Retirement & Investment Planning g in Today’s Market Presented by: Matthew A. Morrow y Munroe Morrow Wealth Management 346 Commercial Street Boston, MA 02109 617-600-5488Date: April 24, 2012
Will you have enough money?Future!income!needs!and!sources> Most!people!have!a!gap!between!income!and!expenses> Social!Security!will!not!be!enough> Will!you!have!a!pension?> Do!you!have!other!sources!of!income?> Pl t b id th Plan!to!bridge!the!gap!with!your!investments ith i t t 1
Will you have enough money?Future!income!needs!and!sourcesThe!size!of!the!nest!egg!you’ll!needAnnual!amount!desired Nest egg!needed*$!40,000 $!963,922$!85,000 $!2,048,334$!100,000 $!2,409,804 2
Will you have enough money?Percentage surviving by age FPO Percentage surviving by age: Death-registration 1900-1902,1949-51, 2004. National Vital Statistics Reports, Vol. 56, No. 9, December 28, 3 2007
Investing!short!courseI ti h t> Get!invested> Diversify> Stay invested Stay!invested
Types!of!risk!or!“volatility”T f i k “ l tilit ”> Specific!risk> Market!risk> Industry risk Industry!risk> Interest!rate!risk
Historical range of returns of S&P 500: 1970-2009 61 30 19 18 Positive!change No!change 7 "2 Negative!change "7 " 43 1!year 5!years 10!years 20!yearsSource:!Standard!and!Poor’s!500!Index.!The!Standard!&!Poor’s!500!Market!Index!(S&P!500)!is!an!unmanaged!list!of!common!stocks frequently!used!as!a!measure!of!market!performance.!The!index!reflects!reinvestment!of!all!distributions!and!changes!in!market!prices,!but!excludes!brokerage!commissions!or!other!fees.!The!highest!return!is!represented!by!the!top!of!each!bar!and!the!lowest!annual!return!is!shown!at!the!bottom.!The!rolling!5",10" and!20"year!ranges!are!also!shown.!Over!time,!lower!performing!years!will!be!offset!by!higher!performing!years!and!vice!versa.!Therefore!the!range!of!the!historical!returns!over!the!entire!period!is!narrower!than!the!range!of!returns!in!any!single!year.!Returns!over!1!year!in!length!are!annualized.!It!is!not!possible!to!invest!directly!in!an!index.!!Past!performance!is!no!guarantee!of!future!results.!
Dollar"cost!averagingD ll t i> Put!market!fluctuations!to!work!for!you> Can!be!an!effective!means!of!accumulating!shares> Does not guarantee profit or protect against losses due to Does!not!guarantee!profit!or!protect!against!losses!due!to! declining!prices
Dollar"cost!averaging Month You invest Share price Shares purchased January $100 ! $10 = 10 February $100 ! $8 = 12.5 March $100 ! $5 = 20 April $100 ! $7 = 14.3 May $100 ! $9 = 11.1 June $100 ! $10 = 10 Total $600 = 77.9 77 9 Average!price!per!share:!(10+8+5+7+9+10)/6=!$8.17 Average!cost!per!share:!(600/77.9)=!$7.70Dollar"cost!averaging!not!guarantee!a!profit!or!protect!against!losses!in!a!declining!market.!Investors!should!consider!their!ability!to!continue!investing!during!periods!of!low!markets.!This!illustration!is!hypothetical!and!is!not!a!forecast!or!guarantee!of!specific!investment!results.
How should you invest along the way?Five!kinds!of!risk!to!manageInflation!riskI fl ti i k The!possibility!that!your!investment’s!value! Th ibilit th t i t t’ l will!lag!inflationMarket!risk The!chance!that!your!investment’s!price!will!fallDefault!risk The!chance!that!a!bond!issuer!won’t!be!able!to!pay! interest!dueInterest!rate!riskInterest rate risk The!likelihood!that!bond!prices!will!fall!when!interest! The likelihood that bond prices will fall when interest rates!riseCurrency!risk The!possibility!that!your!investment!will!lose!value!due! to!fluctuations!in!foreign!currencies 10
How should you invest along the way?Asset!allocation!and!diversification 2001 2002 2003 2004 2005 2006 2007 2008 2008*SMALL CAP SMALL CAP LARGE CAP REAL ESTATE INT’L STOCKS REAL ESTATE BONDS VALUE BONDS 10.25% GROWTH 33.16% 35.97% GROWTH 14.02% 5.24% 14.02% 48.54% 11.81% INT’L!Stocks!MSCI!EAFE!Index SMALL CAP SMALL CAP HIGH YIELDREAL ESTATE REAL ESTATE REAL ESTATE INT’L STOCKS INT’L STOCKS VALUE VALUE BONDS 12.35% 3.58% 46.03% 22.25% 13.82% 26.86% 11.63% -26.16% Diversified!Portfolio!Hypothetical!portfolio! with!quarterly!rebalancing!and!an!equal! with quarterly rebalancing and an equal BONDS HIGH YIELD MID CAP INT’L STOCKS MID CAP SMALL CAP SMALL CAP DIVERSIFIED weighting!in!each!of!the!indices!listed!against! BONDS STOCKS STOCKS VALUE GROWTH PORTFOLIO 8.44% -1.41% 40.06% 20.70% 12.65% 23.48% 7.05% -28.58% loss. HIGH YIELD SMALL CAP MID CAP DIVERSIFIED LARGE CAP SMALL CAP BONDS VALUE INT’L STOCKS BONDS STOCKS PORTFOLIO VALUE VALUE 5.28% -11.43% 39.17% 6.97% 20.22% 7.46% 22.25% -28.92% *Data as of 12/31/08. Source: Morningstar LARGE CAP Direct. DirectDIVERSIFIED DIVERSIFIED DIVERSIFIED LARGE CAP DIVERSIFIED MID CAPPORTFOLIO PORTFOLIO REAL ESTATE PORTFOLIO VALUE PORTFOLIO STOCKS VALUE Past performance does not guarantee future 36.18% -36.85% -1.87% -11.74% 16.63% 7.05% 17.97% 5.60% results. Diversification and asset allocation LARGE CAP do not guarantee overall portfolio profit and LARGE CAP LARGE CAP DIVERSIFIED LARGE CAP LARGE CAP MID CAP DIVERSIFIED VALUE VALUE PORTFOLIO VALUE GROWTH STOCKS PORTFOLIO GROWTH do not protect against loss. It is not possible -5.59% -15.52% 33.58% 16.49% 5.26% 15.26% 2.19% -38.44% to invest directly in any of the unmanaged indices shown. There is no assurance that a MID CAP LARGE CAP SMALL CAP SMALL CAP HIGH YIELD SMALL CAP STOCKS INT’L STOCKS VALUE GROWTH SMALL CAP GROWTH BONDS GROWTH secondary market will be available for real -15.66% VALUE 4.71% -5.62% 30.03% 14.31% 13.35% 1.87% -38.54% estate invest trust, which may hinder attempts to sell the investment. SMALL CAP MID CAP LARGE CAP HIGH YIELD SMALL CAP HIGH YIELD LARGE CAP REAL ESTATE GROWTH STOCKS GROWTH BONDS GROWTH BONDS VALUE -39.20% -9.23% -16.19% 29.75% 11.13% 4.15% 11.85% -0.17% Diversification helps you spread risk throughout your portfolio, so that LARGE CAP LARGE CAP HIGH YIELD LARGE CAP HIGH YIELD LARGE CAP SMALL CAP MID CAP GROWTH GROWTH BONDS GROWTH BONDS GROWTH VALUE STOCKS investments that do poorly may be balanced –20.42% -27.88% 28.97% 6.30% 2.74% 9.07% -9.78% -41.46% by others that do relatively better. SMALL CAPINT’L STOCKS BONDS BONDS BONDS BONDS REAL ESTATE INT’L STOCKS GROWTH -21.21% 4.10% 4.34% 2.43% 4.33% -17.55% -43.06% -30.26% 11
A new way to think about taxesTax"diversify!your!portfolio Neither Ameriprise Financial nor any of its representatives or agents provide tax 12 advice.
How should you invest along the way??2012!limits!for!a!contributory!Roth!IRA!2012 limits for a contributory Roth IRA> $5,000!maximum!contribution!in!202*> $1,000!“catch"up”!contribution!for!those!age!50+ $ , p gAdvantages!of!Roth!IRAs:• Tax!Deferred!Savings. T D f dS i• Tax"Free!withdrawals!of!earnings!after!age!59!½.• Contributions!can!be!withdrawn!penalty!and!tax"free!at!!any!time.• Earnings!up!to!$10,000!can!be!withdrawn!for!first!time!home!purchase!without! i $ 0 000 b i hd f fi i h h ih early!withdrawal!penalty. *Maximum contribution limits may be 13 13 adjusted for inflation in future years.