Smart Investment Practices: The Do s & Don ts of Preparing for Retirement

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1 Smart Investment Practices: The Do s & Don ts of Preparing for Retirement Scott D. Knapp, CFA Director of Investment Strategy

2 You ve Changed!

3 You ve Changed!

4 Investment Do s

5 Do: Understand Your Objective Why do you save and invest in your retirement plan? A. Start my own hedge fund B. Beat the market C. Become the next Warren Buffett D. Buy an island in the Caribbean E. Replace my paychecks when the current ones stop

6 Why do you save and invest in your retirement plan? A. Start my own hedge fund B. Beat the market C. Become the next Warren Buffett D. Buy an island in the Caribbean E. Replace my paychecks when the current ones stop How you invest should be determined by how soon your replacement paychecks will start.

7 Do: Understand Your Objective Stream of Cash Flows ( Replacement Paychecks ) During Retirement Today Retirement Date PV How soon will YOUR replacement paychecks start?

8 Do: Pull the Big Lever First What is the most important decision a retirement saver can make? A. Which funds are the best B. When to get in and out of different funds C. Asset allocation D. How to respond to changing economic conditions E. How much money to save

9 What is the most important decision a retirement saver can make? A. Which funds are the best B. When to get in and out of different funds C. Asset allocation D. How to respond to changing economic conditions E. How much money to save Savings rate is the biggest lever you can pull to achieve your objective then asset allocation then choosing funds.

10 Do: Think About the Whole Pie, Not Just Each Slice The majority of your investment returns will be determined by how you allocate your savings among each major asset class: Domestic stocks, international stocks, bonds, money market, etc. Attempting to pick the right funds will likely provide minimal lift in your investment returns. Attempting to get in and out of the market at the right time is a fool s errand.

11 Do: Stay Engaged and Stick to Your Plan

12 Do: Stay Engaged and Stick to Your Plan

13 Investment Don ts

14 Don t: Get Distracted From Your Objective Financial crisis starts here Heavy transfers from stocks to guaranteed investments here Heavy transfers from guaranteed investments to stocks here Objective: Replacement paychecks! Not trying to beat the market!

15 Don t: Stay Too Engaged and Ignore Your Plan

16 Don t: Use Investments to Catch Up Facts: $50,000 salary with 3% annual raises 30-year saving horizon 50% employer match up to 5% Base Example: 6% interest, 5% deferral = $414,528 in final savings Impact of Interest Rate & Savings Rate Adjustments: 7 % interest, 5% deferral = $486,093 a 17% increase in final savings 6% interest, 7% deferral = $525,065 a 27% increase in final savings 7% interest, 7% deferral = $616,695 a 49% increase in final savings

17 Don t: Take Too Much or Too Little Risk According to the 2008 EBRI Retirement Confidence Survey: Only 13% of workers feel very confident they will have enough money for retirement a 50% decline from 2007 Over 28% of workers said they have adjusted their retirement age The number of current workers expecting to work during retirement has grown to 72% (only 34% of current retirees work for pay) Only 44% of workers have calculated retirement savings needs Only 20% of current retirees feel very confident about their retirement security 1 in 4 workers age 56 to 65 held 90% or more of their 401(k) investments in common stocks. 2 in 5 held 70% or more.

18 Summary Think replacement paychecks. Above all else, save enough! Allocate your savings among major asset classes based on how soon your replacement paychecks are expected to start. Stay engaged! RetireOnTarget will keep you informed. Don t get distracted by world events. Consider target date funds. They could help you maintain your plan. Don t take additional risk in an effort to catch up with your savings program. Don t forget why you ve changed. 401K

19 Disclosures Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value, and are not obligations of or guaranteed by the financial institution. Retirement and Investment Solutions Center team members offer retirement and investment education but do not provide investment, legal or tax advice. Participants are encouraged to consult their own advisors. CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Life, accident, health and annuity insurance products are issued by CMFG Life Insurance Company. Each insurer is solely responsible for the financial obligations under the policies and contracts it issues. Corporate headquarters are located in Madison, Wisconsin. 19