harvard law school presentation 3 27 2013

Introduction The Financial Planning Process Budgeting, Debt Management, and SavingPersonal Taxes and Tax Planning Retirement Planning Investing Risk Management and Personal Insurance...

Financial Planning Workshop

March 27, 2013

Introduction The Financial Planning Process Budgeting, Debt Management, and Saving

Personal Taxes and Tax Planning

Retirement Planning

Investing Risk Management and Personal Insurance

Patrick Donnelly, CFP®

• Vice President & Senior Financial Counselor

• Certified Financial Planner, CFP®

• 12 years of financial services experience, 8 as a personal financial planner to high net worth clients

Patrick Donnelly, CFP®

• Vice President & Senior Financial Counselor

• Certified Financial Planner, CFP®

• 12 years of financial services experience, 8 as a personal financial planner to high net worth clients

Matt Ilteris, EA®, CFP®

• Financial Counselor

• Enrolled Agent, EA®

• 8 years of experience with The Colony Group

Matt Ilteris, EA®, CFP®

• Financial Counselor

• Enrolled Agent, EA®

• 8 years of experience with The Colony Group

Shaun Thompson, CFA, CFP®

• Financial Counselor

• Chartered Financial Analyst, CFA

• 8 years of financial services experience

Shaun Thompson, CFA, CFP®

• Financial Counselor

• Chartered Financial Analyst, CFA

• 8 years of financial services experience

Gathering data

and goals

Analyzing and evaluating your financial status

Developing

a plan

Implementing the plan

Monitoring the plan

• Insurance – Health, Dental, Home, Auto, Life, Disability, etc.

• Debt service – Student Loans, Mortgage, Auto Loan

• Insurance – Health, Dental, Home, Auto, Life, Disability, etc.

• Debt service – Student Loans, Mortgage, Auto Loan

• Identify your spending patterns

• Prioritize your spending (needs vs wants)

• Eliminate potentially damaging spending behavior

• Control your money or your money will control you

• Piece of mind and increases probability of reaching goals

• Identify your spending patterns

• Prioritize your spending (needs vs wants)

• Eliminate potentially damaging spending behavior

• Control your money or your money will control you

• Piece of mind and increases probability of reaching goals

Note: www.mint.com is useful for tracking expenses and identifying trends.

Organizing and prioritizing debt obligations is critical to successful

• Emergency fund (3-6 mos of expenses)

• Down payment on home (20% of purch.)

• Starting now makes it easier

• Take advantage of tax-deferral

• Maximize employer contributions

• Target a 15% savings rate

• Avoid pauses

• Do not touch it until retirement

Retirement savings

• Filing Requirement

• Tax Rates

• Tax Calculation

• Tax Savings Tips

“In this world, nothing can be said to be certain, except

Introduction

Filing requirement

Enforcement in a “Voluntary” Compliance System

• Unlike the taxing systems of certain other countries, the U.S taxing system depends largely on voluntary compliance.

• Federal and state returns need to be filed by April, 15th

Taxpayers are allowed a six-month extension to file their

return It is an extension of the time to file, NOT to pay.

• Online is easiest and inexpensive Will pick up most deductions and relevant scenarios.

• Accountants tend to be relatively expensive, but can be helpful

if your return is complicated (i.e., rental property,

self-employed, etc.)

2013 Income Tax Brackets

2013 Ordinary Income Tax Rates

Single Married (Filing Jointly)

Alternative Minimum Tax Rates: 26%, 28%

2013 Long-Term Capital Gain and Qualified Dividend Tax Rates

Single Married (Filing Jointly)

Highest Marginal Ordinary Income Tax Rates

Top Marginal Tax Rate

Calculating Your Tax Liability: The Basics

Income Tax Calculation

$ Gross Income

- Adjustments

= Adjusted Gross Income

Calculating Your Tax Liability: Gross Income

Income Tax Calculation

$ Gross Income

- Adjustments

= Adjusted Gross Income

Alimony received Interest

Business profits Gains

Rents Royalties Refunds Other

Calculating Your Tax Liability: Adjustments

Income Tax Calculation

$ Gross Income

- Adjustments

= Adjusted Gross Income

IRA contributions Moving expenses Rental expenses Other

Calculating Your Tax Liability: Deductions

Income Tax Calculation

$ Gross Income

- Adjustments

= Adjusted Gross Income

Itemized Deductions

Taxes Interest Casualty losses Charitable donations Employee education Medical expenses Other

Calculating Your Tax Liability: Exemptions

Income Tax Calculation

$ Gross Income

- Adjustments

= Adjusted Gross Income

Keeping more in your pocket

Tax Savings Tips

• Transportation: Employees can pay for transportation costs, such as a mass

transit pass or qualified parking, on a pre-tax basis up to $240/month.

• Student Loan Interest: Individuals may deduct up to $2,500 of interest paid on

a qualified student loan used for higher education, subject to AGI limits.

• Education Credits: American Opportunity Tax Credit is available for the first four years of postsecondary education The maximum annual credit is $2,500, subject to AGI limits Lifetime Learning Credit up to $2,000 (annual) available for an unlimited number of years, subject to AGI limits

• 529 College Savings Plan: Contributions not tax-deductible, but earnings grow

Keeping more in your pocket

Tax Savings Tips

• Flexible Spending Account (FSA): Allow employees to set aside a portion of earnings pre-tax to pay for qualified medical and dental expenses $2,500 limit in 2013.

• IRA: Make a Traditional IRA (pre-tax) or Roth IRA (after-tax) contribution if

circumstances warrant such a contribution.

Savings Vehicles

Power of Compounding and Tax Deferral

Example: Invest $50,000 today, earn 8% per year for 10, 20, or 30 years

3 All else equal, if you anticipate your tax rate will be lower in retirement, it is

advantageous to invest with pre-tax dollars as opposed to the after-tax equivalent (i.e 37,500 if a 25% current tax rate was assumed).

Basics

Portfolio Construction

The ability to tolerate higher volatility coupled with a long time horizon equates to a more

(more equities and less bonds).

House purchase, retirement savings, job security, etc.

Are you averse to losses?

Fixed Income (Bonds)

Note: www.morningstar.com is useful for researching mutual funds and ETFs.

Basic Documents

Will

Trust

DPOA

Living Will

Personal Memorandum

Steps in the process

The Colony Group, LLC (“Colony”) is an SEC Registered Investment Advisor headquartered in Boston Registration does not imply that the SEC has endorsed or approved the qualifications of Colony or its respective representatives to

provide any advisory services described herein.

Information provided herein is general and educational in nature It is not intended to be, and should not be construed

as, investment advice Colony’s financial planning and investment advisory services are provided pursuant to an

advisory agreement with the client.

Data and statistics included in this presentation are based upon information reasonably available to Colony as of the date of this presentation Information has been obtained from sources that Colony believes to be reliable; but these sources cannot be guaranteed as to their accuracy or completeness The delivery of this presentation shall not, under any circumstances, create any implication that the information contained herein is correct, including as of any time subsequent to the date of this presentation, and Colony does not undertake an obligation to update such information at any time after such date.

Colony’s Form ADV Part 2A and 2B and Privacy Statement will be provided as required by law.

This presentation is confidential and intended only for use of the person to whom it is distributed by Colony Further distribution or disclosure is expressly prohibited without the prior written consent of Colony.