Are You a Fiduciary? What Are Your Fees? How Does It Work?

Contributed by: Kelsey Arvai, CFP®, MBA

Contributed by: Nick Errer and Ryan O'Neal

Fiduciary vs. Financial Advisor

There is often confusion surrounding the differences between financial advisors and fiduciaries. While anyone who gives financial advice may call themselves a financial advisor, what separates fiduciaries is their legal and ethical responsibility to act in the best interest of their clients. In other words, a fiduciary is a person or organization with a legal and/or ethical obligation to act on behalf of someone else (or a group of people) and to put the interests of that individual or group ahead of their own. A fiduciary typically has more knowledge or expertise in a particular area than the person or group the fiduciary is helping.

A fiduciary relationship is intended to eliminate the conflicts of interest and abuses that could occur in such an uneven situation by requiring the fiduciary to always act for the exclusive benefit and interest of those they are serving (common examples are doctors, lawyers and fiduciary financial advisors and investors).  A financial advisor who is not held to the fiduciary standards may provide recommendations that could result in higher commissions or other personal incentives, whereas a financial fiduciary must give advice that best suits a client’s needs, regardless of the consequences to themselves.

Who Regulates Fiduciaries?

Financial Advisors who have a fiduciary commitment to their clients will be registered with either the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA) as Registered Investment Advisors (RIAs). All RIAs are required to always act as fiduciaries, which means they put their client’s interests above their own. Additionally, financial advisors may hold professional designations such as Certified Financial Planner™ (CFP®) and Accredited Investment Fiduciary® (AIF®), which have their own ethical standards that must be adhered to.

What Are the Fees?

Fiduciaries are compensated in various ways, and the specific payment structure will vary from one client to another. In some cases, fees are based on a flat rate or hourly charge for a particular plan, while most times, they are calculated as a percentage of Assets Under Management (AUM). Non-fiduciary advisors often receive commissions as part of their payment structure. These advisors are held to a “suitability standard,” meaning they must have a reasonable belief that an investment or transaction is suitable for their customer.

When seeking new financial advice, it is essential to conduct comprehensive research to confirm that the advisor prioritizes your best interests over their own financial gain.

Kelsey Arvai, MBA, CFP® 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 Kelsey Arvai, Nick Errer, and Ryan O’Neal and not necessarily those of Raymond James.

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.

1099 Details for Tax Season

Contributed by: Nick Defenthaler, CFP®, RICP®

Tax season is in full swing (everyone’s favorite time of year, right?!), and 1099s are in the process of being developed and distributed by investment broker-dealers and custodians. The two most common accounts clients own are retirement accounts (Roth IRAs, Traditional IRAs, SEP-IRAs, etc.) or after-tax investment/brokerage accounts (Joint brokerage account, individual brokerage account, trust brokerage account, etc.). Because retirement accounts and after-tax accounts are vastly different from a tax perspective, the 1099s that are generated will be much different as well. Let’s review the differences.

Retirement Accounts (Traditional IRAs, Roth IRAs, SEP-IRAs, 401k, 403b, etc.)

Retirement accounts produce what’s known as a 1099-R. Yes, you guessed it – the “R” stands for retirement account! Because retirement accounts are tax-deferred vehicles, the IRS only cares about how much was withdrawn from the account and if there was any tax withheld on those distributions (the 1099-R is also accompanied by form 5498, which also shows any contributions to the retirement account). Because of the simplicity and what’s captured on this tax form, I commonly refer to a client’s 1099-R as their “retirement account’s W2”. Because of the tax-deferred nature of retirement accounts, portfolio income such as dividends, interest, and capital gains are completely irrelevant from a tax reporting standpoint. Because these income sources do not play a role within the 1099-R, there’s far less accounting that goes into producing the 1099-R, which means they are released early in the year – typically in late January/early February (around the same time most W2s are produced for those still working).

**Important Tip: For those over 70 ½ that have chosen to utilize the Qualified Charitable Distribution or ‘QCD’ strategy (click here to learn more about QCDs) and gift funds directly from their IRA, please note that not all investment companies will report these gifts on your 1099-R! If the gifts you made from your IRA directly to charity do not appear on your 1099-R, it will be your responsibility (or you can ask your advisor) to communicate how much you’ve gifted throughout the year to your tax preparer to ensure you’re receiving the tax benefits you’re fully entitled to! If gifts are missed, you would be able to file an amended tax return, but this is a time-consuming and sometimes costly step I would recommend avoiding, if possible.**

After-Tax Investment/Brokerage Accounts (Trust accounts, joint accounts, individual accounts, etc.)

After-tax investment or ‘brokerage accounts’ are very different compared to retirement accounts when it comes to tax reporting. Because these accounts are funded with after-tax dollars and not held in a retirement account, there is no tax-deferral. This means that income sources such as dividends, interest, and capital gains are taxable to clients each year – the 1099 produced for these accounts captures this data so your tax preparer can accurately complete your tax return each year. Within the 1099 summary, there are three common sections:

• 1099-Div: Reports dividends paid throughout the year

• 1099-Int: Reports interest paid throughout the year

• 1099-B: Reports capital gains or losses generated throughout the year

Unlike retirement accounts that are tax-deferred, dividends, interest, and capital gains/losses play a significant role within the 1099 because they are reportable on your tax return each year. Because of this, a significant amount of accounting from the various investments within your account is required to ultimately determine these figures that will be captured on your 1099. Because taxes are not withheld in these accounts if distributions ever occur, withdrawals are not captured on these 1099s as they would be on a 1099-R. Given the extensive accounting that occurs to ensure errors are not made on reportable income, the earliest these 1099s become available is typically mid-February. That said, it’s quite common for many 1099s to be distributed closer to mid-March. Because of this, I always recommend consulting with your tax professional to see if filing a tax extension would be appropriate for your situation.

As you can see, there are important differences between these different tax reporting documents. Having a better understanding of each will hopefully make your upcoming tax season a bit more manageable. 

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. 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. 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. Conversions from IRA to Roth may be subject to its own five-year holding period. 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 of contributions along with any earnings are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

If You’re a Single Woman, These Are the Top 5 Things to Plan for Prior to Retirement!

Contributed by: Kali Hassinger, CFP®, CSRIC™

Retirement planning comes with its own unique set of opportunities and challenges. When you're a single woman, deciding to retire and the many subsequent decisions surrounding that life change can feel like it presents even more anxiety. Focusing on a few key areas to optimize your financial future can help ease these doubts and ensure you make the right financial choices. Here are the top five items to plan for as you consider retirement:

1. Build and maintain a Diversified Investment Portfolio

Throughout your career, you've successfully built your retirement savings pool. When you're working and living off of your income, it can be easier to weather the market's ups and downs. When your portfolio is needed to provide income for your lifestyle and well-being, the stakes are a bit higher. Building a balanced portfolio that aligns with your risk tolerance, time horizon, and retirement goals is extremely important. With those guidelines in mind, your investment portfolio should be well-diversified across various asset classes, sectors, and geographical regions.

2. Understand your Budget, Expenses, and Lifestyle Needs

At all stages of our lives, having a budget and understanding of spending is important. When making the decision to retire, you'll want to plan for both current and future expenses. Women often have longer life expectancies than men, meaning their savings need to last longer in retirement. A detailed budget and retirement spending projection can help you determine if you've saved enough to have a financially confident retirement.

3. Create a Comprehensive Withdrawal Strategy

A well-thought-out withdrawal strategy can help preserve your portfolio and ensure it lasts throughout your lifetime. One common approach is the "bucket strategy," where you segment your savings and portfolio into different buckets or investments based on when you will need to use the money. When working with clients, we recommend keeping approximately 12 months of your portfolio income need in cash or low-risk, cash-like positions that are not subject to market volatility. Beyond that 12-month need, your ability to handle risk can vary.

Your withdrawal strategy should also incorporate and consider the tax implications of your withdrawals to avoid unforeseen tax burdens.  Strategic tax planning can also help to extend the life of your portfolio.

4. Develop an Estate Plan

Estate planning is often overlooked, but it's one of the most critical steps in helping to ensure that your assets are distributed according to your wishes. Whether you choose family or charitable causes, deciding how your savings and possessions are handled can avoid unnecessary stress for your loved ones.

Without a spouse who would be the default decision-maker in a situation where you cannot make them yourself, it's extremely important to ensure that you've appointed a power of attorney for financial or healthcare decisions.

5. Understand your Social Security Benefits

For many, Social Security is the only fixed source of income in retirement, and the decisions are often irrevocable. As a single person, you'll want to optimize the Social Security benefits available to you. Although you can collect as early as age 62, your benefit will be higher if you collect at your full retirement age or even as late as age 70. A financial planner can help you determine the best strategy for you based on your assets, life expectancy, and retirement goals.

