Endowment WealthManagement, Inc.Robert Riedl, CPA, CFP, AWMADirector of Wealth ManagementAmerican National Bank Bldg2200 N. Richmond St. Suite 200Appleton, WI 54911920-785-6010 x6011Rob@EndowmentWM.comwww.EndowmentWM.com

July 2016Mid-Year 2016: An Investment Reality Check

Q&As on Roth 401(k)s

Finding and Claiming Forgotten Funds

I have matured U.S. savings bonds. Are theystill earning interest and, if not, can I roll themover to another savings bond?

EWM July 2016 NewsletterPlanning Your Financial FutureMid-Year 2016: An Investment Reality Check

See disclaimer on final page

Market volatility is alive andwell in 2016. Low oil prices,China's slowing growth, theprospect of rising interestrates, the strong U.S. dollar,global conflicts--all of thesefactors have contributed toturbulent markets this year.

Many investors may be tempted to review theirportfolios only when the markets hit a roughpatch, but careful planning is essential in alleconomic climates. So whether the markets areup or down, reviewing your portfolio with yourfinancial professional can be an excellent wayto keep your investments on track, and midwaythrough the year is a good time for a realitycheck. Here are three questions to consider.

1. How are my investments doing?Review a summary of your portfolio's totalreturn (minus all fees) and compare theperformance of each asset class against arelevant benchmark. For stocks, you mightcompare performance against the S&P 500,Russell 2000, or Global Dow; for mutual funds,you might use the Lipper indexes. (Keep inmind that the performance of an unmanagedindex is not indicative of the performance of anyspecific security, and you can't invest directly inan unmanaged index.)

Consider any possible causes of over- orunderperformance in each asset class. If anyover- or underperformance was concentrated ina single asset class or investment, was thatconsistent with the asset's typical behavior overtime? Or was recent performance an anomalythat bears watching or taking action? Inaddition, make sure you know the total fees youare paying (e.g., mutual fund expense ratios,transaction fees), preferably as a dollar amountand not just as a percentage of assets.

2. Is my investment strategy on track?Review your financial goals (e.g., retirement,college, house, car, vacation fund) and marketoutlook for the remainder of the year todetermine whether your investment asset mixfor each goal continues to meet your timeframe, risk tolerance, and overall needs. Ofcourse, no one knows exactly what the markets

will do in the future, but by looking at currentconditions, you might identify factors that couldinfluence the markets in the monthsahead--things like inflation, interest rates, andeconomic growth projections from the FederalReserve. With this broader perspective, youcan then update your investment strategy asnecessary.

Remember, even if you've chosen anappropriate asset allocation strategy for variousgoals, market forces may have altered your mixwithout any action on your part. For example,maybe your target was 70% stocks and 30%bonds, but now you have 80% stocks and 20%bonds. To return your asset mix back to itsoriginal allocation, you may want to rebalanceyour investments. This can be done by sellinginvestments and transferring the proceeds tounderrepresented asset classes, or simply bydirecting new contributions into asset classesthat have been outpaced by others. Keep inmind that rebalancing may result in commissioncosts, as well as taxes if you sell investmentsfor a profit.

Asset allocation does not guarantee a profit orprotect against loss; it is a method used to helpmanage investment risk.

3. Am I maximizing my tax savings?Taxes can take a significant bite out of youroverall return. You can't control the markets,but you can control the accounts you use tosave and invest, as well as the assets youchoose to hold in those accounts. Consider the"tax efficiency" of your investment portfolio.Certain types of investments tend to result inlarger tax bills. For example, investments thatgenerate interest or produce short-term capitalgains are taxed as ordinary income, which isusually a higher rate than long-term capitalgains. Dividing assets strategically amongtaxable, tax-deferred, and tax-exempt accountsmay help reduce the effect of taxes on youroverall portfolio.

All investing involves risk, including the loss ofprincipal, and there can be no guarantee thatany investing strategy will be successful.

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Q&As on Roth 401(k)sThe Roth 401(k) is 10 years old! With 62% ofemployers now offering this option, it's morelikely than not that you can make Rothcontributions to your 401(k) plan.1 Are youtaking advantage of this opportunity?

