Advantages to Pre-Tax Deferral of Income in an Uncertain Tax Environment

6WHYH %URDGEHQW &KULV 1\ODQG )XOFUXP 3DUWQHUV //& IXOFUXPSDUWQHUVOOF FRP

$ ' 9 $ 1 7 $ * ( 6 7 2 35( 7$; '()(55$/ 2) ,1&20( LQ DQ 8 1 & ( 5 7 $ , 1 7D[ (QYLURQPHQW $ QHZ WUHQG LV XSRQ XV (PSOR\HHV ZKR RQFH URXWLQHO\ GHIHUUHG FRPSHQVDWLRQ DUH QRZ UHWKLQNLQJ WKRVH KDELWV DV WKH\ FRQVLGHU XSGDWHV WR WKHLU ILQDQFLDO SODQV $PRQJ WKH FRQFHUQV LV ZKHWKHU LW PLJKW EH EHWWHU WR WDNH LQFRPH WRGD\ EHFDXVH RI WKH XQFHUWDLQW\ RI WD[ LQFUHDVHV LQ WKH IXWXUH 7KH XQFHUWDLQW\ ZDV KLJKOLJKWHG LQ WKH ³ILVFDO FOLII´ QHJRWLDWLRQV LQ ZKLFK WKH WRS )HGHUDO WD[ UDWHV ZHUH LQFUHDVHG DQG D QXPEHU RI ³UHYHQXH HQKDQFHPHQWV´ ZHUH DGGHG ZKLFK DUH QRWKLQJ PRUH WKDQ QHZ WD[HV XQGHU WKH SURYHUELDO VKHHS¶V FORWKLQJ 7KLV DUWLFOH VKRZV KRZ \RX VKRXOG FRQVLGHU UHFHQW DQG IXWXUH WD[ UDWH FKDQJHV DQG LQYHVWPHQW UHWXUQV ZKHQ DQDO\]LQJ ZKHWKHU WR SDUWLFLSDWH LQ \RXU FRPSDQ\ V QRQTXDOLILHG GHIHUUHG FRPSHQVDWLRQ SODQ '&3

A Challenge to Current Thinking on Income Deferral 7KH QHZ FRQYHQWLRQDO ZLVGRP UHYHUVHV WKH WLPH KRQRUHG WKRXJKW WKDW RQH VKRXOG WXFN DZD\ LQFRPH LQ GHIHUUHG DFFRXQWV QRZ WR SD\ ORZHU WD[HV LQ UHWLUHPHQW ODWHU %XW LV WKH FRQYHQWLRQDO ZLVGRP FRUUHFW" $ VWXG\ E\ )XOFUXP 3DUWQHUV //& VXJJHVWV WKDW LQ DOO EXW D IHZ VFHQDULRV HYHQ LI WD[HV GR ULVH LQ WKH \HDUV DKHDG ZKLOH ZRUNLQJ RU GXULQJ UHWLUHPHQW WKH

$ ' 9 $ 1 7 $ * ( 6 7 2 DFFXPXODWHG VDYLQJV WKDW PD\ EH DFKLHYHG RYHU WKH ORQJ WHUP WKURXJK

GHIHUUDO RI LQFRPH DQG UHODWHG WD[HV XQGHU DQ '&3 SODQ DUH VWLOO JUHDWHU WKDQ WKH DPRXQW WKDW FRXOG EH DFFXPXODWHG WKURXJK DIWHU WD[ LQYHVWLQJ LQ D

3 5SHUVRQDO LQYHVWPHQW DFFRXQW ( 7$; '()(55$/ 2) ,1&20(

8 1 & ( 5 7 $ , 1 7D[ (QYLURQPHQW LQ DQ IDFWRUV 3URSHOOLQJ WKH QHZ FRQYHQWLRQDO ZLVGRP RI GRQ W GHIHU DUH WKH IROORZLQJ

x

'&3 SDUWLFLSDQWV QRZ DQWLFLSDWH D FKDQJH LQ IHGHUDO WD[ SROLF\ WKDW ZLOO FDXVH DQ XSZDUG VKLIW LQ WKHLU PDUJLQDO WD[ UDWHV ZLWK QR SURVSHFW IRU WD[ UDWHV WR GHFOLQH GXULQJ UHWLUHPHQW

x

$W WKH VDPH WLPH WKH SURYLVLRQV RI ,QWHUQDO 5HYHQXH &RGH ,5& 6HFWLRQ $ WKDW JRYHUQ DOO LQFRPH GHIHUUHG DIWHU -DQXDU\ KDYH GHFUHDVHG SDUWLFLSDQW IOH[LELOLW\ LQ FHUWDLQ UHVSHFWV UHJDUGLQJ WLPLQJ RI GHIHUUDO HOHFWLRQV DQG GLVWULEXWLRQV

