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Enrollment Retirement Funds Date Presenter Name. 2 WELCOME INFORMATIONPROCESSYOUR ROLE IntroductionToday Welcome Sit Back – Relax – Ask Questions – Get.

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Presentation on theme: "Enrollment Retirement Funds Date Presenter Name. 2 WELCOME INFORMATIONPROCESSYOUR ROLE IntroductionToday Welcome Sit Back – Relax – Ask Questions – Get."— Presentation transcript:

1 Enrollment Retirement Funds Date Presenter Name

2 2 WELCOME INFORMATIONPROCESSYOUR ROLE IntroductionToday Welcome Sit Back – Relax – Ask Questions – Get Info – ACT!

3 3 This presentation has been prepared by T. Rowe Price Investment Services, Inc., for informational purposes only. T. Rowe Price Investment Services, Inc., its affiliates, and its associates do not provide legal or tax advice. Any tax-related discussion contained in this presentation, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any tax penalties or (ii) promoting, marketing, or recommending to any other party any transaction or matter addressed herein. Please consult your independent legal counsel and/or professional tax advisor regarding any legal or tax issues raised in this presentation.

4 4 WELCOME INFORMATIONPROCESSYOUR ROLE IntroductionToday Allow me to introduce myself I’m _________________________________ I work for ____________________________

5 5 WELCOME INFORMATIONPROCESSYOUR ROLE IntroductionToday Allow me to introduce myself I’m _________________________________ I work for ____________________________ Retirement specialist Series 7 and 63 registered representative Series 66 investment advisor representative

6 6 WELCOME INFORMATIONPROCESSYOUR ROLE IntroductionToday What we’ll cover today Info –Why save and the benefits of your plan Process –How to make the plan work for you Your role –What you need to do

7 7 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits Social insecurity? Source: Social Security Administration, 2006 OASDI Trustee Report. 2005: 3.3 workers per Social Security recipient 2030: 2.2 workers per Social Security recipient 1940: 16.5 workers per Social Security recipient

8 8 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits Social insecurity? Full Social Security benefits age is on the rise –Born 1937 or earlier: age 65 Born : age 65 + set number of months Born : age 66 Born : age 66 + set number of months Born 1960 or later: age 67 Receiving Social Security at age 62 reduces benefits –Born 1937 or earlier: 80% of full benefits Born : between 75% and 80% of full benefits Born : 75% of full benefits Born : between 70% and 75% of full benefits Born 1960 or later: 70% of full benefits

9 9 Pop Quiz What was the average life expectancy for U.S. citizens in 1930? A. Age 87 for men and age 91 for women B. Age 67 for men and age 70 for women C. Age 58 for men and age 62 for women D. Age 52 for men and age 55 for women

10 10 Pop Quiz What was the average life expectancy for U.S. citizens in 1930? C. Age 58 for men and age 62 for women (Eligibility for Social Security benefits began at age 65!) Source: Life Expectancy for Social Security (www.socialsecurity.com).

11 11 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits What’s in it for you? Power of compounding Take note… ! Investing as little as $1 a day can really add up over time.

12 12 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits The power of compounding See how just $1 a day can add up 10 years 20 years 30 years $5,265 $37,107 $15,845 7% annual rate of return, compounded monthly. This is for illustrative purposes only and not meant to represent the return of any of your plan’s investment options. Your situation will vary.

13 13 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits The power of compounding See how just $20 a week can add up 7% annual rate of return, compounded monthly. This is for illustrative purposes only and not meant to represent the return of any of your plan’s investment options. Your situation will vary. 10 years 20 years 30 years $15,001 $105,731 $45,147

14 14 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits What’s in it for you? Power of compounding Free money Take note… ! Your employer will match your contributions.

15 15 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits Your employer match [Add customized text for dollar for cents employer match here.]

16 16 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits Your employer match [Add customized text for dollar for dollar employer match here.]

17 17 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits Vesting schedule Your entitlement to the employer’s contribution portion of your account –20% after 1 year –40% after 2 years –60% after 3 years –80% after 4 years –100% after 5 years You are always 100% vested in the salary deferral portion of your account

18 18 Now add the match (25%) 10 years 20 years 30 years Assumes a $20 weekly contribution, 25% match, and a 7% annual return compounded monthly. This is for illustrative purposes only and not meant to represent the return of any of your plan’s investment options. Your situation will vary. $132,164 $56,434 $18,751

19 19 $22,501 $67,720 $158,596 Now add the match (50%) Assumes a $20 weekly contribution, 50% match, and a 7% annual return compounded monthly. This is for illustrative purposes only and not meant to represent the return of any of your plan’s investment options. Your situation will vary. 10 years 20 years 30 years

20 20 Now add the match (100%) Assumes a $20 weekly contribution, 100% match, and a 7% annual return compounded monthly. This is for illustrative purposes only and not meant to represent the return of any of your plan’s investment options. Your situation will vary. 10 years 20 years 30 years $30,001 $90,294 $211,462

21 21 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits What’s in it for you? Power of compounding Free money Multiple tax advantages Take note… ! When you make before-tax contributions to the plan, you can lower your current taxable income and you won’t pay taxes until you take a distribution from the plan. [USE THIS SLIDE IF NO ROTH AND DELETE SLIDES 25 THROUGH 27]

22 22 Lower current taxable income * An investment in a savings account at a bank may be FDIC insured; an investment through the plan is not. **This example assumes a 15% tax rate. This is a hypothetical example for illustrative purposes only; your situation will vary. Ed’s 6% Regular Savings* Jane’s 6% Plan Savings $25,000Annual base wage$25,000 0Before-tax contributions-1,500 25,000Pay subject to income tax23,500 -3,750Tax**-3,525 -1,913Social Security-1,913 -1,500Regular savings0 $17,837Spendable income$18,062 Jane’s taxable income is lower, and she will have $225 more in spendable income than Ed. [USE THIS SLIDE IF NO ROTH AND DELETE SLIDES 25 THROUGH 27]

23 23 No taxes along the way Pat: $250/month 401(k) plan $304,993 $236,630 Year 1Year 30 This example assumes that both invest over a 30-year period, at an 18.75% tax rate, and earn a 7% annual return, compounded monthly. Taxes are taken from the 401(k) account upon withdrawal. This is a hypothetical example for illustrative purposes only and is not meant to represent the investment return of any of your plan’s options. Your situation will vary. Chris: $250/month taxable account outside the plan [USE THIS SLIDE IF NO ROTH AND DELETE SLIDES 25 THROUGH 27]

24 24 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits What’s in it for you? Power of compounding Free money Multiple tax advantages Take note… ! The plan offers before-tax and Roth contributions. Compare the tax advantages of both. [USE THIS SLIDE IF ROTH IS OFFERED AND DELETE SLIDES 22 THROUGH 24]

25 25 Compare the different tax advantages of contributing Your plan offers you two great ways to save for retirement. Now you can choose the tax advantage you prefer by making Roth contributions, before-tax contributions, or both as long as your combined savings do not exceed plan or IRS limits. Before-Tax ContributionsRoth Contributions Are made before taxes are taken out of your payAre made after taxes are taken out of your pay Give you a tax break by helping you lower your current taxable income Don’t give you a tax break today—contributions are made with money you’ve already paid taxes on Allow more of your income to stay in your paycheck (compared to Roth contributions) Will cause you to see less take-home pay (compared to before-tax contributions) Accumulate tax-deferred—once you begin making withdrawals, you will pay taxes on your contributions and associated earnings Accumulate tax-free—the balance of your contributions and any associated earnings are tax-free when you take a qualified distribution* * A qualified distribution is tax-free if taken at least five years after the year of your first Roth contribution AND you’ve reached age 59½, become totally disabled, or died. If your distribution is not qualified, any withdrawal from your account will be partially taxed. These rules apply to Roth distributions only from employer-sponsored retirement plans. Additional plan distribution rules apply. [USE THIS SLIDE IF ROTH IS OFFERED AND DELETE SLIDES 22 THROUGH 24]

