BUILDA
BETTER
RETIREMENT
YOUR PLAN’S TRUSTEES ARE
PROUD TO PROVIDE YOU WITH
THE BEST RETIREMENT PLAN
POSSIBLE, AND HOPE THAT
Whatever retirement you envision —
YOU TAKE FULL ADVANTAGE
fishing with your grandchildren, barbecuing
OF ALL IT HAS TO OFFER.
in the backyard, or traveling across the country — one thing is certain:
it will take plenty of money to get there. Where will it come from? You can
expect to receive some money from Social Security, and you’ll also receive
a union pension. Together, those sources will make a great foundation.
But just as important is the money you’ll receive from your self-directed
defined contribution retirement plan — money that’s invested the way you
decide. And how soon you make that decision can have a big impact on
whether you can live the life you imagine further down the road. So use
this guide to learn more about the basics of investing and what you can
do to prepare today for a better retirement tomorrow.
1
GET
INVOLVED
Getting involved in your plan is essential to meeting
your retirement goals. The decisions you make today
can have a real impact on your savings down the road.
Your contributions are automatic
Your employers automatically make contributions on your behalf
to a plan account in your name. It’s important for you to take ownership
of your account.
Your savings compound tax deferred
As your account balance accumulates, your money can earn an investment return on both the amount contributed and the earnings itself —
an effect known as compounding. Compounding is enhanced in the
plan because taxes do not eat away at your account balance until you
withdraw the money. The more time you allow compounding to work,
the more dramatic its affect can potentially be.
You decide how to invest your account
Unlike your union pension, where investment decisions are made
by the Trustees, this plan gives you the power to make your own
investment decisions. How you choose to invest your plan account
among the plan’s options will directly affect the value of your savings
at retirement. Without your active participation, your account will
remain invested in the plan’s default fund, which may not be the best
option for pursuing your personal retirement goals.
2
By not taking charge of how your
account is invested, you may miss out
on some significant earnings.
$1,047,302
Account value*
at retirement
Investor A
invests
in a portfolio that earns 8%
Investor B
invests
in a portfolio that earns 3%
Both investors receive
$300 a month in contributions
for 40 years, for a total
contribution of $144,000.
$277,218
Account value*
at retirement
Today
10 years
20 years
30 years
40 years
* This illustration is intended solely to demonstrate the comparative effect of compounding at various rates of return. It assumes
the investor makes contributions at the end of each month and that the investments earn a hypothetical 8% nominal rate of return
compounded monthly (the effective return is 8.30%) and a 3% nominal rate of return (the effective return is 3.04%), respectively.
It does not reflect the return of any investment in your plan, which will fluctuate. Regular investing does not ensure a profit or
protect against loss in declining markets. Examples do not reflect taxes due upon withdrawal. Withdrawals are subject to income
tax, and those made before age 591⁄2 may be subject to an additional 10% tax.
3
LEARN
THEBASICS
Your plan lets you choose from a variety of funds,
which invest in both stocks and bonds.
Stocks offer the potential to build wealth
Stocks represent part ownership of a company, including its earnings
and assets. As a company grows and earns greater profits, its stock
can increase in value, sometimes dramatically over the long term.
Historically, stocks have been the best way to grow the value of an
investment over the long term and to help protect savings from the
effects of inflation. However, they have also been more likely to lose
money in any given year.
Bonds offer the potential for greater stability
Bonds represent loans to companies or governments that are
repaid to investors over time with interest. Although a bond’s price
can fluctuate with changes in the financial markets, particularly in
response to changes in interest rates, bond prices historically have
fluctuated less than stocks. The lower volatility means that bonds are
less likely to grow fast enough to meet your long-term savings goals.
Funds offer a convenient way to invest
in stocks and bonds
A fund pools your money with that of other investors to buy a
variety of stocks, bonds, or both, in a single, professionally managed
portfolio. Since there are different types of stocks and bonds, funds
are managed in different styles, including growth, blend, value, income,
and capital preservation.
