FINANCIAL LITERACY EDUCATION PROGRAMS Retirement Strategies for Women Education Program Workbook Financial Planning offered through VALIC Financial Advisors, Inc. (VFA). SAVING : INVESTING : PLANNING
FINANCIAL LITERACY EDUCATION PROGRAMS
Preparing for retirement can be challenging particularly for women Looking back over the years, what have been your goals and aspirations? Was it to learn a musical instrument, a sport or how to drive? Did you dream of earning a scholarship to the college of your choice to later secure your dream job, and/or raise a family? Maybe a few of these are still your goals today and you re planning on making them come true. What about retirement? Has it ever been a goal? As you look back, did you ever think of retirement as a goal? Chances are good that it wasn t at the top of your list. It s natural to put off thinking about retirement especially when you re busy with career, children and the dozens of other things you have to do in a day. So, how do you manage work and home life while also planning for retirement? This educational workshop provides useful information that will help you overcome the unique challenges women face when preparing for retirement. During the workshop, use this guide to capture your notes. Take it home for further thought or to discuss today s presentation with your spouse or partner. Finally, if you decide to meet with a VALIC financial advisor, bring it with you to the consultation you ll be one step ahead in the planning process! 1
Retirement challenges Saving for retirement seems to be especially challenging for many women as they try to find a balance between working outside of the home and caring for their family. Generally, women earn less than men On average, women earn about 76 cents for every dollar earned by men. 1 At this rate, women will need to work an additional 10 years to catch up to a man s wages. 2 Additionally, women are often the primary caregivers for children and aging parents, which necessitates leaving the workplace to provide care. Without regular earnings, there are no contributions to workplace retirement plans or Social Security. How will contributions to your workplace plan affect your retirement income? Women should prepare financially for life-changing events In addition to caregiving and job changes, women are hit hard financially by divorce and widowhood. It is estimated that women are 80% more likely than men to fall into poverty at age 65 and older. 3 Also, disability, long-term illness or other unforeseen emergencies could drastically reduce current income and savings, if you re not prepared. Unfortunately, 26 percent of Americans (overall) say they have saved less than $1,000 and 54 percent have saved less than $25,000; excluding their primary residence and defined benefit plans, if any. 3 Can you think of other life-changing events that could possibly impact your current finances? Sources: 1 ASecureLife.com. Women and Investing Statistics: Why More Women Should Plan For Retirement. February 3, 2017. 2 The Wage Gap: The Who, How, Why, And What To Do, National Women s Law Center (NWLC), Fact Sheet. September 2016. 3 The 2016 Retirement Confidence Survey: Worker Confidence Stable, Retiree Confidence Continues to Increase. EBRI Issue Brief No. 422. March 2016. 2 FINANCIAL LITERACY EDUCATION PROGRAMS
The future of Social Security is uncertain Women receive, on average, significantly smaller payments from Social Security and pensions than men do, requiring a greater focus on self-funding a larger portion of their retirement. 1 Because many women retire at an average age of 62, their Social Security benefit is reduced by as much as 30 percent for the rest of their lives. This might be a contributor to the nearly 2.9 million women over age 65 living in poverty. 2 Average Benefits, by Sex Women, $1,182 monthly benefit Men, $1,500 monthly benefit $0 $300 $600 $900 $1200 $1500 Source: Fast Facts & Figures About Social Security, 2016. SSA Publication No. 13-11785. SSA.gov. August 2016. Will Social Security be your only income in retirement? How will that impact your lifestyle in retirement? On average, women live longer than men Statistically women live longer than men. Today s 65-year-old female has an average life expectancy of age 86, compared to age 84 for a male of the same age. 3 Do the women in your family tend to outlive their spouses? Sources: 1 Addressing the Challenges Women Face in Retirement: Improving Social Security, Pensions, and SSI. J. Marshall Law Review, Vol. 46, Issue 3, 2013. 2 The Biggest Mistake That Women Make on Social Security Benefits. NBCnews.com, Aug 11, 2015. 3 Life Expectancy Calculator. Socialsecurity.gov. Retrieved November 2017. 3
