Your Wealth Management TeamPinnacle Wealth Planning Services,Inc.800-987-4767info@lpipinnacle.comwww.pinnacleadvisors.com

December 2017Demographic Dilemma: Is America's AgingPopulation Slowing Down the Economy?

It's Time for Baby Boomer RMDs!

What can I learn from looking back on myfinancial situation in 2017?

What financial resolutions should I considermaking as I look ahead to 2018?

Pinnacle Advisor MonthlyWe help families plan for their financial future.

Questions to Ask Before Buying That Thing You've Always Wanted

See disclaimer on final page

Even if you're generallycomfortable with yourfinances, you mayoccasionally worry abouthow much you'respending, especially ifyou consistently havetrouble saving for short-or long-term goals. Here

are a few questions to ask that might help youdecide whether a purchase is really worth it.

Why do I want it?Maybe you've worked hard and think youdeserve to buy something you've alwayswanted. That may be true, but are you certainyou're not being unduly influenced by otherfactors such as stress or boredom?

Take a moment to think about what's importantto you. Comfort? Security? Safety? Status?Quality? Thriftiness? Does your purchase alignwith your values, or are you unconsciouslyallowing other people (advertisers, friends,family, neighbors, for example) to influenceyour spending?

How will buying this now affect melater?When you're deciding whether to buysomething, you usually focus on the featuresand benefits of what you're getting, but whatare you potentially forgoing? When you factorthis into your decision, what you're weighing isknown as the opportunity cost. For example,let's say you're trying to decide whether to buya new car. If you buy the car, will you have togive up this year's family vacation to DisneyWorld? Considering the opportunity cost mayhelp you evaluate both the direct and indirectcosts of a purchase. Ask yourself how you willfeel about your purchase later. Tomorrow? Nextmonth? Next year?

Will this purchase affect your family?Couples often fight about money because theyhave conflicting money values. Will yourspouse or partner object to your purchasing

decision? And what about your children?Children learn from what they observe. Are youcomfortable with the example you might besetting?

Do I really need it today?Buying something can be instantly and tangiblygratifying. After all, which sounds more exciting:spending $1,500 on the ultra-light laptop you'vehad your eye on or putting that money into aretirement account? Consistently prioritizing animmediate reward over a longer-term goal isone of the biggest obstacles to saving andinvesting for the future. The smaller purchasesyou make today could be getting in the way ofaccumulating what you'll need 10, 20, or 30years down the road.

Be especially wary if you're buying somethingnow because "it's such a good deal." Take timeto find out whether that's really true. Shoparound to see that you're getting the best price,and weigh alternatives. You may discover alower-cost product that will meet your needsjust as well. If you think before you spendmoney, you may be less likely to make impulsepurchases and more certain that you're makingappropriate financial choices.

Can I really afford it?Whether you can afford something depends onboth your income and your expenses. Youshould know how these two things measure upbefore making a purchase. Are you consistentlycharging purchases to your credit card andcarrying that debt from month to month? If so,this may be a warning sign that you'reoverspending. Reexamining your budget andfinancial priorities may help you get yourspending back on track.

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Demographic Dilemma: Is America's Aging Population SlowingDown the Economy?It's no secret that the demographic profile of theUnited States is growing older at a rapid pace.While the U.S. population is projected to growjust 8% between 2015 and 2025, the number ofolder Americans ages 70 to 84 will skyrocket50%.1

With roughly 75 million members, babyboomers (born between 1946 and 1964) makeup the largest generation in U.S. history. As agroup, boomers have longer life expectanciesand had fewer children than previousgenerations.2

Now, after dominating the workforce for nearly40 years, boomers are retiring at a rate ofaround 1.2 million a year, about three timesmore than a decade ago.3

Though the economy has continued to improvesince the Great Recession, gross domesticproduct (GDP) growth has been weakcompared with past recoveries. A number ofeconomists believe that demographic changesmay be the primary reason.4

Spending shiftsThe lower birth rates in recent decadesgenerally mean that fewer young people arejoining the workforce, so the consumerspending that fuels economic expansion andjob creation could take a hit. When youngpeople earn enough money to strike out ontheir own, marry, and start families, it typicallyspurs additional spending — on places to live,furniture and appliances, vehicles, and otherproducts and services that are needed to set upa new household.

