OCTOBER 2019

AdvisorBALTIMORE - WASHINGTON FINANCIAL ADVISORS President’s Address This summer we had a team of five interns who helped us our summer interns JACK FRANZ work on a variety of different projects supporting the My name is Jack Franz, and I’m currently a rising senior at the University of Maryland. This year, I’ll be completing robert g. carpenter financial planning, investment management, and tax teams. my Finance and Information Systems degrees and beginning to work toward a Master’s. I hope to pursue a career PRESIDENT & CEO in either financial advising or consulting after I graduate. Outside of school, my biggest hobbies are soccer, guitar, [email protected] and video games. One fun fact about me is that I studied abroad in Australia and New Zealand this past winter, where I got to scuba dive at the Great Barrier Reef, whitewater raft, and bungee jump. I’ve thoroughly enjoyed interning at BWFA this summer and learning more about the world of finance. I’m truly grateful to be exploring In addition, they assisted us plan for a few The goal of our summer intern program is It was a pleasure to get to know each of my career interests in such a great environment! Client Appreciation Events, which included to provide the students with mentorship the interns better and I wanted to take this the third Columbia Orchestra Concert at the and guidance as well as meaningful work opportunity to thank and highlight each of Merriweather Park Chrysalis Amphitheater! opportunities that provide a glimpse into them. They are a wonderful group of young JENNIFER HORNOR We want to thank our interns for their the everyday operations of a financial professionals, and I am confident that a bright My name is Jennifer Hornor and I am a rising Junior studying Marketing and Finance at the University of assistance with the planning process. We services company that strives to provide future awaits each one of them. Pittsburgh. Interning at BWFA this past summer has been an extremely valuable experience for me, as it has allowed me to develop both my professional skills and my confidence for future success. After I graduate from really enjoyed the event and if you attended, the best possible service to its clients. We college, I plan to pursue a career in digital marketing, which will allow me to combine my interests in digital we hope you did too! work hard to meet this goal and hope the THANK YOU to Jack, Jennifer, Spencer, Connor, and Andrew for spending the media and data analytics. In five years, I hope to live in the Baltimore - D.C. area and work at a company with students have grown from their experience. an equally encouraging and rewarding environment as BWFA has been for me. A fun fact about me is that While the interns were involved in several summer and sharing your talents with us! when I’m not working at BWFA, I am coaching swim team and training for my first marathon! projects over the summer, they did not participate in client meetings due to Sincerely, privacy issues. However, they did have SPENCER LIN the opportunity to prepare materials for My name is Spencer Lin and I am a rising Senior at James Madison University. I am on track to graduate in the the portfolio managers and financial Spring of 2020 with a Finance degree. After graduation, my goal is to find a job in the wealth management planners. They performed some market sector where I can grow as a professional. BWFA has provided me with the necessary knowledge and experience to enter into employment with confidence. The personal and professional skills I learned this summer will research and electronic filings for the firm. certainly prove to be beneficial as I enter into the workforce. In 5 years, I see myself living in the Washington, They also had the chance to interact D.C. area with a job I can not only excel at, but also enjoy on a daily basis. Some of my favorite hobbies include with many of our clients by taking your scuba diving, traveling, and exercising. calls, answering your questions, and greeting you as you visited the office.

CONNOR SCHLICHTING I am currently a sophomore at Duquesne University in Pittsburgh Pennsylvania. I am a dual major in information systems and computer science. I aspire to do software development or computer engineering after graduating. At school I spend my free time competing in intermural sports and keeping up with my favorite football team, the Pittsburgh Steelers. A fun fact about me would have to be my Eagle Scout Award I achieved during high school. I look forward to using workplace skills I learned while interning at BWFA.

ANDREW CADE PHOTO: Torre de Belém is My name is Andrew Cade and I am currently attending the University of Maryland, hoping to attend the a 16th-century fortification Robert H. Smith School of Business to pursue a degree in Marketing, and then majoring in another field of that served both as a fortress business as well. I plan on graduating in 2022 and possibly attending another year for a Plus 1 Master’s degree. and as a ceremonial gateway My internship at BWFA has provided a lot of insight into the different aspects of business and has been a great to , . learning experience, applicable to more than just the financial services field. In 10 years, I plan to be working for a marketing company or possibly in consulting in one of the big firms. A fun fact about me is that I love to try all different kinds of unique foods from all cultures and enjoy traveling to new places.

2 3 PHOTO: Panoramic image of the lake of Sete Cidades in Sao Miguel, Azores.

Come Cruise with Us!