As retirement approaches, it's natural to feel overwhelmed by the decisions that need to be made. Working with a financial planner can provide you with the expertise and personalized advice to feel confident in your financial future. It can also provide a partner you can trust with any of life's financial decisions.

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 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 Kali Hassinger, CFP®, CSRIC™ and not necessarily those of Raymond James.

Prior to making an investment decision, please consult with your financial adviser 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 2024

Contributed by: Andrew O’Laughlin, CFP®, MBA

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.

2024 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, 2025, 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 2024.

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.

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 the Director of Client Services 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.

Managing Financial Decisions after a Traumatic Event

Contributed by: Sandra Adams, CFP®

Life happens…someone we love passes away, we are diagnosed with a life-threatening illness, we are involved in a horrible automobile accident that totals our vehicle and makes us scared for our lives. And then, to add to the stress, we need to make a significant financial decision. How can we do that when we are completely traumatized and overwhelmed?

1. Take an intentional time out—called the Decision Free Zone—to ensure you get your mind clear, your emotions settled, and your financial goals clear before making any big financial decisions.

2. Acknowledge the impact of your trauma — understand how your trauma experience may be influencing your financial decisions, and be intentional about putting off big decisions until you feel ready to do so with your future purpose in mind.

3. Prioritize self-care – whether it is taking time to grieve, making sure you get the proper medical or psychological treatment, or just taking time to rest, relax, and recover from the traumatic event, take care of yourself first before pressing yourself to make significant financial decisions.

4. Communicate – Talk to a trusted friend, partner, family member, or professional about your financial concerns or challenges — do not try to manage the stress alone. It is also important to let others know that it may be a while before you are ready to make big decisions so they are not pressuring you based on their timelines.

5. Set boundaries – like the above, set boundaries based on the timelines you feel comfortable with, not with the timelines others are pressuring you to stick to. Only make decisions when you are ready to make them.

6. Seek professional help – Find a professional partner, like a financial advisor trained in transition planning, who understands your need to take your time and can help you through your trauma and transition.

When you have experienced a traumatic event, it is important to be patient with yourself and to make sure to take the proper steps to heal and prepare yourself before making big financial decisions. By taking the appropriate steps and aligning yourself with the right financial partners, you can overcome the trauma and come out the other side making solid financial decisions. If you or someone you know has been through a traumatic event and is struggling with financial decisions and could benefit from some assistance, please send them our way. 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.

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 and not necessarily those of Raymond James.

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.

Past Performance Is No Guarantee of Future Results!

Contributed by: Nicholas Boguth, CFA®, CFP®

Over the past year, the S&P 500 has had a fantastic run and was up 38% (10/31/23 to 10/31/24). Does that mean we should expect lower returns in the next 12 months? Absolutely not, at least not for that reason.

Many investors get nervous after a very positive year. You may hear things like: 

• “Stocks have been on a great run, so there is no way this can continue.”

• “Trees don’t grow to the sky!”

• “The past year was well above average; we’d expect mean reversion and lower returns going forward.”

But the truth is, the next year of stock returns has almost nothing to do with the previous year. The chart above shows the last 12 months’ return on the horizontal axis and the next 12 months’ return on the vertical axis. This is monthly U.S. large stock data since 1934 (90 years of data – over 1000 monthly readings!). If higher return years were generally followed by lower return years, you’d see the dots above in a tighter, more downward-sloping line. This is not a tight downward sloping line. This looks like my toddler got excited with a blue marker.

Statisticians call this a “random walk,” but practically speaking, all it means is that negative years can happen no matter what happened last year, and positive years can happen no matter what happened last year!  Past performance is no guarantee of future results. On average, though, we know that the stock market goes up more than it goes down, diversification is key to smooth out the ride, and a well-designed financial plan is the foundation of it all. Please contact any of us here at the Center if you have questions about any aspect of your financial plan. 

Nicholas Boguth, CFA®, CFP® is a Senior Portfolio Manager and Associate Financial Planner at Center for Financial Planning, Inc.® He performs investment research and assists with the management of client portfolios.

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. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Diversification and asset allocation does not ensure a profit or protect against a loss.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transactions costs or other fees, which will affect actual investment performance.

