1

Resident Lunch and Learn: Key Aspects of Financial Wellness

2

What Does “Financial Wellness” Mean?

Today’s financial decisions (or lack thereof) can impact your life for many years and in many ways:

Good Outcomes: Good credit score Best possible rates on loans Contentment on the job Better housing options Improved job opportunities Healthy personal relationships

Bad Outcomes: Lowered credit score High-rate loans or denial Lowered job productivity Denial of housing Narrower job options Stress on personal relationships

3

Financial Definitions

401(k)

403(b)

A 401(k) plan is an employer-sponsored, tax-deferred retirement plan. Employees make tax-deductible contributions to their retirement funds, and employers can offer matched contributions. Your annual contribution amount is limited, though if you are over age 50 you can use a catch-up provision. You can borrow from a 401(k) plan, but must pay it back with interest or pay a penalty.

A 403(b) plan is similar to a 401(k), but is typically available only to certain types of government entities and tax-exempt nonprofit organizations, such as hospitals, churches, and charities. These plans generally have more favorable vesting rules, and employers can make additional contributions for years of service, if defined in their plan.

Retirement Planning

4

Traditional IRA

Roth IRA

Contributions to a Roth IRA are not tax deductible. There are no mandatory distribution ages. All earnings and the principal are 100% tax-free, if rules and regulations are followed. Principal contributions could be withdrawn any time without penalty. Roth IRAs are available to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually.

Contributions to a Traditional IRA are tax deductible, depending on income level. Withdrawals can begin at age 59½ and are mandatory by 70½. Taxes are paid on earnings at withdrawal. All funds withdrawn before 59½ are subject to a penalty. Traditional IRAs have no income restriction, so they are available to everyone.

Retirement Planning

Financial Definitions

5

Stocks & Bonds

Mutual Funds

A mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities, such as stocks and bonds. Mutual funds are operated by money managers, who invest the fund’s capital and attempt to produce gains and income for investors.

Stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. Bonds, on the other hand, are a debt investment in which an investor loans money to an entity (corporate or government) for a defined period of time at a fixed interest rate.

Retirement Planning

Financial Definitions

6

Get financial advantage through fringe benefits:

Employment Benefits

Money Benefits

Personal Benefits

Often provide peace-of-mind benefit to help you deal with emergency or stressful situation, usually have monetary impact from a cost-saving perspective.

Back-Up or Elder Care Employee Assistance Programs Legal Aid Programs

Provide benefit through cost reduction or saving opportunity, usually impacting spending plans and money management:

Tuition Reimbursement Credit Union or “Bank-at-Work” Programs Financial Planning Employee Discount Programs

7

Four Components of Success

Managing Your Money

1. Track Your Money Where do you get it and where do you spend it?

2. Make a Budget (Spending Plan) Fixed vs. variable expenses

3. Identify Savings and Spending Goals Discretionary savings, emergency funds, retirement savings

4. Be Proactive Review your plan and stay in front of the unexpected

8

Helpful Money Management Tools

Managing Your Money

1. Excel Spreadsheet Track expenses and income manually by entering figures from your records. Online samples available. You do not have to share your account information.

2. Mint.com Free site that links to your bank and credit card accounts. Automatically tracks expenses and income to compare against budget and savings goals. You must share your account login information over a secure server.

3. Quicken.com Similar to Mint.com, but requires you to purchase software.

9

Managing Your Money

Federal and Private Student Loans Federal Private

Pro

Fixed interest rate Subsidized interest Deferred payments

No pre-payment penalty Loan consolidation

Tax benefit

Larger borrowing capacity Unrestricted use of funds

Covers gaps in federal funding Apply any time

Anyone can apply

Con

Needs-based criteria Limited borrowing capacity

Restricted application of funds Limited window to apply

Lots of paperwork

Credit-based Variable rate

Not deferred or subsidized May not have tax benefit

No consolidation Subject to pre-payment penalty

10

Federal Student Loan Resources

Managing Your Money

1. Federal Student Aid Information Center: Info on types of student aid, eligibility requirements, FAFSA filing, and repayment ▪ studentaid.ed.gov ▪ 800.4 FED AID (800.433.3243)

2. Federal Student Loan PIN: Obtain/retrieve PIN ▪ PIN.ed.gov

3. Manage Your Federal Direct Loan: Meet counseling and other requirements to manage your loan ▪ studentloans.gov

4. National Student Loan Data System: Title IV loans and/or grants inquiries, including who services your loan ▪ nslds.ed.gov

5. Public Service Loan Forgiveness: If you work full-time in a public service job, you may qualify for the PSLF program ▪ studentaid.ed.gov/publicservice

6. Loan Consolidation: Learn more about consolidating your student loans for easier management ▪ loanconsolidation.ed.gov

11

What goes into a credit score?

