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2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
2013-05-05 ACR Fundamentals of Financial Planning
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2013-05-05 ACR Fundamentals of Financial Planning

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Raffa Wealth Management (RWM) presentation to the American College of Radiology (ACR) on the Fundamentals of Financial Planning

Raffa Wealth Management (RWM) presentation to the American College of Radiology (ACR) on the Fundamentals of Financial Planning

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  • 1. Money. Grow it for Good ®American College of RadiologyFundamentals ofFinancial PlanningDennis Gogarty, CFP®, AIF®PresidentChase Deters, CFP®, ChFC®Portfolio ManagerMay 5, 2013
  • 2. Fundamentals of Financial Planning / Page Money. Grow it for Good.®WELCOME2Raffa Wealth Management (RWM)•Founded in 2005 by principals with over 25years of financial services experience•Clients are mid-sized institutions, high net-worth investors, and qualified retirementplans•Assets under management exceed $250million•Affiliated with accounting, tax, estate andfinancial planning professionals.
  • 3. Fundamentals of Financial Planning / Page Money. Grow it for Good.®AGENDA3•Cash Flow Tracking & Savings Techniques•Insurance Planning•College Savings Strategies•Asset Allocation Techniques•Retirement Savings Strategies•Basic Estate Planning•What to Look For in a Financial Planner
  • 4. Fundamentals of Financial Planning / Page Money. Grow it for Good.®CASH FLOW & SAVINGS STRATEGIES4Save First, Spend Second•Prioritize your financial goals•Calculate the monthly savings required•Invest savings based on amount of time until goal dateFind Ways to Increase Savings•Get a raise or bonus?•Done paying down a debt?•Capture a portion of increase in surplus cash flow –part savings, part increase in lifestyle
  • 5. Fundamentals of Financial Planning / Page Money. Grow it for Good.®CASH FLOW & SAVINGS STRATEGIES5WheretoSave?Open a Vanguard/Fidelity/SchwabInvestment Account•Set up ACH link to checking account (overnighttransfers)•Begin monthly deposits from your checking accountUltra Short Term Goals < 1 Year•ING Savings Account•DFA One-Year Fixed Income FundShort Term Goals > 1 Year•Vanguard Short Term Bond Index Fund•Vanguard Limited Term Tax Exempt Fund
  • 6. Fundamentals of Financial Planning / Page Money. Grow it for Good.®AGENDA6•Cash Flow Tracking & Savings Techniques•Insurance Planning•College Savings Strategies•Asset Allocation Techniques•Retirement Savings Strategies•Basic Estate Planning•What to Look For in a Financial Planner
  • 7. Fundamentals of Financial Planning / Page Money. Grow it for Good.®INSURANCE PLANNING7Types ofInsuranceLife Insurance•Term, Variable Life, Universal Life, Whole LifeDisability Insurance•Short and Long Term DisabilityLong Term Care Insurance•Home and Facility CareProperty and Casualty•Home, Auto, Liability
  • 8. Fundamentals of Financial Planning / Page Money. Grow it for Good.®INSURANCE PLANNING8Term Insurance•Covers needs for theleast expense•Layer policies to coverneeds over various timeperiodsPermanent Insurance•More expensive•Protects long termneeds$500,000$1,500,000$2,500,000$3,500,000$4,500,000$5,500,000Income Replacement Childrens EducationDebt Coverage Estate TaxesLifeInsuranceNeedsChangeOver Time
  • 9. Fundamentals of Financial Planning / Page Money. Grow it for Good.®INSURANCE PLANNING9Permanent Life Insurance – As Savings Vehicle?•Permanent Insurance will be pitched to you as a way tosupplement your retirement income–In order for this approach to work, you must over fund thepolicy being purchased as much as possible–Distributions are then "borrowed" out of the policy free of tax –but not free of expenses–Loans are paid back when the policy pays out the death benefit•Insurance company sets the lowestpremium you can pay (Term), thegovernment sets the highest (MEC)•Most insurance salesmen are not acting asfiduciaries, they are selling a productPotentialPitfalls ofPermanentLifeInsurance
