The Anne Arundel County Deferred Compensation Riviera Plan Beach Harundale Jessup

Transcription

1 Glen Harmans Burnie The Anne Arundel County Deferred Compensation Riviera Plan Beach Harundale Jessup Severn Fort Meade Pasadena Lake Shore Maryland City Odenton Severna Park Magothy Riv Patuxent Crownsville Sherwood Forest Arnold Crofton Annapolis Seve Rive Riva Davidsonville South Owensville West Patuxent Lothian Shady Side Waysons Corner Deale Friendship

2 Almost everyone has their own dreams about how they want to spend their retirement years. Yet, whether you see yourself sailing around the bay or simply lounging by the shore with your family, chances are you re going to need money.

3 Patuxent Maryland City Jessup Fort Meade Patuxent Harmans Severn Odenton Patapsco Crofton Waysons Corner Crownsville Glen Burnie Harundale Riva Davidsonville Owensville Lothian Severna Park Friendship Pasadena Sherwood Forest Deale Riviera Beach Lake Shore Annapolis West Shady Side Arnold Magothy South Severn C Cape St. Claire a y T. Rowe Price believes that most people will need approximately 75% of their preretirement income to maintain the same lifestyle in retirement. The money you have in your defined benefit will help, but you ll likely need other sources of savings. That s where the voluntary Anne Arundel County Deferred Compensation Plan comes in. Participating in this Plan can help improve your chances of reaching your retirement goals. With the Anne Arundel County Deferred Compensation Plan, creating a retirement saving strategy is a snap! This brochure can help you understand the basics of investing along with how the plan works. It also highlights features and services you can use to make the most of your Deferred Compensation Plan. h e s a p e a k e B Your Plan s service provider, T. Rowe Price T. Rowe Price is a leading investment management firm headquartered in Baltimore, Maryland. The company offers an exceptional combination of investment management expertise, world-class customer service, and extensive resources to help you prepare for the challenges of retirement planning. T. Rowe Price Retirement Plan Services, Inc. currently serves more than 2 million participants. page {1 Anne Arundel County Deferred Compensation Plan

4 n nie Harundale Riviera Beach SPICE UP Severna Park Pasadena Sherwood Forest YOUR FUTURE Lake Shore Arnold Magothy You know that planning for your future is important. Cape St. Claire But sometimes it can feel overwhelming. Don t get steamed! Saving through the Deferred Compensation Plan can help you develop your own saving strategy. Annapolis Severn a y lle Riva e a k e B South s a p h e Owensville West C Shady Side Lothian Deale Friendship page {2

5 Why do you need to save? There are probably a million other things that seem more important today than planning for retirement. But the fact is, one day you will retire and your retirement could last 30 years or more (assuming a retirement age of 67). With inflation, increasing medical expenses, and uncertain Social Security benefits, you ll need enough income to provide for yourself and possibly others. Sources of Retirement Income 16% 2% 15% 50% Social Security Other Income Retirement Plans Earned Income 17% Personal Savings and Investments Source: Social Security Administration, 2012 Income of the Aged Chartbook, Released: April (These percentages are based on those age 67 and up with at least $63,648 in annual income in 2012.) Totals do not necessarily equal the sum of the rounded components. page {3 Anne Arundel County Deferred Compensation Plan

6 Time and money work together Your retirement may seem far away, but that just means that time is on your side. The earlier you start contributing and the longer you stay invested in the Plan, the greater the chance your money has to compound over the years potentially increasing the value of your account. Compounding is when any earnings on your investments are put back into your account. That means your money has a chance to make money, which has a chance to make more money. So the money you save today can be more powerful than the money you save tomorrow, thanks to compounding. Still curious about how compounding can help your strategy? Check out the example below to see who will have more money in retirement. 1. Cathy started contributing $250 a month to her retirement savings plan when she was age 30 and continued contributing the same amount for 30 years. 2. John started contributing $250 a month to his retirement savings plan at the age of 30, but then he stopped making contributions after 10 years. 3. Dan started contributing to his retirement savings plan 10 years later at age 40. His contribution was $250 a month, and he contributed for the next 20 years. Advantages of Tax-Deferred Compounding Cathy $250/mo. Years of Saving 30 years Before-Tax Account Total $304,993 John $250/mo. 10 years no contributions $174,761 Dan $250/mo. no contributions 20 years $130,232 At Age This chart is for illustrative purposes only. This is not meant to represent the performance of the investment options in your Plan. These amounts assume $250 invested each month and a 7% annual rate of return. As illustrated by the chart, the first scenario provided the best outcome in this case. As indicated by the second and third scenarios, the amount of time an investor saves can be more important than the amount of money saved. page {4

