Sometimes it’s hard to tell if you need professional help for a problem or if you can handle it yourself. Whether it’s taking care of a common cold, fixing the sink, changing the oil in your car or doing your own taxes. The same question often arises about finances.

It happens all the time - financial questions pop up that you consider silly or stupid so you feel like you must handle alone and you don’t seek help. This is not the best course. As happens often in life, not reaching out to a professional can delay you reaching your goals and cause you to incur more out-of-pocket expenses and lots of headaches.

Here is the thing: there are no stupid questions when it comes to your finances. Don’t ever sit on the sidelines and fear asking a question or think you’re unqualified to go to a planner. Solid and respectable planners let you know if they can’t help you and refer a professional who can. They also let you know if they think you can plan your finances yourself.

Here are signs you may need a financial planner:

You recently married

To merge or not to merge finances is a huge question: emotions to contend with, forms to update, cash flow to track, debts to pay down, goals to lay out and spending habits and needs to reorganize and prioritize.

Communication during this transition helps you navigate possible questions about taxes, investment allocation updates, selecting benefits, joint roles in management of the household, deciding whether to maintain separate bank accounts and more.

You own a business

Whether considering starting your own business or a long-term entrepreneur, you likely need to know how to prioritize goals, pay yourself while keeping the operation running and the best way to manage cash flow on an income that fluctuates monthly.

Not to mention saving for retirement, obtaining health insurance and protecting you and your family against a loss in income from death or disability.

You want to make a big purchase

Simple budgeting often enables you to handle large purchases. If you look to buy a first home or make another sizeable investment, understanding the overall effect on your cash flow, lifestyle and future goals looms large.

How much home can you afford? What’s your budget for home maintenance? What other goals go on the back burner? What about your future savings?

You make a career change

Job or career transitions also bring changes in income and benefits. Make sure you maximize your company benefits, leave no retirement accounts behind and ignored, plan appropriately for income fluctuations, take into account future job growth or career prospects and consider the transition’s overall influence on your lifestyle.

Your family’s growing

A baby comes with a slew of considerations: ensuring you have an emergency fund of three to six months’ expenses adjusting your spending for child care, groceries and medical costs and updating your estate plan and insurance coverage in case something happens to you, among many other needed updates.

At the End of the Day

The first step in asking for help always seems the hardest. The assistance and feedback may surprise you when you open up to the idea that you need not handle all financial questions solo.

And it makes the experience much more enjoyable.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Developing a Successful Business Plan

A well-crafted business plan can be a blueprint for success. This multifaceted tool is as important to established CrossFit owners looking to grow their business as it is to budding entrepreneurs.

A business plan defines your business, outlines your goals, and lays a strong foundation for achieving them. A valuable resource for investors and lenders, a strong business plan can help you secure capital for expanding operations. As your Affiliate grows, your plan will help you respond to changes in the marketplace and fitness industry. Let’s take a closer look at three essential business plan elements: the executive summary, the business description, and the financial data.

 1. Executive Summary

First impressions are everything, and this quick snapshot of your Affiliate has the potential to attract or discourage investors. This is your opportunity to effectively summarize your company’s history and articulate your mission:

• Briefly explain the employee and management structure.
• Describe your location and facilities.
• Provide relevant financial information.
• Disclose strategic corporate relationships.
• Highlight key accomplishments.

By the end of your executive summary, you want your readers to know about your products and/or services, understand the demand for your business, and believe in your potential for success.

 2. Business Description

After a compelling introduction, it’s time to provide details. Here, it is important to accomplish the following:

• Describe your business.
• Identify your Affiliate’s niche in the marketplace.
• Demonstrate your industry knowledge.

As you know, there must be a market for your products/services, and your business plan can outline how you are going to attract and maintain that market. Ask yourself some basic questions:

• What are you selling?
• Who are your clients?
• Who is your competition?
• What makes your gym unique?

In answering these questions, demonstrate the ways in which various components of your business work in concert to accomplish your objectives. For example, how does your location support your business? What experience do you bring to your operation? What are the specialized skills of your coaches? Remember, your intent is to construct a winning approach and make your readers confident about your business.

