Your Financial Future June 2016

YOUR FINANCIAL FUTURE
Your Guide to Life Planning
May 2016
Our roads to success may
have twists and turns and
ups and downs; together we
can navigate a course and
enjoy the scenery along the
way.
Christian Phillips
Phillips Financial
LPL Registered Principal
1920 Tienda Drive Suite 202
Lodi, CA 95242
209-367-0868
Fax: 209-367-0811
christian.phillips@lpl.c
om
http://lpladvisorweb.com
/PhillipsFinancial/
CA Insurance Lic# 0A20651
In This Issue
A Net Worth Statement Helps Keep Retirees on Track
Your net worth is more than just your income. A net worth statement presents a composite
picture "in time" of your overall financial health.
Keep Emotions at Bay With an Investment Policy Statement
An investment policy statement can serve as a blueprint for all of your short-, mid-, and
long-term financial goals.
Retirement Planning for Dual-Wage Earning Households
Dual-wage earning couples have a lot to consider when assessing their various retirement
portfolios.
Turning the Page: Five Things Baby Boomers Need to Know
About RMDs
How time flies. The first of the baby boom generation will be required to start taking RMDs from
their retirement accounts this year. Read on to learn some crucial "basics" about RMDs and how
the rules governing them may affect you.
Health Savings Accounts: Get to Know These Versatile
Savings Tools
Health savings accounts are a popular resource commonly used by individuals covered by a
high-deductible health plan. Whether you have access to an HSA through your employer or you
opt to enroll in one on your own, there is much to learn about these flexible savings vehicles.

2 Your Guide to Life Planning
Taking stock of your
assets and liabilities
may require a bit of
research at first, but
the process will get
easier each time you
do it.
A Net Worth Statement Helps Keep Retirees on Track
A number of planning tools can help retirees monitor their cash flow and make appropriate adjustments in
response to changes in income and expenses. Not the least of these is a net worth statement.
By calculating your net worth, you are essentially taking a snapshot of your current financial status. That
snapshot can then provide you with the information you need to make important financial decisions.
What is net worth? It is more than just your income -- it's your overall wealth. To determine your net worth,
just add up your assets and subtract your liabilities. Your assets are everything you own, including the money in
your bank accounts, retirement plans, and investments accounts as well as real estate and even possessions
such as your car(s) or a boat. Your liabilities are what you owe. This may include the balance on your home
mortgage, credit card debt, car payments, and even unpaid taxes.
Taking stock of your assets and liabilities may require a bit of research at first, but the process will get easier
each time you do it. It's a good idea to review the calculation each year to make sure you stay on the right track.
Whether your net worth is higher or lower than you expected really should not be of concern. The main purpose
of identifying your net worth is to give you a reference point for assessing your overall financial health.
The following worksheet will help you break down your assets and liabilities so you can reach your bottom line.
YOUR ASSETS
Cash/bank accounts, CDs, etc.1
$
Vested share of retirement accounts (employer plans,
pensions, profit-sharing plans, etc.)
$
Market value of investments (stocks, bonds, mutual
funds, IRAs, annuities, etc.)2
$
Market value of real estate (home, other property) $
Market value of vehicles (car, boat) $
Cash value of insurance policies $
Other (valuables, furnishings, etc.) $
TOTAL ASSETS $
YOUR LIABILITIES
Balance due on home or real estate mortgage(s) $
Balance due on loans (car, student, real estate) $
Balance due on rental properties $
Balance due on credit cards $
Fixed monthly payments $
Unpaid taxes $
Other $
TOTAL LIABILITIES $
YOUR NET WORTH (Subtract liabilities from $

assets)
CDs are FDIC insured and offer a fixed rate of return if held to maturity.1
Investing in stocks involves risks, including loss of principal. Bonds are subject to market and interest rate2
risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and
change in price. Investing in mutual funds involves risk, including loss of principal. Mutual funds are offered
and sold by prospectus only. You should carefully consider the investment objectives, risks, expenses and
charges of the investment company before you invest. For more complete information about any mutual fund,
including risks, charges and expenses, please contact your financial professional to obtain a prospectus. The
prospectus contains this and other information. Read it carefully before you invest.
An annuity is a long-term, tax-deferred investment vehicle designed for investment purposes and contains both
an investment and an insurance component. They are sold only by prospectus. Guarantees are based on the
claims-paying ability of the issuer and do not apply to an annuity's separate account or its underlying
investments. The investment returns and principal value of the available subportfolios will fluctuate so that the
value of an investor's unit, when redeemed, may be worth more or less than their original value. Gains from
tax-deferred investments are taxable as ordinary income upon withdrawal.
© 2016 Wealth Management Systems Inc. All rights reserved.
1-331501

