Center Clients Donate over $1 Million in Tax-Savvy QCD Strategy in 2023

Contributed by: Lauren Adams, CFA®, CFP®

We are proud to announce that The Center assisted clients in donating over $1,000,000 to charities using the Qualified Charitable Distribution (QCD) strategy in 2023!

The QCD strategy allows clients with assets in an IRA account and who are over age 70.5 to donate funds directly from their retirement account to a charity. Giving directly from an IRA to charity results in those dollar amounts not being included as taxable income for that year. That usually results in a lower tax bill for clients and can have positive downstream effects like lowering the amount they may pay for Medicare premiums and the portion of Social Security that is taxable to them, depending on their situation and income level. For those 73 or older, QCDs also count towards the distributions they need to take each year for their Required Minimum Distribution.

Now, there are some caveats for QCDs – for example, you need to be at least 70.5, and the charity must be a 501c3. There are also limits on how much you can give each year through this method, but that number is relatively high at $105,000 per person per year currently.

The Center’s mission is to improve lives through financial planning done right, and we are proud to be able to help clients make such a positive impact on the world (bonus points for it being in a tax-savvy manner!). 

Did you know that QCDs are only one of many charitable giving strategies our team helps clients deploy? Check out this video to learn more about ways our clients make their charitable dollars stretch further for the causes they care about while also potentially lowering their tax burden. 

As always, we recommend that you work with your tax preparer to understand how these strategies can affect your situation. If you want to explore these strategies and more, contact your Center financial planner today! 

Lauren Adams, CFA®, CFP®, is a Partner, CERTIFIED FINANCIAL PLANNER™ professional, and Director of Operations at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Lauren Adams, CFA®, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Strategies to Help Protect Your Income Plan

Contributed by: Nick Defenthaler, CFP®, RICP®

In my recent blog focused on the popular '4% rule', we discussed safe portfolio distribution rates over the course of retirement. While the percentage one is drawing from their portfolio is undoubtedly very important, other factors should also be taken into consideration to ensure the income you need from your portfolio lasts a lifetime:

Asset Allocation

• It's common for retirees to believe their portfolio should become extremely conservative when they're in retirement, but believe it or not, having too little stock exposure has proven to do MORE harm than holding too much stock! While having a 100% stock allocation is likely not prudent for most retirees, maintaining at least 60% in equities is typically recommended to ensure your portfolio is outpacing inflation over time.

Reducing your Withdrawal Rate 

• Spending less during market downturns is one of the best ways to protect the long-term value of your portfolio. When I think of this concept, I always go back to March 2020, when the global pandemic hit, causing the US stock market to fall 35% in only two weeks. Due to the COVID-induced recession we were living through, we were all forced to dramatically reduce activities such as travel, entertainment, and dining out. This reduced spending for many clients, which helped tremendously while portfolio values recovered. This highlights the importance of reducing fixed expenses over time to provide flexibility. In years when markets are down significantly, having the ability to reduce variable expenses will prove to be an advantage.

Part-time Income

• Let's be honest – most of us don't want to think about work after retirement! That said, I'm seeing more and more retirees work 15-20 hours/week at a job they're enjoying, which is helping to reduce distributions from their portfolio. I find that most folks dramatically underestimate how valuable even earning $15,000 annually for several years can be on the long-term sustainability of their portfolio. While working part-time in retirement certainly has its financial benefits, I've also seen it help with the transition to retirement. Going from working full-time for 40+ years to a hard stop can prove challenging for many. 'Phasing into retirement' through part-time work can be an excellent way to ease into this exciting next chapter of your life.  

Impact of Fixed Income Sources 

• Often, we recommend that clients consider delaying Social Security into their mid-late 60s to take advantage of the over 7% permanent annual increase in benefits. It's also fairly common to have pension and annuity income start around the same time as Social Security, which could mean several years when a client draws on their portfolio for their entire income need. In many cases, this means a significantly higher portfolio withdrawal rate for several years. To plan for this short-term scenario with elevated distributions, one might consider holding at least several years' worth of cash needs in highly conservative investments (i.e., cash, money market funds, CDs, short-term treasuries, and bonds). Doing so helps to reduce the likelihood of being forced to sell stocks while down considerably in a bear market, something we'll want to avoid at all costs – especially in the first several years of retirement.

As someone who primarily works with clients either currently retired or within a few years of retirement, I can tell you that completing this retirement income puzzle requires a high level of customization and intention. Over time, your plan and strategy will have to adjust to changes in the market and tax law, to name a few. Please feel free to reach out if you'd like to discuss your plan in greater detail – our team and I are always happy to serve as a resource for you!

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Center for Financial Planning, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services Investment advisory services are offered through Center for Financial Planning, Inc.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Sources:

https://www.financialplanningassociation.org/article/journal/MAR04-determining-withdrawal-rates-using-historical-data

Is My Pension Taxable in Michigan?

Contributed by: Kali Hassinger, CFP®, CSRIC™

In 2023, a tax relief bill many are calling “Lowering MI Costs” was signed into law that will eventually phase out state tax on pensions (both public and private) and other retirement income for many Michigan residents! As with many laws, however, the timeline for implementation and how and when this law will affect everyone can be confusing. Ultimately, the amount that can be deducted depends on when you were born and is adjusted incrementally over the next few years. I’ve outlined below what you can expect based on the year you were born. 

First, it’s important to note that there is no change for those born in 1945 and before. The maximum allowed deduction can still be claimed each year. The bill will also allow those taxpayers collecting a pension for service as a public police or fire department employee (including corrections officers and state police) to claim the same full deduction as those born in 1945 and prior. For 2023, that amount is $61,518 for single filers and $123,036 for joint filers.

For those born after 1945, however, the amount that can be deducted varies based on the year you were taken. By 2026, everyone will be allowed to deduct the full amount, just as those born before 1945 do now. 

2023 

• For those born between 1946 and 1952:  Taxpayers will choose between claiming the current exemption of $20,000 for single filers or $40,000 for joint filers, or, under the new law, they can deduct up to 25% of the max 2023 deduction amount (Single Filers: $61,518 x .25 = $15,379.50; Joint Filers: $123,036 x .25 = $30,759).

• For those born between 1953 and 1958: Single filers can deduct up to 25% of the 2023 amount of $61,518 ($15,379.50), Joint Filers can deduct up to 25% of the 2023 amount of $123,036 (30,759). Under previous law, there was no deduction allowed. 

• For those born 1959 and after:  No deduction allowed.

2024  

• For those born between 1946 and 1952:  Taxpayers will choose between claiming the current exemption of $20,000 for single filers or $40,000 for joint filers, or under the new law, Single and Joint filers can deduct up to 50% of the 2024 maximum deduction amount.

• For those born between 1953 and 1962:  Can deduction up to 50% of the maximum deduction allowed in 2024.

• For those born in 1963 and after: No deduction allowed.

2025

• For those born between 1946 and 1952:  Taxpayers will get to choose between claiming the current exemption of $20,000 for single filers or $40,000 for joint filers, or under the new law, Single and Joint filers can deduct up to 75% of the 2025 maximum deduction amount.

• For those born between 1953 and 1966:  Can deduct up to 75% of the maximum deduction allowed in 2025.

• For those born in 1967 and after: No deduction allowed.

2026 

• For all taxpayers: Full Deduction will be allowed for everyone!

The Bill noted that as it is currently, the deduction available for joint returns will be based on the older spouse’s date of birth. If you have any questions about your pension or how this law will impact you, we are here to help! 

Source: House Bill 4001 (2023): http://legislature.mi.gov/doc.aspx?2023-HB-4001

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

The information contained in this letter 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®, CSRIC™, and not necessarily those of Raymond James. Expression of opinion are as of this date and are subject to change without notice. There is no guarantee that these statement, 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, including diversification and asset allocation. Individual investor’s results will vary. Past performance does not guarantee future results. 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.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

24800 DENSO DRIVE, STE 300, SOUTHFIELD, MI 48033 | 248.948.7900

Raymond James does not provide tax advice. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. Please discuss these matters with the appropriate professional. This document is a summary only and not meant to represent all provisions within the Lowering MI Cost plan.

Avoid Common Inheritance Mistakes with These Tips

Contributed by: Sandra Adams, CFP®

If you are like most of our clients, anticipating an inheritance likely means something is happening or has happened to someone you love. This often means dealing with the pain of grief and loss in addition to the potential stress of additional financial opportunities and responsibilities. Combining your past money experience and your relationship with the person you are losing or have lost can cause varying degrees of stress.

