Informational Sample Only: Not for Distribution. Dreams. Commitment. Planning. Retirement. A journey made simple.

Transcription

1 Dreams. Commitment. Planning. Retirement. A journey made simple.

2 Transamerica. Master Retirement. POWER CHOICE FREEDOM Here at Transamerica Retirement Services 1 we focus on helping you obtain the power, choice, and freedom that come with mastering retirement. We encourage you to learn more about your retirement savings plan and to take advantage of this excellent way to save for your future. We understand that planning for retirement can be challenging. That is why we have developed this enrollment workbook to help make participating fast and easy. Transamerica Retirement Services is part of AEGON, one of the world s leading life insurance and pension groups, and a provider of investment products. With headquarters in The Hague, the Netherlands, AEGON companies employ approximately 29,000 people worldwide. AEGON s businesses serve millions of customers in over twenty markets throughout the Americas, Europe, and Asia, with major operations in the United States, the Netherlands, and the United Kingdom. Respect, quality, transparency, and trust constitute AEGON s core values as the company continually strives to meet the expectations of customers, shareholders, employees and business partners. AEGON is driven to deliver new thinking with the ambition to be the best in the industry. Not FDIC Insured May Lose Value No Bank Guarantee 1 Transamerica Retirement Services ( Transamerica ), a marketing unit of Transamerica Financial Life Insurance Company( TFLIC ), 4 Manhattanville Road, Purchase, New York 10577, and Transamerica Life Insurance Company ( TLIC ), 4333 Edgewood Road NE, Cedar Rapids, Iowa 52499, and other TFLIC and TLIC affiliates, specializes in the promotion of retirement plan products and services. TFLIC is not authorized and does not do business in the following jurisdictions: Guam, Puerto Rico, and the U.S. Virgin Islands. TLIC is not authorized in New York and does not do business in New York.

3 Your Simple Solutions Workbook. This enrollment workbook contains the information and tools you need to enroll in your retirement savings plan. Step 1. Learn about your journey Page 1.1 Plan Highlights Page 1.5 Step 2. Discover your risk tolerance Page 2.1 Step 3. Determine how much you should save Page 3.1 Step 4. Select an investment allocation and choose your investments Page 4.1 Investment Choices Page 4.5 Step 5. Begin your journey enroll now Page 5.1 Enrollment Instructions/Forms Page 5.2 Each section is easily identified by its color-coded bar. Retirement. A journey made simple.

4 Learn about your journey. Dream the future. Why you should start today. Step 1 Welcome to the first step on your journey to a brighter retirement! You may be wondering why you need to save for retirement at all. Let s take a look at some important reasons why saving today is vital for a happy tomorrow. Most of your retirement income will come from you. Many people are hoping that they will be taken care of in retirement. The reality is Social Security covers only about 37% of the average retiree s income, an average of $12,948 per year. 1 The other traditional slice of the retirement income pie, pensions, is offered by fewer and fewer employers. Thus the reality is that the majority of your retirement income will likely come from you either from your own savings or from part-time employment after retirement. So, if you want to live comfortably and work less in retirement, you need to start saving today. Based on today s average life expectancy, you may need retirement income for 20 years or more after your regular paychecks stop. As a result, you need to make sure that you have enough money to live comfortably in your retirement years. So, just how much will you need? Sources of Retirement Income 13% Savings and Investments 37% Social Security You may need more retirement income than you think. Fast Facts & Figures About Social Security, September % Pensions 28% Earnings from Work 3% Other What you will need depends greatly on your individual circumstances, including factors such as your age, health, income, investments, and savings. Retirement experts estimate that retirees may need from 75% to over 100% of their preretirement income in retirement. 2 Why such a high percentage? Well, increased life expectancy coupled with growing health care expenses calls for increased retirement savings. 1 Social Security Administration, Fact Sheet Social Security: 2008 Social Security Changes. 2 Jack VanDerhei, "Measuring Retirement Income Adequacy: Calculating Realistic Income Replacement Rates," Employee Benefit Research Institute Issue Brief, No. 297, September Find out what you can expect to receive from Social Security when you retire. Go to or call (800) to request an estimate. 1.1

5 Make a commitment. How your retirement savings plan can help you save. On the previous page, you saw why it s important to save for retirement. Now let s look at a couple of reasons why your retirement savings plan is a great way to save. You pay less in taxes. Every dollar you contribute to your retirement savings plan account is deducted directly from your salary before taxes are taken out. Because your contributions reduce your taxable income, they can reduce the taxes you may owe. Tax deferral accelerates your savings. The money in your plan has the potential to grow tax-free until you withdraw it. The money you don t pay in taxes can continue earning interest through the years. Take a look at the chart below it shows just how big a difference tax deferral can make over time. The Power of Tax Deferral $2,500 annual contribution $300,000 $244,822 $240,000 $180,000 $120,000 $123,438 Before tax $60,000 After tax 0 After 30 Years Assumes 7.2% annual return. The after-tax example includes a 28% tax on deposits and gains. Assumptions do not include wage increases or inflation. See general assumptions on inside back cover. 1.2

