Issue: #  30
 
JUNE 2011
Bautis Financial
Dear ,
 

Welcome to the June 2011 issue of The Wealth Chronicle.   

 
Feature Article 

Rebalancing Your Portfolio

 

Studies have shown that when investing the best way to make money is through a proper asset allocation strategy.  Market timing and Individual Stock picking is aTightrope difficult if not impossible way to make money with your investments because 1) when market timing you have to be right on both when to buy and when to sell, and 2) the theory is that all publicly available information is already included in the price of a stock.  Your pick on the stock rising would be the equivalent of a monkey throwing a dart at a board of stocks.. 

When most investors think of asset allocation diversification comes to their minds.  Diversification, the strategy of not keeping all of your eggs in one basket is a critical component of asset allocation, but rebalancing is also a strategy that helps you "Buy Low and Sell High".

What is rebalancing

Rebalancing is the process of realigning the weightings of one's portfolio of assets. Rebalancing involves periodically buying or selling assets in your portfolio to maintain your original desired level 

 

The following is an example that highlights how to rebalance

You decide that you want to set up your portfolio with an allocation of 50% in stocks, 50% in bonds.  With a $1,000 portfolio the allocation would look like this

$500 in Equities (Stocks)
$500 in Fixed Income (Bonds)

A year goes by and you take a look at your portfolio.  The stock in your portfolio had a great year and went up from $500 and is now worth $750.  Your bonds went up too but not as much (From $500 to $550). 

If we look at our percentage allocations we see that the current allocation is now:

Equities - 58%
Bonds - 42%

This is different than the original allocation of  50% in stocks, 50% in bonds.  To get back to our initial plan we would have to sell $100 in stocks and use that money to add to our bond investments.  Our new breakdown would be $650 in stocks and $650 in bonds.

When should you rebalance?

 Some professionals recommend rebalancing every 2 to 3 years.  My preference is to rebalance once your allocations hit a certain threshold, say 10 percent above or below where they should be recommend rebalancing your accounts once every two or three years. A 10 percent threshold for a 50/50 mix would rebalance when the mix reached 55/45 or 45/55.)

Secondly, rebalancing requires a heavy dose of discipline.  You'll be selling what everyone around you loves, and buying what they're avoiding.

Why rebalance?

Rebalancing is something that you should do periodically to maintain a stocks-bonds allocation that's appropriate for you over the long term. The ups and downs of the financial markets will naturally re-jigger your portfolio's proportions as different investments earn different returns.

The idea behind rebalancing is to bring you back to your target mix and control Risk.  By rebalancing you can assure that you have a risk allocation that you are comfortable with.

Feature Article 

Taxes on Social Security Income

 

Do I have to pay taxes on the income I receive from Social Security?  That is one of the most frequent questions I am asked when giving a Social Security Seminar.  The answer to the question is most likely and up to 85% of your benefits may be taxable.  Like anything else regarding the US tax code, Social Security taxes are not straight forward.  The taxability of Social Security benefits are a function of

 

·         The total amount of Social Security benefits you receive, and

·         The amount of your other income

  

Social Security Card

Calculating the Taxable Portion of Social Security benefits

 

If a taxpayer's modified adjusted gross income for the tax year PLUS one-half of Social Security benefits received during the tax year EXCEED the Base Amount, then the lesser of the following two amounts must be included in gross income and is therefore taxable

 

1.      One half of the Social Security benefits received during the year; or

2.      One-half of the amount by which the provisional income exceeds the base amount

 

The base amount is:

·         $32,000 for married individuals filing jointly;

·         $0 for married individuals filing separately; and

·         $25,000 for everyone else

 

To further complicate matters, those taxpayers with provisional incomes above an adjusted base amount ($44,000 for married individuals filing jointly; $0 for married individuals filing separately; and $34,000 for unmarried individuals), the following has to be included in your taxable income:

 

An example may help clarify:

John, a single individual has income of $20,000, plus $10,000 of Social Security benefits.  He also received tax-exempt interest of $7,000 during the tax-year

 

Step 1: Determined modified adjusted gross income

Income: $20,000

Plus Tax-exempt income: $7,000

Modified Adjusted Gross Income: $27,000

 

Step 2: Determine if modified adjusted gross income plus on half of he Social

 Security benefits received exceeds the base amount

Modified Adjusted Gross Income: $27,000

Plus one-half of Social Security benefits: $5,000

Total: $32,000

Minus Base Amount: $25,000

Excess: $7,000

 

Step 3: Determine what amount must be included in gross income:

One-half of Social Security benefits received: $5,000
OR

One-half of excess amount: $3,500

 

John must include the excess amount of $3,500 in his taxable income.

 

Note: The rules are a little more complicated if your provisional income

exceeds a certain amount.  Unfortunately, as you may have figured, "more complicated" means most likely owing more taxes.

Article 

Summer Seminars

 

The summer seminar series kicks off in July with two seminars on Retirement Planning.  The first seminar I am hosting will be on July 18th at the Wood-Ridge Memorial Library and will cover Retirement Income Planning.  The second seminar will be the next day July 19th at the Edgewater Public Library and will cover Social Security Planning.  To find out more about the seminars and to register please visit www.bautisfinancial.com/seminars.html or see the information below.

