THE HOFFMANN-EASOM-LANNAN
RETIREMENT PLANNING GROUP AT MORGAN STANLEY
227 West Monroe Street, Suite 3400, Chicago, IL 60606
Main 312-648-3471 • Toll Free 800-621-5231 ext. 3471
Fax 312-648-3344
Front Row L to R: William Kramer, Therese Dolezal,
Anthony Severino, Jacqueline Malacha,
Michael Haynes, Cynthia Garner, Sean Lannan
Back Row L to R: Dan Hoffmann, David Whitacre,
Erin Haley, William Easom, Kathleen Dufficy,
Steven Fill, Barbara Martin, Kenneth Robson
www.morganstanleyfa.com/hoffmanneasomlannan
T h e
R E T I R E M E N T
REPORTER
JANUARY/FEBRUARY 2017
Should You Contribute to a 401(k) Plan or IRA? Or Both?
F YOU’RE ELIGIBLE to contribute to an
employer-sponsored retirement plan,
should you? Should you contribute to an
individual retirement account (IRA)? How
about contributing to both? The answers are: Yes,
yes, and yes. If this comes as a surprise, it’s probably
because there are so many rules about eligibility for
contributing to IRAs and workplace retirement
plans, it’s easy to become confused about what is
allowed and what isn’t.
But whatever rules there are, one thing is never
ruled out: you can always contribute to both a workplace retirement plan — like a 401(k) or 457 plan —
and an IRA, as long as you have earned income.
What’s open to question are how much you can contribute, to which type of account, and whether your
contributions are tax deductible. Keep these three
important points in mind:
POINT 1: THERE ARE LIMITS TO YOUR ANNUAL CONTRIBUTIONS. Every year, the IRS sets limits on how
much you can contribute to retirement plans, and the
amounts are different for various types of plans. The
one rule common to them all is this: you can’t contribute more than your earned income (except for
contributions to a spousal IRA for a spouse who
does not work).
Let’s say your employer sponsors a 401(k) plan.
If you participate in the plan by a) making contributions of your own, b) your employer makes contributions for you, or c) you and your employer both
contribute to your account, then you can still contribute to your own IRA outside the workplace. If
I
❝ Only 15%
of retirees said
they actually
retired after
age 65. Many
retirees report
they left the
workforce for
reasons beyond
their control,
including
health problems
or changes at
their companies.
❞
Source: 2016
Retirement
Confidence Survey
FR2016-0718-0044
you’re 49 or younger, in 2016 and 2017, you can contribute $18,000 to the 401(k) plan and another $5,500
to an IRA, for a total of $23,500 in retirement plan
contributions. If you’re 50 or older, those numbers
are $24,000 for the workplace plan and $6,500 for an
IRA, for a total of $30,500.
POINT 2: YOUR INCOME CAN AFFECT THE TAX
TREATMENT OF IRA CONTRIBUTIONS. Originally, there
was only one kind of IRA: the kind that enabled you
Continued on page 3
How to Set Savings Goals
savings goals is one
of the best ways to achieve your financial
objectives, but it’s a task many people
struggle with. Below is a simple seven-step
plan that you can use to set your savings goals.
1. SELECT GOALS. Before you start saving, it
helps to know what you are saving for. Common
savings goals are creating an emergency fund with at
least six months of living expenses or saving for
retirement, a child’s college education, a down payment, or a vacation. Your goals will be as unique as
you are; the most important thing is that you select
them and make them as specific as possible.
2. DETERMINE HOW MUCH YOU NEED TO SAVE.
Exactly how much money do you need to accomplish your goal? Don’t just choose a random number
at this point — research how much you’ll actually
need, so that you can be confident that your savings
S
ETTING CLEAR, SPECIFIC
Continued on page 2
Copyright © Integrated Concepts 2017. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of
these subjects. Professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.
2
How to Set Savings Goals
Continued from page 1
will be sufficient to get you to where you want to be.
