A publication of

& CHRONICLEK C

Money MattersThe Kane County Financial Planning Guide

FEBRUARY 28

2014

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Financial planning services to address major financialgoals related to retirement, college funding,

and risk management

~Asset management customizedto your specific circumstances

~Easy-to-understand fee structure based on

the value of the managed account

~Independence both in ideas and in form; we do not

represent any one product or company,we represent you

Investment advisory representative offering securities and advisory servicesthrough Cetera Advisor Networks LLC, member FINRA/SIPC. Advisoryservices also offered through Total ClarityWealth Management, Inc.

Total Clarity is under separate ownership from Cetera.

Terry Murphy, CFP®, ChFCPresident

525 Tyler Road, Suite TSt. Charles, IL 60174

(630) 762-9352terry@totalclaritywealth.com

Money Matters | Friday, February 28, 2014 • Kane County Chronicle / KCChronicle.com

3

Financial planning services to address major financialgoals related to retirement, college funding,

and risk management

~Asset management customizedto your specific circumstances

~Easy-to-understand fee structure based on

the value of the managed account

~Independence both in ideas and in form; we do not

represent any one product or company,we represent you

Investment advisory representative offering securities and advisory servicesthrough Cetera Advisor Networks LLC, member FINRA/SIPC. Advisoryservices also offered through Total ClarityWealth Management, Inc.

Total Clarity is under separate ownership from Cetera.

Terry Murphy, CFP®, ChFCPresident

525 Tyler Road, Suite TSt. Charles, IL 60174

(630) 762-9352terry@totalclaritywealth.com

EXPECTAT IONS???

$$$

2013 was a banner year for stocks.

The S&P, including dividends, returned better than 32% on the year. After the past year, it is easy to believe that the markets only move in one direction. (In this case, UP.)

However, it turns out that is not the case. Market pull backs of 10% are relatively common; occurring about every 11months. The last 10% decline happened in June of 2012 - so we may be overdue. This isn’t a call to get out of the market, but rather a reminder about investing vs. speculating. The rising dividends of great American companies (represented by the S&P 500) have returned 7,384% from January of 1970 through year-end 2013. That works out to an annual rate of return of 10.3%. So, when we hear “the market returns about 10% a

year”, over the long run that has been fairly accurate. Interestingly, over the last 44 years the market posted an annual return at or near 10% only twice – in 1993 and again in 2004.

These facts become important when we set expectations for our investments in 2014 and beyond. Expecting returns like we experienced in 2013 for 2014 will probably lead to disappointment. But, if we think of our investments as investing in the rising dividends of great American companies for the long run, we have a good chance of making our investment goals - just not overnight. That would be speculating - and speculating is a fool’s game.

The case of Johnson & Johnson (JNJ) provides a good illustration of the power of long-term investing. $10,000 invested in JNJ at the beginning of 1970 would be worth

today about $1,900,000 - a return of 12.67% per year. This, despite challenges such as an energy crisis, several wars, at least 4 violent market sell offs and “9/11”. And, the quarterly dividend of JNJ which has been raised every year since 1962, would be $13,200 per quarter or $52,800 - more than 5 times the amount originally invested.

This is not a recommendation to run out and by JNJ; but these facts illustrate that investing for the long haul can potentially lead to superior results. Without worrying, “What is the market going to do this year?”

Terry Murphy, CFP, ChFCPresident, Total Clarity Wealth Management, Inc.

[Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change with notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance is not an indication or guarantee of future results.]

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Credit and debit cards are how many people make their purchases, both

big and small. Many people would rather swipe a card at the checkout counter than count cash. These cards offer unmatched convenience and can help keep receipts organized and purchases accountable with minimal effort.

Although debit and credit cards are frequently used interchangeably, there are times when one is preferable over the other. Here’s how to decide which card to use.

$ Need to build credit? Use a credit card if you are trying to establish a positive credit his-tory. However, you must pay your bill in a timely fashion, and it helps to pay the entire balance each and every billing cycle to develop a good credit score.