26 26 How using before-tax or Roth contributions could affect your annual pay and income in retirement These charts assume a participant is age 45, earns $50,000 a year, gets a 3% raise each year, contributes 10% of pay annually to his or her retirement plan, has an annual rate of return of 7% before retirement, has a 28.75% tax rate, retires at age 65, and withdraws 4% of the account balance in the first year of retirement. The annual income estimate is in today’s dollars and assumes a 3% rate of inflation. Chart and estimates only account for future contributions and not current balances in an effort to illustrate characteristics of each contribution type. Any current tax benefit from contributing to a before-tax account is assumed to be spent and not factored into retirement income. The tax rate reflects estimated federal and state taxes. For illustrative purposes only. This is not meant to represent the performance of any investment options for your plan. Your results will vary. Impact to your current annual pay BEFORE-TAX Annual Income 10% Before-Tax Contribution Taxable Income 28.75% Tax RateIncome Tax $50,000$5,000$45, $12,938 ROTH Annual Income 10% Roth Contribution Taxable Income 28.75% Tax RateIncome Tax $50,000$5,000$50, $14,375 Estimate of annual income in first year of retirement $8,000 $6,000 $4,000 $2,000 $0 Before-TaxRoth $6,037 $4,302 [USE THIS SLIDE IF ROTH IS OFFERED AND DELETE SLIDES 22 THROUGH 24]

27 27 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits What’s in it for you? Power of compounding Free money Multiple tax advantages Automatic services The auto-enroll service makes it easy to get started. *All trades must comply with the fund’s excessive trading policy. Each T. Rowe Price fund prospectus defines its excessive trading policy. The auto-increase service helps you gradually boost your contribution rate over time. The auto-rebalancing* service helps you maintain your allocation strategy. Take note… ! [OPTIONAL IF THE CLIENT OFFERS AUTO-ENROLL, AUTO-INCREASE, AND AUTO-REBALANCING] **DELETE FOOTNOTE BELOW IF NO AUTO-REBALANCING**

28 28 Auto-enroll service Automatically enrolls eligible employees into the employer’s retirement plan. You must give specific instructions to be excluded (opt out) during a specific grace period. You are enrolled with a default deferral percentage and investment option. [DELETE SLIDE IF NO AUTO-ENROLL]

29 29 Auto-rebalancing service Automatically rebalances your account to your selected investment allocation strategy. Lets you select quarterly, semiannual, or annual rebalancing. Helps you stay in line with your risk tolerance and helps reduce long-term account volatility. [DELETE SLIDE IF NO AUTO-REBALANCING]

30 30 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits What’s in it for you? Power of compounding Free money Multiple tax advantages Automatic services Flexible withdrawals Take note… ! When the time comes, you have a variety of ways to get your money out of the plan.

31 31 Flexible withdrawals Termination of service Retirement Age 59½ Death Disability Financial hardship Withdrawals prior to age 59½ may be subject to a 10% penalty tax unless rolled over to an IRA or eligible employer plan.

32 32 WELCOME INFORMATION PROCESSYOUR ROLE Why SaveBenefits What’s in it for you? Power of compounding Free money Multiple tax advantages Automatic services Flexible withdrawals Loans Take note… ! Loans offer access to your money to meet special needs.

33 33 Loans Borrowing from your account –Minimum = $1,000 –Maximum = 50% of your vested account balance, up to $50,000* Interest = prime rate + 1% Pay your account back –Plus interest, over five years (10 years if buying a primary home) $50 fee for each loan Up to two loans at a time *Reduced by the highest outstanding balance during the prior 12 months.

34 34 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting Decide how much to save Experts suggest a 15% to 20% savings goal –Includes employer contributions

35 35 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting Plan contribution limits You can contribute between 1% and ____% of your before-tax pay up to $17,000 for If you will be 50 or over by the end of the year, and contribute the maximum amount allowed by your plan, you can contribute up to an additional $5,500 into the plan for 2012.

