Year-End Financial Checklist: 7 Tips to End on High Note

Contributed by: Jaclyn Jackson

And just like that, we are already in the fourth quarter; the year has gone by quickly! Before it completely slips away...

Try these top tips to strengthen your finances and get things in order for the year ahead:  

1. Harvest your losses – Tax-loss harvesting generates losses that can be used to reduce current taxes while maintaining your asset allocation. Take advantage of this method by selling the investments that are trading at a significant loss and replacing them with a similar investment. 

2. Max out contributions – While you can wait until you file your tax return, it may be easier to take some of your end-of-year bonus to max out your annual retirement contribution.  Traditional and Roth IRAs allow you to contribute $5,500 each year (with an additional $1,000 if you’re over age 50).  You can contribute up to $18,000 for 401(k)s, 403(b)s, and 457 plans.

3. Take RMDs – Don’t forget to take the required minimum distribution (RMD) from your IRA.  The penalty for not taking your RMD on time is a 50% tax on what should have been distributed.  RMDs should be taken annually starting by April 1st of the year following the calendar year you reach 70 ½ years of age.

4. Rebalance your portfolio – It is important to rebalance your portfolio periodically to make sure you are not overweight in an asset class that has outperformed over the course of the year.  This helps maintain the investment allocation best suited for you.

5. Use up FSA money – If you haven’t depleted the money in your flexible spending account (FSA) for healthcare expenses, now is the time to squeeze in those annual check-ups.  Some plan sponsors allow employees to roll over up to $500 of unused amounts, but that is not always the case (check with your employer to see if that option is available to you). 

6. Donate to a charity – Instead of cash, consider donating highly appreciated securities to avoid paying capital gains tax.  Typically, there is no tax to you once the security is transferred and there is no tax to the charity once they sell the security.  If you’re not sure where you want to donate, a Donor Advised Fund is a great option.  By gifting to a Donor Advised Fund, you could get a tax deduction this year and distribute the funds to a charity later. 

7. Review your credit score – With all of the money transactions done during the holiday season, it makes sense to review your credit score at the end of the year.  You can go to annualcreditreport.com to request a free credit report from the three nationwide credit reporting agencies: Equifax, Experian, and TransUnion.  Requesting one of the reports every four months will help you keep a pulse on your credit status throughout the year.

Bonus: 

If there have been changes to your family (new baby, marriage, divorce, or death), consider these bonus tips:

• Adjust your tax withholdings

• Review insurance coverage

• Update financial goals, emergency funds, and budget

• Review beneficiaries on estate planning documents, retirement accounts, and insurance policies

• Start a 529 plan

Jaclyn Jackson is a Research Associate at Center for Financial Planning, Inc.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. 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 Jaclyn Jackson and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. RMD's are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your 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. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Passing on Wealth & Money Values to the Next Generation

Contributed by: Matthew E. Chope, CFP®

I work with a lot of moms and dads who want their kids to know what they think is important. Since I’m their financial planner, these values are often tied to money. In an ideal situation, parents want to give their children and grandchildren the freedom to choose for themselves when wealth is passed on to them. But oftentimes, I’ve seen an inheritance turn into guilt, bring out greed, or even sprout into remorse…when all the parents wanted was for their kids to be okay.

Discussing Inheritance + Values

I recently spoke at The Private Wealth Midwest Forum in Chicago to other professional advisors regarding multigenerational family wealth issues. I shared how to help families manage wealth across the generations, covering the successes and challenges I’ve witnessed with families. A major part of the equation is communicating across the generations. The conversation is different when you’re talking to a tween than a college grad. By taking maturity level into consideration, you can tailor the conversation to focus on what brings meaning to money for them. I generally try to have parents or grandparents lead this discussion and share their values, how their wealth was conceived, and their ongoing intentions. Involving children in the conversation and encouraging them to share fosters deeper understanding.

Are My Kids too Young for this Conversation?

I had a meeting with an 11 year old and his father recently – he’s my youngest new client! We started chatting about what money means and providing an early education about stocks vs. bonds, working for the family business, and his wages vs. the company’s profits.  I was amazed at how much the 11 year old could understand. He was quicker with all of the math in his head than I was! Parents often assume their children are too young for serious conversations about wealth and inheritance. I feel the time is right as soon as the parents are ready and I always encourage my clients not to wait until it’s too late!

Knowing How to Give and How to Receive

Once your family has the conversation and develops an understanding of what is sacred, there are other ways to link money with meaning. I hear from clients that, “Our tax guy said gifting money is a smart thing to do.” But simply dropping checks into a bank account can be like a meteor strike if your family hasn’t invested time and effort in the money and in a meaningful conversation. I encourage parents and grandparents to accompany monetary gifts with a note about the value and meaning of the gift. Your goal is likely to help your children on their journey, but not provide for entropy … so tell them that. The act of transferring wealth may not change, but the values associated with the inheritance can provide valuable perspective for both the givers and the receivers. Is it time for you to begin the family conversation? I’m here to help.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matt Chope and not necessarily those of Raymond James.

