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Medicare Changes in 2017

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Contributed by: James Smiertka James Smiertka

We all know Medicare can be complicated, and the cost of benefits change each year. In recent years, you may have heard that you should expect rising premiums and higher out-of-pocket deductibles. These Medicare costs are tied to the COLA (cost-of-living adjustment) that increases the benefit of Social Security recipients each year. The Social Security Administration decides the year’s COLA based on the inflation rate from the prior year.

Most recipients of Medicare pay premiums for Part B coverage whether they pay for Part A coverage. Generally, Medicare recipients with 40 quarters of Medicare-covered employment receive Part A coverage while not paying a premium. Part A covers hospital stays, skilled nursing facilities, and home health and hospice care. Part B covers other things like doctor visits, outpatient procedures, and medical equipment. Premiums are also required for Part D prescription drug coverage.

So how exactly does this year’s 0.3% Social Security COLA tie in with Medicare costs?

In 2016, there was no COLA for Social Security, and with the increase in Medicare Part B premiums about 70% of Social Security recipients did not have to pay the higher premiums do to the “hold harmless” provision which prevents them from having their Social Security incomes drained by the rising Medicare premiums. With this year’s 0.3% Social Security COLA recipients can expect to pay just a few dollars more per month. The average increase will be about 4%.

Medicare announced increases of about 10% for 2017 part B premiums & deductibles. There are modest increases for Part A premiums, and Part D plans have already been set and are not affected by the Part A or Part B changes. This year’s 0.3% Social Security COLA will be too small to fully fund higher Part B premiums so many recipients will once again be saved from increases by the “hold harmless” provision.

Here are Medicare numbers for 2017 from Raymond James.

  • Premiums are higher for those with higher taxable incomes ($85,000 for individuals and $170,000 for couples filing jointly).

  • The average Medicare Part B premium in 2017 will be about $109 (compared to $104.90 for the past 4 years).

  • Standard premium is increasing from $121.90 in 2016 to $134 in 2017.

  • The Medicare Part B deductible is increasing from $106 in 2016 to $183 in 2017.

  • The monthly Medicare Part A premium for those needing to buy coverage is increasing from $411 in 2016 to $413 in 2017.

  • The Medicare Part A deductible for inpatient hospitalization is increasing from $1,288 in 2016 to $1,316 in 2017, with additional increases to daily co-insurance amounts for stays that exceed 61 days.

  • The co-insurance cost for beneficiaries in skilled nursing facilities will increase from $161 in 2016 to $164.50 in 2017 for days 21 through 100.

For the 5 to 6 percent of enrollees that earn enough to trigger the high-income surcharges, here are the numbers:

  

If you’re not enrolled in Medicare, remember to enroll in the 7-month period around your 65th birthday, and contact your financial planner with any questions.

Additional Links

James Smiertka is a Client Service Associate at Center for Financial Planning, Inc.®

Any opinions are those of James Smiertka 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."
Sources: http://www.hhs.gov/about/budget/fy2017/budget-in-brief/cms/medicare/index.html
https://www.thestreet.com/story/13747734/1/how-to-prepare-your-finances-for-medicare-changes-coming-in-2017.html
https://www.medicare.gov/pubs/pdf/10050-Medicare-and-You.pdf
http://www.pbs.org/newshour/making-sense/2017-medicare-premiums-and-deductibles/
https://www.medicare.gov/pubs/pdf/10050-Medicare-and-You.pdf
http://www.raymondjames.com/pointofview/medicare-updates-for-2017

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Giving Thanks

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Contributed by: Gerri Harmer Gerri Harmer

