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All About IRAs 1/30/2012

2012-01-30T16:35:00.000-08:00

All About IRAs 1/30/2012

An individual retirement arrangement (IRA) is a personal retirement savings plan that offers specific tax benefits. In fact, IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA.

What types of IRAs are available?

There are two major types of IRAs: traditional IRAs and Roth IRAs. Both allow you to make annual contributions of up to $5,000 in 2011 and 2012. Generally, you must have at least as much taxable compensation as the amount of your IRA contribution. But if you are married filing jointly, your spouse can also contribute to an IRA, even if he or she does not have taxable compensation. The law also allows taxpayers age 50 and older to make additional "catch-up" contributions. These folks can put up to $6,000 in their IRAs in 2011 and 2012.

Both traditional and Roth IRAs feature tax-sheltered growth of earnings. And both give you a wide range of investment choices. However, there are important differences between these two types of IRAs. You must understand these differences before you can choose the type of IRA that's best for you.

Traditional IRAs

Practically anyone can open and contribute to a traditional IRA. The only requirements are that you must have taxable compensation and be under age 70½. You can contribute the maximum allowed each year as long as your taxable compensation for the year is at least that amount. If your taxable compensation for the year is below the maximum contribution allowed, you can contribute only up to the amount you earned.

Your contributions to a traditional IRA may be tax deductible on your federal income tax return. This is important because tax-deductible (pretax) contributions lower your taxable income for the year, saving you money in taxes. If neither you nor your spouse is covered by a 401(k) or other employer-sponsored plan, you can generally deduct the full amount of your annual contribution. If one of you is covered by such a plan, your ability to deduct your contributions depends on your annual income (modified adjusted gross income, or MAGI) and your income tax filing status. You may qualify for a full deduction, a partial deduction, or no deduction at all.

What happens when you start taking money from your traditional IRA? Any portion of a distribution that represents deductible contributions is subject to income tax because those contributions were not taxed when you made them. Any portion that represents investment earnings is also subject to income tax because those earnings were not previously taxed either. Only the portion that represents nondeductible, after-tax contributions (if any) is not subject to income tax. In addition to income tax, you may have to pay a 10% early withdrawal penalty if you're under age 59½, unless you meet one of the exceptions.

If you wish to defer taxes, you can leave your funds in the traditional IRA, but only until April 1 of the year following the year you reach age 70½. That's when you have to take your first required minimum distribution from the IRA. After that, you must take a distribution by the end of every calendar year until your funds are exhausted or you die. The annual distribution amounts are based on a standard life expectancy table. You can always withdraw more than you're required to in any year. However, if you withdraw less, you'll be hit with a 50% penalty on the difference between the required minimum and the amount you actually withdrew.

Roth IRAs

Not everyone can set up a Roth IRA. Even if you can, you may not qualify to take full advantage of it. The first requirement is that you must have taxable compensation. If your taxable compensation is at least $5,000 in 2012 (and 2011), you may be able to contribute the full amount. But it gets more complicated. Your ability to contribute to a Roth IRA in any year depends on your MAGI and your income tax filing status. Your allowable contribution may be less than the maximum possible, or nothing at all.

Your contributions to a Roth IRA are not tax deductible. You can invest only after-tax dollars in a Roth IRA. The good news is that, if you meet certain conditions, your withdrawals from a Roth IRA will be completely free from federal income tax, including both contributions and investment earnings. To be eligible for these qualifying distributions, you must meet a five-year holding period requirement. In addition, one of the following must apply:

• You have reached age 59½ by the time of the withdrawal
• The withdrawal is made because of disability
• The withdrawal is made to pay first-time homebuyer expenses ($10,000 lifetime limit from all IRAs)
• The withdrawal is made by your beneficiary or estate after your death

Qualified distributions will also avoid the 10% early withdrawal penalty. This ability to withdraw your funds with no taxes or penalty is a key strength of the Roth IRA. And remember, even nonqualified distributions will be taxed (and possibly penalized) only on the investment earnings portion of the distribution, and then only to the extent that your distribution exceeds the total amount of all contributions that you have made.

Another advantage of the Roth IRA is that there are no required distributions after age 70½ or at any time during your life. You can put off taking distributions until you really need the income. Or, you can leave the entire balance to your beneficiary without ever taking a single distribution. Also, as long as you have taxable compensation and qualify, you can keep contributing to a Roth IRA after age 70½.

Choose the right IRA for you

Assuming you qualify to use both, which type of IRA is best for you? Sometimes the choice is easy. The Roth IRA will probably be a more effective tool if you don't qualify for tax-deductible contributions to a traditional IRA. However, if you can deduct your traditional IRA contributions, the choice is more difficult. Most professionals believe that a Roth IRA will still give you more bang for your dollars in the long run, but it depends on your personal goals and circumstances. The Roth IRA may very well make more sense if you want to minimize taxes during retirement and preserve assets for your beneficiaries. But a traditional deductible IRA may be a better tool if you want to lower your yearly tax bill while you're still working (and probably in a higher tax bracket than you'll be in after you retire). A financial professional or tax advisor can help you pick the right type of IRA for you.

Note: You can have both a traditional IRA and a Roth IRA, but your total annual contribution to all of the IRAs that you own cannot be more than $5,000 ($6,000 if you're age 50 or older).

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Trust Basics 1/28/2012

2012-01-28T07:00:00.000-08:00

Trust Basics 1/28/2012

Whether you're seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals. Their power is in their versatility--many types of trusts exist, each designed for a specific purpose. Although trust law is complex and establishing a trust requires the services of an experienced attorney, mastering the basics isn't hard.

What is a trust?

A trust is a legal entity that holds assets for the benefit of another. Basically, it's like a container that holds money or property for somebody else. There are three parties in a trust arrangement:

• The grantor (also called a settlor or trustor): The person(s) who creates and funds the trust

• The beneficiary: The person(s) who receives benefits from the trust, such as income or the right to use a home, and has what is called equitable title to trust property

• The trustee: The person(s) who holds legal title to trust property, administers the trust, and has a duty to act in the best interest of the beneficiary
You create a trust by executing a legal document called a trust agreement. The trust agreement names the beneficiary and trustee, and contains instructions about what benefits the beneficiary will receive, what the trustee's duties are, and when the trust will end, among other things.

Funding a trust

You can put almost any kind of asset in a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork. The assets you choose to put in a trust will depend largely on your goals. For example, if you want the trust to generate income, you should put income-producing assets, such as bonds, in your trust. Or, if you want your trust to create a fund that can be used to pay estate taxes or provide for your family at your death, you might fund the trust with a life insurance policy.

Potential trust advantages:

• Minimize estate taxes

• Shield assets from potential creditors

• Avoid the expense and delay of probate

• Preserve assets for your children until they are grown (in case you should die while they are still minors)

• Create a pool of investments that can be managed by professional money managers

• Set up a fund for your own support in the event of incapacity

• Shift part of your income tax burden to beneficiaries in lower tax brackets

• Provide benefits for charity

Potential trust disadvantages

• There are costs associated with setting up and maintaining a trust, which may include trustee fees, professional fees, and filing fees

• Depending on the type of trust you choose, you may give up some control over the assets in the trust

• Maintaining the trust and complying with recording and notice requirements can take considerable time

• Income generated by trust assets and not distributed to trust beneficiaries may be taxed at a higher income tax rate than your individual rate

Types of trusts

There are many types of trusts, the most basic being revocable and irrevocable. The type of trust you should use will depend on what you're trying to accomplish.

Living (revocable) trust

A living trust is a trust that you create while you're alive.

A living trust:

• Avoids probate: Unlike property that passes to heirs by your will, property that passes by a living trust is not subject to probate, avoiding the delay of property transfers to your heirs and keeping matters private

• Maintains control: You can change the beneficiary, the trustee, any of the trust terms, move property in or out of the trust, or even end the trust and get your property back at any time

• Protects against incapacity: If because of an illness or injury you can no longer handle your financial affairs, a successor trustee can step in and manage the trust property for you while you get better. In the absence of a living trust or other arrangement, your family may have to ask the court to appoint a guardian to manage your property

A living trust can also continue after your death--you can direct the trustee to hold trust property until the beneficiary reaches a certain age or gets married, for instance.
Caution: Despite the benefits, living trusts have some drawbacks. Property in a living trust is generally not protected from creditors, and you cannot avoid estate taxes using a living trust.

Irrevocable trusts

Unlike a revocable trust, you can't easily change or revoke an irrevocable trust. You usually cannot change beneficiaries or change the terms of the trust. Irrevocable trusts are frequently used to minimize potential estate taxes. The transfer may be subject to gift tax at the time property is transferred into the trust, but the property, plus any future appreciation, is usually removed from your gross estate.
Additionally, property transferred through an irrevocable trust will avoid probate, and may be protected from future creditors.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Can You Avoid a Layoff?

2012-01-26T09:42:00.000-08:00

Can You Avoid a Layoff?

You may be a dedicated employee who has worked for the same employer for many years, yet you still may be susceptible to getting laid off. Sometimes getting laid off is inevitable, but rarely does a company lay off all of its workers. Usually, it retains those who are most valuable and offer the greatest benefit, sometimes at the least cost. Fortunately, there may be some things you can do to make the decision to lay you off a little harder.
Signs of impending layoff
It may not be obvious, but often there are signs that layoffs are looming. Try looking at your employer from the outside. Often, larger companies must file financial reports with the state and federal government securities offices. You may be able to glean some information on the financial health of your employer from these reports. For example, if the company has publicly traded stock, see if its price has dropped recently, especially compared to stock of similar companies that have not experienced the same downward trend. Are there rumors in the press or within the industry that your employer is involved in a sale or merger?
More often than not, the most telling source of information is what you hear and observe from within the company. What's the scuttlebutt around the water cooler? Have any key employees left the company recently? Have key management positions changed? Has your department undergone recent budget cuts? Are the bosses meeting behind closed doors more frequently than usual? Has the company proposed or implemented cuts in employee benefits, such as a reduction in employer contributions to employee health insurance or retirement plans? Have you recently received any negative feedback on your job performance or on the performance of your department? In addition to these potential warning signs, if there is a layoff in the offing, the Worker Adjustment and Retraining Notification Act may require your company to provide 60 days notice to affected employees and local governments in advance of impending plant closings and "mass layoffs." Check with your state's Department of Labor for any notices filed by your employer.
Before protecting your job, protect yourself
In conjunction with trying to keep your job, be prepared to lose it. Think who you might rely on for a good reference. Document your accomplishments, goals attained, and any ideas you promoted. Have your resume updated and ready.
In addition, read your employee manual or other documentation to find out about severance policies, health and life insurance coverage, and retirement plans in which you participate. Is there a severance package; if so, do you qualify? Can you remain covered by your employer-sponsored health insurance? If you have company-provided life insurance, what happens to it if you get laid off? Are you vested in your retirement benefits? Can you roll over your defined benefit or pension plan to another employer's plan or to an IRA? Are you eligible for unemployment payments; if so, at what rate and for how long? You should have answers to these questions and review this information periodically.
Make yourself relevant on the job
Take a step back and evaluate your job performance. Honestly and objectively examine how well you do your job. Can you find ways where you could improve your output? Can you improve your skills on the job? What can you do better or faster?
One surefire way to separate yourself from the majority of your coworkers is to focus on work while you're on the job. Sounds simple, but it's easy to get distracted by activities unrelated to work. So instead of engaging in online shopping, gaming, and personal e-mails, try increasing your productivity by focusing your time on getting your assignments done. Especially if your employer is experiencing some difficulties, don't get distracted by gossip and long lunches. Rather, try to do more to improve your performance.
Tip: Don't be afraid of "showing up" your coworkers. Remember, if a layoff is in the offing, you're trying to stand out from other employees, not blend in with them. By the same token, try to be helpful and maintain a good working relationship with your coworkers.
Another way to stand out is by continuing your education. Demonstrate that you're trying to enhance your job skills by taking advanced courses, even if your employer isn't paying for them. But if your company offers tuition assistance or programs to defray education costs, take advantage of those opportunities.
Standing out also means making yourself as visible within the company as possible. Attend staff meetings and company events, even if they're not mandatory. Arrive on time and be prepared. Participate during staff meetings, even if it's to express support for someone else's idea or proposal.
You'll also get noticed if you volunteer for tasks and projects whenever you can. Let your boss know you're willing to assume more responsibilities and spend more time at your job. If your boss offers you extra tasks and responsibilities, seize that opportunity to separate yourself from the rest of the pack. And if there are no new assignments, come up with a project on your own. Make your boss look good. The more you know, the harder it will be to replace you.
And don't shy away from discretely communicating your accomplishments. Update your boss on progress you're making with a new task or project.
If you interviewed for your job, you probably dressed in a manner befitting the position to which you were applying. Thereafter, your attire may have become more casual. While overdressing isn't recommended, spruce up your wardrobe with some new work clothes. Look well-groomed and ready to work. Sometimes a change in your work attire gives your bosses the perception of a new, reenergized employee.
Another way to keep your job is by working in a department that's performing well. Depending on the size of your company, there may be some areas that are underperforming, while other sections are surging. Find out which departments are holding their own and which sections are lagging. If you're in an area that's performing up to par or better, now's not the time to ask for a change. But if you happen to work in an underperforming sector, try to be part of the solution and not the problem. Don't complain about what's not working; rather, try to figure out what you can do to enhance your department's performance. In addition, offer to spend time working with growth segments--even if on a voluntary basis. If jobs open up in a department that's prospering, consider making an internal move to that area if a position becomes available.
Finally, despite all your best efforts, if your boss tells you your job is on the chopping block, you may be able to keep your position by offering to take a pay cut or a reduction in hours. If the company really values your performance, it may be able to justify keeping you on at a reduced cost, allowing you to hang on until the company is in a better position to increase your pay or hours. Meanwhile, you can continue to work as you map out your strategy for a different job either with your current employer or with a new company.
If you get laid off anyway
Were your efforts to keep your job worth it? Probably yes. If nothing else, you're more marketable now, with greater skills, accomplishments, and maybe even more training and education. Your job performance should garner you some favorable recommendations and reference letters from your former employer to help you land that next job. And who knows, you might even be rehired by your former employer.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE January 23, 2012

2012-01-24T09:38:00.000-08:00

John Jastremski Presents:
WEEKLY ECONOMIC UPDATE January 23, 2012

NO CONSUMER INFLATION INCREASE IN DECEMBER
For the second month in a row, the Labor Department reported no advance in its Consumer Price Index. Core CPI did rise 0.1% last month. Across 2011, consumer prices rose 3.0%; last year was the most inflationary year since 2007. As for wholesale inflation, the Producer Price Index declined 0.1% in December.1
MORE HOMES MOVING ON THE MARKET
The National Association of Realtors announced a 5.0% increase in existing home sales for December, with a 4.6% gain in sales of single-family houses. For all of 2011, existing home sales improved by 1.7% as the median sale price declined 3.9%. One negative real estate signal last week: in December, housing starts fell by 4.1%.1,2,3
FEWEST INITIAL JOBLESS CLAIMS IN FOUR YEARS
The Labor Department said initial applications for jobless benefits dropped by 50,000 to 352,000 in the week ending January 14. That is the lowest number of initial claims taken in any week since April 2008.1
GOLD GAINS 2% IN FIVE DAYS
Its 2.04% weekly advance on the COMEX led to a closing price of $1,664.00 Friday. Gold’s rise was not matched by oil (-0.37%) or the U.S. Dollar Index (-1.69%) last week. Oil ended the week at $98.33 a barrel on the NYMEX.2
DOW RISES FOR A FOURTH STRAIGHT WEEK
Stocks have surprised many analysts this month, as Wall Street has paid more attention to earnings than to news from Europe. The weekly numbers: S&P 500, +2.04% to 1,315.38; NASDAQ, +2.80% to 2,786.70; DJIA, +2.40% to 12,720.48.2,3
THIS WEEK: EU finance ministers meet on Monday, and Halliburton and Texas Instruments announce Q4 earnings. On Tuesday, Q4 results roll in from Apple, Yahoo!, Johnson & Johnson, Travelers, Verizon, DuPont, and McDonald’s, and President Obama will make a State of the Union address. On Wednesday, Boeing, Netflix, Motorola, Symantec, Amgen, SanDisk, ConocoPhillips and Delta all come out with earnings reports, NAR delivers news about December pending home sales, and the Fed concludes a policy meeting. Thursday brings Q4 earnings from AT&T, Time Warner Cable, Nokia, Starbucks, Caterpillar, 3M, Bristol-Myers and AutoNation, plus reports on December durable goods orders and new home sales and the latest initial claims figures. Friday, we have the government’s first take on Q4 GDP, the final University of Michigan consumer sentiment survey of January and earnings from Chevron, D.R. Horton and Procter & Gamble.
% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +4.12 +7.59 +0.25 +3.10
NASDAQ +6.97 +3.05 +2.74 +4.80
S&P 500 +4.59 +2.74 -1.61 +1.75
REAL YIELD 1/20 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.01% 1.22% 2.47% 3.48%

Sources: money.msn.com, bigcharts.com, treasury.gov, treasurydirect.gov - 1/20/122,4,5,6
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Market Week: January 23, 2012

2012-01-23T09:38:00.000-08:00

Market Week: January 23, 2012
The Markets
Downgrades? What downgrades? Having just lowered its long-term ratings on nine eurozone sovereigns, Standard and Poor's downgraded the European Financial Stability Fund itself early last week. European equity markets responded with a four-day rally, choosing to focus instead on the renewed possibility of a deal on Greek debt, and strong bond sales by France and Spain. The rally petered out on Friday, however, as doubts about Greece began to creep back in. Domestically, equities reached six-month highs, with the S&P 500 and Dow Industrials gaining every day of the holiday-shortened week (and the Nasdaq just missing that feat with a 1.63 point loss on Friday). This third straight week of equity gains--fueled by bank earnings, encouraging economic news, and eurozone optimism--slowed, at least temporarily, the flow of funds to U.S. Treasuries, which finished the week with yields on benchmark 10-year notes rising back above the 2% level.
Index 2011 Close Prior Week As of 1/20 Week Change YTD Change*

DJIA 12217.56 12422.06 12720.48 2.40% 4.12%
Nasdaq 2605.15 2710.67 2786.70 2.80% 6.97%
S&P 500 1257.60 1289.09 1315.38 2.04% 4.59%
Russell 2000 740.92 764.20 784.62 2.67% 5.90%
Global Dow 1801.60 1841.21 1908.00 3.63% 5.91%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treas1.89% 1.89% 2.05% 16 bps 16 bps

*Equities data reflect price changes, not total return.
Last Week's Headlines
•Standard and Poor's downgraded its long-term rating on the European Financial Stability Fund from AAA to AA+, expressing some concern about the fund's bailout capabilities in light of S&P's downgrade of member states Austria and France.
•Negotiators for Greece's private creditors left talks in Athens suddenly on Saturday, leaving the status of a possible deal unclear and resurrecting the specter of a disorderly default.
•Despite the selloff in traditional notes, the Treasury Department announced the record sale of $15 billion of 10-year Treasury Inflation Protected Securities (TIPS) last week with a "high-yield" of negative 0.046%, marking the first time 10-year TIPS have been sold with a negative yield.
•After revising the prior week's numbers back over the 400,000 benchmark, the Department of Labor reported that seasonally adjusted initial claims for unemployment benefits dropped by 50,000 to 352,000, the lowest total since April 2008. The somewhat less volatile 4-week moving average was 379,000, a decrease of 3,500 from the previous week's revised average of 382,500.
•The Federal Reserve announced that industrial production increased 0.4% in December after having fallen 0.3% in November. For the fourth quarter as a whole, industrial production rose at an annual rate of 3.1%, its 10th consecutive quarterly gain. Manufacturing production climbed 0.9% in December, the largest increase in a year, with gains widespread among major industry groups.
•The Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers (CPI-U) remained flat for December. The index for all items other than food and energy (core inflation) increased just 0.1% in December, after rising 0.2% in November. However, the CPI rose 3% overall in 2011, compared to a 1.5% increase in 2010.
•The Bureau also reported that the producer price index for finished goods (PPI, measuring wholesale inflation) declined 0.1% in December. Excluding food and energy, however, the index rose 0.3% in December, the largest increase since July 2011. The PPI rose 4.8% in 2011, after rising 3.8% in 2010.
•There was some positive news in the housing sector. The National Association of Home Builders reported that builder confidence in the market for newly built single-family homes continued to rise for the fourth consecutive month, reaching its highest level since June 2007. The National Association of Realtors announced that sales of existing homes rose 5% in December to an 11-month high. For all of 2011, existing home sales rose 1.7% to 4.26 million, up from 4.19 million sales in 2010. And the Commerce Department reported that new single-family housing starts rose 4.4% in December. However, 2011 ended as the worst on record for single-family home construction. Meanwhile, Freddie Mac reported that the average 30-year fixed rate mortgage edged down slightly for the week ending January 19 to 3.88%, a new all-time record low, marking the seventh consecutive week below 4%.
Eye on the Week Ahead
The first look at U.S. economic growth for the final quarter of 2011 could suggest the potential for further recovery in the coming year. Wednesday's Fed announcement is scheduled to include a forecast for the federal funds interest rate at the end of the year; any projected change could affect bond markets. But Greece may take center stage yet again, as the race to avoid a disorderly default continues.
Key dates and data releases: Federal Open Market Committee announcement (1/25); durable goods orders, new home sales (1/26); initial estimate of Q4 2011 gross domestic product (1/27).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

The Roth 401(k) 1/17/2012

2012-01-17T07:08:00.000-08:00

The Roth 401(k) 1/17/2012

Some employers offer 401(k) plan participants the opportunity to make Roth 401(k) contributions. If you're lucky enough to work for an employer who offers this option, Roth contributions could play an important role in maximizing your retirement income.

What is a Roth 401(k)?

A Roth 401(k) is simply a traditional 401(k) plan that accepts Roth 401(k) contributions. Roth 401(k) contributions are made on an after-tax basis, just like Roth IRA contributions. This means there's no up-front tax benefit, but if certain conditions are met, your Roth 401(k) contributions and all accumulated investment earnings on those contributions are free from federal income tax when distributed from the plan. (403(b) and 457(b) plans can also allow Roth contributions.)

Who can contribute?

Unlike Roth IRAs, where individuals who earn more than a certain dollar amount aren't allowed to contribute, you can make Roth contributions, regardless of your salary level, as soon as you're eligible to participate in the plan. And while a 401(k) plan can require employees to wait up to one year before they become eligible to contribute, many plans allow you to contribute beginning with your first paycheck.

How much can I contribute?

There's an overall cap on your combined pretax and Roth 401(k) contributions. You can contribute up to $17,000 of your pay ($22,500 if you're age 50 or older) to a 401(k) plan in 2012. You can split your contribution any way you wish. For example, you can make $10,000 of Roth contributions and $7,000 of pretax 401(k) contributions. It's up to you.
But keep in mind that if you also contribute to another employer's 401(k), 403(b), SIMPLE, or SAR-SEP plan, your total contributions to all of these plans--both pretax and Roth--can't exceed $17,000 ($22,500 if you're age 50 or older). It's up to you to make sure you don't exceed these limits if you contribute to plans of more than one employer.

Can I also contribute to a Roth IRA?

Yes. Your participation in a Roth 401(k) plan has no impact on your ability to contribute to a Roth IRA. You can contribute to both if you wish (assuming you meet the Roth IRA income limits). You can contribute up to $5,000 to a Roth IRA in 2012, $6,000 if you're age 50 or older (or, if less, 100% of your taxable compensation).

Should I make pretax or Roth 401(k) contributions?

When you make pretax 401(k) contributions, you don't pay current income taxes on those dollars (which means more take-home pay). But your contributions and investment earnings are fully taxable when you receive a distribution from the plan. In contrast, Roth 401(k) contributions are subject to income taxes up front, but qualified distributions of your contributions and earnings are entirely free from federal income tax.

Which is the better option depends upon your personal situation. If you think you'll be in a similar or higher tax bracket when you retire, Roth 401(k) contributions may be more appealing, since you'll effectively lock in today's lower tax rates. However, if you think you'll be in a lower tax bracket when you retire, pretax 401(k) contributions may be more appropriate. Your investment horizon and projected investment results are also important factors. A financial professional can help you determine which course is best for you.

Are distributions really tax free?

Because your Roth 401(k) contributions are made on an after-tax basis, they're always free from federal income tax when distributed from the plan. But the investment earnings on your Roth contributions are tax free only if you meet the requirements for a "qualified distribution."

In general, a distribution is qualified only if it satisfies both of the following:

• It's made after the end of a five-year waiting period
• The payment is made after you turn 59½, become disabled, or die

The five-year waiting period for qualified distributions starts with the year you make your first Roth contribution to your employer's 401(k) plan. For example, if you make your first Roth contribution to the plan in December 2012, then the first year of your five-year waiting period is 2012, and your waiting period ends on December 31, 2016.

But if you change employers and roll over your Roth 401(k) account from your prior employer's plan to your new employer's plan (assuming the new plan accepts Roth rollovers), the five-year waiting period starts instead with the year you made your first contribution to the earlier plan.

If your distribution isn't qualified (for example, if you receive a payout before the five-year waiting period has elapsed or because you terminate employment), the portion of your distribution that represents investment earnings on your Roth contributions will be taxable, and will be subject to a 10% early distribution penalty unless you are 59½ or another exception applies.

You can generally avoid taxation by rolling your distribution over into a Roth IRA or into another employer's Roth 401(k), 403(b), or 457(b) plan, if that plan accepts Roth rollovers. (State income tax treatment of Roth 401(k) contributions may differ from the federal rules.)

What about employer contributions?

While employers don't have to contribute to 401(k) plans, many will match all or part of your contributions. Your employer can match your Roth contributions, your pretax contributions, or both. But your employer contributions are always made on a pretax basis, even if they match your Roth contributions. That is, your employer's contributions, and investment earnings on those contributions, are not taxed until you receive a plan distribution.

What else do I need to know?

Like pretax 401(k) contributions, your Roth 401(k) contributions and investment earnings can be paid from the plan only after you terminate employment, incur a financial hardship, attain age 59½, become disabled, or die.

Also, unlike Roth IRAs, you must begin taking distributions from a Roth 401(k) plan after you reach age 70½ (or in some cases, after you retire). But this isn't as significant as it might seem, since you can generally roll over your Roth 401(k) dollars (other than RMDs themselves) into a Roth IRA if you don't need or want the lifetime distributions.

Employers aren't required to make Roth contributions available in their 401(k) plans. So be sure to ask your employer if they are considering adding this exciting feature to your 401(k) plan.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

The benefits of Tax-Advantaged Savings Vehicle 1/16/2012

2012-01-16T08:30:00.000-08:00

The benefits of Tax-Advantaged Savings Vehicle 1/16/2012

Taxes can take a big bite out of your total investment returns, so it's helpful to look for tax-advantaged strategies when building a portfolio. But keep in mind that investment decisions shouldn't be driven solely by tax considerations; other factors to consider include the potential risk, the expected rate of return, and the quality of the investment.

Tax-deferred and tax-free investments

Tax deferral is the process of delaying (but not necessarily eliminating) until a future year the payment of income taxes on income you earn in the current year. For example, the money you put into your 401(k) retirement account isn't taxed until you withdraw it, which might be 30 or 40 years down the road!

Tax deferral can be beneficial because:

• The money you would have spent on taxes remains invested

• You may be in a lower tax bracket when you make withdrawals from your accounts (for
example, when you're retired), and

• You can accumulate more dollars in your accounts due to compounding

Compounding means that your earnings become part of your underlying investment, and they in turn earn interest. In the early years of an investment, the benefit of compounding may not be that significant. But as the years go by, the long-term boost to your total return can be dramatic.

Keep in mind that tax deferred is not the same as tax free. "Tax deferred" means that the payment of taxes is delayed, while "tax free" means that no income taxes are due at all. Some savings vehicles, like Roth IRAs, can generate tax-free income.

Taxes make a big difference

Let's assume two people have $5,000 to invest every year for a period of 30 years. One person invests in a tax-free account like a Roth 401(k) that earns 6% per year, and the other person invests in a taxable account that also earns 6% each year. Assuming a tax rate of 28%, in 30 years the tax-free account will be worth $395,291, while the taxable account will be worth $295,896. That's a difference of $99,395.

This hypothetical example is for illustrative purposes only, and its results are not representative of any specific investment or mix of investments. Actual results will vary. The taxable account balance assumes that earnings are taxed as ordinary income and does not reflect possible lower maximum tax rates on capital gains and dividends which would make the taxable investment return more favorable, thereby reducing the difference in performance between the accounts shown. Investment fees and expenses have not been deducted. If they had been, the results would have been lower. You should consider your personal investment horizon and income tax brackets, both current and anticipated, when making an investment decision as these may further impact the results of the comparison. This illustration assumes a fixed annual rate of return; the rate of return on your actual investment portfolio will be different, and will vary over time, according to actual market performance. This is particularly true for long-term investments. It is important to note that investments offering the potential for higher rates of return also involve a higher degree of risk to principal.

Tax-advantaged savings vehicles for retirement

One of the best ways to accumulate funds for retirement or any other investment objective is to use tax-advantaged (i.e., tax-deferred or tax-free) savings vehicles when appropriate.

• Traditional IRAs --Anyone under age 70½ who earns income or is married to someone with earned income can contribute to an IRA. Depending upon your income and whether you're covered by an employer-sponsored retirement plan, you may or may not be able to deduct your contributions to a traditional IRA, but your contributions always grow tax deferred. However, you'll owe income taxes when you make a withdrawal (and a 10% additional penalty tax if you're under age 59½, unless an exception applies). In 2012, you can contribute up to $5,000 to an IRA, and individuals age 50 and older can contribute an additional $1,000.

• Roth IRAs --Roth IRAs are open only to individuals with incomes below certain limits. Your contributions are made with after-tax dollars, but they will grow tax-deferred and qualified distributions will be tax free when you withdraw them. The amount you can contribute is the same as for traditional IRAs. Total combined contributions to Roth and traditional IRAs can't exceed $5,000 each year for individuals under age 50.

• SIMPLE IRAs and SIMPLE 401(k)s --These plans are generally associated with small businesses. As with traditional IRAs, your contributions grow tax deferred, but you'll owe income taxes when you make a withdrawal. For 2012, you can contribute up to $11,500 to one of these plans; individuals age 50 and older can contribute an additional $2,500. (SIMPLE 401(k) plans can also allow Roth contributions.)

• Employer-sponsored plans (401(k)s, 403(b)s, 457 plans) --Contributions to these types of plans grow tax deferred, but you'll owe income taxes when you make a withdrawal. For 2012, you can contribute up to $17,000 (up from $16,500 in 2011) to one of these plans; individuals age 50 and older can contribute an additional $5,500. Employers can generally allow employees to make after-tax Roth contributions, in which case qualifying distributions will be tax free.

• Annuities --You pay money to an annuity issuer (an insurance company), and the issuer promises to pay principal and earnings back to you or your named beneficiary in the future. Annuities generally allow you to elect to receive an income stream for life (subject to the claims-paying ability of the issuer). There's no limit to how much you can invest, and your contributions grow tax deferred. However, you'll owe income taxes on the earnings when you start receiving distributions.

Tax-advantaged savings vehicles for college

For college, tax-advantaged savings vehicles include:

• 529 plans --College savings plans and prepaid tuition plans let you set aside money for college that will grow tax deferred and be tax free at withdrawal at the federal level if the funds are used for qualified education expenses. These plans are open to anyone regardless of income level. Contribution limits are high--typically over $300,000--but vary by plan.

• Coverdell education savings accounts --Coverdell accounts are open only to individuals with incomes below certain limits, but if you qualify, you can contribute up to $2,000 per year, per beneficiary. Your contributions will grow tax deferred and be tax free at withdrawal at the federal level if the funds are used for qualified education expenses.