$ Don’t want a large monthly bill? Debit cards withdraw money directly from your account at the moment the transaction occurs. Much like spending with cash, debit cards let users know when they have run out of cash, as cards will be denied if the transaction is not ap-proved. If you do not want to pay a large bill at the end of the month, debit cards are the better choice.

$ Prefer greater security? Great strides have been made to thwart would-be identity thieves and keep financial data safe. However, as was evidenced by the major data breach in Target’s payment system in late 2013, when millions of credit and debit card numbers and PIN codes were hacked, no system is entirely foolproof. Credit cards offer added security because if fraudulent purchases are made, your credit card account will be quickly frozen and you will not be held accountable. When using debit cards, you are spending your own money up front. Fraudulent purchases may be fixed over time, but it could leave a deficit in your account until matters are resolved.

$ Want to minimize fees? Debit cards do not charge interest or minimum charge penal-ties. There’s no need to worry about being late for a payment and getting charged a fee, and causing your balance to skyrocket. Gas stations and other retailers that may charge more per purchase for us-ing credit cards will treat debit cards like cash and offer the same discounts.

$ Enjoy perks? Credit card companies will sell you their card over another based on various perks. In addition to competitive interest rates, perks may include being able to accumulate travel points, cash-back dollar amounts, advanced ticketing offers for shows and sporting events, discounts and coupons for certain retailers, and many other benefits.

More and more consumers are relying largely on credit cards and debit cards to make their purchases. Each type of card has its benefits and disadvantages, so consum-ers must weigh their options to determine which type of card works best for them.

C R E D I T or

D E B I T?Weigh your options regarding

credit and debit cards

Money Matters | Friday, February 28, 2014 • Kane County Chronicle / KCChronicle.com

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www.volkmaninsurance.com

VOLKMAN INSURANCE AGENCY, INC.161 S Lincolnway, Suite 206 North Aurora, IL 60542

630-897-8824

Do you have money in a CD that you wantto leave to your children or grandchildren?

You can immediately increase the amountyou can leave to your heirs and avoid anynegative tax implications with a SinglePremium Whole Life Insurance policy.

Look at this example: Joe (age 65) has $17,000 sitting in a CD. He plans to leave this money to hisgranddaughter as a gift. If Joe were to use this money to purchase a Single Premium Whole LifeInsurance policy, it would instantly be worth $29,667*—an immediate gain on the deposit of over$12,000. Plus, his granddaughter will receive this money tax-free!

*Based on a Preferred rating, which is a Nonsmoker rating.

Understand your planHealth plans are largely broken down into two main categories: HMOs and PPOs. All managed plans contract with doctors, hospitals, pharmacies, and laboratories to provide services at a certain cost. Generally this group of medical providers is known as a “network.” HMOs, or health management organizations, require you receive most or all of your health care from a network provider. You also may need to select a primary care physician who oversees and manages all of your health care requirements, including approving referrals for tests or approving visits to specialists.

PPOs, or preferred provider organizations, create a list of preferred providers that participants can visit. You will not need to select a primary care physician and likely won’t need referrals to visit specialists. Should you choose to stay in-network, you will pay only the co-payment required. However, you also have the option of going out of your network, and will have to pay the co-insurance, which is the balance remaining for the doctor after the PPO has paid their share. Many plans will cover 70

to 80 percent of the out-of-network bill, and you will be responsible for the rest.

HMOs are the least expensive option, but they’re typically the least flexible as well. For those who have a family doctor who is in-network and will not need to see doctors outside of the network, it is financially beneficial to go with an HMO. Those who routinely see specialists or want greater say over when and where they can go to the doctor, a PPO is a better option.

Note co-payment changesIt is generally the patient’s responsibility to know what is expected of him or her at the time of payment. Doctors take many different plans, and some prefer not to manage the terms and conditions of each and leave it up to the patient to understand the specifics. As such, you should know your co-payment requirement for tests, office visits, lab work and the like. You will be responsible for making these co-payments at the time of your visit, as many doctors no longer bill for co-payments. Failure to pay the correct amount could result in penalties or even refusal of service.

