Center Team Improves Improv Skills

For some, public speaking and acting in front of groups comes naturally. But imagine you aren’t one of those people. The mere thought of performing in public is traumatic. Your stomach churns if someone suggests you give a presentation. That’s where Karen Bell-Brege of Improv You comes in.

Improv isn’t about just getting people out of their shells. It can be a mind-opening, learning experience. That’s what Partner Tim Wyman had in mind when he sprung a surprise improv workshop on us. Tim had given us only had two clues. Block out 2 hours from your afternoon and don’t wear heels. Here’s what happened:

Uploaded by CenterFinPlan on 2015-01-22.

The First Rule of Improv

We learned a lot from our crash course in improv. When it comes to improvisation, rule #1 is “Yes, and….” That’s the idea that anyone’s contribution to the group is accepted without judgment says Linda Flanagan who writes about improv’s impact on learning. We put that lesson to work in our office. Through the afternoon, we tried to stay open to anything and everything our co-workers contributed. It helped some of us to overcome the fear of making mistakes. We found that when we got categorical support for everything we did, our confidence grew with each new improv challenge.

Improv’s Educational Value

The techniques of improv are being used in many different ways, according to Flanagan. It helps kids with learning and physical disabilities develop a sense of play and trains budding scientists to develop critical emotional detachment. Graduate students at The Alan Alda Center for Communicating Science at Stony Brook University can even sign up for a course in improv. Beyond helping us let go of our mistake-making fears, improv can also:

• Hone communication and public speaking skills
• Stimulate fast thinking and engagement with ideas
• Chip away at mental barriers that block creative thinking

After 2 hours on our feet, letting go of our inhibitions, Bell-Brege said we exceeded the expectations she had for a bunch of financial advisers. And we walked away with some valuable insight to improve both our personal and professional lives.

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Your Go-To List for Record Retention – Just in Time for Tax Season

It’s hard to believe that it’s already time to start going through piles of records and getting your documents in order for tax season.  If you’re like me, going through this process reminds me of how much I hate to see stacks of paper and has me dreaming of a nice, neat desk!  Here is a concise list to help you determine what to keep and what to shred as you get organized this year:

Bank Statements: Keep one year unless needed for tax records.

Cancelled Checks: Keep one year unless needed for tax records.

Charitable Contributions: Keep with applicable tax return.

Credit Purchase Receipts: Discard after purchase appears on credit card statement if not needed for warranties, merchandise returns or taxes.

Credit Card Statements: Discard after payment appears on credit card statement.

Employee Business Expense Records: Keep with applicable tax return.

Health Insurance Policies: Keep until policy expires, lapses or is replaced.

Home & Property Insurance: Keep until policy expires, lapses or is replaced.

Income Tax Return and Records: Permanently.

Investment Annual Statements and 1099's: Keep with applicable tax return.

Investment Sale and Purchase Confirmation Records: Dispose of sale confirmation records when the transactions are correctly reflected on the monthly statement. Keep purchase confirmation records 3-6 years after investment is sold as evidence of cost.

Life Insurance: Keep until there is no chance of reinstatement. Premium receipts may be discarded when notices reflect payment.

Medical Records: Permanently.

Medical Expense Records: Keep with applicable tax return if deducted on tax return.

Military Papers: Permanently (may be required for possible veteran's benefits).

Individual Retirement Account Records: Permanently.

Passports: Until expiration.

Pay Stubs: One year. Discard all but final, cumulative pay stubs for the year.

Personal Certificates (Birth/Death, Marriage/Divorce, Religious Ceremonies): Permanently.

Real Estate Documents: Keep three to six years after property has been disposed of and taxes have been paid.

Residential Records (Copies of purchase related documents, annual mortgage statements, receipts for improvements and copies of rental leases/receipts.): Indefinitely.

Retirement Plan Statements: Three to six years. Keep year end statements permanently.

Warranties and Receipts: Discard warranties when they are clearly expired. Use your judgment when discarding receipts.

Will, Trust, Durable Powers of Attorney: Keep current documents permanently.

My best advice?  Print this list and keep it with your tax records to revisit each tax year.  And call your financial planner if you have any questions about what you need to keep. 

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.

This list may not be a complete description of the documents available for shredding or their retention requirements. You should discuss any tax matters with the appropriate professional.

