Tim Wyman: Now is the Time to Rebalance Your Portfolio

Contributed by: Timothy Wyman, CFP®, JD

The end of August for investors might have felt like a ride at Cedar Point. The downs were jarring, the ups exhilarating. In the midst of consecutive days of corrections, Detroit News Financial Editor Brian J. O’Connor interviewed The Center’s managing partner Tim Wyman.

“We investors have been pretty spoiled the last few years with low volatility, and these corrections are certainly more common than people think,” Tim said. “This latest correct is certainly nerve-wracking, but it’s common. This time it’s not different and a prudent, long-term focus will  prevail.”

Shifting investors’ focus from immediate headlines about China, Europe, the Federal Reserve and oil to the long-term may be easier in a bull market. But Tim says concerns should stiffen your resolve.

How Should I React?

When it comes to your next move, Tim told Detroit News that history suggests now is the time to rebalance your portfolio. Taking a look at your mix of stocks, bonds and assets on a quarterly basis is always a good practice, but doing it now makes sense.

“Research suggests that if you rebalance when there are large swings you get the biggest bang,” Tim said. “So this is an ideal time to be rebalancing. Some of that will mean increasing your stock allocation at this time. It’s hard to do, but we know it’s the right thing to do.”

Is the six-and-a-half year historic bull market over? The indicators aren’t pointing to a recession. But during this seesaw of the market, it is time to focus on the long term and consider rebalancing. If you’re ready to take a look at your portfolio, we’re here to help.

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

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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 Tim Wyman and not necessarily those of Raymond James. Past performance may not be indicative of future results. Diversification and asset allocation do not ensure a profit or protect against a loss. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. You should discuss any tax or legal matters with the appropriate professional.

How to Increase Your Social Security Benefit by 8% per Year

Contributed by: Nick Defenthaler, CFP®

Most people have either received their Social Security statement in the mail or have reviewed it online but do you know what your “full retirement age” is and what it actually means?  Full retirement age (FRA) is defined as the age at which a worker is entitled to 100% of their Social Security benefit.  Below is a summary of the current full retirement age “schedule” according to year of birth:

Source:  ssa.gov

The earliest you can collect benefits on your own earnings record is 62, however, the benefit will be permanently reduced, and in most cases, is not something we recommend to clients.  Each year benefits are delayed, you are entitled to a permanent, 8% increase in benefit.  You can also continue to delay beyond your full retirement age until age 70 to fully maximize your benefit. 

Knowing your full retirement age, given your date of birth, is very important because it can impact when you ultimately decide to file and what your actual benefit will be.  As many of you have noticed, several years ago, the Social Security Administration stopped mailing annual Social Security statements out to most Americans as a cost savings measure.  However, creating an account and checking your Social Security statement online has become very easy and is something we recommend to all clients who are still working.  You should check the statement for accuracy as it relates to your wages for the year and to see if your benefits have changed in any way. For step-by-step instructions to quickly set up your own online Social Security account, click here.

Social Security is a critical part of most retirees’ financial game plan, so knowing things such as your full retirement age, is important to make sure you are making the most of the benefits that you’ve earned.  If you have questions about Social Security, we’ll find the answers.  We have a team of CERTIFIED FINANCIAL PLANNER™ professionals who can help guide you through one of the most important financial decisions you will make in your lifetime.  

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 blogs.

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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 Nick Defenthaler, CFP® and not necessarily those of Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

When the experts need financial perspective – who do they call? Center for Financial Planning of course

Contributed by: Center for Financial Planning, Inc.

Rod Meloni of Channel 4 visited with Tim Wyman, CFP®, JD on August 24, 2015 as he breaks down the market turmoil. 

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 speakers and Tim Wyman 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. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The NASDAQ Composite Index is an unmanaged index of securities traded on the NASDAQ system. 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. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Diversification and asset allocation do not ensure a profit or protect against a loss. Raymond James is not affiliated with and does not endorse the opinions of Rod Meloni. Investments mentioned may not be suitable for all investors. Prior to making an investment decision, please consult with your financial advisor about your individual situation. C15-034569

Rising College Costs Make Early Savings Crucial

Contributed by: Melissa Parkins

If you have school-aged kids, what will a college education cost by the time they get there? According to J.P. Morgan Asset Management, if the cost of college continues to increase 5% each year, the cost will be more than double what it is today by 2032.  Colleges are spending more to attract students, hiring more to reduce student-to-faculty ratios, and receiving less financial support from the states.  Add these factors up and costs go up too. And with the rapidly increasing costs, we hear people asking more and more, “Is a college education worth it anymore?” The short answer is: Yes! The value of a college education is growing faster than the cost to attend. A college diploma opens the door to career opportunities, increased earnings potential, and job security.

