5 Ways to Locate Lost Assets

Contributed by: Sandra Adams, CFP®

Working for a firm that has been serving clients for 30 years, it is not surprising that we are often in the position of helping to settle estates, either for existing clients or their relatives. Aside from assets that are known, an important step in the process is to search for assets that might not have been documented, or assets that the deceased was unaware of. Here, I share some very useful resources that can be used to search out missing life insurance policies, unclaimed assets, or money due:

USA.GOV - the site provides links to various resources to search out unclaimed assets by state, lost pensions, unclaimed tax refunds, settlements for closed banks and credit unions, money due from mortgage transactions, savings bonds and more.

Michigan Money Quest - The Michigan Department of Treasury's site for unclaimed property.

NAUPA/MissingMoney.com - The National Association of Unclaimed Property Administrators.

NAIC - The National Association of Insurance Commissioners orphaned life insurance policy search.

MIB Solutions - Lost life insurance policy locator service.

If you are the executor of an estate or think you might be the beneficiary of a lost insurance policy or asset left by a loved one, consider searching these sites.

To ensure that you don't leave any "lost" assets for your heirs, search these sites during your lifetime and do your best to document all of your assets, income sources, and advisors using our Personal Record Keeping document.  And make sure your financial planner is aware of your full financial picture so that he or she can quarterback the estate settlement process when the time comes.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

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 Sandy Adams, CFP® and not necessarily those of Raymond James. 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.Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. You should discuss any legal matters with the appropriate professional.

What to Consider Before You Buy a Second Home

Contributed by: Timothy Wyman, CFP®, JD

Well it’s that time of year again.  No not the cold and flu season – well actually it’s that time too.  Rather, I am talking about the time of year where my wife and I go up north for a few days and after a fantastic 24 hours have the conversation.  You know, should we buy our own vacation home/condo rather than mooch off our friends (hey they are good friends)? It’s a question that many of my Empty and Soon-to-be-Empty Nester clients ask.

First Steps to a Second Home

Our friends, we will call them John & Michelle to protect their identity, decided a few years ago to purchase a condo in God’s Country (that’s northern Michigan….not way up North).   So far the purchase has worked out well and I think they did a few things right.  They actually bought the condo with another family as they knew neither of them would use the condo fully on their own.  They spelled out their “parenting” time or who had first right of refusal for each Holiday.  And last but not least, they formed a Limited Liability Company (LLC) to own the property in order to shield other personal assets from potential liability. All in all, the purchase has been wonderful for us…..er I mean them.

Consider the “Carrying” Costs

For a short period of time a second home or vacation home sounds like a wonderful idea to us (wine is involved in many instances).  However, after a few minutes we decide that it is not for us.  Although interest rates are low, making the cost more manageable, we have some other financial priorities at this time.  Also, many folks do not fully consider, or fully appreciate, the “carrying” costs of owning a second home.  The real or total cost of owning a second home is much more than principal & interest payments.  Additional costs can include:

• Property taxes

• Association dues

• Utilities

• Insurance

• Repairs & maintenance (necessary year round, whether or not you’re there)

Additionally, simply furnishing and updating two homes is no cheap undertaking. For now, we are content renting for the couple of times that we make it up north. 

3 Factors in Buying a Second Home

That said, I wouldn’t be surprised if we decide to make a second home purchase in the future – for lifestyle purposes rather than investment.  And if we do, we’ll make the following a part of our decision-making process:

• Use: Do we expect to use it more than just a couple of weeks? If so then buying may make sense.

• Location: What area makes sense now and in the future? Are we willing to drive X hours?

• Price: What price point will still allow us to fund retirement savings? What are the ongoing expenses?

Adding a second home can have wonderful lifestyle benefits.  Many a family has built cherished memories thanks to the family cottage.  Make sure you weigh the full cost of owning a second home with the desired lifestyle benefits.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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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 Center for Financial Planning, Inc. and not necessarily those of Raymond James.

Your Go-To List for Record Retention – Just in Time for Tax Season

It’s hard to believe that it’s already time to start going through piles of records and getting your documents in order for tax season.  If you’re like me, going through this process reminds me of how much I hate to see stacks of paper and has me dreaming of a nice, neat desk!  Here is a concise list to help you determine what to keep and what to shred as you get organized this year:

Bank Statements: Keep one year unless needed for tax records.

Cancelled Checks: Keep one year unless needed for tax records.

Charitable Contributions: Keep with applicable tax return.

Credit Purchase Receipts: Discard after purchase appears on credit card statement if not needed for warranties, merchandise returns or taxes.

Credit Card Statements: Discard after payment appears on credit card statement.

Employee Business Expense Records: Keep with applicable tax return.

Health Insurance Policies: Keep until policy expires, lapses or is replaced.

Home & Property Insurance: Keep until policy expires, lapses or is replaced.

Income Tax Return and Records: Permanently.

Investment Annual Statements and 1099's: Keep with applicable tax return.

Investment Sale and Purchase Confirmation Records: Dispose of sale confirmation records when the transactions are correctly reflected on the monthly statement. Keep purchase confirmation records 3-6 years after investment is sold as evidence of cost.

Life Insurance: Keep until there is no chance of reinstatement. Premium receipts may be discarded when notices reflect payment.

Medical Records: Permanently.

Medical Expense Records: Keep with applicable tax return if deducted on tax return.

Military Papers: Permanently (may be required for possible veteran's benefits).

Individual Retirement Account Records: Permanently.

Passports: Until expiration.

Pay Stubs: One year. Discard all but final, cumulative pay stubs for the year.

Personal Certificates (Birth/Death, Marriage/Divorce, Religious Ceremonies): Permanently.

Real Estate Documents: Keep three to six years after property has been disposed of and taxes have been paid.

Residential Records (Copies of purchase related documents, annual mortgage statements, receipts for improvements and copies of rental leases/receipts.): Indefinitely.

Retirement Plan Statements: Three to six years. Keep year end statements permanently.

Warranties and Receipts: Discard warranties when they are clearly expired. Use your judgment when discarding receipts.

Will, Trust, Durable Powers of Attorney: Keep current documents permanently.

My best advice?  Print this list and keep it with your tax records to revisit each tax year.  And call your financial planner if you have any questions about what you need to keep. 

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

This list may not be a complete description of the documents available for shredding or their retention requirements. You should discuss any tax matters with the appropriate professional.

NUA: Answering 7 Questions about Net Unrealized Appreciation

The financial planning profession is full of acronyms such as RMD, IRA, TSA and NUA. One acronym making a comeback due to the increase in the US Equity market is “NUA”. NUA stands for net unrealized appreciation and anyone with a 401k account containing stock might want to better understand it. NUA comes into play when a person retires or otherwise leaves an employer sponsored 401k plan. In many cases, 401k funds are rolled over to an IRA. However, if you hold company stock in the 401k plan, you might be best served by rolling the company stock out separately.

Before getting to an example, here are the gory details: The net unrealized appreciation in securities is the excess of the fair market value over the cost basis and may be excluded from the participant's income. Further, it is not subject to the 10% penalty tax even though the participant is under age 59-1/2, since, with limited exceptions; the 10% tax only applies to amounts included in income. The cost basis is added to income and subject to the 10% penalty, if the participant is under 59.5 and the securities are not rolled over to an IRA.

Suppose Mary age 62 works for a large company that offers a 401k plan. Over the years she has purchased $50,000 of XYZ company stock and it has appreciated over the years with a current value of $150,000. Therefore, Mary has a basis of $50,000 and net unrealized appreciation of $100,000.

If Mary rolls XYZ stock over to an IRA at retirement or termination, the full $150,000 will be taxed like the other funds at ordinary income tax rates when distributed. However, if Mary rolls XYZ stock out separately the tax rules are different and potentially more favorable. In the example above, if Mary rolls XYZ out she will pay ordinary income tax immediately on $50,000 but may obtain long term capital treatment on the $100,000 appreciation when the stock is sold; thus potentially saving several thousand dollars in income tax.

Here are some critical questions to review when considering taking advantage of this opportunity:

Have you determined whether you own eligible employer stock within your workplace retirement plan?

Have you determined whether you have a distribution triggering event that would allow you to take a lump sum distribution of your employer stock from your plan?

