G U I D E T O FRIENTAI RNECMI A
L TP LPAL N
I NI N
GG
EN
ANN
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
DRAFT
12/1/04
Guide to Retirement Planning
Your guide to sound financial stewardship and
proactive planning for your retirement years
GUIDE TO RETIREMENT PLANNING
Contacts and Resources
NOTES
Adventist Retirement Plan
12501 Old Columbia Pike
Silver Spring, MD 20904-6600
www.nadadventist.org/ret
AIG VALIC
2929 Allen Parkway
Houston, TX 77019
www.aigvalic.com
Adventist Web site
www.aigvalic.com/adventist
ePrint
www.aigvalic.com/adventist
AIG VALIC AdviceLine
1-888-568-2542
Press 0 and ask for AdviceLine
Social Security Administration
www.socialsecurity.gov
Internal Revenue Service
www.irs.gov
Schwab Personal Choice Retirement Account® (PCRA)
www.schwabPCRA.com
Online Financial Planning & Education Center
www.aigvalic.com/adventist/fpc
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Table of Contents
Planning the right retirement . . . . . . . 1
Today’s challenges . . . . . . . . . . . . . . . . . . . 1
Knowing where you stand today . . . . . . . . 1
Retirement and its costs
.............2
Your retirement lifestyle . . . . . . . . . . . . . . 2
How much income will you need? . . . . . . 2
Retirement income sources
..........3
Social Security . . . . . . . . . . . . . . . . . . . . . 3
Adventist defined benefit plan . . . . . . . . . . 3
Adventist defined contribution plan . . . . . 4
Other sources of income . . . . . . . . . . . . . . 6
Putting it all together . . . . . . . . . . . . . . . . 7
Investment planning
...............8
Managing your investments . . . . . . . . . . . 8
Time horizon . . . . . . . . . . . . . . . . . . . . . . 9
It’s time in, not timing . . . . . . . . . . . . . . . . 9
Determining your risk tolerance . . . . . . . . 9
Risk Tolerance Quiz . . . . . . . . . . . . . . . . 10
Diversification . . . . . . . . . . . . . . . . . . . . 11
Adventist fund options . . . . . . . . . . . . . . 11
Investing for good . . . . . . . . . . . . . . . . . . 12
Weatherproofing principles . . . . . . . . . . . 12
Strategic asset allocation . . . . . . . . . . . . . 13
Pre-set asset allocation models . . . . . . . . 13
Rebalance to preserve your optimal mix . 15
Guided Portfolio Services . . . . . . . . . . . . 16
Schwab PCRA . . . . . . . . . . . . . . . . . . . . 16
Getting started
. . . . . . . . . . . . . . . . . . . . 17
Adventist Web site . . . . . . . . . . . . . . . . . 17
AdviceLine . . . . . . . . . . . . . . . . . . . . . . . 17
ePrint . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Your portfolio . . . . . . . . . . . . . . . . . . . . . 18
Fund information . . . . . . . . . . . . . . . . . . 19
Electing an asset allocation model . . . . . .19
Investment elections . . . . . . . . . . . . . . . . 20
Asset rebalancing . . . . . . . . . . . . . . . . . . 20
Additional resources
. . . . . . . . . . . . . . . 21
Quarterly account statement . . . . . . . . . . 21
Topical reports . . . . . . . . . . . . . . . . . . . . 21
Online Financial Planning &
Education Center . . . . . . . . . . . . . . . . 22
Program evaluation
. . . . . . . . . . . . . . . 23
GUIDE TO RETIREMENT PLANNING
NOTES
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Planning the right retirement
People today are retiring earlier, living longer and doing more in
retirement. Let’s take a look at why saving and planning for retirement
is more important than ever before.
NOTES
Sources of Retirement Income
Today’s challenges:
THEN
Increasing medical and long-term care costs
Strain on Social Security as baby boomers
approach retirement
Longer life expectancy — your money may
have to last longer
How to make the most of current income
and estate tax laws
How to invest for maximum returns
with minimal volatility
Personal Savings
20%
80%
Pension/Social Security
NOW
Personal Savings
40%
60%
Pension/Social Security
Knowing where you stand today
Part of planning for your future is knowing where you stand today.
