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Reinventing Your Retirement PA0000.029.0405 New Reality, New Challenges Transition Assistance Plan TIPS for Salem Works May 18, 2009 Steve Stanganelli, CRPC®, CFP® Member, Financial Planning Association Rated Advisor, Paladin Registry [email_address] www.moneylinkpro.wordpress.com Direct: 978-388-0020 Cell: 978-621-8268

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Resource Links <ul><li>www.moneylinkpro.wordpress.com </li></ul><ul><li>http://www.cfp.com/learn/ </li></ul><ul><li>http://www.fpaforfinancialplanning.org/ </li></ul>PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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Common Comments Today <ul><li>How Do I Get Back on Track? </li></ul><ul><li>Where’s My Bailout? </li></ul><ul><li>How Will I Be Able to Afford to Retire? </li></ul><ul><li>Who Will Be There to Help Me? </li></ul>Source of data: Employee Benefits Research Institute (EBRI) 2005 Survey PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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Today’s Presentation <ul><li>10 Tips to Financial Health </li></ul><ul><li>Reviewing the Fundamentals of Investing </li></ul><ul><li>Retirement Plan Distributions </li></ul><ul><li>Understanding the Impact of Your Behavior on Financial Success </li></ul>PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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What’s a Person to Do? <ul><li>Develop a plan </li></ul><ul><li>Increase your savings </li></ul><ul><li>Invest with clear goals in mind </li></ul><ul><li>Review your plan regularly </li></ul><ul><li>Review estate planning needs </li></ul>PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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Back to Basics <ul><li>Have a Plan – Every House Starts with a Blueprint </li></ul><ul><li>Have SMART Goals </li></ul><ul><li>Recalibrate Your Risk Temperature </li></ul><ul><li>Understand the Impact of Inflation & Taxes </li></ul><ul><li>Diversify: Your Mom’s Advice Was Right </li></ul><ul><li>Control What You Can – </li></ul><ul><ul><li>Don’t Panic Over the Press </li></ul></ul>PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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Back to Basics -- Part 2 <ul><li>Your Asset Allocation </li></ul><ul><ul><li>It’s Not All About Buy & Hold </li></ul></ul><ul><li>Avoid the Common Mistakes </li></ul><ul><li>Control Your Costs </li></ul><ul><ul><li>With Your Lifestyle & Investments </li></ul></ul><ul><li>Take Care of the Ones You Love </li></ul><ul><ul><li>Insurance is for the Living & Day-to-Day </li></ul></ul><ul><ul><li>Estate Planning is for Everyone </li></ul></ul>PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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Understand the effects of taxes This is a hypothetical illustration and does not represent the performance of a specific investment option. Taxable distributions (and certain deemed distributions) are subject to ordinary income tax and, if taken prior to age 59½, may also be subject to a 10% federal income tax penalty. Early surrender charges may apply. 1 Based on an assumed federal tax rate of 33% and assume no distributions. This chart is intended to illustrate the advantage of tax deferral. It does not project the actual performance of a specific product or its underlying funds. 2 Tax-deferred results do not reflect Total Insurance Charge or surrender charges, or the $30 annual maintenance fee, which is waived for contract anniversary values of $50,000 or more and no Contingent Deferred Sales Charge. Please note that no federal income taxes have been paid on the results. Taxable Illustration 1 Tax-Deferred Illustration 2 $100,000 9% 33% 33% Starting investments Rate of return Tax rate Tax rate on 9% = 6% net $100,000 9% 33% 0% Starting investments Rate of return Tax rate Tax rate on 9% = 9% net It will take 12 years to double your investment. 72 ÷ 6% = 12 years It will take 8 years to double your investment. 72 ÷ 9% = 8 years $100,000 Start $100,000 Start $200,000 12 years $200,000 8 years $400,000 24 years $400,000 16 years $800,000 24 years

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Inflation Matters What Will It Cost to Maintain Your Lifestyle? Be prepared to double your money if you’re retired for 25 years!! PA0000.029.0405 Steve Stanganelli, CRPC®, CFP® What 3% Inflation Can Do to a $30,000 Per Year Standard of Living 5 Years $34,778 10 Years $40,317 15 Years $46,739 20 Years $54,183 25 Years $62,813

