What happens to my Social Security benefit if I retire early?

Contributed by: Kali Hassinger, CFP®

Did you know that the benefit shown on your Social Security estimate statement isn’t just based on your work history?

The estimated benefit shown on your statement assumes that you’ll work from now until your full retirement age.  And, on top of that, it assumes that your income will remain about the same that entire time. For some of our clients who are still working, early retirement has become a frequent discussion topic. What happens, however, if you retire early and don’t pay into Social Security for several years? In a world where pensions are quickly becoming a thing of the past, Social Security will be the largest, if not the only, fixed income source in retirement for many. 

Your Social Security benefit is based on your highest 35 earning years, with the current full retirement age at 67.

So, what happens to your benefit if you retire at age 50? That is a full 17 years earlier than your statement assumes you’ll work, which effectively cuts out half of what is often our highest earning years.

We recently had a client ask about this exact scenario, and the results were pretty surprising! This client has been earning a great salary for the last 10 years and maxing out the Social Security tax income cap every year. Her Social Security statement, of course, assumes that she would continue to pay in the maximum amount (which is 6.2% of $132,900 for an employee in 2019 - or $8,240 - with the employer paying the additional 6.2%) until her full retirement age of 67. She wanted to make sure her retirement plan was still on track even after stopping her income and contributions to Social Security at age 50.

We were able to analyze her Social Security earning history, then project her future earnings based on her current income and future retirement age of 50. Her current statement showed a future annual benefit of $36,000. When we reduced her income to $0 at age 50, her estimated Social Security benefit actually dropped by 13%, or $4,680 per year. That’s still $31,320-per-year fixed income source would still pay our client throughout retirement. Given the fact that she’s working 17 years less than the statement assumes and she has the assets necessary to support the difference, a 13% decrease isn’t too bad. This is just one example, of course, but it is indicative of what we’ve seen for many of our early retirees. 

Social Security isn’t the only topic you’ll want to check on before making any final decisions about an early retirement.

You’ll also want to consider health insurance, having enough savings in non-retirement accounts that aren’t subject to an early withdrawal penalty, and, of course, making sure you’ve saved enough to reach your goals! If you’d like to chat about Social Security and your overall retirement plan, we are always happy to help!

Kali Hassinger, CFP®, CDFA® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

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Any opinions are those of Kali Hassinger, CFP and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. The case study included herein is for illustrative purposes only. Individual cases will vary. Prior to making any investment decision, you should consult with your financial advisor about your individual situation. 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. Raymond James and its advisors do not provide tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

InvestmentNews Best Places to Work for Financial Advisors Award

Contributed by: Center for Financial Planning, Inc.®

InvestmentNews has, for a second, consecutive year, named Center for Financial Planning, Inc.® in Southfield, Michigan, among its Best Places to Work for Financial Advisors.

Each year in April, the publication honors financial advisory firms across the U.S. that maintain a balance of fun events for employees and top service to their clients. The Center ranked 12th out of the 50 firms recognized.

“We are a close-knit team of fun-loving, hard-working people,” said Managing Partner Timothy Wyman. “We are dead serious about our work, but we know it is healthy to have fun and goof off when the moment calls for it. The Center is, flat out, a fun place to work.”

The Center’s core values include caring about the internal client just as much as the external client. Healthful catered lunches, a stress-reducing ping pong table, and time off for volunteer work are among the components of its happy and healthy work environment.

This, in turn, motivates The Center’s team members to demonstrate a passion for personal growth. Dedicated professional development plans are reviewed at least quarterly, and employee-run committees plan regular social and wellness events.

Wyman said, “A long-standing effort to meet needs as they arise are part of The Center’s DNA and that won’t be changing any time soon.”

