SEPTEmBER 2015

U P D A T E

Tax-Efficient Investing Strategies

Using strategies that defer the payment of taxes for as long as possiblecan make a substantial difference in your portfolio’s ultimate size.

Consider the following tax-efficient strategies:

4minimize portfolio turnover. Carefully evaluate your investmentchoices, selecting those you’ll be comfortable owning for years.

That way, you can let any realized capital gains grow for many years.

4Place investments that generate ordinary income or that you

want to trade frequently in your tax-deferred accounts. Sinceincome and realized capital gains inside tax-deferred accounts aren’t taxeduntil withdrawn, you defer paying taxes on that income. Keep in mindthat withdrawals may be subject to a 10% federal penalty if made prior toage 591⁄2.

4Analyze the tax consequences before rebalancing your portfolio.

Portfolio rebalancing is a taxable event that may result in a taxablegain or loss. You should generally avoid selling investments for reasonsother than poor performance. You can bring your asset allocation back inline through other means.

4Utilize losses to offset capital gains. Selling investments at a losscan offset capital gains for that year, reducing your total tax liabili-

ty. Excess losses may be used to offset up to $3,000 of ordinary incomeand the unused portion may be carried forward indefinitely. If you stillwant to own that investment, you can purchase it 30 days before or afterselling it. That way, you will not be subject to the wash sale rules, so yourloss will be tax deductible. 444

Tax Planning Through Your Life

Tax planning involves makingstrategic decisions through-out the year that will help

you minimize taxes both in the com-ing April and perhaps many years inthe future. Here are some key taxplanning issues you may facethroughout your life.

In Your 20s

You’re just getting started build-ing your life and career, and there’s a good chance your taxes are a bitmore complicated than when youwere in school. Specific tax planningsteps you may want to take in your20s include:

4Contribute money to a tax-deferred retirement account,

like a 401(k) plan or IRA.

4Keep track of student loan payments, if you have them. If

your income falls below certain lim-its, you may be able to deduct theinterest even if you don’t itemize.

4Save receipts and other recordsif you move for a new job,

since expenses related to a move youmake for work can be deducted evenif you don’t itemize.

4Check your withholding. Ifyou’re getting a big refund at

tax time, you may need to tweakhow much is being withheld fromyour paycheck, so that you’re notgiving an interest-free loan to thegovernment.

Finally, make sure you’re

Continued on page 2

FR2015-0409-0064

FROm THE DESK OF THE LEV GROUP

JUDITH WILKENS LEVSenior Vice PresidentInvestment Management Consultant Financial Advisor

COREY D. LEV, CFP®, CRPC®

First Vice PresidentFinancial Planning SpecialistFinancial Advisor

855 Franklin AvenueGarden City, New York 11530516-227-2899 800-645-8600516-248-8630 Faxjudy.w.lev@morganstanley.comcorey.d.lev@morganstanley.com

U P D A T E

Tax Planningcontinued from page 1

keeping all your key financial docu-ments organized. Find a secure placeto store everything, and get essentialdocuments from your parents if theystill have them,

In Your 30s

Your finances are probably getting more complicated as youincrease your savings and completemajor financial goals like buying ahouse. These tips will help you keepthings on track:

4Keep saving for retirement intax-deferred accounts, but also

look into accounts that will generatetax-free income in retirement, like aRoth IRA or Roth 401(k) plan. Yes,you’ll pay more in taxes now, butyou’ll be happy to have a tax-freeoption for income once you stopworking.

4Getting married or having chil-dren? Set up a meeting with a

tax advisor or financial advisor (orboth together) to make sure you’remaking tax-smart financial decisions,like itemizing or not itemizing yourreturn. An advisor can also talk toyou about setting up a 529 plan tohelp pay for your children’s futurecollege educations.

4The government has plenty ofcredits and deductions for peo-

ple with children, like the child taxcredit, the child and dependent carecredit, and the adoption credit. Knowwhat you do — and don’t — qualifyfor.

4Take advantage of flexiblespending plans and reimburse-

ment accounts. Between you, yourspouse, and your children, you maybe spending a lot of money on co-pays, prescription drugs, dental, andmore. Save a bit of cash by using

money in a tax-free flexible spendingaccount for these costs.

In Your 40s

You’re hitting your financialstride. Don’t let any bumps in theroad derail your financial plans:

4Incomes tend to hit their peakwhen people hit their 40s.

That’s good news, but it also meansthat you may find yourself in a high-er tax bracket. If that happens, lookfor ways to reduce your taxableincome, like maximizing deductibleretirement contributions.

