Financial Fitness Forever

Transcription

1 4/11/ :46:22 AM Financial Fitness Forever Five Steps to More Money, Less Risk and More Peace of Mind by Paul Merriman President, The Merriman Financial Education Foundation Page 1 of 88

2 4/11/ :46:22 AM The Merriman Financial Education Foundation Mission Statement The Merriman Financial Education Foundation believes "knowledge is power" and is dedicated to providing comprehensive financial education to investors, with information and tools to make informed decisions in their own best interest and successfully implement their retirement savings program. Page 2 of 88

3 4/11/ :46:22 AM Current Projects of the Merriman Foundation Personal Investing 216 Class at Western Washington University Weekly retirement column at Marketwatch.com Weekly podcasts at Merriman Podcasts and itunes Free ebooks and other free resources at paulmerriman.com Free Bi-monthly newsletter to subscribers Page 3 of 88

4 4/11/ :46:22 AM What You Will Learn How to select the best equity investments How much in stocks and bonds How to select the best performing mutual funds How to take money out of investments in retirement How to leave a legacy to your children/grandchildren Page 4 of 88

5 4/11/ :46:22 AM The Importance of Making an Extra Half Percent Invest $5,000 for 40 years and take 4% distributions for 25 years 8% $1,464,283 at 65/ $2,499,788 distributions $3,947,406 at death 8.5% $1,694,691 at 65/ $3,110,897 distributions $5,172,415 at death 8% $2,499,788 + $3,947,406 = $6,447, % $3,110,897 + $5,172,415 = $8,283,312 Page 5 of 88

6 4/11/ :46:22 AM 50 Years of Improvements in Investment Products: Commissions on stocks fall 99% (May 1, 1975) Commissions on mutual funds fall by 30% to 50% No-load funds eliminate commissions entirely Mutual Fund expense ratios fall by 90% New retirement accounts (IRAs and 401ks) Page 6 of 88

7 4/11/ :46:22 AM 50 Years of Improvements (continued) Index funds guarantee market rates of return (1976) Index funds for dozens of equity asset classes stocks to 10,000-20,000 stocks in 10 asset classes Money magazine (1972), Wall Street Week ( ) Academics teach investors how to invest Fama/French discover small cap and value premiums Target date funds (1994) Page 7 of 88

8 4/11/ :46:22 AM 50 Years of Improvements (continued) Exchange Traded Funds (1993) Commission-free ETFs Move from bank trust department to investment advisors Successful investors move from offense to defense Page 8 of 88

9 4/11/ :46:22 AM Offense Versus Defense? One company vs. many One industry vs. many One asset class vs. many One country vs. many Low vs. high expenses Low vs. high turnover Low vs. high taxes Passively vs. actively managed funds Adding bonds for lower risk and higher returns Page 9 of 88

10 4/11/ :46:22 AM Three Big Problems for Investors: Pensions disappearing (80/20) Savings rates too low (11% vs. 5%) Investors are own worst enemy Page 10 of 88

11 4/11/ :46:22 AM DALBAR Quantitative Analysis of Investor Behavior Summary of Investor Returns as of 12/31/2015 Equity Funds Investor Returns Asset Allocation Funds Fixed Income Funds Inflation S&P 500 Barclays Aggregate Bond Index 30 Year Year Year Year Year Months Page 11 of 88

12 4/11/ :46:23 AM Ultimate Buy & Hold Equity Portfolio Ultimate Buy & Hold Equity Portfolio Performance (46 years) (with YEARLY rebalancing) S&P US LCV + US SCB + US SCV + US REITs + Int'l + EM Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Portfolio 5 Portfolio 6 Portfolio 7 Initial $100,000 Portfolio Grew to: $5,859,979 $6,946,224 $7,399,214 $8,819,731 $9,319,507 $12,611,816 $13,645,527 Annualized Compound Rate of Return 9.25% 9.66% 9.81% 10.23% 10.36% 11.09% 11.28% Annualized Standard Deviation 17.30% 16.44% 16.59% 16.75% 16.48% 17.21% 17.96% Difference from Portfolio 1 0 $1,086,245 $1,539,236 $2,959,752 $3,459,528 $6,751,837 $7,785,548 Ultimate Buy & Hold Equity Portfolio Asset Class Allocation Portfolio S&P 500 US LCV US SCB US SCV US REITS Int'l LCB Int'l LCV Int'l SCB Int'l SCV EM Total #1 100% 100% #2 90% 10% 100% #3 80% 10% 10% 100% #4 70% 10% 10% 10% 100% #5 60% 10% 10% 10% 10% 100% #6 20% 10% 10% 10% 10% 10% 10% 10% 10% 100% #7 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 100% Notes:Int'l LCV data available only since 1/1975, US REIT data available only since 1/1978, Int'l SCV data available only since 7/1981, EM data available only since 1/ The Merriman Financial Education Foundation Page 12 of 88

13 4/11/ :46:23 AM Four Fund Solution Table Summary of 1 Yr. Period Results LCB LCV SCB SCV 4-Fund In 88 years $100 grows to 88 year CRR Standard Deviation of CRR Best 1 year return Worst 1 year return 0% Ret. No. of 1 year periods <0% Ret. Ret. 10% Avg. Ret. of 1 yr periods Ret. <10% $351,052 $941,654 $2,074,967 $6,253,103 $1,722, % 11.0% 12.0% 13.4% 11.7% 20.1% 23.5% 28.9% 32.0% 25.2% 54.0% 92.7% 110.0% 125.2% 96.0% % -62.0% -48.0% -54.7% -51.8% % 23.8% 31.2% 34.1% 26.8% -13.6% -15.0% -15.8% -16.8% -14.4% Page 13 of 88

14 4/11/ :46:23 AM Four Fund Solution Table (continued) Summary of 15 Yr. Period Results LCB LCV SCB SCV 4-Fund Avg. 15 yr period $100 grows to $469 $634 $695 $936 $680 Avg. 15 year period CRR 10.9% 13.1% 13.8% 16.1% 13.6% Best 15 year period CRR 18.9% 21.7% 23.1% 26.4% 22.1% Worst 15 year peroid CRR 0.6% -1.4% 1.6% -1.6% 0.5% Avg. 15 yr period Std. Deviation 18.2% 20.4% 26.3% 29.1% 22.4% 10% CRR No. of 15 yr periods with <10% CRR CRR 10% 14.1% 15.0% 14.8% 16.9% 15.0% Avg. CRR for 15 yr periods CRR <10% 6.4% 6.6% 6.2% 4.2% 7.2% Page 14 of 88

15 4/11/ :46:23 AM Four Fund Solution Table (continued) Summary of 40 Yr. Period Results Average 40 yr period $100 grows to Average 40 year period CRR Best 40 year period CRR Worst 40 year period CRR LCB LCV SCB SCV 4-Fund $6,307 $15,676 $17,264 $40,744 $17, % 13.5% 13.7% 16.2% 13.8% 12.5% 15.8% 16.7% 19.0% 15.9% % 8.3% 10.7% 11.8% 10.7% Avg. 40 yr period Standard 17.8% 19.8% 26.7% 28.6% 22.1% 10% Deviation CRR No. of 40 yr periods with <10% CRR CRR 10% 11.4% 13.9% 13.7% 16.2% 13.8% Avg. CRR for 40 yr periods CRR <10% 9.6% 9.0% N/A N/A N/A Page 15 of 88

16 4/11/ :46:23 AM Fine Tuning Table - Using Ultimate Buy & Hold Equity Portfolio 1.00% Management Fee is subtracted from all portfolios, except the S&P 500 Year 100% Bonds 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100% Stock % 11.9% 10.2% 8.5% 6.8% 5.1% 3.4% 1.8% 0.1% -1.6% -3.2% 4.0% % 9.0% 11.3% 13.7% 16.1% 18.5% 21.0% 23.5% 26.0% 28.5% 31.1% 14.3% % 5.2% 6.7% 8.3% 9.8% 11.4% 12.9% 14.5% 16.1% 17.6% 19.2% 19.0% % 1.1% -1.1% -3.4% -5.6% -7.8% -10.0% -12.1% -14.2% -16.3% -18.4% -14.7% % 3.3% 0.2% -2.9% -5.9% -8.8% -11.7% -14.5% -17.3% -19.9% -22.6% -26.5% % 10.2% 13.8% 17.4% 21.1% 24.9% 28.7% 32.6% 36.5% 40.5% 44.5% 37.2% % 9.6% 10.6% 11.6% 12.5% 13.5% 14.4% 15.3% 16.2% 17.0% 17.9% 23.8% % 4.4% 6.7% 9.0% 11.4% 13.9% 16.4% 18.9% 21.5% 24.2% 26.8% -7.2% % 4.2% 6.9% 9.7% 12.5% 15.4% 18.3% 21.3% 24.3% 27.4% 30.6% 6.6% % 7.1% 8.1% 9.2% 10.2% 11.2% 12.3% 13.3% 14.3% 15.3% 16.3% 18.4% S&P 500 Page 16 of 88