NUA: Answering 7 Questions about Net Unrealized Appreciation

The financial planning profession is full of acronyms such as RMD, IRA, TSA and NUA. One acronym making a comeback due to the increase in the US Equity market is “NUA”. NUA stands for net unrealized appreciation and anyone with a 401k account containing stock might want to better understand it. NUA comes into play when a person retires or otherwise leaves an employer sponsored 401k plan. In many cases, 401k funds are rolled over to an IRA. However, if you hold company stock in the 401k plan, you might be best served by rolling the company stock out separately.

Before getting to an example, here are the gory details: The net unrealized appreciation in securities is the excess of the fair market value over the cost basis and may be excluded from the participant's income. Further, it is not subject to the 10% penalty tax even though the participant is under age 59-1/2, since, with limited exceptions; the 10% tax only applies to amounts included in income. The cost basis is added to income and subject to the 10% penalty, if the participant is under 59.5 and the securities are not rolled over to an IRA.

Suppose Mary age 62 works for a large company that offers a 401k plan. Over the years she has purchased $50,000 of XYZ company stock and it has appreciated over the years with a current value of $150,000. Therefore, Mary has a basis of $50,000 and net unrealized appreciation of $100,000.

If Mary rolls XYZ stock over to an IRA at retirement or termination, the full $150,000 will be taxed like the other funds at ordinary income tax rates when distributed. However, if Mary rolls XYZ stock out separately the tax rules are different and potentially more favorable. In the example above, if Mary rolls XYZ out she will pay ordinary income tax immediately on $50,000 but may obtain long term capital treatment on the $100,000 appreciation when the stock is sold; thus potentially saving several thousand dollars in income tax.

Here are some critical questions to review when considering taking advantage of this opportunity:

Have you determined whether you own eligible employer stock within your workplace retirement plan?

Have you determined whether you have a distribution triggering event that would allow you to take a lump sum distribution of your employer stock from your plan?

Have you discussed the special taxation rules that apply to lump sum distributions of employer stock and NUA?

• Cost basis taxable as ordinary income

• Net unrealized appreciation taxable at long term capital gains rates when stock is sold

Have you discussed the criteria necessary to qualify for NUA’s special tax treatment?

• Qualifying lump sum distribution including stock of the sponsoring employer taken within one taxable year

• Transfer of stock in kind to a brokerage account

• Sale of stock outside of the current qualified plan

Have you discussed the pros and cons of rolling over your employer stock into an IRA, taking into consideration such things as available investment options, fees and expenses, services, taxes and penalties, creditor protection, required minimum distributions and the tax treatment of the employer stock?

Have you discussed the pros and cons of selling your employer stock within the plan, including the need for proper diversification?

Have you discussed with your tax advisor whether a NUA tax strategy would be beneficial from a tax planning perspective given your current situation?

These are a handful of the key questions that should be considered when deciding whether or not this opportunity makes sense for you. Professional guidance is always suggested before making any final decisions.

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.

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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 Trujillo, CFP® and Tim Wyman, CFP® and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Strategies mentioned may not be appropriate for all investors.

Slightly Off-Center: Any hidden talents?

There’s a lot you know about our team at The Center … but we’ve dug up answers to some questions you might have never thought to ask.

I’m a serious amateur musician –Dan Boyce

Master chess player –Matt Trujillo

I’m actually a pretty good cook – I really enjoy trying out new recipes and cooking on the grill –Nick Defenthaler

Part 2 - A Year of Lessons on Money Matters for Your Children and Grandchildren

When I was just starting out in the investment business, one of my mentors said over and over, “Accumulation of wealth is about time, not timing.”  If you start early and invest appropriately, you don’t need to try to time the market.  Timing the market is a fool’s game and leads to many troubling mistakes.  Most people, even the pros, can’t time the market correctly with a high percentage of success.

The chart below from Fidelity is a simple but dramatic example of accumulating greater wealth by starting early. 

The “Leave it Alone” Approach

There are more steps to starting early. They begin with understanding your risk tolerance and then sticking to it by finding the appropriate portfolio allocation.

