Personal finance/Retirement

savings importance
Follow simple rules and ideas to keep financial discipline
Presentation by Jeyamariappan Ganapathy,CFA
Profile – Jeyamarippan Ganapathy, CFA
• Independent investment/financial Advisor (Fiduciary)
• Chartered Financial Analyst (CFA)
• Founded Samatva Wealth Management LLC (www.samatva.us) , Registered
Investment Advisor
• Graduated MBA (Finance) Degree from Johns Hopkins university, Maryland
• Lead Mentor at Startups-Ignite accelerator, https://www.startups-
ignite.com and part of board of advisors in few startups
• Worked as Systems Development Director, Xerox Corporation
• Worked as project management consultant
• Master of engineering from PSG college of Technology
• Bachelor of Engineering from Coimbatore Institute of Technology
Agenda
• Emergency Savings (Expense spreadsheet)
• Back up and continuity (Financial records tracking checklist)
• Mortgage Refinance decision making (analysis spreadsheet)
• Retirement savings/goals (analysis demo)
• Q&A
• Retirement savings tools
• College 529 plan
• Term life Insurance importance
• WILL and Trust
• Transferring assets from India
• Q&A
Emergency savings

At least to cover 6
months to 1 year
of your expenses
COVID-19 impacts
• As of April 30th 2020 -- 20 millions people unemployed and 14%
unemployment rate --- as of last Friday May 8th - 33 millions people filled
for unemployment benefits (Highest unemployment fillings from 3 states –
Georgia, Florida and Michigan)
• Fortune 500 companies – how are they handling this crisis?
• Layoffs
• Furloughs
• Reduced hours
• Drastically cutting CAPEX (Capital expenditure for new projects)
• Increasing cash liquidity (by issuing corporate debt in billions)
• Stop or reduce dividends and cancel stock buy backs
• Reducing marketing budgets
COVID-19 impacts
• Sectors performed well: Technology/Health and consumer staples

• Sectors impacted badly: Airlines, banks, leisure and entertainment,

logistics, transportation, hotels industry

• Sectors impacted very badly: Energy (oil and gas), Commercial Real
Estate, Retailers (who did not have much online presence)
COVID-19 impacts
• CTS -COGNIZANT Technologies – earnings report ---May 7th
“cancellations of projects and discretionary spending and select
requests for furloughs, rate concessions and extended payment terms
from our clients”
“25% exposure to hardest hit industries, including travel, hospitality,
retail and automotive, energy, media and entertainment and
International markets, which tend to rebound more slowly”
“Work from home policy is going to continue for longer period –
companies are working on retrofitting existing facilities to
accommodate a lower density ratio amid new social distancing norms
and other business continuity-related costs”
COVID-19 impacts
• Aptiv (Automotive supplier) – earnings report ---May 5th
“we're not expecting a rapid recovery in global vehicle production and
remain cautious as we begin our planning for post 2020.
As a result of these factors, we expect vehicle production to decline in
the range of 20% to 30% in 2020, with a view that the current list of
puts and takes tilts the scale closer to 30% than 20%. Our outlook
reflects a trough in the second quarter, with production declining over
50% and a slow ramp up in the second half of the year”
COVID-19 --- How to handle this crisis if you
do not have enough emergency funds?
• Conserve your cash / save every penny
• Cut back eating out, Vacations, Home improvements and Car purchase
• Refinance your home at lower interest rate
• If you are paying too much mortgage, moving into smaller home or renting option
• Turn off reinvesting dividends
• Direct your 401k future pay check contributions to money market account
• CARES (Coronavirus Aid, Relief, and Economic Security Act) act is waiving the 10% early
withdrawal penalty on 401k/IRA withdrawals if it is due to a Corona-Virus-related cause
• Delay mortgage payments under CARES Act – You can get 90 days forbearance / no late
fees/ bank will be accruing the interest – it will increase your total cost of the loan and
repayment term
• GROW YOUR EMERGENCY SAVINGS – keep your emergency money in checking or savings
account or money market or CDs
Post COVID-19 – IT sector job opportunities
• Companies will start moving from legacy technologies to cloud
Technologies at a faster rate and produce huge job opportunities for
cloud and digital transformation
• demand will grow very fast post COVID crisis --- SerivceNow,
Microsoft Azur, Amazon AWS, Google cloud, (dev ops), IBM (Red Hat
– OpenStack), SAP/HANA, Sales force (sales, marketing, service and
ecommerce), Atlassian (Jira,Trello,Bitbucket) support Agile, slack,
Microsoft TEAM, ZOOM (online meetings), Workday HCM
(Finance/Payroll), digital transformation (infrastructure or application
side), cyber security and e-commerce
Back up and continuity plan
• Share all the financial records (assets/liability) and retirement accounts information and access
details with your spouse and please make them as a beneficiary for every account
• Saving/checking banking accounts (local and foreign)
• 401k/IRA/529/Brokerage account/crypto accounts etc
• Insurance
• Titles
• Past three years of Tax returns
• Home/rental property/land
• Loan information – Auto/Mortgage/Home Equity
• Credit cards
• Debit cards
• Paper bills or E-billing access for all the recurring monthly payments
• Check books -How to write checks / How to withdraw money from ATM/ wire transfer / how to deposit
checks
• Locker
• Share your HR department contact number and email/ Your Boss contact info/office friends contact info
 Back up and continuity plan
• Bills and expenses – Teach them how to make the bill payments and handle
expenses and budget
Housing
Transportation Food
Mortgage or rent Children
Vehicle 1 payment Groceries Pets
Cell Phone Tuition
Vehicle 2 payment Dining out Food
Land Phone Rent
Bus/taxi fare Medical
Electricity Utilities
Title registration Grooming
Gas Books
Licensing Toys
Water and sewer
Fuel Personal Care Parking
Cable Medical Groceries
Maintenance
Waste removal Hair/nails Internet + Cable
Vacation Travel
Maintenance or repairs Clothing Vehicle payment *
Supplies Insurance Dry cleaning Misc Expenses: Gas,
HOA Home Health clubs Food…
Gifts Health Organization dues or
Life fees
Auto
What will happen if you do not save enough
for your retirement?
keep working – no retirement for you

