Is Retirement Within Your Reach?
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Is Retirement Within Your Reach?. Is a retirement plan really necessary?. Your Retirement Goals. What’s your choice?. Retire by age ? Work part-time? Travel? Buy home in warmer climate? Reduce lifestyle? Maintain or increase current lifestyle?.

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Your Retirement Goals

What’s your choice?

Retire by age ?

Work part-time?

Travel?

Buy home in warmer climate?

Reduce lifestyle?

Maintain or increase current lifestyle?



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When do you plan to retire?

$1

$4

How much to save?

Age 55

Age 35





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Sources of Retirement Income

  • Company Retirement/Pension Plans

  • Social Security

  • Individual savings

    Tax deferred or taxable

  • Part time work



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Estimating the Amount to Save

  • Retirement income goal

  • Social Security and Pension income

  • Additional income needed

  • Value of assets currently owned

  • Revised amount to save



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Social Security

  • Contribute for 40 quarters

  • Replacement rates between 59% and 24% depending on income earned

  • Collect full benefits at designated retirement age


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Full Retirement Age by Year of Birth

Year of Birth Full Retirement Age

1937 & earlier 65 years 1938 65 years, 2 months 1939 65 years, 4 months 1940 65 years, 6 months 1941 65 years, 8 months 1942 65 years, 10 months 1943 - 1954 66 years 1955 66 years, 2 months 1956 66 years, 4 months 1957 66 years, 6 months 1958 66 years, 8 months 1959 66 years, 10 months 1960 & after 67 years


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Check Social Security Records

  • SSA will automatically mail your statement of retirement, disability & survivor benefits 90 days before your birthday

  • Use “Requests for Earnings and Benefits Form” from Social Security office or call

  • 1-800-772-1213 or consult web site www.ssa.gov

  • Save IRS W-2 Forms


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Retirement Plans

  • Company Retirement Plans

  • Salary Reduction Retirement Plans

  • Individual Retirement Accounts (Traditional or Roth)

  • Plans for the self-employed



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Maximize benefits from your Retirement Plans

  • Begin contributions as soon as possible.

  • Make maximum contributions allowed, if possible.

  • Choose investments that pay high earnings


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Saving in a Tax Deferred versus a Taxable Account

Years

10

20

30

40

Taxable Account

$ 24,420

$ 59,201

$108,740

$179,279

Tax Deferred

$ 26,414

$ 69,414

$139,679

$253,679


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Individual Retirement Accounts

  • Tax-deferred retirement program

  • Must have earned income or alimony

  • Contribute up to *: $4,000 in 2005-07

    $5,000 in 2008

*Amounts shown are for individuals.

Amounts double for couples.


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Traditional Individual Retirement Accounts

  • Fully deductible from income taxes if no retirement plan at work.

    OR

  • May be partially or fully deductible based on Adjusted Gross Income.



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Deductible IRA Contributions

Reduce taxable income

Report on 1040 tax form


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Traditional Non-deductible IRA Contributions

File IRS Form 8606 with Federal Tax return

Retain copy permanently


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Investing in Traditional IRAs

  • Check yearly maintenance fees.

  • As IRA grows in value see if fee can be removed.

  • 10% penalty plus taxes on amount withdrawn before age 59 1/2.


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Roth IRA

Contributions made with after-tax dollars

No mandatory age for withdrawals

No mandatory age limit for contributions

Contributions (after-tax dollars) always available for withdrawal without penalty


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Roth IRA Rules

  • Withdrawals of earnings are not taxed if…

    • Account is 5 years old and

    • You are at least 59 ½ or

    • Earnings up to $10,000 are being

      used for first time home purchase

      or

    • Higher education for self, family & grandchildren


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Roth IRA Contributions

  • Make contribution to Roth IRA until April 15 for previous year.

  • The 5 year waiting period for tax free withdrawal of earnings begins with the year of the first contribution.

  • Ordinary IRA funds converted to Roth IRA must remain at least 5 years or a 10% penalty will apply.


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Investing in IRAs

Don’t have $4,000 all at once? Consider making automatic monthly payments from checking account or payroll deduction.


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Investing In An IRA

  • Contributions held in a custodial account

  • Accounts can be at any financial institution, bank, credit union, mutual fund company, brokerage account.

  • Invest for high return.


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Timing IRA Contributions

  • Make contributions as early in year as possible

  • Can make previous year’s contribution until April 15th, but tell account custodian it is for the previous year


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IRAs - An Example of Return on Investment

Contributions made only between ages 22-30 (9 years)

  • $2,000 contributed each year

  • Total investment of $18,000

  • At an interest rate of 9% by age 65 will have $579,471


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IRAs - An Example of Return on Investment

Contributions made only between ages 31-65 (35 years)

  • $2,000 contributed each year

  • Total investment of $70,000

  • At an interest rate of 9%, by age 65 will have $470,249


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E. M. I. L. Y.

Early money is like yeast, it helps your dough rise!


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IRA Direct Transfers

transfer of IRA funds from one IRA custodian to another



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Finding Money to Save

One cup of coffee at $1.00/cup x 5 days x 50 weeks = $250/yr.

One soft drink at $1.00/each x 5 days x 50 weeks = $250/yr.

2 video rentals/week @ $3.00 each x 50 weeks = $300/yr.

One fast food meal/week @ $5.00 = $250/yr.

TOTAL SAVED = $1,050/year

Other ideas?


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Retirement Planning Has Changed!

  • More self-directed

  • No “guarantees”

  • Living longer

  • Portable plans

  • Inflation & taxation



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Is Retirement Within Your Reach? baggage and twice as much money!


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