Graph Source: JPMorgan Asset Management College Planning Essentials

Where do you Start Saving for College Costs?

Wondering how to begin saving for this huge financial goal? Well, you have to start somewhere, and it’s never too early. By starting to save early, you can take advantage of not only potential investment returns, but the power of compounding. Choosing the right savings plan and investment mix can help you maximize growth potential and also help on taxes (and who doesn’t want to reduce taxes?!). You may not make the goal of saving enough to cover all the costs, but check out this chart to compare the investment in college savings vs. taking out loans:

Source: JPMorgan Asset Management College Planning Essentials. This is a hypothetical example for illustration purpose only and does not represent an actual investment. Actual investor results will vary.

What are my College Savings Plan Choices?

There are many ways to set aside money for college expenses. Some families use traditional savings accounts while others use tax-advantaged accounts, like 529 plans. These give you the opportunity to grow your contributions faster than using a taxable investment account earning the same exact returns. Not only can you withdraw money for qualified expenses tax free, but many 529 plans offer state tax deductions as well. This chart illustrates the impact of investing in a tax efficient way for college:

Source: JPMorgan Asset Management College Planning Essentials. This is a hypothetical example for illustration purpose only and does not represent an actual investment. Actual investor results will vary.

What about other Ways to Pay for College?

Perhaps you’re hoping to rely on financial aid, grants, or scholarships? Remember, not all aid is free and not everyone qualifies. According to www.finaid.com, only 0.3% of college students receive enough grants and scholarships to cover all costs. And loans? Well, it costs more to borrow and pay interest than to save and earn interest. Not to mention the burden it causes not only to the student, but their family as well.

Source: JPMorgan Asset Management College Planning Essentials

Need help getting started on saving for college costs? We can work with you to find a plan that fits your family. Also, look for details to come out soon for our September webinar on Ways to Raise Money Smart Kids.

Melissa Parkins is a Registered Client Service Associate at Center for Financial Planning, Inc.

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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 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 a loss.

Investors should carefully consider the investment objectives, risks, charges and expenses associated with 529 plans before investing. This and other information about 529 plans is available in the issuer's official statement and should be read carefully before investing. Investors should consult a tax advisor about any state tax consequences of an investment in a 529 plan.

As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state. 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.

Post-Transplant Report on Tim & Kacy Wyman

Contributed by: Center for Financial Planning, Inc.

You may have heard that Tim Wyman was out of the office earlier this summer. He underwent surgery to remove a kidney, which was then transplanted to his daughter Kacy. Tim’s wife Jen Wyman gave us this update on how the recovery is going:

Tim and Kacy have just passed the 12 weeks post-kidney transplant mark …. a milestone of sorts. After a rough surgery and recovery for Tim, he is back to an almost normal version of himself, less a kidney, but otherwise feeling like himself.  While it has not been easy on him, he would do it over again in a heartbeat.  All he has to do is look at Kacy to know that.    

Kacy, despite the fact that she has a 12-inch scar, looks and acts as if nothing ever happened. She has completed 12 weekly uneventful transplant clinics with very few medication tweaks.  Her labs are stable and her health has been excellent.   She now will go to clinics every other week, 11 different medications will reduce to 8, and 40 daily pills will now be 34.   Still big numbers, but as the weeks and months go by, so too will the medications reduce.  Each week is a baby step in the right direction with no signs of rejection and a happy and healthy Kacy.  She just restarted her competitive swim schedule and is ready for her 7th grade year with her dad’s kidney and a new lease on life.   I have a new respect for Tim and Kacy having watched them endure this journey together.  Tim gave her the ultimate gift of life and Kacy’s body welcomed it as her own.  

