After health,the most common lifegoal is retirementsecurity.The median annual income for Americans age 65 and over*Men• $25,704Women• $15,072Families• $45,7633* With head of household 65+* Source: A Profile of Older Americans, Administration on Aging and US Dept. of Health and HumanServices, 2011. Online at http://www.aoa.gov/AoAroot/Aging_Statistics/Profile/2011/9.aspx Thesenumbers are updated annually every July.
The average SocialSecurity benefit formen in 2011:• $1,381/ month• $16,572 / year*4The average SocialSecurity benefit forwomen in 2011:•$1,072/ month•$12,864/ year** Social Security Administration, Office of Policy, Fast Facts and Figures AboutSocial Security, 2012 These numbers are updated annually every July
1. Determineyour life goals2. Analyze yourcurrent situation3. Create a planto help youreach your goals4. Implementthe plan5. Monitor &adjust the plan6. Continue toeducate yourselfLet’s talk about getting this process started…5
7Withdraw Personal Assets First with a 7% Rate of ReturnPrepared for Samuel and Barbara SampleThe Cash Flow report illustrates your income, savings, expenses, and resulting net cash flow on an annual basis.Based upon the levels of income and spending in the Withdraw Personal Assets with a 7% Rate of Return, your portfolio assets will lastthrough at least 2045 (age 90/90).Samuels Retirement: 2020 (65)Barbaras Retirement: 2020 (65)First Death (Samuel): 2045 (90/90)MONTHLY LIVING EXPENSESRetirement: $100,000After First Death: $60,000Indexed at: 3.50%Relevant FactsWithdrawal of personal assets first allows for retirement assets to remain invested on a tax deferred basis .FOR ILLUSTRATION PURPOSES ONLY. This data is not intended to represent actual or typical results for any individual and isnot based upon an actual investment allocation. Supporting documentation is provided when actual allocations are reviewed witha client to support data within the graph. Past Performance is no guarantee of future results. The value of investments canfluctuate over time, and loss of principal may occur.
“The great secret of success is that there are no secrets of success;there are only timeless principles that have proven effectivethroughout the centuries.”Brian Tracy1. Inflation2. Taxes3. Rate of Return4. Risk5. Time6. Diversification7. Balance8. Asset Allocation8
(15)(10)(5)05101520192619311936194119461951195619611966197119761981198619911996200120062011PercentInflationYearsInflation 1926-2012Principle #1InflationSource:http://www.bls.gov/cpi/Big inflation is a non-issue but persistent, core inflationwill eat the guts out of your finances9
Medical care Personal care Housing Aging parents Golf Travel Grandchildren CollegePrinciple #1InflationOur needs and interests do not become cheaperas we get older...Reality…You will spend at least the same amount in retirement asbefore - and many of those items are more inflation-sensitive.10
What do you notice about this historical timeline whenlooking at every single year?Past performance is no guarantee of future results. The S&P 500 is an unmanaged index whichcan not be invested into directly.Yearly Returns – 1926-201211Principle #5Time-60-40-200204060PercentReturnYears
How does the portfolio mix impact overall performanceand risk?Stocks are subject to market fluctuation. Sources: Standard & Poor’s and Barclay’s, NYSE & DFA.Refer to disclosures in addendum. Past performance is no guarantee of future results. Indicescannot be invested into directly.1926 – 2012: Totals and Averages1240%S&P40%BondsS&P500LTGovernmentBondsSmallStocks50% S&P50%Bonds20%SmallStocksAverage 9.9 5.7 11.4 8.4 9.3Highest 54.0 40.4 142.9 34.1 50.1returnLowest -43.3 -12.9 -58.0 -24.3 -19.9returnSpread 97.3 53.3 200.9 58.4 70.0High/LowPrinciple #7Balance
It’s Purpose• Attempts to contain volatility risk• Attempts to engineer a return in keeping with your investmentobjective.• Avoids over-concentration in investment sectors or industries• Potentially dampens volatility by:o Avoiding correlation of investments choseno Utilizing covariance among investments chosen13Principle # 8AssetAllocation
23,000 All Funds20,000 Funds open withoutrestrictions9,000 No load funds600 Large value funds60 Outperforming theirpeers20 Outperforming their peers:less than average risk12 Outperforming their peers:less than average expense14Numbers referenced are estimations and are subject to change. Illustration is intended only as an example ofoptions available when selecting investments.
Is your allocation diverse enough today?Names and allocations used in this example are for illustrative purposes only and should not be construedas an investment recommendation to any person. Prior to investing into any security, you should seek theadvice of your Financial Advisor.15
How do you determine the right financial partner for you?17The investment advisory industry is fragmented.There is no shortage offinancial advice…• Traditional brokers• Discount brokers• Insurance agents• Banks• Accountants• Independentadvisors
1. Determineyour life goals2. Analyze yourcurrent situation3. Create a planto help youreach your goals4. Implement theplan5. Monitor &adjust the plan6. Continue toeducate yourselfACTION!18Make an appointment now for a complimentaryconsultation to start or accelerate you along theroad toward your unique financial goals.
