Event in Review: 2019 Investment Outlook

Contributed by: Angela Palacios, CFP®, AIF®

With market volatility back, we came together to discuss what occurred in 2018 (particularly in the last quarter) and what we are thinking about for 2019.  If you weren’t able to attend, don’t sweat it, we have the cliff notes for you!

On February 27th, 2019, Angela Palacios CFP®, AIF®, Director of Investments, CERTIFIED FINANCIAL PLANNER™, Nick Defenthaler CFP®, Senior Financial Planner, CERTIFIED FINANCIAL PLANNER ™, and Nick Boguth, Investment Research Associate teamed up to tackle these pressing questions and more.

Here is a recap of key points from the “2019 Investment Update”:

• What spooked the markets last year:

  • Decelerating global growth lead by China

  • Declining earnings growth expectations

  • Higher short term interest rates in the U.S. and other parts of the world

  • Valuations started 2018 in elevated territory

  • UK BREXIT

  • Italian debt concerns

  • Trade issues

  • Government shutdown

  • Mueller investigation

• What worked last year:

  • High quality fixed income rallied in this market

  • Bond duration – the more the better

  • Defensive & Low volatility stocks held up better than broad markets

  • Dividend paying stocks held up better than non-dividend paying stocks

  • Large cap equities held up better than small cap equities

  • In the last quarter of 2018 emerging and international developed markets held up better

• Is a recession on the horizon: Recessions are mainly caused by four reasons throughout the world (Inflation, Reduction in exports, Financial Imbalance or commodity price crash). Currently inflation is benign here in the U.S., exports are healthy, financial excesses aren’t present (equity valuations and household debt are moderate), and our economy is highly driven by commodities.  So at this point it looks unlikely in the next year.

• Yield curve: Flattened dramatically last year while the 2 and 5 year treasury bond yields did invert.  A traditional inversion is between the 2 and 10 year and is the signal usually watched for to telegraph a coming recession. We are keeping a close eye on this as this is becoming a potential concern.

• Tax reform recap: Nick Defenthaler gave us an update on tax reform looking at the changes to income tax brackets, changes in the standard deduction and deductibility of state and local income taxes. If you’d like to hear more on this please listen in on our Year-end tax planning webinar for the details!

• Client Portal: A Center for Financial Planning, Inc.® app??!!! We hope you are as excited as we are! Nick Boguth gave a quick demo of our new client portal and document vault. If you are interested in learning more or want to sign up for this service just reach out to your planner!

Angela Palacios, CFP®, AIF® is a partner and 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.

3 Signs Your Client Needs a Divorce Financial Advisor

Contributed by: Jacki Roessler, CDFA®

Not every client needs financial planning advice during their divorce and certainly, not every client feels they can afford it. We’re often asked if there are any tried and true red flags that should alert an attorney that divorce financial advisors should be consulted. 

Read on to discover the top 3 signs some outside help is typically needed.

1. Your client is afraid to sign the settlement agreement.

You’ve assured your client Doug that he can afford to pay the agreed upon spousal and child support. His income is high–you believe it’s a good settlement for him. However, he’s worried he won’t be able to afford his own expenses if he agrees to the settlement. The solution? You send Doug to a financial specialist who runs projections that give him a concrete number for his after-tax, post child and spousal support net income. Now, Doug can make decisions from a position of knowledge, not guess-work.

2. Your client is willing to give up everything for the “_______.” Fill in the blank with anything that fits; it could be the marital home, his or her pension, a share of a family business, etc…

Consider this all too familiar scenario:

Mary and Joe were married for 13 years with three children under the age of 10. Mary was a full time mom while Joe was earning a hefty salary. Mary is emotionally attached to the house and was willing to walk away from all the retirement and cash assets to keep it. Mary’s attorney is concerned and sent her to a divorce financial advisor. Together, they prepared a reasonable monthly post-divorce budget and looked at several different cash flow and net worth projections. Mary was sad to discover that if she kept the house and did not return to work, she would run out of money in 3 years. She was sad, but empowered to make decisions from a position of knowledge.

3. One or both parties have pension plans and retirement accounts that will need to be divided equitably.

No two corporations have identical retirement benefits for their employees. Furthermore, even in the most amicable of cases, employees often don’t understand all the quirks of their particular pension and/or retirement savings plan. As a firm that prepares close to 1,000 orders that divide retirement benefits pursuant to divorce, we have in-depth knowledge of what makes Acme Widgets’ 401k different from Beta Widgets’ 401k as well as the federal requirements and restrictions related to post-divorce division. Since no two plans are alike and no two divorce cases have the same circumstances, a specialist should be called in on every case unless the attorney has intimate knowledge of the plans being divided.

