YOUR FINANCIAL FUTUREYour Guide to Life Planning

October 2016

Our roads to success mayhave twists and turns andups and downs; together wecan navigate a course andenjoy the scenery along theway.

Christian PhillipsPhillips FinancialLPL Registered Principal1920 Tienda Drive Suite 202Lodi, CA 95242209-367-0868Fax: 209-367-0811christian.phillips@lpl.comhttp://lpladvisorweb.com/PhillipsFinancial/

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In This Issue

Millennials: On Investing and RetirementThe generation of young Americans between the ages of 18 and 34 are now the largest, mostinfluential demographic group in the United States. Heres a glimpse into their financial world.

Identity Theft and TaxesIdentity theft is rampant in America. And tax-related identity crimes are among thefastest-growing offenses. Learn what the IRS is doing -- and steps you can take -- to help youstay protected.

Plan Ahead for Gift GivingPeople may think of holidays and birthdays as the major gift-giving occasions. But there areevents that occur throughout the year that call for the exchange or giving of gifts. Here are sometips to help you save and plan for the financial implications of gift giving.

Common Estate Planning Mistakes -- and How to AvoidThemEstate planning can be as simple as drafting a will -- or as complex as setting up specializedtrusts. When you are ready to create your own plan, it's wise to enlist the help of a qualified,experienced estate planning expert.

For Love or Money: Portrait of a Voluntary Long-TermCaregiverMillions of Americans provide hours of unpaid care to an aging or ailing loved one every week.Find out who these individuals are and what they are sacrificing.

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Of those who arecurrently saving forretirement, 69% doso through anemployer-sponsoredplan.

Millennials: On Investing and Retirement

 Move over Baby Boomers. These days all eyes are on Millennials, those young adults between the ages of 18and 34 who are now America's largest living generation. According to the U.S. Census Bureau, Millennials in1

the United States number more than 75 million -- and the group continues to expand as young immigrantsenter the country.1

Due to its size alone, this generation of consumers will undoubtedly have a significant impact on the U.S.economy. When it comes to investing, however, the story may be quite different. One new study found that59% of Millennials are uncomfortable about investing due to current economic conditions. Another study2

revealed that just one in three Millennials own stock, compared with nearly half of Generation-Xers and BabyBoomers.3

On the Retirement Front

How might this discomfort with investing manifest itself when it comes to saving for retirement -- a goal forwhich time is on Millennials' side? According to new research into the financial outlook and behaviors of thisdemographic group, 59% have started saving for retirement, yet nearly two-thirds (64%) of workingMillennials say they will not accumulate $1 million in their lifetime. Of this group, half have started saving forretirement -- 37% of which are putting away more than 5% of their income -- despite making a modest median$27,900 a year.2

As for the optimistic minority who do expect to save $1 million over time, they enjoy a median personal incomethat is about twice that -- $53,000 -- of the naysayers. Three out of four have started saving for retirement andtwo-thirds are deferring more than 5% of their income; 28% are saving more than 10%.2

So despite their protestations, their reluctance to embrace the investment world, and a challenging studentloan debt burden -- a median of $19,978 for the 34% who have student loan debt -- Millennials are stillcharting a slow and steady course toward funding their retirement.2

For the Record …

Here are some additional factoids about Millennials and retirement revealed by the research:

The vast majority (85%) of Millennials view saving for retirement as a key passage into becoming a"financial adult."

A similar percentage (82%) said that seeing people living out a comfortable retirement todayencourages them to want to save for their own retirement.

Those who have started saving for retirement said the ideal age to start saving is 23.

Those who are not yet saving for retirement say they will start by age 32.

Of those who are currently saving for retirement, 69% do so through an employer-sponsored plan.

Three out of four said they do not believe that Social Security will be there for them when they retire.

Most would like to retire at age 59.

 

Pew Research Center, April 25, 2016.1 "Millennials overtake Baby Boomers as America's largest generation,"

2Wells Fargo & Company, news release, "Wells Fargo Survey: Majority of Millennials Say They Won't Ever August 3, 2016.Accumulate $1 Million,"

3The Street.com, " ," July 10 2016.Only 1 in 3 Millennials Invest in the Stock Market

 

© 2016 Wealth Management Systems Inc. All rights reserved.

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Tax-related identitytheft occurs when athief uses your SocialSecurity number tofile a tax return andclaim a fraudulent taxrefund.

Identity Theft and Taxes

 Identity theft is one of the fastest growing crimes in America affecting millions of unsuspecting individualseach year. A dishonest person who has your Social Security number can use it to obtain tax and other financialand personal information about you.

Identity thieves can get your Social Security number by:

Stealing wallets, purses, and your mail.

Stealing personal information you provide to an unsecured website, from business or personnel recordsat work, and from your home.

Rummaging through your trash, the trash of businesses, and public trash dumps for personal data.

Posing by phone or email as someone who legitimately needs information about you, such as employersor landlords.

Tax-related identity theft occurs when a thief uses your Social Security number to file a tax return and claim afraudulent tax refund. In 2015 alone, the IRS stopped 1.4 million confirmed identity theft tax returns,protecting $8.7 billion in taxpayer refunds. The IRS has become increasingly diligent in its efforts to thwart1

identity theft with a program of prevention, detection, and victim assistance. The "Taxes. Security. Together." is aimed at building awareness among taxpayers about the need to protect personal data whenprogram

conducting business online and in the real world.

Stay Vigilant

By remaining vigilant and following a few commonsense guidelines, you can support the IRS in keeping yourpersonal information safe. Here are a few tips to consider:

Protect your information. Keep your Social Security card and any other documents that show yourSocial Security number in a safe place.

DO NOT routinely carry your Social Security card or other documents that display your number.

Monitor your email. Be on the lookout for phishing scams, particularly those that appear to come froma trusted source such as a credit card company, bank, retailer, or even the IRS. Many of these emailswill direct you to a phony website that will ask you to input sensitive data, such as your accountnumbers, passwords, and Social Security number.

Safeguard your computer. Make sure your computer is equipped with firewalls and up-to-dateanti-virus protections. Security software should always be turned on and set to update automatically.Encrypt sensitive files such as tax records you store on your computer. Use strong passwords andchange them routinely.

Be alert to suspicious phone calls. The IRS will never call you threatening a lawsuit or demanding animmediate payment for past due taxes. The normal mode of communication from the IRS is a lettersent via the U.S. postal service.

Be careful when banking or shopping online. Be sure to use websites that protect your financialinformation with encryption, particularly if you are using a public wireless network via a smartphone.Sites that are encrypted start with "https." The "s" stands for secure.

Google yourself. See what information is available about you online. Be sure to check other searchengines, such as Yahoo and Bing. This will help you identify potential theft sources and will also helpyou maintain your reputation.

Fear You Have Been Scammed?

If you feel you are the victim of tax-related identity theft - e.g., you cannot file your tax return because one wasalready filed using your Social Security number - there are several steps you should take.

File your taxes the old-fashioned way -- on paper via the U.S. postal service.

Print an from the IRS website and include it with your taxIRS Form 14039 Identity Theft Affidavitreturn.

File a consumer complaint with the .Federal Trade Commission (FTC)

Contact one of the three national credit reporting agencies -- Experian, Transunion, or Equifax and

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 request that a fraud alert be placed on your account.

If you have been confirmed as a tax-related identity theft victim, the IRS may issue you a special PIN that youwill use when e-filing your taxes. You will receive a new PIN each year.

For more information on tax-related identity theft visit the IRS website, which has a devoted tospecial sectionthe topic.

The Internal Revenue Service, IRS Summertime Tax Tip1 "How Identity Theft Can Affect Your Taxes,"2016-16, August 8, 2016.

© 2016 Wealth Management Systems Inc. All rights reserved.

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Whether you set up aformal gift accountand contribute to itregularly or juststash away a fewextra dollars hereand there, it's goodto accumulate cashthat is earmarked forgift giving.

Plan Ahead for Gift Giving

 Special occasions often call for gift giving: a graduation in May, a wedding in June, an anniversary in July, andbirthdays throughout the year. Each event seems to sneak up on us -- and our budgets. Retailers plan forholidays and seasonal sales, so why not do a little gift planning of your own?

Here are a few tips for your planning list:

Save now. Gift buying will seem more manageable if you've been saving for it a little at a time. Whetheryou set up a formal gift account and contribute to it regularly or just stash away a few extra dollars hereand there, it's good to accumulate cash that is earmarked for gift giving.

Put a cap on spending. Work out a gift-giving budget for the year that includes a comfortable spendinglimit as well as a detailed list of individual gifts with spending caps for each. Then stick to it.

Avoid credit traps. If you must charge your purchases, put them on your bank credit card. Departmentstore cards typically charge a much higher interest rate. And make sure you watch out for the "buy now,pay later" offers. Although tempting at the time, it is very easy to forget about a DVD recorder youbought in November if the first payment isn't due until March.

Two for one. When you find a great deal on something nice, buy two -- one for yourself and one to giveaway. Then, when a birthday or other unexpected event pops up and catches you by surprise, you'll beprepared with a gift. Importantly, you will have avoided the last-minute (and often expensive) rush tobuy something quickly.

Take advantage of post-holiday sales. In Canada, the United Kingdom, and other Commonwealthcountries they call it Boxing Day, but here it's just the day after Christmas. For those truly die-hardshoppers, it can be the best shopping day of the year. Stores slash already reduced prices even more tomake way for spring inventories.

