Will You Be Ready for Retirement? Get prepared with your employer s retirement plan

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1 Will You Be Ready for Retirement? Get prepared with your employer s retirement plan

2 Will You Be Ready for Retirement? I ll start in a couple of years. I have plenty of time. I don t need to worry about inflation. I already invest in my pension/state plan. I can live on Social Security. Your employer s retirement plan can help you take the right step down the path toward retirement, whether that s next year or in 40 years. Achieving the retirement of your dreams may be possible with a solid plan and a commitment to invest for the long term. Fortunately, your employer gives you access to one of the best tools around a workplace retirement plan. Call or visit workplace If you re just starting out, already building toward a nest egg, or approaching your retirement years, this booklet can show you how to take advantage of your retirement plan no matter what stage you re in. 2 Call

3 Contents Just Starting Out Building Toward Retirement Approaching Retirement Retirement Solutions Get Started Make a Choice for Your Future Planning for your retirement has to start somewhere. We can help you determine which kinds of investments are right for your situation and put you on the right path toward retirement. Stick With a Strategy You ve been investing for a while. Use our investment strategies and tools and the expertise of our Business Retirement Specialists to keep your retirement plan on track. Keep Investing in Retirement You ve almost reached retirement, but you don t have to spend your money all at once or stop investing. We ll help you with strategies designed to preserve your wealth and make your money last. One Choice Portfolios from American Century Investments One Choice Portfolios provide a broadly diversified portfolio in a single investment made up of American Century Investments funds. We re Here to Help Take advantage of our investment guidance services plus online account management tools, all at no additional cost. Visit 3

4 JUST STARTING OUT Make a Choice for Your Future I ll start in a couple of years. I have plenty of time. I m short on cash right now. I just got hired. Why should I start investing right away? This is actually the best time to think about your retirement. Your employer s retirement plan is one of the best places for you to set aside money for your future. With every paycheck, you can invest money in an account designed exclusively for retirement. Plus, participation in the plan lowers your current income taxes. You probably have a lot of plans for your paycheck: bills, leisure and giving to others, so it may seem practical to choose today s financial obligations over tomorrow s retirement plan. But rather than put off planning for tomorrow, make investing in your retirement the priority for today. Don t worry if you re not sure how to get started. Business Retirement Specialists at American Century Investments are here to help you choose the right funds, help you create and manage your retirement plan and guide you every step of the way. Did you know? More than half of workers (60%) report that the total value of their household s savings and investments is less than $25,000, including 30% who have saved less than $1,000. Source: Employee Benefit Research Institute s 2012 Retirement Confidence Survey I can only invest a small amount. Is that enough? Our mutual funds are designed so that you can save for retirement no matter what your budget. Small amounts add up, too. For example, you may already spend $4 or $5 a day for your morning latté. You could save $20 to $25 a week right there, which is a great start. When you sign up for automatic payroll deductions, your employer will send your contributions to us, and we ll invest the money the way you ve decided. Additionally, your employer may match all or part of your contribution, up to a certain level. And it s easy to increase your contributions later by contacting your payroll office. How do I choose investments? What about risk? It s best to invest in a mix of stocks, bonds and cash investments known as asset allocation to balance risk and reward, because each asset type performs differently. We can help you build a portfolio by choosing from more than 80 no-load American Century Investments mutual funds with the risk and return potential that meets your goals (e.g., conservative versus aggressive funds, stock funds versus bond funds). You can also choose a pre-diversified asset allocation option, where you select a ready-made portfolio that aligns with your investment goals. > See p. 16 for more information about our One Choice Portfolios. 4 Call

