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June 2012 Vol. 2 No. 6 Wealth Management Update
Advisor Corner
COMPASS Wealth Management,LLC is a client-focused wealthmanagement firm dedicated toproviding superior advice toindividuals, families, andcorporate retirement plans.
Our wealth management servicesinclude investment management,retirement and gift planning,education funding, and otheradvisory services.
We take pride in offering youexpert financial advice along withpersonalized service. Assistingyou in reaching your financialgoals is our business and we takethat responsibility very seriously.
For details on the selectioncriteria used to determine therecipients of the 2012 FIVE STARWealth Manager award, pleasevisit our web site.
If you would prefer NOT toreceive future editions of TheCOMPASS Chronicle, please sendan e-mail with "UNSUBSCRIBE" inthe subject line and you will beremoved from the distribution list.
The Tax Code and U.S.Competitiveness
While investors prepare for tax hikes in 2013, it isn’tsurprising to learn that taxes have become increasinglyimportant when it comes to the economy and U.S.competitiveness. �e Harvard Business Schoolrecently published results of a survey on U.Scompetitiveness, which aims to lay out facts andrealities of international competition and implicationsfor the U.S. In October 2011, about 10,000 alumnicompleted an in-depth survey on U.S.competitiveness. According to the survey, the greatestcurrent or emerging weaknesses are perceived to beAmerica’s tax code, political system, K-12 educationsystem, macroeconomic policies, legal framework,regulations, infrastructure, and workforce skills.Respondents were deterred from investing in theUnited States not only by a high statutory corporatetax rate, but also by the sheer complexity and uncertainfuture of the tax code.
Louis E. Conrad II, CFAPresident
[email protected](978) 828-5681www.compassinvest.com
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COMPASS Wealth Management Wealth Management Update June 2012 2
The Fiscal Cliff
Economic headlines have wreaked havoc with thestock market recently. Whether it has been theongoing European debt crisis, a deceleration of growthin China, or our own tepid economic and employmentgrowth, these types of headlines led to a decline in theU.S. stock market during the months of April andMay. As if this wasn’t enough to shake investors’confidence, at the beginning of 2013 we face what hasbecome known as a “fiscal cliff,” or a combination ofreduced federal spending and increased federal taxes,which are expected to be a meaningful drag oneconomic activity next year if nothing is done toalleviate their effects.
Federal Tax Rates to Rise
Under the Tax Relief Acts of 2001 and 2003 andsubsequent extensions, the lower rates that we haveenjoyed over the past decade sunset at the end of thisyear and revert back to the rates in effect previously.Consequently, only those in the current 15% federalincome tax bracket will not experience a rise in incometax rates. Those in the 10% federal income tax bracketwill see an increase to 15%, 25% will go to 28%, 28%will go to 31%, 33% will go to 36%, and 35% will riseto 39.6%.
Long-term capital gains tax rates will rise for everyone.For those in the new 15% income tax bracket, thecapital gains tax rate will increase from 0% to 10%.For those in higher income tax brackets, the capitalgains tax rate will increase from 15% to 20%. Withassets held for at least 5 years, the capital gains tax ratewill be 8% (instead of 10%) and 18% (instead of 20%),respectively.
Interest income will continue to be taxed at ordinaryincome tax rates, though at the new higher rates asoutlined above. However, tax rates on qualifieddividend income will experience a notable increasefrom 15% for most taxpayers to their new ordinaryincome tax rate.
Two other tax changes for 2013 involve payroll taxesand taxes related to health care reform. The employee-paid component of Social Security payroll taxes,which had been reduced to 4.2% from 6.2% for 2011
and 2012, will revert back to 6.2% in 2013. Inaddition, higher earners (those with incomes above$200,000 for individuals and $250,000 for couplesfiling jointly) will be subject to a new health carereform tax of 3.8% on taxable investment income, suchas interest, dividends, capital gains, rents, androyalties; however, retirement plan distributions andmunicipal bond interest will be excluded. This taxwould be eliminated if the U.S. Supreme Courtdeclares the health care reform law unconstitutional inits entirety.
Other noteworthy tax changes will also begin in 2013,including a reduction in the child tax credit, areduction in the estate and gift tax exemptions, and anincrease in estate and gift tax rates. A more extensivediscussion of these and other tax changes slated for2013 are beyond the scope of this article.