  • 10. Fundamentals of Financial Planning / Page Money. Grow it for Good.®INSURANCE PLANNING10What to Look Out For in an Salesmens Illustration•Front loaded Premiums (higher in start years)–Feeds the Salesmen a higher commission, at your expense•Premiums that are below the maximum allowable premiumbased on the policy you are looking for–The same premium dollars in policies with larger death benefitsresult in larger commisions, at your expense•Unreasonable Rate of Return Illustrated–Policies will fall apart if those returns are notmet•Rate of Return does not change duringillustrated distributions during retirement–Rate of Return expectations should be reducedwhen distributions are being madeRed FlagsinPermanentLifeInsuranceIllustrations
  • 11. Fundamentals of Financial Planning / Page Money. Grow it for Good.®INSURANCE PLANNING11Your Ideal Permanent Life Insurance Policy•Quotes from MORE THAN ONE Insurance Company–Identical illustrations from more than one company allow you to moreeasily identify superior products•MAXIMIZE the premium dollars that fit into the smallestpossible death benefit•Inexpensive Investment Options – Fees Matter•Low Spread between Loan Rate and Loan Credit Rate–Less than 2% is ideal, some as low as 0.50% or less, are avaiable•Hire an independent third party for an assessment ofwhat people are showing you!LifeInsuranceis aComplexandExpensiveProduct toPurchase
  • 12. Fundamentals of Financial Planning / Page Money. Grow it for Good.®INSURANCE PLANNING12DisabilityInsurancePlanningGroup Short & Long Term Disability•Inexpensive coverage•Benefits can be taxable, depending on how premiums are paid•Potentially low monthly cap on benefits paidSupplemental Long Term Disability•Covers gaps in some group DI plans•Can provide more specific definitions of disability that willprotect specialized skill setsShortTermGroup DILong TermGroup DISupp.LongTermDI
  • 13. Fundamentals of Financial Planning / Page Money. Grow it for Good.®AGENDA13•Cash Flow Tracking & Savings Techniques•Insurance Planning•College Savings Strategies•Asset Allocation Techniques•Retirement Savings Strategies•Basic Estate Planning•What to Look For in a Financial Planner
  • 14. Fundamentals of Financial Planning / Page Money. Grow it for Good.®COLLEGE SAVINGS STRATEGIES14529 Savings Plans•Can be used for collegeexpenses at any college oruniversity•Potential for state taxdeductions•Account grows tax deferred•Distributions for collegeexpenses are tax free•Ideal for long termaccumulation needsEducation Savings Trusts•Prepay tuition semesters forcertain state public schools•Lock in tuition at today’s rates(deposits earn a rate of returnequal to tuition inflation rate)•Ideal for older children with lesstime for growth before college•Cannot be used for other collegeexpenses (but can be paired witha 529 account for other expenses)
  • 15. Fundamentals of Financial Planning / Page Money. Grow it for Good.®COLLEGE SAVINGS STRATEGIES15SupplimentalSources forCollegeExpenses401k Plans•Most plans allow for an in-service loan up to 50% (upto $50k) of your account value to be taken out, usuallyat a low net interest rate•5 year payback period.•Potential tax liability if you leave your job beforepaying back the loanStudent Loans•Deferred payment student loans can provide you andyour child time to get on better financial footingbefore payments are due•Help pay back loans without sacrificing your ownfinancial goals
  • 16. Fundamentals of Financial Planning / Page Money. Grow it for Good.®AGENDA16•Cash Flow Tracking & Savings Techniques•Insurance Planning•College Savings Strategies•Asset Allocation Techniques•Retirement Savings Strategies•Basic Estate Planning•What to Look For in a Financial Planner
  • 17. Fundamentals of Financial Planning / Page Money. Grow it for Good.®ASSET ALLOCATION TECHNIQUES17
  • 18. Fundamentals of Financial Planning / Page Money. Grow it for Good.®ASSET ALLOCATION TECHNIQUES18Building aBalancedInvestmentPortfolioPortfolio Building Process:1. Determine Stock/Bond Mix- 60 Stock, 40% Bond2. Decide on US vs. International Mix3. Determine US Large/Mid/SmallMix4. Determine International Developedvs. Emerging Markets5. Decide on Long/Intrm/Short TermBond Holdings
  • 19. Fundamentals of Financial Planning / Page Money. Grow it for Good.®ASSET ALLOCATION TECHNIQUES19US Stocksvs.InternationalStocksGlobal Market BreakdownJuly 31, 2011Location Total Value ($mm) Weight SecuritiesUnited States 15,078,889 43.94% 3599International 14,713,323 42.87% 3720Emerging 4,526,117 13.19% 2811Global 34,318,329 100% 10,130
  • 20. Fundamentals of Financial Planning / Page Money. Grow it for Good.®20Portfolio Building Process:1. Determine Stock/Bond Mix- 60% Stock, 40% Bond2. Decide on US vs. International Mix- 65% US Stock,35% International Stock3. Determine US Large/Mid/SmallMix4. Determine International Developedvs. Emerging Markets5. Decide on Long/Intrm/Short BondTerm HoldingsASSET ALLOCATION TECHNIQUESBuilding aBalancedInvestmentPortfolio
