Providing for income in retirement
Estimate how much you’ll need to save and learn how compounding and the tax benefits of retirement savings may help you achieve your retirement goals.
Types of retirement savings accounts
IRAs, annuities, employer-sponsored retirement savings plans and more to help you prepare for a comfortable retirement.
Getting an early start
If you’re in your 20s or late 30s, you’re in luck. Contributing now to tax-advantaged retirement savings vehicles may help your money work even harder for you.
Catch-up retirement savings options for those who got a late start
Entering your 40s or 50s and behind in your retirement planning goals? Don’t fret. You’ve still got time to get your financial plan back on track.
Balancing risk and reward
All investments have risks. In order to figure out how to manage risk, you must first understand it.
Strategies for investment success
You can potentially reduce your investment risk and increase your chances of meeting your investment goals by strategically allocating your investments among each of the major asset classes based on your unique financial goals, risk tolerance, and time horizon.
Rebalancing and reevaluating your retirement goals
Conducting an annual review of your retirement goals and strategy is a great way to help ensure that your plans for your financial future remain realistic and on track.
Stock represents ownership of a company. If a company is privately held, then its stock may be owned by only a few individuals and is not available for purchase by the public. If a company is publicly held, then its stock can be purchased through stockbrokers by individual investors and institutions alike. Corporations can issue different types of stock, but the most typical is common stock.
By investing in stock, you stake a claim in the future of that company and all the potential investment return that it may bring. With potential reward, however, you also have all the risks associated with owning a company. If a company is forced to liquidate, it is first obligated to pay its creditors, bondholders and those who hold preferred stock (a limited issue stock that does not hold voting rights), before those who own common stock.
As a shareholder of common stock, you have voting rights on issues such as election of a board of directors and other important issues affecting the direction of the company.
Shareholders may also receive dividends, which are paid to shareholders from the company’s earnings. The amount of the dividend is decided by the board of directors, and is based on what portion of earnings needs to be reinvested in the growth of the company and what portion can be distributed to shareholders.
Stocks carry higher investment risks than bonds or money market investments, but they also have historically realized higher rates of return over longer holding periods (see chart). While past performance doesn’t guarantee future results, the higher return potential of stocks can make them suitable investments for long-term investors seeking to build the value of their portfolios or to stay ahead of inflation. Both of these objectives are critical to investors with specific long-term goals in mind, such as saving for retirement.
Stocks of companies that are forecasted to increase earnings by 15% or more per year. Of course, there is no guarantee that this objective will be met.
Stocks of companies that are priced near their asset value (with no growth in earnings assumed) are called value stocks. They may or may not be bargains, however, depending on whether their prices subsequently recover.
Stocks of companies headquartered outside the United States in industrialized countries.
Stocks of companies headquartered in underdeveloped, fast-growing countries
Type of industry, such as technology, energy, or cyclicals.
Before investing, weigh the potential risk of loss of principal against the risk of not meeting your investment goals or of losing purchasing power to inflation.
Stock investors can also manage risk by:
Investing in just one or two stocks is generally much more risky than buying stocks of 15 or 20 companies. By holding stocks of different companies in several industries, you limit your exposure to a substantial loss due to a price decline in just one stock.
This refers to how you spread your portfolio among different types of investments, such as stocks, bonds, and money market investments.
An aggressive investor with a long-term horizon might choose to keep a greater portion of his or her portfolio in stocks, for example, with the remaining portion in bonds and money market funds. This adds yet another level of diversification to the portfolio and can further reduce investment risk. Your financial professional can help you select an asset allocation that is appropriate for your goals and time frame.
Staying invested through periods of market turbulence can also help manage risk of loss as the variability of returns tends to decrease over time.
Individuals can buy stocks directly or can purchase mutual funds or annuities which may invest in individual stocks. An employee may also have an opportunity to buy stock in his or her company through a company stock purchase plan or retirement plan.
Many financial analysts believe that most people can best access the stock market by buying shares of mutual funds that invest in stocks. There are thousands of mutual funds investing within a variety of stock market categories and sectors. Mutual funds offer the potential advantages of professional money management, diversification, and liquidity. These advantages are particularly apparent when investing in international and emerging market stocks, which are often less accessible to individual investors. Your financial professional can help you assess which types of mutual funds may be suitable for your portfolio.
Investors with, say, $20,000 or more to invest and who want to manage their own portfolio can build a diversified portfolio with just 15 to 30 stocks. Even though it may seem to be a daunting task to find companies in which to invest, basic information on most publicly traded companies is available online, at libraries, and best of all, through information and guidance provided by your financial professional.
Price Range
The price of a stock is determined according to the rules of supply and demand. Tracking the price over time can give you a partial picture of the company and its recent performance. Daily information in national newspapers includes the high and low price for the stock in the previous 52 weeks.
Price-to-Earnings Ratio (A.K.A. “P/E”)
This number, which is derived by dividing the stock price by the company’s earnings per share, is used to determine what an investor is paying for the earning power of the company. It is one figure that can be used in comparing the value of several companies even though their prices may be vastly different.
Dividend Yield
The dividend yield, determined by dividing the amount of the dividend by the share price, simply indicates what percent return the company is paying its investors. National newspapers report the return on both the initial investment at the time of the first public offering and the return on the current value of the stock. This number can also be used in a comparison of companies.
Payout Ratio
This figure represents the percentage of earnings a company is paying out to its investors. It is an indication of whether most of a company’s earnings are being paid to its investors, or whether they are being reinvested in the growth of the company.
In addition, a fundamental approach to stock investing considers the following questions:
Because of their long-term potential, stocks have a place in nearly every portfolio.
Speak with your financial professional about how you can best include stocks in your portfolio.
After years of saving and investing, you are finally getting ready to enjoy the benefit of your planning and hard work. But there are still decisions that need to be made.
Saving For Education:
Your child’s education may be one of the most meaningful investments you’ll ever make. As with any investment, starting early and planning carefully can really pay off. 529 Plans For College
Will I be penalized if the money in my 529 plan isn’t used for college expenses?
Yes. Whether your 529 plan is a college savings plan or a prepaid tuition plan, the money you withdraw must be used for qualified higher education expenses. These expenses include tuition, fees, books, and room and board (if the beneficiary is attending school at least half-time) for college and graduate school.
If you use the money for any other purpose, the earnings portion of the distribution will be taxable on your federal (and possibly state) income tax return in the year of the distribution. Also, you generally must pay a 10% federal penalty on the earnings portion of your distribution. There are a couple of exceptions. The penalty is usually not charged if you terminate the account because your beneficiary has died or become disabled, or if you withdraw funds not needed for college because your beneficiary has received a scholarship.
Bear in mind that the “distributee” is the one subject to tax. (The distributee is the person who actually receives the money from the 529 plan.) In most situations, this will be the account owner. So, if you fund a college savings plan for your son, for example, and withdraw the money three years later (before he reaches college age), you will be the one taxed and penalized. However, some plans specify who the distributee is, while others allow the account owner to determine the recipient of a nonqualified withdrawal.
Note: Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about 529 plans is available in each issuer’s official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits.