Putnam Investments: Pathway to Independence

Embed Size (px)

DESCRIPTION

Retirement strategies for women

Text of Putnam Investments: Pathway to Independence

  • 1. Not FDIC May LoseNo Bank InsuredValue GuaranteeEO013 270090 10/11 |1

2. A strong foundationNearly half of the U.S. 47%labor forceMore than half ofmanagement and professional51%jobsMore likely (than men)to attend college 74%Source: Bureau of Labor Statistics, Women in the Labor Force: A Databook, 2010.EO013 270090 10/11 |2 3. The challenges Earnings (still) tend to be lower overall Likely to live longer Often in the role of caregiver Investment behavior is more cautiousEO013 270090 10/11 |3 4. Receiving lower overall pay TodayAt retirementThis estimated wage gapcould cost the average Women are paidfull-time woman worker 77 cents for $700,000 to every dollar earned by a man$2 million over thecourse of her work lifeSource: National Committee on Pay Equity, September 2010. EO013 270090 10/11 |4 5. Enjoying a long retirementHealth-care costs The average womanwill outpace the who retires at age 65rate of inflation today can expect to live A longer lifespan 21 years in retirement means more yearsin retirementSource: Social Security Administration, 2011.EO013 270090 10/11 |5 6. Taking care of others61%More than halfof those who of employedprovide unpaid women caregiverscare to an elderly adjust their workor disabled adultschedules toare womenprovide careSource: U.S. Department of Health and Human Services, Office on Womens Health, May 2008, which is the most recent data available.. EO013 270090 10/11 |6 7. Being too conservative However, being tooWomens patience conservative canin investing isnegatively affect your retirementoften rewarded savings goals Sources: Hewitt Associates, "Total Retirement Income at Large Companies: The Real Deal," July 2008; Society of Actuaries, Risks and.Process Retirement Survey Report, May 2008, which is the most recent data available.EO013 270090 10/11 |7 8. Strategies to move yourretirement planin the right directionEO013 270090 10/11 |8 9. Will you need more incomein retirement?The average household Expenses requires $49,067 annually,or $981,340 over 20 years,before inflation* Wealth Long-term inflation preservation averages 3.24% per year*** U.S. Dept. of Labor, 2010 Consumer Expenditure Survey Report (based on 2009 data).** Consumer Price Index, 2011, for the period 1913-2010. EO013 270090 10/11 |9 10. Do you know how muchyoull need to save? Survey responses Less than 31% $250,000 Less than 50% $500,000 Less than 72% $1,000,000 At least 17% $1,000,000Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2011 Retirement Confidence Survey.EO013 270090 10/11 | 10 11. Because reality can be startling If your current annual income is Youll need to save $50,000$890,000 $100,000$1,800,000 $250,000 $3,600,000Assumes 25 years of retirement, and a retirement nest egg growing at 6% annually, compounded monthly and adjusted for 3% inflation.EO013 270090 10/11 | 11 12. Save as much as you can 2011 limitYour employers retirement plan$16,500Before-tax contributions, tax-deferred earningsTraditional IRA$5,000Before-tax contributions (if you qualify), tax-deferred earningsRoth IRA $5,000After-tax contributions, tax-free withdrawalsAdditional contributions for those age 50 and overEmployers retirement plan $5,500Traditional or Roth IRA$1,000Source: IRS, 2011.EO013 270090 10/11 | 12 13. Social Security wont cover it all $50,908 $38,272 Annual income of full-time worker (age 60)$17,520$14,460What you canexpect fromSocial Security*Single MenSingleWomen* In todays dollars. Assumes retirement at age 66.The maximum Social Security benefit in 2011 for an individual at full retirement age (66) is $28,392.Sources: Bureau of Labor Statistics, Highlights of Womens Earnings in 2010, Social Security Administration, 2011. EO013 270090 10/11 | 13 14. Actively manage your nest egg Diversify to reduce risk, while seekingto optimize returns Rebalance regularly Take sustainable withdrawals Diversification and rebalancing will not necessarily prevent you from losing money; however, they may reduce volatility and potentially limit downside losses. EO013 270090 10/11 | 14 15. Diversification can helplower volatilityStocks felt the boomand bust of the 1990sand early 2000s.$500,000$1,703,459Jan. 1991 Dec. 2010Annual withdrawal: $25,000Illustration is based on a hypothetical investment of $500,000 in the S&P 500 Index. The S&P 500 Index is an unmanaged index of common stockperformance. You cannot invest directly in an index.EO013 270090 10/11 | 15 16. Diversification can helplower volatilityBonds were steady,but lagged behindstocks.$500,000Jan. 1991 $716,709 Annual withdrawal: $25,000Dec. 2010Illustration is based on a hypothetical investment of $500,000 in the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond Index. The BarclaysCapital U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities. You cannot invest directly in an indexEO013 270090 10/11 | 16 17. Diversification can helplower volatilityA diversified portfoliooutpaced bonds withfar less volatility.