7/23/19 YOUR FINANCES 101 Managing Your Financial Future Key - PDF document

7/23/19 YOUR FINANCES 101 Managing Your Financial Future Key Question: What do I need to do to be sure to have enough money for the rest of my life? 1

7/23/19 WHERE TO START Creating a Long-term Financial Plan STEP 1: Knowing your sustainable rate of spending – Retirement income guardrails Income to Work With q Sources of Future Income q Investment Returns q Pensions q Social Security (maximizing) q Earned income? 2

7/23/19 Assets Available q Brokerage Account Investments q IRAs and other Retirement Accounts q Cash Value from Life Insurance q Annuities q Real Estate q Other Tangible Assets Future Expenses q Day-to-day Living q Riderwood Expenses q Health Care/Additional LTC q Family Related q Travel/Entertainment q Other 3

7/23/19 Retirement Income Income – Expenses = Surplus or Deficit q Surplus will be added to assets q Deficit must be funded from assets LEGACY PLANNING Do you want to: q Live the fullest life you can q Leave something for heirs Family Gifting: q Your needs vs family q Lifetime vs bequests – tax and other considerations Key Considerations in Estate Planning q Selecting Fiduciaries q Determining amount of control q Providing for special protections or needs 4

7/23/19 SURVIVING SPOUSE CHECKLIST See Appendix Resource Guide TAXES –PLANNING AND CONSIDERATIONS q Required Minimum Distributions - RMDs q Roth Conversions q Deductions under new tax law q Charitable Giving o Appreciated stock o Qualified Charitable Distributions (QCD’s) 5

7/23/19 INSURANCE CONSIDERATIONS What do you still need? q Life insurance – may no longer need – permanent vs term q Long-term care – hard to qualify and expensive after 60’s q Property casualty and liability insurance – important to maintain q Health insurance – reevaluate each year – good resource INVESTMENTS q Importance of stable returns q Return vs risk — Rules of Thumb (e.g. X% of assets ) q Diversification q Inflation protection 6

7/23/19 As an investor, assume you expect in Portfolio A (Blue Bars) and Portfolio B (Orange Bars) to have the above returns over the next 18 years. • Portfolio A outperforms Portfolio B in 12 of the 18 years or 67% of the time. • Portfolio A returns more than 20% in 4 of the years while Portfolio B never returns above 17%. Which investment would you choose? If you are like many investors, you probably would choose Portfolio A . Portfolio A outperformed Portfolio B a majority of the time and posted a several very high performance years, but Portfolio B would generate more wealth over these 18 years. Here are the real numbers for a $1,000,000 investment: • Portfolio A - would have generated the investor $2,577,990 at the end of the 18 years. • Portfolio B - would have left the investor $2,747,758 at the end of those 18 years. This is a $169,768 difference! 7

7/23/19 Goal-Based Investment Allocations Distribution Phase Accumulation Phase INCOME CORE ACCUMULATION LONG-TERM GROWTH FOR INVESTORS WHO: FOR INVESTORS WHO: FOR INVESTORS WHO: FOR INVESTORS WHO: • Want to emphasize a • Want a balanced • Want a balanced stable level of current portfolio with an portfolio with an • Want capital income and capital emphasis on income emphasis towards appreciation and preservation and capital owning growth wealth accumulation • Expect to use this preservation investments • Are in the early portfolio as a • May have a need to • Are in the late accumulation years significant source of supplement their accumulation stage or and still adding to current income income with portfolio do not have a current their portfolio assets need to supplement their income with portfolio assets Targeted 25% Equity Targeted 40% Equity Targeted 60% Equity Targeted 80% Equity Allocation Allocation Allocation Allocation Lower Volatility Higher Volatility Cash Equivalents to Loans to Governments Equity interests in Security ownership A variety of defensive provide liquidity for and businesses businesses around of tangible assets such and non-correlated trading and to the world as precious metals, investments accommodate client natural resources and withdrawals real estate 8

7/23/19 Narrowing the Focus: Mutual Funds MUTUAL FUND ATTRIBUTES VS. PEERS: • 1-year, 3-year and 5-year returns better than peer average • Long-term measurable track record and fund manager • Assets > $75 million with liquidity • Composition of fund’s asset allocation at least 80% in their defined asset class • Net expense ratio better than peer average 9

7/23/19 Hiring Professionals: Understanding different types of financial professionals Insurance agent /broker q Agent is captive, q Broker will look at best carrier for you Bank q Look at fees and access – q Do you go in or online – q Choose best one for your preferences Do you need a financial planner/advisor? q What can a financial planner do for you q What does it cost – is it worth it? Other financial support possibilities q Bill payment q Do you need a tax preparer? WORKING WITH AN ADVISOR See Appendix Resource Guide 10

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