Your Source for Financial Well-Being - LIFE WELL PLANNED. · success. Beliefs drive behaviors In 2011, The Journal of Financial Therapy ... older Americans ages 70 to 84 will skyrocket

Benoist Wealth Strategies,Inc.Blaise Benoist, AIF®Managing Partner, BWSBranch Manager, RJFS390 N. Orange Ave. Ste. 2300Orlando, FL [email protected]

1st Quarter 2018

Deducting 2017 Property Losses from YourTaxes

Demographic Dilemma: Is America's AgingPopulation Slowing Down the Economy?

Why is it important to factor inflation intoretirement planning?

How can I protect myself from digital deception?

Financial Insight QuarterlyYour Source for Financial Well-BeingWhat's Your Money Script?

See disclaimer on final page

Money is power. Afool and his moneyare soon parted. Apenny saved is apenny earned.Money is the root ofall evil.

Do any of theseexpressions ringtrue for you?

As it turns out, the money beliefs our familiesespoused while we were growing up may havea profound effect on how we behave financiallytoday — and may even influence our financialsuccess.

Beliefs drive behaviorsIn 2011, The Journal of Financial Therapypublished a study by financial psychologistBrad Klontz et al., that gauged the reactions of422 individuals to 72 money-relatedstatements.1 Examples of such statementsinclude:

• There is virtue in living with less money• Things will get better if I have more money• Poor people are lazy• It is not polite to talk about money

Based on the findings, Klontz was able toidentify four "money belief patterns," alsoknown as "money scripts," that influence howpeople view money. Klontz has described thesescripts as "typically unconscious,trans-generational beliefs about money" thatare "developed in childhood and drive adultfinancial behaviors."2 The four categories are:

1. Money avoidance: People who fall into thiscategory believe that money is bad and is oftena source of anxiety or disgust. This may resultin a hostile attitude toward the wealthy.Paradoxically, these people might also feel thatall their problems would be solved if they onlyhad more money. For this reason, they mayunconsciously sabotage their own financialefforts while working extra hours just to makeends meet.

2. Money worship: Money worshippers believethat money is the route to true happiness, andone can never have enough. They feel that theywill never be able to afford everything theywant. These people may shop compulsively,hoard their belongings, and put work ahead ofrelationships in the ongoing quest for wealth.

3. Money status: Similar to moneyworshippers, these people equate net worthwith self-worth, believing that money is the keyto both happiness and power. They may livelavishly in an attempt to keep up with or evenbeat the Joneses, incurring heavy debt in theprocess. They are also more likely than those inother categories to be compulsive gamblers orto lie to their spouses about money.

4. Money vigilance: Money vigilants arecautious and sometimes overly anxious aboutmoney, but they also live within their means,pay off their credit cards every month, and savefor the future. However, they risk carrying alevel of anxiety so high that they cannot enjoythe fruits of their labor or ever feel a sense offinancial security.

Awareness is the first stepAccording to Klontz's research, the first threemoney scripts typically lead to destructivefinancial behaviors, while the fourth is the oneto which most people would want to aspire. Ifyou believe you may fit in one of theself-limiting money script categories, considerhow experiences in your childhood or thebeliefs of your parents or grandparents mayhave influenced this thinking. Then do somereality-checking about the positive ways to buildand manage wealth. As in other areas ofbehavioral finance and psychology in general,awareness is often the first step towardaddressing the problem.1 "Money Beliefs and Financial Behaviors," TheJournal of Financial Therapy, Volume 2, Issue 1

2 Financial Planning Association, accessed October24, 2017

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Deducting 2017 Property Losses from Your TaxesHurricanes, wildfires, tornadoes, floods,earthquakes, winter storms, and other eventsoften cause widespread damage to homes andother types of property. If you've sufferedproperty loss as the result of a natural orman-made disaster in 2017, you may be able toclaim a casualty loss deduction on your federalincome tax return.

What is a casualty loss?A casualty is the destruction, damage, or lossof property caused by an unusual, sudden, orunexpected event. Casualty losses may resultfrom natural disasters or from other eventssuch as fires, accidents, thefts, or vandalism.You probably don't have a deductible casualtyloss, however, if your property is damaged asthe result of gradual deterioration (e.g., along-term termite infestation).

