Elevate your retirement planning. ELEVATOR CONSTRUCTORS ANNUITY AND 401(k) RETIREMENT PLAN

Transcription

1 Elevate your retirement planning ELEVATOR CONSTRUCTORS ANNUITY AND 401(k) RETIREMENT PLAN

2 Topics we will cover today Getting started Contributing to the 401(k) Decisions to Retirement Readiness Changing Contributions Reviewing Investment Allocation Be a confident investor Risk and Return Asset Allocation What is the Annuity Plan? How contributions are invested The Annuity Allocation Pre-Retirement Common Pre-Retirement Questions Getting Retirement Ready Social Security Understanding Your Withdrawal Options How MassMutual can help Online Resources Participant Information Center Mobile APP C:RS

3 Top reasons to contribute to your 401(k) 1. It s EASY 2. TAX-DEFERRED savings 3. You owe it to YOUR FUTURE 4. Choice of INVESTMENT OPTIONS C:RS

4 Decisions to retirement readiness Decision #1 How much do you save from each paycheck? Decision #2 Which investment options do you want to select? Considerations to help your decision making: Save as much and as early as you can. Starting small is okay. Be sure to plan to increase your deferral percentage each year. Visit massmutual.com/iuec to learn more about investing and track your progress. C:RS

5 Even small amounts add up How $10 per week can grow: Assumes contributions made at the beginning of the week, hypothetical 8%, 4% and 0% earnings on investments, compounded monthly and reinvestment of earnings. The calculations do not take into account leap years. Final amounts are exclusive of any taxes or penalties that may be due upon distribution. This hypothetical chart is for illustrative purposes to demonstrate the effects of compounding. They do not reflect the actual performance of any specific investment. Individual experience will likely vary. Past performance does not guarantee future results. C:RS

6 Changing Contribution Amounts Maximizing your Annuity and 401(k) Retirement Plan is easy!! Adjust your contributions by completing a form and returning it to your employer Modify your investments either online of by telephone RetireSMART Website: Automated Phone Service massmutual.com/iuec

7 Asset Allocation: Investment Mix Considerations Diversification can help offset market volatility Approaching retirement: Consider a more conservative portfolio For the 401(k) portion of your account, consider one of the T. Rowe Price Target Retirement Funds Don t retire from investing Remember, you could spend more than 20 years in retirement Your needs may change over time therefore you should review your retirement plan at least annually Diversification does not assure a profit and does not protect against loss in a declining market. 7

8 Asset Allocation: Risk Profile Quiz If you are unsure of your current risk tolerance, try this quick and easy questionnaire. 8

9 Potential Risk/Return Investment basics: risk/return spectrum Higher Stocks: Potential for Higher Returns Highest Level of Risk Asset Allocation/Lifestyle: Diversified Investments with Varying Returns & Risks Bonds: Slightly Higher Returns Slightly Lower Risk The risk/return indicator is for comparative purposes and is based on the general comparative risks of these categories. Lower Cash: Potential for Lower Returns Lower Risk C:RS

10 How Target Date Funds Work 10

11 Market volatility Don t let it distract you! Keep focused. Be patient stick with your long-term strategy Keep short-term financial news in perspective Don t try to time the market Dollar cost averaging can help take advantage of market swings Dollar Cost Averaging does not assure a profit, that more shares/units will be purchased than a lump sum purchase or protect against loss in a declining market, and involves continuous investment in securities regardless of fluctuating prices. An investor should consider his/her ability to continue investing through periods of low price levels. C:RS

12 Manage your investments over time Do an Annual Review to make sure your plan is still in line with your goals Check your asset allocation Rebalance periodically Review other retirement savings C:RS

13 What is the Annuity Plan? The Annuity Plan was established on your behalf on January 1, This member pool is made up of participants ranging from our 22-year-old apprentices to older retirees. This benefit was negotiated as part of your wage package and established as an investment vehicle with the goal that this benefit would be used to supplement retirement income and aid in defraying retiree health insurance costs. Your employer contributes the collectively bargained contribution to your Annuity Plan. For 2019, the hourly contribution is $7.55. This contribution will increase $.65 cents each year of the new contract. These contributions are pooled and invested by the Board of Trustees. C:RS

14 How are the annuity contributions invested? Prior to July 2007 The Annuity Plan was invested in a Guaranteed investment contract that provided a rate of return of 3% each year. After July 2007 The Annuity Plan has been investing in a broadly diversified portfolio of equity (stocks) and fixed income (bonds), as determined by the Board of Trustees. C:RS

