Balancing Financial Priorities As You Start Your Career – Q&A with Chuck Porter

As we meet and work with people in all stages of life, some common questions come up again and again. Canon Capital Wealth Management Senior Investment Advisor Chuck Porter addresses the balance of financial priorities when you’re starting out in your career.

Question: “My husband and I are in our late 20’s.  We would like to be able to put money towards our retirement, but we just can’t afford it!  How do other people make ends meet and save money to retire?” 

Gone are the days of guaranteed pensions, stable social security, and retirement healthcare coverage. Today’s retirees are facing tough decisions and even tougher realities, and young professionals are watching. Seeing the prior generation work later in life, live longer, and the deterioration of Social Security benefits has many people of your generation thinking ahead. 401(k)s are taking over as the most popular method of employer-sponsored retirement saving. People are forced to budget their own retirement savings and make sound investment decisions. Many are not properly educated in the area of personal finance when they are required to start making these choices; sadly, this leads to bad financial decisions and will continue to be a concern for future generations.

Many people fear that they will have no spending money if they start putting money towards retirement and delay saving in favor of short-term needs. In reality, one percent of your pay pre-tax is usually the difference of one or two coffees in a month. The benefit you receive if your employer offers a match is worth far more. What many people consider to be a ‘small’ company match will generate tens of thousands of dollars in retirement earnings over time. If you do not contribute enough to earn the full company match, you are leaving free money on the table.

If you are hesitant about contributing, start out small. Begin by maximizing the employer match from the day you are eligible. A general rule of thumb is to increase your contribution with every raise that you earn, so even if you receive a small raise, bump up your contribution in proportion.  It is much harder to save more when you’ve gotten used to spending that extra cash. Make the most of your savings by creating a mixed portfolio appropriate to your age and time until retirement, and if you have questions, seek help from a financial professional. An advisor can also assist you if you are self-employed or if your employer does not offer a match or a retirement plan.

After you have started saving through your company retirement plan, look at your income and spending habits. Cash management is crucial to making ends meet: a realistic budget could help solve a lot of social and economic problems. While it can seem overwhelming, the principles are the same no matter your income level.

  1. Debt
    Chances are that you and/or your partner have some form of debt. Start by organizing it all and make sure you understand the terms. Use a spreadsheet, debt reduction calculator, or work with a financial professional to compare different payoff scenarios. Often, paying off high-interest debt like credit cards can save you hundreds of dollars. Paying off low balances first lends you more money each month to ‘snowball’ into the next piece. Whatever method works best for you, resist the temptation to stop retirement savings. Even 1 or 2% going into your 401(k) throughout the years of debt reduction can make a major difference long term. Try not to take on new debt – if you can’t afford it now, don’t assume you will be able to later.
  2. Buffer
    Make sure you leave money for living expenses. Your outgoing loan payments should not exceed 40% of total income. Expect something unexpected to happen and try to keep three to six months’ worth of expenses available for an emergency so that you are not taking on new debt to cover it. One major word of caution; don’t lie on applications so that you can “afford” a bigger mortgage or newer car.  While it is harder to get away with nowadays, stretching for larger loans forced millions of Americans into foreclosure during the Great Recession. To build up this buffer, set up a consistent amount monthly that you are saving, and try to add to it with irregular income like bonuses. It may be 5-10% of income, or just $25-50 a month. Either way, create the habit.
  3. Spending
    I encourage new couples to individually keep track of all their purchases in a small notebook for one month and review it together. There are multiple apps that can assist with this too, if you are open to it. My wife and I did this when we were first married, and it was amazing to see where our money was really going.  What we soon found was that we were thinking at the register and we quickly began making less frivolous decisions and had more money to save. You can also look back over the past 3-6 months of transactions in your accounts. Be very realistic with your budget; don’t say that you will only spend $20 on hair products if you have consistently been spending $50.
  4. Fixed vs. Variable Expenses
    Start your list with fixed expenses, like rent and debt. Try to round up debt payments by $5, $10, $50 dollars if possible; even a little extra adds up. After you cover your fixed expenses, break up your variable costs into categories that reflect your lifestyle. Do you want to track spending at coffee shops, restaurants, dessert, and markets individually? Or is one ‘dining’ category okay? Finally, be sure to set aside some money each month to go towards irregular expenses. You know you will have to spend money on your car, health, or home, but it’s rarely in the form of an even $25 a month. Be prepared for big bills by setting up an intermediate bucket to cover those costs – without hitting the emergency fund.
  5. Reward
    You should reward yourself for good habits! Set a goal that when you pay off a debt, you will use that $200 for a nice dinner the next month before moving on to the next one. Reach an emergency savings goal? Use a weekend to stay-cation and imagine what your next savings goal will be – maybe a vacation or car fund? Once you hit a few milestones, you will feel more in control.

