1 / 8

Investing 101

Investing 101. L. Gattis Monday 7PM-8:30PM March 18, 2013 103 Career Services Building. Agenda. How much do I need in retirement? How much do I need to save today for retirement? How do I allocate funds among asset classes? How do I select securities? Take Aways.

amato
Download Presentation

Investing 101

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Investing 101 L. Gattis Monday 7PM-8:30PM March 18, 2013 103 Career Services Building

  2. Agenda • How much do I need in retirement? • How much do I need to save today for retirement? • How do I allocate funds among asset classes? • How do I select securities? • Take Aways

  3. How Much Do I Need in the First Year of Retirement? • Maybe 40% – 70% of final year income < Plug < Smooth

  4. How Much Wealth do I Need at Retirement? • Maybe 8-12 times final year income

  5. How Much of My Income Do I Need to Save? • Assumes long term average returns and Age in Bonds Rule • Maybe 10-15% if you start at age 25 • You mayneed to save over 17% if you start at age 35! • Assumptions • $100K Salary • 11% Savings Rate • Age in Bonds Allocation • 6% Real Stock Returns • 2% Real Bond Returns

  6. How Do I Select Securities? • Mutual Funds “Managed” • E.g., Fidelity Magellan Fund • 0.53% Net Expense Ratio, 10-Year Return = 5.32% • Index Funds • E.g., Fidelity Spartan 500 Index • 0.10% Net Expense Ratio, 10-Year Return = 8.16% • Target Retirement Date (Life Cycle) Funds • E.g., Vanguard Target Retirement 2045 • 63% U.S. Stock Index • 27% Intl Stock Index • 10% Total Bond Index

  7. Personal Financial Risks • Death/Disability/Unemployment of Working Spouse • Life and Disability Insurance, 6-month emergency fund • College Debt (and other personal debt) • Need to save about $5,000 per year per child (starting at birth) to fully fund $25,000/year college • Market crash near retirement • Life cycle investing (reducing risk over time) • Downsize or delay retirement • Retirement Healthcare • LTC, Medi-gap insurance policies • Home equity • Long Life • Long Life Insurance • Purchase Life Annuity at Retirement • Reverse Mortgage

  8. Take Aways • Need retirement wealth of 8-12 times final year income to smooth retirement transition • Save 10-15% of your salary starting at age 25 • Save more than 15% if start at age 35 • Reduce portfolio risk as you approach retirement – either by annual reallocations or life cycle funds • Risk Mitigation: Emergency Fund, Insurance, Home Equity, Retirement Flexibility (downsize/delay)

More Related