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Picture It Now

Your Financial Future

Wealth Management Systems, Inc.

futurenow

past

One of the most popular

employee benefits these days is

a retirement savings plan — and

for good reason. Your retirement

savings plan offers tax benefits

and an easy method of setting

aside money for the future.

Together with the income

you may receive from Social

Security, other pension plans,

and other savings and assets,

your retirement savings plan

can become a valuable tool

for retirement planning.

Picture It Now was developed

by the financial and educational

experts at Wealth Management

Systems Inc. to help you make

the most of your retirement

planning strategies. Although

neither your employer nor

Wealth Management Systems Inc.

can guarantee that this guide

will enhance the performance

of your retirement savings plan

account, the information you’ll

find here is based on widely

accepted concepts that are

supported by historical fact.

It should provide the “blueprint”

you need to make informed

retirement planning decisions.

And informed decision making

is the most important factor in

helping to transform your vision

for retirement into reality.

About Picture It Now

1 | Retirement: An Old Concept With a New Flair

2 | Your Retirement Savings Plan Provides the Power to Prepare

3 | The Power of Tax Deferral

4 | Put Time on Your Side

5 | Understanding Investments

6 | Finding the Right Mix: How Do You Feel About Risk?

7 | Building Your Investment Portfolio

8 | Next StepsWealth Management Systems, Inc.

Retirement isn’t what it used to be.

In the past, retirement was more about

entering the final stage of life than

about planning for its next chapter. In

the 21st century, retirement can mean

a new career or business, part-time work,

volunteerism, education, or travel.

Longer Life, Higher Costs Thanks to medical advances, better

nutrition, and increased awareness of

health-related issues, people are living

longer than ever. That means retirement

is lasting longer than ever — but it is also

more expensive. Costs don’t decline

across the board when you retire. They

change. Clothing and commuting costs

may go down, but your medical costs

will probably rise. For example, you may

decide to supplement Medicare with

additional health insurance, which is

costly for retirees. And don’t forget about

inflation, which can significantly influence

a retiree’s cash flow through the years.

Prepare Yourself Be realistic about your plans for

retirement. Are you financially on track?

In 2013, the average benefit retired

workers received from Social Security

was $1,273 a month.1 The bottom line

is that it’s up to you to accumulate

enough money to help ensure an

adequate retirement income.

Planning Pointers More than ever before, getting ready

for the retirement of tomorrow depends

on careful planning today. This guide is

designed to help you put a plan into

action. It will help you develop and refine

a long-term strategy using one of the

best tools available — your retirement

savings plan.

1Source: Social Security Administration, “Monthly Statistical Snapshot,” November 2013.

Where Do Retirees Get Their Income?2

Other

Social Security

Earnings

Qualified Retirement Plans (including 401(k)s and IRAs)

Other Assets

32%

18%

11%

36%

3%

2Source: Fast Facts & Figures About Social Security, 2013. Based on aggregate data for retiree income, 2011. Due to rounding, total may equal more or less than 100%.

Assets Any owned properties or

rights that have value. These include

cash, investments, art, jewelry, real

estate, and other items considered

to have cash value.

buzzwords

How Much Can You Expect From Social Security?You can find out your estimated

benefit by visiting the Social

Security Administration (SSA)

website at www.ssa.gov and

clicking on the “Estimate your

retirement benefits” link. The

information is based on data

received by the SSA from your

current and previous employers.

If you find an error, call the SSA

at 1-800-772-1213.

Retirement: An Old Concept With a New Flair

1


WHEN

WHEREHOW

WHAT?

WHY

Your retirement savings plan provides one

of the most convenient ways to save money.

Your contributions (that is, the money

you put into the account) are deducted

automatically from your paycheck — and

what you don’t see, you won’t spend. For

many people — particularly those who

have difficulty saving money — payroll

deductions are a great way to build savings.

You’ll Probably Keep More Than You Think … Your contribution will reduce your take-

home pay, but because they are made with

pretax dollars, they reduce your take-home

pay by less than you might think.

Say you are in the 28% federal income tax

bracket. For every $100 you contribute to

your plan, your taxes are reduced by $28.

So each $100 contribution will only “feel”

like $72 in terms of what you miss from

your take-home pay.3

… While Postponing Tax Payments to

Uncle SamYour retirement savings plan also allows

you to shelter your nest-egg earnings

from taxes until you retire. That means

that you don’t have to pay taxes on your

contributions and earnings until you

withdraw the money.4

This process — postponing taxes on

your plan contributions and earnings —

is known as tax deferral. You’ll have to

pay taxes eventually, but if you wait until

retirement to withdraw the money, you

may come out ahead — especially if you

are in a lower tax bracket.

