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  1. 1. Create the Opportunity for a Comfortable Retirement with an IRA Principal Financial Group John B. Sullivan A Simple Five-Step Action Plan
  2. 2. Creating a Comfortable Retirement What about a Comfortable Retirement? Define Comfortable
  3. 3. How do you create a comfortable retirement? Ask yourself. . . <ul><ul><ul><li>• What do you want to do in </li></ul></ul></ul><ul><ul><ul><li>• How much will you need to save? </li></ul></ul></ul>retirement? money You are in control of creating an opportunity for a more comfortable retirement.
  4. 4. Only 2 in 5 Workers Have Attempted to Calculate How Much Money They Will Need in Retirement Source: 2006 Retirement Confidence Survey, EBRI 42% 48% 53% 1998 1999 2000 44% 38% 43% 2001 2002 2003 42% 42% 42% 2004 2005 2006
  5. 5. Today’s Agenda <ul><li>Key points </li></ul><ul><li>Discuss how saving for retirement can be less daunting </li></ul><ul><li>Show you the power of tax-advantaged growth in your savings </li></ul><ul><li>Introduce the IRA as a powerful savings tool </li></ul><ul><li>Highlight the differences between a traditional IRA and Roth IRA </li></ul><ul><li>Give you the opportunity to make an appointment to go over your personalized retirement savings strategy </li></ul>
  6. 6. Why don’t people save enough for retirement? <ul><li>“ I don’t make enough ” </li></ul>money . • Start small • Contributions may help reduce your current federal income tax burden “ I’m too to worry about something so far away.” young • Power of compounded earnings “ I’m too . It’s too late now.” old <ul><ul><ul><li>• Catch-up your contributions </li></ul></ul></ul>
  7. 7. Why don’t people save enough for retirement? <ul><li>“ It’s too ” </li></ul>Why don’t people save enough for retirement? risky . <ul><ul><ul><li>• Spread out your investments </li></ul></ul></ul>“ I can longer than most people before I retire.” work <ul><ul><ul><li>• Be prepared to leave the workforce early </li></ul></ul></ul>“ I’m willing to give up anything now, just to have more later.” <ul><ul><ul><li>• More options to save </li></ul></ul></ul><ul><ul><ul><li>• You can now send your federal tax refund directly to your IRA </li></ul></ul></ul>not
  8. 8. <ul><li>“ Saving is too ” </li></ul>Why don’t people save enough for retirement? confusing . <ul><ul><ul><li>• Help make sense of your options </li></ul></ul></ul>“ will happen and I’ll be ok.” Something <ul><ul><ul><li>• Never hurts to have a plan </li></ul></ul></ul>“ The government and/or my will take care of me.” <ul><ul><ul><li>• Take the lead of your future </li></ul></ul></ul>employer “ Why save when I can ?” borrow <ul><ul><ul><li>• Costly and not always available </li></ul></ul></ul>
  9. 9. Individual Retirement Arrangement (IRA) <ul><ul><ul><li>An </li></ul></ul></ul>Individual Retirement Arrangement (IRA) <ul><ul><ul><li>can help get you on track toward your retirement goals. </li></ul></ul></ul>
  10. 10. What is an IRA? A personal, tax-advantaged arrangement Benefits of an IRA: • Help you save on current and potentially future federal income taxes •   Variety of investment options •   Potential for powerful compound earnings
  11. 11. The Power of Tax-Advantaged Growth • $5,000 annual contribution •   Hypothetical 8% annual rate of return •   No additional distributions are made on the account •   Assumes a 28% federal income tax bracket years until retirement John 20 years until retirement Kelly 30 years until retirement Marc 40
  12. 12. At Retirement. . . $164,743 $136,496 $407,819 $288,587 $932,603 $554,854 Marc 40 years until retirement Kelly 30 years until retirement John 20 years until retirement Investor IRA Balance Taxable Investment Balance
  13. 13. How Will You Get the Money To Invest? The average American home has more television sets than people.* Flat-panel TV sales rose to more than 17 million in 2006.** Consider * “Average home has more TVs than people,”, 9/21/2006. ** Tarr, Greg, “Flat-Panel TVs Begin to Dominate U.S. Market,” This Week in Consumer Electronics (, 3/26/2007. Will that T.V. you buy today be worth the potential of $400,000* in retirement later? Assumes: $5,000 annual contribution to a full tax-deductible traditional and/or Roth IRA into the account for 30 years Hypothetical 8% rate of return No distributions made on accounts Assumes a 28% federal income tax bracket and a 15% long-term capital gains rate 2.55 people per household 2.73 tvs per household
  14. 14. Creating a comfortable retirement with an IRA in five simple steps Establish your goals. Determine which IRA is right for you. Understand your options. Consider funding sources. Open an account and review it regularly. Step 1: Step 2: Step 3: Step 4: Step 5:
  15. 15. Creating a Comfortable Retirement <ul><li>Define your retirement </li></ul><ul><li>Set your timeline </li></ul>10+ years Short-term investor Intermediate-term investor Long-term investor 5 years or less 5 - 10 years Establish your Goals. Step 1:
  16. 16. <ul><li>Long-Term Savings Goals </li></ul><ul><ul><li>I want to be able to put money aside and let it grow so I have income for retirement. </li></ul></ul><ul><li>Tax-Savings Goals </li></ul><ul><ul><li>I want to be able to deduct my contributions from my federal income taxes. </li></ul></ul><ul><li>Investment Goals </li></ul><ul><ul><li>I want to be able to choose my own investment options. </li></ul></ul><ul><li>Balanced Income Goals </li></ul><ul><ul><li>I want federally tax-free growth for tax-free distributions later. </li></ul></ul><ul><li>Legacy Goals </li></ul><ul><ul><li>I want to be able to distribute my remaining retirement savings to my spouse and our children after I’m gone. </li></ul></ul>Creating a Comfortable Retirement Establish your Goals. An IRA can be used for a variety of goals. Step 1:
  17. 17. Creating a Comfortable Retirement Traditional IRA • Get a tax break now and the opportunity for tax-deferred growth* Roth IRA • Make post-tax contributions now, and get federal tax-free growth and distributions on qualified withdrawals** * Not all investors eligible to receive federal tax deduction. Consult IRS Publication 590 or tax advisor to determine eligibility. Distributions prior to age 59½ may be subject to an IRS 10% penalty. ** Only qualified distributions are eligible for federal tax-free growth/distributions. Distributions that are not deemed qualified may be subject to income taxes and IRS penalty if removed prior to age 59½. Determine which IRA is right for you. Step 2:
  18. 18. Creating a Comfortable Retirement A traditional IRA is a simple solution with immediate tax advantages With a traditional IRA, you get: • Opportunity to lower your tax liability • Tax-deferred growth - you don’t pay taxes on your earnings until you withdraw money • A wide range of investment choices to meet your individual needs • Flexibility to invest as much as you’d like , up to annual limits *Based on your income level and other limitations; consult your tax advisor and financial professional for specifics. Determine which IRA is right for you. Step 2:
  19. 19. Creating a Comfortable Retirement <ul><li>Make post-tax contributions now, and get the potential for federal tax-free growth and distributions. </li></ul><ul><li>With a Roth IRA, you get: </li></ul><ul><li>Potential for tax-free distributions - never pay federal income </li></ul><ul><li>taxes on your earnings, assuming you meet withdrawal guidelines </li></ul><ul><li>No annual distribution requirements - you don’t have to withdraw </li></ul><ul><li>money until you’re ready for retirement </li></ul><ul><li>Flexible contributions - you can contributing contributing after age </li></ul><ul><li>70 ½ as long as you have earned income </li></ul><ul><li>• A wide range of investment choices to meet your individual needs </li></ul>Determine which IRA is right for you. Step 2:
  20. 20. Creating a Comfortable Retirement <ul><li>Traditional IRA </li></ul><ul><li>My spouse and/or I have earned income </li></ul><ul><li>Under age 70 1 / 2 </li></ul><ul><li>My tax bracket in retirement will be lower than my tax bracket now </li></ul><ul><li>Not currently covered by an employer-sponsored plan </li></ul><ul><li>Covered by an employer-sponsored plan and my household AGI below $53,000 (single)* or $85,000 (married)* </li></ul><ul><li>*(2008 tax year) </li></ul>Understand your options. Step 3:
  21. 21. Creating a Comfortable Retirement <ul><li>Roth IRA </li></ul><ul><li>My spouse and/or I have earned income </li></ul><ul><li>Our annual gross income is lower than $101,000 (single)* or combined </li></ul><ul><li>less than $159,000 (married)* </li></ul><ul><li>My tax bracket in retirement may be higher than my tax bracket now </li></ul><ul><li>Prefer the potential for federally tax-free growth on qualified distributions </li></ul><ul><li>in the future </li></ul><ul><li>I may work past 70 1 / 2 </li></ul><ul><li>*2008 tax year </li></ul>Understand your options. Step 3:
  22. 22. Creating a Comfortable Retirement <ul><li>How much can you contribute to a traditional or Roth IRA? </li></ul><ul><ul><ul><li>Thereafter, the limit will be indexed for inflation annually in $500 increments. </li></ul></ul></ul>• 2008 - $5,000 Catch-up contributions for age 50 and older is $1000 annually! Consider funding sources. Step 4:
  23. 23. Creating a Comfortable Retirement <ul><li>You can fund your IRA through: </li></ul><ul><ul><li>Lump sum contributions </li></ul></ul><ul><ul><li>Monthly contributions </li></ul></ul><ul><ul><li>Direct contribution of your federal tax refund </li></ul></ul><ul><li>Possible sources for funding your IRA: </li></ul><ul><ul><li>Savings/Checking/Certificates of Deposit (CD) </li></ul></ul><ul><ul><li>Rollover from employer-sponsored retirement plan </li></ul></ul><ul><ul><li>(401(k), 403(b), 457, pension) </li></ul></ul><ul><ul><li>Inheritance of an IRA or employer-sponsored </li></ul></ul><ul><ul><li>retirement plan </li></ul></ul>Consider funding sources. Step 4:
  24. 24. Creating a Comfortable Retirement When is the deadline for contributing to an IRA? A: The tax-filing deadline (generally April 15), not the end of the calendar year. Open an account and review it annually. Q: A: Step 5:
  25. 25. Creating a Comfortable Retirement • Review your account and revisit your goals every year. • Have you experienced changes in any of the following? If so, you may need to adjust your savings strategy. I can help you stay on track to creating a comfortable retirement. <ul><li>Job </li></ul><ul><li>Income </li></ul><ul><li>Marital status </li></ul><ul><li>Expenses </li></ul><ul><li>Health </li></ul><ul><li>Retirement outlook </li></ul>Open an account and review it annually. Step 5:
  26. 26. <ul><ul><ul><li>Saving for retirement should be a priority </li></ul></ul></ul><ul><ul><ul><li> and it doesn’t have to be difficult or daunting </li></ul></ul></ul>Create a Comfortable Retirement with an IRA <ul><ul><ul><li>An IRA is a great retirement savings tool </li></ul></ul></ul><ul><ul><ul><li>that offers tax-advantaged growth </li></ul></ul></ul><ul><ul><ul><li>Traditional IRA and Roth IRA </li></ul></ul></ul><ul><ul><ul><li>have a few different features and benefits </li></ul></ul></ul><ul><ul><ul><li>that may suit you best </li></ul></ul></ul>A good way to determine the right retirement savings strategy for you is to make a one-on-one appointment
  27. 27. John B. Sullivan 919-755-8689 [email_address]
  28. 28. Disclosures While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. Insurance issued by Principal Life Insurance Company. Principal Investors Funds, Inc A. B and C shares are distributed by Principal Funds Distributor, Inc. Other share classes of Principal Investors Funds, Inc. are distributed by Princor Financial Services Corporation, member SIPC. Principal Funds Distributor, Principal Shareholder Services, Principal Management Corporation, and Principal Investors Fund, Inc. are collectively referred to as Principal Funds. These companies are members of the Principal Financial Group ® , Des Moines, IA 50392. # 6564092009 PD3663-1