Bitcoin: The Open Source Currency

 Have you heard about Bitcoin? It’s an online “cryptocurrency” meaning it has no physical presence like the U.S. Dollar or similar currencies. Instead it’s simply a long sequence of random numbers and letters that’s supposed to be unique and not replicable. If you want to purchase something and the merchant on the other end of the transaction is willing to accept Bitcoins, you simply send that person Bitcoins through an online exchange.  An “electronic signature” is added (the random sequence of letters and numbers) which supposedly makes the transaction secure and not duplicable.  

How does someone get Bitcoins?

There are three ways to get Bitcoins.

  1. You can acquire Bitcoins by converting local currency (U.S. Dollars, Euro’s, British Pound Etc…) for Bitcoins on an online exchange. 
  2. If you are a merchant you can advertise that you accept Bitcoins for goods and services.
  3. Finally, you can “mine” for Bitcoins by dedicating your computer to the Bitcoin network. When your computer solves math problems, you earn Bitcoins. Anyone can take part but without a computer technology background, it can be extremely confusing. I candidly admit I don’t entirely understand it.  For further information:  http://www.bitcoinmining.com/

What is a Bitcoin worth?

The value of Bitcoins fluctuates dramatically on a day-to-day basis due to the emerging nature of the currency.  At the time of this writing 1 Bitcoin was worth $915.48 U.S. Dollars.  Unlike other currencies Bitcoin is not backed by the full faith and credit of any sovereign government so the “value” is only what the users are willing to pay for it.  

Where to store Bitcoin money?

There are several “wallets” currently available:

  1. Web wallets are stored on the world wide web, but apparently are less secure then other forms of wallets.
  2. Software wallets are downloaded and stored on your personal computer, and are considered more secure because the user has more control and doesn’t depend on a 3rd party service.
  3. Mobile Phone Wallets are available on iPhones and Android devices. 

How does someone spend Bitcoins?

Bitcoins can be spent anywhere that they are accepted. There are two commonly used websites to find Bitcoin-friendly merchants near you http://coinmap.org/ and https://bitpay.com/directory#/#search   .   By current estimates there are over 12,000 vendors that accept Bitcoins.  

Where to find more information? 

Here are some good places to keep up with Bitcoin news and discussion:

  • Coindesk.com - An excellent source of Bitcoin news
  • BitcoinMagazine.com - Insightful articles with deep technical credentials
  • BitcoinX.com - Bitcoin headlines, market rates & charting resources

Matthew Trujillo is a Registered Support Associate at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

This article and its links are being provided for information purposes only.  It is not a recommendation to buy or sell Bitcoins.  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. #C14-001113

Financial Life Planning Gets Beneath the Raw Numbers

 I recently traveled to Beverly, MA to attend the Kinder Institute’s 5-day Life Planning training.  The Kinder Institute is internationally recognized and founder George Kinder is a thought leader in the Life Planning movement. The 5-day advanced training was well structured and the experiential teaching format was powerful. I walked away with a deeper understanding of how to promote a stronger relationship between financial resources, personal values and aspirational goals.

One example that comes to mind is that money matters are often thought about in terms of numbers:

  1. I make $X
  2. I’d like to save $X for retirement
  3. Our debt is $X
  4. I own a home worth $X
  5. My investments are worth $X

These concerns represent the raw data, facts and resources that make up your financial life.  To get beneath the numbers takes some additional exploration. Spending time up front to figure out what's most important to you creates a bridge between financial numbers and the life you strive to live.  A personal vision statement is an inspirational document that goes hand in hand with your financial plan. 

At The Center, we are fortunate to have many long-term relationships with clients. My experience at the Kinder Institute was an exceptional opportunity to learn new skills to better serve our clients and the financial planning process that is core to The Center.

Laurie Renchik, CFP®, MBA is a Partner 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.

George Kinder and the Kinder Institute are independent of Raymond James. C14-000816

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Protecting Yourself Against Identity Theft in 4 Easy Steps

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 Who hasn’t heard about the Target stores’ security breach that occurred during the recent holiday season? I am sure we all know someone who was affected by this security scare as they routinely used their store credit card to pay for holiday purchases. While the victims of this breach could not control their circumstances, incidents like these are a friendly (or not so friendly) reminder that credit card security and identity theft are a fact of our everyday lives. So what can you do to make sure that your own actions don’t lead to an identity theft nightmare?

  1. Routinely check your Credit Report. Go to www.annualcreditreport.com, where you can access a free report from each of the credit reporting agencies once per year. Consider requesting one report every four months to keep an eye on your credit activity.
  2. Limit the number of cards you own and monitor them actively. Review your account activity at least monthly when you receive your statement to make sure that all charges are legitimate.
  3. Do not give identifying numbers or financial information over the phone, by e-mail, or in person unless you are sure of the person you providing information to. Be careful not to e-mail important numbers – Social Security Numbers, credit card numbers, etc.
  4. Shred documents with personal information or store them in a locked cabinet or safety deposit box. Prevent easy access to your personal information.

Taking these simple steps does not guarantee that you won’t be a victim, but can go a long way towards preventing the opportunity for fraud, or catching it early in the process.

Contact your financial planner about this and other credit and identity theft issues.

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.

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. C14-001633

Can You Ignore the Facebook Speculation?

 If you’re tapped into social media, you’ve likely heard the latest hype about Facebook’s share prices. Facebook has drawn a lot of attention and, as a result, a lot of demand for its underlying common stock. 

How Facebook is Valued

There are a lot of different methods for valuing shares in publicly traded companies.  Two of the more common approaches are to look at present earnings versus the current share price and decide whether a company is under or overvalued based on some multiple of those two figures. This is known as the price to earnings ratio.  The second common approach, and probably the one more applicable to social media companies, is future projected price to earnings. This approach is nothing more then educated guess work, and in many cases can lead investors to pay large dollar amounts for a company based on their potential earnings rather than current earnings.

The argument is that because social media sites have so many users, they can leverage that user base into advertising dollars. It sounds great, in theory, and even in practice we are starting to see those advertising dollars roll in for Facebook. The company recently reported $2.02 billion of revenue for the third quarter of 2013.  That’s certainly a lot of money, but if you take a look at what that means in the bigger picture that’s simply .39 cents for each share they have outstanding.  If you were to purchase Facebook’s stock today, you would be paying almost 150 times their earnings.  The closing price on January 13th, 2014, was $56.46 per share.

Even if you account for future potential earnings, Facebook would have to triple their revenue to bring their multiples down to any sort of reasonable historical P/E ratio (according to Morningstar.com, S&P 500 companies have a historical P/E ratio of roughly 15). Furthermore, a future tripling of revenue would only justify the current price. For any further appreciation of the share price, the growth would have to continue at an exponential rate, which seems highly unrealistic, even by Facebook standards.  

Technology Craze Notables

Despite all this, don’t be surprised if Facebook’s share price continues to rise in the short term.  It’s widely documented from the 1999-2000 technology craze that companies share prices appreciated substantially regardless of their underlying fundamentals or profitability.  You may or may not remember some of these under-achievers from that time period: 

  • Boo.com -- spent $188 million in just six months n an attempt to create a global online fashion store that went bankrupt in May 2000.        
  • Broadcast.com -- acquired by Yahoo! for $5.9 billion in stock, making Mark Cuban a multi-billionaire.  The site is now defunct and redirects to Yahoo!'s home page.
  • Freeinternet.com – Filed for bankruptcy in October 2000, soon after canceling its initial public offeringISP in the United StatesBaby Bob, the company lost $19 million in 1999 on revenues of less than $1 million.
  • GeoCities – Purchased by Yahoo! for $3.57 billion in January 1999.  Yahoo! closed GeoCities on October 26, 2009.
  • theGlobe.com -- social networking service that went live in April 1995 and made headlines by going public on November 1998 and posting the largest first day gain of any IPO in history up to that date.       
  • inktomi – Valuation of $25 billion in March 2000.
  • InfoSpace – In March 2000 this stock reached a price $1,305 per share, but by April 2001 the price had crashed down to $22 a share.
  • MicroStrategy -- shares lost more than half of their value on March 20, 2000, following their announcement of re-stated financials for the previous two years.  A BusinessWeek editorial said at the time, "The company's misfortune is a wake-up call to all dot-com investors.  The message:  It's time, at last, to pay attention to the numbers."
  • Xcelera.com – Swedish investor in start-up technology firms that was one of the "greatest one-year rise of any exchange-listed stock in the history of Wall Street." 