Also do not assume that a provider is in-network. There may be subtleties and subdivisions of certain insurance plans. It may seem like one doctor takes your insurance, but it may not be your particular plan. Confirm that the doctor is in-network prior to visiting to avoid any unforseen bills.

Notify your doctorMany insurance plans will start coverage at your sign-up or anniversary date, others may begin January 1st. Notify your healthcare provider as soon as possible as to the change in coverage. This protects you if they are behind in billing and paperwork by helping you avoid additional out-of-pocket expenses resulting from billing the wrong insurance company.

Learn about annual examsA new plan may wipe the slate clean with respect to how frequently you are entitled to yearly physicals or specialized tests, such as mammograms or prostate exams. When your insurance plan changes, investigate when you are able to go for routine exams and if you will have to pay a co-payment. You may want to schedule a physical at this time to start the new year on a healthy note.

NEW HEALTH INSURANCE: How to get the most out of your new plan.

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American Bank & Trust0260908

I nvestors know that money management can be difficult. The ebb and flow of the economy can be similar to a roller coaster, with soaring

highs followed by steep drops, and those changes all affect investors’ bottom

lines. It’s no wonder then that many investors over 50 envision

the day when they can get off that roller coaster and

simply enjoy their money without having to worry about the everyday ups and downs of the market. But managing money after 50 is about more than just reducing risk. Here are additional steps to ensure your golden years are as enjoyable and financially

sound as possible.

$ Prioritize saving for retirement. Men

and women over 50 know that retirement is right around the

corner. Despite that, many people over 50 still have not prioritized saving for retirement. It’s understandable that other obligations, be it paying kids’ college tuition or offering financial assistance to aging parents, may seem more immediate, but men and women over 50 should recognize that their time to save for retirement is rapidly dwindling. Just because you are retired does not mean your bills will magically disappear. In fact, some of those bills, such as the cost of medical care, are likely to increase.

$ Pay down debt. Men and women over 50 are not often associated with debt, but that’s a misconception. Thanks in part to the recession that began in 2008 and led to high unemployment, many people went back to school to make themselves more attractive to prospective employers. While that might have been a sound decision, it left many deeply in debt. According to a 2013 report from the Chronicle of Higher Education, student loan debt is growing fastest among people over 60. Men and women over 50 who are still carrying debt should eliminate consumer debt first, as such debt tends to be accompanied by higher interestrates than mortgages and student loan debt. Paying

down debt can help reduce stress, improve your quality of life and free up money for living and recreational expenses once you retire.

$ Examine your insurance policies. Your approach to insurance should change as you get closer to retirement. For example, you want to maximize your liability insurance on homeowners and auto insurance policies. This ensures the money you have set aside for retirement won’t be going to a third party should you be at-fault in an auto accident or if someone suffers an injury at your home. Experts recommend liability insurance be substantial for men and women over 50, some suggesting it be twice your net worth.

If it wasn’t already, securing long-term disability insurance should be a priority once you have turned 50. A sudden accident or illness at 55 that prevents you from working could prove devastating to your financial future if you do not have disability insurance. Some employers offer long-term disability, though many people are left to secure policies on their own. Make sure it provides adequate coverage should you succumb to an illness or injury and be unable to work.

Managing Money af ter 50

Trust and InvestmentManagement

Grow. Guard. Give.

2580 Foxfield Road, Suite 201St. Charles, IL 60174Phone 630-584-0043

Jennifer Johnson-Vice President Trust OfficerKathleen Krochock-Vice President Trust Officer

Full ServiceBranches

Get On With Your Life Safely!