Stock Market Update

Contributed by: Angela Palacios, CFP®

In the past week the S&P 500 tumbled amid increased volatility, wiping out all gains year to date and sending the index into negative territory.  Activity like this can be unsettling so please find some of our thoughts and observations following. 

Why is this happening?

• Uncertainty around whether or not the FED will raise rates next month is concerning in general.  Markets don’t like this uncertainty as we move closer to September.

• Weak growth in China and Emerging markets are spilling over into commodities and the currency markets causing concern in general that there will be contagion to local markets.

What have we done to prepare?

• We expect volatility like this to happen from time to time.  The past several years have been an anomaly with little to no volatility.  Reacting is rarely a profitable move for an investor but acting ahead of time can be.  We have structured a portion of portfolios with active managers that have been building cash positions for just these moments.  When they see attractive opportunities they can put that cash to work.

• Bonds were never abandoned; in fact, we have increased our exposure here over the past year.  Even when faced with rising interest rates, we believe bonds are an important piece of diversification as they have held up very well in this short downturn giving positive performance.

• We utilize a bucket strategy when managing clients’ accounts to provide cash flow that is needed even when markets are at their most volatile.  The first bucket of defense is the cash that we hold to fund any current cash flow needs.  The next bucket is short term and high quality bonds which as mentioned above usually hold up well in a market rout.  Your personal situation dictates how much is appropriate to hold within these buckets.

What else can you do?

• Make sure your long-term allocation is still appropriate

• Double check thatyour time frame is correct for the investments in your portfolio

• Review and consider your risk tolerance for those investments

A correction doesn’t necessarily mean a recession is looming.  None of the indicators we are following point to a recession on the horizon so we feel this is just a temporary pullback.  This is the time when you lean on your financial planner to help you make the right decisions for your goals and needs and not act out of panic or fear.  Please feel free to reach out to us with any concerns or questions you may have, we are here for you!

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 as investment updates at The Center.

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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 Angela Palacios, CFP® and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investments mentioned may not be suitable for all investors. Past performance is not a guarantee of future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Individuals cannot invest directly in any index. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Diversification and asset allocation do not ensure a profit or protect against a loss.

3 Things a Widow can do to Gain Financial Control

Contributed by: Sandra Adams, CFP®

Typical of most couples, my clients “Mike and Sue” split the household chores evenly.  She handled the house – decorating, cleaning, meals, etc.  He handled the cars, and the finances, including paying the bills.  He was a retired engineer – he loved cars and he loved numbers and details.  She hated all of that numbers stuff – so much so that for the most part she didn’t even attend annual meetings with their financial advisor -- until the last few years that I offered to go out to their home to meet so she would be involved in the annual meeting. I felt like it was important that Sue at least have a basic understanding of what was going on.

Mike was killed unexpectedly in a car accident; a man taken way too young in his mid-70’s.   Sue was taken completely by surprise and was unprepared, as most of us are, to be alone.  Her children live nearby, so that was comforting.  From a financial perspective, she was at least knowledgeable about what she had to work with and knew who to call, and we were able to speak immediately.

In the coming months, Sue gave herself time, as we recommended, not to make any big decisions; to find her new normal without Mike.  This involved figuring out what her new cash flow looked like; she got rid of some services and added some others, etc.  Sue also worked her way through Mike’s bill paying system.  It was very detail oriented and complicated – way too rigorous for her tastes.  But she felt, somehow, like she needed to stick to his system because it had always worked for them.  My advice to Sue (and to any widow) as they take control of their own financial affairs after the death of a loved one is this:

1. Take the time to figure out what your new normal is and what changes can be made to fit your new lifestyle;

2. Use a system that makes things easy for you, don’t stick to a system that makes you crazy just because it’s the one that your deceased spouse used for years;

3. Use your financial advisor as a partner/coach to help guide you through the process as you take control of your financial life.  If this is new to you, it could take a year or two for you to feel comfortable with the process.  And that’s okay.

Becoming a widow at any age is challenging enough, without facing the additional hurdles of handling things you weren’t responsible for in the past.  Use your resources and give yourself permission to design your financial life to fit your new normal. 

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 material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James.