• Series EE bonds --The interest earned on Series EE savings bonds grows tax deferred. But if you meet income limits (and a few other requirements) at the time you redeem the bonds for college, the interest will be free from federal income tax too (it's always exempt from state tax).

Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans. More information about specific 529 plans is available in each issuer's official statement, which should be read carefully before investing.

Bottom line

Though tax considerations shouldn't be your only investing concern, by putting your money in tax-advantaged savings vehicles and investments when appropriate, you'll keep more money in your own pocket and put less in Uncle Sam's.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Leaving a Legacy 1/16/2012

2012-01-16T08:16:00.000-08:00

Leaving a Legacy 1/16/2012

You've worked hard over the years to accumulate wealth, and you probably find it comforting to know that after your death the assets you leave behind will continue to be a source of support for your family, friends, and the causes that are important to you. But to ensure that your legacy reaches your heirs as you intend, you must make the proper arrangements now. There are four basic ways to leave a legacy: (1) by will, (2) by trust, (3) by beneficiary designation, and (4) by joint ownership arrangements.

Wills

A will is the cornerstone of any estate plan. You should have a will no matter how much your estate is worth, and even if you've implemented other estate planning strategies.
You can leave property by will in two ways: making specific bequests and making general bequests. A specific bequest directs a particular piece of property to a particular person ("I leave Aunt Martha's diamond broach to my niece, Jen"). A general bequest is typically a percentage of property or property that is left over after all specific bequests have been made. Typically, principal heirs receive general bequests ("I leave all the rest of my property to my wife, Jane").

With a will, you can generally leave any type of property to whomever you wish, with some exceptions, including:

• Property will pass according to a beneficiary designation even if you name a different beneficiary for the same property in your will
• Property owned jointly with rights of survivorship passes directly to the joint owner
• Property in a trust passes according to the terms of the trust
• Your surviving spouse has a right to a statutory share (e.g., 50%) of your property, regardless of what you leave him or her in your will
• Children may have inheritance rights in certain states
Caution: Leaving property outright to minor children is problematic. You should name a custodian or property guardian, or use a trust.

Trusts

You can also leave property to your heirs using a trust. Trust property passes directly to the trust beneficiaries according to the trust terms. There are two basic types of trusts: (1) living or revocable, and (2) irrevocable.

Living trusts are very flexible because you can change the terms of the trust (e.g., rename beneficiaries) and the property in the trust at any time. You can even change your mind by taking your property back and ending the trust.

An irrevocable trust, on the other hand, can't be changed or ended except by its terms, but can be useful if you want to minimize estate taxes or protect your property from potential creditors.

You create a trust by executing a document called a trust agreement (you should have an attorney draft any type of trust to be sure it accomplishes what you want).

A trust can't distribute property it does not own, so you must also transfer ownership of your property to the name of the trust. Property without ownership documentation (e.g., jewelry, tools, furniture) are transferred to a trust by listing the items on a trust schedule. Property with ownership documents must be re-titled or re-registered.

You must also name a trustee to administer the trust and manage the trust property. With a living trust, you can name yourself trustee, but you'll need to name a successor trustee who'll transfer the property to your heirs after your death.

Tip: A living trust is also a good way to protect your property in case you become incapacitated.

Beneficiary designations

Property that is contractual in nature, such as life insurance, annuities, and retirement
accounts, passes to heirs by beneficiary designation. Typically, all you have to do is fill out a form and sign it. Beneficiaries can be persons or entities, such as a charity or a trust, and you can name multiple beneficiaries to share the proceeds. You should name primary and contingent beneficiaries.

Caution: You shouldn't name minor children as beneficiaries. You can, however, name a guardian to receive the proceeds for the benefit of the minor child.
You should consider the income and estate tax ramifications for your heirs and your estate when naming a beneficiary. For example, proceeds your beneficiaries receive from life insurance are generally not subject to income tax, while your beneficiaries will have to pay income tax on proceeds received from tax-deferred retirement plans (e.g., traditional IRAs). Check with your financial planning professional to determine whether your beneficiary designations will have the desired results.

Be sure to re-evaluate your beneficiary designations when your circumstances change (e.g., marriage, divorce, death of beneficiary). You can't change the beneficiary with your will or a trust. You must fill out and sign a new beneficiary designation form.
Caution: Some beneficiaries can't be changed. For example, a divorce decree may stipulate that an ex-spouse will receive the proceeds.

Tip: Certain bank accounts and investments also allow you to name someone to receive the asset at your death.

Joint ownership arrangements

Two (or more) persons can own property equally, and at the death of one, the other becomes the sole owner. This type of ownership is called joint tenancy with rights of survivorship (JTWRS). A JTWRS arrangement between spouses is known as tenancy by the entirety in certain states, and a handful of states have a form of joint ownership known as community property.
Caution: There is another type of joint ownership called tenancy in common where there is no right of survivorship. Property held as tenancy in common will not pass to a joint owner automatically, although you can leave your interest in the property to your heirs in your will.
You may find joint ownership arrangements are useful and convenient with some types of property, but may not be desirable with all of your property. For example, having a joint checking account ensures that, upon your death, an heir will have immediate access to needed cash. And owning an out-of state residence jointly (e.g., a vacation home) can avoid an ancillary probate process in that state. But it may not be practical to own property jointly where frequent transactions are involved (e.g., your investment portfolio or business assets) because you may need the joint owner's approval and signature for each transaction.

There are some other disadvantages to joint ownership arrangements, including: (1) your co-owner has immediate access to your property, (2) naming someone who is not your spouse as co-owner may trigger gift tax consequences, and (3) if the co-owner has debt problems, creditors may go after the co-owner's share.

Caution: Unlike with most other types of property, a co-owner of your checking or savings account can withdraw the entire balance without your knowledge or consent.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

In-Service Withdrawals from 401(k) Plans

2012-01-12T12:42:00.000-08:00

In-Service Withdrawals from 401(k) Plans

You may be familiar with the rules for putting money into a 401(k) plan. But are you familiar with the rules for taking your money out? Federal law limits the withdrawal options that a 401(k) plan can offer. But a 401(k) plan may offer fewer withdrawal options than the law allows, and may even provide that you can't take any money out at all until you leave employment. However, many 401(k) plans are more flexible.

First, consider a plan loan

Many 401(k) plans allow you to borrow money from your own account. A loan may be attractive if you don't qualify for a withdrawal, or you don't want to incur the taxes and penalties that may apply to a withdrawal, or you don't want to permanently deplete your retirement assets. (Also, you must take any available loans from all plans maintained by your employer before you're even eligible to withdraw your own pretax or Roth contributions from a 401(k) plan because of hardship.)
In general, you can borrow up to one half of your vested account balance (including your contributions, your employer's contributions, and earnings), but not more than $50,000.
You can borrow the funds for up to five years (longer if the loan is to purchase your principal residence). In most cases you repay the loan through payroll deduction, with principal and interest flowing back into your account. But keep in mind that when you borrow, the unpaid principal of your loan is no longer in your 401(k) account working for you.

Withdrawing your own contributions

If you've made after-tax (non-Roth) contributions, your 401(k) plan can let you withdraw those dollars (and any investment earnings on them) for any reason, at any time. You can withdraw your pretax and Roth contributions (that is, your "elective deferrals"), however, only for one of the following reasons--and again, only if your plan specifically allows the withdrawal:
•You attain age 59½
•You become disabled
•The distribution is a "qualified reservist distribution"
•You incur a hardship (i.e., a "hardship withdrawal")

Hardship withdrawals are allowed only if you have an immediate and heavy financial need, and only up to the amount necessary to meet that need. In most plans, you must require the money to:
•Purchase a principal residence or repair a principal residence damaged by an unexpected event (e.g., a hurricane)
•Prevent eviction or foreclosure
•Pay medical bills
•Pay certain funeral expenses
•Pay certain education expenses
•Pay income tax and/or penalties due on the hardship withdrawal itself

Investment earnings aren't available for hardship withdrawal, except for certain pre-1989 grandfathered amounts.
But there are some disadvantages to hardship withdrawals, in addition to the tax consequences described below. You can't take a hardship withdrawal at all until you've first withdrawn all other funds, and taken all nontaxable plan loans, available to you under all retirement plans maintained by your employer. And, in most 401(k) plans, your employer must suspend your participation in the plan for at least six months after the withdrawal, meaning you could lose valuable employer matching contributions. And hardship withdrawals can't be rolled over. So think carefully before making a hardship withdrawal.

Withdrawing employer contributions

Getting employer dollars out of a 401(k) plan can be even more challenging. While some plans won't let you withdraw employer contributions at all before you terminate employment, other plans are more flexible, and let you withdraw at least some vested employer contributions before then. "Vested" means that you own the contributions and they can't be forfeited for any reason. In general, a 401(k) plan can allow you to withdraw vested company matching and profit-sharing contributions if:
•You become disabled
•You incur a hardship (your employer has some discretion in how hardship is defined for this purpose)
•You attain a specified age (for example, 59½)
•You participate in the plan for at least five years, or
•The employer contribution has been in the account for a specified period of time (generally at least two years)

Taxation

Your own pretax contributions, company contributions, and investment earnings are subject to income tax when you withdraw them from the plan. If you've made any after-tax contributions, they'll be nontaxable when withdrawn. Each withdrawal you make is deemed to carry out a pro-rata portion of taxable and any nontaxable dollars.

Your Roth contributions, and investment earnings on them, are taxed separately: if your distribution is "qualified," then your withdrawal will be entirely free from federal income taxes. If your withdrawal is "nonqualified," then each withdrawal will be deemed to carry out a pro-rata amount of your nontaxable Roth contributions and taxable investment earnings. A distribution is qualified if you satisfy a five-year holding period, and your distribution is made either after you've reached age 59½, or after you've become disabled. The five-year period begins on the first day of the first calendar year you make your first Roth 401(k) contribution to the plan.

The taxable portion of your distribution may be subject to a 10% premature distribution tax, in addition to any income tax due, unless an exception applies. Exceptions to the penalty include distributions after age 59½, distributions on account of disability, qualified reservist distributions, and distributions to pay medical expenses.

Rollovers and conversions

Rollover of non-Roth funds
If your in-service withdrawal qualifies as an "eligible rollover distribution," you can roll over all or part of the withdrawal tax free to a traditional IRA or to another employer's plan that accepts rollovers. In general, most in-service withdrawals qualify as eligible rollover distributions except for hardship withdrawals and required minimum distributions after age 70½. If your withdrawal qualifies as an eligible rollover distribution, your plan administrator will give you a notice (a "402(f) notice") explaining the rollover rules, the withholding rules, and other related tax issues. (Your plan administrator will withhold 20% of the taxable portion of your eligible rollover distribution for federal income tax purposes if you don't directly roll the funds over to another plan or IRA.)
You can also roll over ("convert") an eligible rollover distribution of non-Roth funds to a Roth IRA. And some 401(k) plans even allow you to make an "in-plan conversion"--that is, you can request an in-service withdrawal of non-Roth funds, and have those dollars transferred into a Roth account within the same 401(k) plan. In either case, you'll pay income tax on the amount you convert (less any nontaxable after-tax contributions you've made).

Rollover of Roth funds

If you withdraw funds from your Roth 401(k) account, those dollars can only be rolled over to a Roth IRA, or to another Roth 401(k)/403(b)/457(b) plan that accepts rollovers. (Again, hardship withdrawals can't be rolled over.) But be sure to understand how a rollover will affect the taxation of future distributions from the IRA or plan. For example, if you roll over a nonqualified distribution from a Roth 401(k) account to a Roth IRA, the Roth IRA five-year holding period will apply when determining if any future distributions from the IRA are tax-free qualified distributions. That is, you won't get credit for the time those dollars resided in the 401(k) plan.

Be informed

You should become familiar with the terms of your employer's 401(k) plan to understand your particular withdrawal rights. A good place to start is the plan's summary plan description (SPD). Your employer will give you a copy of the SPD within 90 days after you join the plan.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE January 9, 2012

2012-01-10T12:41:00.001-08:00

John Jastremski Presents:

WEEKLY ECONOMIC UPDATE January 9, 2012

UNEMPLOYMENT DOWN TO 8.5%
In December, the jobless rate declined for the fourth straight month to its lowest level since February 2009. The Labor Department announced that the economy added 200,000 net new jobs last month, topping the consensus forecast of analysts polled by Reuters who expected a gain of 155,000. Separately, payroll processing firm ADP reported private sector firms hiring 325,000 workers in December. Whether December’s boost reflects a seasonal hiring boom or not, Labor Department data indicates that private sector payrolls expanded by an average of 132,000 jobs per month during the second half of 2011.1,2
MANUFACTURING, SERVICE SECTOR GAUGES RISE
According to the twin barometers of the Institute for Supply Management, the U.S. manufacturing and non-manufacturing sectors continued to expand last month. ISM’s service sector PMI came in at 52.6, up 0.6% from the November reading; its manufacturing PMI rose to 53.9 from November’s 52.7 mark.3
BIG GAINS OUT OF THE GATE FOR GOLD & CRUDE
The first trading week of 2012 saw crude oil futures rise 2.73% to top $100 a barrel again; futures settled at $101.56 Friday on the NYMEX. Gold went back above the $1,600 level with a $50.30 weekly advance. Gold futures were up 3.21% for the week; Friday’s closing price on the COMEX was $1,616.10.4,5
STOCKS START 2012 WITH GAINS
Across January 3-6, the Dow rose 1.17% to 12,359.92, the NASDAQ climbed 2.65% to 2,674.22 and the S&P 500 advanced 1.61% to 1,277.81. Optimism prevailed despite more woes from the Eurozone: Fitch Ratings lowered Hungary’s credit rating to “junk” status on Friday and the euro fell to a 16-month low versus the dollar.2
THIS WEEK:
Monday, German chancellor Angela Merkel and French president Nicolas Sarkozy meet to discuss the EU’s new fiscal pact; Alcoa kicks off the Q4 earnings season. Tuesday, we get a report on November’s wholesale trade. Wednesday brings a new Beige Book from the Federal Reserve and Q4 results from Lennar. Thursday, the Census Bureau releases December retail sales figures, the latest initial jobless claims data arrives and the European Central Bank and Bank of England issue monetary policy statements. On Friday, the University of Michigan’s preliminary January consumer sentiment survey will be out, plus Q4 earnings from JPMorgan.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +1.17 +5.66 -0.0006 +2.12
NASDAQ +2.65 -1.32 +1.97 +3.13
S&P 500 +1.61 +0.31 -1.87 +0.97
REAL YIELD 1/6 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.11% 0.96% 2.39% 3.48%

Sources: online.wsj.com, bigcharts.com, treasury.gov, treasurydirect.gov - 1/6/122,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends. Please feel free to forward this article to family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address.
We will contact them first and request their permission to add them to our list.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Market Week: January 9, 2012

2012-01-09T12:39:00.000-08:00

Market Week: January 9, 2012

The Markets
So far, so good: The new year got off to a moderately encouraging start, beginning with solid reports on manufacturing and construction and ending with a fourth month of improved employment data. The Nasdaq took the lead; it was the first week since early October in which its gains outpaced those of the other three domestic indices. Not surprisingly, the Global Dow continued to be sluggish.

Market/Index 2011 Close Prior Week As of 1/6 Week Change YTD Change*
DJIA 12217.56 12217.56 12359.92 1.17% 1.17%
Nasdaq 2605.15 2605.15 2674.22 2.65% 2.65%
S&P 500 1257.60 1257.60 1277.81 1.61% 1.61%
Russell 2000 740.92 740.92 749.71 1.19% 1.19%
Global Dow 1801.60 1801.60 1812.76 .62% .62%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.89% 1.89% 1.92% 3 bps 3 bps

*Equities data reflect price changes, not total return.
Last Week's Headlines
•Unemployment fell in December for the fourth straight month, hitting 8.5%; that's almost a full percentage point from last December's 9.4%. The Bureau of Labor Statistics said employers added 200,000 net new jobs, with the biggest gains occurring in transportation/warehousing, retail, and manufacturing. The measure of unemployment that includes underemployed workers also fell; it's down from 15.6% to 15.2%.
•U.S. manufacturing growth accelerated in December, according to the Institute for Supply Management. The ISM's index hit 53.9%, its highest level since June; it was the 29th straight month of expansion. Meanwhile, the Commerce Department said new durable goods orders also rose by 3.8%. The growth, driven primarily by new orders for aircraft and other transportation equipment, represented the fourth increase in the last five months.
•The Federal Reserve will start spelling out its expectations for the direction of short-term interest rates, including when it might start to raise rates. The forecasts will be made quarterly beginning with the January 25 release of other Fed economic forecasts, which will include projections for the end of this year.
•Expansion in the U.S. services sector picked up at a faster pace in December as the Institute for Supply Management's index rose 0.6% to 52.6%. It was the 26th consecutive month of growth, with 11 of the index's 18 industries reporting improvement.
•The average interest rate on 30-year fixed mortgages fell to 3.91% during the first week of 2012. According to mortgage giant Freddie Mac, that's as low as it's ever been. It also was the fifth straight week of rates under 4%.
Eye on the Week Ahead
Bond auctions are scheduled in Italy and Spain; with Italian 10-year yields over 7%, the results will be watched. Also, Monday's Alcoa earnings announcement represents the informal kickoff for the fourth-quarter earnings season.
Key dates and data releases: Fed "beige book" report (1/11); weekly new jobless claims, retail sales, business inventories (1/12); international trade, import/export prices, consumer sentiment (1/13).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Saving for Retirement 1/9/2011

2012-01-09T06:58:00.000-08:00

Saving for Retirement 1/9/2011

Although most of us recognize the importance of sound retirement planning, few of us embrace the nitty-gritty work involved. With thousands of investment possibilities, complex rules governing retirement plans, and so on, most people don't even know where to begin. Here are some suggestions to help you get started.

Determine your retirement income needs

Some experts suggest that you need anywhere from 60% to 90% of your current income to enable you to maintain your current standard of living in retirement. But this is only a general guideline. To determine your specific needs, you may want to estimate your annual retirement expenses.

Use your current expenses as a starting point, but note that your expenses may change dramatically by the time you retire. If you're nearing retirement, the gap between your current expenses and your retirement expenses may be small. If retirement is many years away, the gap may be significant, and projecting your future expenses may be more difficult.

Remember to take inflation into account. The average annual rate of inflation over the past 20 years has been approximately 2.6%. (Source: Consumer price index (CPI-U) data published by the U.S. Department of Labor, 2011.) And keep in mind that your annual expenses may fluctuate throughout retirement. For instance, if you own a home and are paying a mortgage, your expenses will drop if the mortgage is paid off by the time you retire. Other expenses, such as health-related expenses, may increase in your later retirement years. A realistic estimate of your expenses will tell you about how much annual income you'll need to live comfortably.

Calculate the gap

Once you have estimated your retirement income needs, take stock of your estimated future assets and income. These may come from Social Security, a retirement plan at work, a part-time job, and other sources. If estimates show that your future assets and income will fall short of what you need, the rest will have to come from additional personal retirement savings.

Figure out how much you'll need to save

By the time you retire, you'll need a nest egg that will provide you with enough income to fill the gap left by your other income sources. But exactly how much is enough? The following questions may help you find the answer:
• At what age do you plan to retire? The younger you retire, the longer your retirement will be, and the more money you'll need to carry you through it.
• What kind of lifestyle do you hope to maintain during your retirement years?
• What is your life expectancy? The longer you live, the more years of retirement you'll have to fund.
• What rate of growth can you expect from your savings now and during retirement? Be conservative when projecting rates of return.
• Do you expect to dip into your principal? If so, you may deplete your savings faster than if you just live off investment earnings. Build in a cushion to guard against these risks.
Build your retirement fund: Save, save, save

When you know roughly how much money you'll need, your next goal is to save that amount. First, you'll have to map out a savings plan that works for you. Assume a conservative rate of return (e.g., 5 to 6%), and then determine approximately how much you'll need to save every year between now and your retirement to reach your goal.

The next step is to put your savings plan into action. It's never too early to get started (ideally, begin saving in your 20s). To the extent possible, you may want to arrange to have certain amounts taken directly from your paycheck and automatically invested in accounts of your choice (e.g., 401(k) plans, payroll deduction savings). This arrangement reduces the risk of impulsive or unwise spending that will threaten your savings plan. If possible, save more than you think you'll need to provide a cushion.

Use the right savings tools

Employer-sponsored retirement plans like 401(k)s and 403(b)s are powerful savings tools. Your contributions come out of your salary as pretax contributions (reducing your current taxable income) and any investment earnings grow tax deferred until withdrawn. Some 401(k), 403(b), and 457(b) plans also allow employees to make after-tax "Roth" contributions. There's no up-front tax advantage, but qualified distributions are entirely free from federal income taxes. In addition, employer-sponsored plans often offer matching contributions, and may be your best option when it comes to saving for retirement.

IRAs also feature tax-deferred growth of earnings.
If you are eligible, traditional IRAs may enable you to lower your current taxable income through deductible contributions. Withdrawals, however, are taxable as ordinary income (except to the extent you've made nondeductible contributions).

Roth IRAs don't permit tax-deductible contributions but allow you to make completely tax-free withdrawals under certain conditions. With both types, you can typically choose from a wide range of investments to fund your IRA.

Annuities are generally funded with after-tax dollars, but their earnings grow tax deferred (you pay tax on the portion of distributions that represents earnings). There is also no annual limit on contributions to an annuity.

Note: Distributions from retirement plans, IRAs, and annuities prior to age 59½ may be subject to a 10% penalty tax unless an exception applies.
You have several options for saving for your retirement. How do you know what to do? Here's one common approach:
First contribute to employer-sponsored retirement plans, at least enough to get full company match
• Employer match is "free" money (you may forfeit match if you don't work for a given length of time)
• Dollars grow tax deferred until withdrawn
• Systematic payments from your paycheck--you'll hardly notice
• Most plans allow pretax contributions resulting in an immediate savings
• Certain plans may allow Roth contributions--tax free when withdrawn, earnings tax free if "qualified distribution"
• But, investment choices might be limited
Then contribute to IRAs
• Many investment options
• Traditional IRA contributions may or may not be tax deductible; Roth IRA contributions made with after-tax dollars
• Dollars grow tax deferred until withdrawn
• Roth IRA contributions tax free when withdrawn, earnings tax free if "qualified distribution"
• Can contribute up to $5,000 in 2011 and 2012 (individuals age 50 and older may contribute an additional $1,000)
Other options: annuities, stock plans, life insurance, other investments (e.g., stock, mutual funds), nonqualified deferred compensation, salary continuation plans
• Annuities, life insurance and other options have unique tax advantages
• Current lower capital gains tax rates make some equity investments more attractive for retirement planning
• Some options may be complex, and timing of taxable events may be difficult to control

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Financial Planning – Helping You See the Big Picture 1/7/2012

2012-01-07T07:52:00.000-08:00

Financial Planning – Helping You See the Big Picture 1/7/2012

Do you picture yourself owning a new home, starting a business, or retiring comfortably? These are a few of the financial goals that may be important to you, and each comes with a price tag attached.
That's where financial planning comes in. Financial planning is a process that can help you reach your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources.

Why is financial planning important?

A comprehensive financial plan serves as a framework for organizing the pieces of your financial picture. With a financial plan in place, you'll be better able to focus on your goals and understand what it will take to reach them.

One of the main benefits of having a financial plan is that it can help you balance competing financial priorities. A financial plan will clearly show you how your financial goals are related--for example, how saving for your children's college education might impact your ability to save for retirement. Then you can use the information you've gleaned to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you'll have the peace of mind that comes from knowing that your financial life is on track.

The financial planning process

Creating and implementing a comprehensive financial plan generally involves working with financial professionals to:
• Develop a clear picture of your current financial situation by reviewing your income, assets, and liabilities, and evaluating your insurance coverage, your investment portfolio, your tax exposure, and your estate plan
• Establish and prioritize financial goals and time frames for achieving these goals
• Implement strategies that address your current financial weaknesses and build on your financial strengths
• Choose specific products and services that are tailored to meet your financial objectives
• Monitor your plan, making adjustments as your goals, time frames, or circumstances change

Some members of the team

The financial planning process can involve a number of professionals.
Financial planners typically play a central role in the process, focusing on your overall financial plan, and often coordinating the activities of other professionals who have expertise in specific areas.
Accountants or tax attorneys provide advice on federal and state tax issues.
Estate planning attorneys help you plan your estate and give advice on transferring and managing your assets before and after your death.
Insurance professionals evaluate insurance needs and recommend appropriate products and strategies.
Investment advisors provide advice about investment options and asset allocation, and can help you plan a strategy to manage your investment portfolio.
The most important member of the team, however, is you. Your needs and objectives drive the team, and once you've carefully considered any recommendations, all decisions lie in your hands.

Why can't I do it myself?

You can, if you have enough time and knowledge, but developing a comprehensive financial plan may require expertise in several areas. A financial professional can give you objective information and help you weigh your alternatives, saving you time and ensuring that all angles of your financial picture are covered.

Staying on track

The financial planning process doesn't end once your initial plan has been created. Your plan should generally be reviewed at least once a year to make sure that it's up-to-date. It's also possible that you'll need to modify your plan due to changes in your personal circumstances or the economy. Here are some of the events that might trigger a review of your financial plan:
• Your goals or time horizons change
• You experience a life-changing event such as marriage, the birth of a child, health problems, or a job loss
• You have a specific or immediate financial planning need (e.g., drafting a will, managing a distribution from a retirement account, paying long-term care expenses)
• Your income or expenses substantially increase or decrease
• Your portfolio hasn't performed as expected
• You're affected by changes to the economy or tax laws
Common questions about financial planning

What if I'm too busy?

Don't wait until you're in the midst of a financial crisis before beginning the planning process. The sooner you start, the more options you may have.

Is the financial planning process complicated?

Each financial plan is tailored to the needs of the individual, so how complicated the process will be depends on your individual circumstances. But no matter what type of help you need, a financial professional will work hard to make the process as easy as possible, and will gladly answer all of your questions.

What if my spouse and I disagree?

A financial professional is trained to listen to your concerns, identify any underlying issues, and help you find common ground.

Can I still control my own finances?

Financial planning professionals make recommendations, not decisions. You retain control over your finances. Recommendations will be based on your needs, values, goals, and time frames. You decide which recommendations to follow, then work with a financial professional to implement them.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Social Security: What Should You Do at Age 62? 1/6/2012

2012-01-06T07:43:00.000-08:00

Social Security: What Should You Do at Age 62? 1/6/2012

Is 62 your lucky number? If you're eligible, that's the earliest age you can start receiving Social Security retirement benefits. If you decide to start collecting benefits before your full retirement age, you'll be in good company. According to the Social Security Administration (SSA), approximately 74% of Americans elect to receive their Social Security benefits early. (Source: SSA Annual Statistical Supplement, 2011)

Although collecting early retirement benefits makes sense for many people, there's a major drawback to consider: if you start collecting benefits early, your monthly retirement benefit will be permanently reduced. So before you put down the tools of your trade and pick up your first Social Security check, there are some factors you'll need to weigh before deciding whether to start collecting benefits early.

What will your retirement benefit be?

The exact amount of your Social Security retirement benefit is based on the number of years you've been working and the amount you've earned. Your benefit is calculated using a formula that takes into account your 35 highest earnings years. If you earned little or nothing in several of those years (if you left the workforce to raise a family, for instance), it may be to your advantage to work as long as possible, because you'll have the opportunity to replace a year of lower earnings with a higher one, potentially resulting in a higher retirement benefit.
Each year, you'll receive a Social Security Statement from the SSA that summarizes your earnings history, and estimates the benefits you may receive based on those earnings.

If you begin collecting retirement benefits at age 62, each monthly benefit check will be 20% to 30% less than it would be at full retirement age. The exact amount of the reduction will depend on the year you were born. (Conversely, you can get a higher payout by delaying retirement past your full retirement age--the government increases your payout every month that you delay retirement, up to age 70.)

However, even though your monthly benefit will be 20% to 30% less if you begin collecting retirement benefits at age 62, you might receive the same or more total lifetime Social Security benefits as you would have had you waited until full retirement age to start collecting benefits. That's because even though you'll receive less money per month, you might receive more benefit checks.

The following chart shows how much an estimated $1,000 monthly benefit at full retirement age would be worth if you started taking a reduced benefit at age 62.
Birth Year Full Retirement Age Benefit
1943-1954 66 years $750
1955 66 years, 2 months $741
1956 66 years, 4 months $733
1957 66 years, 6 months $725
1958 66 years, 8 months $716
1959 66 years, 10 months $708
1960 and later 67 years $700
Source: Social Security Administration

Have you thought about your longevity?

Is it better to take reduced benefits at age 62 or full benefits later? The answer depends, in part, on how long you live. If you live longer than your "break-even age," the overall value of your retirement benefits taken at full retirement age will begin to outweigh the value of reduced benefits taken at age 62.

You'll generally reach your break-even age about 12 years from your full retirement age. For example, if your full retirement age is 66, you should reach your break-even age at 78. If you live past this age, you'll end up with higher total lifetime benefits by waiting until full retirement age to start collecting; otherwise, collecting benefits at age 62 may be better.
Of course, no one can predict exactly how long they'll live. But by taking into account your current health, diet, exercise level, access to quality medical care, and family health history, you might be able to make a reasonable assumption.

How much income will you need?

Another important piece of the puzzle is to look at how much retirement income you'll need, based partly on an estimate of your retirement expenses. If there is a large gap between your projected expenses and your anticipated income, waiting a few years to retire and start collecting Social Security benefits may improve your financial outlook.

If you continue to work and wait until your full retirement age to start collecting benefits, your Social Security monthly benefit will be larger. What's more, the longer you stay in the workforce, the greater the amount of money you will earn and have available to put into your overall retirement savings. Another plus is that Social Security's annual cost-of-living increases are calculated using your initial year's benefits as a base--the higher the base, the greater your annual increase.

Do you plan on working after age 62?

Another key factor in your decision is whether or not you plan to continue working after you start collecting Social Security benefits at age 62. That's because income you earn before full retirement age may reduce your Social Security retirement benefit. Specifically, if you are under full retirement age for the entire year, $1 in benefits will be withheld for every $2 you earn over the annual earnings limit ($14,640 in 2012).

Example: You start collecting Social Security benefits at age 62. You continue working, and your job pays $30,000 in 2012. Your annual benefit would be reduced by $7,680 ($30,000 minus $14,640, divided by 2).

Note: If your monthly benefit is reduced in the short term due to your earnings, you'll receive a higher monthly benefit later. That's because the SSA recalculates your benefit when you reach full retirement age, and omits the months in which your benefit was reduced.

Are you eligible for retiree health benefits?

Even if you start collecting Social Security benefits at age 62, keep in mind that you still won't be eligible for Medicare until you reach age 65. So unless you're eligible for retiree health benefits through your former employer or your spouse's health plan at work, you'll probably want to pay for a private health policy until Medicare kicks in.

Other considerations

In addition to the factors discussed here, other personal considerations may influence whether you start collecting Social Security benefits at age 62. Is your spouse already retired or planning to retire early too? Do you plan on traveling, volunteering, going back to school, starting your own business, pursuing hobbies, or moving to a new location? Do you have grandchildren or elderly parents whom you want to help take care of? Every person's situation is different.