3. Financial Data

Here, startups need to project future performance, while established Affiliates need to detail the historic performance of their companies, as well as project future earnings. Include three key financial documents:

• Income statement
• Balance sheet
• Cash flow statement

Lenders in particular may focus on your cash flow statement, which details how money is earned and spent in your business, because poor cash-flow management can sink even profitable businesses. From their perspective of the lenders, accurately projecting cash flow is essential to meeting your financial obligations. Lending aside, effective cash-flow management can benefit your business by helping you maintain liquidity, minimize your credit obligations, and minimize your interest expenses. Check out my blog on 10 Ways To Improve Your Affiliate Cashflow for more information.

The Sky’s the Limit

Think of your business plan as a building with many floors, each fulfilling a function. The function of the foundation is, of course, to present the information that can make your plan a tool for raising capital. If you shortchange this part of your plan, it’s possible that your Affiliate will barely get you off the ground.

Additional functions of a well-engineered business plan include helping you manage daily operations, make decisions in line with your ultimate objectives, and stay on track with your plans for growth.

To keep pace with change, review your plan every year and revise it, as needed. If your business plan helps your business adapt to market fluctuations, industry developments, and business advances, the sky’s the limit.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

If you are like many Affiliate Owners, there may never seem to be enough hours in the day. Yet, once a box reaches a certain size, it can become increasingly difficult to rely solely on the efforts of one person alone to keep things running smoothly. Although you may realize that empowering your coaches will free up some of your valuable time so you can attend to other aspects of the business, you want to be sure the quality of your services doesn’t suffer. Given these concerns, delegating authority can be challenging.

If you think you could benefit by loosening the reins a bit, here are some suggestions to help make the process of delegating responsibility easier:

Make gradual changes.

A gradual transfer of power can help you gauge how much responsibility your coaches are ready to take on, while providing you with the opportunity to develop your leadership skills. Even if you’re pressed for time, resist the urge to unload duties onto unprepared workers. A slow approach will help ensure your workers have adequate time to receive the necessary training to successfully assume their new duties.

Select managers carefully.

Choose individuals in whom you have confidence and who possess the skills and abilities to meet or exceed your expectations. Recognize that not everyone has the ability to be an effective manager. Although a coach may handle certain tasks well, he or she may not excel at supervising others.

Clarify the scope of responsibility.

One of the keys to a successful transition is to clarify the scope of the responsibility you are assigning. Is it for a specific task or a broad responsibility? Also, inform your new manager how much leeway he or she will have when carrying out the newly delegated duties.

Support those you appoint.

Allow time for everyone to adjust to the new chain of command. Once you delegate authority, announce the decision to your employees. Then, support your new manager, even if you must mediate disputes with employees who prefer doing things the “old way.” If you witness an employee trying to make an “end run” around the newly appointed manager, firmly reiterate your support.

Be open to input.

Strive for a balance between keeping things as they were when you were in charge, and giving your appointee a say in how things will be managed going forward. Try to welcome your new manager’s input if he or she brings in a fresh perspective.

Let go.

Once you see that your new manager is handling his or her authority well, let go. One of the greatest rewards of delegating responsibility is that it can free you up to shift your attention to larger business concerns.

Once an Affiliate reaches a certain size, many owners find they can no longer handle all aspects of the business effectively. Delegating authority is a necessary skill to allow your business to flourish at this stage. These suggestions can help you learn to relinquish responsibility to others, adding more hours to your day and leaving you free to attend to the one job only you can handle—furthering your company’s growth.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Cash flow, as it relates to a small business environment, is the inflow and outflow of income. Cash flow Management is the process of allocating income outflows and inflows in a more efficient way than would otherwise happen naturally. The goal is to maximize cash flow; squeezing the most out of the inflows and reducing the cost of outflows so that more money ends up in your pocket.

Below I have outlined ten ways you can improve a box’s cash flow, some of which will be applicable to your personal finances as well!

1)   Do not mix business and personal income and expenses

Establish a business credit card, checking, savings, and investment accounts from the very beginning. Use a/the business account for business transactions and personal accounts for personal use. Set up a paycheck system, such as paying yourself every two weeks or on the 15th and 30th of the month, even when you don’t have any income yet. Avoid the temptation of dipping into your business account for an impulse buy decision just because you can.

