Financial Insights for Living Well - November 2014

Transcription

1 Page 1 of 3 George Financial Advisors Ted George, CFP, MSFP Financial Advisor 1414 Soquel Ave, Suite 220 Santa Cruz, CA admin@georgefa.com November 19, 2014 It's November, so by now you should have a good idea of what your taxable income will be for the 2014 tax year. It is time to think about Year End Tax Planning and what you can do to take the sting out of the inevitable tax bill about to come your way. This month's articles and checklist help ensure that nothing will slip through the cracks. A proper asset allocation for your portfolio is very important. It is also important to understand the types of investments you are using to create that asset allocation as different types have different advantages and risks. Our final article(click here to read) discusses various investment choices you might use in creating an asset allocation that is appropriate for your specific situation. If you have any questions on this topic, please let me know. Financial Insights for Living Well - November 2014 Documents in this presentation: Year-End Tax Planning Tax Planning for Income Appropriate Checklists for Year-End Tax Planning Year-End Tax Planning As the end of the year approaches, it's time to consider strategies that could help you reduce your tax bill. But most tax tips, suggestions, and strategies are of little practical help without a good understanding of your current tax situation. This is particularly true for year-end planning. You can't know where to go next if you don't know where you are now. So take a break from the usual fall chores and pull out last year's tax return, along with your current pay stubs and account statements. Doing a few quick projections will help you estimate your present tax situation and identify any glaring issues you'll need to address while there's still time. When it comes to withholding, don't shortchange yourself If you project that you'll owe a substantial amount when you file this year's income tax return, ask your employer to increase your federal income tax withholding amounts. If you have both wage and consulting income and are making estimated tax payments, there's an added benefit to doing this: Even though the additional withholding may need to come from your last few paychecks, it's generally treated as having been withheld evenly throughout the year. This may help you avoid paying an estimated tax penalty due to underwithholding. Of course, if you've significantly overpaid your taxes and estimate you'll be receiving a large refund, you can reduce your withholding accordingly, putting money back in your pocket this year instead of waiting for your refund check to come next year.

2 Page 2 of 3 Will you suffer the alternative? Originally intended to prevent the very rich from using "loopholes" to avoid paying taxes, the alternative minimum tax (AMT) now reaches further into the ranks of middle-income taxpayers. The AMT is governed by a separate set of rules that exist in parallel to those for the regular income tax system. These rules disallow certain deductions and personal exemptions that you are allowed to include in computing your regular income tax liability, and treat specific items, such as incentive stock options, differently. As a result, AMT liability may be triggered by such items as: Large numbers of personal exemptions Large deductions for state, local, personal property, and real estate taxes Home equity loan interest where the financing isn't used to buy, build, or improve your home Exercising incentive stock options Large amounts of miscellaneous itemized deductions So when you sit down to project your taxes, calculate your regular income tax on Form 1040, and then consider your potential AMT liability using Form If it appears you'll be subject to the AMT, you'll need to take a very different planning approach during the last few months of the year. Even some of the most basic year-end tax planning strategies can have unintended consequences under AMT rules. For example, accelerating certain deductions into this year may prove counterproductive since AMT rules may require you to add them back into your income. If you think AMT is going to be a factor, consider talking to a tax professional about your specific tax situation. Timing is everything The last few months of the year may be the time to consider delaying or accelerating income and deductions, taking into consideration the impact on both this year's taxes and next. If you expect to be in a different tax bracket next year, doing so may help you minimize your tax liability. For instance, if you expect to be in a lower tax bracket next year, you might want to postpone income from this year to next so that you will pay tax on it next year instead. At the same time, you may want to accelerate your deductions in order to pay less tax this year. To delay income to the following year, you might be able to: Defer year-end bonuses Defer the sale of capital gain property (or take installment payments rather than a lump-sum payment) Postpone receipt of distributions (other than required minimum distributions) from retirement accounts To accelerate deductions into this year: Consider paying medical expenses in December rather than January, if doing so will allow you to qualify for the medical expense deduction Prepay deductible interest Make alimony payments early Make next year's charitable contributions this year The gifts that give back If you itemize your deductions, consider donating money or property to charity before the end of the current tax year in order to increase the amount you can deduct on your taxes. As an aside, now is also a good time to consider making noncharitable gifts. In 2014, you may give up to $14,000 ($28,000 for a married couple) to as many individuals as you want without incurring any federal gift tax consequences. If you gift an appreciated asset, you won't have to pay tax on the gain; any tax is deferred until the recipient of your gift disposes of the property. Postpone the inevitable To reduce your taxable income this year, consider maximizing pretax contributions to an employer-sponsored retirement plan such as a 401(k). You won't be taxed on the contributions you make now, and you may be in a lower tax bracket when you do eventually withdraw the funds and report the income. (Note that if you take withdrawals from the plan before age 59½, you'll generally be subject to a 10 percent penalty tax in addition to any income tax due, unless an exception applies.) If you qualify, you might also consider making either a tax-deductible contribution to a traditional IRA or an after-tax contribution to a Roth IRA. In the first instance, a current income tax deduction effectively defers income--and its taxation-- to future years (as with a retirement plan, an additional 10 percent penalty tax will apply to withdrawals made prior to age 59½ in addition to any income tax due, unless an exception applies); in the second, while there's no current tax deduction allowed, qualifying distributions you take later will be tax free. You'll generally have until the due date of your federal income tax return to make these contributions. Tax planning can be complicated. Consider seeking the assistance of a tax professional to determine what year-end tax planning moves, if any, are right for your individual circumstances.

