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Building a Strong Financial Future

Building a Strong Financial Future. Strategies for Age 45 to Retirement. Approved DBA Name. Introduction. Today we will discuss: Planning for retirement Managing multiple financial goals Estate planning essentials.

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Building a Strong Financial Future

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  1. Building a Strong Financial Future Strategies for Age 45 to Retirement Approved DBA Name

  2. Introduction • Today we will discuss: • Planning for retirement • Managing multiple financial goals • Estate planning essentials This presentation was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. The presenter is providing educational services only and is not able to provide participants with investment advice specific to their particular needs. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational presentation.  1

  3. The Future of Retirement • People are living longer • Healthier, more active lifestyles • Social Security benefits are starting later 2

  4. All Workers Ages25-34 Ages35-44 Ages45-54 Ages55+ Less than $10,000 $10,000-$24,999 $25,000-$49,999 $50,000-$99,999 $100,000-$249,999 $250,000 or more 43% 11% 12% 11% 11% 11% 56% 15% 12% 8% 6% 4% 46% 14% 11% 11% 11% 8% 29% 8% 11% 15% 13% 23% 38% 8% 13% 11% 17% 14% Are You Saving for Retirement? Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc. 2010 Retirement Confidence Survey.

  5. Calculate a Savings Goal • You may work to age 65 or beyond • You may need 60% to 100% of your final year’s salary each year in retirement • Social Security and pensions will provide only a fraction of your income needs 4

  6. Estimated Social Security Benefits Age in 2010: 60 (born 1950) Current Annual Earnings Retirement age 62 + one month in 2012 66 in 2016 70 in 2020 Monthly benefit in 2010 dollars $40,000 $868 $1,199 $1,662 $60,000 $1,139 $1,582 $2,206 $80,000 $1,410 $1,920 $2,608 Source: Social Security Administration. Example assumes no future increases in prices or earnings.

  7. $40,000 $60,000 $80,000 $32,000 $48,000 $64,000 $17,612 $29,016 $40,960 $260,634 $429,397 $606,152 Target a Retirement Savings Goal How Much Will You Need? Final Annual Salary Annual Retirement Income (80%) Annual Social Security Benefit (est.) Estimated Savings Goal (in today’s dollars) These estimates are not adjusted for future inflation. They assume $0 principal remaining after 25 years in retirement and an after-inflation annual rate of return of 5% during retirement.

  8. Inflation and Your Savings Goal Retirement Savings Goal In Today’s Dollars In 20 Years at 3% Inflation Rate $260,634 $429,397 $606,152 $470,733 $775,539 $1,094,779 Source: Standard & Poor’s. This example assumes a constant 3% annual inflation rate.

  9. It’s Never Too Late to Start Investment Earnings Can Potentially Compound Over Time $592,247 Investment Earnings Total Invested $296,474 $240,000 $120,000 $59,295 $24,000 Investing $500 monthly Investing $1,000 monthly Investing $100 monthly This is a hypothetical illustration and not representative of any specific investment. Assumes 8% annual return over a 20-year period. Your situation will vary.

  10. Retirement Savings Accounts How Much Can You Contribute to Company Retirement Plans, Traditional IRAs, and Roth IRAs?

  11. The Advantage of Tax Deferral The Power of Tax-Deferred Compounding Results of Investing $100 per Month for 20 Years at an 8% Average Return $59,295 $46,435 Taxed Tax-Deferred For illustrative purposes only. Does not represent the performance of any particular investment vehicle. Your situation will vary.

  12. Investing Your Retirement Savings • Your asset allocation is based on • Time horizon • Risk tolerance 11

  13. Investing for Long Term Growth High Stocks Bonds Risk/ReturnPotential Money Market Instruments Low

  14. A Look at Performance Average Risk and Return Over 30 Years Ended December 31, 2010 Sources: Standard & Poor’s; the Federal Reserve. Stocks represented by the S&P 500 Index. Bonds represented by the Barclays U.S. Aggregate Bond Index. Cash represented by a composite of yields on 3-month Treasury bills and the Barclays 3-Month Treasury Bills Index. Past performance cannot guarantee future results. Indexes are unmanaged and cannot be invested into directly. (CS000137)

  15. The Impact of Inflation Inflation can reduce the purchasing power of your savings. How $1,000 can shrink at just a 4% inflation rate $1,000 $676 $456 $308 $208 Today 10 yrs 20 yrs 30 yrs 40 yrs Source: Standard & Poor’s.

  16. Aggressive Growth–Higher Risk 10% bonds 80% stocks 10% money market instruments 15

  17. Moderate Growth–Moderate Risk 30% bonds 60% stocks 10% money market instruments 16

  18. Conservative–Lower Risk 40% bonds 40% stocks 20% money market instruments

  19. Manage Your Asset Allocation Over Time • Review your asset allocation once a year • Modify your asset allocation as your needs change • Work with a financial professional 18

  20. When You Leave Your Job • Leave your assets in the company’s plan • Transfer to new employer’s plan • Roll over to an IRA • Take a lump-sum distribution 19

  21. Managing Multiple Financial Goals • Retirement savings • College costs • Helping aging parents 20

  22. Financial Considerations for Care Givers • Fewer opportunities for job advancement • Reduced Social Security and pension benefits • Out-of-pocket expenses • Less money to save and invest 21

  23. Estate Planning Essentials • A valid will • Insurance policies • Trusts 22

  24. Ever-Changing Tax Rules • Estate taxes • IRAs 23

  25. Your Retirement Action Plan • Establish a savings goal and make regular contributions to your retirement accounts • If you are over age 50, plan to make additional contributions as permitted by tax laws • Invest your savings to potentially outpace inflation • Review your asset allocation regularly and make adjustments as you near retirement • Work with a financial advisor

  26. Thank You This presentation was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. The presenter is providing educational services only and is not able to provide participants with investment advice specific to their particular needs. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational presentation.  RP-07740-1211

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