On the other hand, when people retire, theytypically reduce their spending and focus moreon preserving their savings. Moreover, retirees'spending habits are often different from whenthey were working. As a group, retirees tend toavoid taking on debt, have more equity built upin their homes, and may be able to downsize ormove to places with lower living costs. Morespending is devoted to covering health-carecosts as people age.

If a larger, older population is spending lessand the younger population is too small to driveup consumer spending, weaker overall demandfor products and services could restrain GDPgrowth and inflation over the long term. Lessborrowing by consumers and businesses couldalso put downward pressure on interest rates.

A new normal?The onslaught of retiring baby boomers haslong been expected to threaten the viability ofSocial Security and Medicare, mainly becauseboth are funded by payroll taxes on current

workers. But this may not be the onlychallenge.

A 2016 working paper by Federal Reserveeconomists concluded that declining fertility andlabor force participation rates, along withincreases in life expectancies, accounted for a1.25 percentage point decline in the natural rateof real interest and real GDP growth since1980. Furthermore, the same demographictrends are expected to remain a structuralimpediment to economic growth for years tocome.5

Put simply, a nation's potential GDP is aproduct of the number of workers times theproductivity (output) per worker, and the U.S.workforce is shrinking in relation to the totalpopulation.

The labor force participation rate — thepercentage of the civilian labor force age 16and older who are working or actively lookingfor work — peaked at 67.3% in early 2000, notcoincidentally the last time GDP grew by morethan 4%. The participation rate has droppedsteadily since then; in August 2017, it was62.9%. This reflects lower birth rates, increasedcollege enrollment, some men in their primeworking years dropping out of the labor force,and large numbers of retiring baby boomers.6

Many economists acknowledge that U.S.population trends are a force to be reckonedwith, but the potential impact is still up fordebate. Some argue that labor shortages coulddrive up wages and spending relatively soon,followed by higher growth, inflation, and interestrates — until automated technologies startreplacing larger numbers of costly humanworkers.7

Even if demographic forces continue to restraingrowth, it might not spell doom for workforceproductivity and the economy. Another babyboom would likely be a catalyst for consumerspending. Family-friendly policies such as paidmaternity leave and day-care assistance couldprovide incentives for women with children toremain in the workforce. It's also possible that alarger percentage of healthy older workers maydelay retirement — a trend that is alreadydeveloping — and continue to add theirexperience and expertise to the economy.8

1, 3) The Conference Board, February 24, 2017

2) The Wall Street Journal, January 16, 2017

4-5) Federal Reserve, 2016

6, 8) The Financial Times, October 25, 2016

7) U.S. Bureau of Labor Statistics, 2016-2017,Bureau of Economic Analysis 2017

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It's Time for Baby Boomer RMDs!In 2016, the first wave of baby boomers turned70½, and many more reach that milestone in2017 and 2018. What's so special about 70½?That's the age when you must begin takingrequired minimum distributions (RMDs) fromtax-deferred retirement accounts, includingtraditional IRAs, SIMPLE IRAs, SEP IRAs,SARSEPs, and 401(k), 403(b), and 457(b)plans. Original owners of Roth IRAs are notrequired to take RMDs.

If you're still employed (and not a 5% owner),you may be able to delay minimum distributionsfrom your current employer's plan until after youretire, but you still must take RMDs from othertax-deferred accounts (except Roth IRAs). TheRMD is the smallest amount you must withdraweach year, but you can always take more thanthe minimum amount.

Failure to take the appropriate RMD can triggera 50% penalty on the amount that should havebeen withdrawn — one of the most severepenalties in the U.S. tax code.

