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Horizons 2 Q2012
Horizons 2 Q2012
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Horizons 2 Q2012

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Horizons 2 Q2012

  1. 1. eStrategies for eDecoding SEP IRAs . . . . . . . . . .3 e Benefits of eNews Briefs . . . . . . . . . . . . . . . .63 6 in this issue Horizons 2nd Quarter 2012 Mature Investors . . . . . . . . . . . .1 R E S P O N D I N G TO YO U Shareholders like you call our representatives with a lot of good questions. In this column, The we share our responses to some of those questions with the thought that for every shareholder who Systematic Investing . . . . . . . . . .5 calls to ask, there are a hundred who didn’t! We encourage you to call our helpful representatives with your questions as well as to check here each quarter to see if your question is featured. Homestead Funds’ A quarterly newsletter for Homestead Funds’ shareholders Item number 00085941 Decoding SEP IRAs News Briefs Are you I’m a small business owner and have heard that a SEP IRA might be a good way for me to save for retirement. Can you tell me more? Small-Company Stock Fund Homestead Small-Company Stock Fund was named Strategies for Mature Investors eligible A simplified employee pension (SEP) individual retirement arrangement (IRA) offers a simple retirement solution that is appropriate for certain savers. in Kiplinger’s as a top pick in the May 2012 cover story of Tips for investors 50 and up to invest in A SEP IRA allows employers to make tax-deductible contributions on behalf Top 25 Funds Kiplinger’s Personal Finance magazine, “Best Funds a SEP IRA? of eligible employees, including the business owner. for Your Goals: This Year’s Picks for the Kiplinger 25 In addition, these contributions and their earnings There is a lot of information out there about investing for retirement— To learn more specifics Include New Ways to Generate Income.” so much, in fact, that it can feel overwhelming at times. To help continue to grow tax-deferred until they are withdrawn. about SEP IRAs, read our Most frequently a SEP IRA is established by a one- our shareholders who are 50 years of age and older, we posed Helpful Tips guide, “Saving person business owner with no employees, such Warthen, Surick this question to several Homestead Funds’ registered representa- for Retirement in a SEP IRA.” You can download it from as a self-employed person who is a sole proprietor. Any Join Staff Sparkle Warthen and Ken Surick joined tives: What should investors do who are about to retire, homesteadfunds.com type of business entity may establish a SEP IRA — a sole Homestead Funds staff as client service associates especially as it relates to their Homestead Funds’ investments? under “Find a Document,” proprietorship, partnership, corporation, nonprofit or earlier this year. Welcome aboard! or you can call us at governmental agency. The employer typically makes con- Their responses, grouped by each life stage, follow. 1-800-258-3030 and we tributions directly to an IRA set up for each employee. will gladly mail you a copy. Five to 10 years until retirement Some businesses cannot establish a SEP, including “If you are within five or 10 years of your planned retirement those businesses that currently maintain another quali- fied retirement plan as well as those that once main- date, evaluate your sources of retirement income with a tained a defined benefit plan. However, an employee Homestead Funds investment advisor, says Jamie Stone. ” Steven Ulrich who participates in his or her employers retirement plan “We’ll work together to nail down your sources of retirement Registered Representative can set up a SEP for self-employment income. income and how much each will provide.” A SEP IRA has broad appeal due to its high annual contribution limits, com- The most common sources of income are Social Security retire- pletely discretionary and flexible annual contributions and minimal administration. Many employers favor SEPs because they are simple to implement and main- ment benefits, pensions, 401(k)s and IRAs. Some people like tain. Also, they do not require trust documents, discrimination testing or IRS to think of their income sources as being in one of two groups: reporting. In addition, employers favor the flexibility of varying contributions from year to year and the option of skipping contributions entirely, if they want. INSTALLMENT INCOME you will receive at regular intervals Call 1-800-258-3030 to speak with one throughout retirement, like Social Security and pension payments. Also, SEPs involve no initial fees and minimal administrative costs. Plus, SEP rules are fairly easy to grasp: Except for higher contribution limits, Traditional IRA of our friendly client service associates, available weekdays INVESTMENT INCOME, like the kind you can tap from your 401(k) tax rules apply to SEP IRAs. H plan and IRAs.* between 8:30 a.m. and 5:00 p.m. Eastern Time. Ideally, it’s good, but not always necessary, to have both types of income in retirement, since the first group gives you a guaran- teed income stream through your lifetime, continued on page 2 If a SEP IRA sounds like it might be the right choice for you or your business, call us toll-free at 1-800-258-3030 to learn more 4301 Wilson Boulevard Arlington, VA 22203-1860 1-800-258-3030 www.homesteadfunds.com from one of our representatives. Mutual funds are subject to market risk, including the potential loss of principal invested. Homestead Funds’ investment manager, RE Advisers Corporation, and distributor, RE Investment Corporation, are indirect, wholly owned subsidiaries of NRECA. RE Investment Corporation, Distributor. 06/12
  2. 2. 2 4 5 Strategies for Mature Investors, continued from page 1 while the second kind, although sometimes erratic, has the If the value of your 401(k) account has dropped and you want to recoup that value potential to outstrip inflation over time. before retiring, you may want to consider working beyond your planned retirement date THE ABCS OF INVESTING or adjusting your plans for retirement life, such as spending less or working part-time. “Also, it’s helpful to continue contributing to your 401(k) and The Benefits of £ Prepare your retirement budget £Discuss with an NRECA £Review health and prescription £Contact the local Social Security office: £ Initiate rollover paperwork Alaina eSet up the date on which benefits, IRAs during this five- to 10-year period. Both of these types Retired or just about to retire £Discuss with your Schrager Systematic Investing eYour financial plan eEvaluate whether you need a Registered £ Double-check that paperwork To learn more specifics about of accounts offer you tax benefits as you save for your future,” At this stage, your primary investment goal is likely preserving the value of your nest Representative eYour optimal retirement date eCompany pensions and benefits £Review long-term care, life, home says Stone. the steps you can take to egg. “I advise the retired shareholders who are on a fixed income to keep a portion ePension distribution options and eWhen to start your eTake care of dental and medical When investors suffer a loss, Buying more for less shares you hold is just as systematic investing does eDetermine if appropriate for retirement of their money in investments designed for stability,” says Suzanne Gillespie. get ready for retirement, read One to five years to retirement eInvesting rollovers Everyone loves a bargain. important because it repre- not ensure a gain or protect eSpousal pension benefits in the they sometimes run for cover At this stage of life, refine the specifics of how much each “However, you may want to keep another portion of your nest egg invested in funds our Helpful Tips brochure, and transfer their stock and bond Let’s say you’re at the sents an opportunity for against a loss. eMinimizing taxes, maximizing income source may provide. Everyone at this stage should that hold stocks. Historically, stock investments have outpaced inflation over time better eProcedures for rolling over any supermarket and see the your account balance to positions into money market Homestead Funds offers “Managing Your Savings in review their investment portfolio to be sure it is well-suited than bonds or money market investments.” paper towels you regularly grow if the share price goes a service that lets you invest eWhether your current investment asset positions. They also may cut back eOptions for retaining employer- buy are on sale. If you’ve got up. And, if you bought more Retirement.” You can download to weather any market fluctuations. Gillespie also recommends making sure your withdrawal strategy considers the effect or stop contributions altogether. the money, likely you’ll buy shares at a lower price, on a regular, systematic schedule. The service allows it from homesteadfunds.com “Generally, it should be positioned to favor income-oriented of taxes. In some cases, that means tapping taxable accounts first as you allow any While this reaction is entirely in quantity to save money then your shares may have you to designate a fixed investments, but you will likely want some exposure to growth income on your tax-deferred and tax-free accounts to continue growing. “That strat- natural, this move may not be later. When stocks suffer greater potential for growth. under “Find a Document,” amount from your payroll or investments, like stock funds, since you’ll want your money egy can keep more of your money working for you, rather than siphoned off in taxes.” in the best interest of long-term a setback, it’s a little like a How systematic bank at regular intervals and or you can call us at to last through retirement,” says Monty Bilkert. For information specific to your tax situation, consult a tax professional. investors. Alaina Schrager store with stocks selling at investing works invest that sum in the Fund(s) bargain prices. Simply put, When the share price is down, explains the potential benefits you select. There is no charge 1-800-258-3030 and we will “In any case, don’t make sudden drastic changes. If market Whether you are 10 years from retirement or already retired, Homestead Funds can help. with lower share prices, your your money buys more fund to participate in the service of a regular, systematic investing money buys