CEDAR POINT FEDERAL CREDIT UNION
Serving Southern Maryland since 1945

Your Financial Goals

CPFCU/CPFS specializes in services to help you plan for your financial goals. We offer financial services that can help you grow and protect your assets, helping you to create security for you, your heirs and your business.

Protection
To protect against the loss of your life or the loss of your ability to earn a living if you become disabled, you need life insurance, disability insurance and long-term care insurance.

Protection
You've worked hard to get where you are. But have you protected the people who depend on you from any unforeseen circumstances? Even substantial assets can be wiped out quickly.

• A medical emergency can result in an early death, leaving your family without adequate income.
• A long-term illness can quickly drain a lifetime of savings.
• An injury or accident makes returning to work impossible.

No one likes to think about dying too soon or suffering a long-term illness or disability. But if you haven't planned for these possibilities, those that depend on you could find themselves in a desperate financial situation.

• If you died leaving expensive, unpaid medical bills, where would the money come from to pay them? Would your family have to sell off assets?
• If your income suddenly stopped, how long could your family go on meeting its monthly obligations? What would happen after that?

Proper planning today will help protect you, your family and the things that are important to you.

• Life Insurance--provides an income-tax-free, lump sum payment that can be used to settle debts, or be invested to provide a monthly income stream for your family should you die.

Wealth Accumulation
Accumulating wealth for financial security is a goal that requires planning and discipline. Here's how to get started.

Wealth Accumulation
Financial security means different things to different people. What does it mean to you?

• Enough money to pursue your dreams?
• Paying for your children's college education?
• Paying for a wedding, family trips or a vacation home?
• Early retirement? Or even a retirement with the same lifestyle or better than you currently have?
• Being able to leave a legacy to your heirs or favorite charity?

Whatever financial security means to you, it begins with a plan for accumulating wealth. The longer you wait, the harder it will be to find the money you'll need to set aside to meet your goals for wealth accumulation.

Wealth Accumulation Strategies
Start with the two fundamental principles for a successful wealth accumulation program:

Save at least 10% of your earnings, consistently and throughout your earning years.

• Examine your spending. Write down every dollar you spend for one month. Where can you cut back?
• Reduce your debt. You can save hundreds -- even thousands -- of dollars in interest every year by consolidating debt and paying off high-interest debt as soon as you can.
• Pay yourself first. Save or invest at least 10% of your earnings each month.
• Take advantage of tax-deferred savings through IRAs, annuities, life insurance and tax-qualified retirement plans.

Develop a sound investment strategy and stick to it over the long term.

• Determine your long-term investment goals. Where do you want to be 10, 20, or even 30 years from now?
• Determine your time horizon. How much time does your money have to grow before you will need it? Don't forget to factor in the impact of inflation.
• Assess your risk tolerance. Are you willing to ride out fluctuations in the value of your investments in order to achieve higher long-term returns? Or do you need to see regular and steady growth, with perhaps less fluctuation in return?
• Diversify your money among different kinds of investments, a process known as asset allocation.
• Invest regularly through a process known as dollar-cost averaging. The idea is to invest a constant dollar amount at regular intervals. By doing so, you even out the cost of your investments over time.

Please note: This plan does not assure a profit and does not protect against loss in a declining market. Such a plan involves continuous investment in securities regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue their purchases through periods of all price levels.

Cost of College
Will you be able to help your children through college without jeopardizing your current lifestyle or postponing your retirement plans?

While college may not be for everyone, government statistics show that college graduates hold a striking financial advantage over their peers without a college degree. On average, according to U.S. Census Bureau statistics, people with a bachelor's degree earn over 56% more than those with only a high school diploma. In dollar terms, that earnings difference amounts to about $22,500 more per year for a college graduate.

But while undoubtedly worthwhile, giving your children the advantage of a college education will be very costly. And if you add inflation to the equation, the amount you and your family will have to pay over time is staggering

Source: U.S. Department of Labor and U.S. Census Bureau "Usual Weekly Earnings Summary," April, 2004.

Assume a 6% interest rate. The above is provided for illustrative purposes only and is not meant to represent any particular investment vehicle or be a representation of past or future performance. Actual results may vary.

The Early’s started saving for college when their daughter was an infant, while the Late’s waited until their son was 8 years old. The difference? The Early’s put away $50 a week. To reach the same funding goal 10 years later, the Late’s had to save about $180 a week.

Related Products
Depending on your required return levels and tolerance for risk, consider allocating your assets among these different financial tools:

Tax-Deferred Savings

• Fixed and variable deferred annuities and immediate annuities 
• Cash value, permanent life insurance including: variable universal life, universal life, and whole life 
• IRAs and Education IRAs
• Tax-qualified retirement plans, such as 401(k) plans

Mutual Funds

Mutual funds are pooled funds that invest in stocks and bonds with a full spectrum of investment objectives, from conservative to aggressive

Individual Equities (Stocks)

The stocks of corporations, including small-, mid- and large-capitalization.

Individual Bonds

The fixed-income instruments issued by corporations and government entities.

Retirement Planning
You can no longer rely just on Social Security and your employer-sponsored plan for your retirement income. You will need to plan for your retirement to ensure that you have enough set aside to be comfortable in your retirement years.

Picture your retirement as you would like it to be:

• What are you doing?
• Where are you living?
• Are you traveling?
• In what other good ways are you spending your time?
• How old are you?
• Will your children be on their own? Will they need you for financial assistance?

Visualizing your retirement may be the most important first step to achieving your retirement dreams. But, your ideal retirement will not just happen. You have to plan for it. People who drift toward retirement without a plan often find -- when they reach retirement age -- that they can't afford to retire. Will you? CPFCU and CPFS can help you develop a plan.

