Investment Lessons of 2016

Contributed by: Jaclyn Jackson

As we embrace the fresh start of a new year, it is important that we retrace our steps to learn from our investment victories and missteps during 2016. I’m optimistic that reflection can help us become better investors in 2017.

A Look Back on 2016 Market Performance:

• First Quarter: US large equities beat US small and mid-equities (SMIDs) in the first quarter as both had positive runs. We witnessed value stocks shifting to outperform growth stocks and commodities make a comeback. Meanwhile, gold became one of the best performing assets. 

• Second Quarter: All three domestic market caps continued to have positive returns with U.S. SMIDs beginning to overtake U.S. large equities. Taking advantage of an improved energy sector, high yield bonds performed well. Emerging markets had both ups and downs, but rebounded by June. Yet, the unexpected BREXIT vote shook the MSCI EAFE and MSCI EAFE Small Cap indices emphasizing a flight to safety. Gold benefited from the flight as demand increased and the US dollar slightly upped the Euro. 

• Third Quarter: Domestic equities continued their success into the third quarter. Driven by the rising prices of crude oil, energy was up. Concurrently, high yield bonds also continued to recover. The price of gold fell, but ended the quarter positive overall. Internationals had positive returns. A weaker US dollar supported international fixed income returns. 

• Fourth Quarter:  The beginning of the fourth quarter was rough all around, but US equities rebounded by November. Election results helped US equity index funds see their largest monthly inflows in two years. Anticipated policy changes brought gains to commodities and financials, but hurt interest rate sensitive stocks. International investments for US investors were negatively impacted by a strengthened dollar.

Asset Flows: What Investors Did in 2016

Source: Morningstar Direct 2016

After an equity selloff in January 2016, investors flocked to fixed income most of the year. In a year of sluggish growth for the US, Europe, and Japan, bonds provided hope for those seeking modest but relatively predictable returns. As the inflow/outflows graph shows, taxable and municipal bond fund flows dominated without waiver. Apart from commodities (gold) and sector equity, all other categories were out of favor for most of the year. A post-election U-turn helped November bring in inflows for U.S. equity index funds, but it remains that the 2016 investor theme was seeking predictability (through bonds) in an unpredictable environment (populism, political uncertainty, and looming fiscal and monetary policies concerns).

Lessons Moving Forward

• Fear of the unknown can’t guide our investment decisions.  It is understandable to seek refuge when things are uncertain, but we may miss out on opportunities hiding under our shells. Buying bonds in 2016 may have helped limit negative exposure to curveball events, but if you used some of your portfolio’s equity budget to purchase them, you also missed the US equity run that persisted throughout the year. Similarly, portfolios placed on the sidelines after the US elections missed the equity surge that began shortly after. People who remained invested in equities in 2016 felt the hit of BREXIT as well as its fast recovery. They also experienced value stock comebacks. A diversified portfolio can help you maintain market participation and mitigate bumps in the road (market volatility) over time.

• 2016 reminded us that the world is unpredictable. No matter how smart, how informed, how technological, or well-researched - nobody can predict the future. In other words, we can’t allow predictions about the markets or economy change our long term, comprehensive investment plan. Admittedly, it is important to pay attention to what is happening in the world. Our gaze, however, should be focused on the long-term implications of that news. Multiple portfolio changes based on short-term noise undermines our investment strategy. We need to give ourselves the time to really understand and unravel the true long term risks/threats to our portfolio before modifying our strategy. 

Jaclyn Jackson is a Portfolio Administrator and Financial Associate at Center for Financial Planning, Inc.®

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This information does not purport to be a complete description of the securities, markets, or developments referred to in this material, it has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Opinions expressed are those of Jaclyn Jackson and are not necessarily those of RJFS or Raymond James. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed. Diversification does not ensure a profit or guarantee against loss. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price being be subject to wide fluctuation; the market being relatively limited; the sources being concentrated in countries that have the potential for instability; and the market being unregulated. The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 21 developed nations. The MSCI EAFE Small Cap Index is an equity index which captures small cap representation across Developed Markets countries around the world, excluding the US and Canada. Please note that direct investment in an index is not possible. Past performance is not a guarantee of future results.