To begin the retirement planning process, you’ll need a complete
inventory of your financial situation.
NET WORTH
Current assets and liabilities
CASH MANAGEMENT
Written monthly budget
Charitable contributions
Income tax liability
Savings
Other expenses
CONTINGENCY PLANNING
Property and casualty insurance
Liability insurance
Health insurance/Medicare
Long-term care insurance
Life insurance
How do you prepare
for today’s
complex retirement?
Develop a plan.
1
GUIDE TO RETIREMENT PLANNING
Retirement and its costs
NOTES
When you have an up-to-date financial picture, the next step is to
envision what you want to do in your retirement years in as much detail
as possible.
Your retirement lifestyle
Think about some activities you’d like to do at least once a month and
once a year after you retire, for example: volunteering, mission work,
traveling, gardening, home improvement, spending more time with
extended family, etc.
Once-a-month activities:
1._______________________________
2.___________________________
Once-a-year activities:
1._______________________________
2.___________________________
How much income will you need?
The general rule
of thumb is that
you will need
75% – 80% of your
pre-retirement income,
in current dollars, to
maintain your lifestyle
during retirement.
2
Go-Go-Years
Reflective Years
Care Years
Expenses
You don’t want to
outlive your money.
What are the chances of your income and expenses staying at the same
level throughout 20 or 30 years of retirement? Your pre-retirement
planning must allow for changing income needs during retirement.
Generally, retirees tend to move through three income stages
during retirement.
Age
65
75
85
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Retirement income sources
Now let’s turn to the resources that will provide your retirement income.
NOTES
Understanding your retirement income
• Social Security
?
?
• Pension
• Tax-qualified plan
?
• Personal savings
and investments
?
Social Security
Social Security is one source of retirement income. It’s important to note
that Social Security was never intended to provide all of a retiree’s
income needs. To learn more, visit the Social Security Web site to
download publications.
Social Security Entitlement for Early Retirement
Eligibility:
40 quarters
Full retirement age
Benefits:
May be reduced if early retirement is taken
May be reduced if you work after
claiming benefits
Adventist defined benefit plan
Year
of Birth
1937 or before
1938
1939
1940
1941
1942
1943-1954
1955
1956
1957
1958
1959
1960 and after
Another source of your retirement income may come from the Adventist
pension plan. It may provide income based on your number of years of
service.
Service Credits were frozen as of December 31, 1999
Resources: SSA Publication No. 05-10069
Web site: www.socialsecurity.gov
Phone number: 1-800-772-1213
Full
Retirement Age
65
65 and 2 months
65 and 4 months
65 and 6 months
65 and 8 months
65 and 10 months
66
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
67
%Received
at Age 62
80.0
79.1
78.3
77.5
76.6
75.8
75.0
74.1
73.3
72.5
71.6
70.8
70.0
For more information
about your
Adventist pension,
go to:
www.nadadventist.org/ret
3
GUIDE TO RETIREMENT PLANNING
Adventist defined contribution plan
NOTES
Your Adventist Retirement Plan (ARP) is a 403(b) defined contribution
plan that provides many important benefits. It is a powerful tool to help
you save for retirement.
Benefits:
Automatic salary reduction – Contribute steadily and effortlessly
by automatic salary reduction.
Pre-tax contributions – Contributions are made before your income
tax withholding is calculated, which reduces the amount you are
currently taxed. Income taxes are payable upon withdrawal. Federal
restrictions and a 10% tax penalty may apply to withdrawals prior
to age 591⁄2.
Annual IRS Contribution Limits
Effective Year
2005
2006 and thereafter
Tax-deferred Growth
Effective
Deferral Limits
$14,000
$15,000 (indexed in
$500 increments)
Catch-up contributions
for 403(b)
$4,000
$5,000 (indexed in
$500 increments)
200
thousands ($)
150
100
50
0
10
years
20
years
30
years
taxable account
tax-qualified plan
This chart assumes a 25% federal marginal income tax
rate and an 8% annual rate of return. Fees and charges,
if applicable, are not reflected in the example and would
reduce the results shown. Income taxes are payable upon
withdrawal. Federal restrictions and a 10% tax penalty
may apply to withdrawals prior to age 591⁄2. Investment
values will fluctuate so that an investor’s shares, when
withdrawn, may be worth more or less than the original
cost. This example is hypothetical and only an example.
