investor update presented by: advisor name company

Investor Update

Presented by:

Advisor NameCompany

Tonight’s Agenda

Overview of Current Economic Issues

Year-End Planning Strategies

Questions & Answers

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All examples provided are hypothetical and meant for illustrative purposes only. State income tax laws can be different from Federal income tax laws depending on your state. Be sure to take this into account before making any decisions. Individual situations will

vary so please consult a tax advisor to address your specific situation.

Five Key Areas of Financial Planning

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Protection Retirement Plan Investments Tax Planning Estate Planning

August 11th 2015

Long Live the BullThe 23 bull markets in U.S. stock since 1900 have lasted an average of 1,219 days. The current bull

market is the fourth-longest on record at 2,262 days.

Market Volatility Returned !

Source: Barron’s 8/21/2015

Market Volatility Continues!

Source: Barron’s 8/28/2015

What is causing this Volatility?Slower than expected growth in China

What is causing this Volatility?Instability of oil prices

What is causing this Volatility?Fear of rising interest rates

Source: Numbernomics.com

What is causing this Volatility?Investor Emotions

History has been kind to investors

Indexes are unmanaged and investors are not able to invest directly into any index. Past performance is no guarantee of future results.

After an extremely volatile two weeks, in September

2015, billionaire value investor Mario Gabelli said

he's largely ignoring the recent extreme stock

market volatility, saying his investment horizon

is 3 to 5 years, not 6 to 12 weeks.

Source: Yahoo! Finance

Trying to time the market can cost you

5 Years Later

Source: Fidelty.com

Are you an investor or a speculator ?

“There are two times in a person’s life when they should not speculate: when they can’t afford it and when they can”.

Mark Twain

Knowledge is Powerful

Franklin Templeton asked 1,000 investors whether the S&P 500 went up or down in the years 2009 and 2010.

66% percent thought it went down in 2009,

49% said it declined in 2010.

In reality, the index gained 26.5% in 2009 and 15.1% in 2010.

Are you a bull or bear?

Is it time to revisit your portfolio ?

Has your cash flow or liquidity needs changed?

Has your risk tolerance changed?Have any of your goals or timelines changed?

What will the future bring?

What Is Rebalancing?

Rebalancing is defined as the process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state. Source: Investopedia.com

How about bonds?

Source: www.wellsfargoadvantagefunds.com

Duration is Important

Our goal it to proceed with caution!

Some Keys to Successful Rebalancing include:

• Focusing on the Long Term• Recording• Comparing • Adjusting• Using Professional Guidance

*Rebalancing a portfolio cannot assure a profit or protect against a loss in any given market environment.

2015 Year End Tax Planning

There are still 7 tax brackets for 2015

5 Tax Tiers

• Traditional Income Tax• Alternative Minimum Tax• 3.8% Tax on Net Investment Income• “PEP” and “Pease” limitations• The 39.6% and 5% incremental rates

2015 Long-Term Capital Gains & Dividends

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Bracket Management

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39.6%

35%

33%

28%

25%

15%

10%

MOST Tax-Sensitive

Tax Aware

Tax Efficient

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Key Year-End Tax Planning Strategies

• Harvesting – Gains and Losses

• Retirement Plan Contributions

• Gifting

• Roth IRA Conversion

Gain Harvesting – Tradeoffs

• On the surface, it appears that taxpayers should always harvest gains

• However, harvesting gains introduces a tradeoff between lower tax rates versus the loss of tax deferral

/̶ Tax is paid at a lower rate, but it is paid sooner/̶ Need to determine a crossover point at which

selling sooner makes more sense32

Income Tax Planning Opportunities in 2015

Gain Harvesting

• Sell assets with long-term capital gains in 2015 if able to take advantage of lower brackets

• Repurchase same or similar assets

• Sell assets whenever you would have sold them otherwise

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Income Tax Planning Opportunities in 2015

Gain Harvesting – When Should Gains Be Harvested?

• Very short time horizon̶/ Gain harvesting will almost always be favorable because

the benefit of tax deferral is small

• Very long time horizon̶/ Gain harvesting will almost always be unfavorable

because the benefit of tax deferral is large

• Taxpayer in the 0% long-term capital gains bracket in 2015̶/ Gain harvesting will always be favorable from a tax

perspective because it gives you a free basis step-up

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Income Tax Planning Opportunities in 2015

Loss Harvesting – Key Issues

• “Wash sale” rule (IRC §1091)

• Diminishing value of capital losses

• Inefficiency of capital loss offsetting

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Income Tax Planning Opportunities in 2015

Short-Term Gain Long-Term GainShort-Term Loss NEUTRAL INEFFECTIVELong-Term Loss EFFECTIVE NEUTRAL