It may be tempting to stop saving and pay off debt or ignore the debt until you reach a savings goal. Make sure you keep all the pieces going, even if it is slowly. By applying these principles, you are on your way to financial independence. As your income grows and your obligations shrink, you will be able to shift how much is going to each item. In  10 years, you could be putting 10-15% into retirement and have healthy savings, while feeling in control of your spending.

Chuck Porter Jr.Chuck has been with Canon Capital since 2006 and was admitted to the company as a unitholder (owner) in 2018. He is a Senior Investment Advisor specializing in serving high-net-worth individuals and families. Chuck graduated from Widener University where he majored in Economics with an emphasis in Personal Financial Service. He has a Certificate in Financial Management for the Family Office from Pepperdine University’s Graziadio School of Business and Management and he is an Accredited Investment Fiduciary.

This article is designed for general information only. The information presented should not be construed to be formal advice nor the formation of a client relationship.

Canon Capital is Co-working in Lancaster, PA!

You are likely aware by now that earlier this year Canon Capital combined offices to our new location in Harleysville, PA. But did you know that we have a satellite location in Lancaster, PA? Wealth Management has expanded to a co-working space called The Candy Factory, where full-time Investment Advisor, Marissa Illingworth, works. She shares her co-working experience in this blog post.

What is co-working?

For those who might not know, co-working is a community of professionals who all share space while working independently. The Candy Factory is comprised of a half-city-block compound offering conference rooms, video call booths, an event space, shared workspaces, a media production room, and private offices. Members also share and collaborate at lunch-and-learns, networking events, social clubs, and professional development services. No, there is no candy onsite; the name comes from the original building, a historic candy factory in downtown Lancaster.

What is the benefit?

It is hard to pick just one single benefit. I have truly felt inspired by the community and remain excited to enter the space daily. The unique aspect is working alongside other professionals who are not traditional co-workers. Instead of going through the same things, or perhaps having competition, you can really engage across fields and learn and share with each other. It is very cool to see so many people doing what they love. It also provides me with opportunities to socialize and expand our network.

How do you keep up?

My passion is truly for technology in business solutions, so working remotely does not hinder me. My entire office fits into one backpack – a laptop, portable second screen, mouse, headphones, and business cards. I can turn on a hotspot and work anywhere – from a train, airport, or car! In the co-working space, I do have a desk with monitors, and I do keep a printer at home. I find it exciting to keep my digital desk organized. With cloud storage and electronic communication tools, I am constantly in touch with clients and coworkers.

While it isn’t for everyone, I think more and more industries will move to remote/flexible work environments. With a little routine (and a great space to focus), it is very sustainable. When I am working, I am entirely focused, and when I’m not, I don’t have to worry about a long commute or bad weather. I believe it makes me more productive and more available.

What do you think about co-working? Could your business or industry work that way? If you have any questions, I’m always happy to chat!

Canon Capital Wealth Management Named Ascensus Signature Elite Advisor

We are honored to announce that Canon Capital Wealth Management’s investment advisory team has been named a Signature Elite Advisor in the Ascensus Elite Advisor program for 2019. The Elite Advisor program is an exclusive experience provided to financial advisors with demonstrated, results-oriented experience in the retirement industry.

“As a Signature Elite advisor, our clients will benefit from dedicated access to the Ascensus award-winning retirement plan service team,” states Patty Webb, Canon Capital partner, and Director of Wealth Management Services. “I’m proud that we have been recognized by an organization that helps millions of Americans make the dream of a stress-free retirement a reality, and I look forward to our continued partnership in serving the retirement planning needs of local small business owners and their employees.”

Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most: retirement, education, and healthcare. Ascensus partners closely with financial advisors across the nation to ensure that business owners and their employees have the technology and guidance they need to invest for their future retirement.

“We truly value our relationships with these key partners and remain committed to giving them the attention and dedication they deserve,” states Jason Crane, head of retirement sales at Ascensus. “As a result, we want to recognize Canon Capital Wealth Management’s achievement as an outstanding financial advisor with a higher level of service, attention, and opportunity.”