Most of us give thanks on Thanksgiving. Some have started listing what they’re thankful for every day of November on social media which I think is absolutely fantastic. It’s how I start my day, not on social media but some kind of affirmation to myself. Most of the things they mention are big things they are most grateful for such as people like family and friends. While I know those are indeed the most important things, I’ve found that the little things about those big things are the things I remember most.  When I think back about some of the best times with family, I don’t always remember the gift I got my son for his birthday but I do remember that big mega-watt smile that spread over his face and the feeling of joy in my heart knowing his day was filled with excitement and bliss. I don’t recall the jokes my dad told or his bigger than life stories but I do remember his voice and the way his eyes lit up when he laughed. I recall my grandmother’s advice and her listening to my latest adventures with excitement as if it were the greatest story she’d ever heard or the hugs I received from grandpa or Mom putting the special spice in the recipe. These small moments fill us. They are what we hold in our hearts. I think Maya Angelo said it best, “People will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

It may sound corny but how we make clients feel is what we hold dear here at The Center. We consider our clients to be part of our extended family. It’s important to us to we take care of their needs, spoken or unspoken, to the best of our ability. If we don’t have the answer, we’ll research it. When our clients call, we do our best to respond as quickly and thoroughly as possible and if we can put a smile on their face or a more peaceful feeling in their hearts then we’re content. When clients go through a joyful occasion, we cheer, when they’re going through a rough time, we feel it and do what we can to make it easier. We prepare in advance for possible emergencies whether it’s economic or situational. We try to get to know clients’ families, in case anything should happen we know who to contact and how to help. We take time to think about how we can do better for our clients even if we’re doing great. We want our client families to create the best lives they can possibly imagine and we feel incredibly thankful they have chosen us to share time and those moments.

Happy Thanksgiving from your Center Family!

Gerri Harmer is a Client Service Manager at Center for Financial Planning, Inc.®

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Market Sector Impact of Donald Trump's Presidential Win

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Contributed by: Jaclyn Jackson Jaclyn Jackson

By appealing to white, blue collar voters, Donald Trump unexpectedly captured rustbelt states and secured the 2016 presidential election. Additionally, Republicans made a clean sweep taking both the House and Senate majority. Uncertainty remains as many await cabinet selections and the unveiling of comprehensive policy. Market industry professionals anticipate rising performance from equity sectors that benefit from tax reform, infrastructure stimulus, and deregulation. The “Post-Election Day Winners and Losers” chart gives us insight as to how market sectors have performed post-election. Below, I’ve explored how each sector could continue to win or lose under the Trump administration.

The Winners

Industrials/Materials: Throughout the campaign trail, Trump showed great enthusiasm for infrastructure spending. Accordingly, industrials picked up after the election. Civil infrastructure companies and military contractors will likely have more opportunity for government work under his administration. As a result, the material and industrial sectors should have legs to run. 

Energy: Companies linked to fossil fuel energy may see a lift under a Republican White House because of less regulation and slower adaptation to renewable energy. Trump’s support of coal energy positions the energy sector for rebound.

Healthcare: Assuredly, the Affordable Care Act is on the agenda for repeal under the Trump administration. Companies that have benefited from Obamacare may decline. In contrast, pharmaceutical and biotech stocks have rallied due to the President-elect’s relatively lenient stance on drug pricing. Yet, there are no sure signs this sector will remain a winner since Trump also favored prescription drugs importation (unconventional for GOP policy) during his campaign run. According to Morgan Stanley analysis, prescription drug importation could negatively impact pharmaceutical companies.

Financials: Banks have rallied as Trump’s victory points towards deregulating financials. Conversely, well-known investment management corporation, BlackRock, challenged that repealing the Dodd-Frank law may result in “simpler and blunter, but equally onerous rules.”

The Losers

Treasuries: As votes tallied in favor of Trump’s victory on election night, investors fled from equities to Treasuries. The risk-off approach, however, dissipated overnight; perhaps because Trump’s victory speech was more conciliatory than expected revealing hope for moderate governance. Ultimately, U.S. Treasury concerns hinge on whether Trump’s policies widen the deficit.