AdvisorCOVER PHOTO: Câmara De Lobos on Madeira Island in Portugal.

october 2019 table of contents

2 PRESIDENT’S ADDRESS Do you know someone ROB CARPENTER I President & CEO who could use guidance 6 FINANCIAL PLANNING THAD ISMART I CFP® with their investments? Senior Financial Planner

8 FINANCIAL PLANNING maybe you know someone TYLER KLUGE I CFP® who is retired or nearing Associate Financial Planner retirement and could benefit 10 ADVANCE MEDICAL DIRECTIVES from our services? 12 JOSEPH CAPUTO I CFP® Portfolio Manager, Chief Information Officer & Executive Manager we ask you, our existing clients, CAPTIVATING RHINE: AMSTERDAM TO BASEL • MAY 4 – MAY 11, 2020 to recommend our services to 14 INVESTMENT MANAGEMENT CHRIS KELLY I CPA, CFP®, M. Accy friends or family members that Financial Advisor, Portfolio Manager Baltimore-Washington Financial Advisors Invite You to Come Cruise with Us! ™ could benefit from our support. & Executive Manager BWFA is partnering with PollinGroup’s full ship AmaWaterways charter to make this a wonderful experience for you, your family and friends. BWFA is one of three groups included on this charter. These are significantly discounted rates and limited availability. 16 HAPPY 10TH ANNIVERSARY CHRIS KELLY! We hope you will consider sailing with the extended BWFA family and creating your own lasting memories! by helping us grow our 18 BWFA Q&A: EMPLOYEE SPOTLIGHT Sincerely, “family of clients,” we get to CHRIS KELLY I CPA, CFP®, M. Accy Financial Advisor, Portfolio Manager share our passion with more & Executive Manager people just like you. 20 BUSINESS SERVICES Robert Carpenter BRIAN MACMILLAN President and CEO PLEASE CONTACT MEGHAN AT [email protected] Managing Director Mergers & Acquisitions 22 BWFA SUMMER FUN! FOR ITINERARY, PRICING AND RESERVATIONS PLEASE CONTACT: • • • This publication is not a solicitation to buy or sell any securities or MARY DAVIS Sr. Director Client and Management Services 443.878.4393 [email protected] advisory products. Baltimore Washington Financial Advisors is an 24 FIREWORKS • FUN • PHOTO BOOTH SEC-Registered Investment Adviser. Investing involves risk, including the BWFA Fourth of July Celebration risk of principal loss. Past performance is no guarantee of future returns. Please contact us at 410-461-3900 if you have any questions. 26 BWFA UPCOMING EVENTS 5 A DECLARATION OF HOMESTEAD Generally, your creditors can reach only those partnerships or LLCs, under most state laws, There are many types of asset protection PROTECTS THE FAMILY RESIDENCE assets that are in your name. a creditor of a partner or member is entitled trusts, each having its own benefits and to obtain only a charging order with respect drawbacks. These trusts include: Financial Planning Your primary residence may be your most to the partner or member’s interest. The • Spendthrift trusts significant asset. State law determines the BUSINESS ENTITIES CAN PROVIDE charging order gives the creditor the right to • Discretionary trusts creditor and judgment protection afforded TWO TYPES OF PROTECTION receive any distributions with respect to the • Support trusts a residence by way of a Declaration of Shielding Your Personal Assets interest. In all respects, the creditor is treated • Personal trusts Homestead, which varies greatly from state From Your Business Creditors and as a mere assignee and is not entitled to asset protection • Self-settled trusts to state. For example, a state may provide a Shielding Business Assets From exercise any voting rights or other rights that in estate planning complete exemption for a residence (i.e., its Your Personal Creditors the partner or member possessed. Since certain claims can pierce domestic entire value), a limited exemption (e.g., up protective trusts (e.g., claims by a spouse or thad ismart to $100,000), or an exemption under certain Consider using a corporation, limited ® child for support and state or federal claims), CFP circumstances (e.g., a judgment for medical partnership, or limited liability company CERTAIN TRUSTS CAN PRESERVE SENIOR FINANCIAL PLANNER you can bolster your protection by placing bills). A Declaration of Homestead is easy (LLC) to operate the business. Such business TRUST ASSETS FROM CLAIMS [email protected] the trust in a foreign jurisdiction. Offshore or to file. You pay a small fee, fill out a simple entities shield the personal assets of the foreign trusts are established under, or made form, and file it at the registry where your shareholders, limited partners, or LLC People have used trusts to protect their assets for generations. The key to using a subject to, the laws of another country (e.g., You’re beginning to accumulate substantial For high exposure, you may want to create a deed is recorded. members from liabilities that arise from the trust as an asset protection tool is that the the Bahamas, the Cayman Islands, Bermuda, wealth, but you worry about protecting it business entity or an offshore trust to shield business. The liability of these owners will be trust must be irrevocable and become the Belize, Jersey, Liechtenstein, and the Cook from future potential creditors. Whether your assets. Remember, no asset protection limited to the assets of the business. owner of your property. Once given away, Islands) that does not generally honor your concern is for your personal assets or tool is guaranteed to work, and you may DIVIDING ASSETS BETWEEN Conversely, corporations, limited partner- these assets are no longer yours and are not judgments made in the United States. your business, various tools exist to keep have to adjust your asset protection strategies SPOUSES CAN LIMIT EXPOSURE ships, and LLCs provide some protection available to satisfy claims against you. To your property safe from tax collectors, as your situation or the laws change. TO POTENTIAL LIABILITY from the personal creditors of a shareholder, properly establish an asset protection trust, accident victims, health-care providers, Perhaps you work in an occupation or limited partner, or member. In a corporation, you must not keep any interest in the trust A WORD ABOUT credit card issuers, business creditors, and FRAUDULENT TRANSFERS LIABILITY INSURANCE IS YOUR business that exposes you to greater a creditor of an individual owner is able assets or control over the trust. creditors of others. potential liability than your spouse’s job to place a lien on, and eventually acquire, FIRST AND BEST LINE OF DEFENSE The court will ignore transfers to an asset does. If so, it may be a good idea to divide the shares of the debtor/shareholder, but Trusts can also protect trust assets from To insulate your property from such claims, protection trust if: assets between you so that you keep only would not have any rights greater than the potential creditors of the beneficiaries of you’ll have to evaluate each tool in terms Liability insurance is at the top of any plan for asset protection. You should consider the income and assets from your job, while rights conferred by the shares. In limited the trust. The extent to which a beneficiary’s • A creditor’s claim arose before you of your own situation. You may decide that purchasing or increasing umbrella coverage your spouse takes sole ownership of your creditors can reach trust property depends made the transfer insurance and a Declaration of Homestead on your homeowners policy. For business- investments and other valuable assets. on how much access the beneficiary has may be sufficient protection for your home related liability, purchase or increase your to the trust property. The more access the • You made the transfer with the intent because your exposure to a claim is low. liability coverage under your business beneficiary has to the trust property, the to defraud a creditor insurance policy. Generally, the cost of more access the beneficiary’s creditors will • You incurred debts without a reasonable the premiums for this type of coverage is have. Thus, the terms of the trust are critical. expectation of paying them minimal compared to what you might be required to pay under a court judgment should you ever be sued.

