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What is a rollover IRA, and do I need one?

What is a rollover IRA, and do I need one?

Generally, the term “rollover IRA” refers to an IRA that you establish to receive funds from an employer retirement plan like a 401(k). A rollover IRA is also sometimes referred to as a “conduit IRA.”

When you roll funds over from an employer plan to an IRA, your financial institution may suggest that you use a rollover IRA to receive the funds. Of course, you can transfer those dollars to any other IRA you own at some future date, because there’s no legal requirement that you keep your plan distribution in a separate IRA. But even though separate IRAs are not legally required, there are at least two reasons to consider keeping your employer plan rollover separate from your contributory IRAs.

The first reason to maintain a separate rollover IRA deals with federal bankruptcy law. Your IRAs are protected from your creditors under federal law if you declare bankruptcy, but this protection is currently limited to $1.28 million for all your IRAs. (1) The $1.28 million limit doesn’t apply, though, to amounts you roll over to an IRA from an employer plan, or any earnings on that rollover. These dollars are protected in full if you declare bankruptcy, just as they would have been in your employer’s plan. Obviously, it’s easier to track the amount rolled over, and any future earnings, if you keep those dollars separate from your contributory IRAs. So a rollover IRA may make sense if creditor protection is important to you.

The second reason to maintain a rollover IRA is that you might decide in the future that you want to roll your distribution back into a new employer’s plan. In the distant past, employer plans could accept rollovers only from rollover (conduit) IRAs — rollovers from contributory IRAs weren’t permitted. Now, however, employer plans can accept rollovers from both contributory IRAs and rollover IRAs. (2) Despite this, employer plans aren’t required to accept rollovers, and they can limit the types of contributions they’ll accept. And while it’s becoming less common, some still accept rollovers only from rollover IRAs. So keep this in mind if you are contemplating a rollover back to an employer plan in the future.

(1) SEP and SIMPLE IRAs have unlimited protection under federal bankruptcy law.

(2) Nontaxable traditional IRA dollars can’t be rolled back into an employer plan.

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. and Allegis do not provide tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017


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The Health-Wealth Connection

The Health-Wealth Connection

It’s a vicious cycle: Money is one of the greatest causes of stress, prolonged stress can lead to serious health issues, and health issues often result in yet more financial struggles.¹ The clear connection between health and wealth is why it’s so important to develop and maintain lifelong plans to manage both.

The big picture

Consider the following statistics:

1. More than 20% of Americans say they have either considered skipping or skipped going to the doctor due to financial worries. (American Psychological Association, 2015)

2. More than half of retirees who retired earlier than planned did so because of their own health issues or to care for a family member. (Employee Benefit Research Institute, 2017)

3. Chronic diseases such as heart disease, type 2 diabetes, obesity, and arthritis are among the most common, costly, and preventable of all health problems. (Centers for Disease Control and Prevention, 2017)

4. Chronic conditions make you more likely to need long-term care, which can cost anywhere from $21 per hour for a home health aide to more than $6,000 a month for a nursing home. (Department of Health and Human Services, 2017)

5. A 65-year-old married couple on Medicare with median prescription drug costs would need about $265,000 to have a 90% chance of covering their medical expenses in retirement. (Employee Benefit Research Institute, 2017)

Develop a plan for long-term health ...

The recommendations for living a healthy lifestyle are fairly straightforward: eat right, exercise regularly, don’t smoke or engage in other risky behaviors, limit soda and alcohol consumption, get enough sleep (at least seven hours for most adults), and manage stress. And before embarking on any new health-related endeavor, talk to your doctor, especially if you haven’t received a physical exam within the past year. Your doctor will benchmark important information such as your current weight and risk factors for developing chronic disease. Come to the appointment prepared to share your family’s medical history, be honest about your daily habits, and set goals with your doctor.

Other specific tips from the Department of Health and Human Services include:

Nutrition: Current nutritional guidelines call for eating a variety of vegetables and whole fruits; whole grains; low-fat dairy; a wide variety of protein sources including lean meats, fish, eggs, legumes, and nuts; and healthy oils. Some medical professionals are hailing the long-term benefits of the so-called “Mediterranean diet.” Details for a basic healthy diet and the Mediterranean diet can be found at health. gov/dietaryguidelines.

Exercise: Any physical activity is better than none. Inactive adults can achieve some health benefits from as little as 60 minutes of moderate-intensity aerobic activity per week. However, the ideal target is at least 150 minutes of moderate-intensity or 75 minutes of high-intensity workouts per week. For more information, visit health.gov/paguidelines.

... and long-term wealth

The recommendations for living a financially healthy life aren’t quite as straightforward because they depend so much on your individual circumstances. But there are a few basic principles to ponder:

Emergency savings: The amount you need can vary depending on whether you’re single or married, self-employed or work for an organization (and if that organization is a risky startup or an established entity). Typical recommendations range from three months’ to a year’s worth of expenses.

Retirement savings: Personal finance commentator Jean Chatzky advocates striving to save 15% of your income toward retirement, including any employer contributions. If this seems like a lofty goal, bear in mind that as with exercise, any activity is better than none — setting aside even a few dollars per pay period can lead to good financial habits. Consider starting small and then increasing your contributions as your financial circumstances improve.

Insurance: Make sure you have adequate amounts of health and disability income insurance, and life insurance if others depend on your income. You might also consider long-term care coverage.²

Health savings accounts: These tax-advantaged accounts are designed to help those with high-deductible health plans set aside money specifically for medical expenses. If you have access to an HSA at work, consider the potential benefits of using it to help save for health expenses.

¹ American Psychological Association, February 4, 2015; The Telomere Effect: A Revolutionary Approach to Living Younger, Healthier, Longer, by Blackburn and Epel; and Ageproof: Living Longer Without Running Out of Money or Breaking a Hip, by Chatzky and Roizen

² The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. A complete statement of coverage, including exclusions, exceptions, and limitations, is found only in the policy. It should be noted that long-term care carriers have the discretion to raise their rates and remove their products from the marketplace.

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. and Allegis do not provide tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017



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Future of the Federal Estate Tax

Future of the Federal Estate Tax

While no one can predict the future, the possibility of tax reform is once again in the spotlight. If it occurs, it may very well include repeal of the federal estate tax and related changes to the federal gift tax, the federal generation-skipping transfer (GST) tax, and the federal income tax basis rules.

History of the federal estate tax

In general, an estate tax is a tax on property a person owns at death. In one form or another, a federal estate tax has been enacted or repealed a number of times since 1797 (1). 


*For 2010, the estate tax was repealed, but later retroactive legislation provided that an estate could elect to be subject to estate tax in return for a stepped-up (or stepped-down) income tax basis for most property. The estate tax was extended in 2011, with some changes.

The estate tax has undergone many changes over the years, including the addition of a federal gift tax and a federal GST tax during modern times. A gift tax is a tax on gifts a person makes while alive. A GST tax is a tax on transfers to persons who are two or more generations younger than the transferor. In recent years, property owned at death has generally received an income tax basis stepped up (or down) to fair market value at death.

