Disclosure Notice

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• Disclosure Notice
• The presentation (The Road to Retirement,
  Charted Course or Aimless Wander) and
  accompanying narrative was created by the
  Arkansas Securities Department. It is intended
  solely for educational purposes and cannot be
  copied, distributed, or used in any manner
  without the permission of the Arkansas Securities
  Department.

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The road to Retirement

• Charted Course or Aimless Wander

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Retirement Quotes

• Im retired goodbye tension, hello pension.
• Retirement Worlds longest coffee break.
• Retirement - when you stop living at work and
  begin working at living.
• Life begins at retirement.

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Retirement Quotes

• The question isnt at what age I want to retire
  but, at what income.
• Retirement Its nice to get out of the rat
  race, but you have to learn to get along with
  less cheese.
• The retirement challenge is how to spend time
  without spending money.
• Retirement is when the living is easy and the
  payments are hard.

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Retirement Reality The Numbers2013
Retirement Confidence Survey Employee Benefit
Research Institute

• 87 - Workers Not Confident About Their
  Retirement
• 57 - Workers Reporting The Value Of Their
  Savings Investments Is Less Than 25,000
• 28 - Workers Saying They Have Less Than 1000
• 54 - Workers Who Havent Tried To Calculate How
  Much They Will Need To Save For A
  Comfortable Retirement

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What Should You Expect From This Program?

• General information on the steps required to
  develop a personal
• retirement plan, including
• Establishing Basic Retirement Goals
• Sources of Retirement Income
• Retirement Income Gaps and How to Close
• Leveraging Your Personal Retirement Savings With
  Tax-Advantaged Resources
• Price of Procrastination
• Basic Investing Your Investment Profile,
  Products, Principles
• Implementing My Plan Who Do I Work With and
  What Should I Know?
• Resources You Can Use For Assistance

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Developing a Retirement PlanFundamental Steps

• Establish Goals
• Assess Current Situation
• Develop Objectives and Strategies
• Review and Update As Required

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Developing a Retirement PlanSome Things To
Remember

• Initial plans are designed to provide a general
  assessment of needs and a basic course of
  action to achieve them.
• Projections are estimates based on assumptions,
  which may or may not be valid over the horizon of
  the plan.
• The nearer to retirement, the more precise the
  plan.

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Developing Basic Retirement GoalsWhen Do I Want
To Retire?

• My Retirement Age or Date.
• But, you may need to be flexible!

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Developing Basic Retirement GoalsHow Much Income
Will I Need?

• Food, Utilities, Clothing, Home, Auto
• Insurance Home, Auto, Life, Healthcare
• Children College and/or Support
• Mortgage / Credit Cards
• Travel Fun
• Emergency Funds

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Developing Basic Retirement GoalsHow Much Income
Will I Need?AON/Georgia State University
Replacement Ratio Study

• Assumptions No Mortgage No Dependent Children
• Reduced Taxes No
  Work-Related Expenses

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Developing Retirement GoalsConsider the Effects
of Inflation

• 1 of Purchasing Power Today

• 30,000 of Income
• Today

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Developing Retirement GoalsConsider the Effects
of Inflation

• 1 of Purchasing Power Today

• 30,000 of Income
• Today

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Developing Retirement GoalsConsider the Effects
of Inflation
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Developing Retirement GoalsConsider the Effects
of Inflation

• Is the Rate of Return on My Retirement Savings
  Staying Ahead of Inflation?

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Developing Basic Retirement GoalsHow Long Will
I Live?Average Life Expectancies
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Developing Retirement GoalsHow Long Will I
Live?Life Expectancy Probabilities
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Developing Retirement GoalsHow Long Will I
Live?Life Expectancy Probabilities
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Sources of Retirement Income

• Employee Pension
• Social Security
• Personal Savings

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Sources of Retirement IncomeSocial Security

• Government program initiated in 1935
• Qualifying Requires at least 40 credits
  generally, 10 years in which you had earnings
  subject to social security taxes Benefit based
  on highest 35 years of earnings
• Benefit Ages
• Early Age 62 to full retirement date
  (penalties apply)
• Full Birthday 1937 and earlier Age
  65
• 1938 to 1942 Graded, Age 65, 2
  mo. to 65, 10 mo.
• 1943 to 1954 Age 66
• 1955 to 1959 Graded,
  Age 66, 2 mo. to 66, 10 mo.
• 1960 - Age 67
• Delayed Full To Age 70 (additional
  benefits accrue)

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Sources of Retirement IncomeSocial Security

• Social Security Benefit (2013) Average
  1,261/mo. Maximum 2,533/mo.
• Income Limits (2013) Before full benefit
  date, earned income is limited to 15,120 -
  For every 2 earned over the limit, 1 of benefit
  is withheld - No limit at or after full
  benefit date
• Taxation of Benefits File Federal Taxes as
• Individual - Income between 25,000 and
  34,000 Pay on up to 50
• Income more than 34,000 Pay on
  up to 85
• Joint Income between 32,000 and
  44,000 Pay on up to 50
• Income more than 44,000 Pay on up
  to 85
• Other Benefit Provisions
• Disability
• Survivorship Spouse and Minor Children
• Disabled Adult Children

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Sources of Retirement IncomeSocial Security

• Concerns and Issues
• Social Security Trust Fund is Critically
  Underfunded Projected to be Depleted in 2033
  Medicare in 2024
• Causes - Changing Demographics - Increasing
  Life Expectancies Lower Worker to Retiree
  Ratio
• Fixing the Problem Raise Taxes Lower Benefits
• Bottom Line - Significant Changes Must Occur

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Sources of Retirement IncomePersonal Savings
(USA)

• Average Personal Savings Rate

• Household Savings Rate Comparison (2012)

• Past 10 Years 3.61
• Range
• Low 1.86 (2005)
• High 5.03 (2008)

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Sources of Retirement IncomePersonal Savings
(USA)

• Average Net Worth By Age Group

• Average household debt
• (96,173)

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Sources of Retirement IncomePersonal Savings
(USA)

• Average Net Worth By Age Group

• Average household debt
• Per Indebted

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Developing Basic Retirement GoalsInitial
Retirement Plan Example

• John
• Single - Age 45
• Started With Current Employer - Age 35
• Assumptions
• Planned Retirement Date - Age 65 Current
  Annual Salary - 35,000
• Has Traditional Pension Plan Inflation 3
  
• Replacement Ratio 85 Planned Retirement
  Years 25 (Age 90)
• Savings 35,000 in Bank CDs Avg. Rate of
  Return 3
• Not Currently Saving For Retirement

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Developing Basic Retirement Goals Initial
Retirement Plan Example

• Projected Retirement Income Replacement Need
• 35,000 _at_ 3 inflation for 20 years X 85
  53,732 per year
• Sources of Retirement Income
• Pension Plan Estimated 2,200 per month, or
  26,400 per year
• Social Security Estimated 1,140 per month, or
  13,680 per year
• 40,080 per year
• (13,652) per year
• Personal Savings - 35,000 _at_ 3 for 20 Years
  63,725
• Years to Deplete _at_ 13,652 per year with a 3
  rate of return 5.1 years
• 25 (years in retirement) 5.1 years (funded)
  19.9 years (income deficient)
• Retirement Income Gap
• 13,652 X 19.9 years

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Developing Basic Retirement Goals Initial
Retirement Plan Example

• Projected Retirement Income Replacement Need
• 35,000 _at_ 3 inflation for 20 years X 85
  53,732 per year
• Sources of Retirement Income
• Pension Plan Estimated 2,200 per month, or
  26,400 per year
• Social Security Estimated 1,140 per month, or
  13,680 per year
• 40,080 per year
• (13,652) per year
• Personal Savings - 35,000 _at_ 3 for 20 Years
  63,725
• Years to Deplete _at_ 13,652 per year with a 3
  rate of return 5.1 years
• 25 (years in retirement) 5.1 years (funded)
  19.9 years (income deficient)
• Retirement Income Gap
• 13,652 X 19.9 years 271,675

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Closing Income GapsOptions

• Save More
• Increase Rate of Return on Savings
• Adjust Retirement Date
• Consider Working In Retirement

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Closing Income Gaps

• What about our example situation?
• Gap 271,675
• Save More
• 381.59 (26 times per year) (9,921.34 per
  year) _at_ 3 for 20 years 271,676

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Closing Income Gaps

• What about our example situation?
• Gap 271,675
• Save More
• 381.59 (26 times per year) (9,921.34 per
  year) _at_ 3 for 20 years 271,676
• Increase Rate of Return
• Total Savings Required 341,300 (13,652 X
  25 years)
• Rate of Return 6 on all savings (including
  existing 35,000 )
• 35,000 224.50 (26 times per year) (5,837
  per year) _at_ 6 for 20 years 341,306

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Closing Income GapsLeveraging Your Retirement
Savings Dollars

• Payroll deducted retirement savings programs
  401k, 403b and 457b
• Tax-advantaged savings - Contributions are made
  with pre-tax dollars
• (1 of contribution reduces paycheck by less
  than 1)
• Tax-deferred growth Gains or earnings
  deferred
• Contribution limits 17,500, plus additional
  5,500 if over age 50
• Some employers may make contributions or offer
  matches
• Investment options Fixed income and mutual
  funds
• Distributions 401k/403b Age 59 ½ or, 55
  separation from service
• 457b
  separation from service
• In-Service Withdrawals 401k/403b Specified
  purposes, check w/plan
• 
  457b - Only for extreme financial hardship

