Is Retirement Within Your Reach?

1. Is Retirement Within Your Reach?

2. Is a retirement plan really necessary?

3. 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?

4. Which one will you be driving when you retire?

5. When do you plan to retire? $1 $4 How much to save? Age 55 Age 35

6. How long will your retirement last?

7. What will retirement cost?

8. What are your sources of retirement income?

9. Sources of Retirement Income • Company Retirement/Pension Plans • Social Security • Individual savings Tax deferred or taxable • Part time work

10. How much have you currently set aside for retirement?

11. 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

12. Retirement Calculators

13. Social Security • Contribute for 40 quarters • Replacement rates between 59% and 24% depending on income earned • Collect full benefits at designated retirement age

14. 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

15. 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

16. Retirement Plans • Company Retirement Plans • Salary Reduction Retirement Plans • Individual Retirement Accounts (Traditional or Roth) • Plans for the self-employed

17. Contributions with pre-tax dollars lowers taxable income.

18. Maximize benefits from your Retirement Plans • Begin contributions as soon as possible. • Make maximum contributions allowed, if possible. • Choose investments that pay high earnings

19. 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

20. 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.

21. 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.

22. Deductible IRA Income Limits

23. Deductible IRA Contributions Reduce taxable income Report on 1040 tax form

24. Traditional Non-deductible IRA Contributions File IRS Form 8606 with Federal Tax return Retain copy permanently

25. 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.

26. 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

27. 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

28. 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.

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

30. 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.

31. 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

32. 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

33. 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

34. E. M. I. L. Y. Early money is like yeast, it helps your dough rise!

35. IRA Direct Transfers – transfer of IRA funds from one IRA custodian to another

36. How to save $3,000 per year

37. 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?

38. Retirement Planning Has Changed! • More self-directed • No “guarantees” • Living longer • Portable plans • Inflation & taxation

39. Think of retirement as a vacation -- take half as much baggage and twice as much money!

40. Is Retirement Within Your Reach?