News & Insights

Is your CPA a Tax Preparer or a Tax Planner?

by Jim Freeman, CFP® on 8/14/2018

Tax planning ranks low on the list of activities people enjoy. Yet despite how astronomically large the tax bill can be in April, after tax season many people do not sit back down with their tax professionals to do in-depth planning. As a result, simple things getting overlooked on a regular basis that needlessly cost taxpayers thousands of dollars.

The goal of today’s blog is to give you a partial checklist and, most importantly, to inspire you to bring this topic up with your tax advisor and to initiate an annual tax planning protocol.

Below I’ve highlighted a few of the more commonly neglected categories:

  • Am I maxing out my tax deductible retirement plans? There can be numerous tax-sheltered buckets to fill here. Some defined-benefit retirement plans allow for six-figure annual contributions! Filling these buckets both lowers taxable income and allows your savings to compound tax-free.
  • Am I eligible for the new Qualified Business Income deduction? If not, what can be done so that I am?
  • If I am a business owner, am I unnecessarily overpaying on my payroll taxes by paying myself too high a salary?
  • Am I eligible for a Heath Savings Account (HSA) and am I funding it? Many people use their HSA as another retirement account as you get to add $3,500 per year pre-tax, those savings compound tax-free, and years later in retirement they can also be withdrawn tax-free. In this way, the HSA works like a hybrid Traditional/Roth IRA.
  • Are there any simple adjustments available that can help drop my taxable income into a lower tax bracket? For example, business owners can strategically deploy capital expenditures into a certain tax year. Or charitable contributions can be prepaid or delayed. Or 529 College Savings Plans can be strategically funded for tax efficiency.
  • Am I taking advantage of “tax loss harvesting” in my investment accounts?

These are just a few. There are many nooks and crannies to explore and exploit for tax savings. They are often easily uncovered through these basic due-course planning discussions. A great example of this is charitable giving. Oftentimes I see people making annual donations from their after-tax savings when they should not be. For retired clients, they can often use pre-tax IRA funds to make such a donation. Or we’ll see others who could be donating appreciated stock thereby avoiding capital gains tax.

The complexity of taxes scares people off but as you can see there as so many ways that money can be saved by paying a little bit of attention to them. The good news is you don’t have to even understand it. All you need to do is schedule the annual tax planning check-up.

posted in General

Introducing eMoney, a Financial Planning Beneficence for our clients!

by Ellen Li, MSBA, CFP® on 8/1/2018

As of this month, Financial Alternatives is rolling out a Personal Financial Management platform called eMoney for our clients. This portal will provide clients with secure access to real time values of all of their accounts across various custodians including held-away 401K accounts and liabilities such as student loans, mortgages, and credit cards.

What benefits does eMoney provide for our clients?

You can see the whole picture by logging on to just one platform

Gone is the day when you have to wait for Fidelity or Schwab’s month end statements or Financial Alternative’s quarterly reports to get an integrated look at your financial situation, from all angles and leaving no stone unturned.

You’ll no longer need to provide your bank account or liability statements for your annual review if you link the accounts in eMoney. Also, you won’t have to worry about keeping track of multiple account log ins anymore as your information will all be held in one place.

You can reduce time spent on creating a budget

eMoney isn’t just about investments.  Clients can add their bank accounts to this platform as well. Just as Mint does, you can see your checking balances and bills.

Procrastination is a huge problem when it comes to budgeting. Who wants to repeatedly track down every last bill or savings account statement? Reduce time spent on the administrative aspects and you’ll find time spent on creating your budget to be more productive.

Read more

posted in BlogGeneralPersonal Finance

Avoiding the Web Can Be Bad For Your Financial Health!

by Chris Jaccard, CFP®, CFA on 7/23/2018

With cybercrime constantly making headlines, it’s no wonder that some people have resorted to avoiding the web altogether as a way to prevent exposure to this risk.

Think again.

Unfortunately, the premise that you can’t be hacked because you haven’t set up online accounts with your bank, utility company, brokerage firm, etc., isn’t a sound one anymore. Many years ago this may have been true, but the unfortunate reality is that nowadays there is nowhere to hide from cybercrime.

The Allure of Anonymity

Despite the advantages that our cyberconnected world has delivered to our doorstep, it seems like this change isn’t one that people welcome with complete open arms.

According to a study by Pew Research Center, 86% of adult internet users have resorted to tactics to enable them to travel the web incognito. Examples include clearing or disabling cookies, trying to mask your identity, using a fake name, or using an anonymous browsing service (as per Rainie et al, 2013). It’s clear that most people have a desire for more online privacy.

Technology can empower our lives and strengthen our ability to connect with the people and things that we want in our lives. Yet there is a price for this progress. In today’s world it seems as if everything is connected to the internet somehow. As far as we’ve come, however, we’re still in the dark about controlling the flow of information so that it doesn’t get into the wrong hands in the midst of all of this.

Read more

posted in BlogGeneralPersonal Finance

Loopholes for Substantial and Perpetual Property Tax

by Jim Freeman, CFP® on 7/9/2018

This blog was written in conjunction with guest author Matt Brand.

Homeownership is quickly becoming a luxury that fewer can afford in California these days. But it doesn’t have to be – if you know the tax code.  In this column we highlight some lesser known property tax loopholes that can help ease the financial burden for those who qualify.

Tax Loophole That May Apply to You

Most people know about Proposition 13, which applies to all California homeowners. It caps property tax at 1% of home value as determined by purchase price and then it limits annual increases to no more than 2% annually thereafter.

There are a handful of loopholes that apply to people in specific circumstances and these are not well known.

Proposition 60 lets homeowners who are 55 or older sell their home, buy a new one, and transfer their “old” home’s tax assessment basis to the new home (“property tax portability”). Such fortuitous transfers are permitted only once in a lifetime. And this law only applies to moves into a home of equal or lesser value and to moves within the 11 participating counties (including San Diego). But these rules may soon become more flexible.

Read more

posted in BlogInvestmentsPersonal Finance

Financial Questions to Ask Yourself on Your Work Anniversary

by Ellen Li, MSBA, CFP® on 6/26/2018

Perhaps the notifications we get on LinkedIn have led to the popularization of the term “work anniversary. ” The passing of another year isn’t just nominal; it can be an opportunity to evaluate how well your job is meeting your financial needs. As you celebrate another year at your job, here are some questions that you should ask yourself.

Income

The first thing to ask yourself on your work anniversary is if the salary still fits your income requirements. If not, consider putting together a summary of your accomplishments and contributions over the year to make the case for higher compensation.  Always know if your salary is in line with what others are earning. You can check this information on sites such as Payscale.

When looking at your income, try to get an idea of what your future earnings are projected to be if you were to continue on along the same path. At which point do you anticipate a bump in earnings? What action would you need to commit to in order to earn that increase?

It may be a good time to think about what your retirement will look like at your projected earnings. Are you comfortable with where you would be in retirement at this rate or does it signal a possible shortfall?

Key questions to ask yourself:

  • What do I need to do to make more money, and it is worth taking the risk at this point in my life to do that?
  • Am I earning an income that is commensurate with my skills and experience?
  • What is the position I will be in when I retire if I continue to earn the level of income I am projecting?

Read more

posted in BlogPersonal Finance

What is the Right Way to Educate the Next Generation About Money?

by Jim Freeman, CFP® on 6/22/2018

Here are some tips for successfully imparting the knowledge and wisdom about money that your family needs to educate the next generation about money.

Most families, even the more financially successful ones, don’t talk about money the right way, or even put much attention into discussing money as a family at all. For a variety of reasons this is harmful to a family’s continued wellbeing. Here are some tips for successfully imparting the knowledge and wisdom about money that your family needs to know to educate the next generation about money.

Family Money Conversations are Tough

More often than not, family dialogues about money don’t happen the right way. Everyone wishes they had more money. As a result, conversations can get emotional and often degenerate into:

  • Arguing
  • Complaining
  • Finger pointing
  • Regret
  • Resentment (Mom and Dad paid to send you to med school and didn’t have enough for me)
  • Shame (I loaned my ex-boyfriend some money and he never paid me back)
  • Jealousy (My brother makes more money than me)
  • Fear

If money is even on the agenda at all, it’s normally not a constructive addition to the family meeting. How is that conducive to a system that will educate the next generation about money?

Read more

posted in BlogPersonal Finance

Stuck in Paradise

by Jim Freeman, CFP® on 6/4/2018

The following is an excerpt from The Financial Alternatives Column in Coast News. In this article, Jim’s co-author Matt discusses his decision to stay in his condominium.

I recently explored upgrading from my current condo into a house, but the resulting property tax and mortgage expense increase would be too great for me to justify a move. This same predicament, which I call the “golden handcuffs” provides disincentives for many homeowners to move, fanning the flames of the affordable housing shortage in North County.

