income - Novation Credit Union

Income For What’s Next
Novation Investment Services
Seminar Provided By:
Cole Backstrom, Financial Advisor
There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice. Not all products, material or
services may be available at all participating firms. Please check with your home office.
Novation Investment Services is located at 500 Imperial Avenue, Oakdale, MN 55128 and can be reached at (651) 739-8080. Securities and advisory services offered through
Cetera Advisor Networks LLC, member FINRA/SIPC. Investments are: • Not FDIC/NCUSIF Insured • May lose value • Not financial institution guaranteed • Not a deposit
• Not insured by any federal government agency. Cetera is under separate ownership from any other named entity.
About the Speaker
Cole E. Backstrom
Financial Advisor with Novation’s
in-house Investment Center Team
from Cetera Advisor Networks
Important Information
Cetera Advisor Networks is a registered broker-dealer.
Securities offered through Cetera Advisor Networks , member
FINRA/SIPC. Securities and insurance products offered by Cetera Advisor
Networks :
• Are not FDIC/NCUSIF insured
• May go down in value
• Not financial institution guaranteed
• Not a deposit
• Not insured by any federal government agency.
All investments involve risks, including possible loss of principal.
This presentation must be preceded or accompanied by a current Franklin Rising Dividends Fund, Franklin Adjustable U.S. Government
Securities Fund, Franklin Income Fund, Mutual Global Discovery Fund and Templeton Global Bond Fund summary prospectus and/or
prospectuses. Please carefully read a prospectus before you invest or send money. Investors should carefully consider a fund’s
investment goals, risks, charges and expenses before investing.
Not FDIC Insured • May Lose Value • No Bank Guarantee
3
Retirement Realities
What percentage said they were concerned
about managing their retirement income to
meet their retirement expenses?1
1. The Franklin Templeton Retirement Income Strategies and Expectations (RISE) Survey was conducted online among a sample of 2,011 adults
comprising 1,008 men and 1,003 women 18 years of age or older. The survey was administered between January 2–16, 2014 by ORC
International’s Online CARAVAN®.
4
Retirement Realities
are concerned about managing their retirement
income to meet their retirement expenses.1
1. The Franklin Templeton Retirement Income Strategies and Expectations (RISE) Survey was conducted online among a sample of 2,011 adults
comprising 1,008 men and 1,003 women 18 years of age or older. The survey was administered between January 2–16, 2014 by ORC
International’s Online CARAVAN®.
5
Retirement Realities
What percentage of those who retired
before age 65 retired due to
circumstances beyond their control?1
1. The Franklin Templeton Retirement Income Strategies and Expectations (RISE) Survey was conducted online among a sample of 2,011 adults
comprising 1,008 men and 1,003 women 18 years of age or older. The survey was administered between January 2–16, 2014 by ORC
International's Online CARAVAN®.
6
Retirement Realities
of those who retired before age 65 retired due
to circumstances beyond their control.1
1. The Franklin Templeton Retirement Income Strategies and Expectations (RISE) Survey was conducted online among a sample of 2,011 adults
comprising 1,008 men and 1,003 women 18 years of age or older. The survey was administered between January 2–16, 2014 by ORC
International’s Online CARAVAN®.
7
Retirement Realities
What percentage of those who have
a written retirement income strategy are
confident about how much of their income
will be replaced by Social Security?1
1. The Franklin Templeton Retirement Income Strategies and Expectations (RISE) Survey was conducted online among a sample of 2,011 adults
comprising 1,008 men and 1,003 women 18 years of age or older. The survey was administered between January 2–16, 2014 by ORC
International’s Online CARAVAN®.
8
Retirement Realities
who developed a written retirement income
strategy are confident about how much of their
income will be replaced by Social Security.1
1. The Franklin Templeton Retirement Income Strategies and Expectations (RISE) Survey was conducted online among a sample of 2,011 adults
comprising 1,008 men and 1,003 women 18 years of age or older. The survey was administered between January 2–16, 2014 by ORC
International’s Online CARAVAN®.
10
Today’s Discussion
• Retirement Is Changing
• The Building Blocks of a Retirement Income Strategy
• Developing Your Retirement Income Strategy
• Final Thoughts
Retirement Is
The Building Blocks
Developing Your
Changing
of a Retirement
Retirement Income
Income Strategy
Strategy
Final Thoughts
12
Retirement Is Changing
PAST
FUTURE
Interest Rate
Declining
Rising?
