SUMMER 2014

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Reassess Your Retirement Plans

Approximately five yearsbefore you plan to retire,thoroughly reassess your

retirement plans and ensure that allsignificant financial pieces are inplace. Once you retire, you probablywon’t have the option of going backto your former job. So before youretire, consider these points:

4Take  a  serious  look  at  your

retirement  plans. You’reclose enough to retirement that youshould have a good feel for yourretirement expenses and expectedincome. While you may be anxiousto retire, remain flexible about yourretirement date. Working an addi-tional year or two can add substan-tially to your retirement savings andmay boost your retirement benefits.

4Get a fix on your Social Secu-

rity  and  pension  benefits.

Make sure you know exactly howmuch you can expect from SocialSecurity and defined-benefit plans.

How much will your benefitsincrease if you delay retirement byone year, five years, etc.? If youretire before full retirement age forSocial Security purposes, do youplan on still working? Be aware thatfor those under full retirement agefor Social Security purposes, earn-

ings over $15,480 in 2014 will causeyou to lose $1 of benefits for every$2 of earnings over this threshold.Make sure you understand your dis-tribution options for any defined-benefit plans. In most cases, thosedecisions are irrevocable.

Continued on page 2

THE CHENEY – EPLEY – WOLBECK GROUP

THE CHENEY – EPLEY – WOLBECK GROUP AT MORGAN STANLEY WEALTH MANAGEMENT401 Main Street, Suite 1000Peoria, IL 61602309-671-2800 • 800-527-3579309-671-3710 Faxwww.morganstanleyfa.com/cheneyepleywolbeckgroup

News and AnnouncementsWelcome to the summer edition of our newsletter. My family will celebrate a signif-

icant milestone this summer. Our daughter, Claire, will graduate from Peoria

Notre Dame High School and will be attending Butler University in Indianapolis this

fall. Once again, I will be coaching my son, John’s, Peoria Diamond Devils 15U travel

baseball team. I have coached this core group of kids since they were eight years old.

I love it!

One other significant event this summer is that one of our three outstanding client

service associates, Becky Trecek, will be participating in the St. Jude Macomb to Peoria

run. Please wish her the best when you speak with her.

What about the markets? I am a baseball guy, so how about this — we believe we

are still in the middle innings (5th inning?) of this bull market that began in March

2009. So stay optimistic about the longer term. Don’t be surprised if we endure a

10% correction sometime this year, however. We are overdue.

Are we in a bubble? We believe the answer is no. Stocks are no longer dirt cheap

but are not in exuberance territory either. The forward earning yield of the S&P 500

at approximately 6.49% (Source – Hays Advisory) compares favorably to the 10-year

Treasury yield of 2.73%. Another way to put things in perspective is that the market,

as of March 31, is only 20% higher than the peak in 2007 and 23% higher than March

2000 (Source – Lord Abbett). This is hardly nosebleed territory.

Regards,

Senior Vice President – Wealth Management

Financial Advisor

Financial Planning Specialist

The views expressed herein are those of the author and do not necessarily reflect the views of Morgan Stanley Wealth Management or its affiliates. All opinions are subject to change without notice. Neither theinformation provided nor any opinion expressed constitutes a solicitation for the purchase or sale of anysecurity. Past performance is no guarantee of future results.

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Reassess continued from page 1

4Determine how much income

your  retirement  investments

will  generate. As a general rule ofthumb, you can multiply your retire-ment investments by 4% to get anidea of how much you can withdrawannually. You can go through a moredetailed analysis, reviewing a widerange of variables for a more preciseanswer. However, the younger youretire, the more conservative yourwithdrawals should be, since yourfunds will have to last longer.

4Investigate  work  options.    Ifyou plan to work at least part-

time during retirement, have youdecided what you’ll do and howmuch it will pay? Make sure youinvestigate your options, includingasking your current employer aboutpart-time opportunities after retire-ment.

4Finalize  living arrangements.

Determine whether you want tostay in your current home or move toanother one, either in the same city ora different location. At this point,you should be able to determinewhether you’ll have a mortgage andhow much equity you’ll have in yourhome. While most retirees continueto live in their current home, explorewhether it makes sense to downsize,freeing up home equity for invest-ments or retirement income.

4Deal  with  health  insurance

and  long-term-care  costs.

Two of the most significant costs inretirement are medical care and long-term care. Make sure you have plansto deal with both. If you are retiringat age 65 or later, you’ll be eligiblefor Medicare, although a spouseunder age 65 will not. You will prob-ably need supplemental coveragewith Medicare. If you are retiringbefore age 65, make sure you know

exactly how much coverage will costyou, especially if coverage is not pro-vided by your employer. Now is alsoa good time to take a look at long-term-care insurance, since premiumsget significantly more expensive asyou age.

4Live  with  your  retirement

budget  for a  couple of years.