7 Ending Balance Tax advantages Reduce your current taxable income By contributing to your Deferred Compensation Plan before federal (and most state) taxes are taken out, you can reduce the taxable income that you have to report to the IRS. As you can see in the example, the person who deferred before-tax money to their Plan account paid $1,450 less in income taxes. advantage of tax-deferred savings today Contributing to the Plan Annual Income 10% Before-Tax Contribution Taxable Income 29% Tax Rate Income Tax $50,000 $5,000 $45, $13,050 Not Contributing to the Plan Annual Income 0% Before-Tax Contribution Taxable Income 29% Tax Rate Income Tax $50,000 $0 $50, { $14,500} The person who saved before-tax dollars paid $1,450 less in income tax. For illustrative purposes only. The tax rate represents estimated federal and state taxes. Your results will vary. LONG-TERM ADVANTAGES OF TAX-DEFERRED SAVING { } Deferring taxes can help your account grow When you make before-tax contributions to your account, the money has a chance to grow tax-deferred. That means you don t pay any taxes on it until you take it out of the Plan, usually when you retire. This can help in two ways: 1. You may be in a lower tax bracket at retirement, and 2. Money you would have paid in taxes can continue compounding Monthly Deposits of $250 Over 30 Years { $304,993 } { $235,847 } $350, , , , , ,000 All things being equal, tax-deferred savings will outpace savings in a regular taxable account. In a taxable account, like a savings account at a bank, you have to pay taxes on your earnings each year. But in the Plan, your money has the opportunity to compound and grow tax-deferred until you take it out. As you can see in the example on the right, the person who saved in a tax-deferred account saved almost $70,000 more than the person saving in a taxable account over 30 years. page {5 50,000 0 Taxable Tax-Deferred Account Account This chart is for illustrative purposes only. This is not meant to represent the performance of the investment options in your Plan. The dollar amounts do not include any money that may be contributed by your employer to the Plan. These amounts assume a 7% annual rate of return, compounded monthly, and a 19% tax on earnings in the taxable account. Money in the tax-deferred account will be taxed when it is withdrawn. Changes in tax rates and the tax treatment of investment earnings may affect comparative results. You should consider your personal investment horizon and income tax brackets, both current and anticipated, when making an investment decision since these factors may further affect the results of the comparison. Anne Arundel County Deferred Compensation Plan

8 How much should you save? Thinking about your retirement savings as one lump sum may be a little daunting. It may be easier to think of your savings in terms of how much you re going to need each year known as your retirement income. We suggest that you save at least 15% of your pay to help you reach your retirement savings goals. It might also be helpful to refer to the chart on the following page. It can provide you with an idea about how much an investor may need to save going forward based on how much he s already saved and how long he has before retirement. Here s how you can find the percentage you might need to save Step 1: Add up all the money you have set aside specifically for retirement. This includes your individual retirement accounts (IRAs), savings accounts, stocks, bonds, and other investments. Step 2: Compare this amount with your yearly salary. For example, if you make $30,000 a year and you ve saved $15,000, go to the column in the chart marked 1/2X annual salary. Step 3: Read down the left side of the table until you come to your current age. Step 4: Read across the column to find a savings rate. For example, if you ve saved one-half of your annual salary and you re 42 years old, you may want to consider saving 22% of your salary each year. page {6

