401(k) in Focus

In this issue

February 2017

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401(k) SOLUTIONS

Tax Day and Your 401(k)—5 Things to Consider for Your 2016 Taxes and Beyond

Quarterly Market Update from Fisher’s Investment Policy Committee

FAQ Check––Starting Your Retirement Savings Late? What You Can Do Now!

2 FEBRUARY 2017

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401(k) SOLUTIONS

Tax Day and Your 401(k)—5 Things to Consider for Your 2016 Taxes and BeyondWith 2016 now a fading memory and spring 2017 fast

approaching, income tax day may be on your mind.

While you’re thinking about your taxes, take a moment

to also review your 401(k) plan choices. Not only

does your 401(k) provide a great way to save for your

future, but it also offers tax advantages that can deliver

significant benefits to your bottom line.

Your 401(k) Offers Significant Tax BenefitsWhen you save in your 401(k) plan, you receive some

distinct advantages: the opportunity to build toward

financial security in retirement, an easy way to save, and

a variety of investment options. Your plan also offers

opportunities for you to learn how to invest smarter,

including direct access to your Retirement Counselor

so you can ask questions and get information when you

need it.

But one of the most important benefits of your 401(k)

plan has to do with taxes: Saving in your 401(k) reduces

your income tax responsibility. For example, if you

earned $40,000 in 2016 and saved 6% of it in your 401(k)

plan, your 2016 federal income taxes would be $360

lower than if you had just put the money in a savings

account.¹ You can save even more if you qualify for the

Saver’s Credit (more about that further on). And another

added bonus—you don’t pay income taxes on your

401(k) account investment earnings as long as the money

is left in the plan.

If your review of 2016 leaves you wishing you had saved

more for retirement and paid less in taxes, you can

take steps now to make better use of your 401(k) and

improve your 2017 tax situation at the same time. A

simple increase of your plan contributions can help you

tackle both issues, especially if your employer offers

a match. By upping your 401(k) contribution now, you

reduce your taxable income and pay less in taxes today.

Having difficulty finding extra money to set aside?

Bonuses are an especially great place to find extra 401(k)

worthy funds. Bonuses are generally taxed at a higher

rate than normal pay. By setting aside that money for

retirement, you end up pocketing more of your money

in the long run as it will be taxed as regular income in

the future when you begin withdrawing that money.

And saving just a little more in your 401(k) plan can also

make a big difference in your ability to retire when and

how you would like. For someone earning $40,000 per

year, a 1% increase in contributions could mean an extra

$61,905 in savings.²

3FEBRUARY 2017

Tax Savings in the Future with your Roth 401(k) If you contribute to a Roth 401(k) account, you won’t get

the immediate benefit of reducing your current income

taxes because you make contributions to your Roth

account using already taxed money and it’s considered

taxable income. However, because your taxes are

already paid, you won’t have to pay taxes when you take

the money out of your Roth 401(k) account in retirement.

And if both tax saving styles appeal to you—the

traditional 401(k) and the Roth 401(k)—you can save for

retirement in both kinds of accounts. This will give you

tax advantages of the traditional account today, and the

Roth account later.

Take Advantage of the Saver’s CreditThe federal government wants you to save for retirement

so much that, if you qualify, you can use the Retirement

Savings Contribution Credit, or Saver’s Credit, in your

tax return. This credit allows people who are 18 or older,

not full-time students, and not claimed as a dependent

on someone else’s tax return, to receive a credit on

their federal income taxes for saving in an approved

retirement savings program. The ultimate amount of the

credit varies based on your marital status, the amount

you contribute, and how much income you earn.

For example, if you’re married, filing jointly, and

your 2016 Adjusted Gross Income was $37,000

or less, you may qualify for a credit of 50% of

your retirement contribution for the year, up to

$4,000. The IRS has provided a chart [www.irs.

gov/retirement-plans/plan-participant-employee/

retirement-savings-contributions-savers-credit] detailing

the credits available.

Check to see if you’re eligible for a Saver’s Credit

for 2016. And don’t forget to take this tax break into

account when you’re deciding how much to contribute

for 2017. It pays to save!

Catch-up with an IRAYou’ve reviewed your taxes—are you still unhappy

with your 2016 income tax bill? Consider opening an

Individual Retirement Account (IRA) before April 18,

2017. (The 2016 federal tax deadline is later than usual

this year because of a weekend and a holiday.) An IRA is

your last chance to add more to your retirement for 2016

while also reducing your taxable income. Contribution

limits for 2016 are $5,500 under age 50, and $6,500

over age 50. Talk to your Retirement Counselor for more

information.

Your plan is one of the greatest assets you own—it

provides a great way to save for your future while

offering real tax benefits now. Take time today to review

how your 401(k) choices can affect your taxes—it’s well

worth the time and effort.

¹Based on 15% federal income tax.²Assuming 40 years of saving at 6% per year rate of return.

4 FEBRUARY 2017

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401(k) SOLUTIONS

Quarterly Market Update from Fisher’s Investment Policy Committee

2016 ended on an upbeat note, bringing the MSCI World’s

full-year return to 7.5%.1 Entering last year, we believed

global stocks would do fine, steadily gaining steam as

uncertainty ebbed. 2017 should be even better—a great

year, rewarding all who remained disciplined.

