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Planning for Retirement. N.C. Department of Environment and Natural Resources. Why is Retirement Planning Important?. Good Question! Here are some more questions…..Pop Quiz!. At what age do you plan to retire?. Never! I’ll have one foot in the office and the other in the grave! 70 or above

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Planning for retirement l.jpg

Planning for Retirement

N.C. Department of Environment and Natural Resources


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Why is Retirement Planning Important?

Good Question!

Here are some more questions…..Pop Quiz!


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At what age do you plan to retire?

  • Never! I’ll have one foot in the office and the other in the grave!

  • 70 or above

  • 65-67 (or age when I’d get full social security benefits)

  • 60 or below


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How Long Will You Be In Retirement?

(What is your life expectancy)


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Fill in the Blank: The general rule of thumb is that retirement income will need to replace ____% of your working income.

  • 30-60%

  • 40-70%

  • 70-100%


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In 2008, the average replacement percentage of average final compensation for all new retirements in the N.C. Teachers and State Employees’ Retirement System was ____%.

  • 85%

  • 65%

  • 45%

  • 25%


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Time to Answer All of Our Questions! compensation for all new retirements in the N.C. Teachers and State Employees’ Retirement System was ____%.


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At what age do you plan to retire? compensation for all new retirements in the N.C. Teachers and State Employees’ Retirement System was ____%.

  • This answer depends on your personal goals, but:

  • Beware of “Never”: you still need to plan for retirement even if you never plan to retire!

  • Remember, the earlier you plan to retire, the more planning you have to do!


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Did You Know? compensation for all new retirements in the N.C. Teachers and State Employees’ Retirement System was ____%.

A 65-year-old man has a 20% chance of living to age 90.

A 65-year-old female has a 32% chance.

For married couples, there is a 45% chance that one spouse will live to this age.

Source: Vanguard Investments at www.vanguard.com

Underestimating life expectancy can derail any retirement plan!

How Long Will You Be In Retirement?(What is your life expectancy?)


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Fill in the Blank: The general rule of thumb is that retirement income will need to replace ____% of your working income.

  • 30-60%

  • 40-70%

  • 70-100%


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In 2007, the average replacement percentage of average final compensation for all new retirements in the N.C. Teachers and State Employees’ Retirement System was ____%.

  • 85%

  • 65%

  • 45%

  • 25%


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How are you going to fund the other 26-56% ? compensation for all new retirements in the N.C. Teachers and State Employees’ Retirement System was ____%.

  • Social security?

  • Personal savings?


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So, why do you need to be saving for retirement in addition to your pension plan?

To Bridge the Gap!

And when should you get started?

NOW!


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The Compounding Effect to your pension plan?

  • Start saving early! Time matters…


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The to your pension plan?Compounding Effect

  • Plus, the longer you wait, the more it “costs” to save:

  • To match the $154,762 retirement balance of the 25-year-old in the example, the person who waited until 45 would have to:

    • Save ________ per year, or

    • Generate annual earnings of ______ per year, or

    • Retire at the age of ___!


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Tax-Advantaged Retirement Accounts for State Employees to your pension plan?

  • NC 401(k) plan

  • NC 457 plan (Deferred Compensation)

  • Traditional IRAs

  • Roth IRAs


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Individual Retirement Accounts (IRAs) to your pension plan?

  • Types:

    • Traditional (potential for tax savings now)

    • Roth (potential for tax savings in retirement)

  • Contribution Limits for 2009

    • $5,000 if under age 50

    • $6,000 if age 50+ ($5,000 limit plus $1,000 catch-up provision)

  • Contribution Deadline

    • January 1 of current year – April 15 of following year


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RETIREMENT SAVINGS PLAN to your pension plan?

  • Save for retirement

  • Use an available tax- advantaged account

  • Decide how to invest my savings


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Investing Basics to your pension plan?

  • Considerations when choosing investments:

    • Diversification

    • Time Horizon

    • Risk Tolerance

      **Past performance is not a guarantee of future returns.


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Diversification to your pension plan?

  • Avoid putting all of your eggs in one basket!!

  • An easy way to diversify: mutual funds!

  • Anatomy of a mutual fund:

    • Stocks (equities)

    • Bonds (fixed income)

    • Short-term investments


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So What is a Mutual Fund? to your pension plan?

  • A pool of investors’ money used to purchase hundreds of securities such as stocks, bonds, and short-term investments

  • Mutual funds provide instant diversification, thus reducing risk.


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Taking Risks to your pension plan?

  • Why should I Put My Money At Risk?

    • When saving long-term, you are battling a little monster named:

INFLATION


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The Effects of Inflation to your pension plan?

Today:

Cost of 1 Gallon of Milk = $4.00

23


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The Effects of Inflation to your pension plan?

In the 1960’s, $4.00 would have bought you:

1 gallon of milk ($.60)

2 dozen oranges ($.90)

10 gallons of gas ($.25/gallon = $2.50)

You could also buy:

A new house for $15,000

A Ford Mustang for $2,368


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The Effects of Inflation to your pension plan?

If the cost of milk were to increase over the next 50 years at the same rate that it has increased since 1960, the price of milk would be….


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Bottom Line… to your pension plan?

  • Investing in securities provides the potential for returns that can outpace inflation over time.

  • If you will be investing for the long-term, you may want to consider investing in securities such as mutual funds.


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Am I on track for retirement? to your pension plan?

No way to know for sure. Keep in mind:

  • You are responsible for providing at least a portion of your own retirement income

  • You might live beyond your life expectancy

  • Starting early is the key!!!!

  • When markets are down your dollars purchase more shares: stay the course and keep investing!


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ANY QUESTIONS??? to your pension plan?


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