For more information

The nuances of Social Security can be complex. For more information about Social Security benefits, visit the Social Security Administration website at www.ssa.gov, or call (800) 772-1213 to speak with a representative. You may also call or visit your local Social Security office.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Annual Market Review 2011

2012-01-04T15:32:00.000-08:00

January 03, 2012
Annual Market Review 2011

The global village became very real as 2011 was consumed by debt, debate, downgrades, and potential default both here and overseas. U.S. economic data had to struggle for months against headwinds from abroad that preoccupied Wall Street even as Wall Street itself got occupied.
Driving markets worldwide were concerns about the impact of the Arab Spring revolts on oil markets, the triple disaster in Japan that left the world gasping for autos and parts, and most especially the shaky state of Europe's finances and banks with heavy sovereign debt exposure. After Greece, Portugal, and Ireland turned to their peers for financial support, the contagion threatened to spread to larger and potentially more threatening economies. As Italian and Spanish bond yields hit the 7% level considered unsustainable, investors worried they might be both too big to fail and too big to bail out despite an enhanced rescue fund and a new agreement increasing the eurozone's ability to impose fiscal discipline on members.
However, some of the turmoil was home-grown, such as the congressional combat that held the United States' credit rating hostage and threatened a first-ever default. Though the buck-inheriting super committee failed to prevent $1.2 trillion in budget cuts scheduled to start in 2013, the conflict ultimately didn't faze bond investors, who sought refuge from Europe's travails in U.S. Treasuries.
Despite the upheaval caused by the global financial system's need to deleverage, the U.S. economy ended the year looking a bit stronger, with increased potential for continued recovery in 2012--assuming that Europe can manage not to implode in the meantime.
Market/Index 2010 Close As of 9/30 As of 12/30 Q4 Change 2011 Change*
DJIA 11577.51 10913.38 12217.56 11.95% 5.53%
NASDAQ 2652.87 2415.40 2605.15 7.86% -1.80%
S&P 500 1257.64 1131.42 1257.60 11.15% 0%
Russell 2000 783.65 644.16 740.92 15.02% -5.45%
Global Dow 2087.44 1725.68 1801.60 4.40% -13.69%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.30% 1.92% 1.89% -3 bps -141 bps
*Equities data reflect price changes, not total return.
Snapshot 2011
The Markets
•Equities: A strong first quarter helped push the Dow to its highest level in almost three years, and by the end of April, the Russell 2000 was at its highest level on record. However, May launched a downhill slide punctuated by the occasional hair-raising bout of volatility. Three of the Dow's 12 largest daily point gains in history occurred in 2011 (two in August alone); unfortunately, August also featured three of the Dow's 12 largest point declines ever. Nevertheless, the Dow was the only index of the four to show a gain for the year. The volatility cost the small-cap Russell 2000 dearly; despite a good start and strong finish, it ended the year down 14% from its April high. The Nasdaq also suffered, ending 2011 with a 9% fall from its April high and its first losing year since 2008. And despite all the ups and downs, the S&P 500 ended 2011 almost exactly where it began. Not surprisingly, global equities were harder-hit than their U.S. counterparts as credit markets showed signs of strain, threatening both emerging and developed markets.
•Bonds: Despite the Federal Reserve's easing its way out of quantitative easing, U.S. Treasury yields hit historic lows thanks to the European debt crisis and the Fed's intent to preserve rock-bottom interest rates through mid-2013. After sinking to roughly 1.7% in September, by year's end the benchmark 10-year yield had recovered slightly but remained below 2%, while spreads between the 2-year and 10-year bonds narrowed over the year.
•Oil: Despite the uncertain global economy, oil prices continued to rise at a slow but relentless pace. After spending much of 2010 under $80 a barrel, oil not only surpassed $90 in 2011, but ended the year near $100.
•Currencies: After reaching US$1.48 in the spring, the euro plummeted in 2011's last four months, ending the year just below US$1.30. By May, the dollar had lost nearly 10% against a basket of six currencies, languishing for much of the summer before the European debt crisis helped return it to roughly even for the year.
•Gold/silver: Global anxiety steadily pushed gold to record after record in 2011. The ascent became jet-propelled in August, when the price hit an all-time high near $1,900 an ounce only weeks after reaching $1,700 for the first time. However, by year's end the luster had begun to fade; despite a late-fall rally, the precious metal closed out 2011 at roughly $1,550 an ounce. Silver also went parabolic for a time, hitting a high near $49 an ounce in the spring before ending the year not far from its $29 starting point.
The Economy
•Unemployment: Starting at 9.4% in December 2010, the unemployment rate remained stuck within a point or two of 9% until November, when the biggest monthly decline in more than 13 years cut it to 8.6% (a level last seen in March 2009). Cuts in state, local, and federal government employment partly offset gains in private-sector jobs.
•GDP: After a slow start--0.4% during Q1--the economy gradually began to improve. Though Q3's 1.8% annualized gross domestic product was much lower than 2010's 2.5%, it kept hope alive for continued recovery in 2012. The manufacturing and services sectors both avoided contraction, and by Q3, corporate after-tax profits were up more than 11% from a year earlier.
•Inflation: Ominously high inflation at the wholesale level in Q1 failed to flow through to consumers as retail spending remained tentative for much of the year, at least until the weekend after Thanksgiving. By November, consumer inflation was running at an annualized 3.4%--not far above its historical average--but wholesale prices were up 5.7% year over year.
•Housing: Housing starts and home sales showed signs of life by year's end. Housing starts were up 24% from last November, and new home sales were almost 10% higher. Though home prices seemed to stabilize a bit, by October they were back to mid-2003 levels and 3.4% lower than a year earlier.
Data sources: Includes data provided by Brounes & Associates. Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Dept. of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprices.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE

2012-01-03T15:31:00.001-08:00

John Jastremski Presents:
WEEKLY ECONOMIC UPDATE
January 2, 2012

STOCKS IN 2011: DJIA +5.5%, S&P 500 ENDS FLAT
The Dow Jones Industrial Average bucked a global trend and advanced in 2011. The index rose 11.95% in the fourth quarter, a move that separated it from a pack of overseas benchmarks that finished the year with double-digit percentage losses. In terms of price return, the S&P 500 recorded its smallest annual change since 1947 (see below). The S&P’s total return for 2011 was +2.11%. With all the fears about Europe and the Federal Reserve keeping interest rates incredibly low, long-term Treasuries had their best year since 2008 with a total return of 33%.1,2,3
CONSUMER CONFIDENCE BAROMETER RISES
The Conference Board's index of consumer confidence saw a big jump north in December, soaring 9.3 points to 64.5. Economists surveyed by Reuters had expected it to come in at 58.3.4
HOME SALE PRICES DOWN, HOME SALE CONTRACTS UP
The good news? The National Association of Realtors said its pending home sales index reached a 19-month peak in November, moving to 100.1 for a 5.9% annual gain. The bad news? The October edition of the S&P/Case-Shiller Home Price Index slipped 1.2% from its September level.4,5
HIGHS & LOWS IN KEY COMMODITIES FOR 2011
Gold lost 10.48% for the month but went +10.23% for the year, in contrast to copper (-22.73%) and silver (-9.77%). Crude oil advanced 8.15% in 2011, while retail gas prices rose 6.41%. Notable yearly dives were made by natural gas (-32.15%) and cotton (-36.69%). The U.S. Dollar Index gained 1.56% on the year.2
A MINOR RETREAT TO END THE YEAR
All three major U.S. stock indices lost ground in the last trading week of 2011. The four-day performances across December 27-30: DJIA, -0.62% to 12,217.56; NASDAQ, -0.52% to 2,605.15; S&P 500, -0.61% to 1,257.60.1,6
THIS WEEK
The NYSE is closed Monday in celebration of the New Year’s Day holiday. Tuesday, the ISM manufacturing index for December is released, plus the most recent FOMC minutes. No major economic releases are scheduled on Wednesday. On Thursday, Monsanto, Amgen and Family Dollar announce earnings, ISM issues its December service sector PMI and new initial claims figures arrive. Friday brings the December jobs report from the Labor Department.
% CHANGE 2011 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +5.53 +5.53 -0.39 +2.19
NASDAQ -1.80 -1.80 +1.57 +3.36
S&P 500 -0.003 -0.003 -2.27 +0.95
REAL YIELD 12/30 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.07% 1.08% 2.41% 3.50%

Sources: online.wsj.com, bigcharts.com, treasury.gov, treasurydirect.gov - 12/30/111,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Handling Market Volatility 1/03/2012

2012-01-03T07:33:00.000-08:00

Handling Market Volatility 1/03/2012

Conventional wisdom says that what goes up, must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when it's your money at stake. Though there's no foolproof way to handle the ups and downs of the stock market, the following common sense tips can help.

Don't put your eggs all in one basket

Diversifying your investment portfolio is one of the key ways you can handle market volatility. Because asset classes often perform differently under different market conditions, spreading your assets across a variety of investments such as stocks, bonds, and cash alternatives (e.g., money market funds, CDs, and other short-term instruments), has the potential to help reduce your overall risk. Ideally, a decline in one type of asset will be balanced out by a gain in another, but diversification can't eliminate the possibility of market loss.

One way to diversify your portfolio is through asset allocation. Asset allocation involves identifying the asset classes that are appropriate for you and allocating a certain percentage of your investment dollars to each class (e.g., 70 percent to stocks, 20 percent to bonds, 10 percent to cash alternatives). An easy way to decide on an appropriate mix of investments is to use a worksheet or an interactive tool that suggests a model or sample allocation based on your investment objectives, risk tolerance level, and investment time horizon.

Focus on the forest, not on the trees

As the market goes up and down, it's easy to become too focused on day-to-day returns. Instead, keep your eyes on your long-term investing goals and your overall portfolio. Although only you can decide how much investment risk you can handle, if you still have years to invest, don't overestimate the effect of short-term price fluctuations on your portfolio.

Look before you leap

When the market goes down and investment losses pile up, you may be tempted to pull out of the stock market altogether and look for less volatile investments. The small returns that typically accompany low-risk investments may seem attractive when more risky investments are posting negative returns.

But before you leap into a different investment strategy, make sure you're doing it for the right reasons. How you choose to invest your money should be consistent with your goals and time horizon.

For instance, putting a larger percentage of your investment dollars into vehicles that offer safety of principal and liquidity (the opportunity to easily access your funds) may be the right strategy for you if your investment goals are short-term (e.g., you'll need the money soon to buy a house) or if you're growing close to reaching a long-term goal such as retirement. But if you still have years to invest, keep in mind that stocks have historically outperformed stable value investments over time, although past performance is no guarantee of future results. If you move most or all of your investment dollars into conservative investments, you've not only locked in any losses you might have, but you've also sacrificed the potential for higher returns.

Look for the silver lining

A down market, like every cloud, has a silver lining. The silver lining of a down market is the opportunity you have to buy shares of stock at lower prices.

One of the ways you can do this is by using dollar cost averaging. With dollar cost averaging, you don't try to "time the market" by buying shares at the moment when the price is lowest. In fact, you don't worry about price at all. Instead, you invest a specific amount of money at regular intervals over time.

When the price is higher, your investment dollars buy fewer shares of stock, but when the price is lower, the same dollar amount will buy you more shares.
For example, let's say that you decided to invest $300 each month towards your child's college education. As the illustration shows, your regular monthly investment of $300 bought more shares when the price was low and fewer shares when the price was high:

Although dollar cost averaging can't guarantee you a profit or avoid a loss, a regular fixed dollar investment may result in a lower average price per share over time, assuming you continue to invest through all types of markets. You should consider your financial and emotional ability to make ongoing purchases, regardless of price fluctuations, however.
(This hypothetical example is for illustrative purposes only and does not represent the performance of any particular investment. Actual results will vary.)

Making dollar cost averaging work for you

• Get started as soon as possible. The longer you have to ride out the ups and downs of the market, the more opportunity you have to build a sizeable investment account over time.
• Stick with it. Dollar cost averaging is a long-term investment strategy. Make sure that you have the financial resources and the discipline to invest continuously through all types of markets, regardless of price fluctuations.
• Take advantage of automatic deductions. Having your investment contributions deducted from your paycheck or bank account is an easy and convenient way to invest, and can help you get in the habit of investing regularly.

Don't stick your head in the sand

While focusing too much on short-term gains or losses is unwise, so is ignoring your investments. You should check up on your portfolio at least once a year, more frequently if the market is particularly volatile or when there have been significant changes in your life. You may need to rebalance your portfolio to bring it back in line with your investment goals and risk tolerance. A financial professional can help you decide which investment options are right for you.

Don't count your chickens before they hatch

As the market recovers from a down cycle, elation quickly sets in. If the upswing lasts long enough, it's easy to believe that investing in the stock market is a sure thing. But, of course, it never is. As many investors have learned the hard way, becoming overly optimistic about investing during the good times can be as detrimental as worrying too much during the bad times. The right approach during all kinds of markets is to be realistic. Have a plan, stick with it, and strike a comfortable balance between risk and return.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Market Week

2012-01-02T15:30:00.000-08:00

Market Week: January 3, 2012
The Markets
Shortened by the Christmas holiday, the last week of 2011 saw low volumes that, despite some volatility, left the domestic equity indices little changed. The Dow was the only one of the four to end the year with a gain, due in no small part to its nearly 12% bounce in the fourth quarter. Meanwhile, the S&P 500 closed out 2011 just four-hundredths of a point below where it began, with a Q4 gain of just over 11%. The summer's volatility cost the Nasdaq and small-cap Russell 2000 dearly; at year's end, they were down 9% and 14% respectively from their April 2011 highs despite the Russell's fourth-quarter 15% gain.
Market/Index 2010 Close Prior Week As of 12/30 Week Change YTD Change*
DJIA 11577.51 12294.00 12217.56 -.62% 5.53%
Nasdaq 2652.87 2618.64 2605.15 -.52% -1.80%
S&P 500 1257.64 1265.33 1257.60 -.61% -0%
Russell 2000 783.65 747.98 740.92 -.94% -5.45%
Global Dow 2087.44 1803.20 1801.60 -0% -13.69%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.30% 2.03% 1.89% -14 bps -141 bps

*Equities data reflect price changes, not total return.
Last Week's Headlines
•Home prices fell in October for the sixth straight month, according to the S&P/Case-Shiller 20-city composite index. Prices were down 1.2% from September, with all but one of the 20 cities tracked by the index showing a decline. Prices also were 3.4% lower than a year ago.
•The National Association of Realtors® said pending home sales (sales for which a contract has been signed but which have not closed) rose 7.3% in November. That represented its highest level since April 2010.
•Spain's new government announced a package of €8.9 billion worth of budget cuts and tax increases to try to attack a deficit that represents roughly 8% of the country's output.
Eye on the Week Ahead
Investors who believe that the first five days of January suggest something about the rest of the year will watch the coming week closely. Manufacturing and construction indicators as well as unemployment data on Friday could suggest whether economic recovery is likely to continue in 2012.
Key dates and data releases: U.S. manufacturing, construction spending, Federal Open Market Committee minutes (1/3); auto sales, factory orders (1/4); U.S. services sector, new weekly jobless claims (1/5); unemployment/payrolls, consumer credit (1/6).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

How Much Annual Income Can Your Retirement Portfolio Provide? 1/1/2012

2012-01-01T07:00:00.000-08:00

Annual Income Can Your Retirement Portfolio Provide? 1/1/2012

Your retirement lifestyle will depend not only on your assets and investment choices, but also on how quickly you draw down your retirement portfolio. The annual percentage that you take out of your portfolio, whether from returns or the principal itself, is known as your withdrawal rate. Figuring out an appropriate initial withdrawal rate is a key issue in retirement planning and presents many challenges.

Why is your withdrawal rate important?

Take out too much too soon, and you might run out of money in your later years. Take out too little, and you might not enjoy your retirement years as much as you could. Your withdrawal rate is especially important in the early years of your retirement; how your portfolio is structured then and how much you take out can have a significant impact on how long your savings will last.

Gains in life expectancy have been dramatic. According to the National Center for Health Statistics, people today can expect to live more than 30 years longer than they did a century ago. Individuals who reached age 65 in 1950 could anticipate living an average of 14 years more, to age 79; now a 65-year-old might expect to live for roughly an additional 19 years. Assuming rising inflation, your projected annual income in retirement will need to factor in those cost-of-living increases. That means you'll need to think carefully about how to structure your portfolio to provide an appropriate withdrawal rate, especially in the early years of retirement.

Conventional wisdom

So what withdrawal rate should you expect from your retirement savings? The answer: it all depends. A seminal study on withdrawal rates for tax-deferred retirement accounts (William P. Bengen, "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning, October 1994) looked at the annual performance of hypothetical portfolios that are continually rebalanced to achieve a 50-50 mix of large-cap (S&P 500 Index) common stocks and intermediate-term Treasury notes. The study took into account the potential impact of major financial events such as the early Depression years, the stock decline of 1937-1941, and the 1973-1974 recession. It found that a withdrawal rate of slightly more than 4% would have provided inflation-adjusted income for at least 30 years. More recently, Bengen used similar assumptions to show that a higher initial withdrawal rate--closer to 5%--might be possible during the early, active years of retirement if withdrawals in later years grow more slowly than inflation.

Other studies have shown that broader portfolio diversification and rebalancing strategies also can have a significant impact on initial withdrawal rates. In an October 2004 study ("Decision Rules and Portfolio Management for Retirees: Is the 'Safe' Initial Withdrawal Rate Too Safe?,"Journal of Financial Planning) Jonathan Guyton found that adding asset classes such as international stocks and real estate helped increase portfolio longevity (although these may entail special risks). Another strategy that Guyton used in modeling initial withdrawal rates was to freeze the withdrawal amount during years of poor portfolio performance. By applying so-called decision rules that take into account portfolio performance from year to year, Guyton found it was possible to have "safe" initial withdrawal rates above 5%.

A still more flexible approach to withdrawal rates builds on Guyton's methodology ("Using Decision Rules to Create Retirement Withdrawal Profiles," Journal of Financial Planning, August 2007). William J. Klinger suggests that a withdrawal rate can be fine-tuned from year to year, using Guyton's methods but basing the initial rate on one of three retirement profiles. For example, one person might withdraw uniform inflation-adjusted amounts throughout his or her retirement. Another might choose to spend more money early in retirement and less later; still another might plan to increase withdrawals as he or she ages. This model also requires estimating the odds that the portfolio will last throughout retirement. One retiree might be comfortable with a 95% chance that his or her strategy will permit the portfolio to last throughout retirement; another might need assurance that the portfolio has a 99% chance of lifetime success. The study suggests that this more complex model might permit a higher initial withdrawal rate, but also means the annual income provided is likely to vary moreover the years.

Don't forget that all these studies were based on historical data about the performance of various types of investments, and that past results don't guarantee future performance. Given market performance in recent years, many experts are suggesting being more conservative in estimating future returns.

Inflation is a major consideration

For many people, even a 5% withdrawal rate seems low. To better understand why suggested initial withdrawal rates aren't higher, it's essential to think about how inflation can affect your retirement income.
Here's a hypothetical illustration; to keep it simple, it does not account for the impact of any taxes. If a $1 million portfolio is invested in a money market account yielding 5%, it provides $50,000 of annual income. But if annual inflation pushes prices up by 3%, more income--$51,500--would be needed next year to preserve purchasing power. Since the account provides only $50,000 income, an additional $1,500 must be withdrawn from the principal to meet expenses. That principal reduction, in turn, reduces the portfolio's ability to produce income the following year. In a straight linear model, principal reductions accelerate, ultimately resulting in a zero portfolio balance after 25 to 27 years, depending on the timing of the withdrawals.

Volatility and portfolio longevity

When setting an initial withdrawal rate, it's important to take a portfolio's ups and downs into account--and the need for a relatively predictable income stream in retirement isn't the only reason. According to several studies in the late 1990s by Philip L. Cooley, Carl M. Hubbard, and Daniel T. Walz, the more dramatic a portfolio's fluctuations, the greater the odds that the portfolio might not last as long as needed. If it becomes necessary during market downturns to sell some securities in order to continue to meet a fixed withdrawal rate, selling at an inopportune time could affect a portfolio's ability to generate future income.
Making your portfolio either more aggressive or more conservative will affect its lifespan. A more aggressive portfolio may produce higher returns but might also be subject to a higher degree of loss. A more conservative portfolio might produce steadier returns at a lower rate, but could lose purchasing power to inflation.

Calculating an appropriate withdrawal rate

Your withdrawal rate needs to take into account many factors, including (but not limited to) your asset allocation, projected inflation rate, expected rate of return, annual income targets, investment horizon, and comfort with uncertainty. The higher your withdrawal rate, the more you'll have to consider whether it is sustainable over the long term.

Ultimately, however, there is no standard rule of thumb; every individual has unique retirement goals, means, and circumstances that come into play.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Lump Sum vs. Dollar Cost Averaging: Which Is Better? 12/30/2011

2011-12-30T07:00:00.000-08:00

Lump Sum vs. Dollar Cost Averaging: Which Is Better? 12/30/2011

Some people go swimming by diving into the pool; others prefer to edge into the water gradually, especially if the water's cold. A decision about putting money into an investment can be somewhat similar. Is it best to invest your money all at once, putting a lump sum into something you believe will do well? Or should you invest smaller amounts regularly over time to try to minimize the risk that you might invest at precisely the wrong moment?

Periodic investing and lump-sum investing both have their advocates. Understanding the merits and drawbacks of each can help you make a more informed decision.

What is dollar cost averaging?

Periodic investing is the process of making regular investments on an ongoing basis (for example, buying 100 shares of stock each month for a year). Dollar cost averaging is one of the most common forms of periodic investing. It involves continuous investment of the same dollar amount into a security at predetermined intervals--usually monthly, quarterly, or annually--regardless of the investment's fluctuating price levels.

Because you're investing the same amount of money each time when you dollar cost average, you're automatically buying more shares of a security when its share price is low, and fewer shares when its price is high. Over time, this strategy can provide an average cost per share that's lower than the average market price (though it can't guarantee a profit or protect against a loss in a declining market).

The accompanying graph illustrates how share price fluctuations can yield a lower average cost per share through dollar cost averaging. In this hypothetical example, ABC Company's stock price is $30 a share in January, $10 a share in February, $20 a share in March, $15 a share in April, and $25 a share in May. If you invest $300 a month for 5 months, the number of shares you would buy each month would range from 10 shares when the price is at a peak of $30 to 30 shares when the price is only $10. The average market price is $20 a share ($30+$10+$20+$15+$25 = $100 divided by 5 = $20). However, because your $300 bought more shares at the lower share prices, the average purchase price is $17.24 ($300 x 5 months = $1,500 invested divided by 87 shares purchased = $17.24).

The merits of dollar cost averaging

In addition to potentially lowering the average cost per share, investing a predetermined amount regularly automates your decision-making, and can help take emotion out of your investment decisions.

And if your goal is to buy low and sell high, as it should be, dollar cost averaging brings some discipline to that process. Though it can't help you know when to sell, and your shares could be worth more or less than their original cost when you do sell, this strategy can help you pursue the "buy low" portion of the equation.

Also, many people don't have a lump sum to invest all at once; any investments come out of their income stream--for example, as contributions to their workplace retirement savings account. In such cases, dollar cost averaging may not only be an easy strategy; it may be the most realistic option.

The case for investing a lump sum

Maybe you're considering rolling over an IRA or have just received a pension payout. Perhaps you've inherited a large amount of money, or the mail-order sweepstakes' prize patrol has finally shown up at your door. You might be thinking about the best way to shift your asset allocation or how to invest the proceeds of a certificate of deposit. Or maybe you've been parking some money in cash alternatives and now want to invest it.

In cases like these, you may want to at least investigate the merits of lump-sum investing. Several academic studies have compared dollar cost averaging to lump-sum investing and concluded that, because markets have risen over the long term in the past, investing in the market today tends to be better than waiting until tomorrow, since you have a longer opportunity to benefit from any increase in prices over time.

For example, a 2009 study by the Association of Investment Companies found that an investor who put a lump sum into the average British investment company at the end of April 2008 (talk about bad timing!) would have been down 30% one year later. Someone who invested the same total amount divided over 12 months would have been down only 7%. However, when the study examined the previous 5 years rather than a single year, the lump-sum investment made in April 2004 would have been up 26% by April 2009, compared to the periodic investment strategy's loss of 10% over the same time. Several U.S. studies over several decades reviewed overall stock market performance and reached a similar conclusion: the longer your time frame, the greater the odds that a lump-sum investment will outperform dollar cost averaging.

Considerations about dollar cost averaging

• Think about whether you'll be able to continue your investing program during a down market. The return and principal value of stocks fluctuate with changes in market conditions. If you stop when prices are low, you'll lose much of the benefit of dollar cost averaging. Consider both your financial and emotional ability to continue making purchases through periods of low and high price levels. Plan ahead for how you'll manage the temptation to stop investing when the chips are down.

• The cost benefits of dollar cost averaging tend to diminish a bit over very long periods of time, because time alone also can help average out the market's ups and downs.

• Don't forget to consider the cost of transaction fees, which can mount up over time with periodic investing.
Considerations about investing a lump sum

• The lump-sum studies reflect the long-term historical direction of the stock market since record-keeping began in 1925. That doesn't mean the markets will behave in the future as they have in the past, or that there won't be extended periods in which stock prices don't rise. Even if they do move up, they may not do so immediately and forever once you invest.

• Even if you don't have a large lump sum to invest now, you may be able to save smaller amounts and invest the total in a lump sum later. However, many people simply aren't disciplined enough to keep their hands off that money. Unless the money is invested automatically, you may be more tempted to spend your savings rather than investing them, or skip a month--or two or three.

• Even seasoned investors have difficulty timing the market, so ignoring fluctuations and continuing to invest regularly may still be an improvement over postponing a decision indefinitely while you wait for the "right time" to invest.

• Don't forget that a lump sum invested in a single security inherently involves more risk than a lump sum put into a more diversified portfolio, regardless of your time frame.

In the end, deciding between lump-sum investing and dollar cost averaging illustrates the classic risk-reward tradeoff that all investments entail. Even if you're convinced a lump-sum investment might produce a higher net return over time, are you comfortable with the uncertainty and level of risk involved? Or are you increasing the odds that you won't be able to handle short-term losses--especially if they occur shortly after you invest your lump sum--and sell at the wrong time?

It's important to know yourself and your limitations as an investor. Understanding the pros and cons of each approach can help you make the decision that best suits your personality and circumstances.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Market Week:

2011-12-28T08:43:00.000-08:00

Market Week:
December 27, 2011

The Markets
In-the-black Friday: Buoyed by good economic data and congressional reconciliation over extension of the payroll tax cut, the Standard & Poor's 500 headed into the Christmas weekend with a gift for investors--its return to positive territory for the year. That left only four trading days in 2011 for the Nasdaq and Russell 2000 to try to catch up as the Dow continued to dominate 2011. The Nasdaq was only 1.3% away from breaking even for the year, but the Russell 2000 was still almost 5% from doing the same. And despite a relatively benign week, the Global Dow would need to gain more than twice as much in four days as it did during the entire first quarter to have a positive year.

Market/Index 2010 Close Prior Week As of 12/23 Week Change YTD Change
DJIA 11577.51 11866.39 12294.00 3.60% 6.19%
Nasdaq 2652.87 2555.33 2618.64 2.48% -1.29%
S&P 500 1257.64 1219.66 1265.33 3.74% .61%
Russell 2000 783.65 722.05 747.98 3.59% -4.55%
Global Dow 2087.44 1751.60 1803.20 2.95% -13.62%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.30% 1.86% 2.03% 17 bps 127 bps

Last Week's Headlines
•Housing starts shot up 9.3% in November, driven largely by construction of multifamily units, while building permits (an indicator of future construction) were up 5.7%. The Commerce Department said that housing starts were up 24.3% compared to last November.

•The U.S. economy grew more slowly during the third quarter than previously estimated by the Commerce Department. The final 1.8% growth rate represented a downward revision from the 2.5% and 2% of the first two estimates, but was still higher than Q2's 1.3%. Corporate profits rose at a slower pace than in Q2; they were up $32.5 billion compared to $61.2 billion in the second quarter, while after-tax profits were up $41.6 billion.

•New home sales rose 1.6% in November; that's 9.8% ahead of the same time last year, according to the Commerce Department. Meanwhile, the National Association of Realtors® said home resales were up 4%, which put them 12.2% above last November.

•There were reassuring signs out of Europe as a successful auction of short-term Spanish sovereign debt cut the yield on three- and six-month bills by more than half. Also, the European Central Bank allowed 523 European banks to borrow a total of €489 billion in three-year loans to refinance debt.

•The Bureau of Labor Statistics said 43 states had lower unemployment rates in November, while three states (Wisconsin, Minnesota, and Colorado) saw unemployment rise and four others remained the same. The West continued to have the highest regional unemployment rate (9.9%) while the Northeast had the lowest (7.9%).

•American incomes were up 0.1% in November, according to the Commerce Department. However, the extra money promptly went out the door, as consumer spending also was up 0.1%.

•The Federal Reserve Board proposed new regulations designed to help prevent a repeat of the 2008 financial crisis. The rules, which would apply to banks with more than $50 billion in assets and other systemically important financial companies, would require annual stress tests, prevent the largest banks from investing more than 10% of their capital in another systemically important bank, limit debt-to-equity ratios and credit exposure to a single company, and increase capital requirements in some cases.

•The Supreme Court set a three-day session March 26-28 to hear arguments in the 26-state legal challenge to the Patient Protection and Affordable Care Act (the health-care reform legislation passed in 2010).

•The Conference Board's index of leading economic indicators was up 0.5% in November. Seven of the index's ten indicators showed improvement, led by interest rate spreads and housing permits.

•Durable goods orders were up 3.8% in November. However, the Commerce Department said if orders for defense and transportation-related equipment such as aircraft parts are excluded, orders actually fell 1.2%.

•Congress gave taxpayers at least a temporary reprieve from higher taxes by approving a two-month extension of a payroll tax cut that had been scheduled to expire January 1.

Eye on the Week Ahead
The holiday-shortened week is the last opportunity for institutional investors to window-dress their portfolios before leaving a tumultuous year behind.

Key dates and data releases: home prices, consumer confidence (12/27); pending home sales (12/29).
Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Weekly Economic Update

2011-12-27T08:42:00.000-08:00

John Jastremski Presents:
Weekly Economic Update
December 26, 2011

PAYROLL TAX HOLIDAY EXTENDED FOR 2 MONTHS
Friday, President Obama signed an extension of the payroll tax cut lasting through February 29. The stopgap legislation also extends long-term unemployment benefits through that date and postpones a 27% reduction in Medicare payments to doctors. The federal government will pay for the extenders by having Fannie Mae and Freddie Mac hike guarantee fees on new mortgages, a cost that will be passed on to those buying or refinancing a home in 2012.1

GAINS IN HARD GOODS ORDERS, CONSUMER SPENDING
November’s consumer spending increase was tiny: 0.1%. Wages advanced just 0.1% as well. However, last month also saw a 3.8% rise in durable goods orders (the best month for that indicator since July).2,3

IMPROVED HOME SALES, HOUSING STARTS
The Census Bureau reported a 1.6% increase in new home purchases in November, with the new home inventory at its smallest since March 2006. Housing starts hit a 19-month peak in November, soaring 9.3% on the month. Existing home sales also improved notably in November, rising 4.0%; according to the National Association of Realtors, that was the best month since January.3

CONSUMERS FEELING MERRIER
December’s final Thomson Reuters/University of Michigan consumer sentiment survey came in at 69.9 compared with November’s final 64.1 mark. That also beat the 68.0 estimate forecast by economists Reuters had surveyed.4

A YEAR-END RALLY GETS ROLLING
Stocks showed definite momentum last week. The 5-day performances: DJIA, +3.60% to 12,294.00: NASDAQ, +2.48% to 2,618.64; S&P 500, +3.74% to 1,265.33. At the close on Friday, oil settled at $99.68 on the NYMEX, gold closed at $1,606.00 on the COMEX, retail gasoline prices had fallen 2.15% in the past 30 days and natural gas futures were at lows unseen in four years.2,5

THIS WEEK: No major economic releases are on tap for Monday, Wednesday or Friday. Tuesday, the October edition of the S&P/Case-Shiller home price index arrives plus the Conference Board’s newest consumer confidence poll. Thursday, the National Association of Realtors issues its November report on pending home sales and we get the latest initial claims figures.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +6.19 +6.23 -0.0008 +2.25
NASDAQ -1.29 -1.76 +1.81 +3.47
S&P 500 +0.61 +0.68 -2.06 +1.05
REAL YIELD 12/23 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.04% 1.08% 2.35% 3.50%

Sources: money.msn.com, bigcharts.com, treasury.gov, treasurydirect.gov - 12/23/112,6,7,8
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Should You Pay Off Your Mortgage or Invest? 12/24/2011

2011-12-24T13:12:00.000-08:00

Should You Pay Off Your Mortgage or Invest? 12/24/2011

Owning a home outright is a dream that many Americans share. Having a mortgage can be a huge burden, and paying it off may be the first item on your financial to-do list. But competing with the desire to own your home free and clear is your need to invest for retirement, your child's college education, or some other goal. Putting extra cash toward one of these goals may mean sacrificing another. So how do you choose?

