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HOW TO KNOW YOU’RE INVESTED IN THE RIGHT PORTFOLIO

From time to time we come across lists and articles on investing. And we’ve taken a few of the items we’ve seen over the years and written a little commentary based on how we serve you.

A year from now, you plan to own similar investments.

We believe ‘winning’ in the market begins with understanding ‘why’ you are allocated as you are.  Timing and changing strategies rarely produce the long term results investors need to fund their retirements.  Sticking with an allocation that is rebalanced and invested with purpose is the best way to ‘Win’ in retirement.

You’re so well-diversified that you always own at least one disappointing investment.

This is probably one of the hardest lessons in investing and represents the value in diversification.  A properly diversified portfolio is always going to have some asset classes (i.e. investments) out of favor with others being the bright spots.  The key is to own them both since timing them consistently is impossible.

When the stock market is volatile, or even decreasing, you are not uncomfortable.

You realize that the stock market is volatile and the temporary declines of 14% inter-year and greater than 20% every 5 years are normal. That’s precisely why stocks return more over the long term than other less volatile investments.

For every dollar you’ve saved, you have an eventual use in mind — and you are invested accordingly.

Dollars that you have saved, but aren’t needed for many years in the future, should be invested accordingly.  The dollars needed soon should be in less volatile (i.e. lower return) investments.  However, don’t shortchange your resources the ability to outpace inflation when they are needed far into the future.

You can remember the last time you rebalanced.

Well, you might not be able to recall if you have, but the good news is that as a client of GuideStream Financial, you have your portfolio(s) rebalanced at least annually.  We help you stay true to your long term investment and retirement objectives.

You never say to yourself, “Wow, I didn’t expect that.”

This is our goal.  Through preparation and education, you understand that year to year, your portfolio will fluctuate depending on contributions, withdrawals and returns – but that in the end, you have a good working knowledge of how your cash flow will work over time.  We know you don’t like surprises and neither do we.  Some years, things may be fruitful and other years they may not be. What’s most important is that we both know the long term goals and that is where we focus.

We appreciate your continued trust and are honored to assist you on your stewardship journey. 

  • July 15, 2016
  • By admin
  • Comments Off on Across the Pond
  • in economic

Across the Pond

If you’ve turned on the news in the last month, you have heard the term “Brexit.” The portmanteau has been splashed all over international headlines since early June, when Britain prepared for a referendum on whether it would exit from the European Union (EU). When the U.K. shocked the world on June 23 by actually voting to leave, “Brexit” cemented its place as one of the most important words of the year. 

(Unsurprising) Panic
The impact of the U.K.’s decision to leave the EU was felt immediately by the global stock market. Analysts all over the world had believed the U.K. would remain and were pushing share prices higher in the hours before the vote. When the results were announced, the reaction was a rapid—but not catastrophic—downturn across nearly every stock exchange.

As it became clear that Brexit probably wouldn’t result in the end of the EU, panic dissipated and stocks returned to normal. For Americans, the disruption seemed to have passed; Brexit would be nothing more than a temporary political problem between distant countries. After all, didn’t we start a war 240 years ago so that British decisions wouldn’t affect us anymore? 

Quid Pro Quo
Brexit still has important implications for the U.S. economy because of the British pound. The pound has a long history and is considered one of the most reliable currencies in the world. Its value has helped make London the financial capital of Europe and ensures the Bank of England is a key player in global interest rates. 

But Brexit means the U.K. will be disrupting its access to the EU’s massive economic power and banking needs. This could shrink the U.K.’s economy and may ruin the stability of its banks, costing the pound its place next to the U.S. dollar, Japanese yen and the euro as a top-tier currency. And that would make all the difference.

A volatile pound will drive some investors to other currencies. Since the EU and its euro are also shaken by Brexit, choices for low-risk currencies are limited and purchases of U.S. dollars and Treasury's increase. 

