Reinventing Your Retirement New Realities For New Challenges For Clear View
-
Upload
steve-stanganelli -
Category
Documents
-
view
888 -
download
2
description
Transcript of Reinventing Your Retirement New Realities For New Challenges For Clear View
Reinventing Your Retirement
Reinventing Your Retirement
PA0000.029.0405
New Reality, New Challenges
Transition Assistance Plan TIPS for Salem Works May 18, 2009
Steve Stanganelli, CRPC®, CFP®Member, Financial Planning Association
Rated Advisor, Paladin Registry
Direct: 978-388-0020 Cell: 978-621-8268
Resource LinksResource Links
• www.moneylinkpro.wordpress.comwww.moneylinkpro.wordpress.com
• http://www.cfp.com/learn/ http://www.cfp.com/learn/
• http://www.fpaforfinancialplanning.org/ http://www.fpaforfinancialplanning.org/
• www.moneylinkpro.wordpress.comwww.moneylinkpro.wordpress.com
• http://www.cfp.com/learn/ http://www.cfp.com/learn/
• http://www.fpaforfinancialplanning.org/ http://www.fpaforfinancialplanning.org/
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Common Comments Today Common Comments Today
• How Do I Get Back on Track?How Do I Get Back on Track?
• Where’s My Bailout?Where’s My Bailout?
• How Will I Be Able to Afford to Retire?How Will I Be Able to Afford to Retire?
• Who Will Be There to Help Me?Who Will Be There to Help Me?
• How Do I Get Back on Track?How Do I Get Back on Track?
• Where’s My Bailout?Where’s My Bailout?
• How Will I Be Able to Afford to Retire?How Will I Be Able to Afford to Retire?
• Who Will Be There to Help Me?Who Will Be There to Help Me?
Source of data: Employee Benefits Research Institute (EBRI) 2005 SurveyPA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Today’s PresentationToday’s Presentation
• 10 Tips to Financial Health10 Tips to Financial Health
• Reviewing the Fundamentals of InvestingReviewing the Fundamentals of Investing
• Retirement Plan DistributionsRetirement Plan Distributions
• Understanding the Impact of Your Understanding the Impact of Your Behavior on Financial SuccessBehavior on Financial Success
• 10 Tips to Financial Health10 Tips to Financial Health
• Reviewing the Fundamentals of InvestingReviewing the Fundamentals of Investing
• Retirement Plan DistributionsRetirement Plan Distributions
• Understanding the Impact of Your Understanding the Impact of Your Behavior on Financial SuccessBehavior on Financial Success
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
What’s a Person to Do?What’s a Person to Do?
• Develop a plan
• Increase your savings
• Invest with clear goals in mind
• Review your plan regularly
• Review estate planning needs
• Develop a plan
• Increase your savings
• Invest with clear goals in mind
• Review your plan regularly
• Review estate planning needs
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Back to BasicsBack to Basics
• Have a Plan – Have a Plan – Every House Starts with a BlueprintEvery House Starts with a Blueprint
• Have SMART GoalsHave SMART Goals
• Recalibrate Your Risk TemperatureRecalibrate Your Risk Temperature
• Understand the Impact of Inflation & TaxesUnderstand the Impact of Inflation & Taxes
• Diversify: Your Mom’s Advice Was RightDiversify: Your Mom’s Advice Was Right
• Control What You Can – Control What You Can –
• Don’t Panic Over the PressDon’t Panic Over the Press
• Have a Plan – Have a Plan – Every House Starts with a BlueprintEvery House Starts with a Blueprint
• Have SMART GoalsHave SMART Goals