x

'&3 DFFRXQWV ODFN WKH VHFXULW\ RI TXDOLILHG UHWLUHPHQW SODQV VXFK DV D N DFFRXQW WKHUHIRUH PDQ\ SDUWLFLSDQWV KDYH GHFUHDVHG RU HYHQ VWRSSHG GHIHUULQJ LQFRPH LQWR D '&3 EHFDXVH RI WKH ILQDQFLDO XQFHUWDLQW\ RI WKHLU HPSOR\HU

THEEXCHANGEFORPEOPLESTRATEGYAPRIL 2014

PSX: ADVANTAGES TO PRE-TAX DEFFERAL

7KH FRPELQDWLRQ RI WKHVH IDFWRUV KDV FDXVHG WKH '&3 OLDELOLWLHV LQ P\ FRPSDQLHV WR OHYHO RII LQ UHFHQW \HDUV DV FRPSDUHG WR WKH VLJQLILFDQW JURZWK LQ '&3V SULRU WR

Basic Truths Still Hold :KLOH EDVLF WUXWKV VWLOO KROG WKH ZLVGRP RI FURZGV PD\ FKDQJH VRRQ +HUH V ZK\ x 7ZR RI WKH IDFWRUV FDXVLQJ D GHFOLQH LQ SDUWLFLSDWLRQ ZLOO IDGH DZD\ ZLWK WLPH 3ODQ VSRQVRUV DQG SODQ SDUWLFLSDQWV KDYH JDLQHG PRUH H[SHULHQFH LQ WKH HIIHFWLYH PDQDJHPHQW RI GHIHUUHG FRPSHQVDWLRQ XQGHU WKH 6HFWLRQ $ UHJXODWLRQV :KLOH WKH UHJXODWLRQV GR LPSRVH VRPH UHVWULFWLRQV RQ \RX WKH HIIHFWLYH RSHUDWLRQ RI D '&3 XQGHU WKHVH QHZ UHJXODWLRQV PHUHO\ UHTXLUHV VRPH DGGLWLRQDO SODQQLQJ x /LPLWHG UHFRYHU\ IURP WKH UHFHQW UHFHVVLRQ LV XQGHUZD\ DQG \RX DUH QR ORQJHU ERPEDUGHG ZLWK EDG HFRQRPLF QHZV DOPRVW HYHU\ GD\ 7KH VORZ HFRQRPLF UHFRYHU\ KDV FUHDWHG QHZ RSWLPLVP DPRQJ '&3 SDUWLFLSDQWV DERXW WKHLU HPSOR\HUV DQG WKHLU LQGLYLGXDO ILQDQFLDO SODQV :LOO 7D[HV 5LVH" ,PPHGLDWHO\ IROORZLQJ WKH 3UHVLGHQWLDO HOHFWLRQ ZH ZLWQHVVHG D FRQWHQWLRXV EDWWOH LQ &RQJUHVV RYHU WKH ´ILVFDO FOLII´ LVVXHV ZKLFK LQ WKH HQG EURXJKW XV D KLJKHU FDSLWDO JDLQV UDWH DQG DQ LQFUHDVH WR WKH WRS PDUJLQDO LQFRPH WD[ UDWH ,Q WKH FRPLQJ PRQWKV ZH ZLOO VHH GHEDWHV RYHU WKH GHEW FHLOLQJ DQG WKH VR FDOOHG ³*UDQG %DUJDLQ´

PSXAPRIL 2014

ZKLFK ZLOO DWWHPSW WR SURYLGH D FRPELQHG VROXWLRQ WR WKH GHEW FHLOLQJ UHGXFLQJ WKH

QDWLRQ¶V GHEW WD[ UHIRUP DQG DQ RXWOLQH IRU IXWXUH )HGHUDO EXGJHWV 7KHVH GHEDWHV ZLOO FUHDWH DGGLWLRQDO SUHVVXUH IRU PRUH LQFUHDVHV WR ERWK FDSLWDO JDLQV DQG LQFRPH WD[ UDWHV 2Q WRS RI WKH ILVFDO LVVXHV FLWHG DERYH H[HFXWLYHV DUH HQGXULQJ D QHZ WD[ RQ LQYHVWPHQW LQFRPH IRU LQGLYLGXDOV ZLWK D PRGLILHG DGMXVWHG JURVV LQFRPH LQ H[FHVV RI