During the 2000s, the estate, gift, and GST tax rates were substantially reduced, and the gift and estate tax lifetime exclusion and the GST tax exemption were substantially increased. The estate tax and the GST tax, but not the gift tax, were scheduled for repeal in 2010 (although certain sunset provisions would bring them back unless Congress acted), but legislation extended the estate tax and the GST tax in 2011. (For 2010, the estate tax ended up being optional and the GST tax rate was 0%.) The gift and estate tax lifetime exclusion and the GST tax exemption were increased to $5,000,000 and indexed for inflation in later years. For 2013, the top estate, gift, and GST tax rate was increased to 40%, and the extension and modifications were made “permanent.”


Federal estate tax

Repeal of the estate tax seems possible once again. If repeal occurs, it could be immediate or gradual as during the 2000s. Would it be subject to a sunset provision, so that the estate tax would return at a later time? All of this may depend on congressional rules on the legislative process, other legislative priorities, and the effect the legislation would have on the budget and the national debt.

Federal gift tax

If the estate tax is repealed, the gift tax may also be repealed. However, it is possible that the gift tax would be retained as a backstop to the income tax (as in 2010). To some extent, the gift tax reduces the ability of individuals to transfer property back and forth in order to reduce or avoid income taxes.

Federal GST tax

If the estate tax is repealed, the GST tax would probably be repealed (as in 2010). If the gift tax is not repealed, it is possible that the lifetime GST tax provisions would be retained, but the GST tax provisions at death repealed.

Federal income tax basis

If the estate tax is repealed, it is possible that the general income tax basis step-up (or step-down) to fair market value at death would be changed to a carryover basis (i.e., the decedent’s basis before death carries over to the person who inherits the property). In 2010, a modified carryover basis (a limited amount of property could receive a stepped-up basis) applied unless the estate elected to be subject to estate tax. It is also possible that a Canadian-style capital gain tax at death could be adopted in return for a stepped-up basis for the property.

(1) 2015 Field Guide to Estate Planning, Business Planning & Employee Benefits

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. and Allegis do not provide tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017



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Don’t Let Rising Interest Rates Catch You by Surprise

Don’t Let Rising Interest Rates Catch You by Surprise

You’ve probably heard the news that the Federal Reserve has been raising its benchmark federal funds rate. The Fed doesn’t directly control consumer interest rates, but changes to the federal funds rate (which is the rate banks use to lend funds to each other overnight within the Federal Reserve system) often affect consumer borrowing costs.

 Forms of consumer credit that charge variable interest rates are especially vulnerable, including adjustable rate mortgages (ARMs), most credit cards, and certain private student loans. Variable interest rates are often tied to a benchmark (an index) such as the U.S. prime rate or the London Interbank Offered Rate (LIBOR), which typically goes up when the federal funds rate increases.

Although nothing is certain, the Fed expects to raise the federal funds rate by small increments over the next several years. However, you still have time to act before any interest rate hikes significantly affect your finances.

Adjustable rate mortgages (ARMs)

If you have an ARM, your interest rate and monthly payment may adjust at certain intervals. For example, if you have a 5/1 ARM, your initial interest rate is fixed for five years, but then can change every year if the underlying index goes up or down. Your loan documents will spell out which index your ARM tracks, the date your interest rate and payment may adjust, and by how much. ARM rates and payments have caps that limit the amount by which interest rates and payments can change over time. Refinancing into a fixed rate mortgage could be an option if you’re concerned about steadily climbing interest rates, but this may not be cost-effective if you plan to sell your home before the interest rate adjusts.

Credit cards

It’s always a good idea to keep credit card debt in check, but it’s especially important when interest rates are trending upward. Many credit cards have variable annual percentage rates (APRs) that are tied to an index (typically the prime rate). When the prime rate goes up, the card’s APR will also increase.

Check your credit card statement to see what APR you’re currently paying. If you’re carrying a balance, how much is your monthly finance charge?

Your credit card issuer must give you written notice at least 45 days in advance of any rate change, so you have a little time to reduce or pay off your balance. If it’s not possible to pay off your credit card debt quickly, you may want to look for alternatives. One option is to transfer your balance to a card that offers a 0% promotional rate for a set period of time (such as 18 months). But watch out for transaction fees, and find out what APR applies after the promotional rate term expires, in case a balance remains.

Variable rate student loans

Interest rates on federal student loans are always fixed (and so is the monthly payment). But if you have a variable rate student loan from a private lender, the size of your monthly payment may increase as the federal funds rate rises, potentially putting a dent in your budget. Variable student loan interest rates are generally pegged to the prime rate or the LIBOR. Because repayment occurs over a number of years, multiple rate hikes for variable rate loans could significantly affect the amount you’ll need to repay. Review your loan documents to find out how the interest rate is calculated, how often your payment might adjust, and whether the interest rate is capped.

Because interest rates are generally lower for variable rate loans, your monthly payment may be manageable, and you may be able to handle fluctuations. However, if your repayment term is long and you want to lock in your payment, you may consider refinancing into a fixed rate loan. Make sure to carefully compare the costs and benefits of each option before refinancing.

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. and Allegis do not provide tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017

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2nd Quarter Recap: April-June 2017

2nd Quarter Recap: April-June 2017

The Markets (as of market close June 30, 2017)

The second quarter proved to be a bit bumpy for equities, but each of the benchmarks listed here closed the quarter ahead of their first-quarter closing values. April saw equities close the month ahead of March, buoyed by favorable corporate earnings reports, proposed tax cuts, and strong foreign economic advances. Nasdaq led the way posting monthly gains of 2.30%, followed by the Global Dow, which gained almost 1.50%. The large-cap Dow advanced 1.34%, ahead of the S&P 500, which increased close to 1.00% for the month. Even the small-cap Russell 2000, which has had some rough weeks, closed April 1.05% ahead of its March close.

May was a slower month as consumer spending and wage growth were relatively weak, with only 138,000 new jobs were added in May, compared with an average monthly gain of 181,000 over the prior 12 months. Nevertheless, only the Russell 2000 lost value, falling 2.16% from its April closing mark. Nasdaq continued to surge, ending May with a monthly gain of 2.50%.

June saw mixed results for the indexes listed here. The Nasdaq lost almost 1.00%, while the Russell 2000 made up for its May losses, advancing almost 4.00% over May. The Dow had a strong June, closing the month up 1.62%, while the S&P 500 and the Global Dow failed to advance 0.50% over May. Long-term bond prices increased in the second quarter with the yield on 10-year Treasuries falling 8 basis points. The price of gold fell during the second quarter, closing June at $1,241.40, down from its $1,251.60 closing price at the end of the first quarter.


Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments..

Monthly Economic News

Employment: May’s employment report showed unexpected weakness in the labor sector with 138,000 new jobs added in the month, on the heels of 174,000 new jobs added in April, revised. April and March were downwardly revised a combined 66,000, which, when coupled with the average gain of 181,000 over the prior 12 months, clearly shows that job growth is slowing. For May, job gains occurred in health care, mining, and professional and business services. The unemployment rate dipped to 4.3% — down from 4.4% in April. There were 6.9 million unemployed persons in May. The labor participation rate inched down 0.2 percentage point to 62.7%. The average workweek was unchanged at 34.4 hours. Average hourly earnings increased by $0.04 to $26.22. Over the last 12 months ended in May, average hourly earnings have risen by $0.63, or 2.5%.

