Taking advantage of employer-sponsored retirement plans

Employer-sponsored qualified retirement plans such as 401(k)s are some of the most powerful retirement savings tools available. If your employer offers such a plan and you're not participating in it, you should be. Once you're participating in a plan, try to take full advantage of it.

UNDERSTAND YOUR EMPLOYER-SPONSORED PLAN

Before you can take advantage of your employer's plan, you need to understand how these plans work. Read everything you can about the plan and talk to your employer's benefit officer. You can also talk to a financial planner, a tax advisor, and other professionals. Recognize the key features that many employer-sponsored plans share:

* Your employer automatically deducts your contributions from your paycheck. You may never even miss the money--out of sight, out of mind.
* You decide what portion of your salary to contribute, up to the legal limit. And you can usually change your contribution amount on certain dates during the year.
* With 401(k), 403(b), 457(b), SARSEPs, and SIMPLE plans, you contribute to the plan on a pretax basis. Your contributions come off the top of your salary before your employer withholds income taxes.
* Your 401(k), 403(b), or 457(b) plan may let you make after-tax Roth contributions--there's no up-front tax benefit but qualified distributions are entirely tax free.
* Your employer may match all or part of your contribution up to a certain level. You typically become vested in these employer dollars through years of service with the company.
* Your funds grow tax deferred in the plan. You don't pay taxes on investment earnings until you withdraw your money from the plan.
* You'll pay income taxes and possibly an early withdrawal penalty if you withdraw your money from the plan.
* You may be able to borrow a portion of your vested balance (up to $50,000) at a reasonable interest rate.
* Your creditors cannot reach your plan funds to satisfy your debts.

CONTRIBUTE AS MUCH AS POSSIBLE

The more you can save for retirement, the better your chances of retiring comfortably. If you can, max out your contribution up to the legal limit. If you need to free up money to do that, try to cut certain expenses.

Why put your retirement dollars in your employer's plan instead of somewhere else? One reason is that your pretax contributions to your employer's plan lower your taxable income for the year. This means you save money in taxes when you contribute to the plan--a big advantage if you're in a high tax bracket. For example, if you earn $100,000 a year and contribute $10,000 to a 401(k) plan, you'll pay income taxes on $90,000 instead of $100,000. (Roth contributions don't lower your current taxable income but qualified distributions of your contributions and earnings--that is, distributions made after you satisfy a five-year holding period and reach age 59½, become disabled, or die--are tax free.)

Another reason is the power of tax-deferred growth. Your investment earnings compound year after year and aren't taxable as long as they remain in the plan. Over the long term, this gives you the opportunity to build an impressive sum in your employer's plan. You should end up with a much larger balance than somebody who invests the same amount in taxable investments at the same rate of return.

For example, you participate in your employer's tax-deferred plan (Account A). You also have a taxable investment account (Account B). Each account earns 8 percent per year. You're in the 28 percent tax bracket and contribute $10,000 to each account at the end of every year. You pay the yearly income taxes on Account B's earnings using funds from that same account. At the end of 30 years, Account A is worth $1,132,832, while Account B is worth only $757,970. That's a difference of over $370,000. (Note: This example is for illustrative purposes only and does not represent a specific investment.)

CAPTURE THE FULL EMPLOYER MATCH

If you can't max out your 401(k) or other plan, you should at least try to contribute up to the limit your employer will match. Employer contributions are basically free money once you're vested in them (check with your employer to find out when vesting happens). By capturing the full benefit of your employer's match, you'll be surprised how much faster your balance grows. If you don't take advantage of your employer's generosity, you could be passing up a significant return on your money.

For example, you earn $30,000 a year and work for an employer that has a matching 401(k) plan. The match is 50 cents on the dollar up to 6 percent of your salary. Each year, you contribute 6 percent of your salary ($1,800) to the plan and receive a matching contribution of $900 from your employer.

EVALUATE YOUR INVESTMENT CHOICES CAREFULLY

Most employer-sponsored plans give you a selection of mutual funds or other investments to choose from. Make your choices carefully. The right investment mix for your employer's plan could be one of your keys to a comfortable retirement. That's because over the long term, varying rates of return can make a big difference in the size of your balance.

Research the investments available to you. How have they performed over the long term? Have they held their own during down markets? How much risk will they expose you to? Which ones are best suited for long-term goals like retirement? You may also want to get advice from a financial professional (either your own, or one provided through your plan). He or she can help you pick the right investments based on your personal goals, your attitude toward risk, how long you have until retirement, and other factors. Your financial professional can also help you coordinate your plan investments with your overall investment portfolio.

Finally, you may be able to change your investment allocations or move money between the plan's investments on specific dates during the year (e.g., at the start of every month or every quarter).

KNOW YOUR OPTIONS WHEN YOU LEAVE YOUR EMPLOYER

When you leave your job, your vested balance in your former employer's retirement plan is yours to keep. You have several options at that point, including:

* Taking a lump-sum distribution. This is often a bad idea, because you'll pay income taxes and possibly a penalty on the amount you withdraw. Plus, you're giving up continued tax-deferred growth.
* Leaving your funds in the old plan, growing tax deferred (your old plan may not permit this if your balance is less than $5,000, or if you've reached the plan's normal retirement age--typically age 65). This may be a good idea if you're happy with the plan's investments or you need time to decide what to do with your money.
* Rolling your funds over to an IRA or a new employer's plan if the plan accepts rollovers. This is often a smart move because there will be no income taxes or penalties if you do the rollover properly (your old plan will withhold 20 percent for income taxes if you receive the funds before rolling them over). Plus, your funds will keep growing tax deferred in the IRA or new plan.

Annuities come in many different forms. There are immediate and deferred annuities, with both fixed and variable rates. However, whatever the type of annuity, all can be classified as either qualified or nonqualified annuities. And the distinction is easy.

Qualified annuities are used in connection with tax-advantaged retirement plans, such as defined benefit pension plans, Section 403(b) retirement plans (TSAs), or IRAs. Premiums for qualified annuities are generally paid with pretax dollars, as are any investments purchased for use in a qualified retirement plan.

By definition, any annuity not used to fund a tax-advantaged retirement plan or IRA is considered a nonqualified annuity. Contributions to nonqualified annuities are made with after-tax dollars--premiums are not deductible from gross income for income tax purposes.

In essence, then, the products are the same. It is the placement in or out of a retirement plan (and the resulting tax treatment) that distinguishes one from the other.


QUALIFIED ANNUITIES

As noted, contributions to a qualified annuity are deductible to the individual or employer (and/or excludable from the income of the individual) at the time of contribution, as would be any tax-advantaged retirement plan investment. When an annuity is in a retirement plan, the rules of the plan govern all tax matters. Specifically, the special tax-deferral advantages of annuities, and the unique tax penalties and tax treatment of annuities at distribution, are superseded when used in a retirement plan by the tax rules governing all investments in such plans. It is for this reason that many financial advisors question the use of deferred annuities in retirement plans.

Note: Although it is true that the tax-deferral advantage of annuities is redundant in a qualified plan, annuity products may offer other features, such as a guaranteed death benefit, that may make them a viable investment option for a portion of a qualified plan portfolio.


NONQUALIFIED ANNUITIES

The rules for nonqualified annuities are different in many respects, because these products are purchased with after-tax money.

If the nonqualified annuity is partially or fully surrendered, the first dollars out are considered earnings, and all of the earnings are taxed at ordinary income rates. After all of the earnings have been distributed, the remaining portion that represents the original investment in the annuity is received tax free.

If payments are taken in the form of an annuity payout (i.e., a distribution taken out over a predetermined period of time), a portion of each payment is considered a return of the original investment and is excludable from gross income, and a portion is considered earnings and taxed at ordinary income tax rates. The percentages that are earnings and return of investment are based on the type of payout at the age of the recipient. Note, too, that distributions taken before age 59½ are subject to a 10 percent early withdrawal penalty tax on earnings.

Note: Variable annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk, including the possibility of loss of principal. Variable annuities are sold by prospectus, which contains information about the variable annuity, including a description of applicable fees and charges. These include, but are not limited to, mortality and expense risk charges, administrative fees, and charges for optional benefits and riders. The prospectus can be obtained from the insurance company offering the variable annuity or from your financial professional. Read it carefully before you invest.

When you determine how much income you'll need in retirement, you may base your projection on the type of lifestyle you plan to have and when you want to retire. However, as you grow closer to retirement, you may discover that your income won't be enough to meet your needs. If you find yourself in this situation, you'll need to adopt a plan to bridge this projected income gap.

DELAY RETIREMENT: 65 IS JUST A NUMBER
One way of dealing with a projected income shortfall is to stay in the workforce longer than you had planned. This will allow you to continue supporting yourself with a salary rather than dipping into your retirement savings. Depending on your income, this could also increase your Social Security retirement benefit. You'll also be able to delay taking your Social Security benefit or distributions from retirement accounts.

At normal retirement age (which varies, depending on the year you were born), you will receive your full Social Security retirement benefit. You can elect to receive your Social Security retirement benefit as early as age 62, but if you begin receiving your benefit before your normal retirement age, your benefit will be reduced. Conversely, if you delay retirement, you can increase your Social Security benefit.

Remember, too, that income from a job may affect the amount of Social Security retirement benefit you receive if you are under normal retirement age. Your benefit will be reduced by $1 for every $2 you earn over a certain earnings limit ($15,120 in 2013, $14,640 in 2012). But once you reach normal retirement age, you can earn as much as you want without affecting your Social Security retirement benefit.

Another advantage of delaying retirement is that you can continue to build tax-deferred funds in your IRA or employer-sponsored retirement plan. Keep in mind, though, that you may be required to start taking minimum distributions from your qualified retirement plan or traditional IRA once you reach age 70½, if you want to avoid harsh penalties.

And if you're covered by a pension plan at work, you could also consider retiring and then seeking employment elsewhere. This way you can receive a salary and your pension benefit at the same time. Some employers, to avoid losing talented employees this way, are beginning to offer "phased retirement" programs that allow you to receive all or part of your pension benefit while you're still working. Make sure you understand your pension plan options.

SPEND LESS, SAVE MORE
You may be able to deal with an income shortfall by adjusting your spending habits. If you're still years away from retirement, you may be able to get by with a few minor changes. However, if retirement is just around the corner, you may need to drastically change your spending and saving habits. Saving even a little money can really add up if you do it consistently and earn a reasonable rate of return. Make permanent changes to your spending habits and you'll find that your savings will last even longer. Start by preparing a budget to see where your money is going. Here are some suggested ways to stretch your retirement dollars:

- Refinance your home mortgage if interest rates have dropped since you took the loan.
- Reduce your housing expenses by moving to a less expensive home or apartment.
- Sell one of your cars if you have two. When your remaining car needs to be replaced, consider buying a used one.
- Access the equity in your home. Use the proceeds from a second mortgage or home equity line of credit to pay off higher-interest-rate debts.
- Transfer credit card balances from higher-interest cards to a low- or no-interest card, and then cancel the old accounts.
- Ask about insurance discounts and review your insurance needs (e.g., your need for life insurance may have lessened).
- Reduce discretionary expenses such as lunches and dinners out.