It does not reflect the return of any specific investment,
and is not a guarantee of future income.
4
Tax-deferred growth – Income taxes on all contributions, earnings,
gains and dividends are deferred until withdrawal, usually at
retirement. The chart at the left compares the hypothetical results
of contributing $100 each month ($133.33 since contributions are
made before tax) to a tax-qualified retirement plan and contributing
$100 each month to a taxable account.
Keep in mind that lower maximum capital gains rates may apply to
certain investments in a taxable account, which would reduce the
differences between performance in the accounts shown in the chart.
You should consider your personal investment horizon and current
and anticipated income tax brackets when making investment
decisions as they may further impact the results of the comparison.
Resource: Adventist Summary Plan Description
ARP Enrollment Brochure
IRS Publication 529
Web site: www.nadadventist.org
www.aigvalic.com/adventist
www.irs.gov
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Employer contributions – In addition to your own contributions,
your employer makes contributions that flow to your retirement plan
in two ways:
1. Basic employer contribution of up to 5% of salary or wages
2. If you contribute, your employer matches 50% of your own
contributions, up to a maximum of 25% of the basic contribution.
This matching contribution is in addition to the automatic
base contribution.
The following chart compares the hypothetical results of contributing
2.5% of annual salary to a tax-deferred account over a 15-year period
with and without the employer contributions. The chart assumes
a 3% annual pay increase and an 8% annual rate of return. As you
can see, your employer basic and matching contributions can make
a big difference!
NOTES
Your employer
contributions can make
a BIG difference!
The Impact of Employer Contributions
2.5% EMPLOYEE DEFERRAL
ANNUAL
SALARY
BI-WEEKLY
DEFERRAL
TOTAL
ACCOUNT
VALUES
15 YEARS
EMPLOYER CONTRIBUTION
BASIC*
TOTAL
BI-WEEKLY
ACCOUNT
AMOUNT
VALUES
15 YEARS
MATCHING**
TOTAL
BI-WEEKLY
AMOUNT ACCOUNT
VALUES
15 YEARS
COMBINED
TOTAL
BI-WEEKLY
CONTRIBUTIONS
COMBINED
TOTAL
ACCOUNT
VALUES
15 YEARS
$20,000
$19.23
$16,813
$38.46
$33,625
$ 9.62
$ 8,406
$ 67.31
$ 58,844
$30,000
$28.85
$25,219
$57.69
$50,438
$14.42
$12,609
$100.96
$ 88,266
$40,000
$38.46
$33,625
$76.92
$67,250
$19.23
$16,813
$134.61
$117,688
* 5% of pay
** Not to exceed 25% of employer basic rate.
This chart is hypothetical and only an example. It is not a guarantee and does not reflect any specific investment.
Investment flexibility – Choice of domestic mutual funds,
international mutual funds, domestic bond funds, a VALIC
fixed-interest option and the Schwab PCRA.
Vesting
100% vested in your own contributions
Three-year cliff vesting for employer contributions
Portability among denominational employers
IRS age-related withdrawal rules
Pre-591⁄2
591⁄2 to 701⁄2
701⁄2 or older
5
GUIDE TO RETIREMENT PLANNING
Typical distribution options
Lump sum withdrawal
Systematic withdrawals
Purchase an annuity
Roll over to IRA
NOTES
Other sources of income
Other sources of retirement income in addition to the sources we’ve
discussed so far include:
Traditional IRA
Roth IRA
Other assets
Part-time work
Let’s compare a traditional IRA to a Roth IRA.
