Enrollment Overview Heart of CarDon LLC 401(k) Plan RETIREMENT PLAN ADMINISTRATIVE AND RECORDKEEPING SERVICES PROVIDED BY MCCREADY AND KEENE, INC., A ONEAMERICA COMPANY
Family caring for Family As an employee of CarDon & Associates, Inc., you are also part of the family. As with any family member, you care about their well-being and want them to make the kind of choices that will help them prepare for what life has in store. One of those choices is deciding whether or not to participate in your employer sponsored retirement plan. Did you know that some investment professionals estimate that you ll need at least 75 80 percent of your final working salary to maintain your lifestyle during retirement? CarDon & Associates, Inc. is committed to providing you with a retirement plan that offers you the tools, education and investment options to help you prepare for your future. 2
Enrollment overview Estimate your need With the average life expectancy increasing, uncertainty around Social Security and inflation continuing to erode the purchasing power of your money, participating in your retirement plan is more important now than ever. Use this worksheet to help you determine how much money you may need to reach your retirement goals. Retirement needs worksheet Note: Example assumes 25 years until retirement Example Your numbers 1 Annual income $40,000 2 Annual income needed in retirement in today s dollars $30,000 (Retirement professionals estimate that you will need 75 to 80 percent of your current annual income each year in retirement) 3 Approximate amount of Social Security expected annually $10,000 (Multiply Line 1 by.25 for a conservative estimate of your Social Security benefit. There is an annual cap on benefits. Visit www.ssa.gov for more information.) 4 Shortfall that will need to be made up from other sources of retirement income $20,000 (Subtract Line 3 from Line 2) 5 Adjust shortfall for inflation $32,800 (Multiply Line 4 by the appropriate inflation factor from the chart below. In the example, we assume 25 years remaining until retirement. Therefore, we multiplied $20,000 by 1.64.) 6 Investments already accumulated adjusted for future growth $325,800 (For this example, we assume $60,000 in already accumulated assets. Because we are still assuming 25 years until retirement, we multiply $60,000 by an investment factor of 5.43. Check the table below for the appropriate investment factor for your situation.) 7 Amount needed at retirement to get the amount entered in Line 5 $410,000 (Multiply Line 5 by 12.5 a payout factor which assumes 2% inflation, 7% return and that 20 years of retirement income will be needed) 8 Determine how much needs to be allocated toward retirement income (Subtract Line 6 from Line 7) $84,200 9 Amount needed in contributions each year to achieve a goal of Line 8 (Divide Line 8 by the appropriate present value factor from the chart below. In the example, we did $84,200 divided by 63.25.) $1,331.23 10 Monthly contribution amount (Divide Line 9 by 12) 11 The percentage to be deducted monthly from paycheck (Line 10 divided by monthly income. In the example: $110.94 divided by $3,333.) $110.94 monthly investment 3.3% monthly investment Retirement needs factors Years until retirement 5 10 15 20 25 30 35 40 Inflation Factor (2 percent inflation) 1.10 1.22 1.35 1.49 1.64 1.81 2.00 2.21 Investment Factor (7 percent return) 1.40 1.97 2.76 3.87 5.43 7.61 10.68 14.97 Present Value Factor (7 percent return) 5.75 13.82 25.13 41.00 63.25 94.46 138.24 199.64 Note: McCready and Keene provides administrative and recordkeeping services and is not a broker/dealer or an investment advisor. Neither McCready and Keene nor its employees provide tax, legal or investment advice. All numeric examples are hypothetical. These hypothetical investment returns are for educational purposes only and are not indicative of any particular investment or performance. Hypothetical returns assume reinvestment of earnings. Actual returns or principal value will vary. Balances shown are before reduction for taxes. 3
Contribute to your retirement plan For many people it is a good idea to participate in your retirement plan as soon as possible. If you start contributing right away, your account may have more time to grow or weather ups and downs in the stock market. Though starting early is important; there is assistance available through the plan if you are contributing later in life. Check with your plan administrator for more information on catch-up contributions. Your retirement plan contributions If you are contributing on a pre-tax basis, the money you contribute to your retirement account is automatically deducted from your paycheck before taxes are taken out. It goes directly into your retirement account, so your paycheck is actually less than it would have been before the deduction when taxes are taken out. This means you are paying less in current income taxes for the year. This can help reduce the impact of contributing to your retirement plan on your take-home pay. Put tax deferral to work for you Tax deferral simply means the contributions to your retirement plan are not currently taxed. You are putting off paying taxes on that money until you withdraw it from your retirement account. How can putting off paying taxes be a benefit? Not only are your contributions invested, but the deferred taxes allow your money to stay invested. The benefits of compound interest Compounding occurs when your