The Diversified Blog

A wealth management blog dedicated to creating a long lasting sustainable retirement.

Prediction Season

Here is a nice article provided by Dimensional Fund Advisors:


Predictions about future price movements come in all shapes and sizes, but most of them tempt the investor into playing a game of outguessing the market.  READ MORE HERE:

Prediction Season.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Making Billions With One Belief: The Markets Can’t Be Beat

Here is a nice article written by Jason Zweig of The Wall Street Journal:


The fastest-growing major mutual-fund company in the U.S. isn’t strictly an active or passive investor. It’s both.

Dimensional Fund Advisors LP, or DFA, is the sixth-largest mutual-fund manager, up from eighth a year ago, according to Morningstar Inc., drawing nearly $2 billion in net assets per month at a time when investors are fleeing many other firms. Learn why DFA’s founders are pioneers of index funds here:

Making Billions With One Belief: The Markets Can’t Be Beat


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Dissecting Dimensional

Here is a nice article written by Charles McGrath of Pensions & Investments:


Dimensional Fund Advisors began with the idea that using academic research to invest in smaller, under priced companies with a tilt to profitability could outperform the market by avoiding subjective stock picking and the rigidness of pure index investing. The firm’s assets have grown significantly since the financial crisis as institutions look for low-cost active strategies that deliver alpha. It is the largest manager of quantitative strategies, strictly to institutional investors.  LEARN MORE:

Dissecting Dimensional


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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15 Things You Should Never Buy During the Holidays

Here is a nice article provided by Bob Niedt of Kiplinger:


The season of giving is also the season of getting. You're likely spending lots of money purchasing gifts for friends and loved ones during the holidays. But proceed with caution: There are a number of things you shouldn't be buying between Thanksgiving and Christmas. Why? Because certain items tend to be considerably less expensive outside the peak holiday shopping season.

We reached out to deal experts to give us the particulars on what not to buy during the holidays. Here are 15 things they say you will be better off purchasing at other times of the year.

1.  Cars

Forget the notion of waking up on Christmas morning to find a new car in the driveway. Instead, think New Year's Eve (during business hours, of course) to get the best deal on a new vehicle. Car dealers are in the mood to haggle and clear their inventory before year's end to make room for new models and earn manufacturer incentives.

Looking for a used car? Hold off until April for the best deals. It's the month dealers tend to buy the most at auction, giving you the best selection.

2.  Exercise Equipment

You might see a few sales on fitness gear and apparel in late November and December, but January is when the real deals appear on exercise equipment, according to Benjamin Glaser of DealNews.com.

Hey, we've all done it and retailers know it: We resolve to lose weight and get fit in the New Year. To that end, those retailers have sales on fitness equipment in January. Look for markdowns of 30% to 70% on fitness DVDs, treadmills, elliptical trainers, stationary bikes and complete home gyms.

3.  Caribbean Cruises

Cruising during the holidays can often mean more crowds and higher fares, says Colleen McDaniel, managing editor of Cruise Critic. By booking a cruise for January, February or March, you can take advantage of lower fares, avoid the holiday crowds and beat the spring break rush. The industry's "wave season" also takes place during that time, when cruise lines offer added discounts that may help you save even more on your trip, she says. You can score some of the best cruise deals if you book at the last minute -- just don't expect the really cheap tickets to get you a stateroom with a view.

4.  Bedding

If you're considering stocking up on bedding during the holidays -- we're talking everything from comforters to sheets and pillow cases -- wait a few weeks longer for even deeper discounts, according to the deals website BensBargains.com. Take advantage of "white sales" in January at big-name retailers including Macy's, Target and Kohl's. Savings on bedding during these annual sales can add up to as much as 50%.

5.  Broadway Tickets

You can get two tickets for the price of one to several popular shows during Broadway Week (which is actually two weeks). In 2017, it runs from January 17 to February 5. The twofer tickets go on sale January 5. Some shows might even offer the discount for up to four weeks, according to one Broadway insider we spoke with.


In general, January and February are good months to see Broadway shows. It's off-season and the dead of winter, so ticket prices tend to drop. Avoid the crush between Christmas and New Year's.

6.  Furniture

If you need to spruce up the living or dining room before guests arrive for the holidays, don't expect to find a good deal on a sofa or table and chairs before Christmas. Instead, wait until after Christmas, when furniture stores hold clearance sales to make room for new styles that are usually released in February. For example, furniture retailer Room & Board has an in-store and online clearance sale once a year, typically the day after Christmas. Expect discounts of up to 50% on discontinued furniture styles and in-store floor samples.

Also, many stores offer 0% financing along with the big discounts during annual clearance sales. Put this note on your 2017 calendar: Because new styles often are released in August, too, July is another good month to look for deals on furniture.

7.  Gift Cards

Gift cards are a no-brainer when you're stumped for ideas. However, if you can hold off until after the holiday shopping frenzy has died down to purchase gift cards, you could save yourself some money.

Here's the scoop from deals experts: Some people who receive unwanted gift cards for the holiday turn around and sell them for cash online. Web sites such as CardCash.com and Cardpool.com buy the gift cards at a steep discount and re-sell them below face value. Since sites typically get flooded with gift cards right after the holidays, the average card price is driven down due to the increased inventory. Also on eBay right after the holidays, gift cards can sell for up to 15% cheaper than the original price.

8.  Winter Sports Gear

Hold off on gifts for winter sports enthusiasts until the New Year. Snowboards, skis, ice skates, goggles, hockey gear and more will be marked down at least 10% to 20% in January, according to DealNews. If you can wait a bit longer, expect even deeper discounts during clearance sales in February and March when the winter sports season winds down.

9.  Jewelry

A new piece of jewelry ranks high on many holiday wish lists. But high demand often means higher prices, so you may want to give your sweetheart a rain check and wait until after Valentine's Day to buy that pearl necklace or those diamond earrings. You can save 15% to 25% on jewelry during post-Valentine's Day sales, says Howard Schaffer of deal site Offers.com.

10.  Luggage

If you need to replace a beat-up roll-on that's been tossed around too many times by airline baggage handlers, March is the best time to buy luggage. Retailers mark down luggage because sales have slowed after the busy holiday travel season and haven't picked up yet for summer travel, according to Deals2Buy.com, a deals and coupons website. Look for discounts ranging from 20% to 70%.

11.  Mattresses

You probably don't expect Santa to shove a mattress down your chimney. But if you were thinking about giving your holiday guests something more comfortable than a futon to sleep on, you might want to reconsider buying a mattress during November or December. You'll save as much as 70% by waiting until Memorial Day sales in May to buy a mattress. In the meantime, promise your guests a plush mattress next year and hope they don't mind sleeping on the couch this year.

12.  Perfume

Perfume sales often peak around Christmas and Valentine's Day. So retailers tend to discount perfume heavily after these holidays have passed. FreeShipping.org founder Luke Knowles says consumers can expect prices on perfume to be slashed by as much as 50% in late February and March, with the best sales at websites dedicated to perfume.

13.  Tools

Tools typically are discounted during Black Friday sales. But wait to buy a new drill, wrench set or tool chest around Father's Day instead. You'll save 5% to 15% more on tools in June when retailers have sales on gifts for dads, says Offers.com's Schaffer.

14.  Winter Apparel

Retailers will offer discounts on coats, sweaters and other cold-weather clothing during Black Friday and Cyber Monday sales. However, the deals will be even better in January when stores have clearance sales on winter apparel to make room for spring clothing. You can expect to see markdowns of at least 75%.

15.  Holiday Decorations

Resist the urge to buy new holiday decorations before Christmas because you can get them at bottom-of-the-barrel prices in January, according to Glaser of DealNews.com. Retailers typically mark down ornaments, garlands, artificial trees and décor as much as 90% after December 25. If you don't mind the red-and-green theme or chocolates shaped like a wreath, you can also load up on deeply discounted edible holiday treats in January. Buy durable decorations that will last in storage until next year, says Glaser.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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8 Things You Should Never Keep in Your Wallet

Here is a nice article provided by The Editor’s of Kiplinger’s Personal Finance:


That overstuffed wallet of yours can’t be comfortable to sit on. It’s probably even too clunky to lug around in a purse, too.

And with every new bank slip that bulges from the seams, your personal information is getting less and less safe. With just your name and Social Security number, identity thieves can open new credit accounts and make costly purchases in your name. If they can get their hands on (and doctor) a government-issued photo ID of yours, they can do even more damage, such as opening new bank accounts. These days, con artists are even profiting from tax-return fraud and health-care fraud, all with stolen IDs.

We talked with consumer-protection advocates to identify the eight things you should purge from your wallet immediately to limit your risk in case your wallet is lost or stolen.

And when you’re finished removing your wallet’s biggest information leaks, take a moment to photocopy everything you’ve left inside, front and back. Stash the copies in a secure location at home or in a safe-deposit box. The last thing you want to be wondering as you're reporting a stolen wallet is, “What exactly did I have in there?”

1.  Your Social Security Card:
...and anything with the number on it.

Your nine-digit Social Security number is all a savvy ID thief needs to open new credit card accounts or loans in your name. ID-theft experts say your Social Security card is the absolute worst item to carry around.

Once you’ve removed your card, look for anything else that may contain your SSN. As of December 2005, states can no longer display your SSN on newly issued driver's licenses, state ID cards and motor-vehicle registrations. If you still have an older photo ID, request a new card prior to the expiration date. There might be an additional fee, but it's worth it to protect your identity.

Retirees, double check your Medicare card, too: If it was issued before April, 2015, it has your SSN on it.

Instead: Photocopy your Medicare card (front and back) and carry it with you instead of your real card. Experts are torn when it comes to blacking out a portion of your Social Security number on the copy, so to be safe, black out all nine digits. If an appointment requires the full SSN, you can then provide it as needed.

2.  Password Cheat Sheet:

The average American uses at least seven different passwords (and probably should use even more to avoid repeating them on multiple sites/accounts). Ideally, each of those passwords should be a unique combination of letters, numbers, and symbols, and you should change them regularly. Is it any wonder we need help keeping track of them all?

However, carrying your ATM card’s PIN number and a collection of passwords (especially those for online access to banking and investment accounts) on a scrap of paper in your wallet is a prescription for financial disaster.

Instead: If you have to keep passwords jotted down somewhere, keep them in a locked box in your house. Or consider an encrypted mobile app, such as SplashID (free or $1.99 monthly for Pro), Password Safe Pro ($19.95, Android only) or Pocket (free, Android only).

3.  Spare Keys:

A lost wallet containing your home address (likely found on your driver's license or other items) and a spare key is an invitation for burglars to do far more harm than just opening a credit card in your name. Don't put your property and family at risk. (And even if your home isn't robbed after losing a spare key, you'll likely spend $100+ in locksmith fees to change the locks for peace of mind.)

And, speaking of keys, be careful what you hand to the valet, warns Adam Levin, chairman and cofounder of Identity Theft 911. "Remember that every time you stop and hand your key to a valet, depending on what's in the glove box [or trunk], you are making yourself vulnerable."

Instead: Keep your spare keys with a trusted relative or friend. If you’re ever locked out, it may take a little bit longer to retrieve your backup key, but that’s a relatively minor inconvenience.

4.  Checks:

Blank checks are an obvious risk—an easy way for thieves to quickly withdraw money from your checking account. But even a lost check you've already filled out can lead to financial loss—perhaps long after you've canceled and forgotten about it. With the routing and account numbers on your check, anybody could electronically transfer funds from your account.

Instead: Only carry paper checks when you will absolutely need them. And leave the checkbook at home, bringing only the exact amount of checks you anticipate needing that day.

5.  Passport:

A government-issued photo ID such as a passport opens up a world of possibilities for an ID thief. “Thieves would love to get (ahold of) this,” says Nikki Junker, a victim adviser at the Identity Theft Resource Center. “You could use it for anything”—including traveling in your name, opening bank accounts or even getting a new copy of your Social Security card.

Instead: Carry only your driver’s license or other personal ID while traveling inside the United States. When you're overseas, photocopy your passport and leave the original in a hotel lockbox.

6.  Multiple Credit Cards:

Although you shouldn’t ditch credit cards altogether (those who regularly carry a card tend to have higher credit scores than those who don’t), consider a lighter load. After all, the more cards you carry, the more you’ll have to cancel if your wallet is lost or stolen. We recommend carrying a single card for unplanned or emergency purchases, plus perhaps an additional rewards card on days when you expect to buy gas or groceries.

Also: Maintain a list, someplace other than your wallet, with all the cancellation numbers for your credit cards. They are typically listed on the back of your cards, but that won’t do you much good when your wallet is nowhere to be found.

7.  Birth Certificate:

The birth certificate itself won’t get ID thieves very far. However, “birth certificates could be used in correlation with other types of fraudulent IDs,” Junker says. “Once you have those components, you can do the same things you could with a passport or a Social Security card.”

Be especially cautious on occasions—such as your mortgage closing—when you may need to present your birth certificate, Social Security card and other important personal documents at once. “Everything’s together,” Junker notes, “and someone can just come along and steal them all. Take the time to take them home, and don’t leave them in your car.”

8.  A Stack of Receipts:

Beginning in December 2003, businesses may not print anything containing your credit or debit card’s expiration date or more than the last five digits of your credit card number. Still, a crafty ID thief can use the limited credit card info and merchant information on receipts to phish for your remaining numbers.

Instead: Clear those receipts out each night, shredding the ones you don’t need. But for receipts you save, keep them safe by going digital. An app like Shoeboxed lets you create and categorize digital copies of your receipts and business cards. Plans start at $9.95 per month. For even more ideas, check out 7 Steps to Convert Paper Files to Digital.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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8 Things Kohl's Shoppers Need to Know

Here is a nice article provided by Bob Niedt of Kiplinger:


Chances are, if you’re not a Kohl’s fan, you know someone who is – and given the opening that someone will shower you with stories of saving big. The Wisconsin-based department store chain boasts a fiercely loyal customer base made up mostly of thrifty suburban shoppers. You’ll find a typical Kohl’s – there are 1,164 stores in 49 states – in a standalone location in a well-to-do shopping center. Malls are not its thing.

If it strikes you as puzzling that Kohl’s has a cult following along the lines of Trader Joe's or Wegmans, then this story is for you. Current customers might even learn a hack or two, as we look into the nuts and bolts of shopping – and saving – at Kohl’s.

1.  Hand Over Your Personal Info:

Yes, you want to give them your name and email address. If you’re like me and tired of giving out your email address, you’ve stopped. But give it up for Kohl’s. It’s where the savings will start. You will also want to sign up for Kohl’s Yes2You Rewards. You can do it in-store or via the Kohl’s app (we’ll get to that later). It’s basically a 5% cash-back program. You garner points as you buy stuff. You will also get special discount offers throughout the year.

Give them your birthday, too. It pays off. You’ll get birthday discounts when your special day rolls around.

2.  Collect Kohl’s Cash:

Take advantage of Kohl’s Cash. Kohl’s Cash is, in essence, a coupon that you earn by shopping during a specified time period. It can be redeemed on a future purchase made during a corresponding redemption period. You get $10 worth of Kohl’s Cash for every $50 you spend after all discounts are applied and before sales tax. (Insider tip: Kohl’s will round up to $50 even if you only spend $48.) So, for example, if you shop between the 15th and 20th of the month, you can redeem the Kohl’s Cash you earn when you shop again between the 21st and 31st of the month.

3.  Download Kohl’s App:

Use it to store all of your Kohl’s coupons including Kohl’s Cash. Additionally, when fired up in-store, you can score 10 free Yes2You rewards points.

“Kohl's always has a coupon offer available and the app is the easiest way to make sure you always have the best coupons available when you walk into the store,” says Heather Schisler, founder of PassionForSavings.com, a coupon and deal website. “You can also use the bar-code scanner in the app to check the price of any item in the store.”

4.  In-Store Technology Is Your Friend:

Use the Kohl’s in-store kiosk. It’s like a self-checkout, except, in my Kohl’s experiences, it’s usually near the customer service counter in another part of the store. It has its savings perks – like free shipping anywhere in the U.S., straight to you or your friends and family (think birthday or holiday gifts).

While shopping at Kohl’s, connect to the free Wi-Fi. A coupon could come your way, typically in the range of $5 off a $25 purchase or $10 off a $30 purchase.

5.  Pile On The Coupons:

Kohl’s accepts multiple coupons for most purchases. Take advantage. “Kohl's coupon policy allows you to stack a dollar-off coupon (a $10 off $30 purchase coupon) with a percent-savings coupon (save 20% on your entire purchase). By using one of each type of coupon you can get double the savings,” says Schisler. “This is one of the best ways to save big when shopping at Kohl's.”

You can even use coupons on clearance items, which have already been marked down 60% or more. So if the clearance price is 80% off and you have a 30% off coupon, stack it, baby.

There’s a caveat to couponing at Kohl’s. Increasingly, more products are on the no-sale list, meaning you can’t use Kohl’s coupons and promotional offers to buy them. Count out most electronics, Keurig items and Nike goods. Check before you commit to a purchase.

6.  Read The Signs:

Electronic price tags on the shelves of Kohl’s stores are there to be easily changed by corporate to reflect new pricing. Learn to interpret the codes parked in the upper-left corner of the LCD readout. BB stands for Bonus Buy (meaning Kohl's bought a lot of these from a manufacturer at a ridiculously low price); BGH stands for Buy One, Get One Half Off; PP is Product Placement, meaning the sale price is fixed by the manufacturer or Kohl's and not discounted; and S stands for Sale, meaning that item will be on sale for up to two weeks. Is there a square in the upper-right corner of the electronic tag? That means the product is at its lowest price – until it goes on clearance.

7.  Know the Best Days and Times to Shop:

Start by playing the age card. If you’re 55 or older, you get a 15% discount every Wednesday in-store. And yes, that’s an offer that’s stackable with other discounts and promotions. Bring valid identification.

Night owls should shop on certain Fridays from 3 p.m. until closing time, when in-store and online specials are offered. Early birds get similar treatment on some Saturdays from opening until 1 p.m. Night Owl/Early Bird specials occur at least twice a month. Check your newspaper insert or Kohls.com for specific dates.

8.  Go Off-Aisle:

Kohl’s is experimenting with a new off-price concept, Off/Aisle by Kohl’s. The recently opened pilot stores in Wauwatosa and Waukesha, Wis., and the year-old store in Cherry Hill, N.J., sell overstock items as well as goods customers have returned to Kohl’s stores or Kohls.com. The heavily discounted merchandise has locked-in prices – meaning you can’t use Kohl’s discounts, offers, promotions, coupons or gift cards at Off/Aisle. And all sales are final, with no returns or exchanges. Kohl’s deemed the New Jersey store a big hit before opening the Wisconsin stores in June. Expect more.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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15 Worst States to Live in During Retirement

Here is a nice article provided by Stacy Rapacon of Kiplinger:


Number crunching alone can't tell you where to retire. That's a choice you'll ultimately need to make on your own. But identifying the places that hold the lowest appeal for retirees can at least help narrow your search.

