financial fridays financial planning assessment las vegas (2)
TRANSCRIPT
Financial PlanningDevelopments and Opportunities
Leonard C. Wright, CPA/PFS, CGMA, CFP®, ChFC®, CLU®
Money Doctor, American Institute of Certified Public Accountants
360financialliteracy.org
FeedThePig.org
Financial Fridays Financial Literacy App:
Leonard Wright, CPA/PFS
Intention
The Truth In Your Heart
Agenda
Financial Planning – The Process
Business Planning Opportunity – ERISA Plans
Financial Planning – The Elements
Insurance Planning – The Pitfalls and the Leverage
Investment Planning – The Future
Covey Matrix
• Emails• Junk Mail• Solitaire• Unproductive
activities
• Unimportant call• Unplanned knock
at the door.• Unnecessary or
lengthy meetings.
•Tax Planning•Financial Planning•Estate Planning•Risk Management Planning
• Investment Planning.•College Planning.• Relationship building• Systems Development
•Annual Tax Returns•Form 706•Annual Review/Audit•Extensions.•RMD•Client Report•Payroll Tax Returns
Important/
Urgent Important/Not
Urgent
Not Important
/Not
Urgent
Not Important
/Urgent
Financial Planning
Strategies Tactics Tools
Financial Planning
Mission Vision Values Goals
Financial Planning
• Solutions• Strategies• Tactics• Tools
• Strategies• Tactics• Tools
• Mission• Vision• Values • Goals
• Ensure that STT continue to be consistent with Mission Values and Goals.
Review
IdentifyDevelopImpleme
nt
Courtesy: Legacy Boston
Financial Planning If We Don’t Assess family mission vision values and goals
Something is not right, just can’t put a finger on it.
Estate plan documents get written, but not signed.
It may feel like, these guys are trying to push me to buy something.
I just don’t have peace of mind. The environment is challenging.
The Process of Planning Planning Questionnaire.
Very low focus questions on the stuff you have.
Complexity Questionnaire.
Risk Questionnaire.
Kolbe Questionnaire.
Where Do You Write the Check?
Facts
1. 4 entities investing in Real Estate, $17k per entity.
2. 24 months later the property sold with $139k to each.
3. The proceeds reinvested and within 18 months $250k value generating a 10 percent IRR on $250k.
Advice RenderedThird Party Administrator turned planner advised to buy through Defined Benefit Plan.
Intention: Save $4,000 in tax short term.
While taxation delayed until RMD required, it permanently changed the bracket to the highest marginal ordinary income tax rate for the client.
Outcome: $3,000,000-$6,000,000 additional tax paid in the long run with a permanent loss of family net worth.
End ResultAge Defined Benefit
PlanRoth 401k/IRA
70 1,855,000 2,980,000
75 2,455,000 4,799.000
80 4,203,000 7,728,000
85 6,432,000 12,446,000
90 9,661,000 20,045,000
401k/Profit Sharing Plans Firm acts as Trustee.
Can be set up to discriminate under the proper conditions.
If employees below SS Threshold, and combined with Worker’s Comp, the plan can pay for itself through significant savings.
Nearly 100 percent enrollment – including Hispanic speaking populations.
Pre-Programmed to triple the level of retirement plan success.
Creates a retirement liability on an individual basis.
Provides a platform to expand employee benefits/planning.
Allows 4 different investment options
Low cost funds
Tax Free Tax Deferred
Tax Advantage
d
Taxable
What Roth IRA IRA Real Estate BondsRoth 401k 401k Oil and Gas STCG
Muni Bonds Simple IRA Stocks
Life Insurance SEPDividends
Distribution Annuity
Loans DBP
1035 X LTC
Who Low Income Rising Rising Diversifier
A portion for Income Income Safety Rising Income Save for RI Save for RI IncomeEstate Planning RI Distr RI Distr.LTC Planning Annuities
Age 16-80 31-70 31-70 25-100
RMDs No Yes N/A No
Tax at LTCGDistribution None OI STCG OI
Special Rules
Tax Diversification
Number of Tax Diversification OptionsUsed and Kept over the Years.
Level ofHappinessIn Retirement
Elements of a Financial Plan
Elements of the Financial Plan
Insurance Planning - PersonalInsurance Planning - PropertyInvestment PlanningTax Planning – Scott TaylorEstate Planning – Scott Taylor, Brooke BorgRetirement PlanningAsset Protection Planning – Brooke BorgEducation Planning
Proper planning requires that we get comfortable with that whichwe have the least comfort.
--Leonard C. Wright, CPA/PFS, CGMA
Insurance Planning
•Mitigating Risk
•Types of Risk
•Preserving Wealth
•Non Qualified Planning Options
Creditor Protection
Tax Free Distribution if planned properly
Tax advantaged accumulation
High flexibility for loans and distributions
Estate planning tool.
Failed Intentions: Read the Contract
Page 21: Index
Index. Index refers to the Standard & Poor's 500 Index, excluding dividend
income. It will be used in the determination of Index Earnings made to each
segment within an Equity-Indexed Strategy. If the publication of the Index is
discontinued, a suitable index will be substituted and you will be notified of such
index. Comment
The Index 500 has averaged about 10 percent per year over the decades. During the 1990s the markets went crazy and later crashed ending in a decade with zero returns from 2000-2009. The 90s dividend payout accounted for a record low 23 percent. Excluding that decade, the average portion that dividends accounted for of the return of the S & P 500 was nearly 60 percent. Some studies have shown that what one accumulates over time is reduced by up to 85 percent if dividends are excluded. Quite simply, you can't compound that which you don't have.