  • 21. Fundamentals of Financial Planning / Page Money. Grow it for Good.®ASSET ALLOCATION TECHNIQUES21MarketNeutralAllocationRussell3000Index•Asset classes werecreated in order tosegment stocks byshared riskcharacteristics•Each style boxcontains a basket ofstock withcomparable returnand volatilityexpectations.Traditional ConsultingStyle Box
  • 22. Fundamentals of Financial Planning / Page Money. Grow it for Good.®22Portfolio Building Process:1. Determine Stock/Bond Mix- 60% Stock, 40% Bond2. Decide on US vs. International Mix- 65% US Stock,35% International Stock3. Determine US Large/Mid/Small Mix- 72% Large, 20% Mid, 8% Small4. Determine International Developed vs.Emerging Markets5. Decide on Long/Intrm/Short Term BondHoldingsASSET ALLOCATION TECHNIQUESBuilding aBalancedInvestmentPortfolio
  • 23. Fundamentals of Financial Planning / Page Money. Grow it for Good.®ASSET ALLOCATION TECHNIQUES23DevelopedIntl Stockvs.EmergingMarketsInternational Market BreakdownJuly 31, 2011Location Total Value ($mm) Weight SecuritiesInternational 14,713,323 76.47% 3720Emerging 4,526,117 23.53% 2811Intl Total 19,239,440 6,531
  • 24. Fundamentals of Financial Planning / Page Money. Grow it for Good.®24ASSET ALLOCATION TECHNIQUESPortfolio Building Process:1. Determine Stock/Bond Mix- 60% Stock, 40% Bond2. Decide on US vs. International Mix- 65% US Stock,35% International Stock3. Determine US Large/Mid/SmallMix- 72% Large, 20% Mid,8% Small4. Determine International Developed vs. Emerging Markets- 75% Developed Intl Stock, 25% Emerging Markets Stock5. Decide on Long/Interm/Short Term Bond HoldingsBuilding aBalancedInvestmentPortfolio
  • 25. Fundamentals of Financial Planning / Page Money. Grow it for Good.®ASSET ALLOCATION TECHNIQUES25FixedIncomeAllocation
  • 26. Fundamentals of Financial Planning / Page Money. Grow it for Good.®264. Determine International Developed vs. Emerging Markets- 75% Developed Intl Stock, 25% Emerging Markets Stock5. Decide on Long/Interm/Short Term Bond Holdings- 0% Long Term, 70% Intermediate, 30% Short TermPortfolio Building Process:1. Determine Stock/Bond- 60% Stock, 40% Bond2. Decide on US vs. International- 65% US Stock35% International Stock3. Determine US Large/Mid/Small- 72% Large, 20% Mid,8% SmallASSET ALLOCATION TECHNIQUESBuilding aBalancedInvestmentPortfolio
  • 27. Fundamentals of Financial Planning / Page Money. Grow it for Good.®AGENDA27•Cash Flow Tracking & Savings Techniques•Insurance Planning•College Savings Strategies•Asset Allocation Techniques•Retirement Savings Strategies•Basic Estate Planning•What to Look For in a Financial Planner
  • 28. Fundamentals of Financial Planning / Page Money. Grow it for Good.®RETIREMENT SAVINGS STRATEGIES28ThreeTypes ofAccountsTax DeferredAssetsTax Free AssetsTaxable Assets•Traditional IRA’s, 401k, SEP,SIMPLE, KEOGH, 457, 403b, etc.•Money goes in pre-tax, comes out asTaxable Income•Pay no taxes on earnings•Roth IRA, Roth 401k•Money goes in after tax, comes out TaxFree•Pay no taxes on earnings•Pay taxes on interest and realizedcapital gains each year
  • 29. Fundamentals of Financial Planning / Page Money. Grow it for Good.®29Employer-sponsored Retirement Plans•2013 limit: $17,500–+$5500 catch-up for those over 5o•Maximize Employer Match – 100% return on investmentTraditional IRA•Likely your largest asset during retirement•All retirement plans you accumulate during workingyears will roll into this account•Ideal if tax rates decrease in the futureTaxDeferredAssetsRETIREMENT SAVINGS STRATEGIES
  • 30. Fundamentals of Financial Planning / Page Money. Grow it for Good.®30Employer-sponsored Roth 401k Plans•2013 limit: $17,500+$5500 catch-up for those over 5o•Money goes in after-tax, comes out tax freeRoth IRA•Maximum income of $112k single / $178kmarried for 2013•Roth(k)’s will roll into Roth IRA•Ideal if tax rates increase in the futureTaxFreeAssetsRETIREMENT SAVINGS STRATEGIES
  • 31. Fundamentals of Financial Planning / Page Money. Grow it for Good.®31Investment Accounts•Money goes in after tax, basis comes out tax free•Pay tax on 1099 income each year•Surplus account for savings when all other savingsoptions are max funded•Pay capital gains tax rate on long term gains andqualified dividends•Pay income tax rate on short term gains and ordinarydividends•Balance of muni-bonds and tax managed equity fundsmakes this a perfectly viable savings opportunityTaxableAssetsRETIREMENT SAVINGS STRATEGIES