Next, set up a dollar-cost-averaging monthly investing discipline in your 401k or IRA program.  And leave it alone!  Obviously, if your employer matches your contributions to a 401k plan, than max that out before any other type of investment program.  A match is the same as free money that will help to build a nest egg. Why not let someone contribute along with you?  

Unbelievably over 30% of participants don’t contribute to their employer plans and miss the match.

This suggestion sounds simple but there will be periods of your life when time seems slow and dull and your investments are not making the headway you expect. People around you are getting wealthier it seems.  You start to think maybe you should be more aggressive.  You will be tempted to change stride and do something different to keep up with crowd.  Don’t mix brains with a bull market!  Occasionally individual markets (like the S&P last year) will trounce a diversified portfolio.  This temporary outperformance by one asset class generally will not persist for more than a year or two. 

Tips for Staying the Course

There may be other periods when the economy or financial markets seem to be falling apart and you cannot believe the extent of losses in markets and even your portfolio.  When you feel regret and loss, it may not seem easy to stay the course.

My advice, when the pain threshold becomes overwhelming at first  breathe and then consider doing the opposite of what your stomach is telling you.

This is when your brain needs to take over.  If you are sad because of losses and feel the need to change direction because, consider buying a little more. When it’s so exciting that you are looking at your portfolio value every day and twice on Saturdays (BTW prices don’t change on Saturdays), slow down your purchases or be slightly more conservative. It’s not always easy to ignore your gut, but historically starting early and staying the course is the advice I give my clients every day.

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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.

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. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or loss.  

Our New Office Design Attracts Attention

Moving offices last summer meant a lot more than packing up our desks and remembering which way to turn in the morning on our way to work. Taking over a new space turned into a major remodel. We seized the opportunity to reinvent the atmosphere of The Center to reflect our approach and values. We ditched the traditional cream and beige and embraced the colors you see on our website. Natural light and an open floor plan now welcome our clients. The changes were so dramatic we were recently featured in The Wall Street Journal.

It helped that we brought in the design team from dPOPculture. The Detroit company helps clients by, “Breaking out of the cubicle and redefining the workplace.” Without their encouragement, we might not have taken as many risks. From the colors to the quotes on the walls, our new office is designed to make everyone feel comfortable, with particular appeal to our younger clients. Partner Melissa Joy explains:

"With a lot of firms today looking to recruit a younger demographic, I think it’s important not to overlook the power that your office space has to tell your story.”

By now, you’ve probably toured our new space. If not, we invite you to stop by or take this virtual tour.

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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.

Slightly Off-Center: What can you simply not resist?

There’s a lot you know about our team at The Center … but we’ve dug up answers to some questions you might have never thought to ask.

Sweets especially Chocolate cake –Angela Palacios

Coca Cola –Amanda Toia

My kids’ faces when they smile –Gerri Harmer

Listening to good music –Jaclyn Jackson

Warm Showers –Jennifer Hackmann

Chocolate chip cookies –Jennie Bauder

Baked by Melissa Cupcakes from NYC –Kali Hassinger

A bowl of popcorn drizzled with butter and finished off with a touch of salt –Laurie Renchik

Cheesecake –Matt Trujillo

It’s a good thing I don’t live in Texas where I was born b/c I love Whataburger. Yummy. –Melissa Joy

Junk food and Mexican!  If it’s in the house, it won’t be there for long… -Nick Defenthaler

Fixed Annuities in Retirement

Who doesn’t like a level of certainty in life?  In a world full of unknowns, it’s human nature to feel more secure by having some type of guarantee.  For some, this might mean holding a certain amount of cash in the bank or having your home paid off in retirement, but the topic I’m tackling in this blog is fixed income sources in retirement.  Traditionally this meant a pension, social security, and annuity income.  However, with pension plans now being about as common as seeing a walkman CD player and social security having its own issues, I think it makes sense to explore other options to provide a guarantee for a portion of your retirement income need.

The 50% Fixed Income Rule of Thumb

One of the many questions we discuss with clients when working with them on their financial plan (especially when they are approaching retirement) is how much of their spending goal should be comprised of fixed income sources?  Ideally, we would like to see that percentage around 50%, but every client situation is different.  So if the annual spending goal is $100,000 gross, $50,000 of fixed income sources (social security, pension or annuity income) is desirable with the remainder of income being drawn from a well-balanced, diversified portfolio.  However, depending on the client’s risk tolerance and other assets, it could make sense to have that percentage higher or lower. 