3These examples are hypothetical. Calculations have been simplified for illustrative purposes. They are based on a 28% federal income tax rate, but do not take into account state taxes or other withholdings that may affect your tax situation.4Withdrawals will be taxed at then-current rates. Early withdrawals prior to age 59½ may be subject to a penalty tax.

Your Retirement Savings Plan Provides the Power to Prepare

Monthly Monthly Taxable Taxes3 Take-Home Pay Contribution Pay Pay

$2,500 $0 $2,500 $700 $1,800

$2,500 $100 $2,400 $672 $1,728

Contribution = $100 Out-of-Pocket Difference = $72

Dividends A portion of profits

that a corporation may pay

to its stockholders.

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2


If you think tax deferral sounds like a

potentially valuable benefit of your

retirement savings plan, you’re right.

Consider the difference in growth between

a tax-deferred retirement savings plan

account and a taxable investment account.

The chart shows that if you invested just

$200 a month in a tax-deferred account

earning 8% for 30 years, it would grow to

$300,059. The same investment in a taxable

account would total only $138,848. Both

accounts assume a 28% federal tax rate.

This example is hypothetical and cannot

be guaranteed.5

Over time, tax deferral has the potential

to make a significant difference in your

ability to build a retirement nest egg that

lasts. Why? Because more of your money

is going to your retirement investments,

not to the IRS. In our example, $15,000

annual withdrawals are made from both

accounts after year 30, but the tax-deferred

account lasts longer.

Keep in mind, however, that the government

generally doesn’t look favorably on people

making withdrawals from their retirement

savings accounts before retirement. To

discourage the practice, a 10% penalty

on early withdrawals may be imposed on

“distributions” (withdrawals) taken before

age 59½, in addition to whatever local and

federal income taxes you may owe. Resist

the urge to use your retirement savings plan

account for anything other than retirement.

In addition to possibly incurring a tax

penalty, you could be depriving yourself

of potential future income.

The Benefits of Regular ContributionsWhen you contribute a

predetermined amount of money

to your retirement savings plan

on a regular basis, you’re using

a strategy called “dollar cost

averaging” (DCA).6 DCA offers

an important benefit.

How? DCA may allow you to take

advantage of price swings in

the market. That’s because your

regular contribution can buy more

investment shares when prices go

down, and fewer when prices

go up. For example, if one share

of an investment costs $5 one

month, a $40 contribution buys

eight shares. If the price drops

to $4, the same amount buys

10 shares. The advantage is that,

over time, your average cost

per share may be less than the

investment’s average price per share.

6Regular investing does not guarantee a profit or protect against a loss in a declining market. Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels of the securities.

Tax Deferral Can Make a Lasting Difference5

$05 10 15 20 25 30 35 40 45 50 55

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000$300,059

$138,848

Years

Tax-Deferred

Taxable

$350,000

5These examples assume an 8% annual rate of return before retirement, a 6% annual rate of return after retirement, and withdrawal amounts that provide the investor with $15,000 a year after taxes. Withdrawals from the tax-deferred account are taxed at the 28% federal tax rate. Examples have been simplified for illustrative purposes. Investment returns cannot be guaranteed.

The Power of Tax Deferral

%

$

3


When you are saving for retirement,

one of your most powerful allies is time.

The sooner you start saving, the better

off you may be. Consider the cases of two

hypothetical retirement plan participants,

Carol and Andy. Both are age 35, plan to

retire around age 65, and are eligible

to enroll in their retirement savings plan.

But the two have different philosophies

when it comes to saving for retirement.

Carol Starts Immediately Eager to start building her savings,

Carol begins contributing $150 per month.

However, after 10 years, she has to stop

contributing because of other financial

obligations. She leaves the money in the

account, hoping it will continue to grow

on its own. She earns an average rate of

return of 8% per year. At age 65, she will

have a total of $128,758 in her account.7

Tips to Save MoreDon’t think you can afford to

participate? Think again. Focus

on small steps. Here are some tips

to find that extra cash to invest.

• Bring your lunch to work, and you

could save about $40 per week,

or $2,080 per year. Brew your

own morning coffee, and you

could save $500 or more annually.

• When grocery shopping, use

a list. Don’t shop hungry. Buy

during sales, and use coupons

for items you regularly purchase.

