United Way Retirees Association

Planning for Retirement in an Era of Uncertainty!!

United Way Retirees Association

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Confirmation code: 3905409

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Today’s Presenters

1. Ralph Gregory

UWRA Board Member,

Retired CEO, United Way of Westchester

and Putnam

2. George Wilkinson

UWRA Board Member,

Retired Senior Vice President, United Way of

America

Poll Question - Audience

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Agenda*

1. Are You Prepared?

2. Key Findings from Polling United Way Retirees

3. Goals for the Webinar Series

4. Framing the Problem

5. 10 Ways to Prepare for Retirement

6. Common Retirement Planning Mistakes

7. How Much Do You Need to Retire

8. Start Planning NOW

9. Tips and Key Lessons Learned

10. Resources & Upcoming Webinars

11. Q and A Session

*Disclaimer: The sole purpose of this Webinar is to encourage lifelong retirement planning; and is not a substitute for legal or financial professional advice.

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Are You Prepared?

•By the end of 2010 roughly 2.3 million people were expected to retire, according to the Social Security Administration.

•According to a 2010 survey by the Employee Benefit Research Institute, 35 percent of Americans—up from 30 percent just a year earlier—felt financially ill-prepared for retirement.

•Almost four in 10 Americans are not currently saving for retirement*

•Many Americans Are Not Financially or Emotionally Prepared for Retirement*

*2009 Charles Schwab Survey conducted by Kelton Research

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Key Findings that Surfaced from Surveying UWRA Retirees

Wish I had…

•Taken better care of my health –a large issue affecting quality of retirement

•Planned better – financially and emotionally

•Saved more money/started earlier

Major Concerns Expressed….

•Health insurance – primary or secondary health insurance is becoming increasingly expensive

•Long Term Care – your retirement plan can be quickly derailed if this extensive and expensive care is needed

Poll Question - Retirement Planning

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Main Goals of Webinar Series

• Encourage and empower United Way staff to take responsibility for planning for their retirement and to view it as a lifelong effort

• Increase the number of United Way employees able to provide for their income needs in retirement

• Help make the transition from work to retirement as smooth as possible

• Convey some “Lessons Learned” – Do’s and Don'ts based on the experiences of United Way retirees

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Framing the Problem

•Frozen/disappearing pension plans and the subsequent increased necessity of individuals to plan for their retirement

•401(k)s and 403(b)s are losing value

•Rising healthcare costs

•Longer life spans

•Uncertainly over Social Security and Medicare

•No system-wide retirement plan is available for United Way employees

•Local United Ways vary considerably in relation to what they offer – with smaller United Ways often providing no benefits at all

•Little best practice information is available from local United Ways in the area of retirement planning

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Research Shows….

•Knowledge of retirement issues is positively related to one’s attitude toward retirement

• Training and intervention programs designed to boost financial knowledge improve financial preparedness by triggering advance planning activities

•Only about 1/3 of workers receive educational materials or seminars from an employer

•Only 52% of 403(b) plan sponsors (nonprofits) contribute to employees’ accounts compared to 88% of 401 (k) sponsors (for-profits)

•Many nonprofit organizations offer no retirement plans to their employees

•Most retirement planning programs/practices are geared to those aged 50 plus

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Top 10 Ways to Prepare for Retirement:National Retirement Planning Coalition

1. Select a target date for when you want to retire.

2. Calculate how much money you need to accumulate by the time you want to retire.

3. Find out how to maximize your Social Security benefits.

4. Take full advantage of tax-advantaged plans such as employer retirement plans, individual retirement accounts and annuities.

5. If your employer doesn’t have a pension or retirement plan, ask that one be started; or start your own.

6. Don’t touch your savings for anything but retirement.

7. Diversify your assets and be sure to include guaranteed income for life.

8. Ask questions. Get help. Seek the assistance of a professional financial advisor.

9. Start now, set goals.

10.Do a retirement plan and monitor your progress. 

