This summary provides the key points from the document in 3 sentences:
The document is a 401(k) plan update presentation given by Steven Scott from Retirement Solution Group on April 30, 2013. The presentation discusses the surprising strength in markets in 2013 so far, compares the benefits of Roth versus pre-tax 401(k) contributions, and notes that media coverage of retirement plans sometimes fails to consider the complexities involved. Contact information is provided for the Retirement Solution Group participant support team to answer any questions.
How to Troubleshoot Apps for the Modern Connected Worker
Q2 2013 RSG Update
1. April 30, 2013
To the Participants of RSG
401(k) Update
Feeling the Good Old Times Again
Presentation by:
Steven Scott
Managing Partner
Retirement Solution Group, LLC
“Securities offered through Ausdal Financial Partners, Inc, 220 North Main Street,
Davenport, IA, 52801, 563.326.2064, member FINRA, SIPC. Advisory services provided by Ausdal
1Financial Partners. Retirement Solutions Group and Ausdal Financial Partners, Inc
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are separately owned and operated companies.”
2. What was the US deficit the day I drafted this
presentation (4/25/13)? (source: Concord Coalition)
$2.5 Trillion
$12.9 Trillion
$16.8 Trillion
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3. Answer: C… Why retirement revenue matters?
Think about that for a moment.
s
U.S. NATIONAL DEBT CLOCK The Outstanding Public Debt as of 25 Apr 2013 at
11:45:25 AM GMT is: $16,804,978,813,739.80
s
The estimated population of the United States is 314,842,110
so each citizen's share of this debt is $53,375.89.
s
But does anyone think the craziness is over???
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Retirement Solution Group
4. Agenda
s The
s Q1
Surprising Bull
Focus Topic: Roth vs. Pre-Tax Deferrals
s Why
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the Media is Sometimes Just Terrible…
6. Markets in 2013 (Source: Morningstar as of 4/26/13)
STOCKS: 1-Year Numbers & Q1, Source – Morningstar.com (as of 1/11/13)
US Stocks 15.66 % & 11.29 %
International Developed Countries, (EAFE) 18.23 % & 9.84 %
International Emerging Markets, (EM) 0.63% & - 3.11 %
BONDS: YTD
Core Bond, 3.09 % & 0.9 %
TIPS, YTD 4.94 % & 0.93 %
Economic Reality
Unemployment as of Q1 2013%
•
•
7.6% March 2013
Down 2% since last meeting
Q1 2013 GDP growth = 2.5 %
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7. Why?
s
Washington DC is scared…
There is a growing concern on the high probability that we have many millions of elderly
Americans living in significant poverty in the next few decades:
•
38% of Americans age 55 and above have less than $10,000 in
retirement savings per Fidelity study 2012
•
US Equities 2000 – 2010 (Source: USA Today)
– DJIA - 9.3%
– SPX - 24.1%
– NASDAQ - 44.2%
•
•
•
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401(k) Average Savings is believed to be 6%
(Source: 401(k) Help Center, note – estimate)
Fidelity 2012 Study – 8% current deferral average
Fidelity 2012 Study – 12% needed deferral average
8. What’s New In 2013
s Deferral
Limits:
$17,500 for 2013
$5,500 in catch-up contribution for participants 50 or older (Plan dependent)
DC Has Been and May Remain Very Active:
1. The
Fiduciary Standard
2. Obama’s
3. Senator
“$3 mm Cap”
Kohl’s Target Date Fund Proposal
4. Forced
Annuitization
5. Forced
Savings Option
8 | Retirement Solution Group
10. The Basic Idea…
s Traditional
401(k): Since 1978 the government has allowed employees to
direct “elective deferrals” salary into employer sponsored retirement plans.
The deferrals are a direct reduction of the employees taxable income.
Source: ERISA
s Roth
IRA: In 1998 Roth IRAs were formed and allowed individuals to save
money in an after tax basis, with the agreement that there would NOT be a
tax a point of distribution.
Source: Wikipedia
s Roth
401(k): In 2006 the “Roth” idea was brought into employee
sponsored plans. Same general concept, but no income limits and the
annual contribution limits were set by the 401(k) rules and much higher than
IRAs.
