WEBINAR IN REVIEW: Mitigating the Tax Bite of Investment Returns

No one likes to pay taxes and your investment decisions are often associated with a related tax cost. This webinar takes a broad look at potential strategies and their tax cost or benefit.

Highlights from Mitigating the Tax Bite of Investment Returns:

  • Minute 1:00: A look at the new 2018 tax brackets – what do you project for your tax bracket in 2018?
  • Minute 2:45: A discussion of tax buckets
  • Minute 5:40: Popular investment strategies for taxable investments including municipal bond investing, cost basis elections, and concentrated stock positions
  • Minute 13:25: Managing taxes from your retirement accounts
  • Minute 17:45: Coordinating your investments with charitable giving strategies including qualified charitable distributions and donor advised funds which may become more popular with the new tax law
  • Minute 23:55: Melissa discusses planning to give investments to your heirs in a way that is considerate of taxes
  • Minute 26:10: Understanding the loss of the miscellaneous itemized deduction for investment advisory fees and a checklist to consider if affected
  • Minute 28:30: An introduction to the concept of tax alpha which is defined as “the outperformance that an investor can achieve by taking advantage of all the available tax-saving strategies” (source: CNBC)

Remember to review some of our favorite tax blogs from the past, including:

Melissa Joy, CFP®, CDFA® is Partner and Director of Investments at Center for Financial Planning, Inc.® In 2013, Melissa was honored by Financial Advisor magazine in the Research All Star List for the third consecutive year. In addition to her contributions to Money Centered blogs, she writes investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.


Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

Charitable Giving Reminder Due to New Tax Law

Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

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Are you making charitable contributions in 2018? 

There are three parties to every charitable gift; the charity, you, and the tax man. Due to the increased standard deduction, many folks will NOT receive an income tax benefit when making direct contributions to charities.  For those over the age of 70.5, consideration should be given to making charitable contributions via your IRA. For those under the age of 70.5 you should consider “bunching” your contributions into one year; a donor-advised fund can be quite useful. 

If we have not had an opportunity to discuss either of these strategies, and you expect to make charitable contributions, please feel free to contact our team to discuss your options in making tax-efficient charitable contributions.   

Here are two links to articles outlining the QCD strategy. 

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Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc.® and is a contributor to national media and publications such as Forbes and The Wall Street Journal and has appeared on Good Morning America Weekend Edition and WDIV Channel 4. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), mentored many CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.


The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Timothy Wyman, CFP©, JD and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. You should discuss any tax or legal matters with the appropriate professional.

WEBINAR IN REVIEW: Retirement Income Planning: How Will You Get Paid in Retirement?

Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

One of most common questions I hear from clients as they approach retirement is, “How do I actually get paid when I’m no longer working?” It’s a question that I feel we as planners can sometimes take for granted.  Because we are helping hundreds of clients throughout the year with their retirement income strategy, we can sometimes forget that this simple question is often the cause of many sleepless nights for soon-to-be retirees.   

Saving money throughout your career can be simple, but certainly not easy. Prudent and consistent saving requires a tremendous amount of discipline. However, if you elect the proper asset allocation in your 401k and you’re a quality saver, in most cases, accumulating really doesn’t have to be all that difficult.  However, when it comes time to take money out of the various accounts you’ve accumulated over time or have to make monumental financial decisions surrounding items such as Social Security or which pension option to elect, the conversation changes. In many cases, this is a stage in life where we frequently see those who have been “do it yourselfers” reach out to us for professional guidance. 

The first step in crafting a retirement income strategy is having a firm grip on your own personal spending goal in retirement. From there, we’ll sit down together and evaluate the fixed income sources that you have at your disposal. Most often these sources include your pension, Social Security, annuity income or even part-time employment income. Once we have a better sense of the fixed payments you’ll be receiving throughout the year, we’ll take a look at the various investable assets you’ve accumulated to determine where the “gap” needs to be filled from an income standpoint and determine if that figure is reasonable considering your own projected retirement time horizon. Finally, we need to dive into the tax ramifications of your income sources and portfolio income. If you have multiple investment or retirement accounts, it’s critical to evaluate the tax ramifications each account possesses. 

Make sure you listen to the replay of our webinar “Retirement Income Planning: How Much Will You Get Paid In Retirement?” for additional tips and information on how you might consider structuring your own tax-efficient retirement income strategy.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick works closely with Center clients and is also the Director of The Center’s Financial Planning Department. He is also a frequent contributor to the firm’s blogs and educational webinars.


The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. This material is being provided for information purposes only. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. You should discuss any tax or legal matters with the appropriate professional.