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Top Ways to Prepare for Retirement (cont)

Missing from the previous list:

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Common Retirement Planning Mistakes

1. Procrastinating – retirement planning should be a lifelong pursuit

– A general rule of thumb has been that the income one needs to live comfortably in retirement is likely to be at least 80% of what one is spending at the time of retirement -- although these income needs can vary considerably from individual to individual

– Having the needed level of income available upon retirement means planning well in advance. Investments made earlier on in life will have a longer time to grow and multiply.

2. Failure to Diversify

– Diversification helps weather market fluctuations (consider assistance of a financial advisor – UWRA booklet provides tips)

– Investment strategy (e.g.., conservative or higher risk) should reflect where you are on the retirement planning continuum

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Common Retirement Planning Mistakes (cont)

3. Not taking full advantage of retirement accounts that are tax free

– If offered, make sure you contribute a sufficient amount to your defined contribution plan to draw down the full organization match, allowing you to take greater advantage of tax benefits

– If your employer does not have a plan, start your own IRA or another investment program

– Avoid cashing out or borrowing against your plan – let it grow

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Common Retirement Planning Mistakes (cont)

4. Retiring before you are financially prepared – postponing your retirement even a few years can make a huge difference. A few key issues to consider:

– While the rule of thumb is to save 10% of your income for retirement , take the time to match savings goals with your retirement goals.

– Try to enter retirement years debt free.

– Calculate how much you plan to withdraw from your retirement assets in your first year of retirement and project it for a possible 25 to 30 year period. “The first year of retirement sets the stage for how much you're taking in future years, and it's a great indicator of the likelihood that your money is going to last longer than you do” Greg McBride, senior financial analyst at Bankrate.com.

– Health care can be an issue if you retire before you turn 65. You'll need to bridge the gap between the end of your employer’s health coverage and the beginning of Medicare coverage. Private health insurance can cost a hefty sum.

– To receive full social security retirement benefits, you must be "normal retirement age" (NRA) which varies from age 65 to age 67 by year of birth (checkout www.UWRA.org for more info). Social security is one income source – not meant to be a complete source of retirement income.

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Common Retirement Planning Mistakes (cont)

5. Believing that planning ends when retirement begins --

– Have a post-retirement plan in place before your retire (put it in writing) and continue to revisit it. When considering post retirement income needs, remember to consider inflation, taxes, market volatility, rising health care costs and unanticipated developments and crises.

– Keep generating income – review ways to extend retirement income by working on a part-time basis and/or seeking investment assistance of a financial advisor

– "Retirees need to plan as if they're going to live to age 95," says McBride (senior financial analyst at Bankrate.com). "They could have a 25- to 30-year period in retirement and they need to preserve their buying power” and not withdraw funds prematurely

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Common Retirement Planning Mistakes (cont)

6. Not Having a Will or a Living Trust – the laws of the state -- not you -- will determine what happens to your estate and your minor children

•Other Considerations

– “Dignity Planning” - creating a power of attorney and writing a living will or healthcare proxy. It covers financial and medical decisions that might need to be made while someone is disabled - helps the spouse of a disabled person considerably.

– Heritage Planning – Passing On Values with Your Valuables (a method of conveying your values as well as your estate to your heirs)

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Common Retirement Planning Mistakes (cont)

7. Not planning for the psychological aspects of retirement* - preparing for retirement is not just a financial function – Life dimensions across the Spectrum include:

–Financial Security

–Health and Wellness

–Lifelong Learning and Work

–Civic Engagement

* These aspects of transitioning into retirement are to be addressed in our 3rd Webinar

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How Much Do You Need to Retire – Things to Consider

Build your own individualized plan. Some Considerations…

• Expense categories fluctuate depending on stage of life. Examples: Potentially Less income needs in retirement:

– mortgage may be paid off, – can predict when you will finish paying for college/other support for

children – No longer working so you will probably be spending less on clothes,

transportation & meals

Potentially More income needed in retirement: – Home maintenance and property taxes– Utility bills – rising costs of energy and you may be home more– Home and car insurance are apt to increase– Medical expenses including the cost of insurance and rising health

care costs

• The rate of inflation may also affect your income needs in retirement Since the government began tracking inflation in 1913 , the average annual

increase has been 3.43% or a cumulative increase of about 1930%!!

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How Much Do You Need to Retire – Make Projections

• Project Expenses/Income - You need to know what your retirement expenses will be and how much retirement income you will need to cover them. Two ways to do this include using a retirement calculator or hiring a certified financial adviser.

Income - distinguish between guaranteed sources of income, like pensions, and those that fluctuate over time, like 401(k)s. Tip - make sure the guaranteed income sources can cover your basic living expenses, like home-maintenance costs, food, and medicine.

Factoring in future health care costs is essential. According to a recent University of Michigan Law School study, medical costs are a major contributor to bankruptcy among older Americans. Tip – an estate attorney or financial planner are good resources to help in this area.

Poll Question – Age Group

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Start Planning NOW – Some ideas by age group*

•Age 20 to 29Start your 401(k) or 403 (b) at work – contribute enough to

capture the full organization match if there is one

Consider starting a Roth IRA if you do not have a 401(k) or 403 (b). Or if you have those plans and can afford a Roth IRA – do both

Start an emergency fund – to avoid going into debt for emergencies or tapping your retirement fund

Make a living will.

* Based on USA Today Report by John Waggoner

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Start Planning NOW – Some ideas by age group (cont)

•Age 30 to 39

Do not reduce your retirement savings while saving for college expenses – make every effort to continue both – you can finance college expenses but not retirement income needs

Use your 401(k) or 403(b) to help you save. Big plus – these plans let you save money before taxes.

Do not confuse life insurance with retirement savings. Life insurance is needed to protect your family but it is not viewed by many as an effective retirement savings vehicle.

Write your will or establish a living trust.

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Start Planning NOW – Some ideas by age group (cont)

•Age 40 to 49Contribute the maximum to your 401(k) or 403(b)

Emergency fund should equal two to three months of expenses

Consider refinancing to make sure your mortgage will end when you stop working

Think about a Roth IRA or other alternatives for retirement savings plans

Purchase a long-term care insurance policy

Update your living will and make sure someone has power of attorney. Think about Heritage planning.

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Start Planning NOW – Some ideas by age group (cont)

•Age 50 plus

If kids are out of college, consider reducing life insurance coverage/premiums and increasing savings

Take advantage of the 401(k), 403(b) and IRA catch-up opportunity, which will let you contribute more each year

Review your guaranteed sources of income. Start projecting how much your savings will have to be tapped to meet expenses and rework retirement planning goals if necessary

Update your will or trust.

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A Few Tips…

1. Take better care of health – it is a huge issue affecting quality of retirement

Seven common sense but effective steps to increase chances of remaining healthy:

1. Stop smoking

2. Monitor/control your blood pressure

3. Eat a healthy, balanced diet

4. Watch your weight

5. Monitor/control your cholesterol

6. Stay active – mentally and physically

7. Get an annual physical

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A Few Tips… (cont)

2. Retain a financial advisor you trust

Get references and explore investment options

3. Long Term Care Insurance

Buy when healthy enough to meet underwriting standards and at a younger age when premiums are lower

4. Develop a plan and revisit it - rework retirement planning goals as necessary

Before retirement - do retirement reading – decide where and how you would like to spend retirement years

After you are retired 6-12 months, re-assess your financial situation and adjust to maintain a sustainable life style.

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How Well You Retire Depends on How Well You Plan Today….

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A Few Tips… (cont)

•Some tips to be explored more in our 3rd Webinar

5. Prepare in advance for continued involvement with colleagues and friends to help bridge the change from full time employment and high level of recognition to a new role

6. Think ahead about retirement involvements/how you will be engaged (e.g., family activities, community & volunteer roles, recreational activities, continuing education and travel) and provide for them adequately in your retirement planning

7. Think ahead about how you want to prioritize your time - be prepared for the “asks” – people and groups will want your time – thinking ahead will help you know when to say “NO” to avoid over commitment

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Key Lessons Learned

I. Theory of Chaos - Plan for the Unexpected!!When considering post retirement income needs you need to remember to

consider inflation, taxes, market volatility, rising health care costs and unanticipated developments and crises.