If there’s one take-away from this list it is this: Short-term speculation is no different than gambling and can end badly.  In the end, fundamentals usually win. As legendary investor Warren Buffet so aptly put it, "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money.”

Matthew Trujillo is a Registered Support Associate at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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, and is not a complete summary or statement of all available data necessary for making an investment decision, and does not constitute a recommendation or a solicitation or an offer to buy or sell any security referred to herein.  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.  Expressions of opinion are as of this date and are subject to change without notice.  The price-earnings ratio, or P/E, is a common measure of the value of stocks.  It shows the relationship between a stock’s prices and the underlying company’s earnings (or profits) per share of stock.  In essence, it calculates how many dollars you pay for each dollar of a company’s earnings.  In very general terms, the higher the P/E ratio, the more likely the stock is to be overpriced.  Forward P/E, sometimes called estimated P/E, divides a stock’s current price by consensus earnings estimates for the next four quarters.  It evaluates the current stock price against projected earnings.  Forward P/E will be lower than current P/E if earnings are projected to rise, and higher if future earnings are expected to slow. 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.  Center for Financial Planning, Inc., Raymond James Financial Services, Inc., its affiliates, officers, directors or branch offices may in the normal course of business have a position in any securities mentioned in this report.  Closing price for Yahoo as of 1/13/14 was $40.21/share.  Google and Yahoo are not closely followed by Raymond James Research.  #C14-000640

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Ways to Maximize Social Security Benefits

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 Recently I had the privilege of presenting at the Michigan Association of CPA’s continuing education conference on the topic of Maximizing Social Security benefits.  Social security is an important source of income for most of the estimated 58 million people who receive benefits.  Over my 22 years as a practitioner, I have tried to counsel clients to be sure to coordinate social security retirement benefits with their overall retirement plan.  As pensions (not just the City of Detroit) continue to become more obsolete, social security remains one of the few, if not only, guaranteed income sources for future retirees.

Following Ida Mae Fuller’s Lead

Before getting to how to maximize social security retirement benefits – how about a little fun social security history?  Do you know Ida Mae Fuller?  She is the first reported person to receive social security retirement benefits.  Apparently Ida went into the SS office after contributing a total of $24.75 over three years in payroll taxes and told the staff that she was retiring and didn’t expect to receive anything – but thought she might as well check. She ended up collecting $22.54/month and lived to age 100 – not a bad return on her contributions!

When to Begin Collecting Benefits

A traditional breakeven analysis works pretty well for single folks.  One of the best research articles that I have come across was in the Journal for Financial Planning and written by Doug Lemons.  Mr. Lemons outlined three main variables in the breakeven analysis: inflation/cost of living, income taxes, and time value of money. Mr. Lemons’ research addressed multiple variations and combinations.  The general rule based on his research is:

  • The breakeven between taking at age 62 and 66 (assume full retirement age) is roughly age 78.  Meaning, you need to live past age 78 to be better off by waiting until age 66.
  • The breakeven between taking at age 66 and 70 is roughly age 83.  Meaning, you need to live past age 83 to be better off. 

Social Security Analysis for Couples

The breakeven analysis breaks down a bit for couples (two life expectancies vs one). I have written about spousal benefits in the past.  In this post I’d like to provide two strategies for couples to consider.

File & Suspend Strategy

June Cleaver:  As you may know, June Cleaver of the “Leave it to Beaver” show was the classic stay-at-home mom.  Her husband Ward, who sometimes was known to be a “bit too hard” on their son the Beaver, was the sole income earner. If June and Ward were close to retirement today, their respective social security benefits at full retirement age might be $2,000/month for Ward and $0 for June.  How can they maximize benefits?  At full retirement age (assume 66) Ward files for social security retirement benefits but then immediately suspends.  This allows June to begin receiving a spousal benefit (assuming she is at full retirement age) which is $1,000/month or 50% of Ward’s benefit. Then, when Ward turns age 70, Ward may elect to begin receiving his own benefit ($2,640 in this example) that has increased 8% per year from age 66-70 thanks to “Delayed Retirement Credits”. Assuming average life expectancy, this combination will provide June and Ward the maximum benefit.  What if Ward passes away at age 75? June will receive the higher of her benefit or Ward’s as a survivorship benefit - $2,640 in this example.