Spring Cleaning Financial Checklist

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Spring has sprung even if it still feels like winter! Everything needs a bit of a dust off, even your money. If you're in the mood to shore things up, here are some ways to get started. Note: If this is all a bit Greek for you, working with a financial planner might be a good idea. Center for Financial Planning is here to help you reach your financial goals.

Goal Setting & Housekeeping

  • Review your current financial goals to see if there's anything you can check off as "achieved".
  • Think about emerging opportunities or frustrations and formulate a goal that you can record. Maybe it's to save up for a new house or pay off a debt. Whatever it is, make a note and set up an achievable plan with a realistic target date to get it done.
  • Don't fall victim to cyber hacks. Review your passwords and security practice to safeguard your accounts.
  • Shred the excess. If you've accumulated paperwork you no longer need, shred and recycle the waste.

Cash Flow & Savings

  • Is your checkbook balanced? Is it time to revisit your personal or family budget? Take this time to see if things are going as planned year to date.
  • Review your loans. With rising interest rates, paying down high interest or rising interest loan account is a good idea. Consider triaging your extra loan payments if you have spare funds, making sure that extra payments are made to the highest interest notes first.
  • Do you have an emergency plan? Evaluate your current emergency reserves. Ideally, they would equal 6-12 months of your living expenses. If not, work on a plan to build up reserves over time.

Retirement Readiness

  • Does your retirement savings rate need a boost? If your retirement contributions need to grow with your paychecks, take this opportunity to boost them up or play catch up.
  • Map your road to retirement. If you're nearing retirement, work with your financial planner to review your retirement needs and understand the possibilities with retirement projections.

Investments

  • Allocation assessment. Has your mix of stocks and bonds drifted from your originally planned balance? Take the opportunity to trade into your preferred zone.
  • Consolidate accounts. If you're practicing diversification by location with lots of loose end accounts lying around, revisit and organize your accounts to make things less complicated.
  • Put some cash to work. If you have extra funds available, consider setting up a monthly-automated investment distribution or making a deposit to your investment accounts to boost your base.

Insurance

  • Bridge your gaps. Have you meant to update your insurance with higher protection for a property or are you just not sure if your coverage is enough? Review your current coverages to make sure your current accounts are priced right with protection to meet your needs.
  • Get your money. If items like health care or day care reimbursements have been piling up, submit them to avoid delays and access your funds.
  • Establish a Health Savings Account. If you are a participant in a high deductible insurance plan, evaluate your options and consider contributing to an HSA. These funds have great tax advantages and can be very handy in retirement.

Taxes

  • You just filed your taxes, hopefully, what should be done differently next year? Spend a bit of time doing a recap of lessons learned and plan accordingly for the coming year.
  • If you got a big refund or unfortunately had a big payment on April 15, review your withholding, estimates, etc. Avoid sending unnecessary money to the IRS or paying a penalty for funds you owed with some forecasting. 
  • Hire a professional. If you've been on the DIY plan but you're in over your head, this is a good time to reach out to a professional to determine if hiring a CPA or tax preparer is right for you.

Estate & Charitable Planning

  • Make sure your documents are relevant. Has estate planning been on your "to do" list for a while? Whether you need to update documents, change your plan, or you're just getting started, commit to tending to these items.
  • Review your beneficiary designations. It might have been a while since you looked at beneficiary designations on retirement accounts or insurance policies. Make sure they're up-to-date and consistent with your current needs.
  • Plan your charitable giving for this year. The 2017 tax bill may have changed the most desirable way to give. Look into bundling your gifts: donor advised funds or qualified charitable distributions if appropriate.

Kids & Education

  • Start your college saving plan. If you have been stressing about college costs rather than doing something about it, look into 529's or request an education analysis from your financial planner.
  • Use the summer break for financial skill building. If your teenagers have summer jobs, your college-bound student doesn't know how to balance a checkbook, or your elementary-aged kid wants to open a lemonade stand, make the most of the summer with some money smart activities for your children.

Did I miss something or do you have a favorite spring financial cleaning tip? Let me know at Melissa.Joy@centerfinplan.com

Melissa Joy, CFP®, CDFA® is Partner and Director of Investments at Center for Financial Planning, Inc.® In 2013, Melissa was honored by Financial Advisor magazine in the Research All Star List for the third consecutive year. In addition to her contributions to Money Centered blogs, she writes investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.


Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Opinions expressed in the blog are those of Melissa Joy and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

What You Need to Know About Pension Benefit Guaranty Corporation or PBGC, Part 2 of a 3 Part Series on Pensions

Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

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In many cases, the decision you make surrounding your pension could be the largest financial choice you’ll make in your entire life.  As such, the potential risk of your pension plan should be on your radar and factored in when ultimately deciding which payment option to elect.  This is where the Pension Benefit Guaranty Corporation comes into play.

