Leslie Roper Day &AssociatesLeslie Roper Day, CFP®, AIF®Financial Advisor950 Glenn DriveSuite 230Folsom, CA 95630916-984-1150Leslie@LeslieRoperDay.comwww.LeslieRoperDay.com

Fall 2016Quiz: Test Your Interest Rate Knowledge

How to Get a Bigger Social SecurityRetirement Benefit

Five Things to Know About InheritedIRAs

Cartoon: Money Monsters

Leslie Roper Day & AssociatesFocus On Your FinancesQuiz: Test Your Interest Rate Knowledge

See disclaimer on final page

Dear friends,

Congratulations are in order! Manyof you have met Landon in the officeover the last couple of years. It'stime for new business cards andletterhead because he is nowLandon Tymochko, CFP®. Landonhas completed all the requirementsand exams to become a CertifiedFinancial Planner® professional.Way to go, Landon!

Best wishes,Leslie

In December 2015, theFederal Reserve raised thefederal funds target rate to arange of 0.25% to 0.50%, thefirst rate increase from thenear-zero range where it hadlingered for seven years.Many economists viewed this

action as a positive sign that the Fed had finallydeemed the U.S. economy healthy enough towithstand slightly higher interest rates. Itremains to be seen how rate increases will playout for the remainder of 2016. In the meantime,try taking this short quiz to test your interestrate knowledge.

Quiz1. Bond prices tend to rise when interestrates rise.

a. True

b. False

2. Which of the following interest rates isdirectly controlled by the Federal ReserveOpen Market Committee?

a. Prime rate

b. Mortgage rates

c. Federal funds rate

d. All of the above

e. None of the above

3. The Federal Reserve typically raisesinterest rates to control inflation and lowersrates to help accelerate economic growth.

a. True

b. False

4. Rising interest rates could result in loweryields for investors who have money incash alternatives.

a. True

b. False

5. Stock market investors tend to lookunfavorably on increases in interest rates.

a. True

b. False

Answers1. b. False. Bond prices tend to fall wheninterest rates rise. However, longer-term bondsmay feel a greater impact than those withshorter maturities. That's because wheninterest rates are rising, bond investors may bereluctant to tie up their money for longerperiods if they anticipate higher yields in thefuture; and the longer a bond's term, the greaterthe risk that its yield may eventually besuperceded by that of newer bonds. (Theprincipal value of bonds may fluctuate withmarket conditions. Bonds redeemed prior tomaturity may be worth more or less than theiroriginal cost.)

2. c. Federal funds rate. This is the interestrate at which banks lend funds to each other(typically overnight) within the Federal ReserveSystem. Though the federal funds rate affectsother interest rates, the Fed does not havedirect control of consumer interest rates suchas mortgage rates.

3. a. True. Raising rates theoretically slowseconomic activity. As a result, the FederalReserve has historically raised interest rates tohelp dampen inflation. Conversely, the FederalReserve has lowered interest rates to helpstimulate a sluggish economy.

4. b. False. Rising interest rates could actuallybenefit investors who have money in cashalternatives. Savings accounts, CDs, andmoney market vehicles are all likely to providesomewhat higher income when interest ratesincrease. The downside, though, is that ifhigher interest rates are accompanied byinflation, cash alternatives may not be able tokeep pace with rising prices.

5. a. True. Higher borrowing costs can reducecorporate profits and reduce the amount ofincome that consumers have available forspending. However, even with higher rates, animproving economy can be good for investorsover the long term.

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How to Get a Bigger Social Security Retirement BenefitMany people decide to begin receiving earlySocial Security retirement benefits. In fact,according to the Social Security Administration,about 72% of retired workers receive benefitsprior to their full retirement age.1 But waitinglonger could significantly increase your monthlyretirement income, so weigh your optionscarefully before making a decision.

Timing countsYour monthly Social Security retirement benefitis based on your lifetime earnings. Your basebenefit--the amount you'll receive at fullretirement age--is calculated using a formulathat takes into account your 35 highestearnings years.

If you file for retirement benefits beforereaching full retirement age (66 to 67,depending on your birth year), your benefit willbe permanently reduced. For example, at age62, each benefit check will be 25% to 30% lessthan it would have been had you waited andclaimed your benefit at full retirement age (seetable).

Alternatively, if you postpone filing for benefitspast your full retirement age, you'll earndelayed retirement credits for each month youwait, up until age 70. Delayed retirement creditswill increase the amount you receive by about8% per year if you were born in 1943 or later.