Endup Selling your home to cover the cost

Possible bankruptcy if you borrow too much debt
to cover the expenses
Getting support from your kids
Leaving your family with financial and emotional stress
How much savings do you need to support
your retirement life?

Expenses after retirement: $50,000 per year

Savings needed $1.5 Million
Expenses after retirement: $100,000 per year
Savings needed $3.0 Million
why retirement savings are very important?

Source: https://www.quora.com
Income/commitment – timeline
Impact of start saving early
Power of
Tax-deferred
Compounding
Assumes regular
investments of
$200 a month, 6%
average annual
return with all
earnings
reinvested and a
25% tax rate.
Dow Jones Industrial Avg for last 100 years –
FOLLOW LONG-TERM INVESTING STRATEGY
How can we increase the probability of
savings
• BEST OPTION - Automate your savings
• Start with minimum 2% of your pay check and increase it gradually
• Goal – At least 15% of your pay check

"Do not save what is left after spending, but spend what is left after
saving“ -- Warren Buffett
How can we save more by reducing monthly
expenses
• Replace cable with low cost streaming services options
• Cell phone – data plans based on your usage
• Conduct energy audit for your home and implement the recommendations to improve energy conservation
• Solar power option for your home (saves huge electricity cost)
• Install smart thermostat to reduce HVAC bills
• Car repairs – use family owned workshops instead of dealers
• Home/Auto insurance – get 2 -3 quotes from competitors every few years and bargain to reduce premium
payment
• Buy e-books or used books / rent books and magazines from local library
• Do not hold more than one credit card and payoff the balance every month and avoid interest charges
• Reduce monthly mortgage payment - Refinance your home at a lower interest rate if you are paying too
much interest
• If you do not use it, cancel club membership
• Always check for discount options or coupons from online for all the purchases
• Avoid service plans and extended warranties for electronic devices
Additional income stream options – addition
to salary
• Investing savings – interest or dividend income
• Buying rental property – rental income / Airbnb services
• Running franchise (Gas stations/ Panera/Dip & Dot etc….)
• AWS (Amazon Web services) / Microsoft Azure cloud services and devops
• Learn Smart Home Devices installation setup and provide in home consulting services to non-technical
customers
• Became a third party seller in Amazon to ship unique products or a product that has a huge demand
• Digital Marketing services (email and social media)
• Graphic design work
• Use your talent and passion (dance/music/arts) and provide training classes to kids
• Running Day care
• Part of paid focus groups
• Freelancing work – Websites : Upwork (oDesk/Elance), Toptal, Freelancer
, Craigslist, Guru, 99designs,
Retirement and college savings tools
Funds Allocation and expected average yearly
returns
****VERY IMPORTANT***
• Cash (Money Market) (0%)
• Short-term bond mutual funds (1 to 2%)
• Long term bond mutual funds (3 to 4%)
• Stock mutual funds (Large /Mid/small cap and international) (6 to 8%)
• Real estate (REIT) funds (8 to 10%)
• ETF (Exchange traded funds) (6 to 8%)

