A Mid-Year Financial Review: More Time to Plan Understanding Mutual Fund Expense Ratios How Much Life Insurance is Enough? I started a business that lost money this year. Do I have NOL?

1. Financial Stewardship May 2010
Angela Giboney, CFP®
Financial Advisor
22108 1st Pl W A Mid-Year Financial Review: More Time to Plan
Bothell, WA 98021
425-415-6029 Mid-year is an ideal time can be as simple as dedicating a folder in your
800-499-2041 to take a look at your file cabinet to this year's tax return so that you
angela.giboney@hbwsecurities.com finances, because the can keep track of important paperwork.
www.hbwcoach.com
demands on your time
Retirement planning
may be fewer, and the
Give me a call and we'll set up a
planning opportunities If you're working and you received a pay
time for your mid year review. greater, than if you wait increase for this year, don't overlook the
until the end of the year. opportunity to increase your retirement plan
Angela Giboney CFP®
Here are a few tips to get you started. contributions by asking your employer to apply
Advisory services offered a higher percentage of your salary. This year,
through Identifying your needs
HBW Advisory Services LLC, you may be able to contribute up to $16,500 to
3355 Financial plans often need to be modified when your retirement plan at work ($22,000 if you're
Cochran St, Suite 100, Simi personal circumstances change. Answering age 50 or older). If you have a traditional IRA,
Valley,
CA 93063, Angela Giboney is an these questions can help you identify the you may also want to weigh the benefits of
Investment Advisor financial issues you want to address within the converting it to a Roth IRA this year, when you
Representative. Securities
offered next few months. may be able to take advantage of a special
through HBW Securities LLC, deferral rule that applies only to 2010
Member FINRA/SIPC, 3355 • Are any life-changing events coming up soon,
Cochran St, Suite 100 Simi conversions. This deferral rule gives you the
such as marriage, the birth of a child,
Valley, option of reporting half of any resulting taxable
CA 93063 (800)473-3856. Angela retirement, or a career change?
Giboney is a registered
income that results on your 2011 tax return and
Representative. HBW Insurance • Will your income or expenses substantially half of the income on your 2012 return.
& increase or decrease this year?
Financial Services, Inc. is a If you're already retired, take a new look at your
separate entity from HBW • Are you concerned about the performance of retirement income needs and whether your
Securities LLC and a separate
entity form HBW Advisory your investment portfolio? current investments and distribution strategy
Services
LLC. HBW Securities LLC does • Do you have any needs or concerns that you will continue to provide enough income.
not would like to address? Investment planning
give legal or tax advice nor does
HBW Advisory Services LLC. Tax planning Have you recently reviewed your portfolio to
Completing a mid-year estimate of your income make sure that your asset allocation is still in
tax liability can reveal tax-planning line with your financial goals, time horizon, and
In this issue: opportunities. You can use last year's tax return tolerance for risk? Though it's common to
as a basis, then make any anticipated rebalance a portfolio at the end of the year, if
A Mid-Year Financial Review: the market is volatile, you may need to
More Time to Plan adjustments to your income and deductions for
this year. Check your withholding, especially if rebalance more frequently.
Understanding Mutual Fund you owed taxes when you filed your most
Expense Ratios Insurance planning
recent income tax return or if you received a
How Much Life Insurance is large refund. Doing that now, rather than Do you know exactly how much life and
Enough? waiting until the end of the year, will help you disability insurance coverage you have? Are
avoid a big tax bill or having too much of your you familiar with the terms of your
I started a business that lost money tied up with Uncle Sam. If necessary, homeowners, renters, or auto insurance
money this year. Do I have policies? If not, it's time to add your insurance
NOL? adjust the amount of federal or state income tax
withheld from your paycheck by filing a new policies to your summer reading list. Insurance
Form W-4 with your employer. needs frequently change, and it's possible that
your coverage hasn't kept pace with your
One of the easiest things you can do right now income or family circumstances.
to help avoid missed tax-saving opportunities
for the year is to set up a system for saving
receipts and other tax-related documents. This

2. Page 2
Understanding Mutual Fund Expense Ratios
Every mutual fund must disclose certain costs handles any transactions. Management fees
associated with running the fund. Those costs often represent the single largest portion of a
represent a fund's expense ratio, which is typical fund's expense ratio.
expressed as a percentage of a fund's assets.