Any opinions are those of Nicholas Boguth, CFA®, CFP® and not necessarily those of Raymond James.

Q4 2024 Investment Commentary

Click the image above to watch the video commentary!

Contributed by: Angela Palacios, CFP®, AIF®

Contributed by: Nicholas Boguth, CFA®, CFP®

Think back to one year ago. It's January 2024. So far, the economy had avoided the recession everyone thought was coming. The S&P 500 just wrapped up a +26% year. Bonds provided some positive performance. Inflation was coming down, unemployment was still at historic lows, and the mood could be described as cautious optimism as investors expected a "growing but slowing" economy.

Most market forecasts (more on these later) expected 2024 to be good but definitely not great. ESPECIALLY in an election year, because you never know what sort of uncertainty that could bring!

Well, we just wrapped up 2024. How was it? From the lens of the financial markets, it was a strong year.

Stocks continued to climb, and bonds were slightly positive despite some bond market volatility. The S&P 500 was the standout among the major asset classes, but even small cap stocks and international stocks contributed positive performance.

Q4 brought some volatility and uncertainty between a major presidential election and multiple Fed rate cuts. U.S. stock indices climbed through the uncertainty, but international stocks and bonds fell slightly.

The big change during Q4 was the increase in bond yields as investors adjusted to what is looking like an even stronger economy than expected. A stronger economy generally comes with higher bond yields, which means less rate cuts from the Fed. This was reiterated in the Fed's Summary of Economic Projections in December that showed they expected the Fed Funds Rate to get to 3.9% by the end of 2025 (3 months prior, that projection showed an estimate of 3.4%).

We'll be watching this dynamic continue to evolve in the markets this year, but as of today investors are looking at a strong economy backed by an easing Federal Reserve, positive expectations for stock earnings, and decent bond yields providing strong fixed income options.

Interest Rates and The Economy

In December, the Federal Reserve (the Fed) held its final meeting of 2024, finalizing a year marked by significant continued disinflation and one of the strongest in recent years of economic activity. However, uncertainty always remains when looking ahead. Tariff and immigration policies proposed by the incoming administration are clouding investor's (and the Fed's) outlook for 2025.

With the Fed still in easing mode, equities should continue to be well supported (remember the old saying, "Don't fight the Fed"). While the Fed's December rate cut was a 'hawkish' cut (a cut with guidance there will be fewer future cuts), we continue to focus not on the number of cuts but more on the overall economic trajectory, which seems to be very resilient right now. With the economy still showing momentum, earnings should maintain their climb in 2025—reinforcing our positive longer-term outlook. However, in the short term, there can always be volatility, and after such a strong year, a little short-term volatility would not be unexpected.

So why doesn't this potential increased volatility scare us very much? A strong consumer!  Since the consumer makes up 70% of the U.S. Economy, we are a key ingredient to keep an eye on. The strength of the consumer in 2024 was evident through several key indicators. Consumer spending has shown consistent growth, while consumer confidence remains unshaken, driven by low unemployment rates, steady job growth, and rising wages. There could be some cracks on the horizon for consumer spending. We are starting to see consumers "trade down" a bit in their purchases, meaning they are still happy to spend but on cheaper options for goods and services. There aren't so many cracks to be concerned about yet, but it is certainly an area we watch closely.

Bonds have had a bizarre year. Coming into 2024, we weren't sure what to expect other than the unexpected. As such, the caution we have exhibited in that portion of our portfolios has helped reduce some volatility in bonds in 2024. Treasury yields have moved contrary to normal historical patterns by rising instead of falling after the Fed started to cut rates in the fall. Better-than-expected economic data and inflation not falling as fast as the market would like to see have challenged investors to reassess the Fed's expected rate path. This means yields are likely to stay a bit more elevated than everyone originally thought. If you look at inflation and employment, the Fed has largely accomplished what it set out to do, even though markets might like to see them do more. The chart below shows where we are versus the Fed's targets.

S&P 500 Price Targets and Return Expectations

Major banks and brokerage firms put out S&P 500 price targets every year, and it may or may not surprise you, but they are rarely accurate. It is impossible to predict something as volatile as the stock market over such a short time. Last year, for example, analysts ranged from bearish to bullish, and the stock market blew straight through every one of their price targets by May.

Stock performance over one year can vary dramatically, but it has been remarkably consistent over the long term.

