financial myths for women demystified

50
GE 42515- (rev 01/10) 1 financial myths for women… demystified

Upload: danatarzia

Post on 06-May-2015

516 views

Category:

Documents


0 download

DESCRIPTION

Women have unique financial issues and needs. This presentation discusses 15 of the most common misconceptions women have about general financial strategies, retirement and estate planning, insurance, as well as money and relationships. It provides guidance on strategies to help women manage their finances.

TRANSCRIPT

Page 1: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

1

financial myths for women… demystified

Page 2: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

2

Please be advised that this document is not intended as legal or tax advice. It is based upon our general understanding of Federal tax rules at the time the material was prepared. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.

Life insurance and annuity products are issued by AXA Equitable Life Insurance Company (NY, NY). Variable products are co-distributed by AXA Advisors, LLC and AXA Distributors, LLC. AXA Equitable, AXA Advisors, and AXA Distributors are affiliated companies and do not provide legal or tax advice.

important notes

Investments are: • Not a Deposit• Not FDIC Insured • Not Insured by Any Federal

Government Agency• Not Guaranteed by the Bank (or

Savings Association)• May Go Down in Value

Page 3: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

3

today’s workshop objectives

Dispel 15 common planning misconceptions: General planning Money and Relationships Insurance strategies Investment strategies Retirement planning Estate planning

Learn about some of your planning options.

Get information on what you can do to help enhance and protect your assets.

Page 4: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

4

general planning/

preparing for the future

Page 5: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

5

myth #1

I am still young. I can wait another few years before I start saving.

Page 6: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

6

truth…

Power of Time and the Magic of Compounding

Hypothetical Example

Age Years Until 65

Monthly Contribution

Total Contribution Growth* Total Value

25 40 $189 $90,905 $409,095 $500,000

30 35 $276 $115,920 $384,070 $500,000

35 30 $407 $146,689 $353,311 $500,000

40 25 $614 $184,090 $315,905 $500,000

45 20 $954 $229,023 $270,977 $500,000

50 15 $1,568 $282,299 $217,701 $500,000

*Chart assumes 7% growth for illustrative purposes. These figures are not intended to indicate the performance of any specific investments. Taxes and fees were not taken into consideration.

Page 7: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

7

myth #2

I can easily pay for my child’s college tuition because I started an Education IRA.

Page 8: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

8

truth…

With a $2,000 annual limit, an Educational IRA may not be enough.

529 Plans are designed to help families save for future college costs and reap special tax benefits.4

Sampling of Colleges 2009 Expenses1, 2

4-Year Total3

Harvard University $48,684 $212,973

Duke University $49,895 $218,271

University of Notre Dame $48.845 $213,678

Wake Forest University $49,032 $214,496

Rice University $43,288 $189,368

University of California-Berkeley $23.633 $103,385

Howard University $24,041 $105,170

University of Maryland $23,650 $103,459

University of Florida $11,873 $51,939

1. Tuition, fees and room and board. Does not include books and personal expenses. Individual college information provided by collegeboard.com. Costs, dates, policies and programs are subject to change.

2. For in state-students.

3. Assuming 6% annual inflation rate in each of the four years of college.

4. If you are investing in a 529 plan outside your state of residence, you may lose available state tax benefits. Make sure you understand your state tax laws to get the most from your plan. 529 plans are subject to enrollment, maintenance, administration/management fees and expenses. 529 plans are subject to fluctuation in value and market rise, including loss of principal. Investors should consider the investment objectives, risks, charges, and expenses of 529 plans carefully before purchasing. More information about 529 plans can be found in the issuer’s official statement which can be obtained from a financial professional. Please read the official statement carefully before investing.

Page 9: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

9

myth #3

The best gift I can give to charity is money.

Page 10: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

10

truth…

By giving cash to a charity, you are missing a chance to save on income taxes and give more money to the charity.

Give an appreciated capital asset instead: Deduct the value as a charitable gift without paying income tax on the

appreciation. Charity will acquire the full value of the contribution. Charity can cash in stock for market value or invest it to make more money.

Page 11: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

1111

truth…

Cash or cash equivalents (cash, T-bills, CDs)

You receive a $1,000 tax deduction Charitable organization receives $1,000

Yougift cash

Appreciable assets (stocks, bonds, mutual funds shares, other securities)You purchase $1,000 of an investment years ago

Shares appreciate to current

market value of $1,500

You gift

shares

Charitable organization receives $1,500

investment

Assumes maximum annual limit on income tax deduction allowable for charitable contributions is not yet met.

Typically, you get a $1,500 tax deduction (without paying income tax on the $500 appreciation).

Can sell or reinvest. Not subject to capital gains tax.

Page 12: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

1212

giving with life insurance

Charitable giving with life insurance

Life Insurance

Company

Donor Insured by

life insurance policy

Donor gives money or property to the charity and asks the Foundation to purchase life insurance on a donor’s life.

The charity is the owner and beneficiary of the policy. Alternatively, life insurance currently owned by donor that is no longer

needed can be gifted to the charity.