Evaluating the opportunity cost

Deciding between prepaying your mortgage and investing your extra cash isn't easy, because each option has advantages and disadvantages. But you can start by weighing what you'll gain financially by choosing one option against what you'll give up. In economic terms, this is known as evaluating the opportunity cost.

Here's an example. Let's assume that you have a $300,000 balance and 20 years remaining on your 30-year mortgage, and you're paying 6.25% interest. If you were to put an extra $400 toward your mortgage each month, you would save approximately $62,000 in interest, and pay off your loan almost 6 years early.

By making extra payments and saving all of that interest, you'll clearly be gaining a lot of financial ground. But before you opt to prepay your mortgage, you still have to consider what you might be giving up by doing so--the opportunity to potentially profit even more from investing.

To determine if you would come out ahead if you invested your extra cash, start by looking at the after-tax rate of return you can expect from prepaying your mortgage. This is generally less than the interest rate you're paying on your mortgage, once you take into account any tax deduction you receive for mortgage interest. Once you've calculated that figure, compare it to the after-tax return you could receive by investing your extra cash.

For example, the after-tax cost of a 6.25% mortgage would be approximately 4.5% if you were in the 28% tax bracket and were able to deduct mortgage interest on your federal income tax return (the after-tax cost might be even lower if you were also able to deduct mortgage interest on your state income tax return). Could you receive a higher after-tax rate of return if you invested your money instead of prepaying your mortgage?

Keep in mind that the rate of return you'll receive is directly related to the investments you choose. Investments with the potential for higher returns may expose you to more risk, so take this into account when making your decision.

Other points to consider

While evaluating the opportunity cost is important, you'll also need to weigh many other factors. The following list of questions may help you decide which option is best for you.

• What's your mortgage interest rate? The lower the rate on your mortgage, the greater the potential to receive a better return through investing.
• Does your mortgage have a prepayment penalty? Most mortgages don't, but check before making extra payments.
• How long do you plan to stay in your home? The main benefit of prepaying your mortgage is the amount of interest you save over the long term; if you plan to move soon, there's less value in putting more money toward your mortgage.
• Will you have the discipline to invest your extra cash rather than spend it? If not, you might be better off making extra mortgage payments.
• Do you have an emergency account to cover unexpected expenses? It doesn't make sense to make extra mortgage payments now if you'll be forced to borrow money at a higher interest rate later. And keep in mind that if your financial circumstances change--if you lose your job or suffer a disability, for example--you may have more trouble borrowing against your home equity.
• How comfortable are you with debt? If you worry endlessly about it, give the emotional benefits of paying off your mortgage extra consideration.
• Are you saddled with high balances on credit cards or personal loans? If so, it's often better to pay off those debts first. The interest rate on consumer debt isn't tax deductible, and is often far higher than either your mortgage interest rate or the rate of return you're likely to receive on your investments.
• Are you currently paying mortgage insurance? If you are, putting extra toward your mortgage until you've gained at least 20% equity in your home may make sense.
• How will prepaying your mortgage affect your overall tax situation? For example, prepaying your mortgage (thus reducing your mortgage interest) could affect your ability to itemize deductions (this is especially true in the early years of your mortgage, when you're likely to be paying more in interest).
• Have you saved enough for retirement? If you haven't, consider contributing the maximum allowable each year to tax-advantaged retirement accounts before prepaying your mortgage. This is especially important if you are receiving a generous employer match. For example, if you save 6% of your income, an employer match of 50% of what you contribute (i.e., 3% of your income) could potentially add thousands of extra dollars to your retirement account each year. Prepaying your mortgage may not be the savviest financial move if it means forgoing that match or shortchanging your retirement fund.
• How much time do you have before you reach retirement or until your children go off to college? The longer your timeframe, the more time you have to potentially grow your money by investing. Alternatively, if paying off your mortgage before reaching a financial goal will make you feel much more secure, factor that into your decision.

The middle ground

If you need to invest for an important goal, but you also want the satisfaction of paying down your mortgage, there's no reason you can't do both. It's as simple as allocating part of your available cash toward one goal, and putting the rest toward the other. Even small adjustments can make a difference. For example, you could potentially shave years off your mortgage by consistently making biweekly, instead of monthly, mortgage payments, or by putting any year-end bonuses or tax refunds toward your mortgage principal.

And remember, no matter what you decide now, you can always reprioritize your goals later to keep up with changes to your circumstances, market conditions,

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Qualified Personal Residence Trust (QPRT) 12/23/2011

2011-12-23T07:00:00.000-08:00

Qualified Personal Residence Trust (QPRT) 12/23/2011

A qualified personal residence trust (QPRT) offers an excellent opportunity for homeowners with taxable estates to minimize federal gift tax and avoid federal estate tax.

What is a QPRT?

A QPRT (pronounced "Q-Pert," and sometimes referred to as a house GRIT) lets you give away your house, but still keep possession for a while. More specifically, a QPRT is an irrevocable trust into which you transfer your home while retaining the right to live there rent free for a specified number (term) of years. At the end of the term of years, the property passes outright to your children or whomever you've named as the remainder beneficiaries.

What are the potential tax savings?

When you transfer a home into a QPRT, you're considered to have made a gift to the remainder beneficiaries that is subject to gift tax. However, the value of the taxable gift isn't the full fair market value of the home, as it would be with an outright transfer. Rather, the gift can be discounted to reflect the fact that you have retained an interest (the right to live in the home). IRS tables and current interest rates are used to determine the amount of the discount.
Moreover, provided you outlive the term of years, the value of the home, plus any appreciation, will completely avoid estate tax because the home will have been removed from your estate.

Tip: Each taxpayer has an exemption from the federal gift and estate tax, which, to the extent it has not already been used, can offset any gift tax that is due. The exemption amount for 2012 is $5,120,000 (plus any applicable deceased spousal unused exclusion amount).

Caution: The transfer of a home to a QPRT does not qualify for the $13,000 annual gift tax exclusion.

What happens if I die during the term of years?

If you die before the term of years expires, the home will be included in your
estate for estate tax purposes (just as it would have been had you not created the QPRT).

How long should the term be?

Because you must survive the term of years to benefit from the QPRT, you might conclude that a shorter term would be best. However, there's a tradeoff--the shorter the term of years, the larger the gift to the remainder beneficiaries and the smaller the tax savings. You must find the right balance, taking your age and health into consideration.

What are the income tax consequences?

For income tax purposes, a QPRT is typically set up as a grantor trust, which means that income and deductions, such as mortgage interest and real estate taxes, are accounted for on your personal income tax return. You also continue to pay for all expenses related to the home, such as repairs and insurance.

Additionally, this arrangement preserves your ability to take the home sale capital gain exclusion ($250,000; $500,000 if married filing jointly) in case the home is sold before the term of years expires.

There is also a significant drawback. When beneficiaries receive property at someone's death, they generally receive an income tax cost basis that is stepped up to fair market value. However, because your beneficiaries will get the home as a gift, they'll receive a carryover basis (your basis) instead. If your home has appreciated substantially in value, the increased capital gains tax that the remainder beneficiaries will owe upon the sale of the home may offset any gift and estate tax savings you'll enjoy.

Can I transfer more than one home to a QPRT?

No. You can't transfer more than one home to a single QPRT. However, you are allowed to set up two QPRTs and transfer one home into each trust. A husband and wife can actually transfer up to three homes to QPRTs--one home that is jointly owned, another home owned by the husband alone, and a third home owned by the wife alone. The home may be either a principal residence or a vacation house.

Can mortgaged property be placed in a QPRT?

Yes. You can transfer mortgaged property to a QPRT. However, it's generally not
recommended because any mortgage payments that you make will be considered gifts to the remainder beneficiaries.

Must I live in the home during the term of years?

You, your spouse, or your dependents must occupy the residence for the entire term of years. The home must be used as a residence at all times, and generally can't be sold unless a replacement home is purchased. Although the primary use must be as a residence, you are allowed to have a home office or some other secondary use of the home.

What if I want to keep living in the home after the term of years expires?

If you wish to continue occupying the home once the term of years expires, you must pay fair market rent to the remainder beneficiaries. You must also enter into a written lease with the remainder beneficiaries, and should do so only at the end of the term of years. The lease should contain all the standard residential lease terms, which should be strictly enforced by the remainder beneficiaries.

Can other property be transferred to a QPRT?

Property that is transferred to a QPRT may include not only the actual home but also other structures that are on the property, such as a separate garage. You may also include a reasonable amount of the surrounding land, but you may not transfer personal property, such as furniture.

A QPRT can also hold cash for the initial purchase of a home, but the purchase must take place within three months of the cash transfer. Additionally, a QPRT can hold cash for up to six months for the payment of certain trust expenses, such as mortgage payments and improvements to the home. And, there are special rules in the event the home is sold or destroyed by fire.

A QPRT example:

Jill, age 50, transfers her vacation home, worth $1 million, to a QPRT. She retains the right to occupy the home for 10 years and a right of reversion, after which the home will pass to her son. Assuming a discount rate of 3.0%, Jill's gift can be discounted by $303,580. The gift is valued at $696,420 but Jill owes no gift tax because it's offset by her available gift and estate tax exemption. If Jill outlives the QPRT's 10-year term and dies several years later when the home is worth $2 million, Jill's estate will owe no estate tax on the $2 million because the home is no longer part of her estate.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

MARKET WEEK: DECEMBER 19, 2011

2011-12-20T10:18:00.000-08:00

MARKET WEEK: DECEMBER 19, 2011
The Markets
Domestic equities gave back last week's gains and then some. The Dow once again fell below the 12,000 mark but managed to remain the only domestic index in positive territory for the year, while the tech-heavy Nasdaq was the hardest hit. Meanwhile, investors once again fled to U.S. Treasuries, pushing the 10-year yield down to a level last seen in late September, while the euro dropped briefly below $1.30.

Market/Index 2010 Close Prior Week As of 12/16 Week Change YTD Change
DJIA 11577.51 12184.26 11866.39 -2.61% 2.50%
Nasdaq 2652.87 2646.85 2555.33 -3.46% -3.68%
S&P 500 1257.64 1255.19 1219.66 -2.83% -3.02%
Russell 2000 783.65 745.40 722.05 -3.13% -7.86%
Global Dow 2087.44 1830.78 1751.60 -4.32% -16.09%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.30% 2.07% 1.86% -21 bps -144 bps
Last Week's Headlines
• Noting that the economy has been "expanding moderately," the Federal Reserve Open Market Committee gave no indication that additional quantitative easing measures are forthcoming. However, it will continue to replace short-term bond holdings with longer maturities and reinvest the proceeds of its portfolio of agency and mortgage-backed securities. It also kept the fed funds rate steady at 0.25%, marking the third anniversary of record low rates.
• The Commerce Department said that though the 0.2% growth in November's retail sales was slower than the 0.6% and 1.3% gains seen during the previous two months, sales were still 6.7% higher than a year ago. The biggest monthly increases were in electronics and appliances (2.1%) and sales by nonstore retailers (1.5%).
• Declining energy costs for the second month in a row helped keep consumer inflation flat in November, the Bureau of Labor Statistics said. That put inflation over the past 12 months at 3.4%, a more moderate pace than the 3.9% annual rate seen in June. Meanwhile, inflation at the wholesale level rose 0.3%, led by a 3.8% increase in raw materials. That put year-over-year inflation at 5.7%, the smallest annual increase since March.
• A parts shortage caused by flooding in Thailand contributed to a 3.4% drop in auto manufacturing, which in turn helped cut overall industrial production by 0.2% in November, according to the Federal Reserve. However, industrial production was still 3.7% higher than a year ago.
• The Securities and Exchange Commission filed civil charges against six former executives of Fannie Mae and Freddie Mac, accusing them of deliberately misleading the public about the extent of the mortgage giants' exposure to risky subprime mortgages prior to the 2008 financial crisis.
Eye on the Week Ahead
Housing data will trickle in throughout the week, while the final number for third-quarter economic growth is due Thursday. And a certain gentleman in red is expected to make an appearance on Sunday.
Key dates and data releases: housing starts (12/20); home resales (12/21); final Q3 gross domestic product (12/22); durable goods orders, personal income/spending, new home sales (12/23).

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE 12-19-2011

2011-12-19T10:18:00.000-08:00

John Jastremski Presents:

WEEKLY ECONOMIC UPDATE

WEEKLY QUOTE

“Comedy is simply a funny way of being serious.”

– Peter Ustinov

WEEKLY TIP

About to do some holiday shopping? Try keeping your credit cards at home. The interest you save can be a financial gift to yourself.

WEEKLY RIDDLE

A man leaves home and makes three left turns. He comes home again and sees two masked men waiting for him, but he jogs straight toward them with a smile as others cheer. Why is this man so unafraid?

Last week’s riddle:
Seven people stand in a square room which measures 30' x 30'. Each one can see the entire room and everyone in it without making any physical movement (aside from eye movement). Where inside this room can you place an apple so that all but one person can see it?

Last week’s answer:
Place the apple on one person's head.

December 19, 2011

JOBLESS CLAIMS FALL TO 3½-YEAR LOW
Last Thursday, the Labor Department announced that 366,000 Americans filed initial jobless claims in the week ending December 10, the lowest weekly figure since March 2008. This was a drop of 19,000 from the preceding week and refuted the expectations of some economists. This may be a sign that the jobless rate, currently at 8.6%, could be poised to fall further.1

HAS INFLATION PEAKED?
The federal government’s Consumer Price Index was flat in November after a 0.1% retreat in October. While core inflation rose 0.2% last month, the Federal Reserve now expects 1.7% inflation across 2012 compared to a projected 2.8% for 2011. Producer prices were up 0.3% in November; core PPI advanced 0.1%. The year-over-year rise in wholesale prices was 5.7%, the smallest 12-month gain since March.2,3

RETAIL SALES RISE 0.2% IN NOVEMBER
While many economists hoped for a bigger advance, the November increase marked the sixth straight monthly gain for the indicator. Lower gas prices may have left consumers with greater discretionary funds: on Friday, AAA said a gallon of regular unleaded averaged $3.25 nationally, 18.4% below a peak hit in early May.2,4

GOLD & OIL TAKE A HIT
Gold lost a whopping 6.93% last week; oil fell 5.49%. Gold settled at $1,597.90 on the COMEX and oil closed Friday’s NYMEX trading day at $93.87.2

STOCKS PULL BACK
Citing “the absence of a credible financial backstop” in the EU debt crisis, Fitch Ratings downgraded France Friday and placed the credit ratings of Spain and Italy on review. It was a wan note to end a rough week, as these numbers point out: DJIA, -2.61% to 11,866.39; S&P 500, -2.83% t0 1,219.66; NASDAQ, -3.46% to 2,555.33.2,5,6

THIS WEEK: No major U.S. economic releases are scheduled for Monday. On Tuesday, we learn about November housing starts and earnings reports arrive from Nike, Oracle, ConAgra and General Mills. Wednesday brings the NAR report on November existing home sales plus earnings out of CarMax, Bed Bath & Beyond and Walgreen’s. Thursday we get the final December consumer sentiment survey from the University of Michigan, the Conference Board’s LEI for November, initial claims numbers and the final 3Q GDP estimate from Washington. Friday brings three big reports: November new home sales, durable goods orders and consumer spending.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +2.50 +3.19 -0.93 +2.00
NASDAQ -3.68 -3.11 +0.80 +2.86
S&P 500 -3.02 -1.87 -2.91 +0.75
REAL YIELD 12/16 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.05% 1.15% 2.29% 3.50%

Sources: money.msn.com, bigcharts.com, treasury.gov, treasurydirect.gov - 12/16/112,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Bonds, Interest Rates, and the Impact of Inflation

2011-12-16T11:00:00.000-08:00

Bonds, Interest Rates, and the Impact of Inflation

There are two fundamental ways that you can profit from owning bonds: from the interest that bonds pay, or from any increase in the bond's price. Many people who invest in bonds because they want a steady stream of income are surprised to learn that bond prices can fluctuate, just as they do with any security traded in the secondary market. If you sell a bond before its maturity date, you may get more than its face value; you could also receive less if you must sell when bond prices are down. The closer the bond is to its maturity date, the closer to its face value the price is likely to be.
Though the ups and downs of the bond market are not usually as dramatic as the movements of the stock market, they can still have a significant impact on your overall return. If you're considering investing in bonds, either directly or through a mutual fund or exchange-traded fund, it's important to understand how bonds behave and what can affect your investment in them.

The price-yield seesaw and interest rates

Just as a bond's price can fluctuate, so can its yield--its overall percentage rate of return on your investment at any given time. A typical bond's coupon rate--the annual interest rate it pays--is fixed. However, the yield isn't, because the yield percentage depends not only on a bond's coupon rate but also on changes in its price.
Both bond prices and yields go up and down, but there's an important rule to remember about the relationship between the two: They move in opposite directions, much like a seesaw. When a bond's price goes up, its yield goes down, even though the coupon rate hasn't changed. The opposite is true as well: When a bond's price drops, its yield goes up.
That's true not only for individual bonds but also the bond market as a whole. When bond prices rise, yields in general fall, and vice versa.

What moves the seesaw?

In some cases, a bond's price is affected by something that is unique to its issuer--for example, a change in the bond's rating. However, other factors have an impact on all bonds. The twin factors that affect a bond's price are inflation and changing interest rates. A rise in either interest rates or the inflation rate will tend to cause bond prices to drop. Inflation and interest rates behave similarly to bond yields, moving in the opposite direction from bond prices.

If inflation means higher prices, why do bond prices drop?

The answer has to do with the relative value of the interest that a specific bond pays. Rising prices over time reduce the purchasing power of each interest payment a bond makes. Let's say a five-year bond pays $400 every six months. Inflation means that $400 will buy less five years from now. When investors worry that a bond's yield won't keep up with the rising costs of inflation, the price of the bond drops because there is less investor demand for it.

Why watch the Fed?

Inflation also affects interest rates. If you've heard a news commentator talk about the Federal Reserve Board raising or lowering interest rates, you may not have paid much attention unless you were about to buy a house or take out a loan. However, the Fed's decisions on interest rates can also have an impact on the market value of your bonds.
The Fed takes an active role in trying to prevent inflation from spiraling out of control. When the Fed gets concerned that the rate of inflation is rising, it may decide to raise interest rates. Why? To try to slow the economy by making it more expensive to borrow money. For example, when interest rates on mortgages go up, fewer people can afford to buyhomes. That tends to dampen the housing market, which in turn can affect the economy.
When the Fed raises its target interest rate, other interest rates and bond yields typically rise as well. That's because bond issuers must pay a competitive interest rate to get people to buy their bonds. New bonds paying higher interest rates mean existing bonds with lower rates are less valuable. Prices of existing bonds fall.
That's why bond prices can drop even though the economy may be growing. An overheated economy can lead to inflation, and investors begin to worry that the Fed may have to raise interest rates, which would hurt bond prices even though yields are higher.
Falling interest rates: good news, bad news
Just the opposite happens when interest rates are falling. When rates are dropping, bonds issued today will typically pay a lower interest rate than similar bonds issued when rates were higher. Those older bonds with higher yields become more valuable to investors, who are willing to pay a higher price to get that greater income stream. As a result, prices for existing bonds with higher interest rates tend to rise.
Example: Jane buys a newly issued 10-year corporate bond that has a 4% coupon rate--that is, its annual payments equal 4% of the bond's principal. Three years later, she wants to sell the bond. However, interest rates have risen; corporate bonds being issued now are paying interest rates of 6%. As a result, investors won't pay Jane as much for her bond, since they could buy a newer bond that would pay them more interest. If interest rates later begin to fall, the value of Jane's bond would rise again--especially if interest rates fall below 4%.
When interest rates begin to drop, it's often because the Fed believes the economy has begun to slow. That may or may not be good for bonds. The good news: Bond prices may go up. However, a slowing economy also increases the chance that some borrowers may default on their bonds. Also, when interest rates fall, some bond issuers may redeem existing debt and issue new bonds at a lower interest rate, just as you might refinance a mortgage. If you plan to reinvest any of your bond income, it may be a challenge to generate the same amount of income without adjusting your investment strategy.

All bond investments are not alike

Inflation and interest rate changes don't affect all bonds equally. Under normal conditions, short-term interest rates may feel the effects of any Fed action almost immediately, but longer-term bonds likely will see the greatest price changes.
Also, a bond mutual fund may be affected somewhat differently than an individual bond. For example, a bond fund's manager may be able to alter the fund's holdings to minimize the impact of rate changes. Your financial professional may do something similar if you hold individual bonds.
Focus on your goals, not on interest rates alone
Though it's useful to understand generally how bond prices are influenced by interest rates and inflation, it probably doesn't make sense to obsess over what the Fed's next decision will be. Interest rate cycles tend to occur over months and even years. Also, the relationship between interest rates, inflation, and bond prices is complex, and can be affected by factors other than the ones outlined here.
Your bond investments need to be tailored to your individual financial goals, and take into account your other investments. A financial professional can help you design your portfolio to accommodate changing economic circumstances.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Funding Your Future with a Fixed Annuity 12/15/2011

2011-12-15T07:23:00.000-08:00

Funding Your Future with a Fixed Annuity 12/15/2011

A fixed annuity is a contract between you and an annuity issuer, usually an insurance company. In its simplest form, you pay money to the annuity issuer; the issuer invests the funds and pays the principal and its earnings back to you or to your named beneficiary. What's fixed about a fixed annuity? The issuer guarantees (subject to its claims-paying ability) a minimum rate of interest on your investment and a fixed benefit amount if you elect to annuitize.

When is an annuity appropriate?

Annuity contributions are made with after-tax dollars and are not tax deductible. That's why it's often advisable to fund other retirement plans first. However, if you've already contributed the maximum allowable amount to other plans and want to save more toward your retirement, an annuity can be an excellent choice. There's no limit to how much you can invest in an annuity, and the funds grow tax deferred until you begin taking distributions.

Once you begin withdrawing from your annuity, you'll pay taxes (at your regular income tax rate) only on the earnings, since your contributions to principal were made with after-tax dollars. Like a qualified retirement plan, a 10% tax penalty may be imposed if you withdraw from an annuity before age 59½.

Annuities are designed to be very-long-term investment vehicles. In most cases, if you take a withdrawal, including a lump-sum distribution of your annuity funds within the first few years after purchasing your annuity, you may be subject to surrender charges imposed by the issuer. However, many companies allow options for withdrawals or distributions without incurring a charge. As long as you're sure you won't need the money until at least age 59½ and you understand the costs (including fees) involved, an annuity is worth considering.

Two distinct phases to an annuity

There are two distinct phases to an annuity contract: the accumulation phase and the distribution phase.

In the accumulation phase, you're putting money into the annuity. You can choose to pay your premiums in one lump sum, or you can make a series of payments over time. These payments can be of equal amounts made at equal intervals, or of variable amounts at irregular intervals, depending on the terms of the contract.

Annuities may be either immediate or deferred; the terms simply refer to when the distribution phase begins. Immediate annuities are typically purchased with a single payment and the distribution phase usually begins within a year of the purchase. While deferred annuities may be purchased with a single lump sum premium payment, they are most often purchased with a series of periodic payments. The distribution period is deferred until some time in the future.
In the distribution phase, you begin taking money out of the annuity. You may withdraw some or all of the money in lump sums, or you may annuitize. Subject to the claims-paying ability of the issuer, annuitization provides a guaranteed income stream for either a specified period or for life.

Why buy an annuity?

• To provide income to supplement what you receive from Social Security, pension plans, and other employer-sponsored retirement plans.
• To create a lifetime income stream.
• To maintain financial independence. For example, you can use annuity funds to pay for long-term care expenses and stay in your own home, rather than rely on your children for care.
• To invest for any specific purpose or long-term goal, such as providing a legacy for your heirs or making a charitable gift.
• To grow funds on a tax-deferred basis.

How a Fixed Deferred Annuity Works

1. In the accumulation phase, you (the annuity owner) send your premium payment(s) (all at once or over time) to the annuity issuer. These payments are made with after-tax funds, and you may invest an unlimited amount.
2. The annuity issuer places your funds in its general account.* Your annuity contract specifies how your principal will be returned as well as what rate(s) of interest you'll earn during the accumulation phase. Your contract will also state what minimum interest rate applies.**
3. The compounding interest on your annuity accumulates tax deferred. You won't be taxed on these earnings until funds are withdrawn or distributed.
4. The issuer may collect fees to manage your annuity account. You may also have to pay the issuer a surrender fee if you withdraw money in the early years of your annuity.
5. Your annuity contract may contain a guaranteed** death benefit or other provisions for a payout upon the death of the annuitant. (The annuitant provides the measuring life used to determine the amount of the payments if the annuity is annuitized. As the annuity owner, you're most often also the annuitant, although you don't have to be.)
6. If you make a withdrawal from your deferred annuity before you reach age 59½, you'll not only have to pay tax (at your ordinary income tax rate) on the earnings portion of the withdrawal, but you may also have to pay a 10 percent premature distribution tax, unless an exception applies.
7. After age 59½, you may make withdrawals from your annuity without incurring any premature distribution tax. Since annuities have no minimum distribution requirements, you don't have to make any withdrawals. You can let the account grow tax deferred for an indefinite period. However, your annuity contract may specifiy an age at which you must begin taking income payments.
8. To obtain a guaranteed** fixed income stream for life or for a certain number of years, you could annuitize which means exchanging the annuity's cash value for a series of periodic income payments. The amount of these payments will depend on a number of factors including the cash value of your account at the time of annuitization, the age(s) and gender(s) of the annuitant(s), and the payout option chosen. Usually, you can't change the payments once you've begun receiving them.
9. You'll have to pay taxes (at your ordinary income tax rate) on the earnings portion of any withdrawals or annuitization payments you receive.
* These funds are invested as part of the general assets of the issuer and are therefore subject to the claims of its creditors.
** All guarantees are subject to the claims-paying ability of the issuing company.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Financial Planning--Helping You See the Big Picture

2011-12-14T10:49:00.000-08:00

Financial Planning--Helping You See the Big Picture

Do you picture yourself owning a new home, starting a business, or retiring comfortably? These are a few of the financial goals that may be important to you, and each comes with a price tag attached.
That's where financial planning comes in. Financial planning is a process that can help you reach your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources.

Why is financial planning important?
A comprehensive financial plan serves as a framework for organizing the pieces of your financial picture. With a financial plan in place, you'll be better able to focus on your goals and understand what it will take to reach them.
One of the main benefits of having a financial plan is that it can help you balance competing financial priorities. A financial plan will clearly show you how your financial goals are related--for example, how saving for your children's college education might impact your ability to save for retirement. Then you can use the information you've gleaned to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you'll have the peace of mind that comes from knowing that your financial life is on track.

The financial planning process
Creating and implementing a comprehensive financial plan generally involves working with financial professionals to:
• Develop a clear picture of your current financial situation by reviewing your income, assets, and liabilities, and evaluating your insurance coverage, your investment portfolio, your tax exposure, and your estate plan
• Establish and prioritize financial goals and time frames for achieving these goals
• Implement strategies that address your current financial weaknesses and build on your financial strengths
• Choose specific products and services that are tailored to meet your financial objectives
• Monitor your plan, making adjustments as your goals, time frames, or circumstances change
Some members of the team
The financial planning process can involve a number of professionals.
Financial planners typically play a central role in the process, focusing on your overall financial plan, and often coordinating the activities of other professionals who have expertise in specific areas.
Accountants or tax attorneys provide advice on federal and state tax issues.
Estate planning attorneys help you plan your estate and give advice on transferring and managing your assets before and after your death.
Insurance professionals evaluate insurance needs and recommend appropriate products and strategies.
Investment advisors provide advice about investment options and asset allocation, and can help you plan a strategy to manage your investment portfolio.
The most important member of the team, however, is you. Your needs and objectives drive the team, and once you've carefully considered any recommendations, all decisions lie in your hands.

Why can't I do it myself?
You can, if you have enough time and knowledge, but developing a comprehensive financial plan may require expertise in several areas. A financial professional can give you objective information and help you weigh your alternatives, saving you time and ensuring that all angles of your financial picture are covered.

Staying on track
The financial planning process doesn't end once your initial plan has been created. Your plan should generally be reviewed at least once a year to make sure that it's up-to-date. It's also possible that you'll need to modify your plan due to changes in your personal circumstances or the economy. Here are some of the events that might trigger a review of your financial plan:
• Your goals or time horizons change
• You experience a life-changing event such as marriage, the birth of a child, health problems, or a job loss
• You have a specific or immediate financial planning need (e.g., drafting a will, managing a distribution from a retirement account, paying long-term care expenses)
• Your income or expenses substantially increase or decrease
• Your portfolio hasn't performed as expected
• You're affected by changes to the economy or tax laws
Common questions about financial planning
What if I'm too busy?
Don't wait until you're in the midst of a financial crisis before beginning the planning process. The sooner you start, the more options you may have.
Is the financial planning process complicated?
Each financial plan is tailored to the needs of the individual, so how complicated the process will be depends on your individual circumstances. But no matter what type of help you need, a financial professional will work hard to make the process as easy as possible, and will gladly answer all of your questions.
What if my spouse and I disagree?
A financial professional is trained to listen to your concerns, identify any underlying issues, and help you find common ground.
Can I still control my own finances?
Financial planning professionals make recommendations, not decisions. You retain control over your finances. Recommendations will be based on your needs, values, goals, and time frames. You decide which recommendations to follow, then work with a financial professional to implement them.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE 12-12-2011

2011-12-13T08:00:00.000-08:00

John Jastremski Presents:

WEEKLY ECONOMIC UPDATE

WEEKLY QUOTE

“Education is the transmission of civilization.”

– Will Durant

WEEKLY TIP

In search of a sizable tax deduction? One idea: donate clothes, electronics and other household items to an IRS-approved charity before 2012 arrives. There are free online tools that can help you keep track of itemized deductions.

WEEKLY RIDDLE

Seven people stand in a square room which measures 30' x 30'. Each one can see the entire room and everyone in it without making any physical movement (aside from eye movement). Where inside this room can you place an apple so that all but one person can see it?

Last week’s riddle:
Alexandra’s mom had four children. The first one was named May, the second was named June, and the third was named August. What was the fourth child's name?

Last week’s answer:
Alexandra.