We rated all 50 states based on quantifiable factors that are important to many retirees. Our rankings penalized states with high living expenses—especially taxes and health care costs—and rewarded states with relatively prosperous populations of residents age 65 and up. We also ranked states lower if their populations are medically unhealthy, or if the state has fiscal health problems (red ink in state budgets could lead to tax hikes and program spending cuts for seniors).

Using our methodology, the following 15 states rank as the least attractive for retirees. That doesn't make them terrible places to live. They might, indeed, be great states in which to work or raise a family. You might even choose to stick around in retirement simply to be close to your grandchildren. But in dollars-and-practical-sense terms, retirees might be better off looking to settle elsewhere.

The average health care cost in retirement of $387,731 we cite is a lifetime cost for a 65-year-old couple who are expected to live to 87 (husband) and 89 (wife). For a complete explanation of our methodology and our data sources, see the Methodology slide at the end of this slide show.

15.  Minnesota

Population: 5.4 million

Share of population 65+: 13.6% (U.S.: 14.5%)

Cost of living: 2% above the U.S. average

Average income for 65+ households: $43,623 (U.S.: $50,291)

Average health care costs for a retired couple: About average at $387,007 (U.S.: $387,731)

Minnesota's tax rating for retirees: Least Tax Friendly

The Land of 10,000 Lakes is a hard place for retirees to stay afloat. Above-average living expenses and below-average incomes can equate to imbalanced budgets in retirement. Plus, the tax situation adds an extra burden. One of the 10 Worst States for Taxes on Retirees, Minnesota taxes Social Security benefits the same as the feds. Most other retirement income, including military, government and private pensions, is also taxable. And the state's sales and income taxes are high.

On the other hand, Minnesota is a great place for health-focused retirees. The state is the third-healthiest in the country for seniors, according to the United Health Foundation rankings, which are based on people's behaviors, such as physical activity, as well as community support and clinical care provided. In fact, Rochester, home of the renowned Mayo Clinic, ranks seventh among the best small metro areas for successful aging, according to the Milken Institute, in part due to its abundance of health care providers.

14.  West Virginia

Population: 1.9 million

Share of population 65+: 16.8%

Cost of living: 3% below the U.S. average

Average income for 65+ households: $38,917

Average health care costs for a retired couple: Below average at $370,403

West Virginia's tax rating for retirees: Tax Friendly

Despite its below-average living costs and positive tax rating, the Mountain State offers some rocky terrain for retirees. According to a recent report from the Mercatus Center at George Mason University, West Virginia ranks as the eighth-worst state in terms of fiscal soundness, indicating low confidence that it can keep up with short-term expenses and long-term financial obligations.

The state also scores poorly for the health of its 65-and-over population, ranking 45th in the country, according to the United Health Foundation. While 41.8% of older adults nationwide enjoy excellent or very good health, only 29.5% of those in West Virginia can say the same.

13.  Maine

Population: 1.3 million

Share of population 65+: 17.0%

Cost of living: 6% above the U.S. average

Average income for 65+ households: $38,504

Average health care costs for a retired couple: Below average at $367,832

Maine's tax rating for retirees: Not Tax Friendly

The Pine Tree State can be a bit prickly when it comes to its retirees. While Social Security benefits are not subject to state taxes, most other retirement income is taxable. There's even an estate tax. Plus, the Mercatus Center at George Mason University ranks Maine as the ninth-worst state in the country in terms of fiscal soundness.

Individuals in the state may have an equally difficult time balancing their own budgets. With below-average household incomes, retirees may struggle to cover Maine's above-average living costs.

12.  Kentucky

Population: 4.4 million

Share of population 65+: 14.0%

Cost of living: 9% below the U.S. average

Average income for 65+ households: $39,935

Average health care costs for a retired couple: About average at $384,317

Kentucky's tax rating for retirees: Tax Friendly

Kentucky seniors suffer the third-worst state of health in the country, according to the United Health Foundation's rankings. Among its challenges are a high rate of smoking, limited access to low-cost, nutritious food, and a low number of quality nursing homes. Also, physical inactivity among residents age 65 and up has increased to 40.2% over the past two years, compared with a national rate of 33.1%.

The Bluegrass State does offer low living costs, as well as a number of tax breaks for retirees. Social Security benefits, as well as up to $41,110 of other retirement income, are exempt from state taxes. However, with a low ranking of 45th in the country for fiscal soundness, those tax benefits may not be very secure. Also, despite the state's overall affordability, plenty of older residents struggle to make ends meet: 11.4% of those age 65 and older are living in poverty, compared with 9.4% for the U.S. as a whole.

11.  Indiana

Population: 6.5 million

Share of population 65+: 13.6%

Cost of living: 4% below the U.S. average

Average income for 65+ households: $39,260

Average health care costs for a retired couple: About average at $388,954

Indiana's tax rating for retirees: Not Tax Friendly

With its below-average living expenses, Indiana might seem like a winner for retirees. But when you consider the well-below-average household income, the older residents of the Hoosier State start looking more like underdogs. And the tax situation doesn't help their cause much. Most retirement income other than Social Security benefits is taxable at ordinary rates.

The state's health ranking is also among the 10 worst in the country. Some of the challenges Indiana's older residents face are high rates of obesity, physical inactivity and premature deaths, according to the United Health Foundation.

10.  Wisconsin

Population: 5.7 million

Share of population 65+: 14.4%

Cost of living: 10% above the U.S. average

Average income for 65+ households: $37,673

Average health care costs for a retired couple: About average at $387,705

Wisconsin's tax rating for retirees: Mixed

High living costs and low average incomes can put a yoke on retirees in Wisconsin. In fact, the state's average household income for seniors is the second-lowest in the country, behind only Montana. The tax situation in the Badger State doesn't help, either. Social Security benefits are exempt from state taxes, but most other retirement income is subject to taxation (though there are some breaks for low-income residents).

If you can afford it, though, the state capital of Madison holds its charms for retirees, offering an abundance of quality health care facilities, as well as plenty of museums, libraries and the University of Wisconsin.

9.  Vermont

Population: 626,358

Share of population 65+: 15.7%

Cost of living: 19% above the U.S. average

Average income for 65+ households: $42,599

Average health care costs for a retired couple: Below average at $373,830

Vermont's tax rating for retirees: Least Tax Friendly

It's not easy being retired in the Green Mountain State. Exorbitantly high living costs and taxes weigh heavily on below-average incomes. Social Security benefits, as well as most other forms of retirement income, are subject to state taxes, and the top income tax rate is a steep 8.95% (which kicks in at $411,500 for both single and married filers).

On a positive note, Vermont boasts the healthiest seniors in the country, according to the United Health Foundation's rankings. Burlington, a small city on the shores of Lake Champlain, rates as a great place to retire thanks to beautiful surroundings that surely help boost physical activity and overall health among the locals.

8.  Montana

Population: 1.0 million

Share of population 65+: 15.7%

Cost of living: 1% above the U.S. average

Average income for 65+ households: $36,933

Average health care costs for a retired couple: Below average at $377,877

Montana's tax rating for retirees: Least Tax Friendly

Despite its Treasure State nickname, it can be hard to hold onto your fortune in Montana. Living costs are about average, but incomes are well below the norm. In fact, the average household income for residents age 65 and up is the lowest in the country. The tax situation certainly doesn't help. One of the 10 Worst States for Taxes on Retirees, Montana taxes most forms of retirement income, and the top rate of 6.9% kicks in once taxable income tops just $17,000.

Still, Big Sky Country seems to retain a large number of retirement-age folks: The state's 65-and-older population is 15.7%, compared with 14.5% for the U.S. The great (albeit cold) outdoors, including Yellowstone and Glacier national parks, may be what trumps the state's drawbacks for adventurous retirees. Great Falls, on the high plains of Montana's Rocky Mountain Front Range, proves particularly popular with the over-65 crowd, which makes up 16.1% of the metro area's population.

7.  Rhode Island

Population: 1.1 million

Share of population 65+: 15.1%

Cost of living: 13% above the U.S. average

Average income for 65+ households: $55,802

Average health care costs for a retired couple: Above average at $392,592

Rhode Island's tax rating for retirees: Least Tax Friendly

Tiny Rhode Island packs in big bills for older folks. On top of the above-average living costs, it's one of the 10 Worst States for Taxes on Retirees, taxing virtually all sources of retirement income at ordinary rates. (Note: Starting in 2016, the state will begin to give residents a break on Social Security taxes.) The state sales tax is 7%.

On the bright side, the above-average incomes for older residents can make those burdensome costs a bit more bearable.

6.  Massachusetts

Population: 6.7 million

Share of population 65+: 14.4%

Cost of living: 17% above the U.S. average

Average income for 65+ households: $61,436

Average health care costs for a retired couple: Above average at $413,007

Massachusetts's tax rating for retirees: Not Tax Friendly

The Bay State harbors some heavy costs for retirees. On top of the high overall living costs, the total a couple can expect to pay for health care throughout their retirement is the second-highest in the country, trailing only Alaska.

And though the average household income for seniors is high, taxes can take a big bite out of those earnings. Social Security benefits are exempt, but effective in 2016 most other retirement income is taxed at the state's flat rate of 5.1%.

5.  Illinois

Population: 12.9 million

Share of population 65+: 13.2%

Cost of living: 4% above the U.S. average

Average income for 65+ households: $51,079

Average health care costs for a retired couple: Above average at $398,927

Illinois's tax rating for retirees: Mixed

The Prairie State's fiscal standing has been sliding downward for years. Illinois has weighty long-term debts, large unfunded pension liabilities and big budget imbalances. All this puts it squarely at the bottom of the state rankings for fiscal soundness, according to George Mason University's Mercatus Center. In October 2015, ratings agency Fitch downgraded the state's credit rating to near-junk status.

On the plus side, the state doesn't tax distributions from a variety of retirement income sources, including 401(k) plans and individual retirement accounts. For now, that is. Given such a poor fiscal state, tax breaks are hardly assured, and higher taxes are on the table. Already, state and local sales taxes rise above a combined 10% in some areas, and they will be even higher effective July 1, 2016.

4.  Connecticut

Population: 3.6 million

Share of population 65+: 14.8%

Cost of living: 29% above the U.S. average

Average income for 65+ households: $63,726

Average health care costs for a retired couple: Above average at $402,594

Connecticut's tax rating for retirees: Least Tax Friendly

The Constitution State does little to promote the general welfare of its resident retirees. In fact, Connecticut ranks among the 10 tax-unfriendliest states for retirees. Real estate taxes are the second-highest in the country. Some residents face taxes on Social Security benefits, and most other retirement income is fully taxed, with no exemptions or tax credits to ease the burden. Because Connecticut ranks 47th out of all states for fiscal soundness, state taxes are not likely to go down any time soon.

All those taxes come on top of high living costs, the second-highest in the country, tied with New York and behind only Hawaii. One plus: Connecticut residents can often afford the costs. The state's average household income for seniors is the fourth-highest in the U.S., and its poverty rate for residents age 65 and older is a low 7.1%, compared with 9.4% for the U.S.

3.  California

Population: 38.1 million

Share of population 65+: 12.1%

Cost of living: 15% above the U.S. average

Average income for 65+ households: $62,003

Average health care costs for a retired couple: Above average at $394,831

California's tax rating for retirees: Least Tax Friendly

Another one of the 10 Worst States for Taxes on Retirees, the Golden State could be fool's gold as a retirement choice. Except for Social Security benefits, retirement income is fully taxed, and California imposes the highest state income tax rates in the nation (the top rate is 13.3% for single filers with $1 million incomes and joint filers with incomes above $1,039,374). The state sales tax combined with additional local levies can reach as high as 10%.

Everything seems bigger in California, including high living expenses. Indeed, plenty of older residents are unable to bear it: 1 in 10 Californians age 65 and over are living in poverty.

2.  New Jersey

Population: 8.9 million

Share of population 65+: 14.1%

Cost of living: 22% above the U.S. average

Average income for 65+ households: $66,409

Average health care costs for a retired couple: Above average at $403,420

New Jersey's tax rating for retirees: Least Tax Friendly

Retirees planning to plant themselves in the Garden State might want to reconsider. Both living costs and taxes in New Jersey take a big bite out of retirement nest eggs. The combined state and local tax burden is the second-highest in the nation. And it doesn't ease up after you die—the money you leave behind is subject to both an estate tax and inheritance tax (though there are exemptions for spouses and some others). Plus, with the second-worst ranking for fiscal soundness, behind only Illinois, the tax picture is unlikely to improve soon.

More bad news: New Jersey's living costs are the fourth-highest in the country, with retiree health care costs ranking third-highest in the nation. Still, residents seem to bear the burden well. The average income for 65-and-up residents is the third-highest in the U.S., and the poverty rate for the age group is a low 7.9%.

1.  New York

Population: 19.6 million

Share of population 65+: 14.1%

Cost of living: 29% above the U.S. average

Average income for 65+ households: $63,174

Average health care costs for a retired couple: Above average at $397,107

New York's tax rating for retirees: Least Tax Friendly

One (pricey) Big Apple spoils the entire Empire State. Manhattan reigns as the most expensive place to live in the U.S., with costs soaring 127.4% above the national average, according to the Council for Community and Economic Research. New York sports the second-highest living costs of any state, behind only Hawaii.

Despite boasting an average income for residents age 65 and older that's among the top five in the country, the same age group suffers a poverty rate of 11.4%, worse than the national 9.4% rate.

Worst States for Retirement 2016

Our Methodology

To rank all 50 states, we weighed a number of factors:

Taxes on retirees, based on Kiplinger's Retiree Tax Map, which divides states into five categories: Most Tax Friendly, Tax Friendly, Mixed, Not Tax Friendly and Least Tax Friendly.

Cost-of-living, with data provided by FindTheData.com.

Average health care costs in retirement are from HealthView Services and include Medicare, supplemental insurance, dental insurance and out-of-pocket costs for a 65-year-old couple who are both retired and are expected to live to 87 (husband) and 89 (wife). With a national average of $387,731, the average couple can expect to spend about $8,400 per person per year in retirement on health care costs. Note: Some of the worst states for retirees have less than average costs in this category, a positive factor for most retirees, but other factors drove the lower rankings.

Rankings of each state's economic health are provided by the Mercatus Center at George Mason University and are based on various factors including state governments' revenue sources, debts, budgets and abilities to fund pensions, health-care benefits and other services.

Rankings of the health of each state's population of residents 65 and over are from the United Health Foundation and are based on 35 factors ranging from residents' bad habits (smoking and excessive drinking) to the quality of hospital and nursing home care available in the state.

Household incomes and poverty rates are from the U.S. Census Bureau. While many of the worst states for retirees in our rankings have above-average household incomes, high average living costs in those states tend to offset the higher incomes.

Final note: Population data, including the percentage of the population that is age 65 and older, is also provided by the Census data. They are highlighted in these rankings, but were not a factor in our methodology for ranking the states. We provided this additional information for readers to decide for themselves whether they are important factors. Some retirees may want to live in states with higher-than-average retiree populations. For others, this isn't important.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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10 Worst States for Taxes on Your Retirement Nest Egg

Here is a nice article provided by Sandra Block of Kiplinger:


Retirees have special concerns when evaluating state tax policies. For instance, the mortgage might be paid off, but how bad are the property taxes—and how generous are the property-tax breaks for seniors? Are Social Security benefits taxed? What about other forms of retirement income—including IRAs and pensions? Does the state impose its own estate tax that might subtract from your legacy? The answers might just determine which side of the state border you’ll settle on in retirement.

These 10 states impose the highest taxes on retirees, according to Kiplinger’s exclusive 2016 analysis of state taxes. Three of them treat Social Security benefits just like Uncle Sam does—taxing as much as 85% of your benefits. Exemptions for other types of retirement income are limited or nonexistent. Property taxes are on the high side, too. And if that weren’t bad enough, some of these states are facing significant financial problems that could force them to raise taxes, cut services, or both.

10.  Utah:

State Income Tax: 5% flat tax

Average State and Local Sales Tax: 6.69%

Estate Tax/Inheritance Tax: No/No

The Beehive State joins our list of least tax-friendly states this year, replacing Rhode Island (which no longer taxes Social Security benefits for residents with adjusted gross income of as much as $80,000/individual, $100,000/joint).

Utah offers few tax breaks for retirees. Income from IRAs, 401(k)s, pensions and Social Security benefits is taxable at the 5% flat tax rate. The state does offer a retirement-income tax credit of as much as $450 per person ($900 for a married couple). The credit is phased out at 2.5 cents per dollar of modified adjusted gross income over $16,000 for married individuals filing separately, $25,000 for singles and $32,000 for married people filing jointly.

On the plus side, property taxes are modest. Median property tax on the state's median home value of $223,200 is $1,480, 11th-lowest in the U.S.

9.  New York:

State Income Tax: 4.0% (on taxable income as much as $8,450/individual, $17,050/joint) – 8.82% (on taxable income greater than $1,070,350/individual, $2,140,900/joint)

Average State and Local Sales Tax: 8.49%

Estate Tax/Inheritance Tax: Yes/No

New York doesn’t tax Social Security benefits or public pensions. It also excludes as much as $20,000 for private pensions, out-of-state government pensions, IRAs and distributions from employer-sponsored retirement plans. New York allows localities to impose an additional income tax; the average local levy is 2.11%, per the Tax Foundation.

The Empire State also has some of the highest property and sales tax rates in the U.S. Food and prescription and nonprescription drugs are exempt from state sales taxes, as are greens fees, health club memberships, and most arts and entertainment tickets.

The median property tax on the state's median home value of $279,100 is $4,703, the 10th-highest rate in the U.S.

While New York has an estate tax, a law that took effect in 2015 will make it less onerous. Estates exceeding $4,187,500 are subject to estate tax in fiscal year 2016–2017, with a top rate of 16%. The exemption will rise by $1,062,500 each April 1 until it reaches $5,250,000 in 2017. Starting Jan. 1, 2019, it will be indexed to the federal exemption. But if you’re close to the threshold, get a good estate lawyer, because New York has what’s known as a "cliff tax." If the value of your estate is more than 105% of the current exemption, the entire estate will be subject to state estate tax.

8.  New Jersey:

State Income Tax: 1.4% (on as much as $20,000 of taxable income) – 8.97% (on taxable income greater than $500,000)

Average State and Local Sales Tax: 6.97%

Estate Tax/Inheritance Tax: Yes/Yes

The Garden State's tax policies create a thicket of thorns for some retirees.

Its property taxes are the highest in the U.S.The median property tax on the state's median home value of $313,200 is $7,452.

While Social Security benefits, military pensions and some retirement income is excluded from state taxes, your other retirement income could be taxed as high as 8.97%. And New Jersey allows localities to impose their own income tax; the average local levy is 0.5%, according to the Tax Foundation.

Residents 62 or older may exclude as much as $15,000 ($20,000 if married filing jointly) of retirement income, including pensions, annuities and IRA withdrawals, if their gross income is $100,000 or less. However, the exclusion doesn’t extend to distributions from 401(k) or other employer-sponsored retirement plans.

New Jersey is one of only a couple of states that impose an inheritance and an estate tax. (An estate tax is levied before the estate is distributed; an inheritance tax is paid by the beneficiaries.) In general, close relatives are excluded from the inheritance tax; others face tax rates ranging from 11% to 16% on inheritances of $500 or more. Estates valued at more than $675,000 are subject to estate taxes of up to 16%. Assets that go to a spouse or civil union partner are exempt.

Proposals to increase the state’s estate-tax threshold—the lowest in the U.S.—to levels that would ensnare fewer estates have been derailed by the state’s financial woes. George Mason University’s Mercatus Center ranks New Jersey 48th in its analysis of states’ fiscal health.

7.  Nebraska:

State Income Tax: 2.46% (on taxable income as much as $3,060/individual, $6,120/joint) – 6.84% (on taxable income greater than $29,590/individual, $59,180/joint)

Average State and Local Sales Tax: 6.87%

Estate Tax/Inheritance Tax: No/Yes

The Cornhusker State taxes Social Security benefits, but new rules that took effect in 2015 will exempt some of that income from state taxes. Residents can subtract Social Security income included in federal adjusted gross income if their adjusted gross income is $58,000 or less for married couples filing jointly or $43,000 for single residents.

Nebraska taxes most other retirement income, including retirement-plan withdrawals and public and private pensions. And the state’s top income-tax rate kicks in pretty quickly: It applies to taxable income above $29,590 for single filers and $59,180 for married couples filing jointly.

Food and prescription drugs are exempt from sales taxes. Local jurisdictions can add an additional 2% to the state rate.

The median property tax on the state's median home value of $133,800 is $2,474, the seventh-highest property-tax rate in the U.S.

Nebraska's inheritance tax is a local tax, ranging from 1% to 18%, administered by counties. Assets left to a spouse or charity are exempt.

6.  California:

State Income Tax: 1% (on taxable income as much as $7,850/individual, $15,700/joint) – 13.3% (on taxable income greater than $1 million/individual, $1,052,886/joint)

Average State and Local Sales Tax: 8.48%

Estate Tax/Inheritance Tax: No/No

California exempts Social Security benefits, but all other forms of retirement income are fully taxed. That’s significant, because residents of the Golden State pay the third-highest effective income tax rate in the U.S.

Early retirees who take withdrawals from their retirement plans before age 59½ pay a 2.5% state penalty on top of the 10% penalty imposed by the IRS.

At 7.5%, state sales taxes are the highest in the country, and local taxes can push the combined rate as high as 10%.

The median property tax on the state's median home value of $412,700 is $3,160.

5.  Montana:

State Income Tax: 1% (on as much as $2,900 of taxable income) – 6.9% (on taxable income greater than $17,400)

Average State and Local Sales Tax: None

Estate Tax/Inheritance Tax: No/No

You won’t pay sales tax to shop in the Treasure State, but that may be small comfort when you get your state tax bill.

Montana taxes most forms of retirement income, including Social Security benefits, and its 6.9% top rate kicks in once your taxable income exceeds a modest $17,400.

Montana allows a pension- and annuity-income exemption of as much as $3,980 per person if federal adjusted gross income is $35,180 ($37,170 if filing a joint return) or less. If both spouses are receiving retirement income, each spouse can take up to the maximum exemption if the couple falls under the income threshold. Montana also permits filers to deduct some of their federal income tax.

The median property tax on the state's median home value of $196,800 is $1,653, below average for the U.S.

4.  Oregon:

State Income Tax: 5% (on taxable income as much as $3,350/individual, $6,700/joint) – 9.9% (on taxable income greater than $125,000/individual, $250,000/joint)

Average State and Local Sales Tax: None

Estate Tax/Inheritance Tax: Yes/No

...
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10 Things That Will Soon Disappear Forever

Here is a nice article provided by David Muhlbaum and John Miley of Kiplinger:


Ten years ago, thousands of Blockbuster Video stores occupied buildings like this all over the country, renting DVDs and selling popcorn. Today, all but a handful are closed. The company’s shares once traded for nearly $30. Now Blockbuster is gone, scooped up (and then erased) by the DISH Network in a bankruptcy auction.

Obsolescence isn’t always so quick or so complete, but emerging technologies and changing practices are sounding the death knell for other familiar items. Check out these 10 that we’ll be saying goodbye to soon.

1.  Keys: Keys, at least in the sense of a piece of brass cut to a specific shape, are going away. At the office, most of us already use a card with a chip embedded to get access. But for getting into your house (and your car), the technology that will kill off the key is your smart phone. Connecting either via Bluetooth or the Internet, your mobile device will be programmed to lock and unlock doors at home, at the office and elsewhere. The secure software can be used on any mobile device. So if your phone runs out of juice, you’ll be able to borrow someone else’s device and log in with a fingerprint or facial scan. Phone stolen? Simply log in and change the digital keys. Kwikset, a brand of Spectrum Brands (SPB), offers the Kevo, and lock veterans Yale have partnered with Nest, now owned by Alphabet (GOOGL), to create the Yale Linus.

For the car, a variety of "connected car" services such as Audi Connect and GM's OnStar already let you unlock and lock the car remotely and even start it with a phone app — but you still need your keyfob to drive off. Next up: Ditching the keyfob entirely. Volvo says it plans to implement this in 2017.

2.  Blackouts: Frustrating power outages that leave people with fridges full of ruined food are on their way out as our electrical grid becomes increasingly intelligent – and resilient.

Two factors are at work: slow, incremental “smart grid” improvements to the system that delivers electricity, and the rapidly expanding use of solar energy in homes and business.

The breakthrough product here is the home battery. Developed by electric-car maker Tesla (TSLA) and others, by 2020, batteries will be cheap enough to store surplus solar power during the day and discharge it overnight, helping to better balance electricity supply and demand – and run a home for up to days during a blackout. LED lighting and more efficient appliances are helping, too, by reducing load on the system, whether the grid is or a backup system is running.

Utilities are also deploying huge banks of batteries, from suppliers like AES (AES), in storm-prone areas to make sure the power stays on for everyone.

3.  Fast-Food Workers: Burger-flippers have targets on their backs as fast-food executives are eager to replace them with machines, particularly as minimum wages in a variety of states are set to rise to $15.

Diners will notice reduced staffing up front as outlets such as Panera (PNRA) turn to touch-screen kiosks for order placing. Behind the scenes in the kitchen, industry giants like Middleby Corp. (MIDD) and boutique startups like San Francisco's Momentum Machines are all hard at work for devices that will take on tasks like loading and unloading dishwashers, flipping burgers, and cooking french fries.

Humans won't be totally out of the picture — the machines will require supervision and maintenance, and dissatisfied customers will need appeasing. But jobs will plummet.

4.  The Clutch Pedal: very year it seems that an additional car model loses the manual transmission option. Even the Ford F-150 pickup truck can’t be purchased with a stick anymore.

The decline of the manual transmission (in the U.S.) has been decades in the making, but two factors are, ahem, accelerating its demise:

Number one: Automatics, developed by firms such as Borg-Warner (BWA), ZF Friedrichshafen and Aisin, are getting more efficient, with up to nine gear ratios, allowing engines to run at the lowest, most economical speeds. Many Mazdas and some BMWs, among others, now score better fuel mileage with an automatic than with a stick.

Number two: Among high-performance cars, such as Porsches, “automated” manual shifts are taking hold. They use electronics to control the clutch instead of your left foot. You can select the gears with paddles, or just let the computer take care of that, too. The result: Shifting is faster than even for the most talented clutch-and-stick jockey, improving the cars' acceleration numbers. Plus, the costs on these are coming down, and they can now be found in less-expensive sporty cars, such as the Golf GTI.

Even the biggest of highway trucks are abandoning the clutch and stick for automatics, for fuel-efficiency gains and to attract drivers who won’t need to learn how to grind their way through 18-plus gears.

Some price-leader economy models, such as the Nissan Versa and Ford Fiesta, will list manuals on their cheapest configurations (though few will actually sell), and a segment of enthusiast cars, such as the Ford Mustang and Mazda Miata MX-5, will continue to offer the traditional three-pedal arrangement for some years to come. “It will be reserved for the ‘driver’s vehicle,’” says Ivan Drury, an analyst for Edmunds.com. But finding one will be a challenge — those holdout drivers had better be prepared to special-order their clutch cars.

5.  College Textbooks: By the end of this decade, digital formats for tablets and e-readers will displace physical books for assigned reading on college campuses, The Kiplinger Letter is forecasting. K–12 schools won’t be far behind, though they’ll mostly stick with larger computers as their platform of choice.

Digital texts figure to yield more bang for the buck than today’s textbooks. Interactive software will test younger pupils’ mastery of basic skills such as arithmetic and create customized lesson plans based on their responses. Older students will be able to take digital notes and even simulate chemistry experiments when bricks-and-mortar labs aren’t handy.

This is a mixed bag for publishers. They’ll sell more digital licenses of semester- or yearlong usage of electronic textbooks as their customers can’t turn to the used-book marketplace anymore. On the other hand, schools are seeking free online, open-source databases of information and collaborating with other institutions and districts to develop their own content on digital models, cutting out traditional educational publishers such as Pearson (PLO), McGraw-Hill and Scholastic (SCHL).

6.  Dial-Up Internet: If you want to hear the once-familiar beeps and whirs of a computer going online through a modem, you will soon need to do that either in a museum or in some very, very remote location.

According to a study from the Pew Foundation, only 3% of U.S. households went online via a dial-up connection in 2013. Thirteen years before that, only 3% had broadband (Today, 70% have home broadband). Massive federal spending on broadband initiatives, passed during the last recession to encourage economic recovery, has helped considerably.

Some providers will continue to offer dial-up as an afterthought for those who can’t or don’t want to connect via cable or another broadband means. But a number of the bigger internet service providers, such as Verizon Online, have quit signing up new dial-up subscribers altogether.

7.  The Plow: Few things are as symbolic of farming as the moldboard plow, but the truth is, the practice of “turning the soil” is dying off.

Modern farmers have little use for it. It provides a deep tillage that turns up too much soil, encouraging erosion because the plow leaves no plant material on the surface to stop wind and rain water from carrying the soil away. It also requires a huge amount of diesel fuel to plow, compared with other tillage methods, cutting into farmers' profits. The final straw: It releases more carbon dioxide into the air than other tillage methods.

Deep plowing is winding down its days on small, poor farms that can't afford new machinery. Most U.S. cropland is now managed as "no-till" or minimum-till, relying on herbicides and implements such as seed drills that work the ground with very little disturbance. Even organic farmers have found ways to minimize tillage, using cover crops rather than herbicides to cut down on weeds. Firms like John Deere (DE) offer a range of sophisticated devices for these techniques.

8.  Your Neighborhood Mail Collection Box: The amount of mail people are sending is plummeting, down 57% from 2004 to 2015 for stamped first-class pieces. So, around the country, the U.S. Postal Service has been cutting back on those iconic blue collection boxes. The number has fallen by more than half since the mid 1980s. Since it costs time and fuel for mail carriers to stop by each one, the USPS monitors usage and pulls out boxes that don't see enough traffic.

Some boxes will find new homes in places with greater foot traffic, such as shopping centers, public transit stops and grocery stores. But on a quiet corner at the end of your street? Better dump all your holiday cards and summer-camp mail in them, or prepare to say goodbye.

9.  Your Privacy: If you are online, you had better assume that you already have no privacy and act accordingly. Every mouse click and keystroke is tracked, logged and potentially analyzed and eventually used by Web site product managers, marketers, hackers and others. To use most services, users have to opt-in to lengthy terms and conditions that allow their data to be crunched by all sorts of actors.

The list of tracking devices is set to boom, as sensors are added to appliances, lights, locks, HVAC systems and even trash cans. Other innovations: Using Wi-Fi signals, for instance, to track movements, from where you're driving or walking down to your heartbeat. Retailers will use the technology to track in minute detail how folks walk around a store and reach for products. Also, facial-recognition software that can change display advertising to personalize it to you (time for a mask?). Transcription software will be so good that many businesses will soon collect mountains of phone-conversation data to mine and analyze.

And think of this: Most of us already carry around an always-on tracking device for which we usually pay good money — a smart phone. Your phone is loaded up with sensors and GPS data. Is it linked to a FitBit perhaps? Now it has your health data.

One reason not to fret: Encryption methods are getting better at walling off at least some aspects of our digital lives. But living the reclusive life of J.D. Salinger might soon become real fiction.

10.  The Incandescent Lightbulb: No, government energy cops are not coming for your bulbs. But the traditional incandescent lightbulb that traces its roots back to Thomas Edison is definitely on its way out. As of January 1, 2014, the manufacture and importation of 40- to 100-watt incandescent bulbs became illegal in the U.S., part of a much broader effort to get Americans to use less electricity.

Stores can still sell whatever inventory they have left, but once the hoarders have had their run, that’s it. And with incandescent bulbs burning for only about 1,000 hours each, eventually they’ll flicker out.

The lighting industry has moved forward with compact fluorescents, halogen bulbs, and most recently and successfully, bulbs that use light-emitting diodes (LEDs), and General Electric (GE) and Sylvania have found themselves sharing shelf space with newer firms like Cree (CREE) and Feit.

Soon, the only places you'll still see the telltale glow of a tungsten filament in a glass vacuum will be in three-way bulbs (such as the 50/100/150 watt), heavy-duty and appliance bulbs, and some decorative bulbs.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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The Power of Markets

Here is a nice article written by Dimensional Fund Advisors:


Markets do a remarkable job of allocating resources, and financial markets allocate a specific resource: financial capital. A classic economic story helps illustrate this concept and explains that investors would be well served in pursuing an investment strategy that harnesses the extraordinary collective power of market prices.  READ MORE HERE: 

The Power of Markets.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Your Plan's Vesting Schedule: Tailor It to Meet Your Needs

A retirement plan's vesting schedule, which establishes when employer contributions to the plan will be owned outright by the employee, plays a role in how effective the plan is in helping to attract and retain employees. Employers will want to carefully consider their goals and the available options when selecting a vesting schedule for their plan.

Common Vesting Schedules

The simplest schedule -- from an administrative perspective -- is to allow immediate vesting in 100% of the employer contributions allocated to the employee. However, immediate vesting offers little incentive for employees to stay with the company and therefore may become more counterproductive as the rates of employee turnover increase.

For this reason, sponsors concerned about employee retention often turn to a delayed vesting schedule. Instead of allowing 100% vesting up front, they seek to maximize employee retention by tying the vesting percentage to the participant's years of service.

Generally, for defined contribution plans, such as 401(k) plans, delayed vesting is available in two forms: "cliff" vesting and "graded" vesting. With cliff vesting, a participant becomes 100% vested after a specific period of service. With graded vesting, a participant becomes vested at a percentage amount that gradually increases until he or she accrues enough years of service to be 100% vested. (It should be noted that an employee's own contributions to the plan are always 100% vested, or owned, by the employee.)





Employers may choose a schedule that provides for vesting at a more rapid rate than those shown above, but they may not adopt a schedule that provides for less rapid vesting.

How do employers calculate years of service? A year of service is any vesting computation period in which the employee completes the number of hours of service (not exceeding 1,000) required by the plan. Typically, the vesting computation period is the plan year, but it may be any other 12-consecutive-month period.

Are all employer contributions subject to a vesting schedule? Several types of employer contributions must always be 100% vested. These include both non-elective and matching contributions in a SIMPLE 401(k) plan or a "safe harbor" 401(k) plan.

Can vesting schedules be changed? Generally, a vesting schedule may be changed, but the vested percentage of the existing participants may not be reduced by the amended schedule. Moreover, an employee with three or more years of service by the end of the applicable election period can choose to select the previous vesting schedule. The election period begins no later than the date of adoption of the amended schedule and ends on the latest of the following dates:

•  Sixty days after the modified vesting schedule is adopted;

•  Sixty days after the modified vesting schedule is made effective; or

•  Sixty days after the participant is provided a written notice of the change in vesting schedule.

What situations would cause vesting of an employee's entire balance? In certain circumstances, the participant's interest in a 401(k) plan is required by law to be 100% vested. These circumstances include attainment of normal retirement age (as defined in the plan), termination or partial termination of the plan, and complete discontinuance of contributions to the plan. Additionally, though not required by law, nearly all 401(k) plans provide for 100% vesting upon the participant's death or disability.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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What Can a Dollar Buy? Depends on Where You Live

You know that $25,000 car you've had your eye on? In just 10 years, it could cost almost $34,000, assuming prices rise by a mere 3% per year. That's the reality of inflation, which is commonly understood as the increase in the price of any product or service.

While the consumer price index (CPI), which is based on a monthly survey by the U.S. Bureau of Labor Statistics, serves as the standard measure of inflation nationwide, prices on all sorts of goods and services -- from a gallon of gasoline to a house -- can vary widely by region, state, and even within states.

Such variations are captured by Regional Price Parities (RPPs), which measure the differences in the price levels of goods and services across states and metropolitan areas for a given year.1 RPPs are expressed as a percentage of the overall national price level (gleaned from the CPI) equal to 100.2

For instance, if an area's RPP is greater than 100, it means that goods and services are more expensive than the national average; if an area's RPP is less than 100, goods and services are less expensive than the national average.2

In July the Bureau of Economic Analysis published RPPs for 2014. The data showed that the District of Columbia's RPP at 118.1 was greater than that of any state. States with the highest RPPs -- and lowest "real value" of a dollar -- were Hawaii (116.8), New York (115.7), New Jersey (114.5), and California (112.4).1 States with the lowest RPPs -- hence, the biggest bang for your buck -- were Mississippi (86.7), Arkansas (87.5), Alabama (87.8), South Dakota (88.0), and Kentucky (88.7).1

How do these price differences play out in real dollars and cents? The same gallon of regular gas that costs $2.74 in Hawaii might run you $1.82 in South Carolina.3 Or, viewed another way, if you had $100 to spend at a store offering a range of goods at national-average prices, in Hawaii, that $100 would feel more like $85.60, while in Mississippi the national-average $100 would be more like $115.30.3

The Bureau of Labor Statistics asserts that in areas where goods and services are more expensive, wages tend to follow suit -- but that is not always the case.2

Be a Savvy Shopper -- Wherever You Live

Regardless of where you live, consider some simple dollar-stretching tips.

