Clear View Wealth Advisors and Steve Stanganelli, CFP(R) present the July 2012 newsletter featuring information on retirement income investing, dividend-paying stocks, tax planning for the pending Medicare surtax and college financial aid tips.

1. Smart Money
Insights
July 2012 Vol. No. 1 Investment Updates
Dividends and Inflation
As an investor, you may ask if an allocation to
dividend stocks in your retirement portfolio will help
keep up with inflation. Examining stock returns
during periods of high inflation may answer this
question. Dividend-paying stocks may offer benefits
such as stability through income return and inflation
protection. While stock prices tend to be volatile,
dividends may serve as a stable component of total
return and may provide better inflation protection
compared with bonds. Between 1974 and 1980 (high
inflation period), the average rate of inflation was
9.3%, much higher than the historical rate of 3%.
During this time, bonds yielded 7.9% from income,
but prices declined by 2.7%, resulting in a total return
of 5.6%—way short of inflation. On the contrary,
stocks returned a total of 10%: 5.0% from dividend
income and 4.8% from price return, outpacing
inflation for this time period.
Personal Note from Steve Stanganelli
My Core Values and value having a reliable Let’s make a plan together to
second opinion or need help improve your bottom line.
I strive to run my practice and my getting on track, then I look
life on the core principles best forward to being a part of your
summed up in Don Miguel Ruiz's team.
The Four Agreements:
I want to help you make sense of
Be Impeccable with Your Word your money.
Don't Take Anything Personally
Steve Stanganelli, MSF, CFP® Don't Make Assumptions Please call me and we can set up
Fee Only Planner & Tax Coach
Always Do Your Best a time for a no pressure chat to
steve@clearviewwealthadvisors.com explore the ways that we may be
978-388-0020 If you are like me and appreciate able to work together.
www.ClearViewWealthAdvisors.com this approach to life and business

2. Clear View Wealth Advisors LLC Investment Updates July 2012 2
media scare you into making poor investment
How to Cope with Financial Anxiety decisions. Times of great uncertainty are usually bad
times to be making major decisions. What is healthy is
knowing how the human mind works and factoring
that into your investment decision-making process.
Researchers and academics in the field of behavioral
No one likes uncertainty. We want to maintain at least finance attempt to better understand and explain how
the illusion of control. But that's almost impossible to emotions and perceptions influence investors and their
do today, given the volatility of the stock market and decisions. If you are interested in learning more, there
employers' belt-tightening. Even the steadiest hand is are plenty of publications devoted to this relatively new
shaking just a little. It is imperative to avoid letting field.
your emotions get in the way of making smart
investment decisions. In times of doubt, it might be in Consider all of the complex financial decisions faced
your best interest to follow these steps for re- by investors today. Without experience in different
examining your current financial strategy. market environments or knowledge of market history,
how might investors make such decisions? Potentially
Reassess Your Risk Tolerance: Today's investor is through their perceptions or based on their emotions.
living those “hypothetical” questions that appear on Thus, it is imperative that investors understand and
risk-tolerance questionnaires. If you haven't checked combat the myriad of illusions to which they might be
your risk tolerance (the degree of uncertainty that you prone.
can handle in your investment portfolio) in more than
a year, you're most likely due—especially if you're When the markets are doing well, people tend to
uncomfortable right now. Maybe you've taken on think the trend will continue indefinitely. During the
more risk than is prudent. If so, it might be in your recent crisis when the market was struggling, we
best interest to change your asset mix. If you find that witnessed overreaction: Investors were running away
you're taking on the appropriate amount of risk for from the stock market. However, if you think U.S.
your goals, just sit tight. companies are still fundamentally strong and will
profit in the next five to 10 years, then you should still
If You Have to Do Something, Review Your have a stake in the stock market. Just make sure you
Expenses: When dealing with uncertainty, some set your asset allocation policy first, and then stay the
people feel compelled to act. Instead of trying to time course with an appropriate mix of stocks, bonds, and
the market (which even the professionals can't do with cash. Investing is a long-term proposition—don’t let
any consistency), focus on things you can control with your emotions overpower your sense of reason.
