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Income Solutions WealthManangementLance A. Browning, RICPSr.
Vice President/Founding Partner3200 Troup Hwy, Suite 150Tyler, TX
75701903-787-8916lance@incomesolutionstx.comwww.lancebrowning.com
June 2015It's Complicated: Money and HappinessPlanned Charitable
GivingMillennials vs. Boomers: How Wide Isthe Gap?How important are
dividends in the S&P500's total returns?
June 2015It's Complicated: Money and Happiness
See disclaimer on final page
Does more wealthlead to morehappiness?Researchers havetackled
this questionfor decades, andalthough the resultshave differed,
onefact is certain: Therelationship betweenmoney and
happiness--or "well-being," as manyresearchers put it--is
complicated.Think before you spendIn their book, Happy Money: The
Science ofSmarter Spending, Professors Elizabeth Dunnand Michael
Norton summarize their own andothers' research. What they found is
that it's notnecessarily how much you make that matters tooverall
happiness (although that certainlycontributes), but what you do
with your money.They boiled down the findings to five
"keyprinciples of happy money."1. Buy Experiences. Investing in
memoriescan result in a more sustained level ofhappiness than
buying a bigger house, a moreluxurious car, or other material
goods. Buyingthe latest technological gadget might elicit thekind
of joy of a child experiences opening anew toy on the holidays, but
just like that newtoy, the gadget loses its novelty with
time--aprinciple psychologists refer to as "hedonicadaptation." On
the other hand,experiences--even those that are fleeting ormay
initially provoke trepidation, such as hanggliding--create memories
that help fosterprolonged contentment.2. Make It a Treat. While
you're investing inthose experiences, be sure to spread them outso
they don't become expectations or habits. Inthis way, the novelty
of each new experiencewill be fully realized. As the book
says,"Abundance is the enemy of appreciation." Thisis also true
with something as simple as acappuccino. If you make it a daily
ritual, itbecomes a habit. If you instead substitute yourdaily
coffee once a week with a froth-coveredtreat, then it becomes a
reward to savor.
3. Buy Time. According to Dunn and Norton,individuals should ask
themselves the question,"How will this purchase change the way I
usemy time?" For example, will it allow you tospend more time with
your friends or family, orcreate more "to-dos" to clog your list?
Will itfree you up to participate in more activities youenjoy?
Investing in products or services thatallow you to spend time on
the things you lovewill lead to greater overall well-being. And,
saythe authors, don't fall into the trap of putting adollar value
on your time, as this leads toincreased stress levels. "Simply
feeling likeyour time is valuable can make it seem scarce."4. Pay
Now, Consume Later. Paying for atreat or experience up front, such
as eventtickets you buy months in advance, allows youto benefit
from the extended pleasure of eageranticipation. With all due
respect to Tom Petty,the waiting, it seems, may be the best
part.Conversely, credit cards can be a dangerous,albeit convenient,
financial tool, facilitating a"consume now, pay later" dynamic. One
studycited in Happy Money found that all 30 peoplesurveyed
underestimated their monthlycredit-card bills by a sizable average
of nearly30%.5. Invest in Others. Regardless of
yourcircumstances--wealthy or not, young orold--research finds that
spending money onothers leads to greater happiness thanspending on
oneself.The danger zonesWhile some experts differ on whether
higherincomes result in greater levels of happiness,they tend to
agree on the following: Increasingdebt levels are detrimental to
happiness, andkeeping up with the Joneses can lead to ageneral
sense of dissatisfaction. Instead,actively managing debt while
finding ways toappreciate what you already have on aday-to-day
basis may help you makewell-thought-out saving and spending
choicesthat support your overall level of well-being.
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Planned Charitable GivingToday more than ever, charitable
institutionsstand to benefit as the first wave of babyboomers reach
the stage where they're able tomake significant charitable gifts.
If you're likemany Americans, you too may have considereddonating
to charity. And though writing a checkat year-end is one of the
most common ways togive to charity, planned giving may be evenmore
effective.What is planned giving?Planned giving is the process of
thinkingstrategically about charitable giving to maximizethe
personal, financial, and tax benefits of yourgifts. For example,
you may need to receiveincome in exchange for the assets you
donate,or you may want to be involved in deciding howyour gift is
spent--things that typically can't bedone with standard checkbook
giving.Questions to considerTo help you start thinking about your
charitableplan, consider these questions: Which charities do you
want to benefit? What kind of property do you want to donate
(e.g., cash, stocks, real estate, lifeinsurance)?
