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Retirement Calculator 401K

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					Welcome

H.R. Options
 401(k) Plan


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                    Agenda

   The Importance of Saving for Retirement

   How Your Plan Works

   Asset Allocation

   Investment Options Under the Plan
    (Building an Investment Portfolio)

   Smart Investment Behavior



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Why Participate in Your 401K?
100%
                                                                             • Male
                                                                             • Female
                                                                             • At least one spouse
                              78   81             86
75



              Americans
50            Are Living                    85         88     91


             Much Longer!

                                                              91   93   96
25




0      65 years old 70   75        80            85          90         95           100        105




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Why Participate in Your 401(k)?
    Today’s workers                         Today’s retirees
    (Expected sources of                    (Actual sources of income)
    retirement income)




               20%

               14%                                36%         43%
     66%

                                                        20%
                     • Social Security
                     • Pension plans
                     • Personal savings/other



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 The Effects of Inflation
The Rising Cost of Postage
        1983-2010
                                                       44¢

                                  29¢
   18¢

                                                33¢
                   25¢
 15¢
1983                  1993                      2010
         Source: United States Postal Service




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Advantages of Your 401(k) Plan?
• Convenience – Automatically Done Through Payroll
  Deductions
• Tax Benefits
   – Pre-Tax - Immediately lowers your taxable income. Result:
     Less Taxes Now!
   – After-Tax (Roth) – Contribution and growth not taxed with
     qualified withdrawal. Result: No Taxes Later!
   – Tax-Deferred Growth – No Taxes Paid on Growth Until
     Withdrawal. Result: Faster Growth!
• Lower Cost
• Employer Match!!



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How Your Plan Works

 H.R. Options
  401(k) Plan


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                  Plan Details
Eligibility:

   – You must be at least age 21; and,
   – You must complete 500 hours of service during the
     Plan Year.
   – You may enter the plan on January 1st, April 1st, July
     1st , or October 1st coinciding with or next following
     the date you meet this requirement.




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                How Your Plan Works
Salary Deferral Contributions
  – The salary deferral limit is up to $16,500.

  – If age 50 or over, you may contribute an
    additional $5,500 in catch-up contributions.

  – Your contributions can be Pre-Tax dollars, After-Tax (Roth) dollars
    or a Combination of Both (not to exceed the above limits)

  – You may change your deferral election anytime by visiting the
    recordkeeping website, www.AccountTRAX.com.


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How is a Traditional 401(k) contribution
 different from the Roth contribution?
• Traditional 401(k) contributions are Pre-tax dollars.
• Roth 401(k) contributions are After-tax dollars.
• Traditional 401(k) Deferrals- Federal income taxes on the
  deferrals and the earnings to your account are postponed.
   – You will pay taxes on any distribution (withdrawal) from your standard
     401(k) portion of your account.

• Roth Deferrals- Contributions are taxed at the time they are
  contributed.
   – You will not be subject to taxation on these amounts as well as the
     earnings provided you receive a qualified distribution from your Roth
     account.


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            Roth vs. Traditional
                          At a Glance

Type of Account    Contributions                      Earnings    Withdrawals


  Traditional         Not Taxed                      Taxed          Taxed as
                  (reduces current taxable
      401(k)                income)              at Withdrawal   current income


                     Taxed as
  Roth 401(k)                                        Not Taxed     Not Taxed
                  current income




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           Plan Details Continued….
Employer Contribution
  – HR Options matches the funds you save in
    your 401(k) account with $.20 (twenty
    cents) on the dollar, up to 3% of
    compensation.
  – This matching contribution will be allocated to your
    account each pay period so you will be benefitting from
    dollar cost averaging throughout the year.




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          Plan Details Continued….

Vesting
  – Your 401(k) contributions are always 100% vested.
  – The employer matching contributions are also
    100% vested.
Rollovers
  – Rollovers from other qualified plans are allowed.




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             Plan Details Continued….
Withdrawals
  –Termination of Employment
  –Financial Hardship
  –Attaining age 59 ½
  –Retirement
  –Disability
  –Death
 The following may apply: 20% Federal tax withholding and state tax
 withholding. Additional federal and state taxes may be due. Federal and
 state penalties may also apply to certain distributions.


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      How Your Plan Works (Cont’d)
Accessing your account
  – Online access at www.AccountTRAX.com
     • Investor Questionnaire
     • Links to Morningstar.com
     • Personalized Rate of Returns
     • Retirement Calculator
     • Download Administration Forms & Documents including Summary Plan
       Description
  – 24 hour Voice Response Unit at 888-401-5629
  – Quarterly statements will be mailed to your home address.
    You may also sign up for electronic delivery of this
    information with our eStatements.

