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CRC I - Review Fundamentals of Retirement Planning Chapters 1 and 2

CRC I - Review Fundamentals of Retirement Planning Chapters 1 and 2. Chapter 1 Retirement Planning Across the Life Cycle. Life Cycle. Lifecycle Predictable Unpredictable Relationship between lifecycle and expenses and income Relationship of life cycle to retirement. 1/1-7.

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CRC I - Review Fundamentals of Retirement Planning Chapters 1 and 2

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  1. CRC I - Review Fundamentals of Retirement Planning Chapters 1 and 2

  2. Chapter 1 Retirement Planning Across the Life Cycle

  3. Life Cycle • Lifecycle • Predictable • Unpredictable • Relationship between lifecycle and expenses and income • Relationship of life cycle to retirement 1/1-7

  4. Retirement and the Life Cycle • While working • Early-, mid-, late-career • End of formal career/full-time work • Early-, mid-, late-retirement • Transition between stages 1/7-8

  5. Challenges to Retirement Education Initiatives/ • Diverse audience at various stages—all at the same time! • Age • Gender • Educational level • Earning power • Culture 1/9-15

  6. Challenges—Generation X • “Always a tomorrow” • Postpone current consumption in return for a secure retirement • Strategy: • Develop and use good savings habits • Living beneath one’s income • Treasure of time • Biggest enemy to success: procrastination 1/10-11

  7. Challenges: Mid-Generation • Biggest issue: competing goals • Strategy: • Saving even small amounts • Concretize goals • Acknowledgement of multiple financial demands • Importance of setting multiple financial goals 1/12-15

  8. Planning for the Unexpected • Unexpected events prior to retirement impact planning for retirement • Caveat: loans from qualified plans • Insurance protects against many of the unexpected events • Elder care • Disability • Natural disaster 1/16-20

  9. Planning for the Unexpected • Financial challenges of divorce • Value of distributed assets • Cash flow/income of parties after a divorce • Issues with defined benefit plan • Use of a QDRO (Qualified Domestic Relations Order) 1/17

  10. Planning for the Unexpected • Termination of employment • Vesting of retirement assets • Disposition of company-sponsored retirement plans • Insurances • COBRA • Continuation as a personal policy 1/21-23

  11. Life Cycle Comparison Chart • Compare and contrast across categories and life cycles • Note specific financial tasks at each stage • Identify key challenges at each stage 1/24-37

  12. Chapter 2 Retirement Readiness: It’s Not Just About Money 2/1

  13. Retirement—Myth and Fact • Myth of the leisure retirement • Economic life hypothesis • Three phases of the life cycle • Retirement signified by shift of living from earnings to savings • Expanding definition of the retirement • Interdisciplinary • Trans life cycles 2/4-9

  14. Financial Planning/Retirement Planning • Relationship offinancial planning--retirement planning--retirement counseling-- • Distinctions among the three 2/10-11

  15. Retirement Readiness • Diverse meanings of “readiness” • Traditional: retirement income adequacy • What is relationship of money to retirement readiness? • Link to gerontology 2/12

  16. Retirement Readiness = Well-Being • Cross disciplines • Strengths-based approach • Beyond “survival” to maximizing well-being in retirement • Geo-financial • Bio-medical • Psycho-social • Best practice approach • Why use an approach based on an integrative model? 2/13-18

  17. Career Stage Retirement Readiness • Usefulness of retirement information • Application of knowledge • Difference between “wanting” to retire and being “prepared” to retire involves non-financial criteria 2/19

  18. Worksheets and Checklists • Identify various distinctions among each type • Geographical readiness • Financial readiness • Biological readiness • Medical readiness • Psychological readiness • Social readiness • Complete each worksheet for yourself 2/20-31

  19. CRC I - Review Fundamentals of Retirement Planning Chapters 3 and 4

  20. Chapter 3 Basic Principles of Effective Counseling and Communication

  21. Effective Communication • Understand the generational zeitgeist • “Silent generation” • Born before 1946 • “Baby boomers” • Early – born between 1946-1955 • Late – born between 1956-1964 • Identify personal style of communication • Yours • Client’s 3/4-5

