A New Voice on the Phone

Contributed by: Gerri Harmer

You may have heard a new voice on the phone lately. Andrea Tomaszewski joined The Center team as Client Service Administrator – Receptionist in January. She settled in quickly with a natural interest in meeting people and a passion for improving people’s lives. She has been a valuable asset with our increased phone volume. Not to worry though, Gerri Harmer is not far away focusing on events and other projects. Please give a warm welcome to Andrea when you call and a friendly hello when you come to visit.

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

Does Staying the Course Pay Off for your Investment Strategy?

Contributed by: Center Investment Department

Almost every year, it seems there is some reason to be concerned with markets.  When market volatility strikes, we often get questions from investors as to whether or not they should sell their portfolio.  Russell Investments does a great job illustrating portfolio performance during the market’s many ups and downs in the chart below.  They look at a hypothetical portfolio of 60% stocks and 40% bonds faced with three alternative investment paths as of Sept. 30, 2008 (two weeks after the collapse of Lehman Brothers).

The starting point for the $100,000 hypothetical portfolio is Oct. 9, 2007, the market peak before the great recession. Over the next year, you would have watched the S&P 500 drop over 20%.  The three choices as of Sept. 30, 2008 are:

1. Stay invested, and make no changes (orange line).

2. Move to 100% cash, and remain in cash (light blue line).

3. Move to 100% treasuries, and remain in treasuries (grey line).

The chart shows the clear winner – stay invested and make no changes. Even though you had to stomach even more downside initially, as well as a menu of other market-altering headlines in the following years, when sticking with a 60/40 diversified portfolio, investors recovered a greater percentage of their lost value— and at a faster rate—than going to cash or treasuries.

Now imagine the potential magnification of the success of the orange line if you were saving regularly during that same time period through a vehicle like your 401(k).  While it may have been difficult to stay the course, 2008 offered a buying opportunity that eventually supported portfolio performance success through 2017.  Planning without panicking is the key.  Make sure you develop a sound savings plan and stick to it regardless of what markets may throw our way!

This information has been obtained from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. Asset allocations are presented only as examples and are not intended as investment advice. Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed. Future investment performance cannot be guaranteed. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Please note, direct investment in any index is not possible.

Timothy Wyman, CFP®, JD Named to Forbes Top State-by-State Advisors List for 2018

Contributed by: Center for Financial Planning, Inc.®

The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research is based on an algorithm of qualitative criteria and quantitative data. Those advisors that are considered have a minimum of 7 years of experience, and the algorithm weighs factors like revenue trends, AUM, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of 21,138 advisors nominated by their firms, 2,213 received the award. Neither Forbes nor SHOOK receive a fee in exchange for rankings. This ranking is not indicative of advisor's future performance, is not an endorsement, and may not be representative of individual clients' experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating.

Webinar in Review: 2018 Investment Update

Contributed by: Angela Palacios, CFP®, AIF®

Late January, investor sentiment shifted from investors worried about missing out on the bull market to concerns that markets were overbought.  Volatility came stampeding back, bond yields continued rising and we even got a peek at some inflation creeping it’s way back into the economy.  This created a flurry of investor concerns and a basis for much of our discussion in our investment webinar to start the year off.

What are we watching out for in 2018?

A number of topics could be of concern this year.  A potential trade war, geopolitical concerns, inflation and bond yield spikes have the eye of our investment committee. 

While U.S. markets were looking a bit expensive at the beginning of the year, international markets were telling us a different story of opportunity.  Other themes we touched on included ESG and cost compression in the investment industry.

Regardless of what may come, it is important to keep a few points in mind.  Plan, don’t panic.  Planning is the cornerstone to everything we do for you.  Remember your financial plan is built with market volatility in mind.  It is expected within the plan.  It is important to keep this in perspective when headlines are doing everything they can to pull your attention away.  What we can control is maintaining appropriate levels of cash for your needs, managing as tax efficiently as possible so more dollars stay in your pocket and rebalancing to maintain a proper risk profile that is appropriate for you. 

What actions are we taking?

With the extended positive returns we have seen in U.S. markets prior to this year, we discussed strategies we are utilizing to rebalance.  A question we commonly received from you is “What prompts us to make a change in your portfolios?”  We took an in depth look at how we make changes in your portfolio and what triggers us to make these changes. 

If you would like to learn more about any of the topics touched on here, feel free to watch the webinar above!

Angela Palacios, CFP®, AIF® 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.

This information has been obtained from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. Opinions expressed are those of Angela Palacios and are not necessarily those of Raymond James. Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. You should discussion specific tax matters with the appropriate professional.