$500,000Jan. 1991$1,029,714Annual withdrawal: $25,000Dec. 2010Illustration is based on a hypothetical investment of $500,000 in the S&P 500 Index, the Barclays Capital U.S. Aggregate Bond Index, and a diversifiedportfolio composed of a 25% investment in the S&P 500 Index and a 75% investment in the Barclays Capital U.S. Aggregate Bond Index. Refer toslides 15 and 16 for index definitions. You cannot invest directly in an index. Annual withdrawals are $25,000 increased by 3% annually for inflation.Diversified portfolio is rebalanced annually. EO013 270090 10/11 | 17 18. Diversify across opportunitiesChanges in market performance, 19912010 1991 199520002005 2010 Highest return Lowest returnU.S. Small-Cap Growth Stocks | Russell 2000 Growth Index International stocks | MSCI EAFE IndexU.S. Large-Cap Growth Stocks | Russell 1000 Growth Index U.S. Bonds | Barclays Capital U.S. Aggregate Bond IndexU.S. Small-Cap Value Stocks | Russell 2000 Value Index Cash | BofA Merrill Lynch U.S. 3-Month Treasury Bill IndexU.S. Large-Cap Value Stocks | Russell 1000 Value IndexPast performance does not indicate future results.Indexes are unmanaged and show broad market performance. It is not possible to invest directly in an index.EO013 270090 10/11 | 18 19. Small-Cap Growth Stocks are represented by the Russell 2000 Growth Index, whichis an unmanaged index of those companies in the Russell 2000 Index chosen for theirgrowth orientation.Large-Cap Growth Stocks are represented by the Russell 1000 Growth Index, whichis an unmanaged index of capitalization-weighted stocks chosen for their growthorientation.Small-Cap Value Stocks are represented by the Russell 2000 Value Index, which is anunmanaged index of those companies in the Russell 2000 Index chosen for their valueorientation.Large-Cap Value Stocks are represented by the Russell 1000 Value Index, which is anunmanaged index of capitalization-weighted stocks chosen for their value orientation.International Stocks are represented by the MSCI EAFE Index, which is anunmanaged index of international stocks from Europe, Australasia, and the Far East.U.S. Bonds are represented by the Barclays Capital U.S. Aggregate Bond Index, which isan unmanaged index used as a general measure of fixed-income securities.Cash is represented by the Bank of America Merrill Lynch U.S. 3-Month Treasury BillIndex, which is an unmanaged index used as a general measure for money market or cashinstruments. EO013 270090 10/11 | 19 20. Active rebalancing Without rebalancing: The market controls asset allocation Stocks Bonds 67% 57%33% 43%Out-of- Balanced balance portfolioportfolio2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Stocks are represented by the S&P 500 Index and bonds by the Barclays Capital U.S. Aggregate Bond Index. Indexes are unmanaged and represent broadmarket performance. It is not possible to invest directly in an index. Data is historical. Past performance is not a guarantee of future results. Diversificationand rebalancing will not necessarily prevent you from losing money; however, they may reduce volatility and potentially limit downside losses.EO013 270090 10/11 | 20 21. Active rebalancing With rebalancing: Asset allocation remains consistent Stocks Bonds 67%57% 67%67%33% 43%33% 33% Balanced Balanced portfolioportfolio2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Stocks are represented by the S&P 500 Index and bonds by the Barclays Capital U.S. Aggregate Bond Index. Indexes are unmanaged and represent broadmarket performance. It is not possible to invest directly in an index. Data is historical. Past performance is not a guarantee of future results. Diversificationand rebalancing will not necessarily prevent you from losing money; however, they may reduce volatility and potentially limit downside losses.EO013 270090 10/11 | 21 22. Putnam Asset AllocationFunds Asset class diversification Global investment perspective Active rebalancing Individual security selectionEO013 270090 10/11 | 22 23. Consider these risks before investing:Putnam Asset Allocation Funds can invest in international investments,which involve risks such as currency fluctuations, economic instability,and political developments.The funds invest some or all of their assets in small and/or midsizecompanies. Such investments increase the risk of greater pricefluctuations. The use of derivatives involves special risks and may resultin losses.The funds can also have a significant portion of their holdings in bonds.Mutual funds that invest in bonds are subject to certain risks includinginterest-rate risk, credit risk, and inflation risk. As interest rates rise,the prices of bonds fall. Long-term bonds have more exposure tointerest-rate risk than short-term bonds. Lower-rated bonds may offerhigher yields in return for more risk. Unlike bonds, bond funds haveongoing fees and expenses.EO013 270090 10/1