Presentation on theme: "Retirement Planning for Women"— Presentation transcript:
1 Retirement Planning for Women [Introduce yourself and welcome the audience to the seminar: Retirement Planning for Women: What you can do today to better prepare for tomorrowProvide a brief overview of the seminar. Mention that this seminar is specifically designed to help women take the proactive steps now to help them prepare for their own future.Give your qualifications and experience with retirement planning.[If you specialize in assisting women investors, talk about this as well.]Note to presenters:> signals an opportunity for interaction Give attendees an approved business card with the worksheet.IAR Name • IAR Title • DateRegistered AddressX.P-1 C (12/10)
7 Important Information (continued) Variable annuities, group annuities or funding agreements are long-term investments designed for retirement purposes. If withdrawals are taken prior to age 59 1/2, an IRA 10% premature distribution penalty tax may apply. Money taken from the annuity will be taxed as ordinary income in the year the money is distributed. An annuity does not provide any additional tax deferral benefit, as tax deferral is provided by the plan. Annuities may be subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject. However, an annuity does provide other features and benefits, such as lifetime income payments and death benefits, which may be valuable to you.Variable investments, of any kind, are not guaranteed and are subject to investment risk including the possible loss of principal. The investment return and principal value of the security will fluctuate so that when redeemed, it may be worth more of less than the original investment. In addition, there is no guarantee that any variable investment option will meet its stated objective.For 403(b)(1) annuities, the Internal Revenue Code (IRC) generally prohibits withdrawals of 403(b) salary reduction contributions and earnings on such contributions prior to death, disability and age 50 ½, severance of employment, or financial hardship. Amounts held in a 403(b)(1) annuity as of 12/31/1988 are “grandfathered” and are not subject to these restrictions. For 403(b)(7) custodial accounts, the IRC generally prohibits withdrawals of any contributions and attributable earnings prior to death, disability, age 59 ½, severance of employment, or financial hardship. For both 403(b)(1) annuities and 403(b)(7) custodial accounts, the amount available for hardship is limited to the lesser of the amount necessary to relieve the hardship, or the account value as of 12/31/1988, plus the amount of any salary reduction contributions made after 12/31/1988 (exclusive of any earnings).You should consider the investment objectives, risk, and charges and expenses of the investment options carefully before investing. Fund prospectuses contain this and other information and can be obtained by contacting your local ING representative. Please read carefully before investing.IMPORTANT: THIS SLIDE TO BE USED FOR HEG MARKET, TSA MARKET AND 401(k) MARKET.7
8 Important Information (continued) Variable annuities, group annuities or funding agreements are long-term investments designed for retirement purposes. If withdrawals are taken prior to age 59 1/2, an IRA 10% premature distribution penalty tax may apply. Money taken from the annuity will be taxed as ordinary income in the year the money is distributed. An annuity does not provide any additional tax deferral benefit, as tax deferral is provided by the plan. Annuities may be subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject. However, an annuity does provide other features and benefits, such as lifetime income payments and death benefits, which may be valuable to you.Variable investments, of any kind, are not guaranteed and are subject to investment risk including the possible loss of principal. The investment return and principal value of the security will fluctuate so that when redeemed, it may be worth more of less than the original investment. In addition, there is no guarantee that any variable investment option will meet its stated objective.For 403(b)(1) annuities, the Internal Revenue Code (IRC) generally prohibits withdrawals of 403(b) salary reduction contributions and earnings on such contributions prior to death, disability and age 50 ½, severance of employment, or financial hardship. Amounts held in a 403(b)(1) annuity as of 12/31/1988 are “grandfathered” and are not subject to these restrictions. For 403(b)(7) custodial accounts, the IRC generally prohibits withdrawals of any contributions and attributable earnings prior to death, disability, age 59 ½, severance of employment, or financial hardship. For both 403(b)(1) annuities and 403(b)(7) custodial accounts, the amount available for hardship is limited to the lesser of the amount necessary to relieve the hardship, or the account value as of 12/31/1988, plus the amount of any salary reduction contributions made after 12/31/1988 (exclusive of any earnings).All Guarantees are based on the financial strength and claims-paying ability of the issuing insurance company, who is solely responsible for all obligations under its policies.You should consider the investment objectives, risk, and charges and expenses of the investment options carefully before investing. Fund prospectuses contain this and other information and can be obtained by contacting your local ING representative. Please read carefully before investing.IMPORTANT: THIS SLIDE TO BE USED FOR RETAIL VA.8
