“Cessation of work is not accompanied by cessation of expenses.” -Cato Copyright © eNestEgg Press, LLC.

Learning Objectives How much do I need for retirement? How to conducting a financial analysis for retirement How will I live for 20 years without any retirement income? How to manage to living on my retirement income. Copyright © eNestEgg Press, LLC.

Misconceptions You have plenty of time to start saving for retirement Saving just a little bit won’t help You’ll spend less money when you retire My retirement will only last 15 years You can depend on Social Security and a company pension to pay your basic living expenses Your pension benefits will increase to keep pace with inflation Your employer’s health insurance plan and Medicare will cover all your medical expenses when you retire Will Social Security be enough? (Source: YouTube-Money Talks News) Will Social Security be enough? Copyright © eNestEgg Press, LLC.

Grandma is poor The average lifespan for an American citizen is now at This is nearly 10 years more than 50 years ago. It is estimated between 9-15%, or over 6.3 million senior citizens, live in poverty. With baby boomers reaching retirement age this number will only get higher. Retiring is Tough (Source: YouTube-Money Talks News) Retiring is Tough Copyright © eNestEgg Press, LLC.

How much will I need for retirement? About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000, according to a survey of 1,000 workers from the non- profit Employee Benefit Research Institute and Greenwald & Associates. How much will you need? How much will you need? (Source: Investopedia) 6 Signs You Are Ready to Retire Early6 Signs You Are Ready to Retire Early (Source: Investopedia) Copyright © eNestEgg Press, LLC.

Retirement Financial Analysis Time to perform another financial check up. What are your major assets? Cash Personal possessions Property Investments What are your major liabilities? Loans Mortgages Taxes Childs education A Pre-Retirement Check Up Determining Retirement Needs (Source: Investopedia) Copyright © eNestEgg Press, LLC.

Your expenses will change Just like every other phase of your financial life, a budget is helpful and most likely required while in retirement. You might spend less on Retirement Fund Contributions Work expenses Clothing expenses Housing Expenses, assuming you own your residence by now Your taxes will most likely be lower Copyright © eNestEgg Press, LLC.

Your expenses will change Some expenses may increase Life and especially health insurance Medical expenses will increase with age More free time, more spent on leisure activities Gifts and contributions Copyright © eNestEgg Press, LLC.

How to live 20 years without a job For those without trust funds and lottery winnings, the most sensible way to prepare for retirement is investing and taking advantage of retirement plans/accounts. Retirement plans come from: Your job The Government Yourself What Are the Different Types of Retirement Accounts ? (Source: YouTube) What Are the Different Types of Retirement Accounts ? Types Of Retirement Accounts (Source: YouTube) Types Of Retirement Accounts Copyright © eNestEgg Press, LLC.

Question Cluster 1 Copyright © eNestEgg Press, LLC.

Employer Pensions Plans Various retirement and pension plans are offered to companies as benefits. These can take on many different forms. Depending on the type of pension plan, many Financial Advisors advice paying the maximum amount you can before you even consider investing. Different Types of Employer Pension Plans include: Defined Contribution Plans Defined Benefit Plans Copyright © eNestEgg Press, LLC.

Employer Pension Plans Defined Contribution- An individual account to which the employer contributes a specific amount annually. The amount you put in is known, what you actually get in the end is NOT. A few different kinds of plans exist, including: Money-purchase pension plans- A percentage of earnings is set aside annually, along with any employer contributions. Stock bonus plans- Employer contributes company stock into an account in your name Profit-sharing plans Employer’s contribution depends on the company’s profits. 401k- salary reduction plan Most well known Copyright © eNestEgg Press, LLC.

Employer Pension Plans Defined Contribution- Primarily forms are the 401(k) or 403(b) plan Introduction to the 401(k)- Source: Investopedia Introduction to the 401(k)- A percentage of each paycheck is put into a special account. Sometimes an employer will match (pay a dollar for every dollar you put in) up to a certain amount. This is free money and a great benefit. Many believe maxing out your matching 401k should be one of your highest financial priorities. The funds in these accounts are invested in stocks, bonds, and mutual funds. A 401k is tax deferred, meaning you don’t pay taxes until you withdrawal it. Companies with best pensions (Source: Bloomberg) Companies with best pensions Copyright © eNestEgg Press, LLC.

Employer Pension Plans Vesting- What if you want to change jobs? What happens to your retirement plan? Vesting is your right to the (a certain amount) contribution your employer has made. Once you become fully vested, you are entitled to 100% of your employers contributions. Vesting (Source: Investopedia) Vesting Fully Vested (Source: Investopedia) Fully Vested Copyright © eNestEgg Press, LLC.

