saving through your employer's plan 0714
Post on 06-Nov-2014
79 Views
Preview:
DESCRIPTION
TRANSCRIPT
Planning your future...today®
Saving and Investing Through Your Employer’s Retirement Plan
Plan Today
Enjoy Tomorrow
Smart Strategies for Retirement Planning
© 2014 PlanMember Financial Corporation
Planning your future...today®
2
Disclosures
This presentation is intended for general information purposes only and does not and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult with your tax, legal and/or financial services professional regarding your individual situation. Material presented is believed to be from reliable sources, and PSEC makes no representation as to its accuracy or completeness.
The use of diversification/asset allocation as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets.
Investors should carefully consider the investment objectives, risks, charges and expenses of a mutual fund before investing. This and other important information is contained in the prospectuses or summary prospectuses, which can be obtained from your PlanMember Program Representative and should be read carefully before investing. All investments may involve risk including possible loss of principal.
Investors should consider the investment objectives of the variable annuity carefully before investing. An investment in a variable annuity involves investment risk, including possible loss of principal. Variable annuities are designed for long-term investing. The contract, when redeemed, may be worth more or less than the total amount invested. Variable annuities are subject to insurance related charges including mortality and expense charges, administrative fees, and the expenses associated with the underlying funds. Withdrawals prior to age 59 ½ may result in a 10% IRS tax penalty, in addition to any ordinary income tax. The guarantee of the annuity is backed by the financial strength of the underlying insurance company. Investment sub-account value will fluctuate with changes market conditions.
You should carefully consider the investment objectives, risks, charges and expenses of a variable annuity and its underlying investment options before investing. For a copy of the prospectus for the annuity and its underlying investments, which contains this and other information about variable annuities, contact your PlanMember Program Representative. Read the prospectus carefully before you invest.
Planning your future...today®
3
Disclosures
Fixed indexed annuities are insurance contracts and do not directly participate in any stock, bond or equity investments. You are not buying any shares of Stocks, bonds or shares of an index. The Market index value does not include the dividends paid on the underlying market index. These dividends are also not reflected in any indexed interest that may be credited to your contact. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Investors are cautioned to carefully review a fixed index annuity for its features, costs, and risk and how the variables are calculated. Any guarantees are backed by the financial strength of the insurance company.
There may be a surrender charge imposed during the first 5 to 7 years that you own a fixed annuity contract. Withdrawals prior to age 59½ may result in a 10% federal tax penalty, in addition to any ordinary income tax. Although it is possible to have guaranteed income for life with a fixed annuity, there is no assurance that this income will keep up with inflation.
The tax-deferred feature of an annuity should not be a factor in purchasing an annuity in a tax-qualified plan. Tax deferral is provided by the plan and the tax-deferral of the annuity does not provide any additional benefit. Annuities are subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject. Individuals should only purchase an annuity in a qualified plan when its other benefits, such as lifetime income payments, family protection through death benefits, and/or guaranteed fees meet their current needs.
Investments are: • Not a deposit • Not FDIC or NCUS/NCUSIF insured • Not bank or credit union guaranteed • Not Insured by any federal government agency • May lose value
Representatives registered with and offer only securities and advisory services through PlanMember Securities Corporation. A registered broker/dealer, investment advisor and member FINRA/SIPC.
Planning your future...today®
4
• Why you Need to Save
• Basics of 403(b) and 457(b) Plans
• Basic Investment Vehicles
• Investment Risk and Return
• Asset Allocation Fundamentals
• Importance of Discipline
• The Cost of Waiting
The Basics of Investing for Retirement
Agenda
Planning your future...today®
5
Why Do I Need to Save?
Your Standard of Living Depends on It!
1. Fast Facts and Figures about Social Security 2013.
2. CalSTRS Fast Facts for the period ending June 30, 2013. Applies to applicants in the California State Teachers Retirement System only. Other State Retirement System benefits will vary.