Gift giving is one of the easiest ways to overspend. But if you do a little planning before you shop, you'llapproach each occasion with your budget and generosity intact.

Give the Gift That Lasts a Lifetime

If you'd like to give a child money but want to do something more lasting than writing a check, consider settingup a custodial account under either the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act(UGMA/UTMA) through a bank or investment company.

Custodial accounts can help finance a child's future and lessen the giver's tax burden. Here are a few detailsyou should be aware of.

The UGMA/UTMA Facts:

There are no income limits affecting eligibility to fund a custodial account.

You can gift away up to $14,000 per child, each year ($28,000 for married couples) to as manychildren as you like without owing gift taxes. Beyond those amounts, gifts may be subject to federal gifttaxes.

Gifts made to UGMA/UTMA accounts are considered irrevocable; once the child reaches legal age (18or 21, depending on the state), he or she gains full control over the assets.

Since custodial accounts belong to the child, account assets may decrease the amount of financial aid achild can receive.

Beware the "Kiddie Tax"

Tax rules affecting UTMA/UGMA accounts bear careful consideration. Under the so-called "Kiddie Tax" rules,a child's investment income over a certain level is taxed at his or her parents' rate rather than the child's lowerrate (typically 5% for most children). Prior to 2006, the Kiddie Tax rule applied only to children younger than14. But the age limit has risen twice in the past few years.

Now the Kiddie Tax includes dependents up to the age of 19 and those up to the age of 24 who are full-timestudents. Any investment income earned in excess of $2,000 will be taxed at the parents' higher tax rate.

This communication is not intended to be tax advice and should not be treated as such. Each individual's taxsituation is different. You should contact your tax professional to discuss your personal situation.

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 © 2016 Wealth Management Systems Inc. All rights reserved.

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 7   Your Guide to Life Planning

Whether drafting abasic will or craftingan elaborate strategyinvolving trusts andtax planning, anestate plan can helpreduce estate taxes,save on estateadministrative costs,and specify how yourassets are to bedistributed.

Common Estate Planning Mistakes -- and How to Avoid Them

 Estate planning can be a minefield of potential missteps, some of which could have far-reaching consequences.Many of the poor choices individuals make when planning for their own future or passing assets to theirfamilies are caused by "one-size-fits-all" planning strategies or well-intended advice from family or friends.Following are some common and potentially costly mistakes along with suggestions for avoiding them.

Failing to plan. Whether drafting a basic will or crafting an elaborate strategy involving trusts and taxplanning, an estate plan can help reduce estate taxes, save on estate administrative costs and specify how yourassets are to be distributed. Today, the majority of Americans have no will. If you die without one, your estatewill be divided according to the intestacy laws of your state -- not according to your wishes. This could createproblems if your intended beneficiary is a minor child, a child with special needs, a favorite charity, or acombination of the above. In these cases, you need a will that details each contingency and a trust or multipletrusts to accomplish your goals.

Not maximizing your marital estate exemptions. Perhaps one of the most important pieces of taxlegislation passed recently is referred to as the "portability" provision. This means that if one spouse dieswithout using up his or her federal estate tax exemption -- $5.43 million in 2015 -- the unused portion may betransferred to the surviving spouse without incurring any federal estate tax.

How might the portability provision work in a real life situation? Consider the following scenario involving thehypothetical $8 million estate of Jim and Helen:

If Jim dies in 2015, the executor of his estate can elect to use the unlimited spousal exemption and can alsotransfer Jim's unused $5.43 million federal estate tax exemption to Helen. If Helen dies in 2015 with $8million in assets, her estate will have a total of $10.86 million in federal estate-tax exemptions: the $5.43million exclusion transferred from Jim and her own $5.43 million exclusion. As a result, none of Jim andHelen's $8 million estate would be subject to federal estate tax.

As welcome as the portability provision may be, it still does not account for future appreciation of assets fromthe first spouse's estate. Nor does portability offer protection from creditors and others aiming to lay claim onan estate's assets. Traditional strategies like credit shelter trusts and bypass trusts do provide these benefitsand therefore are still essential planning instruments for married couples.

Naming a family member as executor. Your executor is the person who will be responsible foradministering your estate after death. The responsibilities of an executor are serious, and you will wantsomeone who will take them seriously. There are many important reasons to choose a paid executor -- a bankor trust company, for instance -- along with (or instead of) a spouse or family member. A professional executoris familiar with the probate process and may actually save the family money, keeping expenses under control.This will undoubtedly be an emotional time for your loved ones, and a family member may find it difficult tofocus on the details involved with settling an estate. In addition, when you name a family member, especially abeneficiary as executor, you introduce the potential for conflict of interest. The larger the estate, the morelikely those conflicts become.