Fourth Quarter Investment Pulse

Contributed by: Angela Palacios, CFP®

Some great research this quarter!  From a headline grabber, to sage words of wisdom from long tenured investors, take a look!

Kevin O’Leary from Shark Tank – 11/18/16 CFA® Society of Michigan

The investment department had the opportunity to listen to “Mr. Wonderful” himself discuss what he has learned being an entrepreneur and his outlook for 2017.  Highlights included that he prefers to invest in companies run by women because they set and accomplish achievable goals for themselves and their employees.  He also discussed his plan for the future generations of O’Learys.  He is not interested in handing his children a privileged life on a platter.  Rather he will pay for them from birth through college and then they are on their own to make their way in life.  The same will happen for their children and so on.  He said his mother taught him this important lesson:

“The only birds that dies leaving the nest are the ones that don't learn how to fly.”

Kevin's predictions for 2017 included:

1. Donald Trump wins the election (he called this a week before the election on television)

2. Oil will end 2017 under $50

3. The 10 year US Treasury bond interest rate will end the year under 3%

4. The S&P 500 will end 2017 at 2,300

5. Financials will underperform the S&P 500 in 2017

6. Real Estate Investment Trusts will outperform the S&P 500 in 2017

7. Energy will underperform the S&P500 in 2017

8. Russell 2000 will outperform the S&P 500 in 2017

9. Europe (currency unhedged) will surprise in 2017 and outperform US markets

Investment team gathers before the presentation: From left to right: Jaclyn Jackson, Portfolio Administrator and Financial Associate, Lauren Adams CFA®, Director of Client Services, Melissa Joy CFP®, Partner; Angela Palacios CFP®, Director of Investments; Nicholas Boguth, Investment Research Associate

David Fisher of American Funds

It was a pleasure learning from David Fisher, equity portfolio manager at Capital Group, and his 50 years of investment experience.  David spent time discussing the culture of their firm and how important it has been over the years to attract and retain high quality investment professionals.  Analysts are compensated on how they perform relative to a benchmark rather than relative to each other.  They feel this has contributed strongly to their years of serving clients well.  David spent his career researching media, consumer electronic and electrical equipment companies.   He discussed how vastly those markets have changed over the years.  He said:

“If you don’t obsolete yourself, someone else will obsolete you.”

He was referring to Eastman Kodak.  Remember those cameras?  The type where you would have to take your film in to develop?  The company held the patent to digital technology and didn’t develop it because it would have put their profitable film and camera areas out of business!  Oops!

Scott Davis, Portfolio Manager of Columbia Dividend Income Fund

We have sat down many times with Scott.  He brings great perspective to our portfolios with his dividend growth focused strategy.  Many investors have chased dividend yields over the past few years when they found their bond portfolios lacking.  Scott argues that the quality of the dividend rather than the yield is most important.  Dividends are not contractually committed to like bond interest.  It is completely up to a Board of Directors whether the dividend is paid or not.  A high yield is only positive if it is sustainable.  A stock price generally depreciates very strongly before a dividend cut occurs, which is why the work Scott does is so important. 

He also discusses with corporate management the type of shareholders that they want to have.  A company’s shareholder base changes when they commit to paying/growing a dividend.  When doing this they have a more stable investor base that tends to hold a position longer term.

Angela Palacios, CFP® is the Director of Investments at Center for Financial Planning, Inc.® Angela specializes in Investment and Macro economic research. She is a frequent contributor The Center blog.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Angela Palacios 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. Holding investments for the long term does not insure a profitable outcome. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Investments mentioned may not be suitable for all investors. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility. Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Investing in the energy sector involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors. Dividends are not guaranteed and must be authorized by the company's board of directors. Raymond James is not affiliated with and does not endorse the opinions or services of Kevin O'Leary, David Fisher, Capital Group, Scott Davis and/or Columbia Dividend Income Fund.

What to Expect This Tax Season 2017

Contributed by: Josh Bitel

The Center's Commitment to You

At The Center, our goal is to provide exceptional service and help meet your needs as efficiently and effectively as possible. We offer the following commitments and services related to the tax season:

• Consistent communication about timelines for tax document receipt, as that information is available.

• Assistance in understanding your tax-related questions and coordination of information, such as cost basis.

