RETIREMENT STRATEGIES. Managing Your Retirement Assets

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1 RETIREMENT STRATEGIES Managing Your Retirement Assets

2 MANAGING YOUR RETIREMENT ASSETS Retirement now requires more from you in terms of planning and saving than ever before. But managing your assets doesn t have to be time-consuming or complex. Taking just a few important steps can put you in position to achieve the retirement you envision. You ve probably contributed to a company retirement plan, a 401(k) plan, and perhaps a traditional or Roth IRA. How you manage your assets within these plans will affect your ability to reach your financial goals. Asset allocation is a key concept that can help you manage risk and make sure your money is positioned effectively. Asset allocation can help you identify an appropriate mix of investments by balancing your goals, risk tolerance, and time horizon, based on the historical risks and returns of different asset classes. We recommend that you develop an asset allocation plan with the help of a licensed financial professional who knows you, who understands your reasons for investing, the time you have to reach your goals, and the amount of risk you re comfortable assuming. Investment Products: ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY MAY LOSE VALUE ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE

3 What are your reasons for investing? Do you need growth? Do you need current income? Or do you need to balance both of these? Different types of investments can help provide the growth or income potential you are looking for. Once you clarify your specific goals, you ll be better able to identify suitable options. How much time do you have? Is your retirement 4 years away, or is it more like 40? Knowing how much time you have to invest helps to focus your choices. If you are a young investor, you may want to be more aggressive with your portfolio because you have more time to weather market fluctuations. As you approach retirement age, your priorities may shift from growth to preservation because broad market swings could have a greater effect on your retirement income. Be honest with yourself As an investor, risk is the price you pay for potential return. Generally, the more potential return an investment offers, the more risk you take with your money; lower potential return, lower risk. An honest assessment of your risk tolerance is critical to a successful asset allocation. Face it, everyone wants a great return on his or her investment. But in times of market volatility, can you bear to watch the value of your investment decline? If so, how far? Your asset allocation should identify an appropriate mix of investments, within your risk tolerance, to help you reach your goals. Review your plan periodically Managing your retirement assets is a dynamic process that will evolve over the stages of your life. Being too conservative early on can reduce your potential for growth, while being too aggressive can put your hardearned assets at risk. Market conditions are likely to change over time so may your needs and even your tolerance for risk. That s why it s important to meet periodically with your financial professional to review your retirement plan, your investment portfolio, and adjust your asset allocation when necessary.

4 JUST STARTING OUT MANAGING SUBSTANTIAL ASSETS At age 30, John is contributing 5% of his salary to his company s 401(k) plan. With the company s 3% matching contribution, he hopes to be well on his way to saving an adequate nest egg. To further prepare for retirement, John decides to fund an IRA every year. He realizes the impact tax deferred compounding and regular contributions can have in achieving his retirement goals. John knows his portfolio needs growth and his time horizon is long enough to ride out market swings. With the help of his financial professional, he develops an investment program concentrated in equities. A young professional whose career is taking off. May change jobs several times before retirement. Retirement time horizon may be 30 years or more. Has a good understanding of financial markets and a high tolerance for risk. Primary objective: Aggressive Growth. Derek and Denise are in their forties and enjoy successful careers. Although they may have 20 to 30 years left to retirement, they have wisely been putting money aside for their future. Denise contributes to a 401(k) at work, and because Derek is self-employed, he participates in an SEP-IRA plan. Since neither will have the benefit of a traditional pension to supplement retirement income, both contribute to an IRA each year. Their portfolios also include several small, qualified accounts rolled over from 401(k) plans with previous employers. They are concerned about managing their assets to meet current and future needs. Their financial professional may suggest a combination of stocks and bonds: stocks for growth to stay ahead of inflation and bonds for stable income. Baby boomers in the prime of their lives. Retirement time horizon is approximately 20 to 30 years. Need income to fund children s college education. Experienced investors with a high tolerance for risk. Primary objective: Growth. investment style. Your portfolio should be constructed to suit your retirement needs, investment time horizon, and risk tolerance. Speak to your financial professional about conducting a detailed retirement planning analysis. investment style. Your portfolio should be constructed to suit your retirement needs, investment time horizon, and risk tolerance. Speak to your financial professional about conducting a detailed retirement planning analysis.

5 BALANCING GROWTH AND INCOME A NEED FOR INCOME At age 60, Fred will retire in five years and hopes to spend more time with his wife, on his hobbies, and visiting their four grandchildren. While Social Security and a company pension may cover most living expenses, he expects his 401(k), IRA, and annuity to provide the extra income they ll need to enjoy retirement. Fred s investment objectives have to change to mirror his changing needs. That means shifting away from investments that seek capital growth and moving toward investments that produce income. But he also has to balance that shift, because he still needs growth potential to help ensure his money will last through a retirement of 20 to 30 years. Retirement time horizon is five years. Will receive income from Social Security and company pension. Looking for a balanced approach to managing assets through the early years of retirement. June retired five years ago. She enjoys excellent health, and travel has become her passion. Now age 70, she receives income from Social Security and a company pension plan, but this covers only about 50% of her living expenses. To cover the rest of her expenses and have money to travel, June needs to draw income from her investments, and at her age, she does not want to take much risk with her assets. Conservatively managed, income-producing options can help June continue to pursue her travel plans for years to come. Already retired. May spend 15 to 20 years or more in retirement. Looking for extra income to travel. Conservative investment approach. Primary objective: Income and preservation of assets. Needs to change investment style to meet upcoming income needs. Primary objective: Balancing growth and income. investment style. This example includes international equity assets, which would add additional risk to a portfolio. Your portfolio should be constructed to suit your retirement needs, investment time horizon, and risk tolerance. Speak to your financial professional about conducting a detailed retirement planning analysis. investment style. Your portfolio should be constructed to suit your retirement needs, investment time horizon, and risk tolerance. Speak to your financial professional about conducting a detailed retirement planning analysis.

6 WORK WITH YOUR FINANCIAL PROFESSIONAL Just as important as investing regularly are the investment choices you make. That's where your financial professional can be an invaluable coach and guide. He or she can help you develop a plan that reflects your unique needs and goals, the time you have to achieve them, and your attitude toward risk. Together you'll develop an asset allocation that matches the goals and objectives of different funds to your specific needs. Contact your financial professional today and begin investing with a strategy that will never go out of style.

7 Financial professionals are not tax or legal advisers. Please consult your tax or legal adviser regarding your particular situation. Securities products and services are distributed by Prudential Investment Management Services LLC (PIMS), Three Gateway Center, 14th Floor, Newark, NJ PIMS is a Prudential Financial company and member SIPC. JennisonDryden is a service mark of The Prudential Insurance Company of America. IFS-A JD1279 Ed. 10/01/2003