Hello and welcome. This presentation is "Preparing for Your Future". My name is Jim Brambilla, and I'm a Senior Employee Education Consultant with PNC. This presentation aims to educate employees about retirement planning, contribution strategies, and tools to maximize savings.

The presentation is structured into five sections to cover essential retirement planning components. Section 1 is contributions, understanding types, limits, and saving strategies. Section 2 is compounding, growth potential of reinvesting earnings.

Section 3 is asset allocation, building a diversified investment portfolio based on risk tolerance and time horizon. Section 4 is Target Date Funds, a hands off investment approach tailored to a target retirement date. And lastly is section 5,

yearly account review, the importance of periodic assessments to stay on track. The IRS sets annual limits on how much you can contribute to a qualified retirement account or other retirement plans. For 2025,

the limit for employees under 50 is now $23,500 and for those 50 and older, there is a catch up contribution of an additional $7,500 for a total of $31,000. As you can see on the slide, there are changes for 2025,

suggesting additional savings opportunities based on your age. It's crucial to adjust contributions annually to match the updated limits. Please check with your plan administrator for updates and see if this is applicable to your retirement plan.

Maxing out contributions helps you build a larger retirement nest egg, especially with the power of compounding, which you'll see in Section 2. Taking full advantage of the limits ensures you're not leaving money on the table in terms of tax benefits and employer matching contributions.

Please note, employer contributions do not count towards the IRS limit. So if your employer does offer a match, contribute at least enough to take full advantage of it. This is essentially free money towards your retirement. Participants can make contributions to a

traditional 401(k) on a pre-tax basis which will reduce their current taxable income. If the plan has a Roth option, contributions are made on an after tax basis, so they do not reduce your current taxable income. The contribution limit set by the IRS each year apply to both the traditional and Roth accounts.

A participant could contribute the entire limit to a before tax account or to an after tax, Roth, account or to both. The IRS limit for employee contributions, however, apply to the total of your contributions in all accounts combined.

Catch up contributions are the same for both traditional and Roth plans and any employer or company contributions are eligible for both options. However, the earnings maybe taxable in a Roth depending on how the individual plan is set up through the employer. This slide shows how small, consistent,

weekly contributions to a retirement plan can have a significant impact on long term savings. By breaking down contributions into consistent amounts, you can see how even small amounts add up over time. Please note how you choose to contribute to the plan, whether it's pre-tax or Roth,

will determine the actual reduction in your take home pay. If possible, aim for 10% to 15% of your income annually to meet retirement goals. While you might not get a raise every year, you want to make sure your retirement account is capturing some of the benefits

of your increased earnings over the course of your career. Employer contributions do count towards the 15% goal and can reduce the burden on your savings. Now let's talk about compounding, specifically the benefit of compound interest.

Reinvesting earnings such as interests, dividends or capital gains back into the investment over time will build earnings on earnings, money on top of money, accelerating growth. Hypothetical scenarios show how consistent contributions and reinvestments can result in significant growth by retirement age.

Starting early and contributing consistently is critical to maximizing the power of compounding interest. You might remember the fable of the tortoise versus the hare, but in this case, being faster out of the gate can win this hypothetical race.

In this example, starting to save $1,000 a year at age 25 can result in significantly more savings by age 65 than starting the same at age 35. This is due to compounding over just an additional ten years. So you see here, regular early contributions combined with

reinvested earnings creates exponential growth.

At age 65, the hare has over twice the amount in their retirement account versus the tortoise at age 65, even with the same hypothetical 8% return on their investments. It's never too early to start saving for retirement. So what is asset allocation?

Asset allocation is the process of spreading investments across asset classes that balance risk and reward. Time horizon and risk tolerance really do go hand in hand. Your time horizon is generally the date that you want to retire or intend to access your retirement account.

Longer horizons allow for riskier growth oriented investments like stocks while shorter horizons focus on preserving capital with lower risk options like bonds and cash. Your risk tolerance should be in line with the amount of time you have left before you need to draw on those assets.

The general theory is the further away you are from retirement, the more risk you should assume. A high risk tolerance would then mean aggressive investments hopefully leading to a higher potential return. A lower tolerance level for risk requires conservative investments prioritizing preservation.

These two factors are the driving force for your ideal asset allocation. Retirement accounts traditionally offer investors the opportunity to invest in three different asset classes: stocks,

bonds, and cash. Each of the three have their own levels of risk and reward, and it's important for you to know which asset classes maybe most appropriate for you. Many investors will have a combination of all three, but that doesn't mean that it's right for you and your strategy. So let's take a closer look at the three primary asset classes available to retirement investors.

The bottom of the pyramid, we have the stock asset class. Stocks offer most possible risks with the most possible reward. Stock mutual funds invest in individual companies like Home Depot, Microsoft, Exxon Mobil, just as examples.

Stock mutual funds are made up of hundreds or thousands of individual investments that fit within the mutual fund's objective. Moving up the pyramid, we have bond funds. Bond funds offer a little less risk, a little less reward than stocks.

