Center Stories: Laurie Renchik, CFP®

Financial planning doesn’t mean planning for the day your health begins to fail. It means asking, “Where do I want to be in three years? Ten years? Twenty years?” Here’s how I help. One of my special interests is working with women who are handling financial assets and want to move forward with their financial lives. We focus on what is important to you. To me, that means being authentically interested in your life story, because financial planning done right is all about you, your plan and your goals. I work with you to put the financial pieces in place so that you can focus on what you do best…living your life!

The below video is an opportunity for you to hear my perspective on finding the right fit in a financial planning relationship. The confidence to know you have a handle on the financial aspects of your vision is why I am inspired to help clients create and manage financial plans to serve as a guide for future success. If you’re interested in working together, please don’t hesitate to contact me!

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner 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 is a member of the Leadership Oakland Alumni Association and is a frequent contributor to Money Centered.

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What is a Non-Qualified Stock Option (NSO)?

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A stock option is a right to buy a specified amount of company shares at a specified price for a certain period of time, as Matt Trujillo, CFP® introduced last month in his blog on ISOs. Unlike ISOs, NSOs (also sometimes referred to as NQSOs) do not receive special federal tax treatment and are more commonly granted by employers. Often preferred by established companies, NSOs granted to an employee will result in ordinary income when exercised and are easier to administer as they do not have to adhere to rules specific to ISOs. Like any stock option, the intent is to give extra incentive to focus participants on increasing the company’s stock price. They are a flexible tool that can allow companies and participants to take advantage of stock price growth at a fairly low cost.

The Basics:

  • Initiation date of the contract is known as the grant date. This is not a taxable event.

  • Employees must comply with a specific vesting schedule to exercise.

  • Exercise date is the date an employee is allowed to take full ownership of the specified lot of shares.

  • After the expiration date, the employee no longer has the right to purchase the company stock under the agreement terms.

Taxation:

  • In contrast to ISOs, NSOs result in additional taxable income to the recipient at the time of exercise, which is the difference between the exercise price and the market value on the exercise date.

  • To determine the amount of tax to be paid, the exercise price is subtracted from the market price on the date the option is exercised. This is called the bargain element which is considered compensation to the employee and is taxed at their ordinary income rate.

  • The sale of the security results in another taxable event. If sold less than a year from the exercise date, the transaction is considered as a short-term capital gain and is subject to ordinary income tax rates. If the employee waits a year or more from the exercise date, the transaction is considered a long-term capital gain (LTCG) and taxed at the applicable tax rates (which are much more favorable than ordinary income tax rates).

Planning Opportunities:

Some plans may allow participants to exercise unvested options when they are no longer “subject to a significant risk of forfeiture.” This may be referred to as “early exercise” or “exercise before vest.” This can allow the exerciser of the options to realize ordinary income at a more favorable time when the difference between the exercise price and market value of the stock is low.

Ideally, if you know that you are going to be exercising NSOs that will generate a large amount of ordinary income tax, you can look to lower your income in other ways to reduce your tax burden (ex: maxing out your contribution to your employer’s retirement plan, accelerating charitable contributions, utilizing deferred compensation if available).

Perhaps the most important planning consideration is the effect that stock options will have on your overall asset allocation. It often makes sense to pay the taxes on your stock options to make sure your portfolio is properly diversified.

Hopefully this information is helpful if you are new to NSOs or even if you’ve held them for years but don’t fully understand them. Many employees may not fully understand their stock options. Here at The Center we are always looking at your entire comprehensive financial plan, and stock option strategy is a small but important part of your total financial picture. Consult your financial planner and/or tax specialist to determine the best execution strategy for your stock options.

Any opinions are those of the author and not necessarily those of RJFS or Raymond James. 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 information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. 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.

http://www.investopedia.com/articles/optioninvestor/07/esoabout.asp
http://www.payscale.com/compensation-today/2013/01/non-qualified-stock-options-are-much-better-than-they-sound
https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Non-Qualified-Stock-Options/INF12046.html

Challenge Detroit: A Fellowship Year in Retrospect

Contributed by: Clare Lilek Clare Lilek

It’s hard for me to believe that one year ago I was embarking on one of the most enlightening, demanding, and rewarding yearlong experiences I could have imagined. I came to The Center without any prior experience in the financial industry but with a passion for learning and for positively impacting communities. Through Challenge Detroit I was able to reach and discover many different nonprofits and various organizations doing good in and around the city. Through my time as a fellow, I was able to establish, retain, and bring connections made to The Center in order to expand our personal and companywide impact in the community that we work in.