This leads to the obvious concern: can my client afford to get financial advice? Often, the client that needs advice the most is the one who feels they can’t afford it. Don’t assume that a divorce financial advisor won’t take a case on a limited basis. It always pays to inquire if they may be willing to offer clients an hour or two of consultation time. 

Divorce can be complex even under the best of circumstances. The financial aspects of divorce not only have the potential to be complex, they may also be emotionally-laden. Helping your clients find the path to financial stability may require the expert advice of a financial advisor.

Jacki Roessler, CDFA® is a Divorce Financial Planner at Center for Financial Planning, Inc.®

---

The above examples are hypothetical in nature for illustrative purposes only. Views expressed are not necessarily those of Raymond James Financial Services and are subject to change without notice. Information contained herein was received from sources believed to be reliable, but accuracy is not guaranteed. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.

Restricted Stock Units vs. Employee Stock Options

Contributed by: Kali Hassinger, CFP®

Some of you may be familiar with the blanket term "stock options." In the past, this term most likely referred to Employee Stock Options (ESOs), which were frequently offered as an employee benefit and form of compensation. But over time, employers have adapted stock options to better benefit both their employees and themselves.

ESOs provided the employee the right to buy a certain number of company shares at a predetermined price, for a specific period of time. These options, however, would lose their value if the stock price dropped below the predetermined price, making them essentially worthless to the employee.

Shares promised

As an alternative, many employers now use another type of stock option, known as Restricted Stock Units (RSUs). Referred to as a "full value stock grant,” RSUs are worth the "full value" of the stock shares when the grant vests. So unlike ESOs, the RSU will always have value to the employee upon vesting (assuming the stock price doesn't reach $0). In this sense, the RSU is a greater advantage to the employee than the ESO.

As opposed to some other types of stock options, the employer does not transfer stock ownership or allocate any outstanding stock to the employee until the predetermined RSU vesting date. The shares granted with RSUs essentially become a promise between the employer and employee, but the employee receives no shares until vesting.

RSU tax implications

Since there is no "constructive receipt" (IRS term!) of the shares, the benefit is not taxed until vesting.

For example, if an employer grants 5,000 shares of company stock to an employee as an RSU, the employee won't be sure of how much the grant is worth until vesting. If this stock value is $25 upon vesting, the employee would have $125,000 of income (reported on their W-2) that year.

As you can imagine, vesting dates may cause a large jump in taxable income, so the employee may have to select how to withhold taxes. Usual options include paying cash, selling or holding back shares within the grant to cover taxes, or selling all shares and withholding cash from the proceeds.

In some RSU plan structures, the employee may defer receipt of the shares after vesting, in order to avoid income taxes during high earning years. In most cases, however, the employee will still have to pay Social Security and Medicare taxes in the year the grant vests.

Although there are a few differences between the old-school stock options and more recent Restricted Stock Unit benefit, both can provide the same incentive for employees. If you have any questions about your own stock options, we’re always here to help!

Repurposed from this 2016 blog: Restricted Stock Units vs Employee Stock Options

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

---

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. 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 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. This is a hypothetical example for illustration purpose only and does not represent an actual investment.

Job Transition and Your Investments

Contributed by: Center Investment Department

We at The Center know that people can be overwhelmed with difficult decisions, especially during stressful life events such as job loss or change.

GM recently announced plant closings and layoffs across the country, which will affect thousands of workers. This hits close to home for those of us in the Motor City and reminds us to look at your investment portfolio, ensure proper allocations, and ask these questions:

Am I close to retirement?

It may be time to scale back your portfolio’s risk. If you are invested within a target date retirement fund, this may already be happening for you.

How long before I have to use this money?

With funds you won't need for more than 5-10 years, you may want to ensure you are taking enough risk to help meet your goals. If you are invested within a target date retirement fund, this may already be happening for you.

What is my ability to take risk?

You may be able to take on more risk if you don't depend entirely on your portfolio. In this case, a target date fund may not be appropriate.

Do I get uneasy or worried when my portfolio drops by a certain percentage and feel the need to take action?

If this affects your decision making, even under normal circumstances, guidance from an advisor during a time of change may help alleviate additional stress.

