Retirement Pathways Ritalka, Inc.

Transcription

1 Retirement Pathways Ritalka, Inc. June 15, 2016

2 Welcome Today we will be discussing: Why it s important to save & Why saving now makes sense Determining your investing approach Determining an appropriate savings rate Completing the necessary forms

3 Your 401(k) Eligibility: age 19 & 6 months of service Contribution Limits: $18,000 + $6,000 catch up if 50+ Managing your contribution Stop any time Adjust your contribution rate quarterly Rollovers

4 Why it s important to save

5 Why it s important to save You ll be responsible for a larger portion You ll need it to last longer Inflation will deflate your buying power

6 You ll be responsible for a larger portion 40% Social Security 60% on your own (retirement plans, part time work, other) Source: Understanding The Benefits - Social Security

7 You ll need it to last longer

8 Inflation will deflate buying power

9 Why saving now makes sense

10 Why saving now makes sense Saving pre-tax may not cost you as much as you think Start now, let compounding work for you

11 Saving pre-tax and your take-home pay $30,000 Annual Salary Contribution Rate 0% 6% 12% 15% Gross Monthly Pay $2,500 $2,500 $2,500 $2,500 Less Amount Saved $0 $150 $300 $375 Taxable Pay $2,500 $2,350 $2,200 $2,125 Less Taxes $ $ $ $ Take-Home Pay $1, $1, $1, $1, Examples are for illustrative purposes only and do not reflect the performance of any particular investment. Your actual paycheck may reflect different amounts. Assumes participant is age 25 with a $30,000 salary, making monthly contributions, a 7% annual rate of return net of expenses compounded monthly, a 25% tax rate, and no salary inflation. The actual rate of return for the periods shown will vary and when redeemed, assets may be worth more or less than the original investment. Calculations are rounded to the nearest whole dollar.

12 Let compounding work for you Amount Age Saved Mary $289,937 Bill $211,486 Contribution period (investing $2,000 each year) This is a hypothetical example for illustrative purposes only and does not reflect the performance of any particular investment. Assumes an 7% compound annual rate of return that is net of any fees or expenses. Actual rates of return will vary and when redeemed may be worth more or less than the original investment. Calculations are rounded to the nearest whole dollar. Amount saved does not reflect the impact of income taxes.

13 Determining an appropriate savings rate

14 Start with a replacement ratio Plan to replace 70% to 100% of your current income each year in retirement Consider all income sources including Social Security, pensions, part-time work Use online retirement income calculator to help you plan

15 How much do I save? Determining savings rate to keep you on pace to creating sustainable income in retirement Evaluate budget and determine what you can afford Use the online calculators to estimate effect on take home pay Consider 10-15%, or start smaller and increase your contribution each year

16 Impact to take-home pay $30,000 Annual Salary Contribution Rate 0% 6% 12% 15% Gross Monthly Pay $2,500 $2,500 $2,500 $2,500 Less Amount Saved $0 $150 $300 $375 Taxable Pay $2,500 $2,350 $2,200 $2,125 Less Taxes $ $ $ $ Take-Home Pay $1, $1, $1, $1, Saving 12% or $300 in this example only costs $225 Examples are for illustrative purposes only and do not reflect the performance of any particular investment. Your actual paycheck may reflect different amounts. Assumes participant is age 25 with a $30,000 salary, making monthly contributions, a 7% annual rate of return net of expenses compounded monthly, a 25% tax rate, and no salary inflation. The actual rate of return for the periods shown will vary and when redeemed, assets may be worth more or less than the original investment. Calculations are rounded to the nearest whole dollar.

17 Pre-tax or after-tax hmm? Pre-tax 401(k) After-tax Roth(k) If you think your tax rate will be lower in retirement You pay taxes later (10% penalty on taxable amount if withdrawn prior to age 59 ½ ) If you think your tax rate will be higher in retirement You pay taxes now (10% penalty on taxable amount if withdrawn prior to age 59 ½ ) Is Congress likely to raise tax rates in the future? Is your tax bracket likely to be higher or lower? In 2016, total contributions can t exceed $18,000. Or, $24,000 if you re age 50 or older (if plan permits) Use the Roth(k) calculator at SecurianRetirementCenter.com Consider the length of time your money will be invested in the plan.

18 What is your approach to investing?

19 Fundamentals of Investing Low Risk and Return Cash Fixed Income Equities High Risk and Return Average Annual Return 4.79% 6.58% 10.00% Return After Inflation 0.94% 2.73% 6.15% Best Year s Return 14.71% 29.10% 37.43% Worst Year s Return 0.02% (5.14%) (37.0%) Source: Morningstar Direct. Based on Ibbotson Stocks, Bonds, Bills, and Inflation indexes. Cash Return is based is based on U.S. 30-day Treasury Bills, bond return by intermediate-term government bonds, and stocks by the Standard & Poor s 500 Index. Return after inflation is based on the Consumer Price Index (CPI) average of 3.85%. All figures are for the period Past performance is not indicative of future results. You cannot invest directly in an index. Indices do not have expenses which would reduce any performance shown.

20 Diversification Don t put all your eggs in one basket And some investments Can move like this Then, this is the general effect of diversification If some investments Can move like this Hypothetical example only, not intended as investment advice. Diversification does not guarantee against loss. It is a method used to manage risk.

21 Which path will you take? Do it for me Do it with help Do it myself

22 TargetAge the Do it for me option Invest based on your age with TargetAge TM Automatically invests your entire account based on your age Your account becomes more conservative as you age. Refer to TargetAge Individual Account Portfolio Progression chart on enrollment form for specific allocations You can opt out at any time

23 TargetAge the Do it for me option TargetAge TM gradually and automatically shifts your account s asset allocation to a more conservative mix of fixed income and equities as you age. Invest based on your age it s that easy!

24 TargetAge disclosures TargetAge allocation portfolios, which are built from the plan s available investment options, are based on generally accepted investment principles and consider an investor s life expectancy. Individuals give prior approval to have their account invested according to their age, rebalanced, and moved (reallocated) to a more conservative allocation portfolio as they age. The final TargetAge allocation is heavily weighted towards fixed income investment options. These portfolios are not guaranteed and may increase or decrease in value. Neither asset allocation nor diversification guarantee against loss. They are methods used to manage risk. Transfer restrictions for the General Account/ Guaranteed Return Account/Stable Value may impact the stated portfolio allocations. The specific plan investments used within the portfolios are subject to change at the discretion of the plan sponsor or due to the closing of an investment. Securian and the plan sponsor may change the allocation model or terminate the service at any time after providing written notice. Making investment allocation changes, transfers, or auto-rebalancing requests will automatically remove a person from TargetAge. A person may cancel TargetAge or make other investment changes at SecurianRetirementCenter.com or by calling TargetAge should not be construed as investment advice. TargetAge portfolios illustrate only some of the possible investment choices. Alternative investment allocations having similar risk and return characteristics can be created from the investment options available in the plan. In applying a particular asset allocation, a person should consider time horizon, risk preference, other assets, income and investments (e.g., equity in a home, IRAs, savings accounts and interests in other qualified and non-qualified plans) in addition to any assets in the retirement savings plan. A financial advisor should be consulted for questions regarding personal financial situations.

25 Do it with help using Model Portfolios Choose from 5 suggested model portfolios Built from your plan s current investment options Use questionnaire to determine which portfolio most closely matches your investing style

26 Model Portfolios disclosures Model portfolios allows individuals to determine how their account is invested by choosing from various pre-mixed portfolios, which are built from the plan s available investment options and considers investors' risk preference and time horizon. Each portfolio is diversified with varying quantities of stock and fixed income investment options. Model portfolios are based on the historic volatility of the asset classes represented in the allocations. These portfolios are not guaranteed and may increase or decrease in value. Neither asset allocation nor diversification guarantee against loss. They are methods used to manage risk. Transfer restrictions for the General Account/ Guaranteed Return Account/Stable Value may impact the stated portfolio allocations. The specific plan investments used within the portfolios are subject to change at the discretion of the plan sponsor or due to the closing of an investment. Securian and the plan sponsor may change the allocation model or terminate the service at any time after providing written notice. Making investment allocation changes, transfers, or auto-rebalancing requests will automatically remove a person from the model portfolio. A person may cancel a model portfolio or make other investment changes at SecurianRetirementCenter.com or by calling Model portfolios should not be construed as investment advice. Model portfolios illustrate only some of the possible investment choices. Alternative investment allocations having similar risk and return characteristics can be created from the investment options available in the plan. In applying a particular asset allocation, a person should consider time horizon, risk preference, other assets, income and investments (e.g., equity in a home, IRAs, savings accounts and interests in other qualified and non-qualified plans) in addition to any assets in the retirement savings plan. A financial advisor should be consulted for questions regarding personal financial situations.

27 Do it myself Want to decide which investments to use and how much to allocate to each, use the Do it Myself form. Allows flexibility to create your own unique investment portfolio.

28 Taking Action 28

29 Complete the form Find the appropriate form Do it for me, Do it with help, or Do it myself based on your investing approach Complete the Beneficiary Designation form

30 Do it for me Complete your personal information Select a pre-tax savings rate from the ones shown or write in your own Select a Roth(k) aftertax savings rate if desired Sign the form

31 Do it with help Select a pre-tax savings rate from the ones shown or write in your own Complete your personal information Select a Roth(k) aftertax savings rate if desired Select an easy invest option Sign the form

32 Do it myself Select a pre-tax savings rate from the ones shown or write in your own Complete your personal information Select a Roth(k) aftertax savings rate if desired Select your investments and rebalancing preference Sign the form

33 Beneficiary designation form Don t forget to fill out your beneficiary designation form

34 You can make changes later Change investments Abusive trading policy applies Change your contribution amount Complete form and returning it to your employer

35 Access your account Quarterly statements Paper, Online Website, Mobile access Phone Automated system (24 hrs) Customer service (7am-7pm CT)

36 Questions? Chapter slide This information is a general discussion of the relevant federal tax laws. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances. This presentation was prepared for informational purposes only and is not intended to be viewed as investment advice. This information is provided through Securian Retirement, a unit of Minnesota Life Insurance Company. Securian Retirement Securian Retirement s qualified plan products are offered through a group variable annuity contract issued by Minnesota Life Insurance Company, a Securian Financial Group affiliate. 400 Robert Street North, St. Paul, MN Securian Financial Group, Inc. All rights reserved. F79061 Rev DOFU