Millennials Outshine Their Elders in Socking Savings Away

Oh, those millennials. Those entitled young ‘uns who can’t raise their heads from their digital devices for more than five minutes, who hop from one job to the next with abandon, who are lazy and narcissistic to boot.

And who have managed to top Baby Boomers, Gen X, Gen Y and what have you all in one important category: They have saved more money.

A study by the personal finance website found that 62 percent of millennials (those born between 1986 and 2004) are saving more than 5 percent of their incomes, something only half of people older than 30 can say. While they have started early, however, they’re also starting small, compared to other generations: Bankrate found that only 25 percent have earmarked 10 percent of their incomes for savings; those 30 to 49 are saving more than 10 percent.

The Bankrate study came as the Commerce Department reported an increase in February’s personal saving rate to 5.4 percent from 5.3 percent in January – its highest level since the end of 2012.

One of the reasons millennials are savers relates to the environment in which they came of age. The Great Recession of 2008 (and beyond) was hugely influential during the formative financial years of many in this generation. The boom years of hot stock and housing markets fostered a consumption mentality among their elders. That’s not the case with the millennials, who know full well that markets can go decidedly down, as well. As a result, they’re inclined to save.

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Another factor is a heightened awareness of longer lifespans and questions over Social Security’s long-term viability. Both factors are leading millennials to save in recognition of their future retirement burden.

While millennials are leading the pack on savings rates, Americans as a whole are saving more of their income as the lessons of the Great Recession remain fresh even eight years later. Bankrate found that 28 percent of Americans overall are socking away more than 10 percent of their income, up from 24 percent.

It’s not just high earners who have gotten into the saving habit. Bankrate found that 27 percent of those with incomes between $30,000 and $50,000 save more than 10 percent of their incomes; 24 percent in the $50,000 to $75,000 bracket do so.

The survey also unearthed some worrying news: More than one-fifth of Americans are saving nothing. While the importance of putting money away is understood, wage and salary gains have been modest, making saving difficult for many.

Bankrate noted that the ideal personal savings rate is 15 percent of an individual’s income.

Why Don’t Americans Save More Money?

It is a myth that Americans cannot save. For decades, they did.

When personal-finance columnists explain America’s poor saving habits, they sometimes start with the aspects of the human mind that make it challenging to plan for the future. Behavioral psychology is a useful scapegoat for many foibles. But the decline in savings is recent, and the human brain hasn’t evolved since the Ford administration. The bottom 90 percent of households saved 10 percent of their income in the first Reagan administration. By 2006, their savings rate was nearly negative-10 percent.

Americans weigh in on financial shame
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Other writers suggest that the country’s low saving rate is purely a matter of American exceptionalism. But it is also a myth that the US is alone in its turn against saving in the last three decades. The personal savings rate has fallen in Canada, Germany, and Japan, as well.

Still, there is something about the US: Nearly half of Americans would not be able to come up with $400 in savings in an emergency, according to a Federal Reserve study cited in The Atlantics cover story this month. America’s poor and its middle class live on the razor’s edge of financial security through their working years and are uniquely ill-prepared for retirement. The United States finished 19th for three consecutive years in a global analysis of retirement security, behind Australia, New Zealand, Japan, South Korea, Canada, and 13 European countries.

April 26 estate planning workshop offers tips to avoid ‘legacy nightmare’

The Adult Center, The Retirement Institute and Judy Southstone of Wolf Creek Guarantee Financial, presents “Avoiding a Legacy Nightmare” from 2 to 3 pm on Tuesday, April 26, at the Prescott Adult Center, 1280 E. Rosser St. During this free educational workshop, you will learn how to protect yourself from the many ways poor planning can turn your estate into a barren, nightmare landscape for your loved ones.

Frederick K. Schoenbrodt, II Joins Bressler, Amery & Ross as Estate Planning and Administration Practice Chair

Growing Practice Aims to Bring in More Snowbird Clients
Florham Park, NJ – April 21, 2016 – The law firm of Bressler, Amery amp; Ross, PC announced today that Frederick K. Schoenbrodt, II has joined the firm as chair of its Estate Planning and Administration practice.

Mr. Schoenbrodt, who counsels clients on wills and trusts, estate and tax planning, administration and taxation of trusts and estates, and personal and family philanthropy, waspreviously with Drinker Biddle amp; Reath. Beforehand, he was with boutique firm Neff Aguilar. He is based in Bressler’s Florham Park headquarters as a principal in the firm.

