TOOLS TO SUPPORT YOU IN SECURING A STRONGER FINANCIAL FUTURE

Transcription

1 TOOLS TO SUPPORT YOU IN SECURING A STRONGER FINANCIAL FUTURE 1 Our Value Proposition The resources of a global company channeled to a local commitment; AXA Equitable is dedicated to providing competitive products, unsurpassed service, and personalized support for the full financial life cycle of our clients. 2 1

2 High Level Structure AXA Equitable is a member of the global AXA Group 64 Countries Million Individual & Institutional Clients Worldwide 1 Over $1.48 Trillion Euros in Assets 2 166,000 Employees 1 1 Data as of 12/31/15 2 Figure is $ 1.6 Trillion using 12/31/15 closing exchange rate of 1 Euro= $1.369: * AXA Group refers to AXA S.A., a French holding company for a group of international insurance and financial services companies, together with its direct and indirect consolidated subsidiaries. AXA Equitable Life Insurance Company (AXA Equitable) (NY, NY) is a subsidiary of AXA Financial, Inc., a member of the global AXA Group. AXA Equitable Life Insurance Company has sole responsibility for its annuity and life insurance obligations. Distribution: AXA Advisors. LLC & AXA Distributors, LLC (members FINRA, SIPC) 3 AXA Equitable Life Insurance Company, NY, NY GE (9/14) AXA Equitable Strength For over 155 years, AXA Equitable has been a leader in the financial services industry, offering our clients an array of products and services to help them meet their financial needs. U.S. Retirement Plan Leader Presence in all 50 States Participants: 893,988 Plan Assets: $25.8 Billion Plans: 28,579 Financially Stable Strong Industry Ratings A.M. Best: A+ S & P: A+ Moody s: Aa3 Fitch: AA- Financial ratings are as of October 2015 and are subject to change. All other data is as of March 31, Q LIMRA Data #1 in K-12 participants with 645,987 #1 in K-12 in contributions with $413m 4 2

3 Deep Community Commitment: AXA Achievement SM Scholarship provides $670,000 annually to young individuals throughout the nation State Winners Fifty-two winners -- one from each state, Washington, D.C. & Puerto Rico -- selected by our nonprofit partner, Scholarship America, to receive one-time scholarship awards of $10,000 National Winners From the pool of 52 state winners, 10 selected as National winners & earn an additional one-time scholarship of $15,000 This brings the top AXA Achievers' total scholarship awards to $25,000 each 5 Meet Your Team Lynn Sarkis Director, Strategic Relations West Mike Schaeffer Regional Vice President West Coast Phil Kim Senior VP Southwest Micah Handell Financial Professional New Mexico 6 3

4 AXA Employer Sponsor- How were different The Common Approach vs. The Professional Approach Common Approach Professional Approach 7 Agenda The Need for Financial Literacy The Problem The Solution 8 4

5 According to the US Census Bureau Average savings of a 50 year old $43,797 Total cost for a couple over 65 to pay for medical treatment over a 20 year span Percentage of individuals who start working at the age of 25, by 65 are dependent on Social Security, friends, relatives or charity Percentage of individuals who have adequate capital stowed away for retirement Percentage of individuals ages believe they will not have enough money put away for retirement $215,000 63% 4% 80% 9 Source: (July 2015) The Need for Financial Literacy A recent Aon Hewitt Survey found that 98% of plan sponsors use written educational materials, but on 22% think they are effective Providing face-to-face, holistic guidance to retirement plan participants-including educating them on Medicare, Social Security, Health Care, and LTC- is an essential component of financial literacy and improving participants retirement readiness. 10 Source: (May 2015) 5

6 The Problems Facing Retirement Plans: Gender Differences of Money Management Schwab Study 1 47% of men are more inclined to trust only themselves to make good financial decisions, vs. 32% of women 29% of men are more likely to say they ve made more financial mistakes than smart financial decisions, vs. 20% of women 35% of men think they still have a lot to learn about managing their finances successfully, vs. 28% of women Women are nearly twice as likely as men to turn to friends or family members for financial advice (30% vs. 17% percent of men) 44% of women say they are taking a passive approach, vs. 37% of men Survey shows everyone handles finances differently No one-size fits all solution Offering tailored help and guidance is a main concern 11 1 Source: Schwab Retirement Study Uncovers Gender Differences in Money Management Styles by Schwab Investor Services News 2011 The Problems Facing Retirement Plans: Missing Out on Professional Advice Schwab Study 1 While importance of retirement plans are recognized, employees not taking full advantage of benefits involved 87% say retirement plan is a must have of benefits offered 87% more likely to have someone change the oil in their car than assistance in choosing retirement plan investments Participants spend the same amount of time reviewing & choosing investments for their retirement plan as they do investigating cell phones Participants spend more than twice as much time researching cars before buying than evaluating retirement plan options - Lifetime vs. temporary decisions 50% surveyed say retirement plan investment information is more confusing than health care benefits One in three admit they feel stress when it comes to allocating retirement plan dollars 12 1 Source: Majority of Participants Missing Out on Professional Investment Advice by Schwab Investor Services News

7 Potential Pension Gap 13 Source: PEW Charitable Foundation, 2014 New Mexico Employee Retirement Benefit Formula Defined Benefit Plan The ERB provides a defined benefit retirement plan funded by contributions from both the employee and the employer for the majority of ERB members. The retirement benefit is determined by a formula applied to the member s salary history and years of qualified service. The Defined Benefit Plan (DBP) uses the following formula to determine your pension benefit: Average annual salary x service credit x.0235 = annual benefit The DBP provides a stable monthly pension payment for the life of the retiree. It also offers members two options to provide lifetime benefits to a surviving beneficiary after the retiree s death. The ERB Defined Benefit Plan is administered as a qualified plan under the Internal Revenue Code, Section 401(a). In a qualified plan, employee contributions are deducted pre-tax; federal and state income taxes are deferred until the member receives monthly retirement benefits or their contributions are withdrawn. 14 7

8 Debt in America What is the average debt balance per household in the US? What age group holds the highest aunt of debt? What are the risk to carrying debt? American Household Credit Card Debt Study According to NerdWallet the average debt per house hold is depicted in the slide shown here. According to NredWallet most of the debt is owned by people between the ages of 28 and 39. This in due to the segment getting their first job, buying a house and paying off student loans. The risk to carrying such high debt is how it affects your credit score. It can reduce your ability and purchasing power by using credit. 16 Source. NerdWallet 8

9 Inflation The rising cost of Higher Education. The rising cost of health care 17 Average Tuition Room & Board Source: Trends.collegeboard.com 9

10 The Rising Cost of Health Care 19 The Rising Cost of Health Care, continued 20 10

11 Student Loans Avg student loan? Avg payment for student loan? 21 Rising Amount of Student Loans w/ Cost of Education 22 Source: Wall Street Journal 11

12 Rising Amount of Student Loans w/ Cost of Education 23 More Shocking Student Loan Debt Stats 24 12

13 Graduate Student Loan Debt 25 The Solution: Education & Guidance ING Study 1 Those who spent some time with an advisor saved 2x as much as those who spent little/no time Those who spent a lot of time save 3x as much RAND Corporation Study 1 Study found that people who received personalized advice (as opposed to none or general), did a better job of investing their money in the following categories: - Use of equities - Diversification - Appropriate level of Aggressiveness/Conservatism 26 1 Source: PROTECTING PARTICIPATION The Impact of Reduced Choice on Participation by School District Employees in 403(b) Plans ASPPA Pension Education AND Research foundation

14 The Solution (cont.) Student Loan Forgiveness Credit Repair Services Debt Consolidation Retirement Calculator 27 Financial Literacy Modules Your Retirement Plans: Understanding your Pension Voluntary Retirement Plans Understanding Social Security Family Love Letter (life insurance) Understanding Terms (fixed, variable, etc) Credit Repair Debt Consolidation 28 14

15 NEW MEXICO EDUCATIONAL RETIREMENT BOARD (NM ERB) 29 DC Versus DB Defined Contribution Amount that you put in is known, but the amount that you get on the back end is not known Ex. 401k, 403b, 457b, SEP IRA Defined Benefit Amount that you get on the back end is calculated by a predetermined formula Ex. Pensions, Social Security 30 15

16 DB plan in New Mexico Defined Contribution Created in 1925 by the state This is a multiple-employer, public employee plan What does multiple-employer mean? Who does it serve? Public schools, state universities and colleges, some charter schools It does NOT serve private employers and non-profits Eligibility requirements Must work at least 25% of a Full Time Employee A short-term sub is not eligible (someone who works less than 6 continuous weeks) 31 What is my Retirement Eligibility? Member is vested after 5 years of service credit have been accumulated After vesting, member may separate service, and receive Pension benefits down the line when eligibility reqs have been met 32 16

17 What is my Retirement Eligibility? (pre- July 1, 2010) 25 and out Service credits equals 25 years No minimum age is required Rule of 75 Age + service credit = 75 or more If you are under 60, and have less than 25 years of service credit, then your Pension is reduced by: % for each ¼ year that retirement occurs before your 60th Bday, equal to 2.40% per year, plus % for each ¼ year that retirement occurs before your 55th BDay, equal to 7.20% per year under age 55 - Ex. If you are 59 and 6 months old, your reduction is 1.20% 65 and 5 65 years old, and 5 years of service 33 What is my Retirement Eligibility? (post- July 1, 2010) 30 and out Service credits equals 30 years No minimum age is required Rule of 80 Age + service credit = 80 or more If you are under 65, and have less than 30 years of service credit, then your Pension is reduced by: % for each ¼ year that retirement occurs before your 65th Bday, equal to 2.40% per year, plus % for each ¼ year that retirement occurs before your 60th BDay, equal to 7.20% per year under age 55 - Ex. If you are 59 and 6 months old, your reduction is 1.20% 67 and 5 67 years old, and 5 years of service 34 17

18 Schedule of Contribution Rates 35 Schedule of Contribution Rates The EE contribution rate has been on the rise since 2006 Remember, the employee also contributes to Social Security The NMERB money is invested by the state 36 18

19 How is the Pension calculated? Formula Final Average Salary (FAS) * service credit *.0235 = your annual Pension benefit FAS is the higher of: Your average income 5 years before retirement Your highest average income over any 5 year period over your Career 37 Let s see some examples Formula is FAS * Service Credit * 2.35% Ex 1 Kevin Garnett taught 22 years, and his FAS was $4, yrs * 2.30% *$4,000 = $2068/month Ex 2 Dustin Pedroia taught 14 years, and his FAS was $3, yrs * 2.35% * $3,500 = $1151/month Ex 3 Curt Schilling taught 31 yrs, and his FAS was $5, yrs * 2.35% * $5,200 = $3788/month 38 19

20 Example One Curt Schilling taught for 31 years and his FAS was $55,000, what is his pension? Eligible to retire under 25 and out 2.35% x 31 years x $55, % x $55,000 $40, Example Two Mark Johnson is 55 years old, has 20 years of service and a FAS of $43,000. What is his pension if her retired today? When is he eligible to retire without any penalty? Mark is eligible to retire under the rule of years old + 20 years of service =75 Mark s pension is calculated by taking 20 years x 2.35% x $43,000 47% x $43,000 If Mark retired today before age 60 under rule of 75 he would incur a penalty equal to: 0.6%/qtr x 4 qtr/y x 5 years = 12% penalty If Mark retires at 55 his penalty is assed by: 47% x (1-0.12) x $43,000 = $17,785 At age 60 47% x $43,000 = $20,

21 Example Three Nancy is 65 years old and has been contributing to NMERB since fall of When is the earliest she can retire? Nancy will be eligible to retire under the new rule of 67 and 5 two years from now. Her pension will be calculated by taking: 5 years x 2.35% x FAS =11.75% x FAS 41 Example Four 42 George James is 49 years old and has been contributing to NMERB for 5 years since fall His FAS is $53,000. When is the earliest George can retire and what is his pension? George will be eligible to retire under the rule of 80 in 13 years, calculated by taking years old 5 years of service / 2 =13 years George s pension is calculated by 18 years x 2.35% x ( ) x $53,000 =39.3% x $53,000 =$20,805 21

22 What are the Payout Options (Irrevocable decision for employee) Option A: Straight Life Annuity Monthly benefit for life of employee only. If death occurs before all contributions have been paid out, bene receives the balance (generally all contributions have been paid out within 2-3 years) Option B: Joint 100% Survivor Benefit Provides a reduced monthly benefit for life. If employee dies first, the bene receives remaining the same monthly checks If bene dies first, the employee pops up to Option A Option C: Joint 50% Survivor Benefit Provides a reduced monthly benefit for life. If employee dies first, the bene receives 50% of Option C as monthly checks If bene dies first, the employee pops up to Option A 43 Cost of Living Adjustment Ranges from 2-4% each year This is under scrutiny RIGHT NOW! Updated July 1, 2016 the COLA is 0.9% for retirees with 25 years of service who s benefit is $1, % for all other retirees 0.1% for disability retirees 44 22

23 Some Misc Notes Remember, the Pension Option decision is irrevocable The ERB holds informational seminars periodically in school districts for people approaching retirement Retirees do pay federal and state (for AZ only) taxes on their pension 45 What if I leave before retirement? Very common occurrence. The average teaching career is 3-5 years! If you move to another district, your membership continues as usual If you leave for private sector job or any other non-erb job, you can Leave the pension money where it is with the ERB, and then take income stream in retirement, as long as you have 5 years (vested) Withdraw the money in the form of cash payment (penalties and taxes apply) or rollover into other qualified account or plan 46 23

24 I want to buy back years of service! 47 This benefits people who want to accelerate their years of credited service, if they qualify How does this work? ERB calculates in dollar terms how much it costs to buy back x amount of years Cannot buy back more than 5 years of service How does one qualify? Military or Reserve duty Past work history with another Public Employer Member who has withdrawn contributions, can buy back, plus 8% interest How is this paid for? Lump sum payment with after-tax money. Employee receives an invoice with the required dollar amount. Rollovers employee can use 403b monies or other qualified assets to roll into the NMERB and buy back years. Client can also rollover years-ofservice from previous public employer. NMERB Info ALBUQUERQUE 6201 Uptown Blvd. NE, Suite 204 Albuquerque, NM Phone: (505) Fax: (505)

25 Questions? 49 25