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Essential Retirement Planning Strategies: Save Smart, Invest Wisely

This comprehensive workshop, "Investing 101," led by L. Gattis, offers crucial insights into retirement planning. Learn how much you need to save today, effective asset allocation strategies, and best practices for selecting securities. Discover the importance of saving 10-15% of your salary starting at age 25, and adjust for starting later. Key topics include mitigating financial risks such as market crashes and unexpected life events. Equip yourself with the knowledge to ensure a smooth transition into retirement and secure your financial future.

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Essential Retirement Planning Strategies: Save Smart, Invest Wisely

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Presentation Transcript

  1. Investing 101 L. Gattis Monday 7PM-8:30PM March 18, 2013 103 Career Services Building

  2. Agenda • How much do I need in retirement? • How much do I need to save today for retirement? • How do I allocate funds among asset classes? • How do I select securities? • Take Aways

  3. How Much Do I Need in the First Year of Retirement? • Maybe 40% – 70% of final year income < Plug < Smooth

  4. How Much Wealth do I Need at Retirement? • Maybe 8-12 times final year income

  5. How Much of My Income Do I Need to Save? • Assumes long term average returns and Age in Bonds Rule • Maybe 10-15% if you start at age 25 • You mayneed to save over 17% if you start at age 35! • Assumptions • $100K Salary • 11% Savings Rate • Age in Bonds Allocation • 6% Real Stock Returns • 2% Real Bond Returns

  6. How Do I Select Securities? • Mutual Funds “Managed” • E.g., Fidelity Magellan Fund • 0.53% Net Expense Ratio, 10-Year Return = 5.32% • Index Funds • E.g., Fidelity Spartan 500 Index • 0.10% Net Expense Ratio, 10-Year Return = 8.16% • Target Retirement Date (Life Cycle) Funds • E.g., Vanguard Target Retirement 2045 • 63% U.S. Stock Index • 27% Intl Stock Index • 10% Total Bond Index

  7. Personal Financial Risks • Death/Disability/Unemployment of Working Spouse • Life and Disability Insurance, 6-month emergency fund • College Debt (and other personal debt) • Need to save about $5,000 per year per child (starting at birth) to fully fund $25,000/year college • Market crash near retirement • Life cycle investing (reducing risk over time) • Downsize or delay retirement • Retirement Healthcare • LTC, Medi-gap insurance policies • Home equity • Long Life • Long Life Insurance • Purchase Life Annuity at Retirement • Reverse Mortgage

  8. Take Aways • Need retirement wealth of 8-12 times final year income to smooth retirement transition • Save 10-15% of your salary starting at age 25 • Save more than 15% if start at age 35 • Reduce portfolio risk as you approach retirement – either by annual reallocations or life cycle funds • Risk Mitigation: Emergency Fund, Insurance, Home Equity, Retirement Flexibility (downsize/delay)

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