1 / 45

Welcome

Welcome. H.R. Options 401(k) Plan . Agenda. The Importance of Saving for Retirement How Your Plan Works Asset Allocation Investment Options Under the Plan (Building an Investment Portfolio) Smart Investment Behavior. Why Participate in Your 401K?. 100%. • Male • Female

robyn
Download Presentation

Welcome

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. Welcome H.R. Options 401(k) Plan

  2. Agenda • The Importance of Saving for Retirement • How Your Plan Works • Asset Allocation • Investment Options Under the Plan (Building an Investment Portfolio) • Smart Investment Behavior

  3. Why Participate in Your 401K? 100% • Male • Female • At least one spouse 78 81 86 75 Americans Are Living Much Longer! 85 88 91 50 91 93 96 25 0 65 years old 70 75 80 85 90 95 100 105

  4. Why Participate in Your 401(k)? Today’s workers(Expected sources of retirement income) Today’s retirees(Actual sources of income) 20% 36% 14% 43% 66% 20% • Social Security • Pension plans • Personal savings/other

  5. The Rising Cost of Postage1983-2010 44¢ 29¢ 18¢ 33¢ 25¢ 15¢ 1983 1993 2010 Source: United States Postal Service The Effects of Inflation

  6. Advantages of Your 401(k) Plan? • Convenience – Automatically Done Through Payroll Deductions • Tax Benefits • Pre-Tax - Immediately lowers your taxable income. Result: Less Taxes Now! • After-Tax (Roth) – Contribution and growth not taxed with qualified withdrawal. Result: No Taxes Later! • Tax-Deferred Growth – No Taxes Paid on Growth Until Withdrawal. Result: Faster Growth! • Lower Cost • Employer Match!!

  7. H.R. Options 401(k) Plan How Your Plan Works

  8. Plan Details Eligibility: You must be at least age 21; and, You must complete 500 hours of service during the Plan Year. You may enter the plan on January 1st, April 1st, July 1st , or October 1st coinciding with or next following the date you meet this requirement.

  9. How Your Plan Works Salary Deferral Contributions • The salary deferral limit is up to $16,500. • If age 50 or over, you may contribute an additional $5,500in catch-up contributions. • Your contributions can be Pre-Tax dollars, After-Tax (Roth) dollarsor a Combination of Both(not to exceed the above limits) • You may change your deferral election anytime by visiting the recordkeeping website, www.AccountTRAX.com.

  10. How is a Traditional 401(k) contribution different from the Roth contribution? Traditional 401(k) contributions are Pre-tax dollars. Roth 401(k) contributions are After-tax dollars. Traditional 401(k) Deferrals- Federal income taxes on the deferrals and the earnings to your account are postponed. You will pay taxes on any distribution (withdrawal) from your standard 401(k) portion of your account. Roth Deferrals- Contributions are taxed at the time they are contributed. You will not be subject to taxation on these amounts as well as theearnings provided you receive a qualified distribution from your Roth account.

  11. Roth vs. Traditional At a Glance

  12. Plan Details Continued…. Employer Contribution HR Options matches the funds you save in your 401(k) account with $.20 (twenty cents) on the dollar, up to 3% of compensation. This matching contribution will be allocated to your account each pay period so you will be benefitting from dollar cost averaging throughout the year.

  13. Plan Details Continued…. Vesting Your 401(k) contributions are always 100% vested. The employer matching contributions are also 100% vested. Rollovers Rollovers from other qualified plans are allowed.

  14. Plan Details Continued…. Withdrawals Termination of Employment Financial Hardship Attaining age 59 ½ Retirement Disability Death The following may apply: 20% Federal tax withholding and state tax withholding. Additional federal and state taxes may be due. Federal and state penalties may also apply to certain distributions.

