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Retirement Planning at Any Age. Marsha Goetting Extension Family Economics Specialist. Revised May 2009. Retirement has different meanings. 20s. 30s. 50s. 60s. 40s. Generations. Greatest Generation-- already retired Baby Boomers-- retiring Generation X-- anticipating

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slide1

Retirement Planning at Any Age

Marsha Goetting Extension Family Economics Specialist

Revised May 2009

slide2

Retirement has

different meanings

20s

30s

50s

60s

40s

generations
Generations
  • Greatest Generation--already retired
  • Baby Boomers--retiring
  • Generation X--anticipating
  • Millennials- Generation Y—?????
retirement confidence survey
Retirement Confidence Survey
  • January 2008
    • Only 18% of workers are very confident they’ll have enough for retirement
      • Compared to 27% in 2007
slide5
2009 ??????

“The American People have no confidence at all ”

5

question
Question

How do I plan for retirement?

7

question8
Question

How much should I save for retirement?

8

finding answers
Finding Answers

Financial Planners

Investment Advisors

Life Planners

10

resources to help you find answers
Resources to Help You Find Answers

“Do it yourselfers”

Financial calculators via the Web

11

choose to save org
Choose to Save.org

Employee Benefit Research Foundation Institute (EBRI)

Gazillion “Saving & Retirement Planning” Web Based Financial Calculators

12

web resources
Web Resources

Ballpark Estimate

American Savings Education Council (ASEC):

www.asec.org

13

aarp web based financial calculators
AARP Web Based Financial Calculators

Retirement Nest Egg

Retirement Shortfall

Retirement Income

Required Minimum Distribution

401(K) Savings

Reverse Mortgage

14

web calculators
Web Calculators

Investment firms

TIAA - CREF

T. Rowe Price

15

different results
Different Results

Complexity

Number & type of questions asked

Underlying assumptions

16

wall street journal
Wall Street Journal

Five Sites

Questions 10 to 63

Amount needed:

$669,714 to $1.1 million shortfall

17

2008 retirement confidence survey
2008 Retirement Confidence Survey

51% of workers who calculated retirement needs changed behaviors

59% saved/invested more

18

2008 retirement confidence survey19
2008 Retirement Confidence Survey

44% changed other aspects of their retirement planning

Changed investment mix 20%

Reduced debt/spending 7%

Enrolled retire/savings plan 5%

Decided to work longer 3%

Researched ways save for retirement 3%

19

decision 1
Decision # 1
  • Age at retirement?
    • How many more years to work?
people are retiring later
People are retiring later
  • Age 62 in 1996
  • Age 65 in 2006 - 2008
today s workers
Today’s Workers

32% expect to be retired prior to reaching age 65

23

gap expectations vs reality
Gap: Expectations vs. Reality
  • 72% of today’s retirees retired by age 65
current retirees
Current Retirees
  • Half retired early than planned (51%)
    • Health reasons 54%
    • Downsizing 33%
    • Caregiving 25%
you retire at age
You—Retire At Age?

55?

60?

62?

65?

70?

26

decision 2
Decision #2
  • Years in retirement?
years in retirement
Years in Retirement
  • Workers Expect:
    • 20 – 24 years (27%)
    • 25 – 29 years (10%)
    • 30 + years (17%)
what about you
What about you?

Your anticipated years in retirement?

31

decision 3
Decision #3
  • Amount of “designated” retirement savings?
workers saving investments
Workers’ Saving & Investments
  • 49% have saved less than $25,000
ira contributions
IRA Contributions
  • 2009
    • $5,000 under age 50*
    • $6,000 age 50 & older*

* indexed to inflation

tax deferred plans 2009 401 k 403 b 457
Tax-Deferred Plans 2009 [401(k) , 403(b), 457]

Under age 50 $15,500*

Age 50 & $20,500* older

* indexed to inflation

36

what about you37
What about you?

Value of your current “designated” retirement savings

37

decision 4
Decision #4
  • Income needed during retirement?
financial planners
Financial Planners
  • Income sources should provide 60% to 80% of pre-retirement income
other financial planners
Other Financial Planners
  • 100% + of pre-retirement income
others say
Others Say
  • 130% + of pre- retirement income
marsha goetting
Marsha Goetting
  • “It depends!”
    • Lifestyle
    • Health
    • Caregiving for parents
tiaa cref
TIAA-CREF
  • 55% of retirees expected expenses to decline
    • But, only 30% of found that to be true
tiaa cref44
TIAA-CREF
  • 20% of retirees said their spending ROSE during retirement
prosperous retirement guide to the new reality michael stein
Prosperous Retirement: Guide to the New Reality -Michael Stein
  • Go-go years
  • Slow-go years
  • No-go years
consumer expenditures 2006 bureau of labor statistics
Consumer Expenditures--2006Bureau of Labor Statistics

Age Monthly Yearly

55 – 64 $4,232 $50,789

65 – 74 $3,413 $40,960

75 + $2,409 $28,904

can you

Can You?

