Webinar In Review: Post Election Update & Year End Planning Opportunities

Contributed by: Center for Financial Planning, Inc.®

The Center's most popular webinar of 2016 was the Post-Election Update and Year End Planning Opportunity presentation. Melissa Joy, CFP®, and Nick Defenthaler, CFP®, break down what President Trump's win may mean for financial markets. They also review areas of financial planning including retirement, taxes, and investments for year-end financial planning opportunities.

Catch a replay of the webinar below. Also, we have a companion year-end planning guide available along with a year-end planning worksheet.

Center for Financial Planning, Inc. is a Registered Investment Advisor and independent of Raymond James Financial Services. Securities offered through Raymond James Fianncial Services, Inc., Member FINRA/SIPC.

Four Considerations for Year End Tax Planning

Contributed by: Nick Defenthaler, CFP®

With the end of the year fast approaching, end of year tax planning is top of mind for many clients. At The Center, we are proactive throughout the entire year when it comes to evaluating a client’s current and projected tax situation but now is typically the time most people really start thinking about it. Let’s be honest, how many of us feel like we don’t pay ENOUGH tax? Most clients want to lower their tax bill and be as efficient with their dollars as possible.

Here is a brief list of items we bring up with clients that could ultimately lead to lowering one’s tax bill for the year:

1. Are you currently maximizing your company retirement account (401k, 403b, Simple IRA, SEP-IRA, etc.)?

   • These plans allow for the largest contributions and are deductible against income.

     • In our eyes, this is often times the most favorable way to help reduce taxes because it also goes towards funding your retirement goals! 

2. How are you making charitable donations? 

   • Consider gifting appreciated securities to charity instead of cash if you have an after-tax investment account with appreciated positions. By doing so, you receive a full tax-deduction on the value of the security gifted to the charity and you also avoid paying capital gains tax – a pretty good deal if you ask me! 

     • Donor Advised Funds are a great way to facilitate this transfer and are becoming increasingly popular lately because of the ease of use and flexibility they provided for those who are charitably inclined.

   • If you’re over the age of 70 ½ and own a Traditional IRA, taking advantage of the now permanent Qualified Charitable Distribution (QCD) could be a great option as well. 

3. Should I be contributing to an IRA? If so, should I put money in a Traditional or Roth?

   • As I always say, in financial planning, there is never a “one size fits all” answer – it really depends on your income and your current and projected tax bracket

     • Keep in mind, not all IRA contributions are deductible, your income and availability to contribute to a company sponsored retirement plan plays a major role.

     • If your current tax bracket is lower than your projected tax bracket in the future, it more than likely makes sense to invest within a Roth IRA, however, as mentioned, everyone’s situation is different and you should consult with your advisor before making a contribution. 

4. Do you have access to a Health Savings Account (HSA) or Flex Spending Account (FSA) at work?

   • These are fantastic tools to help fund medical and dependent care costs in a tax-efficient manner.

     • HSAs can only be used, however, if you are covered under a high-deductible health plan and FSAs are “use it or lose it” plans, meaning money contributed into the account is lost if it’s not used throughout the year. 

This is a busy time of year for everyone. Between holiday shopping, traveling, spending time with family, completing year-end tasks at work, taxes are often times lost in the shuffle.  We encourage you to keep your eyes open for our year-end planning letter you will be receiving within the next few weeks which will be a helpful guide on the items mentioned in this blog as well as other items we feel you should be keeping on your radar.

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 blogs.

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Please include the following to all of the above: Please include: 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. 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 Nick Defenthaler and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investments mentioned may not be suitable for all investors. 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. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

How Not to be a Record Hoarder

Contributed by: Sandra Adams, CFP®, CeFT™

If you’re like me, this is the time of year to go through my files and piles of paperwork in preparation for income tax season.  Seeing the stacks of statements and paperwork I’ve collected makes me feel like I’m a prime candidate to be on an upcoming episode of “Hoarders,” because I never quite feel like I can get rid of things…I might need them someday.

Consult with your financial planner and your CPA for discarding any financial or income tax paperwork, and your attorney before parting with legal paperwork.  AND REMEMBER:  you should shred any paperwork with identifying names, addresses, dates of birth or account or Social Security numbers on them to avoid being a potential financial fraud victim.

To ease your mind as you purge your financial records, here are some document retention guidelines:

(CLICK HERE TO DOWNLOAD YOUR PDF COPY)

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.

If the hoarder in you is still too nervous to part with the paper, you do have some options:

• Electronically scan your important financial and legal papers and save them to a computer file; remember to back up your computer and save a copy of the list (on a disk or USB flash drive) in a safe place.

• Talk to your financial advisor, who may have an electronic document management system that is storing many of your documents (and backing them up) for you. 

Oh, and while you’re revving up your shredder and getting ready to make some confetti, here’s one more piece of paper to keep…this one.  Go ahead, press print.  Save this guide and you’ll save yourself the trouble of trying to remember it all next year. 

Sandra Adams, CFP® , CeFT™ 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 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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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 Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

Non-Qualified Deferred Compensation (NQDC) Plans

Contributed by: Kali Hassinger

A Non-Qualified Deferred Compensation plan (NQDC) is a benefit plan offered by some employers to their higher earning and/or ranking employees. Some of you may have heard of these plans referred to as “Golden Handcuffs” because they often require that an employee stay with their current employer, or at least not move to a competing firm, in order to receive the compensation. This nickname provides both a negative and positive connotation, but, when appropriate, NQDC plans can offer employees greater control over their income, taxes, and financial future.

NQDC plans, unlike your typical 401(k), are not subject to limitations or non-discrimination rules. That means that the employer can offer this benefit to specific employees and there is no restriction on the dollar amount deferred. This is advantageous to an employee who is expecting to be in a high tax bracket, is already fully funding their retirement savings plan(s), has a surplus in cash flow, and may foresee a time when their taxable income will be reduced. With this strategy, the employee and employer agree upon a date in the future to pay the employee his/her earned income. Both parties agree to when the funds will be received in the future, and it isn’t taxable income until it is actually received by the employee.

In most cases, these plans are considered “unfunded” by the employer, which means that the money isn’t explicitly set aside for the employee. This scenario creates a certain level of risk for the employee because the funds would be subject to any future bankruptcy or creditor claims. There are some strategies that the employer can utilize to mitigate the risk (involving trusts and insurance), but they need to uphold the NQDC status. Otherwise, the deferred compensation amount will become fully taxable to the employee along with a 20% penalty. Funded NQDC plans exist as well, and these plans set the deferred compensation assets aside exclusively for the benefit for the employee. Funded plans, however, open themselves back up to ERISA requirements, making them far less popular.  

When an employer and employee enter in a NQDC agreement, it can be a win for both parties.  Employers are securing that valued employees will remain loyal, while employees are able to reduce their taxable income now. 

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Any opinions are those of Kali Hassinger and are not necessarily those of RJFS or Raymond James. Raymond James Financial Services, Inc. and its advisors do not provide advice on tax issues, these matters should be discussed with the appropriate professional.

529 Plans: Saving for your Child’s Education

Contributed by: Nick Defenthaler, CFP®

Doesn’t it always seem like you blink and summer is over? For some reason, this glorious season seems to go by especially fast when you live in the state of Michigan! Hopefully you all took advantage of the hot and sunny weather and had a chance to explore all of the great things our state has to offer with your family. 

If you have children, your focus has probably shifted from weekend getaways to getting back into a more structured routine now that school is back in session.  Since school is top of mind for many, I felt it was a good time to touch on education planning and saving for college. 

Below is a brief refresher of the 529 plan, a popular type of account you can save into for future college expenses.  Many people refer to the 529 plan as the “education IRA” but there are some caveats:

Advantages:

• State tax deduction on contributions up to certain annual limits

• Tax-deferred growth

• No taxation upon withdrawal if funds are used for qualified educational expenses (such as tuition, books, room and board, computers, etc.)

• Parents have control over the account and can transfer the account to another child

• Not subject to kiddie tax rules, unlike UGMA accounts (Uniform Gift of Minors Act) and UTMA accounts (Uniform Transfer to Minors Act)

Disadvantages:

• No guaranteed rate of return – subject to market risk

• Certain taxes and penalties will apply if funds are withdrawn for non-qualified expenses

Items to be aware of:

• Keep records of how money was spent that was withdrawn from the 529 account in case of an audit

• Review the asset allocation/risk profile of the account on an annual basis – typically, the closer the child is to entering college, the more conservative the account should become 

Just like saving for retirement, the sooner you can start saving for college the better. With that being said, if your children are only a few years out from college and your savings isn’t where you’d like it to be, there is still hope. Chances are you still have options and this is where good financial planning can come into play. There are also nuances with financial aid and completing the FAFSA that you want to be aware of—check out our webinar on the topic! If we could provide guidance in this area, don’t hesitate to reach out, we would be happy to help!

