Are You and Your Partner on the Same Retirement Page?

Contributed by: Matt Trujillo, CFP®

Retirement and Longevity

Many couples don't agree on when, where, or how they'll spend their golden years.

When Fidelity Investments asked couples how much they need to have saved to maintain their current lifestyle in retirement, 52% said they didn't know. Over half the survey respondents – 51% – disagreed on the amount needed to retire, and 48% had differing answers when asked about their planned retirement age.*

In some ways, that's not surprising – many couples disagree on financial and lifestyle matters long before they've stopped working. However, adjustments can become more complicated in retirement when you've generally stopped accumulating wealth and have to focus more on controlling expenses and dealing with unexpected events.

Ultimately, the time to talk about and resolve any differences you have about retirement is well before you need to. Let's look at some key areas where couples need to find common ground.

When and Where

Partners often have different time frames for their retirements, an issue that can be exacerbated if they are significantly older. Sometimes, differing time frames are due to policies or expectations in their respective workplaces; sometimes, it's a matter of how long each one wants – or can physically continue – to work.

The retirement nest egg is also a factor here. If you're planning to downsize or move to a warmer location or nearer your children, that will also affect your timeline. There's no numerical answer (65 as a retirement age just isn't relevant in today's world), and this may be a moving target anyway. But you both need to have a general idea on when each is going to retire.

You also need to agree on where you're going to live because a mistake on this point can be very expensive to fix. If one of you is set on a certain location, try to take a long vacation (or several) there together and discuss how you each feel about living there permanently.

Your Lifestyle in Retirement

Some people see retirement as a time to do very little; others see it as the time to do everything they couldn't do while working. While these are individual choices, they'll affect both of you as well as your joint financial planning. After all, if there's a trip to Europe in your future, there's also a hefty expense in your future.

While you may not be able to (or want to) pin everything down precisely, partners should be in general agreement on how they're going to live in retirement and what that lifestyle will cost. You need to arrive at that expense estimate long before retirement while you still have time to make any changes required to reach that financial target.

Your Current Lifestyle

How much you spend and save now plays a significant role in determining how much you can accumulate and, therefore, how much you can spend in retirement. A key question: What tradeoffs (working longer, saving more, delaying Social Security) are you willing to make now to increase your odds of having the retirement lifestyle you want?

Examining your current lifestyle is also a good starting point for discussing how things might change in retirement. Are there expenses that will go away? Are there new ones that will pop up? If you're planning on working part-time or turning a hobby into a little business, should you begin planning for that now?

Retirement Finances

This is a significant topic, including items such as:

• Monitoring and managing expenses

• How much you can withdraw from your retirement portfolio annually

• What your income sources will be

• How long your money has to last (be sure to add a margin of safety)

• What level of risk you can jointly tolerate

• How much you plan to leave to others or to charity

• How much you're going to set aside for emergencies

• Who's going to manage the money, and what happens if they die first

... and the list goes on. You don't want to spend your retirement years worrying about money, but not planning ahead might ensure that you will. Talk about these subjects now.

Unknowns

"Expect the unexpected" applies all the way along the journey toward retirement, but perhaps even more strongly in our later years. What will your healthcare costs be, and how much will have to come out of your pocket? Will you or your spouse need long-term care, and should you purchase insurance to cover that? What happens if the market suffers a severe downturn right after you retire?

While you obviously can't plan precisely for an unknown, talking about what might happen and how you'd respond will make things easier if the unexpected does occur. Included here is the reality that one of you will likely outlive the other, so your estate planning should be done together, and the day-to-day manager of your finances should be sure that their counterpart can take over when needed.

Communication is vital, especially when it comes to something as important as retirement. Almost all of us will have to make some tradeoffs and adjustments (as we do throughout our relationships), and it's important to remember that the earlier you discuss and negotiate what those are going to be, the better your chances of achieving the satisfying retirement you've both worked so hard to achieve.

*2021 Fidelity Investments Couples & Money Study

Matthew Trujillo, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® A frequent blog contributor on topics related to financial planning and investment, he has more than a decade of industry experience.

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.

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 author, and not necessarily those of Raymond James.

