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Catching On to Retirement

Catching On to Retirement. Wherever you are in your career, whatever your wage, there is something you can do to plan for retirement. Co-sponsored by BPW Foundation, U.S. Department of Labor-Women’s Bureau and BPW/USA. Pam Krueger. Some Challenges and Issues Related to Retirement Planning.

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Catching On to Retirement

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  1. Catching On to Retirement Wherever you are in your career, whatever your wage, there is something you can do to plan for retirement. Co-sponsored by BPW Foundation, U.S. Department of Labor-Women’s Bureau and BPW/USA

  2. Pam Krueger

  3. Some Challenges and Issues Related to Retirement Planning • Longer life spans • Fewer and fewer employers are offering the traditional pension plan—the defined benefit pension plan • Paying for health care in retirement • Divorce and widowhood • Consumer knowledge

  4. Some Things You Can Do • Don’t be afraid to take on the challenge • Approach retirement planning as a step by step process • Get a clear picture of what you expect your retirement to look like • Calculate what you need to save • Start early!  Take advantage of the power of compounding • Figure out how to fill any gaps between what you’ve saved/are saving and what you’ll need • Consider the adjustments you can make to fill the gap • Figure out your spending rate in retirement

  5. Guest Speakers Moderator: • Pam Krueger, Executive Producer & Co-Anchor of MoneyTrack on PBS Speakers: • Jerry McCarthy, licensed Certified Public Accountant (CPA), Personal Financial Specialist (PFS), Certified Financial Planner • Diana Varela, Public Affairs Specialist for Social Security Administration • Jonathan Pond, Author of You Can Do It!  The Boomer’s Guide to a Great Retirement and Host of 16 primetime public television specials on financial planning

  6. Audio Clip Speaker David Bach, Author Start Late, Finish Rich and The Automatic Millionaire

  7. Jerry McCarthy

  8. Questions for Retirement • New in Savings • Retirement Savings Gap? • What are some of the key risks? • How should my assets be allocated? • Don’t be a statistic. START SAVING FOR YOUR RETIREMENT TODAY

  9. The New Retirement Territory:Increased Financial Responsibility You will be responsible for almost 60% of your income Other 3% Your Own Investments19% Social Security 20% Earned Income38% Pension20% Source: Social Security Administration, Office of Policy, Income of the Population 55 or Older, 2002,  "Table 7.5:  Shares of Aggregate Income for Units 65 or Older". Key sources of retirement income for households with income of $40,982 or more per year. Percentages have been rounded off and are approximate. For illustrative purposes only.

  10. Key Risks • Longevity • Inflation rates • Asset allocation • Healthcare costs

  11. Think about how long you will spend in retirement Life expectancies for men and women at certain ages Source: Centers for Disease Control and Prevention, United States Life Tables, 2000.

  12. Risk of Inflation Impact of Inflation on the Cost of Goods over Time $0.194 1958 $2,2001 $5,0875 $19,5875 $0.504 1979 $16,2402 2004 $0.984 $28,0002 $56,1745 2029 $117,6155 $58,6263 $2.053 1. U.S. Dept. of Commerce, Bureau of Economic Analysis, 2006 2. Motor Trend, “Average New-Vehicle MSRP Tops $28,000 for First Time,” July 2004. 3. Fidelity Investments, 2006, based on 3% inflation over 25 years from 2004 prices. 4. Actual price data from U.S. Dept. of Labor, Bureau of Labor Statistics, 2006. 5. U.S. Census Bureau 2006. Median family income from 1947 to 2001. Data for 2004 and 2029 projected from 2001 median income based on 3% inflation.

  13. Why asset allocation is so important? • The Magic of Diversification. The practice of spreading money among different investments to reduce risk is known as diversification. By picking the right group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.

  14. Risk Tolerance Investment Experience Financial Situation Determine a Target Asset Mix Key Factors to Consider Target Asset Mix Time Horizon Short-Term Bonds Equities Source: Fidelity Investments, 2006

  15. Health Care Risk Health care and long-term care costs may derail your plan • Health care costs may rise as much as 60% in retirement1 • A 65-year-old couple may need$190,000 for medical expenses during retirement2 • One out of every two retirees maybe admitted to a nursing home3 • Annual long-term care expenses range from $35,900 in the Southeast to $105,500 in the Northeast4 1AARP Web site, 2001. 2Retiree Health Care Costs: Addressing the Growing Gap, Fidelity Investments, March 2005 3Lewin-VHI, In the Health Insurance Association of America, Long Term Care: Knowing the Risk, Paying the Price, Page 12, 1997. 4U.S. General Accounting Office, Testimony before the Special Committee on Aging, U.S. Senate, March 9, 1998.

