ESG Investing: Why Everybody Is Talking About It

Contributed by: Jaclyn Jackson, CAP®

According to CNBC, almost 1 in 4 dollars is going into Environmental, Social, and Governance (ESG) funds this year.  Even before 2021, the combination of ethical provisions and competitive performance turned many heads towards ESG investments.  I aim to explain what the big fuss is about and why ESG investments are gaining traction.

Investors Are Talking About It

To be clear, the March 2020 downturn was no picnic (for anyone).  However, investors who had stake in environmental, social, and governance (ESG) investments managed the economic downturn with greater resilience.  Leading research firm, Morningstar, reported that during March 2020, “sustainable funds dominated the top quartiles and top halves of their peer groups.  Sixty-six percent of sustainable equity funds ranked in the top halves of their respective categories and more than a third (39%) ranked in their category's best quartile.”  Compared to peers, ESG funds pulled top rankings.

Not only did peer to peer comparisons look good, but index comparisons proved more robust too.  In the same study, Morningstar compared 12 passive ESG funds in the large-blend category to a traditionally passive fund. They reported, “For the year through March 12, all 12 ESG index funds outperformed”. What’s more is that fees were included in this study.  While the ESG passive funds compared were more expensive than the traditional passive fund, they still managed to outperform.  Impressively, the trend held with international and emerging market index comparisons…and everybody is talking about it! 

Including the world’s largest investor/asset manager, BlackRock, who’s CEO challenged corporations to consider the impact of climate change on business models.  In 2020, CEO Larry Fink announced BlackRock would incorporate ESG metrics into 100% of their portfolios.  The asset manager also pledged to produce data and analytics to punctuate why considering climate change should be an investment value. 

Yellen And Powell Are Talking About It

Investors are not the only people concerned.  In wake of recent natural disasters, Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell are working to assess the risks climate change poses to the health and resilience of the financial system.  Their consensus implied a concentrated effort to monitor financial institutions and their exposure to extreme weather events.  Leading the charge, Fed Governor Lael Brainard, recently announced the Financial Supervision Climate Committee (FSCC).  Brainard is a proponent of using scenario testing to understand banks’ ability to survive hypothetical climate catastrophes.  The FSCC will focus on developing evaluation processes for climate risks to the financial system.

Why Everybody Is Talking About It

While many people acknowledge the ethical appeal of ESG methodologies, they may not fully appreciate the businesses appeal that underpins stock performance.  Business litigation risk provides a clear example.  The Financial Analyst Journal featured a study that explored the relationship between ESG performance and company litigation risks.  Analyzing US class action lawsuits, researchers found, “a 1 standard deviation improvement in the ESG controversies of an average company in the sample reduced litigation risk from 3.1% to 2.4%”.  The study also asserted that companies with low ESG performance experienced market value losses ($1.14 billion) twice the size of companies with high ESG performance.  Further, the study integrated their findings with a trading strategy and concluded investors benefitted from lower litigation risk.

It doesn’t stop with litigation risk.  There are also links between healthy corporate governance and market returns.  As You Sow, a nonprofit promoting corporate responsibility, has been tracking S&P 500 companies with excessively compensated CEOs since 2015.  They collaborated with R. Paul Herman, CEO of HIP Investor Inc., to do performance analysis based on their tracking. Herman determined, “…shareholders could have avoided lagging returns by excluding companies that keep making the list for excessive CEO pay”.  Companies without excessively paid CEOs significantly outperformed companies with excessively paid CEOs.  The former generated 5.6% in annualized returns compared to the latter at 1.5%.  What’s astonishing is that the report noted, “The performance gap due to excessive compensation equates to approximately $223 billion in shareholder value lost.”  How are companies without overpaid CEOs edging out competitors?  Instead of overpaying CEOs, more resources can be dedicated to research and development projects, dividends to shareholders, or equitable pay for employees; things that advantage company profits and support positive investor outcomes.

Are You Talking About It?

There is definitely a case for the merits of ESG investing.  It is no wonder folks are talking about it.  Are you interested in the conversation?  If you’ve followed trends in ESG investing and are considering adapting ESG strategies into your portfolio, The Center is here to help.  Ask your advisor about the Center Social Strategy; they would be happy to talk about it with you.

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Jaclyn Jackson, CAP® is a Portfolio Manager at Center for Financial Planning, Inc.® She manages client portfolios and performs investment research.

