Losing a Spouse: When to Tackle the Financial Details

 There are few times in life that are worse to make financial decisions than immediately following the death of a spouse. Whether sudden and unexpected or the result of a longtime illness, the loss can be overwhelming. Unfortunately, even during this time of grief, some financial issues need to be addressed. But our advice is to avoid making any major financial decisions right away. Big decisions may be left for weeks or months down the road, once you have had time to deal with your grief and can make rational decisions about your future.

So, what's most important to do right away?

Find Help: Identify a family member or close friend who can help you keep track of things that need to get done.

Make Copies: Get 10 - 20 copies of the certified death certificate to use in settling financial matters.

Call List: 

• The Office: If your spouse was still working, notify his/her employer and get information on health insurance, any life insurance survivor benefits, and retirement benefits.
• Financial Advisor: Contact your financial advisor for help in making sure needed cash is available for immediate expenses. Also, contact your financial advisor and financial institutions where you and your spouse have bank or investment accounts.
• Claims Calls: Contact life insurance and/or annuity companies to notify them for claim purposes. Also contact the Social Security Administration and, if your spouse was a veteran, contact Veteran's Affairs.

While making these contacts is necessary to make sure your financial affairs will be handled going forward, it does not mean that decisions need to be made right away. There will be a lot of forms to be completed and, in some cases, decisions that need to be made about benefits to be paid to you, titling of assets, and beneficiaries to be updated. Your financial planner can be invaluable in helping you navigate this unchartered territory -- from assisting with paperwork to helping you make the most appropriate benefits choices. And most important of all, working with your financial planner will help you determine WHEN it is the right time to make the bigger financial decisions, helping you avoid making mistakes based on emotion and grief.

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.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-003511

Center Recognized for Living the Balanced Life

 

From the snacks in our lunchroom to the support of our colleagues, we have a healthy dose of proof that The Center is a fit place to work. The American Heart Association has named us as a Fit-Friendly Worksite for the 7^th year running! The credit for the award and recognition goes to Center team members who routinely make health and wellness a priority in their lives.

It all started back in 2007 when Jen Hackmann came up with the idea of a committee focused on health at our Annual Retreat. Firm leaders loved the idea because it dovetails with our firm vision of creating a worksite environment that encourages and fosters healthier and more balanced living. Our current Health & Wellness Committee is comprised of Jennie Bauder, Gerri Harmer, and Kali Hassinger. Our health and wellness efforts continue to reduce stress, facilitate greater well-being and encourage camaraderie.

We spread the fit mentality by bringing in professional speakers, a personal trainer, and a massage therapist. Quarterly luncheons promote team members to share goals and achievements and increase social interaction and support with colleagues. We currently have 2 teams and have friendly competitions to increase our physical activity. Our Center shopper, Angie Palacios, assists us by purchasing healthier snack options that are available in our lunchroom. Our lunch coordinator, Gerri Harmer, helps us choose healthier options for our staff lunches. To keep the energy levels up, and activity levels high we encourage walking, stretch breaks and flex time.

Center team members are encouraged to contribute ideas for promoting a healthier and more supportive environment. We look for ways to reduce stress in the workplace and provide tools for effectively dealing with stressful situations. Our most important asset and tool we have in promoting a culture of health is our staff. Living the balanced life value is vital to maintaining and improving our work environment and our wellness program.

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The January Barometer

 We’re off to an icy start, both in the weather and the markets. The weather forecast for this year has been cold, cold and colder in Michigan as well as across the country. It seems the temps are below zero more days than not this year.  Is it much the same in the forecast for the equity markets in 2014 or will they continue the sizzle of 2013?  As goes January so can go the rest of the year.  The chart below forecasts the likelihood of this:

As we finish the month of January with the S&P 500 down almost 3.5%, this means that we are more likely to have an overall negative calendar year than a positive one.  Our chances of being up overall this year are less than 42%.  Things could warm up though as the year progresses. Historical performance from February through the end of the years with negative Januarys have more often than not provided positive returns.

So even though the Groundhog saw his shadow predicting six more weeks of this harsh winter, it isn’t necessarily a given that the markets will remain icy. You’re probably familiar with the disclaimer, “Past performance is no guarantee of future returns.” Sticking with your long-term investment strategy amidst the noise and backward-looking statistics is the most important to the long-term achievement of your financial goals!

