General Financial Planning

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November is National Caregivers Month

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 November is a month of gratitude.  We celebrate Thanksgiving Day and express our appreciation for the good things in our life.  What better time to say an extra “thanks” to the caregivers in our lives?

According to the National Caregivers Association, over 65 million Americans – approximately 29% of the U.S. population – provide care for chronically ill, disabled or aged family members or friends during any given year.  Family caregivers provide an average of 20 hours of care per week.  Over 66% of these caregivers are women, and 37% also have children or grandchildren under the age of 18 living with them.  What, you might ask, does this have to do with financial planning?

The reality is that the value of the services provided by family caregivers in the U.S. is estimated to be upwards of $375 billion each year.  Most of these caregivers receive little to no compensation for the services they provide.  Providing caregiver services to friends and family can create a drain on family funds, as these caregivers must often leave their jobs or significantly reduce their hours.  This, in turn, drains savings and delays retirements.

Action steps can be taken to protect the financial well-being of these valuable caregivers:

  • Have a family plan in place for providing care.  My recent blog on holding a family meeting is a good guide for starting this conversation. 
  • Coordinate family resources.  This involves sharing responsibilities among family members (even those living at a distance) so that no one member is overburdened.
  • Put financial resources in place to cover potential long term care expenses.  This includes purchasing long-term care insurance or alternative self-funding strategies so that care can be paid for (this includes providing possible compensation for family caregivers).

One of the best ways to say “thank you” to current or future caregivers in your life is to plan.  Contact your financial planner to provide assistance with family meetings, coordination of resources, or long-term care funding.

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 of RJFS or Raymond James.

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Year End Retirement Savings: From 401ks to IRAs

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 It should come as no surprise that saving for retirement is a financial priority that takes discipline, diligence and oversight. One important year-end financial move to help keep your retirement savings in check is to review your contributions to 401k plans and IRA’s for the year.

If you received a year-end bonus, you may want to go ahead put some of it into your retirement to max out your contributions for the year (see our post on year-end planning for your bonus).  Likewise, if you’ve received a raise, can you increase your regular contributions? 

Year-End Tips for 401k Participants:

    ✔ Max out 401k contributions if cash flow permits. For 2012 the limit is $17,000 and if you are over age 50 you can contribute an extra $5500 per year.  To calculate your maximum percentage divide $17,000 by your annual salary.

    ✔ Review your employer match policy to make sure you are not leaving money on the table.

    ✔ Plan for 2013.  The maximum contribution amount for 2013 is $17,500; an increase of $500 from 2012.

    ✔ If you have left an employer and have an old 401k sitting around, you may want to consider rolling over to an IRA.

Year-End Tips for IRA Owners:

    ✔ The 2012 maximum contribution amount for IRA’s is $5000. 

    ✔ Don’t forget about the “Catch-up” contribution if you are 50 or older.  That’s an extra $1000 you can contribute for a total of $6000. (Note:  Total combined contributions to Roth and/or traditional IRA’s cannot exceed these amounts)

    ✔ Do you have multiple IRA accounts?  Consider combining them to simplify record keeping and management. 

    ✔ SEP-IRA:  Maximum contribution limits for self-employed and small business owners is 25% of salary or $50,000; whichever is smaller.

    ✔ Plan for 2013.  The IRA contribution limit is $5500 and the SEP-IRA limit is 25% or $55,000; whichever is smaller

So, before you bid farewell to 2012, spend some time with these checklists. Your future is worth the time it takes to properly plan today. If you need help, we’re always ready with answers.

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

Year End Planning: Bonuses

 Less than half of all businesses provide a year-end bonus to employees*.  During the last decade, prior to the financial crisis, more than half of companies handed out bonuses.  My grandfather worked for Ford Motor Company and received many bonuses over his 30 years there.  But one word of wisdom that he shared with me that stuck:  You don’t live on your bonus, that’s for savings.

Here are 5 things to consider in allocating your year-end bonus:

  1. Review your financial plan. Are there any changes since you last updated your financial goals? 
  2. Have you accumulated any additional revolving debt that you don’t want to retain, if so consider paying off the highest costing debt first if you don’t have a cash flow issue?
  3. Are your emergency cash reserves at the appropriate level to provide for your comfort?  If not consider beefing them back up.
  4. Are your insurance coverages where they need to be to cover anything unexpected?  If not, consider re-evaluating these plans.
  5. Review your tax situation for the year.  Make an additional deposit to the IRS if you have income that has not yet been taxed so you don’t have to make that payment and potential penalties next April.   

