Jill Ciccarelli Rapps, CFP | èBella Magazine | November 2019

Women have made phenomenal strides in nearly every job sector. Many now hold equal responsibility with their partner in supporting the household financially. In fact, studies have revealed that more than 50 percent of working women are responsible for half or more of a household’s income.

Although women are taking greater roles in building household income, when it comes to assuming an active role in long-term financial decisions, many women still struggle to maintain equal footing. A UBS Global Wealth Management report found that 56 percent of women between the ages of 20 and 34, and 54 percent of women over the age of 51, leave crucial financial decisions to a significant other.

In the past, it was common for women run the household and leave financial planning to the husband. This practice today could leave many women in a financially insecure predicament. A life-changing event such as divorce or the loss of a spouse can leave you suddenly and unexpectedly with full financial responsibility, perhaps unsure about how to move forward.

One question that often arises regarding finances in a relationship is, “When should we begin discussing money?” Many relationship experts agree that financial discussions should begin early and continue often. A survey conducted by LendingClub found that those who discuss important financial topics early in a relationship are less likely to feel isolated and more likely to prioritize personal health and well-being.

That said, understanding the need for discussion, and putting it into practice are two very different concepts.

Some people may be hesitant to discuss money. It can be hard to overcome the internalized alarms in our brains telling us to retreat when we approach an uncomfortable subject, but that alarm could also signal that we need to have that discussion. You could start small with metaphorical “discovery” questions such as, “Would you rather spend a moderate amount of money on a small vacation every year, or save a substantial amount and go on a big vacation every few years?”

Some women may still feel that taking a more involved role in the household’s financial affairs is just not for them, leaving them in a particularly vulnerable place.

Let’s take the fictional couple, John and Mary. Mary left the workforce years ago to care for their children and aging parents. With the stress of overseeing the care of the family, Mary has left the financial planning to John. One day, John has a stroke and is left severely incapacitated. Since Mary has not been actively involved in the finances, she lapses on the payments for John’s credit card, which was paying the mortgage and utility bills. She has difficulty making financial decisions and incurs penalties and fees. On top of overseeing the care of the family, Mary is now also responsible for the finances and becomes overwhelmed.

Taking part in the financial conversation can be scary, but it can also be extremely rewarding. Having financial autonomy not only provides a sense of security, but it also promotes leadership, accountability and positive self-esteem.

A study done by Everyday Health found that 63 percent of millennial women reported low self-esteem and self-confidence. Having a sense of independence and something to work toward together could help provide that extra boost of confidence.

“Independence” and “togetherness” may often seem like two conflicting terms but having the ability to achieve both can be highly beneficial in a relationship. Especially when money is concerned. Women often have different financial needs, especially when it comes to retirement. Staying uninvolved could leave women unprepared and overwhelmed; but having a say in how and where you want your money spent is empowering.

Becoming financially autonomous in a relationship is not an arbitrary goal. It could be a matter of necessity, and a goal all women should aim to reach.

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

By Raymond F. Ciccarelli

Finding opportunities to bring your family members together could be a challenge for many individuals. Work, school, and life obligations can put a strain on “family time” and create a disconnect between members. Participating in charitable giving could be a beneficial way to gather your family together around a worthy cause. There are many ways your family could become philanthropically involved. One option you may want to consider is a donor-advised fund.  

A donor-advised fund (DAF) is a specific type of fund that allows you to make charitable contributions and receive an immediate tax deduction for your gift. The accounts are controlled by a nonprofit sponsoring organization, and they invest the assets and manage the donor’s account. Donors retain advisory privileges to disburse charitable gifts over time and advise on how the funds are used. Donations made to the fund are irrevocable, and while you get to enjoy the immediate tax benefits of your charitable contribution, you are not obliged to distribute to an IRS-qualified public charity until your choosing. Contributions can continue to grow and compound for years while you and your family decide where your support is most needed.