What is a Roth 401(k) plan?A Roth 401(k) plan is simply a traditional 401(k)plan that permits contributions to a designatedRoth account within the plan. Roth 401(k)contributions are made on an after-tax basis,just like Roth IRA contributions. This meansthere's no up-front tax benefit, but if certainconditions are met both your contributions andany accumulated investment earnings on thosecontributions are free of federal income taxwhen distributed from the plan.

Who can contribute?Anyone! If you're eligible to participate in a401(k) plan with a Roth option, you can makeRoth 401(k) contributions. Although you cannotcontribute to a Roth IRA if you earn more thana specific dollar amount, there are no suchincome limits for a Roth 401(k).

Are distributions really tax free?Because your contributions are made on anafter-tax basis, they're always free of federalincome tax when distributed from the plan. Butany investment earnings on your Rothcontributions are tax free only if you meet therequirements for a "qualified distribution."

In general, a distribution is qualified if:

• It's made after the end of a five-year holdingperiod, and

• The payment is made after you turn 59½,become disabled, or die

The five-year holding period starts with the yearyou make your first Roth contribution to youremployer's 401(k) plan. For example, if youmake your first Roth contribution to the plan inDecember 2016, then the first year of yourfive-year holding period is 2016, and yourwaiting period ends on December 31, 2020.Special rules apply if you transfer your Rothdollars over to a new employer's 401(k) plan.

If your distribution isn't qualified (for example,you make a hardship withdrawal from your Rothaccount before age 59½), the portion of yourdistribution that represents investment earningswill be taxable and subject to a 10% earlydistribution penalty, unless an exceptionapplies. (State tax rules may be different.)

How much can I contribute?There's an overall cap on your combined pretaxand Roth 401(k) contributions. In 2016, you cancontribute up to $18,000 ($24,000 if you are

age 50 or older) to a 401(k) plan. You can splityour contribution between Roth and pretaxcontributions any way you wish. For example,you can make $10,000 of Roth contributionsand $8,000 of pretax contributions. It's totally upto you.

Can I still contribute to a Roth IRA?Yes. Your participation in a Roth 401(k) planhas no impact on your ability to contribute to aRoth IRA. You can contribute to both if youwish (assuming you meet the Roth IRA incomelimits).

What about employer contributions?While employers don't have to contribute to401(k) plans, many will match all or part of yourcontributions. Your employer can match yourRoth contributions, your pretax contributions, orboth. But your employer's contributions arealways made on a pretax basis, even if theymatch your Roth contributions. In other words,your employer's contributions, and anyinvestment earnings on those contributions, willbe taxed when you receive a distribution ofthose dollars from the plan.

Can I convert my existing traditional401(k) balance to my Roth account?Yes! If your plan permits, you can convert anyportion of your 401(k) plan account (your pretaxcontributions, vested employer contributions,and investment earnings) to your Roth account.The amount you convert is subject to federalincome tax in the year of the conversion(except for any after-tax contributions you'vemade), but qualified distributions from yourRoth account will be entirely income tax free.The 10% early-distribution penalty generallydoesn't apply to amounts you convert.2

What else do I need to know?Like pretax 401(k) contributions, your Rothcontributions can be distributed only after youterminate employment, reach age 59½, incur ahardship, become disabled, or die. Also, unlikeRoth IRAs, you must generally begin takingdistributions from a Roth 401(k) plan after youreach age 70½ (or, in some cases, after youretire). But this isn't as significant as it mightseem, because you can generally roll over yourRoth 401(k) money to a Roth IRA if you don'tneed or want the lifetime distributions.1 Plan Sponsor Council of America, 58thAnnual Survey of Profit Sharing and 401(k)Plans (2015) (Reflecting 2014 Plan Experience)2 The 10% penalty tax may be reclaimed by theIRS if you take a nonqualified distribution fromyour Roth account within five years of theconversion.

Which is the better option,pretax or Rothcontributions?

The answer depends uponyour personal situation. If youthink you'll be in a similar orhigher tax bracket when youretire, Roth 401(k)contributions may be moreappealing, since you'lleffectively lock in today's lowertax rates. However, if you thinkyou'll be in a lower tax bracketwhen you retire, pretax 401(k)contributions may be moreappropriate. Your investmenthorizon and projectedinvestment results are alsoimportant factors.

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Finding and Claiming Forgotten FundsAs a child, you may have dreamed aboutfinding buried treasure, but you probablyrealized at an early age that it was unlikely youwould discover a chest full of pirate booty.However, the possibility that you haveunclaimed funds or other assets waiting for youis not a fantasy.

According to the National Association ofUnclaimed Property Administrators (NAUPA),$41.7 billion is waiting to be returned by stateunclaimed property programs. So how do youfind what is owed to you, even if it's not afortune?

State unclaimed property programsEvery state has an unclaimed property programthat requires companies and financialinstitutions to turn account assets over to thestate if they have lost contact with the rightfulowner for one year or longer (such as when theaccount has been inactive). It then becomesthe state's responsibility to locate the owner.State-held property generally can be claimed inperpetuity by original owners and heirs.

For state programs, unclaimed property mightinclude the following:

• Financial accounts• Stocks• Uncashed dividend or payroll checks• Utility deposits• Insurance payments and policies• Trust distributions• Mineral royalty payments• Contents of safe-deposit boxes

To see whether you have unclaimed assets,you may have to search your state's databaseand the databases of states where you formerlylived or worked. It's possible that funds orassets are still waiting for you even if youmoved away years ago. Fortunately, moststates participate in a national database thatyou can search for free at MissingMoney.com.

Finding "lost" life insurance policies might takesome legwork. Life insurance companies thatcan't locate a beneficiary must generally turnover benefits from an individual policy to stateunclaimed property programs, but might not doso if the company does not know that the policyowner has passed away. If you believe that afamily member owned life insurance but can'tfind the physical policy, you may need to lookfor evidence of it by searching personal recordsand files (assuming you have the authority todo so) or by contacting the policy owner'sinsurance agent, attorney, or other financialprofessionals.

Federal unclaimed property programsThe federal government also tracks unclaimedproperty, including:

• Tax refunds• Pension funds• Funds from failed banks and credit unions• Funds owed investors from U.S. SEC

enforcement cases• Refunds from FHA-insured mortgages• Unredeemed savings bonds that are no

longer earning interest

Unlike states, the federal government does nothave a central website for finding unclaimedmoney or assets, so you'll need to check anumber of sources, including one of the biggestsources of unclaimed funds--the IRS--at irs.gov.To find out more about other federal programsthat may hold unclaimed property, visit theNAUPA website, unclaimed.org.

Submitting a claimTo claim property, follow the instructions given,which will vary by the type of asset and wherethe property is held. You'll need to verifyownership, typically by providing informationabout yourself (such as your Social Securitynumber and proof of address), and submit aclaim form either online or by mail.

What if the listed property owner is deceased?A claim may be made by a survivor and will bepayable according to state or federal law. Forlife insurance, you may need the full name andSocial Security number of the deceasedindividual, a copy of the death certificate, and insome cases proof that you were the namedbeneficiary.

Be carefulPrivate companies may be paid to locaterightful owners and/or offer to help rightfulowners obtain property for a fee, but legitimatecompanies will ask you to pay only after youreceive your property. State laws limit feescompanies charge, so check with your statebefore you sign any agreement. However, inmost cases you should be able to find the sameproperty for free by checking state or federaldatabases. Carefully check out anyone whocontacts you, because some scammers willclaim to have property or represent that theyare from a government agency in order toobtain other information about you or yourfinances. For more information about protectingyourself, visit the Federal Trade Commission'sconsumer information site, consumer.ftc.gov.

Do you have a tax refundwaiting for you?

Each year, millions of dollars intax refunds go unclaimed. InMarch 2016, the IRSannounced that it was holding$950 million in unclaimedrefunds as a result of taxpayersfailing to file a federal incometax return for 2012. (Source:IR-2016-38, March 10, 2016)

You may have missed out on apotential tax refund becauseyou earned income and hadtaxes withheld but weren'trequired to file a tax return, or ifyou were eligible for refundabletax credits (where the amountof the credit you qualify forexceeds the amount of tax youowe). Even if you did file a taxreturn, your refund may havebeen undeliverable if youraddress was incorrect.

For more information on findingand claiming missing federalincome tax refunds, visitirs.gov.

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Endowment WealthManagement, Inc.Robert Riedl, CPA, CFP, AWMADirector of Wealth ManagementAmerican National Bank Bldg2200 N. Richmond St. Suite 200Appleton, WI 54911920-785-6010 x6011Rob@EndowmentWM.comwww.EndowmentWM.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016

IMPORTANT DISCLOSURES

The information presented byEndowment Wealth Management,Inc. is not specific to anyindividual's personal circumstancesand should not be taken aspersonal investment advice, norshould it be construed as a firmrecommendation.

To the extent that this materialconcerns tax matters, it is not intendedor written to be used, and cannot beused, by a taxpayer for the purpose ofavoiding penalties that may be imposedby law. Each taxpayer should seekindependent advice from a taxprofessional based on his or herindividual circumstances.

These materials are provided forgeneral information and educationalpurposes based upon publicly availableinformation from sources believed to bereliable—we cannot assure the accuracyor completeness of these materials.The information in these materials maychange at any time and without notice.If you have any questions please callour offices at 920-785-6010.

How many types of government savings bonds arethere, and what's the difference between them?While the U.S. governmenthas issued 13 types of savingsbonds, there are currently onlytwo series available for

purchase through the U.S. TreasuryDepartment: Series EE bonds and Series Ibonds. U.S. savings bonds are nonmarketablesecurities, which means you can't resell themunless you're authorized as an issuing orredeeming agent by the U.S. TreasuryDepartment. Savings bonds are guaranteed bythe federal government as to the timelypayment of principal and interest.

You can buy Series EE bonds and I bonds inany amount from $25 up to $10,000, which isthe maximum amount you can purchase foreach bond type per calendar year. In otherwords, you may buy a total of $10,000 annuallyin both EE and I bonds, for an annual total of$20,000 for the two types combined.

Series EE bonds earn a fixed rate of interest aslong as you hold them, up to 30 years. You'llknow the interest rate the bond will earn whenyou buy it. The U.S. Treasury announces therate each May 1 (for new EE bonds issuedbetween May 1 and October 31) and November

1 (for new EE bonds issued between November1 and April 30).

Series I bonds are similar to EE bonds, but Ibonds offer some protection against inflation bypaying interest based on a combination of afixed rate and a rate tied to the semi-annualinflation rate. The fixed rate component doesn'tchange, whereas the rate tied to inflation isrecalculated and can change every six months.The total interest (fixed and inflation adjusted)compounds semi-annually.

In any case, the interest on EE or I savingsbonds isn't paid to you until you cash in thebonds. You can cash in EE bonds or I bondsany time after one year, but if you cash themout before five years, you lose the last threemonths of interest.

The interest earned on both EE and I bonds isgenerally exempt from state income tax butsubject to federal income tax. Interest incomemay be excluded from federal income tax whenbonds are used to finance higher-educationexpenses, although restrictions may apply.

I have matured U.S. savings bonds. Are they stillearning interest and, if not, can I roll them over toanother savings bond?Once U.S savings bonds havereached maturity, they stopearning interest. Prior to 2004,

you could convert your Series E or EE savingsbonds for Series HH bonds. This would haveallowed you to continue earning tax-deferredinterest. However, after August 31, 2004, thegovernment discontinued the exchange of anyform of savings bonds for HH bonds, so thatoption is no longer available.

Since matured savings bonds no longer earninterest, there is no financial benefit to holdingon to them. If you have paper bonds, you cancash them in at most financial institutions, suchas banks or credit unions. However, it's a goodidea to call a specific institution before goingthere to be sure it will redeem your bonds. Asan alternative, you can mail them to theTreasury Retail Securities Site, PO Box 214,Minneapolis, MN 55480, where they will beredeemed. If you have electronic bonds, log onto treasurydirect.gov and follow the directionsthere. The proceeds from your redeemedbonds can be deposited directly into yourchecking or savings account for a relatively

quick turnover.

Another important reason to redeem yourmatured savings bonds may be becausesavings bond interest earnings, which can bedeferred, are subject to federal income taxwhen the bond matures or is otherwiseredeemed, whichever occurs first. So if youhaven't previously reported savings bondinterest earnings, you must do so when thebond matures, even if you don't redeem thebonds.

Using the money for higher education maykeep you from paying federal income tax onyour savings bond interest. The savings bondeducation tax exclusion permits qualifiedtaxpayers to exclude from their gross income allor part of the interest paid upon the redemptionof eligible Series EE and I bonds issued after1989 when the bond owner pays qualifiedhigher-education expenses at an eligibleinstitution. However, there are very specificrequirements that must be met in order toqualify, so consult with your tax professional.

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