Client Newsletter - End of the Year Checklist
December 2016   Vol. 20 
The 75th Anniversary of the Attack on Pearl Harbor 
At 8 a.m. Sunday, December 7, 1941, the Japanese sent nearly 360 bomber planes to attack the US Naval Base in Pearl Harbor, Hawaii.  The US was caught completely off guard, and many of the military personnel were off-base attending church.  Three of five battleships, three destroyers, seven other ships, and more than two hundred airplanes were bombed.  Nearly 2400 people were killed, 1200 were wounded, and the US was forced to join WWII.   Thankfully, all three of the Navy's Pacific aircraft carriers were out at sea at training.  Six months later, the Japanese came back for those three carriers but were defeated with a devastating loss at the Battle of Midway.  MVT would like to give thanks to our military and domestic community service people for their tireless efforts to keep us safe.
Wringing Out the Old Year:  Goodbye 2016!
Nearly another year has gone by.  As we make our way to 2017, we wanted to pay homage to a market that has been fairly good to us this year.  Stocks started off very sloppy when negative news out of China dropped markets in January.  Despite the rough start, we have enjoyed a mostly upward trend this year.  The only other glitches, thus far, have been from Brexit in late June and the reaction to the US Presidential election in early November. 

The domestic markets recovered nicely after each event.  Major domestic stock indices are up more than 12% year-to-date as of 12/08/16.  However, foreign markets have not been so lucky.  The MSCI EAFE International Index is still below where it was earlier in 2015, although it's had some positive periods this year.  Year-to-date through 12/08/16, the EAFE Index is negative 2%, with your fund managers varying greatly with returns to date between positive 9% and negative 9%.

The bond yields have also been on an upward trend despite the Fed's lack of action since December of 2015.  Rising yields hurt short-term bond performance, but increasing yields mean more income for investors.  We expect it will balance out over time as we move toward a more normal inflation rate.  - Danielle Woods


Congratulations to John Mitchell, 2016 Five Star Wealth Manager!
Mr. Mitchell was named a 2016 Five Star Wealth Manager in Chicago! Please feel free to call him at 312.922.1717 or email him at jmitchell@mvtinvest.com to congratulate him on his award.  


*Disclosure below.
Retirement Contributions in 2016 and 2017

While 401(k) contributions must be completed by year-end, individual investors still have some time to make final contributions to IRA and Roth IRA accounts for the 2016 tax year.  Since contributions are limited by income, investors have until April 15th (after they have determined their Adjusted Gross Income to make deposits for 2016).  Maximum contributions for both IRA and Roth IRAs are $5500 for investors under age 50 and $6500 for those aged 50 and over.  

Roth IRA:  First, be aware that you may contribute to a 401(k) and a Roth IRA in the same year if your income does not exceed IRS rules.  If you are a single tax filer with an Adjusted Gross Income (or AGI, the last number on page 1 of Form 1040) of less than $117,000, you can contribute the full amount to a Roth IRA.  In 2017, that AGI goes up to $118,000.   If you are married filing jointly, your AGI must be less than $184,000 to contribute the maximum.  In 2017, that AGI goes up to $186,000.  Whether an IRA or Roth IRA is the better option for you is a more complicated question that should be addressed with us directly.  If your AGI exceeds the amounts listed above, you may still be able to contribute something.  Let us or your tax preparer assist you in calculating your allowable amount, if any.  

Traditional IRA:  If your income is too high to allow direct contributions to a Roth IRA, you may still use an IRA even if you also max out your 401(k).  However, your contribution to your IRA will likely not be tax-deductible during the year of contribution.  Instead, your tax savings come when you take withdrawals by tracking your contributions over the years.  This is often difficult for investors to do, but there are alternatives.  Please let us know if you need assistance.

Whether you contribute to an IRA, Roth IRA or a 401(k), your maximum contribution amounts do not change in 2017.  Employees can still contribute up to $18,000 to a 401(k) if under age 50 and up to $24,000 if aged 50 or over.

Lastly, contributions to Coverdell Education Savings Accounts are still maxed out at $2,000 in 2017. Please call Danielle Woods at 865.271.9439 or email dwoods@mvtinvest.com for assistance with retirement or college savings plans.

IRA Required Minimum Distributions for 2016
Owners of Traditional IRA accounts are required to begin minimum distributions at age 70 1/2.  That distribution can be taken in the year that you turn 70 1/2 years old or by April of the following year.  After that, they must be taken each calendar year (so if you delay your 70 1/2 year distribution, you will take two the following year). Also, clients who have inherited an IRA have different distribution requirements depending on the person you inherited from.   *IRA distributions will be taxable on your federal tax return at normal income tax rates.

We keep a list of clients that we know need to take distributions.  It is our belief that as of the end of November, all of our clients have taken their required minimum distributions for 2016.  You may have received a check in the mail or your distribution was direct deposited in your brokerage or checking account.  Please let us know if you believe you are required to take a distribution and have not done so.  They MUST be taken before the end of the calendar year.  

