Insert Financial Planning Workshop March 27, 2013 The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Agenda Introduction The Financial Planning Process Budgeting, Debt Management, and Saving Personal Taxes and Tax Planning Retirement Planning Investing Risk Management and Personal Insurance Estate Planning The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Introduction Patrick Donnelly, CFP® • Vice President & Senior Financial Counselor • Certified Financial Planner, CFP® • 12 years of financial services experience, as a personal financial planner to high net worth clients Matt Ilteris, EA®, CFP® • Financial Counselor • Enrolled Agent, EA® • years of experience with The Colony Group Shaun Thompson, CFA, CFP® • Financial Counselor • Chartered Financial Analyst, CFA • years of financial services experience The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com The Financial Planning Process Gathering data and goals The Colony Group, LLC Analyzing and evaluating your financial status Developing a plan Implementing the plan The Smart Choice in Wealth Management.™ Monitoring the plan www.thecolonygroup.com Budgeting Where does my paycheck go? Why is budgeting important? • Taxes • Insurance – Health, Dental, Home, Auto, Life, Disability, etc • Debt service – Student Loans, Mortgage, Auto Loan • Retirement Savings • Utilities • Food, Clothing, Furnishing • Entertainment • Travel, Vacation • Child care • Personal Savings • Identify your spending patterns • Prioritize your spending (needs vs wants) • Eliminate potentially damaging spending behavior • Control your money or your money will control you • Piece of mind and increases probability of reaching goals Note: www.mint.com is useful for tracking expenses and identifying trends The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Debt Management Organizing and prioritizing debt obligations is critical to successful financial planning Fixed Rate vs Variable Rate Student Loans Credit Cards Auto Loans – Lease vs Buy Mortgage – Rent vs Buy The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Savings Non-retirement savings • • • • • • Emergency fund (3-6 mos of expenses) Down payment on home (20% of purch.) Car purchase Vacation College savings for children Investing Retirement savings • • • • • • Starting now makes it easier Take advantage of tax-deferral Maximize employer contributions Target a 15% savings rate Avoid pauses Do not touch it until retirement The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com 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 The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com 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, selfemployed, etc.) The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Personal Tax 2013 Income Tax Brackets 2013 Ordinary Income Tax Rates Single Married (Filing Jointly) $0-$8,925 10% $0-$17,850 10% $8,925-$36,250 15% $17,850-$72,500 15% $36,250-$87,850 25% $72,500-$146,400 25% $87,850-$183,250 28% $146,400-$223,050 28% $183,250-$398,350 33% $223,050-$398,350 33% $398,350-$400,000 35% $398,350-$450,000 35% Over $400,000 39.6% Over $450,000 39.6% Alternative Minimum Tax Rates: 26%, 28% 2013 Long-Term Capital Gain and Qualified Dividend Tax Rates Single Married (Filing Jointly) $0-$36,250 0% $0-$72,500 0% $36,250-$400,000 15% $72,500-$450,000 15% Over $400,000 20% Over $450,000 20% The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Property Insurance The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Renters Insurance Policy The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Liability Insurance The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Life Insurance The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Disability Insurance The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Identity Theft The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Estate Planning Basic Documents The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Estate Planning Will The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Estate Planning Trust The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Estate Planning DPOA The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Estate Planning Living Will The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Estate Planning Personal Memorandum The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Estate Planning Steps in the process The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Contact information The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com 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 The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com [...]...Personal Tax History Class Highest Marginal Ordinary Income Tax Rates 100 90 80 70 60 e (%) Tax Rat 50 40 30 20 10 0 19 13 1918 19 23 1928 1 933 1 938 19 43 1948 19 53 1958 19 63 1968 19 73 1978 19 83 1988 19 93 1998 20 03 2008 Year Top Marginal Tax Rate The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Personal Tax Calculating Your... Personal Exemptions $3, 900 for 20 13 = Taxable Income x Tax Rate = TAX LIABILITY The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Personal Tax Take-home pay Cash Flow and Paycheck Analysis Gross $50,000 $100,000 Federal Tax $4,600 $16,000 MA Tax $1,700 $4,200 Social Security $3, 100 $6,200 $700 $1,400 Medicare 401(k) $3, 000 Medical $3, 500 6% $6,000 6% $3, 500 Disability... currently only $30 ,000 /year – supplementing is necessary The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Retirement Planning Power of Compounding and Tax Deferral Example : Inve s t $50,000 to day, e arn 8% pe r ye ar fo r 10, 20, o r 30 ye ars (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 =5 03, 100 (10.06... (50,000)(1.08) ^30 =5 03, 100 (10.06 multiple) Obs e rvatio ns 1 If you needed 5 03, 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 2 Tax deferral can increase the value of compounding because you avoid paying capital gains taxes if selling appreciated securities 3 All else equal, if you anticipate your tax rate will be lower in retirement,... rent paid to a landlord up to $3, 000 for your primary residence The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com 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 20 13 • 401(k): Traditional 401(k)... www.thecolonygroup.com Investing Portfolio Construction Growth Investment Portfolio Domestic Equities  Large, Mid, Small Fixed Income; 30 % International Equities Domestic Equities; 55% Developed, Emerging rnational Equities; 15% Fixed Income (Bonds)  Corporate, Municipal Note: Remember to keep 3- 6 months of available cash for expenses The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com... selling appreciated securities 3 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) The Colony Group, LLC The Smart Choice in Wealth Management.™ www.thecolonygroup.com Investing Basics The Colony Group, LLC The Smart Choice in Wealth Management.™... Medicare 401(k) $3, 000 Medical $3, 500 6% $6,000 6% $3, 500 Disability $500 $500 Life $500 $500 Calculated using “Single” filing status The Colony Group, LLC Net The Smart Choice in Wealth Management.™ $32 ,400 65% www.thecolonygroup.com $61,700 60% 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 ... $72,500-$146,400 25% $87,850-$1 83, 250 28% $146,400-$2 23, 050 28% $1 83, 250- $39 8 ,35 0 33 % $2 23, 050- $39 8 ,35 0 33 % $39 8 ,35 0-$400,000 35 % $39 8 ,35 0-$450,000 35 % Over $400,000 39 .6% Over $450,000 39 .6% Alternative Minimum... Tax Rates 100 90 80 70 60 e (%) Tax Rat 50 40 30 20 10 19 13 1918 19 23 1928 1 933 1 938 19 43 1948 19 53 1958 19 63 1968 19 73 1978 19 83 1988 19 93 1998 20 03 2008 Year Top Marginal Tax Rate The Colony... www.thecolonygroup.com Personal Tax 20 13 Income Tax Brackets 20 13 Ordinary Income Tax Rates Single Married (Filing Jointly) $0-$8,925 10% $0-$17,850 10% $8,925- $36 ,250 15% $17,850-$72,500 15% $36 ,250-$87,850 25%