principal investment generates a gain that is reinvested and experiences an additional earning. When the new balance (the original investment plus the gain) generates further earnings, the initial gain increases the total return of your initial principal. When the following gains are reinvested, future positive earnings are further compounded. Compound interest example Michael Age 25 $100 Monthly contribution over 40 years Total contribution $48k = $199,149 at retirement Note: This hypothetical investment return and fictitious name is designed to demonstrate the impact of compounding returns and is not indicative of any particular investment or performance. Hypothetical returns assume reinvestment of earnings and a 6 percent average return on investment. Actual returns or principal value will vary. Balance shown is before reduction of taxes. Any investment involves risk and there is no assurance that the investment objective of any investment option will be achieved. Before investing, understand that variable annuities are subject to market risk, including possible loss of principal. 4
Enrollment overview Plan highlights When you participate in the Heart of CarDon LLC 401(k) Plan, you are one step closer to having the income you will need to enjoy your retirement. Here are a few of the features and benefits available to you as a plan participant. Eligibility requirements employee and employer contributions Participation in the plan is open to employees who meet the following requirement(s): Age 21 30 days of service Plan entry dates employee and employer contributions Participants may participate in the plan effective the first day of each month. Upon meeting the eligibility requirements, participants may participate in the plan effective the first day of each month. Employee contributions Generally you can contribute up to 100% of your wages, salary, earnings (and bonus, if applicable), or $17,500 for the 2013 calendar year, whichever is less, subject to plan and statutory limits. You can designate your contribution as a pre-tax deferral, a Roth deferral or a combination of both. Roth deferrals are after-tax contributions, but earnings on these contributions accumulate tax-free in your account and withdrawals at retirement may be exempt from federal income tax. You may increase of decrease the amount of your contributions quarterly. Once you discontinue contributions, you may only start again as provided under the terms of the plan. Future investment choices may be made daily. Rollovers and transfers Your plan allows for the rollover or transfer of an existing qualified retirement plan account from a prior employer. Roth contributions The plan allows you to make after-tax Roth contributions to your retirement plan. The Internal Revenue Code dollar limit also applies cumulatively to your employee pre-tax contributions and your Roth contributions. The dollar limit is $17,500 for 2013. To qualify for tax-free withdrawals, your money must remain in the account for five years and you must have reached 59½. Unlike Roth IRA s, there is no income limit on who can make Roth contributions to a retirement plan. However, Roth contributions may be limited by applicable nondiscrimination rules for retirement plans. See your Benefits Administrator for more details. 5
Catch-Up contributions If you are age 50 or older and make maximum allowable deferrals to your plan, you are entitled to contribute an additional catch-up contribution. The catch-up contribution is intended to help eligible employees make up for smaller contributions made earlier in their career. The maximum catch-up contribution is $5,500 for 2013. See your Benefits Administrator for more details. You are always 100% vested in your deferral contributions to the plan, plus any earnings they generate. Employer contributions Employer matching Your employer will make a $.10 contribution for every dollar you defer up to 6% of pay. Profit sharing contributions Your plan allows for an employer profit sharing contribution as defined by the plan. Vesting employee contributions Deferral Contributions You are always 100% vested in your deferral contributions to the plan, plus any earnings they generate. Rollover contributions You are always 100% vested in any rollovers or transfers to the plan, plus any earnings they generate. Vesting Employer Contributions Profit sharing contributions/matching Contributions made to the plan on your behalf, plus any earnings they generate, are subject to the following vesting schedule. Vesting schedule Years of service Less than 2 years 2 3 4 5 6 Vesting % 0% 20% 40% 60% 80% 100% Withdrawals/Distributions Attainment of normal retirement age, 65 Permanently leave company Death Disability Financial hardship In this case, any distribution would be further limited to the total amount contributed and contributions must be suspended for six months after receipt of a distribution of hardship. See your Summary Plan Description for more details about taking withdrawals from the plan. Be sure to talk with your tax advisor and address any potential adverse tax consequences before withdrawing any money from your plan account. 6
