Recent discussions about bringing jobs back to America has me thinking a sad thought: Is it possible that these jobs are gone forever?

Productivity is essentially a measure of output/input and is usually measured as the (value of output)/ (cost of labor).  Any business owner recognizes the importance of increasing that number.  Looking at the chart below, you can see the DOL has recorded steady increases since WWII.

The question is: How have we gotten here?  Is it possible that you are working 5 times as hard as your grandfather?  I don’t think so!  Are you working 5 times smarter?  I find it doubtful if working smarter could account for this much increase.  My grandfather was a pretty smart guy.  So, there must be another reason!

Here’s where we’re running into a problem.  As the chart below shows, between 2009 and 2016, US manufacturing output was up over 20% while hiring only increased 6%.  How can this be?  I see several reasons: Increased utilization of robotics or automation, better equipment, and the fact that these factories just learned how to get by with fewer employees. The reality is that we’ve lost more jobs to machines than either Mexicans or Chinese.

The truth is that there just isn’t anything to do about the changing tide in employment.  We’ve all know that 30 years and a gold watch at retirement went away with traditional pensions.  Populist politicians will not change the tide.  Those jobs are gone dow the same path as the horse and wagon.  People do not pick cotton by hand anymore.  Nor do we use two men, cross-cut saws to cut down trees (if I can help it).  It is neither bad nor good.  It just IS!

If you might think that we’re the only ones suffering, last year, I read about a Chinese manufacturer (for Apple) eliminating 60k jobs to automation.  The logic for any company is obvious.  A 2015 report by Boston Consulting Group (How Robots with Redefine Competitiveness) showed how a spot-welding robot’s cost had dropped from about $182k to about $133k with performance increasing at 5%/year.  The robot costs about $8/hr to operate as compared to a human at $25.  By 2025, they expect the cost to be in the $2 range.

An Associated Press News article reported that estimates show American has shed 7.5M manufacturing jobs since the peak in 1979.  At the same time, factory production has more than doubled.  At the same time, Ball State University’s Center for Business and Economic Research found that trade accounted for 13% of lost factory jobs.  Their research estimates 88% of manufacturing jobs lost were taken by robots and other internal factors. (AP 2016)

The big question isn’t how to get a job to come back that is no longer a job.  We have to move beyond that sort of populist, Luddite thinking and join the future. History is full of examples of businesses and jobs that went away.  If this were 1880, it is likely that you’d know one or more blacksmiths or coopers. Do you know even one?  I bet that you had to look up what a cooper did for a living.

The question should be, “What are the jobs of the future?”  And, “How do I best position myself and my children for future jobs?”

Arizona is an interesting place (and I’m not just talking politics and Spring Training).  The lowest point is just 70’ above sea level on the Colorado River in Yuma and the highest point is 12,633’ on Humphreys Peak near Flagstaff.  I wonder when the last time that was checked.  Seems like erosion might have knocked a couple feet off since it was last measured. We have 6 distinct climate zones.  Friday 5/5 it was 108° for the high, Sunday 5/7 it was 74°.  Someone won the annual “First 100° Day” contest on the Wednesday before.

Because of late winter rains, it has been a pretty good year for wild flowers. We got out a bit and saw many varieties.  Poppies, lupine, brittlebush, hedgehogs, saguaros and more.  Many are actually right in our yard. Below are some from an outing two weeks ago.  I’m not going to attach a lot, but, you can see much more in a quick web search for Arizona Wild Flowers.

Many people picture Arizona like this:

Barren, dry desert

My version of the state looks more like this:

Table Top Mountain

Or like this:

Maples near Bear Canyon Lake.

Of course, the last one was fall.  That doesn’t mean those red-leafed maples aren’t just as pretty in the spring when they are leafing out.

Traveling the state, I often wonder what early natives’ lives were like. Tribes stretched from those lowest elevations in Yuma up to over 7000’.  I’ve been to dozens of prehistoric sites in Arizona. Like us, they strived for a summer and winter home.  But, unlike us, they didn’t have the benefit of turning on their air conditioning for that first 100° day or have the heater running when it got cold. They followed the food sources rather than having it shipped to the local supermarket.  I wonder what they were thinking about while sitting up on a ridge pecking out messages for me to read hundreds of years later.

Petroglyphs near Brooklyn Mine Hotel

Nice Buck!

I guess we’ll never know.  But, it’s pleasant to sit on the porch with your favorite beverage and think about them.

Best wishes for your spring!

Richard Oxford Financial being interviewed by Aging in Arizona Hosts.

In March, my firm Richard Oxford Financial, had the pleasure of being hosted on the Aging in Arizona radio show by Presley Reader and Mark Young.  It was my first “in studio” interview and I had a great time. Both hosts were both knowledgeable and generally entertaining.  It’s a great show on 960AM radio here in the Phoenix area.

We hit on a variety of topics of interest to retired persons and anyone who plans to someday retire. Some of the topics include Income Planning and methods of funding Long-Term Care.