FOMC/interest rates: Following its meeting in June, the Federal Open Market Committee raised the target range for the federal funds rate by 25 basis points to 1.00%-1.25%. This is the second interest rate hike in 2017, with the first coming in March. In support of its decision to raise interest rates, the Committee observed that economic activity has been rising moderately so far in 2017, business spending has continued to expand, and, while job gains have moderated, the unemployment rate has declined. Noting that inflation has slowed in the short term, the Committee expects inflation to stabilize around 2.0% over the medium term.

Oil: The price of crude oil (WTI) closed June at $46.33 per barrel, down from its end of May value of $48.63. The national average retail regular gasoline price was $2.288 per gallon on June 26, 2017, $0.118 lower than the May 29 price but $0.145 more than a year ago.

GDP/budget: Expansion of the U.S. economy slowed over the first three months of 2017. According to the Bureau of Economic Analysis, the first-quarter 2017 gross domestic product grew at an annualized rate of 1.4% compared to the fourth-quarter GDP, which grew at an annualized rate of 2.1%. Growth in the GDP was slowed by downturns in private inventory investment, a deceleration in consumer spending, and a slowing in state and local government spending that were partly offset by an upturn in exports, an acceleration in nonresidential (commercial and business) fixed investment, and a deceleration in imports. As to the government’s budget, the federal deficit for May was $88.4 billion. Through the first eight months of the fiscal year, the deficit sits at $432.9 billion, which is more than $27 billion above the deficit over the same period last year.

Inflation/consumer spending: Inflationary growth is slowing. Consumer spending, as measured by personal consumption expenditures, expanded at a rate of 0.1% in May. In contrast, PCE climbed 0.4% in both April and March. Core PCE (excluding energy and food) inched ahead 0.1% for the month. Personal income (pre-tax earnings) rose 0.4% for the month, and disposable personal income (income less taxes) enjoyed a 0.5% increase over April. However, wages and salaries moved very little in May, inching up 0.1%. Year-on-year, both the PCE price index and core prices have increased 1.4%.

The prices companies receive for goods and services were unchanged in May from April, according to the Producer Price Index. Year-over-year, producer prices have increased 2.4%. Energy prices, which fell 3.0% for the month, have played a large part in the lack of movement of the PPI. Prices less food and energy climbed 0.3% in May over April. The PPI less food and energy has risen 2.1% since last May.

Consumer prices fell 0.1% in May following a 0.2% increase in April. For the 12 months ended in May, consumer prices are up 1.9% for the year, a mark that remains below the Fed’s 2.0% target for inflation. Even the core rate, which excludes food and energy, climbed 0.1% in May and is up 1.7% year-over-year.

Housing: Sales of new and existing homes, which had slowed during the first quarter of the year, may have picked up the pace in May. Generally, a lack of available homes for sale is driving home prices higher. The median price for existing homes reached its highest recorded level, coming in at $252,800 — 5.8% higher than the price last May. Sales of existing homes climbed 1.1% in May to a seasonally adjusted annual rate of 5.62 million from a downwardly revised 5.56 million in April. May’s sales pace is 2.7% above a year ago and is the third highest over the past year. The Census Bureau’s latest report reveals sales of new single-family homes increased 2.9% in May to an annual rate of 610,000 — up from April’s rate of 593,000. The median sales price of new houses sold in May was $345,800. The average sales price was $406,400. The seasonally adjusted estimate of new houses for sale at the end of May was 268,000. This represents a supply of 5.3 months at the current sales rate, which is essentially unchanged from April.

Manufacturing: One of the reasons the Fed raised interest rates in June was due to expansion in business fixed investment. However, manufacturing did not expand in May according to the Federal Reserve’s monthly index of industrial production (which includes factories, mines, and utilities). Manufacturing output declined 0.4% in May following an April increase of 1.1%. Overall, industrial production was unchanged in May, as declines in manufacturing were offset by gains in mining (1.6%) and utilities (0.4%). Total industrial production in May was 2.2% above its year-earlier level. Capacity utilization for the industrial sector edged down 0.1 percentage point in May to 76.6%, a rate that is 3.3 percentage points below its long-run average. As for durable goods, May’s report from the Census Bureau shows new orders decreased $2.5 billion, or 1.7%, from the prior month. Excluding the volatile transportation segment, new durable goods orders increased 0.1%. Orders for core capital goods (excluding defense and transportation) dropped 0.2% in May, but are up 5.0% over May 2016.

Imports and exports: The advance report on international trade in goods revealed that the trade gap narrowed by 1.8% in May. The overall trade deficit was $65.9 billion in May, down $1.2 billion from April. Exports increased 0.4% to $127.1 billion, $0.4 billion more than April exports. Imports fell 0.4% to $193.0 billion, $0.8 billion less than April imports. Both import and export prices fell in May. Import prices fell 0.3%, led by a sharp 3.9% fall in petroleum imports. This was the largest monthly drop since import prices fell 0.5% in February 2016. U.S. export prices declined 0.7% in May, after advancing 0.2% the prior two months. The May decrease was the first monthly drop since August 2016 when the export prices fell 0.8%.

International markets: Major elections during the month were held in France (Emmanuel Macron and his party were elected) and the UK (Theresa May was reelected, but her Conservative Party lost parliamentary seats). Brexit negotiations began during the third week of June, although European markets had little reaction. Japan’s economic growth slowed in the first quarter on the heels of weaker consumer spending, softening what had been the country’s longest run of economic expansion since 2006. China has attempted to expand its financial markets and entice more foreign capital, which may help drive that country’s GDP and stock markets.

Consumer sentiment: The Conference Board Consumer Confidence Index® for June rose 1.3 points to 118.9. Consumers expressed confidence in current economic conditions, but were somewhat reticent about their expectations for future economic growth. The Index of Consumer Sentiment from The Surveys of Consumers of the University of Michigan dipped from 97.1 in May to 95.1 in June. Keeping in line with The Conference Board’s report, consumers indicated current economic conditions were favorable, but respondents were less certain about future expectations.