• Coordination and communication with CPA’s and tax preparers upon your request. We’ve found that sharing and collaborating with your other trusted advisors can have substantial benefit to you.

• Financial planning and investment management integrated with perspective on tax consequences. If you would like to review or discuss our approach to taxes as it relates to your personal situation, please let us know!

• There is still time to make to contributions to IRA, Roth IRA, and SEP IRA’s until April 18th. Please contact us if you need assistance or would like to discuss this further. 

As you complete your taxes for this year, a copy of your tax return is one of the most powerful financial planning information tools we have. Whenever possible, we request that you send a copy of your return to your financial planner, associate financial planner, or client service manager upon filing. Thank you for your assistance in providing this information which enhances our services to you. If you would prefer that we request a copy of your returns from your tax preparer and have not already, please complete a Consent to Disclosure of Tax Return Information Form and return it to our office.

The Center and Raymond James are constantly exploring ways to enhance technology to provide better service and overall experience for our clients. One new software enhancement rolled out in late 2016 was the Tax Snapshot tool. This personalized report can be generated at any time throughout the year by simply contacting your planner. The Tax Snapshot will give a breakdown of any realized capital gains, losses, and income (dividends and interest) generated within your portfolio throughout the year. This report allows us to have a clear, concise view of the tax status of your portfolio and offers us the opportunity to better communicate these figures with your tax professional as we all strive to work on the same team to serve you in the best way possible.

IRS Filing Dates

Typically, the regular tax return filing deadline is April 15th. However, this year the filing deadline will be on Tuesday, April 18th. This is because the 15th falls on a Saturday this year, and also due to the observance of Washington D.C. Emancipation Day holiday on Monday, April 17th.

Raymond James Tax Reporting

Up to date information on Raymond James Tax Reporting can be found at this tax resource page. This page includes information for TaxACT, TurboTax, and H&R Block users and tax download instructions.

If you have Investor Access through Raymond James, you can view tax reports along with statements for all of 2016 by logging into your account. These documents are available as Adobe PDFs for printing and saving. The information will be archived for 14 years. If you have not already created an online profile, we strongly encourage you to do so.

As an added convenience, you can choose to receive your tax documents electronically. To go paperless, enroll or log in to Investor Access, Raymond James’ secure system for accessing your account information online.

With electronic delivery, you’ll have 24/7 access to your client documents as soon as they become available. Not only will you be able to view your documents sooner, but also, your documents are archived together in one secure location so they are easy to find when you need them.

Tax documents available electronically include the IRS Composite Form (1099-B, -DIV, -INT, -MISC, -OID) and IRS Forms 1099-R and 5498.

Mailing Schedule & Availability for Raymond James Forms

• February 15th – Mailing of original 1099s

• February 28th – Mailing of amended 1099s and those delayed due to specific holdings

• March 15th – Final mailing of any additional original 1099s as well as continued amended mailings as needed

Information on Amended and Delayed Documents

The IRS has granted Raymond James, along with several other broker/dealers, a reporting extension that allows them to delay 1099s for those clients who hold what are considered “pass-through” vehicles for tax reporting purposes. The goal of this extension is to provide an up-to-date 1099 that otherwise might be amended causing confusion or the need to refile.

As a reminder, Raymond James is required by the IRS to produce an amended 1099 if one of the following adjustments is received after the original 1099 has been produced:

• Income Reallocation: Certain investment types, including regulated investment companies, mutual funds, real estate investment, unit investment, grantor and royalty trusts, exchange traded funds, holding company depository receipts, and equities often adjust declarations of income paid during the previous tax year after year-end. These updates are referred to as income reallocations and may result in a more favorable tax treatment.

• Adjustment to Cost Basis: Raymond James is required to report the adjusted cost basis of sold covered securities to the IRS on Form 1099-B. Because cost basis reporting is mandatory, adjustments to reporting result in amended 1099s, which will be mailed as needed. Visit the Cost Basis Legislative Resource Center for more cost basis resources.

• Incomplete or Incorrect Reporting on Original 1099: If a taxable event was not reported or was incomplete on the original 1099, an amended 1099 is required. This includes adjustments received after the original 1099 was produced.

