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Wealth Management Strategies Seminar
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Wealth Management Strategies Seminar


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  • 1. Wealth Management Strategies Turn the money you have into the money you’ll need Not FDIC Insured May Lose Value No Bank Guarantee
  • 2. Planning and saving Managing retirement income Transferring wealth 250998 4/08 2
  • 3. Planning and saving 250998 4/08 3
  • 4. How much do you think you’ll need in retirement? Under $250,000 26% Under $500,000 44% Under $1,000,000 64% Over $1,000,000 18% Source: Employee Benefit Research Institute and Matthew Greenwald & Associates, Inc., 2007 Retirement Confidence Survey. 250998 4/08 4
  • 5. How much will you actually need? To replace an annual income of You’ll need to save $50,000 $890,000 $100,000 $1,800,000 $200,000 $3,600,000 Assumes 25 years of retirement, and a retirement nest egg growing at 6% annually, compounded monthly and adjusted for 3% inflation. 250998 4/08 5
  • 6. Take advantage of tax-sheltered savings plans 2008 limit Employer’s retirement plan $15,500 Before-tax contributions, tax-deferred earnings Traditional IRA $5,000 Before-tax contributions (if you qualify), tax-deferred earnings Roth IRA $5,000 After-tax contributions, tax-free withdrawals Additional contributions for those age 50 and over Employer’s retirement plan $5,000 Traditional or Roth IRA $1,000 250998 4/08 6
  • 7. Does a Roth IRA make sense? Do you expect to pay less in taxes during retirement? Do you expect overall tax rates to increase in the future? Are you interested in passing more assets to your heirs? Would you like the option of tax-free income in retirement? 250998 4/08 7
  • 8. Don’t underestimate college costs Four years of tuition, room, and board 619,962$ $154,685 $129,228 653,45$ 2025 2025 2007 estimated 2007 estimated Public college Private college Source: The College Board, 2007. * Assumes a 5.5% inflation rate. 250998 4/08 8
  • 9. A 529 college savings plan has unmatched benefits  Tax advantages: Account grows tax Do you have free, and there are no taxes on funds existing custodial withdrawn for qualified higher (UGMA/UTMA) accounts? education expenses Converting a custodial  Control: Investor controls account account to a 529 assets after the beneficiary reaches can help you benefit legal age from tax advantages while increasing a child’s  Flexibility: Anyone can contribute — eligibility for financial aid. parents, grandparents, other family members, friends 250998 4/08 9
  • 10. Be aware of AMT Number of taxpayers You may owe AMT if you affected by AMT  Earn between $100K–$500K 32,400,000 in annual income  Claim children as exemptions  Live in area with high income or property tax  Own private activity bonds 3,500,000  Exercise stock options 2007 2010 (projected) Source: Urban-Brookings Tax Policy Center, Aggregate AMT Projections, January 2008. 250998 4/08 10
  • 11. Talk to your advisor about planning and saving  Maximizing your retirement savings  Contributing or converting to a Roth IRA  Converting existing custodial accounts to a 529  Establishing a strategy to avoid AMT 250998 4/08 11
  • 12. Managing retirement income 250998 4/08 12
  • 13. Longevity comes at a cost  The longer you spend Assets needed at retirement $655,000 in retirement, the more savings you’ll $460,000 need just to cover basic expenses such $265,000 as food, housing, and health care 10 years 20 years 30 years Number of years in retirement Source: U.S. Department of Labor, Consumer Expenditure Survey, 2005. Expenses include food, housing, health care, clothing, and transportation. Total expenses based on a present value calculation assuming a retirement age of 65 and an investment return of 2% after adjusting for taxes and inflation. 250998 4/08 13
  • 14. Keep an eye on Social Security Workers per beneficiary  If nothing changes • In 2018, benefits owed will 1950 exceed taxes collected • The trust fund will be 16 workers for each beneficiary exhausted in 2042  Potential consequences Today • Increase payroll taxes • Decrease or delay benefits 3.3 workers for each beneficiary • Use other tax revenues • Pre-fund benefits through 2030 personal, voluntary savings accounts 2 workers for each beneficiary Social Security Administration, ―The Future of Social Security,‖ January 2004. 250998 4/08 14
  • 15. Identify potential sources of income Early in your retirement Later in retirement Pension income Social Security Part- or full-time work IRA withdrawals Life insurance Real estate Long-term care insurance 401(k) withdrawals Immediate annuity 250998 4/08 15
  • 16. Choose the right withdrawal rate How long will your money last? 3% 50+ years 4% 28 years 5% 22 years Annual 6% 18 years withdrawal percentage 7% 15 years 8% 13 years 9% 12 years 10% 10 years IMPORTANT: The projections or other information in this hypothetical illustration are generated by a 10,000-iteration Monte Carlo simulation that shows the likelihood of various investment outcomes. This illustration uses the historical returns from 1926 to 2006 of stocks (as represented by the S&P 500), bonds (U.S. long-term government), and cash (U.S. 30-day T-bills). The projections do not reflect actual investment results and are not guarantees of future results. You should consider your other assets, investment options, and risk tolerance when planning for your specific investment goals. Consult your financial representative for more information. 250998 4/08 16
  • 17. Watch your asset allocation How long will your money last? PORTFOLIO TYPE ALLOCATION 20 YEARS 30 YEARS 40 YEARS 0% Stocks PRESERVATION 70% Bonds 95% 24% 3% 30% Cash 20% Stocks CONSERVATIVE 50% Bonds 98% 51% 17% 30% Cash 60% Stocks BALANCED 30% Bonds 93% 72% 58% 10% Cash 80% Stocks GROWTH 20% Bonds 89% 71% 61% 0% Cash 75–100% probability 50–74% probability 0–49% probability IMPORTANT: The projections or other information in this hypothetical illustration are generated by a 10,000-iteration Monte Carlo simulation that shows the likelihood of various investment outcomes. This illustration uses the historical returns from 1926 to 2006 of stocks (as represented by the S&P 500), bonds (U.S. long-term government), and cash (U.S. 30-day T-bills). The projections do not reflect actual investment results and are not guarantees of future results. You should consider your other assets, investment options, and risk tolerance when planning for your specific investment goals. Consult your financial representative for more information. 250998 4/08 17
  • 18. Consider tax consequences when planning for income Type of income Taxability May be partially taxable as Social Security ordinary income Pension income Taxed as ordinary income IRA and 401(k) distributions Ordinary income rates Dividend income* 15% rate Long-term capital gains* 15% rate Part earnings (taxed as ordinary income) Annuity income and part return of capital (not taxed) * For tax years 2008–2010, taxpayers in the 10% and 15% income tax brackets will have a 0% tax rate on long-term capital gains and qualified dividends. 250998 4/08 18
  • 19. Rolling over into an IRA may help  Maintains tax benefits  Convenience of having assets in one place  Makes it easier to create an income plan in retirement  Allows you to stretch distributions  Gives you a choice of different investment options 250998 4/08 19
  • 20. Talk to your advisor about managing retirement income  Identifying potential sources of income in retirement  Planning withdrawals so your savings will last  Managing longevity risk by adding guaranteed sources of income  Consolidating retirement accounts in one Rollover IRA 250998 4/08 20
  • 21. Transferring wealth 250998 4/08 21
  • 22. Do you need an estate plan?  Do you have children who are minors?  Are all of your assets owned jointly with your spouse?  Are most of your assets in real estate, a business, or a retirement plan?  Do you have a durable power of attorney?  Do you have a living will/health-care proxy?  Do you own property in another state?  Do you have children from a prior marriage? 250998 4/08 22
  • 23. Important documents for staying in control of your assets  Durable power of attorney  Living will  Health-care proxy  Will 250998 4/08 23
  • 24. Disinherit Uncle Sam  Unlimited marital deduction — until 2010  Federal estate tax exclusion  Keep beneficiary designations updated  Use IRAs and trusts to avoid unnecessary taxes  Establish a gifting strategy 250998 4/08 24
  • 25. Stretch the life of your IRA The IRA is depleted. Year 39 Stretched for more than 30 years, an 29 years later, the son distribution $300,000 IRA owner’s $200,000 IRA eventually dies. His wife continues the established pays over $3 million in income distribution schedule. She may not treat the $270,526 $250,000 IRA as her own and no rollover is available. $200,000 Year 30 distribution $150,000 His wife dies at age 70, ten Year 20 $124,329 years after the IRA was created distribution $100,000 and before taking RMDs. The following year, their son (age 46) Year 10 First distribution begins receiving annual payments based on his life distribution $50,000 $54,566 expectancy. He names his wife as his beneficiary. $12,019 $24,506 $0 This chart shows annual Required Minimum Distributions in selected years Income is based upon an initial investment of $200,000 and cumulative annual distributions for 39 years. This hypothetical illustration assumes an 8% annualized return (8.30% effective return) and that distributions are kept to the required minimum. It does not represent the performance of any Putnam fund or investment or take into account the effect of any fees or taxes. Investors should consider various factors that can affect their decision, such as possible changes to tax laws and the impact of inflation and other risks, including periods of market volatility when investment return and principal value may fluctuate with market conditions. The Stretch IRA feature is designed for investors who will not need the money in the account for their own retirement needs. 250998 4/08 25
  • 26. Use a 529 plan to protect assets  Grandparents can reduce the size of their estate, maintain control of their assets, and help finance their grandchildren’s education  Special gift-tax exclusion enables you to make five years’ worth of gifts (up to $60,000, or $120,000 for married couples) in a single year to a single beneficiary without triggering the federal gift tax* • Cannot make additional gifts to the same beneficiary within five-year period • If contributor dies before five-year period ends, portion attributable to remaining period reverts to contributor’s estate  Account owner maintains control over the withdrawals and can • Change beneficiaries • Approve distributions for qualified higher education expenses • Withdraw funds * If an account owner elects to treat a contribution as having been made over a 5-year period and dies before the end of the 5-year period, the portion of the contribution allocable to the remaining years in the 5-year period (not including the year in which the account owner died) would be included in computing the account owner’s gross estate for federal estate-tax purposes. Five-year gift election is made by filing a federal gift tax return. Account owners may wish to consult their tax or estate-planning counsel to ensure that they obtain the tax consequences they desire. 250998 4/08 26
  • 27. Talk to your advisor about transferring wealth  Helping you identify your estate planning needs  Taking advantage of a Stretch IRA  Using a 529 plan as an efficient way to: • Remove appreciated assets from an estate • Help finance college education for family members The IRS has announced that it intends to repropose Section 529 regulations that will include certain changes and clarifications to existing proposed regulations. Although the exact content of the new proposed regulations, and the ultimate content of the final regulations, is not known at this time, the reproposed regulations could limit or require changes to, and affect tax consequences of, certain features of the Putnam CollegeAdvantage Program, including those described herein. 250998 4/08 27
  • 28. Plan for success  Professional guidance • Financial Advisor • Accountant • Lawyer  Next steps 250998 4/08 28
  • 29. The Putnam difference  A time-honored tradition in money management  A prudent approach to investing  Funds for every investment goal  A commitment to doing what’s right for investors  Industry-leading service 250998 4/08 29
  • 30. CollegeAdvantage is offered and overseen by the Ohio Tuition Trust Authority. Ohio taxpayers may obtain state tax benefits through the plan. However, anyone may invest in the plan and use the proceeds to attend school in any state. Before investing, consider whether your state's plan or that of your beneficiary offers tax and other benefits not available through CollegeAdvantage. If you withdraw money for something other than qualified higher education expenses, you will owe federal income tax and may face a 10% federal tax penalty on earnings. Consult your tax advisor. You should carefully consider the investment objectives, risks, charges, and expenses of the plan before investing. Ask your financial representative or call Putnam at 1-800-225-1581 for an offering statement containing this and other information for Putnam CollegeAdvantage, and read it carefully before investing. Putnam Retail Management, principal underwriter. Putnam Investment Management, investment manager. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus carefully before investing. This information is not meant as tax or legal advice. Please consult your legal or tax advisor before making any decisions. Shares of mutual funds are not deposits or obligations of, or guaranteed or endorsed by, any financial institution; are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency; and involve risk, including the possible loss of the principal amount invested. Putnam Retail Management 250998 4/08 30