Emerging Markets: Mexico’s reliance on exports to the US leave it vulnerable to tariffs/trade wars, therefore, Mexico and countries alike (Brazil, Argentina, Columbia) could sell off. We’ve already witnessed the peso falling in response to Trump’s protectionist views. On the other hand, JPMorgan’s chief global strategist, Dr. David Kelly, encouraged investors to evaluate emerging markets by their own “strengths.” China and some countries in Latin America, for example, are adjusting well to growth and lack populous sentiment. Overall, emerging markets have forward momentum with improving economies, easing monetary policies, and a global focus on spending.

Developed Markets/Euro: Companies with money overseas in the technology, healthcare, industrials, and consumer discretionary sectors, could gain from Trump’s desire to incentivize business repatriation of offshore cash. Subsequently, the Euro has fallen provided high concentrations of US based multinationals’ earnings are in Europe.

Consumer Stocks: Consumer stocks could be hurt because tougher immigration restrictions may deter labor supply and consumer demand. Additionally, policies that force tariffs on countries like China and Mexico may unintentionally pass on the costs of tariffs to US consumers.

If you have questions about your portfolio or how these “winners and losers” might affect you and your future, please reach out to your planner. We’re always here to help and answer your questions!

Jaclyn Jackson is an Investment Research Associate at Center for Financial Planning, Inc.® and an Investment Representative with Raymond James Financial Services.

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 Jaclyn Jackson 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. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Investing in emerging markets can be riskier than investing in well-established foreign markets. Investing involves risk and investors may incur a profit or a loss. Past performance may not be indicative of future results.

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Deepening Financial Planning Knowledge: FPA Residency

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Contributed by: Kali Hassinger, CFP® Kali Hassinger

Financial Planning is more than just analyzing data and crunching numbers – it’s also about trust, communication, and (most importantly) relationships. While studying for the CERTIFIED FINANCIAL PLANNER™ certification, all candidates are, perhaps obviously, required to focus on the technical (and necessary) knowledge to be a worthy financial planner. Upon finishing the coursework and passing the test, however, the relationship facet of a financial planning practice is left somewhat overlooked.  In hopes of filling this gap, the Financial Planning Association (FPA) offers a “Residency” program for new financial planners who are looking to hone in on their interpersonal skills. I was lucky enough to be one of the attendees at this workshop in Denver, Colorado last month. 

The FPA Residency program provides a space to refocus on the subtle skill of building relationships based on trust, authenticity, and mutual respect. Although I would have argued that you either innately possess these abilities or you don’t, this course ultimately changed my mind.  Every skill in life can be practiced and improved upon, and communication is no different. The Residency focused on specific strategies such as how to ask the most effective questions and minimize miscommunication. It also focused on the more delicate skill of how to better notice and acknowledge emotions in others. 

Financial Planning is a deeply personal matter for all of our clients. We are discussing your life’s work, your dreams, and your family. In many cases, the financial aspects of these matters aren’t discussed with anyone else, so it’s normal for clients to have a certain level of anxiety when engaging a financial planner or preparing for a meeting. Although numbers and strategies will always be a main focus, above all, we strive to provide clients with a relationship that provides them with confidence. By recognizing, understanding, and dealing with the emotions that are often incited by finances, we can better serve our clients in all aspects of financial planning. Without question, I personally benefited from the FPA Residency program. I hope to use this benefit, however, to foster effective and valued financial planning relationships in the future.  

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

Raymond James is not affiliated with the Financial Planning Association. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Webinar In Review: Post Election Update & Year End Planning Opportunities

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The Center's most popular webinar of 2016 was the Post-Election Update and Year End Planning Opportunity presentation. Melissa Joy, CFP®, and Nick Defenthaler, CFP®, break down what President Trump's win may mean for financial markets. They also review areas of financial planning including retirement, taxes, and investments for year-end financial planning opportunities.

Catch a replay of the webinar below. Also, we have a companion year-end planning guide available along with a year-end planning worksheet.

Center for Financial Planning, Inc. is a Registered Investment Advisor and independent of Raymond James Financial Services. Securities offered through Raymond James Fianncial Services, Inc., Member FINRA/SIPC.

