I know that there are some of you out there who are going, “Seriously?!,” but for people for whom biological/adopted kids weren’t an option (by choice or by biology), or whose kids are long gone grown and flown, often pets are a very real substitute. 
 
Right out of the gate, our pets should have their own line item in our cash flow plans (yes, those budgets I’m always banging on about—will she ever stop…no, she won’t.) When we are calculating the level of Cash Reserve we should be maintaining, our baseline is often those non-discretionary items that have to be paid like the mortgage/rent, car payment, utilities, and basic food. In that food category, make sure you have food for your pets, particularly if they require special (= more expensive) food. If you have a pet that is on meds then there better be a little extra in your Cash Reserve to cover those costs (and no, despite many of our efforts, medical plans won’t cover the cost of pet prescriptions (and don’t think I haven’t tried). 

This all leads me to pet insurance. A wise choice or another “insurance” program just this side of a scam? The answer is “it depends.” As with any insurance, you really have to run the numbers to see if carrying this type of coverage makes sense overall. Like your homeowner’s policy, there is usually a deductible (which should be built into your cash reserve, just like your car and home deductible) and most are reimbursement based which means you pay the vet, submit the bill, and receive some level of reimbursement for the expense. Unlike health insurance, wellness visits aren’t usually covered (although this is starting to change) and very often policies cover only a portion of treatment similar to the co-insurance you find with some health insurance programs. If your fur baby has a pre-existing condition, you’re probably out of luck unless you put the insurance in place when they very young and you didn’t know about the issue. There could also be coverage limits such as lifetime limits, per condition limits, and/or per year limits and you can sometimes add riders for boarding, travel in the event of urgent treatment, or pet retrieval in the event pets are lost (or stolen, which is becoming a surprisingly frequent occurrence). As I said – “it depends.”
 
All that covers if something happens to our non-human kids so what about if something happens to us?  With a show of hands, how many of you have instructions in your wills that cover how your pets will be taken care of if something happens to you? I’m guessing that there aren’t too many hands in the air. You put beneficiary designations on your retirement accounts, you build trusts for your errant children/grandchildren, you leave bequests to various schools and charities but what happens to those pets who have loved you unconditionally all those years (yes, even those cat owners out there…deep down, they love you, too). Make sure there are some instructions that outline who is going to take your pets, make sure your executor is very clear of your intentions, and make sure those people/organizations who are taking on this responsibility are on board with the idea. This leads me to funding that care…
 
Circle back to that earlier paragraph about budgeting and use that line item to build some funding into your estate plans to reimburse those kind people who are willing to take Fluffy until the end of his/her days. Taking on the cost of the family’s beloved gerbil is one thing given it’s ~3 yr. life span, it’s a whole other thing to house the family’s parakeet with its potential 20-year life span or even a cat, dog, or horse which can live 5, 10, or 15+ years (one of our cats crossed the 19-year mark). You could instruct your executor to set aside some funds for this cost, you could set up an immediate annuity to cover the costs if you have a number of animals with longer life spans, or you could even set up a small trust that would provide the new parent with an annual stipend and the balance (once your beloved pet joined you) could go to a charity. The key point is, just as house guests should be conscious of their impact on their hosts, you should be conscious of the sacrifice your pet’s new parent is making.

Image credit: Photo by Krista Mangulsone on Unsplash


Fun with Numbers

Even though the IRS moved the tax deadline to next month, I’m calling it for the home team and shutting down that part of my brain. I’m absolutely convinced that extensions were established to allow people in the financial services industry a little breather. I thought we’d do a little fun with numbers today since we haven’t done that in a while.

Let’s kick things off with some fun Federal tax numbers:

• For the year 2021, individuals are expected to contribute $1.932 trillion tax dollars to the US Treasury versus $284 trillion from corporations.

• For perspective, roughly 10% of people ages 25 to 55 don’t pay income taxes while more than 80% of those age 75 or older don’t need to pay taxes (which is completely different than filing their taxes, which they probably should to ensure they are eligible for various program benefits…). 

• The personal Federal median tax rate is about 14 1/2 % (give or take and based on 2017 numbers). The median corporate rate for the companies in the S&P 500 (on roughly $874 billion dollars of annual revenue) is less than 18% (down from 23% and this includes state taxes – the pure Fed number wasn’t available). What would you do with an extra $43.7 billion?

How about some cost of living fun facts:

• $24/hour: The minimum wage if we matched the economy’s productivity growth, as it did until 1968. We’ve already talked about the fact that Geneva’s minimum wage exceeds $19/hour.

• $3 billion: The amount of Paycheck Protection Program dollars received by 200 Catholic dioceses and related institutions. Not for nothing but an organization that owns perhaps as much as $837 million dollars of US property and pays no real estate tax (or other tax for that matter) probably shouldn’t be cashing a PPP check.

• $8/mos: Totally unrelated but piqued my interest—Scotland is the only country in the world that provides school-age and low-income women free period products. The estimated cost is $8/mos which equals about one hour of take-home pay at minimum wage. 

On to life in general numbers:

• It’s safer to deliver a child in Sudan than it is in parts of the US from a maternal mortality perspective. They barely have roads in Sudan but they can keep their moms alive….I guess I’d have to say this is one area I’d prefer to Make America Great, Again (because I know how to use punctuation…).

• There have been 141 mass shootings and 1,991 gun-related deaths reported to the Gun Violence Archive so far in 2021. Since the annual number of firearms manufactured in the US is 9,052,600, I’m actually surprised that number isn’t higher—still appalled though.

• Americans spent $99 billion on their pets in 2020 with an average of $1,063 spent on non-food items. This one made me laugh out loud. I tell my cats I love them every morning when I leave but there is no way I am spending that much on treats and toys—they can have the cardboard toilet paper roll and be happy about it. 

In closing, for those who don’t think numbers are fun:

• The volume of a cylinder is PI times the radius squared times the height, which means the formula for a pizza reads: PI*z*z*a 

We’ll tackle something more serious next week but now you all have a little tidbit to throw out there during your first post-vaccine cocktail party.


Oh no…not the daffodil or narcissus question!

While I’ve been trying to curb my news junkie tendencies, the staggering variety of train wrecks and car crashes to read about these days threatens to overwhelm one. What I find so interesting (well, I find a million different things interesting but for the purposes of this week’s missive we’ll narrow that down) is that the nature of the catastrophes domestically differs somewhat in make-up from those that are occurring in other countries (or at least what’s getting coverage). And, of course, that leads me to thinking about finances domestically and internationally (penalty points to all of you rolling your eyes right now). I’m sure you’ve all heard the old gardening quip: A daffodil is a narcissus but not all narcissuses are daffodils. I think that quip has some value in the investing world when we think of global investing versus international investing.

Stepping back, let’s do some definitions:  for our purposes, “global” means the whole globe, all 195+ countries including the US (or “domestic” markets) whereas “international” means the whole globe except the US. Generally, a company is classified where the company is headquartered so while it may be a global company, if its headquarters is in the US then it is a “domestic” company whereas a global company with its headquarters in Ireland is an “international” company. 

Now, I know what you’re saying – why bother with investing internationally when I can just buy a global fund. Yes, that would seem logical but I think we’ve established that logic doesn’t always function properly when it comes to investing (or elections, pandemics, congressional aid, etc…). A quick survey of a half dozen “global” funds shows that all of them invest over half of their positions in domestic markets which means you aren’t really getting all that much international exposure, particularly if that one global fund only represents a portion of your investment allocation. If we are looking at target date and/or asset allocation fund (those all-in-one/one-stop-shop funds), that percentage drops to about 20% or even lower.

Ahh, you say but if I invest in a large cap domestic fund don’t I get global exposure through all those big global companies to which I say “ahh, nice try grasshopper…”  The great thing about international funds is that they invest in all sorts of companies that are doing all sorts of things that those big companies aren’t. Think of it this way – that big US company with its fingers in a dozen or more countries is like a big ole battleship. That ship isn’t going to change quickly or turn on a dime.  What you are missing out on are all those little boats swooping around/in front of/loop-de-looping that big ship and that’s the exposure we want. Because of the different nature of their markets, we often see stronger dividends from those international companies (remember our conversation about the insulation dividends provide awhile back) and those other governments are doing different things to help support their economies that often mean more stable share pricing. Heap on top a dollop of completely different ways of reacting to the current pandemic and you are seeing some other countries rebound in ways our domestic markets can only fantasize about.  For example, the Eurozone economy dropped way less last quarter than the US (-12.1% vs -33%) and is on track for a positive growth for the 3rd quarter whereas we probably won’t see true positive numbers for a while yet.

Now, I’m not in any way endorsing a wholesale flip to putting all of your dollars into international holdings.  I’m merely saying that everything has its place in your portfolio, for one reason or another. If, after looking at your portfolio, you’re thinking of adding more international exposure, we can certainly have a conversation about your options. If you aren’t totally convinced that something international belongs in your portfolio, check out the news item about the laptop thieving boar in Germany – interesting stuff happens all over the globe and only a well -diversified portfolio has the chance to take advantage of it.