Working for Today, Saving for Tomorrow How to Take Control of Your Finances and Plan for a Profitable Retirement

November 2012 Marisa S. Ruhter

2

Overview

Personal Finance

R

esources

Retirement Planning

Investing

3

Budget List Fixed Expenses

Track Spending

Identify Needs vs Wants

10 Tools to Help: www.doughroller.net/tools-resources/10-online-budget-tools/

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Industry Debt Guidelines

Sum of Debt Payments Income (Pre Tax)

= Debt to Income Ratio

Debt to Income Ratio < 15 % Very Good

16% - 20% Good 21% - 35% Try to Reduce Debt 36% - 50% Too Much Debt

>50% Serious Trouble

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Emergency Fund

3 to 6 months worth of living expenses Exact amount depends on

personal comfort level

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Insurance

7

How Much Money Will I Need?

Retirement Basics: http://money.cnn.com/retirement/guide/basics_basics.moneymag/

Medical Expenses Leisure Activities Health Care Costs

$$$

Savings Plan Contributions Work Related Expenses Taxes

$$$

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Other Things to Consider Retirement Age

Length in Retirement

Health Care

Inflation

Lifestyle

Retirement Calculator: http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp

Image Source: Wikipedia

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401(k)

Pay Check Modified Income Taxes

401(k)

Employer Contribution

Taxes Income

Retirement

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401(k)

Contributions Managed Externally

Investment Choices

Employer Vesting

Source: www.irs.gov

More Info: www.401khelpcenter.com

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Traditional IRA

Pay Check Modified Income Taxes

Traditional IRA

Taxes Income

Retirement

Employer

12

Roth IRA

Pay Check Take Home Pay Roth IRA

Taxes

Income

Retirement

Employer

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Contribution Limits

Traditional IRA Contribution Limits

Roth IRA Contribution Limits

Age 2012 Contribution Limits Up to age 50 $5,000 Age 50 – 70½ $6,000 Over age 70½ Not allowed

Age 2012 Contribution Limits Up to age 50 $5,000 Over age 50 $6,000

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Latest Age for Social Security Payments

70 67

Full Retirement Age

55

Retirement Age after which 401(k) distributions no longer incur 10% penalty

50

IRA Contribution Limits Increase

Retirement Timeline

Age 59½

IRA Withdrawals subject to 10% early distribution

penalty

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Earliest Age for Social Security Payments

70½

Required Minimum Distributions from Traditional IRA’s

Social Security Benefits: www.socialsecurity.gov/estimator/

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Choosing a Brokerage Banks Mutual Fund Companies Brokerage Firms

Minimum Initial Investment Automatic Contributions

Available Minimum Contributions

Allowed Fees Investment Options

IRA Broker Quiz: https://www.mint.com/ira-center/?campaign=MMB_IRA_brokerage

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Diversification

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Diversification Merriam-Webster Definition: “composed of distinct or unlike elements or qualities”

Risk Management Technique

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Why Diversify?

S&P 500

Bonds

1.9%

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Yearly Asset Class Returns

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Diversification Individual Factors

– Risk Tolerance – Years Until Retirement – Confidence / Experience

Stocks

Bonds Stocks

Money Market Funds

Bonds

MM

Risk Tolerance Quiz: http://njaes.rutgers.edu/money/riskquiz/

– Future Expectations – Personality

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Moderate Allocation Example

Large-Cap Equity Small-Cap Equity International Equity Fixed Income Cash Investments

Indexed Funds – Bond Market Index Fund – Treasury Money Market Fund – S&P 500 Index Fund – International Index Fund – Russell 2000 Index Fund – Total Stock Market Index Fund

Actively Managed Funds – Domestic Large Co. Fund – Domestic Small/Mid Co. Fund – Emerging Markets Fund – Health Care Fund – Blue Chip Growth – Small Cap Value Fund

35% 35%

15%

5%

10%

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Target Date Funds

Retired Retire 2015

Retire 2020

Retire 2025

Retire 2030

Retire 2035

Retire 2040

Retire 2045

Retire 2050

Example Asset Allocation for Target Date Funds

Large / Mid-Cap Equities

Small-Cap Equities

International Equities

Real Estate

Commodities

US Bonds

Global Bonds

Inflation-Linked Bonds

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Buying Stock Where to start?

– Understand yourself – Understand an industry

Research

Create a Watch List

General Investment References: www.fool.com & www.investopedia.com

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Buying Stock How

Rule of 5

Reflect

Taxes

2012 Broker Rankings: www.smartmoney.com/invest/markets/smartmoneys-annual-broker-survey-23119/

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Annual Maintenance Review Allocations Annually

Consider Entire Portfolio

Professional Consultation

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Summary

Personal Finance

R

esources

Retirement Planning

Investing

27

“Don't be too timid and squeamish about your actions. All life is an experiment.”

- Ralph Waldo Emerson