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Why You Should Have a Roadmap for Your Aging Years

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I was asked to speak on a panel of professionals recently on the topic of “11th Hour Planning,” which is essentially planning steps that should be taken when a person nears the end-of-life. Much of the discussion revolved around the vast differences in the resulting situations when a client has planned ahead for their aging years versus when they have not. It was certainly the consensus of the professionals on the panel that those clients who plan in advance have a much more pleasant experience overall, their families are generally less stressed and panicked, and, more often, there are better financial results.

What, might you ask, is involved in “planning for your aging years?” I am referring to planning that goes beyond traditional retirement planning, where we are talking about cash flow projections and making sure your money will last as long (or longer) than you will. The financial aspect is an important piece, and as we discuss what I call the Roadmap for your Aging Years, the financial piece will focus largely on how to pay for funding during the later years of your retirement. We hope that those later years continue to be filled with travel, hobbies, and fun, but they could involve expenses focused on healthcare and long term care.

The Roadmap for your Aging Years covers the following topics:

  • Housing

  • Care (Where will you receive Care/Whowill Care for you)

  • Family

  • Legacy

  • Financials

Within the context of the above topics, you design your plan by exploring the Challenges you see yourself facing as you age, the Alternatives (i.e. solutions) you have for facing those challenges, the Resources you may have at your disposal for facing those challenges, and ultimately envisioning the Experience you would like to have as you age. We call this the C.A.R.E. planning method that was developed by Dan Taylor, author of The Parent Care Conversation. Ideally, you design your Roadmap with the guidance of a professional (your financial planner can help) and in collaboration with your family, so that everyone is on board and part of the plan from the beginning.

The 11th hour can come for any of us at any time, but for most of us comes later in life. Planning ahead can make end-of-life a less stressful experience if there is a plan in place.  If you do not yet have a Roadmap for Your Aging Years, contact your financial planner today to start the conversation.

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.

The opinions expressed are those of Sandra Adams and are not necessarily those of RJFS or Raymond James. Raymond James Financial Services, Inc. and its advisors do not provide advice on tax or legal issues, these matters should be discussed with the appropriate professional. Raymond James is not affiliated with nor does it endorse Dan Taylor.

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How to Handle Financial Transitions

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Contributed by: Timothy Wyman, CFP®, JD Tim Wyman

Kaboom! You are a Baby Boomer or Gen X-er providing loyal service to your employer for 10, 20 and maybe even 30 years and now you find yourself in a period of transition. Let’s face it – a career transition or period of temporary unemployment or underemployment can be a bit frightening and life altering. As I have worked with folks over the last 25 years, many of them going through a major change, I have come to appreciate the additional complexities with such changes. I have witnessed otherwise rational and intellectual behavior be replaced with confusion and thought paralysis – some leading to regrettable long term decision making.

Fortunately, I have also worked with other folks and watched them put plans and plans of action into place to weather the storm. As one of my favorite sayings goes, “Life isn’t about waiting for the storm to pass. It’s about learning to dance in the rain.” People can and do survive periods of financial change and you can too.

There are some specific financial issues for those experiencing a transition.

First, I’d like to introduce you to two concepts or strategies that I have picked up over the years from the Sudden Money Institute. The first is to simply allow or give yourself permission to withhold long term decisions for a period of time, usually as long as 6 months. Decision making can be impaired in times of significant change due to stress– so don’t feel that you have to decide everything right away. Think of this as the Six Month No Decision Zone.

Now, working in a six month decision free zone doesn’t mean you shouldn’t start planning.  Life continues and plans need to be made as there are many details associated with a life transition. So, the second strategy in decision making is the “Now - Soon - Later list”.  Simply write out all of the things you need to address – but prioritize them. By writing them down, you free the mind from constantly having to think about them knowing you have it on your list to address at the appropriate time and allow you to focus on what matters now.

How about some financial strategies relevant to a career transition?

