Charting Your Course to Retirement (Detailed)
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Charting Your Course to Retirement (Detailed)

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Detailed explanation of the importance of saving for retirement and how corporate retirement plans benefit employees.

Detailed explanation of the importance of saving for retirement and how corporate retirement plans benefit employees.

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  • 1. Charting your course to retirement SampleCompany
  • 2. Strategic PARTNERS Your employer has chosen a team of strategic business partners that work together to provide the services your plan needs. This team approach gives you all the resources you need to meet your retirement goals. RANDALL & HURLEY | TPA • Compliance testing • Annual reconciliation • Plan design & consulting • Provides reports & forms • Provides website access SAMPLE | CUSTODIAN • Holds plan assets SAMPLE CO | SPONSOR • Ultimate service provider & fund selection • Transmits information SAMPLE | INVESTMENT BROKER • Advises fund selection • Monitors fund and plan performance
  • 3. Planning Your route
  • 4. Retirement Plans 46% Social Security 36% Savings & Investments 16% Other 2% Retirement Income sources Your retirement plan is a vital source of retirement income and provides several advantages to traditional savings accounts, including: • Personal income tax savings • Choice and flexibility in planning for your future • Convenience of automatic reductions from pay • Potential for employer contributions to further bolster your savings Source: Fast Facts and Figures About Social Security, 2009, Social Security Administration Today’s retirees rely on several income sources. Your retirement plan is a critical component of your retirement income because you are able to control how much is available to you at retirement. By planning ahead, you can achieve your goals. Retirement Planning
  • 5. Start saving & Stay the course
  • 6. Experts agree that the best way to save for retirement is to start saving now. Traditional deferrals are made on a pre-tax basis (but are taxed later) while Roth deferrals are made on an after-tax basis (but aren’t taxed later). WHY SAVE? Use the table to see how it works. You can choose to save taxes now or at retirement based on how you choose to defer. Pre-Tax Deferral Equal Contribution Roth Deferral Equal Pay Roth Deferral Gross Annual Pay $30,000 $30,000 $30,000 401(k) Contribution ($200/mo.) 2,400 2,400 2,040 Taxable Income 27,600 30,000 30,000 Federal Income Taxes (15%) 4,140 4,500 4,500 FICA (7.65%) 2,295 2,295 2,295 Net Take-Home Pay $21,165 $20,805 $21,165
  • 7. After one year of making retirement contributions, your total assets will likely grow due to investment returns and added tax savings. ASSETS AFTER ONE YEAR $28,964 Take Home Pay Taxes +$26,650 -$5,850 Take Home Pay Taxes Tax Savings Retirement Interest Employer Contribs +$23,985 -$5,265 +$585 +$3,250 +$169 $975 NoplanInvestment 10%invested inPlan $26,650
  • 8. The earlier you start saving, the easier it will be to meet your goals. Starting to save now—even if it’s just a little bit—can make a big difference at retirement. HOW LONG WILL IT TAKE TO SAVE $100,000? Number of Years Monthly Savings Required 10 $578 20 $192 30 $82 40 $38 Starting to save now makes it easier to achieve your retirement goals. When you start saving early, your required savings amount is much smaller. Illustrations assumes a 7% annual return.
  • 9. The earnings you accrue as your account grows makes a dramatic impact on your retirement savings. Many call this phenomenon the miracle of compound interest. No matter what you call it, it’s clear that the sooner you begin to save, the more you can rely on investment earnings—and not just contributions—to help you meet your retirement goals! THE MIRACLE OF COMPOUND INTEREST 0 20 40 60 80 100 120 140 160 180 200 0 10 20 30 40 TotalAccountValue($1,000) Years Contribs Earnings Illustration assumes a 7% annual return.
  • 10. Making small changes to your spending habits makes it easier than you might think to meet your retirement goals.A LITTLE GOES A LONG WAY Average Spent Tax Savings Retirement Savings 10 Years 20 Years 30 Years Coffee Break $4/day $58 $2,010 $27,660 $82,071 $189,107  Use a loyalty card Save $146 $2,018 $5,987 $13,795  Limit to twice/week Save $1,040 $14,370 $42,637 $98,243 Eating Lunch Out $148/mo $68 $2,368 $24,538 $72,808 $167,762  Brown bag it 3 times/week Save $1,154 $15,945 $47,310 $109,012 Dining Out $58/wk $232 $8,043 $111,126 $329,727 $759,748  Skip one happy hour/month Save $696 $9,616 $28,533 $65,745 Entertainment $225/mo $78 $2,700 37,304 $110,688 $255,044  Watch movies at home Save $300 $4,145 $12,299 $28,338 Digital Downloads $10/mo $3 $120 $1,658 $4,919 $11,335 INVEST IT INSTEAD WATCH YOUR ACCOUNT GROW Illustrations assume contributions are made on a pre-tax bi-weekly payroll schedule, the 25% income tax bracket, and interest of 7%, compounded annually. Data Source: www.bls.gov, accountingprincials.com
  • 11. YOUR RETIREMENT NEEDS Experts recommend you will need 70% - 90% of your annual income to maintain the quality of life you enjoy now. Annual Income at Retirement Replacement Percent Annual Retirement Need No. of Years in Retirement Total Retirement Savings Need $50,000 80% $40,000 20 $800,000
  • 12. Allocate your investments across multiple asset classes to achieve the right balance of growth and security for your risk tolerance. The following tips will keep you on course: SELECTING INVESTMENTS  Focus on THE long-term goal  UNDERSTAND risk & return  Diversify YOUR PORTFOLIO
