Optima Asset Management,LLCDiane T. McIntee, CFP®400 Millstone DriveSuite 202Hillsborough, NC 27278919-933-9019diane@optimaasset.netwww.optimaasset.net

June 2017Student Loan Debt: It Isn't Just forMillennials

Expect the Unexpected: What to Do IfYou Become Disabled

What is a funeral trust?

What is a pet trust?

Four Numbers You Need to Know Now

See disclaimer on final page

June is here and with it comes weddingseason! If there is a wedding on your horizon,the article on page one will help you navigatethe financial aspects. Looking for a uniquewedding gift that will provide lasting benefit?The gift of a Financial Plan might be theanswer! Give us a call for details and options!

The age old question of "Should I purchasethe insurances offered by car rentalcompanies?" is addressed on page 4.Hopefully this information will help provideanswers for your upcoming travels!

We are now offering our Advisory clientseMoney and our clients are really enjoying allthe benefits and features provided. If you arenot an Advisory client and would like toaccess eMoney for a monthly fee, please talkto us about the options we offer.

Wishing everyone happy Communions,Confirmations, Graduations, and Weddingsduring this season of celebration and newbeginnings!

Regards,

Diane

Your greatest compliment is the referralof your family and friends.

When it comes to your finances,you might easily overlook someof the numbers that really count.Here are four to pay attention tonow that might really matter inthe future.

1. Retirement plan contribution rateWhat percentage of your salary are youcontributing to a retirement plan? Makingautomatic contributions through anemployer-sponsored plan such as a 401(k) or403(b) plan is an easy way to save forretirement, but this out-of-sight, out-of-mindapproach may result in a disparity betweenwhat you need to save and what you actuallyare saving for retirement. Checking yourcontribution rate and increasing it periodicallycan help you stay on track toward yourretirement savings goal. .

Some employer retirement plans let you sign upfor automatic contribution rate increases eachyear, which is a simple way to bump up thepercentage you're saving over time. In addition,try to boost your contributions when you receivea pay raise. Consider contributing at leastenough to receive the full company match (ifany) that your employer offers.

2. Credit scoreWhen you apply for credit, such as a mortgage,a car loan, or a credit card, your credit score isone of the tools used by lenders to evaluateyour creditworthiness. Your score will likelyfactor into the approval decision and affect theterms and the interest rate you'll pay.

The most common credit score that creditorsconsider is a FICO© Score, a three-digitnumber that ranges from 300 to 850. This scoreis based on a mathematical formula that usesinformation contained in your credit report. Ingeneral, the higher your score, the lower thecredit risk you pose.

Each of the three major credit reportingagencies (Equifax, Experian, and TransUnion)calculates FICO® scores using differentformulas, so you may want to check yourscores from all three (fees apply). It's also agood idea to get a copy of your credit report at

least annually to check the accuracy of theinformation upon which your credit score isbased. You're entitled to one free copy of yourcredit report every 12 months from each of thethree credit reporting agencies. You can getyour copy by visiting annualcreditreport.com.

3. Debt-to-income ratioYour debt-to-income ratio (DTI) is anothernumber that lenders may use when decidingwhether to offer you credit. A DTI that is toohigh might mean that you are overextended.Your DTI is calculated by adding up your majormonthly expenses and dividing that figure byyour gross monthly income. The result isexpressed as a percentage. For example, ifyour monthly expenses total $2,200 and yourgross monthly income is $6,800, your DTI is32%.

Lenders decide what DTIs are acceptable,based on the type of credit. For example,mortgage lenders generally require a ratio of36% or less for conventional mortgages and43% or less for FHA mortgages whenconsidering overall expenses.

Once you know your DTI, you can take steps toreduce it if necessary. For example, you maybe able to pay off a low-balance loan to removeit from the calculation. You may also want toavoid taking on new debt that might negativelyaffect your DTI. Check with your lender if youhave any questions about acceptable DTIs orwhat expenses are included in the calculation.

4. Net worthOne of the key big-picture numbers you shouldknow is your net worth, a snapshot of whereyou stand financially. To calculate your networth, add up your assets (what you own) andsubtract your liabilities (what you owe). Onceyou know your net worth, you can use it as abaseline to measure financial progress.