Investment Choices
Fewer
Targeted?
Responsibility
Shared
Individual
Lifespans
Shorter
Longer
Inflation
Significant
Uncertain
13
You Are Not Rich Enough to Retire on CDs Alone
After one year, a $10,000 investment would earn:
MONEY MARKET ACCOUNTS
ONE-YEAR CDs
10-YEAR TREASURIES
$2
$9
$290
0.02%
0.09%
2.90%
Yields as of
December 31, 2013
This chart is for illustrative purposes only and does not reflect the performance of any Franklin, Templeton or Mutual Series fund.
Past performance does not guarantee future results.
It’s important to note that money market accounts and CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 and CDs offer
a fixed rate of return. Treasuries, if held to maturity, offer a fixed rate of return and fixed principal value; their interest payments and principal are guaranteed. Fund
investment returns and share prices will fluctuate with market conditions, and investors may have a gain or a loss when they sell their shares.
Sources: Money Market Accounts and One-Year CDs: BanxQuote. Copyright © 2014 BanxCorp. All rights reserved. BanxQuote® is a registered trademark and
servicemark of BanxCorp; 10-Year Treasuries: The Federal Reserve H.15 Report.
Retirement Is
The Building Blocks
Developing Your
Changing
of a Retirement
Retirement Income
Income Strategy
Strategy
Final Thoughts
15
Prioritize Goals & Concerns
GOALS
CONCERNS
Travel
Go to School
Retire Early
Leave a Legacy
Longevity
Taxes
Outliving Assets
Risk Tolerance
Volunteer
Hobbies
Market Declines
Inflation
16
Translate Goals & Concerns into Expenses
Basic vs. Discretionary
What are they used for?
BASIC
Mortgage
Life Insurance
Fixed Loans
DISCRETIONARY
Health Care
Food
Utilities
Travel
Hobbies
Legacy
17
Translate Goals & Concerns into Expenses
Fixed vs. Rising
Do they rise over time?
RISING
FIXED
Mortgage
Life Insurance
Fixed Loans
Health Care
Food
Utilities
Travel
Hobbies
Legacy
18
Translate Goals & Concerns into Expenses
There are three fundamental expense categories
LIMITED IMPACT INCOME
FROM INCOME VOLATILITY
GREATER IMPACT
FROM INCOME VOLATILITY
FIXED
RISING
DISCRETIONARY
Mortgage
Life Insurance
Fixed Loans
Health Care
Food
Utilities
Travel
Hobbies
Legacy
LIMITED IMPACT FROM
INFLATION
GREATER IMPACT FROM
INFLATION
19
Potential Retirement Income Sources
There is more than one source.
Your Retirement Income
= $??,??? per year
20
Potential Retirement Income Sources
Each one has a unique set of characteristics and risks.
Your Retirement Income
= $??,??? per year
Equity
Mutual
Funds/
Stocks
Social
Security/
Pension
Balanced
Mutual
Funds
Work/
Employment
Variable
Annuities
Bonds/Fixed
Income
Mutual
Funds
CDs/Fixed
Annuities
Real Estate
21
Match Expenses with Potential Income Sources
How do I do this?
Mortgage
Travel
Legacy
Food
Utilities
Life
Insurance
Fixed Loans
Hobbies
Health
Care
22
Match Expenses with Potential Income Sources
Mortgage
Mortgage
Legacy
FIXED
EXPENSES
Mortgage
Life
Insurance
Utilities
Fixed Loans
Travel
Balanced
Mutual
Funds
RISING
EXPENSES
DISCRETIONARY
EXPENSES
Travel
Hobbies
Life
Legacy
Food
Equity Care
Health
Mutual
Food
Funds
Utilities
Hobbies
Insurance
Fixed Loans
Social
Security/
Pension Real Estate
Health
Care
CDs/
Fixed
Annuities
Variable
Annuities
Retirement Is
Developing Your
Changing
Retirement Income
Strategy
Final Thoughts
24
Realistic Withdrawal Rates
If your withdrawal rate is too high…
• It increases the risk of negative long-term impact from market losses
• It increases the likelihood of depleting your investments as a potential
source of income and running out of money
If your withdrawal rate is too low…
• You may not meet your expenses, creating unnecessary stress
• You might not enjoy retirement as much as you should
1. The Franklin Templeton Retirement Income Strategies and Expectations (RISE) Survey was conducted online among a sample of 2,011 adults
comprising 1,008 men and 1,003 women 18 years of age or older. The survey was administered between January 2–16, 2014 by ORC International’s
Online CARAVAN®.