I was drawn to Bressler because of its outstanding reputation in the trusts and estates area, its commitment to client service and its well-established and growing estate planning practice, said Mr. Schoenbrodt, adding the leadership role was a plus.  It is an honor to join this exceptional group of trust and estate practitioners, he said.  The firm’s practice is ideally situated to serve its private clients, possessing a remarkable breadth and depth of experience in the trusts and estates area, an excellent fee structure for clients in today’s legal market, and offices in locations that are essential to this practice.

Florida is an important market for the firm and the practice; Bressler opened in Miami last year, adding to its Ft. Lauderdale location.

We welcome Fred to the firm and as practice chair, said Bressler Managing Principal Brian F. Amery. He will help the practice thrive nationally and serve our snowbird clients well.
In addition to his planning and administration practice, Mr. Schoenbrodt has represented clients in litigation and mediation of disputes related to wills, trusts and estates, including disputes regarding proper construction and interpretation of will and trust terms, challenges to validity of wills, disputes regarding the valuation of closely-held business interests, and fiduciary accounting matters.

He received a BA from Gettysburg College in 1992, a JD from the University of Maryland School of Law in 1995 and an LLM, Taxation in 2000 from NYU School of Law.

Mr. Schoenbrodt is a frequent speaker, writer and contributor on trust, estate and tax topics. He is the successor author of New Jersey Estate Planning, Will Drafting and Estate Administration Forms, a practice manual published by LexisNexis Matthew Bender.

Before entering private practice in 2000, he served as a judge advocate with the US Army in Hawaii.

About Bressler, Amery amp; Ross, PC

Bressler, Amery amp; Ross, PC is a leading full-service law firm and serves clients from its offices in Florham Park, NJ; New York City; Birmingham, AL; and Miami and Ft. Lauderdale, FL.  An NLJ350 firm, Bressler has more than 150 attorneys representing a wide array of clients – Fortune 500 corporations, midsize and small privately held companies, brokerage firms, banks, franchises, insurers, non-profits and individuals.  The firm’s practices focus on business, regulatory, litigation, financial services and securities, labor and employment, and tax, trusts and estates.  For more information,

Donegal Group Reports $11.8M Q1 Net Income

Donegal Group Inc. reported net income of $11.8 million for the first quarter of 2016, a 73 percent increase over $6.9 million for the first quarter of 2015.

The Marietta, Pennsylvania-based insurer said net premiums written for the 2016 first quarter were $170.1 million ($85.3 million in personal lines and $84.8 million in commercial lines). Thats up 8.6 percent from $156.6 million ($80.9 million in personal lines and $75.7 million in commercial lines) during the same period in 2015.

The company said the increase in net premiums written reflects organic growth in both personal and commercial lines.

The GAAP combined ratio for the 2016 first quarter was 94.0 percent, improving from 98.8 percent a year ago.

Net investment income for the quarter was $5.5 million, a 12 percent jump from $4.9 million a year ago.

Donegal Group Chief Financial Officer Jeff Miller said during Wednesdays earnings conference call that both personal and commercial lines segments were profitable for the first quarter, as a result of decreased weather related claims, fewer large fire losses, and a general decline in the volume of the incoming casualty claims.

Miller said the major drivers of the premium growth were strong commercial lines in new business growth, an increase in personal lines policy count and modest premium rate increases in most business lines.

Further commenting on the weather, Miller said the companys weather-related losses of $6.9 million for the first quarter were lower compared to $8.8 million losses one year ago, and also lower than the $8.5 million average for the first quarters of the previous five years.

Our first quarter results have historically reflected the impact of winter weather claim activity and that was certainly the case last year when we experienced sub-freezing temperatures that contributed to frozen pipe claims, Miller said.

Fortunately, we did not experience a recurrence of such extreme temperatures in 2016.

And while there was a significant snow event in January and a wind event in February, Donegal Groups operating regions enjoyed relatively mild winter weather, he said.

Miller also said Donegal Group sustained very few large commercial fire losses during the first quarter. The company also saw a significant decline in the number of fire losses in its homeowners line.

