American Ismaili Chamber of Commerce Investment Education Webinar Series 1 Financial Planning Overview March 30, 2016

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American Ismaili Chamber of Commerce Investment Education Webinar Series 1 Financial Planning Overview March 30, 2016 DISCLAIMER: This information provided in this webinar titled Investment Education

1 American Ismaili Chamber of Commerce Investment Education Webinar Series 1 Financial Planning Overview March 30, 2016 DISCLAIMER: This information provided in this webinar titled Investment Education Webinar Series 1 Financial Planning Overview is for educational and informational purposes only. It is not meant to be legal or financial advice. If you require information or advice as it relates to your individual circumstances, you are advised to consult with a lawyer or financial advisor.

2 Tonight s Agenda 1) Why Plan for your Future? 2) Budgeting and Cash Flow 3) Savings Plans (Overview) 4) Q & A

3 My Background Amin Khakiani - Registered Investment Advisor - Independent - Long Term, Diversified Money Management - Financial Planning & Assessment - Serving individuals, businesses & foundations Education - MBA, University of Michigan Corporate finance & strategic planning experience: - Occidental Petroleum - AlliedSignal/Honeywell International - Internal Revenue Service (Tax Auditor)

4 Why Plan for your Future? 1) Identify your goals and ensure you have the capital to achieve them - Save for a house - College Education for your kids - Retirement (maybe even early retirement!) - New Car - Vacation - Emergencies/Life Changes (Elder care, child care) - Philanthropy/ giving back

5 Why Plan for your Future? 2) Keep up (and outpace) with the rising cost of goods and services - Inflation - Gas/energy/fuel - Health Care - Tuition (college and secondary)

6 Why Plan & Invest? Keep up with Inflation $7 $6 $5 $4 $3 $2 $1 Inflation has averaged 4.3% per year over the last 40 years. You would need $6.00 today to buy the same items you could get for only $ years ago. $ Today 2055 Rent $300 $1500 $9500 Milk $0.55 $3.00 $18.75 Eggs $0.55 $3.00 $18.75 Newspaper $0.20 $1.00 $6.25

7 Why Plan & Invest? Rising Health Care Costs Average Health Care costs have increased at an 8.4% annual compounded rate over the last 25 years $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $ Data is from the National Center for Health Statistics

8 Why Plan & Invest? College Education Average College Tuition has increased at a 7% annual compounded rate over the last 40 years $70,000 $60,000 $50,000 Average Annual Cost of Tuition, Books, Room & Board - Private 2005 $43, $64, $116,000 $40,000 Average Annual Cost of Tuition, Books, $30,000 Room & Board - Public $20, $20,500 $10, $30, $54,000 $ Private school data for U.S.C. (University of Southern California), Public school data for University of California school system

9 Why Plan & Invest? Age & Retirement Trends Today Average Life Expectancy keeps growing: the average person today will live 77 years If you are 65 years old TODAY, your life expectancy will be 18 more years (age 83) Population > 65 years old will grow by 40% over the next 20 years Social Security is less stable Number of workers for each social security recipient 1930s 16 to 1 TODAY 3 to to 1

10 OK, so you need to plan for your future next steps? 1) Identify your short and long term goals What s most important to you? Can you prioritize? 2) Set a timeline for achieving your goals 3) Put together a monthly budget Income <Expenses> <Taxes> Net Savings 4) Put together a long term Financial Plan Next years yearly savings, expenses, major goals, cash flow

11 Monthly Budget Example Income, Assets & Goals Income Sources Amount/Yr COLA Start End Pension $0 0% 2040 Income $75,000 0% 2040 Social Security $30,000 2% 2040 COLA = Cost of Living Adjustment Investment Capital non IRA A $100,000 B $0 C $0 $100,000 IRA: IRA 1 $25,000 IRA 2 $0 Other $0 $25,000 Goals: College for kids Mortgage ends 2040 Retirement 2040

12 Monthly Budget Example - Costs Yearly Expenses Inflation HousingRent/Mortgage $30,000 HOA $0 4% Repair & Maintenance $2,000 3% Property Tax $3,000 2% Insurance $1,000 3% Food Groceries $5,000 3% Dining Out $1,800 3% Auto Gasoline $2,000 3% Repair & Maintenance $3,000 3% Insurance $1,500 3% Medical Insurance $5,000 5% Expenses $1,000 5% Personal Care $3,000 3% Monthly Income <Monthly Expenses> Savings Entertainment $3,000 3% Clothing $2,000 3% Travel/Trips $5,000 3% Miscellaneous (Gifts, etc.) $5,000 $73,300

13 Monthly Budget Example Yearly Expenses $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0

14 Monthly Budget Example Yearly Savings/Cash Flow $20,000 $0 -$20,000 -$40,000 -$60,000 -$80,000 -$100,000

15 Monthly Budget Example Net Worth Growth & NPV $1,200,000 $1,000,000 Present Value of Portfolio in Today's Dollars $122,952 $800,000 $600,000 $400,000 $200,000 $0

16 Many Ways to Invest Company 401k (tax free savings!) Self Employed/Business Retirement Plans Individual Retirement Account Roth IRA College Savings Plans

17 Company 401k

18 Company 401k You can save up to $18,000 per year - $24,000 if age 50 or over Company may match some $ Potential Tax Savings: up to 50 cents in tax saved for every $ invested PROS Immediate Tax Savings Potential Company Match (free money) Tax deferred growth May be able to borrow (up to $50k) CONS Tax and penalty if distribution taken before age 59 ½ Limited investment choices

19 Self Employed/Business Retirement Plans SEP IRA - $53,000 max contribution/year - Based on 20% profit share formula Solo 401k - Owner/spouse - $53,000 max contribution/year - 20% profit share + $18, k contrib Defined Benefit Pension - $210,000 maximum contribution - Based on age, income & performance - Ideal for consultant/1099 income * Be sure to refer to a financial or tax advisor for additional information

20 IRA and Roth IRA IRA - Tax free growth until taken out - Potentially Tax deductible - $5,500 contribution ($6,500 if > 50) ROTH IRA - Tax free growth forever - Not tax deductible - Cannot contribute if income is high ($130k+ single, $190k+ married) - $5,500 contribution ($6,500 if > 50)

21 College Savings Plans Coverdell Savings Account - Tax free growth if used for education - Vast flexibility on investments - $2,000 max contribution/year/child 529 College Savings Plan - Tax free growth if used for education - Less investment flexibility/choice - Greater contribution capability Custodial/Gift for Minor Account - Gift to minor ($14,000 per year) - Income taxed at child s rate (up to $2,000 income/year)

22 Conclusion & Next Steps Identify and evaluate your Goals Assess your Timeline Determine your Risk tolerance Create a Savings Plan Develop and execute an Investment Plan

23 Resources/Links/Contact Information Monthly Cash Flow/Budget: Retirement Savings Calculators: Amin Khakiani Phone: (310)

24 Thank You! Q & A

Monthly Cash Flow Exercise

Name Monthly Cash Flow Exercise Directions: Use the following scenario cards to fill out the Monthly Cash Flow Statement Worksheet on the next page. Each of the items should be recorded in the appropriate