Frequently Asked Questions

Financial Planning

What is the difference between a CFP® and other financial planners?

What separates a Certified Financial Planner (CFP®) professional from other financial advisors is that CFP® professionals are trained and evaluated in six specialty areas to provide a comprehensive approach to financial planning:

• Retirement
• Estate Planning
• Taxes
• Investments
• Budgeting
• Insurance

CFP®s have fulfilled the certification and renewal requirements of the Certified Financial Planner Board of Standards (CFP Board), demonstrating a high level of competency, ethics, and professionalism. CFP®s must complete a rigorous educational curriculum at an approved college or university, pass the comprehensive CFP® exam, and have a minimum of three years of experience in the financial planning process. Because they are held to a fiduciary standard of care, a CFP® professional is required to act in your best interests.

How do I calculate my net worth?

Understanding and knowing your net worth will allow you to set goals and find ways to improve your finances from a holistic perspective. Calculating your net worth can be a shocking dose of reality or a pleasant surprise. However, from a financial planning perspective, it gives us an excellent starting point in analyzing your financial profile. Understanding and knowing your net worth will allow you to set goals and find ways to improve your finances from a holistic perspective.

We analyze net worth annually to determine if progress was made in growth and, if not, what factors contributed to a decline year over year. The process of calculating your household’s net worth yields a personal balance sheet in the same manner and discipline a company develops a balance sheet.

The basic equation for calculating net worth is subtracting liabilities from assets.

• Liabilities are debt, and for many this includes your mortgage, student loans, credit card, and other consumer debt like auto loans and store charge cards.
• On the other hand, assets are the fair market value of any property you own. Assets include checking and savings accounts, investment accounts (including retirement accounts), cash value of insurance contracts, real estate (includes primary residence), car value(s) and other miscellaneous such as jewelry and collectables.

In summary net worth is calculated as Net Worth = Assets – Liabilities.

Negative Net Worth

In preparing a financial plan, there are often instances when a prospective client has a negative net worth. When this is the case we implement several scenarios in how to best reduce liabilities and grow your net worth. We have often found that paying off consumer debt (credit cards, store card, auto loans) quickly is the first step in growing net worth because consumer debt has no tax benefit and often carries a higher interest rate. After liabilities are systematically reduced, it is then that your net worth can hopefully grow strategically. One quick way to do this is to automatically transfer money to investment accounts each month as it puts savings on “auto pilot” and allows you to dollar cost average into the market. Over time, this savings strategy can have a profound impact. It is through calculating your net worth and creating your household’s balance sheet that we see what areas can be improved.

It is our job at Harmony Financial Planners to help develop a plan to successfully grow your net worth and help guide you in your financial goals. Contact us today to speak with a financial Planner about your net worth.

How much can I afford to invest?

For some, the biggest obstacle in implementing an investment plan is their concern about the amount needed to invest. In today’s robust investment marketplace, you do not need to wait to accumulate a significant amount of asset for you to create an investment strategy. Investment alternatives are available in many vehicles such as money market funds, retirement plans, and online brokerage accounts. Most of these alternatives have very low initial entry points, such as ksh.5,000, ksh.10,000, ksh.20,000. Nowadays, anyone who chooses to invest, can invest.

Determining How Much You Can Invest

A great starting point for determining how much you can invest is to do a quick budget. Write down all of your income and subtract your expenses. If the amount left over is smaller than you would like, go over your expenses to see if there are any areas that you can cut back in order to obtain long term advantages.

Invest in Employer Sponsored 401(k) Plans

Employer sponsored 401(k)’s are an excellent starting point. You can ask your employer to deduct a small amount from each paycheck which can be invested on a tax deferred basis. Not only do you have potential long term gains on your deducted amounts, but in many cases, the employer matches some parts of employee’s contributions.

Diversify Your Investments

As you portfolio grows over time, you will be able to expand your investment landscape into additional areas. Money can be apportioned for buying a new house, college expenses, and retirement. Each will have its own unique needs as to the types of investments utilized.

Working with a Financial Planner

An Investment Advisor or Financial Planner can help you in these areas. Although some do have minimum asset levels or minimum fixed fees that must be met, there are numerous advisors that are flexible with their structures. Harmony Financial Planners does not have a minimum asset level. We are fee based but can work with you on an hourly basis in a manner that is conducive to your budget. Our objective is to develop a long term relationship with you so that we can help your investment portfolio grow over time.

No matter how much you have to invest, we can help you embark on a sound investment journey. Let’s start setting goals and working together now.

How much should I contribute to my Retirement Plan?

Unlike our parents, it is uncommon for your employer to offer a defined benefit plan or pension unless you are a government employee. However, the vast majority of empoyers offer some sort of personal retirement plans. How much should you contribute to your retirement plan? If you are not offered a pension plan, you should contribute as much as possible to your personal retirement plan (so that you will still be able to meet all of your financial needs). However, as a general rule of thumb, we believe that contributing at least 10-15% of your gross salary should be the minimum at which you should save.

Pre-tax & after-tax contributions

With each defined contribution or 401(k) plan, you can contribute both pre-tax and after-tax. This after-tax contribution is also known as a Roth contribution (not to be confused with a Roth IRA). The amount that you can contribute pre-tax in 2020 is $19,500, and the annual contribution limit is $57,000. In addition, employees over the age of 50 may contribute an additional $6,500 pre-tax to their 401(k) plan.

Why you should contribute to your personal retirement plan (401(K)) plan

The appeal of contribution to a 401(k) plan is that it gives you the opportunity to make pre-tax contributions up to $19,500. This means that income tax will not be withheld on these contributions and these contributions will lessen your annual income tax liability. Furthermore, many employers also have matching provisions and safe harbor elections they must make to ensure these plans remain qualified. Lastly, 401(k) plans allow for investments to compound and grow tax-deferred. This means that you will not have an income tax liability on distributions and dividends received from investments in your retirement account.

What percentage should you contribute?

It should be everyone’s goal to at least fund the elective deferral amount to their employer’s 401(k) plan, and in 2020 this is $19,500. However, for many this is a lot of money, so we believe contributing at least 10-15% of your gross salary should be the minimum at which you should save. It is a very simple mantra, but something is better than nothing.

Review your 401(K) with the experts

When we review your 401(k) plan, we first determine if your employer offers a matching provision, and then we determine how much you can afford to contribute based on your cash flow and financial profile. After these steps have been determined the last step is we analyze the mutual fund offerings on your employer’s 401(k) plan and pick the investments best suited for your overall portfolio allocation and success for long term growth.

If you’d like to get an individualized answer or recommendation for 401(k) contribution, don’t hesitate to Contact us today!

How much should I save for retirement?

One of the more frequent questions we receive from people is determining how much they should save for retirement. Many individuals and families who have members approaching retirement or are already retired are concerned as to whether they will outlive their retirement funds. The answer to this question, of course, is different for everyone.