December 12, 2011

CONSUMERS FEEL BETTER IN EARLY DECEMBER
December’s initial University of Michigan consumer sentiment index is in, and the reading of 67.7 represents a six-month high. This is a 3.6% increase from the final November survey. The sub-index of consumer expectations (which some regard as an indicator of future consumer spending) improved from 55.4 to 61.1. In other positive news for households, retail gas prices hit a low unseen since February on December 5, according to the American Automobile Association, $3.27 was the national average for a gallon of regular unleaded.1

SERVICE SECTOR GROWTH MODERATES
The 52.0 reading on the Institute for Supply Management’s November service sector index was the lowest since January 2010. Anything above 50 still denotes expansion, but the reading disappointed investors; economists polled by Reuters had forecast a 0.6% gain to 53.5.2

MORTGAGE APPS RISE ALMOST 13%
The Mortgage Bankers Association reports that home loan demand hit a four-month peak in the week of November 28-December 2. According to Freddie Mac’s latest figures, the average rate on the 15-year FRM was 3.27% last week; interest rates on 30-year FRMs averaged 3.99%.3

GOLD & OIL RETREAT FOR THE WEEK
Despite strong Friday gains, oil and gold both had down weeks. Oil futures slipped 1.54% across five days to $99.41 while gold futures lost $34.20 across the same time frame to settle at $1,712.80 per ounce on the COMEX December 9.4

RALLY REACHES TWO WEEKS
A new EU fiscal treaty helped stocks push north Friday, (even with the UK opting out of the deal). Across December 5-9, the DJIA gained 1.37%, the S&P 500 0.88% and the NASDAQ 0.76%. At the close on Friday, the Dow was at 12,184.26, the S&P at 1,255.19, and the NASDAQ at 2,646.85.5,6

THIS WEEK: No major economic news is scheduled for Monday (at least not stateside). On Tuesday, the Census Bureau issues retail sales data for November, a Federal Reserve FOMC meeting occurs and we have 3Q earnings from Best Buy. Wednesday, an OPEC meeting concludes. Thursday, a plethora of earnings reports roll out (Adobe, FedEx, RIM, RiteAid, Discover and Accenture) and we also get the November PPI, the latest weekly jobless claims and a report on industrial output. Friday brings November’s CPI and a speech from ECB president Mario Draghi.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +5.24 +7.16 -0.20 +2.28
NASDAQ -0.23 +1.15 +1.72 +3.29
S&P 500 -0.19 +1.80 -2.19 +1.01
REAL YIELD 12/9 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.01% 1.09% 2.21% 3.50%

Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov - 12/9/115,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Stretch IRAs 12/12/2011

2011-12-12T06:14:00.000-08:00

Stretch IRAs 12/12/2011

The term "stretch IRA" has become a popular way to refer to an IRA (either traditional or Roth) with provisions that make it easier to "stretch out" the time that funds can stay in your IRA after your death, even over several generations. It's not a special IRA, and there's nothing dramatic about this "stretch" language. Any IRA can include stretch provisions, but not all do.

Why is "stretching" important?

Earnings in an IRA grow tax deferred. Over time, this tax-deferred growth can help you accumulate significant retirement funds. If you're able to support yourself in retirement without the need to tap into your IRA, you may want to continue this tax-deferred growth for as long as possible. In fact, you may want your heirs to benefit--to the greatest extent possible--from this tax-deferred growth as well. But funds can't stay in your IRA forever. Required minimum distribution (RMD) rules will apply after your death (for traditional IRAs, minimum distributions are also required during your lifetime after you reach age 70½). The goal of a stretch IRA is to make sure your beneficiary can take distributions over the maximum period the RMD rules allow. You'll want to check your IRA custodial or trust agreement carefully to make sure that it contains the following important stretch provisions.

Key stretch provision #1

The RMD rules let your beneficiary take distributions from an inherited IRA over a fixed period of time, based on your beneficiary's life expectancy. For example, if your beneficiary is age 20 in the year following your death, he or she can take payments over 63 additional years (special rules apply to spousal beneficiaries).

As you can see, this rule can keep your IRA funds growing tax-deferred for a very long time. But even though the RMD rules allow your beneficiary to "stretch out" payments over his or her life expectancy, your particular IRA may not. For example, your IRA might require your beneficiary to take a lump-sum payment, or receive payments within five years after your death. Make sure your IRA contract lets your beneficiary take payments over his or her life expectancy.

Key stretch provision #2

But what happens if your beneficiary elects to take distributions over his or her life expectancy but dies a few years later, with funds still in the inherited IRA?
This is where the IRA language becomes crucial. If, as is commonly the case, the IRA language doesn't address what happens when your beneficiary dies, then the IRA balance is typically paid to your beneficiary's estate. However, IRA providers are increasingly allowing an original beneficiary to name a successor beneficiary. In this case, if your original beneficiary dies, the successor beneficiary "steps into the shoes" of your original beneficiary and can continue to take RMDs over the original beneficiary's remaining distribution schedule.

What if your IRA doesn't stretch?

You can always transfer your funds to an IRA that contains the desired stretch language. In addition, upon your death, your beneficiary can transfer the IRA funds (in your name) directly to another IRA that has the appropriate language.
And if your spouse is your beneficiary, he or she can also roll over the IRA assets to his or her own IRA, or elect to treat your IRA as his or her own (if your spouse is your sole beneficiary). Because your spouse becomes the owner of your IRA funds, rather than a beneficiary, your spouse won't have to start taking distributions until he or she reaches age 70½. And your spouse can name a new beneficiary to continue receiving payments after your spouse dies.

Stretching your IRA--a case study

Jack dies at age 78 with an IRA worth $500,000. He had named his surviving spouse, 69-year-old Mary, as his sole beneficiary. Mary elects to roll over the funds to her own IRA. Mary names Susan, her 44-year-old daughter, as her beneficiary. At age 70½, Mary begins taking required minimum distributions over a period determined from the Uniform Lifetime Table. (Mary is allowed to recalculate her life expectancy each year.) At age 79, Mary dies and Susan begins taking required distributions over Susan's life expectancy--29.6 years (fixed in the year following Mary's death). Susan names Jon, her 30-year-old son, as her successor beneficiary. Susan dies at age 70 after receiving payments for 16 years, and Jon continues receiving required distributions over Susan's remaining life expectancy (13.6 years). (See assumptions below.)

Year 1 Mary becomes owner of Jack's IRA
Year 3 Mary begins taking distributions at age 70½ over her life expectancy
Year 12 Susan begins taking distributions the year after Mary's death over Susan's life expectancy
Year 28 Jon begins taking distributions over Susan's remaining life expectancy
Year 40 All of Jack's IRA funds have been distributed
Under this scenario, total payments of over $2 million are made over 40 years, to three generations.

Note: Payments from a traditional IRA will generally be subject to income tax at the beneficiary's tax rate. Qualified distributions from a Roth IRA are tax free.

Assumptions:
• This is a hypothetical example and is not intended to reflect the actual performance of any specific investment portfolio, nor is it an estimate or guarantee of future value.
• This illustration assumes a fixed 6% annual rate of return; the rate of return on your actual investment portfolio will be different, and will vary over time, according to actual market performance. This is particularly true for long-term investments. It is important to note that investments offering the potential for higher rates of return also involve a higher degree of risk to principal.
• All earnings are reinvested, and all distributions are taken at year-end.
• The projected figures assume that Mary takes the smallest distribution she's allowed to take under IRS rules at the latest possible time without penalty.
• The projected figures assume that tax law and IRS rules will remain constant throughout the life of the IRA.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Monthly Economic Update Dec 2011

2011-12-09T07:15:00.000-08:00

John Jastremski Presents:

MONTHLY ECONOMIC UPDATE

December 2011
THE MONTH IN BRIEF
An astonishing rally during the last three days of November did much to improve what had been an anxious month for investors. The Dow ended up gaining 0.76% in November after jumping 4.24% on November 30 alone, responding largely to coordinated action by the world’s central banks to improve liquidity in the European Union. We got hints that the real estate market might be finding a legitimate bottom, some fine numbers from Black Friday and Cyber Monday, and pleasant surprises from some other key economic indicators. Our stock market struggled to pull off gains in the face of debt worries, both in Europe and at home. 1

DOMESTIC ECONOMIC HEALTH
November 2011 might be remembered most for a political and economic lowlight. On November 21, the Congressional “super committee” of 12 assigned to come up with a plan to reduce the federal deficit simply quit. This paved the way for involuntary cuts of $1.2 trillion in 2013. That prompted a stock market plunge and a Fitch Ratings decision, with the agency changing its U.S. outlook to “negative”.2,3

In better news, consumers spent $52.4 billion during the four-day Thanksgiving Day weekend. The National Retail Federation said average shopper shelled out $398.62 in those four days, a new record. Cyber Monday sales rose 22% over 2010 levels to $1.25 billion. The Commerce Department noted that personal spending rose only 0.1% in October; however, personal wages did increase by 0.4%. The federal government’s Consumer Price Index also budged north by 0.1% in October with annualized inflation coming in at 3.5%.4,5,6

There was a rebound in consumer confidence. November’s Conference Board poll saw a 15-point spike to 56.0. The month’s final University of Michigan index of consumer sentiment came in at 64.1, much better than the final 55.7 for October; it was the third straight monthly gain for the index.4,7

Now, over to industry. The Institute for Supply Management’s November manufacturing PMI bucked a global trend and advanced 1.9% to 52.7, marking the sector’s 28th straight month of expansion. ISM’s most recent service sector PMI (October) came in at 52.9, down from 53.0 the preceding month. Producer prices fell 0.3% in October and total durable goods orders slipped 0.7% in September (they went +0.7% when transportation orders were factored out).8,9,10,11

The jobless rate stunningly dropped to 8.6% in November; it had been 9.0% in October and 9.1% in September. Some of this reduction in unemployment was attributable to people dropping out of the job hunt, but the private sector did add 140,000 positions last month. The underemployment rate fell 0.6% to 15.6%.12

GLOBAL ECONOMIC HEALTH
Political change did not stop key Italian bond yields from approaching 7% during November. On November 23, 35% of the 10-year notes offered at Germany’s federal bond auction went unsold. After these alarming developments, the Federal Reserve and other key central banks united on November 30 to foster cheaper dollar loans for European lenders, a move that global markets cheered in relief.1,13,14,15

Economically, the world is sometimes a small village. Was the trouble in Europe now indirectly affecting China? Its PMI fell to 48 in October from 51, the largest monthly slip since March 2009; below 50 is the contraction zone. Output also contracted in Taiwan and South Korea in October. Key PMIs for the Eurozone and Great Britain also fell below 50 in that month of data.14,16

WORLD MARKETS
Most world benchmarks seem headed for double-digit 2011 losses; fortunately, our benchmarks have done better. How did things go globally in November? Poorly, for the most part. In USD terms, here are the monthly numbers according to Morningstar on November 30: FTSE 100, -0.70%; DAX, -0.85%; CAC 40, -2.72%; All Ordinaries, -4.03%; Shanghai Composite, -5.46%; Nikkei 225, -6.16%; TSX Composite, -6.29%; Hang Seng, -9.63%; Sensex, -10.09%. The oft-watched MSCI World (-2.69%) and MSCI Emerging Markets (-6.75%) indices both slipped for the month.17,18

COMMODITIES MARKETS
Gold futures advanced 1.45% last month while copper lost 1.56% and silver lost 4.51%. Through the end of November, gold was +23.14% YTD on the COMEX. The U.S. Dollar Index gained 2.86% in November; at 78.49, it was still -1.01% YTD. Oil ended November at $100.36 a barrel after going +7.69% for the month. Natural gas went -9.76% in November. Retail gas prices (regular unleaded) fell 4.30% last month to $3.30 a gallon at month’s end. Coffee gained 2.82% for November, but other key crop futures descended: cotton lost 11.13%, corn lost 6.03% and wheat lost 2.27%.15

REAL ESTATE
Unexpectedly, the National Association of Realtors found that existing home sales increased 1.4% in October. Inventory shrank 2.2% to an 8.0-month backlog; the median sale price was $162,500, down 4.7% from a year before. The NAR also measured pending home sales surging by 10.4% in October. The S&P/Case-Shiller Home Price Index showed an overall 0.6% decline in September; after a 3Q overall gain of 0.1%, the index showed home prices at roughly 1Q 2003 levels. New home sales increased by 1.3% in October with the annualized gain at 8.9%.15,19,20,21

Interest rates on conventional mortgages didn’t move much. Freddie Mac noted the following change (or lack thereof) in its November 3 and December 1 Primary Mortgage Market Surveys: the average rate on the 30-year FRM stayed flat at 4.00%, and the average rate on the 15-year FRM ticked down 0.01% to 3.30%. Rates on 5/1-year ARMs moved down from 2.96% to 2.90%; rates on 1-year ARMs fell to 2.78% from 2.88%.22

LOOKING BACK…LOOKING FORWARD
The month ended well. November 28-30 represented the S&P 500’s best three days since November 23-25, 2008. At the close on November 30, the Dow was back above 12,000, the S&P back above 1,200 and the NASDAQ back above 2,600.15

% CHANGE Y-T-D 1-MO CHG 1-YR CHG 10-YR AVG
DJIA +4.04 +0.76 +9.45 +2.23
NASDAQ -1.23 -0.50 +4.89 +3.57
S&P 500 -0.85 -2.39 +5.63 +0.94
REAL YIELD 11/30 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.03% 0.74% 2.16% 3.50%

Sources: reuters.com, cnnmoney.com, bigcharts.com, treasury.gov - 11/30/111,23,24,25,26,27,28
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

December is historically a fine month for stocks, of course. With the continuing EU debt troubles, will a “Santa Claus” rally will occur as we get toward New Year’s Day? It does seem as though there is more optimism at the moment, or at least greater distraction on Wall Street from the crisis in Europe and the apparent slowdown in China. Perhaps stateside indicators will encourage the bulls to run and make 2011 a bit better statistically for investors. As CNBC notes, the Dow has gone positive in 71% of Decembers in its long history, posting an average gain of 1.40%. December has also been the best month of the year for the S&P 500 since 1950.29,30

UPCOMING ECONOMIC RELEASES: Here are the news items arriving between now and the end of the year: the November ISM service sector index and the report on October factory orders (12/5), the initial University of Michigan December consumer sentiment survey (12/9), the report on November retail sales and a Federal Reserve policy announcement (12/13), the November PPI and November industrial output (12/15), the November CPI (12/16), data on November housing starts and building permits (12/20), November existing home sales (12/21), the BEA’s final estimate of 3Q GDP, the final University of Michigan December consumer sentiment survey and the Conference Board’s November Leading Economic Indicators index (12/22), November consumer spending, new home sales and durable goods orders (12/23), the October Case-Shiller home price index and the Conference Board’s December consumer confidence poll (12/27), and the November pending home sales report (12/29). The December unemployment report will be out on January 6.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

.

Citations.
1 - www.reuters.com/article/2011/11/30/markets-stocks-close-idUSWEN125420111130 [11/30/11]
2 - abcnews.go.com/Business/gdp-grew-25-percent-boosted-consumer-spending-double/story?id=14821833 [10/27/11]
3 - abcnews.go.com/blogs/business/2011/11/fitch-cuts-u-s-outlook-from-stable-to-negative/ [11/28/11]
4 - www.kansascity.com/2011/11/29/3291899/americans-in-november-more-confident.html [11/29/11]
5 - www.reuters.com/article/2011/11/23/us-usa-economy-consumer-idUSTRE7AM17320111123 [11/23/11]
6 - www.businessweek.com/ap/financialnews/D9R1SFE00.htm [11/16/11]
7 - latimesblogs.latimes.com/money_co/2011/11/report-consumer-confidence-is-up-.html [11/23/11]
8 - www.ism.ws/ISMReport/MfgROB.cfm [12/1/11]
9 - www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943 [11/3/11]
10 - www.bls.gov/news.release/ppi.nr0.htm [11/15/11]
11 - community.nasdaq.com/News/2011-11/us-durablegoods-order-fell-07-in-october.aspx?storyid=104419 [11/23/11]
12 - www.reuters.com/article/2011/12/02/us-usa-economy-idUSTRE7AL14I20111202 [12/2/11]
13 - www.reuters.com/article/2011/11/29/italy-bonds-auction-idUSL5E7MS3S820111129 [11/29/11]
14 - www.fxstreet.com/fundamental/analysis-reports/the-energy-report/2011/11/24/ [11/24/11]
15 - money.msn.com/market-news/post.aspx?post=fd688bc8-f250-4f5f-b360-b0324cd7581c [11/30/11]
16 - www.ft.com/cms/s/0/88f51a98-1c3e-11e1-af09-00144feabdc0.html#axzz1fKupP0aW [12/1/11]
17 - news.morningstar.com/index/indexreturn.html [11/30/11]
18 - mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [11/30/11]
19 - realtors.org/press_room/news_releases/2011/11/ehs_oct [11/21/11]
20 - www.census.gov/const/newressales.pdf [11/28/11]
21 - www.marketwatch.com/story/us-home-prices-drop-06-in-september-2011-11-29 [11/29/11]
22 - www.freddiemac.com/pmms/ [12/2/11]
23 - money.cnn.com/data/markets/dow/ [11/30/11]
24 - money.cnn.com/data/markets/sandp/ [11/30/11]
25 - money.cnn.com/data/markets/nasdaq/ [11/30/11]
26 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F30%2F01&x=0&y=0 [12/2/11]
26 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F30%2F01&x=0&y=0 [12/2/11]
26 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F30%2F01&x=0&y=0 [12/2/11]
27 - www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [11/2/11]
28 - www.treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm71101.pdf [7/11/01]
29 - montoyaregistry.com/Financial-Market.aspx?financial-market=an-introduction-to-the-stock-market&category=29 [11/2/11]
30 - www.cnbc.com/id/45481657 [11/30/11]

Trusteed IRAs

2011-12-07T15:49:00.000-08:00

Trusteed IRAs

The tax code allows IRAs to be created as trust accounts, custodial accounts, and annuity contracts. Regardless of the form, the federal tax rules are generally the same for all IRAs. But the structure of the IRA agreement can have a significant impact on how your IRA is administered. This article will focus on a type of trust account commonly called a "trusteed IRA," or an "individual retirement trust."

Why might you need a trusteed IRA?
In a typical IRA, your beneficiary takes control of the IRA assets upon your death. There's nothing to stop your beneficiary from withdrawing all or part of the IRA funds at any time. This ability to withdraw assets at will may be troublesome to you for several reasons. For example, you may simply be concerned that your beneficiary will squander the IRA funds.
Or it may be your wish that your IRA "stretch" after your death--that is, continue to accumulate on a tax-deferred (or in the case of Roth IRAs, potentially tax-free) basis--for as long as possible. IRA owners sometimes select much younger IRA beneficiaries because their young age means a longer life expectancy, and this in turn requires smaller required minimum distributions (RMDs) from the IRA each year after your death--allowing more of your IRA to continue to grow on a tax-favored basis for a longer period of time. Your intent to stretch out the IRA payments may be defeated if your beneficiary has total control over the IRA assets upon your death.
Even if your beneficiary doesn't deplete the IRA assets, in a typical IRA you normally have no say about where the funds go when your beneficiary dies. Your beneficiary, or the IRA agreement, usually specifies who gets the funds at that point. And in a typical IRA, particularly a custodial IRA, your beneficiary is responsible for investing the IRA assets after your death, regardless of his or her inclination, skill, or experience.
A trusteed IRA can help solve all of these problems. With a trusteed IRA, you can't stop the payment of RMDs to your beneficiary but you can restrict any additional payments from this IRA. For example, you could maximize the period your IRA will stretch by directing the trustee to pay only RMDs to your beneficiary. Or you can ensure that your beneficiary's needs are taken care of by providing the trustee with the discretion to make payments to your beneficiary in addition to RMDs as needed for your beneficiary's health, welfare, or education.
Another option is to impose restrictions on distributions only until you're comfortable your beneficiary has reached an age where he or she will be mature enough to handle the IRA assets.
In each case, the balance of the IRA (if any) passing, upon your beneficiary's death, can be paid to a contingent beneficiary of your choosing (the contingent beneficiary will continue to receive RMDs based on your primary beneficiary's remaining life expectancy). For example, if you've remarried, you may want to be sure your current spouse is provided for upon your death, but also that any IRA funds remaining on your spouse's death pass to the children of your first marriage. Or you may want to ensure that if your spouse remarries, his or her new spouse won't be the ultimate recipient of your IRA assets.
A trusteed IRA can also be structured to qualify, for example, as a marital, QTIP, or credit shelter (bypass) trust, potentially simplifying your estate planning.
Finally, a trusteed IRA can even be a valuable tool during your lifetime. For example, the IRA can provide that if you become incapacitated the trustee will step in and take over (or continue) the investment of assets, and distribute benefits on your behalf as needed or required, ensuring that your IRA won't be in limbo until a guardian is appointed.
How do you establish a trusteed IRA?
First, you'll need to find a trustee that offers IRA planning services. Not all do, and the ones that do don't all provide the same amount of flexibility. So you may need to shop around to find a trustee that can meet your particular needs. As with a typical IRA, you'll name the beneficiary of the IRA. You and your attorney will work with the trustee to draft a beneficiary designation form and trust agreement that contain any custom language that you need.
Is a trusteed IRA right for you?
While trusteed IRAs can be as flexible as a particular trustee will allow, they're not right for everyone. The minimum balance required to establish a trusteed IRA, and the fees charged, are usually significantly higher than for typical custodial IRAs, making trusteed IRAs most appropriate for large IRA accounts. You may also incur significant attorney fees and other costs. And in some cases, another approach might be more appropriate. For example, you may be able to achieve the same results as a trusteed IRA by instead naming a trust as the beneficiary of your IRA.
The "see-through" trust
Unlike a trusteed IRA, where the trust is the IRA funding vehicle and you select the beneficiary of the IRA, with a see-through trust you name the trust itself as the IRA beneficiary, and you also select the beneficiary of the trust.
Normally, when you name an IRA beneficiary that isn't an individual (i.e., a trust, charity, or your estate), that beneficiary must receive the entire balance of your IRA within five years after your death. However, special rules apply to trusts. If specific IRS rules are followed, then the trust beneficiary, and not the trust itself, will be deemed the beneficiary of the IRA, allowing RMDs to be calculated using the trust beneficiary's life expectancy and avoiding the five-year payout rule. Because the IRS looks beyond the trust to find the IRA beneficiary, this is commonly referred to as a "see-through trust."
To qualify as a see-through trust, the following four requirements must be met in a timely manner:
• The trust beneficiaries must be individuals clearly identifiable (from the trust document) as designated beneficiaries as of September 30 following the year of your death.
• The trust must be valid under state law. A trust that would be valid under state law, except for the fact that the trust lacks a trust "corpus" or principal, will qualify.
• The trust must be irrevocable, or (by its terms) become irrevocable upon the death of the IRA owner or plan participant.
• The trust document, all amendments, and the list of trust beneficiaries (including contingent and remainder beneficiaries) must generally be provided to the IRA custodian or plan administrator by the October 31 following the year of your death.
If you have multiple trust beneficiaries, then the life expectancy of the oldest beneficiary will be used to calculate RMDs. IRS regulations provide that trust beneficiaries can't use the "separate account" rule that might otherwise allow each IRA beneficiary to use his or her own life expectancy. If you want each beneficiary to be able to use his or her own life expectancy to calculate RMDs, then you'll generally need to establish separate trusts for each beneficiary to accomplish that goal.
Generally, see-through trusts are structured as "conduit trusts," where all distributions received by the trustee from the IRA must be passed on to your beneficiary. While an accumulation trust (where the trustee can accumulate distributions, even RMDs, received from the IRA instead of paying them out) might also qualify as a see-through trust, the IRS's rules governing these trusts are not as clear.
Trusteed IRA or see-through trust?
Trusteed IRAs are generally less expensive, less complicated, and have less uncertainty than see-through trusts. However, it's important that you make your decision with an eye toward your total estate plan. You should consult an estate planning professional who can explain your options and make sure you choose the right vehicle for your particular situation.
And a word about spouses ...
In most cases, if your primary goal is that your IRA stretch for the longest period of time, this can be best accomplished by simply naming your spouse as the sole IRA beneficiary, with no withdrawal restrictions. Upon your death your spouse can roll the IRA assets over to his or her own IRA, or simply treat your IRA as his or her own. Your spouse can then name a beneficiary who'll receive RMDs over the beneficiary's life expectancy upon your spouse's death. But while this may provide the longest potential RMD payout period, it doesn't solve the problem of your spouse using the funds sooner than you'd like, or naming a contingent beneficiary that's unacceptable to you. With a trusteed IRA, even if your spouse is the sole beneficiary, your spouse can't treat the IRA as his or her own if his or her withdrawal rights are limited.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Health-Care Reform Changes Affecting Seniors

2011-12-06T15:43:00.000-08:00

Health-Care Reform Changes Affecting Seniors

Health-care reform legislation, enacted in 2010, contains some provisions that directly affect our nation's elder population. If you're a retiree or a senior, you may be concerned about how these reforms may affect your access to health care and insurance benefits. The following is an overview of health-care reform legislation provisions you should be aware of.
Medicare spending cuts
Not surprisingly, the concerns of retirees and seniors generally center on potential cuts in Medicare benefits. At the outset, the new legislation does not affect Medicare's guaranteed benefits. However, two goals of the new health-care legislation are to slow the increasing cost of Medicare premiums paid by beneficiaries, and to ensure that Medicare will not run out of funds.
To help achieve these goals, cuts in Medicare spending will occur over a ten-year period, beginning in 2011, particularly targeting Medicare Advantage programs--Medicare benefits provided through private insurers but subsidized by the federal government. These cuts are intended to bring the cost of federal subsidies for Medicare Advantage plans in line with costs for comparable benefits for Medicare beneficiaries. If you participate in a Medicare Advantage plan, these cuts could reduce or eliminate some of the extra benefits your plan may offer, such as dental or vision care, and your premiums may increase. But Medicare Advantage plans cannot reduce primary Medicare benefits, nor can they impose deductibles and co-payments that are greater than what is allowed under the traditional Medicare program for comparable benefits.
Benefits added to Medicare
The legislation also improves some traditional Medicare benefits. For example, prior to the new legislation, traditional Medicare paid 80% of the cost for a one-time physical for new enrollees within the first 12 months of enrollment. But beginning in 2011, you will receive free annual wellness exams; preventive care tests such as screenings for high blood pressure, diabetes, and certain forms of cancer; and a personalized prevention assessment and plan to address particular health risk factors you may encounter.
Medicare Part D drug program changes
If you are a Medicare Part D beneficiary, you may be surprised to find that you have to pay for the entire cost of prescription drugs out-of-pocket after reaching a gap in your annual coverage, referred to as the "donut hole." You could pay up to an additional $3,610 out-of-pocket for medicines after reaching an initial threshold of $2,830 in total prescription drug costs (including Part D payments, beneficiary co-pays, and deductibles). But, in 2010, if you fell in the donut hole, you received a $250 rebate, and, in 2011, you receive a 50% discount on brand-name drugs. Also beginning in 2011, a reduction in co-payments for generic drugs within the donut hole will be phased in, and, beginning in 2013, a reduction in co-payments for brand-name drugs will be phased in. Essentially, by 2020, a combination of federal subsidies and a reduction in co-payments will reduce your out-of-pocket costs for medications in the gap from 100% to 25%. However, individuals with annual incomes greater than $85,000 and couples with incomes exceeding $170,000, will see their Part D premiums increase as the federal subsidy offsetting some of the cost of Medicare Part D premiums is reduced.
If you are a full-benefit dual eligible beneficiary (eligible for both Medicaid and Medicare) receiving institutional care, such as in a nursing home facility, you do not owe any co-payments for Part D-covered prescriptions. However, if you're dually eligible and receiving long-term care services at home or in a day-care community-based setting, you are subject to Part D drug co-payments. Beginning in 2012, the new legislation removes this imbalance by eliminating co-payments for individuals receiving services at home or in a community setting.
Also, beginning in 2011, the time period during which Part D and Medicare Advantage beneficiaries can make changes to their coverage is extended and runs from October 15 to December 7. This extension should provide more time for you to consider your options while ensuring that all changes are properly incorporated into the plan for the following year.
Coverage for those under age 65
You may be between the ages of 55 and 65 and do not have health insurance provided by your employer, or if covered, find that your cost for insurance is substantial. If you're in this predicament, the health-care legislation provides you with opportunities for affordable health insurance.
By 2014, state-based American Health Benefit Exchanges will be created, through which you can purchase affordable health insurance coverage. The Exchanges will serve as a conduit for health insurance providers to offer health plans with different benefits, co-insurance limits, and premium costs. You can then compare the costs of various plans and benefits. If you can't afford an Exchange plan, you may be eligible for a government subsidy based on income and family size.
Increased access to home-based care
Often, people with disabilities or illnesses would rather receive care at home instead of at a nursing home. The health-care reform law provides for programs and incentives for greater access to in-home care. The Community Living Assistance Services and Support program (CLASS) will be established sometime after 2011 (depending on when final regulations are published) as a voluntary insurance program, financed through payroll deductions and available to all working adults who choose to participate. This national program helps participants with functional limitations to maintain their personal and financial independence and live in the community by providing a cash benefit of at least $50 per day (after a five-year vesting period) for nonmedical services, such as home-care services, family caregiver support, and adult day-care or residential-care services. In order to qualify, you must need help with at least two activities of daily living, such as eating, bathing, or dressing.
Also in 2011, the Community First Choice Option will be available for states to add to their Medicaid programs. This option provides benefits to Medicaid-eligible individuals for community-based care instead of placement in a nursing home.
In addition, the State Balancing Incentive Program, to be established in 2011 and running through October 2015, provides increased federal funds to qualifying states that offer Medicaid benefits to disabled individuals seeking long-term care services at home, or in the community, instead of in a nursing home. In order to be eligible, a state must spend less than 50% of its total Medicaid expenditures for at-home or community-based long-term care services and supports. The state must also agree to use the additional federal funds to provide new or expanded non-institutionally-based long-term care services.
Nursing home transparency
The Independence at Home demonstration program, available in 2012, is a test program that provides Medicare beneficiaries with chronic conditions the opportunity to receive primary care services at home. This is intended to reduce costs associated with emergency room visits and hospital readmissions, and generally improve the efficiency of care.
While in-home care may be a preference, often a nursing facility is the better or only alternative. In the past, consumers had very little information available in order to compare nursing homes. The health-care legislation addresses the need for more transparency regarding nursing facilities. For example, nursing homes are required to disclose their owners, operators, and financers. The government will also collect and report information about how well a particular nursing home is staffed, including the number of hours of nursing care residents receive, staff turnover rates, and how much facilities spend on wages and benefits.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE 12-05-2011

2011-12-05T15:48:00.000-08:00

John Jastremski Presents:

WEEKLY ECONOMIC UPDATE

December 5, 2011

JOBLESS RATE FALLS TO 8.6%
In November, U.S. unemployment hit its lowest level since March 2009. November’s net job gain was 120,000. While the Bureau of Labor Statistics report showed that the majority of the new hires were made by retailers and temp agencies, this is still a sign of recovery. The underemployment rate fell to 15.6% from the prior 16.2%.1

SOME (MOSTLY) POSITIVE HOUSING NEWS
Pending home sales soared 10.4% in October, the National Association of Realtors reported. New home sales also were up 1.3% in that month according to the Census Bureau. The September edition of the S&P/Case-Shiller Home Price Index showed price gains in 14 of 20 metro markets; the index gained 0.1% in the third quarter, but was down 3.9% from a year ago.2

MANUFACTURING SECTOR EXPANDS
The Institute for Supply Management’s manufacturing index showed sector growth in November. It came in at 52.7; economists polled by Briefing.com had forecast it would read 51.0.3

OIL TOPS $100 AGAIN, GOLD ADVANCES
Crude prices ended the week at $100.96 on the NYMEX, going up 4.33% in five days. Gold futures had their best week in more than a month (+3.64%) and settled at $1747.00 Friday.4

S&P 500 GAINS 7.4% IN 5 DAYS
The index had its best week since March 2009, going +7.39% to settle at 1,244.28 Friday. A coordinated central bank move to make cheaper dollar loans available to EU lenders set off a massive Dow rally Wednesday, a big factor behind great weeks for the DJIA (+7.01 to 12,019.42) and NASDAQ (+7.59% to 2,626.93).5,6

THIS WEEK: All eyes will be on Europe late next week, as there will be an EU summit and we could see notable developments regarding EU member fiscal policies and the future of the euro. Stateside, Monday brings the latest ISM report on the service sector, a look at October factory orders and earnings from Dollar General. Tuesday, Toll Brothers comes out with 3Q results. No major economic releases are slated for Wednesday. Thursday, the Bank of England and European Central Bank conclude policy meetings and Costco announces 3Q results. Friday, we have the conclusion of the EU summit meeting and the initial December consumer sentiment survey from the University of Michigan.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +3.82 +5.78 -0.29 +2.31
NASDAQ -0.98 +1.84 +1.77 +3.79
S&P 500 -1.06 +1.86 -2.18 +1.01
REAL YIELD 12/2 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.00% 0.84% 2.10% 3.50%

Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov - 12/2/115,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Lump Sum vs. Dollar Cost Averaging: Which Is Better?

