How to Prepare Your Family Financially, Should the Unexpected Occur

How to Prepare Your Family Financially, Should the Unexpected Occur

This year, it doesn’t seem necessary for Life Insurance Awareness Month to remind us of just how precious life is.  Our thoughts and prayers are with the people of Texas, Florida, Oregon and Montana as they work to rebuild the destruction caused by hurricane and fire.  To the men and women who have come to the aid of others, whether by way of professional duty or just human compassion, we thank you.  

The recent natural disasters highlight the importance of preparing your family financially, should the unexpected occur. Life insurance pays a tax-free death benefit to a named beneficiary following the death of the insured.  If there is anyone in your life who depends on you financially, then you should have life insurance for as long as you will be depended on.  This goes for the household breadwinner as well as the stay-at-home parent making it possible for a spouse to work.  In addition to replacing lost income or the cost to replace stay-at-home care, insurance can be used to pay off existing debts, or provide for other financial goals and priorities, such as college.

For young families, we recommend having enough life insurance that the investment growth alone could replace your after-tax income.  

For example, if your after-tax income is $75,000, assuming a 5% investment return, $1.5 million of insurance will be sufficient ($1.5 million x 5% = $75,000).  While the result might seem to overestimate the need, the coverage should yield an amount that will maintain your family’s lifestyle and provide a cushion for unexpected expenses or lower-than-expected investment performance. Given its low cost, this coverage is likely to be term insurance for the number of years until retirement.

Capital Preservation Method After-Tax Income Need / 5%

Income Replacement Calculation Insurance Need 

$50,000   / 5% = $1 million 
$100,000 / 5% = $2 million 
$200,000 / 5% = $4 million 
$300,000 / 5% = $6 million 

For families nearing retirement, the need for life insurance may decrease as the number of income-producing years becomes smaller. Multiplying the number of years you expect to work by your annual after-tax income should provide enough coverage to allow your survivors to cover both expenses and savings until retirement. Keep in mind that this may fall short if your death would cause a loss in one or more retirement income sources (think: pension).

Related: Frequent Misses in Coverage for Auto and Homeowners Insurance

Ultimately, to determine your unique insurance needs, we recommend working with your financial advisor.

Making $ense of Hindsight Bias

Studied in behavioral finance, hindsight bias is the tendency for individuals to over-simplify the predictability of an event, once the event has actually occurred.  Investment decisions are often made with hindsight bias whereby investors attempt to predict cause and effect based on past events.  Studies suggest that such decisions have not proven beneficial over the long-term. 

The Sense
Sensible Soundbites
Twitter Email

We are moms, daughters, wives, sisters and friends. We’re also business owners, financial planners, investment advisors and lawyers. Like you, we are busy and we struggle to ... Click for full bio

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

Written by: Jeremie Capron

China is on a mission to change its reputation from a manufacturer of cheap, mass-produced goods to a world leader in high quality manufacturing. If that surprises you, you’re not the only one.

For decades, China has been synonymous with the word cheap. But times are changing, and much of that change is reliant on the adoption of robotics, automation, and artificial intelligence, or RAAI (pronounced “ray”). For investors, this shift is driving a major opportunity to capture growth and returns rooted in China’s rapidly increasing demand for RAAI technologies.

You may have heard of ‘Made in China 2025,’ the strategy announced in 2015 by the central government aimed at remaking its industrial sector into a global leader in high-technology products and advanced manufacturing techniques. Unlike some public relations announcements, this one is much more than just a marketing tagline. Heavily subsidized by the Chinese government, the program is focused on generating major investments in automated manufacturing processes, also referred to as Industry 4.0 technologies, in an effort to drive a massive transformation across every sector of manufacturing. The program aims to overhaul the infrastructure of China’s manufacturing industry by not only driving down costs, but also—and perhaps most importantly—by improving the quality of everything it manufactures, from textiles to automobiles to electronic components.