Want to really make sure your retire-

ment budget is reasonable? Try liv-ing with your retirement budget for acouple of years before retirement. Ifyou can do so without increasingyour debt, you can be reasonablyconfident that your budget will workduring retirement.

Please call if you’d like helpassessing your retirement plansbefore you retire. 444

FR2013-1118-0077

A Retirement Account Is Not a Retirement Plan

Just as a road map keeps youfrom getting lost on the road, aretirement plan keeps you

from getting lost on your way toretirement.

A retirement account is simplya vehicle to save for retirement,while a retirement plan includesmany factors — when you want toretire, how much you will needevery month, your assets and investments, your debts, Social Security benefits, health care, emergency fund, and more. Somefactors to consider include:

Are  you  contributing

enough? If you’re like most Amer-icans, the answer is probably no. In2012, on average, Americans con-tributed about $2,700 to their401(k) plans; even if matched at100%, $2,700 a year is not enoughfor most people to make it throughretirement. There is a lot of room tocontribute far more than averagebefore hitting the annual 401(k)contribution maximum of $17,500(that’s the limit in 2014 per IRSrules; it typically increases a biteach year). But if you don’t have aplan — if you don’t know howmuch you’ll need to have savedwhen you retire — you won’t knowhow much you need to contributeevery month.

Are  your  investment  alloca-

tions  right  for  you?  How you allocate your money — the types ofinvestments you have — shoulddepend on where you are on thepath to retirement. Generally, thefurther away you are from retire-ment, the more money you shouldhave in stocks and the less moneyyou should have in bonds. As youget closer to retirement, you shouldreallocate your funds toward morebonds and less stocks.

Have you strategically chosen

your  accounts?  The government incentivizes us to save for ourretirement by giving certain typesof tax advantages to qualified retire-ment accounts. But those advan-tages vary. For some, you get tocontribute pretax dollars (but thatmoney is taxed when you take it outin retirement). For others, you cantake money out tax free in retire-ment, but contributions are madeafter taxes.

If your employer offers a401(k) plan and matches contribu-tions, it usually makes sense to con-tribute at least as much as youremployer will match. But for mostAmericans, that 401(k) plan aloneis not sufficient.

Please call if you’d like to dis-cuss this in more detail. 444

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Have You Assessed Your Risk Tolerance?

While investors want thehighest returns possible,returns compensate you

for the risks you take — higher risksare generally rewarded with higherreturns. Thus, you need to assesshow much risk you are willing totake to obtain potentially higherreturns. However, this can be a diffi-cult task. It is one thing to theoreti-cally answer questions about howyou would react in different circum-stances and quite another to actuallywatch your investments decrease sig-nificantly in value. What you are try-ing to assess is your emotional toler-ance for risk, or how much pricevolatility you are comfortable with.Some questions that can help yougauge that risk tolerance include:

4What  long-term  annual  rate

of  return  do  you  expect  to

earn  on  your  investments? Youranswer will help determine the typesof investments you need to choose tomeet that target. Review historicalrates of return as well as variations inthose returns over a long time periodto see if your estimates are reason-able. Expecting a high rate of returnmay mean you’ll have to invest inasset classes you aren’t comfortablewith or that you may be tempted tosell frequently.

4What  length  of  time  are  you

investing  for? Some invest-

ments, such as stocks, should only bepurchased for long time horizons.Using them for short-term purposesmay increase the risk in your portfo-lio.

4How  long  are  you  willing  to

sustain  a  loss  before  selling?

The market volatility of the past sev-eral years will give you some indica-tion of how comfortable you areholding investments with losses.

4What types of investments do

you own now,  and how com-

fortable are you with them? Makesure you understand the basics of anyinvestments you own, including thehistorical rate of return, the largestone-year loss, and the risks theinvestment is subject to. If you don’tunderstand an investment or are notcomfortable owning it, you may betempted to sell at an inopportunetime.

4Have  you  reassessed  your

financial goals recently? Dueto the significant market volatility ofthe past few years, your financialplan may need to be revamped. Oth-erwise, you may find you won’t havesufficient resources in the future tomeet your goals. Based on your cur-rent investment values, determinewhat needs to be done to meet yourfinancial goals. You may need tosave more, change or eliminate somegoals, or delay your retirement date.

4Do  you  understand  ways  to

reduce  the  risk  in your port-

folio? While all investments are sub-ject to risk, there are some risk reduc-tion strategies you should considerfor your portfolio. These strategiesinclude:

4Diversify your portfolio. Youshould diversify among several

different investment categories,including cash, bonds, and stocks, as

well as within investment categories,such as owning several types ofstocks. A properly diversified portfo-lio should contain a mix of assettypes whose values have historicallymoved in different directions or inthe same direction with differentmagnitudes.

4Stay  in  the  market  through

different  market  cycles.

Remaining in the market over thelong term helps to reduce the risk ofreceiving a lower return than expect-ed, especially for more volatileinvestments, such as stocks.