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             How to Enroll in the Plan
Online Enrollment
   – Log onto www.AccountTRAX.com.
   – Input your Social Security # as your initial User ID and the last four
     digits of your Social Security # as you default Password. The system
     will immediately prompt you to change these security items after
     this initial log in.
   – Verify your Personal Information including home address. Input an
     e-mail address and answer the Verification Question.
   – Designate a Beneficiary (both primary and secondary)
   – Input your salary deferral amount.
   – Select your investments.
   – The sooner you enroll, the sooner your are on your way to meeting
     your financial goals!


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         What is Asset Allocation?

Asset allocation is the
process of combining
                            Stocks                    Bonds
        asset
    classes in a
 portfolio to reduce
    volatility and
 potentially increase
       returns.
                                               Cash




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  Stocks, Bonds, Bills, and Inflation 1926–2009
                                                                                                       $12,231
$10,000


                                                                                                       $2,592
                 Compound annual return
                 • Small stocks        11.9%
  1,000
                 • Large stocks         9.8
                 • Government bonds     5.4
                 • Treasury bills       3.7
                  • Inflation           3.0
  100                                                                                                  $84



                                                                                                       $21
                                                                                                       $12
  10




  1




  0.10
          1926   1936           1946           1956      1966              1976   1986   1996   2006




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   Potential to Reduce Risk and/or Increase Return
                                1970–2009
Fixed income portfolio    Lower risk portfolio          Higher return portfolio

                                                              12%             •   Stocks
      15%                              19%                            27%
                             37%                                              •   Bonds

             85%                       44%                     61%                •   Cash




   Return: 8.0%              Return: 8.0%                    Return: 8.9%

     Risk:   7.8%             Risk:     5.8%                  Risk:   7.8%

         Returns above are annualized returns. “Risk” is standard
         deviation. Roughly 2/3 of the time, returns are within one
           standard deviation of the return number listed above.



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                The Case for Diversifying
50% Return
                                                        Compound annual return
                                                     • Stocks            8.5%
                                                     • 50/50 portfolio   5.8
40                                                   • Bonds             1.9



30




20




10




0




–10




–20
       Year 1     2     3                4       5                  6            7




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 Choosing Your Asset Allocation
What To Consider
 – Personal Need, Willingness and Ability to
   take Risk
 – Retirement Time Horizon
   • How long until you retire?
   • How long will you be in retirement?

 – Expected Rate of Return
   • Risk Reward Trade-Off


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Building An Investment Portfolio




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Building an Investment Portfolio


  Investment Options
    Under the Plan

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Building An Investment Portfolio
   Vanguard Target Retirement Funds
       Vanguard Target Retirement 2015
       Vanguard Target Retirement 2025
       Vanguard Target Retirement 2035
       Vanguard Target Retirement 2045
       Vanguard Target Retirement 2050

   These Vanguard funds invests in other Vanguard
   mutual funds according to an asset allocation
   strategy designed for investors planning to retire in
   or within a few years of the funds indicated year.



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 Target Retirement Glide Path
Asset Allocation Funds (Age Based)




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Building an Investment Portfolio

                      Balanced Fund

T. Rowe Price Capital Appreciation
• Seeks long term capital appreciation.
• Invests approximately 60% of assets in equities (stocks) and
   40% of assets in debt securities (bonds).
• Suitable for a moderate investor.




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Building an Investment Portfolio

                 Stable Value Fund

 Wells Fargo Galliard Stable Value
 • Seeks to provide current income while maintaining
   liquidity and a stable share price of $1.
 • Invests primarily in high-quality, short-term money
   market instruments.




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Building an Investment Portfolio
                      Bond Funds

Vanguard Intermediate-Term US Treasury
• Seeks to provide a moderate and sustainable level of
  current income.
• Normally invests at least 80% of assets in U.S. Treasury
  bills, notes and bonds issued by U.S. Treasury.

Vanguard Inflation Protected Securities
• Seeks to provide inflation protection.
• Invests in inflation indexed U.S. government bonds.



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Building an Investment Portfolio
                 Bond Funds- Cont.

PIMCO Total Return
• Seeks total return consistent with preservation of capital.
• Normally invests at least 65% of assets in debt securities,
  including U.S. government securities , corporate bonds,
  and mortgage-related securities.

Mainstay High Yield Corporate
• Seeks total return consistent with preservation of capital.
• Normally invests at least 80% of assets in high yield bonds.



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Building an Investment Portfolio
       Domestic Large Company Funds
Vanguard Windsor II
• Seeks long-term capital appreciation and income.
• Invests mainly in mid- and large-capitalization companies
  whose stocks are considered by an advisor to be
  undervalued.
Vanguard 500 Index
• Seeks results corresponding with the total return of
  common stocks represented by the SP 500 index.
• Normally invests at least 80% of assets in equity securities
  of companies included in the index.


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Building an Investment Portfolio

     Domestic Large Company Funds cont’d

American Funds Growth Fund of America
• Seeks to provide long-term growth of capital through a
  diversified portfolio of common stocks.
• Invests primarily in common stocks, convertibles, preferred
  stocks, U.S. government securities, bonds and cash.
• May invest up to 10% of assets in debt securities rated below
  investment grade.



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Building an Investment Portfolio
       Domestic Mid-Sized Company Funds
Janus Perkins Mid-Cap Value
• Seeks long-term growth of capital and income
• Invests mainly in the stocks of medium size U.S. companies,
  choosing stocks considered to be undervalued and trading at
  prices that the advisor feels are below average.
Vanguard Mid-Cap Index
• Seeks to track the performance of a benchmark index that
  measures the investment return of mid-capitalization stocks.
• It attempts to replicate the target index by investing all, or
  substantially all, of assets in the stocks that make up the index.


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Building an Investment Portfolio
Domestic Mid-Sized Company Funds-Cont.

Baron Asset
• Seeks capital appreciation.
• Invests in common stocks of middle sized growth oriented
  companies.




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Building an Investment Portfolio

   Domestic Small-Sized Company Funds

Royce Pennsylvania Mutual
• Seeks long-term growth of capital.
• Invests at least 65% of assets in the equities of small- and
  micro-cap companies.
T. Rowe Price New Horizons
• Seeks long term capital growth.
• Invests in a diversified group of small, emerging growth
   companies.



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Building an Investment Portfolio

               International Funds

American Funds EuroPacific Growth
• Seeks long-term growth of capital.
• Primarily invests in securities of issuers located in Europe and
  the Pacific Basin.
• Designed for investors seeking capital appreciation and
  diversification through investments in stocks of issuers based
  outside the United States.




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Building an Investment Portfolio

            International Funds – Cont.

Columbia Acorn International Select
• Seeks long term capital appreciation.
• Invests in middle to small sized companies outside the U.S.
  that are considered growth oriented.




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    Building An Investment Portfolio
                        Sample Portfolio – Moderately Aggressive




•   Cash 5%: Wells Fargo Galliard Stable Return
•   Bonds 15%: PIMCO Total Return
•   Large Company Stocks 35%: Vanguard 500 Index
•   Mid-Small Company Stocks 20%: Vanguard Mid-Cap Index(10%), T. Rowe Price New Horizons(10%)
•   International Stocks 25%: American Funds EuroPacific Growth (20%), Columbia Acorn Intl Select (5%)




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        Building An Investment Portfolio
                                  More Funds Does Not Always Mean
                                       Greater Diversification!
        Equity portfolio A                                                          Equity portfolio B

        Deep-value   Core-value   Blend   Core-growth   High-growth                 Deep-value   Core-value   Blend   Core-growth   High-growth




                                                                            Giant
Giant




                                                                            Large
Large




                                                                            Mid
Mid




                                                                            Small
Small




                                                                            Micro
Micro




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    Dos and Don'ts of Smart Investing

•    Don’t Try to Time the Market
•    Don’t Be Too Conservative
•    Diversify, Diversify
•    Contribute Regularly
•    Re-Balance
•    Navigate the Noise


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           Smart Investment Behavior:
$6             Don’t Try to Time the Market!


       $4.84
                                   Hypothetical value of
$4
                                   $1 invested from
                                   1990–2009


$2                                $2.04             $2.12




$0
     S&P 500        S&P 500 minus best 10 months Treasury bills



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                 Smart Investment Behavior:
                       Don’t Be Too Conservative! (After Taxes)
$1,000

                Compound Annual Return                                                                 $510.68
                • Stocks                7.7%
                • Municipal bonds       4.4
                • Government bonds      3.4
                • Inflation             3.0
100             • Treasury bills        2.3


                                                                                                       $36.22
                                                                                                       $15.96
                                                                                                       $12.05
10
                                                                                                       $6.51




1


0.10


         1926         1936           1946      1956       1966             1976   1986   1996   2006




