Thursday
Oct162014

Putting your Priorities First: A big rocks lesson

 When I was an undergrad at EMU, I heard a time management expert speak to a group of business students and, to drive home a point, she used an illustration we students would never forget. As she stood in front of the group of high-powered overachievers, she said, "Okay, time for a quiz."

Focus on the Big Rocks First

She pulled out a ½ gallon, wide-mouthed Mason jar and set it on the table for the class to see. Then she produced about 5 fist-sized rocks and carefully placed them, one at a time, into the jar. When the jar was filled to the top and no more rocks would fit inside, she asked, "Is this jar full?"

Everyone in the class said, "Yes."

Then she said, "Really?" She reached under the table and pulled out a bucket of gravel. Then she dumped some gravel in and shook the jar causing pieces of gravel to work themselves down into the space between the big rocks. Then she asked the group once more, "Is the jar full?"

By this time the class was on to her. "Probably not," one of them answered.

"Good!" she replied. She reached under the table and brought out a bucket of sand.  She started dumping the sand in the jar and it went into all of the spaces left between the rocks and the gravel. Once more she asked the question, "Is this jar full?"

"No!" the class shouted.

Once again she said, "Good." Then she grabbed a pitcher of water and began to pour it in until the jar was filled to the brim.  Then she looked at the class and asked, "What is the point of this illustration?"

One eager beaver raised his hand and said, "The point is, no matter how full your schedule is, if you try really hard you can always fit some more things in it!"

"No," the speaker explained, that wasn’t the point. The truth this illustration teaches us is:

If you don't put the big rocks in first, you'll never get them in at all."

What are the “big rocks” in your life? Your children? Your loved ones? Your education? Your dreams? A worthy cause? Teaching or mentoring others? Doing things that you love? Time for yourself? Your health? Your significant other? Remember to put these “big rocks” in first or you'll never get them in at all.

If you sweat the little stuff (the gravel, the sand) then you'll fill your life with little things you worry about that don't really matter, and you'll never have the real quality time you need to spend on the big, important stuff (the big rocks). So, ask yourself this question, “What are the 'big rocks' in my life?” Then, consider whether you’re putting them in your jar first. Because, like that time management expert showed me, if you don’t put them first, you’ll never find room.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.


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.

A14-033720

Tuesday
Oct142014

A ROTH IRA Strategy for High Income Earners

 Do you have a 401k Plan from your current employer?  Does it allow you to make after tax contributions (these are different than pretax contributions and Roth 401k contributions)?  If the answer to both is “yes”, a recent IRS notice may present a welcome opportunity.  IRS Notice 2014-54 has provided guidance (positive guidance) allowing the splitting of after tax 401k contributions to a ROTH IRA. Although I believe that ROTH IRAs are used in many less than ideal situations, this is one strategy that can make sense for higher income earners; tax diversification and getting money into a ROTH without a big upfront tax cost. 

After answering “yes” to the first two questions, the next question is, “Are you making maximum contributions on a pretax basis?”  That is, if you are under 50 years old, are you contributing $17,500 and if you are over 50 (the new 30) $23,000? If you are making the maximum contribution, then a second look at after tax contributions should be considered.  Whew – that’s three hoops to jump through – but the benefits might just be worth it.

Putting Notice 2014-54 to Work

For example, Teddy, age 50 has a 401k plan and contributes $23,000 (includes the catch up contribution) and his employer matches $5,000 for a total of $28,000.  Teddy’s plan also allows for after tax contributions and he may contribute $29,000 more up to an IRS limit of $57,000. 

The new IRS Notice makes it clear and simplifies the process allowing this after tax amount at retirement to be rolled into a ROTH IRA.

The bottom line:  It is more attractive to make after tax contributions to your 401k with the flexibility of converting the basis to a ROTH at retirement or separation of employment without the tax hit of an ordinary Roth conversion.

As usual, the nuances are plentiful and your specific circumstances will determine whether this strategy is best for you.  To that end, we are here to help evaluate the opportunity with you.

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.


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 [insert FA name] and not necessarily those of Raymond James.

The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. C14-033701

Thursday
Oct092014

Elder Care Planning: Continuing Care Retirement Communities (CCRCs)  

 In last month's post, we talked about Assisted Living as a housing option for older adults.  But do you know about CCRCs or Continuing Care Retirement Communities? CCRCs are an option for those older adults who have the financial means to support this type of housing. 

What is a CCRC?

In general terms, a CCRC is the most comprehensive of all housing options that can satisfy the needs/wants of those older adults who are healthy and active, as well as those who need assistance and those who need skilled nursing care.  The structure of these communities provides individual residences (usually in the form of an apartment or condo) for independent living, but provide options within the community for assisted living or nursing care. Once you move to the CCRC, you never have to move again!  CCRCs are not for the financially faint of heart – they generally require a buy-in/entrance fee and a monthly service fee.  However, most communities guarantee that once your are approved and have moved in, you will never have to leave, regardless of your future financial position,.

How, might you ask, do CCRCs look when we view them in the context of our 4 “C’s”(Comfort, Convenience, Companionship and Care)?

Peace of Mind and Comfort Knowing You Never Need to Move

As an older adult, making the decision to move from your home is a big one – one that you likely don’t want to make more than once.  Moving to a CCRC allows you to make that decision only once. No matter what needs you have as you age, they will be provided for in the CCRC.  You should make sure that you are aware of how possible transitions will work within the specific communities that you look at and the financial impact of each. Especially for married couples, there may be significant additional financial costs if one needs assisted or nursing care and the other remains independent.

Convenience of…everything!