6 Big difference tomorrow. Hardly any today. Saving for your future in a tax-deferred retirement savings plan impacts your take-home pay less than if you tried to save the same amount after taxes are taken out of your paycheck. Since your contributions reduce your taxable income, you ll pay less in taxes, and may actually keep more of the money you earn! Note the comparison of two employees one who doesn t contribute and one who does. Employee 1 Not Contributing Employee 2 Contributing Annual Salary (Gross Income) $35,000 $35,000 Employee Retirement Savings Contribution Rate 0% 3% Employee Retirement Savings $0 $1,050 Gross Income Minus Total Retirement Savings $35,000 $33,950 Federal Income Tax Paid ($4, plus 25% of amount over $32,550 tax bracket) 1 $5,094 $4,831 Summary: Total Retirement Savings $0 $1,050 Total Reduction in Paid Income Tax $0 $263 The chart above shows that by choosing to participate in your retirement savings plan, Employee 2 was able to save a total of $1,050 in retirement savings and pay $263 less in federal income taxes. 1 This is a hypothetical example based on the 2008 federal tax rate schedule, filing single status, and it does not include any other payroll taxes or deductions. This is an illustration only, and your circumstances may differ from this example. Why you need to enroll today. For some people, retirement may seem a lifetime away. But don t be tempted to put off saving because each year it becomes more and more difficult to make up for lost time. The key is to start as early as possible, as shown by the following example. At age 21, Anne and Tracy were hired for similar jobs at the same time and salary. Anne immediately began investing $30 per week. After 14 years, she stopped contributing but left the money in her plan to grow for the next 30 years. Tracy did not begin contributing until age 35, when she started saving $30 per week like Anne had. Tracy contributed for 30 years, putting in more than twice as much as Anne. Because Anne started early, she still had nearly twice as much as Tracy at retirement. 1.3 The Importance of Starting Early $400,000 $300,000 $200,000 $100,000 0 $30 contribution per week $21,840 Anne (age 21) contributed for 14 years. Tracy (age 35) contributed for 30 years. $46,800 $287,267 $152,769 Total TtlCContributions tibti Balance B l at t Age Assumes 7.2% annual return. Assumptions do not include wage increases or inflation. See general assumptions on back inside cover.

7 Retire successfully. I m ready to start. But how should I invest? It s important to consider the level of risk and rate of return that s right for you, and you ll need to take several important factors into account, including: What is your risk tolerance? Here s a basic rule of thumb: The higher the rate of return you target, the more heavily you will need to invest in stocks. Why? Because historically, stocks have delivered higher long-term returns than any other investment type. They have also historically been the most volatile, which means that they fluctuate in value the most rapidly annual returns have ranged as high as 38% and as low as -22% over the past 25 years. 1 Your ability to ride out the ups and downs of the stock market and benefit from its long-term growth is called your risk tolerance, and in Step 2, we ll help you measure yours. How many years do you have to invest? Before investing, determine the amount of time you have until you plan to retire. If you ve determined that your investment time horizon is short, consider limiting your exposure to the volatility of the stock market. Investing in the stock market typically works better when you have a longer time horizon to recover from downturns in the stock market. How much have you saved already? If you ve already started to save for retirement, congratulations! You re ahead of the game. In Step 3, we ll show you how to Want to earn more on your factor those existing savings into your plan for the future. investments over the long term? Be prepared for more market swings. Congratulations! You ve completed Step 1. Now, go to Step 2, Discover your risk tolerance. Want to take a more conservative route in your investments? Consider deferring a higher percentage of your pay so that you can meet your retirement savings goal with a lower rate of return. 1 Based on average annual total returns of the S&P 500 Index over 25 years from Source: Morningstar, Inc. 1.4

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12 Step 2 Discover your risk tolerance. Complete the Risk Tolerance Questionnaire. Your risk tolerance refers to how comfortable you are with fluctuations in the market and the short- and long-term effects they may have on your investments. Read the following questions and circle the point(s) that correspond to your answers. After you ve completed the questionnaire, total all your points. 1) Do you agree or disagree with the following statement? I am a long-term investor who expects to do well over the next five to ten years or longer. The final result is more important to me than daily, monthly, or annual fluctuations in the value of my account. A) Totally disagree B) Willing to accept a small amount of fluctuation, but not much loss of principal C) Can accept some moderate amount of annual volatility, but not loss of significant principal D) Would accept an occasional annual loss if the final results were good E) Totally agree (Circle one) 1 point 2 points 3 points 4 points 5 points 2) Assume you have $10,000 in your retirement account, primarily invested in equity (stock) investments. Over the next 12 months, your account drops to $8,000. What would you do with the remaining assets? A) Transfer all assets to money market investments (low risk and lower returns) B) Transfer the assets to bond investments (moderate risk and moderate returns) C) Consider transferring a small portion of your assets to bond investments D) Make no changes to your account 0 points 1 point 3 points 5 points 3) While inflation (the rise in the cost of goods and services) can reduce the buying power of money over time, equity investments have historically outpaced inflation as the result of taking higher amounts of risk. Which of the following describes your views? A) I am comfortable if my investments only keep pace with inflation B) I am comfortable taking a small amount of risk to outpace inflation C) I am comfortable taking a moderate amount of risk to significantly outpace inflation D) I want to fully capitalize on my investments despite the potential risk 0 points 1 point 3 points 5 points 2.1

13 4) How old are you? A) 60 years or older B) years old C) years old D) years old E) Less than 30 years old 1 point 2 points 3 points 4 points 5 points 5) How many years until you plan on accessing your retirement savings? A) Less than 3 years B) 3 5 years C) 6 10 years D) years E) More than 15 years 0 points 1 point 2 points 3 points 4 points Total Locate your risk profile in the table below. Take your total points from the Risk Tolerance Questionnaire and check the Risk Profile that best describes you. Total Points Risk Profile 7 or less Conservative 8 to 11 Moderate/Conservative 12 to 16 Moderate 17 to 21 Moderate/Aggressive 22 or more Aggressive Now that you have a better understanding of your risk tolerance when it comes to investing, it s time to determine how much money you need to save for retirement. Now, go to Step 3, Determine how much you should save. Risk tolerance scores are general in nature and are not representative of all possible situations that would be preferable to any investor. Individual risk factors and investment experiences may vary more than illustrated in this representation. This risk tolerance questionnaire is a guideline only and should not be construed as investment advice. 2.2