Have you discussed the special taxation rules that apply to lump sum distributions of employer stock and NUA?

• Cost basis taxable as ordinary income

• Net unrealized appreciation taxable at long term capital gains rates when stock is sold

Have you discussed the criteria necessary to qualify for NUA’s special tax treatment?

• Qualifying lump sum distribution including stock of the sponsoring employer taken within one taxable year

• Transfer of stock in kind to a brokerage account

• Sale of stock outside of the current qualified plan

Have you discussed the pros and cons of rolling over your employer stock into an IRA, taking into consideration such things as available investment options, fees and expenses, services, taxes and penalties, creditor protection, required minimum distributions and the tax treatment of the employer stock?

Have you discussed the pros and cons of selling your employer stock within the plan, including the need for proper diversification?

Have you discussed with your tax advisor whether a NUA tax strategy would be beneficial from a tax planning perspective given your current situation?

These are a handful of the key questions that should be considered when deciding whether or not this opportunity makes sense for you. Professional guidance is always suggested before making any final decisions.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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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 Matt Trujillo, CFP® and Tim Wyman, CFP® and not necessarily those of Raymond James. 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. Strategies mentioned may not be appropriate for all investors.

Fixed Annuities in Retirement

Who doesn’t like a level of certainty in life?  In a world full of unknowns, it’s human nature to feel more secure by having some type of guarantee.  For some, this might mean holding a certain amount of cash in the bank or having your home paid off in retirement, but the topic I’m tackling in this blog is fixed income sources in retirement.  Traditionally this meant a pension, social security, and annuity income.  However, with pension plans now being about as common as seeing a walkman CD player and social security having its own issues, I think it makes sense to explore other options to provide a guarantee for a portion of your retirement income need.

The 50% Fixed Income Rule of Thumb

One of the many questions we discuss with clients when working with them on their financial plan (especially when they are approaching retirement) is how much of their spending goal should be comprised of fixed income sources?  Ideally, we would like to see that percentage around 50%, but every client situation is different.  So if the annual spending goal is $100,000 gross, $50,000 of fixed income sources (social security, pension or annuity income) is desirable with the remainder of income being drawn from a well-balanced, diversified portfolio.  However, depending on the client’s risk tolerance and other assets, it could make sense to have that percentage higher or lower. 

The Bygone Pension Era

Since one of the main fixed income sources for a retiree was a company pension – now virtually non-existent – it’s often up to you. The burden has been placed on the employee to fund their own retirement through a 401k, 403b or other defined contribution plan.  While company matches certainly help the employee, they don’t come close to offering the same lifetime income benefit a pension provides.  As such, it could make a lot of sense to explore the option of utilizing a fixed annuity for part of your retirement need. 

Making Room in your Plan for Annuities

Annuities don’t make sense for everyone and they have rightfully received a bad rap. Many of them are expensive and were “sold” in situations where it just didn’t make sense for the client based on their needs and their personal situation.   However, annuities are around for a reason, because they can fit the need for certain clients for a PORTION of their financial plan.  With so many different options for income, annuities typically place the burden of risk on the insurance company offering the annuity for a guaranteed stream of income.  Having a portion of your spending goal met by a fixed income source, such as an annuity, gives many clients an added layer of peace of mind, knowing that the income stream will be there regardless of what the market is doing. 

In summary, annuities can have a place in your financial plan but like anything financial, they don’t make sense for everyone.  This is our job, as your financial team member, to work with you to see if they have a place in your plan.  Don’t cringe when you hear the word “annuity” like many do. Please have an open mind because they could play a very important role in your retirement!

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Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s Money Centered and Center Connections blogs.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation to buy or sell any investment. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. 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. There are special risks associated with investing in bonds (fixed income) such as interest rate risk, market risk, call risk, prepayment risk, credit risk, and reinvestment risk. Investing involves risk and investors may incur a profit or loss regardless of strategy selected. 

A fixed annuity is a long-term, tax-deferred insurance contract designed for retirement. It allows you to create a fixed stream of income through a process called annuitization and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face fees called surrender charges. If you're not yet age 59½, you may also have to pay an additional 10% tax penalty on top of ordinary income taxes. A fixed annuity contains guarantees and protections that are subject to the issuing insurance company's ability to pay for them.