Deficit/Economic Impact
In addition to the tax increases scheduled to take effectin 2013, discretionary federal spending is slated to bereduced by $2.1 trillion over the next ten years basedon the congressional compromise reached last August,with many of these cuts set to begin in 2013. Basedon Congressional Budget Office (CBO) estimates, ifthe tax increases and spending cuts occur as scheduled,the federal budget deficit will be reduced by severalhundred billion dollars or 5.1% of GDP during 2013.However, this will also drive the U.S. into a recessionduring the first half of 2013, according to projectionsby the CBO.
Given the draconian economic impact these scheduledtax rate increases and spending cuts would have,Congress is expected to reevaluate them during thepost-election lame-duck session this fall or in early2013.
By Louis E. Conrad II, CFA
Without action from Congress,income, capital gains,dividends, and estate and gifttaxes are slated to soar as ofJanuary 1, 2013.
Combined with federalspending cuts that arescheduled to begin in 2013,this "fiscal cliff" will have aserious negative impact oneconomic growth withoutcongressional intervention.
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COMPASS Wealth Management Wealth Management Update June 2012 3
Monthly Market Commentary
Fear grew in May as bad news out of Europe andChina continued to dominate the markets. Greeceremained the epicenter of European problems asGreek election results have made it difficult to form anew government. Bank runs in Greece and rumors ofan exit from the eurozone have plastered headlines aspeople speculate the possibility and implications ofsuch an event. On a lighter note, investors breathed aslight sigh of relief for the eurozone, which managedto eke out a very slight GDP growth in the firstquarter of 2012 after contracting in the fourth quarterof 2011, avoiding the technical indication of arecession (back-to-back quarters of negative GDPgrowth).
As China’s growth rate continued to soften because ofmanufacturing and export demand weakness intandem with Europe’s slowdown, China cut interestrates for the first time since 2008 with the hopes ofspurring more growth. Barring a complete financialcollapse, there should be minimal impact on the U.S.economy because the U.S. exports next to nothing toEurope (and even less to China), while Chineseexports to Europe represent a significant portion ofChina’s GDP.
Employment: Markets tanked as a result of adisappointing employment report, with only a meager69,000 jobs added in May. Worse, the previous twomonths of unemployment data were revised downwardby a total of 49,000 jobs. Despite these setbacks,Morningstar economists still expect monthlyemployment growth to average about 195,000 jobs permonth, with better housing employment andcontinued 2% or so GDP growth to drive thatemployment. The unemployment rate rose slightly to8.2%.
Manufacturing: Despite a tepid manufacturing sectoroutside of the U.S., domestic manufacturing datamostly came in above expectations in April. Almostevery category showed strength, led by utilities, whichrebounded nicely as weather returned to more normal-conditions. While autos have been a huge help in thepast couple of months, April showed a broadening ofthe improvement in manufacturing across allcategories. Investors should be aware that while the
month-to-month numbers looked positive, the year-over-year growth rate remained flat, indicating juststeady, forward progress as opposed to a boom-or-bustscenario.
Housing: Seasonally adjusted home prices increased1.1% from the fourth quarter 2011 to the first quarter2012, the largest increase since the third quarter 2009.Year-over-year, prices fell by 1.9%, which was muchbetter than the 4.6% year-over-year decline in the firstquarter of 2011. As home prices stabilize, this willlikely help the difficult appraisal process that hadprevented thousands of homes from closing. April’spending home sales fell from March but was still up14.4% year-over year, marking the 12th straightmonth of positive growth. Morningstar economistsbelieve that the U.S. housing market has far moreroom for upside than downside at this point in thebusiness cycle.
Consumers: Consumer spending continued to increaseon both a month-to-month and year-over-year basisdespite the apparent volatility in the employmentmarket. Some of the reasons include greateravailability of credit, falling gasoline prices, and asubstantially lower inflation rate. However, in the faceof weakening employment as businesses hit the pausebutton on hiring, there is little chance thatconsumption growth will accelerate.
Market: The U.S. stock market suffered its worst dayof the year on June 1, 2012; the Standard & Poor’sindex fell by 2.5% after the release of a surprisinglyweak employment report. Fears of the impact on theU.S. because of the slowing global economy saw aflight to safety away from stocks and into Treasurybonds.
