Taking the Mystery out of Retirement Planning

1. Taking the Mystery out of Retirement Planning Financial Planning for Women September 2006 Presented by Jean Lown, Tiffany Smith, & Karissa Berndt

2. September is College of Education & Human Services month • Who is affiliated with the College? • Give away personal finance books • Who is here for first time? • Welcome packet • Who brought someone new with them? • PF book

3. Personal Finance Action Plan handout • Make a commitment to yourself to take action as a result of today’s program • Anyone want to share about a personal finance action they took recently?

5. Workbook • for people who are 10 years from retirement, but still excellent for anyone to work through. • With this workbook you can stop worrying if you have enough saved and start planning to get to what you need. • If you don’t have enough saved now, you still have time and options to make it up.

6. Planning for a Lifetime • Start NOW • Pensions are a thing of the past. • Prepare now for retirement. • You don’t want to out live your savings.

7. Chapter 1: Tracking Down Today’s Money • Did any of your previous jobs have a 401(k) or pension that remained with the company? • You might have retirement investments you forgot about.

8. Tracking Down Today’s Money • Get statements from: • Your financial institution • Any place that you have money invested.

9. Tracking Down Today’s Money • Figure out your Home Equity (largest asset) • Current Market Value • Current Mortgage Balance • Home equity debt • Consult an Appraiser for current market value or look at sale prices of comparable homes in your neighborhood.

11. Ch. 2: Tracking Down Future Money at Retirement and After • Use the information from Ch. 1 to fill out worksheets to calculate how much your current investments will grow in 10 years. • The 10 year information will help you figure out a 30 year estimate. • Will you live more than 30 years? • Utahns live long lives!

12. Tracking Down Future Money at Retirement and After • Look at where your money is now. • Are you earning very low interest for guaranteed security? • Would you fare better in the long run with a higher risk investment for higher return? • These depend on your goals and how close or far away your retirement is. • Would you do better with a different asset allocation? (see FPW website for PPT)

13. Tracking Down Future Money at Retirement and After • Investing too much of your assets in one investment can be very risky. • If you’re invested in your employer’s stock what happens if the company goes under? • Remember Enron, WorldCom & Adelphia

14. Long-term Average Annual Returns • Stocks = 10% • Bonds = 6% • Cash (CDs, Treasury bills) = 3% • Inflation = 3.1%

16. Chapter 3: Tracking Down Future Expenses • What are your day-to-day expenses and how they will change over time? • Determine if the money you have saved will be enough to last through retirement. • Inflation is one of the biggest factors. • Historically the average inflation has been 3.1% • Use a higher number, 3.5% - 4% to be conservative

17. Tracking Down Future Expenses • Medical costs are an exception. • Medical expenses have risen faster than inflation for more than 20 years. • Medicare will not cover everything. • Currently additional Medicare part B insurance runs about $79 a month and will continue to rise. • Consider long term care insurance ONLY if you have adequate assets to cover estimated expenses. • 40% of 65 and older spend some time in a nursing home (mostly women)

18. Chapter 4: Comparing Income and Expenses • Now it’s time to compare! • Will your estimated income meet your estimated expenses? • Most people don’t have enough invested. • If your expenses outstrip your income then it’s time to make some changes.

19. Comparing Income and Expenses • Max out your contributions to your IRA. • See FPW website • Cut expenses. • Contribute as much to your 401(k) as your company will match; more if you can afford it. • You may have to work longer than anticipated • Figure out when to begin Social Security. • Invest to stay ahead of inflation!

20. Comparing Income and Expenses • Set up a budget for before & after you retire • 3 phases of retirement (Prosperous Retirement) • Go-go (expenses > income) • Slow-go • No-go (living expenses very low UNLESS long term care is needed) • Medical & LTC expenses are the BIG unknown

24. Chapter 5: Making Your Money Last • The whole point is to discover any gaps in your savings now, while you still have time to do something about them. • DON’T Take unsolicited advice on where to put your money. • If you want advice consult a financial professional that you choose. • Don’t be a target for scams! • Don’t forget about taxes.

25. Making Your Money Last • Choose what you want to withdraw from which savings vehicle. • Roth IRAs: you’ve already paid taxes so it is a good place to leave your money to grow. • Reverse Mortgage to stretch your money • essentially a bank loan based on the amount of home equity. • It can provide a monthly check, but at a cost. You are spending down the value of your home. • The loan does have to be repaid if your heirs want to keep the house.

26. Chapter 6: Tracking Down Help for Retirement Resources • In the past there weren’t a lot of choices in retirement, but that has changed dramatically. • It is up to you to choose how you want to live in retirement & work toward your goals. • Redo these worksheets at least once a year to make sure that you’re still on track.

31. Tracking Down Help for Retirement Resources • The workbook has a large list of resources to help you plan and save for retirement. • Late Savers Guide to Retirement • www.nefe.org/latesaver

32. Questions? • October 11 FPW: Who gets grandma’s yellow pie plate? A guide to passing on personal possessions. • Presented by Dr. Barbara Rowe, USU Extension Specialist • 12:30-1:30 Family Life 318 • 7-8:30 p.m. at the Family Life Center, 500N 700E