more shares shares. On the other hand, gladly mail you a copy. volatility is keeping you awake at night or is affecting your For personalized assistance with your financial plan, call 1-800-258-3030 any weekday approach, especially during than if prices are higher. and you can stop it at any during a rising market, your time. You will find a copy of everyday budget, make the move to a more conservative asset between 8:30 a.m. and 5 p.m. Eastern Time. H periods of market volatility. Owning more money buys fewer shares. the Automatic Transactions allocation gradually.” *Distributions can be taken from these accounts as regular installments also, if desired. shares gives you Investing systematically can Sign-up Form on the web site more opportunity average out the total cost of at homesteadfunds.com Investors who focus only on shares purchased. It may take under “Find a Document,” account balance and share time to see the benefit from or you can call a client service price are missing part of the the program, so it’s important Pre-Retirement Timeline equation. The number of to remain committed. Also, associate at 1-800-258-3030 to request one. *For information specific to your situation, consult a tax professional. A YEAR BEFORE RETIRING THREE MONTHS BEFORE RETIRING AT RETIREMENT Taking Advantage of Price Fluctuations investment advisor: drug coverage: for retirement plans Through Dollar Cost Averaging benefits administrator: including Medicare, will start Time Period, ending March 31 Medigap policy for your pension and health benefits 30 years 20 years 10 years is complete This example illustrates one method of systematic 8 and auto insurance: Social Security benefits procedures while still covered investing, known as dollar cost averaging. It com- the income each will generate 7 $760 under your employer’s health plan pares price paid per share when $100 is invested AVERAGE UNIT PRICE Price, in hundreds of dollars and distributions in the S&P 500 on a monthly basis, beginning 6 AVERAGE PRICE PAID event of your death March 31, 1982, for a 10-, 20-, and 30-year period versus the average respective unit prices. 5 $554 retirement plan accounts tax-deferred portfolio growth Periodic investment plans do not assure a profit or 4 $439 provided benefits and your allocation is appropriate for retirement protect against loss in declining markets. This type estimated costs of plan involves continuous investments in securi- 3 $336 ties regardless of changes in price levels. Investors $251 2 $221 should consider their financial ability to continue purchases through periods of volatile price levels. 1 Source: ChartSource, Standard & Poor’s Financial Communications
  3. 3. 2 4 5 Strategies for Mature Investors, continued from page 1 while the second kind, although sometimes erratic, has the If the value of your 401(k) account has dropped and you want to recoup that value potential to outstrip inflation over time. before retiring, you may want to consider working beyond your planned retirement date THE ABCS OF INVESTING or adjusting your plans for retirement life, such as spending less or working part-time. “Also, it’s helpful to continue contributing to your 401(k) and The Benefits of £ Prepare your retirement budget £Discuss with an NRECA £Review health and prescription £Contact the local Social Security office: £ Initiate rollover paperwork Alaina eSet up the date on which benefits, IRAs during this five- to 10-year period. Both of these types Retired or just about to retire £Discuss with your Schrager Systematic Investing eYour financial plan eEvaluate whether you need a Registered £ Double-check that paperwork To learn more specifics about of accounts offer you tax benefits as you save for your future,” At this stage, your primary investment goal is likely preserving the value of your nest Representative eYour optimal retirement date eCompany pensions and benefits £Review long-term care, life, home says Stone. the steps you can take to egg. “I advise the retired shareholders who are on a fixed income to keep a portion ePension distribution options and eWhen to start your eTake care of dental and medical When investors suffer a loss, Buying more for less shares you hold is just as systematic investing does eDetermine if appropriate for retirement of their money in investments designed for stability,” says Suzanne Gillespie. get ready for retirement, read One to five years to retirement eInvesting rollovers Everyone loves a bargain. important because it repre- not ensure a gain or protect eSpousal pension benefits in the they sometimes run for cover At this stage of life, refine the specifics of how much each “However, you may want to keep another portion of your nest egg invested in funds our Helpful Tips brochure, and transfer their stock and bond Let’s say you’re at the sents an opportunity for against a loss. eMinimizing taxes, maximizing income source may provide. Everyone at this stage should that hold stocks. Historically, stock investments have outpaced inflation over time better eProcedures for rolling over any supermarket and see the your account balance to positions into money market Homestead Funds offers “Managing Your