Flournoy Wealth ManagementPam Flournoy, CFP®LPL Financial AdvisorCA Insurance License # 0E587501165 Lincoln Ave #330San Jose, CA 95125408-271-8800408-887-8704pam.flournoy@lpl.comwww.flournoywealthmanagement.com

December 2013It's December 31. Do You Know Where YourMoney Is?

Divorce and Retirement Benefits

What's In Store for Health-Care Reform in2014

What unique challenges do women face inachieving a financially secure retirement?

Merry Christmas Happy Holidays

It's December 31. Do You Know Where Your Money Is?

See disclaimer on final page

I wish you all a sense of peace, joy andcompassion this Holiday Season. I wish you asense of patience - towards yourselves andothers. How much stress would be dissolvedif people would be patient with one another,

I love Christmas but the season itself comeswith so many things to do, buy and the focuson providing the gifts that our loved oneswant, while realizing that so many people gowithout even the basics. From my ownexperience, I know that the holiday time canbe very difficult, which is another reason forpatience and compassion. The grumpyperson at the store may have just lost orpreviously lost a loved one - let's give themour compassion.

Joy! I received this gift upon serving dinnerlast night at the Julian Street Inn - anInnVision program - a shelter for the mentallyill who are working to turn their lives around. Itwas a joy! My gift on behalf of my clients thisyear is a donation to EHC LifeBuilders.

Merry Christmas and Happy New Year!Pam

December and Januaryare the perfect months tolook back at what youearned, saved, and spentduring the past year, asW-2s, accountstatements, and otheryear-end financialsummaries roll in. So

before Punxsutawney Phil comes out of hisburrow to predict when spring is coming, takesome time to get your financial house in order.

How much have you saved?Whether you simply resolved last year to savemore or you set a specific financial goal (forexample, saving 15% of your income forretirement), it's time to find out how you did.Start by taking a look at your account balances.How much did you save for college orretirement? Were you able to increase youremergency fund? If you were saving for a largepurchase, did you save as much as youexpected? Challenge yourself in the new yearto save a little bit more so that you can makesteady financial progress.

How did your investments perform?Review any investment statements you'vereceived. How have your investmentsperformed in comparison to general marketconditions, against industry benchmarks, and inrelationship to your expectations and needs?Do you need to make any adjustments basedon your own circumstances, your tolerance forrisk, or because of market conditions?

Did you reduce debt?Tracking your spending is just as important astracking your savings, but it's hard to do whenyou're caught up in an endless cycle of payingdown your debt and then borrowing moremoney, over and over again. Fortunately, endof year mortgage statements, credit cardstatements, and vehicle financing statementswill all spell out the amount of debt you still oweand how much you've really been able to payoff. You may even find that you're making moreprogress than you think. Keep these statementsso that you have an easy way to track your

progress next year.

Where did your employment taxes go?If you're covered by Social Security, the W-2you receive from your employer by the end ofJanuary will show how much you paid into theSocial Security system via payroll taxescollected. If you're self-employed, you reportand pay these taxes (called self-employmenttaxes) yourself. These taxes help fund futureSocial Security benefits, but many people haveno idea what they can expect to receive fromSocial Security in the future. This year, get inthe habit of checking your Social Securitystatement annually to find out how much you'vebeen contributing to the Social Security systemand what future benefits you might expect,based on current law. To access yourstatement, sign up for a my SocialSecurityaccount at the Social Security Administration'swebsite, www.socialsecurity.gov.

Has your financial outlook changedduring the past year?Once you've reviewed your account balancesand financial statements, your next step is tolook at your whole financial picture. Taking intoaccount your income, your savings andinvestments, and your debt load, did yourfinances improve over the course of the year? Ifnot, why not?

Then it's time to think about the changes youwould like to make for next year. Start byconsidering the following questions:

• What are your greatest financial concerns?• Do you need help or advice in certain areas?• Are your financial goals the same as they

were last year?• Do you need to revise your budget now that

you've reviewed what you've earned, saved,and spent?

Using what you've learned about yourfinances--good and bad--to set your course fornext year can help you ensure that yourfinancial position in the new year is strongerthan ever.

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Divorce and Retirement BenefitsWhile we all hope our marriages will lastforever, statistics tell us that about 50% ofmarriages in the United States will end indivorce.* And since retirement plan benefits arefrequently among the most valuable maritalassets, it's important to understand how thosebenefits may be impacted by a divorce.

Identify all retirement assetsLike houses, cars, and bank accounts,retirement assets can be divided at the time ofa divorce. The laws of your particular state willdefine just which retirement benefits are maritalassets (or community property in communityproperty states) that are subject to division.

"Retirement assets" is a broad term that coversseveral different account and plan types. Youand your spouse may have one or more IRAs,and they may be held by various financialinstitutions. One or both of you may also beentitled to retirement benefits from past andcurrent employers.

Employer retirement plans come in variousforms. Most are "qualified plans," which areentitled to special tax benefits under federal taxlaws. These can be "defined contribution" planslike 401(k), 403(b), and 457(b) plans--you ownan individual account that contains a specificdollar amount of benefits. Or they can be"defined benefit" plans, which pay a monthlypension benefit (currently or sometime in thefuture) based on your salary and number ofyears of service at retirement, and otherfactors.

Dividing marital assetsOnce the retirement assets, along with all othermarital assets, have been identified, you andyour spouse can begin negotiating a propertysettlement agreement (or seek the assistanceof the courts). In some cases, one spouse mayagree to waive any rights to all or some of theother spouse's retirement benefits in exchangefor other marital assets (for example, thehome). This strategy may be appropriate wherethe retirement assets consist solely of a401(k)-like plan, where the value of the benefitis clear--generally the account balance--sotrading for other marital assets is fairlystraightforward.

On the other hand, trading defined benefitpension benefits for other marital assets shouldbe done only if you're certain you know the fullvalue of those benefits. This may require the

assistance of an actuary, who can determinethe present value of your spouse's futurebenefits. And remember that you may be givingup valuable retirement benefits payable for yourlifetime, so before you give these up, makesure you'll have other adequate resourcesavailable to you at retirement.

Qualified plans--QDROsIf qualified retirement benefits (e.g., a 401(k))must be divided, the procedure is to submit aqualified domestic relations order, or QDRO, tothe retirement plan administrator. A QDRO is acourt judgment, decree, or order establishingthe marital property rights of a spouse, formerspouse, child, or dependent of a participant in aqualified retirement plan.

There are a number of ways that plan benefitscan be divided pursuant to a QDRO. Forexample, you could be awarded all or part ofyour spouse's 401(k) plan benefit as of acertain date, or all or part of your spouse'spension plan benefit. It's very important to hirean attorney who has experience negotiatingand drafting QDROs--especially for definedbenefit plans where the QDRO may need toaddress such items as survivor benefits,benefits earned after the divorce, plansubsidies, COLAs, and other complex issues.(For example, a QDRO may provide that you'llbe treated as the surviving spouse for survivorannuity purposes, even if your spousesubsequently remarries.)

You're responsible for any taxes on benefitsawarded to you pursuant to a QDRO (althoughthe 10% early distribution penalty tax will notapply). You may be able to roll certaindistributions into your IRA to defer taxes.

IRAsThe QDRO rules don't apply to IRAs ornonqualified plans. The extent to which IRAsare marital property, subject to division, is amatter of state law. However, federal law doescontain rules that govern the taxation of IRAbenefits distributed pursuant to a divorce. Thegeneral rule is that the IRA owner-spouse mustpay tax on any IRA distributions. However, ifthe IRA benefits are paid to a spouse or formerspouse's IRA pursuant to a divorce decree,then the IRA owner spouse will not beresponsible for any taxes on the amountdistributed. Instead, the recipient spouse mustpay any taxes due when payments are receivedfrom the IRA.

*Source: The NationalCenter for Health Statistics,"Births, Marriages, Divorces,and Deaths: ProvisionalData for 2009, Table A"

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What's in Store for Health-Care Reform in 2014While the Affordable Care Act (ACA) becamelaw in 2010, several of the more substantiveprovisions of the law don't take effect until2014. Here's a review of some of the key partsof the ACA that are scheduled to begin in 2014.