The CharityOwner and beneficiary

of the life insurance policy

Policy Premium

Gifts

Page 13: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

13

money and relationships/

strategies with your best interest in mind

Page 14: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

14

myth #4

I have a family, yes, but I also have a thriving career. So I can save as much for retirement as my male colleagues can

Page 15: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

15

truth…

Women earn less money1, so their contributions may be less

Caregivers are predominately female and reports show they commonly take time off to provide care to their loved ones2

It may be appropriate to supplement your retirement funding with a variable annuity*

* A variable annuity is a long-term financial product designed for retirement purposes. In essence, an annuity is a contractual agreement in which payment(s) are made to an insurance company, which agrees to pay out an income or a lump sum amount at a later date. Typically, variable annuities have mortality and expense charges, sales and withdrawal charges, account fees, investment management fees, administration fees and charges for optional benefits.Variable annuity account values will fluctuate and are subject to market risk, including the possibility of loss of principal. Guarantees are based on the claims-paying ability of the issuing insurance company.Please consider the charges, risks, expenses, and investment objectives carefully before purchasing a variable annuity. For a prospectus containing this and other information, please contact a financial professional. Read it carefully before you invest or send money.If you are purchasing an annuity contract a Individual Retirement Account (IRA) or Tax-Sheltered Annuity (TSA) to fund a qualified employer-sponsored retirement arrangement, you should do so for the variable annuity’s features and benefits other than tax deferral. For such cases, tax deferral is not an additional benefit of the variable annuity. You should consider the relative features, benefits and costs of annuities with any other investment that you may use in connection with your retirement plan or arrangement.

Sources: 1) Institute for Women’s Policy Research, Fact Sheet, September 2009.

2) National Alliance for Caregiving in the U.S., Care giving in the U.S. Executive summart. November 2009

Page 16: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

16

truth…

Imagine you invested $2,000 a year in a currently taxable and tax-deferred account, earning a hypothetical 8% annual return, assuming a 28% tax bracket.

As the chart shows, even after you pay income tax on withdrawals, the tax-deferred account could leave you with more money in your pocket.

BENEFITS OF TAX DEFERRAL

$150,000

10 Years

$100,000

$50,000

$0

$200,000

$250,000

30 Years20 Years

Tax-Deferred Account

After-Tax Lump Sum Withdrawal

Currently Taxable Account

The hypothetical example above is for illustrative purposes only. See next slide for note.

Page 17: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

17

The hypothetical example on the previous slide is for illustrative purposes only. The 8% return is not intended to reflect the actual performance of any product or investment. Neither investment reflects any withdrawal charges, administration charges or investment management fees.

Variable annuities impose withdrawal charges based on a particular product’s surrender charge schedule. Annual administration and mortality and expense risk charges are generally applied to assets in a product’s investment options or sub-accounts. If these fees and charges would have been reflected in the chart above, the ending values would have been lower. Lower maximum tax rates on capital gains and dividends would make the taxable account returns more favorable compared to the tax deferred account, thereby reducing the difference in performance between the accounts.

Changes in tax rates and tax treatments of investment earnings may impact the comparative results and investors should consider their personal time horizon and income tax bracket, both current and anticipated when making an investment decision as these may further impact the results of the comparison.

Page 18: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

18

myth #5

My husband takes care of the finances so I don’t have to.

Page 19: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

19

truth…

It’s important for both the husband and wife to be involved in the finances

Know your debt, your assets and your expenses At the very least, maintain an active interest

Page 20: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

20

myth #6

In a divorce I should keep the home.

Page 21: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

21

truth…

The costs associated with the running and owning of your home might be more than you anticipated – or can afford

Selling the home may help your long-term financial situation

Page 22: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

22

insurance strategies/

protecting yourself and your loved ones

Page 23: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

23

myth #7

I have life and disability insurance through my job. I don’t need any more.

Page 24: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

24

truth…

In the U.S., a disabling injury occurs every second, a fatal injury occurs every 4 minutes.1

In many cases, group insurance may offer minimal or restrictive coverage and may not be there if you lose your job.

Social security qualifications are strict.

1. U.S. Census Bureau Public Information Office, November 2008.

Page 25: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

25

truth…

Individual insurance can offer more: Many insurance policies provide you with the customized coverage. Unlike group term life insurance, individual life insurance can also serve as

a versatile tool to address other needs. It’s important to:

Secure your family’s future in your absence. Protect your assets, retirement saving and child’s college fund.

Page 26: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

26

myth #8

My medical insurance will cover any unexpected illnesses that come my come my way.

Page 27: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

27

truth…

70% of people over age 65 will need long-term care in their lifetime.1

Average annual cost for nursing home care is almost $68,000.2

Medical insurance, Medicare won’t cover costs.

Long-term care insurance:

Helps to protect your assets.

Helps to preserve an estate for heirs.

Quality medical care.

Helps preserve your independence.

Medicaid may offer certain benefits, but only if a person has limited income and assets or the person’s assets have been substantially depleted. The exact income eligibility vary by state.