Eye on the Month Ahead

There are many economic indicators that could improve in July and for the remainder of the year. The stock market generally have been steady through the first half of 2017, despite domestic and global turmoil. Oil prices continue to tumble, driving down energy prices and inflation. The housing market, which had stalled after a strong 2016, may be gaining steam, at least as to increasing home prices. The FOMC meets again in July following this year’s second interest rate hike in June. If inflation and economic growth continue to show signs of slowing, it is likely the Fed will wait until it meets again in September to consider another rate increase.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/ Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.
IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. and Allegis do not provide tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017

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Student Loan Debt: It Isn’t Just for Millennials

Student Loan Debt: It Isn’t Just for Millennials

It’s no secret that today’s college graduates face record amounts of debt. Approximately 68% of the graduating class of 2015 had student loan debt, with an average debt of $30,100 per borrower — a 4% increase from 2014 graduates.1

A student loan debt clock at finaid.org estimates current outstanding student loan debt — including both federal and private student loans — at over $1.4 trillion. But it’s not just millennials who are racking up this debt. According to the Consumer Financial Protection Bureau (CFPB), although most student loan borrowers are young adults between the ages of 18 and 39, consumers age 60 and older are the fastest-growing segment of the student loan market.2

Rise of student debt among older Americans

Between 2005 and 2015, the number of individuals age 60 and older with student loan debt quadrupled from about 700,000 to 2.8 million. The average amount of student loan debt owed by these older borrowers also increased from $12,100 to $23,500 over this period.3

The reason for this trend is twofold: Borrowers are carrying their own student loan debt later in life (27% of cases), and they are taking out loans to finance their children’s and grandchildren’s college education (73% of cases), either directly or by co-signing a loan with the student as the primary borrower.4 Under the federal government’s Direct Stafford Loan program, the maximum amount that undergraduate students can borrow over four years is $27,000 — an amount that is often inadequate to meet the full cost of college. This limit causes many parents to turn to private student loans, which generally require a co-signer or co-borrower, who is then held responsible for repaying the loan along with the student, who is the primary borrower. The CFPB estimates that 57% of all individuals who are co-signers are age 55 and older.5

What’s at stake

The increasing student loan debt burden of older Americans has serious implications for their financial security. In 2015, 37% of federal student loan borrowers age 65 and older were in default on their loans..6 Unfortunately for these individuals, federal student loans generally cannot be discharged in bankruptcy, and Uncle Sam can and will get its money — the government is authorized to withhold a portion of a borrower’s tax refund or Social Security benefits to collect on the debt. (By contrast, private student loan lenders cannot intercept tax refunds or Social Security benefits to collect any amounts owed to them.)

The CFPB also found that older Americans with student loans (federal or private) have saved less for retirement and often forgo necessary medical care at a higher rate than individuals without student loans..7 It all adds up to a tough situation for older Americans, whose income stream is typically ramping down, not up, unlike their younger counterparts.

Think before you borrow

Since the majority of older Americans are incurring student loan debt to finance a child’s or grandchild’s college education, how much is too much to borrow? It’s different for every family, but one general guideline is that a student’s overall debt shouldn’t be more than his or her projected annual starting salary, which in turn often depends on the student’s major and job prospects. But this is just a guideline. Many variables can impact a borrower’s ability to pay back loans, and many families have been burned by borrowing amounts that may have seemed reasonable at first glance but now, in reality, are not.

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

If the numbers don’t add up, students can reduce the cost of college by choosing a less expensive school, living at home or becoming a resident 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

.2-7Consumer Financial Protection Bureau, Snapshot of Older Consumers and Student Loan Debt, January 2017

.8 Journal of Financial Planning, September 2016

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. and Allegis do not provide tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017


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Four Numbers You Need to Know Now

Four Numbers You Need to Know Now

When it comes to your finances, you might easily overlook some of the numbers that really count. Here are four to pay attention to now that might really matter in the future.

1. Retirement plan contribution rate
What percentage of your salary are you contributing to a retirement plan? Making automatic contributions through an employer-sponsored plan such as a 401(k) or 403(b) plan is an easy way to save for retirement, but this out-of-sight, out-of-mind approach may result in a disparity between what you need to save and what you actually are saving for retirement. Checking your contribution rate and increasing it periodically can help you stay on track toward your retirement savings goal. .

Some employer retirement plans let you sign up for automatic contribution rate increases each year, which is a simple way to bump up the percentage you’re saving over time. In addition, try to boost your contributions when you receive a pay raise. Consider contributing at least enough to receive the full company match (if any) that your employer offers.

2. Credit score
When you apply for credit, such as a mortgage, a car loan, or a credit card, your credit score is one of the tools used by lenders to evaluate your creditworthiness. Your score will likely factor into the approval decision and affect the terms and the interest rate you’ll pay.

The most common credit score that creditors consider is a FICO© Score, a three-digit number that ranges from 300 to 850. This score is based on a mathematical formula that uses information contained in your credit report. In general, the higher your score, the lower the credit risk you pose.

Each of the three major credit reporting agencies (Equifax, Experian, and TransUnion) calculates FICO® scores using different formulas, so you may want to check your scores from all three (fees apply). It’s also a good idea to get a copy of your credit report at least annually to check the accuracy of the information upon which your credit score is based. You’re entitled to one free copy of your credit report every 12 months from each of the three credit reporting agencies. You can get your copy by visiting annualcreditreport.com.

3. Debt-to-income ratio
Your debt-to-income ratio (DTI) is another number that lenders may use when deciding whether to offer you credit. A DTI that is too high might mean that you are overextended. Your DTI is calculated by adding up your major monthly expenses and dividing that figure by your gross monthly income. The result is expressed as a percentage. For example, if your monthly expenses total $2,200 and your gross monthly income is $6,800, your DTI is 32%.

Lenders decide what DTIs are acceptable, based on the type of credit. For example, mortgage lenders generally require a ratio of 36% or less for conventional mortgages and 43% or less for FHA mortgages when considering overall expenses.

Once you know your DTI, you can take steps to reduce it if necessary. For example, you may be able to pay off a low-balance loan to remove it from the calculation. You may also want to avoid taking on new debt that might negatively affect your DTI. Check with your lender if you have any questions about acceptable DTIs or what expenses are included in the calculation.

4. Net worth
One of the key big-picture numbers you should know is your net worth, a snapshot of where you stand financially. To calculate your net worth, add up your assets (what you own) and subtract your liabilities (what you owe). Once you know your net worth, you can use it as a baseline to measure financial progress.

Ideally, your net worth will grow over time as you save more and pay down debt, at least until retirement. If your net worth is stagnant or even declining, then it might be time to make some adjustments to target your financial goals, such as trimming expenses or rethinking your investment strategy.

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. and Allegis do not provide tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017

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Allegis Market Month: May 2017

Allegis Market Month: May 2017

Download this recap as a pdf here

The Markets (as of market close May 31, 2017)

May provided a bumpy ride for investors. However, by the end of the month, each of the indexes listed here posted monthly gains with the exception of the Russell 2000, which lost over 2.0%. Technology shares continued to climb as the Nasdaq climbed 2.50% in May over April and has risen over 15% since the start of the year. Despite terrorist attacks, mundane oil prices, a rocky first quarter in Washington, and a slowdown in economic growth, U.S. stocks closed the month in positive territory, spurred by generally favorable quarterly corporate earnings reports. May saw the Dow and S&P 500 post monthly gains for the second consecutive month, while the Nasdaq increased in value for the seventh month in a row. Long-term bond prices rose in May over April, evidenced by the falling yield on 10-year Treasuries.

By the close of trading on May 31, the price of crude oil (WTI) was $48.63 per barrel, down from the April 28 price of $49.19 per barrel. The national average retail regular gasoline price was $2.406 per gallon on the last day of May, down from the May 1 selling price of $2.411 but $0.138 more than a year ago. The price of gold increased by the end of May, closing at $1,271.40 on the last trading day of the month, up from its April 28 price of $1,269.50.