The Pension Benefit Guaranty Corporation or “PBGC” is an independent agency that was established by the Employee Retirement Income Security Act (ERISA) of 1974 to give pension participants in plans covered by the PBGC guaranteed “basic” benefits in the event their employer-sponsored defined benefit plans becomes insolvent.  Today, the PBGC protects the retirement incomes of nearly 40 million American workers in nearly 24,000 private-sector pension plans. 

Municipalities, unions and public sector professions are almost never covered by the PBGC.  Private companies, especially larger ones, are usually covered (click here to see if your company plan is).  Each year, companies pay insurance premiums to the PBGC to protect retirees.  Think of the PBCG essentially as FDIC insurance for pensions.  Similar to FDIC coverage ($250,000) that banks offer, there are limits on how much the PBCG will cover if a pension plan fails.  It's important to note that in most cases, the age you happen to be when your company’s pension fails is the age the PBGC uses to determine your protected monthly benefit. 

For example, if you start receiving a pension at age 60 from XYZ company and 5 years later, XYZ goes under when you’re 65, your protected monthly benefit with the PBGC would be $5,2420.45 – assuming you are receiving a straight life payment (see table below).  As we would expect, the older you are, the higher the protected monthly benefit will be due to life expectancy assumptions.    

 *chart is from Pension Benefit Guaranty Corporation website

*chart is from Pension Benefit Guaranty Corporation website

When advising you on which pension option to choose, one of the first things we'll want to work together to determine is whether or not your pension is covered by the PBGC.  If your pension is covered, this is a wonderful protection for your retirement income if the unexpected occurs and the company you worked for ends up failing.  If you think it will never happen, let’s not forget 2009 when many unexpected things occurred in the world such as General Motors filing for bankruptcy and Ford nearly doing the same.  If your pension is not covered, we'll want to take this risk into consideration when comparing the monthly income stream options to a lump sum rollover option (if offered). 

While PBCG coverage is one very important element when evaluating a pension, we’ll also want to analyze other aspects of your pension as well, such as the pension’s internal rate of return or "hurdle rate" and various survivor options offered. 

As mentioned previously, the decision surrounding your pension could quite possibly be the largest financial decision you ever make.  When making a financial decision of such magnitude, we’d strongly recommend consulting with a professional to ensure you’re making the best decision possible for your own unique situation.  Let us know if we can help!   

Be sure to check out our pension part 1 blog How to Choose a Survivor Benefit for Your Pension posted April 5th and our next blog Explaining What the “Restore” Option is for Pensions posted May 10.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick works closely with Center clients and is also the Director of The Center’s Financial Planning Department. He is also a frequent contributor to the firm’s blogs and educational webinars.


The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Nick Defenthaler, CFP© and not necessarily those of Raymond James. This is a hypothetical example for illustration purpose only and does not represent an actual investment. This is a hypothetical example for illustration purpose only and does not represent an actual investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

2017 Year-End Financial Planning

Contributed by: Josh Bitel Josh Bitel

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With the fourth quarter upon us, tedious tasks like assessing your financial situation can often fall by the wayside.  With that in mind, this is a good time for us to share some important items to consider before the end of the calendar year. Here are a few things to consider before you take on 2018.

Establish or tighten up your emergency fund.

As we often recommend, keeping three to six months worth of expenses saved in an easily liquidated and accessible account can protect you against any unforeseen perils that may arise. Getting an emergency fund in place before the year wraps up is a great way to jump-start your budget for 2018.

Check your flexible Spending Account

Make sure you don’t end the year with a balance inside your FSA plan. Most of these plans have a ‘use it or lose it’ feature. So if you’re putting off that pesky doctor’s visit or are overdue for a new pair of prescription glasses, use your pre-tax dollars you’ve elected to cover these expenses!

Review your retirement accounts to make sure you’re on track to maximize your contributions

Whether it is an IRA account, either traditional or Roth, or an employer sponsored plan, the end of the year is a great time to assess your contributions and make sure you’re on track to meet your goals. This is important for your tax situation as well, as you may be able to deduct contributions to certain retirement plans. Although IRA accounts can be funded up until April 15th of the following year (up to $5,500 if you’re under age 50), it’s never too early to make sure you’re on track!