Individual mandateThe ACA imposes a shared responsibilitymandate, which requires that most U.S. citizensand legal residents of all ages (includingchildren and dependents) have minimumessential health coverage or pay a penalty tax,unless otherwise exempt. The monthly penaltyis equal to the greater of a declared dollaramount ($95 in 2014) or a percentage of theindividual's gross income.

Note: The employer's mandate to providecoverage for employees was also scheduled tobegin in 2014; however, the requirement willnot be enforced until January 2015.

State ExchangesThe ACA requires that each state establishstate-based American Health BenefitExchanges for individuals and Small BusinessHealth Options Program (SHOP) Exchanges forsmall employers. The Department of Healthand Human Services will establish Exchangesin states that do not create the Exchanges. Thegeneral purpose of these Exchanges is toprovide a single resource in each state forconsumers and small businesses to comparehealth plans, get answers to questions, andenroll in a health plan that is both cost effectiveand meets their health-care needs.

Exchanges may only offer qualified health plansthat cover essential benefits, limit out-of-pocketcosts, and provide coverage based on fourlevels of cost sharing--bronze, silver, gold, andplatinum. Also, tax credits and cost-sharingsubsidies will be available to U.S. citizens andlegal immigrants who buy health insurancethrough the health Exchanges.

Insurers must provide guaranteed issueand renewability of coverageAll individual and group plans must issueinsurance to all applicants regardless of healthstatus, medical condition, or prior medicalexpenses. Insurers must renew coverage forapplicants even if their health status haschanged. Grandfathered individual plans areexempt from these requirements.Grandfathered plans are those that were inexistence prior to the enactment of the ACA(March 2010) and have not been significantlyaltered in subsequent years.

In the past, insurers used pre-existing medicalcondition provisions to deny coverage for care

related to the condition (pre-existing conditionpolicy exclusion), increased the premium tocover the condition, or denied coveragealtogether. Beginning January 1, 2014, the ACAprohibits insurers in group markets andindividual markets (with the exception ofgrandfathered individual plans) from imposingpre-existing condition exclusions.

In keeping with the guaranteed availability ofcoverage, insurers may not charge individualsand small employers higher premiums basedon health status or gender. Premiums may varyonly based on family size, geography, age, andtobacco use.

Essential health benefitsAll nongrandfathered small group and individualhealth plans must offer a package of essentialhealth benefits from 10 benefit categories. Thecategories include ambulatory patient services,emergency services, hospitalization, laboratoryservices, maternity and newborn care, mentalhealth and substance abuse treatment,prescription drugs, rehabilitative services anddevices, preventive and wellness services, andpediatric services, including dental and vision.

Other policy provisionsThe ACA also imposes several requirementsand eliminates other provisions commonlyfound in insurance policies:

• Group and individual policies (includinggrandfathered plans) may not impose waitingperiods longer than 90 days before coveragebecomes effective.

• Annual deductible for small group (fewer than50 full-time equivalent employees) healthplans (excluding grandfathered plans) mustnot exceed $2,000 per insured and $4,000per family. These amounts are indexed toincrease in subsequent years.

• The most you'll pay annually for out-of-pocketexpenses (deductibles, coinsurance, andco-pays) for all individual and group healthplans (excluding grandfathered plans) cannotexceed the maximum out-of-pocket limits forhealth savings accounts ($6,350 forindividual/$12,700 for family in 2014).

• All group health plans and nongrandfatheredindividual health plans can no longer imposeannual or lifetime dollar limits on essentialhealth benefits.

Increase in small businesstax credit

The maximum tax creditavailable to qualifying smallemployers (no more than 25full-time equivalent employees)that offer health insurance totheir employees increases to50% of the qualifyingemployer's premium costs(35% for tax-exemptemployers) on January 1,2014. This is an increase fromthe maximum credit of 35%(25% for tax-exemptemployers) that began in 2010.