Features
Traditional
Roth
• Tax-deductible
contribution
Yes, if eligible
No
$3,000 (2004)
$4,000 (2005)
$3,000 (2004)
$4,000 (2005)
• Additional catch-up
(age 50 and older)
$500
$500
• Tax-deferred growth
Yes
Yes
• Tax-free distributions
No
Yes*
• Maximum
contribution
• Penalty-free distributions
• Required minimum
distributions
Yes, if conditions Yes, if conditions
are met
are met
Starts at
age 701⁄2
None
Although contributions to a Roth IRA are never
tax-deductible, a Roth IRA provides tax-free and
penalty-free distributions after five years in the
following circumstances:
Age 591⁄2
Death or disability
Qualified first-time home purchase
You are eligible to contribute up to the annual
maximum amount to a Roth IRA if your adjusted
gross income is below certain levels. Contribution
eligibility for a Roth IRA phases out for income
levels of $95,000 to $110,000 if you are single
and $150,000 to $160,000 if you are married.
*If held for five years and conditions are met.
Your contributions to a traditional IRA will be fully tax deductible if your
adjusted gross income is within a certain limit. If your income exceeds the
limit, contributions to a traditional IRA may be partially tax-deductible.
And you may still contribute to a non-deductible traditional IRA if your
household income exceeds the limits for tax deductibility.
Unlike traditional IRAs, Roth IRAs are not subject to lifetime minimum
distribution rules.
6
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Putting it all together
NOTES
How much will you receive from each piece of the pie? Will that be
enough over 20 to 30 years of retirement? Have you calculated how
much money you’ll need in retirement? Are you on track to meet your
goal, or is there a shortfall? Have you accounted for the effects of
inflation on your retirement nest egg?
?
?
• Social Security
• Pension
• Tax-qualified plan
• Personal savings
and investments
?
?
The eroding effects of inflation – During retirement, inflation will
continually reduce the purchasing power of your income. Take a look
at the chart below. Assuming the historic average inflation rate of 3%,
in just 10 years, your $50,000 would be worth just $37,205!
Effects of Inflation on Your Income
$50,000
Assumes a
3% annual
inflation rate
$37,205
$32,093
$27,683
Today
In 10 years
In 15 years
In 20 years
This chart is an example only and not a guarantee.
7
GUIDE TO RETIREMENT PLANNING
Investment planning
NOTES
Your Adventist Retirement Plan provides investment options to further
supplement your retirement income resources. How you manage your
investments during retirement is an important aspect of your overall
retirement planning. Let’s look at the three major categories of liquid
assets: cash, bonds and stocks.
Managing your investments
Investments are grouped by three investment objectives and asset
categories: growth (stocks), income (bonds) and stability (cash
equivalents). The amount of money you may want to invest in each
category depends on your investment objective, personal risk tolerance
and time horizon.
Equities/Stocks
/los
s
on
ain
iati
of g
rec
app
risk
ugh
rn t
hro
ing
retu
eas
incr
sing
rea
inc
er
ow
stable value
CASH EQUIVALENTS / MONEY MARKET
FIXED-INTEREST OPTIONS
This chart is intended as a general guide and does not represent
the results of any actual investments. The top of the triangle
represents funds that offer above-average growth potential for
investors who are willing to assume above-average levels of risk.
Stable value funds, at the bottom of the triangle, typically offer
lower return potential in exchange for reduced risk.
Which of these categories, or combination of categories, should you
invest in? To answer this question, we must first ask a couple more:
1. When will you need the money?
2. How much risk are you willing to take?
8
oss
in /l
gp
asin
f ga
rch
f pu
sk o
so
los
BONDS
International Government
High-Yield
Domestic Investment-Grade
g ri
gh
rou
n th
sin
rea
fixed income
tur
g re
dec
sin
Cash
Safety of principal
Risks
– Inflation
– Outliving your money
EQUITIES
Global and Intl
Domestic Small Cap
Domestic Mid Cap
Domestic Large Cap
HYBRID
rea
Bonds
Loan to government
or corporation
Risks
– Credit risk
– Interest rate risk
growth
dec
Ownership position
in a company
Risks
– Business risk
– Market risk
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Time horizon
NOTES
Another aspect to consider when making investment decisions is time.
Here are some questions to consider:
Do you have enough money in a liquid emergency reserve fund?
How long will the money be invested?
How certain are you of the time until distribution?
Are the funds to be used for growth or for income?
It’s time in the market, not timing the market
History has shown that trying to time the market is next to impossible.
In the following chart, you can see how much growth an investor would
have missed out on by being out of the market for just 40 of the
best days.