3 Page 3 of 3 Refer a friend To find out more click here IMPORTANT DISCLOSURES Fee-only financial planning and investment advisory services are offered through George Financial Advisors, a registered investment advisory firm in the state of California. Appointments are available in our offices in Los Gatos, Palo Alto and Scotts Valley. See for more information. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. The receipt of this document shall in no direct or indirect way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any state other than the state of California or where otherwise legally permitted. We are legally empowered to provide investment advisory services to residents of California and certain other states. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP, CERTIFIED FINANCIAL PLANNER and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board s initial and ongoing certification requirements. Copyright 2014 George Financial Advisors LLC All Rights Reserved Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014.

4 Page 1 of 3 George Financial Advisors Ted George, CFP, MSFP Financial Advisor 1414 Soquel Ave, Suite 220 Santa Cruz, CA admin@georgefa.com November 19, 2014 It's November, so by now you should have a good idea of what your taxable income will be for the 2014 tax year. It is time to think about Year End Tax Planning and what you can do to take the sting out of the inevitable tax bill about to come your way. This month's articles and checklist help ensure that nothing will slip through the cracks. A proper asset allocation for your portfolio is very important. It is also important to understand the types of investments you are using to create that asset allocation as different types have different advantages and risks. Our final article(click here to read) discusses various investment choices you might use in creating an asset allocation that is appropriate for your specific situation. If you have any questions on this topic, please let me know. Financial Insights for Living Well - November 2014 Documents in this presentation: Year-End Tax Planning Tax Planning for Income Appropriate Checklists for Year-End Tax Planning Tax Planning for Income What is tax planning for income? Tax planning for income usually involves strategies for minimizing your taxable income. In particular, the timing and the method by which your income is reported become paramount. Effective planning begins with an understanding of the various types of income. Next, you'll want to consider tools for creating tax-free income, methods of sheltering earned income from taxes, strategies to defer taxes (and other tax-advantaged strategies), and vehicles for shifting income and tax. For older taxpayers, it's also useful to know how to minimize taxation of your Social Security benefits. Why is it important for you to understand the concept of income? As a general rule, you are required to pay tax on your income from whatever source derived, unless a statutory exception applies. Therefore, it's important for you to know which items are included and excluded from the IRS's definition of gross income. Additionally, income can be taxed at different rates, depending on whether the income is ordinary or derived from the sale or exchange of certain classes of property held for certain minimum time periods. Because losses can sometimes be used to offset income, it's also important to understand the concept of active versus passive income. Why is it important to know how to generate tax-free income?

5 Page 2 of 3 Although income is usually taxable, there are a number of vehicles that can produce tax-free or nontaxable income. You may be able to enjoy some portion of your income, tax free, by switching some of your investment money to these vehicles. Vehicles to consider include Roth IRAs and tax-exempt bonds. How can you shelter earned income from taxes? Sheltering your earned income involves employing one or more tools to generate losses, deductions or credits that will reduce the current federal tax burden on your earned income. Typically, your desired result is income deferral. Several methods exist to shelter earned income from taxes, including traditional deductible IRAs and employer-sponsored retirement plans. Why should you be aware of strategies to defer taxes? There are several reasons why deferring the taxation of income is generally desirable. First, deferring taxes will provide you with more money right now to fund various financial plans. Moreover, certain qualified retirement plans allow you not only to defer some of your current taxable income, but also let your retirement savings grow tax-free until a distribution is taken. As a general rule, when tax rates are stable, it's wise for you to defer the recognition of as much income as possible to a later year and accelerate deductions. This will allow you to minimize your current income tax liability. As a consequence, you will be able to invest money that would otherwise have been used to pay income taxes, keeping that money working for you. When you eventually recognize the income, it's possible that you'll be in a lower tax bracket. What are some other tax-advantaged strategies? Many other tax-advantaged strategies exist. For instance, you should be aware of tax shelters and tools for creating passive income in order to take advantage of passive losses. Additional strategies that may help you reduce your overall income tax burden include taking advantage of the tax benefits of generating capital gains, investing in real estate, receiving annuitized payments, and engaging in year-end tax planning. How can you shift income and tax to others? Income shifting refers to dividing income among two or more taxpayers in a way that lowers overall taxes. Typically, income is shifted from higher bracket taxpayers to lower ones. If you're interested in income shifting, you should be aware of a number of topics, including the kiddie tax, the tax treatment of below-market and interest-free loans, and the benefits of making gifts of income producing property and employing family members. What about Social Security benefits? If you're an older taxpayer, you should probably be concerned with minimizing the taxation of your Social Security retirement benefits. Certain techniques exist to limit the taxation of such benefits, including filing your income tax return jointly and employing tools to reduce your modified adjusted gross income. Refer a friend To find out more click here IMPORTANT DISCLOSURES Fee-only financial planning and investment advisory services are offered through George Financial Advisors, a registered investment advisory firm in the state of California. Appointments are available in our offices in Los Gatos, Palo Alto and Scotts Valley. See for more information. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. The receipt of this document shall in no direct or indirect way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any state other than the state of California or where otherwise legally permitted. We are legally empowered to provide investment advisory services to residents of California and certain other states. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP, CERTIFIED FINANCIAL PLANNER and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board s initial and ongoing certification requirements.

6 Page 3 of 3 Copyright 2014 George Financial Advisors LLC All Rights Reserved Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014.

7 Page 1 of 3 George Financial Advisors Ted George, CFP, MSFP Financial Advisor 1414 Soquel Ave, Suite 220 Santa Cruz, CA admin@georgefa.com November 19, 2014 It's November, so by now you should have a good idea of what your taxable income will be for the 2014 tax year. It is time to think about Year End Tax Planning and what you can do to take the sting out of the inevitable tax bill about to come your way. This month's articles and checklist help ensure that nothing will slip through the cracks. A proper asset allocation for your portfolio is very important. It is also important to understand the types of investments you are using to create that asset allocation as different types have different advantages and risks. Our final article(click here to read) discusses various investment choices you might use in creating an asset allocation that is appropriate for your specific situation. If you have any questions on this topic, please let me know. Financial Insights for Living Well - November 2014 Documents in this presentation: Year-End Tax Planning Tax Planning for Income Appropriate Checklists for Year-End Tax Planning Appropriate Checklists for Year-End Tax Planning What are appropriate checklists for year-end tax planning? Tax planners often develop checklists to guide taxpayers toward year-end strategies that might help reduce taxes. Typically, suggestions are grouped into several different categories, such as "Filing Status" or "Employee Matters," for ease of reading. When year-end approaches, it might be wise to review each suggestion under the categories that may apply to you. Filing status and exemptions If you're married (or will be married by the end of the year), you should compare the tax liability for yourself and your spouse based on all filing statuses that you might select. Compare the results when you file jointly and when you file married separately. Determine which results in lower overall taxation. Determine whether you're entitled to claim a dependency exemption for a parent or other relative. You will need to have contributed more than half of that individual's support during the year, and other conditions may also apply. If you're claiming a dependency exemption for a child who is 19 or older (age 24 or older if a full-time student), make sure that the child's gross income doesn't exceed $3,950 (for 2014, $3,900 for 2013). If you and several other people financially support someone but none of you individually qualifies to claim the individual as a dependent, you should consider making an agreement with all of the other parties to ensure that at least one of you can claim the individual as a dependent.

