Guide to Understanding Your Northrop Grumman 401(k) Investments FOR INFORMATIONAL PURPOSES ONLY. THE OPINIONS ARE THOSE OF SAGE CAPITAL AND DO NOT REFLECT THOSE OF NORTHROP GRUMMAN.
Understanding Your 401k Investments UNDERSTANDING YOUR 401K INVESTMENTS If you are like most people, thinking about your 401k brings about as much interest as a trip to the dentist. In fact, studies show most people spend more time planning a vacation then they do planning Understanding all of your options and having a sound game plan are Sage Capital will help you to stop guessing about retirement and to learn more about the investments that are available inside your current Northrop Grumman Savings Plan (NGSP). TIM DYER is Managing Director and portfolio manager at Sage Capital Advisors, a full service high net worth individuals, institutions and 401k plan participants. Tim is frequently in the expert opinions and advice for 401k plan participants. He has been featured in many national publications including Investors Business Daily, Forbes, Wall Street Journal, and USA Today. Our Goal is to Help You Learn what your investment options are. Make better use of good plan options and avoid bad ones. Provide a few quick tips your can implement immediately to save money today. Show you the three must knows to be successful, and why most people fail because they ignore them The #1 concern for 90% of current investors who are actively saving for retirement is running out of money Follow Tim Dyer via LinkedIn by clicking here: 01
Facts on Retirement Less than 2% of independent at age 65. The current retirement crisis is well documented and cover in the media. too many people ignore the facts or assume it only pertains to others. FACTS ON RETIREMENT 30% of US workers have $0.00 in retirement savings. 40% of all workers are not currently saving for retirement 1 in 20 retirees will run out of money at age 72 due to investment performance. The average savings shortfall a US household will have The after tax income needs for the average US household is higher. There are more people retiring now than ever before in history. There is less and less money available through Social Security and You are on your own to save for the life of abundance that you deserve. 1 PBS.ORG COMPILED BY CAMMACK LARHETTE CONSULTING RETIREMENT SAVINGS BY THE NUMBERS FOR INFORMATIONAL PURPOSES ONLY. THE OPINIONS ARE THOSE OF SAGE CAPITAL AND DO NOT REFLECT THOSE OF NORTHROP GRUMMAN. NOT A SOLICITATION TO BUY OR SELL A SECURITY. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. 02
Investment vs. Investor Return 56% of workers haven t much money they need to retire comfortably. INVESTMENT VS. INVESTOR RETURN It has long been known that individual investors do not typically fare well in their efforts at do-it-yourself investing. This notion has been validated by numerous academic studies, including one by Dalbar Inc., which revealed the staggering margin by which the average individual investor trails the returns of the broader market. While the numbers change slightly every year the message in the same: investment returns are often very different from investor returns. The reason is two-fold: emotions and hindsight. Too many people look at what did well in the past and assume the results will be the same. When markets perform differently, investor emotion takes over and investment returns suffer. Most Americans are not saving enough for their own retirement The conclusion is that most Americans are not saving enough for their own retirement. Those that are, may not be getting the required results from their investments. Or worse, they unknowingly pay too much in costly fees that can be avoided. Pensions and Social Security cannot provide the income base that past generations received. Those that do plan and receive ongoing guidance have shown to do better historically. 401k and identify some of the opportunities that exist. 03
Key Statistics - Northrop Grumman 401k Northrop Grumman 401k Plan Total Assets...1.04 Billion Average 401k Balance: Northrop Grumman... Average 401k Balance: United States...$84,300 Total mutual funds available in the plan... 401k plan national average...................................... Average Expense Ratio per fund.............. 44 basis pts (1% = 100bp).... Periods core funds outperformed their benchmark... Northrop Grumman Financial Security & Savings Program Performance Update As of September 30, 2013 Performance Comparison - Net of Fees Fund and Benchmark Third Quarter 1 Year 3 Years 5 Years 10 Years Stable Value Fund 0.5% 2.4% 2.9% 3.2% 3.8% Merrill Lynch 1-3 Year Treasury Index 0.3% 0.4% 0.7% 1.6% 2.6% U.S. Fixed Income Fund 0.5% -2.0% 2.6% 5.8% 4.7% Fixed Income Benchmark 0.6% -1.7% 2.9% 5.5% 4.7% Balanced Fund 5.3% 13.4% 10.1% 7.9% 6.7% Balanced Benchmark 5.4% 13.5% 10.4% 8.4% 7.0% U.S. Equity Fund 5.2% 19.1% 16.2% 10.6% 7.6% (S&P 500) 5.2% 19.3% 16.3% 10.0% 7.6% International Equity Fund 11.5% 23.8% 8.5% 6.3% 6.9% Morgan Stanley Capital International EAFE Index (MSCI EAFE) 11.6% 23.8% 8.5% 6.4% 8.0% Small Cap Fund 10.2% 29.7% 18.2% 11.0% 8.7% Russell 2000 Index (Russell 2000) 10.2% 30.1% 18.3% 11.2% 9.6% Emerging Markets Equity Fund 6.9% 0.3% -1.3% 5.7% 12.0% Morgan Stanley Capital International Emerging Markets NDR Index 5.8% 1.0% -0.3% 7.2% 13.0% Northrop Grumman Fund Including Dividends 15.6% 47.2% 23.6% 15.0% 11.8% (S&P 500) 5.2% 19.3% 16.3% 10.0% 7.6% CORE FUNDS AVAILABLE Stable Value US Fixed Income Balanced Fund Retirement Path Retirement Fund US Equity Fund International Equity Fund Small Cap Equity Fund Emerging Markets Equity Fund Northrop Grumman Fund (w/dividends) 04