Earmark the money you save for retirement and invest it immediately. If you can take advantage of an IRA, 401(k), or other tax-deferred retirement plan, you should do so. Funds invested in a tax-deferred account will generally grow more rapidly than funds invested in a non-tax-deferred account.

REALLOCATE YOUR ASSETS: CONSIDER INVESTING MORE AGGRESSIVELY
Some people make the mistake of investing too conservatively to achieve their retirement goals. That's not surprising, because as you take on more risk, your potential for loss grows as well. But greater risk also generally entails greater reward. And with life expectancies rising and people retiring earlier, retirement funds need to last a long time.

That's why if you are facing a projected income shortfall, you should consider shifting some of your assets to investments that have the potential to substantially outpace inflation. The amount of investment dollars you should keep in growth-oriented investments depends on your time horizon (how long you have to save) and your tolerance for risk. In general, the longer you have until retirement, the more aggressive you can afford to be. Still, if you are at or near retirement, you may want to keep some of your funds in growth-oriented investments, even if you decide to keep the bulk of your funds in more conservative, fixed-income investments. Get advice from a financial professional if you need help deciding how your assets should be allocated.

And remember, no matter how you decide to allocate your money, rebalance your portfolio now and again. Your needs will change over time, and so should your investment strategy.

ACCEPT REALITY: LOWER YOUR STANDARD OF LIVING
If your projected income shortfall is severe enough or if you're already close to retirement, you may realize that no matter what measures you take, you will not be able to afford the retirement lifestyle you've dreamed of. In other words, you will have to lower your expectations and accept a lower standard of living.

Fortunately, this may be easier to do than when you were younger. Although some expenses, like health care, generally increase in retirement, other expenses, like housing costs and automobile expenses, tend to decrease. And it's likely that your days of paying college bills and growing-family expenses are over.

Once you are within a few years of retirement, you can prepare a realistic budget that will help you manage your money in retirement. Think long term: Retirees frequently get into budget trouble in the early years of retirement, when they are adjusting to their new lifestyles. Remember that when you are retired, every day is Saturday, so it's easy to start overspending.

Selecting beneficiaries for retirement benefits is different from choosing beneficiaries for other assets such as life insurance. With retirement benefits, you need to know the impact of income tax and estate tax laws in order to select the right beneficiaries. Although taxes shouldn't be the sole determining factor in naming your beneficiaries, ignoring the impact of taxes could lead you to make an incorrect choice.

In addition, if you're married, beneficiary designations may affect the size of minimum required distributions to you from your IRAs and retirement plans while you're alive.

PAYING INCOME TAX ON MOST RETIREMENT DISTRIBUTIONS
Most inherited assets such as bank accounts, stocks, and real estate pass to your beneficiaries without income tax being due. However, that's not usually the case with 401(k) plans and IRAs.

Beneficiaries pay ordinary income tax on distributions from 401(k) plans and traditional IRAs. With Roth IRAs and Roth 401(k)s, however, your beneficiaries can receive the benefits free from income tax if all of the tax requirements are met. That means you need to consider the impact of income taxes when designating beneficiaries for your 401(k) and IRA assets.

For example, if one of your children inherits $100,000 cash from you and another child receives your 401(k) account worth $100,000, they aren't receiving the same amount. The reason is that all distributions from the 401(k) plan will be subject to income tax at ordinary income tax rates, while the cash isn't subject to income tax when it passes to your child upon your death.

Similarly, if one of your children inherits your taxable traditional IRA and another child receives your income-tax-free Roth IRA, the bottom line is different for each of them.

NAMING OR CHANGING BENEFICIARIES
When you open up an IRA or begin participating in a 401(k), you are given a form to complete in order to name your beneficiaries. Changes are made in the same way--you complete a new beneficiary designation form. A will or trust does not override your beneficiary designation form. However, spouses may have special rights under federal or state law.

It's a good idea to review your beneficiary designation form at least every two to three years. Also, be sure to update your form to reflect changes in financial circumstances. Beneficiary designations are important estate planning documents. Seek legal advice as needed.

DESIGNATING PRIMARY AND SECONDARY BENEFICIARIES
When it comes to beneficiary designation forms, you want to avoid gaps. If you don't have a named beneficiary who survives you, your estate may end up as the beneficiary, which is not always the best result.

Your primary beneficiary is your first choice to receive retirement benefits. You can name more than one person or entity as your primary beneficiary. If your primary beneficiary doesn't survive you or decides to decline the benefits (the tax term for this is a disclaimer), then your secondary (or "contingent") beneficiaries receive the benefits.

HAVING MULTIPLE BENEFICIARIES
You can name more than one beneficiary to share in the proceeds. You just need to specify the percentage each beneficiary will receive (the shares do not have to be equal). You should also state who will receive the proceeds should a beneficiary not survive you.

In some cases, you'll want to designate a different beneficiary for each account or have one account divided into subaccounts (with a beneficiary for each subaccount). You'd do this to allow each beneficiary to use his or her own life expectancy in calculating required distributions after your death. This, in turn, can permit greater tax deferral (delay) and flexibility for your beneficiaries in paying income tax on distributions.

AVOIDING GAPS OR NAMING YOUR ESTATE AS A BENEFICIARY
There are two ways your retirement benefits could end up in your probate estate. Probate is the court process by which assets are transferred from someone who has died to the heirs or beneficiaries entitled to those assets.

First, you might name your estate as the beneficiary. Second, if no named beneficiary survives you, your probate estate may end up as the beneficiary by default. If your probate estate is your beneficiary, several problems can arise.

If your estate receives your retirement benefits, the opportunity to maximize tax deferral by spreading out distributions may be lost. In addition, probate can mean paying attorney's and executor's fees and delaying the distribution of benefits.

NAMING YOUR SPOUSE AS A BENEFICIARY
When it comes to taxes, your spouse is usually the best choice for a primary beneficiary.

A spousal beneficiary has the greatest flexibility for delaying distributions that are subject to income tax. In addition to rolling over your 401(k) or IRA to his or her IRA, a surviving spouse can generally decide to treat your IRA as his or her own IRA. This can provide more tax and planning options.

If your spouse is more than 10 years younger than you, then naming your spouse can also reduce the size of any required taxable distributions to you from retirement assets while you're alive. This can allow more assets to stay in the retirement account longer and delay the payment of income tax on distributions.

Although naming a surviving spouse can produce the best income tax result, that isn't necessarily the case with death taxes. One possible downside to naming your spouse as the primary beneficiary is that it will increase the size of your spouse's estate for death tax purposes. That's because at your death, your spouse can inherit an unlimited amount of assets and defer federal death tax until both of you are deceased (note: special tax rules and requirements apply for a surviving spouse who is not a U.S. citizen). However, this may result in death tax or increased death tax when your spouse dies.

If your spouse's taxable estate for federal tax purposes at his or her death exceeds the applicable exclusion amount (formerly known as the unified credit), then federal death tax may be due at his or her death.

NAMING OTHER INDIVIDUALS AS BENEFICIARIES
You may have some limits on choosing beneficiaries other than your spouse. No matter where you live, federal law dictates that your surviving spouse be the primary beneficiary of your 401(k) plan benefit unless your spouse signs a timely, effective written waiver. And if you live in one of the community property states, your spouse may have rights related to your IRA regardless of whether he or she is named as the primary beneficiary.

Keep in mind that a nonspouse beneficiary cannot roll over your 401(k) or IRA to his or her own IRA. However, a nonspouse beneficiary can roll over all or part of your 401(k) benefits to an inherited IRA.

NAMING A TRUST AS A BENEFICIARY
You must follow special tax rules when naming a trust as a beneficiary, and there may be income tax complications. Seek legal advice before designating a trust as a beneficiary.

NAMING A CHARITY AS A BENEFICIARY
In general, naming a charity as the primary beneficiary will not affect required distributions to you during your lifetime. However, after your death, having a charity named with other beneficiaries on the same asset could affect the tax-deferral possibilities of the noncharitable beneficiaries, depending on how soon after your death the charity receives its share of the benefits.

A successful investor maximizes gain and minimizes loss. Though there can be no guarantee that any investment strategy will be successful and all investing involves risk, including the possible loss of principal, here are six basic principles that may help you invest more successfully.

 

 

 

LONG-TERM COMPOUNDING CAN HELP YOUR NEST EGG GROW

 

It's the "rolling snowball" effect. Put simply, compounding pays you earnings on your reinvested earnings. The longer you leave your money at work for you, the more exciting the numbers get. For example, imagine an investment of $10,000 at an annual rate of return of 8 percent. In 20 years, assuming no withdrawals, your $10,000 investment would grow to $46,610. In 25 years, it would grow to $68,485, a 47 percent gain over the 20-year figure. After 30 years, your account would total $100,627. (Of course, this is a hypothetical example that does not reflect the performance of any specific investment.)

 

This simple example also assumes that no taxes are paid along the way, so all money stays invested. That would be the case in a tax-deferred individual retirement account or qualified retirement plan. The compounded earnings of deferred tax dollars are the main reason experts recommend fully funding all tax-advantaged retirement accounts and plans available to you.

 

While you should review your portfolio on a regular basis, the point is that money left alone in an investment offers the potential of a significant return over time. With time on your side, you don't have to go for investment "home runs" in order to be successful.

 

 

 

 

ENDURE SHORT-TERM PAIN FOR LONG-TERM GAIN

 

Riding out market volatility sounds simple, doesn't it? But what if you've invested $10,000 in the stock market and the price of the stock drops like a stone one day? On paper, you've lost a bundle, offsetting the value of compounding you're trying to achieve. It's tough to stand pat.

 

There's no denying it--the financial marketplace can be volatile. Still, it's important to remember two things. First, the longer you stay with a diversified portfolio of investments, the more likely you are to reduce your risk and improve your opportunities for gain. Though past performance doesn't guarantee future results, the long-term direction of the stock market has historically been up. Take your time horizon into account when establishing your investment game plan. For assets you'll use soon, you may not have the time to wait out the market and should consider investments designed to protect your principal. Conversely, think long-term for goals that are many years away.

 

Second, during any given period of market or economic turmoil, some asset categories and some individual investments historically have been less volatile than others. Bond price swings, for example, have generally been less dramatic than stock prices. Though diversification alone cannot guarantee a profit or ensure against the possibility of loss, you can minimize your risk somewhat by diversifying your holdings among various classes of assets, as well as different types of assets within each class.

 

SPREAD YOUR WEALTH THROUGH ASSET ALLOCATION

 

Asset allocation is the process by which you spread your dollars over several categories of investments, usually referred to as asset classes. These classes include stocks, bonds, cash (and cash alternatives), real estate, precious metals, collectibles, and in some cases, insurance products. You'll also see the term "asset classes" used to refer to subcategories, such as aggressive growth stocks, long-term growth stocks, international stocks, government bonds (U.S., state, and local), high-quality corporate bonds, low-quality corporate bonds, and tax-free municipal bonds. A basic asset allocation would likely include at least stocks, bonds (or mutual funds of stocks and bonds), and cash or cash alternatives.