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Source: InvestmentNews “2019 Top 50 Best Places to Work for Financial Advisers”, April 2019. The Best Places to Work for Financial Advisers program is a national program managed by Best Companies Group. The survey and recognition program are dedicated to identifying and recognizing the best employers in the financial advice/wealth management industry. The final list is based on the following criteria: must be a registered investment adviser (RIA), affiliated with an independent broker-dealer (IBD), or a hybrid doing business through an RIA and must be in business for a minimum of one year and must have a minimum of 15 full-time/part-time employees. The assessment process is compiled in a two part process based on the findings of the employer benefits & policies questionnaire and the employee engagement & satisfaction survey. The results are analyzed and categorized according to 9 Core Focus Areas: Leadership and Planning, Corporate Culture and Communications, Role Satisfaction, Work Environment, Relationship with Supervisor, Training, Development and Resources, Pay and Benefits and Overall Engagement. Best Companies Group will survey up to 400 randomly selected employees in a company depending on company size. The two data sets are combined and analyzed to determine the rankings. The award is not representative of any one client's experience, is not an endorsement, and is not indicative of advisor's future performance. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award. InvestmentNews and/or Best Companies Group is not affiliated with Raymond James.

A Dementia Diagnosis and Your Financial Plan

Contributed by: Sandra Adams, CFP®, CeFT™

The inevitable has happened. You or someone you love has received the dreaded diagnosis of Alzheimer’s disease or one of many related dementias. You feel like your world is in a tail spin; you don’t know which end is up, and you certainly don’t know where to start planning…especially from a financial perspective. What should you do?

First, discuss the diagnosis with your financial advisor. Communicate your fears and concerns, and ask for help to make sure that all of your financial “ducks” are in row.

You can check these things off the list now:

• Make sure that important documents are in place assigning advocates who will handle health care and financial affairs when you (or your loved one) are unable to handle them. **Coordinate this with your estate planning attorney.

• Also, make sure that beneficiaries and estate planning documents are updated to reflect current wishes.

• From an organizational standpoint, this is a perfect time to make sure everything is organized, documented (see our Personal Financial Record Keeping Document for help), simplified as much as possible (think consolidating accounts held by multiple firms), and titled properly.

At some point, your financial advisor may want to help you look at additional retirement/financial independence scenarios that include long-term care expenses faced by those who have dementia/Alzheimer’s. This will give you the opportunity to look at the adjustments you may need to make immediately or in the near term.

As time goes on and costs increase, which may be a few months or years depending on disease progression, additional retirement distribution planning may both stretch available dollars and strategize tax efficiencies based on tax law at the time. For instance, in years with very high medical costs/deductions, it may make sense to take distributions from IRAs, so the medical deductions offset the taxable income from the distributions.

It is also extremely important to review all insurances (Long Term Care, life insurances with terminal illness or LTC riders, annuities with such riders, etc.) to understand how they work and how they may benefit you in the future.

Planning with your family

Aside from the purely financial considerations, it is critical to have a conversation with your family about your care (who, where, etc.), your money, your quality of life, and the overall plan for your last phase of life with your new diagnosis, so that everyone is on the same page, with a coordinated plan.

Everyone should know the available resources, the players, and your desires. Having helped families in these situations, I know those who work together and understand the desires of their loved one, no matter what the financial situation, are able to get through tough times and support their loved one much more successfully than those who don’t.

Above all, ask for help, from your advisors, from your family, from your friends and community supports (church, community groups, etc.). You can’t, and shouldn’t, go it alone. If you or someone you know is facing a dementia challenge and needs to plan, please let us know. We are here to help.

Sandra Adams, CFP®, CeFT™ is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

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Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

What Is Tactical Allocation and Why Would I Use It?

Contributed by: Center Investment Department

You’re probably familiar with strategic investing, picking the amounts of stocks, bonds, and cash that create the foundation of your portfolio. But you may also want to consider another layer of portfolio management.

Investors who overweight or underweight asset classes as perceived market opportunities arise are implementing a tactical allocation.

Typically, a tactical allocation overlays a strategic allocation to help reduce risk, increase returns, or both.

While we believe that the relationship of valuation between markets over long periods will be efficient and will correspond to fundamentals, we also know that over shorter periods, some markets may become overvalued and other asset classes will become undervalued. It makes sense at those times to use a tactical allocation strategy. When executed correctly, a somewhat modified asset allocation may offer better returns and less risk.[1]

A tactical asset allocation strategy can be either flexible or systematic.

With a flexible approach, an investor modifies his or her portfolio based on valuations of different markets or sectors (i.e. stock vs. bond markets). Systemic strategies are less discretionary and more model-based methods of uncovering market anomalies. Examples include trend following or relative strength models.

