Financial Planning
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Transcript of Financial Planning
Financial Planning
Presented byRick & Bob Stites
Stites Financial
Member FINRA
Securities, advisory services and certain insurance products are offered through INVEST Financial
Corporation, member FINRA, SIPC, a registered broker/dealer and registered investment advisor, and its
affiliated insurance agencies and are:
• NOT FDIC or NCUA INSURED
• May lose value
• No bank or credit union guaranteeINVEST Financial Corporation is not affiliated with Pinnacle Investment services or Pinnacle Bank.
This information is general in nature and should not be construed as tax or legal advice. INVEST Financial Corporation does not provide tax or legal advice. Please consult your tax and/or legal adviser for guidance on your particular situation.
Are your finances puzzling?
Estate/Trust Management Retirement
Education Insurance
Consumer/ Business Lending Investments/
Objectives
These are Trying Times…
•Uncertain Economy•Volatile Stock Markets•Inflation•High Debt Loads•Low Savings Rate•Low Interest Rates
Reality….
More than half of American households (56%) are behind where they should be in saving for a comfortable retirement!*
*Federal Reserve Economic Analysis sponsored by the Consumer Federation of America
Reality….
Research shows that people with a financial plan have twice the money saved for retirement as those without*
Of the 44% who say they are prepared for retirement & have a plan....only half expect to retire with the same standard of living!**
*DirectAdvice.com President and CEO Brian L. Hollander / Based on a past Consumer Federation of America survey
**Federal Reserve Economic Analysis sponsored by the Consumer Federation of America
We Believe...Financial Planning Can Bring the pieces Financial Planning Can Bring the pieces together!together!
INVESTAdvantage
Retirement Education Insurance
Trust/Estate Management
Investments/ Objectives
Consumer/ Business Lending
Planned a Vacation Lately?
What did you do first?
Second? Third?
Why Plan for Retirement?
Planning is the process used to help clients reach their financial goals.
• Where do you want to go?
• What method of transportation are you comfortable taking?
Things Have Changed
• Today, 40 isn’t old, it’s young
• A time of health and vigor
• Just starting a family
Retirements
• Lasting 25, 30 or even 40 years
• Outliving income?
• Nobody wants to be dependent upon children, grandchildren, government
How Much Will Retirement Really Cost ?
Factors that affect costs:• Time value of money• Inflation
The Cost of Waiting
Early SavingsEarly Savings$65,505$65,505
Delayed SavingsDelayed Savings$47,045$47,045
65,00060,00055,00050,00045,00040,00035,00030,00025,00020,00015,00010,0005,000
01 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
Val
ue
Assuming a hypothetical 10% average annual return and beginning-of-year deposits.
This is a hypothetical example for illustrative purposes only and is not intended to be representative of past or future performance of any particular investment. The information contained here is based on information we believe reliable but we do not guarantee its accuracy. The determinations made by this calculation should not be construed as guarantees or projections. The reasonableness of certain information may change over time due to changes in investment trends, your personal situation and/or tax law. You should keep in mind that actual investment results can vary considerably depending on the type of securities involved, general market conditions and other factors.
Investor saving $2,000 per year for seven years.
Investor waiting seven years then investing $2,000 per year for 12 years.
Effect of Inflation
$.25
$800
$9,000
1940s
$2.89
$30,000
$257,000
Today
* Source: Ibbotson & Associates - SBBI - 2004 Yearbook
Retirement Income Sources
Source: Social Security Administration, 2003
PrivatePensions 18%
Other3%
Earnings
23%
Social Security
38%
Assets
18%
What Does This Mean to You?
1. Don’t wait to begin a retirement program.
2. Inflation will impact your retirement.
3. YOU are the only person responsible.
1. Don’t wait to begin a retirement program.
2. Inflation will impact your retirement.
3. YOU are the only person responsible.
Methods to Save for Retirement
• Dollar-cost averaging or systematic savings program
• Qualified retirement accounts through employer
Dollar-Cost Averaging
Number of Month Share Price Shares Purchased1 $4 1252 $2 2503 $5 1004 $20 255 $10 50Total $41 550
If you were to invest $500 each month for 5 months* (total of $2,500)
Dollar cost averaging does not assure a profit nor protect against loss in a declining market. It involves continuous investments in securities regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue their purchases through periods of low price levels.
This is a hypothetical example for illustrative purposes only. It is not intended to reflect the actual performance of any security. Investments involve risk and you may incur a profit or a loss.
*Dollar-cost averaging is most effective over a long period of time.
Share’s average market price = $8.20 ($41/5)Your average cost = $4.55 ($2,500/550)
Qualified Retirement Plans
Benefits of employer-sponsored retirement plans• Tax deductible contributions• Potential for:
– possible larger contributions than IRAs• May be eligible for “catch-up” contributions if age 50+• Tax-deferred growth potential*• Ability to roll proceeds into IRA
*Withdrawals are subject to income tax and prior to age 59 ½ a 10% federal penalty tax may apply.
A Savings Comparison
With a401(k) Plan
No 401(k)Plan
Gross Pay401(k) Savings
$40,000$3,000
$40,000$0
Taxable IncomeLess: Income Taxes (25%)
$37,000$9,250
$40,000$10,000
After-Tax SalaryAfter-Tax Savings
$27,750$0
$30,000$3,000
Net Spendable Income $27,750 $27,000
Annual Tax Savings $750You can save this amount per
year by contributing to an employer-sponsored plan!
Retirement Plan Rollover?
New Plan? New Plan? Or IRA? Or IRA?
Review
• Importance of planning• Cost of waiting• Effects of inflation• Who will you depend on?• Methods of saving• Review your goals and investments once a year.
Conclusion
• Seek the advice of professionals to help you make investment decisions
• Understand how new laws and tax legislation impact your portfolio or business
• Regularly review your goals and investments — are they compatible?
How can we help you?
• Review Current Investments • Retirement Planning• Advice and Recommendations• Retirement Income Distribution
Remember…….
Most people don’t Plan to Fail….
they Simply Fail to Plan!