Take action toward your financial future. Participate in your retirement plan

Transcription

1 Take action toward your financial future Participate in your retirement plan GETTING STARTED 4 steps to preparing for retirement PRODUCTS AND FINANCIAL SERVICES PROVIDED BY AMERICAN UNITED LIFE INSURANCE COMPANY, A ONEAMERICA COMPANY

2 4Steps to retirement preparation When it comes to retirement, it can be easy to think I will get to that one day or One day that will be more of a priority. To have a better chance of reaching your retirement goals, it is important to make that one day today. Your employer has put you on a good path by offering a retirement plan, but now it is up to you to take advantage of this important benefit. Read on for more information about the four steps you can take now to prepare for retirement. 4 REVIEW 3 CHOOSE 2 CONTRIBUTE 1 ESTIMATE 2

3 Enrollment overview 1. Estimate your need With the average life expectancy increasing, uncertainty around Social Security and inflation continuing to erode the purchasing power of your money, participating in your retirement plan is more important now than ever. Use this worksheet to help you determine how much money you may need to reach your retirement goals. Retirement needs worksheet Note: Example assumes 25 years until retirement Example Your numbers 1 Annual income $40,000 2 Annual income needed in retirement in today s dollars $30,000 (Retirement professionals estimate that you will need 75 to 80 percent of your current annual income each year in retirement) 3 Approximate amount of Social Security expected annually $10,000 (Multiply Line 1 by.25 for a conservative estimate of your Social Security benefit. There is an annual cap on benefits. Visit for more information.) 4 Shortfall that will need to be made up from other sources of retirement income $20,000 (Subtract Line 3 from Line 2) 5 Adjust shortfall for inflation $32,800 (Multiply Line 4 by the appropriate inflation factor from the chart below. In the example, we assume 25 years remaining until retirement. Therefore, we multiplied $20,000 by 1.64.) 6 Investments already accumulated adjusted for future growth $325,800 (For this example, we assume $60,000 in already accumulated assets. Because we are still assuming 25 years until retirement, we multiply $60,000 by an investment factor of Check the table below for the appropriate investment factor for your situation.) 7 Amount needed at retirement to get the amount entered in Line 5 $410,000 (Multiply Line 5 by 12.5 a payout factor which assumes 2% inflation, 7% return and that 20 years of retirement income will be needed) 8 Determine how much needs to be allocated toward retirement income (Subtract Line 6 from Line 7) $84,200 9 Amount needed in contributions each year to achieve a goal of Line 8 (Divide Line 8 by the appropriate present value factor from the chart below. In the example, we did $84,200 divided by ) $1, Monthly contribution amount (Divide Line 9 by 12) 11 The percentage to be deducted monthly from paycheck (Line 10 divided by monthly income. In the example: $ divided by $3,333.) $ monthly investment 3.3% monthly investment Retirement needs factors Inflation Factor (2 percent inflation) Investment Factor (7 percent return) Present Value Factor (7 percent return) Note: Neither AUL, OneAmerica Securities, Inc. nor their representatives provide tax or legal advice. For answers to your specific questions please consult a qualified attorney or tax advisor. All numeric examples are hypothetical. These hypothetical investment returns are for educational purposes only and are not indicative of any particular investment or performance. Hypothetical returns assume reinvestment of earnings. Actual returns or principal value will vary. Balances shown are before reduction for taxes. 3

4 2. Contribute to your retirement plan Though starting early is important; there may be some assistance available through your plan if you are contributing later in life. Check with your plan administrator to see if catch up contributions are available. For many people it is a good idea to participate in your retirement plan as soon as possible. If you start contributing right away, your account may have more time to grow or weather ups and downs in the stock market. Your retirement plan contributions The money you contribute to your retirement account is automatically deducted from your paycheck before taxes are taken out. It goes directly into your retirement account, so your paycheck is actually less than it would have been before the deduction when taxes are taken out. This means you are paying less in current income taxes for the year. This can help reduce the impact of contributing to your retirement plan on your take-home pay. Any investment involves risk and there is no assurance that the investment objective of any investment option will be achieved. Before investing, understand that variable annuities are subject to market risk, including possible loss of principal. Put tax deferral to work for you Tax deferral simply means the contributions to your retirement plan are not currently taxed. You are putting off paying taxes on that money until you withdraw it from your retirement account. How can putting off paying taxes be a benefit? Not only are your contributions invested, but the deferred taxes allow your money to stay invested. The benefits of compound interest Compounding occurs when your principal investment generates a gain that is reinvested and experiences an additional earning. When the new balance (the original investment plus the gain) generates further earnings, the initial gain increases the total return of your initial principal. When the following gains are reinvested, future positive earnings are further compounded. Compound interest example Michael Age 25 $100 Monthly contribution over 40 years Total contribution $48k = $199,149 at retirement Note: This hypothetical investment return and fictitious name is designed to demonstrate the impact of compounding returns and is not indicative of any particular investment or performance. Hypothetical returns assume reinvestment of earnings and a 6 percent average return on investment. Actual returns or principal value will vary. Balance shown is before reduction of taxes. 4

5 Enrollment overview 3. Choose your investments An important, and sometimes confusing, step in retirement preparation is choosing which options to invest in. Because each investor has different goals and different circumstances, there is no set strategy that works for everyone. Asset classes There are different types of investments, known as asset classes, in which you may choose to invest your retirement plan contributions. The three main asset classes are: Stocks Stocks have historically had the greatest risk and highest returns among the three major asset categories. Bonds Bonds are generally less volatile than stocks but offer more modest returns. Cash equivalents Cash equivalents such as certificates of deposit, treasury bills and money market funds are generally the most conservative investments, but offer the lowest return of the three major asset categories. The mix of investments that is appropriate for you depends on your retirement goals, your risk tolerance and how long you have until retirement. Another type of investment, called an Asset Allocation fund, provides investors with a portfolio of a fixed or variable mix of the three main asset classes. These funds are a good option for investors that would prefer not to worry about making adjustments to their portfolio as the market fluctuates. Understanding risk and return Risk is the potential for an investment to lose value. Return is the change in value on an investment. Understanding the relationship between risk and return is very important as you develop your investment strategy. The amount of investment risk you are willing to take, also known as your risk tolerance, is a personal decision, which can be shaped by the amount of time you have until retirement, or your time horizon. Risk tolerance Some people are comfortable taking on the risk of frequent ups and downs of the market in return for potentially greater longterm returns. Others prefer the slow, steady return of lower risk investments. Understanding your personal attitude toward risk will help you find the right mix of investments for your portfolio. Time horizon The longer you have until retirement, the more risk you can potentially afford to take. Mixing it up with diversification Because different asset classes have varying levels of risk and return, it is important to make sure you have a good mix of investments in your portfolio. This strategy, called diversification, aims to balance risk and reward by allocating assets according to your goals, risk tolerance and investment horizon. Note: Each group of investments carry their own unique risks. Before investing, please read each fund prospectus for a detailed explanation of the risks, fees, and costs associated with each underlying investment option. Although you might reduce volatility and risk with diversification, you can t eliminate investment risk all together. Diversification does not ensure a profit or protect against loss. Bond funds have the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund. Money Market funds are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other federal government agency. Although they seek to preserve the value of your investment at $1.00 per share, it s possible to lose money by investing in money market funds. 5

6 Select the investor profile that best fits you by completing this questionnaire. What type of investor are you? This questionnaire will help you select an investor profile, based on your personal situation and comfort level with investing. The total score recommends which of the five risk profiles is most appropriate for you. Answer these questions and total your score at the bottom. I expect to begin withdrawing money from my retirement account in: 1 year 2 4 years 5 7 years 8 10 years 11+ years Score Once I begin withdrawing money from my retirement account, I expect the withdrawals to last: I want a lump sum distribution 2 4 years 5 7 years 8 10 years 11+ years Score I would take money out of my retirement account to pay for a large, unexpected expense. To meet my financial goals, my investments must grow at a high rate of return. I prefer investments that are a low risk, even if the returns are lower than the rate of inflation (the rise in prices over time). I prefer an investment strategy designed to grow steadily and avoid sharp ups and downs. When it comes to investing, protecting the money I have is my highest priority. I am unwilling to wait several years to recover from losses I could incur in an extended down market. I always choose investments with the highest possible return, even if the investments may frequently experience large declines in value because of higher risk. If I had $1,000 invested in an account, and its value dropped to $850 after six months, I would move all my money to a more conservative account. Strongly agree Agree Neutral Disagree Strongly disagree Score TOTAL 6