On your Now list you might address Cash Flow Strategies. While you may not have required a working budget in the past, this may be a time to develop a budget and also determine any short term cash needs. If you determine that reducing spending/expenses is in order, take a tip from Stephen Covey and focus on the Big Rocks. The big rocks when it comes to spending are houses and cars. These two areas consume the majority of the average family budget – and to make a real impact on the overall level of spending these two areas need to take center stage. 

If very short term funds are needed you might consider a 60 day IRA rollover, which can be done once every 12 months*. Another strategy to get at funds if needed is a little known rule for qualified plans (think 401k) that allows folks who separate from service after age 55 to take funds without incurring the 10% excise tax (normal income taxes will apply). Lastly, cash value life insurance policies can be a source of short term funds as many times as the loan provisions are attractive.

For example, let’s say a couple, John and Sally, both age 57, and John has recently left his employer after 20 years of service. John’s initial prospects for a new role have become a bit less clear after three months. John and Sally feel that they will need some additional income for family living expenses. Even though John’s financial advisor suggested he roll his 401k immediately to an IRA, John followed the six month no decision zone strategy. Because John left his 401k intact he can withdraw funds without incurring a 10% penalty. 

Debt doesn’t have to be one of the bad four letter words – but in financial transition special care should be taken. One type of loan to consider is a Securities Based Line of Credit that uses taxable investment assets as the collateral. Rates, while variable, are very competitive with other forms of financing and are not tied to one’s house. 

Employee benefits and the conversion or replacement of certain benefits might be appropriate on both the Now and Soon list. Health care coverage in particular is an immediate need or on the Now list. Cobra might be an option if you worked for an employer with greater than 20 employees. The health care exchange may also be an option along with substantial subsidies based on income. On the Soon or Later list you might review life insurance portability as many times you will have as long as 12 months to make a decision.

A job transition can lead to both pitfalls and opportunity in the area of income taxes.  First, you want to be sure that you have adequate withholding on any severance pay. Sometimes, in the year one leaves an employer their income is higher than normal; meaning in that year their marginal rate will be higher. Additionally, if you have Stock Options or Employee Stock Purchase Plans you may be required to sell the stock at termination and not able to control the timing of income taxes. Essentially, this is a critical time to manage your bracket a strategy I like to call Bracket Maximization.

There are also some potential opportunities to consider during a period of unemployment when your income is lower than what you expect it will be in the future. For example, there is a special 0% capital gain rate for those under the 25% marginal tax bracket; which is about $75,000 for a married couple filing jointly. So, while most of the time a tax LOSS harvesting strategy is recommended, this might be a time to harvest GAINS. A low income year might also be a good time to accelerate IRA distribution for consumption or via a Roth IRA conversion.

Now let’s say a different couple, Tim and Mary, are 57 and 59 and fortunately have done a good job over the years saving, including establishing an emergency fund. They fully expect to be able to cover one year of expenses in the event Tim doesn’t find a new role soon. When Tim is working, they earn roughly $200k and are in the 25% marginal tax bracket. In 2016, they expect to have income of roughly $50k placing them in the 15% marginal tax bracket. Two opportunities they should highly consider include harvesting the capital gains of stock they received as a gift years ago and converting some IRA funds to Roth IRA within the 15% marginal tax bracket.

As pension plans continue to go the way of the dinosaur, most workers today use the 401k as their main retirement savings vehicle. Twenty years ago I used to say that one’s house is probably their largest asset – today it is probably their 401k account. Why is this significant? As your largest assets it needs to be managed prudently and as a large asset other people are interested in it. There are three main strategies, however, in dealing with a 401k after leaving an employer. All three may be appropriate depending on YOUR circumstances. For example, if you are over 55 but younger than 59.5 and might need income, leaving you 401k in the current plan typically makes the most sense. If you are 50 and may need to pay health care premiums while unemployed, you might choose an IRA rollover so you can avoid the 10% penalty on early withdrawals*. If you have a new employer you might consider rolling it to the new plan so you have immediate funds for a loan (up to $50k) if needed. Whatever your situation, it’s best to work with a trusted advisor to be sure your needs are taken into consideration.