Ideally, your net worth will grow over time asyou save more and pay down debt, at least untilretirement. If your net worth is stagnant or evendeclining, then it might be time to make someadjustments to target your financial goals, suchas trimming expenses or rethinking yourinvestment strategy.

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Student Loan Debt: It Isn't Just for MillennialsIt's no secret that today's college graduatesface record amounts of debt. Approximately68% of the graduating class of 2015 hadstudent loan debt, with an average debt of$30,100 per borrower — a 4% increase from2014 graduates.1

A student loan debt clock at finaid.orgestimates current outstanding student loan debt— including both federal and private studentloans — at over $1.4 trillion. But it's not justmillennials who are racking up this debt.According to the Consumer Financial ProtectionBureau (CFPB), although most student loanborrowers are young adults between the agesof 18 and 39, consumers age 60 and older arethe fastest-growing segment of the student loanmarket.2

Rise of student debt among olderAmericansBetween 2005 and 2015, the number ofindividuals age 60 and older with student loandebt quadrupled from about 700,000 to 2.8million. The average amount of student loandebt owed by these older borrowers alsoincreased from $12,100 to $23,500 over thisperiod.3

The reason for this trend is twofold: Borrowersare carrying their own student loan debt later inlife (27% of cases), and they are taking outloans to finance their children's andgrandchildren's college education (73% ofcases), either directly or by co-signing a loanwith the student as the primary borrower.4Under the federal government's Direct StaffordLoan program, the maximum amount thatundergraduate students can borrow over fouryears is $27,000 — an amount that is ofteninadequate to meet the full cost of college. Thislimit causes many parents to turn to privatestudent loans, which generally require aco-signer or co-borrower, who is then heldresponsible for repaying the loan along with thestudent, who is the primary borrower. TheCFPB estimates that 57% of all individuals whoare co-signers are age 55 and older.5

What's at stakeThe increasing student loan debt burden ofolder Americans has serious implications fortheir financial security. In 2015, 37% of federalstudent loan borrowers age 65 and older werein default on their loans.6 Unfortunately forthese individuals, federal student loansgenerally cannot be discharged in bankruptcy,and Uncle Sam can and will get its money — thegovernment is authorized to withhold a portionof a borrower's tax refund or Social Securitybenefits to collect on the debt. (By contrast,

private student loan lenders cannot intercepttax refunds or Social Security benefits to collectany amounts owed to them.)

The CFPB also found that older Americans withstudent loans (federal or private) have savedless for retirement and often forgo necessarymedical care at a higher rate than individualswithout student loans.7 It all adds up to a toughsituation for older Americans, whose incomestream is typically ramping down, not up, unliketheir younger counterparts.

Think before you borrowSince the majority of older Americans areincurring student loan debt to finance a child'sor grandchild's college education, how much istoo much to borrow? It's different for everyfamily, but one general guideline is that astudent's overall debt shouldn't be more thanhis or her projected annual starting salary,which in turn often depends on the student'smajor and job prospects. But this is just aguideline. Many variables can impact aborrower's ability to pay back loans, and manyfamilies have been burned by borrowingamounts that may have seemed reasonable atfirst glance but now, in reality, are not.

A recent survey found that 57% of millennialsregret how much they borrowed for college.8This doesn't mean they regretted going tocollege or borrowing at all, but it suggests that itwould be wise to carefully consider the amountof any loans you or your child take out forcollege. Establish a conservative borrowingamount, and then try to borrow even less.

If the numbers don't add up, students canreduce the cost of college by choosing a lessexpensive school, living at home or becoming aresident assistant (RA) to save on room costs,or graduating in three years instead of four.1 The Institute for College Access & Success,Student Debt and the Class of 2015, October 2016

2-7 Consumer Financial Protection Bureau, Snapshotof Older Consumers and Student Loan Debt, January2017

8 Journal of Financial Planning, September 2016

The intersection of studentloan debt and SocialSecurity benefits

Since 2001, the federalgovernment has collectedabout $1.1 billion from SocialSecurity recipients to coverunpaid federal student loans,including $171 million in 2015alone. During that time, thenumber of Americans age 50and older who have had theirSocial Security benefitsreduced to pay defaultedfederal student loans has risen440%.

