Retirement. on the Brain. A Woman s Guide to a Financially Secure Future - Workbook

Transcription

1 Retirement on the Brain A Woman s Guide to a Financially Secure Future - Workbook

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3 Secure your future starting now Women face unique challenges when it comes to saving and investing for the future. We spend less time in the workforce and tend to have lower earnings, so the decisions we make now like how much to save and invest are extremely important. Time may give us the edge we need to convert those challenges into opportunities. Regardless of our marital status or what the future may hold, we can move toward a financially secure future and the lifestyle we desire. Begin investing in your future by saving in your employer s retirement savings plan. This workbook will guide you through a step-by-step process that can help you get started. Take the needs assessment quiz Page 2 Answer six brief questions to help you determine your future income needs. Calculate how much you should save Page 5 Complete the worksheet to find out how much to save each month. When to start The sooner you start, the easier it will be. Starting early gives your money more time to compound, which is when earnings on your savings are reinvested and earn an investment return of their own. You won t get the benefi t of compounding earnings if you never start saving or if your money has too little time to compound. Plus, it is easier to save a little each pay period throughout your career than a lot at the end. As you get older, it s also easier to be sidetracked by other expenses, such as your child s college tuition. Start now and make saving a lifelong habit. Take the investor profile quiz Page 6 Use the score on this six-question quiz to guide you toward an investment portfolio designed for your investment time frame and risk tolerance. Get started Fill out the forms your employer provides or, if your plan allows, enroll online. 1

4 Anticipate your lifestyle By taking a look at your current situation, imagining what you want for your future and putting your plan into action, you greatly increase your chances of reaching your goals. That s why it s important to take a few minutes to consider the effect of both your current lifestyle and future anticipated lifestyle on your retirement planning. Needs assessment quiz Experts generally agree most people will need 70 to 90 percent of their pre-retirement income during their retirement. Depending on your financial goals and personal situation, you may need more. To help determine how much income you will need, answer the questions below. Circle the answers that most closely fit your plans for retirement. If you re not sure, make your best guess. 1. Do you believe you ll have more or less debt (loans, credit cards, etc.) at retirement than now? a. Less (0) b. About the same (1) c. More (2) 2. During retirement, will your mortgage or rent payment be higher or lower than it is now? a. Lower (0) b. About the same (1) c. Higher (2) 3. During retirement, how much traveling for pleasure do you plan to do compared to how much you do now? a. Less (0) b. About the same (1) c. More (2) 4. During retirement, how many major purchases do you plan to make each year compared to how many you make now? a. Fewer (0) b. About the same (1) c. More (2) 5. Will your entertainment and recreation activities increase or decrease during retirement? a. Decrease (0) b. Remain the same (1) c. Increase (2) 6. How will your out-of-pocket costs for medical care and insurance change when you retire? a. Decrease (0) b. Remain the same (1) c. Increase (2) Add up the numbers next to your answers: Scoring your quiz Score Approximate percentage of current income needed 70% 80% 90% 100% 110% 2

5 Social Security (for women only) Women who take time out from the workforce to raise children or care for elderly parents often forfeit not only earnings but earning power. When they are ready to begin working again, their job skills may have declined, forcing them to take a job that is out of their field or that pays less. Women who choose to work part-time face similar challenges. Their overall earnings are less than if they were in full-time positions, and there s a high probability that their part-time jobs don t offer the same hourly rate that a full-time job would. When you consider that Social Security benefits are based on the 35 highest-paid years of your working career, the implications are obvious. That s why your actual Social Security benefits may fall short of the amounts listed in the Social Security tables of the How much should you save? worksheet on page 5. These tables assume that you have taken no time away from the workforce and have earned annual salary increases equivalent to the rate of inflation (about 3 percent) over the course of your working career. The Social Security Administration can give you a more accurate estimate of your future benefits. In fact, they send an annual personal Social Security Statement detailing the benefits for which you would be eligible under various retirement scenarios. (If you don t receive this statement, contact the Social Security Administration.) Spousal benefits The Social Security Administration recognizes that caregivers may be at a disadvantage when it comes to qualifying for benefits. As a result, married individuals have the option of taking a benefit based either on their own work records or on the work records of their spouses, whichever is greater. Those choosing the spousal benefit will receive an amount that is equivalent to up to one-half of their spouse s benefit, depending on their age when they begin receiving benefits. Divorce If you are divorced, you may still qualify for a spousal benefit if you: were married for at least 10 years have not remarried do not qualify for a benefit that is greater than one-half of your former spouse s benefit are age 62 or older (with some exceptions) If a woman is receiving a spousal benefit and her husband dies, her benefit then increases to an amount equivalent to her spouse s entire benefit (provided she has reached full retirement age). Source: Social Security Administration: What Every Woman Should Know 3

