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

May 2016Understanding Stock Market Indexes

Four Lessons Grandparents andGrandchildren Can Learn Together

Nearing Retirement? Time to Get Focused

How long should I keep financial records?

EWM May 2016 NewsletterPlanning Your Financial FutureUnderstanding Stock Market Indexes

See disclaimer on final page

No doubt you've seen headlines reporting that aparticular stock index is up or down. But do youknow what an index is, and how understandingthe nuts and bolts of a specific index may behelpful to you?

An index is simply a way to measure and reportthe fluctuations of a pool of securities or arepresentative segment of a market. An index isdeveloped by a company that sets specificcriteria to determine which securities areincluded in the index based on factors such asa company's size or location, or the liquidity ofits stock. For example, the S&P 500 is an indexmade up of mostly large-cap U.S.-basedcompanies that Standard & Poor's considers tobe leading representatives of a cross-section ofindustries.

The company that develops the index tracksthe performance of its components andaggregates the data to produce a single figurethat represents the index as a whole. Virtuallyevery asset class is tracked by at least oneindex, but because of the size and variety of thestock market, there are more stock indexesthan any other type. It's important to note thatthe performance of an unmanaged index is notindicative of the performance of any specificsecurity. Individuals cannot invest directly in anindex.

Comparing apples to orangesSince indexes encompass a wide range ofsecurities, it's important to know what segmentof the market a particular index covers. Forinstance, a composite index follows a specificstock exchange. The Nasdaq Composite Indexincludes all the stocks listed on the Nasdaqmarket. Conversely, sector indexes tracksecurities in a specific industry.

Even indexes that include the same securitiesmay not operate in precisely the same way.Generally, indexes tend to be eitherprice-weighted or marketcapitalization-weighted. If an index isprice-weighted, such as the Dow JonesIndustrial Average, the impact of each stock onthe overall average is proportional to its pricecompared to other stocks in the index. With aprice-weighted index, the highest-priced stocks

would have the most impact on the average.For example, a 1 percentage point drop in theprice of a stock selling for $80 per share wouldhave more impact on the overall index'sperformance than a 1 percentage point drop inthe price of a stock that had been selling for$40 a share.

If an index is market capitalization-weighted ormarket value-weighted, such as the NasdaqComposite Index or the S&P 500 CompositeIndex, the average of the index is adjusted totake into account the relative size of eachcompany (its market cap) to reflect itsimportance to the index. Stocks with a largermarket capitalization have a greater influenceon how the index performs than stocks with asmaller market capitalization. For example, ifthe stock of a $10 billion market-cap companydrops by 1 percentage point, it will drag downthe index's performance more than a 1percentage point drop in the share price of a $1billion market-cap company.

Though an index adheres to a set of guidelinesfor selection of the securities it includes, thecompany that oversees the index generallyreviews the security selection periodically andmay make occasional changes. For example,some indexes may rebalance if an individualsecurity grows so large that it dominates theindex. Others have a limit on how much of theindex can be devoted to a particular sector orindustry, and may rebalance if the proportiongets skewed.

Indexes are worth watchingStock indexes can provide valuable informationfor the individual investor. If checked regularly,an index can provide information that may helpyou stay abreast of how the stock market ingeneral, or a particular segment of it, is faring.However, understanding the differencesbetween indexes and how each one works willhelp you make better use of the informationthey provide. All investing involves risk,including the possible loss of principal, andthere is no guarantee that any investmentstrategy will be successful.

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Four Lessons Grandparents and Grandchildren Can Learn TogetherIf you're a grandparent, maintaining a strongconnection with your grandchildren is important,but that may become harder over the years asthey leave for college or become busier buildingtheir careers and families. While they're juststarting out financially, you have a lifetime ofexperience. Although you're at opposite ends ofthe spectrum, you have more in common thanyou think. Focusing on what you can learntogether and what you can teach each otherabout financial matters may help you see thatyou're not that different after all.

1. Saving toward a financial goalWhen your grandchildren were young, you mayhave encouraged them to save by giving themspare change for their piggy banks or slipping acheck into their birthday cards. Now that they'reolder, they may have trouble saving for thefuture when they're focused on paying bills.They may want and need advice, but may notbe comfortable asking for it. You're in a goodposition to share what experience has taughtyou about balancing priorities, which mayinclude saving for short-term goals such as ahome down payment and long-term goals suchas retirement. You'll also learn something aboutwhat's important to them in the process.

You may even be willing and able to givemoney to your grandchildren to help themtarget their goals. While you can generally giveup to $14,000 per person per year withoutbeing subject to gift tax rules, you may want toexplore the idea of offering matching fundsinstead of making an outright gift. For example,for every dollar your grandchild is able to savetoward a specific goal, you match it, up towhatever limit you decide to set. But avoidgiving too much. No matter how generous youwant to be, you should prioritize your ownretirement.