IRU VLQJOH ILOHUV DQG IRU MRLQW ILOHUV $V \RX FRQVLGHU SUH WD[ LQYHVWLQJ LQ D QRQTXDOLILHG '&3 YHUVXV DQ DIWHU WD[ DOWHUQDWLYH LW LV LPSRUWDQW WR UHPHPEHU WKLV WD[ GRHV QRW DSSO\ WR LQYHVWPHQW JDLQV LQ D '&3

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²DQG VWD\ XS²IRU D VLJQLILFDQW SRUWLRQ RI \RXU UHWLUHPHQW SODQQLQJ WLPH KRUL]RQ

Deferral with Higher Tax Rates Ahead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

THEEXCHANGEFOR PEOPLESTRATEGYAPRIL 2014

PSX: ADVANTAGES TO PRE-TAX DEFFERAL

DFFRXQW L H D UHJXODU WD[DEOH EURNHUDJH DFFRXQW RXWVLGH \RXU HPSOR\HU V EHQHILW SODQV WR WKH SUH WD[ GHIHUUDO RI LQFRPH LQWR DQ HPSOR\HU VSRQVRUHG '&3 7KH LPSRUWDQW YDULDEOHV IRU WKH DQDO\VLV DUH x 3HUVRQDO LQYHVWPHQW DFFRXQWV DUH WD[HG DV ORQJ WHUP FDSLWDO JDLQV ,Q UHDOLW\ D GLYHUVLILHG SHUVRQDO LQYHVWPHQW DFFRXQW W\SLFDOO\ ZRXOG EH WD[HG DV D FRPELQDWLRQ RI FDSLWDO JDLQV DQG RUGLQDU\ LQFRPH KRZHYHU WKLV DVVXPSWLRQ ZDV VHOHFWHG WR SURYLGH WKH EHVW DGYDQWDJH WR SHUVRQDO LQYHVWPHQW DFFRXQWV

x 'HIHUUHG FRPSHQVDWLRQ LV WD[HG DV RUGLQDU\ LQFRPH DW WKH WLPH RI GLVWULEXWLRQ x :KLOH WKH ORQJ WHUP FDSLWDO JDLQV UDWH LV FXUUHQWO\ ZH H[DPLQHG WKH LPSDFW RI ERWK WKH SUHYLRXV FDSLWDO JDLQV WD[ UDWH DQG WKH FXUUHQW UDWH x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x 3UH WD[ HDUQLQJV UDWHV DUH RU x ,QYHVWPHQW KRUL]RQV RI DQG \HDUV

PSXAPRIL 2014

x 'LVWULEXWLRQV RFFXU HLWKHU LQ OXPS VXP RU LQ LQVWDOOPHQWV RYHU D \HDU SHULRG

)RU VLPSOLFLW\ LQ SUHVHQWDWLRQ WKLV DQDO\VLV DVVXPHG WKDW D VLQJOH DPRXQW RI ZDV LQYHVWHG LQ HLWKHU D SHUVRQDO LQYHVWPHQW DFFRXQW RU D '&3 DFFRXQW LQ DOO VFHQDULRV 7KH DPRXQW XVHG IRU WKH DIWHU WD[ LQYHVWLQJ LQ \RXU SHUVRQDO DFFRXQW LV PLQXV WKH LQFRPH WD[ RZHG LQ WKH \HDU HDUQHG 7KH VLQJOH GHSRVLW RI ZDV WKHQ WHVWHG LQ DSSUR[LPDWHO\ VFHQDULRV XVLQJ WKH YDULDEOHV OLVWHG DERYH 7KH DQDO\VLV FRPSDUHG WKH YDOXH RI WKH SHUVRQDO LQYHVWPHQW DFFRXQW WR WKH

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²LQ WHUPV RI WKH WRWDO DPRXQW DFFXPXODWHG DIWHU WD[HV DUH SDLG²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

THEEXCHANGEFORPEOPLESTRATEGYAPRIL 2014

PSX: ADVANTAGES TO PRE-TAX DEFFERAL

PSXAPRIL 2014

Lower Rates Now Do Not Matter :KDW FDQ \RX WDNH DZD\ IURP WKLV FKDUW" '&3 SODQV FRQWLQXH WR EH DGYDQWDJHG RYHU WLPH HYHQ LI LQFRPH WD[ UDWHV ULVH DJDLQ LQ WKH FRPLQJ \HDUV 7KH DVVXPSWLRQ RI WKH FDSLWDO JDLQV UDWH LV LPSRUWDQW DV WKH FDSLWDO JDLQV UDWH DV RSSRVHG WR WKH SUHYLRXV UDWH PDNHV WKH '&3 ORRN HYHQ EHWWHU 7KH FRPSRXQGLQJ RI SUH WD[ PRQH\ ZLOO DOZD\V EHDW DIWHU WD[ LQYHVWLQJ DVVXPLQJ HTXDO SUH WD[ UDWHV RI UHWXUQ RQ WKH LQYHVWPHQWV