1542 South Randall RoadGeneva, IL 60134

Phone 630-845-0700

8 South Main StreetElburn, IL 60119

Phone 630-365-4400

www.ambankqc.comNot insured by the FDIC; Not a deposit or other obligation of,or guaranteed by, the depository financial institution; Subject toinvestment risks, including possible loss of principal amount invested. Your Needs - American Bank & Trust KnowHow

Money Matters | Friday, February 28, 2014 • Kane County Chronicle / KCChronicle.com

7Managing Money af ter 50For the 20 year

period ended 2011, the

average investor in equity mutual funds generated an annual return of 3.49% while the stock market (represented by the S&P 500) generated an annual return over the same period of 7.81%.

That is a huge difference. The investor who started with $100,000 at the end of 1991 ended with $198,594 after 20 years. If you matched the return of the stock market you ended with $449,967. That is an increase $251,103 by remaining focused on the long-term and not worrying about short-term market fluctuations. The return information is based on a 2012 study by Dalbar as published in the Wall Street Journal on April 7, 2012.

Emotion is the main reason for such poor performance. Investors tend to sell stocks after the stock market goes down and buy stocks after the stock market goes up. Exactly the wrong approach. Academic studies consistently show that professional investors cannot time the stock market and individual investors are even worse.

What should an individual do? Hire an investment manager to design a portfolio and a portfolio management process based on your situation, goals and risk tolerance. The investment manager will help keep you on track and create a circuit breaker when markets inevitably go down. Look for a manager who does not try to pick stocks or time markets. Their fees should be reasonable and the cost of the investments they use should also be low. Sticking with a diversified low-cost portfolio provides you with the best chance of achieving your investment objectives.

HOW TO

INVEST:

SOLVING

THE

FINANCIAL

PUZZLE

Jeff Martin is a registered investment advisor and president of KDM

Investment Management in Geneva, Il. Find out more at www.kdminvest.com.

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8PROFILESUnique individuals who provide specialized services

Jeff Martin

Martin Takes Confusion out of Retirement PlanningJeff Martin, president of the KDM Investment Management

in Geneva, believes any time is a good time to take control ofyour finances.

“While it’s easier if you start early, it’s never too lateto start. I work with young people to set up ways for themto save through their employer, and I also have clients intheir seventies and eighties. We help them manage theirinvestments during retirement, so their income lasts the rest oftheir life,” Martin said.

KDM Investment Management offers retirement planning,investment and wealth management services, with an emphasison creating an understandable, workable plan to help clientsprepare for, and carry them through retirement. “We help themunderstand how much they need to save and how they need tomanage those investments over their lifetime,” he said.

Martin’s typical new client has scattered, non-strategicinvestments. “They might have a couple of 401ks with differentcompanies, a few IRAs and they need to organize theirportfolio,” he said.

The first consultation focuses on understanding the client’sgoals. “Then we create a strategy, consolidating accountsif possible, which is documented in an Investment PolicyStatement, a plan to achieve their goals,” he said.

The advantage of a documented plan is that it preventsemotion-driven decisions during the market’s inevitable upsand downs, that are often detrimental to a client’s financialhealth.

Martin also enjoys educating clients, and has writtena book, “Strategic Diversification: Retirement PlanningThat Works.” available at Townhouse Books in St. Charles,Anderson’s Bookshop in Naperville and through Amazon.

“The biggest thing is making sure they have the properinvestments for where they are in the savings and retirementcycle, and that those investments are wisely managed,” hesaid.

A University of Georgia graduate, Martin built a 17-year-career in corporate information technology, then realized hewanted a more people-driven profession. “I’ve always beeninterested in personal finance and investing, I knew I wanted tohelp others, so this was a good fit,” he said.

After talking with financial services professionals hepursued certifications and entered the field seven years ago,partnering with his family’s long-time financial advisor forthe first four years. “For me, what’s most rewarding is givingcustomers peace of mind that things are organized and if theystick to the plan it will work,” he said.

Jeff Martin321 Stevens Street, Suite RGeneva, IL 60134630-232-9097www.kdminvest.com

President, KDM Investment Management

“While it’s easierif you start early,

it’s never toolate to start.”

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