Approximately 15% of American adults expect to receive an inheritance in the next decade, according to the New York Life Wealth Watch survey — a shift of wealth being called the "Great Wealth Transfer." The adults who anticipate receiving an inheritance expect it from a parent, spouse, family member, or another individual. On average, adults expecting an inheritance anticipate receiving over $700,000. Only 42% of adults who expect to receive an inheritance feel very comfortable financially handling the new wealth that will be passed down to them - and nearly twice as many women who expect to receive an inheritance (23%) feel uncomfortable managing their inheritance than men who expect to receive an inheritance (12%).

The statistics are not kind. Studies show that roughly 33% of all inheritors have a negative savings balance within two years of receiving an inheritance. After five years, that number jumps to over 70%. Sadly, only about 30% of inheritors take their inheritance seriously and use it to plan for their future. It is important to be aware of and understand the typical habits of inheritors to avoid the risks.

Navigating grief, discomfort with handling finances, and family dynamics can make it hard to know what to do when it comes to anticipating an inheritance. What steps can you take to ensure that you avoid the potential risks that lie ahead and use your possible inheritance to help you make the best use of any funds for your current and future financial goals?

1. Don't Rush to Make Any Big Decisions. Often, when one receives an inheritance, it is hard to resist the urge to splurge on big purchases that you haven't been able to afford in the past (a fancy new car, an exotic international vacation, etc.). A best practice is to avoid major purchases until you can take the time to do some intentional planning. We recommend taking a proactive time out from decision making (we call this a "Decision Free Zone") to process the reality of having a new financial situation and to determine how you would like that to impact your current and future financial plans, including retirement and other financial goals.

This purposeful time-out can help you avoid making promises to do things for others with the new funds. It is important that you inform others who may be expecting your financial help that you will not be ready to make those decisions for some time. This takes the stress and pressure off you and allows you time to plan what you will do with the money at your own pace. You may eventually decide to help others, including family members or charities, with some of the money if it fits in your financial plan, but by avoiding making promises right away, you don't make and/or break commitments that may lead to hurt feelings and broken relationships that could impact future relationships.

2. Set Reasonable Expectations About Timing. Once you have been informed about your inheritance, you may wonder when you will receive it. It is important to find out what types of accounts and assets you might be inheriting to set a clear expectation of how long it takes to get them.

You shouldn't expect to receive funds from an inheritance for at least one to two months following the death of a loved one (if you get them sooner, it is a pleasant surprise!) It could take longer if the assets are not liquid. In some cases, the estate is held up longer for final expenses and/or if legal issues need to be resolved. 

3. Be Aware of Taxes. It is also important to be aware of the types of assets you are inheriting so that you are aware if you might owe taxes on any of the dollars you are receiving. For instance, if you are receiving funds from an IRA or an annuity contract that might have a taxable portion, and you don't have taxes withheld at the time of distribution, you might need to plan to have extra funds at tax time to pay the bill.

Setting aside a portion of the inherited dollars for any possible taxes due is a good idea so you don't get caught blindsided at tax time.

4. Consider the Details. Once you receive the assets, many other questions (besides taxes) will be answered, such as: How should I hold the assets (i.e., in what registration?) Should I hold my inherited assets separately from other assets held with my spouse? Should I hold the same investments as my grandfather/father/etc. held, or should I change the investments? If I inherited IRA assets, how long do I have to distribute the account? Getting the help of a financial adviser to answer these questions is highly recommended.

5. Work with an Advisor. Working with a financial advisor to determine what has changed or could change with your financial picture with the new inheritance is highly advisable. This could include things like:

• Income

• Savings/Emergency Funds

• Spending

• Investments

• Debts/Liabilities

• Health Care

• Home

• Insurance

• Estate/Legal

• Self-Care

• Family/Children

• Gifting/Charity

When your changes have been identified, it makes sense to determine how they can help you identify and meet your financial goals. With the help of your financial advisor, you can design a plan for how to meet your financial goals with your new inheritance. Because it can be overwhelming, we recommend determining what goals must be tackled first and what can wait until later based on a "Now…Soon…Later" schedule. Then, meet regularly with your financial advisor to begin checking off the tasks it takes to meet your goals and make the most of your inheritance.