  15. How Your Plan Works (Cont’d) Accessing your account Online access at www.AccountTRAX.com Investor Questionnaire Links to Morningstar.com Personalized Rate of Returns Retirement Calculator Download Administration Forms & Documents including Summary Plan Description 24 hour Voice Response Unit at 888-401-5629 Quarterly statements will be mailed to your home address. You may also sign up for electronic delivery of this information with our eStatements.

  16. How to Enroll in the Plan Online Enrollment Log onto www.AccountTRAX.com. Input your Social Security# as your initial User ID and the last four digits of your Social Security # as you default Password. The system will immediately prompt you to change these security items after this initial log in. Verify your Personal Information including home address. Input an e-mail address and answer the Verification Question. Designate a Beneficiary (both primary and secondary) Input your salary deferral amount. Select your investments. The sooner you enroll, the sooner your are on your way to meeting your financial goals!

  17. Bonds Stocks Cash What is Asset Allocation? Asset allocation is theprocess of combining assetclasses in aportfolio to reduce volatility and potentially increase returns.

  18. 1926 1936 1946 1956 1966 1976 1986 1996 2006 Stocks, Bonds, Bills, and Inflation 1926–2009 $12,231 $10,000 $2,592 Compound annual return • Small stocks 11.9 % 1,000 • Large stocks 9.8 • Government bonds 5.4 • Treasury bills 3.7 3.0 • Inflation $84 100 $21 $12 10 1 0.10

  19. 12% 15% 19% 27% 37% 85% 44% 61% Potential to Reduce Risk and/or Increase Return1970–2009 Fixed income portfolio Lower risk portfolio Higher return portfolio • Stocks • Bonds • Cash Return: 8.0% Return: 8.0% Return: 8.9% Risk: 7.8% Risk: 5.8% Risk: 7.8% • Returns above are annualized returns. “Risk” is standard deviation. Roughly 2/3 of the time, returns are within one standard deviation of the return number listed above.

  20. The Case for Diversifying 50% Return Compound annual return • Stocks 8.5% • 50/50 portfolio 5.8 40 • Bonds 1.9 30 20 10 0 –10 –20 Year 1 2 3 4 5 6 7

  21. Choosing Your Asset Allocation What To Consider • Personal Need, Willingness and Ability to take Risk • Retirement Time Horizon • How long until you retire? • How long will you be in retirement? • Expected Rate of Return • Risk Reward Trade-Off

  22. Building An Investment Portfolio

  23. Investment Options Under the Plan Building an Investment Portfolio

  24. Vanguard Target Retirement 2015 Vanguard Target Retirement 2025 Vanguard Target Retirement 2035 Vanguard Target Retirement 2045 Vanguard Target Retirement 2050 These Vanguard funds invests in other Vanguard mutual funds according to an asset allocation strategy designed for investors planning to retire in or within a few years of the funds indicated year. Building An Investment Portfolio Vanguard Target Retirement Funds

  25. Target Retirement Glide PathAsset Allocation Funds (Age Based)

  26. Building an Investment Portfolio Balanced Fund T. Rowe Price Capital Appreciation • Seeks long term capital appreciation. • Invests approximately 60% of assets in equities (stocks) and 40% of assets in debt securities (bonds). • Suitable for a moderate investor.

  27. Wells Fargo Galliard Stable Value Seeks to provide current income while maintaining liquidity and a stable share price of $1. Invests primarily in high-quality, short-term money market instruments. Building an Investment Portfolio Stable Value Fund

  28. Vanguard Intermediate-Term US Treasury Seeks to provide a moderate and sustainable level of current income. Normally invests at least 80% of assets in U.S. Treasury bills, notes and bonds issued by U.S. Treasury. Building an Investment Portfolio Bond Funds Vanguard Inflation Protected Securities • Seeks to provide inflation protection. • Invests in inflation indexed U.S. government bonds.