9 Important Information (continued) You should consider the investment objectives, risk, and charges and expenses of the investment options carefully before investing. Fund prospectuses contain this and other information and can be obtained by contacting your local ING representative. Please read carefully before investing.IMPORTANT: THIS SLIDE TO BE USED FOR ING FINANCIAL ADVISERS AND OTHER BROKER-DEALERS SELLING NON-INSURANCE PRODUCTS. ALSO TO BE USED FOR IIPS.9
10 Important Information (continued) This presentation/seminar contains information regarding insurance products for sale.IMPORTANT: THIS SLIDE TO BE USED FOR ALL BUSINESS LINES.10
11 Important Information (continued) Registered representative and retirement educational seminars are provided by ING Investment Advisors, LLC. These educational seminars are provided to you as a supplemental service to your plan sponsor as part of the Plan Administrative services provided by ING Institutional Plan Services, LLC. The information contained herein should not be constituted as (i) an offer to sell or solicitation of an offer to buy a security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. You should contact your investment representative (or advisor), attorney, accountant or tax advisor, with regard to your individual situation prior to implementing a retirement plan strategy.IMPORTANT: This slide is to be used for ING Financial Advisers and other broker-dealers selling non-insurance products. Also to be used for securities sold IIPS business.11
12 What We’ll Cover TodayWhat unique retirement planning challenges do women face?Where am I today?How should I be investing in order to worktowards my goals?Today we’re going to apply that same easy approach to talking about your own retirement plans.In fact, by the time you leave today, my goal is to give you the information you need to answer these four key questions:[Review the four agenda questions.]Am I prepared for the future?Retirement - Insurance - Investments
13 Who will join us along the way SondraEileenDonnaTo make this information come alive today, I’m going to rely on a number of examples…not necessarily actual cases of real clients, but hypothetical examples that illustrate the same kinds of situations that I find many of my clients in. In fact, you may even see yourself in some of these examples.So to help us along our way today, I’m going to refer to three hypothetical clients…There’s Sondra (single mother with a full-time job and one teenager) who says [review her quote].And Eileen (widow with a full-time job and two older children) who says [review her quote].And Donna (married with no children and a full-time job) who says [review her quote].My hope is you will relate to one of these women.“I lost so much money in the market…I just stopped investing. What should I do now?”“I thought I was on track, but then my husband died 10 years ago. Now what?”“I think my husband and I are doing the right things. But I’m always willing to learn more.”
14 What unique retirement planning challenges do women face? “Is preparing for retirement really that different for women?”83% of women were more likely to report being stressed about money compared with 78% of men.Source: health.usnews.com . See: “Managing Your Money-Related Stress” October 8, 2008Let’s get started addressing Donna’s first question: What are the unique investment challenges facing women?When I mention that I’m offering a women’s retirement planning seminar, someone usually poses the same question that Donna raises here: “Is preparing for retirement really that different for women?”> How would you answer Donna? [Solicit feedback.]Truth is, the principles that apply to sound planning are the same no matter who you are or where you are in life. But the opportunities and the challenges you face in putting those principles into action do tend to be different for women. One challenge we already know is women live longer than men, which puts the responsibility of the knowledge of money in the hands of the surviving spouse.Let’s begin to explore the other opportunities and challenges in more detail now.DonnaRetirement - Insurance - Investments
15 The Good News Women are taking greater charge of their finances. They’re earning more…51% of professional jobsU.S. Department of Labor, 2009.They’re controlling more spending…Boston Consulting Group, 2009.73% of household spendingThey’re making more major purchases…20% of home buyers are single women.National Association of Realtors, 2008.They’re starting more businesses.52% of new business start upsSCORE, Partner with SBA.gov, 2006.First, let’s review the good news…In decades past, many women felt that managing the money was someone else’s responsibility. But now more and more women are stepping up and taking financial control of their lives. And since you’re already here at this seminar, I know you’re one of those women…[Review first three statistics.]Women are not only earning more, they are controlling more of the household spending. They are also making more major buying decisions as we can see from the first time home buyer statistic.[Review the final statistic]Women are also starting more businesses and many of those businesses have been started by women who are retiring from one job and moving into a second career.Retirement - Insurance - Investments
