Disclosure Notice

1. Disclosure Notice The presentation (The Road to Retirement, ‘Charted Course or Aimless Wander’) and accompanying narrative was created by the Arkansas Securities Department. It is intended solely for educational purposes and cannot be copied, distributed, or used in any manner without the permission of the Arkansas Securities Department.

2. The road to Retirement ‘Charted Course or Aimless Wander’

3. Retirement Quotes “I’m retired – goodbye tension, hello pension.” “Retirement: World’s longest coffee break.” “Retirement - when you stop living at work and begin working at living.” “Life begins at retirement.”

4. Retirement Quotes “The question isn’t at what age I want to retire but, at what income.” “Retirement: It’s nice to get out of the rat race, but you have to learn to get along with less cheese.” “The retirement challenge is how to spend time without spending money.” “Retirement is when the living is easy and the payments are hard.”

5. Retirement ‘Reality’ – The Numbers2013 Retirement Confidence Survey – Employee Benefit Research Institute 87%- Workers Not Confident About Their Retirement 57% - Workers Reporting The Value Of Their Savings & Investments Is Less Than $25,000 28%- Workers Saying They Have Less Than $1000 54% - Workers Who Haven’t Tried To Calculate How Much They Will Need To Save For A Comfortable Retirement

6. What Should You Expect From This Program? General information on the steps required to develop a ‘personal’ retirement plan, including: • Establishing Basic Retirement Goals • Sources of Retirement Income • Retirement Income ‘Gaps’ and How to Close • Leveraging Your Personal Retirement Savings With Tax-Advantaged Resources • Price of ‘Procrastination’ • Basic Investing – Your Investment ‘Profile’, Products, Principles • Implementing My Plan – Who Do I Work With and What Should I Know? • Resources You Can Use For Assistance

7. Developing a Retirement PlanFundamental Steps • Establish Goals • Assess Current Situation • Develop Objectives and Strategies • Review and Update As Required

8. Developing a Retirement PlanSome Things To Remember • Initial plans are designed to provide a ‘general’ assessment of needs and a ‘basic’ course of action to achieve them. • Projections are estimates based on assumptions, which may or may not be valid over the horizon of the plan. • The nearer to retirement, the more precise the plan.

9. Developing Basic Retirement GoalsWhen Do I Want To Retire? ‘My’ Retirement Age or Date. But, you may need to be flexible!

10. Developing Basic Retirement GoalsHow Much Income Will I Need? Food, Utilities, Clothing, Home, Auto Insurance – Home, Auto, Life, Healthcare Children – College and/or Support Mortgage / Credit Cards Travel & Fun Emergency Funds

11. Developing Basic Retirement GoalsHow Much Income Will I Need?AON/Georgia State University – ‘Replacement Ratio Study’ Assumptions: No Mortgage; No Dependent Children; Reduced Taxes; No Work-Related Expenses

12. Developing Retirement GoalsConsider the Effects of Inflation $1 of Purchasing Power Today $30,000 of Income Today

13. Developing Retirement GoalsConsider the Effects of Inflation $1 of Purchasing Power Today $30,000 of Income Today

14. Developing Retirement GoalsConsider the Effects of Inflation

15. Developing Retirement GoalsConsider the Effects of Inflation Is the ‘Rate of Return’ on My Retirement Savings Staying Ahead of Inflation?

16. Developing Basic Retirement GoalsHow Long Will I Live?Average Life Expectancies

17. Developing Retirement GoalsHow Long Will I Live?Life Expectancy Probabilities

18. Developing Retirement GoalsHow Long Will I Live?Life Expectancy Probabilities

19. Sources of Retirement Income • Employee Pension • Social Security • Personal Savings

20. Sources of Retirement IncomeSocial Security • Government program initiated in 1935 • Qualifying – Requires at least 40 ‘credits;’ generally, 10 years in which you had earnings subject to social security taxes – Benefit based on highest 35 years of earnings • Benefit Ages – ‘Early’– Age 62 to ‘full’ retirement date (penalties apply) ‘Full’ – Birthday 1937 and earlier – Age 65 1938 to 1942 – Graded, Age 65, 2 mo. to 65, 10 mo. 1943 to 1954 – Age 66 1955 to 1959 – Graded, Age 66, 2 mo. to 66, 10 mo. 1960 + - Age 67 • ‘Delayed’ – ‘Full’ To Age 70 (additional benefits accrue)

