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1 Using Debt Wisely INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED NOT A BANK DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NO BANK GUARANTEE MAY LOSE VALUE

2 Disclosures The information provided here is for informational purposes only. It is not an offer to buy or sell any of the securities, insurance products, investments or other products named. This material is derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. Citigroup Inc. and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer s particular circumstances from an independent tax advisor Citigroup Inc. Citigold provides clients with access to enhanced levels of services and benefits from Citibank, N.A. ( Citibank ) and its affiliates in the U.S. Citibank provides banking and lending services, including the Citigold Account package. Citi Personal Wealth Management, a business of Citigroup Inc., offers investment products through Citigroup Global Markets Inc. ( CGMI ), member SIPC. Accounts carried by Pershing LLC, member FINRA, NYSE, SIPC. Citigroup Life Agency LLC ( CLA ) offers insurance products. In California, CLA does business as Citigroup Life Insurance Agency, LLC (license number 0G56746). Citigold Relationship Managers and Private Client Relationship Managers are employees of Citibank, N.A. and are employees and registered representatives of CGMI and agents for CLA. Citibank, CGMI and CLA are affiliated companies under the common control of Citigroup Inc. 3/ Citigroup Inc. Citi, Citi with Arc Design and Citigold are registered service marks of Citigroup Inc. 2

3 Why Borrow? Enables us to cover shortterm costs without selling existing assets Lets us purchase assets without paying cash for them Smoothes out consumption over our lifetime 3

4 Life Stages: Starting Out We often take on substantial debt when we re younger, expecting that we ll have many years to repay the loans. Student loans potential payback through increased earning power Credit cards may need to get a joint card with a parent Car loans could need co-signer to qualify 4

5 Life Stages: Working Years Through your 30s and 40s, your debts may continue to climb. Loans to buy first and second homes Lines of credit for large unplanned expenses, buying cars, remodeling projects Education loans for your children s college costs 5

6 Life Stages: Approaching Retirement Be cautious about taking on more debt and aim to be debtfree before you quit the workforce. Weigh investment opportunities against return from debt repayment. Consider extra principal payments to get your mortgage paid off by retirement. If you re refinancing, tailor the new mortgage s length to your likely retirement date. 6

7 Smarter Debt Management Before taking on debt, think carefully about whether you can manage the loan payments. Understand the 28%/36% debt-to-income ratios for mortgages. % Consider the after-tax cost of your debts. If you use credit cards to cover monthly costs and earn rewards, try to pay off the balance every month. Weigh the advantages and risks of both secured and unsecured debt. 7

8 How to Look Creditworthy Get your credit report: Ask yourself these questions: Am I paying bills (e.g., utilities) on time? Do I know the credit limit for each of my credit cards? Do I apply for credit too often? Does it help or hurt to use a variety of credit: credit cards, auto loans, mortgages, personal loans? What s the impact on my credit if I cancel credit cards that I rarely use? 8

9 Real Estate: When to Consider Purchasing You believe you ll own the house long enough to build up equity. You have enough for a down payment. You have a secure job. You have enough regular income to cover the mortgage, taxes, insurance and maintenance costs. 9

10 Real Estate: Advantages of Homeownership Imputed rent Potential price appreciation Tax deduction Forced savings Eventually eliminate key expense Capital gains exclusion 10

11 Key Issues: Which Mortgage Is Right for You? Fixed-rate loan Job security Stability of income Adjustablerate mortgage Time frame Hybrid loan Other obligations 11

12 Key Issues: Should You Refinance? Factor in job security, income stability and time frame. Calculate how long it will take to recoup the refinancing costs through lower monthly payments.? Make sure you re making an apples-to-apples comparison. 12

13 Key Issues: Should You Pay Down Debt? It s a tough decision given today s low mortgage rates. Compare the after-tax cost of your debt to investment opportunities. You could fall into a tax trap if you carry debt into retirement. Over time, more of each monthly payment goes toward reducing your mortgage s principal balance. Principal vs. Interest Monthly Interest Payment Reduction in Loan Balance Years 13