14 Step 3 Determine how much you should save. Use the Simple Solutions Tables SM to find out. The following Simple Solutions Tables SM help you estimate how much you need to save for retirement. The tables are designed to help you target a Total Retirement Savings Goal of 80% of your projected final preretirement salary for each year in retirement. Just follow the instructions below and record your results. Table A: How much will I need when I retire? Annual Salary Your Age $15,000 $232,000 $201,000 $173,000 $149,000 $129,000 $111,000 $87,000 $67,000 $58,000 $20,000 $406,000 $350,000 $302,000 $260,000 $225,000 $194,000 $157,000 $126,000 $109,000 $25,000 $578,000 $498,000 $430,000 $371,000 $320,000 $276,000 $226,000 $185,000 $160,000 $30,000 $751,000 $648,000 $559,000 $482,000 $416,000 $359,000 $296,000 $244,000 $210,000 $35,000 $924,000 $797,000 $687,000 $593,000 $512,000 $441,000 $366,000 $303,000 $261,000 $40,000 $1,097,000 $946,000 $816,000 $704,000 $607,000 $524,000 $435,000 $362,000 $312,000 $50,000 $1,442,000 $1,244,000 $1,073,000 $926,000 $798,000 $689,000 $575,000 $480,000 $414,000 $60,000 $1,872,000 $1,615,000 $1,393,000 $1,201,000 $1,036,000 $894,000 $750,000 $630,000 $543,000 $75,000 $2,537,000 $2,189,000 $1,888,000 $1,629,000 $1,405,000 $1,212,000 $1,023,000 $863,000 $745,000 $100,000 $3,648,000 $3,147,000 $2,714,000 $2,343,000 $2,025,000 $1,750,000 $1,488,000 $1,266,000 $1,101, Find your annual pay in the left-hand column. If your exact salary is not listed, round up. 2. Find your age listed across the top. If your exact age isn t there, go to the next lower age. 3. The number found at the intersection of your age and salary is your Total Retirement Savings Goal. 4. Write that amount in the appropriate space below and on the following page. Total Retirement Savings Goal: $ This table assumes annual retirement income will be 80% of projected final preretirement salary for each year in retirement, adjusted for 3% annual inflation and will include estimated Social Security benefits. If Social Security benefit amounts were to decline, you would need to save more. The Total Retirement Savings Goal (TRSG) is the amount needed at age 65 to provide this retirement income for 25 years of retirement, less Social Security benefits. This TRSG amount is shown in future dollars (future value), is adjusted for 3% inflation and is rounded to the nearest $1,000. The calculations also assume a constant 5.75% annual rate of return on unused account balances during retirement, and an exhausted account balance at the end of retirement. The TRSG shown on Table A and the following Tables B, C, and D are hypothetical, do not reflect the actual return of any specific investment and are not intended to imply or guarantee future results. Retirement age is assumed to be age 65 and life expectancy age

15 Have you already started saving towards retirement? Congratulations! The money you have already saved may continue to grow until you retire. Table B will help you determine how much your current savings may be worth when you retire. If you don t have any retirement savings yet, skip Table B. Your Net Retirement Savings Goal will be the same as the Retirement Savings Goal you found in Table A, so skip to Table C. Table B: How much will my current savings be worth at retirement? Current Savings Your Age $10,000 $228,000 $161,000 $114,000 $81,000 $57,000 $40,000 $28,000 $20,000 $14,000 $15,000 $343,000 $242,000 $171,000 $121,000 $85,000 $60,000 $43,000 $30,000 $21,000 $20,000 $457,000 $323,000 $228,000 $161,000 $114,000 $80,000 $57,000 $40,000 $28,000 $25,000 $571,000 $403,000 $285,000 $201,000 $142,000 $100,000 $71,000 $50,000 $35,000 $30,000 $685,000 $484,000 $342,000 $242,000 $171,000 $121,000 $85,000 $60,000 $42,000 $35,000 $800,000 $565,000 $399,000 $282,000 $199,000 $141,000 $99,000 $70,000 $50,000 $40,000 $914,000 $645,000 $456,000 $322,000 $227,000 $161,000 $113,000 $80,000 $57,000 $50,000 $1,142,000 $807,000 $570,000 $403,000 $284,000 $201,000 $142,000 $100,000 $71,000 $75,000 $1,713,000 $1,210,000 $855,000 $604,000 $427,000 $301,000 $213,000 $150,000 $106,000 $100,000 $2,284,000 $1,614,000 $1,140,000 $805,000 $569,000 $402,000 $284,000 $200,000 $142, In the left-hand column, find the amount closest to your current retirement savings. If the exact amount is not listed, round down. 2. Find your age across the top of Table B. If your exact age isn t listed, round up. 3. The number found at the intersection is the Projected Value of your Current Savings which represents how much your current savings may be worth when you retire. Write that number in the appropriate space below. 4. Subtract the Projected Value of your Current Savings from your Total Retirement Savings Goal to determine your Net Retirement Savings Goal, or how much you still have to save before retirement. Total Retirement Savings Goal (result from Table A): $ Projected Value of Current Savings (result from Table B): $ Net Retirement Savings Goal (result from Table A result Table B): $ Table B assumes a moderately conservative average annual return of 7.2% before retirement age at 65. The Projected Value of Current Savings is shown in future dollars and is rounded to the nearest $1,000. The amounts shown on Table B are hypothetical and do not reflect the actual return of any specific investment and are not intended to imply or guarantee future results. 3.2