• Social Security accounts for only 36% of average recipients retirement income1
• State Retirement System benefits provide only 49.8% of average applicant’s average three-year salary2
• Social Security and State Retirement System benefits expected to be reduced in future years
Planning your future...today®
6
• Primary retirement plan for public schools and nonprofit employers
• Contributions made through automatic payroll deductions on pre-tax and/or after-tax (Roth) basis*
• Investments grow tax-deferred
• Portable in the event employment changes
• Penalty-free withdrawals at age 591/2, for qualifying hardship situations
• Required minimum annual distributions (RMD) begin at age 701/2
*Roth option not available through all plans.
What is a 403(b) Plan?
The Basics
Planning your future...today®
7
• Voluntary retirement plan offered by governmental and other tax-exempt employers
• Identical contribution features, RMDs, and tax advantages as 403(b) plans
• Contributions do NOT affect limits to 403(b) plan
• Could be primary or secondary plan
Unlike a 403(b) plan:
• Can be made available to select employees
• Penalty-free withdrawals anytime after severance of employment
• Generally fewer investment provider options
What is a 457(b) Plan?
The Basics
Planning your future...today®
8
• Contributions automatically deducted from paycheck through salary reduction
• Contributions invested in the mutual fund and/or annuity products you choose from the plan’s approved providers
• Provides a variety of powerful tax advantages
• Transfer assets from account(s) at previous employers or from providers formerly available through the plan
How do the Plans Work?
An Easy, Systematic Way to Save for Retirement
Before investing, carefully read the prospectus(es) or summary prospectus(es) which contain information about investment objectives, risks, charges, expenses and other information all of which should be carefully considered. For current prospectus(es) call (800) 874-6910. Investing involves risk. The investment return and principal value will fluctuate and, when redeemed, the investment may be worth more or less than the original purchase price.Asset allocation or the use of an investment advisor does not ensure a profit nor guarantee against loss.
Planning your future...today®
9
Tax Advantages
Pre-tax Contributions
• Contributions taken from paycheck before income taxes are deducted
• Reduce current income taxes
• Contribute amounts greater than the reduction in your paycheck
This hypothetical example is for illustrative purposes only and each person’s situation is different.Assumes 25% federal and state income and payroll taxes.
Gross Pay $3,000 $3,000
403(b) Plan Contribution $300 $0
Taxes $675 $750
Take-Home Pay $2,025 $2,250
Reduction in Take-Home Pay $225 $0
With $300 Pre-tax Plan Contribution
With No Plan Contribution
The Advantage of Pre-Tax Contributions
Planning your future...today®
10
• Contributions taken from paycheck after income taxes are deducted
• Qualified withdrawals are free of income taxes
• Ideal for those who will most likely be in a higher tax bracket in retirement
• No required annual minimum distributions if rolled into a Roth IRA before age 701/2
• More flexible for use in a retirement income strategy
• Potential to pass along more to heirs
*Roth option not available through all plans.
Tax Advantages
After-tax “Roth” Contributions*
Planning your future...today®
11
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
After 10 Years After 20 Years After 30 Years
Tax Advantages
Tax-Deferred Investment Growth
Assumes $300 contribution per month, 6% annual compound growth, 25% tax rate.
This hypothetical example is for illustrative purposes only and each person’s situation is different.
$45,306
$115,665$136,694
$293,777
$224,931
$48,979
The Advantage of Tax-Deferred Investment Growth
After Tax
Tax Deferred
Planning your future...today®
12
• Age 591/2
• Certain hardship events
• Disability
• Death
• QDRO
• Severance of employment at any age (457(b) plans only)
When Can I Take a Distribution?
Penalty-Free Plan Withdrawals
Planning your future...today®
13
• Represents shares of ownership in public companies
• Best long-term growth potential but highest short-term volatility
• Small, medium and large-company,value and growth styles, domestic and foreign issuers
Basic Investment Types
Stocks Bonds1
1. Bonds are affected by changes in interest rates, credit conditions, and inflation. As interest rates rise, prices of bonds fall. Long-term bonds are more are more sensitive to interest rate risks than short- term bonds, while lower-rated bonds may offer higher yields in return for more risk.
• Also known as cash
• Earn income in the form of interest payments
• Offers lowest growth potential but provides lowest volatility
• Seeks to maintain $1 share value at all times
2. Mutual funds and money market funds are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of $1 per share, it is possible to lose money by investing in these funds.