This material is provided for information purposes only and is not a complete description of the securities, markets, or developments referred to in this material. Any opinions are those of the author and not necessarily those of Raymond James. There is no guarantee that the 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. Utilizing an ESG investment strategy may result in investment returns that may be lower or higher than if decisions were based solely on investment considerations. 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. Past performance does not guarantee future results.

Am I Spending Enough Or Saving Too Much?

Contributed by: Kali Hassinger, CFP®, CDFA®

No you didn’t read that title incorrectly.  After decades of consistent and focused saving, how do you change your mentality to feel comfortable spending what you’ve worked so hard to accumulate?  Good savers spend decades developing the discipline to save, plan, and minimize debt, all for the ultimate goal of reaching financial independence and freedom.  However, when it comes time to use those hard-earned funds to support your retirement lifestyle, it can be a difficult transition.

The Center defines financial planning as a coordinated and comprehensive approach to reaching your financial goals.  It necessitates an appropriate balance between spending now and investing for the future.  That is a difficult balance to maintain, and without truly understanding your current resources and future needs, it is easy to miss the mark.  Without professional analysis and review, many either spend too much now and jeopardize future goals or have save too aggressively and end up unnecessarily sacrificing current quality of life. 

In planning, we can quantify what it takes to meet future financial goals, and make sure that we are doing what is needed to help reach those objectives.  In some cases, that knowledge can provide the freedom to actually reduce savings.  Beyond just allowing increased spending, this can also provide the opportunity to pursue passions as opposed to income.

When finally reaching that retirement finish line, however, turning your savings into income can be a daunting task.  Pulling from a balance that you’ve worked years to accumulate and build up can be uncomfortable, especially if you don’t know how much you can safely withdrawal without jeopardizing your long term financial security.  If you’re like many of our clients, it isn’t uncommon to react to this discomfort by under-spending and unintentionally accumulating money throughout retirement. 

Life is all about balance.  In this example, it’s about protecting your financial future while also enjoying life now.  If you’re in the enviable position of having more than you need for retirement, making a meaningful plan for the excess can help to ease the reluctance to spend.  Whether it is gifting, creating a financial legacy, or granting yourself permission to indulge a bit, if it brings you joy, it is worth considering.  Of course we would not recommend spending money frivolously, but, the ultimate goal is to pursue areas of interest because they are meaningful and important to you - unconstrained by financial concerns.  Isn’t that true financial freedom?  

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

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Opinions expressed are not necessarily those of 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. Past performance is not a guarantee of future results. Investing involves risk and investors may incur a profit or a loss.

The Benefits Of Working With An ‘Ensemble Practice’

Contributed by: Josh Bitel, CFP®

Financial planning practices come in all shapes and sizes, but perhaps the two most common arrangements are solo practices and ensemble practices. Solo practices are normally led by a single advisor who calls the shots, while ensemble practices are team-oriented firms, all working toward a common goal. The Center identifies with the latter.

An ensemble practice is structured with multiple advisors under the same roof. This allows for constant sharing of ideas, best practices, strategies, and even sharing of resources. The Center has a 2 hour meeting every Monday for just this purpose. Our planners at The Center, all with unique expertise, get together to eat lunch and share client cases, tough questions, interesting reading pieces, and maybe a few jokes here and there. This is all possible because we are all working collaboratively toward a shared vision, as outlined in the Vision 2030 document our entire team had a hand in creating.

The Center, as with many ensemble practices, leverages the power of teams. We have team members who are specialists in such areas as insurance, divorce planning, tax planning, retirement planning, and many more. So if an advisor is met with a tough client case involving long-term care, for example, he or she can seek out help from a team member with expertise in this area instantly.

An often overlooked advantage for clients choosing to work with an ensemble practice such as The Center is the foundation for internal succession planning. It is often said that as an advisor ages, so do their clients. This begs the questions who will take care of me when my advisor retires? And from the advisors end, who will take care of my legacy once I’ve moved on? With a practice like ours, there is an internal succession plan in place for many years before a planner decides to retire. Often, clients are transitioned to an advisor who has been working under the tutelage of the retiring advisor.

As with anything, you must weigh the pros and cons of working with an advisor under their practice’s arrangement. In the end, it is all about finding the right person to help you reach your goals and feel comfortable along the way. At The Center, we have found that working in a team-based environment toward a shared vision helps us serve our clients the best way we can.