6 Calculate how much you should save By now, you ve got the basics down. You know approximately how much money you ll need for retirement, and you know Social Security won t cover all your financial needs. You also know how your retirement savings plan can help. But there s one more important question we haven t answered yet: How much do you need to save to reach your goals? That s where the worksheet on the next page comes in handy. Using information you gathered from the quiz on page 2, as well as your personal financial information, the worksheet can help you estimate the amount you need to save. What do the results mean? If line m is zero or a negative number, congratulations! You re making good progress toward retirement. Stick with your plan, but check the worksheet regularly to ensure the assumptions you made in completing it are still realistic and that you re still on track to reach your goals. If line m is a positive number, consider it a wake-up call. Don t be discouraged; starting today, you still can do plenty to start moving forward. Take the next step: Enroll in your retirement plan. You ve completed a financial planning session for your retirement. Don t let your efforts go to waste. Do something today to invest in your future. When you sign up, you ll be asked: 1. How much of each paycheck you want to contribute to your company s plan. Take the dollar amount on line m from the worksheet on the next page. If you need a percentage, divide the amount on line m by the gross amount (before taxes and other deductions) of your paycheck. 2. How your contributions should be divided among your investment options. Use the information and worksheets beginning on page 5 to help you select investment options. Or, if you re ready to enroll now but aren t comfortable choosing investment options yet, use your employer s default option. What you will need You will need the following items and information to complete the worksheet: 1. A calculator 2. The amount of money you have saved for retirement. Include only money that will be used for retirement income, such as personal savings, Individual Retirement Accounts (IRAs), savings plan balance, investments and other assets. 3. An estimate of the average percentage rate of return you expect to receive from your investments. If you are unsure, use 6 percent. 4

7 How much should you save? Maybe you feel like every dollar you earn is already spoken for and you just can t afford to put anything aside. Even investing a small amount of your pay can make a big difference at retirement. Use this worksheet to calculate what you may need to keep you on target to meet your goals. Refer to the tables below. Your monthly retirement goal Example You a. Current monthly pay (before taxes and deductions) $4,000 b. Pay increase factor (enter number from table 1) x 2.09 c. Monthly pay at retirement (multiply line a by line b) $8,360 d. Percentage of pay needed at retirement (for example, 70%, 80%, 90%, 100% or 110%) x 80% e. Monthly retirement goal (multiply line c by line d) $6,688 Your retirement income sources f. Current value of all retirement accounts $75,000 g. Monthly income factor (enter number from table 2) x.0221 h. Monthly income at retirement (multiply line f by line g) $1,658 i. Monthly income from Social Security (see table 3) $3,422 j. Total expected monthly income at retirement (add lines h and i) If this number is less than line e, you are short of your goal. $5,080 Amount you need to save k. Subtract line j from line e $1,609 l. Monthly savings factor (enter number from table 4) x.215 m. Monthly savings amount needed to meet retirement goal (multiply line k by line l) $346 If line m is zero or negative, congratulations! You re on your way to being ready for retirement. If line m is positive, don t be discouraged. By joining your plan, you can start moving closer to your savings goal. Table 1 Pay increase factor Your current age Table 2 Monthly income from retirement account Annual Your current age investment return % 6% 9% Results assume retirement at age 65, 3% annual pay increase and 3% inflation in retirement. Mortality based on 2012 Group Annuity Reserve Table Projected to 2022 (most recent data available). Expected returns in retirement vary based on pre-retirement returns. For 3% pre-retirement returns, post-retirement returns are 3%. For 6% and 9% pre-retirement returns, post-retirement returns are 5%. If you are a plan participant, you can access an interactive, online guided planner. Be sure to have your user ID and password available. This information is not intended to represent the return of any specific investment. There is no guarantee that these results will be achieved or sustained. Actual results will vary. Table 3 Monthly income from Social Security Current Your current age annual pay $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 Table 4 Monthly savings needed to fund monthly retirement income shortage Annual investment return 3% 6% 9% Based on 2013 calculation date and limits, 3% annual inflation and 3.5% annual wage increase. For an estimate of your Social Security benefits, you can use this table or contact the Social Security Administration at or for a Personal Earnings and Benefit Estimate Statement. Your current age

