Chlebina Capital Management, LLCLarry ChlebinaPresident843 N. Cleveland-Massillon RdSuite DN12Akron, OH 44333330-668-9200lchlebina@ccapmanagement.comwww.chlebinacapital.com

The Benefits of Tax-Advantaged Savings Vehicles

September 25, 2015

Taxes can take a big bite out of your total investmentreturns, so it's helpful to look for tax-advantagedstrategies when building a portfolio. But keep in mindthat investment decisions shouldn't be driven solelyby tax considerations; other factors to considerinclude the potential risk, the expected rate of return,and the quality of the investment.

Tax-deferred and tax-freeinvestmentsTax deferral is the process of delaying (but notnecessarily eliminating) until a future year thepayment of income taxes on income you earn in thecurrent year. For example, the money you put intoyour traditional 401(k) retirement account isn't taxeduntil you withdraw it, which might be 30 or 40 yearsdown the road!

Tax deferral can be beneficial because:

• The money you would have spent on taxesremains invested

• You may be in a lower tax bracket when you makewithdrawals from your accounts (for example,when you're retired)

• You can accumulate more dollars in your accountsdue to compounding

Compounding means that your earnings become partof your underlying investment, and they in turn earninterest. In the early years of an investment, thebenefit of compounding may not be that significant.But as the years go by, the long-term boost to yourtotal return can be dramatic.

Taxes make a big differenceLet's assume two people have $5,000 to invest everyyear for a period of 30 years. One person invests in atax-free account like a Roth 401(k) that earns 6% peryear, and the other person invests in a taxableaccount that also earns 6% each year. Assuming atax rate of 28%, in 30 years the tax-free account willbe worth $395,291, while the taxable account will beworth $295,896. That's a difference of $99,395.

This hypothetical example is for illustrative purposesonly, and its results are not representative of anyspecific investment or mix of investments. Actualresults will vary. The taxable account balanceassumes that earnings are taxed as ordinary incomeand does not reflect possible lower maximum taxrates on capital gains and dividends, as well as thetax treatment of investment losses, which would makethe taxable investment return more favorable, therebyreducing the difference in performance between theaccounts shown. Investment fees and expenses havenot been deducted. If they had been, the resultswould have been lower. You should consider yourpersonal investment horizon and income tax brackets,both current and anticipated, when making aninvestment decision as these may further impact theresults of the comparison. This illustration assumes afixed annual rate of return; the rate of return on youractual investment portfolio will be different, and willvary over time, according to actual marketperformance. This is particularly true for long-terminvestments. It is important to note that investmentsoffering the potential for higher rates of return alsoinvolve a higher degree of risk to principal.

Tax-advantaged savings vehicles forretirementOne of the best ways to accumulate funds forretirement or any other investment objective is to use

Tax deferred is not thesame as tax free. "Taxdeferred" means that thepayment of taxes isdelayed, while "tax free"means that no incometaxes are due at all. Forexample, with a RothIRA, after-tax dollars arecontributed, but qualifieddistributions (thosesatisfying a five-yearholding period and madeafter age 59½ or afterbecoming disabled) arefree from federal incometax.

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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2015

IMPORTANT DISCLOSURES

Securities offered through Securities Service Network, Inc., Member FINRA/SIPC. Fee-based advisory services are offered through ChlebinaCapital Management, LLC., a registered investment advisor.

tax-advantaged (i.e., tax-deferred or tax-free) savingsvehicles when appropriate.

• Traditional IRAs -- Anyone under age 70½ whoearns income or is married to someone withearned income can contribute to an IRA.Depending upon your income and whether you'recovered by an employer-sponsored retirementplan, you may or may not be able to deduct yourcontributions to a traditional IRA, but yourcontributions always grow tax deferred. However,you'll owe income taxes when you make awithdrawal.* You can contribute up to $5,500 (for2014 and 2015) to an IRA, and individuals age 50and older can contribute an additional $1,000 (for2014 and 2015).

