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.

How Much of My Income Should I Be Saving?

Contributed by: Nick Defenthaler, CFP®

This is a common and logical question to ask, right?  Unfortunately, there are too many unknown factors to give a precise answer.  If you’re 45, you have at least 15-20 years before you retire.  A lot can change in life during this time frame! What you think you may want retirement to look like might drastically change over the course of nearly two decades. How much you save obviously can have a big impact on your retirement goals. The simple answer I often hear in regards to this question is, “save at least what your company match is.” Meaning, if your employer offers a 4% match, you should contribute at least 4% to be eligible for the free money your employer is offering by incentivizing you to save for the future. Time to get blunt. Saving 4% isn’t enough. If you’re in your mid to late twenties, this is an acceptable savings rate to get in the habit of saving for retirement, in conjunction with paying down student loans, saving for a house, wedding or having children. When you’re 20 or fewer years away from retirement, however, that number simply needs to be more than the company match – probably closer to 15% - 20%. 

Thirty or forty years ago, saving 4% often times could in-fact create a successful retirement. So what’s changed? The extinction of the company pension plan.  Do you know that it would take a $615,000 retirement account to re-create a $40,000 income stream for 30 years, assuming a 5% distribution rate? In addition, most retirees who do receive a pension don’t just spend their pension income, they withdraw from their portfolio as well -- meaning far more than the $615,000 in my example would have to be accumulated prior to retirement to supplement spending for a 25+ year time horizon. 

So, if you’re not saving in the teens or twenties for retirement, how do you get there? I recommend implementing what I call the “one per year” strategy.  Meaning, you commit to increasing your 401k savings percentage by at least 1% each and every year until you get where you need to be in regards to your retirement saving goals. This is typically very doable for most; we just simply don’t make the change online or with our Human Resources department. As the New Year quickly approaches, now is the perfect time to evaluate your current savings level and check in with your planner to see if you need to be doing more. Many 401k plans now actually offer a great feature that automatically increases your contribution level each and every year, typically in January. Studies have shown that when things are automated, such as savings, they actually get done!  Ask your HR manager or 401k administrator if the plan allows for this and if so, seriously consider taking advantage of it.  

By increasing savings gradually, it will help make retirement savings far more manageable and realistic for many.

Think about it, if you’re trying to lose 100 pounds and you become fixated on that large number, chances are you’ll become overwhelmed and give up on your weight loss goal. Those who have the most success are the ones who focus on small victories. Losing a few pounds per month until that goal is met– the same goes for retirement savings.  

Keep it simple and be consistent – good things usually happen when we do just that!

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. Investing involves risk and you may incur a profit or loss regardless of strategy selected. 401(k) plans are long term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information.

Should I Accelerate My Mortgage Payoff?

Contributed by: Matt Trujillo, CFP®

Most homeowners make their regular mortgage payments every month for the duration of the loan term, and never think of doing otherwise. But by prepaying your mortgage, you could reduce the amount of interest you'll pay over time.

How Prepayment Affects a Mortgage

By prepaying your mortgage, you could reduce the amount of interest you'll pay over the life of the loan, regardless of the type of mortgage. Prepayment, however, affects fixed rate mortgages and adjustable rate mortgages in different ways.

If you prepay a fixed rate mortgage, you'll pay your loan off early. By reducing the term of your mortgage, you'll pay less interest over the life of the loan, and you'll own your home free and clear in less time.

If you prepay an adjustable rate mortgage, the term of your mortgage generally won't change. Your total loan balance will be reduced faster than scheduled, so you'll pay less interest over the life of the loan. Every time your interest rate is recalculated, your monthly payments may go down as well, since they'll be calculated against a smaller principal balance. If your interest rate goes up substantially, however, your monthly payments could increase, even though your principal balance has decreased.

Should I Prepay My Mortgage?

A common predicament is what to do with extra cash. Should you invest it or use it to prepay your mortgage? You'll need to consider many factors when making your decision. For instance, do you have an investment alternative that will give you a greater yield after taxes than prepaying your mortgage would offer in savings? Perhaps you'd be better off putting your money in a tax-deferred investment vehicle (particularly one where your contributions are matched, as in some employer-sponsored 401(k) plans). Remember, though, that the interest savings you'll obtain by prepaying your mortgage is a certainty; by comparison, the return on an alternative investment may not be a sure thing.

Other factors may also influence your decision. The best time to consider making prepayments on your mortgage would be when:

• You can afford to contribute money on a regular basis

• You have no better investment alternatives of comparable certainty

• You cannot refinance your mortgage to obtain a lower interest rate

• You have no outstanding consumer debts that are charging you high interest that isn't deductible for income tax purposes (e.g., credit card balances)

• You are in the early years of your mortgage, when, given the amortization schedule, the interest charges are highest

• You have sufficient liquid savings (three to six months' worth of living expenses) to cover your needs in the event of an emergency

• You won't need the funds you'll use for mortgage prepayment in the near future for some other purpose, such as paying for college or caring for an aging parent

• You intend to remain in your home for at least the next few years

Particularly against a fixed rate mortgage, regular contributions toward prepayment can dramatically shorten the life of the loan and result in savings on the total interest you're charged. As always, consult your financial planner before make any large financial moves. We’re here to look at the big picture and help make the best decisions for you particular situations.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc.® Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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Raymond James Financial Services, Inc. and your Raymond James Financial Advisor do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs.

How to Get on the Same Financial Page

Contributed by: Laurie Renchik, CFP®, MBA

If I told you that over 40% of couples don’t know how much their partner earns, would you believe it? The Couples Retirement Survey recently published by Fidelity Investments revealed that this statistic is in fact true. My first thought was, “how can this be” and a close second was “what’s the best way for folks falling in the 40% to get in sync financially?”   

Here are 5 straightforward questions to help get the conversation started.

Getting to the answers may not be easy especially if there is no centralized management in the household. Ready – set – go!

1. Do we have any financial secrets? Talk about debt, obligations, past mistakes and what you learned. Are you a spender or a saver? Develop a shared vision for the future.

2. How much do we earn? Include bonuses in your discussion and consider your future career goals and earning potential as well. 

3. What’s our budget? Do you know your cost of living? Is it above your means or below? Create and maintain a budget together.

4. What do we own and what do we owe? Take an inventory or your collective assets and liabilities; property, insurance policies, bank and retirement accounts—anything that involves money.

5. How much are we saving for retirement and where are the accounts? Keep track of your 401(k)s, including those from previous jobs; IRA’s and other accounts dedicated to retirement savings. How much are you contributing and whose name is on each?

The preceding five questions are conversation starters. Want to get started? Set a date to talk money using these questions as a starting point. Compile all of your account numbers and passwords in a secure place for easy reference and share with your partner. Schedule time with your financial planner to review your progress and strategize for a more complete understanding of your financial status as a couple which is crucial to planning, budgeting and saving toward future goals.

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc.® In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie is a member of the Leadership Oakland Alumni Association and is a frequent contributor to Money Centered.

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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.

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

Contributed by: Center for Financial Planning, Inc.®

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

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

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

Why You Should Have a Roadmap for Your Aging Years

Contributed by: Sandra Adams, CFP®, CeFT™

I was asked to speak on a panel of professionals recently on the topic of “11th Hour Planning,” which is essentially planning steps that should be taken when a person nears the end-of-life. Much of the discussion revolved around the vast differences in the resulting situations when a client has planned ahead for their aging years versus when they have not. It was certainly the consensus of the professionals on the panel that those clients who plan in advance have a much more pleasant experience overall, their families are generally less stressed and panicked, and, more often, there are better financial results.

What, might you ask, is involved in “planning for your aging years?” I am referring to planning that goes beyond traditional retirement planning, where we are talking about cash flow projections and making sure your money will last as long (or longer) than you will. The financial aspect is an important piece, and as we discuss what I call the Roadmap for your Aging Years, the financial piece will focus largely on how to pay for funding during the later years of your retirement. We hope that those later years continue to be filled with travel, hobbies, and fun, but they could involve expenses focused on healthcare and long term care.

The Roadmap for your Aging Years covers the following topics:

• Housing

• Care (Where will you receive Care/Whowill Care for you)

• Family

• Legacy

• Financials

Within the context of the above topics, you design your plan by exploring the Challenges you see yourself facing as you age, the Alternatives (i.e. solutions) you have for facing those challenges, the Resources you may have at your disposal for facing those challenges, and ultimately envisioning the Experience you would like to have as you age. We call this the C.A.R.E. planning method that was developed by Dan Taylor, author of The Parent Care Conversation. Ideally, you design your Roadmap with the guidance of a professional (your financial planner can help) and in collaboration with your family, so that everyone is on board and part of the plan from the beginning.