If you can tick through the list and don’t need to put your bonus to any of those purposes, here are some other ideas: If you’re lucky enough to save your bonus, like my grandfather, consider maximizing your retirement plan at work, including the catch-up provision if you’re over 50.  Also consider maximizing a ROTH IRA, if eligible, or investing in a stock purchase program at work if one is offered.  Another idea is a 529 plan, which is a good vehicle for savings for educational goals.  If all of these are maximized, then consider saving in your after tax (non-retirement accounts) with diversified investments.

*Source: Huffington Post

Any information is not a complete summary of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily of RJFS or Raymond James.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making an investment.  Investing involves risks and you may incur a profit or loss regardless of strategy selected.  Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision.

Year End Planning: Holiday Spending

 Nothing louses up the family budget like the holidays.  There is something about those twinkle lights and pine smell that weakens all resolve to control spending.  It is estimated the average family spends $750* on gifts and for upper middle income families it is often four times that amount.  This figure does not include entertaining, travel, and decorations.  We all know what to do, but here are a few reminders as we approach the SEASON.

First of all remember what it is all about. Gifting is supposed to have special meaning from the giver to the receiver.  Gifting is a way of saying “thank you” or “I love and appreciate you”. If you have a large family, shorten your gift list by drawing names or giving family gifts.  This is one way to cut down on the number of gifts and make the one you give more meaningful.

It is important to set a budget for holiday spending. There is no better control mechanism.  If you cannot control your use of credit, go back to the old-fashioned method and pay cash.  Many stores have reinstituted lay-away plans which help as well. Along with the budget comes the shopping plan.  Both cut down on impulse buying.

If you are experiencing financial distress, set expectations among your family and friends. This is particularly important to do with children. Children are often unrealistic with their wish list.  Discussing what is possible will help create excitement instead of disappointment.  Get children involved in the spirit of the season. Gift certificates are another way to keep within your budget and are often most appreciated by the receiver.

Shop early and shop late. Many folks shop all year for the holidays so they can take advantage of sales.  Late shoppers can also get great bargains especially if they can be flexible in their gifting.   If you are shipping gifts, seek those stores that give free shipping to save a bundle.

Consider home-made gifts. Busy families and seniors so appreciate a basket of home-made goodies. When one of our daughters was going through a tight financial situation she made the most ingenious gifts—a colorful winter scarf, a charming basket we use for magazine storage, and a hand tiled serving tray.  It is interesting that I cherish and use those gifts but I could not tell you what I received last year.

Last but not least, keep your holidays simple and enjoyable. Remember it is not the amount you spend, but rather the quality of the time and thoughtfulness you spend on giving that counts. Happy Holidays.

*Source: National Retail Federation 10/17/2012

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.

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Year End Planning: Schedule a Family Meeting

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 It’s hard to believe that in just a few short weeks, the holiday season will be upon us.  Family gatherings during the holidays are rare occasions when parents and siblings are in the same place at the same time.  While these gatherings are wonderful opportunities for casual conversations and reminiscing, why not use this time to have a productive family meeting?

It is important for families, no matter the ages of the family members, to have serious conversations about the legal and financial planning in place; or the planning that is not in place that needs to be.  Important points for discussion may be:

  • Legal Documents – Do all family members over the age of 18 have their own Durable Powers of Attorney (POAs for Health Care and General Financial are needed)?  Do those assigned as POAs understand their potential responsibilities in their roles?  Are wills or trusts in place or needed?
  • Financial Savings – Particularly for elder family members, are there financial resources and structures in place to fund potential long-term care needs in the future?  For younger family members, is there an opportunity to use year-end gifting to help fund education or retirement savings (i.e. ROTH IRAs)?
  • Elder Care Planning – For family members who are aging, this meeting may be an opportunity to start conversations about future care.   Discussions regarding future housing and care needs, as well as a review of the older relative’s future challenges, alternatives and resources are important.  In particular, beginning to lay out future roles of family members is critical to the future success of this kind of planning.  For a list of questions that might be helpful in starting these conversations, click here.

As you look forward to the holiday season, plan for good food and family stories.  But also plan for important conversations that can affect your family’s legal and financial success.  By planning ahead for these conversations, family members can be prepared to contribute to the planning in a meaningful way.  For additional tips on holding these all-important family meetings, talk to your financial planner.

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

Timely Tips to Help Protect Against Identity Theft and Cyber Fraud

 Besides being the gateway to the Thanksgiving season, October is National Cyber Security Awareness Month.  At home and at work our growing dependence on technology requires greater awareness and action plans to protect against online risks.

I distinctly remember the sinking feeling in my stomach when I was recently discovered a thief had obtained personal information and made purchases on my credit card.  I was routinely reviewing the statement and I did not expect to see anything out of the ordinary and then boom – there it was.  Several unidentifiable transactions right in front of my eyes.  

Identity theft can occur anywhere and anytime.  