The Center Helps Send Southfield Students Back to School

Co-Contributed by: Jaclyn Jackson and Kali Hassinger

On August 15th, Center team members, Kali Hassinger and Jaclyn Jackson, joined the Southfield community for a day of volunteering and fun at the Southfield Public Schools Back to School Summer Bash.  The event provided free school supplies, books, and pertinent information to families gearing up for the 2015-16 school year.  Featuring rides, ice cream, music, farm animals, and festival food, the picnic-style event proved to be great day for the Southfield community. 

“As we were organizing supplies to give away, you could see a long line forming. One of the volunteers even joked that it looked like a line for a Justin Bieber concert. You could tell parents and students were excited about the event,” Jaclyn said.   

The event reflects responsiveness to recent demographic changes of the school district. Today, sixty-five percent of enrolled students qualify for free or reduced lunch.

“It was such a positive event. It feels great to know that a student, who may not have the ability to buy those supplies otherwise, is starting the year prepared,” Kali explained. 

In addition to volunteering, The Center was an event sponsor.  Sponsorship and volunteer efforts are part of The Center’s vision for community partnering, which aims to contribute $100,000 in sweat equity, commitment, and financial contributions by 2020.  In just 3 hours, the Summer Bash distributed enough school supplies to fill a large school bus.  With continuing support from community sponsors, they hope to keep the annual event going.

 The Center wishes every student a successful and enjoyable 2015-16 school year!

Jaclyn Jackson is a Research Associate at Center for Financial Planning, Inc.

Kali Hassinger is a Registered Client Service Associate at Center for Financial Planning, Inc.

Leadership Oakland Day of Service Experience is Truly Humbling

Contributed by: Sandra Adams, CFP®

Imagine decorating six houses all in one day! On Saturday, May 16th, I joined my 25 fellow Leadership Oakland classmates, former Leadership Oakland Alumni, and friends, along with employees and volunteers from Humble Design, a Pontiac-based 501c3 nonprofit organization. Together we helped fully furnish and decorate 6 existing homes for Grace Centers of Hope. The day was filled with home decorating, spring lawn clean up, and ended with a park celebration with volunteers and the families that were moved into the homes from former homelessness.  The day was particularly special as we helped Humble Designs move their 500th family into a home!

Humble Design started in 2009 and assists families in need who are transitioning out of homeless and domestic abuse shelters by providing furnishings and design services in their new place of residence.  They use donated furniture and in kind goods to turn bare rooms into a fully furnished and decorated home.  Many of their clients leave the shelter with just the clothes on their back and do not have the means to furnish their new space.  That’s where Humble Design steps in, turning the house into a livable, comfortable home.

Grace Centers of Hope is a non-profit Christian organization committed to positively changing the lives of the homeless, addicted, and unwanted through the Gospel of Jesus Christ, personal accountability, life skills education, and work-related programs. The foundation of change is the local church which encourages residents to become strong in faith and independence while it lovingly promotes a sense of belonging within a community that truly can be called “home”.

The day was filled with hard work, camaraderie, emotion and deep fulfillment as we witnessed the true joy and gratefulness of the families seeing the homes designed just for them for the first time. It was truly a HUMBLING experience!

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Raymond James is not affiliated with any of the organizations/charities mentioned. 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.

The Center Supports Gleaners’ Vine and Dine Fundraiser

2014 marks the third year Center for Financial Planning has helped sponsor the Birmingham Bloomfield Chamber’s Vine and Dine event to benefit Gleaners Community Food Bank.  Vine and Dine allows guests to experience music, wine, and food from some of the best artists, caterers, and restaurants in metropolitan Detroit.This year’s event was held at the Cranbrook Institute of Science where guests were treated to a special “behind the scenes” tour of the museum as well as see National Geographic’s touring exhibition, Women of Vision.

As a part of The Center’s 2020 Vision, we are deeply committed to community service and aim for our combined sweat equity and financial contributions to create $100,000 of community support each year.  The Vine and Dine event is one on the ways we are building up to our 2020 Vision goal.  This year, The Center team has also volunteered with Gleaners to donate and assemble food packages because we are moved by their commitment to fight against hunger in southeastern Michigan.  Gleaners has successfully collaborated with the Feeding America network, member agencies, and program partners to deliver millions of pounds of food to the people who need it most.  

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 web sites or their respective sponsors. Raymond James is not responsible for the content of any web site or the collection or use of information regarding any web site’s users and/or members.