Why it’s Time to Start Asking More Questions

Contributed by: Sandra Adams, CFP®

I recently took a week-long family trip with my husband and son (a senior in high school).  This was a rare occasion for the three of us to spend some time together and communicate — away from the TVs, devices and to actually get my son out of his room and away from his Xbox. Getting information out of teenagers — especially boys — about what is going on in their lives is like “getting blood out of a turnip” as they say. 

As with many of our family members, friends and co-workers that we may have difficulty communicating with, rather than become frustrated that we are not getting the information we are looking for, or find that we are “stuck” trying to help or plan for someone that is not helping in the process, we took a different path on our trip.  We decided that I would try to open the door by asking some open ended questions...and then try being quiet.  We just listened and gave space.  It took several days into our trip for our son to start opening up, but once he started, the results were amazing — he talked to us about things that he had never spoken about, asked our advice about some things that were going on at school, and began taking part in “adult” conversations right before our eyes.

Such conversations can and need to take place in many circumstances in our lives.  Whether it be our aging parents that we are beginning to assist, and we aren’t sure of their future desires for their own aging futures; our children as they transition into adulthood; or conversations with ourselves as we determine our next steps in life (transitioning into retirement, transitioning into a new career, figuring out what life looks like after divorce or the death of a spouse).  All of these conversations start with asking the right questions...and then listening...to others or ourselves.  Spending time on this process is important and does not happen overnight, but the results can be life changing.

Start the New Year by committing to start asking questions of those people you want to communicate more clearly with, or about those situations you want to move forward on.  If you are not sure what questions you need to be asking or how to start this process, please feel free to reach out for our help!

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 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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Any opinions are those of Sandra Adams, CFP®, and not necessarily those of Raymond James.

Helping Older Relatives? How to Help Without Jeopardizing Your Own Finances

Contributed by: Matthew E. Chope, CFP®

Helping elderly family members with financial issues can be tricky.  In many cases, you may feel an obligation to assist, especially if the older adult is on a fixed budget and has limited financial resources. In fact, a recent MetLife study found that 68% of American caregivers have been found to spend their own money to support the needs of their older adult relatives, which drained funds that they had planned to use for their own financial independence. If you sense that an elder you care about is on a trajectory for financial ruin, what can you do to help? 

How do you step in and assist without putting your own financial security in jeopardy? 

The first thing to do is to gather some information to get a better sense of your loved one’s financial picture.  You’ll want to have an understanding of their assets and debts, and their budget:  their sources of income and their expenses. With the understanding of what income and what bills and expenses the older adult is dealing with, you can better connect with resources that may be able to assist them.

A client (let us call him John) told me a story recently about how he helped his older sister in-law (let us call her Bonnie) make some difficult decisions.  Bonnie was not a high-income earner in her working years. Although she was able to purchase her home and pay off her mortgage; she didn’t save much, and she had now depleted her savings.  At age 75, the reverse mortgage that Bonnie had put in place, in addition to her minimal Social Security income were not enough to keep up with her rising costs for health care (Medicare premiums and prescription drug co-pays), property taxes, insurances and utilities.

Here are the actions John took to help Bonnie with her situation:

1. John discovered that the county would allow her to apply for a reduced or total removal of real estate taxes through the property tax poverty exemption. As a result, Bonnie received a full exemption from her property taxes. Each county has a program for low-income folks - you need to complete an application and appear before a board of review annually. Here is a link with more information: https://www.michigan.gov/documents/treasury/Bulletin7of2010_322157_7.pdf

2. John contacted low-income home energy assistance (LIHEAP) and received a reduction in electricity and heating costs for Bonnie. https://www.benefits.gov/benefits/benefit-details/1545

3. John contacted Human ARC Premium Assist about receiving a significant reduction in Medicare Part B premiums; as an added bonus, they also provided assistance with Bonnie’s prescription drug costs. https://screening.humanarc.com/PremiumAssist

4. While online at the premium assistance site, John found more information about special coverages for things like medical alert, ambulance/transportation assistance, and a 1.25% copay for prescriptions.

5. John contacted Social Services about food stamps and Bonnie is now receiving about $97 more a month through a program called SNAP. http://www.feedingamerica.org/need-help-find-food/

6. For Bonnie’s auto insurance, John pays the whole year upfront and Bonnie pays John back monthly so she can take advantage of the discount for paying the premium annually.