9 Save more each year If the target percentage you should be saving seems a little high, try to save as much as you can now and increase your contribution a little bit each year even 1% or 2% can help. Saving Percentage Current Age AMOUNT YOU HAVE ALREADY SAVED FOR RETIREMENT 0 1/2X 1X 11/2X 2X 21/2X 3X no savings annual salary annual salary annual salary annual salary annual salary annual salary 27 13% 12% 10% 8% 6% 4% 3% 32 16% 14% 12% 11% 9% 7% 5% 37 20% 18% 16% 14% 12% 10% 8% 42 24% 22% 20% 18% 16% 14% 13% 47 29% 27% 25% 23% 22% 20% 18% 52 36% 34% 32% 30% 28% 26% 24% 57 43% 41% 40% 38% 36% 34% 32% This chart shows the percentage of salary that most people will need to save, in combination with employer contributions, to maintain their current spending level in retirement. Social Security and other sources (like wages and a pension) are assumed to replace 25% of preretirement salary. The chart assumes that the person matches inflation rate increases of 3% annually, that tax-deferred investments earn 7% and that the person retires at age 67. The table also assumes an initial withdrawal amount will be 4% of your balance at that time. The 7% return assumption is based on a blend of historic rates of return for equities, fixed income, and short-term fixed income, in combination with our longterm view of the capital market structure; the 3% inflation assumption is based on long-term historic rates. Catch-up contributions If you will be age 50 or older on or before December 31, you may also contribute an additional amount of catch-up contributions up to the IRS catch-up limit. Also, during the last three years before you reach your normal retirement age as defined in the Plan document, you are able to defer a larger catch-up contribution. This catch-up provision allows you to defer your regular limit plus an amount that you were eligible to contribute in previous years, but did not. During those three years, you can defer up to twice the salary deferral amount in effect for that year. page {7 Anne Arundel County Deferred Compensation Plan

10 START WITH THE BASICS Patapsco By understanding some basic rules about investing, Harmans you can build a strong foundation for your saving Jessup Severn strategy. This means you ll be ready to start reaching for your retirement dreams, like spending all day playing in the sand. Fort Meade Glen Burnie Harundal Maryland City Odenton Sev Par Patuxent Crownsville Crofton Riva Davidsonville Owens Patuxent Lothian Waysons Corner page {8

11 The rules of retirement investing Here are three T. Rowe Price retirement investing tips to consider Each person s financial circumstances differ, so there s no one set of rules that applies to every one. But, generally speaking, there are several tips that we recommend considering as you decide how to invest in your retirement plan. 1 Try to save at least 15% of your before-tax pay. History shows that the cost of living rises over time. To help outpace inflation, save as much as you can. If 15% seems like a lot now, contribute at least 6% and try to increase that amount by 2% each year until you reach your goal. 2 Allocate your savings among investments that offer the strongest potential for growth, such as stock funds, based on your time horizon. Allocation simply means how you spread your savings among the investment categories available in the Plan: stocks, bonds, and short-term investments. The length of time you plan to invest your savings commonly referred to as your time horizon can help you determine how much money you put into each type of investment. After choosing how to allocate your savings, you may want to focus on diversification. Diversification means choosing a variety of different investments within one category. For example, when investing in stocks, you might choose a variety of large and small companies across several industry types, foreign and domestic. Diversifying may help reduce the impact one sector of the market or one particular business will have on your account if it performs poorly. Of course, diversification cannot assure a profit or protect against loss in a declining market. 3 Stick with your investment strategy. No one can predict the ups and downs of the markets. Most successful long-term investors build a strategy that matches their tolerance for risk and time horizon for retirement, and then they stick with it. page {9 Anne Arundel County Deferred Compensation Plan