16 The Not-So-Good NewsWomen are likely to receive less from other sources.Women tend to earn less than men…Women get 80 centsfor every $1 men earn.U.S. Department of Labor, 2009.So they receive less from Social Security…SSA.gov, 2010.Women average 25% less than men.And are less likely to get a pension…Only 28% of women earn a pension.AARP, 2006.Yet — they need their money to last longer.Average 65-year-old man will live to age 83.Now the not-so-good news…When it comes to financial resources, women will still likely get less money from outside sources — and need their money to last longer.[Review statistics.]As you can see from the first three facts here – it is because women tend to earn less than men and often stay out of the workforce longer to care for dependents, such as children or older parents, that they receive less from Social Security and pensions.Something else to think about, because women tend to live longer than men, they have even more of a challenge making these limited resources last longer.Average 65-year-old woman will live to age 85.SSA..gov, 2010.Retirement - Insurance - Investments
17 Women Want Relief from Financial Stress One in five adults aged 45 and older are suffering health problems due to financial stress, according to a new survey by AARPSource: Milwaukee Business Journal reported on Jan. 2, 2009.Women want freedom from financial stress more than they want to be thin, more than they want a faithful partner, and in some cases, more than they love their children, according to a poll on bettyconfidential.com83% of women chose “never having to worry about money again”, while 17% chose “never having to diet again”52% chose “freedom from financial worries”, while only 48% chose “having their partner always be faithful”60% of women chose “be certain that your children will live happy, successful lives” over money. But there were still 40 percent of respondents who chose “never having to worry about money again”.Source: Bettyconfidential.com See: “Women Want Many” April 22, 2009Study: Conducted online on BettyConfidential.com through a series of Feel the Pulse of Women pollsRead slide.So how to you begin to battle financial stress. As shown by the last few slides, the unknown is a part of the source of this financial stress. There will always be things that we can’t control but for those things that we do have an impact on, it all starts with knowledge.Knowing what you need to do to get to where you want to be - these are the keys to begin the journey to lessening the grip that financial stress has on our life.Here at ING, we liken knowing where you want to be as Your number.Retirement - Insurance - InvestmentsRetirement - Insurance - Investments17
18 Envision Where You’d Like to Be You’ll be much more motivated to save.One of the best ways I find to motivate my clients to save more isn’t to talk about how much they need for retirement, but rather to talk about what they really want to do in retirement.So let’s start by envisioning where you’d like to be…every one of you has a different vision of retirement. So I’d like you to think about what you’d like to be doing…Retirement - Insurance - Investments1818
19 Where am I today?“I can’t possibly save any more for my future expenses. It’s tough enough just making ends meet for today’s expenses.”Women’s debt stress is about 34% higher than men for the same level of debt to incomeNow that you’ve taken a “snapshot” of where you are, there is a good chance that you’ll need to consider making changes to better position your retirement. This could mean doing some additional savings for your own future. Let’s explore whether you’re really saving as much as you could and where you should.When I discuss saving more with some of my clients, their first response is that they can’t possibly put any more money aside for the future.And like Sondra, you may feel that you’re having enough trouble with current expenses to address future savings…Source: columbus.bizjournals.com See: “Consumer debt stress eases for September.” Oct. 26, 2009SondraRetirement - Insurance - Investments
20 Your Number – Every Person Has One Your Number – it’s the amount of money you’ll need to have saved to retire the way you wantIf you don’t know Your Number, you’re not aloneOnly 47% of workers report they and/or their spouse have tried to calculate how much money they will need to live comfortably in retirement.Source: Employee Benefit Research Institute, 2008 Retirement Confidence Survey44% of workers who did this calculation changed their retirement planning as a result.So, what is Your Number?It’s the amount of money you’ll need to have saved to retire the way you want. Most people don’t know their number. Many don’t know how to get to their number. And once reached, some don’t know what to do with it.Like I said earlier, if you don’t know your number, you’re not alone.(Read Quotes)Retirement - Insurance - Investments
