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Download 1 SAVING : INVESTING : PLANNING Retirement planning 1 SAVING : INVESTING : PLANNING PREPARE Retirement Income Planning Planning for Financial Security

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  • Slide 1
  • 1 SAVING : INVESTING : PLANNING Retirement planning 1 SAVING : INVESTING : PLANNING PREPARE Retirement Income Planning Planning for Financial Security
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  • 2 SAVING : INVESTING : PLANNING
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  • 3 3 1Retirement planning 2Sources of retirement income 3Cost of procrastination 4Action steps
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  • Retirement Planning 1
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  • 5 Seminar objectives Comprehensive education > Resources that will assist you in reaching your goals Action steps > How are you going to get there and by when? Personalized plan > Whats your lesson plan look like? 5
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  • 6 Retirement planning Reasons to start planning now: > Benefit from tax advantages > The power of compound interest > Social Security and pensions arent enough > Rising cost of living 6
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  • 7 Retirement costs Planning for retirement > How do you visualize retirement? Years in retirement will exceed the number of years worked > What are your necessities? > How much will it cost? 780 opportunities to save > Where will the money come from? 7
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  • 8 Retirement costs Total income needs Assumes a 3% annual inflation rate. 8
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  • Sources of retirement income 2
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  • 10 Sources of retirement income 10 19% Social Security 42-45% Employers Pension Plan 36-39% Personal savings and investments
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  • 11 Sources of income Social Security > Eligibility > Full retirement age 11
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  • 12 Sources of retirement income Social Security Year of BirthFull Retirement Age% Received at Age 62 1937 or before6580.0 193865 + 2 months79.1 193965 + 4 months78.3 194065 + 6 months77.5 194165 + 8 months76.6 194265 + 10 months75.8 1943-19546675.0 195566 + 2 months74.1 195666 + 4 months73.3 195766 + 6 months72.5 195866 + 8 months71.6 195966 + 10 months70.8 1960 and after6770.0 12
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  • 13 Sources of retirement income State sponsored plans > Pension/defined benefit plans (MPSERS) Depending on Basic or MIP members, 30 YOS and generally between ages of 52-55 Benefits are based on a set formula May be inflation protected Becoming less common 13
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  • 14 Sources of retirement income Employer-sponsored plans > Defined contribution plans Traditional 403(b) and Roth 403(b) 401(a)/401(k) > Deferred compensation plans 457(b) 14
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  • 15 Sources of retirement income Why contribute to your employers plan? > Pretax contributions > Tax-deferred growth > Dollar-cost averaging 15
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  • 16 Sources of retirement income Paycheck comparison Taxable AccountTax-qualified Savings Plan Salary$3,000 Pretax contribution$0$200 Taxable income$3,000$2,800 * Federal marginal income taxes$750$700 Total take-home pay$2,250$2,100 After-tax savings$200$0 Net take-home pay$2,050$2,100 This table is hypothetical and only an example. It does not reflect any specific investment and is not a guarantee of future income. *25% marginal tax rate and single filer. 16
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  • 17 Sources of retirement income Dollar-cost averaging DateQuarterly InvestmentShare ValueShares Purchased January 15$500$1533.33 April 15$500$1729.41 July 15$500$ 955.55 October 15$500$1241.66 Totals$2,000$13.25 (avg)159.95 shares Average price per share$13.25 Average cost per share$12.50 ($2,000 159.95) This table is hypothetical and only an example. It does not reflect any specific investment and is not a guarantee of future income. 17
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  • 403(b) retirement plan
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  • 19 403(b) Maximum contribution > $17,500 in 2013 Catch-up contributions > 403(b) catch-up provisions > If age 50 or older, an additional $5,500 in 2013 19
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  • 20 403(b) Investment flexibility Accessing your money > Attainment of age 59.5 > Substantial equal payments 72(t) > Separation from service in the year in which you turn 55 or older
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  • 457(b) Deferred compensation plan
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  • 22 457(b) Deferred Compensation Plan Maximum contributions > $17,500 in 2013 Catch-up contributions > 457(b) catch-up provisions > Age 50 or older, an additional $5,500 in 2013 22
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  • 23 457(b) Deferred Compensation Plan Investment flexibility Accessing your money > Separation from service regardless of age 23
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  • Side-by-side 403(b), 457(b) programs
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  • 25 Side-by-side 403(b), 457(b) programs Increased contribution limits > Annual maximum may be contributed to 457(b) and a 403(b) > Eligible catch-up may be contributed annually to 457(b) and either a 403(b) or 401(k) 25
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  • 26 Side-by-side 403(b), 457(b) programs Roth 403(b) > After-tax contributions > Maximum contribution $17,500 in 2013 > Catch-up contributions $5,500 (age 50 and older) 403(b) catch-up provision > Tax-free earnings > Tax-free distributions after five years and Attainment of age 59 Death or disability 26
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  • 27 Sources of income Summarizing ages of distributions from sources > Social Security Reduced benefit at 62 > MPSERS Generally 52-55, assuming 30 YOS and no purchased years > Personal Savings 403(b), 401(k), IRAs generally 59.5 457(b) separation from service
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  • The cost of procrastination 3
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  • 29 The cost of procrastination Start at age 25Start at age 35Start at age 45 At age 55 $74,518 At age 55 $29,451 At age 55 $9,147 Investing $50 a month earning 8% annually
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  • 30 The cost of procrastination Retirement planning considerations > Estimated cost of retirement > Expected income sources > Current savings rate > Maximization of contribution limits > Investment options > Time horizon
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  • Action steps 4
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  • 32 SAVING : INVESTING : PLANNING 32 Action steps 1Calculate the cost of retirement 2Create a plan 3Take advantage of tax-qualified plans 4Increase savings with increases of pay
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  • 33 Action steps Take action
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  • 34 Action steps Evaluation
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  • 35 Retirement planning 1 SAVING : INVESTING : PLANNING THANK YOU Retirement Income Planning Michael DeTone, CFP 248.274.7200 Planning for Financial Security michael.detone@valic.commichael.detone@valic.com
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  • 36 The information in this presentation is general in nature and may be subject to change. Neither VALIC nor its financial advisors or other representatives give legal or tax advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For legal or tax advice concerning your situation, consult your attorney or professional tax advisor. Securities and investment advisory services are offered by VALIC Financial Advisors, Inc., member FINRA and an SEC-registered investment advisor. VALIC represents The Variable Annuity Life Insurance Company and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company. Copyright The Variable Annuity Life Insurance Company. All rights reserved. VALIC.com VC17899 (02/2012) J85320 EE

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