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1 of 61 AIG / VALIC Retirement Services For Foothill - DeAnza Community College District May 2007.

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Presentation on theme: "1 of 61 AIG / VALIC Retirement Services For Foothill - DeAnza Community College District May 2007."— Presentation transcript:

1 1 of 61 AIG / VALIC Retirement Services For Foothill - DeAnza Community College District May 2007

2 2 of 61 Agenda  Retirement today: What’s different?  Revisioning Retirement study  What have we learned?  What’s next?  403b and 457 Plan Information

3 3 of 61 Retirement today: What’s different? 65 is just a number.

4 4 of 61 Retirement today: What’s different? Average Lifespan Source: National Center for Health Statistics from birth

5 5 of 61 Retirement today: What’s different?

6 6 of 61 Retirement can last years The evolution of retirement planning Retirement was only for the wealthy and those few with pensions Retirement was only for the wealthy and those few with pensions Social Security, pensions, defined contribution plans, IRAs, tax incentives to save Social Security, pensions, defined contribution plans, IRAs, tax incentives to save Present Living longer, retiring earlier, expecting more in retirement Present Living longer, retiring earlier, expecting more in retirement

7 7 of 61 Medical costs are increasing faster than inflation 6.98% 16.75% 21.38% 25% 20% 15% 10% 5% 0%

8 8 of 61 Revisioning Retirement study

9 9 of 61 Ageless Explorers: View retirement as an exciting new phase Feel very financially prepared Developed an overall investment strategy to achieve financial independence Saved for an average of 24 years Have taken numerous steps to prepare for retirement 27% of those surveyed

10 10 of 61 Comfortably Contents: Are enjoying their golden years and the rewards of good financial planning Have saved and invested well and have an overall financial strategy Extremely satisfied with retirement Feel very financially prepared Saved for an average of 23 years 19% of those surveyed

11 Live for Todays: Fun, active and adventuresome Are anxious about retirement due to lack of financial planning Worried they will not have enough money Saved for an average of 18 years Wish they could change how they prepared 22% of those surveyed

12 12 of 61 Sick and Tireds: Have the worst possible retirement Are inactive, unfulfilled and worried about the future Saved very little for an average of 16 years Not financially prepared for retirement and do not have an overall strategy Little they can do to improve their situation - just trying to hang on 32% of those surveyed

13 13 of 61

14 14 of 61 What can we learn from this study?  Save more, save longer  Have a plan  Get assistance

15 15 of 61 Lesson 1: Save more, save longer

16 16 of 61 Lesson 1: Save more, save longer The cost to accumulate $300,000 $ This example compares the total out- of-pocket costs required to fund the retirement goals of three investors who started contributing $200 a month at different ages. An additional $67 is deposited to the tax-qualified retirement plan each month as a result of current income tax savings, assuming a 25% federal income tax bracket and an 8% annual rate of return. Tax-qualified plan accumulations are taxed as ordinary income when withdrawn. Federal restrictions and tax penalties may apply to early withdrawals.

17 17 of 61 Lesson 1: Save more, save longer (continued) Save tax deferred Thousands ($) The chart assumes a 25% federal marginal income tax rate and an 8% annual rate of return. Fees and charges, if applicable, are not reflected in this example and would reduce the amount shown. Income taxes are payable upon withdrawal. Federal restrictions and tax penalties may apply to early withdrawals. Investment values may fluctuate so that an investor’s shares, when withdrawn, may be worth more or less than the original cost.

18 18 of 61 Lesson 2: Have a plan More than 40% of people who have conducted a retirement calculation have made changes in their retirement planning as a result. Source: EBRI 2004 Retirement Confidence Survey

19 19 of 61 Lesson 2: Have a plan (continued) Does your asset allocation look like a goal post?

20 20 of 61 Lesson 2: Have a plan (continued) Asset allocation

21 21 of 61 Retirement summary

22 22 of 61 Lesson 3: Get assistance Revisioning Retirement: Who received assistance? 60%38% 47%22% Ageless ExplorersLive for Todays Comfortably Contents Sick and Tireds

23 23 of 61 Revisioning retirement The secrets to financial freedom according to financially prepared retirees  Think positively toward retirement  Desire and achieve active goals in retirement  Work toward freedom and flexibility  Start saving early  Develop an overall investment strategy  Get professional assistance in developing a financial plan

24 24 of 61 In the past, planning for retirement meant:  Saving money  Paying off the mortgage  Taking a trip Today, planning for retirement means:  Creating and sticking to a financial plan  Paying off the mortgage — or not  Reinventing yourself

