7/23/19 YOUR FINANCES 101 Managing Your Financial Future Key Question: What do I need to do to be sure to have enough money for the rest of my life? 1
7/23/19 WHERE TO START Creating a Long-term Financial Plan STEP 1: Knowing your sustainable rate of spending – Retirement income guardrails Income to Work With q Sources of Future Income q Investment Returns q Pensions q Social Security (maximizing) q Earned income? 2
7/23/19 Assets Available q Brokerage Account Investments q IRAs and other Retirement Accounts q Cash Value from Life Insurance q Annuities q Real Estate q Other Tangible Assets Future Expenses q Day-to-day Living q Riderwood Expenses q Health Care/Additional LTC q Family Related q Travel/Entertainment q Other 3
7/23/19 Retirement Income Income – Expenses = Surplus or Deficit q Surplus will be added to assets q Deficit must be funded from assets LEGACY PLANNING Do you want to: q Live the fullest life you can q Leave something for heirs Family Gifting: q Your needs vs family q Lifetime vs bequests – tax and other considerations Key Considerations in Estate Planning q Selecting Fiduciaries q Determining amount of control q Providing for special protections or needs 4
7/23/19 SURVIVING SPOUSE CHECKLIST See Appendix Resource Guide TAXES –PLANNING AND CONSIDERATIONS q Required Minimum Distributions - RMDs q Roth Conversions q Deductions under new tax law q Charitable Giving o Appreciated stock o Qualified Charitable Distributions (QCD’s) 5
7/23/19 INSURANCE CONSIDERATIONS What do you still need? q Life insurance – may no longer need – permanent vs term q Long-term care – hard to qualify and expensive after 60’s q Property casualty and liability insurance – important to maintain q Health insurance – reevaluate each year – good resource INVESTMENTS q Importance of stable returns q Return vs risk — Rules of Thumb (e.g. X% of assets ) q Diversification q Inflation protection 6
7/23/19 As an investor, assume you expect in Portfolio A (Blue Bars) and Portfolio B (Orange Bars) to have the above returns over the next 18 years. • Portfolio A outperforms Portfolio B in 12 of the 18 years or 67% of the time. • Portfolio A returns more than 20% in 4 of the years while Portfolio B never returns above 17%. Which investment would you choose? If you are like many investors, you probably would choose Portfolio A . Portfolio A outperformed Portfolio B a majority of the time and posted a several very high performance years, but Portfolio B would generate more wealth over these 18 years. Here are the real numbers for a $1,000,000 investment: • Portfolio A - would have generated the investor $2,577,990 at the end of the 18 years. • Portfolio B - would have left the investor $2,747,758 at the end of those 18 years. This is a $169,768 difference! 7
7/23/19 Goal-Based Investment Allocations Distribution Phase Accumulation Phase INCOME CORE ACCUMULATION LONG-TERM GROWTH FOR INVESTORS WHO: FOR INVESTORS WHO: FOR INVESTORS WHO: FOR INVESTORS WHO: • Want to emphasize a • Want a balanced • Want a balanced stable level of current portfolio with an portfolio with an • Want capital income and capital emphasis on income emphasis towards appreciation and preservation and capital owning growth wealth accumulation • Expect to use this preservation investments • Are in the early portfolio as a • May have a need to • Are in the late accumulation years significant source of supplement their accumulation stage or and still adding to current income income with portfolio do not have a current their portfolio assets need to supplement their income with portfolio assets Targeted 25% Equity Targeted 40% Equity Targeted 60% Equity Targeted 80% Equity Allocation Allocation Allocation Allocation Lower Volatility Higher Volatility Cash Equivalents to Loans to Governments Equity interests in Security ownership A variety of defensive provide liquidity for and businesses businesses around of tangible assets such and non-correlated trading and to the world as precious metals, investments accommodate client natural resources and withdrawals real estate 8
7/23/19 Narrowing the Focus: Mutual Funds MUTUAL FUND ATTRIBUTES VS. PEERS: • 1-year, 3-year and 5-year returns better than peer average • Long-term measurable track record and fund manager • Assets > $75 million with liquidity • Composition of fund’s asset allocation at least 80% in their defined asset class • Net expense ratio better than peer average 9
7/23/19 Hiring Professionals: Understanding different types of financial professionals Insurance agent /broker q Agent is captive, q Broker will look at best carrier for you Bank q Look at fees and access – q Do you go in or online – q Choose best one for your preferences Do you need a financial planner/advisor? q What can a financial planner do for you q What does it cost – is it worth it? Other financial support possibilities q Bill payment q Do you need a tax preparer? WORKING WITH AN ADVISOR See Appendix Resource Guide 10
7/23/19 Disclosures FAI Wealth Management (“Company”) is an SEC registered investment adviser located in Columbia, Maryland. Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. This presentation should not be construed by any consumer and/or prospective client as Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Company, please contact the SEC or the state securities regulators for those states in which Company maintains a notice filing. A copy of Company’s current written disclosure statement discussing Company’s business operations, services, and fees is available from Company upon written request. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Certain portions of the presentation may contain a discussion of positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Company, or from any other investment professional. Company is neither an attorney nor an accountant, and no portion of the web site content should be interpreted as legal, accounting or tax advice. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by FAI Wealth Management), or any non-investment related services, will be profitable, equal any corresponding indicate historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. FAI Wealth Management is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. The scope of the services to be provided depends upon the terms of the engagement. 11
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