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Auto 340% College Tuition (not including boarding and books) Home 1978: $6,379 2004: $28,050 1978: $37,229 116% 2004: $80,328 1978: $62,500 2004: $225,000 260% Understand the effects of inflation Source: NADA Industry Analysis Division, May, 2005 Source: The College Board, 2005 Source: US Census Bureau, 2005

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The Investment Pyramid PA0000.029.0405 Steve Stanganelli, CRPC®, CFP® Growth Current Income Cash Equivalent Savings Higher Risk/Higher Reward Potential Lower Risk/Lower Reward Potential

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Stocks were up 71% of the time—57 up periods, 23 down Stocks were up 99% of the time—70 up periods, 1 down Potential Return Stocks were up 87% of the time—66 up periods, 10 down Dec. 31, 1925–Dec. 31, 2005 Potential Return Potential Return Dec. 31, 1925–Dec. 31, 2005 Dec. 31, 1925–Dec. 31, 2005 One-year Holding periods Five-year Holding periods Ten-year Holding periods The Advantages of Diversification and Equities INDEX PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS This illustration is for illustrative purposes only, and does not represent the performance of The Hartford Mutual Funds, The Hartford variable annuities, or any particular investment. The S&P 500 Index is unmanaged. You cannot invest directly in the S&P 500 Index. Assumes reinvestment of income and no transaction cost. Data source: Wiesenberger, 1/06

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Wall Street: The Rise in Red Ink – Newsweek How Many Lean Years? – Newsweek The Economy: Blood, Sweat and Tears – Newsweek The Death of Equities – Business Week Staring into the Abyss…crash is a shocking warning that the economy is living on borrowed time – U.S. News & World Report After an Economic Heart Attack: The crisis calls for emergency treatment to calm the markets –and a long-term plan to restore the nations fiscal health – Newsweek How the Bull Crashed Into Reality – Business Week “… the flight of individual investors and the breakdown of the markets foreshadow the end of the capitalistic system as we have known it.” – Business Week Don’t panic over the Press

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Wall Street: The Rise in Red Ink – April 16, 1973 How Many Lean Years? – August 5, 1974 The Economy: Blood, Sweat and Tears – August 12, 1974 The Death of Equities – August 13,1979 Staring into the Abyss…crash is a shocking warning that the economy is living on borrowed time – November 2, 1987 After an Economic Heart Attack: The crisis calls for emergency treatment to calm the markets –and a long-term plan to restore the nations fiscal health – November 2, 1987 How the Bull Crashed Into Reality – November 2, 1987 “… the flight of individual investors and the breakdown of the markets foreshadow the end of the capitalistic system as we have known it.” – September 14, 1974 Don’t panic over the Press … History Does Repeat and So Do the Headlines

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Don’t panic over the Press INDEX PAST PERFORMANCE IS NO INDICATION OF FUTURE RESULTS The S&P 500 Index is unmanaged and does not represent the performance of any particular investments. You can not invest directly into the S&P 500 Index. Assumes reinvestment of income and no transaction cost. Source: Compilation of both the Bloomberg and Wiesenberger, 1/06. Looking past the current crisis There will always be reasons not to invest. However, in the long-run, even investments made on the worst days of the century, ones with the most upheaval and instability, have historically done well. For example, if you invested $100 S&P 500 Index on December 31, 1936, and added $100 on some of the worst days of the century (instability that was reflected in the market’s performance), what would the outcome be? By December 2005, despite those declines, an investment would have accumulated $407,721. The parenthesis notes the date of the addition.

