SEPTEMBER 2017


PE CAPITAL INVESTMENTS www.pecapital.org


Investing in your passion: the Three-leg-approach

 

by Eliseo "Jojo" Prisno

CRPC, MS Chartered Retirement Planning Counselor

j.prisno@PEcapitalinvestments.com

888-929-2825

Last year I wrote about how you can fund your altruism (March 2016 issue). That article was practically a guide on how we can direct our financial resources or assets to get them productive and have the vehicle to fund the causes or advocacies we are passionate about. In fact, I have always advocated “Legacy Funding.” In the basic financial planning approach I impart to everyone, I always emphasize the “Three-Leg Asset Allocation” program covering the three funding needs: Living Fund, Lifestyle Fund and Legacy Fund.

Living Fund

Obviously, the Living Fund, the very first leg, is a fund that will cover your cost of living, or your basic needs like a roof over your head. That inclues rent or home mortgage plus auxiliary expenses like real estate tax, home insurance or monthly dues in terms of apartment or condo rental. It includes food on the table, clothing, and basic mobilities (car amortization, repairs and gas).

If you are still gainfully employed, then this is normally funded by your wages; if retired, then it will come from your entitlements (Social Security or pension) and may be augmented from your retirement savings. The allocation to this asset pool is entirely based on your projected lifestyle (if you’re retired) or living standards if you’re still actively employed. On average, this will take almost 60-70% of your cash flow (net of tax).

Lifestyle Fund

The second leg is Lifestyle Fund. This is the funding source essential for your “wants” i.e. vacation, recreation, hobbies and branded “necessities.” Typically, this covers 20% of your cash flow. If you’re actively earning, this is your surplus cash flow that you can spare after your critical savings (retirement savings i.e. contribution to your 401K or IRA’s, cash reserves or rainy days or emergency fund). If you are retired, this is normally funded from your moderately aggressive investments like mutual funds or dividend income from your stock portfolio. In effect, the resource allocation to this pool should be invested and hedged against inflation and should track the S&P 500 index returns.

This placement, of course, will be subject to volatility because of the market exposure. Thus, in times of market corrections, your lifestyle or “wants” will have to adjust. If your portfolio delivers zero growth, then your lifestyle practically tapers. On the other hand, if the market delivers fantastic returns, then you will have an augmented “lifestyle” like an expensive travel plan or a more luxurious car.

Legacy Fund

The third leg is your Legacy Fund or a funding source that will address your estate pass-on, your gifting or advocacies or altruism. This is normally what is left out by most investors. Most people would co-mingle this “funding” need with their Lifestyle placement, which more often becomes an elective programming. If this is your mindset, then you’re not truly committed to fund your passion.

Legacy Funding sometimes can be funded through a life insurance contract which upon death, you have an estate to pass on and eventually fund your causes. However, the problem with this approach is the proposition to “gift” or the realization of your donation is when you’re six feet under. Very noble; however, quite impractical. I always believe that the best way to impart a gift or donation is when you’re able to see the appreciation and facial reaction of the receiver. If you can only do this in spirit, you really wouldn’t know how the whole thing transpired. The best way we can feel good is when we are able to impart something to someone personally.

Conservative spectrum

You will have this opportunity if you designate an asset pool that in your mind is something you won’t be needing for yourself or for your “wants.” The approach is a matter of mindset and since you are detaching your investment emotions from this then you can adopt an aggressive investment placement. Simply put, you can speculate in the market. This is where you invest in growth equities or stocks like Facebook (FB), Amazon (AMZN), Tesla (TSLA), Netflix (NFLX) or the NASDQ Index (QQQ) to name a few.

Most retirees tend to neglect this asset class because they get clustered in the conservative spectrum of their tolerance. They then loose the opportunity to hedge on the growth of these new economies. All the stocks I mentioned above, gained more than double just in the past three years. That is indeed a tremendous growth. Imagine if you get this type of windfall, then you can surely fund your passion or gift significantly to your favorite cause.

The key is asset allocation and goal setting. Think outside the box and do not cluster yourself in the classic approach of “risk tolerance” programming mindset. Take advantage of potential opportunities, but in an asset pool that you won’t be technically be dependent on for your own needs. If you hit your target, then you can afford to fund your passion.

If you want to invest in growth oriented stocks, work with investment professionals that are licensed to manage equity portfolios.

ABOUT THE WRITER: Eliseo Jojo Prisno is a Chartered Retirement Planning Counselor (CRPC) and holds a master's degree in engineering For over a decade, he has managed the wealth of select families and business owners. He founded P/E Capital Investments in 2010, a State Registered Investment Advisory Firm (CRD# 172695) and is currently the firm’s Managing Director and Senior Investment Advisor.

Mr. Prisno also manages a Fund of Funds investment program with Ameritas and runs an All-Equity Growth and Income customized portfolios in separate accounts via E*Trade Securities. He is also a licensed professional on insurance products and annuities. If you have questions or desire a complimentary analysis of your investments or retirement readiness, email j.prisno@PEcapitalinvestments.com or call 1-888-929-2825. Visit our website www.pecapital.org and our Facebook Page.

 

 

 

5 Notable tax changes for 2017

By Noel B. Lorenzana, CPA

info@lorenzanatax.com

 

The U.S. Tax Code is constantly changing and 2017 brings 5 notable tax changes that you may want to remember when filing your taxes. Keep in mind these tax changes affect the tax preparation you will do in 2018 for the calendar year 2017.
Here are the five tax changes:

1. Tax tables have been adjusted for inflation

That is the good news, but since inflation has been low, the adjustment is minimal. All thing being equal, you will pay slightly less tax than in 2016. The 2017 rates can be viewed on my website: www.lorenzanatax.com

2. Standard deductions have increased

If you don’t itemize your deductions, then you take the standard deduction. This will rise modestly in 2017 for everyone. Single and head of household filers will receive a $50 increase and married couples will receive a $100 increase. This tax change is insignificant at best.

3. Lowered standard mileage rate

The standard mileage rate, for business related expenses, has been lowered half a penny to 53.5 cents per mile. The rate for medical and moving mileage has been lowered two cents to 17 cents per mile. Previously, the business standard mileage rate was 54 cents per mile, and the rate for medical and moving expenses was 19 cents per mile. This change effectively means less reimbursement for allowable mileage expenses.

4. Deductible medical expenses 10% threshold

For 2017, everyone is subject to the 10% medical expense threshold. This means that your medical expenses need to be greater than 10% of your income before it can be a usable deduction on your tax return. Previously, if you were 65 or older, the deductibility threshold was 7.5%. Keep in mind; if you don’t itemize your deductions, then you can’t deduct medical expenses.

5. Accelerated due dates

Due dates to file many forms and returns have changed, which affect 2017. Employer provided W2’s, W3’s and 1099’s must be filed by January 31 of the following year. Partnership and S corporation tax returns are due by March 15 (previously April 15). C corporation tax returns are due by April 15 (previously March 15).

Tax Hike for Illinois residents

Effective July 1, 2017, Illinois lawmakers voted to permanently increase the personal income tax rate to 4.95% from the previous 3.75%. The corporate tax rate increases to 7% from the previous 5.25%. It’s more important than ever to ensure that you are claiming all deductions, credits, and subtractions so that you don’t pay more in tax than you legally owe.

What can you do to minimize your taxes and stay out of tax trouble? Work with a tax preparer who is knowledgeable and credentialed, like a CPA or an enrolled agent. Have a conversation with him or her, to ensure that you are claiming all the allowable deductions and credits that are afforded to you. Tax planning needs to be done typically before the calendar year ends, so don’t wait until tax time! Email me at info@lorenzanatax.com for a handy printable pdf “2017 Tax Guide“.

Isn’t it time you had an experienced tax professional on your side? Mr. Noel B. Lorenzana is a Registered Certified Public Accountant, and a Certified Tax Resolution Specialist with over 20 plus years of experience, dedicated to providing outstanding tax and accounting services to individuals and small businesses in the Chicagoland area. Contact him at 847-780-6635 or info@lorenzanatax.com to find out how he can help you optimize your year-end tax strategy.

 

 


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