Ten-Year Period Ending 12/31/03 in S&P 500
Average Annual
Return
If you stayed fully invested
If you missed the 10 best days
If you missed the 20 best days
If you missed the 30 best days
If you missed the 40 best days
11.06%
5.94%
2.06%
-1.30%
-4.11%
Based on Standard & Poor's 500 Index’s return over ten-year period ended Dec.31, 2002.
Source: Standard & Poor’s Micropal. Index is unmanaged and includes reinvested dividends.
One cannot invest directly in an index. For illustrative purposes only. Past performance does
not guarantee future results.
Determining your risk tolerance
Gauging your tolerance to risk is an important step in formulating an
investment strategy that’s right for you. The quiz on the next page will
help you determine the level of risk you are comfortable with, factoring
in your current financial situation, and your investment preferences.
9
GUIDE TO RETIREMENT PLANNING
Risk Tolerance Quiz
Being aware of your tolerance for investment risk is important when
planning your investment strategy. We developed this short quiz to help
you understand how much risk you are willing to take to reach your
financial goals.
NOTES
1. Which of the following investments do you feel most
comfortable with?
a. Certificate of deposit
b. High-grade corporate bond
c. Growth stock
2. Of the following stocks, which do you feel would most suit
your needs?
Give yourself 10 points
for every “a” answer, 20 points
for every “b” answer, and
30 points for every “c” answer.
50 – 80
You are a relatively low-risk investor.
You are most concerned with the
preservation of your capital and the
potential for current income. You are
not willing to risk your capital for
greater potential returns.
90 – 110
You are generally conservative,
but you recognize the need to consider
growth-oriented alternatives. You may
be willing to take modest risk to earn
above-average, long-term returns.
a. A conservative utility stock that pays high dividends but offers
little chance for long-term growth
b. A “blue chip” stock that offers the potential for modest
dividends and growth
c. An aggressive small-company stock that pays no dividends but
offers great potential for long-term growth
3. What have you traditionally considered most important from
your investments?
a. Safety
b. Conservative growth
c. Maximum growth
4. You just made a $100,000 investment. The following amounts
represent the estimated best-case and worst-case scenarios after
one year. Which range of possible outcomes would you prefer?
BEST CASE
WORST CASE
POSSIBLE GAIN/LOSS
120 – 150
a. $104,000
$ 96,000
$ 4,000
You may be a relatively high-risk
investor. You are mostly concerned
with long-term appreciation and you
may be willing to take on more risk
to earn greater, long-term returns.
b. $108,000
$ 92,000
$ 8,000
c. $112,000
$ 88,000
$12,000
5. Which statement most closely resembles your feelings about risk?
a. I am not willing to take risks with my investments.
b. I am willing to take limited risks with my investments.
c. I am willing to take substantial risks with my investments.
10
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Diversification
Diversification means that you’ve chosen two or more assets that
historically have responded differently to the market. With a truly
diversified portfolio, you have the potential to achieve the long-term
benefit of each asset, while helping smooth out the overall risk of the
portfolio as a whole.
NOTES
Stocks
Small cap, mid cap, large cap
Domestic vs. foreign
Value vs. growth
Bonds
Short, intermediate, and long term
High quality vs. low quality
Government, municipal and corporate debentures
Adventist fund options
Your Plan offers a broad array of fund choices in asset classes of both
domestic and foreign stocks and bonds, a VALIC fixed-interest option,
and a self-directed brokerage account through Schwab Personal Choice
Retirement AccountTM (PCRA). For more information on the specific
funds offered under your Plan, visit www.aigvalic.com, click ePrint,
and enter code “SDA403b.”
To obtain a prospectus, visit www.aigvalic.com or call 1-888-568-2542. The prospectus
contains the investment objectives, risks, charges and expenses, and other information
about the investment company, which you should consider carefully before investing.
Please read the prospectus carefully before investing or sending money.
A prospectus(es) containing more complete information, including management fees,
charges and expenses, is available from Schwab (1-800-435-4000). Please read the
prospectus(es) carefully before investing.
