Understanding 403(b)(7) Plans
[Name of Financial Professional, Company Name]
[Name of Pacific Life Wholesaler, Pacific Life]
2/15
E30464-15A
Please note that this presentation has been designed to provide general
information. Neither Pacific Life nor its representatives offer legal or tax
advice. Clients should consult their attorneys and tax advisers as to the
applicability of this information to their specific circumstances and for
complete up-to-date information concerning federal and state tax law.
[Name of Financial Professional] and [Company] are not affiliated with
Pacific Life or its affiliated companies.
Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by
Pacific Life & Annuity Company. Product availability and features may vary by state.
No bank guarantee • Not a deposit • May lose value • Not FDIC/NCUA insured • Not insured by any federal government agency
Agenda

Why save for retirement

403(b)(7) basics
–
–
–
–

Eligibility
Contributions
Distributions and Loans
Rollovers and Transfers
Investment choices
– Portfolio Optimization Funds
– Fixed-Income Funds
Saving for Retirement
People are living longer and healthier lives

You could spend 15, 20, 25 years, or more in
retirement

Many experts suggest you will need 70% – 90% of
your working income

You may want the choice to continue working
Sources of Retirement Income1
3% Other Sources
11% Income from Assets
35% Social Security
17% Pensions
34% Earnings
1Source:
Social Security, Fast Facts and Figures About Social Security, 2014.
The Effects of Inflation
Postage Stamp
New Home
Cost Today
Projected
Cost in 20 Years
$.49
$.78
$274,500
$407,893
Postage Stamp: Historian, United States Postal Service, February 2014.
Home: U.S. Census Bureau, Median and Average Sales Process of New Homes Sold in United States, April 2014.
Enjoy Your Retirement
The most important reason to save?

You want a great retirement!

Your financial independence is a necessity
Who is Eligible?

Employees of public schools, colleges, and universities

Employees of 501(c)(3) nonprofit organizations:
–
–
–
–
–
Private schools, colleges, and universities
Religious organizations
Charities
Hospitals
Museums
How Much Can I Contribute?

Maximum annual contribution
– Employee salary deferral only
▪ $18,000, plus an additional $6,000 if age 50 or older
▪ 15 years of service may increase deferral amount by $3,000 per year
▪ Public schools generally do not provide employer or matching
contributions
– Employer and employee
▪ Some plans may be designed to include employer contributions
(e.g., matching contributions)
▪ 100% of pay, up to $53,000 (or $59,000 if age 50 or older)
▪ Public schools generally do not provide employer or matching
contributions
Can I Access The Funds?

An employee may begin taking distributions at age 59½

If younger than age 59½, employees must meet one of
the IRC exceptions to take out money that has been
contributed through salary reduction, such as:




Separation from service
Hardship
Disability
Death
Early Distribution Federal Tax Penalty
 Distributions taken prior to age 59½ may be subject
to an additional 10% federal tax unless the employee
meets a qualifying exception:




Separation from service after age 55
Series of substantially equal lifetime payments
Disability
Death
Loans

May be permitted by plan

Maximum amount is limited to the lesser of:


– $50,000 or 50% of accrued balance
Loan payments must be made at least quarterly
Repayment of the loan generally must occur within
five years (or up to 30 years if for primary residence)
When Must I Begin Distributions?
Required minimum distributions must begin by
April 1 of the year following the year you turn
age 70½, or the calendar year in which you
retire, whichever is later.
 50% excise tax is assessed on required amounts
not taken
 Possible exception: Contributions prior to
12/31/86 may continue to defer until the
calendar year in which employee turns 75

Consolidating Retirement Assets

Contract Exchange – Exchange of assets within the
current employer’s plan from one approved
investment option to another approved investment
option

Plan-to-Plan Transfer – Move assets from an account
with the prior employer 403(b)(7) to a new account
with current employer 403(b)(7)

Rollovers – Between a 403(b)(7) contract and
different types of retirement plans (e.g., 401(k) or IRA)
Why 403(b)(7) Plans?