4Use  dollar  cost  averaging  to

invest. Rather than accumulat-ing cash so you have a large sum toinvest, invest small amounts regular-ly. Dollar cost averaging is a methodof investing a certain sum of moneyin set amounts at regular intervals.This spreads your purchases over aperiod of time, keeping you frommaking one major purchase at highprices. Since you are investing a setamount, you purchase more shareswhen prices are lower and fewershares when prices are higher.

While a valuable investmentstrategy, dollar cost averaging doesnot ensure a profit or protect againstlosses in declining markets. Beforestarting a program, consider yourability to continue purchases duringperiods of low price levels. Thisstrategy requires the discipline toinvest consistently regardless of mar-ket prices and can help develop ahabit of regular investing.

Ensuring your investments arecompatible with your risk toleranceis an important component of yourinvestment strategy. Please call ifyou’d like help assessing your risktolerance. 444

FR2013-1118-0077

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Overdiversification

Diversify. Diversify. Diversify. While thisinvestment advice seems to be continually dis-cussed, it is possible to overdiversify, which can

lead to lackluster returns. Thus, it is important to know

the difference between healthy diversification and excessdiversification.

The primary benefit of diversification for your port-

folio is to spread market risk over different stocks in a

way that will decrease the impact any one stock will have

on your total return. With an appropriate level of diver-

sification, your overall return will not be significantly

impacted if one or even a few investments do not per-

form as expected.

Thus, it is not just the number of investments you

hold that impacts your return, but how those investments

interact with one another. If you keep adding invest-

ments that react to the market in the same way, you are

not really diversifying. You are just adding similar

investments to your portfolio.

Adding too many investments to your portfolio also

makes it more difficult to monitor them. With too many

investments to keep track of, it is more likely that you

will miss important information about investments.

Please call if you’d like to review the level of diver-

sification in your portfolio. 444

MarketDataMONTH END % CHANGE

STOCKS: APR 14 MAR 14 FEB 14 YTD 12 MONDow Jones Ind. 16580.84 16457.66 16321.71 0.0% 11.7%S&P 500 1883.95 1872.34 1859.45 1.9 17.9Nasdaq Comp. 4114.56 4198.99 4308.12 -1.5 23.6Wilshire 5000 19705.45 19711.22 19637.68 1.5 18.3PRECIOUS METALS:Gold 1288.50 1291.75 1326.50 7.2 -12.3Silver 19.20 19.82 21.25 -1.5 -20.5INTEREST RATES: APR 14 MAR 14 FEB 14 DEC 13 APR 13Prime rate 3.25 3.25 3.25 3.25 3.25Money market rate 0.41 0.41 0.41 0.43 0.473-month T-bill rate 0.02 0.05 0.05 0.07 0.0520-year T-bond rate 3.23 3.36 3.42 3.61 2.51Dow Jones Corp. 2.88 2.90 2.83 3.11 2.44Bond Buyer Muni 4.64 4.73 4.81 5.13 4.05Sources: Barron’s, Wall Street Journal. An investor may not invest directly in an index.

This newsletter was produced by Integrated Concepts Group, Inc. on behalf of Morgan Stanley Financial Advisors Douglas S. Cheney, Daren F. Epley, and Patrick J. Wolbeck. The opinions expressed in this newsletter are solely those of the author and do not necessarily reflect those of Morgan Stanley. Morgan Stanley can offer noassurance as to its accuracy or completeness and the giving of the same is not deemed an offer or solicitation on Morgan Stanley’s part with respect to the sale or purchaseof any securities or commodities.

Tax laws are complex and subject to change. This information is based on current federal tax laws in effect at the time this was written. Morgan Stanley, its affiliates,and Morgan Stanley Financial Advisors do not provide tax or legal advice. This material was not intended or written to be used, and it cannot be used by any taxpay-er, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Individuals should consult their personal tax advisor for matters involving taxation and tax planning and their attorney for matters involving personal trusts, estate planning, and other legal matters.

Insurance products are offered in conjunction with Morgan Stanley’s licensed insurance agency affiliates.

Investments and services offered by Morgan Stanley Smith Barney LLC, Member SIPC.

FR2013-1118-0077

The Cheney – Epley – Wolbeck Group at Morgan Stanley Wealth Management

Seated from left:

Florence A. JackSenior Client Service Associate309.671.2860

Rebecca TrecekClient Service Associate309.671.2866

Brooke BaileyClient Service Associate309.671.2869

Standing from left:

Douglas S. CheneySenior Vice President – Wealth ManagementFinancial Advisor 309.671.2879

Patrick J. Wolbeck, CFP®

Vice President – Wealth ManagementFinancial AdvisorFinancial Planning Specialist 309.671.2878

Daren F. EpleySenior Vice President – Wealth ManagementFinancial AdvisorFinancial Planning Specialist 309.671.4660

NOT FDIC INSURED • NOT A BANK DEPOSIT • MAY LOSE VALUE