16 Now that you have established your Net Retirement Savings Goal, you will need to find out how much you need to save each year to reach that goal. Follow the instructions for Table C to find out your Annual Contribution Amount. Table C: How much should I contribute? Net Retirement Savings Goal Your Age $100,000 $220 $326 $489 $747 $1,169 $1,900 $3,283 $6,361 $16,378 $150,000 $330 $489 $734 $1,120 $1,753 $2,850 $4,924 $9,541 $24,568 $200,000 $441 $652 $979 $1,494 $2,338 $3,799 $6,565 $12,721 $32,757 $250,000 $551 $816 $1,223 $1,867 $2,922 $4,749 $8,207 $15,902 $40,946 $300,000 $661 $979 $1,468 $2,241 $3,507 $5,699 $9,848 $19,082 $49,135 $400,000 $881 $1,305 $1,957 $2,987 $4,676 $7,599 $13,131 $25,442 $65,514 $500,000 $1,102 $1,631 $2,446 $3,734 $5,845 $9,499 $16,413 $31,803 $81,892 $600,000 $1,322 $1,957 $2,936 $4,481 $7,014 $11,398 $19,696 $38,164 $98,271 $700,000 $1,542 $2,284 $3,425 $5,228 $8,182 $13,298 $22,979 $44,524 $114,649 $1,000,000 $2,203 $3,262 $4,893 $7,468 $11,689 $18,997 $32,827 $63,606 $163,784 $1,500,000 $3,305 $4,894 $7,339 $11,203 $17,534 $28,496 $49,240 $95,409 $245,677 $2,000,000 $4,407 $6,525 $9,786 $14,937 $23,379 $37,995 $65,654 $127,212 $327,569 $2,500,000 $5,508 $8,156 $12,232 $18,671 $29,223 $47,493 $82,067 $159,015 $409,461 $3,000,000 $6,610 $9,787 $14,679 $22,405 $35,068 $56,992 $98,481 $190,818 $491,353 Contribution amounts in green exceed the 2008 IRS limit on employee retirement savings plan contributions. Please see your Plan Highlights for your plan s contribution limit. 1. In the left-hand column, find your Net Retirement Savings Goal. If the exact amount is not written, round up. 2. Find your age across the top of Table C. If your exact age isn t there, round up. 3. The number found at the intersection is your Annual Contribution Amount, or how much you need to save each year until you retire. 4. Write your annual contribution amount in the space provided. Annual Contribution Amount: $ Table C shows the Net Retirement Savings Goal in future dollars adjusted for 3% inflation. Contributions are assumed to be on a before-tax basis and allocated at the end of each year. Contribution dollars are shown for the first year, and are assumed to increase with wages at 3% per year to keep pace with inflation. Amounts in green exceed the maximum IRS contribution limit for If you are age 50 or older, you may qualify for additional catch-up contributions. Check your summary plan description for details. The Annual Contribution Amounts in current dollars are calculated using a moderately conservative average annual return of 7.2%. These are hypothetical examples, not reflecting the actual return of any specific investment and are not intended to imply or guarantee future results. 3.3

17 Now that you know how much you need to save each year to reach your goal, what percentage of your salary will you need to contribute to your retirement savings plan? Just follow Table D s instructions below to find out. Table D: What percentage of my salary should I contribute? Contribution Amount Annual Salary $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000 $65,000 $70,000 $75,000 $80,000 $100,000 $500 4% 3% 2% 2% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% $1,000 7% 5% 4% 4% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 1% $1,500 10% 8% 6% 5% 5% 4% 4% 3% 3% 3% 3% 3% 2% 2% 2% $2,000 14% 10% 8% 7% 6% 5% 5% 4% 4% 4% 4% 3% 3% 3% 2% $2,500 17% 13% 10% 9% 8% 7% 6% 5% 5% 5% 4% 4% 4% 4% 3% $3,000 20% 15% 12% 10% 9% 8% 7% 6% 6% 5% 5% 5% 4% 4% 3% $3,500 24% 18% 14% 12% 10% 9% 8% 7% 7% 6% 6% 5% 5% 5% 4% $4,000 27% 20% 16% 14% 12% 10% 9% 8% 8% 7% 7% 6% 6% 5% 4% $4,500 30% 23% 18% 15% 13% 12% 10% 9% 9% 8% 7% 7% 6% 6% 5% $5,000 34% 25% 20% 17% 15% 13% 12% 10% 10% 9% 8% 8% 7% 7% 5% $5,500 37% 28% 22% 19% 16% 14% 13% 11% 10% 10% 9% 8% 8% 7% 6% $6,000 40% 30% 24% 20% 18% 15% 14% 12% 11% 10% 10% 9% 8% 8% 6% $6,500 44% 33% 26% 22% 19% 17% 15% 13% 12% 11% 10% 10% 9% 9% 7% $7,000 47% 35% 28% 24% 20% 18% 16% 14% 13% 12% 11% 10% 10% 9% 7% $7,500 50% 38% 30% 25% 22% 19% 17% 15% 14% 13% 12% 11% 10% 10% 8% $8,000 54% 40% 32% 27% 23% 20% 18% 16% 15% 14% 13% 12% 11% 10% 8% $8,500 57% 43% 34% 29% 25% 22% 19% 17% 16% 15% 14% 13% 12% 11% 9% $9,000 60% 45% 36% 30% 26% 23% 20% 18% 17% 15% 14% 13% 12% 12% 9% $9,500 64% 48% 38% 32% 28% 24% 22% 19% 18% 16% 15% 14% 13% 12% 10% $10,000 67% 50% 40% 34% 29% 25% 23% 20% 19% 17% 16% 15% 14% 13% 10% $11,000 74% 55% 44% 37% 32% 28% 25% 22% 20% 19% 17% 16% 15% 14% 11% $12,000 80% 60% 48% 40% 35% 30% 27% 24% 22% 20% 19% 18% 16% 15% 12% $13,000 87% 65% 52% 44% 38% 33% 29% 26% 24% 22% 20% 19% 18% 17% 13% $14,000 94% 70% 56% 47% 40% 35% 32% 28% 26% 24% 22% 20% 19% 18% 14% $15, % 75% 60% 50% 43% 38% 34% 30% 28% 25% 24% 22% 20% 19% 15% 1. Find your annual contribution amount in the left-hand column. If the exact amount is not listed, round up. 2. Find your annual salary listed across the top of the table. If your exact salary is not there, round down. 3. The percentage found at the intersection of your salary and annual contribution amount represents the suggested percentage of pay you should contribute to your plan in order to reach that goal. Percentage of Salary Contributing: % Congratulations, you have completed Step 3! Now go to Step 4, Select an investment allocation and choose your investments. Table D assumes contributions are whole percentages of annual salary before income taxes. Use the contribution percentages on this table to help establish your retirement savings objective. Keep in mind that the percentage you can contribute is subject to your plan's contribution limit. 3.4