Do you own company stock in your 401k? If so, STOP. The nuances of a strategy called Net Unrealized Appreciate is beyond the scope of this blog post. If you own company stock please review this before making ANY change to your 401k. The long term consequences can be quite considerable, and if you roll the 401k to an IRA or new employer you will have lost the potential benefit forever.

What might a Now – Soon – Later list look like? Well, your situation is unique and will vary, but here is an example:

Now:

  • Put on your dancing shoes

  • Make a 6 month budget – if married communicate

  • Secure health insurance via COBRA or Health Care Exchange

  • Address Stock options and ESPP plans

Soon:

  • Get life insurance loan/withdrawal forms

  • Convert employer life insurance (especially if health concerns)

  • Review current year tax planning pitfalls and opportunities

Later:

  • Review 401k strategies

  • Review beneficiaries

When careers and employers change, life changes. When life changes money changes. A transition provides both pitfalls and opportunities. Good luck on your journey and if we can help you navigate the changing seas please feel free to call upon us.

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.

*If you decide upon a 60 day IRA rollover the full amount distributed to you must be deposited into an IRA or another qualified retirement plan within 60 days, if the full amount is not deposited into a new plan the differential amount will be handled as a withdrawal and income taxes (and a possible penalty if under the age of 59 1/2) will apply.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Timothy Wyman and are not necessarily those of Raymond James or Raymond James. Every investor's situation is unique, you should consider your investment goals, risk tolerance and time horizon before making any investment or withdrawal decision. Prior to making an investment or withdrawal decision, please consult with your financial advisor about your individual situation. Examples provided are hypothetical and have been included for illustrative purposes only. Be sure to consider all of your available options and the applicable fees and features of each option before moving your investment and/or retirement assets. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult atax advisor before deciding to complete a conversion. Please note, changes in tax laws may occur at any time and could have a 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. You should discuss tax or legal matters with the appropriate professional. Raymond James is not affiliated with Stephen Covey or the Sudden Money Institute.

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Center Stories: Angela Palacios, CFP®

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Contributed by: Angela Palacios, CFP® Angela Palacios

Getting to focus on what I love has made The Center a natural fit for me. While I spend much of my time “behind the scenes” here, you may not know exactly what it is that I do. 

Research and investments is what initially drew me to a career in the investment world. I came to the realization after working for a few years that investing and financial planning go hand-in-hand. Without financial planning, investing alone doesn’t always produce satisfactory results. That is why I got my CERTIFIED FINANCIAL PLANNER™ certification early in my career. Eventually these two passions landed me at The Center. Learn more about our investment department, its role within our firm and me here!

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.

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Four Considerations for Year End Tax Planning

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Contributed by: Nick Defenthaler, CFP® Nick Defenthaler

With the end of the year fast approaching, end of year tax planning is top of mind for many clients. At The Center, we are proactive throughout the entire year when it comes to evaluating a client’s current and projected tax situation but now is typically the time most people really start thinking about it. Let’s be honest, how many of us feel like we don’t pay ENOUGH tax? Most clients want to lower their tax bill and be as efficient with their dollars as possible.

Here is a brief list of items we bring up with clients that could ultimately lead to lowering one’s tax bill for the year:

  1. Are you currently maximizing your company retirement account (401k, 403b, Simple IRA, SEP-IRA, etc.)?

    • These plans allow for the largest contributions and are deductible against income.

      • In our eyes, this is often times the most favorable way to help reduce taxes because it also goes towards funding your retirement goals! 

  2. How are you making charitable donations? 

    • Consider gifting appreciated securities to charity instead of cash if you have an after-tax investment account with appreciated positions. By doing so, you receive a full tax-deduction on the value of the security gifted to the charity and you also avoid paying capital gains tax – a pretty good deal if you ask me! 