A Top Issue Financial Planning Clients Are Facing Due To The Pandemic

Contributed by: Sandra Adams, CFP®

We are approaching a year of living in what many are calling the “new normal”.  While the future remains unknown, last year provided us with the opportunity to reflect on what is most important in our lives.

When the health of ourselves and the ones we love is threatened, it sparks the reevaluation of our top priorities. During the Covid-19 pandemic, advisors at The Center found that clients are most concerned about the wellbeing of their families instead of short-term market volatility. Additionally, we have had more conversations about charitable giving and the causes clients want to support, especially now when so many people are in need.

I have had many conversations with clients in 2020 that reminded me of a book by Simon Sinek called “What is Your Why?” The book is about helping people find clarity, meaning, and fulfillment to find their purpose. Helping clients find their purpose is woven into the fabric of The Center. It has never been more evident and meaningful than in the last year. Even pre-Covid, after working together to learn what the client wants/needs, we can begin using their financial resources towards those goals – aka helping them LIVE THEIR PLAN.  While the past year may have shifted some of those goals (or delayed some of them – like travel, etc.), I believe that Covid-19 provided extra time, allowing many to focus on their most important goals – their WHY’s.

If you are interested in a financial planner and want to discover your “Why’s”, please reach out.  We would be happy to help you focus on narrowing those down and put those into action steps so that you can ultimately LIVE YOUR PLAN™.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Letter Of Last Instruction: A Helpful Factbook For Your Family

Contributed by: Josh Bitel, CFP®

A letter of last instruction is an often overlooked element of estate planning. While more popular documents, such as your Will, are critical in showing an overview of how your estate plan should be managed and distributed after you are gone, your letter of last instruction offers more detail on the specifics of your life. Among the important items in this letter are funeral preferences, login information for any electronic data your heirs may need access to, preferred care for pets and veterinarian contact information, and private messages to loved ones. These are just some of the items a letter of last instruction can provide that aren’t normally covered in other documents.

Here at The Center, we recently updated the letter of last instruction and personal record keeping templates we provide to clients. These can be intimidating at first glance, over 50 pages between the two, but committing just 20-30 minutes per week and chipping away at these documents until they are finished can go a long way in providing your family the information they will need to meet your wishes after death.

These documents are important to share with your financial planner as well, as part of your team, we can assist in working with your heirs to carry out your wishes when you are gone. Starting the conversation around these topics can be tricky, but they are important. Contact us at The Center if you like some assistance in this area.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

American Rescue Plan Act of 2021 – What You Need to Know

Contributed by: Robert Ingram, CFP®

The American Rescue Plan Act of 2021 was signed into law by President Biden last Thursday.  This $1.9 trillion package, intended to provide relief and recovery from the impacts of the Covid-19 pandemic, contains a wide range of provisions.  These span from funding Covid-19 testing, contact tracing, and vaccination efforts, providing grants for school to improve their capabilities to operate amidst the pandemic, funding support to state and local governments to offset lost tax revenues, small business grants, to tax credit and other relief measures for individuals. 

Here are some of the notable provisions that may impact your finances this year and your overall financial plan.

Direct Payments (“Stimulus Checks”)

The American Rescue Plan Act, much like the CARES Act (enacted in March of 2020) and the Consolidated Appropriations Act (enacted last December 2020) before it, provides a refundable tax credit made as a direct payment to individual and families.  These 2021 Recovery Rebate payments have started to go to recipients.

How much could I receive?

• The full credit amount is $1,400 per eligible individual

• Eligible individuals include not only the taxpayers but also the taxpayers’ dependents

This is a key difference from the criteria determining the eligible number of individuals for the 2020 Recovery Rebates in the CARES Act and Consolidated Appropriations Act, which included only the taxpayers and the taxpayers’ children under age 17.

A married couple, for example, filing a joint return with a 21-year-old daughter in college, a 17-year-old son, and an 85-year-old mother living with them whom they claim as a dependent, could receive up to $1,400 x 5 = $7,000 for their 2021 Recovery Rebate.

Who is eligible?

Generally, U.S. citizens or U.S. Resident Aliens with a valid Social Security number, who are not dependents of another taxpayer, and who fall within certain income thresholds are eligible.

Your Adjusted Gross Income (AGI) determines your income eligibility, with the amount of tax credit phasing out to $0 over the following ranges by tax filing status.