AT LEAST REVIEW FUNDS ALLOCATION ONCE PER YEAR

Funds Allocation
• Pick the funds which has lower management fees and good long term
return
• Focus on the funds 10 year and 15 year performance
• Check funds turn over – higher turn over will increase fund fees and
reduce performance
• When you are getting closer to retirement, please calculate how
much you are planning to withdraw to support your retirement for
next 5 years and allocate those amounts to conservative short term
bond funds.
Invest any additional savings after 401k/IRA
Saving accounts or Certificates

Select brokerage who offers lower

trading cost and lower cost index
funds. Invest stock /bond low cost
index funds
College selection, savings (529) and FAFSA
application process
College budget (Tuition and living expenses)
Current year 2019 college costs

• In-state 4 year degree : $100,000 (+ or – 20%)

• Out of state : $200,000 (+ or – 20%)

• Top Private or IVY : $300,000 (+ or – 20%)

Value of $100,000 investment in index funds by the time your kids reach
their retirement age $2 million
IN-STATE fees for Virginia Tech college cost for
year 2020-2021
Tuition: $11,750
Fees: $2,350
College of Engineering Fees: $2,000
Room: ($5,670) and Board ($4,220): $9,890
Books and Supplies: $1,100
Personal: $1,780
Transportation: $1,500
Loan Fees: $70
Total: $30,440
College cost inflation per year
• Historically average cost of college cost inflation in United States is
8% over the past 50 years

• Current year average cost of college inflation per year : 4%

• Average College cost inflation Projection for next 5 years : 4% per year
College cost in the next 5 years (Year 2024)
• In-state 4 year degree : $120,000 (+ or – 20%)

• Out of state : $240,000 (+ or – 20%)

• Top Private or IVY : $360,000 (+ or – 20%)

College cost in the next 10 years (Year 2029)
• In-state 4 year degree : $150,000 (+ or – 20%)

• Out of state : $300,000 (+ or – 20%)

• Top Private or IVY : $440,000 (+ or – 20%)

 College ROIC (Return on invested capital)

4 year College Value in 43 years Starting Salary

estimated (kids reach their need to make
expense - 2019 retirement age) for breakeven

In-state $100,000 $1,225,045.46 $50,000

Out-of-state $200,000 $2,450,090.93 $75,000

IVY $300,000 $3,675,136.39 $100,000

what exactly to look into while deciding on a
college? – HIGH SCHOOL STUDENTS
This is a very tough decision for students to decide which college is good for them. I
recommend to consider all these points before making their decision.
• Does the college offer the wide range of courses for the career that I had chosen?
• Feedback from past students about college teacher’s performance and college
research labs or computer labs, library and after college hours support
• Does the college have a great alumni network and provide internship and job
opportunities?
• How is the overall quality of education in each of the colleges compared to others?
• Total estimated college cost for four years for the colleges that you had received the
offers
• Is it affordable for me or to my parents based on total projected cost?
• Do I want to carry an enormous amount of student loans that I need to carry for the
next 10 years if my parents could not support me?
Kids College Financial planning options
• Scholarships --- Recommended search sites
• Cappex
• Chegg
• CollegeBoard
• CollegeGreenLight
• Fastweb
• Niche
• https://www.scholarships.com/
• State offered 529 plans
• Federal Student Financial Aid (FAFSA)
• Need-based Aid (Grants)
• Merit-based Aid
• Subsidized loans
• Un-subsidized and PLUS loans
Kids College Financial planning Additional
options
• AP credits
• Coverdell ESA – contribute $2000 per kid per year
• American Opportunity Tax Credit ( maximum annual credit of $2,500 per
year and per eligible student based on your income – check out IRS website
• Students can work part-time (less than 10 hours per week)
• Borrow from 401k using loan option
• Withdraw from Roth IRA after 5 years of holding (penalty and tax free)
[LAST OPTION – AVOID IT AT IF POSSIBLE]
• Could consider good colleges from Florida, Texas, Utah … and their costs
are very low as compared to New York, California
[NEVER TOUCH YOUR RETIREMENT SAVINGS TO FUND KIDS EDUCATION]
Convert from out-off the state to in-state
eligibility
• It varies from state to state. If you claim as an independent (request their parents to
exclude their name from dependent declaration during tax filing). Students can try the
below approach to meet in-state qualification and they should start to work on it while
they are in the first year of college.