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Flournoy WealthManagementPam Flournoy, CFP®LPL Financial AdvisorCA Insurance License # 0E587501165 Lincoln Ave #330San Jose, CA 95125408-271-8800408-887-8704pam.flournoy@lpl.comwww.flournoywealthmanagement.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

The opinions voiced in this materialare for general information onlyand are not intended to providespecific advice orrecommendations for anyindividual. To determine whichinvestment(s) may be appropriatefor you, consult your financialadvisor prior to investing. Allperformance referenced ishistorical and is no guarantee offuture results. All indices areunmanaged and cannot beinvested into directly.

The tax information provided is notintended to be a substitute forspecific individualized tax planningadvice. We suggest that youconsult with a qualified tax advisor.

Pam Flournoy is a RegisteredRepresentative with and, securitiesare offered through LPL Financial,Member FINRA/SIPC. CAInsurance License #0E58750

What can I do to protect my username and passwordinformation from computer hackers?At one time, computer hackerswere viewed as a few rogueindividuals who mainly workedalone. Today, many hackers

are part of highly sophisticated networks thatcarry out well-organized cyber attacks.Unfortunately, these online security breachescan result in your username and passwordinformation being compromised.

Whenever you enter your personal informationonline, you'll want to make sure that you createa strong password to protect that information.Some tips for creating a strong passwordinclude:

• Avoid creating simple passwords that have aconnection to your personal identity (e.g.,date of birth, address) or that can be found inthe dictionary

• Create a password that uses a nonsenseword/random alphanumeric combination oran arbitrary, easy to remember phrase withmixed-up character types (e.g., upper/lowercase, punctuation)

• Don't use the same password for multiplewebsites

• Use an online tool that allows you to test thestrength of a password

If you have trouble keeping track of all of yourpassword information or if you want an extralevel of password protection, you may want touse some type of password managementsoftware. There are a variety of passwordmanagers on the market. Password managerstypically work by using high-level encryptionmethods to store all of your online usernamesand passwords on one secure server, using asingle master password.

There are a few things you should considerwhen choosing a password manager. First, ifyou plan on needing your password informationfor use on various devices (e.g., tablet,smartphone), you will want to choose apassword manager that has mobility features.In addition, some password managers offeradded benefits such as web form fillers, whichcan come in handy if you do a lot of onlineshopping. Other features to look for includeautomatic log in and password generatorcapability.

What unique challenges do women face in achieving afinancially secure retirement?Women can face specialchallenges when saving forretirement. Generallyspeaking, women tend to

spend less time in the workforce, and whenthey do work, they typically earn less than menin comparable jobs. As a result, women'sretirement plan balances, Social Securitybenefits, and pension benefits are often lowerthan their male counterparts. In addition,women generally live longer than men, so theytypically have to stretch their retirement savingsand benefits over a longer period of time.

What can you do to maximize your chances ofachieving a financially secure retirement? Startsaving as soon as possible. The best time tostart saving for retirement is in your 20s; thesecond best time is right now. At every stage ofyour life, there will always be other financialneeds competing with the need to save forretirement. Don't make the mistake of assumingit will be easier to save for retirement in 5, 10,or 15 years. It won't. Start small, with whateveramount you can afford, and contributeregularly, adding to your contribution when youcan.

If you're in the workforce, an employerretirement plan like a 401(k) plan can be aconvenient, no hassle way to get started andbuild your retirement nest egg--contributionsare deducted automatically from your paycheckand may qualify you for employer matchingfunds. If you're out of the workforce andmarried, you can contribute to an IRA(traditional or Roth), provided your spouseearns enough to cover the contributions.

In many cases, your job is your lifeline to beingable to save for retirement. Before leaving theworkforce for family obligations, considerexploring with your employer the possibility offlexible work arrangements, includingtelecommuting and part-time work, that mightenable you to continue to earn a paycheck asyou balance your family obligations.

Start planning now by taking the followingsteps: (1) set a retirement savings goal; (2)start saving as much as you can on a regularbasis, and track your progress at least twice peryear; and (3) find out how much you can expectto receive from Social Security atwww.socialsecurity.gov.

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