BWH Young Profesionals: MAFCU & MunroeMorrow Retirement & Investment Planning (4/24/12)

Retirement & Investment Planning gin Today’s MarketPresented by: Matthew A. Morrowy

Munroe Morrow Wealth Management346 Commercial StreetBoston, MA 02109

Date: April 24, 2012

617-600-5488

Will you have enough money?Will you have enough money?Future!income!needs!and!sources

> Most!people!have!a!gap!between!income!and!expenses> Social!Security!will!not!be!enough> Will!you!have!a!pension?> Do!you!have!other!sources!of!income?> Pl t b id th ith i t t> Plan!to!bridge!the!gap!with!your!investments

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Will you have enough money?Will you have enough money?Future!income!needs!and!sources

The!size!of!the!nest!egg!you’ll!need

Annual!amount!desired Nest egg!needed*

$!40,000 $!963,922$!85,000 $!2,048,334$!100,000 $!2,409,804

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Will you have enough money?Will you have enough money?Percentage surviving by age

FPO

3Percentage surviving by age: Death-registration

1900-1902,1949-51, 2004. National Vital Statistics Reports, Vol. 56, No. 9, December 28,

2007

The High Cost of WaitingAnnual Rate of Return = 8%

AGE Investor A Investor B21 $0 $2,00022 $0 $2,00023 $0 $2,00024 $0 $2,00025 $0 $2,00026 $0 $2,00027 $0 $2,00028 $0 $2,00029 $0 $2,00030 $0 $2,00031 $2,000 $032 $2,000 $033 $2,000 $034 $2,000 $035 $2,000 $036 $2,000 $037 $2,000 $038 $2,000 $039 $2,000 $040 $2,000 $041 $2,000 $042 $2,000 $043 $2,000 $044 $2,000 $045 $2,000 $046 $2,000 $047 $2,000 $048 $2,000 $049 $2,000 $050 $2,000 $051 $2,000 $052 $2,000 $053 $2,000 $054 $2,000 $055 $2,000 $056 $2,000 $057 $2,000 $058 $2,000 $059 $2,000 $060 $2,000 $0

$226,566 $291,547Total Invested: $60,000 $20,000

What if you invested $2,000 per year for all 40 years? $518,113.04

How should you invest along the way?

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I ti h tInvesting!short!course

> Get!invested

> Diversify

> Stay invested> Stay!invested

T f i k “ l tilit ”Types!of!risk!or!“volatility”

> Specific!risk

> Market!risk

> Industry risk> Industry!risk

> Interest!rate!risk

Historical range of returns of S&P 500: 1970-2009

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30 19 18

7No!change

Positive!change

" 2" 7Negative!change

1!year 5!years 10!years 20!years" 43

Source:!Standard!and!Poor’s!500!Index.!The!Standard!&!Poor’s!500!Market!Index!(S&P!500)!is!an!unmanaged!list!of!common!stocks frequently!used!as!a!measure!of!market!performance.!The!index!reflects!reinvestment!of!all!distributions!and!changes!in!market!prices,!but!excludes!brokerage!commissions!or!other!fees.!The!highest!return!is!represented!by!the!top!of!each!bar!and!the!lowest!annual!return!is!shown!at!the!bottom.!The!rolling!5",10" and!20"year!ranges!are!also!shown.!Over!time,!lower!performing!years!will!be!offset!by!higher!performing!years!and!vice!versa.!Therefore!the!range!of!the!historical!returns!over!the!entire!period!is!narrower!than!the!range!of!returns!in!any!single!year.!Returns!over!1!year!in!length!are!annualized.!It!is!not!possible!to!invest!directly!in!an!index.!!Past!performance!is!no!guarantee!of!future!results.!

D ll t iDollar"cost!averaging

> Put!market!fluctuations!to!work!for!you

> Can!be!an!effective!means!of!accumulating!shares

> Does not guarantee profit or protect against losses due to> Does!not!guarantee!profit!or!protect!against!losses!due!to!declining!prices

Dollar"cost!averaging

Month You invest Share price Shares purchased

January $100 ! $10 = 10February $100 ! $8 = 12.5February $100 $8 12.5March $100 ! $5 = 20April $100 ! $7 = 14.3May $100 ! $9 = 11.1June $100 ! $10 = 10Total $600 = 77 9

Average!price!per!share:!(10+8+5+7+9+10)/6=!$8.17Average!cost!per!share:!(600/77.9)=!$7.70

Total $600 77.9

Dollar"cost!averaging!not!guarantee!a!profit!or!protect!against!losses!in!a!declining!market.!Investors!should!consider!their!ability!to!continue!investing!during!periods!of!low!markets.!This!illustration!is!hypothetical!and!is!not!a!forecast!or!guarantee!of!specific!investment!results.