Here at Canon Capital, our Wealth Management investment advisors take the time to learn about your unique financial and investment needs. We then develop a comprehensive service plan that acutely reflects those needs. Our combination of process, service, and client communication provides you with clear expectations and the confidence of knowing that in us, you have a trusted advisor.

For more information on how we might be of service, please contact us or call 215-723-4881.

Tax Cuts and Jobs Act: Opportunities for Tax Beneficial Wealth and Retirement Planning

We continue our blog series recapping our recent presentation on the new tax laws to the Indian Valley Chamber of Commerce. This blog discusses opportunities for tax beneficial wealth and retirement planning.

Tax years 2018 to 2025 (the year many of the changes within the Tax Cuts and Jobs Act are set to expire) brings many changes in the status quo to the individual taxpayer, including:

  • Brackets expanded and tax rates are lowered
  • Capital Gains tax rate changes
  • Standard Deduction increase
  • State and Local Tax limitation (capped at $10,000)
  • Mortgage Interest Deduction limitations (Home Equity interest no longer deductible)
  • Elimination of miscellaneous Itemized Deductions
  • Suspension of Personal Exemptions
  • Child Tax Credit expanded
  • Significant impact on AMT

At first glance, the lowering of the overall tax rate and the increase in the standard deduction looks like good news to most taxpayers. However, not necessarily so when placed alongside the loss of personal exemptions, miscellaneous itemized deductions, home equity interested deductions, and the rest of the negative impact items listed above.

These changes do present four opportunities to create long-term strategies to help build wealth as well as plan for retirement:

“Play” the Tax Brackets and Standard Deduction

For 2018, the standard deduction is now $24,000. If you’re over 65, it is $26,600. One avenue to get the most out of this scenario is to stagger the taxable year of deduction timing given this higher standard deduction.

Let’s look at charitable giving. In years past, your donations would be included amongst your itemized deductions. Now, you might consider frontloading your giving at a higher amount into a Donor Advised Fund. So, if you normally donate $5,000 each year, consider placing $25,000 now into a Donor Advised Fund – this places you above the $24,000 threshold of the standard deduction. Then, over the course of five years, give the annual gift of $5,000 from that Donor Advised Fund. This allows you to get the full advantage of the standard deduction in one tax year, followed by several tax years of maximizing itemized deductions.

Portfolio Rebalancing / Tax Loss Harvesting / Capital Gain Harvesting

Take advantage of stock market downturns and volatility by rebalancing to a formal investment allocation. The more volatile things are, the better the portfolio rebalancing works. Studies show a .75% higher return when rebalancing to a formal investment allocation.

Tax loss harvesting comes into play when the market goes down, allowing you to generate a tax loss. You can still reinvest in a similar fund and enjoy the benefits of that investment.

With historically low Capital Gains rates, take advantage of a zero tax rate Capital Gains situation. It might be an ideal time to sell certain assets, pay zero tax, and reinvest.

Dynamic Asset Location Optimization

Where are you placing your wealth as you go through life?

  • Tax Deferred: IRA, 401(k), 403(b)
  • Taxable: Investment Accounts, Bank Accounts
  • Tax Free: Roth IRA, Roth 401(k)

And, when you retire, from where will you draw this wealth? Think about an asset allocation mix between these three wealth locations.

Roth 401k & IRA

Use this 2018-2025 window of low tax rates to your advantage, with a tax-free Roth 401(k) or IRA. Consider converting 100% of your IRA to a Roth account to allow for “back door” (long-term) Roth IRA contributions in the future or convert smaller amounts over several years.

If you have any questions or concerns about these changes, please call us at 215-723-4881. You may also consult our free online 2018-19 Tax Planning, which can be found here.

To view the portions of his seminar that were broadcast via Facebook Live, please visit our Facebook page.

Team Canon Capital Participates in the Indian Creek Foundation 2018 Roll, Stroll & Run

On Saturday, June 16, 2018, Team Canon Capital joined the many participants in Indian Creek Foundation’s annual Roll, Stroll & Run, an event including opportunities to raise funds by running, walking, or cycling.

Canon Capital Payroll processer/tax preparer Linda Covel brought some family members along for the 5K walk while Canon Capital Wealth Management project coordinator, Brian Erkes, his wife, Janice, and son, Frank, ran in the timed 5K portion of the event, where they placed within the top 15 participants.