Don’t Let 2015 Goals Become Afterthoughts

New beginnings offer the chance to hit the reset button.  Whether it’s setting personal goals spurred on by the beginning of a New Year or adjusting your financial course to focus on retirement, hitting the reset button is an opportunity to think about your intentions and put a finer point on your action plan.

One challenge that comes into play when setting goals, either personal or financial, is the potential to get distracted along the way.  Day-to-day stuff gets in the way and goals can easily become afterthoughts. How can you avoid falling into the gap trap that exists between expressing a goal (Point A) and crossing the finish line (Point B)? 

Here are three tips to get you started.

1. Commitment is essential.  Commitments have an emotional component attached to our personal values.  If something is truly meaningful, you will automatically do what is necessary to get there, whether you set a goal or not.  I am committed to saving appropriately today, so that when I reach retirement I won’t worry about running out of money.

2. Put more focus on the journey rather than the destination.  Goals focused solely on the destination can be met without enjoyment or personal growth along the way.  To retire at age 65 the savings number I need to hit is 15% per year.  Commitments, on the other hand, allow you to chart a course and keep the ultimate arrival point in clear view.   I am committed to understanding how my rate of savings affects my lifestyle in retirement.

3. Don’t get lost in the details of the planning. Getting caught up in the details is a good way to procrastinate.  Action is a must to move good intentions toward progress.

Throughout our lifetime, there are natural breaks in the journey that offer a chance to hit the reset button.  With your goals in hand and motivation clear, the future is shaped.  What will you commit to in 2015?

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The goals listed are for illustrative purposes only. Individual cases will vary. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. C15-000603

Making the Most of Your Empty Nest Years – Part 2

The kids have gone to college or moved away and now you enter the Empty Nest Years. Will your empty nest years resemble “empty nest syndrome” (complete with a sense of loss, perhaps depression, alcoholism, identity crisis and marital conflicts)? Back in July 2014, I shared a conversation with a client in my first Empty Nest blog. They described their empty nest like this: “It’s Like being in college, only with money!” Working with clients whom have transitioned into the empty nest years successfully, the first common thread has been that they make time to plan.

Making time to Plan

It seems like such a simple statement, but it is often overlooked.  Like most successful folks, those empty nesters made a plan to live with intention. They examined their values, decided what was truly important in their lives, and then aligned their decisions with their intentions.

One of the most profound ways to examine values is through the work of George Kinder of the Kinder Institute.  My wife Jen and I have gone through the process with one of our firm’s partners and it has been quite helpful in leading an intentional life.  George Kinder takes a unique approach to financial planning – what he terms “life planning”.  My personal take is that at the core life planning is “financial planning done right”.  Many of life’s most important goals have a financial component. Like life planning, our comprehensive financial planning is designed to move beyond the numbers (not just dollars and cents) and address your goals and values.

3 Steps to Setting Financial Intentions

How can you discover or clarify the deeper values in your life and live with [more] intention? Here are two exercises that you might find helpful.  If they resonate, we’d love to help you.

To help clients discover the deeper values in their lives, Kinder poses three questions:

1. Imagine you are financially secure, that you have enough money to take care of your needs, now and in the future. How would you live your life? Would you change anything? Let yourself go. Don’t hold back on your dreams. Describe a life that is complete and richly yours.

2. Now imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life and how will you do it? (Note that this question does not assume unlimited funds.)

3. Finally, imagine that your doctor shocks you with the news that you only have 24 hours to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did you miss? Who did you not get to be? What did you not get to do?

When you understand what you want to do with your life, you can make financial choices that reflect your values as you plan for your empty nest years.

Taking Stock of Life

Here is a second exercise to consider that can help lead to clarity and intention. Take a piece of paper and at the top write “Goals for My Life – Taking stock”. Below that, across the top write “One month, 3 months, one year, 3 years, 5 years, 10 years, 20 years, and lifetime”.  Next, down the left hand side write “Work, Family, Relationships, Spirit, Community, Creativity, Health, Finances” and any other category for your personal circumstances.

