YOUR FINANCIAL FUTURE

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1 YOUR FINANCIAL FUTURE September 2015 In This Issue Retirement Planning for Dual-Wage Earning Households Dual-wage earning couples have a lot to consider when assessing their various retirement portfolios. We hope this educational resource proves helpful. We believe an educated investor is a better investor. Please call us if you have questions. Your Team at Community Trust Financial Services 101 N. Main St. Versailles, KY severda@ctbi.com Independent Investor August 2015 Newfound wealth brings its own set of issues taxes, as well as saving and investing goals. Surviving Market Turbulence All too often, investors react to a sharp drop in prices by panic selling or digging in their heels despite deteriorating fundamentals. But more thoughtful investors see a correction or downturn as an opportunity to review the risks in their portfolios and make adjustments where necessary.

2 2 Retirement Planning for Dual-Wage Earning Households Like any investment portfolio, retirement accounts should work as a unit to help you pursue a specific accumulation goal. With job changes so prevalent throughout our society, it is likely that a couple may have multiple retirement accounts, including 401(k), 403(b), or 457 plans, rollover IRAs, and possibly defined benefit plans. Because of the variety of investment options offered under such plans, it is important for couples to understand the possible detrimental effects that an uncoordinated retirement nest egg can have on reaching financial goals. Potential red flags include: Inappropriate investment strategy Like any investment portfolio, retirement accounts should work as a unit to help you pursue a specific accumulation goal. Success requires a coordinated investment strategy. Is the overall asset allocation appropriate for a couple's objectives and risk tolerance? Are the portfolios adequately diversified? Are they overweighted (or underweighted) in any one asset class or individual security? Do the portfolios complement a couple's taxable investment accounts, real estate, and other assets? Poorly timed distribution strategy Couples nearing retirement or already retired must consider the timing of their distributions in light of their income needs, tax situation, and market dynamics. For instance, should they begin taking distributions earlier than the required age to avoid a potentially higher income tax hit later? Should they take periodic distributions; annuitize; or take a lump sum and pay the taxes, then reinvest the proceeds elsewhere? Might it make sense to convert a traditional IRA to a Roth IRA to put off distributions as long as possible and/or receive tax-free income? Which accounts should they tap first, and in what order should the others follow? What if the market is in the midst of a downturn when required distributions must begin? Fees Couples should consider the fees associated with all of their retirement accounts and how they might affect returns. Would it make sense to consolidate some accounts to help minimize fees? Estate planning Couples planning their estates will face a number of questions surrounding their retirement plans. A key concern centers on the naming of beneficiaries and the income and estate tax treatment of the proceeds. Should the spouse be the beneficiary, or would naming children or a trust as beneficiary be more appropriate? These are just a few of the questions that couples must grapple with when managing their individual retirement plan accounts. Yet no two couples' financial situations are alike. There is no set formula or mathematical equation that can be applied easily to all circumstances. Keeping track of the range of investments involved is necessary to successfully pursue long-term financial goals -- but doing so is no simple task. It often requires objectivity and professional insight. If you are part of a dual-income family, speak with your financial advisor about how you and your spouse can review and coordinate your separate retirement investments to create an effective, comprehensive plan. This communication is not intended to be tax advice and should not be treated as such. Each individual's tax situation is different. You should contact your tax professional to discuss your personal situation Wealth Management Systems Inc. All rights reserved

3 3 Independent Investor August 2015 Newfound Wealth: Thinking Through the Options Whether you are the recipient of an inheritance, a windfall or a bonus, new wealth brings with it new issues. This checklist can help you identify common tax issues, as well as formulate plans for investing and gifting your newfound wealth. Tax Considerations Here's a list of the different types of taxes that you may encounter as a recipient of sudden, substantial wealth. As you go through it, keep in mind that different states have different rules. Federal, state and local income taxes. While inheritances may not normally be counted as income, payments like buyouts, fees and winnings may be. Even though you may not need to formally pay any taxes due until you file, the IRS and many other jurisdictions require estimated tax payments if your tax liability for the year won't be covered by your tax withholdings. Transfer taxes. Real estate transfers often include a tax, and that tax is often paid by the buyer (or the recipient). Transfer taxes may also be assessed if you receive investment securities and valuable personal property such as fine art, jewelry or antiques. State inheritance taxes. The IRS and some states collect any estate tax due from the estate itself, before assets are distributed to beneficiaries. However, some states require beneficiaries to account for their share of a taxable estate and to settle their state tax liabilities individually. Ad valorem taxes. These taxes are assessed periodically on the value of an item in your possession rather than on a cash flow to you. For instance, some jurisdictions consider investment securities to be taxable personal property and levy taxes on them in the same way they do on real estate, automobiles and jewelry. You should consider talking through these tax issues with a tax professional. You may even find that it helps to create a fund now to meet anticipated future tax liabilities. Put New Wealth to Good Use Today New money may open up new possibilities. Think about how any new priorities might fit with your current plans and goals. For instance: An influx of money may free up your current cash flow, allowing you to increase your contributions to your employer-sponsored retirement savings program and/or to evaluate opportunities for an IRA. You also may find that an annuity might be beneficial. Make sure you're financially prepared for your children's future education needs. Consider making full use of 529 plans, Coverdell educational savings accounts and other education savings vehicles for all your children and/or grandchildren. Weigh the potential return you could earn from new wealth against the cost of carrying your current debt load. You may find it's time to speed up some debt repayments. Prime candidates may include credit cards and other consumer debt, student loans and home equity lines of credit. and Plan Ahead to Create Your Legacy Consider how you can use your estate plan to extend the reach of your wealth. For instance: Could your new wealth help you to increase the amounts of your bequests to the people in your life you care about? Is it important for you to leave a legacy through good works? You may be able to do even more good by increasing your charitable efforts. Any trusts you might have created were probably built to make the most of the resources that you had at the time. You may find that your new wealth has changed your circumstances enough to justify rethinking your existing arrangements. Last, but not least, did your new wealth come with any strings attached? If so, you may want to take the time to understand those special terms or conditions now. For instance, there could be limits or restrictions on how you can use the money or the items you inherited. You may be required to do something or avoid doing something in order to qualify. In addition, some bequests may depend on specific market events or other outside conditions.

4 4 To make sense of special conditions or for help with any other aspect of managing newfound wealth, contact your financial advisor or other trusted planning specialist. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial. This article was prepared by Wealth Management Systems Inc. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Please consult me if you have any questions. Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscribers' or others' use of the content. #

5 5 Surviving Market Turbulence Most stock market investors are looking for the same result: strong and steady gains of their investments. Dealing with a period of sustained falling stock prices is not easy. All too often, investors react to a sharp drop in prices by panic selling or digging in their heels despite deteriorating fundamentals. But more thoughtful investors see a correction or downturn as an opportunity to review the risks in their portfolios and make adjustments where necessary. When confronted with any adverse market event -- whether it is a one-day blip, a more lengthy market correction (a decline of between 10% to 20%), or a prolonged bear market (a decline of more than 20%) -- take time to review your portfolio. Dealing with volatility can be difficult. Here are some suggestions to help you and your portfolio survive market turbulence. Keep a long-term perspective. The only certainty about the stock market is this: It will always experience ups and downs. That's why it's important to keep emotions in check and stay focused on your financial goals. A buy-and-hold strategy -- making an investment and then holding on to it despite short-term market moves -- can help. The opposite of buy-and-hold investing is market timing -- buying and selling investments based on what you think the market will do next. Market timing, as most investment professionals will tell you, is risky. If your predictions are wrong, you could invest when the market is on its way down or sell when it's on its way up. In other words, you risk locking in a loss or missing the market's best days. Organize and review your financial records. Crisis events highlight the importance of knowing where your assets are and maintaining organized financial records. Following the September 11, 2001, terrorist attacks, markets closed for several days and many records in the heart of New York City's financial district were destroyed. Yet the nation's financial systems were up and running in a matter of days, and your securities accounts were safe even when the stock exchanges were closed. While you cannot trade investments or access your assets during a market shutdown, securities firms maintain backup facilities and have contingency plans to help them service customers when trading resumes. Talk with a professional. A financial professional can help you separate emotionally driven decisions from those based on your goals, time horizon, and risk tolerance. Researchers in the field of behavioral finance have found that emotions often lead investors to read too much into recent events even though those events may not reflect long-term realities. With the aid of a financial professional, you can sort through these distinctions, and you'll likely find that if your investment strategy made sense before the crisis, it will still make sense afterward. It's important to remember that periods of falling prices are a natural part of investing in the stock market. While some investors will use a variety of trading tools, including individual stock and stock index options, to hedge their portfolios against a sudden drop in the market, perhaps the best move you can make is reevaluating and limiting your overall risk position Wealth Management Systems Inc. All rights reserved

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