I get it. It’s easy to shop on Amazon. Running low on toilet paper? Need lightbulbs? Want a bath caddy on a whim? With two clicks and even less thought, the item you need/want/desire is at your doorstep, often in 48 hours or less.
Shopping locally requires more thought. Supporting small businesses is an intentional act — one that the mom and pop shops in your neighborhood desperately need you to make.
Tens of thousands of small businesses closed over the past year, many of them permanently. Each closure leaves a void that goes deeper than an empty storefront. The community loses dollars, jobs and resources that now-shuttered business would have circulated back into the local economy.
Small businesses reinvest
According to the U.S. Small Business Administration, when you spend $100 at a small business, $48 stays in the community. Spend the same $100 at a big-box store or national retailer and only $14 stays.
Why? Because local businesses rely on other local businesses.
Kela Nabors is the founder and CEO of Organically Bath & Beauty, an organic vegan skincare line and shop in San Antonio. She uses a local firm for marketing and financial services whenever she can. The cards she puts in each gift set come from another local business: Belle & Union.
“We keep it local as much as possible,” says Nabors, who also partners with and supports a local food bank and frequents other small businesses for her personal shopping.
If her business went under, which it nearly did last year, the loss would ripple through the community. But Nabor’s customers came through, buying products and promoting her store.
“Some people were buying something every day to send to people they knew,” Nabors says. “It really helped create new relationships with people outside of our core (customer) base.”
Turning the lights on
Local support is the only thing keeping the lights on for many businesses. In some cases, it’s turning the lights back on.
Some small businesses that had to close earlier in the pandemic have been able to reopen, in large part because of customer support, according to a January 2021 report from Facebook and the Small Business Roundtable, a coalition of organizations that advocate for businesses and entrepreneurs.
According to the report, 25% of small businesses were closed in December 2020, an improvement from 31% in April 2020. Among those that closed and later reopened, 31% say customer support is the reason they were able to do so. Businesses also cited social distancing measures (40%) and loosened restrictions (30%) as factors that allowed them to reopen.
Nabors had to close her storefront early in the pandemic when sales plummeted from around $15,000 per month to just $500 in March.
“I thought, ‘We can’t make rent like this.’ So we moved everything back into our home,” Nabors says.
Customers kept reaching out, asking Nabors to add products to her website and encouraging her to do more outreach on social media. Her online sales grew from around 10 per month to 50 to 100 per day. She reopened her storefront in May and is now looking to expand.
“We were able to actually thrive and grow during the pandemic,” she says.
Local shops hire locally
Businesses need to staff up as they reopen and gradually bring operations back to pre-pandemic levels. That hiring is going to happen locally, says Tom Sullivan, vice president of small-business policy at the U.S. Chamber of Commerce.
“Small businesses have a unique advantage when it comes to hiring: a network of community that is different than Indeed or LinkedIn,” Sullivan says. “We’re going to see more of an emphasis on local hiring than we have ever seen before.”
Nabors is already looking to hire. Her business went from three employees pre-pandemic (two of whom have since relocated) to one employee and a handful of family members in the early months of the pandemic. Now, she has five employees, is shopping for warehouse space and plans to hire 22 new employees.
A rising tide
There’s a saying: a rising tide lifts all boats. It means everyone benefits from a good economy. This happens on a micro level, too.
When a town or neighborhood has a healthy small-business district, property values rise and housing demand increases, says Matt Wagner, chief program officer at the National Main Street Center Inc., a nonprofit organization that works to revitalize historic commercial districts.
Other small-business owners notice, too.
“You get a bandwagon effect, with more entrepreneurs wanting to enter the market,” Wagner says. “A lot of it has to do with having small businesses there, whether it's a brewery, coffee shop or grocery store. It becomes a neighborhood.”
Small-business districts become a point of pride, a place to show off to friends and family when they visit.
“It’s become an amenity in some ways. It’s like having a robust school system or parks and trails system,” Wagner says. “People may have taken it for granted before, but we see now that it could be gone and that does a lot to your personal quality of life.”
Retiring early? Here’s how to stretch your money and make the most of Social Security
Stretch your savings
New research gives important guidance on how to stretch your retirement dollars the furthest: In your 60s, lean on a “bridge” of withdrawals from your 401(k) and don’t start claiming Social Security until you turn 70.
While you can start claiming your Social Security retirement benefit at age 62, doing so locks in the minimum benefit you are entitled to; waiting until 70 to start entitles you to the maximum benefit. And the gap is massive: Starting at 62 will give you 76% less than starting at 70. There is no other risk-free investment out there that hands you a guaranteed 76% return over eight years. Yet fewer than 10% of retirees wait until age 70 to begin receiving Social Security.
Plan for longevity
Unless you have a pre-existing condition that suggests a shorter-than-average life expectancy, waiting for that higher payout will more than pay off assuming you live into your mid-80s. (For the record, if you make it to 65, the odds are that you will indeed live at least that long.)
That might seem beside the point if you’re stopping work at 62 or 64 or 66, and need money to live on. You might be thinking you simply don’t have the luxury to wait to claim Social Security.
But if you have money saved in a 401(k), the wonks at the Center for Retirement Studies at Boston College (CRR) have crunched the numbers and found that many retirees will lock in a better long-term retirement income stream if they use a “bridge” strategy.
- Step 1: Wait until age 70 to start claiming Social Security.
- Step 2: Make withdrawals from your 401(k) that are equal to what your Social Security benefit would be if claiming at your “full retirement age.” For anyone born in 1943 or later, FRA is between 66 and 67. You can calculate your FRA at the Social Security website, ssa.gov.
401(k) vs. Social Security
The CRR researchers created a model using household survey data from 2016 that showed 65-year-old single men who had 401(k) savings had a median account value of $106,000 and were eligible for an annual Social Security benefit around $15,400. Women with 401(k) savings had a median account value of $110,000 and were eligible for an annual Social Security payout of around $14,500.
CRR then calculated how withdrawing money from the 401(k), in place of drawing Social Security, compared to buying an immediate-income annuity or a deferred income annuity.
For the record: Both of these types of annuities are solid ways to generate guaranteed retirement income. But as the researchers note, even when they may be a smart strategy, retirees have shown little appetite for handing over a big chunk of their savings to an insurance company.
Your Social Security benefit is in effect an annuity that you already own. The researchers set out to see how waiting for the optimal time to claim — age 70 — stacked up against the commercial annuities you could use to generate guaranteed retirement income.
The model factored in investment risk (for a diversified retirement portfolio), life expectancy, and the probability of later-life spending “shocks” (see: healthcare expenses).
For both a single man and woman, with median 401(k) wealth, drawing down a portion of their retirement savings as a “bridge” that allows them to delay claiming Social Security is the best way to go to generate optimal retirement income. The strategy is also smart for households with above-average 401(k) savings.
Full retirement age
If you register at the Social Security website you can get an estimate of your Social Security benefits if you were to claim at 62, at your full retirement age or at age 70. Then you can decide if you want to withdraw your FRA amount (or less) from your 401(k) so you wait to claim Social Security as long as possible.
Not sure about all the moving pieces? This is where hiring a fiduciary financial planner to work through the numbers with you can be a great investment. Plenty of planners will take on the assignment and charge an hourly or project fee. No need to enter into a long-term ongoing relationship if that’s not what you want.
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