Create a solid retirement plan in a few easy steps

Create a solid retirement plan in a few easy steps

Answer two questions How much will you need in retirement? How do you create your investment plan? Create a solid retirement plan > 2

How much should you save? Factors to consider: Desired retirement lifestyle. Years until retirement. Current retirement savings. Helpful tools on https://my.vanguardplan.com: Retirement income calculator. Plan savings calculator. Consider saving 12% to 15% of your pay for retirement, including any contributions your employer might make. Create a solid retirement plan > 3

The retirement income rule of thumb is to replace 75% to 85% of your current income. 75% 85%

Sources of retirement income Annuities Personal savings Retirement plan EMPLOYMENT INCOME Employer-sponsored plan Social Security Inheritance

Put time on your side $294,900 Earnings Amount contributed $173,200 $129,100 $56,200 $42,900 $10,100 $32,800 $72,900 $121,700 After 10 years After 20 years After 30 years Assumes a $30,000 salary, saving 10% over 30 years, a 6% annual rate of return, and a 2% annual pay increase. This hypothetical illustration does not represent the return on any particular investment. The final account balances do not reflect any taxes or penalties that may be due upon distribution. Withdrawals from a tax-deferred investment before age 59½ are subject to a 10% federal penalty tax unless an exception applies. Create a solid retirement plan > 6

How do you create your investment plan?

How mutual funds work Investor Investor Professional investment manager Designated investments Investor Create a solid retirement plan > 8

Asset classes Short-term reserves Bonds Stocks All investing is subject to risk, including the possible loss of the money you invest. Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments.

Average annual returns 1926 2013 Short-term reserves Bonds Stocks 10.2% Average annual return 3.6% 5.5% The performance data shown represent past performance, which is not a guarantee of future results. When determining which index to use and for what period, we selected the index that we deemed to fairly represent the characteristics of the referenced market, given the available choices. For U.S. stock market returns, we use the Standard & Poor s 90 Index from 1926 to March 3, 1957; the Standard & Poor s 500 Index from March 4, 1957, to 1974; the Wilshire 5000 Index from 1975 to April 22, 2005; the MSCI US Broad Market Index through June 2, 2013; and the CRSP US Total Market Index thereafter. For U.S. bond market returns, we use the Standard & Poor's High Grade Corporate Index from 1926 to 1968; the Citigroup High Grade Index from 1969 to 1972; the Lehman Brothers U.S. Long Credit AA Index from 1973 to 1975; the Barclays U.S. Aggregate Bond Index from 1976 to 2009; and the Spliced Barclays U.S. Aggregate Float Adjusted Bond Index thereafter. For U.S. short-term reserves, we use the Ibbotson U.S. 1-Month Treasury Bill Index from 1926 to 1977, and the Citigroup 3-Month Treasury Bill Index thereafter. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest. Index performance is not illustrative of any particular investment because you cannot invest in an index. All investing is subject to risk, including the possible loss of the money you invest. Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. Source: Vanguard. Create a solid retirement plan > 10

The impact of inflation 1926 2013 7.2% Short-term reserves Bonds Stocks Inflation rate 2.5% Real return 0.6% 3.0% 3.0% 3.0% Inflation rate The performance data shown represent past performance, which is not a guarantee of future results. When determining which index to use and for what period, we selected the index that we deemed to fairly represent the characteristics of the referenced market, given the available choices. For U.S. stock market returns, we use the Standard & Poor s 90 Index from 1926 to March 3, 1957; the Standard & Poor s 500 Index from March 4, 1957, to 1974; the Wilshire 5000 Index from 1975 to April 22, 2005; the MSCI US Broad Market Index through June 2, 2013; and the CRSP US Total Market Index thereafter. For U.S. bond market returns, we use the Standard & Poor's High Grade Corporate Index from 1926 to 1968; the Citigroup High Grade Index from 1969 to 1972; the Lehman Brothers U.S. Long Credit AA Index from 1973 to 1975; the Barclays U.S. Aggregate Bond Index from 1976 to 2009; and the Spliced Barclays U.S. Aggregate Float Adjusted Bond Index thereafter. For U.S. short-term reserves, we use the Ibbotson U.S. 1-Month Treasury Bill Index from 1926 to 1977, and the Citigroup 3-Month Treasury Bill Index thereafter. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest. Index performance is not illustrative of any particular investment because you cannot invest in an index. All investing is subject to risk, including the possible loss of the money you invest. Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. Source: Vanguard. Create a solid retirement plan > 11