Donor-advised funds could be a great option for family philanthropy due to their flexibility, tax-favorable treatment, and longevity. There are nearly half a million donor-advised funds across the country, with that number increasing steadily every year. Some sponsoring organizations may have contribution minimums and certain donation rules. DAFs, in general, are a favorable option for nearly any family situation. Some of the potentially beneficial aspects of a donor-advised fund may include:

Fewer time constraints

There could be a great deal to consider when deciding where you would like to donate and how you hope those funds are utilized. When donating the traditional way, where you give money directly to a charity, you need to know who and how much you would like to contribute at the time of the donation. For individuals involved in a charitable endeavor, this may not be an issue. Those not actively involved in an organization might need time to discover a non-profit they would like to build a relationship with. Donors can donate to a DAF for years until they decide where they would like the funds distributed.

Tax-efficiency

Donor-advised funds could be one of the more tax-efficient ways to conduct philanthropy. When a person donates to a DAF, in almost every case they receive an immediate tax deduction. Since they are considered a public charity, individuals can typically deduct a larger portion of their contributions than contributions made to a private foundation. Most can receive a deduction of up to 30% of their adjusted gross income (AGI) and some could even receive as high as 60%. For some, it could also be a great way to avoid capital gains taxes. By donating a highly appreciated asset to a DAF directly, rather than liquidating it and then donating, donors may be able to eliminate the taxes they would have incurred.

Flexibility with donations

There are various ways a person can give, and DAFs are often very open to accepting both liquid and illiquid forms of support. Depending on the sponsoring organization, they will usually accept a broad range of asset types. Most welcome cash, publicly-traded assets like stocks, mutual funds, and bitcoin. Some will even accept private equity, real estate, and artwork. They may require you to make a yearly minimum gift deposit, but most are quite lenient with the donation schedule, allowing you to gift at your own pace.

Long-term capability

Many involved philanthropists hope that their charitable endeavors will extend beyond their lifetime. The involvement of your children and grandchildren in your family’s donor-advised fund could potentially serve as a cornerstone of your children’s philanthropic legacy. DAF is typically a stable long-term charitable giving vehicle. Donors can contribute funds into the account for years before granting out funds, allowing it to grow and generate more for charity. Some may also have the ability to dictate in their Will that contributions occur even after their passing or their successors may continue to donate themselves.

Engaging family tradition

Traditions bring families together and often serve as a cornerstone of your family’s legacy. The technical work of making a family charitable donation could be a difficult task. Since it is very common for family members to live in separate regions, the pressure of deciding on where and when to give could rush the process and cause a strain on familial relationships. A DAF allows family members to place their donations and then make their charitable selections at their convenience. They could also perform the more technical tasks of the donation process and vetting of nonprofits to check that your support is going to legitimate nonprofit organizations.

Giving as a family could be a wonderful way to make memories and engage with your community. In today’s fast-paced world, where technology often takes the place of close connections, it could be important for families to find a cause that brings them together. A donor-advised fund could give your family more freedom in the process of charitable giving and foster a philanthropic legacy for generations to come. The upcoming holiday season may have many in the spirit to give. If you or your family are considering opening a donor-advised fund to provide support, your advisor could assist you with the process.

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

By Paul F. Ciccarelli CFP®, CHFC ®, CLU®

2019 has maintained its status as a year of tumultuous political and economic change, and there may be more developments just around the corner. On May 23, 2019, the House of Representatives approved a bill, which if passed into law, could change the face of retirement savings and how inheritance is passed to your beneficiaries.

The SECURE Act, which stands for “Setting Every Community Up for Retirement Enhancement Act of 2019” was introduced to the House of Representatives on March 29, 2019. Some have called the SECURE act the most important piece of tax legislation for IRA owners in a generation. If passed, among other changes, it could have a profound impact on non-spouse beneficiaries when it comes to inheriting large IRA assets. This could be the end of the “Stretch IRA” era. Many experts share the opinion that the SECURE Act will pass, in part because it does not affect the current IRA owner or their spouse during their lifetimes. However, at death, it could raise significant taxes from your children.