,I WD[HV DUH ORZHUHG GXULQJ \RXU UHWLUHPHQW WKH DGYDQWDJH RI D '&3 GRHV QRW FKDQJH 7KH IROORZLQJ FKDUW DVVXPHV D PDUJLQDO LQFRPH WD[ UDWH GXULQJ WKH GHIHUUDO RU LQYHVWPHQW \HDUV DQG D UDWH GXULQJ UHWLUHPHQW 7KH UHVXOWV GR QRW ORRN VXEVWDQWLDOO\ GLIIHUHQW IURP WKRVH VKRZQ RQ WKH SUHYLRXV FKDUW

PSX: AVANTAGES TO PRE-TAX DEFFERAL

7KH IROORZLQJ FKDUW FRPSDUHV DIWHU WD[ LQYHVWLQJ DW ERWK D DQG FDSLWDO JDLQV WD[ UDWH WR SUH WD[ GHIHUUDO RI LQFRPH LQ D '&3 DVVXPLQJ D SUH WD[ UDWH RI UHWXUQ RQ WKH GHIHUUHG LQFRPH RU LQYHVWPHQW 7KH SDLU RI SHUFHQWDJHV UHSUHVHQWV WKH PDUJLQDO LQFRPH WD[ UDWH DW WKH WLPH RI GHIHUUDO LQYHVWPHQW DQG DW WKH WLPH RI GLVWULEXWLRQ UHVSHFWLYHO\ 7KH SHUFHQWDJHV LQ WKH GHIHUUDO IRU DQG \HDUV FROXPQV UHSUHVHQW WKH DGYDQWDJH RI WKH '&3 RYHU WKH SHUVRQDO LQYHVWPHQW DFFRXQW²LQ WHUPV RI WKH WRWDO DPRXQW DFFXPXODWHG DIWHU DOO WD[HV DUH SDLG ([DPSOH $ SDUWLFLSDQW GHIHUV IRU \HDUV DQG WDNHV D OXPS VXP SD\PHQW IROORZLQJ WKH WZHQWLHWK \HDU ,I WKH SDUWLFLSDQW V WD[ UDWH DW WKH WLPH RI GHIHUUDO LV DQG DW GLVWULEXWLRQ LV WKH DGYDQWDJH RI D '&3 RYHU DQ DIWHU WD[ LQYHVWPHQW RI WKH VDPH DIWHU WD[ # WD[ UDWH LV

$GYDQWDJH RI WKH 3UH 7D[ 'HIHUUDO RI ,QFRPH RYHU WKH (TXLYDOHQW $IWHU 7D[ $OWHUQDWLYH XVLQJ YDULRXV &DSLWDO *DLQV DQG )HGHUDO ,QFRPH 7D[ VFHQDULRV

Personal Investment Account as Taxes Rise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

Security Concerns and Investment Choices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ŽŽŽ %\ 6WHYH %URDGEHQW DQG &KULV 1\ODQG VWHYH EURDGEHQW#IXOFUXPSDUWQHUVOOF FRP FKULV Q\ODQG#IXOFUXPSDUWQHUVOOF FRP

6WHYH %URDGEHQW &$ /,& 2& DQG &KULVWRSKHU 1\ODQG &$ /,& & DUH UHJLVWHUHG UHSUHVHQWDWLYHV RI DQG VHFXULWLHV SURGXFWV DQG VHUYLFHV DUH RIIHUHG WKURXJK 9DO0DUN 6HFXULWLHV ,QF 0HPEHU ),15$ 63,& 6SULQJVLGH 'ULYH $NURQ 2KLR )XOFUXP 3DUWQHUV LV D VHSDUDWH HQWLW\ IURP 9DO0DUN 6HFXULWLHV ,QF

Deferred Compensation Plan Provides Advantages Over

THEEXCHANGEFORPEOPLESTRATEGYAPRIL 2014

Securities offered through Registered Representatives of ValMark Securities, Inc. Member FINRA, SIPC, 130 Springside Drive, Suite 300, Akron, OH 44333-2431, Tel: 1-800-765-5201. Investment Advisory Services offered through ValMark Advisers, Inc., which is an SEC Registered Investment Advisor. Fulcrum Partners LLC is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc..