Protecting Yourself Against Identity Theft in 4 Easy Steps

 Who hasn’t heard about the Target stores’ security breach that occurred during the recent holiday season? I am sure we all know someone who was affected by this security scare as they routinely used their store credit card to pay for holiday purchases. While the victims of this breach could not control their circumstances, incidents like these are a friendly (or not so friendly) reminder that credit card security and identity theft are a fact of our everyday lives. So what can you do to make sure that your own actions don’t lead to an identity theft nightmare?

1. Routinely check your Credit Report. Go to www.annualcreditreport.com, where you can access a free report from each of the credit reporting agencies once per year. Consider requesting one report every four months to keep an eye on your credit activity.
2. Limit the number of cards you own and monitor them actively. Review your account activity at least monthly when you receive your statement to make sure that all charges are legitimate.
3. Do not give identifying numbers or financial information over the phone, by e-mail, or in person unless you are sure of the person you providing information to. Be careful not to e-mail important numbers – Social Security Numbers, credit card numbers, etc.
4. Shred documents with personal information or store them in a locked cabinet or safety deposit box. Prevent easy access to your personal information.

Taking these simple steps does not guarantee that you won’t be a victim, but can go a long way towards preventing the opportunity for fraud, or catching it early in the process.

Contact your financial planner about this and other credit and identity theft issues.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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

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. C14-001633

Ways to Maximize Social Security Benefits

 Recently I had the privilege of presenting at the Michigan Association of CPA’s continuing education conference on the topic of Maximizing Social Security benefits.  Social security is an important source of income for most of the estimated 58 million people who receive benefits.  Over my 22 years as a practitioner, I have tried to counsel clients to be sure to coordinate social security retirement benefits with their overall retirement plan.  As pensions (not just the City of Detroit) continue to become more obsolete, social security remains one of the few, if not only, guaranteed income sources for future retirees.

Following Ida Mae Fuller’s Lead

Before getting to how to maximize social security retirement benefits – how about a little fun social security history?  Do you know Ida Mae Fuller?  She is the first reported person to receive social security retirement benefits.  Apparently Ida went into the SS office after contributing a total of $24.75 over three years in payroll taxes and told the staff that she was retiring and didn’t expect to receive anything – but thought she might as well check. She ended up collecting $22.54/month and lived to age 100 – not a bad return on her contributions!

When to Begin Collecting Benefits

A traditional breakeven analysis works pretty well for single folks.  One of the best research articles that I have come across was in the Journal for Financial Planning and written by Doug Lemons.  Mr. Lemons outlined three main variables in the breakeven analysis: inflation/cost of living, income taxes, and time value of money. Mr. Lemons’ research addressed multiple variations and combinations.  The general rule based on his research is:

• The breakeven between taking at age 62 and 66 (assume full retirement age) is roughly age 78.  Meaning, you need to live past age 78 to be better off by waiting until age 66.
• The breakeven between taking at age 66 and 70 is roughly age 83.  Meaning, you need to live past age 83 to be better off. 

Social Security Analysis for Couples

The breakeven analysis breaks down a bit for couples (two life expectancies vs one). I have written about spousal benefits in the past.  In this post I’d like to provide two strategies for couples to consider.

File & Suspend Strategy

June Cleaver:  As you may know, June Cleaver of the “Leave it to Beaver” show was the classic stay-at-home mom.  Her husband Ward, who sometimes was known to be a “bit too hard” on their son the Beaver, was the sole income earner. If June and Ward were close to retirement today, their respective social security benefits at full retirement age might be $2,000/month for Ward and $0 for June.  How can they maximize benefits?  At full retirement age (assume 66) Ward files for social security retirement benefits but then immediately suspends.  This allows June to begin receiving a spousal benefit (assuming she is at full retirement age) which is $1,000/month or 50% of Ward’s benefit. Then, when Ward turns age 70, Ward may elect to begin receiving his own benefit ($2,640 in this example) that has increased 8% per year from age 66-70 thanks to “Delayed Retirement Credits”. Assuming average life expectancy, this combination will provide June and Ward the maximum benefit.  What if Ward passes away at age 75? June will receive the higher of her benefit or Ward’s as a survivorship benefit - $2,640 in this example.

Claim Now, Claim More Later

Elyse Keaton: Elyse Keaton of “Family Ties” was played by Meredith Baxter (and mother of Michael J. Fox in the show).  Elyse, unlike June Cleaver, had income of her own as an architect. Elyse and her husband Steven Keaton had similar earnings. If Elyse and Steven were close to retirement today, both of their social security benefits at full retirement age might be $2,000/month. Rather than “filing & suspending” like June and Ward, the Keatons might consider another strategy to maximize their total benefits.  At full retirement age Elyse should consider taking her own benefit or $2,000/month.  Steven, at full retirement age, may choose to restrict his benefit to a spousal benefit only (50% of Elyse’s benefit) or $1,000/month.  This allows Steven to collect some benefits now while allowing his own benefit to grow at 8% until age 70.  At age 70, Steven may elect to begin receiving benefits based on his own earnings – or $2,640/month.  Note that the survivor benefit for each of them now becomes $2,640.  The election to “restrict” to a spousal benefit can only be done at full retirement age or later. 