Learn more about our retirement planning services

Set Your Goals & Ideals for Retirement

In order to compute an amount necessary for retirement, you first need to set some goals and ideals for what your retirement will look like. Do you plan to live where you are or move somewhere else? Will you downsize or keep your current level of spending and living? Would you like to travel? Will you have a mortgage on your home? How is your health?

Percentage of Your Current Income

Answering these and similar questions can help set a base for your retirement needs. One way many people calculate their retirement needs is to take a percentage of their current income. For example, if you and your spouse have a combined income of $100,000 now, when retired, you may take a percentage of this, say 80%, as needed upon retirement. In other words, your investment portfolio in combination with Social Security (NSSF in Kenya) and any other income, must be able to provide $70,000 per year.

Budget Your Current Expenses

A different way to calculate retirement needs is to add up your current expenses. For example, if your expenses add up to $75,000, you will need that much each year after retirement. You can analyze your specific expenses to determine if they will be greater or lower upon retirement. For example, medical expenses tend to be higher, where things like auto expense are lower. Many retired couples find they only need one car and can avoid extra auto insurance and gas expenses.

Determine How You Will Fund Retirement

Once you have determined your needs, you can plan for how you will fund the retirement life. Areas such as Social Security, pension plans, annuities, and other means of providing income can be reviewed. Next, you can figure out the total investment portfolio needed to make up the difference.

Assumptions must then be factored in to determine rates of returns of different investment opportunities during the accumulation time before retirement and then during the distribution time after retiring. Various “what if” scenarios can be modeled at differing levels of risk vs. return. This will help you see if additional funds must be invested, higher rates of return must be sought, or retirement expectations must be revised.

Retirement Planning Services from Harmony

Harmony Financial Planners can help you navigate through these financial concerns through a sound financial plan and investment advice. Our Financial Planners are more than happy to put their training, expertise, and diligence to work for you to insure a happy retirement. Let’s get started right away.

How much should I save for college?

Most people understand the value of a great education and a college degree. However, they also know just how fast college costs have been rising. Since 1985, the average cost of a college degree has risen over 500%, according to Forbes Magazine. The cost of college has become so burdensome for parents that it requires years of saving.

Learn more about our education planning services

Begin College Planning Immediately

We encourage our clients to begin college planning immediately after the birth of their children. There are multiple college savings programs that offer tax-free growth, so the earlier you begin saving, the larger the ultimate benefit.

There are several factors that go into the college funding calculation:

• Average tuition increase
• Current cost of public/private universities
• Current college fund
• Average rate of return on college investments
• Current age of the child

Two other considerations for parents: how much, if any, of their children’s college expense do they plan to cover and the impact of a scholarship on their savings plan.

Both of these assumptions should be considered and built into the projection. Accounting for all of these items will allow us to generate a thorough estimation of how much money should be saved, and is needed, for college.

The 529 College Savings Plan

In the United States, the college savings plan that is utilized most frequently is the 529 plan. This plan allows for parents to contribute to an account which they own, with the child as the beneficiary. All contributions are invested and grow tax-free if used for college education expenses. In addition, certain states such as Maryland will offer an additional incentive to parents for savings for college: income tax deduction. For Maryland residents, each parent can deduct up to $2,500 of contributions on their Maryland state income tax return. Therefore, we typically set up two 529 plans, one for each parent. This allows our clients to receive a tax deduction of up to $5,000 for contributions into their child’s college account.

Education Planning Services

Planning for college has become one of the most common financial planning topics for our clients. We assist in building a projection to determine how much they will need to contribute monthly, annually, or as a one-time lump sum. In addition, we will aid in the investment management of their college accounts to ensure maximum tax-free growth of the funds. Automatic monthly contributions from a checking account to a 529 plan have become very common for parents. This allows parents to consistently hit their contribution targets in a streamlined manner.

College costs can’t continue to skyrocket as they have over the years. Cost controls on salaries, as well as changes in policies such as teacher tenure, are already being implemented. In addition, internet based learning is growing in ease and popularity. However, the cost of an education will always be a major budget item for most parents. Start planning now – we can help!

Do I need life, disability, or long-term care insurance?

No one likes to think of tragedies, but everyone should prepare for one. Understanding what resources and liabilities you and your family are exposed to will greatly impact the type of insurance and planning required to mitigate potential loss and risk. The primary purpose of insurance is to protect against risk. Specifically, insurance should mitigate financial loss by meeting financial liabilities and needs in the event of an accident, disability, or death. One of the biggest concerns for parents and spouses is whether their dependents will be provided for if an unexpected event occurs.

About Life Insurance

Life insurance can offer some solution in the tragic circumstances surrounding a death in that it can help maintain a financial quality of life for a spouse, meet mortgage liabilities, and also fund college accounts. These examples take into account the human life value. This value is based on the individual’s income earning ability; it is the present value of the income lost by dependents as a result of the person’s death.

The other component to life insurance planning is understanding a family’s capital needs. If a spouse is the primary earner, he or she must determine what income is needed to maintain her family’s current quality of life.

An example of this is provided in the following scenario: If John dies, he wants his wife to have yearly income of $60,000 that will increase with inflation at 4% and his wife will be able to realize an after-tax return of 7% on investments. Given these figures, we would determine a capital need of $2,060,000, which may be able to be met with a combination of life insurance and existing investments.

About Disability Insurance

Disability insurance alleviates the financial strain of not being able to engage in one’s own occupation. The best definition of disability is the inability of the insured to engage in his or her own occupation. Often, the more technical or physically demanding a profession, the higher the need for a disability policy. This is why surgeons, attorneys, and carpenters should consider the benefits associated with a disability policy.

Sometimes after a disability, it is difficult for that individual to re-enter the workforce with the same physical abilities prior to the disability. Therefore, it is important to know the exact kind of disability policy to enroll to ensure current income is protected as well as confirming what disabilities are included and verifying how the carrier defines your occupation.

About Long-Term Care

Long-term care, for many, can be very costly and a financial strain on many families if a family member is in need of such care. It can also quickly evaporate savings and retirement accounts when not planned for properly. Furthermore, private medical insurance policies (both group and individual) generally exclude coverage for long-term care, and Medicare long-term care can be too restrictive.

It is for these reasons that long term care insurance should be part of the planning process and examined if appropriate. Typically, the need for long term care is triggered by the inability to perform two or three activities of daily living (ADLs), and cognitive impairment is an automatic trigger.

Do I currently have an estate tax liability?

Most people, throughout their lives, accumulate a subsatntial amount of assets that they own. Upon their death, these assets change title and are passed on to their heirs. Based on current estate tax laws, this transfer of assets is considered a taxable transaction. The total value of the estate is calculated and is subjected to a tax rate which the heirs must pay to the government. Estate taxes can be imposed at both the federal and state level.