14 Key Issues: Too Much Debt? I NCOME DEBT Compare debt payments to income Go on a cash diet Focus on paying down high-cost debt Consider consolidating debts 14

15 Seven Questions to Ask Yourself What is in my credit report and what s my credit score? Do I have too much debt or should I be using debt more? If interest rates rise, how will that affect my debt payments? Could I lower my borrowing costs? Would it make financial sense to pay down debt or are there better uses for my savings? If I m hit with a sudden cash need, do I have easy access to borrowed money? 7 Will I be debt-free by retirement? 15

16 Citigold: A World of Benefits Access and service Dedicated Home Lending Officers to provide guidance when you apply for a first mortgage 1 Access to dedicated Citigold Customer Service Representatives Assistance from Citi Identity Theft Solutions, if needed Recognition and benefits Waived fees on select products and services 1 Competitive interest rates on select deposit products and preferred pricing for select loans and lines of credit 1,2 Earn highest maximum monthly points for certain products and services linked to enrolled checking accounts 1,3 Guidance Potential to work with a Citigold Relationship Manager at Citibank 4 Professional guidance, tools and resources from Citi Personal Wealth Management Financial Advisors Access to experienced professionals, tailored information and financial education INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED NOT A BANK DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NO BANK GUARANTEE MAY LOSE VALUE Global benefits 3,000+ Citibank branches and 10,000+ Citibank ATMs worldwide Waived foreign exchange fees when using your Citibank Banking Card for ATM withdrawals or debit card purchases in participating countries 1 1 Requires a checking account in a Citigold Account Package. 2 Loans and lines subject to credit approval. Certain limitations may apply. 3 Separate enrollment of eligible consumer checking account in Citi Thank You Rewards required. Eligible customers with a checking account in the Citi Private Bank Account, Citigold Account of the Citibank Account Packages can enroll their checking accounts in ThankYou Rewards. Eligibility and participation are subject to terms, conditions and restrictions. Customer must be a citizen or resident alien of the United States (U.S) with a valid U.S. taxpayer identification number. Taxes, if any, are customer's responsibility. You must complete 1 qualifying Bill Payment and 1 qualifying Direct Deposit each statement period in order to earn monthly ThankYou Points for eligible products and services linked to your checking account. Citigold and Citi Private Bank clients who do not complete these transaction requirements can earn points at a reduced level. 4 The Relationship Manager Service may be made available to select high net worth clients who have a Citigold Account Package, maintain a minimum balance of two hundred fifty thousand dollars ($250,000) in combined deposit, retirement and investment accounts ("Required Balance") and whose financial needs and activities in Citi's sole determination are appropriate for the Service. The Required Balance of $250,000 or more to be maintained during a consecutive 6 month period is calculated as the average of the closing account balance(s) on periodic (e.g., monthly) statements(s) for deposits in your Citibank, N.A. retail bank account(s), retirement accounts, and investments held in your linked CPWM account(s) and annuity positions shown on linked CGMI statements (except for tax-qualified annuities which includes annuities that qualify under Sections 401, 403, 408 and 457 of the Internal Revenue Code). Citigold provides clients with access to enhanced levels of services and benefits from Citibank, N.A. ( Citibank ) and its affiliates in the U.S. Citibank provides banking and lending services, including the Citigold Account package. Citi Personal Wealth Management, a business of Citigroup Inc., offers investment products through Citigroup Global Markets Inc. ( CGMI ), member SIPC. Citigroup Life Agency LLC ( CLA ) offers insurance products. In California, CLA does business as Citigroup Life Insurance Agency, LLC (license number 0G56746). Citigold Relationship Managers and Private Client Relationship Managers are employees of Citibank, N.A. and are employees and registered representatives of CGMI and agents for CLA. Citibank, CGMI and CLA are affiliated companies under the common control of Citigroup Inc Citigroup Inc. Citi, Citi with Arc Design and Citigold are registered service marks of Citigroup Inc. 16