17 4/11/ :46:23 AM Fine Tuning Table - Using Ultimate Buy & Hold Equity Portfolio (continued) Year 100% Bonds 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100% Stock % 8.3% 10.3% 12.2% 14.2% 16.1% 18.1% 20.0% 22.0% 23.9% 25.8% 32.4% % 9.1% 8.5% 7.9% 7.2% 6.6% 6.0% 5.4% 4.7% 4.1% 3.4% -4.9% % 21.5% 20.5% 19.5% 18.5% 17.5% 16.5% 15.5% 14.5% 13.5% 12.4% 21.4% % 9.1% 11.1% 13.2% 15.3% 17.4% 19.5% 21.7% 23.9% 26.1% 28.4% 22.5% % 12.3% 11.7% 11.1% 10.5% 9.8% 9.2% 8.6% 7.9% 7.2% 6.5% 6.3% % 18.0% 20.7% 23.5% 26.3% 29.2% 32.1% 35.1% 38.1% 41.2% 44.4% 32.2% % 12.9% 14.8% 16.7% 18.6% 20.6% 22.6% 24.5% 26.5% 28.6% 30.6% 18.5% % 4.5% 5.8% 7.1% 8.4% 9.7% 10.9% 12.0% 13.1% 14.1% 15.0% 5.2% % 6.8% 8.6% 10.4% 12.3% 14.1% 16.0% 17.9% 19.8% 21.8% 23.8% 16.8% % 11.8% 12.6% 13.4% 14.3% 15.1% 15.9% 16.7% 17.5% 18.3% 19.1% 31.5% S&P 500 Page 17 of 88

18 4/11/ :46:23 AM Fine Tuning Table - Using Ultimate Buy & Hold Equity Portfolio (continued) Year 100% Bonds 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100% Stock % 7.2% 5.0% 2.8% 0.6% -1.6% -3.8% -5.9% -8.0% -10.1% -12.2% -3.1% % 15.0% 15.9% 16.8% 17.7% 18.6% 19.4% 20.2% 21.1% 21.9% 22.7% 30.5% % 5.7% 5.3% 4.8% 4.4% 3.9% 3.4% 3.0% 2.5% 2.0% 1.5% 7.6% % 10.6% 12.7% 14.7% 16.8% 19.0% 21.1% 23.3% 25.5% 27.7% 29.9% 10.1% % -3.6% -3.0% -2.4% -1.8% -1.2% -0.7% -0.1% 0.5% 1.1% 1.6% 1.3% % 15.4% 15.5% 15.5% 15.5% 15.5% 15.5% 15.5% 15.5% 15.4% 15.4% 37.6% % 3.2% 4.3% 5.4% 6.5% 7.6% 8.8% 9.9% 11.0% 12.1% 13.3% 23.0% % 5.8% 5.7% 5.6% 5.5% 5.3% 5.2% 5.0% 4.8% 4.6% 4.4% 33.4% % 7.0% 6.9% 6.8% 6.6% 6.4% 6.1% 5.8% 5.4% 4.9% 4.4% 28.6% % 0.6% 2.8% 4.9% 7.1% 9.3% 11.6% 13.8% 16.1% 18.5% 20.8% 21.0% S&P 500 Page 18 of 88

19 4/11/ :46:24 AM Fine Tuning Table - Using Ultimate Buy & Hold Equity Portfolio (continued) Year 100% Bonds 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100% Stock % 9.3% 7.9% 6.6% 5.3% 3.9% 2.6% 1.3% 0.0% -1.3% -2.6% -9.1% % 6.2% 5.3% 4.4% 3.5% 2.5% 1.5% 0.5% -0.6% -1.7% -2.8% -11.9% % 9.3% 7.3% 5.3% 3.2% 1.2% -0.9% -2.9% -4.9% -7.0% -9.0% -22.1% % 6.4% 10.4% 14.6% 18.9% 23.3% 27.9% 32.5% 37.4% 42.3% 47.4% 28.7% % 5.0% 7.0% 9.0% 11.1% 13.2% 15.3% 17.4% 19.6% 21.8% 24.0% 10.9% % 2.1% 3.3% 4.6% 5.9% 7.1% 8.4% 9.7% 11.0% 12.2% 13.5% 4.9% % 4.1% 6.3% 8.4% 10.6% 12.9% 15.1% 17.4% 19.8% 22.1% 24.5% 15.8% % 7.7% 7.2% 6.7% 6.1% 5.6% 5.0% 4.4% 3.8% 3.1% 2.5% 5.5% % 1.2% -4.4% -9.8% -14.9% -19.9% -24.7% -29.2% -33.6% -37.8% -41.8% -37.0% % 4.6% 8.3% 11.9% 15.6% 19.4% 23.1% 26.8% 30.6% 34.3% 38.1% 26.5% S&P 500 Page 19 of 88

20 4/11/ :46:24 AM Fine Tuning Table - Using Ultimate Buy & Hold Equity Portfolio (continued) Year 100% Bonds 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100% Stock S&P % 6.2% 7.9% 9.6% 11.2% 12.8% 14.3% 15.9% 17.3% 18.8% 20.1% 15.1% % 5.3% 3.7% 2.0% 0.4% -1.3% -3.0% -4.7% -6.4% -8.1% -9.9% 2.1% % 4.0% 5.6% 7.2% 8.8% 10.3% 11.9% 13.5% 15.1% 16.6% 18.2% 16.0% % -1.9% 0.7% 3.4% 6.2% 9.0% 11.9% 14.8% 17.9% 20.9% 24.1% 32.4% % 2.4% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.4% 13.7% % -0.5% -0.7% -1.0% -1.3% -1.5% -1.9% -2.2% -2.5% -2.9% -3.2% 1.4% Page 20 of 88

21 4/11/ :46:24 AM Fine Tuning Table - Using Ultimate Buy & Hold Equity Portfolio (continued) 100% Bonds 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100% Stock S&P 500 Annualized Return 6.2% 6.8% 7.4% 8.0% 8.6% 9.1% 9.6% 10.1% 10.6% 11.0% 11.4% 10.3% Standard Deviation 4.1% 4.1% 4.6% 5.4% 6.5% 7.8% 9.1% 10.5% 11.9% 13.3% 14.8% 15.3% Worst 3 Months -4.8% -5.3% -8.5% -12.4% -16.4% -20.3% -24.1% -27.7% -31.3% -34.7% -38.1% -29.6% Worst 6 Months -4.5% -6.3% -10.2% -15.8% -21.2% -26.3% -31.1% -35.7% -40.1% -44.2% -48.2% -41.8% Worst 12 Months -4.5% -5.4% -11.6% -17.5% -23.2% -28.5% -33.6% -38.3% -42.9% -47.1% -51.1% -43.3% Worst 36 Months -0.8% 0.0% 0.3% -2.1% -4.4% -6.8% -9.2% -11.5% -13.8% -16.2% -18.5% -16.1% Annualized Worst 60 Months Annualized 1.0% 1.7% 1.9% 1.2% 0.4% -0.5% -1.3% -2.2% -3.2% -4.1% -5.1% -6.6% Worst Drawdown -5.5% -7.2% -11.9% -18.0% -25.0% -31.8% -38.1% -43.9% -49.2% -54.1% -58.6% -50.9% Page 21 of 88

22 4/11/ :46:24 AM What We Should Know About Bear Markets Bear market starts with 20% loss Complete loss is normal with individual companies Never a permanent bear market for market Bear market every 3.4 years since 1929 Average loss 35% lasting 10 months Bull markets average 107% over 31 months Page 22 of 88

23 4/11/ :46:24 AM Why Index Funds Are the Best The big debate: Active vs. Passive Active: market timing and stock picking Easy to understand Investor likely to be in top 10-20% Come with a guaranteed return Low expenses Tax efficient Page 23 of 88

24 4/11/ :46:24 AM Why Index Funds Are the Best (continued) More diversification Offer greater control of asset allocation 60% of U.S. equity funds survive 10 years (SPIVA Report) 10 year returns of indexes in top quartile 2% better than 3rd quartile and 1% than 2 nd quartile No need for continual evaluation of performance Buffet, Lynch, Kahneman, Graham, Schwab agree Page 24 of 88