While this further cements the United States as the economic center of the world, it does cause some problems. Although trade with the U.K. makes up less than half a percent of U.S. GDP, the appreciation of the dollar’s value makes U.S. goods more expensive all over the world, hurting our ability to export. Additionally, U.K. products that directly compete with American products (e.g. luxury cars) gain a huge price advantage in foreign markets.
Brexit’s bigger impact, however, may be on interest rates. The market disruption caused by the U.K. will make the Federal Reserve wary of raising short-term interest rates this summer as it had planned. High demand for Treasuries will push down long-term borrowing rates in major economies. 

This effect was immediately evident following the Brexit vote as U.S. mortgage rates approached historic lows. If interest rates remain this low, they could inflate home prices and make it more difficult for people to buy their first home.

The full effects of Brexit are still unknown, both economically and politically. No independent county has ever left the EU and analysts are unsure when and how (or even if) it will take place. The move could fundamentally alter trade agreements, trigger recessions in emerging economies or open space for another major country to take Europe’s center stage. Regardless of what happens, it’s clear that economic changes don’t stay confined to a single country. Even with 3,000 miles of ocean between us, the consequences of the U.K.’s decision have already begun arriving on our shores.


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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

The Importance of Having A Will

According to a 2014 survey, 51 percent of Americans age 55-64 (and 62 percent of Americans age 45-54) don’t have a will. The reasons for not maintaining a will can range from a lack of urgency to a paralyzing fear of death. Not only is having a will necessary, the effects of dying without having a will—called dying “intestate”—may be worse than you expect.

The Dangers of Dying Intestate
Estate Shrinkage
It is normal for estates to lose some of their value to final costs, such as burial/funeral expenses and outstanding debts. However, lengthy court procedures and legal fees attributed to resolving inheritance disbursement can quickly erode a large part of an estate’s net worth. Wills are created for the benefit of survivors; not having one reduces the amount that passes to the heirs.

Family Disputes and Disagreements
Disagreements regarding an estate can easily cause rifts in families. Arguments over who deserves specific heirlooms or property can be exacerbated when the wishes of the decedent are not directly known. In extreme circumstances, these kinds of disputes can last for decades, making a will essential—especially when families are large or relationships are strained.

Drafting a Will
Inexpensive and Quick Process
Creating a will is not expensive, with some estimates putting the cost at just a few hundred dollars if done through a lawyer. Additionally, there are legal websites that allow individuals to draft their own wills at a fraction of that cost. Whichever method is used, creating a will typically takes less time to complete than most people think.

Benefits of a Will
Control over Assets
The decedent may have specific desires regarding which of their family members get their possessions. Instead of the distribution of assets being decided by another family member or possibly the legal system, having a will allows the decedent to fully control where all assets will be distributed.

Choose Executor of Will
If there is no will, and subsequently no executor named, the individual that is chosen by the probate court may not act according to the decedent’s desires. Choosing the executor of a will ensures that the individual that the decedent thinks will best serve his or her wishes will be in charge of key decisions, handling conflicts and proper care of 
the estate. 

Custody of Children
If the decedent has children, but has not named a new guardian in a will, the courts will decide who gets custody of their children. Although judges consider living situations and familial relations while trying to act in the best interest of children, they can’t possibly know every detail about each family’s unique situation and there is no guarantee that a court-appointed guardian will be the same person the decedent’s would have wanted.

Now is the Time
Peace of Mind
Thinking about death may be frightening, but the thought of leaving confusion, lack of clarity and potential disputes behind can be even more unsettling. Creating a will allows individuals to know that, when they pass away, all of their wishes will be honored and their loved ones will be free from the burden of figuring out the details of an estate.

Keep it Updated
If you already have a will, consider revisiting and, if necessary, updating it. There may have been financial, legal or personal life changes that are not yet reflected by the current version of your will. Not having a will can create confusion, but having an outdated will that gives rights to a former spouse or estranged family members can be disastrous for intended heirs.
 