Enrollment overview Hardship withdrawals If you have an immediate financial need created by severe hardship and you lack other reasonably available resources to meet that need, you may be eligible to receive a hardship withdrawal from your plan. A hardship, as defined by the government, can include: Purchase of your principal residence Payment of tuition and related costs for the employee, spouse, dependents or children who are no longer dependents for post-secondary education Paying certain medical expenses Preventing eviction from, or foreclosure of, your primary residence Funeral/burial expenses for a parent, spouse, child or dependent Repair of damages to employee s principal residence that qualifies for casualty deduction Section 404(c) Notice The plan is intended to be an ERISA Section 404(c) plan. This means that you exercise control over the investments in your plan account. You will choose which investments to put your money in now and you can choose different investment options as your needs change. This allows you to invest in the way that best meets your personal goals. Your investment elections remain in force until changed. Your employer and the fiduciaries of the plan may be relieved of liability for any losses that your account may experience as a result of investment choices made by you or your beneficiary. If you do not make any investment option elections, your contributions will be credited to the default investment option identified in the contract. Once you provide investment option elections, new contributions will be allocated according to those elections. Monies defaulted to the default investment option will remain invested in that option until you transfer such amounts to another investment option. All or a part of your account value may be transferred between the available variable investment options at any time during the Accumulation Period, but no more frequently than once per day. However, AUL reserves the right to reject any transfer request which it reasonably determines to be made in connection with abusive trading practices, such as market timing or excessive trading by an investor or by accounts of investors under common control. 7
Choose your investments An important, and sometimes confusing, step in retirement preparation is choosing which options to invest in. Because each investor has different goals and different circumstances, there is no set strategy that works for everyone. The mix of investments that is appropriate for you depends on your retirement goals, your risk tolerance and how long you have until retirement. Asset classes There are different types of investments, known as asset classes, in which you may choose to invest your retirement plan contributions. The three main asset classes are: Stocks Stocks have historically had the greatest risk and highest returns among the three major asset categories. Bonds Bonds are generally less volatile than stocks but offer more modest returns. Cash equivalents Cash equivalents such as certificates of deposit, treasury bills and money market funds are generally the most conservative investments, but offer the lowest return of the three major asset categories. Another type of investment, called an Asset Allocation fund, provides investors with a portfolio of a fixed or variable mix of the three main asset classes. These funds are a good option for investors that would prefer not to worry about making adjustments to their portfolio as the market fluctuates. Understanding risk and return Risk is the potential for an investment to lose value. Return is the change in value on an investment. Understanding the relationship between risk and return is very important as you develop your investment strategy. The amount of investment risk you are willing to take, also known as your risk tolerance, is a personal decision, which can be shaped by the amount of time you have until retirement, or your time horizon. Risk tolerance Some people are comfortable taking on the risk of frequent ups and downs of the market in return for potentially greater longterm returns. Others prefer the slow, steady return of lower risk investments. Understanding your personal attitude toward risk will help you find the right mix of investments for your portfolio. Time horizon The longer you have until retirement, the more risk you can potentially afford to take. 8
Enrollment overview Mixing it up with diversification Because different asset classes have varying levels of risk and return, it is important to make sure you have a good mix of investments in your portfolio. This strategy, called diversification, aims to balance risk and reward by allocating assets according to your goals, risk tolerance and investment horizon. For those who would like to take a more hands off approach Target date investment options are available to the plan through the American Century Investments One Choice target date funds and may be appropriate for those who wish to take a more hands off approach to investing. Target date investment options are designed for people who plan to retire during or near a specific year. These investment options use a strategy that reallocates equity exposure to a higher percentage of fixed investments; the investment options will shift assets from equities to fixed income investments over time. As a result, the investment options become more conservative over time as you approach retirement. It s important to remember that no strategy can assure a profit or prevent a loss in a declining market. Target date investment options are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, in addition to the expenses of the target date investment options an investor is indirectly paying a proportionate share of the applicable fees