25 4/11/ :46:24 AM s in Retirement 25 years education, 40 years work, 25 years in retirement 16,000 hours of education to earn more How many hours of education to invest extra earnings? Who wants to teach investors what to do with their money? Page 25 of 88

26 4/11/ :46:24 AM How important is the distribution decision? How much you need to retire Cash flow for basics or more How much you leave to children and charities How to find peace of mind for saver and spender Page 26 of 88

27 4/11/ :46:24 AM Finding Best Balance of Asset Allocation and Rate What if need money to last 10, 20, 30 or 40 years? What if you want to retire early with just enough? What if you want to retire with more than enough? What if you want to live well and leave a lot to others? What if you want to live well and leave less to others? What if you want to guarantee you won t run out of money? Page 27 of 88

28 4/11/ :46:24 AM Table 1: Very Conservative Fixed Schedule ($30,000) Initial investment: $1 million. Fixed initial distribution grows with inflation. Results reflect Fine Tuning Table returns. Year 40/60 50/50 60/40 S&P 500 CPI (%) 1970 $1,036,101 $1,019,684 $1,003,357 $1,009,052 $30, % 1971 $1,165,952 $1,170,914 $1,175,467 $1,117,352 $31, % 1972 $1,244,406 $1,267,460 $1,290,310 $1,290,466 $32, % 1973 $1,142,810 $1,137,526 $1,131,384 $1,072,341 $33, % 1974 $1,040,798 $1,003,544 $966,533 $761,558 $36, % 1975 $1,210,625 $1,201,653 $1,190,735 $988,302 $41, % 1976 $1,312,724 $1,313,424 $1,311,536 $1,169,285 $44, % 1977 $1,411,340 $1,443,143 $1,472,556 $1,042,353 $46, % 1978 $1,532,483 $1,608,251 $1,683,786 $1,058,181 $49, % 1979 $1,629,273 $1,728,827 $1,829,610 $1,189,297 $53, % 1980 $1,790,650 $1,936,835 $2,088,327 $1,493,831 $61, % 1981 $1,846,719 $1,991,880 $2,140,737 $1,355,202 $68, % 1982 $2,099,941 $2,252,759 $2,406,893 $1,554,515 $74, % 1983 $2,330,775 $2,552,908 $2,783,796 $1,809,299 $77, % 1984 $2,485,548 $2,715,428 $2,951,795 $1,836,965 $80, % 1985 $3,033,713 $3,399,670 $3,788,977 $2,317,037 $83, % 1986 $3,495,896 $3,994,753 $4,537,119 $2,641,859 $87, % 1987 $3,695,045 $4,284,265 $4,931,850 $2,687,383 $88, % 1988 $4,045,574 $4,784,962 $5,615,013 $3,031,710 $91, % 1989 $4,513,091 $5,396,622 $6,397,014 $3,860,180 $96, % Page 28 of 88

29 4/11/ :46:25 AM Table 1: Very Conservative Fixed Schedule ($30,000) (continued) Year 40/60 50/50 60/40 S&P 500 CPI (%) 1990 $4,437,736 $5,210,714 $6,058,958 $3,643,005 $100, % 1991 $5,097,834 $6,051,586 $7,107,748 $4,613,860 $106, % 1992 $5,205,594 $6,173,464 $7,238,059 $4,847,412 $109, % 1993 $5,949,900 $7,209,120 $8,628,312 $5,211,035 $113, % 1994 $5,727,620 $7,005,190 $8,456,098 $5,162,026 $116, % 1995 $6,477,540 $7,953,210 $9,628,424 $6,937,576 $119, % 1996 $6,770,051 $8,429,486 $10,339,191 $8,379,594 $122, % 1997 $7,007,724 $8,746,392 $10,742,242 $11,006,140 $126, % 1998 $7,334,041 $9,168,034 $11,261,388 $13,985,786 $128, % 1999 $7,715,286 $9,879,696 $12,417,641 $16,770,584 $130, % 2000 $7,979,056 $10,127,688 $12,602,831 $15,121,386 $134, % 2001 $8,113,722 $10,240,292 $12,653,019 $13,201,834 $138, % 2002 $8,229,186 $10,218,448 $12,404,535 $10,174,061 $141, % 2003 $9,612,108 $12,422,589 $15,676,150 $12,907,016 $144, % 2004 $10,514,781 $13,892,683 $17,902,160 $14,147,862 $147, % 2005 $10,971,084 $14,721,422 $19,242,475 $14,683,379 $151, % 2006 $11,963,818 $16,438,580 $21,973,788 $16,820,795 $157, % 2007 $12,525,885 $17,182,992 $22,899,464 $17,575,165 $161, % 2008 $10,512,744 $13,629,710 $17,126,602 $10,967,168 $167, % 2009 $11,962,664 $16,068,091 $20,875,483 $13,657,109 $167, % Page 29 of 88

30 4/11/ :46:25 AM Table 1: Very Conservative Fixed Schedule ($30,000) (continued) Year 40/60 50/50 60/40 S&P 500 CPI (%) 2010 $13,109,900 $17,928,709 $23,673,409 $15,515,871 $172, % 2011 $12,984,621 $17,524,302 $22,797,268 $15,664,882 $175, % 2012 $13,926,404 $19,138,971 $25,315,483 $17,962,582 $180, % 2013 $14,591,252 $20,661,032 $28,118,936 $23,537,453 $183, % 2014 $14,764,989 $20,988,088 $28,633,002 $26,548,005 $186, % 2015 $14,395,047 $20,479,225 $27,918,491 $26,725,185 $187, % Total distributions $4,982,173 Page 30 of 88

31 4/11/ :46:25 AM Table 2: Conservative Fixed Schedule ($40,000) Year 40/60 50/50 60/40 S&P 500 CPI (%) 1970 $1,025,419 $1,009,172 $993,013 $998,650 $40, % 1971 $1,141,309 $1,145,956 $1,150,194 $1,093,402 $42, % 1972 $1,205,374 $1,227,527 $1,249,464 $1,248,999 $43, % 1973 $1,095,319 $1,090,306 $1,084,452 $1,027,334 $45, % 1974 $984,565 $949,312 $914,261 $719,439 $49, % 1975 $1,125,846 $1,116,743 $1,105,754 $911,627 $55, % 1976 $1,200,740 $1,200,363 $1,197,481 $1,056,085 $58, % 1977 $1,269,338 $1,296,795 $1,321,845 $922,952 $61, % 1978 $1,354,148 $1,420,354 $1,485,968 $913,365 $65, % 1979 $1,412,959 $1,499,849 $1,587,377 $996,519 $71, % 1980 $1,520,396 $1,647,261 $1,778,245 $1,211,615 $81, % 1981 $1,532,340 $1,658,723 $1,787,802 $1,065,073 $91, % 1982 $1,697,808 $1,831,961 $1,966,656 $1,171,995 $99, % 1983 $1,837,435 $2,028,608 $2,226,679 $1,308,928 $103, % 1984 $1,910,891 $2,110,026 $2,314,071 $1,276,668 $107, % 1985 $2,272,491 $2,581,422 $2,909,487 $1,539,525 $111, % 1986 $2,558,352 $2,973,008 $3,423,632 $1,686,354 $116, % 1987 $2,646,659 $3,131,582 $3,664,994 $1,651,008 $117, % 1988 $2,834,029 $3,434,348 $4,109,713 $1,785,327 $122, % 1989 $3,092,114 $3,805,338 $4,615,145 $2,179,221 $128, % Page 31 of 88

32 4/11/ :46:25 AM Table 2: Conservative Fixed Schedule ($40,000) (continued) Year 40/60 50/50 60/40 S&P 500 CPI (%) 1990 $2,974,993 $3,612,154 $4,312,100 $1,981,777 $133, % 1991 $3,334,338 $4,114,162 $4,979,388 $2,400,145 $142, % 1992 $3,326,937 $4,122,425 $4,998,771 $2,425,492 $146, % 1993 $3,710,812 $4,724,378 $5,870,808 $2,503,653 $150, % 1994 $3,491,139 $4,512,850 $5,678,188 $2,379,595 $155, % 1995 $3,848,401 $5,028,528 $6,374,110 $3,054,766 $159, % 1996 $3,925,631 $5,237,130 $6,755,119 $3,555,090 $163, % 1997 $3,962,754 $5,338,991 $6,927,838 $4,515,826 $168, % 1998 $4,041,801 $5,497,277 $7,168,529 $5,585,462 $171, % 1999 $4,142,224 $5,818,995 $7,802,790 $6,549,625 $174, % 2000 $4,171,161 $5,861,081 $7,821,932 $5,790,356 $179, % 2001 $4,124,995 $5,818,748 $7,752,547 $4,938,943 $185, % 2002 $4,063,540 $5,697,093 $7,499,482 $3,700,778 $188, % 2003 $4,602,198 $6,787,737 $9,342,782 $4,514,591 $192, % 2004 $4,894,643 $7,459,897 $10,544,324 $4,788,076 $196, % 2005 $4,967,405 $7,775,219 $11,211,120 $4,810,664 $202, % 2006 $5,263,758 $8,539,297 $12,666,588 $5,327,884 $209, % 2007 $5,358,225 $8,787,507 $13,072,101 $5,393,955 $214, % 2008 $4,367,814 $6,859,870 $9,680,293 $3,257,411 $223, % 2009 $4,791,981 $7,920,739 $11,640,453 $3,836,278 $223, % Page 32 of 88

33 4/11/ :46:25 AM Table 2: Conservative Fixed Schedule ($40,000) (continued) Year 40/60 50/50 60/40 S&P 500 CPI (%) 2010 $5,072,627 $8,674,418 $13,047,603 $4,149,511 $230, % 2011 $4,857,815 $8,331,942 $12,431,856 $3,998,798 $233, % 2012 $5,022,085 $8,928,982 $13,646,090 $4,359,893 $240, % 2013 $5,072,424 $9,465,794 $14,994,274 $5,448,219 $244, % 2014 $4,944,740 $9,448,625 $15,115,720 $5,911,869 $248, % 2015 $4,635,916 $9,056,450 $14,590,248 $5,740,121 $250, % Total distributions $6,642,897 Page 33 of 88

34 4/11/ :46:25 AM Table 3: Moderate Fixed Schedule ($50,000) Year 40/60 50/50 60/40 S&P 500 CPI (%) 1970 $1,014,738 $998,659 $982,670 $988,247 $50, % 1971 $1,116,666 $1,120,997 $1,124,921 $1,069,451 $52, % 1972 $1,166,342 $1,187,593 $1,208,618 $1,207,532 $54, % 1973 $1,047,827 $1,043,087 $1,037,519 $982,326 $56, % 1974 $928,332 $895,079 $861,989 $677,320 $61, % 1975 $1,041,068 $1,031,833 $1,020,773 $834,952 $68, % 1976 $1,088,757 $1,087,302 $1,083,427 $942,886 $73, % 1977 $1,127,335 $1,150,446 $1,171,133 $803,550 $77, % 1978 $1,175,812 $1,232,457 $1,288,150 $768,549 $82, % 1979 $1,196,645 $1,270,871 $1,345,145 $803,741 $89, % 1980 $1,250,143 $1,357,686 $1,468,162 $929,399 $101, % 1981 $1,217,961 $1,325,566 $1,434,868 $774,944 $114, % 1982 $1,295,675 $1,411,163 $1,526,419 $789,476 $124, % 1983 $1,344,095 $1,504,308 $1,669,562 $808,556 $129, % 1984 $1,336,234 $1,504,625 $1,676,347 $716,371 $134, % 1985 $1,511,269 $1,763,173 $2,029,996 $762,013 $139, % 1986 $1,620,808 $1,951,264 $2,310,145 $730,848 $145, % 1987 $1,598,273 $1,978,898 $2,398,139 $614,634 $146, % 1988 $1,622,484 $2,083,735 $2,604,413 $538,945 $153, % 1989 $1,671,137 $2,214,055 $2,833,276 $498,263 $160, % Page 34 of 88

35 4/11/ :46:26 AM Table 3: Moderate Fixed Schedule ($50,000) (continued) Year 40/60 50/50 60/40 S&P 500 CPI (%) 1990 $1,512,251 $2,013,594 $2,565,241 $320,550 $167, % 1991 $1,570,843 $2,176,739 $2,851,028 $186,431 $177, % 1992 $1,448,279 $2,071,385 $2,759,484 $3,572 $183, % 1993 $1,471,724 $2,239,636 $3,113,305 $188, % 1994 $1,254,658 $2,020,510 $2,900,278 $193, % 1995 $1,219,261 $2,103,846 $3,119,796 $199, % 1996 $1,081,211 $2,044,773 $3,171,047 $204, % 1997 $917,783 $1,931,590 $3,113,434 $211, % 1998 $749,561 $1,826,521 $3,075,670 $214, % 1999 $569,163 $1,758,294 $3,187,939 $218, % 2000 $363,265 $1,594,473 $3,041,033 $224, % 2001 $136,269 $1,397,204 $2,852,075 $231, % 2002 $1,175,737 $2,594,428 $235, % 2003 $1,152,885 $3,009,413 $240, % 2004 $1,027,110 $3,186,488 $245, % 2005 $829,016 $3,179,766 $253, % 2006 $640,015 $3,359,388 $261, % 2007 $392,022 $3,244,738 $268, % 2008 $90,031 $2,233,985 $279, % 2009 $2,405,422 $279, % Page 35 of 88

36 4/11/ :46:26 AM Table 3: Moderate Fixed Schedule ($50,000) (continued) Year 40/60 50/50 60/40 S&P 500 CPI (%) 2010 $2,421,796 $287, % 2011 $2,066,444 $291, % 2012 $1,976,697 $300, % 2013 $1,869,612 $305, % 2014 $1,598,437 $310, % 2015 $1,262,005 $312, % Total distributions $8,303,621 Page 36 of 88

37 4/11/ :46:26 AM Table 4: Aggressive Fixed Schedule ($60,000) Year 40/60 50/50 60/40 S&P 500 CPI (%) 1970 $1,004,057 $988,147 $972,326 $977,845 $60, % 1971 $1,092,023 $1,096,039 $1,099,649 $1,045,501 $63, % 1972 $1,127,309 $1,147,660 $1,167,771 $1,166,065 $65, % 1973 $1,000,335 $995,867 $990,587 $937,319 $67, % 1974 $872,099 $840,847 $809,716 $635,201 $73, % 1975 $956,289 $946,923 $935,792 $758,277 $82, % 1976 $976,773 $974,241 $969,372 $829,686 $88, % 1977 $985,333 $1,004,097 $1,020,422 $684,149 $92, % 1978 $997,477 $1,044,559 $1,090,332 $623,734 $98, % 1979 $980,332 $1,041,893 $1,102,913 $610,963 $107, % 1980 $979,890 $1,068,112 $1,158,080 $647,183 $122, % 1981 $903,583 $992,409 $1,081,933 $484,815 $137, % 1982 $893,542 $990,364 $1,086,183 $406,956 $149, % 1983 $850,755 $980,009 $1,112,445 $308,184 $155, % 1984 $761,577 $899,223 $1,038,623 $156,074 $161, % 1985 $750,047 $944,925 $1,150,505 $167, % 1986 $683,265 $929,519 $1,196,658 $174, % 1987 $549,887 $826,214 $1,131,283 $176, % 1988 $410,938 $733,121 $1,099,112 $183, % 1989 $250,160 $622,771 $1,051,406 $192, % Page 37 of 88

38 4/11/ :46:26 AM Table 4: Aggressive Fixed Schedule ($60,000) (continued) Year 40/60 50/50 60/40 S&P 500 CPI (%) 1990 $49,508 $415,034 $818,383 $200, % 1991 $239,316 $722,668 $213, % 1992 $20,346 $520,196 $219, % 1993 $355,801 $226, % 1994 $122,368 $232, % 1995 $238, % 1996 $245, % 1997 $253, % 1998 $257, % 1999 $261, % 2000 $268, % 2001 $277, % 2002 $282, % 2003 $288, % 2004 $294, % 2005 $303, % 2006 $314, % 2007 $322, % 2008 $335, % 2009 $335, % Page 38 of 88

39 4/11/ :46:26 AM Table 4: Aggressive Fixed Schedule ($60,000) (continued) 40/60 50/50 60/40 S&P 500 CPI (%) 2010 $345, % 2011 $350, % 2012 $360, % 2013 $366, % 2014 $372, % 2015 $375, % Total distributions $9,964,346 Page 39 of 88

