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Financial Freedom Financing Your Future
 

Financial Freedom Financing Your Future

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This module five of the Financial Freedom Seminar and is based on the book, Family Financial Freedom. A brief overview of investment risk, and short-term vs. long-term investments. Also cover ...

This module five of the Financial Freedom Seminar and is based on the book, Family Financial Freedom. A brief overview of investment risk, and short-term vs. long-term investments. Also cover retirement plans and annuities. Contact me at floyd.saunders@yahoo.com if you want to learn more about presenting the seminar or previewing the participant workbook. You can now view the presentation here, order the Family Financial Freedom book from any of the ebook sites for iPhone, iPad, Kindle, Nook, Kobo reader etc. contact me at floyd.saunders@yahoo.com for a copy of the presentation or more information on how to get seminar materials.

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  • None of can plan for every event that might happen in our lives, but we can take charge of owning our financial future and developing a common sense plan to more financially secure.
  • Savings accounts at banks and credit unions are insured by the federal government for up to $250,000. The financial institution pays you interest on the money you have in a savings account. You can make deposits into your account and withdraw money when you need it.
  • Everyone would like to earn the highest possible return (profit) on their savings. As the possibility of profit goes higher, so does the risk that you might lose your money.
  • When you are considering an investment, it ’s important to ask about: - Risk (There is no guarantee that you will make money on stocks or other uninsured investments) - Liquidity (How easy it is to get your money when you need it?) - Possible returns (profits) (Is there a guaranteed “return” on your investment?) TIP: You probably won ’t find a single investment that gives you high return, low risk and ease of access.
  • - CDs sold by banks and some brokerage companies are insured by the FDIC up to $250,000 per depositor. - CD rates vary widely, but are usually higher than rates paid on savings accounts. - You leave your money in the CD for a specified period and in return you earn favorable interest rates. - In general, the longer you leave your money on deposit, the higher interest rate you ’ll earn. - The times vary from one month to 5 years.
  • . U.S. Treasury Securities include Savings Bonds and Treasury Bills. - When you buy treasury securities you are making a loan to the federal government. - The government sells securities to the public to raise money to run the federal government and pay government debts. - Treasury securities are safe and secure investments because the U.S. government guarantees that interest and principal payments will be paid on time.
  • U.S. savings bonds: - Savings bonds can be purchased in denominations ranging from $50 to $10,000. - The earnings on savings bonds are not taxable. - You buy the bonds at a discount (a percentage of their value at maturity). - Savings bonds are payable only to the person to whom they are registered. - They earn interest for up to 30 years, but after one year from their issue date you can cash them for their current value.
  • Treasury bills pay you back with interest in one year or less from their issue date.
  • $250 divided by $9,750 = 0.0256 (about 2.5%) This is only an example. In 2009, when these slides were last revised, 26 week T-Bill yields were significantly lower. To find current yields, go to www.ustreas.gov and type “T bills” in the search box. EXAMPLE: (Write this example on the blackboard or easel pad.) If you buy a $10,000 26-week T-bill for $9,750 and hold it for the full 26 weeks, your profit will be $250, about 2.5% gain. Explain that the $9,750 cost of the T-Bill is the discount price. RESOURCE: You can purchase treasury bills online at the Treasury Direct web site (www.treasurydirect.gov).
  • How can you increase your chances of making money in the stock market? - Many advisors feel that stock market investments should be for the long term. - By sticking with your investment for the long term, you may increase your chances of a solid return. However, stocks are not insured by the federal government and you can lose your money.
  • Mutual funds: Mutual funds are portfolios of stocks, bonds and other securities in which the public can buy shares. Each investor in a fund shares in the fund ’s gains, losses and expenses. Many individuals invest in mutual funds to “diversify,” or spread out the risk of investing in stocks.
  • Individual retirement accounts (IRAs): - Individual retirement accounts are savings accounts designed to help people put away money for their retirement. - Federal regulations require that an IRA be managed by a custodian or trustee. - Custodians include banks, credit unions, savings and loan associations, insurance companies, mutual funds and investment brokers.
  • - You can check current IRA contribution limits at the Internal Revenue Service web site (www.irs.gov) and search for Publication 590 “Individual Retirement Arrangements” - You will not owe income taxes on your contributions or investment earning until withdrawal, usually after you are 59 1/2. - By age 70 1/2 you are required to begin taking distributions from your IRA.
  • There are two kinds of IRAs: Traditional IRAs and Roth IRAs. (Go to the next slides for more on each kind.)
  • - If you contribute to a traditional IRA and a Roth, your combined contributions can ’t exceed $5,000 (2009). The combined limit for people over 50 is $6,000 per year (2009). You can check current IRA contribution limits at the Internal Revenue Service web site (www.irs.gov) and search for Publication 590 “Individual Retirement Arrangements” - You may make withdrawals from a Roth IRA at a younger age without being disabled if you are using the money for qualified first-time homebuyer expenses of up to $10,000. - Roth contributions are phased out at certain income levels (See IRS Publication 590). These limits increase every year. - Roth contributions can be made at any age, even after age 70 1/2.
  • - Employee retirement plans offer professional investment management advice that you might not be able to afford on your own. - After a specified number of months or years with the company you will be “fully vested” and will own the company’s contribution to your retirement fund. - At tax time, you will owe less money because the portion of your salary that you contributed to your employer ’s retirement plan is not taxable.

Financial Freedom Financing Your Future Financial Freedom Financing Your Future Presentation Transcript

  • Family Financial Freedom Seminars Financing Your FutureSaunders Learning Group, LLC
  • Training from Saunders Learning Group Saunders Learning Group provides a variety of training programs, workshops and seminars targeted to the financial services industry. Programs are available in a wide range of topics, and we are specialists in developing custom programs that are targeted to your needs. Contact the founder, Floyd Saunders at 316-680-6482 or at floyd@floydsaunders.com for more information. Saunders Learning Group, LLC, Andover, KS Financing Your Future2
  • AgendaSaunders Learning Group, LLC, Andover, KS Financing Your Future
  • "Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.” - Charles Dickens Saunders Learning Group, LLC, Andover, KS Financing Your Future 4
  • Risk vs return tradeoff Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Investments and Risk vs. Return Commodities  Collectibles Higher Return  Option Trading Coins  Gold & Precious Metals Potential Return  Currency Trading  Real Estate  Equipment leasing  Oil & Gas  Common Stock  Investment Real Estate  Blue Chip Stocks  Equity/Income Mutual Funds  Annuities  Corporate Bonds Municipal Bonds Lower Return  Insurance  Treasury Bills  Money Market Fund  Certificate of Deposit Checking and Savings Less Risk More Risk Degree of riskSaunders Learning Group, LLC, Andover, KS Financing Your Future subtitle
  • Selecting the Right Investments for You  Consider both the potential return and risk of any investment  Understand your needs and goals  Select investments that meet your needs and goals consistent with the risks you are willing to takeSaunders Learning Group, LLC, Andover, KS Financing Your Future subtitle
  • Short-Term InvestmentsSaunders Learning Group, LLC, Andover, KS subtitle Financing Your Future
  • Savings Accounts  Savings accounts are accounts at financial institutions designed to keep your money safe and help it grow.  In exchange for leaving your money on deposit, your bank pays you interest.  Compounding of the interest and deposits help it grow. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Risks and Rewards of Saving As the possibility of profit goes higher, so does the risk that you might lose your money.Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Insured Accounts Savings accounts and bank CDs that are insured by the FDIC offer a smaller return because they are safer. Stocks, bonds and mutual funds are not insured. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • The Money Market Buying and selling short-term debt securities; quick cash conversion Safety: short maturities and diversification Include Private Paper:  Commercial paper  Bankers’ acceptances (Bas)  Jumbo CDs State & Local Governments: Project Notes  tax anticipation notes  bond anticipation notes  revenue anticipation notes Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Certificates of Deposit or Time Deposits Certificates of deposit (CDs) are a safe way to make your money grow.  A CD (certificate of deposit) is a safe way to save. — Like savings accounts, CDs are insured by the government. — CDs often earn a higher interest rate than savings accounts do. — However, CDs require that you leave your money for a set period of time, such as six months or a year. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • U.S. Treasury Investments  Include Savings Bonds and Treasury Bills.Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • U.S. Savings BondsInterest can vary, but you are alwaysguaranteed a minimum return.Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Treasury Bills  T-Bills are sold for less than their face value.  Your profit is the differenceSaunders Learning Group, LLC, Andover, KS between the Financing Your Future
  • T-Bill Example  Buy a $10,000, 26-week T-bill for $9,750.  Hold it for the full 26 weeks.  Your profit will be $250.  You earned about 2.5% return on your money. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Long-Term Investments Saunders Learning Group, LLC, Andover, KS subtitle Financing Your Future date 18
  • What is a Bond?  In financial terms a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity.  A bond is a formal contract to repay borrowed money with interest at fixed intervals. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Issuing bonds  Bonds are issued by public authorities, credit institutions, companies and supranational institutions in the primary markets.  The most common process of issuing bonds is through underwriting.  In underwriting, one or more securities firms or banks, forming a syndicate, buy an entire issue of bonds from an issuer and re-sell them to investors.  The security firm takes the risk of being unable to sell on the issue to end investors. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Municipal Securities Municipal Bonds  Limited Tax Bonds  Payable from cash Bonds anticipating future generated by specific cash tax  Tax-Anticipation Notes  Revenue Bonds  Bond-anticipation  Industrial Revenue Bonds Notes  Backed by Good Name of  Revenue-Anticipation Municipality Notes  Moral Obligation Bonds Clientele Effect  General Obligation (GO)  High tax bracket Bonds investors  Double-Barreled Bonds  Backed by 2+ sources of funds Saunders Learning Group, LLC, Andover, KS Financing Your Future
  •  A UIT issues redeemable securities (or "units"), like a mutual fund, which means that the UIT will buy back an investor’s "units," at the investor’s request.  A UIT typically will make a one-time "public offering" of only a specific, fixed number of units (like closed-end funds)  A UIT will have a termination date (a date when the UIT will terminate and dissolve  A UIT does not actively trade its investment portfolio.Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • UNDERSTANDING STOCKS Investors buy stocks in thehopes of earning a large return on their investments.Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Stock Market Risk There is no guarantee that stock prices will go up or that you will make money on stocks. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Evaluating Stocks Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Mutual Funds Each investor in a fund shares in the fund’s gains, losses and expenses. Suitable for longer term goals, once you have a stable financial foundation Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Retirement PlansSaunders Learning Group, LLC, Andover, KS Financing Your Future
  • Traditional IRAs  Most taxpayers can set aside up to $5,000 in an IRA.  People over age 50 can deposit $6,000 per year. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Tax breaks on IRAsYou are allowed to fund the account with pre-tax income and take a deduction oncontributions made during the the current taxyear. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Roth IRAs Roth IRAs are not tax-deferred - you invest income you have already paid tax on. All the money you earn in your Roth IRA is tax-free.Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Employer retirement plans  Employers usually match the funds that you contribute to your retirement plan at work.  At tax time, you will owe less money. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Annuities An annuity a contract between two parties, called the insured and an insurance company. The insurance company agrees to pay the insured an agreed upon benefit either in the form of regular interval payments or in lump sum. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • How An Annuity Works In its simplest form, you pay money to an annuity issuer, and the issuer pays out the principal and earnings back to you or to a named beneficiary. Lifeinsurance companies first developed annuities to provide income to individuals during their retirement years. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Different Types of Annuity Single Premium Immediate Annuity: The amount is paid in lump sum and the benefits are derived from the immediate next month onwards. Single Premium Deferred Annuity: Again, the amount is paid in lump sum but the withdrawals can be made only after specified time limit. Annual Premium Deferred Annuity: The premium paid to the insurance company is either in form of quarterly, or monthly or bi-annual or annual installments. Withdrawals are deferred to a later date. Variable Annuity: This is more of a combination annuity scheme where you can chose either to pay a lump sum amount or in installments. You can choose the investment vehicle as well. Thus, the growth of your fund depends on vehicle chosen. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Tax Deferral One of the attractive aspects of an annuity is that its earnings are tax deferred until you begin to receive payments back from the annuity issuer. Inthis respect, an annuity is similar to a qualified retirement plan. Over a long period of time, your investment in an annuity can grow substantially larger than if you had invested money in a comparable taxable investment. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Structure of Annuity1. Premiums are paid to annuity company2. Premiums are in company’s general account3. The General Account accumulates funds4. Fees and expenses are deducted5. Death benefits paid out (it applicable6. Withdrawals occur (6,7 & 8)9. Taxes are paid Saunders Learning Group, LLC, Andover, KS Financing Your Future Slide 37
  • Immediate AnnuityIf you want to start receiving payments within the first year, youll purchase animmediate annuity.You can elect to receive payments over both your lifetime and the lifetime ofanother person (known as a joint and survivor annuity).Under a joint and survivor annuity, the annuity issuer promises to pay you anamount of money on a periodic basis (e.g., monthly, quarterly, or yearly). Saunders Learning Group, LLC, Andover, KS Financing Your Future
  •  If you are age 65 and elect to receive annuity distributions over your entire lifetime. The amount you will receive with each payment will be less than if you had elected to receive annuity distributions over five years. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Distribution Options The distribution phase is when you begin receiving distributions. You have two options: —Under the first option, you can withdraw some or all of the money in the annuity in lump sums. —The second option (referred to as the guaranteed income or annuitization option) provides a guaranteed income stream for your entire lifetime (no matter how long you live) or for a specific period of time (e.g., 10 years). (Guarantees are based on the claims-paying ability of the issuing insurance company.) This option can be elected at any time on your deferred annuity. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Annuity PaymentsThe amount you receive for eachpayment period will depend on:how much money you have in theannuityhow earnings are credited to youraccount (whether fixed or variable)the age at which you begin theannuitization phase.The length of the distribution periodwill also affect how much youreceive. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • Early Withdrawals and Taxes Like a qualified retirement plan, a 10 percent tax penalty may be imposed if you begin withdrawals from an annuity before age 59½. Unlikea qualified retirement plan, contributions to an annuity are not tax deductible, and taxes are paid only on the earnings when distributed. Saunders Learning Group, LLC, Andover, KS Financing Your Future
  • QuestionsSaunders Learning Group, LLC, Andover, KS Financing Your Future
  • Post Workshop Action Plan  Complete the Post Workshop Action Plan Saunders Learning Group, LLC, Andover, KS Financing Your Future44
  • Reference Material Family Financial Freedom 140 pages ISBN 978-1-60-746269-9 Available Formats: 6"x9" paperback PDF download eBook download Link to order: http://www.fastpencil.com/publications/4498-Family-Financial-Freedom?tid=book Also available on Kndle, Nook, iPad and other popular e-readers can be ordered from Amazon or Barnes and Noble in paperback (available soon). Book summary: You might be struggling to make ends meet, but achieving true financial freedom is still possible. The good news is virtually anyone with a desire to learn and the willingness to plan can achieve a considerable degree of financial security. This book is a road map to the personal financial freedom you want and deserve. There are no quick-rich schemes here, just common sense advice on how to manage your money, protect your family from risks and start making the moves to being more financial secure.Saunders Learning Group, LLC, Andover, KS Financing Your Future