and expenses of the underlying funds. The investment options are not guaranteed at any point and may lose value. Note: Each group of investments carry their own unique risks. Before investing, please read each fund prospectus for a detailed explanation of the risks, fees, and costs associated with each underlying investment option. Although you might reduce volatility and risk with diversification, you can t eliminate investment risk all together. Diversification does not ensure a profit or protect against loss. Bond funds have the same interest rate, inflation and credit risks that are associated with the underlying bonds owned by the fund. Money Market funds are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other federal government agency. Although they seek to preserve the value of your investment at $1.00 per share, it s possible to lose money by investing in money market funds. 9
Select the investor profile that best fits you by completing this questionnaire. For those who would like to take a more hands on approach This questionnaire will help you select an investor profile, based on your personal situation and comfort level with investing. The total score recommends which of the five risk profiles is most appropriate for you. Answer these questions and total your score at the bottom. I expect to begin withdrawing money from my retirement account in: 1 year 2 4 years 5 7 years 8 10 years 11+ years Score 1 2 3 4 5 Once I begin withdrawing money from my retirement account, I expect the withdrawals to last: I want a lump sum distribution 2 4 years 5 7 years 8 10 years 11+ years Score 1 2 3 4 5 I would take money out of my retirement account to pay for a large, unexpected expense. To meet my financial goals, my investments must grow at a high rate of return. I prefer investments that are a low risk, even if the returns are lower than the rate of inflation (the rise in prices over time). I prefer an investment strategy designed to grow steadily and avoid sharp ups and downs. When it comes to investing, protecting the money I have is my highest priority. I am unwilling to wait several years to recover from losses I could incur in an extended down market. I always choose investments with the highest possible return, even if the investments may frequently experience large declines in value because of higher risk. If I had $1,000 invested in an account, and its value dropped to $850 after six months, I would move all my money to a more conservative account. Strongly agree Agree Neutral Disagree Strongly disagree 1 2 3 4 5 5 4 3 2 1 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 5 4 3 2 1 1 2 3 4 5 Score TOTAL 10
Enrollment overview Selecting an investor model to suit your style Conservative strategy Score 10 19 The conservative investment strategy seeks to provide high current income and low long-term capital appreciation. 20% Stocks 80% Bonds Investment Percentage n Large-cap stocks 11% n Mid-cap stocks 3% n International stocks 6% n Bonds 52% n Fixed interest/stable 28% value/cash Moderate strategy Score 20 26 The moderate strategy seeks to provide high current income and moderate longterm capital appreciation. 40% Stocks 60% Bonds Investment Percentage n Large-cap stocks 19% n Mid-cap stocks 5% n Small-cap stocks 3% n International stocks 13% n Bonds 41% n Fixed interest/stable 19% value/cash Balanced strategy Score 27 33 The balanced strategy seeks to provide above average capital appreciation and a moderate level of current income. 60% Stocks 40% Bonds Investment Percentage n Large-cap stocks 28% n Mid-cap stocks 6% n Small-cap stocks 5% n International stocks 21% n Bonds 29% n Fixed interest/stable 11% value/cash 11
Selecting an investor model to suit your style (continued) Growth strategy Score 34 40 The growth investment strategy seeks to provide high long-term capital appreciation with low current income. 80% Stocks 20% Bonds Investment Percentage n Large-cap stocks 33% n Mid-cap stocks 9% n Small-cap stocks 8% n International stocks 30% n Bonds 20% Equity growth strategy Score 41 50 An equity growth strategy seeks to provide high long-term capital appreciation. 100% Stocks 0% Bonds Investment Percentage n Large-cap stocks 39% n Mid-cap stocks 12% n Small-cap stocks 11% n International stocks 38% Note: While diversification through an asset allocation strategy is a useful technique that can help to manage overall portfolio risk and volatility, there is no certainty or assurance that a diversified portfolio will enhance overall return or outperform one that is not diversified. An investment made according to asset allocation models neither guarantees a profit nor eliminates the possibility of loss. 12
Enrollment overview Review your plan regularly The last step in investing in your retirement plan is to review your account regularly. Like other important things in life, your retirement account requires periodic monitoring and review. Be sure to carefully read your quarterly statements, call 1-800-442-4015 with any questions you may have and review all materials given to you from your employer about retirement preparation or the plan. As your life and priorities change, the amount you can contribute to your retirement account or your investment allocation strategy may also change. Any of these events might signal a need to re-evaluate your retirement plan choices. Marriage Birth or adoption of a child Change of employment for you or your spouse Divorce Financial emergency Death of a spouse Approaching retirement In addition to reviewing your account when major life events happen, it is also a good idea to do a review annually (perhaps with a financial professional) to determine whether or not you are still on track to reach your goals. This is a good habit because there will be tweaks you may want to make along the way such as rebalancing your investment mix or increasing your contribution level. Log in to your account at www.cardon401k.com 24 hours/ day, 7 days/week to: Access account balances View investment option performance Review or change investment options Update contact information Make deferral changes Designate and update beneficiaries 13