Failed Intentions: Read the Contract
Participation Rate is determined in advance for each twelve-month period and is subject to
change on each anniversary of the creation of a segment. The Participation Rate will never
be less than the Guaranteed Minimum Participation Rate for the applicable strategy shown
in the Data Pages. On the Data Page of the Contract: GUARANTEED MINIMUM PARTICIPATION RATE: 30% Although this falls under option 2 and is currently specified as 120 percent, the insurance company has the "Right" to reduce it by 75 percent.
Failed Intentions: Read the Contract
Overloan Protection Rider According to the rider, you will have 60 days to respond and pay a premium when your policy goes into an excessive "Overloan" status. Failure to do so will result in a cancellation of the rider and the policy shall lapse. You must meet the following conditions for the rider to kick in; over age 75, have the policy for at least 15 years, the loan balance must be more than the face value, and the outstanding debt must be at least 95 percent of the outstanding value less surrender charges. Comment My perspective is that this is a very dicey position for you to be placed in. You fail this test, you could end up with taxable income you don't want to think about. Supposing you had a stroke and your wife was worried about you and did not pay attention to this notice. There are many circumstances that you could have significant issues. The rider stipulates a premium to be paid, but does not state how to calculate it. Nevertheless, this is a tough provision. You have it as long as you can respond within a few weeks. My view is that if they really wanted to give you this rider, they would have built it into the contract and priced for it rather than some sort of premium within a few days to be paid decades down the line. Needless to say, I will be following up with the company to get more specifics on this provision.
Yes I promised Lifetime Income
Some annuity companies are trying to find out how they can get out of paying rich benefits that they can no longer afford to pay.
Allowed insured to pick the most aggressive investments and lose big time.
Excitement About Life Insurance
Amount of Time weShare Talking About
GamblingStocks
AndReality TV
Interest About
Financial Planning.
Interest WeHave In LifeInsurance
Opportunity Lost
Benefit ofProper
LifeInsurancePlanning
WhenMatched
To MVVG
Amount Insurance
AgentKnows.
AmountFamily, FriendsAnd StrangersKnow AboutLife Insurance.
Disabled CashTax Advantaged AssetsTax Free Distributions Long Term Care Potential Income Stream (risks)
Life Insurance Quality Assessed
Performance History?
Ratings?
Structure?
Rate Increases?
Contractual Provisions?
In Force Ledgers?
Life Insurance Considerations for Today’s Market
Verify Ownership
Verify who the beneficiaries and contingent beneficiaries are.
Review the Insurance company
Run an in-force ledger
Cash projections for future premiums.
Verify what the purpose of the policy was intended to Accomplish.
Life Insurance Company Issues
Exposure to sub-prime investments in their investmentportfolios.
Exposure to guarantees on variable annuities.
Exposure to inadequate pricing assumptions on issuedpolicies.
Debt listed as equity on the balance sheet. (Surplus Notes)
Move to weaken reserve requirements.
To No Lapse or Not to No Lapse
No cash value
No flexibility
Can’t miss payments or No Lapse provision void. The policy could go to zero value.
Conflicting perspectives within the same firm.
Life Changes over time.
Long Term Care Experience
Likelihood of an event
Age
Resources
http://www.aicpa.org/Press/PressReleases/2012/Pages/AICPA-Offers-Free-Consumer-Webinar-on-Planning-for-Long-Term-Care.aspx?action=print
Long Term Care for Consumers: Planning for Your
Future Health Care in Plain English
Investment Planning
Risk Perception vs.
Risk Tolerance
What is the Market Going To Do?
Important to UnderstandThe PastDow Cycles
1906 103
1923 103
1929 381
1954 381
1967 995
1982 995
2000 11,750
2002 7,286
2007 14,164
2009 6,547
2014 high 18,053
02/06/15: 17,824
Tomorrow ??????http://stockcharts.com/freecharts/historical/djia2000.html
Focus on Noise: Not Connected With Plan
NoiseHHS, SS, Interest Nearly Entire
BudgetJim Cramer
GoldMake 50%Today!
Armageddon Debt 21T
Deficit $400BState Debt 3T
Global and
Investment info
Important:Your PlanYour Life
Complications of Intentions
Confusion between Risk Perception and Risk Tolerance.
Subjectivity. Perspectives. Risk levels not defined. Lack of competency. Ineffective communication. Behavioral Economics
Investment Planning Does your investment portfolio have a job description that is
consistent with your MVVG?
Has an acceptable risk tolerance been developed, and is it reviewed annually?
Is there adequate diversification?
Has the quality of the assets been evaluated?
Have portfolio turnover rates, expense charges, and fees been evaluated?
Leonard Wright, CPA/PFS App
KLAV 1230 AM, Las Vegas Nevada 3-4PMhttp://www.klav1230am.comAll shows are podcastGo to: PBTK.COM
Leonard C. Wright,Scott Taylor,Jason A. ThomasFinancial FridaysUpdates at Leonard C. Wright
Follow at leonardcwright
[email protected]@[email protected]
AICPA Money Doctor: 360financialliteracy.orgFeedthePig.org, TotalTaxInsights.org
CPA DailyFinancial Fridays Daily
Leonard C. Wright, CPA/PFS, CGMA, CFP®, ChFC®, CLU®