      • Donor Advised Funds are a great way to facilitate this transfer and are becoming increasingly popular lately because of the ease of use and flexibility they provided for those who are charitably inclined.

    • If you’re over the age of 70 ½ and own a Traditional IRA, taking advantage of the now permanent Qualified Charitable Distribution (QCD) could be a great option as well. 

  3. Should I be contributing to an IRA? If so, should I put money in a Traditional or Roth?

    • As I always say, in financial planning, there is never a “one size fits all” answer – it really depends on your income and your current and projected tax bracket

      • Keep in mind, not all IRA contributions are deductible, your income and availability to contribute to a company sponsored retirement plan plays a major role.

      • If your current tax bracket is lower than your projected tax bracket in the future, it more than likely makes sense to invest within a Roth IRA, however, as mentioned, everyone’s situation is different and you should consult with your advisor before making a contribution. 

  4. Do you have access to a Health Savings Account (HSA) or Flex Spending Account (FSA) at work?

    • These are fantastic tools to help fund medical and dependent care costs in a tax-efficient manner.

      • HSAs can only be used, however, if you are covered under a high-deductible health plan and FSAs are “use it or lose it” plans, meaning money contributed into the account is lost if it’s not used throughout the year. 

This is a busy time of year for everyone. Between holiday shopping, traveling, spending time with family, completing year-end tasks at work, taxes are often times lost in the shuffle.  We encourage you to keep your eyes open for our year-end planning letter you will be receiving within the next few weeks which will be a helpful guide on the items mentioned in this blog as well as other items we feel you should be keeping on your radar.

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.

Please include the following to all of the above: Please include: 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. 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 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. Investments mentioned may not be suitable for all investors. 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. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Nick Boguth on his way to a CFA® designation

Contributed by: Angela Palacios, CFP® Angela Palacios

This summer Nick completed his first milestone on his way to completing his Chartered Financial Analyst (CFA®) designation. Nick started as an intern with the Center in May 2014, eventually joining us full time after graduating from the University of Michigan (Go Blue!) with a degree in Economics and Statistics. Almost immediately after starting full time he began the long road to achieving his CFA® designation.

What is the CFA® designation?

The curriculum is designed to build a strong educational foundation of advanced investment analysis and real-world portfolio management skills. Upon completion the average designation holder has spent roughly 1,000 hours studying! 

There are 3 levels that Nick will have to pass and several other hurdles before he can utilize the designation.

  • CFA level 1 – Tests your basic knowledge and comprehension focused on investment tools and ethics.  Congrats Nick on passing this level on your first try!

  • CFA level 2 – Tests more complex analysis along with a focus on valuing assets.

  • CFA level 3 – Requires a synthesis of all the concepts and analytical methods in a variety of applications for effective portfolio management and wealth planning.

Along with passing the courses and the exams, Nick must have four years of work experience in investment decision making which he is on his way to earning with his role as Investment Research Associate here at The Center and as an Investment Representative with Raymond James. He must also agree to follow a rigorous Code of Ethics and Standards of Professional Conduct and become a member of the CFA institute. After obtaining the designation he will be required to complete continuing education to hold on to it.

Is this easy?

While Nick may have made it seem easy to the rest of us, it is far from simple. It is a popular designation to seek out. Each year nearly 200,000 people from all over the world register to take one of the exams always offered in June (level 1 additionally offered in December) and 100,000 will fail because it is extremely difficult! In June 2016, only 43% of people taking level 1 passed!

It is not uncommon to see Nick at his desk early throughout the week studying! It took him roughly 300 hours of studying to pass Level 1. When I asked Nick his thoughts on the program so far he said:

It felt great to pass level 1 my first time through, and it definitely helped having the support of everyone at The Center for extra motivation (and those extra few days off to study as the test approached).

We will continue to be there cheering him on while preparing for the last two levels. His education already adds more depth to The Center’s Investment Department knowledge in order to serve our clients! Way to go Nick!

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.

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