Distribution deadlinesEven though you must take an RMD for the taxyear in which you turn 70½, you have aone-time opportunity to wait until April 1 (notApril 15) of the following year to take your firstdistribution. For example:

• If your 70th birthday was in May 2017, youturned 70½ in November and must take anRMD for 2017 no later than April 1, 2018.

• You must take your 2018 distribution byDecember 31, 2018, your 2019 distribution byDecember 31, 2019, and so on.

IRS tablesAnnual RMDs are based on the accountbalances of all your traditional IRAs andemployer plans as of December 31 of theprevious year, your current age, and your lifeexpectancy as defined in IRS tables.

Most people use the Uniform Lifetime Table(Table III). If your spouse is more than 10 yearsyounger than you and the sole beneficiary ofyour IRA, you must use the Joint Life and LastSurvivor Expectancy Table (Table II). Table I isfor account beneficiaries, who have differentRMD requirements than original accountowners. To calculate your RMD, divide thevalue of each retirement account balance as ofDecember 31 of the previous year by thedistribution period in the IRS table.

Aggregating accountsIf you own multiple IRAs (traditional, SEP, orSIMPLE), you must calculate your RMDseparately for each IRA, but you can actuallywithdraw the required amount from any of youraccounts. For example, if you own twotraditional IRAs and the RMDs are $5,000 and$10,000, respectively, you can withdraw that$15,000 from either (or both) of your accounts.

Similar rules apply if you participate in multiple403(b) plans. You must calculate your RMDseparately for each 403(b) account, but you cantake the resulting amount (in whole or in part)from any of your 403(b) accounts. But RMDsfrom 401(k) and 457(b) accounts cannot beaggregated. They must be calculated for eachindividual plan and taken only from that plan.

Also keep in mind that RMDs for one type ofaccount can never be taken from a differenttype of account. So, for example, a 401(k)required distribution cannot be taken from anIRA. In addition, RMDs from different accountowners may never be aggregated, so onespouse's RMD cannot be taken from the otherspouse's account, even if they file a joint taxreturn. Similarly, RMDs from an inheritedretirement account may never be taken fromaccounts you personally own.

Birthday Guide: This chart providessample RMD deadlines for older babyboomers.

Month &year ofbirth

Year youturn 70½

First RMDdue

SecondRMD due

Jan. 1946to June1946

2016 April 1,2017

Dec. 31,2017

July 1946to June1947

2017 April 1,2018

Dec. 31,2018

July 1947to June1948

2018 April 1,2019

Dec. 31,2019

July 1948to June1949

2019 April 1,2020

Dec. 31,2020

July 1949to June1950

2020 April 1,2021

Dec. 31,2021

In 2016, the first wave ofbaby boomers turned 70½,and many more reach thatmilestone in 2017 and 2018.What's so special about70½? That's the age whenyou must begin takingrequired minimumdistributions (RMDs) fromtax-deferred retirementaccounts, includingtraditional IRAs, SIMPLEIRAs, SEP IRAs, SARSEPs,and 401(k), 403(b), and457(b) plans.

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Your Wealth ManagementTeamPinnacle Wealth PlanningServices, Inc.800-987-4767info@lpipinnacle.comwww.pinnacleadvisors.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017

DISCLOSURE: Please remember that pastperformance may not be indicative of futureresults. Different types of investments involvevarying degrees of risk, and there can be noassurance that the future performance of anyspecific investment, investment strategy, orproduct (including the investments and/orinvestment strategies recommended orundertaken by Pinnacle Wealth PlanningServices, Inc.), or any non-investment relatedcontent, made reference to directly or indirectly inthis newsletter will be profitable, equal anycorresponding indicated historical performancelevel(s), be suitable for your portfolio or individualsituation, or prove successful. Due to variousfactors, including changing market conditionsand/or applicable laws, the content may nolonger be reflective of current opinions orpositions. Moreover, you should not assume thatany discussion or information contained in thisnewsletter serves as the receipt of, or as asubstitute for, personalized investment advicefrom Pinnacle Wealth Planning Services, Inc. Tothe extent that a reader has any questionsregarding the applicability of any specific issuediscussed above to his/her individual situation,he/she is encouraged to consult with theprofessional adviser of his/her choosing.Pinnacle Wealth Planning Services, Inc. isneither a law firm nor a certified publicaccounting firm and no portion of the newslettercontent should be construed as legal oraccounting advice. A copy of Pinnacle WealthPlanning Services, Inc.'s current writtendisclosure statement discussing our advisoryservices and fees is available upon request.