• Other Adjustments: In addition, processing of the following often result in delays in correct information being provided to Raymond James:

• Original issue discount bonds (including select municipal bonds)

• Some cost basis adjustments

• If there are changes made by mutual funds related to foreign tax withholdings

• Tax-exempt payments subject to alternative minimum tax

• Distributions from U.S. Treasury obligations and select mortgage backed securities payments (45 day delay bonds)

As always, we are here to answer any questions that you or your tax preparer may have. Don’t hesitate to let us know how we can help!

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®

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Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.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 Josh Bitel and not necessarily those of Raymond James. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Planning for a Wild 2017

Contributed by: Kali Hassinger, CFP®

Happy 2017 everyone! A new year is a great opportunity to evaluate your financial wellbeing and set goals for the future.  Some of you may have existing financial plans in place, and others may be thinking that 2017 is the year to take control of your finances.  In either situation, it’s important to understand that financial planning is an ongoing and ever-evolving process. Separate from your personal circumstances, there are many outside forces that affect your financial plan, and there are a few items that may be especially important to evaluate this year.

Given the events of 2016 and possible changes in 2017, the following circumstances could be prime examples of why it’s important to review and update your plan.

• Taxes – With the impending presidency of Donald Trump and the GOP in control of both the House and the Senate, we are anticipating a possible overhaul of the current tax system. For almost all taxpayers, your current tax rate could be reduced.  If the brackets are consolidated as expected, 2017 may be a good year to accelerate taxable income or max out your Roth IRA contributions. You can read more about the proposed tax plans here (http://www.centerfinplan.com/money-centered/2016/12/22/is-tax-reform-coming ).  

• Estate Planning – Just as with taxes, the political landscape of 2017 is set to possibly repeal the current Estate Tax. Because this tax is such a central point for Estate Planning with high net worth individuals, some current estate plans may need to be revised. There is also the possibility that the current gift tax laws may be on the docket for elimination. Although nothing is certain at this point, we will remain up to-date on any changes as they come.

• Allocation – 2016 was certainly a year of surprises for the market. After a decline in January, the shock of Brexit, and Donald Trump’s unanticipated election, the market overcame intermittent volatility and reached all-time highs in November.  Just as no one could predict that the market dip after Brexit would recover so quickly, no one expected the markets to actually go up in the wake of Trump’s election. There is no way to predict the future, but there is a disciplined investing approach that can help you through market uncertainties. With a balanced investment portfolio it is possible to reap the benefits of part of these gains while also insulating yourself from potential volatility. Your balanced portfolio returns may not reach the same highs as the S&P 500, but it can help you reach your goals with proper management over time. 

Regardless of your situation, a new year is always a great opportunity to reorganize and review your goals.  Life can be unpredictable, but not unplannable. We are always here to help, and we encourage you to reach out with questions.

Happy New Year! 

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

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This information does not purport to be a complete description of the securities, markets, or developments referred to in this material, it is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Opinions expressed are those of Kali Hassinger, CFP®, and are not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change. There is no assurance that the statements, opinions or forecasts mentioned will prove to be correct. Investing involves risk, investors may incur a profit or loss regardless of the strategy or strategies employed. Asset allocation and diversification do not ensure a profit or guarantee against loss. Raymond James Financial Services, Inc. and its advisors do not provide advice on tax or legal issues, these matters should be discussed with the appropriate professional. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Please note that direct investment in an index is not possible.

Alzheimer’s and Dementia: Support for Caregivers

Contributed by: Sandra Adams, CFP®, CeFT™

For the last several years, I have had the distinct pleasure of serving on the planning committee for a unique conference put on jointly by the Alzheimer’s Association Greater Michigan Chapter and the Wayne State University Institute of Gerontology called “A Meaningful Life with Alzheimer’s Disease.” The conference is unique in that it is one of the only I have ever seen put on for both professionals and caregiver attendees; where those who professionally serve those with dementia and family caregivers of those with dementia can meet, interact, and listen to presenters who have wonderful information for all. This year’s conference was again a huge success, bringing over 300 attendees to hear presenters speak on behavior challenges, caregiver stories, and meditation.