• Roth IRAs -- Roth IRAs are open only toindividuals with incomes below certain limits. Yourcontributions are made with after-tax dollars butwill grow tax deferred, and qualified distributionswill be tax free when you withdraw them. Theamount you can contribute is the same as fortraditional IRAs. Total combined contributions toRoth and traditional IRAs can't exceed $5,500 (for2014 and 2015) for individuals under age 50.

• SIMPLE IRAs and SIMPLE 401(k)s -- These plansare generally associated with small businesses. Aswith traditional IRAs, your contributions grow taxdeferred, but you'll owe income taxes when youmake a withdrawal.* You can contribute up to$12,500 (for 2015, $12,000 for 2014) to one ofthese plans; individuals age 50 and older cancontribute an additional $3,000 (for 2015, $2,500for 2014). (SIMPLE 401(k) plans can also allowRoth contributions.)

• Employer-sponsored plans (401(k)s, 403(b)s, 457plans) -- Contributions to these types of plans growtax deferred, but you'll owe income taxes whenyou make a withdrawal.* You can contribute up to$18,000 (for 2015, $17,500 for 2014) to one ofthese plans; individuals age 50 and older cancontribute an additional $6,000 (for 2015, $5,500for 2014). Employers can generally allowemployees to make after-tax Roth contributions, inwhich case qualifying distributions will be tax free.

• Annuities -- You pay money to an annuity issuer(an insurance company), and the issuer promisesto pay principal and earnings back to you or yournamed beneficiary in the future (you'll be subject tofees and expenses that you'll need to understandand consider). Annuities generally allow you to

elect to receive an income stream for life (subjectto the claims-paying ability of the issuer). There'sno limit to how much you can invest, and yourcontributions grow tax deferred. However, you'llowe income taxes on the earnings when you startreceiving distributions.*

Tax-advantaged savings vehicles forcollegeFor college, tax-advantaged savings vehicles include:

• 529 plans -- College savings plans and prepaidtuition plans let you set aside money for collegethat will grow tax deferred and be tax free atwithdrawal at the federal level if the funds are usedfor qualified education expenses. These plans areopen to anyone regardless of income level.Contribution limits are high--typically over$300,000--but vary by plan.

• Coverdell education savings accounts -- Coverdellaccounts are open only to individuals with incomesbelow certain limits, but if you qualify, you cancontribute up to $2,000 per year, per beneficiary.Your contributions will grow tax deferred and betax free at withdrawal at the federal level if thefunds are used for qualified education expenses.

• Series EE bonds -- The interest earned on SeriesEE savings bonds grows tax deferred. But if youmeet income limits (and a few other requirements)at the time you redeem the bonds for college, theinterest will be free from federal income tax too (it'salways exempt from state tax).

Note: Investors should consider the investmentobjectives, risks, charges, and expenses associatedwith 529 plans. More information about specific 529plans is available in each issuer's official statement,which should be read carefully before investing. Also,before investing consider whether your state offers a529 plan that provides residents with favorable statetax benefits. The availability of tax and other benefitsmay be conditioned on meeting certain requirements.

Bottom lineThough tax considerations shouldn't be your onlyinvesting concern, by putting your money intax-advantaged savings vehicles and investmentswhen appropriate, you'll keep more money in yourown pocket and put less in Uncle Sam's.

Tax-free municipal bonds

Interest earned on tax-freemunicipal bonds isgenerally exempt from statetax if the bond was issuedin the state in which youreside, as well as fromfederal income tax (thoughearnings on certain privateactivity bonds may besubject to regular federalincome tax or to thealternative minimum tax).But if purchased as part ofa tax-exempt municipalmoney market or bondmutual fund, any capitalgains earned by the fundare subject to tax, just asany capital gains fromselling an individual bondare.

Note also that tax-exemptinterest is included indetermining if a portion ofany Social Security benefityou receive is taxable.

*Withdrawals prior to age59½ may be subject to a10% federal income taxpenalty unless anexception applies.

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