3. CONSIDER YOUR TIMELINE. Savings goals can generally
be divided into three broad categories: short term (those you
hope to reach in a year or less), mid term (those that are
roughly one to five years away) and long term (goals you
hope to achieve in five years or more). It’s important to know
your timeline, since it will have a direct impact on how
aggressively you need to save and where to put your money.
4. DETERMINE HOW MUCH TO SET ASIDE EACH WEEK OR
MONTH. Determining how much you need to save to hit your
long- and mid-term goals can be a bit more complicated, as
you’ll need to take into account the growth of your investments.
Whatever the time frame for your goals, making these calculations is important, because it allows you to adjust your
savings as your budget allows. For example, if you can’t
afford to save the amount you need for a goal, you have two
W
E’VE ALL HEARD
options: You can either adjust your timeline or opt to keep it
the same and save less.
5. AUTOMATE YOUR SAVINGS IF POSSIBLE. Once you know
how much you need to save, you’ll likely find it easier to stick
to your plan if you can automate your savings. Adopt the payyourself-first principle and set up automatic transfers to your
savings or investment accounts. The key is to save the money
before you ever have a chance to spend it, as well as to avoid
forgetting to make the transfers.
6. CHOOSE THE RIGHT WAY TO SAVE. Depending on your
goals and timeline, you have different options for savings.
Traditional savings accounts are a good option for short-term
goals, since your money will be safe, while investment
accounts and retirement accounts, like a 401(k) plan or IRA,
are good options for longer-term goals, since you’ll earn
money as you save.
7. WATCH YOUR MONEY GROW. Once you have your savings plan in place, keep an eye on how it is doing. You will
need to periodically review your results and make adjustments
if necessary. 444
Overcoming 5 Retirement Fears
stories about people losing all of
their retirement money in a stock market crash,
outliving their money, or incurring unexpected
medical expenses that forces 80-year-olds back into the workforce. Are these fears likely to become realities? Probably not,
but here’s how you can deal with them just in case.
1. OUTLIVING YOUR MONEY — There’s a rule of thumb to
decrease the odds of outliving your money over a 25-year
retirement: by the time you’re ready to retire, you should
have saved eight times your annual salary. To get there, gradually work up to it. Of course, the amount of money you
need to have saved by the time you’re ready to retire
depends on a huge range of very individual factors. So to
truly decrease the odds that you’ll outlive your money, work
with a financial advisor to develop a robust retirement plan.
2. HIGH INFLATION — What if inflation went up to 12–
14% as it did in the 1970s? It’s probably not likely inflation
would spike like that again. However, because it has happened before, you’ll want to be prepared. This is where an
annual review of your investments can be wise. That is the
point of diversification: if you are properly diversified, your
portfolio should include investments that move opposite of
each other — so when one asset class or subclass is down,
another is up.
3. UNEXPECTED MEDICAL EXPENSES BEFORE RETIREMENT —
Unexpected medical expenses that you may incur while you
are still working could totally derail your retirement. To prepare for them, it’s important to have insurance in place, such
as disability and life insurance. Disability insurance will
ensure that if you do lose your income due to a disability.
Life insurance will protect your family in the event of your
death.
4. UNEXPECTED MEDICAL EXPENSES DURING RETIREMENT —
For most people, health care is one of the largest (often the
largest) expense incurred during retirement. There are a few
ways to prepare for medical emergencies: private health
insurance to fill the gaps in Medicare, long-term-care insurance, and rainy day savings. For today’s retirees, Medicare
takes care of most medical expenses, however, you need savings to cover what insurance won’t — like copays and
expenses exceeding your insurance limit. And just as you
save before retirement for unexpected expenses, so should
you continue your rainy day fund in retirement; even if you
are adequately insured, copays can be significant if you have
a medical emergency.