Marketing costs
For example, a fund that has $100 million in
assets and annual expenses of $1 million would These costs also are known as 12b-1 fees,
report a 1% expense ratio (1% of $100 million = after the legal provision that permits them. They
Running the numbers $1 million). were originally designed to let funds recoup
costs associated with distribution and
To get a true picture of a Why is a fund's expense ratio important? First,
advertising, on the theory that attracting new
fund's performance, you it can help you gauge how efficiently the fund
investors and additional assets would help
do not need to deduct a operates. A high expense ratio reduces the
make a fund more cost-effective for each
fund's expense ratio from amount that is paid to you as a shareholder.
investor. In recent years, there has been
the returns quoted in its Second, a fund's expenses affect your net
discussion of whether 12b-1 fees should be
prospectus. The figures returns, particularly over the long term. For
eliminated--especially for funds that are closed
that measure average example, let's look at a hypothetical illustration
to new investors and therefore should have little
annual and cumulative (which doesn't reflect the performance of any
need to market themselves--but they are still
return have already taken actual security). Assume you have $10,000 in
very common.
both operating and trading one stock fund that earns a 5.5% return and
costs into account. $10,000 in another stock fund that earns Administrative fees
exactly the same return but that costs you an
This category of fees includes the cost of
extra half-percent in expenses. The difference
recordkeeping, custodianship, taxes, and legal,
between 5.5% and 5% over 20 years means a
accounting, and auditing services.
$2,645 reduction in your bottom line.
What's not included in an expense ratio
That's not to say that you should automatically
reject a fund just because it has a high expense Trading expenses represent the cost of buying
ratio if the fund's performance is worth the or selling securities, and also can have a
higher cost. However, you do need to take substantial impact on your net return over time.
expenses into account, especially if you're Trading costs, which include commissions paid
investing for the long term. by the fund when it buys or sells a security,
aren't included in a fund's expense ratio.
Some general categories of funds tend to have
However, funds are required to report the
higher expense ratios than others. For
per-share cost of their annual commissions; this
example, a stock fund that specializes in
can be found in a fund's annual report or
emerging markets may have to spend more on
Statement of Additional Information.
research than a fund that invests only in
large-cap U.S. stocks for which a great deal of Also not included in the expense ratio is any
information is readily available. A fund that is redemption fee a fund might charge if you sell
actively managed may have higher expenses your shares before a specified time, or any
than a fund that mirrors an index. sales charge the fund might impose at the time
of purchase or sale.
Each mutual fund's prospectus must include a
table in the front that you can use to compare Before investing in a mutual fund, carefully
the expenses of various funds. The table lists consider its investment objectives and risks as
the fund's expense ratio as well as a well as its charges and expenses. This
breakdown of the costs included in it, which fall information is available in the prospectus, which
"Some general into three general areas: management fees, can be obtained from the fund. Read it carefully
categories of funds marketing costs, and administrative fees. before investing.
tend to have higher Management fees
expense ratios than Comparison shopping
others." Every fund has an investment management or
The "Tools and Calculators" section of the
advisor firm that manages the fund and makes
Financial Industry Regulatory Authority
investment decisions. Even an index fund,
(FINRA) website includes an online Fund
which does relatively little trading and whose
Analyzer that lets you compare the impact
investments basically duplicate those of an
over time of the fees and expenses of as
index, will have a firm or an individual who
many as three funds.

3. Page 3
How Much Life Insurance Is Enough?
