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Retirement Planning Workshop For Educators
 

Retirement Planning Workshop For Educators

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Retirement Planning Workshop for Educators

Retirement Planning Workshop for Educators

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  • NOTE TO PRESENTER: THIS SEMINAR IS DESIGNED FOR EDUCATORS WHO ARE NEARING RETIREMENT AND ARE FACING IMPORTANT DECISIONS WITH REGARD TO THEIR PENSION AND TAX-SHELTERED ANNUITIES (403(B) PLANS). WHILE IT IS GENERIC IN NATURE, YOU ARE ENCOURAGED TO BECOME FAMILIAR WITH YOUR AUDIENCE’S SPECIFIC PENSION PLAN(S) AND THEIR OPTIONS UPON RETIREMENT. Good morning (AFTERNOON). (INTRODUCE SELF AND CREDENTIALS.) Thanks for being here today. I know that approaching or reaching retirement can trigger some major and, often, confusing financial decisions. And one of them—as you may have already discovered—is figuring out what to do with the money in your tax-sheltered annuity, also known as a 403(b) retirement plan. Why take the time to really examine your choices?

Retirement Planning Workshop For Educators Retirement Planning Workshop For Educators Presentation Transcript

  • Retirement Planning Workshop for Educators OppenheimerFunds Opportunities for TSA/403(b) Investors RE0000.575.0109 January 15, 2009
  • Are you ready for retirement? …How about your 403(b)? RE0000.575.0109 January 15, 2009
  • Today’s Agenda
    • Final preparations for Retirement
      • Challenges and concerns
      • Sources of income
      • Alternate solutions
    • Choices for your 403(b)
      • Making the most of your 403(b)
      • Choosing the right plan type for the long haul
    RE0000.575.0109 January 15, 2009
  • Source of data: National Center for Health Statistics, National Vital Statistics Report, 2005. A Longer Life = A Longer Retirement Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009 M 75 Yr. W 80 Yr. 2005 66.3 Yr. 1950s Life Expectancy People Spend More Years in Retirement
  • Higher Medical Costs
    • As of 1997, elderly women spent approximately 26% of their income on healthcare, compared to 19% for men
    • The average annual cost of nursing-home care was approximately $40,000
    • Between 30% and 40% of all healthcare expenses were incurred during the last year of life
    Note: Consumer Reports “What to expect from Medicaid”, October 1997 Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Don’t Forget Inflation! A $32,000 per year standard of living at an annual inflation rate of 3% Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009 Today $32,000 20 Years $57,800
  • X 80% of Preretirement Salary Years in Retirement Amount Needed to Maintain Same Lifestyle Retirement Formula How Much Will You Need? X 80% of $40,000) = $32,000 20 Years Example $640,000 Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Where Will Your Retirement Income Come from? $ Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009 403(b) Teacher’s Pension IRAs & Personal Savings Social Security
  • Avg. Man $13,212 Avg. Woman $9,984 Will You Be Able To Retire Comfortably? Source: Social Security Administration website Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009 ALL AMERICANS Will Face Difficulties When They Attempt to Retire $22,491 MAXIMUM Social Security Benefit in 2005
  • Information on Social Security Social Security Administration 1.800.772.1213 www.ssa.gov Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Where Will Your Retirement Income Come from? $ Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009 = 40% Social Security 403(b) Teacher’s Pension IRAs & Personal Savings = 60%
  • Teachers Pension Plan
    • Generally have multiple payout options:
      • Joint Life and Survivor Annuity
      • Single Life Annuity
      • In some instances, Cash Payout
    • Probably the largest portion of your retirement cash flow. Payout is lower for joint life and survivor, but guarantees income through your spouse’s lifetime.
    • Check with your HR or Union Representative to find out the exact dollar amount of your benefit.
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • What if it’s not enough?
    • Increase savings levels
    • Lower lifestyle expectations for retirement
    • Work longer
    • Consider partial or part-time employment during retirement
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Preparing your 403(b) for Retirement
    • How will you use the money?
      • Source of retirement income
      • Buffer against outliving other sources of income
      • Legacy for heirs
      • Discretionary funds for one-time purchases
      • All of the above
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • First Steps
    • Determine how much of your 403(b) you’ll need for each of your goals.
    • Establish an investment time-horizon and risk tolerance for each goal.
