Financial Foundations for Veterinarians

Transcription

1 Financial Foundations for Veterinarians Name, title(s), designation(s) Name, title(s), designation(s) The Principal Financial Group

2 A STRONG FOUNDATION Insurance issued by Principal National Life Insurance Co. (except in NY), Principal Life Insurance Co. and the companies available through the Preferred Product Network, Inc. Securities offered through Princor Financial Services Corp., 800/ , Member SIPC. Principal National, Principal Life, the Preferred Product Network and Princor are members of the Principal Financial Group, Des Moines, IA While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal are not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. The Principal Financial Group and its members are providing links to other websites to give you the option to explore information on financial services. The Principal did not create and does not claim any responsibility for the content on those pages. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group. Copyright 2015 Principal Financial Services, Inc.

3 BUSINESS, OWNER AND EXECUTIVE SOLUTIONS

4 THE TAILORED EDGE YOU NEED Our Business, Owner and Executive Solutions offer you the complete package the expertise to help you find the right solutions, a portfolio of products to choose from, and the plan administrative services you need to focus on your business, and leave the details to us.

5 AGENDA

6 HOW SOLID IS YOUR FINANCIAL FOUNDATION? Financial security can only be achieved if built on a solid foundation. HOW PARENTS CAN BE GOOD FINANCIAL ROLE MODELS

7 STUDENT LOANS Subsidized Stafford Loans to students Based on financial need Government pays interest while student is in school Unsubsidized Stafford Loans to students Not based on financial need Interest accrues during school Federal Plus Loans to parents Repayment of principal and interest begins 60 days after disbursements SAVING FOR COLLEGE 101

8 DEBT Can be your friend or enemy. Know your limits. Establish needs vs. wants. HOW PARENTS CAN BE GOOD FINANCIAL ROLE MODELS

9 DEBT DO S AND DON TS Pay down debt and increase emergency savings at the same time. Pay off highest interest rate debt first. As you pay debts off, apply the old payment to the next highest interest rate debt. HOW PARENTS CAN BE GOOD FINANCIAL ROLE MODELS

10 CASH FLOW/LIVING EXPENSES Understand your monthly income and expenses. Track all expenditures (dining out, shopping, entertainment, etc.). Get back in touch with cash instead of credit and/or debit cards. Set aside money for infrequent expenses (car repairs, home repairs, maintenance, medical expenses, vet bills, holidays/gifts etc.). HOW PARENTS CAN BE GOOD FINANCIAL ROLE MODELS

11 RISK MANAGEMENT Disability Insurance Life Insurance Medical Insurance Malpractice Insurance Property and Casualty Insurance Long-term Care Insurance HOW PARENTS CAN BE GOOD FINANCIAL ROLE MODELS

12 DISABILITY INSURANCE/ INCOME PROTECTION In the U.S., a disabling injury happens every second; a fatal injury occurs every four minutes. 1 Employer-paid group disability coverage usually only covers 60 to 66 2/3% of your income and is fully taxable. Medical insurance pays the doctors, hospitals, etc. Who pays you? If you re married, could you live on one income? If you re single, what would you do without any income? 1. Source: National Safety Council, Injury Facts 2012 Ed.

13 DISABILITY INSURANCE/ INCOME PROTECTION Individual DI offers: Customizable features to fit your needs and budget Benefits are tax free when coverage is paid for with after-tax dollars Individually owned protection which means it goes with you where ever your career takes you.

14 DISABILITY INSURANCE COMMON MYTH #1 Source: Principal Life Insurance Company disability insurance claim payments issued in The above is for illustrative purposes only and is not intended as a inclusive representation of all claims.

15 DISABILITY INSURANCE COMMON MYTH #2 Whether your goal is to: Maximize income protection Safeguard specific expenses (e.g., mortgage/rent) Stay within a set budget There are ways to customize the coverage to fit your needs. It may surprise you, but for about the cost of a daily cup of premium store-bought coffee, you could insure your income with personal DI protection.

