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Cornerstone in the News

Year-End Investment Report Mail Suppression

If your accounts are custodied at Fidelity you should know that they will no longer be printing the Year-End Investment Report (YEIR). The YEIR includes a summary of the year's transactions, security level estimated cost basis information, total margin interest, and total fees. The YEIR provides a summary of totals for items such as income, deposits, withdrawals, and securities bought and sold. This report will be available electronically through the Fidelity website, or through our office.

We’re hard at work on taxes:

It may be December, but we're already thinking about April 15th. We've been hard at work doing year-end tax planning for you for the past month. This includes a thorough review of each client's current tax status, realized and unrealized capital gains to date and retirement plan contributions. We want to make sure you maximize your deductions and take advantage of all tax opportunities. If we determine actions that you should take we'll notify you by mid-December.

Go Green, Go Paperless:

Did you know that you can suppress paper statements and/or trade confirmations for all your accounts? In this electronic age, it makes sense to get your documents electronically and store them on your computer. (You'll want to make sure to back up your hard drive periodically so you never lose those important documents.) Think of all the trees and energy you'll save! If you're interested in this service give us a call and we'll help you set it up.

Speaking of paperless, we'd like to know if you have a preference for either our hard copy newsletter or our e-newsletter. Our goal is to provide you with timely and interesting information in the format that best fits your lifestyle. We've been wrestling with the idea of stopping the hard copy in favor of the electronic format, but wonder if some of you still prefer a document that you can hold in your hand and read over coffee. Please let us know how you feel by phone or email.

Cornerstone Happenings

  • Susan and Jill attended the NAPFA Northeast regional conference in Orlando Florida in November. There was much to learn and hear from industry luminaries. Both Jill and Susan volunteered their time during the conference to advise new planners who were enrolled in the "Basic Training" track.
  • We've expanded our Portland location! We now have 3 offices within the firm of Filler & Associates. This gives Susan and CynDee more meeting and working space, which is needed as our company grows.
  • Susan spoke to a Finance and Accounting class at the Univ. of Southern Maine in October. The topic was "Careers in the Financial Services Industry."

Out with the old (bad habits) and in with the new

Why not start 2010 on a positive, financially healthy note? Unlike a New Years Resolution, which is often too big or unrealistic to attain, you can set small financial goals that will have a big impact on your finances. Some of these include: setting up regular contributions to your 401(k) or IRA, taking the credit card out of your wallet and creating a will. Choose one action or goal and take it one step at a time. You will have a much better chance of following through.

A minute under the tree…forever on the credit card

  • Start the year on a positive note by being smart about your holiday spending.
  • Leave the credit cards at home when you do your shopping (you'll be less vulnerable to theft too.)
  • Set a budget for gifts and pay with cash or your debit card.
  • Say "no thanks" when offered a store credit card at the counter. The instant savings of 10 or 15 percent off your purchase isn't worth it when you realize your new card carries a high interest rate - often 20 percent or more. And the credit check involved to approve the card can ding your credit score.

Charity Begins With Your IRA?

‘Tis better to give then receive, and it's especially nice to give and reduce your taxes! If you are over 70 ½ you can make a charitable contribution with IRA money without having to include that distribution in income. This could be an advantage over taking an IRA distribution and then giving it to a charity. By avoiding adding the IRA distribution to taxable income you reduce your "Adjusted Gross Income", which in turn lowers the threshold for the medical expense deduction. It also may affect what income bracket you fall into for Medicare premiums. This benefit is available this year only, so take advantage before Dec 31. Also be aware that you will not qualify if you give your IRA withdrawal to a charitable donor fund - the distribution must be paid directly to a qualified 501(c)3 charity.