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.

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Source: http://blogs.wsj.com/moneybeat/2014/01/31/morning-moneybeat-january-slump-is-nothing-to-fret/

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 Raymond James. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market, 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. C14-003065

Center Family Grows with a New Trujillo Addition

 We’re happy to spread the word that It’s A Boy! Center Support Planner Matthew Trujillo and his wife Diane announced the arrival of their new, darling son, Gavin. Matt and Diane tell us they are having fun raising two little boys and look forward to fishing and camping when they boys get a little older.

Gavin Matthew Trujillo was born on December 26, 2013 at 11:00 a.m. He weighed in at 8 lbs. 7 oz. and measured 21 ¼ inches long. Baby Gavin, mom, dad and big brother Luke are all doing well. Gavin is a sweet little treasure that looks like daddy, which is only fair because big brother Luke looks just like Mommy! Congratulations to the Trujillo family!

Tax Prep: New Laws & Recent Changes to Help You File

Here at The Center, we think of tax season as the most magical and exciting part of the year, but you might not see it that way.  As you prepare to get your taxes in order, it is important to discuss some of the new laws going into effect for 2014 and to revisit some changes from 2013. Earlier this month, Matt Trujillo and Nick Defenthaler attended a portion of the University of Michigan tax seminar to brush up on the ever-changing landscape in the world of taxes.  Below are a few key points that they felt may impact you:

Expiring Provisions in 2014

• Deduction for expenses of elementary and secondary school teachers

• Option to deduct state and local general sales taxes

• Tax credit for energy efficient home goods (windows, doors, appliances, furnaces, etc.)

  • Don’t let home improvement sales people lead you to believe that the new product they are trying to sell you will generate a tax credit!

  • Elimination of private mortgage insurance (PMI) deduction

    • Consider checking a website such as Zillow or consult with a real estate agent to get an idea of what your home may now be worth.  With the housing market improving, you may now have greater than 20% equity in your home.  Consult with your lender to determine the best steps to eliminating your PMI. 

Reminder of changes from 2013

In 2013, the Medicare tax changes went into effect for “high income earners” based on certain thresholds:

• Single – Modified Adjusted Gross Income (MAGI) greater than $200,000

• Married Filing Jointly – Modified Adjusted Gross Income (MAGI) greater than $250,000

This tax has two components, one based on wages earned above the thresholds and another based on net investment income above the thresholds.

• 0.9% additional Medicare tax on wages above thresholds

• 3.8% tax on the lesser of total net investment income or the amount of earnings above the thresholds (net investment income consists of dividends, interest, capital gains, rental income, etc.  It does NOT include distributions from qualified retirement plans such as an IRA or 401k)

• Ex.  A married client’s MAGI for 2013 is $300,000.  They also have $20,000 of net investment income.  They are $50,000 over the $250,000 threshold.  However, the $20,000 is less than the $50,000 overage; therefore, the 3.8% tax is based on the $20,000, resulting in an additional tax of $760 ($20,000 x 3.8%). 

Affordable Care Act (Obamacare)

One of the biggest tax talking points for 2014 are the tax ramifications of the Affordable care act or “Obamacare”. A few key take-aways for 2014:

• it's widely known that the penalty (in 2014) for not having insurance is the greater of $95 or 1% of income - this penalty will increase for the next several years to entice people to get health insurance.

• For those individuals or families that are between 100% and 400% of the federal poverty level, you may qualify for a government subsidy to help offset your insurance premium costs.

• In 2014 you will need to use a combination of last year’s earned income, and your projections of this year’s income to figure out whether or not you qualify.

• If you find you are right on the cusp of qualifying for a subsidy, but are concerned about having to pay back the subsidy in full if you underestimate your income ... fear not!  The rules regarding income are a “cliff”, meaning if you are wrong by $1 dollar you are subject to a penalty. However, the maximum penalty for 2014 is $400.

Example: Joe and Jane are 55 with no dependents.  They estimate their income to be $62,000 and that qualifies them for a government subsidy.  However, Joe gets an unexpected bonus at the end of 2014 and his income ends up being higher than 400% of the federal poverty level.  In this scenario, Joe and Jane will be subject to a maximum $400 penalty.

Tax planning can be very confusing, especially since the IRS seems to change the tax code more often than electronics companies push new products.  Please don’t hesitate to contact us if you have questions about your personal tax situation. Although we are not CPAs, we can still help to make your overall financial plan as tax efficient as possible and work together as a team with your tax professional to ensure we are all on the same page.

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

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. 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. Please note, changes in tax laws may occur at any time and could have substantial impact upon each person’s situation. 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. All examples are hypothetical. Please consult the appropriate professional if you have questions about these examples and how they relate to your own financial situation. C14-002577

The Business Cycle: A Corporate Checklist

Making a list and checking it twice … Have you ever stopped to make a checklist just to be able to check things off you’ve already done?  I will admit I have done that on more than one occasion.  I love checklists, they keep me focused throughout the day at work and at home.  While corporations utilize checklists, they go by different names like agendas, goals or even vision statements.  Coming out of 2008, many corporations didn’t have a choice as to the items on their checklists.  They had to get financially healthier and fast because they were in the worst spot of the business cycle!  Following are some of the steps many corporations had to follow.

✔ Improve balance sheets by reducing the amount of outstanding debt

You can see the ratio of debt to equity is now below even long term averages.

Source: Standard & Poor’s Compustat, JP Morgan Asset Management

✔ Horde cash to be ready for the unexpected

Companies have nearly doubled the amount of cash on hand over the past decade.

Source: Standard & Poor’s Factset and JP Morgan Asset Management

✔ Buyback stock and increase dividends

Dividends paid are reaching record levels for the past decade and stock buybacks are getting close.

Source: S&P Dow Jones Indices

❍ Increase capital spending

Notice the final item on the checklist has yet to be checked.

Our economy is nearing the expansion/growth phase and this capital spending by companies is usually one of the later occurrences in the business cycle.  So, while I would love to check off the last item on the checklist (almost nothing makes me feel better) doing so could bring us closer to the next stage in the business cycle and closer to possible recession.

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 contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material, is not a complete summary or statement of all available data necessary for making an investment decision, and does not constitute 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 Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. Past performance may not be indicative of future results. Dividends are not guaranteed and must be authorized by the company’s board of directors. C14-002179

Community Commitment Hits a High Note

 The Center proudly sponsored Brass in the Hills, a Detroit Chamber Winds & Strings (DCWS) concert performed at Kirk in the Hills Presbyterian Church.  As part of The Center’s 2020 Vision, we are committed to supporting events like this in and around our community. The January 14, 2014 concert featured composer Timothy Kramer’s world premier and included a mix of works for large and small brass ensemble.  The program was a large undertaking because of the extraordinary level of difficulty and obscure instrumentation.  Classical works from past composers shared the spotlight with contemporary pieces written in the last 100 years. 

Composer Timothy Kramer, was the winner of a composition competition sponsored by DCWS, The University of Michigan, and Oberlin College. 

The DCWS was founded in 1982 and has set the standard for chamber music in Detroit.  By bringing together top musicians from the metro area, most of whom are members of the Detroit Symphony Orchestra and Michigan Opera Theatre, DCSW immerses audiences in a chamber music experience that is innovative, entertaining and unsurpassed anywhere in the region.  The Brass in the Hills concert did just that. 

Prepping for Tax Time

 As you prepare your 2013 taxes, here is some information you may find beneficial.

The Center’s Commitment to You

At The Center, our goal is to provide exceptional service and meet your needs as efficiently and effectively as possible. We offer the following commitments and services related to the tax season:

• Consistent communication about timelines for tax document receipt as that information is available.
• Assistance in understanding your tax-related questions and coordination of information such as cost basis.
• Coordination and communication with CPA’s and tax preparers upon your request. We’ve find that sharing and collaborating with your other trusted advisors can have substantial benefit to you.
• Financial planning and investment management integrated with perspective on tax consequences. If you would like to review or discuss our approach to taxes as it relates to your personal situation, please let us know!

• 2013 Year-End Tax-Planning Letter

As you complete your taxes for this year, a copy of your tax return is one of the most powerful financial planning information tools we have. Whenever possible, we request that you send a copy of your return upon filing to your financial planner, support planner, or client service manager at the time of filing. Thank you for your assistance in providing this information which enhances our services to you.