8 Page 2 of 3 Family tax planning Determine whether you can shift income to family members who are in lower tax brackets in order to minimize overall taxes. The kiddie tax rules apply to: (1) those under age 18, (2) those age 18 whose earned income doesn't exceed onehalf of their support, and (3) those age 19 to 23 who are full-time students and whose earned income doesn't exceed one-half of their support. Consider making gifts of up to $14,000 per person federal gift tax free under the annual gift tax exclusion. Use assets that are likely to appreciate significantly for optimum income tax savings. Take advantage of tax credits for higher education costs if you're eligible to do so. These may include the American Opportunity (Hope) credit and the Lifetime Learning credit. Note that these credits are based on the tax year rather than the academic year. Therefore, you should try to bunch expenses to maximize the education credits. If you have qualified student loans (and meet all necessary requirements), you may be entitled to take a deduction for the interest you paid during the year. The maximum amount you can deduct is $2,500. Employee matters Self-employed individuals (who generally use the cash method of accounting) can defer income by delaying the billing of clients until next year. You may also be able to defer a bonus until the following year. Use installment sale agreements to spread out any potential capital gains among future taxable periods. Employees can deduct their business expenses as long as these expenses exceed 2 percent of annual adjusted gross income (AGI). Therefore, attempt to bunch as many of these business expenses as possible during the current year in order to maximize the deductions. Business income and expenses Accelerate expenses (such as repair work and the purchase of supplies and equipment) in the current year to lower your tax bill. Increase your employer's withholding of state and federal taxes to help you avoid exposure to estimated tax underpayment penalties. Pay last-quarter taxes before December 31 rather than waiting until January 15. Make sure that you meet the required threshold percentages of your AGI to deduct expenses by "bunching" miscellaneous expenses into the same year. If you have significant business losses this year, it may be possible for you to apply them to the prior year's returns to receive a net operating loss carryback refund. If you had significant income in prior years, you should maximize the current year's losses by deferring income if possible. In certain circumstances, it may be possible for the full cost of last-minute purchases of equipment to be deducted currently by taking advantage of Section 179 deductions. Generally, you are able to make a contribution to your retirement plan at any time up to the due date (plus extensions) for filing a given year's tax return. Financial investments Pay attention to the changes in the capital gains tax rates for individuals and try to sell only assets held for more than 12 months. Consider selling stock if you have capital losses this year that you need to offset with capital gain income. If you plan to sell some of your investments this year, consider selling the investments that produce the smallest gain. Personal residence and other real estate Make your early January mortgage payment (i.e., payment due no later than January 15 of next year) in December so that you can deduct the accrued interest for the current year that is paid in the current year. If you want to sell your principal residence, make sure you qualify to exclude all or part of the capital gain from the sale from federal income tax. If you meet the requirements, you can exclude up to $250,000 ($500,000 for married couples filing jointly). Generally, you can exclude the gain only if you used the home as your principal residence for at least two out of the five years preceding the sale. In addition, you can generally use this exemption only once every two years. However, even if you don't meet these tests, you may still be able to qualify for a reduced exclusion if you meet the relevant conditions. Consider structuring the sale of investment property as an installment sale in order to defer gains to later years. Maximize the tax benefits you derive from your second home by modifying your personal use of the property in accordance with applicable tax guidelines. Retirement contributions Make the maximum deductible contribution to your IRA. Try to avoid premature IRA payouts to avoid the 10 percent early withdrawal penalty (unless you meet an exception). Contribute the full amount to a spousal IRA, if possible. If you