4You may be making moremoney than in past years,

which could mean that you’re readyto upgrade your charitable giving.Make sure you’re keeping track ofany gifts you make to eligible chari-ties, whether they are in cash, stock,or in-kind gifts, since you’ll need thatdocumentation if you plan to deductthem on your tax return.

4If your children are headed offto college, don’t neglect tax

credits for education, like the lifetimelearning credit and the Americanopportunity tax credit.

4Some parents may draw moneyfrom taxable investment

accounts to pay for college or otherexpenses. If you’re tapping that cash,be aware of the tax implications ofselling appreciated securities. It maybe well worth it to meet with an advi-sor before you make any big moves.

In Your 50s

As you hit the mid-century mark,keep doing what you can to reducethe taxes you owe and save as muchas you can for retirement.

4Don’t forget about catch-up contributions to IRAs and

401(k) plans. You can contribute anextra $6,000 to a 401(k) plan and anextra $1,000 to an IRA once you hit age 50.

4Start thinking about health-careexpenses in retirement, if

you haven’t already. Putting somemoney into a tax-free health savingsaccount is a way to reduce your taxable income today and have a tax-free fund to draw on for healthexpenses later in life.

4Selling the family home? Don’tneglect to consider the potential

tax implications.

4If you’ve earned stock optionsor other perks through your

employer, make sure you understandthe tax implications of a cash-out.

In Your 60s

Retirement is on the horizon. Thetax planning decisions you make inthis decade will be crucial to youroverall retirement success.

4Understand how your SocialSecurity benefits will be taxed.

Up to 85% of your total benefit maybe taxed, depending on how muchother income you have.

4Consider converting a tradi-tional IRA to a Roth IRA. Some

people may benefit from paying thetaxes on the conversion now for thepromise of tax-free income later on.For those who are not eligible for traditional or Roth IRAs, considercontributing to a nondeductible IRA.As of 2011, all taxpayers, regardlessof income level, can convert tradi-tional IRAs to Roth IRAs.

4Check your options beforeretiring. The choices you make

regarding distributions from yourpension plans and IRAs will have asignificant impact on your tax situa-tion after retirement. Make sure youreview all your options before decid-ing how to withdraw those funds.

Please call if you’d like to discuss your tax situation in moredetail. 444

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U P D A T E

Easing into Retirement

For most of your working life,you’ve looked forward to theday when you can quit your

job and start enjoying retirement.But in recent years, talk of longer lifeexpectancies, uncertain Social Secu-rity benefits, declining pension bene-fits, unknown inflation rates, and lowretirement savings have made retir-ing at a relatively young age seemdifficult. More and more people arecoming to the conclusion that eitherretiring later or continuing to workduring retirement is necessary toensure that they remain financiallycomfortable for the rest of their lives.

Working doesn’t necessarilymean you have to stay with your cur-rent employer. Rather, many individ-uals are taking on totally differentjobs that can allow them to try some-thing new, provide more free time byworking less, or ensure less stress.Besides the nonfinancial reasons forworking, there are several financialreasons that make this an importantretirement strategy:

4You have more time to save.

Each additional year you workis an additional year you can contin-ue to save for retirement.

4You shorten your retirement

period. The longer you work,the less time you’ll spend in retire-ment, which means you’ll need lessmoney to fund that retirement.

4You can delay Social Security

benefits. Each additional yearyou wait to take Social Security benefits, up to age 70, will perma-nently increase your monthly benefit.

4You keep health insurance

benefits. One of the most sig-nificant costs in retirement is healthcare, and you can delay that cost byworking at a job that provides thisbenefit.

Some companies are helpingemployees with retirement issues byallowing phased retirement, in whichhours are gradually reduced until fullretirement. If your employer offers aphased retirement program, find outthese details before signing up:

4How will phased retirement

affect your benefits? Manypension benefits are calculated basedon your earnings in the last few yearsof your working career. If you don’twant to take pension benefits yet,make sure your pension will be cal-culated using earnings while youworked full-time. You may also beable to draw a pension and work part-time.

4What will happen to your

salary with reduced hours?

Will you receive a pro-rata share ofyour pay or will a different pay scalebe used? Will you be entitled to payincreases in the future? Make sureyou agree on how you will be paidbefore moving to part-time status.

4Will you be eligible for health

insurance benefits? Find outthe company’s policy regardinghealth insurance benefits for part-time workers. This will be especial-ly important if you move to part-timestatus before age 65, since you won’tbe eligible for Medicare.

4What other details should you

investigate? Make sure there

is a mutual understanding about your hours. Can you take time off to travel? Is this a permanent or short-term arrangement? If you don’t likepart-time work, can you go back toyour full-time job?