Live on 50%, 60%, 70%, or 80% of current income?

practice

Practice

Take income cut now

Put difference in retirement savings

48

decision 5
Decision #5

Income sources & amounts during retirement?

49

income sources stool
Income Sources “Stool”

Pension

Savings

Social Security

income from social security
Income from Social Security

Pension

Savings

Social Security

51

average social security benefits 2008
Average Social Security Benefits 2008

IncomeMenWomen

Worker $1,216 $935

Spouse $308 $536

what about you53
What about you?

What will be your Social Security benefit?

53

social security
Social Security

Retirement Planner Calculators

Quick

On-line

Detailed

54

social security55
Social Security

When to take benefits??????

Age 62

Age 65

Full retirement age (FRA)

Calculator to assist with decision

55

income from pension
Income from Pension?

Pension

Savings

Social Security

56

income from pension57
Income from Pension?

59% of workers expect income from pension

57

supplemental pension sources
Supplemental Pension Sources

403 (b)

401 (k)

State Deferred Plan (457)

IRA

Other?

58

what about you59
What about you?
  • What will be the amount of your pension?
income from savings
Income from Savings

Pension

Savings

Social Security

60

income from savings61
Income from Savings

Workers Expect 74%

Retirees Reported 48%

61

why save for retirement slide card blue
Why Save for RetirementSlide Card (Blue)
  • Growth Calculator
    • Find your age
    • See how large your weekly/biweekly investment can grow by age 65
slide66

Growth & Savings

Assuming 8% rate of return

66

slide67

Growth & Savings

Assuming 8% rate of return

67

slide68

Growth & Savings

Assuming 8% rate of return

68

slide69

Growth & Savings

Assuming 8% rate of return

69

cost of one year delay
Cost of ONE YEAR delay
  • Find your age
  • Look under weekly/biweekly amount to invest
  • See how much less
slide71

Cost of One Year Delay

Assuming 8% rate of return; Pay Increases 3%

71

slide72

Cost of One Year Delay

Assuming 8% rate of return; Pay Increases 3%

72

what about you73
What about you?
  • How much income will you receive from your designated retirement fund?
income from job
Income from job

Savings

Pension

Job(s)

Job(s)

Job(s)

Social Security

74

work after retiring
Work After Retiring
  • 63% of today’s workers expect to
retirees 25 work
Retirees--25% work
  • Stay active 87%
  • Enjoy working 79%
  • Financial 79%
    • Make ends meet 78%
    • Money for extras 78%
    • Keep health insurance 77%
what about you77
What about you?
  • Do you anticipate income from work after retirement?
    • If yes, how much?
decision 6
Decision #6

Investment Rate of Return?

Before retirement?

During retirement?

78

diversification
Diversification

Stocks & Bonds

Mutual Funds

U. S. Savings Bonds

Real Estate

Certificates of Deposit

Money Market Certificates

81

what about you82
What about you?

What do you “think” will be your investment rate of return?

82

decision 7
Decision #7

Inflation rate??

Before retirement

During retirement

83

recent inflation rates
Recent Inflation Rates %

2003 2.3

2004 2.7

2005 3.4

2006 3.2

2007 2.9

2008 (Aug) 3.8

85

inflation
Inflation

3.4% average1913 - 2007

86

consumer expenditures 4 232 monthly
Consumer Expenditures $4,232 monthly

3.4%

inflation

  • 5 yrs $5,002
  • 10 yrs $5,912
  • 15 yrs $6,988
  • 20 yrs $8,260
  • 25 yrs $9,762
  • 30 yrs $11,539
what about you88
What about you?
  • What do you “think” the average inflation rate will be?
7 key decisions
7 Key Decisions
  • Age at retirement
  • Years in retirement
  • Current retirement savings
  • Income needed
  • Income sources/amounts
  • Investment rate of return
  • Inflation rate
results of web financial calculators
Results of Web Financial Calculators

How much you need to save, (if any) by your targeted retirement date

90

slide91

When can

I afford

to retire?

slide92
Well…..at your current rate of savings, you can retire 3 days before your 106th Birthday!!!!!!!!
general tradeoffs
General Tradeoffs

Save More (spend less) BEFORE retirement

Spend Less AFTER retirement

Combination

93

revisit decisions
Revisit Decisions

Age at retirement

Years in retirement

Current retirement savings

Income needed

Income sources/amounts

Investment rate of return

Inflation rate

94

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Best wishes as you make key decisions & adopt strategies for:Retirement Planning Regardless of Your Age Marsha

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