Honkamp Krueger Financial Services, Inc. Your Premier Executive Counseling Services Partner The...

Honkamp Krueger Financial Services, Inc.

Your Premier Executive Counseling Services Partner

The Importance of Planning for a Lifetime…

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Agenda

• How to Become a Millionaire?– Establish Financial Goals by Incorporating Smart

• Tax Planning• Investment Planning• Retirement Planning• Insurance Planning• Monitoring Your Financial Plan’s Progress Regularly


How do I get there?

3 Types of Income

• Renewals

• Investments

• Retirement

RE

NE

WA

LS

INVESTMENTSRETIREMENT

RE

NE

WA

LS

INVESTMENTSRETIREMENT


Tax Planning

• Income Type

• Taxes

• Qualified Expenses– Vehicle– Travel– Lodging– Meals & entertainment– Office space


Investment Planning

• Prioritize Your Financial Goals– Emergency fund– Build savings &

investments– Buy house– Accumulate college fund– Invest for retirement– Save and invest into luxury

items after all the above


Types of Investments

• Cash alternatives• Stocks• Bonds• Alternative investments

– Precious Metals, Real Estate, Commodities etc.

• Mutual Funds


Disadvantages

Low Returns

May not keep up with inflation

Advantages

Predictable earnings

Highly liquid

Little risk

Cash Alternatives

• Low risk• Short term• Relatively liquid• Examples

– Certificates of Deposit (CDs)

– Money Market– U.S. Treasury Bills (T-Bills)

Pote

ntia

l Ret

urn

Risk

Cash Alternatives


Advantages

Steady & predictable

Relatively lower-risk

Low correlation to stock market

Disadvantages

Risk of default

Value of bond fluctuate with interest rates

Lower potential returns

Bonds

• Loans to a government or corporation• Interest typically paid at regular

intervals• Taxable or Tax Free• Examples

– US government securities– Agency bonds– Municipal bonds– Corporate bonds

Pote

ntia

l Ret

urn

Risk

Cash Alternatives

Bonds


Disadvantages

Company performance affects value of shares

Subject to market volatility

Greater risk to principal

Advantages

Highest long-term returns

Ownership rights

Easy to buy & sell

Stocks

• Shares of stock represent an ownership position in a business

• Various type of stocks– Small to Large– United States to Foreign/International

• Invest for the long term

• Expect volatility (fairly large swings in annual performance)

Pote

ntia

l Ret

urn

Risk

Cash Alternatives

Bonds

Stocks


Advantages

Diversification

Professional management

Small investment amounts

Liquidity

Disadvantages

Share value fluctuates daily

Potential tax inefficiency

Fees & expenses

Mutual Funds

• One of the best ways to start out by investing your money to satisfy medium to longer term investment objectives.

• Money pooled with that of other investors with similar investment objectives

• There is a mutual fund that is right for your investment objective

Pote

ntia

l Ret

urn

Risk

Money market funds

Bonds funds

Balanced funds

Stock funds

International funds


Alternative Investments

Real Estate

Stock Options

Futures and Commodities

Collectibles

Low Risk

High Risk

Hig

her

Ris

k


Retirement Planning

• Start Now– Don’t put off planning and investing for

retirement– The sooner you start, the longer your

investments have to grow– Playing “catch-up” later can be difficult and

expensive


Beginning at age 25

Beginning at age 35

Beginning at age 45

$1,225,000Value at age 55 by Investing $1,000/month or $12,000 saved each year at a 7% annual rate of return

Put Time & Money on Your Side

This is a hypothetical example and is not intended to reflect the actual performance of any specific investment, nor is it an estimate or guarantee of future value.