This strategy can cut 25% or

more off your grocery bills.

• If you usually get a substantial

tax refund, consider decreasing

your federal tax withholding and

redirecting that amount into your

retirement savings plan.

Put Time on Your Side

$18,000 Contributed

$110,758 EarnedCarol starts at 35,

stops after 10 years

Results at age 65

$54,000 Contributed

$171,044 EarnedBoth start at 35,

continue to 65

$36,000 Contributed

$52,942 EarnedAndy starts at 45,

continues to 65

An Early Start Can Be Your Best Move7

buzzwordsReturn Profit on an investment,

usually expressed as an annual

percentage rate.

Risk Possibility that an investment

will lose or not gain value.

7These examples are hypothetical and for illustrative purposes only. Investment returns cannot be guaranteed.

Andy Waits Andy, on the other hand, chooses not

to participate in the plan immediately

because he figures he has plenty of time.

At age 45, he begins contributing $150

per month and, unlike Carol, continues to

do so until his retirement. He also earns

an average return of 8% per year. Yet upon

retiring at age 65, Andy will have a total of

just $88,942 in his account.7

Surprising Results Although Carol contributes half as much

as Andy, she ends up with about $40,000

more. The reason is that Carol’s earnings

continue to build upon themselves, a

process known as compounding. Because

her account has a 10-year head start,

the compounding effect snowballs, and

she winds up with more money. Now

consider what Carol and Andy would have

accumulated if they had made contributions

for the entire 30-year period — $225,044.7

4


Once you recognize the benefits of

participating in your retirement savings

plan, the next step is to begin building

your investment strategy. Through your

plan, you have a wide range of investment

options to choose from.

The right mix of investments for you will

depend on several factors, such as the

number of years you have until you retire;

your lifestyle and financial situation;

and your ability to withstand market

swings (occasional changes in the value

of your investments). In addition, you need

to understand the types of investments

offered, as well as the risk and reward

potential associated with each type.

About Asset Classes In general, the investment choices in

your retirement savings plan can be

categorized into one of three major asset

classes — stocks (or equities), bonds (or

fixed-income securities), and cash (or

money market or stable value securities).

Stocks represent a share of ownership in a

company. When you buy a stock, you buy

part ownership in that company. The value

of a stock rises and falls according to how

attractive it is to buyers and is influenced by

the general conditions of the stock market.

Stocks are considered the riskiest of these

three asset classes, but they also offer the

highest potential rewards for that risk.

Bonds represent debt and are considered

IOUs. When you buy bonds, you are

essentially lending money to a company,

city, or other government body. The seller

of the bond promises to make regular

interest payments for a specific period

of time and then repay the loan at a

stated date in the future, known as the

bond’s “maturity date.” Bonds’ risk/return

potential can vary depending on their

type, but generally they are considered

a moderate-risk investment and offer a

moderate rate of return.

Cash investments are safe, short-term

investments such as money market

securities and investment contracts.

The value of your principal (the money

you contribute) will rarely fluctuate,

although interest rates will rise and fall

with market conditions. Cash investments

are low-risk investments, but they also

offer the lowest potential returns.

About Investment Funds When you invest through your retirement

savings plan, your money may be

invested in mutual funds or pooled funds,

as opposed to individual stocks, bonds,

or cash investments. Mutual funds and

pooled funds are managed by professional

money managers, who “pool” the money

of many different individuals and use that

combined buying power to purchase a

variety of different stocks, bonds, and/or

cash investments. Each fund pursues a

stated objective, which can be found in

its prospectus. Your ownership in the

fund is represented by the number of

shares you own.

Understanding Investments

Target the Investments That Are Right for You8

1983

1989

1992

1995

1998

2001

2004

2010

2007

$0

$5

$10

$15

$20

$25

Stocks

Bonds

Cash

Inflation

2013

1986

Gro

wth

of

$100

Despite their volatility, stocks have significantly outpaced bonds and cash historically, making them the investment of choice for long-term investors.

8Sources: Standard & Poor’s; Barclays Capital; Federal Reserve. For the period from December 31, 1983, through December 31, 2013. Stocks are represented by the S&P 500. Bonds are represented by the Barclays U.S. Aggregate Bond index. Cash is represented by a composite of the yields of 3-month Treasury bills, published by the Federal Reserve, and the Barclays 3-Month Treasury Bellwethers index. Inflation is represented by the monthly change in the Consumer Price Index. Past performance is not a guarantee of future results.