As the year wrapped up, my “fellow” Challenge Detroit fellows and I worked on three more challenges culminating in a total of six challenges completed throughout the year. For more information on the first part of the year, check out my blog: Challenge Detroit—An Update Halfway Through. Here’s what we’ve been up to since I last checked in:

Challenge #4: Downtown Detroit Partnership

Downtown Detroit Partnership is a partnership of corporate, civic, and philanthropic leaders that supports, advocates, and develops programs and initiatives designed to create a clean, safe, and inviting Downtown Detroit. We worked with the DDP to see how the organization could more positively establish a back and forth communication and integration with Detroit’s neighborhoods outside of the downtown area.

Challenge #5: Detroit Future City and Black Family Development

Detroit Future City are the gatekeepers to the Strategic Framework, a highly detailed long term guide for decision-making, that is meant for all of the stakeholders in the City in order to guide land use and space development. Challenge Detroit was tasked with using their Open Lot Field Guide to take a vacant lot in the Osborn neighborhood and create an open, safe, and beautiful space for the neighbors, while simultaneously working with Black Family Development, a nonprofit in the Osborn neighborhood, on neighborhood specific tasks that involve land development.

Challenge #6: Recovery Park

Recovery Park, centered in the historic Pole Town region of Detroit, aims at developing land, creating job opportunities, and revitalizing a once highly populated area through urban farming. We were tasked with aiding in the redevelopment of this neighborhood through transportation access, small business development, and land beautification.

The past few months of Challenge Detroit went insanely fast. It feels like 2016 was just starting and more than three quarters of the experiences and opportunities that the fellowship brings still lied fatefully ahead. Now, as the year comes to an end and Challenge Detroit prepares to welcome the Year 5 fellows, I can’t help but reflect on the challenges, rewards, and unforgettable experiences this past year has brought me. I am continually grateful for that opportunity, especially since it introduced me to The Center and the wonderful people that work here. The Center chose to participate in the program in order to be connected to and participate in all the exciting work that is being done in the City. I plan on continuing that work and mission with The Center outside of the fellowship in order to keep the Challenge Detroit spirit alive.

Clare Lilek is a Challenge Detroit Fellow / Client Service Associate at Center for Financial Planning, Inc.®

Raymond James is not affiliated with Challenge Detroit or any of the co-operating organizations named. Challenge Detroit: A Fellowship Year in Retrospect

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How to Make Grants from Donor-Advised Funds

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Contributed by: Matthew E. Chope, CFP® Matt Chope

I talk to a lot of clients who have set up Donor-Advised Funds or family foundations and are confused. They’ve figured out how to put money in, but how to make grants isn’t always as clear. The IRS prohibits using these funds to satisfy a pledge. That doesn’t prohibit you from supporting organizations like churches, but it does mean you need to follow certain steps.

The first step is to talk to your attorney and your CPA. They can give you tax and legal advice about making a grant. Carla Hargett, the Vice President of Raymond James Trust, told me if you’re planning on giving to your church, for example, she believes the best way to handle the Donor-Advised Fund Grants is to start by discharging any pledge made in the past. Donor-Advised Funds cannot be used to satisfy a pledge. You can let your church know you intend to provide General Support for a certain amount of money and year(s) going forward. The amount can be close to an amount you’ve given in the past – that’s up to you. But any legally enforceable pledges must be cancelled first. This should stop the audit trail if the IRS ever decides to get into the particulars with a grantor. So make sure the grant requests from your Donor-Advised Fund should say something like "2016 General Support.”  

When pledge time comes around, I recommend that you write on the pledge card something like, "I intend to request a distribution of $XXXX.XX from my Donor-Advised Fund during the 20XX fiscal year." Your church or charitable organization will be familiar with this language and can use it for budget planning similar to a pledge.

We just want to make sure that Grantors of donor-advised funds are doing things as accurately as possible and if an IRS auditor someday digs into your grants, you’ll have nothing to worry about.

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.

The information contained in this blog 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 Matt Chope and not necessarily those of Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

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Rio Olympics: A Lesson in Commitment

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Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

If you’re like me, you spent the majority of your nights this month tuning into the Summer Olympics held in Rio de Janerio, Brazil. I’m more of a football and hockey type of guy but I must admit, watching some of the best athletes in the entire world compete for their respective countries, even in sports I wouldn’t consider myself a die had fan in, was captivating. The level of competition was incredible and you could truly feel the passion each athlete had as they competed for gold. 