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COMPASS Wealth Management Wealth Management Update June 2012 4
Retirement: The Next Generation
If you had a dollar for every time you heard the phrase“Start investing early,” you could retire with a million.If you actually acted on that phrase, you are probablyretiring with more. Now is the time to encourage yourchildren and grandchildren to start saving as soon asthey get their �rst job. Let’s assume that your teenagechild or grandchild is employed for �ve years from age16 to age 21. During this time, he or she saves $276per month ($3,315 per year) and invests the money ina Roth IRA (paying taxes, of course, but at a low taxbracket). �is may be a serious sacri�ce for a teenager,so any contribution from you would be of great help.Assuming the money returns the historical equivalentof a diversi�ed 60% stock/40% bond portfolio, yourchild can retire at 65 with $1 million tax-free, withouthaving to invest another dollar after age 21.
This article points to the powerof compounding and havingtime work for you.
The importance of stayinginvested through the vagariesof the market is required forsuch a result.
©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is notwarranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arisingfrom any use of this information. Past performance is no guarantee of future results. "Morningstar" and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar MarketCommentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder.
Louis E. Conrad II, CFAPresident
COMPASS Wealth ManagementPost Office Box 250Lexington, Massachusetts 02420
Tel:(978) 828-5681Fax:(781) 862-7030
© COMPASS Wealth Management, LLC, as well as Morningstar. While the information contained in this newsletter relies on sources believed to be reliable, accuracy cannot be guaranteed. Unlessotherwise noted, all information and opinions are as of the date of transmittal, and are subject to change without notice. This newsletter is intended for general informational purposes only and it doesnot discuss all aspects that may apply to your situation. Please consult with a qualified professional. COMPASS Wealth Management, LLC is a registered investment advisor with the appropriateregulatory authorities. For additional details on the services that COMPASS offers, we encourage you to also review Parts 2A and 2B of our Form ADV, which is provided on request. For details on theselection criteria used to determine the recipients of the FIVE STAR Wealth Manager award, please visit our web site (www.compassinvest.com).
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Letter from Dan
We had a nice turnout for our open house in February,thank you to those of you who attended. For those ofyou who were unable to attend, please feel free to stopby our new Rochester o�ce if you are in the area – we’dlove to give you a tour!
�e �rst quarter returns on the stock market weretremendous – the S&P 500 gained 12%! We may easilysee a slight downturn in the second quarter as investorstake pro�ts. �e outlook for Europe has improved asGreece came to agreement with their bond holders, butSpain and Portugal are still areas of concern. We expecta sideways market through the summer, rising gas pricesand the national elections will most likely hold themarket back. Looking towards the end of the year, weexpect to end the year at least at the level where we arenow, so keep your chin up and enjoy the early spring!
April 2012 Vol. No. 6 www.prattkutzke.com
Advisor Corner
Daniel KutzkePartner - Financial [email protected]
Pratt, Kutzke & AssociatesPartner, Dan Kutzke, has morethan 28 years of experience in thefinancial services industry. Heworks both as an InvestmentAdvisor Representative forindividuals as well as anemployee benefits specialist forbusinesses.
He attained his Chartered LifeUnderwriter (CLU) and Chartered
Financial Consultant (ChFC)designations in 1988.
Dan and his wife, Kim, live inRochester and enjoy spendingtime with their children. Inaddition to community andindustry involvement, Dan alsoenjoys playing golf, singing andtraveling.
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Monthly Market Commentary Most of the economic news released during the
past few weeks pointed toward slow but steadyprogress in the U.S. economy, despite somemarket volatility that was attributed to news outof the Federal Reserve. Markets rallied based ona Ben Bernanke speech that suggested theeconomy was not out of the woods yet and thatquantitative easing remained an option if thingsworsened. Markets also collapsed on the releaseof the minutes from the Federal Reserve OpenMarket Committee, which indicated that theeconomy was stronger than the Fed hadanticipated and offered no hints that morequantitative easing was being considered.
Employment: March saw a disappointing120,000 jobs being added; the lower number wasmainly a result of a large decline in private-sectorretail jobs and the continued contraction of thepublic sector. This is a significant drop from therevised 240,000 jobs in February and revised275,000 jobs in January. The unemployment ratefell slightly, to 8.2%.
Manufacturing: Manufacturing data in Februaryremained mixed but still showed an improvementfrom January, at least in terms of durable-goodsorders. As export demand weakens and growthslows in the auto sector later this spring,Morningstar economists are not expecting a lot ofgrowth (or declines) from manufacturing in 2012.The economic key continues to remain in thehands of U.S. consumers, with a potential addedboost from housing and construction markets.
Housing: Real estate data continued to berelatively inconclusive as abnormal weatherwreaked havoc on the data, causing most realestate numbers to show better results on a year-over-year basis than on a month-to-month basis.The Case-Shiller Home Price Index (seasonallyadjusted) for the three months ending in Januarywas flat compared with December, while the year-over-year numbers showed some improvement.Month-to-month pending contracts for Februarywere down 0.5% and have now declined for twoof the last three months, while year-to-yearpending contracts were up a stunning 9.2%.
Although the media remains thoroughlyconfused, with many outlets featuring month-to-month weakness while others ran headlinestrumpeting a new boom based on the year-over-year numbers, Morningstar economists believethat the truth lies somewhere in the middle.
Retail: The International Council of ShoppingCenters reported 4.1% year-over-year same-storesales growth in March, matching the gains inFebruary. Warm weather and an earlier Easterhelped boost the numbers, with both apparel anddepartment stores showing an improved growthrate.
Quarter-end insights: The first quarter of 2012saw the U.S. economy gaining strength as otherworld economies slowed. Morningstareconomists believe that slow but steady U.S. GDPgrowth, moderating inflation, and risingemployment growth may be on tap for theremainder of the year. While better employmenthas helped a number of sectors, includinghousing, restaurants and even health care, othersectors such as industrials continued to worryabout slowing demand from Europe and China.Slowdowns in these regions may be harmful toindividual companies but not necessarily to theoverall U.S. economy—many of those goods arenot produced in the U.S. Overall, companiespoised to benefit from a relatively strong U.S.economy with limited exposure to non-U.S.markets may be better performers. This includessmall-cap companies that typically had a smallerportion of their revenues from non-U.S. sources.Around the world, government data suggests thatChina’s typical 10% growth rate is likely to fall to7.5%. A slowdown in China combined with a lessgenerous U.S. Federal Reserve will likely bring incommodity prices, significantly affectingcommodity-based economies (such as Australiaand Brazil) as well as capital goods-relatedexporters (such as Germany).
Pratt, Kutzke & Associates www.prattkutzke.com April 2012 2
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Six Reasons Why Boomers’Retirement Is Different From TheirParents’ 1. Much Longer Retirement: Many people in
previous generations worked as long as they couldand very few were fortunate enough to have aretirement that would be considered “golden” bytoday’s standards. How many spent the last third(or more) of their lives pursuing hobbies andleisure instead of working? Boomers retiring intheir 60s can expect to live about 30 years inretirement, which is a lot longer than their parentsdid.
2. Higher Expectations: Not considering tours ofduty in Europe or the Pacific, how much travelingdid past generations of retirees do? Boomers’parents were Depression-era babies who practicedfrugality and continued to pinch penniesthroughout retirement. In stark contrast, boomerswant their retirement to include travel, vacationhomes, new cars, dining out, etc. This is fine, butit is expensive. Therefore, boomers need to planfor a much more expensive retirement than theirparents ever would have expected.
3. Personal Savings Instead of Pensions: Thegreatest generation might have had a lower percapita income but many also had corporatepensions. Boomers wanted higher salaries,freedom to change employers and the ability tosave independently. Corporate pensions werelargely phased out, giving way to the 401(k).However, when given the option, most boomersdidn't start saving enough or early enough. Today,many boomers haven’t amassed enough inpersonal savings, and most don’t have meaningfulpensions compared to their parents.
4. Rising Instead of Declining Interest Rates: Inthe 1980s, when the greatest generation started toretire, interest rates were much higher than theyare today. The long decline in interest ratesprovided a great return to bond investors. Theboomers are facing the very opposite situation.Instead of an ever-declining interest rate, they are
facing the likelihood of steadily increasing interestrates during their retirement.
5. Exotic Investment Options: The greatestgeneration had relatively few investment options;mostly ordinary bonds and certificates of deposit.Today’s boomers, on the other hand, are beingoffered an ever-expanding universe of incomesecurities. The investment industry has provideda lot of rope, and a lot of new and exciting waysto lose it all.