For many, receiving an inheritance means the loss of a loved one. And the fear of failing with the big responsibility that comes with handling what is being left financially (especially if you don't feel confident handling money) might leave you feeling overwhelmed. By taking your time and using the guidance of a financial advisor who will provide you with education and guidance, you can set yourself up for success to use your inheritance to make the most of your current and future financial goals.

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.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandra D. Adams, CFP® and not necessarily those of Raymond James.

Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Important Information for Tax Season 2023

Contributed by: Andrew O’Laughlin

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.

2023 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 custodians (including Raymond James) to extend the mailing date until March 15, 2024, 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.

If you do have a delayed Form 1099, we may be able to generate a preliminary statement for you for informational purposes only, as the form is subject to change.

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 2023.

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 here.

And Don’t Forget…

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 associate 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.

Andrew O’Laughlin, CFP®, MBA; is a Senior Client Service Manager at Center for Financial Planning, Inc.® He has the CERTIFIED FINANCIAL PLANNER™ certification.

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.

Q4 2023 Investment Commentary

Contributed by: Angela Palacios, CFP®, AIF®

Contributed by: Nicholas Boguth, CFA®, CFP®

There were many reasons the fourth quarter of 2023 could have been weak. After two years of revenge spending of pent-up household COVID savings, the consumer seemed like they could have run out of steam, but the Christmas spending season was strong, and consumer confidence grew. The strength in the labor market has slowed down, and jobs are being added at a slower pace, but unemployment is creeping down and not up. While much of the population is still enjoying their low mortgage or auto loan rates that have been locked in, those forced to move into a new home or buy new automobiles are feeling the crunch of higher interest rates. Student loan debt became payable again just ahead of the holiday season while all insurance premiums are on the rise.

Despite all these reasons, we saw one of the strongest fourth quarters on record regarding returns. While returns were narrow early in the year, driven by AI-related hype, the second half of the year has been about inflation coming under control and, thus, a halt in interest rate increases for the last quarter. A typical 60% Stock/40% Bond diversified portfolio ended the year up around 15%, led by the strong growth of U.S. large stocks with some of the best returns of any major asset class at +26% for the year (Example 60/40 portfolio represented by 40% Bloomberg US Aggregate Bond TR, 30% S&P 500 TR, 15% MSCI EAFE NR, 10% Russell 2000 TR, and 5% MSCI EM NR). International stocks underperformed the U.S. but also had a strong year, up around 18%, and U.S. aggregate bonds finished the year positively at 5.5%, thanks to falling yields and tighter spreads.

Recession?

A year ago, the media was full of recession buzz. The S&P 500 experienced a peak-to-trough drawdown during 2022 of 24%, which usually signals a mild recession (stock market reaction usually happens ahead of an economic recession). But just because we didn’t experience a traditional recession, defined as two-quarters of negative Gross Domestic Product Growth in a row, doesn’t mean various sectors didn’t have periods of contraction. Capital Group shared an interesting perspective recently that the economy experienced recessions within multiple industries; they just didn’t align simultaneously. No doubt another hangover anomaly from the COVID shutdown and subsequent highs from the government infusion of cash. The common thread over the past couple of years was the resiliency of the jobs market. As long as people are as employed as they want, money continues to flow into their pockets for spending. Consumer spending is the largest component of our economy, and a strong job market means the economy should continue to grow and avoid recession.

U.S. Dollar

The U.S. Dollar weakened somewhat versus a basket of other currencies from the beginning of the year. This has served as a tailwind for international investing. Some of the weakening came late in the fourth quarter after the Federal Reserve indicated their desire to start cutting rates in the U.S. before other developed market economies would start. The differential between interest rates in the U.S. versus other economies worldwide is a driver of the strength or weakness of the dollar. If the rate differential narrows, meaning rates in the U.S. start to come down while rates stay higher in other areas of the world, making the yields similar, whether here or abroad, would weaken the U.S. dollar. This coupled with slowing inflation will likely continue to impact the dollar strength.

Source: JP Morgan Guide to the markets 11/30/23

Inflation and Interest Rates

Speaking of inflation…It appears that inflation is back down to long-term averages and continuing to drift downward. The chart below shows headline inflation (blue) and core CPI, the Federal Reserve’s preferred measure, as it strips out volatile items like food and energy in the short term. Shelter and services are the two areas of the economy that are still driving inflation. If inflation remains under control, this gives the Federal Reserve more leeway in cutting interest rates next year. 

