Retirees can claim Social Security benefits at any age between 62 – 70, and the later you start, the bigger your benefit.  Just how much bigger depends on when you were born.  Americans born from 1943 – 1954 have a normal or full retirement age of 66.  They get 25% less than their normal benefit if they cash in at 62 and 32% more than their normal benefit if they wait until age 70.  Those born after 1960 have a full retirement age of 67.  While the above benefits appear dramatically different, in theory the system is designed to be actuarially neutral — meaning if you live to an average age, then you should end up with the same total benefit regardless of when you claim.  While this is great in theory, life tends to play by its own rules and we should consider all relevant information.  Today, I want to look at the following three points when you’re making your decision:

If you’re still working, don’t claim your benefits before full retirement age. 
Prior to full retirement age, Social Security benefits are subject to the earnings penalty.   For each $2 you earn above $14,640, you lose $1 of your annual Social Security benefits.  After full retirement age, benefits are no longer reduced regardless of how much you earn.  Simply put, it does not make sense to take early Social Security benefits if you are still working — unless you absolutely need the additional income.

Should you consider the break-even analysis?
A break-even analysis aims to help you decide when to take Social Security in order to receive the most money out of the system to cover your remaining lifetime.  Your break-even age is the age at which the present value of delaying benefits is equal to the present value of taking early benefits.  Obviously your health and family history should play a role in this analysis.  If your family has a history of living into their 80s or 90s, then you would be better served to delay benefit until at least your full retirement age, or age 70.

Understand the married game.
This concept is important and complex and if designed correctly, provides the beneficiaries the greatest flexibility in maximizing Social Security benefits.  There are favorable options for married couples that the actuarial equivalence of early and delayed benefits, mentioned above, do not take into consideration.  For example, if one spouse passes, the survivor can claim the deceased spouse’s check instead of their own, assuming the deceased spouse’s check is larger.  Therefore, at least one partner (the higher earner) should delay benefits past age 66, to buy the higher lifetime second-to-die annuity.

A common strategy is the “62 / “70 rule, which allows benefits to start early but delays the higher earner’s future benefits until they cap out at age 70.  Under this system, the lower-earning spouse files for Social Security benefits at age 62, while the higher earner delays benefit until age 70.  No matter which spouse dies first, the smaller benefit will die off as the living spouse can claim either their benefit or up to half of the spouse’s benefit, whichever is higher.

Additionally,  suppose the high income earner wants to collect some benefit prior to reaching age 70.  This can be achieved once he or she reaches full retirement age of 66 by claiming spousal benefits (50% of spouse’s income) and deferring his own earned benefit until reaching age 70.

As noted above, determining when to draw Social Security is a complex and difficult question to answer.  There are many more factors to consider that were beyond the scope of this blog but the point is to understand that retirees have options and a combination of the above considerations should help ensure one is maximizing their Social Security benefits.  If you have any questions or are nearing retirement age, we encourage you to talk to a trusted financial advisor on this topic.

What I mean by marketing consistently is conveying your message and performing your marketing strategy on a regular schedule.  The trap that many (including myself) have fallen into, is marketing only when you have time.  This leads to spikes in busy times and down times.  Many businesses have some seasonality to their customer flow.  The less busy times are when you have time to market, so you do.  This can lead to your normally busy times being even busier.  Of course, now you are so busy that you don’t have time to do your marketing.  The cycle continues.  Here are a few tips to help you market consistently.

Use a marketing calendar.
I advocate having a rolling one-year marketing calendar.  The calendar should illustrate your next 12 months of marketing activities.  This calendar will help you identify when you have holes in your marketing strategy.  Plan to cover up these holes.  If you send out a mailer every six weeks, for instance, then think about what you can do half-way through each cycle.  If you do a lot during the holiday season, what can you do similarly in the spring/summer months?