25
Realistic Withdrawal Rates
of pre-retirees don’t know how much of
their retirement savings they expect to
spend/withdraw annually in retirement.1
1. The Franklin Templeton Retirement Income Strategies and Expectations (RISE) Survey was conducted online among a sample of 2,011 adults
comprising 1,008 men and 1,003 women 18 years of age or older. The survey was administered between January 2–16, 2014 by ORC International’s
Online CARAVAN®.
Retirement Is
The Building Blocks
Developing Your
Changing
of a Retirement
Retirement Income
Income Strategy
Strategy
Final Thoughts
27
Retirement Income Pop Quiz
1
If you invested $10,000 in a Money Market Account for
one year, what could you buy with the interest earned?
ANSWER
A small latte1
1. Money Market Account yield as of 12/31/13 was 0.02%. Source: BanxQuote. Copyright © 2013 BanxCorp. All rights reserved.
BanxQuote® is a registered trademark and servicemark of BanxCorp.
28
Retirement Income Pop Quiz
2
When evaluating your sources of retirement
income, it is best to:
ANSWER
Evaluate each source individually
1. Money Market Account yield as of 12/31/13 was 0.02%. Source: BanxQuote. Copyright © 2013 BanxCorp. All rights reserved.
BanxQuote® is a registered trademark and servicemark of BanxCorp.
29
Retirement Income Pop Quiz
3
1
2
When
evaluating
sources
of retirement
How much
wouldyour
you need
to invest
into a 1-Year
All retirement expenses are the same.
income,
it is best$5000
to… per year in income?
CD to generate
ANSWER
FALSE
1. Money Market Account yield as of 12/31/13 was 0.02%. Source: BanxQuote. Copyright © 2013 BanxCorp. All rights reserved.
BanxQuote® is a registered trademark and servicemark of BanxCorp.
30
Retirement Income Pop Quiz
4
3
1
2
How much
can
you
withdraw
your
When
evaluating
your
sources
of retirement
would
you
need
tofrom
invest
intoinvestments
a 1-Year
Are all retirement expenses created equal?
to
annual
income,
itaissustainable
best$5000
to… per
CDcreate
to generate
yearincome?
in income?
ANSWER
Generally between 2%–6% annually based on
length of retirement.
1. Money Market Account yield as of 12/31/13 was 0.02%. Source: BanxQuote. Copyright © 2013 BanxCorp. All rights reserved.
BanxQuote® is a registered trademark and servicemark of BanxCorp.
31
Retirement Income Pop Quiz
5
3
1
2
Name
two
keys
toyour
reducing
anxiety
around
When
evaluating
sources
of retirement
How much
would
you
need
to invest
into a 1-Year
Are all retirement expenses created equal?
developing
successful
retirement
income strategy?
income,
it isabest
to… per
CD to generate
$5000
year in income?
ANSWER
Use a financial advisor and develop a written
retirement income strategy.
1. Money Market Account yield as of 12/31/13 was 0.02%. Source: BanxQuote. Copyright © 2013 BanxCorp. All rights reserved.
BanxQuote® is a registered trademark and servicemark of BanxCorp.
32
Join the Retirement Conversation
33
Franklin Templeton Distributors, Inc.
One Franklin Parkway
San Mateo, California 94403-1906
franklintempleton.com
All investments involve risks, including possible loss of principal.
This presentation must be preceded or accompanied by a current Franklin Rising Dividends Fund, Franklin Adjustable U.S. Government
Securities Fund, Franklin Income Fund, Mutual Global Discovery Fund and Templeton Global Bond Fund summary prospectus and/or
prospectuses. Please carefully read a prospectus before you invest or send money. Investors should carefully consider a fund’s
investment goals, risks, charges and expenses before investing.
© 2014 Franklin Templeton Investments. All rights reserved.
RTSI CUPPT 02/14
Questions/Comments
Cole E. Backstrom
Novation Investment Services
Located at Novation Credit Union
500 Imperial Avenue
Oakdale, MN 55128
(651) 735-9934 | Fax: (651) 739-0648
Securities offered through Cetera Advisor Networks, Member SIPC. Cetera
Advisor Networks and Novation Credit Union are not affiliated companies.
• NOT NCUSIF INSURED
• NO CREDIT UNION GUARANTEE
• MAY LOSE VALUE
• NOT INSURED BY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT
Thank You!