MAIN PHOTO: Mosteiro dos Jeronimos, a highly ornate monastery situated in the Belem district of western Lisbon. CIRCLE: Porto City Hall on Liberdade Square, Porto, Portugal.

6 7 MAIN PHOTO: Praca Do Comercio Square with the Saint George Castle in Lisbon viewed from Tajo River. Financial Planning CIRCLE: The Padrao dos Descobrimentos celebrates the Portuguese who took part in the Age of Discovery. Maintaining a joint account does have Also, the account activity won’t show up EMPLOYER-SPONSORED advantages, such as easier record keeping on the authorized user’s credit record. But RETIREMENT PLANS and lower maintenance fees. However, it’s remember, you would remain responsible merging your money sometimes more difficult to keep track of for the account. If both you and your spouse participate when you marry how much money is in a joint account when in an employer-sponsored retirement two individuals have access to it. Of course, plan, you should be aware of each plan’s INSURANCE characteristics. Review each plan together tyler kluge you could avoid this problem by making sure CFP® that you tell each other every time you write carefully and determine which plan provides If you and your spouse have separate ASSOCIATE FINANCIAL PLANNER a check or withdraw funds from the account. the best benefits. If you can afford it, you health insurance coverage, you’ll want to [email protected] Or, you could always decide to maintain should each participate to the maximum in do a cost/benefit analysis of each plan separate accounts. your own plan. If your current cash flow is to see if you should continue to keep your limited, you can make one plan the focus As I am a newlywed as of August, I thought Then, determine which goals are most The first step of the budget is to begin by health coverage separate. For example, of your retirement strategy. Here are some an article about merging finances with your important to you. Once you’ve identified listing your sources of income (e.g., salaries CREDIT CARDS if your spouse’s health plan has a higher helpful tips: spouse was fitting. Some of these topics are the goals that are a priority, you can focus and wages, interest, dividends). Then, list deductible and/or co-payments or fewer good food for thought for many couples, not your energy on achieving them. your expenses (it may be beneficial to Before adding your name to your spouse’s benefits than those offered by your plan, • If both plans match contributions, just newlyweds. Getting married is exciting, review several months of entries in your credit card accounts, it is important to he or she may want to join your health plan determine a strategy to take advantage but it also brings some challenges. One such checkbook and credit card bills). Add them consider the potential implications. When instead. You’ll also want to compare the rate of that benefit challenge that you and your spouse may face PREPARE A BUDGET up and compare the two totals. Hopefully, you and your spouse have joint credit, both for one family plan against the cost of two • Compare the vesting schedules for is how best to merge your finances. Planning you get a positive number, meaning that you of you will become responsible for 100 single plans. It’s a good idea to examine your Another important step is to prepare a the employer’s matching contributions carefully and communicating clearly are spend less than you earn. If not, review your percent of the credit card debt. In addition, auto insurance coverage, too. If you and budget that lists all of your income and important because the financial decisions expenses and see where you can cut down if one of you has poor credit, it will your spouse own separate cars, you may expenses over a certain time period (e.g., • Compare the investment options that you make now can have a lasting on your spending. BWFA is now offering our negatively impact the credit rating of the have different auto insurance carriers. monthly, annually). It is important to have a offered by each plan impact on your future goals. clients a new online budgeting tool within other. If you or your spouse does not Consider pooling your auto insurance discussion with your spouse to understand our Financial Planning software, which can qualify for a card because of poor credit, policies with one company; many insurance All of us at BWFA are here to help you. how you will handle managing the budget. help you create and view your budget. If and you are willing to give your spouse companies will give you a discount if you Anytime you have questions or would like Will one of you be in charge of managing DISCUSS YOUR FINANCIAL GOALS this is something you would be interested in account privileges anyway, you can make insure more than one car with them. If one to meet with us just let us know and we’d the budget, or will you handle it jointly just let us know and we would be happy to your spouse an authorized user of your of you has a poor driving record, however, be happy to spend time with you. The first step in mapping out your financial (e.g. would you take turns keeping records explain the details further. credit card. An authorized user is not a make sure that changing companies won’t future together is to discuss your financial and paying the bills)? If both you and joint cardholder and is therefore not liable mean paying a higher premium. goals. A good place to start is to make a your spouse are going to be involved, it for any amounts charged to the account. list of your short-term goals (e.g., paying is important to develop a record-keeping BANK ACCOUNTS— off wedding debt, new cars, vacations) and system that both of you understand. It is SEPARATE OR JOINT? long-term goals (e.g., having children, your equally important to keep your records in children’s college education, retirement). a joint filing system so that both of you At some point, you and your spouse will can easily locate important documents. have to decide whether to combine your bank accounts or keep them separate.

