Welflflcome to Life Planning for Retirementwoodstonefinancial.com/wp-content/uploads/2017/02/Retirement... · Welflflcome to Life Planning for Retirement ... learners will participate

Retirement Planning Today®

l f l fWelcome to Life Planning for Retirement

Presented by:

Joel Kelley, CFP®

Advisory Services are offered through Woodstone Financial, LLC, a Registered InvestmentAdvisor in the State of North Carolina. Supervisory office: 30 Town Square Blvd, Ste 208,Asheville, NC 28803

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This material is intended to provide general financial education and is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.


LIFE@WesternCarolinaLIFE@WesternCarolina is a lifelong education program specifically

designed to provide learning opportunities to adults ages 50 and over. In this program, learners will participate in non-credit educational programs led by current and retired WCU facultyeducational programs led by current and retired WCU facultyand staff and other educators from the region.

life.wcu.edu

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We Have a Saying……

We believe that Retirementshould mean Independence,should mean Independence,Dignity and the ability to LiveLife on your own termsLife on your own terms.

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dRetirement Needs & Expenses

Presented by:

Joel Kelley, CFP®


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To put it another way…Your Money Today Will Likely Buy Less Tomorrow

1913 1963 20151913 1963 2015

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$0 09 W th f Milk 1913 2015

$0.09 = Quart of milk $0.09 = 1 Small Glass of milk $0.09 = 7 Tablespoons of milk

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14.0In US dollars. Source for 1913 and 1963: Historical Statistics of the United States: Colonial Times to 1970/U.S. Dept. of Commerce. Source for 2014: United States Department of Labor, Bureau of Labor Statistics, Economic Statistics, Consumer Price Index–Average Price Data.

$0.09 Worth of Milk 1913-2015


dbl k kRetirement Roadblocks & Mistakes

Presented by:

Jacob Sadler, CFP®

Advisory Services are offered through Woodstone Financial, LLC, a Registered Investment Advisor in the State of North Carolina. Supervisory office: 30 Town Square Blvd, Ste 208,

Asheville, NC 28803

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Cash Flow Importance – BalanceIncome and Expensesp

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Homework: Income/ExpensesOptional vs. Non-Optional Spendingp p p g

Non-Optional (Non Discretionary)

Food (Groceries)

Shelter (Mortgage, Utilities, Clothes)

Health and Safety (Phone, Insurance, Prescriptions)

TaxesTaxes

Optional (Discretionary)

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Food (Dining Out)

Consumer Products (Hobby equipment, furniture, clothes)

Entertainment (Cable Movies Vacation)

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Entertainment (Cable, Movies, Vacation)


Use Cash Flow to Your AdvantagePay Yourself FIRSTy f

Pay Yourself First

Monthly Income $4,000

Savings (Hitting Your Target) $1,000

Available for Living Expenses $3,000

Pay Expenses First

Monthly Income $4,000

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Living Expenses (Creep Upward) $3,500

Available for Savings $ 500

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If you pay yourself last – you pay yourself less


Simple Interest

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Compounding

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Use Time to Your Advantage

Example in Book- Compounding requires time

Accumulating - Take advantage of compound growth build assets that can pay youthat can pay you

Decumulating - Take advantage of compound growth to protect h i i t i fl ti

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your purchasing power against inflation

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Retirement IncomeRetirement IncomeAnd Savings

Presented by:

Jacob Sadler, CFP®

Advisory Services are offered through Woodstone Financial, LLC, a Registered Investment Advisor in the State of North Carolina. Supervisory office: 30 Town Square Blvd, Ste 208,

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Advisor in the State of North Carolina. Supervisory office: 30 Town Square Blvd, Ste 208,Asheville, NC 28803

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Page 4-16

Social Security

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14.0 1 People born on after 1960 have FRA of 67 (66 between 1943-1954)


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Social Security

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14.0 1 People born on after 1960 have FRA of 67 (66 between 1943-1954)


The Retirement Income Gap

Total Spending Needs

Social Security Other Sources

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Roth Conversion- Three Questions3 Questions to ask before completing a Roth Conversion

1. When – When will the money be needed – the longer the time1. When When will the money be needed the longer the timehorizon the better usually (10-15 years)

2 What – Consider what the future tax rates might be for you2. What – Consider what the future tax rates might be for you(consider changes in income)

3 Wh Wh ill th t th t f

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3. Where – Where will the money to pay the tax come from(Generally better to not pay taxes from amount converted)

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Page 4-15

Other Personal Retirement SourcesFactors to Consider

• Reliability

• Flexibility

• Liquidity

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14.01 It is not recommended that you tap into your home equity to invest. Investors who must rely on investment returns to make their home equity or

mortgage payments could end up defaulting on their home loans if their investments decline and they are unable to meet their monthly payments.


Saving For Retirement to Provide Income• Save Consistently

• The ‘new’ opportunity and responsibility. Start where you are.

• Save more as income growsSave more as income grows• Where? Workplace Retirement Plan, IRA, After-Tax

• Monitor Progress• Cash Flow and Financial Statement

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Investments

Presented by:

Joel Kelley, CFP®


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Page 6-3

Investment CategoriesLOANING VS. OWNINGIn the simplest terms, there are two basic ways to invest:

• Loaning your moneyLoaning your money

• Purchasing and owning an asset

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14.0Image Source: Dimensional Fund Advisors


People Trust Market Pricing Every Day

The daily price of fish may vary based on buyer and seller expectations of market forces. We accept the price as an accurateWe accept the price as an accurateestimate of current value and make decisions accordingly.

The same is true of a stock priceThe same is true of a stock price,which reflects all known information about a company.

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Image Source: Dimensional Fund Advisors


What Affects a Stock’s Current Price?

All A company’s AllAvailable Information

p yequity, its prospectsfor future earnings, and

Priceg

perceived risk

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Given all information, a stock’s current price reflects aggregate expectations about risk and return.

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Ten Considerations to Help You Manage Investment Risk

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1. Embrace Market PricingWorld Equity Trading in 2015

The market is an effective, information-processing machine. Millions of participants buy and

ll iti i th ld

World Equity Trading in 2015

Number of Trades Dollar Volume

sell securities in the worldmarkets every day, and the real-time information they bring helps set prices.

DailyAverage

98.6million

$447.3billion

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In US dollars. Global electronic order book (largest 60 exchanges). Source: World Federation of Exchanges.Image Source: Dimensional Fund Advisors


2. Don’t Try to Outguess the MarketThe market's pricing powerUS Equity Mutual Fund Performance The market s pricing power

makes it difficult for investors who try to outsmart other participants through stock picking or market timing.

US Equity Mutual Fund Performance

As evidence, only 17% of US equity mutual funds have survived and outperformed th i b h k th

43%Survive

17%Outperform

their benchmarks over thepast 15 years.

15 Years2,758 funds at beginning

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Beginning sample includes US equity mutual funds as of the beginning of the 15-year period ending December 31, 2015. Survivors are funds that were still in existence as of December 31, 2015. Non-survivors include funds that were either liquidated or merged. Outperformers are funds that survived and beat their respective benchmarks over the period. Past performance is no guarantee of future

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results.Data Source: Analysis conducted by Dimensional Fund Advisors using data on US-domiciled mutual funds obtained from the CRSP Survivor-Bias-Free US Mutual Fund Database, provided by the Center for Research in Security Prices, University of Chicago. Sample excludes index funds. Benchmark data provided by MSCI, Russell, and S&P. MSCI data © MSCI 2016, all rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. The S&P data is provided by Standard & Poor’s Index Services Group. Benchmark indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Mutual fund investment values will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Diversification neither assures a profit nor guarantees against a loss in a declining market.


3. Resist Chasing Past PerformanceSome investors select mutualDo Outperforming US Equity Mutual Funds Persist? Some investors select mutual

funds based on past returns. However, funds that have outperformed in the past do not always persist as winners.

Do Outperforming US Equity Mutual Funds Persist?

37%20% Outperformed 541funds

Past performance alone provides little insight into a fund’s ability to outperform in the future.

2001 2010 2011 20152001–20102,758 funds at beginning

2011–2015

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The graph shows the proportion of US equity mutual funds that outperformed and underperformed their respective benchmarks (i.e., winners and losers) during the initial 10-year period ending December 31, 2010. Winning funds were re-evaluated in the subsequent five-year period from 2011 through 2015, with the graph showing winners (outperformers) and losers (underperformers). Fund count and percentages may not correspond due to rounding. Past performance is no guarantee of future results. Data Source: Analysis conducted by Dimensional Fund Advisors using data on US-

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p g y p g p g y y gdomiciled mutual funds obtained from the CRSP Survivor-Bias-Free US Mutual Fund Database, provided by the Center for Research in Security Prices, University of Chicago. Sample excludes index funds. Benchmark data provided by MSCI, Russell, and S&P. MSCI data © MSCI 2016, all rights reserved. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. The S&P data is provided by Standard & Poor’s Index Services Group. Benchmark indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Mutual fund investment values will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Diversification neither assures a profit nor guarantees against a loss in a declining market.


4. Let Markets Work for YouTh fi i l k tGrowth of a Dollar 1926–2015 The financial markets

have rewarded long-term investors. People expect a positive return on the capital they supply, and historically, the

Growth of a Dollar, 1926 2015(Compounded monthly)

$16,743US Small Cap Index they supply, and historically, the

equity and bond markets have provided growth of wealth that has more than offset inflation.

US Small Cap Index$5,386US Large Cap Index

$132 Long-TermGovt. Bonds Index

$21 Treasury Billsy$13 US Inflation (CPI)

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In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. US Small Cap Index is the CRSP 6-10 Index; US Large Cap Index is the S&P 500 Index; Long-Term Government Bonds Index is 20-Year US Government Bonds; Treasury Bills are One-Month US Treasury bills; US Inflation is the Consumer Price Index. CRSP data is provided by the Center for Research in Security Prices, University of Chicago. The S&P data is provided by Standard & Poor's Index Services Group. Bonds, T-bills, and inflation data provided by Morningstar. Past performance is no guarantee of future results.


5. Consider the Drivers of ReturnsAcademic research hasDimensions of Expected Returns Academic research has

identified these equity and fixed income dimensions, which point to differences in expected returns.

Dimensions of Expected Returns

MarketEquity premium—stocks vs. bonds

These dimensions are pervasive, persistent, and robust and can be pursued i t ff ti tf li

Company Size Small cap premium—small vs. large companies

Relative PriceValue premium—value vs. growth companies

STO

CK

S

in cost-effective portfolios.ProfitabilityProfitability premium—high vs. low profitability companies

Term

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Term premium—longer vs. shorter maturity bonds

CreditCredit premium—lower vs. higher credit quality bonds

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Diversification does not eliminate the risk of market loss. Relative price is measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios. Profitability is a measure of current profitability, based on information from individual companies’ income statements. Image Source: Dimensional Fund Advisors


6. Practice Smart DiversificationDiversification helps reduceHome Market Global Market Diversification helps reduce

risks that have no expected return, but diversifying within your home market is not enough. Global diversification can broaden

Home MarketIndex Portfolio

Global MarketIndex Portfolio

your investment universe.

S&P 500 I d MSCI ACWIS&P 500 Index

1 country, 500 stocks

MSCI ACWIInvestable Market Index (IMI)

46 countries, 8,716 stocks

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Number of holdings and countries for the S&P 500 Index and MSCI ACWI (All Country World Index) Investable Market Index as of December 31, 2015. Indices are not available for direct investment, and their performance does not reflect the expenses associated with the management of an actual portfolio. International investing involves special risks such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks. Diversification neither ensures a profit nor guarantees against loss in a declining market. Past performance is not a guarantee of future results. The S&P data is provided by Standard & Poor`s Index Services Group. MSCI data © MSCI 2016, all rights reserved.Image Source: Dimensional Fund Advisors


7. Utilize Asset Allocation-Avoid Market Timingg

You never know which market segments will outperform from year to year. By holding a globally di ifi d tf li i t

Annual Returns by Market Index

2002 2004 2006 2008 2010 2012 2014 2016

diversified portfolio, investors are well positioned to seek returns wherever they occur.

US Large Cap

US Large CapValue

US Small Cap

US Small CapValue

HIGHERRETURN

US Real Estate

Emerging Markets

LOWER

Intl. Large CapValueIntl. Small CapValue

Five-Year US

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In US dollars. Chart is for illustrative purposes only.

US Large Cap is the S&P 500 Index, provided by Standard & Poor’s Index Services Group. US Large Cap Value is the Russell 1000 Value Index. US Small Cap is the Russell 2000 Index. US Small Cap Value is the Russell 2000 Value Index. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. US Real Estate is the Dow J US S l t REIT I d id d b D J I di I t ti l L C V l i th MSCI W ld USA V l I d ( t di id d ) I t ti l S ll C V l i th MSCI W ld

RETURNGovt. Fixed

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Jones US Select REIT Index, provided by Dow Jones Indices. International Large Cap Value is the MSCI World ex USA Value Index (net dividends). International Small Cap Value is the MSCI World ex USA Small Cap Value Index (net dividends). Emerging Markets is the MSCI Emerging Markets Index (net dividends). MSCI data © MSCI 2017, all rights reserved. Five-Year US Government Fixed is the Bloomberg Barclays US Treasury Bond Index 1-5 Years. Bloomberg Barclays data provided by Bloomberg. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Image Source: Dimensional Fund Advisors


8. Manage Your EmotionsMany people struggle toAvoid Reactive Investing Many people struggle to

separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making

Avoid Reactive Investing

poor investment decisions at the worst times.

NervousnessOptimism

Elation

Optimism

NervousnessOptimism

Fear

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For illustrative purposes only.Image Source: Dimensional Fund Advisors


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Humans Are Not Wired for Disciplined InvestingWhen people follow their natural instincts, they tend to apply faulty reasoning to investingto investing.

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9. Look beyond the HeadlinesDaily market news andDaily market news and

commentary can challenge your investment discipline. Some messages stir anxiety about the future while others tempt you to chase the latest investment fad.

When tested, consider the d i t i l tsource and maintain a long-term

perspective.

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14.0For illustrative purposes only.Image Source: Dimensional Fund Advisors


Markets Have Rewarded Discipline Despite the NewsGrowth of a dollar—MSCI World Index (net dividends), 1970–2016

$43

Euro zone debtcrisis

S&P 500 down 46%

Dotcom stock crash

9/11 terrorist attack

Y2KScar

e

Income tax rates rate

Savings

Dow drops 23% on Black Monday

BusinessWeek: “The Death of Equities”

G ld hitArab oil

embargo$48

Eurozonedebtcrisis

Subprimemortgage

crisis

Dotcom stock crash

9/11 terrorist attacks

Y2KScare

Incometax rates rise

Savings

Dow drops 23% on Black Monday

BusinessWeek: “The Death of Equities”

Arab oil embargo

Brexit

US home prices hitbottom

Fi lSubprimemortgage

Hurricanes Katrinaand Rita

Iraqwar b i

attacke

Russian financial

crisisAsianIraq

i d

Savingsand loan crisis

USinflation at 13 5%

Gold hitsrecord high

S&P 500 down

Oil prices quadruple

embargo

1

US home prices hitbottom

Fi l

S&P500

Hurricanes Katrina

and RitaI

attacks

Russian financial

crisisAsianIraq

i d

Savingsandloan crisis

US inflation at 13.5%

Gold hits record high

S&P 500 down

Oil prices quadruple

Fiscalcliffworries

mortgagecrisis

begins

currency crisis

invadesKuwait

13.5%43%

1970 1980 1990 2000 2010 2013

1 Fiscalcliffworries

down 46%

Iraqwar begins

currency crisis

invadesKuwait

down43%

1970 1980 1990 2000 2010 2016

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A disciplined investor looks beyond the concerns of today to the long-term growth potential of markets

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In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results. MSCI data © MSCI 2017, all rights reserved.

potential of markets.

Image Source: Dimensional Fund Advisors


10. Focus on What You Can ControlDecide if you want to be selfDecide if you want to be self-

directed or if you want to work with a professional financial advisor to create a plan tailored to your personal financial needs while

Creating an investment plan to fit

your needs and risk tolerancehelping your focus on actions that add value.

Following these ten strategies l d t b tt i t t

Structuring a portfolio alongdimensions of expected returns

Diversifying broadly

can lead to a better investmentexperience.

Reducing expenses and turnover

Minimizing taxes

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Diversification does not eliminate the risk of market loss. There is no guarantee investment strategies will be successful. For illustrative purposes only.Image Source: Dimensional Fund Advisors


kRisk Management & Asset Protection

Presented by:

Jacob Sadler, CFP®

Advisory Services are offered through Woodstone Financial, LLC, a Registered Investment Advisor in the State of North Carolina. Supervisory office: 30 Town Square

Blvd Ste 208 Asheville NC 28803

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Blvd, Ste 208, Asheville, NC 28803

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Types of Risk

Speculative RiskChance of LossChance of Loss

Chance of Gain

Pure RiskChance of Loss

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Responses to RiskRisk Control

Risk Avoidance

Don’t Do SomethingDon t Do Something

Risk Reduction

Safety Belt, Alarm System, Smoke Detector

Risk Diversification

Spread risk out- duplicate activities at different locations

Risk Financing

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gRisk Retention

Deductibles, Self Insurance, Co-insurance

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Risk Transfer

Purchase Insurance, Business Incorporation


Parts of an Insurance ContractDeclarations Page- States the person, property, and/or activity

being insured and the parties of the agreement.

Definitions- Explains key terms within the policy

Insuring agreements- Describes the basic promises of the insurance company

Exclusions- Spells out the circumstances when the insurer will not ppay

Conditions- Spells out the duties and rights of both parties

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AutoReview your limits

Liability (Required in NC)Liability (Required in NC)

Per person/ Per Incident/ Property Damage

North Carolina (Bodily Injury and Property Damage Liability is required) Minimum split limits $30 000/$60 000/$25 000required) Minimum split limits $30,000/$60,000/$25,000

Medical Payments Uninsured/underinsured coverage

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Damage to Auto

*Business Use

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Business Use


HomeownerDwelling, Other structures, Personal property, Loss of UseReview your Perils- Causes of loss

Basic – Covers only specifically named perils (fire, vandalism, smoke, lightening, etc.)

Broad- Basic plus falling objects freezing of plumbing electricBroad- Basic plus falling objects, freezing of plumbing, electricsurge, system rupture

Open- Covers everything except for perils specifically excluded

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Earthquake, flood, ordinance of law, power failure, neglect,

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nuclear hazard, war, intentional loss,


Umbrella Liability Auto Homeowner’s

Umbrella UmbrellaU b e aLiability Up To$1,000,000

Liability Up To$1,000,000

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Auto Base Liability$200,000

Homeowner’s Base Liability$300,000

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Ownership and Taxation of Life Ins.

• Death Benefits can be Tax free

• Important to identify ‘Incidents of ownership’

Right to convert, terminate, assign, or name beneficiaries

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1035 Exchanges• Tax Free Exchange of certain life insurance and annuity

contracts

Life for life

Or

Life for annuityLife for annuity

Or

Annuity for annuity

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14.0 Note: Annuities are considered insurance products. Provides protection against superannuation


lEstate Planning

Presented by:

Jacob Sadler, CFP®

Advisory Services are offered through Woodstone Financial, LLC, a Registered Investment Advisor in the State of North Carolina. Supervisory office: 30 Town Square

Blvd, Ste 208, Asheville, NC 28803

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Page 8-1

Planning Ahead –For When You Cannot Plan

Contrary to common belief, everyone needs estate planning:

• A set of decisions

• Re-evaluate and update their plan

• Develop a plan to give (during lifetime and beyond)

• Can be difficult to think about

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Page 8-5

Transfer TaxesAPPLICABLE EXCLUSION AMOUNTThe applicable exclusion amount is the value of the taxable estate that can pass free of transfer taxes.

• In 2017, the applicable exclusion amount is $5,490,000 (per spouse)

• In 2000, the applicable exclusion amount was $675,000pp(per spouse)

• Top Tax Rate currently – 40%

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Top Tax Rate currently 40%

• Between 1941-1976 top rate was 77%

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Planning Your Legacy - Homework

Do you have any requests that you want to make sure are in writing?

Do you want to create a financial impact beyond your lifetime?

How do you want to be remembered?

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Final Thoughts

Discipline

Confidence

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Knowledge

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Welflflcome to Life Planning for Retirementwoodstonefinancial.com/wp-content/uploads/2017/02/Retirement... · Welflflcome to Life Planning for Retirement ... learners will participate