We attribute the decrease to comparatively warmer temperatures in 2016, he said. Combination of decreases in both weather and fire losses led to excellent combined ratios in our commercial multi-peril and homeowners lines.

Commenting on pricing trends, Donegal Group President and CEO Kevin G. Burke said the company filed rate increases in the homeowners for the 2 percent-to-3.5 percent range, depending upon the state and subsidiary. Meanwhile, rate increases in personal auto ranged in the low single digits, depending upon the state and subsidiary.

And in commercial lines, renewal premium increases during the 2016 first quarter generally ranged from 3 percent to 5 percent. We continue to see opportunities to obtain modest renewal premium increases, Burke said, but there is increased competition for quality accounts.

Main Street Capital: Energy Bites Its Dividend Income

On its conference call, Main Street Capital (NYSE:MAIN) executives fielded an odd number of questions about the companys dividend income from its portfolio of small businesses. What were analysts so interested in? I had to take a look for myself.

Start from the top
Main Street Capital makes money for shareholders by making loans to, and buying pieces of, small businesses in the United States. It primarily invests in companies that are controlled by others, though it has a hearty portfolio of smaller businesses it does control (defined as businesses in which it owns more than 25% of the equity). Think things like jewelry stores, restaurants, and RV dealers.

The company breaks out its earnings from its portfolio companies into three sources — interest, dividends, and fees. Primarily a lender, roughly 80% of its income came in the form of interest in 2015. Dividends made up about 15% of its income, and fees tallied up to the other 5%.

Though seemingly unimportant at just 15% of its investment income, the dividends Main Street Capital receives from the companies it invests are seen as something of a barometer for the health of its underlying investments. Logic follows that the combined earnings power of its portfolio companies should be measurable with the dividends they collectively pay back to Main Street Capital.

Unfortunately, dividends from small businesses can be pretty lumpy. The fourth quarter is when most of the haul comes in, and when the fruits of a full year can be tallied. Calendar year 2015 wasnt exactly a groundbreaker, getting little in the way of a seasonal quarterly boost. Main Street Capital took in about $6.9 million in dividend income during Q4 2015 vs. $6.8 million in the prior year.

Main Street executives pitched the case that the fourth quarter of 2014 was particularly good for dividend income, and suggested that dividend income actually grew by about $600,000 if you ignore about $700,000 of 2014 dividends that were unusual.

Some other noise in this income item occurs due to the fact that its portfolio companies arent paying out all of their free cash in the form of dividends. Some naturally gets reinvested. Some likely gets stored away for a rainy day. 

Taken in the aggregate, however, we can clearly see that after robust growth from 2013 to 2014, dividend income from its portfolio companies slowed in 2015.

Looking under the hood
Only by doing a deeper dive into its tables of transactions with portfolio companies can we see the changes in dividend income on an individual-company basis. In comparing its 2015 filings to its 2014 filings, I found four particularly noteworthy investments that paid substantially lower dividends back to Main Street Capital this year.

The first is Mid-Columbia Lumber, which paid a $1.24 million dividend in 2014 only to pay -$34,000 in dividends in 2015. I have no explanation for the negative figure, but do note that the reduction in dividends does seem to be the result of a significant change to its business. Main Street Capital wrote down the value of its equity investment in the company by $7.6 million, or nearly 75% of its value at the beginning of the year.

Three energy-exposed industrial companies, Gulf Manufacturing, LF Manufacturing, and Houston Plating and Coating, seem to have been negatively affected by the downturn in oil prices. This group paid just $913,000 in dividends to Main Street in 2015 vs. $3.2 million in 2014. Its equity investments in the companies were written down by nearly $6.7 million, or 22% of their value at the beginning of 2015. Importantly, these companies are not classified as part of the 9.4% of its portfolio dedicated to energy pure-plays at the end of 2015.

There are, of course, some offsetting investments. Perennial winner CBT Nuggets paid a $4.77 million dividend back to Main Street, up from $3.76 million last year. Meanwhile, Main Streets asset management arm kicked in nearly $2.2 million in dividends compared to less than a half million dollars in 2014.

But all in all, the slowing growth in dividends from portfolio companies was a little disappointing to see. Main Street Capital carried its equity investments at a valuation of about $531 million vs. $408 million last year. Should dividend income continue to come in soft, companies that have been written up will likely need to take a ride back down.