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

  • July 6, 2016
  • By admin
  • Comments Off on Financial Planning: Not Just for Men!
  • in financial management

Financial Planning: Not Just for Men!

Financial Planning: Not Just for Men!

-by Debra Lyon, Caitlin Koppelman, and Lori Pelham-

Lisa is 35. She’s a mother to 2 beautiful children and a recent divorcee. She just returned to part time work last year when her youngest started school. Up until now, she’s largely left the management of family finances to her husband. Now that he’s her ex-husband, she’s faced with limited financial knowledge, heaped on top of an already stressful balance between work and family.

Lisa needs an advisor who knows her needs; someone she can trust completely. Someone who can clearly communicate financial principles to help her not only succeed, but grow in her financial literacy. In short, she needs a coach who can teach her and help her look out for her family’s financial future.

Susan is 72 and recently widowed. Her children are grown, and she’s pleased to say that she devoted her life to raising them well. She hasn’t worked since before the kids were born, and she’s always been thankful for her husband’s careful attention to their family finances. Now that he’s gone, she’s not sure who to turn to. She knows the basics of paying bills - her husband shared that much with her – but what about taxes? Long-term care needs? How does her husband’s death affect their estate plan?

­­­­Susan needs an advisor who recognizes her situation and knows the unique needs that come with it. The ideal advisor for Susan would be able to look at the whole picture of her financial situation – appreciate and honor what her husband has put in place - and help Susan move forward toward the future with confidence.

These are just two examples of women and their unique financial needs. Even if you’re currently married and/or part of a dual-income household, as a woman you have specific financial thoughts and convictions that may be different from your husband’s. While you’re working together toward a shared future, it’s important you continue to take an active role in the management of family finances.

Women are earning more and spending more than ever. They control more dollars in the US economy today than in any other time in history. Any financial advisor worth their fee should recognize this fact and (more importantly!) recognize the unique needs of the women in his/her client base.

Find yourself a financial coach. Maybe you already have one, but you don’t usually go to the annual review meetings with your spouse. We encourage you to go: build a relationship with your advisor. If you have shared finances, that coach should be looking out for you, too.

If you’re on your own, like Lisa or Susan, seek out the counsel of an advisor. If it helps, look for a woman whose professional opinion you trust. Even if her personal situation is different from yours, you still have some major things in common.

Don’t leave your financial future to chance. Find an advisor you can trust, a coach who can help you navigate the twists and turns of life. That relationship will prove fruitful now and in the future.  

 

Rates Go Negative

In mid-February, the Bank of Japan (BOJ)—Japan’s central bank—lowered its funds interest rate to -0.1 percent. It meant the BOJ would begin charging private Japanese banks for holding on to excess cash reserves.

This negative interest rate policy (NIRP) is not unique to the BOJ. By “going negative,” Japan joins the European Central Bank and the central banks of Sweden, Switzerland and Denmark.

Why are so many central banks doing this? Economic growth in several developed countries has recently slowed down as businesses have grown accustomed to low rates. Central bankers hope that pushing rates down into negative territory will help their economies resume expansion.

How it Works

To understand how NIRP is supposed to help, try imagining what would happen if your personal bank accounts had negative interest rates. How would you react to paying to save money each month? What changes would you make to your finances?

You probably would reach the same conclusion as most people: “I need to minimize the money in my accounts.” One option would be to invest the money so that it has a chance to grow; another option would be to spend it on a major purchase before you need to pay any interest.

These are essentially the same responses governments are hoping to incite from investment banks and large corporations. Economic slowdowns cause businesses to focus on saving money when central banks need them to spend it. The savings penalty created by negative rates squeezes hoarded cash out of corporate accounts and into new business investments.

NIRP also provides a strong signal that a central bank will do whatever it takes to promote healthy inflation and fight against a slowing economy. This means a NIRP can become a type of rallying point for businesses, creating enough confidence in future growth that companies proactively expand and turn their growth expectations into reality.