  29. PIMCO Total Return Seeks total return consistent with preservation of capital. Normally invests at least 65% of assets in debt securities, including U.S. government securities , corporate bonds, and mortgage-related securities. Mainstay High Yield Corporate Seeks total return consistent with preservation of capital. Normally invests at least 80% of assets in high yield bonds. Building an Investment Portfolio Bond Funds- Cont.

  30. Building an Investment Portfolio Domestic Large Company Funds Vanguard Windsor II Seeks long-term capital appreciation and income. Invests mainly in mid- and large-capitalization companies whose stocks are considered by an advisor to be undervalued. Vanguard 500 Index Seeks results corresponding with the total return of common stocks represented by the SP 500 index. Normally invests at least 80% of assets in equity securities of companies included in the index.

  31. Building an Investment Portfolio Domestic Large Company Funds cont’d American Funds Growth Fund of America • Seeks to provide long-term growth of capital through a diversified portfolio of common stocks. • Invests primarily in common stocks, convertibles, preferred stocks, U.S. government securities, bonds and cash. • May invest up to 10% of assets in debt securities rated below investment grade.

  32. Building an Investment Portfolio Domestic Mid-Sized Company Funds Janus Perkins Mid-Cap Value Seeks long-term growth of capital and income Invests mainly in the stocks of medium size U.S. companies, choosing stocks considered to be undervalued and trading at prices that the advisor feels are below average. Vanguard Mid-Cap Index Seeks to track the performance of a benchmark index that measures the investment return of mid-capitalization stocks. It attempts to replicate the target index by investing all, or substantially all, of assets in the stocks that make up the index.

  33. Building an Investment Portfolio Domestic Mid-Sized Company Funds-Cont. Baron Asset Seeks capital appreciation. Invests in common stocks of middle sized growth oriented companies.

  34. Building an Investment Portfolio Domestic Small-Sized Company Funds Royce Pennsylvania Mutual Seeks long-term growth of capital. Invests at least 65% of assets in the equities of small- and micro-cap companies. T. Rowe Price New Horizons Seeks long term capital growth. Invests in a diversified group of small, emerging growth companies.

  35. Building an Investment Portfolio International Funds American Funds EuroPacific Growth Seeks long-term growth of capital. Primarily invests in securities of issuers located in Europe and the Pacific Basin. Designed for investors seeking capital appreciation and diversification through investments in stocks of issuers based outside the United States.

  36. Building an Investment Portfolio International Funds – Cont. Columbia Acorn International Select Seeks long term capital appreciation. Invests in middle to small sized companies outside the U.S. that are considered growth oriented.

  37. Building An Investment Portfolio Sample Portfolio – Moderately Aggressive • Cash 5%: Wells Fargo Galliard Stable Return • Bonds 15%: PIMCO Total Return • Large Company Stocks 35%: Vanguard 500 Index • Mid-Small Company Stocks 20%: Vanguard Mid-Cap Index(10%), T. Rowe Price New Horizons(10%) • International Stocks 25%: American Funds EuroPacific Growth (20%), Columbia Acorn Intl Select (5%)

  38. Equity portfolio A Equity portfolio B Deep-value Core-value Blend Core-growth High-growth Deep-value Core-value Blend Core-growth High-growth Giant Giant Large Large Mid Mid Small Small Micro Micro Building An Investment Portfolio More Funds Does Not Always Mean Greater Diversification!

  39. Dos and Don'ts of Smart Investing • Don’t Try to Time the Market • Don’t Be Too Conservative • Diversify, Diversify • Contribute Regularly • Re-Balance • Navigate the Noise

  40. Smart Investment Behavior:Don’t Try to Time the Market! $6 $4.84 Hypothetical value of $1 invested from 1990–2009 $4 $2.12 $2.04 $2 $0 S&P 500 S&P 500 minus best 10 months Treasury bills

