Money Management. Making the Most of Your Financial Future. Waddell & Reed (03/10) Waddell & Reed, Inc (03/10)

Transcription

1 Money Management Making the Most of Your Financial Future Waddell & Reed, Inc (03/10)

2 What We ll Do Today Time is Money. What s important about money to you? Where does your money go? Your cash reserves The what if question How money works

3 What We ll Do Today Taxes & how to win Retirement Sending your children to college Estate planning The next steps

4 What s Important About Money To You?

5 Money Management What s Important About Money To You?

6 Where Does Your Money Go? Who do you think will be better off in the future? The Jones, who save today s money for tomorrow, or the Smiths, who spend tomorrow s money today?

7 Where Does Your Money Go? A Typical Family Your Monthly Spending Cost of Living/Debt Repayment Taxes Insurance Savings/Investments % % % %

8 What About Your Cash Reserves?

9 Your Cash Reserves The Need: Emergencies Planned expenses Investment opportunities Minimize the need to use credit

10 Your Cash Reserves What to look for: Interest paying Liquidity/check writing Low risk No withdrawal penalties

11 The What If Question Are you adequately insured? Homeowners Health Disability Auto Life

12 The What If Question The Right Amount Mortgage Education Debt Final expenses Income

13 The What If Question The right type: Term Whole life Combination

14 The What If Question Policy check-ups: No duplicate coverage Policy discounts Up-to-date policies Deductibles

15 The What If Question What Are Your Protection Needs?

16 A Money Reality Check

17 How Money Works SAFETY LIQUIDITY CURRENT INCOME INCOME/ GROWTH GROWTH TAX TREATMENT Savings Accounts Ordinary Income CDs Money Market Funds Annuities Bonds & Bond Funds Municipal Bonds & Municipal Bond Funds Balanced Funds Stocks & Growth Funds Other

18 How Money Works Asset Allocation YOUR PORTFOLIO GOAL ONE GOAL TWO GOAL THREE GOAL FOUR RETIREMENT NEW HOME EDUCATION OTHER Please remember that asset allocation does not guarantee a profit or protect against loss in a declining market. It is a method used to help manage risk.

19 How Money Works The Rule of Interest Rate = Number of Years to Double 6% doubles in 12 years % doubles in years % doubles in years Note: This is for illustration purposes only and is no guarantee of future results. Most investments generate fluctuating returns, so the period of time in which a specific investment will double cannot be determined with certainty.

20 How Money Works The Magic of Compound Interest Return figures are for illustrative purposes only and do not represent the past or future performance of any actual investment. Examples assume the reinvestment of all earnings but do not take into account any applicable fees or expenses or any taxes (unless otherwise noted).

21 How Money Works Tax-Deferred Compounding Return figures are for illustrative purposes only and do not represent the past or future performance of any actual investment. Examples assume the reinvestment of all earnings but do not take into account any applicable fees or expenses or any taxes (unless otherwise noted). Please note that lower minimum tax rates on capital gains and dividends would make the investment return for the taxable investment more favorable, and thus would reduce the difference in performance between the accounts shown.

22 How Money Works As Time Goes By AS TIME GOES BY Dow Jones Industrial Average at the end of each decade: YEAR 12/31 VALUE , , , Today

23 How Money Works A Tale of Two Investors Return figures are for illustrative purposes only and do not represent the past or future performance of any actual investment. Example assumes investment is made at the beginning of each year and the reinvestment of all earnings but does not take into account any applicable fees or expenses or any taxes (unless otherwise noted).

24 How Money Works The Three Worst Enemies To Your Money Debt Inflation Taxes

25 Credit Card Check-Up Balance $1,000 $ Finance Cost 18% % Tax Bracket 28% % Pretax Cost 25% % Annual Pretax Cost $250 %

26 Taxes & How To Win Federal Income Taxes Tax Brackets Marginal Tax Rate Maximum marginal income tax rate on various types of income Ordinary Income: % (Salary, wages, interest, etc.) Capital Gains: % Qualifying Dividends: % Municipal Bond Interest: %

27 Taxes & How To Win Taxable Equivalent Yields 6% 8% 10% 10% 5.40% 7.20% 9.00% 15% 5.10% 6.80% 8.50% 25% 4.50% 6.00% 7.50% 28% 4.32% 5.76% 7.20% 33% 4.02% 5.36% 6.70% 35% 3.90% 5.20% 6.50%

28 Taxes & How To Win Other taxes: Sales tax State/city income tax Social Security tax Personal property tax Real estate tax Other

29 Taxes & How To Win Tax-advantaged investment strategies: Tax-deferred investments Pretax retirement plan contributions Capital gains treatment Tax-free investments Tax-deductible items Tax credits

30 \ Taxes & How To Win Tax savings opportunities: IRA/TSA/401(k)/SEP Other retirement plans Municipal bonds Annuities Growth-oriented investments Certain insurance plans Home ownership Other

31 Taxes & How To Win Impact of Pretax Investing NON-RETIREMENT PLAN CONTRIBUTIONS TAXED AT 25% PRETAX CONTRIBUTION TO RETIREMENT PLAN $4,000 Earned Income $4,000 -$1,000 Less Taxes (25% Bracket) -$0* =$3,000 Net for Investment =$4,000 +$240 First Year s Earnings at 8% +$320 -$60 Taxes on Earnings -$0 =$3,180 Net Savings at End of Year =$4,320 *Taxes are deferred until money is withdrawn. This is a hypothetical illustration only that assumes the reinvestment of all distributions and does not consider the effects of employersponsored retirement plan fees or expenses. Early withdrawal from a retirement plan may be subject to a 10% IRS-mandated penalty. Please consult your tax advisor for additional information.

32 A Retirement Check

33 Retirement Sources of Income, Population Age 65 and Over, 2008 Earnings 25.6% Other 1.9% OASDI 39.8% Income & Assets 13% Pensions & Annuities 19.7% Source: Employee Benefit Research Institute estimates from the Current Population Survey, March 2009 Supplement.

34 Retirement Personal Retirement Plans Traditional IRA Roth IRA IRA Rollover Roth Conversion

35 Retirement Employer-Sponsored Plans Pension/Profit Sharing 401(k) SIMPLE IRA SEP TSA 457 Thrift / Savings Plan

36 Retirement Retirement Time Line * Source: Social Security Administration, January 26, 2010.

37 Retirement Planning For Retirement Income Making your money last: Planning Asset consolidation Simplification Diversification Staying ahead of inflation

38 Retirement Planning For Retirement Income Payout options: Self-directed IRA rollover Monthly/periodic payout Lump-sum payout 10 year averaging Other

39 Retirement Know About Your Own Social Security Personal Earnings & Benefit Statement or visit their website at

40 Retirement Spending Plan For Your Retirement Dollars This is a hypothetical illustration only and is not indicative of any specific investment.

41 College Funding Check-Up

42 Preparing for College Education Funding Life Cycle

43 Preparing for College Funding strategies: Section 529 Plans Coverdell Education Savings Account Gifts to Minors/Kiddie Tax Investments Owned in Parent s Name

44 Preparing for College Funding strategies: Withdrawals from Traditional/Roth IRA Loans from a 401(k) EE Bonds

45 Preparing for College How Aid is Figured

46 Preparing for College Remember, there are no scholarships or loans for your retirement.

47 An Estate Planning Check-Up

48 Estate Planning Estate planning objectives: Maintain standard of living Avoid conflicts Shorten settlement delays Minimize expenses Provide for family and heirs Benefit community/charitable causes

49 Estate Planning

50 Estate Planning Steps to an effective estate plan: Make sure that you have an up-to-date will Review the ownership of property Consider the benefits of a living trust Investigate a gifting program Determine the need for any other estate planning strategies

51 Estate Planning Do You Have An Inventory Of Your Estate?

52 The Next Step Review What s important about money to you?

53 The Next Step Review What s important about money to you? Where does your money go?

54 The Next Step Review What s important about money to you? Where does your money go? Your cash reserves

55 The Next Step Review What s important about money to you? Where does your money go? Your cash reserves The what if questions

56 The Next Step Review What s important about money to you? Where does your money go? Your cash reserves The what if question How money works

57 The Next Step Review What s important about money to you? Where does your money go? Your cash reserves The what if question How money works Taxes & how to win

58 The Next Step Review What s important about money to you? Where does your money go? Your cash reserves The what if question How money works Taxes & how to win Retirement

59 The Next Step Review What s important about money to you? Where does your money go? Your cash reserves The what if question How money works Taxes & how to win Retirement Sending your children to college

60 The Next Step Review What s important about money to you? Where does your money go? Your cash reserves The what if question How money works Taxes & how to win Retirement Sending your children to college Estate planning

61 What Are Your Financial Goals And Objectives?

62 The Next Step The Financial Planning Process

63 The Next Step The Financial Planning Process

64 The Next Step The Financial Planning Process

65 The Next Step The Financial Planning Process

66 Money Management Making the Most of Your Financial Future