9 Page 3 of 3 meet all of the requirements, you may be able to deduct annual contributions of $5,500 to your traditional IRA and $5,500 to your spouse's IRA. You may be able to contribute and deduct more if you're at least age 50. Set up a retirement plan for yourself, if you are a self-employed taxpayer. Set up an IRA for each of your children who have earned income. Minimize the income tax on Social Security benefits by lowering your income below the applicable threshold. Charitable donations Make a charitable donation (cash or even old clothes) before the end of the year. Remember to keep all of your receipts from the recipient charity. Use appreciated stock rather than cash when contributing to charities. This may help you avoid income tax on the built-in gain in the stock, while at the same time maximizing your charitable deduction. Use a credit card to make contributions in order to ensure that they can be deducted in the current year. Itemized miscellaneous and medical expenses Take advantage of the adoption tax credit for any qualified adoption expenses you paid. In 2014, you may be able to claim up to $13,190 (up from $12,970 in 2013) per eligible child (including children with special needs) as a tax credit. The credit begins to phase out once your modified AGI exceeds $197,880 (up from $194,580 in 2013), and it's completely eliminated when your modified AGI reaches $237,880 (up from $234,580 in 2013). Maximize the use of itemized miscellaneous expenses and/or medical expenses by bunching such expenses in the same year, to the extent possible, in order to meet the threshold percentage of your AGI. Make sure that you have applied for Social Security numbers for all new dependents. Otherwise, the dependency exemption on your income tax return may be disallowed. Refer a friend To find out more click here IMPORTANT DISCLOSURES Fee-only financial planning and investment advisory services are offered through George Financial Advisors, a registered investment advisory firm in the state of California. Appointments are available in our offices in Los Gatos, Palo Alto and Scotts Valley. See for more information. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. The receipt of this document shall in no direct or indirect way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any state other than the state of California or where otherwise legally permitted. We are legally empowered to provide investment advisory services to residents of California and certain other states. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP, CERTIFIED FINANCIAL PLANNER and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board s initial and ongoing certification requirements. Copyright 2014 George Financial Advisors LLC All Rights Reserved Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014.

10 Balancing Your Investment Choices with Asset Allocation Page 1 of 3 About Us Client Login FAQ News Blog Contact Us SANTA CLARA SANTA CRUZ PALO ALTO FINANCIAL PLANNING INVESTMENTS WEALTH MANAGEMENT COMPARE SERVICES GET STARTED Balancing Your Investment Choices with Asset Allocation A chocolate cake. Pasta. A pancake. They re all very different, but they generally involve flour, eggs, and perhaps a liquid. Depending on how much of each ingredient you use, you can get very different outcomes. The same is true of your investments. Balancing a portfolio means combining various types of investments using a recipe that s appropriate for you. Getting an appropriate mix The combination of investments you choose can be as important as your specific investments. The mix of various asset classes, such as stocks, bonds, and cash alternatives, accounts for most of the ups and downs of a portfolio s returns. There s another reason to think about the mix of investments in your portfolio. Each type of investment has specific strengths and weaknesses that enable it to play a specific role in your overall investing strategy. Some investments may be chosen for their growth potential. Others may provide regular income. Still others may offer safety or simply serve as a temporary place to park your money. And some investments even try to fill more than one role. Because you probably have multiple needs and desires, you need some combination of investment types. Balancing how much of each you should include is one of your most important tasks as an investor. That balance between growth, income, and safety is called your asset allocation, and it can help you manage the level and type of risks you face. About George Financial Advisors ABOUT US ABOUT TED GEORGE OUR APPROACH AFFILIATIONS About Ted George My work as a financial planner is very rewarding. As a financial consultant serving Santa Cruz, Scotts Valley, Santa Clara, and Palo Alto communities, I can make a difference in an area that matters the most: your financial wellbeing. Whether your financial needs are large or small, I am honored to be able to help you to Be Prepared and Live Well. Read More Balancing risk and return Ideally, you should strive for an overall combination of investments that minimizes the risk you take in trying to achieve a targeted rate of return. This often means balancing more conservative investments against others that are designed to provide a higher return but that also involve more risk. For example, let s say you want to get a 7.5% return on your money. Your financial professional tells you that in the past, stock market returns have averaged about 10% annually, and bonds roughly 5%. One way to try to achieve your 7.5% return would be by choosing a mix of stocks and bonds. It might not work out that way, of course. This is only a hypothetical illustration, not a real portfolio, and there s no guarantee that either stocks or bonds will perform as they have in the past. But asset allocation gives you a place to start. Someone living on a fixed income, whose priority is having a regular stream of money coming in, will probably need a very different asset allocation than a young, well-to-do working professional whose priority is saving for a retirement that s 30 years away. Many publications feature model investment portfolios that recommend generic asset allocations based on an investor s age. These can help jump-start your thinking about how to divide up your investments. However, because they re based on averages and hypothetical situations, they shouldn t be seen as definitive. Your asset allocation is or should be as unique as you are. Even if two people are the same age and have similar incomes, they may have very different needs and goals. You should make sure your asset allocation is tailored to your individual circumstances.