2011-12-02T10:57:00.000-08:00

Some people go swimming by diving into the pool; others prefer to edge into the water gradually, especially if the water's cold. A decision about putting money into an investment can be somewhat similar. Is it best to invest your money all at once, putting a lump sum into something you believe will do well? Or should you invest smaller amounts regularly over time to try to minimize the risk that you might invest at precisely the wrong moment?
Periodic investing and lump-sum investing both have their advocates. Understanding the merits and drawbacks of each can help you make a more informed decision.
What is dollar cost averaging?
Periodic investing is the process of making regular investments on an ongoing basis (for example, buying 100 shares of stock each month for a year). Dollar cost averaging is one of the most common forms of periodic investing. It involves continuous investment of the same dollar amount into a security at predetermined intervals--usually monthly, quarterly, or annually--regardless of the investment's fluctuating price levels.

Because you're investing the same amount of money each time when you dollar cost average, you're automatically buying more shares of a security when its share price is low, and fewer shares when its price is high. Over time, this strategy can provide an average cost per share that's lower than the average market price (though it can't guarantee a profit or protect against a loss in a declining market).
The accompanying graph illustrates how share price fluctuations can yield a lower average cost per share through dollar cost averaging. In this hypothetical example, ABC Company's stock price is $30 a share in January, $10 a share in February, $20 a share in March, $15 a share in April, and $25 a share in May. If you invest $300 a month for 5 months, the number of shares you would buy each month would range from 10 shares when the price is at a peak of $30 to 30 shares when the price is only $10. The average market price is $20 a share ($30+$10+$20+$15+$25 = $100 divided by 5 = $20). However, because your $300 bought more shares at the lower share prices, the average purchase price is $17.24 ($300 x 5 months = $1,500 invested divided by 87 shares purchased = $17.24).
The merits of dollar cost averaging
In addition to potentially lowering the average cost per share, investing a predetermined amount regularly automates your decision-making, and can help take emotion out of your investment decisions.
And if your goal is to buy low and sell high, as it should be, dollar cost averaging brings some discipline to that process. Though it can't help you know when to sell, and your shares could be worth more or less than their original cost when you do sell, this strategy can help you pursue the "buy low" portion of the equation.
Also, many people don't have a lump sum to invest all at once; any investments come out of their income stream--for example, as contributions to their workplace retirement savings account. In such cases, dollar cost averaging may not only be an easy strategy; it may be the most realistic option.
The case for investing a lump sum
Maybe you're considering rolling over an IRA or have just received a pension payout. Perhaps you've inherited a large amount of money, or the mail-order sweepstakes' prize patrol has finally shown up at your door. You might be thinking about the best way to shift your asset allocation or how to invest the proceeds of a certificate of deposit. Or maybe you've been parking some money in cash alternatives and now want to invest it.
In cases like these, you may want to at least investigate the merits of lump-sum investing. Several academic studies have compared dollar cost averaging to lump-sum investing and concluded that, because markets have risen over the long term in the past, investing in the market today tends to be better than waiting until tomorrow, since you have a longer opportunity to benefit from any increase in prices over time.
For example, a 2009 study by the Association of Investment Companies found that an investor who put a lump sum into the average British investment company at the end of April 2008 (talk about bad timing!) would have been down 30% one year later. Someone who invested the same total amount divided over 12 months would have been down only 7%. However, when the study examined the previous 5 years rather than a single year, the lump-sum investment made in April 2004 would have been up 26% by April 2009, compared to the periodic investment strategy's loss of 10% over the same time.
Several U.S. studies over several decades (Richard Williams and Peter Bacon, "Lump Sum Beats Dollar Cost Averaging," Journal of Financial Planning, April 1993; G.M. Constantinides, "A Note on the Suboptimality of Dollar-Cost Averaging," Journal of Financial and Quantitative Analysis, June 1979; John Knight and Lewis Mandell, "Nobody Gains From Dollar Cost Averaging,"Financial Services Review, 1992) reviewed overall stock market performance and reached a similar conclusion: the longer your time frame, the greater the odds that a lump-sum investment will outperform dollar cost averaging.
Considerations about dollar cost averaging
• Think about whether you'll be able to continue your investing program during a down market. The return and principal value of stocks fluctuate with changes in market conditions. If you stop when prices are low, you'll lose much of the benefit of dollar cost averaging. Consider both your financial and emotional ability to continue making purchases through periods of low and high price levels. Plan ahead for how you'll manage the temptation to stop investing when the chips are down.
• The cost benefits of dollar cost averaging tend to diminish a bit over very long periods of time, because time alone also can help average out the market's ups and downs.
• Don't forget to consider the cost of transaction fees, which can mount up over time with periodic investing.
Considerations about investing a lump sum
• The lump-sum studies reflect the long-term historical direction of the stock market since record-keeping began in 1925. That doesn't mean the markets will behave in the future as they have in the past, or that there won't be extended periods in which stock prices don't rise. Even if they do move up, they may not do so immediately and forever once you invest.
• Even if you don't have a large lump sum to invest now, you may be able to save smaller amounts and invest the total in a lump sum later. However, many people simply aren't disciplined enough to keep their hands off that money. Unless the money is invested automatically, you may be more tempted to spend your savings rather than investing them, or skip a month--or two or three.
• Even seasoned investors have difficulty timing the market, so ignoring fluctuations and continuing to invest regularly may still be an improvement over postponing a decision indefinitely while you wait for the "right time" to invest.
• Don't forget that a lump sum invested in a single security inherently involves more risk than a lump sum put into a more diversified portfolio, regardless of your time frame.
In the end, deciding between lump-sum investing and dollar cost averaging illustrates the classic risk-reward tradeoff that all investments entail. Even if you're convinced a lump-sum investment might produce a higher net return over time, are you comfortable with the uncertainty and level of risk involved? Or are you increasing the odds that you won't be able to handle short-term losses--especially if they occur shortly after you invest your lump sum--and sell at the wrong time?
It's important to know yourself and your limitations as an investor. Understanding the pros and cons of each approach can help you make the decision that best suits your personality and circumstances

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

The Investment Tax Landscape: Countdown to 2013

2011-11-30T10:56:00.000-08:00

The Investment Tax Landscape: Countdown to 2013

In December 2010, Congress extended the so-called Bush-era tax cuts by passing the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. However, for investors, the legislation may represent not a pardon but a stay of execution. While it's true that federal tax rates on income, qualifying dividends, and capital gains have been extended through the end of the 2012 tax year, many of the issues that influenced the debate over tax rate extensions will continue to be the subject of heated discussion. As a result, investors have been granted a reprieve while Congress wrestles with those issues. That's time you can use to think about how best to position your portfolio.
The can won't stay kicked down the road forever
Why should you look at the time between now and 2013 as an opportunity? Because the U.S. budget deficit is at levels that both political parties recognize can't be sustained long-term. In 2010, a presidential budget commission recommended addressing the problem through a combination of spending cuts and tax increases. Though the proposals didn't get enough support to be submitted to Congress, the deficit problem hasn't gone away. Even if Congress can agree on budget cuts, the possibility of higher taxes in the future can't be ruled out.
There are several categories of investors who should be paying particular attention to the planning process in the coming years. They include people with investments that have appreciated substantially in value; people who rely on dividends and bonds to provide them with ordinary living expenses; and people who are considering investing in the newly issued stock of a small business.
Capital gains and dividends
The tax cut extensions gave investors who have large unrealized capital gains some breathing room. Rather than a top tax rate of 20%, long-term capital gains will generally continue to be subject to a maximum rate of 15%, and the rate for investors in the lowest two tax brackets will remain at zero. If you own investments that have appreciated substantially in value and that now represent a bigger portion of your portfolio than you'd like, you have another chance to examine whether it makes sense to unwind those investments before the end of 2012. Taxes obviously are only one factor in making such a decision, of course. However, if you've been considering selling an asset anyway, you've got some time to plan and gradually implement a strategy for doing so.
Two points worth remembering: first, unless further action is taken, the top long-term capital gains rate will increase to 20% after 2012 (a top rate of 10% will apply to investors in the 15% tax bracket); and second, even at the increased level, the rates on those gains would still be relatively low. As recently as 1986, under President Ronald Reagan, the Tax Reform Act of 1986 provided for capital gains to be taxed at the same rates as ordinary income, with a top rate of 28%. To paraphrase Mark Twain, no one is safe when Congress is in session, and there's no guarantee that the top capital gains rate after 2012 might not be increased beyond the scheduled 20% maximum.
Qualified dividends will continue to be taxed through 2012 at the long-term capital gains rates rather than as ordinary income, as they were before 2003 and are scheduled to be again beginning in 2013. The higher your tax bracket and the more reliant you are on dividends for your income, the more you should be aware of the potential impact if that income were subject to higher taxes. Again, many factors will affect your decision about the role of dividends in your portfolio, including the potential for higher interest rates in the future. However, doing some "what-if" analysis might be useful.
Taxable vs. tax-free bonds
Taxable bonds typically pay higher interest rates than municipal bonds. However, if you're in a relatively high tax bracket or expect to be in one in the future, munis can potentially offer a better after-tax return. They may be worth a second look between now and 2013, when--separate from any potential increase in federal income tax rates--the unearned income of people making $200,000 a year ($250,000 for couples filing a joint return) is scheduled to be subject to a new 3.8% Medicare contribution tax. Absent further legislative changes, that could make munis even more attractive for affluent investors.
However, as with any investment decision, there are many factors to consider. Local and state governments have come under severe financial constraints in recent years, and though the default rate on muni bonds has historically been low, default by individual governmental bodies is always possible. Also, the legislation that extended the tax cuts did not authorize continued issuance of Build America Bonds (BABs) beyond 2010. During the almost two years BABs were authorized, many local and state governments used them to tap the taxable bond market; that temporarily reduced the issuance of new tax-free munis. However, since BABs can no longer be issued without further authorization from Congress, the supply of new munis may increase, which could affect prices. Finally, interest rates have been at historic lows since the end of 2008; since bond prices move in the opposite direction from their yields, rising interest rates would not be good news for bond prices.
Tax break for qualifying small business stock
To help small businesses raise capital, the Internal Revenue Code offers a tax break for investments in businesses that meet certain qualifications. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended the exclusion of 100% of any capital gains on the sale of qualified small business stock. The 100% exclusion now applies to qualifying stock issued after September 27, 2010 and before January 1, 2012.
The 100% exclusion is higher than that previously available. Prior to the 2010 legislation, the exclusion amount for a qualifying small business investment was generally 50% of the capital gains on stock issued between August 10, 1993, and February 17, 2009, or 75% for stock issued after February 17, 2009, and before September 28, 2010.
If you're interested in making an investment that qualifies for the exclusion, you should be aware of some of the restrictions that govern it:
• You must hold the stock for more than five years.
• The business must satisfy certain active business requirements.
• The gross assets of the business may not exceed $50 million before or immediately after issuance of the company's stock.
• The stock must be acquired at original issue rather than purchased through the secondary market. (Exceptions apply, including those relating to qualifying stock acquired through inheritance or as a gift.)
• A qualified investor must be a noncorporate investor (though passthrough entities such as S corporations and partnerships may qualify).
• You may not sell the stock short during the required five-year holding period and still receive the exclusion.
There are limits on the total amount of gain that is eligible for the exclusion. There also may be special considerations if you roll over the gain from the sale of your stock to another qualified small business stock, or if you receive qualified stock as part of your deferred compensation plan. Consult a financial professional about your specific situation.
2013 and beyond
The nation's financial pressures will almost certainly mean continued adjustments to the tax code as 2013 approaches. Though there are no guarantees about what will happen when the new provisions expire, investors generally have another chance to fine-tune their planning efforts while taxes remain historically low. If a bird in the hand is worth two in the bush, why not get expert help in taking advantage of the opportunities available now?

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Market Week: November 28, 2011

2011-11-29T22:00:00.001-08:00

Market Week: November 28, 2011

Market Summaries are available in weekly and quarterly editions. Market Summaries contain information on the Dow, S&P 500, NASDAQ, Russell 2000, Global Dow, Federal Funds interest rate, and 10-year Treasury yields as well as a highlight of past and future economic data.

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The Quarterly Market Review replaces Market Month at the end of March, June, and September. The Annual Market Review replaces both quarterly and monthly Market Summaries for December.
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MARKET WEEK: NOVEMBER 28, 2011
The Markets
Once again, European debt woes drove the headlines that drove the markets. The abbreviated trading week gobbled up last week's rally, leaving the Dow back in negative territory for the year, the S&P 500 with its seventh straight day of losses, and the Russell 2000 down almost 13% from its level just a month ago. Despite the euroangst, Treasury yields remained relatively stable, while gold ended the week below $1,700 an ounce. The euro sank to $1.32 and is now down almost 11% since its $1.48 year-to-date high last spring.

Market/Index 2010 Close Prior Week As of 11/25 Week Change YTD Change
DJIA 11577.51 11796.16 11231.78 -4.78% -2.99%
Nasdaq 2652.87 2572.50 2441.51 -5.09% -7.97%
S&P 500 1257.64 1215.65 1158.67 -4.69% -7.87%
Russell 2000 783.65 719.42 666.16 -7.40% -14.99%
Global Dow 2087.44 1784.40 1688.11 -5.40% -19.13%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.30% 2.01% 1.97% -4 bps -133 bps
Last Week's Headlines
• The congressional supercommittee charged with finding ways to cut the national deficit by $1.2 trillion admitted it had been unable to do so. As a result, $1.2 trillion in across-the-board budget cuts, split roughly evenly between defense and other programs, are slated to be implemented in 2013. The dissent among committee members also raised questions about the potential for resolution of other issues, such as payroll tax cuts and unemployment benefits that are scheduled to expire at year's end.
• Auction demand for German bonds fell short of what had been anticipated. As a result, the European Central Bank bought nearly 40% of the offer, raising questions about whether the debt crisis might be starting to affect even the eurozone's strongest nation. Meanwhile, the yield on the Italian 10-year bond rose once again, hitting roughly 7.3%, and yields on the country's short-term debt rose even higher.
• French President Nicolas Sarkozy and German Chancellor Angela Merkel said they will propose revising the European Union treaty to enhance fiscal coordination among countries, and Greece reportedly asked its bondholders to take a bigger reduction in the amount owed. Also, Fitch Ratings warned that France's credit rating could be in jeopardy, while Standard & Poor's cut Belgium's rating to AA.
• U.S. economic growth for the third quarter was a bit slower than earlier thought, but continued to improve from the previous quarter. The Bureau of Economic Analysis's second estimate for Q3 was 2% rather than the earlier estimate of 2.5%, but that was still higher than Q2's 1.3%.
• Lower demand for commercial aircraft helped cut durable goods orders by 0.7% in October, according to the Commerce Department. However, orders for nontransportation-related goods actually rose 0.7%.
• U.S. incomes were up in October, but the Commerce Department said savings rose more than spending. Incomes rose 0.4%, but consumer spending increased only 0.1%, while the savings rate rose to 3.5% of income during the month.
Eye on the Week Ahead
Major bond auctions throughout the week in several eurozone countries, including Italy, Spain, France, and Belgium, will be watched for signs of increasing pressure on yields. Also, eurozone finance ministers will meet Tuesday to discuss the debt situation. Friday's unemployment figure and Black Friday sales reports will highlight domestic economic data.
Key dates and data releases: new home sales (11/28); home prices, consumer confidence (11/29); business productivity/costs, pending home sales (11/30); U.S. manufacturing, construction spending (12/1); unemployment/payrolls (12/2).
Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE 11-28-2011

2011-11-28T10:50:00.000-08:00

«John Jastremski» Presents:

WEEKLY ECONOMIC UPDATE

November 28, 2011

A TINY INCREASE IN CONSUMER SPENDING
Personal spending advanced by just 0.1% in October, the smallest gain in four months, as measured by the Commerce Department. Hopefully a strong Black Friday and Cyber Monday will make November a different story. In better news, personal incomes rose 0.4% last month, the best month for that statistic since March. America’s savings rate increased 0.2% to 3.5%.1

HOUSEHOLD CONFIDENCE RISES
Americans seems to be feeling less pessimistic about the economy. The final November Thomson Reuters/University of Michigan consumer sentiment survey came in at 64.1, much better than the final October mark of 60.9.1

HOME SALES, DURABLE GOODS ORDERS ENCOURAGE
The National Association of Realtors reported a 1.4% increase in existing home sales in October and a 2.2% monthly reduction in the backlog of unsold properties, taking the inventory down to 8.0 months. Overall hard goods orders declined 0.7% in October but were up 0.7% with transportation orders factored out; economists polled by Bloomberg News had expected a 1.2% overall monthly retreat.2,3,4

GOLD DIPS UNDER $1,700
The precious metal slipped2.27% last week, and it is down 5.71% in the past two weeks; prices settled at 1,685.50 an ounce. Oil lost 0.92% last week on the NYMEX to settle at $96.77 at closing. 5

BUYERS CROWD THE MALLS, BUT NOT WALL STREET
Stocks were hit hard during a short trading week by two developments: the failure of the “super committee” on Capitol Hill and a German bond auction at which 35% of the 10-year notes offered went unsold. The numbers for the week: DJIA, -4.78% to 11,231.78; S&P 500, -4.69% to 1,158.67; NASDAQ, -5.09% to 2,441.51.6

THIS WEEK: On Cyber Monday, the numbers on October new home sales come out. Tuesday, the latest S&P/Case-Shiller home price index is released along with the Conference Board’s November snapshot of U.S. consumer confidence; also, Tiffany issues 3Q results. Wednesday, we get data on October pending home sales from the National Association of Realtors and a new Federal Reserve Beige Book. Thursday brings the latest initial claims numbers, November’s ISM manufacturing index, data on auto sales from the Commerce Department and earnings from Kroger, Barnes & Noble and H&R Block. Friday, the October unemployment report is released and Big!Lots announces 3Q earnings.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA -2.99 +1.26 -1.71 +1.25
NASDAQ -7.97 -3.67 -0.15 +2.58
S&P 500 -7.87 -2.58 -3.46 +0.0001
REAL YIELD 11/25 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.05% 0.75% 2.27% 3.50%

Sources: usatoday.com, bigcharts.com, treasury.gov, treasurydirect.gov - 11/25/117,8,9,10
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

How Secure Is Social Security?

2011-11-25T07:43:00.000-08:00

How Secure Is Social Security?
If you're retired or close to retiring, then you've probably got nothing to worry about your Social Security benefits will likely be paid to you in the amount you've planned on (at least that's what most of the politicians say). But what about the rest of us?

The media onslaught
Watching the news, listening to the radio, or reading the newspaper, you've probably come across story after story on the health of Social Security. And, depending on the actuarial assumptions used and the political slant, Social Security has been described as everything from a program in need of some adjustments to one in crisis requiring immediate, drastic reform.
Obviously, the underlying assumptions used can affect one's perception of the solvency of Social Security, but it's clear some action needs to be taken. However, even experts disagree on the best remedy. So let's take a look at what we do know.
Just the facts, ma'am
According to the Social Security Administration (SSA), over 57 million Americans currently collect some sort of Social Security retirement, disability or death benefit. Social Security is a pay-as-you-go system, with today's current workers paying the benefits for today's retirees.
How much do today's workers pay? Well, the first $106,800 of an individual's annual wages is subject to a 12.4% Social Security payroll tax, with half being paid by the employee and half by the employer (self-employed individuals pay all of it). This money is put into a big holding tank--the Social Security trust fund--and is used to pay out current benefits. (Note that for 2011 only, the payroll tax for employees has been reduced by 2%, so the combined tax for employees and employers is 10.4%.)
The amount of your retirement benefit is based on your average earnings over your working career. Higher lifetime earnings result in higher benefits, so if you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily.
Your age at the time you start receiving benefits also affects your benefit amount. Currently, the full retirement age is in the process of rising to 67 in two-month increments, as shown in the following chart:
________________________________________
What Is Your Full Retirement Age?
Birth Year Full Retirement Age
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67
Note: If you were born on January 1 of any year, refer to the previous year to determine your full retirement age.
You can begin receiving Social Security benefits before your full retirement age, as early as age 62. However, if you retire early, your Social Security benefit will be less than if you had waited until your full retirement age to begin receiving benefits. Specifically, your retirement benefit will be reduced by 5/9ths of 1 percent for every month between your retirement date and your full retirement age, up to 36 months, then by 5/12ths of 1 percent thereafter. For example, if your full retirement age is 67, you'll receive about 30 percent less if you retire at age 62 than if you wait until age 67 to retire. This reduction is permanent--you won't be eligible for a benefit increase once you reach full retirement age.
Demographic trends
Even those on opposite sides of the political spectrum can agree that demographic factors are exacerbating Social Security's problems, namely, life expectancy is increasing and the birth rate is decreasing. This means that over time, fewer workers will have to support more retirees. According to the Social Security Administration (SSA), in 1950, there were 16 workers per beneficiary, today there are 3 workers per beneficiary, and within 40 years there will be just 2 workers per beneficiary.
The SSA predicts that in 2011, Social Security will begin paying out more money than it takes in. However, by drawing on the Social Security trust fund that, on paper, is supposed to receive today's payroll surpluses, the SSA estimates that Social Security should be able to pay promised benefits until 2036.
The caveat is that money in the trust fund isn't exactly like money in your pocket--various administrations have used the money to pay for general government spending, leaving the trust fund with only a legal obligation to be paid back. To do so, the federal government would need to reduce other spending, borrow money, or raise taxes--a hurdle that might factor into the final solution.
Possible fixes
While no one can say for sure what will happen (and the political process is sure to be contentious), here are some solutions that have been proposed:
• Allow individuals to invest some of their current Social Security taxes in "personal retirement accounts"
• Raise the current 12.4% payroll tax
• Raise the current ceiling on wages currently subject to the payroll tax
• Raise the retirement age beyond age 67
• Reduce future benefits, especially for wealthy retirees
• Tie initial benefit levels to a more modest price index instead of the current wage index
• Allow the Social Security program itself to invest in assets other than government bonds
Uncertain outcome
Members of Congress and the President still support efforts to reform Social Security, but progress on the issue has been slow. However, the SSA continues to urge all parties to address the issue sooner rather than later, to allow for a gradual phasing in of any necessary changes.
Although debate will continue on this polarizing topic, there are no easy answers, and the final outcome for this decades-old program is still uncertain.
In the meantime, what can you do?
Aside from following the news to learn of any legislative developments, you should periodically check to make sure that your earnings have been properly credited. Due to budgetary pressures the SSA has stopped mailing out Social Security Statements, but if you're employed you can check your earnings by reviewing the W-2 you receive from your employer annually.
If you want to estimate the amount of Social Security benefits you will be eligible to receive in the future under current law (based on your earnings record) you can use the SSA's Retirement Estimator. It's available at the Social Security website at www.ssa.gov.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Choosing Your State of Domicile

2011-11-23T11:41:00.000-08:00

Choosing Your State of Domicile

What is it?
Your domicile is the state where you maintain your legal residence. Domicile is determined by intent, rather than by the length of time you spend in a state. You may establish a state as your domicile the first moment you occupy property there, provided your intent is to return there if you go away. You have only one domicile, although you may have more than one home.
Example(s): Fred, who lives in New Mexico, takes a new job in Arizona. He establishes a temporary residence there until the end of the school year when his wife and children will join him. Although he maintains homes in both Arizona and New Mexico, he decides to keep New Mexico as his state of domicile until his family relocates to join him, after which he'll call Arizona his state of domicile.
Your domicile is not formally registered anywhere, but if you want to change it, you should be prepared to convince the authorities of any state which may be negatively affected by your change of intent.
Example(s): Frank changes his state of domicile from Massachusetts, a state with income taxes, to New Hampshire, a state without income taxes. He prepares to convince the Massachusetts Department of Revenue, if called upon, that he's made a legitimate change of domicile by renting a home in New Hampshire, getting a driver's license and registering his car there, and also registering to vote there.

Definitions
• Domicile, also called your "state of legal residence"--your true, fixed, and permanent home. It is the place to which you intend to return if you're away.
Example(s): Jane relocates from Atlanta to Boston to attend graduate school. She intends to return to Atlanta when her education is complete. Georgia is her state of domicile. Even if Jane remains in Boston for many years earning several advanced degrees, Georgia is her state of domicile for the entire period as long as she intends to return there.

Suppose, while living in Boston, Jane decides she won't return to Atlanta but would like to make Vermont her state of domicile. She would have to travel to Vermont and have the appropriate mental intent while physically present there.
• Residence--The place where you actually live. This, by itself, has little or no legal significance.
• Statutory residence--The place where you live and where you're required to pay state income taxes. In some states, if you're physically present for a certain period of time, you're liable for income taxes in that state.
Tip: If you're a statutory resident of one state and claim another state as your domicile, your state of domicile may require you to file a tax return there as well.

Why is your domicile important?
Your domicile is important because it affects the following:
• Your liability for state income taxes
• Your eligibility for certain state benefits, such as in-state tuition rates at public colleges and universities, disability benefits, and Medicaid benefits
• The jurisdiction where your will is probated

Determining your domicile
In general
You must meet the following requirements to claim a state as your domicile:
• You must be physically present in the state, although you don't have to be present for any particular length of time. In theory, only a few minutes would suffice. In practice, however, if your residency status is ever challenged in court, you might need to prove that you were in the state for several months
• You must intend to make that state your permanent home.
If you're a naturalized citizen, your domicile is usually the state where you became a citizen, unless you marry a citizen domiciled in another state.
Tip: There is one exception to the physical presence requirement. If you marry a person domiciled in another state, you may be able to claim your spouse's state of domicile as your own, even if you've never set foot there.

Proving intent
It isn't necessary to do any of the following in order to claim a state as your domicile. However, you might want to do some or all of them to prove that you intend to make that state your domicile:
• Own property
• Open bank accounts
• Register to vote
• Obtain a driver's license
• Establish ties to the local community

Specific purposes
If your state of domicile is important to you for specific reasons, such as state income tax, the effect of state property laws, or state tuition rates, you may want to consult an attorney. The specific facts regarding your domicile that you will need to establish may vary depending upon the benefit that you are seeking.

Changing your domicile
There are only two requirements to change your domicile: (1) you must be physically present in that state, and (2) you must intend to make it your permanent home. In order to prove your intent, you may also want to take some or all of the actions mentioned above. The most important point to remember when claiming a state as your domicile is that you should be consistent. Inconsistency is the single biggest mistake you can make regarding domicile.
Example(s): Melissa chooses Oregon as her state of domicile. She doesn't keep her California driver's license or vote in New Mexico, where she has a second home.

Domicile and community property
You may own community property and income or separate property and income depending on your state of domicile. If you and your spouse have different domiciles, you must examine the laws of each domicile to determine if you own community property and income or separate property and income. If you move in or out of a community property state during the year, you may or may not have community property and income. You must take into account the factors noted previously in determining your domicile.

Tax considerations
Your income may be taxed in two states
Your income may be taxed in your state of domicile or the state where you earned it, or both.

You may need to file part-year returns
If both your present and former states of domicile tax income and if you move on any day other than the first of January, you'll have to file part-year returns in both states.

Your choice of domicile can affect state death taxes
At your death, if your state of domicile is unclear and more than one choice is available, your personal representative should take into account the affect of domicile on state death taxes. State tax laws vary with different exemption amounts, tax rates, etc. A wise choice of domicile may minimize your state death tax liability.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE 11-21-2011

2011-11-21T11:40:00.000-08:00

«John Jastremski» Presents:

WEEKLY ECONOMIC UPDATE

WEEKLY QUOTE

“Accept no one’s definition of your life; define yourself.”

– Harvey Fierstein

WEEKLY TIP

If you pay your real estate taxes instead of your mortgage lender, you could pre-pay some 2012 taxes this year to qualify for a deduction on your 1040.

WEEKLY RIDDLE

Gerald Ford was our 38th President, but he was actually the 37th man to take the job. Why was that?

Last week’s riddle:
A sudden noise startles a gopher, an owl and a skunk at the edge of a forest. The owl flies off and the gopher retreats into his burrow, but the skunk runs for the trees. How far can that skunk run into the forest?

Last week’s answer:
Halfway; after he gets halfway in, he’s running out of the forest.

November 21, 2011

CONSUMER PRICES RETREAT IN OCTOBER
For the first month since June, consumer inflation decreased. The biggest influence on the 0.1% decline in the Consumer Price Index? Falling retail gasoline prices. New car prices also saw their biggest one-month drop in nearly two years. Core CPI rose 0.1% in October; annualized inflation lessened to 3.5% with annualized core CPI at 2.1%. Producer prices declined last month as well, going -0.3% after a +0.8% September showing; core PPI was flat in October.1,2

RETAIL SALES, HOUSING STARTS, LEI ALL ENCOURAGE
The Commerce Department said U.S. retail purchases increased by 0.5% in October – the fifth consecutive monthly gain. While overall housing starts declined 0.3% last month, single-family home construction improved by 5.1%. October housing permits were 17.7% above year-ago levels. The Conference Board’s index of leading economic indicators rose a striking 0.9% in October, with the boost in home construction a key factor.2,3,4,5

GOLD & OIL PRICES SLIDE
In fact, gold had its roughest trading week since September, with prices pulling back 3.5% to $1,720.10 at Friday’s COMEX close. Oil prices also descended: crude settled at $97.41 per barrel on the NYMEX at week’s end.6,7

STOCKS LOSE SOME GROUND
Investors weren’t buying much last week, what with one eye on Europe and another on the “super committee” impasse in Congress. The Dow, S&P 500 and NASDAQ all pulled back for the week as follows: DJIA, -2.94% to 11,796.23; S&P 500, -3.81% to 1,215.67; NASDAQ, -3.97% to 2,572.50.8

THIS WEEK: Monday, the National Association of Realtors tells us about October existing home sales and Hewlett-Packard and Tyson Foods issue 3Q results. Tuesday brings the second estimate of 3Q GDP, the most recent Federal Reserve policy meeting minutes and earnings from Campbell Soup and Hormel Foods. Wednesday is big indeed: the day before Thanksgiving is the deadline for the Congressional “super committee” to approve a deficit-trimming plan. Wednesday will also see the release of data on October consumer spending and October durable goods orders, plus the latest initial claims figures and the final University of Michigan consumer sentiment poll for the month. Thursday being Thanksgiving, all U.S. financial markets will be closed. This Friday will be Black Friday, of course; the NYSE will have a shortened trading day.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +1.89 +5.50 -0.89 +1.82
NASDAQ -3.03 +2.31 +1.04 +3.30
S&P 500 -3.34 +1.59 -2.65 +0.56
REAL YIELD 11/18 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS 0.05% 0.83% 2.33% 3.50%

Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov - 11/18/118,9,10,11
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Distribution Funds: Putting Income on Autopilot 11/19/2011

2011-11-19T07:06:00.000-08:00

Distribution Funds: Putting Income on Autopilot 11/19/2011

As baby boomers retire, they begin to focus less on accumulating assets and more on how those assets can be converted into an ongoing stream of income. Distribution funds are one way to simplify that process.

Distribution funds are actively managed mutual funds that focus not on maximizing asset growth but on making regularly scheduled payments to investors. Distribution funds were primarily designed to give retirees an easy way to receive income. For example, early retirees might use one to provide income until they reach full retirement age. They also can be used to complement a pension or other income sources.

How distribution funds work

A distribution fund basically functions much like a systematic withdrawal plan. Its annual payout (either a percentage of assets or a specific dollar amount) is divided into equal payments that are scheduled to be made at regular intervals (typically monthly or quarterly).