The Widow’s Penalty: Lower Income, Higher Taxes

Contributed by: Nick Defenthaler, CFP®, RICP®

A newly widowed example client, whom we'll call "Judy," receives communication from Medicare that her Part B and D premiums are significantly increasing from the prior year. To make matters worse, she also notices that she's now in a much higher tax bracket when filing her most recent tax return. What happened? Now that Judy's husband is deceased, she is receiving less in Social Security and pension income. Her total income has decreased, so why would she have to pay more tax and Medicare premiums? Unfortunately, she's a victim of what's known as the "widow's penalty."

Less Income and More Taxes. What Gives?

Simply put, the widow's penalty is when a surviving spouse ends up paying more taxes on less income after the death of their spouse. This happens when a widow or widower starts filing as a single filer the year after their spouse's death.

When the first spouse dies, the surviving spouse typically sees a reduction in income. While the surviving spouse will continue to receive the greater of the two social security benefits, they will no longer receive the lower benefit. In addition, it's also very likely that the surviving spouse will either entirely or partially lose income tied only to the deceased spouse (ex., employment income, annuity payments, or pensions with reduced or no survivor benefits). Depending on how much income was tied to the deceased spouse, the surviving spouse's fixed income could see a sizeable decrease. At the same time, the surviving spouse starts receiving less income, and they find themself subject to higher taxes.

With some unique exceptions, the surviving spouse is required to start filing taxes as single instead of as married, filing jointly in the year following their spouse's death. In 2024, that means they will hit the 22% bracket at only $47,150 of taxable income. Married filers do not reach the 22% bracket until they have more than $94,300 of income. To make matters worse, the standard deduction the widow will receive will also be cut in half. In 2024, for a married couple (both over 65), their standard deduction will be $32,300. A single filer (over the age of 65) will only have a $16,500 deduction! Unfortunately, even with less income hitting the tax return, widowed tax filers commonly end up paying higher taxes due to the compression of tax brackets and the dramatic standard deduction decrease for single filers.

Medicare Premiums Increase

Tax brackets are not the only place surviving spouses are penalized. Like the hypothetical example above, many surviving spouses see their Medicare premiums increase even though their income has decreased because of how the income-related monthly adjusted amount (IRMAA) is calculated (click HERE to visit our dedicated Medicare resource page). Whereas there is no surcharge until a married couple filing jointly reaches an income of $206,000, single filers with a modified adjusted gross income (MAGI) of more than $103,000 are required to pay a surcharge on their Medicare premiums. This means that a couple could have an income of $127,000 and not be subject to the Medicare IRMAA surcharge. However, if the surviving spouse now has income over $106,000, their premium will increase by almost $1,000 per year. In this same example, the widow could now be in the 22% bracket (as compared to the 12% bracket with $120k of income filing jointly) and be paying approximately $3,600 more in federal tax.

Proactive Planning

Short of remarrying, there is no way to avoid the widow's penalty. However, if your spouse has recently passed away, there may be some steps you can take to minimize your total tax liability.

For most widows, the year their spouse dies will be the last year they will be allowed to use the higher married filing jointly tax brackets and standard deduction. In some cases, it can make sense to strategically realize income during the year of death to minimize the surviving spouse's lifetime tax bill. A surviving spouse might do this by converting savings from a Traditional IRA to a Roth IRA while they are still subject to the married filing jointly rates.

Let's look at a hypothetical scenario with a couple we'll call John and Mary. After several years in a long-term care assisted living facility, John sadly passed away at age 85. Because John and Mary did not have long-term care insurance, they had sizeable out-of-pocket medical expenses that resulted in a significant medical deduction in the year of John's passing. Several months after her husband's passing, over $100,000 was converted from her IRA to a Roth IRA. Because this was the last year she could file jointly on her taxes and had the significant medical deduction for the year John passed, Mary only paid an average tax rate of 10% on the $100,000 that was converted. As we stand here today, Mary would now be filing single and find herself in the 24% tax bracket (which will likely increase to 28% in 2026 as our current low tax rates expire at the end of 2025).