So, are you more like June or Elyse?  If your situation is more like June’s then consider the “File & Suspend” strategy.  If your circumstances are more like Elyse’s then consider the “Claim Now, Claim More Later” strategy. Do you have a social security question? Let us know – we love to research and help you maximize the benefits. 

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

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing information is accurate or complete. Any information is not a complete summary or statement of al available data necessary for making a decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of Raymond James. The examples provided are for illustrative purposes only. Every individual’s situation is unique and you should consult with the appropriate professional regarding your individual situation.  Every individual’s situation is unique and you should consult with the appropriate professional regarding your individual situation. Guarantees are based on the paying ability of the issuer. #C14-000038

Health Savings Account Basics

With the Affordable Care Act becoming effective in 2014, healthcare seems to be top of mind with a lot of people.  But there are still many kinks to be worked out and many questions left unanswered.  In a world of uncertainty, why not consider utilizing a savings vehicle to help with medical costs that you can control? 

Using an HSA

A Health Savings Account, or HSA, is a fairly new type of account that is available to those who are enrolled in a high deductible health care plan.  Many confuse an HSA with a Flex Spending Account or FSA – don’t make that mistake!  A Health Savings Account is typically much more flexible and allows you to roll any unused funds over year to year, something a Flex Spending Account does not offer – it is a “use it or lose it” plan. 

What an HSA Can Cover

Many employers who offer high deductible plans will often contribute a certain amount to the employee’s HSA each year as an added benefit, somewhat like a 401k match.  Dollars contributed to the account are pre-tax and earnings accumulate tax deferred.  Funds withdrawn, if used for qualified medical expenses (including earnings), are tax-free.  The list of qualified medical expenses can be found at irs.gov, however, just to give you an idea, a few include:  expenses to cover your deductible (not premiums), co-payments, prescription drugs, various dental and vision care expenses, etc.  As always, consult with your financial advisor, tax advisor and health savings account institution to verify what expenses are considered qualified.  If you make a withdrawal that is considered “non-qualified”, you will be subject to taxes and a 20% penalty on the withdrawal amount. 

Here are the details for 2014:

Individuals

• Must have a plan with a minimum deductible of $1,250

• $3,300 contribution limit ($1,000 catch-up contribution if 55 or older)

• Maximum out-of-pocket expenses cannot exceed $6,350

Family

• Must have a plan with a minimum deductible of $2,500

• $6,550 contribution limit ($1,000 catch-up contribution if 55 or older)

• Maximum out-of-pocket expenses cannot exceed $12,700

Withdrawing from an HSA

Once you reach age 65 and enroll in Medicare, you can no longer contribute to an HSA.  However, once you are 65, funds can be withdrawn for any purpose, medical related or not, and you will no longer be subject to the 20% penalty.  However, the withdrawal will be included in taxable income, like an IRA or 401k distribution. This can present a great planning opportunity for clients who may want to defer additional money but have already maximized their 401k plans or IRAs for the year.  Although you have to wait 5 ½ years longer to access the funds from a HSA than a traditional retirement plan (age 59 ½) to avoid penalty, this is just another investment vehicle that could reduce taxable income in the year contributions were made while earnings have the opportunity to grow tax-deferred and tax free.  

As you can see, a Health Savings Account can be a great addition to an overall financial plan and should be considered if you are covered under a high deductible health plan.  No one likes medical expenses; this can be a vehicle that can potentially soften of medical expenses. 

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

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. #C13-002464

Three Steps to Curing a Holiday Spending Hangover

 You enjoyed your holiday season to the fullest – great gifts for everyone, parties and evenings out with family and friends.  But now the credit card bills are arriving, and you are feeling the pain and misery of your holiday spending hangover.  

3 steps to help you recover and get yourself back on track:

1. Take a Break:  From the plastic, that is.  No need to abstain from all spending, but moving to a “pay cash” system and avoiding the use of credit cards, at least until the holiday bills are paid in full, will help to get your responsible spending back on track.
2. Replenish:  With a traditional party hangover, it is important to replenish your body with water and healthy foods.  Similarly, with a spending hangover, it is important to replenish your bank account.  Rebuild your savings to get your New Year off to a solid start.
3. Exercise:  Set a spending plan and stick to it to get your finances off to a healthy start.  Map out your monthly spending and monitor.  Just like a healthy exercise plan, tracking is the best way to ensure success.

