HOW MUCH IS ENOUGH?? - Harvard Medical SchoolHOW MUCH IS ENOUGH FOR US? • Are you investing...
Transcript of HOW MUCH IS ENOUGH?? - Harvard Medical SchoolHOW MUCH IS ENOUGH FOR US? • Are you investing...
SEE THE FOREST
Strategies for accumulating wealth,minimizing taxes, planning for retirement
and your legacy
HOW MUCH IS ENOUGH??
SEE THE FOREST
HOW MUCH IS ENOUGH?
STRATEGIES
How Much Is Enough For Us?
Needs
Goals
Dreams
How Much ToCharity?
How Much ToChildren?
SEE THE FOREST
HOW MUCH IS ENOUGH FOR US?
SEE THE FOREST
HOW MUCH IS ENOUGH FOR US?
• How Much Do You Need Today??
– What does your current lifestyle cost?
• How Much Do You Need for the Future??
– Do you have enough assets and income to maintain financial
independence?
• Are you prepared for inflation?
• Will you outlive your assets?
• Are there additional short/long term needs?
– Care for parents, handicapped child or grandchild
SEE THE FOREST
• Prepare For Inflation
– Inflation erodes purchasing power over time:
2.2% annual inflation over 10 years turns $100 into $80.
– Rising inflation is historically a drag on stock and bondreturns.
– This makes diversifying beyond traditional asset classesmore important.
HOW MUCH IS ENOUGH FOR US?
SEE THE FOREST
HOW MUCH IS ENOUGH FOR US?
• How much do you earn and save?
• Are you spending less than you earn?
• How much will Social Security or pensions provide?
• How to determine if you have enough?
SEE THE FOREST
HOW MUCH IS ENOUGH FOR US?
• What Other Financial Goals Would You Like to Achieve?
• Education for children or grandchildren
• Additional residences
• Travel
• Charitable giving
• If you had total freedom to do anything, what would that
be?
SEE THE FOREST
HOW MUCH IS ENOUGH FOR US?
SEE THE FOREST
HOW MUCH IS ENOUGH FOR US?
SEE THE FOREST
HOW MUCH IS ENOUGH FOR US?
• Are you investing properly for the future?
• Do you have low cost, no load funds?
• Do you know what you pay in fees?
• Is your portfolio tax efficient?
– Are you paying unnecessary taxes?
• Is your portfolio diversified?
• What other services are provided?
SEE THE FOREST
HISTORICAL RETURNS CHART
10 Years95.7%40.7%
15 Years164.3%141.0%
Cumulative Returns:S&P 500Balanced Portfolio
Data is from Envestnet Tamarac, Hedge Fund Research, Morningstar, and Federal Reserve Economic Data. Sharpe ratioutilizes a 3.35% risk-free rate derived from the average annual 10-yearTreasury rate over 15 years. The informationpresented represents the performance of various indexes. Does not represent actual investment performance.
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 15 Yr StandardDeviation
Sharpe Ratio
DJ UBSCommodity
25.9%
MSCI EM55.8%
Wilshire USREIT
33.2%
MSCI EM34.0%
Wilshire USREIT
36.0%
MSCI EM39.4%
HFRI SystemDiv
18.1%
MSCI EM78.5%
Wilshire USREIT
28.6%
BarclaysMunicipals
10.7%
MSCI EM18.2%
Russell 200038.8%
Wilshire USREIT
31.8%