How should you invest along the way?How should you invest along the way?Five!kinds!of!risk!to!manage

I fl ti i k Th ibilit th t i t t’ lInflation!risk The!possibility!that!your!investment’s!value!will!lag!inflation

Market!risk The!chance!that!your!investment’s!price!will!fall

Default!risk The!chance!that!a!bond!issuer!won’t!be!able!to!pay!interest!due

Interest rate risk The likelihood that bond prices will fall when interestInterest!rate!risk The!likelihood!that!bond!prices!will!fall!when!interest!rates!rise

Currency!risk The!possibility!that!your!investment!will!lose!value!due!to!fluctuations!in!foreign!currencies

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How should you invest along the way?How should you invest along the way?Asset!allocation!and!diversification

2001 2002 2003 2004 2005 2006 2007 2008*

SMALL CAP VALUE

14.02%

REAL ESTATE 12.35%

BONDS 10.25%

REAL ESTATE3.58%

SMALL CAP GROWTH48.54%

SMALL CAP VALUE

46.03%

REAL ESTATE33.16%

SMALL CAP VALUE22.25%

INT’L STOCKS14.02%

REAL ESTATE 13.82%

REAL ESTATE 35.97%


LARGE CAP GROWTH11.81%


2001 2002 2003 2004 2005 2006 2007

BONDS 5.24%

HIGH YIELD BONDS-26.16%

2008

INT’L!Stocks!MSCI!EAFE!Index

Diversified!Portfolio!Hypothetical!portfolio!with quarterly rebalancing and an equal

BONDS 8.44%

HIGH YIELD BONDS5.28%

HIGH YIELD BONDS-1.41%

SMALL CAP VALUE

-11.43%

MID CAP STOCKS 40.06%



MID CAP STOCKS 20.22%

MID CAP STOCKS12.65%

DIVERSIFIED PORTFOLIO

7.46%

SMALL CAP VALUE

23.48%

LARGE CAP VALUE

22.25%

BONDS 6.97%

SMALL CAP GROWTH

7.05%

SMALL CAP VALUE

-28.92%


-28.58%

*Data as of 12/31/08. Source: Morningstar Direct

with!quarterly!rebalancing!and!an!equal!weighting!in!each!of!the!indices!listed!against!loss.


-1.87%

LARGE CAP VALUE-5.59%

MID CAP


-11.74%

LARGE CAP VALUE

-15.52%

REAL ESTATE 36.18%


33.58%

LARGE CAP


16.63%

LARGE CAP VALUE

16.49%

LARGE CAP VALUE7.05%

LARGE CAP GROWTH

5.26%


17.97%

MID CAP STOCKS15.26%

MID CAP STOCKS5.60%


2.19%

HIGH YIELD SMALL CAP SMALL CAP

LARGE CAP GROWTH-38.44%

SMALL CAP

LARGE CAP VALUE

-36.85%

Direct. Past performance does not guarantee future results. Diversification and asset allocation do not guarantee overall portfolio profit and do not protect against loss. It is not possible to invest directly in any of the unmanaged

indices shown. There is no assurance that a MID CAP STOCKS-5.62%

LARGE CAP

INT’L STOCKS-15.66%

MID CAP STOCKS-16.19%

LARGE CAP

LARGE CAP VALUE

30.03%

LARGE CAP GROWTH29.75%

HIGH YIELD


LARGE CAP

SMALL CAP VALUE 4.71%

HIGH YIELD


LARGE CAP


LARGE CAP VALUE-0.17%

SMALL CAP

SMALL CAP GROWTH -9.23%


SMALL CAP GROWTH

4.15%


SMALL CAP GROWTH-38.54%

REAL ESTATE -39.20%

MID CAP

secondary market will be available for real estate invest trust, which may hinder

attempts to sell the investment.

Diversification helps you spread risk throughout your portfolio, so that

investments that do poorly may be balanced

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GROWTH–20.42%


GROWTH-27.88%

BONDS28.97%

BONDS4.10%

GROWTH6.30%

BONDS 4.34%

BONDS2.74%

BONDS2.43%

GROWTH9.07%

BONDS4.33%

VALUE-9.78%

REAL ESTATE-17.55%

SMALL CAP GROWTH-30.26%

STOCKS-41.46%


investments that do poorly may be balanced by others that do relatively better.

A new way to think about taxesA new way to think about taxesTax"diversify!your!portfolio

12Neither Ameriprise Financial nor any of its

representatives or agents provide tax advice.

How should you invest along the ?way?

2012 limits for a contributory Roth IRA2012!limits!for!a!contributory!Roth!IRA!> $5,000!maximum!contribution!in!202*> $1,000!“catch"up”!contribution!for!those!age!50+$ , p g

Advantages!of!Roth!IRAs:T D f d S i• Tax!Deferred!Savings.

• Tax"Free!withdrawals!of!earnings!after!age!59!½.• Contributions!can!be!withdrawn!penalty!and!tax"free!at!!any!time.

i $ 0 000 b i hd f fi i h h i h• Earnings!up!to!$10,000!can!be!withdrawn!for!first!time!home!purchase!without!early!withdrawal!penalty.

13*Maximum contribution limits may be adjusted for inflation in future years.

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Education

BWH Young Profesionals: MAFCU & MunroeMorrow Retirement & Investment Planning (4/24/12)