Last Month’s Economic News

Employment: The employment sector picked up the pace in April following a weak March. There were 211,000 new hires in April in contrast to March’s revised total of only 79,000. For April, employment growth occurred in leisure and hospitality (+55,000), food services and drinking places (+26,000), health care and social assistance (+37,000), and professional and business services (+39,000). The unemployment rate dipped to 4.4% — the lowest rate since May 2001. Over the year, the unemployment rate has declined by 0.6 percentage point, and the number of unemployed has fallen by 854,000. There were 7.056 million unemployed persons in April (7.202 million in March). The labor participation rate remained at 62.9%. The average workweek was 34.4 hours in April. Average hourly earnings increased by $0.07 to $26.19, following a $0.05 increase in March. Over the last 12 months ended in April, average hourly earnings have risen by $0.65, or 2.5%.

FOMC/interest rates: The Federal Open Market Committee conceded that consumer spending may have slowed in the first quarter, prompting the Committee to leave interest rates unchanged at 0.75%-1.00%. However, labor has remained strong, nearing full employment, while a dip in consumer spending and consumer prices was deemed transitory by the Committee. Continued strength in employment and increases in consumer spending and inflation next month may prompt the FOMC to consider a rate increase when it next meets in June.

GDP/budget: Expansion of the U.S. economy slowed over the first three months of 2017. According to the Bureau of Economic Analysis, the first-quarter 2017 gross domestic product grew at an annualized rate of 1.2%. The fourth-quarter 2016 GDP grew at an annual rate of 2.1%. The first-quarter GDP reflected positive contributions from nonresidential fixed investment, exports, residential fixed investment, and personal consumption expenditures that were partly offset by negative contributions from private inventory investment, federal government spending, and state and local government spending. Imports, which are a subtraction in the calculation of the GDP, increased. An indicator of inflationary trends, the price index for gross domestic purchases increased 2.6% in the first quarter, compared to an increase of 2.0% in the fourth quarter. As to the government’s budget, the federal deficit through the first eight months of fiscal 2017 was $344 billion — $8 billion less than the deficit over the same period last year. For the month of April, the government realized a budget surplus of $182.4 billion, which is $76 billion more than the April 2016 surplus.

Inflation/consumer spending: Inflation, as measured by personal consumption expenditures, picked up in April. For the 12 months ended in April 2017, the personal consumption expenditures price index expanded at a rate of 1.7%. For April, personal income increased 0.4% over March. Disposable personal (after-tax) income increased 0.4%. Personal consumption expenditures (the value of goods and services purchased by consumers) also increased 0.4% for the month. The prices companies receive for goods and services showed improvement in April from March, as the Producer Price Index increased 0.5% in April following a 0.1% dip the prior month. Year-over-year, producer prices have increased 2.5%. In April, energy prices climbed 0.8% while food prices increased 0.9%. The PPI less food and energy increased 0.4% for the month and has risen 1.9% over the last 12 months. Consumer prices, which retreated in March, increased 0.2% in April. For the year, consumer prices are up 2.2%. Core prices, which exclude volatile food and energy, increased 0.1% for the month and have climbed 1.9% since April 2016.

Housing: The housing sector, which had showed strength over the first three months of 2017, slowed considerably in April. Existing home sales plunged 2.3% to a seasonally adjusted annual rate of 5.570 million, down from March’s revised annual rate of 5.700 million. Existing home sales are only 1.6% ahead of the sales pace from a year ago. The median sales price for existing homes rose to $244,800 from the March price of $236,400. Total housing inventory at the end of April climbed 7.2% to 1.93 million existing homes available for sale (9.0% lower than a year ago). Sales of newly constructed homes also dropped in April, according to the Census Bureau. Sales of new single-family homes fell 11.4% in April to an annual rate of 569,000 — down from March’s revised rate of 642,000. The median sales price of new houses sold in April was $309,200 ($318,700 in March), while the average sales price was $368,300 ($388,200 in March). The seasonally adjusted estimate of new houses for sale at the end of April was 268,000. This represents a supply of 5.7 months at the current sales rate.

Manufacturing: According to the Federal Reserve, industrial production ticked up 1.0% in April. Manufacturing output increased 1.0% following a 0.4% decline in March. Manufacturing gains were led by production of motor vehicles, business equipment, and consumer goods. The indexes for mining and utilities posted gains of 1.2% and 0.7%, respectively. Total industrial production for April was 2.2% above its year-earlier level. Capacity utilization increased 0.6 percentage point to 76.7%, which is 3.2 percentage points below its long-run average. As for durable goods, the Census Bureau report reveals that new orders dropped 0.7% in April following a 2.3% revised increase in March. Excluding the volatile transportation segment, new durable goods orders fell 0.4%. Orders for core capital goods (excluding defense and transportation) had no change from March, but are up 2.9% over the past 12 months.

Imports and exports: The advance report on international trade in goods revealed that the trade gap grew by $2.5 billion in April. The overall trade deficit was $67.6 billion, up from March’s deficit of $65.1 billion. Exports declined 0.9% to $125.9 billion. Imports increased by 0.7% to $193.4 billion in April. The prices for U.S. imports of goods showed strength in April following a weak March. Import prices jumped 0.5% for the month, led by a 1.6% increase in petroleum prices. U.S. export prices rose 0.2% after advancing a revised 0.1% in March. Export prices haven’t recorded a monthly decline since the index fell 0.8% in August 2016.

International markets: The election of Emmanuel Macron as France’s president was greeted favorably by eurozone investors early in May. Despite the tragic terrorist attack in Manchester, England, investors maintained a “steady-as-she-goes” approach with moderate trading throughout the month. OPEC and Russia agreed to extend the cut in oil output. However, oil prices haven’t climbed appreciably as investors apparently were hoping for deeper cuts than those announced. Moody’s Investors Service cut China’s sovereign credit rating for the first time since 1989 on the premise that the country’s financial strength is expected to weaken as debt continues to rise and the economy slows.

Consumer sentiment: Consumer confidence is holding steady in May. The Conference Board Consumer Confidence Index® for May fell slightly to 117.9 from April’s 119.4. While consumers continued to express optimism about both the current state of the economy and its future, their enthusiasm has waned some from earlier in the year. The Surveys of Consumers of the University of Michigan Index of Consumer Sentiment also dropped marginally to 97.1 in May from 97.6 in April.

Eye on the Month Ahead

Economic signs were mixed last month, so it isn’t certain that the FOMC will raise interest rates when it meets in June. The final GDP figures for the first quarter are out in June. Consumer spending has been relatively weak through much of the first part of 2017, causing inflation to slow a bit.

Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/ Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

This communication is strictly intended for individuals residing in the state(s) of UT. No offers may be made or accepted from any resident outside the specific states referenced.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017.

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Converting Retirement Savings to Retirement Income

Converting Retirement Savings to Retirement Income

You’ve been saving diligently for years, and now it’s time to think about how to convert the money in your traditional 401(k)s (or similar workplace savings plans) into retirement income. But hold on, not so fast. You may need to take a few steps first.