Past performance is no guarantee of future results. Indices are unmanaged andcannot be invested into directly.• Small Company Stocks are represented by the fifth capitalized quintile of stocks onthe NYSE for 1926-1981 and by performance of the Dimensional Fund Advisors (DFA)Small Company Fund thereafter.• Standard & Poor’s 500 is an unmanaged group of securities and is considered to berepresentative of the stock market in general.• Government Bonds are 20-year US Government Bonds.• Stocks, unlike Government Bonds, are not backed by the full faith and credit of theUnited States government. Furthermore, small company stocks may be subject to ahigher degree of market risk than large company stocks.22
BII International Bonds-- Salomon Brothers’ non-dollar denominated world bond index stated in U.S. Dollar terms.CG Corp. Bonds – General Composite of all Corporate Bond General funds in database. Seeks income by investingin fixed income securities, primarily corporate bonds of various quality ratings.SBI Salomon Broad Bond Index -- Salomon Brothers’ total rate of return index for U.S. Treasury and Agencybonds, investment grade corporate bonds (BBB or higher), and mortgage pass-through securities.SCS Salomon Cp. Bds. 1-3 Yrs -- Salomon Brothers’ index of 1 to 3 years Corporate Bonds.STG Salomon Treas / Govt Bonds -- Salomon Brothers index of BBB or better Government and mortgage backedbonds with an average maturity of 9 years.WLG Wilshire Large Co Growth -- Wilshire Associates Large Company Growth style. This style invests in the top750 companies of the Wilshire 2500 with a market capitalization down to $960 million. The companies selectedmeet certain target criteria for sales growth, return on equity, and dividend payout.WLV Wilshire Large Value -- Wilshire Associates Large Company Value style. This style invests in the top 750companies of the Wilshire 2500 with a market capitalization down to $960 million. The companies selected meetcertain target criteria for price/earnings, price-to-book, and yield.WMV Wilshire Mid-Cap Value -- Wilshire Associates Mid-Cap Value style. This style invests in companies with amarket capitalization between $1.7 billion and $400 million. The companies selected meet certain target criteriafor price/earnings, price-to-book, and yield. Companies are selected by the Wilshire Mid-Cap 750 universe.WSG Wilshire Small Co Growth -- Wilshire Associates Small Company Growth style. This style invests in the last1750 companies of the Wilshire 2500. The market capitalizations for this range is between $960 million and $100million. The companies selected meet certain target criteria for sales growth, return on equity, and dividendpayout.WSV Wilshire Small Value -- Wilshire Associates Small Company Value style. This style invests in the last 1750companies of the Wilshire 2500 with a market capitalization between $960 million and $100 million. Thecompanies selected meet certain target criteria for price/earnings, price-to-book, and yield.WF International -- Composite of all funds classified as Foreign Stock. Invests in equity securities of issuers locatedoutside of the United States, except under adverse circumstances. Composite of mutual funds investing incompanies domiciled primarily outside of the U.S.WW Word Wide (Equity) --Composite Index. Invests primarily in equity securities of issuers located throughoutthe world, maintaining a percentage of assets (normally 25% to 53%) in the United States.23
24Reports are based on information we have provided by the client, which is assumed to beaccurate and complete. The assumptions and projections in this plan are estimates and aremeant to be used solely for illustrative purposes and as a guideline. No guarantees can begiven about future performance and this illustration shall not be construed as offering such aguarantee.It should be recognized that the portfolio may invest in both passive and actively managedaccounts and securities, that the actual weightings of these investments can and will varyand, as a result, actual returns and volatility characteristics can be higher or lower than thosepresented above.The plan does not offer legal or tax advice and should be reviewed by your legal and taxadvisor before any action is taken. The information is displayed using the investments,probability range, holding periods and time frames selected by you. Indexes are notavailable for investment and they are not indicated of any particular investment.Each point on the Frontier represents the combination of investments selected by the clientthat will, hypothetically, generate the highest rate of return for each level of risk (asmeasured by the standard deviation). More conservative mixes are located in the lower leftportion of the curve, while more aggressive portfolios are found on the upper right portionof the curve.