Government Fiscal Situation

While we, as consumers, have applauded higher yields for over a year, interest outlay on the national debt is rising. Doubling from just a few years ago, interest payments now total approximately 14-15% of tax revenues. The 1990s is the last time we saw levels like this. Likely, this has yet to peak as debt continues to mature and be re-issued at higher interest rates. The level of debt continues to increase at what seems to be an unsustainable pace, too. The amount of debt per capita is nearly $100,000 for the first time. That means the government is $100,000 in debt per person in the United States. There are several ways to reduce or slow the growth: strong GDP growth, increasing immigration, spending cuts, and increased taxes (fiscal policy).

At the December Federal Reserve meeting, the FED confirmed that they are intending on rate cuts in 2024 rather than any more rate increases. The data is supporting this move. Rate reductions should help to slow the stress on interest payments for the government. This has certainly impacted consumer mortgage rates as they are falling from their peak.

You might have heard that there is an election in 2024. Some major topics of debate will make headlines in the coming months, including international policy, the impact of inflation, the growing national debt, and many key social issues.  

While it is nearly a year away, you may be anxious about how it will impact investments. A volatile campaign season and close vote can create uncertainty for markets. But, historically, election years have favored patient investors even though they may be volatile. For long-term investors, the political party holding the White House has had little impact on returns. Check out the chart below. You can see that returns for the S&P 500 have, on average, been similar regardless of who holds this office.

No doubt 2024 will be interesting. Not only are we facing a major election, but 40 national elections are happening worldwide (Russia, India, the U.K., South Africa, and Taiwan, to name a few)! That is more than 40% of the world’s population. Since a year can be a lifetime in politics, in addition to our February investment update, we will be doing a special election update in the fall to shed light on the progression of this process and how it may be impacting investments in the short run.

Portfolio Construction: Thinking Differently for the Coming Year

We are coming off two years that were full of surprises. Nobody saw the fastest rate hike cycle in history coming in 2022, leading to one of the worst stock and bond years. To follow that up, nobody predicted that the U.S. stock market would be positive over 25% in 2023. While your core investment philosophy should not change from year to year, the market is constantly changing and may provide short-term opportunities to keep on your radar. Lately, it feels as though those market changes are happening faster than ever. A few things that we are keeping on our radar that might drive opportunities for tweaks in portfolios are:

Inflation: Is high inflation behind us? How will the Fed react?

• Think about shifting in or out of real assets, commodities, and TIPS.

Interest Rates: Are we leaving a rising rate environment and entering a falling rate environment?

• Think about targeting certain maturities in bond portfolios.

Elections: Are there key policy shifts that may drive market trends for years? 

• Think about an overweight or underweight to certain sectors in both stocks and bonds and use election volatility as a rebalancing opportunity throughout the year.

Valuations: Have international, small-cap stocks, or the value style become cheap enough to expect outperformance?

• Think about shifting from the more expensive asset class to the discounted one. 

Dollar Strength: The dollar was in a bull market for almost 15 years, but are we in the early innings of a turnaround?

• Don’t give up on international investing. Think about underweighting U.S. dollar assets and adding to international.  

While these themes, and surely many others, will play out through the next year and potentially provide opportunities to take advantage of – our underlying philosophy will not change. We will focus on fundamentals and stick to our process. Headlines might cause investors to overreact one way or the other, but rather than get swept up in the news cycles, we will use those opportunities to rebalance and stick to our long-term investment goals.

Lastly, there is one additional change coming in May of 2024. The SEC is shortening the standard trade settlement cycle from two business days after the trade date to one business day after the trade date. This reduces the time between when a sale of a security occurs and when the proceeds are cleared for withdrawal. Remember years ago when settlement took three days? Will there ever be a zero-day settlement? Only time will tell. As technology improves and processes can be completed more efficiently, we see benefits like this!

Stay tuned for the invitation to our annual economic and investment update coming soon! There will be both an in-person event and a webinar!

Angela Palacios, CFP®, AIF®, is a partner and Director of Investments at Center for Financial Planning, Inc.® She chairs The Center Investment Committee and pens a quarterly Investment Commentary.