  • 32. Fundamentals of Financial Planning / Page Money. Grow it for Good.®32Control Your Tax Rate During Retirement•Balance Savings between Taxable, Tax Free, and TaxDeferred accounts•Allow for strategic distributions during retirement•Maximize tax bracket distributionsTax Deferred Assets Tax Free AssetsTaxable AssetsRETIREMENT SAVINGS STRATEGIES
  • 33. Fundamentals of Financial Planning / Page Money. Grow it for Good.®33Ima Client (age 72): needs $225,000/yr•Has Rental Property income of $18,000/yr•Social Security income of $36,000/yr•Pension income of $16,000/yr•RMD for 2013 of $31,500• Total Taxable Income of $101,500/yr•Pull $44,900 more from TaxDeferred Assets- Maximize 25% Tax Bracket•Pull remaining $78,600 from TaxFree Assets and Taxable AssetsTaxRate Income Bracket10% Up to $17,85015% $17,851 - $72,50025% $72,501 - $146,40028% $146,401 - $223,05033% $223,051 - $398,35035% $398,351 - $450,00039.6% $450,001 +ControlYour TaxRateDuringRetirementRETIREMENT SAVINGS STRATEGIES
  • 34. Fundamentals of Financial Planning / Page Money. Grow it for Good.®AGENDA34•Cash Flow Tracking & Savings Techniques•Insurance Planning•College Savings Strategies•Asset Allocation Techniques•Retirement Savings Strategies•Basic Estate Planning•What to Look For in a Financial Planner
  • 35. Fundamentals of Financial Planning / Page Money. Grow it for Good.®35Will & Advanced Directives•Written document that outlines your final wishes, including:• Designating a Guardian for your children• Bequest assets and valuables to your heirs• Make charitable donations•Advanced Directives also specify what type of medicaltreatment you desire, should you become incapacitatedDurable Power of Attorney•An advance directive, you provide another individual thepower of attorney to allow them to make bank transactions,sign checks, apply for disability, etc., in the case of anincapacitating medical conditionBASIC ESTATE PLANNINGMake theDecisionsNow-Or-The StateWillDecide forYou
  • 36. Fundamentals of Financial Planning / Page Money. Grow it for Good.®AGENDA36•Cash Flow Tracking & Savings Techniques•Insurance Planning•College Savings Strategies•Asset Allocation Techniques•Retirement Savings Strategies•Basic Estate Planning•What to Look For in a Financial Planner
  • 37. Fundamentals of Financial Planning / Page Money. Grow it for Good.®WHAT TO LOOK FOR IN AFINANCIAL PLANNER37Look for a Certified Financial Planner - CFP®• Held to higher level of fiduciary care by the CFP Board of Standards• Search for a CFP in your area at www.cfp.netBroker/Dealer (BD) vs. Registered Investment Advisor(RIA)• BD’s charge commissions for products, leaving room for a potentialconflict of interest• RIA’s charge an asset based management fee, aligning yourinterests with theirs• RIA’s are held to a 3(21) or 3(38) fiduciary standard to put yourinterests ahead of their ownReview their Client Service History• Check for a history of past client complaintsat www.brightscope.com
  • 38. Fundamentals of Financial Planning / Page Money. Grow it for Good.®HELPFUL PLANNING TOOLS38Visit www.raffawealth.com•Click on the “Resources” tab•Click on “Calculators”–Retirement Nestegg Calculator–How Long Will My Money Last?Contact RWM•Email: chase@raffawealth.com or dennis@raffawealth.com•Phone: (202) 955-7217
  • 39. Fundamentals of Financial Planning / Page Money. Grow it for Good.®DISCLOSURE39The performance data presented represent pastperformance. Past performance is not a guarantee offuture results and there is always a risk that an investormay lose money. Information contained has beengathered from sources we believe to be reliable, but we donot guarantee the accuracy or completeness of suchinformation. Current performance may be lower or higherthan the performance quoted. An investment in a sub-account will fluctuate in value to reflect the value of theunderlying portfolio and, when redeemed, may be worthmore or less than original cost. Performance current tothe most recent month end is available atwww.jhpensions.com. Indices are not available for directinvestment and performance does not reflect expenses ofan actual portfolio. Returns are shown net of fundexpenses and gross of RWM’s advisory fee.

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