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Financial Management abd YOU

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This presentation is to communicate ideas and information that will help you build financial security. We define financial security as a feeling of confidence that you will achieve your financial goals through the actions you are taking today.

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Financial Management abd YOU

  1. 1. Financial Management How to Build Financial Security Al Straub 11/11/2010
  2. 2. • Worries • Delays • Regrets • Confidence • Actions • Goals Why is money a problem for some people? Financial Security - What Is It? Financial security means different things to different people. And a problem-solver for others?
  3. 3. A feeling of confidence that you will achieve your financial goals through the actions you are taking today. Financial Security - Defined Risk Management Wealth Accumulation Wealth Preservation & Distribution Knowledge and actions work together to build financial security.
  4. 4. • Health care • Real estate • Taxes • Investments • Job security • Savings • Disability • Social Security • Insurance • Inflation • College costs Do You Have Financial Confidence Now? Discussing your concerns can help build financial confidence.
  5. 5. A Structure for Lifetime Financial Security Risk Management Wealth Accumulation Wealth Preservation & Distribution Financial security can be achieved across all life stages.
  6. 6. A financial pyramid is only as strong as its foundation. • Life insurance • Disability income insurance • Long-term care insurance • Health insurance • Auto and home owner’s insurance Risk Management: A Strong Foundation Lifetime financial security is built on a foundation of risk management. Risk Management Northwestern Mutual and its subsidiaries does not sell auto or home owner's insurance.
  7. 7. Age $50K Income $100K Income $200K Income 30 $1,750,000 $3,500,000 $7,000,000 40 $1,250,000 $2,500,000 $5,000,000 50 $ 750,000 $1,500,000 $3,000,000 Potential Income to Age 65 Protect Your Most Valuable Asset Your ability to earn an income is your most valuable asset.
  8. 8. His HersObjective Income Replacement Pay Off Mortgage Education Funds Emergency Fund TOTAL ? How Much Life Insurance? The answer depends on what you want and need to accomplish.
  9. 9. Probability of Becoming Disabled Prior to Age 65 Probability in % DI insurance can replace a portion of your salary if you can't work. One Person 25 4530 35 40 50 55 Age Three People Five People 70 60 50 40 30 20 10 0 Source: 1985 Commissioner’s Disability Table (a) Disability lasting at least 90 days. Best occupation classes. Sex-neutral statistics.
  10. 10. National Annual Projected Cost of Long-Term Care Services (2005-2035) S & P 500 Treasury Bills$50,000$25,000 $100,000 Annual Pre-Disability Income Annual Lost Income Annual SSDI Benefits LTC insurance can provide reassurance about your care later. $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 0 Note: These figures provide national averages. See your financial representative (a licensed insurance agent) for the average cost of care in your area. Long-term care insurance is offered through Northwestern Long-Term Care Insurance Company. Home Health Aide ($115/8-hour day) Assuming a 5.8 percent annual increase in costs Nursing Home Facility ($177/day semi-private room) $42,000 $350,600 $64,600 $227,800 Source: Dykes, J.S., “The Outlook for Long-Term Care Insurance,” Kiplinger’s Retirement Report, April 2004. “Basic Statistics about Home Care,” National Association for Home Care, 2004. ($109/day for 2004). “Nursing home costs average $57,700/year survey,” Daily Articles from Reuters Health, August 4, 2003, ($158/day semi-private room for 2003).
  11. 11. Addressing Life’s Financial Risks • Premature death • Disability, defined as sick, hurt and inability to work • Cost of care associated with injury, illness or declining health Risk Management Summary Proper risk management is essential to financial security. Risk Management
  12. 12. Savings Personal Investments Retirement Solutions Property Annuities Cash Value Insurance Most great fortunes are built patiently over a lifetime. Wealth Accumulation Wealth Accumulation for Financial Security Expert guidance, diversified asset allocations, investment fundamentals.
  13. 13. Four-Year Public $26,741 Four-Year Private $35,696 Source: College Board www.collegeboard.com, Trends in Higher Education Series, "2009 Trends in College Pricing" Begin by Defining Each Goal and its Cost Define expected costs before making specific investment decisions.
  14. 14. • Funding Retirement faces new challenges • Sources of Retirement Funding are shifting • Take control of your savings plan Source: ©2006 Ibbotson Associates, Inc. All rights reserved. Used with permission. This is for illustrative purposes only and not indicative of any investment. Expected sources of income during retirement taken from a survey of current workers and current retirees. The responses to that survey are the opinions of the participants involved. Actual sources: retirees Expected sources: workers Actual retirement income of current retirees versus expected income of current workers Pension plans 14% Personal savings/other 66% Social Security 20% Personal savings/other 36% Pension plans 20% Social Security 43% Times Are Changing Sign of the Times Invest systematically to achieve your goals.
  15. 15. Personal Investor Profile • Investment time frame • Withdrawal time frame • Personal liquidity • Income stability • Risk tolerance What's Your Tolerance for Risk A profile will increase your confidence when evaluating investments.
  16. 16. Risk is measured by standard deviation. Return is measured by arithmetic mean. Risk and return are based on annual data over the period 1970–2005. Portfolios presented are based on modern portfolio theory. Keep in mind that an investment cannot be made directly in an index, and past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. The data assumes reinvestment of all income and does not account for taxes or transaction costs. No investment strategy can guarantee a profit or protect against loss. Source: ©2006 Ibbotson Associates, Inc. All rights reserved. Used with permission. Benefits of Diversification and Asset Allocation Appropriate mix balances your risk tolerance and return requirements. An Efficient Frontier Benefiting from the relationship between stocks and bonds 1970-2005 13% 12% 11% 10% 9% Risk Return 10% 11% 12% 13% 14% 15% 16% 17% 18% 25% Stocks/75% Bonds 100% Bonds 50% Stocks/50% Bonds 60% Stocks/40% Bonds 80% Stocks/20% Bonds 100% Stocks
  17. 17. Highest Return Lowest Return Source: ©2006 Ibbotson Associates, Inc. All rights reserved. Used with permission. 1995 LT gov’t bonds 2004 2005200319981991 1992 1993 1994 1996 1997 1999 2000 2001 2002 Internat’l stocks Large stocks Large stocks LT gov’t bonds LT gov’t bonds Large stocks LT gov’t bonds LT gov’t bonds Internat’l stocks LT gov’t bonds Large stocks Internat’l stocks Large stocks Internat’l stocks LT gov’t bonds 30 day T-bills 30 day T-bills 30 day T-bills 30 day T-bills 30 day T-bills LT gov’t bonds Internat’l stocks Small stocks Small stocks Small stocks Small stocks Small stocks Small stocks LT gov’t bonds Small stocks Internat’l stocks 30 day T-bills LT gov’t bonds Small stocks Internat’l stocks Small stocks Large stocks LT gov’t bonds Internat’l stocks 30 day T-bills LT gov’t bonds Small stocks Internat’l stocks Large stocks Small stocks 30 day T-bills Large stocks Internat’l stocks LT gov’t bonds Small stocks Large stocks Internat’l stocks Timing the Market Threatens Wealth Accumulation Potential costs and potential taxes are not usually worth the risk.
  18. 18. 70 82.6% 88.6% 80 51.4 64.9 90 14.5 26.3 Among 60-year olds in the U.S., the percentage of those who will live to age… Purchasing power of $100,000 at age… (Assumes a 4% annual rate of inflation) Source: Social Security Period Life Table updated 2006. Men Women Prepare for a Long Retirement Plus Inflation 60 $100,000 70 67,556 80 45,639 90 30,832 Strategies should account for inflation to maintain purchase power.
  19. 19. Without a Net • You don’t want to outlive your portfolio • How much can you withdraw • Greater risk of shortfall with high withdrawal rates Source: Stocks—Standard & Poor's 500®, which is an unmanaged group of securities and is considered to be representative of the stock market in general; Bonds—five-year U.S. Government Bond; Inflation—Consumer Price Index. Source: ©2006 Ibbotson Associates, Inc. All rights reserved. Used with permission. Keep in mind that an investment cannot be made directly in an index, and past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. The data assumes reinvestment of all income and does not account for taxes or transaction costs. No investment strategy can guarantee a profit or protect against loss. Make Smart Rollover Decisions Investment decisions and withdrawal rates can affect asset depletion. Annual Inflation-Adjusted Withdrawal as a % of Initial Portfolio Wealth $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 1972 1977 1982 1987 1992 1997 9% Withdrawal Rate 8% Withdrawal Rate 7% Withdrawal Rate 6% Withdrawal Rate 5% Withdrawal Rate
  20. 20. Wealth Management needs include: • Savings and investment for retirement • Asset allocation investment strategy based on Personal Investor Profile • College funding vehicles Wealth Accumulation Summary Basic investment principles and expert guidance can help you. Wealth Accumulation
  21. 21. Retirement income Estate coordination Lifetime gifts Charitable gifts Wills and trusts Life insurance Wealth Preservation & Distribution Wealth Preservation and Distribution Making the most of the assets you worked so hard to accumulate.