Enjoying the holidays and special times with family and friends is important to your overall enjoyment of life.  If you occasionally go a little bit overboard, simply follow these steps to get yourself back on track and on your way to fulfilling your longer-term financial goals.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of Raymond James. #C13-002512

This New Year Take Our Resolution Challenge

 The beginning of a new year gives us a clean slate to get on the right track.  Then it happens … we all do it.  With the best intentions we make those dreaded New Year resolutions that very rarely get accomplished. Then we find ourselves in the same boat as we were the year before.  Have you ever noticed how busy the gym is in January and how it magically goes back to normal capacity within a few months?  I’m just as guilty as the next person with failed resolutions. However, this year I’m going to make a challenge to our fine clients at The Center.   Make a New Year resolution to sit down for just an hour in January and make a game plan for your finances in 2014.  It’s not a challenge to save “X” amount for retirement or to rollover that 401k plan to an IRA that has been with an ex-employer for a few years. These are individual goals that you can work into your plan.  My challenge is rather to open up the discussion, take a close look at your own personal financial scenario, and set some goals that you would like to achieve in 2014. 

Think of the approach in terms of the famous Fitzhugh Dodson quote: “Without goals, and plans to reach them, you are like a ship that has set sail with no destination.”  As your trusted advisors, we are here to help you identify these goals and work with you to navigate through them until they are accomplished.  We look forward to working with you in this New Year and wish our clients and their families and friends nothing but the best for 2014 and beyond!

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

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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.  C13-001740.

How I Set My Own Financial New Year’s Resolutions

 If you are like me, each year you make a list of New Year’s resolutions that don’t end up making it to spring time, much less the entire year… i.e. going to the gym, eating healthy, etc. Well, this year I plan to not only stick to my goals, but also add goals for my financial well-being to the list. Make improving your financial well-being part of your annual resolution procedure … and stick to it! In hopes of getting you going, here are mine:

I will make a budget, and use it to improve my spending habits

 This doesn’t have to be as gruesome as you think. Consider using a tool such as Mint.com that automates, aggregates, and updates for you. Track your progress monthly with their charts and see what areas you can cut back (like the Jimmy John’s sandwich that is oh so convenient to have delivered for lunch multiple times per week).  

I will spend less, and thus save more

• Take advantage of coupons, Groupons, or any other deals out there. I’m not saying become an extreme couponer like you see on TV (unless you have the time and energy for that), but there are easy potential ways to save on your expected purchases. Try a quick Google search for sales or price comparisons before you head out to make that buy.
• Don’t pay for pricey added features that you don’t use, just because you get a deal for bundling (i.e. cable, cell phones, internet). If you lead a busy life and don’t have the time to watch TV very often, consider a streaming option such as Netflix, Hulu, or Roku instead of paying for pricey cable.
• If you get an end-of-year bonus, put it into savings (or at least majority of it) instead of going on a shopping spree and spending it all in one day. For your job well done, treat yourself to something satisfying yet small in expense (maybe that Biggby specialty coffee you hardly ever buy because it’s expensive), then transfer the rest to savings. 

I will plan for future retirement

Take advantage of employer matching 401(k)s. If you get a raise for the upcoming year, consider increasing your 401(k) contribution as well. Then your increased income goes directly into your retirement savings instead of into your checking account, where it will be tempting to spend.

I will create a long term vision and strive to make it my future reality

Start an emergency fund (the Center recommends 3-6 months of expenses). This may take some time, depending on if you have one started. Once your emergency fund is sufficient, consider compartmentalizing your incoming savings for your long-term visions (click here for recent post about compartmentalizing).

The little things add up before you realize it, so strive to break the constant bad spending habits (the daily Jimmy John’s or Biggby coffee); but have fun treating yourself sometimes as well. Finding enjoyment while staying within your means will help you stick to your resolutions long term and may improve your financial well-being.

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Any opinions are those of Center for Financial Planning, Inc., and not necessarily of RJFS or Raymond James. C13-001741.

Holiday Financial Conversations for the Generations: Older Adult Parents

 The holidays provide us with rare opportunities to gather with family.  This is a time to check in with older adult parents to see how things are going and to see what might be changing.   Often, we will notice that time (and/or age) are beginning to make everyday life a little more challenging for our parents.  This is the perfect time to ask your parents about their plans for their future.

Things to discuss with your parents may include:

• Where do they plan to live as they age?
• How do they envision living their future lives (activities, future care, etc.)?