6. Deregulations: If they felt like taking risk, theboomers’ parents might buy some dividend-paying stocks. At the time, most of the dividend-paying industries, such as finance and utilities,were highly regulated. Decades of deregulationhave caused these industries to become lesspredictable and more risky; hence, the certainty ofpreviously assumed dividends is now extremelyuncertain.
What Boomers Really Need: As boomers give upon stock gains, they tend to focus on incomeinvesting, and are always on the hunt for higheryields. There is no secret to finding higheryielding securities. In one way or the other, ahigher yield just means higher risk: either termrisk, credit risk or price risk. Higher-yieldingsecurities always have more risk than lower-yielding securities. And some high-yieldsecurities can even be riskier than a simple basketof stocks, but with a lower expected return. Forthese reasons, you may want to ask your advisorto establish a sustainable withdrawal rate andbuild a diversified portfolio focusing on totalreturn rather than focusing on dividend-producing, interest-paying securities.
Diversification does not ensure a profit or protectagainst a loss in a declining market. The opinionsherein are those of Morningstar, Inc. and shouldnot be viewed as investment advice.
Pratt, Kutzke & Associates www.prattkutzke.com April 2012 3
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Dangers of Market Timing
Important Disclosures
Securities & InvestmentAdvisory Services offeredthrough Woodbury FinancialServices, Inc., Member FINRA,SIPC & Registered InvestmentAdviser.Not FDIC Insured. Not BankGuaranteed. Not a bankdeposit. Not insured by anygovernment agency. May losevalue.Pratt Kutzke & Associates, LLPand Woodbury FinancialServices, Inc., are not affiliatedentities.P.O. Box 64284, St. Paul, MN55164, 800-800-2638
Two of the most dangerous words in the investingworld are “market timing.” Market timing occurswhen investors try to predict which direction thestock market will head. While some investors havebeen known to make money timing the market, itis highly inadvisable for long-term investors to trythis extremely risky strategy. Opponents ofMarket Timing: Most investors and academicsbelieve it is impossible to forecast marketmovements. Such a technique amounts togambling when compared with a sound investmentapproach. It fails far more than it works, andmarket timers often end up buying high and sellinglow. Furthermore, you run the risk of missingperiods of exceptional returns. For example, overthe past 20 years, a $1 investment in stocks, asrepresented by the Standard & Poor’s 500®, wouldhave grown to $4.50. If that same $1 investmenthappened to miss the best 11 months of stockreturns over the past 20 years, the ending valuewould have equaled only $1.79. �is would havebeen less than the value for an investor in a 30-dayTreasury bill, a.k.a. cash, $1.87. Only those who
remained invested in stocks throughout the entireperiod were sure to get market exposure during thecrucial hot months.
Advocates of Market Timing: On the contrary, anumber of websites, newsletters, and other tradingservices boast they can time the market. Whiletheir returns may have in fact beaten the market bya considerable margin, it’s safe to assume that thesesystems can’t consistently hold up over the longterm. On some occasions and during somestretches of time, market timing can help generateimpressive pro�ts. However, you must be familiarwith the dangers behind such an approach.
Pratt, Kutzke & Associates www.prattkutzke.com April 2012 4
©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/orthe content providers; (3) is not warranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor thecontent providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. "Morningstar"and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar Market Commentary originally published by Robert Johnson, CFA, Director ofEconomic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder.
Daniel KutzkePartner - Financial Advisor
Pratt, Kutzke & Associates959 34th Avenue NWRochester, Minnesota 55901
Tel:507-281-6650Fax:507-281-6884
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June 2012 Asset Accumulation & Preservation Strategies
Advisor Corner
We hope you enjoy this edition ofthe Financial Insights & Outlooknewsletter. Contact us with anyquestions or comments on theideas expressed herein. Feel freeto share this document withothers who may benefit from itscontent.
Proficient Wealth Counselors, LLCis a Registered InvestmentAdvisor. Advisory services areonly offered to clients orprospective clients whereProficient Wealth Counselors, LLCand its representatives areproperly licensed or exempted.
This newsletter is solely forinformational purposes. Noadvice may be rendered byProficient Wealth Counselors, LLCunless a client service agreementis in place with you.
Fight Back Against Identity Theft
Identify theft starts with the misuse of your personalidentifying information such as your name and SocialSecurity number, credit card numbers, or other�nancial account information. For identity thieves,this information is as good as gold. Skilled identitythieves may use a variety of methods to get hold ofyour information, including:
• Dumpster Diving. They rummage through trashlooking for bills or other paper with your personalinformation on it.