What Compromises an Individual’s Estate

An individual’s estate is comprised of all assets that are owned or have certain interests in at the date of death. Some items that are factored into your estate calculation include:

• Cash
• Stocks
• Bonds
• Real estate
• Life insurance
• Annuities
• Business interests
• Personal assets

These assets make up your gross estate, which is the starting point for determining if you have an estate tax liability.

How to Calculate an Adjusted Gross Estate

Once the gross estate figure is determined, certain items are deducted, resulting in an individual’s adjusted gross estate. The following are subtracted from your gross estate:

• Debt
• Funeral and burial expenses
• Administration expenses
• Outstanding taxes
• Casualty losses

If you have made any taxable gifts, a gift to someone that exceeded the annual exclusion ($15,000 in 2021), those gift amounts are added to your adjusted gross estate to determine your tax base.

About the Exemption Amount

A key component in determining if you have an estate tax liability is the exemption amount. The exemption amount is the threshold for which taxes are imposed on any dollars over the limit. Therefore, the exemption amount is often the target level we use when making an effort to reduce an estate. The current federal exemption level is $5,340,000 per individual. Married couples receive the benefit of portability, or combining their individual exemption, if their spouse passes, thus increasing the total level to $10,680,000. For Maryland, the exemption level is $1,000,000. Portability does not currently exist for married couples. If your estate taxable estate exceeds either of these levels, you will be subject to estate tax. Assets exceeding the federal exemption are taxed at a maximum rate of 40%. For Maryland, the estate tax rate is 16% for all assets that surpass the $1 million limit.

Maryland Estate Planning

Let us ensure that your estate is managed and your liabilities are contained. We can help you with a customized estate plan. If we determine that your estate most likely will exceed exemption levels, we can assist you in various transfer mechanisms that are designed to minimize both estate taxes and the need for probate. Some examples are trusts, lifetime gifting, and retitling of certain assets. If taxes are unavoidable, we can help plan for the cash to be available to the heirs when the tax payment is due.

Understanding the laws, implementing a plan, and strategically minimizing your estate will result in significant savings for your beneficiaries. If you have any questions about estate tax liability or estate planning, don’t hesitate to contact us today.

When can I afford to retire?

The answer to this question is different for everyone. Some of us can retire tomorrow, while others will be able to retire after several decades of saving and investing. Some may even feel they’ll never be able to retire! However, the first step in determining this is to determine how much money you’ll need on an inflation-adjusted basis to survive each year.

How to Calculate How Much You Need to Retire

This amount should take into account the quality of lifestyle you’re accustomed to, while also being realistic. After this, annual income need is determined based on all your retirement sources of income (social security, 401(k), pension), the second step is to calculate how much money you will need to accumulate or save in order to withdraw that amount each year—without outliving the money you have accumulated through strategically saving.

Adjusting for Inflation

The third step in this equation is to determine the inflation adjusted number of this amount. For example, if we determine you’ll need to save $1,000,000 for retirement over the next twenty years, we will need to factor inflation to that dollar amount. Specifically, if we peg an annualized inflation rate of 3%, the $1,000,000 you planned to save actually is more like $1,800,000 after adjusting for inflation. Given this example, it is obvious that inflation becomes a key risk when saving for retirement and it is therefore necessary to limit inflationary risk by properly investing so you can afford to retire.

How to Afford to Retire

It is easier to answer the question of when can I afford to retire as this is a quantifiable number that we can assign. The toughest part of this process is the how I can afford to retire. The easiest answer is: save, save, and save some more. In order to achieve this target amount, it is necessary to:

• Fund as much as possible your company’s retirement plan
• Seek to invest in an Individual Retirement Account (IRA) for you and your spouse
• Align the risk of your investments to the time in which you plan to draw on your investments

For example, an investor in her 20’s may be properly invested if her portfolio is entirely in equities, while an investor in her 50’s may be properly invested if it’s a balanced mix between equities and fixed income.

Retirement Planning from Harmony Financial Planners

The final step to this process is to not be overwhelmed. It is our job to work with you in writing the blueprint for a retirement plan. In this plan we can account for income and growth opportunities, while providing the short term objectives you must achieve to meet your long term goals. It is never too late to start planning for retirement and you are taking the necessary steps.

If you’d like to get an individualized answer on your retirement planning, don’t hesitate to Contact us today!

Tax Planning

Does Harmony Financial Planners offer tax preparation?

Almost every area of our lives are touched by tax considerations. Many of the rules, regulations, and requirements regarding taxes are cumbersome and ever-changing. But reaching successful financial goals almost always means considering tax implications. At Harmony Financial Planners, our tax professionals can walk you through most any tax scenario and help with the planning strategies. Our services include tax planning, tax preparation and tax compliance.

We provide income tax planning services for individuals, corporates and small businesses on a year round basis through our on-staff Certified Public Accountants® as well as our relationship with other tax professionals. Learn more about our tax planning services.

How Many Years Do I Need to Keep My Financial Records in Case of an Audit?

Having complete and detailed records are crucial to the preparation and support for any income tax return. For most of us, we wonder how long we need to keep our tax records after we have filed a return. In most cases, the answer is three years (USA) & five years (Kenya).

When You Should Store Your Records for Longer Than Three Years

• You owe additional tax and situations (2), (3), and (4), below, do not apply to you; keep records for three years.
• You do not report income that you should report, and it is more than 25% of the gross income shown on your return; keep records for six years.
• You file a fraudulent return; keep records indefinitely.
• You do not file a return; keep records indefinitely.
• You file a claim for credit or refund after you file your return; keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.
• You file a claim for a loss from worthless securities or bad debt deduction; keep records for seven years.
• Amended assessments
• Keep all employment tax records for at least four years after the date that the tax becomes due or is paid, whichever is later.

Electronic Financial Records

The use of electronic media and scanning technology has made it much easier to store records. Instead of bulky file cabinets, records can be stored on hard drives or other media. The important consideration is that the electronic records must be readily available if needed.

What Are the Tax Consequences of Withdrawing Money Early from my Retirement Account?

No one should draw money early from their retirement account unless the circumstances are financially beneficial or there is an emergency need. When not strategically planned, these withdrawals are very expensive and can jeopardize your long-term retirement investment goals. There are two primary retirement savings vehicles investors typically use: an Individual Retirement Account (IRA) and your employer’s Defined Contribution Account, which is often referred to as a 401(k) plan, TSP, or 403(b) plan.

Withdrawing from Your Roth IRA

The most flexible account to withdraw money early from is a Roth IRA, which is an IRA account that has been established with after-tax dollars. You may withdraw from this account tax-free if the following events occur:

• Attainment of age 59.5
• Death
• Disability
• Your first primary home purchase (up to $10,000).

Principal payments made to a Roth IRA may also be withdrawn so long as the funds have been in the account for at least five years. Also, there are several emergency/special purpose withdrawals to a Roth IRA that may be permitted without a 10 percent penalty, but may be subject to income tax:

• Medical expenses
• Medical insurance premiums while unemployed
• Substantially equal periodic payments
• Higher education expenses.