•  Cut back on nickel-and-dime items. You might be surprised at how much you can save by reducing out-of-pocket expenses. Instead of indulging on a "designer" cup of coffee, purchase a regular coffee. The amount saved can add up fast.

•  Save on books, music, and movies. Visit your neighborhood library to check out books and music instead of purchasing your own.

•  Brown bag meals. Work days can be hectic, but instead of buying breakfast or lunch out, carry it in. If you spend $8 per day on lunch, you could free up $160 per month for your long-term financial goals.

•  Seek travel values. By traveling off-season or during the shoulder season -- the periods just before or after the peak tourist season -- you can receive discounted rates on lodging and airfares, which can cut your vacation expenses.

•  Practice energy efficiency. By turning the thermostat back in winter while you're at work or sleeping, you can save on your heating bills. Same for the air conditioner in hot summer months.

•  Be creative. Can't imagine skipping your daily trip to the vending machine? Don't fret. The main point is to look for effective ways to stretch a dollar -- and then do it. Over time, you might find that a little savings can make a big difference when it comes to funding your bigger ticket financial goals.

Sources:

1.  The Bureau of Economic Analysis, news release, "Real Personal Income for States and Metropolitan Areas, 2014," July 7, 2016.

2.  The Bureau of Labor Statistics, Monthly Labor Review, "Purchasing power: using wage statistics with regional price parities to create a standard for comparing wages across U.S. areas," April 2016.

3.  The New York Times, "What $100 Can Buy State by State," August 8, 2016.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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When Employees Leave, but Plan Accounts Stay

Work force reductions may leave some employers with low-balance plan accounts owned by former employees. These accounts can be expensive to maintain and burdensome to administer. Below, you will find answers to commonly asked questions about handling these small accounts.

Can we just distribute small accounts to the former employees? Check your plan's provisions. Under federal law, plans can provide that, if a former employee has not made an affirmative election to receive a distribution of his or her account assets or to roll those assets over to an IRA or another employer's plan, the plan can distribute the account - as long as its balance does not exceed $5,000. For accounts valued at $1,000 or less, the plan can simply send the former employee a check for his or her balance. Distributions of more than $1,000 must be directly transferred to an IRA set up for the former employee. Accounts valued at $1,000 or less may also be rolled over for administrative convenience.

Should non-vested assets be included when determining whether a mandatory distribution can be made? You only have to include the value of the former employee's non-forfeitable accrued benefit. If the employee was not fully vested in any portion of the account when he or she left your employ, you do not have to count the non-vested portion.

What about rollovers? A plan may provide that any amounts that a former employee rolled over from another employer's plan (and any earnings on those rolled over assets) are to be disregarded in determining the employee's non-forfeitable accrued benefit. Thus, you may be able to cash out and roll over accounts greater than $5,000. Note that rolled over amounts are included in determining whether a former employee's accrued benefit is greater than $1,000 for purposes of the automatic rollover requirement.

What requirements do we have to meet when rolling over a small account? To fulfill your fiduciary duties as a plan sponsor, the following requirements must be met:

•  The rollover must be a direct transfer to an IRA set up in the former employee's name.

•  The IRA provider must be a state or federally regulated financial institution, such as an FDIC-insured bank or savings association or an FCUA-insured credit union; an insurance company whose products are protected by a state guaranty association; or a mutual fund company.

•  You must have a written agreement with the IRA provider that addresses appropriate account investments and fees.

•  The IRA provider cannot charge higher fees than would be charged for a comparable rollover IRA.
(Other fiduciary responsibilities apply.)

Are there rules for investing the rollover IRA? The investments chosen for the IRA must be designed to preserve principal and provide a reasonable rate of return and liquidity. Examples include money market mutual funds, interest-bearing savings accounts, certificates of deposit, and stable value products.

Do we have to provide disclosures? Yes. Before you cash out an account, you must notify the former employee in writing, either separately or as part of a rollover notice, that, unless the employee makes an affirmative election to receive a distribution of his or her account assets or rolls them over to another account, the distribution will be paid to an IRA. As long as you send the notice to the former employee's last known mailing address, the notice requirement generally will be considered satisfied. In addition, you must include a description of the plan's automatic rollover provisions for mandatory distributions in the plan's summary plan description (SPD) or summary of material modifications (SMM).

"For accounts valued at $1,000 or less, the plan can simply send the former employee a check for his or her balance."


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Millennials: On Investing and Retirement

Move over Baby Boomers. These days all eyes are on Millennials, those young adults between the ages of 18 and 34 who are now America's largest living generation.1 According to the U.S. Census Bureau, Millennials in the United States number more than 75 million -- and the group continues to expand as young immigrants enter 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 that 59% of Millennials are uncomfortable about investing due to current economic conditions.2 Another study revealed that just one in three Millennials own stock, compared with nearly half of Generation-Xers and Baby Boomers.3

On the Retirement Front

How might this discomfort with investing manifest itself when it comes to saving for retirement -- a goal for which time is on Millennials' side? According to new research into the financial outlook and behaviors of this demographic group, 59% have started saving for retirement, yet nearly two-thirds (64%) of working Millennials say they will not accumulate $1 million in their lifetime. Of this group, half have started saving for retirement -- 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 income that is about twice that -- $53,000 -- of the naysayers. Three out of four have started saving for retirement and two-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 student loan debt burden -- a median of $19,978 for the 34% who have student loan debt -- Millennials are still charting 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 today encourages 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.
 
Source(s):

1.  Pew Research Center, "Millennials overtake Baby Boomers as America's largest generation," April 25, 2016.

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

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

Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Identity Theft and Taxes

Identity theft is one of the fastest growing crimes in America affecting millions of unsuspecting individuals each year. A dishonest person who has your Social Security number can use it to obtain tax and other financial and 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 records at 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 employers or landlords.

Tax-related identity theft occurs when a thief uses your Social Security number to file a tax return and claim a fraudulent tax refund. In 2015 alone, the IRS stopped 1.4 million confirmed identity theft tax returns, protecting $8.7 billion in taxpayer refunds.1 The IRS has become increasingly diligent in its efforts to thwart identity theft with a program of prevention, detection, and victim assistance. The "Taxes. Security. Together." program is aimed at building awareness among taxpayers about the need to protect personal data when 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 your personal information safe. Here are a few tips to consider:

•  Protect your information. Keep your Social Security card and any other documents that show your Social 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 from a trusted source such as a credit card company, bank, retailer, or even the IRS. Many of these emails will direct you to a phony website that will ask you to input sensitive data, such as your account numbers, passwords, and Social Security number.

•  Safeguard your computer. Make sure your computer is equipped with firewalls and up-to-date anti-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 and change them routinely.

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

•  Be careful when banking or shopping online. Be sure to use websites that protect your financial information 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 search engines, such as Yahoo and Bing. This will help you identify potential theft sources and will also help you 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 was already 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 IRS Form 14039 Identity Theft Affidavit from the IRS website and include it with your tax return.

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

•  Contact one of the three national credit reporting agencies -- Experian, Transunion, or Equifax and 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 you will 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 special section devoted to the topic.


Source:

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


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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When Planning, Focus More on Goals Less on Numbers

Financial planning is a complex, lifelong process that people tend to approach with a numbers orientation. What rate of return do I need to reach my goal? How much insurance do I need? Can I afford a bigger house? How much money do I need to save for retirement?

To support their pursuit of the "right numbers," people often use separate advisors -- for instance, a banker, a financial planner, an insurance agent, a tax professional, and an estate planning attorney -- to oversee the various components of their household wealth. But can too many cooks spoil the broth?

This "siloed" approach to financial planning can easily lead to redundant investment strategies that could create exposure to unnecessary levels of risk. It may also result in multiple, random investment accounts in need of consolidation. Furthermore, such an approach may inadvertently overlook crucial tools, leaving entire planning areas to chance.

Unlocking Financial Synergies

When viewing their financial goals -- such as buying a home, paying for a child's education, or saving for retirement -- individuals typically think in terms of what those goals cost rather than how achieving them might affect their lives. If, however, they were to re-engineer the planning process and assess their current life issues and future aspirations prior to selecting investments and asset allocation strategies, they may be in a better position to achieve satisfactory outcomes. Perhaps equally important, by putting life circumstances at the center of financial decision-making, individuals may find more meaning in their actions with regard to money.

Indeed, values have a significant role to play in determining how individuals manage their assets. This is one way in which a holistic approach to "financial life planning" enables individuals to better assess their wants and needs, establish meaningful priorities, and avoid misguided investments. And, as life circumstances and priorities change -- as they inevitably will -- so too do financial goals. In this way, individuals employing a holistic approach to planning can easily identify and address those areas of their financial lives that are still working well and those that may be hindering their financial well-being.

Crafting a Plan

Crafting a plan that reflects your unique situation and that ties your life aspirations to your financial goals is part art, part science. To achieve this level of planning you need to rely on the guidance of a single skilled advisor -- someone who will take the time to get to know you and your circumstances and who will put together an appropriate combination of vehicles, strategies and, where appropriate, additional planning professionals to help achieve your goals -- whatever they may be.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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What Motivates Your Investment Moves?

When the stock market falls sharply as it did following the recent Brexit Referendum in the United Kingdom, it is not unusual for investors to react emotionally -- to act on impulse before thinking through the potential long-term consequences. Why does emotion sometimes cloud your judgment when it comes to making investment decisions? The answer may be found in the study of "behavioral finance."

Scholars of behavioral finance believe that investors are too often influenced by psychological or emotional impulses that run contrary to the fundamental principles of long-term planning. But the study of behavioral finance involves more than pointing fingers at past mistakes. Its proponents encourage investors to develop skill in recognizing situations that may lead them to make emotionally driven errors, so those errors may be avoided in the future.

Investor, Know Thyself

Behavioral psychologists have identified several common behaviors that may be exhibited by investors. See if you recognize yourself in any of these examples.

Fear of Regret/Risk Aversion -- The threat of a potential disappointment or a short-term loss is a powerful force that often inspires second-guessing of portfolio strategies. Common responses are to avoid investing altogether, to hold on to a losing stock for far too long in the hopes that it will bounce back one day, or to sell winners too soon -- before they may have reached their full potential.

Overconfidence -- Some investors tend to overestimate their knowledge and skills. For instance, they may overload their portfolio with stocks of a certain sector or geographic region they know well, because they are confident of their ability to understand and track these investments. As a result, they may tend to trade more actively than is in their best interest.

In addition, overconfidence may lead to irrational expectations and, ultimately, to a financial shortfall. For example, the Employee Benefit Research Institute's 2016 Retirement Confidence Survey revealed that a majority (63%) of workers are "very" or "somewhat" confident that they will have enough money to live comfortably throughout retirement, even though fewer than half have actually tried to calculate how much money they would need.1 In other words, many people may have a false sense of security based on incomplete knowledge of their situation.

Anchoring -- This behavior involves reading too much into recent events, despite the fact that those events may not reflect long-term realities or statistical probabilities. For example, investors who believe that a market surge (or downturn) will continue indefinitely may be anchoring their long-term expectations to a short-term perception. Anchoring causes investors to hold on to their investments even after an extended period of poor performance. As we all know, things change. Mental anchoring prevents us from adjusting to those changes.

Today's investor needs a plan of action to help maintain a disciplined strategy and resist making common mistakes. Work with your financial advisor to construct a fully integrated financial plan that reflects your needs and risk tolerance. Such a plan will help you avoid potential pitfalls and stay focused on the long term.
 

Source:

1.  Employee Benefit Research Institute's 2016 Retirement Confidence Survey, March 2016.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Back to School Bonus

Families with students heading off to college this fall take note: The interest rates on all newly-issued federal loans have been reduced for the coming academic year -- but those reductions are much more pronounced for student borrowers than for their parents.1

 

For instance, the interest rate on Stafford subsidized and unsubsidized loans for undergraduates will decline to 3.76% from 4.29% last year.1 For graduate students, the Stafford loan rate will fall from 5.84% to 5.31% for the coming academic year.1 In contrast, the rate on Federal PLUS loans for parents is a full percentage point higher at 6.31%.1

 

That rate is down from 6.84% for PLUS loans issued for the 2015-2016 academic year, but it still will nearly double the cumulative interest paid on a $50,000 loan over 20 years when compared with an undergraduate Stafford loan.1 (Note that rates are set each year for new loans, but those rates remain fixed for the life of the loan.)

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Business Owner or Corporate Exec: Are You On Track to Retire (Someday)?

If you are a business owner, corporate executive or similar professional, “success” often means at least two things. There’s the career satisfaction you’ve worked your tail off for. Then there’s that question that starts whispering in your ear early on, growing louder over time:

Am I on track to retire on my own terms and timeline? (And if not, what should I do about it?)

While every family’s circumstances are unique and personalized retirement planning is advised, the ballpark reference below can help you consider how your current nest eggs stack up. It shows the savings you’ll want to have accumulated, assuming the following:

•  You’re saving 10–16% of your salary (or equivalent income) and receiving an annual raise of 3%.

•  Your annual investment return is 6%.

•  At retirement (age 65) you want to spend 40% of your final salary (with Social Security making up an additional 20–40% of the same).

•  You plan to withdraw 4% annually from your portfolio.

Salary vs. Age vs. Desired Savings Today (To Retire at 65)



Still feeling a little overwhelmed by the size of the chart? Let’s look at some plausible scenarios.

Let’s say you are a 40-year-old couple earning $100,000 annually. The table suggests you should have saved about $317,000 by now. If you continue to save 10–16% of your salary every year and the other assumptions above hold true as well, you should be on track to retire at age 65 and replace 40% of your final paychecks by withdrawing 4% of your portfolio each year. If you’re already 50 and pulling in $200,000, your savings should be right around $1.067 million to be on track in the same manner.

Do your numbers not add up as well as you’d like? No need to panic, but it’s likely you’ll want to get planning for how you can make up the gap. That may mean saving more, retiring later in life, investing more aggressively or employing a judicious combination of all of the above.

If you’re not sure how to get started, I recommend turning to a professional, fee-only advisor who you’re comfortable working with. He or she should be able to offer you an objective perspective to help you decide and implement your next steps. In the meantime, here is one tip to consider.

How To Channel Your Salary Increases Into Retirement Assets

As you approach retirement, many business owners’ or corporate executives’ salaries tend to increase, while some of their expenses (such as the mortgage) remain level. If that’s the case and you’re behind on your retirement savings, you may be able to direct your annual salary increases into increased saving.

For example let’s say you’ve been saving 7% of your salary, or $10,500/year, and you receive a 3% raise.  Take that extra 3% ($4,500) and direct it into savings. Without having to alter your current spending, you’re now saving 9.7% of your salary or $15,000 total.  If you get another 3% raise the following year, do it again and you’ll be saving $19,635 or about 12.3% of your $159,135 salary.

And so on. If you can’t allocate all of every raise every year to increased savings, do as much as you’re able and the numbers should start adding up, without having to significantly tighten your belt. Who knows, as you and your spouse see the numbers grow, you may even begin to enjoy the exercise.

One repeated caveat before we go: Remember that the table above offers only rough saving guidelines. It’s certainly not the final word, and should not be taken as such. In addition to saving for retirement, you’ll want to ensure that the rest of your financial house is in order, so your plans won’t be knocked off course by life’s many surprises.

Again, a financial professional can assist. He or she can help ensure that your investment portfolio is well diversified (to manage investment risk), your estate plan is current, your advance directives and insurance policies are in place, and your tax strategies are thoughtfully prepared. 

So, start with the chart, and give us a call if we can tell you more.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.



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Presidential Elections and the Stock Market

Here is a nice article written by Dimensional Fund Advisors:

 

Making investment decisions based on the outcome of presidential elections is unlikely to result in reliable excess returns for investors. At best, any positive outcome will likely be the result of random luck. At worst, it can lead to costly mistakes.  CLICK HERE TO READ:

 

Presidential Elections and the Stock Market.pdf

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Defined Benefit Plans

The defined benefit plan is a powerful tax strategy for high income individuals with self-employment income. It's great for small business owners who want to catch-up on their retirement saving and save a tremendous amount on taxes.

Click here, or in the image below, to view our latest webinar on Defined Benefit Plans.




Click here to read a case study.
 
Why is a defined benefit plan a powerful tax strategy for high income individuals with self-employment income and small business owners?

The small business defined benefit (DB) plan is an IRS-approved qualified retirement plan that allows independent professionals and consultants, individuals with self-employment income and small business owners to make large contributions and accumulate as much as $1-2 Million in just 5-10 years. The contributions are deductible and can potentially reduce income tax liability by $40,000 or more annually. To read more about examples where a defined benefit plan would be beneficial click here The Defined Benefit Plan.pdf
 
New Flexibility in Defined Benefit Plans
 
Independent professionals and consultants, small business owners, and individuals with self-employment income often are so busy with their day-to-day responsibilities that they don't take the time to think about preparing for the day they finally retire. Since they aren't thinking about the future - at least not one that includes life beyond their daily work - they may not accumulate retirement savings sufficient to maintain their pre-retirement lifestyle. Business owners are also more likely to put the needs of their business ahead of their well-being... to read more click here New Flexibility in Defined Benefit Plans.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail i This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.
 
 

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Predictions About The Future

“I don't read economic forecasts. I don't read the funny papers.” — Warren Buffett

“One day, the world will indeed end. The sun will run out of hydrogen fuel, turn into a red giant star, and expand until it engulfs the earth. That is about 5 billion years in the future. In the meantime, you can safely ignore all other forecasts.” — Barry Ritholtz

It's just amazing how long this country has been going to hell without ever having got there. — Andy Rooney

It is very hard to ignore predictions about the stock market, especially when the forecast calls for rain. To make matters worse, the financial press often preys on our “fight or flight” instincts by featuring the forecasters’ doom-and-gloom predictions. After all, it’s what sells their stream of stuff.

As we’ll describe today, the more urgently a financial pundit is pressing you to buy this or sell that based on imminent past or future events, the more reasons you’ve got to fight your impulse to react. As Dimensional Fund Advisors’ Jim Parker wrote about here, confusing fleeting trends with permanent conditions is like mixing up the difference between the weather and the climate.

