XL America, Inc. Employee Savings Plan. Life priorities: Home, family, health and finances

Transcription

1 XL America, Inc. Employee Savings Plan Life priorities: Home, family, health and finances

2 Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. Please consult your legal and/or tax advisors before making any financial decisions. This material should be regarded as general information on health care considerations and is not intended to provide specific health care advice. Please consult with your own attorney or tax advisor to understand the tax and legal consequences of your HSA, Health FSA and/or HRA plan or program offerings to your employees and your particular situation in your capacity as employer and/or plan administrator. Long-term care insurance coverage contains benefits, exclusions, limitations, eligibility requirements and specific terms and conditions under which the insurance coverage may be continued in force or discontinued. Not all insurance policies and types of coverage may be available in your state. All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. They are not backed by Merrill Lynch or its affiliates, nor do Merrill Lynch or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company. Life insurance policies contain fees and expenses, including cost of insurance, administrative fees, premium loads, surrender charges and other charges or fees that will impact policy values. Life insurance death benefit proceeds are generally excludable from the beneficiary s gross income for income tax purposes. There are a few exceptions, such as when a life insurance policy has been transferred for valuable consideration. Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation (BofA Corp.). MLPF&S is a registered broker-dealer, member SIPC and a wholly owned subsidiary of BofA Corp. Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp. Banking products are provided by Bank of America, N.A., and affiliated banks, Members FDIC and wholly owned subsidiaries of BofA Corp. Investment products through MLPF&S and Annuity and Insurance products offered through MLLA: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value Are Not Deposits Are Not Insured by Any Federal Government Agency Are Not a Condition to Any Banking Service or Activity Unless otherwise noted, all trademarks and registered trademarks are the property of Bank of America Corporation Bank of America Corporation. All rights reserved. AR7K9CCT /2016 ADA 2

3 What s important to you? 3

4 Finances are key 4

5 Let s explore a few priorities Buying a home, renovating your current home, or purchasing a vacation home or investment property Taking care of your loved ones and yourself now and in the future Defining current and future finances 5

6 Home: more than a house Buy or sell a home Rent 6

7 How much home can you afford? Monthly payment typically includes: Principal and interest on the loan Taxes Insurance Set your budget: Know your income and expenses Set your priorities Track your spending To help you figure out your budget and how much home you may be able to afford, try the Affordability Calculator on BetterMoneyHabits.com. 7

8 Make the most of your home 8

9 How do you want to support your family? 9

10 Planning for college costs 10

11 Three types of college savings accounts Coverdell Education Savings Account Federally tax-free withdrawals if money used for qualified higher education expenses* Can change the beneficiary any time Offers more flexible investment options than a 529 Plan Section 529 Plan Federally tax-free withdrawals if money used for qualified higher education expenses* Can change the beneficiary any time Plan chooses the investments available No age or income limits UGMA/UTMA Custodial Account Assets can be used for any purpose; first $950 of earnings each year is federally tax-free* Make irrevocable contributions to the beneficiary Beneficiary gains control upon reaching age of majority * State tax may apply. 11

12 Considerations for caregivers 12

13 Paying for long-term care Long-term care insurance Family members Personal assets 13

14 Long-term care coverage options 1. Traditional long-term care insurance Likely to need long-term care, based on your personal or family health history 2. Hybrid life insurance with a long-term care benefit rider* Plan for long-term care just in case, with the flexibility to set aside unused funds for heirs 3. Permanent life insurance with a long-term care rider* Want life insurance with a death benefit, but concerned about paying for long-term care benefits you may not use * This rider is designed to provide extra income when an investor's health changes and is not meant to be a substitute for long-term care insurance. 14

15 Factors to consider when selecting long-term care coverage Expect to pay for all or will family help with care? Which long-term care costs are most concerning? Coverage for just you? Long-term care expenses reimbursed? Protect against inflation? How do you want to pay for benefits? Concerned about paying for benefits you may not use? Life insurance protection? 15