How could longevity affect your retirement? Although women benefit from greater average longevity than men, it comes with a financial reality the need for greater savings to fund a longer lifetime. And how long might that lifetime be? Due to medical technology and better nutrition, life is being extended dramatically. You could live to be 100! Centenarians are becoming a growing segment of the population, with the U.S. Census estimating over 55,000 centenarians in the U.S. 1 With all those extra years in your future, how are you going to pay for them? 80% Estimated percentage of last working year's salary you'll need to maintain your lifestyle in retirement. 2 Living longer also brings additional costs, some potentially very prohibitive. Long-term care planning is essential for all workers, yet it takes on a greater importance for women for several reasons. Six in 10 women Longer care $97,455 3 Recipients of long-term care 1 Women (3.7 years) Median annual cost of a more than men (2.2 years) 2 private room in a nursing home Sources: 1 Report: Long-term Care in America: Expectations and Reality. The Associated Press-NORC Center for Public Affairs Research, 2013. http://www.longtermcarepoll.org/pages/polls/report.aspx. 2 How Much Care Will You Need? Longtermcare.gov. Retrieved November 2017. 3 Cost of Long Term Care Survey. Genworth Financial, 2017. Single women are less prepared for retirement It is estimated that approximately 55 million single women in the U.S. are less prepared financially for retirement. This may be due in part to lack of a dual-income household to carry costs or additional savings and Social Security retirement benefits from a spouse. And for single mothers, the sole financial responsibility of supporting a household can put a strain on income that is possibly already lower than that of a male counterpart. 3 Sources: 1 The Centenarian Population: 2007-2011, April 2014. U.S. Census Bureau. 2 Retirement Benefits. SSA Publication No. 05-10035. Social Security Administration. January 2015. 3 Retirement may be dicey for single women. Cnbc. March 22, 2016. 4 FINANCIAL LITERACY EDUCATION PROGRAMS
Women are taking control... Today women are more financially successful and independent than ever before and enjoy career opportunities that our grandmothers generation could only dream about. 47% 1 Women part of the total labor force 52% 2 In management or professional occupations 44% 3 Primary income earners Because women are more involved in multiple facets of their household s financial well-being, they can no longer rely on a spouse s benefits alone or overlook the need to plan for their retirement. Sources: 1 U.S. Department of Labor Blog. 12 Stats About Working Women. March 1, 2017. 2 Bureau of Labor Statistics, Current Population Survey, Table 11: Employed Persons by Detailed Occupation, Sex, Race, and Hispanic or Latino Ethnicity, Household Data Annual Averages 2015, released 2016. 3 CNBC.com. For women, retirement can be a serious challenge. January 19, 2017. 5
Women currently hold 23 CEO positions at S&P 500 companies and counting. * This pyramid shows the percent of women who hold CEO, executive and managerial positions in S&P 500 companies. Can you identify any women that hold top positions in your own organization? Perhaps you are one such woman or on your way to being. 4.6% 9.5% CEOs Top Earners 19.9% Board Seats 25.1% 36.4% 44.3% Executive/Senior-level Officials and Managers First/Mid-level Officials and Managers Total Employees Sources: * Catalyst. Women CEOs of the S&P 500. New York: Catalyst, September 19, 2016. The S&P 500 Index measures the performance of 500 widely held stocks in US equity market. Included are the stocks of industrial, financial, utility, and transportation companies. 6 FINANCIAL LITERACY EDUCATION PROGRAMS
Closing the gender wage gap Although women are still affected by wage inequality, the gap seems to be shrinking. Here are some statistics: Women today are earning more college degrees than ever before, and outpacing men in educational attainment. This coupled with women s increased participation in the labor force is associated with the narrowing of the wage gap. 1 In households where both spouses are employed, 40% of wives earn within the same pay range or more than their husbands. 2 Younger women (20-24 years old) are closer to pay equity and earn 92.3% of men s earnings, compared to older women (55 to 64 years old) who earn just 76.4% of men s full-time wage and salary. 3 This again is a result of career interruption experienced by older women. Women in the healthcare, education, and public administration fields, have higher incomes in retirement and lower rates of poverty, due to participation in Defined Benefit pension plans. 4 Sources: 1 Breaking Down the Gender Wage Gap. Women s Bureau, U.S. Department of Labor. Extracted from the U.S. Bureau of Labor Statistics, Current Population Survey. 2 Earning Gaps Within Couples. Current Population Survey, Annual Social and Economic Supplement, U.S. Census Bureau, 2015. 3 Christianne Corbett and Catherine Hill, Graduating to a Pay Gap: The Earnings of Women and Men One Year after College Graduation, (The American Association of University Women, 2012). 4 Shortchanged in Retirement, The Continuing Challenges to Women s Financial Future. March 2016. What other strides can you identify for women in the workplace, society and overall? 7
Sources of retirement income Part of preparing financially for retirement is knowing where your income will come from. Retirement income traditionally depended on three sources: Social Security, retirement plan or pension plan and savings. With fewer employers still offering pension plans to new employees and Social Security only intended to supplement part of your retirement income, you have a bigger responsibility to self-fund your retirement with other income sources, such as with savings or even the growing option of working in retirement. Keep in mind that the percentages will vary depending on your individual situation. Post-retirement wage 32% 34% 33% Social Security Pension plan 21% 20% 13% Asset income/other Source: Income of the Aged Population, Shares of Aggregate Income by Source, 1962 and 2015. Fast Facts and Figures About Social Security, 2017. SSA Publication No. 13-11785. Released September 2017. Notes: 8 FINANCIAL LITERACY EDUCATION PROGRAMS
