Post on 24-May-2015
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CMW Financial, Inc.Financial Representative of and Advisory Services and Securities Offered through Lincoln Investment Planning, Inc., Registered Investment Advisor, Member NASD/SIPC. CMW Financial, Inc. and Lincoln Investment Planning, Inc. are independently owned and each is responsible for its own business. 09/07
Don’t Retire – Rewire!What’s Your Next Chapter?
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What is Retirement?
Pay Off Bills
Pay Off House
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What Retirement Is…
Opportunity
The Next ChapterHobbies
Family
Workingat SomethingYou Love
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The Reality
Life as Usual with a Different Slant
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How Long Should I Plan For?
IndividualLife Expectancy
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Couple Age 62 TodayJoint Life Expectancy
92
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How Should I Plan for One-Third of My Life?
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RET
URN
RISK
The Pyramid of Financial Independence©
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Goals
TravelFamily CollegeLater YearsWhere to LiveElderly Parents
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New Retirementality
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Emergency Reserves
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Foundation Savings
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Risk Management
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Inflation Hedge
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Modern Portfolio Theory (MPT)
The 1952 publication "The Modern Portfolio Theory" by Harry M. Markowitz revolutionized portfolio development. An approach to choosing investments allowing investors to quantify and control the amount of risk they accept and amount of return they achieve in their portfolios. It shifts the emphasis away from analyzing the specific security in the portfolio and towards determining the relationship between risk and reward in the total portfolio.
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What You See…
May Not Be What You Get
S&P 500Index
Average Mutual Fund Investor
3.7%
13.2%
Average Annual total Returns 1984-2004
Source: Dalbar, Inc.
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Aggressive Inflation Hedge
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High Risk
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How Much Income Will I Need…
… in 5 years
… in 10 years
… in 15 years
… in 20 years from now?
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Your Retirement Income Should Support Your Needs & Goals
TravelFamily CollegeLater YearsWhere to LiveElderly Parents
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How Standard Annuity Calculated
Average of Highest 3 or 5 Annual Salaries
Annual Annuity / 12 = Monthly Standard Annuity
Total % Average Salaryx = Annual Annuity
Total Years of Service Credit
x Total %=2.3% (.023)
May also visit http://www.trs.state.tx.us/Benefits/RetEst.html for an online Retirement Estimate Worksheet.
Grandfathered Option
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Grandfathered Provision
Continue Rule of 80 but with a 5% reduction for each year below age 60Change from 3 to 5 years highest salary to determine benefit paymentEliminate subsidy for early retirement for individuals with 20 + years of serviceRequire rule of 90 to be eligible for PLSO
Age 50 or meet the rule of 70 or have 25 years of service at 08/31/2005if not covered by one of above, then the following will apply beginning 9/1/05
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Increase Your Income in theLast 3/5 Years You Work
Saturday School
Tutoring
Summer School
Increase your income for the rest of your life!
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Buy Back Years to Increase Retirement Income
Texas Unlimited
Out of State1 15
Military 5
Substitute Unlimited
50 State Days 1
1. TRS members who have service credit in another state before 01/01/2006 can purchase TRS out of state service at the current subsidized cost. Purchase of out-of state service credits accrued after 1/1/06 will be charged at the full actuarial cost.
Career 2
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These payment are not tax-sheltered.
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How Do I Finance?
Out of SavingsFinance Through State at 9%Roll TSA- Rolling takes 2 - 3 months
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Eligibility for TRS-Care1
Must have at least 10 years of actual Texas public school service.
Must be age 65 or older or must meet a rule of 80 where age and years of service credit for actual Texas public school service equal 80.
Can satisfy a portion (up to 5 years) of any requirement for “actual Texas public school service” through the purchase of military service credit.
Out-of state service, can no longer be used toward health insurance eligibility.
1. Increase active member contribution to TRS Care from .5% to .65%
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Vesting
Five (5) years to vest TRS
Ten (10) years to vest TRS Care
Years of Service* + Age = 80to vest full retirement benefits
* Even if you meet rule of 80, you must be 60 to get full benefits
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Here’s the Math
Average of 3 Years: $50,000
30 years x 2.3%: x 69%
$ 34,500 12 = $2,875 per month
$34,500
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Out of State Years
10 Years = $50,000
Cost of Buying Out of State Years
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Buying Back Years is Essential
$50,000 x 92% (40 x 2.3) = $46,000
$46,000 12 = $3,833 per month
$ 3,833 - $2,875 = $958 more per month
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Buying Back Years is Essential
Cost: $50,000Annual Gain: $11,496
Years to Recover: 4.4
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Investment Decisions
$50,000 x 4% = $2,000
$166 per month
Not Guaranteed
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Buying Back Military
Cost of Three Military Years = $17,000
$50,000 x 6.9% (2.3 x 3) = $3,450 Annual Gain
$287.50 Extra Per Month
Years to Recover: 4.9
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PARTIAL LUMP SUM OPTION
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Partial Lump Sum
...fix up my house
…buy a car
…pay off bills
I want to have the money to...
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The Tax Implications of Taking PLSO in Cash
Partial Lump Sum: $150,000
Federal Taxes (36%): - $ 54,000
Under Age 59-½
Federal Penalty (10%): - $ 15,000 ____________
Net To You: $ 81,000
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Tax Implication of Taking Just Part of Your PLSO in Cash
Partial Lump Sum: $50,000Federal Taxes (30%) -$15,000Under Age 59-½Federal Penalty (10%): -$ 5,000
__________
Net To You $30,000
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The Alternative
Roll it into a 403(b) and you can borrow up to $50,000 at net cost of 2.5%
Payback loan in five (5)* years or thirty (30) years for principal residence *approximately $20 per month per $1,000 borrowed
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TRS and Social Security
Your personal Social Security is discounted whether you work at a district that offers Social Security or not.
You can collect half of spousal SocialSecurity by working at a district that pays into both TRS and Social Security for five years prior to retiring.
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Ages Increase to Receive BenefitYear of Birth Full Retirement Age
1937 and prior 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943-54 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67
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Questions?