• Recalibrate Your Risk TemperatureRecalibrate Your Risk Temperature
• Understand the Impact of Inflation & TaxesUnderstand the Impact of Inflation & Taxes
• Diversify: Your Mom’s Advice Was RightDiversify: Your Mom’s Advice Was Right
• Control What You Can – Control What You Can –
• Don’t Panic Over the PressDon’t Panic Over the Press
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Back to Basics -- Part 2Back to Basics -- Part 2
• Your Asset AllocationYour Asset Allocation
• It’s Not All About Buy & HoldIt’s Not All About Buy & Hold
• Avoid the Common MistakesAvoid the Common Mistakes
• Control Your CostsControl Your Costs
• With Your Lifestyle & InvestmentsWith Your Lifestyle & Investments
• Take Care of the Ones You LoveTake Care of the Ones You Love
• Insurance is for the Living & Day-to-DayInsurance is for the Living & Day-to-Day
• Estate Planning is for EveryoneEstate Planning is for Everyone
• Your Asset AllocationYour Asset Allocation
• It’s Not All About Buy & HoldIt’s Not All About Buy & Hold
• Avoid the Common MistakesAvoid the Common Mistakes
• Control Your CostsControl Your Costs
• With Your Lifestyle & InvestmentsWith Your Lifestyle & Investments
• Take Care of the Ones You LoveTake Care of the Ones You Love
• Insurance is for the Living & Day-to-DayInsurance is for the Living & Day-to-Day
• Estate Planning is for EveryoneEstate Planning is for Everyone
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Understand the effects of taxes
Taxable Illustration1 Tax-Deferred Illustration2
$100,0009%33%33%
Starting investmentsRate of returnTax rateTax rate on 9% = 6% net
$100,0009%33%0%
Starting investmentsRate of returnTax rateTax rate on 9% = 9% net
It will take 12 years to double your investment.72 ÷ 6% = 12 years
It will take 8 years to double your investment.72 ÷ 9% = 8 years
$100,000 Start $100,000 Start$200,000 12 years $200,000 8 years$400,000 24 years $400,000 16 years
$800,000 24 years
This is a hypothetical illustration and does not represent the performance of a specific investment option. Taxable distributions (and certain deemed distributions) are subject to ordinary income tax and, if taken prior to age 59½, may also be subject to a 10% federal income tax penalty. Early surrender charges may apply.1 Based on an assumed federal tax rate of 33% and assume no distributions. This chart is intended to illustrate the advantage of tax deferral. It does not project the actual performance of a specific product or its underlying funds.2 Tax-deferred results do not reflect Total Insurance Charge or surrender charges, or the $30 annual maintenance fee, which is waived for contract anniversary values of $50,000 or more and no Contingent Deferred Sales Charge. Please note that no federal income taxes have been paid on the results.
What 3% Inflation Can Do What 3% Inflation Can Do to a $30,000 Per Year Standard of Livingto a $30,000 Per Year Standard of Living
5 Years5 Years $34,778$34,778
10 Years10 Years $40,317$40,317
15 Years15 Years $46,739$46,739
20 Years20 Years $54,183$54,183
25 Years25 Years $62,813$62,813
Inflation Matters What Will It Cost to Maintain Your Lifestyle?What Will It Cost to Maintain Your Lifestyle?Inflation Matters What Will It Cost to Maintain Your Lifestyle?What Will It Cost to Maintain Your Lifestyle?
Be prepared to double your moneyif you’re retired for 25 years!!
Be prepared to double your moneyif you’re retired for 25 years!!
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Auto
340%College Tuition (not including boarding and books)
Home
1978: $6,379 2004: $28,050
1978: $37,229
116%
2004: $80,328
1978: $62,500 2004: $225,000
260%
Understand the effects of inflation
Source: NADA Industry Analysis Division, May, 2005
Source: The College Board, 2005
Source: US Census Bureau, 2005
The Investment PyramidThe Investment Pyramid
GrowthGrowth
CurrentIncomeCurrentIncome
Cash Equivalent Savings
Cash Equivalent Savings
Higher Risk/Higher Reward PotentialHigher Risk/Higher Reward Potential
Lower Risk/Lower Reward PotentialLower Risk/Lower Reward Potential
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Stocks were up 71% of the time—
57 up periods,23 down
Stocks were up 99% of the time—70 up periods,
1 downPo
tent
ial R
etur
n
Stocks were up 87% of the time—
66 up periods,10 down
Dec. 31, 1925–Dec. 31, 2005
Pote
ntia
l Ret
urn
Pote
ntia
l Ret
urn
Dec. 31, 1925–Dec. 31, 2005
Dec. 31, 1925–Dec. 31, 2005
One-yearHoldingperiods
Five-yearHoldingperiods
Ten-yearHoldingperiods
The Advantages of Diversification and Equities
INDEX PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTSThis illustration is for illustrative purposes only, and does not represent the performance of The Hartford Mutual Funds, The Hartford variable annuities, or any particular investment. The S&P 500 Index is unmanaged. You cannot invest directly in the S&P 500 Index. Assumes reinvestment of income and no transaction cost. Data source: Wiesenberger, 1/06
Wall Street: The Rise in Red Ink – Newsweek
How Many Lean Years? – Newsweek
The Economy: Blood, Sweat and Tears – Newsweek
The Death of Equities – Business Week
Staring into the Abyss…crash is a shocking warning that the economy is living on borrowed time – U.S. News & World Report
After an Economic Heart Attack: The crisis calls for emergency treatment to calm the markets –and a long-term plan to restore the nations fiscal health – Newsweek
How the Bull Crashed Into Reality –Business Week
“…the flight of individual investors and the breakdown of the markets foreshadow the end of the capitalistic system as we have known it.” – Business Week
Don’t panic over the Press
Wall Street: The Rise in Red Ink – April 16, 1973
How Many Lean Years? – August 5, 1974
The Economy: Blood, Sweat and Tears – August 12, 1974
The Death of Equities – August 13,1979
Staring into the Abyss…crash is a shocking warning that the economy is living on borrowed time – November 2, 1987
After an Economic Heart Attack: The crisis calls for emergency treatment to calm the markets –and a long-term plan to restore the nations fiscal health – November 2, 1987
How the Bull Crashed Into Reality –November 2, 1987
“…the flight of individual investors and the breakdown of the markets foreshadow the end of the capitalistic system as we have known it.” – September 14, 1974
Don’t panic over the Press … History Does Repeat and So Do the Headlines
Don’t panic over the Press
INDEX PAST PERFORMANCE IS NO INDICATION OF FUTURE RESULTSThe S&P 500 Index is unmanaged and does not represent the performance of any particular investments. You can not invest directly into the S&P 500 Index. Assumes reinvestment of income and no transaction cost. Source: Compilation of both the Bloomberg and Wiesenberger, 1/06.
Looking past the current crisisThere will always be reasons not to invest. However, in the long-run, even investments made on the worst days of the century, ones with the most upheaval and instability, have historically done well. For example, if you invested $100 S&P 500 Index on December 31, 1936, and added $100 on some of the worst days of the century (instability that was reflected in the market’s performance), what would the outcome be? By December 2005, despite those declines, an investment would have accumulated $407,721. The parenthesis notes the date of the addition.
Four Numbers You Need to KnowComparing Returns: Average Annual Returns From Stocks, Bonds Comparing Returns: Average Annual Returns From Stocks, Bonds and Treasury Bills Over the Last 54 Years (12/31/54–12/31/08)and Treasury Bills Over the Last 54 Years (12/31/54–12/31/08)
Four Numbers You Need to KnowComparing Returns: Average Annual Returns From Stocks, Bonds Comparing Returns: Average Annual Returns From Stocks, Bonds and Treasury Bills Over the Last 54 Years (12/31/54–12/31/08)and Treasury Bills Over the Last 54 Years (12/31/54–12/31/08)