While watching the actual games and being engaged in the competition is very entertaining, what hit home the most to me was the level of commitment each athlete had, especially those who are dominant in their respective sport. Athletes like Usain Bolt, Michael Phelps, Katie Ledecky, and Simone Biles are in a league of their own when it comes to training, execution, and their overall commitment to their goals. Training is rigorous and is often times 6 – 8 hours per day 5 – 6 days a week for nearly 4 years in preparation for a 2 week competition. Just think about that for a moment. That’s over 1,000 days of hard work, persistence, consistency and probably ten additional adjectives necessary to describe what it takes to be an elite Olympic athlete. 

As you hopefully already know, setting and committing to goals are at the core of what we help clients with here at The Center. We need to know what’s important to you and what you want to accomplish to help you with your own unique situation to ensure your financial plan is aligned with what’s important to you. Often times, some might perceive this as too “touchy feely” or you might ask yourself, “Why do they want to know this stuff? They’re financial planners, aren’t they just concerned about the numbers?” Simple answer – absolutely not. Committing to goals, whether they are for your family, career, personal life or financial well-being, are critical for your success, just as they are for Olympic athletes. 

As you start to think about the goals you might have, keep in mind what Michael Phelps had to say about them – “Goals should never be easy; they should force you to work, even if they are uncomfortable at the time.” If goals were simple, they wouldn’t be fulfilling. Personally, watching the Olympics re-energized me to better commit to my own goals. Do you have a clear vision of what your goals look like? If so, are they challenging? Commit to the things that bring real value to your life and work hard to make them a reality. Life is too short not to. As always, feel free to contact your financial planner to help prioritize and strategize when it comes to these goals. 

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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3 Reasons Discretionary Investment Management could be Right for You

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Contributed by: Angela Palacios, CFP® Angela Palacios

We all have busy lives. Whether you are getting down to business or enjoyingyour retirement to the fullest who wants to worry about missing a call from their advisor because something in their portfolio needs to be changed? Perhaps cash needs to be raised to meet that monthly withdrawal to your checking account so you can keep paying your traveling expenses. Or money has to be deposited to your investment account, if you are still saving, and needs to be invested. Regardless of your situation, many investors find it difficult to make time to manage their investment portfolios. We argue this is far too important to be left for a moment when you happen to have some spare time. 

What is Discretionary Management?

It is the process of delegating day-to-day investment decisions to your financial planner. Establishing an Investment Policy Statement that identifies the guidelines you need your portfolio managed within is the first and arguably the most important step. Investment decisions are then made on your behalf within the scope of this statement. It is kind of like utilizing a target date strategy in your employer’s 401(k). You tell it how old you are and when you are going to retire and all of the asset allocation, rebalancing and buy/sell decisions are made for you.

3 reasons this can be a suitable option for investors:

  1. Frees up your time to do what you love most. Time is the resource we all struggle to get our hands on. Need I say more?

  2. Markets move quickly and sometimes portfolios must also to respond. Changes can happen in a timely fashion whether you are within reach on your cell phone or not.

  3. May reduce the potential for poor investor behavior. Let those not emotionally charged by fluctuations in the market make decisions on your behalf.

If you have questions on whether or not this is right for you and your portfolio don’t hesitate to contact us.  We’d be happy to help!

Angela Palacios, CFP® is the Director of Investments at Center for Financial Planning, Inc.® Angela specializes in Investment and Macro economic research. She is a frequent contributor The Center blog.

The information contained in this blog 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 Angela Palacios and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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Millennials Matter: The Importance of a Budget

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Contributed by: Melissa Parkins, CFP® Melissa Parkins

No one likes making a budget. It takes time to make, time to maintain, and it can provide some depressing information. All this considered, you still SHOULD make a budget! Actually, no matter your age or where you are in life, a budget is a critical piece to your financial plan. A financially successful future can depend on your actions today, and budgeting is an effective way to keep your actions in check.

Why budget:

A budget helps you best plan for your short term goals (like a vacation, or paying down student loans) and long term goals (like a home purchase, or a comfortable retirement). First you lay out your goals with specific amount and timeline, then you track your spending habits and monitor your progress, and before you know it, your dreams can become a reality! I know, easier said than done. But in all seriousness, a budget is one of the best ways to keep yourself accountable AND focused so that your goals can be met. It also forces you to realize your bad spending habits (the depressing part of any budget) and then work towards correcting them. First know what you earn and what you need to spend to live then determine how much you need to save to reach your goals. As you’ve heard many times before, don’t spend money that you don’t have! Especially if you already have unwanted debt (like student loans!). Even if you are currently comfortable with your income and spending each month, creating a budget is still helpful to identify unnecessary spending and redirect those funds to your priorities. I mean, do you really need to be spending $100 a month on lattes?! A budget will show you what little guilty pleasures actually add up to in the long run, and it may surprise you.