Source: The Wall StreetJournal, Social SecurityChecks Are Being Reduced forUnpaid Student Debt,December 20, 2016

Page 2 of 4, see disclaimer on final page

Expect the Unexpected: What to Do If You Become DisabledIn a recent survey, 46% of retirees said theyretired earlier than planned, and not necessarilybecause they chose to do so. In fact, many saidthey had to leave the workforce early becauseof health issues or a disability.¹

Although you may be healthy and financiallystable now, an unexpected diagnosis or injurycould significantly derail your life plans. Wouldyou know what to do, financially speaking, ifyou suddenly became disabled? Now may be agood time to familiarize yourself with thefollowing information, before an emergencyarises.

Understand any employer-sponsoredbenefits you may haveDisability insurance pays a benefit that replacesa percentage of your pay for a designatedperiod of time. Through your employer, youmay have access to both short- and long-termdisability insurance. If your employer offersdisability insurance, be sure to fully understandhow the plan works. Review your plan'sSummary Plan Description carefully todetermine how to apply for benefits should youneed them, and what you will need to providefor proof of disability.

Short-term disability protection typically coversa period of up to six months, while long-termdisability coverage generally lasts for the lengthof the disability or until retirement. Your planmay offer basic coverage paid by youremployer and a possible "buy-up" option thatallows you to purchase additional coverage.

According to the Bureau of Labor Statistics,40% of private industry workers have access toshort-term disability insurance through theiremployers, while 33% have access to long-termcoverage. For both types of plans, the medianreplacement amount is about 60% of pay, withmost subject to maximum limits.²

Consider a supplemental safety netIf you do not have access to disability insurancethrough your employer, it might be wise toinvestigate other options. It may be possible topurchase both short- and long-term groupdisability policies through membership in aprofessional organization or association.Individual policies are also available fromprivate insurers.

You can purchase policies that cover you forlife, until age 65, or for shorter periods such astwo or five years. An individual policy willremain in force as long as you pay thepremiums. Because many disabilities do notresult in a complete inability to work, somepolicies offer a rider that will pay you partialbenefits if you are able to work part-time.

Most insurance policies have a waiting period(known as the "elimination period") before youcan begin receiving benefits. For privateinsurance policies, this period can be anywherefrom 30 to 365 days. Group policies(particularly through your employer) typicallyhave shorter waiting periods than privatepolicies. Disability insurance premiums paidwith after-tax dollars will generally result intax-free disability benefits. On the other hand, ifyour premiums are paid with pre-tax dollars,typically through your employer, your benefitpayments may be taxable.

Review the Social Security disabilityprocessThe Social Security Administration (SSA) paysdisability benefits through two programs: theSocial Security Disability Insurance (SSDI)program and the Supplemental Security Income(SSI) program. SSDI pays benefits to peoplewho cannot work due to a disability that isexpected to last at least one year or result indeath, and it's only intended to help suchindividuals make ends meet. Consider that theaverage monthly benefit in January 2017 wasjust $1,171.

In order to receive SSDI, you must meet strictcriteria for your disability. You must also meetrequirements for how recently and how longyou have worked. Meeting the medical criteriais difficult; in fact, according to the NationalOrganization of Social Security Claimants'Representatives (NOSSCR), about two-thirdsof initial SSDI applications are denied on theirfirst submission. Denials can be appealedwithin 60 days of receipt of the notice.³

The application process can take up to fivemonths, so it is advisable to apply for SSDI assoon as you become disabled. If yourapplication is approved, benefits begin in themonth following the six-month anniversary ofyour date of disability (as recorded by the SSAin your approval letter). Eligible family membersmay also be able to collect additional paymentsof up to 50% of your benefit amount.

SSI is a separate program, based on incomeneeds of the aged, blind, or disabled. You canapply to both SSI and SSDI at the same time.

For more information, visit the Social SecurityDisability Benefits website at ssa.gov, whereyou will also find a link to information on the SSIprogram.

¹ 2016 Retirement Confidence Survey, EmployeeBenefit Research Institute

² Bureau of Labor Statistics,National Compensation Survey, 2016

³ NOSSCR web site, accessed March 2017

About 20% of Americanslive with a disability, andone in four of today's20-year-olds will becomedisabled before retiring.

Source: SSA, DisabilityFacts, 2017

The average age of SSDIrecipients in 2015 was 54.