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Let’s Talk About RiskLet’s Talk About Risk
• Risk is the chance of not meeting your goals
• Risk is a natural, necessary part of investing
• A majority of Americans continue to have most of their money in investments that aren’t beating inflation
• The greatest risk to financial successcan be taking no risk at all
• Risk is the chance of not meeting your goals
• Risk is a natural, necessary part of investing
• A majority of Americans continue to have most of their money in investments that aren’t beating inflation
• The greatest risk to financial successcan be taking no risk at all
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
TIPS TO REBUILDING FINANCIAL HEALTH
What You Can Do Now …
Steve Stanganelli, CRPC®, CFP®
1.) Let’s Get Physical …Getting Your Nest Egg Off the Couch and Back Into Shape
1.) Let’s Get Physical …Getting Your Nest Egg Off the Couch and Back Into Shape
• Finding Balance is Not Just for YogaFinding Balance is Not Just for Yoga
• Rebalancing Reduces Risk and May Lead Rebalancing Reduces Risk and May Lead to Bigger Future Gainsto Bigger Future Gains
• Finding Balance is Not Just for YogaFinding Balance is Not Just for Yoga
• Rebalancing Reduces Risk and May Lead Rebalancing Reduces Risk and May Lead to Bigger Future Gainsto Bigger Future Gains
Source of data: Schwab Center for Financial ResearchPA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
$2.9M $3.5M
Never Rebalanced Annually Rebalanced
Source of data: vanguard Center for Retirement Research
2.) Diversify to Protect2.) Diversify to Protect
• A 60%-stock / 40%-bond Mix in Action
• Since 1926 this mix has returned 8.5% versus 8.1% for a 50%/50% Mix
• Use an Auto-Rebalancing Feature
• Too Much of a Good Thing Can Give You More than a Headache
• Trim holdings in US Treasuries to no more than 20% of total bond/fixed income portfolio
• A 60%-stock / 40%-bond Mix in Action
• Since 1926 this mix has returned 8.5% versus 8.1% for a 50%/50% Mix
• Use an Auto-Rebalancing Feature
• Too Much of a Good Thing Can Give You More than a Headache
• Trim holdings in US Treasuries to no more than 20% of total bond/fixed income portfolio
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
3.) Understand Your Self 3.) Understand Your Self
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
““People don’t change their People don’t change their behavior unless it makes a behavior unless it makes a difference for them to do so.”difference for them to do so.”
––Fran TarkentonFran TarkentonAmerican Football player,American Football player,
Businessman, Author, Businessman, Author, Corporate Consultant Corporate Consultant
Traditional Finance Theory versus Actual Reality
®
Behavioral FinanceBehavioral Finance
““InvestorsAre not totally rationalOften act based on imperfect information
MarketsMay be difficult to beat in the long termIn the short term, there are anomalies and
excesses”
““InvestorsAre not totally rationalOften act based on imperfect information
MarketsMay be difficult to beat in the long termIn the short term, there are anomalies and
excesses”
CC0000.068.0803
®
Behavioral FinanceBehavioral Finance
CC0000.068.0803
• Loss aversion
• Narrow framing
• Anchoring
• Mental accounting
• Naïve Diversification
• Disposition effect
• Herding
• Regret
• Media response
• Optimism
• Take Your Risk Temperature: www.myriskprofile.com
•Risk Profiles Change Over Time Usually Because of Market Conditions
• Financial Planning May Help Us Avoid Bubbles
(see www.moneylinkpro.wordpress.com)
®
4.) Lose Rate4.) Lose Rate
• Consider Refinancing Your Home Loan
• Refinance or Get a New Home Equity Line for Emergencies
• Talk with an Experienced Real Estate Attorney About a Loan Modification
• Consider Refinancing Your Home Loan
• Refinance or Get a New Home Equity Line for Emergencies
• Talk with an Experienced Real Estate Attorney About a Loan Modification
CC0000.068.0803
5.) Boost Your Credit Score•Check Your Credit Report for Errors or Possible ID Theft
•Go to www.annualcreditreport.com
•Check out these consumer info sites: www.ftc.gov or www.idtheftcenter.org
•Avoid balance transfers or using more than 50% of line
®
6.) Lighten the Load6.) Lighten the Load
• Review Recurring Charges to Identify Items to Cut
• Those Movie Channels You Rarely Watch
• Calling Features on Phone Services
• Negotiate with Providers for Lower Fees
• They’d Rather Keep You than Lose You