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 blogs.

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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 and are not necessarily those of Raymond James. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state. Asset allocation does not ensure a profit or guarantee against loss.

How to Make Grants from Donor-Advised Funds

Contributed by: Matthew E. Chope, CFP®

I talk to a lot of clients who have set up Donor-Advised Funds or family foundations and are confused. They’ve figured out how to put money in, but how to make grants isn’t always as clear. The IRS prohibits using these funds to satisfy a pledge. That doesn’t prohibit you from supporting organizations like churches, but it does mean you need to follow certain steps.

The first step is to talk to your attorney and your CPA. They can give you tax and legal advice about making a grant. Carla Hargett, the Vice President of Raymond James Trust, told me if you’re planning on giving to your church, for example, she believes the best way to handle the Donor-Advised Fund Grants is to start by discharging any pledge made in the past. Donor-Advised Funds cannot be used to satisfy a pledge. You can let your church know you intend to provide General Support for a certain amount of money and year(s) going forward. The amount can be close to an amount you’ve given in the past – that’s up to you. But any legally enforceable pledges must be cancelled first. This should stop the audit trail if the IRS ever decides to get into the particulars with a grantor. So make sure the grant requests from your Donor-Advised Fund should say something like "2016 General Support.”  

When pledge time comes around, I recommend that you write on the pledge card something like, "I intend to request a distribution of $XXXX.XX from my Donor-Advised Fund during the 20XX fiscal year." Your church or charitable organization will be familiar with this language and can use it for budget planning similar to a pledge.

We just want to make sure that Grantors of donor-advised funds are doing things as accurately as possible and if an IRS auditor someday digs into your grants, you’ll have nothing to worry about.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions.

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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 Matt Chope and not necessarily those of Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Unpacking Incentive Stock Options

Contributed by: Matt Trujillo, CFP®

What is an ISO?!

Some of you reading this might have been granted Incentive Stock Options (ISOs) in the past or perhaps this is something that your employer recently started to grant you. In either case it never hurts to get a refresher on what they are and some of the nuanced planning opportunities that go with them. ISOs are a form of stock option that employers can grant to employees often to reward employees' performance, encourage longevity with the company, and give employees a stake in the company's success. A stock option is a right to buy a specified number of the company's shares at a specified price for a certain period of time. ISOs are also known as qualified or statutory stock options because they must conform to specific requirements under the tax laws to qualify for preferential tax treatment.

The tax law requirements for ISOs include*:

• The strike price—the price you will pay to purchase the shares—must be at least equal to the stock's fair market value on the date the option is issued.

• To receive options, you must be an employee of the issuing company.

• The exercise date cannot be more than 10 years after the grant.

*Special rules may also apply if you own more than 10 percent of your employer's stock (by vote). Nonqualified stock options, another type of employee stock option, are separate from ISOs therefore receive different tax treatment.

Once you have been granted a stock option, you can buy the stock at the strike price even if the value of the stock has increased. If you choose to exercise a stock option, you must buy the stock within the specific time frame that was set when the option was purchased or granted to you. You are not required to exercise a stock option.

Your options may be subject to a vesting schedule developed by the company. Unvested options cannot be exercised until some date in the future, which often is tied to your continued employment. The stock that you receive upon exercise of an option may also be subject to a vesting schedule.

Assuming that a stock option satisfies the tax law requirements for an ISO, preferential tax treatment will be available for the sale of the stock acquired upon the exercise of the ISO, but only if the stock is held for a minimum holding period. The holding period determines if a sale of the stock you received through the exercise of an ISO is subject to taxation as ordinary income or as capital gain or loss.

To receive long-term capital gain treatment, you must hold the shares you acquired upon exercise of the option for at least:

• Two years from the date you were granted the option, and

• At least one year after the date that you exercised the option

So whether this is something new to you or something you’ve been handling for a long time, feel free to contact us with questions regarding the nuances around Incentive Stock Options.

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 information does not purport to be a complete description of Incentive Stock Options, this information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Investing in stocks always involves risk, including the possibility of losing one's entire investment. Specific tax matters should be discussed with a tax professional.

Qualified Charitable Distributions: Giving Money while saving it

Contributed by: Nick Defenthaler, CFP®

Late last year, the Qualified Charitable Distribution (QCD) from IRAs for those over the age of 70 ½ was permanently extended through the Protecting Americans from Tax Hikes (PATH) Act of 2015. Previously, the QCD was constantly being renewed at the 11th hour in late December, making it extremely difficult for clients and financial planners to properly plan throughout the year. If you’re over the age of 70 ½ and give to charity each year, the QCD could potentially make sense for you. 