Wilshire USREIT4.2%
Russell 200021.3%
Wilshire USREIT
10.8%
MSCI EM32.5%
Wilshire USREIT0.35
LB ITGvt/Credit
9.8%
Russell 200047.3%
MSCI EM25.6%
DJ UBSCommodity
21.4%
MSCI EM32.1%
DJ UBSCommodity
16.2%
Barclays ITGvt/Credit
5.1%
MSCI EAFE31.8%
Russell 200026.9%
Wilshire USREIT9.2%
Wilshire USREIT17.6%
S&P 50032.4%
S&P 50013.7%
BarclaysMunicipals
3.3%
S&P 50012.0%
MSCI EM9.5%
MSCI EAFE21.1%
BarclaysMunicipals
0.30
LBMunicipals
9.6%
MSCI EAFE38.6%
MSCI EAFE20.2%
HFRI SystemDiv
14.4%
MSCI EAFE26.3%
MSCI EAFE11.2%
U.S. 30 DayTBill1.6%
Wilshire USREIT
28.6%
MSCI EM18.9%
Barclays ITGvt/Credit
5.8%
MSCI EAFE17.3%
MSCI EAFE22.8%
HFRI SystemDiv
10.7%
S&P 5001.4%
BloombergCommodity
11.8%
Russell 20008.5%
Russell 200021.6%
Barclays ITGvt/Credit
0.28
Wilshire USREIT3.6%
Wilshire USREIT
36.2%
Russell 200018.3%
Wilshire USREIT
13.8%
Russell 200018.4%
HFRI SystemDiv
10.3%
U.S. Inflation0.0%
Russell 200027.2%
DJ UBSCommodity
16.8%
U.S. Inflation3.0%
Russell 200016.3%
HFRI FoFComposite
9.0%
BarclaysMunicipals
9.1%
Barclays ITGvt/Credit
1.1%
MSCI EM11.2%
S&P 5006.7%
Wilshire USREIT
21.3%
HFRI SystemDiv0.26
U.S. Inflation2.5%
S&P 50028.7%
BalancedPortfolio
11.9%
MSCI EAFE13.5%
HFRI SystemDiv
16.8%
HFRI FoFComposite
10.3%
BarclaysMunicipals
-2.5%
S&P 50026.5%
S&P 50015.1%
S&P 5002.1%
S&P 50016.0%
BalancedPortfolio
7.5%
Russell 20004.9%
U.S. Inflation0.7%
Wilshire USREIT7.2%
BalancedPortfolio
6.0%
BloombergCommodity
19.1%
BalancedPortfolio
0.25
U.S. 30 DayTBill1.6%
DJ UBSCommodity
23.9%
S&P 50010.9%
BalancedPortfolio
10.5%
S&P 50015.8%
BalancedPortfolio
7.8%
BalancedPortfolio-20.1%
BalancedPortfolio20.2%
BalancedPortfolio
11.6%
U.S. 30 DayTBill
0.0%
BalancedPortfolio
8.3%
Wilshire USREIT1.9%
BalancedPortfolio
4.4%
U.S. 30 DayTBill
0.0%
BalancedPortfolio
5.7%
HFRI SystemDiv
5.5%
S&P 50018.2%
Russell 20000.24
HFRI FoFComposite
1.0%
BalancedPortfolio
22.5%
DJ UBSCommodity
9.1%
HFRI FoFComposite
7.5%
BalancedPortfolio
14.5%
LB ITGvt/Credit
7.4%
HFRI FoFComposite
-21.4%
DJ UBSCommodity
18.9%
HFRI SystemDiv
9.8%
BalancedPortfolio
-2.2%
BarclaysMunicipals
6.8%
U.S. Inflation1.5%
HFRI FoFComposite
3.4%
HFRI FoFComposite
-0.3%
Barclays ITGvt/Credit
2.1%
MSCI EAFE5.3%
BalancedPortfolio
10.4%
MSCI EM0.19
BalancedPortfolio
-1.2%
HFRI SystemDiv
15.4%
HFRI FoFComposite
6.9%
S&P 5004.9%
HFRI FoFComposite
10.4%
S&P 5005.5%
Russell 2000-33.8%
BarclaysMunicipals
12.9%
MSCI EAFE7.8%
HFRI SystemDiv
-3.5%
HFRI FoFComposite
4.8%
U.S. 30 DayTBill
0.0%
Barclays ITGvt/Credit
3.1%
MSCI EAFE-0.8%
U.S. Inflation2.1%
BarclaysMunicipals
4.7%
HFRI FoFComposite
8.5%
S&P 5000.18
HFRI SystemDiv
-3.3%
HFRI FoFComposite
11.6%
HFRI SystemDiv
6.4%
Russell 20004.6%
LBMunicipals
4.8%
U.S. 30 DayTBill4.7%
DJ UBSCommodity
-35.6%
HFRI FoFComposite
11.5%
Barclays ITGvt/Credit
5.9%
Russell 2000-4.2%
Barclays ITGvt/Credit
3.9%
Barclays ITGvt/Credit
-0.9%
U.S. Inflation0.7%
