EMPATHY ALTRUISM EYE ON ALCHEMY ALTRUISM EMPATHY 2 FR2016-0527-0174/E FEATURES 1662 Building Retirement

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    MONEY EYE ON

    S E P O C T 2 0 1 6

    BUILDING RETIREMENT SAVINGS AT ANY AGE WHAT TO DO IN YOUR 20s, 30s, 40s, 50s, AND 60s TO PREPARE FOR RETIREMENT

    BOND AND CD LADDERS

    CHARITABLE GIVING WITH A

    DONOR-ADVISED FUND

    WHY START A RETIREMENT PLAN

    FOR YOUR BUSINESS

    plus

    EM PATHY • ALTRU I S M • ALCHEMY

    EM PATHY • ALTRU I S M • ALCHEMY EM PATHY • ALTRU I S M • ALCHEMY

    EM PATHY • ALTRU I S M • ALCHEMY

  • I N S U R A N C E

    2 FR2016-0527-0174/E

    F E A T U R E S

    6 Building Retirement Savings at Any Age

    What to do in your 20s, 30s, 40s, 50s, and 60s to prepare for retirement.

    12 Charitable Giving with a Donor-Advised Fund

    An introduction to the tax benefits and features of a donor-advised fund.

    U P F R O N T

    2 Three Mistakes to Avoid Regarding Long-Term Care

    3 Three Reasons to Start a Retirement

    Plan for Your Business 4 What Is a Bond or CD Ladder? 5 Test Your Insurance Knowledge Test your knowledge and gain a greater

    understanding of how insurance can help protect your financial security.

    F Y I

    16 Hong Kong, China: City of Lights 18 Two Reasons to Celebrate on the National Mall 19 Quiz: Test Your College Smarts

    © 2016 Quinn Communications Inc. This publication was created by Quinn Communications Inc. (www.quinncom.biz) for the use of the sender. It is intended to provide general information on the subject matter covered. It is not intended to provide a financial, legal, or other professional service. The information in this publication may not be appropriate for you. Contact a financial or legal professional before making changes to your plans.

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    ©iStock.com/PeopleImages

    THREE REASONS TO START A

    RETIREMENT PLAN FOR YOUR BUSINESS THREE MISTAKES TO AVOID REGARDING

    LONG-TERM CARE

    1 Thinking you won't ever need it. About 70% of people turning age 65 will need long-term care at some point in their lives, according to the U.S. Department of Health and Human Services.

    2 Counting on Medicare to cover it. Medicare generally does not cover long-term custodial care services, such as assistance with bathing, dressing, and other activities of daily life, if that is the only type of care you need. Medicaid covers them, but your income must be low and your assets limited to qualify for Medicaid. If you need long- term custodial care, your only options may be to pay for it from your personal income and savings, or a combination of long-term care insurance, income, and savings.

    3 Waiting too long to purchase long-term care insurance. If long-term care insurance is right for you, it is generally a good idea to purchase it well before you need it. If you wait until your health deteriorates, insurance companies may not sell you a policy. Plus, your premiums will generally be lower the younger you are when you purchase the policy.

    Please consult your financial advisor about how to plan for long-term care expenses.

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  • 3FR2016-0527-0174/E

    R E T I R E M E N T

    1 Higher Contribution Limits Than Regular IRAs Most business retirement plans will permit you to contribute more money per year to your account than a regular IRA will allow. How much more? To give you one example, the SEP-IRA retirement plan permits a business to contribute up to 25% of an em- ployee’s compensation, up to a maximum contribution of $53,000, in 2016. A regular IRA limits contributions in 2016 to $5,500 ($6,500 if you are age 50 or older).

    If you are self-employed or own a small business and want to save large amounts each year on a tax-favored basis, you owe it to yourself to explore your business retirement plan options.

    2 Tax Breaks for You and Your Business    A tax deduction for your business. Contri- butions that your business makes to your account and your employees’ accounts are generally deductible as a business expense.