Understanding the Core Funds UNDERSTANDING THE CORE FUNDS Today s low bond yields and the threat of rising interest rates make bond funds less attractive over a longer time frame. The stock funds are used to generate long term growth in the portfolio through rising stock prices. These funds have the most upside growth potential but also the most downside risk. stable value or income producing investments with the majority of the return from interest and dividends paid out. The target date funds are designed to glide your portfolio to where it needs to be on the estimated year you are planning on retiring. This is done by investing more in stocks today and slowly moving more into safer bonds as you get closer to retirement. Are Stock Funds right? STOCK FUNDS US Equity Fund Balanced Fund NG Stock Fund Small Cap Equity Fund International Equity Fund Emerging Markets Fund BOND FUNDS US Fixed Income Stable Value Anyone that has had money invested in recent years knows that stocks and stock mutual funds can be risky. But they historically offer the highest returns over a long time period. The stock market cycles rotate between up (bull markets) and down (bear markets), leaving some investors confused along with periodic adjustments as market conditions change. Are Bond Funds right? The simple thing to know here is that when interest rates go UP, bond prices go DOWN. In the last few years interest rates have fallen to historic lows. This has been great for your bond investments. In fact some US government bonds actually pay a negative interest rate. Todays low bond yields and the threat of rising interest rates make bond funds less attractive over a longer time frame. 05
Understanding the Core Funds Should I invest in the Target Date fund closest to my projected retirement year and forget everything else? The simplicity of this approach is certainly appealing, but if you look under the hood the risks can be alarming. Target Date funds invest a greater In translation more and more money is being moved into an asset class (bonds) that has greater risks of going down when interest rates eventually going up. be a good place to invest, so why make that decision now? Make it along the way as conditions dictate. ONE LAST OPTION A professionally managed 401k removes the huge burden employees have trying to manage their own retirement. Personal Choice Retirement Account Inside the Northrop Grumman 401k there is a self directed option. Think of it as the 16th choice. The self directed option is a brokerage account that you can easily open at right through The process is simple and easy and only takes a few minutes to activate. Its called Personal Choice Retirement Account or PCRA. The PCRA gives you access to low fee mutual funds, index funds, stocks, individual bonds, CDs, and more. Plan participants also use it to access managed portfolios using proven strategies from top performing money managers. This is an excellent opportunity for Northrop Grumman employees to accomplish their objectives. It removes the huge burden employees have trying to manage their retirement on their own. Most employees utilize PCRA with the help of expert advice. Together taking advantage of this opportunity to create a custom strategy using low cost investments. A strategy that is continuously watched and managed 06
Help Tips for Your 401k TIPS TO IMMEDIATELY HELP WITH YOUR 401K 1 3 Avoid target date funds, or use them as a stand alone choice, not mixed with other funds, it defeats the purpose. The Human Resource can only give you information, not advice. 4 If you currently own Northrop Grumman Stock Fund, consider replacing with the actual stock (ticker: NOC) in the PCRA brokerage account. It will eliminate mutual fund fees (approx. 0.33%) per year. If you currently own the US Equity fund, consider replacing it with 6 Bond funds are traditionally thought of as safe and stable, but understand the inverse relationship between bond prices and interest rates and make sure you are not taking more risk than you thought. Calculate your retirement needs. Without a simple plan your investments have no real direction and can suffer over the long-term. Your future and that of your family depends on it. that will leave you feeling more informed knowing you are on track.