Year-end Tax Planning

Tis the season...to take some last minute actions that can save you on taxes! Here are some ways to reduce the tax bite:
  1. Maximize company retirement plan contributions: increase payroll deductions to get the most you can into the account by Dec. 31.
  2. Contribute to your IRA. Individuals under age 50 with earned income can contribute up to $5,000. Those 50 and over can contribute $6,000.
  3. Sell securities in your taxable investment accounts that are showing losses. You can use the losses to offset gains you've realized during the year and to shave $3,000 of taxable income off your return. (Just be careful not to buy the same security within 30 days before or after the sale.)
  4. If you find your itemized deductions come close, but don't exceed, the standard deduction, consider increasing them by prepaying your 2010 property taxes or making an extra mortgage payment, or increasing other expenses that go on Schedule A. The goal is to get your itemized deductions up over the amount of the standard deduction.
  5. Sign up for your company Flexible Spending Account. This will give you the equivalent of a tax deduction on every dollar you put into the account and then spend on medical expense. OK, this actually saves you money on next year's tax return but you have to sign up during open enrollment period, which is November and December.

There are other strategies to minimize income and maximize expenses. Give us a call and let's see what we can do for your bottom line.

Strategies for Maximizing Social Security

Those who qualify for Social Security benefits may want to consider delaying the start date at which they begin collecting. Some little known strategies help married couples maximizing their benefits.

One strategy is to a spousal split whereby a lower-earning spouse (call her Judy) retires at 62 and starts taking benefits. The higher earning spouse (call him Greg) keeps working and defers his benefits as long as possible. If Greg dies, Judy can stop collecting her benefits and start collecting his full benefit.

In another situation Greg defers his own benefit but files for a spousal benefit for his wife's lower benefit as soon as he turns 66. If Judy's benefit is $800 he'll get a check for $400 every month. Meanwhile, his own benefit will continue to rise by 8 percent a year until he's 70. At that point he can file for his own benefit and give up the spousal benefits. Judy can give up her benefit and apply for a spousal benefit based on Greg's history now.

Another strategy is referred to as "file and suspend". In this case, Greg files for his own benefits at age 66 but immediately suspends them allowing Judy (assuming she's also 66) to take spousal benefits from his account, but leaving his own benefits to grow that 8 percent a year until he's 70. This works well when one spouse has significantly higher earnings during the working years than the other spouse.

Another strategy is to buy back some benefits. Perhaps Greg started taking benefits at age 62, but regrets that decision because he received a great job offer. Greg can pay the Social Security Administration back all of the benefits he received, withdraw his early retirement application, and then reapply for full benefits at age 66 or later. This would of course require that Greg have the financial resources to repay those benefits, but also means that he will have borrowed that money interest-free from the Social Security Administration for all of those years.

Depending on how long one lives, all of these strategies could result in either higher or lower lifetime payouts. Waiting to sign up for Social Security can help ensure against out-living one's savings, but delaying is never a good idea if a person is in poor health or otherwise does not anticipate living a long life.

Emerging Market Bonds

Given the large U.S. trade deficit, the tremendous debt we’ve taken on to stimulate the economy and the weak growth our economy will likely experience as we come out of the current recession, it is quite likely that over the long term the U.S. dollar will decline against other market currencies. On the other hand, many emerging markets, which are those nations whose social or business activity is in the process of rapid growth and industrialization, run trade surpluses, are less indebted to the rest of the world and are likely to grow faster than the U.S. and the rest of the developed world in the foreseeable future.

Furthermore, emerging-markets currencies offer higher yields, which attract capital flows that support their currencies. And longer term, as the balance of the global economy shifts, it may become increasingly in emerging-market countries’ self-interest to allow their currencies to appreciate versus the dollar in order to improve the purchasing power of their consumers. Taking into account all these factors, purchasing a basket of emerging-markets fixed-income securities, which have a low correlation with other asset classes provides an opportunity to reduce exposure to a rise in U.S. interest rates and also hedge against an anticipated decline in the U.S. dollar.

