As an investment advisor of nearly 20 years, my intuition increasingly acts as an analytical shortcut. While that’s to be expected as experience accumulates, it is always comforting to see that intuition validated. This recently happened after I reviewed an academic study on retirement and the amazing value of working longer.

The math at work behind the retirement decision really isn’t that complex. There are only a small number of levers to pull. First is your savings rate. Second is your investment return on those savings. Third is the proportion of your retirement lifestyle that your savings won’t need to cover after factoring in your Social Security and – if you are lucky – your pension income. And, the final lever to factor into the retirement equation is, of course, your life expectancy.

This final lever is a bit perverse. Strive to live longer and your retirement hurdle grows higher. Choose the opposite and your retirement challenge becomes a cake walk. In the end, however, this is nothing but a Hobson’s choice for most of us. As humans, we don’t really control this lever as our will for a long and healthy life is quite inherent.

Each of the controllable retirement levers have built in sensitivities. A way to measure these sensitivities is to see how much a slight tweak on each lever might affect the level of available financial resources in retirement.

For example, you could choose to save a little more and your sustainable retirement income will obviously go up. Or, you could work to lower the cost of your investment program – which directly boosts the investment returns you get to keep – and, naturally, your retirement resources would rise.

In fact, this academic study showed that a small boost of your annual savings rate by 1% more starting at age 36 might produce a 4% boost in your annual income during your retirement years. The longer you wait to increase your savings rate, the smaller your bang is for the buck. Like the classic advice on voting, you should save early and often!

Now, what happens if you could also get better returns on your savings? The study showed that if you were able to boost your investment returns by 0.5% per year during your working years, your sustainable retirement income might also increase by as similar 4% per year.

Doing both things – as easy as walking and chewing gum at the same time – could boost your retirement lifestyle by closer to 8% per year. Since percentages aren’t all that easy to visualize, let’s just say this would translate into a lot of nice experiences over your retirement years!

Importantly, these basic planning moves – moderately boosting your savings rate and your investment returns – are both time-tested and largely controllable.

But, what about simply working longer? How much longer would you need to keep working to equal the impact of saving 1% more of your income for your entire career and squeezing out 0.5% more return on your investments each and every year? Drumroll, please! The answer is you wouldn’t need to delay your retirement for even one full year!

So, here’s some truly intuitive advice. Be sure to save early and save often, and then, find work you enjoy, with people you enjoy, and keep at it for as long as you can.

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

A trillion dollars is not what it used to be! That impressive figure has revealed itself in two different ways over the past few weeks.

In the first case, it marks a measure of business success that is truly unparalleled in history. In the second case, it highlights a deep and growing concern about official economic policy.

Apple released their latest quarterly report and its stock rose to levels that helped the company pierce the trillion dollar mark.

Investors for many years have been doubting the resilience of Apple. The littered path of hardware makers is both long and storied. Just think of names such as Gateway, Blackberry or Nokia. The primary concern with hardware companies is the intense pace of change they face in both customer tastes, required successful innovation and the inevitability of commoditization. Few have ever navigated it successfully for too long.

Yet, the doubts have begun to fade into the background as Apple has shown itself to have two additional assets that pure hardware makers don’t usually possess.

With an installed base of iPhones and iPads of over 1 billion in use today, the business model of “planned obsolescence” has created a very predictable device upgrade cycle for Apple. Once you get hooked into the Apple-based user experience, few switch to an alternative. As a result, almost like clockwork, a new iPhone finds itself in your palm every two to three years.

And, with almost 25% of its revenues coming from services such as the App Store, Apple Music, Apple Pay and iCloud, Apple is building an enviable level of consumer stickiness; creating a virtuous cycle for future device upgrades. It’s little wonder Apple now sails in the unchartered waters of a trillion dollar company.

While not as celebratory as Apple’s, yet another trillion dollar milestone will soon be reached.

Despite entering our tenth year of an economic expansion, the latest projections from the nonpartisan Congressional Budget Office show soon-to-be $1 trillion deficits for as far as the eye can see. Not surprisingly, the surge in deficit projections has been fueled by a combination of large tax cuts and continued unconstrained federal spending.

