Oak Tree WealthManagementDiane L. Woodward, CFP®, RICP®3180 Crow Canyon PlaceSuite 220San Ramon, CA 94583925-275-9400888-965-9550 Faxdiane@oaktreewealth.comwww.oaktreewealth.com

May 2016Free Shredding Event 5/14/2016 9am-noon

Cost of Living: Where You Live Can AffectHow Rich You Feel

Nearing Retirement? Time to Get Focused

How long should I keep financial records?

Free Shredding Event 5/14/2016 9am-noon

See disclaimer on final page

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I have been getting ready for theshredding event, how about you? Ihave cleaned up many of the filesfrom my parent's estate, old PG&Ebills, checking account informationfor closed accounts and so on. Ihope you can take advantage of ourfree shredding event.

Now that you've finished up another tax seasonare your file cabinets at home bulging with olddocuments, but you don't know what youshould keep and for how long? Check out thearticle later in this newsletter for suggestions.

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Cost of Living: Where You Live Can Affect How Rich You FeelDo you find yourself treading water financiallyeven with a relatively healthy householdincome? Even with your new higher-paying joband your spouse's promotion, do you still find itdifficult to get ahead, despite carefully countingyour pennies? Does your friend or relativehalfway across the country have a better qualityof life on less income? If so, the cost of livingmight be to blame.

The cost of living refers to the cost of variousitems necessary in everyday life. It includesthings like housing, transportation, food,utilities, health care, and taxes.

Single or family of six?Singles, couples, and families typically havemany of the same expenses--for example,everyone needs shelter, food, and clothing--butfamilies with children typically pay more in eachcategory and have the added expenses of childcare and college. The Economic Policy Institute(epi.org) has a family budget calculator that letsyou enter your household size (up to two adultsand four children) along with your Zip code tosee how much you would need to earn to havean "adequate but modest" standard of living inthat geographic area.

What areas have the highest cost of living? It'sno secret that the East and West Coasts havesome of the highest costs. According to theCouncil for Community and EconomicResearch, the 10 most expensive U.S. urbanareas to live in Q3 2015 were:

Rank Location

1 New York, New York

2 Honolulu, Hawaii

3 San Francisco, California

4 Brooklyn, New York

5 Orange County, California

6 Oakland, California

7 Metro Washington D.C./Virginia

8 San Diego, California

9 Hilo, Hawaii

10 Stamford, Connecticut

Factors that influence the cost of livingLet's look in more detail at some of the commonfactors that make up the cost of living.

Housing. When an area is described as having"a high cost of living," it usually means housingcosts. Looking to relocate to Silicon Valley fromthe Midwest? You better hope for a big raise;the mortgage you're paying now on your

modest three-bedroom home might get you awalk-in closet in this technology hub, whereprices last spring climbed to a record-high$905,000 in Santa Clara County, $1,194,500 inSan Mateo County, and $690,000 in AlamedaCounty. (Source: San Jose Mercury News,Silicon Valley Home Prices Hit Record Highs,Again, May 21, 2015)

Related to housing affordability is student loandebt. Student debt--both for young adults andthose in their 30s, 40s, and 50s who either tookout their own loans, or co-signed or borrowedon behalf of their children--is increasinglyaffecting housing choices and living situations.For some borrowers, monthly student loanpayments can approximate a second mortgage.

Transportation. Do you have access to reliablepublic transportation or do you need a car?Younger adults often favor public transportationand supplement with ride-sharing services likeUber, Lyft, and Zipcar. But for others, a car (ortwo or three), along with the cost of gas andmaintenance, is a necessity. How far is yourwork commute? Do you drive 100 miles roundtrip each day or do you telecommute? Havingto buy a new (or used) car every few years cansignificantly impact your bottom line.

Utilities. The cost of utilities can vary bylocation, weather, usage, and infrastructure.For example, residents of colder climates mightfind it more expensive to heat their homes inthe winter than residents of warmer climates docooling their homes in the summer.

Taxes. Your tax bite will vary by state. Sevenstates have no income tax--Alaska, Florida,Nevada, South Dakota, Texas, Washington,and Wyoming. In addition, property taxes andsales taxes can vary significantly by state andeven by county, and states have different rulesfor taxing Social Security and pension income.

Miscellaneous. If you have children, otherthings that can affect your bottom line are thecosts of child care, extracurricular activities,and tuition at your flagship state university.

To move or not to moveRemember The Clash song "Should I Stay orShould I Go?" Well, there's no question yourmoney will go further in some places than inothers. If you're thinking of moving to a newlocation, cost-of-living information can makeyour decision more grounded in financial reality.

There are several online cost-of-livingcalculators that let you compare your currentlocation to a new location. The U.S. StateDepartment has compiled a list of resources onits website at state.gov.

Americans on the move

Americans are picking up andmoving again as the recessionfades, personal financesimprove, and housing marketsrecover. Counties in Florida,Nevada, and Arizona hadlarger influxes of people, whilesome counties in Illinois,Virginia, New York, andCalifornia saw more peoplemoving out. (Source: The PewCharitable Trusts, AmericansAre on the Move--Again, June25, 2015, www.pewtrusts.org)

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Nearing Retirement? Time to Get FocusedIf you're within 10 years of retirement, you'veprobably spent some time thinking about thismajor life change. The transition to retirementcan seem a bit daunting, even overwhelming. Ifyou find yourself wondering where to begin, thefollowing points may help you focus.

Reassess your living expensesA step you will probably take several timesbetween now and retirement--and maybeseveral more times thereafter--is thinking abouthow your living expenses could or shouldchange. For example, while commuting and drycleaning costs may decrease, other budgetitems such as travel and health care may rise.Try to estimate what your monthly expensebudget will look like in the first few years afteryou stop working. And then continue toreassess this budget as your vision ofretirement becomes reality.

Consider all your income sourcesNext, review all your possible sources ofincome. Chances are you have anemployer-sponsored retirement plan andmaybe an IRA or two. Try to estimate howmuch they could provide on a monthly basis. Ifyou are married, be sure to include yourspouse's retirement accounts as well. If youremployer provides a traditional pension plan,contact the plan administrator for an estimate ofyour monthly benefit amount.

Do you have rental income? Be sure to includethat in your calculations. Is there a chance youmay continue working in some capacity? Oftenretirees find that they are able to consult, turn ahobby into an income source, or work part-time.Such income can provide a valuable cushionthat helps retirees postpone tapping theirinvestment accounts, giving them more time topotentially grow.

Finally, don't forget Social Security. You can getan estimate of your retirement benefit at theSocial Security Administration's website,ssa.gov. You can also sign up for a my SocialSecurity account to view your online SocialSecurity Statement, which contains a detailedrecord of your earnings and estimates ofretirement, survivor, and disability benefits.

Manage taxesAs you think about your income strategy, alsoconsider ways to help minimize taxes inretirement. Would it be better to tap taxable ortax-deferred accounts first? Would part-timework result in taxable Social Security benefits?What about state and local taxes? A qualifiedtax professional can help you develop anappropriate strategy.

Pay off debt, power up your savingsOnce you have an idea of what your possibleexpenses and income look like, it's time to bringyour attention back to the here and now. Drawup a plan to pay off debt and power up yourretirement savings before you retire.

• Why pay off debt? Entering retirementdebt-free--including paying off yourmortgage--will put you in a position to modifyyour monthly expenses in retirement if theneed arises. On the other hand, enteringretirement with mortgage, loan, and creditcard balances will put you at the mercy ofthose monthly payments. You'll have less ofan opportunity to scale back your spending ifnecessary.

• Why power up your savings? In these finalfew years before retirement, you're likely tobe earning the highest salary of your career.Why not save and invest as much as you canin your employer-sponsored retirementsavings plan and/or your IRAs? Aim for themaximum allowable contributions. Andremember, if you're 50 or older, you can takeadvantage of catch-up contributions, whichallow you to contribute an additional $6,000to your employer-sponsored plan and anextra $1,000 to your IRA in 2016.

Account for health careFinally, health care should get special attentionas you plan the transition to retirement. As youage, the portion of your budget consumed byhealth-related costs will likely increase.Although Medicare will cover a portion of yourmedical costs, you'll still have deductibles,copayments, and coinsurance. Unless you'reprepared to pay for these costs out of pocket,you may want to purchase a supplementalinsurance policy.