5. MARKET CRASH — As with high inflation, the key to
surviving a market crash is diversification. (There is no way
to insulate yourself completely from the effects of economic
turmoil. But you can take steps to ensure that turmoil doesn’t
completely ruin your retirement plans.) As you get closer to
retirement, you should be invested less heavily in equities
and more in investments such as bonds. 444
FR2016-0718-0044
Y
3
Keep Saving after Retirement
saving just because you are retired. 4 KEEP DEBT TO A MINIMUM. Most consumer loans and
Carefully managing your money and looking for ways
credit cards charge high interest rates that aren’t tax
to save will help ensure you remain financially fit durdeductible. During retirement, that can put a serious
ing retirement. Consider these tips:
strain on your finances. If you can’t pay cash, avoid
4 CONSTRUCT A FINANCIAL PLAN. Create a financial plan
the purchase.
detailing how much money will be obtained from what
4 LOOK FOR DEALS. Take the time to shop wisely, not just
sources and how that income will be spent. Review your
at stores, but for all purchases. When was the last time
plan annually to ensure you stay on course.
you compared prices for auto or home insurance? Can
4 CONSIDER PART-TIME EMPLOYMENT. Especially if you retire at
you find a credit card with lower fees and interest
a relatively young age, you might want to work on at least
rates? When did you last refinance your mortgage?
a part-time basis. However, if you receive Social Security
444
benefits and are between the ages of 62 and full retirement
age, you will lose $1 of benefits for every $2 of earnings
above $15,720 in 2016 and $16,920 in 2017.
4 CONTRIBUTE TO YOUR 401(K) PLAN OR INDIVIDUAL RETIREMENT ACCOUNT (IRA). If you work after retirement, put
some of that money into a 401(k) plan or IRA.
4 TRY BEFORE YOU BUY. Want to relocate to another city or
purchase a recreational vehicle to travel around the country? Before you buy a home in an unfamiliar city or purchase an expensive recreational vehicle, try renting first.
OU SHOULDN’T STOP
STEP 3: DOING EITHER CAN BUILD ASSETS FASTER — BOTH,
The complexity of the rules regarding whether
Continued from page 1
IRA contributions are tax deductible has obscured the most
to reduce your taxable income by the amount of your contriimportant benefit of qualified retirement plans: they combutions when you file your income tax return. Today, it’s
pound free of annual taxes. This gives them a distinct advanreferred to as a traditional IRA to distinguish it from a Roth
tage over taxable savings accounts, because at the same rate of
IRA, to which you can only contribute after-tax money.
return, assets grow faster when returns are not taxed.
There are good reasons to choose either the traditional or
For someone with an effective federal tax rate of 25%, an
Roth IRA; but if you participate in a workplace retirement plan
annual contribution of $5,500 to a taxable account that returns
and have income above the IRS limits, your ability to take the
6% a year grows to almost $226,000 in 25 years. But that same
tax deduction for a contribution to a traditional IRA is limited.
contribution to an IRA, at the same rate of return, grows to
In 2016, tax deductibility begins to phase out if you’re a single
more than $301,000 — a difference of more than $75,000,
filer and earn more than $61,000, and disappears altogether at
regardless of whether the contributions were tax deductible.
$71,000. For joint filers, the range is higher: $98,000 to $118,000.
Increase the contribution to $20,000 a year, and your retireTake note, however: if you make too much to be eligible
ment fund grows to nearly $1.1 million after 25 years — and
for the up-front income tax benefit in the year you contribute
the advantage over a taxable account exceeds $200,000. These
to a traditional IRA, you can still make contributions to it and
examples are provided for illustrative purposes only and are not
to your workplace retirement plan. In this case, you might
intended to project the performance of a specific investment vehicle.
want to consider contributing to a Roth IRA instead. But you
The bottom line: you should contribute as much as possimight be limited by income here as well: for 2016, eligibility to
ble to tax-advantaged retirement plans. For many people who
contribute to a Roth IRA phases out for single filers above
work, there are multiple retirement savings options available,
$117,000 and joint filers above $184,000 ($118,000 and $186,000
including dividing your IRA contributions between both a train 2017) and disappears completely for those earning more
ditional and a Roth IRA. There are even IRA options open for
than $132,000 and $194,000 respectively ($133,000 and $196,000
nonworking spouses. To make sure you’re taking full advanin 2017).
tage of the options open to you, please call. 444
Should You Contribute?
FR2016-0718-0044
FASTER YET.
4
News and Announcements from the Hoffmann-Easom-Lannan
Retirement Planning Group at Morgan Stanley
WILLIAM EASOM – Bill volunteers for iMentor, a program that
builds mentoring relationships that empower first-generation students from low-income communities to graduate from high school,
succeed in college, and achieve their ambitions. Bill continues progressing with his mentee to apply to colleges, as his mentee is now a
high school senior. On a separate note, Bill’s daughter is enjoying her
semester abroad! The last communication was, “Do I have to come
home?”
DAN HOFFMANN – Dan enjoyed cheering on his beloved
Cubs to the World Series this Fall. He cashed in “a lot of chips” to get
the green light for a last-minute flight to Cleveland for Game 7. Dan
was happy he could be there to see history. The Hoffmann girls are
busy with school and other activities. Elyse (9) has been taking violin
lessons, and Adele (6) decided to try drumming lessons, illustrating
that…they are very different indeed.
SEAN LANNAN – The Lannan family is spending winter at a
myriad of ice arenas for hockey games and tiny, old Catholic school
gymnasiums for basketball games. They are very much looking
forward to Spring Break in March, which includes a family vacation
to Mexico.
ANTHONY SEVERINO – The Severinos enjoyed a quiet, local
holiday season in Chicago with a short jaunt to Indiana to visit with
Jessica’s family. Greta (4) and Rocco (2.5) have been involved in Lil
Sluggers baseball in Chicago. The indoor facility is close to home and
serves as a great escape on Saturday mornings for the family. The
kids mostly enjoy running the bases and hitting. Vivienne (8 months)
cheers on the sidelines and is eager to join her older siblings next
year. Anthony will be training for three long-distance running events
in 2017, which will include race distances of 26.2, 50, and 100 miles.
MICHAEL HAYNES – In the cold winter months, the Haynes
family goes to the hockey rink to get warm. Erica hasn’t taken her
coat off in months. Austin celebrated his “golden birthday” on
January 10; he turned 10 and, of course, got Blackhawk vs. Red
Wings tickets! Lydia (5.5) officially decided, “Dad I don’t want to
play hockey or other activities, I just want to hang out with my
friends.” Yeah, she’s 5.5 going on 16.5. Please send help…Everyone
enjoyed spending the holidays with family in Michigan, and fortunately, Mike didn’t hurt himself in the annual family hockey game.
DAVID WHITACRE – Thank you to all who took a moment to
encourage me during my foot surgery and subsequent recovery. This
was my eleventh procedure, all of which started when I fell off a
ladder building a basketball goal for my daughters in 2003. My heel
shattered when my foot got caught up in the ladder rungs on my way
down. Fortunately, this may be my last, since a lot of the bones are
solidly fused together. My foot modeling days are over, but I
am starting to walk easier now and with less discomfort. My wife,
Tammy, and I are looking forward to the spring weather, and a chance
to develop our empty-nesting together. We are both car lovers (she
is a Detroit girl), so we have a lot of mutual interests to build on…
ERIN HALEY – There must be something in the water on the
Hoffmann-Easom-Lannan team, because Erin and her husband,
Adam, are thrilled to announce that they are expecting their first
child in late March! Although they don’t yet know the gender of their
baby, they are busy nesting and getting their home ready to welcome
their little one. Erin welcomes any tips on how to ready their Great
Dane puppy, Duke, for another baby in the family!
