Inside: Keeping It Simple

S P R I N G 2 0 1 4

SMART PLANNING FOR A LASTING RETIREMENT

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It’s Spring Cleaning Time

Most people don’t have the time or patience to be hands-on managers of their retirement savings. That

can feel like a demanding task, especially if you have an account with a previous employer as well as at your current job, and own IRAs, savings and brokerage accounts at more than one fi nancial institution.

But it doesn’t have to be that hard. This year, consider simplifying your fi nancial life to save yourself time and money.

CONSOlIDaTE YOur aCCOuNTSConsolidating accounts helps you create and periodically adjust a sensible long-term asset mix and streamline your recordkeeping. And it's likely to reduce your maintenance charges and other fees.

auTOMaTE YOur TraNSaCTIONSTake advantage of direct deposit. It's safer and more convenient than receiving paper

checks that you must deposit at the bank and it provides faster access to your money.

PuT YOur SavINgSON auTOPIlOT Contributing to your workplace retirement plan through each paycheck is a great way to force yourself to save regularly. Boost your contribution rate to save even more, or, if you reach your plan's saving limit, ask your bank or your employer to have a set amount automatically transferred into an outside savings account.

PaY YOur BIllS ONlINE Most credit-card issuers and utilities make it easy to do this, and many banks now offer online bill-paying services. Paperless transactions save you time and reduce the risk you'll incur late-payment fees.

In this issue of Financial Dimensions, we discuss these and other ways to organize and simplify your fi nancial life.

Tidy Your RecordsToo many fi nancial statements can be overwhelming. Here's how to take control.

1. Divide fi nancial papers into three basic categories:

• Records to keep indefi nitely, like receipts for major purchases.

• Records to keep for seven years. These are the documents that support your tax returns, like receipts for business expenses and charitable contributions.

• Records you can discard almost immediately, such as ATM receipts after transactions are posted to your bank account, and paid utility bills.

2. Shred all monthly and quarterly fi nancial statements once the information is duplicated in a comprehensive year-end statement.

3. Go digital. Bank, mutual fund, brokerage and credit-card statements typically are accessible online. Download and save them on your computer instead of keeping paper records.

The value of reducing clutterin your retirement investing

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If you don't have time to create a workplace retirement account that fi ts your long-term goals and risk tolerance, consider investing in mutual funds that do a lot of the work for you. These funds can help you streamline your portfolio without sacrifi cing diversifi cation:

• Index funds. You can create a well-diversifi ed portfolio by combining just three basic indexes—one that replicates the U.S. bond market, one that tracks the U.S. stock market and one that mimics the international stock markets. This ensures you broad diversifi cation within each asset class. It’s up to you to periodically rebalance your portfolio to maintain or change your allocation.

• asset allocation funds. These are premixed portfolios of stocks and bonds. Each fund is designed to suit a different level of risk tolerance—typically “aggressive,” “moderate” or “conservative.” The funds are automatically rebalanced to maintain their original allocations. It’s up to you to switch to a more aggressive or conservative fund if your risk tolerance changes.

• Target-date funds. These are premixed portfolios that grow more conservative over time according to a predetermined schedule, or “glide path.” The glide path is typically pegged to a specifi c future date, but funds bearing the same date often have very different schedules for transitioning to a more conservative mix. It’s up to you to choose a glide path that fi ts your comfort level.

hands-Off Diversifi cationHow to create an easy-to-manage retirement investment plan Q. If I have savings in a former

employer’s retirement plan, does it make more sense to roll it into my new employer's plan or into an individual retirement account (IRA)?

a. There's no one-size-fi ts-all

answer. The decision depends

on the investments available in

your new employer's plan, how

its fees compare with those of an

IRA and even on how confi dent

an investor you are. The amount

you have to roll over may also be

a factor, since many mutual funds

require a $3,000 minimum initial

investment in an IRA.

The 401(k) plan’s investment

menu is chosen by your employer.

A good menu provides all the

basic asset classes (including

both domestic and international

investments), as well as the

types of funds that can simplify

your investment decisions, such

as index, target-date or asset

allocation funds.

An IRA offers virtually unlimited

investment choices and the

freedom to change investments

at any time. Some investors prefer

this unlimited freedom to a pre-

selected menu, while others fi nd

it overwhelming. If you opt to roll

over your 401(k) savings into an

IRA, ask your IRA institution to

handle the rollover for you in a

direct transfer from your former

employer's plan. This preserves

the account's tax-deferred status

and exempts the transfer from

tax-withholding requirements.

IRAs vs.Plan Rollovers

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Investing is often counterintuitive: what feels right is frequently the wrong move. As a result, people sometimes make investment decisions that can hurt their long-term returns.

TrYINg TO TIME ThE MarkETSIn a falling market, anxious investors often cash out and wait until the “right” time to reinvest. The typical result: They lock in losses, miss most of the recovery and reinvest at higher prices.

A wiser strategy is to invest steadily regardless of market ups and downs, periodically rebalancing—moving money from winning to underperforming

investments—to maintain your allocation. When you rebalance, you're buying low and selling high.

hOlDINg TOO MaNY INvESTMENTS Don't assume the more mutual funds you own, the more diversified you are. In reality, the opposite is true. The more funds you own, the likelier it is some of them duplicate each other. If you own several big-cap U.S. stock funds, for example, there's probably overlap among their top holdings. That means your portfolio may be much more concentrated than you realize.

