welcome. workshop objectives introduce introduce educate educate illustrate illustrate
TRANSCRIPT
Our CommitmentOur Commitment
Provide sound financialProvide sound financialinformationinformation
Help you identify goalsHelp you identify goals Offer complimentaryOffer complimentary
consultationconsultation
About Your WorkbookAbout Your Workbook
Informative Informative
graphicsgraphics
Wide marginsWide margins
Helpful Helpful
exercisesexercises
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Your Financial FutureYour Financial Future
Lifetime Earnings
$ 40,000 $ 70,000 $ 100,000per year per year per year
10 years $ 480,244 $ 840,427 $1,200,611
20 years $1,191,123 $2,084,466 $2,977,808
30 years $2,243,398 $3,925,946 $5,608,494
Assumes a 4% annual salary increase
Your Financial Your Financial FutureFuture
Overcome obstacles to successOvercome obstacles to success Practice sound financial managementPractice sound financial management
DebtDebt
Credit Card \ kred’- t kärd \ n.:
1. A means for buying some-
thing you don’t need, at a price
you can’t afford, with money
you don’t have.
e
The Rule of 72The Rule of 72
72Inflation Rate
6% Inflation72 ÷ 6 = 12 years
4% Inflation72 ÷ 4 = 18 years
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TaxesTaxes
The average The average person will person will work until work until late April to pay late April to pay all federal, state, all federal, state, and local taxes.and local taxes.
Tax Freedom DayTax Freedom Day
Source: Tax FoundationSource: Tax Foundation
Yield After Taxes Yield After Taxes and Inflationand Inflation
Investment $ 10,000
8% interest + 800Taxes (27% tax bracket) – 216Net interest $ 584
Total after taxes $ 10,584
Adjusted for inflation (4%) 1.04
Net after taxes and inflation $ 10,177
Net return = 1.77%
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What Is Financial What Is Financial Management?Management?
E
N
W
S
ESTATE PLANNING
INVESTMENTPLANNING
RETIREMENTPLANNING
TAX PLANNINGCASH
MANAGEMENT
RISKMANAGEMENT
Risk ManagementRisk Management
LifeLife DisabilityDisability Medical andMedical and
long-term carelong-term care AutoAuto HomeHome LiabilityLiability
IncomeIncomeReplacement CalculatorReplacement Calculator
1. Total income now $ 80,000
2. Total income available $ 40,000
3. Additional income needed $ 40,000
4. Capital required $500,000
5. Additional cash requirements $125,000
6. Life insurance needed $625,000
Mr. and Mrs. Harrick
The Investment SpectrumThe Investment Spectrum
CASHCASHEQUIVALENTSEQUIVALENTS
FIXEDFIXEDINTERESTINTEREST BONDSBONDS STOCKSSTOCKS
HIGHER RISKHIGHER POTENTIAL RETURN
LOWER RISKLOWER POTENTIAL RETURN
Diversification ExampleDiversification Example
Bill and Jill after 20 years
Bill 7% $193,485
Jill (loss) $ 05% $ 26,5337% $ 38,697
10% $ 67,27512% $ 96,463
Jill’s Total $228,968
Difference = $ 35,483
This is a hypothetical example. Actual results will vary.This is a hypothetical example. Actual results will vary.
College PlanningCollege Planning
• Combined income: $48,000
• One child: Robby, age 5
• College cost: $10,000
Mr. and Mrs. Thompson
College SavingsCollege SavingsCalculatorCalculator
• Estimated future collegecost: $107,000 for 4 years
• Annual savings required:$5,671 a year for 13 years
Mr. and Mrs. Thompson
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Dollar Cost AveragingDollar Cost Averaging
PRICE PER SHARES
INVESTMENT SHARE PURCHASED
This is a hypothetical example. Actual results will vary.This is a hypothetical example. Actual results will vary.
MONTH 1 $ 200 $ 10.00 20MONTH 2 $ 200 $ 8.00 25MONTH 3 $ 200 $ 5.00 40MONTH 4 $ 200 $ 8.00 25MONTH 5 $ 200 $ 10.00 20
TOTAL $1,000 130 SHARES
AVERAGE PRICE: $8.20AVERAGE COST: $7.69
Tax DeferralTax Deferral
Mr. Washington
• 45 years old
• $70,000 salary
• $85,000 investment portfolioInterest income: $6,800
Taxes: $2,040
Tax DeferralTax Deferral
Mr. Washington
Taxable (30% tax bracket)
Tax deferred
Tax deferred after taxes
5 years 10 years 15 years 20 years
$111,619
$124,891
$145,574
$183,507
$192,476
$269,637$252,754
$396,185
$302,827
Mortality and expense charges, sales charges, and administrative fees are not taken into account and would reduce the performance shown if they were included.
$85,000 initial portfolio8% annual rate of return
Tax-Free InvestmentsTax-Free InvestmentsCalculating the Taxable Equivalent YieldCalculating the Taxable Equivalent Yield
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EXAMPLEEXAMPLE EXAMPLEEXAMPLE YOU YOU
1.1. Take the tax-exempt yieldTake the tax-exempt yield 7% 7% 7% 7% _____%_____%
2.2. Your marginal federalYour marginal federal
tax ratetax rate 27% 27% 35% 35% _____%_____%
3.3. Subtract your rate fromSubtract your rate from
100% (1.00 – line 2)100% (1.00 – line 2) 73% 73% 65% 65% _____%_____%
4.4. Taxable equivalent yieldTaxable equivalent yield 9.59%9.59% 10.77%10.77% _____%_____%
(line 1 ÷ line 3)(line 1 ÷ line 3)
Sources ofSources ofRetirement IncomeRetirement Income
Social SecuritySocial Security
Employer-sponsored plansEmployer-sponsored plans
Personal savings andPersonal savings andinvestmentsinvestments
Other Retirement Other Retirement Planning ConsiderationsPlanning Considerations
Distribution optionsDistribution options
Tax considerationsTax considerations
Changing JobsChanging Jobs
Ms. Martin
Total distribution amount $40,000
20% withholding – $ 8,000
Early withdrawal penalty – $ 4,000
Additional income tax due – $ 2,800
After-tax distribution $25,200
RolloverRollover
Ms. MartinTax-deferred growth @ 8%
$40,000
$58,773
START 5 10 15 20 25 30
$86,357
$126,887
$186,438
$273,939
$402,506
YEARS
Mr. and Mrs. Tucker
Retirement Retirement DistributionDistribution
Annuity
• Single-life annuity
• Joint and survivor annuity
Mr. and Mrs. Tucker
Increasing YourIncreasing YourPensionPension
$1,000
$1,200
$200
SurvivingSpouse
DeathBenefit
Mr. and Mrs. Tucker
Lump-sum distribution — $220,000
Tax alternatives
Ordinary income tax $58,500
10-year averaging $42,100
Capital gains + 10-year averaging $38,300
Potential tax savings $20,200
RetirementRetirementDistributionDistribution
Estate PlanningEstate PlanningConcernsConcerns
DistributionDistribution WillsWills TrustsTrusts GiftingGifting ProbateProbate Taxes and feesTaxes and fees
Reducing Reducing Estate TaxesEstate Taxes
Mr. and Mrs. Hudson
• Two grown children
• Estate value: $1,500,000
• Estimated tax: $210,000
Reducing Reducing Estate TaxesEstate Taxes
Assets Trust
A Trust
Death ofSecondSpouse
Children
B Trust
Death ofFirst
Spouse
Mr. and Mrs. Hudson — Estate value: $1.5 million
ESTATE TAX SAVINGS: $210,000ESTATE TAX SAVINGS: $210,000
Reducing Reducing Estate TaxesEstate Taxes
Mr. and Mrs. Hudson — Estate value: $2.5 million
ESTATE TAX SAVINGS: $470,000ESTATE TAX SAVINGS: $470,000
Premiums
InsuranceTrust
Children
DeathBenefit
Deathof Second
Spouse
ReviewReview
Cash managementCash management Risk managementRisk management Investment planningInvestment planning Tax planningTax planning Retirement planningRetirement planning Estate planningEstate planning
Financial Financial Management ProcessManagement Process
1.1. Gather informationGather information2.2. Identify objectivesIdentify objectives3.3. Determine present positionDetermine present position4.4. Develop strategiesDevelop strategies5.5. Implement strategiesImplement strategies6.6. Review periodicallyReview periodically
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Where Do You Where Do You Go from Here?Go from Here?
Do it yourselfDo it yourself Work with othersWork with others
Work with usWork with us ProcrastinateProcrastinate