21. Sources of Retirement IncomeSocial Security • Social Security Benefit (2013) – ‘Average’ $1,261/mo. – ‘Maximum’ $2,533/mo. • Income Limits (2013) – Before ‘full’ benefit date, ‘earned income’ is limited to $15,120 - For every $2 earned over the limit, $1 of benefit is withheld - No limit at or after ‘full’ benefit date • Taxation of Benefits – File Federal Taxes as: Individual - Income between $25,000 and $34,000 – Pay on up to 50% Income more than $34,000 – Pay on up to 85% Joint – Income between $32,000 and $44,000 – Pay on up to 50% Income more than $44,000 – Pay on up to 85% • Other Benefit Provisions: Disability Survivorship – Spouse and Minor Children Disabled Adult Children

22. Sources of Retirement IncomeSocial Security Concerns and Issues: • Social Security Trust Fund is Critically Underfunded – Projected to be Depleted in 2033 – Medicare in 2024 • Causes - Changing Demographics - Increasing Life Expectancies – Lower ‘Worker’ to ‘Retiree’ Ratio • Fixing the Problem – Raise Taxes – Lower Benefits • Bottom Line - Significant Changes ‘Must’ Occur

23. Sources of Retirement IncomePersonal Savings (USA) Average Personal Savings Rate Household Savings Rate Comparison (2012) • Past 10 Years = 3.61% • Range: • Low = 1.86% (2005) • High = 5.03% (2008)

24. Sources of Retirement IncomePersonal Savings (USA) Average Net Worth By Age Group Average household debt ($96,173)

25. Sources of Retirement IncomePersonal Savings (USA) Average Net Worth By Age Group Average household debt Per Indebted

26. Developing Basic Retirement GoalsInitial Retirement Plan Example ‘John’ Single - Age 45 Started With Current Employer - Age 35 Assumptions: Planned Retirement Date - Age 65 Current Annual Salary - $35,000 Has Traditional Pension Plan Inflation – 3% Replacement Ratio – 85% Planned Retirement Years – 25 (Age 90) Savings $35,000 in Bank CD’s Avg. Rate of Return – 3% Not Currently Saving For Retirement

27. Developing Basic Retirement Goals Initial Retirement Plan Example Projected Retirement Income Replacement Need: $35,000 @ 3% inflation for 20 years X 85% = $53,732 per year Sources of Retirement Income: Pension Plan – Estimated $2,200 per month, or $26,400 per year Social Security – Estimated $1,140 per month, or $13,680 per year $40,080 per year ($13,652) per year Personal Savings - $35,000 @ 3% for 20 Years = $63,725 Years to Deplete @ 13,652 per year with a 3% rate of return = 5.1 years 25 (years in retirement) – 5.1 years (funded) = 19.9 years (income deficient) Retirement Income ‘Gap:’ $13,652 X 19.9 years =

28. Developing Basic Retirement Goals Initial Retirement Plan Example Projected Retirement Income Replacement Need: $35,000 @ 3% inflation for 20 years X 85% = $53,732 per year Sources of Retirement Income: Pension Plan – Estimated $2,200 per month, or $26,400 per year Social Security – Estimated $1,140 per month, or $13,680 per year $40,080 per year ($13,652) per year Personal Savings - $35,000 @ 3% for 20 Years = $63,725 Years to Deplete @ 13,652 per year with a 3% rate of return = 5.1 years 25 (years in retirement) – 5.1 years (funded) = 19.9 years (income deficient) Retirement Income ‘Gap:’ $13,652 X 19.9 years = $ 271,675

29. Closing Income ‘Gaps’Options • Save More • Increase Rate of Return on Savings • Adjust Retirement Date • Consider Working In Retirement

30. Closing Income ‘Gaps’ What about our ‘example’ situation? ‘Gap’ = $271,675 Save More – $381.59 (26 times per year) ($9,921.34 per year) @ 3% for 20 years = $271,676

31. Closing Income ‘Gaps’ What about our ‘example’ situation? ‘Gap’ = $271,675 Save More – $381.59 (26 times per year) ($9,921.34 per year) @ 3% for 20 years = $271,676 Increase Rate of Return – Total Savings Required = $341,300 ($13,652 X 25 years) Rate of Return = 6% on all savings (including existing $35,000 ) $35,000 + $224.50 (26 times per year) ($5,837 per year) @ 6% for 20 years = $341,306

32. Closing Income ‘Gaps’Leveraging Your Retirement Savings Dollars Payroll deducted retirement savings programs – 401k, 403b and 457b • Tax-advantaged savings - Contributions are made with pre-tax dollars ($1 of contribution reduces paycheck by less than $1) • Tax-deferred growth – Gains or earnings ‘deferred’ • Contribution limits – $17,500, plus additional $5,500 if over age 50 • Some employers may make contributions or offer ‘matches’ • Investment options – Fixed income and mutual funds • Distributions – 401k/403b – Age 59 ½ or, 55 & ‘separation from service’ 457b – ‘separation from service’ • In-Service Withdrawals – 401k/403b – Specified purposes, check w/plan 457b - Only for ‘extreme financial hardship’

