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Women and Wealth: Creating a Strategy That Works for You General Financial Strategies for Women Presented by: Natalie Lariccia and Katie Solvesky.

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Presentation on theme: "Women and Wealth: Creating a Strategy That Works for You General Financial Strategies for Women Presented by: Natalie Lariccia and Katie Solvesky."— Presentation transcript:

1 Women and Wealth: Creating a Strategy That Works for You General Financial Strategies for Women Presented by: Natalie Lariccia and Katie Solvesky

2 Women control substantial wealth Some economic factors about women:  Women comprise 43% of top wealth holders 1  Women account for 37% of North American high-net-worth segment (more than $1 million in investable assets) 2 1 Lisa Belkin, “The Power of the Purse,” The New York Times, August World Wealth Report 2011, Merrill Lynch Global Wealth Management and Capgemini,

3 Women comprise almost half the work force Some statistics about women in the workplace:  Women comprise 46.7% of the total U.S. labor force 1  They account for 51.5% of persons employed in management/professional positions 2  More than 8 million U.S. businesses are majority women-owned, with an economic impact of $3 trillion annually, translating into more than 23 million jobs 3  Women receive more bachelor and advanced college degrees than men 4  22% of married women earn more than their husbands 5 1 Women’s Employment During the Recovery, U.S. Department of Labor, 2011, 2 Bureau of Labor Statistics, “Employed persons by detailed occupation, sex, race, and Hispanic or Latino ethnicity,” The Economic Impact of Women-Owned Businesses in the United States, Center for Women’s Business Research, U.S. Census Bureau, Current Population Survey, 2010 Annual Social and Economic Supplement, April Pew Research Center analysis of 1970 Decennial Census and 2007 American Community Survey.

4 Women influence most household financial decisions 1 Prudential Research Study, “Financial Experience & Behaviors Among Women, 2010– MSAO Strategic Insights and Intelligence team analysis of Spectrem Group’s 2008 Millionaire Investor survey data, August 25, MSAO Strategic Insights and Intelligence team analysis of Spectrem Group’s 2011 UHNW Investor and 2011 Millionaire Investor survey data, February 8, Women are actively involved in household finances:  95% of women are financial decision makers and 84% of married women are either solely or jointly responsible for household financial decisions 1  Investment attitudes and behavior in a shared decision-making household tend to resemble those of a female decision maker 2  Women more readily recognize their Advisors’ worth and reward them with loyalty 3

5 Unique challenges Women face unique challenges that can impact their ability to realize longer-term goals:  Increased life expectancy/greater retirement needs 1  Longer exposure to inflation/increased health care costs  Long-term impact of time spent out of work force 2  Earning 81.2% as much as men as a full-time worker 3 1 U.S. Census Bureau, Life Expectancy by Sex, Age, and Race: 2008 (most recent statistics). 2 The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents, Bureau of Labor Statistics, Current Population Survey, “Median weekly earnings of full-time wage and salary workers by detailed occupation and sex, 2010,” April Life Expectancy in Years 1 Women Men

6 $.31 $.49 $.04 $ $2.73 $3.67 $.44 $ $7.33 $9.85 $1.18 $ Assumed 2.5% Inflation Rate from 2010 through 2050 Inflation A necessary planning factor 6

7 The top financial priorities identified by women are: 1  Funding retirement  Financial situation of children or grandchildren  Health, spouse’s health and becoming a burden to family  Adequate help to meet financial goals Chief financial concerns 1 Wealthy Women Investors, Spectrem Group, 2011.

8 Hypothetical example for illustrative purposes only. Assumed minimum payment is calculated by using 2.5% of the balance Budgeting Develop a Budget and Stick to It Create a budget to help plan for the long term  Become more aware of day-to-day cash flow and expenses  Pay down debt, especially high-interest debt  Consider health care and insurance options  Set up an emergency fund High Interest Debt can be crippling Paying the minimum balance on a $1,000 balance credit card with an 18% APR will take 153 months to pay off and you would have paid $1, in interest!

