1. financial strategies 101 dollars and sense - making the most of your money
Good evening, and welcome to our seminar, Dollars and Sense – Making the Most of Your Money – An introduction to Financial Strategies. We’re delighted to see you and we know you’ll hear some helpful strategies that can help you plan for your financial future.
My name is ________ , and I am __________________.
[If applicable: Joining me this evening are (introduce other participants, CPA or attorney co-presenters & identify their firms)]
We are presenting this information today because we assist people like you with their financial situations every day. We recognize that many people are eager for information on how best to manage their finances and how to build a road map to a successful financial future.
[Discuss break, rest room, refreshment info; cell phone etiquette; how you’ll handle questions from attendees. Make sure you cover the importance of attendees filling out the evaluation form – it will help make future seminars even better!]

2. Important notes
Please be advised that this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.
Securities products and services are offered through AXA Advisors, LLC, Member FINRA and SIPC. Life insurance and annuity products are distributed through AXA Network, LLC, and its subsidiaries. AXA Advisors and AXA Network are affiliated companies and are located at 1290 Avenue of the Americas, New York, NY AXA Advisors and AXA Network do not provide tax or legal advice.

3. Agenda Advantages of smart financial management
Overcoming obstacles to success
Financial management components
Cash management
Risk management
Estate planning strategies
Investment strategies
Tax-reduction strategies
Retirement programs
How to get started
Our discussion tonight will help arm you with the information you need to help you plug any of the gaps you may have in your financial program.
We’ll look at some of the advantages of preparing a financial program and some of the obstacles to success that you may encounter along the way.
We’ll discuss aspects of cash management, risk management, estate planning strategies and investing – strategies that can help accumulate dollars, protect those dollars from unforeseen events and the effects of taxes and inflation.
We’ll look at some concepts to start helping you plan for retirement and the need for tax reduction and estate planning strategies.
Of course, it is difficult to cover these issues in detail, both because some of the topics are very technical and because the “best decision” for many families depends heavily on their own circumstances. If you are armed with information, however, your financial professional can help you zero in on a strategy for your own situation.

4. Financial management
Financial management begins with your first paycheck
A financial program is simply a map for the future that can help you achieve your financial dreams
Advantages of financial management
Keeps you focused
A track to run on…& a game plan!
Coordination of all your goals
Organization
Managing your finances begins as early as with your first paycheck. You may notice money is automatically withheld or deducted to pay for federal and state taxes, for Social Security, and Medicare. From what is left over, you probably allocate to cover expenses, such as the mortgage payment, groceries, and other bills. You then may have some left over for entertainment or a coveted purchase. Some of us wisely make sure we allocate a small portion to saving for the future.
A financial program is simply a map or game plan. It is the process of prioritizing the allocation of cash resources to help you achieve your goals and dreams for the future.
We all give thought to managing our finances; after all, we know we will be dealing with money for the rest of our lives. But money – more, less or just enough – is only a tool, and too few of us practice sound financial management with it.
[Pause, and then ask:] How many people know they are on track for where they need to be - children’s education? … or retirement? How many feel they could do a little more than they are?
There are many advantages to setting up a financial program. By taking an accurate inventory of your assets and figuring out where your money goes, you can begin to establish a road map toward your financial future.
When you understand where you are and where you need to go, your financial life can be much easier. A sensible program, and workable goals, will help you make the most of your money. Remember, financial goals are simply personal goals with a price tag attached to them.
You may find there are so many choices, so much to do and sometimes so many expenses, that it’s difficult to plan. Don’t get bogged down in the details. Step back. Regroup. A financial program can help keep you focused on the bigger picture and make wiser choices.

5. Obstacles to financial success
Expectations — but no goals
“Kiss of Debt”
Inflation
Procrastination
So, what ARE some of the obstacles that can derail the best of intentions? We have identified four major ones. [Read slide.]
[Pause] We probably all have expectations. Anybody in here can easily picture children at the college of their choice and retirement in a hammock. We may assume that as long as money is coming in, things will automatically take care of themselves – you can pay bills, go on vacation, and enjoy dinner out with the family. But without a goal you will never know if your expectations are realistic. We’ve all heard the expression, “If you don’t know where you’re going, any road will get you there!” But where is “there”? Those who plan know where “there” is!
You could improve your financial future simply by developing and implementing a financial program.

6. “Kiss of Debt” “Painless plastic” Do the math
For a credit card balance of $3,000 at 12% interest rate…
If you pay a $50 monthly payment
it will take 92 payments (7.7 years) to pay off
Interest alone is $1,558!
Too much consumer debt can be a major obstacle. Debt is not a new problem – writers famous and unknown have remarked upon its burden in public and private writings for centuries. What is relatively new, though, is the apparently “painless plastic!”
It’s so easy to whip out the plastic and sign away. But think how quickly charges and finance charges pile up on credit cards. For a credit card balance of $3,000 at 12% interest rate, it will take 92 payments (7.7 years) to pay off if you only make the minimum payment of $50 per month. The interest alone is $1,558!*
[*For reference only: Table below shown assumes 12% annual interest rate and $50 monthly payment made at the end of each monthly cycle. Calculation based on 30 day interest calculation period, compound monthly.]
Beginning Bal Interest Total Mthly Pymt
Year 1 $3,000 $341 $600
Year 2 $2,741 $309 $600
Year 3 $2,450 $273 $600
Year 4 $2,123 $232 $600
Year 5 $1,755 $186 $600
Year 6 $1,340 $134 $600
Year 7 $874 $76 $600
Year 8 $350 $8 $264
Grand Total $1,558 $4,464
“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” -Ogden Nash