CCRCs provide most conveniences of everyday living:

  • Transportation if you can’t or don’t want to drive on your own.
  • Activities – usually a full gym, clubs, social activities, classes and entertainment on community grounds, as well as organized trips off campus.
  • Restaurants, banks and visits from dentist, eye doctors, etc. are generally available on campus.
  • Services of all kinds are usually available (maintenance and cleaning for your residence; food plans so you don’t have to cook, etc.)

Companionship of All Kinds

In working with clients who live in CCRCs, I have found that they can always be around people and be busy…if they want to be.  The options available to interact with others that have similar interests are many…usually more than you have time for.  I have found that moving to these communities, for many, has resulted in an improvement in quality of life.

Care at Every Level

Ideally, you consider moving to a CCRC when you are completely independent and have no need for assistance, so that you can engage in all that these communities have to offer.  However, if and when assistance is needed, you can be certain that it will be available.  Assistance can be provided within the independent living units or within the community at a different location – every level of care can be provided for without another move being required.

If you or someone you know thinks they may need to look at the possibility of moving to a CCRC, I recommend (as always) to plan ahead AND to consult your financial planner to make sure that your finances are sufficient.   Please contact me if you need additional resources or have additional questions about this or other housing options.

Sandra Adams, CFP® 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 2012-2014 Sandy has been 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.

Any opinions are those of Sandra Adams and not necessarily those of Raymond James. C14-028648

Tuesday
Oct072014

Where are we in the full market cycle? 

 Cycles exist everywhere.  One of the first cycles we learn about as a child is the water cycle or the journey of a raindrop. There’s something about the circularity of cycles that I just love.

The economy and financial markets also cycle. An economic cycle is the periodic ebb and flow of economic growth like Gross Domestic Product or employment.  According to the National Bureau of Economic Research the average economic cycle lasts a little less than six years.  This span is measured both from one peak to the next peak or one trough to the next trough.  While six years is an average, the cycle can be much quicker or much longer than six years. 

The Cyle of Economic “Seasons”

The various stages of the economic cycle can be thought of like seasons of the year as shown in the chart below.  From winter, or recession, where jobs are lost and the economy is shrinking to summer, where growth is accelerating and jobs have been recovered. 

Every quarter we take a poll at The Center to see where team members think we fall in this spectrum.  Our consensus is that we believe we are in the midst of summer meaning that this bull still has some room to go as we are still lacking some keys signs of a maturing economy like inflation and volatility.

Stock Market Cycles

The stock market also goes through cycles and, along with it, investor emotions ebb and flow.  Usually the stock market cycle is slightly ahead of the economic cycle meaning that market indexes often peak before the economic cycle peaks.  Our latest survey of our employees placed the stock market cycle near excitement in the picture below.  At this point (excitement/thrill/euphoria) investors start to question why they don’t have more aggressive positions because they have clearly performed very well and many even start to shift their portfolios in this direction.  As Warren Buffett said”

“Be fearful when others are greedy and greedy when others are fearful.”

Refocusing on the Long Term

This is the point when it is most important to stay in a diversified portfolio, not abandon your long-term investment objectives while reaching for more returns. Rebalancing at these market extremes may go against what investors want to do, for example, selling your stock positions to buy more bonds right now or selling your bonds in 2009 to buy more stocks. However, going against these basic emotions have potential to be the best decisions you can make for your portfolio.  Navigating these emotions is the single most difficult road block to the success of an investment strategy.  While markets and economies will cycle as long as water continues to cycle, having sound financial advice during these market extremes can make big difference in the success of your long-term financial plans. 

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.


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 Angela Palacios and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or loss regardless of strategy selected. 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 Angela Palacios and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or loss regardless ofstrategy selected. C14-031971

Thursday
Oct022014

How Singles Can Use File and Suspend

 There are certain advanced social security income strategies available for married couples that can help to maximize income in retirement. It’s a different story for single people who have fewer opportunities to use some of these more advanced strategies.  But there’s a strategy called “filing and suspending” that may work for you, no matter your marital status. 

File & Suspend: Not just for married couples

This strategy is sometimes used by married couples because it allows for one partner to defer taking benefits and gain credits on their benefit for doing so. In the meantime, the other partner receives a spousal benefit. But if you’re single, there is no “spousal benefit” so the rationale for utilizing such a strategy is different.  A single person might use this strategy by filing for benefits retroactively.

Retroactive Benefit Payment Limits

Under the “normal” social security rules, those who are full retirement age can only file to receive back payment benefits retroactively for up to 6 months. For example, let’s say George plans to wait until age 70 to collect benefits so he doesn’t go through the process of filing and suspending those benefits. Then, at age 67, George changes his mind and wants to file and suspend. He is only entitled to receive a lump sum payment for the last 6 months of benefits that he could have received.  If George had filed and suspended benefits at his full retirement age and later changed his mind, he would be entitled to receive all of the benefits he would have been entitled to receive going back all the way to the date that he originally filed and suspended.

When File & Suspend Can Pay Off

Now you might be asking, “Why does any of this matter if my game plan is to wait until age 70 to collect benefits?”  Your skepticism is justified because in most cases it will make no difference.  However, in some cases, your health might change from the time you are 66 to 70. Then, it would make a lot of sense to go back to social security and ask for a lump sum payment for benefits you would have received from 66 to 70.  If you filed and suspended, you are entitled to get all of those benefits. If you didn’t file and suspend than you are only entitled to receive 6 months’ worth of back payments.

The rules surrounding social security are vast and very complex.  As with any complicated financial decision, it’s often best to seek the help of a qualified financial professional to help navigate the waters.

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.


The information contained in this report 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 a n 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. Examples are for illustrative purposes only. C14-028511