• Empower Your Kids to Handle Their Own Budget – A Great Learning Tool
• Consider the “Latte Factor”
• Review Recurring Charges to Identify Items to Cut
• Those Movie Channels You Rarely Watch
• Calling Features on Phone Services
• Negotiate with Providers for Lower Fees
• They’d Rather Keep You than Lose You
• Empower Your Kids to Handle Their Own Budget – A Great Learning Tool
• Consider the “Latte Factor”
CC0000.068.0803
®
7.) Safety Net Makeover7.) Safety Net Makeover• Review All Your Insurance Coverage
• Don’t Skimp in the Wrong Places
• Poor Coverage Will Leave You Exposed
• Life Insurance: Newer Actuarial Tables Mean Possible Lower Rates if Current Policy > 5 yrs old and Health Hasn’t Changed
• Auto & Home: Raise the Deductible, Reap the Savings
• Real Estate: File a “Homestead Declaration”
• Health: Talk with an Insurance Specialist about post-COBRA options
• ID Theft: Take Steps to Protect Yourself
• Review All Your Insurance Coverage
• Don’t Skimp in the Wrong Places
• Poor Coverage Will Leave You Exposed
• Life Insurance: Newer Actuarial Tables Mean Possible Lower Rates if Current Policy > 5 yrs old and Health Hasn’t Changed
• Auto & Home: Raise the Deductible, Reap the Savings
• Real Estate: File a “Homestead Declaration”
• Health: Talk with an Insurance Specialist about post-COBRA options
• ID Theft: Take Steps to Protect YourselfCC0000.068.0803
®
8.) Estate PlanningDecide Now or Someone Else Will8.) Estate PlanningDecide Now or Someone Else Will
CC0000.068.0803
Now’s the time to get your affairs in order:
• Health Care Directives – Remember Terry Schiavo?
• Durable Power of Attorney • “Simple” Will – Your Life is Probably More Complex but It’s a Start• Guardianship for Minors• Trusts – Great Way to Lower Probate Costs & Protect Privacy
®
9.) Roll, Roll, Roll Your EggRetirement Plan Distribution Strategies9.) Roll, Roll, Roll Your EggRetirement Plan Distribution Strategies
CC0000.068.0803
A.) Leave It• Cannot make additional contributions• Limited investment choices• Plan may change if company changes hands• Potential for tax issues based on payout to heirsB.) Transfer It to New Employer• Same as ‘A’ aboveC.) Cash-Out/Lump Sum = TAXESD.) Roll to Your IRA = More Options
®
9.) Roll, Roll, Roll Your EggRetirement Plan Distribution Strategies9.) Roll, Roll, Roll Your EggRetirement Plan Distribution Strategies
CC0000.068.0803
• Consider a “self-directed” IRA Option to invest in a number of non-traditional alternatives like real estate, operating businesses or franchises.
• Consider starting a business and opening a solo-401(k) with a loan option; roll your old 401(k) into the new plan and then take a loan without jeopardizing the tax-deferral status
®
10.) College Funding is A Retirement Issue10.) College Funding is A Retirement Issue
CC0000.068.0803
If your child is already in school or getting ready to attend in fall 2009:• Call the Financial Aid Officer and let them know• Appeal any awards
If your child is within 3 years of attending:• Minimize assets held by the child• Consider starting a business – it reduces income and assets used in financial aid calculations
What Advantages Does a Fee-Only Fiduciary Financial Planner Offer to You?
The Value of Advice … Work with an Advisor Working On Your Side
Experience
Time
Resources
Knowledge
Investment Planning
Investment Discipline
An Understanding of the Effectsof Taxes
What Should You Do Next?What Should You Do Next?
• Find a Fee-Only CFP ® Professional Through the Resource Links Provided
• Learn More. Sign up for Financial Topics/Financial Planning Strategies e-newsletters.
• Check out www.investorwatchdog.com and www.moneylinkpro.wordpress.com for more comments, information and resource links.
• Call for a complimentary Money Tune Up, Portfolio Review or College Money Assessment
• Call 978-388-0020 to discuss any questions.
• Find a Fee-Only CFP ® Professional Through the Resource Links Provided
• Learn More. Sign up for Financial Topics/Financial Planning Strategies e-newsletters.
• Check out www.investorwatchdog.com and www.moneylinkpro.wordpress.com for more comments, information and resource links.
• Call for a complimentary Money Tune Up, Portfolio Review or College Money Assessment
• Call 978-388-0020 to discuss any questions.
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP®
Reinventing Your Retirement
Reinventing Your Retirement
AAQQ&&
PA0000.029.0405
Steve Stanganelli, CRPC®, CFP® 978-388-0020