Source: Fast Facts andFigures About SocialSecurity, 2016

Page 3 of 4, see disclaimer on final page

Optima AssetManagement, LLCDiane T. McIntee, CFP®400 Millstone DriveSuite 202Hillsborough, NC 27278919-933-9019diane@optimaasset.netwww.optimaasset.net

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017

This article was created by a ThirdParty and was not written orcreated by Diane T. McIntee anddoes not represent the views andopinions of Cambridge InvestmentResearch, Inc.

Securities offered throughRegistered Representatives ofCambridge Investment Research,Inc., a broker-dealer, memberFINRA/SIPC.

Advisory services throughCambridge Investment ResearchAdvisors, Inc., a RegisteredInvestment Adviser.

Cambridge and Optima AssetManagement, LLC are notaffiliated.

What is a pet trust?A pet trust is an arrangementto provide for the care andfinancial support of your pet(s)upon your disability or death.You fund the trust with

property or cash that can be used to provide foryour pet based on your instructions in the trustdocument.

Your pet trust should name a trustee who willcarry out your instructions for the care of yourpet, including handling and disbursement oftrust funds and turning your pet over to theperson or entity you designate to serve as yourpet's caregiver. The trustee and caregiver couldbe the same person or entity.

As with most trusts, you can create your pettrust while you're alive (an inter vivos or livingtrust) or at your death through your will (atestamentary trust). In either case, you cangenerally change the terms of your pet trust atany time during your lifetime to accommodatechanging circumstances. If you create an intervivos trust, you can fund it with cash or propertyeither during your life (needed if the trust is tocare for your pet if you become incapacitated)or at your death through your will. Atestamentary trust is only funded after you die.

Some of the instructions to consider for yourpet trust include: provisions for food and diet,daily routines, toys, medical care and grooming,how the trustee or caregiver is to documentexpenditures for reimbursement, whether thetrust will insure the caregiver for any injuries orclaims caused by your pet, and the dispositionof your pet's remains.

You may also want to name a person ororganization to take your pet should your trustrun out of funds. Also consider naming aremainder beneficiary to receive any funds orproperty remaining in the trust after your petdies.

A potential problem arises if your pet isexpected to live for more than 21 years afteryour death. That's because, in many states, the"rule against perpetuities" forbids a trust fromlasting beyond a certain period of time, usually21 years after the death of an identified person.However, almost every state has laws relatingto pet trusts that address this issue in particularand allow for the continued maintenance of thetrust, even if its terms would otherwise violatethe rule.

Note that there are costs and expensesassociated with the creation of a trust.

What is a funeral trust?A funeral trust is anarrangement entered into witha provider of funeral or burialservices. Prepaying funeralexpenses may allow you to

"lock in" costs for future funeral or burialservices at an agreed-upon price. The funeralhome sometimes serves as trustee (manager oftrust assets), and you usually fund the trust withcash, bonds, or life insurance. A revocablefuneral trust can be changed and revoked byyou at any time. An irrevocable trust can't bechanged or revoked, and you generally can'tget your money out except to pay for funeralservices.

Irrevocable funeral trusts may also help youqualify for long-term care benefits throughMedicaid. For example, these trusts may befunded with assets that would otherwise becountable resources for Medicaid (i.e., includedin determining Medicaid eligibility). They areoften sold through insurance companies, inwhich case they are typically funded with lifeinsurance. And you can fund the funeral trustright before entering the nursing home — there'sno "look-back" period for these transfers, unlikethe case with certain other transfers that can

cause a delay in the start of Medicaid benefits.

Another advantage of funding your trust with lifeinsurance is that the trust will have no taxableincome to report, because life insurance cashvalues grow tax deferred. Otherwise, incomefrom trust assets may be taxed to you as thegrantor of the trust, unless the trustee elects totreat the trust as a qualified funeral trust byfiling Form 1041-QFT with the IRS, in whichcase trust income is taxed to the trust.

But what happens if you want to change funeralhomes, or the facility you selected goes out ofbusiness? Does your irrevocable trust allow youto change beneficiaries (e.g., funeral homes)?Are trust funds protected from creditors of thefuneral home? State laws regulating prepaidfuneral trusts often require funeral homes tokeep trust assets separate from their ownbusiness assets, keeping them safe fromfuneral home creditors. And most irrevocabletrusts are transferable to another funeral homeshould the initial business fail or you changefuneral homes.

There are expenses associated with thecreation of a trust and the purchase of lifeinsurance, and benefits are not guaranteed.

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