The bill would modify the current requirements for employer-provided retirement plans, individual retirement accounts (IRAs), and other tax-favored savings accounts. The aim of this modification is to encourage greater retirement savings in the general population. There has been a concern by some economists and lawmakers that the U.S. retirement savings gap could become a crisis by 2050. Reports on the size and severity of the U.S. retirement gap vary, but the fear that today’s workers will outlive their assets prompted policymakers to create legislation to address perceived shortcomings in our current retirement system. 

The bill includes 29 provisions aimed at increasing access to tax-advantaged accounts and preventing elderly Americans from outliving their assets. Some of the provisions in the Secure Act include:

• Repeal of the maximum age for traditional IRA contributions
• Increase of the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70 ½)
• Provide a maximum tax credit of $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment
• Allow long-term part-time workers to participate in 401(k) plans
• Allow more annuities to be offered in 401(k) plans
• Parents can withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses
• Parents can withdraw up to $10,000 from 529 plans to repay student loans

To many, these provisions sound like the ideal solution to the retirement savings problem. There are, however, two sides to every coin. Many of these modifications to the current tax code, such as the increase in the RMD and the tax credit, would require that funding comes from another source. To do this, the SECURE Act would do away with the “stretch IRA”.

The stretch IRA is an estate-planning tool that allows non-spouse heirs to inherit an IRA and “stretch” withdrawals over their life expectancy. This could allow the money in the account to continue to grow tax-deferred for potentially decades. It is a popular planning option for parents or grandparents hoping to provide greater security for their heir’s lifetime.

The change to the stretch IRA would make it a requirement for non-spouse heirs to withdraw funds from inherited IRAs within 10 years of receiving it. There are some exemptions to this rule and they include: if the heir is no more than 10 years younger than the account owner, a minor child, and those who are chronically ill or disabled. In the case of the minor child exemption, the 10-year countdown would still come into effect once they reach the age of majority.

The Senate may add an additional provision on to the bill so that the limitation on inherited IRAs only applies to individual account balances of over $450,000. Overall, the change could most likely impact individuals in their middle ages inheriting an account from their parents while at the height of their career, earning their highest income. Being forced to withdraw money from the account could have noticeable tax consequences for those individuals.

The bill has not yet been signed into law. It has thus-far only passed through the House of Representatives but has been stalled in the Senate. Senate leaders attempted to have it pass via unanimous consent but it was blocked. At this point, it will have to go through the Senate floor and be debated and voted on again. Lawmakers may attach it to one of several spending bills in order to pass it before the 2020 election. However, as it stands, the SECURE Act remains in legislative limbo until further notice.

Those worried that the SECURE Act will upend their beneficiary’s lifetime security may have to consider other options to protect their family’s wealth. In the event that you are passing on significant IRA assets to children and grandchildren, you may have to rethink your estate planning strategy.

There are two possible alternatives that are being discussed among financial planning experts. One idea would be to convert as much of your traditional IRA assets during your lifetime and pay the taxes on them under the current tax rate. The theory behind this strategy is that you will take advantage of the current tax rate since many experts feel the rate might increase in the future.

When a Roth IRA is inherited by a child or grandchild, there is no tax liability associated with the asset. The 10 years maximum withdrawal period is still in effect, but there are no taxes on Roth IRA withdrawals for the beneficiary. The SECURE Act would require non-spouse beneficiaries to empty inherited Roth IRA accounts within 10 years of your passing. In order to optimize the benefits of your Roth IRA conversions over the next 4 years, significant tax and income planning may need to be undertaken. In the long run, a tax of 24% paid today may be significantly lower than what your beneficiaries could pay later.

Another alternative plan combines charitable giving by keeping the assets in the family. In the event you are leaving assets to your favorite charities, you could consider leaving IRA assets to the charity and non-IRA assets to your family.

Some individuals may consider creating their own private “Family IRA STRETCH” that would pay income to beneficiaries over their lifetimes and provide the remainder to the family’s favorite charity after the death of the last survivor. This technique may not affect the original account holder and their spouse during their lifetime, but instead would “turn on” upon the death of the survivor. This technique could also lower the taxable estate value if the estate is taxable at the time of the survivor’s death.   