Distribution amounts are based on the market value of all of your IRA accounts (Roth IRA's do not count toward this total) and your age.  We can assist you in calculating your distribution amount.  You may also check it yourself on Schwab's calculator.  Schwab Required Minimum Distribution Calculator

Let us know if you have questions.  You are penalized by the IRS for not taking distributions, so please do not delay your withdrawals.  - Danielle Woods

End of Year Checklist
The end of the year is a good time to review some of those important financial issues in your life. We can assist you with most of the needs itemized below.  Let us know if you have questions.

1.  Estate Planning - Do you need a will or health care power of attorney or need to update them?

2.  Beneficiaries - Have you had any changes in your life (birth of a child, divorce, marriage) that would require you to update your beneficiary forms on retirement accounts and life insurance?

3.  Credit - Have you accessed your free credit reports yet this year?  You get one free review per year.  Just visit the website here:

4.  Retirement - Review your allocation in your 401k, contact your investment advisor, make your Roth or IRA deposits.
5.  Tax Planning - Discuss any income or expense changes with your tax preparer to make sure you are prepared for the result of your income tax return filings.

6. New Business - If you are thinking of starting a new business, the new year is a good time to get established.  

7.  College Planning - make your annual deposit to your child's or grandchild's college account.


- Danielle Woods, dwoods@mvtinvest.com    
Interest Rates Finally On the Rise
The Fed unanimously agreed to raise the Fed rate yesterday for the first time in a year.  It moved up 0.25%.  The new range is 0.5% - 0.75%.   This is still a very small change in historically low rates.  

The Fed is happy with the normalizing trend in employment and inflation.  They are anticipating raising rates about three more times next year if the economy continues to do well.  

With a new administration in the White House next year, economic policy changes could cause the Fed to either reduce those rate hikes or increase them depending on how employment and inflation react.  The Treasury yield curve has been moving up for the past several months in anticipation of Fed rate increases.  The 10-year Treasury yield is around 2.5%. This is good for bond investors who will begin seeing some decent income on their debt investments.  While it does hurt bond values temporarily (remember that the value of a bond declines when rates increase), the better yields on the investments will make up for it in near future investments.  

We continue to maintain a short to intermediate stance on bonds, while searching for additional yield through municipal and corporate debt.  We are buying into new bonds as yields increase for clients who can buy individual bonds.  Bond mutual funds investors will feel a bit of the sting of rising rates on the value of their funds until the increased yields are absorbed by the fund manager.  Please let us know if you have any questions.  - Margie Burke, mburke@mvtinvest.com
Margie Burke
Margie is our Fixed Income Portfolio Manager.  Please feel free to email her with questions about  your fixed income portfolio or how the current market is impacting it.  
mburke@mvtinvest.com
A Note from MVT about Cybersecurity

As we do more and more online and cloud-based work with clients, we wanted to assure you that we are constantly monitoring and increasing our security needs.  In fact, the SEC is currently requiring that firms like ours be more proactive in cybersecurity.  We will have additional safeguards and policies in effect after the new year that we will share with you.  In the meantime, we invite you to review a Cybersecurity Round Table Presentation that was chaired by John Mitchell at a recent educational event for pension fund trustees.  You can find it on our home page on the far right side in the Special Announcements box.  If you have any questions about our Cybersecurity Processes or Procedures, please contact our Chief Compliance Officer, Dwight Ower at dower@mvtinvest.com or by calling 312.922.1717.
  * Disclosure for Five Star Professional:   The Five Star Wealth Manager award, administered by Crescendo Business Services, LLC (dba Five Star Professional), is based on 10 objective criteria. Eligibility criteria – required: 1. Credentialed as a registered investment adviser or a registered investment adviser representative; 2. Active as a credentialed professional in the financial services industry for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by Five Star Professional, the wealth manager has  not : A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three customer complaints filed against them [settled or pending] with any regulatory authority or Five Star Professional’s consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through Five Star Professional’s consumer complaint process; feedback may not be representative of any one client’s experience; C. Individually contributed to a financial settlement of a customer complaint filed with a regulatory authority; D. Filed for personal bankruptcy; E. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria – considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Award does not evaluate quality of services provided to clients. Once awarded, wealth managers may purchase additional profile ad space or promotional products. The Five Star award is not indicative of the wealth manager’s future performance. Wealth managers may or may not use discretion in their practice and therefore may not manage their client’s assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. For more information on the Five Star award and the research/selection methodology, go to fivestarprofessional.com. 
Mitchell, Vaught and Taylor, Inc.
Investment Advisors
53 W. Jackson Boulevard
Suite 905
Chicago, Illinois 60604
Phone: 312-922-1717

A business that makes nothing but money is a poor business.

- Henry Ford