If your employer doesn’t offer aphased retirement program or youwant to try something new, investi-gate your options before quittingyour job. Some factors to considerinclude:

4How do you plan to spend yourretirement? If you plan to

travel a lot, how will work fit intothat schedule? If you plan to splityour time between two homes in two locations, how will you be ableto work?

4What interests you? Would yoube happier pursuing a job that

takes advantage of skills from yourcurrent job, or would you like to trysomething totally different? Do youneed to obtain additional skills or goback to school?

4Do you want a job with signifi-cant responsibility, or are you

trying to reduce the stress in yourlife?

4Are you passionate about aninterest or hobby that you may

be able to turn into a business? Doyou want to start your own business?If so, do you have the financialresources, without risking funds foryour retirement?

4Is there a cause that is impor-tant to you? Is it time to move

to the nonprofit sector, finding anopportunity that matters to you on apersonal level?

If you’d like to discuss work andits role in your retirement, pleasecall. 444

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U P D A T E

Control Your Spending

If you’re trying to increase savings, remember that sav-ings are directly tied to spending — the less you spend,the more you have to save. Some tips to help you

clamp down on your spending include:

4Analyze your spending for a month. Give seriousthought to your purchasing patterns, looking for ways

to reduce spending.

4Go over major expenditures also. When was the lasttime you comparison shopped your auto or homeown-

ers insurance? Have you checked mortgage rates lately tosee if you should refinance? Have you reviewed strategiesto reduce your income taxes?

4Make a spending plan and put it in writing. Budgetfor all major expenditures and resolve not to purchase

items that aren’t in your budget.

4Throw out your credit cards (or at least hide them fora while). Most people find it more difficult to spend

cash than to charge a purchase.

4Don’t purchase items over a fairly low dollar amountuntil your second shopping trip.

4Think carefully before making major purchases.Often, upkeep and maintenance will add to your costs.

4Figure out the maximum amount you can afford for ahouse and then buy one substantially less expensive

than that. Not only will you save on your mortgage pay-ment, other costs associated with owning a home will belower. Living well within your means is one of the bestways to ensure you have money for saving. 444

MarketDataMONTH END % CHANGE

STOCKS: JUL 15 JUN 15 MAY 15 YTD 12 MON.Dow Jones Ind. 17689.86 17619.51 18010.68 -0.7% 6.8%S&P 500 2103.84 2063.11 2107.39 2.2 9.0Nasdaq Comp. 5128.28 4986.87 5070.03 8.3 17.4Wilshire 5000 21965.00 21630.90 22043.01 2.5 9.1PRECIOUS METALS:Gold 1098.40 1171.00 1191.40 -8.4 -14.5Silver 14.83 15.72 16.73 -5.8 -27.7INTEREST RATES: JUL 15 JUN 15 MAY 15 DEC 14 JUL 14Prime rate 3.25 3.25 3.25 3.25 3.25Money market rate 0.33 0.34 0.36 0.43 0.403-month T-bill rate 0.05 0.02 0.02 0.04 0.0320-year T-bond rate 2.73 2.81 2.75 2.47 3.06Dow Jones Corp. 3.31 3.25 2.98 3.08 2.81Bond Buyer Muni 4.40 4.47 4.41 4.31 4.53Sources: Barron’s, Wall Street Journal. An investor may not invest directly in an index.

FR2015-0409-0064

This newsletter was produced by Integrated Concepts Group, Inc. on behalf of Morgan Stanley Financial Advisors Judith Wilkens Lev and Corey D. Lev, CFP®. The opinions expressed in

this newsletter are solely those of the author and do not necessarily reflect those of Morgan Stanley. Morgan Stanley can offer no assurance as to its accuracy or completeness and the giving

of the same is not deemed an offer or solicitation on Morgan Stanley’s part with respect to the sale or purchase of any securities or commodities.

Tax laws are complex and subject to change. This information is based on current federal tax laws in effect at the time this was written. Morgan Stanley Smith Barney LLC (“Morgan

Stanley”), its affiliates, and Morgan Stanley Financial Advisors do not provide tax or legal advice. Individuals should consult their personal tax advisor for matters involving taxation and tax

planning and their attorney for matters involving personal trusts, estate planning, and other legal matters.

Investments and services offered by Morgan Stanley Smith Barney LLC, Member SIPC. 2015-PS-59

THE LEV GROUP AT mORGAN STANLEY WEALTH mANAGEmENT

855 Franklin Avenue

Garden City, New York 11530