The chart below shows how a monthly benefitof $1,800 at full retirement age (66) would beaffected if claimed as early as age 62 or as lateas age 70. This is a hypothetical example usedfor illustrative purposes only; your benefits andresults will vary.

Birth year Full retirementage

Percentagereduction atage 62

1943-1954 66 25%

1955 66 and 2months

25.83%

1956 66 and 4months

26.67%

1957 66 and 6months

27.50%

1958 66 and 8months

28.33%

1959 66 and 10months

29.17%

1960 or later 67 30%

Early or late?Should you begin receiving Social Securitybenefits early, or wait until full retirement age oreven longer? If you absolutely need the moneyright away, your decision is clear-cut;otherwise, there's no ''right" answer. But taketime to make an informed, well-reasoneddecision. Consider factors such as how muchretirement income you'll need, your lifeexpectancy, how your spouse or survivorsmight be affected, whether you plan to workafter you start receiving benefits, and how yourincome taxes might be affected.

Sign up for a my SocialSecurity account at ssa.govto view your online SocialSecurity Statement. Itcontains a detailed record ofyour earnings, as well asbenefit estimates and otherinformation about SocialSecurity.

1 Social SecurityAdministration, AnnualStatistical Supplement, 2015

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Five Things to Know About Inherited IRAsWhen an IRA owner dies, the IRA proceeds arepayable to the named beneficiary--or to theowner's estate if no beneficiary is named. Ifyou've been designated as the beneficiary of atraditional or Roth IRA, it's important that youunderstand the special rules that apply to"inherited IRAs."

It's not really "your" IRAAs an initial matter, while you do have certainrights, you are generally not the "owner" of aninherited IRA. The practical result of this fact isthat you can't mix inherited IRA funds with yourown IRA funds, and you can't make 60-dayrollovers to and from the inherited IRA. Youalso need to calculate the taxable portion of anypayment from the inherited IRA separately fromyour own IRAs, and you need to determine theamount of any required minimum distributions(RMDs) from the inherited IRA separately fromyour own IRAs.

But if you inherited the IRA from your spouse,you have special options. You can takeownership of the IRA funds by rolling them intoyour own IRA or into an eligible retirement planaccount. If you're the sole beneficiary, you canalso leave the funds in the inherited IRA andtreat it as your own IRA. In either case, the IRAwill be yours and no longer treated as aninherited IRA. As the new IRA owner (asopposed to beneficiary ), you won't need tobegin taking RMDs from a traditional IRA untilyou reach age 70½, and you won't need to takeRMDs from a Roth IRA during your lifetime atall. And as IRA owner, you can also name newbeneficiaries of your choice.

Required minimum distributionsAs beneficiary of an inherited IRA--traditional orRoth--you must begin taking RMDs after theowner's death.* In general, you must takepayments from the IRA annually, over your lifeexpectancy, starting no later than December 31of the year following the year the IRA ownerdied. But if you're a spousal beneficiary, youmay be able to delay payments until the yearthe IRA owner would have reached age 70½.

In some cases you may be able to satisfy theRMD rules by withdrawing the entire balance ofthe inherited IRA (in one or more payments) bythe fifth anniversary of the owner's death. Inalmost every situation, though, it makes senseto use the life expectancy method instead--tostretch payments out as long as possible andtake maximum advantage of the IRA'stax-deferral benefit.

You can always elect to receive more than therequired amount in any given year, but if youreceive less than the required amount you'll be

subject to a federal penalty tax equal to 50% ofthe difference between the required distributionand the amount actually distributed.

More stretching...What happens if you elect to take distributionsover your life expectancy but you die with fundsstill in the inherited IRA? This is where your IRAcustodial/trustee agreement becomes crucial.If, as is sometimes the case, your IRA languagedoesn't address what happens when you die,then the IRA balance is typically paid to yourestate--ending the IRA tax deferral.

Many IRA providers, though, allow you to namea successor beneficiary. In this case, when youdie, your successor beneficiary "steps into yourshoes" and can continue to take RMDs overyour remaining distribution schedule.

Federal income taxesDistributions from inherited IRAs are subject tofederal income taxes, except for any Roth ornondeductible contributions the owner made.But distributions are never subject to the 10%early distribution penalty, even if you haven'tyet reached age 59½. (This is one reason whya surviving spouse may decide to remain asbeneficiary rather than taking ownership of aninherited IRA.)