Examples of things that can derail your plans:

• Turbulent economic times like we are experiencing now:

Weakness in the Housing and Job market

Uncertainties related to Social Security and Medicare

Extreme Market Volatility

Rising costs for groceries and other basic needs

• Long Term Care - your retirement plan can be quickly derailed if this extensive and expensive care is needed

• Additional (unanticipated) dependents – e.g., elderly parents, adult children hitting a rough spot

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Some Things to think about…

1. A buffer - extra reserve fund money for unexpected costs in a liquid bearing account

2. Buying that Long Term Care policy

3. Diversify your portfolio with fixed income investments

4. Do not anticipate your home value to rise

5. Live within your means – now

6. Factor in life changes (e.g., loss of spouse, divorce)

7. Take nothing for granted!!

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Key Lessons Learned (cont)

II. Understand completely the terms and conditions of your organization’s retirement plan

• Ask some key questions, and ask them regularly, perhaps once a year, to make sure that you stay on track on the way to retirement.

1. Does the organization match your contribution and, if so, by how much? Are you automatically enrolled?

2. How long does it take to be vested in the plan?

3. What is the maximum annual contribution you can make? Will contributions lower your taxable income and allow your investments, to grow tax-deferred?

4. Can you select your own investments – do you have to pay any penalties to change investment choices? If so, how much?

5. Who are the organization’s fund managers and how have they performed in the past?

6. What are the conditions for borrowing or withdrawing from the account, if such actions are allowed?

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Retirement Planning Resources

• Two UWRA booklets* – electronic version on UWRA website (www.UWRA.org) and available in hard copy by contacting the UWRA office:

1. It’s Never too Early or Too Late to Plan for your Retirement

helpful resources are listed in the back of this publication and on the UWRA website

2. Choosing a Financial Advisor

* Booklets distributed in 2008 to over 1200 local United Ways for each of their 20,000 employees and to all UWRA members. This publication was made possible by a grant from the UWRA endowment

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Retirement Planning Resources (cont)

• UWRA Website: www.UWRA.org– List of helpful resources including Retirement Calculators

http://www.uwra.org/retirement-resources

– Links to Social Security information: http://www.ssa.gov.  Such as: Retirement Benefits booklets: http://ssa.gov/pubs/10035.html.  

Retirement Planner: http://www.ssa.gov/retire2/

Calculators: http://www.ssa.gov/planners/benefitcalculators.htm

“Normal retirement age" (NRA)*: http://www.ssa.gov/oact/progdata/nra.html

– Following each Webinar – posted link for recorded version and PowerPoint presentations

*To receive full social security retirement benefits you must be of normal retirement age, which varies from age 65 to age 67, based on the year of your birth

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Retirement Planning Resources (cont)

•Coaching Service - UWRA is exploring the feasibility of a retirement coaching program.

– A coaching service that would be offered, free of charge, to United Way current and former employees to assist in navigating the journey to retirement and beyond 

– Coaches will be retired United Way colleagues that have participated in a training program

– The objective is to provide general information and guidance in response to individual questions and concerns. Assistance in locating appropriate information and resources would also be provided; The coaching service, if offered, is not intended to take the place of a financial planner or a professional advisor

– This service is designed to assist individuals planning for retirement or who are already retired.  The service will be available by phone and/or email. 

Poll Question – Coaching

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To Avoid This…Tune in for more….

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Upcoming Webinar Series

1. How United Ways Can Help – for CEOs & HR professionals

2. Transition into Retirement/Life in Retirement

3. Financial Planning

4. Estate Planning

5. Healthcare Options

6. Understanding Medicare

* FYI Archived Webinar by the Heritage Institute on The Elements of Heritage Planning @ http://www.ustream.tv/recorded/13064292

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