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                           Asset-Class Winners and Losers
          1995          1996          1997          1998          1999          2000           2001         2002          2003          2004          2005          2006          2007          2008          2009

                                                                                 L/T           Small         L/T           Small           Intl          Intl          Intl          Intl          L/T          Intl
Highest   Large         Large                       Large         Small                        Stocks       Govt.          Stocks        Stocks        Stocks        Stocks        Stocks         Govt.       Stocks
                                       Large        Stocks        Stocks        Govt.
Return    Stocks        Stocks         Stocks                                                               Bonds                                                                                 Bonds
                                                                                Bonds
            37.6%        23.0           33.4          28.6          29.8         21.5             22.8        17.8            60.7          20.7          14.0          26.9          11.6          25.9        32.5

          Small         Small         Small           Intl          Intl        T-Bills         T-Bills     T-Bills          Intl        Small           L/T         Small           L/T          T-Bills     Small
          Stocks        Stocks        Stocks        Stocks        Stocks                                                   Stocks        Stocks         Govt.        Stocks         Govt.                     Stocks
                                                                                                                                                        Bonds                       Bonds

            34.5          17.6          22.8          20.3          27.3         5.9             3.8         1.6              39.2          18.4         7.8            16.2         9.9           1.6            28.1

           L/T          Diversified   Diversified    L/T          Large         Diversified      L/T        Diversified    Large        Diversified   Diversified    Large         Large        Diversified    Large
          Govt.          Portfolio     Portfolio    Govt.         Stocks         Portfolio      Govt.        Portfolio     Stocks        Portfolio     Portfolio     Stocks        Stocks        Portfolio     Stocks
          Bonds                                     Bonds                                       Bonds

              31.7        10.3          15.9          13.1          21.0         0.6             3.7          –6.5            28.7          12.0         7.3            15.8         5.5          –20.7         26.5

          Diversified     Intl         L/T          Diversified   Diversified   Small         Diversified   Small         Diversified    Large         Small        Diversified   Diversified    Small        Diversified
           Portfolio    Stocks        Govt.          Portfolio     Portfolio    Stocks         Portfolio    Stocks         Portfolio     Stocks        Stocks        Portfolio     Portfolio     Stocks        Portfolio
                                      Bonds

            23.8           6.4          15.9          12.2          14.3          –3.6            –0.8      –13.3             24.8          10.9         5.7            12.9         5.4          –36.7           14.0

            Intl        T-Bills       T-Bills       T-Bills       T-Bills       Large          Large          Intl           L/T           L/T         Large          T-Bills       T-Bills      Large          T-Bills
          Stocks                                                                Stocks         Stocks       Stocks          Govt.         Govt.        Stocks                                    Stocks
                                                                                                                            Bonds         Bonds

            11.6           5.2           5.3         4.9           4.7            –9.1          –11.9       –15.7            1.4           8.5           4.9           4.8           4.7          –37.0          0.1

                                                                                                                                                                                                               L/Term
          T-Bills        L/T            Intl        Small          L/T            Intl           Intl       Large           T-Bills       T-Bills       T-Bills        L/T         Small           Intl         Govt.
                        Govt.         Stocks        Stocks        Govt.         Stocks         Stocks       Stocks                                                    Govt.        Stocks        Stocks        Bonds
Lowest                  Bonds                                     Bonds                                                                                               Bonds
Return
             5.6          –0.9           2.1          –7.3          –9.0          –14.0           –21.2       –22.1          1.0           1.2           3.0           1.2            –5.2        –43.1         –14.9




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 Smart Investment Behavior: Re-Balance

 Some investments will grow faster than others

 Rebalance is inherently contrarian
   “Buy Low” and “Sell High”
   Sell assets that have appreciated
   Purchase assets that have underperformed

 Returns portfolio to a comfortable level of risk




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               Importance of Rebalancing
                                       1988–2009
70%
      • Stock allocation

      • Bond   allocation               70%
60                                                           69%

                                                                                63%
50

      50%        50%    53%
                                 47%
40



30                                                                                       37%

                                                    30%                   31%
 20



10


 0          Year End                                                                  2009
                              1994            1999                 2004
              1989




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                   Feeling Panicky?
           4 Reasons Not to Overreact
1. Market Timing is a losing strategy
   – Risk of selling low and buying high; you have to be right twice

2. Investors have been rewarded for taking risk
   – Risk isn’t always rewarded in the short term

3. Playing it “safe” can lead to a shortfall
   – Cash may be safe in the short term, but is risky in the long run

4. Emotional decisions often lead to regrets
   – Staying calm can help you avoid making moves you later
     regret

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