 

There are two main reasons why asset allocation is important. First, the mix of asset classes you own is a large factor--some say the biggest factor by far--in determining your overall investment portfolio performance. In other words, the basic decision about how to divide your money between stocks, bonds, and cash is probably more important than your subsequent decisions over exactly which companies to invest in, for example.

 

Second, by dividing your investment dollars among asset classes that do not respond to the same market forces in the same way at the same time, you can help minimize the effects of market volatility while maximizing your chances of return in the long term. Ideally, if your investments in one class are performing poorly, assets in another class may be doing better. Any gains in the latter can help offset the losses in the former and help minimize their overall impact on your portfolio.

 

CONSIDER LIQUIDITY IN YOUR INVESTMENT CHOICES

 

Liquidity refers to how quickly you can convert an investment into cash without loss of principal (your initial investment). Generally speaking, the sooner you'll need your money, the wiser it is to keep it in investments with comparatively less volatile price movements. You want to avoid a situation, for example, where you need to write a tuition check next Tuesday, but the money is tied up in an investment whose price is currently down.

 

Therefore, your liquidity needs should affect your investment choices. If you'll need the money within the next one to three years, you may want to consider certificates of deposit or a savings account, which are insured by the FDIC, or short-term bonds or a money market account, which are neither insured or guaranteed by the FDIC or any other governmental agency. Your rate of return will likely be lower than that possible with more volatile investments such as stocks, but you'll breathe easier knowing that the principal you invested is relatively safe and quickly available, without concern over market conditions on a given day.

 

Note: If you're considering a mutual fund, consider its investment objectives, risks, charges, and expenses, all of which are outlined in the prospectus, available from the fund. Consider the information carefully before investing.

 

DOLLAR COST AVERAGING: INVESTING CONSISTENTLY AND OFTEN

 

Dollar cost averaging is a method of accumulating shares of stock or a mutual fund by purchasing a fixed dollar amount of these securities at regularly scheduled intervals over an extended time. When the price is high, your fixed-dollar investment buys less; when prices are low, the same dollar investment will buy more shares. A regular, fixed-dollar investment should result in a lower average price per share than you would get buying a fixed number of shares at each investment interval.

 

Remember that, just as with any investment strategy, dollar cost averaging can't guarantee you a profit or protect you against a loss if the market is declining. To maximize the potential effects of dollar cost averaging, you should also assess your ability to keep investing even when the market is down.

 

An alternative to dollar cost averaging would be trying to "time the market," in an effort to predict how the price of the shares will fluctuate in the months ahead so you can make your full investment at the absolute lowest point. However, market timing is generally unprofitable guesswork. The discipline of regular investing is a much more manageable strategy, and it has the added benefit of automating the process.

 

BUY AND HOLD, DON'T BUY AND FORGET

 

Unless you plan to rely on luck, your portfolio's long-term success will depend on periodically reviewing it. Maybe your uncle's hot stock tip has frozen over. Maybe economic conditions have changed the prospects for a particular investment, or an entire asset class.

 

Even if nothing bad at all happens, your various investments will likely appreciate at different rates, which will alter your asset allocation without any action on your part. For example, if you initially decided on an 80 percent to 20 percent mix of stocks to bonds, you might find that after several years the total value of your portfolio has become divided 88 percent to 12 percent (conversely, if stocks haven't done well, you might have a 70-30 ratio of stocks to bonds in this hypothetical example). You need to review your portfolio periodically to see if you need to return to your original allocation. To rebalance your portfolio, you would buy more of the asset class that's lower than desired, possibly using some of the proceeds of the asset class that is now larger than you intended.

 

Another reason for periodic portfolio review: your circumstances change over time, and your asset allocation will need to reflect those changes. For example, as you get closer to retirement, you might decide to increase your allocation to less volatile investments, or those that can provide a steady stream of income.

 

Read More: Abney & Associates -Six keys to successful investing

 

 

Abney Associates Ameriprise Financial Advisor, Six Keys To Successful Investing

If you have a 401(k) plan at work and need some cash, you might be tempted to borrow or withdraw money from it. But keep in mind that the purpose of a 401(k) is to save for retirement. Take money out of it now, and you'll risk running out of money during retirement. You may also face stiff tax consequences and penalties for withdrawing money before age 59½. Still, if you're facing a financial emergency--for instance, your child's college tuition is almost due and your 401(k) is your only source of available funds--borrowing or withdrawing money from your 401(k) may be your only option.

PLAN LOANS
To find out if you're allowed to borrow from your 401(k) plan and under what circumstances, check with your plan's administrator or read your summary plan description. Some employers allow 401(k) loans only in cases of financial hardship, but you may be able to borrow money to buy a car, to improve your home, or to use for other purposes.

Generally, obtaining a 401(k) loan is easy--there's little paperwork, and there's no credit check. The fees are limited too--you may be charged a small processing fee, but that's generally it.

HOW MUCH CAN YOU BORROW?
No matter how much you have in your 401(k) plan, you probably won't be able to borrow the entire sum. Generally, you can't borrow more than $50,000 or one-half of your vested plan benefits, whichever is less. (An exception applies if your account value is less than $20,000; in this case, you may be able to borrow up to $10,000, even if this is your entire balance.)

WHAT ARE THE REQUIREMENTS FOR REPAYING THE LOAN?
Typically, you have to repay money you've borrowed from your 401(k) within five years by making regular payments of principal and interest at least quarterly, often through payroll deduction. However, if you use the funds to purchase a primary residence, you may have a much longer period of time to repay the loan.

Make sure you follow to the letter the repayment requirements for your loan. If you don't repay the loan as required, the money you borrowed will be considered a taxable distribution. If you're under age 59½, you'll owe a 10 percent federal penalty tax, as well as regular income tax on the outstanding loan balance (other than the portion that represents any after-tax or Roth contributions you've made to the plan).

WHAT ARE THE ADVANTAGES OF BORROWING MONEY FROM YOUR 401(K)?
- You won't pay taxes and penalties on the amount you borrow, as long as the loan is repaid on time

- Interest rates on 401(k) plan loans must be consistent with the rates charged by banks and other commercial institutions for similar loans

- In most cases, the interest you pay on borrowed funds is credited to your own plan account; you pay interest to yourself, not to a bank or other lender

WHAT ARE THE DISADVANTAGES OF BORROWING MONEY FROM YOUR 401(K)?
- If you don't repay your plan loan when required, it will generally be treated as a taxable distribution.

- If you leave your employer's service (whether voluntarily or not) and still have an outstanding balance on a plan loan, you'll usually be required to repay the loan in full within 60 days. Otherwise, the outstanding balance will be treated as a taxable distribution, and you'll owe a 10 percent penalty tax in addition to regular income taxes if you're under age 59½.

- Loan interest is generally not tax deductible (unless the loan is secured by your principal residence).

- You'll lose out on any tax-deferred interest that may have accrued on the borrowed funds had they remained in your 401(k).

- Loan payments are made with after-tax dollars.

HARDSHIP WITHDRAWALS
Your 401(k) plan may have a provision that allows you to withdraw money from the plan while you're still employed if you can demonstrate "heavy and immediate" financial need and you have no other resources you can use to meet that need (e.g., you can't borrow from a commercial lender or from a retirement account and you have no other available savings). It's up to your employer to determine which financial needs qualify. Many employers allow hardship withdrawals only for the following reasons:

- To pay the medical expenses of you, your spouse, your children, your other dependents, or your plan beneficiary

- To pay the burial or funeral expenses of your parent, your spouse, your children, your other dependents, or your plan beneficiary

- To pay a maximum of 12 months worth of tuition and related educational expenses for post-secondary education for you, your spouse, your children, your other dependents, or your plan beneficiary

- To pay costs related to the purchase of your principal residence

- To make payments to prevent eviction from or foreclosure on your principal residence

- To pay expenses for the repair of damage to your principal residence after certain casualty losses

Note: You may also be allowed to withdraw funds to pay income tax and/or penalties on the hardship withdrawal itself, if these are due.

Your employer will generally require that you submit your request for a hardship withdrawal in writing.

HOW MUCH CAN YOU WITHDRAW?
Generally, you can't withdraw more than the total amount you've contributed to the plan, minus the amount of any previous hardship withdrawals you've made. In some cases, though, you may be able to withdraw the earnings on contributions you've made. Check with your plan administrator for more information on the rules that apply to withdrawals from your 401(k) plan.

WHAT ARE THE ADVANTAGES OF WITHDRAWING MONEY FROM YOUR 401(K) IN CASES OF HARDSHIP?
The option to take a hardship withdrawal can come in very handy if you really need money and you have no other assets to draw on, and your plan does not allow loans (or if you can't afford to make loan payments).

WHAT ARE THE DISADVANTAGES OF WITHDRAWING MONEY FROM YOUR 401(K) IN CASES OF HARDSHIP?
- Taking a hardship withdrawal will reduce the size of your retirement nest egg, and the funds you withdraw will no longer grow tax deferred.

- Hardship withdrawals are generally subject to federal (and possibly state) income tax. A 10 percent federal penalty tax may also apply if you're under age 59½. (If you make a hardship withdrawal of your Roth 401(k) contributions, only the portion of the withdrawal representing earnings will be subject to tax and penalties.)

- You may not be able to contribute to your 401(k) plan for six months following a hardship distribution.


WHAT ELSE DO I NEED TO KNOW?
If your employer makes contributions to your 401(k) plan (for example, matching contributions) you may be able to withdraw those dollars once you become vested (that is, once you own your employer's contributions). Check with your plan administrator for your plan's withdrawal rules.

If you are a qualified individual impacted by certain natural disasters, or if you are a reservist called to active duty after September 11, 2001, special rules may apply to you.

Go out into your yard and dig a big hole. Every month, throw $50 into it, but don't take any money out until you're ready to buy a house, send your child to college, or retire. It sounds a little crazy, doesn't it? But that's what investing without setting clear-cut goals is like. If you're lucky, you may end up with enough money to meet your needs, but you have no way to know for sure.

HOW DO YOU SET GOALS?
The first step in investing is defining your dreams for the future. If you are married or in a long-term relationship, spend some time together discussing your joint and individual goals. It's best to be as specific as possible. For instance, you may know you want to retire, but when? If you want to send your child to college, does that mean an Ivy League school or the community college down the street?

You'll end up with a list of goals. Some of these goals will be long term (you have more than 15 years to plan), some will be short term (5 years or less to plan), and some will be intermediate (between 5 and 15 years to plan). You can then decide how much money you'll need to accumulate and which investments can best help you meet your goals. Remember that there can be no guarantee that any investment strategy will be successful and that all investing involves risk, including the possible loss of principal.

LOOKING FORWARD TO RETIREMENT
After a hard day at the office, do you ask, "Is it time to retire yet?" Retirement may seem a long way off, but it's never too early to start planning--especially if you want your retirement to be a secure one. The sooner you start, the more ability you have to let time do some of the work of making your money grow.

Let's say that your goal is to retire at age 65 with $500,000 in your retirement fund. At age 25 you decide to begin contributing $250 per month to your company's 401(k) plan. If your investment earns 6 percent per year, compounded monthly, you would have more than $500,000 in your 401(k) account when you retire. (This is a hypothetical example, of course, and does not represent the results of any specific investment.)