What financial resolutions should I consider making asI look ahead to 2018?A new year is right around thecorner, bringing with it a freshstart for you and yourfinances. What will you do this

year to help improve your financial situation?

Evaluate your savings goals. The beginningof the year is a great time to examine youroverall financial plan. Maybe you want to buy anew vehicle this year or save money toward aCaribbean cruise next year. Perhaps you wantto focus less on material items and more onlong-term goals, such as your retirementsavings. Regardless of what you are settingmoney aside for, make sure you come up witha realistic savings plan that will help youachieve your goals and avoid the risk ofsignificant loss.

Pay down debt. Whether you owe money onyour credit cards or have student loanpayments to make, the start of a new year is agood time to develop a strategy to reduce youroverall level of debt. Reducing your debt canhelp create opportunities to contribute towardother goals throughout the year. But unless youcan definitely afford it, don't plan to pay off all

your debts in one fell swoop. Set a smaller goalthat you'll be more likely to achieve over thecourse of the year.

Automate as much as you can. Your plan topay down debt can be accomplished moreeasily if you automate your bill paying, saving,and investing. Most banks, credit card issuers,retirement plan providers, and investmentcompanies offer services that make paymentsautomatic — allowing you to worry less aboutpayment dates. The best part is that it mightonly take a few taps on your smartphone tomake these processes automatic.

Think about organizing your financialdocuments. If your overall financial situation isalready in good shape for the new year,consider taking time now to clear out andorganize your financial records. Do you haveimportant documents, such as your tax returnsor passport, in a safe place? Are you holding onto records that you no longer need? Organizingyour financial records now can save you timeand frustration later if you need to locate aparticular document.

What can I learn from looking back on my financialsituation in 2017?If your financial plan for 2017didn't work out the way youwanted it to, don't beatyourself up. Instead, ask

yourself the following questions to determinewhat you can learn from reflecting on yourfinancial situation in the last year.

Did you meet your financial goals andexpectations for 2017? Perhaps you startedthe year with some financial goals in mind. Youwanted to establish a budget that you couldstick to, or maybe you hoped to build up youremergency savings fund throughout the year. Ifyou fell short of accomplishing these or othergoals, think about the reasons why. Were yourgoals specific? Did you develop a realistictimeframe for when they would be achieved? Ifnot, learn to set attainable and measurablegoals for your finances in the new year.

How did your investments perform? Ayear-end review of your overall portfolio canhelp you determine whether your assetallocation is balanced and in line with your timehorizon and goals. If one type of investmentperformed well during the year, it couldrepresent a greater percentage of your portfolio

than you initially wanted. As a result, you mightconsider selling some of it and using thatmoney to buy other types of investments torebalance your portfolio. Keep in mind thatselling investments could result in a tax liability.And remember, asset allocation does notguarantee a profit or protect against loss; it is amethod to help manage investment risk. Allinvesting involves risk, including the possibleloss of principal, and there is no guarantee thatany investment strategy will be successful.

Are your retirement savings on track? Didyou contribute the amount you wanted in 2017?Or did unexpected financial emergencies forceyou to borrow or withdraw money from yourretirement savings? In that case, you can helpyour savings recover by contributing the mostyou can to your employer-sponsored retirementplan and taking advantage of employermatching (if it's available to you). Contributingto a 401(k) or 403(b) plan can help you savemore consistently because your contributionsare automatically deducted from your salary,helping you avoid the temptation to skip amonth now and then.

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