Saving for Retirement: It’s Easier Than you Think Chapter 7.

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Saving for Retirement: It’s Easier Than you Think Chapter 7

Transcript of Saving for Retirement: It’s Easier Than you Think Chapter 7.

Saving for Retirement:

It’s Easier Than you Think

Chapter 7

Where do Women Stand?

A smaller percentage of women than men participate in a pension plan at work. Why? Because they work fewer years.

Because they are more likely to move into and out of the labor force, women are less likely to be entitled to the full benefit of an employer’s pension plan or profit-sharing plan.

Where do Women Stand?

On average, women in the United States live about 5 1/2 years longer than men. Bottom line: we need $ to live on.

In 2004, men age 65 and over have an average annual income of more then $32, 000, compared with just over $17,000 for women

Women and Retirement Women will have to provide for themselves

financially for more years of retirement than men

For many of those years women are likely to be alone or in some cases, they will be in assisted living facilities (long term care insurance plays a valuable role in this scenario)

Yet women tend to earn less than men Women participate in the work force less

steadily Losing income and job seniority and pension

and entitlement buildups. Women are less likely than men to fully

participate on a pension or profit-sharing plan

Retirement Words to Live BySave Early, Save Regularly,

Save Aggressively. – the mantra of this class

Start Small, and Think Big.Start NOW. It’s never too late.

How Much Will You Need?

When looking at needs for retirement, don’t be intimidated- or worse, paralyzed.

Everyone’s retirement needs will be different, and there are many ways to cut down on your expenses, or supplement your income from a variety of sources, to see you through your retirement years

How Much Will You Need?

Kiplinger’s estimates that you will need 75-80% of your pre-retirement income to maintain your standard of living – Note this is your income when you retire not today’s income

A conservative guideline suggests that if you withdraw only 4%- or 1/25th- of your retirement nest egg during the 1st year and subsequent years of retirement, you might not outlive your wealth

How Much Will You Need? You would also be entitled to Social

Security payments and possibly pension benefits through your employer. But beware, these benefits for the younger generations will not be as generous once the Baby Boomers have lived through their retirement

Bodnar states that young workers don’t need to get hung up on a specific target for their retirement nest egg.

I tend to disagree and therefore feel that you need to become well versed in how much you need. Aim for a goal…

How Much Will You Need?

Retirement Calculator – check out some sites

3 Legged Stool

Social Security/MedicareMore Important for Women than MenShortest leg on the stool –

Remember David WalkerEmployer Pensions Plans

A lesser option for younger generations coming of age.

Private SavingsThe most important leg in the stool –

401K’s, IRA’s, SEP IRA’s etc.

Investing for Retirement:A StrategySave as much as possible as early

as possible and be prudent about your investments

Avoid stashing too much of your money in “safe” investments

Diversity your investmentsStocks BondsMutual FundsReal estate might be an option if you

are into rental properties

Run, Don’t Walk, to Open an IRA What is an IRA – Individual Retirement

Account Widely available

Anyone who has income from a paying job can have one, even stay at home mom’s can have an IRA

Money you put into the account grows tax-deferred. Meaning you don’t have to pay tax on the

earning as they accrue, so more of your money is working on your behalf- and reaping the bountiful rewards of compound interest.

Traditional IRA’s in a nutshell Tax deductible contributions – certain

situations will dictate how much you can deduct – check with your accountant

Withdrawals begin at age 59 ½ and are mandatory by 70 ½

Taxes are paid on earnings when withdrawn from the IRA.

Inheritance taxes are very high on traditional IRA’s.

Funds can be used to purchase a variety of investments

Available to everyone; no income restrictions

All funds withdrawn before 591/2 are subject to a 10% penalty (subject to exception)

Roth IRA’s in a nutshell Contributions, ie. what you put in are not tax

deductible No mandatory distribution age All earnings and principal are 100% tax free

if rules and regulations are followed Funds can be used to purchase a variety of

investments Available only to single-filers making up to

$95,000 or married couples making a combined maximum of $150,000 annually

Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions)

Roth withdrawals cannot cause social security benefits to be taxed

The balance of your Roth goes to heirs tax free

Where can you open an IRA

Most brokerage firms, banks, etc. will offer IRA’s and the minimum investment varies by institution. Check online for the firm that works best for you.

Who can help you make this decisionFinancial planner, accountant,

or other advisorsContinue to update yourself

on rules and regulations as part of our ongoing learning process

A blend might be good for you as you piece together your retirement puzzle

A Retirement Plan for Stay-at-Home MomsFor married women, one of the

great features of an IRA is that you can have one even if you don’t have a paying job, as long as your husband if employed.

Often times these spousal contributions can be deducted form your taxes

Take Full Advantage of a 401(k)Some companies offer a company

match- 50 cents on the dollar is common, and some employers are even more generous

Tax BreaksBecause contributions you make to the

plan come right off the top of your salary, that money is not taxed by the IRS.

As with IRS, earning inside the plan aren’t touched by taxes, ie no capital gains taxes

Plan for a Joint Retirement

Don’t get yourself into a situation where all the retirement money is in your husband’s name and all your own earnings have gone to paying for shorter-term expenses

Max out your 401(k)?

After I have reached the limit that my employer will match on my 401(k), should I invest additional retirement savings in a Roth or max out my 401(k)?the Ideal would be to max out your

401(k) and contribute the full amount to an IRA. If you cant afford both, the Roth gets the nod

How Retirement Plans Philanthropy Work TogetherIf you elect to do so, you can

assign over your 401K plans and IRA’s to benefit a charity of your choice. This is a great way to leave a legacy for your philanthropy of choice – more to come on this in philanthropy.

Find Money you Didn’t Know you Had Your Uncle Sam return

Update your W-4 Form to make sure that you are getting the maximum due back to you.

Your savings from refinancing your home

Your insurance Premiums Insurance rates are down, Shop Around!

Your Car Insurance Your Mortgage Insurance

Do you still need it?

Don’t Stop Now!

Use a retirement-planning calculator to estimate how much money you’ll need in retirement

Identify the extra $20 per week that you could redirect into your retirement savings

Decide whether a traditional or Roth IRA is better for you and open one

Don’t Stop Now!

Open an IRA if you’re a stay-at-home mom, and fund it from your husband’s income

Stash at least enough money in your 401(k) to get the maximum employer-sponsored match

Revise contributions as necessary to even out the amounts in your husband’s and your respective accounts