Inside: Life Lessons: Saving While You’re Young and Facts of Investing Life

Can I change the benefi ciary on my retirement plan account?It’s a good idea to review your benefi ciary designation periodically, especially if your life changes signifi cantly. If you marry, divorce, lose a spouse, remarry, or have children, you may want to designate someone different to receive your plan assets.

Keep in mind that there may be legal restrictions and fi nancial issues to consider before changing your benefi ciary.

For example, your plan may require that you name your spouse as the primary benefi ciary. If you decide that you want someone else to be your primary benefi ciary, your spouse will need to approve the change by signing a consent form waiving his or her rights to your plan assets.

Also, most plans won’t transfer money directly to minors. If you want your minor children to receive your plan assets, you may want to consider naming a trust as the benefi ciary of your retirement account and naming your minor children as benefi ciaries of the trust. You’d then appoint a person or institution to act as trustee to carry out your instructions. Be sure to consult an attorney before setting up a trust.

Your Financial FuturePicture It Now

Fall 2017

Establishing a fi nancial foundation means preparing for what the future may hold. If your foundation isn’t as solid as you’d like it to be, there may be steps you can take to make it stronger.

Your Investments: A Good Place to Start Knowing what you’ll need money for in the future is key in planning your fi nancial strategy. Start building a solid fi nancial foundation by adequately diversifying your investments and choosing an appropriate asset allocation for your goals and risk tolerance.1 It’s a great beginning.

But simply accumulating assets isn’t enough. You also need to take steps to protect yourself and your assets from signifi cant losses in the event of a fi nancial setback.

Set Up an Emergency FundCreate an emergency fund to help you through a fi nancial crisis, such as a job loss or an unexpected large expense. Generally, you’ll want to have enough money in your emergency fund to cover approximately six months of living expenses. It’s important for your emergency fund to be liquid — meaning that the assets in your account can easily be turned into cash.

Without an emergency fund, you might be forced to sell investments when the markets are down or charge expenses to your credit cards if a fi nancial crisis occurs. Either situation could throw your fi nances off course and prevent you from reaching your fi nancial goals.

Insurance Protects Your AssetsPurchasing adequate insurance coverage reduces the risk that you or your family will have to sell assets to meet expenses. Disability insurance replaces a percentage of your income if you become disabled and can’t work. Life insurance helps ensure that your family can maintain its standard of living if you die. Determine whether employer-provided insurance coverage you may have is adequate for your needs. If it isn’t, consider buying supplemental policies on your own. And don’t forget to keep your auto and homeowners insurance coverage up to date.

A Retirement Plan Can HelpSaving for your future in your employer’s retirement plan can help you pursue your long-term fi nancial goals. Since your contributions to a retirement plan account come out of your paycheck before you receive it, you probably won’t even miss the money. You may be surprised at how much you’ve saved by the time you’re ready to retire.

Taking steps to protect your fi nancial security can serve you well now — and in the future.

1Diversifi cation and asset allocation do not guarantee a profi t or protect against losses .

Q Your QuestionsAnswered Building Your Financial Foundation

I T ’ S Y O U R M O N E Y

Welcome to the Real World!If you’ve just started working at your fi rst “real” job, you may be earning more money than ever before. But you also could have new expenses, too. If this is your fi rst time living independently from your parents, you’re now the one responsible for paying all of your living expenses. Plus, you may be paying off your student loans and saving to buy a new car. Setting aside money for a far-off retirement might not seem to be

Life Lessons: Saving While You’re YoungWhen you’re in your twenties and just starting out in your career, saving for retirement might not be a high priority. It can be hard to save when you have so many other demands on your money. But getting a head start on saving now could have a signifi cant impact on your future fi nancial security.

a sensible thing for you to do right now. But this really is the ideal time to save.

Time Is on Your SideSaving for retirement while you’re in your 20s will give your savings more time to potentially benefi t from compounding. Compounding happens when the money you set aside generates investment earnings. Those earnings are added to your plan balance and reinvested.

You then have the potential to earn a return on your contributions and your earnings. The longer the compounding process has to repeat itself, the larger your account balance may be at retirement. The money you save now could have 40 or more years to benefi t from potential compounding.

Your Plan Makes It Easy to SaveSaving for retirement is convenient with your employer’s plan. You don’t have to make a special trip to the bank or write a check each month. Your plan contributions are automatically deducted from your paycheck each pay period and put into your plan account. Because you don’t receive that money, you aren’t tempted to spend it instead of saving it. Consider increasing your contribution whenever you can.

Built-in Plan Benefi tsYour employer’s retirement plan also offers you a number of investment options. These funds or portfolios are professionally managed. You just select the investments that fi t your risk tolerance and time frame. As a young investor with many years before you plan to retire, you may want to consider selecting investments with the potential for growth.

Your situation is unique, so be sure to consult a professional before taking action.

Making contributions to your retirement plan account while you’re young could have a signifi cant impact on the amount of money you may be able to accumulate by the time you retire.

Getting a Head Start

This is a hypothetical example used for illustrative purposes only. It is not representative of any investment vehicle. It assumes monthly compounding and a 7% average annual return. Your investment results will be different. Tax-deferred amounts accumulated in the plan are subject to ordinary income taxes on withdrawal, unless they represent qualifi ed Roth distributions. Source: DST Systems, Inc.