Reduction of risk over time U.S. stock market returns 1926 2013 +54.2% Best Worst The bar chart and accompanying figures show the best and worst 1-, 5-, 10-, and 20-year periods of market performance within the 1926 2013 time frame. The performance data shown represent past performance, which is not a guarantee of future results. When determining which index to use and for what period, we selected the index that we deemed to fairly represent the characteristics of the referenced market, given the available choices. For U.S. stock market returns, we use the Standard & Poor s 90 Index from 1926 to March 3, 1957; the Standard & Poor s 500 Index from March 4, 1957, to 1974; the Wilshire 5000 Index from 1975 to April 22, 2005; the MSCI US Broad Market Index through June 2, 2013; and the CRSP US Total Market Index thereafter. Index performance is not illustrative of any particular investment because you cannot invest in an index. Source: Vanguard. +27.1% 12.4% 5 years +19.9% +17.2% 0.9% +3.1% 10 years 20 years 43.1% 1 year Create a solid retirement plan > 12

Find the right mix 1926 2013 Bonds Stocks Average annual return 5.5% 7.9% 8.9% 10.2% Worst one-year return 8.1% 18.4% 26.6% 43.1% Best one-year return 32.6% 27.9% 36.7% 54.2% The performance data shown represent past performance, which is not a guarantee of future results. When determining which index to use and for what period, we selected the index that we deemed to fairly represent the characteristics of the referenced market, given the available choices. For U.S. stock market returns, we use the Standard & Poor s 90 Index from 1926 to March 3, 1957; the Standard & Poor s 500 Index from March 4, 1957, to 1974; the Wilshire 5000 Index from 1975 to April 22, 2005; the MSCI US Broad Market Index through June 2, 2013; and the CRSP US Total Market Index thereafter. For U.S. bond market returns, we use the Standard & Poor's High Grade Corporate Index from 1926 to 1968; the Citigroup High Grade Index from 1969 to 1972; the Lehman Brothers U.S. Long Credit AA Index from 1973 to 1975; the Barclays U.S. Aggregate Bond Index from 1976 to 2009; and the Spliced Barclays U.S. Aggregate Float Adjusted Bond Index thereafter. Index performance is not illustrative of any particular investment because you cannot invest in an index. All investing is subject to risk, including possible loss of principal. Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. Source: Vanguard. Create a solid retirement plan > 13

Create your investment plan Invest for the long term. Don't focus on individual stock selection. Choose a mix of investments appropriate to your situation.

Choose your investments Identify your goals and time horizon. Choose your investment mix. Select your funds. Monitor your investments. Create a solid retirement plan > 15

Take charge of your savings Some things to consider: Increase your contribution rate. Change where you invest your money when needed. Move money between funds gradually. Review your investments annually. Create a solid retirement plan > 16

Support on the web https://my.vanguardplan.com View and manage your account. Receive account statements, confirmation notices, and tax forms electronically. Access to planning tools and educational materials. Create a solid retirement plan > 17

Take charge of your future Decide how much to save. Increase your contributions annually. Create your investment plan. Create a solid retirement plan > 18

Retirement plan recordkeeping and administrative services are provided by The Vanguard Group, Inc. (VGI). VGI has entered into an agreement with Ascensus, Inc., to provide certain plan recordkeeping and administrative services on its behalf. Ascensus is not affiliated with The Vanguard Group, Inc., or any of its affiliates. 2014 The Vanguard Group, Inc. All rights reserved. BBBBGBQM 062014