16 Health Savings Account (HSA) Available to those with a qualifying HDHP You can make pre-tax contributions to your HSA Potentially lowers current income tax May be able to invest some of your funds Potential for earnings from interest and investments in your account Tax-advantaged way to pay for current and future qualified out-of-pocket health care expenses Unused funds roll over year to year HSA is yours to keep if you leave your place of employment While you can use your HSA to pay or be reimbursed for qualified medical expenses, if you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% federal tax. Certain limits may apply to employees who are considered highly compensated key employees. Contact a qualified tax or legal advisor for assistance before establishing a HSA. 16

17 How can you balance your priorities and support your goals? 17

18 Save for multiple goals Create a budget Automate savings Manage debt 18

19 Habits that matter Managing debt

20 The impact of debt on your finances Q: How long will it take to pay off $5,000 in credit card debt at 20% interest, if you make only the minimum payment each month? A: 24 years Source: Bank of America Credit Card Repayment Calculator: 20

21 Maintain good credit Having some debt may not be all bad Why do you need good credit? To secure financing for major purchases Credit score influences interest rates for loans Some employers do a credit check on prospective employees To maintain a good credit rating Make all payments on time Don t go over your credit limit Don t let your balance get too high Don t apply for a lot of credit accounts in a short period of time Keep credit accounts that you ve historically paid on time 21

22 Monitor your credit standing 1. Know your credit (FICO ) score & how it s calculated MyFico.com 2. Take steps to improve your credit score if it s poor CreditKarma.com 3. Check your credit reports for accuracy at least once a year AnnualCreditReport.com Merrill Lynch has not endorsed or approved the content on any links that are not owned or managed by Merrill Lynch, and does not monitor or maintain any of the site s information. FICO is a registered trademark of Fair Isaac Corporation. 22

23 Use credit wisely If you find yourself in too much debt: Stop using credit cards and avoid new debt Pay more than the minimum required payment Find a credit card with a lower interest rate When you pay off a card, put that money toward paying off another one Seek help from credit counseling services Save for purchases rather than using credit Check if your company or local community offers assistance with managing debt, or visit the National Foundation for Credit Counseling website for resources. Merrill Lynch has not endorsed or approved the content on any links that are not owned or managed by Merrill Lynch, and does not monitor or maintain any of the site s information. 23

24 Two methods for paying down debt Snowball or low balance method List debts in order of amount owed from smallest to largest Each month, make the largest payment you can afford to the debt with lowest balance Continue making minimum monthly payments on all other debts When debt is paid off, repeat process with debt with next smallest amount owed High-interest rate method List debts in order of interest rates from highest to lowest Each month, make the largest payment you can afford to the debt with the highest interest rate Continue making minimum monthly payments on all other debts When debt is paid off, repeat process with debt with next highest interest rate This method generally results in paying less in interest, and thereby saving money, over time 24

25 Build your strategy Understand your life UNDERSTAND YOUR LIFE Stay on track STAY ON TRACK Build a customized financial strategy BUILD A CUSTOMIZED FINANCIAL STRATEGY 25

26 Start preparing now Starting at Age 25 $100.00$ invested monthly $48,000 invested over 40 years Starting at Age 35 $133.33$ invested monthly $48,000 invested over 30 years Starting at Age 45 $200.00$ invested monthly $48,000 invested over 20 years This hypothetical illustration assumes a 6% annual effective rate of return and pre-tax contributions made at the beginning of each month. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. Taxes are due upon withdrawal. If you take a withdrawal prior to age 59½, you may also be subject to a 10% additional federal tax. 26

27 Two ways to defer money for retirement 401(k) IRA 27

28 Plan features 28

29 Employee contributions Employee contributions 1% to 50% of eligible pay on a pre-tax, Roth 401(k) or traditional after-tax basis IRS pre-tax/roth 401(k) after-tax limit: $18,000 for 2016 Additional limits may apply Catch-up contributions Age 50 or older during the calendar year Must make Plan/IRS maximum pre-tax/roth 401(k) contribution first IRS catch-up limit: $6,000 for

30 Company contributions Company matches 200% of first 5% of eligible pay you contribute pre-tax and/or Roth 401(k) Match is invested according to your current investment selections Employee/employer contributions may be lesser of $53,000 or 100% of pay 30

31 Vesting Your contributions and any rollover contributions Always 100% vested, adjusted for earnings or losses Company contributions Vested after 3 years, according to the schedule shown (includes credited service) Vesting Time period 34% 1 year of service 67% 2 years of service 100% 3 or more years of service 31