Relying on advice from family or friends. Would you go to a friend or relative for surgery or to fix yourcar if he or she was not a skilled surgeon or auto mechanic? Why would you take their advice about estateplanning issues if they are not professional planners? When seeking a professional, look for a specialist --someone who knows trusts, estate tax law, and probate issues. A specialist will have more experience and skillin his/her chosen area -- and that will translate into higher quality services provided in the most cost effectivemanner.

No set of rules or advice can apply in all cases, but a sure way to avoid these and other problems is to rely on atrusted team of tax and legal professionals led by your financial advisor.

This communication is not intended to be tax and/or legal advice and should not be treated as such. Eachindividual's situation is different. You should contact your tax/legal professional to discuss your personalsituation.

© 2016 Wealth Management Systems Inc. All rights reserved.

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Who are these peoplewho sacrifice timeand careers to carefor loved ones?Here's a profile.

For Love or Money: Portrait of a Voluntary Long-Term Caregiver

 It is a story that doesn't grab many headlines, but its stealthy impact is growing at an alarming rate. Today,some 65 million Americans -- 29% of the U.S. population -- provide at least 20 hours per week of unpaid carefor a chronically ill, disabled, or aged family member or friend. According to statistics compiled by the1

Caregiver Action Network, the value of the services family caregivers provide for free is estimated to be $375billion a year. That is almost twice as much as is actually spent on homecare and nursing home servicescombined ($158 billion).

While voluntary caregiving is an activity that impacts both men and women -- it is estimated that 66% of adultwomen and 34% of adult men provide unpaid care for a friend or family member -- a profile of the averagecaregiver suggests she is a 49-year-old woman caring for her widowed mother.1

The Financial Fallout

Family caregiving can interfere with individuals' careers and put them at financial risk. According to AARP,family caregivers who are at least 50 years old and leave the workforce to care for a parent forgo, on average,$304,000 in lost salary and benefits over their lifetime. These estimates range from $283,716 for men to$324,044 for women. Evidence suggests, however, that due to the higher amount of lost income and their2

tendency to assume the role of caregiver in midlife, women caregivers face a substantially higher risk of livingin poverty in their elder years than do men. The cost of caregiving effects employers as well. Data shows thatU.S. businesses lose more than $33 billion annually in productivity losses and worker absences. Broken downon a per-worker basis, the annual cost to employers per full-time employee amounts to $2,110.3

Completing the Portrait

The following statistics compiled by help to round out the portrait of today's long-termPBS NewsHourcaregiver in America.

Gender:

Female -- 66%

Male -- 34%

Work accommodations: Percent who have:

Arrived late, left early, or taken time off -- 64%

Taken a leave of absence -- 17%

Quit or taken early retirement -- 10%

Turned down a promotion -- 5%

Any of the above -- 68%

Relationship to individual cared for:

Parent/in-law -- 72%

Grandparent -- 7%

Spouse -- 5%

Sibling -- 3%

Aunt/uncle -- 2%

Other family -- 5%

Non-family -- 6%

Percent who've used all or most of their own savings to provide care -- 47%

Among ALL U.S. workers, percent who:

Expect to provide elder care in next five years -- 49%

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 Have provided care for an aging relative or friend in past five years -- 42%

If you are currently a caregiver or expect to be one in the not-too-distant future and would like to learn more,the following resources offer good starting points:

The Family Caregiver Alliance, National Center on CaregivingNational Alliance for CaregivingCaregiver Action Network

 

 

, "Value of voluntary long term care for family reaches staggering amounts," April 8, 2014.1PBS News Hour

2AARP: Understanding the Impact of Family Caregiving on Work, Fact Sheet 271, October, 2012 and MetLifeMature Market Institute, "The MetLife Study of Caregiving: Costs to Work Caregivers: Double Jeopardy forBaby Boomers Caring For Their Parents," 2011.

3AARP: Understanding the Impact of Family Caregiving on Work, Fact Sheet 271, October, 2012 and MetLifeMature Market Institute and National Alliance for Caregiving (NAC), MetLife Caregiving Study: "ProductivityLosses to U.S. Business," 2006.

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The opinions voiced in this material are for general information only and are not intended to provide specificadvice or recommendations for any individual. To determine which investment(s) may be appropriate foryou, consult your financial advisor prior to investing. All performance referenced is historical and is noguarantee of future results. All indices are unmanaged and cannot be invested into directly.

 

The financial consultants of Phillips Financial are registered representatives with and Securities are offeredthrough LPL Financial. Member FINRA/SIPC. Insurance products offered through LPL Financial or itslicensed affiliates.

 

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