5 Three steps to create your retirement plan 1Define your goal(s) Name it. Know what you re investing for. Date it. Determine when you ll use your investment. Estimate the amount. Add up how much you may need for each goal. 2 3 Design a strategy Execute your plan Evaluate your risk tolerance. Decide how much of the market s ups and downs you re comfortable with. Diversify. Spread your investments across different types of assets to help lower your overall risk. Run the numbers. Calculate how much you ll need to invest to meet your goals or how much income you ll need in retirement. Know your decision-making style. Do the research yourself, or talk to a Business Retirement Specialist for free investment guidance. Take action. Set up accounts with investments that align with both your risk tolerance and goals. Make it automatic. Set up periodic automatic investments so you are consistently building on your investment. Monthly Investments Can Add Up Hypothetical Future Value of Investment $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ $200 per month $150 per month $100 per month Try it yourself Use the Time Value Calculator at workplace to see how different contribution amounts can grow over time. Years of Investing This is a hypothetical example to show the benefits of making monthly investments over time. It assumes an initial investment of $2,500 and an average annual return of 7%. This chart does not represent any actual investment, and the projections are before taxes. The value and return may vary, and different investments may perform better or worse than this example. Visit 5

6 JUST STARTING OUT Did you know? Inflation has averaged about 3% annually over the past 30 years. If that continues, 30 years from now it will take $243 to buy what $100 buys today. Source: InflationData.com, 2011 How do I determine my risk tolerance? The balance of risk versus return is a key consideration when you choose investments. Some types of investments have a higher growth potential over time as well as a higher risk that you may lose money. On the other hand, some investments aren t as likely to lose money, but they may present a different problem: inflation risk. Inflation has averaged about 3% a year over the last 30 years, and if your money can t keep up, it will lose its purchasing power by the time you retire. If you re not sure how much risk you can handle, call a Business Retirement Specialist at They can help you determine your risk tolerance. How often should I review my investments? If you have created an investment strategy with a long-term goal in mind, we recommend that you review your investments at least annually, either on your own or with a Business Retirement Specialist. Over the course of the year, the value of your investments may have changed, and you may need to rebalance, that is, buy and sell investments to bring the asset mix in your portfolio back in line with your original asset allocation plan. > See asset allocation and rebalancing in action on the following page. It s also a good idea to reevaluate your investment plan every time your life situation changes retirement, changing jobs, a home purchase, marriage, birth of a child, etc. Remember to maintain a long-term view and avoid making decisions based on short-term market conditions. Buying stocks or funds based on their recent performance or selling them as soon as they begin to decline is a recipe for buying high and selling low the exact opposite of successful investing. The more time you have for your investments to grow and compound, the more likely you are to reach your goals. 6 Call

7 Asset allocation and rebalancing in action Original Allocation 10% Cash 30% Bonds 60% Stocks You may have decided to allocate 60% of your portfolio to stocks, 30% to bonds and 10% to cash investments. 5% Cash Out of Balance 15% Stocks 80% Stocks If market activity causes the value of the stock portion of your portfolio to increase significantly, you ll have a greater percentage of your portfolio invested in stocks, leaving you exposed to more risk than you intended. Next steps Don t want to worry about rebalancing your portfolio on your own? Let us do it for you with our professionally and actively managed asset allocation portfolios. Visit workplace to learn more. Rebalanced 10% Cash 30% Bonds 60% Stocks Rebalancing buying more bonds and cash investments and selling stocks gets your portfolio back to your desired 60/30/10 percentage mix. > See p. 16 for more information on our One Choice Portfolios. Visit 7