  16. Diana Varela

  17. Importance of Social Security to Women • Fewer covered by pensions • Benefits tied to inflation • Continue for life

  18. Importance of Social Security to Women • 58% of all aged beneficiaries • 71% of all aged beneficiaries over age 85

  19. Women and Social Security • For about 78% of unmarried women aged 65 or older, Social Security represents at least ½ of their total income • For about 30% of unmarried women aged 65 or older, • Social Security is their only source of income

  20. Women & Social Security Average Monthly Benefits (12/06) Women Men Retirement $905 $1,177 Disability $840 $1,098

  21. Full Retirement Age Year of Birth Full Retirement Age 1937 65 1938 65 & 2 months 1939 65 & 4 months 1940 65 & 6 months 1942 65 & 10 months 1943 – 1954 66 1955 66 & 2 months 1956 66 & 4 months 1957 66 & 6 months 1958 66 & 8 months 1959 66 & 10 months 1960 & later 67

  22. Social Security’s Online Services • Retirement & Disability Applications • Retirement/Survivors/Disability Planner • Medicare Card Replacements • Request a Statement • Request a Benefit Verification Letter • Change of Address

  23. The Social Security Statement

  24. Jonathan Pond

  25. It’s All About Retirement

  26. Planning for a Financially Comfortable Retirement The challenges Prepare a projection

  27. I’ve got all the money I’ll ever need if I die by four o’clock. -Henny Youngman

  28. Expense Reductions When You Retire • Expense Item Spending Level • Savings 5 to 20% • Work expenses 3 to 5% • Social Security taxes 6 to 8% Expense reduction @ retirement ---- 14 to 33% Reduced income taxes --10% Expense and income tax 24 to 43% reductions @ retirement

  29. Finding Out Where You Stand

  30. Important Assumptions Life Expectancy 95 Inflation Rate 3% Annual Investment Returns 6%

  31. The Late Starter Checklist • Find out where you stand now • Put yourself on a budget to increase savings • Consider ways to increase income • Consider delaying retirement or relocating • Don’t become discouraged

  32. Best Places to Put Money Away for Retirement

  33. Which Retirement Plans are Best ? • BEST: • Any plan with an employer match • NEXT BEST: • Any pre-tax or tax deductible plan • STILL WORTHWHILE: • A nondeductible plan, especially a Roth IRA

  34. Preparing for the Unexpected

  35. Getting the Right Kind ofInsurance... at the Right Price Eliminating gaps Lowering premium costs

  36. Ways to Save on Insurance • Shop for lower premiums • Eliminate unneeded coverage • Increase deductibles

  37. Q&A • Moderator: • Pam Krueger, Executive Producer & Co-Anchor of MoneyTrack on PBS • Speakers: • Jerry McCarthy, licensed Certified Public Accountant (CPA), Personal Financial Specialist (PFS), Certified Financial Planner • Diana Varela, Public Affairs Specialist for Social Security Administration • Jonathan Pond, Author of You Can Do It!  The Boomer’s Guide to a Great Retirement and Host of 16 primetime public television specials on financial planning

  38. Wrap-Up Jane Walstedt, Co-Team Leader, Wi$e Up Social Science Advisor Office of Policy and Programs Women's Bureau U.S. Department of Labor

  39. Resources • Savings Fitness:  A Guide To Your Money and Your Financial Future, www.dol.gov/ebsa/pdf/savingsfitness.pdf, Employee Benefits Security Administration, U.S. Department of Labor.  The publication has a section and a table on “the power of compounding” on page 17.”  • New Employee Savings Tips—Time Is On Your Side, www.dol.gov/ebsa/pdf/NewEntrants.pdf, Employee Benefits Security Administration, U.S. Department of Labor; • www.ssa.gov/pubs/index.html; • www.jonathanpond.com; • www.moneytrack.org; • www.bpwfoundation.org (Rawalt Online Resource Center); • You Can Do It!  The Boomer’s Guide to a Great Retirement, by Jonathan D. Pond, HarperCollins, 2007; • Retirement Confidence Survey – 2007 Results, www.ebri.org/surveys/rcs/2007/, Employee Benefit Research Institute.

  40. Technical Difficulties? If we experience technical difficulties in the call or webinar portion, do not worry. Simply log back in to the phone and/or webinar site and the even will continue where it left off. • Log into the webinar site at http://www.mmstartvisuals.com/. Input your information into the “Join” option. The participant ID is 1012343. Log into the audio portion by calling 1-888-790-8390 Passcode: WISE UP. Ensure you put your name in the appropriate space. We’ll use that to chat and ask questions.

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