12 Types of investments Mutual Funds Mutual funds are investments that pool the money of many individual investors and use it to buy many different investments depending on the goals of the fund. Mutual funds each have a manager with professional expertise who directs the buying and selling of securities held in the fund based on the fund s objective. Your fund s holdings tend to be diversified among investments from three different categories: money market/stable value, bonds, and stocks. Because they are frequently diversified in many different investments, mutual funds prices may not go up and down as dramatically as the prices of individual stocks or bonds. Stocks Stock is a partial share of ownership in a given company. Generally, stocks do not pay interest; however, some stocks pay dividends. A stockholder participates in the company s successes and failures through the increase or decrease in the value of the company s stock and dividends. A stock investment offers the highest potential for returns, but also the highest risk. Bonds A bond is essentially a loan made by an investor to the company or government entity issuing the security. A company or government body usually issues bonds to raise money for a specific project. The issuer promises to pay interest while the loan is outstanding and to pay back the face value of the bond at maturity. Bonds offer the potential for moderate investment returns at a moderate level of risk. Money Market/Stable Value These types of investments generally invest in money market securities and guaranteed investment contracts (GICs). The risk of losing your principal in a money market or stable value investment is usually lower than in stock or traditional bond investments; however, the potential return is also lower. page {10

13 PLOT YOUR COURSE Now that you ve got the basics down, you re ready to choose how you want to invest your money. With your Deferred Compensation Plan, there s an approach for every kind of investor from the crustiest crustaceans to the softest soft shells. Glen Burnie Harundale Riviera Beach Pasadena Lake Shore Severna Park Magothy lle Sherwood Forest Arnold Cape St. Claire Annapolis Severn a y vidsonville Riva e a k e B South s a p h e Owensville West C Shady Side page {11 Anne Arundel County Deferred Compensation Plan

14 Your Plan allows you to choose from two different ways to invest: 1. Age-based Investment If you want a portfolio that automatically adjusts over time, consider investing in a pre-assembled target date investment. 2. Build-Your-Own Portfolio If you want more control, consider building your own portfolio from your plan s investment options. You manage your portfolio and asset allocation over time to suit your risk tolerance, time horizon, and financial situation. Help simplify retirement investing with this key question. Do I want to control my investments? If the answer is yes, you can build your own portfolio from your plan s lineup of professionally managed investments. See the build-your-own portfolio section on page 15. If no, you can select a single, pre-assembled portfolio. Investment professionals will rebalance the fund regularly to reflect its target allocation. Read about age-based investments on the next page. page {12

15 Age-based investments Age-based investments automatically adjust over time. They are pre-assembled, diversified portfolios designed for a specific retirement date in a single investment. Provides a diversified portfolio in a single investment designed to target the year an investor retires assumed to be age 65. Asset allocation automatically adjusts throughout a person s working years and retirement. The principal value of the Retirement Funds is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire significantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target date. The funds allocations among a broad range of underlying T. Rowe Price stock and bond funds will (with the exception of the Retirement Balanced Fund) change over time. The funds (other than the Retirement Balanced Fund) emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with the need for income as retirement approaches, and focus on supporting an income stream over a long-term postretirement withdrawal horizon. The funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. The funds maintain a substantial allocation to equities both prior to and after the target date, which can result in greater volatility over shorter time horizons. The chart below can help you understand which Retirement Fund available in your plan is closest to the year you will turn 65. Which Retirement Fund for Which Age? If you were born... } The Retirement Fund designed for your age is In 1993 or after Retirement 2060 Fund 1988 to 1992 Retirement 2055 Fund 1983 to 1987 Retirement 2050 Fund 1978 to 1982 Retirement 2045 Fund 1973 to 1977 Retirement 2040 Fund 1968 to 1972 Retirement 2035 Fund 1963 to 1967 Retirement 2030 Fund 1958 to 1962 Retirement 2025 Fund 1953 to 1957 Retirement 2020 Fund 1948 to 1952 Retirement 2015 Fund 1943 to 1947 Retirement 2010 Fund In 1942 or before Retirement 2005 Fund Depending on your risk tolerance, time horizon, and financial situation, you may consider a Retirement Fund with a different target date. For a diversified portfolio that maintains a static asset allocation, consider the Retirement Balanced Fund. Call to request a fact sheet, a prospectus, or, if available, a summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. page {13 Anne Arundel County Deferred Compensation Plan

