Investment Planning

• Traditional IRA--You make contributions with money you may be able to deduct on your tax return, and any earnings can potentially grow tax-deferred until you withdraw them in retirement. Many retirees also find themselves in a lower tax bracket than they were in pre-retirement, so the tax-deferral means the money may be taxed at a lower rate.
   

• Roth IRA- You make contributions with money you’ve already paid taxes on (after-tax), and your money may potentially grow tax-free, with tax-free withdrawals in retirement, provided that certain conditions are met.
   

• Rollover IRA- A Traditional IRA intended for money "rolled over" from a qualified retirement plan. Rollovers involve moving eligible assets from an employer-sponsored plan, such as a 401(k) or 403(b), into an IRA.
   

• 401(k) Plan- A 401(k) is a retirement savings plan offered by an employer. It lets workers save and invest a portion of their paycheck before taxes are taken out. You pay tax when the funds are withdrawn, typically at retirement age. 401(k) plans are part of a family of retirement plans known as defined contribution plans. Other defined contribution plans include profit sharing plans, IRAs and Simple IRAs, SEPs, and money purchase plans. They are called "defined contribution plans" because the amount that is contributed is defined either by the employee (a.k.a. the participant) or the employer.

Understanding Mutual Funds

A mutual fund is a company that makes investments on behalf of its owners (shareholders). When you buy shares of a mutual fund, your money is pooled with money from other shareholders. Professional money managers use the pool of money to invest in securities (stocks, bonds and other investment instruments) that fit a fund's specific objectives.

How do mutual funds make money for you?

ONE, the fund can pay dividends earned from its investments.

TWO, if fund managers sell a security held by the fund at a profit, the fund could pay capital gains (profits) to shareholders.

You can choose to receive dividends or capital gains in cash, or you can reinvest them in your fund to help your investment grow faster. The amount you receive is proportionate to the number of fund shares you own. The fund's average annual total return is a percentage that tells you how much you gained or lost on your investment for a given period of time. Whether you invest $1,000 or $10,000, you'll get the same rate of return.

Benefits of Investing in Mutual Funds

Mutual funds have a long history, dating from the 1920s, and are now one of the most popular forms of investing worldwide. But there are many pieces to the mutual fund investing pie, and before you become a mutual funds investor, you'll want to understand how all those pieces fit together and the potential benefits of investing in mutual funds.

Diversification--Your best protection against risk is diversification--spreading your investment across many securities and asset classes. Mutual Funds offer a variety of investment options to help you construct a diverse portfolio.

Professional Management--With mutual funds, you have built-in professional money managers who base their buying and selling decisions on extensive, ongoing financial trade and industry research.

Growth Potential--Mutual Funds allow for the possibility of higher long-term returns than traditional savings accounts.

Convenience--Mutual funds are easy to buy and give you a liquid asset because your money is easily accessible. Your shares may be redeemed at the net asset value any day the New York Stock Exchange is open. The price of shares sold may be more or less than their original cost, depending on the market conditions.

Flexibility--

• Automatic reinvestment--Most mutual funds allow you to automatically reinvest your dvidends or captial gains to purchase additional fund shares at no extra cost.
   

• Exchange privilege--Within a fund family, you can generally move portions of your investment into other funds with different objectives as your financial situation changes, with no additional sales charge.

A key part of creating a successful investment plan is maintaining realistic expectations about your investments' performance. It's important to review your portfolio with your financial adviser periodically to accommodate your changing goals, especially when you have a major life change such as having a child or setting off into retirement. Whatever stage you are in life, it's never too late to start planning.

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