Daily Archives: December 13, 2019

As part of a radical reimagination of the welfare system in Britain, Labour shadow chancellor John McDonnell has announced plans to roll-out Universal Basic Income (UBI).

The scheme, which will entitle every British citizen to a monthly tax-free allowance, will likely be trialled in the north of England if Labour were to win the upcoming General Election.

UBI trials in Finland, the only advanced economy to launch such a widespread scheme, found that those who had benefited under the scheme had reported significantly higher feelings of self-worth and stability than they had before.

Curiously, it appears that the policy itself seems to have support from across the political spectrum.

Indeed, economists on both the left and the right have argued for UBI as a source of personal empowerment, providing citizens with more choice over work, education, training, leisure and caring.

Practically speaking, for those on the left, UBI would be a modern method of cutting poverty and inequality in a way that is fitting for the 21st century and, for those on the right, it could guarantee a less bureaucratic and, therefore, more streamlined welfare system.

With jobs in many sectors looking increasingly under threat with the rise of technology and automation which experts forecast could threaten up to a third of current jobs in the west within 20 years UBI could help to keep families afloat financially while breadwinner earners retrain or enter full-time studies, for example.

INCREASE 'TRUST' IN POLITICIANS

Some critics, notably John Kay, the former director of the Institute for Fiscal Studies, fear that UBI would be too expensive.

Kay said: If you do the numbers, either the basic income is unrealistically low or the tax rate to finance it is unacceptably high. End of story.

However, Mr McDonnell remains convinced of the benefits.

He said: The reason were doing it is because the social security system has collapsed. We need a radical alternative and were going to examine that.

We want to do it in areas that have been hit hard by austerity.

Well look at options, run the pilots and see if we can roll it out. If you look at the Finland pilot it says it didnt do much in terms of employment but did in terms of wellbeing things like health. It was quite remarkable.

And the other thing it did was increase trust in politicians, which cant be a bad thing.

The think tank Compass has suggested the total cost of the UBI would be as high as 300bn, however, under the changes to taxation outlined in Labours fully-costed manifesto, it is likely that this will be well-covered. For them, UBI can deliver social justice in a manner that is fit-for-purpose in a modern economy.

Compass have stated: The basic income would update the British system of social security for the 21st century. All households would enjoy greater certainty about future income, directly tackling growing economic and social insecurity.

LIVERPOOL TO SHEFFIELD

For shadow chancellor McDonnell, the north appears to represent the perfect testing ground for the scheme.

Id like to see a northern and Midlands town in the pilot so we have a spread, he said.

I would like Liverpool of course I would, Im a Scouser but Sheffield have really worked hard. Ive been involved in their anti-poverty campaign and theyve done a lot round the real living wage.

I think those two cities would be ideal and somewhere in the Midlands.

Studies conducted by HMRC in 2017 concluded that Manchester has one of the highest rates of child poverty by local authority area in the UK, with 35.5% of children under 16 living in poverty.

Alarmingly, this figure is concurrent with the situations facing a host of cities in the north of England. In Liverpool, the same report claims that 32.7% of children under 16 were living in poverty, with the figure in Sheffield around 25%.

McDonnell does concede that the idea is undoubtedly left-field, however, he feels with the right strategy the scheme could make a real difference to families in the North.

Of course its a radical idea, he said.

But I can remember, when I was at the trade unions campaigning for child benefit and thats almost like UBI you get a universal amount of money just based on having a child.

UBI shares that concept. Its about winning the argument and getting the design right.

'MATTER OF PRIORITIES'

Some have argued in the past that such a programme would effectively lead to the dismantling of the welfare state, however, these fears were quickly rebuffed by experts such as Guy Standing, the founder and co-president of the Basic Income Earth Network.

He is in favour of maintaining benefits for the most vulnerable people in society even with the introduction of McDonnells scheme, something he stresses is affordable.

There is no reason why a city or country could not afford to have a basic income for everybody, says Standing.

In Britain, tax reliefs for the wealthy and corporations come to about 400bn a year this by itself could be used to pay for a basic income for everybody.

Its not something that is unaffordable its a matter of priorities.

Although no fee has been disclosed regarding how much those involved in the pilot stand to receive per week, it is worth noting that in March of this year, McDonnell came out in agreement with a proposal put forward by the New Economics Foundation (NEF) think tank who posited that a figure of 48.08 a week should be paid to every adult over the age of 18 earning less than 125,000 a year.

The NEFs proposal outlined that the cash would not replace benefits and would not depend on employment, something Guy Standing confirmed was entirely achievable.

The NEFs blueprint, which forecasts that some 88% of all adults would see their post-tax income rise or stay the same while helping to lift 200,000 families across the country out of poverty, has also been welcomed by the Green Partys Caroline Lucas.

In Manchester, currently 1 in 47 children are homeless according to the housing charity Shelter. Nationwide, at least 135,000 children are expected to be homeless or in temporary accommodation across Britain on Christmas day the highest number for 12 years.

Perhaps, UBI could offer the catalyst for turning the tide in this most appalling of situations.

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A modern method of cutting poverty: Investigating what Universal Basic Income will mean for Northern families - Mancunian Matters

The worlds happiest country, according to an international survey two years in a row, is now one of very few to have a female leader. Finlands Sanna Marin, who is 34, will become the youngest serving prime minister when she is sworn in later this week. In setting this record, the Social Democrat follows in the footsteps of another young, progressive PM New Zealands Jacinda Ardern, who was 37 when her Labour party won the 2017 election, and the first woman to give birth in office since Pakistans Benazir Bhutto (the male, 35-year-old prime minister of Ukraine, Oleksiy Honcharuk, was the worlds youngest PM for three months in between).

Finland, which was the first country in Europe to grant women the vote in 1906, is often regarded by those on the left as something akin to utopia or at least a shining example of what a big-spending, socially liberal government can achieve. Its well-funded universal education system is among the most successful in the world. Between 2017 and 2019 it ran one of the first trials of universal basic income. This summer a new left-leaning government pledged to make Finland carbon neutral by 2035 a target accurately described by Finnish Greens as probably the most ambitious in the world.

The four other parties in the new coalition are all headed by women, three of them in their 30s. New Zealand has more than 40% women in its House of Representatives (compared with 32% in the UKs last parliament). But should we make connections between the personal characteristics of a countrys leaders and its political culture as a whole? Is it a coincidence that these two nations, often viewed as progressive beacons, both have women in charge (while Ms Marin will become Finlands third female prime minister, Ms Ardern is New Zealands third)?

A female leader is certainly no guarantee that a country, or a party, has a progressive outlook. The UKs two female prime ministers have been Conservatives. Angela Merkel is a Christian Democrat. The French far right is led by Marine Le Pen. Neither are female voters or politicians necessarily any more liberal, social democratic or environmentalist than men. While Ukip and the Brexit party have never been as popular with UK women as they are with men, national populist parties in continental Europe do not have the same problem, and 53% of white women in the US voted for President Trump.

But at a time when the political life of so many nations (Brazil, India, Hungary) is being reshaped by leaders in a strongman mould, Finland and New Zealand are reminders that there are alternatives. Academic evidence on the impact of more diverse representation shows that previously marginalised groups do gain as a result of an increased focus on policies to advance their interests. Far from feeling hamstrung by her reliance on coalition partners, Ms Ardern told the Guardian that building consensus is an aspect of her job that she enjoys. To suggest that all female politicians are more adept at this style of working would be to stereotype. But just as Greta Thunbergs leadership has given new energy to the climate movement, it is heartening to see a new generation of women in government to address some of the many challenges that we all face.

Originally posted here:

The Guardian view on Finlands new PM: a different type of leadership - The Guardian

A retirement plan is a lot like an orchestral score, and when all the pieces come together it can be a beautiful thing. Are you making music, or could your plan use a tuneup?

If you love music, and symphony orchestra performances especially, youve no doubt reveled time and again at how the whole thing comes together so magnificently.

The strings, percussion, woodwinds and brass sections each have their part all equally important. But without the conductor, I suspect most concerts would be chaos. Its the conductor who makes sure each instrument comes in at precisely the right time fast or slow, soft or loud as he or she interprets the score. To do that, the conductor must learn every part of every piece of music to be played and have a fundamental knowledge of every instrument and artist who will play it.

You can probably guess where Im going with this.

So often, when I meet individuals and couples who are planning for retirement, theyre doing it on their own and without much thought to what they need or when theyll need it. They might have a jumble of investments, each of which sounds good on its own, but those instruments arent necessarily working together to create the retirement theyve envisioned.

Much like an orchestra conductor, this is when a financial planner could come in and help turn the chaos to harmony. The right adviser should have a fundamental knowledge of all the investments and strategies available, as well as the ability to put together a comprehensive retirement plan that addresses each individual clients needs, goals, strengths and weaknesses.

There are five important parts in a comprehensive retirement plan that should play well together.

Many pre-retirees I meet have been diligently saving money in a tax-deferred retirement account (such as an IRA, 401(k), 403(b), etc.). Some may also have a pension benefit through their employer. And, of course, theres Social Security. But as they near retirement, most people need guidance on how to combine those income streams to create a reliable paycheck to replace the one they received while working. If you were told youd need less income in retirement, that isnt necessarily true particularly in the early years, when people generally are more active. Younger retirees usually have plans to travel, golf, dine out and do the things they couldnt do when they were employed. An income plan will help determine whats possible. And if your income will drop in retirement, a plan could help stretch your dollars further.

Your portfolio should work hand in hand with your income plan. Its important to be sure your investments are allocated appropriately based on your risk tolerance and your short- and long-term objectives. While saving for retirement, your goals may have been more focused on growth and accumulation and you may have felt more comfortable with a higher exposure to risk. But in retirement, your allocation should be significantly different. If not, you could be in for some sour notes during a market downturn and if a big loss happens just before or after you retire, it could be devastating to your nest egg.

Pre-retirees often underestimate how much theyll end up paying in taxes in retirement. If you dont prepare a long-term plan, taxes could take a sizable chunk out of your nest egg. Your adviser should make tax strategies a priority and be able to tell you how the money you withdraw from retirement accounts, including required minimum distributions (RMDs), could affect your tax bracket from year to year; if (and how much) your Social Security benefits will be taxed; and if your income could cause you to pay more for Medicare.

People tell me all the time that they dont ever want to become a burden to their families, and yet, they often fail to plan for expensive health care and long-term care costs. According to the 2019 Genworth Cost of Care Survey, the national median cost of a home health aide in 2019 is $4,385 per month, a private room at an assisted living facility was $4,051 and a semi-private room in a nursing home was $7,513. Those bills are seldom covered by Medicare, and they can quickly deplete a retired couples resources. Looking at options to offset those costs before they get out of hand can make a big difference in the quality of care retirees receive and lower the possibility that they might have to rely on others for help someday.

I think most people hope to leave some sort of legacy to their loved ones or favorite charity. But making those wishes a reality is far more complicated than simply telling your children what you want them to have. The most basic estate planning tool is a will, and thats all it takes for some families. But a will often must go through the probate process, which can be expensive and invasive and doesnt guarantee your wishes will be followed. Though it isnt always necessary, a trust may be a better option for you and your family. Its definitely something you should discuss with a financial adviser and/or an attorney. Dealing with a death is difficult enough. Whatever your plan includes, it should be as clear and issue-free as possible.

When all the parts of a retirement plan work in sync, its a more enjoyable experience for everyone involved. But its a lot to think about especially if youre still working and dont have time to research every investment tool and strategy. A knowledgeable and experienced financial adviser could help fine-tune your portfolio and lead you through each new and necessary movement, whether its the markets that are changing or your life in retirement.

Kim Franke-Folstad contributed to this article.

Securities offered through Securities America, Inc. A Registered Broker/Dealer. Member FINRA/SIPC. Advisory services offered through Cooper McManus, a Registered Investment Advisory Firm. Link Financial Advisory, Cooper McManus and Securities America are not affiliated.

Richard London is a CERTIFIED FINANCIAL PLANNER and founder of Link Financial Advisory (www.linkfinancialadvisory.com). As an independent financial planner, he goes into the market and finds the best solutions and strategies for his clients. Richard grew up and lives in Las Vegas with his wife and two children, and he holds a bachelor's degree in finance from the University of Nevada, Las Vegas.

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

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Want to Retire in Harmony? Make Sure All Parts of Your Plan Are in Sync - Kiplinger's Personal Finance