How to setup a budget:

Taking the time to start your budget is the hardest part.

  • First, collect your paystubs and any other regular monthly income statements to determine the amount that comes in each month.

  • Next, collect bank and credit card statements, and other monthly bills to figure out your fixed expenses, necessary expenses, and unnecessary spending.

  • Compare multiple months of statements to determine on average how much you spend monthly.

  • Break down your spending into categories (living expenses, household bills, debt payments, groceries, eating out, shopping, savings etc.).

  • Analyze your spending categories to see which areas are your “bad habits” and you’d like to consciously make improvements.

  • Review your goals and make sure you are appropriately saving for them.

Once you have done all this, you now have your bottom line, and it is just a matter of sticking to it. The way you go about maintaining and tracking your budget is a matter of personal opinion. Some prefer using an excel spreadsheet. Others find online tools such as Mint, Level Money, or You Need a Budget to be most helpful. There are also alternatives to the traditional budget like utilizing multiple checking/savings accounts at the bank to organize your spending and savings (opening different savings accounts and titling them for different goals like emergency fund, travel, etc. or having separate checking accounts for necessary spending and discretionary spending).

It doesn’t matter how you do it, you just need to find the way that works best for you. Creating and sticking to a budget involves discipline, and maybe some sacrifice at times, but it will break the bad habits and replace them with good spending and savings habits. At the end of the day, a budget can help you eliminate your debts and build your net worth quicker. If you have dreams of luxury purchases, traveling the world, paying down student loans quickly, or just having a happy retirement, you need a budget! It can help you reach your goals quicker and easier.

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

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 Melissa Parkins and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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No Such Thing as too much Security!

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Contributed by: Raya Chope Raya Chope

Raymond James has rolled out a new feature for Investor Access called Enhanced Authentication. This is a new, free option that allows clients to add another layer of security to Investor Access accounts.

How Enhanced Authentication Works

If you have ever logged into your Investor Access account from a new, unrecognized device you may have been prompted to answer a few security questions. This new feature replaces security questions with a one-time text message or voice call that includes an authorization code. It’s not until the code is received and entered that you’re able to gain access to your Investor Access.

How to Get Started

To enable Enhanced Authentication, follow these simple steps:

  • Log in to Investor Access from a trusted device

  • Select the Account Services tab

  • Select the Password & Security sub-tab

  • Click the bubble at the bottom of the page to enable Enhanced Authentication

Once the feature is enabled, you will be prompted to choose either a mobile device or a landline from the phone numbers we have on file. If a mobile device is selected, you have the choice to receive the authentication code via text message or voice call. If a landline is selected, a voice call is the only option to receive the code. If you do not see your corresponding phone numbers or would like to add another one to our files, please contact the office.

If you’re new to Investor Access, get started by visiting our webpage and clicking on the Investor Access tab at the top.

Raya Chope is a Client Service Associate at Center for Financial Planning, Inc.®

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Elder Care Planning for Single Older Adults

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As I have written about for many years, having a plan in place for one’s aging years is important. Making sure that there is a plan for future housing, future care, having legacy plans in place, and having the proper estate planning documents procured so that someone is set to handle things in the case of incapacity is vital. For aging couples, it is important that these plans are discussed and ready; but in a worse-case scenario, when plans haven’t been solidified, at least the spouse is in place to help provide support and clean up the pieces, even if the situation isn’t ideal.  But what happens if planning hasn’t been done for a single older person, one who might never have been married and might have no children? One who might not have any close or living relatives, then what?

I have found that many single older adults think that planning for their aging years is very simple. They believe because it is “just them,” not much planning it is involved. Quite to the contrary, because it is “just them,” more planning is actually needed. There are not any default family caregivers or family living situations to rely on. The estate planning area can be a special area of challenge.

For single older adults with possibly no family to name as durable powers of attorney or successor trustees on Trusts, what are possibilities?

  • Consider naming a close family friend that you trust.

  • An estate planning attorney can serve as a general power of attorney or executor of an estate if there is no other suitable person to name.

  • An estate planning attorney or family friend along with a corporate Trustee can be named as a successor trustee of a Trust (i.e. broker dealer of the financial advisor you work with, if that is appropriate and the fees are reasonable).

  • A Geriatric Care Manager might be considered as a power of attorney for health care/patient advocate if there is no other suitable person to name (they have the appropriate background in nursing and social work to make the health care related decisions on your behalf).

Elder Care planning is important for everyone, but especially important for older single adults. If you haven’t started planning and this applies to you, start the conversation with your financial planner today.

Sandra Adams, CFP® , CeFT™ 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 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.

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 Sandra Adams and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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