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Q2 2013 RSG Update

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Q2 2013 RSG Update

  1. 1. April 30, 2013 To the Participants of RSG 401(k) Update Feeling the Good Old Times Again Presentation by: Steven Scott Managing Partner Retirement Solution Group, LLC “Securities offered through Ausdal Financial Partners, Inc, 220 North Main Street, Davenport, IA, 52801, 563.326.2064, member FINRA, SIPC. Advisory services provided by Ausdal 1Financial Partners. Retirement Solutions Group and Ausdal Financial Partners, Inc | are separately owned and operated companies.”
  2. 2. What was the US deficit the day I drafted this presentation (4/25/13)? (source: Concord Coalition) $2.5 Trillion $12.9 Trillion $16.8 Trillion 2|
  3. 3. Answer: C… Why retirement revenue matters? Think about that for a moment. s U.S. NATIONAL DEBT CLOCK The Outstanding Public Debt as of 25 Apr 2013 at 11:45:25 AM GMT is: $16,804,978,813,739.80 s The estimated population of the United States is 314,842,110 so each citizen's share of this debt is $53,375.89. s But does anyone think the craziness is over??? 3| Retirement Solution Group
  4. 4. Agenda s The s Q1 Surprising Bull Focus Topic: Roth vs. Pre-Tax Deferrals s Why 4| the Media is Sometimes Just Terrible…
  5. 5. The Surprising Bull 5|
  6. 6. Markets in 2013 (Source: Morningstar as of 4/26/13) STOCKS: 1-Year Numbers & Q1, Source – Morningstar.com (as of 1/11/13) US Stocks 15.66 % & 11.29 % International Developed Countries, (EAFE) 18.23 % & 9.84 % International Emerging Markets, (EM) 0.63% & - 3.11 % BONDS: YTD Core Bond, 3.09 % & 0.9 % TIPS, YTD 4.94 % & 0.93 % Economic Reality Unemployment as of Q1 2013% • • 7.6% March 2013 Down 2% since last meeting Q1 2013 GDP growth = 2.5 % 6|
  7. 7. Why? s Washington DC is scared… There is a growing concern on the high probability that we have many millions of elderly Americans living in significant poverty in the next few decades: • 38% of Americans age 55 and above have less than $10,000 in retirement savings per Fidelity study 2012 • US Equities 2000 – 2010 (Source: USA Today) – DJIA - 9.3% – SPX - 24.1% – NASDAQ - 44.2% • • • 7| 401(k) Average Savings is believed to be 6% (Source: 401(k) Help Center, note – estimate) Fidelity 2012 Study – 8% current deferral average Fidelity 2012 Study – 12% needed deferral average
  8. 8. What’s New In 2013 s Deferral Limits: $17,500 for 2013 $5,500 in catch-up contribution for participants 50 or older (Plan dependent) DC Has Been and May Remain Very Active: 1. The Fiduciary Standard 2. Obama’s 3. Senator “$3 mm Cap” Kohl’s Target Date Fund Proposal 4. Forced Annuitization 5. Forced Savings Option 8 | Retirement Solution Group
  9. 9. Q1 Focus Topic: ROTH vs. Pre-Tax 9|
  10. 10. The Basic Idea… s Traditional 401(k): Since 1978 the government has allowed employees to direct “elective deferrals” salary into employer sponsored retirement plans. The deferrals are a direct reduction of the employees taxable income. Source: ERISA s Roth IRA: In 1998 Roth IRAs were formed and allowed individuals to save money in an after tax basis, with the agreement that there would NOT be a tax a point of distribution. Source: Wikipedia s Roth 401(k): In 2006 the “Roth” idea was brought into employee sponsored plans. Same general concept, but no income limits and the annual contribution limits were set by the 401(k) rules and much higher than IRAs. Source: ERISA 10 | Retirement Solution Group
  11. 11. Example 1 – Tax Rate in Retirement is the Same 401(k) Comparative: 30 year old who plans on retiring at 65 and 25% tax bracket Accumulation Phase Roth 401(k) (Non-Deductible) 401(k) (Deductible) Annual contribution (before tax) $10,000 $10,000 Adjustment for taxable contributions* -2,500 -0 Total annual contribution (after tax) $7,500 $10,000 Interest rate (accumulation phase) 8% 8% Term (accumulation phase) 35 35 Account value at retirement $1,395,769 $1,861,026 Distribution Phase Roth 401(k) (Non-Deductible) 401(k) (Deductible) Account value at retirement $1,395,769 $1,861,026 Term (distribution phase) 30 30 Interest rate (distribution phase) 6% 6% Annual income before taxes $101,401 $135,202 Annual income tax $0 $33,800 After-tax annual income $101,401 $101,401 After-tax monthly income $8,450 $8,450 11 |