1. Administration on Aging http://www.longtermcare.gov/LTC,2008 2. Genworth Cost of Care Survey, 2009

Page 28: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

28

investment strategies/smart choices, smart investors

Page 29: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

29

I’m not a risk taker, so I’m hesitant to invest in stocks.

myth #9

Page 30: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

30

There is always a risk to investing

Consider the greater risk of not investing

Diversification is the key to asset allocation and can help you: Lower your overall investment risk

Increase chances of meeting investment objectives

Consider time frame, goals and risk tolerance

Diversification and asset allocation do not assure a profit or protection against a loss.

truth…

Page 31: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

31

Growth

Little need for current income

Focus on growth

High tolerancefor risk

Intermediate/long investment horizon

Growth with Income

Equal focus on growth and current income

Moderatetolerance for risk

Intermediate investment horizon

Younger Investors (Aggressive)

Nearing or In Retirement (Low Risk)

Income with Moderate Growth

Need for current income

Moderate focus on growth

Low tolerance for risk

Intermediate investment horizon

Income with Capital Preservation

Need for capital preservation and current income

No focus on growth

Lowest tolerance for risk

Shortest investment horizon

Aggressive Growth

• No need for current income

Focus on aggressive growth

Highest tolerance for risk

Long investment horizon

truth…

Adjust your risk exposure for your age

Page 32: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

32

Investing is too complicated and time-consuming.

myth #10

Page 33: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

33

A well-structured plan doesn’t require you to be a market-savvy financial expert

An experienced financial professional can help guide you through the planning process

truth…

Page 34: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

34

retirement planning/

living the retirement of your dreams

Page 35: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

3535

myth #11

I “max out” the contributions to my 401(k), so I’m all set for retirement.

Page 36: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

3636

truth…

A 401(k) is not a savings account: Offers investment options. Requires strategic planning.

Maximize your retirement funds — choose investments wisely.

Consider the allocation of your contributions.

Page 37: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

37

myth #12

I don’t need a retirement plan because my successful business will fund all of my retirement needs.

Page 38: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

38

truth…

Relying solely on your business to ensure your personal financial well-being is risky:

Will your business still be a success after you retire? Are you overestimating its worth?

Strategic planning protects both your business and personal finances.

Consider the allocation of your contributions: Maintain separation (business/personal). Implement a business continuation plan. Take advantage of financial vehicles available to you.

Page 39: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

39

myth #13

When I retire, I’ll just sell all my assets and collect the money. The order in which I do it doesn’t matter.

Page 40: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

40

truth…

Timing and sequencing are important to avoid additional taxes and penalties. Ex: Many pensions, 401(k)s and annuities are subject to restrictions

or penalties for early withdrawals. Create a planning strategy for retirement.

At retirement: A 20+ year retirement? Evaluate short and long-term needs. Identify assets for liquidation. Periodic reviews.

Page 41: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

41

estate planning/preserve more of your

hard earned assets

Page 42: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

42

I don’t need to worry about estate planning since everything is going to my spouse when I die.

myth #14

Page 43: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

43

truth…

You and your spouse could be involved in a common accident or other unexpected situation where lack of a plan could be costly.

Leaving everything to your spouse could eventually cost your heirs large amounts in estate taxes.

Utilize the Unified Tax Credit.Under the Economic Growth and Tax Relief Reconciliation Act of 2001, numerous changes to the federal estate and gift taxes are scheduled to take effect between 2002 and 2010. These include repeal of the estate tax for the year 2010 (although gift taxes on lifetime transfers wouldcontinue in effect). 2001 estate and gift tax law are scheduled to be reinstated for year 2011 and thereafter. Therefore, while the Act provided several years of lower rates and higher exemptions followed by one year of repeal for 2010, in the absence of new legislation, 2011 would bring back the old $1 million exemption.

It is also expected that Congress will be revisiting gift and estate taxes.

Page 44: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

44

truth…

Net to heirs without using the Unified Credit

Decedent’s Taxable Estate $7,000,000

All to Surviving Spouse

IRS

$1,575,000*

Children $5,425,002

Hypothetical example:

Tax savings: $1,575,000* Assumes both spouses die in 2009, when the applicable exclusion amount is equal to $3,500,000. Other deductions and/or credits which are not shown that may be available.

Surviving Spouse’s Taxable Estate $7,000,000

Net to heirs with Unified Credit Planning

Decedent’s Taxable Estate $7,000,000

Surviving Spouse’s Taxable Estate $3,500,000

Non-Marital Trust$3,500,000

Children $7,000,000

Page 45: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

45

myth #15

Estate plans are only for wealthy people.

Page 46: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

46

truth…

Realize your worth.

Create a plan.

Preserve more of what you’ve earned for those you care about.

CashReal EstateEmployee benefitsInvestmentsLife insurancePensionProfit sharingIRA401(k)

= An estate worthy of planning and protection

Page 47: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

47

The truth – the most important tool you need in planning for your financial future

The right advice can help you make smart decisions Plan ahead

summary

Page 48: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

48

where do you want to go from here

Do it yourself.

Work with us.

Most importantly, don’t procrastinate; timing is important.

Page 49: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

49

workshop evaluation

Please complete evaluation form and hand it in before you leave.

Schedule time to meet for a personal consultation.

Page 50: Financial Myths For Women Demystified

GE 42515- (rev 01/10)

50

thank you!