Loss Harvesting – Inefficiency of Capital Loss Harvesting• In general, capital losses are more tax effective if they can

be used to offset income taxed at higher tax rates (e.g. short-term capital gains and ordinary income)

/̶ Thus, long-term losses used against short-term gains are more tax-efficient than short-term losses being used against long-term capital gains

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Income Tax Planning Opportunities in 2015

Income Tax Planning Opportunities in 2015

Loss Harvesting Strategies• Buy stock of similar company

1. Taxpayer has a stock (e.g. Coke) with an unrealized loss (i.e. “loss stock”)

2. Taxpayer purchases a similar stock (e.g. Pepsi) at any time prior to (or after) the sale of the “loss stock”/̶ NOTE: The sale and purchase can occur on the same day in that the two stocks are not “substantially identical”

• Double-up “loss stock” – wait 31 days

Retirement Plan Contributions

Always Consider Contributing to Your Retirement Plans if Possible!

Gifting in 2015

• Annual Gift Amount for 2015 is $14,000

• 529 Plans

• Charitable Donations

• Lifetime Amounts

Roth IRA

• Contribution• Conversion

Roth IRA Conversions – Roth IRA Conversion Benefits

• Lowers overall taxable income long-term

• Tax-free compounding

• No RMDs at age 70½

• Tax-free withdrawals for beneficiaries

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Income Tax Planning Opportunities in 2015

Roth IRA Conversions – Understanding the Mathematics

• In simplest terms, a traditional IRA will produce the same after-tax result as a Roth IRA provided that:

/̶ The annual growth rates are the same/̶ The tax rate in the conversion year is the same as the tax rate during the withdrawal years

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Income Tax Planning Opportunities in 2015

Traditional IRA Roth IRACurrent Account Balance 100,000$ 100,000$ Less: Income Taxes @ 40% - (40,000) Net Balance 100,000$ 60,000$

Growth Until Death 200.00% 200.00%

Account Balance @ Death 300,000$ 180,000$ Less: Income Taxes @ 40% (120,000) - Net Account Balance to Family 180,000$ 180,000$

Roth IRA Conversions – Understanding the Mathematics

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Income Tax Planning Opportunities in 2015

Roth IRA Conversions – Understanding the Mathematics

• Critical decision factors/̶ Tax rate differential (i.e. tax rate in year of conversion vs. tax rate in years of withdrawals)

/̶ Ability to use “outside assets” (i.e. non-IRA funds) to pay the income tax on the conversion

/̶ Time horizon / need for IRA to meet annual living expenses

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• The goal of a successful Roth IRA conversion is to keep as much of the conversion income as possible in lower income tax brackets

Income Tax Planning Opportunities in 2015

Taxpayers may “recharacterize” (i.e. undo) the Roth IRA conversion

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Income Tax Planning Opportunities in 2015

Income Tax Planning Opportunities in 2015

Roth IRA Conversions – Roth IRA Conversion Timeline

Roth IRA Conversions – Recharacterizations

2016

Conversion Period Recharacterization Period

1/1/2015 First day

conversion can take place

2015

12/31/2015 Last day

conversion can take place

4/15/2016 Normal filing date for 2015

tax return

10/15/2016 Latest filing date for 2015 tax return / last day to recharacterize

2015 Roth IRA conversion

12/31/2016

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Invest – Don’t Trade or Speculate

Don’t Panic

An Investor Who has all theAnswers Doesn't EvenUnderstand all the Questions

Hire Wise Experts to Help You !

Sir John Templeton47

Where do we go from here?

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Our GOAL is to

Monitor your Situation!

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What can you expect from us?

Constant communication

Frequent discussions

We are constantly reviewing economic, tax, estate and investment issues for our clients

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Our Role as Your Advisor We won’t be making panicky decisions

We will maintain a non-emotional objective

We will avoid knee-jerk reactions

We will assist you in making decisions that are

always in your best interest! - and

WE ARE HERE FOR YOU !!!!

Available Soon

Our Year-End Tax Report

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Help Us Help Others !

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Become a Client Advocate !

Thank you for helping our 2015 Growth Initiative!

Thank You We appreciate the opportunity to assist

with YOUR financial needs!

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Any Questions?

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The views expressed are not necessarily the opinion of Insert Broker-dealer name. Information is based on sources believed to be reliable, however, their accuracy or completeness cannot be guaranteed.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice.

Investing involves risk including the potential loss of principal. No investment strategy, such as asset allocation and rebalancing, can guarantee a profit or protect against loss in periods of declining values. Please note that rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability.

Contents provided by Academy of Preferred Financial Advisors, Inc.Copyright 2015 Academy of Preferred Financial Advisors, Inc.