If your Roth IRA withdrawals are not made for any of these reasons and you fail to meet the five year holding requirement your withdrawal will be subject to a 10 percent penalty and regular income tax.

Withdrawing from a Traditional IRA

Unlike Roth IRA’s which offer income-tax fee distributions, traditional IRA distributions typically are taxable. That said, traditional IRA account owners may withdraw funds for the same special needs cited above (except purchase of first house), but will still be subject to regular income tax. If the withdraw is not for a qualifying event he or she will create a 10 percent penalty on funds withdrawn from the account. If funds are withdrawn for a non-qualified need, the account owner has 60 days to return funds to the account to avoid the tax and penalty.

Withdrawing from Your 401(k) or Employer’s Retirement Account

Withdrawals from your employer’s retirement account are typically more prohibitive. If there is a need for these funds, the optimal means to obtaining these funds is to borrow from your account. IRC Section 72(p) allows participants to borrow from their plan on a tax-free basis as long as the following requirements are satisfied: total loans do not exceed the lesser of 50 percent of the participants vested plan benefit or $50,000.

There is a special rule that allows participants with small accounts to borrow $10,000 without regard to percentage limitation. The loans typically must be paid back over five years unless the loan is used to acquire a principal residence/dwelling. These loans must be paid back to your account at least quarterly. If you fail to make the payments or separate from service during the loan period, the balance is deemed a taxable distribution. This deemed distribution is subject to ordinary income tax and a 10 percent penalty if made prior to 59.5 years of age. If you are not 59.5 years old and you are not borrowing funds from your employer’s retirement account there is a strong likelihood you will be subject to a 10 percent penalty and regular income tax on the distribution.

Hardship Withdrawals

In service withdrawals from 401(k)’s are typically called hardship withdrawals. A financial hardship is defined as immediate and heavy with no other resources available to meet this need. This distributable amount is equal to the employee’s elective deferrals and vested profit-sharing contributions. If this withdrawal is done the employee will not be able to make contributions for six months to their employer’s plan. Lastly, the hardship withdrawal is again subject to the 10 percent penalty and creates an ordinary income tax liability.

Who Can I Claim as a Dependent?

A dependent is someone whom a taxpayer can claim on their income tax return. Typically, you may claim yourself unless you are the dependent of another taxpayer, your spouse (unless he or she files separately), and your children. You may claim also your parent(s) or qualifying relatives as dependents.

Qualifying a Child as a Dependent

The qualified child must have a relationship with you in one of the following ways:

• A son
• A daughter
• A stepchild
• A foster child
• An adopted child
• A grandchild

If they are a full-time student, they must be under the age of 24 as of the end of the year or regardless if they are students, they must be under the age of 19 as of the end of the year. Their place of residence should be the same of the taxpayer’s for more than one-half of that year. Lastly, the child must not provide more than one-half of their own support.

Qualifying a Parent as a Dependent

The qualified parent or relative must have gross taxable income less than $3,950 in that year to even qualify as a dependent (as of 2014). Next, the qualified parent or relative also must be a U.S. citizen and you can be the only one claiming them as a dependent. For families with multiple siblings supporting their parent, this is something that should be coordinated well in advance of the filing deadline. Lastly, you cannot claim a parent or relative who is married and files a joint tax return.

Knowing Who You Can Claim As a Dependent on Your Income Tax Return

The importance of knowing who you can claim as a dependent on your income tax return will allow you to benefit from an accurate number of exemptions. Specifically, for every qualified dependent you claim, you have the ability to reduce your taxable income up to the exemption amount for that stated year. The personal exemption amount is $3,950 in 2014, up from $3,900 in 2013.

Phase-Outs for Personal Exemptions

However, there are phase-outs for personal exemptions that are worth noting. Phase-outs for personal exemption amounts begin with adjusted gross incomes of $254,200 and phase out entirely at $375,700 for individuals in 2014. For joint filers the phase-out begins at $305,050 and phases out entirely at $427,550 in 2014.

What Is the Annual Gift Exclusion?

Before we provide you with more information, let’s review estate taxes. The government imposes a tax on individuals at death when assets are transferred to heirs, known as estate tax. However, the total value of the estate needs to exceed certain levels (exemption level) for the tax to be applied. As wealthy individuals age, a major financial objective is to reduce their estate enough that it is below the exemption level, thus avoiding the feared estate tax. Therefore, the most common way individuals remove assets from their estate is by gifting them to family and friends, often the people that will ultimately receive their assets at death anyways.

Annual Gift Exclusion

In an effort to prohibit individuals from rapidly depleting their estate in order to avoid estate taxes as death becomes more evident, the government established the annual gift exclusion. This exclusion limits the amount of money that may be transferred to another person each year.

For 2021, that limit is $15,000 ($30,000 for married couples). Although you can transfer $15,000 to as many people as you wish, you can only transfer $15,000 to each without incurring a gift tax. Gift tax is imposed on assets that are gifted to others, exceeding the annual exclusion. A gift tax return must be filed in the year in which a gift to a specific individual exceeded the limit. At death, all of these “taxable gifts” are added back to your estate, which may cause your estate to exceed the exemption amount, leading to an estate tax liability.

Estate Planning with Harmony Financial Planners

There are numerous ways for individuals and families to reduce their estate. We have the necessary knowledge and can implement strategic techniques (including, but not limited to gifting) for you to minimize or eliminate the dreaded, and often substantial, estate tax liability. In addition, we have several relationships with trusted estate planning attorneys who assist us in navigating the constantly changing estate planning landscape. You worked hard to accumulate your wealth. Let us protect that wealth so your beneficiaries are not left with a fraction of what you intended.

What Education Credits Are Available and Do I Qualify?

There is no question that for most households, education expenses are one of the most expensive line items. College costs continue to rise. Fortunately, there are some benefits for both the parents paying for their children’s secondary education as well as for individuals covering their way through graduate school. There are two tax credits available to help you offset the costs of higher education: the American Opportunity Tax Credit and the Lifetime Learning Credit.

About the American Opportunity Tax Credit

The most widespread tax credit that filers use for their children in college is the American Opportunity Tax Credit (AOTC). The credit is available to each student for four years. If your child elects to do a fifth year of undergraduate studies this credit will not be available.

Extension of the AOTC

The American Opportunity Tax Credit (AOTC) modifies the existing Hope Credit. The AOTC makes the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two.

Eligibility for the American Opportunity Tax Credit

Many of those eligible will qualify for the maximum annual credit of $2,500 per student. The full credit is available to individuals, whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing jointly and phased-out for both filers filing above these levels.

About the Lifetime Learning Credit

For the Lifetime Learning Credit, there is no limit on the number of years the credit can be claimed for each student. Like the AOTC, your income may limit the amount of the credit that you may capture.