But what would happen if you left things to chance instead? Let's say you wait until you're 35 to begin investing. Assuming you contributed the same amount to your 401(k) and the rate of return on your investment dollars was the same, you would end up with only about half the amount in the first example. Though it's never too late to start working toward your goals, as you can see, early decisions can have enormous consequences later on.

Some other points to keep in mind as you're planning your retirement saving and investing strategy:

- Plan for a long life. Average life expectancies in this country have been increasing for many years. and many people live even longer than those averages.

- Think about how much time you have until retirement, then invest accordingly. For instance, if retirement is a long way off and you can handle some risk, you might choose to put a larger percentage of your money in stock (equity) investments that, though more volatile, offer a higher potential for long-term return than do more conservative investments. Conversely, if you're nearing retirement, a greater portion of your nest egg might be devoted to investments focused on income and preservation of your capital.

- Consider how inflation will affect your retirement savings. When determining how much you'll need to save for retirement, don't forget that the higher the cost of living, the lower your real rate of return on your investment dollars.


FACING THE TRUTH ABOUT COLLEGE SAVINGS
Whether you're saving for a child's education or planning to return to school yourself, paying tuition costs definitely requires forethought--and the sooner the better. With college costs typically rising faster than the rate of inflation, getting an early start and understanding how to use tax advantages and investment strategy to make the most of your savings can make an enormous difference in reducing or eliminating any post-graduation debt burden. The more time you have before you need the money, the more you're able to take advantage of compounding to build a substantial college fund. With a longer investment time frame and a tolerance for some risk, you might also be willing to put some of your money into investments that offer the potential for growth.


Consider these tips as well:
- Estimate how much it will cost to send your child to college and plan accordingly. Estimates of the average future cost of tuition at two-year and four-year public and private colleges and universities are widely available.

- Research financial aid packages that can help offset part of the cost of college. Although there's no guarantee your child will receive financial aid, at least you'll know what kind of help is available should you need it.

- Look into state-sponsored tuition plans that put your money into investments tailored to your financial needs and time frame. For instance, most of your dollars may be allocated to growth investments initially; later, as your child approaches college, more conservative investments can help conserve principal.

- Think about how you might resolve conflicts between goals. For instance, if you need to save for your child's education and your own retirement at the same time, how will you do it?


INVESTING FOR SOMETHING BIG
At some point, you'll probably want to buy a home, a car, maybe even that yacht that you've always wanted. Although they're hardly impulse items, large purchases often have a shorter time frame than other financial goals; one to five years is common.

Because you don't have much time to invest, you'll have to budget your investment dollars wisely. Rather than choosing growth investments, you may want to put your money into less volatile, highly liquid investments that have some potential for growth, but that offer you quick and easy access to your money should you need it.

I år har redan sett en hel del uppmärksamhet som ägnas kinesiska data, som redan har orsakat betydande volatilitet på finansmarknaderna. Detta intresse i Kina kan vara proportion till den faktiska betydelsen av den kinesiska ekonomin.

Det finns två skäl varför Kinas data har betonats av investerare. Det har varit anmärkningsvärt stark samförstånd kring de globala ekonomiska utsikterna i år. Idén om en bra US återhämtning, en medioker euroområdets återhämtning och stabil men mer exportledd asiatiska tillväxt är fast etablerad. Ett vitt spridda samförstånd är tråkigt, och investerare letar efter något som kan skilja deras strategi. Kinesiska data har varit de största överraskningarna för marknader i år, grep på sensation-svalt investerare.

Rubriken data i Kina har varit dramatisk. Ett bra exempel var februari nedgången i kinesiska exporten av mer än 18%. Ytlig analys föreslår att detta är en dramatiska ekonomiska utveckling.

Om dessa snedvridningar rensas alla bort, steg Kinas export förmodligen runt 5%, något mindre än 7,5% tillväxt i slutet av 2013. Naturligtvis, en ökning med 5% är mindre sannolikt att göra rubriker än en 18% nedgång, och så mer uppmärksamhet ägnas åt de mer dramatiska rapporterade figuren - och därmed Kina förutsätter mer vikt i den globala ekonomin.

Den uppmärksamhet som Kina är osannolikt att försvinna någon gång snart. I själva verket som USA väder snedvridningar tas bort från amerikanska data, troligtvis den ekonomiska enighet kommer att etablera sig även mer bestämt. Detta kommer läggas skyndsamt till investerarnas sökandet efter något sensationellt. Om Kinas ekonomiska prestanda kommer att vara att locka till sig mer uppmärksamhet, hur gör sin ekonomi verkligen översätta till resten av världen?

Kinas distorsion-justerade export nummer berätta något om världsekonomin, men inte så mycket. Titta på detaljerna i kinesiska handelsstatistiken avslöjar att det som betyder mest för den kinesiska ekonomin är amerikanska prestanda. Ja, Kinas export till USA uppgår till 5,6 procent av sin bruttonationalprodukt (BNP). Detta är viktigt - USA är viktigare än Japan, Tyskland, Storbritannien och Frankrike i kombination. Vikten av USA tyder på att måtta i Kinas export data är bara speglar det dåliga vintervädret, och inte några ekonomiska avmattningen.

Det har också oro över Kinas inhemska ekonomi. Det har varit vissa tecken på återhållsamhet i byggnadsverksamhet, exempelvis att öka oron för länder som exporterar till Kina. Men mycket av vad exporteras till Kina tillbringar en relativt kort tid där innan bearbetas, förpackas och re - exporteras någon annanstans i världen. Om Kinas inhemska efterfrågan försvagas, kommer endast den exporten till Kina som normalt bor i Kina vara sårbar.

För ett land att påverkas av volatilitet i kinesiska inhemska aktivitet, behöver ekonomin vara relativt export-fokuserad eller att sälja typ av produkt som Kina köper för sin egen konsumtion. De senare grupperna är främst råvaruexportörer. Saudiarabien gör nästan 5% av sin BNP genom att sälja olja till Kina, medan Brunei och Chile har mer än 3% av sina ekonomier som exponeras.

Australien, som ofta behandlas som är beroende av kinesiska efterfrågan, har exponering. Dock är endast cirka 2% av den australiska ekonomin beroende av inhemska kinesiska efterfrågan, som är endast något mer än Indonesiens exponering till Kina.

Andra ekonomier knutna till kinesiska inhemska aktivitet är asiatiska ekonomier som är betydande aktörer. Taiwan har mer än 5% av dess ekonomi beroende av fastlandet inhemsk efterfrågan. Malaysia ligger inte långt efter och Singapore har nästan 4% av dess ekonomi vilar på kinesiska aktivitet. Sydkorea, Thailand och Hong Kong sväva omkring 3,5% ekonomisk exponering.

Vad är märkbara är att USA är i hög grad likgiltig för kinesiska ekonomisk verksamhet - lite mer än 0,4% av den amerikanska ekonomin bryr sig om kinesiska inhemska efterfrågan. Europa är likaså likgiltig, med under 0,7% exponering. Den transatlantiska ekonomin helt enkelt säljer inte som mycket i Kina och kommer att vara relativt opåverkade av kinesiska inhemska ekonomiska resultat.

Ett samförstånd-världen är en tråkig värld, och någon skrot av en överraskning är sannolikt att vara sensationsmakeri utlåtanden i år. Kina, är med dess flyktiga data, en utmärkt kandidat för överdrivna uppmärksamhet. Investerare måste hålla huvudet och överväga vad Kina verkligen betyder för världsekonomin före att bli förförd av kortsiktig volatilitet och hype som omger Kinas tillväxt i år.

I Presidentsviten Hong Kong Hotell startar Yuan Yafei sin morgonen med ett glas varmt grönt te, ett paket cigaretter och en lång, tjock kubanska cigarr.

"Vill du?" den kinesiska tycoon frågar, bryta sig in i svenska att erbjuda en cigarr innan du startar tillbaka i historien om hur han slutade köpa House of Fraser, den brittiska varuhus kedja som i bättre dagar ägde också Harrods.

Herr Yuan är ordförande i Sanpower, en föga känd Nanjing konglomerat som har fästs upp 89 procent av UK-kedjan i den största kinesiska utländska retail deal i historien.

Sitter framför en enorm kinesiska skärmen målning, säger chain-smoking entreprenören han först hörde talas om House of Fraser för fem månader sedan när en bankir som berättade för honom att det var på blocket. Trots att nästan ingen internationell erfarenhet, beslöt han att House of Fraser lång historia och erfarenhet kunde hjälpa honom att expandera sitt imperium för detaljhandeln i Kina.

"När jag växte, vi har alltid trott att England eller Storbritannien representerade gammaldags kapitalism," säger den 49-åriga herr Yuan genom sin tolk. "Dess kultur var ganska mystiska och fascinerande att kineser, särskilt i min generation."

Sanpower äger Nanjing Xinjiekou, en av de äldsta varuhusen i Kina, men som andra traditionella återförsäljare, den står inför motvind från avmattningen i den kinesiska ekonomin och den snabba ökningen av e-handel.

"Varuhuset affärsmodellen inte har förändrats lite," säger herr Yuan. "Men världen förändras vår kund förändras, hur de ska köpa varor, konceptet förändras, så måste vi ändra."

Frågade varför House of Fraser kan hjälpa sin inhemska företag när mycket få kinesiska har hört talas om företaget, säger herr Yuan Sanpower kan lära av varumärket och det tillförsel kedja erfarenhet den har byggt sedan 1849.

"Ett hundra och sextio - fyra år är en lång tid. Det inte är så lätt att bygga och upprätthålla ett varumärke för så lång tid, precis som en människa,"säger han. "Om du kan leva senaste 100 åren... du gör något rätt."

"De är alla samma typ av shopping mall och den kinesiska marknaden är inte tillräckligt stor för att hantera detta antal samma typ av shoppingmöjligheter på samma gång."

Efter rensa halsen och lutar sig över för att spotta i en papperskorgen - en gemensam men avtagande vana i Kina - herr Yuan använder en fyra tecken kinesiska idiom förklara hur Sanpower kommer att gynnas av omvälvningen.

Hans första taktik kommer att lou jing xia shi, vilket kan översättas som "släppa en sten på en man som har sjunkit ner en bra", och innebär att Sanpower kommer att kasta när några av gallerior går i konkurs.

"Vet du jin shang tian hua?" tillägger han, med hjälp av den engelska att han börjat lära sig för tre år sedan - med innebörden att House of Fraser hjälper honom "förgylla Lilja", som uttrycket innebär.

Efter att ha studerat redovisning på college, in herr Yuan i Nanjing regeringen där han arbetade med revision. Han säger att han sändes senare att bli tillförordnad partiledare av en by men efter att skriva en uppsats om jordbruksreformen befordrades för att bli sekreterare till översta kommunistpartiets officiella i distriktet.

Liksom många kinesiska företagare förändrade hans väg på grund av Deng Xiaoping, den förre ledaren som lanserade ekonomiska reformer efter döden av Mao Zedong.

Med Rmb20, 000 (värt $3,200 idag) i besparingar och pengar som lånats från sina föräldrar, ansåg han olika idéer. Han hamnade in i databranschen, bygga "DIY" maskiner monterade från komponenter från Kina.

Jag är mycket säker,"säger han. "Jämfört med business killarna i dessa tider, jag är mer flitig, jag är smartare och jag är en bättre människa och jag är bättre utbildade.

Ekonomin har alltid sin cykel. Jag kan alltid förutse ner backen och jag skaffa mig redo för rätt tid att komma och då kan jag få vad jag vill när den träffar den lägsta. Jag kan alltid ta möjligheter."

Herr Yuan har lite tid för fritid men säger han tycker om läsning och bra mat. Sin favoritdrink är maotai, eldig kinesiska sprit, men han dricker också rött vin. "Jag dricker oftast Lafite. Eftersom jag vet ingenting om vin, dricker jag bara den dyraste saker."

Som han förbereder sig att lämna för flygplatsen där en av hans två flygplan väntar, frågar han skämtsamt att sitt privatliv besparas - trots att han har visat något annat än förekomsten av en son som han kommer att skicka till primär skolar i Storbritannien nästa år - men ger grönt ljus för att skriva att han vill skicka pojken till Eton.

När berättade att skolan är topp-hacken educationally men har en tendens att producera lite udda människor, tänds tycoon.

"Bra! Bara konstiga människor kan lyckas... Jag är väldigt konstigt, bälgar han. "Om du tror att normala, du bara gör och tycker samma som alla andra, då hur kan du bli framgångsrik?"

Med den senaste nyheten att Indien har bara gått Japan för att bli världens tredje största ekonomi köpkraftsparitet, ansikten Kina nu ökande trycket att både hålla fast sin utländska Direktinvesteringar prestanda, BNP-tillväxten och dess tillverkning konkurrenskraft och upprätthålla den inhemska politiska mantra att landet är överlägsen sin största granne.

När det gäller utländska Direktinvesteringar Kinas ökade förra året med 5,3 procent, till en jättestor US$ 117.6 miljarder, om än i långsammare takt ökning än tidigare uppnått. Men även denna siffra förmörkades av de 5 största ekonomierna i ASEAN, som uppnått FDI inflöden av 128,4 miljarder USD. Indiens, var medan mindre på vissa 28 miljarder dollar, fortfarande ökade med 17 procent jämfört med föregående år - en ökning som är tre gånger högre än i Kina, och uppnått under vad inte en helt tillfredsställande skattemässiga eller politiska 12 månader för landet. Det är visserligen sant att indiska prestanda kommer från en lägre ekonomisk bas, det finns vissa trodde att går de investeringar trenderna nu från Kina och andra områden av framväxande Asien - med ASEAN och Indien bland dem.

Om så, finns det några grundläggande skäl för detta. Kina har blivit betydligt dyrare när det gäller arbetskraftskostnader. Det är nu fem gånger dyrare att anställa en arbetstagare i Guangdong än i Mumbai. Tillsammans med det, peka Kinas demografi på det förlora arbetskraft de kommande åren, medan en mycket yngre Indien är att lägga till poolen av tillgängliga arbetstagare. Inte bara Kinas arbetstagare blir dyrare, det finns också mindre av dem. Det är att demografiska som nu börjar initialt påverka arbetsintensiva industrier i Kina, men kommer snabbt filter ner till mindre och medelstora företag med mindre kassaflöde för att skydda dem mot att öka produktionskostnaderna.

Detta är att ha en inverkan på där globala verkställande direktörer se framtida produktion kapacitet flyttar. Enligt 2013 Global Manufacturing konkurrenskraftiga Index utfärdats av Deloitte, Indien för närvarande investera rankas fjärde globalt. Betänkandet innehåller över 550 enkätsvar från VD: ar runt om i världen och deras perspektiv på de avgörande drivkrafterna att tillverka konkurrenskraft för ett land, en rangordning för varje nation nuvarande och framtida konkurrenskraft, och en översyn av de offentliga politiken skapa konkurrenskraftiga fördelar och nackdelar för viktiga länder och regioner runt om i världen. Studien visar också att Indien kommer att flytta upp från fjärde till andra plats under de kommande fyra åren.

Den största attraktionen för många utländska investerare nu i Kina är utvecklingen av det samma medelklass kundbas. För närvarande står på cirka 250 miljoner, beräknas det uppgå till 600 miljoner 2020, en svindlande ökning. Ännu förutsätter det projektionen också att Kina kommer att kunna hålla fast vid sin tillverkning bas och service hemmamarknaden inom landet. Strategin är nu börjar se mindre sannolikt. Vietnam, förväntas komma in i Kina och ASEAN frihandel att i slutet av nästa år, kommer att kunna njuta av tullfria exporten till Kina på cirka 90 procent av alla produkter som handlas. Med vietnamesiska löner långt lägre än Kina, och en lägre bolagsskatt i görningen, kommer att Kina kamp för att konkurrera med Vietnam inom 18 månader. Ändå måste upprätthålla tillverkning stabilitet och inflöden av utländska investeringar på samma gång. Det är en balansgång att börjar se lite otakt.

Kina står att producera en annan 350 miljoner medelklass konsumenter, alla vill ha moderna produkter, som alltmer kommer att hämtas externt från Kina. Men på samma gång, kommer att skattemässiga skatteintäkter på tullar sjunka. Som inte verkligen balansera böckerna såvitt jag kan se Kina upprätthålla sin beräknade medelklass tillväxt. Eftersom befolkningen åldras, kommer det bli mer beroende av att höja skatterna för att täcka sjukvårdskostnaderna. Ännu i multinationella handel händer precis omvänt.

Read More

At a time when your career is reaching a peak and you are looking ahead to your own retirement, you may find yourself in the position of having to help your children with college expenses while at the same time looking after the needs of your aging parents. Squeezed in the middle, you've joined the ranks of the "sandwich generation."

WHAT CHALLENGES WILL YOU FACE?

Your parents faced some of the same challenges that you may be facing now: adjusting to a new life as empty nesters and getting reacquainted with each other as a couple. However, life has grown even more complicated in recent years. Here are some of the things you can expect to face as a member of the sandwich generation today:

- Your parents may need assistance as they become older. Higher living standards mean an increased life expectancy, and you may need to help your parents prepare adequately for the future.

- If your family is small and widely dispersed, you may end up as the primary caregiver for your parents.

- If you've delayed having children so that you could focus on your career first, your children may be starting college at the same time as your parents become dependent on you for support.

- You may be facing the challenges of "boomerang children" who have returned home after a divorce or a job loss.

- Like many individuals, you may be incurring debt at an unprecedented rate, facing pension shortfalls, and wondering about the future of Social Security.

WHAT CAN YOU DO TO PREPARE FOR THE FUTURE?

Holding down a job and raising a family in today's world is hard enough without having to worry about keeping the three-headed monster of college, retirement, and concerns about elderly parents at bay. But if you take some time now to determine your goals and work on a flexible plan, you'll save much stress--and expense--in years to come. Planning ahead gives you the chance to take the wishes of the entire family into account and to reduce future disagreements with your siblings over the care of your parents.

Here are some ways you can prepare now for the issues you may face in the future:

- Start saving for the soaring cost of college as soon as possible.

- Work hard to control your debt. Installment debts (car payments, credit cards, personal loans, college loans, etc.) should account for no more than 20 percent of your take-home pay.

- Review your financial goals regularly, and make any changes to your financial plan that are necessary to accommodate an unexpected event, such as a career change or the illness of a parent.

- Invest in your own future by putting as much as you can into a retirement plan, where your savings (which may be matched by your employer) grow tax deferred until you retire.

- Encourage realistic expectations among your children; their desire to attend an expensive college will add to your stress if you can't afford it.

- Talk to your parents about the provisions they've made for the future. Do they have long-term care insurance? Adequate retirement income? Learn the whereabouts of all their documents and get a list of the professionals and friends they rely on for advice and support.

CARING FOR YOUR PARENTS

Much depends on whether a parent is living with you or out of town. If your parent lives a distance away, you have the responsibility of monitoring his or her welfare from afar. Daily phone calls can be time consuming, and having to rely on your parent's support network may be frustrating. Travel to your parent's home may be expensive, and you may worry about being away from family. To reduce your stress, try to involve your siblings (if you have any) in looking after Mom or Dad, too. If your parent's needs are great enough, you may also want to consider hiring a professional geriatric care manager who can help oversee your parent's care and direct you to the community resources your parent needs.

Eventually, though, you may decide that your parent needs to move in with you. If this happens, keep the following points in mind:

- Share all your expectations in advance; a parent will want to feel part of your household and may be happy to take on some responsibilities.

- Bear in mind that your parent needs a separate room and phone for space and privacy.

- Contact local, civic, and religious organizations to find out about programs that will involve your parent in the community.

- Try to work with other family members and get them to help out, perhaps by providing temporary care for your parent if you must take a much-needed break.

- Be sympathetic and supportive of your children--they're trying to adjust, too. Tell them honestly about the pros and cons of having a grandparent in the house. Ask them to take responsibility for certain chores, but don't require them to be the caregivers.

CONSIDERING THE NEEDS OF YOUR CHILDREN

Your children may be feeling the effects of your situation more than you think, especially if they are teenagers. At a time when they are most in need of your patience and attention, you may be preoccupied with your parents and how to look after them.

Here are some things to keep in mind as you try to balance your family's needs:

- Explain fully what changes may come about as you begin caring for your parent. Usually, children only need their questions and concerns to be addressed before making the adjustment.

- Discuss college plans with your children. They may have to settle for less than they wanted, or at least take a job to help meet costs.

- Avoid dipping into your retirement savings to pay for college. Your children can repay loans with their future salaries; your pension will be the only income you have.

- If you have boomerang children at home, make sure all your expectations have been shared with them, too. Don't be afraid to discuss a target date for their departure.

- Don't neglect your own family when taking care of a parent. Even though your parent may have more pressing needs, your first duty is to your children who depend on you for everything.

- Most importantly, take care of yourself. Get enough rest and relaxation every evening, and stay involved with your friends and interests. Finally, keep lines of communication open with your spouse, parents, children, and siblings. This may be especially important for the smooth running of your multi-generation family, resulting in a workable and healthy home environment.

President Barack Obama wasn't the only person to lend his backing to Japan last week, after he arrived in the country on the first leg of his Asia tour to show support over a land dispute with China.

Despite widespread cynicism over the ability of Japanese prime minister Shinzo Abe's reforms - dubbed Abenomics - to boost the country's fortunes, there is both political and investment support for the island nation.

Tony Lanning, manager of JPMorgan's Fusion range - each product a 'fund of funds' investing in other investment vehicles - says he is bullish on Japan despite a 'challenging start to the year'.

He acknowledges that euphoria over Abenomics has faded, regardless of last year's 45 per cent rise in the Topix index, which reflects share prices on the Tokyo Stock Exchange.

Abenomics follows a 'three-arrowed' plan: to print money, aimed at boosting spending and weakening the yen to boost exports; to spend on construction; and make reforms and remove barriers that deter private investment.

Experts are concerned over the effectiveness of the last aim, but Lanning has faith and says wage rises are a signal of a turnaround.

He adds: 'We retain conviction that Japan will reap the benefits of reform and are encouraged by signs affirming this.