Your life insurance needs often depend on a • Debts, including credit cards and mortgages:
number of factors, including whether you're $317,000
married, the size of your family, the nature of • Emergency fund: $100,000
your financial obligations, your career stage,
and your goals. Subtotal: $459,500
There are a number of approaches you can use Next, they estimate ongoing income needs,
to figure out how much insurance you should such as:
have. One method, called the "family needs • Providing for their dependent children's needs
approach," focuses on the amount of life for a period of time: $500,000
insurance it would take to allow your family to
meet its various financial obligations and • Wendy's income needs until her retirement:
expenses in the event of your death. $450,000
Family needs approach • Wendy's retirement income needs: $380,000
Subtotal: $1,330,000
With the family needs approach, you divide
your family's financial needs into three main Adding the sub totals together, John and
categories: Wendy estimate that, should John die, their
family would need $1,789,500. They then
• Immediate needs at death, such as cash
determine that assets available to offset their An insurance
needed for estate taxes and settlement costs,
needs include: coverage review is a
credit card and other debts including
mortgages (unless you choose to include • Bank savings: $40,000 periodic reassessment
mortgage payments as part of ongoing family of your insurance
• Investments: $220,000 needs. The main
needs), an emergency fund for unexpected
costs, and college education expenses. • Retirement assets: $250,000 objectives are to
• Existing life insurance on John's life: $300,000 confirm that the level
• Ongoing income needs for expenses related of insurance coverage
to food, clothing, shelter, and transportation, Subtotal: $810,000 you have is still
among other things. These income needs will adequate, to alert you
vary in amount and duration, depending on a The difference between their family needs
($1,789,500) and their available assets to shortages in
number of factors, such as your spouse's age, coverage that can
your children's ages, your surviving spouse's ($810,000) equals their life insurance need
($979,500). occur due to changes
capacity to earn income, your debt (including in your life, and to
mortgages), and whether you'll provide funds Review your coverage ensure that any cash
for your surviving spouse's retirement. value policies are
Trying to figure out how much life insurance is
• Special funding needs, such as college enough isn't always easy, and that amount will performing as
funding, charitable bequests, funding a likely change with your changing expected.
buy/sell agreement, or business succession circumstances. By examining your family's
planning. anticipated expenses during various periods
Once you determine the total amount of your after your death, you get a more realistic
family's financial needs, you subtract from this estimate of your life insurance needs.
total the available assets that your family could Unfortunately, many people underestimate their
use to defray some or all of their expenses. The insurance needs and are underinsured. Often,
difference, if any, represents an amount that life the purchase of life insurance is based on cost
insurance proceeds, and the income from instead of what's needed. By the same token,
future investment of those proceeds, can cover. it's possible to have more insurance than you
Example: John and his wife, Wendy, are need. You may have purchased a large policy
estimating the appropriate amount of life during a particular point in your life, and then
insurance to buy on John's life. They first didn't adjust your coverage when your
estimate their immediate needs as follows: insurance need was reduced. Both of these
circumstances are reasons to review your
• Final medical expenses: $5,000 insurance coverage periodically with your
• Estate settlement costs including funeral and financial professional. Doing so can reveal
burial expenses: $37,500 opportunities to change your levels of coverage
to match your current and projected life
insurance needs.

4. Ask the Experts
I started a business that lost money this year. Do I
have a net operating loss (NOL)?
If you're a sole proprietor for--the 2 years preceding the year in which you
and your business expenses have the net operating loss. Any remaining loss
exceed your business is carried forward for up to 20 years after the
income, you have a year in which you have the NOL. You can,
reportable loss for income tax purposes. You're however, choose not to carry back the NOL to
generally able to apply this loss against any the prior 2 years and simply carry forward the
wage income or other business income that you entire NOL.