IRS Filing Dates

For Tax Season 2013, due to the government shutdown in 2013, the IRS will not start accepting and processing returns until somewhere between Jan. 28 and Feb. 4. This is approximately two weeks later than the standard start date.

Raymond James Tax Reporting.

For the most up to date information on the 2013 Tax Season & Raymond James, visit their tax resource page.

Many 1099’s will be delayed so as to ensure accuracy and reduce the potential for amended 1099’s.

2013 Form 1099 Mailing Schedule

• February 14 – Raymond James begins mailing “basic” or fully reallocated 1099s
• February 28 – Second round of original 1099s and first round of amended1099s are mailed

To reduce the number of delayed tax forms due to income reallocation, Raymond James will be utilizing February 15th as its deadline for mailing our first round of original 1099s. This additional time will allow Raymond James to capture further income reallocation and produce additional tax forms that would otherwise been delayed until the 2/28 mailing. 2/15 also aligns with the regulatory IRS mailing date.

Electronic Access to Tax Documents through Investor Access

You can view your tax reports, along with statements for all of 2013, by accessing your account online through Investor Access: raymondjames.com/investoraccess.

These documents are available in Adobe PDF format, so you are able to print or save them to your own computer. They will be archived in Investor Access for 20 years.

TurboTax users click here for information on importing tax data

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. You should discuss any tax or legal matters with the appropriate professional.

Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2011 and 2012, Melissa was honored by Financial Advisor magazine in the inaugural Research All Star List. In addition to her frequent contributions to Money Centered blogs, she writes frequent investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.

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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. A14-001496

Where Do I Take Cash From Next? The 72(t) Option

A longtime client, we will call her “Joan”, called last month needing to set aside money for her 2014 income needs. She had nothing left in the bank.  She had been through a life transition recently, out of work for over a year, and helping family with some health concerns.  Nearing retirement but not quite at the point at which she could access her retirement moneys without penalty (she was in her late 50’s, but not quite 59 1/2), she was concerned because her only choices were a Roth IRA and a traditional IRA.  So her normal reaction was to go for the Roth because it had fewer penalties or tax (she had established the Roth over 5 years ago and could access her contributed portion without penalty; she would likely experience a penalty if drawing on earnings portion). 

Penalty-free IRA Withdrawals

I offered a rarely used suggestion to establish a section 72(t) distribution (as authorized under the IRS tax code). This rule allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.

Rule 72(t) allows you to take advantage of your retirement savings before the age of 59 1/2, when there is otherwise a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate.

How to Use Rule 72(t)

The substantially equal period payments must generally continue for at least five full years, or if later, until age 59 ½. For example, if you began taking payments at age 56 on December 1, 2006, you may not take a different distribution or alter the amount of the payment until December 1, 2011, even though your fifth payment was taken on December 1, 2010.

If you begin taking substantially equal periodic payments on December 1, 2005, and you turn 59 ½ on July 1, 2011, you may not take a different distribution or alter the amount of the payment until July 1, 2011.

This works well for Joan because she did not have any earned income in 2013 so we actually started her distribution in December for the 1st of 5 distributions.  We plan to take the next one immediately in January of 2014 and this should fulfill her income requirements needed for 2014.  She also does not plan on finding work in 2014 so the taxes on these dollars will be small since she had no other income.   The Roth arguably would also have fewer tax implications, but we suggested taking from the Roth IRA after this if additional income was needed in the year as she climbs the tax bracket wall.

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.

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.

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. A 72(t) distribution may not be right for everyone. Investors should take into consideration the possibility of depleting their retirement account before the end of their life expectancy. In addition, any withdraws are taxed at the investor’s income rate and may raise their tax bracket. Please discuss any tax or financial matters with the appropriate professional before making a decision. #C14-001634

Curtain Call

 The Center's Team enjoys sharing their knowledge with the press to help stories come to life, share facts and bring important topics to the forefront.  We are also honored when we are recognized by media and publications for our work and service to our profession. Here's what's new:

Center Included in 2013 Crain's List Largest Money Managers

Center for Financial Planning, Inc. has been recognized among the top 25 largest money managers in Crain’s 2014 Book of Lists. Ranked by assets under management. View Crain's List here.

Click here to view the profile of Timothy W. Wyman, CFP®, JD.

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