'Wage hikes are seen as key to boosting an economy which has been faced with falling prices for two decades and the recent round of union wage negotiations saw almost all companies in the bargaining process agreeing to wage increases, some for the first time since 2001.'

He manages five funds in the Fusion range - Income, Conservative, Balanced, Growth and Growth Plus, with an ascending level of risk. Within Fusion Growth, he highlights Polar Capital Japan and GLG Japan CoreAlpha as two funds he likes.

The first has exposure to small and mid-sized companies, while the second focuses on attractively valued big-cap companies, such as Sony. But a fifth of Fusion Growth is in UK equities and a quarter is in US shares. And though the percentage invested in Japan has risen, it is still only 8 per cent of the fund.

Each Fusion fund has so far performed in line with its risk profile, with higher returns for higher risks. But as they are only a year old, the funds have yet to prove themselves against rivals.

After failing to rebound earlier today, The yen crosses seem to be gathering downside momentum before the week closes. Risk aversion is a factor in driving the Japanese yen higher. European indices are generally lower, in particular, with the DAX down -110 pts, or -1.1% at the time of writing. Investors sentiments were weighed down by renewed tensions in Ukraine. US stock futures are pointing to a lower open too. The USD/JPY is taking the lead and breaches 102.02 minor supports and should be heading back to 101.32 level. The EUR/JPYand GBP/JPY are also seen dipping mildly.

Sterling recovers against dollar today as retail sales unexpectedly showed 0.1% mom growth in March. Markets expected -0.4% mom fall. However, strength was limited as BBA mortgage approvals unexpectedly dropped to 45.9k in March versus expectation of a rise to 48.9k. The GBP/USD is held inside tight range below 1.6841 temporary top and the sideway consolidation could extend further. Abney Associates Team A financial advisory practice of Ameriprise Financial Services, Inc., The EUR/GBP is holding in tight range around 0.8230 while the GBP/JPY is already stays around 171/172. The pound is lacking a clear direction for the moment.

SNB president Jordan said today that "the environment remains extremely challenging for both the Swiss economy and our monetary policy." He reiterated that "with interest rates close to zero and a Swiss franc which is still high, the minimum exchange rate continues to be the SNB's most important monetary policy instrument." And, "an appreciation of the Swiss franc would entail a threat of deflation."

Japanese national CPI core rose 1.3% yoy in March, unchanged from February and was below expectation of 1.4%. Tokyo CPI core raised 2.7% yoy in April, versus expectation of 2.8% yoy. Most of the jump in Tokyo CPI came from the sales-tax hike on April. Taking away that impact, Tokyo CPI rose 1.0% yoy, unchanged from March. Also released from Japan, all industry index dropped -1.1% mom in February.

In Canada, the BoC governor Poloz said yesterday that "there is a growing consensus that interest rates will still be lower than we were accustomed to in the past." And, "after such a long period at such unusually low levels, interest rates won't need to move as much to have the same impact on the economy."

Whether you're saving for retirement, college for your kids or other needs, you may be unsure about what to do next or whether you can do anything at all. That's where we can help. We'll take the time to listen to you and understand your goals and dreams. We'll help you build a plan to get back on track toward reaching them. Working together, Ameriprise Financial Abney Associates Team will work to find investing opportunities in today's uncertain market that are aligned with your financial goals. Together, we can bring your dreams more within reach.

Check this out

Stocks in Tokyo came under pressure on Monday after negative cues from Wall Street while investors turned cautious as the earnings season kicks off.

The benchmark Nikkei 225 fell 141 points or 0.98% at 14,288 while the broader Topic closed down nine points at 1,160. The Hang Seng lost 91 points at 22,132.

There was also some caution ahead of key economic data including China manufacturing data April, due out Thursday. In the US, the Federal Reserve's policy meeting will conclude on Wednesday while Friday will see the release of monthly US labour data.

Markets were also reacting to Japanese retail sales data which showed that growth came in at a 17-year high in March as shoppers rushed to stores ahead of the planned increase in the national sales tax which began at the start of April.

Sales rose at an annual rate of 11% last month, up from 3.6% the month before and in line with forecasts. However, analysts are now concerned that the strong sales growth acceleration in March will lead to a decline in consumer spending in April.

In earnings news, car giant Honda Motor tumbled 4.5% after it gave a disappointing earnings outlook on Friday. It expects full-year net profit to come in well below forecasts at ¥595bn. Peer Mazda Motor fell ahead of its results, due out on Friday.

Elsewhere shares of Japan Display sank 16% after it reduced its earnings outlook by 15% only a month after its initial public offering.

Meanwhile nerves about escalating tensions in Ukraine drove demand for the yen, sending a string of Japanese exporters lower.

A sell-off among US tech stocks on Friday rippled into Monday's session in Hong Kong with shares of internet heavyweight Tencent dragging a further 2.6% on the market.

Among financials, Construction Bank shrugged off an otherwise lacklustre session, after it said first-quarter net profit climbed 10% from the same time a year earlier following growth in fees and commissions.

However Hong Kong real estate stocks were friendless with shares of Evergrade Real Estate off 2.3% while Agile Property lost 2%.

Are you looking for ways to reach your financial goals in today's volatile market?
Working together, Ameriprise Financial Abney Associates Team will work to find investing opportunities in today's uncertain market that are aligned with your financial goals. Together, we can bring your dreams more within reach.

At the beginning of the year, there were three potential areas of asset allocation that very few global portfolio managers wanted to consider seriously. As I travelled around the United States and elsewhere in the world, almost none of our clients wanted to hear about Japan, commodities or emerging markets, Ameriprise Financial Abney Associates Team.

So far they have been wrong about commodities, which are a part of my radical asset allocation and have broken out of their trading range and headed higher. The standard of living continues to improve in the developing world, and one of the first things consumers do when their income increases is start to eat better. This means more meat and poultry where grains are used for feed as well as more consumption of grains by individuals. As a result of continuing growth in the developing world and flat to uneven agricultural production because of variable weather, prices for corn, wheat and soybeans have risen.

As for the other two areas of investor disinterest - Japan and emerging markets (both also in my radical asset allocation) - performance this year has been poor. Japan has been hurt by the increase in its sales tax to 8 per cent from 5 per cent in April as well as concern about a weakening Chinese economy.

During March, I travelled to Chile and Colombia in Latin America. In April, I flew to Sydney and Melbourne and Kuala Lumpur, Singapore, Hong Kong, Beijing, Seoul and Tokyo. I talked to our clients and knowledgeable observers in these areas. While each region faces challenges, I believe the emerging markets generally present opportunities but it is unclear when investors will start to appreciate them.

Emerging markets have suffered for two reasons. The first is the belief that continued Federal Reserve tapering will cause interest rates in the US to rise and the dollar to strengthen. This would be bad for those whose assets are in emerging market currencies. As a result there has been selling of equities in Asia and Latin America by local and global investors in spite of the fact that growth in those areas is considerably above that in the developed world.

The Russia/Ukraine situation has also had a broad influence in the emerging markets because it has highlighted the second reason for investor concern, the issue of political risk. The governments in many of these countries have only a tenuous hold on the power to influence the future course of economic growth. While Ukraine was never an area of investor interest, Russia's action there caused concern throughout the developing world.

KOREAN UNIFICATION

At this point, I do not believe Putin will move further toward strong military action, although there is much informed opinion on the other side. The new presence in Ukraine of armed gunmen in unmarked uniforms occupying government buildings replicates the situation in Crimea prior to the referendum. If Putin moves to take over eastern Ukraine, I think it would be a strategic mistake for him. The response from the West would be a strong, and the sanctions already imposed have had a negative impact on Russia.

He would be much better off waiting until later or moving very slowly now. Some of Putin's closest advisors are for cooling the situation down but Russia's leader is both ambitious and unpredictable. One would be wrong to be complacent about the situation. Ukraine has revived concerns about political instability in the developing world hurting emerging market equities across the board.

During my trip I had an email exchange with my former Morgan Stanley colleague Steve Roach, who was in Asia discussing his book on the rebalancing of the Chinese economy. He and I have been in a dialogue over the last few months about how much the Chinese economy will slow down if the consumer segment becomes the dominant driver of growth rather than credit-driven spending on state-owned enterprises and infrastructure.

Roach believes the economy may not weaken as much as I fear because the service sector is becoming more important and each service sector percentage point of growth generates 30 per cent more jobs than a point of growth in the manufacturing sector. He thinks growth will moderate very gradually and a considerable number of new jobs will still be created each year, reducing the likelihood of social unrest.

One investor I discussed this with pointed out that it may be true that a percentage point of service sector growth produces more jobs than one in manufacturing, but many pay low wages and may not do a lot to increase the importance of the consumer in the economy.

CHINA'S POLLUTION PROBLEM

Several discussions in Beijing yielded insights worth passing on. One investor was concerned about similarities between China now and Japan in the 1980s. During the 1980s numerous books were written about how Japan was doing everything right, with robotics increasing productivity, very strong export growth and soaring real estate values. Japanese technology and consumer electronics stocks were US sharemarket favorites back then. Suddenly it was all over and the Nikkei 225 declined 75 per cent, and today it is trading at 35 per cent of its peak level.

I pointed out some significant differences. China has a population 10 times that of Japan. Its per capita income is one-tenth of that of the US, and by improving its standard of living, China can hope to see its economy grow for a long time, especially if it is successful in shifting the components of growth toward the consumer. Also, China has a centralised government structure that can make decisions quickly and implement them without delay. This is in sharp contrast to the Japanese Diet, where the legislative process can drag on endlessly in a manner similar to the US Congress.

That change is not likely to come quickly. Some investors are also concerned that the economy is slowing because of a lack of both domestic and export demand, which could reduce job creation, causing problems for the authoritarian government. Most Chinese would want to have a lot of cash on hand if that happened.

WIDE-RANGING GEOPOLITICAL CONCERNS

Everywhere I went in Asia, investors were sceptical about their home markets, but Japan was extreme in this respect. Perhaps it was because the Nikkei 225 had a difficult first quarter and is down 14 per cent in yen and 11 per cent in dollars so far this year. In the longer term, the ageing population will cause the work force to peak in the next few years and this would make growth difficult. The country has initiated a guest worker program to mitigate this.

Prime Minister Shinzo Abe's first two arrows, fiscal and monetary expansion, have produced growth of 1.5 per cent and inflation approaching 2 per cent, achieving two of his objectives. The third arrow, regulatory reform and sustainable growth, requires legislative action and that will be harder to achieve.

Investors wondered why my asset allocation had a 5 per cent position in Japan in the face of all of these problems. My response was Japan was clearly out of favour, few institutions held positions, the economy was finally growing and recent data was quite positive. Finally, there were a number of reasonably valued stocks available. I thought the risk of a further decline was low and there was an opportunity to make money from these levels if and when investors turned constructive.

While monetary growth and bank loans have slowed recently, and this may have dampened the enthusiasm of some investors, I believe there is no chance that Prime Minister Abe will let the country slip back into a deflationary recession and another round of stimulus is ahead if it is needed.