Angela Giboney, CFP®
Financial Advisor have (wages are considered business income)
While NOLs are generally allowed to be carried
22108 1st Pl W and any nonbusiness income (e.g., interest)
back 2 years, special rules apply to NOLs
Bothell, WA 98021 that remains after taking your allowable
incurred in 2008 and 2009 that allow NOLs to
425-415-6029 nonbusiness deductions. If you still have a
be carried back for up to 5 years. There are
800-499-2041 business loss remaining after offsetting all your
angela.giboney@hbwsecurities.com also exceptions to the general 2-year carryback
www.hbwcoach.com income, you have a "net operating loss" for the
rule, and alternative minimum tax (AMT)
year. The net operating loss (NOL) calculation
implications. Even in the most straightforward
is very complicated, though. For example,
Advisory services offered through HBW Advisory cases, NOLs are complicated.
Services LLC, 3355 Cochran St., Suite 100, Simi
certain items, like personal exemption
Valley, CA 93063, Angela Giboney is an
Investment Advisor Representative.
deductions and other nonbusiness deductions, If you have an NOL, you'll want to read IRS
aren't allowed in calculating an NOL. Publication 536, Net Operating Losses (NOLs)
Securities offered through HBW Securities LLC,
Member FINRA/SIPC, 3355 Cochran St., Suite for Individuals, Estates, and Trusts, and the
100 Simi Valley, CA 93063 (800)473-3856. The general rule is that you get to carry back an
Angela Giboney is a registered Representative. instructions for IRS Form 1045, Application for
NOL for 2 years. This means that you can apply
HBW Insurance & Financial Services, Inc. is a Tentative Refund. You should also consider
the NOL as a credit against income that was
separate entity from HBW Securities LLC and a discussing your situation with a tax
separate entity form HBW Advisory Services earned in--and reported on the tax returns
LLC. HBW Securities LLC does not give legal or
tax advice nor does HBW Advisory Services
professional.
LLC.
This advertisement is not intended as legal or tax
advice and may not be relied on for purposes of
avoiding federal tax penalties. All individuals,
including those involved in the estate planning
process, are advised
to meet with their tax and legal professionals.
The individual sponsoring this newsletter will
work with your tax and legal advisors to help
Is it too late to take advantage of the special 2009 net
select appropriate product solutions. We do not
endorse or guarantee the content or services of operating loss (NOL) rules?
any website mentioned in this newsletter. We
encourage you to review the privacy policy of The Worker, Stabilization Act of 2008 (i.e., a "TARP"
each website you visit. Limitations, restrictions
and other rules and regulations apply to many of
the financial and insurance products and
Homeownership, and recipient) is not eligible. Special rules apply to
concepts presented in this newsletter, and they Business Assistance Act of insurance companies.
may differ according to individual situations.
2009 (WHBAA) included a
If you're a calendar-year filer, you have to make
provision that allows almost all taxpayers with
the WHBAA election by the due date of your
business losses to make an irrevocable election
2009 federal income tax return, including
to carry back losses incurred in either 2008 or
extensions. This deadline applies regardless of
2009 for up to 5 years (the election can only be
whether you're making the election for a 2008
made for 1 year, however). Specifically, you're
NOL or a 2009 NOL. If you filed your 2009
able to elect to extend the general 2-year NOL
federal income tax return by April 15, 2010,
carryback period to 3, 4, or 5 years; NOLs
without making an election, you have until
carried back 5 years can offset up to 50% of the
October 15, 2010, to do so.
taxable income from the fifth year, and 100% of
the taxable income from the other carryback You can make the election in one of two ways.
years. You can attach an election statement to the
federal income tax return or amended return for
Even if you took advantage of a similar
the tax year in which the loss is incurred. Or,
provision in earlier legislation to carry back a
you can attach the election statement to the
2008 NOL, you're still able to elect to carry back
carryback form itself (1040 filers would use
a 2009 NOL under the provisions of the
Form 1045 or Form 1040X). Your election
WHBAA. Certain taxpayers are specifically
statement must contain specific language. You
excluded from making the election, however.
can find more information by checking the IRS
Prepared by Forefield Inc, For example, any business in which the federal
website (www.irs.gov) or by talking to a tax
Copyright 2010 government acquired an equity interest
professional.
pursuant to the Emergency Economic