As with so-called lifestyle or lifecycle funds, distribution funds typically are offered as part of a group. All funds in the group use a similar investing methodology, but each fund has a different payout target or distribution rate. For example, one fund in the group might offer a 3% annual payout. Another fund in the same group might target a 4% payout, and a third might aim for 6%.

One size doesn't fit all

Even though funds within a given series are consistent in their approach to income distribution, methods used by various families of distribution funds to generate returns and calculate payments vary widely. For example, one series might differentiate its funds based on the annual percentage each one distributes. Another group of funds might determine annual income levels and asset allocation based on how long each fund's portfolio is intended to last. The shorter a fund's time horizon, the higher the targeted annual payout.

Some distribution funds are managed so that all capital is exhausted by the end of a designated time period, generally getting more conservative as that end date gets closer. Others are designed to preserve capital and make payouts primarily from earnings; these typically have no time frame attached. Regardless of how the targeted payout rate is derived for a given fund series, it's based on what is considered a sustainable withdrawal rate given the fund's objectives, planned asset allocation, and time frame (if applicable). Also, in some cases, the amount of the payout is adjusted to keep pace with inflation.

A distribution fund's method of providing its targeted income is generally based on historical rates of return for various types of investments in both good and bad markets. Though past performance is no guarantee of future results and asset allocation alone can't guarantee a profit or prevent a loss, each fund's strategy is intended to minimize the impact of market fluctuations on its income payout. However, there is no guarantee a fund's payout will remain the same from year to year. Also, it's important to remember that all investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

A distribution fund is generally structured as a fund of funds, meaning that it is comprised of other mutual funds. However, some also include other types of investments.
Distribution funds aren't annuities

Because of their focus on income, distribution funds are designed to fill a role in retirement that is somewhat similar to that of annuity payments. However, there are some key differences. Perhaps the most important is that distribution funds offer no guarantees of the payout levels they offer; annuities generally do (subject to the claims-paying ability of the annuity's issuer). Also, a mutual fund is not an insurance contract, as an annuity is. And annuities often are designed to ensure an income that lasts throughout an individual's lifetime, and/or that of a spouse. Though an investor can attempt to provide that with an appropriate distribution fund, no fund can guarantee income for life.

Advantages of distribution funds

A distribution fund can simplify and streamline the process of receiving ongoing income. You don't have to worry about constructing that diversified portfolio yourself, shifting its asset allocation over time, or rebalancing it periodically. Also, the concept of a distribution fund may be easier to understand than an insurance contract that has many riders and variables. In addition, a targeted payout rate may make it easier to estimate how long your savings will last than if you were to try to manage your portfolio on your own.

Distribution funds also offer a great deal of flexibility. Even though you receive regularly scheduled payments, you can withdraw additional amounts from your principal at any time. That means you can adjust your annual retirement income from year to year, or make withdrawals to take care of unexpected costs. Investments that guarantee a regular income stream typically restrict the use of your principal.

Because distribution funds were intended as low-cost alternatives to annuities, expense ratios tend to be comparatively low.

Tradeoffs with distribution funds

As mentioned previously, a distribution fund may strive to provide a certain level of income, but there are no guarantees that it will do so. Depending on how a fund is structured and managed, a steep or prolonged market decline could affect the amount of the scheduled payments from year to year, or how long your investment will last. If you cannot afford either possibility, a distribution fund may mean more uncertainty--either long term or short term--than you're comfortable with.

If you are willing and able to structure and administer a systematic withdrawal program independently, you may be able to replicate many of the advantages of a distribution fund with a well-diversified portfolio. That would give you greater ability to customize payouts to your individual situation. For example, you could shift investments based on what's happening in the financial markets or your own life, and manage your tax situation from year to year.

Distribution funds are designed for individuals who plan to stay invested in a given fund for an extended period of time. If you're an active trader or might withdraw your money relatively quickly, you may want to think twice; in-and-out investing will undercut the very reason for choosing a distribution fund. And be aware that even though you can withdraw amounts over and above your scheduled payments, those withdrawals will reduce future earnings that would have supported distributions in later years. That could leave you vulnerable to longevity risk--the possibility of outlasting your savings.

You also may need to consider any projected distribution fund payouts in the context of other retirement income concerns, such as the tax consequences of those payouts, or required minimum distributions from a qualified retirement plan or IRA.

One of many choices

Before investing in a distribution fund, carefully consider its investment objectives, risks, charges, and expenses, which can be found in the prospectus available from the fund. Read the prospectus carefully before investing. As with most investment options, a distribution fund may not fill all your retirement income needs. Don't hesitate to get expert advice on whether one might be useful for part of your portfolio, or for a specific purpose.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

THE BEST AND THE WORST 11/18/2011

2011-11-18T07:04:00.000-08:00

THE BEST AND THE WORST 11/18/2011

Rounding up the rankings of places to be (and not to be) financially.

Presented by John Jastremski

Do you live in one of the worst tax states for retirees? Are you fortunate enough to live in one of the best states to do business? Here is a roundup of the miscellaneous, fascinating rankings offered by leading magazines and websites.

What are the best (and worst) states for business? Well, CNBC has ranked all 50 states based on 43 criteria including quality of work force, cost of doing business, quality of life, state economies and access to capital. Coming in at #1: Virginia. Number two is Texas, number three is North Carolina. The state with the lowest cost of doing business – Iowa – ranked 9th. The bottom three? Hawaii (48th), Alaska (49th) and … Rhode Island? Yes, it was dead last. CNBC cited its 10.9% jobless rate and a corporate tax rate nearly as high.1,2

What are the best (and worst) tax states for retirees? Kiplinger sees four “tax hells” in the Northeast. Vermont is ranked #1 (high property taxes along with state levies of up to 8.95%) and Maine, Connecticut and New Jersey also make the bottom ten. Minnesota is #2, Nebraska #3, Oregon #4 and California #5. As to the best, Wyoming ranks #1 among the “tax heavens”, followed by Mississippi, Pennsylvania, Kentucky and Alabama. Wyoming has no estate tax, no state income tax, and only a 4% sales tax; the state collects abundant revenues from oil and mineral firms.3,4

What cities may be especially attractive for a retiring baby boomer? Fortune offers 4 “great places”, citing ideals among four types of retirement destinations. It ranks Athens, GA as the best college town, Seattle as the best big city, St. George, UT as the best town for outdoors lovers and San Rafael, Argentina as an ideal foreign city for retirement.5

Where could I live well and prosper in my career or business? Kiplinger has ranked its Best Value Cities – metro areas featuring “vibrant economies, a low cost of living, and plenty of lifestyle amenities.” The #1 place to be is ... Omaha. Then we have Charlotte at #2, Nashville at #3, and respectively 4th-10th we have Colorado Springs, Knoxville, Lexington, Little Rock, Wichita, Cedar Rapids and Cincinnati. It also identifies the metro areas with the largest household income growth between 2005-09: Midland, TX (+31.3%), Grand Junction, CO (+24.8%) and Jacksonville, NC (+21.8%) came in 1-2-3, while the three biggest household income declines were in St. George, UT (-11.2%), Muskegon-Norton Shores, MI (-11.4%) and Albany, GA (-11.9%).6,7

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Citations.
1 - cnbc.com/id/41666602 [7/29/11]
2 - advisorone.com/2011/06/29/top-10-best-states-for-business?t=marketing-technology [6/29/11]
3- finance.yahoo.com/focus-retirement/article/112987/tax-unfriendly-states-retirees [6/24/11]
4 - finance.yahoo.com/retirement/article/113021/5-tax-friendly-states-retirees-kiplingers [7/1/11]
5 - advisorone.com/2011/06/03/4-great-places-for-baby-boomers-to-retire?page=2 [6/3/11]
6 - kiplinger.com/guides/best-cities/ [7/31/11]
7 - kiplinger.com/tools/bestcities_sort/index.php?sortby=salary&sortorder=ASC [7/31/11]

Growth vs. Value: What's the Difference?

2011-11-17T09:27:00.000-08:00

Growth vs. Value: What's the Difference?

With the wide variety of stocks in the market, figuring out which ones you want to invest in can be a daunting task. Many investors feel it's useful to have a system for finding stocks that are worth buying, deciding what price to pay, and realizing when a stock should be sold. Bull markets--periods in which prices as a group tend to rise--and bear markets--periods of declining prices--can lead investors to make irrational choices. Having objective criteria for buying and selling can help you avoid emotional decision-making.
Even if you don't want to select stocks yourself--and many people would much prefer to have a professional do the work of researching specific investments--it can be helpful to understand the concepts that professionals use in evaluating and buying stocks.
There are generally two schools of thought about how to choose stocks that are worth investing in. Value investors focus on buying stocks that appear to be bargains relative to the company's intrinsic worth. Growth investors prefer companies that are growing quickly, and are less concerned with undervalued companies than with finding companies and industries that have the greatest potential for appreciation in share price. Either approach can help you better understand just what you're buying--and why--when you choose a stock for your portfolio.
Value Stocks Growth Stocks
Relatively low P/E ratio High P/E ratio
Low price-to-book ratio High price-to-book ratio
Relatively slow earnings growth Rapid earnings growth
High dividend yield Low or no dividend yield
Sluggish sales growth Rapid sales growth
Value investing
Value investors look for stocks with share prices that don't fully reflect the value of the companies, and that are effectively trading at a discount to their true worth. A stock can have a low valuation for many reasons. The company may be struggling with business challenges such as legal problems, management difficulties, or tough competition. It may be in an industry that is currently out of favor with investors. It may be having difficulty expanding. It may have fallen on hard times. Or it may simply have been overlooked by other investors.
A value investor believes that eventually the share price will rise to reflect what he or she perceives as the stock's fair value. Value investing takes into account a company's prospects, but is equally focused on whether it's a good buy. A stock's price-earnings (P/E) ratio--its share price divided by its earnings per share--is of particular interest to a value investor, as are the price-to-sales ratio, the dividend yield, the price-to-book ratio, and the rate of sales growth.
Value-oriented data
Here are some of the questions a value investor might ask about a company:
• What would the company be worth if all its assets were sold?
• Does the company have hidden assets the market is ignoring?
• What would the business be worth if another company acquired it?
• Does the company have intangible assets, such as a high level of brand-name recognition, strong new management, or dominance in its industry?
• Is the company on the verge of a turnaround?
Contrarians: marching to a different drummer
A contrarian investor is perhaps the ultimate example of a value investor. Contrarians believe that the best way to invest is to buy when no one else wants to, or to focus on stocks or industries that are temporarily out of favor with the market.
The challenge for any value investor, of course, is figuring out how to tell the difference between a company that is undervalued and one whose stock price is low for good reason. Value investors who do their own stock research comb the company's financial reports, looking for clues about the company's management, operations, products, and services.
Growth investing
A growth-oriented investor looks for companies that are expanding rapidly. Stocks of newer companies in emerging industries are often especially attractive to growth investors because of their greater potential for expansion and price appreciation despite the higher risks involved. A growth investor would give more weight to increases in a stock's sales per share or earnings per share (EPS) than to its P/E ratio, which may be irrelevant for a company that has yet to produce any meaningful profits. However, some growth investors are more sensitive to a stock's valuation and look for what's called "Growth At a Reasonable Price" (GARP). A growth investor's challenge is to avoid overpaying for a stock in anticipation of earnings that eventually prove disappointing.
Growth-oriented data
A growth investor might ask some of these questions about a stock:
• Has the stock's price been rising recently?
• Is the stock reaching new highs?
• Are sales and earnings per share accelerating from quarter to quarter and year to year?
• Is the volume of trading in the stock rising or falling?
• Is there a recent or impending announcement from or about the company that might generate investor interest?
• Is the industry going up as a whole?
Momentum investing: growth to the max
A momentum investor looks not just for growth but for accelerating growth that is attracting a lot of investors and causing the share price to rise. Momentum investors believe you should buy a stock only when earnings growth is accelerating and the price is moving up. They often buy even when a stock is richly valued, assuming that the stock's price will go even higher. If a stock falls, momentum theory suggests that you sell it quickly to prevent further losses, then buy more of what's working.
The most extreme momentum investors are day traders, who may hold a stock for only a few minutes or hours then sell before the market closes that day. Momentum investing obviously requires frequent monitoring of the fluctuations in each of your stock holdings, however. A momentum strategy is best suited to investors who are prepared to invest the time necessary to be aware of those price changes.
Why understand investing styles?
Growth stocks and value stocks often alternate in popularity. One style may be favored for a while but then give way to the other. Also, a company can be a growth stock at one point and later become a value stock. Some investors buy both types, so their portfolio has the potential to benefit regardless of which is doing better at any given time. Investing based on data rather than stock tips or guesswork can not only assist you as you evaluate a possible purchase; it also can help you know when to sell because your reasons for buying are no longer valid.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Distributions from Traditional IRAs: Between Ages 59½ and 70½

2011-11-16T09:26:00.000-08:00

Distributions from Traditional IRAs: Between Ages 59½ and 70½

What is an IRA distribution?

A withdrawal from an IRA is referred to as a distribution. Distributions can come in the form of several payment patterns, from a one-time (lump-sum) payment to a series of distributions over a number of years. Depending on how old you are at the time of the distribution, the payment may be classified as a premature distribution (made prior to age 59½), a normal distribution (between ages 59½ and 70½), or a required minimum distribution (after age 70½). There are tax consequences to any type of traditional IRA distribution.
Caution: This discussion pertains primarily to distributions from traditional IRAs. Qualified distributions from Roth IRAs are tax-free. Even Roth IRA distributions that don't qualify for tax-free treatment are tax free to the extent of your own contributions to the Roth IRA. Only after you've recovered all of your contributions are distributions considered to consist of taxable earnings. Further, special rules apply to distributions taken from Roth IRAs that have funds rolled over or converted from traditional IRAs.
IRA distributions subject to income tax
When you receive a distribution from your traditional IRA, the amount you receive is generally subject to income tax. If you have made nondeductible contributions to your traditional IRA, part of any distribution will be considered nontaxable.
Caution: Taxable income from an IRA is taxed at ordinary income tax rates even if the funds represent long-term capital gains or qualifying dividends from stock held within the IRA.
Premature distribution tax does not apply
Once you reach the age of 59½, you are allowed (but not required) to take distributions from your IRA without being subject to the 10 percent premature distribution tax. You may choose to take distributions sporadically, as you need the money, or you may request an automatic distribution from your account according to a prearranged schedule you establish with your IRA administrator.
Withholding from IRA distributions
Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. Generally, tax is withheld at a 10 percent rate. If you receive an annuity or similar periodic payment, tax withheld is based on your marital status and the number of withholding allowances you claim on your withholding certificate (Form W-4P). No withholding or waiver is needed when the distribution is a trustee-to-trustee rollover from one IRA to another. See the following section.
Rollovers
In general
A rollover is the reinvestment of a distribution from one retirement plan to another. A rollover must be completed within 60 days of the date the funds are released from the distributing account. If your rollover isn't completed in this time frame, the entire distribution is treated as having been distributed to you for tax purposes. Rollovers are treated separately from contributions. You are still allowed to make your regular IRA contribution in a year when you have a rollover transaction.
Tip: You can roll over funds from a traditional IRA to another traditional IRA or you can roll over funds from a Roth IRA to another Roth IRA. Special rules apply to converting or rolling over funds from a traditional IRA to a Roth IRA. See "Converting traditional IRAs to Roth IRAs" below. You may also be able to roll over taxable funds from an IRA to an employer-sponsored retirement plan.

You receive the funds and reinvest them
With this method, you receive a distribution from your IRA. To complete the rollover transaction, you make a deposit into the IRA plan receiving the funds, and you must deposit the full amount distributed within the allowable 60-day time period.
Example(s): On January 2, you withdraw your IRA funds from a maturing bank CD and choose to have no income tax withheld. The bank cuts a check payable to you for the full balance of the account. You plan to move the money into a higher-rate CD at a competing bank. Fifteen days later, you go to the new bank and deposit the full amount of your IRA distribution into your new rollover IRA CD. Your rollover is complete.
If you don't complete the rollover transaction or miss the 60-day deadline, your distribution is treated as taxable. However, the IRS is able to extend the 60-day period, in limited circumstances, when the failure to timely complete the rollover is not the taxpayer's fault.
Example(s): Assume the same scenario as the first example, except that when you receive your check from the first bank, you cash the check and loan the money to your brother-in-law, who promises to repay you in 30 days. As it turns out, he doesn't pay back the loan until March 5 (the 62nd day after your withdrawal). You deposit the full sum into the higher-rate CD at the new bank. Because you didn't complete your rollover within the 60-day time period, the January 2 withdrawal is treated as a distribution of your IRA funds for income tax purposes.
Caution: You are allowed to make a rollover from a particular IRA only once in a 12-month period. If you receive a second distribution from the same IRA within a 12-month period, you cannot roll it over (you also can't make a rollover from the IRA you roll the funds into for 12 months).
Tip: If federal income tax is withheld from a distribution and you wish to roll over the entire amount of the distribution, you have to make up the amount of withholding out of pocket.
Example(s): You take a $1,000 distribution (all of which would be taxable) from your IRA that you want to roll over into a new IRA, and $100 is withheld for federal income taxes, so you actually receive $900. If you roll over only the $900, you are treated as having received a $100 taxable distribution. To roll over the entire $1,000, you will have to deposit in the new IRA the $900 that you actually received, plus an additional $100. (The $100 withheld will be claimed as part of your credit for federal income tax withheld on your federal income tax return.)

Trustee-to-trustee rollover
The second type of rollover transaction occurs directly between the trustees of your old and new IRA plans. You never have control of the funds, so the trustee-to-trustee rollover is not subject to withholding taxes or penalties, and is not subject to the "once per 12-month" limitation.
Example(s): You have an IRA invested in a bank CD with a maturity date of January 2. In December, you provide your bank with instructions to close your CD on the maturity date and transfer the funds to the bank across town paying a higher CD rate. On January 2, your bank issues a check payable to the new bank as trustee for your IRA and sends it to the new bank. The new bank deposits the IRA check into your new CD account, and your trustee-to-trustee rollover is complete. Trustee-to-trustee rollovers avoid the danger of missing the 60-day deadline.

Converting traditional IRAs to Roth IRAs
You may be able to convert your traditional IRA to a Roth IRA, but you will have to pay income taxes on the amount of the traditional IRA contributions you previously deducted and any earnings you withdraw. Generally, if you're over age 59½, withdrawals from your Roth IRA are considered to be qualified tax-free distributions once you satisfy a five-year holding period.
Other types of distributions
Lump-sum distributions
A lump-sum distribution is one whereby you receive the entire balance of your account in one payment. The trustee or custodian of your IRA will withhold 10 percent of your balance for taxes unless you choose not to have taxes withheld. You must report your distribution for income tax purposes and are subject to regular income taxes on the distribution.
Caution: The amount of your distribution is included in your income in the year received. A large enough lump-sum distribution could have the effect of causing a portion of your income to be taxed at a higher marginal tax rate (i.e., "pushing you into a higher tax bracket").

Discretionary distributions
Discretionary distributions do not follow a payment schedule and are considered nonperiodic payments. Under this withdrawal scheme, you take distributions as the need arises. The IRA custodian or trustee will withhold 10 percent of your withdrawals for federal income tax unless you choose not to have tax withheld.
Example(s): You have $55,000 in your IRA. You are age 60. You decide to take a distribution from your account to celebrate your 25th wedding anniversary with a cruise. You withdraw $10,000. You are subject to federal and state income taxes on the amount of the distribution. If you have made only deductible contributions to the IRA, the entire amount of the distribution is subject to tax. If you have made nondeductible contributions, a portion of the distribution will not be subject to tax.
Caution: The amount of your distribution is included in your income in the year received.

Substantially equal periodic payments
You may have begun taking substantially equal periodic payments from your IRA before reaching age 59½ to avoid the10 percent premature distribution tax (refer to Internal Revenue Code Sec. 72(t)). The rules for substantially equal payments require that you receive payments over your life expectancy (or the joint life expectancy of you and your designated beneficiary). The payments must occur at least annually. If you started taking substantially equal payments before age 59½, you can't modify the payments before five years from the payment start date or upon reaching age 59½, whichever is later. If you began receiving payments under this guideline and you increase or decrease the payment amounts before this period of time ends, the premature distribution tax generally applies retroactively to all distributions before age 59½.
Example(s): Billy Bob, at age 57, needed some cash from his IRA and didn't want to pay the premature distribution tax, so he began receiving substantially equal payments from his IRA. The balance in his IRA at the time was $60,000, and according to the charts accepted by the IRS at the time, his life expectancy was 27.9 years. Based on this life expectancy and the IRA balance, and applying the level payment amount amortization method, the amount allowed each year under substantially equal payments was $5,435 (derived by amortizing $60,000 at 8 percent interest in level payments over 27.9 years). Three years later, on his 60th birthday, Billy Bob increases the distribution amount to $7,000. Because the substantially equal payments did not run for 5 years before the change, Billy Bob must pay the premature distribution tax on the full amount received from age 57 until age 59½.
Tip: One of the methods that can be used to calculate substantially equal periodic payments is effectively the same as that used to calculate required minimum distributions. In April 2002, the IRS issued final regulations relating to required minimum distribution rules and provided new distribution tables. Substantially equal periodic payments that were calculated using the required distribution method will not be considered to have been modified merely because the new tables are used in the future to determine annual periodic payments. Consult a tax professional.
Should you withdraw money from your IRA between ages 59½ and 70½?
It depends on your circumstances. If you really need the money for income or unforeseen expenses, it may very well be advisable to draw on your IRA. However, if you have other sources of income and don't need the IRA funds, you may want to think twice about withdrawing funds. Even though you will be free of the premature distribution tax once you've reached age 59½, you still may have to pay income taxes on all or part of any IRA withdrawals (depending on whether or not the contributions you made were tax deductible). If the amount of a taxable distribution is substantial, it may even push you into a higher tax bracket for that year. This could increase your annual tax liability significantly.
In addition, if you take a number of large IRA distributions after reaching 59½, your IRA could be depleted (or at least reduced in size) more quickly than you had planned. This could mean a smaller nest egg for your later retirement years when you may need income the most, and a much smaller balance available to leave to your beneficiaries when you die. And, of course, the longer you leave funds in an IRA, the greater the opportunity for compounded, tax-deferred growth of earnings. The point is that it's often not wise or appropriate to take distributions from an IRA between ages 59½ and 70½.
This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE 11-14-2011

2011-11-15T09:23:00.000-08:00

«John Jastremski» Presents:

WEEKLY ECONOMIC UPDATE 11-14-2011

WEEKLY QUOTE
“The trust of the innocent is the liar’s most useful tool.”

– Stephen King

WEEKLY TIP
Income from stock options and bonuses could put you into a higher tax bracket for 2011. If that is a problem, consider deferring that income until 2012.

WEEKLY RIDDLE
A sudden noise startles a gopher, an owl and a skunk at the edge of a forest. The owl flies off and the gopher retreats into his burrow, but the skunk runs for the trees. How far can that skunk run into the forest?

Last week’s riddle:
What can run but never walks, has a mouth but never eats, has a head but never thinks, and has a bed but never sleeps?

Last week’s answer:
A river.

November 14, 2011

ACTIONS IN GREECE & ITALY CALM MARKETS
Global investors seemed reassured at the end of last week by developments in the European Union. By Friday, Greek prime minister George Papandreou had stepped down; Italian prime minister Silvio Berlusconi’s resignation was at hand. Greek prime minister designate Lucas Papademos and a new coalition government will now be charged with implementing austerity cuts as Greece accepts the EU’s latest €130 billion aid package. Italy’s senate passed new economic reforms at the end of the week aimed at reducing its sovereign debt. Italy’s treasury was also able to sell €5 billion of one-year notes , albeit at 6.09% interest.1,2

A BIG REBOUND IN CONSUMER CONFIDENCE
The preliminary November consumer sentiment index from the University of Michigan was a nice surprise. It came in at 64.2; far better than the final mark of 60.9 for October and the 61.3 consensus forecast of economists polled by Briefing.com. The reading hasn’t been this high since June. The future expectations sub-index improved to 56.2 from the previous 51.8.3

OIL PUSHES TOWARD $100 AGAIN
On Veterans Day, oil futures settled at $98.99 on the NYMEX after a +5.02% week that saw prices rise $3.25 across Thursday and Friday. Gold prices posted a weekly gain as well: the precious metal gained 1.83% on the COMEX for the week, and that brought its 3-week advance to 9.32%.4

STRONG FRIDAY PUTS DOW BACK IN THE BLACK
The DJIA climbed 260 points on Friday after rising 113 points on Thursday, almost offsetting Wednesday’s 389-point descent. That left it at +4.98% YTD. Last week’s performances: DJIA, +1.42% to 12,153.68; S&P 500, +0.85% to 1,263.85; NASDAQ, -0.28% to 2,678.75.5,6,7

THIS WEEK: Key economic releases will be complemented by earnings from the big boxes. Monday, Lowe’s, Urban Outfitters and JCPenney issue 3Q results. On Tuesday, Wal-Mart, Home Depot, Staples, Dell and Beazer Homes come out with earnings, and the October PPI arrives along with October’s retail sales report from the Census Bureau. Wednesday, the October CPI appears along with data on October industrial output; 3Q results roll in from Target and Abercrombie & Fitch. Thursday brings earnings from Ross Stores, Sears, Dollar Tree, GameStop and GAP, the latest initial claims figures and October’s housing starts report. Friday, Heinz announces 3Q results, EU finance ministers meet and the Conference Board offers its October leading indicator index.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +4.98 +7.72 +0.00075 +2.72
NASDAQ +0.98 +4.82 +2.42 +4.56
S&P 500 +0.49 +4.15 -1.70 +1.30
REAL YIELD 11/11 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.04% 0.71% 2.25% 3.50%

Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov - 11/11/117,8,9,10
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Protecting Your Loved Ones with Life Insurance 11/14/2011

2011-11-14T07:02:00.000-08:00

Protecting Your Loved Ones with Life Insurance 11/14/2011

How much life insurance do you need?
Your life insurance needs will depend on a number of factors, including the size of your family, the nature of your financial obligations, your career stage, and your goals. For example, when you're young, you may not have a great need for life insurance. However, as you take on more responsibilities and your family grows, your need for life insurance increases.
Here are some questions that can help you start thinking about the amount of life insurance you need:
• What immediate financial expenses (e.g., debt repayment, funeral expenses) would your family face upon your death?
• How much of your salary is devoted to current expenses and future needs?
• How long would your dependents need support if you were to die tomorrow?
• How much money would you want to leave for special situations upon your death, such as funding your children's education, gifts to charities, or an inheritance for your children?
• What other assets or insurance policies do you have?
Types of life insurance policies
The two basic types of life insurance are term life and permanent (cash value) life. Term policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy's death benefit. If you live to the end of the term, the policy simply terminates, unless it automatically renews for a new period. Term policies are typically available for periods of 1 to 30 years and may, in some cases, be renewed until you reach age 95. With guaranteed level term insurance, a popular type, both the premium and the amount of coverage remain level for a specific period of time.
Permanent insurance policies offer protection for your entire life, regardless of your health, provided you pay the premium to keep the policy in force. As you pay your premiums, a portion of each payment is placed in the cash value account. During the early years of the policy, the cash value contribution is a large portion of each premium payment. As you get older, and the true cost of your insurance increases, the portion of your premium payment devoted to the cash value decreases. The cash value continues to grow--tax deferred--as long as the policy is in force. You can borrow against the cash value, but unpaid policy loans will reduce the death benefit that your beneficiary will receive. If you surrender the policy before you die (i.e., cancel your coverage), you'll be entitled to receive the cash value, minus any loans and surrender charges.
Many different types of cash value life insurance are available, including:
• Whole life: You generally make level (equal) premium payments for life. The death benefit and cash value are predetermined and guaranteed (subject to the claims-paying ability of the issuing insurance company). Your only action after purchase of the policy is to pay the fixed premium.
• Universal life: You may pay premiums at any time, in any amount (subject to certain limits), as long as the policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value will grow at a declared interest rate, which may vary over time.
• Variable life: As with whole life, you pay a level premium for life. However, the death benefit and cash value fluctuate depending on the performance of investments in what are known as subaccounts. A subaccount is a pool of investor funds professionally managed to pursue a stated investment objective. You select the subaccounts in which the cash value should be invested.
• Variable universal life: A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits), as long as policy expenses and the cost of insurance coverage are met. The amount of insurance coverage can be changed, and the cash value goes up or down based on the performance of investments in the subaccounts.
With so many types of life insurance available, you're sure to find a policy that meets your needs and your budget.
Choosing and changing your beneficiaries
When you purchase life insurance, you must name a primary beneficiary to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You may name multiple beneficiaries and specify what percentage of the net death benefit each is to receive. If you name your minor child as a beneficiary, you should also designate an adult as the child's guardian in your will.
What type of insurance is right for you?
Before deciding whether to buy term or permanent life insurance, consider policy cost and potential savings that may be available. Also keep in mind that your insurance needs will likely change as your family, job, health, and financial picture changes, so you'll want to build some flexibility into the decision-making process. In any case, here are some common reasons for buying life insurance and which type of insurance may best fit the need.
Mortgage or long-term debt: For most people, their home is one of their most valuable assets and also the source of their largest debt. An untimely death may remove a primary source of income used to pay the mortgage. Term insurance can replace the lost income by providing life insurance for the length of the mortgage. If you die before the mortgage is paid off, the term life insurance pays your beneficiary an amount sufficient to pay the outstanding mortgage balance owed.
Family protection: Your income not only pays for day-to-day expenses, but also provides a source for future costs such as college education expenses and retirement income. Term life insurance of twenty years or longer can take care of immediate cash needs as well as provide income for your survivor's future needs. Another alternative is cash value life insurance, such as universal life or variable life insurance. The cash value accumulation of these policies can be used to fund future income needs for college or retirement, even if you don't die.
Small business needs: Small business owners need life insurance to protect their business interest. As a business owner, you need to consider what happens to your business should you die unexpectedly. Life insurance can provide cash needed to buy a deceased partner's or shareholder's interest from his or her estate. Life insurance can also be used to compensate for the unexpected death of a key employee.
Review your coverage
Once you purchase a life insurance policy, make sure to periodically review your coverage--over time your needs will change. An insurance agent or financial professional can help you with your review.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

