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Presentation Transcript

  1. Insert Financial Planning Workshop March 27, 2013

  2. Agenda

  3. Introduction

  4. The Financial Planning Process

  5. Budgeting Note: www.mint.com is useful for tracking expenses and identifying trends.

  6. Debt Management

  7. Savings

  8. Personal Tax Introduction • Filing Requirement • Tax Rates • Tax Calculation • Tax Savings Tips “In this world, nothing can be said to be certain, except death and taxes.” - Benjamin Franklin

  9. Personal Tax Filing requirement Enforcement in a “Voluntary” Compliance System • Unlike the taxing systems of certain other countries, the U.S. taxing system depends largely on voluntary compliance. • Federal and state returns need to be filed by April, 15th. Taxpayers are allowed a six-month extension to file their return. It is an extension of the time to file, NOT to pay. • Online is easiest and inexpensive. Will pick up most deductions and relevant scenarios. • Accountants tend to be relatively expensive, but can be helpful if your return is complicated (i.e., rental property, self-employed, etc.)

  10. Personal Tax 2013 Income Tax Brackets

  11. Personal Tax History Class

  12. Personal Tax Calculating Your Tax Liability: The Basics

  13. Personal Tax Calculating Your Tax Liability: Gross Income Compensation (W-2)DividendsAlimony receivedInterestBusiness profitsGainsRentsRoyaltiesRefundsOther

  14. Personal Tax Calculating Your Tax Liability: Adjustments Business expensesLosses from salesAlimony paidIRA contributionsMoving expensesRental expensesOther

  15. Personal Tax Calculating Your Tax Liability: Deductions Higher of: Standard Deduction Single: $6,100 MFJ: $12,200 Itemized Deductions TaxesInterestCasualty lossesCharitable donationsEmployee educationMedical expensesOther

  16. Personal Tax Calculating Your Tax Liability: Exemptions $3,900 for 2013

  17. Personal Tax Take-home pay Cash Flow and Paycheck Analysis Calculated using “Single” filing status

  18. Personal Tax Keeping more in your pocket Tax Savings Tips • Transportation: Employees can pay for transportation costs, such as a mass transit pass or qualified parking, on a pre-tax basis up to $240/month. • Student Loan Interest: Individuals may deduct up to $2,500 of interest paid on a qualified student loan used for higher education, subject to AGI limits. • Education Credits: American Opportunity Tax Credit is available for the first four years of postsecondary education. The maximum annual credit is $2,500, subject to AGI limits. Lifetime Learning Credit up to $2,000 (annual) available for an unlimited number of years, subject to AGI limits. • 529 College Savings Plan: Contributions not tax-deductible, but earnings grow tax-deferred and qualified distributions are tax-free. • Massachusetts Rental Deduction:Limited to 50% of the rent paid to a landlord up to $3,000 for your primary residence.

  19. Personal Tax Keeping more in your pocket Tax Savings Tips • Flexible Spending Account (FSA): Allow employees to set aside a portion of earnings pre-tax to pay for qualified medical and dental expenses. $2,500 limit in 2013. • 401(k): • Traditional 401(k) contributions are made with pre-tax dollars (upfront tax break, taxable when distributed). • Roth 401(k) contributions are made with after-tax dollars (no upfront tax break, tax-free when distributed). At the very least, contribute enough to obtain the maximum employer match, if available. • IRA:Make a Traditional IRA (pre-tax) or Roth IRA (after-tax) contribution if circumstances warrant such a contribution.

  20. Retirement PlanningSavings Vehicles Note: Social Security approx. max benefit is currently only $30,000 /year – supplementing is necessary.

  21. Retirement PlanningPower of Compounding and Tax Deferral Example: Invest $50,000 today, earn 8% per year for 10, 20, or 30 years(50,000)(1.08)^10 = 107,900 (2.15 multiple) (50,000)(1.08)^20 = 233,000 (4.66 multiple) (50,000)(1.08)^30 = 503,100 (10.06 multiple) Observations If you needed 503,100 at retirement, but only had 10 years to invest, you would need to either (a) invest 233,000 or (b) earn 26% per year. Tax deferral can increase the value of compounding because you avoid paying capital gains taxes if selling appreciated securities. All else equal, if you anticipate your tax rate will be lower in retirement, it is advantageous to invest with pre-tax dollars as opposed to the after-tax equivalent (i.e. 37,500 if a 25% current tax rate was assumed).

  22. InvestingBasics

  23. InvestingPortfolio Construction The ability to tolerate higher volatility coupled with a long time horizon equates to a more aggressive asset allocation (more equities and less bonds). House purchase, retirement savings, job security, etc. Are you averse to losses?

  24. InvestingPortfolio Construction • Domestic Equities • Large, Mid, Small • International Equities • Developed, Emerging • Fixed Income (Bonds) • Corporate, Municipal Note: Remember to keep 3-6 months of available cash for expenses.

  25. InvestingMarketplace Note: www.morningstar.com is useful for researching mutual funds and ETFs.

  26. Risk Management and Personal Insurance

  27. Health Insurance

  28. Automobile Insurance

  29. Automobile Insurance Policy

  30. Property Insurance

  31. Renters Insurance Policy

  32. Liability Insurance

  33. Life Insurance

  34. Disability Insurance

  35. Identity Theft

  36. Estate PlanningBasic Documents

  37. Estate PlanningWill

  38. Estate PlanningTrust

  39. Estate PlanningDPOA

  40. Estate PlanningLiving Will

  41. Estate PlanningPersonal Memorandum

  42. Estate PlanningSteps in the process

  43. Contact information

  44. Disclosures The Colony Group, LLC (“Colony”) is an SEC Registered Investment Advisor headquartered in Boston. Registration does not imply that the SEC has endorsed or approved the qualifications of Colony or its respective representatives to provide any advisory services described herein. Information provided herein is general and educational in nature. It is not intended to be, and should not be construed as, investment advice. Colony’s financial planning and investment advisory services are provided pursuant to an advisory agreement with the client. Data and statistics included in this presentation are based upon information reasonably available to Colony as of the date of this presentation. Information has been obtained from sources that Colony believes to be reliable; but these sources cannot be guaranteed as to their accuracy or completeness. The delivery of this presentation shall not, under any circumstances, create any implication that the information contained herein is correct, including as of any time subsequent to the date of this presentation, and Colony does not undertake an obligation to update such information at any time after such date. Colony’s Form ADV Part 2A and 2B and Privacy Statement will be provided as required by law. • This presentation is confidential and intended only for use of the person to whom it is distributed by Colony. Further distribution or disclosure is expressly prohibited without the prior written consent of Colony.