  22. 22. Quality • Predictability • Flexibility • Liquidity • Inflation-hedge potential • Longevity protection So you can… • Count on it • Change it, if you wish • Access cash for special needs • Protect your purchasing power • Be confident you won’t outlive it What qualities are important in your retirement income? Designing a Retirement Income Not all types of retirement income are equal.
  23. 23. • How much do you want to leave to heirs? • When do you want your heirs to receive the money? • What values would you like to pass on to your children and heirs? • Have you considered making any gifts to charity? • When was the last time you updated your will and trust? Estate Preservation and Distribution Taking the initiative now can avoid complications later.
  24. 24. Wealth Preservation and Distribution needs may include: • “Self-sufficient” retirement income as long as either lives • Wills and trusts that clarify estate distribution wishes • Lifetime gifts to grandchildren for college needs • Life Insurance Wealth Preservation and Distribution Summary Wealth Preservation & Distribution Maybe not pressing issues now but forethought can help in the future.
  25. 25. Protecting your income Plans to pay for college costs Appropriate investment risk Retirement confidence Savings discipline Estate analysis and minimization of taxes Sufficient retirement income Protecting your assets Wealth Preservation & Distribution Wealth Accumulation Risk Management Financial Confidence = Identifying Your Needs and Providing Solutions Identifying your needs can increase your financial security.
  26. 26. About Northwestern Mutual • Received the best possible insurance financial strength ratings from the four major rating agencies. • Northwestern Mutual is the only company to lead its industry in America's Most Admired Companies® for 25 years - FORTUNE® magazine Who we are…a company with over a 150-year tradition Ratings: Moody's 04/09, S&P 07/09, Fitch 06/09, A.M. Best 06/09. Third party ratings are subject to change. For further information, see Northwestern Mutual's Annual Report on our web site www.northwesternmutual.com. Dividends are not guaranteed, reviewed annually, and subject to change.
  27. 27. Personal Needs Analysis… Step 1: Understand and analyze your specific needs Step 2: Discuss customized solutions Step 3: Annually review and adjust as needed Survivor/Disability Income Insurance/Long-Term Care Education/RetirementAsset Allocation Estate Analysis The Next Step A personal needs analysis is offered at no expense or obligation.
  28. 28. How to Build Financial Security Thank you! Financial Management Questions?
  29. 29. The Northwestern Mutual Financial NetworkTM is a marketing name for the sales and distribution arm of The Northwestern Mutual Life Insurance Company, its affiliates and subsidiaries. The products and services referenced are offered and sold only by appropriately appointed and licensed entities and Financial Representatives. Each Financial Representative is a licensed insurance agent and represents one or more, but not necessarily all, of the entities shown. The Northwestern Mutual Life Insurance Company (Northwestern Mutual), Milwaukee, WI (life insurance, disability insurance and annuities) is neither a registered investment advisor nor a registered broker- dealer. Strategic Employee Benefit Services is a nationwide marketing program providing employee benefit services exclusively through the Northwestern Mutual Financial Network. Securities are offered through Northwestern Mutual Investment Services, LLC, member FINRA and SIPC. Northwestern Mutual Wealth Management Company, Milwaukee, WI, a wholly-owned company of The Northwestern Mutual Life Insurance Company, is a limited purpose federal savings bank. Long-term care insurance is offered through Northwestern Long Term Care Insurance Company, a subsidiary of The Northwestern Mutual Life Insurance Company, Milwaukee, WI. This policy is intended to be a tax-qualified long-term care contract. This material is produced for the marketing and solicitation of insurance. Disclosures

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