21 Step One: Know Your Number Your Number is based on several factors:Current ageRetirement savingsWhen you want to retireRetirement expensesAnnual incomeInflationReturn on investmentSocial Security benefitsGuaranteed pension planLife expectancyEntering these factors into retirement calculator, such as the one found on can help you determine what Your Number is. What’s great about Your Number is that it’s flexible. How? By deferring your retirement – waiting longer than you initially anticipated – by a few years, you shorten the number of years during which you need income. You also lengthen the number of years your money is invested and could potentially continue to grow.Retirement - Insurance - Investments
22 Find yours at INGYourNumber.com Here it is, This site is up and ready to use. Has anyone here visited the site yet?My advice before logging on: write down the answers to all of the factors we just discussed. This will help you provide well-thought-out answers to the questions on the site. Take your time going through it, and when you’re done, be sure to contact your financial professional to figure out what you’re going to do with Your Number.Retirement - Insurance - Investments
23 Take Stock of Where You Are How much do you spend each month?How much debt have you accumulated?Do you have an emergency fund to cover 3-6 months?How much have you saved?How much more could you save — if you spent even a little less?As I’ve discussed, it’s important that you take a close inventory of your current financial house so that you have a starting point from which to develop your retirement goals. It’s not surprising that we’ve developed spending habits over time that we don’t always have a handle on. This is really about increasing awareness of and, then, exercising control over our spending choices.Once you have a clear vision of how you want to spend your retirement, you’ll be more motivated to take the necessary steps to work towards those goals. And one of the first steps is to take stock of where you are today.[Review questions on slide]To formulate a retirement spending goal for your retirement years, you need to be aware of how you spend your money today. This is not so much about looking for mistakes or regrets, it’s about building awareness. Once you are aware of what you are doing, you are in a position to take control and potentially consider making changes to better prepare for tomorrow.Retirement - Insurance - Investments
24 Where Can You Save More? Sacrifices to consider: Other ways to save: One less latte a day of the week = $90 each monthTwo less $5=trips to the fast food joint a week = $40 a monthOther ways to save:Cut back on music, entertainment, cloths, magazines, etc.You’d be amazed how those expenses add up each month!You’ve done the time-consuming part – documenting where you spend your money today. Now it’s time to take the next step and make some decisions for some of you this will be the hard part but many more of you may find it easier to do than you thought -- now that you have a vision and a plan!Where can you save more? Maybe one less trip to the coffee shop each week? Maybe eat out less during the week? Think about how you can free up more savings for your future.The additional benefit to putting your current expenses under a “microscope” is that you give yourself the opportunity to get into the habit of spending your money on those things that are most important to you. It’s not surprising to find that we do some things out of habit and that a particular expenditure really isn’t that important to us once we’ve looked at it more closely.By focusing some time on this aspect of our financial situation, we give ourselves two opportunities. If it turns out you’ll need to devote additional resources for your future, you already know where you can make some changes.Additionally, if you do eliminate current expenditures in favor of increasing your savings, you’re training yourself to live on less – helping to make your retirement goal more affordable. All by just making sure you focus your resources on those items that are most important to you!Retirement - Insurance - Investments
25 Maximize Contributions to Your Employer-Sponsored Retirement Plan Sondra Decided she couldn’t save… but still ended up paying Uncle Sam over $2,100 more!Eileen Paid herself first. Saved over $2,100 on taxes. Plus got over $2,300 more free from her employer!Taxable Income*401(k) contribution: Catch-up contribution Taxable income:Federal income tax:Employer match:$46,166.67= $46,166.67$11,Taxable Income*401(k) contribution: Catch-up contribution Reduced taxable income:Federal income tax:Employer match:$46,166.67- $ 4, $ 4, = $8,616.67$9, $2,308.33If you discover that you can free up a little more money to put aside for the future, where should you put that money? Well, one of the best ways to save for retirement is through your employer’s retirement plan.Many of you know that your money invested in an employee retirement plan is on a pretax basis. That tax deferred compounding can really add up. In addition, many of your employers are giving you matching contributions. Do you know how your retirement plan works?How many of you are already participating in your employer’s retirement plan? How many