QCD Refresher

The Qualified Charitable Distribution only applies if you’re at least 70 ½ years old. It essentially allows you to donate your entire Required Minimum Distribution (RMD) directly to a charity and avoid taxation on the dollars coming from your IRA. Normally, any distribution from an IRA is considered ordinary income from a tax perspective, however, by utilizing the QCD the distribution from the IRA is not considered taxable if the dollars go directly to a charity or 501(c)(3) organization.    

Let’s look at an example:

Sandy, let’s say, recently turned 70 ½ in July 2016 – this is the first year she has to take a Required Minimum Distribution (RMD) from her IRA which happens to be $25,000. Sandy is very charitably inclined and on average, gifts nearly $30,000/year to her church. Being that she does not really need the proceeds from her RMD, but has to take it out of her IRA this year, she can have the $25,000 directly transferred to her church either by check or electronic deposit. She would then avoid paying tax on the distribution. Since Sandy is in the 28% tax bracket, this will save her approximately $7,000 in federal taxes!

Rules to Consider

As with any strategy such as the QCD, there are rules and nuances that are important to keep in mind to ensure proper execution:

• Only distributions from a Traditional IRA are permitted for the QCD.

• Employer plans such as a 401k, 403b, Simple IRA or SEP-IRA do not allow for the QCD

• The QCD is permitted within a Roth IRA but this would not make sense from a tax perspective being that Roth IRA withdrawals are tax-free by age 70 ½ *

• Must be 70 ½ at the time the QCD is processed.

• The funds from the QCD must go directly to the charity – the funds cannot go to you as the client first and then out to the charity.

• The amount you can give to charity through the QCD is limited to the amount of your RMD.

• The most you can give to charity through the QCD in a given year is $100,000, even if one’s RMD exceeds that amount.

The QCD can be a powerful way to achieve one’s philanthropic goals while also being tax-efficient. The amount of money saved from being intentional with how you gift funds to charity can potentially keep more money in your pocket, which ultimately means there’s more to give to the organizations you are passionate about. Later this month, we will be hosting an educational webinar on philanthropic giving – click here to learn more and register, we hope to “see” you there!

Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

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 blogs.

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Any opinions are those of Nick Defenthaler and are not necessarily those of Raymond James. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Millennials Matter: Paying Down Debt While Saving for the Future

Contributed by: Melissa Parkins, CFP®

If you missed it, last month I began a monthly blog series geared towards millennials, like me, with topics that are important and relevant to us. Chances are you are going to have debt at some point in your life—student loans, credit cards, new cars, or perhaps a mortgage—and let’s be honest, most of us millennials are drowning in student loan debt these days! Let’s say you finally have a steady income stream and want to start building your net worth… but have enormous student loan debt and maybe some credit cards to think about too. If you are like me, a big question on your mind is probably, “with extra money in my budget over my necessary expenses, do I pay down more debt, or invest more for the future?” The decision can be overwhelming and definitely not easy answer-- how do you decide the right mix of paying down debt and saving for the future?

Things to Consider:

• First, make sure you are able to at least make the minimum payments on your debts and cover all your other necessary monthly expenses. Then, determine how much extra cash you have each month to work with for additional loan payments and to invest for the future.

• Have an adequate emergency reserve fund established (the typical emergency fund should be 3-6 months of living expenses). If you don’t have a comfortable emergency fund, start building one with your extra monthly cash flow now.

• Take advantage of your employer’s 401(k) match, if they offer one.*  If there is a 401(k) match, contribute enough to get the matching dollars. You are not only saving for the future, but it’s extra money invested for retirement too!

• Make deductible IRA contributions – who doesn’t like saving for the future while saving on taxes? If you have earned income and are not covered by a retirement plan like a 401(k) through work, you are eligible to make deductible IRA contributions up to the annual limit. If you are covered by a retirement plan at work, the deduction on IRA contributions may be limited if your income exceeds certain levels.

• Make high interest rate debt a priority. Take inventory of your debts and their corresponding interest rates and terms. It is a good idea to pay more than the minimum due on high interest rate debt so you are reducing your interest paid over the life of the loan. You can do this by increasing your monthly debit amount or by making more than one payment a month. Also, check with your lenders for discounts for enrolling in auto payments – many offer a small rate reduction when payments are set to be automatically debited each month.