The 11th hour can come for any of us at any time, but for most of us comes later in life. Planning ahead can make end-of-life a less stressful experience if there is a plan in place.  If you do not yet have a Roadmap for Your Aging Years, contact your financial planner today to start the conversation.

Sandra Adams, CFP® , CeFT™ is a Partner and Financial Planner at Center for Financial Planning, Inc.® Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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The opinions expressed are those of Sandra Adams and are not necessarily those of RJFS or Raymond James. 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. Raymond James is not affiliated with nor does it endorse Dan Taylor.

How to Handle Financial Transitions

Contributed by: Timothy Wyman, CFP®, JD

Kaboom! You are a Baby Boomer or Gen X-er providing loyal service to your employer for 10, 20 and maybe even 30 years and now you find yourself in a period of transition. Let’s face it – a career transition or period of temporary unemployment or underemployment can be a bit frightening and life altering. As I have worked with folks over the last 25 years, many of them going through a major change, I have come to appreciate the additional complexities with such changes. I have witnessed otherwise rational and intellectual behavior be replaced with confusion and thought paralysis – some leading to regrettable long term decision making.

Fortunately, I have also worked with other folks and watched them put plans and plans of action into place to weather the storm. As one of my favorite sayings goes, “Life isn’t about waiting for the storm to pass. It’s about learning to dance in the rain.” People can and do survive periods of financial change and you can too.

There are some specific financial issues for those experiencing a transition.

First, I’d like to introduce you to two concepts or strategies that I have picked up over the years from the Sudden Money Institute. The first is to simply allow or give yourself permission to withhold long term decisions for a period of time, usually as long as 6 months. Decision making can be impaired in times of significant change due to stress– so don’t feel that you have to decide everything right away. Think of this as the Six Month No Decision Zone.

Now, working in a six month decision free zone doesn’t mean you shouldn’t start planning.  Life continues and plans need to be made as there are many details associated with a life transition. So, the second strategy in decision making is the “Now - Soon - Later list”.  Simply write out all of the things you need to address – but prioritize them. By writing them down, you free the mind from constantly having to think about them knowing you have it on your list to address at the appropriate time and allow you to focus on what matters now.

How about some financial strategies relevant to a career transition?

On your Now list you might address Cash Flow Strategies. While you may not have required a working budget in the past, this may be a time to develop a budget and also determine any short term cash needs. If you determine that reducing spending/expenses is in order, take a tip from Stephen Covey and focus on the Big Rocks. The big rocks when it comes to spending are houses and cars. These two areas consume the majority of the average family budget – and to make a real impact on the overall level of spending these two areas need to take center stage. 

If very short term funds are needed you might consider a 60 day IRA rollover, which can be done once every 12 months*. Another strategy to get at funds if needed is a little known rule for qualified plans (think 401k) that allows folks who separate from service after age 55 to take funds without incurring the 10% excise tax (normal income taxes will apply). Lastly, cash value life insurance policies can be a source of short term funds as many times as the loan provisions are attractive.

For example, let’s say a couple, John and Sally, both age 57, and John has recently left his employer after 20 years of service. John’s initial prospects for a new role have become a bit less clear after three months. John and Sally feel that they will need some additional income for family living expenses. Even though John’s financial advisor suggested he roll his 401k immediately to an IRA, John followed the six month no decision zone strategy. Because John left his 401k intact he can withdraw funds without incurring a 10% penalty. 

Debt doesn’t have to be one of the bad four letter words – but in financial transition special care should be taken. One type of loan to consider is a Securities Based Line of Credit that uses taxable investment assets as the collateral. Rates, while variable, are very competitive with other forms of financing and are not tied to one’s house. 

Employee benefits and the conversion or replacement of certain benefits might be appropriate on both the Now and Soon list. Health care coverage in particular is an immediate need or on the Now list. Cobra might be an option if you worked for an employer with greater than 20 employees. The health care exchange may also be an option along with substantial subsidies based on income. On the Soon or Later list you might review life insurance portability as many times you will have as long as 12 months to make a decision.

A job transition can lead to both pitfalls and opportunity in the area of income taxes.  First, you want to be sure that you have adequate withholding on any severance pay. Sometimes, in the year one leaves an employer their income is higher than normal; meaning in that year their marginal rate will be higher. Additionally, if you have Stock Options or Employee Stock Purchase Plans you may be required to sell the stock at termination and not able to control the timing of income taxes. Essentially, this is a critical time to manage your bracket a strategy I like to call Bracket Maximization.