of you understand the advantages to saving through your employer’s retirement plan? [Solicit feedback.][Review slide]As you can see, on an annual basis, Eileen incurred much more in tax savings than Sondra did. Because Eileen contributed to her 401K her taxable income was much lower than Sondra. We can see – same taxable income, however, Eileen not only contributed 10%, but because she is over 50 she also contributed $4000 in catch up contributions. Eileen ended up saving $2,154 in taxes and receiving $2,308 in matching contributions from her employer. Taking advantage of her 401K and employer match put Eileen ahead of Sondra for the year by over $4,000.Ask your employer for a summary plan description which describes your employer’s retirement plan. Also request an enrollment kit which will list your investment choices. These materials will get you on the right track to understanding your employer’s retirement plan.* Taxable income shown is after standard deductions applied. For illustrative purposes only. Assumes 25% tax bracket, 10% 401(k) contribution, $4,000 catch-up contribution and 50% employer match–up to 10%.Retirement - Insurance - Investments
26 Roth 401k? Does your Employer offer the new Paycheck Traditional 401kDistributions are all taxable at ordinary incomePre -TaxAfter TaxRoth401kDistributions are alltax free*No loans available from Roth 401kEmployee ContributionsEmployer ContributionsPre-TaxEmployer Matchtaxable at ordinary incomeDoes your Employer offer the newRoth 401k?The Pension Protection Act of 2006 has made the Roth 401k a permanent law. This is another sign that we are responsible for our retirement success. Let take a minute and look at how this new program works. In a traditional 401k you defer money from your paycheck PRE-TAX and that money continues to grow tax deferred until you retire. At that point you rollover your 401k into an IRA and as you take distributions you are taxed at ordinary income brackets. Remember, you can’t start taking from your IRA until 59 ½ without penalty and must start distributions no later than 70 1/2. The New Roth 401k allows you to defer money from your paycheck AFTER-TAX and money grows TAX FREE. When you retire you roll this account to a Roth IRA and distributions are TAX FREE. So all the growth you experience in this account is free of tax. Remember, you must be 59 ½ to touch the growth tax free but there is no 70 ½ rule that applies to the Roth 401K.Ladies, it is so important to keep learning and to examine your options. If your employer is not offering this benefit ask if they will check into adding this as a feature to your retirement plan.
27 Your projected investment Income The Key to Distribution: Taxation Taking an Inventory of Your Buckets of Money Understanding Taxation is Key to Understanding DistributionAfter-Tax ContributionBefore Tax Contribution________________________________________ ____________________QUALIFIEDNON -QUALIFIED________________________________________ ____________________QUALIFIEDAfter-Tax Contribution________________________________________ ____________________Taxed AnnuallyTaxed as Ordinary Incomeon WithdrawalROTH IRAAfter-Tax ContributionTax free withdrawalAfter-Tax ContributionThe first aspect of financial planning is understanding the titling and taxation of money. So let me teach you some terms we use in the financial planning world.[ point to each bucket and follow description on slide]Qualified money is money invested before tax and when withdrawn is fully taxable as ordinary income. An example is your 401K or IRA account.Roth IRA money is money invested after tax and grows tax free, giving the investor tax free withdrawals after age 59 ½.Non qualified money is money invested after tax and taxed annually through a 1099 or capital gain or dividend. An example of this type of account would be your savings account at the bank.Non qualified tax deferred money (an annuity) is money invested after tax, grows tax deferred, and the growth is taxed as ordinary income after age 59 ½.Tax exempt money, also known as municipal bonds, is money invested after tax and the growth is exempt from federal tax.These are the five main categories of investment dollars. When doing an inventory of your finances, it is important to know how full your buckets are and which buckets you are using. This will help identify your income flow and taxation in retirement.________________________________________ ____________________NON –QUALIFIEDTAX DEFERREDTAX EXEMPT________________________________________ ____________________QUALIFIED$________________________% _______________________Your projected investment IncomeNo Federal TaxGrowth taxed uponWithdrawal
28 Your Fixed Income Streams: ________________________________________ ____________________QUALIFIEDSocial SecurityRealEstate________________________________________ ____________________________________________________________ ____________________InheritanceIn addition to the five buckets we just reviewed, many of you will have income from additional sources.[Review slide]All of these buckets may now become your wealth and success in retirement.________________________________________ ____________________________________________________________ ____________________Pension?????
