AIG VALIC Retirement Services For Foothill De Anza

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

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

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

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

Retirement today: What’s different? 5 of 61

Retirement can last 20 - 30 years The evolution of retirement planning 1900 - 1935 Retirement was only for the wealthy and those few with pensions 1935 - 1975 Social Security, pensions, defined contribution plans, IRAs, tax incentives to save 1975 - Present Living longer, retiring earlier, expecting more in retirement 6 of 61

Medical costs are increasing faster than inflation 25% 20% 21. 38% 16. 75% 10% 5% 6. 98% 0% 7 of 61

Revisioning Retirement study 8 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 9 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 10 of 61

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

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 32% of those surveyed • Little they can do to improve their situation - just trying to hang on 12 of 61

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

Lesson 1: Save more, save longer 24 19 11 15 of 61

Lesson 1: Save more, save longer The cost to accumulate $300, 000 $ This example compares the total outof-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. 16 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. 17 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 18 of 61

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

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

Retirement summary 21 of 61

Lesson 3: Get assistance Revisioning Retirement: Who received assistance? 60% Ageless Explorers 38% Live for Todays 47% Comfortably Contents 22% Sick and Tireds 22 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 23 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 24 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 25 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 26 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? 27 of 61

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

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

403 b Contribution Limits 100% of Includible Compensation up to $15, 500 Age Based Catch Up of $5, 000 for employees age 50 and over 30 of 61

403 b Benefits to Employees Contributions made on a “Pre-Tax” basis Defer current income taxation on contributions and earnings Salary Reduction -- Easy to participate! 31 of 61

403(b) Withdrawal Restrictions Availability of funds generally subject to: Separation from service Age 591/2 Disability Death Hardship 32 of 61

403(b) Tax Penalties on Early 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 33 of 61

403(b) Taxability Pre-tax contributions Tax-deferred earnings Taxed as ordinary income when withdrawn Subject to minimum distribution rules at age 70½ 34 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 35 of 61

403 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 36 of 61

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

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

457 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 403 b and 457 at the same time! 39 of 61

457(b) Contribution Limits 100% of compensation not to exceed $15, 500 in 2007 Age 50 + catch up is $5, 000 in 2007 40 of 61

457(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 41 of 61

457(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 42 of 61

457(b) Taxability Pre-tax contributions Tax-deferred earnings Taxed as ordinary income when withdrawn Subject to minimum distribution rules at age 70½ 43 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 44 of 61

Thank You! 45 of 61

Securities and investment advisory services are offered by VALIC Financial Advisors, Inc. , member NASD, SIPC and an SEC-registered investment advisor. AIG VALIC is the marketing name for the group of companies comprising VALIC Financial Advisors, Inc. ; VALIC Retirement Services Company; and The Variable Annuity Life Insurance Company (VALIC); 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 VALIC 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 16197 9/2004 46 of 61