• Married Filing Jointly: $150,000 to $160,000

• Head of Household: $112,500 to $120,000

• Single and all other filers: $75,000 to $80,000

For example, if you are married filing jointly and your AGI is an amount up to the initial threshold of $150,000, you would be eligible for the full credit.  If instead, your income falls between $150,000 and $160,000, your eligible credit is reduced proportionally as your income approaches the $160,000 ceiling.  If your income is at the $160,000 level or above, you are no longer eligible.

Determining Eligibility

There are a few different measuring points used to determine your income eligibility for receiving the rebate benefit. 

1. For the direct payments that are already starting to be disbursed now

The IRS uses available information, that is, your most recently filed tax return.  Since we are still within the tax-filing period for 2020, you may or may not have already filed your 2020 return.

If you had already filed your 2020 tax return, the IRS will use your 2020 tax return to determine your Adjusted Gross Income for eligibility.

If you have not filed your 2020 tax return, the IRS will use your 2019 tax return to determine your income eligibility.

Folks that would be eligible for the direct payment based on 2019 income but whose 2020 income might result in a reduced payment (or could make them ineligible) may benefit from not having filed their 2020 returns.

For those whose income was within the phase-out range or was above the eligibility phase-out based on the 2019 tax returns, there are other opportunities to benefit from these rebates (particularly if your income had fallen in 2020 due to the pandemic or other factors).

 2. The “Additional Determination Date”

Taxpayers who have not yet filed their 2020 returns but do file them before an Additional Payment Determination Date will have their rebate payment recalculated based on their 2020 AGI.  If the recalculated rebate payment is higher than the amount determined from the 2019 taxes, the IRS will send out another “stimulus check” to make up the difference.

The Rescue Act sets this Additional Payment Determination Date as the earlier of

• 90 days after the 2020 tax year filing deadline (still April 15th as of this writing) or

• September 1st

Keep in mind that If you anticipate filing an extension for 2020 and the extended filing deadline is October 15, you would still need to file your return much sooner to have your potential rebate recalculated using 2020 income.

3. Filing your 2021 Tax Return

Remember that the Recovery Rebate is a 2021 tax credit, so even if the advanced direct payments of the credit are determined using the 2019/2020 tax returns for income eligibility, filing your tax return for 2021 is the 3rd way to be eligible for this benefit.

If your 2021 AGI is lower than the 2019/2019 AGIs used to determine the advanced payment, and it is low enough to result in an eligible credit or a larger credit than was already paid out, this difference is applied as a tax credit on your 2021 tax return.

Increased Child Tax Credit (CTC) for 2021

The American Rescue Plan Act also makes some temporary enhancements to the normal Child Tax Credit for 2021.

• The Child Tax Credit is raised to $3,000 from $2,000 for children over age 6 and to $3,600 for children under age 6

• Eligible children can be up to 17 years old rather than just under age 17.

• The enhanced CTC is also a fully refundable tax credit this year. (i.e. it can become a tax refund if the credit makes the tax liability negative)

• A provision also has the IRS paying out 50% of the estimated 2021 tax credit over equal installments starting in July 2021, all based on your most recently filed tax return.

*If, however, at the end of 2021 you were eligible for a smaller amount than was paid out to you, that difference is “clawed back” by adding it to your tax liability on your 2021 tax return.

Because tax credits reduce tax liability dollar for dollar, this credit overall can have a significant impact on a family’s tax situation, particularly for a family with young children.  As a hypothetical example, a married couple with 3 kids (ages 3, 5, and 8) filing jointly with $100,000 of income in 2021 (assuming all ordinary income) and taking the standard deduction ($25,100) would have tax liability of $8,590.  After subtracting the CTC for the kids ($3,600 + $3,600 + $3,000 = $10,200), the couple’s tax liability would be negative $1,610 ($8,590 - $10,200) meaning a refund of $1,610!

With these enhanced credits, the credit amounts do begin to phase-out at the following Adjusted Gross Income (AGI) levels:

Married Filing Jointly: $150,000

Head of Household: $112,500

Single and all other filers: $75,000

Being ineligible for the 2021 enhanced child tax credit does not exclude you from using the normal child tax credit of up to $2,000 per child. You can still qualify for that credit up to these higher-income phase-out thresholds:

Married Filing Jointly: $400,000

Single and all other filers: $200,000

Child and Dependent Care Tax Credit Increased for 2021

The Rescue Act also makes changes to the Child and Dependent Care Tax Credit for this year that essentially raises the maximum possible credit from $1,050 to $4,000 for a single qualifying dependent and from $2,100 to $8,000 for two or more dependents.

• First, the maximum amount of eligible expenses (such as daycare) used to calculate the tax credit increases from $3,000 to $8,000 for a single dependent and from $6,000 to $16,000 for multiple dependents.

• There is also a percentage number applied to the taxpayer’s eligible expenses to calculate the actual credit amount (this is known as the ‘Applicable Percentage). For 2021, the Applicable Percentage increases to 50% from the previous maximum of 35%.

• The income threshold for reducing that percentage is expanded to an AGI of $125,000 (regardless of tax filing status).

Before this change under the Rescue Act, the 35% applicable percentage reduced down to 20% at a much lower income range.  Starting at $15,000 the percentage decreased 1% point for every $2,000 that your AGI exceeded that threshold down to a minimum floor of 20% (actually reached at an AGI of $45,000).  This meant the credit amount was more limited for most taxpayers.

For 2021 the same reduction applies, but it does not start until an AGI of $125,000.  As a result, when AGI hits $185,000, the applicable percentage is capped at 20%.  The combination of these changes allows more people to be eligible for higher potential tax credits.

• One downside for higher-income earners of $400,000 or more is that the Rescue Act adds a phase-out from the 20% minimum Applicable Percentage.  Starting at a $400,000 AGI, the 20% Applicable Percentage is reduced 1% point for every $2,000 your income exceeds that threshold.  This effectively makes you ineligible for any credit amount once your AGI exceeds $440,000.

Other Provisions of Note:

Federal unemployment support

Certain unemployment compensation benefits have been extended, including

• The federal unemployment insurance (UI) supplement is set at $300 per week through Sept. 6.k.

• The Pandemic Unemployment Assistance program providing benefits to individuals such as those self-employed is extended to September 6th

The Rescue Act also makes the first $10,200 in federal unemployment insurance assistance nontaxable for incomes under $150,000.  This would be $20,400 for two spouses.

*A key point is the $150,000 AGI threshold includes the unemployment benefits received)

Health Insurance Support

• Provides COBRA subsidies in 2021 for individuals that were involuntarily terminated.  Individuals can maintain their coverage at $0 cost from April through September.

• Expands the Premium Assistance Tax Credits for health insurance plans purchased through the state exchanges.

Small Business Support

Additionally, there is $15 billion in new funding for Economic Injury Disaster Loans (EIDL) as grants. The bill designates $7 billion for the Paycheck Protection Program (PPP) to nonprofits and news services. An additional $1 billion funds a grant program for independent live venues, theaters and cultural institutions. EIDL grants are exempt from inclusion in recipients’ gross income for tax purposes.

As you may have noticed, many of these provisions in the new legislation are nuanced and how they apply to your specific situation depends on several factors.  Continue to have conversations with your financial planner, and as always please reach out if you have questions.

Robert Ingram, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

5 Social Security Rules to Know for Maximizing Your Benefits

Contributed by: Robert Ingram, CFP®

Social Security is still a key source of income for most retirees.  At the same time with the program’s many nuanced rules and options, just understanding your available benefits can be confusing enough, let alone figuring out how to make the most of those benefits throughout retirement.  Additionally, there are some strategies not as widely publicized and they can easily fly under the radar.

Here are five Social Security rules to keep in mind as you plan your Social Security filing strategy. 

1. Delaying Social Security Can Increase Your Benefit Amount

Under the Social Security retirement program, you can collect your full retirement benefit at the designated Full Retirement Age (FRA), determined by your birth year.  Individuals born from 1943 to 1954 reached FRA at age 66.  In each year from 1955 to 1959 the FRA increases by 2 months (e.g. 1955 = age 66 and 2 months, 1956 = age 66 and 4 months, and so on). Those born in 1960 or later reach their FRA at age 67.

Think of your full retirement age benefit as your baseline benefit.  You can begin collecting benefits as early as age 62.  However, your benefit amount would be reduced by a small percentage for each month that you collected early.  This can add up to a sizable reduction. For example, if your full retirement age is 67 and you begin collecting as early as possible at 62, you could see your benefit reduced by 30%.

Now, the opposite is also true if you begin collecting your benefits after your full retirement age.  For each month that you delay taking your benefits beyond your full retirement age until age 70, your benefit amount increases by 2/3 of 1%.  (Are you thinking that doesn’t sound like much?)  These delayed retirement credits would yield an 8% increase over 12 months.  For clients that are concerned about longevity in retirement (a.ka. living a long time needing retirement income), this can be an effective way to help protect themselves.

2. Delaying Social Security Can Impact Benefits To A Surviving Spouse

For married couples that are receiving their Social Security retirement benefits, when one spouse passes away, the surviving spouse will receive only one benefit going forward.  It is the larger of his or her benefit or the deceased spouse’s benefit. 

By delaying Social Security to increase your benefit amount while you are living, you are also locking in a higher benefit amount that could be available to your surviving spouse.   Conversely, taking benefits early at a reduced amount may leave a smaller benefit available to your surviving spouse.  These different possible scenarios present both unique challenges and planning opportunities for maximizing the value of your benefits over both spouses’ lifetimes.

3. Withdrawal of Social Security Application (The “Do-Over”)

Suppose you have started collecting your benefits and then you changed your mind.  Perhaps you had collected early at a reduced benefit.  Can you go back and reverse the decision to claim benefits?  Well, if you are within the first 12 months of claiming, you can.

You can withdraw your application for benefits and then reapply later.  This resets things as if you had never started benefit.  Keep in mind there are also some important requirements.

• You must repay all of the benefits you and your family received from your original retirement application, including:

  • Benefit amounts your spouse collected based on your earnings record or benefits dependent children received

  • Any amounts withheld for Medicare premiums

  • Voluntary tax withholding

• Anyone who receives benefits based on your application must provide written consent

• You can only withdraw your application once in your lifetime.

4. Voluntary Suspension

Ok, you may be wondering if it has been longer than 12 months since you claimed your benefits and you change your mind, are you completely stuck?  Well, not exactly.  There is another way to increase your benefit amount.

Once you reach full retirement age, you can request a suspension of your benefit payments (regardless of when you started them).  By doing so, the benefit you were receiving earns those delayed retirement credits of 2/3 of 1% for each month that your benefits are suspended.  This results in a higher amount when you resume your benefits, no later than age 70.

This strategy of suspending benefits can be an effective tax planning tool for years in which you anticipate other outside income, like a pension that recently started or a lump sum from the sale of a business.

5. Benefits Based On An Ex-Spouse’s Earnings

If you are divorced, you may be able to collect benefits based on your ex-spouse’s Social Security record.  Similar to the benefits for married couples, you can receive up to one-half of your ex-spouse’s full retirement amount by waiting until your full retirement age to apply.  Collecting earlier than your full retirement age still results in a reduced benefit.

You can collect based on your ex-spouse’s record if you meet the following criteria:

• You were married at least 10 years and you have been divorced for at least 2 years

• You are unmarried

• You are age 62 or older

• The benefit you are entitled to on your Social Security earnings record is less than the benefit you would receive based on your ex-spouse’s record

If the amount you could receive based on your ex-spouse’s record is larger than the amount from your record, you have the opportunity to receive the higher benefit.

Decisions around when and how to collect Social Security benefits can be complicated and depend so heavily on your unique circumstances.  Your health, your retirement spending needs, your income sources, and financial assets are just a few that come to mind.  If you have questions about how Social Security fits within your overall retirement income plan, or if we can be a resource for you, please reach out to us!

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

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This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Prior to making a decision, please consult with your financial advisor about your individual situation.

How Risky Was It To Invest In Gamestop?

Contributed by: Nicholas Boguth

A quick Google search tells us that the odds of winning the Powerball Jackpot is roughly .000000003%. The odds of getting struck by lightning is roughly .0002%. What are the odds of getting rich by investing in a stock that grows by 100x in a year like Gamestop? Also slim.

It is hard not to envy those individuals posting screenshots of their LIFE-CHANGING gains like we saw last month with some of the lucky winners of the GME hysteria. The only problem is that it is far more likely that style of investing ends with life-changing LOSSES.

How often does a stock return 100x?

Christopher Mayer explored that question in his book, “100 Baggers”. His research found that 110 stocks returned 100x between 1976-2014.

Pair that with research from Credit Suisse and you soon realize that if your goal is to get rich quick, the odds are stacked against you. The number of listed securities has fluctuated from 3,000+ to 7,000+ over the past 50 years, and there have been OVER 15,000 new stocks listed in that time frame alone.

Some “back of the napkin” calculations would suggest that there is a ~0.5% chance you pick the stock that returns 100x, and that is assuming you hold through all the turbulence and sell at the correct time as well.