  12. 12. Example 2 – Tax Rate in Retirement is Higher 401(k) Comparative: 30 year old who plans on retiring at 65 and 25% tax bracket, but 45% tax bracket at point of retirement Accumulation Phase Roth 401(k) (Non-Deductible) 401(k) (Deductible) Annual contribution (before tax) $10,000 $10,000 Adjustment for taxable contributions* -2,500 -0 Total annual contribution (after tax) $7,500 $10,000 Interest rate (accumulation phase) 8% 8% Term (accumulation phase) 35 35 Account value at retirement $1,395,769 $1,861,026 Distribution Phase Roth 401(k) (Non-Deductible) 401(k) (Deductible) Account value at retirement $1,395,769 $1,861,026 Term (distribution phase) 30 30 Interest rate (distribution phase) 6% 6% Annual income before taxes $101,401 $135,202 Annual income tax $0 $60,841 After-tax annual income $101,401 $74,361 After-tax monthly income $8,450 $6,197 12 |
  13. 13. Example 3 – Tax Rate in Retirement is Lower 401(k) Comparative: 30 year old who plans on retiring at 65 and 25% tax bracket, but 15% tax bracket at point of retirement Accumulation Phase Roth 401(k) (Non-Deductible) 401(k) (Deductible) Annual contribution (before tax) $10,000 $10,000 Adjustment for taxable contributions* -2,500 -0 Total annual contribution (after tax) $7,500 $10,000 Interest rate (accumulation phase) 8% 8% Term (accumulation phase) 35 35 Account value at retirement $1,395,769 $1,861,026 Distribution Phase Roth 401(k) (Non-Deductible) 401(k) (Deductible) Account value at retirement $1,395,769 $1,861,026 Term (distribution phase) 30 30 Interest rate (distribution phase) 6% 6% Annual income before taxes $101,401 $135,202 Annual income tax $0 $20,280 After-tax annual income $101,401 $114,921 After-tax monthly income $8,450 $9,577 13 |
  14. 14. Why the Media is Sometimes Just Terrible… 14 |
  15. 15. Media s The Problem 2008 Crash The 401(k) thing has to work… Unclear pricing Hidden fees Unengaged advisors just collecting fees No standards • These are the reason behind 2012 fee disclosure rules 15 | Retirement Solution Group
  16. 16. Thank You Frontline… s Why they DO NOT “Get It”: 1. Comparing 2. But 1. 2. 3. 4. 5. 6. 7. the Vanguard S&P 500 vs. an S&P 500 Fund in a 401(k) a 401(k) has a few more moving parts: Massive and increasing government compliance Annual Audits 5500 tax filings Active management Fiduciary liability Daily recordkeeping Educational/404(c) requirements Question: If self directed on-line IRAs are cheaper why are the savings rates in 401(k) plans more than double? 16 | Retirement Solution Group
  17. 17. Summary s The Surprising Bull Strong Results, but Risk Remains s Q1 Focus: ROTH vs. Pre-Tax Key is Taxes s The Media Apples vs. Oranges 17 |
  18. 18. So What? The DOL says the average American Should Save 12% Note: 3.7% Savings Rate (Source: BEA) Next Steps: s 2013 limits are $17,500 ($23,000 with catch-up provision for those over 50) s What do you own? s Volatility will remain s Does it fit? Next Steps: s Save More s Be More Engaged s Create a Retirement Plan Calendar “Investments involve risks and potential loss of principal and are not FDIC insured investments. Investments and investments in 401k plans are not guaranteed by the federal government or the FDIC, they involve risk including but not limited to loss of principal. Opinions expressed are those of Steve Scott and do not represent the opinions of Ausdal Financial Partners, or Retirement Solution Group, LLC. They are opinion only and should be not considered as stand alone advice.” 18 | Retirement Solution Group
  19. 19. RSG Participant Support Team RSG is always available, 866-352-7731 1. Steve Scott, Managing Partner x 210 2. Elvia Sanchez, Education & Relationship Manager (Bi-Lingual) x410 3. Christie Cheng, Education & Relationship Manager x310 4. Megan Dunne, Associate x200 5. Mary Urlich, Participant Transactions x1 “Can you help me with my forms?” “I have no idea on these funds, can you help me with that?” “How much should I be saving?” “Not really sure if I am aggressive investor or not, how do I figure that out?” “What is a stock/bond?” “Why do people keep talking about Spanish Bonds Yields?” 19 | Retirement Solution Group

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