Example 60/40 portfolio represented by 40% Bloomberg US Aggregate Bond TR, 30% S&P 500 TR, 15% MSCI EAFE NR, 10% Russell 2000 TR, and 5% MSCI EM NR.

Any opinions are those of the Angela Palacios, CFP®, AIF® and not necessarily those of 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. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. 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. The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 22 developed nations. The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond 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. Diversification and asset allocation do not ensure a profit or protect against a loss. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not a guarantee or a predictor of future results. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Toyota Announces Buyout Offer

Contributed by: Michael Brocavich, CFP®, MBA

Toyota North America recently offered some employees a voluntary severance package. Employees received offers dated December 11th, 2023, and must apply for the offer and have received an acceptance or rejection by January 25th. Not all employees will be able to qualify, and the offer is very limited compared to other recent offers from the Detroit Big Three. 

Employees who are approved for the severance offer will receive payments based on salary and years of service. Employees with 15 years or greater of service could receive up to two times their salary. Employees with years of service between 10 and 14 years could receive up to a year and a half of salary, while employees with five years of service to nine years could get up to one full year of salary.  

Over the past several years, the ‘Big Three’ have all offered similar buyouts, and many of our clients have come to us for guidance to ensure they make an informed decision. Above is a webinar recently hosted by partner and Senior Financial Planner Nick Defenthaler, CFP®, RICP®. During this educational session, Nick discusses five important considerations when going through a layoff or a recent job transition: 

Timestamps:

• Cash Flow Planning - 6:01

• Health Care & Insurance Guidance - 11:49

• Tax Considerations - 18:19

• Retirement Account & Pension Decisions - 23:41

• Putting It All Together - 35:21

If you, friends, family members, or colleagues have recently received a buy-out offer from Toyota North America and would like to discuss the details with one of our team’s Certified Financial Planners, please feel free to reach out, and we’d be happy to arrange a time to chat. Our team has nearly four decades of experience helping clients navigate significant life transitions such as this – we’d be honored to serve as a resource for you. 

Office Line: 248-948-7900

Website Contact Inquiry: https://www.centerfinplan.com/contact 

If you’d like to receive a copy of our “Should I roll over my 401k to an IRA?” checklist, please click HERE!

CENTER FOR FINANCIAL PLANNING, INC is not affiliated with Toyota North America.

Michael Brocavich, CFP®, MBA is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He has an extensive background in both personal and corporate finance.

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 information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Financial Resolutions to Consider for 2024

Contributed by: Kelsey Arvai, CFP®, MBA

As the year comes to a close, it is time to start thinking about the New Year and starting it off on the right foot. What better way to accomplish this than by improving your financial health in 2024? January is Financial Wellness Month and Wealth Mentality Month – which serves as a reminder to get our finances in order and plan out our financial strategies. It is also the perfect opportunity to check in with your Financial Advisor to ensure you are financially prepared both in the short and long term.

While planning your financial resolutions, remember to be specific about what you want and why. The key to success is being clear about your priorities and choosing a particular goal. Make sure your goals are attainable, write them down, and post them somewhere where you will be reminded of them often. You can ensure accountability by creating calendar reminders to check in on your goals throughout the year.  

For additional resources on Financial Planning tips going into the New Year, check out this blog from Sandy Adams. I have also provided some additional ideas below from a previous blog of mine:

Automate Savings & Debt Reduction

Establishing and maintaining a positive cash flow is a top-tier priority for your financial health. Automation is key to efficiency and effectiveness while working towards your financial goals. Prioritizing your savings contribution through automation helps hedge against the temptation to spend the funds elsewhere. Utilizing automatic payments for your credit card could help your credit score if the payment happens before your due date. After establishing an emergency fund through your automated savings, you might consider directing excess cash to your retirement and health savings plans.

Max Out Your 401(k) & Health Savings Account (HSA)

The beginning of the year is a great time to review your 401(k) and HSA contributions to ensure that you are maximizing your benefits and taking advantage of increased deferral limits for 2024. 401(k), 403(b), and most 457 plan limits are now up to $23,000 for elective employee deferral. The catch-up contribution limit for employees aged 50 allows for an additional savings of $7,500. Similarly, HSA contribution limits are up to $4,150 for individuals and $8,300 for family coverage, with an additional $1,000 for employees 55 for older. Since HSAs are not "use-it-or-lose-it" accounts, and they can be spent on any expense without penalty after 65, it is advantageous to fully fund these accounts every year.