Estate Planning
Without proper estate planning, much of your estate may be subject to hefty estate and inheritance taxes. Why take the chance that the government will get those assets instead of your heirs?

Your heirs deserve as much of your estate as possible.

Many people think that estate planning is only for the very wealthy; but that isn't true. When you die, the government calculates the value of everything you own, including:

• Your home and other real estate you own.
• The face amount of any personal or group life insurance policies in your name.
• Savings, investments, retirement plan assets or Social Security benefits.
• The value of any personal property such as cash, furniture, jewelry and automobiles.
• Your share of a business.

Once the value of all of your assets combined exceeds the amount exempt from federal estate taxes -- $1,500,000 through 2005 -- you have an estate tax problem. What part of you estate would you want your family to liquidate in order to pay your estate taxes?

With a proper estate plan, you can:

• Ensure financial security for you and your family during your lifetime and after your death.
• Pass on your estate - wholly intact -- to your heirs and according to your wishes.
• Reduce or eliminate taxes, administrative expenses and delays in the transfer of your estate.
• Have the liquidity to cover your taxes, debts and expenses.

But without a good estate plan:

• State law will determine who inherits your assets.
• The court appoints administrators for your estate.
• You may pay unnecessary taxes and expenses.
• The court appoints a guardian for your children.
• Your family could be forced to sell your assets to pay your estate taxes.

CPFCU/CPFS can help you to learn more about:

• Who needs estate planning?
• The estate tax bite
• Estate planning process
• Transferring your estate

Business Planning
For business owners, planning means more than business as usual. You need to ensure that your business continues without you at the controls. To promote employee loyalty, reward your key employees with Selective Employee Benefits. 75% of business failures follow the unexpected death of the founder. Source: Prince and Associates. Analysis of 749 family businesses that failed within 3 years of transfer to next generation.

Ensure your business continues without you

What would happen to your business if you weren't there to run it due to your death, disability or retirement.? The business you've worked so hard to build could be threatened. But with proper business continuation planning, you can ensure that your business will go through an orderly succession when you are gone.
What is business continuation planning?
Simply put, business continuation planning is developing and implementing a plan of succession. Through what is usually called a Buy-Sell Agreement, Proper business continuation planning will determine who will take over your business if you die prematurely, become disabled or retire.

Ensuring the continuation of your business with a properly drafted Buy-Sell Agreement will provide more than just a mechanism for transferring the business. It may save you thousands of dollars -- and hours -- by eliminating the costs, delays and frustration of IRS contests and litigation. When properly drafted, a Buy-Sell Agreement will establish the value of a business for the purposes of federal estate and gift taxes.

What is your business worth?
A key consideration in planning for the success of your business is understanding its value

Buy-Sell Agreement Options
There are basically four types of Buy-Sell Agreements:

Entity Buy-Sell Agreement
The business entity agrees to purchase the interests of the individual owners.

Cross-Purchase Buy-Sell Agreement
All of the owners of the business agree to purchase the share of any owners.

"Wait and See" Buy-Sell Agreement
The owners and the business agree that either the owners or the business will have the first option to buy the interests of the owners who leave, depending on which is most advantageous.

Disability Buy-Sell Agreement
This guarantees the sale and purchase of a business interest in the event of an owner's total disability. It can be set up as either an Entity or Cross-Purchase plan.

Depending upon the legal entity of your business, a Buy-Sell Agreement can be established between:

• You and your partners.
• Your business and its shareholders.
• You and other family members.
• You and a key employee or employees.

The Buy-Sell Agreement should address these issues before they arise:

• An instant market for the business interest is created.
• The price and terms of payment are specified in advance.
• Money is provided to fund the purchase of the business interest.
• The business is allowed to continue without interruption.
• The value of the business interest is established for estate planning purposes.
• Estate liquidity to help pay estate taxes, debts and probate expenses.

What is Your Business Worth?

A key consideration in planning for the success of your business is understanding its value. Have you completed a valuation of your business, being sure to factor in the effects of inflation? There are several methods of valuing your business. Which one will you use?

Your financial representative can work with you to help determine the value of your business.

Selective Employee Benefits
Make sure your business remains successful. Reward your key employees with Selective Employee Benefits.

Recruiting, retaining and rewarding your key employees can be one of the toughest jobs you'll ever face as a business owner, especially in today's highly competitive marketplace. One of the best things you can do for those employees, and for yourself, is to offer selective employee benefit plans.

Traditional qualified plans place limits on earnings, contributions and benefits, resulting in an "income gap" for highly compensated employees. Plus, there's no cost recovery for your company's out-of-pocket costs for the plans. And there are no "golden handcuffs" in them to help you retain key employees.

Selective Employee Benefit Plan options
There are a variety of plan options that, depending upon how your company is structured and your retirement income objectives, allow you to provide enhanced, tax-favored benefits to yourself and select key employees.  CPFCU/CPFS can help you learn more about:

• 401(k) Overlay Plans
• Supplemental Employee Retirement Plans (SERPs)
• Deferred Compensation Plans
• Restricted Bonus Plans or Executive Bonus Plans
• Split Dollar Plans
• Qualified Retirement Plans

To help you develop a Selective Employee Benefits Plan based on your objectives and situation, make your financial representative a valuable member of your business planning team. A CPFCU/CPFS – HTK/Penn Mutual representative has the knowledge, experience and financial tools to help you make the best choices for your situation and goals.

This page was updated:
August 15, 2007 11:03