7. Steps to decrease consumer debt
STOP CHARGING!
Focus on those cards with the highest annual rate and pay those off first
Commit to paying MORE than the minimum each month
Transfer balances to lower cost cards or obtain a home equity loan
Establish a realistic budget — and stick to it!
The best way to begin handling credit card debt is to STOP CHARGING! Then, focus on those cards with the highest annual rate and pay those off first. If possible, double or triple your minimum monthly payment. It makes a big difference! Consider our previous example. If you increased that monthly payment from $50 to $100 each month, you would reduce your payments from 7.7 years to 3 years and your total interest charges would decrease to $575! This step alone would save you two third of the interest AND more than 4 years of headaches!
Other popular strategies to get credit card debt under control are to transfer balances to lower cost cards or to obtain a home equity loan. A word of warning – if you clear your cards by transferring the debt to lower interest rate cards or to a home equity loan, DO NOT let the debts build up again!
Overall, make sure you take a hard look at your finances and figure out what you can pay each month. Then, stick to your plan. Establish a realistic budget for your income level and learn to live within it.
Remember, debt is essentially spent future income and it is important not to let it build up again. If this is a serious problem in your situation, there are services that can provide in-depth help.
[*For reference only: Table below shown assumes 12% annual interest rate and $50 monthly payment made at the end of each monthly cycle. Calculation based on 30 day interest calculation period, compound monthly.]
Beginning Bal Interest Total Mthly Pymt
Year 1 $3,000 $308 $1,200
Year 2 $2,108 $196 $1,200
Year 3 $1,104 $71 $1,175
Grand Total $575 $3,575

8. Obstacles to financial success — inflation
$1 in 1913 Had the Same Buying Power as
$ 2.43 in 1950
$ 3.92 in 1970
$ in 1990
$20.94 in 2007
$22.88 in 2011! *
Another huge obstacle to financial success is inflation. Like heart disease, inflation is a “silent killer” – you don’t feel its impact until it’s too late! Inflation can erode the purchasing power of your dollars because prices go up… even though your income may not.
Take a look at the slide. The CPI inflation calculator uses the average Consumer Price Index for a given calendar year. This data represents changes in prices of all goods and services purchased for consumption by urban households. This index value has been calculated every year since In 2011, for example, it takes $22.88 to buy what $1 bought in 1913.
If you want to know how fast your money is losing its value, follow the rule of 72. Just divide 72 by the current inflation rate to find the number of years it will take prices to double. For example, if the inflation rate is 3%, prices will double in 24 years.
* Results from CPI inflation calculator of U.S. Department of Labor, Bureau of Labor Statistics, which uses the average Consumer Price Index for a given calendar year (

9. The cost of procrastination
Hypothetical Example
Age
Years Until 65
Monthly Contribution
Total Contribution
Growth*
Total Value 25 40
$189
$90,905
$409,095
$500,000 30 35
$276
$115,920
$384,070
$407
$146,689
$353,311
$614
$184,090
$315,905 45 20
$954
$229,023
$270,977 50 15
$1,568
$282,299
$217,701
The final – and, probably the biggest – obstacle is procrastination. “Tomorrow” always seems to be plenty of time, but “tomorrow” has a way of becoming “today” awfully suddenly. The cost of procrastination is expensive. This chart illustrates how the earlier you start putting funds aside, the longer the time period it has in which to accumulate and therefore, the lower amount you will have to set aside to meet your specific objective. It illustrates the power of time and the magic of compounding. You can see here that procrastination has a huge price!
Assuming a hypothetical 7% annual return, we see that a 25-year-old, with 40 years to go until age 65, must invest $189 per month to have $500,000 of account value at age 65. Notice also, that over the years, our smart 25-year-old has invested only $90,900 of that $500,000 total – the other $409,000 comes from the amazing power of compounding returns. Her money has had longer to compound and has worked harder.
Let’s go to the other extreme and look at a 50-year-old, at the bottom of the chart. To reach the same $500,000 goal by age 65, averaging the same 7% hypothetical return, the 50-year-old must invest $1,568 a month. More than that, the 50-year-old contributes a much greater share of the total – $282,299. Since it has less time to work – the compounding returns only another $218,000.
The compounding relationship between time and necessary investment holds at any age. Time can be one of your biggest allies or your biggest enemy, depending on how you use it. The message here is – no matter how old you are – START NOW.
[In case audience asks what compounding is: It is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.]
* Chart assumes 7% growth for illustrative purposes. These figures are not intended to indicate the performance of any specific investments. Taxes and fees were not taken into consideration.

10. How to get started Assess your current situation
Budget/Cash management
Insurance
Estate plan
Investments
Taxes
Retirement plan
We’ve talked about the importance of planning and we looked at common obstacles to success. We know it’s time to start, so, what now?
The first step to building a sound financial program is to assess your current financial situation.
Get a handle on your budget. Is more coming in than going out?
Do you carry credit card debt? Can you pay it off with existing cash reserves?
If you couldn’t work because of an injury or illness, will you have enough income to live on?
If your house and property burned to the ground, how much will your insurance replace?
If you or your spouse dies, where will the money to support your family come from?
Do you have a will and/or an estate plan?
Is your portfolio performance on track? Or, is it time to start a portfolio?
Do you have a retirement goal? Are you on track for meeting it?
These are big questions. A reputable financial professional can help you address these as part of your overall program. After you determine where you are, you can start building a road map toward where you want to go.

11. Setting goals & making fixes
Short-term
Creating or updating your will
Updating insurance program
Ongoing goals
Transferring high-cost debt
Lowering taxes
Longer-term goals
College education
Retirement
Once you have a good idea of what your current financial situation looks like, the next step is to set your goals. If you didn’t like the answers to some of the questions we’ve just asked, probably the first goal is to fix them.
Begin by making a list of your financial priorities for the next few years. Some shortcomings will be easier to fix. Examples are updating your will or insurance program. Other priorities however, will require a little more planning and maintenance, such as transferring higher cost debt to lower cost cards or obtaining a home equity loan, and then paying it off. Others may be even more challenging and long range in nature, such as buying a house or financing your children's education.
Rank your priorities by how important they are to you and list the time frame in which you would like to accomplish them. For example, a $10,000 dream vacation may be 10 years away but less important to you than a $1,000,000 retirement nest egg in 25 years.
Next, determine what funds will be needed to reach these objectives over the selected time frame. Then list the available funds you have to reach these objectives.
You can even apply these principles to less urgent goals such as taking a dream vacation, buying a car or making gifts to charity.

12. Tips on getting started
Set goals
Pay yourself first
8 month’s emergency reserves
Deduct from paycheck
Company retirement plans
You will probably realize it’s hard to take what you have and make everything you want become a reality without some careful management. Remember the old saying goes: “The more you make, the more you spend!” and not “The more you make, the more you save!”
Here’s some tips you can use to improve your cash flow and help increase your excess funds:
Set goals – Set goals for both the short-term and long-term as well as for specific expenditures. By setting goals, you will always be reminded that you are setting money aside for your financial future.
Pay yourself first – Most people tend to spend first and try to save and invest what is left over. By setting aside a definite amount first and then spending the balance, saving can become a part of your normal monthly routine. Make YOUR bill the first one you pay each month.
Have at least 8 months of living expenses set aside in case of short-term emergencies.
Have a specific amount automatically deposited into your account. Many companies have savings plans where you may set aside a pre-determined amount and have that deducted from your paycheck. Once you get used to having the money deducted up-front, it is an almost “painless” way to save – you will probably never miss it.
Use your company’s retirement plan – Qualified retirement plans are a tremendous way to save. Your employer may match dollar-for-dollar up to a certain percentage for participation. Your money may be deducted as pre-tax dollars. This will reduce your overall pre-tax income and thereby the amount of taxes you have to pay now.
A financial professional can help you evaluate your financial situation so you can make the most of your dollars today while pursuing a more secure tomorrow.

13. Components of financial management
Risk management
Cornerstone of a sound financial program
Property casualty & liability protection
Health insurance
Life, disability and long-term care insurance
Now that we’ve talked about evaluating your current financial situation and how to start building your financial roadmap, it is important to make sure you protect yourself from risks that may derail you from achieving your goals along the way.
Risk management is the cornerstone to any financial program. Risk management means protecting your finances against unexpected future events. In financial terms, this protection means insurance.
Insurance is not a popular topic to talk about. But we’re going to talk about it anyway because you have an insurance program even if you don’t own any of the coverage listed here. Your program is one where you are self insuring against the risks of poor health, liability, asset loss, death and disability. The question is do you want to bear the cost of these risks on your own, or would it make sense to transfer that risk to a third party?
Homeowner, auto, liabilities and health insurances cover the most basic forms of everyday risk. Many people believe the coverage is an economic necessity. However, there are areas of risk that are often overlooked. These include life, disability and long-term care insurance. Why are these overlooked? Perhaps it is because purchasing coverage is voluntary and the risk seems remote. Yet with all the risks that can threaten your family’s financial independence, it is important to make sure your are adequately covered.
Let me ask you a question: What is your most valuable asset?
[Wait for feedback.]
If you have answered or thought your most valuable asset is your home, your car, or your investments – well, probably not!