8 9 Advance Medical Directives

A Living Will is an essential document everyone should create and keep stored on their smartphone in case of an emergency.

What kind of medical care would you want if you were too ill or hurt to express your wishes? Advance directives are legal documents that allow you to spell out your decisions about end-of-life care ahead of time. They give you a way to tell your wishes to family, friends, SUMMER and health care professionals and to avoid confusion later. POPS CONCERT A living will tell which treatments you want if you are dying or permanently unconscious. For the third year in a row, You can accept or refuse medical care. You might want to include instructions on BWFA was proud to sponsor • The use of dialysis and breathing machines a Columbia Orchestra • If you want to be resuscitated if your breathing or heartbeat stops • Tube feeding concert at The Chrysalis. • Organ or tissue donation It was a glorious evening A durable power of attorney for health care is a document that names your health care proxy. of music & fun! Your proxy is someone you trust to make health decisions for you if you are unable to do so.

BWFA recommends that you have those for your Spouse, Parents and/or Family members easily available in an emergency.

For more information visit: medlineplus.gov/endoflifeissues.html

Renowned Author & Public Speaker James Osterhaus

BOOK REVIEW • OCTOBER 8, 2019 • 6:00 PM TO 7:30 PM Review your cash reserve either annually DEAL WITH YOUR EXISTING DEBT Weigh your pre-existing debt against your or when your financial situation changes. need to borrow more and determine whether Major milestones like a new baby or At this stage in your life, you might be dealing this is a wise decision at this particular point Financial Planning homeownership will likely require some with student loan debt and wondering how in your life. adjustments. you can pay it off. Fortunately, there are many repayment plans that make it easier to pay off student loans. Check to see whether TAKE ADVANTAGE OF TECHNOLOGY financial basics BE CAREFUL WITH CREDIT CARDS you qualify for income-sensitive repayment Access to technology at a young age for millennials options or Income-Based Repayment. Even Credit cards can be useful in helping you is one major advantage that benefits if you’re not eligible, you may be able to monitor how much you spend, but they can millennials, compared with their parents joseph caputo refinance or consolidate your loans to make also lead you to spend more than you can and grandparents when they were starting CFP® the repayment schedule easier on your afford. Before accepting a credit card offer, out. These days, there’s virtually an app or PORTFOLIO MANAGER, CHIEF INFORMATION OFFICER budget. Explore all your options to find & EXECUTIVE MANAGER evaluate it carefully by doing the following: a program for everything, and that includes out what works best for you. [email protected] financial basics. Do your homework and find • Read the terms and conditions closely out which ones could be the most helpful • Know what the interest rate is and BEWARE OF NEW BORROWING to you. Do you need alerts to remind you With age comes responsibility, so if you’re a • How important is it for me to ESTABLISH AN EMERGENCY FUND how it is calculated to pay bills on time? Do you need help young adult in your 20s or 30s, chances are achieve each goal? You’re doing your best to pay off your organizing your finances? Are you looking It’s an unpleasant thought, but a financial you’ve been introduced to the realities of • Understand hidden fees such as late- existing debt, but you might find that you for a program that allows you to examine • How much will I need to save crisis could strike when you least expect it, so adulthood. While you’re excited by all the payment charges and over-limit fees need to borrow more (for example, for your bank, credit card, investment, and loan for each goal? you’ll want to be prepared. Protect yourself opportunities life has to offer, you’re also graduate school or a car). Think carefully account activities all at once? by setting up a cash reserve so you have • Look for rewards and/or incentive aware of your emerging financial responsi- Once you have a clear picture of your goals, before you borrow. funds available in the event you’re confronted programs that will be most beneficial bility. In the financial realm, the millennial you can establish a budget that will help Researching different programs can also with an unexpected expense. Otherwise to you generation (young adults born between 1981 you target them. Ask yourself the following questions before help with number crunching. Many financial and 1997) faces a unique set of challenges, you may need to use money that you have Contact the credit card issuer if you have you do: apps offer built-in calculators that simplify earmarked for another purpose—such as a including a competitive job market and questions about the language used in an • Is this purchase necessary? tasks that may seem overwhelming, such as significant student loan debt that can make BUILD A BUDGET down payment on a home—or go into debt. offer. And if you are trying to decide between breaking down a monthly budget or figuring it difficult to obtain financial stability. two or more credit card offers, be sure to • Have you comparison-shopped to out a loan repayment plan. Experiment with A budget helps you stay on track with You may be familiar with advice that you evaluate them to determine which will work make sure you’re getting the best what you find, and you’ll most likely develop your finances. There are several steps you’ll should have three to six months’ worth Poor money management can lead to best for you. possible deal? skills and insight that you can use as a debt, stress, and dependency on others. need to take to establish a budget. Start by of living expenses in your cash reserve. In reality, though, the amount you should save • How much will this loan or line of starting point for future planning. Fortunately, good money management skills identifying your current monthly income Bear in mind that your credit card use affects depends on your particular circumstances. credit cost over time? can make it easier for you to accomplish your and expenses. This is easier than it sounds: your credit score. Avoid overspending by Although apps are one way to get started, Consider factors like job security, health, personal goals. Become familiar with the Simply add up all of your sources of income. setting a balance that you’re able to pay • Can you afford to add another consider working with a financial professional income, and debts owed when deciding how basics of planning now, and your future Do the same thing with your expenses, off fully each month. That way, you can monthly payment to your budget? for a more personalized strategy. much money should be in your cash reserve. self will thank you for being responsible. making sure to include discretionary safely build credit while being financially • Will the interest rate change if you expenses (e.g., entertainment, travel, responsible. Take into account that missed Source: “Millennials Projected to Overtake A good way to accumulate emergency funds miss a payment? Baby Boomers as America’s Largest Generation,” hobbies) as well as fixed expenses (e.g., is to earmark a percentage of your paycheck payments of any sort can cause your credit Pew Research Center, March 2018. • Are your personal finances in good FIGURE OUT YOUR housing, food, utilities, transportation). each pay period. When you reach your goal, score to suffer. In turn, this could make shape at this time, or should you FINANCIAL GOALS don’t stop adding money—the more you it more difficult and expensive to borrow Compare the totals. Are you spending more wait to borrow until you’ve paid MAIN PHOTO: Azenhas do Mar, a seaside town in the have saved, the better off you’ll be. money later. Setting goals is an important part of life, than you earn? This means you’ll need to off pre-existing debt? municipality of Sintra, Portugal. CIRCLE: The Initiation Well particularly when it comes to your finances. make some adjustments to get back on (88 feet deep) located on the land of . Over time, your goals will probably change, track. Look at your discretionary expenses which will likely require you to make some to identify where you can scale back your adjustments. Start by asking yourself the spending. It might take some time and self- following questions: discipline to get your budget where it needs to be, but you’ll develop healthy financial • What are my short-term goals habits along the way. (e.g., new car, vacation)? • What are my intermediate-term On the other hand, you may discover that goals (e.g., buying a home)? you have extra money that you can put toward savings. Pay yourself first by adding • What are my long-term goals to your retirement account or emergency (e.g., saving for your child’s college fund. Building up your savings using extra education, retirement)? income can help ensure that you accomplish your financial goals over the long term.

