Is Your Financial House In Order?

Transcription

1 Is Your Financial House In Order? Morgan (Trey) Laffitte III, CFP, RICP Financial Planner The Prudential Insurance Company of America 751 Broad Street Newark, NJ MAP YOUR RETIREMENT 2 ASSESSING YOUR FINANCIAL SITUATION 3 1

2 ORGANIZING FINANCIAL PAPERWORK Important papers Tax returns Keep for seven years Paycheck stubs Cancelled checks Documents pertaining to buying, selling or improving your home Keep as long as you own the home Receipts for major purchases Keep as long as you own the item Throw-away after you reconcile with monthly statement and/or track in your budget Grocery & other nondeductible expense receipts Utility bills Credit card bills 4 BUDGETING Track spending Manage debt Curb impulse purchases Find ways to save more 5 WHERE S THE MONEY? 6 2

3 SET YOUR FINANCIAL PRIORITIES Fixed Expenses Mortgage/rent Food Utilities Transportation Healthcare Insurance Property taxes Alimony/Child Support Variable Expenses Entertainment Vacations Hobbies Sports Home Improvement Gifts Charitable Giving New Clothes 7 MANAGING DEBT Make managing debt a high priority: Reduce debt or credit card with the highest interest rate first Consolidate debt where possible Avoid incurring unnecessary debt 8 WHAT YOU NEED SAVINGS FOR Emergency fund Protection solutions Big ticket items Retirement Caring for family 9 3

4 SECURE YOUR FINANCIAL FUTURE Take advantage of available resources Seek professional guidance Take an active role Avoid cashing out early 10 TAX IMPLICATIONS Pre-Tax After-Tax Potentially Income- Tax Free 2 Company sponsored retirement plan: 401(k) 403(b) 457(b) Pension plan Individual Retirement Account (IRA) Simplified Employee Pension (SEP) Savings account Certificate of deposit Mutual fund Annuities Real estate Tax exempt bonds/funds Education savings accounts Life insurance death benefits 1 Roth IRAs 3 Roth accounts in company sponsored plans Plans 1. Under section 101 of the Internal Revenue Code, most life insurance death benefits are income tax free. But if a policy has been transferred for value, the portion of the death benefit that represents gain may be taxable. There are some exceptions to this general rule, including certain changes in ownership and payment of any additional interest at death. 2. Tax exempt income may impact the taxation of social security benefits and may have AMT consequences. 3. Qualified distributions are federally tax-free, provided the Roth account has been open for at least five tax years and the owner has reached age 59 ½ or meets other requirements. Qualified Roth IRA distributions may be subject to state and local income tax. 11 MAKE A COMMITMENT TO SAVE Remind yourself of your goals on a regular basis Save for your short-, mid-, & long-term goals Pay yourself first Have money automatically moved from your checking to saving account Make an income from your hobbies Save tax refunds, inheritances, and monetary gifts 12 4

5 PAY YOURSELF FIRST Imagine if you saved this much each week $25 $75 $125 Compounded 4% Rate of Return $55,237 $165,709 $276,181 You could have this much in 25 years!* * The compounding example is hypothetical and for illustrative purposes only and is not intended to represent performance of any specific investment, which may fluctuate. No taxes are considered in the calculations; generally withdrawals are taxable at ordinary rates and it assumes no withdrawals. It is possible to lose money by investing in securities. Assumes a 4% rate of return. Neither Prudential Financial nor any of its representatives are tax or legal advisors and encourage you to consult your individual legal or tax advisor with any specific questions. 13 FINANCIAL CHECKUPS Health insurance Long-term care insurance Property & Casualty insurance Life insurance Disability income insurance 14 HEALTH INSURANCE 15 5

6 LONG-TERM CARE INSURANCE 16 PROPERTY AND CASUALTY 17 LIFE INSURANCE HOW MUCH IS ENOUGH? How much life insurance you need depends on: Income Expenses, including debt Goals (e.g., college for children or grandchildren) Potential estate Desire to create a legacy Charitable aspirations Desire to continue a business 18 6

7 DISABILITY INCOME INSURANCE According to Social Security Administration, 25% of today s 20 year-olds will become disabled before they retire. That s one in four people 1. 1 Social Security Administration Publication No , January PLANNING FOR RETIREMENT How much will you need? 20 ACCOUNT FOR INFLATION Monthly Expenses Basic Needs Food Basic Needs $670 $ $1,333 Shelter $1,796 $2,533 $3,574 Transportation $934 $1,318 $1,858 Total Total $3,400 $4,796 $3,642 $6,765 This is a hypothetical example for illustrative purposes only. Every individual's situation and expenses are unique. Assumes a 3.5% annual inflation rate over time. 21 7

8 RISING MEDICAL COSTS A 65-year-old couple retiring today could expect to pay $266,000 1 in out-of-pocket healthcare expenses. Only 52% 2 of adults ages are confident they can afford the cost of health care in retirement SET SMART GOALS Goals can change over time Housing College education Vacation home/travel Retirement 23 DIVERSIFY Non-Diversified Diversified 100% CASH He has: Low risk to principal Low growth potential Stocks Other Cash Bonds 100% STOCKS She has: High risk High growth potential Money in several baskets Tolerable risk Some growth potential 24 8

9 MAINTAIN A LONG-TERM PERSPECTIVE 25 SOCIAL SECURITY MAXIMIZATION Break Even Points: Age 70 vs. 66: Age 81 Age 66 vs. 62: Age 76 Age 70 vs. 62: Age 79 This is a hypothetical example for illustrative purposes only. This assumes a full retirement age benefit of $24,000 a year, an annual cost of living adjust of 3%, and the client living to age ESTATE PLANNING Help to plan for the orderly distribution of your estate Help to provide a legacy to loved ones and valued charitable organizations 27 9

10 ASSEMBLE A FINANCIAL TEAM Financial professional, financial advisor or financial planner Tax advisor and/or tax attorney Credit counselor Lawyers 28 People don t plan to fail they fail to plan. Plan for tomorrow today with Prudential IMPORTANT INFORMATION Prudential, the Prudential logo, the Rock symbol and Bring Your Challenges are service marks of Prudential Financial, Inc., and its related entities, registered in many jurisdictions worldwide. Prudential Financial, its affiliates, nor its financial professionals render tax or legal advice. Please consult with an attorney, accountant and/or tax advisor concerning gyour particular circumstances. This seminar was not intended to market or sell any specific products or services. Offering this seminar does not constitute an endorsement by the employer of Prudential products or services in any way. The speaker of the seminar is a registered representative of Pruco Securities, LLC (Pruco), a Prudential Financial company