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Presented by: Marisa Ruhter
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Working for Today, Saving for Tomorrow How to Take Control of Your Finances and Plan for a Profitable Retirement
November 2012 Marisa S. Ruhter
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Overview
Personal Finance
R
esources
Retirement Planning
Investing
3
Budget List Fixed Expenses
Track Spending
Identify Needs vs Wants
10 Tools to Help: www.doughroller.net/tools-resources/10-online-budget-tools/
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Industry Debt Guidelines
Sum of Debt Payments Income (Pre Tax)
= Debt to Income Ratio
Debt to Income Ratio < 15 % Very Good
16% - 20% Good 21% - 35% Try to Reduce Debt 36% - 50% Too Much Debt
>50% Serious Trouble
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Emergency Fund
3 to 6 months worth of living expenses Exact amount depends on
personal comfort level
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Insurance
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How Much Money Will I Need?
Retirement Basics: http://money.cnn.com/retirement/guide/basics_basics.moneymag/
Medical Expenses Leisure Activities Health Care Costs
$$$
Savings Plan Contributions Work Related Expenses Taxes
$$$
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Other Things to Consider Retirement Age
Length in Retirement
Health Care
Inflation
Lifestyle
Retirement Calculator: http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp
Image Source: Wikipedia
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401(k)
Pay Check Modified Income Taxes
401(k)
Employer Contribution
Taxes Income
Retirement
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401(k)
Contributions Managed Externally
Investment Choices
Employer Vesting
Source: www.irs.gov
More Info: www.401khelpcenter.com
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Traditional IRA
Pay Check Modified Income Taxes
Traditional IRA
Taxes Income
Retirement
Employer
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Roth IRA
Pay Check Take Home Pay Roth IRA
Taxes
Income
Retirement
Employer
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Contribution Limits
Traditional IRA Contribution Limits
Roth IRA Contribution Limits
Age 2012 Contribution Limits Up to age 50 $5,000 Age 50 – 70½ $6,000 Over age 70½ Not allowed
Age 2012 Contribution Limits Up to age 50 $5,000 Over age 50 $6,000
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Latest Age for Social Security Payments
70 67
Full Retirement Age
55
Retirement Age after which 401(k) distributions no longer incur 10% penalty
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IRA Contribution Limits Increase
Retirement Timeline
Age 59½
IRA Withdrawals subject to 10% early distribution
penalty
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Earliest Age for Social Security Payments
70½
Required Minimum Distributions from Traditional IRA’s
Social Security Benefits: www.socialsecurity.gov/estimator/
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Choosing a Brokerage Banks Mutual Fund Companies Brokerage Firms
Minimum Initial Investment Automatic Contributions
Available Minimum Contributions
Allowed Fees Investment Options
IRA Broker Quiz: https://www.mint.com/ira-center/?campaign=MMB_IRA_brokerage
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Diversification
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Diversification Merriam-Webster Definition: “composed of distinct or unlike elements or qualities”
Risk Management Technique
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Why Diversify?
S&P 500
Bonds
1.9%
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Yearly Asset Class Returns
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Diversification Individual Factors
– Risk Tolerance – Years Until Retirement – Confidence / Experience
Stocks
Bonds Stocks
Money Market Funds
Bonds
MM
Risk Tolerance Quiz: http://njaes.rutgers.edu/money/riskquiz/
– Future Expectations – Personality
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Moderate Allocation Example
Large-Cap Equity Small-Cap Equity International Equity Fixed Income Cash Investments
Indexed Funds – Bond Market Index Fund – Treasury Money Market Fund – S&P 500 Index Fund – International Index Fund – Russell 2000 Index Fund – Total Stock Market Index Fund
Actively Managed Funds – Domestic Large Co. Fund – Domestic Small/Mid Co. Fund – Emerging Markets Fund – Health Care Fund – Blue Chip Growth – Small Cap Value Fund
35% 35%
15%
5%
10%
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Target Date Funds
Retired Retire 2015
Retire 2020
Retire 2025
Retire 2030
Retire 2035
Retire 2040
Retire 2045
Retire 2050
Example Asset Allocation for Target Date Funds
Large / Mid-Cap Equities
Small-Cap Equities
International Equities
Real Estate
Commodities
US Bonds
Global Bonds
Inflation-Linked Bonds
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Buying Stock Where to start?
– Understand yourself – Understand an industry
Research
Create a Watch List
General Investment References: www.fool.com & www.investopedia.com
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Buying Stock How
Rule of 5
Reflect
Taxes
2012 Broker Rankings: www.smartmoney.com/invest/markets/smartmoneys-annual-broker-survey-23119/
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Annual Maintenance Review Allocations Annually
Consider Entire Portfolio
Professional Consultation
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Summary
Personal Finance
R
esources
Retirement Planning
Investing
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“Don't be too timid and squeamish about your actions. All life is an experiment.”
- Ralph Waldo Emerson