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Slide 1: Access Financial University Establishing your Financial Foundation
Slide 2: Access Financial University  Retirement and Investment Planning – November 16, 2005  Tax Planning – December 14, 2005  Putting your Financial Plan in Motion – January 11, 2006
Slide 3: Shannon S. Shareef, CPA   Bachelor’s Degree – University of TN – Knoxville Masters of Accountancy (Concentration in Taxation) – University of TN – Knoxville Certified Public Accountant Member of American Institute of Certified Public Accountants –   360 Degrees of Financial Literacy  Member of Georgia Society of Certified Public Accountants
Slide 4: Retirement and Investment Planning  Understand the different investment strategies: – – Short Term ( 0 to 5 years) Long Term ( 5 years +) Employer Sponsored Retirement Plans Individual Retirement Accounts  Analyze your Retirement Choices – –  Determine your ideal portfolio
Slide 5: Short Term Investing : 0 – 5 years   If you need your money in a few years, its important to invest your money in less volatile investments. For example : – – – – Down payment on a Home Purchase a car College Education Capital to start a business
Slide 6: Short Term Investing : 0 – 5 years  Certificates of Deposit Money Market Accounts Short-Term Treasury Securities  
Slide 7: Certificates of Deposit (CD)     Low risk investment Typically offers a higher rate of interest than a regular savings account Invest a fixed sum of money for a specified period of time and in exchange, the bank pays you interest at regular intervals Upon maturity of the CD – the bank will re-pay the money originally invested plus any accrued interest
Slide 8: Money Market Accounts    Money Market Accounts (MMA) are interest-earning savings accounts offered by a FDIC-insured financial institution with limited transaction privileges. The interest rate paid by a financial institution on a money market account is usually higher than a regular savings account. Money market accounts may also have a minimum balance requirement. Examples of Money Market Accounts include : ING Direct, Emigrant Direct and E*Trade
Slide 9: Short Term Treasury Securities  Treasury Bills (T-Bills) – – Securities that can be purchased with a maturity date ranging from a few days to 26 weeks Bonds are sold at a discount from their face value  For example, a T-Bill with a face value of $1,000 would be sold at a discount for $900. Upon maturity, you would receive the face value of the T-Bill. The difference between the purchase price and face value of the T-Bill ($100) is your interest.
Slide 10: Short Term Treasury Securities  Treasury Inflation-Protected Securities (TIPS) are marketable securities whose principal is adjusted by changes in the Consumer Price Index. With inflation (a rise in the index), the principal increases. With a deflation (a drop in the index), the principal decreases.   Interest is paid every six months at a fixed rate based upon the adjusted principal. When TIPS are redeemed, you are either paid the adjusted principal or original principal. (You cannot lose money on the investment.)
Slide 11: Long Term Investing : 5 years +   If you do not anticipate needing your money within the next 5 years and you have time to “ride the waves of the market”. For example: – Retirement – College Education – Starting a business
Slide 12: Long Term Investing : 5 years + Stocks  Bonds  Mutual Funds  Real Estate 
Slide 13: Stock  By issuing stock, a company can raise money without going into debt. People who buy the stock are giving the company the money it needs to grow. Shares of stock can be bought or sold on the stock exchange. If the company does well, the price of the stock increases. If the company performs poorly, the price of the stock decreases. 
Slide 14: Bonds  A bond is debt that a company or government take to finance their operations. Similar to Treasury Securities mentioned earlier, you pay for the bond and interest is paid at maturity. Caution : Exercise extreme caution in purchasing bonds from Corporations. Corporations that go out of business are not able to repay the interest accrued nor the principal owed on bonds.  
Slide 15: Mutual Funds   A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, and/or other securities. There are three types of stock in a mutual fund: – Growth – Shares of companies whose revenues are growing fast – Value – Undervalued companies that may grow over time – Blend – A combination of growth and value stocks
Slide 16: Mutual Funds  Mutual Funds can be actively managed or unmanaged – – Actively Managed Funds have a professional money manager that actively buy or sell stock within the mutual fund Unmanaged Funds do not have a professional money manager and are designed to track an existing market index.
Slide 17: Mutual Funds    Fees and Expenses can reduce the return on any investment. The expenses charged by the mutual fund company are used to pay their annual operating costs Fees are sales commissions paid to the adviser that sold the mutual fund.
Slide 18: Mutual Funds  Items you should consider before purchasing a Mutual Fund : – Fees and Expenses   Front Load Back Load – – – Fund Manager Diversification Performance
Slide 19: Retirement Planning   All Retirement Plans include Stocks, Bonds and Mutual Funds. Typical Retirement Plans are: – – 401(k)’s Individual Retirement Accounts   Roth Traditional – Roth 401(k)’s
Slide 20: 401(k)    A 401(k) plan is an employer-sponsored plan that allows employees to set aside funds for retirement. Any 401(k) contributions are Pre-Tax which reduce a taxpayer’s taxable income. You can defer up to $14,000 in a 401(k) plan in 2005 (increases to $15,000 in 2006 with a $5,000 catch up contribution for those age 50 or older)
Slide 21: 401(k)  Qualified Withdrawals – – – – – – Loans – taxpayers repay principal and interest Hardship withdrawals Purchase of primary residence Payment of post secondary education expenses Unreimbursed Medical Expenses Prevent eviction or foreclosure from principal residence  Unqualified withdrawals are subject to ordinary income taxes plus a 10% penalty Qualified withdrawals are only subject to 10% Federal Tax Withholding and may incur a 10% penalty. 
Slide 22: Individual Retirement Account    An IRA is a personal savings plan that allows individuals to save for retirement. There are two types of IRA’s : Roth IRA’s and Traditional IRA’s. The maximum contribution to an IRA for 2005 (and 2006) is $4,000.
Slide 23: Roth IRA  Eligibility – – Earned Income Single Taxpayers    single filer – full contribution if modified AGI is less than $95,000. partial contribution if modified AGI is between $95,000 and $110,000. No contribution if modified AGI reaches $110,000 The phase-out range for a Roth IRA contribution for a married couple filing a joint return is $150,000 to $160,000. – Married Taxpayers 
Slide 24: Traditional IRA  Eligibility – Earned Income – Under the age of 70.5 – Did you participate in a 401(k) or other qualified retirement plan ?  No - Contribution is fully deductible  Yes - Contribution may be partially deductible based upon Adjusted Gross Income (AGI) – The amount of a traditional IRA contribution that is deductible declines to zero between certain AGI ranges, as follows: • • • • $0 to $10,000 for married couples filing separately $50,000 to $60,000 for single or head of household filers $70,000 to $80,000 for joint filers $150,000 to $160,000 you are not covered by a qualified retirement plan, but your spouse is (and you're filing jointly)
Slide 25: Roth vs. Traditional IRA     Roth IRA Funded with after-tax dollars No income tax liability during retirement Contributions limited to $4,000 per year      Traditional IRA Funded with after-tax dollars Deduction on tax return converts it to before-tax dollars Contributions may be limited based upon participation in qualified retirement plan Must pay income taxes on any withdrawals during retirement
Slide 26: Roth 401(k)    Authorized by President Bush in 2001 and will take effect January 1, 2006. Roth 401(k) would be offered by employers as a “parallel” system to the regular 401(k) Contributions to a Roth 401(k) plan-and the investment earnings-can be withdrawn tax-free. However, investment earnings cannot be withdrawn tax-free until five years after an employee first began to contribute to the plan and after he or she reaches age 59½. 
Slide 27: Roth 401(k)  Under the proposed rules, employers would have to keep traditional 401(k) and Roth 401(k) accounts separate, but contributions to the two plans would be combined when running the basic nondiscrimination test that compares contributions made by highly and nonhighly compensated plan participants. The rules also require that Roth 401(k) plan participants begin to take distributions from the plans no later than age 70½. 
Slide 28: Roth 401(k)    Employees will be able to contribute to both plans, but you will not be able to switch money from one plan to the other In addition, the contribution limit for both 401(k) and Roth 401(k) is $15,000. Employer matching contributions would be placed in the regular 401(k) account - even if the employee directs all of their contribution to the Roth 401(k).
Slide 29: Roth IRA vs. Roth 401(k)     Roth IRA Contribution limit : $4,000 Income limits : Cannot contribute if you have an AGI that exceeds $110,000 (singles) and $160,000 (married) Required distributions : None      Roth 401(k) Contribution limit: $15,000 Income limits : None Required Distributions : Must start distributions at age 70.5 Conversion : You can convert an Roth 401(k) to a Roth IRA
Slide 30: Create your Ideal Portfolio  Determine your risk level – – Conservative or Aggressive Short Term and/or Long Term  Determine your time horizon – –  Depending on your risk level and time horizon - develop a balanced portfolio
Slide 31: Create your Ideal Portfolio  Conservative Portfolio – – – 80% Domestic Bonds (or Bond Funds) 10% Stocks (including International Stock) 10% Money Market Accounts  Conservative Portfolios are ideal for those near retirement age or those who are riskadverse.
Slide 32: Create your Ideal Portfolio  Aggressive Portfolio – – – 70% in US Stocks 20% International Stock 10% Domestic Bonds  Aggressive Portfolios are ideal for younger investors who welcome varying levels of risk
Slide 33: Contact Us Access Financial Management, LLC c/o Shannon S. Shareef, CPA P.O. Box 724834 Atlanta, GA 31139 Email : sspencer@accessfinmgmt.com Office : (404) 592-4418 Fax : (404) 592-4418