Effects at Home

The BOJ’s move to negative rates has raised questions about the future of America’s monetary policy. In a world where several central banks have continued to lower rates, the United States has been trying to raise them. Economists and investors wonder whether America will be able to continue bucking the downward trend or if its rate hikes need to be stopped.

Rising interest rates often accompany economic success. Because the United States’ economic recovery has drastically outpaced most other developed economies since 2009, it needed to start increasing its interest rates first. As its economy improves, its interest rates should need to be raised.

However, central bank rates must be compared to each other. Although the United States has only recently started raising rates, rate cuts in other countries have led some to believe that its relative rates are increasing too quickly. If the relative rates climb too much, the dollar could become too strong and other countries would stop buying U.S. goods, hurting the chances of further U.S. growth.

Will America Go Negative?

While anything could happen in the future, most experts currently believe U.S. rates will not go below zero. The U.S. Federal Reserve has said it studies negative rates and simulates them for bank “stress tests” but doesn’t envision needing them. After years of aggressive quantitative easing and zero percent interest rates, it’s unclear what new benefits negative rates would even provide for the U.S. economy.

It’s also important to remember that countries can influence rates in both directions. As the world’s two largest economies, the United States and China are in position help stimulate other economies through trade. If their growth and consumption become strong enough, the world economy will improve and rates in other countries will be brought above zero.

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Keeping Up With the Joneses

People like to fit in; it’s one of the simplest laws of human nature. Although we value the things that make us unique, most of us are careful to not let them make us social outsiders. There is strength in numbers, and conformity reassures us that we are making the right decisions.

Unfortunately, comparing ourselves to others can lead to real problems. Our egos can become sensitive—even irrational—when trying to protect the public image of our wealth and status. If left unchecked, the fear of falling behind our peers can destroy our financial security. 

Meet the Neighbors
In a paper published by the Federal Reserve Bank of Philadelphia, economists tested and analyzed the social behavior of “keeping up with the Joneses” and the impact it could have on personal finances.

In their study, economists used six-digit postal codes to divide Canadian cities into micro-neighborhoods (13 households on average). They then observed financial changes in the neighborhoods after one of the households had won a lottery prize.

Whereas many researchers have documented the Sudden Wealth Syndrome of lottery winners (many of whom end up in financial ruin), this study instead focused on the winners’ closest neighbors. The researchers wanted to know how people responded when someone else suddenly had more money to spend. 

The results were clear: for every 1,000 Canadian dollar increase in the size of the lottery prize, the number of bankruptcy filings among close neighbors increased 2.4 percent in the three years following the lottery win (the base rate was .46 bankruptcies per neighborhood). This effect was greater in low-income neighborhoods where prize values were higher relative to average incomes.

What happened? When the asset sheets of the bankrupt neighbors were reviewed, researchers found that the houses had increased their “conspicuous consumption,” 

spending more of their money on visible signs of wealth (rather than investments that go unseen). Accordingly, the ratio of visible to invisible assets rose with the size of the lottery winnings, suggesting that individuals were willing to spend more when their “Joneses” had won more.

Irrational Groupthink

While the study may simply confirm what many might have suspected, the irrationality of the situation is striking. Winning a lottery is not a reward or promotion—it says nothing about a person’s value or rank. Why would neighbors, who know the wealth was won by luck, compare themselves to a situation they can’t possibly copy? Furthermore, why try to emulate the neighborhood’s one winner, when “fitting in” should mean behaving like all the other non-winning households?

The problem is that wealth and status are relative each person. Everyone has his or her own “Joneses.” When one house receives a windfall of cash and begins spending, it can set off a chain reaction. Our egos would rather let us spend too much than risk falling behind.

This arms race mentality is why the housing bubble of the last decade became so severe. It wasn’t just the opportunity to make money off real estate; it was the visibility of the changing wealth. Every day, people watched their neighbors buy and improve properties, knowing that they would have to do the same just to maintain the status quo.

Forgetting About the Joneses

A little social pressure isn’t necessarily a bad thing. It often provides a nudge towards positive action and helps us make good choices. But when it comes to money habits, trying to match (or exceed) those around you can lead to serious problems. Everyone’s financial situation is unique, and each person defines success differently. As difficult as it is, you need to shut out the social noise and ignore what others do with their money. After all, you’re trying to accomplish your financial goals—not theirs.

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

The Best of You

-March 2016-
by Scott Blakemore

This editorial was written by Scott Blakemore, one of our advisers, for our local Jackson Magazine.  While usually the editorial topic is financial related, this issue was about the winners in various categories of businesses in Jackson, therefore, Scott chose to take a little different direction.  We think the letter not only applies to our community, but to life in general.  Substitute ‘Jackson’ with your communities name and we think you will resonate with Scott’s thoughts and that is why we are sharing it with you.  Enjoy.

“The Best of Jackson” starts with “The Best of You”.  While we recognize the significant accomplishments of “The Best of” businesses, we realize that behind each business is a person or group of individuals working to deliver exceptional products and services.  The best of them has resulted in making a great organization, and the best of all of us together results in making a great community and city.

Developing “The Best of You” requires time and effort in all areas of life.  “The Best of You at Home” starts with attention and encouragement towards your spouse, children and other loved ones.  I realize now, more than ever, that our home life often gets the least of our best.  You have likely noticed how disengaged we are due to our devices.  I know I am guilty! We could all put our phones down and focus more on our spouses and children (or grandchildren), giving them our full attention and the best of us (T-I-M-E spells love).  Many people are lonely and hurting and just want to be noticed and encouraged and this includes those closest to us.  Attention and encouragement are “The Best of You at Home.”

“The Best of You at Work” begins with attitude more than aptitude.  You may have a bad boss, tough co-workers, feel unappreciated or be discouraged with bureaucracy, but in the end, your attitude is what people see and respond to.  Your customers surely notice it.  Staying positive, solving problems, and contributing to the purpose of the business will create opportunities for you and create a better work environment for everyone.  A positive attitude is “The Best of You at Work.”

Communities are a combination of families and businesses with organizations around them to help them in their times of need.  “The Best of You in the Community” involves giving back in time and resources.  With hectic lives demanding more and more of our time; it seems community service is falling by the wayside.  While I understand the time constraints of life (I have 4 children of my own), giving back, even a little, in service to our community helps us recognize and attend to the needs of others.  It also cultivates gratitude in our own lives.  Serving is “The Best of You in the Community.”

We celebrate the people and businesses recognized in this “The Best of” edition of Jackson Magazine.  But let us remember:  Attention, Encouragement, Positive Attitudes and Serving share “The Best of You” with those around you and help make Jackson a better place to live, work and play. 

Annuities As a Potential Part of a Retirement Plan

-March 2016 -
by Kirk A. Hoffman

A three legged stool analogy is often used for planning and saving for retirement.  The three legs represent personal savings, employer provided benefits, and government benefits.  For public school employees, 403(b) plans are used for individual savings.  School districts pay into 403(b) plans and/or the state pension program to provide an employer benefit.  Social Security provides the government benefit.

One of many tools available for the personal savings portion of a goal focused financial plan is an annuity.  Annuities have two phases, the accumulation phase and the pay-out phase.  Annuities can be part of a 403(b) plan to accept and accumulate contributions.  The accumulation phase is pretty straight forward.  Contributions go in on a tax deferred basis and taxes on earnings are deferred.  More questions arise once a plan participant reaches retirement and the pay-out phase begins.

There are several options available at the pay-out phase:

Interest/earnings only.

Under this option, the participant withdraws only the interest and earnings on the account.  The principal balance is not accessed.  This can be done on a monthly, quarterly, semi-annual, or annual basis.  Taxation on the principal is deferred until death.  (Required minimum distributions at age 70 ½ may require some principal distribution).

Systematic withdrawal based on a percentage or dollar amount.