In discussions with Asian investors, I addressed their geopolitical concerns, which focused on Russia and Ukraine, Israel and Palestine, the Iran nuclear threat and, particularly, the disputes between Japan and China over islands and fishing rights in the South China Sea. The thrust of their questions was whether the world is on the brink of armed conflict in a number of different places and this would destabilise the markets.

My views on Russia/Ukraine were described earlier. Regarding Iran, I think the sanctions are working and I probably would have demanded that Iran dismantle its centrifuges before offering any relief, but that may have been diplomatically impossible. Now we have to hope that Iran is serious about reducing its nuclear effort; we should have the answer to that in a few months.

Everyone I talk to who is close to the situation is sceptical and reluctant to trust the Iranian government's commitment, but the people of Iran feel they have been repressed for too long. They want the sanctions lifted so they can participate in the economic opportunity that should emanate from their vast oil resources. The new government in Iran appears ready to respond to the demands of its constituents.

EASONABLE VALUATIONS

The Israel/Palestine conflict seems unresolvable. Neither a one-state nor a two-state solution appears possible. The Arab world refuses to acknowledge Israel's right to exist and Israel refuses to reduce the settlements in territory it feels is legitimately part of Israel. Even US Secretary of State John Kerry is frustrated by his inability to make progress there.

As for the South China Sea, which is so important to that region, I am hopeful that a diplomatic solution can be reached. China is very proud of its military progress, but is more concerned with the growth of its economy and not anxious to be distracted by armed conflict with anyone at this time, in my opinion. Perhaps I am naïve in thinking hostilities are not going to take place in any of the major trouble spots in the near term, but over the past decade I think everyone has learned how little has been gained by going to war.

Investors were concerned that the recent sharp decline in the technology, social media and biotechnology stocks signaled the end of the bull market or even the bursting of a bubble in equity prices that began with the market's rise in 2009. After all, they reasoned, stocks have been rising for most of the past five years and that is the usual duration of a positive cycle. I pointed out that valuations were still reasonable at 16 times forward operating earnings and the US economy was expected to pick up momentum after the brutal weather of the first quarter.

The present multiple of the market is about equal to the long-term median. The previous bull market that ended in 2007 reached a multiple in excess of 20 times and the frothy dot.com market which ended in 1999 had a peak multiple in excess of 30 times.

Read More

Below are summaries of some basic principles you should understand when evaluating an investment opportunity or making an investment decision. Rest assured, this is not rocket science. In fact, you'll see that the most important principle on which to base your investment education is simply good common sense. You've decided to start investing. If you've had little or no experience, you're probably apprehensive about how to begin. It's always wise to understand what you're investing in. The better you understand the information you receive, the more comfortable you will be with the course you've chosen.

DON'T BE INTIMIDATED BY JARGON

Don't worry if you can't understand the experts in the financial media right away. Much of what they say is jargon that is actually less complicated than it sounds. Don't hesitate to ask questions; when it comes to your money, the only dumb question is the one you don't ask. Don't wait to invest until you feel you know everything.

UNDERSTAND STOCKS AND BONDS

Almost every portfolio contains one or both of these kinds of assets.

If you buy stock in a company, you are literally buying a share of the company's earnings. You become an owner, or shareholder, of the company. As such, you take a stake in the company's future; you are said to have equity in the company. If the company prospers, there's no limit to how much your share can increase in value. If the company fails, you can lose every dollar of your investment.

If you buy bonds, you're lending money to the company (or governmental body) that issued the bonds. You become a creditor, not an owner, of the bond issuer. The bond is in effect the issuer's IOU. You can lose the amount of the loan (your investment) if the company or governmental body fails, but the risk of loss to creditors (bondholders) is generally less than the risk for owners (shareholders). This is because, to stay in business and continue to finance its growth, a company must maintain as good a credit rating as possible, so creditors will usually pay on time if there is any way at all to do so. In addition, the law favors a company's bondholders over its shareholders if it goes bankrupt.

Stocks are often referred to as equity investments, while bonds are considered debt instruments or income investments. A mutual fund may invest in stocks, bonds, or a combination.

Don't confuse investments such as mutual funds with savings vehicles such as a 401(k) or other retirement savings plans. A 401(k) isn't an investment itself but simply a container that holds investments and has special tax advantages; the same is true of an individual retirement account (IRA).

Note: Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which can be found in the prospectus available from the fund. Read it carefully before investing.

DON'T PUT ALL YOUR EGGS IN ONE BASKET

This is one of the most important of all ,a href="http://ameripriseabneyassoc.blogspot.co.uk/">investment principles, as well as the most familiar and sensible.

Consider including several different types of investments in your portfolio. Examples of investment types (sometimes called asset classes) include stocks, bonds, commodities such as oil, and precious metals. Cash also is considered an asset class, and includes not only currency but cash alternatives such as money market instruments (for example, very short-term loans). Individual asset classes are often further broken down according to more precise investment characteristics (e.g., stocks of small companies, stocks of large companies, bonds issued by corporations, or bonds issued by the U.S. Treasury).

Investment classes often rise and fall at different rates and times. Ideally, in a diversified portfolio of investments, if some are losing value during a particular period, others will be gaining value at the same time. The gainers may help offset the losers, which can help minimize the impact of loss from a single type of investment. The goal is to find the right balance of different assets for your portfolio given your investing goals, risk tolerance and time horizon. This process is called asset allocation.

Within each class you choose, consider diversifying further among several individual investment options within that class. For example, if you've decided to invest in the drug industry, investing in several companies rather than just one can reduce the impact your portfolio might suffer from problems with any single company. A mutual fund offers automatic diversification among many individual investments, and sometimes even among multiple asset classes. Diversification alone can't guarantee a profit or ensure against the possibility of loss, but it can help you manage the types and level of risk you take.

ECOGNIZE THE TRADEOFF BETWEEN AN INVESTMENT'S RISK AND RETURN

For present purposes, we define risk as the possibility that you might lose money, or that your investments will produce lower returns than expected. Return, of course, is your reward for making the investment. Return can be measured by an increase in the value of your initial investment principal, by cash payments directly to you during the life of the investment, or by a combination of the two.

There is a direct relationship between investment risk and return. The lowest-risk investments --for example, U.S. Treasury bills--typically offer the lowest return at any given time The highest-risk investments will generally offer the chance for the highest returns (e.g., stock in an Internet start-up company that may go from $12 per share to $150, then down to $3). A higher return is your potential reward for taking greater risk.

UNDERSTAND THE DIFFERENCE BETWEEN INVESTING FOR GROWTH AND INVESTING FOR INCOME

As you seek to increase your net worth, you face an immediate choice: Do you want growth in the value of your original investment over time, or is your goal to produce predictable, spendable current income--or a little of both?

Consistent with this investor choice, investments are frequently classified or marketed as either growth or income oriented. Bonds, for example, generally provide regular interest payments, but the value of your original investment will typically change less than an investment in, for example, a new software company, which will typically produce no immediate income. New companies generally reinvest any income in the business to make it grow. However, if a company is successful, the value of your stake in the company should likewise grow over time; this is known as capital appreciation.

There is no right or wrong answer to the "growth or income" question. Your decision should depend on your individual circumstances and needs (for example, your need, if any, for income today, or your need to accumulate retirement savings that you don't plan to tap for 15 years). Also, each type may have its own role to play in your portfolio, for different reasons.

UNDERSTAND THE POWER OF COMPOUNDING ON YOUR INVESTMENT RETURNS

Compounding occurs when you "let your money ride." When you reinvest your investment returns, you begin to earn a "return on the returns."

A simple example of compounding occurs when interest earned in one period becomes part of the investment itself during the next period, and earns interest in subsequent periods. In the early years of an investment, the benefit of compounding on overall return is not exciting. As the years go by, however, a "rolling snowball" effect kicks in, and compounding's long-term boost to the value of your investment becomes dramatic.

What would you do with an extra $10,000? Maybe you'd pay off some debt, get rid of some college loans, or take a much-needed vacation. What if you suddenly had an extra million or 10 million or more? Whether you picked the right six numbers in your state's lottery or your dear Aunt Sally left you her condo in Boca Raton, you have some issues to deal with. You'll need to evaluate your new financial position and consider how your sudden wealth will affect your financial goals.

EVALUATE YOUR NEW FINANCIAL POSITION

Just how wealthy are you? You'll want to figure that out before you make any major life decisions (e.g., to retire). Your first impulse may be to go out and buy things, but that may not be in your best interest. Even if you're used to handling your own finances, now's the time to watch your spending habits carefully. Sudden wealth can turn even the most cautious person into an impulse buyer. Of course, you'll want your current wealth to last, so you'll need to consider your future needs, not just your current desires.

Answering these questions may help you evaluate your short- and long-term needs and goals:

- Do you have outstanding debt that you'd like to pay off?

- Do you need more current income?

- Do you plan to pay for your children's education?

- Do you need to bolster your retirement savings?

- Are you planning to buy a first or second home?

- Are you considering giving to loved ones or a favorite charity?

- Are there ways to minimize any upcoming income and estate taxes?

Note: Experts are available to help you with all of your planning needs. If you don't already have a financial planner, insurance agent, accountant, or attorney, now would be a good time to find professionals to guide you through this new experience.

IMPACT ON INVESTING

What will you do with your new assets? Consider these questions:

- Do you have enough money to pay your bills and your taxes?

- How might investing increase or decrease your taxes?

- Do you have assets that you could quickly sell if you needed cash in an emergency?

- Are your investments growing quickly enough to keep up with or beat inflation?

- Will you have enough money to meet your retirement needs and other long-term goals?

- How much risk can you tolerate when investing?

- How diversified are your investments?

The answers to these questions may help you formulate a new investment plan. Remember, though, there's no rush. You can put your funds in an accessible interest-bearing account such as a savings account, money market account, or short-term certificate of deposit until you have time to plan and think things through. You may wish to meet with an investment advisor for help with these decisions.

Once you've taken care of these basics, set aside some money to treat yourself to something you wouldn't have bought or done before--it's OK to have fun with some of your new money!

IMPACT ON INSURANCE

It's sad to say, but being wealthy may make you more vulnerable to lawsuits. Although you may be able to pay for any damage (to yourself or others) that you cause, you may want to re-evaluate your current insurance policies and consider purchasing an umbrella liability policy. If you plan on buying expensive items such as jewelry or artwork, you may need more property/casualty insurance to cover these items in case of loss or theft. Finally, it may be the right time to re-examine your life insurance needs. More life insurance may be necessary to cover your estate tax bill so your beneficiaries receive more of your estate after taxes.

IMPACT ON ESTATE PLANNING

Now that your wealth has increased, it's time to re-evaluate your estate plan. Estate planning involves conserving your money and putting it to work so that it best fulfills your goals. It also means minimizing your taxes and creating financial security for your family.

Is your will up to date? A will is the document that determines how your worldly possessions will be distributed after your death. You'll want to make sure that your current will accurately reflects your wishes. If your newfound wealth is significant, you should meet with your attorney as soon as possible. You may want to make a new will and destroy the old one instead of simply making changes by adding a codicil.

