February 15, 2012
By Perspective Financial Services
 Did you know that there’s a wealth-transfer technique you can use to reduce your taxable estate and keep more of your assets for your heirs? You can make annual gifts of up to $13,000 ($26,000 per married couple) to as many people as you wish without incurring federal gift taxes.
An example: A married couple with three children could reduce their estate by $78,000 each year if $26,000 were given to each of their children.
Gifting can be used in a number of unique ways. You can use annual gifts to help build a college fund for a child, grandchild, relative or even a friend — by contributing to a 529 plan account, a Coverdell Education Savings Account, or a UGMA/UGTA account. In fact, 529 plans have special rules that allow you to make five years’ worth of contributions in one year without incurring any gift taxes — that’s $65,000 for individuals and $130,000 for married couples.
Gifts can also be used to build wealth for future generations, as well as help a child, relative or friend fund a down payment on a home, buy a car or start a business. Your financial advisor can help you determine how annual gifts might fit into your overall financial plan.
Portions of this article were provided through the Financial Planning Association, the membership organization for the financial planning community (through McGraw-Hill Financial Communications), and is brought to you by Perspective Financial Services, a local member of FPA.
February 8, 2012
By Perspective Financial Services
 If you’re an outdoor enthusiast, at some point or another you’ve probably contemplated what you might do should you encounter a bear or other wild animal. Wildlife experts typically recommend these tips: Stay calm and don’t run. Investors might do well to heed that advice when traversing the stock market, as well.
Plan ahead: Rather than fret about which way the market is headed this week or even this month, do what 87 percent of millionaires do to reduce worries — be proactive and develop a plan (The Millionaire Mind, by Thomas J. Stanley). A sound financial plan can keep you focused on your long-term financial objectives and keep you from getting caught up in the doldrums of a short-term market downturn or the hype of the latest hot sector.
Hold on: A buy-and-hold investing strategy can help keep you from being distracted by short-term market performance. It can also potentially help reduce the risk of loss over time.
Maintain realistic expectations: Consider that since 1926, the average total annual return of the S&P 500 has been 9.9 percent (Standard & Poor’s, 2011). Maintaining realistic return expectations can make it easier to cope with short-term market downturns.
Make diversification your ally: Different types of investments lead the market at different times. By holding a well-diversified portfolio of stocks and bonds, for example, you may increase the possibility that those securities that increase in value could offset those that decrease.
Try dollar cost averaging: Think about adding to your investments on a monthly basis, as opposed to purchasing or selling securities based on anticipated market changes (called market timing). This disciplined strategy can take the emotion and guesswork out of investing. It might also save you money. By regularly investing in a mutual fund, for example, you buy fewer shares when prices are high and more shares when prices are low. Over the long term, the average cost that you pay for the shares may be less than the average price.
Seek expert advice: Meet with a qualified financial advisor regularly. In particular, you may want to get into the habit of beginning every year with a comprehensive portfolio review.
Portions of this article were provided through the Financial Planning Association, the membership organization for the financial planning community (through McGraw-Hill Financial Communications), and is brought to you by Perspective Financial Services, a local member of FPA.
February 1, 2012
By Perspective Financial Services
 In February, resolve to spend a few hours organizing your personal files and documents.
There are several personal financial records you should keep indefinitely. These include property records (home purchase, significant improvements), pension records, and retirement distribution records. Save copies of any applications or documents where you have designated a beneficiary on your account or insurance policy.
De-clutter by disposing of outdated financial statements or personal documents (be sure to shred the pages to help avoid identity theft). Generally, any tax return documents older than seven years can be purged.
Organize the remaining documents into expandable files and/or storage boxes, and make sure a family member or trusted advisor is aware of their location.
January 25, 2012
By Perspective Financial Services
 Stories abound about the fireman who retires at age 45 with a six-figure pension, or the city manager who leaves after just five years’ service with full salary and health coverage for life. What doesn’t make headlines, however, is the growing number of public sector employees who have seen their retirement benefits erode in the face of budget cutbacks and mounting public deficits.
States and cities across the country are taking steps to reduce pension costs by whittling away employees’ retirement entitlements. Even San Francisco recently saw voters approve a plan to scale back retirement benefits for city employees.