What Can I do?

Review the investments in your account and your beneficiaries. We often neglect our 401(k) accounts in times of change.

Maintain a diversified portfolio to help stay on track for your retirement goals. Some plans offer an overwhelming number of choices, while other plan offerings seem insufficient to diversify a portfolio. Your advisor can help with your comprehensive investment strategy, especially during challenging times.

When you’ve spread assets among multiple financial institutions, maintaining an effective investment strategy – one that accurately reflects your goals, timing, and risk tolerance – may become difficult. Consolidate, and your financial professional can help ensure these assets are part of an overall allocation strategy that reflects your current financial situation and long-term retirement goals.

For more information on consolidating retirement accounts, read “Simplifying Your Retirement Plans.”

---

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. Expressions of opinion are as of this date and are subject to change without notice.

Every type of investment, including mutual funds, involves risk. Risk refers to the possibility that you will lose money (both principal and any earnings) or fail to make money on an investment. Changing market conditions can create fluctuations in the value of a mutual fund investment. In addition, there are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly.

Why Retirees Should Consider Renting

Contributed by: Nick Defenthaler, CFP®

“Why would you ever rent? It’s a waste of money! You don’t build equity by renting. Home ownership is just what successful people do.”

Sound familiar? I’ve heard various versions of these statements over the years, and every time I do, the frustration makes my face turns red. I guess I don’t have a very good poker face!

As a country, we have conditioned ourselves to believe that homeownership is always the best route and that renting is only for young folks. If you ask me, this philosophy is just flat out wrong and shortsighted.

Below, I’ve outlined various reasons that retirees who have recently sold or are planning to sell might consider renting:

Higher Mortgage Rates

• The current rate on a 30-year mortgage is hovering around 4.6%. The days of “cheap money” and rates below 4% have simply come and gone.

Interest Deductibility

• Roughly 92% of Americans now take the standard deduction ($12,200 for single filers, $24,400 for married filers). It’s likely that you’ll deduct little, if any, mortgage interest on your return.

Maintenance Costs

• Very few of us move into a new home without making changes. Home improvements aren’t cheap and should be taken into consideration when deciding whether it makes more sense to rent or buy.

Housing Market “Timing”

• Home prices have increased quite a bit over the past decade. Many experts suggest homes are fully valued, so don’t bank on your new residence to provide stock-market-like returns any time soon.

Tax-Free Equity

• In most cases, you won’t see tax consequences when you sell your home. The tax-free proceeds from the sale could be a good way to help fund your spending goal in retirement.  

Flexibility

• You simply can’t put a price tag on some things. Maintaining flexibility with your housing situation is certainly one of them. For many of us, the flexibility of renting is a tremendous value-add when compared to home ownership.

Quick Decisions

• Rushing into a home purchase in a new area can be a costly mistake. If you think renting is a “waste of money” because you aren’t building equity, just look at moving costs, closing costs (even if you won’t have a mortgage), and the level of interest you pay early in a mortgage. Prior to buying, consider renting for at least two years in the new area to make darn sure it’s somewhere you want to stay.

Every situation is different, but if you’re near or in retirement and thinking about selling your home, I encourage you to consider all housing options. Reach out to your advisor as you think through this large financial decision, to ensure you’re making the best choice for your personal and family goals.

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.

---

Any opinions are those of Nick Defenthaler, CFP® and not necessarily those of RJFS or Raymond James. 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. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

New Partner to Start Off the New Year

Contributed by: Center for Financial Planning, Inc.®

We are excited to announce Angela Palacios, CFP®, AIF®, as the newest Partner at The Center! She follows in the long tradition of strong female leadership that began with Founding Partners Marilyn Gunther and Estelle Wade. Our team looks forward to working with Angie in her new leadership role.

Let’s take a look back at her time at The Center and how this promotion will affect our operations.

Part-time Associate to Department Head

Angie joined The Center team 10 years ago as a part-time Investment Research Associate, after having her daughter, Lilly. She served as Director of Investments before advancing to partnership.

“I got in on the ground floor of operations, so I got to do a lot of behind the scenes work and focus on investments,” she said. “The Center really allowed me to do what I have a passion to do.”

Laying the Groundwork for Success

Right out of college, Angie earned her CERTIFIED FINANCIAL PLANNER™ certification, awarded in 2003. A Master’s in Business Administration from Nichols College followed in 2007, and she earned the Accredited Investment Fiduciary (AIF®) designation in 2017.