Since the SECURE Act is not yet law, we can only estimate and prepare for any potential impact it may have. Our advisory team remains up-to-date on legislation that could affect your estate plan and will maintain a vigilant eye on any upcoming changes. We will also be discussing the SECURE Act at our 2020 Wealth Symposium if you are interested in learning more about the topic. Please CLICK HERE for event details.

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

By Ciccarelli Advisory Services

The terms “residency” and “domicile” are terms that are often used interchangeably in our routine vernacular, but they have distinct differences when establishing legal obligations and domestic rights. It may seem a simple task to determine where one’s home lies. Home, after all, is where the heart is. However, state regulatory bodies and differing legal jurisdictions often make the issue more complex. It may be helpful for homeowners who own multiple properties across state lines to understand how your “home” status is determined to hopefully prevent any mishaps come tax season.

In general, a residence is a place you expect to inhabit for a fixed period, whereas a domicile is a home you plan to live in for an indefinite period. Income tax regulations make it clear that a person can have multiple residences, but only one domicile. Even if you have homes in two different states and split your time evenly between both, you can still only claim one as your domicile. The decision of which state fills that role may be more complicated than just determining where the most time is spent.

Take for example this scenario: you spend many years in Illinois, you work there, raise a family, and own a home there. You then buy a home in Florida, where you begin to spend more than half the year. You vote there, have mail delivered, register your car, and change your license. However, you continue to maintain ties to Illinois, conducting business and drafting up legal documents in the state. Now comes the question of which residence is your domicile? Since you have created ties to Florida and spend more time there, you may feel that Florida is your domicile. You may even file a declaration of domicile (a document declaring your intent to remain in that state permanently), but it may take more than this to prove to Illinois that you have made Florida your domicile.

In the 2012 court case, Cain v. Hamer, the Illinois Department of Revenue sent the Cains a notice of tax deficiency for unpaid state income taxes a few years after they established Florida as their domicile. They had been Illinois residents from 1964-1995, but in 1990 they built a second home in Florida. By 1996 they were splitting time evenly between both homes but took steps to establish permanent residency in Florida. The court used the domicile test to determine which state they had a domicile in. This test was based on four factors:

1. Physical abandonment of the first domicile
2. An intent not to return to the first domicile
3. Physical presence in the new domicile
4. An intent to make that one’s domicile

The court investigated everything from credit card statements, telephone records, club memberships, political affiliations, and even planned burial arrangements to determine the couples domicile. In the end, the court decided that since the couple had taken steps to establish a permanent home in Florida (obtaining Florida driver’s licenses, voting in the state, developing relationships with Florida medical professional, and purchasing burial plots there) they were domiciled in Florida, and held a residency in Illinois. The case was a close call though, and factors such as continued business relations and charitable contributions with Illinois based organizations nearly turned tides the other way.

Since this case, higher-tax states have tightened up regulations and added stricter authentication processes to determine the resident’s true domicile. Since the recent $10,000 cap the Federal Government has placed on deductions of state and local taxes, many wealthier individuals are making the move to domicile in low to no income tax states. Tax officials in California and New York have begun performing residency audits on high-earning individuals with multiple residences who change their domicile.

Florida is a highly appealing move due to its lack of state income tax, estate tax, and inheritance tax. In 2018, more than 63,000 New York residents transplanted to Florida. In select cases, millionaires in California and New York have been able to save more than $1 million in taxes each year by relocating to Florida. Many residents who live part-time in both the Sunshine and Empire State, but wish to change their domicile to Florida, have had to demonstrate quite extensively that they have cut ties with their former home. Tax officials have looked into even the most unassuming of details to ascertain the true extent of one’s residency. In one case a man nearly lost his audit case due to the purchase of a New York in-state fishing license after claiming domicile for his Florida residence.  

Depending on the regulations and guidelines in each state, you may need to be prepared to substantially sever ties with your original domicile. This could mean keeping detailed records of where you are spending your time, where your valuable possessions are kept, professional and charitable affiliations, club memberships, voting and mailing records, and financial accounts. If you are planning on changing your domicile or considering changing it in the future, you may want to discuss the decision with your advisor to determine if any adjustments need to be made to your financial plan.

