Planning for Retirement - PowerPoint PPT Presentation

Planning for Retirement

N.C. Department of Environment and Natural Resources

Good Question!

Here are some more questions…..Pop Quiz!

• 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

How Long Will You Be In Retirement?

(What is your life expectancy)

• 30-60%
• 40-70%
• 70-100%

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%

• 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!

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!

• 30-60%
• 40-70%
• 70-100%

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%

• Social security?
• Personal savings?

To Bridge the Gap!

And when should you get started?

NOW!

• Start saving early! Time matters…

• 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 ___!

• NC 401(k) plan
• NC 457 plan (Deferred Compensation)
• Traditional IRAs
• Roth IRAs

• 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

• Save for retirement
• Use an available tax- advantaged account
• Decide how to invest my savings

• Considerations when choosing investments:
• Diversification
• Time Horizon
• Risk Tolerance

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

• 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

• 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.

• Why should I Put My Money At Risk?
• When saving long-term, you are battling a little monster named:

INFLATION

Today:

Cost of 1 Gallon of Milk = $4.00

23

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

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….

• 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.

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!