2)   Anticipate and plan for fat and lean months

Most retail businesses are cyclical, and your CrossFit box is probably too. You will have fat months (think January/February) and lean months (June/July). Do not be so quick to distribute or reinvest the extra inflow in fat months. You may need it during the lean months or in case of an emergency. Which leads me to…

3)   Establish and maintain an Emergency Fund

You’ve heard this before. Having an adequate emergency fund for personal and business use is a prudent financial planning technique. The purpose of an Emergency Fund is to provide capital in case of an emergency. Since emergencies typically don’t provide any forewarning, you should plan as if there is a 100% chance of an emergency. Avoid investing your Emergency Fund into high-risk vehicles such as the stock market.

4)   Utilize high interest savings account for idle cash

Whether it’s your Emergency Fund or cash you have set aside to purchase five Assault Bikes next month, utilizing a high interest savings account can put some cash in your pocket. CIT Bank is currently offering 1.35% APY with $100 minimum deposit and will even give you a bonus of $100 if you qualify for the bonus. Synchrony Bank is offering 1.30% APY with no minimums. Since in today’s day and age it can take less than three days to transfer from your savings account to a checking account using Electronic Funds Transfer (EFT), it makes a lot of sense to utilize a high yield savings account as much as possible.

5)   Anticipate and plan for Self-Employment Tax

Self-Employment Tax is your portion of Social Security and Medicare tax. When an individual is self-employed, she/he has to pay both the employer and employee portion of this tax since self-employed individuals are considered both. For 2017, the tax is 15.3%, consisting of 12.4% of Social Security tax (up to $127,200 of income) and 2.9% of Medicare an all income (no cap). Self-Employment Tax is due April 15th, June 15th, September 15th, and January 15th.

April is especially a heavy tax month since you may have Self-Employment tax due as well as prior year’s tax underpayment. Penalties for tax underpayment can be pretty steep. This is where a solid Emergency Fund may be very helpful.

6)   Maximize your credit card rewards

Try to deliberately use credit cards that best match your business(give you cash-back, miles, etc.). Many times, you may have a choice of using cash or credit when paying for business expenses. Since paying with cash (or check) doesn’t give you any benefits, wisely utilizing credit cards can put some money back in your pocket.

For business use, I especially like credit cards that offer a competitive cash back feature. Currently, I like Barclays CashForward World Mastercard that offers unlimited 1.5% cash back, $200 bonus when you spend $1,000 within the first 90 days, no annual fee, and 5% cash rewards redemption bonus. I also like the Chase Freedom Unlimited that offers unlimited 1.5% cash back, no annual fee, and a $150 bonus after you spend $500 in the first 3 months.

As a general rule of thumb, the IRS considers credit card rewards to be a form of a discount and not income; so this extra money is tax-free. Keep in mind however, that for business use, any cash back you receive lowers your costs and therefore the amount you can deduct for business use.

7)   Take advantage of Free Money

In addition to cash back rewards, credit cards offer another great feature: 0% financing. Let’s say you are trying to buy 5 Assault Bikes and have the option to pay for them with cash (maybe dipping into your emergency fund) or using a 0% for 12 months credit card. From a cash flow perspective, utilizing a 0% loan is the better alternative as long as you are disciplined enough to pay it off within the term. Not only is it easier to cash flow such an expenditure, but that cash you were going to spend is earning you interest in the high interest savings account you setup earlier. Currently, Citi Diamond Preferred and Citi Simplicity Card offer 21 month 0% introductory APR and no annual fee.

8)   Create Incentives for prepaying

Most businesses utilize this tactic and you ought to consider it as well. There is a certain value that comes from when a client prepays for the next three, six, or twelve month period. Aside from the fact that getting a $1 today is more valuable than getting it a year from now, it helps you more accurately project your future cash flows, earn interest on that money, and provide money for equipment/expansion/etc.

It’s valuable to you so make it valuable to your community. You can offer a small cash discount, merchandise, or an additional service such as an hour of personal training. Make sure your community is well aware of any incentives that you offer.

9)   Consider subscription based sales

When you buy a recurring product online such as protein or FitAid, they try to get you to sign up for a subscription(i.e. receive a case every month) and offer a small discount to entice you do so. They got it right. Not only does it commit the buyer for a longer term and in turn is more profitable, but it also helps with cash flow. Again, make sure your community is well aware of any offer your have made available to them.

