Tag Young Professionals - Merrill Lynch Presentation

It’s Your Future:

Strategies for a Healthy Financial Life

Christina Perley, Financial AdvisorAndrew Senfield, Financial AdvisorBenjamin Josephson, Wealth Management Banker

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Are Not Deposits Are Not Insured by Any Federal Government AgencyAre Not a Condition to Any Banking Service or

Activity

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© 2011 Bank of America Corporation. All rights reserved.

The information in this presentation is intended to be a general introduction of Merrill Lynch’s approach to wealth management. It is not intended to be either a specific offer by any Merrill Lynch entity to sell or provide, or a specific invitation to apply for, any particular product or service.

Merrill Lynch offers a broad range of brokerage, investment advisory (including financial planning) and other services. There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. It is important to understand the differences, particularly when determining which service or services to select.

Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Neither Merrill Lynch nor its Financial Advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors.

While Financial Advisors may discuss healthcare costs as part of a client’s retirement plan and provide general information on social security options, Financial Advisors do not provide specific advice on healthcare coverage or social security. If you have questions regarding your particular situation, please contact your legal or tax advisor.

Asset allocation, diversification and rebalancing do not assure a profit or protect against a loss in declining market.

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

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Today’s Discussion

I. Current Market and Economic Update

Christina Perley, Financial Advisor

II. Financial Planning- Basics for Young Investors

Andrew Senfield, Financial Advisor

III. Buy vs. Rent?

Interest Rate Environment

Benjamin Josephson, Wealth Management Banker

IV. Wrap Up, Q&A

3rd Quarter Market Review

Brutal 3rd Quarter for Risk Assets ~ Global equities and high yield bonds suffered their greatest losses since the

fourth quarter of 2008

Fears of a global recession

EU debt default

Policy impotence

~ Commodity prices collapsed

~ 10-year Treasury yield fell to a record low

~ Equity volatility at its highest since March ’09

~ Investors pricing in a hard landing in China

Intensifying the risk-off sentiment

October was a treat, but ends with a trick3rd best October for S&P since 1928

October was a treat, but ends with a trickWith a return of 10.8% for the S&P 500, October was a treat for investors. It was the third best October and the 23rd highest monthly return for the S&P since 1928. But, renewed concerns over the lack of a solid plan to resolve the European sovereign debt crisis have turned the equity markets to a trick from a treat. The drop of 5.2% from the 28 October high in the S&P 500 has generated two 90% down days on a pick-up in volume. This bear market behavior has tricked the bullish seasonal pattern, but the risk is that Europe’s sovereign debt issues trump bullish year-end seasonals.Key levels to watch – 1200 area support The bad news is that the S&P 500 is back below the 200-day moving average near 1274. While below this moving average, the bullish seasonal bias into year-end is called into question. The good news is that the S&P is testing support at 1230-1200, which is the breakout area of the recently completed double bottom off the 1100-1074 lows. Holding this support would keep the breakout intact with an upside pattern projection of 1350-1360 to as high as 1385. But, with the exception of projected Fibonacci support at 1184-1158, there is not much support ahead of 1100-1074 on a decisive break below 1200.

What to expect moving forward

Our Research Investment Committee’s base case:

~ Over the medium term:

Low growth, Low interest rates, and High liquidity

(portfolios tilted toward assets that generate high growth, high yields and high quality)

~ In the short term, tail risks exist (low probability):

Disorderly Greek debt default

A hard landing in China

Slump in global earnings growth

~ If the global economy avoids a recession:

Policy stimulus gains traction

Yields attract buyers

Possible reversal of fortune for risk assets in 4Q11

7

20-Yr annualized returns by asset class (1990-2009)

(1) Barclays Capital US Aggregate Bond Index.(2) Calculated using Dalbar Funds Flow information.Source: JPMorgan

(1)

(2)

Budgeting

Investing

Retirement Savings

During today’s seminar we will help you explore:

It’s Your FutureWhat We’ll Discuss Today

1) Build a solid spending and savings foundation

2) Develop a relationship with a financial provider

3) Include your spouse or life partner in managing your finances

4) Balance your priorities and make tradeoffs

5) Invest for growth potential while managing risk

6) Safeguard your health and well-being

7) Protect your earnings potential

8) Focus on family and intergenerational topics

9) Expand your life experiences

10) Give Back

Take the long view and invest in yourself

Create the Future You Want

Sources:1 http://projectonstudentdebt.org/files/pub/classof2009.pdf2 https://www1.salliemae.com/about/news_info/newsreleases/041309.htm

The average senior who graduated in 2009 had:

$24k in student loans1

$4.1k in credit card debt2

- 1 in 5 had over $7k in credit card debt

Prioritize what’s important to you

Recognize financial realities- Live within your means

Save as much as you can- Pay yourself first

Manage liabilities as well as assets

The SolutionYoung and in Debt

The ChallengesNewly Graduated/Newly in Debt

$.31

$.49

$.04

$.57

19601 2010

$2.73

$3.67

$.44

$1.37

20502

$7.33

$9.85

$1.18

$3.68

1 http://www.1960sflashback.com/1960/Economy.asp2 Assumed 2.5% Inflation Rate from 2010 through 2050

InflationA Necessary Planning Factor

BudgetingBudgeting

Hypothetical example for illustrative purposes only. Assumed minimum payment is calculated by using 2.5% of the balance

BudgetingDevelop a Budget and Stick to It

Create a budget to help plan for the long term

Become more aware of day-to-day cash flow and expenses

Pay down debt, especially high-interest debt

Consider health care and insurance options

Set up an emergency fund

High Interest Debt can be crippling

Paying the minimum balance on a $1,000 balance credit card with an 18% APR will take 153 months to pay off and you would have paid $1,115.41 in interest!

http://www.smartmoney.com/personal-finance/real-estate/to-rent-or-to-buy-9687/

Flexibility (can relocate easily) Can invest money elsewhere

(stock market) No upkeep fees

(drippy faucets, broken dishwashers, etc.)

No Equity Annual rent increase

could outpace inflation

BudgetingBuy or Rent?

Renting

Pros Cons

Tax-break: deduct mortgage interest and property taxes

Potential tax-free capital gain Emotional satisfaction

Property tax and upkeep Mortgage costs Less flexibility should you

want to move; in very bad housing markets, you could lose principal

Buying

The interest rate of this loan is locked in

at origination and remains the same throughout the

term of the loan

These loans have an interest rate that is tied

to an index, changing with prevailing market rates

Adjustable Rate Mortgage

Fixed Rate Mortgage

BudgetingFinancing a Home

The FHA loan is a fixed rate mortgage that is

designed especially for the first time home buyer of moderate or low income.

A VA loan, is designed for men and women with a history of active military service or he/she is the surviving spouse of an active service member.

Government Guaranteed Loans

InvestingInvesting

Taking Control

Investors can take greater control of their financial situation.

Learn about investing Identify your financial goals Work with a Financial Advisor Monitor your portfolio

A Strategy Defined By Your Goals

Your overall investment strategy depends on:

Your goals, timetable and tolerance for risk A balance of stocks, bonds and cash Monitoring and rebalancing your portfolio

The more time you have, the more aggressive you can be!

??

? STOCKS

BONDS

CASH

20%

55%

25%40%

50%

10%

60%35%

5%

70%

25%

5%

80%

15%

5%

ConservativeModerately

Conservative ModerateModeratelyAggressive Aggressive

StocksBonds Cash

Source: Bank of America Merrill Lynch Research Investment Committee (RIC) Report, March, 2011. Models are for illustrative purposes only. Merrill Lynch has changed the allocations for each model in the past and may change the allocations in the future, depending upon research and investment strategy recommendations.

Determining An Appropriate Asset Allocation

Merrill Lynch Asset Allocation Models

16.5 to 1 3.3 to 1 2.3 to 1

"The 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds," May 12, 2009.

2010 20251950

Not-so-good News: Social Security Is Threatened by an Aging Population

Ratio of Workers to Beneficiaries

Number of Defined Contribution PlansNumber of Defined Benefit Plans

Private Pension Plans, Participation, and Assets: Update(Data from tabulations of the U.S. Department of Labor's Form 5500)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

1974 1986 19980

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1974 1986 1998

Not Your Parent’s Retirement Plan

There Is Hope “The Rule of 72”

"Compound interest is the eighth wonder of the world. He who understands it, earns it ...

he who doesn't ... pays it." - Attributed to Albert Einstein

The “Rule of 72” is a simple way to determine how long an investment could take to double, given a fixed annual rate of interest.

You divide 72 by the annual rate of return, to get an estimate of how many years it could take for the initial investment to double.

Hypothetical example for illustrative purposes only. Results are not meant to represent the past or future performance of any specific investment vehicle. Actual rates of return cannot be predicted and will fluctuate. Your results may be more or less.

Example $100 invested at 10% would take approximately 7.2 years to turn into $200.

Start Saving As Soon As You Can

The sooner you start, the more money you could potentially have in retirement

This hypothetical illustration assumes an annual $5000 IRA contribution made at the beginning of each year for 35 years, a 7% annual rate of return, and no taxes on any earnings within the IRA. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost.

(35 Years later)At Retirement

$5,000

$739,567

Save for Retirement Every Year

Even one year can potentially make a difference in your nest egg

This hypothetical illustration assumes annual $5000 IRA contribution made at the beginning of each year and beginning one year apart for various ages, a 7% annual rate of return, and no taxes on any earnings within the IRA until the age of 71. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost.

Roth IRATraditional IRA

Choose the IRA That’s Right for You

Contributions may be tax-deductible

Withdrawals taxed as ordinary income

Contributions are not tax-deductible

Withdrawals are taken tax-free

Must be under 70½ to open and contribute

Anyone with earned income can contribute

No age limit

Contribution eligibility is based on income

Required Minimum Distributions

Distributions prior to age 59½ may incur a 10% additional federal tax

No Required Minimum Distributions

10% additional federal tax on early withdrawals applies to earnings only

Meet Your Company Match In 401(k) Plans

Many companies offer to match a percentage of employees’ 401(k) contributions

Investors should consider contributing at least as much as the company is willing to match

Don’t leave “free money” on the table by failing to contribute to your company’s 401(k)

¹ http://www.bls.gov/news.release/pdf/nlsoy.pdf, September 2010

The average person born in the latter years of the baby boom held

11 jobs from age 18 to age 441

Reasons to Invest EarlyImpacts on Your Paycheck

A pre-tax contribution to your retirement account reduces your take home pay less than the amount of your contribution.

Example

Mary is 35 and her annual salary is $50,000. She wants to contribute 5% of her salary to her 401(k) to take advantage of her company’s matching contributions and retire in 30 years.

Results- Mary’s monthly take-home pay would be reduced by: $156     - Her annual income tax bill would decrease by: $625     - With an employer match, at age 65 her account would

grow to: $395,291

This hypothetical illustration assumes a 5% contribution rate at the beginning of each year, a 6% annual rate of return, and a 25% federal tax bracket (state and local taxes are not included). It also assumes a company match of 100% for every dollar contributed up to 5% of eligible compensation. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. Taxes are due upon withdrawal. If you take a withdrawal prior to age 59½, you may also be subject to a 10% additional federal tax.

Best Practices to Help You Plan for your Future

Save Every Year

Pay Down Debt

Monitor and Adjust Your Portfolio

Start Saving As Soon As You Can

Meet Your Company’s 401(k) Match

Create A Budget

Questions?Questions?