Save for retirement with pretax dollars

Offers tax deferral on contributions and earnings

Reduces current taxable income

Can be rolled over to other eligible retirement plans
A Tax-Advantaged Strategy—Hypothetical Example
Tax-Deferred Investments vs. Taxable Investment
10 Years
20 Years
$78,812
$71,193
$36,568
$100,000
$34,610
$200,000
$172,232
$300,000
$210,999
$400,000
30 Years
$447,726
5 Years
$326,461
$500,000
0
Taxable Income
Tax-Deferred Investment
Assumes a 28% federal tax rate, assessed yearly on the taxable investment and at period-end on the tax-deferred example. Assumes the tax-deferred investment
is made with pretax funds and not a Roth 403(b)(7) contribution. This hypothetical illustration does not include charges and fees. Had these charges and fees been
included, the investment returns would have been reduced. If the full amount of the tax-deferred investment was withdrawn at the end of the 30 years, assuming
a 28% tax rate, the value after paying taxes would be $349,363. Actual tax rates may vary for different taxpayers and assets from that illustrated (for example,
capital gains and qualified dividend income). Actual performance of your investment also will vary. Lower tax rates on capital gains and dividends would make the
investment return for the taxable investment more favorable, thereby reducing the difference in performance among the examples shown. Consider your personal
investment horizon and income tax brackets, both current and anticipated, when making an investment decision. Hypothetical returns and tax rates are not
guaranteed and do not represent performance of any particular investment.
A Tax-Advantaged Strategy—Hypothetical Example
Don’t Delay, Start Today!
After 35 Years
$800K
$600K
$701,738
$576,800
$481,139
$296,201
$400K
Earnings
Contributions
$200K
$124,938
$184,938
Julia
Barry
0
End balances after 35 years. Assumes $30,000 annual wage, 10% contributions for 25 years, 4% average annual wage inflation,
8% average annual return, and Barry starts 10 years after Julia. Deposits to the plan at the end of each month.
Investment Choices
What is a mutual fund?
 Pools the money of investors
 Managed by a professional fund manager
 Invests in stocks, bonds,
to meet fund’s objective
and other securities
Investment Choices
Managing risk through diversification

Diversification is the process of spreading
investments among different types of companies,
industries, or asset classes to reduce risk

Mutual funds generally provide automatic
diversification
Pacific Life 403(b)(7) Investment Options
Asset Allocation
Funds
Fixed-Income
Funds
• Pacific FundsSM Portfolio
Optimization Funds
(five funds ranging in
investment style from
conservative to
aggressive-growth)
• Pacific FundsSM
Short Duration Income
• Pacific FundsSM
Core Income
• Pacific FundsSM
Strategic Income
• Pacific FundsSM
Floating Rate Income
• Pacific FundsSM
Limited Duration High
Income
• Pacific FundsSM
High Income
Specialty Fund
• Pacific FundsSM
Diversified Alternatives
Retirement Plan
Service Provider
• Aspire provides
recordkeeping
services
Asset allocation, although intended to provide diversification, does not guarantee future results, ensure a profit, or protect against loss.
Better returns could be achieved by investing in an individual fund or funds representing a single asset class rather than using asset allocation.
Asset Allocation Funds
Portfolio Optimization Funds
Pacific Funds offers five Portfolio Optimization Funds, allowing
you to match the appropriate fund to your financial objectives,
risk tolerance, and time horizon. Each fund is structured as a
fund-of-funds (a mutual fund that invests in other mutual
funds) that has been diversified to achieve a specific target-risk
level using a strategic mix of multiple asset classes.
Asset Allocation Funds
Portfolio Optimization Funds offer:
One-Step Diversification
Each Portfolio Optimization Fund is diversified among multiple asset classes,
providing you with a core asset allocation solution to help meet your financial goals.
A Dedicated Team that Manages Multi-Asset Class Solutions
Pacific Life Fund Advisors’ investment approach uses three fundamental disciplines:
 Asset allocation
 Manager research
 Investment risk management
Target-Risk Funds to Fit Your Needs
Portfolio Optimization Funds range in investment style from conservative to
aggressive-growth to help match your risk tolerance and investment goals.
Select The Portfolio Optimization Fund
That’s Right For You
High
Broad Asset Class Allocations as of 12/31/14
Potential Return
Growth
AggressiveGrowth
Moderate
ModerateConservative
Fixed Income
Low
Domestic Equity
International Equity
Conservative
Low
Source: Ibbotson Associates®
Risk Tolerance
High
One-Step Diversification
Example: Pacific Funds Portfolio
Optimization Moderate
SM
19
Money
Managers
As of 12/31/14.
+
21
Underlying
Funds
+
17
Asset
Class Styles
=
1
Portfolio
Optimization
Fund
Fixed-Income Funds

