Retirement 2007

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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

89

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





1943-54 66






1960 and later 67

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Questions?

Retirement 2007

Economy & Finance

Transcript of Retirement 2007