Managing Your Money During Retirement

The Estes Valley Library is providing this program through a grant from the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation and the American Library Association (ALA). The grant is distributed as part of the library® initiative, an ALA program. This project is in its fifth year of educational partnership with libraries across the country Marsha Yelick CFA(retired) Financial Programs Consultant

Figure out how to make your money last. If you ever needed a plan for your money, you need it in retirement! You earned it. You saved it. Now it’s time to keep it safe and spend it well. (Spend only what you have!) Major themes du jour

Is the Average American Ready for Retirement? Personal savings rate Average amount saved Retirement Readiness Page 2

The boomers changed everything… Retirement Redefined Percent of US population by age and sex, 1970, 1990 and projections for 2010 Page 3

What are the Current Challenges of Retirement in 2010? Retirement Challenges Bear Market of 2008 Real estate depreciation Rising Taxes Fixed income yields decline Possibility of inflation Living longer Rising medical costs Complex financial products Etc……… Page 4

is not a destination Stages of Retirement Page 5

What are the BASIC retirement needs? CHECK LIST Retirement Checklist Page 6

Complete a NEW Net Worth & Budget Spreadsheet Using Retirement Needs (You will need this for the calculators!) Review Seminar 1

INCOME or CONSERVATIVE Allocation (Use allocation rules of thumb with the funds necessary to support your budget. Use simple investing for this part of your money.) 50-year-old 50% BONDS(7.5%) 60-year-old 60% BONDS (7%) 70-year-old 70% BONDS (6.5%) 80-year-old 80% BONDS (6%) Review Seminar 2&4

MUTUAL FUNDS (Seminar 3 & 4) THE ADVANTAGES: Diversification Economies of scale Convenience Professional management THE DISADVANTAGES Limits opportunity for a “home run” Limits control of taxable gains/losses Can only sell at close market EXPENSES (front end, back end, annual…) Review Mutual Funds

BOND Mutual Funds (a good way to own bonds) Buy some short, medium, and long term bond funds Look for lowest fees Consider inflation-protected funds for a portion of retirement funds Reinvest interest (Dollar cost average until you need the income.) Review BONDS(4)

Put it together… How long will your money last? Spending in Retirement Page 7

THE 3 – 4 % SOLUTION How Much can I Spend? Page 7 You can figure it by hand

How Long Will the Money Last? This chart depicts the average rate of annual withdrawals that a hypothetical portfolio of U.S. stocks and Treasury bonds was able to sustain during a series of 30-year holding periods since The average sustainable rate for all 30-year rolling periods from 1926 to 2005 was 5.5% when adjusted for actual consumer price inflation. Source: Standard & Poor's. Why 3-4% is Safe Page 8

The Calculators Online Calculators  Play with many scenarios until you get a sense of  How inflation changes things  How withdrawal rates can extend or shorten your nest egg  How supplemental income enhances the life of your money  How total return damages or enhances your money  Revisit the calculators when the market – or your circumstances – change, so you can make necessary adjustments to your budget.

ASSUMPTIONS… What about 50% of retirees saved… $100,000 Living in retirement (age 60 to 90)… 30 years Inflation rate - historic… 3.5% Earnings rate of conservative 5% Use the Calculators Page

Manage your retirement IN COME Income Management Page 13

Stretch your retirement OUT GO Spending Management Page 14 Small things you can do that will make a BIG difference

The LARGER considerations… Major Changes Big changes can make HUGE differences! Page 15

Be a happy, money-wise SENIOR Happy Retirement

Thank you for attending Be Money Smart for Life