How much should you save for retirement? The guideline is to save at least 10 to 15 percent of your annual income starting in your twenties.* Then, raise the percentage as you get older. 15% Estimated percentage of income to save annually to live comfortably in retirement. This percentage is only a guideline. The percentage may increase depending on your investment goals and time horizon. If you re uncertain how much you can afford to save, you might consider creating a household budget. It s a great way to assess your essential and nonessential expenses. With a household budget, you ll see areas where you can reduce spending so you can contribute more to your savings. And, depending on the lifestyle you want in retirement you might also consider working with a financial advisor to help you develop an overall retirement savings strategy. Notes: * Source: How much should you save for retirement? Bloomberg.com. June 14, 2017. 9
Social Security benefits Social Security was never intended to do more than supplement retirement savings. The chart below provides a historical picture of average annual Social Security benefits for single retirees at full retirement age. Keep in mind that, if you retire before full retirement age, your benefits are reduced. At full retirement age, you will begin to collect your full retirement benefits; however, you may now have to start spending some of your retirement savings to make up for any possible income shortfall resulting from the loss of a steady paycheck. Either way, there might be a gap to fill; either at the start of retirement or when savings run out. Women receive, on average, significantly smaller payments from Social Security and pensions than men do, requiring a greater focus on self-funding a larger portion of their retirement. Source: RCS 2015 Fact Sheet #4, EBRI. Consequently, there is a need to implement an income-generating strategy that can help cover your essential living expenses in retirement. Historical annual Social Security benefits, 1940-2016 $16,092 $14,160 $10,135 $3,853 $981 $273 1940 1960 1980 2000 2010 2016 Sources: (Years 1940 2010). Average Monthly Social Security Benefits (calculated to provide annual total), 1940 2011. Social Security Bulletin: Annual Statistical Supplement. SocialSecurity.gov. (Year 2016). 2014 Social Security Changes, Fact Sheet and 2016 Social Security Changes, Fact Sheet. ssa.gov. Notes: 10 FINANCIAL LITERACY EDUCATION PROGRAMS
Why participate in your workplace plan? Now that you know the importance of saving early for retirement, why not take advantage of the benefits offered by your employer s retirement savings plan? Participating in your workplace helps with accumulating the money for retirement Automated savings Automatic payroll deduction Tax advantages Tax-deferred growth Matching contributions Helps increase your savings Here s why: Saving is easy and automatic through payroll deduction. Contributions are deducted from your paycheck before tax withholding is calculated, helping to reduce your taxable income while investing for retirement. Additionally, taxes on all interest and earnings are deferred until withdrawal, usually at retirement. Remember, income taxes are payable upon withdrawal, and withdrawals prior to age 59½ may be subject to a 10% federal early withdrawal tax penalty. Once you sign up for the plan, the amount you designate is regularly contributed to your retirement account through convenient payroll deduction. That means you are paying yourself first a good savings habit. Tax advantages. While you are working, whether you re five or 35 years from retirement, your money grows tax deferred until withdrawn. Matching contributions. Many employers match a percent of your contributions. Inquire from your employer if they offer a match. If your employer doesn t, perhaps your spouse s plan does. Notes: 11
Taxable account versus tax-deferred account The chart below is a hypothetical example of how the funds in a tax-qualified plan can grow more quickly than funds in a taxable account. It compares the hypothetical results of contributing $100 every two weeks to (1) a taxable account and (2) a tax-qualified retirement account. Bear in mind that a $100 pretax contribution to a tax-qualified account has a current cost of $75 (assuming a 25% income tax bracket) and also reduces current taxable income. taxable account tax-deferred account $176,858 $106,788 $57,598 $88,021 $23,557 $33,482 10 years 20 years 30 years Lower maximum capital gains rates may apply to certain investments in a taxable account (subject to IRS limitations, capital losses may also be deducted against capital gains) which would reduce the differences between performance in the accounts shown in the chart. The chart assumes a 5% annual rate of return. Remember investing involves risk, including possible loss of principal. Fees and charges, if applicable, are not reflected in this example and would reduce the amount shown. Income taxes on tax-deferred accounts are payable upon withdrawal. Federal restrictions and a 10% federal early withdrawal tax penalty may apply to withdrawals prior to age 59½. This information is hypothetical and only an example. It does not reflect the return of any investment and is not a guarantee of future income. Notes: 12 FINANCIAL LITERACY EDUCATION PROGRAMS
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What are the most common retirement plans? The most common employer-sponsored retirement plans are 403(b),457(b) and 401(k) plans. The table below provides an overview of each plan. Take a moment to review the options available through your employer-sponsored plan. Remember, you choose the salary deferral amount. And, you have the option of increasing or decreasing the amount or stopping deferrals, subject to employer plan provisions. Traditional and Roth Category 403(b) 457(b) 401(k) Employers Public schools and nonprofit organizations Government and tax-exempt organizations Non-government organizations Contribution limits for 2018 Maximum annual elective employee contribution: $18,500 See employee and employer combined contributions below Maximum annual elective employee contribution: $18,500 Employee and employer combined contributions $55,000 which excludes any age-based catch-up contributions for age 50+ 100% of includable income up to $18,500 $55,000 which excludes any age-based catch-up contributions for age 50+ Age-based catchup contributions Employee age 50+ catch-up contribution limit: $6,000 Employee age 50+ catch-up contribution limit: $6,000 1 (governmental plans only) Employee age 50+ catch-up contribution limit: $6,000 Service-based catch-up contributions 15+ years of service: Up to $3,000 per year ($15,000 lifetime maximum) if undercontributed in prior 15 years 2 Up to an additional $18,500 in last three years prior to normal retirement age if undercontributed in prior years 3 Not applicable Withdrawal restrictions Reach age 59½ Severance from employment Reach age 70½ Severance from employment Reach age 59½ Severance from employment Death Death Death Disability Unforeseeable emergency Disability Financial hardship Financial hardship 10% federal early withdrawal tax penalty May apply to withdrawals prior to age 59½ Not applicable, except on distributions from amounts rolled over from non-457(b) plans to a governmental 457(b) plan May apply to withdrawals prior to age 59½ Generally, a qualified Roth distribution is a distribution that (1) is withdrawn after the end of the five-year period beginning with the first year in which a Roth contribution was made to the plan, and (2) is after reaching age 59½, death or disability. 1 Important note: For 457(b) plans, employees who are eligible for both the age-based and service-based catch-up contributions in the same year may not combine them, but may contribute up to the higher amount. Non-governmental 457(b) plan participants are not eligible for the age-based catch-up option. 2 For 403(b) plan participants, if you are eligible for both catch-up contributions, you must exhaust the 15-year catch-up first. 3 Ordinary income taxes are due upon withdrawal. 14 FINANCIAL LITERACY EDUCATION PROGRAMS
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Time is money, start saving early Every day you delay saving for retirement means less time to benefit from compound interest. For example, a 25-year-old who started investing $300 a month for ten years could have accumulated more than $200,000 by age 65, assuming a 5% annual rate of return. Remember investing involves risk, including possible loss of principal. 25-year -old $300 monthly for 10 years 5% annual rate of return More than $200,000 by age 65 This hypothetical example illustrates the cost to accumulate more than $200,000 by age 65 with the assumptions indicated. Tax-qualified plan accumulations are taxed as ordinary income when withdrawn. Federal restrictions and tax penalties may apply to early withdrawals. This information is hypothetical and only an example. It does not reflect the return of any investment and is not a guarantee of future income. Notes: 16 FINANCIAL LITERACY EDUCATION PROGRAMS
What happens if I leave my employer? At some point in your career, you may leave an employer for a new job or to retire. If you were enrolled in your former employer s sponsored retirement plan, review the plan s distribution options to see if you need to withdraw funds. The table below describes the most common ways to withdraw funds from a tax-qualified retirement plan. The most common ways to withdraw funds from a tax-qualified retirement plan Lump-sum distribution Systematic withdrawals Annuitization Rollovers You withdraw all the money from your retirement account as a single lump-sum payout; however, your employer is required to withhold 20% for tax purposes. You take payments from a retirement account in regular intervals (monthly, quarterly, annually). You convert all or a portion of your investment into a series of periodic income payments to be paid at an interval of your choosing. Annuitization is generally irrevocable. You roll your retirement savings into another tax-qualified retirement program, an Individual Retirement Account (IRA) or a Roth IRA. Income tax would have to be paid before the funds could be put into a Roth IRA. Remember, your savings have been growing tax deferred. Ordinary income taxes are due upon withdrawal. Also, a 10% federal early withdrawal tax penalty may apply if you are under age 59½ when you take the distribution, unless certain conditions are met. Please note that the 10% federal early withdrawal tax penalty does not apply to 457(b) plans. Notes: 17
More about rollovers In the simplest of terms, think of rollovers as assets that are moved from one retirement plan to another. The two ways to accomplish a rollover are to choose the direct rollover option or take a cash distribution and then roll it over. When you leave an employer, you can choose to roll your retirement assets over to your new employer s retirement plan or to an IRA. Either way, your retirement savings can resume building income for the future. Direct rollover If you choose the direct rollover option, funds are transferred directly from your qualified plan to an IRA or another qualified plan. You do not pay income taxes or penalties and you also avoid the 20% tax withholding. Indirect rollover However, if you take possession of the cash, even if you plan on rolling it over to another qualified plan or IRA, your employer must withhold 20%. You have 60 days to roll it over into another qualified plan or an IRA tax free. This includes replacing the 20% withholding from other funds to avoid taxation on the withheld amount. If you wait longer than 60 days, you ll pay income taxes on the entire distribution and a 10% federal early withdrawal tax penalty may apply if you are under age 59½. Please note that non-governmental 457(b) plans cannot be rolled into an IRA or another type of employer-sponsored retirement plan. Qualified plan Direct rollover IRA or new qualified plan No income taxes No penalties No withholding Qualified plan 60 days to roll over After 60 days Indirect rollover Lump-sum cash distribution 20% withholding No income taxes No penalties Replace 20% withholding Taxes are due on entire distribution 10% federal early withdrawal tax penalty may apply if under age 59½ The 10% federal early withdrawal tax penalty does not apply to 457(b) plans. 18 FINANCIAL LITERACY EDUCATION PROGRAMS
Investment planning Preparing for retirement involves more than simply setting aside money from your paycheck. You must also consider how to make that money work for you. A sound investment strategy is an important part of your retirement planning process. Know what you expect and need from your investments Before investing, ask yourself these questions: How will the income from the investment be used? How much money will I need? When will the money be needed? These are the types of issues to consider when you are establishing goals for your investment program. Establish your investment goals by ensuring they are: 1. Written 2. Realistic 3. Measurable 4. Prioritized Once you ve established your investment goals, you should determine your investor profile. Investment consideraions Your investor profile has a direct influence on which type of investment strategy you select. When you re investing, you must answer two important questions: What is my risk tolerance? When will I need the money? Your ability to tolerate investment risk is a personal matter and may be dictated by a variety of factors. It could be based primarily on your emotional temperament and attitude toward possible fluctuations in the value of your investment. Other factors could include your current financial status, the amount of time until you need the money and your prior investment experience. If you have a short time horizon, you may want to put your money into a short-term, conservative type of investment. But, if your time horizon is longer for instance, retirement you might be more interested in capital appreciation, rather than capital preservation. Check your IRA IQ 1. Generally, anyone who has taxable compensation can contribute to an IRA up to age 70½. A. True B. False 2. The annual contribution limit for an IRA is $5,500. A. True B. False 3. If you are age 50 or older, you can contribute an additional $1,000 a year to an IRA. A. True B. False 4. Earnings grow tax deferred in an IRA. A. True B. False 5. You must begin taking withdrawals from a traditional IRA at age 70½. A. True B. False Answers on last page 19
Asset allocation Asset allocation is deciding the right mix of asset classes (stocks, bonds, and cash) for your investments balancing risk and reward against your long- and short-term goals. Here we provide a sample mix for a conservative and aggressive investor. For the conservative investor, the larger share of the investment pie is allocated to bonds, which are not as risky as stocks or equities. However, in the aggressive sample, the percentage of stocks is much greater than the percentages of bonds and cash equivalents. Conservative Aggressive 10% Cash 10% Stock funds 20% Cash 10% Bond funds 10% Bonds funds 70% 70% Stock funds 80% Higher potential returns generally involve greater risk and short-term volatility is not uncommon when investing in various types of funds, including but not limited to sector funds, emerging market funds and small- and mid-cap funds. Risks for emerging markets include, for instance, risks relating to the relatively smaller size and reduced liquidity of these markets, high inflation rates and adverse political developments. Risks for smaller companies include business risks, significant stock price fluctuations and reduced liquidity. Investing in higher yielding, lower rated bonds has a greater risk of price fluctuation and loss of principal and income than U.S. government securities such as U.S. Treasury bonds and bills. Treasuries are guaranteed by the government for repayment of principal and interest if held to maturity. Investors should carefully assess the risks associated with an investment in the fund. Government securities are guaranteed by the timely payment of principal and interest if held to maturity. Fund shares are not insured and are not backed by the U.S. government and their value and yield will vary with market conditions. Diversification Once you have decided the right mix among asset classes, you will now decide what funds