18 Select an investment allocation and choose your investments Step 4 Planning works. Plan your investment strategy. Now that you understand the benefits of saving in your retirement savings plan, you probably have questions about how to invest your contributions. So, let s begin by first learning about the three major asset classes. Understanding the asset classes will provide a foundation for helping you to develop an investment strategy that works for you. Understanding Asset Classes All of the investment choices available to you through your retirement savings plan will fall into one, or a combination of three broad asset classes. Asset classes are categories of investments, grouped according to their objectives and what they invest in. In general, different types of investments react differently to the same market conditions. Understanding how stocks, bonds, and cash equivalents work will help you form the basis for developing an investment strategy that meets your needs. As shown in the following chart, different types of investments have different rates of return over time. Here are the three main types of investments: Stocks are shares of ownership in a company. Over the past 25 years, stocks have returned an average annual return of about 12.7%. 1 Bonds represent the loan of money to a company or government. Bonds have returned an average annual return of about 8.6% over the past 25 years. 2 Cash equivalents seek to maintain the value of your investments. Over the past 25 years, they've returned an average annual return of 5.2%. 3 Historical Asset Class Performance Growth of $1,000 4 $25,000 Stocks $20,000 Bonds Cash $20, $15,000 $10,000 $5,000 $7, $3, $ Based on average annual total returns of the S&P 500 Index over 25 years from December 1982-December Source: Morningstar, Inc. 2 Based on average annual total returns of the Lehman Brothers Aggregate Bond Index over 25 years from December 1982-December Source: Morningstar, Inc. 3 Based on average annual total returns of Citigroup 3-month U.S. Treasury Bill Index over 25 years from December 1982-December Source: Morningstar, Inc. 4 Calculated by Transamerica Retirement Services using data from Morningstar, Inc. Stocks are represented by the S&P 500 Index, an unmanaged index generally considered representative of the stock market. Bonds are represented by the Lehman Brothers Aggregate Bond Index. Cash is represented by the Citigroup 3-month U.S. Treasury Bill Index. This chart is for illustrative purposes only, and your circumstances may differ from this example. Chart assumes $1,000 invested in December 1982 through December It does not reflect the actual return of any specific investment and is not intended to imply or guarantee future results. One cannot invest directly in an index. An index is unmanaged and does not take into account the fees and expenses associated with an actively managed fund, so performance may differ. There is no guarantee that any asset class will achieve a certain rate of return or outperform another asset class. Past performance is not a guarantee of future performance. 4.1

19 Asset Allocation and Diversification In addition to understanding the asset classes, understanding some basic investment strategies is also vital to creating the investment plan that suits your needs. Asset allocation is how you divide your money among the different types of investments. Having asset allocation can help you manage the ups and downs of the market. For example, when stock prices are up, bond prices are often down and vice versa. By spreading your money among the various asset classes, you reduce the risk that poor performance in any one asset class will affect your entire retirement portfolio. Once you have made your asset allocation decisions, stick to them. However, you may want to review your strategy annually as life changes, such as marriage, children, or promotions may require adjustments. It s also important to diversify, or divide your investments within the asset classes. If you have several investment choices in the same types of stocks, all your money is exposed to the same kind of risk. It may be better to spread your savings among investment choices that invest in different segments of the market. The chart below shows how asset classes move in and out of favor from year to year. The danger of chasing returns is that the asset class that had the highest returns last year may have the lowest returns this year. For example, if you had decided to put all of your money into growth investments during 1999 because of their high returns in 1998, you would have experienced low returns in The Importance of Diversification Source: Morningstar, Inc. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. 4.2