8 Investor profile quiz After each question, circle the letter that best describes you. Then add up the points and match the total with the investor profile on the next page. Please note that this profiling tool is only a guide. For advice specific to your situation, you will want to consider other factors, such as your retirement savings, tax considerations and investing time frame. You should contact your investment professional or tax advisor for personalized advice. Investor profile quiz 1. When do you expect to tap into your retirement account? a. Less than five years b. Between five and 10 years c. Between 10 and 15 years d. More than 15 years 2. What do you expect to happen to your pay (salary) in the next five years? a. I expect my pay to increase much faster than inflation (due to promotions, new job, etc.). b. I expect my pay to increase slightly faster than inflation. c. I expect my pay to just keep up with inflation. d. I expect my pay to decrease (due to retirement, part-time work, depressed industry, etc.). 3. How do you feel about investing for retirement? a. I am seeking maximum stability, even if returns are low. b. I can tolerate a small amount of fluctuation in my investment account and I am seeking consistent returns. c. I am middle-of-the-road and prefer both growth potential and consistency of returns. I can tolerate a fair amount of market movement in exchange for more attractive long-term returns. d. I am willing to assume a relatively high level of volatility for potentially greater returns. e. I am seeking maximum long-term growth, even if it means wide swings in my account value Points Points Points How much risk are you willing to take in order to potentially increase your investment return? a. I am willing to take a lot of risk with all of my retirement account. b. I am willing to take a lot of risk with some of my retirement account. c. I am willing to take a little risk with all of my retirement account. d. I am willing to take a little risk with some of my retirement account. e. I am unwilling to take on more risk. Points 5. If the stock market went down 15 percent, what would you do? Points a. Sell all of my stock funds immediately and put the money in something more stable. b. Transfer some of my stock funds into less aggressive investments. c. Do nothing and wait for it to come back. d. Buy more: Increase my stock investments while prices are low. 6. If you received several statements in a row with negative returns and realized that your account had lost 20 percent, what would you do? a. Sell all of my stock funds immediately and put the money in something more stable. b. Transfer some of my stock funds into less aggressive investments. c. Do nothing and wait for it to come back. d. Buy more: Increase my holdings in stock funds while prices are low Points

9 Select an asset allocator portfolio Your asset allocation is an important part of your investing strategy. The following pre-mixed portfolios show how you may want to diversify your investments. The pre-mixed portfolios represent conservative to aggressive investments, with Portfolio 1 as the most conservative and Portfolio 6 as the most aggressive. Circle the portfolio that matches your profile score from the quiz on page 6. If you need more information, you may wish to contact a personal financial advisor. Asset allocator: Where do you fit? Portfolio 1 (Score: 0-27) Portfolio 2 (Score: 28-41) Portfolio 3 (Score: 42-55) Portfolio 4 (Score: 56-69) Portfolio 5 (Score: 70-83) Portfolio 6 (Score: ) Cash Equivalents 50% Cash Equivalents 40% Cash Equivalents 40% Cash Equivalents 30% Cash Equivalents 15% Cash Equivalents 0% Bonds 24% Bonds 19% Bonds 0% Bonds 0% Bonds 0% Bonds 0% Lg Cap Stocks 16% Lg Cap Stocks 21% Lg Cap Stocks 25% Lg Cap Stocks 30% Lg Cap Stocks 40% Lg Cap Stocks 45% Sm/Mid Cap 5% Sm/Mid Cap 15% Sm/Mid Cap 25% Sm/Mid Cap 30% Sm/Mid Cap 35% Sm/Mid Cap 45% Int l Stocks 5% Int l Stocks 5% Int l Stocks 10% Int l Stocks 10% Int l Stocks 10% Int l Stocks 10% Less risk / less potential return Higher risk / higher potential return You should carefully consider the investment objectives, risks, charges and expenses of the investment options offered under the retirement plan before investing. Funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk and inflation risk. As interest rates rise, the prices of bonds fall. Small-company (small cap) investing involves specific risks not necessarily encountered in large-company investing, such as increased volatility. International investing involves certain risks, such as currency fluctuations, economic instability and political developments. These risks may be accentuated in emerging markets. 7

10 Enroll today. Plan for tomorrow. Take an important step toward making tomorrow financially secure. Join your retirement savings plan today. Your employer s plan offers a rewarding way to invest for your retirement. Take advantage of this opportunity. The amount you invest now might make the difference between having financial security in retirement and just getting by. Enrollment materials provided by your plan administrator have all of the forms you need and information on the investment choices offered by the plan. Please read all of the materials you receive carefully before making any decision about how to invest your money. If you have any questions about the plan, contact your plan administrator. Your plan may be funded by a mutual fund trust or a group annuity contract. Both are suitable for long-term investing, including saving for retirement. While annuities generally provide tax-deferred treatment of earnings, the group annuity contract does not provide any additional tax-deferred treatment beyond the treatment provided by your retirement plan. 8

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12 Employers and plan participants should carefully consider the investment objectives, risks, charges and expenses of the investment options offered under the retirement plan before investing. The prospectuses for the individual mutual funds and each available investment option in the group annuity contain this and other important information. Prospectuses may be obtained by calling Please read the prospectus carefully before investing. Investments are subject to market risk and fluctuate in value. The Standard is the marketing name for StanCorp Financial Group, Inc. and its subsidiaries. StanCorp Equities, Inc., member FINRA, wholesales a group annuity contract issued by Standard Insurance Company and a mutual fund trust platform for retirement plans. Third-party administrative services are provided by Standard Retirement Services, Inc. Investment advisory services are provided by StanCorp Investment Advisers, Inc., a registered investment advisor. StanCorp Equities, Inc., Standard Insurance Company, Standard Retirement Services, Inc. and StanCorp Investment Advisers, Inc. are subsidiaries of StanCorp Financial Group, Inc. and all are Oregon corporations. Standard Retirement Services, Inc SW Sixth Avenue Portland OR A Woman s Guide to a Financially Secure Future - Workbook RP AA-wkbk (4/13)