Consider each time frame and category and the things you would like to accomplish.  Perhaps in 5 years under Family you would like to take the entire family on a holiday trip.  Or perhaps in 3 months under Work you want to reduce your hours.  Write it down – don’t underestimate the power of the pen or pencil.  Dr. Gail Matthews, a psychology professor at Dominican University in California, found that you are 42 percent more likely to achieve your goals just by writing them down. My experience suggests it’s even higher – write them down!

The empty nest years are an important transition.  I hope yours are “It’s Like being in college, only with money!”

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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 Center for Financial Planning, Inc. and not necessarily those of Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. C15-001184

Smart Moves to Make the Year You Retire

So you’ve decided to hang ‘em up? Congratulations!  Retirement is an extremely personal decision and is made for a multitude of reasons.  Many of our clients have had the ability to retire for several years, however, they have now reached a point where the weekly grind isn’t as enjoyable as it once was.  There are probably thousands of things running through your head.  What will life look like without work?  How will I spend my days?  Where do I/we want to travel?  Do I want to work part-time or volunteer?  With so many emotions and thoughts, it can be easy to miss good opportunities to really maximize your final year of full-time work. How do you get the most “bang for your buck” in your final year of working full-time?

Maximizing your employer retirement contribution (401k, 403b, etc.)

If you aren’t doing so already, do your best to maximize your company retirement plan contribution.  If you are retiring mid-year, adjust your payroll deduction to make sure you are contributing the maximum ($24,000 for those over the age of 50 in 2015) by the time you retire.  If monthly cash flow won’t allow for it, consider using money in a checking/savings or taxable account to supplement your cash flow so you can put the max into the plan.  This will most likely be the final year you will be in the highest tax bracket of your life, you really want to take advantage of this and get the maximum tax benefit. 

“Front-load” your charitable contributions

If you are charitably inclined and plan on making charitable gifts, even into retirement, you might consider “front-loading” your donations.  Think of it this way – if you are currently in the 25% tax bracket and you will drop into the 15% bracket when retired, donating in which year will give you the most tax savings by making a donation?  The year you are in the higher bracket, of course!  So if you donate $5,000/year to charity, consider making a contribution for $25,000 while you are in the 25% bracket (ideally with appreciated securities).  This would satisfy five years worth of donations and save you more on your taxes.  As I always tell clients: When you save more money on your tax bill by gifting efficiently, you give less to the IRS’ and more to the organizations you care about!

Explore your health care options

This is typically a retiree’s largest expense.  How will you and your family go about obtaining medical coverage upon retirement?  Will you continue to receive benefits on your employer plan?  Will you go on COBRA?  Will you be age 65 soon and enroll in Medicare?  Are you retiring young and need to obtain an individual plan until Medicare kicks in?  No matter what your game plan, make sure you talk to the experts and have a firm grip on the cost and steps you need to take to ensure you don’t go without coverage and that it’s as affordable as possible.  With recent changes in health care, we are positioning more and more clients in a way to qualify for health care premium subsidies under the Affordable Care Act (“Obamacare”). For more information on how you might qualify, take a look at Matt Trujillo’s recent blog on this topic.

With so many moving parts, it really makes sense to have someone in your corner to help you navigate through these difficult and sometimes confusing retirement topics and decisions.  Ideally, seek out the help of a Certified Financial Planner (CFP®) to give you the comprehensive guidance you need and deserve!

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s Money Centered and Center Connections blogs.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. 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. 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. C14-041996

Capital Gains: 3 Ways to Avoid Buying a Tax Bill

Many asset management firms have started to publish estimates for what their respective mutual funds may distribute to shareholders in short- and long-term capital gains. Moreover, early indication is that some firms will be paying out capital gains higher than recent years. As you may be aware, when a manager sells some of their holdings internally and realizes a gain they are required to pass this gain on to its shareholders. More specifically, by law and design, asset management firms are required to pay out 95% of their realized dividends and capital gains to shareholders on an annual basis. Many of these distributions will occur during November and December. Remember this is only relevant for taxable accounts; capital gain distributions are irrelevant in IRA’s or 401k’s.

Capital gain distributions are a double edged sword.  The fact that a capital gain needs to be paid out means money has been made on the positions the manager has sold. The bad news – the taxman wants to be paid.