14. Risk management Protect your single most valuable asset Life insurance
Your ability to generate income is the foundation of your family’s financial independence
Disability insurance
1 out of every 7 workers will suffer a five-year or longer period of disability before age 651
Long-term care insurance
70% of people over age 65 will need long-term care in their lifetimes2
Over 40% will need care in a nursing home for some period of time2
Your single most valuable asset – assuming you’re not within hollering distance of retirement – is your earning power. Ability to generate income, and this alone, allows most of us to obtain all other assets. It is the foundation of your family’s security, both now and in years to come. However, your ability to earn an income is not guaranteed. While it is difficult for us to face our mortality or the thought of disability, planning for it or adequately transferring risk can help ease the burden you and your loved ones may have to face later on.
If there are people who depend on you financially, then you need life insurance. It provides your dependents with an immediate source of funds in the event of your death. When purchasing life insurance, it is important to consider how much to purchase to protect your dependents financially. It should be enough to cover their immediate cash needs for expenses such as unpaid bills and burial costs. It should also take into account their standard of living. The length of time your survivors would need income will also affect how much insurance you should own.
Even if you have NO financial dependents, consider protecting your earning power with disability insurance. Disability income insurance can help replace your income if you get sick or hurt and are unable to work. According to the National Association of Insurance Commissioners 1 out of every 7 workers will suffer a five-year or longer period of disability before age 65.1 Disability income protection is absolutely aimed at protecting the golden goose who makes all the eggs possible.
The graying of America has begun to increase our awareness for the necessity of planning for a time when we – or our parents – may not be able to live a fully independent life. 70% of the U.S. population over age 65 will need long-term care at least once during their lifetime. And over 40 percent will need care in a nursing home for some period of time.2 Consider the risk of needing either nursing home or home health care seriously. One year of care in a nursing home, based on the 2010 national average, costs over $74,500* for a semi-private room.  This doesn’t even include older Americans who don’t need skilled nursing care but DO need help managing bathing, cleaning, or shopping in order to stay in their own homes. Unless you are terminally ill and getting hospice care or qualify for Medicaid, these bills are usually your responsibility, making long-term care insurance a wise planning strategy.
*According to the 2010 MetLife Market Survey of Long-Term Care Costs (
Sources: 1) National Association of Insurance Commissioners ( ) Administration on Aging 

15. Estate planning strategies
Your estate is everything you own:
Realty: Home, land, buildings
Personal: Jewelry, furniture, etc.
Financial: IRAs, investments, pension and insurance
A plan addresses who, when, and how these assets are distributed – this puts the power in YOUR hands
We’ve talked about risk management and transferring risk. Let us talk about one risk that you can’t transfer. Death. Yours.
Part of your risk management program means having an estate plan. “Estate planning” is shorthand for addressing the important issues of, “What happens to my assets when I die? Who should get them, when should they get them, and how should they get them?” This is where you address such questions as, how do I ensure my children get assets when they are old enough to properly manage them effectively?
Your estate is everything you own in your name and your share of anything you own with other people. Your property can be real, such as land or buildings, or personal, such as a stamp collection or an antique table. Money, stocks, bonds or a life insurance policy are considered property too.
Assessing the value of your estate and what will happen to it after you die is something most individuals do not take the time to plan for. Many of us do not like to think about death or feel it is far enough off and delay planning for some time. Most people spend more time planning their vacations than they do planning for the orderly disposition of the estates they have worked a lifetime to create.
The value of your estate is computed only after you die, when you are no longer around to figure it out. Allow me to point out that this timing is less than helpful to you! The time to calculate its value is while you are still alive. Right now, you may have options. You can plan now what you want to leave to heirs, to project if any death taxes will be due and whether the money will be available to pay taxes and settle your estate.
Estate plans can be simple or complex, depending on your situation and your assets. In many cases, estate taxes can be an issue, and they aren’t cheap! Marginal estate tax rates on your assets can top 50%. You should meet with an attorney and tax professional to discuss your situation so that they can help you develop the plan appropriate for you and your family.

16. You need a will
If there are people and/or assets you care about, YOU NEED A WILL!
What your will can do:
Name heirs and when they get your property
Designate guardians of minor children
Establish trusts to protect property
Reduce expenses (waive fees)
Provide bequests to charities
Reduce estate taxes (through trusts)
At the very least, if you have people and/or assets you care about, you need a will. If you do not have a will, the state determines where your assets go according to formula. It will also decide where your minor children go. The state’s plan may not be your plan. So, remember this: if you have people and/or assets you care about, you need a will! A will puts you in the driver’s seat, and if there are passengers in your car, you need one!
A will contains your name as well as the names of other people and organizations who will either receive property when you die or have specific jobs they have to fulfill.
The executor oversees the settling of the estate and carries out your wishes. Beneficiaries are the parties who will inherit the property in your estate. Your will can also name a guardian or guardians if you have minor children. Trustees may be named to administer any testamentary trusts your will establish.
Once again, if you have people and or assets you care about, you need your own will! The state’s may not be what you had in mind! You should consult with an attorney who can draft a will appropriate for you.

17. Investment strategies
Help build greater long-term financial independence
Establish goals
Develop a program to meet them
Now that we’ve covered what is important in your financial foundation and risk management, let’s shift gears and talk about what you need to do to help you meet your long term goals.
People have a general desire for financial independence at all stages of life. We all recognize that increased financial independence gives us the luxury of more options and that we can have the ability to build that future for ourselves.
Where does this leave people who know they should do more for themselves but haven’t quite gotten started? Or those who have money in various financial instruments but aren’t sure they’re choosing wisely? Many of us would like to bring a sense of order and purpose to our financial lives.
An investment program can help you meet your long-term financial goals and enhance your financial independence.
Where do you begin? As with any program, whether it be a financial program, or even an exercise program, it will always be easier if you have a goal in mind.
[Pause, scan audience.] Let’s do it together now. Write down your top goals. You don’t need to share with the group. This is just to put the goal setting underway. [Give audience 1 to 2 minutes.]

18. Investment strategies — getting started
Getting started can be tough
Common reasons to postpone:
“The amount I have to invest is too small to make a difference…”
“I’ve got a baby on the way and there are other needs…”
“I’ve got two kids nearing college and can’t afford it…”
“We’re Empty Nesters & we want to travel…”
“...I’ve run out of time.”
Once you have goals it is easier to start considering what you have to do and how you are going to accomplish them. Still, getting started can be a tough question. It often seems there are other very good reasons to postpone that first step, as you can see on the screen! But, remember earlier we said “Tomorrow always seems to be plenty of time, but tomorrow has a way of becoming today awfully suddenly?” Remember the cost of procrastination?
Again, the same principles apply and the ideal time to start is NOW! The sooner you start your investment program, the longer your money has to work for you. Even if you can only start with $25 a month, start with what you can!
So how does the process begin?
The investment process begins by using principal, or the money you earn, to potentially earn more money. Success is measured by the amount of total return you earn on the initial amount you invest. “Investing” in its true definition means “taking a measured degree of risk with money in pursuit of higher returns over a long period of time.” The word, “Risk” here means the level of volatility or uncertainty in how a particular investment will perform.
Because investing includes an element of risk, it is important before you begin an investment program to assess your risk tolerance.

19. Risk tolerance High Total Net Potential Reward Low Risk Taker
Risk Tolerant
Potential Reward
To evaluate your risk tolerance, you need to determine how much safety you are willing to trade in return for a higher yield. The concept of risk and reward is as old as investing itself. Generally, the higher the potential return on an investment, the greater the level of risk associated with that investment.
The basic measures of risk tolerance are: Risk Averse, Risk Tolerant or Risk Taker.
Risk Averse individuals value safety and would rather have a more certain, and therefore probably lower return, in order to protect their principal from potential loss. Risk Averse investors are generally conservative and want to make sure their principal is safe and may be uncomfortable with the ups and downs of the financial markets. Assets that present a lower risk potential include money market funds, savings accounts, certificates of deposit, fixed annuities, and income-oriented mutual funds.
Risk Tolerant individuals will accept a higher level of risk on principal in exchange for a potentially higher return. This displays a conservative temperament with a little more flexibility than Risk Averse individuals. Risk Tolerant individuals may have a longer time to invest and can withstand some market volatility. Investments may include growth-oriented mutual funds and common stocks.
Risk Takers seek the highest return possible for a given level of risk. This group can afford to risk and lose principal and generally choose more aggressive assets such as capital-appreciation and small-stock mutual funds, or even raw land and commodities.
In general, the higher the measure of risk you accept, the higher your potential return over time. And small differences truly add up.
Risk Averse
Low

20. Risk/Reward Pyramid Increasing Risk Speculative High Risk
Options1
Commodities
Penny Stocks
Alternative Investments2
Derivatives
Investments are subject to market risk, will fluctuate and may lose value. 1) Risk may vary dependent upon the type of option strategies. 2) Risk may vary dependent upon the type of underlying investments. 3) Risk may vary dependent upon the type of underlying investment options and the claims-paying ability of the insurance company. 4) Risk may vary dependent upon the type of underlying funds, generally chosen based on the age of the child.
INCREASING RISK
Increasing Potential Return
Speculative
Individual Stocks
Small Cap Funds
High Yield Bonds
Collectibles
High Risk
Large Cap Funds
High-Quality Municipal &Corporate Bonds & Funds
Increasing Risk
Balanced Variable Variable Life
Funds Annuities* Insurance* Plans**
Balanced Variable Variable Life
Funds Annuities3 Insurance Plans4
Moderate Risk
[Review the slide]
All investing involves a certain amount of risk. How well you tolerate price fluctuations in your investment portfolio will need to be balanced against your desired rate of return in determining the types of investments you will choose. An offsetting factor to risk is time. If you have a long investment time horizon, you will probably be able to tolerate more risk because you have time to make up any losses you may experience early on. For a shorter-term investment, such as saving to buy a house, you probably want to take on less risk and have more liquidity in your investments.
In general, younger people can usually afford to take on more risk than older investors, although they may not wish to.
Certificates Money Market Treasuries:
of Deposit Funds Bills, Notes, Bonds
Fixed Annuities Traditional Life Insurance
Fixed Annuities Traditional Life Insurance
STABILITY OF PRINCIPAL
Reduced Potential for Return
Low Risk
Savings: Home Equity: Insurance: Retirement Funding:
6-8 Months Mortgage Life, Disability Income, Qualified Plans,
Net Salary Insurance Health, Long Term Care Pensions, IRAs
Foundation

