Your Quick & Easy Guide to Retirement

Transcription

1 Your Quick & Easy Guide to Retirement Helping Children s of Alabama employees pave the road to a dream retirement stoploss protection with the HCM-BuyLine

2 Your Road to Retirement Are you on the right path to your dream retirement? The decisions you make leading into your retirement years and as a retiree can impact the longevity of your retirement income. Health care costs, distributions, taxes and inflation can leave you with either enough money to enjoy the lifestyle you want, or scrambling to make ends meet. Meet with your TCG Children s of Alabama retirement expert today to discuss ways you can generate a healthy nest egg that may last a lifetime and more, in any type of market. 1 Quick & Easy Guide to Retirement

3 Life Expectancy How long will your retirement savings last? How many years will your retirement savings need to last? According to research conducted by the National Center for Health Statistics 1, the average lifespan has increased by approximately 30 years in the last century. This means the average number of years in retirement has increased, directly impacting the amount of funds needed to support you during those years. Estimating your life expectancy can help determine a ballpark estimate of the amount of money you need to save in order to safeguard you from outliving your retirement funds. Life expectancy tools are often based on factors such as your gender and date of birth ( 2, though these tools should never be taken as 100% accurate. NCHS 2012 Life expectancy increase of specific age and gender in the U.S. 3 Life Expectancy Starting Point Both Genders Men Women Birth Age Avg. Retirement Years Tip: Define your financial goals in every season of life, to better prepare you as a retirement investor. Sources: 1 Centers for Disease Control and Prevention - National Center for Health Statistics Data Brief, Number 168, October 2014; 2 Social Security - life expectancy calculator; 3 NCHS 2012 life expectancy ratio between gender. 2 Quick & Easy Guide to Retirement

4 Bridging the Gap What are your retirement needs? By properly planning for your retirement income needs, you can help ensure the transition between your time in the workforce into retirement is a smooth ride, even an exciting one. Ensure your dream retirement is fulfilled by considering the expenses you pay now, and the expenses you ll need to pay during retirement. Identify those needs most important to you in maintaining your ideal lifestyle. Tip: Define your source(s) of retirement income: Savings from Job Earnings Retirement Investments Other Investments Social Security Tip: Create a budget for each of the below categories. Food Transport Debt Traveling Clothing Insurance Taxes Hobbies Housing Health Care Savings Leisure Utilities Education Investments Miscellaneous 3 Quick & Easy Guide to Retirement

5 Taxes and Cash Withdrawals What is the effect on your retirement income? Taxes and withdrawals can have a larger than anticipated impact on assets available to generate retirement income, especially if the majority of your savings or income is in tax-qualified accounts. It s important to understand the tax consequences on these investments, and how withdrawals can impact your portfolio. If your retirement plans require cash right away, you may take a lump sum distribution. However, doing this will incur income taxes and sometimes penalties on your distribution in the tax year in which you make the withdrawal. This can be sizeable and can take a large chunk of your nest egg: roughly 20% federal and 2% - 8% state income taxes. All invested money in qualified accounts is considered earned income when withdrawn and larger withdrawals could potentially shift you into a higher tax bracket. Always check with your plan administrator or financial advisor prior to making any withdrawals to review your options and penalties. At 59½ there is no longer a 10% early withdrawal penalty, but you will still need to pay income taxes on your withdrawals from a traditional 401(k). After you reach 70½ you are required to make withdrawals from your accounts each year. Tip: Minimize long-term tax consequences to help your portfolio last longer. Develop a time horizon of how long your portfolio needs to last, and plan your withdrawals accordingly, to prevent you from running out of income prematurely. Source: IRS - Retirement Plan FAQs: 4 Quick & Easy Guide to Retirement

6 Inflation and Volatility What is the impact on your portfolio? Statistically, annual inflation rates have averaged 2.96% each year over the past 100 years. 1 Not just an increase in inflation, but inflation itself will affect the purchasing power of your investments, and their real rate of return. It is said, prices double every years due to inflation, which in turn, will affect a 30 year retirement financial plan at some point 2. The effect of inflation on your portfolio can heavily erode your purchasing power over time. Below is an illustration of the effect of inflation on dollar values. Using the average of 2.96%, you can see that prices almost double in 25 years. 1 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Market volatility can drastically impact the performance of your portfolio. Historically, markets run in cycles. We have had four bear markets and four bull markets in the last 117 years. The fluctuation of investment values is important to consider when preparing your portfolio to weather all types of markets. Tip: Allocate your portfolio to include investments structured to endure the effects of inflation, as well as fluctuating market conditions during your retirement years. Sources: 1 US Inflation Calculator - Historical Inflation Rates from ; 2 Inflation Data - Inflation s Effect on Retirement Savings, November 2012: 5 Quick & Easy Guide to Retirement

