understanding 403(b)(7) plans 2/15 e30464-15a [name of financial professional, company name] [name...
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Why save for retirement 403(b)(7) basics – Eligibility – Contributions – Distributions and Loans – Rollovers and Transfers Investment choices – Portfolio Optimization Funds – Fixed-Income Funds AgendaTRANSCRIPT
Understanding 403(b)(7) Plans
2/15E30464-15A
[Name of Financial Professional, Company Name][Name of Pacific Life Wholesaler, Pacific Life]
No bank guarantee • Not a deposit • May lose value • Not FDIC/NCUA insured • Not insured by any federal government agency
Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state.
Please note that this presentation has been designed to provide general information. Neither Pacific Life nor its representatives offer legal or tax advice. Clients should consult their attorneys and tax advisers as to the applicability of this information to their specific circumstances and for complete up-to-date information concerning federal and state tax law.
[Name of Financial Professional] and [Company] are not affiliated with Pacific Life or its affiliated companies.
Why save for retirement 403(b)(7) basics
– Eligibility– Contributions– Distributions and Loans– Rollovers and Transfers
Investment choices– Portfolio Optimization Funds– Fixed-Income Funds
Agenda
People are living longer and healthier lives You could spend 15, 20, 25 years, or more in
retirement Many experts suggest you will need 70% – 90% of
your working income You may want the choice to continue working
Saving for Retirement
Sources of Retirement Income1
1Source: Social Security, Fast Facts and Figures About Social Security, 2014.
3% Other Sources
35% Social Security
34% Earnings
17% Pensions
11% Income from Assets
The Effects of Inflation
Postage Stamp: Historian, United States Postal Service, February 2014.Home: U.S. Census Bureau, Median and Average Sales Process of New Homes Sold in United States, April 2014.
Cost TodayProjected
Cost in 20 YearsPostage Stamp $.49 $.78
New Home $274,500 $407,893
Enjoy Your Retirement
The most important reason to save? You want a great retirement! Your financial independence is a necessity
Employees of public schools, colleges, and universities Employees of 501(c)(3) nonprofit organizations:
– Private schools, colleges, and universities– Religious organizations– Charities– Hospitals– Museums
Who is Eligible?
Maximum annual contribution– Employee salary deferral only▪ $18,000, plus an additional $6,000 if age 50 or older▪ 15 years of service may increase deferral amount by $3,000 per year▪ Public schools generally do not provide employer or matching
contributions– Employer and employee ▪ Some plans may be designed to include employer contributions
(e.g., matching contributions) ▪ 100% of pay, up to $53,000 (or $59,000 if age 50 or older)▪ Public schools generally do not provide employer or matching
contributions
How Much Can I Contribute?
An employee may begin taking distributions at age 59½ If younger than age 59½, employees must meet one of
the IRC exceptions to take out money that has been contributed through salary reduction, such as: Separation from service Hardship Disability Death
Can I Access The Funds?
Distributions taken prior to age 59½ may be subject to an additional 10% federal tax unless the employee meets a qualifying exception:
Separation from service after age 55 Series of substantially equal lifetime payments Disability Death
Early Distribution Federal Tax Penalty
May be permitted by plan Maximum amount is limited to the lesser of:
– $50,000 or 50% of accrued balance Loan payments must be made at least quarterly Repayment of the loan generally must occur within
five years (or up to 30 years if for primary residence)
Loans
Required minimum distributions must begin by April 1 of the year following the year you turn age 70½, or the calendar year in which you retire, whichever is later.
50% excise tax is assessed on required amounts not taken
Possible exception: Contributions prior to 12/31/86 may continue to defer until the calendar year in which employee turns 75
When Must I Begin Distributions?
Contract Exchange – Exchange of assets within the current employer’s plan from one approved investment option to another approved investment option
Plan-to-Plan Transfer – Move assets from an account with the prior employer 403(b)(7) to a new account with current employer 403(b)(7)
Rollovers – Between a 403(b)(7) contract and different types of retirement plans (e.g., 401(k) or IRA)
Consolidating Retirement Assets
Save for retirement with pretax dollars Offers tax deferral on contributions and earnings Reduces current taxable income Can be rolled over to other eligible retirement plans
Why 403(b)(7) Plans?
A Tax-Advantaged Strategy—Hypothetical Example
Assumes a 28% federal tax rate, assessed yearly on the taxable investment and at period-end on the tax-deferred example. Assumes the tax-deferred investment is made with pretax funds and not a Roth 403(b)(7) contribution. This hypothetical illustration does not include charges and fees. Had these charges and fees been included, the investment returns would have been reduced. If the full amount of the tax-deferred investment was withdrawn at the end of the 30 years, assuming a 28% tax rate, the value after paying taxes would be $349,363. Actual tax rates may vary for different taxpayers and assets from that illustrated (for example, capital gains and qualified dividend income). Actual performance of your investment also will vary. Lower tax rates on capital gains and dividends would make the investment return for the taxable investment more favorable, thereby reducing the difference in performance among the examples shown. Consider your personal investment horizon and income tax brackets, both current and anticipated, when making an investment decision. Hypothetical returns and tax rates are not guaranteed and do not represent performance of any particular investment.
Tax-Deferred Investments vs. Taxable Investment5 Years 10 Years 20 Years 30 Years
$500,000
$400,000
$300,000
$200,000
$100,000
0
$34,
610
$36,
568
$71,
193
$78,
812 $1
72,2
32
$210
,999
$326
,461
$447
,726
Taxable Income Tax-Deferred Investment
A Tax-Advantaged Strategy—Hypothetical Example
End balances after 35 years. Assumes $30,000 annual wage, 10% contributions for 25 years, 4% average annual wage inflation, 8% average annual return, and Barry starts 10 years after Julia. Deposits to the plan at the end of each month.
Julia
$800K
$600K
$400K
$200K
0
Don’t Delay, Start Today!
Barry
$124,938 $184,938
$576,800
$296,201
$701,738
$481,139
After 35 Years
Earnings
Contributions
Investment Choices
What is a mutual fund?Pools the money of investorsManaged by a professional fund managerInvests in stocks, bonds, and other securities
to meet fund’s objective
Investment Choices
Managing risk through diversification Diversification is the process of spreading
investments among different types of companies, industries, or asset classes to reduce risk
Mutual funds generally provide automatic diversification
Asset Allocation Funds
• Pacific FundsSM Portfolio Optimization Funds (five funds ranging in investment style from conservative to aggressive-growth)
Fixed-Income Funds
• Pacific FundsSM
Short Duration Income• Pacific FundsSM
Core Income• Pacific FundsSM
Strategic Income• Pacific FundsSM Floating
Rate Income• Pacific FundsSM
Limited Duration High Income
• Pacific FundsSM
High Income
Retirement Plan Service Provider
• Aspire provides recordkeeping services
Pacific Life 403(b)(7) Investment Options
Asset allocation, although intended to provide diversification, does not guarantee future results, ensure a profit, or protect against loss.Better returns could be achieved by investing in an individual fund or funds representing a single asset class rather than using asset allocation.
Specialty Fund
• Pacific FundsSM Diversified Alternatives
Portfolio Optimization Funds
Pacific Funds offers five Portfolio Optimization Funds, allowing you to match the appropriate fund to your financial objectives, risk tolerance, and time horizon. Each fund is structured as a fund-of-funds (a mutual fund that invests in other mutual funds) that has been diversified to achieve a specific target-risk level using a strategic mix of multiple asset classes.
Asset Allocation Funds
One-Step DiversificationEach Portfolio Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals.
A Dedicated Team that Manages Multi-Asset Class SolutionsPacific Life Fund Advisors’ investment approach uses three fundamental disciplines: Asset allocation Manager research Investment risk management
Target-Risk Funds to Fit Your NeedsPortfolio Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals.