As we expected, 2016 was a year of falling uncertainty.

Full-year returns weren’t blah like 2015, but weren’t

big, either. We see bigger gains in 2017. After markets

spent nearly three years grinding, a big bull market year

is unfathomable to most. Yet bull markets typically surge

out of dull periods. While a correction (a sharp, sentiment-

driven decline exceeding -10%) is always possible for any

or no reason, we think the most likely outcome this year

is an unexpectedly beautiful year as sentiment improves,

growth persists and political fears fade.

Last year’s big news was Donald Trump winning the

White House. While this shocked many, during the run up

to November 8, we frequently pointed out in 2016 that

if states voted according to their legislatures’ partisan

composition, Trump had a clear path. As Ken wrote in his

July 26 Forbes column: “Even if he doesn’t win the popular

vote, if he manages to keep it close—despite Clinton’s

overwhelming margins in places like California and New

York—he’s still game in the electoral college.”

We favored no party or candidate in 2016 (or any earlier

election), shunning partisan politics as a source of blinding

bias potentially infecting investment decisions—clearly

visible in the investing public today. No one knows

what Trump will do in office, but everyone has opinions.

He could be Dr. Jekyll or Mr. Hyde. His supporters are

convinced he’s the good doctor, while Democrats see only

chaotic Mr. Hyde. Many Republicans hope he’s Dr. Jekyll

but fear Mr. Hyde lurks. The media, flailing after failing to

envision Trump’s victory, keeps whipping a dead horse—

dissecting every tweet for policy clues. Investors outside

America can’t understand how Trump won and what the

fearful media rhetoric means. Professional sentiment

is also cautious: Most Wall Street forecasts are barely

positive, the most muted since 2010. If Trump turns out

to be more Jekyll than Hyde, melting fear should support

surging stocks. If more Hyde, depending on economic and

sentiment factors, the probability stocks fall increases.

Inaugural years tend to be very positive or down, not

middling. Most positive years happen under Democrats—

investors fear anti-business policies in the election year,

then are positively surprised as the new administration

does less than imagined. This time, we see a fresh twist:

Markets should receive Trump as they typically receive

Democrats, with big inaugural-year returns. Ken explained

this in Forbes’ November 8 issue: “Why? Because so

many conventional Republican investor types fear him as

5FEBRUARY 2017

well—that he will be anti-trade, populist, pro-rabble

and undignified! … Never has so much of the

GOP firmament so opposed its nominee,

including three of the last five nominees,

a slice of Congress, big global-trade

firms and Wall Street, and its same-

name journal.” Combine this intra-

party opposition with the tiny

Republican Senate edge, and

gridlock looks assured.

Some argue stocks’ post-election

rise signals investors’ high hopes

for tax cuts, fiscal stimulus and faster

growth—hopes gridlock will dash, bringing

disappointment. Yet Trump-phobia outweighs

isolated Trump-phoria. For all the “Trump Rally” talk,

stocks didn’t have a huge election year—just mildly

positive, nearly matching the election year average since

1928. Most pre-election trends continued post-election.

Meanwhile, Trump’s escalating protectionist rhetoric and

jawboning against the likes of Ford, Boeing, Lockheed and

Carrier scared the pants off Corporate America. He is the

most hated new president in modern times. All signs point

to markets receiving Trump as they would a Democrat,

with a great year most likely.

While we expect greatness for markets, 2017 is a year for

vigilance. The likelihood of a down year is higher than in

recent years. We don’t believe this warrants immediate

action, but we’re watching closely. Beyond this, we are

also watching for changing leadership: Foreign stocks

often begin outperforming in inaugural years. Sentiment

has progressed much more slowly in Europe than America,

and the region looks primed for its own year of falling

uncertainty. A leadership shift isn’t certain in 2017, but

given sentiment factors and historical precedent, we think

this would be a highly inopportune time to ignore foreign

markets.

One of our more contrarian 2017 forecasts is for falling

long-term interest rates. Our expectations

for little Fed action and sideways long-

term interest rates proved correct

in 2016, with the Fed hiking once

(in December) and 10-year U.S.

Treasury yields rising just 18 basis

points. With yields ending 2016

on an upswing, most expect them

to continue rising, increasing the

likelihood markets have already

priced the consensus view and will

do something different.

A negative year is possible; successful

investing is about probabilities, not possibilities.

We believe big positive returns are the most probable

outcome in 2017. To us, that suggests now isn’t a time

to reduce equity exposure or delay putting cash to work.

It’s a time to seize opportunities and be ready for beauty,

while remaining watchful, just in case.

If you would like to learn more about the stock market,

have any questions, or need assistance with your 401(k),

we encourage you to contact your company’s Fisher

Retirement Counselor, or call the Fisher 401(k) Solutions

Help Desk at 888-322-7586.

-The Investment Policy Committee

¹FactSet, as of 01/03/2017. MSCI World Index return with net dividends, 12/31/2015 – 12/31/2016.