10)      Work with a professional

You may have already come to the realization that you cannot do everything.  There is a whole lot of value that comes from outsourcing certain tasks. Time, knowledge, perspective, and expertise are some of the reasons why your clients hired you and they are some of the reasons you should consider working with someone. You may have heard that the biggest risk comes from not knowing what you don’t know... not from what you do know. 

Ask yourself, what business are you in? If it's not a cash flow management business, than you probably shouldn’t be doing it.

I hope that you find this blog post valuable. If there are other topics that you would like me to write about, please send your suggestions to ivan@otbfinancialplanning.com.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Partnering with Outside The Box Financial Planning offers numerous benefits for individuals seeking retirement planning, small business support, wealth management, and beyond.  With their fiduciary duty, comprehensive approach, unbiased advice, transparent fee structure, and ongoing support, OTBFP act as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations. 

However, if you would like to take a shot at building a financial plan on your own, we offer our financial planning software, RightCapital, free of charge. Click here to get started.

One of the more onerous tax issues facing CrossFit Affiliate owners is determining what type of employee compensation is taxable. This may be especially true for small business owners who often wear many administrative hats and may not have the luxury of an in-house accountant to answer complex tax reporting questions.

Generally, an employee’s wages are considered taxable compensation. However, the term “wages” can be somewhat misleading. In addition to actual earned compensation, federal and many state payroll tax laws generally define “wages” as any type of payment received for services rendered. Here’s a quick look at some of the other “wages” typically paid to employees that must generally be reported for payroll tax purposes.

Advances

Payments to any employee for future work or services are considered taxable wages. An advance is not considered a taxable wage if: 1) it’s used for expenses involved in performing a service for the employer; or 2) it is a loan to the employee that is properly documented and must be repaid.

Awards

Many employers have contests or give out awards for outstanding performance. In general, all awards and prizes are taxable wages with one exception. An employee award or prize is not included in taxable wages if it meets the following conditions: 1) the prize or award is not cash; 2) its value is less than $600; and 3) it is given as a reward for length of service or as a safety achievement award.

Benefits

There are many types of benefits in the workplace. Generally speaking, any fringe benefit not specifically excluded by law is considered taxable compensation for payroll tax purposes. However, the list of benefits excluded from payroll taxation is fairly extensive. These include, but are not limited to, payments attributable to a health insurance plan, employer contributions to a qualified plan, workers compensation, and a wide array of other “perks.”

Business Expenses

Generally, expenses cannot be reimbursed unless they are made via an advance or are specifically highlighted in an accountable plan. Under an accountable plan, an employee: 1) must be properly reimbursed for deductible expenses incurred while rendering services for the employer; 2) must keep accurate records that validate the reimbursement; and 3) must return any payment by the employer that exceeds the actual amount of reimbursement.

Jury duty

Compensation paid to an employee serving jury duty is generally a taxable wage. However, actual taxation will vary based on how jury duty pay is actually paid. If you deduct jury duty pay from regular wages, payroll taxes apply to regular wages less jury duty pay. Likewise, if you pay an employee his or her regular wages but ask the employee to give you the jury duty pay, payroll taxes also apply to regular wages less jury duty pay. Finally, if you pay regular wages and allow employees to retain their jury duty pay, only regular wages are subject to payroll taxes.

Vacation

If you offer your employees paid vacation, the compensation they receive while they’re on vacation are taxable wages. In addition, if you allow employees to “buy back” unused vacation time, that is also considered wages.

Payroll taxation is just one of the many tax issues facing CrossFit Affiliate owners. This article is meant to serve as a general overview. A qualified tax professional can help you ensure your business is on proper payroll tax footing.

Neither the firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Caught up in the day-to-day operations of your business, you may not be thinking about how much your box could be worth when the time comes for a transition. But the choices you make now, both large and small, can add to or detract from the future value of the business.

There are many ways for a gym to grow, including opening new locations, developing new products, acquiring complementary businesses (pt practice, recovery, etc.), hiring more employees, and increasing sales and marketing expenditures. You can grow the business faster by tapping into outside financing or more slowly by using the company’s own revenue. With so many strategies to consider, you may want to develop a long-term plan to guide the growth of your business.