What the Talking Heads Aren’t Telling You
If you think about hot financial predictions in a logical fashion, why would these prognosticators have to work at all if they could accurately predict the future? Why wouldn’t they use their insights to enrich themselves rather than tipping their cards to us?

Someone with forecasting talent could implement financial instruments to leverage their assets for something like a 20:1 payoff. If they really did see a 20% correction coming, they could easily use leveraging to earn a 400% return, just as a few lucky souls did in the movie, “The Big Short.” They would only have to do this a few times before they could get rich quick and call it a day. (Of course, as we saw in “The Big Short,” you only have to be wrong once – or even not right soon enough – to be wiped out by leveraging!)

Chicken Little Forecasting
Think of it this way: I could predict every blizzard in Boulder by forecasting that a blizzard is about to fall every time I saw a cloud in the sky. Similarly, a plucky prognosticator could predict an impending 10% market decline whenever there’s a hint of bad news on the horizon. Mind you, there’s no substantial evidence that every appearance of bad news causes a market decline, but because the markets tend to drop at least 10% about every 7 months for all sorts of reasons, our “sky is falling” Chicken Little faces not-bad odds of being correct now and then through random chance.

The Track Records of an “Etch A Sketch”
By now you might be thinking: “But won’t a false prophet eventually be found out?” Unfortunately, the answer is, probably not. Are you familiar with the classic Etch A Sketch? No matter how big a mess you make, you can wipe your slate clean in seconds.

Financial forecasters seem to enjoy similar treatment. It seems as if there is little to no penalty when they’re wrong, because no one monitors their predictions or seriously calls them to task when they lead their followers astray.
 
Instead, whenever someone does get lucky and makes an important prediction or two that happens to come true, they are heralded as a guru and people flock to hear what they have to say next … at least until the next guru comes along and the last one is forgotten. 

Luck or Skill?
If you’re up on your financial forecaster lore, you may remember Elaine Garzarelli, who predicted the 1987 stock market crash. Her seemingly prescient prediction allowed her to start her own mutual funds, which were eventually folded into other mutual funds or liquidated due to poor performance.

We could cite countless other illustrations of yesterday’s financial superstars fading fast. Bottom line, when the talking heads on TV get a prediction right, we can’t know at the time whether it was due to luck or skill. What we do know is that, in markets that are highly efficient, it’s far more likely to be luck, as appears to be the case for Garzarelli.

Our “What Have You Done for Me Lately?” Bias
We also need to consider your own biases, especially recency bias. Behavioral finance informs us that investors tend to assume that recent market trends are more likely to happen again or to keep happening. This too can aggravate your tendency to give a financial forecast greater weight than it deserves.

For example, whenever one corner of the market has underperformed for a while, we see forecasters predicting continued pain. “It’s the new normal,” they proclaim, wherever a downturn has lingered. We also see investors fleeing that holding and piling up on whatever has recently been doing well.

Then the forecasts and the fund flows reverse when the tables turn.

This is recency bias in action.  For example, as “Advisor Insights” blogger Matthew Carvalho described in April 2016, there were a host of dire market predictions in the beginning of the year. Some investors likely exited or remained out of the market as a result. Carvalho observed: “One prediction that was spot on came on January 1 from the Associated Press: Expect less and buy antacid. Looking backward, that was apt advice for daily market spectators; however, if you took a 3-month vacation and didn’t check your balance, you’d return thinking the first quarter was normal — no antacid needed.”

Perfect Timing … or Else
Another problem with fleeing the market in response to gloomy forecasts is that you must correctly time both your exit and reentry points. It may be tempting to sell when the market is down, but you’re selling low, incurring trading costs and potentially facing taxable gains. Then you have to determine when it’s time to jump back in. Most investors end up buying back in when prices are high, incurring another round of trading costs.

Trying to successfully repeat this process over and over is expensive, frustrating and likely fruitless. According to this DALBAR study of investor behavior, market timing caused average investors to realize only a fraction of the stock market gain that would have been available to them. For the 20-year period ending December 2014, the average equity fund investor earned 5.19% annually while the S&P 500 Index returned 9.85% annually. It was even worse for the 30-year period with the average equity fund investor earning 3.79% annually and the S&P 500 returning 11.06% annually.

What’s an Investor To Do?
We believe in the Efficient Market Hypothesis, which says that all available information is incorporated into the market very quickly. The markets aren’t perfectly efficient, but they’re efficient enough that your best chance to enjoy a successful investment experience is to forget the forecasts and focus on far more timeless advice:

Invest for the long-term. Capture available market returns within your risk tolerances and according to the best available evidence. Aggressively manage the factors you can expect to control and disregard the ones that you cannot.

These principles guide the actions we’ve advised all along. We will continue to embrace them unless compelling evidence were ever to inform us otherwise. They are the ones that serve your highest financial interests, which is our highest priority as your advisor. 


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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How Survivorship Bias Can Skew Your Views on Mutual Fund Performance

It’s important to avoid treating the market like a popularity contest by chasing out-performers or running away from the underdogs. But neither do most investors want to go into the market entirely blind. For that, there are database services that track and report on how various fund managers and their offerings have performed.

Besides ample evidence that past performance does not predict future returns, there is another reason we advise investors to proceed with caution when considering past performance: Many returns databases are weakened by survivorship bias.

With respect to mutual funds and similar investment vehicles, survivorship bias creeps in when only the returns from surviving funds are included in the historical returns data you are viewing.

Here is what happens: As you might expect, there is a tendency for outperforming funds to survive, and for under-performers to disappear. When a fund is liquidated or merged out of existence, if its poor returns data disappears as well, overall historic returns tend to tick upward.

As such, you may end up depending on past performance data that is optimistically inaccurate.

Here is an article that further explains how survivorship bias works. In addition, consider the following illustration from Dimensional Fund Advisors’ report, The US Mutual Fund Landscape 2016. It illustrates how survivorship bias can skew your view on fund performance. This video also explains their research report.






In the beginning – in this case January 1, 2001 – there were 2,758 US equity mutual funds. Now fast-forward 15 years to December 31, 2015. By then, only 43% of those funds (roughly 1,186 funds) had survived the period. Out of the survivors, only 17% (about 469 funds) had both survived and outperformed their benchmark over the 15-year time-frame.1

In the illustration above, you can readily see that the small blue box in the lower-right corner represents relatively low, less than 1:5 odds that any given fund in January 2001 went on to outperform its peers by the end of the 15 years.

If a database instead eliminates the “disappeared” funds from its performance data, the larger gray box disappears from view as well, as in the illustration below. Without this critical larger context, you may conclude that those 469 outperforming funds only had to compete against the 1,186 survivors, versus the actual universe of 2,758 funds. While it may seem as if nearly half of the fund universe has done well, in reality, the less than 1:5 odds have remained unchanged.




But wait, maybe you could “take a look at the past performance, pick the funds that have outperformed after the first 10 years, and pile up on those seeming winners. Dimensional’s report also shares the results from that exercise:




The left-hand side of this diagram shows the funds that outperformed (in blue) and under-performed (in gray) during the first 10 years of the 15-year analysis.2 You can see that 20% outperformed their respective benchmark then. The right-hand side of the diagram shows what happened to that outperforming subset during the next five years. Only 37% of the initial “winners” continued to outperform. This demonstrates that is it is extremely hard to predict “winning” mutual funds based on past performance. Your odds are even worse than what you can expect from a basic coin toss!

So let’s take a moment to reinforce our ongoing advice: Invest for the long-term. Instead of fixating on past performance, focus on capturing future available returns within your risk tolerances and according to the best available evidence. Aggressively manage the factors you can expect to control (such as managing expenses) and disregard the ones that you cannot (such as picking future winners based on recent past performance).

These principles guide the actions we’ve advised all along. We will continue to embrace them unless compelling evidence were ever to inform us otherwise. They are the ones that serve your highest financial interests, which is our highest priority as your advisor. 


1.  Beginning sample includes funds as of the beginning of the 15-year period ending December 31, 2015. The number of beginners is indicated below the period label. Survivors are funds that were still in existence as of December 31, 2015. Non-survivors include funds that were either liquidated or merged. Out-performers (winners) are funds that survived and beat their respective benchmarks over the period. Past performance is no guarantee of future results. See Mutual Fund Landscape paper for more information. US-domiciled mutual fund data is from the CRSP Survivor-Bias-Free US Mutual Fund Database, provided by the Center for Research in Security Prices, University of Chicago.

2.  The graph shows the proportion of US equity mutual funds that outperformed and under-performed their respective benchmarks (i.e., winners and losers) during the initial 10-year period ending December 31, 2010. Winning funds were re-evaluated in the subsequent five-year period from 2011 through 2015, with the graph showing winners (out-performers) and losers (under-performers). The sample includes funds at the beginning of the 10-year period, ending in December 2010. The graph shows the proportion of funds that outperformed and under-performed their respective benchmarks (i.e., winners and losers) during the initial periods. Winning funds were re-evaluated in the subsequent period from 2011 through 2015, with the graph showing the proportion of out-performance and under-performance among past winners. (Fund counts and percentages may not correspond due to rounding.) Past performance is no guarantee of future results. See Data appendix for more information. US-domiciled mutual fund data is from the CRSP Survivor-Bias-Free US Mutual Fund Database, provided by the Center for Research in Security Prices, University of Chicago.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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History on the Run

Here is a nice article provided by Jim Parker of Dimensional Fund Advisors:

When news breaks and markets move, content-starved media often invite talking heads to muse on the repercussions. Knowing the difference between this speculative opinion and actual facts can help investors stay disciplined during purported “crises.”  CLICK HERE TO READ MORE:

 

History on the Run.pdf



Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Negative Real Returns

Here is a nice article written by Dimensional Fund Advisors:

Even when the inflation-adjusted return on Treasury bills is negative, a relatively common occurrence, bond investors may still achieve positive expected real returns by broadening their investment universe.  CLICK HERE TO READ MORE:

 

Negative Real Returns.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Back to School

Here is a nice article written by Dimensional Fund Advisors:

Education planning is a complex issue. A disciplined approach to saving and investing can help remove some of the uncertainty from the planning process.  CLICK HERE TO READ MORE:

 

Back to School.pdf




Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Buying a Car

A new car could be the most expensive purchase you make apart from housing. Before you go off with the first vehicle that catches your eye, you should think about how you plan to use and pay for the car. Here's a checklist.

The basics

•  Determine how many passengers you may carry on a regular basis. The typical new sedan seats four or five adults. Larger vans, crossovers and SUVs typically seat seven adults. Some smaller crossovers, SUVs and station wagons can seat four or five adults and two or three children.

•  Assess how much power you'll need. Generally speaking, a vehicle's standard engine should be adequate for most normal driving. However, if you routinely carry a full load of passengers or cargo, or drive in hilly areas, you may want to consider larger engines, if available. Keep in mind that larger engines typically cost more and aren't as fuel efficient as smaller engines.

•  Estimate potential yearly fuel cost. In a world of high fuel prices, a car that gets 40 miles per gallon on the highway could save thousands per year over an SUV that gets 20 miles per gallon. Hybrid and clean diesel models often burn less fuel than their conventional counterparts, but they may also cost more up front.

•  Determine your needs for carrying things in addition to people. Crossovers, SUVs, station wagons and hatchbacks tend to be easier to load and generally carry more than sedans of similar size. Fold-down rear seats can expand storage space considerably.

•  Plan for your boat or camping trailer. Manufacturers often promote towing packages on vehicles they think might be especially suitable for towing. They often also designate models they think are unsuitable for towing. Check the vehicle manual or ask the sales representative about the capabilities of any vehicle you might be considering. Also be sure that any vehicle you consider is properly equipped for towing.

•  Consider how frequently you might need to drive in mud, sand and snow. All-wheel drive and four-wheel drive systems are popular but potentially costly features. If you don't live in areas with significant snowfall and don't drive on dirt roads, you may not benefit much from these systems.

Features you may want to include

•  Collision mitigation braking, adaptive cruise control, cross-traffic and lane-departure warning, and blind-spot monitoring can warn of hazards and even sometimes apply the brakes automatically in an emergency. The Insurance Institute for Highway Safety's list of top safety picks offers a list of cars with active front crash prevention systems.

•  GPS navigation is a common but potentially costly option. Weigh the convenience of a built-in system against less costly portable GPS units and smartphone apps. Consider the costs and procedures for updating the maps stored in built-in units.

•  Roof racks or rails are common options or built-ins for crossovers, SUVs, station wagons and hatchbacks. Consider whether the original equipment racks will accommodate your needs; they may not be compatible with bicycle and kayak carriers or those extra-large boxes used for skis and other cargo.

•  Other common convenience features include power door lifts for rear doors, convertible seats that can be readily switched between child and adult use, and built-in rear-seat entertainment systems.

•  Anti-lock brakes, traction control, power windows, Bluetooth connectivity, parking assist and backup cameras have become more common; expect a new vehicle to have some or most of these features.

 

Financing

•  Leasing generally gives you the use of a new car over a limited period of time for a relatively small monthly payment. But over the long haul, leasing tends to cost significantly more than outright ownership in many cases. Make sure your lease realistically anticipates the number of miles you expect to drive during the term of the lease. Excess mileage charges can raise the final cost of the lease significantly.

•  Buying may require a larger down payment and a higher monthly outlay up front, if you plan to finance your car. But the payments generally end while the car is still usable, potentially offering many additional years of service. As a result, buying tends to be significantly less expensive over time if you hold on to the car and drive it to the limits of its useful service life.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Paying Off Student Loans

Actively managing your debt is an important step, and your student debt may be one of the biggest financial obligations you have. There are many strategies that could help you manage student loans efficiently. Here is a checklist.

•  Choose a federal loan repayment plan that fits your circumstances:

o  The Standard Repayment Plan requires a fixed payment of at least $50 per month and is offered for terms up to 10 years. Borrowers are likely to pay less interest for this repayment plan than for others.

o  The Graduated Repayment Plan starts with a reduced payment that is fixed for a set period, and then is increased on a predetermined schedule. Compared to the standard plan, a borrower is likely to end up paying more in interest over the life of the loan.

o  The Extended Repayment Plan allows loans to be repaid over a period of up to 25 years. Payments may be fixed or graduated. In both cases, payments will be lower than the comparable 10-year programs, but total costs could be higher. This program is complex and has specific eligibility requirements. See the Extended Repayment Plan page on the U.S. Department of Education website for details.

o  The Income-Based Repayment Plan (IBR), the Pay as You Earn Repayment Plan, the Income-Contingent Repayment Plan (ICR) and the Income-Sensitive Repayment Plan offer different combinations of payment deferral and debt forgiveness based on your income and other factors. You may be asked to document financial hardship and meet other eligibility requirements. See the U.S. Department of Education's pages on income-driven repayment plans and income-sensitive repayment plans for more information.

•  Take an inventory of your debt. How much do you owe on bank and store credit cards? On your home mortgage and home equity credit lines? On car loans? Any other loans? Consider paying extra each month to reduce the loans with the highest interest rates first, followed by those with the largest balances.

•  Free up resources by cutting costs. Consider eating out less, reducing snacks on the go, and carpooling or using mass transit instead of driving to work. You may also be able to cut your housing costs, put off vacations and reduce clothing purchases.

•  Think about enhancing your income. A second job? A part-time business opportunity?

•  Consider jobs that offer opportunities for subsidies or debt forgiveness.

o  Federal civil service employees may be eligible for up to $10,000 a year for paying back federal student loans. See the U.S. Office of Personnel Management's Student Loan Repayment Program for more information.

o  Nurses working in underserved areas may be eligible for loan assistance through the U.S. Department of Health and Human Services' NURSE Corps Loan Repayment Program.

o  Service members in the U.S. Armed Forces are eligible for support. Check out the service-specific programs offered by the Air Force, the Army, the National Guard and the Navy.

o  Teachers can consider programs such as Teach for America and the Teacher Loan Forgiveness Program.

•  Sign up for automatic loan payments. Many loans offer discounted interest rates for setting up automatic electronic payments on a predetermined schedule. A reduction of 0.25% per year may look small, but over the life of a 20-year loan, it can reduce your total interest cost by hundreds or even thousands of dollars.

•  A last resort is seeking loan deferment or forbearance. Students facing significant financial hardship may be able to put off loan interest or principal payments. To see whether you might qualify, look to the U.S. Department of Education's information on Deferment and Forbearance.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Growth vs. Value: Two Approaches to Stock Investing

Growth and value are two fundamental approaches, or styles, in stock and stock mutual fund investing. Growth investors seek companies that offer strong earnings growth, while value investors seek stocks that appear to be undervalued in the marketplace. Because the two styles complement each other, they can help add diversity to your portfolio when used together.

Growth and Value Defined

Growth stocks represent companies that have demonstrated better-than-average gains in earnings in recent years and that are expected to continue delivering high levels of profit growth, although there are no guarantees. "Emerging" growth companies are those that have the potential to achieve high earnings growth, but have not established a history of strong earnings growth.

The key characteristics of growth funds are as follows:

•  Higher priced than broader market. Investors are willing to pay high price-to-earnings multiples with the expectation of selling them at even higher prices as the companies continue to grow.
•  High earnings growth records. While the earnings of some companies may be depressed during period of slower economic improvement, growth companies may potentially continue to achieve high earnings growth regardless of economic conditions.
•  More volatile than broader market. The risk in buying a given growth stock is that its lofty price could fall sharply on any negative news about the company, particularly if earnings disappoint on Wall Street.

Value fund managers look for companies that have fallen out of favor but still have good fundamentals. The value group may also include stocks of new companies that have yet to be discovered by investors.

The key characteristics of value funds include:

•  Lower priced than broader market. The idea behind value investing is that stocks of good companies will bounce back in time if and when the true value is recognized by other investors.
•  Priced below similar companies in industry. Many value investors believe that a majority of value stocks are created due to investors' overreacting to recent company problems, such as disappointing earnings, negative publicity or legal problems, all of which may raise doubts about the company's long-term prospects.
•  Carry somewhat less risk than broader market. However, as they take time to turn around, value stocks may be more suited to longer-term investors and may carry more risk of price fluctuation than growth stocks.

Growth or Value... or Both?

Which strategy -- growth or value -- is likely to produce higher returns over the long term? The battle between growth and value investing has been going on for years, with each side offering statistics to support its arguments. Some studies show that value investing has outperformed growth over extended periods of time on a value-adjusted basis. Value investors argue that a short-term focus can often push stock prices to low levels, which creates great buying opportunities for value investors.