In 2015, the Employee Benefit ResearchInstitute reported that the average 65-year-oldmarried couple would need $213,000 in savingsto have at least a 75% chance of meeting theirinsurance premiums and out-of-pocket healthcare costs in retirement. And that doesn'tinclude the cost of long-term care, whichMedicare does not cover and can varysubstantially depending on where you live. Forthis reason, you might consider a long-termcare insurance policy.

These are just some of the factors to consideras your prepare to transition into retirement.Breaking the bigger picture into smallercategories may help the process seem a littleless daunting.

A financial professional canhelp you estimate howmuch your retirementaccounts may provide on amonthly basis. Youremployer may also offertools to help. Keep in mind,however, that neitherworking with a financialprofessional nor usingemployer-sponsored toolscan guarantee financialsuccess.

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Oak Tree WealthManagementDiane L. Woodward, CFP®,RICP®3180 Crow Canyon PlaceSuite 220San Ramon, CA 94583925-275-9400888-965-9550 Faxdiane@oaktreewealth.comwww.oaktreewealth.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016

California Insurance License#0785820. Diane Woodward is aregistered representative with andsecurities, advisory services andfinancial planning offered throughLPL Financial, a RegisteredInvestment Advisor, MemberFINRA/SIPC.

What are some tips for organizing financial records?Organizing your financialrecords is a cyclical processrather than a one-time event.You'll need to set up a systemthat helps you organize

incoming documents and maintain existing filesso that you can easily find what you need. Hereare a few tips.

Create your system: Where you should keepyour records and documents depends on howquickly you want to be able to access them,how long you plan to keep them, and thenumber and type of records you have. A simpleset of labeled folders in a file cabinet may befine, but electronic storage is another option forcertain records if space is tight or if yougenerally choose to receive and view recordsonline. No matter which storage option(s) youchoose, try to keep your records in a centrallocation.

File away: If you receive financial statementsthrough the mail, set up a collection point suchas a folder or a basket. Open and read whatyou receive, and decide whether you can file itor discard it. If you receive statementselectronically, pay attention to any notificationsyou receive. Once you get in a routine, you may

find that keeping your records organized takesonly a few minutes each week.

Purge routinely: Keeping your financialrecords in order can be even more challengingthan organizing them in the first place. Let thephrase "out with the old, in with the new" beyour guide. For example, when you get thisyear's auto policy, discard last year's. Whenyou receive an annual investment statement,discard the monthly or quarterly statementsyou've been keeping. It's a good idea to do asweep of your files at least once a year to keepyour filing system on track (doing this at thesame time each year may be helpful).

Think safety: Don't just throw hard copies offinancial paperwork in the trash. To protectsensitive information, invest in a good qualityshredder and destroy any document thatcontains account numbers, Social Securitynumbers, or other personal information. Ifyou're storing your records online, make sureyour data is encrypted. Use strong passwords,and back up any records that you store on yourcomputer.

How long should I keep financial records?There's a fine line between keeping financial records for a reasonable period oftime and becoming a pack rat. A general rule of thumb is to keep financialrecords only as long as necessary. For example, you may want to keep ATMreceipts only temporarily, until you've reconciled them with your bank statement.But if a document provides legal support and/or is hard to replace, you'll want to

keep it for a longer period or even indefinitely. It's ultimately up to you to determine which recordsyou should keep on hand and for how long, but here's a suggested timetable for some commondocuments.

One year or less More than one year Indefinitely

Bank or credit unionstatements

Tax returns anddocumentation*

Birth, death, and marriagecertificates

Credit card statements Mortgage contracts anddocumentation

Adoption papers

Utility bills Property appraisals Citizenship papers

Annual insurance policies Annual retirement andinvestment statements

Military discharge papers

Paycheck stubs Receipts for major purchasesand home improvements

Social Security card

*The IRS requires taxpayers to keep records that support income, deductions, and credits shownon their income tax returns until the period of limitations for that return runs out--generally three toseven years, depending on the circumstances. Visit irs.gov or consult your tax professional forinformation related to your specific situation.

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