36 36 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting Decide how much to save Experts suggest a 15% to 20% savings goal –Includes employer contributions Start with ____% or more –Ensures you get the maximum match

37 37 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting Decide how much to save Experts suggest a 15% to 20% savings goal –Includes employer contributions Start with ____% or more –Ensures you get the maximum match Increase your contributions annually –Helps you get closer to your goal

38 38 Auto-increase service Automatically increases your payroll deduction each year so you don’t have to worry about doing it yourself. You choose the amount of the increase and the month you want it to occur. There is less time required to manage your account. [DELETE SLIDE IF NO AUTO-INCREASE]

39 39 Annual increase in contributions and the power of compounding $ Salary $30,000 2% contribution rate 7% annual return 3% annual salary increase This is a hypothetical example for illustrative purposes only and is not meant to represent the investment return of any of your plan’s options. Your situation will vary. $83,358 [DELETE SLIDE IF NO AUTO-INCREASE]

40 40 Annual increase in contributions and the power of compounding $ Salary $30,000 2% contribution rate 7% annual return 3% annual salary increase This is a hypothetical example for illustrative purposes only and is not meant to represent the investment return of any of your plan’s options. Your situation will vary. $83,358 $385,289 1% annual contribution increase with a 12% cap [DELETE SLIDE IF NO AUTO-INCREASE]

41 41 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What are my investment choices? Pre-assembled Retirement Funds or Do-it-yourself investments based on your time horizon and risk profile

42 42 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What are my investment choices? T. Rowe Price Retirement Funds –Professionally managed portfolios –Easy for retirement investing –Diverse portfolio combining stocks, bonds, and other securities –Automatic adjustments for approximately 30 years after the target date The principal value of the Retirement Funds is not guaranteed at any time, including at or after the target date, which is the approximate date when investors turn age 65. The funds invest in a broad range of underlying mutual funds that include stocks, bonds, and short-term investments and are subject to the risks of different areas of the market. The funds emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with the need for income as retirement approaches, and focus more on income and principal stability during retirement. The funds maintain a substantial allocation to equities both prior to and after the target date, which can result in greater volatility.

43 43 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting Select one and your decision is done Participants born:Would select: In 1988 or afterRetirement 2055 Between 1983 and 1987Retirement 2050 Between 1978 and 1982Retirement 2045 Between 1973 and 1977Retirement 2040 Between 1968 and 1972Retirement 2035 Between 1963 and 1967Retirement 2030 Between 1958 and 1962Retirement 2025 Between 1953 and 1957Retirement 2020 Between 1948 and 1952Retirement 2015 Between 1943 and 1947Retirement 2010 Between 1938 and 1942Retirement 2005 In 1937 or beforeRetirement Income

44 44 How Retirement Funds are managed Retirement 2055 Fund Retirement 2050 Fund Retirement 2045 Fund Retirement 2040 Fund Retirement 2035 Fund Retirement 2030 Fund Retirement 2025 Fund Retirement 2020 Fund Retirement 2015 Fund Retirement 2010 Fund Retirement 2005 Fund Retirement Income Fund Stocks Emerging Markets Stock Equity Index 500 Growth Stock International Growth & Income International Stock Mid-Cap Growth Mid-Cap Value New Horizons Overseas Stock Real Assets Small-Cap Stock Small-Cap Value Value Bonds Emerging Markets Bond High Yield Inflation Focused Bond International Bond New Income Underlying funds as of 1/1/12. *Does not invest in the Growth Stock Fund or the Value Fund. This chart shows the long-term neutral allocations for the funds as of January 1, The allocation for each fund may vary from the long-term neutral allocation. Call for the most current asset allocation.

45 45 How your investment mix changes over time The performance and risks of each Retirement Fund will directly correspond to the performance and risks of the funds in which it invests. By investing in many underlying funds, the Retirement Funds have partial exposure to the risks of many different areas of the market, including possible loss of principal. Less Market Risk

46 46 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What are my investment choices? Pre-assembled Retirement Funds or Do-it-yourself investments based on your time horizon and risk profile

47 47 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What are my investment choices? Take note… ! Your plan offers several stock funds. Stocks Higher risk/ return potential Lower risk/ return potential

48 48 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What is a stock fund? Invests in stocks Is risky, yet has the most potential for long-term returns A long time horizon is very important