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Closing Income GapsLeveraging Your Retirement
Savings Dollars

• What about our example situation ?
• Previous after-tax contribution scenario -
• Rate of Return 6 on all savings (including
  existing 35,000)
• 35,000 224.50 (26 times per year) (5,837
  per year) _at_ 6 for 20 years 341,306

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Closing Income GapsLeveraging Your Retirement
Savings Dollars

• What about our example situation ?
• Previous after-tax contribution scenario -
• Rate of Return 6 on all savings (including
  existing 35,000)
• 35,000 224.50 (26 times per year) (5,837
  per year) _at_ 6 for 20 years 341,306
• Using pre-tax contributions of 224.50 net
  paycheck reduction of 175.11 (4,552.86 per
  year)

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The Cost of Procrastination
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What If I Dont Have A Pension Plan Or Dont Have
Much Time Until Retirement?

• Whats Your Choices?
• Accept retirement as is Develop a plan to
  adjust
• Be flexible on your retirement date
• Consider a post-retirement career
• Start doing something's to cushion the
  financial impact of less money in retirement
• What Can I Do?
• Start reducing debt
• Start thinking about unnecessary expenses
• Start saving or save more
• Utilize tax-advantaged programs
• Focus on take-home pay reductions
• Pay yourself first - Increase savings amount
  each year or with each salary
  increase you get

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• Questions?

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Basic InvestingWhats My Investing Profile?

• Some Questions to Consider
• How do I feel about taking risk with my money?
• Do I understand the risk / reward relationship?
• How well do I tolerate fluctuations in the value
  of my assets?
• Whats my time horizon?
• Whats my investing experience?

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Basic InvestingSometimes the Need Dictates the
Risk

• Conservative investments/contributions ?
  objective
• Forced to look at higher risk/higher reward
  options
• Last Resort
• Adjust Retirement Date
• Work In Retirement

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Basic InvestingSome Principles To Consider

• All Investments Carry Some Level of Risk
• Investments With Potentially Higher Returns Are
  Generally Accompanied By Higher Risk Factors
• Diversification Investing In A Variety Of
  Assets To Minimize Risk
• Asset Allocation - Balancing Risk Versus Reward
  By Adjusting The Percentage Of Each Asset In An
  Investment Portfolio According To Goals, Risk
  Tolerance, And Time Horizon
• Successful Investing Requires Periodic Monitoring
  And Adjustments

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Basic InvestingInvestment Choices

• Certificates of Deposit
• Money Market Funds
• Bonds Government , Corporate
• Stocks Preferred, Common
• Mutual Funds Bond, Stock, Index, Hybrid
• Options

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Basic InvestingHistorical Rates of Return

• Average Rate of Return - 1926 thru 2010
• U.S. Small Company Stocks 12.1
• International Stocks 10.1
• U.S. Large Company Stocks 9.9
• Balanced Stock/Bond Portfolio 8.3
• Bonds 5.5
• Money Market 3.6
• Inflation 3

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Basic InvestingImplementing My Plan

• Who Should I Work With and What Should I Know?
• Work Only With Licensed / Registered Companies
  and Representatives
• Be Informed About Your Investments Stay In
  Charge of Your Money
• Understand The Fine Print Terms, Fees,
  Ability and Cost to Access Money
• Never Sign Anything Until You Are Completely Sure
• Demand Periodic Statements and Representative
  Reviews
• Be On Guard For Too Good To Be True Deals

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Retirement PlanningResources

• Retirement Planning
• U.S. Department of Labor
• Taking The Mystery Out Of Retirement
  Planning -
• www.dol.gov/ebsa/Publications/nearretirement.htm
  l
• Sources of Retirement Income
• U.S. Social Security Administration -
• Benefit Calculator - www.ssa.gov/planners/calc
  ulators.htm
• Traditional Pension Plan See Your Employer
• Leveraging Retirement Savings Dollars
• Tax-Advantaged Savings Programs See Your
  Employer
• Implementing My Plan
• Financial Industry National Regulatory
  Association (FINRA)
• Broker Check
• www.finra.org/Investors/ToolsCalculators/Broker
  Check

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• Questions?

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Would you tell me which way I ought to go from
here? asked Alice. That depends a good deal
on where you want to get, said the Cat. I
really dont care where replied Alice. Then
it doesnt much matter which way you go, said
the Cat.
d
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• If you dont know where youre going, it doesnt
  matter which road you take.

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The road to Retirement

• Charted Course or Aimless Wander