The holiday season is just around the corner, and so the season of giving will soon be upon us. The understanding that 'charity begins at home' imparts a gentle reminder that we should all consider helping those less fortunate. Like Jackie DeShannon sang nearly 55 years ago, “think of your fellow man, lend him a helping hand, put a little love in your heart. And the world will be a better place, for you and me, you just wait and see.” The desire to help others is a noble trait that lifts the gift recipient as well as the one that gives. The ability to be generous comes from having a plan in place that prepares for what can be given, whether that may be later this year or at some point in the future.
Carolanne’s Corner
I’ve always felt that one of the benefits a well thought out financial plan provides is the ability to save money with the hope of donating to a favorite cause. There is something so satisfying in the knowledge that a client, through their years of planning, can help people in need of support. Whatever your favorite charity is, your contributions – monetary and, in many cases, your time and talents – are important. It truly is a gift that gives back with a satisfying and heart-warming feeling.
Charitable Giving Strategies
Giving to charity is a wonderful way to make a difference and support causes that are close to your heart. There are strategies that can be used with great success to help maximize the humanitarian impact of your money while having a significant financial impact as well. Let’s explore a few of these options, each designed to fit different needs and goals.
First, consider Donor-Advised Funds (DAFs), which are like charitable savings accounts. Cash, stocks, or other assets can be contributed to a fund at your custodian, such as Charles Schwab. They take care of the management of the fund, and you decide who, how much, and when to distribute the charitable gifts. A big advantage is that you receive an immediate tax deduction when you contribute, and you have the luxury of taking your time to decide which charities to support. Another positive to a DAF is that assets remaining in the fund can be invested and grow tax-free. Finally, keeping all your charitable giving in one of these accounts simplifies record-keeping and provides you time to solidify your charitable wishes while still receiving an immediate tax benefit.
Another option, for those aged 70½ or older, is a Qualified Charitable Distribution (QCD) that allows up to $100,000 per year to be given directly from your IRA to a charity. A nice benefit of the QCD is that the amount you donate can be counted toward your required minimum distribution (RMD). Since the distribution isn’t added to your taxable income, it can help lower your overall tax liability. Importantly, this lowers your adjusted gross income used to calculate additional taxes and Medicare surcharges. This strategy is particularly beneficial if you don’t itemize deductions on your tax returns.
For a more structured approach, Charitable Trusts – such as Charitable Remainder Trusts or Charitable Lead Trusts – might present the best option. These trusts allow you to donate assets while still receiving income for a certain period, after which the remaining assets go to charity. They can provide income and estate tax deductions while buffering your cash flow as you envision what your charitable legacy will look like. Plus, you have the flexibility to choose which charities and recipients will benefit.
In summary, these strategies help you provide support to the causes you care about in a more organized and impactful way while offering tax benefits that come from reduced income or minimized estate taxes. Each of these programs furnishes the flexibility and control you need to decide how and when your donations are made. If charitable giving is on your mind at all, having the right financial plan can ensure that you’ll be able to make the most of your resources while supporting the causes you love.
Jordan’s Journal
Last month, the Federal Reserve took a notable step by lowering interest rates for the first time since March 2020. The federal funds rate dropped to a range of 4.75% to 5%. Before this reduction, rates were at their highest point in two decades. In reaction, the stock market climbed over 1% for the week, with the S&P 500 and Dow Jones hitting record highs despite some fluctuations.
Fed Chair Jerome Powell pointed out two main reasons behind the rate cut. First, it’s aimed at maintaining the current economic pace, rather than jumpstarting it. Second, while inflation has improved, there’s still work to be done. Economic data still points to continued growth. For example, last month’s retail sales and housing numbers exceeded expectations. This week also brought additional positive economic updates. The revised second-quarter GDP report revealed that the U.S. economy grew at an annual rate of 3.0%, a notable increase from 1.6% in the first quarter. Additionally, the core PCE price index, the Federal Reserve's preferred inflation measure, came in at 2.7% year-over-year, down from 3.2% in the previous quarter. These figures suggest a strong economic performance and a gradual easing of inflation, aligning with the Fed's goal of achieving a 2% target.
What might the Fed do next? According to the CME FedWatch Tool, the market is split down the middle regarding what will happen at the Fed’s next meeting on November 7th. There’s a 50% chance of another 25 basis point (1/4 of 1%) cut and a 50% chance they’ll keep rates steady.
As for the effects of the recent cut, it’s still too soon to know. Some believe the Fed should have cut rates earlier and more aggressively, while others feel the move wasn’t needed at all. But one thing is certain: the effects of rate cuts take time to play out. It’s like turning a large ship —changes in direction are gradual, and it takes time before the new course becomes clear – and the US Economy is one massively large ship.
News and Upcoming Events
Summer Photo Contest
Thank you to all those who sent in submissions for our Summer Photo Contest! It was great to see everyone enjoying their summer and sharing good times with friends and family. It was hard to choose a winner when everyone looked so happy, but the top three finalists were:
Third Place - Chris & Eunice Ko and Family  |
Second Place - Cheryl Lancaster |
and the Winner is - Ty Dote  |
Fall Prosperity Planning Sessions
The Fall Prosperity Planning Sessions are in full swing. They offer an excellent opportunity to address some of the holistic planning topics not covered in the spring sessions. The fall topics included:
- Financial and Investment Plan Update
- Beneficiary Review and Legacy Notebook Introduction
- Estate Plan Analysis
- Tax-loss Harvesting and other Tax Strategies
- Maximizing Contributions (if applicable)
- Determining Distributions (if applicable)
The Fall Prosperity Planning Sessions are only offered through the end of November, if you haven’t booked an appointment, click here to schedule while dates are still available.
Annual Voice of the Client Survey
Please help us improve our client experience by taking a few minutes to fill out the upcoming Prosperity Wealth Planning Voice of the Client survey. The survey will be sent out on October 23rd. We are a client-focused practice, and your voice is vital in making decisions for the firm's future.
California Client Appreciation Event
The excitement and anticipation are growing for this year’s California Client Appreciation Event. We will be returning to the Tin Roof Bistro in Manhattan Beach on October 24th from 5:30 to 8:30 p.m. We are looking forward to seeing our California-based friends and introducing you to some of our new team members.
Supercharge Your Finances - Episode 8
The latest episode of the Supercharge Your Finances podcast was recently posted on our website. Each month, your favorite financial planners discuss a trending topic from the world of financial planning. In Episode 8, Carolanne, Jordan, and Ava talk about the impact of the Fed's recent rate cuts on your investment portfolio. Click here to listen to Episode 8 or to catch up on any of the past episodes.
Articles of Interest
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In keeping with the spirit of the season, we would like to give thanks to you, our clients, for your loyalty and trust. We hope that giving is in your heart and that you'll contact us to help define a strategy to make that happen. Please reach out anytime and let us know how we can help.
Happiest of holidays,
Carolanne