7 The HCM-BuyLine Mitigate downside risk with stoploss protection Tip: Learn how to safeguard your investments from volatile market conditions and catastrophic losses. The HCM-BuyLine is a mathematical, non-emotional tool designed to mitigate downside risk. The indicator was created to avoid declines in the market by moving to the safety of money markets and/or short term bonds leaving greater capital to reinvest during subsequent market advances. During the financial meltdown in 2008, the HCM-BuyLine signaled to exit the stock market, avoiding much of the worst market drawdown in the past decade (as indicated on the right). Signal to Sell Signal to Buy Incurring financially devastating losses due to market volatility is unnecessary, and we have created a system designed to mitigate the risk. Our main objective is to safeguard your retirement investments from the volatile swings of the market. -- Vance Howard President and Portfolio Manager of Howard Capital Management, Inc. 6 Quick & Easy Guide to Retirement

8 The HCM 401(k) Optimizer Personalized advice for your retirement plan The HCM 401(k) Optimizer is a web-based, easy-to-use, interactive tool that assists you in allocating your investments within your company-sponsored plan, providing quarterly updates and instructions on how to invest in plan assets. It is intended to help you get the most out of your company-sponsored retirement plan. The HCM 401(k) Optimizer uses our stoploss protection tool, the HCM-BuyLine. The Optimized Trend Indicator (OTI) offers buy and sell signals on any single stock in the current market. This tool can help you decide if and how much of your publicly traded company s stock you should hold in your retirement account. Below is an example of the OTI in action on Apple Inc. (AAPL) from 2010 to (Apple Inc. should not be construed as being a past recommendation of HCM.) 7 Quick & Easy Guide to Retirement

9 What You Need to Remember History has proven markets move in cycles Even the greatest investors can attest. According to John Bogle, in an interview with CNBC on April 1, 2013 on volatile markets: Prepare for at least two declines of 25%-30%, maybe even 50%, in the coming decade. I went through one in , I went through one in 2001, 2002, 2003; I went through another one in They re kind of scary often terrifying but it s typical. Prepare for at least two declines of 25%-30%, maybe even 50%, in the coming decade. The Vanguard Group founder, John Bogle, on the future of the economy Tip: Prepare your portfolio to help weather any possible market volatility by properly allocating your assets. 8 Quick & Easy Guide to Retirement

10 Investing in Your Retirement Future with a Children s of Alabama expert We believe the needs of the investor comes first, and we understand each investor has different investment goals and objectives. Our goals are to help you: Help you identify your risk tolerance Add the stoploss protection overlay, the HCM-BuyLine to your retirement portfolio Help you be better prepared for volatile markets Help you get your Children s of Alabama retirement plan allocations on track with your retirement goals Get started today. Talk with your Children s of Alabama retirement expert at TCG Retirement by calling: (205) Or visit our website: 9 Quick & Easy Guide to Retirement