Smart Moves to Make the Year You Retire

So you’ve decided to hang ‘em up? Congratulations!  Retirement is an extremely personal decision and is made for a multitude of reasons.  Many of our clients have had the ability to retire for several years, however, they have now reached a point where the weekly grind isn’t as enjoyable as it once was.  There are probably thousands of things running through your head.  What will life look like without work?  How will I spend my days?  Where do I/we want to travel?  Do I want to work part-time or volunteer?  With so many emotions and thoughts, it can be easy to miss good opportunities to really maximize your final year of full-time work. How do you get the most “bang for your buck” in your final year of working full-time?

Maximizing your employer retirement contribution (401k, 403b, etc.)

If you aren’t doing so already, do your best to maximize your company retirement plan contribution.  If you are retiring mid-year, adjust your payroll deduction to make sure you are contributing the maximum ($24,000 for those over the age of 50 in 2015) by the time you retire.  If monthly cash flow won’t allow for it, consider using money in a checking/savings or taxable account to supplement your cash flow so you can put the max into the plan.  This will most likely be the final year you will be in the highest tax bracket of your life, you really want to take advantage of this and get the maximum tax benefit. 

“Front-load” your charitable contributions

If you are charitably inclined and plan on making charitable gifts, even into retirement, you might consider “front-loading” your donations.  Think of it this way – if you are currently in the 25% tax bracket and you will drop into the 15% bracket when retired, donating in which year will give you the most tax savings by making a donation?  The year you are in the higher bracket, of course!  So if you donate $5,000/year to charity, consider making a contribution for $25,000 while you are in the 25% bracket (ideally with appreciated securities).  This would satisfy five years worth of donations and save you more on your taxes.  As I always tell clients: When you save more money on your tax bill by gifting efficiently, you give less to the IRS’ and more to the organizations you care about!

Explore your health care options

This is typically a retiree’s largest expense.  How will you and your family go about obtaining medical coverage upon retirement?  Will you continue to receive benefits on your employer plan?  Will you go on COBRA?  Will you be age 65 soon and enroll in Medicare?  Are you retiring young and need to obtain an individual plan until Medicare kicks in?  No matter what your game plan, make sure you talk to the experts and have a firm grip on the cost and steps you need to take to ensure you don’t go without coverage and that it’s as affordable as possible.  With recent changes in health care, we are positioning more and more clients in a way to qualify for health care premium subsidies under the Affordable Care Act (“Obamacare”). For more information on how you might qualify, take a look at Matt Trujillo’s recent blog on this topic.

With so many moving parts, it really makes sense to have someone in your corner to help you navigate through these difficult and sometimes confusing retirement topics and decisions.  Ideally, seek out the help of a Certified Financial Planner (CFP®) to give you the comprehensive guidance you need and deserve!

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s Money Centered and Center Connections blogs.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. 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. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. C14-041996

Unrealized Capital Gains? Consider Gifting Stock Instead of Cash

One of the most tax-efficient ways to give a financial gift to your favorite charity is with long-term appreciated securities.  While gifts of cash are easy to make by simply writing a check, don’t overlook the potential benefits of gifting stock that has gone up in value.  By considering both options, you may be able to increase the tax benefit and make the most of your year-end tax planning and gifting goals. 

Here are four tips to consider:

1. If you own stock investments (held longer than 12 months) with unrealized capital gains, the best way to give may be with a portion of stock rather than an all cash donation.  By gifting stock, you receive a deduction for the market value and reduce future capital gains tax liability.  

2. If you own stock with short-term gains (owned for less than 12 months) the strategy is not optimal because your tax deduction will be limited to the amount you paid for the shares. 

3. If you think the gifted stock still has upside potential, you can use the cash you would have otherwise donated to replace the shares of stock you donated.  This will reset the stock cost basis to the current market value, reducing future capital gains tax liability.

4. If you are holding taxable investments that have lost ground, it may be preferable to sell the investment, claim a capital loss, take the charitable deduction and gift the cash.  In this scenario, the combined tax deductions may make this strategy a winner.

Making the Call between Gifting Cash or Appreciated Stock 

If you are looking to support organizations important to you and maximize your tax benefits, it is important to consult with your tax advisor and include your financial planner to make the most of your tax planning and lifetime gifting goals.  

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-036845

An Easy Guide to Year-End Tax Planning

With the end of the year fast approaching, tax planning is top of mind for many clients.  At The Center, we are proactive throughout the entire year when it comes to evaluating a client’s current and projected tax situation, but now is typically the time most people really start thinking about it.  We like to share this simple checklistthat we feel is very user friendly and a good guide to evaluating your tax situation for the year.  Let’s be honest, does anyone feel like they don’t pay ENOUGH tax?  Most clients want to lower their tax bill and be as efficient with their dollars as possible. 