How do you calculate the amount ofyour loss?To calculate a casualty loss on personal-useproperty, like your home, that's been damagedor destroyed, you first need two importantpieces of data:

• The decrease in the fair market value (FMV)of the property; that's the difference betweenthe FMV of the property immediately beforeand after the casualty

• Your adjusted basis in the property before thecasualty; your adjusted basis is usually yourcost if you bought the property (different rulesapply if you inherited the property or receivedit as a gift), increased for things likepermanent improvements and decreased foritems such as depreciation

Starting with the lower of the two amountsabove, subtract any insurance or otherreimbursement that you have received or thatyou expect to receive. The result is generallythe amount of your loss. If you receiveinsurance payments or other reimbursementthat is more than your adjusted basis in thedestroyed or damaged property, you mayactually have a gain. There are special rules forreporting such gain, postponing the gain,excluding gain on a main home, andpurchasing replacement property.

After you determine your casualty loss onpersonal-use property, you have to reduce theloss by $100. The $100 reduction applies percasualty, not per individual item of property.Two or more events that are closely relatedmay be considered a single casualty. Forexample, wind and flood damage from thesame storm would typically be considered asingle casualty event, subject to only one $100reduction. If both your home and automobile

were damaged by the storm, the damage isalso considered part of a single casualty event —you do not have to subtract $100 for each pieceof property.

You must also reduce the total of all yourcasualty and theft losses on personal propertyby 10% of your adjusted gross income (AGI)after each loss is reduced by the $100 rule,above.

Keep in mind that special rules apply for thoseaffected by Hurricanes Harvey, Irma, andMaria. The Disaster Tax Relief Act of 2017increased the threshold for claiming a casualtyloss deduction to $500, waived the requirementthat the loss is deductible only to the extent itexceeds 10% of AGI, and allowed a deductioneven for those who do not itemize.

Also note that the rules for calculating loss canbe different for business property or propertythat's used to produce income, such as rentalproperty.

When can you deduct a casualty loss?Generally, you report and deduct the loss in theyear in which the casualty occurred. Specialrules, however, apply for casualty lossesresulting from an event that's declared a federaldisaster area by the president.

If you have a casualty loss from a federallydeclared disaster area, you can choose toreport and deduct the loss in the tax year inwhich the loss occurred, or in the tax yearimmediately preceding the tax year in which thedisaster happened. If you elect to report in thepreceding year, the loss is treated as if itoccurred in the preceding tax year. Reportingthe loss in the preceding year may reduce thetax for that year, producing a refund. Yougenerally have to make a decision to report theloss in the preceding year by the federalincome tax return due date (without anyextension) for the year in which the disasteractually occurred.

Casualty losses are reported on IRS Form4684, Casualties and Thefts. Any lossesrelating to personal-use property are carriedover to Form 1040, Schedule A, ItemizedDeductions.

Where can you get more information?The rules relating to casualty losses can becomplicated. Additional information can befound in the instructions to Form 4684 and inIRS Publication 547, Casualties, Disasters, andThefts. If you have suffered a casualty loss,though, you should consider discussing yourindividual circumstances with a taxprofessional.

New rules for 2018 andbeyond

Recent tax reform legislationeliminates deductions forcasualty losses that occur in2018 through 2025, except forlosses in federally declareddisaster areas.

The legislation also makeschanges that applyretroactively to 2016 and 2017for net disaster losses arisingfrom 2016 federally declareddisaster areas.

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Demographic Dilemma: Is America's Aging Population SlowingDown the Economy?It's no secret that the demographic profile of theUnited States is growing older at a rapid pace.While the U.S. population is projected to growjust 8% between 2015 and 2025, the number ofolder Americans ages 70 to 84 will skyrocket50%.1

With roughly 75 million members, babyboomers (born between 1946 and 1964) makeup the largest generation in U.S. history. As agroup, boomers have longer life expectanciesand had fewer children than previousgenerations.2

Now, after dominating the workforce for nearly40 years, boomers are retiring at a rate ofaround 1.2 million a year, about three timesmore than a decade ago.3

Though the economy has continued to improvesince the Great Recession, gross domesticproduct (GDP) growth has been weakcompared with past recoveries. A number ofeconomists believe that demographic changesmay be the primary reason.4

Spending shiftsThe lower birth rates in recent decadesgenerally mean that fewer young people arejoining the workforce, so the consumerspending that fuels economic expansion andjob creation could take a hit. When youngpeople earn enough money to strike out ontheir own, marry, and start families, it typicallyspurs additional spending — on places to live,furniture and appliances, vehicles, and otherproducts and services that are needed to set upa new household.