32 Target date funds can help simplify investing Diversified investment mix Based on projected retirement date Adjusted over time to become more conservative For more about target date funds: > 401(k) Plan > Investments The target date for these funds is the approximate date when an investor plans to start withdrawing the assets from his or her retirement account. The principal value of these funds is not guaranteed at any time, including at the target date. These funds are designed to become more conservative over time as the target date approaches. Diversification does not ensure a profit or protect against loss. 32

33 Your target date funds Investment option Target date funds State Street Target Retirement Income NL Fund (C) 1, 3 State Street Target Retirement 2015 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2020 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2025 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2030 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2035 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2040 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2045 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2050 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2055 NL Fund (C) 1, 2, 3 Mixed-Asset State Street Target Retirement 2060 NL Fund (C) 1, 2, 3 Mixed-Asset Lipper classification Mixed-Asset Target Today Funds Target 2015 Funds Target 2020 Funds Target 2025 Funds Target 2030 Funds Target 2035 Funds Target 2040 Funds Target 2045 Funds Target 2050 Funds Target 2055 Funds Target 2060 Funds 1 As a fund of funds, this fund, as a shareholder of underlying mutual funds, will indirectly bear its pro rata share of the expenses incurred by the underlying funds. 2 The target date for this fund is the approximate date when an investor plans to start withdrawing the assets from his or her retirement account. The principal value of this fund is not guaranteed at any time, including at the target date. This fund is designed to become more conservative over time as the target date approaches. 3 This investment option is not a mutual fund registered under the Investment Company Act of A prospectus is not available and shares are not publicly traded or listed on exchanges. 33

34 Have you asked yourself any of these questions? How much do I need for retirement? How much should I contribute to my 401(k) plan? How should I invest my money? How should I withdraw my retirement assets? Am I on track with my goals? 34

35 Consider Advice Access Your Plan offers a service called Advice Access, at no additional charge Specific, personalized recommendations for your 401(k) account The screen shots shown in this presentation are intended to illustrate the functionality and services available to participants on Benefits OnLine. They are not meant as exact representations of the screens available through your plan. 35

36 What Advice Access can do for you Recommend a contribution rate Suggest which investment options to choose Consider your personal financial situation Review your account on a regular basis Make changes to your investments or maintain the original investment mix Recommend a strategy for withdrawing your retirement assets 36

37 How Advice Access works Basic information: Age and gender Salary Contribution rate and account balance (if you re already in the plan) Projections about retirement age and needed income Information you can provide 37

38 Important information The Advice Access service uses a probabilistic approach to determine the likelihood that you may be able to achieve your stated goal and/or to identify a potential wealth outcome that could be realized. Additionally, the recommendations provided by Advice Access may include a higher level of investment risk than you may be personally comfortable with. You are strongly advised to consider your personal goals, overall risk tolerance, and retirement horizon before accepting any recommendations made by Advice Access. You should carefully review the explanation of the methodology used, including key assumptions and limitations, which is provided in the Advice Access disclosure statement. It can be obtained through Benefits OnLine or through a participant service representative. IMPORTANT: The projections or other information shown in the Advice Access service regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time. 38

39 Your investment options Investment option Lipper classification Symbol Stable value Invesco Stable Value Trust 3, 4 Stable Value 5 N/A Bond/Fixed income Dodge & Cox Income Fund Core Bond Funds DODIX Vanguard Total Bond Market Index Fund (Instl.) Core Bond Funds VBTIX Equity/Stock American Funds EuroPacific Growth Fund (R-6) International Large-Cap Growth RERGX DFA US Targeted Value Portfolio Fund (Instl.) Small-Cap Value Funds DFFVX Dodge & Cox Stock Fund Large-Cap Value Funds DODGX Prudential Jennison Small Company Fund (Q) Small-Cap Growth Funds PJSQX Strategic Completion Non-Lendable Fund 3 Flexible Portfolio Funds N/A 3 This investment option is not a mutual fund registered under the Investment Company Act of A prospectus is not available and shares are not publicly traded or listed on exchanges. 4 Although this fund seeks to maintain a stable value, this investment option may experience fluctuations in its net asset value. 5 This is not a Lipper classification. 39