  41. 1926 1936 1946 1956 1966 1976 1986 1996 2006 Smart Investment Behavior: Don’t Be Too Conservative! (After Taxes) $1,000 Compound Annual Return $510.68 • Stocks 7.7 % • Municipal bonds 4.4 • Government bonds 3.4 • Inflation 3.0 • Treasury bills 100 2.3 $36.22 $15.96 $12.05 10 $6.51 1 0.10

  42. Highest Return Lowest Return Asset-Class Winners and Losers 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 L/TGovt. Bonds LargeStocks LargeStocks Small Stocks L/T Govt. Bonds Small Stocks Intl Stocks Intl Stocks Intl Stocks Intl Stocks L/T Govt. Bonds Intl Stocks Large Stocks Small Stocks Large Stocks 37.6% 23.0 33.4 28.6 29.8 21.5 22.8 17.8 60.7 20.7 14.0 26.9 11.6 25.9 32.5 Small Stocks Small Stocks Small Stocks Intl Stocks Intl Stocks T-Bills T-Bills T-Bills Intl Stocks Small Stocks L/T Govt. Bonds SmallStocks L/T Govt. Bonds T-Bills Small Stocks 34.5 17.6 22.8 20.3 27.3 5.9 3.8 1.6 39.2 18.4 7.8 16.2 9.9 1.6 28.1 L/T Govt. Bonds Diversified Portfolio Diversified Portfolio L/T Govt. Bonds Large Stocks Diversified Portfolio L/T Govt. Bonds Diversified Portfolio Large Stocks Diversified Portfolio Diversified Portfolio Large Stocks Large Stocks Diversified Portfolio Large Stocks 31.7 10.3 15.9 13.1 21.0 0.6 3.7 –6.5 28.7 12.0 7.3 15.8 5.5 –20.7 26.5 Diversified Portfolio Intl Stocks L/T Govt. Bonds Diversified Portfolio Diversified Portfolio Small Stocks Diversified Portfolio Small Stocks Diversified Portfolio Large Stocks Small Stocks Diversified Portfolio Diversified Portfolio Small Stocks Diversified Portfolio 23.8 6.4 15.9 12.2 14.3 –3.6 –0.8 –13.3 24.8 10.9 5.7 12.9 5.4 –36.7 14.0 Intl Stocks T-Bills T-Bills T-Bills T-Bills Large Stocks Large Stocks Intl Stocks L/T Govt. Bonds L/T Govt. Bonds Large Stocks T-Bills T-Bills Large Stocks T-Bills 11.6 5.2 5.3 4.9 4.7 –9.1 –11.9 –15.7 1.4 8.5 4.9 4.8 4.7 –37.0 0.1 L/Term Govt. Bonds T-Bills L/T Govt. Bonds Intl Stocks Small Stocks L/T Govt. Bonds Intl Stocks Intl Stocks Large Stocks T-Bills T-Bills T-Bills L/T Govt. Bonds Small Stocks Intl Stocks 5.6 –0.9 2.1 –7.3 –9.0 –14.0 –21.2 –22.1 1.0 1.2 3.0 1.2 –5.2 –43.1 –14.9

  43. Smart Investment Behavior:Re-Balance • Some investments will grow faster than others • Rebalance is inherently contrarian • “Buy Low” and “Sell High” • Sell assets that have appreciated • Purchase assets that have underperformed • Returns portfolio to a comfortable level of risk

  44. Importance of Rebalancing1988–2009 70% • Stock allocation •Bond allocation 70% 69% 60 63% 50 50% 53% 50% 47% 40 37% 30 30% 31% 20 10 0 Year End 2009 1994 1999 2004 1989

  45. Feeling Panicky? 4 Reasons Not to Overreact • Market Timing is a losing strategy • Risk of selling low and buying high; you have to be right twice • Investors have been rewarded for taking risk • Risk isn’t always rewarded in the short term • Playing it “safe” can lead to a shortfall • Cash may be safe in the short term, but is risky in the long run • Emotional decisions often lead to regrets • Staying calm can help you avoid making moves you later regret

More Related