2. CHAPTER 18Slide 1 of 9 Chapter 18. FINANCIAL PLANNING FOR THE LATER YEARS Preparing for Retirement, the Empty Nest, Your Budget and Your Pension A. If Not For You, Then For Your Parents B. Reaching Financial Maturity 1. Housing a. Staying as is? b. Becoming renters? c. Buying another dwelling? d. Refinancing an old mortgage? e. Profit potential? 2. Investing a. Staggered maturities

3. CHAPTER 18Slide 2 of 9 B. Reaching Financial Maturity, (continued) 3. Insurance 4. Activities and idleness 5. To work or to retire? 6. Alert for the older single person 7. Alert for domestic partners 8. Alert about health care

4. CHAPTER 18Slide 3 of 9 C. Financial Arrangements for the Later Years 1. The specter of inflation 2. Shaping the Budget (See Personal Action Worksheet, Text page 547) 3. The income sources a. Income from Social Security b. Income from pensions and profit-sharing plans c. Income from investments d. Income from working

5. CHAPTER 18Slide 4 of 9 4. The principal sources a. Equity in the home b. Life insurance values c. Pension and profit-sharing lump sum distributions d. Business interests e. Non-earning assets f. Potential inheritances 5. Nest-egg dipping - How much and for how long?

6. CHAPTER 18Slide 5 of 9 D. Tax and Pension Laws - How They Affect the Rights of Workers and Retirees 1. The effect on retirement age 2. The Federal Pension Reform Law (ERISA) a. Vesting b. Funding c. Folding d. Reporting e. Managing investments 3. New twists on old pensions - Now you see it, now you don’t a. Cooking the books?

7. CHAPTER 18Slide 6 of 9 E. Do-it-Yourself Pensions - IRAs, Keoghs, 401(k)s, etc. 1. Individual Retirement Accounts (IRAs) a. Tax deferral of the standard IR b. Tax deductibility of the standard IRA c. Penalties for early withdrawal from standard IRAs i. Avoiding the penalties 2. The New IRAs a. The Roth Ira i. Converting standard IRAs to Roth IRAs b. The Education IRA 3. 401 (k) plans 4. Simplified Employee Pensions (SEPs) 5. Keogh plans for the self-employed

8. CHAPTER 18Slide 7 of 9 E. Do-it-Yourself Pensions..., continued 6. Setting up and relocating your do-it- yourself plans 7. How to invest your do-it-yourself plans F. Pensions and Taxes 1. Lump sum payout vs. monthly payments 2. Minimizing the tax bite a. The IRA rollover b. Forward averaging G. One Final Caution

9. CHAPTER 18Slide 8 of 9 TALKING POINTS… Chapter Eighteen, Number One Your parents have always lived it up. Not wastefully, but enjoyably. They always seemed to have enough money to do what they wanted to do. Retirement is on their horizon - perhaps 5 to 10 years away. How would you react, in word and deed, to the following discoveries? 1. They have spent every dime. They have no savings. No investments. Their pensions and Social Security will provide them with about 40% of their pre-retirement income. 2. They don’t see why they should change their lifestyle while they are still working and earning. 3. Their house is mortgaged to the hilt. They have virtually no equity, having refinanced many times over the years. 4. They tell you that they expect you and your siblings will help them out if they need help, just as they had helped their parents (and they had, quite handsomely.)

10. CHAPTER 18Slide 9 of 9 TALKING POINTS… Chapter Eighteen, Number Two You and your spouse have children of your own. You are both working and earning good money. Retirement is still a distant goal - perhaps 20 to 30 years away. You have been spending quite freely, enjoying the fruits of your labors, and have not given much thought to the long term future. How would you expect your children to react if you had to tell them the following 15 or 20 years from now? 1. We have spent every dime. We have no savings or investments. Pensions s and Social Security will provide us with about 40% of our working income. 2. We want to continue with our life-style while we’re still working. 3. Our house is mortgaged to the hilt. We have virtually no equity. 4. You tell them that you hope they will help you out if you need it - and they have no clue as to how much you helped out your parents, unless you tell them now.