certainty: expenses. Identify where you can tighten
your belt. Try to identify unneeded or underused Stocks are not guaranteed and have been more volatile
services. After such cuts, you’ll have some extra cash to than bonds. Past performance is no guarantee of future
invest each month. Expenses also matter in investment results. Diversification does not eliminate the risk of
accounts. Do you know what you’re paying in expense experiencing investment losses.
ratios, 12b-1 fees, front- or back-end loads? Burn up
some of your nervous energy by making sure those
expenses aren’t eating up what little positive returns
you might have.
Create a Shopping List of Investments: Research
stocks or funds that would complement your portfolio,
then see where they are currently trading. This could
be a great opportunity to pick up some of your favorite
picks at rock-bottom prices. However, make sure they
are trading at historical lows because of investor
overreaction and not because they are no longer
financially sound.
Win the Psychological Battle: Don't let the financial

3. Clear View Wealth Advisors LLC Investment Updates July 2012 3
be under foreclosure; their prices may also be low in
Retirees: Non-Traditional Investment absolute terms. As with investing in any other security
type, seeking low valuations is a key way to bring
Risks down your risk, but distressed real estate investing is
far from a low-risk endeavor. Distressed properties
may require substantial additional investment before
Volatile markets pose several challenges for retirees they can be rented or resold, and there is no guarantee
who rely on receiving a livable income stream from that a seemingly low-priced property won't fall further
their investments. Interest rates are low and likely to still. Finally, real estate can be illiquid, and for smaller
stay low for the foreseeable future, making cash and investors can be cost-prohibitive to build a diversified
high-quality bonds a safe parking place for now. Amid portfolio of properties.
such a challenging environment, it's hard to blame
retired investors for looking beyond traditional Private Mortgages: The troubled housing market has
investments like stocks, bonds, and cash, or the mutual given rise to another real estate-related investment, the
funds and exchange-traded funds that invest in these private mortgage. In contrast to a loan extended by a
securities. bank or financial institution, a private mortgage is
funded by individuals, groups of individuals, or a
Many investors have flocked to gold and other corporation that specializes in making such loans. A
precious metals, while others have gravitated toward private mortgage holder may be able to earn a
investment types like life settlements, distressed real substantially higher interest rate than he or she can
estate investments, and private mortgage investments. earn on cash or high-quality bond investment. At the
Such non-traditional investments might hold the same time, the risks of a private mortgage loan are also
promise of higher returns compared with traditional a lot higher than cash or bonds, even though the loan
asset classes, but there is often a trade-off of higher is secured by the property. Individuals usually turn to
risks and/or costs. Moreover, investors in non- the private mortgage market because they can't secure
traditional investments might not benefit from the bank financing; thus, they might have poor credit or
same liquidity, transparency, and regulatory oversight limited down payments. Those risks can be
that investors in traditional assets have. The following exacerbated because it can be difficult to diversify in
three asset types have picked up traction, but it is the private mortgage market.
important to understand the risks before entrusting
your hard-earned cash to them. Retirees should exercise caution when investing in non
-traditional assets. It is important to understand that
Life Settlements: A life settlement originates when a investors in these non-traditional assets might have to
life insurance policyholder, often an elderly or give up transparency, liquidity, and regulatory
terminally ill person, sells his or her interest in the oversight.
policy to a third party, usually at a level that is well
below the policy's stated death benefit. The third party
then resells, often by issuing securities, that interest to
investors who in turn must keep the policy in effect by
paying its premiums. When the originally insured
person dies, the owner of the security collects the
death benefit. The rate of return on a life-settlement
investment will hinge on when the originally insured
person dies. If death occurs within his or her estimated
life expectancy, the return will be relatively high. But if
the original policy owner lives well beyond the
expected time frame, a life settlement can be a poor
investment. Not only will it take a while to pay off, but
the investor will have to fork over premiums on a
regular basis.
Distressed Real Estate: Distressed properties typically
sell at prices lower than what the owners paid and may

4. Clear View Wealth Advisors LLC Investment Updates July 2012 4
Remember, the act only applies the surtax to
Planning for the New 3.8% Medicare investment gains when the total adjusted gross income
on a return exceeds $250,000 for couples and
Surtax $200,000 for single taxpayers. If your adjusted gross
income is less than those amounts, the surtax will not
apply. If you’re above those thresholds, then it applies
If you are a business owner, real estate investor, or an only to the lesser of the net investment income or AGI
investor with potential adjusted gross income above above the mark.
$250,000 in 2012, then you need to consider planning
for the new Medicare surtax. Here are some examples to consider.
This surtax is a new provision contained in the Health If you had zero investment income but had salary
Care and Reconciliation Act of 2010 that amended income above $250,000, then you would expect to pay
the Patient Protection and Affordable Care Act of zero additional tax. (So capital losses from previous
2010. Now that the US Supreme Court has ruled that years or passive activity losses are valuable and can be
the health care law is constitutional, this new provision used to reduce your investment income).
takes effect in 2013.
A married couple with combined salaries of $200,000
Officially, the surtax is known as the Unearned and net investment income of $150,000 would pay the
Income Medicare Contributions Tax ["UIMCT"]. surtax on $100,000 of income since it is the lesser of
$150,000 of net investment income or the excess over
The UIMCT broadens the Medicare tax base for the MAGI threshold of $250,000.
higher-income taxpayers by imposing a 3.8% surtax on
the lesser of: (1) “net investment income”; or (2) the IRS Guidance
excess of adjusted gross income [AGI], increased by
any foreign earned income otherwise excluded from
AGI, over the taxpayer’s threshold amount. Net Without additional guidance from the IRS, it appears
investment income does not include income from a that the surtax applies to dividends, royalties, short-
trade or business, distributions from IRAs or qualified and long-term capital gains,passive income from
plans or tax-exempt municipal bond interest. partnerships, the taxable portion of annuity payments
received and gains on home sales above the exclusion
limits.
While it is difficult to provide specific
recommendations to investors without knowing the
total composition of their income, there are certain While a lot in personal investing is not controllable,
planning tips to consider when speaking with your tax you certainly can find ways to reduce the impact of
or financial planning professional. Based on the these external factors. With some proper tax planning
definitions of this new law, it appears that anything ahead of time, you can minimize your tax bill and keep
that can be done to reduce your AGI will be helpful. more in your pocket.
So, avoid foreign earned income that is not otherwise By Steve Stanganelli, CFP(R), CRPC(R)
exempted. Consider municipal bond income. You may
consider contributing more to your qualified plans at
work (maximum $17,000 in employee contributions
plus any applicable catch-up if you are over age 50).
You may consider annuities and cash-value life
insurance as other places to put cash. If you have the
opportunity to defer bonus income into another tax
year, consider that as well. If you can operate or start a
side-business (schedule C-type income), you may be
able to use the start-up costs to reduce your net profit
and subsequently your AGI.

5. Clear View Wealth Advisors LLC Investment Updates July 2012 5
name cache.
College Funding Corner
The factors that seem to conspire to keep young
people in college - and debt - forever are:
Financial Aid Question of the Month: * Parents let them * Students don't go to class
everyday * Students change their majors too much
and too late * Students go to too many schools, or
Q. When is the best time to start preparing for the they transfer and lose credits * A lack of adequate
financial aid forms? funds or a family crisis may keep a student away for a
semester or more * Working during college also can
A. This is a great question and one that is easy to delay the process of getting out as can postponing
answer AND that answer is right now. Imagine you required courses for one's major because a class is
were doing tax planning. You wouldn't wait until oversubscribed * Schools make it difficult to get
April 15th. You'd start earlier than that. Strategies required classes
must be created, tactics executed. Completing your tax
return is merely a step in the process. The same is true This has become such a concern that the Dept. of Ed.
of the financial aid planning process. Your planning is requires colleges to at least report their six-year
reflected in the financial aid forms. graduation rates. Another factor that drives down
graduation rates are the number of Pell Grant
Doing everything possible to present a favorable recipients who are right out of high school and either
financial aid picture requires planning, familiarity with aren't prepared for the rigors of independent study or
the rules, regulations, proper completion of the they just can't receive enough money to finish.
financial aid forms and of course, meeting deadlines.
These days, applying for financial aid is a minefield NOTE: The older the Pell Grant recipient (non-
designed to lessen your chances of getting money. The traditional student) the more likely they are to
only way to make it safely through a minefield is to graduate than their younger counterparts.
follow someone with the map...and we have the
map.______________________________
My suggestion is to have a head-to-head talk with
your student about what you're willing to do and what
Graduation Rates Interpreted they're willing to do. Having a game plan to be
successful in college is just as important as applying to
You may or not be aware that based on U.S. college.
Department of Education data, only 53% of college
students graduate in six years. Can you afford for your ______________________________
student to have a 53% chance of success in six years.
Don't you want your son or daughter to have a 100%
chance of success in four years? More College Funding Strategies at
www.CollegeCashPro.com.
And about a quarter of freshmen don't return for their
sophomore year. So half the problem occurs by the
end of the first year.
What the data actually says is that of first-time college
students, only 53% graduate from the institution
where they begin their studies within six years. Many
will graduate from other institutions.
A good college fit goes a long way toward reducing the
25% failure rate between the freshman and sophomore
year. So choosing the right college for the student is
important - not just the school with the right brand or

6. Clear View Wealth Advisors LLC Investment Updates July 2012 6
your current account value. If the current value of your
Annuities: Beware of Excess investment sub-accounts is, say, $80,000, you now get
5% of $80,000: only $4,000. The examples presented
Withdrawals herein are for informational purposes only. They are
not representative of any specific annuity and do not
constitute investment advice. Annuities are suitable for
It’s extremely important to understand the impact of long-term investing, particularly retirement savings.
withdrawals on a living benefit attached to an annuity Withdrawal of earnings will be subject to ordinary
contract. The most widely used living benefit today is income tax and, if taken prior to age 59½, may be
the lifetime guaranteed minimum withdrawal benefit subject to a 10% federal tax penalty. Additional fees
(Lifetime GMWB). These usually allow you to make apply for living-benefit options. Investment
withdrawals from your account up to an annual limit restrictions may also apply for all living-benefit
(usually 4–6% of your investment). If you withdraw options. Violating the terms and conditions of the
more than that percentage, future payments may be annuity contract may void guarantees. Read your
reduced. Sometimes, an excess withdrawal triggers a prospectus carefully for all the fees and expenses that
reset of the base on which your guaranteed amount is may apply to your variable annuity contract. It is also
calculated. These withdrawals can also negatively recommended that you consult with a financial advisor
impact the account value and death benefit. Example: and tax advisor before purchasing an annuity.
You purchase an annuity for $100,000 that allows you
a guaranteed 5% annual withdrawal until you start
receiving your monthly payments for life. You may
withdraw $5,000 every year. If you take out more than
$5,000, your annual guaranteed withdrawal amount
may decrease, and you won’t be able to take out as
much the following year. An excess withdrawal of, say,
$5,500 will trigger a reset of your benefit base to equal
©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 not
warranted 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 arising
from 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 Market
Commentary originally published by Robert Johnson, CFA, Director of Economic Analysis with Morningstar and has been modified for Morningstar Newsletter Builder.
Steve Stanganelli, MSF, CFP® Clear View Wealth Advisors LLC steve@clearviewwealthadvisors.com Tel:978-388-0020
Fee Only Planner & Tax Coach 12 Amidon Avenue www.ClearViewWealthAdvisors.com
Amesbury, Massachusetts 01913