Asset Allocation Funds
Portfolio Optimization Funds offer:
Select The Portfolio Optimization Fund That’s Right For You
Domestic Equity
Fixed Income
Source: Ibbotson Associates®
Pote
ntial
Ret
urn
Conservative
Moderate-Conservative
Moderate
Growth
Aggressive-Growth
Risk Tolerance HighLow
Broad Asset Class Allocations as of 12/31/14
International EquityLow
High
One-Step Diversification
Pacific FundsSM Portfolio Optimization Moderate
19 Money
Managers
21Underlying
Funds
17Asset
Class Styles
1Portfolio
Optimization Fund
+ + =
As of 12/31/14.
Example:
Designed for IncomeCover a broad spectrum of income opportunities
Based on ExperienceA portfolio management team that specializes in institutional fixed-income asset management.
Fixed-Income Funds
There’s no guarantee that the funds’ investment strategies will achieve the funds’ investment goal under all market conditions.
Fixed-Income Funds
This chart is for illustrative purposes only and is not intended to represent all available investments. A fund may not be invested in all the types of investments at any one time and may invest in other types of investments not reflected in the chart.
Pacific Funds High Income
Pacific Funds Limited Duration High Income
Pacific Funds Floating Rate Income
Pacific Funds Strategic Income
Pacific Funds Core Income
Pacific Funds Short Duration IncomeLo
wer
High
erPo
tenti
al In
com
e
Lower HigherVolatility (Risk)
High-Yield BondsFloating-Rate LoansInvestment-Grade Corporate BondsCash and Other
Asset class mix as of 12/31/14
The fund offers: A Simplified Approach to Alternatives Investing: Pacific Funds Diversified
Alternatives provides exposure to multiple alternative asset classes in one fund-of-funds.
Professional Management and Oversight: An experienced portfolio management team uses a disciplined approach to oversee investment manager selection, asset allocation, and investment risk management.
Portfolio Diversification: The addition of alternative asset classes to a portfolio can help improve diversification and may smooth out the overall risk.
Pacific Funds Diversified Alternatives
Broad Asset Class Allocations as of 12/31/14
Fixed IncomeDomestic Equity International Equity
Today we’ve reviewed: Why save for retirement 403(b)(7) basics Pacific Funds offered within the Pacific Life
403(b)(7) Program
Get Started Today!
For more information: Contact your financial professional Determine which investment choices in your
Pacific Life 403(b)(7) Program are best for you
Get Started Today!
Pacific Life, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor or attorney.You should carefully consider an investment’s goals, risks, charges, strategies and expenses. This and other information about Pacific Funds are in the prospectus available from your financial advisor or by calling (800) 722-2333, option 2. Read the prospectus carefully before investing.
Pacific Life Fund Advisors LLC (PLFA), a wholly owned subsidiary of Pacific Life Insurance Company, is the investment advisor to Pacific Funds and is responsible for determining the asset allocation mix for each fund. PLFA also does business under the name Pacific Asset Management and manages certain funds under that name.
Pacific Life offers the 403(b)(7) Program. Aspire provides recordkeeping services and is not a broker/dealer or an investment advisor. Pacific Life and its affiliates are not affiliated with Aspire, do not provide any employer-sponsored qualified plan administrative services or impartial investment advice, and do not act in a fiduciary capacity for any plan.
Effective December 31, 2014, Pacific Life Funds and its family of mutual funds changed its name to Pacific Funds. In addition, individual funds were also renamed. For more information, please visit www.PacificFunds.com.
Please contact your plan administrator for any questions relating to your plan. For information regarding administrative and recordkeeping services for the Pacific Life 403(b)(7) Program, call Aspire at (866) 634-5873.
Mutual funds are offered by Pacific Funds. Pacific Funds are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA), and are available through licensed third-party broker/dealers.