There are also some potential opportunities to consider during a period of unemployment when your income is lower than what you expect it will be in the future. For example, there is a special 0% capital gain rate for those under the 25% marginal tax bracket; which is about $75,000 for a married couple filing jointly. So, while most of the time a tax LOSS harvesting strategy is recommended, this might be a time to harvest GAINS. A low income year might also be a good time to accelerate IRA distribution for consumption or via a Roth IRA conversion.

Now let’s say a different couple, Tim and Mary, are 57 and 59 and fortunately have done a good job over the years saving, including establishing an emergency fund. They fully expect to be able to cover one year of expenses in the event Tim doesn’t find a new role soon. When Tim is working, they earn roughly $200k and are in the 25% marginal tax bracket. In 2016, they expect to have income of roughly $50k placing them in the 15% marginal tax bracket. Two opportunities they should highly consider include harvesting the capital gains of stock they received as a gift years ago and converting some IRA funds to Roth IRA within the 15% marginal tax bracket.

As pension plans continue to go the way of the dinosaur, most workers today use the 401k as their main retirement savings vehicle. Twenty years ago I used to say that one’s house is probably their largest asset – today it is probably their 401k account. Why is this significant? As your largest assets it needs to be managed prudently and as a large asset other people are interested in it. There are three main strategies, however, in dealing with a 401k after leaving an employer. All three may be appropriate depending on YOUR circumstances. For example, if you are over 55 but younger than 59.5 and might need income, leaving you 401k in the current plan typically makes the most sense. If you are 50 and may need to pay health care premiums while unemployed, you might choose an IRA rollover so you can avoid the 10% penalty on early withdrawals*. If you have a new employer you might consider rolling it to the new plan so you have immediate funds for a loan (up to $50k) if needed. Whatever your situation, it’s best to work with a trusted advisor to be sure your needs are taken into consideration.

Do you own company stock in your 401k? If so, STOP. The nuances of a strategy called Net Unrealized Appreciate is beyond the scope of this blog post. If you own company stock please review this before making ANY change to your 401k. The long term consequences can be quite considerable, and if you roll the 401k to an IRA or new employer you will have lost the potential benefit forever.

What might a Now – Soon – Later list look like? Well, your situation is unique and will vary, but here is an example:

Now:

• Put on your dancing shoes

• Make a 6 month budget – if married communicate

• Secure health insurance via COBRA or Health Care Exchange

• Address Stock options and ESPP plans

Soon:

• Get life insurance loan/withdrawal forms

• Convert employer life insurance (especially if health concerns)

• Review current year tax planning pitfalls and opportunities

Later:

• Review 401k strategies

• Review beneficiaries

When careers and employers change, life changes. When life changes money changes. A transition provides both pitfalls and opportunities. Good luck on your journey and if we can help you navigate the changing seas please feel free to call upon us.

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

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*If you decide upon a 60 day IRA rollover the full amount distributed to you must be deposited into an IRA or another qualified retirement plan within 60 days, if the full amount is not deposited into a new plan the differential amount will be handled as a withdrawal and income taxes (and a possible penalty if under the age of 59 1/2) will apply.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Timothy Wyman and are not necessarily those of Raymond James or Raymond James. Every investor's situation is unique, you should consider your investment goals, risk tolerance and time horizon before making any investment or withdrawal decision. Prior to making an investment or withdrawal decision, please consult with your financial advisor about your individual situation. Examples provided are hypothetical and have been included for illustrative purposes only. Be sure to consider all of your available options and the applicable fees and features of each option before moving your investment and/or retirement assets. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult atax advisor before deciding to complete a conversion. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Raymond James is not affiliated with Stephen Covey or the Sudden Money Institute.

Four Considerations for Year End Tax Planning

Contributed by: Nick Defenthaler, CFP®

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

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

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

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

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

2. How are you making charitable donations? 

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

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

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

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

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

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

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

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

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

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

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

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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Please include the following to all of the above: Please include: The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investments mentioned may not be suitable for all investors. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Webinar in Review: Planning for Medicare

Contributed by: Sandra Adams, CFP®, CeFT™

Here it is again…time for changing leaves, cooler weather, and Open Enrollment for Medicare.  Open Enrollment is the period from October 15th to December 7th each year during which those currently enrolled in Medicare can change their health plans and prescription drug coverage for the following year if a change would better meet their needs.  The Center recently hosted a webinar presented by Nat Towle, an Independent Consultant from Freedom Consulting, LLC, that provided details on Medicare, open enrollment, and what is important for 2017 (see the link to the replay below).