The other thing on investors' minds right now is…can the performance continue? Of course it can! No one knows for sure if it WILL over the next year (as I said, it is impossible to predict something so volatile as the stock market over such a short time frame), but just because stocks had a tremendous last year does not mean that they must lag the following year. In fact, the statistics show there is essentially no correlation between last year's performance and the next year's performance.

Election Outcome and Markets

As the election dust settles, it is important to remember that the economy is usually the guiding force behind winners and losers in our portfolio.  Overall, rising corporate profits, continued economic expansion, and the potential for lower yields later this year provide a potentially positive backdrop for the markets, in our view.  Some areas, like international investments, may see additional headwinds from political forces like tariffs or a strong U.S. dollar.  At the same time, smaller companies in the U.S. may see some natural tailwinds from continued onshoring and disinflation. While there are many reasons for an optimistic outlook, being prepared for a downturn is evergreen. Our actions in your portfolio will reflect our continued research and developments in these areas as President Trump takes office. There are important things that we need to focus on, as always, such as making sure that you have 6-12 months of expenses set aside in cash so that we can weather any short-term volatility in markets (especially if you are retired), rebalancing to maintain proper diversification and paying close attention to tax loss harvesting and capital gains. 

A new administration may provide new risks, but when aren't there risks in investing? With new risks also come new opportunities, and our investment committee meets monthly to ensure portfolios are allocated to take advantage of constantly changing markets. Most importantly, your financial planner here at The Center is here to help you build a financial plan that gives you confidence no matter the market conditions. With that being said, onto 2025!

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.

Nicholas Boguth, CFA®, CFP® is a Senior Portfolio Manager and Associate Financial Planner at Center for Financial Planning, Inc.® He performs investment research and assists with the management of client portfolios.

Any opinions are those of the Angela Palacios, CFP®, AIF® and Nick Boguth, CFA®, CFP® 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 Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index. 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. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. 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.

Three Financial Planning To-Dos for New Parents

Contributed by: Lauren Adams, CFA®, CFP®

If you’ve recently become a new parent, maybe your first thoughts when meeting your new child were like mine: feelings of overwhelming joy and gratitude, but also immense responsibility for this new life. Not only do you need to feed, clothe, and shelter this child, but you are also responsible for providing for their health, mental, and financial well-being for the next 18+ years. Talk about a commitment!

Hopefully, you have some trusted people in your life to help you with the health and mental well-being part, but we want you to know we’re here to help you with the financial part of the equation. In addition to stocking up on diapers and assembling the crib, we want you to add three very important to-dos to your New Parent Checklist:

1. Review Your Life Insurance Coverage

First, ensure you have enough life insurance to care for your loved ones if something happens to you. Many of us are fortunate to receive some life insurance benefits from our employer through what is called “group term life insurance.” Often, this is equal to a certain dollar amount (for instance, one times your annual salary) and is available at little to no cost to you. The plus side of group term life insurance is that it is cost-effective and usually doesn’t require medical underwriting. The downside of group term life insurance is that it typically does not provide enough coverage that your family would need if you were gone, and it usually does not stay with you if you were to leave your employer.

That is why we frequently recommend that our clients consider getting their own term life insurance through an independent insurance agent. In most cases, term life insurance (as opposed to other kinds of permanent insurance) that provides financial coverage for a certain period of time is the best way to get the most death benefit for the least amount of premium dollars. The length of that term and the dollar amount of coverage can be dictated by financial needs as well as what is important to each client. For instance, some clients want to be able to pay off a mortgage, fund college costs, allow their spouse to hire childcare, and so on. Depending on the dollar amount, you may be required to go through medical underwriting to be approved for the death benefit you want. Your financial advisor can help you determine what time and dollar amount is right for you.

2. Meet with an Estate Planning Attorney

Everyone should have an estate plan in place, which is especially important for parents. An estate plan – that usually includes a Last Will & Testament, Durable Power of Attorney for Finances, Durable Power of Attorney for Healthcare/Advanced Medical Directive, and sometimes a Revocable Living Trust – can make sure all your wishes are correctly carried out in the event of your incapacity or death. This could include everything from who you want to make healthcare decisions on your behalf to at what ages your children should receive any inheritances you leave them. One of the most important things you specify in an estate plan is the guardian for minor children if something happens to you.

When choosing a guardian, parents should discuss who is the best person to care for their children’s needs. The guardian is often a relative or close friend near the same age. The guardian does not have to be the person who manages investments on the children’s behalf (in that case, parents may want to name a separate conservator—someone who handles money on behalf of their minor children). Many times, the guardian and conservator are the same people, but there are situations when the duties are best split (usually depending on the skills and strengths of the friends or family that they choose). In that case, the guardian and conservator work together to determine an appropriate monthly stipend for the guardian to care for their children.

3. Review Your Beneficiaries

Meeting with an estate planning attorney and drafting documents is only one piece of the puzzle. You’d be surprised to learn how often we meet with married couples, help them review their financial statements, and discover that their parents are still named as the primary beneficiaries on their accounts. It is surprising but understandable; between checking and savings accounts, workplace retirement accounts like 401(k)s, Individual Retirement Accounts, and a myriad of other investment account options, there is a lot to keep track of!

When this happens, beneficiaries could be required to go through probate court to obtain inheritances, resulting in additional expenses to settle the estate. Once a client is deceased, their account could be frozen, which delays accessing funds for family members who might rely on the assets (namely, spouses and minor children). Because of this, we regularly help clients keep track of their beneficiaries and account titling.

Now, I know life insurance, estate planning, and beneficiary designations are not the most exciting things to think about after you bring your new bundle of joy home. But knowing that you have a plan in place to care for your child regardless of what happens to you can be one of the greatest gifts you give them. Reach out to discuss your personal situation and let us help you through this process!

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 Center for Financial Planning, Inc.

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

2025 Retirement Account Contribution and Eligibility Limits Increases

Contributed by: Robert Ingram, CFP®

The IRS has recently announced the annual contribution limits for retirement plans and IRA accounts in 2025. And while the increases to most of the limits are modest, there are some notable increases. In particular, the legislation Setting Every Community Up for Retirement Act of 2022 (SECURE Act 2.0) adds some special contribution limits starting in 2025. Here are some of the adjustments to contribution limits and income eligibility limits for some contributions that you should keep on your radar as you plan your savings goals and targets for the New Year.

Employer retirement plan contribution limits (401k, 403b, most 457 plans, and Thrift Saving):

• $23,500 annual employee elective deferral contribution limit (increases $500 from $23,000 in 2024)

• $7,500 extra "catch-up" contribution if age 50 and above (remains the same as in 2024)

• Total amount that can be contributed to a defined contribution plan, including all contribution types (e.g., employee deferrals, employer matching, and profit sharing), will be $70,000 or $77,500 if age 50 and above (increased from $69,000 or $76,500 for age 50+ in 2024)

*SECURE Act 2.0 contribution limit change

Under a change made in SECURE ACT 2.0, starting in 2025, there will be a higher catch-up contribution limit for employees aged 60, 61, 62, and 63 who participate in the above plans.

• $11,250 is the "catch-up" contribution for those aged 60, 61, 62, and 63  ($3,750 more than the age 50 and above "catch-up" amount)

Traditional, Roth, SIMPLE IRA contribution limits:

Traditional and Roth IRA

• $7,000 annual contribution limit (remains the same as in 2024)

• $1,000 “catch-up” contribution if age 50 and above (also remains the same as in 2024)

Note: The annual limit applies to any combination of Traditional IRA and Roth IRA contributions. (i.e., You would not be able to contribute up the maximum to a Traditional IRA and to up the maximum to a Roth IRA.)

SIMPLE IRA

• $16,500 annual elective contribution limit (increases $500 from $16,000 in 2024)

• $3,500 “catch-up” contribution if age 50 and above  (remains the same as in 2024)

*SECURE Act 2.0 also sets a higher “catch-up” contribution limit to a SIMPLE for those aged 60-63)

• $5,250 “catch-up” contribution if aged 60, 61, 62, and 63 ($1,750 more than the age 50 and above “catch-up” amount)

Traditional IRA deductibility (income limits):

You may be able to deduct contributions to a Traditional IRA from your taxable income.  Eligibility to do so depends on your tax filing status, whether you (or your spouse) is covered by an employer retirement plan, and your Modified Adjusted Gross Income (MAGI). The amount of a Traditional IRA contribution that is deductible is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For example,

• Filing Single

  • You are covered under an employer plan

    • Partial deduction phase-out begins at $79,000 up to $89,000 (then above this no deduction) compared to 2024 (phase-out: $77,000 to $87,000)