9  Flexibility (can relocate easily)  Can invest money elsewhere (stock market)  No upkeep fees (drippy faucets, broken dishwashers, etc.)  No Equity  Annual rent increase could outpace inflation Budgeting Buy or Rent? Renting ProsCons  Tax-break: deduct mortgage interest and property taxes  Potential tax-free capital gain  Emotional satisfaction  Property tax and upkeep  Mortgage costs  Less flexibility should you want to move; in very bad housing markets, you could lose principal Buying

10 The interest rate of this loan is locked in at origination and remains the same throughout the term of the loan These loans have an interest rate that is tied to an index, changing with prevailing market rates Adjustable Rate Mortgage Fixed Rate Mortgage Budgeting Financing a Home The FHA loan is a fixed rate mortgage that is designed especially for the first time home buyer of moderate or low income. A VA loan, is designed for men and women with a history of active military service or he/she is the surviving spouse of an active service member. Government Guaranteed Loans

11 Investing

12 Taking control Investors can take greater control of their financial situation.  Learn about investing  Identify your financial goals — Financial security of children/grandchildren — Care of aging parents — Your own long-term care  Work with a Financial Advisor  Monitor your portfolio  Don’t procrastinate

13 A strategy defined by your goals Your overall investment strategy depends on:  Your goals, timetable and tolerance for risk  A balance of stocks, bonds and cash  Monitoring and rebalancing your portfolio ? ? ? STOCKS BONDS CASH

14 Determining an appropriate asset allocation 20% 55% 25% 40% 50% 10% 60% 35% 5% 70% 25% 5% 80% 15% 5% Conservative Moderately Conservative Moderate Moderately Aggressive Aggressive Stocks Bonds Cash Merrill Lynch Asset Allocation Models Source: Bank of America Merrill Lynch Research Investment Committee (RIC) Report, January Models are for illustrative purposes only. Merrill Lynch has changed the allocations for each model in the past and may change the allocations in the future, depending upon research and investment strategy recommendations.

15 Education Planning

16 How the average family pays for college  Average percentage of total cost of attendance paid for each source: Source: Ipsos Public Affairs/Sallie Mae’s How America Pays for College 2012 study 16

17 Consider tax-efficient college planning options Tax-advantaged college planning options  Section 529 college savings plans  Coverdell Education Savings Accounts  Uniform Gift/Transfer to Minors Act (UGMA/UTMA) custodial accounts Please remember there's always the potential of losing money when you invest in securities. Before you invest in a Section 529 plan, request the plan’s official statement from your Merrill Lynch Financial Advisor and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the plan, which you should carefully consider before investing. You should also consider whether your home state or your designated beneficiary’s home state offers any state tax or other benefits that are available only for investments in such state’s 529 plan. Section 529 plans are not guaranteed by any state or federal agency. Understand your education funding options 17

18 Retirement

19 16.5 to 13.3 to 12.3 to 1 "The 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds," May 12, Not-so-good News: Social Security Is Threatened by an Aging Population Ratio of Workers to Beneficiaries

20 Number of Defined Contribution PlansNumber of Defined Benefit Plans  Private Pension Plans, Participation, and Assets: Update  (Data from tabulations of the U.S. Department of Labor's Form 5500) Not Your Parent’s Retirement Plan

21 There Is Hope “The Rule of 72” "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." - Attributed to Albert Einstein  The “Rule of 72” is a simple way to determine how long an investment could take to double, given a fixed annual rate of interest.  You divide 72 by the annual rate of return, to get an estimate of how many years it could take for the initial investment to double. Hypothetical example for illustrative purposes only. Results are not meant to represent the past or future performance of any specific investment vehicle. Actual rates of return cannot be predicted and will fluctuate. Your results may be more or less. Example $100 invested at 10% would take approximately 7.2 years to turn into $200.

22 Start Saving As Soon As You Can The sooner you start, the more money you could potentially have in retirement This hypothetical illustration assumes an annual $5000 IRA contribution made at the beginning of each year for 35 years, a 7% annual rate of return, and no taxes on any earnings within the IRA. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. (35 Years later) At Retirement $5,000 $739,567

23 Save for Retirement Every Year Even one year can potentially make a difference in your nest egg This hypothetical illustration assumes annual $5000 IRA contribution made at the beginning of each year and beginning one year apart for various ages, a 7% annual rate of return, and no taxes on any earnings within the IRA until the age of 71. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost.