Evaluate your needs

If you haven’t done so, estimate how much income you’ll need to meet your desired lifestyle in retirement. Conventional wisdom says to plan on needing 70% to 100% of your annual pre-retirement income to meet your needs in retirement; however, your specific amount will depend on your unique circumstances. First identify your non-negotiable fixed needs — such as housing, food, and medical care — to get clarity on how much it will cost to make basic ends meet. Then identify your variable wants — including travel, leisure, and entertainment. Segregating your expenses into needs and wants will help you develop an income strategy to fund both.

Assess all sources of predictable income

Next, determine how much you might expect from sources of predictable income, such as Social Security and traditional pension plans.

Social Security: At your full retirement age (which varies from 66 to 67, depending on your year of birth), you’ll be entitled to receive your full benefit. Although you can begin receiving reduced benefits as early as age 62, the longer you wait to begin (up to age 70), the more you’ll receive each month. You can estimate your retirement benefit by using the calculators on the SSA website, ssa.gov. You can also sign up for a my Social Security account to view your Social Security Statement online.

Traditional pensions: If you stand to receive a traditional pension from your current or a previous employer, be sure to familiarize yourself with its features. For example, will your benefit remain steady throughout retirement or increase with inflation? Your pension will most likely be offered as either a single life or joint-and-survivor annuity. A single-life annuity provides benefits until the worker’s death, while a joint-and-survivor annuity generally provides reduced benefits until the survivor’s death.¹

If it looks as though your Social Security and pension income will be enough to cover your fixed needs, you may be well positioned to use your other assets to fund those extra wants. On the other hand, if your predictable sources are not sufficient to cover your fixed needs, you’ll need to think carefully about how to tap your retirement savings plan assets, as they will be a necessary component of your income.

Understand your savings plan options

A key in determining how to tap your retirement plan assets is to understand the options available to you. According to the Government Accountability Office (GAO), only about one-third of 401(k) plans offer withdrawal options, such as installment payments, systematic withdrawals, and managed payout funds.² And only about a quarter offer annuities, which are insurance contracts that provide guaranteed income for a stated amount of time (typically over a set number of years or for the life expectancy of the participant or the participant and spouse).³

Plans may allow you to leave the money alone or require you to take a lump-sum distribution. You may also choose to roll over the assets to an IRA, which might offer a variety of income and investment opportunities, including the purchase of annuity contracts. If you choose to work part-time in retirement, you may be allowed to roll your assets into the new employer’s plan.

Determining the right way to tap your assets can be challenging and should take into account a number of factors. These include your tax situation, whether you have other assets you’ll use for income, and your desire to leave assets to heirs. A financial professional can help you understand your options.

¹Current law requires married couples to choose a joint-and-survivor annuity unless the spouse waives those rights.

²”401(k) Plans: DOL Could Take Steps to Improve Retirement Income Options for Plan Participants,” GAO Report to Congressional Requesters, August 2016

³Generally, annuity contracts have fees and expenses, limitations, exclusions, holding periods, termination provisions, and terms for keeping the annuity in force. Most annuities have surrender charges that are assessed if the contract owner surrenders the annuity. Qualified annuities are typically purchased with pre-tax money, so withdrawals are fully taxable as ordinary income, and withdrawals prior to age 59½ may be subject to a 10% penalty tax. Any guarantees are contingent on the claims-paying ability and financial strength of the issuing insurance company. It is important to understand that purchasing an annuity in an IRA or an employer-sponsored retirement plan provides no additional tax benefits other than those available through the tax-deferred retirement plan.


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Spring Cleaning Your Finances

Spring Cleaning Your Finances

The arrival of spring often signifies a time of renewal, a reminder to dust off the cobwebs and get rid of the dirt and grime that have built up throughout the winter season. And while most spring cleaning projects are likely focused on your home, you could take this time to evaluate and clean up your personal finances as well.

Examine your budget..and stick with it

A budget is the centerpiece of any good personal financial plan. Start by identifying your income and expenses. Next, add them up and compare the two totals to make sure you are spending less than you earn. If you find that your expenses outweigh your income, you’ll need to make some adjustments to your budget (e.g., reduce discretionary spending).

Keep in mind that in order for your budget to work, you’ll need to stick with it. And while straying from your budget from time to time is to be expected, there are some ways to help make working within your budget a bit easier:

Make budgeting a part of your daily routine

Build occasional rewards into your budget

Evaluate your budget regularly and make changes if necessary

Use budgeting software/smartphone applications

Evaluate your financial goals

Spring is also a good time to evaluate your financial goals. Take a look at the financial goals you’ve previously set for yourself — both short and long term. Perhaps you wanted to increase your cash reserve or invest more money toward your retirement. Did you accomplish any of your goals? If so, do you have any new goals you now want to pursue? Finally, have your personal or financial circumstances changed recently (e.g., marriage, a child, a job promotion)? If so, would any of these events warrant a reprioritization of some of your existing financial goals?

Review your investments

Now may be a good time to review your investment portfolio to ensure that it is still on target to help you achieve your financial goals. To determine whether your investments are still suitable, you might ask yourself the following questions:

Has my investment time horizon recently changed?

Has my tolerance for risk changed?

Do I have an increased need for liquidity in my investments?

Does any investment now represent too large (or too small) a part of my portfolio?

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Try to pay off any accumulated debt

When it comes to personal finances, reducing debt should always be a priority. Whether you have debt from student loans, a mortgage, or credit cards, have a plan in place to pay down your debt load as quickly as possible. The following tips could help you manage your debt:

Keep track of your credit card balances and be aware of interest rates and hidden fees

Manage your payments so that you avoid late fees

Optimize your repayments by paying off high-interest debt first

Avoid charging more than you can pay off at the end of each billing cycle

Take a look at your credit history

Having good credit is an important part of any sound financial plan, and now is a good time to check your credit history. Review your credit report and check for any inaccuracies. You’ll also want to find out whether you need to take steps to improve your credit history. To establish a good track record with creditors, make sure that you always make your monthly bill payments on time. In addition, you should try to avoid having too many credit inquiries on your report (these are made every time you apply for new credit). You’re entitled to a free copy of your credit report once a year from each of the three major credit reporting agencies. Visit annualcreditreport.com for more information.

Assess tax planning opportunities

The return of the spring season also means that we are approaching the end of tax season. Now is also a good time to assess any tax planning opportunities for the coming year. You can use last year’s tax return as a basis, then make any anticipated adjustments to your income and deductions for the coming year.

Be sure to check your withholding — especially if you owed taxes when you filed your most recent tax return or you were due a large refund. If necessary, adjust the amount of federal or state income tax withheld from your paycheck by filing a new Form W-4 with your employer.


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What are bond ratings?

What are bond ratings?

Bond ratings are an essential tool when considering fixed-income investments. Ratings provide a professional assessment of credit risk, or the risk of default, which can be measured to some degree by analyzing the bond issuer’s financial condition and creditworthiness.