2. Weathering market ups and downsYour grandchildren are just starting out asinvestors, while you have likely been in themarket for many years and lived through morethan one challenging economic climate. Whenyou're constantly barraged by market news, it'seasy to become too focused on short-termresults; however, the longer-term picture is alsoimportant. As the market goes up, noviceinvestors may become overly enthusiastic, butwhen the market goes down they may becomeoverly discouraged, which can lead to poordecisions about buying and selling. Sharingyour perspective on the historical performanceof the market and your own portfolio may help

them learn to avoid making decisions based onemotion. Focusing on fundamentals such asasset allocation, diversification, and tolerancefor risk can remind you both of the wisdom ofhaving a plan in place to help you weatherstormy market conditions.

Note: Asset allocation and diversification do notguarantee a profit or protect against investmentloss. Past performance is no guarantee offuture results.

3. Using technology wiselySome people avoid the newest technologybecause they think the learning curve will besteep. That's where your grandchildren canhelp. With their intuitive understanding oftechnology, they can introduce you to the latestand greatest financial apps and opportunities,including those that may help you manage yourfinancial accounts online, pay your bills, trackinvestments, and stay in touch withprofessionals.

Unfortunately, as the use of technology hasgrown, so have scams that target individualsyoung and old. Your grandchildren might knowa lot about using technology, but you have theexperience to know that even financially savvyindividuals are vulnerable. Consider making apact with your grandchildren that if you areasked for financial information over the phone,via email, or online (including account or SocialSecurity numbers); asked to invest insomething that promises fast profits; orcontacted by a person or business asking formoney, you will discuss it with each other andwith a trusted professional before taking action.

4. Giving backAnother thing you and your grandchildren mighthave in common is that you want to make theworld a better place.

Perhaps you are even passionate about thesame special causes. If you live in the samearea, you might be able to volunteer together inyour community, using your time and talents toimprove the lives of others. But if not, there areplenty of ways you can give back together. Forexample, you might donate to a favorite charity,or even find the time to take a "volunteervacation." Traveling together can be anenjoyable way for you and your grandchildrento bond while you meet other people across thecountry or globe who share your enthusiasm.Many vacations don't require experience, just awillingness to help--and learn--something youand your grandchildren can do together.

According to a PewResearch study, there aresome significant differencesbetween members of theMillennial generation (born1981-96) and the Silentgeneration (born 1928-45).

• 68% of men and 63% ofwomen in the Millennialgeneration are employed,compared with 78% ofmen and 38% of women inthe Silent generation whenthey were young.

• 68% of Millennialgeneration members havenever been married,compared with 32% ofSilent generationmembers when they werethe same age.

• 21% of men and 27% ofwomen in the Millennialgeneration have at least abachelor's degree,compared with only 12%of men and 7% of womenin the Silent generationwhen they were young.

Source: "How Millennialstoday compare with theirgrandparents 50 years ago,"Pew Research Center,Washington, D.C. (March 19,2015), pewresearch.org.

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Nearing Retirement? Time to Get FocusedIf you're within 10 years of retirement, you'veprobably spent some time thinking about thismajor life change. The transition to retirementcan seem a bit daunting, even overwhelming. Ifyou find yourself wondering where to begin, thefollowing points may help you focus.

Reassess your living expensesA step you will probably take several timesbetween now and retirement--and maybeseveral more times thereafter--is thinking abouthow your living expenses could or shouldchange. For example, while commuting and drycleaning costs may decrease, other budgetitems such as travel and health care may rise.Try to estimate what your monthly expensebudget will look like in the first few years afteryou stop working. And then continue toreassess this budget as your vision ofretirement becomes reality.

Consider all your income sourcesNext, review all your possible sources ofincome. Chances are you have anemployer-sponsored retirement plan andmaybe an IRA or two. Try to estimate howmuch they could provide on a monthly basis. Ifyou are married, be sure to include yourspouse's retirement accounts as well. If youremployer provides a traditional pension plan,contact the plan administrator for an estimate ofyour monthly benefit amount.

Do you have rental income? Be sure to includethat in your calculations. Is there a chance youmay continue working in some capacity? Oftenretirees find that they are able to consult, turn ahobby into an income source, or work part-time.Such income can provide a valuable cushionthat helps retirees postpone tapping theirinvestment accounts, giving them more time topotentially grow.

Finally, don't forget Social Security. You can getan estimate of your retirement benefit at theSocial Security Administration's website,ssa.gov. You can also sign up for a my SocialSecurity account to view your online SocialSecurity Statement, which contains a detailedrecord of your earnings and estimates ofretirement, survivor, and disability benefits.

Manage taxesAs you think about your income strategy, alsoconsider ways to help minimize taxes inretirement. Would it be better to tap taxable ortax-deferred accounts first? Would part-timework result in taxable Social Security benefits?What about state and local taxes? A qualifiedtax professional can help you develop anappropriate strategy.