21. Managing investment risk
Notes:
1) Diversification does not guarantee a profit or protect against loss.
2) Asset Allocation is a method of diversification which positions assets among major investment categories.
This tool may be used in an effort to manage risk. However, it does not guarantee a profit or protect against a loss.
3) Dollar cost averaging does not assure a profit nor does it protect against loss in declining markets. To be effective, there must be a continuous investment regardless of price fluctuations. Investors should consider their financial ability to continue to make purchases through periods of low price levels.
Diversify1
Put “eggs” in a variety of baskets!
Asset Allocate2
Build portfolio using several asset types
Dollar Cost Averaging3
Buffers against market decline
After you assess your risk tolerance and the asset choices on the investment pyramid, you may find you have to step a little outside your comfort zone to begin investing, but this doesn’t mean you have to dive into an overly aggressive position. You can invest using mixes of the asset classes we just talked about.
The first principle of managing risk, once you determine your overall risk tolerance, or profile, is to diversify your holdings. If you are comfortable with, say, stocks that pay dividends, you will want more than one!
A second key principle is asset allocation. This means that you distribute your holdings among several different asset classes to reduce a potential loss from a downturn that overly impacts, say, the utility industry. A diversified portfolio that combines different classes of investments could smooth out the overall performance over time.
Another way to help reduce risk is through dollar cost averaging.* The concept of dollar cost averaging entails investing equal dollar amounts at regular intervals. When your holding price is low, you will automatically purchase more shares; when it is high, fewer. This doesn’t guarantee that your portfolio won’t suffer losses in any given time frame, but it can insulate you from both frenzies and from market panics. It provides some protection against the famous “fear, hope and greed” cycle that can play havoc with an investor’s portfolio.
* Note: Dollar cost averaging does not guarantee a profit or protect you against a loss in a declining market. Dollar cost averaging requires that you invest regularly. Before beginning any periodic investment plan, you should consider your ability to continue your purchases through periods when prices are low.

22. Reducing your tax liability
Municipal bonds
Tax deferred annuities
Qualified retirement plans
IRAs, Roth IRAs
401(k), 403(b), 457, Roth 403(b) & Roth 401(k)
Bond investments are subject to interest rate risk so that when interest rates rise, the prices of bonds can decrease and the investor can lose principal value. They are also subject to the risk of issuer default; and inflation risk. The municipal market is volatile and can be significantly affected by adverse tax, legislature or political changes in the financial condition of the issuers of municipal securities.
We have discussed ways in which you can help your assets accumulate and grow, the magic of compounding and managing investment risk. Let’s now take a moment to discuss another not so popular topic – taxes – as inevitably, the IRS is going to come knocking at your door – you can be sure this will not be a social call!
Taxes can take a big bite out of your wages – as you no doubt already know! According to the Tax Foundation's annual calculation, nation’s taxpayers had to work on average 102 days in 2011 (i.e. from January 1st to April 12th) before earning enough money to pay for government – federal, state and local taxes – before they start spending money on themselves.1
Taxes can also impact the amount of investment return you can keep! Taxes can’t be avoided altogether, but there are strategies you can use to help minimize the amount you will actually have to pay. Tax planning can be especially challenging with the complexity of taxes and the ever changing tax laws. However, there are some investment strategies that can help you hold the Green Reaper at bay. You should meet with a tax professional to discuss your situation so that he or she can help you develop the plan appropriate for you and your family.
One strategy is to consider tax-advantaged municipal bonds instead of taxable bonds. If you are in a high tax bracket, the generally lower, Federal income tax exempt bond income may leave you with more in your pocket than the higher, but taxable income from other bond types.2
Another strategy for accumulating assets without having the immediate tax bill is to use tax-favored assets such as annuities. Annuities and other products that provide tax-deferral are attractive because gains in such products aren’t taxed until they are withdrawn, so they have the potential to accumulate at a faster rate. For this reason, tax-deferred accumulation can provide you with a powerful financial edge.
If you participate in a qualified retirement plan, such as a 401(k), provided by your employer or you own an Individual Retirement Account (IRA) you are already enjoying the benefits of tax-deferred accumulation. Let’s look at an example of how the power of tax deferral can work for you.
1) Source: Tax Foundation, Tax Freedom Day Report 2011, 2) Some investors may be subject to the AMT tax (Alternative Minimum Tax).
Notes:
Bond investments are subject to interest rate risk so that when interest rates rise, the prices of bonds can decrease and the investor can lose principal value. They are also subject to the risk of issuer default; and inflation risk. The municipal market is volatile and can be significantly affected by adverse tax, legislature or political changes in the financial condition of the issuers of municipal securities.

23. The power of tax-deferral*
Hypothetical Example
This is for illustrative purposes only. Lower maximum tax rates on capital gains and dividends would make the return of the taxable investment more favorable, thereby reducing the difference in performance between the accounts shown. Changes in tax rates and tax treatment of investment earnings may impact the comparative results and investors should consider their personal time horizon and income tax bracket, both current and anticipated when making an investment decision as these may further impact the results of the comparison.
Assume a single sum of $50,000 will be left to accumulate for 30 years at a hypothetical rate of return of 8%. Let’s assume our hypothetical investor is in a 28% Federal tax bracket.
Now, after 10 years, the taxable account would be worth $87, In a tax-deferred vehicle, this principal would have accumulated to $107,950. This represents a difference of $20,414.46! I’m sure everyone could find uses for this additional amount! This tax leverage is even more pronounced after 20 years – $153, versus $233,048 and after 30 years: $268,295 versus $503,132.
Even in a tax-deferred account after taxes are withdrawn the difference is substantial – $233,048 versus $354, This is assuming a 28% tax bracket.
Note that a 10% IRS tax penalty may be imposed on withdrawals from annuities and some insurance products, IRA’s or 401(k) plans when these withdrawals are made before the purchaser has reached 59 1/2. Your financial professional can help you determine what mix of assets will best suit your needs and objectives, given your own particular situation.
* 8% hypothetical return does not represent a specific product. Illustration based on 28% tax bracket.