15 How are the annuity contributions invested? The Board of Trustees work with Investment Advisors to allocate these dollars according to certain parameters. These dollars are conservatively invested in order to protect the investment principal as well as maintain a steady stream of asset growth, i.e. produce returns of 3 3.5% above inflation over the long term. Based on the current market environment, the Annuity allocation is expected to generate a long term average rate of return of 5.8%. A variety of managers are utilized to attempt to outperform market indices and enhance the 5.8% return expectation. There will be short-term return volatility with the expectation that the Annuity will perform consistently with the asset allocation and risk and return objectives established by the Board of Trustees. The asset allocation of the Annuity may be modified as market conditions or objectives change. C:RS

16 The Annuity Allocation The Annuity Allocation is invested approximately 49% in stocks and 51% in bonds Core Blend (Annuity) CPI + 3.5% Core Blend Annuity CPI + 3.5% Investment Summary as of 12/31/2018 Trustees, ECA & 401(k) 1 Year Years Years Years Years The Annuity s mid-single digit trailing returns are consistent with a period of low interest rates and modest inflation. Recent performance has been impacted by increased stock market volatility and rising interest rates. The Annuity has achieved its objective of protecting against inflation and providing incremental asset growth. 16

17 Summary: The Annuity Fund Strategy The total Annuity account represents $2.4B as of December 31, A wide pool of participants 49% in the Stock Market 51% in the Bond Market These dollars are conservatively invested in order to protect the investment principal as well as maintain a steady stream of asset growth. Investing in stocks and bonds will come with some short term volatility but with the expectation of improved long term growth. The Annuity should prove to be an attractive supplement to your retirement. C:RS

18 Common Pre-Retirement Questions Have I saved enough? - What kind of lifestyle do I want? - What expenses do I need to consider? What about Social Security? - When do I get it? - How do I get it? - Who do I contact? How do I plan for future medical expenses? 18

19 Common Pre-Retirement Questions Is my current investment strategy appropriate? Can I keep all/most of my retirement money together in one place? What do I do with my money when I retire? What tools/services does MassMutual provide to help me plan for retirement? 19

20 Retirement Readiness: Financial Planning Your plan should account for your entire financial picture. It may include: - Anticipated retirement lifestyle - Healthcare expenses - Retirement savings - College planning - Disability income insurance - Life insurance - Long-term care insurance - Estate and/or tax planning Decisions on these items may affect your plans for retirement 20

21 Retirement Readiness: Retirement Reality? Pre-retiree population is growing and living longer Research shows large numbers of pre-retirees are financially under-prepared DID YOU KNOW? An individual reaching age 65 today will likely live until age 84.3 (men) or 86.6 (women). 25% of 65-year olds will live past age 90 and 10% will live past age 95. *Source: January

22 Retirement Readiness: How Much Will You Need? Retirement Formula 80% of Pre-retirement Income X Years in Retirement Amount Needed To Maintain Same Lifestyle Example 80% of $100,000 = $80,000 X 20 Years $1,600,000 (Or $6,666/month) Hypothetical example for illustrative purposes only. Not intended to reflect the actual performance of any specific investment. Individual experience will likely vary. 22

23 Retirement Readiness: Retirement Income Sources Determine all income sources: - Annuity and 401(k) Retirement Plan - Pension - IRAs - Personal savings - Employment during retirement - Social Security - Other 23

24 Retirement Readiness: Advantages of Your Retirement Plan Catch-up contributions If you are age 50 or more, at any time during the 2019 calendar year, you can make an additional pre-tax contribution up to $6,000* above and beyond normal plan and legal limits** Future increases will be indexed for inflation * Legal limit is $19,000 for the 2019 calendar year. ** Not all plans offer the Catch-Up Contribution. Check your plan s provisions to verify. 24

25 How much do you need? Will your Social Security be enough? Probably not DID YOU KNOW? In 2017, the average Social Security retirement benefit was $1,368 per month* or $16,416 per year. *Source: January 2018 C:RS

26 Retirement Readiness: Social Security When can I start receiving it? How much can I expect? When and how do I apply for it? DID YOU KNOW? In 2017 the average Social Security benefit was. $1,368 per month or $16,416 per year. *Source: January

27 What is Full Retirement Age? Year of Birth Full Retirement Age 1937 or earlier & 2 months & 4 months & 6 months & 8 months & 10 months & 2 months & 4 months & 6 months & 8 months & 10 months 1960 or later 67 Source: Social Security Administration, January

28 How Your Benefit is Determined STEP 1 SSA looks at your lifetime earnings STEP 2 Takes a monthly average of your 35 highest earnings STEP 3 Adjustments are made for inflation STEP 4 Result is average indexed monthly earnings To get an estimate visit: SSS.gov/estimator Source: Social Security Administration, January

29 Consider Delaying Social Security Example: Person born in 1965 earning $80,000 today: Retire at age 62 = $2,095/month Retire at age 67 = $3,479/month (an extra $1,384 per month for life) Retire at age 70 = $4,806/month (an additional $1,327 more) *Source: August

30 How Do I Apply for Retirement Benefits? Online at Call (TTY ) Apply at your local Social Security office 30

31 Distribution options Distribution option events include: 3-month separation from service 6-month separation from service Working for a contributing employer at the age of 59 & ½ Age 55+ and retired Disabled Financial hardship C:RS

32 When can I receive a distribution of my Annuity Account? Account Balance Prior to January 1, 2011 When you are terminated from the industry and have not had any annuity hours in six consecutive months When you retire (i.e., when you separate from service at age 55 or older and are receiving your pension from the NEI Pension Fund or Social Security Retirement benefits) If you become disabled (Social Security disability award) Upon your death New Contributions and Earnings Accumulated After January 1, 2011 When you retire (i.e., when you separate from service at age 55 or older and are receiving your pension from the NEI Pension Fund or Social Security Retirement benefits) If you become disabled (Social Security disability award) Upon your death 32

33 Understanding Your Options: Staying with the Annuity/401(k) Plan Maintain control over your account Account balance continues to benefit from the tax-deferred growth opportunity until withdrawn Required Minimum Distribution at age 70-1/2 Same investment options available to you as a retiree in the Plan Upon your retirement you may now request that your distribution be taken from a specific investment option in the 401(k) portion of your account (not pro-rata) 33

34 Understanding Your Options: Traditional IRA Roll Over Continue to receive tax-deferred treatment until withdrawn Control over your money Flexibility to make a different choice later Possible to choose investment options separate from your current retirement plan 34

35 Understanding Your Options: Taking the Cash After you separate from service Upon distribution, taxes apply Need to be age 59½ to avoid a 10% early withdrawal penalty, except for a few reasons such as: Separation from service during/after the year you reach age 55 Payments paid as equal payments over your life/life expectancy Retirement due to disability Payments made to alternate payee under a QDRO This is not all-inclusive. For more information, call the Retirement Specialist Group. Consider consulting a tax advisor prior to distributions. 35

36 Understanding Your Options: Taking the Cash High Price for Early Withdrawals $50,000 Initial distribution - $12,500 Federal income tax (estimated) - $ 2,500 State income tax (estimated) $35,000 could be all you see of the original $50,000 Hypothetical example assumes a flat 25% federal tax rate and a 5% state tax rate. Your tax rates may be higher or lower. Hypothetical example for illustrative purposes only. Not intended to reflect the actual performance of any specific investment. Individual experience will likely vary 36

37 Understanding Your Options: Taking the Cash Cost of Cashing Out $50,000 Initial distribution - $ 7,500 Federal income tax (estimated) - $ 2,500 State income tax (estimated) $40,000 could be remaining of the original $50,000 Hypothetical example assumes a flat 15% federal tax rate and a 5% state tax rate. Your tax rates may be higher or lower. Hypothetical example for illustrative purposes only. Not intended to reflect the actual performance of any specific investment. Individual experience will likely vary 37

38 Understanding Your Options: Required Minimum Distributions Cost of Cashing Out Deadline for Withdrawals: First Required Beginning Date (RBD): - April 1st of the calendar year after the year you reach age 70½ Subsequent Required Minimum Distributions (RMDs): - December 31st of each year Penalty: 50% on the shortfall! 38

39 Understanding Your Options: Required Minimum Distributions Cost of Cashing Out Required Minimum Distributions (RMDs) are calculated based on three Life Expectancy Tables: Joint & Life Last Survivor Life Expectancy: Owner whose spouse is the sole beneficiary and more than 10 years younger Uniform Table (old MDIB Table) Single Life Expectancy Table 39

40 Online resources C:RS

41 MassMutual resources Participant Information center: Customer Service Representatives available from 8 a.m. to 8 p.m., ET Participant Retirement Plan Website: Search for RetireSmart or MassMutual in your phone s app store. 41

42 Make room for a NEW mobile app! Available for Android and Apple devices. The app lets you view: Total account balance Balances by source and investment Vested balance by source Personal rate of return Last contribution amount Asset allocation by investment in chart and list form It also provides: A link to Login assistance Contact information and more C:RS

43 Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA All rights reserved. RS8978