Agecontributions start

Monthlycontribution Earnings Contributions

Account balance at

age 65

$100for 40 yrs. $214,481 $48,000 $262,481

$100for 35 yrs. $138,105 $42,000 $180,105

$100for 30 yrs. $85,997 $36,000 $121,997

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P O R T F O L I O P O I N T E R S

On a more serious note, there are also certainties in the world of fi nance and investing. Two are particularly important for plan participants: (1) The prices of stocks and bonds will rise on some days and fall on others, and (2) infl ation will always be around. Understanding these two realities and knowing what — and what not — to do in response can help you better manage your plan investments.

Rising and FallingThe values of stocks, bonds, and other investments can rise or fall on any given day. But the different asset types don’t always move in the same direction. Stocks and bonds, for example, often react differently to developments in the market or economy. That’s why you might want to consider diversifying your portfolio by selecting different types of investments.1

Although past performance never guarantees an investment’s future results, in the past, bond returns have often been good during periods when stock returns were not so good — and vice versa. The accompanying chart illustrates how investing in both asset classes can help an investor lessen the impact of market risk.

Steady ErosionOn to infl ation. Even though infl ation rates have been low during recent years, infl ation can still “rob” your savings. For example, over a 30-year period, a relatively low average annual infl ation rate of 3% will reduce the purchasing power of a $200,000 retirement savings account to $82,397.

That’s why it’s so important to account for infl ation as you plan for your retirement. Even when infl ation is low, it will increase the amount of income you’ll need once you retire. If you want to maintain your standard of living throughout your retirement years, being able to absorb the impact of infl ation is important. To combat the effects of infl ation, you want your retirement plan investments to earn a rate of return that’s greater than the annual infl ation rate. That doesn’t necessarily ensure that you’ll meet your retirement income needs, but you’ll at least keep pace with infl ation. Investing a portion of your account in stocks, which have the greatest potential to earn infl ation-beating returns, also increases the potential for your portfolio to meet your needs.

Your fi nancial professional can help you choose investments that are appropriate for your situation.

1Diversifi cation does not ensure a profi t or protect against loss in a declining market.

Facts of Investing LifeSome things will never change: The sun will always rise in the east, country singers will always sing about broken hearts, and it will always rain after you’ve washed your car.

Stocks measured by the S&P 500 Stock Index, an index of the stocks of 500 major corporations. Bonds measured by the Bloomberg Barclays U.S. Aggregate Bond Index, an index of U.S. government, corporate, and mortgage-backed securities with maturities up to 30 years. Both indexes are unmanaged and carry no expenses. You can’t invest directly in an index. These returns are for illustrative purposes only and don’t refl ect the returns of any specifi c investment or the returns stocks and bonds may earn in the future. Past performance doesn’t guarantee future returns. Your investment returns will be different. Source: DST Systems, Inc.

Bonds Versus Stocks: Performance Variations

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F I N A N C I A L K N O W - H O W

Spending ChoicesTake spending, for example. Buying things is fun. But splurging on too many things now could limit your ability to splurge later — or even to afford the necessities. If you shortchange your savings, you might end up having to live on a lot less or postpone your retirement.

You don’t have to eliminate all discretionary spending, but you should think twice before buying things you don’t need. Before making a big fi nancial commitment, weigh the pros and cons. For example, if you normally buy a new car once your current loan is paid off, try waiting a few years to replace your vehicle. Then tuck the money that would have gone to car payments into your retirement account.

Lifestyle ChoicesMaking healthy lifestyle choices — eating well, exercising, taking care of yourself — can pay off throughout your life. And the potential benefi ts are not just physical. Your choices may promote good fi nancial health, too, by keeping your medical costs in check now and in retirement.

Contribution ChoicesThe amount of savings you have in your retirement plan when you retire will depend in large part on your decisions about how much to contribute. Many experts today recommend annual contributions of between 10% and 15% of pretax pay.

Career ChoicesHow much you’re able to earn will infl uence how much you’re able to save. Ideally, the more you earn, the more you can save. Therefore, an opportunity to advance your career is also an opportunity to advance your chances of a fi nancially secure retirement.

If you change employers at some point, you may be eligible to withdraw money from your plan account. As tempting as it may be to cash out, that would derail the progress you’re making toward your goals. Instead, consider choosing an option that lets you keep your savings growing tax deferred.

Create a spending and saving plan to fi t your needs with the help of your fi nancial professional.

Choose Wisely Now . . . for LaterPaper or plastic? Stairs or escalator? Chocolate, vanilla, or butter almond toffee crunch? You make decisions every day — lots of them. Many have little or no lasting signifi cance. But some of the choices you make now could have a signifi cant impact later when you retire.

Prepared by DST Wealth Management Systems Inc. in cooperation with DST Market Services, LLC, Member of FINRA/SIPC.

Your Financial Future is published by DST Wealth Management Services, Inc., 2000 Crown Colony Drive, Quincy, MA 02169, www.dstsystems.com.

© 2017 DST Wealth Management Services, Inc. (DST). Reproduction in whole or in part is prohibited. All rights reserved. The opinions expressed herein are solely those of DST and in no way represent the advice, opinions, or recommendations of the company distributing the publication to its employees or affi liates. Information contained in this publication has been obtained from sources believed to be reliable. However, DST does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Nothing in this publication should be construed as a recommendation with respect to the purchase or sale of any security or other investment, the election of rollover or distribution alternatives, or the management of retirement plan assets. The data in this edition is current as of the time of publication.