With a tactical allocation, keep in mind less can be more. Successful execution of these methods requires knowledge, discipline, and dedication. The Center utilizes tactical asset allocation decisions to supplement our strategic allocation when we identify a compelling opportunity. Our Investment Committee arrives at these decisions based on many factors considered during our monthly meetings.

Want to learn more? Reach out to your financial planner or a member of the Investment Department team to learn how The Center uses tactical allocation to manage your portfolio.

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[1] All investing involves risk, and there is no assurance that this or any strategy will be profitable nor protect against loss.

Opinions expressed in the attached article are those of the author and are not necessarily those of 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. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to

Matthew Chope, CFP® Named to Forbes 2019 Best-in-State List

Contributed by: Center for Financial Planning, Inc.®

Center for Financial Planning, Inc.® is pleased to announce that Matthew Chope, CFP® has been named to Forbes 2019 list of "Best -in-State" Wealth Advisors in Michigan, where he ranked 59th in the state.

“Matt’s clients are his top priority,” said Sarah McDonell, a Client Service Associate who works closely with Matt. “He genuinely cares about their success and helping them reach their financial goals.” 

In addition to helping individuals and families with financial planning, Matt also works with local corporations and non-profits on strategic planning and business management decisions. He oversees and manages several local endowments and is a member of the Financial Planning Association of Michigan, The Estate Planning Council of Metro Detroit, and the CFA Society Detroit.

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The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research is based on an algorithm of qualitative criteria and quantitative data. Those advisors that are considered have a minimum of 7 years of experience, and the algorithm weighs factors like revenue trends, AUM, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of 29,334 advisors nominated by their firms, 3,477 received the award. This ranking is not indicative of advisor's future performance, is not an endorsement, and may not be representative of individual clients' experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating. Raymond James is not affiliated with Forbes or Shook Research, LLC. 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. Any opinions are those of Center for Financial Planning, Inc.® and not necessarily those of Raymond James.

Timothy Wyman, CFP®, JD Named to Forbes 2019 Best-in-State for the 2nd Consecutive Year

Contributed by: Center for Financial Planning, Inc.®

Center for Financial Planning, Inc.® is pleased to announce that Timothy Wyman, CFP®, JD has been named to Forbes 2019 list of "Best-in-State" Wealth Advisors in Michigan for the 2nd consecutive year, where he ranked 53rd in the state.

“What’s most impressive to me is Tim’s ability to explain complex topics to clients to help them navigate through important financial decisions,” said Jeanette LoPiccolo, CFP®, an Associate Financial Planner that works closely with Tim. “He is as easy-going and friendly as the neighbor next door and so enthusiastic to help our clients and our community.”

In addition to working directly with clients and helping them achieve their financial goals, Tim also acts as Branch Manager, RJFS, Partner and member of the firm’s Operations Committee. Tim has recently been appointed to the Albion College Endowment Investment Committee and is an active member of the Small Giants Community whose mission is putting people before profits. Having gone through Leadership Oakland's program, Tim now serves his community as a member of its Board of Directors.

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The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research is based on an algorithm of qualitative criteria and quantitative data. Those advisors that are considered have a minimum of 7 years of experience, and the algorithm weighs factors like revenue trends, AUM, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of 29,334 advisors nominated by their firms, 3,477 received the award. This ranking is not indicative of advisor's future performance, is not an endorsement, and may not be representative of individual clients' experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating. Raymond James is not affiliated with Forbes or Shook Research, LLC. 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. Any opinions are those of Center for Financial Planning, Inc.® and not necessarily those of Raymond James. Raymond James is not affiliated with any of the organizations named above.

International Women’s Day Celebration Challenges Women to Find Their Tribe

Contributed by: Laurie Renchik, CFP®, MBA

The Center team recently commemorated International Women’s Day by hosting a gathering in Southfield to celebrate and support women’s achievements in our community and throughout the world.

In keeping with the theme of building personal and professional networks, over 150 attendees enjoyed networking opportunities before and after the keynote delivered by Joscelyn Davis, Founder and President of Jade Strategies.  Ms. Davis inspired her audience with personal stories and research-based strategies for visionary women who want to advance and lead.  Acknowledging that barriers exist, Ms. Davis provided fresh ideas and easily implemented action steps to help women cultivate a tribe of trusted advisors, mentors, and colleagues.

Aligned with the keynote message, The Center has a long history of supporting women in leadership roles.  In fact, two of our three founding partners are women, as are three of our five current partners.  Statistics bear out that women have very few role models at the top, and we are proud to be an exception to the rule!

Understanding the challenges women face is a worthy endeavor, and we wholeheartedly thank all those who joined us for our International Women’s Day celebration here in Southfield, Mich

Laurie Renchik, CFP®, MBA is a Partner and CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® With 20 years of industry experience, she specializes in proactive retirement planning and helping clients assess risk in their portfolios.

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Raymond James is not affiliated with nor endorses Joscelyn Davis and/or JADE Strategies.

Protect Your Credit by Checking and Correcting These Reports

Contributed by: Josh Bitel

If you’re like most people, you probably don’t think or worry about your credit score unless you’re getting ready to use it. Your credit report provides detailed information about your credit history and may even make or break your applications for loans, mortgages, or credit cards. Errors or false applications bogging down your score could also prevent you from receiving a better interest rate, for example.

Tips for checking your credit report

1. Visit annualcreditreport.com to request your free credit report from your choice of three agencies: Equifax, Experian, and TransUnion. Use all three. You are entitled to a free report from each every 12 months.

2. Set an annual reminder to pull your report with each agency. Stagger these reminders, so you can check your full report once every four months and keep a closer eye on it.

3. Review all information, including the basics – addresses, phone numbers, employers, etc. – to spot any errors or discrepancies.

4. Make sure you recognize all accounts, loans, credit cards, etc. listed on your report.

Fixing or disputing errors

When you notice a problem, first directly contact the credit reporting companies and let them know what information you believe is not correct. You may be asked to provide supporting documentation to dispute a claim as fraud. In some instances, that may be hard, if not impossible, to do. It can be difficult to produce proof that you never opened a credit card, for example. Still, putting forth your best effort is well worth your time.

Second, contact the fraud/security department at the company that reported the fraudulent information. They will send dispute paperwork for you to submit with supporting documentation. Inform them, in writing, that the account was opened or charged without your knowledge, explain why you dispute the information and are asking that it be removed or corrected. Keep a paper trail for yourself.

Also, verify whether the debt has been sold to a collections agency. If it has, make sure they will notify the collections agency that the debt is in dispute. And brace yourself! It could take 90 days (or more!) before you see a resolution. Set a reminder to follow up if you have not heard anything within the time promised. Once you have received confirmation that the fraudulent claim has been discharged, make sure they have also closed the account in your name.

Haggling with credit reporting agencies can be a pain, but the work is a necessary evil. Misreported information could lead to your credit score suffering by as much as 100 points, and unless you review and monitor your reports on a consistent basis, you’ll never know.

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

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Repurposed from July 23, 2015 - Previous blog

Event in Review: 2019 Investment Outlook

Contributed by: Angela Palacios, CFP®, AIF®

With market volatility back, we came together to discuss what occurred in 2018 (particularly in the last quarter) and what we are thinking about for 2019.  If you weren’t able to attend, don’t sweat it, we have the cliff notes for you!

On February 27th, 2019, Angela Palacios CFP®, AIF®, Director of Investments, CERTIFIED FINANCIAL PLANNER™, Nick Defenthaler CFP®, Senior Financial Planner, CERTIFIED FINANCIAL PLANNER ™, and Nick Boguth, Investment Research Associate teamed up to tackle these pressing questions and more.

Here is a recap of key points from the “2019 Investment Update”:

• What spooked the markets last year:

  • Decelerating global growth lead by China

  • Declining earnings growth expectations

  • Higher short term interest rates in the U.S. and other parts of the world

  • Valuations started 2018 in elevated territory

  • UK BREXIT

  • Italian debt concerns

  • Trade issues

  • Government shutdown

  • Mueller investigation

• What worked last year:

  • High quality fixed income rallied in this market

  • Bond duration – the more the better

  • Defensive & Low volatility stocks held up better than broad markets

  • Dividend paying stocks held up better than non-dividend paying stocks

  • Large cap equities held up better than small cap equities

  • In the last quarter of 2018 emerging and international developed markets held up better

• Is a recession on the horizon: Recessions are mainly caused by four reasons throughout the world (Inflation, Reduction in exports, Financial Imbalance or commodity price crash). Currently inflation is benign here in the U.S., exports are healthy, financial excesses aren’t present (equity valuations and household debt are moderate), and our economy is highly driven by commodities.  So at this point it looks unlikely in the next year.