The biggest emerging market economies include Brazil, China, Eqypt, India, Indonesia, Mexico, Philippines, Poland, Russia, South Africa, South Korea and Turkey. Smaller emerging market economies include Peru, Chili, Morocco and the Czech Republic. While economic improvements in emerging markets has improved the credit quality of their issued debt, investing in these countries is not without risk and therefore the allocation should only represent a portion of a diversified portfolio.

Is Gold a Good Investment?

With all the money the Feds have pumped into the economy, many economists and analysts anticipate a dramatic increase in the inflation rate within the next few years. Traditionally, when threatened with higher inflation, investors have turned to gold as a hedge, and in the past, gold indeed, has proven to be a good hedge. Gold holds its value in times of rising prices and for this reason has earned the moniker “the crisis commodity.”

Before you run out and buy a few gold bars, however, there are a few reasons to reconsider. First, gold is not easy to buy in large quantities, but if you do, you must factor storage and insurance costs into your return on this investment. Most investors will instead opt to purchase mutual funds and exchange-traded funds (ETFs.) The SPDR Gold Shares ETF is the seventh largest holder of physical gold in the world. The size of the fund is itself problematic. If the fund needed to, or was forced to sell a large portion of its holdings, it would prove difficult to find buyers, considering that they are one of the largest buyers themselves. And if they are selling, it’s likely others are too. The inability to sell could result in a marked decline in price – like a fire sale. This may seem unlikely, but we’ve seen this type of crisis hit hedge funds and mutual funds over the past year and decimate their returns.

Another important consideration is that, unlike stock, profits from trading bullion are considered “collectibles” to the IRS. That means you don’t get the advantage of long-term capital gains rate if you hold bullion for more than 1 year. Instead it’s taxed at 28%.

In addition there are other means to fight inflation that didn’t exist 10 or 20 years ago, and these alternate investments could limit the attraction of gold, thus reducing its potential march in lock-step with inflation. Now investors can buy Treasury Inflation Protected Securities (TIPS), currencies (through ETFs) and commodity ETFs, products that didn’t exist in the early 1980’s, which was the last time we experienced high inflation. These alternatives, such as TIPS, may be more stable than gold, which has had higher volatility than stocks over the past 40 years.

When we see high inflation become a real threat (and we don’t see this now) we will explore the various options for client portfolios. Gold ETFs may be one of them, but it won’t be the only one.

Term Insurance Rates Set to Rise

Recently the Wall Street Journal reported that term life insurance rates, after years of falling, are now reversing course and starting to rise. It may be time to re-evaluate your life insurance need and lock in the proper amount.

Doubling the Speed of Chaos

Two respected and dependable advisors to our firm have told us that any marketing effort should include connecting with peers, colleagues and other potential business growth resources via an internet site known as “LinkedIn”. In addition it is recommended that we establish “Facebook” pages, also on the internet, as another means of utilizing the power of cyberspace to spread our name.

New Repayment Options on Student Loans

There's good news on the horizon for those with federal student loans. The goverment will introduce a new income-based payment program on July 1st.

Action Indeed is the Sole Medium for Expression of Ethics (J. Addams)

As you likely know, we are members of NAPFA (National Association of Personal Financial Advisors) and are so because we feel strongly about providing Fee-Only services - we are solely compensated by our clients and do not receive any commissions or other income from the recommendations we provide.

Credit card changes not instant

Experts caution users to stay alert

Jill Boynton of Cornerstone Financial quoted in The Concord Monitor!

For some investors, patience is hard advice to follow

Several media sources contacted our offices on Monday and Tuesday as the market reacted to news out of Washington. Susan's quotes in Wednesday's Portland Press Herald mirror the advice we sent to clients via email.

In Retirement You Are Never to Old to Own Stocks

This is a section of the article, Winning Strategies for Tough Times, by Carolyn Bigda and Yuval Rosenberg published in the October 2008 Issue of Money Magazine. 

His pension pays most of his bills. But with plans to leave an estate, Dave Cowley shouldn't give up on equities.

Gift Registry for College Savings

Want to move beyond giving your kids or grandchildren toys and video games? Now you can more easily contribute to their education fund without the hassle and inconvenience of filling out long forms and mailing them with your gift to the child’s college savings account. www.Upromise.com administers 10 state-sponsored 529 plans and lets its accounts owners invite relatives and friends to contribute for birthdays, holidays and other events. A donor can give as little as $15. A similar start-up outfit, www.freshmanfund.com, allows for donors to contribute to any state plan of the account owner, not just those run by a particular administrator.

What's the Biggest Market Risk? (Might it be You?)

No one likes to lose. And most of all we don't like to lose our money. A natural tendency when we see account values going down month after month is to sell our investments and stop the losses (and pain). In most areas of life our gut instinct is to be trusted, but in the case of investing such an instinct - really our emotions - often leads us astray.

Year-End Tax Planning

As the end of the year approaches, it's time to consider strategies that can help reduce your tax bill.

Cornerstone Happenings

Jill enjoyed the summer with her children and visited family in Conn. She helped organize the annual Newington Road Race that raises money for the Newington Public School. Son Sam heads back to California for his sophomore year at UCSB.

Susan's summer included spending time with various loved ones in many delightful places. Sunshine and sea, mountains and dunes; picnics and projects - rich and memorable.

Cornerstone Presents Basic Training for New Planners

Susan and Jill lead "Basic Training" sessions for new financial planners at the NAPFA Conference.

'Round and About

News about Travel Insurance, Buzz Words, Rewards for Military Families, and American driving habits from Cornerstone Financial.

Summer Tips for Students

Summer's here and the kids will soon be out of school. If your son or daughter is going to be working this season, we recommend taking the opportunity to teach some fundamentals of good financial behavior.

Regaining Our Creativity

Trying to find balance among the many demands we place upon ourselves is hardly a fresh topic, but most people (including busy retirees) would agree that such a thing is desirable.

Cornerstone Happenings

An update of the goings-on at the Cornerstone Financial Office.

Local Financial Experts on Economy: Don't Panic

Advice includes adjusting portfolios, monitoring cash

By Dave Choate, Seacoast Online (July 16, 2008)

6 Smart 401(k) Moves for Rough Times

Novices usually do a few dumb things when the market tanks, but you don't have to if you know the alternatives.

By Tim Middleton

Money Makeover Chat with Jill Boynton

Jill Boynton, an adviser at Cornerstone Financial Planning, took readers' questions about retirement investing, saving for college, and managing debt. Here's a transcript of the discussion.

From Boston.com

Paying Beyond the Bottom Line

Money Makeover: In addition to investments, couple need to reexamine insurance, estate.

Target Date Funds Don't Always Hit the Mark

If you have a company retirement plan, no doubt you’ve noticed a new addition to your fund line-up in the last few years. Target-Date Funds (TDF), sometimes called Lifecycle funds, are made up of both stocks and bonds and are allocated according to a specific retirement date. For instance the Vanguard Target Retirement 2015 is focused on a balance of stocks and bonds that is deemed appropriate for someone retiring in 2015.

Managing Your Inbox

Experiencing email overload? You’re not alone. The average email user receives more than 50 messages a day Here are some tips to help take your inbox back.

Your Credit Score

Your credit score affects not only whether you qualify for a loan and what rate you'll pay, but also whether you'll be able to rent an apartment or get a job (anemployer can legally refuse to hire youbased on a low credit score.) A low credit score also means you'll pay higher premi-ums for car insurance because research shows that people with higher credit scores file fewer claims. If your score is in the 700s you won't have any trouble qualifying for the best interest rates.

Cornerstone Commentary

Get our view on recent financial events and situations »

Stay on top of current financial news

More Posts from Jill's Blog at Boston.com»



Contact Information

  • New Hampshire Office
    Jill Boynton
    70 Old Post Road
    Newington NH 03801
    Near Portsmouth
    603.431.1133
  • Maine Office
    Susan Veligor
    70 Center Street
    Portland ME 04101
    207.772.8133

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