Money Market Funds2
• Earns income from interest payments
• Low to moderate long-term growth potential with lower short-term volatility
• Short-term to long-term maturities, Governmental, Corporate, Municipal and High Yield
Planning your future...today®
14
• Professionally managed pool of stocks, bonds, money markets and/or other investments
• Investors purchase fund shares
• Provide growth through increase in share price and/or income through interest and capital gains
• Index vs. actively managed funds
• Different share classes
• Objective, policies, expenses, fees, performance and other information found in fund prospectus
What is a Mutual Fund?
The Most Common Retirement Investment Vehicle
Planning your future...today®
15
Primary Use and Benefit: A contract sold by an insurance company designed to provide tax-deferred growth, guaranteed interested rates* and a steady stream of guaranteed income* upon annuitization
Annuitization: The process of converting an annuity investment into a series of guaranteed* periodic income payments
Optional Features: May be able to purchase additional “riders” for optional features
Fees and Expenses: Mortality & expense, surrender charges, rider and other contract fees
Fixed, variable, income and index
*Guarantees and benefits subject to the claims-paying ability of the underlying insurance company. Guaranteed interest rates not available through all annuity types.
What is an Annuity?
The Basics
Planning your future...today®
16
$1,400,000
Growth of $10,000 Investment since 1964
Financial Market Performance
From January 1, 1964 to December 31, 2013
Large-company stocks measured by the Standard & Poor’s 500 index, long-term government bonds by a one-bond portfolio with approximate maturity of 20 years, cash by a one-treasury bill portfolio with approximate maturity of 30 days and inflation by the Consumer Price Index. It is not possible to invest directly in an index. All results assume reinvestment of dividends on stocks or coupons on bonds and assume no taxes. Source: Ibbotson Associates. Graph is for illustration purposes only and does not predict or depict any investment option offered through the PlanMember Services Program.
Stocks Bonds 7% Fixed Money Market Inflation5% Fixed
$400,000
$600,000
$800,000
$1,154,670
$328,217$294,570
$121,021$114,674$75,816
$200,000
$1,000,000
19641966
19681970
19721974
19761978
19801982
19841986
19881990
19921994
19961998
20002002
20042006
20082012
20132010
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
$1,200,000
Investment Risk and Return
Historical Financial Market Growth
Large-company stocks measured by the Standard & Poor’s 500 index, bonds by a one-bond long-term government bond portfolio with approximate maturity of 20 years, money market by a one-treasury bill portfolio with approximate maturity of 30 days and inflation by the Consumer Price Index. It is not possible to invest directly in and index. Past performance is not a guarantee of future results. All results assume reinvestment of dividends on stocks or coupons on bonds and assume no taxes. Source: Ibbotson Associates.
Stocks Bonds 7% Fixed Money Market Inflation5% Fixed
Growth of $10,000 From January 1, 1964- December 31, 2013
Planning your future...today®
17
Investment Risk and Return
Investment Types Have Different Risks
LowerRisk
Market Risk
Inflation RiskLower
Risk
HigherRisk
HigherRisk
Money Market Funds
Money Market Funds
Bonds
Bonds
Stocks
Stocks
Planning your future...today®
18
Investment Risk and Return
Risk Tolerance Considerations
• Inflation risk mitigated through stocks and other investments that have historically out-paced inflation over the long term
• Investors with longer investment horizons can reduce risk by investing more in stocks to capture historically superior long-term returns
• Investors with shorter horizons can guard against volatility through more stable bond and money market investments
Planning your future...today®
19
General Considerations:
• Your current age
• The age at which you
will begin withdrawing
your investments
• Your personal feelings
and emotions concerning
investment volatility
Investment Risk and Return
Determining Your Personal Risk Tolerance
Planning your future...today®
20
• Hypothetical investor Mary, age 25 and is just starting to invest for retirement
• Has more than a 40 year investment horizon. Wants to maximize long-term growth of nest egg
• Works with financial professional to construct a mutual fund portfolio of small, medium and large-company U.S. stock funds as well as international stock funds
Constructing Your Asset Allocation
Case Study 1
Large-Company Stock Funds
Small-Company Stock Funds
Medium-Company Stock Funds
International Stock Funds
For illustration purposes only.
