Alliance Education

Clear solutions in a complex worldSM

P.O. Box 7876Fort Wayne, IN 46801-7876800-4LINCOLN (800-454-6265) or in New York 888-223-1860www.LincolnLife.com or in New York www.LincolnLife-NY.com

Mutual funds offered through Lincoln Financial Advisors, a broker/dealer. The stable value option is subject to availability and may not beavailable in all states. It may be offered as a fixed annuity through Lincoln affiliates or as a collective trust through independent third partytrust companies. The self-directed brokerage account is offered through Wilmington Brokerage Services Company, a broker/dealer. For aspecific mutual fund prospectus, call 800-234-3500. The prospectus contains more complete information, including charges and expensesand should be read thoroughly before investing or sending money. Lincoln Financial Group is the marketing name for Lincoln NationalCorporation and its affiliates.

*2001 Lincoln Financial GroupCRN #0106-4200c Form 2996

Lincoln Alliance ProgramA tax-deferred retirement program

Big,Plan Wisely

Dream

AAnnnnuuiittyy:: An insurance contract that sets aside money on a taxdeferred basis until you’re ready to withdraw it. Taxes are due uponwithdrawal. At retirement, you can withdraw your money asneeded or turn the annuity into a regular income stream viaannuitization for the rest of your life.

AAsssseett aallllooccaattiioonn:: The distribution of money amongvarious investments.

BBoonndd:: A debt security issued by a government or a corporation.Bond issuers promise to pay afixed rate of interest and to returnthe original investment when the loan ends.

CCoommppoouunndd iinntteerreesstt:: Interestcomputed by applying the statedpercentage rate to both the original amount invested and the accumulated interest of previous periods.

DDiivveerrssiiffiiccaattiioonn:: Spreading money among different types ofinvestments to help manage risk.

DDiivviiddeenndd:: A portion of acompany’s profits paid to itsshareholders. A mutual fund’sdividend comes from theinvestment income the fund has earned.

DDoollllaarr ccoosstt aavveerraaggiinngg:: Buyingthe same dollar amount of aninvestment at fixed intervals. Youbuy more shares when prices aredown, fewer when prices are up.

GGrroowwtthh:: A rise in the market valueabove the amount of the originalinvestment. Also referred to as“capital appreciation.”

IInnccoommee:: Any interest or dividends from an investment. Also called “earnings.”

IInnffllaattiioonn//ddeeffllaattiioonn:: The increaseor decrease of buying power dueto an overall change in the pricesof goods and services.

IInnvveessttmmeenntt rriisskk:: The chance thatinvestment principal won’t grow as much as expected or that theinvestment could lose money.

MMaarrkkeett vvaalluuee:: The amount ofmoney a buyer is willing to pay and a seller is willing to accept fora security.

MMaattuurriittyy ddaattee:: The day a bondissuer has agreed to pay back themoney it originally borrowed. Afixed-income portfolio’s averagematurity combines the maturitydates of all bonds in a portfolio.

MMuuttuuaall ffuunndd:: An investmentcompany that pools the assets ofindividuals and invests them for acommon goal.

NNeett aasssseett vvaalluuee ((NNAAVV)):: Themarket value of one share of amutual fund. The NAVs for mostmutual funds appear in the business section of majornewspapers. To determine the total value of your mutual fundholdings, multiply the NAV by the number of shares you own.

PPrriinncciippaall:: The dollar amount ofany initial investment. Also called“capital.” It doesn’t take intoaccount any dividends or interestreceived or capital appreciation. For bonds, the principal is theamount of money borrowed by the bond issuer.

PPrroossppeeccttuuss:: A legal document that describes how a mutual fund or other registered securityoperates. It’s prepared by theinvestment company and tells whatthe fund may and may not investin, states the fund’s investment

goal and describes managementfees and other expenses.

RRiisskk ttoolleerraannccee:: The amount of risk an investor is willing to take to achieve a desired return.

SSeeccuurriittiieess:: A general term used forall types of stocks, bonds and otherinvestment options. Also calledinvestment “instruments.”

SSttaabbllee vvaalluuee iinnvveessttmmeenntt ooppttiioonn::Stable value investment optionsare among the more secure ofinvestments over time. Examplesinclude a fixed annuity or acollective trust offered throughindependent third party trustcompanies.

SSttoocckk:: A share of ownership in acorporation. Stocks are also called“equities.” Investment profitstypically come from the stockincreasing in market value. Stocksmay or may not pay dividends.

TTiimmee hhoorriizzoonn:: The number of yearsyour principal can remain invested.

TToottaall rreettuurrnn:: The return of aninvestment over a specific periodof time. Total return takes intoaccount any changes in share priceplus any interest or dividends youreceived. Often reported as anannualized rate of return.

TTrreeaassuurryy bbiillll:: Short-termdebt issued by the U.S.government with a maximummaturity of one year.

TTrreeaassuurryy bboonndd:: Long-term debtissued by the U.S. government with a maturity date of more than 10 years.

VVoollaattiilliittyy:: The tendency of aninvestment to experience priceswings (ups and downs) over periods of time.

GGlloossssaarryy ooff iinnvveessttmmeenntt tteerrmmss

ProgramThe

Table of

Review your program

Determine your needs

Learn the basics

Develop a plan

Choose your investment options

Follow the easy instructions

Navigating

OOvveerrvviieeww

SStteepp 11

SStteepp 22

SStteepp 33

SStteepp 44

GGeett ssttaarrtteedd

LNC1

Where does the time go? How does thesand slip so quickly through the hourglass?It was only yesterday that you were learningto drive a car, graduating from high school,accepting your first job. Future becomespresent. Plans become life. Families.Houses. Cars. Vacations. Grandchildren.Retirement.

Retirement is a dream for many people. Butto make that dream come true, you’ll need asolid plan for your future financial security.Sound intimidating? It doesn’t have to be.This section will walk you through theprocess in three easy steps:

Step 1: Determine your needs.

Step 2: Learn the basics.

Step 3: Make it work for you.

OK, let’s go...

The work of a lifetime.

Plan,invest...

enjoy.

Seeing the future

A comfortable retirement. That’s the dream. But what is comfortable?Gardening in an acre of flowers? Dancing along the sands of the Gold Coast?Sleeping at night with no financial worries? Perhaps it’s all of the above. Orperhaps you haven’t thought that far ahead yet. In any case, it’s time to take acloser look. So ask yourself these questions:

How long will you live?

At 65, you’ll likely live another 17 years, according to current statistics.1 That’snearly two decades of retirement.

When can you retire?

Today, most people can retire with full Social Security benefits at age 65.Starting in 2005, that age will rise to 66. In 2022, it’ll be 67.2 But will SocialSecurity be enough?

What do you want to do in retirement?

Take a cruise? Start a business? Relax? Whatever it is, you’ll need to build yourfunds today for your life tomorrow.

What if you or a family member has a major medical crisis?

Per capita health care spending is expected to jump to 31/2 times current levelsby 2030.3 And when you’re older, you’re more likely to have medical bills. Willyou be able to pay them?

How far will your money go in the future?

Inflation can eat away at your savings. Over the last 15 years, inflation hasaveraged about 4% a year.4 That means you’ll have to earn 4% on your moneyjust to stay even with inflation.

Step 1:Determine

your needs

Note: Words in italics are defined in the "Glossary ofinvestment terms" onthe inside back cover.

1”Baby Boom, Baby Bust,” an issue backgrounder commissioned by Lincoln Financial Group, Fort Wayne, Ind., January 1999.2”The Good Life and its Discontents: The American Dream in the Age of Entitlement, 1945-1995,”

Robert J. Samuelson, Times Books/Random House, Toronto, 1995.3“From Baby Boom to Elder Boom: Providing Health Care for an Aging Population,”

Watson Wyatt Worldwide, Washington, D.C., April 1996.4U.S. Department of Labor, Bureau of Labor Statistics, 1996.

Tax-deferredplan

Taxablesavings

This example assumes 5% state and 28% federal tax rates. It does nottake into account any standard or itemized deductions. Your actualsavings will depend on your specific federal and state income tax rates.

$2,000

$200

$1,800

$504

$90

$153

$0

$1,053

$2,000

$0

$2,000

$560

$100

$153

$200

$987

Monthly tax savings = $66

Gross monthly earnings

Pretax savings

Monthly earnings usedto calculate taxes

Federal withholding

State income tax

FICA

Post-tax savings

Net pay

The advantages of tax-deferred plans

One of the best ways to set aside money for retirement isthrough a tax-deferred retirement plan. Any money you earnfrom your investments is reinvested to buy even more sharesof your investment choices. This keeps the money insideyour retirement plan and away from Uncle Sam. That moneywill eventually be taxed by the government, but not until youuse it, rather than when you earn it. It sounds like a simpledifference, but it can have important advantages for you.

When you contribute to a tax-deferred retirement plan,your contributions are deducted from your paycheckbefore your wages are taxed. This means you pay lowerfederal and, in some cases, state income taxes, and you getan immediate tax break. Taxes won’t be due on yourcontributions or investment earnings until you take yourmoney out of your account at a later date or when youretire. (Note: If you withdraw money before age 59½, youmay have to pay an additional 10% penalty. This penaltydoes not apply to 457 Deferred Compensation Plans.)

Unlike earnings on a regular savings account and mutualfund investments, which are taxed annually, your tax-deferred investment earnings continue to grow withoutan annual tax bite until you withdraw your money. Thisis called tax-deferred compounding and, over time, itcould make a big difference in the amount of money youaccumulate and how quickly it can add up.

$100,000

$75,000

$50,000

$25,000

$00 years 10 years 20 years 30 years

� Tax-deferred investment� Taxable investment

The power of tax-deferred growth5

5This chart is hypothetical and is not intended to predict or guarantee the performance of any particularinvestment. Actual returns and principal values will vary. Please note that withdrawals from the tax-deferred investment are subject to taxation.

This example assumes:

• An individual invests $10,000 inone lump sum in a tax-deferredinvestment and another $10,000in an investment which is taxedeach year.

• Both investments earn 8.00%.

• A 28% tax bracket is assumedfor the taxable investment.

$100,626.57

LNC2

$53,659.09

I might...

if I startinvesting

Will I live better than my parents did?

Will I own a car that doesn’t pre-date disco?

Will I retire before I’m 60?

Will I walk on the grass of Wrigley Field?

Will I be a millionaire?

A person who starts saving

just $125 a month in a tax-

deferred retirement plan at

age 21 and continues to save

that amount for 45 years

with an annual 8% rate of

return will have a nest egg

worth more than $1 million

by age 65! That’s the magic

of compound interest. And it

works hardest for you when

you start young.

today.

Calculate your retirement needsFollow these steps to find out how much you’ll need for a comfortable retirement.

25

35

45

55

4.6

3.2

2.1

1.5

Age 25 Age 35 Age 45 Age 55

$200,000

$300,000

$400,000

$500,000

$1,000,000

4%

2,031

3,046

4,062

5,076

10,153

8%

687

1,031

1,374

1,719

3,437

4%

3,458

5,187

6,916

8,645

17,290

8%

1,610

2,416

3,220

4,026

8,052

4%

6,544

9,815

13,088

16,359

32,718

8%

4,075

6,112

8,150

10,186

20,373

4%

16,299

24,448

32,598

40,747

81,494

8%

13,119

19,678

26,238

32,797

65,593

Current age

TABLE B*TABLE A

Retirementsavings

goal

Annual contribution required if invested at:

Yourcurrent

age

Inflation factor

List your current annual income

Calculate the annual income you’d need if you retired today. Expertssay it takes 70-80% of your pre-retirement income.

Multiply Line 1 by .25 to estimate your Social Security benefit if youretired today. The amount can’t be more than $17,196.

Subtract Line 3 from Line 2. This is how much money you’d need toprovide yourself each year if you retired today. You’d have to do itthrough retirement savings and personal assets.

Adjust the amount on Line 4 for inflation. Multiply Line 4 by aninflation factor from Table A. (The example assumes you’re now 35.)

Calculate how much money you’ll need to accumulate to provide theannual retirement income on Line 5. For a rough estimate, multiplyLine 5 by a factor of 10. (This assumes there’ll be a 3% annual inflationrate, an 8% yearly return on your investments and you’ll spend 15years in retirement.)

Add up how much money you now have in other long-term savingsvehicles, such as savings accounts, investments and pension plans. (The example assumes you have $40,000 in such savings.)

Adjust Line 7 for inflation. Multiply Line 7 by the same inflation factoryou used in Line 5 above. (The example assumes you’re now 35.)

Subtract Line 8 from Line 6. This will show you how much additionalmoney you’ll need to accumulate in your retirement plan.

Estimate how much money you’ll need to set aside each year in yourretirement plan to reach your goal from Line 9. Use Table B to findyour approximate required savings and the annual return it may earn.(The example assumes age 35, a $400,000 goal and an 8% return.)

Calculate how much you’ll need to contribute to your retirement planeach month. Divide the annual amount on Line 10 by 12.

1

2

3

4

5

6

7

8

9

10

11

$30,000

$24,000($30,000 x .80)

$7,500

$16,500

$52,800($16,500 x 3.2)

$528,000($52,800 x 10)

$40,000

$128,000($40,000 x 3.2)

$400,000($528,000

- $128,000)

$3,220

$268.33($3,220 ÷ 12)

Example YouExplanationStep


LNC3

* Note: Annual contributions to your employer sponsored retirement plan are subject to IRS limitations. In order to meet yourgoals, you may need to make additional contributions to other investments. Please consult your financial advisor.

The major types of investments

Bonds and stocks and funds, oh my. Knowing just which investment optionsare right for you isn’t easy. But it’s not impossible, either. As soon as youunderstand a few fundamental concepts, you’ll be ready to develop acomfortable, appropriate strategy in no time.

There are three basic types of investments (asset classes), each with adifferent potential for risk and reward:

Step 2:Learnthe basics

Asset class What it is Potential risks

Cash andstable-valueinvestments

Bonds

Stocks

Cash equivalents areshort-term investmentsthat can easily be turnedinto cash. They includeU.S. Treasury bills,*certificates of deposit andmoney market funds.

Stable-value investmentsinclude insurancecompany fixed annuities,guaranteed investmentcontracts and stable-valuemutual funds.

Bond investmentsrepresent loans issued by a government* or a corporation.

Stocks are also calledequities. They representshares of ownership in acorporation. Investmentprofits typically comefrom the stock increasingin market value. Somestocks pay dividends; not all do.

Almost no risk of losingyour invested money.Interest rate may not keeppace with inflation.

Certificates of Deposit areFDIC insured and offer afixed rate of return, whereasboth the principal and yieldof investment securities willfluctuate with changes inmarket conditions.

Little risk of losing youroriginal investment.

Usually less risky than stocks.

Bond values rise wheninterest rates are falling,and bond values fall wheninterest rates are rising.

Stocks are more volatile investments in the short term.Could lose some or all oftheir value, making themworth less than what youpaid for them.


*Note: U.S. Treasury bills and U.S. long-term government bonds are backed by the full faith and credit of the U.S. Government and offer a fixed rate of return.

Potential rewards

Typically lower returnsthan with bonds.

Cash equivalents havebeen among the leastvolatile of investments over time.

When inflation andinterest rates are low,stable-value optionsusually provide betterreturns than cashequivalents and other short-term interest rate investments.

Bond issuers promise topay a fixed rate of interestand to return youroriginal investment whenthe loan period ends.

Bond returns providemore stability than stocks,but lower returns thanstocks over the long term.

Have the potential forlong-term capital growth.

Although pastperformance doesn’tguarantee future results,stocks have historicallyprovided a higher overallreturn on average thanother investments.

Over the past 21 years,these three different assetclasses have produceddifferent levels of returns.The following chart showshow they performedcompared to inflationduring the same period.Keep in mind that pastperformance does notguarantee future results.

Different types of investment vehicles

You’ve seen the asset classes and the sorts of risks and rewards they offer.To access those asset classes, your tax-deferred retirement plan may offermultiple investment vehicles, including annuities and mutual funds:

• An annuity is an insurance contract. Your plan may include a fixedannuity issued by Lincoln Life. Your contribution to the annuity growstax deferred and is invested in the General Account of Lincoln Life at a guaranteed minimum rate backed by the financial strength of LincolnLife. Generally, you may begin withdrawing your money after age 59½without penalty. (Note: This penalty does not apply to 457 DeferredCompensation Plans.) Annuities offer the unique option of receivingperiodic payments that are guaranteed to last the rest of your lifetimeor that of your beneficiaries.

• Mutual funds are portfolios of stocks, bonds or other investments thatcontinuously offer shares of ownership to investors. These portfoliosare overseen by professional fund managers who continually monitoryour investments. Mutual funds invest your money among a variety ofsecurities to help reduce your risk and achieve the funds’ investmentobjectives. These securities may generate returns through:– Capital appreciation (if the price you paid for your share of the fund

has gone up).– Earnings, such as interest (from bonds), dividends (from stocks) and

capital gains (any profit the mutual fund makes from selling a particular investment in the portfolio).

The combination of capital appreciation (or loss) and earnings is calledthe fund’s total return.

Source: Stocks, Bonds, Bills, and Inflation 2000 Yearbook, © Ibbotson Associates, Inc. 2000.

How the asset classes have performed, 1979-1999

Cash andstable-valueinvestments

Bonds Stocks

Inflation U.S.Treasury

bills

Long-termgovernment

bonds

Small-company

stocks

Large-company

stocks

4.0%

6.9%

10.7%

15.5%

17.9%

LNC4

Fund type Definition

Money market/

stable-value funds6

Bond funds

Stock funds

Balanced funds

Investment vehicles such as money market funds and stable-value funds invest inshort-term securities that carry little risk. An investment in a money market fund is notinsured or guaranteed by the FDIC or any other government agency. Although thefund seeks to preserve the value of your investment at $1.00 per share, it is possible tolose money by investing in the fund.

Bond funds invest in bonds issued by a corporation, the government or its agencies. The issuer promises to pay bondholders some rate of interest and to repay the principal when the bond matures. Fixed-income funds are similar; they’re investmentswith specified payment dates and amounts. Their risk varies, depending on the type,quality and maturity of the security.