12 13 WHICH ASSETS SHOULD YOU However, this may not always be the best Roth IRAs aren’t subject to the lifetime DRAW FROM FIRST? strategy. For example, if you intend to RMD rules. (Beneficiaries of either type of leave your entire estate to your spouse, it IRA are required to take RMDs after the Investment Management You may have assets in accounts that may make sense to withdraw from taxable IRA owner’s death.) are taxable (e.g., stocks), tax deferred (e.g., accounts first. This is because spouses are traditional IRAs), and tax free (e.g., Roth given preferential tax treatment with regard If you have more than one IRA, a required IRAs). Given a choice, which type of account distribution is calculated separately for each converting investment Your withdrawal rate is especially important to retirement plans. A surviving spouse should you withdraw from first? The answer can roll over retirement plan funds to his IRA. These amounts are then added together assets to retirement income in the early years of your retirement, as it is — it depends. to determine your RMD for the year. You can will have a lasting impact on how long your or her own IRA or retirement plan, or, in some cases, may continue the deceased withdraw your RMD from any one or more savings last. For retirees who don’t care about leaving an chris kelly spouse’s plan as his or her own. The funds of your IRAs. (Your traditional IRA trustee CPA, CFP®, M. ACCY estate to beneficiaries, the answer is simple in the plan continue to grow tax deferred, or custodian must tell you how much you’re FINANCIAL ADVISOR, PORTFOLIO MANAGER One widely used guideline on withdrawal in theory: withdraw money from taxable & EXECUTIVE MANAGER and distributions need not begin until the required to take out each year, or offer to rates for tax-deferred retirement accounts accounts first, then tax-deferred accounts, [email protected] spouse’s own required beginning date. calculate it for you.) For employer retirement that emerged in the 1990s stated that and lastly, tax-free accounts. By using your withdrawing slightly more than 4% annually plans, your plan will calculate the RMD, and tax-favored accounts last, and avoiding distribute it to you. (If you participate in more from a balanced portfolio of large-cap taxes as long as possible, you’ll keep more During your working years, SETTING A WITHDRAWAL RATE equities and bonds would provide inflation- CERTAIN DISTRIBUTIONS than one employer plan, your RMD will be you’ve probably set aside funds of your retirement dollars working for you. ARE REQUIRED determined separately for each plan.) The retirement lifestyle you can afford adjusted income for at least 30 years. in retirement accounts such as IRAs, However, more recent studies have found For retirees who intend to leave assets 401(k)s, or other workplace savings will depend not only on your assets and In practice, your choice of which assets It’s important to take RMDs into account investment choices, but also on how quickly that this guideline may be too generalized. to beneficiaries, the analysis can be to draw first may, to some extent, be when contemplating how you’ll withdraw plans, as well as in taxable accounts. you draw down your retirement portfolio. Individuals may not be able to sustain a more complicated. For example, if you directed by tax rules. You can’t keep your money from your savings. Why? If you Your challenge during retirement The annual percentage that you take out 4% withdrawal rate, or may even be able have appreciated assets, it may be more money in tax-deferred retirement accounts withdraw less than your RMD, you will pay is to convert those savings into of your portfolio, whether from returns to support a higher rate, depending on advantageous for you to withdraw from forever. The law requires you to start a penalty tax equal to 50% of the amount an ongoing income stream that or both returns and principal, is known their individual circumstances. The bottom tax-deferred and tax-free accounts first. taking distributions — called “required you failed to withdraw. The good news: will provide adequate income as your withdrawal rate. Figuring out an line is that there is no standard guideline This is because these accounts will not minimum distributions” or RMDs — from you can always withdraw more than your throughout your retirement years. appropriate initial withdrawal rate is a key that works for everyone — your particular receive a step-up in basis at your death, traditional IRAs by April 1 of the year RMD amount. issue in retirement planning and presents withdrawal rate needs to take into account as many of your other assets will. following the year you turn age 70½, many challenges. Why? Take out too many factors, including, but not limited to, whether you need the money or not. The bottom line is that an appropriate much too soon, and you might run out your asset allocation and projected rate of For employer plans, RMDs must begin by withdrawal rate/account selection can of money in your later years. Take out return, annual income targets (accounting April 1 of the year following the year you be a complicated one. A BWFA financial too little, and you might not enjoy your for inflation as desired), investment horizon, turn 70½ or, if later, the year you retire. professional can help you determine the retirement years as much as you could. and life expectancy. best course based on your individual circumstances.

MAIN PHOTO: Square is literally the centre of Lisbon, known for its fountains and architecture. The Portuguese calçada (traditional pavement featuring mosaics of limestone and black basalt) dates back from the nineteenth century. CIRCLE: Famous yellow tram 28 passing in front of Santa Maria cathedral in Lisbon, Portugal.

14 15 Congrats Chris! CHRIS KELLY HAS REACHED HIS 10 YEAR ANNIVERSARY WORKING FOR BWFA!

His commitment to building strong relationships with his clients is at the core of his makeup. Chris brings a diverse expertise to BWFA with a command of investments, tax, and financial planning. He can talk with you about it all, and this insight is of utmost value. We are so happy to have Chris as part of our BWFA family. Thank you Chris for all you have done for your clients and BWFA over the past decade!

Sincerely, bwfa q&a cordially invite you to attend 8,000 days in retirement employee spotlight

chris kelly CPA, CFP®, M. ACCY FINANCIAL ADVISOR, PORTFOLIO MANAGER & EXECUTIVE MANAGER [email protected]

