Smart MoneyInsights

October 2012 Vol. No. 1 Investment Updates

Personal Note from Steve Stanganelli

Fall is in the air.

Soon the elections will be behindus and the holidays will becoming on fast.

If you feel unnerved by potentialeconomic or political events orthere's been a recent life-changing event in your family,then arrange some time to getyour financial plans on track andprepared for the changes ahead.

I want to help you make sense ofyour money.

Please call me and we can set upa time for a no pressure chat toexplore the ways that we may beable to work together.

Let’s make a plan together toimprove your bottom line.

Should Your Asset Allocation BeMore Tactical?

The market downturn of 2008-2009 was hard for allinvestors, especially retirees, many of whomquestioned their game plan amid huge losses. Investorsquestioned the value of long-term strategic assetallocation, in particular the buy-and-hold strategy.Many investors also began thinking about being moretactical. Market volatility tests buy-and-hold investorsand in many cases increases the appeal of tactical assetallocation.

Tactical asset allocation is an active portfoliomanagement strategy by which portfolio compositionand weighting are altered in the short-term to takeadvantage of perceived differences in relative values ofvarious asset classes. While tactical asset allocationmay look appealing on the surface, it is best left toinvestors who understand its complexity. Otherwise,this strategy could leave investors stuck with an assetallocation that may be unsuitable for their goals, risk,and liquidity requirements. It is also important to keep

in mind that active trading increases both taxes andtransaction costs.

The bottom line: Pick a strategic portfolio plan withan appropriate asset allocation for your time horizon.Your individual portfolio should address both yourimmediate and intermediate needs. With the rightplan in place, your portfolio will be better equipped tohandle volatility, allowing time to smooth out thechoppy returns.

There is no guarantee that strategic or tactical assetallocation will protect against market risk. Theseinvestment strategies do not ensure a profit or protectagainst loss in a declining market. Please keep in mindthat diversification does not eliminate the risk ofexperiencing investment losses. Please consult with afinancial professional for advice specific to yoursituation.

Steve Stanganelli, MSF, CFP®Fee Only Planner & Tax Coach

steve@clearviewwealthadvisors.com978-388-0020www.ClearViewWealthAdvisors.com

Clear View Wealth Advisors LLC Investment Updates October 2012 2

Retirement Investing Q&A

Q: Under current law, at what age can you beginreceiving Social Security benefits?

A: The earliest age at which you can begin receivingSocial Security benefits is 62. However, you willreceive a reduced benefit if you retire before your fullretirement age.

Q: What are some big mistakes that people makeconcerning their retirement?

A: Not contributing to an IRA, a 401(k), or both isprobably the single biggest mistake that is made. 45%of current retirees utilize their personal savings forretirement income; 62% of current workers anticipatepersonal savings to play a role during retirement.

Q: What is the maximum contribution to IRAs (bothregular and Roth) and 401(k) plans in 2012?

A: If you are age 49 or younger, the maximumcontribution is $5,000 for both regular and RothIRAs, and $17,000 for a 401(k) plan. If you are age 50or more, the maximum contribution is $6,000 for bothregular and Roth IRAs, and $22,500 for a 401(k) plan.

Q: Are distributions (payouts) taxed on regular IRAs,Roth IRAs, and 401(k)s?

A: The short answer is that if you got a tax break onthe contribution, you will pay taxes on the subsequentdistribution. Contributions to regular IRAs and401(k)s are generally made with pre-tax dollars (pre-tax contributions reduce your taxable income for theyear in which they are made), so distributions aretaxed. Roth IRA contributions, however, are madewith after-tax dollars, so distributions are generally nottaxed.

Q: At what age can you generally begin takingdistributions from an IRA or 401(k)?

A: You can begin taking distributions from yourregular IRA, Roth IRA, or 401(k) plan at age 59 ½.

Q: Can you roll your 401(k) over into an IRA?

A: Yes. You can move 401(k) balances into a “rollover”IRA account without penalty. This option enables youto keep your money tax deferred, and can potentiallyincrease your investment options, as IRAs are self-directed and 401(k) plans have investment optionsthat are decided by the plan administrator.

Q: How can I begin saving for retirement?

A: Little changes can make huge differences. Forinstance, have a regular coffee ($1.75) instead of a latte($3.50) every morning before work. Invest the savingseach month ($1.75 X 22 workdays = $38.50), and youcould end up with quite a hill of beans!