Online tools In today s busy world, many investors enjoy learning about retirement related topics online. Through our Investment Education Toolbox and the AdvicePlus tool from MasteryPOINT Financial Technologies, you can educate yourself and develop your retirement preparation strategy wherever (and whenever) it works best for you. Investment Education Toolbox By visiting www.cardon401k.com, you have access to our Investment Education Toolbox which has retirement preparation resources such as: Our Asset Allocation Builder questionnaire to assist you with determining what type of investor you are Financial education resources from McGraw-Hill Financial Communications presented through articles, interactive charts and tutorials on a variety of topics Calculators and other tools to help you determine your retirement preparation strategy AdvicePlus from MasteryPOINT AdvicePlus is available to you by logging in to your retirement account through www.cardon401k.com and includes: Strategy Builder Designed to help you create a retirement action plan and provide recommendations from MasteryPOINT Retirement education Provides information on retirement preparation concepts and the advantages of your retirement plan Calculators Includes the College Planner, the Distribution Planner, the Paycheck Calculator and many more 14
Enrollment overview Get started! eenrollment www.cardon401k.com 1. Visit www.cardon401k.com 2. Enter log in information. 3. If you are a first time user, enter your full Social Security Number (SSN) as your user name 4. The last four digits of your SSN are your initial PIN 5. Check the box if you have other retirement accounts you would like to rollover (if applicable) 6. Enter your personal information 7. Decide how much you want to contribute and choose your investment options 8. Add beneficiary information 9. Review your entries and click Enroll Me Enroll today at www.cardon401k.com or by calling 1-800-442-4015. Enrollment assistance over the phone 1-800-442-4015 English and Spanish speaking representatives are available Monday through Friday between 8 a.m. and 8 p.m. Eastern Time to help you complete your enrollment. Note McCready and Keene provides administrative and recordkeeping services and is not a broker/dealer or an investment advisor. Neither McCready and Keene nor its employees provide tax, legal or investment advice. Mutual Funds are sold by prospectus. The prospectus contains important information about the fund. Before investing any money, plan participants should read the prospectus and carefully consider the fund s investment objectives, risks, charges and expenses. Investing involves risk, including the potential loss of principal. To obtain a copy of the prospectus, the participant should contact the plan s investment advisor or the mutual fund company directly. MasteryPOINT Financial Technologies and McGraw Hill Financial Communications are not affiliates of McCready and Keene, Inc. and are not OneAmerica companies. 15
Family caring for Family About McCready and Keene, Inc. McCready and Keene, Inc., a OneAmerica company, is an actuarial and retirement benefits consulting firm that focuses on designing, installing and administering customized retirement plans. Based in Indianapolis, Ind., McCready and Keene provides actuarial services to defined benefit plans and provides record keeping services to employee stock ownership plans and other defined contribution plans, including a trust program that uses an open architecture investment platform available to 401(k), 403(b), 457, money purchase pension, and profit sharing plans. About OneAmerica OneAmerica Financial Partners, Inc., headquartered in Indianapolis, Ind., has companies that can trace their solid foundations back more than 135 years in the financial services marketplace. OneAmerica s nationwide network of companies offers a variety of products to serve the financial needs of their policyholders and other customers. These products include retirement plan products and services; individual life insurance, annuities, long-term care solutions and employee benefit plan products. The goal of OneAmerica is to blend the strengths of each company to achieve greater collective results. The products of the OneAmerica companies are distributed through a nationwide network of employees, agents, brokers and other distribution sources that are committed to increasing value to policyholders by helping them prepare to meet their financial goals. McCready and Keene, Inc. a OneAmerica company P.O. Box 50460 Indianapolis, IN 46250-0460 1-800-442-4015 www.mcak.com 2013 OneAmerica Financial Partners, Inc. All rights reserved. OneAmerica and the OneAmerica banner are all registered trademarks of OneAmerica Financial Partners, Inc. R-25171 07/22/13