8 BUILDING TOWARD RETIREMENT Stick With a Strategy I already invest in my pension/state plan. I ll get Social Security benefits. Did you know? More than half of workers (56%) say they and/or their spouse haven t tried to calculate how much money they will need to enjoy a comfortable retirement. Source: Employee Benefit Research Institute s 2012 Retirement Confidence Survey I m already investing. What s next for me? Investing in your workplace retirement plan puts you in control of how much you ll have when you retire, so you don t have to rely entirely on Social Security or a pension. If you re already investing for retirement, you understand the potential benefits of saving now and getting a solid start on your goals. Since you started investing, you may have experienced other changes financially, within your family or at your job which could result in new investment goals. When life changes, investment objectives should change, too. We can help you stay on track and make adjustments to your existing investment strategy. I want to be comfortable in my retirement. How much will I need? Pensions Retirement Income Sources (Age 65 and Older) Asset Income 18.6% Other (including public assistance) 3.1% 11.4% 30.2% Earnings 36.7% Social Security Source: Income of the Aged Chartbook 2010 (released March 2012) Note: Totals do not necessarily equal the sum of the rounded components. As a rule of thumb, you will need 70% to 80% of your current income to maintain a similar way of life after you retire. For example, if your annual salary is $50,000, you may need $35,000 to $40,000 a year in retirement to continue your existing lifestyle. The amount you ll need also depends on your living expenses and how you ll spend your time. Ask yourself these questions to plan how much you may need: 1. How many years do I have until I want to retire? 2. What do I want to do in retirement? 3. When will I receive Social Security benefits and how much will I get? 4. Will I have other income (e.g., a pension plan, a part-time job, inheritance or the sale of my house)? Our Planning for Your Retirement tool at can help you translate that information into dollars and cents. Simply answer a few questions and find out how much money you could have, how long it could last and how much you may be able to withdraw from your savings for retirement living expenses. We provide straightforward, easy-to-understand results, and we ll recommend an action plan and next steps to move your plan forward. As you put together your retirement plan and identify potential sources of income, remember that Social Security was never designed to be more than a supplement. In fact, it currently accounts for just over a third of a retiree s income. That percentage is decreasing as baby boomers near retirement, so it s up to you to make up the difference. 8 Call

9 Contribute as much as possible The more you can save, the better your chances of retiring comfortably. If you can, max out your contribution up to the IRS annual limit. Not only does your pre-tax contribution lower your taxable income, but your earnings grow tax deferred until you withdraw the money. Whatever you re contributing now, even a small increase can make a big difference, especially when you re investing regularly over a long period. With a modest return, it s possible to build a significant amount by the time you need it. Contact your payroll office to increase your contribution amount. Value of Hypothetical Investment $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 10 Increasing Your Contributions Can Pay Off 4 % 6 % 8 % 10 % 15 Years 20 Try it yourself Use the Contribution Calculator at workplace to see how different contribution percentages can grow over time. This is a hypothetical example to show the benefits of making monthly contributions for different periods of time with different contribution amounts. It assumes an annual salary of $35,000 and an average annual return of 7%. This chart does not represent any actual investment, and the projections are before taxes. The value and return may vary, and different investments may perform better or worse than this example. This strategy does not ensure a profit and does not protect against loss in a declining market. Visit 9

10 BUILDING TOWARD RETIREMENT Am I still in the right funds? It s important that you re comfortable with your investments. They should match how long you have to invest and how much risk you re willing to take, both of which have probably changed since you started investing. How do I identify my current comfort with risk? If you re not sure how much risk you can handle, contact a Business Retirement Specialist at They can help you determine your risk tolerance. How often should I review my portfolio? We recommend that you review your investments at least annually, either on your own or with a Business Retirement Specialist, and reevaluate your investment plan every time your life situation changes retirement, changing jobs, a home purchase, marriage, birth of a child, etc. Next steps Our online Investment Planner tool can help you determine your risk tolerance and an investing profile for your goal. Visit workplace and simply answer a few questions. During your review, identify funds that no longer fit your risk profile or time frame and consider adding new funds that do. Additionally, the value of your investments may have changed, and you may need to rebalance, that is, buy and sell investments, to bring your portfolio back in line with your original plan. > See asset allocation and rebalancing in action on p. 7. You can choose from more than 80 no-load American Century Investments mutual funds that align with your goals. Or choose an asset allocation option, where you select a ready-made portfolio that aligns with your time frame or your comfort with risk. > See p. 16 for more information on our One Choice Portfolios. 10 Call