HFRI SystemDiv
-2.3%
MSCI EAFE1.0%
Barclays ITGvt/Credit
4.1%
HFRI SystemDiv
8.2%
MSCI EAFE0.09
MSCI EM-6.2%
LBMunicipals
5.3%
LBMunicipals
4.5%
LBMunicipals
3.5%
U.S. 30 DayTBill4.8%
U.S. Inflation4.1%
S&P 500-37.0%
Barclays ITGvt/Credit
5.2%
HFRI FoFComposite
5.7%
HFRI FoFComposite
-5.7%
U.S. Inflation1.8%
HFRI SystemDiv
-0.9%
U.S. 30 DayTBill
0.0%
BalancedPortfolio
-3.1%
HFRI FoFComposite
0.7%
HFRI FoFComposite
3.3%
BarclaysMunicipals
4.5%
HFRI FoFComposite
-0.01
MSCI EAFE-15.9%
LB ITGvt/Credit
4.3%
U.S. Inflation3.3%
U.S. Inflation3.3%
LB ITGvt/Credit
4.1%
LB Municipals3.4%
Wilshire USREIT
-39.2%
U.S. Inflation2.8%
BarclaysMunicipals
2.4%
MSCI EAFE-12.1%
U.S. 30 DayTBill0.1%
MSCI EM-2.6%
MSCI EM-2.2%
Russell 2000-4.4%
BarclaysMunicipals
0.3%
U.S. Inflation2.1%
Barclays ITGvt/Credit
2.7%
BloombergCommodity
-0.11
Russell 2000-20.5%
U.S. Inflation2.0%
LB ITGvt/Credit
3.0%
U.S. 30 DayTBill3%
U.S. Inflation2.5%
Russell 2000-1.6%
MSCI EAFE-43.4%
U.S. 30 DayTBill0.1%
U.S. Inflation1.4%
DJ UBSCommodity
-13.3%
DJ UBSCommodity
-1.1%
BarclaysMunicipals
-2.6%
MSCI EAFE-4.9%
MSCI EM-14.9%
U.S. 30 DayTBill0.2%
BloombergCommodity
1.2%
U.S. 30 DayTBill1.7%
U.S. Inflation-1.14
S&P 500-22.1%
U.S. 30 DayTBill1.0%
U.S. 30 DayTBill1.2%
LB ITGvt/Credit
1.6%
DJ UBSCommodity
2.1%
Wilshire USREIT
-17.6%
MSCI EM-53.3%
HFRI SystemDiv
-1.7%
U.S. 30 DayTBill0.1%
MSCI EM-18.4%
HFRI SystemDiv
-2.5%
DJ UBSCommodity
-9.5%
BloombergCommodity
-17.0%
BloombergCommodity
-24.7%
HFRI SystemDiv
-1.3%
U.S. 30 DayTBill1.2%
U.S. Inflation1.1%
U.S. 30 DayTBill-1.26
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 15 Yr Std Dev Sharpe
SEE THE FOREST
Get Invested, Stay Invested: Facts about Market Volatility
SEE THE FOREST
• Municipal Bonds
• Broad Market Stock Index
Funds or ETFs
• Tax Managed Funds
• Individual Stocks (long-
term)
Tax Deferred
• Taxable Bonds or Bond Funds
• Actively Managed Funds
• REITs
• Commodities, gold and silver
ETFs
• Individual stocks (short term)
INVESTING
Location, Location, Location
Taxable Accounts
SEE THE FOREST
EXAMPLES OF TAX DEFERRED RETIREMENT ACCOUNTS
• IRA
– Traditional or Roth
– SEP and SIMPLE
• 403(b) Plan
• 457(b) Deferred Comp
• Annuities
• Qualified Plans
– Defined Benefit Plan
– Profit Sharing
– Money Purchase
– ESOP
– 401(k) Traditional/Roth
SEE THE FOREST
MEDICARE AND MAGI
• MAGI greater than $170,000
– Higher premiums for Medicare Part B and Part D
– Five income tiers
– Part B Premiums
• $134/month vs. $429/month– High Income couple could pay more than $10,000/year in additional
premiums
– Important to reduce taxable income in retirement
» Roth, Qualified Charitable Distributions, Charitable Gift Annuity
SEE THE FOREST
HOW MUCH TO CHILDREN?
• Do you feel each child should receive an equal share?
– “fair is not always equal, and equal is not always fair”
• What if you leave them little or no money?