Under this option, the participant establishes a regular withdrawal percentage or dollar amount.  The plan participant could outlive the withdrawals depending on the withdrawal rate and earnings.

Guaranteed life income.

The real power of an annuity is that it can provide guaranteed life income.  Under this option, the annuity is set up to pay out, like the participant’s pension and social security, monthly income for life.  Just like with the pension, there are various guarantees that can be selected:

            Life only – payments cease at death

            Life with a period certain (5, 10, 20 years) – payments for the longer of life or the

            guaranteed number of years.

            Joint and Survivor – based on two lives, payments cease at the second death

            Joint and Survivor with period certain (5, 10, 20 years) – payments for the longer of

            life of the two individuals or the guaranteed number of years.

The monthly payout is affected by the selected guarantees.  The more guarantees, the lower the monthly payment.

There is no better tool to create another guaranteed income stream to go along with a pension and Social Security than an annuity.  It works well if you are in good health and you have a history of longevity.  You cannot outlive the income.  It removes you from the markets so you are not subject to volatility which provides peace of mind for risk adverse individuals.

Every investment tool has positives and negatives.  Some negatives of annuitizing are that you give up access to the principal and potential higher earnings that could be realized from other investments.  These are significant factors to consider.

A professional advisor can assist in determining if creating another guaranteed income stream with an annuity is a good fit for your particular situation and if it will contribute to accomplishing the goals defined in you financial plan. 

Worse Than Taxes

Protecting Yourself from Tax Scams
Tax season is perhaps the most widely hated time of the year. It’s annoying and, for many, expensive. But despite its unpopularity, some people are determined to make it even worse: tax scammers.

Wherever there is money, there is someone willing to steal it. Tax season provides thieves with several opportunities to fleece people who are just trying to do their civic duty. Fortunately, being able to recognize the signs of a swindle can offer a lot of protection. Here are some of the common tax scams thieves like to use:

Stolen Refund
The Scam: A thief steals taxpayers’ information, files their tax returns before them and pockets the refunds. When the victims go to file their taxes, the IRS informs them that their taxes have already been filed, causing complications and delays on their real returns.

Defense: This scam is difficult to block because taxpayers don’t know it’s happening until it’s too late (though the IRS has greatly increased its efforts to detect and stop fake returns). Personal information stolen digitally is the thieves’ greatest asset. Be sure to protect your computer from viruses and delete any unwanted emails that request personal information or ask you to update your IRS e-file account.

Opportunistic Preparers
The Scam: A dishonest tax service skims refund money or personal information after preparing clients’ taxes. Refund skimming has become particularly easy to disguise because many tax preparers allow you to pay service fees directly from your refund. While convenient, this process can obscure refund values and make it easier for preparers to charge undisclosed fees. Aggressive scammers will actually falsify your tax information to secure a bigger refund while putting you at risk of tax fraud.

Defense: If you have someone else prepare your taxes, make sure they are trustworthy and reputable. Although many quality services allow you to pay with your refund, it is best to pay fees upfront when using a new tax service. This will reveal the true cost of filing and whether the service is offering competitive rates. Always copy and review your tax return before it’s submitted; you are legally responsible for your return, even if you did not prepare it.

Tax Extortion
The Scam: Rather than intercepting tax returns, some ambitious scammers actually impersonate IRS agents and try to collect additional taxes. After calling an individual and identifying themselves with fake names and fake government ID numbers, the scammers demand extra taxes be paid immediately to a specific bank account or P.O. box. These scams often target recent immigrants who are unfamiliar with U.S. tax procedure.

Defense: If you receive an unexpected call from the IRS, hang up. The IRS never calls anyone without first mailing a letter to resolve the issue. Also, the IRS does not demand immediate payment or require payment in a certain form (many scams use wire-transfers or prepaid debit cards). Scammers may also reveal themselves by using threats, hostile language and follow-up calls from someone claiming to be the police—things the real IRS never does.

For additional information on tax scams, review the IRS consumer alerts webpage at: https://www.irs.gov/uac/Tax-Scams-Consumer-Alerts.