• Yield curve: Flattened dramatically last year while the 2 and 5 year treasury bond yields did invert.  A traditional inversion is between the 2 and 10 year and is the signal usually watched for to telegraph a coming recession. We are keeping a close eye on this as this is becoming a potential concern.

• Tax reform recap: Nick Defenthaler gave us an update on tax reform looking at the changes to income tax brackets, changes in the standard deduction and deductibility of state and local income taxes. If you’d like to hear more on this please listen in on our Year-end tax planning webinar for the details!

• Client Portal: A Center for Financial Planning, Inc.® app??!!! We hope you are as excited as we are! Nick Boguth gave a quick demo of our new client portal and document vault. If you are interested in learning more or want to sign up for this service just reach out to your planner!

Angela Palacios, CFP®, AIF® is a partner and 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.

3 Signs Your Client Needs a Divorce Financial Advisor

Contributed by: Jacki Roessler, CDFA®

Not every client needs financial planning advice during their divorce and certainly, not every client feels they can afford it. We’re often asked if there are any tried and true red flags that should alert an attorney that divorce financial advisors should be consulted. 

Read on to discover the top 3 signs some outside help is typically needed.

1. Your client is afraid to sign the settlement agreement.

You’ve assured your client Doug that he can afford to pay the agreed upon spousal and child support. His income is high–you believe it’s a good settlement for him. However, he’s worried he won’t be able to afford his own expenses if he agrees to the settlement. The solution? You send Doug to a financial specialist who runs projections that give him a concrete number for his after-tax, post child and spousal support net income. Now, Doug can make decisions from a position of knowledge, not guess-work.

2. Your client is willing to give up everything for the “_______.” Fill in the blank with anything that fits; it could be the marital home, his or her pension, a share of a family business, etc…

Consider this all too familiar scenario:

Mary and Joe were married for 13 years with three children under the age of 10. Mary was a full time mom while Joe was earning a hefty salary. Mary is emotionally attached to the house and was willing to walk away from all the retirement and cash assets to keep it. Mary’s attorney is concerned and sent her to a divorce financial advisor. Together, they prepared a reasonable monthly post-divorce budget and looked at several different cash flow and net worth projections. Mary was sad to discover that if she kept the house and did not return to work, she would run out of money in 3 years. She was sad, but empowered to make decisions from a position of knowledge.

3. One or both parties have pension plans and retirement accounts that will need to be divided equitably.

No two corporations have identical retirement benefits for their employees. Furthermore, even in the most amicable of cases, employees often don’t understand all the quirks of their particular pension and/or retirement savings plan. As a firm that prepares close to 1,000 orders that divide retirement benefits pursuant to divorce, we have in-depth knowledge of what makes Acme Widgets’ 401k different from Beta Widgets’ 401k as well as the federal requirements and restrictions related to post-divorce division. Since no two plans are alike and no two divorce cases have the same circumstances, a specialist should be called in on every case unless the attorney has intimate knowledge of the plans being divided.

This leads to the obvious concern: can my client afford to get financial advice? Often, the client that needs advice the most is the one who feels they can’t afford it. Don’t assume that a divorce financial advisor won’t take a case on a limited basis. It always pays to inquire if they may be willing to offer clients an hour or two of consultation time. 

Divorce can be complex even under the best of circumstances. The financial aspects of divorce not only have the potential to be complex, they may also be emotionally-laden. Helping your clients find the path to financial stability may require the expert advice of a financial advisor.

Jacki Roessler, CDFA® is a Divorce Financial Planner at Center for Financial Planning, Inc.®

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The above examples are hypothetical in nature for illustrative purposes only. Views expressed are not necessarily those of Raymond James Financial Services and are subject to change without notice. Information contained herein was received from sources believed to be reliable, but accuracy is not guaranteed. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.