24 Meet Your Company Match In 401(k) Plans  Many companies offer to match a percentage of employees’ 401(k) contributions  Investors should consider contributing at least as much as the company is willing to match  Don’t leave “free money” on the table by failing to contribute to your company’s 401(k) ¹ September 2010http://www.bls.gov/news.release/pdf/nlsoy.pdf The average person born in the latter years of the baby boom held 11 jobs from age 18 to age 44 1

25 Reasons to Invest Early Impacts on Your Paycheck A pre-tax contribution to your retirement account reduces your take home pay less than the amount of your contribution. Example  Mary is 35 and her annual salary is $50,000. She wants to contribute 5% of her salary to her 401(k) to take advantage of her company’s matching contributions and retire in 30 years.  Results -Mary’s monthly take-home pay would be reduced by: $156 -Her annual income tax bill would decrease by: $625 -With an employer match, at age 65 her account would grow to: $395,291 This hypothetical illustration assumes a 5% contribution rate at the beginning of each year, a 6% annual rate of return, and a 25% federal tax bracket (state and local taxes are not included). It also assumes a company match of 100% for every dollar contributed up to 5% of eligible compensation. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. Taxes are due upon withdrawal. If you take a withdrawal prior to age 59½, you may also be subject to a 10% additional federal tax.

26 26 Risk in retirement Types of risk to consider:  Market and sequence of returns  Inflation  Longevity/life expectancy  Health care  Asset allocation

27 27 Framework for building a retirement strategy Different portfolios are designed to address separate needs:  A short-term portfolio is designed to supplement ongoing retirement income sources  An intermediate-term portfolio is designed to generate returns over a longer period of time, helping you keep pace with inflation and making it less likely you will outlive assets  A long-term portfolio is designed to fund wealth structuring goals

28 28 Managing your retirement assets Remember to:  Review your portfolio annually or as needed  Consider whether rebalancing your portfolio is necessary  Continue to monitor your portfolio

29 Estate planning strategies

30 30 Getting in the know Don’t rely on others to handle the details.  Review and understand your estate plan  Ask your own personal legal advisor about asset titling and beneficiary designations  Find out: —Are you a personal representative (executor) and/or a trustee? —Are you familiar with your parents’ estate plan?

31 31 Reasons to have an estate plan Your entire estate is taxable.  IRA and 401(k) assets  Life insurance proceeds  Real property, bank accounts Your beneficiaries need liquidity to pay:  Estate tax  Administrative expenses  Outstanding debt Neither Merrill Lynch nor its Financial Advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors.

32  Provides benefits while you are still alive, including during incapacitation, and after death  Allows limited probate proceedings for pour-over will  Applies to all assets titled in the name of the trust  Addresses lifetime management of assets  Requires grantor-appointed trustee  Provides for the distribution of assets after your death  Applies to assets owned in your name not otherwise the subject of beneficiary designations  Does not address lifetime planning, e.g., incapacity  Is subject to probate proceedings  Requires court-appointed personal representative Distributing your assets per your wishes Living Trust Will

33 33 Be prepared for your discussion Before meeting with your own personal legal advisor:  Prepare a family tree  Make a list of everything you own  Think about whom you want to designate as beneficiaries, personal representative and /or trustee of your plan  Consider what you want to leave to whom and in what form  Indicate which charitable organizations you wish to support

34 Putting it all together

35 Best Practices to Help You Plan for your Future Save Every Year Pay Down Debt Monitor and Adjust Your Portfolio Start Saving As Soon As You Can Meet Your Company’s 401(k) Match Create A Budget

36 What about your life? 36 Consider this:  Are you living for today, maintaining a long-term horizon, or both?  Is your financial strategy a balance between lifetime financial needs and the legacy you would like to leave?  Are you familiar with your investment portfolio? Do you feel you have the right mix of stocks, bonds and cash to help meet your investment needs?  Have you determined your tolerance—both financial and emotional—for investment risk?  Have you worked to develop strategies to help meet your philanthropic goals?  Do you have a will and/or trusts? If so, are they current?

37 The information in this presentation is intended to be a general introduction of Merrill Lynch’s approach to wealth management. It is not intended to be either a specific offer by any Merrill Lynch entity to sell or provide, or a specific invitation to apply for, any particular product or service. Merrill Lynch offers a broad range of brokerage, investment advisory (including financial planning) and other services. There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. It is important to understand the differences, particularly when determining which service or services to select. Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Neither Merrill Lynch nor its Financial Advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors. Asset allocation, diversification and rebalancing do not assure a profit or protect against a loss in declining markets. Investments in foreign securities involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation. Banking products are provided by Bank of America, N.A., and affiliated banks, members Federal Deposit Insurance Corporation (FDIC) and wholly owned subsidiaries of Bank of America Corporation. Investment products: MLPF&S is a registered broker-dealer, member Securities Investor Protection Corporation (SIPC) and a wholly owned subsidiary of Bank of America Corporation. Are Not FDIC InsuredAre Not Bank GuaranteedMay Lose Value


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