Bonds represent income and they represent money lent to corporations or government entities. And lastly, we have cash. Cash offers the least risk and least reward of the three primary asset classes. You can expect rates of return within this asset class

to be slightly better than what you might find through your bank or credit union savings account. On this slide, you'll see asset allocation models that look at return on the vertical axis and risk on the horizontal axis. Looking at the top right of the slide, you'll see an aggressive portfolio of 100% stock. This allocation would be suitable for a very young investor with a long time horizon ahead of them. The preservation allocation at the bottom left shows a very conservative allocation of 55% cash, 30% bonds, and 15% stocks.

This allocation would be appropriate for an investor who's already in retirement and doesn't want to expose their portfolio to much risk. Looking back over the last 20 years, if an investor stayed invested in the S&P 500 benchmark index,

they would have had an average return of 8.6% and their $10,000 initial investment would have grown to over $51,000. But if that same investor missed the best 20 days the S&P had over that 20 year period, they'd only be up 1.6%.

Their $10,000 investment would have only grown by $4,000 and some change. If they would have missed the more best days of the market, they would have had negative returns, and that defeats the whole purpose of a long term investment, like retirement savings. Just remember, it's time in the market

versus time in the market that historically has fared better in the long term. There's never been an asset class that's always a consistent winner. Each color that you see on this slide represents a unique asset class and its yearly performance since 2008.

So what do you see? That all assets have good years and all asset classes have had bad years. It would be great to pick a handful of asset classes so that things are going really well in the market, then you're covering and capturing the performance upside. But when things aren't going well,

you'll have your money in multiple asset classes that can mitigate or offset those losses of the underperforming asset classes. The slide highlights the concept of diversification and after seeing a visual representation of the importance of it, hopefully you can manage your portfolio with this concept in mind.

Target Date Funds are mutual funds designed to simplify and retirement investing by automatically adjusting their asset allocation as you approach retirement. But before we get into the specifics of Target Date Retirement Funds, I think it's important to define what makes an investor an active investor

or a passive investor. In most retirement plans, the funds provided will allow you to be active or passive. Active are those participants who are comfortable looking at their investment options, building a portfolio of maybe three to six funds based on their research and due diligence.

They're essentially the quarterback of their portfolio. All investment changes and decisions fall on their shoulders. Now, not every participant is comfortable with picking and making the needed changes to their investment selections throughout their working careers. If you're someone who feels they'd be better off with a guided approach

that takes care of their asset allocation and diversification decisions for them, you're what we call a passive investor. Active isn't better than passive and passive is not better than active. The key here is to pursue your strategy that you're most comfortable with

and that you feel will give you the best shot of hitting your retirement goals. For those participants that fall into the passive investor category, you might want to start your investment selection search by looking at the Target Date Funds that may be offered in your plan.

Target Date Funds are very easy to identify as they will have a year at the end of the fund name. Those years are the end of the fund names represent around the year you as the participant think you're going to retire. The fund managers who manage those Target Date Retirement Funds will then set up the funds'

asset allocations to have the appropriate amount of stocks, bonds, and cash based on the estimated retirement year. These funds are designed to have a very high stock allocation if you're very far away from retirement. For example: a Target Date Fund that might have

a 2050 or 2060 at the end of its name, but the magic behind these funds is that the allocations will automatically adjust to become more conservative, less stock, more bonds and cash as you approach your target retirement year. The farther you are away from retirement, the most risk will be built into these, but automatically and over the long term, these funds will scale back risk and provide allocation that's appropriate for participants that are investing around the date shown on the fund. So how do Target Date Funds work?

Target Date Funds take care of the three most important investment decisions, which are asset allocation, diversification, and rebalancing, and that's done automatically. Now it's important to note that these funds, even though they're professionally managed, do not guarantee positive investment returns or that you'll have enough money to retire on when you hit your

retirement date. They simply provide a roadmap to follow that takes care of the asset allocation, diversification, and rebalancing decisions so that you don't have to. And finally for your yearly account review.

What to review annually? It's important to review your retirement account annually to ensure alignment with financial goals in changing circumstances. This helps you stay on track and ensures that your contributions and investment strategy and savings are progressing towards your retirement goals.

Reassess your asset allocation to reflect market performance and economic conditions. Ask yourself if you're contributing enough to meet your retirement goals. If your financial situation has improved throughout your career, consider increasing contributions to match those IRS limits. Also,

You can compare your portfolio's performance against benchmarks or target returns. Take a look at identifying underperforming assets and decide whether to adjust allocations. If you have an employer matching your qualified retirement plan,

ensure you're contributing enough to capture the full employer match. By doing so, you get peace of mind knowing that you're on track for retirement, you get the benefit of maximizing growth potential because you can ensure that your investments are optimized for your time horizon

and your tolerance level for risk. And this way you avoid surprises. You can address issues proactively rather than reacting to problems later. Major life events, things like marriage, children, career shifts, or unexpected expenses,

might require adjustments to the contributions, investments, and even beneficiary designations. Set a calendar and reminder for yourself each year to review your retirement account preferably after receiving your latest statement. Remember, retirement is the longest vacation of your life.

So there's a need for careful preparation and disciplined saving. Remember, the journey to retirement begins with the steps you take today, so let's make it each step count.

Thank you.