Use your team to keep you on track.
Utilize those around you to make the marketing plan happen.  Perhaps during your busy times, again when marketing tends to fall off, make sure you have marketing tactics planned that your team can administer without much direction from you.  Maybe you have an employee who enjoys writing or using Facebook or Twitter — utilize his/her skills and ability to enhance your marketing approach.  By spreading the responsibility, you maintain marketing on a regular consistent basis.

Don’t be afraid to outsource.
There are a lot of great professionals out there who are worth what you may pay for them.  Find one who has experience in your industry so you can leverage not only their general marketing expertise but also their expertise with your specific target customer.  A marketing professional can help you with planning your strategy, the execution of your strategy… or both!  You can use them to perform one particular piece of your plan — website optimization, for example.  Or use them to be your resource when you don’t have the time to commit to consistent marketing.

Want to see more consistent results?  The answer is consistent marketing.

Indiana allows the parent(s) to claim the exemption for their dependent and also allows the child to claim a personal exemption on their own return.  So while each of you can claim it on the state return, only one of you can claim it on the federal return.

Who is rightfully entitled to the exemption is an entirely separate topic, but I’m going to give you the highlights.  As long as you meet the following criteria, you as the parent(s) are entitled to the dependency exemption to be claimed on your return.

• Your child must be under 19 years old OR under 24 years old and be a full-time student
• Parents must have provided more than half of the child’s support (housing/living expenses)
• Your child must have lived with the parent for more than half the year (this includes time enrolled at school)

The definition of the last two situations may be gray at times, especially in the cases of divorced parents.  So please discuss what is appropriate with your tax advisor.  Lastly, even though you claim your child as a dependent and take the exemption, they can still file a tax return and receive a refund — the child would just need to claim zero exemptions.

Anyone unmarried with earned income more than $5,800 is required to file a federal tax return, but even if they earned income is less, you may still want to file to receive at least a partial refund of the tax withholdings.  As with most of our tax laws, there are always exceptions and special circumstances, so please check with your tax advisor first, as it is always recommended (and less costly) to file correctly the first time, rather than having to amend to fix a mistake.

One thing that in the long run doesn’t differentiate your company is advertising or marketing that you have “better quality” or “lower prices.”  You actually have to prove it.  You have to earn it.  You have to create believers.  But is better quality or lower prices good enough?  And when you are delivering service, rather than a product, how do you make yourself stand out?

I’ve learned that it’s all about value.  Demonstrate value.  Make yourself indispensable.  Create an experience where you spoil your first-time customers — they’ll not ever be able to use a competitor again.  Position your “product” to be something your customers cannot do without.  Two products or two services, compared side-by-side, may be the same by themselves.  But the value and the experience that goes with it can make it stand out.

Does that appeal to you?  Do you want to better differentiate your business?  Here are two suggestions of where to start.  First, identify what you think makes your business better.  Now how can you magnify this and build on it?  How can you seize this strength?  Secondly, identify three things you can do to enhance your customer’s experience.  What can you do to go above and beyond?  What little things can you add to your process?

Differentiation isn’t always easy.  Only the best companies do it well.  What can you do to put yourself on this path?

IT Backup, Security, Anti-virus Software
Some of the most devastating business disasters relate to information and information technology.  Be sure you have the basics covered to protect you and your business.  Have regular data backups, including offsite storage of your backup media.  Confirm you have proper firewalls and protections in place to protect all of the confidential information you have.  And keep your network protected from viruses by properly implementing and keeping updated anti-virus protection.

Employee Handbook
The employee handbook may be a seldom-used tool that only your attorney says you need to have.  And they are just telling you this so they can bill you more, right?  Not exactly.  The employee handbook can help protect you or your business in a variety of ways.  For instance, say your company gets pulled into a harassment lawsuit because of something an employee did while on the job.  The handbook, which would outline the business’s no harassment policy, would be quite useful at that time and could save your business thousands of dollars.

Legal Entity
Many businesses operate as some sort of legal entity now, but there are still many sole proprietorships out there without the additional legal protection.  While not right for everyone running a business, an entity certainly should be considered.  The legal entity in some ways is another insurance policy with no maximum coverage limits.

Collections Process
When you learn that you have a three-year-old invoice, what do you think is the likelihood that you’ll collect it at that point?  When you make exceptions to your collections policy, what precedent does that set for everyone else?  When you have a cash flow issue, where is the first place you should look?  Accounts receivable growth is usually not a good thing and it can creep up slowly but surely.  A consistent collections process can help mitigate that accounts receivable “creep.”

Annual Meeting & Minutes
For those who have a legal entity, there is not much to do to maintain it.  However, holding an annual meeting and documenting the minutes in most states is imperative.  Check with your attorney first, but in many states, this is a legal requirement to be respected as an entity.  In other words, you may think you are protected but because of one administrative miscue, you may not be.  Make sure you know if this is required for your business.

So do you have all of these things in place?  Or have you been putting them off?  What other things have you put off that you’d like to share?  We want to know.  Share with us your “thing” that you didn’t do that you think others should do before it’s too late.

Last weekend, New England unceremoniously ended Tim Tebow’s season behind Tom Brady’s 6-touchdown passes.  Tebow has become a polarizing sports figure as half the nation appears to be infatuated with him — both on and off the field — while the other half disparages his ability to perform and success in the NFL.  I’m one of those rare persons who does not have a strong like or dislike for Tebow; however, I do respect how he conducts himself and how he goes about achieving his accomplishments.

First, a quick look back on Tebow’s brief NFL career.
He was drafted in the first round by the Broncos in 2010 — which many people thought was far too high for a quarterback whose game seems ill-suited for the NFL.  He sat behind Kyle Orton last year until Orton got injured toward the end of the season. In his 3 starts in 2010, he went 1-2 with a team that was 3-10 the rest of the season and the team was very competitive in their two losses where he started.  He entered this year again as the backup to Orton, but after a 1-4 start, he was named the starter and led the team to a 7-4 record and a division title.  He then enjoyed a remarkable playoff win against the Pittsburgh Steelers and their vaunted defense in a contest in which few thought Denver would be competitive, let alone win.

The point I want to make is not whether you should like or dislike Tebow; my point is that Tebow is one of the best real-life examples of the accomplishments that can be achieved when you combine hard work with passion and belief in yourself.  Think about this when you consider your own success (or maybe lack thereof) in any aspect of your life.  Do you possess those 3 qualities, and if not, why not?  Is something holding you back?  Do you have one or two but maybe not all three?  Potentially not having one of these qualities could be holding you back.  If you are passionate about what you do then putting in the hard work required to be successful will come much easier for you.  As a founding member of our firm, I know that passion was and always will be a key component of what drives our firm and our success.  Without passion, the hard work and the belief in our long-term success may not have always been there when needed.

I love the quote that I opened with from Tebow’s poster; it says that much success can be achieved just through hard work.  I would argue that Tebow’s passion and belief in himself enhances that hard work exponentially and allows him to achieve success at a higher level than most believe possible.  It probably wasn’t an accident that Tom Brady was the primary person responsible for ending Tebow’s season this year.  Brady also is known to have that unique combination of traits and he has gone from a 6th round draft pick out of college to one of the best all-time quarterbacks in the game.  Take the time this year to find that combination in your life — the difference it can make is significant and definitely worth your time.

Our holistic wealth management approach consists of two parts, which together creates Your Tomorrow Plan.

1) Your Roadmap
This is a detailed plan used to connect your tomorrow to where you are today.  It provides a balanced approach between current lifestyle needs and wants and appropriate planning for Your Tomorrow.

2) Your Investment Plan
This plan is used to outline the key variables that impact how your portfolio should be managed and the asset class diversification and strategy diversification to be utilized within your investment portfolio.