Stock funds invest in public companies. When you buy stock, you participate in theprofits or losses of the company. There are several categories of stock funds:

U.S. stock fundsThese invest in companies that have their principal businesses in the United States.They are ranked by capitalization, which is the sum of their long-term debt, stock and surpluses.• Large-cap: Invests in companies with more than $5 billion in capitalization.• Mid-cap: Invests in companies with $2.5 billion to $5 billion in capitalization.• Small-cap: Invests in companies with less than $2.5 billion in capitalization.7

• Sector: Invests entirely or mostly in a single portion of a market, industry or economy whose components share similar characteristics.8

International or global stock funds9

• International: Invests in the stocks of companies based in foreign countries.• Global: Invests in the stocks of both foreign and U.S. companies.• Emerging markets: Invests in stocks from developing countries, usually a small

market with a short operating history.

Fund management by investment styleStock funds may also be categorized by the investment style of the fund manager. • Value: This style buys stocks whose prices are currently lower than they might be

expected to be, then sells them later at or above their "fair value."• Growth: This style buys stocks of companies with strong growth potential or a

history of growing earnings. The fund manager expects the earnings to continue at the current rate or go even higher.

• Blend: This style mixes both value and growth stocks.

Balanced funds buy a combination of common stocks, preferred stocks, bonds and short-term bonds. The goal is to provide both income and capital appreciation whileavoiding excessive risk.

Mutual funds offer investment flexibility

Your mutual fund contribution is pooled with money from other investors, all of it managed by aprofessional advisor. Most mutual funds own a large number of securities, providing greater diversity thanmost people could assemble on their own. Mutual funds offer varying degrees of risk and reward. Eachfund has an objective and style (stated in its prospectus) that the manager must follow. Here are the basictypes of mutual funds:

6Note: Not all plans offer a money market/stable-value mutual fund. The Lincoln Alliance Program may provide a fixed annuity which is a stable-value option. 7Small-cap stocks may be riskier than stocks from more established companies. Small-cap investments cannot be readily converted into cash. This may affect their value so that shares, when redeemed, may be worth more or less than what they originally cost.

8The risks associated with funds with investments concentrated in one economic sector or geographic area are greater than in more broadly diversified mutual funds.9The risks associated with global investing include differences in regulation of financial data and reporting, currency exchange differences, and economic and politicalsystems that may be different from those in the United States.


No onetold me to invest

for my future...no onehad to. Beating the pace of inflation

is crucial to a financially

secure retirement. Even at

an extremely low inflation

rate of 4%, living expenses

that add up to $40,000

today will rise to almost

$130,000 in 30 years. To

keep pace with inflation,

start contributing to your

employer-sponsored

retirement plan today.

No one told me life was a roller coaster.

No one told me 9 to 5really meant 8 to 6.

No one told me sunsetsare different in Maui.

No one told me I’dtrade my convertiblefor a mini-van.

No one told me kidswould be so expensive.

LNC5

Understanding risk and reward

You know the basics. What’s next? You should realize that all investments havesome degree of risk. There’s a chance you might lose some or all of your money orthat it won’t grow as much as you expected. But smart investors don’t try to avoidall risk. That’s not practical because the potential reward from any investment isdirectly related to the amount of risk you’re willing to take. Consider this:• Investments that have historically offered the potential for the highest return over

the long term often come with higher risk and tend to fluctuate more in valueover the short term.

• Conservative, low-risk, low-volatility investments have historically provided thelowest potential returns. But they can also give you a smoother road to moderatesavings growth.

In short, higher potential returns usually mean higher potential risks, and lowerpotential returns usually mean lower potential risks. Stocks, bonds and cash/stable-value investments each have their own spectrum of relatively conservative toaggressive alternatives.

How to help reduce potential risks

No matter what your personal risk tolerance, there are ways to help manageinvestment risks:• Diversification10: If you spread your money across a variety of funds, your

account should be better able to weather drops in one investment without riskingall your money. You can also diversify your risk by spreading your investmentamong the various asset classes and among both domestic and foreign securities.

• Time horizon: How long you can let your money grow is called your investmenttime horizon. The longer you can invest your money before retirement, the moretime you have to ride out the ups and downs of the market. For shorter timeperiods, you can help reduce risk by investing in more conservative options.

• Dollar cost averaging: With this investment approach, you invest a fixed amountat regular intervals (every payday, for example). You buy more shares when stockprices are low, and fewer when prices are high. This tends to reduce your averageprice in the long run, but it doesn’t guarantee you’ll make a profit and won’tprotect you against losses in a declining market. Because this strategy involvesperiodic investments, you should consider your financial ability and willingness tocontinue purchases through periods of varying price levels.