33. Closing Income ‘Gaps’Leveraging Your Retirement Savings Dollars What about our ‘example’ situation ? Previous ‘after-tax’ contribution scenario - Rate of Return = 6% on all savings (including existing $35,000) $35,000 + $224.50 (26 times per year) ($5,837 per year) @ 6% for 20 years = $341,306

34. Closing Income ‘Gaps’Leveraging Your Retirement Savings Dollars What about our ‘example’ situation ? Previous ‘after-tax’ contribution scenario - Rate of Return = 6% on all savings (including existing $35,000) $35,000 + $224.50 (26 times per year) ($5,837 per year) @ 6% for 20 years = $341,306 Using ‘pre-tax’ contributions of $224.50 = net paycheck reduction of $175.11 ($4,552.86 per year)

35. The Cost of ‘Procrastination’

36. What If I Don’t Have A Pension Plan Or Don’t Have Much Time Until Retirement? What’s Your Choices? Accept retirement ‘as is’ – Develop a plan to adjust Be ‘flexible’ on your retirement date Consider a ‘post-retirement’ career Start doing something's to ‘cushion’ the financial impact of less money in retirement What Can I Do? Start reducing debt Start thinking about unnecessary expenses Start saving or save more Utilize ‘tax-advantaged’ programs Focus on ‘take-home pay’ reductions ‘Pay yourself first’ - Increase savings amount each year or with each salary increase you get

37. Questions?

38. Basic InvestingWhat’s My Investing ‘Profile’? Some Questions to Consider: • How do I feel about taking ‘risk’ with my money? • Do I understand the ‘risk / reward’ relationship? • How well do I tolerate fluctuations in the value of my assets? • What’s my time horizon? • What’s my investing experience?

39. Basic InvestingSometimes the ‘Need’ Dictates the ‘Risk’ • Conservative investments/contributions ≠ objective • ‘Forced’ to look at higher risk/higher reward options • ‘Last Resort’: • Adjust Retirement Date • Work In Retirement

40. Basic InvestingSome Principles To Consider • All Investments Carry Some Level of Risk • Investments With Potentially Higher Returns Are Generally Accompanied By Higher Risk Factors • Diversification – Investing In A Variety Of Assets To Minimize Risk • Asset Allocation - Balancing Risk Versus Reward By Adjusting The Percentage Of Each Asset In An Investment Portfolio According To Goals, Risk Tolerance, And Time Horizon • Successful Investing Requires Periodic Monitoring And Adjustments

41. Basic InvestingInvestment Choices • Certificates of Deposit • Money Market Funds • Bonds – Government , Corporate • Stocks – Preferred, Common • Mutual Funds – Bond, Stock, Index, ‘Hybrid’ • Options

42. Basic InvestingHistorical Rates of Return Average Rate of Return - 1926 thru 2010 • U.S. Small Company Stocks : +12.1% • International Stocks: +10.1% • U.S. Large Company Stocks: +9.9% • Balanced Stock/Bond Portfolio: +8.3% • Bonds: +5.5% • Money Market: +3.6% Inflation : 3%

43. Basic InvestingImplementing My Plan Who Should I Work With and What Should I Know? • Work Only With Licensed / Registered Companies and Representatives • Be Informed About Your Investments – Stay In Charge of Your Money • Understand The ‘Fine Print’ – Terms, Fees, Ability and Cost to Access Money • Never Sign Anything Until You Are Completely Sure • Demand Periodic Statements and Representative Reviews • Be On Guard For ‘Too Good To Be True’ Deals

44. Retirement PlanningResources Retirement Planning: U.S. Department of Labor – ‘Taking The Mystery Out Of Retirement Planning’ - www.dol.gov/ebsa/Publications/nearretirement.html Sources of Retirement Income: U.S. Social Security Administration - Benefit Calculator - www.ssa.gov/planners/calculators.htm Traditional ‘Pension Plan’ – See Your Employer Leveraging Retirement Savings Dollars: ‘Tax-Advantaged Savings Programs – See Your Employer Implementing My Plan: Financial Industry National Regulatory Association (FINRA) – Broker Check – www.finra.org/Investors/ToolsCalculators/Broker Check

45. Questions?

47. “Would you tell me which way I ought to go from here?” asked Alice. “That depends a good deal on where you want to get,” said the Cat. “I really don’t care where” replied Alice. “Then it doesn’t much matter which way you go,” said the Cat. d

48. ‘If you don’t know where you’re going, it doesn’t matter which road you take.’

50. The road to Retirement ‘Charted Course or Aimless Wander’