40 4/11/ :46:26 AM Table 5: Very Conservative Flexible Schedule (3.00%) Initial investment: $1 million. Set percentage of account value is withdrawn at start of each year. Mgmt. fees plus costs included. 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 1970 $1,019,684 $30,000 $30,000 $1,009,052 $30,000 $30, $1,172,164 $30,591 $60,591 $1,118,922 $30,272 $60, $1,266,115 $35,165 $95,755 $1,291,310 $33,568 $93, $1,132,453 $37,983 $133,739 $1,068,870 $38,739 $132, $1,001,492 $33,974 $167,712 $762,483 $32,066 $164, $1,213,125 $30,045 $197,757 $1,014,832 $22,874 $187, $1,335,277 $36,394 $234,151 $1,219,152 $30,445 $217, $1,475,154 $40,058 $274,209 $1,097,677 $36,575 $254, $1,651,179 $44,255 $318,464 $1,134,743 $32,930 $287, $1,781,440 $49,535 $367,999 $1,303,493 $34,042 $321, $2,006,820 $53,443 $421,442 $1,674,147 $39,105 $360, $2,075,526 $60,205 $481,647 $1,544,208 $50,224 $410, $2,365,794 $62,266 $543,913 $1,818,569 $46,326 $457, $2,693,476 $70,974 $614,887 $2,161,159 $54,557 $511, $2,869,661 $80,804 $695,691 $2,227,686 $64,835 $576, $3,596,096 $86,090 $781,781 $2,856,018 $66,831 $643, $4,206,524 $107,883 $889,664 $3,282,033 $85,681 $729, $4,474,681 $126,196 $1,015,859 $3,350,097 $98,461 $827, $4,954,024 $134,240 $1,150,100 $3,795,828 $100,503 $928, $5,530,645 $148,621 $1,298,721 $4,841,431 $113,875 $1,041,908 Page 40 of 88

41 4/11/ :46:27 AM Table 5: Very Conservative Flexible Schedule (3.00%) (continued) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 1990 $5,278,178 $165,919 $1,464,640 $4,550,409 $145,243 $1,187, $6,070,214 $158,345 $1,622,985 $5,758,691 $136,512 $1,323, $6,117,761 $182,106 $1,805,092 $6,011,845 $172,761 $1,496, $7,059,188 $183,533 $1,988,624 $6,418,823 $180,355 $1,676, $6,762,826 $211,776 $2,200,400 $6,308,510 $192,565 $1,869, $7,576,869 $202,885 $2,403,285 $8,418,819 $189,255 $2,058, $7,911,658 $227,306 $2,630,591 $10,041,117 $252,565 $2,311, $8,084,324 $237,350 $2,867,941 $12,989,187 $301,234 $2,612, $8,342,726 $242,530 $3,110,470 $16,200,172 $389,676 $3,002, $8,846,937 $250,282 $3,360,752 $19,021,154 $486,005 $3,488, $8,918,271 $265,408 $3,626,160 $16,770,534 $570,635 $4,058, $8,868,585 $267,548 $3,893,708 $14,334,106 $503,116 $4,561, $8,704,123 $266,058 $4,159,766 $10,831,025 $430,023 $4,991, $10,411,391 $261,124 $4,420,890 $13,520,253 $324,931 $5,316, $11,429,615 $312,342 $4,733,231 $14,541,299 $405,608 $5,722, $11,878,034 $342,888 $5,076,120 $14,797,934 $436,239 $6,158, $13,004,477 $356,341 $5,432,461 $16,621,397 $443,938 $6,602, $13,316,151 $390,134 $5,822,595 $17,008,814 $498,642 $7,101, $10,346,646 $399,485 $6,222,080 $10,394,573 $510,264 $7,611, $11,979,348 $310,399 $6,532,479 $12,750,996 $311,837 $7,923,311 Page 41 of 88

42 4/11/ :46:27 AM Table 5: Very Conservative Flexible Schedule (3.00%) (continued) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 2010 $13,106,215 $359,380 $6,891,859 $14,231,598 $382,530 $8,305, $12,548,814 $393,186 $7,285,046 $14,096,292 $426,948 $8,732, $13,432,070 $376,464 $7,661,510 $15,861,530 $422,889 $9,155, $14,201,362 $402,962 $8,064,472 $20,368,764 $475,846 $9,631, $14,120,608 $426,041 $8,490,513 $22,462,462 $611,063 $10,242, $13,485,419 $423,618 $8,914,132 $22,090,076 $673,874 $10,916,460 Page 42 of 88

43 4/11/ :46:27 AM Table 6: Conservative Flexible Schedule (4.00%) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 1970 $1,009,172 $40,000 $40,000 $998,650 $40,000 $40, $1,148,120 $40,367 $80,367 $1,095,970 $39,946 $79, $1,227,359 $45,925 $126,292 $1,251,783 $43,839 $123, $1,086,471 $49,094 $175,386 $1,025,469 $50,071 $173, $950,922 $43,459 $218,845 $723,982 $41,019 $214, $1,139,994 $38,037 $256,882 $953,654 $28,959 $243, $1,241,847 $45,600 $302,481 $1,133,847 $38,146 $281, $1,357,792 $49,674 $352,155 $1,010,347 $45,354 $327, $1,504,145 $54,312 $406,467 $1,033,696 $40,414 $367, $1,606,077 $60,166 $466,633 $1,175,178 $41,348 $409, $1,790,618 $64,243 $530,876 $1,493,785 $47,007 $456, $1,832,830 $71,625 $602,501 $1,363,640 $59,751 $515, $2,067,618 $73,313 $675,814 $1,589,364 $54,546 $570, $2,329,733 $82,705 $758,519 $1,869,303 $63,575 $633, $2,456,536 $93,189 $851,708 $1,906,982 $74,772 $708, $3,046,655 $98,261 $949,969 $2,419,652 $76,279 $785, $3,527,076 $121,866 $1,071,835 $2,751,911 $96,786 $881, $3,713,241 $141,083 $1,212,918 $2,780,023 $110,076 $991, $4,068,634 $148,530 $1,361,448 $3,117,432 $111,201 $1,103, $4,495,373 $162,745 $1,524,193 $3,935,172 $124,697 $1,227,787 Page 43 of 88

44 4/11/ :46:27 AM Table 6: Conservative Flexible Schedule (4.00%) (continued) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 1990 $4,245,936 $179,815 $1,704,008 $3,660,496 $157,407 $1,385, $4,832,735 $169,837 $1,873,846 $4,584,719 $146,420 $1,531, $4,820,377 $193,309 $2,067,155 $4,736,922 $183,389 $1,715, $5,504,815 $192,815 $2,259,970 $5,005,453 $189,477 $1,904, $5,219,341 $220,193 $2,480,163 $4,868,714 $200,218 $2,104, $5,787,310 $208,774 $2,688,937 $6,430,402 $194,749 $2,299, $5,980,727 $231,492 $2,920,429 $7,590,467 $257,216 $2,556, $6,048,249 $239,229 $3,159,658 $9,717,799 $303,619 $2,860, $6,177,225 $241,930 $3,401,588 $11,995,134 $388,712 $3,248, $6,483,028 $247,089 $3,648,677 $13,938,685 $479,805 $3,728, $6,467,927 $259,321 $3,907,998 $12,162,738 $557,547 $4,286, $6,365,585 $258,717 $4,166,715 $10,288,559 $486,510 $4,772, $6,183,131 $254,623 $4,421,339 $7,694,015 $411,542 $5,184, $7,319,674 $247,325 $4,668,664 $9,505,343 $307,761 $5,492, $7,952,690 $292,787 $4,961,451 $10,117,790 $380,214 $5,872, $8,179,496 $318,108 $5,279,558 $10,190,208 $404,712 $6,277, $8,862,869 $327,180 $5,606,738 $11,327,889 $407,608 $6,684, $8,981,723 $354,515 $5,961,253 $11,472,418 $453,116 $7,137, $6,906,851 $359,269 $6,320,522 $6,938,844 $458,897 $7,596, $7,914,311 $276,274 $6,596,796 $8,424,111 $277,554 $7,874,258 Page 44 of 88

45 4/11/ :46:28 AM Table 6: Conservative Flexible Schedule (4.00%) (continued) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 2010 $8,569,525 $316,572 $6,913,368 $9,305,359 $336,964 $8,211, $8,120,479 $342,781 $7,256,149 $9,121,869 $372,214 $8,583, $8,602,435 $324,819 $7,580,969 $10,158,358 $364,875 $8,948, $9,001,356 $344,097 $7,925,066 $12,910,487 $406,334 $9,354, $8,857,902 $360,054 $8,285,120 $14,090,772 $516,419 $9,871, $8,372,235 $354,316 $8,639,436 $13,714,316 $563,631 $10,434,696 Page 45 of 88