Step 3:Make it

work for you

10 Diversifying your investments may help reduce your chance of losing money, but it doesn’t eliminate the risk. Even if past risk-and-return performance suggests that you’ll have similar results in the future, there’s no guarantee. Taking on more risk doesnot ensure that you’ll earn more money.


Determine your Investor Profile

How much risk are you comfortable with? The following quiz is intended to help you think aboutways to invest your retirement money. This questionnaire is not intended to be the only criterion fordetermining your long-term investment goals and objectives.

ScoreQuestions

Your total score

1. How many years until you plan to begin taking money out of your retirementplan? (Distributions taken before age 59½ may be subject to a 10% penalty. Thispenalty does not apply to 457 Deferred Compensation Plans.)

A. Within 5 yearsB. 6-10 yearsC. 11-15 yearsD. 15+ years

2. Do you have other money set aside to cover planned expenses (new car, house, college tuition) and emergencies?

A. I have no separate savings available for emergencies.B. I have an emergency fund, but it is less than six months of after-tax income. C. I have adequate savings for emergencies and planned expenses.D. I have substantial savings and investments outside this plan.

3. If the value of your investment temporarily dropped 15%, what would you do?(For example: a $1,000 account balance dropped to $850 in one month.)

A. I would be very uncomfortable and would sell my investment.B. I would do nothing immediately. However, if it dropped another 10% within the next

month, I would sell the investment.C. Do nothing. I am investing for the long term and expect some temporary declines in

market value.D. Deposit more money into this investment, considering this an opportunity to buy at a

lower price.

4. Which one of the following best describes your feelings toward choosingretirement investment options?

A. I prefer a high degree of stability in my investments. I am quite uncomfortable with aninvestment mix that is likely to lead to investment losses in any one year. A lower level of potential long-term growth is all right with me, if stability is achieved.

B. I am comfortable with an investment mix that could lead to an occasional moderate loss ininvestment value, in order to have some higher potential for long-term growth.

C. I am comfortable with an investment mix that could occasionally produce substantial lossof principal during the course of the year. I can tolerate this volatility because I believe thepotential for greater long-term growth is considerably improved.

D. I am comfortable with an investment mix that is likely to result in very substantial yearlyprincipal losses from time to time because I believe this is the price to be paid for substantial long-term asset growth.

Your score

Under 36 points

36-55 points

More than 55 points

Your Investor Profile

Conservative

Moderate

Aggressive

4 points10 points15 points20 points

4 points8 points

12 points17 points

4 points7 points

12 points

17 points

4 points

8 points

12 points

16 points

Compare your total score with the Investor Profile at theright, then match your profileto the sample asset allocationmodels on the following pages.

LNC6

Ihave... a plan.

I have a daughter who wants to be a doctor.

I have a cabin, in my mind, in Breckenridge.

I have a house and a car and matching towels.

I have parents who worked until they were 70.

I have a different idea about retirement.

Even in your 40s, it’s not too

late to begin preparing for

retirement. Suppose every

morning you spend $3.50 for

breakfast on your way to

work. If you eat at home

instead and save the $3.50,

you’d have $70 a month to

invest. That could grow to

more than $56,000 tax

deferred in just 20 years at an

average annual rate of 8%.

Allocating your assets

The final key to balancing risk and return iscalled asset allocation. This means combiningdifferent investment types to get the bestreturn possible for the least amount of risk.Wise asset allocation has been shown over timeto account for 92% of investment returns.11

When deciding where to invest your assets,you should realize that different funds havedifferent objectives. The objective of someinvestment options is to provide a dependable,predictable return on an investment. Otherfunds aim to provide a balance between riskyand stable investments for more growth andincome. Still others strive to provide evengreater investment returns — as long asyou’re willing to take the risks involved inachieving them.

In allocating your assets, you may, for example,decide to put some of your money in riskierinvestments (such as stocks) and the rest insafer investments (a fixed annuity, income-generating bonds, stable-value investments orcash equivalents) to help you achieve desiredresults at a tolerable level of risk. You have todetermine the mix that best suits your needs.Refer to your Investor Profile on the previouspage.

At the right are hypothetical examples to useas a guide for allocating your retirement planassets. These examples are illustrations only,are not intended to be investment advice, andcan’t take the place of professional investmentguidance available from your financialadvisor.12

11”Stocks, Bonds, Bills and Inflation (SBBI) Yearbook,” Roger G. Ibbotson and Rex A. Sinquefield, 1999. Updated annually.12The proper asset allocation for your own situation may differ and may include circumstances not covered in this

booklet. You should adopt an asset allocation mix that best fits your own situation.LNC7

Aggressive modelFor investors who are willing to assume substantialrisk in order to seek maximum capital appreciation.

Conservative modelFor investors who are willing to assume a smallamount of risk of principal and limit exposure toequity investments.

Moderate modelFor investors who are willing to assume some risk ofprincipal for greater returns with moderate exposureto equity investments.

Bonds0-15%

Stocks70-85%

Cash and stable-valueinvestments

0-15%

Bonds10-25%

Stocks40-55% Cash and

stable-value investments20-35%

Bonds20-35%

Stocks10-25%

Cash andstable-value investments40-55%


Choosing investments to support your goals and objectives

The investments you choose for your tax-deferred retirement plan should help you achieve yourfinancial goals. Your goals, your Investor Profile and your investment mix should all work together toprovide a direction that lets you pursue the returns you want without creating more risk and stressthan you can comfortably handle. Here’s one way to put these factors in perspective:

Growth of Capital

Growth & Income

Current Income

Preservation of Capital

Remember to look at the big picture

Your retirement plan is probably only part of your family’s total financial picture. You may also havea home, other pension or retirement accounts, checking and passbook savings accounts, and otherinvestments. When allocating your retirement plan savings, be sure to consider your completefinancial picture and your family commitments.

Your investment priorities are likely to change over time. Changes in your lifestyle, such as marriage,divorce or deciding to start a family, will affect your investment choices. It’s a good idea to talk to afinancial advisor about your specific investment goals and options. Your advisor will be able to offerspecific guidance based on your personal financial situation.

Now use what you’ve learned

By putting your whole financial picture in focus, you can create your own portfolio using theinvestment options available in your plan. Keep these factors in mind:• Your short- and long-term goals.• Your comfort with risk (your Investor Profile).• Your years until retirement (your time horizon).• Your family’s total financial picture.• The performance and mix of your portfolio over time.


Keeping pace withinflation while earningsteady returns, and youexpect to retire soon ormay need your assets inthe next 3-5 years

Staying ahead ofinflation without takingon too much risk, andyou won’t need yourassets for 5-10 years

Earning the greatestpotential return on yourinvestments, and youwon’t need your assets for 10 years or more

Slow investment growthwith little chance oflosing your originalcontributions

Moderate fluctuation ofprincipal and investmentreturns

More dramatic fluctuationof investment returnswith increased possibilityof losing some or all ofthe amount invested

Primarily cash or stable-value investments, with a smaller concentrationin bonds

A blend that puts abouthalf of your money instocks, with the otherhalf divided betweenbonds and cash or stable-value investments

Primarily stocks, with amuch smaller investmentin bonds and cash orstable-value investments

Conservative

Moderate

Aggressive

And you’re For an assetIf your goal is… comfortable with… You should consider… allocation mix that’s…

I am watching

myinvestments

grow...every day.

The power of tax-deferred

compound interest is amazing.

If you put $200 into a tax-

deferred retirement plan each

month beginning at age 25 and

earned an 8% annual return,

you’d have $298,024 by the

time you’re 55. You’d be nearly

$160,000 ahead of someone

who put the same amount of

money in a taxable savings plan

with 8% interest during that

period. Can’t beat that.

I am nearing retirement and am still inspired by my students.

I am finally restoring that ’63 Corvette.

I am learning the differencebetween port and starboard.

I am still getting used to being called “grandpa.”

I am more secure than I ever thought I’d be.

LNC8

Once you’ve selected your investments,you’re on your way. But you’ll want tokeep track of your portfolio. Is yourmoney growing? Is it achieving yourgoals? Is the investment mix appropriatefor your risk comfort level? To helpanswer these questions, do the following:

Read

Read your plan statement on a regular basis.

Review

Review your investment allocations once a year to make sure your currentinvestments and asset allocation still meetyour objectives and your Investor Profile.

Recheck

Over time, you may want to adjust yourallocation to better reflect your currentfinancial situation. Continue to evaluateyour goals, time horizon and risk tolerance.

Readjust

As you get closer to retirement, yourfinancial responsibilities and your abilityto tolerate risk may change. You may want to rebalance your portfolio tomaintain a level of risk exposure consistent with your situation.

and now, you have

a plan.

your dreamsYou have

AAnnnnuuiittyy:: An insurance contract thatsets aside money on a tax deferredbasis until you’re ready to withdrawit. Taxes are due upon withdrawal.At retirement, you can withdrawyour money as needed or turn theannuity into a regular incomestream via annuitization for the restof your life.