Although traditional pensions still dominate at all levels of state and local government, hybrid plans are emerging that combine a 401(k)-type component with a guaranteed benefit. In fact, 11 states now have primary retirement plans that include some defined contribution component.1
The upshot for public sector employees is that, increasingly, they are likely to need to augment their pensions with salary contributions to employer-sponsored plans or save on their own if they want to maintain their preretirement lifestyle. And since many states have “double dipping” laws in place that prevent public employees from collecting both Social Security and a state pension, the need to set aside their own funds for retirement is even more important.
How to Compensate
Several tax-advantaged retirement savings options exist that may be accessible to public sector employees. The most popular include:
- 403(b) plans are generally available to employees of qualified public organizations such as schools, hospitals and certain nonprofit employers. Similar to 401(k) plans, 403(b) plans allow employees to contribute a portion of their salary on a pre-tax basis; and no tax is paid on contributions or earnings until it is withdrawn in retirement.2
- 457 plans are available to state and local government employees and are somewhat similar to 403(b) plans. There is no penalty for early distributions from a 457 plan (however, taxes are due), although you generally cannot take in-service distributions unless you have an unforeseen emergency.
- IRAs are available to both public and private sector employees. Like 403(b) and 457 plans, IRAs also offer tax-deductible contributions and tax deferral. However, IRAs have lower annual contribution limits and eligibility for favorable tax treatment may be subject to certain income limits.2
To find more information on these or other tax-advantaged retirement savings plans, see Publication 590 at http://www.irs.gov/
Sources: 1Journal of Pension Economics and Finance, “Behavioral Economics Perspectives on Public Sector Pension Plans,” April 2011; 2Withdrawals from 403(b) plans and IRAs prior to age 59½ may also be subject to a 10% early withdrawal penalty, in addition to ordinary tax on withdrawn amounts.
Portions of this article were provided through the Financial Planning Association, the membership organization for the financial planning community (through McGraw-Hill Financial Communications), and is brought to you by Perspective Financial Services, a local member of FPA.
January 18, 2012
 The New Year is always a good time to think about your financial goals and objectives for the year ahead and beyond. But don’t feel as though you have to do everything at once. Instead of the annual ritual of overdoing New Year’s resolutions and making grandiose plans (then backsliding or giving up after a few months), why not resolve to take a series of small steps throughout the year?
During the next 12 months on our blog, we will share 12 quick, easy things you can do to help you stay on track with your financial goals. Just one thing per month — 12 proactive tasks for 12 months in 2012.
In January, resolve to call your advisor if you’ve recently had or are planning any major life changes that may impact your investment planning.
Marriage, divorce, a career change, the birth of a child, returning to school, a new car purchase and many other life events can impact your finances – both in the short term and the long term. Take just a moment to contemplate recent changes or ones you see on the horizon, and let us know what’s new. With a brief review of your investment plan, we can help ensure you stay on track with your financial goals.
Here’s a preview for the year ahead. Don’t worry, we’ll provide you with more detail when the time comes.
In February, resolve to spend a few hours organizing your personal files and documents.
In March, resolve to talk to your children or grandchildren about the importance of saving and investing.
In April, resolve to review your life, home and auto insurance policies to ensure they meet your current needs.
In May, resolve to spend a few hours volunteering your time to a charitable organization.
In June, resolve to assess your need for disability insurance.
In July, resolve to create or update your will.
In August, resolve to call a family meeting to discuss your estate plan/will, and follow it up with a fun event like a dinner or outing.
In September, resolve to review and, if needed, update all beneficiary information for your accounts and policies.
In October, resolve to create a budget for holiday spending.
In November, resolve to call your financial and tax advisor to discuss any questions you may have about your 2012 income tax filing.
In December, resolve to review your financial plan to see if the goals you’ve set are still on track and important to you.
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Did you know that there’s a wealth-transfer technique you can use to reduce your taxable estate and keep more of your assets for your heirs? You can make annual gifts of up to $13,000 ($26,000 per married couple) to as many people as you wish without incurring federal gift taxes.