    • Assign proportionate quantities of your 403(b) to each goal, and invest that portion accordingly.
    • From time to time, review investment strategies and dollar allocations vis-à-vis each goal.
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Considerations by Goal: Managing your 403(b) for retirement income
    • Choose a stable asset allocation of cash and bond funds designed by your financial advisor to meet your goals
    • Consider annuity options.
      • Joint Lifetime and Survivor annuities offer smaller payouts but guarantee payout for your spouse’s lifetime as well as your own, a potentially valuable feature.
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
    • Possible expenditures
      • A safety net
      • Income to provide for a spouse’s well being
      • Luxury purchasing power
      • A source for charitable giving
    • Evaluate potential time horizons for specific purchases.
    • Consider keeping roughly a year’s worth of expected expenditures invested in cash equivalents; invest the remainder for the future.
    Considerations by Goal: A Source of Discretionary Income Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Considerations by Goal: Legacy for Heirs
    • Remember, only your beneficiary designation, not your will, determines who will receive the balance of your retirement assets.
    • Some 403(b)s require that non-spouse beneficiaries take a taxable, lump-sum distribution – OppenheimerFunds does not .
    • Consider investing these assets with a longer time horizon in mind.
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Estate-Planning Strategies How to leave the most to your family …
    • Stretch IRAs
      • New rules aid you in keeping more of your IRA in your IRA to pass on to your heirs
      • The ability to stretch out an IRA has been greatly enhanced
        • The oldest beneficiary on record at account holder’s death may stretch out distributions over his/her own life expectancy
        • Divide IRA into separate IRAs for multiple beneficiaries
        • Spouse may still roll over account and name new beneficiaries
      • What about a stretch 403(b)?
        • The IRS allows it, but many product providers don’t.
        • OppenheimerFunds supports stretch 403(b)s.
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Preparing your 403(b) for Retirement
    • At retirement, you can do the following with your 403(b) assets:
      • Leave them in your 403(b) account
      • Roll them into an IRA
      • Take a cash distribution
    • How do each of these options affect your ability to invest for your different needs?
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Take Your Distribution in Cash Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps Bottom line : Cash may be king, but you don’t want it in hand from your 403(b) RE0000.575.0109 January 15, 2009 Disadvantages
    • Federal taxes due
    • Possibility of state and local taxes
    • Potential for higher tax bracket
    • Loss of tax-deferred earnings
    • 10% premature distribution penalty (if under age 55)
    Advantages
    • Immediate access to your money
  • Compare Amount of Distribution 31% Federal Income Tax 10% Penalty Amount now available for investment $200,000 ($62,000) ($20,000) $118,000 No Rollover Cash Dist. $200,000 $ 0 $ 0 $200,000 Direct IRA Rollover Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
    • Bob’s lump sum distribution
      • Taxes on the entire account at his highest marginal tax bracket at 38.6%
      • $624,000 minus State & Local Taxes left for investment – no ongoing tax deferral
    Bob and Sue each Inherit $1Million Accounts at age 40! Here’s What Cash Can Mean for your Beneficiaries The persons portrayed in this example are fictional. This material does not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted.
    • Bob inherits from a 403(b) that forces a distribution
    • Sue inherits hers from an IRA or OppenheimerFunds 403(b)
    • Sue’s IRA
      • Sue’s first required minimum distribution is based on her life expectancy: 43.6. 44year payout period!
      • RMD = Account Value/Life Expectancy = 1,000,000/43.6 = $22,936
      • The remainder continues to grow tax deferred
    RE0000.575.0109 January 15, 2009
    • Assume that and both:
      • Never spend any of this money
      • Find a fixed investment returning 8% annually
      • Pay 30% in taxes each year
    • How much do they each have at the end of Sue’s 44 year payout period?
    What’s it all worth over time? A Tale of Bob and Sue This example is not intended to represent any particular investment. $6,861,151 $17,486,446 RE0000.575.0109 January 15, 2009
  • Advantages Disadvantages
    • Limited investment choices
    • Distribution restrictions
    • Non-spouse beneficiaries may be forced to take taxable lump-sum distributions
    Keep Your Assets in Your Existing 403(b) Plan
    • Comfort level
    • Loan privileges
    • Ability to defer RMDs past age 70 ½, if still working
    • Penalty-free distributions start at age 55
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps Bottom line : OppenheimerFunds allows stretch 403(b)s and offers all IRA investment options to 403(b) owners RE0000.575.0109 January 15, 2009
  • Rolling Over to an IRA Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
    • 20% is not withheld for federal taxes
    • Avoid current taxes and tax penalties and keep your money growing tax-deferred
    • Enjoy maximum investment flexibility
    • Ability to take 72(t) distributions
    • Spouse can be named as beneficiary and inherit account without forfeiture of any payout benefits
    • Ability to create a “Stretch IRA” for beneficiaries
    • Ability to convert to Roth IRA
    Advantages
    • No immediate access to cash without taxes and possibly penalty
    • No penalty-free distributions at
    • age 55
    Disadvantages
  • Consider the Roth IRA for your Rollover
    • Unique Tax Benefits
    • Tax-deferred growth
    • Tax-free withdrawal of earnings and gains
    • Can continue to make contributions after age 70½
    • No mandatory distributions at age 70½
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Consider the Roth IRA
    • Powerful Estate-planning Tool
    • No age limit on contributions and no mandatory distributions
    • Assets continue to grow tax-deferred throughout your lifetime
    • Nonspouse beneficiaries can spread distributions over their life expectancy
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Invest in a Diversified Portfolio
    • Focus on asset allocation
    • Invest in mutual funds
    • Change your allocation as circumstances warrant
    • Move money between the pools you’ve established for each of your retirement goals depending on investment experience
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Focus on Asset Allocation
    • Common stocks
    • Stock mutual funds
    • Corporate bonds
    • Bond mutual funds
    • Treasury bonds
    • Growth & income mutual funds
    • Balanced mutual funds
    • Money market mutual funds
    • Certificates of deposit
    • Treasury bills
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009 Major Asset Classes Growth Investments Income Investments Growth & Income Investments Cash-equivalent Investments
  • Invest in Mutual Funds The Right Way to Invest OppenheimerFunds , Inc. Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Benefits of OppenheimerFunds
    • Helping investors enjoy retirement for over 40 years
    • Manages assets in more than 6 million shareholders’ accounts
    • Over 40 mutual funds to help achieve your financial goals
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Benefits of OppenheimerFunds
    • Latest technology provides secure, fast, easy online access to your accounts
    • Toll-free access to helpful, knowledgeable representatives
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Why OppenheimerFunds?
    • One low annual maintenance fee no matter how many funds you invest in
    • A wide range of funds
    • Toll-free 24-hour access to account information
    • Simplified statements after every transaction
    • A separate year-end report with complete tax information
    • Commitment to your financial well-being
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009
  • Making It Easy
    • Help establish new IRAs
    • Complete rollover paperwork
    • Assist with RMD calculations and beneficiary designation concerns
    • Bottom line: Easiest way to roll into an OppenheimerFunds IRA
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009 1-800-322-1017 ext 211 Peter G Langelier Horizon Financial
  • Making It Easy
    • If you already have an OppenheimerFunds 403(b)….
      • You’re all set!
    • But consider:
      • Revisiting your investment allocations
      • Breaking your account into different investment pools by goals
      • Reviewing and updating your beneficiary information.
        • The Special Options Request form contains a special section for stretch beneficiary designations
    Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps RE0000.575.0109 January 15, 2009 1.800.835.7305 OppenheimerFunds 403(b)
  • Thank You! Your Financial Challenges Understanding Your Financial Choices Strategies for Investing Next Steps Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation Before investing in any of the Oppenheimer funds, investors should carefully consider a fund’s investment objectives, risks, charges and expenses. Fund prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting our website at www.oppenheimerfunds.com or calling us at 1.800.525.7048. Read prospectuses carefully before investing. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008 ©Copyright 2009 OppenheimerFunds Distributor, Inc. All rights reserved. RE0000.575.0109 January 15, 2009 RE0000.575.0109 January 15, 2009