If you are interested in learning more about residency and domicile, we will be discussing the topic at our upcoming 2020 Wealth Symposium. CLICK HERE for more details!

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

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By Samantha R. Webster, CFP®

In 2017, a story was published in Global News of a Canadian couple who were separated for the first Christmas in over seven decades for health reasons. Although initially, they were residing in the same long-term care facility, the husband was moved to a memory care facility due to his progressive dementia. The story itself was heartbreaking, but it highlighted a real concern that many couples have about the uncertainty of aging and how that may affect their life together. Most couples hope to enjoy their golden years with the company of their partner, but a sudden change in health could alter that path.

When it comes to long term care planning in today’s world, there are many paths seniors can choose. 

One popular choice is a continued care retirement community (CCRC). This allows the majority of caregiving needs to be met in one community. CCRCs offer independent living, assisted living, and nursing home care in one campus. If greater caregiving needs are required, these communities can typically accommodate without having to move an individual to a separate facility. However, there may still be special considerations that you and your partner may want to discuss when comparing different CCRCs to determine if it is the right fit for both parties. Some questions you may want to discuss include:

How seamlessly can care be increased or decreased for one or both partners, if required? 

It is likely that at some point in retirement, your care needs may increase. It is also very possible that one partner’s needs may increase more than the others. A 2017 AARP study found that 52% of people turning age 65 or older will need some type of long-term care. If one partner has a sudden change in health that renders them unable to perform everyday tasks or in need of medical supervision, it could put considerable strain on the other partner to provide adequate assistance. Care facilities can often take the pressure off of the caregiving spouse. However, some facilities may only accommodate a certain level of care in certain areas and may end up having to relocate a spouse to a different building or unit that can meet these needs. This could pose a problem if the other spouse can live independently. It could be a difficult adjustment for some if different levels of care require couples to be shifted around quite a bit, or separated, even within the same community. When looking at retirement communities, partners may want to consider how the facility handles increasing care needs, and how one spouse’s care needs may impact the living arrangement at the facility.  

Does the culture and programs offered at the facility suit both of your lifestyles? 

Your emotional and social needs are just as important as physical care, and making sure you and your partner find fulfillment in these areas may be important to your long-term happiness in the community. In the past, there has been a stigma around senior living as a place where people just go to quietly pass away. Over the last few decades, the mind-set on aging has taken on a more holistic view. Studies have shown that mental and emotional factors can play just as big a role in the aging process as physical and genetic determinants. Being restricted to a community where you feel “out of the loop” or not adequately stimulated could lead to social withdrawal and possibly depression. This could, in turn, lead to premature aging and limit your overall quality of life. Your retirement years should hopefully be a time where you discover an enriching second chapter of your life. Your partner and you may want to sit down and list specific areas of interest and amenities you want your community to include.  

What does your space and living environment need to contain to feel like “home”? 

Stepping into your space and having it feel like “home” is a very specific feeling that differs for every person. Of course, every space becomes more familiar once it is filled with your items and effects, but other factors may affect your ability to familiarize with the space. Moving into a CCRC can be a big adjustment for many couples, especially if you lived in your previous home for years. Some communities may only have limited unit sizes, which could mean downsizing. After years together in your home, you most likely developed an unconscious comfort and familiarity with certain elements of the space. It’s possible that you and your partner have not formally discussed your ideas on what makes you feel “at home” in years. This may be the perfect time to have that discussion since this will be an adjustment for both of you. While considering communities, you may want to take note of your current home and what you find most comforting in your current space. This could help guide your selection.

Moving at any age can be a big adjustment, but in our advanced years, other factors such as limited mobility and declining health conditions may make the process even more difficult. Everyone ages differently, and you and your partner’s needs may differ as you age together. The growing market for CCRCs may offer more options to choose from, but it can also require a bit of research to discover the right fit for both of you. Your advisor could assist you in comparing your options and provide insight into the structure and long-term viability of different retirement communities.