7 Enrollment overview Selecting an investor model to suit your style Conservative strategy Score The conservative investment strategy seeks to provide high current income and low longterm capital appreciation. 20% Stocks 80% Bonds Investment Percentage n Large-cap stocks 11% n Mid-cap stocks 3% n Foreign stocks 3% n World stocks 3% n High yield bonds 5% n Intermediate-term bonds 13% n Short-term bonds 34% n Fixed interest/stable 28% value/cash Moderate strategy Score The moderate strategy seeks to provide high current income and moderate long-term capital appreciation. 40% Stocks 60% Bonds Balanced strategy Score The balanced strategy seeks to provide above average capital appreciation and a moderate level of current income. 60% Stocks 40% Bonds Investment Percentage n Large-cap stocks 19% n Mid-cap stocks 5% n Small-cap stocks 3% n Foreign stocks 8% n World stocks 5% n High yield bonds 5% n Intermediate-term bonds 13% n Short-term bonds 23% n Fixed interest/stable 19% value/cash Investment Percentage n Large-cap stocks 28% n Mid-cap stocks 6% n Small-cap stocks 5% n Foreign stocks 13% n World stocks 8% n High yield bonds 4% n Intermediate-term bonds 10% n Short-term bonds 15% n Fixed interest/stable 11% value/cash 7

8 Selecting an investor model to suit your style (continued) Growth strategy Score The growth investment strategy seeks to provide high long-term capital appreciation with low current income. 80% Stocks 20% Bonds Investment Percentage n Large-cap stocks 33% n Mid-cap stocks 9% n Small-cap stocks 8% n Foreign stocks 16% n World stocks 14% n Intermediate-term bonds 9% n Short-term bonds 11% Equity growth strategy Score An equity growth strategy seeks to provide high long-term capital appreciation. 100% Stocks 0% Bonds Investment Percentage n Large-cap stocks 39% n Mid-cap stocks 12% n Small-cap stocks 11% n Foreign stocks 21% n World stocks 17% Note: While diversification through an asset allocation strategy is a useful technique that can help to manage overall portfolio risk and volatility, there is no certainty or assurance that a diversified portfolio will enhance overall return or outperform one that is not diversified. An investment made according to asset allocation models neither guarantees a profit nor eliminates the possibility of loss. 8

9 Enrollment overview 4. Review your plan regularly The last step in investing in your retirement plan is to review your account regularly. Like other important things in life, your retirement account requires periodic monitoring and review. Be sure to carefully read your quarterly statements, call with any questions you may have and review all materials given to you from your employer about retirement preparation or the plan. As your life and priorities change, the amount you can contribute to your retirement account or your investment allocation strategy may also change. Any of these events might signal a need to re-evaluate your retirement plan choices. Marriage Birth or adoption of a child Change of employment for you or your spouse Divorce Financial emergency Death of a spouse Approaching retirement In addition to reviewing your account when major life events happen, it is also a good idea to do a review annually (perhaps with a financial professional) to determine whether or not you are still on track to reach your goals. This is a good habit because there will be tweaks you may want to make along the way such as rebalancing your investment mix or increasing your contribution level. Log in to your account at www. accountservices.aul.com 24 hours/day, 7 days/week to: Access account balances View investment option performance Review or change investment options Update contact information Make deferral changes Designate and update beneficiaries 9

10 Online tools In today s busy world, many investors enjoy learning about retirement related topics online. Through our Investment Education Toolbox and the AdvicePlus tool from MasteryPOINT Financial Technologies, you can educate yourself and develop your retirement preparation strategy wherever (and whenever) it works best for you. Investment Education Toolbox By visiting you have access to retirement preparation resources such as: Our Asset Allocation Builder questionnaire to assist you with determining what type of investor you are Financial education resources from McGraw-Hill Financial Communications presented through articles, interactive charts and tutorials on a variety of topics Calculators and other tools to help you determine your retirement preparation strategy AdvicePlus from MasteryPOINT If applicable for your plan, AdvicePlus is available to you by logging in to your retirement account at and includes: Strategy Builder Designed to help you create a retirement action plan and provide recommendations from MasteryPOINT Retirement education Provides information on retirement preparation concepts and the advantages of your retirement plan Calculators Includes the College Planner, the Distribution Planner, the Paycheck Calculator and many more 10

11 Enrollment overview Get started! eenrollment Registration 1. Go to 2. Click on Register Now. 3. Complete the step-by-step registration process, which includes: Creation of User ID and Password Creation of password recovery information Enrollment 1. Enter your User ID and Password created during Registration. Click Login. 2. Complete the step-by-step enrollment process, which includes: Entry of deferral information Investment selection Information regarding account consolidation (if any) Note: eenrollment is available for most, but not all plans. Enroll today at com/enrollment or by calling Enroll over the phone via OneAmerica TeleServe Call Register by entering some information: Enter your Social Security Number (SSN) Then re-enter the last four digits of your SSN Enter the numeric portion of your Plan Number Enter your birth date (mm/dd/yyyy) 3. Choose and enter a password 4. Answer the questions about whether you want to make a deferral contribution and what percentage you want to defer 5. Enter your investment option elections 6. Indicate whether you have other retirement accounts that you wish to roll over to your AUL retirement plan Paper enrollment form If your plan offers enrollment with a paper enrollment form, simply fill out the form and return it following the instructions given by your plan administrator. TO DO LIST: PAY BILLS LAUNDRY PARTICIPATE Now that you know the steps to take to prepare for retirement, make today that one day that you get started! 11

12 Investment information is provided for educational purposes only. Contributions to your retirement account are deposited into separate accounts, which in turn are invested into the investment options you select. It is not possible to invest your contributions directly in stocks, bonds or mutual funds. Tax qualified retirement plans from American United Life Insurance Company (AUL) are funded by an AUL group annuity contract. While a participant in an annuity contract may benefit from additional investment and annuity related benefits under the annuity contract, any tax deferral is provided by the plan and not the annuity contract. Contributions are used to purchase units of an investment account within an AUL separate account and AUL in turn purchases shares of the corresponding investment option. Variable products are sold by prospectus. Both the product prospectus and underlying fund prospectuses can be obtained from your investment professional or by writing to 433 N. Capitol Ave., Indianapolis, IN 46204, Before investing, carefully consider the fund s investment objectives, risks, charges and expenses. The product prospectus and underlying fund prospectus contain this and other important information. Read the prospectuses carefully before investing. The retirement plan discussed is funded by a group annuity. A variable annuity contract is a long-term, tax deferred investment designed for retirement that will fluctuate in value. The annuity has underlying investment options. These investment options may not be available for purchase outside the variable annuity. Group variable annuity contracts are issued by AUL and registered group variable annuity contracts are distributed by OneAmerica Securities, Inc., Member FINRA, SIPC, a Registered Investment Advisor, 433 N. Capitol Ave., Indianapolis, IN 46204, , which is a wholly owned subsidiary of AUL. MasteryPOINT Financial Technologies and McGraw Hill Financial Communications are not affiliates of American United Life Insurance Company (AUL) or OneAmerica Securities and are not OneAmerica companies. About AUL American United Life Insurance Company (AUL) is the founding member of OneAmerica and is focused on providing a strong portfolio of products for individuals, families and businesses. AUL uses a national network of experienced professionals utilizing an extensive menu of financial products, including life insurance, retirement, annuities and employee benefit plan products. The company helps consumers prepare for tomorrow by helping to protect their financial futures. About OneAmerica OneAmerica Financial Partners, Inc., is headquartered in Indianapolis, IN. The companies of OneAmerica can trace their solid foundations back more than 130 years in the insurance and financial services marketplace. OneAmerica s nationwide network of companies offers a variety of products to serve the financial needs of their policyholders and other clients. These products include retirement plan products and services; individual life insurance, annuities, long-term care solutions and employee benefit plan products. The goal of OneAmerica is to blend the strengths of each company to achieve greater collective results. The products of the OneAmerica companies are distributed through a network of employees, agents, brokers and other distribution sources that are committed to increasing value to our policyholders by helping them prepare to meet their financial goals. American United Life Insurance Company a OneAmerica company One American Square, P.O. Box 368 Indianapolis, IN (317) OneAmerica Financial Partners, Inc. All rights reserved. OneAmerica and the OneAmerica banner are all registered trademarks of OneAmerica Financial Partners, Inc. R /17/12