       A reduction in your personal income taxes. If you choose a plan that allows employees to contribute, you can contrib- ute part of your pay before income taxes are withheld from it, which reduces your taxes for the current year. For example, if you contribute $10,000 of your compensa- tion to a SIMPLE IRA account or a tax- deferred 401(k) account, you will not have to pay income tax on that $10,000 this year. Income taxes are postponed until the money is withdrawn from your account.

    If you choose a 401(k) plan that offers Roth accounts, you can make after-tax

    contributions instead of pre-tax contri- butions to your own account. Although after-tax contributions will not reduce your current income taxes, withdrawals from your Roth account in retirement are tax-free, as long as you follow the rules.

       Tax-deferred or tax-free growth potential. Your investment earnings are not taxed while they are in the retirement plan. Because they are not subject to tax each year, as they generally would be in a taxable account, your earnings have the potential to grow faster, resulting in a larger nest egg at retirement.

    Your investment earnings may even- tually be taxed, depending on your type of retirement account. Earnings in a tax- deferred account are subject to income tax when withdrawn from the account. Earnings in a Roth account can be with- drawn tax-free in retirement, provided the rules for Roth accounts are followed.

    3 Attract and Retain Better Employees Because many job applicants and em- ployees place a high value on access to an employer-sponsored retirement plan when considering whether to join or stay with a company, adding a retirement plan to the perks that your business offers can help attract qualified job applicants and minimize employee turnover.

    There is still time to set up a retirement plan for 2016, although you will need to act soon (generally by October 1, 2016) if you want to set up a SIMPLE IRA. Please ask your financial advisor about which plan is the best fit for you and your business. n

    THREE REASONS TO START A

    RETIREMENT PLAN FOR YOUR BUSINESS

    Retirement Plans for Small Businesses and

    Self-Employed Individuals

    SIMPLE IRA A good choice for businesses with

    fewer than 100 employees that want an easy-to-operate plan that their employees can contribute to,

    as well as their business.

    SEP-IRA Funded solely by employer

    contributions. This plan's high con- tribution limits help make it a good fit for owner-only businesses that

    want to make substantial contributions to their own

    retirement accounts.

    401(k) Plan A good choice for businesses that want to allow their employees to

    contribute, as well as their business to make matching or profit-sharing

    contributions. High contribution limits, vesting schedules, and a

    Roth option make 401(k) plans attractive.

    MyRA A "starter" retirement plan for

    businesses that want to make it easy for their low- and middle- income employees to begin to save for retirement without any

    cost to the business.

    © iStock.com/Jacob Ammentorp Lund

  • 4 FR2016-0527-0174/E

    I N V E S T I N G 1 0 1

    Test Your Insurance Knowledge Test your knowledge—and gain a greater understanding of how insurance can help protect your financial security,

    as well as the security of those people you love. Please consult your financial advisor for specific insurance advice.

    WHAT IS A BOND OR CD LADDER? A ladder is a strategy that staggers the maturity dates of individual bonds and certificates of deposits (CDs) in order to provide you with frequent access to portions of your principal and help you manage reinvestment risk.

    HOW DOES A LADDER TYPICALLY WORK? Let’s say you have $300,000 to invest in individual bonds. To build a bond ladder, you might invest $100,000 in bonds that mature in one year, $100,000 in bonds that mature in two years, and $100,000 in bonds that mature in three years. When the first group of bonds matures (group A in the illustration below), the proceeds are typically reinvested in bonds with the longest maturity, which in this example is three years. By following this pattern of reinvestment, a portion of your bonds will mature every year for as long as you continue to use the laddering strategy.

    WHAT ARE THE BENEFITS OF LADDERING YOUR INVESTMENTS? Laddering can help you take advantage of rising interest rates by providing you with access to a portion of your principal at regular intervals so that you have the opportunity to reinvest it in bonds or CDs paying higher rates.

    If interest rates decline, laddering can also help you manage reinvestment risk—the risk that comparable investments will be paying interest at a lower rate when your current investments mature. For example, if all of your bonds mature at the same time and rates decline, you’ll be faced with either accepting less in- come if you reinvest in comparable investments or shooting for equal or higher income by choosing riskier investments. If your investments mature at different times, however, those investments that are not currently maturing will continue to generate income at the same rate as before so that your overall income may not decrease as much. n

    PLEA