49 49 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting Stock options [Customize per the plan lineup]

50 50 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting Your company stock Only invests in [CUSTOM] company stock, with minimal cash holdings Allows you to share in your company’s profits or losses Nondiversified investment Greatest volatility of principal

51 51 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What are my investment choices? Take note… ! [Customize per the plan lineup] Stocks Higher risk/ return potential Lower risk/ return potential Bonds

52 52 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What is a bond fund? Invests in bonds May balance risk of growth investments Moderate risk with moderate return potential

53 53 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What are my investment choices? Take note… ! [Customize per the plan lineup] Stocks Higher risk/ return potential Lower risk/ return potential Bonds Money Market/ Stable Value An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in them.

54 54 WELCOMEINFORMATION PROCESS YOUR ROLE SavingsInvesting What is a money market/stable value fund? May include U.S. Treasury bills, certificates of deposit (CDs), and other short-term investment instruments Provides stability and income to the investor An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in them.

55 55 Investing for retirement It is important to spread your savings among different categories of investments: stocks, bonds, and money market/stable value. The length of time you plan to invest your savings should determine how much money you allocate to each type of investment. As you grow older, your portfolio should move gradually from more aggressive (more stocks) to more conservative (fewer stocks). To find an investment mix for your time horizon, consider the following age-based asset allocations. Diversify your stock allocation among different types of stocks A typical mixture could include 60% large-cap (established companies), 20% mid-cap/small-cap (small to medium-sized companies), and 20% international (companies outside the U.S.) stocks. Diversification cannot assure a profit or protect against loss in a declining market. The allocation pie charts above are age-based only and do not account for your personal circumstances. Your Age:20s30s40s50s60s70s and over Stocks Bonds (Fixed Income) Money Market/Stable Value Stock 60% Large-Cap Stock20% Mid-/Small-Cap Stock20% International Stock

56 56 WELCOMEINFORMATIONPROCESS YOUR ROLE MonitorAchieve When should I consider making changes? To get your investment mix back Take note… ! You can call your plan provider [or insert call center number] for assistance.

57 57 WELCOMEINFORMATIONPROCESS YOUR ROLE MonitorAchieve When should I consider making changes? To get your investment mix back As your time horizon changes Take note… ! Usually, investors move toward more conservative investments as they near retirement.

58 58 WELCOMEINFORMATIONPROCESS YOUR ROLE MonitorAchieve When should I consider making changes? To get your investment mix back As your time horizon changes When you have a “major” life event Take note… ! Your goals may change after you marry or have children.

59 59 WELCOMEINFORMATIONPROCESS YOUR ROLE MonitorAchieve When should I consider making changes? To get your investment mix back As your time horizon changes When you have a “major” life event NOT in reaction to market fluctuations Take note… ! Market timing can have a negative impact on your account.

60 60 What are some of the benefits of the plan? Free money Multiple tax advantages Automatic services Flexible withdrawals Loans

61 61 WELCOMEINFORMATIONPROCESS YOUR ROLE MonitorAchieve Take action today! Join the plan! Save as much as you can! Invest wisely! Get ready for a great future! Take note… ! [Insert plan’s eligibility criteria here]

62 62 1EnrollmentWithRDFs UPDATE CODE WITH FILENAME WHEN CREATING PRESENTATION FROM TEMPLATE. DO NOT KEEP TEMPLATE NAME. DELETE LEGAL CODE WHEN CREATING PRESENTATION FROM TEMPLATE. LEGAL CODE APPLIES TO MASTER ONLY. Call to request a prospectus, which includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. T. Rowe Price Investment Services, Inc., distributor, T. Rowe Price mutual funds. [Insert recordkeeper logo here]

63 63 TO PLAN SPONSORS ─ This presentation should only be used as a visual presentation for T. Rowe Price Investment Services, Inc., client meetings. This program should not be altered, printed, distributed, or posted for employees to access.

64 64 TO WEB MEETING ATTENDEES ─ This Web meeting may be recorded and posted for other employees to access. For security reasons, please do not speak or any personal information during this meeting. For example, you should not give your address, Social Security number, or account information during this Web meeting.


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