The widow's penalty should be on every married couple's radar. It's possible that while both spouses are living, their tax rates will always remain the same, as we've highlighted above. Unless both spouses pass away within a very short period of time from one another, higher taxes and Medicare premiums are likely inevitable. However, proper planning can help dramatically reduce the impact of this penalty on your plan.

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.

Raymond James and its advisers do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

These examples are hypothetical illustrations and are not intended to reflect any actual outcome. they are for illustrative purposes only. Individual cases will vary. 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. Prior to making any investment decision, you should consult with your financial advisor about your individual situation.

When is the Right Time for a Family Meeting?

Contributed by: Sandra Adams, CFP®

In the context of our financial planning work with clients, family meetings can be scheduled for many different reasons. These meetings are often scheduled because something has changed, and the family needs to discuss a family transition or crisis. However, family meetings, like most planning, are most effective when done proactively — before a stressful life transition or crisis.

What does a proactive family meeting look like?

When we talk to clients about scheduling a family meeting with their children, what is the purpose? What is on the agenda?

Purpose(s):

One of the purposes of the meeting is to ensure that our clients’ children get to know us. They are most often the future decision-makers for their parents if anything happens with their health or decision-making ability in the future (as future powers of attorney, trustees, etc.), and it is always nice if they have met us and are comfortable contacting us when that time comes. Another purpose for the meeting is to communicate to the children the parents’ long-term plans and wishes and (if the parents are comfortable) review their overall assets, estate plan, and how everything works and will work in the future when and if needed.

Agenda Items:

The agenda is something that can change based on the family and based on the parent’s needs and desires. Some clients are comfortable going over their complete plan with their families, covering everything we would cover in our full annual review. Others want to keep things much higher level and explain their long-term plan and wishes without discussing specific assets and amounts.

No family meeting will look the same, but most clients and children leave feeling that they are valuable and are helpful to everyone involved to help plan for the future.

So, when is the right time for a family meeting? When it is needed. That means when a family transition or a crisis is looming, that is the right time. If you are part of a family that would like to be proactive and communicate your plan to your family in advance of a transition or crisis, then scheduling a family meeting with your financial advisor early as part of your retirement planning or early longevity planning may be the best time. In any case, there is no wrong time unless you never do it.

If you or someone you know is interested in scheduling a family meeting and has questions about the process, please let us know. We are always happy to help. Reach out to me at Sandy.Adams@CenterFinPlan.com

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.

Does It Make Sense to Pay Off Your Mortgage Early?

Contributed by: Matt Trujillo, CFP®

Owning a home outright is a dream that many Americans share. Having a mortgage can be a huge burden, and paying it off may be the first item on your financial to-do list. But competing with the desire to own your home free and clear is your need to invest for retirement, your child's college education, or some other goal. Putting extra cash toward one of these goals may mean sacrificing another. So how do you choose?

Evaluating the Opportunity Cost

Deciding between prepaying your mortgage and investing your extra cash is challenging because each option has advantages and disadvantages. But you can start by weighing what you'll gain financially by choosing one option against what you'll give up. In economic terms, this is known as evaluating the opportunity cost.

Here's an example. Let's assume you have a $300,000 balance and 20 years remaining on your 30-year mortgage, and you're paying 6.25% interest. If you were to put an extra $400 toward your mortgage each month, you would save approximately $62,000 in interest and pay off your loan almost six years early.

By making extra payments and saving all of that interest, you'll gain a lot of financial ground. But before you opt to prepay your mortgage, you still have to consider what you might be giving up by doing so—the opportunity to potentially profit even more from investing.

To determine if it makes more sense to pay off your mortgage with extra cash on hand or invest the cash, you first need to see the risk-free return rate. The risk-free rate of return is the return you could get on your money if you invested in a savings account at the bank, a CD, or a money market fund, something that has little risk of loss of principle. If that rate is lower than your current mortgage rate, then deploying your cash to pay down that debt makes sense. If the risk-free rate is higher than your mortgage rate, you may want to consider investing your money and paying your planned mortgage payments.  

Keep in mind that the rate of return you'll receive is directly related to the investments you choose. All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful. Investments with the potential for higher returns may expose you to more risk, so consider this when making your decision.

Other Points to Consider

While evaluating the opportunity cost is important, you'll also need to weigh many other factors. The following questions may help you decide which option is best for you.