Do you want the gift to take effect during yourlife or at your
death?
Do you want to retain an interest in theproperty you donate?
Do you want to be involved in deciding howyour gift is
spent?
Gifting strategiesThere are many ways to donate to charity,
froma simple outright cash gift to a complex trustarrangement. Each
option has strengths andtradeoffs, so it's a good idea to consider
whichstrategy is best for you. Here are somecommon options:Outright
gift. An outright gift is an immediategift for the charity's
benefit only. It can be madeduring your life or at your death via
your will orother estate planning document. Examples ofproperty you
can gift are cash, securities, realestate, life insurance proceeds,
art, collectibles,or other property.Charitable trust. A charitable
trust lets yousplit a gift between a charitable and anoncharitable
beneficiary, allowing you tointegrate financial needs with
philanthropicdesires. The two main types are a charitableremainder
trust and a charitable lead trust. Atypical charitable remainder
trust provides anannuity or unitrust interest for one or twopersons
for life. An annuity interest providesfixed payments, while a
unitrust interest
provides for payments of a fixed percentage oftrust assets
(valued annually). At the end of thetrust term, assets remaining in
the trust pass tothe charity. This can be an attractive strategyfor
older individuals who seek income. Thereare a few other variations
of the charitableremainder trust, depending on how the incomestream
is calculated. With a charitable leadtrust, the order is reversed;
the charity gets thefirst, or lead unitrust or annuity interest,
and thenoncharitable beneficiary receives theremainder interest at
the end of the trust term.Charitable gift annuity. A charitable
giftannuity provides a fixed annuity for one or twopersons for
life. It's easier to establish than acharitable remainder trust
because it doesn'trequire a formal trust document.Private
foundation. A private foundation is aseparate legal entity you
create that makesgrants to public charities. You and your
familymembers, with the help of professionaladvisors, run the
foundation--you determinehow assets are invested and how grants
aremade. But in doing so, you're obliged to followthe many rules
and regulations governingprivate foundations.Donor-advised fund.
Similar to but lessburdensome than a private foundation,
adonor-advised fund is an account held by acharity to which you can
transfer assets. Youcan then advise, but not direct, how your
assetswill be invested and how grants will be made.Tax
benefitsCharitable giving can provide you with greatpersonal
satisfaction. But let's face it, the taxbenefits are valuable, too.
Your gift can result ina substantial income tax deduction in the
yearyou make the donation, and it may also reducecapital gains and
estate taxes. With a charitableremainder trust, you generally
receive anup-front income tax deduction equal to theestimated
present value of the interest that willeventually go to
charity.Charitable contribution deductions are generallylimited to
50% of your adjusted gross income(AGI), or 30% or 20% of AGI
depending on thetype of charity and the property donated.Disallowed
amounts can generally be carriedover and deducted in the following
five years,subject to the percentage limits in those years.Your
overall itemized deductions may also belimited based on the amount
of your AGI.The charity must be a qualified public charity inorder
for you to enjoy these tax benefits. Not alltax-exempt charities
are qualified charities fortax purposes. To verify a charity's
status, checkIRS Publication 78, or visit www.irs.gov.
Planned giving is theprocess of thinkingstrategically
aboutcharitable giving tomaximize the personal,financial, and tax
benefits ofyour gifts.
There may be costs andexpenses associated withtrusts, private
foundations,and donor-advised funds.Income from charitabletrusts
and charitable giftannuities is not guaranteed.