Health care costs are going up, especially for seniors.  In fact, a Healthview Services cost data report from 2015 showed that healthcare costs for a healthy couple turning 65 could be over $395,000 over their lifetimes.  And healthcare inflation exceeds Social Security COLA on an annual basis; for instance, the Social Security increase for 2016 was 0% and the healthcare cost inflation rate (year-to-date) for 2016 has been 3.26%.  The Social Security COLA increase for 2017 was just announced to be .3%, and we be sure that the healthcare cost of inflation will be .3%+ in 2017.  Why is this important?  When costs increase, this often means that plans will be competing for business, and it means that clients should be reviewing their plans EACH YEAR to make sure that they are in the right plans based on their current circumstances.

The other big news for 2017 is that the Blue Cross Medigap Legacy C Plan premiums that were frozen through 2016 are set to increase dramatically beginning in 1/1/2017.  Those currently enrolled in the Legacy C Plan will be receiving letters and will have to make a choice about whether to stay in the plan and pay the higher premiums, move to another plan within Blue Cross, or move to another plan outside of Blue Cross.  There are additional details to potential underwriting considerations, so it is important to do your research or consult with an advisor to assist you before making a change, as Nat suggests in the webinar.

Medicare coverage is an important decision, and we suggest reviewing your coverages on an annual basis.  If you have additional questions after viewing the webinar, please contact your financial advisor or Nat Towle directly for assistance.

Raymond James is not affiliated with Nathaniel "Nat" Towle or Freedom Consulting. The information provided here and in the webinar replay has been obtained from sources considered to be reliable but we do not guarantee that it is accurate or complete. These materials are being provided for information purposes only and are not a complete descriptions, nor are they recommendations. Opinions expressed are those of the Sandra Adams and Nat Towle and are 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.

How Not to be a Record Hoarder

Contributed by: Sandra Adams, CFP®, CeFT™

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

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

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

(CLICK HERE TO DOWNLOAD YOUR PDF COPY)

Bank Statements: Keep one year unless needed for tax records.

Cancelled Checks: Keep one year unless needed for tax records.

Charitable Contributions: Keep with applicable tax return.

Credit Purchase Receipts: Discard after purchase appears on credit card statement if not needed for warranties, merchandise returns or taxes.

Credit Card Statements: Discard after payment appears on credit card statement.

Employee Business Expense Records: Keep with applicable tax return.

Health Insurance Policies: Keep until policy expires, lapses or is replaced.

Home & Property Insurance: Keep until policy expires, lapses or is replaced.

Income Tax Return and Records: Permanently.

Investment Annual Statements and 1099's: Keep with applicable tax return.

Investment Sale and Purchase Confirmation Records: Dispose of sale confirmation records when the transactions are correctly reflected on the monthly statement. Keep purchase confirmation records 3-6 years after investment is sold as evidence of cost.

Life Insurance: Keep until there is no chance of reinstatement. Premium receipts may be discarded when notices reflect payment.

Medical Records: Permanently.

Medical Expense Records: Keep with applicable tax return if deducted on tax return.

Military Papers: Permanently (may be required for possible veteran's benefits).

Individual Retirement Account Records: Permanently.

Passports: Until expiration.

Pay Stubs: One year. Discard all but final, cumulative pay stubs for the year.

Personal Certificates (Birth/Death, Marriage/Divorce, Religious Ceremonies): Permanently.

Real Estate Documents: Keep three to six years after property has been disposed of and taxes have been paid.

Residential Records (Copies of purchase related documents, annual mortgage statements, receipts for improvements and copies of rental leases/receipts.): Indefinitely.

Retirement Plan Statements: Three to six years. Keep year end statements permanently.

Warranties and Receipts: Discard warranties when they are clearly expired. Use your judgment when discarding receipts.

Will, Trust, Durable Powers of Attorney: Keep current documents permanently.

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

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

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

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

Sandra Adams, CFP® , CeFT™ is a Partner and Financial Planner at Center for Financial Planning, Inc.® Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.