• What's your mortgage interest rate? The lower the rate on your mortgage, the greater the potential to receive a better return through investing.

• Does your mortgage have a prepayment penalty? Most mortgages don't, but check before making extra payments.

• How long do you plan to stay in your home? The main benefit of prepaying your mortgage is the amount of interest you save over the long term; if you plan to move soon, there's less value in putting more money toward your mortgage.

• Will you have the discipline to invest your extra cash rather than spend it? If not, you might be better off making extra mortgage payments.

•  Do you have an emergency account to cover unexpected expenses? Making extra mortgage payments now doesn't make sense if you'll be forced to borrow money at a higher interest rate later. And keep in mind that if your financial circumstances change, if you lose your job or suffer a disability, for example, you may have more trouble borrowing against your home equity.

• How comfortable are you with debt? If you worry endlessly about it, give extra consideration to the emotional benefits of paying off your mortgage.

• Are you saddled with high balances on credit cards or personal loans? If so, it's often better to pay off those debts first. The interest rate on consumer debt isn't tax deductible and is often far higher than your mortgage interest rate or the rate of return you're likely to receive on your investments.

• Are you currently paying mortgage insurance? If you are, putting extra toward your mortgage until you've gained at least 20% equity in your home may make sense.

• How will prepaying your mortgage affect your overall tax situation? For example, prepaying your mortgage (thus reducing your mortgage interest) could affect your ability to itemize deductions (this is especially true in the early years of your mortgage when you're likely to be paying more in interest). It's important to note that due to recent tax law changes, specifically the increase in the standard deduction, many individuals aren't itemizing their taxes and are no longer taking advantage of the mortgage interest deduction.

• Have you saved enough for retirement? If you haven't, consider contributing the maximum allowable each year to tax-advantaged retirement accounts before prepaying your mortgage. This is especially important if you are receiving a generous employer match. For example, if you save 6% of your income, an employer match of 50% of what you contribute (i.e., 3% of your income) could potentially add thousands of extra dollars to your retirement account each year. Prepaying your mortgage may not be the savviest financial move if it means forgoing that match or shortchanging your retirement fund.

• How much time do you have before retirement or until your children go to college? The longer your timeframe, the more time you have to potentially grow your money by investing. Alternatively, if paying off your mortgage before reaching a financial goal will make you feel much more secure, factor that into your decision.

The Middle Ground

If you need to invest for an important goal but also want the satisfaction of paying down your mortgage, there's no reason you can't do both. It's as simple as allocating part of your available cash toward one goal and putting the rest toward the other. Even minor adjustments can make a difference. For example, you could potentially shave years off your mortgage by consistently making biweekly, instead of monthly, mortgage payments or by putting any year-end bonuses or tax refunds toward your mortgage principal.

Remember, no matter what you decide now, you can always reprioritize your goals later to keep up with changes in circumstances, market conditions, and interest rates.

Matthew Trujillo, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® A frequent blog contributor on topics related to financial planning and investment, he has more than a decade of industry experience.

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.

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 author, and not necessarily those of Raymond James.

Are Fair and Equal the Same When It Comes to Gifting Children?

Contributed by: Sandra Adams, CFP®

I have had several client conversations in recent months about gifting to children. Parents are always concerned about making sure that they are being fair to all their children as they gift. As these discussions evolve, the definition of “fair” in the minds of parents often means “equal.” But do gifts to our children always need to be—and should they always be—equal?

Think back to when your children were younger. For some reason, many of us drive ourselves crazy making sure each of our children had the same number of pictures taken, received the same number of holiday gifts each year, got offered the same number of extra-curricular activities, got the same amount for each tooth from the Tooth Fairy...the list goes on and on. Why do we do this?

Our children are individuals, and their situations and needs are different. As our children reach adulthood and we are ready to gift them from our accumulated wealth (or plan to give to them in the future through inheritance), we should consider each of their situations and needs when gifting. For instance, providing more to a child who struggles to support their family on a modest income than one who is financially successful and has no children. Or to offer more to a child who has decided to give more of their time and career to help with a parent’s care versus one who is more focused on their career. There are families with special needs children that must devote more time and resources to that child than the others. Or simply taking into consideration the types of gifts given based on need, such as helping to pay off student loans for one versus contributing to the purchase of a home for another.

Getting out of the mindset that gifts to our children must be monetarily “equal” to be “fair” is one we should all consider. It allows us to give better thought and intent to the gifts we give to our children based on their actual needs, and it takes the stress off us to ensure that every cent is accounted for to monetarily make things equal. When the gifts are meaningful, there are few of your children that will be counting!

If you or someone you know are working on your gifting or legacy plan and have questions, please reach out. We are always happy to help Sandy.Adams@centerfinplan.com

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.

Opinions expressed in the attached article are those of the author and are 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.

Navigating Your Financial Journey

Contributed by: Kelsey Arvai, MBA, CFP®

In a world where financial decisions can often feel overwhelming and complex, the role of a financial planner stands out as a guiding beacon, offering expertise and tailored strategies to help individuals achieve their financial goals. Whether you're aiming to buy a home, save for retirement, or planning for your children's education, a financial planner can be an invaluable asset in navigating the intricacies of personal finance. In this blog, we'll explore who financial planners are and what they do.

Who are Financial Planners?

Financial planners are professionals who specialize in helping individuals and families manage their finances, make informed decisions, and plan for their financial future. We possess expertise in various areas of finance, including investment management, retirement planning, tax strategies, estate planning, insurance, and more. Our primary objective is to understand clients' financial situations, goals, and risk tolerances and develop comprehensive plans to help them achieve their objectives.

What Do Financial Planners Do?

1. Goal Identification & Determining Net Worth: Financial planners begin by assessing clients' current financial status, including income, expenses, assets, and liabilities. We then work with clients to establish short-term and long-term financial goals, such as buying a home, saving for retirement, or funding a college education.

2. Financial Planning: Based on the client's goals and financial situation, planners develop personalized financial plans that outline strategies to achieve those objectives. This may involve budgeting, investment management, tax planning, risk management, estate planning, financial independence review or retirement income analysis, charitable planning, college planning, preparing future generations for wealth management, and coordinating with multiple advisors (i.e., CPA, attorney, etc.).

3. Investment Management: Financial planners help clients ensure their investments reflect their objectives, risk tolerance, and time horizon. We may recommend specific investment vehicles, asset allocations, and diversification strategies to help clients maximize returns while managing risk.

4. Retirement Planning: Planning for retirement is a significant aspect of financial planning. Planners help clients estimate retirement expenses, determine retirement savings goals, and develop strategies to accumulate retirement assets through vehicles such as employer-sponsored retirement accounts (e.g., 401(k), IRA), pensions, and other investments.

5. Risk Management and Insurance: Financial planners assess clients' insurance needs, including life insurance, health insurance, disability insurance, and long-term care insurance. We help clients select appropriate coverage to protect against unforeseen events and mitigate financial risks.

6. Estate Planning: Financial planners assist clients in ensuring their beneficiary designations are properly set up on accounts, including retirement, checking & savings, brokerage accounts, and life insurance policies. Estate planning documents (wills, durable power of attorney, health care power of attorney, and trusts) are drafted by an Estate Planning Attorney. Your Financial Planner will help to ensure that you work with an attorney when appropriate and that your estate plan is reviewed at least every 3-5 years.

7. Regular Reviews and Adjustments: Financial planning is not a one-time event; it's an ongoing process. Planners regularly review clients' financial plans and adjust as needed based on changes to your financial situation, goals, and market conditions.

Financial planners play a vital role in helping individuals and families navigate the complexities of personal finance, achieve their financial goals, and build a secure future. Financial planners empower clients to make informed decisions and take control of their financial well-being by providing expertise, personalized advice, and ongoing support. When choosing a financial planner, it's essential to consider their qualifications, expertise, and alignment with your financial goals and values. With the right planner by your side, you may embark on your financial journey with confidence and clarity.

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

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Opinions expressed in the attached article are those of the author and are 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.