24. Retirement planning Common Retirement Myths: Reality Check:
Retirees happily leave their jobs at age 65 and never work again. Funds keep coming in from their generous employer retirement plans
Social Security IS a complete retirement plan
Retirees die, conveniently, before the money runs out
Reality Check:
21.5% of men and 13.3 of women over age 65 still work in the U.S.1
Social Security represents 64.8% of the aggregate income of people age 65 or older 2
Study shows a majority of middle-class Americans are likely to outlive their financial resources in retirement 3
We’ve already covered a lot of topics, and I want to address a subject that’s probably near and dear to most of us: our retirement.
We all have different visions of retirement. For some of us, it may be playing golf three times a week, for others it may be exotic travel.
Regardless of how you view your retirement years, do not be misled by some of these common retirement myths:
Retirees happily leave their jobs at age 65 and never work again. Funds keep coming in from their generous employer pension plans.
Social Security will do it all for you.
It’s a given that you’ll die before your money runs out.
Until last century, retirement was generally for the rich. Usually, everybody else worked until they dropped dead. People are living longer and you will have to build up a greater amount of reserves to last you longer. When Social Security was just getting started back in 1935, the average American's life expectancy was just under age 60. A baby born in 2011 in the U.S. has an average life expectancy of 78.3 years1.
That means workers have more time for retirement, and you would need more money to spend for your retirement. Ensuring that you will have enough income to retire as you expect will require forethought and planning.
Sources: (1)
Sources: 1) Older Workers: Employment and Retirement Trends; Congressional Research Service, September ) Income of the Population 55 or Older, 2008 p.310; Social Security, released April ) Updated Retirement Vulnerability Analysis: The Likelihood of Outliving Their Financial Assets; Ernst & Young LLP, June 2009.

25. Why is your employer’s 401(k) or 403(b) so important?
A fast way to save for retirement that also provides tax benefits and employer matches
Funding plans correctly can:
Reduce the money needed to save for retirement
May substantially increase a tax refund due to refundable credits like the additional child tax credit and earned income tax credit
Two types of contribution types to a 401(k) and 403(b): Roth and Traditional
Modified adjusted gross income thresholds that impact IRA contributions do not affect these plans
Roth 401(k) and Roth 403(b) Contributions
After-tax
May be distributed federally income tax-free in retirement
Traditional 401(k) and Traditional 403(b) Contributions
Before-tax
Federally taxable distributions
The best place to start is with your employer’s salary deferral plan, if one is offered.
People realize that participating in these plans can cost very little, if people take advantage of employer matches and understand that contributions can lower taxable income and therefore decrease certain tax benefit phase-outs against itemized deductions, child tax credits, personal exemptions, etc. And the contributions can actually be subsidized by the saver’s credit and refundable credits like the earned income tax credit and additional child tax credit.
There are now two kinds of possible contributions to an employer 401(k)s and 403(b)s- Traditional and Roth. Which one is better is based on your needs?
Unlike their Roth IRA counterparts, the Roth contributions to a 401(k) or 403(b) have no modified adjusted gross income limits for contributions, are made from after-tax dollars and, when distributed in the future, can be received federally tax-free provided the requirements for a tax-free (qualified) distribution are met.
The Traditional contributions also have no modified adjusted gross income limits (unlike their Traditional IRA counterparts) that may impact the deductibility of contributions and are federally taxable at distribution.
Special Notes to speaker
The adjusted gross income levels apply to IRAs and a taxpayer’s ability to either contribute money to a Roth IRA or limits the deductibility of a traditional IRA. This is separate from limits set forth in IRC §§ 402 (g) & 415(c).
Roth contributions to a 401(k) or 403(b) are usually state income-tax free too but individuals should check with their local tax advisor

26. Why is your employer’s 401(k) or 403(b) so important, cont.
Employer plans may provide more flexibility than individual retirement arrangements:
Loan provisions
Higher contribution amounts
No deduction phase-outs due to AGI
No age restriction for contributions
Increase your salary through matching
Employers may match employee contributions
Employer matching contributions may be exempt from FICA under IRC 3121(a)(5)
Some states have special tax provisions that exempt all or a portion of a retirement plan distribution from state income taxes
Employer plans can provide loans that can provide an employee with the flexibility to access their contributions and possibly the employer contributions without tax consequence (assuming loan is paid back according to certain plan provisions).
Saving for retirement through contributions does two things:
If employer provides a match, it gives you the opportunity to get a match from the employer.
Employer contributions are not only nontaxable today, they are usually exempt from FICA and Medicare (note that matching contributions made by self-employed persons do not completely escape FICA taxation). This is an additional tax savings for you, since your contributions are subject to FICA and Medicare, but employer matching contributions are not.
Notes to speaker:
State taxation of retirement benefits vary from state to state. If a client asks for specifics, they should be encouraged to seek advice from an attorney or tax advisor.

