Elevate your retirement planning• Approaching retirement: Consider a more conservative portfolio...
Transcript of Elevate your retirement planning• Approaching retirement: Consider a more conservative portfolio...
Elevate your retirement planningELEVATOR CONSTRUCTORS ANNUITY AND 401(k) RETIREMENT PLAN
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Topics we will cover today
Getting started•Contributing to the 401(k)
•Decisions to Retirement Readiness
•Changing Contributions
•Reviewing Investment Allocation
Be a confident investor•Risk and Return
•Asset Allocation
What is the Annuity Plan?•How contributions are invested
•The Annuity Allocation
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Pre-Retirement•Common Pre-Retirement Questions
•Getting Retirement Ready
•Social Security
•Understanding Your Withdrawal
Options
How MassMutual can help•Online Resources
•Participant Information Center
•Mobile APP
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Top reasons to contribute to your 401(k)
1. It’s EASY
2. TAX-DEFERRED savings
3. You owe it to YOUR FUTURE
4. Choice of INVESTMENT OPTIONS
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Decisions to retirement readiness
Decision #1
• How much do you save from each paycheck?
Decision #2
• Which investment options do you want to select?
Considerations to help your decision making:
• Save as much and as early as you can.
• Starting small is okay. Be sure to plan to increase
your deferral percentage each year.
• Visit massmutual.com/iuec to learn more about
investing and track your progress.
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Even small amounts add up
How $10 per week can grow:
Assumes contributions made at the beginning of the week, hypothetical 8%,
4% and 0% earnings on investments, compounded monthly and reinvestment
of earnings. The calculations do not take into account leap years. Final
amounts are exclusive of any taxes or penalties that may be due upon
distribution. This hypothetical chart is for illustrative purposes to demonstrate
the effects of compounding. They do not reflect the actual performance of
any specific investment. Individual experience will likely vary. Past performance does not guarantee future results.
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Changing Contribution Amounts
Maximizing your Annuity and 401(k) Retirement Plan is easy!!
• Adjust your contributions by completing a form and returning it to your employer
• Modify your investments either online of by telephone
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RetireSMART Website: Automated Phone Service
massmutual.com/iuec 1-800-743-5274
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Asset Allocation: Investment Mix Considerations
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• Diversification can help offset market volatility
• Approaching retirement: Consider a more
conservative portfolio
• For the 401(k) portion of your account, consider one
of the T. Rowe Price Target Retirement Funds
• Don’t retire from investing
– Remember, you could spend more than 20 years in
retirement
– Your needs may change over time – therefore you should
review your retirement plan at least annually
Diversification does not assure a profit and does not protect against loss in a declining market.
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Asset Allocation: Risk Profile Quiz
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If you are unsure of your current risk tolerance, try this quick and easy questionnaire.
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Investment basics: risk/return spectrum
Stocks: Potential for Higher Returns
Highest Level of Risk
Asset Allocation/Lifestyle:
Diversified Investments with
Varying Returns & Risks
Bonds: Slightly Higher Returns
Slightly Lower Risk
Cash: Potential for Lower Returns
Lower Risk
The risk/return indicator is
for comparative purposes
and is based on the
general comparative risks
of these categories.Po
ten
tial R
isk/R
etu
rn
Higher
Lower
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How Target Date Funds Work
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Market volatility — Don’t let it distract you! Keep focused.
• Be patient — stick with your long-term strategy
• Keep short-term financial news in perspective
• Don’t try to time the market
• Dollar cost averaging can help take advantage of market swings
Dollar Cost Averaging does not assure a profit, that more shares/units
will be purchased than a lump sum purchase or protect against loss in
a declining market, and involves continuous investment in securities
regardless of fluctuating prices. An investor should consider his/her
ability to continue investing through periods of low price levels.
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Manage your investments over time
Do an Annual Review to make sure your plan is still in line
with your goals
• Check your asset allocation
• Rebalance periodically
• Review other retirement savings
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What is the Annuity Plan?
• The Annuity Plan was established on your behalf on January 1, 2003.
• This member pool is made up of participants ranging from our 22-year-old apprentices
to older retirees.
• This benefit was negotiated as part of your wage package and established as an
investment vehicle with the goal that this benefit would be used to supplement
retirement income and aid in defraying retiree health insurance costs.
• Your employer contributes the collectively bargained contribution to your Annuity Plan.
For 2019, the hourly contribution is $7.55.
This contribution will increase $.65 cents each year of the new contract.
These contributions are pooled and invested by the Board of Trustees.
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How are the annuity contributions invested?
Prior to July 2007
• The Annuity Plan was invested in a Guaranteed investment
contract that provided a rate of return of 3% each year.
After July 2007
• The Annuity Plan has been investing in a broadly diversified
portfolio of equity (stocks) and fixed income (bonds), as
determined by the Board of Trustees.
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How are the annuity contributions invested?
The Board of Trustees work with Investment Advisors to allocate these dollars according to certain parameters.
• These dollars are conservatively invested in order to protect the investment principal as well as maintain a
steady stream of asset growth, i.e. produce returns of 3–3.5% above inflation over the long term.
• Based on the current market environment, the Annuity allocation is expected to generate a long term
average rate of return of 5.8%.
• A variety of managers are utilized to attempt to outperform market indices and enhance the
5.8% return expectation.
• There will be short-term return volatility with the expectation that the Annuity will perform consistently with
the asset allocation and risk and return objectives established by the Board of Trustees.
• The asset allocation of the Annuity may be modified as market conditions or objectives change.
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The Annuity Allocation
Investment Summary
as of 12/31/2018
Trustees, ECA & 401(k)
The Annuity Allocation is invested approximately
49% in stocks and 51% in bonds
Core Blend
(Annuity)CPI + 3.5%
1 Year -5.89 5.51
3 Years 3.95 5.62
5 Years 2.90 5.04
7 Years 5.08 5.08
10 Years 7.20 5.36
Core Blend
AnnuityCPI + 3.5%
2017 13.86 5.68
2016 4.84 5.66
2015 -1.51 4.18
2014 4.29 4.18
2013 8.73 5.07
2012 12.76 5.32
2011 2.27 6.67
• The Annuity’s mid-single digit trailing returns are consistent with a period of low interest rates and modest inflation.
• Recent performance has been impacted by increased stock market volatility and rising interest rates.
• The Annuity has achieved its objective of protecting against inflation and providing incremental asset growth .
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Summary: The Annuity Fund Strategy
• The total Annuity account represents $2.4B as of December 31, 2018.
• A wide pool of participants
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49% in the
Stock Market
51% in the
Bond Market
• These dollars are conservatively invested
in order to protect the investment
principal as well as maintain a steady
stream of asset growth.
• Investing in stocks and bonds will
come with some short term volatility
but with the expectation of improved
long term growth.
• The Annuity should prove to be an
attractive supplement to your retirement.
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Common Pre-Retirement Questions
• Have I saved enough?
- What kind of lifestyle do I want?
- What expenses do I need to consider?
• What about Social Security?
- When do I get it?
- How do I get it?
- Who do I contact?
• How do I plan for future medical expenses?
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Common Pre-Retirement Questions
• Is my current investment strategy
appropriate?
• Can I keep all/most of my retirement
money together in one place?
• What do I do with my money when I retire?
• What tools/services does MassMutual
provide to help me plan for retirement?
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Retirement Readiness: Financial Planning
• Your plan should account for your entire financial picture. It may include:
- Anticipated retirement lifestyle
- Healthcare expenses
- Retirement savings
- College planning
- Disability income insurance
- Life insurance
- Long-term care insurance
- Estate and/or tax planning
• Decisions on these items may affect your plans for retirement
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Retirement Readiness: Retirement Reality?
An individual reaching age 65 today will likely live until age
84.3 (men) or 86.6 (women). 25% of 65-year olds
will live past age 90 and 10% will live past age 95.
*Source: www.SSA.gov, January 2015
DID YOU
KNOW?
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• Pre-retiree population is growing and living longer
• Research shows large numbers of pre-retirees are financially
under-prepared
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Retirement Formula Example
Retirement Readiness: How Much Will You Need?
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Hypothetical example for illustrative purposes only. Not intended to reflect the actual
performance of any specific investment. Individual experience will likely vary.
X Years in Retirement
Amount NeededTo Maintain Same Lifestyle
$1,600,000(Or $6,666/month)
80% of $100,000
= $80,000
X 20 Years
80%
of Pre-retirement Income
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Retirement Readiness: Retirement Income Sources
• Determine all income sources:
- Annuity and 401(k) Retirement Plan
- Pension
- IRAs
- Personal savings
- Employment during retirement
- Social Security
- Other
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Retirement Readiness: Advantages of Your Retirement Plan
Catch-up contributions
• If you are age 50 or more, at any time during the 2019 calendar year, you
can make an additional pre-tax contribution up to $6,000* above and
beyond normal plan and legal limits**
• Future increases will be indexed for inflation
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* Legal limit is $19,000 for the 2019 calendar year.
** Not all plans offer the Catch-Up Contribution. Check your plan’s provisions to verify.
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How much do you need?
Will your Social Security be enough?
Probably not…
In 2017, the average Social Security retirement benefit was
$1,368 per month* or $16,416 per year.
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DID YOU
KNOW?
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Retirement Readiness: Social Security
In 2017 the average Social Security benefit was….
$1,368 per month or $16,416 per year.
*Source: www.SSA.gov, January 2018
DID YOU
KNOW?
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• When can I start receiving it?
• How much can I expect?
• When and how do I apply for it?
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Year of Birth Full Retirement Age
What is Full Retirement Age?
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Source: Social Security Administration, January 2018.
1937 or earlier 65
1938 65 & 2 months
1939 65 & 4 months
1940 65 & 6 months
1941 65 & 8 months
1942 65 & 10 months
1943 – 1954 66
1955 66 & 2 months
1956 66 & 4 months
1957 66 & 6 months
1958 66 & 8 months
1959 66 & 10 months
1960 or later 67
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How Your Benefit is Determined
• STEP 1 – SSA looks at your lifetime earnings
• STEP 2 – Takes a monthly average of your 35 highest earnings
• STEP 3 – Adjustments are made for inflation
• STEP 4 – Result is “average indexed monthly earnings”
To get an estimate visit: SSS.gov/estimator
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Source: Social Security Administration, January 2018.
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Consider Delaying Social Security
Example: Person born in 1965 earning $80,000 today:
• Retire at age 62 = $2,095/month
• Retire at age 67 = $3,479/month (an extra $1,384 per month for life)
• Retire at age 70 = $4,806/month (an additional $1,327 more)
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*Source: www.SSA.gov/estimator, August 2015
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How Do I Apply for Retirement Benefits?
• Online at www.socialsecurity.gov
• Call 1-800-772-1213 (TTY 1-800-325-0778)
• Apply at your local Social Security office
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Distribution options
Distribution option events include:
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• 3-month separation from service
• 6-month separation from service
• Working for a contributing employer at
the age of 59 & ½
• Age 55+ and retired
• Disabled
• Financial hardship
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When can I receive a distribution of my Annuity Account?
Account Balance Prior to January 1, 2011 • When you are terminated from the industry and have not had any annuity hours in six consecutive months
• When you retire (i.e., when you separate from service at age 55 or older and are receiving your pension
from the NEI Pension Fund or Social Security Retirement benefits)
• If you become disabled (Social Security disability award)
• Upon your death
New Contributions and Earnings Accumulated After January 1, 2011 • When you retire (i.e., when you separate from service at age 55 or older and are receiving your pension
from the NEI Pension Fund or Social Security Retirement benefits)
• If you become disabled (Social Security disability award)
• Upon your death
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Understanding Your Options: Staying with the Annuity/401(k) Plan
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• Maintain control over your account
• Account balance continues to benefit from the tax-deferred growth
opportunity until withdrawn
• Required Minimum Distribution at age 70-1/2
• Same investment options available to you as a retiree in the Plan
• Upon your retirement you may now request that your distribution be
taken from a specific investment option in the 401(k) portion of your
account (not pro-rata)
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Understanding Your Options: Traditional IRA Roll Over
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• Continue to receive tax-deferred treatment until withdrawn
• Control over your money
• Flexibility to make a different choice later
• Possible to choose investment options separate from your current
retirement plan
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Understanding Your Options: Taking the Cash
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• After you separate from service
• Upon distribution, taxes apply
• Need to be age 59½ to avoid a 10% early withdrawal penalty, except for a few reasons such as:
– Separation from service during/after the year you reach age 55
– Payments paid as equal payments over your life/life expectancy
– Retirement due to disability
– Payments made to alternate payee under a QDRO
This is not all-inclusive. For more information, call the Retirement Specialist Group. Consider consulting a tax advisor prior to distributions.
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High Price for Early Withdrawals
Understanding Your Options: Taking the Cash
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Hypothetical example assumes a flat 25% federal tax rate and a 5% state tax rate.
Your tax rates may be higher or lower. Hypothetical example for illustrative purposes only.
Not intended to reflect the actual performance of any specific investment.
Individual experience will likely vary
$50,000 Initial distribution
- $12,500 Federal income tax (estimated)
- $ 2,500 State income tax (estimated)
$35,000 could be all you see of the original $50,000
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Cost of Cashing Out
Understanding Your Options: Taking the Cash
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Hypothetical example assumes a flat 15% federal tax rate and a 5% state tax rate.
Your tax rates may be higher or lower. Hypothetical example for illustrative purposes only.
Not intended to reflect the actual performance of any specific investment.
Individual experience will likely vary
$50,000 Initial distribution
- $ 7,500 Federal income tax (estimated)
- $ 2,500 State income tax (estimated)
$40,000 could be remaining of the original $50,000
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Cost of Cashing Out
Understanding Your Options: Required Minimum Distributions
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Deadline for Withdrawals:
• First Required Beginning Date (RBD):
- April 1st of the calendar year after the year you reach age 70½
• Subsequent Required Minimum Distributions (RMDs):
- December 31st of each year
Penalty: 50% on the shortfall!
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Cost of Cashing Out
Understanding Your Options: Required Minimum Distributions
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Required Minimum Distributions (RMDs) are calculated
based on three Life Expectancy Tables:
• Joint & Life Last Survivor Life Expectancy: Owner whose spouse is
the sole beneficiary and more than 10 years younger
• Uniform Table (old MDIB Table)
• Single Life Expectancy Table
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MassMutual resources
• Participant Information center: 1-800-743-5274
Customer Service Representatives available
from 8 a.m. to 8 p.m., ET
• Participant Retirement Plan Website:
www.massmutual.com/iuec
• Search for “RetireSmart” or “MassMutual” in
your phone’s app store.
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Make room for a NEW mobile app!
Available for Android and Apple devices.
The app lets you view:
• Total account balance
• Balances by source and investment
• Vested balance by source
• Personal rate of return
• Last contribution amount
• Asset allocation by investment in chart and list form
It also provides:
• A link to www.massmutual.com/iuec
• Login assistance
• Contact information and more
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© 2017 Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001. All rights reserved. www.massmutual.com.
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© 2018 Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001. All rights reserved. www.massmutual.com.