7. John pays Bonnie’s utility bills via automatic payments from his account to avoid late fees, which in the past were a wasteful and unnecessary expense. Bonnie also reimburses John monthly for this.

8. To save money on her cell phone bill, John added Bonnie’s phone line to his plan as an additional line.

9. Bonnie was willing to give up cable TV – John found that an inexpensive antenna works fine and they were able to rid Bonnie of her monthly cable bill.

With a little bit of creativity and resourcefulness, John was able to assist Bonnie while also preserving his own financial resources.  If you or someone you know is in the position of assisting an older adult and needs help putting together a strategy, please let us know.  We are here to help!

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.

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This information has been obtained from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. The case study provided is hypothetical and has been included for illustrative purposes only. Individuals cases will vary. Links are being provided for informational 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. Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax, legal, or mortgage issues, these matters should be discussed with the appropriate professional. 

Warming Haven's Hearts on Valentine's Day

Contributed by: Nancy Sechrist

The “season of giving” never really stops when the holidays are over.  There is a need for help and assistance throughout the year: winter, spring, summer and fall.  Over the last few weeks, The Center Team has come together to make 30 fleece blankets for the women and mothers at a women’s shelter called Haven in Oakland County. Haven offers a comprehensive program for victims of domestic violence and sexual assault and provides shelter, counseling, advocacy and educational programming.

The Center’s Creativity and Charitable Committee, along with other Center Team members spent time together cutting and tying knots of soft and colorful fleece material to make warm blankets.  We all know how good it feels when you receive something handmade - whether it’s a picture drawn by your grandchild or a knitted scarf – what makes it special is that somebody took the time to make something unique for you.  The blankets will be delivered to the women as a Valentine’s Day surprise, with the hope that these blankets will brighten and uplift the women at Haven to give them comfort, warmth, and knowing they are cared about.

As Author Leo Buscaglia wrote, "Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around."

With hopes that all are kept warm and safe during this cold winter season…

Nancy Sechrist is the Office Manager at Center for Financial Planning, Inc.®

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Raymond James is not affiliated with Haven.

Sandy’s Spring Teaching at Schoolcraft College

Contributed by: Sandra Adams, CFP®

I am excited to let you know that for a second semester am going to be teaching courses for Schoolcraft College as part of the Continuing Education and Professional Development Program.  As always, the opportunity to share my knowledge and passion in the areas of financial planning and gerontology is exciting for me. 

The classes I will be teaching again, in April are:

Serving as a Financial Fiduciary: 
April 2nd, 2018, from 6-9pm

Being responsible for someone else’s finances can be a huge weight to carry. Learn what it means to serve in the role of a financial fiduciary — persons required to always act in the best financial interest of those they are serving.  Learn where to find guidance and resources, avoid scams, and how to establish sound, long-term planning.

Long Life Planning:
Mondays for three weeks starting April 9th, 2018, from 6-8pm

Go beyond traditional retirement planning and tackle topics such as long-term care planning, difficult conversations with family, aging, and end-of-life planning.  Discuss resources, downsizing, housing and care options, legal and financial guidance and more.  Plan now for your later long life.

If you or someone you know might be interested in attending one of these or other courses offered by the Schoolcraft Continuing Education and Professional Development program, find more information here:  www.schoolcraft.edu/cepd

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 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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Raymond James is not affiliated with Schoolcraft College. 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.

Market Pull Backs: Painful in the Short Term, Normal in the Long Run

Contributed by: Nick Defenthaler, CFP®

As I’m sure you’ve noticed as of late, global markets have not been very cooperative with investors. It almost seems like a broken record from past market declines when you turn on the television or read the paper and the majority of headlines you see and hear about are market driven – many with a “doom and gloom” sentiment. While market declines are rarely a fun thing to experience, they are normal, virtually unavoidable and come with the territory if you want to be invested long-term with the goal of growing your portfolio. To be honest, I think we’d be more nervous if they didn’t occur! Pullbacks like we’re experiencing right now tend to bring things back to reality a bit and keep markets in check. Although some pain can be felt short-term, typically investors are rewarded for going through such rollercoasters when things eventually improve. 

Check out the graph below provided by JP Morgan which tells an intriguing and comforting story over the last three and a half decades. Since 1980, every single year experienced a market pull back at some point which averaged -14.2%. However, over the course of those 35 years, 27 of them ended the year in positive territory! I really think this helps to put things in perspective when the markets get rocky, like we’re currently experiencing.    

This chart is for illustration purposes only. Past performance is not a guarantee of future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.