What’s sparks my concern is the talk of a new wave of tax cuts to come. The most recent chatter focuses on making the cuts “permanent” and using inflation adjustments as a way to lower taxes on capital gains.

The stated goal, of course, for this unconventional policy – that is, boosting fiscal stimulus deep into an already long-in-the-tooth expansion – is to grow the economic pie. As the old business saying goes, I guess we’re going to try to make it up on volume!

Still, if one wanted to charge that this political agenda imprudently throws caution to the wind while unabashedly favoring the wealthiest among us, it wouldn’t be a totally unfair charge.

We do live in a time of economic and political wonder. All I can say with certainty is a trillion dollars just isn’t what it used to be!

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

With all that’s happening in our trade spat with China, the old saying, “An eye for an eye, a tooth for a tooth”, rings ever louder in my ears with each and every tweet.

To this point, the ongoing US – China trade dispute has not yet escalated to dangerous levels. With only $50 billion of mutual tariffs now in place, just a fraction of our hundreds of billions of dollars of trade with China are affected.

Still, from the standpoint of investors and business leaders, the threat of escalation into a full-blown trade war looms too large. Very few economists – operating outside the White House, that is – are proponents of tariffs. The well-established consensus view on tariffs is they work to raise prices on consumers and ultimately cost us jobs. Using tariffs to resolve disputes is almost indisputably seen as poor economic policy.

That isn’t to say that China is blameless. It’s clear that Chinese authorities do not properly protect the intellectual property of foreign companies. The lure of access to China’s massive market and our addiction to cheap imports literally blinds us to this uncomfortable fact. And, up until now, our response has basically been to turn the other cheek.

I’ve always found it odd that US companies wanting to gain access to China’s market are forced to enter into joint ventures with a domestic Chinese company. Through these mandatory arrangements, foreign companies willfully hand over their trade secrets and industry know-how to China with no legitimate recourse for protection. The short-term profit motive is apparently just too enticing.

In contrast, the US offers nearly unfettered access and full protections to our foreign counterparts. Given the surge in populist politics that propelled Trump into office, it comes as little surprise that his administration is pushing back hard against China. It should also come as little surprise that China will push back equally as hard.

Of course, China has been highly strategic in its responses to Trump’s aggressive statements, threats and trade actions. To begin, China has been extraordinarily careful to never be viewed as the party that initiates or escalates matters. It’s also smartly positioning itself with our major trading partners, such as the European Union, and working to fill the vacuum left behind in Asia by our abrupt withdrawal from negotiations of the Trans-Pacific Partnership. These are calculated and subtle countermoves by China in their long-term aim to gain greater global economic influence.

Not so subtle retaliations by China are possible if a legitimate trade war heats up. It’s always important to recognize that China, as a direct result of their large trade imbalance with the US, is our biggest lender. Selling their US Treasury holdings with indelicate speed could act as a shot across our bow. In other words, tariffs are not the only arrow in their quiver.

Since nobody wins in a brutal, tit-for-tat trade war, my hope is our leaders in Washington and Beijing are reminded of the wise words of Martin Luther King, “An eye for an eye leaves everyone blind!”

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

Perhaps a little disturbingly, I’ve had a couple thoughts rattling around in my head and their common thread is none other than the Unabomber. No, I have not been reading his long-winded, half-crazed essay! Instead, I recently binge-watched the Netflix series on the long manhunt to catch him. It was a fascinating tale about both language and technology’s inevitable path.

Language tells us a lot. In the Unabomber’s case, his words acted as a dead giveaway. It was only through the linguistic clues left behind in his 35,000-word manifesto that he was successfully profiled. And, then, only after the Unabomber demanded his manifesto be widely-published did enough clues surface for his own relatives to recognize his ideas and turn him in.

In one particular episode in the series, I was fascinated by the use of linguistics and what it can tell about a person or group.

About 1500 years ago, apparently an ethnic group, known as the Slavs, just suddenly appeared throughout Europe. Historians debated for years about this group’s origins; a place referred to as the true Slavic Homeland.