Sources: Employee Benefit Research Institute, 2012Retirement Confidence Survey.

Clear View Wealth Advisors LLC Investment Updates October 2012 3

Risk Calibration for Retiree Portfolios

Managing risk during retirement has changed a lotduring the past few decades. In the past, retireesenjoyed the luxury of much higher interest rates aswell as pensions, which meant they could lower theirequity holdings during retirement. For today's retirees,however, staying invested in low-return assets is aluxury they may not be able to afford. Instead, theyshould keep their eyes on the following risks.

Longevity: Longevity risk is the risk of outliving yourassets. Given a long portfolio life span, retirees needmore growth from their portfolios than cash andbonds can afford. Holding stocks is important forgrowth; however, the question remains: what’s theright amount? In addition to considering a higherequity weighting, pre-retirees and retirees can alsoconsider options such as deferring Social Security,working longer or part-time, and decreasing in-retirement spending, particularly after marketdownturns.

Long-Term Care: A year in a private room in anursing facility now averages $78,000, according to aGenworth survey*, and long-term care in urbansettings can be far more costly than that. If you areconcerned that long-term care could eat away yourretirement nest egg, you may want to considerpurchasing a long-term care insurance policy. Thesepolicies are pricey, particularly if you buy one with aninflation component and/or if you're over 65, but theycan provide invaluable peace of mind, too.

Inflation: Retirees living off of their investments don'treceive cost-of-living adjustments (except for theirSocial Security and possibly their pension income), soinflation can readily translate into decliningpurchasing power and a reduced standard of living.Treasury Inflation-Protected Securities (TIPS) are themost direct way to hedge against an unexpectedincrease in inflation, providing an adjustment to aninvestor's principal to keep pace with inflation. Stocksare another, indirect way to guard your portfolioagainst the threat of inflation. They have the potentialfor higher returns than bonds, and inflation will take asmaller bite out of your future purchasing power.Owning companies with a demonstrated history ofdividend growth is another way to help offset the

effects of inflation on your portfolio.

Higher Taxes: Massive government spending andunfunded liabilities could translate into higher taxesacross the board. Investors may be able to reduce taxliabilities by including tax-loss selling, Rothconversions, and municipal bonds. Roth 401(k)s andIRAs are also good options for tax-conscious investorsseeking at least some tax-free treatment of theirretirement assets.

*Report cited: “Genworth 2012 Cost of Care Survey,Home Care Providers, Adult Day Health CareFacilities, Assisted Living Facilities and NursingHomes,” April 2012.

Diversification does not eliminte the risk ofexperiencing investment losses. Government bonds areguaranteed by the full faith and credit of the U.S.government as to the timely payment of principal andinterest, while stocks are not guaranteed and have beenmore volatile than other asset classes. Dividends arenot guaranteed and are paid solely at a company’sdiscretion. Municipal bonds may be subject to thealternative minimum tax (AMT) and state or localtaxes, and federal taxes would apply to any capitalgains distributions. TIPS are subject to risks whichinclude, but are not limited to, liquidity risk, creditrisk, income risk, and interest-rate risk. Funds in atraditional IRA grow tax-deferred and are taxed atordinary income tax rates when withdrawn.Contributions to a Roth IRA are not tax-deductible,but funds grow tax-free, and can be withdrawn tax freeif assets are held for five years. A 10% federal taxpenalty may apply for withdrawals prior to age 59 1/2.Please consult with a financial or tax professional foradvice specific to your situation. Insurance guaranteesare based on the claims paying ability of the insurancecompany.

Clear View Wealth Advisors LLC Investment Updates October 2012 4

10 Minutes to a Better Retirement:New Planning Tools

We all lead very busy lives. Finding time to getthrough the daily commute and all life's priorities onthe work and home fronts can sometimes bechallenging - overwhelming sometimes. But every nowand then you need to stop, take a deep breath andassess where you are in order to get to where you'regoing.

This is why Clear View Wealth Advisors has addedtwo new online Do-It-Yourself tools to help youdetermine if you are on track for your goals.

YOUR PERSONAL ROAD MAP andDASHBOARD: Go towww.ClearViewWealthAdvisors.com and click on theStarter Road Map icon. You'll be able to choose yourown goals, input some data about your income andinvestments and the online dashboard will show you ifyou are on track. You'll also receive a personalized

report and free access to the Dashboard to update yourplan.