What can we do to minimize the effect of capital gain distributions:

1. We exercise care when buying funds at the end of the year to avoid paying tax on gains you didn’t earn, and in some cases hold off on making purchases.

2. We may sell a current investment before its ex-dividend date and purchase a replacement after the ex-dividend date.

3. Throughout the year we harvest tax losses, when available, to offset these end of the year gains. 

As always, there is a balance to be struck between income tax and prudent investment management.  Please feel free to contact us if you would like to discuss your personal situation.

This material is being provided for information purposes only and is not a complete description of all available data necessary for making an investment decision, nor is it a recommendation to buy or sell any investment. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, tax situation and time horizon before making any investment decision. Any opinions are those of [insert FA name] and not necessarily those of Raymond James. For any specific tax matters, consult a tax professional. C14-040561

The 2014 Movember Challenge: Changing faces at The Center

Who doesn’t love a good beard or mustache?  I think you’d be hard pressed to find many people who don’t enjoy the look on us guys.  Heck, Dan Boyce has been rocking a mustache since our firm came into existence almost 30 years ago!  Over the last few years, November has become the month dedicated to growing out your facial hair, otherwise known as “MOVEMBER”.   What many people don’t realize though, is that Movember is actually dedicated to raising money and spreading awareness for prostate cancer, the second leading cause of cancer-related deaths in men in the United States.  To find out more about the foundation that’s changing the face of men’s health, check out movember.com. I think it’s a fun thing to do each year, switch the look up a little bit and save some time and money with your shaving supplies while hopefully donating some of those savings to prostate cancer research.   

Throwing down the Movember Gauntlet

This year, Matt Trujillo and I took the Movember challenge and have had an ongoing facial hair battle all month. You can check out our hairy progress on The Center’s Facebook page.  When I decided to partake in Movember once again this year, I started thinking about the “skillset” that it takes to grow an amazing beard/mustache.  When I really took a step back, I realized how much it had it common with investing -- as crazy as that may sound! Consider these hair-raising similarities to investing:

Patience – Not everyone has the genes for growing good facial hair – like me for example.  I have what many deem as a “baby face” and have a hard time filling in the gaps in certain areas, but hey, I’ve seen way worse. Have you ever seen Justin Bieber’s attempt at a mustache?  If not, take a look because it makes me feel better. But the one thing I do have in my favor is patience.  I know it will take longer than most to get a decent beard/mustache going, but I’m in it for the long run. 

Persistence – As every man can attest, you will come to a point where your facial hair drives you crazy.  This is typically about 1½ – 2 weeks into the growing cycle and is when the itchiness and overall feel starts to really get to you.  Although this growth period is tough to push through, persistence is essential and is necessary to prevail.

Consistency – You have to stick with it!  If you want good facial hair, consistency is key.  You have to know going in that the process won’t be easy. Being consistent and keeping up with the general maintenance of having facial hair, along with fighting the countless urges to shave that lip sweater off your face, is what separates the men from the boys.

Movember & Investing Parallels

Can you see how these three attributes required to growing facial hair can play into investing too? The most successful clients we’ve worked with started saving at a young age and did so over the course of their 30+ year working career. That required discipline and patience.  They’ve seen the market go up and down along with their account balances; however, they’ve stayed the course and are now enjoying a very comfortable retirement.  Investing with persistence, in my opinion, means staying true to your personal goals and maintaining a diversified portfolio. Instead of following “new” or “hot” investment crazes. Keeping it simple and using asset allocation has led to countless success stories for our clients.  Finally reaching your goals takes consistency, which if you ask me, is the number one key to investor success.  Consistent saving at a reasonable rate, no matter what the market is doing, can reap monumental dividends over the course of 40+ years. 

Matt and I have had a lot of fun the past few weeks partaking in Movember and know the office has also enjoyed our evolution into our “business professional cave man” look.  However, what we can’t forget is the true purpose of growing our facial hair– prostate cancer awareness.  We all know someone who has been affected by cancer and if trends like Movember can help to ultimately fight the cancer battle, I’m all for it.  Happy Movember, from everyone at The Center! 

Nick Defenthaler, CFP® is a Certified Financial Planner™ at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.

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