Linguistic anthropologists finally noticed, through their study of the Slavic language, that they inexplicably didn’t have words for some very basic things all around them, like names for various common trees, plants or foods. Naturally, the Slavs just borrowed words from other languages to fill in their gaps.

This was the key insight in determining the location of their long-lost homeland. All that was required was to look for the only swaths of land that were devoid of these very same trees, plants and foods. It was a very elegant concept.

It made me think a bit about the financial services industry. A similar idea might help consumers discern the key differences among certain financial professionals. Like the ancient Slavs in Europe, there too are missing words in certain financial professionals’ vocabulary, such as fiduciary duty and strictly fee-only, that might offer insightful clues. The only difference between the Slavs and these professionals is they can’t (as easily) borrow these terms as their own.

On an entirely different track, I was also struck by how eerily relevant the Unabomber’s warnings were about society’s adoption of technology. His violent remedy to combat its advance was, of course, beyond perverse. That’s what made him wild-eyed crazy, after all. However, his generalized conclusion about how technology would lead to our loss of control, privacy, security and dignity now feels ahead of its time.

Robotics, automation and artificial intelligence are rapidly creeping into mainstream use. One could easily argue we’re experiencing an accelerating pace of change. No doubt, these technologies will produce amazing and magical things. But, without thinking ahead, it’s also clear it won’t all be for the good.

Capitalism, if allowed in its most unregulated form, will hungrily gobble up these tools and put them to use. Inevitably, however, we will also see a massive loss of many traditional jobs that depend on real people today.

If we simply hurl ourselves down technology’s inevitable path, without a real plan, we might deeply regret it. It certainly wouldn’t hurt to start thinking about it now.

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com

As I write this, I’m enjoying a short, but stark, change of scenery. Without a doubt, there’s a serious contrast between the hustle and bustle of Brooklyn and Manhattan and the tranquility of Traverse City.

On one of our daily treks from our Airbnb to the nearest subway station, I overheard our 10-year old say to my wife that our hometown is far simpler. I totally agree. And, I must say, most of the time, simple is nice!

Unfortunately, I’d describe the backdrop of today’s financial markets as not so simple. Yes, stocks and bonds have been a bit boring this year in terms of investment returns. But, let’s not confuse boring with simple.

The fundamentals do look reasonably sound. Corporate earnings are growing nicely; largely boosted by the significant corporate tax cut this year. Job growth has been remarkably steady; in line with what we’ve seen for many years now. And, consumer spending has been consistent and inflation remains tame.

When viewed over time, rather than quarter to quarter, there doesn’t appear to be a noticeable acceleration n the growth rate of the economy. We’ve basically been living in a 2% economy, give or take, along with sub-2% inflation. Not too hot, not too cold.

The Fed also sees this Goldilocks backdrop and considers it an open window to methodically raise interest rates. They’ve long-desired a pathway out of their decade long zero interest rate policy. They’re getting awfully lucky and they aren’t squandering their chance.

The Fed has now raised interest rates twice this year and has raised rates seven times since late 2015. If things go as investors expect, we’ll likely see two more hikes before the end of the year. That would bring us closer to a 2.25% to 2.5% yield on money market funds. With each hike, cash and shorter-term bonds are becoming increasingly more competitive. For investors, things aren’t quite as simple as when cash paid zero.

In addition, the departure from simple might leave early if Trump and his advisors continue to play hardball with our major trading partners. These partners would include our allies to our north, to our south, to our east and to our west. As you can see, the implications for the global economy are unusually large!

While one could wisely adopt the sanguine view of Warren Buffett that we would never be so reckless as to start a full-blown trade war, what we’ve heard from official sources – a.k.a., Twitter – must give one serious pause before quickly discounting less-optimistic scenarios.

For now, despite the lack of simplicity all around us – and that also applies to our last few subway rides – the only rational response for a thoughtful investor is to manage risk through prudent asset allocation, to diversify properly, to remain price conscious and to tilt toward owning high-quality companies. Sounds pretty simple, doesn’t it?

Jason P. Tank, CFA is the owner of Front Street Wealth Management, a fee-only wealth advisory firm located in Traverse City. He encourages questions and comments about future columns. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com