Managing Your Credit

Payment History

Debt-to-Credit Ratio

Length of History

New Credit

Types of Credit

35%

30%

15%

10%

10%

12

Five MUST DO’s in Managing Your Credit

Managing Your Credit

1. Pay on time, every time.

2. Keep your balances low by sticking to your spending plan.

3. Lock up old cards, but don’t cancel them.

4. Apply for new credit sparingly, especially if you’re buying a home soon.

5. Look at your credit report at least annually.

13

Establish credit with a low-limit, low fixed-rate card

Add an installment loan into the mix

Use 25% or less of your available credit

Dispute old negatives and fight significant errors

Renegotiate the terms of your old cards to get better rates or better rewards without closing the account

Managing Your Credit

Do these to establish and elevate your score:

14

Pay late or skip payments

Use only unsecured credit

Use only one credit card that is always maxed out

Apply for a bunch of new cards all at once

Ignore creditors and force them to turn you over to collections or to seek judgments against you

File for bankruptcy

Managing Your Credit

To maintain a good score, don’t do these:

15

Managing Your Credit

Other good advice that indirectly affects credit:

Avoid overdrawing your checking account

Live within your means by budgeting

Pay your other bills on time

If you begin to have difficulty, seek credit counseling early

Plan ahead for life milestones like marriage, family, new homes

16

Types of Insurance

Life Insurance

Auto & Home Insurance

Debt Consolidation Insurance Dental Insurance

Disability Insurance

ID Theft Insurance

Medical Insurance

PDA Insurance

Professional Liability Insurance

Travel Insurance

17

Guaranteed Issue The right to purchase insurance without physical examination; the present and past physical condition of the applicant is not considered.

Simplified Issue Applicants must answer a few medical and/or lifestyle questions to determine eligibility to purchase; additional underwriting may be required occasionally.

Underwriting The process of selecting risks and classifying them according to their degrees of insurability so the appropriate rates may be assigned, including rejections.

Insurance Definitions

Broker/Agent Insurance salesperson or company that searches the marketplace in the interest of clients, not insurance companies. An agent can represent either, however.

18

Group Coverage A policy issued through a group entity, usually an association. Individuals cannot be singled out for an increase in rates (a.k.a. rate action).

Claim A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.

Individual Coverage Coverage issued to and underwritten for an individual.

Insurance Definitions

Disability Insurance Short Term benefits payable for a disability that lasts a few months. Long Term benefits payable into 60s or 70s with a waiting period of a 60 days or longer.

19

Any Occupation Once you are able to return to work in ANY capacity, your disability benefits may reduce or cease.

Waiting Period Relating to disability insurance, the length of time before benefits are payable on a claim.

Own Occupation Relating to disability insurance, you are unable to do your specific job, then you are eligible for benefits under Own Occupation coverage.

Insurance Definitions

Residual/Partial Disability Benefits The ability to continue receiving part of your monthly benefit while returning to work after a disability.

20

Claims-Made Policy Covers only claims made on the policy while the coverage is in force.

Life Insurance Term Life Insurance provides coverage for a set amount of time. If the insured dies within that time, the policy pays the proceeds to the beneficiary. This type of coverage does not build equity. Permanent Life Insurance provides coverage over the course of your life. It builds cash value, has a surrender value, and is similar to an investment vehicle in addition to the life insurance benefit. This policy has the potential to build equity and may accrue value over time.

Occurrence Policy Covers claims that occur during the policy period regardless of when the claim is reported as long as coverage was active during the time when the claim occurred.

Insurance Definitions

21

Waiver of Premium This means you are not liable to pay the premium should you become disabled, however the coverage remains active.

Accelerated Death Benefit If you are terminally ill under the policy provisions, you are eligible to receive part of your death benefit early to help cover costs/expenses.

Beneficiary The person you designate to receive the proceeds of a policy if you were to die. May help with avoiding certain estate taxes or probate, depending on state laws.

Insurance Definitions

Accidental Death & Dismemberment If a claim occurs due to an accident, AD&D coverage will provide additional benefits in addition to your life insurance face amount.

22

Protect your family:

Future living expenses College funding Final expenses

Protect your lifestyle:

Housing expenses Monthly bills

Medical expenses

Cover your debt:

Student loans Mortgages

Credit cards

Understanding Insurance

23

www.aapinsurance.com/insurance-calculator

Understanding Insurance

Life Insurance Needs Calculator:

of all consumers believe they don’t have enough life

insurance, including one quarter who currently owns a

policy.”

Source: LIMRA and LIFE Foundation 2013 Insurance

Barometer Study

24

Membership Matters to You. And to Us.

Who Are the Partners?

1. Value Added to Your Membership More than 60 years serving the needs of AAP members

2. Experienced Partners USI Affinity brings more than 75 years experience in administering insurance programs for associations like AAP

3. Exclusive to the AAP Insurance Program Rates and offers from top insurance underwriter New York Life are designed to meet the needs of AAP members and their families

25 See marketing materials for actual offer details

*Paid for by the AAP Group Insurance Trust. Please see marketing material for exact offer and eligibility details.

Graduating Resident Benefit

Graduating Residents

under Age 45

One year of $100,000 term life

insurance*

One year of $1,000/mo.

disability insurance*

Ability to add to coverage with no or

limited underwriting

Continue coverage without

underwriting

26

www.aapinsurance.com

27

Call us at 1.800.257.3220 www.aapinsurance.com Text me (David at USI Affinity) at 1-312-608-4913 Email david.thomas@usiaffinity.com

Questions?