On the other hand, when people retire, theytypically reduce their spending and focus moreon preserving their savings. Moreover, retirees'spending habits are often different from whenthey were working. As a group, retirees tend toavoid taking on debt, have more equity built upin their homes, and may be able to downsize ormove to places with lower living costs. Morespending is devoted to covering health-carecosts as people age.

If a larger, older population is spending lessand the younger population is too small to driveup consumer spending, weaker overall demandfor products and services could restrain GDPgrowth and inflation over the long term. Lessborrowing by consumers and businesses couldalso put downward pressure on interest rates.

A new normal?The onslaught of retiring baby boomers haslong been expected to threaten the viability ofSocial Security and Medicare, mainly becauseboth are funded by payroll taxes on current

workers. But this may not be the onlychallenge.

A 2016 working paper by Federal Reserveeconomists concluded that declining fertility andlabor force participation rates, along withincreases in life expectancies, accounted for a1.25 percentage point decline in the natural rateof real interest and real GDP growth since1980. Furthermore, the same demographictrends are expected to remain a structuralimpediment to economic growth for years tocome.5

Put simply, a nation's potential GDP is aproduct of the number of workers times theproductivity (output) per worker, and the U.S.workforce is shrinking in relation to the totalpopulation.

The labor force participation rate — thepercentage of the civilian labor force age 16and older who are working or actively lookingfor work — peaked at 67.3% in early 2000, notcoincidentally the last time GDP grew by morethan 4%. The participation rate has droppedsteadily since then; in August 2017, it was62.9%. This reflects lower birth rates, increasedcollege enrollment, some men in their primeworking years dropping out of the labor force,and large numbers of retiring baby boomers.6

Many economists acknowledge that U.S.population trends are a force to be reckonedwith, but the potential impact is still up fordebate. Some argue that labor shortages coulddrive up wages and spending relatively soon,followed by higher growth, inflation, and interestrates — until automated technologies startreplacing larger numbers of costly humanworkers.7

Even if demographic forces continue to restraingrowth, it might not spell doom for workforceproductivity and the economy. Another babyboom would likely be a catalyst for consumerspending. Family-friendly policies such as paidmaternity leave and day-care assistance couldprovide incentives for women with children toremain in the workforce. It's also possible that alarger percentage of healthy older workers maydelay retirement — a trend that is alreadydeveloping — and continue to add theirexperience and expertise to the economy.8

1, 3) The Conference Board, February 24, 2017

2) The Wall Street Journal, January 16, 2017

4-5) Federal Reserve, 2016

6, 8) The Financial Times, October 25, 2016

7) U.S. Bureau of Labor Statistics, 2016-2017,Bureau of Economic Analysis 2017

Page 3 of 4, see disclaimer on final page

Benoist WealthStrategies, Inc.Blaise Benoist, AIF®Managing Partner, BWSBranch Manager, RJFS390 N. Orange Ave. Ste. 2300Orlando, FL [email protected]

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018

This information, developed by anindependent third party, has been obtainedfrom sources considered to be reliable, butRaymond James Financial Services, Inc.does not guarantee that the foregoingmaterial is accurate or complete. Thisinformation is not a complete summary orstatement of all available data necessary formaking an investment decision and does notconstitute a recommendation. Theinformation contained in this report does notpurport to be a complete description of thesecurities, markets, or developments referredto in this material. This information is notintended as a solicitation or an offer to buy orsell any security referred to herein.Investments mentioned may not be suitablefor all investors. The material is general innature. Past performance may not beindicative of future results. Raymond JamesFinancial Services, Inc. does not provideadvice on tax, legal or mortgage issues.These matters should be discussed with theappropriate professional.

Benoist Wealth Strategies, Inc. is not aregistered broker/dealer and is independentof Raymond James Financial Services, Inc.,member FINRA/SIPC. Securities offeredthrough Raymond James Financial Services,Inc., member FINRA/SIPC. Investmentadvisory services offered through RaymondJames Financial Services Advisors, Inc.

How can I protect myself from digital deception?Imagine that you receive anemail with an urgent messageasking you to verify yourbanking information by clickingon a link. Or maybe you get an

enticing text message claiming that you've wona free vacation to the destination of your choice— all you have to do is click on the link you weresent. In both scenarios, clicking on the linkcauses you to play right into the hands of acybercriminal seeking your sensitiveinformation. Just like that, you're at risk foridentity theft because you were tricked by asocial engineering scam.

Social engineering attacks are a form of digitaldeception in which cybercriminalspsychologically manipulate victims intodivulging sensitive information. Cybercriminals"engineer" believable scenarios designed toevoke an emotional response (curiosity, fear,empathy, or excitement) from their targets. As aresult, people often react without thinking firstdue to curiosity or concern over the messagethat was sent. Since social engineering attacksappear in many forms and appeal to a variety ofemotions, they can be especially difficult toidentify.

Take steps to protect yourself from a socialengineering scam. If you receive a messageconveying a sense of urgency, slow down andread it carefully before reacting. Don't click onsuspicious or unfamiliar links in emails, textmessages, and instant messaging services.Hover your cursor over a link before clicking onit to see if it will bring you to a real URL. Don'tforget to check the spelling of URLs — anymistakes indicate a scam website. Also be sureto look for the secure lock symbol and theletters https: in the address bar of your Internetbrowser. These are signs that you're navigatingto a legitimate website.

Never download email attachments unless youcan verify that the sender is legitimate.Similarly, don't send money to charities ororganizations that request help unless you canfollow up directly with the charitable group.

Be wary of unsolicited messages. If you get anemail or a text that asks you for financialinformation or passwords, do not reply — deleteit. Remember that social engineering scamscan also be used over the phone. Use healthyskepticism when you receive calls that demandmoney or request sensitive information. Alwaysbe vigilant and think before acting.

Why is it important to factor inflation into retirementplanning?Inflation is one of the keyfactors you will need toconsider when planning forretirement. Not only will the

cost of living rise while you're accumulatingassets for retirement, but it will continue to riseduring your retirement, which could last 25years or longer. This, combined with the factthat you will not likely earn a paycheck duringretirement, is the main reason your portfolioneeds to maintain at least some growthpotential for the duration of your retirement.

Consider this: If inflation runs at 3% (which isapproximately its long-term average, asmeasured by the Consumer Price Index), thepurchasing power of a given sum of moneywould be cut in half in 23 years. If it averages4%, your purchasing power would be cut in halfin 18 years.

A simple example illustrates the impact ofinflation on retirement income. Assuming aconsistent annual inflation rate of 3%, if$50,000 satisfies your retirement income needsthis year, you'll need $51,500 of income nextyear to meet the same income needs. In 10years, you'll need about $67,195 to equal the

purchasing power of $50,000 this year. And in25 years, you'd need nearly $105,000 just tomaintain that purchasing power!1

Keep in mind that even a 3% long-term averageinflation rate conceals periods of skyrocketingprices, such as in the late 1970s and early 80s,when inflation reached double digits. Althoughconsumer prices have been relatively stable inmore recent decades, there's always thechance that unexpected shocks could causeprices to spike again.

So how do you strive for the returns you'll needto outpace inflation by a wide enough marginboth before and during retirement? The key isto consider investing at least some of yourportfolio in growth-oriented investments, suchas stocks.2

1 This hypothetical example of mathematicalprinciples is used for illustrative purposes only anddoes not represent the performance of any specificinvestment. Note that these figures exclude theeffects of taxes, fees, expenses, and investmentreturns in general.

2 All investing involves risk, including the possibleloss of principal, and there is no guarantee that anyinvestment strategy will be successful.

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