40 Your investment options Investment option Lipper classification Symbol Equity/Stock T. Rowe Price Institutional Large-Cap Growth Fund Large-Cap Growth Funds TRLGX Vanguard Extended Market Index Fund (Instl.) Mid-Cap Core Funds VIEIX Vanguard Institutional Index Fund (Instl.) S&P 500 Index Funds VINIX Vanguard Total International Stock Index Fund (Instl.) International Multi-Cap Core VTSNX 40

41 Important information Investing involves risk, including the possible loss of principal. Investments in foreign securities or sector funds, including technology or real estate stocks, are subject to substantial volatility due to adverse political, economic or other developments and may carry additional risk resulting from lack of industry diversification. Funds that invest in small or mid-capitalization companies experience a greater degree of market volatility than those of large-capitalization stocks and are riskier investments. Bond funds have the same interest rate, inflation, and credit risks associated with the underlying bonds owned by the fund. Generally, the value of bond funds rises when prevailing interest rates fall and falls when interest rates rise. Investing in lower-grade debt securities ("junk" bonds) may be subject to greater market fluctuations and risk of loss of income and principal than securities in higher rated categories. There are ongoing fees and expenses associated with investing. Bear in mind that higher return potential is accompanied by higher risk. Investors should consider the investment objectives, risks, charges and expenses of investment options carefully before investing. This, and additional information about the investment options, can be found in the prospectuses and, if available, the summary prospectuses, which can be obtained on Benefits OnLine at or by calling Merrill Lynch at Investors should read the prospectuses and, if available, the summary prospectuses carefully before investing. 41

42 401(k) plans: Pre-tax v. Roth 401(k) contributions Pre-tax contributions Defer current income taxes on pre-tax contributions May lower your current taxable income Take-home pay reduced by less than the amount of your contributions Taxes are due upon withdrawal You may also be subject to a 10% additional federal tax if you take a withdrawal prior to age 59½ Roth 401(k) contributions You pay taxes up-front on contributions No taxes on earnings due if qualified distribution is taken No income limitations (unlike Roth IRA) To take a qualified distribution: At least five years must elapse from the year of your first Roth 401(k) contribution, and You must reach age 59½ (or become disabled or deceased) For non-qualified distributions, any earnings are subject to taxes, including a 10% additional federal tax under age 59½ 42

43 401(k) plans: After-tax contributions Offer the opportunity to contribute more to your Plan beyond the IRS limits for pre-tax and Roth 401(k) after-tax contributions Up to the IRS annual additions limit You do not pay taxes upon withdrawal of after-tax contributions, as you ve already paid taxes on them Taxes are due on any earnings and a 10% additional federal tax may be due if you withdraw those earning prior to reaching age 59½ Please consult a tax advisor for more information 43

44 Individual Retirement Accounts (IRA) Traditional IRA Tax deferred growth potential Contributions may reduce taxable income Roth IRA Qualified distributions federally tax-free* Eligibility based on income & taxes based on current tax bracket *For a distribution from a Roth IRA to be federally tax free, it must be qualified. A qualified distribution from your Roth IRA may be made after a five-year waiting period has been satisfied (this period begins January 1 of the tax year of the first contribution or the year of conversion to any Roth IRA) and you (1) are age 59½ or older; (2) are disabled, (3) qualify for a special purpose distribution such as the purchase of a first home (lifetime limit of $10,000), or (4) are deceased. If you take a non-qualified distribution of your Roth IRA contributions, any Roth IRA investment returns are subject to regular income taxes, plus a possible 10% additional tax if withdrawn before age 59½, unless an exception applies. While the withdrawals are federally tax free, certain states may tax withdrawals; consult your tax advisor for assistance. 44

45 Manage your 401(k) plan account Benefits OnLine Call Merrill Lynch Helpful online resources The Benefits OnLine Education Center Make smart, informed financial decisions with the help of articles, videos, calculators and planning tools. myfuture Get practical investment guidance and financial tips from this quarterly online newsletter. Financial Calculators See how small changes in your spending habits may really add up for retirement. go.ml.com/calc 45

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