to choose within each of those asset classes. By mixing a variety of asset classes in a portfolio, diversification can help to smooth performance of the overall portfolio. Mutual funds allow for diversification in your portfolio by combining a collection of stocks, bonds, short-term money-market instruments or other securities or assets, or some combination of these investments. Keep in mind that neither asset allocation or diversification guarantee a profit or protect against a loss. Growth funds, income funds, index funds, sector funds Stock funds (equity funds) Bond funds (fixed funds) Corporate funds, high-yield (junk bond) funds, international/global funds, treasury funds Money market funds 55% 1 Invest in high-quality, short-term debt (e.g., U.S. treasury bills, certificates of deposit) Source: The Three General Types of Mutual Funds. About.com. Retrieved June 2015. 20 FINANCIAL LITERACY EDUCATION PROGRAMS
Reality check Now that you have a better understanding of the realities women face when saving for retirement, how would you answer the following questions? Question Yes No I don t know 1. Have you calculated how much income you ll need in retirement? 2. Do you know where your income for retirement will come from? 3. Do you know how much you are currently saving in your workplace retirement plan? 4. Are you contributing the maximum amount allowed? 5. Are you eligible for any catch-up contributions? 6. Are your assets properly allocated? 7. Are you confident that you will be able to maintain your current lifestyle in retirement? If you answered, No or I don t know to any of the questions above, maybe it s time you take a proactive approach to planning. After all, you re in control of your future. Will it be a good one? Notes: 21
Analyze the situation No matter what challenges you face, the most important thing to do is to develop a plan for overcoming them. With a financial plan in place, you re more likely to adapt easily to life s changes and feel more secure about your finances. A plan analyzes your current financial situation, highlights areas in your savings strategy that need adjusting, and helps keep you on track to meet your goals. To help you contemplate an overall savings strategy, we ve prepared some questions below. Take a few moments to jot down your thoughts for each one. This will help you identify roadblocks that may be standing between you and saving for the retirement you envision. 1. What challenges are you facing when it comes to saving for retirement? 2. Rate these items from 1 to 6 in order of importance. (1=most important and 6=least important) Buy a home Buy a car Pay off debt Save for retirement Support family financially Pay for tuition 3. Have you anticipated special circumstances that will result in a large expenditure? (wedding, tuition, children, special purchases, etc.) 4. What steps have you taken so far to save for retirement? Do you feel confident that what you re doing now will provide enough income for a 20- to 30-year retirement? 5. Have you calculated your monthly/annual essential expenses? Are there areas where you could reduce spending to save more? Women in Leadership As a child, Oprah Winfrey lived in a poor, dysfunctional family and suffered from abuse. Education provided the way to a better life. Perhaps these humble beginnings inspired her philanthropy for girls with similar backgrounds. The Oprah Winfrey Leadership Academy in South Africa helps educate girls from poor, troubled backgrounds who have exhibited academic excellence to become the next generation of leaders. Oprah s hope is to change the trajectory of a child s life by empowering her through education. It s never too late to live your own dream. Oprah Winfrey Sources: Oprah Winfrey Biography. Achievement.org. October 21, 2010. Building a dream. O the Oprah Magazine. January 2007. Oprah.com. Retrieved March 2014. 22 FINANCIAL LITERACY EDUCATION PROGRAMS
Many people assume that retirement issues and concerns are the same for men and women but translating future goals into reality can be tricky for women because they often face genderspecific financial challenges to sound retirement planning including the greater possibility of outliving their retirement savings. But, with the right planning and knowledge of key financial issues, that doesn t have to become reality for you. 23
Spending and savings plan A review of how to allocate your income is an important starting point in the planning process. Take a few minutes to complete this simple four-step process to learn your monthly income and expenses. When you re finished, you ll have a general idea of what you can afford to save or where you may want to reduce spending. Step 1. Current income sources. Identify your current income sources. Add up the corresponding dollar amounts to find your total monthly income. Income sources Current income Wages $ Interest/dividends $ Other $ Other $ Total monthly income $ Step 2. Essential expenses. List your current monthly essential expenses. Add up the corresponding dollar amounts to find your total monthly essential expenses. Services and goods Current essential expenses Food $ Housing/property taxes $ Utilities $ Medical care/prescriptions $ Health insurance $ Homeowners/vehicle insurance $ Income taxes $ Social Security taxes $ Loan payments $ Clothing/grooming $ Other $ Other $ Total essential expenses $ 24 FINANCIAL LITERACY EDUCATION PROGRAMS