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Millennials vs. Boomers: How Wide Is the Gap?Texting versus
email (or even snail mail). AngryBirds versus Monopoly. "The Theory
ofEverything" versus "The Sound of Music.""Dancing with the Stars"
versus "AmericanBandstand."It's no secret that there are a lot of
differencesbetween baby boomers, born between1946-1964, and
millennials, who were generallyborn after 1980 (though there is
disagreementover the precise time frame for millennials). Butwhen
it comes to finances, there may not be asmuch difference in some
areas as you mightexpect. See if you can guess which generationis
more likely to have made the followingstatements.Boomer or
millennial?1) I have enough money to lead the life I want,or
believe I will in the future.2) My high school degree has increased
mypotential earning power.3) I rely on my checking account to pay
for myday-to-day purchases.4) I consider myself a conservative
investor.5) Generally speaking, most people can betrusted.6) I'm
worried that I won't be able to pay off thedebts that I owe.The
answers1) Millennials. According to a 2014 survey bythe Pew
Research Center, millennials weremore optimistic about their
finances than anyother generational cohort, including babyboomers.
Roughly 85% of millennials said theyeither currently had enough to
meet theirfinancial needs or expected to be able to livethe lives
they want in the future; that'ssubstantially higher than the 60% of
boomerswho said the same thing. Although a higherpercentage of
boomers--45%--said theycurrently have enough to meet their needs,
only32% of millennials felt they had enough moneyright now, though
another 53% were hopefulabout their financial futures.
Source:"Millennials in Adulthood," Pew ResearchCenter, 20142)
Boomers. The ability of a high schooleducation to provide an income
has droppedsince the boomers' last senior prom, while acollege
education has never been morevaluable. In 1979, the typical high
schoolgraduate's earnings were 77% of a collegegraduate's; in 2013,
millennials with a highschool diploma earned only 62% of what
acollege graduate did. And 22% of millennialswith only a high
school degree were living in
poverty in 2013; back in 1979, the figure forboomers at that age
was 7%. Source: "TheRising Cost of Not Going to College,"
PewResearch Center, 20143) Boomers. Not surprisingly, millennials
are farmore likely than boomers to use alternativepayment methods
for day-to-day expenses. Astudy by the FINRA Investor
EducationFoundation found that millennials are almosttwice as
likely as boomers to use prepaid debitcards (31% compared to 16% of
boomers).They're also more than six times as likely to usemobile
payment methods such as Apple Pay orGoogle Wallet; 13% of
milliennials reportedusing mobile methods, while only 2% ofboomers
had done so. Source: "The FinancialCapability of Young Adults--A
GenerationalView," FINRA Foundation Financial CapabilityInsights,
FINRA Investor Education Foundation,20144) Millennials. You might
think that withthousands of baby boomers retiring every day,the
boomers might be the cautious ones. But inone survey of U.S.
investors, only 31% ofboomers identified themselves as
conservativeinvestors. By contrast, 43% of millennialsdescribed
themselves as conservative when itcame to investing. The survey
also found thatmillennials outscored boomers on whether theywanted
to leave money to their children (40%vs. 25%) and in wanting to
improve theirunderstanding of investing (44% vs. 38%).Source:
Accenture, "Generation D: AnEmerging and Important Investor
Segment,"20135) Boomers. Millennials may have been aroundthe track
fewer times than boomers have, buttheir experiences seem to have
given them amore jaundiced view of human nature. In thePew Research
"Millennials in Adulthood"survey, only 19% of millennials said
mostpeople can be trusted; with boomers, thatpercentage was 31%.
However, millennialswere slightly more upbeat about the future
ofthe country; 49% of millennials said thecountry's best years lie
ahead, while only 44%of boomers agreed.6) Millennials. However, the
difference betweenthe generations might not be as significant asyou
might think. In the FINRA Foundationfinancial capability study, 55%
of millennialswith student loans said they were concernedabout
being able to pay off their debt. That's notmuch higher than the
50% of boomers whowere worried about debt repayment.
Can you tell the differencebetween the attitudes ofbaby boomers
andmillennials when it comes tofinances? Take this quiz andsee.
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Income SolutionsWealth ManangementLance A. Browning, RICPSr.
Vice President/FoundingPartner3200 Troup Hwy, Suite 150Tyler, TX
75701903-787-8916lance@incomesolutionstx.comwww.lancebrowning.com
Prepared by Broadridge Investor Communication Solutions, Inc.
Copyright 2015
The opinions voiced in this materialare for general information
only andare not intended to provide specificadvice or
recommendations for anyindividual. To determine whichinvestment(s)
may be appropriate foryou, consult your financial advisorprior to
investing. All performancereferenced is historical and is
noguarantee of future results. Allindices are unmanaged and
cannotbe invested into directly.