Pay off debt, power up your savingsOnce you have an idea of what your possibleexpenses and income look like, it's time to bringyour attention back to the here and now. Drawup a plan to pay off debt and power up yourretirement savings before you retire.

• Why pay off debt? Entering retirementdebt-free--including paying off yourmortgage--will put you in a position to modifyyour monthly expenses in retirement if theneed arises. On the other hand, enteringretirement with mortgage, loan, and creditcard balances will put you at the mercy ofthose monthly payments. You'll have less ofan opportunity to scale back your spending ifnecessary.

• Why power up your savings? In these finalfew years before retirement, you're likely tobe earning the highest salary of your career.Why not save and invest as much as you canin your employer-sponsored retirementsavings plan and/or your IRAs? Aim for themaximum allowable contributions. Andremember, if you're 50 or older, you can takeadvantage of catch-up contributions, whichallow you to contribute an additional $6,000to your employer-sponsored plan and anextra $1,000 to your IRA in 2016.

Account for health careFinally, health care should get special attentionas you plan the transition to retirement. As youage, the portion of your budget consumed byhealth-related costs will likely increase.Although Medicare will cover a portion of yourmedical costs, you'll still have deductibles,copayments, and coinsurance. Unless you'reprepared to pay for these costs out of pocket,you may want to purchase a supplementalinsurance policy.

In 2015, the Employee Benefit ResearchInstitute reported that the average 65-year-oldmarried couple would need $213,000 in savingsto have at least a 75% chance of meeting theirinsurance premiums and out-of-pocket healthcare costs in retirement. And that doesn'tinclude the cost of long-term care, whichMedicare does not cover and can varysubstantially depending on where you live. Forthis reason, you might consider a long-termcare insurance policy.

These are just some of the factors to consideras your prepare to transition into retirement.Breaking the bigger picture into smallercategories may help the process seem a littleless daunting.

A financial professional canhelp you estimate howmuch your retirementaccounts may provide on amonthly basis. Youremployer may also offertools to help. Keep in mind,however, that neitherworking with a financialprofessional nor usingemployer-sponsored toolscan guarantee financialsuccess.

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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.

What are some tips for organizing financial records?Organizing your financialrecords is a cyclical processrather than a one-time event.You'll need to set up a systemthat helps you organize

incoming documents and maintain existing filesso that you can easily find what you need. Hereare a few tips.

Create your system: Where you should keepyour records and documents depends on howquickly you want to be able to access them,how long you plan to keep them, and thenumber and type of records you have. A simpleset of labeled folders in a file cabinet may befine, but electronic storage is another option forcertain records if space is tight or if yougenerally choose to receive and view recordsonline. No matter which storage option(s) youchoose, try to keep your records in a centrallocation.

File away: If you receive financial statementsthrough the mail, set up a collection point suchas a folder or a basket. Open and read whatyou receive, and decide whether you can file itor discard it. If you receive statementselectronically, pay attention to any notificationsyou receive. Once you get in a routine, you may

find that keeping your records organized takesonly a few minutes each week.

Purge routinely: Keeping your financialrecords in order can be even more challengingthan organizing them in the first place. Let thephrase "out with the old, in with the new" beyour guide. For example, when you get thisyear's auto policy, discard last year's. Whenyou receive an annual investment statement,discard the monthly or quarterly statementsyou've been keeping. It's a good idea to do asweep of your files at least once a year to keepyour filing system on track (doing this at thesame time each year may be helpful).

Think safety: Don't just throw hard copies offinancial paperwork in the trash. To protectsensitive information, invest in a good qualityshredder and destroy any document thatcontains account numbers, Social Securitynumbers, or other personal information. Ifyou're storing your records online, make sureyour data is encrypted. Use strong passwords,and back up any records that you store on yourcomputer.

How long should I keep financial records?There's a fine line between keeping financial records for a reasonable period oftime and becoming a pack rat. A general rule of thumb is to keep financialrecords only as long as necessary. For example, you may want to keep ATMreceipts only temporarily, until you've reconciled them with your bank statement.But if a document provides legal support and/or is hard to replace, you'll want to

keep it for a longer period or even indefinitely. It's ultimately up to you to determine which recordsyou should keep on hand and for how long, but here's a suggested timetable for some commondocuments.

One year or less More than one year Indefinitely

Bank or credit unionstatements

Tax returns anddocumentation*

Birth, death, and marriagecertificates

Credit card statements Mortgage contracts anddocumentation

Adoption papers

Utility bills Property appraisals Citizenship papers

Annual insurance policies Annual retirement andinvestment statements

Military discharge papers

Paycheck stubs Receipts for major purchasesand home improvements

Social Security card

*The IRS requires taxpayers to keep records that support income, deductions, and credits shownon their income tax returns until the period of limitations for that return runs out--generally three toseven years, depending on the circumstances. Visit irs.gov or consult your tax professional forinformation related to your specific situation.

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