Where Your Money Is Protected From Loss

1. Where YourMoneyIs Protected From Loss

2. Safe Money Places • Certificates of Deposit • Fixed Annuities • Money Market Account • Savings Account • Savings Bond Important Information • Definition: A safe money place as one where your principal is protected from loss as long as you follow the initial guidelines • If you do decide to take your money and leave, you know pretty much what leaving early will cost. Backyard, Mattress, & Other Safe Money Places

3. Each Category Includes: • Yield Section • Tax Advantage Section • Liquidity and Penalties Section • Safety of Principal Section Important Information: • We say a safe money place is a place where it is highly unlikely to lose principal. • Please Note: In this presentation, “liquidity” means “under normal circumstances.” How Safe Is Safe? ............ Get The Facts

4. Each Category Includes: • Series I Bonds • Series EE Bonds • Series HH Bonds Important Information: • Savings Bonds are issued by the U.S. Treasury. • The bonds earn interest monthly. • The interest is compounded twice a year. • Savings Bond interest is exempt from all state and local income taxes Red, White, & Blue … Savings Bonds

5. Red, White, & Blue … Savings Bonds Yield • New rates each May and November for Savings Bonds • Series EE bonds issued on or after 1 May, 2005 lock-in and earn a fixed rate of interest • Series I Bonds combine a minimum rate with an index-linked component • Series EE Savings Bonds offer a minimum guaranteed return, ensuring principal will at least double after 20 years. Tax Advantages • Tax Deferred until it is redeemed or until final maturity is reached in 30 years Liquidity and Penalties • The money placed in savings bonds cannot be withdrawn for 1 year from all state and local income taxes • If redeemed within 5 years after purchase, the penalty for early withdrawal is equal to the last three months of earned interest. Safety of Principal • Do you have to ask?

6. Savings Accounts Savings account is a bank instrument where money is extremely liquid and FDIC insured. Money Market Accounts Protects principal, is very liquid, and earns interest. • Yield • Yields are typically higher than those paid on bank savings accounts. • Lower than rates realized on certificates of deposit. • Tax Advantages • None • Liquidity and Penalties • Extremely liquid • You can write a certain number of checks a month • Safety of Principal • Bank money market accounts are FDIC insured

7. Mom, Apple Pie, & CDs A Certificate of Deposit (CD) is a bank savings account with a specified maturity. • Yield • Average Earned Interests 1% - 7% • Rates can swing violently up and down • Tax Advantages • Interests are fully taxable • Liquidity and Penalties • ECD penalties for early withdraw can vary from one month to one year’s worth of interest • Safety of Principal • Certificate of Deposits are FDIC insured

8. An annuity is a periodic income for a specified length of time, for life, or a combination of the two. • Provide a means of accumulating interest with a tax advantage • Provides an instrument that preserves and protects assets. • Two Types: • Variable Annuities • Fixed Annuities Fixed Annuities … Fixed Rate or Linked Rate

9. Fixed Annuities … Fixed Rate or Linked Rate Yield • Fixed Annuities guarantee minimum value • Guarantees potential interest • Often higher rates than other Safe Money Places Stated Rated • Many fixed rate annuities declare new interest rates each year • Others lock-in a rate from 2-10 years Index-Link Interest Index Annuity Minimum Value

10. Fixed Annuities … Fixed Rate or Linked Rate Linked Rate • The interest within the annuity grows tax-deferred. • Interest received is linked to the performance of an external index. • Principal and credited interest are protected from stock market risk Tax Advantage • Money remaining inside an annuity grows without being taxed until withdrawn. Liquidity and Penalties • Fixed annuities offer a wide variety of term choices • Most Permit the withdrawal of at least the interest earned each year without penalty. Safety of Principal • A fixed annuity is as safe as the insurance company issuing the annuity. • Insurance companies have an exceptional record of safety. Index Annuity Participates in Index Gains But Never Loses

11. Comparisons of Safe Money Places

12. Comparisons of Safe Money Places Yield • Passbook Savings Accounts will usually offer the worst yield. • Money Market Accounts often have low yields because they are so liquid. • Series EE Savings Bonds returns have a floor. Interest Rate is locked for the life of the bond. • Series I Bonds have a fixed rate for the life of the bond. • It also combines an inflation-linked rate which is updated every 6-months • Certificates of Deposit offer a variety of terms and ease of use. • Fixed Annuities have different yields because they have different ways of crediting interest. • There is a guaranteed minimum interest rate. Tax Advantages • Savings Bonds and Fixed Annuities offer tax deferral. • Doesn’t mean tax free Liquidity and Penalties • Money Market Accounts clearly win the liquidity • Savings Bonds are typically liquid after the first year. • Certificates of Deposit usually have a penalty of 6 months to a year’s worth of interest if cashed before maturity. • Fixed Annuities have penalties for early surrender that vary. Cost of Liquidity • Insurance companies are rated by their financial strength. • Banks are backed by the FDIC or the Treasury.

13. Quick Recap • Savings Bonds and Fixed annuities offer tax deferral • Money market accounts and savings accounts offer the highest liquidity. • Fixed annuities and Series EE Savings Bonds offer minimum return. Think about your Financial Needs: • When do you need your money back? • Do you want to make more money with higher interest? • Are you concerned with liquidity? • Are you trying to save money for retirement or leave a legacy? Summary of Safe Money Places