FPH Insights - May 2017Submitted by Financial Planning Hawaii on June 19th, 2017
April's showers brought May Flowers. Our Marketing Director suggests taking time to stop and smell them.
Announcements, colorful commentary, and useful financial planning tidbits from John H. Robinson
Important Update RE: eMoney... On June 13th, eMoney users (i.e., nearly all FPH clients) will be required to enroll in "Client Site 2-Factor Authentication." Details may be found in this post on the eMoney Blog
How the Sausage is Made... An article I have written for my industry peers on advisor compensation models and the financial planner's value proposition has been published in the current issue of Advisor Perspectives.
First Quarter Reports Posted... FPH investment advisory clients may find their Q1 Black Diamond performance reports in the "Investments" folder in their eMoney vaults.
A Heads-up to Small Biz Owners with SEPs & SIMPLEs... Twice in the past month I have heard rumors from reliable sources suggesting that IRS may be taking a closer look at SEPs and SIMPLEs. These plans are a popular choice among many small businesses because of their low admin cost and simplicity. However, IRS is concerned that many businesses with these plans may not be in compliance with existing rules. To be clear, being caught out of compliance would be bad. IRS tends to look favorably, however, on self-correcting and reporting of errors.
Podcast - Don't Make Big Bets On Low Probability Outcomes... Readers may notice that the title of my podcast has been changed. Since I am always railing against misrepresentation in the financial advice profession, it seemed disingenuous to call it "Market Minute", when it is always considerably more long-winded. The new title permits me to ramble on guilt-free.
Social Security and Divorce
In one of the intro videos on the FPH Homepage, I refer to the search for hidden client benefits as a “Treasure Hunt.” Finding money for clients is one of the most satisfying aspects of being a financial planner, and having a thorough understanding of the complex rules for claiming social security benefits is one of the tools of the trade. Social security optimization is often the“low hanging” fruit in the quest to validate the planner's value proposition.
One of the best examples of this comes from raising client awareness of the benefits available to divorced clients who were married for at least ten years. Many divorced clients are not aware that they may be entitled to claim divorced spousal benefits when they become eligible for social security (as long as the ex-spouse is also old enough to be eligible). For some clients, the 50% spousal benefit is significantly higher than the benefit he or she would receive by claiming benefits on their own earnings histories.
Similarly, people who were married longer than 10 years and were born between 1947 and 1954 (ages 64-70) should also be aware of the opportunity for cross-claiming of social security benefits. Under this strategy, the divorced person, upon reaching social security FRA (age 66), may file a restricted application to claim divorced spousal benefits , while allowing his or her own social security benefits to accrue at 8% per year to age 70.
It is important to understand that the Social Security Administration is not aware of your previous marital status and it is not the agency’s purview to help you maximize your lifetime benefits. It is, however, right up my alley!
For more detailed information on this topic, please see the following excellent thought piece from Nerd’s Eye View blogger extraordinaire, Michael Kitces:
Save clients from costly RMD aggregation mistakes This article raises awareness of the complexity of managing RMDs from multiple types of accounts at multiple institutions.
What Health Care Directives Are Called in Your State The rules and laws governing your health care decisions if you are incapacitated depend upon your state of residence.
Yale slammed Warren Buffett's favorite investing advice, but still endorsed it The way institutions manage their money is not the way individual and families should manage theirs.
Beating Conventional Wisdom Using Roth IRAs
The the most tax efficient withdrawal outcomes require sophisticated analysis.
Securities offered through J.W. Cole Financial, Inc. (JWC) member FINRA/SIPC. Advisory services offered through Financial Planning Hawaii and J.W. Cole Advisors, Inc. (JWCA). Financial Planning Hawaii and JWC/JWCA are unaffiliated entities.
Fee-Only Financial planning services are provided through Financial Planning Hawaii, Inc, a separate Registered Investment Advisory firm. Financial Planning Hawaii does not take custody of client assets nor do its advisers take discretionary authority over client accounts.
The information contained herein is general in nature. Neither Financial Planning Hawaii nor J.W. Cole provides client specific tax or legal advice. All readers should consult with their tax and/or legal advisors for such guidance in advance of making investment or financial planning decisions with tax or legal implications.