The performance displayed herein is hypothetical and was compiled after the end of the time period (Time Horizon)advertised. Such results do not represent actual trading and may not reflect the impact that material economic andmarket factors might have had on the advisor’s decision making if the advisor were actually managing your money.No attempt has been made to predict how these investments will perform in the future. Rather, this study attemptsto compare the historical relationship between specific investments and/or general investment categories, with thehope of improving year overall portfolio balance and diversification. As such, there is no specific claim or warrantybeing implied regarding future performance. Thus, past performance cannot guarantee future results.SPECIAL RISKSInternational Investments: There may be specific risks associated with investing internationally such as changes incurrency rates, foreign taxation, differences in auditing and financial standards, and other risks which may beassociated with specific country investments.High-Yield Bonds: There may be specific risks associated with investing in high-yield bonds related to creditworthiness, limitations on marketability of the bonds, and the ability of the borrowers to repay the debt.Concentration of Investments: There may be increased risk and volatility in concentrating investments in oneeconomic sector or geographical region.INDEXESIndexes are not available for investment and they are not indicative of any particular investment.Certain terms were used in this study, the definitions for which follow:1,2,3,4,&5 Year ReturnThe 1,2,3,4,&5 year returns represent the “average” return for all of those rolling time periods (January to January,February to February and so on) in the time horizon specified. For example, during a 10-year time horizon there are108 one-year holding periods and calculations.25
STANDARD DEVIATIONStandard deviation is a measure of volatility, I.e. a relative measure of how frequently actual resultsvaried from the mean rate of return for a given historic time period. One standard deviation willinclude 68.4% of all observations within the dispersed population of results. The wider the spreadof measurements within one standard deviation, the greater the variability of return. Therefore,the greater the historic variability from the mean rate of return, the greater the risk associated withthe investment. The validity of correlating standard deviations among several asset classes willdepend upon using the same time period of measurement. In general, assuming the same timeperiod is used, the greater the standard deviation of one asset in relation to another, the morevolatile that has been in relation to the other.MAXIMUM RETURNThe portfolio’s maximum return is calculated using the portfolio’s mean rate of return, standarddeviation and a statistical “probability multiplier”. The minimum return represents the lowerboundary of a specific frequency range of returns. It is important to bear in mind that the“Minimum” and “Maximum” rates of return referred to in this report are relative figures based ona range established by the selected Frequency Level. As such, they are figures derived fromstatistical calculations and most likely, have not actually been experienced in reality. It should alsobe understood that higher and lower returns might have actually been experienced outside of thefrequency range selected for this study. No guarantees can be given about future performance andthis value shall not be construed as offering such a guarantee. It should be recognized that theportfolio may invest in both passive and actively managed accounts and securities, that the actualweightings of these investments can and will vary and, as a result, actual returns and volatilitycharacteristics can be higher or lower than those presented in this report.Maximum Return 18.0%Mean Return 10.0% Range or returnMinimum Return 2.0%Mean return + (std.)(probability multiplier)26
MINIMUM RETURNThe portfolio’s minimum return is calculated using the portfolio’s mean rate, standard deviation and a statistical“probability multiplier”. The minimum return represents the lower boundary of a specified range of return. It isimportant to bear in mind that the “minimum” and “maximum” rates of return referred to in this report are relativefigures based on a range established by the selected Frequency Level. As such, they are figures derived from statisticalcalculations and most likely, have not actually been experienced in reality. It should also be understood that higher andlower returns might have actually been experienced outside of the probability/range selected for this study. Noguarantee can be given about future performance and this value shall not be construed as offering such as guarantee. Itshould be recognized that the portfolio may invest in both passive and actively managed accounts and securities, that theactual weightings of these investments can and will vary and, as a result, actual returns and volatility characteristics canbe higher or lower than those presented in this report.Maximum Return 18.0%Mean Return 10.0%Minimum Return 2.0%Mean return - (std.)(probability multiplier)PROBABILITY RANGEThe Probability Range expresses how often a certain range of return occurred during a given historical time period. It isbounded by a minimum and maximum rate of return for that period. In any statistical sample 68.4% of all observationswill be included in one standard deviation from the mean; 95.4% within two standard deviations; and 99.7% within threestandard deviations. Therefore, at the 90% probability range 90% of all prior observations fell within the minimum andmaximum rates of return displayed for the designated holding period during the selected time horizon. Conversely, 5% ofthe returns fell below and 5% fell above the minimum and maximum returns respectively. Therefore, it is important tobear in mind that the maximum and minimum rates referred to within this study are not absolute and they only describethe relative high and low range for the given probability range and holding period selected. Probability Ranges expressedin the system represent the percentage of times the portfolio return fell within a range of historical rates of return overthe past period being examined. This does not, in any way, guarantee that any of the displayed returns or standarddeviations will actually be realized.Probability Range = Mean + (std.)(probability multiplier)Multiplier may be found in a standard statistical “t” table, the numbers for which are as follows for each probability leveldisplayed in the reports.Probability Level Multiplier80% 1.20290% 1.64527