• It is best to have at least two government-issued documents that demonstrate state

residency. At least one of these documents establishing residency must be dated at least
twelve months prior to the first day of classes. Examples include:
• Registering to vote in the state, as evidenced by a voter registration card.
• Registering with Selective Service in the state.
• Filing a Declaration of Domicile form with the county clerk at the start of residency.
• Filing state and federal income tax returns with an in-state residential address
Source: https://www.finaid.org/otheraid/stateresidency.phtml
Students – Budget management
• Students are struggling to manage their budget when they are
independent during the college tenure.
• Students needs to track all of their expenses and income in a
spreadsheet
• Food, housing, tuition, books, travel, and college experiences etc
• How much they are getting it from their parents and self-earned money
• Students have to pay very close attention to where their dollars are
going and reduce the expense if it is not critical to their education.
Parents – control expenses while your kids are
in college – PLAN AHEAD
• No new cars
• No home remodels
• No costly vacations
• No additional debt
• Adjust your lifestyle
529 college savings plans
• State based 529 pre-paid and invest 529 plans
• 529 contributions could be eligible for state income tax deductions
(Maryland: $5k per kid /year and Virginia: $4K per kid / year)
• 529 Earnings are tax free
• Open a separate 529 account per kid – you can always change the
beneficiary name
Coverdell ESA

• No State tax benefit

• Contribute $2000 max per kid per year
• Tax free withdrawal
• Coverdell ESA phases out for parents with modified adjusted gross
incomes between $190,000 and $220,000 ($95,000-$110,000 for
single filers).
• Allows self directed investments – allocate the funds to stocks/ETF
• Funds are the property of the beneficiary and cannot be revoked
• Use the funds by the time your kid turns 30
 www.2connectworld.org

College Application University of Maryland student provides

free seminar about college prep. Please
check out future event and attend this
event along with your kid. You will gain
• Grade/AP courses great knowledge

• SAT or ACT (Khan Academy/college board ---- more practice tests)

• Extra curricular ( 2 to 3 clubs / Leadership roles – SGA/Debate/STEM)
• Volunteer work
• Internships (starts around November)
• Essay
• Recommendation letters from teachers ( 5 to 6 letters)
• SAT subject tests
FAFSA Student Aid Application Process
• To complete the Free Application for Federal Student Aid (FAFSA®)
form, you will need:
• Your Social Security number
• Your Alien Registration number (if you aren’t a U.S. citizen)
• Your federal income tax returns, W-2s, and other records of money
earned. (Note: You may be able to transfer your federal tax return
information into your FAFSA form using the IRS Data Retrieval Tool.)
• Bank statements and records of investments (if applicable)
• Records of untaxed income (if applicable)
• An FSA ID so you can electronically sign the FAFSA form.
FAFSA Student Aid Application Process –
Estimated duration 1 hour
• The 2020-2021 FAFSA consists of the following sections:
Student Demographics
• School Selection
• Dependency Status
• Parent Demographics
• Parent Financials
• Student Financials
• Sign & Submit
• Confirmation
FSFSA Application Deadline
• Federal student aid for the 2020–21 award year, you can complete
a Free Application for Federal Student Aid (FAFSA®) form between Oct.
1, 2019, and 11:59 p.m. Central time (CT) on June 30, 2021.