 

Retirement Income Planning - After a lifetime of saving, building a strategy for income in retirement is a whole new challenge. The Retirement Fitness Challenge Workshop will help you determine if you are on track for retirement with your savings and how to convert your savings to an income stream that will cover your expenses during retirement.  You will learn strategies on how to prevent outliving your money, combat inflation, minimize risk in your portfolio, and how to maximize Social Security income.

 

The Retirement Fitness Challenge™ -  "Enjoy Your Retirement Years As You've Always Envisioned"

Learn how to put together a plan that maps how to achieve your goals during retirement.  Topics covered will include:

  • Prevent outliving your money
  • How to combat inflation
  • Manage market volatility
  • Maximize your Social Security income
  • Minimize your expenses
  • Tax advantaged investment strategies

 

Date: Monday July 18, 2011
Time: 7:00PM
Location: Wood-Ridge Memorial Library, 231 Hackensack Street Wood-Ridge, NJ 07075

 
Register Now!

 

Social Security - "What Baby Boomers Need to Know to Maximize Retirement Income"  

After being told for years that Social Security is "going broke," baby boomers are realizing that it will soon be their turn to collect.  To help baby boomers better understand the Social Security system, this workshop will cover the following: 

  • 5 factors to consider when deciding when to apply for benefits
  • When it makes sense to delay benefits -- and when it does not
  • Why you should always check your earnings record for accuracy
  • How to estimate your benefits
  • How to coordinate benefits with your spouse
  • How to minimize taxes on Social Security benefits
  • How to coordinate Social Security with your other sources of retirement income

The decisions baby boomers make now can have a tremendous impact on the total amount of benefits they stand to receive over their lifetime.

 

Date: Tuesday July 19, 2011
Time: 7:00PM
Location: Edgewater Free Public Library, 49 Hudson Ave, Edgewater NJ 07020

 
Register Now!

 

Article 

On June 4th I had the honor of being inducted into the Lyndhurst High School Athletic Hall of Fame 

Hall of Fame

The Watercooler

 

 

Mariano Rivera just became the 15th pitcher to make 1000 appearances. But that isMariano Rivera not the only interesting fact about Rivera.  Rivera was signed by the Yankees in 1990; he came from Panama.  The cost to sign Rivera was only $3000.  Sure that is 20 years ago, right?! However his cost in today's dollars is still only $5230.  The scout that signed him should have gotten a FAT raise.

 

Most universities across the US have guest speakers at their annual graduation ceremonies.  Not surprisingly a lot of the speakers at business school graduation ceremonies wind up being CEO's of companies across the US. John C. Cushman III, Chairman of Cushman & Wakefield  spoke at the graduation ceremony of  USC's Marshall School of Business on May 13th and made this interesting comment: "On behalf of everyone born before 1975, I want to express my sympathy for the hand you've been dealt.  Who ran up global debt imbalances and the US federal debt to the tune of 100 percent of gross domestic product?  We did.  Who has to pay it off with interest? You do."

$67 billion in unused vacation days!  The average employed American worker got 18 vacation days last year, but only used 14 of those desirable days off, according to a 2010 survey by Expedia.com.  Considering the average wage of $39,208 for a full-time worker - that's $67.5 billion worth of time.  Alternatively, workers in France got 37 vacation days last year and used 35 of them while the average worker in Great Britain received 28 vacation days and took 25, Expedia said

 

CEO pay goes up - The median compensation (including salary, bonuses, and compensations) for American CEO's was $9.3 million in 2010.  That number is up 11% from the year before.  The highest paid Chief Executive was Phillipe Dauman from Viacom; he earned $84.3 million in 2010.  To note in two years Viacom's stock price has gone from $25/share to its current price of $60/share.  Unemployment levels are still high, however, and debt levels are getting dangerously high.  Yet one thing is for certain:: companies keep raking in the profits

 

Ron Paul: A Man of His Word - All members of Congress were required to discloseRon Paul their investment holding by June 16th.  Ron Paul investing a large portion of his portfolio in gold, silver, and mining stocks would not raise an eyebrow if not for the fact that he has been purporting the end of the Fed and a return to the gold standard of currency: http://bit.ly/mEPrNa

 

Please contact me if you have any questions about the articles above or about your personal or business finances.

  

Sincerely,

Marc Bautis
Wealth Manager

office: 201-842-7655
cell: 201-221-6895
fax:  201-754-9760

Disclaimer:The information contained in this newsletter is for information purposes only and may not be suitable for your specific financial situation.  You should consult a financial advisor before making any investment decisions relating to the information contained in this newsletter

What's Inside?
Rebalancing
Taxes on Social Security Income
Summar Seminars
Hall of Fame
The Watercooler
Bautis Headshot
MEET MARC

Marc Bautis is a Wealth Manager specializing in working with young families as well as retirees and those nearing retirement. He understands that everyone wants to not only protect their principal, but also be sure that their money lasts.  He is committed and proud to deliver independent advice, always in the interest of his clients.

Marc is the creator of the Retirement Fitness Challenge™,  a program designed to be sure his clients enjoy the retirement years as they have always envisioned them.  Marc's program is designed to prevent outliving your money but also to minimize expenses during retirement and find the best time to start taking Social Security benefits. 

Marc is a graduate of Seton Hall University.  He is a Bergen County native, from Lyndhurst, where much of his extended family still resides. He currently lives in Hasbrouck Heights with his wife Katie and Old English Bulldog, Winnie.

 

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