A Time to Give Thanks!

                  

Dear Clients and Friends,

By the time you receive this note of gratitude, Thanksgiving may have come and gone.  We trust that you paused, at least for a moment, to reflect on all there is to be grateful for too.   While this message is not in the form of a traditional Thanksgiving Day card, we are thankful for the opportunity to work on your behalf.  After celebrating 25 years recently, we couldn’t be more grateful to all of you who have contributed to making The Center the special place it is today.

Simply put, we love what we do and your continued confidence and trust inspires us to show our gratitude each and every day.   We hope our enthusiasm has shone through over the years and will continue to shine bright for many years to come. 

Best Wishes from The Center family to your family . . .  Happy Holiday Season!

Jennie Bauder, Jennifer Hackmann, Marilynn Levin, Amanda Toia, Jaclyn Jackson, Melissa Joy, Angela Palacios, Gregg Bloomfield, Gerri Harmer, Betsey Schrock, Brenda Spencer , Sandy Adams, Dan Boyce, Matt Chope, Marilyn Gunther, Julie Hall, Laurie Renchik, Troy Wyman, Tim Wyman

A Holiday Shopping Three-Step Challenge

If you’re like millions of Americans, one of your after Thanksgiving dinner activities tomorrow will be making your holiday shopping list and browsing the Black Friday savings deals that are published in advance.  Your excitement will build as you anticipate the first store door opening on Friday morning.  You will prepare to feel the adrenaline rush as you dash in for the best buys of the season.  You are ready to save!  Or are you?

For most of us, we feel a great sense of accomplishment in finding great deals during the holidays.  In fact, many of us will buy an item that isn’t even on our list because the deal is just too good to pass up.  So, are we actually saving or just spending?  Wouldn’t it be a better strategy to find good deals on those items actually on our list, and save the rest?

My three step challenge for you this Black Friday (and the entire holiday shopping season) is this:

1. Make a list of those items you wish to buy for each person on your shopping list – before you leave home – and set a limit on what you can afford to spend.
2. Find the best deals you can find on those items you have listed, but avoid buying additional items just because the deal is too good to pass up.
3. If you find that you have money left over in your budget after your shopping list is completed, invest in yourself.  Put the extra dollars towards either a short-term savings goal (like a car) or a long-term savings goal (like retirement).  Add the cash to a savings account, investment account, or to your IRA or ROTH IRA (if you haven’t already contributed the maximum amount allowable this year).

Meeting the three step challenge will help you to cross of all of the items on your gift list, feel the accomplishment of finding great deals, and invest in yourself all at the same time!  So get ready, get set, and SAVE!

Medicare Costs and Social Security

In a previous post I shared that the Social Security Administration recently announced a Cost of Living Adjustment for 2012 in the amount of 3.6%. Those covered by Medicare will be interested in knowing that the Centers for Medicare and Medicaid Services (“CMS”) also announced that Medicare Part B premiums in 2012 will be $15.50 per month LESS than in 2011 ($99.90 in 2012). However, many folks (estimated at 75%) have been paying $96.40 since 2008, so this is really an increase of $3.50/month more for most. 

So, assuming this is an increase for most can it be good news?  I think so.  (Easy for me to say,  I know - I am not a recipient). Even assuming a $3.50 increase seems like good news with the extreme northward direction of medical costs in general over the past few years. Many had feared that Medicare premiums were going to escalate at a rate that would essentially offset the expected average Social Security increase of $43 completely. 

Further good news includes estimates by the CMS that the average Medicare Part D prescription drug plan premium will be near $30 and Medicare Advantage premiums will be lower for 2012. 

Additional information regarding the Medicare announcements can be found at: www.cms.gov 

Have a Social Security or Medicare question?  Send me an email – the tougher the question the better.  And remember, there’s no such thing as a dumb question when dealing with government agency’s policies (or the tax code).

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The Key to Planning for Your Lifestyle in Retirement

After working with retirement clients for nearly 30 years, I have learned many things.  One of the most important lessons I have learned is that we all need to have the answer to one very simple question before we begin the planning process -- “what does it cost for me to live per month”?   As planners we can develop scenarios to help achieve retirement goals, but if we start with the wrong premise, we may be forming strategies to meet the wrong goal. 

Why is it so difficult to come up with a figure for our income needs? The general tendency is to underestimate expenditures and overestimate income. We also think about what we should be spending, not what we do spend.  Not knowing our expenditures comes about because we forget a few things:

• Food, shelter, transportation and clothing are only the beginning of expenses. They are the ones we see each month.
• We need to add insurances, taxes, gifts, car replacements, vacations, travel, family visits, and hobby and entertainment expenses. 
• If you have children, your educational expenses may drop off by the time you retire but you need to determine how much you might need for weddings and launching (yes—getting your darlings out of the parental home)
• If you plan to change your living arrangements, you need to factor in not only the additional cost of making a change but also the change in monthly expenditures related to the move.

There are circumstances that are out of our control, such as the rising cost of health care and insurance, declining markets and inflation.  To guard against these events we need to factor in percentage increases over time and to have a savings cushion of at least six months to help us weather the storm.