5


How you divide — or allocate — the

money in your retirement plan account

among the three major asset classes will

depend on a number of factors. One of

the most crucial factors is determining

how you feel about risk.

The following questions can help you

determine how much risk you are

comfortable with and can help lead you

to an asset allocation that may be right

for you.9 (See results on next page.)

Market capitalization The total

value of a company’s stock. To

find the market capitalization of a

company, multiply the price of one

share by the total number of shares

outstanding. Definitions of large-,

mid-, and small-cap companies can

vary. See below for examples.

Large-cap stocks Stocks

issued by companies with market

capitalizations of more than

$10 billion.

Midcap stocks Stocks

of companies with market

capitalizations between $3 billion

and $10 billion.

Small-cap stocks Stocks

of companies with market

capitalizations below $3 billion.

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1. How many years do you have until you expect to retire?

a. More than 30 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 pts

b. Between 10 and 30 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 pts

c. Less than 10 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 pt

2. Which saying best describes your feelings about investing?

a. I need to invest aggressively to be able to retire, so I would accept higher risk for potentially higher returns. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 pts

b. I am willing to take a chance with some of my savings, providing it gives me the chance to earn potentially higher returns. . . . . . . . . . . . . . . . . . 2 pts

c. I am not comfortable risking what I’ve earned, even if it means potentially earning less. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 pt

3. Which statement best describes your knowledge about investing and investment products?

a. I know a good deal about investing, and am always eager to learn more. . . 3 pts

b. I know a little about investing, and am willing to learn a little more. . . . . . . 2 pts

c. I know very little about investing, and I am not interested in learning more. . 0 pts

4. If the markets decline and the value of your stock portfolio drops by 30% over the course of several months, what would you do?

a. Allocate more money into your stock investments. . . . . . . . . . . . . . . . 3 pts

b. Maintain your current investment position. . . . . . . . . . . . . . . . . . . . 2 pts

c. Move all of your money immediately into a more conservative option. . . . . 1 pt

5. If you were given a lump sum of $50,000 to invest today and knew you wouldn’t need the money for at least 10 years, how would you invest it?

a. I would invest most or all of it in stocks or stock mutual funds to maximize its potential for growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 pts

b. I would invest some of the money in stock or stock mutual funds, but would keep at least half in something less risky, such as a bond or money market fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 pts

c. I’m taking no chances. I would invest it all in a low-risk government bond or money market fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 pt

TOTAL POINTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Finding the Right Mix: How Do You Feel About Risk?

Market Risk The likelihood that the value of a security will move

in tandem with the market.

Inflation Risk The risk that the purchasing power of your investment

will decline due to a rise in the costs of goods and services.

Investment Risk The potential for an investment to

decline in value or produce a lower-than-expected return.

Interest Rate Risk The potential for a bond’s price to

fall when interest rates rise.

Types of Risk

6


The grid below will help you determine

your comfort level with risk. If you scored

7 points or less, you’re probably looking

for a more conservative portfolio. If

you scored between 8 and 11 points,

you’re probably more comfortable with

a moderate portfolio that assumes some

risk, but also includes a healthy dose

of principal preservation. If you scored

12 to 15 points or more, you’re probably

seeking a more aggressive portfolio.

Stocks are the most aggressive type of

investment and have historically returned

the highest rate of return of the three major

asset classes. However, stocks involve the

greatest risk. Bonds provide lower risk, but

also have lower returns historically than

stocks. Money market instruments typically

earn even less than stocks and bonds, but

involve the least amount of risk.

Sample Asset Allocations

9Asset allocation does not ensure a profit or protect against a loss.10 Performance for the 30-year period ended December 31, 2013. The performance of any index is not indicative of the performance of a particular investment and does not take into account the effects of inflation or the fees and expenses associated with purchasing mutual fund shares. It is not possible to invest directly into an index. Past performance does not guarantee future results.

Stocks: 80%Bonds: 20%Cash: 0%

Stocks (as represented by the S&P 500): 11.09% average rate of return over the past 30 years10

Bonds (as represented by the Barclays Long-Term Government Bond Index): 7.74% average rate of return over the past 30 years10

Cash (as represented by the Barclays Treasury Bill Index): 4.20% average rate of return over the past 30 years10

7 points or less: CONSERVATIVE

8-11 points: MODERATE

12-15 points: AGGRESSIVE

S&P 500 Standard & Poor’s

Composite Index of 500 Stocks

measures the activity of 500

equities, most of which are listed on

the New York Stock Exchange, the

American Stock Exchange, and

the Nasdaq system. It provides a

broad indicator of the movement of

U.S. stock price levels and changes.

buzzwords

CONSERVATIVE (7 points or less)

MODERATE (8-11 points)

AGGRESSIVE (12-15 points)



Building Your Investment Portfolio

7


If you’re new to the plan:Enroll and select your investments. Follow

your plan’s instructions for enrolling and

select a mix of investments that closely

matches your desired asset allocation.

