“Better three hours too soon than a minute too late”
William Shakespeare (birthdate unknown – April 23, 1616 – Famed English poet and playwright
We selected this quote for our last 2011 commentary because of the temptation everyone has to wait until the perfect time to act, which is invariably too late. Whether it is in planning steps or investment decisions, our belief is that acting sooner than the crowd will provide long-term benefits.
As we approach the end of the year there are certain planning strategies that should be implemented or evaluated. While many of the items below may have been crossed off your list earlier in the year, some may still remain. While this may be the busiest time of year for many, taking some time out of your schedule to cross some of these year-end planning items off the list will surely provide lasting benefits.
If you have any questions or want to discuss how one of these items may apply to you, please call us!
1. Fund your Indiana CollegeChoice 529 plan to obtain the 20% state tax credit. Remember that your first $5,000 of contributions qualify for the credit.
2. Make a contribution to your favorite charity. If it will be a particularly bad tax year you may consider making some of your planned 2012 donations by the end of this year to reap the benefit of the deduction a year earlier when it is especially needed.
3. Consider a tactical contribution to your Donor Advised Fund or Family Foundation. You should be sure this makes sense from a tax perspective and fits in your intermediate and long-term charitable giving plans.
4. As you set your 2012 company-sponsored retirement plan contribution rate, consider other retirement funding strategies you will use in conjunction with your contributions to this plan.
5. Start a budget. If you have been considering a new household budget and want to better understand how you use your cash, start the year fresh and use a tool like mint.com to help you dissect your spending habits.
6. Make a Roth IRA, Traditional IRA and/or Health Savings Account contribution if you are eligible. Note the deadline for contributions to IRAs and HSAs is generally your tax-filing deadline.
7. Use the remainder of your Flexible Spending Account. If you have residual balances available they will be forfeited if not used prior to year-end.
8. Take your Required Minimum Distribution from your IRA (if older than 70.5) or Inherited IRA.
9. Make a family gift. If you planned on taking advantage of the annual gift exclusion of $13,000 this gift must occur by year-end to utilize the 2011 exclusion.
With world events continually evolving and the news changing from day to day, we thought it would be important to highlight recent action taken by the central banks of developed nations on Wednesday. The U.S. Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank agreed to lower the interest rate charged on existing temporary U.S. dollar liquidity swap arrangements by one-half of one percent (50 basis points). This joint action provides cheap, emergency U.S. dollar loans to banks in Europe and elsewhere. The coordinated action doesn’t directly address Europe’s government debt and budget woes. Instead, it is aimed at alleviating the impact of those troubles on global markets. In another move, the Bank of China lowered its reserve requirement after three years of a tightening monetary policy. Stock prices worldwide surged upward on this news and the euro also strengthened. How will this impact the markets going forward? We believe fixed investments could suffer and the growth potential of equities, from depressed valuation levels, is even more compelling. There is an old saying “don’t fight the Fed.” We think it is even tougher trying to fight seven different central banks. The coordinated printing of money will eventually result in long-term inflation. The US government has recently reported that inflation is running at close to 4%. This shows that most fixed income investments could lose wealth to inflation going forward. In our client portfolios we have greatly reduced the average maturity of our fixed income holdings to protect against rising interest rates and inflationary pressures. Given historically low equity valuation levels, we are slightly overweight stocks.
Financial Market Indices as of November 30, 2011
Last 3 Months
Last 12 Months
|S&P 500 Total Return (US stocks)||-6.0%||-3.5%||5.2%||-0.4%|
|MSCI Developed EAFE (foreign stocks)||-11.4%||-13.3%||-3.4%||-20.1%|
|MSCI Emerging Mkt. Equities (emerging country stocks)||-11.5%||-15.9%||-0.9%||-22.3%|
|Barclays Capital Aggregate Bond – Intermediate Term||0.4%||1.0%||1.9%||5.1%|
|Barclays Capital Municipal Bond Index||0.8%||1.3%||3.8%||10.4%|
During November Taylor attended Schwab’s annual IMPACT conference in San Francisco, CA. This event was held over three days and attended by approximately 2,000 advisors and an additional 3,000 vendors and Schwab employees. He spent much of his time learning more about Schwab’s efforts to help independent advisory firms integrate their various software technologies to best serve clients. The highlight of the conference was a general session with Tony Blair, former UK Prime Minister, who gave tremendous insights to global issues, particularly the challenges Europe is facing.
Perry, Terry and Ann attended the 22nd Annual Evansville Bar Association Estate and Business Planning Institute on November 18. Topics covered included, business owner succession and estate planning, IRA Trust planning, business valuation techniques and recent developments of interest to estate planners.
Payne Wealth Partners believes in giving back to the community. Please enjoy the short story and pictures of the Big Brothers/Big Sisters bike rodeo that Ann Pendley coordinated on November 5th on our website at paynewealthpartners.com
We recognize there are many in need during this holiday season. In lieu of sending baskets or other holiday gifts to clients, we are sending donations to the following charities:
You can see more about some of the charities we support on our website at paynewealthpartners.com
We highly value the trust and confidence you have placed in our team. We’ll continue to work diligently to protect and plan your financial future and seek the opportunities that will most help you in these challenging times.