When I have gone through this analysis with clients, I often find a dramatic difference between projected income needs and actual income needs.  Can you imagine trying to reach your destination with only half a tank of gas?  It doesn’t work. Using the wrong expenditure figure can ruin the lifestyle you anticipated.

Talk to your financial advisor about tools to help you track your monthly income needs.

Laurie Renchik Supports “Women of Words” Fundraising Event

Michigan Women’s Media recently hosted a “Women of Words” fundraiser to kick-start its annual Women and Journalism Internship.  Three Michigan authors headlined the evening by talking about their work and passion for writing. 

The historic Masonic Hall in downtown Farmington provided a wonderful venue for the event.  Guests enjoyed tea service, petit sandwiches and a cupcake dessert bar.  The Center for Financial Planning proudly sponsored the event.

Laurie serves as an active board member for Michigan Women’s Media, Inc. where she joins an equally dedicated group of women supporting this newly formed non-profit organization.  Their primary mission is to fund and maintain a robust internship program that will offer student journalists the opportunity to write about women’s interests.

Contact Laurie for additional information or volunteer opportunities.

What Does a Social Security Raise Mean to You?

You may have heard that the Social Security Administration recently announced a 3.6% cost of living increase for Social Security recipients starting in 2012. This is good news for those receiving Social Security benefits, as the last increase came two years ago (5.8% in 2009).  If you are not yet drawing Social Security, you may be wondering what this raise means for you. 

While a PhD in Social Security benefits might be needed to calculate how, a fact that is less known is that those aged 62 or older who are not receiving benefits just yet also receive benefit of the 3.6% increase.  Essentially, Social Security benefits before age 60 are based on wage increases, but at age 62 they are based on price increases, i.e. the 3.6% cost of living adjustment. 

Other Social Security related changes courtesy of Horsesmouth.com include:

• The maximum taxable wage base rises to $110,100 in 2012, up from $106,800 in 2011.  This means that you do not pay Social Security tax on any wages over $110,100 next year.
• The earnings test before full retirement age rises to $14,640 in 2012, up from $14,160 in 2011.  If you are drawing Social Security before your full retirement age, you can earn $14,640 next year before your Social Security benefits will be reduced.
• The maximum Social Security benefit for a maximum earner retiring in 2012 will be $2,513/month, up from 2,366/month in 2011.

The bottom line is that Social Security benefits can have a meaningful impact during retirement and it is important to maximize those benefits to the extent possible.  Careful analysis based on your particular situation is therefore critical to your financial health.  Consult your financial advisor about maximizing your Social Security benefits.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

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The Gift that Keeps on Giving

As the holiday shopping season approaches, many of us struggle to make our gift lists.  This can be a frustrating exercise, particularly when it comes to you adult children and grandchildren.  What can we possibly give them that will be appreciated and not be sitting on the dresser in a week when the next new gadget comes along?  Why not consider a gift that will keep on giving long after your gone?

If your children or grandchild had earned income from employment during 2011, you can contribute up to $5,000 or 100% of their total earnings (whichever is less) in a ROTH IRA in the child’s name.  [Remember that what you put in to the ROTH IRA counts toward the $13,000 annual gift exclusion; $26k if your spouse contributes to the gift].

Why is the ROTH IRA such a great gift?

• It grows tax-free over time.  A $5k contribution to a 16 year-old’s ROTH IRA earning 8% each year will grow to $217,000 by age 65*.  If the child works summers during high school and college and contributes each year, the future balance in the account will likely be significantly larger.
• ROTH IRAs provide tax-free withdrawals after age 59 ½**.
• In some specific situations, the child can pull out contributions (not earnings) free of tax (i.e. for the purchase of a first home).

A Roth IRA can be one of the best gifts you can give…one that will be giving for years to come.

*This is a hypothetical illustration and is not intended to reflect the actual performance of any particular security.  Future performance cannot be guaranteed and investment yields will fluctuate with market conditions.

**Unless certain criteria are met, ROTH IRA owners must be 59 ½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

Laurie Renchik Embarks on Leadership Oakland Cornerstone Program

Since 1990, the Leadership Oakland Cornerstone Program has brought together over 900 leaders from corporate, civic and non-profit organizations.

As one of class of 50 leaders for 2011-12, Laurie’s membership in this program provides exposure to an exclusive organization with a mission to develop leadership skills, expose individuals to key issues impacting the region, and enable participants to reach their full potential personally, professionally, and through public service to their communities.

Laurie recently attended the Kick-Off Retreat, a three-day, two-night retreat, where participants were provided an overview of the region and its challenges, insights into their own leadership style, and an opportunity to get to know their fellow Leadership Oakland classmates.  They will also set goals for their year in the Leadership Oakland Cornerstone program.

Laurie commented, "Over time community leaders armed with knowledge, collective creativity and innovation can change the course of our region to a stronger more vibrant future.”

By building a shared understanding and partnership, Cornerstone graduates develop purpose and commitment to the community for the organizations they represent and the communities they live and work in.