When most people think of wealth management, they think of investments and the various vehicles used to generate wealth such as stocks, bonds, mutual funds, ETFs, etc.  While these tools are important, they only paint part of the picture.  Before we can construct the ideal portfolio for a client, we have to first understand our client’s goals and in particular, what number we are working toward.  The Roadmap is the tool we use to determine what a client has today, what resources they can save for the future, and where they need to be in retirement. The Roadmap enables you to convert future goals from being intangible to tangible and provides a way to measure and track yearly progress.

As you focus on your New Year’s resolution, make it a point to revisit your retirement planning.  If you do not have a plan in place or are struggling to figure out what your number needs to be, then I encourage you to reach out to your trusted advisor.  We all know how quickly time flies and the biggest asset you can have on your side as you work towards your number is time.  Don’t let another year go by.  Make it a point to review your assets this month and determine where your number needs to be when it’s time to retire.

Meeting your yearly savings goals becomes much easier once you have defined your number because you know what you are working toward.  Without a plan in place, you are shooting toward a continuous moving target.  Once your plan is in place, you can have peace of mind knowing that if you meet your annual savings goals and have a solid investment plan in place that delivers consistent year-over-year returns that you have given yourself a great opportunity to meet your number and enjoy a long and prosperous retirement.

Over the last several years, the equity markets have offered much to investors in terms of risk and volatility but little in absolute positive returns as the S&P 500 is still over 20% below its high reached in October 2007.  But should an investor with a long-term time horizon care about this or should they follow Wall Street’s advice to think “long-term” and assume future returns will make up for their short-term losses?  Unfortunately, your short-term results have a large and direct impact on your long-term performance.

Which one would you choose for your portfolio?  Well, assuming you started with a fixed amount of $1,000 in Year 1, here is what your portfolio would be after 5 years:

You may have guessed this based on the subject of this blog — the slow and steady portfolio A outperforms portfolio B and C by having more consistent, positive returns.  This difference in ending value can be attributed to the returns that are required to recover from “short-term” losses.  For example, a loss of 20% requires a gain of 25% to get back to break-even; $1,000 declines to $800, you now need to have a 25% gain ($200/$800) to get back to your original $1,000.  Also, the larger the loss, the larger the gain that is needed to recover.  For example, when the equity markets declined about 40% in 2008, you would have had to have a gain of 67% to completely recover.  So this means that while short-term losses at certain times are likely to be unavoidable (think 2008), you still want to contain those losses as much as possible.

The point to drive home here is that consistent returns can lead you to superior long-term performance.  So the next time someone tells you to ignore poor short-term results and focus on the long-term (typical Wall Street babble), you may want to take some time to educate that person that your short-term performance has a large impact on your long-term results.  In my future blogs, I will dive into investment strategies and ideas on how to achieve more consistent short- and long-term results within your portfolio — even in the current uncertain and volatile environment.

As the New Year approaches and we are all making our resolutions, this is a great time to consider and review what tools you have to help fix those unexpected problems.  For some this might be getting wills established if you have young children or a large estate.  The following is a list of some of the areas you may want to review so you have that safety net or plan in place for when the unexpected happens:

• disability insurance coverage
• life insurance coverage
• short-term emergency cash funds
• long-term care insurance coverage
• creating or updating your wills or trusts
• naming/updating beneficiaries or retirement accounts

There are also the most common that we see individuals push to the back burner due to the fact that they’re not needed immediately – because the unexpected hasn’t happened.  But that’s the whole point, isn’t it?  None of us know when the time will come when having these documents or insurance coverage in place will actually be needed.  Knowing you have a plan that can help you and your family ensure less grief and problems when you or they are already dealing with that unexpected event creates some peace of mind.

Each person or family has different priorities and are in different stages in their lives.  As an independent advisor (which means we are not selling or preparing any of the items in the list above), we can help sift through the details for you to determine what is most appropriate for your situation.  As part of our wealth management services, we review and monitor these areas with our clients because what you have in place today does not mean that you won’t change it in 5, 10, or even 20 years from now.  Give it a thought now and determine if you need to add any of these items to your New Year’s resolution!