• How is an inheritance going to affect your child’s marriage
or future marriage?
• What is your child’s work ethic?
SEE THE FOREST
HOW MUCH TO CHILDREN?
• Do you think your children are likely to be less productive
if they are left significant money?
• Are you concerned that they (children, grandchildren,
great grandchildren) may suffer from a loss of self worth
or lack of respect from others?
• Should you leave money in trust for them?
• What strings (advice, criticism) are you going to apply to
how they spend the money?
SEE THE FOREST
HOW MUCH TO CHILDREN?
Current Estate and Gift Tax Rules:
• Annual gift amount of $14,000 per person.
• Unlimited amounts directly paid for tuition and medical.
• $5,490,000 Federal exemption per person; spousalportability.
• 40% Estate Tax rate above that.
• Unlimited amounts can be left to a spouse or charity.
• Generation-skipping Tax is an additional 40% tax.
• Step-up (or down) in cost basis for assets in the estate,EXCEPT for tax-deferred accounts (e.g. IRAs, annuities)
• Don’t forget state estate and inheritance taxes.
SEE THE FOREST
HOW MUCH TO CHILDREN?
Estate Tax Planning Strategies
• Lifetime gifts – annual exclusion; GRATs; grantor trusts;
spousal access trusts; 529 plans
• Life Insurance Trust
• Discounts on business entities and partial interests in real
estate
• IRA conversion to Roth IRA
• Don’t forget state estate and inheritance taxes.
SEE THE FOREST
HOW MUCH TO CHARITY?
• Do you have charitable goals during your lifetime or after
your death?
• Are there particular causes you care about and how do
you want to impact them?
• Education, environment, health care, children,
hunger?
• What institutions have been most important in your life?
SEE THE FOREST
HOW MUCH TO CHARITY?
• Would you like to establish an endowed scholarship or
endowed family gift in your name or a loved one?
• Do you want your children to be involved in the decision
making process?
• What goals do you have for future generations and their
charitable giving?
SEE THE FOREST
QUALIFIED CHARITABLE DISTRIBUTION
• Donor—must be over 70 ½ at time of transfer
– Make tax free transfer to charity from IRA
• Up to $100,000/year
• Must be direct transfer from donor to public charity
– Traditional or inherited IRA
– Not eligible for income tax deduction
– Counts toward donor’s RMD
– Lowers Federal and state taxable income and couldhave Medicare premium implications
SEE THE FOREST
CHARITABLE GIFT ANNUITY
• Contract between Donor and Qualified Charity
– Backed by general assets of the charity, so review theirfinancial strength.
– Funded with cash or appreciated stock
– Immediate income tax deduction on gift portion
– Fixed income stream with competitive rates of return
– Ability to defer payments
– A portion of each payment is tax-free
– Single or joint lifetime payments
SEE THE FOREST
CHARITABLE GIFT ANNUITY
• Example 1
− Donor age 70 funds a CGA with $100,000 cash
− Charity pays 6% annually for life starting at 70
Results: $6,000 annual cash flow; $1,500 taxable income
$4,500 tax-free income; $31,000 tax deduction up front
• Example 2
– Two Donors age 75 fund a CGA with $100,000 cash
– Charity pays 7.5% annually for life starting at 80
Results: $7,500 annual cash flow; $1,600 taxable income
$5,900 tax-free income; $27,000 tax deduction up front
SEE THE FOREST
CHARITABLE REMAINDER TRUST
• Irrevocable trust that pays you, or your family, income andleaves the rest to a designated charity (or charities).
– Fixed term not more than 20 years, or it can be for alifetime.
– Fixed Annuity or Unitrust (percentage) payout.
– The trust is tax-exempt, but income paid out is taxable.
– You get a charitable income tax deduction upfront basedon the payout.
– Income payout must be at least 5%.
– Terrific option for diversifying highly-appreciated stock.
SEE THE FOREST
DONOR ADVISED FUNDS
SEE THE FOREST
DAINTREE ADVISORS LLC
Daintree Advisors is a multi-family office and wealthmanagement firm. Our mission is to help clients “see theforest” so they can attain their goals.
Mary Shahian, CFP®, ChFC, CDFA™
Partner, Senior Client Advisor
617-848-3423
William Speciale, J.D., AEP®
Partner, Senior Client Advisor
617-848-3408