Saving for Retirement Its Easier Than you Think

Saving for Retirement: It’s Easier Than you Think Chapter 7

Where do Women Stand? Z A smaller percentage of women than men participate in a pension plan at work. Why? Because they work fewer years. Z Because they are more likely to move into and out of the labor force, women are less likely to be entitled to the full benefit of an employer’s pension plan or profit-sharing plan.

Where do Women Stand? Z On average, women in the United States live about 5 1/2 years longer than men. Bottom line: we need $ to live on. Z In 2004, men age 65 and over have an average annual income of more then $32, 000, compared with just over $17, 000 for women

Women and Retirement Z Women will have to provide for themselves financially for more years of retirement than men Z For many of those years women are likely to be alone or in some cases, they will be in assisted living facilities (long term care insurance plays a valuable role in this scenario) Z Yet women tend to earn less than men Z Women participate in the work force less steadily Z Losing income and job seniority and pension and entitlement buildups. Z Women are less likely than men to fully participate on a pension or profit-sharing plan

Retirement Words to Live By ZSave Early, Save Regularly, Save Aggressively. – the mantra of this class ZStart Small, and Think Big. ZStart NOW. It’s never too late.

How Much Will You Need? Z When looking at needs for retirement, don’t be intimidated- or worse, paralyzed. Z Everyone’s retirement needs will be different, and there are many ways to cut down on your expenses, or supplement your income from a variety of sources, to see you through your retirement years

How Much Will You Need? Z Kiplinger’s estimates that you will need 75 -80% of your pre-retirement income to maintain your standard of living – Note this is your income when you retire not today’s income Z A conservative guideline suggests that if you withdraw only 4%- or 1/25 th- of your retirement nest egg during the 1 st year and subsequent years of retirement, you might not outlive your wealth

How Much Will You Need? Z You would also be entitled to Social Security payments and possibly pension benefits through your employer. But beware, these benefits for the younger generations will not be as generous once the Baby Boomers have lived through their retirement Z Bodnar states that young workers don’t need to get hung up on a specific target for their retirement nest egg. Z I tend to disagree and therefore feel that you need to become well versed in how much you need. Aim for a goal…

3 Legged Stool Z Social Security/Medicare Z More Important for Women than Men Z Shortest leg on the stool – Remember David Walker Z Employer Pensions Plans A lesser option for younger generations coming of age. Z Private Savings The most important leg in the stool – 401 K’s, IRA’s, SEP IRA’s etc.

Investing for Retirement: A Strategy Z Save as much as possible as early as possible and be prudent about your investments Z Avoid stashing too much of your money in “safe” investments Z Diversity your investments Z Stocks Z Bonds Z Mutual Funds Z Real estate might be an option if you are into rental properties

Run, Don’t Walk, to Open an IRA Z What is an IRA – Individual Retirement Account Z Widely available Z Anyone who has income from a paying job can have one, even stay at home mom’s can have an IRA Z Money you put into the account grows taxdeferred. Z Meaning you don’t have to pay tax on the earning as they accrue, so more of your money is working on your behalf- and reaping the bountiful rewards of compound interest.

Traditional IRA’s in a nutshell Z Tax deductible contributions – certain situations will dictate how much you can deduct – check with your accountant Z Withdrawals begin at age 59 ½ and are mandatory by 70 ½ Z Taxes are paid on earnings when withdrawn from the IRA. Z Inheritance taxes are very high on traditional IRA’s. Z Funds can be used to purchase a variety of investments Z Available to everyone; no income restrictions Z All funds withdrawn before 591/2 are subject to a 10% penalty (subject to exception)

Roth IRA’s in a nutshell Z Contributions, ie. what you put in are not tax deductible Z No mandatory distribution age Z All earnings and principal are 100% tax free if rules and regulations are followed Z Funds can be used to purchase a variety of investments Z Available only to single-filers making up to $95, 000 or married couples making a combined maximum of $150, 000 annually Z Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions) Z Roth withdrawals cannot cause social security benefits to be taxed Z The balance of your Roth goes to heirs tax free

Where can you open an IRA ZMost brokerage firms, banks, etc. will offer IRA’s and the minimum investment varies by institution. Check online for the firm that works best for you.

Who can help you make this decision ZFinancial planner, accountant, or other advisors ZContinue to update yourself on rules and regulations as part of our ongoing learning process ZA blend might be good for you as you piece together your retirement puzzle

A Retirement Plan for Stay-at. Home Moms Z For married women, one of the great features of an IRA is that you can have one even if you don’t have a paying job, as long as your husband if employed. Z Often times these spousal contributions can be deducted form your taxes

Take Full Advantage of a 401(k) Z Some companies offer a company match- 50 cents on the dollar is common, and some employers are even more generous Z Tax Breaks Z Because contributions you make to the plan come right off the top of your salary, that money is not taxed by the IRS. Z As with IRS, earning inside the plan aren’t touched by taxes, ie no capital gains taxes

Plan for a Joint Retirement ZDon’t get yourself into a situation where all the retirement money is in your husband’s name and all your own earnings have gone to paying for shorter-term expenses

Max out your 401(k)? Z After I have reached the limit that my employer will match on my 401(k), should I invest additional retirement savings in a Roth or max out my 401(k)? Z the Ideal would be to max out your 401(k) and contribute the full amount to an IRA. If you cant afford both, the Roth gets the nod

How Retirement Plans Philanthropy Work Together ZIf you elect to do so, you can assign over your 401 K plans and IRA’s to benefit a charity of your choice. This is a great way to leave a legacy for your philanthropy of choice – more to come on this in philanthropy.

Find Money you Didn’t Know you Had Z Your Uncle Sam return Z Update your W-4 Form to make sure that you are getting the maximum due back to you. Z Your savings from refinancing your home Z Your insurance Premiums Z Insurance rates are down, Shop Around! Z Your Car Insurance Z Your Mortgage Insurance Z Do you still need it?

Don’t Stop Now! Z Use a retirement-planning calculator to estimate how much money you’ll need in retirement Z Identify the extra $20 per week that you could redirect into your retirement savings Z Decide whether a traditional or Roth IRA is better for you and open one

Don’t Stop Now! Z Open an IRA if you’re a stay-at-home mom, and fund it from your husband’s income Z Stash at least enough money in your 401(k) to get the maximum employersponsored match Z Revise contributions as necessary to even out the amounts in your husband’s and your respective accounts