MOST REWARDING PART WHERE DO YOU SEE FUN FACT ABOUT OF WORKING AT BWFA? YOURSELF IN 5 YEARS? YOURSELF? My most rewarding part of working Professionally, personally and Although I enjoy maintaining an at BWFA is having the privilege to spiritually — my goal is to be a overall healthy lifestyle, I can be a work alongside a fantastic group of better version of myself 5 years big eater — recently my son (he’s individuals, all of whom share the from now than I am today. 12 years old) challenged me to a taco same passion for providing the best eating contest at our home. This was financial advice and customer service a challenge I couldn’t turn down, so to each and every one of our clients. WHO INSPIRES YOU? I went out and bought all the fixins I’m inspired by anyone who realizes — 50+ taco shells, 6 lbs of ground their dream with humility and beef (grass fed to keep it somewhat FAVORITE THINGS TO DO kindness — while always seeking healthy GRIN-ALT, rice, beans, lettuce, salsa OUTSIDE OF BWFA? out ways to help those next in line and guacamole. After about an hour A few things I enjoy outside of BWFA below them. A famous country or so in, calling it quits at 19 tacos, — being able to share memorable singer, Tim McGraw, has two verses my son found himself keeled over on experiences with my family and good in his song, Humble and Kind, that the floor in defeat — I downed 20, friends, getting in a good workout puts it best... and could’ve kept going! that pushes my limits, and enjoying all the natural beauty that surrounds When the dreams you’re dreamin’ us throughout the United States. come to you TELL ME ABOUT A DECEMBER 17, 2019 • 11:45 AM TO 1:00 PM • LUNCH WILL BE SERVED MEMORABLE TRAVEL When the work you put in EXPERIENCE. is realized In 2019 the average retiree is living much longer than previous generations. Let yourself feel the pride but I’ve been fortunate to enjoy many memorable travel experiences with What will you do with all that additional time? Are you financially prepared? Always stay humble and kind my wife and kids over the past 15 The Massachusetts Institute of Technology AgeLab, led by Joesph Coughlin has performed fascinating new research years or so, and I cherish each and Don’t take for granted the love on aging. At BWFA we are committed to the whole retirement experience, including client wellness and navigating every one of our trips dearly. But, my this life gives you most memorable travel experience the ups and downs of the entire retirement journey. We encourage you to join us for a robust discussion on the When you get where you’re goin’ dates back to the 1980’s when my four distinctly different phases of retirement. Discover how each phase will impact you and your loved ones. Don’t forget turn back around Dad and I did a father/son trip. We Sincerely, Help the next one in line flew out to California and drove the CA coast via Pacific Coast Highway in Always stay humble and kind a red Mustang convertible! That trip not only sparked my initial fascination Robert Carpenter WHAT IS YOUR with travel, but it also taught me FAVORITE MOVIE? the importance of sharing/enjoying President and CEO experiences with loved ones. The Family Man To register for the event: Email Eve Kennedy at [email protected] 18 19 • Statements of income, or profit and • If your small business is one that • Depending on whether you use your loss statements, help pinpoint carries no inventory, then you can home or other real estate for business unprofitable departments, products, generally use the cash method purposes, you may deduct some or all Business Services or services, alerting you to make of accounting. of any mortgage interest paid, as well changes or eliminations if necessary. as some or all of the maintenance • If you produce, purchase, or sell and repair expenses associated with • The balance sheet captures the merchandise, you typically must keep the property. condition of your business at a given an inventory and use the accrual record keeping for • In addition to providing income moment in time, allowing you to method of accounting. However, there • You may deduct the cost of business your own business tax information to your employees, measure its reality against either are exceptions to this rule if you are supplies purchased during the tax year. payroll records help you determine your own budget projections or a “qualifying taxpayer” or a “qualifying • You may deduct the cost of utilities brian macmillan the appropriateness of your pricing similar businesses. small business taxpayer.” associated with business use. MANAGING DIRECTOR and customer billing policies. MERGERS & ACQUISITIONS • The business-related portion of • You can deduct professional fees, such [email protected] • If your business keeps merchandise BE PREPARED: deductible car or truck expenses as those paid to your accountant. on hand, your records help you THE TAXMAN COMETH may be the actual expenses incurred, manage the size of your inventory, or you may elect to take the standard Remember to save any records and Keeping good business records will Many websites allow you to see a demonstration thus avoiding the loss of profits One of the most important functions mileage rate. underlying documentation, such as invoices not only help you stay in business but version of the software before you purchase from obsolescence, deterioration, of business records is to prepare you or receipts, relevant to your tax return for may also help you increase profits. the software. • Depreciation may be taken on property or simply being out of stock. (or your accountant) for filing tax returns at least three years. Ask your accountant Your business records let you analyze for the business. Thus, you may want to that is used in the business or held to how long he or she suggests keeping the You can decide whether to keep your own books where your business is and where it’s • Expense records help you plan to set up a record-keeping system that produce income, provided it has documentation. or hire someone to do it for you. Your decision going. They point out potential trouble meet obligations in a timely fashion. captures information in a way that matches “substantial” and “determinable” depends in part on how much time and ability spots and serve as a guide to where They also help you assess whether the demands of the IRS. If you are a sole useful life. you have for the task. You can hire a company MANAGING YOUR you want your business to be. the income generated supports the proprietor, you’ll want to familiarize yourself that specializes in payroll services to handle the • You may deduct any contributions BUSINESS RECORDS expense involved. with the requirements for completing paperwork and withholdings for your employees. to employee benefit plans (such as CRITERIA FOR RECORD- Ideally, you will have an accountant prepare Form 1040, Schedule C. health insurance plans and other fringe Records management is vital to any business. You should have a good system in place that KEEPING SYSTEMS your tax returns and year-end statements. In Here are some tax considerations to benefits) or contributions to pension many cases, an accountant can also offer advice or profit-sharing plans that are for the will ensure that both your paper (physical) Your record-keeping system should be remember in relation to your record- records and your electronic or digital on various aspects of financial management, keeping system design: benefit of employees. easy to use. If it’s too complicated, it might such as cash flow analysis, borrowing for the records are retained as long as they need be neglected, defeating its purpose. It should business, tax considerations, and suggestions • You may deduct real estate or personal to be. Make sure your records are easily reflect information accurately, completely, for which software to buy for record keeping. property taxes on business assets, identifiable and accessible, and keep them and consistently throughout all of its Whichever way you go, you should stay involved Social Security and Medicaid taxes well-organized. Shred (and recycle) paper applications, and it should do so in a timely in the record-keeping process. After all, it’s your paid to match required withholdings records that you do not need or no longer fashion; you don’t want to base important business, and ultimately you are responsible on employee wages, state disability need. Keep your electronic records safe and business decisions on partial or outdated for its success or failure. and federal and state unemployment secure by adding a firewall to your computer information. Finally, it should present results taxes paid. Sales tax should be treated and using software that provides adequate in an easily understandable manner. If you as part of the cost of goods or security. Back up your computer regularly can’t comprehend the data that your record- WHAT YOUR RECORDS merchandise purchased. using a CD, external hard drive, or an online keeping system provides, you might ignore SHOULD DO FOR YOU remote back-up service (i.e., in the “cloud”), their implications. and be sure to use logins and passwords that Like a medical diagnostic tool, your records are secure. Dispose of e-records carefully. Some commercial record-keeping systems help you assess the health of your business. are generic in format and applicable to • Bank statements measure cash on many types of business. Others are designed MAIN PHOTO: The is a Romanticist castle in hand, and accounts receivable predict São Pedro de Penaferrim, in the municipality of Sintra, on for specific types of business operations future income. Together, these records the . CIRCLE: Porto, Portugal old town (e.g., retail sales and manufacturing). help determine cash flow requirements cityscape on the Douro River with traditional Rabelo boats. Most generally will offer the ability to and may point to a need for short- summarize your business activity with term borrowing. appropriate periodic financial reports.