16 DISABILITY INSURANCE COMMON MYTH #3 Financial professionals can help: Consider your entire financial picture Explain product features Make underwriting easier Be a resource for questions Provide future service and support (e.g. evaluating changing needs or filing a claim)

17 LIFE INSURANCE Who depends on you financially for their wellbeing? Do you depend on someone financially for your well-being? Do you have life insurance because you love someone or owe someone? o Term Insurance o Permanent Insurance HOW PARENTS CAN BE GOOD FINANCIAL ROLE MODELS

18 WHAT S THE BUSINESS WORTH? Fair Market Value - the price at which the property would change hands between a willing buyer and a willing seller. Would you sell your business interest today for this price?

19 BUSINESS VALUE DRIVERS Focus on increasing cash flow Develop operating systems that improve sustainability of cash flows Document sustainability of earnings Improve facility s appearance Pay down debt Solidify and diversify customer base Implement a strategy to grow the company Build a solid management team, and groom a successor

20 WHO PERFORMS VALUATIONS? Business appraisal firms Business brokers or investment bankers CPAs Financial professionals

21 NEED FOR VALUATION SERVICES Buy-sell planning Exit planning Estate planning Executive benefits Other

22 COMPLIMENTARY INFORMAL BUSINESS VALUATION What does your Buy-Sell say the value is? Do you have a buyer? Will you or your heirs be taxed on this? Or this? Will this hold if your Key Person leaves?

23 NO. 1: BUY-SELL PLANNING Implementing a well-crafted and funded buy-sell agreement is the foundation of a healthy business.

24 BUY-SELL AGREEMENTS Common triggering events: Death Disability Bankruptcy/Insolvency Divorce Termination of Employment (voluntary and involuntary) Retirement

25 CONSIDERATIONS: AGREEMENTS BETWEEN OWNERS Common pitfalls No formal agreement Poorly structured agreement No funding Antiquated agreements

26 CONSIDERATIONS: AGREEMENTS BETWEEN OWNERS Questions to consider: Are all possible triggers included? Is business valuation clear, specific, appropriate, continuous? Is a mandatory buy-out required upon death and/or disability? Is disability defined and consistent?

27 CONSIDERATIONS: CONVERTING PROFITS TO WEALTH Percentages of business owner agreements that cover the top three transition events and those that include them as mandatory triggers* Most business owners tell us, My business IS my retirement. 91% 70% 62% 35% 23% 12% DEATH DISABILITY RETIREMENT Mandatory buy-out events *Source: Review of 720 buy-sell reviews by The Principal, Jan. 1, 2011, to July 31, 2014

28 BUSINESS OWNER BUY-SELL AGREEMENT

29 NO. 2: EXIT PLANNING What is exit planning? A process resulting in your successful transition out of the business.

30 COMMON OWNER CONSIDERATIONS When can I exit my business? Will my kids be able to or want to - take over? Will it sell for what it s worth? How can I avoid huge taxes? Can it survive without me? How do I reward key employees/management team to stay?

31 SALE TO INSIDERS OR OUTSIDERS

32 THE BEST LAID PLANS Only 8% of business owners are confident in their exit strategy. 59% do not have a written plan in place to help continue the business in the event of death, disability or retirement. *Source: Principal Financial Group, USIS Business Owner Research, January 2015

33 EVEN IF THE BUSINESS IS SOLD, REPLACING THE INCOME IS DIFFICULT Higher taxes and lower yields reduce potential income from reinvested sale proceeds. Boom Bust Sale Price of Business $15,000,000 $10,000,000 Capital Gains Rate/Tax Amount 15%/$2,250,000 24%/$2,400,000 Net Proceeds $12,750,000 $7,600,000 Pre-Tax Income from Proceeds $637,500 $152,000

34 NO. 3: EMPLOYEE BENEFITS Who is the difference maker in your company? Immediately change operations, customer relations, profitability Significant recovery time Hiring the difference maker Compete with compensation and benefits Consider customized benefits Align commitment with vesting

35 Q&A Questions?

36 THANK YOU Presenter name Contact info - phone Contact info Contact info - website BB I 09/2015 t rb