1. October 30, 2012
Q3 401(k) Review:
Defense Wins Championships
Presentation by:
Christie Cheng
Sr. Relationship Manager
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
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are separately owned and operated companies.”
2. 401(k) 101
s Retirement Monies
Not a holiday savings account
Is your social security going to be enough?
s Defer 0 – 100% of pay, but not more than annual limit of $17,000 (2012)
Traditional, Pre-Tax
Roth, After-Tax
Catch-Up Contributions ($5,500)
s Investments
Do it yourself, mutual funds
Little help, risk based models
Auto-Pilot, age based models/RIA solutions
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3. Most expected a soft year in the market for 2012, but
where has S&P 500 been through the first three quarters?
(source: Standard & Poors)
-2%
8.7 %
16.4 %
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4. Answer: C… 16.4% Is that possible???
Think about that for a moment.
s That would annualize a year well over 20% in the S&P 500
s The “summer selloff” never happened
s Q3 statements have gotten people optimistic again
But…
s This is one market/index, not true representation of most people’s account
s The year is NOT over, remember Q3 of 2011
s QE3 has created a steroid for some equities
s Rollercoasters go up and down, but we are still on a rollercoaster
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5. Agenda
s What Matters?
s What Has Been Happening in 2012?
s What To Do?
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7. Why 401(k)/Retirement Plans Matter
s Situation: In 2012 Fidelity reports the highest average participant account
balance in 401(k)’s ever at just under $74,600. We call it the “$100,000
problem.”
s Complication: Lump sum vs. income stream.
s Result: At a standard 5% income payout in retirement a $100,000 account
yields $5,000 per year as a social security supplement. Is that really your
goal?
The key is “Retirement Readiness”
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8. Limits for 2012
s Deferral Limits:
$17,000 for 2012
$5,500 in catch-up contribution for participants 50 or older (Plan dependent)
Question:
s Which of these variables changed by 20% will have the GREATEST
IMPACT on Retirement Readiness:
1. Retiring 5 years early at age 62
2. Contributing 8 years earlier at age 34
3. Increasing the 7.11% ROR by 20%
4. Increasing the 6.00% Deferral by 20%
5. Increasing the 50 cent match by 20%
6. Decreasing the 72bp fee by 20%
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9. RRR is What Matters (Source: FBi)
• The sensitivity analysis below shows the impact on the Retirement Readiness Ratio of 87% by
changing 6 important retirement assumptions by 20% (except for Early Retirement where the
reduction is the earliest age one can begin receiving Social Security):
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11. Markets in 2012 (Source: Morningstar as of 10/26/12)
US STOCKS:
S&P 500, YTD 14.26 % & 1 Year 16.23 %
S&P 400, YTD 12.19 % & 13.06 %
Russell 2000, YTD 10.99 % & 13.46 %
International: YTD
EAFE, YTD 10.91 % & 6.46 %
EM, YTD 8.11 % & 3.46%
BONDS: YTD
Core Bond, YTD 3.84 % & 1 Year 5.11 %
US T-Bills, YTD 0.07 % & 1 Year 0.07 %
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12. What Matters…
Still Europe:
Spanish Bond Yields
Greece Missing Deadlines
Slowed Growth
Q1 Better than Expected
Q2 Worse than Expected
Q3 MUCH Better than Expected
Economic Reality (Source: USBLS)
Unemployment as of September 2012 = 7.8%
Q3 2012 GDP growth (est.) = + 2%
2011 GDP = $15.094 Trillion
Deficit as of Q3 2012 = $16.015 Trillion
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13. Europe Again… (Slide used in 7/26/11 webinar)
s Situation: Renewed concerns over 2010 debt crisis focal points (Italy,
Ireland, Spain), especially Greece.
s Complication: Increased political strife reduces markets belief that deal is
certain after concerns from Germany become public and there is potential
expansion as Italy is identified as having solvency concerns.
s Result: Anticipated summer sell-off becomes a bit steeper and sooner
(May) than initially expected. July 21, France and German deal reported.
Review risk tolerance and foreign exposure. This is expected to be an on
and off drag on US stocks for the foreseeable future
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15. What is result?
s Offense or Defense: Do not follow the crowd or chase returns, have a
strategy:
When the general feeling is negative, we tend to be positive
When the general feeling is positive, we tend to be negative
Why there is some concern for equities after great YTD number
•
Fiscal Cliff is almost here
•
Election and lame duck session creates uncertainty
•
Need to get deficit under control and removal of QE = less government “propping”
•
Earnings season for fall of 2012 has been a disappointment
•
Rob Ausdal of Ausdal Financial Partners and others believe that once revised GDP numbers
are trued up, it will be shown the US may have already slipped back into another recession
s Save More…
The national average in 401(k)’s hovers just below 6%. RSG’s +2 Goal.
s Have a Retirement Readiness Plan
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16. New Limits for 2013
s 401(k) deferral $17,500, a $500 increase
s Catch-Up Contribution for those 50 or older $5,500, no increase
s Reminders:
This is a total for pre-tax, ROTH or both
Most Plans today allow up to 100% of pay deferrals not to exceed these limits
The best thing you can do is control what you can control – your savings rate
The +1% Rule
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17. Summary
s What Matters?
Rollercoasters go up and down
s What Happened?
Goal is for participants to make “Informed Decisions,”
Solid returns in US equities through first 3 quarters of 2012
But a lot of risk seen on short-term horizon
s What To Do?
Don’t be a “Vince”
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18. So What?
The DOL says the average American Should Save 12%
Note: 3.7% Savings Rate (Source: BEA)
Next Steps:
s Save more, 2013 limits are $17,500 ($23,000 with catch-up provision for those over 50)
s Review your asset allocation/risk level
s Volatility will remain for foreseeable future
s You must decide between offense and defense – RIGHT NOW!
Next Steps:
s Analyze Situation
s Select a Path
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, John
Hancock, HRCP or Retirement Solutions Group. They are opinion only and should be not
18 | Retirement Solution Group considered as stand alone advice.”
19. RSG Participant Support Team
RSG is always available, 866-352-7731
1. Steve Scott, Managing Partner x 210
2. Christie Cheng, Education & Relationship Manager x310
3. Elvia Sanchez, Education & Relationship Manager (Bi-Lingual) x410
4. Megan Dunne, Associate x200
5. Mary Urlich, Participant Transactions x1
“I have no idea about investments, can you help me my choices?”
“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?”
“Can you help me with my forms?”
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Editor's Notes
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The purpose of this section is to demonstrate our client-focused approach by showing that we’ve done our homework to identify what we know about their financial challenges and objectives and what we can do to address them.
The purpose of this section is to demonstrate our client-focused approach by showing that we’ve done our homework to identify what we know about their financial challenges and objectives and what we can do to address them.
The purpose of this section is to demonstrate our client-focused approach by showing that we’ve done our homework to identify what we know about their financial challenges and objectives and what we can do to address them.