Also keep in mind that the chart above is for a 100% stock index. When you utilize a more diversified, balanced portfolio strategy, like the majority of our clients, the effect typically means less volatility which in turn translates into less potential upside required to get back to where we were before the selloff. To use a baseball analogy, we’re focused on hitting singles and doubles because those are what usually lead to actually scoring runs. Those who swing for the fences and hit occasional home runs or grand slams are usually the ones who have the most strike outs and worst batting averages. 

The bottom line is this – while market pullbacks can make us nervous and uneasy, they’re a completely normal part of the market cycle. As an investor, staying true to a disciplined investment process and keeping your long-term goals in mind should help get you through the difficult times and put you in a strong position when things recover.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick works closely with Center clients and is also the Director of The Center’s Financial Planning Department. He is also a frequent contributor to the firm’s blogs and educational webinars.

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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 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. Investing involves risk and you may incur a profit or loss regardless of strategy selected. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. 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. Diversification and asset allocation do not ensure a profit or protect against a loss.

Annuity Basics

Contributed by: Kali Hassinger, CFP®

An annuity is a contract between you, the purchaser or owner, and an insurance company, the annuity issuer.  In its purest form, you pay money to an annuity issuer, and the issuer eventually pays the principal and earnings back to you or a named beneficiary.  Life insurance companies first developed annuities to provide income streams to individuals during retirement, but these contracts have since become a highly criticized investment vehicle.  The surrender periods, fees, and endless annuity products on the market make it difficult for retail investors to understand contracts, let alone feel confident that it's the best option available for their situation.  There are of course pros and cons to consider when entering into an annuity contract, and it's especially important to understand the basics of what an annuity offers. 

Annuities are categorized as either qualified or non-qualified. 

Qualified annuities are used similarly to tax-advantaged retirement plans, such a 401(k)s, 403(b)s, and IRAs.  Qualified annuities are subject to the same contribution, withdrawal, and tax rules that apply to these retirement plans.  That may make you question why someone would use a qualified annuity at all!  If you are merely looking for tax-deferral, a qualified annuity probably doesn't make sense in connection with your retirement account.  However, depending on your goals, there are aspects of a qualified annuity that are not available with traditional retirement plans, such as a living income benefit guaranteed by the insurance company and an additional death benefit. 

One of the attractive aspects of a non-qualified annuity (which means the money deposited has already been taxed), on the other hand, is that its earnings are tax-deferred until you begin to receive payments or make withdrawals. During the period before withdrawing funds, the non-qualified annuity is treated similarly to your typical retirement plan.  The same age requirement is enforced, which means that if you access this account before age 59 ½ there is still a 10% tax penalty on a portion of the withdrawals.  The difference between a qualified and non-qualified annuity becomes apparent, however, when the withdrawal or annuitization payments begin.  Only the part of these payments that represents investment or account growth is taxed at ordinary income tax rates.  When annuitizing a contract, there is an "exclusion ratio" that means each payment represents both a portion of your initial investment and a portion of your investment returns.  This means that the entire payment received isn't taxable to you – only the percentage that represents an investment gain. 

Beyond the categories of qualified and non-qualified annuities, you can then classify annuities into fixed and variable contract options.

A fixed annuity functions similarly to a bank CD.  You make a deposit, and the insurer will pay a specific interest rate over a specified period.  A variable annuity, on the other hand, allows a contract holder to invest the funds in annuity subaccounts or mutual funds.  Insurance companies can offer income riders as an additional benefit to their annuities.  These riders typically have a guaranteed income growth rate, and they will increase the overall cost of the contract. 

It is important to understand that annuities, although they can be an effective savings tool, are not right for everyone.  Most deferred annuity contracts are designed to be long-term investment vehicles and can penalize the contract holder for making early withdrawals.  If an annuity seems like it would fit within your overall financial picture, it is essential to consider which annuity products are appropriate and how to utilize them within your investment portfolio. 

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

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP® and not necessarily those of Raymond James. 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. 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.

With variable annuities, any withdrawals may be subject to income taxes and, prior to age 59 1/2, a 10% federal penalty tax may apply. Withdrawals from annuities will affect both the account value and the death benefit. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. An annual contingent deferred sales charge (CDSC) may apply.

A fixed annuity is a long-term, tax-deferred insurance contract designed for retirement. It allows you to create a fixed stream of income through a process called annuitization and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face fees called surrender charges. Plus, if you're not yet 59½, you may also have to pay an additional 10% tax penalty on top of ordinary income taxes. You should also know that a fixed annuity contains guarantees and protections that are subject to the issuing insurance company's ability to pay for them. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.