11 Disclosure Securities and Investment Advisory services offered through NEXT Financial Group, Inc., Member FINRA/SIPC. To view NEXT Financial Group s privacy policy and other important information, visit the Clients section of www. nextfinancial.com. The Covenant Group is not affiliated with NEXT Financial Group, Inc. Investment products abd services available only to residents of: AL, CA, FL, GA KY, LA, MS, NC, NM, SC, OH, TN, TX, VA, WA. Howard Capital Management, Inc. (HCM) offers its investment methodology through multiple programs that may invest in exchange traded funds (ETFs), mutual funds and individual stocks. This service is available for a fee in addition to those costs associated with the underlying securities. Our standard annual management fee is 2.2% of assets under management, charged quarterly in advance. An investor should carefully consider investment objectives, risks, charges and expense before investing in a mutual fund or ETF. This information and more complete information, including potential risks, is included in each product s prospectus, which can be obtained from your financial professional. Read the prospectus carefully before investing. Mutual funds and ETFs are subject to risks similar to those of stocks. Investment returns will fluctuate and are subject to market volatility, so that an investor s shares when redeemed may be worth more or less than their original costs. There are unique potential risks associated with the specific asset classes that a mutual fund or ETF represents. Investments in smaller companies typically exhibit higher volatility. In addition to the normal risks associated with investing, narrowly focused investments typically exhibit higher volatility. Bonds and bond funds will usually decrease in value as interest rates rise. Commodities markets have historically been extremely volatile. Inverse funds should lose money when their benchmark indexes rise a result that is opposite from traditional mutual funds or ETFs. Inverse funds also entail certain risks, including inverse correlation, leverage, market price variance and short sale risks. Investments in foreign investments generally incur greater risks than domestic investments. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. You should carefully consider the risk, charges and expenses of an ETF prior to investing. This and other important information can be found in the product s prospectus. The graphic on p.6 represents some of the dates on which our proprietary indicator, the HCM-BuyLine, identified changes in the market trend. Buys and sells may or may not have occurred on the exact dates shown. These dates do not necessarily reflect transactions applied to every individual account. Also, certain products, custodians and portfolios may have a delay in execution. When the HCM-BuyLine indicates a bull market, HCM then identifies the particular mutual funds, ETFs or individual stocks that we believe have the best return potentials in the current market from the universe of assets available in each given program and invests in them. When the HCM-BuyLine indicates a bear market, HCM moves clients investments to less risky alternatives. Not every HCM-BuyLine buy and sell will result in a profitable trade. There will be times when following the indicator results in a loss. However, there have been situations in the past in which HCM reduced clients exposure to equities during market downturns by following an HCM-BuyLine signal, thereby preserving capital. An important goal of the BuyLine is to outperform the market on a long-term basis. The reason is the mathematics of gains and losses. A portfolio which suffers a 30% loss takes a 43% gain to return to the previous portfolio value. 10 Quick & Easy Guide to Retirement

12 Disclosure The HCM-BuyLine is a reactive indicator, not a proactive one. It will not catch the first 5 10% of a bull or bear market. Ideally, it will avoid most of the downtrends and catch the vast bulk of the uptrends. There may be times when the use of the indicator will result in a loss when we re-enter the market. Other times there may be a modest positive impact. When severe downtrends occur, however, such as in and , it has the potential to make a significant difference in portfolio performance. Naturally, there can be no guarantee that the HCM-BuyLine indicator will perform as anticipated. Stoploss protection will not necessarily contain your losses in the desired amounts due to the limitations of the HCM-BuyLine, market conditions, and delays in executing orders. It is not an actual stoploss order that automatically sells securities in the portfolio at a certain price. No current or prospective client should assume that the future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by the advisor), will be profitable or equal to past performance levels. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark for measuring the performance of a portfolio. All investment approaches have the potential for loss as well as gain. Please work with your financial advisor to determine which investment program is consistent with your financial objectives and risk tolerance. Past performance is no guarantee of future results. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security or investment product. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Howard Capital Management, Inc. HCM is registered as an investment advisor with the SEC and only transacts business where it is properly registered or is otherwise exempt from registration. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability. Any subsequent, direct communication by HCM with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of HCM, please contact HCM or refer to the Investment Advisor Public Disclosure web site ( For additional information about HCM, including fees and services, send for our disclosure statement as set forth in our brochure using the contact information herein. Please read the disclosure statement carefully before you invest or send money. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of HCM. Howard Capital Management, Inc. is registered as an investment advisor with the SEC and only transacts business where it is properly registered or is otherwise exempt from registration. The HCM Optimized Trend Indicator ( OTI ) is a tool developed by HCM to help assist a subscriber determine what portion, if any, of the subscriber s company stock should be bought, sold or held in the subscriber s retirement portfolio as of a particular date. It shall always remain the subscriber s exclusive responsibility to review and evaluate the OTI and his/her company stock and to determine whether to accept or reject any recommendation and to correspondingly determine whether any OTI recommendation is appropriate for his/her financial situation, or investment objective. The subscriber acknowledges and understands that the OTI is an opinion only, based upon HCM s judgment as of a particular date. That opinion could be wrong. No current or prospective subscriber to the HCM 401(k) Optimizer should assume that investment in, or purchase and sale of, his/her company stock based upon the OTI will be profitable for his/her retirement portfolio. Unlike the mutual funds that are available for investment in the subscriber s retirement portfolio, individual equities such as the subscriber s company stock are not diversified positions, and may be subject to greater volatility and principal risk. Advisory services offered through Howard Capital Management, Inc. Howard Capital Management, Inc., is wholly owned by HCM Holding, Inc., which is also the majority owner of The Optimized Advisor, LLC. 11 Quick & Easy Guide to Retirement

13 Phone: (205) stoploss protection with the HCM-BuyLine