The Bygone Pension Era

Since one of the main fixed income sources for a retiree was a company pension – now virtually non-existent – it’s often up to you. The burden has been placed on the employee to fund their own retirement through a 401k, 403b or other defined contribution plan.  While company matches certainly help the employee, they don’t come close to offering the same lifetime income benefit a pension provides.  As such, it could make a lot of sense to explore the option of utilizing a fixed annuity for part of your retirement need. 

Making Room in your Plan for Annuities

Annuities don’t make sense for everyone and they have rightfully received a bad rap. Many of them are expensive and were “sold” in situations where it just didn’t make sense for the client based on their needs and their personal situation.   However, annuities are around for a reason, because they can fit the need for certain clients for a PORTION of their financial plan.  With so many different options for income, annuities typically place the burden of risk on the insurance company offering the annuity for a guaranteed stream of income.  Having a portion of your spending goal met by a fixed income source, such as an annuity, gives many clients an added layer of peace of mind, knowing that the income stream will be there regardless of what the market is doing. 

In summary, annuities can have a place in your financial plan but like anything financial, they don’t make sense for everyone.  This is our job, as your financial team member, to work with you to see if they have a place in your plan.  Don’t cringe when you hear the word “annuity” like many do. Please have an open mind because they could play a very important role in your retirement!

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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.

This material is being provided for information purposes only and is not a complete description, 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. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. There are special risks associated with investing in bonds (fixed income) such as interest rate risk, market risk, call risk, prepayment risk, credit risk, and reinvestment risk. Investing involves risk and investors may incur a profit or loss regardless of strategy selected. 

A fixed annuity is a long-term, tax-deferred insurance contract designed for retirement. It allows you to create a fixed stream of income through a process called annuitization and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face fees called surrender charges. If you're not yet age 59½, you may also have to pay an additional 10% tax penalty on top of ordinary income taxes. A fixed annuity contains guarantees and protections that are subject to the issuing insurance company's ability to pay for them.

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Efficient Tax Planning is a Year-Round Job

While many of us are so focused this time of year on getting our tax returns done and over with until 2016, year-round tax planning is something that excites us number geeks!  Taxes are something we really can’t control, right?  Not exactly.  While we can’t change the tax rates set by our government, we can work collaboratively with you and your tax professional to make sure certain financial decisions throughout the year ensure that you are being as efficient as possible with your tax situation.  Let’s take a look at a few examples:

Example #1: Ford Stock

Say you have a stock position in Ford that you purchased when the “sky was falling” at $3/share.  Now it is worth much more and you have an unrealized gain of $20,000.  You might not want to part ways with the stock because it has done so well and you don’t want to pay tax on that nice $20,000 gain.  This might make your reconsider: If your taxable income falls within the 15% marginal tax bracket, chances are you would pay very little or possibly ZERO tax on the $20,000 gain.  You could lock in some nice profit on the stock and potentially improve the overall allocation of your portfolio. 

Example #2: Roth Conversion

Let’s take a look at another real life example we see very often.  What if your income this year drops significantly?  Whether it be a job loss, retirement, job change, etc. this is something we want you to keep us in the loop on for pro-active tax planning purposes.  In this situation, a Roth IRA conversion could make a lot of sense if your income this year will fall into a lower tax bracket that you will most likely never be in again.  Paying tax at a much lower rate than you normally would and moving Traditional IRA dollars into a Roth IRA for potential future tax-free growth could be a monumental planning opportunity.   

Sharing Your Tax Returns

These are just two examples of the many factors we are looking for in your financial plan to make sure your dollars are being taxed efficiently.  You can help us do this work by providing us with your tax return early in the year.  This gives us a much better chance to fully analyze your tax situation throughout the year to see if any tax planning strategies could make sense for you and your family.  Many of our clients have now signed a disclosure form allowing us to contact their CPA or tax professional directly to obtain copies of returns and to discuss tax-planning ideas.  This saves you, as the client, the hassle of making copies or e-mailing your return to us – we are all about making your life easier! 

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.

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. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Raymond James does not provide tax advice. You should consult a tax professional for any tax matters. C15-004265