11 Keep your investment plan on track 1Focus on your goal 2 Invest appropriately Determine how much money you ll need to retire comfortably. Create a plan using our online Planning for Your Retirement tool or talk with a Business Retirement Specialist. Maximize your contributions to help you meet your goal. Periodically use our Investment Planner tool to determine your current comfort with risk. Receive fund suggestions that best meet your risk comfort level. Try it yourself Take advantage of our complimentary investment guidance tools and services to prepare for the retirement lifestyle you imagine. Call a Business Retirement Specialist at for more information. 3 Save more with IRAs or a Roth 401(k)/403(b) Open a Roth or Traditional IRA. An IRA can give you additional tax benefits and potential earnings. Contact us to find out which IRA is right for you. Transfer any existing IRAs to American Century Investments. We ll help you with the paperwork and provide expert guidance. Plus, all your retirement accounts will be consolidated on one statement. Roll over your former employer s retirement plan to American Century Investments. We ll help you keep control of your retirement money and possibly avoid paying taxes until you withdraw it. Consider a Roth 401(k) or 403(b). These accounts offer higher contribution limits, tax-free withdrawals and no income restrictions. Check with your administrator to determine if your plan offers this option. IRA investment earnings are not taxed. Depending on the type of IRA and certain other factors, these earnings, as well as the original contributions, may be taxed at your ordinary income tax rate upon withdrawal. A 10% penalty may be imposed for early withdrawal before age 59½. This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation. IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation. Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59 ½. Visit 11

12 APPROACHING RETIREMENT Keep Investing in Retirement I don t need to worry about inflation. I can live on Social Security. I really don t know how much I need, but I ll probably be fine. I ve worked hard for my retirement. Will I be ready? Retirement may mean you re finished working, but your money shouldn t be. Now it s time to put your investments to work for you through a personal retirement strategy. You ll need to determine how you want to invest your money, how much you can withdraw and other goals you may have. We have the tools to help you put a plan together, and we ll work with you throughout your retirement years to help you reach your goals. How can I preserve my assets and make my money last? You can time your withdrawals to get the most of your retirement income no matter what the initial value. Ideally, your withdrawal rate should provide a steady source of income for 20 to 30 years more if you re retiring early. Did you know? A 65-year-old American, on average, can expect to spend 19.2 years in retirement. And since Social Security accounts for only about a third of total aggregate income for aged persons, Social Security alone may not be enough to see you through your retirement years. How will taxes affect my withdrawals? It s best to withdraw from your accounts in a way that gives you the greatest tax advantage. In general, you ll want to withdraw from taxable accounts first so your IRAs and employer-sponsored retirement plan(s) continue to grow tax deferred. When you reach age 70½, you ll have to take required minimum distributions (RMDs) from your employer s retirement plan and your IRAs (except Roth IRAs). But if you work past age 70½, you can delay taking the RMDs from your employer s plan. Source: CDC report, Health, United States, 2011 Data from 2009 Source: Fast Facts & Figures About Social Security, 2011, Social Security Administration 12 Call

13 There are a number of risks that cause uncertainties for retirees. Withdrawals Longevity Solvency Savings Market Volatility Inflation Retiree Spending Retirees must manage RMDs and determine a sustainable withdrawal rate to avoid depleting their accounts too soon. Long retirement horizon: A couple aged 65 has a 25% chance of a survivor living to age 96. Retirees must factor in the uncertainty of Social Security and Medicare payments and pension plans. Many Americans have an enormous savings gap and under-funded defined contribution accounts. Market returns and when those returns occur can greatly impact account balances and potential income. Inflation erodes the value of savings and reduces returns, and inflation of health-care costs also chips away at savings. To avoid running out of money for your basic needs in retirement, it s important to budget for essential expenses (e.g., medical bills) versus lifestyle spending. Try it yourself Our Planning for Your Retirement tool at workplace can help you choose your withdrawal rate. Take a few minutes to experiment with varying rates and periods. Calculating an appropriate withdrawal rate Your withdrawal rate needs to take into account many factors, including (but not limited to) your asset allocation, projected inflation rate, expected rate of return, annual income targets, investment horizon, and comfort with uncertainty. The higher your withdrawal rate, the more you ll have to consider whether it is sustainable over the long term. Call a Business Retirement Specialist at to create a withdrawal strategy to meet your needs, or complement that strategy with your other goals. Visit 13

