The Whole Picture

Do you have the diversification you need to keep your portfolio on track even when the stock market falters? The first step is to sit down with your financial advisor to take a closer look at your holdings to make sure your portfolio is well enough diversified to stand the test of time.

Does your investment portfolio have the diversification you need to sail smoothly through the ups and downs of the market? True diversification means more than spreading your assets around to a handful of stocks. It means putting assets into a variety of different types of investments beyond the stock market.

The younger you are the more aggressive you can be. While no strategy assures success or protects against loss, a portfolio heavily weighted in stocks might make sense for investors in their 20s and 30s. But the closer you are to retirement, the more important it is to spread some of your money to other types of investments.

Make sure you have the diversification you need to keep your portfolio on track even when the stock market falters, The first step is to sit down with your financial advisor to take a closer look at your holdings to make sure your portfolio is well enough diversified to stand the test of time.

Time, Not Timing

In these days of detailed and ubiquitous reporting on stock markets one of the great dangers facing individual investors is the temptation to time the market. Never forget that time, not timing, is the investor’s greatest ally.

If your biggest concern is when to invest your money, you’re worrying about the wrong thing. Investing a set amount each month IS fine as a saving strategy, but as an investing strategy, it’s flawed. The best time to invest is as soon as you can. If you have created your asset allocation strategy, invest now!

But many people don’t follow this advice, or they try to beat the market by picking the right time to invest.

Vacation Properties and Income – Part 2

Another way for retirees to generate income from a vacation home is to sell it. By using the federal capital gains exclusion in conjunction with the sale of your primary residence, you can potentially realize tax-free income. Here’s how it works. The basic capital gains exclusion rules state that you must have owned and used the home as your primary residence for at least two years out of the five-year period ending on the date of the sale. If you are married, the full $500,000 exclusion ($250,000 for single homeowners) is available as long as one or both of you satisfies the ownership test (two years) and you both satisfy the use test (primary residence).

Vacation Properties and Income – Part 1

If you have a vacation home, you’re already aware of the enjoyment it provides and the benefits it can offer at tax time. But you may not be aware of how vacation property can be used to generate income in retirement or how it can play into an estate plan. In fact, vacation properties offer retirees a number of different options in managing their finances and estate.
Vacation property may be used to generate income in several different ways. The first, and most obvious, is renting it. The IRS allows you to deduct mortgage interest on your primary residence and one additional property up to a limit of $1 million in combined mortgage debt for mortgages taken out after 1987. Current tax rules also allow you to rent out a second home for up to 14 days per year without having to report the rent as income. If you rent for more than 14 days, the home is considered investment property, and rent must be reported as income. Converting the property to an investment property, however, allows you to deduct rental expenses, such as insurance and utilities, if you have a net profit on the property (deductions are limited if you report a loss). You can still use an income-producing property for personal use while maintaining your tax advantages — but only for the greater of 14 days or 10 percent of the total days it is rented. Maintenance days do not count as personal-use days, but use by in-laws or other part-owners does, even if rent is charged.

Simple Truths

As a financial advising firm, one of the simple truths we have learned is that relationships are the single greatest influence on how people use their money and plan for the future. When people talk about their hopes and dreams, they talk about the people they love. Their future, the life they wish to live, is always full of the people most important to them. They don’t talk first about dollars and cents, Dow averages, or bond yields. They talk about a spouse, a parent, a child. When imagining their financial futures, even those without family often focus on others, such as employees, friends, faith communities, and charities.

Keeping Your Emotions in Check…

In times like these, with the economy in a tailspin, and the stock market in the tank, investing requires an extra dose of patience, perseverance and perspective.
It takes patience to ride out the bear market, perseverance to continue to invest even through a difficult economy, and perspective to see the long-term picture and realize that recessions and bear markets are just part of the natural economic cycle. Slumping economies and bear markets of the past have always turned around — and there is no reason to believe that this time will be any different.

Saving for College

Saving for College
Another school year is around the corner and your children or grandchildren are that much closer to college. If you haven’t already started to save for their college costs, this may be a good time to talk to your adviser about setting up a tax-sheltered college savings plan.
By planning ahead, you can use a 529 college savings plan to give your children a head start on their college costs. There are two types of 529 plans: college savings plans and prepaid tuition plans.
College savings plans are state sponsored investment accounts that allow participants to contribute regularly. A 529 plan account grows tax-deferred and withdrawals from the plan for qualified educational expenses are exempt from federal income tax. There are no income limits.

Trusts and How They Can Work For You

Trusts and You

Trusts are vehicles that can help shelter your assets from taxation and manage the property that you leave to your heirs. Simply put, you transfer property in the name of a trustee who manages it for the benefit of a third party, the beneficiary. One of the great advantages of trusts in their flexibility. They can be adapted to fit a wide variety of situations. In fact, as our attorneys at Wealth Enhancement Group say, “Trust is not the key word. Trust doesn’t tell you that much.”

What precedes the word trust tells you everything. The most important aspect of trusts is that they allow property to be managed according to the donor’s specific wishes, far into the future. Living trusts allow you to control trust assets; irrevocable trusts take away control but offer many attractive estate tax implications and more. Your advisers can help you determine which type of trust best suits your situation

Wealth Enhancement Discusses Planning For Retirement

Planning Together…

The first step in planning for retirement with your spouse is to reach an agreement on your primary objectives. Without that, a strategy is impossible, or at least a lot more complicated and expensive.

I have been amazed at how often I’ve interviewed new clients, couples creating a financial plan, who have fundamental disagreements on what they want from retirement. Sometimes they don’t even realize their differences until I ask them both to write down their ideal retirement. I get back one piece of paper from Mars and one from Venus.

As in all other things with your spouse, communicate clearly and never assume. Lay out precisely what each of you wants and decide how you can make those desires work together. Be specific. I advised one couple that was confident they shared a similar vision of retirement, a home on the beach. Only after I probed further did we all learn that he wanted to live in Florida and she wanted to live in Martha’s Vineyard. Both were shocked, and neither would budge. They had always talked about a beach home, but had never gotten around to specifying which beach.

As part of your review of your financial plan you might also want to confirm that your partner’s plans or wants have not changed. You wouldn’t want to find out years from now that your spouse decided long ago that his view of an ideal retirement had changed, but he had forgotten to tell you.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Is It Time For a Financial Checkup?

If you are working with a financial advisor already, now might be a good time for a “financial checkup”: to reconfirm your goals and time horizon, and in light of the current market environment, gain a better understanding of your tolerance for risk. All of which can help you determine whether you’re on track for a comfortable retirement.
Now more than ever, investors need a trusted financial advisor, an experienced professional who can guide you through difficult times and help maximize opportunities in good times. Further, we believe that such an advisor should be independent, not tied to the sales quotas of a large brokerage firm, for example, but committed solely to providing objective and constructive advice.

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Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.