ABLE Funds: Understanding the Investment Side of ABLE. Moderator: Michael Morris J.D., Executive Director National Disability Institute (NDI)

Transcription

1 ABLE Funds: Understanding the Investment Side of ABLE Moderator: Michael Morris J.D., Executive Director National Disability Institute (NDI)

2 Slide 2 This webinar is brought to you by the ABLE National Resource Center and sponsored by

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6 Submitting Questions Slide 6 For Q&A: Please use the Q&A box to submit any questions you have during the webinar and we will direct the questions accordingly during the Q&A portion. If you are listening by phone and not logged in to the webinar, you may also ask questions by ing questions to nmatthews@ndi-inc.org. Please note: This webinar is being recorded and the materials will be placed on the ABLE National Resource Center website at:

7 Technical Assistance Slide 7 If you experience any technical difficulties during the webinar, please use the chat box to send a message to the host NDI Admin, or you may also nmatthews@ndi-inc.org.

8 Presenters Moderator: Michael Morris, Executive Director, National Disability Institute Slide 8 Presenters: Chris Rodriguez, ABLE National Resource Center John Nadworny, Special Needs Financial Planning, a specialty practice to Shepherd Financial Partners Mark Friese, Vice President at Merrill Lynch, Menick-Friese Group Guest Panelists: Catherine Beck Jennifer Sikora Karen Prewitt Alex Ghenis

9 Agenda Slide 9 ABLE Key Characteristics Understanding ABLE as an Investment Account Examples of ABLE Account Holders and Investments Questions and Answers

10 The ABLE Act is Law Slide 10 The Stephen Beck, Jr. Achieving a Better Life Experience (ABLE) Act became law on December 19, 2014 creates a new option for some people with disabilities and their families to save for the future, while protecting eligibility for public benefits.

11 Key Characteristics There are eligibility requirements related to opening an ABLE account that speak to the age in which the individual first experienced his/her disability and related to the severity of such disability Slide 11 An eligible individual in not obligated to enroll in their state of residence The Designated beneficiary is the account owner (although another person such as a parent or guardian may be allowed signature authority over the account). Funds in the account may be used for qualified disability related expenses Assets in, and distributions for qualified disability related expenses, will be disregarded or given special treatment when determining eligibility for most federal means-tested benefits (including Social Security and Medicaid) Multiple individuals may contribute to an individual s ABLE account There is a $14,000 annual contribution limit (all contributors combined)

12 Development of ABLE Programs Slide 12 There are currently 5 active programs enrolling eligible individuals We expect the number of active programs to double by the end of the year and continue to grow in 2017 We estimate that the current number of eligible individuals nationwide exceeds 10 million and will only increase given pending federal legislation

13 Slide 13 Investing Basics for the ABLE Account Presented by: John Nadworny, CFP Special Needs Financial Planning A specialty practice to Shepherd Financial Partners (781) Mark Friese, CRPC Menick Friese Phillips Bock Group Private Wealth Management Merrill Lynch & Co. (202) Financial Planning and investment advice offered through Shepherd Financial Partners, LLC, a registered investment advisor. Securities offered through LPL Financial, member FINRA/SIPC. Special Needs Financial Planning, Shepherd Financial Partners and LPL Financial are separate entities.

14 Slide 14 Savings Account vs Investment Account

15 Savings vs. Investment Account Slide 15 Savings are usually put into the safest places or products that allow you access to your money at any time. Losing any of the money you deposit is highly unlikely. The tradeoff for this security is that your savings deposits earn a low rate of return. Investing involves a greater chance of losing your money than when you save. You can lose some or all of your principal, the amount you have invested, even when you buy investments through a bank. The higher risk of investing comes with the potential for greater returns.