YOUR RETIREMENT HEALTH CHECK: Godirectly to www.FreeRetirementMap.com and you'llbe able to create your own personalized retirementassessment. You'll be able to answer the importantquestions about funding your retirement lifestyle andsavings goals.

SOCIAL SECURITY TIMING REPORT: Mostfolks are unaware of the many choices they have whenelecting to receive Social Security benefits. Choosingthe wrong option may be worth thousands of dollars ayear - perhaps a million over a couple's lifetime. Youcan find out how various claiming strategies willimpact you personally by clicking on the "SocialSecurity Timing" icon found at my company website.

MarketFlex Portfolio Update fromSteve Stanganelli CFP

At Clear View, we focus on building portfolios thatare low-cost, global and tax-efficient. Portfolios arebased on a core of passive investments offeringexposure to broad asset classes like international anddomestic stocks, bonds, and real estate.

TACTICAL IS PRACTICAL: Tactical positions areadded to take advantage of market conditions orprovide some way to mitigate the risk of loss orvolatility. Positions may include defensive asset classesor conservative covered call income strategies.

SIMPLE INVESTING RULES: We operate under asimple rule: Clients win by not losing

THE MARKETFLEX CORE 4+ PORTFOLIO:To that end, our MarketFlex Core 4+ portfoliosinclude several low-cost Vanguard Exchange TradedFunds for US Stocks (VTSSX), US Bonds (VBTSX),

Dividend-Paying Stocks (VHDYX), Real Estate(VGRSX) and International Stocks (VTSGX).

This broadly diversified, global portfolio is correlatedwith the Russell 3000 index.

This core portfolio illustrates the value ofdiversification. Over the past three years (thru10/3/12), this portfolio would have returned two-thirds the return of the index (10% versus 15%annualized) but with half of the risk of its index(standard deviation of 8.2% versus 16.4%). With a0.50 Beta, it responds to market moves by half versusthe index. The maximum drawdown during the timeperiod would have been half the index (less than 10%versus more than 20%).

The annualized returns for the MarketFlex portfolioaveraged 10% assuming advisory and trading fees of0.75% per year. The index each returned close to 15%.While the total return of the MarketFlex portfolio wasless, it did it with a much less bumpy ride.

Clear View Wealth Advisors LLC Investment Updates October 2012 5

Why You Need a Financial Advisor

After dismal portfolio returns during the “lost decade,”investors may be wondering why they are still payingtheir advisors’ fees. Until recently, the generallyaccepted (and expected) premise was that the advisorwould deliver returns in excess of the market. Butsince many advisor-managed portfolios lost value withthe market during the two major crises of the decade,many clients have begun to question the advisors’ roleand their justification for receiving fees even duringperiods of poor performance.

An advisor’s value, however, may go beyond returnsthat beat the market. Of course, return is the firstthing investors tend to think about, but there are otherfactors that influence the investing process and need tobe carefully considered, as well. This is where anadvisor can help you. Many investors do not aligntheir portfolios with their risk tolerance; theyoverweigh in stocks expecting high returns and thencan’t sleep at night when the market fluctuates. An

advisor can help manage your expectations and build aportfolio that’s best suited for your risk tolerance level.

Another area where an advisor’s expertise can bevaluable is goal-oriented investment. Instead ofaccumulating all your savings in one place andinvesting them irrespective of a goal or timeline, anadvisor can help you identify various investment goals(retirement, child’s college fund, income-orientedinvesting) and then reorganize your portfolioaccording to these goals.

In addition to risk/return management and goal-oriented investment, wealth preservation, taxmanagement, and the prevention of rash decisions aresome of the additional benefits you may gain from theclient-advisor relationship. When you evaluate youradvisor’s performance, think about how an advisor’svalue may extend beyond returns that outperform themarket.

©2012 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is intended solely for informational purposes; (2) is proprietary to Morningstar and/or the content providers; (3) is notwarranted to be accurate, complete, or timely; and (4) does not constitute investment advice of any kind. Neither Morningstar nor the content providers are responsible for any damages or losses arisingfrom any use of this information. Past performance is no guarantee of future results. "Morningstar" and the Morningstar logo are registered trademarks of Morningstar, Inc. Morningstar MarketCommentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder.

Steve Stanganelli, MSF, CFP®Fee Only Planner & Tax Coach

Clear View Wealth Advisors LLC12 Amidon AvenueAmesbury, Massachusetts 01913

steve@clearviewwealthadvisors.comwww.ClearViewWealthAdvisors.com

Tel:978-388-0020