How Grandparents Can Help Grandchildren with College Costs 11/12/2011

2011-11-12T07:04:00.000-08:00

How Grandparents Can Help Grandchildren with College Costs 11/12/2011

As the cost of a college education continues to climb, many grandparents are stepping in to help. This trend is expected to accelerate as baby boomers, many of whom went to college, become grandparents and start gifting what's predicted to be trillions of dollars over the coming decades.
Helping to pay for a grandchild's college education can bring great personal satisfaction and is a smart way for grandparents to pass on wealth without having to pay gift and estate taxes. So what are the best ways to accomplish this goal?
Outright cash gifts
A common way to help with college costs is to make an outright gift of cash or securities. But this method has drawbacks. If you gift the money directly to your grandchild, he or she might spend it on something other than college. Also, a gift of more than the annual federal gift tax exclusion amount--$13,000 for individual gifts, $26,000 for joint gifts--might have gift tax and generation-skipping transfer (GST) tax consequences (GST tax is an additional gift tax imposed on gifts made to someone who is more than one generation below you). Note that the $13,000 figure is for 2011. The exclusion is indexed for inflation, so this figure may increase in future years.
Another drawback to outright gifts is that a gift becomes an asset of the student, and the federal government treats student assets more harshly than parent assets for financial aid purposes. Students must contribute 20% of their assets each year toward college costs, compared to 5.6% for parent assets. Fortunately, there are better options available.
529 plans
A 529 plan can be an excellent way for grandparents to contribute to a grandchild's college education, while simultaneously paring down their own estate. Contributions to a 529 plan grow tax deferred, and withdrawals used for the beneficiary's qualified education expenses are completely tax free at the federal level (and at the state level too).
There are two types of 529 plans: college savings plans and prepaid tuition plans. College savings plans are individual investment-type accounts offered by nearly all states and managed by financial institutions. Funds can be used at any accredited college in the United States or abroad. Prepaid tuition plans allow prepayment of tuition at today's prices for the limited group of colleges--typically in-state public colleges--that participate in the plan.
Grandparents can open a 529 account and name a grandchild as beneficiary (only one person can be listed as account owner, though), or they can contribute to an existing 529 account. Grandparents can contribute a lump sum to a grandchild's 529 account, or they can contribute smaller, regular amounts.
Regarding lump-sum gifts, a big advantage of 529 plans is that under special rules unique to 529 plans, individuals can make a lump-sum gift of up to $65,000 ($130,000 for joint gifts by married couples) and avoid federal gift tax. A special election must be made to treat the gift as if it were made in equal installments over a five-year period, and no additional gifts can be made to the beneficiary during this time.
Example: Mr. and Mrs. Brady make a lump-sum contribution of $130,000 to their grandchild's 529 plan in Year 1, electing to treat the gift as if it were made over 5 years. The result is they are considered to have made annual gifts of $26,000 ($13,000 each) in Years 1 through 5 ($130,000 / 5 years). Because the amount gifted by each spouse is within the annual gift tax exclusion, the Bradys won't owe any gift tax (assuming they don't make any other gifts to their grandchild during the 5-year period). In Year 6, they can make another lump-sum contribution and repeat the process. In Year 11, they can do so again.
Significantly, this money is considered removed from your estate, even though one grandparent can still retain control over the funds if he or she is the 529 account owner. There is a caveat, however. If the donor were to die during the five-year period, then a prorated portion of the contribution would be "recaptured" into the estate for estate tax purposes.
Example: In the previous example, if Mr. Brady were to die in Year 2, his total Year 1 and 2 contributions ($26,000) would be excluded from his estate. But the remaining portion attributed to him in Years 3, 4, and 5 ($39,000) would be included in his estate. The contributions attributed to Mrs. Brady ($13,000 per year) would not be recaptured into the estate.
Another attractive feature of 529 plans is that under current law, grandparent-owned 529 accounts are excluded by the federal government's financial aid formula. So a grandparent-owned 529 plan won't impact a grandchild's chances of qualifying for federal aid.
However, if you need the money in your 529 account for something other than the beneficiary's college expenses--for medical expenses or emergency purposes, for example--you'll face a double consequence: the earnings portion of the withdrawal is subject to a 10% penalty and will be taxed at your ordinary income tax rate.
Also, note that funds in a grandparent-owned 529 plan may still be factored in when determining Medicaid eligibility, unless these funds are specifically exempted by state law.
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about specific 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.
Pay the college directly
Another excellent way for grandparents to help their grandchildren with college costs is to pay the college directly. Under federal law, tuition payments made directly to a college aren't considered taxable gifts, no matter how large the payment. So you don't have to worry about the $13,000 annual federal gift tax exclusion. But this is true only for tuition--room and board, books, fees, equipment, and other similar expenses don't qualify. Aside from the obvious tax advantage, paying tuition directly to the college ensures that your money will be used for education, plus it removes the money from your estate. And you are still free to give your grandchild a separate tax-free gift each year up to the $13,000 limit.
However, colleges will often reduce a student's financial aid by the amount of the grandparent's payment. Before sending a check, ask the school how it will affect your grandchild's eligibility for school-based aid. If your contribution will adversely affect your grandchild's financial aid package, another option is to give the money to your grandchild after graduation to help him or her pay off student loans.
Private elementary/secondary school
Finally, if you're interested in contributing to your grandchild's private elementary or secondary school education, a Coverdell education savings account (ESA) can help. Up to $2,000 per beneficiary can be contributed to a Coverdell ESA each year. Like funds in a 529 plan, the money grows tax deferred and is tax free at both the federal and state levels if used to pay the beneficiary's qualified education expenses, including private elementary and secondary school as well as college. But there are income limitations on who can contribute to an ESA. Specifically, married couples with a modified adjusted gross income over $220,000 ($110,000 for individuals) can't contribute.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Should You Pay Off Your Mortgage or Invest? 11/11/2011

2011-11-11T07:59:00.000-08:00

Should You Pay Off Your Mortgage or Invest? 11/11/2011

Owning a home outright is a dream that many Americans share. Having a mortgage can be a huge burden, and paying it off may be the first item on your financial to-do list. But competing with the desire to own your home free and clear is your need to invest for retirement, your child's college education, or some other goal. Putting extra cash toward one of these goals may mean sacrificing another. So how do you choose?
Evaluating the opportunity cost
Deciding between prepaying your mortgage and investing your extra cash isn't easy, because each option has advantages and disadvantages. But you can start by weighing what you'll gain financially by choosing one option against what you'll give up. In economic terms, this is known as evaluating the opportunity cost.
Here's an example. Let's assume that you have a $300,000 balance and 20 years remaining on your 30-year mortgage, and you're paying 6.25% interest. If you were to put an extra $400 toward your mortgage each month, you would save approximately $62,000 in interest, and pay off your loan almost 6 years early.
By making extra payments and saving all of that interest, you'll clearly be gaining a lot of financial ground. But before you opt to prepay your mortgage, you still have to consider what you might be giving up by doing so--the opportunity to potentially profit even more from investing.
To determine if you would come out ahead if you invested your extra cash, start by looking at the after-tax rate of return you can expect from prepaying your mortgage. This is generally less than the interest rate you're paying on your mortgage, once you take into account any tax deduction you receive for mortgage interest. Once you've calculated that figure, compare it to the after-tax return you could receive by investing your extra cash.
For example, the after-tax cost of a 6.25% mortgage would be approximately 4.5% if you were in the 28% tax bracket and were able to deduct mortgage interest on your federal income tax return (the after-tax cost might be even lower if you were also able to deduct mortgage interest on your state income tax return). Could you receive a higher after-tax rate of return if you invested your money instead of prepaying your mortgage?
Keep in mind that the rate of return you'll receive is directly related to the investments you choose. Investments with the potential for higher returns may expose you to more risk, so take this into account when making your decision.
Other points to consider
While evaluating the opportunity cost is important, you'll also need to weigh many other factors. The following list of questions may help you decide which option is best for you.
• What's your mortgage interest rate? The lower the rate on your mortgage, the greater the potential to receive a better return through investing.
• Does your mortgage have a prepayment penalty? Most mortgages don't, but check before making extra payments.
• How long do you plan to stay in your home? The main benefit of prepaying your mortgage is the amount of interest you save over the long term; if you plan to move soon, there's less value in putting more money toward your mortgage.
• Will you have the discipline to invest your extra cash rather than spend it? If not, you might be better off making extra mortgage payments.
• Do you have an emergency account to cover unexpected expenses? It doesn't make sense to make extra mortgage payments now if you'll be forced to borrow money at a higher interest rate later. And keep in mind that if your financial circumstances change--if you lose your job or suffer a disability, for example--you may have more trouble borrowing against your home equity.
• How comfortable are you with debt? If you worry endlessly about it, give the emotional benefits of paying off your mortgage extra consideration.
• Are you saddled with high balances on credit cards or personal loans? If so, it's often better to pay off those debts first. The interest rate on consumer debt isn't tax deductible, and is often far higher than either your mortgage interest rate or the rate of return you're likely to receive on your investments.
• Are you currently paying mortgage insurance? If you are, putting extra toward your mortgage until you've gained at least 20% equity in your home may make sense.
• How will prepaying your mortgage affect your overall tax situation? For example, prepaying your mortgage (thus reducing your mortgage interest) could affect your ability to itemize deductions (this is especially true in the early years of your mortgage, when you're likely to be paying more in interest).
• Have you saved enough for retirement? If you haven't, consider contributing the maximum allowable each year to tax-advantaged retirement accounts before prepaying your mortgage. This is especially important if you are receiving a generous employer match. For example, if you save 6% of your income, an employer match of 50% of what you contribute (i.e., 3% of your income) could potentially add thousands of extra dollars to your retirement account each year. Prepaying your mortgage may not be the savviest financial move if it means forgoing that match or shortchanging your retirement fund.
• How much time do you have before you reach retirement or until your children go off to college? The longer your timeframe, the more time you have to potentially grow your money by investing. Alternatively, if paying off your mortgage before reaching a financial goal will make you feel much more secure, factor that into your decision.
The middle ground
If you need to invest for an important goal, but you also want the satisfaction of paying down your mortgage, there's no reason you can't do both. It's as simple as allocating part of your available cash toward one goal, and putting the rest toward the other. Even small adjustments can make a difference. For example, you could potentially shave years off your mortgage by consistently making biweekly, instead of monthly, mortgage payments, or by putting any year-end bonuses or tax refunds toward your mortgage principal.
And remember, no matter what you decide now, you can always reprioritize your goals later to keep up with changes to your circumstances, market conditions, and interest rates.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com

WOMEN & RETIREMENT PERCEPTIONS 11/10/2011

2011-11-10T06:37:00.000-08:00

WOMEN & RETIREMENT PERCEPTIONS 11/10/2011

Will the reality of retirement live up to expectations?

Presented by John Jastremski

In January 2011, Merrill Lynch released the results of a survey asking baby boomers with $250,000+ in investable assets about their retirement hopes. There were some interesting across-the-board findings – 70% of those polled expected to work at least part-time, and 84% felt their retirements would be more comfortable and dynamic than those of their parents. Yet it was the collective response of women in the 1,000-investor study that drew the most attention.1,2

Women envision a very active retirement. Volunteering and travel registered as major priorities for women, more so than for men: 64% of women said they wanted to get more involved in their communities, 62% planned to devote more time to philanthropy, and 86% planned to travel when retired. Additionally, 14% of the women surveyed said that they wanted to start a business after their careers ended.2

Women are more concerned than men about running out of money. While 52% of male respondents were unsure that their retirement assets would last a lifetime, 63% of women polled were worried about outliving their money. Additionally, 70% of the women surveyed said they worried about rising healthcare costs.2

Will reality prove disappointing? Too many women approach retirement unprepared, with too little saved or invested. You can cite two major reasons for that.

1. The multiyear absence of some women from the workplace (which can coincide with peak earning years, lessening the rate of retirement plan contributions)
2. A notable earnings gap (full-time working women earn 78 cents for every dollar men earn, which may reflect everything from gender inequality in career paths to wage discrimination).3

Another factor may be conservative investing. While you can take on too much risk in your portfolio and pay the price, there may also be a cost for assuming too little risk – your portfolio may not be able to produce returns that keep up with inflation. The federal Consumer Price Index from June 2011 shows annualized inflation at 3.6%.4

How are you investing and saving to pursue your retirement dream? Is there a strategy in place with realistic objectives? A chat with a financial professional may lead to the discovery of creative new ways to pursue your retirement ambitions.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Citations.
1 - reuters.com/article/2011/01/31/us-retirement-study-idUSTRE70U3E820110131 [1/31/11]
2 - mediaroom.bankofamerica.com/phoenix.zhtml?c=234503&p=irol-newsArticle&ID=1521693&highlight [1/31/11]
3 - civilrights.org/archives/2009/04/291-equal-pay-day.html [4/29/09]
4 - online.wsj.com/article/SB10001424052702304521304576447641965268196.html [7/15/11]

All about IRAs

2011-11-09T13:20:00.000-08:00

November 07, 2011

All about IRAs
An individual retirement arrangement (IRA) is a personal retirement savings plan that offers specific tax benefits. In fact, IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA.
What types of IRAs are available?
There are two major types of IRAs: traditional IRAs and Roth IRAs. Both allow you to make annual contributions of up to $5,000 in 2010 and 2011. Generally, you must have at least as much taxable compensation as the amount of your IRA contribution. But if you are married filing jointly, your spouse can also contribute to an IRA, even if he or she does not have taxable compensation. The law also allows taxpayers age 50 and older to make additional "catch-up" contributions. These folks can put up to $6,000 in their IRAs in 2010 and 2011.
Both traditional and Roth IRAs feature tax-sheltered growth of earnings. And both give you a wide range of investment choices. However, there are important differences between these two types of IRAs. You must understand these differences before you can choose the type of IRA that's best for you.
Traditional IRAs
Practically anyone can open and contribute to a traditional IRA. The only requirements are that you must have taxable compensation and be under age 70½. You can contribute the maximum allowed each year as long as your taxable compensation for the year is at least that amount. If your taxable compensation for the year is below the maximum contribution allowed, you can contribute only up to the amount you earned.
Your contributions to a traditional IRA may be tax deductible on your federal income tax return. This is important because tax-deductible (pretax) contributions lower your taxable income for the year, saving you money in taxes. If neither you nor your spouse is covered by a 401(k) or other employer-sponsored plan, you can generally deduct the full amount of your annual contribution. If one of you is covered by such a plan, your ability to deduct your contributions depends on your annual income (modified adjusted gross income, or MAGI) and your income tax filing status. You may qualify for a full deduction, a partial deduction, or no deduction at all.
What happens when you start taking money from your traditional IRA? Any portion of a distribution that represents deductible contributions is subject to income tax because those contributions were not taxed when you made them. Any portion that represents investment earnings is also subject to income tax because those earnings were not previously taxed either. Only the portion that represents nondeductible, after-tax contributions (if any) is not subject to income tax. In addition to income tax, you may have to pay a 10% early withdrawal penalty if you're under age 59½, unless you meet one of the exceptions.
Traditional IRAs--Tax Year 2011
Individuals Covered by an Employer Plan
Filing status Deduction is limited if MAGI between: No deduction if MAGI over:
Single/Head of household $56,000 - $66,000 $66,000
Married joint* $90,000 - $110,000 $110,000
Married separate $0 - $10,000 $10,000
* If you're not covered by an employer plan, but your spouse is, your deduction is limited if your MAGI is $169,000 to $179,000, and eliminated if your MAGI exceeds $179,000.
If you wish to defer taxes, you can leave your funds in the traditional IRA, but only until April 1 of the year following the year you reach age 70½. That's when you have to take your first required minimum distribution from the IRA. After that, you must take a distribution by the end of every calendar year until your funds are exhausted or you die. The annual distribution amounts are based on a standard life expectancy table. You can always withdraw more than you're required to in any year. However, if you withdraw less, you'll be hit with a 50% penalty on the difference between the required minimum and the amount you actually withdrew.
Roth IRAs
Not everyone can set up a Roth IRA. Even if you can, you may not qualify to take full advantage of it. The first requirement is that you must have taxable compensation. If your taxable compensation is at least $5,000 in 2011 (and 2010), you may be able to contribute the full amount. But it gets more complicated. Your ability to contribute to a Roth IRA in any year depends on your MAGI and your income tax filing status. Your allowable contribution may be less than the maximum possible, or nothing at all.
Tax Year 2011
Filing status Contribution is limited if MAGI between: No contribution if MAGI over:
Single/Head of household $107,000 - $122,000 $122,000
Married joint $169,000 - $179,000 $179,000
Married separate $0 - $10,000 $10,000
Your contributions to a Roth IRA are not tax deductible. You can invest only after-tax dollars in a Roth IRA. The good news is that, if you meet certain conditions, your withdrawals from a Roth IRA will be completely free from federal income tax, including both contributions and investment earnings. To be eligible for these qualifying distributions, you must meet a five-year holding period requirement. In addition, one of the following must apply:
• You have reached age 59½ by the time of the withdrawal
• The withdrawal is made because of disability
• The withdrawal is made to pay first-time homebuyer expenses ($10,000 lifetime limit from all IRAs)
• The withdrawal is made by your beneficiary or estate after your death
Qualified distributions will also avoid the 10% early withdrawal penalty. This ability to withdraw your funds with no taxes or penalty is a key strength of the Roth IRA. And remember, even nonqualified distributions will be taxed (and possibly penalized) only on the investment earnings portion of the distribution, and then only to the extent that your distribution exceeds the total amount of all contributions that you have made.
Another advantage of the Roth IRA is that there are no required distributions after age 70½ or at any time during your life. You can put off taking distributions until you really need the income. Or, you can leave the entire balance to your beneficiary without ever taking a single distribution. Also, as long as you have taxable compensation and qualify, you can keep contributing to a Roth IRA after age 70½.
Choose the right IRA for you
Assuming you qualify to use both, which type of IRA is best for you? Sometimes the choice is easy. The Roth IRA will probably be a more effective tool if you don't qualify for tax-deductible contributions to a traditional IRA. However, if you can deduct your traditional IRA contributions, the choice is more difficult. Most professionals believe that a Roth IRA will still give you more bang for your dollars in the long run, but it depends on your personal goals and circumstances. The Roth IRA may very well make more sense if you want to minimize taxes during retirement and preserve assets for your beneficiaries. But a traditional deductible IRA may be a better tool if you want to lower your yearly tax bill while you're still working (and probably in a higher tax bracket than you'll be in after you retire). A financial professional or tax advisor can help you pick the right type of IRA for you.
Note: You can have both a traditional IRA and a Roth IRA, but your total annual contribution to all of the IRAs that you own cannot be more than $5,000 ($6,000 if you're age 50 or older).

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

TAX EFFICIENCY IN RETIREMENT 11/09/2011

2011-11-09T07:35:00.000-08:00

TAX EFFICIENCY IN RETIREMENT 11/09/2011

How much attention do you pay to this factor?

Presented by John Jastremski

Could you end up paying higher taxes in retirement? Do you have a lot of money saved in a 401(k) or a traditional IRA? If so, you may be poised to receive significant retirement income.

Those income distributions will be taxed. As federal and state governments are hungry for revenue, you may see higher marginal tax rates in the near future.

Poor retirees with meager savings may rely on Social Security as their prime income source. They may end up paying less income tax in retirement, as up to half of their Social Security benefits won’t be counted as taxable income. On the other hand, those who have saved and invested well may retire to their current tax bracket or even a higher one.1

Given this possibility, affluent investors would do well to study the tax efficiency of their portfolios. Both pre-tax and after-tax investments have potential advantages.

What’s a pre-tax investment? Traditional IRAs and 401(k)s are classic examples of pre-tax investments. You can put off paying taxes on the contributions you make to these accounts and the earnings these accounts generate. When you take money out of these accounts come retirement, you will pay taxes on the withdrawal.2

Pre-tax investments are also called tax-deferred investments, as the invested assets can benefit from tax-deferred growth.

What’s an after-tax investment? A Roth IRA is a prime example. When you put money into a Roth IRA during the accumulation phase, contributions aren’t tax-deductible. As a trade-off, you don’t pay taxes on the withdrawals from that Roth IRA (providing you have followed the IRS rules for the arrangement). These tax-free withdrawals lower your total taxable retirement income.2

As everyone would like to pay less income tax in retirement, the tax-free withdrawals from Roth IRAs are very attractive. As federal tax rates look poised to climb for obvious reasons, after-tax investments are starting to look even more attractive.

As anyone can now convert a traditional IRA to a Roth IRA, many affluent investors are considering making the move and paying taxes on the conversion today in order to get tax-free growth tomorrow.

Certain tax years can prove optimal for a Roth conversion. If a high-income taxpayer is laid off for most of a year, closes down a business or suffers net operating losses, sells rental property at a loss or claims major deductions and exemptions associated with charitable contributions, casualty losses or medical costs ... he or she might end up in the lowest bracket, or even with a negative taxable income. In circumstances like these, a Roth conversion may be a good idea.

Should you have both a traditional IRA and a Roth IRA? It may seem redundant or superfluous, but it could actually help you manage your marginal tax rate. If you have both kinds of IRAs, you have the option to vary the amount and source of your IRA distributions in light of whether income tax rates have increased or decreased.

Your marginal tax rate might be higher than you think. Consider that about 25 different federal tax deductions and credits are phased out as your income increases. Quite a few of these have to do with education. If your children (or grandchildren) are out of school when you retire, good luck claiming those deductions.

Smart moves can help you lower your taxable income & taxable estate. An emphasis on long-term capital gains may help, as they aren’t taxed as severely as short-term gains or ordinary income. Tax loss harvesting - selling the “losers” in your portfolio to offset the “winners” – can bring immediate tax savings and possibly help to position you for better long-term after-tax returns.

If you’re making a charitable gift, giving appreciated stock or other investments you have held for at least a year may be better than giving cash. In addition to a potential tax deduction for the fair market value of the asset, the charity can sell the stock later without triggering capital gains. If you’re reluctant to donate shares of your portfolio’s biggest winner, consider this: you could give the shares away, then buy more shares of that stock and get a step-up in cost basis for free.3,4

The annual gift tax exemption gives you a way to remove assets from your taxable estate. In 2011, you can gift up to $13,000 to as many individuals as you wish without paying federal gift tax. If you have 11 grandkids, you could give them $13,000 each – that’s $143,000 out of your estate. All appreciation on that amount is also out of your estate.5

Are you striving for greater tax efficiency? In retirement, it is especially important – and worth a discussion. A few financial adjustments could help you lessen your tax liabilities.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Citations.
1 - ssa.gov/planners/taxes.htm [2/9/11]
2 - retirement.ameriprise.com/planning-for-retirement/retirement-risks/pre-tax-investments.asp [7/25/11]
3 - boston.com/business/personalfinance/managingyourmoney/archives/2010/12/a_win-win_situa.html [12/14/10]
4 - marketwatch.com/story/donate-appreciated-securities-to-charity-for-maximum-tax-benefit [12/16/07]
5 - blogs.forbes.com/hanisarji/2011/07/13/how-to-cut-state-death-taxes-without-moving/ [7/13/11]

U.S. Stock, Commodity, and Option Exchanges

2011-11-08T13:21:00.000-08:00

November 07, 2011

U.S. Stock, Commodity, and Option Exchanges

What are U.S. stock, commodity, and option exchanges?
U.S. stock, commodity, and option exchanges are financial marketplaces in which individuals (usually with the assistance of a broker) buy and sell stocks, commodities and futures, and options.

New York Stock Exchange
The New York Stock Exchange (NYSE) was founded in 1792 and is the oldest and largest stock exchange in the United States. Stocks, bonds, warrants, options, and rights are traded among the trading posts located on the floor of the exchange. The NYSE has a 25-member board of directors, consisting of a chairman and CEO, 12 representatives from the public, and 12 representatives from the securities industry.
A company listed on the NYSE must meet the exchange's stringent listing requirements regarding its pretax earnings for the most recent past year, its net tangible assets, the total market value of its publicly-held listed shares, and the minimum number of shareholders for those shares. However, the NYSE stipulates that each listing application be judged on its own merits. As a result, if a company does not meet all of the listing criteria, it may still be eligible for listing if it has other positive characteristics.
You must be a member of the exchange in order to trade securities on the floor of the NYSE. Currently, full membership is limited to 1,366 seat owners. In order to become a member of the NYSE, an individual must
• Have attained the age of majority required to be responsible for contracts in each jurisdiction in which he or she conducts business
• Be sponsored by two current members
• Never have violated a securities law or committed a felony
In addition to meeting these requirements, an individual wishing to become a member of the NYSE must purchase the seat, the price of which fluctuates with market conditions. Since 1978, the NYSE has allowed its members to lease their seats to individuals who meet the NYSE membership criteria.
In 2007, the regulatory functions of the NYSE were combined with the responsibilities of the National Association of Securities Dealers (NASD) to create a new Self-Regulatory Organization (SRO) called the Financial Industry Regulatory Authority (FINRA). FINRA is responsible for writing and enforcing member regulations and arbitration procedures for more than 5,000 securities firms.

New York Futures Exchange
The New York Futures Exchange (NYFE) is a wholly owned subsidiary of the New York Board of Trade (NYBOT). The NYFE trades in futures and options on the NYSE Composite Index, the Bridge/CRB Index, the Pacific Stock Exchange (PSE) Technology Index, and the Russell 1000 Index of large cap U.S. stocks.

Nasdaq Stock Market
Originally an acronym for the National Association of Securities Dealers (NASD) Automated Quotation system, the Nasdaq Stock Market is now a subsidiary of the Nasdaq/Amex Market Group, a shareholder-owned for-profit holding company. The Nasdaq Stock Market has become the world's largest electronic stock market. Unlike other exchanges, it isn't limited to one physical location. Instead, a network of dealers buys and sells securities instantaneously through a global computer and telecommunications network.
In 1998, NASD merged with the American Stock Exchange (AMEX), the second-largest floor-based exchange in the United States. Under the terms of the merger, the AMEX equity and options markets continue to operate as a subsidiary separate from the Nasdaq Stock Market.
The Nasdaq Stock Market is really comprised of two separate markets: the Nasdaq National Market, which is the market for Nasdaq's largest and most actively traded securities, and the Nasdaq SmallCap Market, which lists emerging growth companies (companies that, once established, move up to the Nasdaq National Market). Companies based outside the United States can list on the Nasdaq Stock Market as either foreign listings or as American Depositary Receipts.

American Stock Exchange
The American Stock Exchange (AMEX) is the primary marketplace in the United States for equities, bonds, options, andderivative securities. The AMEX is second only to the NYSE in trading and dollar volume activity.
AMEX membership is comprised of regular members (those entitled to transact business in all securities traded on the exchange), options principal members (those who trade in options and derivative products), and limited trading permit holders (who may trade in options other than those on individual stocks and in some derivative products). The AMEX allows seats to be leased to individuals who meet certain AMEX requirements, and offers associate memberships to individuals who wish to have electronic access to floor trading.
On the whole, AMEX listing requirements are less stringent than those of the NYSE. Furthermore, a company that doesn't meet the listing requirements can sometimes achieve listing status if it demonstrates future earnings and viability. As a result, many companies use the AMEX as a springboard to ultimately achieving listing status on the NYSE.

Chicago Board of Options Exchange
The Chicago Board of Options Exchange (CBOE) was founded in 1973 and trades exclusively in equity, index, and interest-rate options. Originally created by the Chicago Board of Trade (CBOT), the CBOE has nonetheless always remained a separate, independent entity. The CBOE is the world's largest options exchange, accounting for the majority of all U.S. options trading, and lists options on an extensive list of widely traded stocks.

Chicago Board of Trade
The Chicago Board of Trade (CBOT), founded in 1848, began as the centralized marketplace for the grain trade and eventually became the oldest and largest derivatives (futures and futures-options) trading facility in the world. Using both open auction and electronic platform systems, the CBOT trades primarily in agricultural and precious metals futures, options contracts on grains, silver, and gold, U.S. Treasury bond and note futures, municipal index futures, and catastrophic index futures. In 1997, the CBOT launched futures and options on the Dow Jones Industrial Average. In response to the increased usage of CBOT markets by international businesses, the CBOT opened a European office in London and an Asia-Pacific office in Sydney, Australia. In 2007, CBOT merged with the Chicago Mercantile Exchange and now operates as part of the CME Group.

Chicago Mercantile Exchange
Founded in 1874, the Chicago Mercantile Exchange (CME) originated as a not-for-profit organization owned by its members. In 2000, it became a for-profit shareholder-owned corporation. The CME is a U.S. derivatives exchange that trades futures options and contracts on agriculture commodities, foreign currencies, indices, and interest rates. Recently, the CME has introduced chemical, energy, and weather derivatives. In addition, the CME has the greatest open interest (the number of futures contracts and options positions outstanding at the close of trading, and a leading indicator of a market's liquidity) of any exchange in the world.

Regional stock exchanges
Regional stock exchanges are organized national securities exchanges located in various parts of the United States. Although regional exchanges carry local listings (primarily of securities issued by companies too small to be listed on a national exchange), they also derive their business from "dual listings" or listings primarily marketed on the larger exchanges. Typically, a company listed on the NYSE and/or the AMEX will list on the regional exchanges to broaden the market for their securities.
While regional exchanges increase overall market liquidity, they are under pressure to cut costs and make technological improvements to remain viable. Of the more than three dozen regional exchanges that were in operation prior to the 1929 stock market crash, only a handful remain.
Foreign exchanges
At one time, the U.S. securities markets dominated the world financial landscape. Today, this is no longer the case. Foreign exchanges are quickly staking their place as major players on the world market stage. Foreign exchanges include, among others, European markets (London, Frankfurt, Paris, Milan, Amsterdam, and Zurich), Latin American markets (Mexico, Brazil, Argentina, and Chile), and Asia-Pacific markets (Japan, Korea, China, and Southeast Asia).

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

WEEKLY ECONOMIC UPDATE

2011-11-07T13:20:00.001-08:00

«John Jastremski» Presents:

WEEKLY ECONOMIC UPDATE

WEEKLY QUOTE
“Experience is a dear teacher, but fools will learn at no other.”

– Ben Franklin

WEEKLY TIP
Starting a small business? A written plan is handy for forecasting, risk management and raising capital. A written plan is far preferable to one you keep in your head.

WEEKLY RIDDLE
What can run but never walks, has a mouth but never eats, has a head but never thinks, and has a bed but never sleeps?

Last week’s riddle:
A man brings a silver antique wrapped up in a towel to an appraiser, claiming it is a trophy engraved “To General Stonewall Jackson, presented after the first Battle of Bull Run, 1861.” The appraiser knows it is a fake without even looking at it. Why?

Last week’s answer:
People in 1861 wouldn’t have known it was the first Battle of Bull Run (the second occurred in 1862). Also, Stonewall Jackson fought for the Confederacy, which referred to the battle First Manassas.

November 7, 2011

JOBLESS RATE DECREASES TO 9.0%
Economists surveyed by Bloomberg News had expected unemployment to stay at 9.1% in October, so this was a nice development. Still, this latest jobs report had something in common with its predecessors: underwhelming job growth. Non-farm payrolls expanded by 80,000 positions last month, but that fell short of the 95,000 new jobs envisioned in the consensus Bloomberg forecast. On the bright side, the percentage of underemployed Americans fell from 16.5% to 16.2% and the long-term unemployed (those out of work for at least 27 weeks) shrank to 42.4% of the jobless population, the lowest percentage since November 2010.1

BOTH ISM INDICES MOVE LOWER
The Institute for Supply Management’s purchasing manager indexes were both above 50 in October, but not quite where they were at a month before. The ISM manufacturing index slipped from 51.6 to 50.8; its service sector index ticked down to 52.9 from the preceding 53.0. The service sector employment gauge improved by 4.6% and moved from 48.7 in September (contraction) to 53.3 (expansion).2

GOLD & OIL POST WEEKLY GAINS
Oil futures advanced 1.01% last week to settle at $94.26 per barrel on the NYMEX Friday. Prices have jumped 19.02% over the past five weeks of trading. Gold logged a 0.52% gain last week, closing at $1,755.30 an ounce on the COMEX Friday.3

GREEK THEATRE PREOCCUPIES WALL STREET
The whims of Greek Prime Minister George Papandreou affected stocks more than anything last week: first he announced a public vote on the latest austerity cuts for the nation, reconsidered it, and then prepared to step down Friday amid concerns that he might change his mind. As these weekly performance numbers show, bears were roaming last week: DJIA, -2.03% to 11,983.24; S&P 500, -2.48% to 1,253.23; NASDAQ, -1.86% to 2,686.15.4,5,6

THIS WEEK: No major economic releases are slated for Monday; we do have results from Priceline and SYSCO. Eurozone finance ministers conclude their meeting in Brussels on Tuesday, and Toyota presents earnings. Wednesday, Ben Bernanke speaks at a Federal Reserve conference on small business; earnings come in from GM, Anheuser Busch, HSBC, Cisco, Green Mountain, Ralph Lauren, Macy’s and Wendy’s. Thursday we have earnings from Viacom, Kohl’s, Disney and Nordstrom; Ben Bernanke speaks at an El Paso town hall. Friday is Veterans Day: banks are closed, markets are open, and the initial October University of Michigan consumer sentiment survey arrives plus earnings from D.R. Horton.

% CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG
DJIA +3.50 +4.80 -0.000047 +2.69
NASDAQ +1.25 +4.22 +3.05 +4.98
S&P 500 -0.35 +2.63 -1.63 +1.36
REAL YIELD 11/4 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO
10 YR TIPS -0.08% 0.44% 2.40% 3.50%

Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov - 11/4/116,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.