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The Changing Tax Landscape
Many of us hone in on financial planning from a wealth-building perspective, considering things like asset allocation and comfort with risk. But there is also another key component to financial planning: the tax perspective. Our own Julie Hall, CFP® recently attended the American Institute of CPAs financial planning conference in Las Vegas where taxes were top of mind. Session topics included Advanced Tax and Estate Financial Planning Strategies for the mass affluent and high net worth.
Julie found the conference very timely. "Due to the recent presidential election, successful fiscal cliff negotiations and The American Taxpayer Relief Act of 2012, everyone needs to be planning for the fluctuating tax landscape." She said the sessions helped her to understand the impact of these tax changes and how the changes will affect the Center's clients and came back from Las Vegas ready to share her newly-acquired knowledge, proving that what happens in Vegas doesn't always have to stay in Vegas.
Any opinions are those of Julie E. Hall, CFP, MS-Finance and not necessarily those of RJFS of Raymond James. You should discuss any tax matters with the appropriate professional.
What Do Organ Donation and 401(k)s Have In Common?
While taking a Duke University course on Behavioral Finance, which is a topic I find fascinating, the professor presented the following scenario on organ donation:
While individuals around the world generally approve of organ donation, very few actually sign a donor card to grant permission, especially here in the US.
According to the chart below, some countries like Austria and France have an extremely high participation rate, 100% of the population. Why, then, is there such a difference from a country like Germany with only a 12% participation rate to Austria with a 100% participation rate? They share a border and culturally don’t have vastly different beliefs.
“Do Defaults Save Lives?” www.sciencemag.org
The answer is actually much simpler than cultural differences or beliefs. It is Defaults. Individuals love to take the easiest way out. The fewer decisions we have to make the better. Requiring people to opt out of something rather than opt in is a very effective way to push us toward a choice.
Defaults can be a very powerful tool, not only to increase organ donors, but also in investing for your retirement. Many 401(k)s offered by employers opt to automatically enroll their employees in the plan. If just a few percent is automatically deducted from employee’s paycheck, most individuals will not go out of their way to stop this as shown in the graphic below.
Automatic enrollment plans actually encourage individuals who are younger and have lower incomes to start saving for retirement much earlier than they normally would, when the effects of compounding interest are the most powerful.
While I will likely never live to regret being an organ donor, 401(k) contributions make me cringe just a little precisely every other Monday. Hopefully though this delayed gratification will pay off in retirement!
Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.
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 Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.
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Checkout our current blog posts HERE. See you there!
We're Sorry, This Page is No Longer Available
Checkout our current blog posts HERE. See you there!
Save the Date: May 5, 2013 Cystinosis Fun Run/Walk
On May 5th we will hold the 7th Annual Cystinosis Fun Run/Walk in honor of Kacy Wyman. In the past we have had over 300 walkers and runners support the event and Kacy. We understand that there are many worthy causes and feel very fortunate that so many have chosen to support Kacy’s cause in the past – and appreciate you considering a financial contribution for our May 5th event. All proceeds benefit Cystinosis Research Network. CRN is an all-volunteer, non-profit 501(c)(3) organization. The CRN Federal Tax ID# is 04-3323789.
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Thanks to 37 pills a day, eye drops 8-10 times per day and 7 liters of water Kacy’s condition is stable – but we need a cure. Your financial support is making a difference in Kacy’s life and all of the children enduring this rare disease called Cystinosis (Sis-ta-know-sis). Your support drives research and gives us hope that a cure will be found during Kacy’s lifetime. Thank you again for considering.
Checks should be made payable to:
Cystinosis Research Network
Investment Performance - 1st Quarter 2013
Source: Morningstar
Bonds represented by Barclay's Aggregate Bond Index a market-weighted index of US bonds. US Large Companies per S&P 500 Index a market-cap weighted index of large company stocks. Barclay’s Global Bond index is a market-cap weighted index of global bonds. US Small Companies per Russell 2000 Index a market-cap weighted index of smaller company stocks. International stocks measured by MSCI EAFE is a stock market index designed to measure the equity market performance of developed markets outside of the US and Canada. Commodities per Morgan Stanley Commodity Index a broadly diversified index designed to track commodity futures contracts on physical commodities. Barclays Capital US Corporate High Yield Index is an unmanaged index that covers the universe of fixed-rate, noninvestment-grade debt. Barclays Capital US Corporate High Yield Index is an unmanaged indexthat covers the universe of fixed-rate, noninvestment-grade debt.
Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results.
Got Savings Bonds?
Ahhh….savings bonds. Throughout the years, savings bonds have been popular gifts. Grandma and grandpa have given their grandchildren savings bonds for birthdays to encourage saving for the future. They were easily available savings vehicles that you could purchase at your local bank or, in some instances, through payroll deduction. The paper certificates are those you might stumble across in a stack of old papers or locked away in your safety deposit box.
What do you do if you find that you have savings bond certificates?
- Check the dates. All savings bonds have a maturity date; a date at which they stop accruing interest (i.e. Series EE bonds accrue interest for 30 years). You can use any number of online savings bond calculators to find out if your bonds have matured.
- Transition to Electronic Bonds. The U.S. Treasury recently stopped issuing paper bonds to save costs. If you own paper bonds that are still accruing interest, consider establishing a Treasury Direct account to convert your paper bonds to electronic bonds. This helps eliminate the risk of loss or damage to the physical bond certificates. If/when your bonds have matured, you can cash them in and have the proceeds deposited to your bank through Treasury Direct.
- Check the registration on the bonds. Savings bonds seem to be easily forgotten. It is not uncommon for a client to find a bond in the name a deceased relative, in a former/maiden name, or in custodial registration for a child who is now a well-established adult. Updating the registration on active savings bonds now can prevent headaches later. Registration changes can be handled through Treasury Direct.
- Last but not least, document that you own savings bonds. List these holdings with your financial planner and on your Personal Record Keeping Document to ensure that these assets are not forgotten if something happens to you.
While savings bonds are not as en vogue today as they were in past decades, they can still be valuable assets. It is worth taking the time to bring the old bonds into the current century with Treasury Direct.
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.
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.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.
Center Celebration of Service
Many of you would recognize her voice, even if you didn’t know Brenda Spencer’s face. She’s been greeting our clients with the warmest of receptions since 2006. Most people don’t know that Brenda was actually a client before becoming a member of our staff. And she is the person responsible for moving the Center to a paperless office. A genuinely happy lady, she is perfect for the job and that’s one of the reasons The Center recently celebrated her exceptional service.
In her 7 years on the job, managing partner Tim Wyman, CFP®, JD said Brenda made the Center a better place for her colleagues and clients with her positive and caring attitude. “Brenda understood and modeled that providing great service to both internal and external clients is an opportunity, and happens everywhere at the Center.”
Jennie Bauder, Client Service Manager adds, “It was with mixed emotions that the Center team gathered on a recent afternoon to wish Brenda well as she transitioned into retirement. Over lunch and gifts, we celebrated her contributions and her next phase in life.” For Brenda, that next chapter is sure to include traveling and visiting the casinos (we’re positive because we gave her a casino-themed gift basket, including a gift card to stay at one of her favorites). Brenda may like to try her luck at the casinos, but we’re the ones who really hit the jackpot, as Tim Wyman explains, “We are all better for having Brenda here and wish her well in retirement.”
High Tech with a Human Touch
Technology seems to change at the speed of light but it always plays an important role in helping us provide world-class service to clients. The Center has a long history of being early adopters of technology. We’ve been using a client relationship management system since 1997; back when very few financial planning firms were doing it. Done right, technology can increase the value that we provide to our clients. Done not so right, technology can be expensive and frustrating.
In order to keep abreast of the latest innovations and best practices in our profession, Tim Wyman, CFP® recently attended the Financial Planning Association’s annual practice management event, Business Solutions, which took place just outside Chicago. For 2.5 days Tim was immersed in practice management and technology demonstrations, all focused on how to increase the level of service to clients.
Our Vision 2020, the Center’s roadmap for the future, guides us to successfully use technology wherever we can to enhance the client experience and our team member experience. We also are keenly aware that our investment in technology enhances, but does not replace, the need for the human touch. Instead, we think new tools create more space and time to discuss and plan for what’s most important in our clients’ lives.