# Presentation: 311584

## The Pastor Group

## Please

- Silence your Cell Phones and Pagers
- Thank you!

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## When every day is Saturday.

*When every day is** Saturday.*

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## The Pastor Group

**“...****I wish we had a retirement plan that didn’t require matching six numbers.”**

## FINANCIAL PLANNING PROCESS

**FINANCIAL PLANNING PROCESS**

- 1. Determine where you are going.
-     (Set Goals and Objectives)
- 2. Know where you are.
-    (Take inventory of Existing Assets)
- 3. Develop and Follow a Retirement _Plan._

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## WHAT

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**WHAT**
**DO YOU WANT TO DO IN RETIREMENT?**

**WHEN**
**DO YOU WANT TO RETIRE?**

## How Much Money

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**How Much Money**
**Do You Need To Live **
**On??**

## January

- 1) Obtain monthly totals from checking out statement
- 2) Write down total for each month
- 3) Add totals
- 4) Divide by number of years

- Result: Average Expenses

- February
- March
- April
- May
- June
- July
- August
- September
- October
- November
- December
- Total:		$		$		$

**2004**

**2005**

**2006**

## Manage your Monthly

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**Manage your Monthly**
**Debt Payments**

-   Short-term debt payments
-      - Should not exceed 20% of after-tax income
-   2. Mortgage payment
-      - Should not exceed 28% of monthly gross income
-   Combined monthly debt payments
-      - Should not exceed 36% of monthly gross income

## Will I Need A Lump Sum of Money at Retirement?

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**Will I Need A Lump Sum of Money at Retirement?**

-   Repairs to your house
-   Pay off bills
-   College Tuition
-   Wedding
-   Retirement Vacation
-   Start a Business?

## Summarize

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**Summarize**

-   When will I retire?
-   What will I do?
-   How Much do I need to live on?
-   CONSIDER- Taxes, Inflation, & Risk

**Where do I want to go?**
- (Goals & Objectives)

## Where Am I Now?

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**Where Am I Now?**

-   Social Security
-   Basic Benefit Plan
-   Thrift Savings Plan
-   Personal Investments

**(Taking Inventory):**

## Birthdate

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**Birthdate**

**Full Retirement**
**Benefits Paid at Age**

- Before 1/2/38
- 1/2/38 - 1/1/39
- 1/2/39 - 1/1/40
- 1/2/40 - 1/1/41
- 1/2/41 - 1/1/42
- 1/2/42 - 1/1/43
- 1/2/43 - 1/1/55
- 1/2/55 - 1/1/56
- 1/2/56 - 1/1/57
- 1/2/57 - 1/1/58
- 1/2/58 - 1/1/59
- 1/2/59 - 1/1/60
- After 1/2/60

- 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

## FERS

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**FERS**

-   Basic Benefit Plan
-   Thrift Savings Plan

## Basic Benefit

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**Basic Benefit**

-   MONTHLY PAYMENTS

## PAY TAXES

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**PAY TAXES**
**OR**
**DEFER TAXES**

## ALTERNATIVES

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**ALTERNATIVES**

-   1. Pay Taxes
-          - Ordinary income
-   2. Defer taxes
-          - Direct Rollover Transfer

## What is Eligible for Rollover

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**What is Eligible for Rollover**

-   Qualified pretax contributions
-   Agency contributions/matching
-   Earnings on contributions

## How to Roll Over Distributions

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**How to Roll Over Distributions**

-   Direct rollover transfer

## Direct Rollover Transfer

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**Direct Rollover Transfer**

-   Employer sends directly to IRA,
-    new plan or custodian

## STEP 1

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**STEP 1**

-   Fill out agency paperwork,
-    request Direct Rollover
-   No Taxes, No Penalties

- Agency

**IRA**

- $$$

## STEP 2

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**STEP 2**

-   Invest money into various securities:
-    i.e.: CD’s, Govt. Bonds, GNMA’s,
-    Stock, Mutual Funds, Unit Trusts

**IRA**

- CD’s
- Stock
- Mutual Funds
- GNMA
- Unit Trusts
- Money Market

## STEP 3

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**STEP 3**

-   Take distributions when you are
-    ready. Distributions will be subject to
-    taxes & possibly 10% penalties

**IRA**

- CD’s
- Stock
- Mutual Funds
- GNMA
- Unit Trusts
- Money Market

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- Subject to ordinary Income taxes & possible penalties

- YOU

- $$

## Under Age 55

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**Under Age 55**

-   1. Defer Taxes
-          - Direct Rollover
-   2. Pay taxes
-          - Take distributions-subject to ordinary
-             income taxes & 10% penalty
-          - Take distributions-subject to ordinary
-             income taxes but avoid 10% penalty

## PENALTY FREE WITHDRWAL

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**PENALTY FREE WITHDRWAL**

-   3 IRS Formulas
-   Function of age, interest rate assumptions, value of IRA.
-   Amount O.K. to withdraw equal to interest and some principal.
-   Once elected must take exact same amount each year.
-   Until age 59 1/2 or 5 years, whichever is later
-   If the stream is broken 10% penalty is assessed on the first
-    dollars out of the plan.

## 55

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- 57

- 50

- 60

- 62

- 59 1/2

- 59 1/2

- 59 1/2

## Pre-59 1/2 Distributions

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**Pre-59 1/2 Distributions**

- Plan Balance $500,000

- Expected Plan Growth 6%
- Owners Birthdate 01/01/1952
- Distribution Method: Annuitization
- “Reasonable Interest Rate” 5.97%

_**Year**__**	**__**	**__**Amount**_
- 2006		$37,029.36
-  or $3,085.78 per month
- Gross, before taxes

## Use of Multiple IRA’s

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**Use of Multiple IRA’s**

-   Annuitize on IRA.
-   Continue the tax-deferred growth in the
-     second IRA

- $300,000

**IRA 1**
- $125,000
**Annuitize**

**Split**

**IRA 2**
- $175,000
**Defer**

## Between Ages of 55 & 59 1/2

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**Between Ages of 55 & 59 1/2**

-   1. Defer Taxes
-          - Direct Rollover
-   2. Pay taxes
-          - Take distributions-subject to ordinary
-             income taxes & 10% penalty
-          - Take distributions-subject to ordinary
-             income taxes but avoid 10% penalty

## Age 55 - 59 1/2

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**Age 55 - 59 1/2**

- Avoid 10% penalty distribution directly from a qualified plan

**Your Company Plan**

**Distributing directly to you**

**20% withholding No 10% penalty**

## Between Ages 59 1/2 & 70 1/2

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**Between Ages 59 1/2 & 70 1/2**

-   1. Defer Taxes
-          - Direct Rollover
-   2. Pay taxes
-          - Ordinary Income Tax

## AFTER AGE 70 1/2

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**AFTER AGE 70 1/2**

- Mandatory Distributions

## Penalty for Not Taking Mandatory Distributions

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**Penalty for Not Taking Mandatory Distributions**

- 50% of difference between Mandatory amount and Actual withdrawal

## Basic Breakdown of Investments

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**Basic Breakdown of Investments**

- Stocks
- Mutual Funds
- Unit Trusts

- % Fixed Income
- _Lend_

- % of Growth
- _Own_

- T-Bill
- T-Note
- T-Bond
- GNMA

- U.S. Govt.

- Govt. Agency

- Municipal Bonds -- State & Local Govt.
- Corporate Bonds -- Corporation
- CD’s ---------------- Bank
- Fixed Annuity ----- Insurance Co.

- Agency Note
- Agency Bond
- Mtg backed Sec.

## Sample Investment Mix

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**Sample Investment Mix**

- Investment Style Value/Growth

- Growth %

- Fixed
-     Income %

- Special Situations
- International Companies
- Small Companies
- Mid Size Companies
- Large Companies

- CD’s
- Govt. Bonds
- GNMA’s
- Corporate Bonds

- Laddered
- Maturities

## IRA

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**IRA**

- Stocks
- Bonds
- REITS
- MM

- Your monthly distribution

- Your Bank

- Basic Benefit

- Other Income

- Social Security

- Your retirement pay check

- $$$$

**How do I receive my monthly income?**

## Does Rate of Return Really 

- The Pastor Group

**Does Rate of Return Really **
**Make a Difference?**

**$ 500,000 at 5% for 20 years ****	****= $ 1,326,649**
**	****            ****8%****	****	****	****	****= $ 2,330,479**
**	****            ****10%****	****	****	****= $ 3,363,750**

## Are All Average Returns the Same

- The Pastor Group

**Are All Average Returns the Same**

**                      ****Manager A****	****	****                 Manager B**
**	****     ****Return****	**** Cumulative****	****        Return****	****        Cumulative**
**	****	****               ****$100.00****	****	****	****	****$100.00**
**Period 1      15%****	****     $115.00****	****	****5%****	****	****$105.00**
**Period 2****	****-5%****	****     $109.25****	****	****5%****	****	****$110.25**
**Period 3      15%****	****     $125.64****	****	****5%****	****	****$115.76**
**Period 4       -5%****	****     $119.36****	****	****5%****	****	****$121.55**
**Average****	****5.00%****	****	****	****	****5.00%**

**4.52%**

**5.00%**

**CAGR **

## Are all CAGR’s the Same?

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**Are all CAGR’s the Same?**

**                      ****Manager C****	****	****                 Manager D**
**	****     ****Return****	**** Cumulative****	****        Return****	****        Cumulative**
**	****	****               ****$100.00****	****	****	****	****$100.00**
**Period 1      15%****	****     $115.00****	****	****-20%****	****	****$  80.00**
**Period 2****	****-5%****	****     $109.25****	****	****-20%****	****	****$  64.00**
**Period 3      15%****	****     $125.64****	****	****-20%****	****	****$  51.20**
**Period 4  -3.25%****	****     $121.55       137.40%****	****	****$121.55**
**Average****	****5.00%****	****	****	****	****5.00%**

**11.07**

**Std Dev**** **

**78.70**

## YES

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**Can This Risk Be Managed?**

**Can This Risk Be Eliminated?**

**Does Management of this Risk make a difference?**

**YES**

**YES**

**NO**

## Best Days vs. Worst Days

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**Best Days vs. Worst Days**

- For the 16 year period studied between July `84 and October 2000, the average annual return of the S&P 500 was 14.83%.

- If you disregard the 10 best days and the 10 worst days, the return of the S&P 500 jumps to 17.07%.

- Source: Denver Post, „Advisors Group Rejects Strategy of Buy and Hold“

*Missed the Best & Worst ...Return:*

*Missed the Best ...Return:*

*Missed the Worst ...Return:*

## The Buy-and-Hold Myth

- The Pastor Group

**The Buy-and-Hold Myth**

**Buy the “Market“ in 1929...**
**       ****It took 25 years to get back to even.**

**    ****Buy it 1973...**
**       ****It took 7.6 years to get back to even.**

**     ****Starting in 1987 IBM went down 74%...**
**        ****It took 10 years to recover**

**     ****Using the same assumptions, **
**        ****it could take CSCO 13 years to**
**        ****get back to its high of 82 from**
**        ****its April 2001 low at a return of 15% a year.**

- Note: Past performance is no guarantee of future success.
- Compliments of Dorsey Wright and Associates

## Fundamental Analysis vs. Technical Analysis

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**Fundamental Analysis vs. Technical Analysis**

**	****What is Fundamental**** ****Analysis?**
- What to Buy
- Management
- Earnings Quality
- Price/Earnings Ratio
- Product Acceptance