Back to the major problem – while 110 stocks returned 100x, there were THOUSANDS of stocks that failed. Some go bankrupt or get delisted because they never trade above $1/share, or lose 90% of their value and plateau. There’s a good chance a lot of those companies shared the financial position of Gamestop as well (Gamestop lost almost $500M in 2020).

So when we see a Reddit user celebrating their life-changing journey from $50k to $5M, know that there are DOZENS of individuals who tried the same thing – but are sulking in a less fortunate journey from $50k to $0.

At The Center, we believe in a more sustainable, long-term approach to gaining (and preserving) wealth. If you have questions about how that applies to you and your financial plan, please don’t hesitate to call or email anyone on our team.

Nicholas Boguth is a Portfolio Administrator at Center for Financial Planning, Inc.® He performs investment research and assists with the management of client portfolios.

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Any opinions are those of Nick Boguth and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. 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 a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

A Better Way To Pass Down Wealth To The Next Generation

Contributed by: Kali Hassinger, CFP®, CDFA®

You may have heard the saying, “Shirtsleeves to shirtsleeves in three generations.”  In a family, it refers to the phenomenon of a generation building wealth, passing it down to the second generation, but going broke by the third. Whether you are passing down investment assets or a family business, many parents have the hope that their money will enrich the lives of their children, grandchildren, and future generations for years to come. However, successful transitions do not just happen when assets are distributed.  Like most challenges in life, transitions require planning, communication, and coordination.

When planning for generational wealth transfers, opening the lines of communication is often the first and most difficult hurdle to overcome. Parents may be reluctant to share information on wealth and money for many different reasons. Our society as a whole often treats money as a taboo subject that is rarely discussed in personal terms. Other concerns could be stifling an heir’s initiative or the threat of a child’s future divorce. Simply avoiding these conversations, however, can lead to unintended confusion, irresponsibility, or resentment.

Family meetings devoted to discussing wealth can help heirs better understand their parents’ plan and any possible role they may play in the future. Family meetings also give participants the opportunity to express their views, accept responsibility, or acknowledge where they may need additional help in the future. There are many ways these meetings can be conducted, but they all center on the same objectives of trust, communication, and understanding.

A meeting with the family’s advisors, financial planner, attorney, and CPA should take place at some point as well. This will help the family to gain both comfort with the advisors and a greater understanding of the level of assets in question. With the passing of the SECURE Act eliminating the stretch IRA in many situations, retirement assets that are transitioning to the next generation may require more detailed tax strategies. The Estate tax limit has also fluctuated drastically throughout the last few decades, and that will most likely be the case going forward.  It’s important that those who will ultimately gain control of assets understand why plans were put into place and how they will function going forward. While no amount of planning can ultimately guarantee success, when the lines of communication are open between owners, heirs, and advisors, a family is able to develop the best strategy for all involved.

Successful family meetings are intended to engage family members, not be a set of rules handed from one generation to the next. Healthy communication builds trust, and trust builds understanding. We often encourage clients to involve children in their Annual Review meetings when they're comfortable. If full disclosure of all information seems too invasive initially, have a conversation with your planner prior to the meeting. We are happy to tailor the meeting as necessary and can review only the portions of your plan that you are comfortable sharing!

Senior Financial Planner Joins Center Team: Meet Michael!

Welcome to the team!

The Center proudly welcomes Michael Brocavich, CFP®, MBA to our team. With nearly 13 years of experience in the profession, Michael is thrilled to join a team where he can collaborate with other professionals to further enhance his career as a financial planner. 

Background

His extensive background includes both personal and corporate finance. After earning a BA in Economics and Management from Albion College, he launched his career in finance with Federal Mogul in Southfield, Michigan. He then went on to earn an MBA from Wayne State University and relocated to Chicago, where he worked as a senior financial analyst, first for Federal Mogul and later Barton, Inc.

Michael entered the personal finance field in 2007 when he joined MetLife Investors' Marketing and Distribution division. In 2013, he opened an Edward Jones office in Northville, Michigan, helping individual investors and small business owners with financial goal planning and wealth management.

Specialties

He joined Raymond James Financial Services in May of 2017 as a financial advisor specializing in financial planning, wealth management, and estate planning. 

Personal Life

Michael and his wife live in nearby Plymouth. In his spare time, he enjoys golf, the company of friends and family, and everything Detroit Sports.