20 Now that you have a better understanding of how much you need to save to reach your retirement goal and the amount of investment risk you re willing to take to get there the next step in your journey is to determine how to select the investments that are best suited for you. Match your risk profile to a sample investment allocation. Review the pie charts on the next page and find the chart that corresponds to your Risk Profile identified in Step 2. Each chart identifies the mix to consider and the percentages you may want to allocate to each of the eight asset classes. 1 In addition to the average rate of return, each sample investment allocation shows the highest and lowest annual rate of return over 50 years. 2 As you can see, the more aggressive the investment mix is, the higher the average rate of return. However, you can expect greater fluctuation or volatility as illustrated by the higher highs and the lower lows. It is also important to keep in mind that when you determined how much you should save in Step 3, the tables assumed that the investments would earn an average rate of return of 7.2%. If your investment s allocation produces a higher or lower rate of return, you may have to adjust the amount you need to save to reach your retirement goal. Remember, risk and return go hand in hand. As we discussed in Step 1, the higher your risk tolerance, the more you may want to weight your mix towards stocks because over the long term, stocks offer the most potential for growth. Just keep in mind that over the short term you may be in for more ups and downs. Select the investment mix that s right for you and check the box next to your suggested investment allocation. Choose your investments. Now that you know which mix is right for you, you need to choose the specific investments within each asset class that is identified in your asset mix. Don t worry we ve made this a simple process as well! Review your investment choices in the "Enrollment Instructions/Forms" section of this workbook. After reviewing the information for each investment choice, select the investment choice(s) you d like to include in your portfolio. Assign a percentage of your contribution to your investment choice(s). 1 See inside back cover for important disclosures. Sample investment allocations do not include the following asset classes: Global Equity, Hybrid, and Specialty. Your plan may not offer all asset classes. 2 The rates of return shown are annual rates based on historical rates of return over the past 50 years ( ) and are adjusted for an assumed management fee of 1.25%. These risk and return expectations may not be realized over future time periods or future economic or business cycles; therefore, they are not intended to be predictions of risk or return. The historical and expected rates of return are based on historical performance and do not reflect the performance of any specific investment choice. The rates of return are not guaranteed. Past performance is not necessarily representative of future results. 4.3

21 Sample Investment Allocations Conservative Avg. Return 6.2% High: 25.3% Low: -3.2% Suggested Investment Period: 2 7 years 10% Large/Mid Value Equity 10% High Yield Bond 70% Bond 10% Cash Equivalents Moderate/Conservative Avg. Return 7.2% High: 25.3% Low: -5.8% Suggested Investment Period: 5 12 years 6% Small Company Equity 4% International Equity 6% Large/Mid Growth Equity 5% Large/Mid Blend Equity 9% Large/Mid Value Equity 15% High Yield Bond 55% Bond Moderate Avg. Return 8% High: 25.8% Low: -10.3% Suggested Investment Period: 8 15 years 10% Small Company Equity 7% International Equity 10% Large/Mid Growth Equity 8% Large/Mid Blend Equity 15% Large/Mid Value Equity 10% High Yield Bond 40% Bond Moderate/Aggressive Avg. Return 8.8% High: 33.8% Low: -16.3% Suggested Investment Period: years 14% Small Company Equity 10% International Equity 14% Large/Mid Growth Equity 11% Large/Mid Blend Equity 21% Large/Mid Value Equity 8% High Yield Bond 22% Bond Aggressive Avg. Return 10% High: 49.4% Low: -25.2% Suggested Investment Period: 20 plus years 20% Small Company Equity 15% International Equity 20% Large/Mid Growth Equity 15% Large/Mid Blend Equity 30% Large/Mid Value Equity Now, go to Step

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24 Cash Equivalents - Investment choices whose objectives are to maximize current income, consistent with liquidity and preservation of principal. Investment Risk - An investment in a cash equivalent investment choice is not insured or guaranteed by the FDIC or any other government agency. Although the investment seeks to preserve the value of your investment, it is possible to lose money by investing in the investment choice. Transamerica Stable Value Account As of 12/31/2007 Inception Date: 11/01/2002 Investment Strategy: Best suited for investors seeking a stable return and safety of principal. The investment seeks to protect against any loss of principal while providing returns in excess of money market funds and one-year treasury bills. The investment has a portfolio investment rate design in which all deposits are credited with the same interest rate, credited on a daily basis, and there is no set maturity. The effective credited interest rate is set monthly and effective on the first day of the month. Contract charges may reduce this return. Financial Strength Ratings: A.M. Best A+ (Superior) 2nd of 15 Fitch AA+ (Very Strong) 2nd of 24 Standard & Poor's AA (Very Strong) 3rd of 21 Moody's Aa3 (Excellent) 4th of 21 TFLIC is awarded the above high claims paying ability ratings from the top four financial rating agencies. Investment Information: Not available Bond - Investment choices that pursue their objectives primarily through the investment in investment grade bonds, issued by domestic companies and government agencies. Investment choices may also invest a portion of their assets in below investment grade securities. Investment Risk - The values of bonds change in response to changes in economic conditions, interest rates and the creditworthiness of individual issuers. Investment choices that invest in bonds can lose their value as interest rates rise and an investor can lose principal. Long Term Loomis Sayles Bond Ret Acct As of 12/31/2007 Inception Date: 04/01/2002 Investment Strategy: The investment seeks high total investment return through both current income and capital appreciation. The portfolio seeks to attain its objective by normally investing substantially all of its assets in debt securities (including convertibles), although 20% may be invested in preferred stocks. At least 80% of the total assets will normally be invested in bonds with no more than 35% in below investment grade quality bonds. Investors should have the patience, perspective and financial ability to take on aboveaverage bond price volatility in pursuit of a higher return. Expense Ratio: Type 3*: 1.25% of fund assets Management Company: -- Subadvisor: Loomis, Sayles & Company, L.P. Investment Information: The Loomis Sayles Bond Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the Loomis Sayles Bond Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account (SA). The TLIC SA is subadvised by Loomis, Sayles & Company, L.P. Prior to , the TLIC SA invested exclusively in the Loomis Sayles Bond Fund (Inst shares), a mutual fund. High Yield Bond - Investment choices that invest primarily in bonds which are considered riskier and have a higher yield. Investing in high yield, lower quality securities generally offer higher yield but also involve heightened risk. Investment Risk - The investor should note that investment choices that invest in lower-rated debt securities (commonly referred to as junk bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. The investor should be aware of the possible higher level of volatility, and increased risk of default.

25 Diversified Investors High Yield Opportunities Ret Acct As of 12/31/2007 Inception Date: 04/01/2002 Investment Strategy: The investment seeks to provide a high level of current income. The fund invests primarily in high-yielding, income producing debt securities and preferred stocks. Under normal circumstances it invests at least 80% of net assets in high-yield bonds and related investments. High-yield securities usually are lower-rated debt securities, commonly referred to as "junk bonds." Investing in junk bonds is an aggressive approach to income investing. Expense Ratio: Type 4*: 1.10% of fund assets Management Company: Transamerica Asset Management, Inc. Subadvisor: Eaton Vance Management Investment Information: The Diversified Investors High Yield Opportunities Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the Diversified Investors High Yield Opportunities Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the Diversified High Yield Opportunities Fund (Investor Class), a mutual fund (Fund). Hybrid - Investment choices that invest in a combination of domestic stocks, bonds, treasuries and money market securities. Investment Risk - The values of stocks change in response to general market and economic conditions and the circumstances of individual issuers. The values of bonds change in response to changes in economic conditions, interest rates and the creditworthiness of individual issuers. Balanced American Funds Balanced Inv Acct As of 12/31/2007 Inception Date: 03/26/2003 Investment Strategy: The investment seeks conservation of capital, current income and long-term growth of capital and income. The fund invests in a broad range of securities, including stocks, bonds and securities issued and guaranteed by the U.S. government. It normally maintains at least 50% of assets in common stocks and at least 25% of assets in debt securities, including money market securities. The fund may also hold cash or money market instruments. Expense Ratio: Type 4*: 0.90% of fund assets Trading Restrictions: Type A* Management Company: Capital Research & Mgmt Company Subadvisor: -- Investment Information: The American Funds Balanced Inv Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the American Balanced Fund (Class R-3), a mutual fund (Fund). Strategic Allocation Series TA IDEX Asset Allocation - Conservative Ret Acct As of 12/31/2007 Inception Date: 12/19/2005 Investment Strategy: The investment seeks current income and preservation of capital. The fund invests its assets in a combination of underlying IDEX funds. It normally invests 35% of assets in equity securities, 55% of assets in bonds and 10% of assets in money market instruments. The fund may also invest directly in government securities and short term commercial paper. Expense Ratio: Type 4*: 1.44% of fund assets Management Company: Transamerica Fund Advisors, Inc. Subadvisor: Blackrock Investment Management, LLC Morningstar Associates, LLC Neuberger Berman Management Inc Templeton Investment Council, LLC Third Avenue Management LLC Investment Information: The TA IDEX Asset Allocation - Conservative Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the TA IDEX Asset Allocation - Conservative Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the TA IDEX Asset Allocation - Conservative Portfolio (Class A shares), a mutual fund (Fund).

26 TA IDEX Asset Allocation - Moderate Ret Acct As of 12/31/2007 Inception Date: 12/19/2005 Investment Strategy: The investment seeks capital appreciation and current income. The fund invests its assets in a combination of underlying IDEX funds. It normally invests 50% of assets in equity securities, 45% of assets in bonds and 5% in money market instruments. The fund may also invest directly in government securities and short-term commercial paper. Expense Ratio: Type 4*: 1.46% of fund assets Management Company: Transamerica Fund Advisors, Inc. Subadvisor: Blackrock Investment Management, LLC Morningstar Associates, LLC Neuberger Berman Management Inc Templeton Investment Council, LLC Third Avenue Management LLC Investment Information: TA IDEX Asset Allocation - Moderate Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the TA IDEX Asset Allocation - Moderate Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the TA IDEX Asset Allocation - Moderate Portfolio (Class A shares), a mutual fund (Fund). TA IDEX Asset Allocation - Moderate Growth Ret Acct As of 12/31/2007 Inception Date: 12/19/2005 Investment Strategy: The investment seeks capital appreciation and current income. The fund invests its assets in a combination of underlying IDEX funds. It normally invests 70% of assets in equity securities, 25% of assets in bonds and 5% in money market instruments. The fund may also invest directly in government securities and short-term commercial paper. Expense Ratio: Type 4*: 1.51% of fund assets Management Company: Transamerica Fund Advisors, Inc. Subadvisor: Blackrock Investment Management, LLC Morningstar Associates, LLC Neuberger Berman Management Inc Templeton Investment Council, LLC Third Avenue Management LLC Investment Information: The TA IDEX Asset Allocation - Moderate Growth Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the TA IDEX Asset Allocation - Moderate Growth Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the TA IDEX Asset Allocation - Moderate Growth Portfolio (Class A shares), a mutual fund (Fund). TA IDEX Asset Allocation - Growth Ret Acct As of 12/31/2007 Inception Date: 12/19/2005 Investment Strategy: The investment seeks long-term capital appreciation. The fund primarily invests in a combination of underlying IDEX funds that invest in equity securities. It may invest 25% of assets in the securities of issuers primarily engaged in the same industry. The fund may also invest in ADRs, GDRs and EDRs. Expense Ratio: Type 4*: 1.59% of fund assets Management Company: Transamerica Fund Advisors, Inc. Subadvisor: Blackrock Investment Management, LLC Morningstar Associates, LLC Neuberger Berman Management Inc Templeton Investment Council, LLC Third Avenue Management LLC Investment Information: The TA IDEX Asset Allocation - Growth Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the TA IDEX Asset Allocation - Growth Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the TA IDEX Asset Allocation - Growth Portfolio (Class A shares), a mutual fund (Fund).

27 Target Maturity Series Vanguard Target Retirement 2005 Ret Acct As of 12/31/2007 Inception Date: 10/05/2004 Investment Strategy: The investment seeks to provide growth of capital and current income. The fund primarily invests in other Vanguard mutual funds according to an asset allocation designed for investors planning to retire within a few years of It typically allocates 52% of assets to bonds and 48% to stocks. Expense Ratio: Type 8*: 0.96% of fund assets Management Company: The Vanguard Group Subadvisor: -- Investment Information: The Vanguard Target Retirement 2005 Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the Vanguard Target Retirement 2005 Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the Vanguard Target Retirement 2005 Fund (Investor Class), a mutual fund (Fund). Vanguard Target Retirement 2015 Ret Acct As of 12/31/2007 Inception Date: 10/05/2004 Investment Strategy: The investment seeks to provide growth of capital and current income. The fund primarily invests in other Vanguard mutual funds according to an asset allocation designed for investors planning to retire within a few years of It typically allocates 65% of assets to stocks and 35% to bonds. Expense Ratio: Type 8*: 0.96% of fund assets Management Company: The Vanguard Group Subadvisor: -- Investment Information: The Vanguard Target Retirement 2015 Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the Vanguard Target Retirement 2015 Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the Vanguard Target Retirement 2015 Fund (Investor Class), a mutual fund (Fund). Vanguard Target Retirement 2025 Ret Acct As of 12/31/2007 Inception Date: 10/05/2004 Investment Strategy: The investment seeks to provide growth of capital and current income. The fund primarily invests in other Vanguard mutual funds according to an asset allocation. It typically allocates 81% to stocks and 19% of assets to bonds. Expense Ratio: Type 8*: 0.96% of fund assets Management Company: The Vanguard Group Subadvisor: -- Investment Information: The Vanguard Target Retirement 2025 Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the Vanguard Target Retirement 2025 Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the Vanguard Target Retirement 2025 Fund (Investor Class), a mutual fund (Fund). Vanguard Target Retirement 2035 Ret Acct As of 12/31/2007 Inception Date: 10/05/2004 Investment Strategy: The investment seeks to provide growth of capital and current income. The fund primarily invests in other Vanguard mutual funds according to an asset allocation. It typically allocates 90% of its assets to stocks and 10% to bonds. Expense Ratio: Type 8*: 0.96% of fund assets Management Company: The Vanguard Group Subadvisor: -- Investment Information: The Vanguard Target Retirement 2035 Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the Vanguard Target Retirement 2035 Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the Vanguard Target Retirement 2035 Fund (Investor Class), a mutual fund (Fund).

28 Vanguard Target Retirement 2045 Ret Acct As of 12/31/2007 Inception Date: 10/05/2004 Investment Strategy: The investment seeks to provide growth of capital and current income. The fund primarily invests in other Vanguard mutual funds according to an asset allocation. It typically allocates 90% of assets to stocks and 10% to bonds. Expense Ratio: Type 8*: 0.96% of fund assets Management Company: The Vanguard Group Subadvisor: -- Investment Information: The Vanguard Target Retirement 2045 Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the Vanguard Target Retirement 2045 Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the Vanguard Target Retirement 2045 Fund (Investor Class), a mutual fund (Fund). Large/Mid Value Equity - Investment choices that invest primarily in stocks issued by larger companies that are considered to be undervalued or have low P/E ratios. Investment Risk - Historically, stocks have provided greater long-term returns and have entailed greater short-term risks than other investments. The securities issued by mid-cap companies may be more susceptible to market downturns, and their prices could be more volatile than those of larger companies. Value stocks may be subject to special risks that have caused the stocks to be out of favor and undervalued in the management company's opinion. Large Cap American Century Large Company Value Inv Acct As of 12/31/2007 Inception Date: 10/05/2004 Investment Strategy: The investment seeks capital growth; income is a secondary consideration. The fund invests at least 80% of assets in equity securities comprising the Russell 1000 index. It may invest in foreign securities, convertible securities, corporate and government debt, non-leveraged stock index futures contracts, and other similar securities. The fund invests in companies that the advisor believes are undervalued by the market. Expense Ratio: Type 4*: 1.09% of fund assets Management Company: American Century Inv. Mgmt. Subadvisor: -- Investment Information: The American Century Large Company Value Inv Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the American Century Large Company Value Fund (Advisor Class shares), a mutual fund (Fund). Mid Cap Diversified Investors Mid-Cap Value Ret Acct As of 12/31/2007 Inception Date: 04/01/2002 Investment Strategy: The investment seeks a high total investment return. The fund normally invests at least 80% of net assets in securities of medium sized companies. It primarily invests in companies which the fund's advisers believe have valuations below their intrinsic value and present an opportunity for earnings improvement. The fund may also invest in foreign securities. Expense Ratio: Type 4*: 1.25% of fund assets Management Company: Transamerica Asset Management, Inc. Subadvisor: Cramer Rosenthal McGlynn LLC LSV Asset Management LP RiverSource Investments, LLC Investment Information: The Diversified Investors Mid-Cap Value Ret Acct is a Separate Account Sub-Account maintained by TFLIC and invests exclusively in the Diversified Investors Mid-Cap Value Ret Opt, a Transamerica Life Insurance Company (TLIC) Separate Account. The TLIC Separate Account invests exclusively in the Diversified Mid-Cap Value Fund (Investor Class), a mutual fund (Fund).