14 APPROACHING RETIREMENT Know how much risk to take Switching all your assets to conservative cash investments may seem like the safest option, but some risk may be necessary. After all, you could be spending 20 to 30 years in retirement. For that, you need continued growth to outpace inflation, but worrying about dramatic swings from volatile investments is not an ideal scenario, either. Examples of Conservative Asset Allocation Next steps A Business Retirement Specialist will help you evaluate your current portfolio and determine if your goals are more suited to moderate or more aggressive investments. 45% Bonds 10% Cash 23% 25% Cash Stocks 45% Stocks 52% Bonds For example, our most conservative asset allocation portfolios allocate in the range of 25-45% to stock funds, 45-52% to bond funds and 10-23% to money market funds (cash alternatives). Keep in mind that these allocations may or may not be appropriate for your needs, and the overall risk for a portfolio also depends on which underlying investments you choose. A Business Retirement Specialist can help you weigh your options. > See p. 16 for more information on our One Choice Portfolios. 14 Call

15 Did you know? We offer dedicated resources to help you with college savings, rollovers and estate transfers. Call for more information. What if I have other goals? You may also need to keep investing for other goals, such as a child or grandchild s education, another house, a new hobby or activities you may not have factored into your initial plan. You may also be concerned about making up for previous investment losses. For each goal, you ll need to determine your tolerance to balance the riskreward equation. How can I simplify my investment plan when I retire? Consolidating your investments can help you reduce paperwork and simplify your financial and tax recordkeeping. And if you move your investments to one company, you only have one place to go when you have questions or concerns about your accounts. By consolidating to fewer accounts and/or financial companies, you can: Track statements and tax documents more efficiently. Calculate and withdraw your required minimum distributions more easily. Make it less complicated for your heirs to settle your estate. You can also roll over money from your employer s plan to an IRA to further consolidate your retirement assets. Call a Business Retirement Specialist at to discuss rollovers and other ways to consolidate. Visit 15

16 RETIREMENT SOLUTIONS One Choice Portfolios Making a difference One Choice Target Date Portfolios invest in tobacco-free underlying funds, one of the many ways American Century Investments supports the fight against cancer. American Century One Choice Portfolios are single-fund, pre-diversified asset allocation solutions designed to help you reach your long-term financial goals. You choose a targetdate or target-risk portfolio and our investment teams do the rest: Professional portfolio management Broad diversification Risk management Target date With One Choice SM Target Date Portfolios, you choose the target date the approximate year when you plan to retire or start withdrawing your money. The principal value of the investment is not guaranteed at any time, including at the target date. Each portfolio seeks the highest total return consistent with its asset mix. Over time, the asset mix and weightings are adjusted to be more conservative. In general, as the target year approaches, the portfolio s allocation becomes more conservative by decreasing the allocation to stocks and increasing the allocation to bonds and money market instruments. By the time each fund reaches its target year, its asset mix will become fixed and will match that of One Choice In Retirement Portfolio. % Stocks % Bonds % Cash Alternatives One Choice 2055 Portfolio SM One Choice 2050 Portfolio SM One Choice 2045 Portfolio SM One Choice 2040 Portfolio SM One Choice 2035 Portfolio SM One Choice 2030 Portfolio SM One Choice 2025 Portfolio SM One Choice 2020 Portfolio SM One Choice In Retirement Portfolio SM Allocations are adjusted annually on December 1. The allocations above are as of 12/1/2014. See the prospectus for the most current allocations. 16 Call

17 Target risk With One Choice Target Risk Portfolios, you choose a portfolio based on your tolerance for risk. Our investment managers select the mix of stock, bond and money market investments and rebalance the portfolio when necessary to keep the investment mix consistent with the targeted risk level you chose. Each portfolio is a fund of funds, and its performance and risk characteristics are dependent on the underlying funds. A portfolio s risk designation ranging from very conservative to very aggressive is intended to reflect its relative short-term price volatility compared to the other target risk portfolios. Neutral Mix % Stocks % Bonds % Cash Alternatives One Choice Portfolios : Very Conservative One Choice Portfolios : Conservative One Choice Portfolios : Moderate One Choice Portfolios : Aggressive One Choice Portfolios : Very Aggressive When you invest in One Choice Portfolios, you re putting your money in the hands of veteran investment professionals who have managed asset allocation funds since They oversee asset allocation strategies that investors use to prepare for retirement, save for college and pursue other major financial goals. The managers of your investment also benefit from the resources of a company with a track record that spans more than 50 years. The underlying funds do not invest in securities issued by companies assigned the Global Industry Classification Standard (GICS) for the tobacco industry. The performance of the portfolios is dependent on the performance of their underlying American Century Investments funds and will assume the risks associated with these funds. The risks will vary according to each portfolio s asset allocation, and a fund with a later target date is expected to be more volatile than one with an earlier target date. Visit 17

18 GET STARTED Managing Money, Making a Difference Stowers Institute for Medical Research Staying focused on doing the right thing for you is part of what makes our story unique. Find out how we ve been helping clients since Who we are When James E. Stowers, Jr. founded American Century Investments he wanted to help people become financially independent. That s still why we re in business today and why we relentlessly focus on delivering superior investment performance and building longterm client relationships. Mr. Stowers long-held belief is that we will only be successful when our clients are successful. The legacy of our founder is what inspires us to do the right thing for you every day. As a privately controlled and independent company, we are empowered to do the right thing for our clients, and our success funds a greater purpose. Through our ownership structure, more than 40% of our profits support the Stowers Institute for Medical Research a biomedical research organization dedicated to improving quality of life by researching and uncovering the causes, treatment, and prevention of gene-based diseases such as cancer. What we offer In order to help you achieve your investing goals, we provide a broad range of no-load mutual funds and other investments. Whether your goal is retirement, college savings or something else, we will work with you to build a diversified portfolio. Unlike most firms, our guidance services are available to you at no additional cost. Our commitment to you At American Century Investments, we strive to help you achieve your goals by partnering with you to develop customized solutions. The combination of our high-quality products, service and expert advice all add up to a great value for your money. The ultimate measure of our performance is your success. 18 Call

19 We re Here to Help Meet our team Our Business Retirement Specialists are focused on helping people like you achieve their financial goals. After all, we re investors, too, and we understand that investing is not just about money it s also about your hopes for the future. When you invest in your retirement at American Century Investments, you can take advantage of our guidance services plus account management tools, all at no additional cost. Expert assistance Our Business Retirement Specialists are here to help with your retirement plan from helping you with account management to helping you make changes to your portfolio. Personalized portfolio consultations We ll help you create an investment plan for your future. Learn how to manage your retirement money while you re making contributions and when you re ready to begin withdrawals. Business Retirement Specialists will work with you to find retirement investments that fit your comfort with risk. Tools for investing Choose from a variety of online educational articles and calculators to help you make informed investment decisions. Go to the Planning tab at and click on Library or Calculators. Account information: 24/7 Your account information is as close to you as your computer, telephone or mailbox. We ll send a statement every quarter so you ll always stay connected to your investments. Learn more about your investment options and retirement strategies. Visit or call weekdays, 8 a.m. to 5:30 p.m. Central time.

20 You should consider the fund s investment objectives, risks, and charges and expenses carefully before you invest. The fund s prospectus or summary prospectus, which can be obtained by calling , contains this and other information about the fund, and should be read carefully before investing. Diversification cannot assure a profit or protect against a loss in a down market. Mutual fund investing involves market risk. Rebalancing allows you to keep your asset allocation in line with your goals. It does not guarantee investment returns and does not eliminate risk. This information is not a recommendation, is not individualized, and is not intended to serve as the primary basis for an investment decision. The projections or other information generated by Investment Planner regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. As with all investments, there are risks of fluctuating prices, uncertainty of dividends, rates of return and yields. Current and future holdings are subject to market risk and will fluctuate in value. Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results. Past performance is no guarantee of future results. Investment return and fund share value will fluctuate and it is possible to lose money by investing in these funds. American Century Investment Services, Inc., Distributor 2015 American Century Proprietary Holdings, Inc. All rights reserved. P.O. Box Kansas City, MO Business Retirement Specialists BR-BKT