16 A fund of funds Each Retirement Fund is a mutual fund made up of other mutual funds. That means you get a diversified mix of investments in large and small companies, both domestic and foreign. T. Rowe Price Retirement Fund Pie Charts Stocks Emerging Markets Stock Equity Index 500 Growth Stock International Growth & Income International Stock Mid-Cap Growth Mid-Cap Value New Horizons Overseas Stock Real Assets Small-Cap Stock Small-Cap Value Value Retirement Retirement Retirement Retirement Retirement 2060 Fund 2055 Fund 2050 Fund 2045 Fund 2040 Fund 10.0% 10.0% 10.0% 10.0% 10.5% Retirement 2035 Fund 90.0% 90.0% 90.0% 90.0% 89.5% 84.5% Retirement 2025 Fund Retirement 2020 Fund Retirement 2015 Fund Retirement 2010 Fund Retirement 2005 Fund 15.5% Retirement Balanced Fund Retirement 2030 Fund 21.5% 78.5% Bonds Emerging Markets Bond High Yield International Bond Limited Duration Inflation Focused Bond New Income 28.5% 71.5% 36.5% 63.5% 46.0% 54.0% 54.5% 45.5% 60.5% 39.5% 60.0% 40.0% Underlying funds as of 1/1/16. This chart shows the neutral allocations for the funds as of January 1, The allocation for each fund may vary from the long-term neutral allocation. Call for the most current asset allocation. An investment mix that gradually becomes more conservative A Retirement Fund geared toward a longer time horizon, such as 30 years or more, starts out with a more aggressive risk/ return potential and then gradually becomes more conservative over time. Also, the Retirement Funds allocations are actively managed for approximately 30 years after their target retirement dates before arriving at their final 20% stock, 80% bond ratios. The Retirement Balanced Fund s allocation does not shift over time. It invests in a diversified portfolio of about 60% bonds and 40% stocks. page {14

17 Build-Your-Own Portfolio If you want more control, consider building your own diversified portfolio using your plan s investment options. You manage your portfolio and asset allocation over time to suit your risk tolerance, time horizon, and financial situation. Your Plan s investment options Stock Funds American Funds EuroPacific Growth Fund (REREX). The American Funds EuroPacific Growth Fund seeks longterm growth of capital by investing in strong, growing companies based chiefly in Europe and the Pacific basin, ranging from small firms to large companies. Investments outside the United States can involve special risks, such as currency fluctuations, political instability, differing securities regulations, and periods of illiquidity. Fidelity Balanced Fund (FBALX). The Fidelity Balanced Fund seeks income and capital growth consistent with reasonable risk. It invests approximately 60% of assets in stocks and other equity securities and the remainder in bonds and other debt securities, including lower-quality debt securities, when the outlook is neutral. The fund invests at least 25% of total assets in fixed income senior securities (including debt securities and preferred stock). With respect to equity investments, it emphasizes above-average income-producing equity securities, which tend to lead to investments in stocks that have more value characteristics than growth characteristics. To select investments, the fund analyzes an issuer using fundamental factors, evaluating each security s current price relative to estimated long-term value. Franklin Mutual Shares Fund (MUTHX). The Franklin Mutual Shares Fund, Z, seeks capital appreciation; income is a secondary consideration. The fund normally invests, following a value-oriented strategy, in companies with market capitalizations greater than $1.5 billion. It may, however, invest in smaller companies. The fund can invest up to 35% of assets in foreign equity and may use forward currency exchange contracts to hedge against currency risks. It can also invest in debt securities in any rating category. Goldman Sachs Mid Cap Value Fund (GSMCX). The Goldman Sachs Mid Cap Value Fund seeks long-term capital appreciation. The fund normally invests at least 80% of assets in equity securities, typically with market capitalizations within the range of the market capitalization of companies in the Russell Mid-Cap Value Index. It may invest up to 25% of assets in foreign securities, including securities of issuers in emerging countries. The fund may also invest up to 20% of assets in companies with market capitalizations outside the range of companies in the Russell Mid-Cap Value Index and in fixed income securities, such as government, corporate, and bank debt obligations. Harbor Capital Appreciation Fund (HACAX). The Harbor Capital Appreciation Fund seeks long-term growth of capital by investing primarily in a portfolio of equity securities of established companies with above-average prospects for growth. Dividend income, if any, is a consideration incidental to the fund s objective of growth of capital. The fund is designed for investors seeking long-term growth of capital and for whom income is a secondary consideration. T. Rowe Price Blue Chip Growth Fund (TRBCX). The investment seeks long-term capital growth; income is a secondary objective. The fund will normally invest at least 80% of its net assets in the common stocks of large and mediumsized blue chip growth companies. It focuses on companies with leading market position, seasoned management, and strong financial fundamentals. The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities. T. Rowe Price Capital Appreciation Fund (PRWCX). The investment seeks long-term capital appreciation. The fund normally invests at least 50% of its total assets in stocks, and the remaining assets are generally invested in convertible securities, corporate and government debt (including mortgage- and asset-backed securities), and bank loans (which represent an interest in amounts owed by a borrower to a syndicate of lenders), in keeping with the fund s objective. page {15 Anne Arundel County Deferred Compensation Plan