• Skimming. They steal credit/debit card numbers byusing a special storage device when processing yourcard.
• Phishing. They pretend to be financial institutions orcompanies and send spam or pop-up messages to getyou to reveal your personal information.
• Changing Your Address. They divert your billingstatements to another location by completing a changeof address form.
• Old-Fashioned Stealing. They steal wallets andpurses; mail, including bank and credit cardstatements; pre-approved credit o�ers; and new checksor tax information. They steal personnel records, orbribe employees who have access.
• Pretexting. They use false pretenses to obtain yourpersonal information from �nancial institutions,telephone companies, and other sources.
Protecting your personal information is the �rst stepin preventing identity theft. Identity theft is a seriouscrime that costs American consumers billions ofdollars and countless hours each year. It occurs whensomeone uses your personal information without yourpermission to commit fraud or other crimes.
Continued on Page 2.
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Proficient Wealth Counselors, LLC Asset Accumulation & Preservation Strategies June 2012 2
Fight Back Against Identity Theft
While you can't entirely control whether you willbecome a victim, there are steps you can make tominimize your risk. The Federal Trade Commission(FTC), the nation's consumer protection agency,encourages consumers to Deter, Detect and Defend tohelp cut down on identity theft. Deter identy thievesby safeguarding your information:
• Shred financial documents and paperwork withpersonal information before you discard them.
• Protect your Social Security number. Don't carryyour Social Security card in your wallet or write yourSocial Security number on a check. Give it out only ifabsolutely necessary or ask to use another identifier.
• Don't give out personal information on the phone,through the mail, or over the Internet unless you knowwho you are dealing with.
Detect suspicious activity by routinely monitoring yourfinancial accounts and billing statements. Be alert tosigns that require immediate attention, such as: billsthat do not arrive as expected; unexpected credit cardsor account statements; denials of credit for noapparent reason; and calls or letters about purchasesyou did not make.
If you think your identity has been stolen, here’s whatto do:
• Contact the fraud departments of any one of thethree consumer reporting companies (Equifax,Experian, TransUnion) to place a fraud alert on yourcredit report. The fraud alert tells creditors to contactyou before opening any new accounts or making anychanges to your existing accounts. You only need tocontact one of the three companies to place an alert.
• Close the accounts that you know or believe havebeen tampered with or opened fraudulently.
• File a report with your local police or the police inthe community where the identity theft took place.Get a copy of the report or, at the very least, thenumber of the report, to submit to your creditors and
others who may require proof of the crime.
• File your complaint with the FTC. The FTCmaintains a database of identity theft cases used by lawenforcement agencies for investigations. Filing acomplaint also helps officials learn more about identitytheft and the problems victims are having so that theycan better assist you.
Kids make attractive targets for identity thievesbecause they have no previous credit history.Moreover, the crime could go undetected for yearsbecause parents don't typically check to see whethertheir children have credit records.
Credit issuers often do not verify the age of theapplicant. The information on the application is takenat face value, especially when submitted over thephone or online.
Credit reporting agencies and the Social SecurityAdministration don't share information. Anapplicant's age becomes "official" in the eyes of thecredit reporting agencies when it is reported on thefirst credit application. Credit agencies believe theindividual's age as indicated on the credit applicationis accurate until a dispute is filed and upheld.
Often your child's school, physician's office, daycarecenter, or sport's team may request your child's SSN.Always ask why it is needed, how it will be used, andhow it will be protected. Refuse to give it unlessabsolutely necessary.
For a child, the damage caused by identity theft can bedevastating because of the time that could pass beforeit is discovered.
To learn more, visit ftc.gov/idtheft.
Spring is here and it's time forour 1st annual "Shred Fest"!This event will be held onSaturday, June 23, 9:00-12:00,in our parking lot. The event isfree of charge and will includecomplimentary refreshments.
Bring your outdated bankstatements, canceled checks,expired policies, etc - we willhave a mobile shreddingservice on site to do the rest.What a great time to DEFENDyour identity; DISCARDoutdated documents; and DE-CLUTTER your space!
You can request your freereport online, by phone or bymail. VisitAnnualCreditReport.com, call 1-877-322-8228, or fill out theAnnual Credit Report Requestform and mail it to AnnualCredit Report Request Service,P.O. Box 105281, Atlanta, GA30348-5281. You have theoption to request all threereports at once or to order onereport at a time.