Credit rating agencies perform this type of analysis and issue ratings that reflect the agency’s assessment of the bond issuer’s ability to meet the promised interest payments and return the principal upon maturity. The best-known independent rating agencies — Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings — use similar scales in descending alphabetical order, ranging from AAA/Aaa for the most creditworthy bonds to C/D for the least creditworthy.

Bonds rated BBB/Baa or higher are considered “investment grade.” Lower-rated bonds, commonly called “junk bonds,” are non-investment grade; they generally offer higher yields and are considered speculative with higher credit risks. Bond insurance can add a layer of protection, but it is only as good as the insurer’s credit quality and ability to pay.

A credit rating is not a recommendation to purchase a bond. Even so, higher-rated bonds in general may be more appealing to investors, and — due to supply and demand — typically have a lower yield than similar bonds with a lower rating. Investors must balance risk and reward when choosing bonds that present a comfortable risk while providing a yield that is appropriate to help meet investment goals.

Ratings are very important to a bond issuer when the bond is first offered for sale, because a higher rating may reduce interest costs. After the initial sale, significant shifts in the issuer’s financial condition could result in rating changes that may affect the bond’s yield and market value. However, as long as the issuer does not default, a change in a bond’s rating would not affect the coupon rate or the principal due upon maturity.

Bonds carry other risks as well, such as market risk, interest rate risk, and inflation risk. However, these depend on factors that are difficult to measure or predict.

The principal value of bonds fluctuates with changes in market conditions. A bond sold prior to maturity may be worth more or less than its original value.


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Four Ways to Double the Power of Your Tax Refund

Four Ways to Double the Power of Your Tax Refund

The IRS expects that more than 70% of taxpayers will receive a refund in 2017.¹ What you do with a tax refund is up to you, but here are some ideas that may make your refund twice as valuable. 

Double your savings

Perhaps you’d like to use your tax refund to start an education fund for your children or grandchildren, contribute to a retirement savings account for yourself, or save for a rainy day. A financial concept known as the Rule of 72 can give you a rough estimate of how long it might take to double what you initially save. Simply divide 72 by the annual rate you hope that your money will earn. For example, if you invest your tax refund and it earns a 6% average annual rate of return, your investment might double in approximately 12 years (72 divided by 6 equals 12).

This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investment. Fees, expenses, and taxes are not considered and would reduce the performance shown if they were included.

Split your refund in two

If stashing your refund away in a savings account or using it to pay bills sounds unappealing, go ahead and splurge on something for yourself. But remember, you don’t necessarily have to spend it all. Instead, you could put half of it toward something practical and spend the other half on something fun.

The IRS makes splitting your refund easy. When you file your income taxes and choose direct deposit for your refund, you can decide to have it deposited among two or even three accounts, in any proportion you want. Qualified accounts include savings and checking accounts, as well as IRAs (except SIMPLE IRAs), Coverdell Education Savings Accounts, health savings accounts, Archer MSAs, and TreasuryDirect® online accounts. To split your refund, you’ll need to fill out IRS Form 8888 when you file your federal return.

Double down on your debt

Using your refund to pay down credit card debt or a loan with a high interest rate could enable you to pay it off early and save on interest charges. The time and money you’ll save depend on your balance, the interest rate, and other factors such as your monthly payment. Here’s a hypothetical example. Let’s say you have a personal loan with an $8,000 balance, a 12% fixed interest rate, and a 24-month repayment term. Your fixed monthly payment is $380. If you were to put a $4,000 refund toward paying down your principal balance, you would be able to pay off your loan in 12 months and save $780 in interest charges over the remaining loan term. Check the terms of any loan you want to prepay, though, to make sure that no prepayment penalty applies.

Be twice as nice to others

Giving to charity has its own rewards, but Uncle Sam may also reward you for gifts you make now when you file your taxes next year. If you itemize, you may be able to deduct contributions made to a qualified charity. You can also help your favorite charity or nonprofit reap double rewards by finding out whether your gift qualifies for a match. With a matching gift program, individuals, corporations, foundations, and employers offer to match gifts the charitable organization receives, usually on a dollar-for-dollar basis. Terms and conditions apply, so contact the charitable organization or your employer’s human resources department to find out more about available matching gift programs.

¹IR-2017-01, irs.gov


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Allegis Quarterly Recap: 1st Quarter 2017

Allegis Quarterly Recap: 1st Quarter 2017

The Markets (as of market close March 31, 2017)

Riding the momentum following the presidential election, stocks surged for much of the first quarter of 2017. Buoyed by the anticipation of tax cuts and policies favorable to domestic businesses, the benchmark indexes listed here reached historic highs throughout the quarter. At the end of January, the Dow reached the magic 20000 mark for the first time, while the tech-heavy Nasdaq gained almost 4.50% for the month. The trend continued in February, as stocks posted solid monthly gains. The Dow closed the month with a run of 12 consecutive daily closings that reached all-time highs. The S&P 500 also achieved a milestone — 50 consecutive trading sessions without a daily swing of more than 1.0%. At the close of trading in February, each of the benchmark indexes listed here posted year-to-date gains, led by the Nasdaq, which was up over 8.0%.

March began with a bang but ended with a whimper. The Dow closed the first week of the month at over 21000, while the Nasdaq gained over 9.0% year-to-date. However, energy stocks slipped as the price of oil began to fall. Entering mid-March, investors exercised caution pending the potential Fed interest rate hike and the push for a new health-care law. Following its mid-March meeting, the Fed raised interest rates 25 basis points, while the move to replace the ACA with a new health-care law failed for lack of congressional support.

For the quarter, each of the indexes listed here posted impressive gains over their fourth-quarter closing values. The Nasdaq climbed the most, posting quarterly gains of close to 10.0%, followed by the Global Dow and the S&P 500, which achieved its largest quarterly gain in almost two years. Long-term bond prices increased in the first quarter with the yield on 10-year Treasuries falling 6 basis points. Gold prices also climbed during the first three months of the year, closing the quarter at $1,251.60 — about 8.5% higher than its price at the end of the fourth quarter.


Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Monthly Economic News

Employment: February’s employment report showed continued strengthening in the labor sector with 235,000 new jobs added in the month, on the heels of 238,000 new jobs added in January. Job gains occurred in construction, private educational services, manufacturing, health care, and mining. The unemployment rate dipped to 4.7% — down from 4.9% a year earlier. There were 7.5 million unemployed persons in February. The labor participation rate inched up 0.1 percentage point to 63.0%. The average workweek was unchanged at 34.4 hours in February. Average hourly earnings increased by $0.06 to $26.09, following a $0.05 increase in January. Over the last 12 months ended in February, average hourly earnings have risen by $0.71, or 2.8%.

FOMC/interest rates: Following its meeting in March, the Federal Open Market Committee raised the target range for the federal funds rate by 25 basis points to 0.75%-1.00%. This is the first interest rate change for 2017, although the FOMC projects that it will increase rates two more times this year. The Committee expects that economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2% over the medium term. FOMC Chair Janet Yellen supported the current rate hike, cautioning that without gradual rate increases inflation could escalate, requiring the Committee to raise rates rapidly which, in turn, could risk disrupting financial markets and push the economy into recession.