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Four Numbers You Need to Know Comparing Returns: Average Annual Returns From Stocks, Bonds and Treasury Bills Over the Last 54 Years (12/31/54–12/31/08) PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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Let’s Talk About Risk <ul><li>Risk is the chance of not meeting your goals </li></ul><ul><li>Risk is a natural, necessary part of investing </li></ul><ul><li>A majority of Americans continue to have most of their money in investments that aren’t beating inflation </li></ul><ul><li>The greatest risk to financial success can be taking no risk at all </li></ul>PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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TIPS TO REBUILDING FINANCIAL HEALTH <ul><li>What You Can Do Now … </li></ul>Steve Stanganelli, CRPC®, CFP®

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1.) Let’s Get Physical … Getting Your Nest Egg Off the Couch and Back Into Shape <ul><li>Finding Balance is Not Just for Yoga </li></ul><ul><li>Rebalancing Reduces Risk and May Lead to Bigger Future Gains </li></ul>Source of data: Schwab Center for Financial Research PA0000.029.0405 Steve Stanganelli, CRPC®, CFP® $2.9M $3.5M Never Rebalanced Annually Rebalanced

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Source of data: vanguard Center for Retirement Research 2.) Diversify to Protect <ul><li>A 60%-stock / 40%-bond Mix in Action </li></ul><ul><ul><li>Since 1926 this mix has returned 8.5% versus 8.1% for a 50%/50% Mix </li></ul></ul><ul><li>Use an Auto-Rebalancing Feature </li></ul><ul><li>Too Much of a Good Thing Can Give You More than a Headache </li></ul><ul><ul><li>Trim holdings in US Treasuries to no more than 20% of total bond/fixed income portfolio </li></ul></ul>PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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3.) Understand Your Self PA0000.029.0405 Steve Stanganelli, CRPC®, CFP® “ People don’t change their behavior unless it makes a difference for them to do so.” – Fran Tarkenton American Football player, Businessman, Author, Corporate Consultant Traditional Finance Theory versus Actual Reality

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Behavioral Finance <ul><li>“ Investors </li></ul><ul><ul><li>Are not totally rational </li></ul></ul><ul><ul><li>Often act based on imperfect information </li></ul></ul><ul><li>Markets </li></ul><ul><ul><li>May be difficult to beat in the long term </li></ul></ul><ul><ul><li>In the short term, there are anomalies and excesses” </li></ul></ul>CC0000.068.0803 ®

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Behavioral Finance CC0000.068.0803 <ul><li>Loss aversion </li></ul><ul><li>Narrow framing </li></ul><ul><li>Anchoring </li></ul><ul><li>Mental accounting </li></ul><ul><li>Naïve Diversification </li></ul><ul><li>Disposition effect </li></ul><ul><li>Herding </li></ul><ul><li>Regret </li></ul><ul><li>Media response </li></ul><ul><li>Optimism </li></ul><ul><li>Take Your Risk Temperature: www.myriskprofile.com </li></ul><ul><li>Risk Profiles Change Over Time Usually Because of Market Conditions </li></ul><ul><li>Financial Planning May Help Us Avoid Bubbles </li></ul><ul><li>(see www.moneylinkpro.wordpress.com) </li></ul>®

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4.) Lose Rate <ul><li>Consider Refinancing Your Home Loan </li></ul><ul><li>Refinance or Get a New Home Equity Line for Emergencies </li></ul><ul><li>Talk with an Experienced Real Estate Attorney About a Loan Modification </li></ul>CC0000.068.0803 5.) Boost Your Credit Score <ul><li>Check Your Credit Report for Errors or Possible ID Theft </li></ul><ul><li>Go to www.annualcreditreport.com </li></ul><ul><li>Check out these consumer info sites: www.ftc.gov or www.idtheftcenter.org </li></ul><ul><li>Avoid balance transfers or using more than 50% of line </li></ul>®

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6.) Lighten the Load <ul><li>Review Recurring Charges to Identify Items to Cut </li></ul><ul><ul><li>Those Movie Channels You Rarely Watch </li></ul></ul><ul><ul><li>Calling Features on Phone Services </li></ul></ul><ul><li>Negotiate with Providers for Lower Fees </li></ul><ul><ul><li>They’d Rather Keep You than Lose You </li></ul></ul><ul><li>Empower Your Kids to Handle Their Own Budget – A Great Learning Tool </li></ul><ul><li>Consider the “Latte Factor” </li></ul>CC0000.068.0803 ®

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7.) Safety Net Makeover <ul><li>Review All Your Insurance Coverage </li></ul><ul><ul><li>Don’t Skimp in the Wrong Places </li></ul></ul><ul><ul><li>Poor Coverage Will Leave You Exposed </li></ul></ul><ul><li>Life Insurance: Newer Actuarial Tables Mean Possible Lower Rates if Current Policy > 5 yrs old and Health Hasn’t Changed </li></ul><ul><li>Auto & Home: Raise the Deductible, Reap the Savings </li></ul><ul><li>Real Estate: File a “Homestead Declaration” </li></ul><ul><li>Health: Talk with an Insurance Specialist about post-COBRA options </li></ul><ul><li>ID Theft: Take Steps to Protect Yourself </li></ul>CC0000.068.0803 ®

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8.) Estate Planning Decide Now or Someone Else Will CC0000.068.0803 <ul><li>Now’s the time to get your affairs in order: </li></ul><ul><li>Health Care Directives – </li></ul><ul><li>Remember Terry Schiavo? </li></ul><ul><li>Durable Power of Attorney </li></ul><ul><li>“ Simple” Will – Your Life is Probably More Complex but It’s a Start </li></ul><ul><li>Guardianship for Minors </li></ul><ul><li>Trusts – Great Way to Lower Probate Costs & Protect Privacy </li></ul>®

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9.) Roll, Roll, Roll Your Egg Retirement Plan Distribution Strategies CC0000.068.0803 <ul><li>A.) Leave It </li></ul><ul><li>Cannot make additional contributions </li></ul><ul><li>Limited investment choices </li></ul><ul><li>Plan may change if company changes hands </li></ul><ul><li>Potential for tax issues based on payout to heirs </li></ul><ul><li>B.) Transfer It to New Employer </li></ul><ul><li>Same as ‘A’ above </li></ul><ul><li>C.) Cash-Out/Lump Sum = TAXES </li></ul><ul><li>D.) Roll to Your IRA = More Options </li></ul>®

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9.) Roll, Roll, Roll Your Egg Retirement Plan Distribution Strategies CC0000.068.0803 <ul><li>Consider a “self-directed” IRA </li></ul><ul><ul><li>Option to invest in a number of non-traditional alternatives like real estate, operating businesses or franchises. </li></ul></ul><ul><li>Consider starting a business and opening a solo-401(k) with a loan option; roll your old 401(k) into the new plan and then take a loan without jeopardizing the tax-deferral status </li></ul>®

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10.) College Funding is A Retirement Issue CC0000.068.0803 <ul><li>If your child is already in school or getting ready to attend in fall 2009: </li></ul><ul><li>Call the Financial Aid Officer and let them know </li></ul><ul><li>Appeal any awards </li></ul><ul><li>If your child is within 3 years of attending: </li></ul><ul><li>Minimize assets held by the child </li></ul><ul><li>Consider starting a business – it reduces income and assets used in financial aid calculations </li></ul>®

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What Advantages Does a Fee-Only Fiduciary Financial Planner Offer to You? The Value of Advice … Work with an Advisor Working On Your Side <ul><li>Experience </li></ul><ul><li>Time </li></ul><ul><li>Resources </li></ul><ul><li>Knowledge </li></ul><ul><li>Investment Planning </li></ul><ul><li>Investment Discipline </li></ul><ul><li>An Understanding of the Effects of Taxes </li></ul>

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What Should You Do Next? <ul><li>Find a Fee-Only CFP ® Professional Through the Resource Links Provided </li></ul><ul><li>Learn More. Sign up for Financial Topics/Financial Planning Strategies e-newsletters. </li></ul><ul><li>Check out www.investorwatchdog.com and www.moneylinkpro.wordpress.com for more comments, information and resource links. </li></ul><ul><li>Call for a complimentary Money Tune Up, Portfolio Review or College Money Assessment </li></ul><ul><li>Call 978-388-0020 to discuss any questions. </li></ul>PA0000.029.0405 Steve Stanganelli, CRPC®, CFP®

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Reinventing Your Retirement PA0000.029.0405 Steve Stanganelli, CRPC®, CFP® 978-388-0020 A Q &