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

Sources:

Judith G. Alexander-Wasley MBA. CFP®

On the morning of August 14th, 2019, headlines were streaming on major news sites that the 10-year Treasury yield had fallen below the two-year note prompting the inversion of the yield curve.  The media went a step further declaring the inversion as an imminent indicator of a recession. Subsequently, the Dow Jones Industrial Average sank by 800 points; the broader S&P 500 Index was down 86 points, and the NASDAQ was lower by 242 points.  With memories of the market turbulence of last December still fresh in many people’s minds, the prognostication of a looming recession was not welcomed news for investors. While a yield curve inversion has occurred more than once in the recent past, this does not mean it’s time to metaphorically “run for the hills.”  To understand the yield curve inversion, and why some economists use it as a predictive model for future recessions, it could be helpful to initially understand how the bond market functions in relation to current and future economic conditions.        

Bonds represent the debt of companies or the U.S. Government. Investors lend the money to companies or the Government, and in exchange, receive an interest “coupon” (the annual interest rate paid on a bond, expressed as a percentage of face value) at predetermined intervals until the principal is returned to the lender on its maturity date. The maturity is typically determined when the bond is issued and can range from 1 day to 100 years; although, the majority of maturities span between 1-30 years.  Since a bond’s term can span several years, they are often separated into 3 categories: short-, medium-, and long-term. Generally, bonds are considered a more conservative investment than stocks and they typically provide a steady stream of income.

The bond market is often viewed by economists as a predictor of overall economic conditions. When the economy is robust and consumer sentiment is positive, investors are likely to pull away from the slower growth of long-term bonds in favor of stocks, which may carry more risk but may generate greater returns over time. When investors view the economy less favorably, many will consider repositioning their holdings from stocks into bonds to lessen volatility. This scenario creates a supply-demand challenge as the greater demand for bonds will drive up the price of bonds and lower the yield, or return the investor reaps. The increased propensity of investors to secure bonds can foster the yield curve inversion. 

A “healthy” yield curve, or one where short-term interest rates are lower than long-term, historically indicates a growing or expanding economy. In contrast, an “inverted” yield, or one where short-term rates are greater than long-term, are viewed by many as an indicator of a slowing economy or economic recession.

The Federal Reserve Bank’s Federal Open Market Committee (FOMC) typically raises rates when they see the economy as thriving to curb inflation. Their rate hikes last year may have led to some slowing in the market. Potential concerns by many investors that the ongoing trade dispute with China will bring about a recession may have led to greater stock “sell-offs” and increased purchasing of long-term bonds, prompting higher prices and lower yields.

In this past month, August 2019, the yield has inverted twice so that 2-year Treasury bonds were trading at a higher yield than 10-year bonds. These inversions only happened briefly, but many are concerned that the inversion is a signal of an oncoming recession. Over the last 50 years, a yield inversion has sometimes preceded a recession. However, it is important to note that in the past an inversion typically did not signal an immediate recession. Most occurred approximately 22-24 months following the inversion. Furthermore, the inversion does not measure the length or severity of a recession.

It could be helpful to remember that the bond market, in general, is driven by investor’s expectations for future economic growth. The trades of stocks and bonds are made by people. While different computational technologies may assist, the financial decisions of people are generally the main driving factor of the economy. People may be motivated to buy and sell based on strong emotions, such as fear. Uneasy political conditions and the possible long-term consequences of a trade war could lead investors, and companies, to favor less risky financial options, such as bonds.

By many measures, the U.S. economy is considered to be relatively healthy:  with low unemployment rates, rising wages, and steady GDP growth. Predictive models, such as the inverted bond yield, often only measure one piece of the entire economy. While it could be helpful to heed possible warning signals, it may also be beneficial to consider various other factors which could affect economic conditions.  

If you do have any questions regarding the financial landscape, it may be a good time to reach out to your advisor to discuss your current financial picture to make sure it is in line with your vision for the future.    

