Post on 13-Jul-2020
transcript
INVESTING IN YOUR FUTURE: A TIAA FINANCIAL ESSENTIALS WORKSHOP
Money at Work 1:Foundations of investing
Money at Work 1: Foundations of investing
Staying on course: Today’s agenda
Retirement Advisor
Understanding saving
Risk tolerance
Asset classes and asset allocation
Mutual funds, IRAs, stocks and annuities
Tools and action steps
Money at Work 1: Foundations of investing
Trivia
1. What percentage of Americans has no confidence that they’ll have enough money to retire comfortably?
2. What percentage of Americans report that they aren’t contributing to any retirement plan?
Money at Work 1: Foundations of investing
The basics
Where to begin?
Assess your current situation
Get out of debt
Make saving a priority
Create a budget, and stick to it
Pay yourself first
Money at Work 1: Foundations of investing
Retirement Advisor - How much will you need?
TIAA.org/setyourgoalsTIAA tools can help you figure out your personal retirement situation.
Money at Work 1: Foundations of investing
Understanding saving: The rainy day will come
Take advantage of employer retirement plans
Start saving right away to take advantage of compound interest
Put some savings toward an emergency fund
Consider saving at least 15-20% of your income each year
Consider tax advantages when looking into investment vehicles
403(b) tax-deferred annuity plans
An IRA can give you a tax-advantaged boost!
Money at Work 1: Foundations of investing
Investing in stocks: the Rule of 72
How long does it take to double your money?
729
the magic number
your percentage rateof return as a whole number
= years it will take todouble your money8
Money at Work 1: Foundations of investing
The above illustration is intended to show a hypothetical example of the principle of compounding.
Assumptions: Current age: 35, $65,000 salary with no increases, employee contribution rate of 12%, employer contribution rate of 6% and 6.0% rate of return.
These returns are illustrative only and do not reflect actual performance, or predict future results, of any TIAA account. Investment returns, and the value of the principal you’ve invested, will vary over time. Investments offering the potential for higher rates of return also involve a higher degree of risk to capital. The results do not represent any specific product and do not predict or project future returns. The examples also do not reflect any withdrawals during the period displayed. You need to keep in mind that investing poses risks and it is possible to lose money by investing in securities.
The high cost of delaying
Money at Work 1: Foundations of investing
Investing: Find your type
Vehicles vs. investments– Vehicles: 401(k), 403(b) or other types of
investment accounts– Investments: stocks, bonds, mutual funds,
annuities
Money at Work 1: Foundations of investing
Understanding your risk tolerance
What’s your risk level?
Conservative
Moderately conservative
Moderate
Moderately aggressive
Aggressive
What’s your time horizon?
There are inherent risks associated with investing in securities, including loss of principal. The greater the risk, the more likely you can lose money. An investor’s needs and the suitability of an investment should be carefully considered prior to purchase.
Money at Work 1: Foundations of investing
Class is in session
Asset classes
Guaranteed
Money market
Fixed income
Real estate
Stocks (a.k.a. equities)
There are inherent risks in investing in securities. Past performance is no guarantee of future results. In addition, investment returns and principal value will fluctuate so your accumulation, when redeemed, may be worth more or less than the original cost.* Subject to TIAA’s claims-paying ability.** In California, the TIAA Real Estate Account is available through IRAs, but not all employer-sponsored plans. Please contact us to determine if
your institution’s plan can accept investments into the account.
Guaranteed* MoneyMarket
FixedIncome
RealEstate** Equities
RiskLower Higher
Money at Work 1: Foundations of investing
Asset allocation: Diversifying your portfolio
You can diversify your portfolio to avoid big investment value fluctuations by:
Dividing your investments into stocks, bonds and cash equivalents
Diversifying by sector also (retail vs. energy vs. etc.)
As you get closer to retirement, you may want to shift more investments to safer options
Examples - Bonds, cash and a guaranteed account
Money at Work 1: Foundations of investing
Diversification!
Money at Work 1: Foundations of investing
Determinants of portfolio return variation
Diversification is a technique to help reduce risk. However, there is no guarantee that diversification will protect against a loss of income.The strategies of diversification, rebalancing and asset allocation cannot eliminate the risk of investment losses or guarantee that an investor's goal will be met.
Money at Work 1: Foundations of investing
Mutual funds: Strength in numbers
Generally made of several assets, like stocks or bonds
Money is pooled to buy assets for the investors who own part of the fund
Retirement accounts can invest in mutual funds
After tax vs. employer-sponsored retirement plans
Money at Work 1: Foundations of investing
IRAs: Traditional vs. Roth
Traditional IRA
Roth IRA
Money at Work 1: Foundations of investing
Traditional IRA
Contributions may be tax deductible
Tax-deferred potential growth
No income limits to make contributions
May be a good option if you think you might be in a lower tax bracket during retirement or if you may need money before age 59½ (withdrawal is subject to 10% early distribution penalty)
Money at Work 1: Foundations of investing
Roth IRA
Contributions made with after-tax dollars
Withdrawals can be tax free (conditions apply)
Consider a Roth IRA if you:- Think you might be in a higher tax bracket during retirement
- Can double as a savings vehicle for certain short-term goalssuch as buying a home or college tuition (qualifications, restrictionsand/or penalties may apply)
- Would like to leave tax-free assets to your heirs
- May want to retrieve your original contributions before retirement
- Are age 70½ or older and want to continue investing in an IRA
Money at Work 1: Foundations of investing
IRA comparison
Traditional IRA Roth IRA
Tax Benefits Tax-deferred growthTax deductible contributions*
Tax-free growthTax-free qualified withdrawals
Eligibility: Income Limits None
Single or head of household:$120,000-$135,000Married, filing jointly:$189,000-$199,000
Annual Contribution Limits Age 49 and below: $5,500 cumulativeAge 50 and above: $6,500 cumulative
Eligibility: Withdrawals No restrictions with earned compensations and income levels met
If held for >5 years, eligible for withdrawals starting at age 59½
Can withdraw contributions only, anytime without penalty
Penalties at WithdrawalIf age 59½ or younger, withdrawalsare subject to a 10% federal early
withdrawal fee*
If held <5 years, withdrawals result in taxable earnings and a 10% early withdrawal fee if age 59½ or less*
Required Minimum Distribution (RMDs) Must start at age 70½ No requirements
*Some qualifications and/or exceptions may apply. Consult a tax advisor for more information.
Money at Work 1: Foundations of investing
Investing in stocks—a primer
A stock is a piece—or share—of something valuable.
Stocks are also known as equities.
Stocks are volatile investments—their value can vary a great deal in a short time period.
BUT that’s looking at too big of a picture!
Money at Work 1: Foundations of investing
Dollar cost averaging
NOTE: A periodic investment plan such as dollar cost averaging does not assure a profit or protect against a loss in declining markets.
Money at Work 1: Foundations of investing
Demystifying the annuity
TIAA.org/public/offer/products/annuities
An annuity is a contract between you and an insurance company.
There are different kinds of annuities:– Deferred vs. immediate annuities– Fixed vs. variable annuities
Some annuities offer the option of lifetime income
Myths about annuities
Money at Work 1: Foundations of investing
Average annual total returns (1926–2016)(Subtract inflation from the nominal return to get the real return)
Source: ©2017 Morningstar Investment Management LLC. All rights reserved. Morningstar Investment Management LLC is a registered investment adviser and subsidiary of Morningstar, Inc. The Morningstar name and logo are registered marks of Morningstar, Inc. These returnsare for illustrative purposes only and do not reflect TIAA-CREF performance or the returns various kinds of investments may earn in the future. Stocks represent shares of ownership in a corporation, bonds are debt obligations and real estate is direct property ownership. The value of each will fluctuate with market conditions. Treasury bills (T-bills) and government bonds are insured as to timely payment of principal and interest by the U.S. government, unlike stocks and corporate bonds. T-bills are short-term money market instruments. Past performance does not guarantee future returns. S&P 500, Ibbotson U.S. Long Term Corporate Bonds, Ibbotson U.S. Long Term Government Bonds, Ibbotson U.S. 30-Day Treasury Bills, U.S. Consumer Price Index for All Urban Consumers (CPI-U). Please note that the indexes are unmanaged and that it is not possible to invest directly in an index.
*Chart illustrates returns from 1/1/1926 to 12/31/2016. Real Estate returns are from 12/31/1978—12/31/2016 from NCREIF Index.