If you’re a current participant:1. Review your current situation. You should

first know how the money in your account is

currently allocated. Look at your existing fund

balances and figure out what percentage

of your total is invested in each asset class.

(Your retirement savings plan statement

contains this information.) Compare that

asset allocation with your desired allocation.

Does it match? If not, proceed to step two.

2. Reallocate your existing fund balances.

To arrive at your new allocation, you will

have to rearrange your existing fund

balances. If your balance is relatively

small or your current allocation is close

to your investment profile, this step may

be fairly easy: Simply follow your plan’s

instructions for transferring money from

one option to another.

3. Move large sums gradually to avoid a

bumpy ride. If you need to shift a substantial

sum of money, you might consider moving

it in stages instead of transferring it all at

once. By shifting your money gradually,

you may avoid exposing the entire amount

to extreme fluctuations that may occur in

the financial markets.

4. Adjust the allocations for upcoming

contributions, too. Changing the allocation

of your existing fund balances does not

necessarily mean that your future contributions

will be allocated accordingly. Don’t forget

to change future allocations to synchronize

with your overall investment strategy.

For all participants, both new and current:Make periodic adjustments to stay on course.

Minor shifts in the stock market are

common — and major changes sometimes

come quickly. These changes can throw

your allocation off kilter. Suppose your plan

calls for 65% of your savings to be invested

in stocks, but the market surges and raises

your stock allocation to 75%. One possible

solution: Get back on track by rebalancing

your account once a year to “correct” for

the market’s behavior.

It’s also a good idea to reassess your personal

investment profile each year by retaking the

quiz. That way you’ll stay in the driver’s seat.

Your long-term goals — and not the market’s

short-term ups and downs — will determine

your investment course.

Next Steps

Fluctuations Changes in an

investment’s value or price.

Share Represents a portion of

interest in a company or a mutual

fund. Investors purchase shares of

stock or shares of mutual funds.

buzzwords

8


Informed decision making is the most important factor in transforming your vision for retirement into reality.

Mutual fund A pool of money

professionally managed for investors

who are the owners of the fund. The

amount of each investor’s ownership

is represented by the number of

shares owned. Mutual funds are

managed with the intent of achieving

specific objectives, such as growth of

principal or current income. The fund

manager selects a diversified mix of

securities to pursue that objective.

buzzwords

Self-Study11

Books

Stocks for the Long Run (Siegel)

The Bond Book (Thau)

The Intelligent Investor (Graham)

The Millionaire Next Door (Stanley and Danko)

The Wall Street Journal Guides (A series by various authors)

The Wealthy Barber (Chilton)

Magazines Businessweek

Fortune

Kiplinger’s Personal Finance

Money

NewspapersBarron’s

Investor’s Business Daily

USA Today Money section

The Wall Street Journal

Your local newspaper’s business section

Websiteswww.money.cnn.com (CNN, Fortune, and Money)

www.aaii.com (American Association of Individual Investors)

www.better-investing.org (National Association of Investors Corporation)

www.fool.com (The Motley Fool)

www.irs.gov (Internal Revenue Service)

www.mfea.com (Mutual Fund Investor’s Center)

www.ssa.gov (Social Security Administration)

www.thestreet.com (TheStreet.com)

www.wsj.com (The Wall Street Journal )

11This is a suggested list and does not constitute financial advice. Neither your employer nor Wealth Management Systems Inc. can guarantee the accuracy of information provided by these resources or that these resources will enhance your investment results.


Picture It Now is published by Wealth Management Systems Inc., 100 Franklin Street, 4th Floor, Boston, MA 02110, www.wealthmsi.com. © 2014 Wealth Management Systems Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. The opinions and recommendations expressed herein are solely those of Wealth Management Systems Inc. and in no way represent the advice, opinions, or recommendations of the company distributing the publication to its employees or affiliates. Information has been obtained by this publication from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, this publication, or any other, Wealth Management Systems Inc. does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Nothing contained herein should be construed as a solicitation to buy or sell securities or other investments. The data in this edition were current as of the time of publication.


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