What to Do If Your Tax Refund is Stolen
Despite the best efforts of both taxpayers and the IRS, some tax scams are successful. If you believe you’ve been scammed, it’s important to act quickly to minimize the damage. Although some scams might only delay your return, others could indicate serious identity theft. It may not always be possible to get back money lost in a scam, but protecting your financial accounts can keep things from getting much worse.

If you suspect your identity has been stolen, follow the government’s official instructions found here: https://www.usa.gov/identity-theft.
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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

Much Ado About Nothing

Ever since the U.S. Federal Reserve (“the Fed”) ended its latest quantitative easing program in late 2014, people from all over the world have debated when it should try to increase interest rates. It seems like every financial news outlet and economist has spent the past year discussing when a rate hike could happen and the potential impact of getting it wrong. Various forecasts and models been used to “prove” each argued outcome of a hike—everything from rapid U.S. growth to global financial disaster. The market became so obsessed that the mere suggestion of an earlier-than-expected September hike caused market volatility to jump in August and helped pushed the S&P 500 down 10 percent in a week.

The arguments and analysis continued until December 16, when the Fed finally raised short-term interest rates for the first time in almost a decade. The world held its breath and financial markets prepared for anything.

But, the day passed and nothing bad happened—almost nothing happened at all. The rate was raised and people carried on. Despite months of frenzied coverage and concern, everything was calm and average. 

Why did nothing happen?
The most important thing to understand about the December rate hike is that “nothing” was the Fed’s goal. Although it was the first increase in nine years, the Fed made worked hard to make it as comfortable as possible and gave people the opportunity to prepare. In fact, the Fed had so clearly signaled the hike was coming, it would have caused problems if it left the rate unchanged.

In addition to the heavy signaling and preparation time, the hike was designed to be very small. The target rate was moved from a range of 0–.25 percent up to a range of .25–.50 percent. By using these ranges, the Fed gave rates the opportunity to move closer the new target before the actual hike took place. This allowed the real rate to change even more gradually than the official quarter-percent move.

The other important thing to recognize is that economies have momentum. It can take years to alter their courses or change how they grow. The Fed’s short-term interest rate holds a lot of power, but it’s only designed to work as an economic nudge. To influence the economy, the 
Fed must continuously use its short-term rate changes to reflect a consistent, long-term goal for the United States.

Staying on the same page
The Fed wasn’t the only party hoping for “nothing” from the rate hike. Banks and investors were doing everything they could to ensure a smooth transition. Changes to interest rates, even ones meant to promote economic growth, can be disastrous for those caught trading in affected markets. 

Wall Street has been watching the Fed particularly closely over the past several months. Every document produced by Fed leaders was examined for details, while every economic indicator was analyzed for its impact on future interest rates. As the data came in, institutions and investors changed their market exposure for a post-hike market and, in doing so, created a market was already adapted for the new rate.

Ultimately, the December rate hike didn’t cause any major disruptions to the market because both sides were careful. The Fed opted for a small, obvious rate hike, and the markets listened to its signals and prepared accordingly. After years of struggle to move the economy forward, no one wanted to derail the country’s progress or lose money in a needlessly chaotic market.

No one knows what the future will bring for the economy and what will happen as the Fed continues to slowly normalize interest rates, but December was an important first step. The hike proved that as long as both the Fed and markets communicate and work together, they can accomplish “nothing”—which can be a very valuable thing.

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Remember that past performance may not indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, strategy, or product referenced directly or indirectly in this newsletter will be profitable, equal any corresponding historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. You should not assume that any information contained in this newsletter serves as the receipt of personalized investment advice. If a reader has questions regarding the applicability of any specific issue discussed to their individual situation, they are encouraged to consult with a professional adviser. 

This article was written by Advicent Solutions, an entity unrelated to Guidestream Financial, Inc.. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. Guidestream Financial, Inc. does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2014 Advicent Solutions. All rights reserved.

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