Increasing contributions presentation Increasing contributions in your retirement plan account.
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Transcript of Increasing contributions presentation Increasing contributions in your retirement plan account.
Increasing contributions presentation
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• Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution• Not insured by any federal government agency • May lose value
Budgeting
Benefits of contributing
Increasing your contribution
Importance of retirement plans
Why should I contribute to my retirement plan?
4 Americans aren’t saving enough
1 http://www.statisticbrain.com/american-family-financial-statistics.2 http://www.statisticbrain.com/retirement-statistics.3 http://www.bls.gov/ore/pdf/ec100020.pdf.4 http://business.time.com/2013/01/08/how-to-rock-your-401k-in-2013.
25% of Americans
have no savings1
36% of Americans aren’t
currently saving2
68% of Americans
have access to a 401(k) plan3
Only 5%contribute the
maximum4
Importance of retirement plans
5
Less than half of Americans
have calculated how much they will
need for retirement5
5 http://www.dol.gov/ebsa/publications/10_ways_to_prepare.html.
How much you’ll needImportance of retirement plans
6
6 "Your Retirement Lifestyle" www.kiplinger.com.
78%
How much you’ll needImportance of retirement plans
7
10-15% of your annual compensation7, which should equal: 1x by age 35
3x by age 45
5x by age 55
8x at retirement8
7 source: https://www.fidelity.com/viewpoints/retirement/8X-retirement-savings8 source: http://www.fidelity.com/inside-fidelity/employer-services/age-based-savings-guidelines
How much you’ll needImportance of retirement plans
8
9 "Social Security Planner: Learn About Social Security Programs, Social Security Administration (April 2013).10 http://www.ssa.gov/oact/tr/2012.
Social Security
• Social Security benefits typically cover —at most — 40% of pre-retirement income9
• Social Security can only pay full benefits to retirees until 203310
• Post 2033 through 2086, Social Security can cover 75% of benefits promised10
Importance of retirement plans
9
Full retirement
age
Early retirement
age
Deferredretirement
age
Social Security
– permanently decreases payment
– permanently increases payment
Importance of retirement plans
Importance of retirement plans
Tax benefits
Increasing your contribution
Benefits of contributing
What are the benefits of contributing to a retirement plan?
11 Tax benefitsBenefits of contributing
• Taxes are paid at withdrawal, not when contributing
• Money has more potential to grow
12 Tax benefits
Potential to be in
lower tax bracket at retirement
Contributing to plan
lowers taxable income
Benefits of contributing
13 Tax benefits
The power of tax-deferred compoundingTotals shown reflect a $100 monthly investment, an 8% annual return, a4% annual wage inflation and a 25% marginal federal income tax bracket. From the taxable investments, taxes are taken each month from deposits and annually upon gains. Taxes are taken on the tax-deferred investment’s end balance. This is a hypothetical compounding example and is not intended to predict or project investment results of any specific investment. Investment return is not guaranteed and will vary depending upon your investments and market experience. If costs were reflected,the return would be less.
Benefits of contributing
14 Tax benefits
• Incentive from IRS that gives credit to eligible participants for contributing to a retirement plan11
• Credits 50%, 20% or 10% up to $2,000 ($4,000 if joint filing)11
11 "http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Retirement-Savings- Contributions-Credit-(Saver%E2%80%99s-Credit).
Benefits of contributing
15 Compounding interestBenefits of contributing
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16 Compounding interest
Those in early stages of
retirement saving have a longer time horizon
Those nearing retirement can
take advantage of catch-up
contributions
Benefits of contributing
17
The average company contribution is now
4.5% of pay12
Employer match
86% of companies
offer a matching program13
Only a
third of employees take advantage of full company match14
12 http://www.psca.org/401-k-plans-are-working13 http://www.transamericacenter.org/docs/default-source/resources/center-research/tcrs2013_sr_retreadimperative.pdf.14 http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/RetirementAccounts/P121889 .
Benefits of contributing
Importance of retirement plans
Benefits of contributing
The Learning CenterIncreasing your contribution
Why should I increase my contribution?
19 Save moreIncreasing contribution
Maximum contribution limit
for 2015 is
$18,000
Catch-up contribution for those age 50 and above is
$6,00015
15
15 IRS Announces 2015 Pension Plan Limitations, Internal Revenue Service, IR-2014-99 (Oct. 23, 2014).
20
• Set aside retirement savings before paying other expenses
• Automatic deductions from your paycheck make it easy
Save moreIncreasing contribution
21
Auto-increase your existing contribution
by 1% each year
Save moreIncreasing contribution
Save part of your annual raise or bonus
Increase savings after
paying off debt
22 Save moreIncreasing contribution
Salary 9% 10%
$25,000 $220,178 $244,642
$50,000 $440,356 $489,284
$75,000 $660,534 $733,926
23 The Learning CenterIncreasing contribution
Paycheck impact
calculator
Future value
calculator
Roth retirement plan
analyzer
24 On Your Side Interactive Retirement Planner
SM
Increasing contribution
25
Talk to your Plan Sponsor about making or increasing contributions to your plan
Nationwide’s online tools and calculators
can help you see the impact of your contributions
The On Your Side Interactive Retirement
Planner can be a helpful tool in determining
how much you will need in retirement
Your company’s retirement plan
is important, and so is increasing contributions to it
SummaryIncreasing contributions
Access your retirement account
nationwide.com/myretirement
1-800-772-2182