  • 13. FOCUS ON LONG TERM GOALS How much time you have to save for retirement should impact how you investment your retirement plan account. Years Until Retirement <15 Long Term Investor You can afford to take some risks in hopes of a bigger payoff. >5 SHORT Term Investor Your goal is to preserve capital. Your portfolio should be more risk-averse. 5 - 15 MID Term Investor You have enough time to take on some risk in search of higher-than- average returns. Less Risk More Risk 5 10 15 20 25 AVERAGERATE OF Return INVESTORPROFILE Conservative Moderate Balanced Growth Aggressive
  • 14. UNDERSTAND RISK & RETURN How much time you have to save for retirement should impact how you investment your retirement plan account. RISK/RETURNRELATIONSHIP Risk/RETURNBYASSET CLASS Risk Return Short Term Investments Bonds Large Cap Mid Cap Int’l. Small Cap
  • 15. 3.58% Annual Range of Return (%) Average Return 6.04% 7.90% 8.81% 9.42% 9.85% -0.04 15.20 11.13 0.06 -17.67 31.06 17.24 -0.37 -40.64 76.57 23.14 -6.18 -52.92 109.55 27.27 -10.43 -60.78 136.07 31.91 -13.78 -67.56 162.89 36.12 -17.36 5% 25% 49% 21% Data Source: Ibbotson Associates, 2011 (1926-2011). Past performance is no guarantee of future results. Returns include the reinvestment of dividends and other earnings. This chart is for illustrative purposes only and does not represent actual or implied performance of any investment option. RISK & RETURN BY PORTFOLIO This chart illustrates how asset allocation can be created with different risk and return characteristics to meet your goals. You should choose your investments based on your particular objectives and situation. Int’l. Stocks Bonds Short-Term/Cash Domestic Stocks 15% 60% 25% 70% 30% 10% 40%35% 15% 30% 50% 14% 6% Short-Term Conservative Balanced Growth Aggressive Growth Most Aggressive
  • 16. DIVERSIFY YOUR PORTFOLIO By allocating your account across multiple asset classes, you balance your risk for a variety of market conditions. Diversification does not ensure a profit or protect against a loss in a declining market.
  • 17. ASSET CLASS DIVERSIFICATION Certain asset classes do better in different market conditions. For example, stocks tend to rise when bond rates fall. Past performance is no guarantee of future results.
  • 18. SAMPLE ASSET ALLOCATIONS The diagram below illustrates how asset allocations change based on your risk tolerance and time horizon. 10% 40% 50% 20% 40% 40% 30% 40% 30% 20% 50% 30% 40% 40% 20% 50% 40% 10% 70% 20% 10% 80% 20% 90% 10% Long Term Investor 15+ Years Short Term Investor 0 - 15 Years Mid Term Investor 5 – 15 Years Conservative Moderate Aggressive Stocks Bonds Short-Term/Cash
  • 19. o Contact Information Is your street address and email current? o Contribution Level Can you save a little more? o Beneficiary Designations Marriage, divorce and children may necessitate a change. o Investment Elections Is your current investment strategy a good fit for your long-term goals? o Rebalance Options Should you rebalance your account to align with your investment strategy? PERIODIC REVIEW At least once each year, you should complete a plan review to verify:
  • 20. ANYTIME ACCOUNT ACCESS 1-888-454-0334 VRU System (888) 454-0334 Basic Account Inquiry Online & Mobile Website www.randall-hurley.com Comprehensive Account Management
  • 21. YOUR PLAN HIGHLIGHTS
  • 22. YOUR PLAN HIGHLIGHTS General Plan Information Plan Type: 401(k) Plan Trustees: John Smith Effective Date: January 1, 2012 (for employer contributions) Normal Retirement Age: Age 62 (with 5 years of participation) Vesting Percent: • Account balance from elective deferrals is 100% vested; • Account balance from employer 3% Safe Harbor Nonelective contributions is 100% vested; • Account balance from Employer Profit Sharing and Matching contributions is subject to a 6 year graded vesting schedule (0-1 years = 0%, 2 years = 20%, 3 years = 40%, 4 years = 60%, 5 years = 80%, 6+ years = 100%). Years of service start effective 1/1/2012. Investments: Plan assets will be invested in accounts held at Thrivent. Participants will be able to direct 100% of their account balance and will have access to their account through Thrivent’s website. Timing of Statements: Thrivent will issue monthly/quarterly participant statements. Plan assets are daily valued.
  • 23. YOUR PLAN HIGHLIGHTS Plan Eligibility & Entry Eligibility Requirements: Attainment of age 21 and one year of service (working over 1000 hours). Entry Date: January 1 or July 1 following completion of eligibility requirements. Contribution Types Employee Pre-Tax or Roth Salary Deferrals: Participants are allowed to elect pre-tax or Roth salary deferral contributions up to 100% of compensation not to exceed $17,000 (2012). Participants who are age 50 by December 31 may contribute an additional $5,500 “catch-up” contribution. These limits are adjusted each plan year. Employer 3% Safe Harbor Nonelective Contribution: The employer will make a Safe Harbor contribution to each eligible participant’s account equal to 3% of compensation. Employer Discretionary Profit Sharing Contribution: The employer may make a discretionary profit sharing contribution that will be a designated percentage of each participant’s compensation. Employer Discretionary Matching Contribution: The employer may make a discretionary matching contribution.
  • 24. YOUR PLAN HIGHLIGHTS Distributions from the Plan In-Service Withdrawals: None permitted. Distributions: Processed as soon as administratively feasible following termination of employment. Forms of Payment: One-time Lump-sum of account balance that can be received as taxable income or rolled over (to an IRA or another qualified plan).
  • 25. CUSTOMER SERVICE Monday – Friday 8 am – 5 pm PST (888) 682-4406 info@randall-hurley.com Messages will be routed Monday – Friday, 8 am – 5 pm PST www.randall-hurley.com For general questions, from the home page, click For Individuals/Resources.