29 How should I be investing in order to work towards my goals? “I know I’m losing time. But I’m afraid to lose any more money.”When I ask my clients about their concerns for the future, many women tell me they are worried most about simply maintaining their lifestyle. They don’t want to have to worry about finances when they retire. They want to remain independent and not be a burden on their family or friends.And while saving more is essential to pursuing that goal, so is investing that savings wisely. So in this section, I’d like to focus on how you can invest now so you can potentially maintain your lifestyle later.Of course, just the mention of the word “investing” strikes fear into the heart of many women…especially given the volatility of the stock market. In fact, some of my clients like Eileen have stopped investing altogether and are waiting on the sidelines for things to settle down. Like Eileen, they know they’re losing time, but they’re afraid of losing money.In this section, I’m going to give you some practical guidelines you can use to invest wisely for your own future. We will give you a general overview of investment principles and get you started thinking about how you should be investing.So let’s get started!EileenRetirement - Insurance - Investments
30 Levels of Risks and the Asset Classes Real EstateIntl’ EquitiesSmall Cap EquitiesMid Cap EquitiesLarge Cap EquitiesLet’s start with reviewing so of the basics of asset classes or categories of investments.Here are the major asset classes that you will choose from to build a portfolio. We start at the bottom of the pyramid with cash, representing no market risk or money in the bank. The top of the pyramid represents the most market risk.A diversified portfolio may include most, if not all, of these asset classes.Fixed IncomeCashRetirement - Insurance - Investments
32 Important Information Source: ChartSource, Standard & Poor's Financial Communications.Stocks are represented by the S&P 500® Index, an unmanaged index generally considered representative of the stock market. The return and principal value of investing in a stock mutual fund or variable annuity funding option fluctuates with changes in market conditions. Stocks may offer greater growth potential in comparison to bonds, but carry more risk.Bonds are represented by long-term Treasuries (10+ years) and constructed from yields published by the Federal Reserve. The principal value of a bond varies inversely to the rise and decline of interest rates. Bonds typically offer a fixed rate of return, if held to maturity. However, bonds may contain a call feature that may be exercised prior to maturity.Cash is represented by the yield of 90-day Treasury bills and is a highly liquid security with a known market value and maturity when acquired, of less than three months.Past performance does not guarantee future results. An index is unmanaged. You cannot invest directly in an index, and indices do not reflect the portfolio of any investment.For illustrative purposes only. This example may not reflect your actual situation.Retirement - Insurance - Investments
33 S&P 500 Performance Following Recessions Stick with your strategy—even whenthe market gets rough.S&P 500 Performance Following RecessionsRecession stock market low6 months later1 year later5/26/19704.15%32.14%10/3/197434.47%38.14%3/27/198010.69%21.62%8/12/198239.25%59.26%10/11/199026.42%31.06%9/21/200117.82%-12.84%Average22.13%28.23%4.8%The hardest part of investing is staying in when the markets are down. It’s important to stick with it…even when the market gets rough.Why? Because there actually is a risk in being too conservative. In fact, not doing anything can cost you over the long-term — as this example shows.[Review example.]Of course, as the years go on and your time horizon shortens, you may need to adjust your investment strategy to be slightly more conservative to help protect you in the down markets.But the point of this example is clear. Don’t let the short-term ups and downs of the market derail you from your long-term investment goals.This chart is for illustrative purposes only. Stock market performance is based on the S&P 500®, and not illustrative of any particular investments. Source: National Bureau of Economic Research. Past performance is historical and cannot predict future results. There are risks of fluctuating prices and uncertainty with regard to rates of return and yield inherent in investing. The S&P 500 is an unmanaged index of the common stock prices of 500 widely-held U.S. stocks. An investor cannot invest directly in an index.