• Remember that interest you pay on some debt is tax deductible, like student loan interest (if your income is below certain levels) and mortgage interest (if you are itemizing your deductions). So at least some of the interest payments you are making on your loans go towards saving on your taxes.

• Lastly, don’t forget to consider what short-term goals you have to pay for in the next 1-2 years. Are you looking to buy a home and need a down payment? Wedding to pay for? New car? Or maybe you have just been working hard and want to treat yourself to a vacation! Lay out these larger short-term goals with amounts and time frame, and see how much of your monthly extra cash should be going to fund them.

Ideas and Tools to Help

• Technology – Consider the use of budgeting apps like Mint or Level Money to keep your spending in check and your goals on track

• Social Media – Look to your Twitter feed for inspiration and helpful tips (personally, I like to follow @Money for motivation).

• Do you receive commissions, bonuses or side income above your normal pay? Instead of counting on that as typical cash flow, each time it comes in put it towards paying off high interest rate debt (I do this and I promise, the feeling is rewarding!). You can also do this with your tax refund each year.

• When you receive a pay increase at work, instead of increasing your spending level, use it to increase your savings (have you read Nick’s blog on his “One Per Year” strategy?)

• Call us! We are here not only as financial planners, but also as behavioral coaches to help you effectively achieve your goals!

Ultimately, how do you feel about debt? Your balance between paying down debt and saving for the future will depend on your personal feelings about having liabilities. It is a good idea to start saving as early as possible because of the power of compounding over the long term. But that doesn’t mean you can’t be aggressively tackling your debt as well. Create a plan that you are comfortable with, review it often to make sure you are staying on track, and make adjustments as your cash flow changes over time.

Continuing on with the topic of debt… read next month about student loans and what you can  be doing to be more efficient with them. Don’t forget to look for more info on our upcoming webinar in July as we’ll be going into more details about student loans!

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.

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*Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor or your retirement

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 Melissa Parkins and are not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. 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 matters. You should discuss tax matters with the appropriate professional.

Are Your Aging Parents a Roadblock in Your Retirement Planning?

Contributed by: Sandra Adams, CFP®

As the meat in the so-called “sandwich generation,” the baby boomers are approaching retirement at a record pace. As we work with clients and client couples to get their financial and non-financial “ducks in a row,” it is becoming more and more common to discuss issues surrounding the assistance of one or both sets of parents and aging/long term care issues. If this sounds familiar, here are the possible roadblocks that this can cause for your retirement planning and some suggestions about what you can do to prevent them.

What are the Roadblocks?

• Providing assistance/caregiving often limits the time you can work; you may be forced to take family leave time to provide care, go to part time work, or even take early retirement.

• Working less reduces earnings, providing less Social Security earnings, and less in retirement savings for future retirement.

• Stopping work prior to age 65 may mean a need to bridge a health insurance gap when that was not the original plan.

• Caregiving can be stressful, especially if you are trying to continue to work and also have responsibilities with adult children and/or grandchildren, so your own health can become a concern.

• With so much going on, just being able to keep your “eye on the ball” and concentrate on your own retirement goals can be a challenge.

What Can You Do to Make Sure To Stay On Track?

If you find yourself in the position of assisting aging parents, now or in the future, do not assume that all is lost. There are things that you can do to make sure that your own retirement will stay on track:

• Have conversations with your parents and plan ahead as much as possible to make sure that their long term care is funded; have a conversation to discuss if they are willing and able to have non-family members provide care if and when the time comes (at least until you retire); have a professional moderate the planning conversation if it’s not a talk your family is comfortable having on their own.

• If you do end up leaving work to care for an aging parent, discuss having a paid caregiver contract drafted or determine if your parent’s Long Term Care insurance policy has the ability to pay you for your services as a caregiver.

• Make sure others take their turn and spread the responsibilities amongst others (see my recent blog on Family Care Agreements); take breaks and take care of yourself (caregiver stress is a real thing!).

• Continue to meet with your financial planner on an annual basis to keep yourself focused on your own goals along the way—continue to save for retirement as you are able and make progress.

We all have roadblocks that slow our progress towards our goals; aging parents might be one of yours.  The love and care we have for our family—especially our parents—is not something we would ever deny, however frustrating it might be when it delays that ultimate freedom we call retirement. But if we plan ahead, and coordinate with our families and professional partners, we can hope to make the roadblock more of a speedbump.  Contact me if you have questions about how your financial planner can be of assistance.

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 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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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 Sandy Adams and not necessarily those of Raymond James. Prior to making an investment decision, please consult with your financial advisor about your individual situation.