FINISH READING HERE

posted in Blog

What You Need to Know About Preventing Elder Abuse in La Jolla, CA

by Chris Jaccard, CFP®, CFA on 5/18/2018

It is a sad fact of life that often those who are close to us are the ones who have the ability to hurt us the most, even trusted caregivers or family members. Members of the La Jolla community may recall the chilling case of Robert Stella, an elderly man who was tied to his bed, starved, and forced to live in squalor by his ex-wife (NBC, 2014). Elder abuse can happen to any older adult in any community, but the subject of our story today is how our community members in La Jolla, CA may defend themselves and their loved ones from elder abuse.

Elder Abuse: The Silent Perpetrator

Elder abuse takes many forms. In some cases the crime is overt and violent, but most of the time the unsuspecting victim is silently preyed upon for a period of time by a familiar person.

  • It can be as surreptitious as the plumber who “cases” the house on routine visits, only to return back through an unsecured window at a time when he knows that the victim is asleep or habitually out of the house. He pillages as much money and jewelry as he can from the places where he knows the victim keeps her valuables, and then leaves.
  • Elder abuse can happen over the phone. Let’s say an older adult suffering from dementia receives a solicitation from someone pretending to be a relative, saying that they have an immediate need to wire over some money to get them out of a pinch.
  • We’ve even heard of Medicaid facilities partaking of the monies awarded to the facilities’ patients to use for themselves while the patients starve or go malnourished.
  • Sadly, elder abuse even happens within families. Ex-spouses, children, siblings, cousins, etc., acting out of desperation, can act as perpetrators of this crime to their own family members.

Americans who are financially abused lose an average of $140,500, according to a Certified Financial Planner Board of Standards study (CFP Board, 2012).

Finally, the Industry Reacts

Over the past few years, several states have enacted regulations to protect vulnerable adults from exploitation and abuse and now the financial services industry is catching up – enacting the first uniform, national standard to protect vulnerable adults.

Read more

posted in BlogPersonal Finance

What Your Investment Advisor Should Be Doing to Protect Your Confidentiality

by Financial Alternatives on 4/2/2018

Here are some things your investment advisor should be doing to protect your client confidentiality.

Silence and privacy are the most undervalued assets in a client’s portfolio. We say this to acknowledge an often overlooked facet of investment management and financial planning: client confidentiality. This is something that many financial advisors and even their clients don’t pay enough attention to until it is too late. Is your advisor doing what your advisor should be doing to protect your confidentiality? Read on to figure it out. 

The Affluent Person’s #1 Fear is Being Discovered 

Anyone who has been taken advantage of financially knows too well that wealth can sometimes attract unsavory types and bring out the greed in people. Most affluent people live in fear (and in fact it is their #1 fear) of having others in their lives –including some of their friends and relatives – know how much money they have. They could end up being judged or criticized and the awkwardness it creates may be harmful to relationships. 

Aside from the social fears, there are real risks to having the public know how much money you have. You face a higher risk of being kidnapped or robbed. And that leads to the affluent person’s second biggest fear – losing it all.  

Read more

posted in BlogGeneral

Beware the Ides of March: Are You Your Own Retirement’s Worst Enemy?

by Financial Alternatives on 3/7/2018

The Ides of March commemorate Julius Caesar, the Emperor who significantly expanded the Roman Empire — only to meet his demise by a conspiracy carried out by his own people.  Just as Caesar’s fate turned to misfortune as a result of his tragic flaw, we see people who are their wealth’s worst enemy. If you’re making these retirement planning mistakes, it’s best to seek counsel before the bright day brings forth the adder.

Making Emotional Decisions

In our decades of experience, we’ve seen examples of perfectly rational, logical people who make emotional decisions that lead to their finances becoming compromised. Unfortunately, being called in to be the independent voice of reason after the fact is a step too late.

A common emotional trap that people run into when managing their own money includes holding on to company stock or an inherited position for nostalgia reasons. This can lead to dangerously undiversified portfolios.

Timing the Market

Very few people get this right. Most of the time, trying to sell at the top of the market and buy when the market has dipped creates more trouble than it prevents. Even professional money managers can’t successfully time the market.

Choose an advisor who will balance your needs for principle protection, income, and growth against market conditions. This approach, rather than one of reactive trading, is the best way to create long term growth.

Read more

posted in BlogGeneralPersonal Finance

Blog Topics

Featured Literature

Search

Subscribe

Receive updates by email.

Disclaimer

Posts are general in nature and do not constitute the rendering of legal, investment, accounting or other professional advice.