Step 3. Nonessential expenses. List your current monthly nonessential expenses. Add up the corresponding dollar amounts to find your monthly nonessential expenses. Services and goods Current nonessential expenses Travel $ Entertainment $ Hobbies $ Leisure $ Other $ Total nonessential expenses $ Step 4. Monthly shortfall or extra income. Insert total monthly income from step 1 and total monthly essential and nonessential expenses from steps 2 and 3. Subtract to calculate your monthly shortfall or extra income. Total monthly income $ Total monthly essential expenses - $ Total monthly nonessential expenses - $ Amount of shortfall or extra = $ 25
Saving small amounts can make a huge difference 1. If you have extra income left over at the end of the month, is it possible to save all or a portion of that amount for your retirement? How much will that amount be annually? 2. If you are short each month, what nonessential expenses could you reduce to allow you to save more for retirement? For example, let s say you have your nails manicured once a week. At $15 a week, that s $780 a year. Consider reducing those visits to every other week and you ll cut that expense in half to $390 a year. If you invested that $390 in your retirement plan, it could potentially grow to $27,207 over 30 years, assuming a 5 percent annual return. That s a pretty good return for skipping a few manicures. Weekly $15 Annually $390 30 years $27,207 This illustration is hypothetical only. Fees and charges, if applicable, are not included and if they were would decrease the amount shown. It does not reflect the return of any investment and is not a guarantee of future income. Withdrawals may be subject to withdrawal charges and federal and/or state income taxes. A 10% federal early withdrawal tax penalty may apply if taken before age 59½ in addition to ordinary income. Notes: 26 FINANCIAL LITERACY EDUCATION PROGRAMS
Are you saving enough to meet your financial goals? Making informed decisions about your retirement requires taking stock of your income sources. Maybe you question if the amount you can afford to save will make a difference. It s natural to feel that way. But, realize that small changes can make a big difference, especially if you contribute to a retirement plan regularly and consistently. Take a moment to answer the following questions and see if you re doing all you can to cover the costs of the type of lifestyle you want in retirement. 1. When do you want to retire? Did a certain age come to mind? If so, what prompted you to think of that retirement age? 2. What activities do you see yourself doing in retirement? Will they be the same as or different from the activities you participate in today? Have you considered how you will pay for those activities in retirement? 3. What concerns, needs or feelings come to mind when you think about your money? 4. Have you considered how inflation will impact your investments and income in retirement? What are you doing now to maximize your purchasing power in the future? 5. What would you like your investments to achieve? 27
Understanding investment risk is one of the most important parts of developing a sound financial strategy Investment risk is the chance that the actual return will be different than expected. Depending on the type of investment, there is a risk of losing some or all of your investment. How you perceive yourself as a risk-taker will play an important role in your investment decision making. Most people fall into one of these investor categories: Investor categories Conservative Less risk Low potential High risk High potential Aggressive Moderately Conservative Moderate Moderately Aggressive Before investing, you should know what to expect and what you want from your investments. Consider the following questions and write down your answers. 1. What is your risk tolerance level? (Check one) Conservative. I do not wish to accept the risk that my investment mix will decline in value, and I will accept lower returns to protect against declines. Moderately Conservative. Although preservation of principal is a concern, I am seeking higher returns with minimal risk, and I can tolerate some volatility. Moderate. I am willing to accept some fluctuations of principal to achieve a better return. Moderately Aggressive. I am willing to tolerate greater fluctuations of principal in an attempt to achieve an even higher return. Aggressive. I am seeking high returns and am willing to accept much greater fluctuations of principal for the opportunity to achieve long-term gains. 2. What are your investment goals? 3. What is your time horizon? 4. What is your investment strategy? 28 FINANCIAL LITERACY EDUCATION PROGRAMS
Create a plan Whether you re five or 35 years from retirement, saving and preparing for retirement can be complex. But you don t have to go it alone. Take the first step today by contacting a VALIC financial advisor. Once you ve chosen to work with a financial advisor, be sure to ask questions and stay involved in decisions along the way. Peace of mind comes from having and implementing a plan. And your VALIC financial advisor will help you create a customized financial plan geared to help you achieve a comfortable retirement. 1. Are you currently enrolled in your employer s retirement plan? If so, how did you choose the contribution amount? If not, do you need help getting started? 2. If you are enrolled in your employer s retirement plan, how are your assets currently invested? How did you choose those investments? How often do you review your portfolio? 3. If you re not enrolled, what are the roadblocks keeping you from taking advantage of tax-deferred savings? 4. How confident are you that what you are doing now will fund the lifestyle you d like in retirement? If you re less confident than you d like to be, what could you do differently? 5. Do you have financial concerns that need to be addressed by meeting with a financial advisor? (Examples include retirement income planning, education savings, investment planning, etc.) 29