11 Balancing Your Investment Choices with Asset Allocation Page 2 of 3 Many ways to diversify When financial professionals refer to asset allocation, they re usually talking about overall classes: stocks, bonds, and cash or cash alternatives. However, there are others that also can be used to complement the major asset classes once you ve got those basics covered. They include real estate and alternative investments such as hedge funds, private equity, metals, or collectibles. Because their returns don t necessarily correlate closely with returns from major asset classes, they can provide additional diversification and balance in a portfolio. Even within an asset class, consider how your assets are allocated. For example, if you re investing in stocks, you could allocate a certain amount to large-cap stocks and a different percentage to stocks of smaller companies. Or you might allocate based on geography, putting some money in U.S. stocks and some in foreign companies. Bond investments might be allocated by various maturities, with some money in bonds that mature quickly and some in longer-term bonds. Or you might favor tax-free bonds over taxable ones, depending on your tax status and the type of account in which the bonds are held. Asset allocation strategies There are various approaches to calculating an asset allocation that makes sense for you. The most popular approach is to look at what you re investing for and how long you have to reach each goal. Those goals get balanced against your need for money to live on. The more secure your immediate income and the longer you have to pursue your investing goals, the more aggressively you might be able to invest for them. Your asset allocation might have a greater percentage of stocks than either bonds or cash, for example. Or you might be in the opposite situation. If you re stretched financially and would have to tap your investments in an emergency, you ll need to balance that fact against your longer-term goals. In addition to establishing an emergency fund, you may need to invest more conservatively than you might otherwise want to. Some investors believe in shifting their assets among asset classes based on which types of investments they expect will do well or poorly in the near term. However, this approach, called market timing, is extremely difficult even for experienced investors. If you re determined to try this, you should probably get some expert advice and recognize that no one really knows where markets are headed. Some people try to match market returns with an overall core strategy for most of their portfolio. They then put a smaller portion in very targeted investments that may behave very differently from those in the core and provide greater overall diversification. These often are asset classes that an investor thinks could benefit from more active management. Just as you allocate your assets in an overall portfolio, you can also allocate assets for a specific goal. For example, you might have one asset allocation for retirement savings and another for college tuition bills. A retired professional with a conservative overall portfolio might still be comfortable investing more aggressively with money intended to be a grandchild s inheritance. Someone who has taken the risk of starting a business might decide to be more conservative with his or her personal portfolio. Things to think about Don t forget about the impact of inflation on your savings. As time goes by, your money will probably buy less and less unless your portfolio at least keeps pace with the inflation rate. Even if you think of yourself as a conservative investor, your asset allocation should take long-term inflation into account. Your asset allocation should balance your financial goals with your emotional needs. If the way your money is invested keeps you awake worrying at night, you may need to rethink your investing goals and whether the strategy you re pursuing is worth the lost sleep. Your tax status might affect your asset allocation, though your decisions shouldn t be based solely on tax concerns.

12 Balancing Your Investment Choices with Asset Allocation Page 3 of 3 Even if your asset allocation was right for you when you chose it, it may not be appropriate for you now. It should change as your circumstances do and as new ways to invest are introduced. A piece of clothing you wore 10 years ago may not fit now; you just might need to update your asset allocation, too Copyright 2014 George Financial Advisors LLC All Rights Reserved Content Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014 About George FA Quick Links Financial Reports Our Locations ABOUT US FAQ TAX RELIEF ACT OF Coleman Ave., Suite F21 ABOUT TED GEORGE TOOLS & RESOURCES ASSET PROTECTION Santa Clara, CA OUR APPROACH SITEMAP EXCHANGE-TRADED FUNDS P: F: AFFILIATIONS THE BIG PICTURE 1414 Soquel Ave., Suite 220 Santa Cruz, CA P: F: E. Bayshore Road, Suite 200 Palo Alto, CA P: F: Copyright 2014 George Financial Advisors Website Designed by Foxxr, Inc. George Financial Advisors is a California Registered Investment Adviser. See Disclosures. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP, CERTIFIED FINANCIAL PLANNER and CFP in the U.S.