**	****What is Technical Analysis?**
- When to Buy
- Trend
- Relative Strength
- Momentum
- Price Forecasting

## “How Did So Many Get It Wrong?”New York Times - December 31, 2000

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**“****How Did So Many Get It Wrong?”****New York Times - December 31, 2000**

- “How can so many who are paid so much to scrutinize companies have blown it so spectacularly for their investor customers?” Anthony Noto at Goldman, Sachs sums the situation up quite well.  He is an Internet analyst who, according to the article, “remained upbeat on shares that were trading at a fraction of their former values.” Noto lowered his ratings on some stocks only after they had declined as much as 98% during the previous 52 weeks.
- “Our research is driven by fundamental analysis and is not influenced by anything else,” Mr. Noto said. He went on to explain that the companies he follows had their stock price drop last spring not because their operations were failing, but because *market psychology* had changed. He downgraded the stocks much later because only then had it become clear through his research that the companies’ results were deteriorating. “In hindsight,” he said, “we should have lowered our ratings sooner. We regret that.”

## Market Psychology

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**Market Psychology**
**IS**
**Supply and Demand**

## Point & Figure Analysis

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**Point & Figure Analysis**

- 	Captures the Supply and Demand that is going on in ...

**the market**

**the sector**

**stocks**

## NYSE Bullish Percent

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**NYSE Bullish Percent**

**Red Zone**
- Defensive Area, Higher Risk

**Middle**
- Normal Market Conditions

**Green Zone**
- Offense Area, Lower Risk

## Sector Bell Curve – April 15, 1998

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**Sector Bell Curve – April 15, 1998**

## Sector Bell Curve – September 10, 1998

- The Pastor Group

**Sector Bell Curve – September 10, 1998**

## Sector Bell Curve – September 26, 2001

- The Pastor Group

**Sector Bell Curve – September 26, 2001**

## Sector Bell Curves – 1987

- The Pastor Group

**Sector Bell Curves – 1987**

**                               **_**September 2**__**nd**__** 1987**_
**                                       ****|                     **
**                                       ****|                     **
**                                       ****|                             STEE**
**                                       ****|                  GAS        RETA**
**                                       ****|                  TELE       TRAN**
**                                       ****|       REST  WALL OILS       MEDI**
**                                       ****|       OILS  TEXT BANK       FOOD**
**                                       ****|       LEIS  META AUTO HEAL  INSU**
**                ****ELEC           BIOT    |       FRST  COMP AERO PREC  CHEM   **
**---------------------------------------------------------------------------------------**
** ****10%             30%                  50%                  70%             90% **
** **
** **
**                                **_**October 28**__**th**__** 1987**_
** **
**      ****GAS                              |**
**      ****UTIL                             |**
**      ****TELE                             |**
**      ****STEE                             |**
**      ****REST                             |                     **
**      ****OIL                              |                      **
**WALL  META                             |                     **
**TEXT  MEDI                             |                     **
**RETA  LEIS                             |                                 **
**TRAN  FOOD                             |                                 **
**PREC  COMP                             |                                 **
**INSU  CHEM                             |                                 **
**HEAL  BIOT                             |                                 **
**BUIL  AUTO                             |                                 **
**BANK  AERO                             |                                    **
**---------------------------------------------------------------------------------------**
** ****10%             30%                  50%                  70%             90% **

## The Five-Step Game Plan

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**The Five-Step Game Plan**

- Market Analysis
- Sector Analysis
- Fundamental Research
- Technical Research
- Continual Follow-Up and Risk-Management

## Managing Risk

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**Managing Risk**

- 	“In order to be a successful risk management investment strategy, market timing does not have to be perfect.  Despite belief to the contrary, market timing does not target getting in and out of the market at the absolute bottoms or tops.  It does, however, strive to get an investor’s funds out of the market before a major bear market devastates the portfolio.  Market timing’s first and foremost priority is the preservation of capital.”
*    **How can I manage risk to preserve capital?*

## The Pastor Group