• Do they have their financial lives organized and documented to make future planning easier?  If not, here is a great resource to give them: https://static1.squarespace.com/static/54341a03e4b08690c01bc8de/54dcf260e4b018fb5adfbec4/54dcf261e4b018fb5adfc6e8/1303923614337/record_system.pdf

• Are their legal documents up-to-date so that their current wishes will be carried out?

If having these conversations makes you feel uneasy, you are not alone.   However, giving your parents the opportunity to express their desires and helping them to put an actual plan in place to make their plans a reality is an invaluable gift.  And what better time than the holidays to give that gift?

Contact your financial planner for tips on holding these conversations or to schedule a family planning meeting.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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

Holiday Financial Conversations for the Generations: Teenagers

The upcoming holiday break from school gives you the perfect opening to have conversations with your teenage children about their college plans.  Try talking to them about what they are currently interested in studying once they reach college, where they think they might apply, and also your family’s plan for college funding.  This includes what you plan to contribute, as well as your expectations about your child’s contribution. 

Here are several items that should be on your list:

How much is your child’s education likely to cost?  Go online and look up tuition rates for the schools your child might be considering. Then find one of the many online college tuition calculators to determine what your child’s costs might be.

How will you plan to pay for school?

• Discuss what you have saved (529 College Savings Plans, UTMAs, and other savings).

• Discuss opportunities for scholarships and grants.  Here are two sites to visit as early as your child’s freshman year in high school:

  • http://www.studentaid.ed.gov/  -- basic information about college costs, financial aid, etc.

  • www.fastweb.com  -- create a profile to get matched up with scholarship and grant opportunities specific to your child.

Discuss ways for your child to contribute, either now or in the future. This may include part-time work in high school, during summers, or during college.  This also includes strong academic performance and/or extra curricular activities now which can put them in a position for academic or other scholarships in the future.

The high cost of a college education makes these family conversations necessary.  By framing the discussions around the excitement of planning for your child’s future, you can make this an enjoyable and productive use of the holidays.

Talk to your financial planner about the many ways to save for your child’s college education.

In my next blog, I will talk about holiday financial discussions to have with your older adult parents.

Sandra Adams, CFP®is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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

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.

Holiday Financial Conversations for the Generations: Children

 The hustle and bustle of everyday life does not always give us the chance to have meaningful conversations with our children about money and charitable giving.  The long holiday vacation is the perfect time to have these conversations, but does any child want to spend school break listening to lesson from their parents? 

Some ways to sneak in teachable moments around money and giving this season: 

• Keep extra change with you when you are out shopping and have your children donate to the Salvation Army red kettles.  Have a conversation about where the money goes and how it helps.
• While shopping for Christmas gifts, have your children pick out an extra toy to give to Toys for Tots or other charitable organization. Again, talk about where the toy is going.
• As part of your family holiday tradition, consider adopting a family to provide Christmas or Hanukkah gifts.  Have a conversation about helping others to have a holiday that they might not otherwise have.
• After your children have opened their gifts, ask them to go through their old toys and clothes to find those that they have outgrown.  These gently-used items can be donated to an organization for others to use and enjoy.

These are just a few ideas to help you instill the spirit of giving in your children this holiday season; to teach them that this time is as much about giving as receiving.

In my next blog, I will provide tips for talking to your teenage children about preparing for college funding.

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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

Is Too Much Success a Penalty at Tax Time?

Many investors have been so successful they may face a potentially hefty tax bill for 2013.  This bull market we are experiencing in the U.S. has had such strong legs for a long period of time many investors have few, if any, capital losses to harvest to help offset the gains they have accumulated in their equity investments. In some ways this is a great problem to have. 

Tax Increases

This year there were a couple of noteworthy tax increases to keep in mind.  The maximum tax rate on capital gains has increased from 15% to 20%.  Taxpayers with taxable income north of $400,000 ($450,000 for couples) will be affected by this increase.  There is also the new Medicare investment income “surtax” affecting taxpayers with modified adjusted gross income over $200,000 ($250,000 for couples).  This tax is an additional 3.8% on investment income (interest, capital gains, dividends etc.).

Look for Bond Losses

Some taxpayers may still have tax losses from 2008-2009 to help offset gains, but for many these have run out during the successful run the markets have enjoyed for the past 4 ½ years.  One place to look for some losses this year may be in the bond portion of your portfolio (if applicable).  There may be an opportunity to swap to a similar investment for a short period of time, at least 31 days, to harvest those losses to help offset other gains you may have. 

Harvesting Losses

Make sure you are reviewing your portfolio throughout the year for tax losses to harvest.  Bond losses were at their peak during late summer and into the fall, but if you wait until December to harvest those losses, they could be much diminished from what they were.  The end of the year is rarely the best time of the year to harvest tax losses.  Personal circumstances vary widely so it is critical to work with your tax professional and financial advisor today to prepare for the risk of higher taxes in your future.

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

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.