Pros and Cons of Qualified Longevity Annuity Contracts

Contributed by: Matt Trujillo, CFP®

A recent IRS ruling made it possible to defer 25% or $125,000 of your 401(k) and/or IRA assets into a qualified longevity annuity contracts or QLAC.  Our financial planning department here at The Center decided to explore these in greater detail to see what, if any, merits these products might have in clients’ overall financial plans.

QLAC Option 1

To start there are two main types of these QLACs. In the first, you give your money to an insurance company in exchange for substantial future payments (usually beginning at age 85). In return, the life insurance carrier gets to keep the full initial premium in the event that you pass away prior to benefits starting. This is an insurance product like auto and home-owners insurance in the sense that if you don’t use it, you lose it.  Due to this forfeiture of initial premium, this product has not been widely adopted.

QLAC Option 2

So, in order to make the product more marketable, insurance companies have recently come out with a second type of product that guarantees a return of your initial premium. However, this too has drawbacks because you are giving up any potential growth you might have had on the money prior to benefit payments commencing. Also, when benefits do finally commence, the payout is not quite as high as the first product because the insurance carrier is on the hook to return 100% of the initial premium.

Consider the Drawbacks

Essentially the drawbacks of QLACs can be summed up quite easily. If you purchase one and you die prior to benefits commencing, then you made a bad deal. However, if you purchase one and do live at least 5 years past the commencement of benefits, you rapidly recover the entire initial premium and start to draw more than you initially paid.  

Just like the name of the product suggests, these seem to only make sense as a hedge against living an above average life expectancy. If longevity risk is something that concerns you, we encourage you to speak with a professional to understand what methods can be taken to give your plan the greatest probability of success!

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 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. You should discuss any tax matters with the appropriate professional. Guarantees are based on the claims paying ability of the issuing company.

Clare Lilek is Up for the Challenge

Contributed by: Center for Financial Planning, Inc.

As we told you last month, we’ll be welcoming a Challenge Detroit participant to The Center starting in September. Let us take the opportunity to introduce Clare Lilek in her own words. Clare is a University of Michigan graduate who spent the last year working in Peru as a volunteer. For more about Clare, here is her Challenge Detroit application video.

Raymond James is not affiliated with Challenge Detroit.

Part 8 – A Year of Lessons on Money Matters for your Children and Grandchildren

Contributed by: Matthew E. Chope, CFP®

What motivates you? You might get out of bed in the morning and go to work because you want shelter, nutrition and safety. You might do it because you love your job and can’t wait to get to the office. Understanding what incentivizes you can help you accomplish what is most important and help you prioritize to do the hardest things first.  These are important – yet sometimes overlooked – lessons to share with your children, whether they are tackling tough assignments in school or facing obstacles at the beginning of their career.

Rewards = Results

Try figuring out how to motivate yourself to get results suggests Charlie Munger, Vice Chairman of Warren Buffett’s Berkshire Hathaway Corporation. He calls it the “reward and punishment super response tendency” in his book On Success.  Great employers have managed this for their key employees; but you can do this for yourself.  When you achieve the results you want, reward yourself.

Early in my career, at age 25 I needed to make calls to people I did not know and ask them to considering doing financial planning with me.  This was a difficult task, but I knew it was necessary to build a business.  At the time I enjoyed coffee so it became my reward. If I made my calls each day and achieved the results I needed to succeed, the next morning I treated myself to a coffee.  At the end of the week, if I meet my weekly goal, I bought myself a Twix candy bar to enjoy. Your personal rewards may be different, but they should be motivating. And expect them to evolve over time. Maybe that Twix becomes a vacation if you reach your quarterly goal or new car if you meet your annual goal.

Setting Your Priorities

If you have 5 projects or jobs and one is going to be the most difficult (but also the most important), where do you begin? I suggest if you are having a difficult time in a certain aspect of your business, begin by tackling a portion of the problem first.  Then go to something that’s easier and come back to the subject that is troubling before ending your day. Back to me at age 25, I didn’t like making calls to people I didn’t know but needed to make 20 a day.  I found if I started by doing the difficult part – I wasn’t looking at that list all day. 

If you can determine what motivates you to accomplish your daily tasks, you can reach your work goals. As a bonus, linking incentives to challenging tasks and prioritizing your time can also lead to personal growth and accomplishment.

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.

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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.

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 Matthew Chope, CFP® and not necessarily those of Raymond James.