20 21 BWFA SUMMER FUN 2019 FIREWORKS • FUN • PHOTO BOOTH A great time was had, and captured, by all at the BWFA Fourth of July Celebration! Upcoming Events All Seminars are from 11:45 A.M. to 1:00 P.M. unless noted otherwise. Please join us and bring a friend.

october 29, 2019 december 10, 2019 October What’s Your Retirement Number? Business Owner Series: Estate Planning

october 1, 2019 october 31, 2019 december 12, 2019 Tax Planning w/ Lex Ruygrok, CPA BOO! Investing & Retirement Planning State of Residence in Retirement BOO! Doesn’t Have to be Scary october 3, 2019 december 13, 2019 Hospice Care and End of Life Issues Wellness Series: Deepen Your State Investing & w/ Gary Greenwald, Esq. November of Relaxation w/ Dagmar Bohlmann, Certified Yoga Teacher october 8, 2019 november 5, 2019 Retirement 6:00 PM - 7:30 PM Disability Planning w/ Gary Greenwald, Esq. december 17, 2019 Book Review w/ Jim Osterhaus, PhD. 8,000 Days in Retirement “Questions Couples Ask Behind Closed november 6, 2019 Planning Doors: Exploring the Most Common 8,000 Days in Retirement at Cured december 20, 2019 Conflicts in Marriage” Table & Tap w/ Elville and Associates BWFA Internship Open House Doesn’t october 10, 2019 november 12, 2019 Wellness Series: Self Care for the Why a Cash Balance Plan is a Huge January Caregiver w/ Dr. Emily Telfair, N.D. Tax Strategy w/ Pollard & Associates Have to january 7, 2020 october 15, 2019 november 14, 2019 Tax Planning w/ Lex Ruygrok, CPA Pitfalls of Annuities CST: Client Information Workshop be Scary! january 9, 2020 october 17, 2019 november 19, 2019 Wellness Series: Boost Immune Health this Elder Law w/ Elville and Associates Tax Planning w/ Lex Ruygrok, CPA Cold & Flu Season w/ Dr. Emily Telfair, N.D. OCTOBER 31, 2019 • 11:45 AM TO 1:00 PM • LUNCH WILL BE SERVED october 18, 2019 november 21, 2019 january 14, 2020 8,000 Days in Retirement at Cured Estate Planning for the LGBTQ+ Planning for Social Security Table & Tap w/ Elville and Associates Community w/ Elville and Associates *COSTUME OPTIONAL* january 16, 2020 october 22, 2019 Estate Planning: Legacy & Charitable Baltimore-Washington Financial Advisors invite you to enjoy an educational discussion on investing and retirement planning State of Residence in Retirement December Giving w/ Elville and Associates while having some fun on Halloween! Our financial education will ensure you don’t get tricked and enjoy treats. october 24, 2019 december 3, 2019 Top 10 Reasons You Should Fire january 16, 2020 TOPICS WILL INCLUDE: Making the Most of Medicare Your Financial Advisor 6:00 PM - 9:00 PM • What is the Halloween investment strategy? october 24, 2019 BWFA Book Club (TBD) • Is the October effect real? december 5, 2019 6:00 PM - 9:00 PM Hospice Care and End of Life Issues • How to avoid the return gap? BWFA Book Club “Calm Sea w/ Gary Greenwald, Esq. • How to avoid the “Tax Boogey Man” and Prosperous Voyage” Check out BWFA.COM for latest list of seminars. • Does your advisor trick or treat you? Sincerely,

Robert Carpenter President and CEO

The 25 de Abril Bridge connects the city of Lisbon to the municipality of on the left bank of the river. To register for the event: Email Eve Kennedy at [email protected] 26 27 RETIREMENT & ESTATE PLANNING I INVESTMENT MANAGEMENT I TAX SERVICES I BUSINESS SERVICES 5950 SYMPHONY WOODS ROAD I SUITE 600 I COLUMBIA, MD 21044 I P: 410.461.3900 I TF: 888.461.3900 I F: 443.539.0330 I BWFA.COM