² Ibid. 10-Year U.S. Treasury yield, 12/31/2015 – 12/31/2016.

It’s a time to seize opportunities and be

ready for beauty, while remaining watchful,

just in case.

6 FEBRUARY 2017

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401(k) SOLUTIONS

FAQ Check—Ask a Retirement Counselor I’m close to retiring and haven’t been able to save nearly as much as I would have liked to. What can I do now?

You are not alone. As a Retirement Counselor, I hear this

question from employees like you every day. According

to the National Retirement Risk index, 52% of U.S.

households¹ will not have enough money saved to maintain

their current standard of living in retirement. Depending

on how far behind you are lagging, saving late in the game

can feel overwhelming. But we want you to know that with

hard work and a little flexibility, there is hope.

Here are three basic ways to catch-up your savings:

#1 – Save MoreIncreasing your 401(k) contributions can make a significant

difference, and the earlier you increase the amount you save,

the better. By upping your savings rate, you give more of

your dollars the chance to grow tax-deferred. Contribution

limits for 2017 have remained unchanged from 2016

($18,000 standard contribution with an additional $6,000

allowed for catch up for those age 50+).² And if you need

help with budgeting advice or discovering ways to find

extra money to save, check out thepennyhoarder.com,

AmericaSaves.org, or MyMoney.gov, or contact your Fisher

Retirement Counselor.

#2 – Work LongerMany people want to retire as early as possible; however,

delaying retirement by a few years can greatly increase

your retirement income. By waiting to retire, you can save

more money, continue growing your assets, and shorten

the time you will need to save for. Another huge benefit

to delaying retirement comes in the form of Social Security

benefit increases. For every year you delay retirement past

age 62, your Social Security benefit increases by up to 8%

per year!² That means if you decided to retire at age 66,

rather than age 62, you could see a potential 32% increase

in your Social Security payment.

#3 – Lower the GoalThe Department of Labor suggests that you will need

70% to 90% of your pre-retirement income to maintain

your current standard of living in retirement.³ Reducing

your income goal from 90% to 70% of your pre-retirement

income will require you to stretch the dollars you have

saved. Creating a cash flow budget will help you identify

how much is coming in and how much will go out. It will

also allow you to assess what is a necessity and what is not.

¹Source: National Retirement Risk Index; Center for Retirement Research at Boston College, Nov. 2016.²Source: Delayed Retirement: If You Were Born Between 1943 and 1954; Internal Revenue Service; www.irs.gov, Nov. 2016.³Source: Top 10 Ways to Prepare for Retirement; U.S. Dept. of Labor, Employee Benefits Security Administration, Sept. 2015.

About Steve ForrerSteve Forrer has been active in the financial services industry for more than 14 years. Before joining the Fisher 401(k) Solutions Service Team in 2016, he spent more than 10 years as a Government and Corporate Retirement Education Specialist at Mass Mutual/The Hartford. Prior to that, he was a Registered Representative at Legend Equities and New England Financial.

Steve received his B.S. in Business Management and Marketing from the Charles H. Lundquist School of Business at the University of Oregon.

7FEBRUARY 2017

4 Things Your Budget Can Do FOR YouDid you know a good budget can actually improve your life while

helping you save some cash? Here are 4 ways your budget can

make a positive difference every day.

1. Simplify Your Life — Being selective about how you spend

your money will help you minimize extra purchases, meaning less

stuff cluttering your halls and more money in your wallet.

2. Reduce Your Stress — Knowing how and where you spend

your money and saving for a rainy day is a great way to decrease

anxiety of the unknown. It can also help you feel empowered

when making your purchasing decisions.

3. Achieve Your Goals — A good budget can help you make your financial dreams like owning a home or

being comfortable in retirement a reality. And watching your nest egg grow each month can help keep you

motivated and stay positive.

4. Improve Your Health — Food eats up a big chunk of most people’s income, especially when it’s on the go.

Reducing convenience and restaurant foods in your diet can save you money while also improving the quality

of food you eat, leading to better nutrition and more energy.

Budget Tip

CONTACT US

If you have a 401(k) account serviced by Fisher Investments 401(k) Solutions and need help or have

any questions, please contact us at 888-322-7586. We can help you with your 401(k) account, including

assistance with technical issues, as well as other service needs. We can also help answer questions about

the latest news developments and what it may mean in terms of investments and retirement planning.

ABOUT FISHER

Fisher Investments 401(k) Solutions is dedicated to helping business owners and their employees successfully

reach their retirement goals. We help people better optimize their retirement savings opportunities and

understand their retirement plan options through in-person enrollments, ongoing education and our live-

person Help Desk.

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K02163V February 2017©2017 Fisher Investments.

Investing in stock markets involves the risk of loss. Past performance is never a guarantee of future returns. This newsletter is intended for educational purposes only. It constitutes the general views of Fisher Investments and should not be regarded as personalized investment or tax advice or as a representation of investment performance. No assurances are made that Fisher Investments will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Not all past forecasts have been, nor future forecasts may be, as accurate as any contained herein.