  22. Individualistic Anti-institution Work thru retirement Personal meaning Role of leisure Financial savvy Zeitgeist of the Generation Silent Generation Baby Boomers • Financial help • Leisure • Housing • Duty/obligation • Role of leisure • Work hard, get ahead 3/5-10

  23. Institutional mistrust Skepticism of institutions Need to control More savvy about investments Zeitgeist of the Generation Silent Generation Baby Boomers • Disappointment in mythof getting ahead/hard work • Widowhood • Label of “aging” • Problems associated withlongevity 3/5-10

  24. Effective Communication • Generational traits combine with personal traits • Impacts both listening and speaking 3/11-12

  25. Effective Communication • Build trust and receptivity with clients • Two-way nature of communication • Understand your own style • Understand the style of the other • Ability to adapt your communication style to the listening style of the other 3/11

  26. Effective Communication • Communication strengths are the flip side of communication weaknesses • Staying “on task” vs. Addressing spontaneous issues as they arise • Warm, welcoming vs. Responding to a problem 3/12-17

  27. Effective Communication • Assessing the style of the other person and matching your style to their pattern • Determine the pace of the other person • Speak, listen, respond • Be aware of the other person’s priorities • Balance between relationship-oriented and task-oriented • Be willing to adjust your communication style—not vice versa! 3/17-22

  28. Chapter 4 Retirement Mindsets and Behavioral Finance

  29. Money Personalities • Various ways of dealing with money—spending, saving, planning • Awareness of the personality types may provide direction for planning and communication 4/3-4

  30. Role of Behavioral Finance • Attempt to understand the investor and financial markets from a psychological perspective • How clients think about their money • How they behave with their money • How to deal with irrational investor behavior • Use of behavioral investor types • Help professionals make rapid, insightful judgments about clients 4/4-17

  31. Retirement Mindset • Permeates an individual’s life and career and evidenced by the choices made during that life • Retirement stages • Based on proximity to actual date of retirement • Changing priorities • Background vs. Foreground 4/18-19

  32. Communication Paper Trail • Updated and detailed record keeping of client/counselor interactions • Clarify when education-related duties create a fiduciary responsibilities 4/19-20

  33. Communication Paper Trail • Documentation is part of professional self-care • Time; date of interaction • Who was present • Reason for interaction • Topics discussed • Recommendations • Responsibilities for implementation • Exchange of written information 4/20

  34. Safe Harbors • Information that is generallyregarded as NOT creatingfiduciary responsibility • Plan information • General financial and investment information • Asset allocation models • Interactive investment materials 4/20, 22

  35. ERISA 404(c) and You • What must a fiduciary do to be protected by 404(c)? • Exercise prudence in selecting and monitoring advisors and educators • Same prudence as exercised with any other plan function • Must act solely on behalf of plan participants and beneficiaries • Determine whether education, advice, counseling 4/21

  36. ERISA 404(c) and You • Can a fiduciary offer investment advice and still be protected from liability? • 404(c) does not require that investment advice be provided • Question: How do employees make competent decisions without advice? • Difference between education and advice? • Guidance found in the Department of Labor Interpretive Bulletin 96-1 4/21

  37. 404(c) and Safe Harbors • “Education” not “Advice” • No liability if certain rules are met • Safe harbors protect counselors and employers and provide scope of “education” activities • General plan information • General financial concepts • Asset allocation information • Interactive investment materials 4/22-23

  38. Nature of “Advice” • Advice is specific to individuals • Telling someone what they should do with their investments 4/23

  39. Ongoing Discussion • Some individual rulings given for companies who provide investments to plans can also provide advice for those investments • Exception rather than the rule • Important to stay current • Older view: Providing education was a liability • Recent view: Not to provide education is a liability 4/23-25

  40. Caveat for Counselors • Counselor/employee relationship different from planner/client • Complete facts may not be available • One-side representation (employee) • Insufficient time to gather adequate information 4/23-25

  41. Regulations Proposed in 2008 for 401(k) Plans and IRAs • Certified unbiased computer model may be used • Information delivered via an adviser compensated on a “level fee” basis with fees disclosed 4/23-25

  42. CRC I - Review Fundamentals of Retirement Planning Chapters 5, 6, and 7

  43. Chapter 5 Budgeting

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