Post on 05-Jul-2015
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
1
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
2
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?
4
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
61
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
10
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%
INT’L STOCKS26.86%
LARGE CAP GROWTH11.81%
INT’L STOCKS11.63%
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%
INT’L STOCKS39.17%
INT’L STOCKS20.70%
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%
DIVERSIFIED PORTFOLIO
-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.
DIVERSIFIED PORTFOLIO
-1.87%
LARGE CAP VALUE-5.59%
MID CAP
DIVERSIFIED PORTFOLIO
-11.74%
LARGE CAP VALUE
-15.52%
REAL ESTATE 36.18%
DIVERSIFIED PORTFOLIO
33.58%
LARGE CAP
DIVERSIFIED PORTFOLIO
16.63%
LARGE CAP VALUE
16.49%
LARGE CAP VALUE7.05%
LARGE CAP GROWTH
5.26%
DIVERSIFIED PORTFOLIO
17.97%
MID CAP STOCKS15.26%
MID CAP STOCKS5.60%
DIVERSIFIED PORTFOLIO
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
HIGH YIELD BONDS11.13%
LARGE CAP
SMALL CAP VALUE 4.71%
HIGH YIELD
HIGH YIELD BONDS11.85%
LARGE CAP
HIGH YIELD BONDS1.87%
LARGE CAP VALUE-0.17%
SMALL CAP
SMALL CAP GROWTH -9.23%
SMALL CAP GROWTH14.31%
SMALL CAP GROWTH
4.15%
SMALL CAP GROWTH13.35%
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
11
GROWTH–20.42%
INT’L STOCKS-21.21%
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%
INT’L STOCKS-43.06%
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.
13