46 4/11/ :46:28 AM Table 7: Moderate Flexible Schedule (5.00%) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 1970 $998,659 $50,000 $50,000 $988,247 $50,000 $50, $1,124,325 $49,933 $99,933 $1,073,257 $49,412 $99, $1,189,402 $56,216 $156,149 $1,213,071 $53,663 $153, $1,041,904 $59,470 $215,619 $983,405 $60,654 $213, $902,416 $52,095 $267,715 $687,052 $49,170 $262, $1,070,574 $45,121 $312,835 $895,582 $34,353 $297, $1,154,076 $53,529 $366,364 $1,053,710 $44,779 $342, $1,248,683 $57,704 $424,068 $929,158 $52,686 $394, $1,368,866 $62,434 $486,502 $940,728 $46,458 $441, $1,446,405 $68,443 $554,945 $1,058,346 $47,036 $488, $1,595,802 $72,320 $627,266 $1,331,264 $52,917 $541, $1,616,406 $79,790 $707,056 $1,202,619 $66,563 $607, $1,804,476 $80,820 $787,876 $1,387,089 $60,131 $667, $2,012,053 $90,224 $878,100 $1,614,406 $69,354 $737, $2,099,465 $100,603 $978,702 $1,629,792 $80,720 $817, $2,576,684 $104,973 $1,083,676 $2,046,402 $81,490 $899, $2,951,924 $128,834 $1,212,510 $2,303,164 $102,320 $1,001, $3,075,359 $147,596 $1,360,106 $2,302,455 $115,158 $1,116, $3,334,599 $153,768 $1,513,874 $2,555,007 $115,123 $1,231, $3,645,971 $166,730 $1,680,604 $3,191,620 $127,750 $1,359,738 Page 46 of 88

47 4/11/ :46:28 AM Table 7: Moderate Flexible Schedule (5.00%) (continued) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 1990 $3,407,794 $182,299 $1,862,903 $2,937,919 $159,581 $1,519, $3,838,355 $170,390 $2,033,292 $3,641,371 $146,896 $1,666, $3,788,659 $191,918 $2,225,210 $3,723,067 $182,069 $1,848, $4,281,536 $189,433 $2,414,643 $3,893,143 $186,153 $2,034, $4,017,214 $214,077 $2,628,720 $3,747,344 $194,657 $2,229, $4,407,968 $200,861 $2,829,580 $4,897,786 $187,367 $2,416, $4,507,835 $220,398 $3,049,979 $5,721,140 $244,889 $2,661, $4,511,242 $225,392 $3,275,371 $7,248,270 $286,057 $2,947, $4,559,448 $225,562 $3,500,933 $8,853,682 $362,413 $3,309, $4,735,317 $227,972 $3,728,905 $10,181,060 $442,684 $3,752, $4,675,076 $236,766 $3,965,671 $8,791,336 $509,053 $4,261, $4,553,174 $233,754 $4,199,425 $7,359,198 $439,567 $4,701, $4,376,599 $227,659 $4,427,083 $5,446,046 $367,960 $5,069, $5,127,107 $218,830 $4,645,913 $6,658,071 $272,302 $5,341, $5,512,481 $256,355 $4,902,269 $7,013,240 $332,904 $5,674, $5,610,634 $275,624 $5,177,893 $6,989,859 $350,662 $6,024, $6,016,059 $280,532 $5,458,424 $7,689,299 $349,493 $6,374, $6,033,229 $300,803 $5,759,227 $7,706,286 $384,465 $6,758, $4,591,162 $301,661 $6,060,889 $4,612,428 $385,314 $7,144, $5,206,046 $229,558 $6,290,447 $5,541,393 $230,621 $7,374,846 Page 47 of 88

48 4/11/ :46:28 AM Table 7: Moderate Flexible Schedule (5.00%) (continued) Year 50% Global Stocks/50% Bonds S&P 500 Year-end Cumulative Year-end Balance Balance Cumulative 2010 $5,578,327 $260,302 $6,550,749 $6,057,318 $277,070 $7,651, $5,230,958 $278,916 $6,829,666 $5,876,023 $302,866 $7,954, $5,483,696 $261,548 $7,091,214 $6,475,533 $293,801 $8,248, $5,678,221 $274,185 $7,365,398 $8,144,173 $323,777 $8,572, $5,529,522 $283,911 $7,649,309 $8,796,128 $407,209 $8,979, $5,171,905 $276,476 $7,925,786 $8,471,948 $439,806 $9,419,374 Page 48 of 88

49 4/11/ :46:28 AM Table 8: Aggressive Flexible Schedule (6.00%) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 1970 $988,147 $60,000 $60,000 $977,845 $60,000 $60, $1,100,780 $59,289 $119,289 $1,050,781 $58,671 $118, $1,152,236 $66,047 $185,336 $1,175,165 $63,047 $181, $998,722 $69,134 $254,470 $942,647 $70,510 $252, $855,910 $59,923 $314,393 $651,645 $56,559 $308, $1,004,714 $51,355 $365,748 $840,486 $39,099 $347, $1,071,678 $60,283 $426,031 $978,478 $50,429 $398, $1,147,324 $64,301 $490,331 $853,736 $58,709 $457, $1,244,512 $68,839 $559,171 $855,269 $51,224 $508, $1,301,165 $74,671 $633,841 $952,072 $51,316 $559, $1,420,449 $78,070 $711,911 $1,184,980 $57,124 $616, $1,423,644 $85,227 $797,138 $1,059,203 $71,099 $687, $1,572,557 $85,419 $882,557 $1,208,814 $63,552 $751, $1,734,998 $94,353 $976,910 $1,392,106 $72,529 $823, $1,791,317 $104,100 $1,081,010 $1,390,580 $83,526 $907, $2,175,350 $107,479 $1,188,489 $1,727,662 $83,435 $990, $2,465,911 $130,521 $1,319,010 $1,923,964 $103,660 $1,094, $2,541,981 $147,955 $1,466,965 $1,903,126 $115,438 $1,209, $2,727,246 $152,519 $1,619,484 $2,089,646 $114,188 $1,324, $2,950,517 $163,635 $1,783,118 $2,582,832 $125,379 $1,449,492 Page 49 of 88

50 4/11/ :46:29 AM Table 8: Aggressive Flexible Schedule (6.00%) (continued) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 1990 $2,728,742 $177,031 $1,960,150 $2,352,496 $154,970 $1,604, $3,041,155 $163,725 $2,123,874 $2,885,084 $141,150 $1,745, $2,970,184 $182,469 $2,306,343 $2,918,761 $173,105 $1,918, $3,321,250 $178,211 $2,484,554 $3,019,968 $175,126 $2,093, $3,083,409 $199,275 $2,683,829 $2,876,271 $181,198 $2,275, $3,347,718 $185,005 $2,868,834 $3,719,720 $172,576 $2,447, $3,387,527 $200,863 $3,069,697 $4,299,295 $223,183 $2,670, $3,354,402 $203,252 $3,272,949 $5,389,560 $257,958 $2,928, $3,354,559 $201,264 $3,474,213 $6,513,990 $323,374 $3,252, $3,447,280 $201,274 $3,675,486 $7,411,744 $390,839 $3,642, $3,367,599 $206,837 $3,882,323 $6,332,666 $444,705 $4,087, $3,245,265 $202,056 $4,084,379 $5,245,253 $379,960 $4,467, $3,086,576 $194,716 $4,279,095 $3,840,798 $314,715 $4,782, $3,577,806 $185,195 $4,464,289 $4,646,146 $230,448 $5,012, $3,806,237 $214,668 $4,678,958 $4,842,475 $278,769 $5,291, $3,833,230 $228,374 $4,907,332 $4,775,528 $290,548 $5,582, $4,066,954 $229,994 $5,137,326 $5,198,092 $286,532 $5,868, $4,035,629 $244,017 $5,381,343 $5,154,738 $311,886 $6,180, $3,038,703 $242,138 $5,623,481 $3,052,779 $309,284 $6,489, $3,409,400 $182,322 $5,805,803 $3,629,016 $183,167 $6,672,984 Page 50 of 88

