1. Retirement Saving Vehicles
(that everyone should know)

2. This program is provided through a grant from the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation and the American Library Association (ALA). The grant is distributed as part of the library® initiative, an ALA program. This project is in its sixth year of educational partnership with libraries across Colorado and the country.
Marsha Yelick CFA(retired)
Financial Programs Consultant
Ext 831

3. Protect savings from taxes (legally)
“Nothing is certain but death and taxes.” Daniel De Foe
Retirement is very long and costs lots of money!
It is your responsibility to provide for your own retirement.
Earn more than you spend. Protect the rest from TAXES!
The most common mistakes in money management
can be fixed with a simple plan.
Major themes du jour

4. Why should I have to save for retirement?
Who ME?

5. Generations before the baby boomers (1946)
In the past, you were responsible for only 1/3.
The past…

6. The present Plan on providing ALL your retirement income!
Tax-deferred savings
Tax-free savings
After-tax savings
The present
OR you could plan to work well into retirement
(baby boomer solution #4)

7. Tax deferred savings How to save for retirement
Our IRS regulations encourage us to do this!

8. Types of tax deferred savings
There are many tax deferred vehicles.
IRAs Individual Retirement Accounts
Traditional
Roth
Etc.
Employee Sponsored Retirement Accounts
401(k)
403(b)
Defined Benefit Plans
Small Business Plans
Simple
SEPs
Types of tax deferred savings

9. Why is Tax Deferred Better? Advantages (since 1974)…
Money that is tax deferred will grow (compounding) without taxation.
Advantages

10. Disadvantages Tax Deferred Disadvantages Government regulations
You must know the rules

11. Traditional or Roth? IRAs either when you put money in (ROTH)
You will pay taxes sometime
either when you put money in (ROTH)
or when you take money out (TRADITIONAL)

12. Major Points to Remember
IRAs
Major Points to Remember
You must have earned income to contribute (a paycheck)
Some contributions are tax deductible in year of contribution
There are limits as to how much you can contribute – based on age, type of account, taxable income
There are deadlines for contributions, April 15
There may be taxes and penalties depending on when you withdraw money
You may have to withdraw money (age 70.5)
You may have to pay taxes on withdrawals.
Etc.
Traditional or Roth?

13. Traditional or Roth? IRAs
Major Differences
Traditional has no taxes going in, taxed going out
Roth is taxed going in, no taxes going out
No Required Minimum Distribution for Roth
Roth has no age limit for contributions (earned income needed)

14. When you leave your employer, convert your 401(k) to a rollover IRA.
Control (no rules from EX)
Timely information
Investment flexibility
Lower fees possible
“ROLL” TO A ROLLOVER IRA
Rollover IRA

15. 401(k) upside The GREAT 401(k) since 1982
It’s much like an traditional IRA, except...
It’s painless – payroll deduction
It’s regular – dollar cost averaging
It’s portable if you change employers
Sometimes, there’s free money
Limits are higher

16. 401(k) downside The disadvantages of the 401(k)
Tax-deferred money only
Employer rules on top of IRS regulations
Hidden fees
Choices too numerous, too complex, and not what you want
Incomprehensible statements
Drifting to autopilot. Ouch!
401(k) downside
Remember – “ROLLOVER”

17. Annuities Another way to tax-defer (since 1912 in U.S.)
A contract between one or more individuals and an insurance company, where the insurance company agrees to provide regular, periodic income to the individual(s) in exchange for payment
(the money grows tax deferred at the insurance company)
Annuities

18. Buy if you have specific need
Annuities – long term
Know what you are getting into. READ AND UNDERSTAND ALL OF THE FINE PRINT!

19. Special tax protection
A few other methods to avoid taxes (legally) although you may not be around to see the benefit
Tax exempt bonds, rental real estate, expatriation, create a company, trust, or foundation
Life insurance (proceeds paid to your heirs are paid outside of your estate with no tax due)
Buy and hold stocks or bonds (capital gains forgiven and receiver has new basis based on date of your death)
Buy and hold real estate (depreciate to protect income, capital gains forgiven and receiver has new basis based on date of your death)
Special tax protection

20. Most common tax protections…

21. So how are Americans doing?
Are American Saving?

22. So how are Americans doing?
Are American Saving?

23. How much do I need to retire?
Whatever resources of good health, character, and fortitude you bring to retirement, remember also to bring money!
How much is enough?

24. Rules of thumb Some ways to estimate: The EXPERTS say...
8 to 16 times your final salary ($50,000 x 12 = $600,000)
Annual needed income multiplied by 25 you think ($50,000 x 25 = $1,250,000)
$1,000,000 for an income of $50,000
33 times annual retirement spending ($50,000 x 33 = $1,650,000)
When you’re young, save 10% of earnings, move to 15% in middle age.
If you are close to retirement, figure you will need 70 – 90% (or more) of your preretirement income each year in retirement.
Remember to factor in inflation.
Rules of thumb

25. Calculators Use and REUSE online calculators
Figure out what you need to save each year to reach your goal.
Calculators

26. Scary things to consider
Social Security cutting benefits Increasing life expectancy
Working longer
INVESTING retirement monies
(low interest rates)
Another rule of thumb

27. Simple Keys Live on less – Save the Rest
Review KEYS to Retirement Saving
Simple Keys
Live on less – Save the Rest
You have more money to save.
You learn to live on less.

28. Slowly shift some of your allocation from stocks to bonds.
Remember the allocation “decade”
Every birthday that ends with a ZERO (20, 30, 40, 50, 60, 70, 80, 90, etc.),
Allocation
Slowly shift some of your allocation from stocks to bonds.

29. Before retirement Prepare today for happy tomorrows!
Check list for success
A successful and stress-free retirement is up to you.
Before retirement
Prepare today for happy tomorrows!

30. Thank you for attending
Be money SMART for life
Thank you for attending