25 25 of 61 In the past, planning for retirement meant:  Relying on Medicare to cover large medical expenses Today, planning for retirement means:  Saving more for higher medical costs and long-term care expenses

26 26 of 61 In the past, planning for retirement meant:  Relying on pension and Social Security to supplement retirement income needs Today, planning for retirement means:  Relying on a employer-sponsored retirement plan to supplement a significant portion of retirement income  More decisions to make; more choices available

27 27 of 61 What’s next?  Have you enrolled in your retirement plan?  Are you contributing enough?  Is the money in your plan invested in the best possible way?  Have you done your short-term and your long-term retirement calculations?  Is it time to seek assistance with your retirement planning?

28 28 of 61 These may be the most important years of your retirement.

29 29 of 61 Your 403b Program at Foothill-De Anza Community College District

30 30 of b Contribution Limits  100% of Includible Compensation up to $15,500  Age Based Catch Up of $5,000 for employees age 50 and over

31 31 of b Benefits to Employees  Contributions made on a “Pre-Tax” basis  Defer current income taxation on contributions and earnings  Salary Reduction -- Easy to participate!

32 32 of (b) Withdrawal Restrictions  Availability of funds generally subject to:  Separation from service  Age 591/2  Disability  Death  Hardship

33 33 of (b) Tax Penalties on Early Withdrawals  Withdrawals prior to age 591/2 generally subject to 10% federal tax penalty except:  Death  Disability  Separation from service at age 55  Payout through a substantially equivalent payment stream  Tax-Deductible Medical Expenses  Qualified domestic relations order (QDRO)  Payment to IRS on account of federal tax levy

34 34 of (b) Taxability  Pre-tax contributions  Tax-deferred earnings  Taxed as ordinary income when withdrawn  Subject to minimum distribution rules at age 70½

35 35 of 61 Other Plan Features  Loans are available  Special Catch up provisions for employees with 15 years of service who qualify  Portable to 403(b), 401(k) or IRAs at separation from service

36 36 of b Contribution Example  Employees less than 50 years old: $15,500  Employees age 50+: $15,500 + $5,000 = $20,500  Employees age 50+ with 15 years of service that qualify for cap expansion: $15,500 + $5,000 +$3,000 = $23,500

37 37 of 61 ROTH 403b  Contributions on an After-Tax basis  No Taxes up distribution  Subject to all regular 403b plan provisions:  Same contribution Limits  Same investment choices  Portable to ROTH IRAs

38 38 of 61 Your 457 Program at Foothill-De Anza Community College District

39 39 of Benefits to Employees  Supplement retirement income  Defer current income taxation on contributions and earnings  Able to “double up” on contribution deferrals - Now can contribute to both 403b and 457 at the same time!

40 40 of (b) Contribution Limits  100% of compensation not to exceed $15,500 in 2007  Age 50 + catch up is $5,000 in 2007

41 41 of (b) Contribution Limits continued  “3-year” catch-up prior to normal retirement equal to 2 times the annual dollar limit ($31,000 in 2007)  Must have been eligible for this plan and must consider prior year pre-tax deferrals with this ER  Cannot use age 50 and 3 year catch up together

42 42 of (b) Withdrawal Restrictions  Availability of funds generally subject to:  Attaining age 70½  Separation from service (any age with no pre-59 1/2 withdrawal penalty)  Unforeseen emergency

43 43 of (b) Taxability  Pre-tax contributions  Tax-deferred earnings  Taxed as ordinary income when withdrawn  Subject to minimum distribution rules at age 70½

44 44 of 61 Other Plan Features  Loans are available  Portable to 403(b), 401(k) or IRAs at separation from service  Unforeseen Emergency Withdrawals are available

45 45 of 61 Thank You!

46 46 of 61 Securities and investment advisory services are offered by V ALIC Financial Advisors, Inc., member NASD, SIPC and an SEC- registered investment advisor. AIG V ALIC is the marketing name for the group of companies comprising V ALIC Financial Advisors, Inc.; V ALIC Retirement Services Company; and The Variable Annuity Life Insurance Company (V ALIC ); each of which is a member company of American International Group, Inc. The information in this presentation is general in nature and may be subject to change. Neither AIG V ALIC nor the financial advisors give legal or tax advice. Applicable laws and regulations are complex and subject to change. For legal or tax advice concerning your situation, consult your attorney or professional tax advisor. Copyright © 2004 American International Group, Inc. All rights reserved. Houston, Texas VL /2004


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