27. Consider a Roth IRA If you qualify for a Roth IRA…
Consider funding it!
But if you already have a 401(k)…
Consider funding 401(k) to employer match
Then, fund Roth IRA (assuming you meet income requirements)
Then, resume funding 401(k)
If you don’t qualify for a Roth IRA…
Consider reducing taxable income using other techniques
Like the traditional IRA, accumulations in a Roth IRA grow income tax-deferred. However, if you follow all the rules, the retirement payout of a Roth IRA is income tax free. But non-qualified distributions could lead to income tax on any gain in the IRA, as well as a penalty tax on the gain.
All right. So, what is an effective strategy?
If you qualify for a ROTH IRA...
Consider funding it!
If you have an existing 401(k) and qualify for a ROTH IRA...
Consider first funding the 401(k) up to the employer match. An employer match is an instant return, and you want to capture it!
Then, with additional funds, contribute fully to the ROTH IRA.
And only then resume funding the 401(k).
In the case you don’t qualify for the Roth IRA…
Consider reducing taxable income using other techniques, such as deferring bonus.

28. The impact of persistence
Hypothetical Example
$1,000 Annual Investment (<$84 /month!) at 5, 7, & 10% Annual Rate of Return
10 Years*
20 Years*
30 Years* 5%
12,578
33,066
66,439 7%
14,784
43,865
101,073
10%
15,937
57,275
164,494
One very important point:
Don’t discount the power of relatively modest savings and investments when compounded over time! I’ve made this point several times, but I want to show it to you again! This chart illustrates what a $1,000 annual contribution – that’s less than $84 a month, folks! – could accumulate to at 5%, 7%, and 10% rates of return when compounded annually over 10, 20 and 30 years.
We saw that personal assets and investments make up almost 50% of the average retiree’s income. THIS is the category where your actions will have the biggest impact on your retirement lifestyle! We discussed putting together a program earlier in our session. Do not forget to take into account taxes and inflation!
Remember, time is your ally. It can help iron out the volatility of the market while potential compound growth multiplies your savings. Then, if your rate of withdrawal in retirement is equal to or below your rate of return, your money will last longer.
While you’re at it, make sure you stay on top of your Social Security benefits. Contact the Social Security administration for a free earnings and benefit statement. Your financial professional can help you with this, if you like. It’s important to assure that there are no errors in your records so you get everything you are entitled to.
Learn about your company’s retirement plans and check to see what your retirement benefit is worth. Most employers will provide an individual benefit statement if you request one. Take full advantage of contributory plans, such as 40l(k) plans. It is an easy way to make sure that you “pay yourself first.”
This chart is for illustrative purposes only and does not take into consideration any taxes or fees due. Hypothetical rates of return — does not represent any specific products.
* End of year values.

29. Financial management — how to get started
Assess your current picture
Build foundation with risk management and cash reserves
Eliminate consumer debt
Pay yourself first
Work with a professional
Review and fine-tune your strategy
Finally, let’s take a moment to quickly review the steps to a successful financial program.
You must first gather data to determine and establish what your current financial picture is. You then need to develop goals for both the short term and the long term. Start with your risk management program – emergency cash reserves, and protection for the “Golden Goose” – you and your ability to earn an income!
Eliminate consumer debt or begin an aggressive program to pay it off.
Invest in yourself and make your household profitable. A good way to do this is to “pay yourself first.” This means you contribute to your cash reserves and/or to your investment program before you pay other bills. You are your most important asset! Even if all you can start with is $25 a month, do it! The important step is to start; you can always increase the amount later!
If building a financial program has been on your “to-do” list for a while, enlist the help of a financial professional. He or she can help you clarify goals and resources and has access to information which will help you make cost-effective decisions.
Finally, remember that this isn’t a “set & forget” proposition. Make adjustments as your life and income change! Once you have a track to run on, fine-tuning it can be an easy and gratifying process.

30. Your feedback
We greatly appreciate your feedback and truly believe in the impact of financial education.
Thank you!
We wrap-up in just a moment. But I wanted to take a couple of minutes and ask you to complete the evaluation form in front of you. Please be candid so that I might improve this workshop for others.
[NOTE to speaker: Take a couple of minutes to allow people to begin complete the evaluation form while you are wrapping up.]
I hope you’ve enjoyed this program and learned something about financial management. I do want to emphasize that planning can be complicated and all suggestions should be reviewed by your own legal or tax advisor before being implemented.

31. In conclusion Your Role My Role Know your goals
Know where you stand on achieving them
My Role
To help you develop a program that can move you closer to achieving financial success
Well, we’ve covered a lot of ground today. We talked about the advantages of setting up a financial program and some of the obstacles you may encounter. We’ve looked at assessing your current financial situation and establishing short-term and long-term goals. We’ve reviewed the main components of financial management. It’s impossible to do the subject justice in the short time we’ve spent together. If there is one message I hope you take away this evening, it’s a simple one: START NOW. Remember, sooner is better than later, and something is better than nothing. The earlier you plan, the more options and flexibility you will have in making the most of your money.
You have a role and your financial professional has a role. Your role is to know your goals and where you are in achieving them. My role is to help you develop a program that can move you closer to achieving financial success.
The road to financial success requires reading the signs and following directions. Generally, no one arrives at the destination of financial success by chance.
Most people fail to implement a solid strategy, only to realize too late the short distance they traveled and how little they have accomplished! Begin the journey now by setting goals and establishing priorities. Get committed to a plan of action!
This concludes this evening’s formal presentation. We invite you to stay a few moments and enjoy the refreshments. My associates and I will be happy to talk to you one-on-one about this important topic.