16 Before you make any decisions. Slide 16 Understand and identify your objectives for the ABLE account Understand risk & your risk profile Define the timeframe you are planning for Understand your Investment options The opinions voiced here are for general information only and not intended to provide specific advice or recommendations for any individual, nor intended as tax or legal advice. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes. Investing involves risk including loss of principal. Prior to investing in an ABLE account, investors should consider whether the investor s or designated beneficiary s home state offers any state tax or other benefits available for investments in such state s ABLE program. Consult with your tax adviser before investing. Sources include: SEC.gov, FDIC.gov, Investopedia, Vanguard.com

17 Objectives for ABLE Investors Parents and eligible individuals with disabilities may have several objectives in mind when investing with an ABLE account. Objectives by Time Frame Time Frame Sample Objectives Example Slide 17 Short term Short- Intermediate term Long term As an emergency fund requiring access to funds on a daily basis. Identify a need for funds in 3-7 year period. You should not need access to funds for 7 years or longer. Use as a transactional account to stay below the $2000 threshold for eligibility for government benefits. Planning for a vacation Saving for a security deposit to rent an apartment in 5 years. To save for a residence in the future or long term supplemental needs.

18 Risk and Time Slide 18 Knowing when you will need the funds in your ABLE account will influence the investment choices you make for your contributions. The longer you can invest money, the more time investments will have to recover from any potential losses.

19 Understanding Risk Slide 19 All investments carry some degree of risk. Your investment timeframe plays a large role in determining a proper risk profile.

20 Risk and Return Slide 20 Generally, the higher the risk, the higher the potential for a better return and the higher the risk of a potential loss of some or all of your investment.

21 Your Personal Risk Profile Slide 21 Your personal risk profile is defined by how willing you are to potentially lose money in return for potentially larger returns. Factors include: o o o o Your attitude toward risk your comfort zone Your goals or objectives for the money. Your current financial situation Your investment timeframe

22 Balancing Risk, Return & Asset Selection Slide 22 Level of potential risk Stocks Level of potential return Portfolio of stocks, bonds and cash Portfolio of bonds Cash, Savings Accounts, Money Market Accounts

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25 Diversification Slide 25 Diversification is a risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio constructed of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. ABLE accounts provide opportunities to choose a combination of funds to help provide diversification.

26 Hypothetical Investment Options Securities most frequently found in portfolios with these asset allocations Slide 26 Conservative Asset Allocation Moderate Asset Allocation Aggressive Asset Allocation Cash and equivalents, money markets & bonds Portfolio of stocks, bonds and cash Stocks

27 Time Frame, Risk and Investment Options Slide 27 Length of Time Money May Remain Invested Short term Long term Conservative Asset Allocation Moderate Asset Allocation Aggressive Asset Allocation Relative Risk of Investment Portfolios Level of Potential Return Relatively low Relatively high

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29 Your Investment Objectives Over Time Slide 29 Depending on factors such as your age and circumstances, there will be times when it makes sense to change your investment objectives. This may lead you to change your investment selections. There may be restrictions however, ABLE accounts allow you to change your investment selections no more than twice a year.

30 Fees for Investment Options Slide 30 Administrative fee- shown on your account as a separate line item. Investment fees- they are not a separate line item on your statement. They are deducted directly by the financial institution managing the investment option selected.

31 Guest Perspectives Slide 31 Why did you choose to enroll in an ABLE Program and how might it change your life? What ABLE Program are you enrolled in? What did you take into consideration when choosing an ABLE Program? Did you feel comfortable having to choose your investment options? What did you take into considerations when choosing your investment option?

32 Slide 32 John Nadworny Special Needs Financial Planning, a specialty practice to Shepherd Financial Partners john.nadworny@shepherdfinancialpartners.com (781) Mark Friese Vice President Merrill Lynch, Menick-Friese Group mark_friese@ml.com (202)

33 ABLE National Resource Center Slide 33 The ABLE National Resource Center (ANRC) is a collaborative whose supporters share the goal of accelerating the design and availability of ABLE accounts for the benefit of individuals with disabilities and their families. We bring together the investment, support and resources of the country s largest and most influential national disability organizations. Chris Rodriguez Senior Public Policy Advisor National Disability Institute crodriguez@ndi-inc.org www.