Questions to Consider

Here are some questions we ask clients that could ultimately help save money at tax time:

• Are you currently maximizing your company retirement account (401k, 403b, Simple IRA, SEP-IRA, etc.)?

  • These plans allow for the largest contributions and are deductible against income

    • In our eyes, this is often the most favorable way to reduce taxes because it also goes towards funding your retirement goals! 

    • How are you making charitable donations?  Are you writing checks or gifting appreciated securities?

      • Gifting appreciated securities to charity allows you to avoid paying capital gains but still receive a charitable deduction – a pretty good deal if you ask me!

        • Donor Advised Funds are a great way to facilitate this transfer and are becoming increasingly popular lately because of the ease of use and flexibility they provide for those who are charitably inclined – take a look at Matt Trujillo’s recent blog on this great tool.

        • Should I be contributing to an IRA?  If so, should I put money in a Traditional or Roth?

          • These are fantastic tools to help fund medical and dependent care costs in a tax-efficient manner

            • HSAs can only be used, however, if you are covered under a high-deductible health plan and FSAs are “use it or lose it” plans, meaning money contributed into the account is lost if it’s not used throughout the year – take a look at the blog I wrote earlier this year that goes into greater detail on the advantages and disadvantages of HSAs and FSAs

This is a busy time of year for everyone.  Between holiday shopping, traveling, spending time with family, and completing year-end tasks at work, taxes can get lost in the shuffle.  We encourage you to check out the link we’ve provided that will hopefully give you some guidance with your personal tax situation.  Although we are not CPAs, tax planning is something we feel is extremely important.  We would love to hear from you if you have any questions or ideas you’d like to discuss with us!

Nick Defenthaler, CFP® is a Certified Financial Planner™ at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Raymond James financial advisors, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. C14-037860

Are Donor Advised Funds Right for You?

Many people are charitably inclined and like to give money to churches or synagogues (among others) throughout the year.  At The Center, we fully support these efforts, but are always conscious of the most tax efficient ways in which our clients can give to their favorite charities.   One option that we often consider is a Donor Advised Fund. 

Charitable Giving

In order to take advantage of this charitable vehicle, an individual must open an account with the fund, and deposit cash, securities or other similar financial instruments.   By taking this approach, you can set funds aside--even if you aren’t sure exactly where you want them to go-- and still take the tax deduction in the year that the donation was made. 

Who Should Consider this Strategy?

An example of where a strategy like this might make sense is if you are in your peak earning years, but approaching retirement in the next 3-5 years.  You might need the charitable deduction more now than you would in retirement when your income would probably be less and your tax liability lower.

For illustrative purposes, let’s assume that Joe and Jane Smith are 58 years old and are employed with a taxable income of $300,000.  This places them squarely in the 33% marginal tax bracket. However, in retirement, they anticipate they will only need $140,000 of taxable income to sustain their desired standard of living. This would place them in a 25% bracket.  Every year Joe and Jane like to give about $10,000 to their church.  A donor advised fund may make a lot of sense for Joe and Jane because, if they know they are going to make the gifts anyway, they can set the money aside now and take advantage of the tax deduction at a 33% marginal rate as opposed to a 25% rate.

As always, be sure to consult with a qualified financial professional before incorporating any of these ideas into your own personal financial plan.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

This material is being provided for information purposes only and is not a complete description of all information necessary for making a decision, nor is it a recommendation to buy or sell any investment. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. Consult a tax or legal professional for any specific tax or legal matters. C14-034226

Holiday Financial Conversations for the Generations: Children

 The hustle and bustle of everyday life does not always give us the chance to have meaningful conversations with our children about money and charitable giving.  The long holiday vacation is the perfect time to have these conversations, but does any child want to spend school break listening to lesson from their parents? 

Some ways to sneak in teachable moments around money and giving this season: 

• Keep extra change with you when you are out shopping and have your children donate to the Salvation Army red kettles.  Have a conversation about where the money goes and how it helps.
• While shopping for Christmas gifts, have your children pick out an extra toy to give to Toys for Tots or other charitable organization. Again, talk about where the toy is going.
• As part of your family holiday tradition, consider adopting a family to provide Christmas or Hanukkah gifts.  Have a conversation about helping others to have a holiday that they might not otherwise have.
• After your children have opened their gifts, ask them to go through their old toys and clothes to find those that they have outgrown.  These gently-used items can be donated to an organization for others to use and enjoy.

These are just a few ideas to help you instill the spirit of giving in your children this holiday season; to teach them that this time is as much about giving as receiving.

In my next blog, I will provide tips for talking to your teenage children about preparing for college funding.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.