Savings in review their investment portfolio to be sure it is well-suited than bonds or money market investments.” paper towels you regularly grow if the share price goes a service that lets you invest eWhether your current investment asset positions. They also may cut back eOptions for retaining employer- buy are on sale. If you’ve got up. And, if you bought more Retirement.” You can download to weather any market fluctuations. Gillespie also recommends making sure your withdrawal strategy considers the effect or stop contributions altogether. the money, likely you’ll buy shares at a lower price, on a regular, systematic schedule. The service allows it from homesteadfunds.com “Generally, it should be positioned to favor income-oriented of taxes. In some cases, that means tapping taxable accounts first as you allow any While this reaction is entirely in quantity to save money then your shares may have you to designate a fixed investments, but you will likely want some exposure to growth income on your tax-deferred and tax-free accounts to continue growing. “That strat- natural, this move may not be later. When stocks suffer greater potential for growth. under “Find a Document,” amount from your payroll or investments, like stock funds, since you’ll want your money egy can keep more of your money working for you, rather than siphoned off in taxes.” in the best interest of long-term a setback, it’s a little like a How systematic bank at regular intervals and or you can call us at to last through retirement,” says Monty Bilkert. For information specific to your tax situation, consult a tax professional. investors. Alaina Schrager store with stocks selling at investing works invest that sum in the Fund(s) bargain prices. Simply put, When the share price is down, explains the potential benefits you select. There is no charge 1-800-258-3030 and we will “In any case, don’t make sudden drastic changes. If market Whether you are 10 years from retirement or already retired, Homestead Funds can help. with lower share prices, your your money buys more fund to participate in the service of a regular, systematic investing money buys more shares shares. On the other hand, gladly mail you a copy. volatility is keeping you awake at night or is affecting your For personalized assistance with your financial plan, call 1-800-258-3030 any weekday approach, especially during than if prices are higher. and you can stop it at any during a rising market, your time. You will find a copy of everyday budget, make the move to a more conservative asset between 8:30 a.m. and 5 p.m. Eastern Time. H periods of market volatility. Owning more money buys fewer shares. the Automatic Transactions allocation gradually.” *Distributions can be taken from these accounts as regular installments also, if desired. shares gives you Investing systematically can Sign-up Form on the web site more opportunity average out the total cost of at homesteadfunds.com Investors who focus only on shares purchased. It may take under “Find a Document,” account balance and share time to see the benefit from or you can call a client service price are missing part of the the program, so it’s important Pre-Retirement Timeline equation. The number of to remain committed. Also, associate at 1-800-258-3030 to request one. *For information specific to your situation, consult a tax professional. A YEAR BEFORE RETIRING THREE MONTHS BEFORE RETIRING AT RETIREMENT Taking Advantage of Price Fluctuations investment advisor: drug coverage: for retirement plans Through Dollar Cost Averaging benefits administrator: including Medicare, will start Time Period, ending March 31 Medigap policy for your pension and health benefits 30 years 20 years 10 years is complete This example illustrates one method of systematic 8 and auto insurance: Social Security benefits procedures while still covered investing, known as dollar cost averaging. It com- the income each will generate 7 $760 under your employer’s health plan pares price paid per share when $100 is invested AVERAGE UNIT PRICE Price, in hundreds of dollars and distributions in the S&P 500 on a monthly basis, beginning 6 AVERAGE PRICE PAID event of your death March 31, 1982, for a 10-, 20-, and 30-year period versus the average respective unit prices. 5 $554 retirement plan accounts tax-deferred portfolio growth Periodic investment plans do not assure a profit or 4 $439 provided benefits and your allocation is appropriate for retirement protect against loss in declining markets. This type estimated costs of plan involves continuous investments in securi- 3 $336 ties regardless of changes in price levels. Investors $251 2 $221 should consider their financial ability to continue purchases through periods of volatile price levels. 1 Source: ChartSource, Standard & Poor’s Financial Communications