51 4/11/ :46:29 AM Table 8: Aggressive Flexible Schedule (6.00%) (continued) 50% Global Stocks/50% Bonds S&P 500 Year Year-end Cumulative Year-end Cumulative Balance Balance 2010 $3,614,749 $204,564 $6,010,367 $3,925,135 $217,741 $6,890, $3,353,974 $216,885 $6,227,252 $3,767,575 $235,508 $7,126, $3,479,013 $201,238 $6,428,490 $4,108,263 $226,054 $7,352, $3,564,505 $208,741 $6,637,231 $5,112,507 $246,496 $7,598, $3,434,621 $213,870 $6,851,102 $5,463,648 $306,750 $7,905, $3,178,674 $206,077 $7,057,179 $5,206,894 $327,819 $8,233,353 Page 51 of 88

52 4/11/ :46:29 AM Successful Investors Know the Impact of Luck S&P 30.10% S&P -0.80% SCV -6.30% S&P 14.10% SCV 19.70% S&P 4.30% SCV 6.80% S&P 17.20% SCV 22.20% S&P 4.10% SCV 12.40% Page 52 of 88

53 4/11/ :46:29 AM Successful Investors Select the Best Sources of Advice Select competent and ethical advisor Select competent and ethical firm Select competent and ethical investments Wall Street: $20+ billion bank and brokers ( ) Main Street: Who can you trust? University Street: The only trustworthy source Page 53 of 88

54 4/11/ :46:29 AM Successful Investors Control What Can be Controlled Pie graph of all the is to know about investing What you know you know What you know you don t know What you don t know you don t know What you know you know but you re wrong What you know you know but don t do anything about it Expand what you know you know & do something about it! Page 54 of 88

55 4/11/ :46:29 AM Building a Better Target Date Fund Find target date fund for retirement date Missing small cap and value Add percentage of small cap value Page 55 of 88

56 4/11/ :46:29 AM Building a Better Target Date Fund (continued) Invested in small-cap value 0 25% 40% Pre-retirement growth rate 8% 9.5% 10.2% Value in 40 years $1.3 million $1.93 million $2.31 million 1st year payout $51,811 $77,213 $92,454 Total of 25 annual payouts $1.71 million $2.99 million $3.58 million Value after 65 years $2.43 million $3.94 million $4.5 million Lifetime return $3.84 million $7.03 million $8.41 million Page 56 of 88

57 4/11/ :46:29 AM Paul s Mutual Fund Recommendations For Vanguard Vanguard Tax Deferred Portfolios Fund Symbol Aggressive Moderate Conservative Vanguard 500 Index Admiral Shares VFIAX 11% 6% 4% Vanguard Value Index Admiral Shares VVIAX 11% 7% 5% Vanguard Tax Managed Small Cap Admiral Shares VTMSX 11% 7% 4% Vanguard Small Cap Value Index Admiral Share VSIAX 12% 7% 5% Vanguard REIT Index Admiral Shares VGSLX 5% 3% 2% Vanguard Developed Markets Index Admiral Shares VTMGX 9% 6% 3% Vanguard International Value VTRIX 18% 10% 7% Vanguard FTSE All World ex US Small Cap Index VFSVX 9% 5% 4% Vanguard Emerging Mkts Stock Index Admiral Shares VEMAX 9% 6% 4% Vanguard Globel Ex US Real Estate Index Admiral Shares VGRLX 5% 3% 2% Short Term Government Bond Index Admiral Shares VSBSX 0% 12% 18% Intermediate Term Government Bond Index Admiral Shares VSIGX 0% 20% 30% Short Term Inflation Protected Securities Index Admiral Shares VTAPX 0% 8% 12% Page 57 of 88

58 4/11/ :46:29 AM Legacy for New Born Child Create a savings account for benefit of child or grandchild Use proceeds to fund Roth IRA Invest in growth asset class Lifetime impact $10 to $50 million Page 58 of 88

59 4/11/ :46:29 AM Legacy for New Born Child Table Nominal $ CRR 12% 11% 10% 9% 8% 7% Table 1 - Deposit $3,000 at Birth --> Initial Deposit Grows to age 65 --> 5% Annual Withdrawals age 65 to age 95 age 65 $ 4,745,617 $ 2,649,201 $ 1,471,112 $ 812,538 $ 446,340 $ 243,819 Total s $ 20,133,878 $ 9,511,783 $ 4,487,412 $ 2,114,611 $ 995,540 $ 468,342 age 95 $ 30,516,981 $ 13,017,045 $ 5,509,783 $ 2,313,911 $ 964,020 $ 398,372 Table 2 - Deposit $365/yr for first 21 yrs --> Balance Grows to age 65 --> 5% Annual Withdrawals age 65 to age 95 age 21 $ 33,398 $ 29,278 $ 25,697 $ 22,584 $ 19,877 $ 17,522 age 65 $ 4,890,117 $ 2,889,055 $ 1,702,788 $ 1,001,296 $ 587,476 $ 343,932 Total s $ 20,746,934 $ 10,372,964 $ 5,194,106 $ 2,605,848 $ 1,310,338 $ 660,646 age 95 $ 31,446,192 $ 14,195,585 $ 6,377,484 $ 2,851,448 $ 1,268,851 $ 561,945 Table 3 - Deposit $365/yr until age 64 --> 5% Annual Withdrawals age 65 to age 95 age 65 $ 5,385,506 $ 3,248,813 $ 1,964,823 $ 1,192,869 $ 728,185 $ 447,865 Total s $ 22,848,684 $ 11,664,652 $ 5,993,406 $ 3,104,413 $ 1,624,184 $ 860,288 age 95 $ 34,631,821 $ 15,963,283 $ 7,358,889 $ 3,397,003 $ 1,572,761 $ 731,760 Page 59 of 88

60 4/11/ :46:29 AM Paul s Recommended No-Load Mutual Fund Portfolios Vanguard Portfolios Fidelity Portfolios T Rowe Price Portfolios Page 60 of 88

61 4/11/ :46:29 AM Paul s Recommended Commission-Free ETF Portfolios Vanguard Portfolios Fidelity Portfolios Schwab Portfolios TD Ameritrade Portfolios Page 61 of 88

62 4/11/ :46:29 AM Paul s Recommended Reading Your Money & Your Brain by Jason Zweig The Little Book of Common Sense Investing by John Bogle Thinking: Fast and Slow by Daniel Kahneman Mutual Funds for Dummies by Eric Tyson (2016 edition) Page 62 of 88

63 4/11/ :46:29 AM Articles, Free Newsletter and Free E-Books from PaulMerriman.Com The following e-books are free at paulmerriman.com: First Time Investor: Grow and Protect Your Money Investment Decisions Guaranteed to Change Your Financial Future Get Smart or Get Screwed: How to Select the Best and Get the Most Out of Your Financial Advisor Page 63 of 88

64 4/11/ :46:29 AM Articles, Free Newsletter and Free E-Books from PaulMerriman.Com The Ultimate Buy and Hold Strategy article, table and podcast is updated each year: Fine Tuning Your Asset Allocation article, table and podcast is updated each year: Retirement articles, tables and podcasts are updated each year: Page 64 of 88

65 4/11/ :46:29 AM Quotes to Make You a Successful Investor To be a success you only have to do a very few things right in your life, as long as you don t do too many things wrong. Warren Buffet "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it. John Bogle We have two classes of forecasters: Those who don t know and those who don t know they don t know. John Kenneth Galbraith, Economist Page 65 of 88

66 4/11/ :46:29 AM Questions Contact: Paul paul@paulmerriman.com Paul s free e-books Page 66 of 88

67 4/11/ :46:30 AM Equity Funds Investor Returns Asset Allocation Funds Fixed Income Funds Inflation S&P 500 Barclays Aggregate Bond Index 30 Year Year Year Year Year Months Page 67 of 88

68 4/11/ :46:30 AM Page 68 of 88

69 4/11/ :46:31 AM (46 years) (with YEARLY rebalancing) Initial $100,000 Portfolio Grew to: Annualized Compound Rate of Return Annualized Standard Deviation Difference from Portfolio 1 Ultimate Buy & Hold Equity Portfolio Performance S&P US LCV + US SCB + US SCV + US REITs + Int'l + EM Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Portfolio 5 Portfolio 6 Portfolio 7 $5,859,979 $6,946,224 $7,399,214 $8,819,731 $9,319,507 $12,611,816 $13,645, % 9.66% 9.81% 10.23% 10.36% 11.09% 11.28% 17.30% 16.44% 16.59% 16.75% 16.48% 17.21% 17.96% 0 $1,086,245 $1,539,236 $2,959,752 $3,459,528 $6,751,837 $7,785,548 Ultimate Buy & Hold Equity Portfolio Asset Class Allocation Portfolio S&P 500 US LCV US SCB US SCV US REITS Int'l LCB Int'l LCV Int'l SCB Int'l SCV EM Total #1 100% 100% #2 90% 10% 100% #3 80% 10% 10% 100% #4 70% 10% 10% 10% 100% #5 60% 10% 10% 10% 10% 100% #6 20% 10% 10% 10% 10% 10% 10% 10% 10% 100% #7 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 100% Notes: Int'l LCV data available only since 1/1975, US REIT data available only since 1/1978, Int'l SCV data available only since 7/1981, EM data available only since 1/ The Merriman Financial Education Foundation Page 69 of 88

