Presented by: CalmWater Financial Group 100 N. 13 th St, Ste 310, Norfolk, NE Chuck Olsen, CFP

Transcription

1 Nucor Corporation Retire Ready Presented by: CalmWater Financial Group 100 N. 13 th St, Ste 310, Norfolk, NE Chuck Olsen, CFP Securities and Advisory Services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered by CalmWater Financial Group are separate and unrelated to Commonwealth. This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax or legal professional regarding their individual situation.

2 Local CalmWater Advisors

3 Unprepared Nearly one in three working Americans (32%) are unable to project when they will be able to retire (i.e., their answer to the question when will you retire is I have no idea ). Source: Hartford Retirement Survey, BTN Research Can t Retire 47% of Americans currently between the ages of would run out of the funds necessary to pay for basic retirement expenditures if they retire at age 65. Source: Employee Benefit Research Institute, BTN Research Scared To Death More than three out of every five Americans questioned (61%) between the ages of 44 to 75 admit they fear the prospect of depleting their accumulated assets during retirement more than they fear death. More than 3,200 Americans were surveyed for the poll. Source: Allianz Life Insurance Company, BTN Research

4 Unbalanced & Unprepared

5 Balanced & Prepared

6 Common Misconceptions & Errors Made Misconceptions: I need $1 Million to retire Quit at a certain age (59 1/2, 62, 65, etc. vs. saving $XX) Can t get money out of 401(k) until age 59 ½ My friend retired so I can too / My friends aren t retired so I can t I won t live to be 85 Errors Made Spend more than you think No budget ahead of time Don t budget for health insurance costs Don t think about LTC insurance until it s too late Too much risk taken with investments when unnecessary No Tax Planning Not enough in Roth IRAs Try to pay off all debt immediately upon retirement from 401(k) Social Security considerations draw early at age 62 or delay until age 66 Too much exposure to one stock Placing all my money in bank accounts or CD s means I m taking no risk

7 Pre-Retirement RedZone Retirement Outline & Income Plan How much do I need to retire? How much should you be saving? Where will my income come from? ESOP NUA distributions Maximize Nucor Benefits Reduce/Eliminate Debt Review & Rebalance 401(k)/investment allocation Insurance Planning Long Term Care (LTC) Planning Determine Life Insurance Needs Health Insurance Estate Planning Will Living Will Durable POA Healthcare POA Tax Planning Understand The Tax Code Assemble Your Financial Team CFP (Financial Planner) CPA (Accountant)

8 Maximize Nucor Benefits Insurance Health/Flex Spending Account Life Disability Investing Employee Stock Purchase Plan (EMSIP) Profit Sharing/401(k) Plan Retirement Planning Early Retiree Health Plan and COBRA Health Options Online Tools On-site Financial Education

9 Retirement Outline & Income Plan When would I like to retire? (Age) How much income will I need in retirement? (Spending) Where will my income come from? (Income) How much should I have saved? (Investments) What hazards jeopardize my plan? (Risks)

10 Age: When Will It Start? (k) Distributions (Separation of Service) 59.5 IRA Distributions Penalty Free 60 Surviving Spouse Social Security Benefits 62 Early Social Security 65+ Medicare 66 Full Social Security (Born ) 67 Full Social Security (Born 1960+) 70 Maximum Social Security Accrual 70.5 Required Minimum Distributions *Please consult with a financial advisor regarding your individual situation.

11 How Much Will I Spend? Most people need between 65%-85% of their current income to maintain their lifestyle in retirement. Health Care Food Utilities Personal Insurance Transportation Recreation Giving Taxes Social Security Administration, Understanding the Benefits, SSA Publication No (2012), available at Government Accountability Office, Retirement Income: Ensuring Income Throughout Retirement Requires Difficult Choices, pg.9 (2011), available at

12 Spending Patterns

13 Spending Changes Work-related expenses Family-related expenses Home mortgage costs Income taxes Healthcare expenses Cost of living Pay Off Your Debt! Lighten Your Load! Leisure activities Some types of insurance

14 Income: Where Will It Come From? Social Security Pension Plans/Retirement Accounts Personal Savings/Investments Part-time Work Grace Chen 2008