In addition to sending a team, we served as the event’s Volunteer Shirt Sponsor.

We are proud to support the efforts of Indian Creek Foundation, whose mission is “to provide opportunities for people with intellectual and developmental disabilities to live in and enrich the community throughout their lives.”

We’ll Soon be One Source, Many Services, the Right Decision — All Under One Roof at our New Harleysville Location

We are excited to inform you that later this year, we are looking forward to moving from our Souderton and Hatfield offices to combine under one roof at our newly-acquired Harleysville location.

We’ll keep you posted on our progress with the building renovations as we work to make it our own before settling in. Until then, we are happy to continue to serve you at our Souderton and Hatfield locations.

One Source. Many Services. The Right Decision. This is our motto, which we strive to embody each and every day as our four business units work to serve your Accounting, Computer Solutions, Payroll, and Wealth Management needs.

Personal Wealth Opportunities Under the New Tax Laws: A Canon Capital Wealth Management Financial Literacy Seminar

Many are wondering how the new tax laws will affect them in the short and long-term. Our Wealth Management unit dedicated the first Financial Literacy seminar of the year to the topic, with our managing director of Wealth Management, Dr. Peter Roland, providing an overview of what to expect and how best to prepare.

In addition to the overview we’ll present in this blog post, you may view the full webinar here. You may download the presentation to follow along, take notes, and note any questions.

The official name for the bill that passed in December 2017 is “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.” Not very catchy, Congress has dubbed it the “Tax Cuts and Jobs Act.” No matter the name, what this bill was designed to do is lower general tax rates, while also making changes to the deductions and exemptions many have grown accustomed to. With that, this bill creates “winners,” “losers,” and considerations and opportunities for both short and long-term wealth management.

Changes in Tax Rates and Deductions/Exemptions

With this new plan, individual tax rates have dropped, meaning many are seeing more money in their paychecks. At the same time, the standard deduction amounts have nearly doubled. However, this can lead to an issue at tax time for taxpayers with large itemized deductions and personal exemptions. Their tax liability may go up even though the rate at which they are being taxed is lower. To make sure you’re not headed for a surprise when your 2018 taxes are being prepared, do what we call a “Paycheck Check-up”. Use the withholding calculator provided by the IRS to make sure enough money is being withheld from your pay.

Among the changes in itemized deductions in the Tax Cuts and Jobs Act:

  • Medical expenses for 2018 and 2019 are now deductible in excess of 7.5% of adjusted gross income (AGI). Before it was in excess of 10% of your AGI.
  • Deduction for State, Local, and Real Estate taxes (SALT) is limited to $10,000.
  • Deduction for Mortgage Interest Qualified Acquisition Debt reduced from $1,000,000 to $750,000 for first or one second home.
  • Home Equity Loans other than the amount used to acquire or improve the home are no longer deductible.
  • Charitable contributions can now offset 60% of AGI (was 50%).
  • Casualty losses eliminated except for federally-declared disaster areas.
  • Miscellaneous Itemized Deductions eliminated (unreimbursed employee business expenses, investment fees, tax prep fees).
  • Personal Exemptions have been eliminated (was $4,050 per Exemption in 2017).
  • Higher exemptions for Alternative Minimum Tax.
  • Alimony is not taxable by recipient (or deductible by payor) for new agreements after 12/31/2018.
  • Homeowners gain exclusion ($250,000/$500,000) now requires that the homeowner must live in the residence five of the prior eight years as opposed to two of the prior five years.

This new law has also affected credits and deductions related to child care and college savings:

  • Child Care Credit increased from $1,000 to $2,000.
  • Section 529 Education Plans allowed to distribute up to $10,000 for elementary, secondary, and certain home school expenses.
  • Investment income of child now taxed at higher trust tax rates vs. individual tax rates.

Estate & Gift Taxation as changed as follows:

  • Federal exemption of estate tax is now $11.2 million per person (to be adjusted for inflation).
  • Higher Annual Gift Tax exemption amount of $15,000 (raised from $14,000).

Business owners will see a reduction in tax rates as well:

  • Regular “C” Corporation: highest tax rate reduced from 35% to 21%
  • Higher Section 179 depreciation deduction limits
  • New deductions for 20% of qualified business net income from passthrough entities (S Corporations, Partnerships, LLC’s, Sole Proprietorships).
  • Income limits for 20% benefit – $157,500 and $315,000 taxpayer income.
  • 20% deduction of income from REIT dividends, Master Limited Partnership dividends, and Co-ops.
  • Real Estate now counts as a qualified business.

Truc Alert

A “Truc” is not some advanced financial term. It’s the word our local Pennsylvania Dutch use for “trick.” Under this new tax law, even though for many the tax rate will go down, the amount of tax owed will increase. In addition:

  • These reduced tax rates and standard deduction changes for individuals will sunset, aka disappear, in 2025.
  • Those beneficial provisions will be disappearing on a now-expanded income base.
  • The new IRS inflation factor calculation for brackets modified are now using “Chained CPI,” resulting in higher taxes over time as a result of “taxflation.”

Strategies

How can you make the best of the advantages and disadvantages of this new tax law? In addition to the “Paycheck Check-up” we recommended earlier, you might also consider:

  • Take advantage of “Tax Arbitrage” when possible.
  • Use donor-advised funds to “bunch” charitable contributions, using appreciated assets when possible.
  • Look at your “bucket list,” the funds you choose to be taxed now, taxed later, and never taxed (i.e., Roth IRA).
  • Review Roth IRA opportunities
  • Consider real estate investments to enjoy the 20% deduction of net income from investment real estate activity. This is especially key as many will opt to rent over buying a home with the loss of the itemized deduction benefit.
  • Evaluate your personal debt and consider paying off non-deductible home equity loans more quickly that are no longer subject to interest deductibility.
  • Plan for and use the 20% deduction against “Qualified Business Income” and evaluate your business structure for new rules.
  • Make optimal use of “portability” election in estates to maximize the exemption available to surviving spouse, not forgetting about step up in tax basis for assets flowing through estates. Also consider State inheritance taxes in your planning.

We’ve included a lot of information in this blog post. Take about 45 minutes of your time, watch the webinar, and please let us know if we can help with any questions you might have regarding this or any other financial services matter. Contact us online or call 215-723-4881.

Canon Capital Wealth Management Names Senior Investment Advisor Chuck Porter, Jr. to the Firm as Unitholder

We are proud to announce the admission of senior investment advisor Chuck Porter, Jr. to the firm as a unitholder. Porter serves as a Senior Investment Advisor specializing in serving high-net-worth individuals and families.

Porter, who joined Canon Capital Wealth Management in 2006, earned his degree in Economics with an emphasis in Personal Financial Service from Widener University.  An Accredited Investment Fiduciary, Porter has also earned a Certificate in Financial Management for the Family Office from Pepperdine University’s Graziadio School of Business and Management.

“Chuck has a proven track record of client service,” said Dr. Peter Roland, managing director of Canon Capital Wealth Management and one of the founders of Canon Capital Management Group. “He exemplifies our values of acting as a trusted advisor, taking the time to learn about the needs of our clients and then developing a comprehensive service plan that acutely reflects those needs. We are pleased to welcome him as a fellow unitholder.”

Part of Porter’s success is his commitment to the community, where he makes the time to coach Souderton Area Youth Football (SAYFA), Souderton-Harleysville Youth Basketball Association (SHYBA), and baseball; as well as serve as a member of the Calvary Church Count Team.

“When I joined Canon Capital eleven years ago, I knew that this was a special company. The leadership team genuinely cares about their employees, and there is a firmwide commitment to serve our clients well and put their interests first,” said Porter. “I am extremely humbled by and grateful for this unitholder designation and the opportunity to contribute to the Canon Capital legacy of willingly investing in the things that matter. When I think about how many lives Canon Capital has touched since its founding thirty years ago, I can’t help but smile in knowing that I might be able to help carry that torch for the next thirty years.”

Canon Capital Wealth Management is a business unit of Canon Capital Management Group, celebrating 30 years of providing a single source of financial and business services.

Canon Capital in the Community

 

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Indian Creek Foundation 2015 Roll and Stroll

Our very own Amanda Spengler, CPA, joined 500 other participants on June 20, 2015 in the 24th Annual Indian Creek Foundation Roll & Stroll, a bike/run/walk event. The largest of Indian Creek Foundation’s fundraisers, the proceeds help further their mission of providing services for children and adults with intellectual and developmental disabilities. Thanks for representing Canon Capital, Amanda!

 

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Matthew Witter Named to Board of Pregnancy Resource Clinic of North Penn

Matthew Witter, an Investment Advisor in our Wealth Management unit, recently joined the board of the Pregnancy Resource Clinic of North Penn.