Five Reasons Supporting the Case for Discretionary Investing

Contributed by: Mallory Hunt

We all lead busy lives. Whether you are getting down to business (in the throes of the grind??) or enjoying your retirement to the fullest, who wants to worry about missing a call from their advisor because something in their portfolio needs to be changed? Perhaps cash needs to be raised to meet that monthly withdrawal to your checking account so you can keep paying your traveling expenses. Or maybe you are still in the saving phase, and money has to be deposited into your investment account to keep pace with your retirement goals. Regardless of your situation, many investors find it challenging to make time to manage their investment portfolios. We would argue that this is far too important to be left for a moment when you happen to have some “spare time” (is that a thing?!). In the dynamic world of finance, making the right investment decisions can be a complex and intimidating task. Discretionary investing emerges as a powerful solution for clients seeking an investment strategy that places the decision-making responsibilities in the hands of seasoned professionals, offering a myriad of benefits that cater to the diverse needs of investors.

What is Discretionary Management?

Discretionary management is the process of delegating day-to-day investment decisions to your financial planner. Establishing an Investment Policy Statement that identifies the guidelines you need your portfolio managed within is the first and arguably the most important step of the process. Investment decisions can then be made on your behalf within the scope of your unique criteria laid out in this statement. Think of it as utilizing a target date strategy in your employer’s 401(k): you tell it how old you are and when you will retire, and Voilà! All of the asset allocation, rebalancing, and buy/sell decisions are made for you.

5 Reasons This Can Be a Suitable Option for Investors:

1. Adaptability to Market Changes: Financial markets are inherently unpredictable, and staying ahead of the curve requires constant vigilance. Discretionary management allows for swift responses to market changes, adjusting and rebalancing portfolios in real-time to capitalize on emerging opportunities or shielding against potential downturns. In the face of evolving market conditions, this adaptability ensures that your investments remain aligned with your financial goals, whether you can be reached or not.

2. Time Efficiency: For many clients, the demands of daily life leave little time for in-depth market research and portfolio management. Discretionary investing provides a welcome solution by freeing clients from the burden of day-to-day decision-making. This frees up your time and allows your focus to be redirected to what’s important to you: your family, your career, and personal pursuits. After all, time is the resource we all struggle to get our hands on. Need I say more?

3. Tailored Approach to Unique Goals: Discretionary investing is NOT a one-size-fits-all strategy. Seasoned investment managers take the time to understand each client’s unique financial goals, risk tolerance, and time horizon. This personalized approach ensures that investment strategies are aligned with the needs outlined in the Investment Policy Statement. Think of this as your customized roadmap to financial success. While this is similar to non-discretionary investing, discretion will allow investment managers the ability to keep your portfolio at this set target in a timely manner through strategic and tactical rebalancing when the markets are changing.

4. Diversification & Risk Management: Successful investing is not solely about maximizing returns but also about minimizing risks. Discretionary management employs strategies to diversify portfolios and manage risk effectively. By expanding investments across various asset classes and geographical regions, we can create a resilient portfolio that can weather market fluctuations and aims to deliver more consistent returns over the long term. Again, while this can also be applicable to non-discretionary management, it comes down to the time efficiency offered by discretionary management to continuously monitor your diversification and risk management with no bother to you.

5. Expert Guidance: Discretionary investing allows clients to tap into the expertise of financial professionals; it’s what we are here for! Financial planners and investment managers bring a wealth of knowledge and experience to the table, navigating the intricacies of the market to make informed decisions on your behalf, with your best interest in mind always. In turn, leaving the decision-making to the professionals may reduce the potential for poor investor behavior. Let those not emotionally charged by fluctuations in the market make decisions on your behalf.

In the fast-paced world of finance, where information overload and market volatility can overwhelm even the most seasoned investors, discretionary investing presents itself as a compelling choice. By entrusting investment decisions to experienced professionals, clients may enjoy soundness, time efficiency, and a tailored approach that empowers their financial future. If you have questions on whether discretionary management suits you and your portfolio, don’t hesitate to contact us. We’d be happy to help you weigh out your options!

Mallory Hunt is a Portfolio Administrator at Center for Financial Planning, Inc.® She holds her Series 7, 63 and 65 Securities Licenses along with her Life, Accident & Health and Variable Annuities licenses.