When you take a distribution from an inheritedRoth IRA, the owner's nontaxable Rothcontributions are deemed to come out first,followed by any earnings. Earnings are alsotax-free if made after a five-calendar-yearholding period, starting with the year the IRAowner first contributed to any Roth IRA. Forexample, if the IRA owner first contributed to aRoth IRA in 2014 and died in 2016, anyearnings distributed from the IRA after 2018 willbe tax-free.

Creditor protectionTraditional and Roth IRAs are protected underfederal law if you declare bankruptcy. The IRAbankruptcy exemption was originally aninflation-adjusted $1 million, which has sincegrown to $1,283,025. Unfortunately, the U.S.Supreme Court has ruled that inherited IRAsare not covered by this exemption. (If youinherit an IRA from your spouse and treat thatIRA as your own, it's possible that the IRA won'tbe considered an inherited IRA for bankruptcypurposes, but this was not specificallyaddressed by the Court.) This means that yourinherited IRA won't receive any protectionunder federal law if you declare bankruptcy.However, the laws of your particular state maystill protect those assets, in full or in part, andmay provide protection from creditors outside ofbankruptcy as well.

You are generally not the"owner" of an inherited IRA.The practical result of thisfact is that you can't mixinherited IRA funds withyour own IRA funds, andyou can't make 60-dayrollovers to and from theinherited IRA. Spousalbeneficiaries, however, maybe able to assume actualownership of an inheritedIRA.

*If the traditional IRA ownerdied after age 70-1/2 and didnot take an RMD for theyear of his or her death, youmust also withdraw anyremaining RMD amount forthat year.

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Leslie Roper Day &AssociatesLeslie Roper Day, CFP®, AIF®Financial Advisor950 Glenn DriveSuite 230Folsom, CA 95630916-984-1150Leslie@LeslieRoperDay.comwww.LeslieRoperDay.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016

Leslie Roper Day is a RegisteredRepresentative and InvestmentAdviser Representative with/andoffers securities and advisoryservices through CommonwealthFinancial Network, MemberFINRA/SIPC, a RegisteredInvestment Adviser. Fixedinsurance products and servicesoffered by Leslie Roper Day &Associates. Leslie Roper Day &Associates does not provide legalor tax advice. You should consult alegal or tax professional regardingyour individual situation. CAInsurance License #0808285

Can I make charitable contributions from my IRA in2016?Yes, if you qualify. The lawauthorizing qualified charitabledistributions, or QCDs, hasrecently been made

permanent by the Protecting Americans fromTax Hikes (PATH) Act of 2015.

You simply instruct your IRA trustee to make adistribution directly from your IRA (other than aSEP or SIMPLE) to a qualified charity. Youmust be 70½ or older, and the distribution mustbe one that would otherwise be taxable to you.You can exclude up to $100,000 of QCDs fromyour gross income in 2016. And if you file ajoint return, your spouse (if 70½ or older) canexclude an additional $100,000 of QCDs. Butyou can't also deduct these QCDs as acharitable contribution on your federal incometax return--that would be double dipping.

QCDs count toward satisfying any requiredminimum distributions (RMDs) that you wouldotherwise have to take from your IRA in 2016,just as if you had received an actual distributionfrom the plan. However, distributions (includingRMDs) that you actually receive from your IRAand subsequently transfer to a charity cannotqualify as QCDs.

For example, assume that your RMD for 2016is $25,000. In June 2016, you make a $15,000QCD to Qualified Charity A. You exclude the$15,000 QCD from your 2016 gross income.Your $15,000 QCD satisfies $15,000 of your$25,000 RMD. You'll need to withdraw another$10,000 (or make an additional QCD) byDecember 31, 2016, to avoid a penalty.

You could instead take a distribution from yourIRA and then donate the proceeds to a charityyourself, but this would be a bit morecumbersome and possibly more expensive.You'd include the distribution in gross incomeand then take a corresponding income taxdeduction for the charitable contribution. Butthe additional tax from the distribution may bemore than the charitable deduction due to IRSlimits. QCDs avoid all this by providing anexclusion from income for the amount paiddirectly from your IRA to the charity--you don'treport the IRA distribution in your gross income,and you don't take a deduction for the QCD.The exclusion from gross income for QCDsalso provides a tax-effective way for taxpayerswho don't itemize deductions to makecharitable contributions.

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