Corporate Transparency Act: What You Need to Know if You Own a Small Business

Things have gotten a lot more regulated in the last few years especially when it comes to monitoring small business activity here in the United States. This increase is due to security concerns relating to international conflicts, terrorism, and how US businesses might be involved in these illegal activities.

Continue reading “Corporate Transparency Act: What You Need to Know if You Own a Small Business”

Fake Millionaires!

There’s a lot of speculation surrounding how to become a millionaire. Do they inherit a massive amount of wealth? Graduate from an Ivy League school? Earn a high salary? What would you say if we told you that an average person with an average income and no inheritance can still become a millionaire? Continue reading “Fake Millionaires!”

Being a Successful Investor!

Many studies have been conducted over the years to pinpoint the common traits of savvy investors. Here are five factors that these studies have identified as the keys to successful investing.

Save More

First and foremost, strive to spend less and save more. The more you tuck away each month, the more wealth you will accumulate over time. To put this advice into action, always pay yourself first. This means putting at least 10% of your income from every paycheck straight into a retirement account. Then, make sure your expenses don’t exceed the remaining 90% of your income. Cut back on your spending if you must to make sure everything else gets paid.

Avoid Worrying

We’re inundated with information 24/7, so it can be hard to ignore all the noise out there. However, as the old Bobby McFerrin song says, “Don’t worry, be happy.” Stop worrying about whether a bubble or a crash is happening right now. Stop worrying about what might happen with the market next week, next month, next quarter, or next year. Studies show that even if you invest at the market peaks each year, you still wind up with great, long-term results.

Start Early

When you start investing early, compounding interest has time to work its magic. Here’s what happens: Say you put $10 into an investment account. The balance grows by 10% in year one, so now you have $11. The balance grows by 10% again in year two, but you don’t make $1—you make $1.10. This compounding effect leads to a sizable amount of wealth over an extended period. Starting 10 years earlier than someone else could result in a much more sizeable retirement account.

Stay Positive

The world is not going to end if your investment account loses value from one month to the next. And if it does, then your financial plan doesn’t matter, right? All jokes aside, understanding that you need a positive outlook helps you stay the course as an investor.

Over the past 100 years, the markets have certainly seen ups and downs because of world wars, recessions, presidential assassinations, pandemics, and everything else you can think of. And yet, the trajectory has continued to move upward. Remember, the market represents the value of companies that produce high-demand goods and services. So it’s really no surprise that the market continues to trend upward over the long-term.

Have a Steady Temperament

Temperament cannot be learned. Rather, it’s an innate characteristic of your personality. A steady temperature allows you to consider the bigger picture and not lose sight of potential growth, even during periods of extended market upheaval. Others may get swept up in their emotions, but successful investors never abandon their discipline.

Looking to accumulate more wealth in 2021 and beyond? Turn to Nelson Financial Planning. We have over 35 years of experience helping our clients enjoy cost-effective financial plans and superior investment results. To schedule your free initial consultation, please call us at 407-629-6477.

The Benefits of Pre-Tax Retirement Accounts

Have you noticed the terms “pre-tax” and “post-tax” when looking at your retirement accounts? If you’re confused about what these terms mean, learn the difference between them to help maximize your tax savings.

One way or another, each dollar you earn as income usually runs through the tax system. The type of retirement account you set up determines whether this happens right away or years in the future. Here’s the big question: Is it better for you to pay taxes now or later? Let’s take a closer look at pre-tax contributions to help you answer this question.

What is a Pre-Tax Retirement Account?

“Pre-tax” means before paying taxes and usually refers to contributions made to a tax-deferred retirement account. These include:

• 401(k)
• 403(b)
• Traditional individual retirement account (IRA)
• Deferred compensation plan

Pre-tax contributions deposit directly into your retirement account. The money is not taxed as long as it remains in that account. This means your dividends, interest, and capital gains grow on a tax-deferred basis until you withdraw them.

Benefits of Pre-Tax Retirement Accounts

Many people choose to make pre-tax contributions because of these great benefits:

Pre-tax contributions save you money today by reducing your taxable income.

Pre-tax contributions are invested in stocks and bonds that pay dividends or interest each year. Being in a tax-deferred account means you don’t pay taxes on this growth. The compounding effect of these reinvested amounts can really snowball into amazing results by the time you withdraw the money after retirement.

When you make a withdrawal from a pre-tax retirement account, the money finally runs through the tax system. This is when you pay taxes on your retirement account contributions. Most retirees are in a lower tax bracket than when they were working. As a result, you will probably pay fewer taxes in the end than if you had opened a post-tax retirement account.