While all good retirement advice should be personalized, many topics have a lot in common for most of us.  Each of us need be concerned with ways to create permanent income in retirement.  Each of us need not neglect our exposure to needing Long-Term Care.  Without a doubt, both topics will affect you or someone you know.  It is inevitable!

As I often say, “Plan Early and Plan Often!”

Have a listen and enjoy!  Richard Oxford Interview

How to Create Retirement Income!

Few of us are building pensions anymore.  Social Security doesn’t seem as “secure” as the name implies. So, what are working stiffs supposed to do?  Where are we supposed to get our Retirement Income? What about a small business owner?  Obviously, the answer is different for each of us, but, there are commonalities that we can discuss in open forum without doing a full analysis of your personal situation.

Creating Retirement Income!

If they have average earnings about 40% of an average retiree’s income in retirement is filled by Social Security (www.ssa.gov). The balance of your needs will have to be fulfilled from your savings in one manner or another. The following is a discussion of commonly used methods.

LIVE OFF OF INTEREST ONLY

In years past, I met several retirees that had no intention of ever touching the principal of their savings.  This method was working back when interest rates were 5% and higher. Now, with CD rates hovering around 1%, it becomes very difficult. Imagine someone needing to generate $2500/month at a current annual CD rate of 1.25%.  That person would need $2.4M in CD’s.  Fixed annuities are in the 3% and under range so they aren’t much better.

What about if we tried it with high quality bonds?  Well, as of this writing, Moody’s Aaa bond yield averaged 3.43%.  The same $2,500/month would require an investment of about $874K.  The issue with this type of investment is that your money is at risk.  While you may be living off the interest, your principal is at risk.  As interest rates go up, bond values drop. As you can see, this time of historically low interest rates are killing this plan.  All interest is taxed as ordinary income.

THE 4% RULE

“The four percent rule is a rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. This rule seeks to provide a steady stream of funds to the retiree, while also keeping an account balance that allows funds to be withdrawn for a number of years. The 4% rate is considered a “safe” rate, with the withdrawals consisting primarily of interest and dividends.” (INVESTOPEDIA, http://www.investopedia.com/terms/f/four-percent-rule.asp)

The theory behind this rule is that if you begin withdrawing 4% annually and increase the withdrawal 2% annually (inflation), that you should be able to fund 30 years of retirement.  Emphasis on the word “theory”.  For this sort of plan to work, you cannot have losses early in the process.  Also, remember that the 4% paid to you is a variable. If you begin your retirement with $1M in savings, your initial annual income would be $40k.  If you take $40k and also have a 10% loss for the year, you now have $864k.  4% for the next year would be $35,251 (with your inflation increase). You see how this might work.

Many investment advisors shy from these sorts of “rules of thumb” because there are too many variables that the advisor cannot control.  Some or all of the income may be taxable depending upon the account type.

ANNUITIZATION

Annuitization is the process of converting money from an asset into a series of payments.  Those payments can be a period of time or for your lifetime.  Your pension or social security deposits are converted to income through annuitizing those assets.  Many people do not like annuitizing as they no longer control the asset.  It is very effective for creating your own personal pension, but, in low interest rate environments, the payouts will be relatively low.  Gains paid out are taxable.

INCOME BENEFITS FROM ANNUITIES

“Living Benefits” have been around for quite a while and many iterations.  There are two basic types of income benefits (with respect to payouts): Guaranteed Minimum Withdrawal Benefits and Guaranteed Minimum Income Benefits. Both are similar in that they guarantee a minimum rollup of income value during the accumulation phase.  The income value can be converted to a guaranteed lifetime income at some point in the future.  Gains paid out are taxable.  

There are many ways to access this kind of benefit.  Done properly, it can make a significant difference in the remaining value to a spouse of beneficiary.  Done improperly, an annuitant or owner can lose significant value.  Significant as in 20-60%.  Consult a knowledgeable professional before attempting this by yourself or referring to a website.

CASH VALUE OF LIFE INSURANCE POLICIES

Some types of whole and universal life policies have the ability to accumulate cash value that can later be borrowed from the policy.  In many cases, with a properly designed policy, these loans are tax free.  There are very few other mechanisms that turn out “tax-free” income besides a ROTH.

This is not an exhaustive list of ways to create income in retirement, just some of the more common methods being used today.  Please realize that the last two methods take time to mature.  You need to plan!  As Winston Churchill said: “Failure to plan is a plan to fail”! Talk to a financial advisor and plan early and often!

Last weekend was a wonderful time for a May outing in Central Arizona.  Typically, we would be expecting 100^◦ + days in early May.  Just warm enough to make one uncomfortable on a long outing.  Saturday was a beautiful day on Perry Mesa starting in the low 50’s and reaching the 70’s.

Susan and I love to explore Arizona.  It has remarkable diversity and beauty.  Often, we go with friends.  This time it was just us.