4
Keep in mind that stocks have provided higher average
returns than bonds over time, but with more dramatic ups
and downs along the way.
Average annualized returns, along with best and worst calendar year returns (12/31/83–12/31/03)
STOCKS
BONDS
42.16%
Best
return
37.58%
37.00%
22.11%
Average
return
12.63%
12.98%
12.90%
9.37%
11.12%
5.74%
1.15%
0%
-2.92%
Worst
return
-23.59%
-22.10%
-20.85%
GROWTH
BLEND
VALUE
INCOME
CAPITAL PRESERVATION
Growth funds seek
to maximize the value
of your savings over
time by investing in
the stocks of companies
that have a strong
potential for providing
above-average
earnings growth.
Blend funds seek to
increase the value
of your savings over
time by investing in a
combination of stocks
of companies that
have the potential
for strong earnings
growth and stocks
of companies that
are priced below
their expected
long-term worth.
Value funds seek
to increase the value
of your savings over
time by investing in
undervalued, or
attractively priced,
stocks of
well-established
companies.
Income funds seek
to provide a steady
stream of income,
which is reinvested in
your account, and in
some cases a small
amount of growth,
by investing in bonds
issued by governments
and corporations.
Capital preservation
funds seek to offer price
stability and a steady
stream of income, which
is reinvested in your
account, by investing in
short-term bonds or
contracts issued by
creditworthy companies,
financial institutions, and
government entities.
Growth, blend, value, income, and capital preservation are represented by the S&P 500/Barra Growth Index, S&P 500 Index,
S&P 500/Barra Value Index, Lehman Aggregate Bond Index, and Merrill Lynch 91-Day Treasury Bill Index, respectively. Investors
cannot invest directly in these unmanaged indexes. Past performance does not guarantee future results or the results of any fund
in your plan, which will fluctuate with market conditions. Regular investing does not ensure a profit or protect against loss in declining
markets. Withdrawals are subject to income tax, and those made before age 59∂ may be subject to an additional 10% tax.
5
BE AN
INVESTOR
Investing for retirement requires careful planning along
with ongoing maintenance. Although your individual goals
are unique, there are some investment principles that
apply to every long-term investor.
Diversify to smooth out the market’s ups and downs
Since it is impossible to predict the market, by choosing a variety of
investments — a practice called diversification — you can increase your
chances of owning the best performers while reducing your exposure
to poor performers. Of course, diversification does not guarantee
a profit, and you can still lose money in a diversified portfolio.
Rebalance your portfolio to keep it in line with your goals
Over time, gains in one type of investment and losses in others could
result in your portfolio being invested in proportions that don’t match
your goals. Rebalancing your portfolio — selling some of your investments that have grown and investing more in the areas that have fallen
behind — can help ensure you are taking on the level of investment risk
that you intend, although it can’t guarantee you won’t lose money.
Stick to your plan through market cycles
While it is natural when your investments are going up to want to
buy more of the best performers — or when your investments are
going down to sell the worst performers — history has shown that
contributing to a diversified portfolio that is rebalanced through up
and down markets is a more effective way to invest for long-term goals.
6
Because the market is unpredictable,
diversifying your portfolio across
investment styles can help keep it
on track.
YEAR
BEST
PERFORMER
1984
15.15%
2.33%
8.59%
1985
33.31%
8.46%
27.39%
1986
21.67%
6.75%
16.57%
1987
6.73%
2.75%
4.84%
1988
21.67%
6.93%
13.98%
1989
36.40%
8.99%
25.81%
1990
8.96%
-6.85%
0.37%
1991
38.37%
6.38%
25.17%
1992
10.53%
3.93%
7.29%
1993
18.60%
1.68%
9.35%
1994
4.19%
-2.92%
0.73%
1995
38.13%
6.03%
30.60%
1996
23.91%
3.63%
17.32%
1997
36.53%
5.33%
25.79%
1998
42.16%
5.23%
22.20%
1999
28.25%
-0.82%
14.83%
2000
11.63%
-22.08%
-2.98%
2001
8.44%
-12.73%
-6.32%
2002
10.25%
-23.59%
-13.29%
2003
31.97%
1.15%
21.03%
WORST
PERFORMER
DIVERSIFIED
PORTFOLIO
A diversified portfolio
can help increase your
exposure to the best
performers while
limiting the impact of
poor performers.
