10.

Personal Loss Exposures and Financial Planning

Personal Loss Exposures Planning for the Future Investing to attain Financial Goals Retirement Planning Tax Deferred Retirement Plans Annuities Social security

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 1

Personal Loss Exposures

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 2

Personal Loss exposures

Premature Death
o Early death, Outstanding or unfilled financial Obligations Poor Health and Disability Unemployment

Weekly Cash benefits will be paid by Government programs

Retirement

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 3

Personal Loss exposure- Unemployment Payment Conditions

Benefits
o Based on employee's covered earnings during the base period

o Benefits paid up to max of 26 weeks

o Established from employers tax contribution with exception of very few state

Extended Benefits
o Benefits from federal controlled programs

o States with high Rates of unemployment

o Paid additional 13 weeks o Shared equally by state and Federal Government

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 4

Personal Loss exposure- Unemployment Payment Conditions

Involuntary unemployed Earn Qualifying Wages during a specific base period Actively seek work Free from disqualifying acts Meet a specified waiting period Benefits
o o o Based on employee's covered earnings during the base period Paid up to max of 26 weeks Established from employers tax contribution with exception of very few state

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 5

Financial Planning

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 6

Financial Planning
Gathering financial Information Analyze the present financial situation

Determine specific financial goals and objectives

Design a financial plan to achieve the financial goals Periodically review and revise the plan

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 7

Obstacles to Financial Planning

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 8

Obstacles to Financial Planning

Unwillingness to save and invest
Excessive use of High-interest credit cards and continued spending Natural tendency to delay and postpone saving Inadequate knowledge about financial planning

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 9

Financial Goals

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 10

Financial Goals
Increase in personal wealth
Higher standard of Living Protection of the family and property

Saving for Retirement

Purchase of home
College education for Children Emergency fund Getting out of Debt Minimizing taxes

Investment Goals

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 11

Investing to Attain Financial Goals

Investment Objectives Investment Risks Investment Types

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 12

Investment objectives

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 13

Investment Objectives
Capital Appreciation o No taxation until sold
o Capital gains taxation

o Long term investment

Preservation of Capital o Conservative Investor

o Short term investment o To address the rate of inflation

Current Income
Growth and Income Liquidity
Minimizing Taxes

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 14

Investment Risks

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 15

Investment Risks
Variability of Investment outcomes Total Return = Dividends paid + Capital appreciation

Conservative (Risk Averse) and Speculative Investments (Aggressive Risk)

Risks o Inflation Risk
o Market Risk o Interest Rate Risk o Financial Risk o Business Risk o Liquidity Risk

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 16

Investment Types

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 17

Investment Types
Savings accounts and Savings Instruments
Stocks Bonds Mutual Funds Real Estate

Miscellaneous Investments

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 18

Savings Accounts and Savings Instruments

Free from interest rate and Market Risk Free from Financial Risks when insured by Deposit Corporation Subject to Inflation Risk High Liquidity Short term and Emergency fund

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 19

Saving accounts and Instruments Types

Regular Savings Accounts
Certificates of Deposit Money Market Mutual Funds Money Market Deposit Accounts

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 20

Stocks
Highly Risk investment of all major types
Subject to all types of investment risk Ownership interest in the Corporation Stockholders share the profits and losses, and receive the dividends

Common and Preferred Stock

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 21

Bonds and Mutual Funds

Bonds
o Riskier than Savings accounts but less riskier than stocks o Fixed maturity date and periodic interest payments o Coupon Rate o Can be sold before Maturity date

Mutual Funds
o Diversification o Professional Management o Record Keeping o Marketability o Liquidity

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 22

Real Estate
Shelter, stability and security for family
Apartments, Shopping centers, Mortgages, Farmland, REITs Advantages o Regular income

o
o o o

Capital appreciation
Maintenance, tax and insurance expenses Liquidity problem Dealing with problem tenants

Disadvantages

Tax issues

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 23

Retirement Planning
Problems in comfortable retirement Suggestions for Retirement Retirement Investment Methods

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 24

Problems in Comfortable Retirement

Increased Proportion of Retirees Longer Period of Retirement Insufficient Money Income

Insufficient Financial Assets

Poor Health

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 25

Suggestions for Retirement Investment

Begin investing early Max contributions to Tax deferred retirement plans (Ex : 401(k) plan) Change the allocation of assets over the Life Cycle Consider Dollar Cost Averaging Dont ignore the effect of Inflation after Retirement

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 26

Retirement Plans
Tax deferred Retirement Plans Social Security

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 27

Tax Deferred Retirement Plans

Advantages Private Pension Plans o o o Meets IRS Requirements (Qualified Plans) Eligibility Requirements
Minimum age and length of Service (21 and one year of service)

Types
Defined Contribution (Money Purchase Pension) Plan

- Majority are Defined Contribution plans

Defined Benefit Plan Retirement Age Vesting (employees ownership of pension contributions made by the employer) Annual Limits on Contributions and Benefits Early and Late Distributions

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 28

IRA, Other Tax Deferred Retirement Plans

IRA Individual Retirement account
Traditional IRA (Taxable compensation during the year and less than 70.5 years of ages by the end of the taxable year)

Roth IRA
It is a Individual Retirement plan that allows 1) Investment earnings to accumulate free of federal taxes and 2) tax-free withdrawals at age 59.5 or later; does not allow federal incometax deduction of annual contributions

Other Tax deferred Retirement Plans

o Section 401(k) Plans

o Profit Sharing Plan

o Thrift Plan ( or Savings plan) o Keogh(HR-10) o SEP (Simplified Employee Pension Plan) o SIMPLE( Savings Incentive Match Plan for Employees)

o Section 403(b)- Tax Sheltered Annuities

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 29

Individual Annuities
Immediate Annuity Deferred Annuity Flexible Premium Annuity Fixed Annuity

Variable Annuity

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 30

Social Security
OASDHI
o Social Insurance Program o Compulsory Program Base of financial Security to Population Control of Adverse Selection o Minimum Floor Of income o Emphasis on Social adequacy o Benefits loosely related to earnings o Benefits prescribed by law o Financially Self Supporting o Full Funding unnecessary o No Means Test o Covered Occupations

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 31

Social Security
Insured Status
o Fully Insured

40 Credits or worked for 10 years full time

o Currently Insured At least 6 credits during last 13 calendar quarters in which death ,disability or entitlement to benefit o Disability Insured The worker must be disability insured to get disability benefits

31 or older must be fully insured

At least 20 credits out of the last 40 quarters

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 32

Social Security Benefits

Retirement Benefits
o Must be in fully insured status

o
o o o

Benefits are based on PIA (Primary insurance Amount)

Cost of Living Adjustment Early Retirement age ( 62) Delayed retirement Credit ( up to 70)

Survivor Benefits
o Either fully or currently insured

Disability Benefits Medicare Benefits

EVENT/CLIENT NAME or Confidentiality statement

6/23/2013 9:01 AM New Brand FMT-P2 33