When to Consider Post-Tax Contributions

Pre-tax retirement accounts aren’t for everyone. That’s why the IRS also offers post-tax contributions. “Post-tax” is when you pay taxes right away, leaving you with tax-exempt retirement income. Consider setting up a Roth 401(k) or Roth IRA if:

You’re in a low tax bracket now and expect to be in a higher bracket later due to retirement income or because you think taxes will increase.

You would rather have your income run through the tax system now instead of at retirement so your nest egg isn’t subject to further taxation.

If you still have questions about pre-tax vs. post-tax retirement accounts, Nelson Financial Planning can help you decide which option is best for you. Our team consists of Certified Financial Planners who fulfill their fiduciary duty to keep your best interests in mind at all times. With our help, you’ll understand the rules better than ever so you can maximize your tax savings. Contact us today at 407-629-6477 to schedule your free initial consultation.

The Biggest Lessons to Learn from 2020

It’s good to see 2020 in the rearview mirror, but investors can learn a lot from this tumultuous year. Here are some of the biggest takeaways. 

Fearless Forecast from 2020 

For the past three decades, Nelson Financial Planning has offered an annual “Fearless Forecast.” This tongue-in-cheek exercise goes out on the proverbial limb to predict the market’s future. 

As we started 2020: 

• Unemployment was at 3.5 percent. 
• Economic growth was humming along at 2 to 3 percent. 
• The Dow closed out 2019 at 28,538 points. (Our Fearless Forecast for 2019 predicted closing at 28,400 points.) 

Here’s how things unfolded: 

• Unemployment rose to 7.9 percent. 
• The economy shrank by 3.6 percent. 
• The Dow closed out 2020 at just over 30,600. (Our Fearless Forecast for 2020 predicted closing at 31,600 points.) 

Key Takeaways from 2020 

Investors can apply four big things from 2020 going forward: 

• Markets don’t perfectly reflect the economy. Fear over the pandemic caused the market to plummet about 35 percent in March 2020. The lockdowns obviously had a dramatic economic impact, and the market reflected that in this instance. However, remember that the market indicates what the future may hold rather than serving as a template for what’s happening today. 
• It pays not to time the market. If you pulled out at the beginning of the pandemic, you missed a tremendous opportunity. After all, the market rose 15 or 16 percent from its low point in March until closing in December. 
• Forecasts are just forecasts. No one can predict the future. That’s why forecasters constantly change their predictions. Ignore them as best you can. 
• Embrace new trends, but balance your portfolio. Big tech companies drove around 30 percent of the market performance in 2020. Moreover, technology dominated our personal lives. Remember how Zoom became a household name when everyone shifted to remote work environments and videoconferencing? Big drivers are important, but don’t neglect the opportunity to diversify your investments. Even consider those from overseas as international markets recover faster than the US. 

Fearless Forecast for 2021 

Here are our predictions for this year: 

• We estimate economic growth of 3 percent, maybe a little higher. We expect 2021 to be a comeback year, but we believe the money injected into the market may have stolen some of the recovery we might have otherwise seen in 2021. 
• Low interest rates are here to stay. The Federal Reserve is doing everything it can to hold interest rates near 0 percent until 2023. 
• We predict the Dow will close out 2021 at 32,250, or 5 to 6 percent higher than it closed in 2020. 

If you’re ready to accumulate more wealth in 2021 and beyond, turn to Nelson Financial Planning for help. We have over 35 years of financial planning experience to provide superior investment results and peace of mind for the future through a successful and cost-effective financial plan. Call 407-629-6477 or schedule a free initial consultation online. 

Financially Savvy House Buying

On 8/17/2020 we did a radio show talking about a Money Magazine article.  This article talked heavily about the proper way to buy a house.  Buying a house can be a very happy and exciting time or a frustrating financial trap.

Buying a home is one of the most expensive purchases most people make in their lives. But before signing any documents and letting your friends and relatives know about this huge financial milestone, there is a very important factor which tends to get overlooked by a lot of future homeowners: not knowing how much house they can afford.

It is completely understandable that many of us allow our excitement and emotions to take over during our home buying journey; especially if you find the house of your dreams. When this happens, it’s easy to forget about the real numbers, which can harm you down the road.

A good way to start figuring out how much house you can afford is by using the 28%/36% rule with your monthly gross income (MGI). 28% represents the portion of your MGI that goes to your mortgage expenses while 36% represents the portion of your MGI that goes to all of your other debt obligations. To be on the safe side, get in touch with your preferred lender to get an idea of what loan amount you can qualify for.

For more on a financially savvy way to buy a house, click on the link to view the article posted by Money Magazine https://money.com/get-items-removed-from-credit-report/ or visit our YouTube channel to watch our 8/17/2020 radio show https://youtu.be/UHcL_nB485I

Hello Friends

2020 will certainly go down as a historical year – and we still haven’t gotten to the election yet! We hope you are well and staying healthy.

Speaking of elections, we thought it would be interesting to go into the archives and pull the election piece we wrote four years ago. At that point, eight years of a Democratic Administration were ending and the election looked like a lock for the Democratic candidate. What’s interesting about this four year old article is that it needs NO updating – except for the date of the election which is November 3 for the 2020 election and not November 8 (which was election day in 2016).

Here are two of the more notable quotes from the article. “Presidents from both parties have raised or reduced taxes, supported or opposed free trade, increased or reduced regulatory burdens etc.” “History tells us that there is no magic formula to the Presidency and stock market movement.” Frankly, we believe that the after shock of the Covid pandemic will consume much of the next Presidential term and dictate the direction of many policy choices.

Despite all of the headlines these days, the markets have shown a remarkable level of resiliency. However, resiliency does not equate to all clear and we expect volatility to increase significantly in the months ahead as the election draws nearer and the economic impact of the continued rise in Covid cases starts to show. As always, remain consistent and know that your allocation is designed to be a bit of an all weather allocation as we never know when crazy stuff is going to happen.

Unfortunately, given the current state of Covid cases, we can’t in good conscience bring together a large group of people for our usual fall meeting formats.  And for that we are deeply disappointed. But we wanted to at least do something that felt normal so we are doing a Shred Day at the office.

Many of you have told us that you have spent this quarantine time organizing things at home and have documents that need to be disposed of properly. Here’s your chance!  We also have the option to bring your old digital devices and computer equipment for proper disposal as well. You can stay in your car and we will unload your car and bring you a box lunch.

Our series of portfolio manager conference calls continues. These calls represent an opportunity for you to hear directly from senior investment personnel about the decisions and changes that are being made on a daily basis to your investments. These calls require no internet or computer equipment – simply dial the phone number and enter the meeting number to connect. Please join us for the following upcoming calls at 5:00 PM sharp and email us any of your questions ahead of time.

If you have not visited with us yet in 2020 please contact the office to arrange a conversation. We are available by phone, video or in person in our outdoor meeting space with the CDC recommended universal masking protocol.

Look forward to seeing you on Shred Day.

Fondly,

Joel Garris

Nelson Ivest Brokerage Services, Inc. & Nelson Financial Planning, Inc. Business Continuity Plan

Nelson Financial Planning, Inc. and Nelson Ivest Brokerage Services, Inc. have developed a Business Continuity Plan on how we will respond to events that significantly disrupt our business.  Since the timing and impact of disasters and disruptions is unpredictable, we will have to be flexible in responding to actual events as they occur.  With that in mind, we are providing you with this information on our business continuity plan in case an event occurs that causes significant disruption.

Contacting Us – If after a significant business disruption you cannot contact us as you usually do at 407-629-6477, you should call our alternative number 407-619-5307.  If you cannot access us through either of those means, you should contact the applicable mutual fund or variable annuity company to complete any transactions within your accounts, including investments or redemptions.  The contact information for the four mutual fund families that we predominately do business with is as follows:

American Funds, 1-800-421-4225, P. O. Box 2280, Norfolk, VA 23501-2280

Deutsche AM Service Company 1-800-728-3337, P. O. Box 219151, Kansas City, MO 64121-9151

MFS Service Center, 1-800-225-2606, P. O. Box 219341 Kansas City, MO 64121

Putnam Investments, 1-800-225-1581, P. O. Box 219697 Kansas City, MO 64105

Our Business Continuity Plan – We plan to quickly recover and resume business operations after a significant business disruption and respond by safeguarding our employees and property, making a financial and operational assessment, protecting the firm’s books and records, and allowing our customers to transact business.  In short, our business continuity plan is designed to permit our firm to resume operations as quickly as possible, given the scope and severity of the significant business disruption.

Our business continuity plan addresses: data back up and recovery; all mission critical systems; financial and operational assessments; alternative communications with customers, employees, and regulators; alternate physical location of employees; critical supplier, contractor, bank and counter-party impact; regulatory reporting; and assuring our customers prompt access to their funds and securities if we are unable to continue our business.

Each mutual fund or variable annuity company backs up client records in a geographically separate area. While every emergency situation poses unique problems based on external factors, such as time of day and the severity of the disruption, we have been advised by the mutual fund and variable annuity companies that their objective is to restore their own operations and be able to complete existing transactions and accept new transactions and payments within a reasonable period of time.  Your orders and requests for funds and securities could be delayed during this period.

Varying Disruptions – Significant business disruptions can vary in their scope, such as only our firm, a single building housing our firm, the business district where our firm is located, the city where we are located, or the whole region.  Within each of these areas, the severity of the disruption can also vary from minimal to severe.  In a disruption to only our firm or a building housing our firm, we will transfer our operations to a local site when needed and expect to recover and resume business as quickly as possible.  In a disruption affecting our business district, city, or region, we will transfer our operations to a site outside of the affected area and recover and resume business within a reasonable period.  In either situation, we plan to continue in business, direct you to contact the mutual fund or variable annuity company directly and notify you through our customer emergency number at 407-619-5307 how to contact us.  If the significant business disruption is so severe that it prevents us from remaining in business, we will assure our customer’s prompt access to their accounts.

For more information – If you have questions about our business continuity planning, you can contact us at 407-629-6477.

Mid Year Outlook – Let’s hope the back half is less crazy…

Dear Friends,

As we approach the mid point of year 2020, it seems like we all need to catch our breath from the Covid nightmare. Unfortunately, I am not sure we’ll have that luxury given that this is in fact a Presidential election year (and the unemployment numbers still stink too!).

If you missed our last client conference call a couple of weeks ago, this piece contains a lot of information that Marc Nabi, Portfolio Manager with American Funds, discussed on the call.

In summary, always remember that recoveries last longer and produce much stronger results then downturns. And most importantly, the active management that occurs on a daily basis inside every fund that you own with us will be a key driver of your investment success over time. After any economic downturn there are always winners and losers among companies – business that emerge better positioned than their competitors. Selectivity will be key moving forward and that’s the kind of activity that occurs everyday with the portfolio managers who are making investment decisions inside each fund you own.

Don’t ignore the potential for continued volatility – that is a part of it and the tougher the headlines the more that is a factor. Speaking of volatility, let’s not forget about that Presidential election. There is no discernable difference between parties and market direction. Let’s face it – the economy is far bigger than any one person or one political party. Pay particular attention to the headline events that occurred during each President’s time in office. We often forget these historical headlines that, at the time they are happening, feel like the worst case scenario.

In a week or so you will receive your statements for the second quarter. The good news is that they will look much better than what you saw at the end of the first quarter. At the end of March, the markets were free falling due to the Covid shutdowns and in that first quarter were down about 20%. As of the date of this email, 6/25/2020, markets overall are down about 5% an upward shift of 15% since the end of March. This strong recovery in the second quarter makes the results for the year to date not too bad considering Covid.

As we have mentioned in previous emails, the office is fully open for meetings either by phone, video or in person. Please know that we do adhere to a universal masking policy for in person meetings and try to have those in-person meetings outside if the weather permits. Who knew those oak trees I planted a decade ago would grow to make a shady outdoor meeting space that we would actually use!

We hope you all are well. As always please let us know if we can be of any help and if we haven’t seen you in 2020 yet, we encourage you to contact us to set up a review.

Dear State of Florida Employee

June 9, 2020

Dear State of Florida Employee,

2020 is certainly giving us some significant swings in the markets, the economy and our society. The Covid pandemic created the single biggest loss of jobs in history. In response, the markets achieved an incredibly high level of volatility.

1. Market Commentary

The volatility in the market created breathtaking swings in account values. At one point, markets were down 34% from the beginning of the year. As of the start of this week markets had shifted up 45% from this low point to be less than 7% from their all time peak in mid – February.

There are three things that are helping the markets to hang in there despite the widespread Covid shut downs. First, don’t fight the Fed. This maxim has been around for decades and when the Federal Reserve is lowering interest rates and making borrowing easier the markets typically respond positively. Second, don’t fight city hall. When government leaders are providing significant cash relief to both individuals and businesses, the markets will respond positively as well. And third, tech rules the day. The Covid pandemic only accelerated the performance of industry leaders in the technology area and it is these companies that contribute significantly to market performance.

That’s the good news – but there is always the rest of the story. And Covid is still very much with us and its spread may very well have been compounded by the current level of social unrest as well. In addition, the amount of Americans unemployed is still at a staggering level. Consequently, the markets may be getting somewhat ahead of themselves. Remember though, the best possible investment results are achieved over time by being consistent with one’s approach. If you have any questions about your overall financial picture or investment mix, we are available at any time for phone or video conversations along with on-site visits that follow CDC guidelines.

1. Our Weekly Podcast & FRS Booklet

Our weekly radio show/podcast network continues to expand. In addition to the Newsradio Orlando network of stations on 94.1 FM, 93.1 FM, and 540 AM, the live show “Dollar & Sense” that airs every Sunday morning from 9 – 10 AM can now be heard on the local sports network 96 Nine The Game (96.9 FM) which is home to the Orlando Magic and the Tampa Bay Buccaneers.

To download or listen on-line, follow us on Facebook under Nelson Financial Planning. We are also on a variety of other platforms like Twitter, Itunes, Spotify and many others. Visit our website www.NelsonFinancialPlanning.com to find direct links to your favorite podcast format.

One of our most recent videos addresses the topic of why you should still continue to contribute to your deferred compensation account despite the Covid pandemic. Be sure to subscribe to our Nelson Financial Planning Channel on Youtube for this and other timely updates on retirement matters.

Our Booklet – The State of Your Retirement; The Essential Guide for all State of Florida Employees – continues to be the one source for state employees that describes all of the unique choices you face at retirement. The latest edition includes information about your eligibility for the Health Insurance Subsidy along with a chapter on the importance of Deferred Compensation Accounts. Please be sure to call (407-629-6477) or visit our website www.NelsonFinancialPlanning.com to get your free copy today.

III. Investment Plan Fund Changes

Last month FRS announced a change in its FRS Investment Plan Fund options. As of July 1, 2020, the FRS Large Cap Stock Fund and the FRS Small/Mid Cap Stock Fund will become the FRS U.S. Stock Fund. In addition, the FRS Investment Bond Fund will be merged into the FRS Core Plus Bond Fund and the FRS 2015 Retirement Plan Fund will be merged into the FRS Retirement Fund. These changes effectively reduce your investment options which unfortunately continues a trend within the FRS Investment Plan of offering less options. These reduced choices force employees to use more cookie cutter options that aren’t very finely tuned to one’s individual objectives. As for this change, we recommend that FRS Investment Plan participants who own these funds let them automatically transfer to the new funds as there really aren’t any other choices that represent similar investment objectives. Just one more reason why when you do retire from FRS you certainly want to explore your rollover options to an outside IRA in order to broaden your investment mix to more accurately reflect your retirement income needs.

These investment changes do present an opportunity to review your overall investment mix in your FRS Investment Plan. However, as you approach retirement, you should enter into more of a growth and income approach.  Receiving income while maintaining some growth to cover that income becomes paramount in retirement.  This shift means that your investment mix needs to adjust as well.  We encourage those that are within 3-5 years of retirement to review their investment allocation.  As always, we are happy to provide free consultations to state employees who would like to review their investment allocation.  Simply contact the office at 407-629-6477 to schedule a conversation and be sure to have your login information handy.

1. 2020 Legislative Update

In our January letter, we mentioned some proposed legislation that would have increased the employer’s contribution rate to your retirement. This bill (SB 992) didn’t really go anywhere during the legislative session and wound up being withdrawn. However, the bill was far from perfect as it also forced state employees to increase their required contributions from 3% to 5% over the next few years. Perhaps in the next legislative session FRS employees will get some improvement in their benefits!

1. Retirement Under the Florida Retirement System.

There are many factors that go into properly planning your retirement.  The various types of FRS retirement accounts such as IRAs, FRS Investment Plan Accounts and Deferred Compensation Accounts are unique and have different tax consequences depending on your age.  These are very important and very complicated issues that require proper planning in order to have the most flexibility in retirement. If you are thinking of retiring or have recently done so, please contact us at 407-629-6477 to schedule an appointment to discuss planning your retirement in the most tax and cost efficient manner. THESE RETIREMENT PLANNING SESSIONS ARE ABSOLUTELY FREE NO OBLIGATION CONVERSATIONS THAT ANALYZE ALL YOUR RETIREMENT OPTIONS. 

As always, stay well and please contact us with any questions on any financial matter.

Sincerely,

Joel Garris, JD, CFP, CFF

Host, “Dollar & Sense”