Schwab’s standard transaction fee will be charged on each redemption of fund shares bought with no
transaction fee and held for 90 days or less. Schwab reserves the right to assess Schwab's standard transaction
fees in the future should short-term trading become excessive. Schwab receives remuneration from Mutual
Fund OneSource companies. Schwab reserves the right to change the funds made available without
transaction fees.
Depending on the terms of your retirement plan, your Schwab Personal Choice Retirement AccountTM is a
custodial account established under Section 401(a), Section 403(b)(7) or Section 457 of the Internal Revenue
Code of 1986, as amended. Your rights under the account are governed by the terms of your account or your
employer’s plan.
11
GUIDE TO RETIREMENT PLANNING
Investing for good
NOTES
Your Plan offers socially responsible funds that are screened for social,
ethical and religious values to avoid investing in companies that receive
significant revenues from alcoholic beverages, gambling, meatpacking,
caffeinated beverages, pornography and tobacco. ARP socially
responsible funds are chosen for consistency with the investment
philosophy of the Seventh-Day Adventist Church.
Weatherproofing principles
Diversification can have further benefits by applying what’s called
“weatherproofing”. In the first illustration, sales of Suntan Lotion, Inc. and
Sunglasses, Inc. react similarly on days when the weather is sunny, and
are, therefore, positively correlated.
The second illustration shows that sales of Suntan Lotion, Inc. and
Umbrellas, Inc. behave oppositely on days when the weather is sunny or
rainy and are, therefore, negatively correlated. Investing in negatively
correlated companies may result in a diversified portfolio with potentially
steadier performance.
Percent (%)
Positive correlation
0
Suntan Lotion, Inc.
Sunglasses, Inc.
Percent (%)
Negative correlation
0
Suntan Lotion, Inc.
12
Umbrellas, Inc.
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Strategic asset allocation
After you have assessed your investment goals and objectives, time
horizon, and risk tolerance, you can then work through the asset
allocation process to create a portfolio that fits your financial
profile. Design your asset allocation model BEFORE making
your investment selections.
NOTES
Strategic asset allocation, also called Modern Portfolio Theory,
is a concept derived from a Nobel-Prize-winning economic theory.
According to research, over 93% of investment returns are a result
of strategic asset allocation, while only 2.5% are a matter of specific
fund selection, and only 4% of investment returns result from market
timing and other factors.
Asset allocation is likely the most important investment strategy you’ll
use. Using asset allocation, you diversify your investments to help
optimize your return, while simultaneously reducing risk. It is important
to note that neither diversification nor asset allocation can ensure a profit
or protect against loss.
Asset Class
Stock or Bond
Market Timing
and Other Factors
93.6% of your
investment performance
is attributed to the
asset classes you select
93.6% of your investment performance is attributed
to the asset classes you select
Source: G.P. Brinson, B.D. Singer & G. L. Beebower/1995
Neither asset allocation nor diversification ensure a profit or protect against market loss.
Asset allocation can be the master plan that governs all your investment
decisions. It works for any age and stage of life because it integrates your
personal goals with your risk tolerance.
13
GUIDE TO RETIREMENT PLANNING
Pre-set asset allocation models
NOTES
The Adventist Retirement Plan offers 10 pre-set asset allocation models
— five socially screened models and five unscreened models. The models
were designed using the existing investment options and the VALIC FixedInterest Option available under the Plan. They are set to rebalance on an
annual basis.
Socially
Screened
Models
Fixed-Interest
Option
SDA Total
Market Bond
Index Fund
SDA Large
Cap Index
Fund
Conservative
25%
75%
0%
0%
0%
Moderately
Conservative
10%
55%
25%
5%
5%
Moderate
(DEFAULT
PORTFOLIO)
5%
35%
45%
8%
7%
Moderately
Aggressive
0%
20%
55%
13%
12%
Aggressive
0%
0%
65%
19%
20%
Unscreened
Models
14
Fixed-Interest
Option
SDA Small/ SDA Internat’l
Mid Cap
Equity Index
Index Fund
Fund
Vanguard
Intermediate
Vanguard
AIM Capital T. Rowe Price
U.S. Treasury Growth & Development International
Fund
Income Fund
Fund
Stock Fund
Conservative
25%
75%
0%
0%
0%
Moderately
Conservative
10%
55%
25%
5%
5%
Moderate
5%
35%
45%
8%
7%
Moderately
Aggressive
0%
20%
55%
13%
12%
Aggressive
0%
0%
65%
19%
20%
PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Rebalance to preserve your optimal mix
NOTES
Once you’ve determined your ideal allocation, you can reposition your
assets accordingly. However, because your actual portfolio mix will
change over time because of market fluctuations, you’ll want to
rebalance periodically to keep your portfolio in line with your
ideal allocation.