Keep in mind that discretion may not be appropriate for clients who prefer to participate in investment decisions or maintain concentrated positions. Additionally, discretionary authority may not be possible with certain investing strategies or accounts, such as options or annuities. Another consideration is whether an advisory account is the best option for client or if a brokerage account would be more suitable. Its important to consider all options and speak with a financial advisor about your specific situation.

The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Mallory Hunt and not necessarily those of Raymond James. 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. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Secure Act 2.0 Roth Catch-up Change Delayed

Contributed by: Kali Hassinger, CFP®, CSRIC™

In late 2022, Secure Act 2.0 was passed by Congress with the intention of expanding access to retirement savings. The package requires retirement plans to implement many changes and updates based on the new rules. Of the nearly 100 provisions within Secure Act 2.0, only a few went into effect in 2023, and many changes were scheduled to become effective in 2024.

One of these provisions would require future retirement plan catch-up contributions (those ages 50 and over) to be categorized as Roth for participants who earned more than $145,000 in the prior year. Although more employer-sponsored retirement plans have included access to Roth savings over the years, not all plans offer that option to participants. With the new rule, they would either need to offer Roth savings to all employees or remove the option to make catch-up savings contributions for future years.

As the fall open enrollment period for 2024 is quickly approaching, many plan administrators and participants were waiting for guidance on implementing and monitoring this change for 2024. In late August, the IRS announced a two-year delay or “administrative transition period,” meaning that plans don’t need to implement this change until 2026.  

For those retirement plan participants who are 50 and older and contributing more than the base savings amount ($22,500 for 2023), pre-tax catch-up contributions can continue for 2024 and 2025 as they have in the past. For retirement plans that aren’t already offering a Roth savings option, they won’t need to make any changes yet!  

We are monitoring this and future changes as information and guidance are released on Secure Act 2.0 provisions. As always, we are here to help if you have questions on how this could affect you and your financial plan! 

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. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.

The Dangers of Ignoring Financial Planning When You're in a Couple

Contributed by: Sandra Adams, CFP®

In an ideal world, a committed couple would be on the same page about most of the important things in life, especially about their financial future. Not only would they be on the same page, but they would equally participate in the planning process — all the way through the process. So, what happens when one partner is not engaged in the planning process — whether it be lack of interest in the process at all, or lack of engagement and/or follow-through once a plan has been completed? And what can be done, if anything, to make sure the couple and their plan are successful?

If both partners have been involved in going through at least an initial planning process, this is a good first step. This means that the couple has worked through the steps of establishing common goals, gathered their common financial information, and worked with a financial planner to review the analysis regarding how the assets and income they have may work to fulfill their specific goals, both now and in the future. These couples likely worked with the planner to establish at least an initial set of action steps to start working towards meeting their short- and long-term goals in the key areas of their financial plan.

Why One Partner May Be Unengaged:

Here is where there is usually a disconnect — where the less engaged spouse likely becomes unengaged. Once the initial financial plan is complete and the action steps are in place, the less engaged spouse may check out for various reasons:

• They may decide they don’t see the full value of the financial plan;

• They may get too busy with “life” and not make the financial plan a priority; or

• They may not see themselves in the “financial” lead role in the relationship and be simply delegating the action items to their more financially savvy spouse (whether or not this makes sense remains to be seen.)

If one of the partners is not involved in the planning process at all, this can be an even harder situation to address. When one partner is not engaged in the process at all, it is hard to discuss, set, and include common goals in the planning process. If one partner goes ahead with a plan, it can be one-sided or incomplete if done without the unengaged partner. The plan will lack input from one partner and may, in fact, be missing important information about assets, employment benefits, and/or future income resources if the participating spouse isn’t privy to all of the couple’s collective financial resources. Not having a financial plan that both partners have participated in putting together will be one that is lacking in some way — whether it be a lack of information or resources or a lack of input or agreement on current or future goals.

Why You Should Move Ahead Anyway:

Why might someone decide to move ahead with the financial planning process even if their partner is hesitant to participate in the process? In my experience, there are clients who have wanted to do planning for years and haven’t been able to get their partner on board. They may finally decide that they need to move forward, with or without their partner, for fear that they will end up without a plan and completely unprepared for the future. In addition, they may have had an experience as a caregiver for an older adult parent or watched someone they are close to go through the process of becoming a widow or widower and decide they want to be prepared if either of these major life transitions ever happens to them. For these clients, the personal experience of seeing others go through major life transitions without proper planning may compel them to want to plan more urgently than their partner.

What are some actions that a couple can take if one is more engaged than the other in the financial planning process so that their plan can be successful?

1. Come to a base agreement that a financial plan is needed. If you can come to a common agreement that a financial plan is needed, even if one of you is more enthusiastic about it than the other, that can be okay. If you can come to an agreement about who will take charge of scheduling a meeting with an advisor, collecting and organizing the information, scheduling appointments, etc., that is the first step. It is best if both partners will agree to participate in the full process, even if one takes the lead. This is the best way to ensure that you agree to and set common goals.

2. Set a regular “date” with your partner to discuss and review your finances. This blocks out time on your common schedules to concentrate on just your plan when you are working on preparing for the initial financial plan, and then can be helpful when you are working on the action items following your plan. This helps with the issues related to partners who get busy with life and can’t seem to make finances a priority.

3. Find a financial advisor that you feel you can trust and can delegate to. For those who have trouble with follow-through, or again, for those who have trouble carving out time, having a trusted professional to whom they can delegate to make sure that the plan gets carried out fully can be valuable and worth the cost.

As with many things in a relationship, partners aren’t always 100% on the same page or always rowing in the same direction all of the time. Finances are one of the most important issues a couple faces, and being in lock-step as much as possible is important. If a couple can find a way to work together in some way to complete and follow through on the financial planning process, even if one of the two takes the lead, but both participate, the process can still be a successful one.

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.

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.

Impending Social Security Shortfall?

Contributed by: Josh Bitel, CFP®

About 1 in 4 married couples, and almost half of unmarried folks, rely on Social Security for a whopping 90% (!) of their retirement income needs. While the Social Security Administration recommends that no more than 40% of your retirement paycheck come from Social Security, the reality is that many Americans depend heavily on this benefit. The majority of Social Security funds come from existing workers paying their regular payroll taxes; however, when payroll is not enough to cover all claimants, we must then dip into the trust fund to make up the difference. According to the 2023 Social Security and Medicare Trustees Reports, the 'trust fund' that helps supply retirees with their monthly benefits is projected to run out of money by 2033. This estimate has many folks understandably worried, but experts have proposed several potential solutions that could help boost solvency.

One popular solution is to raise the age at which retirees are permitted to file for benefits. Currently, a claimant's full retirement age (the age at which you receive 100% of the benefits shown on a statement) is between 66 and 67. Studies published by the Congressional Budget Office show that raising by just two months per year for workers born between 1962 and 1978 (maxing out at age 70) could save billions of dollars annually in Social Security payments, thus helping cushion the trust fund by a substantial amount.

Another hotly debated solution is reducing annual cost-of-living adjustments (COLA) for claimants. As it currently stands, your Social Security benefit gets a bump each year to keep up with inflation (the most recent adjustment was 8.7% for 2023). This number is based on the consumer price index report and is a tool used to help retirees retain their purchasing power. Recent studies from the SSA show that if we reduced COLA by 0.5%, we could eliminate 40% of the impending shortfall. This goes up to 78% if we assume a 1.0% reduction in COLA. Neither of these solutions completely solves the shortfall, but a combination of COLA reductions and changes to FRA, as shown above, would go a long way toward solving this issue.

These are just a few of the several solutions debated by experts each year. It is important to note that even if no changes are made, current beneficiaries will continue to receive their payments. However, estimates show that if the trust fund ran completely dry, payments may be reduced by as much as 25%. While this is not an insignificant haircut, it is certainly better than cutting payments altogether.

The point is that Social Security is a crucial part of many retirees' livelihoods. It would be safe to assume that Congress would act and make changes before any major benefit cuts are required. These are several options to consider that would have varying impacts on not only solvency but also benefits themselves. If you are concerned about the role of Social Security in your personal retirement plan, discuss with your advisor how these changes may impact you.

Josh Bitel, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Josh Bitel, CFP® and not necessarily those of Raymond James.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

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.