0
2
4
6
8
10
12
Inflation U.S. T-Bills Long-termCorporate Bonds
Real Estate* Common Stocks
2.90 2.903.38
0.48
6.00
3.10
9.29
6.39
10.04
7.14
Nominal Real
Money at Work 1: Foundations of investing
You’re in control of your investments: Next steps to consider
Pay off debt
Make and stick to a budget
Discover your investment personality
Build your investment mix
Review your retirement plan regularly
Use our online tools: TIAA.org/tools
Schedule an appointment with a Financial Consultant
Money at Work 1: Foundations of investing
Tools and resources
TIAA.org/tools
Retirement AdvisorTIAA.org/setyourgoals
Selecting the right IRATIAA.org/public/iraselectortool
Money at Work 1: Foundations of investing
Congratulations. You’ve invested in your future today
Questions?
Money at Work 1: Foundations of investing
Action steps to consider
Call 800-732-8353Weekdays, 8 a.m. to 8 p.m. (ET)
to schedule a one-on-one session with a TIAA Financial Consultant.
Schedule online at
TIAA.org/schedulenow
Money at Work 1: Foundations of investing
Sources
Retirement confidence declined to 60% in 2017, down from 64% in 2016.1Nearly 4 in 10 American workers say they aren’t contributing to any retirement plan, according to a 2017 study by the Employee Benefits Research Institute.11Employee Benefit Research Institute, “The 2017 Retirement Confidence Survey,” March 2017
Average annual healthcare spending can reach nearly $4,400 for households over 65—and can jump to more than $6,600 for those 85 and older.22Employee Benefit Research Institute, “Utilization Patterns and Out-of-Pocket Expenses for Different Health Care Services Among American Retirees,” accessed May 2017
Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. By investing in more than one asset category, if one asset category's investment return falls, you'll be in a position to counteract your losses in that asset category with potentially better investment returns in another asset category. The practice of spreading money among different investments to reduce risk is known as diversification. By picking the right group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns.3
3Securities and Exchange Commission, “Beginners' Guide to Asset Allocation, Diversification, and Rebalancing,” accessed May 2017
Money at Work 1: Foundations of investing
The Retirement Advisor does not monitor your retirement assets or personal circumstances. The purpose of the retirement income tool is to show how the performance of the underlying investment accounts could affect the participant's policy cash value and the resulting retirement income. It is not intended to project or predict investment results. The advice may vary over time and with each use. There may be other investments not considered by the Retirement Advisor that have characteristics similar or superior to those being analyzed. The tool’s advice is based on statistical projections of the likelihood that you will achieve your retirement goals. The projections rely on financial and economic assumptions of historical rates of return of various asset classes that may not reoccur in the future, volatility measure and other facts, as well as information you have provided.
IMPORTANT: Projections and other information generated through the Retirement Advisor regarding the likelihood of various investment outcomes are hypothetical, do not reflect actual investment results and are not a guarantee of future results. The projections are dependent in part on subjective assumptions, including the rate of inflation and the rate of return for different asset classes. These rates are difficult to accurately predict. Changes to the law, financial markets or your personal circumstances can cause substantial deviation from the estimates. This could result in declines in the account’s value over short or even extended periods of time.
You should consider the investment objectives, risks, charges and expenses carefully before investing. Call 877-518-9161 or log on to TIAA.org for underlying product and fund prospectuses that contain this and other information. Read the prospectuses carefully before investing.
This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor’s personal advisor based on the investor’s own objectives and circumstances.
Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value.
Investment products may be subject to market and other risk factors. See the applicable product literature, or visit TIAA.org for details. It is possible to lose money when investing in securities.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. The TIAA-CREF Retirement Advisor is a brokerage service provided by TIAA-CREF Individual & Institutional Services, LLC, a registered broker/dealer and member of FINRA. After-tax annuities are issued by TIAA-CREF Life Insurance Company, New York, NY. Each is solely responsible for its own financial condition and contractual obligations.
TIAA.org©2017 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue, New York, NY 10017
Annuities are designed for retirement and other long term goals. If you choose to invest in variable annuities, your money will be subject to the risks inherent in investing in securities. Annuities offer several payment options, including lifetimeincome. Guarantees are based on the claims-paying ability of the issuer. Payments from variable annuity accounts are not guaranteed and will rise or fall based on investment performance.
Withdrawals of earnings from a retirement account or annuity are subject to ordinary income tax, plus a possible federal 10% penalty if you make a withdrawal before age 59½.
The tax information contained herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. The TIAA group of companies does not provide legal or tax advice. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
324676
141023326
Money at Work 1: Foundations of investing
Thank you!
You can call 800-732-8353Weekdays, 8 a.m. to 8 p.m. (ET)to schedule a one-on-one session with a TIAA Financial Consultant
Or, schedule online at
TIAA.org/schedulenow