Your decision regarding the ultimate disposition of the company may influence many aspects of your current business strategies, including your form of business ownership. You may want to consider a C corporation structure for a business that may go public or an S corporation structure if a private sale is planned. We help guide clients in regard to the implications of various forms of business ownership and how it can impact their overall goals.

Transferable Assets

To begin, work on building and maintaining your company’s transferable assets. These may include tangibles like property and equipment, as well as intangibles, including a customer database, website, brand recognition, and business processes. You may also develop intangible assets, such as copyrights or trademarks, proprietary lists of customers or prospects, and long-term contracts. An attractive location can also add value beyond an owner’s equity.

A CrossFit Box can also derive intangible benefits from a strong management team with the knowledge and connections required to maintain the business without the owner’s oversight. In many cases, having a skilled and loyal workforce may also be considered a transferable asset in a sale.

Financial Performance

When growing your business, strive to establish a self-sustaining enterprise with steady revenue growth. The financial performance of a box is often measured by its free cash flow or the cash that it generates before interest, taxes, depreciation, and amortization, less capital expenditures. In assessing the value of a business, a buyer may, for example, project a company’s earnings over the next five years based on the current cash flow. This projection will take into account any outstanding debt, as well as whether revenue growth and margins demonstrate a history of consistent growth.

Businesses are often more efficient when they focus on their core competencies, rather than diversifying too broadly. So, if your CrossFit box has product lines or offers services not closely aligned with the box’s core business, consider whether these areas are profitable or represent a drag on the business income.

You may also want to restructure agreements or contracts that may be objectionable to a potential buyer, such as a long-term lease, licensing contracts, employment contracts, and loan agreements. Long-term leases may be an asset provided the terms are favorable, the location is suitable, and the size is right. If, however, the current box is likely to outgrow it’s current space before the lease is up, a short-term lease may be more appropriate.

For a detailed analysis of your company’s value, we offer business valuation services specifically serving the CrossFit microgym community. Even if you have no immediate plans sell the box, an estimate can help you identify ways to maximize the value of your business in preparation for a future exit strategy.

Neither the firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom-suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference

Partnering with Outside The Box Financial Planning offers numerous benefits for individuals seeking retirement planning, small business support, wealth management, and beyond.  With their fiduciary duty, comprehensive approach, unbiased advice, transparent fee structure, and ongoing support, OTBFP act as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations. 

However, if you would like to take a shot at building a financial plan on your own, we offer our financial planning software, RightCapital, free of charge. Click here to get started.

In recent years, the markets, the economy and the global political scene have evolved considerably. We’ve witnessed both remarkable volatility and remarkable resilience in these areas. The reality is that less predictability in today’s economic landscape requires more vigilant risk diversification, coupled with the ability to adapt to a fast-changing environment.1

I work with my clients to set financial goals and make strategic and tactical recommendations to help them reach their individual financial objectives. Equally as important, I want to encourage clients to work with me to monitor their financial progress and let me know when their personal or financial situation changes. Investing mirrors life in many ways: You make plans, but they often get disrupted, waylaid or delayed. By closely monitoring your financial strategy, I can help you determine if and when it’s time to make changes.

To this end, it may be beneficial for you to understand the distinction between strategic asset allocation and tactical asset allocation. Strategic allocation establishes and maintains a deliberate mix of stocks, bonds and cash designed to help meet your long-term financial objectives.2

Tactical asset allocation, on the other hand, is more market focused. While an investor may set parameters for how much and how long he wants to invest in a certain asset class, he may want to then increase or decrease his allocations by 5 percent to 10 percent over a short time based on economic or market opportunities.3

It is important to be aware that tactical asset allocation strategies present higher risks but also the opportunity for higher returns. It’s a good idea to set percentage limits on asset allocations and time benchmarks for when you may want to exit certain positions.4 Tactical asset allocation is, in fact, a market timing strategy, but its risk lies more in asset categories rather than individual holdings, and a crucial key for this type of allocation is to actively manage that risk.5

To help diversify and manage risk, some financial advisors recommend exchange traded funds (ETFs). These are passively managed funds that can be bought and sold throughout the trading day. While ETFs are passively managed, they provide a means for an investor to tactically expand or shrink exposure to a specific asset class in her own actively managed portfolio. Proponents of ETFs favor them because of their low cost, tax efficiency and trading flexibility.6

Content prepared by Kara Stefan Communications.

