4/3/2017. Charting Your Course: A financial guide for women. Today s agenda. Savings challenges women may face. Alicia Brady April 11, 2107

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1 SAVING FOR LIFE S MILESTONES: A TIAA FINANCIAL ESSENTIALS WORKSHOP Charting Your Course: A financial guide for women Alicia Brady April 11, 2107 Today s agenda Evaluate your financial health Set financial goals Make your money work for you The Financial Game of Life (time permitting) Put it all together to create your financial plan Savings challenges women may face Need to save more money to fund a generally longer retirement Typically have fewer years to save the amount needed May not be able to save as much from year to year 1

2 Common myths about investing and retirement I need to have a lot of money before I can start investing. If my spouse has a health and pension plan, then I don t need to worry about having my own. Women and men receive the same retirement benefits. Medicare will take care of long-term care needs. Evaluate your financial health Where do you stand? Organize your financial records Check your credit rating Review your cash flow Review your net worth Consider what goals you need to save for Evaluate your financial health Cash Flow and Net Worth Cash Flow the path your money takes Income - Expenses = positive or negative Net Worth ratio of what you own to what you owe Assets - Liabilities = positive or negative 2

3 Set financial goals What do you want to achieve? Set short-term financial goals Set long-term financial goals Set financial goals Setting short-term goals: Reduce unnecessary expenditures Use cash flow information Reduce debt and increase net worth Determine savings priorities Emergency account, auto purchase, other Begin or increase savings for goals Start saving today Pay yourself first Check your tax withholding Set financial goals Setting long-term goals: Retirement Paying off your mortgage Protecting your assets Building a financial legacy 3

4 Make your money work for you The basics of saving and investing Pay yourself first! Continue making payments to savings when debt is eliminated Increase contributions when you get a raise Take advantage of your company match Understand the concepts of compounding and tax-deferred growth Contributing more Current Year Limits for Salary Deferral Retirement Plans* $30,000 $25,000 $20,000 $18,000 $24,000 $21,000 $27,000** $15,000 $10, (k) & 403(b) Plans 401(k) & 403(b) Plans 403(b) Plans 403(b) Plans $5,000 $0 Most Employees Employees Age 50+ Employees with 15+ Years of Service Employees Age 50+ with 15+ Years of Service * Based upon your salary, you may contribute up to the maximum amount under each scenario represented by the different bars. ** You must be an employee of an eligible teaching institution, hospital, church, home health agency or health and welfare service agency to be eligible for these contribution limits. Traditional and Roth IRAs An additional retirement savings option Year IRA 50+ Catch-up Total $ Yearly Current Year $5,500 $1,000 $6,500 After 2010, indexing may be in $500 increments, subject to inflation. IRA contribution limits rise for deductible and nondeductible. Traditional and Roth IRAs. Eligibility to participate in a Roth IRA is subject to income limits. 4

5 Investment concepts Investment risk Volatility Diversification and asset allocation Expenses matter Types of risk Interest-rate risk Inflation risk Market risk Foreign investment risk Market-timing risk Risk levels - 5

6 Understanding market volatility $10,000 $1, Ending Wealth $6,023 Average Annual Return 10.04% $ % $100 $ % $10 $1 $ $ % $ % Stocks Corporate Bonds Government Bonds Treasury Bills Inflation * Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss. Past performance is no guarantee of future results. Source: 2017 Morningstar Investment Management LLC. All rights reserved. Morningstar Investment Management LLC is a registered investment adviser and subsidiary of Morningstar, Inc. The Morningstar name and logo are registered marks of Morningstar, Inc. Hypothetical value of $1 invested at year-end Assumes reinvestment of income and no transaction costs or taxes. Chart illustrates returns from 1/1/1926 to 12/31/2016. Benchmarks: S&P 500 Index, Ibbotson U.S. Long Term Corporate Bonds, Ibbotson U.S. Long Term Government Bonds, Ibbotson U.S. 30-Day Treasury Bills, U.S. Consumer Price Index for All Urban Consumers (CPI-U). You cannot invest directly in an index. Understanding diversification Spreads risk among different asset classes Guaranteed* Fixed Income Equities Real estate Cash/money market Potentially reduces overall portfolio volatility To diversify, allocate assets Across asset classes Within asset classes Diversification does not guarantee against losses *Guaranteed by the claims-paying ability of the issuer. Protecting your assets Insurance Life insurance Property/casualty & liability insurance Long-term care insurance Disability Insurance Pays a portion of your income if you become disabled with a qualifying disability Additional tool to help protect your assets Group disability insurance sometimes available through your employer as long-term and/or short-term policies 6

7 The Financial Game of Life Read the scenario as a group and discuss what you d do in this situation Talk about how this may affect your goals, and what you can do to still move towards them Balancing care During your son's soccer game yesterday, an unexpected call came from the hospital. Your mother, whom you see often and love dearly, fell at her home and broke her hip. She is now unable to live alone and will either need to move into a nursing facility or your guest room. Since she's been relatively healthy up to this point, you re not quite financially ready for this. What will you need to change to care for your children and mother? Balancing care Discuss financial plans now with your relatives Maintain your goals Contribute to retirement even when you aren t working Budget for the unexpected Travel cost to take care of loved ones Unpaid time off from work Assistance with medical bills 7

8 Staying single As a single woman living comfortably on one salary, you have just been told your company is downsizing and you ve lost your job. Since this is unexpected, you haven t been saving specifically to do without this income how will you cope? How will your approach to your finances change? Staying single Set goals, and determine savings and investment strategy Choose a beneficiary Establish legal documents Will Power of Attorney Healthcare Directives Plan for long-term care Suddenly single Your long-awaited divorce is complete, and you need to get your financial affairs in order. What needs to be updated? Now that you re responsible for all of the bills instead of just half, how will you pay them and still save for the future? 8

9 Suddenly single Seek advice before making financial decisions Understand your rights Re-evaluate financial goals Update Legal documents Change beneficiaries Titling of assets Wills, Power of Attorney and Healthcare Directives Your financial plan Suggested steps to a financial plan: Pay off high-interest credit card debt Create an emergency fund Evaluate your need for life insurance Check the status of your will Know your interest rate and options for refinancing Take advantage of your employer's retirement plan Identify your risk tolerance and align your allocations Your financial plan Think about opening or contributing to an IRA An estate plan can help make your wishes clear See a Financial Consultant for help 9

10 TIAA Financial Consultants are available to help you. Call TIAA IS HERE FOR YOU Retirement and tax-advantaged options IRAs College savings Brokerage Services Mutual Funds The products and services referenced above are offered by the various entities within the TIAA group of companies. Sources There are three times as many widowed women over age 65 than men. 1 1 U.S. Department of Health and Human Services, A Profile of Older Americans: 2014, accessed online February 2017 Sixty-six percent of caregivers are women women have fewer working years to save for their future. 2 2 Family Caregiver Alliance/National Center on Caregiving, Women and Caregiving: Facts and Figures, accessed online February % saved additional money in a non-workplace savings plan; 15% increased their workplace retirement plan savings rate before or following their leave. 55% of caregiving millennials saved more for retirement to make up for time out of the workplace, compared to 38% of Gen Xers and 21% of Baby Boomers. 3 3 Plansponsor, Caregiving Women Make Up for Retirement Savings Gaps, September 2016 In 2016, women earned 82% of men's salaries based on median weekly earnings for full time workers. 4 4 Bureau of Labor Statistics, Median Weekly Earnings of Full Time Wage and Salary Workers by Detailed Occupation and Sex (2016), accessed online February 2017 Sources For women age 65 and older, their typical income is 25 percent lower than men. 5 5 National Institute on Retirement Security, Shortchanged in Retirement: Continuing Challenges to Women's Financial Future, March 2016 A woman starting her career now will lose $430,480 over a 40-year career. 6 6 National Women s Law Center, Wage Gap Costs Women More Than $430,000 Over a Career, NWLC Analysis Shows, April 2016 The median value in women s defined contribution retirement accounts was one-third less than that of men. 3% fewer women than men are eligible for employer-sponsored plans, lowering women's participation rates. 7 7 National Institute on Retirement Security, Shortchanged in Retirement: Continuing Challenges to Women's Financial Future, March 2016 A 20-year-old worker has a 1-in-4 chance of becoming disabled before reaching full retirement age. 8 8 Social Security Administration, Disability Benefits, accessed online February

11 Sources 20% of adults have never married, compared to 9% in The median age women are first marrying is up to Pew Research Center, Record Share of Americans Have Never Married, accessed online February % of single-parent families are headed by women Single Mother Guide, Single Mother Statistics, September 2016 About 80 percent of the divorces are initiated by women Divorce Source, Why Women File 80 Percent of Divorces, accessed online February 2017 Older women outnumber older men by 28%--and 35% of older women are widows Administration for Community Living, Administration on Aging: Highlights, accessed online February 2017 You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call or log on to TIAA.org for underlying product and fund prospectuses that contain this and other information. Please read the prospectuses carefully before investing. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. Investment products may be subject to market and other risk factors. See the applicable product literature, or visit TIAA.org for details. TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each of the foregoing is solely responsible for its own financial condition and contractual obligations. The TIAA group of companies does not provide legal or tax advice. Please consult with your legal or tax advisor. This discussion is general in nature, is intended for informational purposes only and is not intended to provide specific advice or recommendations for any individual or organization. The circumstances surrounding each situation differ. This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor s personal advisor based on the investor s own objectives and circumstances. TIAA.org 2017 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Avenue, New York, NY