Designed for Income
Cover a broad spectrum of income opportunities

Based on Experience
A portfolio management team that specializes in institutional
fixed-income asset management.
There’s no guarantee that the funds’ investment strategies will achieve the funds’ investment goal under all market conditions.
Higher
Fixed-Income Funds
Pacific Funds
High Income
Asset class mix as of 12/31/14
Potential Income
Pacific Funds Floating
Rate Income
Pacific Funds Limited
Duration High Income
Pacific Funds
Core Income
Pacific Funds
Strategic Income
High-Yield Bonds
Lower
Floating-Rate Loans
Investment-Grade Corporate Bonds
Cash and Other
Pacific Funds Short
Duration Income
Lower
Volatility (Risk)
Higher
This chart is for illustrative purposes only and is not intended to represent all available investments. A fund may not be invested
in all the types of investments at any one time and may invest in other types of investments not reflected in the chart.
Pacific Funds Diversified Alternatives
The fund offers:

A Simplified Approach to Alternatives Investing: Pacific Funds Diversified
Alternatives provides exposure to multiple alternative asset classes in one
fund-of-funds.

Professional Management and Oversight: An experienced portfolio
management team uses a disciplined approach to oversee investment manager
selection, asset allocation, and investment risk management.

Portfolio Diversification: The addition of alternative asset classes to a
portfolio can help improve diversification and may smooth out the overall risk.
Broad Asset Class
Allocations as of 12/31/14
Fixed Income
Domestic Equity International
Equity
Get Started Today!
Today we’ve reviewed:

Why save for retirement

403(b)(7) basics

Pacific Funds offered within the Pacific Life
403(b)(7) Program
Get Started Today!
For more information:

Contact your financial professional

Determine which investment choices in your
Pacific Life 403(b)(7) Program are best for you
Pacific Life, its distributors and their respective
representatives do not provide tax, accounting or
legal advice. Any taxpayer should seek advice based
on the taxpayer’s particular circumstances from an
independent tax advisor or attorney.
You should carefully consider an investment’s goals,
risks, charges, strategies and expenses. This and
other information about Pacific Funds are in the
prospectus available from your financial advisor or
by calling (800) 722-2333, option 2. Read the
prospectus carefully before investing.
Pacific Life Fund Advisors LLC (PLFA), a wholly owned
subsidiary of Pacific Life Insurance Company, is the
investment advisor to Pacific Funds and is responsible
for determining the asset allocation mix for each
fund. PLFA also does business under the name Pacific
Asset Management and manages certain funds under
that name.
Pacific Life offers the 403(b)(7) Program. Aspire
provides recordkeeping services and is not a
broker/dealer or an investment advisor. Pacific Life and
its affiliates are not affiliated with Aspire, do not
provide any employer-sponsored qualified plan
administrative services or impartial investment advice,
and do not act in a fiduciary capacity for any plan.
Effective December 31, 2014, Pacific Life Funds and its
family of mutual funds changed its name to Pacific Funds.
In addition, individual funds were also renamed. For
more information, please visit www.PacificFunds.com.
Please contact your plan administrator for any questions
relating to your plan. For information regarding
administrative and recordkeeping services for the Pacific
Life 403(b)(7) Program, call Aspire at (866) 634-5873.
Mutual funds are offered by Pacific Funds. Pacific Funds
are distributed by Pacific Select Distributors, LLC
(member FINRA & SIPC), a subsidiary of Pacific Life
Insurance Company (Newport Beach, CA), and are
available through licensed third-party broker/dealers.