Eligibility for the Lifetime Learning Credit

The full credit of $2,000 is available to individuals, whose modified adjusted gross income is $69,000 or less, or $138,000 or less for married couples filing jointly and phased-out for both filers filing above these levels. Furthermore, this available for all years of post-secondary education and for courses to acquire or improve job skills. Qualified expenses for this credit include tuition and fees required for enrollment or attendance. Lastly, you may not use this credit if you already are claiming the AOTC for the same student in the current tax year.

Education Planning with Harmony Financial Planners

Secondary education is certainly expensive and unfortunately tax credits will not dramatically lower the price of secondary education. It is necessary to start planning for your child’s education as soon as possible. There are several savings vehicles that every parent can use and we highly recommend for clients. Talk to us today to start planning for your child’s educational needs.

How Do I Value Non-Cash Charitable Contributions?

Charities welcome gifts of not only cash, but also property. These non-cash gifts can be used by the charity itself, given to the beneficiaries of the charity, or converted by the charity into cash. Some examples of non-cash charitable giving include:

• Clothes
• Electronics
• Furniture
• Paintings
• Jewelry
• Cars
• Stocks
• Bonds, and more

Many of our clients wonder if they donate property, how much they are allowed to deduct on their tax return.

Deducting Non-Cash Charitable Gifts

In most cases, you are allowed to deduct the fair market value of the property on the date of the contribution. This is normally the price you would pay if you wanted to buy the article on the open market. The condition of the property must be considered. Usually, if you value the gift or property over $500, an outside appraisal is suggested.

In cases where the price is not reasonably obtained, or on very high priced donations, an expert opinion may be required. For example, for art, any donation over $5,000 must have an outside appraisal. Additional details are available in IRS Publication 561.

Are Losses On Rental Properties Deductible?

For those people who have business ventures that offer residential real estate to renters, figuring out whether this business provides a profit or not is sometimes difficult. Even more daunting is determining where to file them on a tax return and how to deduct any losses. In most cases, the amount of profit or loss is simply the difference between the total of rental income less all of the expenses incurred to support the property. This activity is usually reported on Schedule E of your income tax return. So, are losses on rental properties deductible? Losses are normally deductible. However, there are two sets of rules that may limit the amount of loss you can deduct, and there are limitations to these deductions.

Rules for Deducting Loss on Rental Properties

If you have a loss from your rental real estate activity, there are two sets of rules that may limit the amount of loss you can deduct. You must consider these rules in the order shown below. More details can be obtained from IRS Publication 527.

• At-risk rules: These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. This applies only if the real property was placed in service after 1986.
• Passive activity limits: Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. However, there are exceptions.

Most of the time, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at-risk in the activity at the end of the tax year. You are considered at-risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year.

Limitations to Deductions

Most rental real estate activities are passive activities. For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Deductions or losses from passive activities are limited. You generally cannot offset income, other than passive income, with losses from passive activities. Also, you cannot offset taxes on income, other than passive income, with credits resulting from passive activities. Any excess loss or credit can be carried forward to the next tax year.

Please reach out to us with any tax questions you may have in relation to rental properties and deductions, simply call +254733278830.

What do I do with old 401(k)’s that I have from former employers?

It is likely that over the course of your career, you will contribute to multiple retirement plans. However, having multiple retirement accounts across former employers can be confusing and hard to monitor. Furthermore, you may miss opportunities of compounded growth on collective retirement assets if they are held in multiple accounts, as well as the benefit of ensuring a consistent strategy.The solution for this is to consolidate these multiple accounts into one Individual Retirement Account (IRA) that can be easily tracked, monitored and managed. Specifically, this should be a Traditional IRA because of the pre-tax contributions that may have been contributed to your 401(k).

Direct Rollover/Trustee-to-Trustee Transfer

To avoid any tax consequences, we recommend establishing a trustee-to-trustee transfer, also known as a direct rollover. In this process, you first establish an IRA and then give instruction to your former employer’s retirement plan to directly deposit assets into this established account. This is the optimal way so that all funds are transferred directly. A mistake individuals often make is to request the funds be issued to them rather than the account, whereby their former employer is required to withhold 20% of the balance. Put simply, this delays the process of effectively transferring all the assets. Also, if you fail to deposit these funds into an IRA within 60 days, it becomes a taxable distribution that is subject to ordinary income tax and potentially a 10% penalty. For this reason, we almost always recommend a direct rollover to an established Traditional IRA.

The Importance of Transferring to a Traditional IRA

The benefits of rolling a 401(k) to a Traditional IRA can be tremendous. The first benefit is that you are no longer limited in your investment selection and may be able to pick the optimal allocation for your investment objectives and goals. The other benefit is you can continue to contribute to this account through annual contributions while you are employed or you may rollover other 401(k)’s into this account. As mentioned above, with all your retirement accounts rolled into one account, you not only can manage your allocation more effectively, you can also amplify the benefits of dividends and interest earned via compounding growth.

Can my spouse contribute to a retirement account if he or she doesn’t work?

Spousal IRA’s are a tremendous way to maximize tax deferred growth for the entire family because the less you have to pay on your investment gains, the better your investments will perform over the long run. One can contribute the lesser of earned income or the annual allowed contribution to their IRA. Furthermore, employed individuals who are married may also contribute to an IRA for their spouse. Specifically, the amount of the combined contributions can’t be more than the taxable compensation reported on the joint return.

We recommend that all married individuals with qualified income contribute to an IRA. You and your spouse may both be able to contribute to either a Roth IRA or a Traditional IRA.

If your income is above certain limits your ability to contribute to a spousal Roth IRA is phased out, and you may only contribute to a Traditional IRA. Unlike Roth IRA’s, Traditional IRA’s have no income limits for a spousal contribution. Often making both contributions by the time taxes are due can be a strain on cash flow. One strategy that we recommend is making joint contributions monthly so that by April both IRA’s have been fully funded. Put simply, it’s always easier to save incrementally than all at once!

Which investment choices on my 401(k) platform should I invest in?

Determining When You Can Retire

The first step in choosing investments for your 401(k) is determining when you can realistically retire. Specifically, your investment time horizon impacts how aggressively you can invest. If you’re later in your career with 5-7 years to retirement, it may be prudent to scale down to a more moderate or conservative portfolio. Conversely, if you are in the early stages of your career, with multiple decades of earning ahead, it is recommended you allocate more aggressively. A younger person’s retirement account has significant time to not only recover from recessionary markets, but also has the benefit of investing in opportunistic environments. History has shown that, given several decades to invest, stocks outperform bonds and cash. Therefore, it is more risky for a younger person to be invested conservatively than aggressively because conservative investing, though safe, has a greater probability of limiting long term gains. Put simply, the risk is worth the reward when it comes to a long-term aggressive allocation.

Understanding the Purpose of Your 401(k)

The second step in this process is realizing that the purpose of a 401(k) is to fund your retirement. It is not designed to be withdrawn from or used on discretionary spending throughout your career. This discipline allows for you to maximize on compounding growth no matter where you are in your career, while enhancing your probability of successful investing.

Selecting Investments

If you take the time to understand the aforesaid steps, it should be easier to peg which investments make the most sense for where you are in your career. To reinforce this concept, a younger professional should predominately be invested in stocks, while an older professional should have a balanced allocation to both equities and fixed income. If investment options are limited on your plan, one should allocate to index funds and vary exposure by their investment time horizon. If there are multiple options on your investment platform it is recommended you reach out to an investment professional to help guide you in the suitability of the investments as well as plan an allocation that is designed to yield beneficial long-term results.

Retirement Planning with harmony Financial Planners

There are many options when it comes to saving for retirement. This is both a benefit and deterrent as you have the resources to be successful but simply don’t know where to start. Fortunately, your planners at harmony Financial Planners can make sense of these investments in a simple strategy you can understand.

Asset Management

Is there a fee for an initial meeting?

No, there is no fee for an initial meeting. We look forward to discussing your goals and aspirations and helping you to determine if Harmony Financial Planners is the best fit for you.

Are your services “fee-based”?

Harmony Financial Planners’s fee structure is based on the services provided.

Fee Structure for Investment Management Services

For our Investment Management services, our fees are asset-based. We do not charge commissions or earn more money when trades are placed in a client’s account. We never charge loads on mutual funds obtained through us. Our fees are calculated on the total value of your assets under management and only increase as your account grows. This puts our loyalties in line with yours.

Fee Structure for Financial Planning & Tax Services

The fees for our financial planning and tax services are usually calculated on an hourly basis and depend on the complexity of the situation. Certain other financial products such as insurance and annuities can be obtained through us. One or more of Harmony Financial Planners’s affiliated persons are licensed to provide annuities, life, and health insurance. If a client purchases these products, Harmony or the affiliated person will receive the normal commission.

How often will Harmony Financial Planners meet with a client to review their portfolio?

We will review your portfolio at least once a quarter, usually upon generation of our quarterly reports. More frequent or interim reviews can be requested by you at any time.

In all cases, you will receive regular account statements from those companies where investments are held.

Does your company hold my money?

No, Harmony Financial Planners does not hold custody over client assets. Most of our asset-based accounts are held at Fidelity Institutional Wealth Services (FIWS), a leading provider of trading, custody, and brokerage services to Registered Investment Advisors, Trust Institutions, and Third Party Administrators.

Do you have an investment committee?

Yes. Our investment committee meets to review the current investment environment and determine if any changes need to be made to our strategies.

Our Top-Down Approach

We use a fundamental, top-down approach to our discussions, considering:

• Economic conditions
• Earnings
• Industry outlook
• Politics (as it relates to the investment)
• Historical data
• Price-earnings ratios
• Dividends
• General level of interest rates
• Company management
• Tax benefits

We also use technical analysis, chart analysis, cycle analysis and regression analysis to determine such factors as price and volume action, momentum, direction, and relative strength.

Our Investment Committee dictates the strategy of our model portfolios and provides the framework for client portfolio allocations.

Does Harmony Financial Planners have access to separate account managers and Private Equity investments?

Yes, we have selected an array of separate account managers (third party advisors) who have demonstrated an expertise in obtaining investment success in very specific asset classes. In certain cases, the separate account manager’s investment philosophy and strategy will add value with respect to achieving the client’s investment objectives.

Our separate account managers serve as a complement to the core portfolios the Harmony Financial Planners’s investment committee manages.

Private Equity investments are available to our ultra-risky investors who seek investments uncorrelated to traditional asset classes such as stocks and bonds, with the expectation the increased risk will generate outsized returns.

How do I pick a financial advisor?

Having a trusted advisor to help you successfully navigate through the world of finances can be extremely valuable. Most of us do not have the time, specialized education, or experience that trained financial advisors do. So how do you find the right advisor for you?

Determine What Type of Advisor You Need

First, take stock of your financial situation and financial knowledge to determine what type of advisor you need. For example, someone with a great deal of financial know-how may only need some add-on assistance of a broker for stock selection, where someone with little experience may want the services of a full- fledged financial planner. Others may need specialized services in regards to tax, estate, and insurance matters.

Ask Family & Friends for References

Once you have an idea of what you are looking for, begin your search by asking family and friends who they use as their trusted advisor. Find out how often they meet, what services their provider offers, and how much value they feel they are getting from the relationship. You should be able to get a few good names from these sources.

Research National Associations

Next, check out national associations, such as the Financial Planning Association and the American Institute of Certified Public Accountants. Cross reference to see if the names on your recommended advisors list are on these lists and also obtain a few additional names for those in your area. Go to the web sites of the advisors and read through their information. Most sites will explain all of the services available and how to begin a relationship.

In addition, the history, experience, and background of the firm and its employees are usually attainable online. You can also do a check of the advisors on the Financial Industry Regulatory Agency’s (FINRA) Broker Check or the Security and Exchange Commission’s (SEC) IARD.

Meet With Advisors In Person

Meet with a few advisors in person. This will help determine if your personalities match, enable you to get all of your questions answered, and know what fees or other costs are involved. Determine if the advisor has any vested interest in selling or recommending certain actions or investments. If commissions are charged, understand how they are computed.

Work with a Registered Investment Advisor

A Registered Investment Advisor is required to give you a copy of their ADV Part 2 which explains in writing how your relationship will work, investment strategies employed, and any disciplinary action taken against the firm. RIA’s are considered fiduciaries and must treat all clients fairly and always consider the client’s interest in front of their own.

Work With a Financial Planner

If the advisor is a Financial Planner, they will explain how the planning process works and walk you through the written planning agreement. CFP®’s are subject to rules and integrity regulations of the Financial Planning Board.

With the right amount of effort and due diligence on your part, you can select and work with an excellent advisor. Such a relationship should prove to be rewarding not only financially, but also personally as it grows into one of mutual trust and appreciation.

Why Should I Hire a Financial Planner?

Throughout our lives, we are taught that it is smart to save, to pay off debt, and to be prudent with our spending. However, many of us are not taught the basic principles that come with those actions:

• How much is necessary to save
• how to protect assets
• How to invest a portfolio, and more

Often, we simply do not have the time or interest in devising, implementing, and regularly monitoring a financial plan. Working with a financial Planner allows you to objectively and logically plan for your financial future, manage risks, and answer any (and every) question along the way.

When you work with a Financial Planner?

We take pride in our ability to simplify your entire financial profile (investments, tax, insurance, estate planning, etc.) in an easy to understand picture that can make immediate and long term goals attainable.

Financial Planners work with a variety of clients regardless of the stage they are in life:

• For the young professional, we lay the groundwork for a monthly savings plan that will grow his/ her assets
• For the retiree, or the industry veteran approaching retirement, we can systematically plan for your income, insurance, and estate needs as you age
• For the business owner looking to implement a retirement plan for his firm, we will work with you develop a plan that will attract and retain talented employees while benefiting from both an individual and corporate tax perspective

So much of your life is spent earning, paying, and saving money. You need a Financial Planner to guide you and help ensure that your finances are managed properly and that your assets are always working for you and your family. Let a trusted financial planner, show you the way.

Investment Advisory

How Should I Diversify My Portfolio?

The saying “don’t put all your eggs in one basket” defines diversification in investment advisory. It is this wisdom, perhaps passed from one’s parents, of not putting everything you have in one choice that should absolutely be followed in investing.

Importance of Diversifying Investments

Through diversifying your investments, you have a greater probability of capturing investment opportunities over the long-term, while at the same time helping to minimize those concentrated risks of being overly exposed to any particular investment in the short run.

Investors do not like to think of periods when the market is in a recession, but during recessionary cycles, diversification may limit your exposure to market loss. For example, during 2008, the stock market performed poorly while treasury bonds performed positively. The opposite may be true during a bull market. For this reason, you want investment vehicles in your portfolio that may perform well during all market cycles.

Reducing Portfolio Volatility

Diversification allows one to reduce portfolio volatility, as it is volatility that makes investments move like a roller coaster. Volatility, for some, is what makes investing difficult and invites emotion to cloud the logical process of investing.

Diversifying investments into buckets (including U.S Stocks, International Stocks, Domestic Bonds, and International Bonds), aids the investment process by dampening volatility because typically all asset classes do not move in unison. Put simply, diversification allows for your portfolio to have a smoother ride. It is through the process of diversification that you can match your capital need and investment goals. For example, you can invest in CDs and bonds for capital you know you’ll need in one to two years, while the stock component of your portfolio can be for the capital you’ll need in the next decade. Everyone will have a different asset mix or diversify differently.

Diversifying Portfolios in Different Financial Markets

However, we believe every portfolio should have broad enough exposure to capitalize on the opportunities available in the financial markets. These opportunities come in the form of:

• Stocks
• Bonds
• Commodities
• Alternative investments
• Private equity
• Real estate

The act of diversifying requires financial planners to examine your entire financial profile and find the allocation that best meets your objectives. Lastly, diversification requires your portfolio to be flexible enough to reallocate and rebalance so as to not be too underweight or overweight in any one sector or strategy.

Have questions about diversifying your portfolio? Contact us to speak with a financial planner.

What Should My Asset Allocation Be?

The biggest question in investing is “Where should I invest my money?” Investors often wonder whether they should invest entirely in stocks, bonds, or a balanced mix of both. Aggressive allocations tend to be all stocks, while conservative allocations tend to be all bonds and cash. Having an asset allocation strategy in place provides discipline and guidelines for investors.

Asset Allocation Strategy & Investment Objectives

Having a disciplined asset allocation strategy allows one to stay focused on meeting their investment objectives. Right or wrong, emotion always makes way into investing; however, having the right asset allocation will remind you of your investment objectives.

How to Set Your Asset Allocation

The simple answer to what your asset allocation should be is: the one you are comfortable with and understand to reach your investment goals. At Harmony financial Planners, we cater your asset allocation to align with your time horizon, investment goals, and risk tolerance. Specifically, before we invest your hard earned capital, we examine your entire financial profile to ensure we are investing to align with you and your family’s goals.

If your current investments keep you up at night, and you are constantly worried about the direction of your account, it is likely that you are not allocated correctly. A financial planner’s job is to help you match your current situation and time horizon to an allocation that will help yield the highest probability of success in attaining your financial goals. For example, with a younger investor who has several decades of earning ahead, it makes sense to plan for her retirement by having a higher allocation to stocks than any other kind of investment. Our logic in this instance is that over time, we believe stocks outperform bonds and bonds outperform cash. It is for this reason that retirees should consider a more moderate allocation, whereas a younger investor just starting in their career can consider being aggressive.

The Risk of Holding Too Much Cash

Another concept that we consider when implementing your asset allocation is that over time, one of the biggest risks to any asset allocation is holding too much cash. Yes, cash should be kept to maximize buying opportunities; however, it is important to understand that sitting in cash may cause a significant loss of purchasing power if used as a long-term investment because of inflation.

The Most Significant Determinant to Asset Allocation

A simple example of this is comparing gas prices in the 1980s to gas prices in 2000s. The most significant determinant to asset allocation is your time horizon because time is an investor’s best friend. The more time you have, the more risk and reward opportunities available. This is also why your asset allocation must be flexible and change as you get closer to your investment goal. It is our job to identify how to adjust your asset allocation and manage risk.

Retirement Planning

What are the benefits of implementing a retirement plan in my company?

People of all ages are well aware of the need to save for retirement. They are also mostly well informed of the worries about Social Security and the decline of pension plans to help fund a stable retirement. Because of this, prospective employees consider an Employer-Sponsored Retirement Plan a significant benefit. Your ability to attract and retain the best talent can be severely handicapped without such a benefit. A decision to join your company may hinge on how your plan compares to the competition.

About Employer-Sponsored Retirement Plans

Employer-Sponsored Retirement Plans also help keep employees. Your plan can be tailored to allow for matching contributions into the employee accounts and can be vested by the employees on percentage earned based on years of service. Many employees build up sizable retirement savings that they highly value, knowing the longer they stay, the larger their retirement account becomes.

Employer-Sponsored Plans, such as 401(k) plans, have been around for many years. At the outset, they were very expensive and usually only able to be offered by large companies—those that could afford the costs and handle the administration. Now, however, internet-based plans have dramatically lowered costs and made it easy and practical for businesses of any size to sponsor and maintain an employer-sponsored 401(k) plan.

Tax Benefits of Offering Sponsored a Retirement Plan

Employers are also eligible for some tax benefits such as credits for offering a plan. These benefits are dependent on the type of plan and a qualified tax consultant should be consulted.

Not only employees, but small business owners can also benefit from sponsoring a plan. Many owners have very little time to worry about their own financial prospects and a retirement date that is well off in the future. A 401(k) plan can assist in relieving the worry about building a retirement nest egg.

Still have more questions about implementing a company retirement plan? Contact us to speak with one of our retirement experts.

What are target date mutual funds?

Target date mutual funds simplify the investment process, and for many investors, these funds can be an effective way to achieve diversification with only one investment product. Typically, investors have encountered these funds on their company’s retirement plan, and the product name usually aligns with their retirement age goal.

For example, one may see XYZ 2035 Fund and, by strategy, this fund is aimed at employees and investors aiming to retire around 2035.

The goal of these target date funds is to transition from aggressive to more conservative as the fund nears the target date. This means increasing bond exposure and decreasing equity exposure. And to be fair, the simplicity in the fund’s name can be an effective call to action towards investing for retirement.

Composition of Target Date Mutual Funds

To better understand target date funds, one must also understand the composition of these funds. These funds typically are funds of funds under one financial institution, which means they utilize multiple mutual funds in one product to achieve an overall domestic equity, international equity, and fixed income allocation. Since these funds are diverse, it is difficult to compare their performance to one benchmark. A blended benchmark is more appropriate in this circumstance. Morningstar, S&P 500, and Dow Jones all have relative target date benchmarks that may be appropriate to judge performance of your underlying target date fund.

Disadvantage of Target Date Mutual Funds

The strengths of target date funds have been highlighted above. However, there are some weaknesses in these strategies, primarily articulated in that we believe every investor has unique goals and objectives. To lump all investors in the same allocation who will all hopefully all reach retirement at the same time may not be optimal. We believe it is necessary to examine risk tolerance, overall household income, and net worth to peg the optimal allocation for a given investor.

A well-crafted allocation should be understandably simple, and this is why target date funds are effective. But it may be to your advantage to consult with a Registered Independent Advisor (RIA), who can be an effective resource in actively managing a retirement plan that is easy to understand, and a plan that is right for you as you transition to retirement.

If I am self-employed, what kind of retirement plans can I establish?

Self-employed people are incredibly busy. Fortunately, they can worry less about their retirement security, and focus more on running the business, by choosing from one of the many plans available. Here is a list of the most popular plans, with some of the unique benefits and qualifications of each. More information about the tax and contribution limits can be obtained from the IRA website.

Simplified Employee Pension (SEP)

• You can contribute as much as 25 percent of your net earnings from self-employment (not including contributions for yourself), up to $52,000 for 2014 ($53,000 for 2015).

401(k) Plan

A one-participant 401(k) plan is sometimes referred to as a “solo-401(k),” “individual 401(k)” or “uni-401(k).” It is generally the same as other 401(k) plans, but because there are no employees other than your spouse who work for the business, it is exempt from discrimination testing.

• You can make salary deferrals up to $17,500 in 2014 and $18,000 in 2015 (plus an additional $5,500 in 2014 and $6,000 in 2015 if you’re 50 or older) either on a pre-tax basis or as designated Roth contributions.
• You can contribute up to an additional 25 percent of your net earnings from self-employment for total contributions of $52,000 for 2014 ($53,000 for 2015), including salary deferrals.
• A 401(k) plan allows you to tailor your plan to allow access to your account balance through loans and hardship distributions.

Savings Incentive Match Plan for Employees (SIMPLE IRA Plan)

You can put all your net earnings from self-employment in the plan: up to $12,000 in 2014 and $12,500 in 2015 (plus an additional $2,500 in 2014 and $3,000 in 2015 if you’re 50 or older) in salary reduction contributions and either a 2% fixed contribution or a 3% matching contribution.

Should my payroll provider manage my 401(k)?

Employer Sponsored Benefit Plans are now offered through many avenues. The most important consideration in choosing a provider is the reputation of the firms involved. Retirement plans are long-term propositions. You want to make sure you are partnering with qualified experts in the field with whom you can build a long lasting relationship.

There are two key components of every plan:

• The administration of the plan
• The investment of the plan assets

Plan administration includes:

• The initial set up
• Enrolling employees
• Maintaining accounts
• Closing accounts for terminated employees
• Filing tax forms
• Managing payroll deductions
• Educating employees

Fortunately, the use of web-based software programs has made this fairly easy and affordable. Investment of plan assets includes deciding on the investment funds available within the plan and making sure that the fund managers are doing a good job for employees.

Because of the many complexities of plans, the industry has coalesced around two major types of providers: a one size fits all approach and a team approach. Many large providers have the ability and resources to develop expertise and experience in handling all aspects of plans from start to finish. Because of their structure, these firms mainly service large companies and corporations. The other alternative is a team, usually consisting of a firm specializing in plan administration and one with expertise in investment asset management. These teams usually service smaller plans.

Each type of provider has its plusses and minuses and it is important to do a lot of homework to help make the best decision for your plan. At Geier Asset Management, we can offer you a quick evaluation the various plans available and help you choose the best solution. Contact us today to schedule a consultation.

Other

What is your approach to providing financial advice to your clients?

We are client-centric and devoted to cultivating long-term relationships with our clients. We take our role as Financial Planners seriously and are committed to serving the best interest of our clients at all times. We are not just investment managers- "brokers". We are advisors who seek to be integral to your financial life.

Are you an independent financial planner?

Yes, through United Planners Financial Services, an independent broker dealer and Registered Investment Advisor. With few restrictions, we are able to provide "best of breed" products and services wherever these may be found.

What kind of process do you follow in managing my investments?

We provide rigorous analysis to develop effective investment strategies and monitor these investments regularly to help attain expected performance. Investments are determined in conjunction with your other important financial goals.

What makes you different from other advisers?

Several things; our values - we work best with individuals who are concerned about the "big picture" and the impact they can make, not just the amount of accumulated wealth or the rate of return on investments. Secondly, our focus on comprehensive financial planning whereby we examine 7 different financial planning strategies and then establish the best financial plan for our clients. Finally, we believe it's our passion for personal growth and emphasis on quality of life above all else. It may sound clichéd, but for us it is the hallmark of what we do: money is simply a means to an end and not an end in itself.

What aspects of my financial life can I expect you to assist with?

All aspects of your financial life that you are concerned with matter to us and will be discussed in the course of our meetings and discussions.

Do you work with other professionals? If so, how?

We maintain a network of highly trained and respected professionals who we can refer to for their subject matter expertise in associated areas such as tax planning, estate planning, business legal matters, liability insurance etc. These relationships are strictly professional and are not compensated by any fee sharing arrangements. These individuals are not affiliated with Harmony Financial Planners.

Are you available to answer my questions whenever I have them? If so, will I be billed?

We maintain a highly accessible business practice. You can expect to reach us whenever you need assistance and, under normal circumstances, the fee paid in managing your account covers everything.

How often can I expect to hear from you, and when?

Mostly, this is up to you. We like to maintain regular meetings of approximately 2-4 times a year to review your situation. In cases where you desire less frequent meetings we will accommodate your request but ask that we meet no less frequently than annually. If more frequent meeting are desired, that is never a problem.

How are you compensated?

We operate under a hybrid compensation model. Mostly we are compensated as a percent of the assets we manage for our clients. However, where it is in the client's best interest to have us compensated by commission instead of an ongoing fee we will bring this option to the client's attention and discuss the pros and cons thoroughly.

Do you have a minimum investment requirement?

We do not have a minimum investment requirement and we will do our best to meet our clients' needs appropriately, regardless of their investment value. Many individuals without significant accumulation of assets would benefit from undertaking a comprehensive financial plan and it is our mission to help as many people as possible achieve this important step. If we feel we can't help you we will provide the name of another qualified advisor.