AAsssseett aallllooccaattiioonn:: The distribution of money among various investments.

BBoonndd:: A debt security issued by a government or a corporation.Bond issuers promise to pay a fixedrate of interest and to return theoriginal investment when the loan ends.

CCoommppoouunndd iinntteerreesstt:: Interestcomputed by applying the statedpercentage rate to both the original amount invested and the accumulated interest of previous periods.

DDiivveerrssiiffiiccaattiioonn:: Spreading money among different types ofinvestments to help manage risk.

DDiivviiddeenndd:: A portion of a company’sprofits paid to its shareholders. Amutual fund’s dividend comes fromthe investment income the fund has earned.

DDoollllaarr ccoosstt aavveerraaggiinngg:: Buying the same dollar amount of aninvestment at fixed intervals. Youbuy more shares when prices aredown, fewer when prices are up.

GGrroowwtthh:: A rise in the market valueabove the amount of the originalinvestment. Also referred to as“capital appreciation.”

IInnccoommee:: Any interest or dividends from an investment. Also called “earnings.”

IInnffllaattiioonn//ddeeffllaattiioonn:: The increase ordecrease of buying power due to anoverall change in the prices ofgoods and services.

IInnvveessttmmeenntt rriisskk:: The chance thatinvestment principal won’t grow asmuch as expected or that theinvestment could lose money.

MMaarrkkeett vvaalluuee:: The amount ofmoney a buyer is willing to pay and a seller is willing to accept for a security.

MMaattuurriittyy ddaattee:: The day a bondissuer has agreed to pay back themoney it originally borrowed. Afixed-income portfolio’s averagematurity combines the maturitydates of all bonds in a portfolio.

MMuuttuuaall ffuunndd:: An investmentcompany that pools the assets ofindividuals and invests them for acommon goal.

NNeett aasssseett vvaalluuee ((NNAAVV)):: The marketvalue of one share of a mutualfund. The NAVs for most mutualfunds appear in the business section of majornewspapers. To determine the total value of your mutual fundholdings, multiply the NAV by the number of shares you own.

PPrriinncciippaall:: The dollar amount ofany initial investment. Also called“capital.” It doesn’t take intoaccount any dividends or interestreceived or capital appreciation. For bonds, the principal is theamount of money borrowed by the bond issuer.

PPrroossppeeccttuuss:: A legal document that describes how a mutual fund or other registered securityoperates. It’s prepared by theinvestment company and tells whatthe fund may and may not investin, states the fund’s investment goaland describes management fees andother expenses.

RRiisskk ttoolleerraannccee:: The amount of risk an investor is willing to take to achieve a desired return.

SSeeccuurriittiieess:: A general term used forall types of stocks, bonds and otherinvestment options. Also calledinvestment “instruments.”

SSttoocckk:: A share of ownership in acorporation. Stocks are also called“equities.” Investment profitstypically come from the stockincreasing in market value. Stocksmay or may not pay dividends.

TTiimmee hhoorriizzoonn:: The number of yearsyour principle can remain invested.

TToottaall rreettuurrnn:: The return of aninvestment over a specific period oftime. Total return takes intoaccount any changes in share priceplus any interest or dividends youreceived. Often reported as anannualized rate of return.

TTrreeaassuurryy bbiillll:: Short-term debt issued by the U.S.government with a maximummaturity of one year.

TTrreeaassuurryy bboonndd:: Long-term debtissued by the U.S. government with a maturity date of more than10 years.

VVoollaattiilliittyy:: The tendency of aninvestment to experience priceswings (ups and downs) over periods of time.

GGlloossssaarryy ooff iinnvveessttmmeenntt tteerrmmss

directiondreams

yourGive

Lincoln Alliance ProgramA tax-deferred retirement program

Clear solutions in a complex worldSM

P.O. Box 7876Fort Wayne, IN 46801-7876800-4LINCOLN (800-454-6265) or in New York 888-223-1860www.LincolnLife.com or in New York www.LincolnLife-NY.com

Mutual funds offered through Lincoln Financial Advisors, a broker/dealer. The stable value option is subject to availability and may not beavailable in all states. It may be offered as a fixed annuity through Lincoln affiliates or as a collective trust through independent third partytrust companies. The self-directed brokerage account is offered through Wilmington Brokerage Services Company, a broker/dealer. For aspecific mutual fund prospectus, call 800-234-3500. The prospectus contains more complete information, including charges and expensesand should be read thoroughly before investing or sending money. Lincoln Financial Group is the marketing name for Lincoln NationalCorporation and its affiliates.

*2001 Lincoln Financial GroupCRN #0106-4200a Form 2996

Documents

Alliance Education