$525,000

175,000


Tax-Advantaged Savings Vehicles

• Tax deferral can help your money grow

• Take full advantage of the various retirement plans that are available to you

• Contribute to a Traditional or Roth IRA

• Establish an appropriate plan


Traditional IRA vs. Roth IRA

Traditional RothTraditional

(non-deductible)

Deductible contributions

Yes No No

Tax-Deferred Growth Yes Yes Yes

Tax-Free Distributions No Yes No

Income Limits No Yes No

Minimum Distribution Requirements

Yes No Yes


Single 401k Plans

• Defer up to $16,500 of compensation/“catch-up” provisions available for 50+

• Can make additional contributions

• Investments grow tax deferred• Distributions made prior to

age 59 ½ are subject to additional 10% premature distribution tax


Insurance Planning

93%1

of Americans say that

life insurance is something most people

need41%

1

Own an individual purchased

policy

1 LIFE Foundation and Kelton Research, 2008

2 LIMRA International, Trends in Life Insurance Ownership, 2005

Protect Your Family and Your Most Valuable Asset (your ability to earn an income)


Types of Insurance

Term Permanent

Length of coverage A specified term typically 10, 20 or 30 years

Until age 100 or later as long as premiums are paid

Premiums Considerably lower than permanent insurance, when initially purchased

Initially higher than term premiums, but often level for life

Cash value None Accumulates over time one a tax-deferred basis

Key advantage Typically offers the highest death benefit for the lowest cost

Offers lifelong protection and tax-deferred savings


Term Insurance

Term insurance provides protection for a specific period of time and generally pays a benefit only if death occurs during the “term.” Term periods typically range from one year to 30 years, with 20 years being the most common term.


Key Features of Term

Insurance• Convertibility to a Permanent Policy

– Without evidence of insurability– Coverage needed for a longer period

• Return of Premium– Refund of premium made over the term period– Premium is considerably higher (20-30%)

• Accelerated Death Benefit– Allows a terminally ill person to collect a significant

portion of the death benefit while still alive

• Disability Waiver of Premium


Features Unique to Permanent Insurance

• Access to cash

• Flexibility

• Tax advantages

• Guaranteed coverage

• Stable premiums


Types of Permanent Insurance

• Whole Life– Provides a guaranteed amount of death benefit and a

guaranteed rate of return on cash values.– Dividends

• Universal Life– Adjustable premiums– Cash values grow at the current crediting rate. The

crediting rate, as well as, cost of insurance is subject to change over the life of the policy.

– Secondary Guarantees “No-Lapse Guarantee”• Variable Universal Life

– Allows to have premium dollars allocated to a variety of investment options.


Disability Insurance

The chances of a disability occurring are much greater than most Americans realize

3 months or more 1 in 3

1 year or more 1 in 5

5 years or more 1 in 7

Sources: America’s Health Insurance Plans, National Association of Insurance Commissioners, U.S. Commerce Department


Disability InsuranceAsk most people to think about their most valuable asset, and they'll mention their home, their car, their jewelry, or other possessions. But for most of us, our most valuable possession isn't anything of those things. It's our ability to earn a living. And just as you would insure your car, your home, and other valuable possessions, you need to insure yourself in case you are no longer able to work. That's what disability insurance does. It provides a source of replacement income if you're unable to work due to an illness or accident.

For many, a sudden interruption of income could have serious financial consequences. Most of us have some kind of personal debt, typically a mortgage or credit card bills. Would you be able to maintain your standard of living if you were too ill or injured to work for an extended length of time? Half of all home foreclosures in the United States result from disability as do an alarming number of personal bankruptcies. Simply put, if you have a job you likely need disability insurance.

The other thing to keep in mind is that an accident or illness that keeps you out of work for a period of time can be very costly. That's because people who become disabled not only need to continue providing for loved ones, but for themselves as well. A disabling injury or illness could lead to medical bills, modifications to your car or home, or other unforeseen needs that can be quite expensive. For all these reasons, almost anyone who works – whether they're single, married, with children or without – should consider disability insurance.


Key Terms

• Benefit level & period• Elimination period• Definition of disability• Extent of disability

• Residual benefit• Guaranteed

renewable• Non-cancelable• Inflation protection

When considering disability insurance needs, be familiar with the following:


Other Financial Planning Considerations

• Mortgage Refinancing

• Payoff debt or invest for my future

• College Funding Strategies

• Wills

• Trusts


HKFS’ Commitment to Platinum Services: Complete Financial Planning Services

Estate P

lanning

Risk Management

Inve

stmen

t

Plannin

g

Tax P

lanningRetirement

Planning

HK & HKFS

Thank you

2355 JFK Road, Dubuque, IA 52002

563.582.2855 or 800.791.8994

www.hkfs.com

Honkamp Krueger Financial Services, Inc. Your Premier Executive Counseling Services Partner The...

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