1.
2.
3.
4.
5.
Once you know how
much risk you can
accept, you can
create an asset
allocation target and
a policy statement
designed specifically
for you.
Keep Emotions at Bay With an Investment Policy Statement
Chances are your investment strategy calls for some portion of your portfolio to be invested in stocks to help
you reach your long-term goals. But when the stock market turns choppy -- as it most certainly will from time1
to time -- try not to let your emotions get in the way of achieving your objectives. Keep in mind that a loss in
stock market value may only matter if you need access to that money within two years or less. Furthermore,
history shows that the market has typically made up its losses fairly quickly, although past performance is no
guarantee of future results.
If you are skittish about the markets and what might lie ahead, there are steps you can take to help you stick to
your long-term strategy, some of which may best be explored and implemented with the help of a trusted
financial advisor.
Put an Investment Policy in Place
Working with an advisor, you can develop a customized investment policy statement to help you pursue your
short- and long-term financial goals -- throughout all economic cycles. A typical policy statement might be
based on five key factors:
The time frames for your various financial goals (e.g., short-, medium, long).
Your need for liquidity in your portfolio.
Your personal tax situation.
The legal structure of the investment vehicle, such as an IRA or trust account.
Other special factors affecting your personal situation, such as a preference for socially responsible
investing, or if you have a special needs child.
Once you know how much risk you can accept, you can create an asset allocation target and a policy statement
designed specifically for you. When properly structured, your investment policy statement helps to protect you
against market downturns. For example, say you may have the risk tolerance to accept a one-year decline of
more than 20% on some of your long-term money, but if part of your portfolio is earmarked to pay for your
daughter's wedding in 18 months, your policy would not allow that portion to be exposed to extreme market
volatility.
Don't Panic
As tempting as it may be to abandon your investment policy, such a shortsighted move is likely to cause you far
more harm than good. Emotional decisions are rarely the best financial decisions for your portfolio. Instead of
overreacting to volatile market conditions, try to stick with your strategy and avoid a costly disruption in the
balance of your investments.
As a matter of fact, you may consider using market declines as opportunities to add to your equity holdings.
During times of economic downturn, stocks are often priced below market value, which means it may be a
good time to "bargain shop," as long as doing so fits within the parameters of your investment policy
statement.
In times of market stress, plan to revisit your investment policy with your financial advisor, and remind
yourself why you set it up in the first place. If nothing has changed in your life, you probably shouldn't change
your strategy. The bottom line is that only personal factors -- not the current state of the economy and/or
financial markets -- should drive your investment decisions.
Investing in stocks involves risks, including loss of principal.1
1-345196

Like any investment
portfolio, retirement
accounts should work
as a unit to help you
pursue a specific
accumulation goal.
Retirement Planning for Dual-Wage Earning Households
With job changes so prevalent throughout our society, it is likely that a couple may have multiple retirement
accounts, including 401(k), 403(b), or 457 plans, rollover IRAs, and possibly defined benefit plans. Because of
the variety of investment options offered under such plans, it is important for couples to understand the
possible detrimental effects that an uncoordinated retirement nest egg can have on reaching financial goals.
Potential red flags include:
Inappropriate investment strategy
Like any investment portfolio, retirement accounts should work as a unit to help you pursue a specific
accumulation goal. Success requires a coordinated investment strategy. Is the overall asset allocation
appropriate for a couple's objectives and risk tolerance? Are the portfolios adequately diversified? Are they
overweighted (or underweighted) in any one asset class or individual security? Do the portfolios complement a
couple's taxable investment accounts, real estate, and other assets?
Poorly timed distribution strategy
Couples nearing retirement or already retired must consider the timing of their distributions in light of their
income needs, tax situation, and market dynamics. For instance, should they begin taking distributions earlier
than the required age to avoid a potentially higher income tax hit later? Should they take periodic
distributions; annuitize; or take a lump sum and pay the taxes, then reinvest the proceeds elsewhere? Might it
make sense to convert a traditional IRA to a Roth IRA to put off distributions as long as possible and/or
receive tax-free income? Which accounts should they tap first, and in what order should the others follow?
What if the market is in the midst of a downturn when required distributions must begin?
Fees
Couples should consider the fees associated with all of their retirement accounts and how they might affect
returns. Would it make sense to consolidate some accounts to help minimize fees?
Estate planning
Couples planning their estates will face a number of questions surrounding their retirement plans. A key
concern centers on the naming of beneficiaries and the income and estate tax treatment of the proceeds.
Should the spouse be the beneficiary, or would naming children or a trust as beneficiary be more appropriate?
These are just a few of the questions that couples must grapple with when managing their individual
retirement plan accounts. Yet no two couples' financial situations are alike. There is no set formula or
mathematical equation that can be applied easily to all circumstances. Keeping track of the range of
investments involved is necessary to successfully pursue long-term financial goals -- but doing so is no simple
task. It often requires objectivity and professional insight. If you are part of a dual-income family, speak with
your financial advisor about how you and your spouse can review and coordinate your separate retirement
investments to create an effective, comprehensive plan.
This communication is not intended to be tax advice and should not be treated as such. Each individual's tax
situation is different. You should contact your tax professional to discuss your personal situation.
1-360687

1.
2.
3.
4.
5.
While first-timers
officially have until
April 1 of the
following year to take
their first annual
required minimum
distribution (RMD),
doing so means you'll
have to take two
distributions in 2017.
Turning the Page: Five Things Baby Boomers Need to Know About RMDs
The times they are a changin' for baby boomers. The generation that lived through and influenced the
revolution in the retirement industry is now poised to begin withdrawing money from their retirement-saving
vehicles -- namely IRAs and/or employer-sponsored retirement plans.
If you were born in the first half of 1946 -- you are among the first baby boomers who will turn 70½ this year.
That's the magic age at which the Internal Revenue Service requires individuals to begin tapping their qualified
retirement savings accounts. While first-timers officially have until April 1 of the following year to take their
first annual required minimum distribution (RMD), doing so means you'll have to take two distributions in
2017. And that could potentially push you into a higher tax bracket.
This is just one of the tricky details you'll have to navigate as you enter the "distribution" phase of your
investing life. Here are five more RMD considerations that you may want to discuss with a qualified tax and/or
financial advisor.
RMD rules differ depending on the type of account. For all non-Roth IRAs, including traditional IRAs,
SEP IRAs, and SIMPLE IRAs, RMDs must be taken by December 31 each year whether you have retired
or not. (The exception is the first year, described above.) For defined contribution plans, including
401(k)s and 403(b)s, you can defer taking RMDs if you are still working when you reach age 70½
provided your employer's plan allows you to do so AND you do not own more than 5% of the company
that sponsors the plan.
You can craft your own withdrawal strategy. If you have more than one of the same type of retirement
account -- such as multiple traditional IRAs -- you can either take individual RMDs from each account
or aggregate your total account values and withdraw this amount from one account. As long as your
total RMD value is withdrawn, you will have satisfied the IRS requirement. Note that the same rule
does not apply to defined contribution plans. If you have more than one account, you must calculate
separate RMDs for each then withdraw the appropriate amount from each.
Taxes are still due upon withdrawal. You will probably face a full or partial tax bite for your IRA
distributions, depending on whether your IRA was funded with nondeductible contributions. Note that
it is up to you -- not the IRS or the IRA custodian -- to keep a record of which contributions may have
been nondeductible. For defined contribution plans, which are generally funded with pretax money,
you'll likely be taxed on the entire distribution at your income tax rate. Also note that the amount you
are required to withdraw may bump you up into a higher tax bracket.
Penalties for noncompliance can be severe. If you fail to take your full RMD by the December 31
deadline on a given year or if you miscalculate the amount of the RMD and withdraw too little, the IRS
may assess an excise tax of up to 50% on the amount you should have withdrawn -- and you'll still have
to take the distribution. Note that there are certain situations in which the IRS may waive this penalty.
For instance, if you were involved in a natural disaster, became seriously ill at the time the RMD was
due, or if you received faulty advice from a financial professional or your IRA custodian regarding your
RMD, the IRS might be willing to cut you a break.
Roth accounts are exempt. If you own a Roth IRA, you don't need to take an RMD. If, however, you
own a Roth 401(k) the same RMD rules apply as for non-Roth 401(k)s, the difference being that
distributions from the Roth account will be tax free. One way to avoid having to take RMDs from a
Roth 401(k) is to roll the balance over into a Roth IRA.
For More Information
Everything you need to know about retirement account RMDs can be found in ,IRS Publication 590-B
including the life expectancy tables you'll need to figure out your RMD amount. Your financial and tax
professionals can also help you determine your RMD.
The information in this communication is not intended to be tax advice. Each individual's tax situation is
different. You should consult with your tax professional to discuss your personal situation.
1-486482

HSAs are typically
offered in conjunction
with high-deductible
health plans to help
offset the burden of
out-of-pocket medical
expenses that must
be incurred before
the deductible is met
and the insurance
policy kicks in.
Health Savings Accounts: Get to Know These Versatile Savings Tools
The number of Americans covered by high-deductible health plans (HDHPs)/health savings accounts (HSAs)
rose to about 19.7 million in 2015 -- up from 17.4 million in 2014. On average, enrollment in HDHPs/HSAs has
risen nearly 22% over the past two years. If you are new to HSAs and eager to take advantage of all the1
potential benefits they have to offer, keep the following in mind as you familiarize yourself with your account
this year.
For Immediate Use. HSAs help to cushion the effect of high upfront medical costs, but in order to take
advantage of your account it must be funded. According to industry experts, having an open account is not
enough. You must have money in the account -- even a few dollars -- in order for it to be considered a valid
source of tax-advantaged funding. If you wait until a medical bill arrives to fund your HSA for the first time,
you may well miss out on its key benefit.
Triple Tax Savings. HSAs are typically offered in conjunction with high-deductible health plans to help offset
the burden of out-of-pocket medical expenses that must be incurred before the deductible is met and the
insurance policy kicks in. They do this by offering tax savings three ways:
Contributions made to the account are tax deductible up to certain limits or, if they are made through
an employer program, they are made with pretax dollars.
Any interest or investment earnings accrued on the money in the account is tax free.
When withdrawals are used for qualifying medical expenses they are tax free.
An Investment Vehicle, Too. Not all HSAs are created equal. Some are simple savings accounts that offer a
minimal rate of interest. Others allow you to invest your contributions as you would in a 401(k) or IRA. This
potential investment feature, coupled with the fact that HSAs are not a "use it or lose it" vehicle, opens the
door to viewing HSAs as another tool in an individual's retirement funding arsenal.
For instance, because money can accumulate in the account indefinitely, it could be earmarked for future
health care costs incurred in retirement. What's more, if money in the account is not used by age 65, it can be
withdrawn for any reason with no penalty, although taxes will be owed at then-current rates. For those who2
can afford to contribute money to an HSA and leave it to grow (electing instead to use non-HSA monies to pay
for medical costs) an HSA has the potential to be a sound addition to a retirement savings strategy.
Contribution limits for 2016 are $3,350 for an individual plan and $6,750 for a family plan. In either case, an
extra $1,000 contribution is allowed for those over age 55.
Employer Perks. Akin to the 401(k) match, some employers contribute money to HSAs on behalf of their
employees. Find out what your employer's policy is with regard to HSA contributions and whether there is a
Wellness Program in place that may offer additional savings incentives.
Shop Around for a Better Plan. If you are enrolled in an HDHP at work, chances are your employer also
enrolled you in an HSA. But you need not stick with that HSA if you find another one that better suits your
needs. You can essentially "roll over" your HSA assets to another plan by filling out the requisite paperwork
and following the rules that are comparable to those governing 401(k) or IRA rollovers -- i.e., a direct
trustee-to-trustee HSA transfer. Similarly, if you withdraw the money and deposit it in a non-HSA account you
will pay regular income tax on the amount plus a 20% additional federal tax.
This communication is not intended to be tax advice and should not be treated as such. Each individual's tax
situation is different. You should contact your tax professional to discuss your personal situation.
America's Health Insurance Plans (AHIP), "2015 Census of Health Savings Account - High Deductible1
Health Plans," November 2015.
U.S.News.com, "10 Ways to Maximize Your HSA in 2016," Feb. 4, 2016.2
1-491633

The opinions voiced in this material are for general information only and are not intended to provide specific
advice or recommendations for any individual. To determine which investment(s) may be appropriate for
you, consult your financial advisor prior to investing. All performance referenced is historical and is no
guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The financial consultants of Phillips Financial are registered representatives with and Securities are offered
through LPL Financial. Member FINRA/SIPC. Insurance products offered through LPL Financial or its
licensed affiliates.
Not FDIC/NCUA Insured
Not Bank/Credit Union
Guaranteed
May Lose Value
Not Insured by any Federal Government Agency Not a Bank Deposit
This newsletter was created using , powered by Wealth Management Systems Inc.Newsletter OnDemand

Your Financial Future June 2016

More Related Content

What's hot

Viewers also liked

Similar to Your Financial Future June 2016

Recently uploaded

Your Financial Future June 2016