Plan for Charitable Giving

Most people wait until December to give, but we recommend not being in such a rush that you wait until the end-of-the-year deadline and lose sight of your charitable goal. The beginning of the year is a great time to develop a plan for your year ahead.

Invest in Your Emotional and Physical Well-Being

As you take stock of your financial health this year, carving out time for your physical health is equally paramount. There is a connection between health and wealth; each should be analyzed and reviewed professionally, at least annually.

Reach Out to Your Financial Advisor 

Working with your advisor, at least annually, can provide support to keep you on track while determining and working towards financial goals.

On behalf of all of us at The Center, we wish you a happy and healthy 2024!

Kelsey Arvai, CFP®, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of the Kelsey Arvai, MBA, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Retirement Plan Contribution and Eligibility Limits for 2024 (Additional Updates)

Contributed by: Kelsey Arvai, CFP®, MBA

The Internal Revenue Service (IRS) announced how much individuals can contribute to their retirement accounts and updated figures for income eligibility limits. See this blog from earlier in the month for adjustments to contribution limits and income eligibility limits that are notable as you set your savings targets for the New Year. Below, you’ll find additional updates worth keeping in mind as well.

Saver’s Credit Income Limit (Retirement Savings Contributions Credit):

For low and moderate-income workers, it is $76,500 for married couples filing jointly (up from $73,000), $57,375 for heads of household (up from $54,750), and $38,250 for singles and married individuals filing separately (up from $36,500).

Additional changes made under SECURE 2.0: 

• The limitation on premiums paid concerning a qualifying longevity annuity contract is $200,000. For 2024, this limitation remains $200,000.

• Added an adjustment to the deductible limit on charitable distributions. For 2024, this limitation is increased to $105,000 (up from $100,000).

• Added a deductible limit for a one-time election to treat a distribution from an individual retirement account made directly by the trustee to a split-interest entity. For 2024, this limitation is increased to $53,000 (up from $50,000).

As we begin 2024, keep these updated figures on your radar when reviewing your retirement savings opportunities and updating your financial plan. As always, if you have any questions, feel free to contact our team! 

Have a Happy and Healthy New Year! 

Kelsey Arvai, CFP®, MBA is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

Any opinions are those of Kelsey Arvai, MBA, CFP® and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, 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. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

Five Steps to Take if You’re Going Through a Life Transition

Contributed by: Sandra Adams, CFP®

Our lives are constantly changing. We have in our minds what our ideal plan for our lives will be…and then life happens. According to Bruce Feller, author of “Life is in the Transitions: Mastering Change at Any Age,” on average, everyone goes through a disruptive event every 12 to 18 months. One in ten are major changes he calls “lifequakes,” which lead to transitions. More than half of them are out of our control, such as the sudden loss of a loved one or a job. We choose nearly half of them, such as moving or changing careers. Others, like a natural disaster, 9/11, or the COVID pandemic, we experience along with other people. All transitions involve us going through a process of readjusting our plans, and having the proper process in place allows us to deal with these transitions healthily.

What action steps should we take if we experience a life transition of our own?

1. Take a time-out. We call this the Decision Free Zone. This is an established time intentionally set aside to avoid making big decisions. When you experience a transition, you often experience shock and/or being overwhelmed, and you need time to clear the “brain fog” before any major decisions are made.

QUADRANTS

1. Protect: When you feel ready to start rethinking your plan based on your new circumstances, determine what needs to be protected from your project. Given the transition, are there things you save from your previous plan in the face of change?

2. Choices: In the face of your transition, determine what new options or alternatives you need to consider.

3. Consequences: Based on the various choices and alternatives, consider the consequences of each to your plan.

4. New Story: As you make your plan based on what you want to protect, your choices/alternatives and the consequences of each, you can picture your new plan — your new story! You can begin to imagine it in your mind and plan to make it happen. This will help you to work your way through your transition over time.

Transitions are a part of life. We are likely to have to adjust our plans many times over the course of our lifetimes. How effectively we deal with transitions will determine how successful our ultimate financial and life plans will be. If you are experiencing or anticipating a transition and would like assistance with working through the process, please reach out — we are always happy to help!

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.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

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