Here at The Center, many of our clients are beginning to face the challenges of Alzheimer’s, dementia, and/or serving in the role as a caregiver for someone with the disease. One of our Center friends, Paula Duren, Ph.D., was one of the featured speakers at this year’s conference and spoke of her experience as a caregiver to both of her parents. Through her non-profit Universal Dementia (www.universaldementia.org), she runs lunch and learn sessions, trainings and support groups to help other caregivers in their journey. For example:

Her top tips for Caregiver Health are:

• Adjust your expectations

• Allow others to help

• Increase your healthy behaviors

• Take one day at a time

• Maintain a positive mindset

• Know that there is no one right way

The Alzheimer’s Association also has a number of support groups for both caregivers and those with early through mid-stage dementias (24/7 Helpline – 1-800-272-3900). Getting support from others going through similar experiences as you is very important for your psychological and emotional well-being. If you or someone you know is in need of additional resources, do not hesitate to reach out to me at sandy.adams@centerfinplan.com, I am always happy to help!

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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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. Raymond James is not affiliated with any of the organizations mentioned herein.

The Center Welcomes New Team Member Josh Bitel!

Contributed by: Center for Financial Planning, Inc.®

As The Center grows, so does our team! This December, we welcomed another new team member to the Financial Planning Department: Josh Bitel! Josh came to know The Center through a valuable team member and friend of over ten years, Investment Representative Nick Boguth.

After graduating from college, Josh was looking for a job in the finance industry. When the position in the financial planning department opened, we were lucky enough to have Nick recommend that Josh apply for the job.  Josh stood out in the interview process primarily due to his high level of energy and clear passion for financial planning.  Although Josh is in the early stages of his career, he already possesses strong technical skills surrounding various planning topics. 

Josh graduated with a Bachelor of Business Administration in Finance from Walsh College in 2016. During college he interned at Scottrade, INC. as a finance intern and is currently working toward obtaining industry license and certifications.

He’ll be working closely with Sandy Adams, CFP®, within the firm’s financial planning department.  Josh will complete financial planning research, write blogs on a variety of important topics, attend client meetings, provide meeting follow-up, and will assist Sandy and other financial planners to respond to client requests that are financial planning related specifically concerning pension analysis, Social Security analysis, and mortgage re-finance review.

We are lucky to have Josh join our Center Team as we expand in order to best serve the many needs of our clients. Next time you’re in the office, please feel free to say “Hi!” to our growing team!

Raymond James Financial Services, Inc. and its advisors do not provide advice on mortgage issues, these matters should be discussed with a mortgage professional.

Year-End Financial Checklist: Tips to End the Year on a High Note (UPDATED)

Contributed by: Jaclyn Jackson

This post was written in December 2015 as a helpful reminder of things you can do to strengthen your finances and get things in order for the upcoming year. Many of the tips are still useful, but I’ve updated to reflect potential policy changes in 2017.   

1. Harvest your losses – Tax-loss harvesting generates losses that can be used to reduce current taxes while maintaining your asset allocation. Take advantage of this method by selling the investments that are trading at a significant loss and replacing it with a similar investment. In light of potential 2017 tax cuts, it is also important to consider whether you may land in a lower tax bracket. If that is the case, postpone realizing capital gains and losses until next year.

2. Taking Advantage of Deductions – If marginal tax rates decrease significantly in 2017, now is a great time to get the most “bang for your buck” from deductions. In other words, consider paying medical expenses, real property taxes, fourth quarter state income taxes, or your January mortgage this month instead.

3. Max out contributions – While you have until you file your tax return, it may be easier to take some of your end-of-year bonus to max out your annual retirement contribution.  Traditional and Roth IRAs allow you to contribute $5,500 each year (with an additional $1,000 for people over age 50). You can contribute up to $18,000 for 401(k)s, 403(b)s, and 457 plans.

4. Take RMDs – Don’t forget to take the required minimum distribution (RMD) from your IRA.  The penalty for not taking your RMD on time is a 50% tax on what should have been distributed. RMDs should be taken annually starting the year following the year you reach 70 ½ years of age.

5. Rebalance your portfolio – It is important to rebalance your portfolio periodically to make sure you are not overweight an asset class that has outperformed over the course of the year. This helps maintain the investment objective best suited for you.

6. Use up FSA money - If you haven’t depleted the money in your flexible spending account (FSA) for healthcare expenses, now is the time to squeeze in those annual check-ups. Some plan sponsors allow employees to roll over up to $500 of unused amounts, but that is not always the case (check with your employer to see if that option is available to you).