18 The fund may also invest up to 25% of its total assets in foreign securities. T. Rowe Price Equity Income Fund (PRFDX). The investment seeks a high level of dividend income and long-term capital growth primarily through investments in stocks. The fund will normally invest at least 80% of its net assets (including any borrowings for investment purposes) in common stocks, with an emphasis on large-capitalization stocks that have a strong track record of paying dividends or that are believed to be undervalued. It generally seeks investments in large-capitalization companies, and the fund s yield, which reflects the level of dividends paid by the fund, is expected to normally exceed the yield of the S&P 500 Stock index. T. Rowe Price Mid-Cap Growth Fund (RPMGX). The investment seeks long-term capital appreciation. The fund normally invests at least 80% of net assets (including any borrowings for investment purposes) in a diversified portfolio of common stocks of mid-cap companies whose earnings T. Rowe Price expects to grow at a faster rate than the average company. It defines mid-cap companies as those whose market capitalization falls within the range of either the S&P MidCap 400 Index or the Russell Midcap Growth Index. While most assets will typically be invested in U.S. common stocks, the fund may invest in foreign stocks in keeping with the fund s objectives. earnings growth because of rejuvenated management, new products, or structural changes in the economy. T. Rowe Price Small-Cap Value Fund (PRSVX). The investment seeks long-term capital growth. The fund will invest at least 80% of its net assets (including any borrowings for investment purposes) in companies with a market capitalization that is within or below the range of companies in the Russell 2000 Index. It may invest in foreign stocks in keeping with the fund s objectives. The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities. Vanguard 500 Index Fund (VFIAX). The Vanguard 500 Index Fund, Admiral Shares, seeks to match the performance of a benchmark index that measures the investment return of large-capitalization stocks. The fund employs a passive management strategy designed to track the performance of the Standard & Poor s 500 Index, which is dominated by the stocks of large U.S. companies. The fund attempts to replicate the target index by investing all or substantially all of its assets in the stocks that make up the index. T. Rowe Price New Horizons Fund (PRNHX). The investment seeks long-term capital growth. The fund invests primarily in a diversified group of small, emerging growth companies, preferably early in their corporate life cycle before the companies become widely recognized by the investment community. The fund may also invest in companies that offer the possibility of accelerating page {16