WILLIAM KRAMER – Bill and Anna welcomed their baby boy
Liam on October 17! He is growing by the minute, off the charts, in
height and weight. Liam is constantly smiling, eating, and, of course,
sleeping. Anna went back to work in January as a PICU nurse.
Anna’s parents, just two blocks down, have been a huge help with
the adjustment. So much to be thankful for in the Kramer household.
KENNETH ROBSON – 2017 is off to a great start! Courtney and
Kip took time over the holidays to relax with family in Baltimore and
Richmond and also went to their wedding venue for the menu
tasting. Fun plans for the wedding are underway. Excited for August
to get here! They are looking forward to traveling back east this
spring for some of their friends’ weddings.
CYNTHIA GARNER – The final Garner football season has
come to an end. The Palatine High School football team made it to
the state semifinals. They lost to the team that won the state championship for a second year in a row. Cindy will definitely miss watching her boys play football. Kevin will continue to coach, but it’s
just not the same. Cindy enjoyed a girls’ trip to Saint Maarten in
November, but was able to make it back in time to make their semifinal game. Both boys are making their final decisions on college.
Ryan is leaning toward Purdue for engineering and Matt is leaning
toward ISU for special education (following in his father’s footsteps).
The Garners are planning a trip to Scottsdale for spring break to golf
and catch a couple Cubs spring training games. Cindy is going to
relax by the pool.
BARBARA MARTIN – Barb and Chris enjoyed a wonderful
holiday season with Luke (3) and Abby (7 months). Luke started preschool in the fall, and he absolutely loves it! Abby now has six teeth,
started crawling last month, and pulls herself up on everything in
sight. Barb and Chris have been busy looking at houses in the suburbs, which is exciting but bittersweet at the same time. They will be
sad to leave the city, but happy to have some more room for all the
kids’ toys! They are all looking forward to spring, as everyone is
getting a little stir crazy!
STEVEN FILL – The Fills had a great holiday season and are
ready for what 2017 has in store. One thing for sure, their oldest
daughter Keeley (10) qualified for the 2017 World Irish Dancing
Championships in Dublin!! They are very proud of her accomplishment and can’t wait to see how she does. Tierney (7) is still loving
school, enjoying gymnastics classes, and making “slime” with her
friends in her free time. Jameson (2) is growing up so fast! He thoroughly enjoys going to his open gym classes and is about to start up
a “baby blades” ice skating class…Thanks grandpa! He is also taking
swim lessons to make sure he is ready for the beach this summer in
Wisconsin. They have been enjoying the mild winter but are still very
much looking forward to spring.
JACK STARKEY – It’s been an exciting few months for Jack and
his fiancé, Rachel! Back in late September, they were able to get away
for a two-week excursion through Asia. In Beijing, Jack proposed to
Rachel on the Great Wall of China; and then after a couple stops in
Japan, they went to Jack’s hometown of Singapore. Since then, she
said YES, thank goodness, because otherwise it would have been a
long trip. The two have been busy planning their wedding set for
September 2017 in Chicago!
This newsletter was produced by Integrated Concepts Group, Inc. on behalf of Dan Hoffmann, NMLS# 1275580, Financial Advisor; David Whitacre, NMLS# 245303, Financial Advisor; Erin Haley,
NMLS# 1262066, Financial Advisor; William Easom, NMLS# 1265054, Financial Advisor; Kathleen Dufficy, Portfolio Associate; Steven Fill, Portfolio Associate; Barbara Martin, Senior Registered
Associate; Kenneth Robson, NMLS# 865573, Financial Advisor; William Kramer, NMLS# 1449326, Financial Advisor; Therese Dolezal, Wealth Management Associate; Anthony Severino, NMLS#
1272513, Financial Advisor; Jacqueline Malacha, Client Service Associate; Michael Haynes, NMLS# 1275732, Financial Advisor; Cynthia Garner, Group Administrator; and Sean Lannan, NMLS#
1270099, Financial Advisor. 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.
2016-PS-53