The information provided is notintended to be a substitute
forspecific individualized tax planning orlegal advice. We suggest
that youconsult with a qualified tax or legaladvisor.
LPL Financial Representatives offeraccess to Trust Services
through ThePrivate Trust Company N.A., anaffiliate of LPL
Financial.
Lance A. Browning is a RegisteredRepresentative with and
Securitiesand Advisory Services offeredthrough LPL Financial, a
RegisteredInvestment Advisor. MemberFINRA/SIPC.
Are stock dividends reliable as a source of income?Dividends can
be an importantsource of income. However,there are several factors
youshould take into considerationif you'll be relying on them
to
help pay the bills.An increasing dividend is generally regarded
asa sign of a company's health and stability, andmost corporate
boards are reluctant to cutthem. However, dividends on common
stockare by no means guaranteed; the board candecide to reduce or
eliminate dividendpayments. Investing in dividend-paying
stocksisn't as simple as just picking the highest yield;consider
whether the company's cash flow cansustain its dividend, and
whether a high yield issimply a function of a drop in a stock's
shareprice. (Because a stock's dividend yield iscalculated by
dividing the annual dividend bythe current market price per share,
a lowershare value typically means a higher yield,assuming the
dividend itself remains the same.)Also, dividends aren't all alike.
Dividends onpreferred stock typically offer a fixed rate ofreturn,
and holders of preferred stock must bepaid their promised dividend
before holders ofcommon stock are entitled to receive theirs.
However, because their dividends arepredetermined, preferred
stocks typicallybehave somewhat like fixed-incomeinvestments. For
example, their market value ismore likely to be affected by
changing interestrates, and most preferred stocks have aprovision
allowing the company to call in itspreferred shares at a set time
or at a specifiedfuture date. If you have to surrender
yourpreferred stock, you might have difficulty findingan equivalent
income stream.Finally, dividends from certain types ofinvestments
aren't eligible for the special taxtreatment generally available
for qualifieddividends, and a portion may be taxed asordinary
income.Note: All investing involves risk, including thepotential
loss of principal, and there can be noguarantee that any investing
strategy will besuccessful. Investing in dividends is a
long-termcommitment. Investors should be prepared forperiods when
dividend payers drag down, notboost, an equity portfolio. A
company's dividendcan fluctuate with earnings, which areinfluenced
by economic, market, and politicalevents.
How important are dividends in the S&P 500's totalreturns?In
a word, very. Dividendincome has representedroughly one-third of
the totalreturn on the Standard &
Poor's 500 index since 1926.*According to S&P, the portion
of total returnattributable to dividends has ranged from a highof
53% during the 1940s--in other words, morethan half that decade's
return resulted fromdividends--to a low of 14% during the
1990s,when the development and rapid expansion ofthe Internet meant
that investors tended tofocus on growth.*And in individual years,
the contribution ofdividends can be even more dramatic. In 2011,the
index's 2.11% average dividend componentrepresented 100% of its
total return, since theindex's value actually fell by
three-hundredthsof a point.** And according to S&P, the
dividendcomponent of the total return on the S&P 500has been
far more stable than price changes,which can be affected by
speculation and ficklemarket sentiment.Dividends also represent a
growing percentageof Americans' personal incomes. That's
beenespecially true in recent years as low interest
rates have made fixed-income investments lessuseful as a way to
help pay the bills, In 2012,dividends represented 5.64% of per
capitapersonal income; 20 years earlier, that figurewas only
3.51%.*Note: All investing involves risk, including thepotential
loss of principal, and there can be noguarantee that any investing
strategy will besuccessful. Investing in dividends is a
long-termcommitment. Investors should be prepared forperiods when
dividend payers drag down, notboost, an equity portfolio. A
company's dividendcan fluctuate with earnings, which areinfluenced
by economic, market, and politicalevents. Dividends are typically
not guaranteedand could be changed or eliminated.*Source: "Dividend
Investing and a Look Insidethe S&P Dow Jones Dividend
Indices,"Standard & Poor's, September 2013**Source:
www.spindices.com, "S&P 500Annual Returns" as of 3/13/2015
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