Mindfulness. and investing. Tradeoffs quiz. Weather the year-end tax season. November 2016

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1 Previous issues Are you finding the right balance between today s needs and tomorrow s goals? > Test your knowledge Mindfulness and Weather the year-end tax season These strategies could impact your income well beyond > Find out how Find out why leading experts in the financial industry have adopted mindfulness training to improve their decision making skills and how it could help you too. > Watch video

2 Some of the most common traps can be avoided by adopting the practice of mindfulness. Improved decision making is just one of the many benefits. Watch our video to find out how it works. See last page for important information

3 TradeoffsQuiz Are you making the tradeoffs needed to maintain your lifestyle? Take our quick quiz to find out. Question 1 What percentage of Baby Boomers plan to leave a significant inheritance to their heirs? A. About 25% B. About 50% C. About 65% See answer Question 2 Imagine you re in the market for a new home and decide to purchase a modest house instead of a larger family home. The difference between the two mortgages is $400 a month. If you invest this savings over the life of your 30-year mortgage, how much more do you expect to save for retirement, assuming 5% annual interest? A. Not much: about $50,000 B. Quite a bit: about $100,000 C. A great deal: about $330,000 See answer *Source: Ameriprise Financial Tradeoffs study, March

4 Answers to Tradeoffs Quiz questions 1 and 2 Answer: A About 25% Only 27% of Boomers say they often think about how much money they ll leave to others (significantly less than other generations), and 62% say they don t worry much about how much money they will leave to others. This may come as a shock to their Millennial children 31% of whom expect to receive an inheritance averaging $356,000. * Answer: C About $330,000 If you re willing to make significant tradeoffs to fund your retirement, then you re much more likely to retire comfortably. That s especially true if you re young and can depend on the power of compound interest. In a 2014 study commissioned by Ameriprise Financial, 24% of respondents said that they had spent less on their mortgage or rent in order to save more for the future. * This does not represent any specific investment or guaranteed rate of return.

5 Question 3 What percentage of new businesses are started by people age 55 64? A. About 10% B. About 23% C. About 50% Question 4 Making small lifestyle changes over time can substantially add to your savings account. In a recent Ameriprise survey, what was the most-cited expense that Baby Boomers, Gen Xers and Millennials all cut back on in order to save? A. Buying new clothes each season B. Taking vacations C. Eating out at restaurants See answer See answer How did you compare? Whether you re a retirement expert or just beginning to understand this complex topic, there s always more to learn. Your advisor can help you balance today s needs with tomorrow s goals. *Source: Ameriprise Financial Tradeoffs study, March

6 Answers to Tradeoffs Quiz questions 3 and 4 Answer: B About 23% As they near traditional retirement age, many Americans are starting their own businesses. In 2013, 23% of all new businesses were formed by people between the ages of 55 and 64, according to Chris Farrell, author of Unretirement. If you have a strong financial foundation, great professional skills and contacts and less responsibility for children you may be in a great position to start a business as you approach traditional retirement age, says Mike Greene, Senior Vice President of Financial Advice at Ameriprise. Just make sure you work with your financial advisor and a lawyer about how to set up your business without taking unnecessary risks. Answer: C Eating out at restaurants While Boomers and Millennials might not have a ton in common, one bond that ties them is their simple saving strategy. According to a recent survey conducted by Ameriprise, eating out less often was the most common way all American generations cut their living costs: 51% of Boomers say they consciously spend less on eating out, while 70% of Gen Xers and 79% of Millennials employed this tactic to save money. *

7 Weather the year-end 3 Tax planning strategies to consider during the busiest time of year. While you may think of year-end tax moves in terms of reducing your tax bill next April, some strategies can make a difference much further down the road by reducing estate taxes or addressing education costs. With 2016 s market volatility, tax moves that can help you offset gains or mitigate losses may be even more relevant this year. Meeting with your financial advisor, sooner rather than later, can help you lay the groundwork for conversations with your tax planner. Next page: Make the most of losses Here are three basic principles to keep in mind while you prepare:

8 Harvest Depending on your federal income tax bracket, consider harvesting capital gains or losses to optimize your overall tax liability. Those who will remain in a lower tax bracket of 10% 15% can consider harvesting long-term capital gains, which can be taxed at a rate as low as 0%. Those in a higher tax bracket, such as 25% 39.6% can consider harvesting losses to offset capital gains and then up to $3,000 of ordinary income. Your financial advisor and tax planner can help you determine whether harvesting is right for your individual situation and how to best take advantage of this strategy. Good to know: Unused deductible losses may be eligible to be carried over into following years until the full amount is accounted for. Invest A 529 plan is a great way to help future college students fund an education. But did you know that it s also possible to use one for yourself? Whether it s for taking classes to further your career or pursuing higher learning as a retiree, a 529 plan can help cover higher education costs via tax-free growth and withdrawals. Good to know: You can jump-start a 529 plan by contributing up to the annual gift tax exclusion in December then front-loading the plan for the next five years beginning in January 2017, giving your investment more time to grow. The annual gift tax exclusion in 2016 is $14,000 for single contributors ($70,000 front-loading limit) and $28,000 for couples ($140,000 front-loading limit). Special rules apply. Next page: Consider giving gifts

9 Give In addition to your gifts to charitable organizations, consider sharing with loved ones to substantially lower your taxable estate over time. Stay within the federal 2016 annual limits of $28,000 per recipient for couples and $14,000 per recipient for individuals, and you can avoid paying gift tax or using any of your lifetime exclusion. Good to know: These amounts are per recipient, which means you can make gifts to as many people as you like by year end, and as long as total gifts to the recipient for the year are within the stated limits, you can avoid gift tax consequences. Extra tax savings that are age dependent Older than 70 ½? Reduce your taxable income by contributing some or all of your IRA required minimum distribution (RMD) directly to charity by the end of December through a qualified charitable distribution (QCD). Thanks to a federal law signed in December 2015, the rule allowing a QCD to count toward satisfying your RMD has been made permanent. You will not have to pay income taxes on it, provided certain conditions are met. Talk to your advisor about other strategies to reduce your taxable income while boosting your retirement income. Depending on timing, you may still be able to max out your 401(k) ($18,000), traditional IRA ($5,500) or Roth IRA ($5,500). Those over age 50 may also want to make catch-up contributions ($6,000 for a 401(k) and $1,000 for an IRA). See last page for important information

10 * The Financial Trade-Offs study was created by Ameriprise Financial utilizing survey responses from 3,002 employed Americans with access to an employer sponsored retirement plan (or with a spouse that has access to an employer sponsored plan) ages who are primary financial decision makers or share in financial decisions in their household. All respondents ages have investable assets of at least $25,000 while those over 50 have at least $250,000 (including employer retirement plans, but not real estate). The survey was commissioned by Ameriprise Financial, Inc. and conducted via online interviews by Koski Research from November 25 December 16, These articles are provided only as a general source of information and are not intended to be used as a primary basis for investment decisions, nor should they be construed as advice designed to meet the particular needs of an individual investor. Investment decisions should always be made based on an investor s specific financial needs, objectives, goals, time horizon and risk tolerance. Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. Ameriprise Financial and its representatives do not provide tax advice. Consult with your attorney or tax advisor regarding specific tax issues. Please refer to the Ameriprise Financial Internet Privacy Statement for our internet privacy policies. Ameriprise Financial Services, Inc. Member FINRA and SIPC Ameriprise Financial, Inc. All rights reserved.