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In This Issue
IRS Warns Northern CA of Phone Scams
IRS Warns Northern CA of Phone Scams
It has come to our attention that a phone scam is targeting Northern California residents. The IRS is warning Northern California residents about a scam in which telephone callers are asking for personal information for bogus refunds. The reports, coming from far Northern California residents in Redding, Chico and Glenn County, involve callers asking for Social Security and checking account information in order to deposit refunds. IRS employees identify themselves by name, occupation, identity number and telephone number. If the IRS does call, it will be following a letter that was previously sent. You can also call the official IRS phone number, 1-800-829-1040, and ask whether the IRS is trying to contact you. More information on scams targeted toward taxpayers is available on the IRS website.
Protect Your Identity: Freeze Your Credit Files
For people who worry about identity theft, a credit freeze can serve as an important barrier to criminals who try to set up fraudulent accounts in your name. A credit freeze bars the bureaus from issuing your credit history without your consent. Because few lenders will issue credit without first reviewing a credit score, putting a freeze on your information means ID thieves cannot use stolen Social Security numbers to fraudulently obtain credit in your name. As of November 1, 2007, all three credit bureaus - TransUnion, Experian and Equifax - now allow consumers to freeze their credit reports. More details are available on our website.
Donor Advised Funds – A Growing Phenomena
A donor-advised fund is a charitable giving vehicle set up under the tax umbrella of a public charity, under which donors enjoy a convenient, cost-efficient and tax-advantaged method to make charitable gifts. Donors receive the maximum tax deduction available when contributions are made to the fund. Release of funds to the desired charity ("grants") is accomplished by a phone call to Fidelity. Grants may be made for amounts as little as $100, and can be made at any time, regardless of when the deduction was taken. See our website for more details.
529 College Savings Plans and College Financial Aid Eligibility
Investors saving for college often wonder what effect (if any) 529 funds may have on a student's chances of qualifying for financial aid and how to maximize their chances of obtaining aid. The chart below shows the ranges of parental and student income and assets used to calculate an annual Expected Family Contribution (EFC) for a student. The EFC represents the amount of money that your family is considered to have available to put towards college costs that year. The difference between EFC and the cost of attendance at your child's college equals your child's financial need.
1Available income is the amount of parental adjusted gross income after allowances for federal, state, local and FICA taxes, as well as an income protection allowance based on the number of people in the household. The percentage of parental assets considered in determining EFC will vary based on the amount of assets, the age of the eldest parent and whether there are one or two parents.
Under the current rules, 529 savings plans generally have relatively little impact on financial aid. As shown in the chart above, they are considered part of the account owners' assets (typically the parents'), which are heavily protected in the EFC formula. Under this methodology, no more than 5.6% of parental assets are deemed available for college costs. More details are available on our website.
Not All Returns Are Created Equal
Last November, Google set an all-time high, closing at $741.79, silencing the critics of the tech bubble and shrugging off worries over a slowing economy and housing market. Google's strong performance since its initial public offering in August 2004 has confounded many observers (one skeptic was bearish on the stock even before it went public) and offers a reminder on how difficult it is to be an active manager who can exploit these so-called "bubbles" in stock prices. Even the brightest minds in the investment world sometimes (and often do) get it wrong.
Investment Returns
More data is available here.
Who's New at GFC
Financial Planner: Anthony Runnels, CPA, is responsible for producing clients' Financial Plans and providing advice on all financial matters of importance to our clients. If you have had your financial plan updated in the last three months you've seen the improvements he has already made. Anthony expands our ability to research opportunities for our clients in investments, insurance, taxes, estate planning, retirement and college funding, and cash management. In addition to being a CPA, Anthony holds several securities licenses, an insurance license, and is studying for the CFP licensing exam in early 2008. Anthony graduated from Berkeley in 2000 with a B.S. degree in Business Administration. He obtained his CPA credential while employed at Ernst & Young, then progressed through several financial management positions, as Chief Financial Officer of USN Corporation and Senior Manager of Investor Relations at Herbalife Ltd. Tax Manager: Mason Klinck, Enrolled Agent, MBA, is responsible for Tax Services at Grubman Financial. He provides planning, advice, analysis, projections and tax return preparation. Mason has extensive experience in tax matters, having worked at CPA firms and as an IRS agent and California Franchise Tax Board auditor. He becomes visibly animated when asked about a particularly esoteric section of the tax code.
Mason's arrival enables Grubman Financial to prepare our clients' tax returns in-house, providing an information loop for investment, retirement funding and cash flow decisions. It makes integrated financial management a seamless and efficient reality, raising the bar for financial management services. Our Staff Client Service:
Operations:
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Fun Facts 94%, 4%, 2% The percentage of variability in a portfolio’s investment return that is attributable to: 94% - asset allocation Market timing and stock selection only represent 6% of the variability in a portfolio’s investment return. Your best bet is to construct a broadly diversified portfolio across a variety of asset classes. Source: Financial Analysts Journal, July – August 1986 edition
Emerging Markets, US Real Estate, Emerging Markets, International Small Cap Value Asset classes with the highest annual returns for the last four calendar years: Emerging Markets - 2007 For any time period, it is difficult to predict which asset class will yield the highest return. A properly structured and diversified portfolio will eliminate this "guessing" risk.
11.2%, 10.3%, 7.8% Returns of the S&P 500 from January 1970 – December 2006 taking into account missed opportunities: 11.2% - over entire period Money managers trying to forecast which days or weeks will yield good or bad returns is a guessing game that can prove costly for investors.
1.4%, 0.6%, 1.6%, 0.7% Comparison of average domestic and international expense ratios for active vs. passive mutual funds:
"After costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar for any time period." - William F. Sharpe, 1990 Nobel Laureate
$7.6 million, $5.7 million, $4.3 million Projected portfolio over 30 years based on a $1,000,000 million initial investment, 8% annualized return and different investment-related expenses: $7.6 million – 1% fee Over long periods of time, high expenses can be a significant drag on wealth creation.
Zero The number of times over the last 24 years that U.S. equities have outperformed all international developed countries. Although many investors prefer to keep their capital close to home, they may pay a high price in terms of lower diversification and missed opportunity.
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| Please contact Grubman Financial Consulting, Inc. if there are any changes in your personal or financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure document (Form ADV, Part II) can be viewed on our website, or you may contact us to request a paper copy. |