Perry Mesa rests just East of Sunset Point (Black Mesa) along I-17 and is largely a part of Agua Fria National Monument.  From the Interstate, it looks desolate and foreboding.  In reality, it is ripe with ancient culture and wildlife.  Tens of thousands of Hohokam Indians inhabited that prairie, mountains and canyons. Hundreds of miners, ranchers and pioneers traveled the dusty roads, living and dying in the area.  Evidence is everywhere. If you know where to look.

Most of the following pictures were taken in and around the Brooklyn Mine in Brooklyn Basin.  The mine operated sporadically from 1907 to 1970.  The mine was established for copper, but gold and silver usually occur in the same areas.  (Note the turquoise in the stone hearth.) The mine was also subject to one of the early mining scams in Arizona.  One of the owners went to New York to raise significant funds from shareholders.  I read the incorporation document and it was somewhat entertaining for someone with a geology background who is intimately familiar with Arizona.

This area also has some extremely good petroglyphs.  We took pictures of some of the more interesting ones.  There are literally hundreds more.  I doubt you can walk a canyon wall in the area without encountering this Stone Age art.  In fact, I’ve encountered petroglyphs in most parts of the state.  Some are obvious, others are not.  Why don’t you see if you can figure out what the artist was trying to say?

Richard Oxford is an avid outdoorsman who loves to hike and camp in Arizona. He is also a master barbecue chef. Rick is an Investment Advisor Representative with Richard Oxford Financial, and affiliated with Sowell Management Services. He is also a Certified College Advisor, with College Funding Solutions. His offices are in Scottsdale, Arizona. He may be reached at rick@richardoxford.com, or 602-697-7657.

In a recent presentation at the Phoenix Business Journal’s “Global Market Series” on trade opportunities with Mexico, Carlos Slim Helu said that the world economy has changed dramatically just within the past decade.

It used to be that people in the United States would retire around the age of 55. He says that people are living much longer, and that many American workers are doing service based jobs. This means that workers working in knowledge based industries should be able to work fewer days each week, for more hours a day, and work well into their 70’s and beyond.

Intrigued? Watch this video of Carlos Slim Helu’s presentation.

Is it too late to qualify for merit based aid for college? The short answer is “it depends.”

In this interview on 550-AM KFYI, Richard Oxford talks about the many misconceptions regarding college financial aid. The biggest one is “I make too much money to qualify for aid.”

If you listen to this interview Richard Oxford explains the different types of aid and scholarship opportunities with colleges and universities. He also talks about how filling out the FAFSA form early can help you get in the front of the line, for the greatest financial aid breaks. If you are a family with a household income of more than $100,000 you may be interested to hear of the financial incentives available from colleges.

Richard Oxford is the head of Richard Oxford Financial, in Scottsdale, Arizona, and is a Certified College Advisor, with College Funding Solutions. For more information listen to the podcast, go online at www.richardoxfordfinancial.com, or call 602-697-7657.

Richard Oxford will be on the Terry Gilberg Radio Show, on 550-AM KFYI, this Saturday night at 8:30pm (PST – Arizona) to talk about planning for college.

Richard is a Certified College Advisor, with College Funding Solutions, He helps families who are seeking college planning assistance want the peace of mind that comes from dealing with an individual who is truly concerned about the student and their educational goals, and who is knowledgeable about the inner-workings of the overall college planning process.

This show may also be heard online live at www.kfyi.com.

If you have a son or daughter planning to attend college next fall, now is the time to file your FAFSA scholarship form. The biggest mistake that people make is they wait to complete the application after they have filed federal tax returns. Instead you should fill out the FAFSA form as early as January 1st.

FAFSA stands for Free Application for Federal Student Aid. This form is used to determine the amount of money a family is expected to contribute to the price of attending a postsecondary institution. The results of the FAFSA are used in determining student grants, work study, and loan amounts.

If you have any questions about the financial aid process in college, please contact Rick Oxford, who is a college funding expert at Richard Oxford Financial, and registered with College Funding Solutions.

About

Richard Oxford is a master chef at home and an investment advisor representative with Richard Oxford Financial by day, in Scottsdale, Arizona. You may reach him at rick@richardoxford.com or 602-697-7657.

According to the IRS, many people who carry on a trade or business are self-employed. Sole proprietors and independent contractors are two examples of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return.

Here are six important tips about income from self-employment:

• SE Income.  Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
• Schedule C or C-EZ.  There are two forms to report self-employment income. You must file aSchedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions. See the form instructions to find out if you can use the form.
• SE Tax.  You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, make sure you file the schedule with your federal tax return.
• Estimated Tax.  You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. You usually pay this tax in four installments for each year. If you do not pay enough tax throughout the year, you may owe apenalty.
• Allowable Deductions.  You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
• When to Deduct.  In most cases, you can deduct expenses in the same year you paid for them, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.

Visit the Small Business and Self-Employed Tax Center on IRS.gov for all your federal tax needs. You can also get IRS tax forms on IRS.gov/forms anytime.

About

Richard Oxford is a master chef at home and an investment advisor representative with Richard Oxford Financial by day, in Scottsdale, Arizona. You may reach him at rick@richardoxford.com or 602-697-7657.