History shows us that:

•  Growth stocks, in general, have the potential to perform better when interest rates are falling and company earnings are rising. However, they may also be the first to be punished when the economy is cooling.
•  Value stocks, often stocks of cyclical industries, may do well early in an economic recovery but are, typically, more likely to lag in a sustained bull market.





When investing long term, some individuals combine growth and value stocks or funds for the potential of high returns with less risk. This approach allows investors to, in theory, gain throughout economic cycles in which the general market situations favor either the growth or value investment style, smoothing any returns over time.
 

Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Own a Retirement Account? Keep Your Beneficiary Designations Up to Date

Many investors have taken advantage of pretax contributions to their company's employer-sponsored retirement plan and/or make annual contributions to an IRA. If you participate in a qualified plan program you may be overlooking an important housekeeping issue: beneficiary designations.

An improper designation could make life difficult for your family in the event of your untimely death by putting assets out of reach of those you had hoped to provide for and possibly increasing their tax burdens. Further, if you have switched jobs, become a new parent, been divorced, or survived a spouse or even a child, your current beneficiary designations may need to be updated.

Consider the "What Ifs"

In the heat of divorce proceedings, for example, the task of revising one's beneficiary designations has been known to fall through the cracks. While (depending on the state of residence and other factors) a court decree that ends a marriage may potentially terminate the provisions of a will that would otherwise leave estate proceeds to a now-former spouse, it may not automatically revise that former spouse's beneficiary status on separate documents such as employer-sponsored retirement accounts and IRAs.

Many qualified retirement plan owners may not be aware that after their death, the primary beneficiary -- usually the surviving spouse -- may have the right to transfer part or all of the account assets into another tax-deferred account. Take the case of the retirement plan owner who has children from a previous marriage. If, after the owner's death, the surviving spouse moved those assets into his or her own IRA and named his or her biological children as beneficiaries, the original IRA owner's children could legally be shut out of any benefits.

Also keep in mind that the law requires that a spouse be the primary beneficiary of a 401(k) or a profit-sharing account unless he/she waives that right in writing. A waiver may make sense in a second marriage -- if a new spouse is already financially set or if children from a first marriage are more likely to need the money. Single people can name whomever they choose. And nonspouse beneficiaries are now eligible for a tax-free transfer to an IRA.

The IRS has also issued regulations that dramatically simplify the way certain distributions affect IRA owners and their beneficiaries. Consult your tax advisor on how these rule changes may affect your situation.

To Simplify, Consolidate

Elsewhere, in today's workplace, it is not uncommon to switch employers every few years. If you have changed jobs and left your assets in your former employers' plans, you may want to consider moving these assets into a rollover IRA or your current employer's plan, if allowed. Consolidating multiple retirement plans into a single tax-advantaged account can make it easier to track your investment performance and streamline your records, including beneficiary designations.

Review Your Current Situation

If you are currently contributing to an employer-sponsored retirement plan and/or an IRA contact your benefits administrator -- or, in the case of the IRA, the financial institution -- and request to review your current beneficiary designations. You may want to do this with the help of your tax advisor or estate planning professional to ensure that these documents are in synch with other aspects of your estate plan. Ask your estate planner/attorney about the proper use of such terms as "per stirpes" and "per capita" as well as about the proper use of trusts to achieve certain estate planning goals. Your planning professional can help you focus on many important issues, including percentage breakdowns, especially when minor children and those with special needs are involved.

Finally, be sure to keep copies of all your designation forms in a safe place and let family members know where they can be found.

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


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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College Planning -- It's About More Than Money

Choosing a way to save for your child's education expenses may be your family's first college planning decision, but it certainly won't be the last. From making that first deposit, to selecting a college, to choosing a course of study, you and your child will be making choices that can have a financial impact for years to come.

How Will You Save Enough?

Starting to save for college when your child is young may give you the best chance for accumulating a significant amount of money. Section 529 plans -- prepaid tuition plans designed to lock in today's tuition rates at eligible institutions -- and college savings plans, which permit contributions to an investment account set up to pay qualified education expenses, are popular tax-favored options. 1Coverdell Education Savings Accounts also offer tax advantages, although contribution limits are relatively low.2 Custodial accounts set up under the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) are another option to consider.

The Financial Aid Game

By the time college gets close, your family's life may seem to be ruled by deadlines. There are different deadlines for college applications, scholarship applications, and the FAFSA (Free Application for Federal Student Aid) submissions. Applying well in advance of the deadlines can boost your child's chances of getting accepted to the school of his or her choice and receiving a favorable financial aid package. If you wait too long, spots may already be filled and aid money given to students who applied earlier.

Dissecting Aid Packages

Typically, aid packages consist of grants, loans, work study, and an expected family contribution. When reviewing aid offers, compare apples to apples. Start with the cost of tuition at each school. Then look at how much of the aid package consists of loans that will have to be repaid. Make sure non-tuition costs, such as room and board, books, equipment, transportation, and fees, are included in the school's cost estimates. It's a good idea to do your own cost estimate and use that as your basis for comparing offers.

The Right Fit

As important as it is, money shouldn't be the only criterion used when choosing a college. Lower cost of attendance or generous financial aid is most valuable if the college is a good fit for your child's abilities, personality, and goals. Choosing the wrong college could cost a bundle in lost opportunities if your child is unhappy or doesn't feel sufficiently challenged by the curriculum.

Look Toward the Future

A college education is an investment in the future, so parents may want to discuss choosing a course of study that will lead to a career. Talk to your child about the importance of preparing for life beyond college by obtaining the practical skills and knowledge needed to land a job after graduation. By planning ahead, your child may turn his or her interests into a successful career.
 

Sources:

1.  Certain benefits may not be available unless specific requirements (e.g., residency) are met. There also may be restrictions on the timing of distributions and how they may be used.

2.  Internal Revenue Service. The annual contribution limit is $2,000. Taxpayers with modified adjusted gross incomes (MAGIs) of more than $220,000 (for married couples filing a joint tax return) and $110,000 (for singles) may not contribute. For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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The DOL Revisits Conflict of Interest Rules

Over the past several decades, there has been a significant shift in the retirement savings landscape away from employer-sponsored defined benefit pension plans to defined contribution plans, such as 401(k)s. At the same time, there has been widespread growth in assets in IRAs and annuities.

One consequence of this change, according to the U.S. Department of Labor -- the governmental body that oversees pensions and other retirement accounts -- is the increased need for sound investment advice for workers and their families.

The DOL says its so-called "conflict of interest" rules are intended to require that all who provide retirement investment advice to employer-sponsored plans and IRAs abide by a "fiduciary" standard -- putting their clients' best interest before their own profit.

Originally proposed more than a year ago, the "final" rules -- introduced in April 2016 -- have been revised to reflect input from consumer advocates, industry stakeholders, and others. Following are some of the key takeaways from the DOL's final regulatory package.

The Role of the Fiduciary

According to the DOL's definition, "a person is a fiduciary if he or she receives compensation for providing advice with the understanding that it is based on a particular need of the person being advised or that it is directed to a specific plan sponsor, plan participant, or IRA owner. Such decisions can include, but are not limited to, what assets to purchase or sell and whether to roll over from an employment-based plan to an IRA. 1 In this capacity, a fiduciary could be a broker, registered investment adviser, or other type of adviser.

The Best Interest Contract Exemption

The DOL's final rules include a provision called the Best Interest Contract Exemption (BICE). This exemption is intended to allow firms to continue to use certain compensation methods provided that they "commit to putting their client's best interest first, adopt anti-conflict policies and procedures, and disclose any conflicts of interest that could affect their best judgment as a fiduciary rendering advice" -- among other conditions.2

How does the BICE affect you? The contract provisions of the BICE are slated to go into effect January 1, 2018. At that time, IRA clients entering into a new advisory relationship should expect to sign the contract either before or at the time that a new recommended transaction is executed. IRA clients already working with an investment adviser as of January 1, 2018, may receive a notice from their adviser describing their new rights, but they should not be required to take any action unless they object to the terms of the notice.

Clients receiving advice about investments in an employer-sponsored retirement plan should receive the same general protections and disclosure, but should not expect to receive a contract to sign.

Education vs. Advice

The DOL's final rules clarify its position that education about retirement savings is beneficial to plan sponsors, plan participants, and IRA owners. As such, the DOL said that plan sponsors and service providers can offer investment education without becoming investment advice fiduciaries.

Further, the DOL stated that communications from plans that identify specific investment alternatives can be considered "education" and not a "recommendation" because plans have a fiduciary who is responsible for making sure the investment offerings in the plan are prudent. Since there is no such responsible fiduciary in the IRA context, references to specific investment alternatives are treated as fiduciary recommendations and not merely education.

Time to Get on Board

The new regulations are expected to take effect in the spring of 2017 (at the earliest) to allow all affected parties to adapt to and incorporate the changes.

To learn more about the new regulations and how they may affect you, visit the Department of Labor website.
 

Source:

United States Department of Labor, "FAQs About Conflicts of Interest Rulemaking."


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Consider the "Autopilot" Option for Your Plan

These days, it is vitally important for individuals to set money aside for retirement during their working years. Unfortunately, not every employee thinks so. Which explains why some employer-sponsored retirement plans have low participation rates. If your company's retirement plan participation rate disappoints you, there may be an easy fix. Why not put your plan on autopilot?

The Nuts and Bolts

Putting a retirement plan on autopilot simply means introducing an automatic enrollment feature. In other words, employees are automatically enrolled in the retirement plan unless they elect otherwise. A specific percentage of the employee's wages will be automatically deducted from each paycheck for contribution to the plan unless the employee opts out.

Once enrolled in the plan, employees can change their contribution rate and choose how to invest their contributions from the plan's investment menu. If they don't make their own investment selections, their contributions are automatically directed to a qualified default investment alternative (QDIA), which is typically a target date fund, a balanced fund, or an account managed by an ERISA-qualified investment manager. Employees whose contributions are invested in the default option can later switch into another plan investment, if desired.

Does It Work?

According to recent research, approximately 75% of employees participate in their employer's retirement plan.1 The same study found that 62% of plan sponsors offer an auto-enrollment feature, 97% of those offering auto enrollment are satisfied with their program, and that 88% of sponsors believe auto enrollment has had a positive impact on their plan participation rates.2

A Win-Win

Many employees are confused about retirement planning. Many want guidance. Automatic enrollment makes the tough decisions for them and starts them on the path to a more secure financial future. Having a robust retirement plan usually helps businesses attract and keep talented employees. Automatic enrollment may be just the enhancement you need to get more employees to participate in -- and appreciate -- the benefits of working for you.
 

Source:

1. & 2.  Deloitte Consulting, LLP, the International Foundation of Employee Benefit Plans, the International Society of Certified Employee Benefit Specialists, "Annual Defined Contribution Benchmarking Survey, 2015 Edition."


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Avoid These Financial Traps -- They May Be Hazardous to Your Wealth

Money. It's hard to get and easy to lose. It doesn't take long for the wealth you've accumulated to disappear if you don't manage your money well or have a plan to protect your assets from sudden calamity.

Snares like the ones mentioned below could easily threaten your financial security. Planning ahead can protect you and your loved ones from getting caught.

Undisciplined Spending

The more you have, the more you spend -- or so the saying goes. But not paying close attention to your cash flow may prevent you from saving enough money for your future. Manage your income by creating a spending plan that includes saving and investing a portion of your pay. Your financial professional can help identify planning strategies that will maximize your savings and minimize your taxes.

High Debt

With the easy availability of credit, it isn't hard to understand how many people rack up high credit card balances and other debt. Short-term debt will become long-term debt if you're paying only the minimum amount toward your balances. If you can't pay off your credit card debt all at once, consider transferring the balances to a card with a lower interest rate.

Unprotected Assets

Your life, your property, and your ability to work should all be protected. Life insurance can provide income for your family if you die. Homeowners and automobile insurance can help protect you if your home or car is damaged or destroyed and provide liability coverage if someone is injured. Disability insurance can protect your income if you're unable to work.

Unmanaged Inheritance

A financial windfall is great, but it also can be dangerous. Without solid advice on managing and investing the money, you could find that your inheritance is gone in a much shorter time than you would have thought possible. Your financial professional can help you come up with a plan for managing your wealth. Setting aside a portion of the money to spend on a trip or other luxury while investing the rest may be one way to reward yourself and still preserve the bulk of your assets.

Neglected Investments

Reviewing your investments to make sure they're performing as you expected -- and making changes in your portfolio if they're not -- is essential. But it's also essential to periodically review your investment strategy. You may find that your tolerance for risk has changed over time. You'll also want to assess the tax implications of any changes you plan to make to help minimize their impact.

Retirement Shortfall

If you're not contributing the maximum amount to your employer's retirement savings plan, you're giving up the benefits of pretax contributions and potential tax-deferred growth. Maximizing your plan contributions can start you on your way to a comfortable retirement -- hopefully with no traps along the route.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Cash Balance Plans: Offering a Break to Successful Small Business Owners

For successful small business owners, cash balance plans can offer larger contributions than 401(k) limits allow.

Are you a small, highly profitable business owner looking for ways to (a) reduce your current taxes and/or (b) dramatically step up your tax-sheltered retirement savings?  If so, a cash balance plan may be worth looking into for your company.

What Is a Cash Balance Plan?
A cash balance plan is a retirement savings vehicle, crafted with the small business owner in mind. When combined with a safe harbor 401(k) or profit sharing plan, it can allow you to make significant, tax-deductible contributions to your own and select partners’ retirement savings, while controlling the costs of your contributions to employee retirement accounts.

What Are the Potential Benefits?
Here are a few of the possibilities a cash balance plan can offer:
•  It can position you to contribute considerably more toward your tax-sheltered retirement savings than 401(k) limits allow – up to $200,000 or more annually (depending on your age, income, years in business and other IRS limits).
•  Your annual contributions are tax-deductible.
•  You can make varying levels of contributions for you and partners in your firm.
•  You must contribute to your employees’ 401(k) accounts, but the contributions can be modest, typically in the range of 5.0–7.5% employee’s salary.

What Does It Take to Set Up a Cash Balance Plan?
In addition to accompanying it with a 401(k) or profit-sharing plan as required, your cash balance plan usually works best when all of these conditions are met:
•  You are a small business owner, age 40 or older, with 1–10 employees.
•  Your expected income is relatively predictable for at least the next five years.
•  You can contribute up to $200,000 or more annually for the next five years.

How Does It Work?
To establish your cash balance plan, you open one trust investment account for the plan, where investments are pooled for participants. Participants typically include you, and any partners or key employees. As the business owner and plan sponsor, you are the plan’s fiduciary trustee, charged with prudently managing its investments (or selecting and monitoring an investment manager to do so for you).

Each cash balance plan participant has a hypothetical “account” that earns a set interest credit annually, regardless of the plan’s actual investment performance. Contributions are then adjusted annually as needed, to fill any under-performance gap that may occur.

Investment Strategy Counts
If you’re reading between the lines, the structure of your plan means that it is both your fiduciary duty as well as in your best financial interests to be careful about how you invest your cash balance plan’s pooled assets.

You probably have taken or are continuing to take plenty of rewarding risks in your thriving business. Your cash balance plan serves as venue for offsetting those risks with a stable approach to preserving the wealth you’ve worked so hard to accumulate. Typically, we’d suggest something in the range of a three percent performance target, generated by a conservatively managed, low-cost portfolio.


Cash Balance Plans in Action


Case #1 – A Medical Practice with 1-10 Employees*

 

Dr. Curtis, age 53, is a successful internal medicine practitioner with four employees. During the next decade, she wants to maximize her own retirement savings while contributing to her staff’s retirement accounts. Here’s how that might look:

...
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Can Volatility Predict Returns?

Here is a nice article provided by Dimensional Fund Advisors:

Do recent market volatility levels have statistically reliable information about future stock returns? We examine historical data to see if there have been differences in average returns between more volatile and less volatile markets, if a strategy that attempts to avoid equities in times of high volatility adds value, and if there is any relation between current volatility and subsequent returns.  CLICK HERE TO READ MORE:
 
Can Volatility Predict Returns.pdf



Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Economic Growth & Equity Returns

Here is a nice article provided by Dimensional Fund Advisors:

Opinions about future economic growth often differ across market participants. A relevant question for many investors is whether their view of economic growth should impact how they invest. CLICK HERE TO READ MORE:
 
Economic Growth and Equity Returns.pdf



Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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The Saver's Credit: Don't Leave This Tax Break on the Table

You probably know about the benefits of tax-deferred investment accounts. But did you know that there is a special IRS provision that potentially allows you to save money just for being a retirement saver? The so-called "saver's credit," formally known as the Retirement Savings Contributions Credit, permits certain low- to middle-income workers to claim a tax credit for making eligible contributions to an IRA or most qualified workplace retirement plans.

But this tax break is currently going largely untapped. According to a study by the nonprofit Transamerica Center for Retirement Studies, only about a third of U.S. workers are aware of the saver's credit.1

The IRS Says …2

Here is a rundown on the basic rules governing the credit.

In order to claim the credit, the IRS requires that you:

•  Are at least 18 years old;
•  Are not a full-time student; AND
•  Cannot be claimed as a dependent on another person's tax return.

Retirement plans eligible for the credit include:

•  Traditional or Roth IRAs
•  401(k)s and 403(b)s
•  SIMPLE IRAs
•  SARSEPs
•  501(c)(18) or governmental 457(b) plans
•  Voluntary after-tax employee contributions to qualified retirement and 403(b) plans.

The Amount You Can Claim

According to the IRS, "The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income (reported on your Form 1040 or 1040A)."

Here's a breakdown for tax year 2016:


*Single, married filing separately, or qualifying widow(er).
 
To learn more about the saver's credit visit the IRS website. For help shaping up your retirement planning and/or tax planning strategy contact your financial advisor.

 
Source(s):

1.  Transamerica Center for Retirement Studies, "Retirement Throughout the Ages: Expectations and Preparations of American Workers," May 2015.

2.  IRS, "Retirement Savings Contributions Credit," updated February 22, 2016.



Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Retirement Confidence Leveled Off in 2016

Americans' confidence in their ability to retire in financial comfort has rebounded considerably since the Great Recession, but worker optimism leveled off in 2016. According to the 26th annual Retirement Confidence Survey -- the longest-running study of its kind conducted by Employee Benefit Research Institute in cooperation with Greenwald & Associates -- worker confidence stagnated in the past year due largely to subpar market performance.

The percentage of workers who reported being "very confident" about their retirement prospects hit a low of 13% between 2009 and 2013, recovered to 22% in 2015, and stabilized at 21% in 2016. However, significant improvement was reported among workers who said they were "not at all" confident about retirement, as their numbers shrank from 24% in 2015 to 19% this year. Curiously, the attitude shift away from being not at all confident came from those respondents who reported no access to a retirement plan.