19 Bond Fund PIMCO Total Return Fund (PTTRX). The PIMCO Total Return Fund, Institutional, seeks to obtain maximum current income consistent with preservation of capital and daily liquidity. The fund invests in a diversified portfolio of bonds of varying maturities. The average portfolio duration will normally vary between three and six years, and a majority of assets will be invested in investmentgrade, income-producing securities. The fund is intended for those who seek high current income and are willing to assume higher risk for higher return potential. Money Market/Stable Value Fund T. Rowe Price Stable Value Fund. 1 This trust seeks to provide maximum current income while maintaining stability of principal. The trust will invest primarily in guaranteed investment contracts (GICs), bank investment contracts (BICs), synthetic investment contracts (SICs), and separate account contracts (SACs). GICs, BICs, SICs, and SACs are types of investment contracts that are designed to provide principal stability and a competitive yield. 1 The T. Rowe Price Stable Value Common Trust Fund (Trust) is not a mutual fund. It is a common trust fund established by T. Rowe Price Trust Company under Maryland banking law, and its units are exempt from registration under the Securities Act of Investments in the Trust are not deposits or obligations of, or guaranteed by, the U.S. government or its agencies or T. Rowe Price Trust Company. Although the Trust seeks to preserve the value of your investment at $1.00 per unit, it is possible to lose money by investing in the Trust. All investments involve risk, including possible loss of principal. Investment Risks: Funds that invest in growth stocks are subject to the volatility inherent in common stock investing, and their share price may fluctuate more than a fund investing in income-oriented stocks. Mid-cap company stocks are generally more volatile than stocks of large, well-established companies. Investing in small companies involves greater risks than is customarily associated with larger companies, since small companies often have limited product lines, markets, or financial resources. Funds that invest in non-u.s. securities are subject to the unique risks of international investing, including currency fluctuation. Investments in fixed income securities are subject to interest rate risk and credit risk. Also, investments in derivatives are subject to a number of risks, such as liquidity risk, interest rate risk, market risk, credit risk, and management risk. A fund investing in a derivative instrument could lose more than the principal amount invested. page {17 Anne Arundel County Deferred Compensation Plan

20 Invest through the TradeLink brokerage service The Anne Arundel County Deferred Compensation Plan offers more experienced and confident investors TradeLink, a self-directed brokerage service. TradeLink gives you access to stocks, bonds, and mutual funds outside of the Plan s core lineup.* Please note that TradeLink investment choices may be subject to greater volatility and risk of loss than the investment options chosen for the Plan. For more information, including fees and risks, request a TradeLink kit by calling * Brokerage services are offered by T. Rowe Price Investment Services, Inc. (member FINRA/SIPC), and are carried by Pershing LLC, a BNY Mellon company (member NYSE/ FINRA/SIPC), which acts as a clearing broker for T. Rowe Price Investment Services, Inc. Keep these trading rules in mind Excessive Trading Excessive or short-term trading occurs when a participant places frequent trades into and out of an investment, often holding shares for a short period of time. This practice can increase the investment s administrative costs and negatively impact the fund manager s strategy. As a result, many funds closely monitor trading activity and implement short-term trading fees when necessary. A possible consequence of excessive trading may be the suspension of your trading privileges. Redemption Fees Redemption fees are designed to deter short-term trading behavior and protect the funds and their long-term investors. By penalizing short-term trading activity, redemption fees encourage Plan participants to pursue long-term investment strategies. These fees are paid to the mutual fund to help offset any costs created by short-term traders. Refer to the enclosed fund performance page or call T. Rowe Price at for details on the funds redemption fee policies. Call to request a fact sheet, a prospectus, or, if available, a summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. page {18

21 AVOID TRAPS WITH HELP psco Glen Burnie Harundale When it comes to making decisions about your retirement planning strategy, sometimes the best way to avoid those pesky pots is to ask for help. Your Plan makes it easy to get help anytime you need it. Riviera Beach Pasadena Lake Shore Severna Park Magothy Crownsville Sherwood Forest Arnold Cape St. Claire on Annapolis Severn a y Davidsonville Riva e a k e B South s a p h e Owensville West C Shady Side Lothian page {19 Anne Arundel County Deferred Compensation Plan