Give a tax-deductible charitable contribution

The end of the year is a time when we’re all thinking about giving. If you are charitably inclined, the end of the year is a great time to donate to any causes you are passionate about so you can receive a write off on your taxes for 2017. Don’t forget, donating appreciated securities from a taxable account is often more advantageous for you and the cause you believe in! Make sure you are making this donation for something you really believe in and not just for the potential tax write-off, the holiday season is a great time to asses this.

As always, in regard to your financial life, we are here to assist in anyway we can. These are just a few of the things you should keep in mind as the year wraps up. If you have any questions regarding your personal situation, contact us here at The Center for Financial Planning.

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®


Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues, these matters should be discussed with the appropriate professional.

#GivingTuesday 2017: 10 Perspectives on Giving

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Giving Tuesday is NOVEMBER 28 this year.

We resume our annual tradition of 10 inspirational considerations for your charitable endeavors updated from years' past.

  1. With tax legislation pending, keep the future in mind. Current tax proposals could significantly reduce the percentage of Americans who are able to itemize deductions. If the tax legislation passes with days to spare prior to year-end, you may want to increase your charitable gifts for this calendar year. You can do that with a donor advised fund (described below) or gifts directly to organizations. Work in coordination with your financial planner and tax professional can help to guide you for gift maximization.
  2. Qualified Charitable Distribution for the win. Qualified Charitable Distributions (QCD) might still feel new, as they have only been permanent for a couple years. If you are over age 70.5 and subject to Required Minimum Distributions (RMD), you can replace your gifts out of cash with a gift of your distribution directly to a charitable organization. The results? This income is not reportable as taxable income like a normal RMD. Make sure to keep track of your records, make your gift in accordance with QCD rules, and report your qualified gift to your tax professional.
  3. Get on a first name basis with organizations that matter to you. Charities appreciate your gifts and dollars. They also enjoy hearing from you about what the organization means to you and the impact that you hope your gifts will have. Getting involved and building relationships is valuable for the organization and can also be rewarding to you. 
  4. Spread the word or give in groups. Giving Tuesday is a social phenomenon for good. Sharing your own charitable endeavors can create communication and encourage generous behavior within your network. So hashtag away! #GivingTuesday
  5. Take advantage of your corporate match. If you work for a company who provides a match to donations, your time for making it count this calendar year is fleeting. Decide how you would like your match to be utilized and make sure to dot your i's and cross your t's with the appropriate paperwork or process to get the money into the right hands.
  6. Gift appreciated stock for a double-tax plus. What's better than a charitable gift that multiplies its power with a current tax deduction and reduced future tax liability? If you gift appreciated assets like stocks in taxable accounts that have grown over time, you're doing just that. You would potentially get a charitable deduction and take away future tax liability on realized capital gains. Not sure how to make this happen? We would be happy to coordinate with you and the organization you want to help to take care of the details at your instruction. 
  7. Define your philanthropy in a document. If you want to dig deeper into the scope and meaning of your gifts, we have a workbook to assist. Download a Philanthropic Values Statement to get started. https://static1.squarespace.com/static/54341a03e4b08690c01bc8de/t/56607eade4b07de43e2ccb23/1449164461431/philanthropic_values_statement_worksheet.pdf
  8. Establish or add to a Donor Advised Fund. A donor advised fund allows you to combine the opportunity for gifts of appreciated stock (see #6 above) as well as taking an immediate deduction and spreading out your gift over time if you prefer. This may become more relevant if new tax legislation is passed this year. Also, in peak earning years with presumed lower earnings in the future (read, near retirement), you can preload future gifting in a year that may be very impactful for your finances. Looking for more details, reach out to us or read here. http://www.centerfinplan.com/money-centered/2014/10/30/are-donor-advised-funds-right-for-you.html?rq=Donor%20advised%20fund 
  9. Make your donations generational. Shared philanthropy projects can help to introduce younger children to important money topics or provide governance practice for adult children. You can see how family dynamics work and teach about money with less self-interest. Plus, donating time, effort, and money just plain feels good. Call it family bonding.
  10. Cost of living adjustment. Inflation is real, and it might be growing over the coming years. If you've kept your gifts static, it might be time to review things and give them a boost so they keep up with the value of today's dollar.

Philanthropy and charitable giving are deeply personal. #GivingTuesday is a great opportunity to review and upgrade your game plan. Looking for the optimal financial results? Coordinate with your trusted advisors to plan and execute for maximum impact for you and the organizations that matter to you and your family.

Melissa Joy, CFP®, CDFA® is Partner and Director of Investments at Center for Financial Planning, Inc.® In 2013, Melissa was honored by Financial Advisor magazine in the Research All Star List for the third consecutive year. In addition to her contributions to Money Centered blogs, she writes investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.


Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Melissa Joy and not necessarily those of Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.