Asset Allocation – The Optimal Mix
Portfolio – End of Year 1
Rebalanced Portfolio – Beginning of Year 2
These illustrations are hypothetical and only an example. They do not reflect the return of any specific investments and are not
a guarantee of future income. Rebalancing mutual fund investments that are outside tax-deferred portfolios (such as annuity
contracts, IRAs and employer-sponsored plans) generally can result in current taxes on gains from the sales of mutual
fund shares.
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GUIDE TO RETIREMENT PLANNING
NOTES
Guided Portfolio ServicesSM (GPS)
AIG VALIC offers GPS for those who want investment advice and/or
implementation. GPS offers two levels of service:
Portfolio Advisor
– Advice
– Self implementation
Portfolio Manager
– Advice
– Automatic implementation
To learn more or to enroll in GPS, call AdviceLine at 1-888-568-2542.
Schwab PCRA
www.schwabPCRA.com
Schwab PCRA is simply another choice available to you through your
Plan. It provides a larger universe of funds for those with investment
knowledge and the desire to select investments beyond those offered
in the core retirement plan. To learn more about the program or request
an enrollment packet, call AdviceLine at 1-888-568-2542. Visit the
Schwab PCRA Web site for complete information about the services
Schwab offers.
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PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Getting started
Adventist Web site
NOTES
www.aigvalic.com/adventist
When you log onto the Web site, select View Your Account and enter
your PIN. This will take you to your personal account information. To
access all the asset management tools, click on More Options and select
403(b). You’ll then see a full menu with inquiry and transaction functions.
AdviceLine
1-888-568-2542, press 0
If you need assistance, call the number above, press 0 and ask for
AdviceLine. Licensed financial advisors are available Monday through
Friday from 7 a.m. to 8 p.m., Central Time.
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GUIDE TO RETIREMENT PLANNING
NOTES
ePrint
www.aigvalic.com/adventist
AIG VALIC’s ePrint offers online access to the forms you’ll need to enroll
in the Plan, change your contributions, designate beneficiaries and find
out more specific information about the Plan. After logging onto the
Web site, click on the ePrint icon and enter “SDA403b” as the Plan ID.
You can print and complete the Salary Reduction/ Deferred
Compensation Agreement. The ePrint site is also your resource for fund
profiles and prospectuses.
Your portfolio
By clicking on Portfolio, you can view and print an up-to-date Portfolio
Summary by Investment Vehicle report, with current fund performance
depicted in graphical format, asset class modeling and each fund’s
percentage of the mix.
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PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Fund information
NOTES
Check fund pricing and performance for funds in your current
portfolio and those you are considering by clicking on Fund Price &
Performance. Full fund profiles and prospectuses may be accessed
through ePrint.
Selecting an asset allocation model
You can select an allocation model by clicking on Asset Allocation
Model and selecting the model you prefer from the pull-down menu.
The one you choose will display the risk mix (as shown below). You
may want to print the model to study and refer to before you process
your changes.
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GUIDE TO RETIREMENT PLANNING
NOTES
Investment elections
Clicking on Investment Elections shows your current fund elections and
each fund’s percentage of the mix.
Asset rebalancing
As we have illustrated earlier, it’s important to check your asset allocation
mix periodically to ensure it remains in line with your chosen risk model.
To rebalance, click Asset Rebalancing and check the current allocation
percentages against your model. If the percentages have deviated, you
can reset manually or set the program to automatically rebalance at
set intervals.
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PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Additional resources
Quarterly account statement
NOTES
Your consolidated account statement includes many useful reports
including the Investment Summary. Funds are shown with quarterly
beginning and ending values, total additions, investment transfers,
reductions, and net change in value. Funds are listed by asset class and
shown as percentages of the total portfolio — another way to check your
asset allocation status.