Already, China has become what is arguably the most exciting robotics market in the world. The numbers speak for themselves. In 2016 alone, more than 87,000 robots were sold in the country, representing a year-over-year increase of 27%, according to the International Federation of Robotics. Last month’s World Robot Conference 2017 in Beijing brought together nearly 300 artificial intelligence (AI) specialists and representatives of over 150 robotics enterprises, making it one of the world’s largest robotics-focused conference in the world to date. That’s quite a transition for a country that wasn’t even on the map in the area of robotics only a decade ago.

As impressive as that may be, what’s even more exciting for anyone with an eye on the robotics industry is the fact that this growth represents only a tiny fraction of the potential for robotics penetration across China’s manufacturing facilities—and for investors in the companies that are delivering or are poised to deliver on the promise of RAAI-driven manufacturing advancements.

Despite its commitment to leverage the power of robotics, automation and AI to meet its aggressive ‘Made in China 2025’ goals, at the moment China has only 1 robot in place for every 250 manufacturing workers. Compare that to countries like Germany and Japan, where manufacturers utilize an average of one robot for every 30 human workers. Even if China were simply trying to catch up to other countries’ use of robotics, those numbers would signal immense near-term growth. But China is on a mission to do much more than achieve the status quo. The result? According to a recent report by the International Federation of Robotics (IFR), in 2019 as much as 40% of the worldwide market volume of industrial robots could be sold in China alone.

To understand how the country can support such grand growth, just take a look at where and why robotics is being applied today. While the automotive sector has historically been the largest buyer of robots, China’s strategy reaches far and wide to include a wide variety of future-oriented manufacturing processes and industries.

Related: Smooth Tomorrow's Market Volatility With a Smart Approach to Robotics & AI

Electronics is a key example. In fact, the electrical and electronics industry surpassed the automotive industry as the top buyer of robotics in 2016, with sales up 75% to almost 30,000 units. Assemblers such as Foxconn rely on thousands of workers to assemble today’s new iPhones. Until recently, the assembly of these highly delicate components required a level of human dexterity that robots simply could not match, as well as human vision to help ensure accuracy and quality. But recent advancements in robotics are changing all that. Industrial robots already have the ability to handle many of the miniature components in today’s smart phones. Very soon, these robots are expected to have the skills to bolster the human workforce, significantly increasing manufacturing capacity. Newer, more dexterous industrial robots are expected to significantly reduce human error during the assembly process of even the most fragile components, including the recently announced OLED (organic light-emitting diode) screens that Samsung and Apple introduced on their latest mobile devices including the iPhone X. Advancements in computer vision are transforming how critical quality checks are performed on these and many other electronic devices. All of these innovations are coming together at just the right time for a country that is striving to create the world’s most advanced manufacturing climate.

Clearly, China’s trajectory in the area of RAAI is in hyper drive. For investors who are seeking a tool to leverage this opportunity in an intelligent and perhaps unexpected way, the ROBO Global Robotics & Automation Index may help. The ROBO Index already offers a vast exposure to China’s potential growth due to the depth and breadth of the robotics and automation supply chain. As China continues to improve its manufacturing processes to meet its 2025 initiative, every supplier across China’s far-reaching supply chains will benefit. Wherever they are located, suppliers of RAAI-related components—reduction gears, sensors, linear motion systems, controllers, and so much more—are bracing for spikes in demand as China pushes to turn its dream into a reality.

Today, around 13% of the revenues generated by the ROBO Global Index members are driven by China’s investments in robotics and automation. Tomorrow? It’s hard to say. But one thing is for certain: China’s commitment to improving the quality and cost-efficiency of its manufacturing facilities is showing no signs of slowing down—and its reliance on robotics, automation, and artificial intelligence is vital to its success.

Want all the details? Download the ROBO Global Investment Report - Summer Brings Best ROBO Earnings in Six Years or visit us here.

ROBO Global
Robotics and AI
Twitter Email

ROBO Global LLC is the creator of the ROBO Global® Robotics and Automation Index series, which provides comprehensive, transparent and diversified benchmarks representing the ... Click for full bio