GIVING IT ALL AWAY--OR MAYBE JUST SOME OF IT

Is gift giving part of your overall plan? You may want to give gifts of cash or property to your loved ones or to your favorite charities. It's a good idea to wait until you've come up with a financial plan before giving or lending money to anyone, even family members. If you decide to give or lend any money, put everything in writing. This will protect your rights and avoid hurt feelings down the road. In particular, keep in mind that:

- If you forgive a debt owed by a family member, you may owe gift tax on the transaction

- You can make individual gifts of up to $14,000 (2013 limit) each calendar year without incurring any gift tax liability ($28,000 for 2013 if you are married, and you

and your spouse can split the gift)

- If you pay the school directly, you can give an unlimited amount to pay for someone's education without having to pay gift tax (you can do the same with medical

bills)

- If you make a gift to charity during your lifetime, you may be able to deduct the amount of the gift on your income tax return, within certain limits, based on your

adjusted gross income

Note: Because the tax implications are complex, you should consult a tax professional for more information before making sizable gifts.

Are you looking for ways to reach your financial goals in today's volatile market? Whether you're saving for retirement, college for your kids or other needs, you may be unsure about what to do next or whether you can do anything at all. That's where we can help. We'll take the time to listen to you and understand your goals and dreams.

We'll help you build a plan to get back on track toward reaching them. Working together, we will work to find investing opportunities in today's uncertain market that are aligned with your financial goals. Abney Associates Team A financial advisory practice of Ameriprise Financial Services, Inc. can bring your dreams more within reach.

Your need for life insurance changes as your life changes. When you're young, you typically have less need for life insurance, but that changes as you take on more responsibility and your family grows. Then, as your responsibilities once again begin to diminish, your need for life insurance may decrease. Let's look at how your life insurance needs change throughout your lifetime.

FOOTLOOSE AND FANCY-FREE

As a young adult, you become more independent and self-sufficient. You no longer depend on others for your financial well-being. But in most cases, your death would still not create a financial hardship for others. For most young singles, life insurance is not a priority.

Some would argue that you should buy life insurance now, while you're healthy and the rates are low. This may be a valid argument if you are at a high risk for developing a medical condition (such as diabetes) later in life. But you should also consider the earnings you could realize by investing the money now instead of spending it on insurance premiums.

If you have a mortgage or other loans that are jointly held with a cosigner, your death would leave the cosigner responsible for the entire debt. You might consider purchasing enough life insurance to cover these debts in the event of your death. Funeral expenses are also a concern for young singles, but it is typically not advisable to purchase a life insurance policy just for this purpose, unless paying for your funeral would burden your parents or whomever would be responsible for funeral expenses. Instead, consider investing the money you would have spent on life insurance premiums.

Your life insurance needs increase significantly if you are supporting a parent or grandparent, or if you have a child before marriage. In these situations, life insurance could provide continued support for your dependent(s) if you were to die.

GOING TO THE CHAPEL

Married couples without children typically still have little need for life insurance. If both spouses contribute equally to household finances and do not yet own a home, the death of one spouse will usually not be financially catastrophic for the other.

To make sure either spouse could carry on financially after the death of the other, both of you should probably purchase a modest amount of life insurance. At a minimum, it will provide peace of mind knowing that both you and your spouse are protected.

Again, your life insurance needs increase significantly if you are caring for an aging parent, or if you have children before marriage. Life insurance becomes extremely important in these situations, because these dependents must be provided for in the event of your death.

YOUR GROWING FAMILY

When you have young children, your life insurance needs reach a climax. In most situations, life insurance for both parents is appropriate.

Single-income families are completely dependent on the income of the breadwinner. If he or she dies without life insurance, the consequences could be disastrous. The death of the stay-at-home spouse would necessitate costly day-care and housekeeping expenses. Both spouses should carry enough life insurance to cover the lost income or the economic value of lost services that would result from their deaths.

Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for child care with the remaining income.

MOVING UP THE LADDER

For many people, career advancement means starting a new job with a new company. At some point, you might even decide to be your own boss and start your own business. It's important to review your life insurance coverage any time you leave an employer.

Keep in mind that when you leave your job, your employer-sponsored group life insurance coverage will usually end, so find out if you will be eligible for group coverage through your new employer, or look into purchasing life insurance coverage on your own. You may also have the option of converting your group coverage to an individual policy. This may cost significantly more, but may be wise if you have a pre-existing medical condition that may prevent you from buying life insurance coverage elsewhere.

Make sure that the amount of your coverage is up-to-date, as well. The policy you purchased right after you got married might not be adequate anymore, especially if you have kids, a mortgage, and college expenses to consider. Business owners may also have business debt to consider. If your business is not incorporated, your family could be responsible for those bills if you die.

SINGLE AGAIN

If you and your spouse divorce, you'll have to decide what to do about your life insurance. Divorce raises both beneficiary issues and coverage issues. And if you have children, these issues become even more complex.

If you and your spouse have no children, it may be as simple as changing the beneficiary on your policy and adjusting your coverage to reflect your newly single status.

However, if you have kids, you'll want to make sure that they, and not your former spouse, are provided for in the event of your death. This may involve purchasing a new policy if your spouse owns the existing policy, or simply changing the beneficiary from your spouse to your children. The custodial and noncustodial parent will need to work out the details of this complicated situation. If you can't come to terms, the court will make the decisions for you.

YOU'RE RETIREMENT YEARS

Once you retire, and your priorities shift, your life insurance needs may change. If fewer people are depending on you financially, your mortgage and other debts have been repaid, and you have substantial financial assets, you may need less life insurance protection than before. But it's also possible that your need for life insurance will remain strong even after you retire. For example, the proceeds of a life insurance policy can be used to pay your final expenses or to replace any income lost to your spouse as a result of your death (e.g., from a pension or Social Security). Life insurance can be used to pay estate taxes or leave money to charity.

Check this out

When you change jobs, you need to decide what to do with the money in your 401(k) plan. Should you leave it where it is, or take it with you? Should you roll the money over into an IRA or into your new employer's retirement plan?

As you consider your options, keep in mind that one of the greatest advantages of a 401(k) plan is that it allows you to save for retirement on a tax-deferred basis. When changing jobs, it's essential to consider the continued tax-deferral of these retirement funds, and, if possible, to avoid current taxes and penalties that can eat into the amount of money you've saved.

TAKE THE MONEY AND RUN

When you leave your current employer, you can withdraw your 401(k) funds in a lump sum. To do this, simply instruct your 401(k) plan administrator to cut you a check.

Then you're free to do whatever you please with those funds. You can use them to meet expenses (e.g., medical bills, college tuition), put them toward a large purchase (e.g.,a home or car), or invest them elsewhere.

While cashing out is certainly tempting, it's almost never a good idea. Taking a lump sum distribution from your 401(k) can significantly reduce your retirement savings, and is generally not advisable unless you urgently need money and have no other alternatives. Not only will you miss out on the continued tax-deferral of your 401(k) funds, but you'll also face an immediate tax bite.

Working together, Ameriprise Financial Abney Associates Team will work to find investing opportunities in today's uncertain market that are aligned with your financial goals. Together, we can bring your dreams more within reach.

First, you'll have to pay federal (and possibly state) income tax on the money you withdraw (except for the amount of any after-tax contributions you've made). If the amount is large enough, you could even be pushed into a higher tax bracket for the year. If you're under age 59½, you'll generally have to pay a 10 percent premature distribution penalty tax in addition to regular income tax, unless you qualify for an exception. (For instance, you're generally exempt from this penalty if you're 55 or older when you leave your job.) And, because your employer is also required to withhold 20 percent of your distribution for federal taxes, the amount of cash you get may be significantly less than you expect.

Note: Because lump-sum distributions from 401(k) plans involve complex tax issues, especially for individuals born before 1936, consult a tax professional for more information.

Note: If your 401(k) plan allows Roth contributions, qualified distributions of your Roth contributions and earnings will be free from federal income tax. If you receive a nonqualified distribution from a Roth 401(k) account only the earnings (not your original Roth contributions) will be subject to income tax and potential early distribution penalties.

LEAVE THE FUNDS WHERE THEY ARE

One option when you change jobs is simply to leave the funds in your old employer's 401(k) plan where they will continue to grow tax deferred.

However, you may not always have this opportunity. If your vested 401(k) balance is $5,000 or less, your employer can require you to take your money out of the plan when you leave the company. (Your vested 401(k) balance consists of anything you've contributed to the plan, as well as any employer contributions you have the right to receive.)

TRANSFER THE FUNDS DIRECTLY TO YOUR NEW EMPLOYER'S RETIREMENT PLAN OR TO AN IRA (A DIRECT ROLLOVER)

Just as you can always withdraw the funds from your 401(k) when you leave your job, you can always roll over your 401(k) funds to your new employer's retirement plan if the new plan allows it. You can also roll over your funds to a traditional IRA. You can either transfer the funds to a traditional IRA that you already have, or open a new IRA to receive the funds. There's no dollar limit on how much 401(k) money you can transfer to an IRA.

You can also roll over ("convert") your non-Roth 401(k) money to a Roth IRA. The taxable portion of your distribution from the 401(k) plan will be included in your income at the time of the rollover.

If you've made Roth contributions to your 401(k) plan you can only roll those funds over into another Roth 401(k) plan or Roth 403(b) plan (if your new employer's plan accepts rollovers) or to a Roth IRA.

Note: In some cases, your old plan may mail you a check made payable to the trustee or custodian of your employer-sponsored retirement plan or IRA. If that happens, don't be concerned. This is still considered to be a direct rollover. Bring or mail the check to the institution acting as trustee or custodian of your retirement plan or IRA.

HAVE THE DISTRIBUTION CHECK MADE OUT TO YOU, THEN DEPOSIT THE FUNDS IN YOUR NEW EMPLOYER'S RETIREMENT PLAN OR IN AN IRA (AN INDIRECT ROLLOVER)

You can also roll over funds to an IRA or another employer-sponsored retirement plan (if that plan accepts rollover contributions) by having your 401(k) distribution check made out to you and depositing the funds to your new retirement savings vehicle yourself within 60 days. This is sometimes referred to as an indirect rollover.

However, think twice before choosing this option. Because you effectively have use of this money until you redeposit it, your 401(k) plan is required to withhold 20 percent for federal income taxes on the taxable portion of your distribution (you get credit for this withholding when you file your federal income tax return for the year). Unless you make up this 20 percent with out-of-pocket funds when you make your rollover deposit, the 20 percent withheld will be considered a taxable distribution, subject to regular income tax and generally a 10 percent premature distribution penalty (if you're under age 59½).

WHICH OPTION IS APPROPRIATE?

Assuming that your new employer offers a retirement plan that will accept rollover contributions, is it better to roll over your traditional 401(k) funds to the new plan or to a traditional IRA?

Each retirement savings vehicle has advantages and disadvantages. Here are some points to consider:

-A traditional IRA can offer almost unlimited investment options; a 401(k) plan limits you to the investment options offered by the plan

-A traditional IRA can be converted to a Roth IRA if you qualify

-A 401(k) may offer a higher level of protection from creditors

-A 401(k) may allow you to borrow against the value of your account, depending on plan rules

-A 401(k) offers more flexibility if you want to contribute to the plan in the future

Finally, no matter which option you choose, you may want to discuss your particular situation with a tax professional (as well as your plan administrator) before deciding what to do with the funds in your 401(k).