34 Is the return worth the risk? TIME MATTERS! Sondra Invests $4000 annuallyAgeEileen Invests $4000 annuallyAge6% return =8% return = Difference =$ 335, $ 489, $154,176.766% return = % return =Difference =$ 55, $ 62, $ 6,695.38Let’s take a look at Eileen age 55 and Sondra age 35. Up to this point we have talked about risk associated with the type of portfolio you have chosen. It is important you also look at your timeline in investing and ask yourself, is the risk worth the return I got? Remember each of the portfolios we reviewed had both up and down years. No one complains about the up years, it is the down years that can be unsettling. Let’s look at Sondra and Eileen, both investing $4,000 annually. Sondra has 30 years to retirement; Eileen has 10 years. By Sondra taking more risk and trying to get an 8% rate of return, she was able to gain $154,176. Eileen, with 10 years to retirement, would gain $6,695. By increasing the risk of the portfolio we increased our potential for a higher rate of return, but we also increased our potential for greater losses. Is the risk worth it? Know you risk tolerance and balance it with your age and time frame.Know your risk tolerance and balance it with your age and time frame.Rates of return are hypothetical and not indicative of any actual investment, which will fluctuate and may lose value.Retirement - Insurance - Investments
35 Types of money and taxation Time to ReviewTypes of money and taxationHow you should invest in relationship to your risk toleranceImportance of staying in the marketHow age plays a roll in your investment decisionsWe have covered a lot of material.[Review slide]If you are feeling overwhelmed this is a good sign you should begin building a relationship with a financial professional. We will talk a little more about that towards the end of our presentation today.
36 Am I prepared for the future? “I’ve been so focused on saving. I never gave much thought to how I would manage those savings for future needs.”So let’s talk about how prepared you are for your future.Up until now, we’ve been talking a lot about saving more…and investing well…But I don’t want you to get the idea that “retirement” is an end goal — it’s a new beginning. Remember, you’re going to be retired for 20 or 30 or more years. So as part of your retirement planning, you’ll also have to consider how you’re going to spend your savings wisely over two or three decades and not run out.[Review quote.]With all of that in mind, let’s talk about maximizing your retirement resources.DonnaRetirement - Insurance - Investments
37 Organize Your Assets into Categories Create an emergency fund that could cover up to six months’ expensesSeparate remaining assets into three categories:Short-term money to help cover your basic expensesMid-term money to help cover your lifestyle needsLong-term money that might grow and help balance rising costs of inflationOne of the key ways to spend wisely throughout retirement is to start by organizing your assets. And generally, I advise my clients to think about arranging their portfolios into several key categories.The first step is to look at your emergency funds. You’ll want to re- evaluate exactly how much you need for emergencies now that you’re no longer working.>What are some things you might need to draw upon your emergency fund for in retirement? [Solicit feedback]Divide the rest of your savings into three categories.Short term spending - money for every day billsMid term spending – your lifestyleLong term resources – money that’s still growing to help fight inflationRetirement - Insurance - Investments
38 Short Term: Have a steady stream of cash to pay your basic expenses What goes in:Social SecurityPensionPart-time incomeRental incomeInvestment incomeWhat it covers:FoodHousingUtilitiesTaxesHealth CareInsuranceEmergenciesLet’s look at what goes in — and is paid out of —your short-term resources. Remember, this is your basic cost of living.[Review slide]
39 Mid-term: Once basic cost of living is covered, fund life style needs. TravelEntertainmentHouse/car repairsEducationOnce you have your basic cost of living covered, you can now think about tapping into your mid-term money for your lifestyle.How much money do you need to create the lifestyle you desire? Where does that money come from? Remember, we have covered your basic living expenses, is there any money left over?How much do you need and where does this money come from?