22 The Deferred Compensation Plan provides you access to third party investment services. You ll find them all on the T. Rowe Price website as soon as you are enrolled. Morningstar Retirement Manager SM : Your Plan offers Retirement Manager, which is a range of investment services. You choose how to allocate your assets among investment categories (stocks, bonds, and money market investments). This Morningstar service offers investment recommendations and strategies, asset mix information, and access to Morningstar research and education tools. Morningstar also offers tools to help you track the performance of your portfolio and its underlying investments on an ongoing basis. Morningstar Portfolio Manager SM This Morningstar service offers asset mix information and investment Morningstar Ratings TM. The Morningstar name and trademarks are registered marks of Morningstar, Inc. Morningstar Retirement Manager is offered by and is the property of Morningstar Associates, LLC, a registered investment advisor and a wholly owned subsidiary of Morningstar, Inc., and is intended for citizens or legal residents of the United states or its territories. Morningstar Associates is not affiliated with, nor is it an employee or agent of, T. Rowe Price. Plan sponsors must elect to make the Morningstar services available. Get FREE education and tools as soon as you are enrolled. Log in to rps.troweprice.com and click on Tools. page {20

23 CONSERVING RESOURCES Withdrawals You can withdraw money from your vested account balance if you retire or leave employment with the county for any reason. While employed by the county, you may make limited withdrawals from your account if you experience an unforeseeable emergency. n nie Harundale Riviera Beach Tax matters While your money is in your Plan account, it is sheltered from taxes. However, when you begin to withdraw your money, the taxable portion is subject to income tax. In addition, most withdrawals are subject to a mandatory 20% federal withholding, and applicable mandatory state withholding, unless you make a direct rollover to a Traditional IRA or another eligible employer plan. You may directly roll over a distribution from the Plan into a Roth IRA. The amount rolled into the Roth IRA is taxable income to you in the year of the rollover consult your tax advisor for details. Before taking money out of your account, please read the Rollover Options Notice that accompanies the distribution forms. Pasadena Lake Shore Severna Park Magothy Cape St. Claire Sherwood Forest Arnold Annapolis Severn y Riva B a lle k e South p e a page {21 Anne Arundel County Deferred Compensation Plan

24 CHECKING IN ON YOUR INVESTMENTS Jessup Harmans Severn Patapsco Fort Meade Maryland City Odenton Patuxent Crofton Patuxent Waysons Corner page {22

25 Online The website at rps.troweprice.com is your one-stop, online location for information about the Anne Arundel County Deferred Compensation Plan and your individual planning needs. It offers you all the features of the Plan Account Line (PAL) and some additional benefits, allowing you to: Review your Plan s policies, features, and investment options Review your investment options Download forms Link to tools that let you calculate how much to save for retirement, estimate Social Security benefits, estimate how long your savings will last, and more! Login instructions once you are enrolled: Go to rps.troweprice.com Phone Log in using your user name and password If you are visiting the website for the first time, you can register using your Social Security number, date of birth, and ZIP code (just follow the on-screen prompts) Call to connect to the PAL. With your personal identification number, you can use the PAL to: Get your account balance Make changes to your account For direct assistance, representatives are available on business days between 7 a.m. and 10 p.m. eastern time. page {23 Anne Arundel County Deferred Compensation Plan

26 DIVE IN You re armed with the ingredients you need to help make your retirement dreams a reality. Sign up today! psco Glen Burnie Harundale Riviera Beach Pasadena Lake Shore Severna Park Magothy Crownsville Sherwood Forest Arnold Cape St. Claire on Annapolis Severn y Davidsonville Riva e a k South s a p a e B h e C Owensville West Shady Side Lothian page {24

27 Enroll today by returning the enrollment form to T. Rowe Price. Or call and follow the instructions. If you would like help, representatives are available on business days between 7 a.m. and 10 p.m. eastern time.

28 The Anne Arundel County Deferred Compensation Plan T. Rowe Price Investment Services, Inc., distributor, T. Rowe Price mutual funds. This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice. This material does not provide fiduciary recommendations concerning investments or investment management; it is not individualized to the needs of any specific benefit plan or retirement investor, nor is it directed to any recipient in connection with a specific investment or investment management decision. T. Rowe Price Retirement Plan Services, Inc., its affiliates, and its associates do not provide legal or tax advice. Any tax-related discussion contained in this material, including any attachments/links, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or professional tax advisor regarding any legal or tax issues raised in this material. CEAZZ7CN8_ OCB41-AACE 2/ GCC-92241