saving through your employer's plan 0714

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


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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.


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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.


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• 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


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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


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• 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


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• 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


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• 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.


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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


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• 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*


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$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


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• 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


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• 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


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• 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


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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


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$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


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Investment Types Have Different Risks

LowerRisk

Market Risk

Inflation RiskLower

Risk

HigherRisk

HigherRisk

Money Market Funds

Money Market Funds

Bonds

Bonds

Stocks

Stocks


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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


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General Considerations:

• Your current age

• The age at which you

will begin withdrawing

your investments

• Your personal feelings

and emotions concerning

investment volatility


Determining Your Personal Risk Tolerance


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• 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.


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• 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


Long-Term Bond funds


Short/Medium-Term Bond Funds




Long-TermBond Funds

Money Market 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.


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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


Long-Term Bond funds

Guaranteed Fixed Annuity*




GuaranteedFixed Annuity*



Long-TermBond 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.


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• 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


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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%


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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


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• 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

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