Mary Hunt: Turn books you no longer need into cash

Dear Mary: My husband and I retired within the last year and are 64. We live on our social security plus investment income from 401K and SEP/IRA accounts. We dont have a lot of extra income but we live frugally and are doing fine. I have a $250,000 term life policy and my husband has a $150,000 term policy. Should we keep these, or reduce our monthly payments and cancel them?

Top Five Reasons You Need Estate Planning

Comprehensive estate planning services have proven advantageous in an array of separate circumstances. If any of the following scenarios currently apply to your life, it may be time you sought out the help of a skilled attorney. Allow a trained professional to handle all matters of estate planning, and youll undoubtedly start to notice the benefits.

3 Sky High Dividend Stocks to Buy Ahead of Earnings

Certain stocks are beating the Samp;P 500 while paying dividends three to seven times the markets average. Thanks to gradual improvements in the economy and higher interest rates, these stocks have trounced the Samp;P 500 in 2016, and should continue to do so.

Business development corporations (BDCs) have bounced back spiritedly from their early 2016 slump, buoyed by their steady and significant payouts.

The best performers of the group have outperformed by a wide margin year-to-datespecifically Main Street Capital Corporation (MAIN), Goldman Sachs BDC Inc (GSBD), and Triangle Capital Corporation (TCAP).

Big Payers With Better Returns

GSBD is managed by Goldman Sachs Group Inc (GS), and has access to daddys massive investment banks rolodex. But analyst expectations are only particularly rosy for MAIN heading into BDC earnings season (which starts in May).

Analysts Like MAIN, Unsure on GSBD amp; TCAP

What is a BDC?

Whats driving this bullishness? To understand that, we must first consider what a BDC is.

In 1940, the US Congress passed the Investment Company Act, which created a new form of lending firm with tax benefits. The goal was to help non-accredited investors pool together funds to lend to smaller firms. In recent years, that has meant investors can get exposure by buying BDC shareswhich provide one-click diversification as these firms invest in dozens or hundreds of companies.

  • 8 Bargain Dividend Stocks to Buy Now

While venture capitalists and private equity firms like Blackstone Group LP (BX) invest in startups by buying shares, BDCs instead primarily lend to startups. They do this for two reasons. First, there is less risk involved in the senior loans that most BDCs extend. Second, these loans pay high yields.

The Investment Company Act requires BDCs pay out at least 90% of that income to shareholders. Most do so in the form of dividends, which is why their yields trounce the broader markets.

On top of consistent dividends (which are paid monthly in the case of TCAP and MAIN, quarterly for GSBD), these firms will also pay special dividends when they receive a windfall from an investment. For example, Main Street paid out two special dividends of 27.5 cents per share in 2015, bringing its annual yield to 8.6% for the year. And management just declared its latest special dividend also for 27.5 cents yesterday. That will be paid out in June.

How BDCs Pay You

If that seems too high to be true, it isnt. Remember, most of the companys net investment income (NII) must be paid to shareholders, or else the company loses its special tax-advantaged status. MAINs trailing twelve month NII is $2.25, meaning its $2.16 regular dividend payments in 2015 represented just 95.8% of the companys total investment incomea healthy margin over the 90% minimum requirement.

The best BDCs manage their payouts according to their NII, and adjust payments when NII changes significantly. That can mean dividends go up or down. In the case of MAIN, that has meant dividend increases of 44% since 2007:

In the case of some other BDCs, like Prospect Capital Corporation (PSEC), Medley Capital Corp (MCC) and Fifth Street Finance Corp (FSC), that can mean dividend cuts. In early 2015, PSEC cut its dividend from 11.06 cents per share to 8.33 cents per share, which is partly why the stock has plummeted over 11% since then.

Mitigating the Risks in BDCs

With BDCs, your biggest risk is the security of your dividend stream. When interest rates eventually rise, BDCs will be able to make new loans at higher interest ratesbut their borrowing costs will go up too. This will benefit some firms, and hurt others.

In this volatile space, navigate carefully and choose the BDC that best fits your risk profile and income goals. While MAIN, GSBD, and TCAP are all attractive, I actually prefer another trio of high yielders thats benefiting from one of the biggest demographic shifts in American history.

Theyre paying 6.6%, 7% and 8.9% dividends and have booked double-digit price gains already this year. Click here for all the details, including the names and tickers of all three.

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