EMORY FINANCIAL WELLNESS Retirement / Investing. March 2, 2012

Transcription

1 EMORY FINANCIAL WELLNESS Retirement / Investing March 2, 2012 SmartPath, LLC, Copyright 2010

2 This is a 3-Part Series February 17 February 24 March 2 Set the Strategy Solidify the Core Leave a Legacy Market Trends Financial Strategy The 5S System, Homeownership Insurance Debt Management Retirement Investing 2

3 The Financial 5S System S 1 Set the Foundation Maximize Income Budgeting Process Banking Retirement Match S 2 Stabilize your Finances Sanity Money Housing Mandatory Exp Cars Insurance/Estate Emergency Fund 1 S 3 Surface from Debt Payoff Debt Debt Responsibility Credit Cards Student Loans Credit Reports Emergency Fund 2 S 4 Save for the Future Saving Funnel Retirement College Savings Personal Savings Investing S 5 Spend with Confidence Good Life Smart Spending Money & Relationships Generational Wealth 3

4 Saving vs. Investing Saving Behavior In your control Investing Action Limited control Way of life + $$ $$ 4

5 Saving Funnel Money for Saving Retirement Education/ College Personal 15% of Gross 5% of Gross Carpe Diem Reality Check: It s About Balance 5

6 2 Steps - Buckets and Investments Retirement, College, Emergency Fund, General? Stocks, Bonds, Mutual Funds, Money Market 6

7 S 4 Retirement: Stay Independent SmartPath, LLC., Copyright All Rights Reserved 7

8 Three parts to the puzzle How much do I need at retirement? Where will I get the money from? So how much should I be saving today and where? Expenses, lifestyle, healthcare Government, insurance, yourself Employer options, Investments, Withdrawals 8

9 1/2 Retirement Realities Maintaining Lifestyle: On average, need 70-80% of preretirement income Wishful thinking: Only 34% of retirees actually work during retirement Don t be dependent: By 2037, payroll taxes collected will be enough to pay 76% of the benefit! No support: You cannot borrow against retirement Source: Dalton, Retirement Planning and Employee Benefits, MoneyCheck Analysis 9

10 1 How much will I need? Current monthly income THE MATH. (multiply) Percentage needed at retirement Monthly retirement income (multiply) Percentage replaced by personal savings Monthly retirement income from personal savings (multiply) Months/year Annual retirement income from personal savings (divide) Withdrawal factor Adjusted for inflation: Years Until Retirement $8,000 Gross Income Multiplier 10 13x 20 17x 30 23x X 75% $6,000 X 50% $3,000 X 12 $36,000 / 4% Required Retirement savings (in today s dollars) $900,000 10

11 2 Focus on what you control 30 yrs Out of your control 5% 6% 7% 8% In your control $250 $500 $750 $208K $251K $305K $373K Save 15% of Gross $416K $502K $610K $745K $624K SOON! $753K $915K $1.1M $1000 $832K $1M $1.2M $1.5M 11

12 3 Your BUCKETS Through your employer - 401(k) - 403(b) -Money Purchase - Stock bonus - Employee stock option plan -Thrift plan -Profit sharing On your own - Individual Retirement Accounts (IRA) 12

13 3 Retirement saving and tax Tax deferred.not tax free Tax treatment. Traditional Taxed at withdrawal Roth Taxed now Required minimum distributions? I should use if. Other Benefits Yes, at 70 ½ Higher tax bracket today Could reduce current tax bracket No Higher tax bracket at retirement Can save more Can withdraw principal 13

14 S 4 Investing: Humility is the Best Medicine SmartPath, LLC., Copyright All Rights Reserved

15 How they make money Publications are in the business to... 15

16 How you make money? Interest Income Asset Appreciation* Dividends 16

17 Principle 1: Risk / Reward ILLUSTRATIVE Expected Return Stocks Corporate Bonds Treasuries / TIPS CD / deposit accounts / money market Risk Source: Fundamental of Investing, Gitman & Joehnk For illustrative purposes only. Actual risk characteristics vary by security 17

18 Principle 2: Diversification We are the last Dodos on the planet, so I ve put all of our eggs safely into this basket 18

19 Investing: Simplified What do you buy? How much do you buy? When do you buy? Investing Strategy 19

20 Asset Options What Stock (Equity) You own a piece of a company You make or lose $$ based on how the company performs Bonds (Debt or Fixed Income) You loan a company money You get paid a fixed amount unless the company goes bankrupt 20

21 Funds offer instant diversification What Funds Types of Funds LMAO Stock BYOR Stock Actively managed funds THX Stock NP Stock LOL Stock BYOB Stock OMG Stock Mutual Fund Equity Index funds Bond funds 21

22 Standard risk formula How Much Take risks, let it grow Balance yourself, protect with growth Lock in security, protect your assets [Your Age] = % in safer stuff 22

23 Know yourself How Much More Aggressive More Conservative Significant retirement savings (beyond what you need) Ability to pass to future generations Other, defined sources of retirement income Job Security? You may need the money sooner than retirement Limited safety nets (family and personal) Can t sleep at night 23

24 Don t time it but trust it When DJIA Year End Close ( ) 15,000 10,000 Dollar Cost Average Buy each month so you buy during the ups and down 5,000 Hold for the Long Run Remember when you need the money

25 Do Your Research How have they performed? How much does it cost? What are the investments? Who runs the show? 25

26 Enter Fund 5 Letter Symbol See Fees

27 See Allocations

28 Investor key tips Diversify your investments Remember risk and return there is no free lunch Eliminate emotion and avoid following the herd stick with your strategy Past performance never guarantees future performance Know what you don t know! 28

29 Parting Shots If investing is entertaining, if you re having fun, you re probably not making any money. Good investing is boring. George Soros 29

30 Keep Learning! February 17 February 24 March 2 Subscribe to the free blog blog.smartpathonline.com Market Trends Financial Strategy The 5S System, Need a Financial Coach? Set the Strategy Solidify the Core Leave a Legacy coach@smartpathfinancial.com Homeownership Insurance Debt Management Retirement Investing 30