Before buying a new investment, compare it with those you already own. Would this investment fill a hole in your portfolio or replicate an existing holding? If you already own a similar fund, you may want to choose between them rather than putting more eggs into the same basket.

SavINg TOO lITTlEIt's a mistake to focus only on investment performance, forgetting how much your nest egg's growth depends on your annual contributions. You can't control or predict which way the market will move, but you can keep adding to your account, boosting your savings every year as your salary increases.

avoid These Investing PitfallsThree ways you may be hurting your chances for investment success—and how to avoid them

Waiting around for a la Carte Cable?It’s not likely to happen anytime soon, analysts say

Do you hope that someday

you can pay only for the

cable TV stations you

actually watch? Don’t hold

your breath. A la carte

pricing won't happen in

the near future. Despite the

financial struggles facing

cable TV providers, industry

analysts say that it’s the

networks—such as Viacom

and Disney—that decide

how channels are priced.

Those networks have little

incentive to unbundle

channels when selling

them to cable providers.

The bottom line? The best

way for consumers to

reduce their cable bills is

still to buy a more-limited

plan or drop it altogether

and get a subscription

service like Netflix.

Adapted from “Why Cable TV Bills are Only Going Up,” MarketWatch.com, Dec. 11, 2013.

The Benefits of Dollar-Cost averagingInvesting a fixed amount at regular intervals

is a good way to protect yourself from the

dangers of market timing. This technique,

called dollar-cost averaging, makes it

mathematically certain that you'll buy

more shares when prices are low and fewer

shares when prices are high, although

this strategy doesn't assure a profit or

prevent losses. Here’s an example of

the benefits of buying stock shares as

prices fall:

January February March April May June

100 100

125142.9

133.3

166.7$5.00 $5.00

$4.00$3.50

$3.00$3.75

January February March April May JuneYour monthly investment: $500 Your total investment: $3,000Average share price: $4.04 ($24.25; 6 months) The average cost you paid per share: $3.91 ($3,000; 767.9 shares)

SharE PrICE SharES BOughT

IN SIghT

For bulk subscription sales please call Victoria Monsul at 212-597-5837 or email Victoria.Monsul@wsj.com.

Why FSAs Look More Attractive in 2014 Workers no longer lose savings if they don’t use them by December 31

If your employer offers a fl exible spending account (FSA) for health care and you don’t take advantage of it, you may want to reconsider. FSAs allow workers to save up to $2,500 of their pretax income annually for out-of-pocket medical expenses. But in past years, less than a quarter of eligible workers at large companies have used them, according to surveys by human resources consulting fi rm Mercer. The likely reason: Participants were required to use up their account balance by the end of the year or forfeit the remaining balance. A new government rule taking effect in 2014 allows workers to carry forward up to $500 of their FSA balance each year to the following year. Government offi cials hope that the change will reduce the need for unnecessary year-end spending by employees worried about losing their cash.

Adapted from “78% of Employees Miss Health-Care Tax Break,” MarketWatch.com, Nov. 25, 2013.

© 2014 Dow Jones & Company, Inc. Prepared by WSJ. Custom Content Studios, a service of Dow Jones & Company, Inc. All Rights Reserved.This newsletter is for informational purposes only. Everyone should evaluate his or her personal situation before taking any action. Please consult your own advisors for legal and tax information.

Adapted from “78% of Employees Miss Health-Care Tax Break,” MarketWatch.com, Nov. 25, 2013.

Test Your Knowledge of Retirement Planning

Multiple investment accounts can make retirement planning unnecessarily complicated.

1

It takes a lot of time and effort, and multiple investments, to create and maintain a well-diversifi ed retirement account.

2

It's prudent to cash out of stocks during a bear market and reinvest after the market has recovered.

3

Dollar-cost averaging is a good long-term strategy.

4

1. True. If you have several IRAs, more than one workplace retirement account and savings accounts at different fi nancial institutions, you may not be able to see the forest for the trees. Consolidating accounts shows you where you stand fi nancially and makes it easier to manage your retirement plan. 2. False. You can create a retirement plan that’s simple yet very effective with a single well-chosen asset allocation fund or target-date mutual fund, or as few as three index funds that replicate the U.S. stock and bond markets and the international stock markets. These funds are designed to make smart retirement planning easier for investors who don't want to be hands-on managers. 3. False. This strategy, called market timing, is usually self-defeating. People who try to time

the market typically sell their stocks at a loss and don’t reinvest until after the recovery, when prices have been rising for some time. As a result, market timers frequently sell low and buy high—a sure way to lose money. 4. True. Dollar-cost averaging helps take the emotion out of investing, which reduces the risk that you'll make counterproductive decisions. When you invest a predetermined amount on a regular schedule regardless of how the market is moving, you automatically buy more shares at low prices and fewer shares at high prices. Although this strategy doesn't assure a profi t or prevent losses, it helps protect you from two bear market risks: the danger that you'll sell at a loss when prices fall and the danger that you won't reinvest in time to benefi t from the market's resurgence.

Answers: