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Welcome

Welcome. Workshop Objectives. Introduce Educate Illustrate. Our Commitment. Provide sound financial information Help you identify goals Offer complimentary consultation. Evaluation Form. About Your Workbook. Informative graphics Wide margins Helpful exercises. 4.

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Welcome

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  1. Welcome

  2. Workshop Objectives • Introduce • Educate • Illustrate

  3. Our Commitment • Provide sound financialinformation • Help you identify goals • Offer complimentaryconsultation

  4. Evaluation Form

  5. About Your Workbook • Informative graphics • Wide margins • Helpful exercises 4

  6. Your Financial Future Lifetime Earnings $ 40,000 $ 70,000 $ 100,000 per year per year per year 10 years $ 480,244 $ 840,427 $ 1,200,611 20 years $ 1,191,123 $ 2,084,466 $ 2,977,808 30 years $ 2,243,398 $ 3,925,946 $ 5,608,494 Assumes a 4% annual salary increase

  7. Your Financial Future • Overcome obstacles to success • Practice sound financial management

  8. Lack of Direction

  9. Debt e Credit Card \ kred’- t kärd \ n.: 1. A means for buying some- thing you don’t need, at a price you can’t afford, with money you don’t have.

  10. Inflation

  11. The Rule of 72 72 Inflation Rate 6% Inflation 72 ÷ 6 = 12years 4% Inflation 72 ÷ 4 = 18 years 6

  12. Taxes Tax Freedom Day The average person will work until late April to pay all federal, state, and local taxes. Source: Tax Foundation

  13. Yield After Taxes and Inflation Investment $ 10,000 8% interest + 800 Taxes (27% tax bracket) – 216 Net interest $ 584 Total after taxes $ 10,584 Adjusted for inflation (4%) ¸ 1.04 Net after taxes and inflation $ 10,177 Net return = 1.77% 6

  14. What Is Financial Management? N ESTATE PLANNING W E INVESTMENT PLANNING S RETIREMENT PLANNING TAX PLANNING RISK MANAGEMENT CASH MANAGEMENT

  15. Do I Need Financial Management? 7

  16. Cash Management CASH MANAGEMENT

  17. Cash Flow Total Income $ ________ Total Expenses – $ ________ Net Cash Flow = $ ________ 8

  18. Liquidity Fund Savings = Liquidity Ratio Monthly Expenses

  19. Reposition Assets and Liabilities

  20. Risk Management RISK MANAGEMENT

  21. Risk Management • Life • Disability • Medical andlong-term care • Auto • Home • Liability

  22. Protect Yourself

  23. How Do You Know If You Have Enough? 9

  24. IncomeReplacement Calculator Mr. and Mrs. Harrick 1. Total income now $ 80,000 2. Total income available $ 40,000 3. Additional income needed $ 40,000 4. Capital required $ 500,000 5. Additional cash requirements $ 125,000 6. Life insurance needed $ 625,000

  25. Investment Planning INVESTMENT PLANNING

  26. Investment Objectives Safety Growth Income

  27. The Investment Spectrum HIGHER RISKHIGHER POTENTIAL RETURN FIXEDINTEREST CASHEQUIVALENTS BONDS STOCKS LOWER RISKLOWER POTENTIAL RETURN

  28. Diversification CASH FIXED PRINCIPAL DEBT EQUITY TANGIBLES

  29. Diversification Example BILL JILL $50,000 $50,000

  30. Diversification Example Bill and Jill after 20 years Bill 7% $ 193,485 Jill (loss) $ 0 5% $ 26,533 7% $ 38,697 10% $ 67,275 12% $ 96,463 Jill’s Total $ 228,968 Difference = $ 35,483 This is a hypothetical example. Actual results will vary.

  31. College Planning Mr. and Mrs. Thompson • Combined income: $48,000 • One child: Robby, age 5 • College cost: $10,000

  32. College SavingsCalculator Mr. and Mrs. Thompson • Estimated future collegecost: $107,000 for 4 years • Annual savings required:$5,671 a year for 13 years 12

  33. Dollar Cost Averaging

  34. Dollar Cost Averaging PRICE PER SHARES INVESTMENT SHARE PURCHASED MONTH 1 $ 200 $ 10.00 20 MONTH 2 $ 200 $ 8.00 25 MONTH 3 $ 200 $ 5.00 40 MONTH 4 $ 200 $ 8.00 25 MONTH 5 $ 200 $ 10.00 20 TOTAL $1,000 130 SHARES AVERAGE PRICE: $8.20 AVERAGE COST: $7.69 This is a hypothetical example. Actual results will vary.

  35. Tax Planning TAX PLANNING

  36. Tax Strategies

  37. Tax Deferral Mr. Washington • 45 years old • $70,000 salary • $85,000 investment portfolioInterest income: $6,800 Taxes: $2,040

  38. Tax Deferral Mr. Washington Taxable (30% tax bracket) Tax deferred Tax deferred after taxes $396,185 $85,000 initial portfolio8% annual rate of return $302,827 $269,637 $252,754 $192,476 $183,507 $145,574 $124,891 $111,619 5 years 10 years 15 years 20 years Mortality and expense charges, sales charges, and administrative fees are not taken into account and would reduce the performance shown if they were included.

  39. Tax-Free Investments Calculating the Taxable Equivalent Yield EXAMPLE EXAMPLE YOU 1. Take the tax-exempt yield 7% 7% _____% 2. Your marginal federaltax rate 27% 35% _____% 3. Subtract your rate from100% (1.00 – line 2) 73% 65% _____% 4. Taxable equivalent yield 9.59% 10.77% _____%(line 1 ÷ line 3) 13

  40. Retirement Planning RETIREMENT PLANNING

  41. Sources ofRetirement Income Social Security Employer-sponsored plans Personal savings and investments

  42. Other Retirement Planning Considerations Distribution options Tax considerations

  43. Changing Jobs Ms. Martin Total distribution amount $ 40,000 20% withholding – $ 8,000 Early withdrawal penalty – $ 4,000 Additional income tax due – $ 2,800 After-tax distribution $ 25,200

  44. Rollover Ms. Martin Tax-deferred growth @ 8% $402,506 $273,939 $186,438 $126,887 $86,357 $58,773 $40,000 START 5 10 15 20 25 30 YEARS

  45. Retirement Distribution Mr. and Mrs. Tucker Annuity • Single-life annuity • Joint and survivor annuity

  46. Increasing YourPension Mr. and Mrs. Tucker Surviving Spouse $1,000 $1,200 Death Benefit $200

  47. RetirementDistribution Mr. and Mrs. Tucker Lump-sum distribution — $220,000 Tax alternatives Ordinary income tax $ 58,500 10-year averaging $ 42,100 Capital gains + 10-year averaging $ 38,300 Potential tax savings $ 20,200

  48. Estate Planning ESTATE PLANNING

  49. John Wayne

  50. Estate PlanningConcerns • Distribution • Wills • Trusts • Gifting • Probate • Taxes and fees

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