  4. 4. eStrategies for eDecoding SEP IRAs . . . . . . . . . .3 e Benefits of eNews Briefs . . . . . . . . . . . . . . . .63 6 in this issue Horizons 2nd Quarter 2012 Mature Investors . . . . . . . . . . . .1 R E S P O N D I N G TO YO U Shareholders like you call our representatives with a lot of good questions. In this column, The we share our responses to some of those questions with the thought that for every shareholder who Systematic Investing . . . . . . . . . .5 calls to ask, there are a hundred who didn’t! We encourage you to call our helpful representatives with your questions as well as to check here each quarter to see if your question is featured. Homestead Funds’ A quarterly newsletter for Homestead Funds’ shareholders Item number 00085941 Decoding SEP IRAs News Briefs Are you I’m a small business owner and have heard that a SEP IRA might be a good way for me to save for retirement. Can you tell me more? Small-Company Stock Fund Homestead Small-Company Stock Fund was named Strategies for Mature Investors eligible A simplified employee pension (SEP) individual retirement arrangement (IRA) offers a simple retirement solution that is appropriate for certain savers. in Kiplinger’s as a top pick in the May 2012 cover story of Tips for investors 50 and up to invest in A SEP IRA allows employers to make tax-deductible contributions on behalf Top 25 Funds Kiplinger’s Personal Finance magazine, “Best Funds a SEP IRA? of eligible employees, including the business owner. for Your Goals: This Year’s Picks for the Kiplinger 25 In addition, these contributions and their earnings There is a lot of information out there about investing for retirement— To learn more specifics Include New Ways to Generate Income.” so much, in fact, that it can feel overwhelming at times. To help continue to grow tax-deferred until they are withdrawn. about SEP IRAs, read our Most frequently a SEP IRA is established by a one- our shareholders who are 50 years of age and older, we posed Helpful Tips guide, “Saving person business owner with no employees, such Warthen, Surick this question to several Homestead Funds’ registered representa- for Retirement in a SEP IRA.” You can download it from as a self-employed person who is a sole proprietor. Any Join Staff Sparkle Warthen and Ken Surick joined tives: What should investors do who are about to retire, homesteadfunds.com type of business entity may establish a SEP IRA — a sole Homestead Funds staff as client service associates especially as it relates to their Homestead Funds’ investments? under “Find a Document,” proprietorship, partnership, corporation, nonprofit or earlier this year. Welcome aboard! or you can call us at governmental agency. The employer typically makes con- Their responses, grouped by each life stage, follow. 1-800-258-3030 and we tributions directly to an IRA set up for each employee. will gladly mail you a copy. Five to 10 years until retirement Some businesses cannot establish a SEP, including “If you are within five or 10 years of your planned retirement those businesses that currently maintain another quali- fied retirement plan as well as those that once main- date, evaluate your sources of retirement income with a tained a defined benefit plan. However, an employee Homestead Funds investment advisor, says Jamie Stone. ” Steven Ulrich who participates in his or her employers retirement plan “We’ll work together to nail down your sources of retirement Registered Representative can set up a SEP for self-employment income. income and how much each will provide.” A SEP IRA has broad appeal due to its high annual contribution limits, com- The most common sources of income are Social Security retire- pletely discretionary and flexible annual contributions and minimal administration. Many employers favor SEPs because they are simple to implement and main- ment benefits, pensions, 401(k)s and IRAs. Some people like tain. Also, they do not require trust documents, discrimination testing or IRS to think of their income sources as being in one of two groups: reporting. In addition, employers favor the flexibility of varying contributions from year to year and the option of skipping contributions entirely, if they want. INSTALLMENT INCOME you will receive at regular intervals Call 1-800-258-3030 to speak with one throughout retirement, like Social Security and pension payments. Also, SEPs involve no initial fees and minimal administrative costs. Plus, SEP rules are fairly easy to grasp: Except for higher contribution limits, Traditional IRA of our friendly client service associates, available weekdays INVESTMENT INCOME, like the kind you can tap from your 401(k) tax rules apply to SEP IRAs. H plan and IRAs.* between 8:30 a.m. and 5:00 p.m. Eastern Time. Ideally, it’s good, but not always necessary, to have both types of income in retirement, since the first group gives you a guaran- teed income stream through your lifetime, continued on page 2 If a SEP IRA sounds like it might be the right choice for you or your business, call us toll-free at 1-800-258-3030 to learn more 4301 Wilson Boulevard Arlington, VA 22203-1860 1-800-258-3030 www.homesteadfunds.com from one of our representatives. Mutual funds are subject to market risk, including the potential loss of principal invested. Homestead Funds’ investment manager, RE Advisers Corporation, and distributor, RE Investment Corporation, are indirect, wholly owned subsidiaries of NRECA. RE Investment Corporation, Distributor. 06/12

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