Q: I have heard conflicting information on what the Social Security Administration looks at to calculate my benefit. Is it 35 years of working or is it my 35 highest earning years that is used for the calculation?
A: Your Social Security benefit will be based on your best 35 years of earnings. If you do not have 35 years of earnings, the Social Security Administration will use zero earnings for those gaps.

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IRA’s have been around for a long time and are widely used for retirement savings. Here are three common snafus that a lot of people make:
1. Having too many accounts. I had a client that established a completely new IRA each year he made him contribution. When we met and he asked me to take over management of his massive number of IRA accounts, they had numbered 20. I transferred all of the small IRA’s into IRA’s have been around for a long time and are widely used for retirement savings. Here are three once manageable account.
2. Using the wrong investment mix. Recently, I have been meeting a number of 20 somethings that want to start investing; they are a bit gun-shy and are very concerned about preserving principal. They are at the age where a portfolio that is weighted more towards equities vs. income is prefect. The greatest asset they have is time. Generally, with a long time horizon to invest, equities prevail.
3. Waiting too late to start your IRA. I am not referencing age; I am referencing the calendar year. If you make your deposits to your IRA in the beginning of the year, you take advantage of the great assets I just mentioned – time. Make your contributions in January vs. April, over the years the extra 3 months of tax-deferred compounding will make a difference to your retirement.

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I have a client that is in her late 50’s and a widow. Recently, she gave me a check made out to an investment company to add to her account and I noticed that the names on the account were hers and her 28 year old son. I told her that her next stop from my office needed to be at her bank. She has to remove his name as a co-owner of the account right away. I told her she could add him as a signer on her account, and she should add the “Payable on death” designation to the account.
Here is the reason you do not want to be joint owners on any financial accounts with your kids:
If her son had caused an accident and was sued, her assets may be subject to the suit and taken for a settlement.
If her son were to walk from a debt, she may be held liable.
If her son suffers a catastrophic illness and racks up huge medical bills, she could be on the hook for those bills.
I know my client just wanted someone to have access to her account in an emergency and she now knows there is a better way to accomplish that.

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We always hear of wacky things that people try to deduct from their taxable income – these happen to be deductions that, surprisingly so, worked.
When I was in high school, I was trying to decide between art school and business school. I decided I did not want to be a starving artist – who knew that if I went down that path, I could have this deduction:
If you are a “performing artist,” you may be able to deduct your business expenses if you have at least two employers. If each has paid you at least $200, and your expenses are 10% of what you make, you can take a deduction if your AGI is less than $16,000.
Are you a cat lover? This may work for you;
A couple bought cat food for feral cats that congregated at their junk yard. The cats help keep the rat and snake population down, making the junk yard safer for customers. The couples argued this before the IRS and were allowed to keep the deduction.

In this case, beer and gasoline do go together:
A gas station owner offered free beer with a fill-up. The owner’s sales increased a lot and in Tax Court the owner argued successfully that the cost of the beer was a business expense.

You can get creative, to a point with your deductions, but make sure you consult a tax professional if you will be pushing the envelope with your own wacky deduction.

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According to Fidelity Investments, female investors have outperformed male investors in the past decade. We are not selfish, so I will share with you some of the reasons why we invest better than our male counterparts.
We tend to be more patient than male investors. When investing, we tend to take a longer view of the goals. We will buy and hold a stock or mutual fund longer with the attitude of investment + saving for our families.
Because some of us are getting married later in life, getting divorced, or finding ourselves widowed at a young age, we can’t rely on guys to handle our finances. We will talk to people, seek out professional help, and read to learn what we need to know about investing.

We don’t outperform you by a lot year over year, but a win is a win!

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Whether you find yourself suddenly single due to death or divorce, the weight of becoming solely in charge of all financial decisions can be overwhelming. Here are a few key places to start:

Establish an emergency fund. Look at your immediate expenses and then the gap between those expenses and your monthly income. This will give you a guideline amount to start stashing away until your emergency fund is about 3 times that figure.
Update all of your beneficiary designations. Make sure you change the beneficiary on your retirement plans, life insurance, and bank accounts. Make sure you change the primary and contingent beneficiary.

Look at your tax picture to determine how to file your taxes. Will you deem yourself as “married filing separate”, “Single filer”, or “Head of household.” Find the filing designation that will benefit you most.

Take care of your legal designation such as; who has your power of attorney? Who can make medical decisions on your behalf? Who would handle your estate?

Most important – do not forget to take care of yourself. If you do not, you will not be any good to those you love.

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Who doesn’t love tax time! So many colorful thoughts and words come to mind. Here are some RED flags for you to avoid so you do not spend any extra GREEN:
1. Making simple errors can cost you such as math errors or forgetting to include necessary forms.
2. Inflating you charitable deductions can raise the red flag. Being charitable is wonderful on so many different levels but remember this, many charities report donations received to the IRS. Also, if your charitable donations seem significantly higher than those in your tax bracket, you will attract attention.
3. Not facing the fact that it is a hobby, not a business. If you cannot be profitable 3 out of 5 years, your business may be deemed a hobby by the IRS.
Take your time while compiling your tax return so you keep all of your green.

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This is what a new client said to me recently, and I don’t have a problem with it. My new client has been a widow for three years, and has done nothing with her assets or those she received from her husband. She finally feels ready to move forward and had asked me to look at her situation. She has accounts everywhere, with many different titles and tax considerations. I initially asked her to provide basic financial planning information to me; a list of the accounts, an expense summary, and a lot of discussion about her hopes and dreams going forward. After a few meetings, she decided she would like me to help with the management of her investments, but not all of them right now. This is where the dating begins.
She wants to get comfortable with our process, learn how to confidently read her new statements, learn to live with a new cash flow plan, and deal with taxes. She has one account that came to her in a wacky manner that caused her to pay a lot in tax up front, plus, she is paying too high of a management fee in my opinion. This is the one account she did not want to move to my management as of yet, we have not dated long enough. I do not have a problem with this; I did suggest that she ask for a reduction in management fees from her current financial advisor.
Getting to know your client and advisor through the “dating” process can lead to a very long and successful relationship.

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It’s a funny number – isn’t it? This is the number that was listed as the very small compensation to be paid to an agent proposing an annuity for a client. The actual statement is “will pay financial advisor a commission based fee equivalent to .61795% of the deposit annually over the 10yr. period of the annuity”. This 10 year annuity, that the agent also quotes an average annual return of 3%, was suggested for a client under 24/7 care with annual expenses of $75,000. The actual amount as a suggested deposit was $750,000 with the ability to withdraw 10% annually to meet the care needs without being charged a penalty. What this annuity does not allow for is liquidity of the principal in case there is an emergency beyond the 10% annual withdrawal. While this financial advisor addressed the current cash flow needs, there was, in my opinion, no forward thinking for the unknown.
By the way; the low compensation of .61795% is equal to $96,400 in the first three years – not such a funny number – is it?

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