457 retirement education for life ® is your retirement rockin’ or rollin’?
TRANSCRIPT
457
Retirement Education for LIFE®
Is Your RetirementIs Your RetirementRockin’ or Rollin’?Rockin’ or Rollin’?
457
Retirement Education for LIFE®
NRM-3448A0.1 (308)
Nationwide Retirement SolutionsRetirement Education for LIFE™
Retirement Specialists are registered representatives of Nationwide Investment Services Corporation, member FINRA. In Michigan only: Nationwide Investment Svcs. Corporation.
How to Manage YourInvestment Risk
How to Mange Your Investment RiskHow to Mange Your Investment RiskRetire — 3
Today, you will …
• Define the main types of investment risk
• Learn three ways to manage investment risk
• Prepare an action plan to help you manageinvestment risk
How to Mange Your Investment RiskHow to Mange Your Investment RiskRetire — 4
What is risk?
The possibility
of loss
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Investment risk
Five main types:
•Volatility (market risk)
•Purchasing power (inflation risk)
•Business-specific
•Interest rate
•Longevity
Action step
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Managing investment risk
Three methods (strategies):
• Match investments to time horizon
• Diversification
• Dollar cost averaging
Action step
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Jane’s time horizon
• Life expectancy 85
• Expected retirement age 65
• Current age 40
• Time horizon: 85 - 40 = 45 years NOT 65 - 40 = 25 years
Action step
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Use of diversification as part of an overall investment strategy does not assure a profit or guarantee against loss in a declining market.
DiversificationDiversification is the
principle of __________
your assets around, or not
putting all of your _____ in
one basket.
spreading
eggs
Action step
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This illustration is hypothetical and is not intended to predict or project investment results. It doesn't reflect any fees or charges. If they were, the results would be lower.
Diversification in action• Option #1• $50,000 @ 2% for 25 years =
• Option #2
• $10,000 @ -100% =
• $10,000 @ 0% =
• $10,000 @ 5% for 25 yrs =
• $10,000 @ 8% for 25 yrs =
• $10,000 @ 10% for 25 yrs =
$ 0$ 10,000$ 33,864$ 68,485$108,347
$220,696
$ 82,030
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$10 .79 13
$10 .59 17
$10 .39 26
$10 .79 13
Amount Price # of Golf Balls
Dollar cost averaging does not assure a profit and does not guarantee against loss in a declining market.
Dollar cost averaging
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• $10 .79 13
• $10 .59 17
• $10 .39 26
• $10 .79 13
Average store price per ball $2.56 divided by 4 = 64
cents
Average price paid per ball $40 divided by 69 = 58
cents
$40 $2.56 69
Dollar cost averaging
Amount Price # of Golf Balls
Action step
Please be aware that dollar cost averaging does not assure a profit and does not guarantee against loss in a declining market.
How to Mange Your Investment RiskHow to Mange Your Investment RiskRetire — 12
DefinitionTime
horizonDiversificati
on
Dollar cost
averaging
The risk that you might not have enough money on which to retire
The up and down movements In the price of an investment
The risk that your money won’tbuy as much in the future
The risk that the value of aparticular company’s stock declines
How an upward move in interest rates makes the value of your fixed income investment decline
Volatility
Purchasingpower
Business–specific
Interest rate
Accumulation
Type of risk
Tools for managing risk
Action step
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Tools for managing risk
DefinitionTime
horizonDiversificati
on
Dollar cost
averaging
The risk that you might not have enough money on which to retire
The up and down movements In the price of an investment
The risk that your money won’tbuy as much in the future
The risk that the value of aparticular company’s stock declines
How an upward move in interest rates makes the value of your fixed income investment decline
Volatility
Purchasingpower
Business–specific
Interest rate
Accumulation
Type of risk
Action step
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Tools for managing risk
DefinitionTime
horizonDiversificati
on
Dollar cost
averaging
The risk that you might not have enough money on which to retire
The up and down movements In the price of an investment
The risk that your money won’tbuy as much in the future
The risk that the value of aparticular company’s stock declines
How an upward move in interest rates makes the value of your fixed income investment decline
Volatility
Purchasingpower
Business–specific
Interest rate
Accumulation
Type of risk
Action step
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Tools for managing risk
DefinitionTime
horizonDiversificati
on
Dollar cost
averaging
The risk that you might not have enough money on which to retire
The up and down movements In the price of an investment
The risk that your money won’tbuy as much in the future
The risk that the value of aparticular company’s stock declines
How an upward move in interest rates makes the value of your fixed income investment decline
Volatility
Purchasingpower
Business–specific
Interest rate
Accumulation
Type of risk
Action step
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Tools for managing risk
DefinitionTime
horizonDiversificati
on
Dollar cost
averaging
The risk that you might not have enough money on which to retire
The up and down movements In the price of an investment
The risk that your money won’tbuy as much in the future
The risk that the value of aparticular company’s stock declines
How an upward move in interest rates makes the value of your fixed income investment decline
Volatility
Purchasingpower
Business–specific
Interest rate
Accumulation
Type of risk
Action step
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Tools for managing risk
DefinitionTime
horizonDiversificati
on
Dollar cost
averaging
The risk that you might not have enough money on which to retire
The up and down movements In the price of an investment
The risk that your money won’tbuy as much in the future
The risk that the value of aparticular company’s stock declines
How an upward move in interest rates makes the value of your fixed income investment decline
Volatility
Purchasingpower
Business–specific
Interest rate
Accumulation
Type of risk
Action step
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So what can you do?
• Annually rebalance your investments
• Change allocation as you get closer to retirement
• Invest fixed amounts at regular intervals
• Diversify
Ways to manage risk
Action step
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Why combine other retirement dollars into this plan?
• It may make investing easier!
• Personal help now and after you retire
• May pay less in annual account fees
• Nationwide is an industry leader in both 457(b) and 401(k) markets
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What types of accounts can you combine?
• Qualified 401(k) retirement plan
• Qualified 403(b) retirement plan
• Rollover IRA, Contributory IRA or SIMPLE IRA account
You can transfer other 457 dollars or rollover dollars from a:
There are differences between deferred compensation plans, individual retirement accounts, and qualified plans, including fees and when you can access funds. There may be sales charges or other fees when you move money out of your current account. You should consider all factors before making a decision. Assets rolled over from a qualified plan, DROP plan or IRA may be subject to a 10% penalty tax if withdrawn prior to age 59½. Neither Nationwide, nor any of its representatives give legal or tax advice.
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Tools and services to make informed investing decisions
Information provided by Retirement Specialists is for educational purposes only
and is not intended as investment advice.
Action step
• Face-to-face
• Online
• By phone
• Other financial education workshops
How to Mange Your Investment RiskHow to Mange Your Investment Risk
Thank you for your attendance!
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