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

Sources

By Jill Ciccarelli Rapps, CFP®

We’re nearing the end of summer, and for many recent high school graduates, this means they will be setting off on their first adventure as independent adults. If you’re a parent of a child leaving for school, this time could cause a mix of emotions and may include concern over the safety and well-being of your now adult-aged child. The distance and inability to keep a watchful eye over them could leave many parents wishing they had a mechanism to give them constant updates. Though it is most likely not advisable to place a tracking device on your child, it could be beneficial to take certain preliminary steps to secure your ability to assist your child in the event of an emergency. Certain documents could allow you to step in to provide critical support even if your child has surpassed eighteen years of age. Some documents you may want to consider creating with your child may include: 

A Healthcare Proxy

The idea of facing life or death circumstances will most likely seem outlandish to the majority of young, healthy, recent high school graduates. However, ask someone who has been in such a situation, and most will tell you the same thing: “you never expect it to happen until it does.” The unhealthy habits many college students form to stay on top of their increased workload can often create a perfect storm for health issues to arise. It could be helpful to establish a medical power of attorney, otherwise known as a healthcare proxy. This document allows an appointed individual to make medical decisions on your behalf to ensure that your medical treatment instructions are carried out if you become incapacitated and can no longer communicate your wishes. While this document is typically associated with seniors and those with terminal illnesses, nearly anyone over 18 years of age can appoint a healthcare agent. Without this document, it may be up to the discretion of the doctor or healthcare provider what treatment your child receives, even if this goes against your child’s wishes.

HIPPA Authorization Form

It is nerve-racking for parents to imagine their child being involved in an emergency and even more frightening to imagine trying to obtain information on their current status and getting denied access. With the continued rise in out of state college attendance, it’s not unusual for many parents to find themselves already at a disadvantage when trying to stay up-to-date on the well-being of their child. To add another barrier to this situation, if your adult child is hospitalized and unconscious, and has not authorized you as a recipient of their healthcare information, the hospital will most likely be unable to provide you with any updates on their condition. HIPPA Laws, or the Health Insurance Portability and Accountability Act of 1996, safeguard who can access an adult’s private healthcare data. There is a great benefit to the law in protecting your information from strangers, but for a concerned parent trying to ensure the safety of their child, it could be burdensome. A HIPAA authorization that has been signed by your child and names you as an authorized party could prevent this roadblock. Out-of-state students may have to fill out the form for both their home and school states. If your child is reluctant to sign this form in fear that it would permit you to see every detail of their health records, it does allow them to specify which details remain private.

Power of Attorney

Many students may believe that once they turn eighteen, a magical switch is flipped and suddenly they fully have all the knowledge and wisdom of an adult. While some may show a great deal of maturity, there is still a good chance they have not dealt with the majority of aspects involved in adult life. However, their legal status as an adult could prevent you from assisting with various financial and legal affairs. Many parents may want to step in at times to help ease the transition into independence. A Power of Attorney (POA) could give a parent the ability to conduct business on behalf of their child to help with matters such as housing agreements, managing financial accounts, and signing legal documents. There are different types of POAs and some grant more authority than others. You may want to discuss with your attorney which type is best for your family.

As a parent, you likely wish you could put an invisible shield around your child to protect them at all times. It’s not easy watching one of your life’s greatest treasures leave the nest, but it may bring some solace to discuss early on their ideas and beliefs regarding financial and healthcare matters. This way, if an emergency were to arise, it could relieve some of the pressure from the decisions you may have to make. Your advisor may be able to assist you with how to open lines of communication in these areas. 

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.

By Lynn Ferraina, Advisor

Everyone has a different memory of the day they received their very first paycheck along with the excitement that came from having that first taste of financial freedom. It’s a feeling most of us hope to feel throughout our life, but if you were not exposed to lessons on financial responsibility when you were young, it may be a more tumultuous road to get that feeling again. That is why it could be helpful to teach your children and grandchildren as early as possible how to intelligently manage their money. While it’s a skill nearly everyone at any age can learn, studies have shown that children who don’t receive financial education are more likely to have lower credit scores and face financial difficulties later in life. The concern of many parents and grandparents is often “at what age and how do I begin teaching these concepts?” The following, broken down by age group, are skills which can be taught at each age, and creative ways to incorporate these lessons into your children and grandchildren’s lives.