Source: ERISA
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11. Example 1 – Tax Rate in Retirement is the Same
401(k) Comparative: 30 year old who plans on retiring at 65 and 25% tax bracket
Accumulation Phase
Roth 401(k) (Non-Deductible)
401(k) (Deductible)
Annual contribution (before tax)
$10,000
$10,000
Adjustment for taxable contributions*
-2,500
-0
Total annual contribution (after tax)
$7,500
$10,000
Interest rate (accumulation phase)
8%
8%
Term (accumulation phase)
35
35
Account value at retirement
$1,395,769
$1,861,026
Distribution Phase
Roth 401(k) (Non-Deductible)
401(k) (Deductible)
Account value at retirement
$1,395,769
$1,861,026
Term (distribution phase)
30
30
Interest rate (distribution phase)
6%
6%
Annual income before taxes
$101,401
$135,202
Annual income tax
$0
$33,800
After-tax annual income
$101,401
$101,401
After-tax monthly income
$8,450
$8,450
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12. Example 2 – Tax Rate in Retirement is Higher
401(k) Comparative: 30 year old who plans on retiring at 65 and 25% tax bracket,
but 45% tax bracket at point of retirement
Accumulation Phase
Roth 401(k) (Non-Deductible)
401(k) (Deductible)
Annual contribution (before tax)
$10,000
$10,000
Adjustment for taxable contributions*
-2,500
-0
Total annual contribution (after tax)
$7,500
$10,000
Interest rate (accumulation phase)
8%
8%
Term (accumulation phase)
35
35
Account value at retirement
$1,395,769
$1,861,026
Distribution Phase
Roth 401(k) (Non-Deductible)
401(k) (Deductible)
Account value at retirement
$1,395,769
$1,861,026
Term (distribution phase)
30
30
Interest rate (distribution phase)
6%
6%
Annual income before taxes
$101,401
$135,202
Annual income tax
$0
$60,841
After-tax annual income
$101,401
$74,361
After-tax monthly income
$8,450
$6,197
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13. Example 3 – Tax Rate in Retirement is Lower
401(k) Comparative: 30 year old who plans on retiring at 65 and 25% tax bracket,
but 15% tax bracket at point of retirement
Accumulation Phase
Roth 401(k) (Non-Deductible)
401(k) (Deductible)
Annual contribution (before tax)
$10,000
$10,000
Adjustment for taxable contributions*
-2,500
-0
Total annual contribution (after tax)
$7,500
$10,000
Interest rate (accumulation phase)
8%
8%
Term (accumulation phase)
35
35
Account value at retirement
$1,395,769
$1,861,026
Distribution Phase
Roth 401(k) (Non-Deductible)
401(k) (Deductible)
Account value at retirement
$1,395,769
$1,861,026
Term (distribution phase)
30
30
Interest rate (distribution phase)
6%
6%
Annual income before taxes
$101,401
$135,202
Annual income tax
$0
$20,280
After-tax annual income
$101,401
$114,921
After-tax monthly income
$8,450
$9,577
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15. Media
s The
Problem
2008 Crash
The 401(k) thing has to work…
Unclear pricing
Hidden fees
Unengaged advisors just collecting fees
No standards
•
These are the reason behind 2012 fee disclosure rules
15 | Retirement Solution Group
16. Thank You Frontline…
s Why
they DO NOT “Get It”:
1. Comparing
2. But
1.
2.
3.
4.
5.
6.
7.
the Vanguard S&P 500 vs. an S&P 500 Fund in a 401(k)
a 401(k) has a few more moving parts:
Massive and increasing government compliance
Annual Audits
5500 tax filings
Active management
Fiduciary liability
Daily recordkeeping
Educational/404(c) requirements
Question: If self directed on-line IRAs are cheaper why are the savings
rates in 401(k) plans more than double?
16 | Retirement Solution Group
18. So What?
The DOL says the average American Should Save 12%
Note: 3.7% Savings Rate (Source: BEA)
Next Steps:
s
2013 limits are $17,500 ($23,000 with catch-up provision for those over 50)
s
What do you own?
s
Volatility will remain
s
Does it fit?
Next Steps:
s
Save More
s
Be More Engaged
s
Create a Retirement Plan Calendar
“Investments involve risks and potential loss of principal and are not FDIC insured investments.
Investments and investments in 401k plans are not guaranteed by the federal government or
the FDIC, they involve risk including but not limited to loss of principal. Opinions expressed are
those of Steve Scott and do not represent the opinions of Ausdal Financial Partners, or
Retirement Solution Group, LLC. They are opinion only and should be not considered as stand
alone advice.”
18 | Retirement Solution Group
19. RSG Participant Support Team
RSG is always available, 866-352-7731
1.
Steve Scott, Managing Partner x 210
2.
Elvia Sanchez, Education & Relationship Manager (Bi-Lingual) x410
3.
Christie Cheng, Education & Relationship Manager x310
4.
Megan Dunne, Associate x200
5.
Mary Urlich, Participant Transactions x1
“Can you help me with my forms?”
“I have no idea on these funds, can you help me with that?”
“How much should I be saving?”
“Not really sure if I am aggressive investor or not, how do I figure that out?”
“What is a stock/bond?”
“Why do people keep talking about Spanish Bonds Yields?”
19 | Retirement Solution Group
Notes de l'éditeur
NOTE ABOUT SPEAKER NOTES:
Content in the speaker notes section are not meant to be used as scripts and SHOULD NOT be distributed to clients. Instead, they’re supposed to provide general concepts expressed by the material, explanations of specific services and capabilities, and suggestions for expressing these ideas effectively.
You may replace content in these speaker’s notes with your own language that reflects the concepts being expressed.
The purpose of this section is to demonstrate our client-focused approach by showing that we’ve done our homework to identify what we know about their financial challenges and objectives and what we can do to address them.
The purpose of this section is to demonstrate our client-focused approach by showing that we’ve done our homework to identify what we know about their financial challenges and objectives and what we can do to address them.
The purpose of this section is to demonstrate our client-focused approach by showing that we’ve done our homework to identify what we know about their financial challenges and objectives and what we can do to address them.