Claim Now, Claim More Later

Elyse Keaton: Elyse Keaton of “Family Ties” was played by Meredith Baxter (and mother of Michael J. Fox in the show).  Elyse, unlike June Cleaver, had income of her own as an architect. Elyse and her husband Steven Keaton had similar earnings. If Elyse and Steven were close to retirement today, both of their social security benefits at full retirement age might be $2,000/month. Rather than “filing & suspending” like June and Ward, the Keatons might consider another strategy to maximize their total benefits.  At full retirement age Elyse should consider taking her own benefit or $2,000/month.  Steven, at full retirement age, may choose to restrict his benefit to a spousal benefit only (50% of Elyse’s benefit) or $1,000/month.  This allows Steven to collect some benefits now while allowing his own benefit to grow at 8% until age 70.  At age 70, Steven may elect to begin receiving benefits based on his own earnings – or $2,640/month.  Note that the survivor benefit for each of them now becomes $2,640.  The election to “restrict” to a spousal benefit can only be done at full retirement age or later. 

So, are you more like June or Elyse?  If your situation is more like June’s then consider the “File & Suspend” strategy.  If your circumstances are more like Elyse’s then consider the “Claim Now, Claim More Later” strategy. Do you have a social security question? Let us know – we love to research and help you maximize the benefits. 

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

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing information is accurate or complete. Any information is not a complete summary or statement of al available data necessary for making a decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of Raymond James. The examples provided are for illustrative purposes only. Every individual’s situation is unique and you should consult with the appropriate professional regarding your individual situation.  Every individual’s situation is unique and you should consult with the appropriate professional regarding your individual situation. Guarantees are based on the paying ability of the issuer. #C14-000038

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Marilynn Levin reflects on her recent retirement

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 Client Services Manager Marilynn Levin recently retired after more than 20 years working at The Center. As she says goodbye, she leaves us with some parting thoughts on what might be ahead for her.

Now that I’m retired, I like to think of my days as vacation days and I am getting used to that luxury.  Many people have told me that retirement will keep me so busy that I won’t believe I ever had time to work!  Right now, I am considering many options to volunteer in a way that is meaningful to me, I am spending more time with my husband, and I am looking forward to seeing more of my 7 grandchildren.

People say old age is not for sissies, but I think the same thing can be said about what I’m going through. Retirement is not for sissies!  After almost 22 years at the Center, I am already missing my routines and my colleagues.  I was so fortunate to have worked with such an amazing and caring group of people.  We always found time to share our lives with each other – we laughed, cried, played, volunteered, shared pictures and really and truly cared about each other.

The same is true of the clients I was privileged to have assisted. I was privy to their thoughts and feelings, as well as their financial lives.  With many, we also laughed, cried and shared our family stories. I will miss those relationships, but look forward to seeing many of you at future Center events.

The Hebrew word Shalom means hello, goodbye, and peace. In parting, Shalom and I wish everyone an amazing 2014.

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The Turkey Trot Connection

 It was mere weeks ago that we wished Betsey Schrock well as she left The Center for retirement, promising that it was a “See you later” rather than a “Goodbye”. Guess we were right. It wasn’t long after Betsey’s departure that Client Service Associate Gerri Harmer reported the first sighting:

On Thanksgiving morning, I found myself in unquestionably cold weather handing out coffee and hot chocolate to thousands of jovial runner.  Although the weather was brisk at the Ann Arbor Turkey Trot, the snow was falling beautifully and everyone was smiling.  I was having a great time volunteering at this event; especially checking out the creative and clever Turkey Day costumes when all of a sudden who should appear?   Betsey Schrock.  Just days after her retirement from The Center, Betsey had gone turkey and was hanging out with a wild bunch.  No peaceful serene retirement for her.  Great to see you Betsey Schrock --- Keep on Moving!

At The Center, volunteering is one of the values we most prize. Gerri’s gift of her time to the Turkey Trot is just one of the ways we get involved in our community. It just goes to show that when you give of your time, you just might get something unexpected in return. And it might also suggest that no matter how fast you run, you just can’t escape The Center!

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