Large-CompanyStock Funds
Small-CompanyStock Funds
Medium-CompanyStock Funds
InternationalStock Funds
This example does not represent any specific product, nor does it reflect sales charges or other expenses that may be required for some investments. Using diversification/asset allocation as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets.
Planning your future...today®
21
Constructing Your Asset Allocation
• Hypothetical investor Bill, age 49
• Wants to start cushioning his nest egg from stock market volatility
• Works with financial professional to construct a mutual fund portfolio of large and medium-company stock funds, along with bond and money market funds
Case Study 2
Large-Company Stock Funds
Long-Term Bond funds
Medium-Company Stock Funds
Short/Medium-Term Bond Funds
Short/Medium-Term Bond Funds
For illustration purposes only.
Large-CompanyStock Funds
Long-TermBond Funds
Money Market Funds
Medium-CompanyStock Funds
Short/Medium-Term Bond Funds
This example does not represent any specific product, nor does it reflect sales charges or other expenses that may be required for some investments. Using diversification/asset allocation as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets.
Planning your future...today®
22
Constructing Your Asset Allocation
Case Study 3
• Hypothetical investor Mary, age 61 and wants to retire in a few years
• Wants a strategy to help ensure that at least her current principal is available when she retires regardless of market performance
• Works with financial professional to construct portfolio that blends a guaranteed fixed annuity* with mutual funds, large and medium-company stock funds, along with bond funds
Case Study 3
Large-Company Stock Funds
Long-Term Bond funds
Guaranteed Fixed Annuity*
Short/Medium-Term Bond Funds
Medium-Company Stock Funds
For illustration purposes only.
GuaranteedFixed Annuity*
Short/Medium-Term Bond Funds
Large-CompanyStock Funds
Long-TermBond Funds
Medium-CompanyStock Funds
*Guarantees and benefits subject to the claims-paying ability of the underlying insurance company. Using diversification/asset allocation as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets.
This example does not represent any specific product, nor does it reflect sales charges or other expenses that may be required for some investments.
Planning your future...today®
23
• Not getting started early
• Buying investments after the market has made big gains
• Selling investments after the market has declined
• Overreacting to short-term market events
• Failing to stick to a long-term investment strategy
• Assuming too much risk by failing to prudently diversify
The Importance of Discipline
Common Mistakes Made by Individual Investors
Planning your future...today®
24
The Importance of Discipline
Market Timing is a Recipe for Failure
Source: Google Finance and PlanMember Securities Corporation. Results shown reflect share price changes only and do not include taxes or the reinvestment of capital gains and dividends. Past performance is not a guarantee of future results. It is not possible to invest directly in an index.
S&P 500 Index Average Annual ReturnsJanuary 1, 2004 – December 31, 2013
FullyInvested
7.14%
Minus Best10 Days
.31%
Minus Best20 Days
-3.87%
Minus Best30 Days
-7.36%
Planning your future...today®
25
Time is Your Most Valuable Asset
The Cost of Waiting
Hypothetical Saver Lisa
• Age 21
• Begins saving $3,000 annually
• Stops savings at 36 (15 years)
• Account Value at age 66 is $425,119
Hypothetical Saver Jim
• Age 36
• Begins saving $3,000 annually
• Stops savings at 66 (30 years)
• Account Value at age 66 is $251,405
*Example assumes hypothetical 6% annually compounded tax-deferred growth. Example is for illustrative purposes only.
Actual return may be higher or lower.
A $173,000 Mistake
Annual Contribution $3,000 $3,000
Number of Years 15 30
Total Investment $45,000 $90,000
Accumulated value at age 66 $425,119 $251,405
LisaAGE 21
JimAGE 36
Planning your future...today®
26
• Review the approved providers in the district’s plan and what investment services and vehicles they provide
• Review your current investments to see how your portfolio is currently allocated
• Request a complimentary Plan & Savings Analysis to help you determine if any adjustments should be made to your saving and investment strategy
Investors should carefully consider the investment objectives, risks, charges and expenses. This and other important information is contained in the prospectuses or summary prospectuses, which can be obtained from your PlanMember Program Representative and should be read carefully before investing.
Asset allocation or the use of an investment advisor does not ensure a profit nor guarantee against a loss.
What is Next?
Action Steps
top related