Toddlers

(Ages 2-4)

Toddlers are just starting to develop their verbal and non-verbal abilities, so understanding the finer points of fiscal responsibility may be a bit of a stretch. This can be a good age to begin introducing the concept of money, how it can be exchanged to purchase items, and how it has to be earned. Pew Research found that most adult’s attitudes toward money were actually formed by the time they were seven. Toddlers tend to be sensory learners, so incorporating physical touch and feel into the learning process could enhance their comprehension.

As you begin to teach counting, you could use coins to demonstrate. You could then integrate this practice into playtime by setting up a pretend “storefront” and have children exchange toys or empty food containers for money. To help them understand the concept of earning, you might have them help with a small task such as putting away a toy in order to “earn” another toy or game. At this age, the goal is to ideally instill a positive association with money, so as they age they feel a greater comfort discussing more advanced financial concepts.

Children

(Ages 5-12)

At this age, kids can begin to understand the true value of goods and services, the time and effort it takes to earn money, and how saving money can allow them to save up for larger purchases. When grocery shopping, you could have them help you count out the correct change, and have them hand over the money. As you shop you can point out the prices of different items, and compare them. Showing an example of how candy they may want could equal the cost of two boxes of cereal, or that milk costs a dollar seventy-six cents more than a carton of eggs. Having a general understanding of the cost of goods can then build toward creating a budget.     

When a child is throwing a tantrum in front of a display of shiny new action figures, it can be enticing to just give in to their whims and buy them the toy. This may not have the desired benefit of teaching one of life’s important lessons: “If you’re not willing to put in the work, you won’t be able to reap the reward”. Toys cost money which requires working to earn that money. You could have extra chores they can perform with different values placed on the tasks. In the professional world, jobs which require a greater level of experience, education, or specialization typically earn more. The same principles may apply with chores. Once the child has their goal (the toy) you can help them budget how many chores will be required to earn it.

If the toys they want are more expensive, it may take more than a days’ worth of chores to pay for it. This is where you can introduce savings. We can’t always buy everything we want the moment we want it. An often important step in comprehensive financial planning is determining long term and short term financial goals and then tailoring your spending and savings habits to them. Children could learn this lesson by having separate jars for immediate spending and savings. Seeing a jar filled with money that they worked and saved for provides a sense of accomplishment and may lead to more conscientious financial habits in the future.

Teenagers

(Ages 13-18)

It is your last few years to really instill positive habits before they reach adulthood. When you’re a child, you don’t face the same financial consequences that you do as an adult. If you’re not careful in your financial decision making, you may find yourself facing some long-term difficulties. A part-time job could help introduce this lesson. In the workplace, your actions and behaviors can have real repercussions. How you manage the time, effort, and tasks your given can result in either gaining a paycheck or losing the job.

If your teenager has a paycheck from their part-time job, you could open a savings account so they can get a head start on savings for their future. It will also introduce them to the concept of having their money make more money through interest. Most savings accounts earn low-risk, low-return interest, which could be a great place to start potentially growing their wealth. If they start depositing into the account early enough, they might even have a decent nest egg once they graduate high school. 

This may also be a good time to introduce them to investing. Your teen may not have enough in their account to invest in a real company’s stock or a fund, but they could virtually “invest” in an online stock market game. Various online market simulation games exist, many of which are free. Even if the money their investing is not real, it can still teach them how they may want to manage and invest their money in the future.

While there may not be a perfect uniformed method to teach financial literacy that works the same for every child, generally speaking, beginning lessons as early as possible tends to lead to better results. The lessons that come from learning how to be financially responsible can also teach kids how to make positive choices in other areas of their life as well. At some point, almost everyone wishes that they had learned more about a subject or life skill when they were younger. However, it could potentially benefit your children in their future endeavors if money management is not something they wish they had learned more about. As you and your children explore the financial landscape together, you may want to discuss with your advisor your financial goals and desires for their future. Together you could work to foster your legacy.    

Sources

Benefits of Financial Education:

Financial Attitudes:

Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation.  Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.