Growth
Blend
Value
Income
Capital preservation
Growth, blend, value, income, and capital preservation are measured by the S&P 500/Barra Growth Index, S&P 500 Index,
S&P 500/Barra Value Index, Lehman Aggregate Bond Index, and Merrill Lynch 91-day Treasury Bill Index, respectively. Investors
cannot invest directly in these unmanaged indexes. Past performance does not guarantee future results or the results of any fund
in your plan, which will fluctuate with market conditions. The hypothetical diversified portfolio is composed of 20% S&P 500/Barra
Growth, 30% S&P 500 Index, 20% S&P 500/Barra Value, 20% Lehman Aggregate Bond Index, and 10% Merrill Lynch 91-day
Treasury Bill Index, and has been rebalanced annually. It does not represent an actual investment product. Results would vary
for other allocations.
7
CHOOSE A
STRATEGY
Your plan offers two ways to build a diversified portfolio.
You can choose a ready-mixed portfolio or you can mix
your own portfolio.
Option A
Choose a ready-mixed portfolio for one-step diversification
A ready-mixed portfolio may be right for you if you want to
•
•
Make a single investment choice for your plan account
Invest in a complete portfolio, diversified across a mix of
stock and bond investments
•
Have your portfolio automatically rebalanced for you, or
professionally adjusted based on market conditions, on an
ongoing basis
Option B
Mix your own portfolio for a custom approach
The mix-your-own portfolio may be right for you if you want to
•
•
•
8
Take the time to learn about your individual fund options
Choose your own diversified combination of growth, blend,
value, income, and capital preservation funds to match your
specific goals and risk tolerance
Personally make adjustments to your portfolio’s risk level on
an ongoing basis
GET
STARTED
Use the Investing in your plan booklet
to apply what you’ve learned and take
advantage of all your plan has to offer.
•
•
•
•
Choose your strategy
Review your investment options
Pick the fund or funds that are
right for you
Implement your decisions
For more information, log on to
www.ibenefitcenter.com.
Log on to www.ibenefitcenter.com or
call Putnam at 1-877-UNION-44 (1-877-864-6644).
About Putnam
Your Trustees selected Putnam Investments to provide self-directed
retirement services for this Plan. Founded in 1937, Putnam is one of the
nation’s oldest and largest investment management firms. With over
65 years of experience, Putnam has a proven record of successful money
management and a commitment to providing high-quality investor
services and education. We are proud to be recognized as a leading
provider of Taft-Hartley plan services in the United States. Today, more
than a quarter million union members rely on Putnam to help them
save for retirement, college, and life’s other important savings goals.
Investors should carefully consider the investment objectives, risks, charges,
and expenses of a fund before investing. For a prospectus or an offering
statement containing this and other information about any fund, please
call your Plan’s toll-free number. Read the prospectus or offering statement
carefully before making any investment decisions.
Investments in mutual funds are not guaranteed or insured and will fluctuate in value.
While every effort has been made to ensure the accuracy of the information in this material,
in the case of a discrepancy, the official plan document will govern.
Putnam, LLC, also known as Putnam Investments, is the holding company for affiliated entities
that provide services to unions on behalf of their member benefit plans, including Putnam Retail
Management. Putnam is affiliated with Mercer HR Services, LLC and Mercer Trust Company,
which provide recordkeeping, administration, and directed trustee and custodian services to
unions on behalf of their member benefit plans.
D
Putnam Taft-Hartley Services
One Post Office Square
Boston, Massachusetts 02109
Putnam Retail Management
www.putnam.com
223485 7/05