7. Donate to a charity – Instead of cash, consider donating highly appreciated securities to avoid paying capital gains tax. Typically, there is no tax to you once the security is transferred and there is no tax to the charity once they sell the security. If you’re not sure where you want to donate, a Donor Advised Fund is a great option. By gifting to a Donor Advised Fund, you could get a tax deduction this year and distribute the funds to a charity later. Again, considering the possibility of decreased marginal tax rates in 2017, you may be better off moving your 2017 contributions into 2016.

8. Review your credit score – With all of the money transactions done during the holiday season, it makes sense to review your credit score at the end of the year. You can go to annualcreditreport.com to request a free credit report from the three nationwide credit reporting agencies: Equifax, Experian, and TransUnion. Requesting one of the reports every four months will help you keep a pulse on your credit status throughout the year.

Bonus:  If there have been changes to your family (new baby, marriage, divorce, or death), consider these bonus tips:

• Adjust your tax withholds

• Review insurance coverage

• Update financial goals, emergency funds, and budget

• Review beneficiaries on estate planning documents, retirement accounts, and insurance policies.

• Start a 529 plan

Jaclyn Jackson is a Portfolio Administrator and Financial Associate at Center for Financial Planning, Inc.®

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. 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 Jaclyn Jackson and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. RMD's are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation. 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. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability.

Is Tax Reform Coming?

Contributed by: Nick Defenthaler, CFP®

One of the hot topics in the recent presidential election was tax reform. Although both candidates may have had very different ideas of what changes they felt should be made, they did both agree that it was time to move forward with some type of reform. Our tax code is very confusing and many would also add, unnecessarily complex. The last tax reform we’ve had in the U.S was in 1986 – 31 years ago! Coincidentally, this is roughly the same period of time that elapsed between the reforms that were put in place previously in 1954.

Below is a breakdown of some of the proposals both President Elect Trump and the GOP have expressed as we enter 2017:

President Elect Trump:

• Tax Brackets

  • Reduce the number of tax brackets:

    • Currently seven different brackets (10%, 15%, 25%, 28%, 33%, 35% and 39.6%)

    • Proposal is to reduce the number of brackets to three (12%, 25% and 33%)

• Itemized Deductions and Standard Deduction

  • Consolidate the standard deduction and personal exemptions into a single, larger standard deduction:

    • $15,000 for single filers (compared to $6,300 in 2016)

    • $30,000 for those who are married and file jointly (compared to $12,600 in 2016)

    • Cap the total amount of itemized deductions ($200k for married filers, $100k for single filers)

• Capital Gains Tax

  • Maintain similar capital gains tax rates for the new, proposed brackets:

    • 0% for those who are within the 12% proposed tax bracket

    • 15% for those who are within the 25% proposed tax bracket

    • 20% for those who are within the 33% proposed tax bracket

  • Would eliminate the 3.8% Medicare surtax on net investment income

GOP:

• Tax Brackets

  • Reduce the number of tax brackets – same proposal as President Elect Trump:

    • Currently seven different brackets (10%, 15%, 25%, 28%, 33%, 35% and 39.6%)

    • Proposal is to reduce the number of brackets to three (12%, 25% and 33%)

• Itemized Deductions and Standard Deduction

  • Eliminate virtually all forms of itemized deductions except for mortgage and charitable deductions, but like President Elect Trump, consolidate the standard deduction and personal exemptions into a single, larger standard deduction:

    • $12,000 for individuals

    • $18,000 for individuals with a child

    • $24,000 for those who are married and file jointly

• Capital Gains Tax

  • Allow individuals to exclude 50% of their investment income – including both capital gains, qualified dividends and even interest income and then tax it at ordinary income rates

    • For example, this would mean if you’re in the 33% proposed tax bracket, investment income would be taxed at 16.5%

  • Would eliminate the 3.8% Medicare surtax on net investment income – same proposal as President Elect Trump

While obviously nothing is set in stone and many of these proposed changes could be blocked by a Democratic filibuster, history has shown that we are more than likely due for some type of tax reform in the near future. Stay tuned!

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 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 Nick Defenthaler, CFP®, 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.
Sources:
http://www.cnbc.com/2016/11/22/how-advisors-are-preparing-clients-for-trumps-tax-plans.html
http://www.forbes.com/sites/kellyphillipserb/2015/10/21/irs-announces-2016-tax-rates-standard-deductions-exemption-amounts-and-more/#28a4d953792e

The Center Partnered with Toys for Tots Again!

Contributed by: Jeanette LoPiccolo, CRPC®

When you hear the words “Toys for Tots,” what comes to mind? For me, it’s the image of a wide eyed child filled with anticipation, unwrapping a colorful present on Christmas morning. I immediately smile when I think of the toy cars, dolls, and stuffed animals that generous patrons have given to families in need. I reflect on the relief that the parents may feel knowing that a present will be under the tree for their child.

How did this tradition start? It’s been around for so long that some of us may not know the history – I didn’t. After joining The Center’s charitable committee I had the opportunity to participate in this year’s collection. I was so impressed to learn that Diane Hendricks, the spouse of a Major in the Los Angeles Marine Reservists, hand crafted a doll in hopes of giving it to a needy child for Christmas in 1947.

Diane and her spouse, Bill, soon learned that there was no organization that existed to make her wish happen. So Bill decided to start the Toys for Tots project. Toys for Tots became an immediate success and the US Marine Corps Reserve has been collecting toys ever since!

Wondering how the toy drive works? Over the years, Marines have established close working relationships with social welfare agencies, churches and many local community agencies which are well qualified to identify the needy children in their community. These organizations play an important role in the distribution of the toys. Over 97% of the donations go to their mission of providing a much needed gift of joy to the less fortunate children on their community. In 2015, the program took place in 782 communities covering all 50 States, the District of Columbia, Puerto Rico, and the Virgin Islands.  

The Center is pleased to participate with the Oakland County chapter of Toys for Tots for the second year in a row. The Center and our friends have shown their generosity once again this year. With generous donations and happy hearts the collection boxes were overflowing!   

On behalf of The Center, thank you for your donations to the Toys for Tots project. We wish our community, all of our friends a very happy holiday season!

Jeanette LoPiccolo, CRPC® is a Client Service Manager at Center for Financial Planning, Inc.®

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Ten Tips for Aging Successfully

Contributed by: Sandra Adams, CFP®, CeFT™

Longevity might just be one of the most important current topics in financial planning: how long will people live and how do financial planners help make sure their clients don’t run out of money before they run out of years? Ironically, many client conversations at The Center aren’t so much about will the money run out, but what will the money be spent on. Clients are concerned that the majority of their money will be spent on health and long term care expenses, and not the travel, leisure and meaningful family spending that they would prefer. What, clients ask, can they do to make sure that they can spend their money on the things they want to spend them on, not on those “costs of care?”

Before you start to think that this is a blog about Long Term Care insurance (that may be a blog for another day), think again!  This is where I tell you that I was recently asked to read the book “Live Long, Die Short – A Guide to Authentic Health and Successful Aging,” by Roger Landry, MD, MPH, for a Long Life Planning advisory group that I am on, and it helped me answer some of these client questions. If clients were given tips on how to live their aging lives planning for being healthy for the long haul with only a short unhealthy “end,” wouldn’t that address the goal?

So how does Dr. Landry suggest we Live Long and Die Short?

Here are his Ten Tips for Successful Aging:

1. Use it or Lose it (Your Mind, Your Body, Your abilities)

2. Keep Moving

3. Challenge Your Mind

4. Stay Connected (Stay Social)

5. Lower Your Risks

6. Never Act Your Age!

7. Wherever You Are…Be There (Be Present)

8. Find Your Purpose

9. Have Children in Your Life

10. Laugh!

The research suggests that lifestyle, more than genetics, determines how we age. Dr. Landry suggests that the time is now to assess your lifestyle to make the necessary changes to get healthy and change your future path. You, too, can find a way to live long and die short. Find a way to direct your own aging future…and work with your financial planner to make sure your financial future is planned accordingly.

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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This 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 Sandra Adams and Dr. Roger Landry, and are not necessarily those of RJFS or Raymond James. Raymond James is not affiliated with nor does it endorse the services or opinions of Dr. Roger Landry.