•  Married filing jointly

  • Spouse contributing to the IRA is covered under a plan

    • Phase-out begins at $126,000 to $146,000 compared to 2024 (phase-out: $123,000 to $143,000)

  • Spouse contributing is not covered by a plan, but the other spouse is covered under a plan

    • Phase-out begins at $236,000 to $246,000 compared to 2022 (phase-out:  $230,000 to $240,000)

Roth IRA contribution (income limits):

Similarly to making tax-deductible contributions to a Traditional IRA, being eligible to contribute to a Roth IRA depends on your tax filing status and your income. Your allowable contribution is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range. For 2025, the limits are as follows:

• Filing Single or Head of Household

  • Partial contribution phase-out begins at $150,000 to $165,000  compared to 2024 (phase-out:  $146,000 to $161,000)

•  Married filing jointly

  • Phase-out begins at $236,000 to $246,000 compared to 2023 (phase-out: $230,000 to $240,000)

If your MAGI is below the phase-out floor, you can contribute up to the maximum. Above the phase-out ceiling, you are ineligible for any partial contribution.

Eligibility for contributions to retirement accounts like Roth IRA accounts also requires you to have earned income. If you have no earned income or your total MAGI makes you ineligible for regular Roth IRA contributions, other strategies such as Roth IRA Conversions could be good alternatives in some situations to move money into a Roth. Roth Conversions can have different income tax implications, so you should always consult with your planner and tax advisor when considering these types of strategies.

As always, if you have any questions surrounding these changes, don’t hesitate to contact us!

Have a happy and healthy holiday season!

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.

Any opinions are those of Bob Ingram, 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.

Rules of Thumb and the Current Bond Market

Contributed by: Nicholas Boguth, CFA®, CFP®

In a recent Bloomberg interview, famed investor Stanley Druckenmiller shared a rule of thumb that I've heard many times over the years: a good estimate for the 10-year treasury yield is nominal GDP growth (real GDP + inflation).  

I'm not here to tell you Stanley Druckenmiller doesn't know what he's talking about (he most definitely does). But I am here to remind you that rules of thumb, golden rules, estimates, projections, averages, and even cited statistics can be misleading and dangerous when taken out of context!

In the long term, that 10-year yield = GDP growth rule of thumb is about right. It makes sense for that yield to trade higher when inflation and growth are higher, but is it always right?

Nope. Not even close.

The green lines below show the average 10-year yield at each level of GDP growth. You can see why the rule of thumb exists – the average is within each range, and higher as GDP growth is higher…but look at that range of yields! When GDP has grown between 3% and 6%, for example, the 10-year has traded anywhere between ~1% and ~14%! In 1982, the 10-year yield was above 14%, and GDP grew around 4.8%. The rule of thumb was a bit off that year.

Most recently, from 6/30/23 to 6/30/24, nominal GDP was 5.7%. The 10-year yield on 6/30/24 was ~4.5%. It's not exactly spot on, but it's reasonably close.

Going forward, the Fed expects inflation to be 2.1% and real GDP growth to be 2.0% next year.

2.1% + 2.0% = 4.1%. The 10-year yield is currently 4.07%. Maybe the estimates will be right, and the rule of thumb will hold. But don't let the rule of thumb mask that growth could take off, or inflation could spike (hopefully not), or any number of things could happen that cause the 10-year yield to increase and cause the bond to have a worse return next year. On the flip side, don't let the rule of thumb make you forget that there could be a "hard landing", deflation, flight to safety, or any number of other things that could push the 10-year yield down and cause the bond to have an even higher return next year.

Rules of thumb are ABUNDANT in the financial planning industry. "100 minus your age", the "4% rule", "hold 6 months' emergency cash reserves", "buy the dip!", etc. These can be helpful sometimes but can also be misleading and cause people to overlook important risks and rewards. We at the Center for Financial Planning are here to help you consider all outcomes, weigh how the risks apply to YOU, and work with you to make informed decisions. Have you ever seen a rule of thumb and wondered if it applied to you? Give us a call!

Nicholas Boguth, CFA®, CFP® is a Senior Portfolio Manager and Associate Financial Planner at Center for Financial Planning, Inc.® He performs investment research and assists with the management of client portfolios.

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.

The information contained in this email 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. 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.

Any opinions are those of the author and not necessarily those of Raymond James.

Treasury securities are direct obligations of the United States Government. Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government.