Oil: The price of crude oil (WTI) closed March at $50.85 per barrel, after spending much of the month hovering around $48.00 per barrel. The national average retail regular gasoline price was $2.314 per gallon on February 27, 2017, $0.018 higher than the January 30 price and $0.531 more than a year ago.

GDP/budget: Expansion of the U.S. economy slowed over the final three months of 2016. According to the Bureau of Economic Analysis, the fourth-quarter 2016 gross domestic product grew at an annualized rate of 2.1% compared to the third-quarter GDP, which grew at an annual rate of 3.5%. Growth in the GDP was slowed by downturns in exports, federal government spending, and business investment. A positive from the report is the rise in consumer spending, which increased 3.5% over the prior quarter. An indicator of inflationary trends, the price index for gross domestic purchases increased 2.0% in the fourth quarter, compared to an increase of 1.5% in the third quarter.

As to the government’s budget, the federal deficit for February was $192 billion. Over the first 5 months of the fiscal year, the deficit sits at $385 billion, which is 0.7% below the same period of time last year.

Inflation/consumer spending: Inflation, as measured by personal consumption expenditures, reached the Fed’s 2.0% annual target in February. For the 12 months ended in February 2017, personal consumption expenditures expanded at a rate of 2.1%. Core PCE (excluding energy and food) increased 1.8%. For February, PCE climbed 0.1%, while core PCE rose 0.2%, following a 0.3% monthly increase in January. Personal income (pre-tax earnings) rose 0.4% for the month, and disposable personal income (income less taxes) enjoyed a 0.3% increase over January. For the 2016 calendar year, personal income increased 3.6% from the 2015 annual level, compared with an increase of 4.4% in 2015. Disposable personal income increased 3.9% in 2016, compared with an increase of 3.8% in 2015. In 2016, PCE increased 3.9% compared with an increase of 3.5% in 2015.

The prices companies receive for goods and services trended higher in February as the Producer Price Index climbed 0.3% for the month. Year-over-year, producer prices have increased 2.2%. Energy prices have played a large part in the upward movement of the PPI, climbing 0.6% in February. The PPI less food and energy has risen 1.5% for the year, after climbing 0.3% in February.

Consumer prices also increased marginally in February, climbing 0.1%. However, consumer prices are up 2.7% for the year, a mark that is not only well above the Fed’s 2.0% target for inflation, but stands as the highest rate of growth in almost five years. Even the core rate, which excludes energy, is holding steady at 2.2% since February 2016.

Housing: The housing sector proved to be a mixed bag in February as the sales pace of existing homes slowed while new home sales increased. Higher home prices and a lack of available homes for sale are the main reasons for the drop in the sales of existing homes, which fell 3.7% to a seasonally adjusted annual rate of 5.48 million, down from January’s revised annual rate of 5.69 million, according to the National Association of Realtors®. However, February’s sales pace is still 5.4% above a year ago. The median sales price for existing homes was $228,400 — up 7.7% from January. Total housing inventory at the end of February increased 4.2% to 1.75 million existing homes available for sale, but is 6.4% lower than a year ago (1.87 million) and has declined year-over-year for 21 straight months. Conversely, the Census Bureau’s latest report reveals a spike in new home sales. Sales of new single-family homes increased 6.1% in February to an annual rate of 592,000 — up from January’s rate of 558,000. The median sales price of new houses sold in February was $296,200, while the average sales price was $390,400. The seasonally adjusted estimate of new houses for sale at the end of February was 266,000. This represents a supply of 5.4 months at the current sales rate, which is up from 262,000 homes available (supply of 5.4 months) in January.

Manufacturing: One of the reasons the Fed raised interest rates in March is the increase in manufacturing production. The Federal Reserve’s monthly index of industrial production (which includes factories, mines, and utilities) remained at the same level in February as the prior month, held down by another weak month for utilities. Unseasonably warm weather prompted utility production to fall 5.7% in February following a 5.8% drop in January. However, manufacturing production increased 0.5% month-over-month, which is the largest increase in monthly volumes since July 2015. At 104.7% of its 2012 average, total industrial production in February was 0.3% above its level of a year earlier. Capacity utilization for the industrial sector declined 0.1 percentage point in February to 75.4%. As for durable goods, the latest report from the Census Bureau shows new orders increased 1.7% in February from the prior month. Excluding the volatile transportation segment, new durable goods orders gained a lackluster 0.4%. Orders for core capital goods (excluding defense and transportation) dropped 0.1% for the month, but are up 2.7% over February 2016.

Imports and exports:The advance report on international trade in goods revealed that the trade gap narrowed by 5.9% in February. The overall trade deficit was $64.8 billion in February, down $4.1 billion from January. Exports declined 0.1% to $126.8 billion, $0.1 billion less than January exports. Imports fell 2.1% to $191.6 billion, $4.2 billion less than January imports. The prices for U.S. imports of goods advanced 0.2% in February, led by higher nonfuel import prices, which more than offset lower fuel prices. U.S. export prices rose 0.3% in February, after advancing 0.2% in January. Export prices haven’t recorded a monthly decline since the index fell 0.8% in August 2016.

International markets: A relatively positive stream of eurozone economic data helped international stocks post gains for February. Both manufacturing and service sectors accelerated during the month, while eurozone job creation reached a 10-year high. In Great Britain, Prime Minister May continued to push forward with Brexit amid pushback from Parliament and protestors. Nevertheless, the UK delivered written notice to the president of the European Union, formally beginning the process of leaving the EU. This action now opens a two-year window for Britain to negotiate the terms of its exit. One of the potentially contentious issues that will be addressed is whether, and how much, Britain will pay to leave the bloc. In Japan, retail sales increased 1.0% for the month, although the fourth-quarter GDP growth slowed from the previous quarter.

Consumer sentiment: The Conference Board Consumer Confidence Index® for February rose 3.2 points to 114.8. Consumers expressed confidence in the job market, which increased expectations for the economy in general. The Surveys of Consumers of the University of Michigan Index of Consumer Sentiment dipped from a 10-year high of 98.5 in January to 96.3 in February. Nevertheless, consumers continued to express optimism about current economic conditions, as the Current Conditions Index has been trending upward since December 2016.

Eye on the Month Ahead

The first quarter of 2017 proved to be a banner three months for equities. The FOMC next meets during the first week of May, when it will consider another interest rate hike. If employment remains strong and consumer prices trend higher, the Fed may raise the target range rate to 1.25% following their next meeting, with at least one more rate increase likely before the end of the year.

Key Dates/Data Releases

4/3: PMI Manufacturing Index, ISM Manufacturing Index

4/4: International trade

4/7: Employment situation

4/11: JOLTS

4/12: Treasury budget

4/13: Producer Price Index

4/14: Consumer Price Index, retail sales

4/18: Industrial production, housing starts

4/21: Existing home sales

4/25: New home sales

4/27: International trade in goods, durable goods orders

4/28: GDP


Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/ Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg. com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/ FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indices listed are unmanaged and are not available for direct investment.

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. and Allegis do not provide tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017



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