As a CFP®, she has trained to not only understand the analytics side of financial planning, but also the client’s side. The AIF® designation means that Angie complies with fiduciary standards of care and prudent investment practices.

Over the past decade, Angie has become a trusted member of our team. She founded our Social committee, a group that plays a large part in making The Center a wonderful – and award-winning – place to work. We are a family, and Angie makes sure that value is never forgotten!

Angie also created, designed, and implemented the Center for Financial Planning smart phone app, which is currently in the final stages of development.

An Offer of Partnership

Managing Partner, Timothy Wyman, invited Angie to become a Partner because of the work she was already doing. Of course, her new role comes with additional responsibilities, but she will also continue to work on a foundation built over the last decade.

“Angie exemplifies all that we look for in a new partner,” Wyman said. “From day one, Angie has acted like an owner, by being a self-starter and self-manager. Angie shows passion for The Center’s Mission and Vision and most importantly models The Center Values each day. Moreover, Angie is dedicated to helping create a great place to work and shows the utmost respect for all of us. She works tirelessly to bring success to the entire firm (we before me) and has a ‘whatever is needed’ attitude. We are so fortunate that Angie has accepted the partner invitation!”

A Bright Future

Angie will continue to oversee the firm’s Investment Department and Technology department, while adding Compliance function oversight. She looks forward to getting involved with the planning and implementing of The Center’s strategic vision. She will also maintain her role as Chair of the Social committee.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification re-quirements.

Important Information for Tax Season 2018

Contributed by: Center for Financial Planning, Inc.®

As we prepare for tax season, we want to keep you apprised of when you can expect to receive your tax documentation from Raymond James.

Form 1099 mailing schedule 

• January 31 – Mailing of Form 1099-Q and Retirement Tax Packages

• February 15 – Mailing of original Form 1099s

• February 28 – Begin mailing delayed and amended Form 1099s

• March 15 – Final mailing of any remaining delayed original Form 1099s

Additional important information

Delayed Form 1099s

In an effort to capture delayed data on original Form 1099s, the IRS allows us to extend the mailing date until March 15, 2019, for clients who hold particular investments or who have had specific taxable events occur. Examples of delayed information include:

• Income reallocation related to mutual funds, real estate investment, unit investment, grantor and royalty trusts; as well as holding company depositary receipts

• Processing of Original Issue Discount and Mortgage Backed bonds

• Expected cost basis adjustments including, but not limited to, accounts holding certain types of fixed income securities and options.

Amended Form 1099s

Even after delaying your Form 1099, please be aware that adjustments to your Form 1099 are still possible. Raymond James is required by the IRS to produce an amended Form 1099 if notice of such an adjustment is received after the original Form 1099 has been produced. There is no cutoff or deadline for amended Form 1099 statements. The following are some examples of reasons for amended Form 1099s: 

• Income reallocation

• Adjustments to cost basis (due to the Economic Stabilization Act of 2008)

• Changes made by mutual fund companies related to foreign withholding

• Tax-exempt payments subject to alternative minimum tax

• Any portion of distributions derived from U.S. Treasury obligations

What can you do?

You should consider talking to your tax professional about whether it makes sense to file an extension with the IRS to give you additional time to file your tax return, particularly if you held any of the aforementioned securities during 2018.

If you receive an amended Form 1099 after you have already filed your tax return, you should consult with your tax professional about the requirements to re-file based on your individual tax circumstances.

You can find additional information at https://raymondjames.com/wealth-management/why-a-raymond-james-advisor/client-resources/tax-reporting.

As you complete your taxes for this year, a copy of your tax return is one of the most powerful financial planning information tools we have. Whenever possible, we request that you send a copy of your return to your financial planner, associate financial planner, or client service manager upon filing. Thank you for your assistance in providing this information, which enhances our services to you.

We hope you find this additional information helpful. Please call us if you have any questions or concerns about the upcoming tax season.

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.

Is the Diversified Portfolio Back?

Contributed by: Robert Ingram

(Repurpose of the 2014 blog: ‘Why I Didn’t Like My Diversified Portfolio’)

As our team finished 2018 and began reviewing the 2019 investment landscape, I couldn’t help but to think of a Money Centered blog written by our Managing Partner, Tim Wyman. As Tim shared:

“I was reminded of the power of headlines recently as I was reviewing my personal financial planning; reflecting on the progress I have made toward goals such as retirement, estate, tax, life insurance, and investments. And, after reviewing my personal 401k plan, and witnessing single digit growth, my immediate reaction was probably similar to many other investors that utilize a prudent asset allocation strategy (40% fixed income and 60% equities). I’d be less than candid if I didn’t share that my immediate thought was, “I dislike my diversified portfolio”.