It's All in the Plan

The data clearly shows a strong relationship between the level of retirement confidence among workers and retirees and participation in a retirement plan -- be it a defined contribution (DC) plan, a defined benefit (DB) pension plan, or an IRA. Workers reporting they and or their spouse have money in some type of retirement plan -- from either a current or former employer -- are more than twice as likely as those with no plan access to be very confident about retirement.

Still Not Preparing

Underlying the generally positive trend in the 2016 survey was the persistent fact that most Americans are woefully unprepared for retirement, having little or no money earmarked for retirement. For instance, among today's workers, 54% said that the total value of their savings and investments (excluding the value of their home and any defined benefit plan assets) is less than $25,000. This includes 26% who have less than $1,000 in savings.

Retirement Plan Dynamics

Not only do workers and retirees that own retirement accounts have substantially more in savings and investments than those without such accounts, on a household level, these individuals tend to have assets stored in multiple savings vehicles. For instance, according to the 2016 RCS, about two-thirds of those with money in an employer-sponsored plan also report that they or a spouse have an IRA. Further, 90% of survey respondents with access to a defined benefit pension plan either through their current or former employer also have money in a defined contribution plan.

Retirement Age

Perhaps as an antidote to their lack of savings, some workers are adjusting their expectations about when they will retire. In 2016, 17% of workers said the age at which they expect to retire has changed -- of those, more than three out of four said their expected retirement age has increased. Longer-term trends show that the percentage of workers who expect to retire past the age of 65 has consistently crept higher -- from 11% in 1991 to 37% in 2016.

For more retirement trends among workers and retirees or to review the 2016 Retirement Confidence Survey in its entirety, visit EBRI's website.


Source:

Employee Benefit Research Institute and Greenwald & Associates, 2016 Retirement Confidence Survey, March 2016.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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UK's EU Referendum Result

Here is a nice article written by Dimensional Fund Advisors:

On June 23, citizens of the United Kingdom voted to leave the European Union. While there has been much speculation leading up to and since the vote, our investment philosophy remains the same. 

CLICK HERE TO READ MORE:

UK EU Referendum Result.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Ten Reasons to be Cheerful

Here is a nice article provided by Jim Parker of Dimensional Fund Advisors:

Do you ever listen to the news and find yourself thinking that the world has gone to the dogs? The roll call of depressing headlines seems endless. But look beyond what the media calls news, and there also are a lot of things going right. 

CLICK HERE TO READ MORE:

Ten Reasons to be Cheerful.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Wine Lovers Guide to Investing

Here is a nice article provided by Jim Parker of Dimensional Fund Advisors:

Savoring a vintage wine is one of life's great pleasures. But often overlooked in the joy of consumption is the carefully calibrated journey from grape to glass. Similar levels of care are critical to good investment outcomes.  CLICK HERE TO READ MORE:

Wine Lovers Guide to Investing.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Diversifying Your Portfolio With Midcap Stocks

Long eclipsed by their bigger and smaller brothers, midcap stocks clearly suffer an image problem. Most have yet to achieve the universal coverage and broad visibility of large caps, but they lack the nimble reputation of small caps to potentially generate rapid earnings and share price growth. Yet these same characteristics are what make midcaps an ideal middle ground for investors looking to potentially reap the best of both worlds.

What Are Midcap Stocks?

Not surprisingly, midcap equities represent ownership in medium-sized companies. The value of a company's stock is known as its market capitalization, or market cap, defined as its share price multiplied by the number of shares outstanding. Midcap stocks are typically deflned as those with market capitalizations ranging from $3 billion to $10 billion, although ranges vary. Note that this definition changes over time as the value of the overall market shifts.

Because midcap stocks are typically issued by established companies with experienced management, they are usually considered less risky than small-cap stocks. They also may be more stable after surviving the transition from small business to larger company. And because they usually have an established track record, research about mid-sized companies -- crucial to determining an investment's potential -- is usually readily accessible.

On the other hand, because they're medium-sized, there's often still room for growth as they strive to gain more market share and become dominant in their industry. After all, most of today's blue-chip stocks were once midcaps.

Evaluating the Numbers

While the spotlight often shines on large-cap stocks (they comprise more than 80% of the equities market based on market value), midcap stocks (which account for less than 10% of the market) have historically been kind to long-term investors. For the 30 years ended December 31, 2015, midcap stocks returned an annualized 13.31% while large-cap stocks rose 10.37% and small-cap stocks increased 10.73%.1

Performance, however, is just one consideration when investing. Risk is another important factor. Over that same 30-year period, the standard deviation (a historical measure of volatility) of midcap stocks was 17.18% compared with 15.23% and 18.52% for large caps and small caps, respectively. And the combined risk/return profile, or Sharpe ratio, is also favorable for midcap stocks (see chart). Although past performance is not a guarantee of future returns, these statistics make a compelling historical case for owning stocks of medium-sized companies.1



Spreading Risk


Perhaps the best reason to consider including midcap stocks in a portfolio can be summed up in one word: diversification. Doing so means you'll own different types of stocks, which may potentially help reduce risk. Why? Because different investments perform better during different phases of the market cycle. Purchasing a variety of investments helps spread the risk and may help cushion your portfolio from short-term market swings.

You can diversify further by buying a mix of growth and value stocks in each size category. Some years, growth stocks outperform. For example, in 2007, midcap growth stocks returned 13.5% while midcap value stocks gained only 2.7%. However, in 2014, midcap growth stocks gained only 7.6% while midcap value stocks gained 12.1%.2

Another way to diversify your portfolio with midcap stocks is to invest in a midcap mutual fund. Such funds are naturally diversified because they invest in many midcap companies. Additionally, midcap mutual funds come in a variety of styles and are professionally managed.

Finally, be sure to review all of your investments once a year with a qualified financial professional. Among the items on your to-do list, you'll want to check that your investments are still compatible with your financial goals.


Source(s):

1.  ChartSource®, DST Systems, Inc. For the period from January 1, 1986, through December 31, 2015. Large-cap stocks are represented by the S&P 500 index. Midcap stocks are represented by a composite of the CRSP 3d-5th deciles and the S&P 400 index. Small-cap stocks are represented by a composite of the CRSP 6th-10th deciles and the S&P 600 index. It is not possible to invest directly in an index. Past performance is not a guarantee of future results. Copyright © 2016, DST Systems, Inc. All rights reserved. Not responsible for any errors or omissions. (CS000136)

2.  DST Systems, Inc. Midcap growth and value stocks are represented by the S&P MidCap 400 Growth and Value indexes. These unmanaged indexes are considered representative of their respective markets. Indexes do not take into account the fees and expenses associated with investing, and individuals cannot invest directly in any index. Past performance cannot guarantee future results.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Transferring Assets to a 529 Plan

By now most Americans who are saving and investing to pay for college costs have probably heard that so-called 529 college savings plans allow tax-free distributions for qualified education expenses, potentially making them even more attractive and effective than in the past, when they were only tax deferred. Add that tax benefit to other benefits of 529 plans, including high contribution limits, and many families may want to consider taking advantage of the plans.

But don't despair if you have already committed college-earmarked assets to another type of financial vehicle, such as a Coverdell Education Savings Account (formerly Education IRA) or a custodial account for a minor beneficiary. You may be able to transfer assets from either type of account into a 529 plan without triggering taxes or penalties. In addition, the proceeds from the redemption of certain types of U.S. savings bonds can also be transferred to a 529 plan tax free, as a result of the Treasury Department's "Education Bond Program."

Making the Move From a Coverdell

The IRS makes clear in Publication 970, Tax Benefits for Higher Education, that amounts transferred from a Coverdell account to a "qualified tuition program" (IRS lingo for a 529 plan) are viewed as qualified education expenses and are therefore tax free -- as long as the amount of the withdrawal is not more than the designated beneficiary's qualified education expenses.

There are several reasons a college saver may want to take this course of action. For example, to consolidate college assets into a single account with a more generous contribution limit. Whereas Coverdell accounts limit contributions to just $2,000 per beneficiary per year, 529 plans typically allow much higher lifetime contribution limits -- in excess of $200,000 per beneficiary in many states. And unlike Coverdells, 529 plans generally do not impose income limits that restrict the ability of higher-income taxpayers to contribute.

As you take other variables into account, keep in mind that Coverdells and 529 plans are still relatively new, so the legal and procedural precedents for specific strategies may not be well established yet. For example, there is the question of the ownership and control of any money that is transferred from a Coverdell to a 529 plan. By declaring in Publication 970 that "the designated beneficiary of a Coverdell can take withdrawals at any time," the IRS effectively states that the funds in a Coverdell are owned by the beneficiary. If those assets were moved to a 529 plan owned by a parent, however, it could be construed as a transfer of ownership from the beneficiary to the parent. In theory, at least, that could raise legal issues down the road if the parent eventually uses the money for personal reasons or changes the beneficiary of the 529 plan.

It's also important to remember that Coverdells can be used to pay for primary or secondary school costs, whereas 529 plans are limited to college expenses. Consequently, you might want to contribute to a Coverdell and a 529 plan if you need to pay for a primary or secondary education in addition to college.

Relocating UGMA/UTMA Assets

Many 529 plans also accept rollovers from custodial accounts established for minor beneficiaries, such as those created under the provisions of the Uniform Gifts/Uniform Transfers to Minors Act (UGMA/UTMA). Keep in mind, though, that the money in an UGMA/UTMA account belongs to the minor, so any subsequent withdrawals of those assets after a transfer to a 529 plan may only be used for that minor.

Therefore, you are generally prohibited from changing the beneficiary of a 529 plan after assets from that beneficiary's UGMA/UTMA account have been transferred to the 529 plan. Also, the minor will gain full control of the UGMA/UTMA money at age 18 or 21 (depending on the state), which is not normally the case with 529 plans. Keep in mind, too, that contributions to 529 plans must be in cash. As a result, UGMA/UTMA assets would first need to be liquidated, with any capital gains being taxable to the minor.

Back to Basics: An Overview of 529 Plans, Coverdell Education Savings Accounts, and Custodial Accounts

As you begin your search for tax-efficient strategies to pay for college costs, keep in mind that 529 plans, Coverdell Education Savings Accounts, and UGMA/UTMA accounts each offer unique benefits. It's critical that you understand all of them before making a final decision.

Section 529 college savings plans are named after the section of IRS code that created them. They are college- or state-sponsored, tax-advantaged plans that allow individuals to invest in portfolios of stocks, bonds, and cash equivalents. Contribution limits for 529 plans vary from state to state. Distributions made to pay qualified education expenses are tax free. Prepaid tuition plans also fall under Section 529, but for the purposes of this article, the phrase 529 plan refers only to a college savings plan.

Coverdell Education Savings Accounts (formerly known as Education IRAs) allow tax-free earnings on nondeductible contributions of up to $2,000 per year, per student. Coverdell’s can generally hold a variety of investments. They can only be established for a child younger than 18, and the money must be distributed for educational costs before the beneficiary turns 30. Income limits apply: Single filers with modified adjusted gross incomes (MAGI) of more than $110,000 and joint filers with MAGI in excess of $220,000 are not eligible. Qualified withdrawals may be used to fund a primary, secondary, or college education.

An UGMA/UTMA custodial account allows you to establish a savings or investment account in a child's name, with one adult named as custodian. Each parent can contribute up to $14,000 in 2016 without triggering mandatory filing of IRS Gift Tax Form 706 and possible payment of gift taxes. With an UGMA/UTMA account, the first $1,050 per year of unearned income is tax free. For children under 19 (and for children under 24 who are full-time students and whose earned income does not exceed half of the annual expenses for their support), the next $1,050 is taxed at the child's rate. Beyond $2,100, the income is taxed at the parent's or child's rate, whichever is higher.

A Better Bond Strategy?

The third option you may have for a transfer involves cashing in qualified U.S. savings bonds and contributing the proceeds to a 529 plan, in accordance with the guidelines established by the IRS and the Treasury Department's "Education Bond Program." This strategy allows you to avoid the normal taxation of interest earned on U.S. savings bonds.

Only Series EE bonds issued since 1990 and Series I bonds can be used in this manner. To qualify, you need to have been at least 24 years old on the first day of the month in which you purchased the bonds. If the bonds are to be used for your child's education, they must be registered in your name and/or your spouse's name. (The child can be listed as a beneficiary of the bonds, but not as owner or co-owner.) If the bonds are to be used for your own education, they must be registered in your name. If you are married, you must file a joint tax return to reap the benefits of this program.

Work With a Pro

Which 529 transfer strategy makes the most sense in light of your unique situation? Will there be tax benefits or consequences? Before you decide, you should speak with financial and tax advisors who have the knowledge and experience to help assess your entire range of options.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Buying Your First Home

Home ownership is the cornerstone of the American Dream. But before you start looking, consider a number of things.

First, look at buying a home as a lifestyle investment and only secondly as a financial investment. Over time, buying a home can be a good way to build equity. But as recent history has shown, house prices can go down as well as up. Like many other investments, real estate prices can fluctuate considerably. If you aren't ready to settle down in one spot for a few years, you probably should defer buying a home until you are. If you are ready to take the plunge, you'll need to determine how much you can spend and where you want to live.

How Much House Can You Afford?

Most people, especially first-time buyers, must take out a mortgage to buy a home. To qualify for a mortgage, the borrower generally needs to meet two ratio requirements that are industry standards: the housing expense ratio and the total obligations ratio.

•    The housing expense ratio compares basic monthly housing costs to the buyer's gross monthly income (before taxes and other deductions). Basic costs include monthly mortgage, insurance, and property taxes. Income includes any steady cash flow, including salary, self-employment income, pensions, child support, or alimony payments. For a conventional loan, your monthly housing cost should not exceed 28% of your monthly gross income.

•    The total obligations ratio is the percentage of income required to service all your total monthly payments. Monthly payments on student loans, installment loans, and credit card balances older than 10 months are added to basic housing costs and then divided by gross income. Your total monthly debt payments, including basic housing costs, should not exceed 36%.

In addition to qualifying for a mortgage, you will likely need a down payment. Down payment requirements vary from more than 20% to as low as 0% for some Veterans Administration (VA) loans. Down payments greater than 20% generally buy a better rate and exempt you from buying private mortgage insurance.

Closing Costs

Closing costs vary considerably, but typically add between 3% and 8% to your purchase price. Such costs include home inspection costs, loan origination fees, up-front "points" (prepaid interest), application fees, appraisal fee, survey, title search and title insurance, first month's homeowner's insurance, recording fees, and attorney's fees. In many locales, transfer taxes are assessed. Finally, adjustments for heating oil or property taxes already paid by the sellers will be included in your final costs.

Home Buying Costs

Down Payment        0%-20% of purchase price

Home Inspection     $200-$500

Points                       $1,000 and up for 1%-3%

Closing Costs            3%-8% of purchase price

Operating Costs

In addition to mortgage payments, there are other costs associated with home ownership. Home association fees, utilities, heat, property taxes, repairs, insurance, services such as trash or snow removal, landscaping, assessments, and replacement of appliances are the major costs incurred. Check the actual expenses of the previous owners and make sure you understand how much you are willing and able to spend on such items.

Once you've determined a price range and location, you're ready to look at individual homes. Remember that much of a home's value is derived from the values of those surrounding it. Since the average residency in a house is seven years, consider the qualities that will be attractive to future buyers as well as those attractive to you. The more research you do today, the better your decision will look in the years to come.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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The Mathematics of Investing

Tracking the performance of your investments can get confusing, due to the various ways of calculating returns. Whether you prefer to use a calculator or spreadsheet software, the following discussion will help you use and calculate common measurements of investment performance to truly judge your investment results.

Determining Rate of Return

Probably the most basic calculation for investors is return on investment. Total return includes capital appreciation and income components, and assumes all income distributions are reinvested. If you automatically reinvest distributions such as interest or dividends, total return is calculated by taking the difference in an investment portfolio's ending and beginning balance, and dividing that difference by the beginning balance. In formula format, it would look like this:
 
Total Return:
(Calculator or Spreadsheet:)
(Ending Balance [EB] - Beginning Balance [BB])
Beginning Balance

For example, Joe started with an investment of $10,000. After five years, his portfolio's value increased to $12,000. He can determine his portfolio's total return as follows: ($12,000 - $10,000) / $10,000 = 0.20, or 20%. Therefore, Joe can say his $10,000 has increased by 20%.

To annualize this total return, you'll need to calculate the compound annual return.

For example, Jane also originally invested $10,000. However, it took her portfolio only two years to grow to $12,000. If you measure the performances of both Joe's and Jane's portfolios by using the formula above, both increased by 20%. To take the difference in time into consideration, calculate the compound annualized rate of return (you will need a calculator that can raise to powers to calculate this).
 
Compound Annualized Rate of Return =
Calculator: [(EB / BB)^(1 / # of years) - 1]
Spreadsheet: [(EB/BB)^(1/# of years)] - 1

Using this formula to calculate Joe's annual compound return, we take $12,000 / $10,000 = 1.2. Then, we raise 1.2 to the 1/5 (or 0.20) power, giving us 1.03714. Subtract out 1, and we have 0.03714, or 3.714%, which is Joe's annualized return. Jane's portfolio, on the other hand, performed much better, earning 9.54% on average every year. Of course, two different investments should not be judged solely on performance results for short periods of time or for different time periods. The risk of the portfolio must also be considered.

10% Plus 10% Doesn't Equal 20%

You might think that Jane's annualized return should have been 10%, and not 9.54%, since she invested her money for two years and 10% + 10% = 20%, which was her total rate of return. However, here's where the math can get tricky.

Let's just say that Jane's $10,000 did grow 10% each year for two years. At the end of the first year, Jane would have accumulated $11,000. In year one, $10,000 x (1 + 0.10) = $11,000. In year two, if Jane's $11,000 grows by another 10%, this gives us $11,000 x (1 + 0.10) = $12,100, which is more than the $12,000 Jane actually accumulated. This $100 discrepancy explains why Jane only earned a 9.54%, and not a 10%, compound annual return.

Similarly, the math doesn't intuitively make sense when you're losing money. If Jane's $10,000 investment had lost 10% the first year, she would have $9,000 left. In year two, if Jane's investment rebounds by exactly the same amount - 10% - Jane would not break even, as you might expect. In fact, a 10% increase in $9,000 results in only $9,900. Therefore, you need a greater percentage gain after a losing year in order to break even on your investment.

The Rule of 72

If you need an approximation of how your nest egg might grow, you might want to use the Rule of 72. The Rule of 72 can reveal how long it could take your money to double at a particular rate of return. Use the following formula:

Rule of 72
72 / Annual Rate of Return = Number of years it will take for your money to double at a particular rate of return

For example, Jane and Joe want to figure out how long it will take their $10,000 investments to double to $20,000. They use their compound annual rates of return (as figured previously) to estimate how many years it will take to double their money. Joe estimates it will take over 19 years (72 / 3.71% = 19.4 years). However, Jane's portfolio could grow to $20,000 in less than eight years (72 / 9.54% = 7.55 years). It is important to note that the Rule of 72 does not guarantee investment results or function as a predictor of how your investment will perform. It is simply an approximation of the impact a targeted rate of return would have. Investments are subject to fluctuating returns, and there can never be a guarantee that any investment will double in value.

Remember Taxes and Inflation

You should always take into consideration the effects of taxes and inflation when constructing an investment plan to meet your financial objectives. After all, even though Jane earned an average 9.54% on her investments every year, her "real" rate of return will be reduced by taxes and increases in the cost of living.

Depending on Jane's situation and income tax bracket, as much as 39.6% of her 9.54% compound annual return could be paid in federal taxes, leaving her with [9.54% x (1 - 0.396)], or 5.76%.

Then, Jane must figure in the effects of inflation on her earnings. For example, assume inflation averaged 3% over the two years that Jane invested her $10,000, and that she earned a 5.76% compound annual return after taxes, but before inflation. Now, Jane must adjust her after-tax return for the loss of purchasing power caused by inflation. To determine an inflation-adjusted rate of return, use the following formula:

Inflation-Adjusted Return:
(Calculator or Spreadsheet:)
[(1+Rate of Return)/(1+Inflation Rate) - 1] x 100

Jane's inflation-adjusted, after-tax rate of return is [(1.0576) / (1.03) - 1] x 100, or 2.68%. Keep in mind that we've assumed the highest federal income tax bracket (which does not apply to every investor); however, the example does show the impact that taxes and inflation can have on your return.

Bond Yields

Bond investors generally receive periodic income from their investment. The amount of income paid to the holder of the bond is based on the bond's coupon rate. For instance, Jane buys a $1,000 bond that pays a 7% coupon rate and therefore receives $70 a year ($1,000 x 0.07) for as long as she owns the bond. She can determine the income return (or yield) on this bond by taking the coupon dollar amount and dividing it by the purchase price of the bond, or $70 / $1,000 = 7.00%. In this example, the yield and the coupon rate are the same because Jane purchased the bond at its original (or "face") value of $1,000.

However, that yield can fluctuate depending on how much an investor pays for a bond. Let's say Jane's bond cost $1,200. Its current yield is now only ($70 / $1,200), or 5.83%.

Bond prices and yields may change over time with changes in interest rates. As the price of a bond increases, its yield decreases. Conversely, as bond prices decrease, yields increase. If Jane's bond increases in value, her total return (income plus price appreciation) on the investment would be higher than the 7% coupon rate. However, as the yield on her bond changes, the dollar income she receives does not.

Taxable-Equivalent Yield

Municipal bond investors generally receive income that is free from federal and in some cases state and local taxation. As a result, the stated yields on taxable bonds tend to be higher than yields on municipal bonds in order to compensate investors for their tax liability. When comparing bond yields, bond investors must use a taxable-equivalent yield to compare the rate of return on a tax-free municipal bond with that of a taxable bond.

The taxable-equivalent yield on a tax-free bond can be determined as follows:

Taxable-Equivalent Yield:
(Calculator or Spreadsheet:)
Tax-free yield /(1 - investor's marginal income tax rate)

For an investor in a 28% income tax bracket, the taxable equivalent yield for a municipal bond yielding 5% would be 5% / (1 - 0.28), or 6.94%.

No Substitute for Understanding

A financial planner can help you gauge your investments' performance, so you don't have to do the calculations yourself. But it is still your responsibility to understand what it all means. Without that knowledge, you could make potentially unfavorable financial decisions. With a fundamental understanding of the information presented above, you'll be better able to realistically judge your investments.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Tips for Running a Successful Seasonal Business

If you have a seasonal business, you most likely face some challenges that year-round businesses don't. After all, trying to squeeze a year's worth of business into a far shorter period can get pretty hectic. Here are some tips that may help.

Cash Control

All small-business owners have to be careful cash managers. Strict management is particularly critical when cash flows in over a relatively short period of time. One very important lesson to learn: Control the temptation to overspend when cash is plentiful.

Arming yourself with a realistic budget and sound financial projections -- including next season's start-up costs -- will help you maintain control. And you may want to establish a line of credit just in case.

In the Off-season

It's difficult to maintain visibility when you aren't in business year round. But there's no reason why you can't send your customers periodic updates via e-mail or snail mail. You'll certainly want to announce your reopening date well ahead of time. You can also spend time developing new leads and lining up new business.

Time for R and R

You deserve it, so take some time for rest and relaxation. But you'll also want to put the off-season to good use by making necessary repairs and taking care of any sprucing up you'd like to do. You can also use the off-season to shop around for deals on items you keep in stock and/or equipment you need to buy or replace.

Expansion Plans

If you're thinking of making the transition from "closed for the season" to "open all year," start investigating new product lines or services. If you diversify in ways that are complementary to and compatible with your core business, your current customer base may provide support right away. A well-thought-out expansion can be the key to a successful transition into a year-round business.

Being the owner of any type of business has its rewards -- and its challenges. Contact your business advisor, consultant, or small business banker for help. These individuals have experience dealing with the unique challenges of operating small businesses.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Saving for a Sunny Day

Most of us know we need to save for our future goals. Buying a home, providing an education for our children, investing for a secure retirement, or just "saving for a rainy day" are the most common savings goals. But what about next year's vacation, remodeling or refurbishing the house, or buying a second car? You can always just say "charge it." That's how Americans have amassed billions of dollars in credit card debt. Or, you could begin saving for these short-term needs today.

Getting Started ...

The first step in any investment strategy is to develop goals. First, check to see if you have enough reserve funds to cover emergencies or even temporary unemployment. Many financial planners suggest that you have three months' salary available in savings for the unexpected. Then, take a look at your spending needs over the next 12 to 24 months. How much did you spend on your last vacation? How's the car running? By planning ahead for large expenditures, you can prevent anxiety and save on finance charges. Once you've determined how much you need and when you'll need it, you're ready to begin matching your investment objectives to the investment options available to you.

It sounds easy, but if you're like most people, you may lack the discipline to save. Banks offer a variety of special-purpose savings plans designed to help. Vacation and Christmas Clubs use coupon books that provide a schedule for reluctant savers. The idea is to make savings a habit. Whether or not you use coupons or clubs, you can treat your savings deposits like your rent or mortgage payment, and write a check each month (or even each week) for deposit into savings.

Many companies offer automatic payroll deductions for savers. Money that you don't see might not be missed, and it can add up quickly. If your company doesn't offer payroll deductions, you can set up your own automatic transfers from your checking account to your savings account. Money market mutual funds also offer automatic investment plans.

Selecting an Investment Vehicle

Whether your goals are long term or short term, you should look at three investment factors before choosing a savings or investment vehicle: liquidity, safety, and return.

Liquidity -- When can you get your money? If you're saving for next year's vacation, real estate is probably not a good investment. But even certificates of deposit (CDs) may be too restrictive. Be sure you understand what it might cost to turn your investment into cash. Are there penalties for early withdrawal? When you are using a time deposit, make sure your investment's maturity matches your needs.

Safety -- As a general rule, return is proportional to risk. (That's why the old horse with weak legs pays 40 to 1.) Just as liquidity concerns would rule out short-term investments in real estate, safety factors would rule out short-term investments in stocks or bonds. It's not that these investments are inherently unsafe, but that the volatility (or fluctuation in the value) of these investments often makes them unsuitable for short-term investing.

Another concern is credit quality. FDIC-insured products often offer lower returns than mutual funds. The U.S. Treasury is a better credit risk than a corporation. You need to determine what level of safety you are comfortable with, realizing that increased safety usually means lower returns.

Return -- Short-term investors are restricted by safety and liquidity. You should, therefore, be realistic about how much you can expect to earn. Still, there are many investment choices available. Keep in mind that your final return will be reduced by any fees or taxes you incur.

While some investments require a minimum amount, others do not. Generally speaking, the more you have, the more you can earn. Even if you don't have the $500 for a CD, you can still save $50 a week until you do.

Savings Vehicles

Savings Accounts -- Given their convenience, availability, and relative safety, banks are often the first choice for savings. Accounts at FDIC-insured banks are protected up to $250,000 per depositor. Shop around for rates and fees, keeping in mind that banks will usually waive monthly fees if you maintain a minimum balance. Most banks will link your savings and checking accounts. Try keeping most of your money earning interest by writing checks once a week and transferring the money from your savings account as needed.

Money Market Accounts -- These accounts generally pay a higher rate than passbook savings accounts, with a rate that fluctuates with market conditions. You may also get the advantage of limited check writing.

Time Deposits -- CDs are available with terms ranging from 7 days to 30 years. CDs are FDIC insured and offer a fixed rate or return if held to maturity. A fixed rate CD may or may not be an advantage. The time to lock-in is when rates are at their peak. Since it is difficult to know when rates have peaked, you can stagger maturities to limit your interest rate risk (the likelihood that rates will rise or fall). By purchasing CDs with a variety of maturities, you can reinvest principal from maturing CDs if rates go up, while longer-term CDs will continue earning higher returns should rates fall.

Banks may also offer CD products with variable or adjustable rates. Others may be tied to stock indexes or the price of gold. You need to assess the risk, liquidity, and cost of these options to find a product that you understand and are comfortable with.

Relationship Accounts -- Many banks reward their best customers with relationship accounts. By consolidating your deposits and loans with one bank, you can often minimize fees, earn higher rates, or get free services. Check with your bank to see if this option would benefit you.



Money Market Mutual Funds1

Money market mutual funds pool investors' dollars to buy short-term securities such as commercial paper and Treasury securities. Interest paid on these investments is passed on to shareholders in the form of dividends. Dividends as a percentage of the price of the fund are referred to as the fund's yield, which is usually expressed in annual terms. While these funds strive to maintain a fixed price (net asset value or NAV) of $1, the yield fluctuates daily. Typically, money market funds lag behind the market such that yields increase and decrease more slowly than market rates in general.

Money market funds offer many conveniences, including check writing. Although they are considered safe, they are not covered by FDIC insurance. If safety is a concern, funds are available that invest only in U.S. Treasury obligations. However, while Treasury securities are guaranteed by the government, the funds that invest in them are not. If you are in a high tax bracket, a tax-exempt money market fund might be a good idea. Check to determine if the fund is tax free for federal, state, and/or local taxes. Then calculate the taxable-equivalent yield.

U.S. Treasury and Other Money Market Securities

You can buy the same securities as the money market mutual funds. U.S. Treasury bills (T-bills) are generally issued in 13- and 26-week maturities with a $1,000 minimum investment. You can also purchase T-bills with shorter maturity rates directly through banks and brokers. T-bills are sold at a discount, which means that the interest is paid to you when the bill matures. A 26-week $10,000 T-bill yielding 5% will be discounted by $252.80: You'll pay $9,747.20 ($10,000-252.80) to buy the bill and receive $10,000 at maturity. An added bonus is that interest earnings on T-bills are exempt from most state and local taxes. However, earnings may be subject to the alternative minimum tax (AMT).

In addition to Treasury securities, a wide variety of short-term commercial securities are available. The yields will be higher than T-bills due to the increased risk. Unlike mutual funds or bank money market accounts, these investments pay a fixed rate of return.


Source:

1.  An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Buying Life Insurance: What Kind and How Much?

You are likely to need life insurance if others depend on you for financial support, if you provide your family with such services as child care, if you need to consider protecting a surviving spouse or if you have accumulated substantial assets. There are several types of life insurance that you may want to consider.

Types of Insurance

•  Term insurance is the most basic, and generally least expensive, form of life insurance for people under age 50. A term policy is written for a specific period of time, typically between one and 10 years, and may be renewable at the end of each term. Premiums increase at the end of each term and can become prohibitively expensive for older individuals. A level term policy locks in the annual premium for periods up to 30 years.

•  Whole life combines payment protection with a savings component. As long as you continue to pay the premiums, you are able to lock in coverage at a level premium rate. Part of that premium accrues as cash value. As the policy gains value, you may be able to borrow up to 90% of your policy's cash value tax-free.

•  Universal life is similar to whole life with the added benefit of potentially higher earnings on the savings component. Universal life policies are also highly flexible in regard to premiums and face value. Premiums can be increased, decreased or deferred, and cash values can be withdrawn. You may also have the option to change face values. Universal life policies typically offer a guaranteed return on cash value, usually at least 4%. You'll receive an annual statement that details cash value, total protection, earnings, and fees. Drawbacks include higher fees and interest rate sensitivity -- your premiums may increase when interest rates rise.

•  Variable life generally offers fixed premiums and control over your policy's cash value, which is invested in your choice of stocks, bond, or mutual fund options. Cash values and death benefits can rise and fall based on the performance of your investment choices. Although death benefits usually have a floor, there is no guarantee on cash values. Fees for these policies may be higher than for universal life, and investment options can be volatile. On the plus side, capital gains and other investment earnings accrue tax deferred as long as the funds remain invested in the insurance contract.

How Much Insurance Do I Need?

A popular approach to buying insurance is based on income replacement. In this approach, a formula of between five and 10 times your annual salary is often used to calculate how much coverage you need. Another approach is to purchase insurance based on your individual needs and preferences. In this instance, the first step is to determine how much income you need to replace.
 
Start by determining your net earnings after taxes (insurance benefits are generally income tax free). Then add up your personal expenses (food, clothing, transportation, etc.) This will provide an idea of the annual income that your insurance will need to replace. You'll want a death benefit which, when invested, will provide income annually to cover this amount. Remember to add amounts needed to fund one-time expenses such as college tuition or paying down your mortgage.
 
Purchasing the right type of insurance in an amount that is suitable for your family's needs is an important element in financial planning. You may want to consult an advisor who can help you implement the details.

 
Source:

© 2008 Standard & Poor's Financial Communications. All rights reserved.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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Benchmarks Gauge Investment Markets

Just as a car salesperson uses the "blue book" to gauge the approximate price for a newly acquired vehicle, you can use market benchmarks to gauge the approximate performance of your mutual fund investments. Each market index tracks a representative sampling of stocks, bonds, or other securities that may be similar to the holdings in your investment portfolio.

Often tracked in financial websites and newspapers, benchmarks can be especially helpful to individual investors by offering a framework whereby they can evaluate the risk and return history of their own investments. The important consideration to keep in mind is that, when using benchmarks to compare to your investments, you should always compare apples to apples. In order to accurately do this, it helps to be familiar with a variety of benchmarks and the sectors and asset classes they track.

What Are Benchmarks and How Are They Used?

The dictionary defines a benchmark as "a point of reference for measurement." In investing, benchmarks are measurements used by investors, portfolio managers, and market watchers to track how a particular asset class or sector performs and to compare relevant investments to that measurement.

A Variety of Measures

Some of the more popular and widely used indexes include:

•  IBC's Money Fund Report Averages®: These benchmarks track the averages of taxable and tax-free money market fund yields on a 7- and 30-day basis.1

•  Barclays Aggregate Bond Index: A combination of several bond indexes, Barclays indexes are among the most widely used benchmarks of bond market total returns.

•  10-Year U.S. Treasury Bond: The yield on this long-term U.S. government bond is often looked to as the standard bond yield for long-term bond investments.

•  Standard & Poor's Composite Index of 500 Stocks (S&P 500): A broad-based, unmanaged index of the average performance of 500 widely held industrial, transportation, financial, and utility stocks. Many people believe that this, one of the most often-cited indexes, includes the 500 largest stocks on the New York Stock Exchange. Not true: In fact, it includes the stocks of companies that are or have been leaders in their respective industries and that are listed in the New York Stock Exchange and the NASDAQ Market System. The industry weightings in the S&P 500 are selected to reflect components of the Gross Domestic Product (GDP).

benchmark n: a point of reference for measurement.

•  Dow Jones Industrial Average: Following the returns of 30 well-established American companies, the Dow is among the most renowned of the stock market indexes. However, the S&P 500 can be considered a broader indicator of the stock market. The Dow has usurped much of the focus of the newspapers' investment pages because of its unprecedented string of double-digit gains in the late 1990s.

•  The Nasdaq Composite Index: This index was created in 1971 and measures all domestic and non-U.S.-based common stocks listed on the NASDAQ market. It contains many new-economy companies and is widely acknowledged as a benchmark for technology stocks.

•  Morgan Stanley Capital International's Europe, Australasia, Far East (EAFE) Index: The most prominent of the indexes that track international stock markets, the EAFE is composed of companies considered representative of 20 European and Pacific Basin countries.

In addition to the above, there are many others including the Value Line Composite Index (stocks); the Russell 2000 Index (small-cap stocks); the Citi 3-Month T-bill (money markets); the Dow Jones World Stock Market Index (major international markets, including U.S.); and the Barclays Global Aggregate Bond Index (global bond index).

Many benchmarks, including those listed above, are reported regularly on major financial websites and in the business section of local newspapers; national publications such as The Wall Street Journal and Investor's Business Daily; and, internationally, in The Financial Times.





Using Benchmarks to Target Expected Return

Benchmarks can be used to assess what types of investments may be most suitable to an investor's goals and investment time frame. By looking at the past performance of a market index, you can gauge the relative return potential of a particular asset class, as well as its risk characteristics. Keep in mind, however, that past performance is not a guarantee of future results. Also, be careful to use the right benchmark. For example, you wouldn't want to invest in corporate bonds maturing in five years based on the benchmark performance of 10-year U.S. Treasury bonds. Your financial advisor can help you assess which benchmarks to use in evaluating the performance and risk of a given market.

In mutual fund investing, market indexes can be used as a benchmark to evaluate how a given fund has performed in relation to the overall market. Be careful to look at the fund's performance relative to the benchmark over time. Keep in mind that a fund that outperforms the benchmark some of the time and underperforms it in others can still be a good addition to your portfolio if it offers opportunities to diversify.

You may also want to look at indexes of specific types of mutual funds when assessing their performance.

Don't Rely Solely on the Blue Book

The short-term, stellar performance of a particular benchmark may spark your interest in a specific investment class or sector; but remember, you shouldn't buy the car based solely on the blue book price.

In other words, research the investment opportunity, your personal objectives, and risk tolerance before investing. And use the benchmark as just one more resource to keep tabs on your investment performance.


Source:

1.  An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

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