1 Nasdaq. June 26, 2017. “Asset owners must be more innovative to fulfill investment missions.” http://www.nasdaq.com/press-release/asset-owners-must-be-more-innovative-to-fulfill-investment-missions-20170626-00612. Accessed July 8, 2017.

2 Chris Chen. Insight Financial Strategists. July 1, 2017. “Tactical asset allocation can enhance a long term strategy.” http://insightfinancialstrategists.com/asset-allocation/?utm_source=ReviveOldPost&utm_medium=social&utm_campaign=ReviveOldPost. Accessed July 8, 2017.

3 Ibid.

4 Ibid.

5 Girija Gadre, Arti Bhargava and Labdhi Mehta. The Economic Times. June 19, 2017. “5 smart things to know about tactical asset allocation.” http://economictimes.indiatimes.com/wealth/invest/5-smart-things-to-know-about-tactical-asset-allocation/articleshow/59189407.cms. Accessed July 8, 2017.

6 Robert Powell. MarketWatch. June 9, 2017. “Why financial advisers prefer ETFs over mutual funds.” http://www.marketwatch.com/story/why-financial-advisers-prefer-etfs-over-mutual-funds-2017-06-09. Accessed July 8, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Many large companies offer employees a 401(k) plan with some degree of matching contribution. Although this is a good employee benefit to have, you always should pay attention to the fees involved in your plan. Your plan provider charges various fees to invest, manage and administer the plan, and those fees are passed on to the participants who invest.

The Center for Retirement Research at Boston College reports that, in recent years, the fees charged by actively managed mutual funds — including those in 401(k) plans — have dropped. Since 2015, the average fee dropped from 0.78 percent to 0.75 percent. Around 15 years ago, fees averaged about 1 percent. However, fees for passively managed index mutual funds, generally referred to as index funds, average significantly less at 0.17 percent. Index funds passively track the investments of a specific market index; there is no manager actively choosing investments for the fund on a day-to-day basis.1

If you have a 401(k) plan through a current or former employer, I’d happy to help you determine what you are paying in fees and help you assess your financial situation. In many cases, the more investors learn about fees, the more they start choosing investments that cost less. The Center for Retirement Research suggests this by sharing that U.S. investors withdrew $627 billion from actively managed funds that charged the highest fees and invested $429 billion into lower-fee index funds in 2015 and 2016.2

The Department of Labor’s fiduciary rule, which took partial effect in June, has made it easier for investors to know what they are paying for by requiring the disclosure of all fees and commissions. This information must be in dollar form.3 In addition, FINRA, a self-regulatory organization that regulates broker-dealers in the United States, offers a Fund Analyzer tool on its website that can help investors estimate the impact of fees and expenses on an investment and research applicable fees and available discounts for specific funds.4

Are fees really that important? It can depend. If you are paying a money management firm to select investments and it does a great job of providing consistent performance over time, it may be worth what you pay in fees. But it may also be worth considering how your investments compare with the overall market. For example, over the past three years, the S&P 500 has increased by 26 percent (as of mid-June 2017).5 If you were invested in a low-expense S&P 500 index fund, you would have experienced impressive returns. But if you had been paying a high fee for an active manager yielding the same performance, it may not have been worth the expense.

Speaking of fees, be aware that the IRS permits investors to deduct certain expenses incurred on taxable investments, such as:

• Fees for investment counsel, including subscriptions to financial publications
• IRA or Keogh custodial fees (if paid by cash outside the account)
• Transportation to your broker’s or investment advisor’s office
• Safety deposit box rent if you use it to store certificates or investment-related paperwork

If you have a 401(k) plan through a current or former employer and would like help determining what you are paying in fees, I’m happy to help you assess your financial situation. Using a variety of investments, I can create a financial strategy that can help put you on the path toward your financial goals.

Content prepared by Kara Stefan Communications.

1 Center for Retirement Research at Boston College. June 29, 2017. “Mutual Fund Fees: Here’s What Matters.” http://squaredawayblog.bc.edu/squared-away/mutual-fund-fees-heres-what-matters/. Accessed July 5, 2017.

2 Ibid.

3 Investopedia. July 5, 2017. “DOL Fiduciary Rule Explained as of July 5th, 2017.” http://www.investopedia.com/updates/dol-fiduciary-rule/. Accessed July 13, 2017.

4 FINRA. “Fund Analyzer.” http://apps.finra.org/fundanalyzer/1/fa.aspx. Accessed July 5, 2017.

5 Dayana Yochim. Atlanta Journal Constitution. July 5, 2017. “This May Be Why You’re Down in an Up Market.” http://www.ajc.com/business/consumer-advice/this-may-why-you-down-market/hQWTwwUWlBhEKX8tJoyNHL/. Accessed July 5, 2017.

6 Rande Spiegelman. Charles Schwab. March 15, 2017. “Investment Expenses: What’s Tax Deductible?” http://www.schwab.com/insights/taxes/investment-expenses-whats-tax-deductible. Accessed July 5, 2017.

Neither the firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
 

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Over the years, you may have heard it’s good to have different “kinds” of money as you head into retirement. A financial advisor may recommend a combination of tax-deferred and tax-exempt accounts, diversifying your money to help take advantage of the tax benefits both types of products provide.

What many people don’t understand, however, is why it’s important to take advantage of the different types of accounts available. What are the potential benefits of utilizing both tax-deferred and tax-exempt accounts? First, let’s take a look at the difference between the two.

A tax-deferred financial accounts means simply that: You owe taxes on the money, but those taxes have been deferred or pushed back. You haven’t paid any taxes on the contributions or the growth that’s occurred over the life of the account. When you take money out of it, those distributions are 100 percent taxable at ordinary income rates.1 Withdrawals taken prior to age 59 1/2 may also be subject to an additional 10 percent federal tax.

What types of financial accounts are tax-deferred? A 401(k), 403(b) or traditional IRA are all examples of tax-deferred investment accounts. Growth in some types of annuities or life insurance policies may also be tax-deferred.2

Tax-exempt means no taxes are owed on qualified distributions made from the account. A Roth IRA or Roth 401(k) is a good example of a tax-exempt account. Contributions to a Roth are made with money that’s already been taxed.3

So why can it be beneficial to have a mix of tax-deferred and tax-exempt accounts in your financial strategy? Mostly, it gives you flexibility in how you take distributions during your retirement. For example, you might use distributions from tax-deferred accounts to pay for your fixed expenses every month. If you have expenses that are outside of your “normal” spending -- such as a vacation or a large purchase -- you could use money from a tax-exempt accounts and not incur a taxable event.

While it could be tempting to go heavy in tax-exempt accounts when you’re establishing a financial strategy, using a tax-deferred accounts may put more money in your pocket in the long run. Many people are in a lower tax bracket during their retirement years. If that is the case, you may pay less taxes on distributions during retirement than if you were paying taxes on your contributions up front while still working.4

What’s the right mix of tax-deferred and tax-exempt accounts for you? Every situation is unique. If you’re not sure what types of accounts you should be using, give us a call. We can look at your existing financial strategy and make recommendations based on your specific circumstances.

Content prepared by Amy Ragland

1 The Balance. “What is a Tax-Deferred Investment Account?” https://www.thebalance.com/tax-deferred-savings-account-and-investments-2388988. Accessed May 31, 2017.

2 Prudential. “Tax Strategies: Tax-Deferred Annuities.” http://www.prudential.com/view/page/public/12609?param=12624. Accessed June 1, 2017.

3 Teresa Mears. U.S. News & World Report. Dec. 19, 2014. “7 Retirement Savings Accounts You Should Consider.” http://money.usnews.com/money/personal-finance/articles/2014/12/19/7-retirement-savings-accounts-you-should-consider. Accessed May 31, 2017.

4 Arthur Pinkasovitch. Investopedia. “Retirement Savings: Tax-Deferred or Tax-Exempt?” Updated April 5, 2017. http://www.investopedia.com/articles/taxes/11/tax-deferred-tax-exempt.asp. Accessed May 31, 2017.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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