Here are some practical suggestions to help you keep cyber security top of mind:

  • Review your credit report periodically to be on the lookout for fraudulent activity.  Free credit reports from each of the three major bureaus (staggered quarterly for year-round monitoring) are available annually at www.annualcreditreport.com
  • Fee-based services are available for a cost to provide convenience for those who don’t want to personally monitor their information. 
  • Monitor bank and credit card accounts at least weekly.
  • Be vigilant about keeping sensitive information from prying eyes in public places.
  • If you file taxes electronically – review the security policy with your tax preparer.
  • Stop hackers by using strong passwords. 

Here are some additional resources to help protect you against identity theft:

Spending a little time to protect your information can help you avoid all of the hassle of being a victim. If you’d like more help, feel free to contact your Center Planner. 

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

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A GIFT FOR A LIFETIME: Grandparent Giving for Education

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 We all know grandparents and grandchildren have a special bond. If you are a grandparent of college age children, or those attending private schools in some cases, you have to be alarmed about the amount of debt students are racking up. Economists are estimating students will be paying loans for as long as 20 years, affecting their ability to get homes and cars.*

Grandparents have a special tax saving measure that will be a wonderful gift to their favorite student.  They can make direct payments of tuition to a school free of gift tax.  So what does that mean to the grandparent?  It means that even if you have contributed to 529 plans or given to your student directly, you can exceed the $13,000 annual gift tax exclusion by writing the check directly to the educational institution for tuition payments.  The grandparent is giving now and also reducing their future taxable estate.

What does it mean to your grandchild?  It could mean less debt and the ability to start their professional career on a more solid financial basis.   With the giving season right around the corner, this may be a strategy you want to consider. To learn more, contact your financial planner at the Center.

Source: Huffington Report, 7/20/2012

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.  You should discuss any tax or legal matters with the appropriate professional.

Open Enrollment: Other Benefit Selections

 Various benefits offered by employers might not fit the mold when it comes to choices you have to make during Open Enrollment.  Some benefits are more obscure.  For example legal services, long-term care insurance and even professional development tracks could be perceived as benefits today.  

Professional Development:

Professional development encompasses all types of facilitated learning opportunities, ranging from college degrees to formal coursework, conferences and informal learning opportunities. There are a variety of approaches to professional development, including coaching, consultation, mentoring, technical assistance, and even reflective supervision.  If your employer has an annual budget for such activities, you know they are serious.  I suggest reading your employee handbook to see what resources are available to enhance your career and personal development.

At the Center for Financial planning our firm maintains professional development tracks. We have a professional development budget and provide at least one formal meeting each year with each employee discussing their career and personal development. There are other meetings and discussions throughout the year, like check-ins and group discussions that can help provide insight to employees as well.

Group Long-Term Care Insurance:

Here’s a startling fact: Over 40% of people receiving long-term care services are under the age of 65. These days, some forward-thinking companies are offering long-term care insurance. As an employee, you may want to consider this as part of your benefits package, because it’s a way to help:

✔ Protect your savings and assets

✔ Protect your family and friends from the burden of caregiving

✔ Protect your ability to choose where care is received

Employer-sponsored group coverage for LTCi brings up some thorny issues. While some group plans can be helpful for folks with certain, otherwise-disqualifying health conditions, in some cases LTCi coverage is best customized and purchased through an independent broker. That’s because many group plans entice younger, healthier people to enroll by offering them lower rates, but these rates may still be higher than an individual policy. Group plans typically have fewer selections in benefit choices and less amount of home care.

Pre-Paid Legal Services

Another rather new and uncommon employee benefit is pre-paid legal service.  This is an individual or group low-cost provider for specific, limited legal services. The services are usually pretty basic, but can sometimes be specialized and can cost considerably less than hiring an attorney on your own. These services can be helpful to participants with anything from automotive-related issues and ticket violations to various basic legal issues like purchasing a home without a realtor.

Pre-paid legal services may be provided on an "open" basis, with a subscriber selecting specialists relatively freely from a pool of participating providers. They may also be offered in a "closed" system, in which most or all services are provided to a subscriber by one central law firm. Pre-paid legal services have existed since the early 1900s, and have increased in popularity since the 1970s.

These might not all be benefits that you have to select during open enrollment. In some cases, they may be yours for the taking. But you can’t take advantage, if you don’t know what’s available. So find out about your own company policies and make the most of them. This is just one in our 8-part blog series dedicated to answering the tough questions during the open enrollment season.

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.  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.  You should discuss any tax or legal matters with the appropriate professional.

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Open Enrollment: Disability Insurance

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 Too often disability insurance is overlooked or underutilized.  It is natural to assume good health enjoyed today will continue uninterrupted until retirement.  Because this is not always the case, paying for disability insurance today when it is not needed is like dotting the “i’s” and crossing the “t’s” in a comprehensive financial plan for the future.  In the event a health crisis occurs, disability insurance is designed to replace a portion of your income lost during the period of disability. 

Employers that include disability insurance on the menu of choices generally offer two types:

    ✔ Short term disability – provides benefits for a limited period of time – usually six months or less.

    ✔ Long term disability – provides extended benefits after an employee has been disabled for a period of time.

Short Term Disability Insurance:

    ✔ Bridges the gap between sick pay and long term disability coverage. 

    ✔ Coverage typically lasts between 10 to 26 weeks.

Long Term Disability:

    ✔ Benefits employees who are disabled as a result of sickness or accident and unable to work for a lengthy period of time (usually more than six months).

    ✔ Long term disability insurance does not provide insurance for work-related accidents or injuries that are covered by workers compensation insurance.

What else do you need to know?

    ✔ The cost of group coverage is often less expensive than the cost of individual coverage

    ✔ Group policies often have fewer underwriting restrictions than individual policies.  A physical exam is not typically required.

    ✔ “You can’t take it with you” is a phrase that normally applies to group disability insurance.  When you leave your job most often the coverage does not convert to an individual policy.

    ✔ If you know you are leaving your job, consider applying for individual coverage before you quit. Assuming you are insurable this strategy eliminates lapses in coverage.

    ✔ Consult a Certified Financial Planner™ to determine how disability insurance fits into your long-term financial picture.

We want to make sure you don’t miss your opportunity to take advantage of employer provided benefits during open enrollment period.  That’s why we are focusing an 8-blog series on your options when it comes to open enrollment. Typically, open enrollment is offered toward the end of each calendar year and provides a window of time to make new elections or change current benefit coverage.  It’s easy to confirm this period of time by checking with your human resource department or benefits coordinator.

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 information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

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Open Enrollment: Health Insurance and Medicare Enrollment

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 Reviewing health care insurance options is as important as getting a physical or flossing (and about as much fun).  For employees age 65 and older, this decision becomes more complicated due to Medicare eligibility.  Major questions arise for this group of employees: 

  • What, if any, health insurance coverage will my employer provide when I turn 65?
  • Should I apply for Medicare at age 65?
  • If I apply for Medicare, what parts should I apply for (A, B, D)? 

Legally, employers can drop employees from their group health plans once they turn 65.  But Medicare secondary payer rules prevent employers from reducing health benefits to current employees due to their eligibility for Medicare (except for very small employers).  So, the employer must offer equal health benefits to all employees; coordinating health benefits with Medicare is allowed as part of this offering.  

Employers with more than 20 employees typically offer group health coverage to 65+ employees, with Medicare acting as the secondary payer.  In this case, eligible employees should enroll in Medicare Part A, hospital coverage, which is free.  These employees should also get a deferral from Medicare so that they are not subject to penalties for enrolling in Parts B and D in the future.  

Employers with less than 20 employees offer group coverage that is the secondary to Medicare.  In this case, eligible employees should enroll in Medicare Parts A and B (Part B covers medical services, including doctor visits).  Failing to enroll in both parts of Medicare could leave them responsible for paying out-of-pocket for anything that Medicare would have covered.  

Here are some tips and considerations for employees age 65+ in making health insurance and Medicare enrollment decisions:

    ✔ Coordinate with your spouse. If you are both still working at age 65, you can compare employer health plans and how they work with Medicare.  If spousal/family coverage is available, choose the optimal plan. 

    ✔ Get in writing the details of your employer-provided coverage to help you decide how to handle Medicare choices. 

    ✔ Plan to enroll in Medicare Part A (it’s free!) up to 3 months prior to your 65th birthday.  You can sign up online or at your local Social Security office. 

    ✔ If you are planning to enroll in Medicare Part B or Part D (prescription drug coverage), you can enroll up to 3 months prior to age 65 or within 8 months of retirement or loss of group health coverage (if you miss the 8 month Special Enrollment Period, you will need to wait until the next General Enrollment Period for that coverage).

    ✔ Consult with a CERTIFIED FINANCIAL PLANNER™ to help you choose the benefits that are most appropriate for your financial situation. 

    ✔ Most importantly, do your research and plan ahead; Medicare has strict enrollment periods and rules that come with financially penalties. 

This is the third blog in our 8-part open enrollment series. Check back in the upcoming days for more important tips to help you make the best choices for the upcoming year.

Sandra D. Adams, CFP® is a Lead Financial Planner at the Center for Financial Planning, Inc. In 2012, she was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered blogs, she is a regularly quoted in national media publications such as the Wall Street Journal, Research Magazine and the Journal of Financial Planning.  Sandy is a frequent speaker on the topic of Elder Care Financial Planning.

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.  Any opinions are those of Center for Financial Planning and not necessarily those of RJFS or Raymond James.

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