Take action! Sound financial planning addresses the most important aspects of saving for retirement. Let us help you develop a personal financial plan, as well as outline the action steps and strategies that will help you achieve your financial goals. To schedule a complimentary consultation with a VALIC financial advisor, simply check yes on the evaluation form on page 31. Be sure to complete the entire evaluation and turn it in at the end of the workshop. We ve provided an overview of items you ll need to bring with you to the consultation, as well as what you can expect from your financial advisor. What you ll need Once you ve decided to work with a financial advisor, you ll need to bring certain documents to your first appointment. These documents are listed below. Don t delay your meeting if some items are not available. Bring what you have. Current retirement account statement Recent statements from other investments Social Security Statement of Benefits Insurance policies (recent statement or billing) List of assets and liabilities (credit cards, loans, etc.) Recent paycheck stub Household budget What to expect Your financial advisor can help you: Prioritize investment goals Determine the time horizon needed to achieve your goals Determine a financial strategy to help you meet your goals VALIC is a leading provider of retirement plan and investment services* and specializes in providing guidance on retirement income. Our longevity within the financial services industry and wide range of investment options means that we ve helped hundreds of thousands of people, just like you, plan for and enjoy retirement. Most importantly, through our experience, our goal is to help you live retirement on your terms. * Source: LIMRA SRI Not-for-Profit Retirement Market Survey 09/30/2017. Based on total assets in a survey of 25 major companies. 30 FINANCIAL LITERACY EDUCATION PROGRAMS
Seminar evaluation form Date of seminar: Name of presenter: Would you like to schedule a complimentary consultation? Yes No Name: Day phone: Evening phone: Email address: (Please indicate your preferred contact method.) Please rate the overall seminar Not very good 1 2 3 4 5 Excellent 1. What did you find of particular interest in today s seminar? 2. How could we improve this seminar? 3. What other topics would you like to learn more about? 4. Would any of your friends or associates benefit from this presentation? If so, may we invite them to a future seminar? Name: Telephone: Name: Telephone: 31
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Answers to true-false quiz on IRAs Questions 1-5 are all true! How does an IRA fit into your overall retirement plan? Consult a VALIC financial advisor to help you learn more. Anyone can save for retirement. You just need the right plan. And the right guidance. At VALIC, we can help you with both. To watch a free educational video about Cash Management, download a QR reader at your App Store. After downloading the QR reader to your smartphone, take a picture of or scan the image and the video will automatically begin downloading to your phone.
VALIC has more than half a century of experience helping Americans plan for and enjoy a secure retirement. We provide real solutions for real lives by consistently offering products and services that are innovative, simple to understand and easy to use. We take a personal approach to retirement plans and programs, offering customized solutions for individual needs. We are committed to the same unchanging standard of one-on-one service we have delivered since our founding. Our goal is to help you live retirement on your terms. Your Future is Calling. Meet It with Confidence. CLICK VALIC.com CALL 1-800-426-3753 VISIT your financial advisor This information is general in nature, may be subject to change, and does not constitute legal, tax or accounting advice from any company, its employees, financial professionals or other representatives. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For advice concerning your individual circumstances, consult a professional attorney, tax advisor or accountant. Securities and investment advisory services offered through VALIC Financial Advisors, Inc. ( VFA ), member FINRA, SIPC and an SEC-registered investment advisor. VFA registered representatives offer securities and other products under retirement plans and IRAs, and to clients outside of such arrangements. Annuities issued by The Variable Annuity Life Insurance Company ( VALIC ). Variable annuities distributed by its affiliate, AIG Capital Services, Inc. ( ACS ), member FINRA. VALIC, VFA and ACS are members of American International Group, Inc. ( AIG ). American International Group, Inc. (AIG) is a leading global insurance organization. Founded in 1919, today AIG member companies provide a wide range of property casualty insurance, life insurance, retirement products and other financial services to customers in more than 80 countries and jurisdictions. Copyright The Variable Annuity Life Insurance Company. All rights reserved. VC 18364 (04/2018) J51203 EE