• Check with your college or career school about its deadlines.

• Because of the variation in state and college deadlines, it’s highly

recommended that you fill out the FAFSA form as soon as you can
after Oct. 1 to ensure that you don’t miss out on available aid.
Asset Net Worth
current value of the assets minus what is owed on
those assets.
• Assets include:
• Money in cash, savings,
and checking accounts
• Businesses
• Investment farms
• Other investments, such as
real estate (other than the
home in which you live),
UGMA and UTMA accounts
for which you’re the owner,
stocks, bonds, certificates
of deposit, etc.
• Assets don’t include:
• The home in which you live
• UGMA and UTMA accounts
for which you’re the
custodian, but not the
owner
• The value of life insurance
• Retirement plans (401[k]
plans, pension funds,
annuities, non-education
IRAs, Keogh plans, etc.)
Do you need annuity?
• Variable annuity and fixed indexed annuities may not be suitable for
you based on your time horizon and return objective and you may
incur higher commission costs and higher penalties for surrendering it
back to them. Please talk to Fiduciary advisor before buying any of
these annuities
Post Retirement

• 401K/IRA savings – RMD (Required Minimum Distribution) at age 72

• Simple 4% withdrawal rule
• Social security income activation decision– before age 62 (reduced
payment) and after age 67 (full retirement age – full payment)
• Medicare (Part-A,B,F,G,D)/Medicaid coverage
• Long term care insurance
Social Security
• https://opensocialsecurity.com/
• Social Security Strategy calculator
• Early retirement will reduce your pay check from social security
• About 30% at 62
• About 25% at 63
• About 20% at 64
• About 13.3% at 65
• About 6.7% at 66
Medicare
• The single largest expense after retirement will be health insurance and health
care.
• The money withheld from our paychecks during our working life paid for Part A,
which is roughly equivalent to “Major Medical”; it pays for hospital costs but not
includes deductibles and co-pays. It does NOT pay doctors, tests, etc. that most of
us have grown used to being paid by insurance from our employer or union. That
comes under Part B, the premiums for which are withheld from your social
security payments.
• To be covered for most expenses working people have grown used to, you must
also buy Part F or Part G (commonly called “Medigap”) for which you write a
check directly to an insurance company. It covers most deductibles and co-pays.
But none of these covers prescription drugs, for which you buy Part D, which you
sometimes have withheld from your SS or sometimes write a check directly to an
insurance company. None of these cover vision care, dental care, and other
things.
Long term care
• Health Insurance and Medicare does not cover the cost of long term
care
• Medicaid covers it when your assets are below $2,500
• Aging in place communities
• National costs in 25 years
• $71 /hour for a home health aid ($129,000 per year)
• $217/day for care in an adult day care center ($79,205 per year)
• 11,627/month for care in an assisted living facility ($139,424 per year)
• $835/day for a private room in a nursing home ($304,775 per year)
Home Mortgage Loan
/Refinance
Mortgage Rates
• Always go for fixed rate when current interest rate is low
• 30 Year fixed – 3.3 to 3.4%
• 15 Year fixed – 2.8 to 3.1%
• Jumpo loans – Get good deals from SECU credit unions
• Requests quotes from credit unions, banks, mortgage brokers and
compare interest rates, closing costs
• Understand total interest rate cost over 30 years – For $400,000 loan
– you may end up paying $400,000 more towards interest rate
Life Insurance

It should cover At least 5 times of your annual salary

Life Insurance
• Term:
• Premium will be lower as compared to whole life
• You could consider group life insurance from your employer if private market term
insurance premium is high
• At least buy 25 to 30 year term life to cover until your retirement age
• Request quotes from Term4sale.com / Zander.com/ Selectquote.com and compare it
• Whole-life
• Understand total cost including commission/surrender/rider options
• Premium will be very high as compared to term life and make sure that you can
afford to pay the premium for decades
• Cash value
• Loan option available
• Tax advantage
Great book: Beyond the Grave: The right way
and the wrong way of leaving money to your
children by Jeffery L Cordon
Estate planning -Trusts

Source: https://napkinfinance.com/napkin/revocable-vs-
irrevocable-trusts/
Estate planning
 Be Healthy
Reduce your work life stress