The headlines suggest it should have been a better year. However, knowing that the substance is below the headlines, and 140 characters can’t convey the whole story, my diversified portfolio performed just as it is supposed to in 20xx.”

This may have been a familiar thought throughout 2018. Interestingly though, Tim’s blog post was actually from 2015. He was describing 2014.

THE FINANCIAL HEADLINES – Same Old, Same Old?

The financial news about investment markets today still focuses primarily on three major market indices: the DJIA, the S&P 500, and the NASDAQ. All three are measures for large company stocks in the United States; they provide no relevance for other assets in a diversified portfolio, such as international stocks, small and medium size stocks, and bonds of all types. As in 2014, the large U.S. stock indices were at or near all-time highs throughout much of 2018. Also in that year, many other major asset classes gained no ground or were even negative for the year. These included core intermediate bonds, high yield junk bonds, small cap stocks, commodities, international stocks, and emerging markets.

Looking Beyond the Headlines

Here at The Center, our team continues to apply a variety of resources in developing our economic outlook and asset allocation strategies. We take into account research from well-respected firms such as Russell Investments, J.P.Morgan Asset Management, and Raymond James. Review the “Asset Class Returns” graphic below, which shows how a variety of asset classes have performed since 2003.

This chart shows the historical performance of different asset classes through November of 2018, as well as an asset allocation portfolio (35% fixed and 65% diversified equities). The asset allocation portfolio incorporates the various asset classes shown in the chart.

If you “see” a pattern in asset class returns over time, please look again. There is no determinable pattern. Because asset class returns are cyclical, it’s difficult to predict which asset class will outperform in any given year. A portfolio with a mix of asset classes, on average, should smooth the ride by lowering risks that any one asset class presents over a full market and cycle. If there is any pattern to see, it would be that a diversified portfolio should provide a less volatile investment experience than any single asset class. A diversified portfolio is unlikely to be worse than the lowest performing asset class in any given year. And on the flip side, it is unlikely to be better than the best performing asset class. Just what you would expect!

STAYING FOCUSED & DISCIPLINED

As during other times when we have experienced strong U.S. stock markets and periods of accelerated market volatility, some folks may be willing to abandon discipline because of increased greed or increased fear. As important as it is to not panic out of an asset class after a large decline, it remains equally important to not panic into an asset class. In the case of the S&P 500’s outperformance of many other asset classes, for example, many have wondered why they should invest in anything else. That’s an understandable question. If you find yourself in that position, you might consider the following:

• As in the five years leading up to 2015, the S&P 500 Index (even with the recent pullback in stock prices) has had tremendous performance over the last five years. However, it’s difficult to predict which asset class will outperform from year to year. A portfolio with a mix of asset classes, on average, should smooth the ride by lowering risk over a full market cycle.

• Fundamentally, prices of U.S. companies relative to their expected earnings are hovering around the long-term average. International equities, particularly the emerging markets, are still well below their normal estimates and may have con­siderable room for improvement. This point was particularly relevant in 2018 and continues to be as we begin 2019.

• Through 2018, U.S. large caps, as defined by the S&P 500 Index, have outperformed international equities (MSCI EAFE) in six of the last eight years. The last time the S&P outperformed for a significant time, 1996-2001, the MSCI outperformed in the subsequent six years.

• What’s the potential impact on a portfolio concentrated in a particular asset class, if that asset class experiences a period of loss? Remember, an investment that experienced a loss requires an even greater percentage return to get back to its original value. For example, an investment worth $100,000 that loses 50% (down to $50,000) would actually require a 100% return from $50,000 to get back to $100,000.

MANAGING RISK

Benjamin Graham, known as the “father of value investing,” dedicated much of his book, The Intelligent Investor, to risk. In one of his many timeless quotes, he says, “The essence of investment management is the management of risks, not the management of returns.” This statement may seem counterintuitive to many investors. Rather than raising an alarm, risk may provide a healthy dose of reality in all investment environments. That’s important in how we meet financial goals. Diversification is about avoiding the big setbacks along the way. It doesn’t protect against losses – it helps manage risk.

Often, during times of more volatile financial markets like those we have experienced during the last couple of months, the benefits of diversification become apparent. If you have felt the way Tim did back in 2015 about your portfolio, we hope that after review and reflection, you might also change your perspective from “I dislike my diversified portfolio” to “My diversified portfolio – just what I would expect.”

As always, if you’d like to schedule some time to review anything contained in this writing, or your personal circumstances, please let me know. Lastly, our investment committee has been hard at work for several weeks and will be sharing 2019 comments in the near future. Make it a great 2019!

Robert Ingram is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.®

---

Any opinions are those of Bob Ingram, CFP® and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The MSCI is an index of stocks compiled by Morgan Stanley Capital International. The index consists of more than 1,000 companies in 22 developed markets. Investments can not be made directly in an index.

Webinar in Review: Charitable Giving Strategies

Contributed by: Center for Financial Planning, Inc.®

The New Year is a great time to get your charitable giving plan in place for the New Year. With the fairly recent tax law changes, you may be finding that it is more challenging than ever to give to the way you want while still reaping the tax benefits for doing so. Feel free to watch the recorded webinar with Sandy Adams, CFP® and Jana McNair from the Wayne State University Development Department as they discuss strategies for charitable giving that can help you get a more pro-active and tax-efficient plan in place to start the year off right.

Check out the time stamps below to listen to the topics you’re most interested in:

(02:00): Intro & Agenda

(09:30): Taxes & Charitable Giving 101

(13:30): Make Charitable Contributions and Still Get a Tax Benefit

(16:45): Tip #1: Donating Appreciated Securities

(21:00): Tip #2: Donor Advised Fund

(26:30): Tip #3: Qualified Charitable Distribution (QCD)

(34:00): Planned Giving Ideas for Impactful Giving

(41:00): Takeaways for Charitable Giving

The One Mistake You DON’T Want to Make with Your Long Term Care Insurance

Contributed by: Sandra Adams, CFP®

If you’re reading this, you are likely among the few people who have planned ahead and purchased Long Term Care insurance. By doing this, you intend to protect yourself and your family, and hedge your assets against the possible threat of a long-term care event (need for care in your home, assisted living or nursing home).

Given that only about 15% of Americans own Long Term Care insurance (Fidelity 2016) and 70% of Americans over the age of 65 will need some form of long-term care services for cognitive or physical impairment (HealthView Insights 2014), you will likely need the insurance you’ve purchased. The question is, will you use your Long Term Care insurance when the time comes?

I have had several client experiences that looked like this:

• The client was at or near a point of qualifying for benefits under their Long Term Care insurance for either physical or cognitive reasons;

• The client and/or the family made the decision to not begin the claim process. Why? They wanted to wait a while longer, continue to try to care for the client on their own, save the Long Term Care insurance benefits for later, when they really needed them.

• The results in nearly all of these cases? The clients either never filed a claim or filed far too late, ended up in a long-term care facility, and ultimately passed away without ever receiving the policy benefits for which they had made years – even decades – of payments.

In my experience as a financial advisor, I have never had a client run out of a Long Term Care benefit pool. I am not here to tell you that it does not happen – it certainly can. But I am here to tell you that I do not believe it happens often. I have searched far and wide for statistics that would show how often it happens and cannot find a number!

Although your Long Term Care insurance company would prefer that you wait to put in your claim, I recommend that you do so as soon as you are eligible. You can always stop the benefits if you no longer need them, then restart later. And if you max out your benefits, you have the satisfaction of knowing that you received 100% of your benefits and protected your assets to the greatest possible degree. Don’t lose out (or let your parents lose out) on the Long Term Care insurance benefits they have purchased!

If you have questions or need additional guidance on this or related issues, please do not hesitate to reach out. We are always happy to help! Sandy.Adams@centerfinplan.com

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.

---

Any opinions are those of Sandra D. Adams, CFP® and not necessarily those of RJFS or Raymond James. 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. Guarantees are based on the claims paying ability of the issuing company. Long Term Care Insurance or Asset Based Long Term Care Insurance Products may not be suitable for all investors. Surrender charges may apply for early withdrawals and, if made prior to age 59 1⁄2, may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income. Please consult with a licensed financial professional when considering your insurance options. These policies have exclusions and/or limitations. The cost and availability of Long Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of Long Term Care insurance. Guarantees are based on the claims paying ability of the insurance company.