Topical reports
You have online access to a number of helpful reports including: Estate
Planning, Financial Overview, Insurance Planning, Retirement Planning
and Saving for College.
Estate Planning
Should you have a living trust? Would your estate be subject to probate fees or estate taxes? Your Estate
Planning Report addresses all aspects of your estate planning no matter how simple or complicated your
estate may be.
Financial Overview
Whether you’re looking for ideas on how to manage your debt or you just want to see if you’re on track for
meeting your goals, the Financial Overview Report can give you answers. It provides a general overview on
your budget, your general finances and risk management, as well as your investments.
Insurance Planning
Would your dependents need to change their lifestyle if something happened to you? Would the funds still
be there for college? Would the mortgage still get paid? Proper insurance planning is critical if there are
people who depend on you for their well-being.
Retirement Planning
How much will your retirement cost in two years or twenty-two years when you want to retire? Are you on
track for reaching your retirement goals, or is there still a shortfall? The Retirement Planning Report will tell
you exactly what you need to do to help ensure that you can retire in style!
Saving for Education
College costs do not increase at the rate of inflation; they have historically increased at a much faster pace.
Will you be able to assist your child in attending the college of his or her choice? How much will you need
to save before that freshman year? The Education Report will give you the answers to all these questions.
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GUIDE TO RETIREMENT PLANNING
NOTES
Online Financial Planning & Education Center
(FPEC)
Interactive financial planning courses developed by AIG VALIC are
available through the FPEC Online. Education courses include practical
exercises to apply to your personal financial planning on topics that
include: Cash Management, Risk Management, Investment Types,
Investment Strategies and Retirement Planning.
An important step in financial education is applying the knowledge to
your individual situation. With online planning reports, you enter your
specific information and obtain detailed analyses. Customized reports
include: Financial Overview, Insurance Planning, Retirement Planning,
Saving for Education and Estate Planning.
The Online Financial Planning & Education Center is available 24 hours,
7 days a week by visiting www.aigvalic.com/adventist/fpc.
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PAT H WAY S T O YO U R F I N A N C I A L F U T U R E
Program evaluation form
Date of workshop: ___________________________________________________ Name of presenter: _________________________________________________________________________________________________
Are you interested in starting employee contributions or increasing your existing contributions?
Yes, I’m interested in starting employee contributions.
Yes, I’m interested in increasing my existing employee contributions.
Are you interested in learning more about investment advice/implementation through Guided Portfolio ServicesSM?
Yes
No
Name: ______________________________________________________________________________________________________________________________________________
Day phone: ________________________________________________________________________
Evening phone: __________________________________________________________________
Email address:_____________________________________________________________________
(Please check box next to preferred contact method.)
Please rate the overall seminar:
Not very good
1
2
3
4
5
Excellent
1. What did you find of particular interest in today's workshop? ______________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________________________________________________________________________________________________________
2. How could we improve this workshop? _______________________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________________________________________________________________________________________________________
3. What other topics would you like to learn more about? _________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________________________________________________________________________________________________________
4. Would any of your friends or associates benefit from this presentation? If so, may we invite them to a future workshop?
Name: _______________________________________________________________________________________________ Telephone: __________________________________________________________________________________________
Name: _______________________________________________________________________________________________ Telephone: __________________________________________________________________________________________
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GUIDE TO RETIREMENT PLANNING
24
Planning
Advice
Choice
Education
AIG VALIC’s mission is to positively impact the future well-being
of our clients. Through planning, advice, choice and education we strive
to fulfill our mission, one client at a time. Let us know how we can
help you find your path.
Securities and investment advisory sevices are offered by
VALIC Financial Advisors, Inc. member NASD, SIPC and an
SEC-registered investment advisor.
AIG VALIC is the marketing name for the group of companies comprising VALIC Financial Advisors,
Inc.; VALIC Retirement Services Company; and The Variable Annuity Life Insurance Company (VALIC);
each of which is a member company of American International Group, Inc.
Copyright © 2004, American International Group, Inc. All rights reserved.
Houston, Texas
www.aigvalic.com
VL 16456 8/2004