15 Income: Part-Time Work A great way to stay active, contribute, and to supplement your retirement income Avoids drawing down your nest egg *Reminder- Income Reduction Levels with Social Security Early Retirement Age: $15,720/yr ($1,310/mo) Full Retirement Age: $41,880/yr ($3,490/mo)

16 Income: Social Security Social Security When To Start? Early Retirement (Age 62-66) Full Retirement (Age 66-67) Delayed Retirement (Age 67-70) Key Numbers Reduction - Earned Income Early Retirement Age: $15,720/yr ($1,310/mo) Full Retirement Age: $41,880/yr ($3,490/mo) Is it Taxed? - Combined Income (see IRS formula) Indiv: $25,000-$34,000 Joint: $32,000-$44,000 Strategies Survivor Benefits Divorcee Benefits Hybrid Approach/Spousal Benefits File & Suspend Restricted Claim

17 Social Security: Claiming

18 Social Security: Breakeven

19 Social Security: Analysis Hypothetical example of a plan:

20 Social Security: Analysis This is a hypothetical example and is for illustrative purposes only. No specific investments were used in this example. Actual results will vary. Past performance does not guarantee future results.

21 Social Security: Taxes Hypothetical example of a plan: John retired from Nucor. John and Carol have joint earned income of $48,000, $4,000 of interest income, and $3,000 of dividends. Their combined Social Security benefits come to $20,000. ($48,000 + $4,000 + $3,000 + $10,000 [50% SS] = $65,000) Their MAGI is therefore $65,000. They may have to pay tax on up to 85% of their Social Security benefits due to being over the $44,000 Provisional Income Threshold

22 Income From Investments: How Much Do I Need? Retirement Quick Check - MoneyGuidePro - CalmWater Financial Network Advisor Back of The Envelope - BOTE $4,000 $4,000 $2,000 $2,000 $2,000 $2,000 $0 $0 $2,000 $2,000 $24,000 $24, $600,000 $400,000 Retention Depletion For Illustrative Purposes Only

23 What Percentage to Take Out?

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27 The Impact of Inflation Inflation and the Rule of % doubles in years 18 4% doubles in years $3,000 per month needed at age 55 is $6,000 per month at age 73 and $12,000 per month at age 91 assuming 4% inflation. For Illustrative Purposes Only The formula used for the Rule of 72 approximates the time it will take for a given amount of money to double at a given compound interest rate. Compound illustrations are not predictions of investment performance, and investment principal and interest are not guaranteed and are subject to market fluctuation.

28 Investment Planning How & Where To Invest Understand What You Own Determine Suitable Approach Time frame? Goal what is purpose of investments? Volatility Tolerance Diversify Rebalance

29 What are these numbers? %? Answer: The return in the S&P %? Answer: The Return of the Average Equity Investor Source: JPMorgan Guide to the Markets All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future result. The S&P 500 Index is a broad- based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks.

30 What is the significance? $100,000 starting value and 25 years growth: 2.5% 9.2% Difference (No deposits) $185,394 $902,747 $717,353 For illustrative purposes only. Not indicative of any actual investing result.

31 The Cycle of Market Emotions

32 Consider A More Diverse Portfolio

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34 Insurance Options Types Life Insurance Disability Insurance Health insurance Long-Term Care Insurance Do you have a need for insurance? Does your need for insurance extend into retirement? What types of insurance should you have?

35 Insurance Planning and Strategies Insurance Needs Health Long Term Care (age 50-60) Life Who has financial loss in the event of your passing? How much do you need? Single Married Married with kids No children at home and have accumulated assets Disability - Insuring your income times working years (ie. $50k X 20 years = $1,000,000) Continuously Review & Update

36 Health Insurance Group Plan while employed Options In Retirement? 1. COBRA 18 Months 102% Premium 2. Early Retiree Medical Plan Age 50 Rule 70 - Cost Shared But Still Expensive 3. Individual Policy - The Affordable Care Act (ObamaCare) No longer Underwritten Health Savings Account Options High Deductible 4. Medicare at Age 65+ with Supplement (i.e. Plan F )

37 Health Insurance Medicare Age 65 Part A Hospital No Premium Part B Doctor Approximately $105/mo Premium Supplement - Medigap Plan G - Approximately $95/mo Premium (priced per county) One time annual deductible of $147 for Part B If enroll in Plan F Same as Plan G but no deductible (~$35/m more than G) Part D Drug Coverage Plan Premium Approximately $35/mo Approximate Total = $235/mo Per Person

38 Nucor Retiree Expected Health Ins. Premiums ~ age 62 Health Insurance Coverage Options As of 1/1/ Subject To Change *Option 1: Individual Bronze (HSA $5,000 Deductible - $12,700 out of pocket max) Spouse #1 Spouse #2 Total Monthly Cost ( income >62k) If show income at $40k $630 $630 $1,260 $113 Option 2: COBRA (18 month coverage) $508 $508 $1,016 Option 3: Nucor Early Retiree (ages 60-64) $777 $818 $1,595 *Please review options and potential tax credits with the Affordable Care Act at

39 Long-Term Care Insurance Final 5 years, 50% of expenses. Who will go? How long will they be there? What about Home Care or Assisted Living? Medicare, Medicare supplement and Medicaid. Partnership program. Premiums range $4,000 - $6,000 per year for a couple. Current LTC costs are ~$7,000 -$14,000 per month. Recently popular option: Life/LTC Hybrid Policy Will you be providing care or depending on it?

40 Long-Term Care Usage

41 Long-Term Care Costs

42 Active Life Insurance Planning Hypothetical Life Insurance Options Assumes cost of $120k Life Insurance (~$40k income x 3) Age band Weekly Annual 5 year cost $ 6.00 $ $ 1, $ $ $ 2, $ $ $ 4, $ $ 1, $ 5, Total cost $ 14, Outside option: Male, Pref Non Tobacco 20 year You save $ 5.03 $ $ 5, $ 8, Preferred Chew Tobacco $ 7.88 $ $ 8, $ 5, Preferred Smoker $ $ $ 13, $

43 Disability Insurance Cost savings of appropriate company benefit election: A versus B option If I work past 65 at the company- should I keep paying for the company Long-Term Disability benefit?

44 Estate Planning Who will take care of things when I m gone? What documents should I have? Wills Power Of Attorney (POA) Medical Directives Health Care POAs See Handout

45 Distribution/Rollover Options 401(k)/Profit Sharing Plan 1. Leave in 401(k)/Profit Sharing Plan - Continue to grow or take installments (distributions at 55) - Withdrawals subject to mandatory 20% fed tax withholding 2. Roll out to an IRA (distributions at 59 ½) ESOP Plan 1. Rollover to an IRA - Taxed at Ordinary Income Rates upon withdrawal 2. Take the distribution in shares (NUA) - Basis taxed at Ordinary Income Rates - Appreciation taxed at Long-Term Capital Gain Rates *TAX RATES ARE SUBJECT TO CHANGE

46 Fidelity ESOP

47 Fidelity ESOP Cont

48 Leave? Rollover? Distribute? NUA? Q.R.P. 401(k) Profit Sharing ESOP Lose NUA & Capital Gain Treatment IRA Investments Flexibility YOU Checking Brokerage See Special Tax Notice: these publications are available from your local IRS office, on the IRS s Internet Web Site at or by calling TAX-FORMS.

49 Understand The Tax Code

50 The above is for illustrative purposes only. Please consult a tax advisor for your personal situation.

51 Tax Bucket Strategy Reduce your tax liability 401(k) IRA Non- Qualified (Nucor) Savings Roth IRA Social Security Social Security Until $1 Taxed (~$22,000) Until $1 Taxed $0 Taxed $0 Taxed???? See a tax professional regarding your situation

52 Post-Retirement Tax Planning Tax Bracket Utilization Roth Conversions Maximizing Social Security Breakeven Analysis Spousal Benefit Ongoing Monitoring Investment Allocation & Performance Retirement Income Plan Have a plan and stay the course!

53 What Now? Organize Add? Grow? Protect? Utilize benefit of advisors provided by Nucor Update benefits Rebalance all investments to appropriate risk level Determine monthly income need Live off desired amount now to prepare for retirement Determine desired retirement date Shift/maximize savings to best tax advantages Increase 401(k), EMSIP, Roth IRA s, etc Determine best long-term Social Security income plan Choose Retention or Depletion method Health insurance plan Long Term Care insurance - decide now Update/establish estate planning documents Update beneficiaries

54 Questions? Contact one of our advisors at (402) Chuck Olsen, CFP Travis Riggert, CFP Terry Heimes, CFP Jack Rother, CFP Ryan Anderson, CFP

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