40 Long Term: Stash some cash away for the long term. How do you keep your portfolio growing?Withdrawal of 5% if the portfolio growth is 7%Keep a piece of your portfolio in reserveAdditional income in order to continue the growth of your portfolioGiven how long you’ll likely be retired, we still need to address getting some growth in your portfolio.So the third thing we need to look at is how to keep your portfolio growing.If we can define how much money you need for your emergency fund, your short term funds, your midterm funds, your long term funds, and we add all those together – we have now identified your retirement need.Rates of return are hypothetical and not indicative of any actual investment, which will fluctuate and may lose value.
41 Don’t withdraw from your tax-deferred plans too early or too late. Your tax-deferred savings limit when & how you take your money.Type of Tax When It Applies How Much It May BeEarly Withdrawal Generally, if you withdraw 10% of amount Penalty prior to age 591/2 withdrawnRequired Minimum If you don’t withdraw at least 50% of Minimum Required Distribution the Minimum Required Distribution not taken Penalty Distribution beginning at the later of retirement or April 1st of the year after you turn age 701/2One thing to keep in mind. In your retirement years Uncle Sam has lots of rules and regulations that you will want to learn.For the most part if you withdraw too early and you will pay a 10% early withdrawal penalty on top of federal and state income tax. So remember, it is good to have a lot of different buckets of money that are taxed differently so you may be able to retire early.On the other hand, if you haven’t taken your money by 70 ½, Uncle Sam does want you to start taking withdrawals from your retirement plan. This is called a required minimum distribution. If you don’t take the required minimum distribution you will have to pay a truly whopping 50% penalty equal to the amount you should have withdrawn.So it pays to ask your financial professional about when you should — and shouldn’t — take withdrawals.
42 Don’t withdraw too much too fast. Donna withdraws 10% each year…And runs out of money in 11 years.Sondra withdraws 5% each year…And it lasts 24 years.Eileen withdraws 7% each year…And runs out of money in 16 years.One other principle of spending wisely…don’t withdraw too much too fast. Remember, whatever resources you have will likely need to last you well into your 80s and even your 90s! Who knows…maybe 100!>Let me ask you a question: what % of your retirement savings do you think you can afford to withdraw each year…without running out of money prematurely. Say you have a $200,000 stash put away. What % of that would you want to withdraw each year. [Solicit feedback.}Well, let me show you an example:[Review example on slide - how long $200,000 in personal savings will last with 10%, 7%, and 5% annual withdrawal rates.]This chart assumes a retirement balance of $200,000, an average inflation rate of 3%, and an average fixed rate of return of 4%. This chart is for illustrative purposes only and is not indicative of any investment. Past performance is no guarantee of future results.
43 Everyone has a different number Everyone has a different number, do you know yours?
44 Don’t Feel You Have to Go it Alone A financial professional:Helps you evaluate your entire financial situationProvides objective inputExplains risks and optionsOffers choices personalized to your situationOperates from experiencePreparing for your tomorrow can be overwhelming and there is a lot to learn. So building a financial team to work with you is very important. One of the key members of your team will be your financial professional. This person will:[Review slide]Choosing the right financial professional is about building a relationship with someone you can trust and someone who communicates in a way you can understand.Retirement - Insurance - Investments
45 Don’t Wait any Longer to Move Forward! Whatever you do, the most important thing is that you do something.Here are three sample resolutions Donna, Eileen, and Sondra might have made after hearing this seminar. But now, what will you do?[Re-weight means re-balance.]But now, what will you do?Make financial planning a priority!Retirement - Insurance - Investments
46 Retirement Planning for Women [Introduce yourself and welcome the audience to the seminar: Retirement Planning for Women: What you can do today to better prepare for tomorrowProvide a brief overview of the seminar. Mention that this seminar is specifically designed to help women take the proactive steps now to help them prepare for their own future.Give your qualifications and experience with retirement planning.[If you specialize in assisting women investors, talk about this as well.]Note to presenters:> signals an opportunity for interaction Give attendees an approved business card with the worksheet.Thank You!Retirement - Insurance - Investments4646
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