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Proficient Wealth Counselors, LLC Asset Accumulation & Preservation Strategies June 2012 3
De-Cluttering Your Financial Life
“Getting organized” is a common goal, but you maynot have considered it in terms of your financial life.Though it's often overlooked, getting your financialdocuments in order can be an important step towardachieving your overall financial goals.
THE RIGHT TOOLS FOR THE JOB
Think about all the time you've wasted (and the stressyou've felt) trying to find bills, statements, andreceipts. An easy way to solve this problem is to keepall of your financial papers in a file cabinet, separatedby category. Name and organize the categories in away that makes sense to you. Here are a fewsuggestions to get you started:
• Brokerage account and portfolio statements
• Bank statements
• Tax information
• Receipts
• Retirement account documents
• Mortgage or lease agreements
• Insurance documents (e.g., policy statements)
• Bills (separated into “to be paid” and “paid”)
To cut down on the amount of paper you have toorganize, consider taking advantage of an electronicfiling cabinet for account statements and otherdocuments. Your financial or tax professional mayhave such a system in place—just ask!
Remember, whatever filing method you choose, thesystem has to work for you in order to work at all.
GETTING INTO THE HABIT
Once you have a place for everything, take time to
gather all of your documents and put them in the rightspot.
Here are some tips to help you stay organized in a fewkey areas:
• Your bills. For recurring bills, consider setting upautomatic payments online. Just remember to trackthese payments as you would any other transaction.Making a list of your automatic payments and storingit in your filing system is a smart move.
• Your will. Although you might try to avoid thinkingabout your will, it's important to keep it up to date incase the unexpected happens. Store the original in asafe place, and be sure to inform a family member ofits location. Keeping your will with birth certificates,marriage certificates, life insurance policies, and othersuch documents will help you keep track of them.
• Your advisors' information. To save yourself timesearching for their phone numbers, create a list ofcontact information for your professional advisors,such as your financial planner or investment advisor,attorney, and accountant. Consolidating thisinformation will also help your loved ones locateimportant numbers in case of an emergency.
STICKING WITH IT
Getting organized may seem like a daunting task, butdevoting a bit of time to it each day will benefit you inthe long run. Soon, you'll find that organization hasbecome a habit, and you won't want to return to thestress of a cluttered financial life. While it may take afew hours to get started, in the end, organizing yourdocuments frees you up to focus on doing the thingsyou enjoy!
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Proficient Wealth Counselors, LLC Asset Accumulation & Preservation Strategies June 2012 4
What Is Personal Liability Insuranceand Do I Have It?
Personal liability insurance protects your assets if youinjure another person or damage someone else'sproperty. It's also known as third-party insurancebecause it protects you if a third party �les a claimagainst you. Personal liability insurance can bepurchased as part of a package policy or as a separatepolicy.
Today, lawsuits are everywhere. What if your dog bitesa neighbor? What would happen if someone slips andfalls on your front walk? While you may not be able toavoid all accidents, you can transfer some of the�nancial risk of the resulting loss to an insurancecompany by buying personal liability insurance.
How much liability coverage do you need? Probablymore than you think you do. Because there's nooptimum amount that applies to everyone, how muchpersonal liability coverage you need depends partly on
your tolerance for risk. Can you a�ord to pay the costof a claim out of pocket or would even a small claimthreaten your �nances? If you already have liabilitycoverage, take a look at your current policy. Determinewhether your liability limits are high enough, or ifthere are any coverage gaps you'd like to �ll.
If you own a homeowners or automobile insurancepolicy or another type of property insurance, you havebasic personal liability coverage. �ese policies willprotect you against many liability claims. Yourinsurance company will defend or settle claims andlawsuits brought against you and pay the sum owed forcovered damages, up to the liability limits of thepolicy. If you want greater liability coverage limits or ifyou want broader coverage that includes more types ofclaims, consider buying a personal umbrella liabilitypolicy.
No personal liability insurance policy will protect youagainst every loss you might face. Generally, personalliability policies don't cover claims stemming fromyour business or profession, claims resulting from anact intended to cause injury or damage, and damage toproperty owned by you.
©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is notwarranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arisingfrom any use of this information. Past performance is no guarantee of future results. "Morningstar" and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar MarketCommentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder.
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