70 4/11/ :46:31 AM Page 70 of 88

71 4/11/ :46:33 AM Year 100% Bonds Fine Tuning Table-Using UltimateBuy & HoldEquity Portfolio 1.00% ManagementFee issubtracted from allportfolios, exceptthes&p /90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/ % 11.9% 10.2% 8.5% 6.8% 5.1% 3.4% 1.8% 0.1% -1.6% -3.2% 4.0% % 9.0% 11.3% 13.7% 16.1% 18.5% 21.0% 23.5% 26.0% 28.5% 31.1% 14.3% % 5.2% 6.7% 8.3% 9.8% 11.4% 12.9% 14.5% 16.1% 17.6% 19.2% 19.0% % 1.1% -1.1% -3.4% -5.6% -7.8% -10.0% -12.1% -14.2% -16.3% -18.4% -14.7% % 3.3% 0.2% -2.9% -5.9% -8.8% -11.7% -14.5% -17.3% -19.9% -22.6% -26.5% % 10.2% 13.8% 17.4% 21.1% 24.9% 28.7% 32.6% 36.5% 40.5% 44.5% 37.2% % 9.6% 10.6% 11.6% 12.5% 13.5% 14.4% 15.3% 16.2% 17.0% 17.9% 23.8% % 4.4% 6.7% 9.0% 11.4% 13.9% 16.4% 18.9% 21.5% 24.2% 26.8% -7.2% % 4.2% 6.9% 9.7% 12.5% 15.4% 18.3% 21.3% 24.3% 27.4% 30.6% 6.6% % 7.1% 8.1% 9.2% 10.2% 11.2% 12.3% 13.3% 14.3% 15.3% 16.3% 18.4% % 8.3% 10.3% 12.2% 14.2% 16.1% 18.1% 20.0% 22.0% 23.9% 25.8% 32.4% % 9.1% 8.5% 7.9% 7.2% 6.6% 6.0% 5.4% 4.7% 4.1% 3.4% -4.9% % 21.5% 20.5% 19.5% 18.5% 17.5% 16.5% 15.5% 14.5% 13.5% 12.4% 21.4% % 9.1% 11.1% 13.2% 15.3% 17.4% 19.5% 21.7% 23.9% 26.1% 28.4% 22.5% % 12.3% 11.7% 11.1% 10.5% 9.8% 9.2% 8.6% 7.9% 7.2% 6.5% 6.3% % 18.0% 20.7% 23.5% 26.3% 29.2% 32.1% 35.1% 38.1% 41.2% 44.4% 32.2% % 12.9% 14.8% 16.7% 18.6% 20.6% 22.6% 24.5% 26.5% 28.6% 30.6% 18.5% % 4.5% 5.8% 7.1% 8.4% 9.7% 10.9% 12.0% 13.1% 14.1% 15.0% 5.2% % 6.8% 8.6% 10.4% 12.3% 14.1% 16.0% 17.9% 19.8% 21.8% 23.8% 16.8% % 11.8% 12.6% 13.4% 14.3% 15.1% 15.9% 16.7% 17.5% 18.3% 19.1% 31.5% % 7.2% 5.0% 2.8% 0.6% -1.6% -3.8% -5.9% -8.0% -10.1% -12.2% -3.1% % 15.0% 15.9% 16.8% 17.7% 18.6% 19.4% 20.2% 21.1% 21.9% 22.7% 30.5% % 5.7% 5.3% 4.8% 4.4% 3.9% 3.4% 3.0% 2.5% 2.0% 1.5% 7.6% % 10.6% 12.7% 14.7% 16.8% 19.0% 21.1% 23.3% 25.5% 27.7% 29.9% 10.1% % -3.6% -3.0% -2.4% -1.8% -1.2% -0.7% -0.1% 0.5% 1.1% 1.6% 1.3% % 15.4% 15.5% 15.5% 15.5% 15.5% 15.5% 15.5% 15.5% 15.4% 15.4% 37.6% % 3.2% 4.3% 5.4% 6.5% 7.6% 8.8% 9.9% 11.0% 12.1% 13.3% 23.0% % 5.8% 5.7% 5.6% 5.5% 5.3% 5.2% 5.0% 4.8% 4.6% 4.4% 33.4% % 7.0% 6.9% 6.8% 6.6% 6.4% 6.1% 5.8% 5.4% 4.9% 4.4% 28.6% % 0.6% 2.8% 4.9% 7.1% 9.3% 11.6% 13.8% 16.1% 18.5% 20.8% 21.0% % 9.3% 7.9% 6.6% 5.3% 3.9% 2.6% 1.3% 0.0% -1.3% -2.6% -9.1% % 6.2% 5.3% 4.4% 3.5% 2.5% 1.5% 0.5% -0.6% -1.7% -2.8% -11.9% % 9.3% 7.3% 5.3% 3.2% 1.2% -0.9% -2.9% -4.9% -7.0% -9.0% -22.1% % 6.4% 10.4% 14.6% 18.9% 23.3% 27.9% 32.5% 37.4% 42.3% 47.4% 28.7% % 5.0% 7.0% 9.0% 11.1% 13.2% 15.3% 17.4% 19.6% 21.8% 24.0% 10.9% % 2.1% 3.3% 4.6% 5.9% 7.1% 8.4% 9.7% 11.0% 12.2% 13.5% 4.9% % 4.1% 6.3% 8.4% 10.6% 12.9% 15.1% 17.4% 19.8% 22.1% 24.5% 15.8% % 7.7% 7.2% 6.7% 6.1% 5.6% 5.0% 4.4% 3.8% 3.1% 2.5% 5.5% % 1.2% -4.4% -9.8% -14.9% -19.9% -24.7% -29.2% -33.6% -37.8% -41.8% -37.0% % 4.6% 8.3% 11.9% 15.6% 19.4% 23.1% 26.8% 30.6% 34.3% 38.1% 26.5% % 6.2% 7.9% 9.6% 11.2% 12.8% 14.3% 15.9% 17.3% 18.8% 20.1% 15.1% % 5.3% 3.7% 2.0% 0.4% -1.3% -3.0% -4.7% -6.4% -8.1% -9.9% 2.1% % 4.0% 5.6% 7.2% 8.8% 10.3% 11.9% 13.5% 15.1% 16.6% 18.2% 16.0% % -1.9% 0.7% 3.4% 6.2% 9.0% 11.9% 14.8% 17.9% 20.9% 24.1% 32.4% % 2.4% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.4% 13.7% % -0.5% -0.7% -1.0% -1.3% -1.5% -1.9% -2.2% -2.5% -2.9% -3.2% 1.4% 100% Stock S&P 500 Annualized Return Standard Deviation 6.2% 6.8% 7.4% 8.0% 8.6% 9.1% 9.6% 10.1% 10.6% 11.0% 11.4% 10.3% 4.1% 4.1% 4.6% 5.4% 6.5% 7.8% 9.1% 10.5% 11.9% 13.3% 14.8% 15.3% Worst 3 Months Worst 6 Months Worst 12 Months Worst 36 Months Annualized -4.8% -5.3% -8.5% -12.4% -16.4% -20.3% -24.1% -27.7% -31.3% -34.7% -38.1% -29.6% -4.5% -6.3% -10.2% -15.8% -21.2% -26.3% -31.1% -35.7% -40.1% -44.2% -48.2% -41.8% -4.5% -5.4% -11.6% -17.5% -23.2% -28.5% -33.6% -38.3% -42.9% -47.1% -51.1% -43.3% -0.8% 0.0% 0.3% -2.1% -4.4% -6.8% -9.2% -11.5% -13.8% -16.2% -18.5% -16.1% Worst 60 Months Annualized 1.0% 1.7% 1.9% 1.2% 0.4% -0.5% -1.3% -2.2% -3.2% -4.1% -5.1% -6.6% Worst Drawdown -5.5% -7.2% -11.9% -18.0% -25.0% -31.8% -38.1% -43.9% -49.2% -54.1% -58.6% -50.9% Page 71 of 88