Employer Pension Plans Defined Benefit Plan- With a defined benefit plan you know how much you will be getting at retirement. This is mostly based on how much you made and how long you’ve worked. This benefit does not have the employee pay anything in. Defined Benefit Plans are becoming a thing of the past. These plans are very expensive for companies. However, 88% of public employees have a Defined benefit plan. Copyright © eNestEgg Press, LLC.

Social Security Social Security is funded by both the employee and the employer (the FICA from your paycheck). The amount of Social Security benefits you receive is based on how much you have earned, up to $113,7oo (2013). You can usually begin collecting at age 62,65, or 70. (65 for full retirement) The longer you wait to receive benefits, the more you will receive. People are living longer, and a person born after 1960 can only receive full benefits at age 67. Copyright © eNestEgg Press, LLC.

Social Security Most widely used source of retirement income, covering 97% of U.S. workers. Social security covers mainly the disabled and the retired. Social Security makes payments to about 1/6 of the American population. Meant as part of your retirement income, not the sole source The average monthly benefit for someone who starts taking Social Security at age 62 in 2014 is roughly $1,992 — not even enough to keep them above the federal poverty line. (Source: US Department of Health & Human Services)$1,992poverty line. Social Security Basics (Source: Investopedia) Social Security Basics Retired and Poor (Source: Yahoo! News) Retired and Poor Copyright © eNestEgg Press, LLC.

Question Cluster 2 Copyright © eNestEgg Press, LLC.

Personal Retirement Plans In personal retirement plans, you set up the account, fund the account, and monitor the account. These can be quite necessary if you don’t have access to an employer pension plan. (Especially being self employed) The most common personal retirement plans are IRA’s Keogh Plans Copyright © eNestEgg Press, LLC.

IRAs (Individual Retirement Accounts) An IRA is an account set up at a financial institution that allows an individual to save for retirement Roth vs Traditional IRA (Source: Investopedia) Roth vs Traditional IRA Traditional IRA- Allows $5,000 contribution in 2009 and beyond Contribution may be tax-deductible, depending on your tax filing status and income Interest accumulates tax free until you begin withdrawal May begin withdrawing at 59 ½ Must begin withdrawing at 70 ½ Withdrawals are taxable income Copyright © eNestEgg Press, LLC.

IRA Roth IRA Contributions are not tax deductible Distributions tax free after age 59 ½ Same contribution limits as traditional IRA If you are single with an AGI < $120,000 or If you are filing jointly with an AGI < $176,000 After five years, withdrawals are tax free and penalty free, if: You are at least 59 ½ … or Funds used as a down payment on a first-time home purchase Copyright © eNestEgg Press, LLC.

IRA Simplified Employee Pension (SEP) IRA funded by the employer Employer can make annual contributions up to $40,000 Employee’s contributions fully tax deductible Simplest retirement plan for the self-employed Spousal IRA Contributions for a nonworking spouse if filing a joint return Contribution limits same as for Roth or Traditional IRAs Copyright © eNestEgg Press, LLC.

IRA Rollover IRA Traditional IRA allowing transfer of all, or a portion, of your taxable distribution from a retirement plan or other IRA Education IRA Coverdell Education Savings Account May give up to $2,000 a year to each child under age 18 Contributions not tax-deductible Tax-free distributions for education expenses Copyright © eNestEgg Press, LLC.

Keogh Plan Keogh Plans H.R. 10 plan or self-employed retirement plan Designed for the self-employed Annual tax-deductible contributions limited Can be difficult to administer Copyright © eNestEgg Press, LLC.

Annuities Annuities (Source: Investopedia) Annuities A contract with an insurance company where an amount of money is paid on a regular basis over a certain number of years or life. They are very complex investment vehicles. They can also have very high fees. They are best for retirees who need a stable income. Provides guaranteed income for life Purchase with proceeds of an IRA or company pension Use as supplemental retirement income Single or periodic payments Immediate- Begins now Deferred- Begins at a future date Copyright © eNestEgg Press, LLC.

Surviving on your retirement income Spouse's pension Savings 12% 27% Other 9% 401(k) 7% 7% 18% IRA 8% Home equity 5% 7% Copyright © eNestEgg Press, LLC.

Surviving on Retirement Income Living without active income may require major lifestyle changes. Ways retirees adjust can include: Moving to a place were cost of living is less expensive Working during retirement Delaying retirement Forgoing certain luxuries Moving in with family members Surviving Retirement (Source: Investopedia) Surviving Retirement Copyright © eNestEgg Press, LLC.

Question Cluster 3 Copyright © eNestEgg Press, LLC.