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Retirement 101 Enrollment Presentation
This document provides comprehensive guidance for public employees on planning for retirement, emphasizing the importance of compounding interest, investment strategies, and tax advantages. It illustrates various scenarios for biweekly deferrals and their potential growth over time, while highlighting the risks associated with investments. The information serves as an educational resource rather than specific investment advice and encourages individuals to stay informed and actively manage their retirement plans.
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Retirement 101 Enrollment Presentation
- 1. PLANNING FOR RETIREMENT HELPING PUBLIC EMPLOYEES PREPAREFOR AND LIVE IN RETIREMENT
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- 7. Plan Primer Compounding This illustrationis a hypothetical compounding calculation assuming a 7% annual rate of return. It is not intended to serve as a projection or prediction of the investment results of any specific investment. Investments are not guaranteed. Depending on your underlying investments, your return may be higher or lower. Interest compounded annually based on beginning-year contributions. No taxes or fees are reflected in this example, which would lower the results displayed. Source: Nationwide Financial® (2012). 30 35 40 45 50 55 60 65 25-year Investment/ Compounding Period $135,353 at retirement Investor2’saccount 10 Year Investment/ Compounding Period Additional Compounding On Top Of Investment $160,474 at retirement Investor2’saccount
- 8. Plan Primer *Chart assumptions:This hypothetical illustration assumes a 25% tax rate, $50 biweekly deferrals (for 25 years), and a 7% rate of return with reinvestment of income. The tax-deferred total does not reflect fees and expenses incurred under a particular investment. If these were taken into account, they would reduce the performance shown. This hypothetical information is not intended to predict or project the investment results of any specific investment. Investment return is not guaranteed and will vary based on your investments and market experience. Tax Advantage $50 taxable = $37.50contributed After-tax Account $49,469 $50 pretax = $50 contributed Deferred Comp Account $63,885
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- 10. Plan Primer Smart choices Thistable shows the cumulative value of 26 biweekly deferral amounts over 20, 25, and 30 years, assuming a compound annual rate of 7% and a 25% federal tax rate, for a single person with an annual salary of $38,000 and one deduction for federal tax purposes. Actual investment returns will vary from year to year, and the value of your account after the specified periods of years shown in the table may be less or more than the amounts shown. This illustration is hypothetical and is not intended to serve as a projection of the investment results of any specific investment. If fees and expenses were reflected, the returns would have been less. Growth Period Ending Balance Deferral Per Pay Paycheck Impact Annual Deferral Accumulation 10 Years Accumulation 10 Years Accumulation 10 Years $25 $18.75 $650 $9,304 $27,605 $63,607 $50 $37.50 $1,300 $18,607 $55,210 $127,214 $75 $56.25 $1,950 $27,911 $82,815 $190,821 $100 $75.00 $2,600 $37,214 $110,420 $254,428 $200 $150.00 $5,200 $74,429 $220,841 $508,856 $300 $225.00 $7,800 $111,643 $331,261 $763,283 $400 $300.00 $10,400 $148,857 $441,681 $1,017,711 $500 $375.00 $13,000 $186,071 $552,102 $1,272,139 $600 $450.00 $15,600 $223,286 $662,522 $1,526,567 (Maximum) $654 $490.50 $17,000 $243,381 $722,149 $1,663,958
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- 12. Investment Basics learning thelingo. ■ ■ ■ ■
- 13. Investment Basics learning thelingo. ■ ■ ■ ■ ■ ■ ■ ■
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- 15. Investment Basics risk andreward International Small-cap Mid-cap Large-cap Bonds Short Term Investments PotentialReward (Thechancetomakemoney) Potential Risk (The chance to lose money)
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- 18. Investment Strategy Conservative Moderately Conservative Moderate Moderately AggressiveAggressive International 5% 10% 15% 25% 30% Small-cap 0% 0% 5% 5% 10% Mid-cap 5% 10% 10% 15% 15% Large-cap 10% 20% 30% 35% 40% Bonds 40% 35% 25% 15% 5% Short-term investments 40% 25% 15% 5% 0% choose your style. Asset allocation models provided by Ibbotson Associates Advisors, LLC, a leading financial consulting organization. Ibbotson uses a broad approach to diversify holdings across asset categories, which include combinations of different types of stock investments, diversified real return, bonds, and short-term investments.
- 19. Investment Strategy Go hands-onor hands-off. Hands-off A little of both Hands-on Professionally Managed Accounts1 Target Date Funds2,3/ Investor Profile Funds2 The Plan’s Available Investments2/ Self-Directed Option2 1 Investment advice for Nationwide ProAccount is provided to plan participants by Nationwide Investment Advisors, LLC, an SEC-registered adviser. Nationwide Investment Advisors, LLC, has hired Wilshire Associates Incorporated as the Independent Financial Expert for ProAccount. 2 Offering may not be available in your plan. 3 Target Maturity funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, in addition to the expenses of the Target Maturity funds, an investor is indirectly paying a proportionate share of the applicable fees and expenses of the underlying funds. Target Maturity funds are designed for people who plan to withdrawal funds during or near a specific year. These funds use a strategy that reallocates equity exposure to a higher percentage of fixed investments over time. As a result, the funds become more conservative as they approach retirement. It’s important to remember that no strategy can assure a profit or prevent a loss in a declining market. A target date fund’s principal value is not guaranteed at any time, including the target date designated in the fund’s name.
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- 21. Investment Strategy in syncwith your life. Investment Strategy A little bit more saving could go a long way... $2.80 gourmet coffee x 258 working days in a year _____________________________________ $722.40 per year
- 22. Investment Strategy a bigdifference over time. This illustration is a hypothetical compounding example that assumes biweekly deferrals (for 35 years) at a 7% annual effective rate of return. It illustrates the principle of time and compounding. It is not intended to predict or project the investment results of any specific investment. Investment returns are not guaranteed and will vary depending on investments and market experience. If fees, taxes, and expenses were reflected, the hypothetical returns would be less. Year 1 Year 5 Year 10 Year 25 Year 30 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 Increases contributions $25 per paycheck each year $1,365,431 Maintains $100 per paycheck contributions $375,338
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- 24. Investment Strategy Stay inthe plan Chart assumptions: 4% annualized effective rate of return applied daily during “income” phase; and withdrawals taken at the end of each month. The systematic payout assumes a $0 balance at the end of a 20-year period. Withdrawals may need to be more than the amount shown to meet the required minimum distribution requirements; withdrawals will be taxed as ordinary income. This hypothetical illustration is not intended to predict or project investment results. This chart is not intended to project the performance of your deferred compensation account. Investments involve risk including possible loss of principal. Actual investment results will vary depending on your investments and market experience. Income stream durations and amounts are not guaranteed. Monthly Income for a 20-year Systematic Payout Account Value at Age 65 $100 $16,660 $250 $41,649 $500 $83,298 $750 $124,948 $1,000 $166,597 $1,500 $249,895 $2,000 $333,192 $3,000 $499,788 $4,000 $666,385 $4,000 $832,981
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- 26. Remember what matters Takeadvantage of the plan Think about investment basics Refresh your strategy Stay up-to-date and your accounts Next Steps...
- 27. Neither Nationwide® norany of its representatives give legal or tax advice. Information provided by Retirement Specialists is for educational purposes only and is not intended as investment advice. Nationwide Retirement Solutions, Inc. and Nationwide Life Insurance Company (collectively "Nationwide") have endorsement relationships with the National Association of Counties and the International Association of Firefighters-Financial Corporation. More information about the endorsement relationships may be found online at www.nrsforu.com. Nationwide Retirement Solutions, Inc. and its affiliates (Nationwide) offer a variety of investment options to public sector retirement plans through variable annuity contracts, trust or custodial accounts. Nationwide may receive payments from mutual funds or their affiliates in connection with those investment options. For more detail about the payments Nationwide receives, please visit www.nrsforu.com. Retirement Specialists are registered representatives of Nationwide Investment Services Corporation, member FINRA. In MI only: Nationwide Investment Svcs. Corporation. Nationwide, the Nationwide framemark, and On Your Side are service marks of Nationwide Mutual Insurance Company. ©2012 Nationwide Retirement Solutions Inc. All rights reserved. NRM-4952AO.4 (11/12)
Editor's Notes
- #3 It may seem like retirement is far away, but now is the time to plan for your future, or make progress on the plan you already have in place. For those of you who aren’t already saving for retirement, the time to get started is now. Why? Because according to the 2010 National Retirement Risk Index, 65% of households are “at risk” of not having enough money to maintain their living standards in retirement. For most Americans, pension and Social Security benefits will simply not provide enough retirement income. On average, a public pension will provide only about 50% of your current income after 25 years of service. And, most industry professionals say you’ll need about 70% to 90% of your current income just to maintain your standard of living in retirement. But when you factor in inflation and increases in medical costs, some experts say you may need as much as 126% of your final pay. So how will you bridge your retirement income gap? With social security in a precarious position, it seems that having supplemental retirement savings is more than a “nice-to-have” — it’s a necessity.
- #4 Let’s dig a little deeper into retirement reality for a moment… You’ll have to consider inflation. Inflation is the rate of increase in the prices of goods and services over time. For example: the rising cost of gas. You need to think about health care, which are on the rise. Fact is, men who retired at age 65 may need up to $346,000 to cover health expenses in retirement and women could need even more.1 There’s also a possibility that you’ll need long-term or assisted-living care. Continual care for an ongoing condition can be very expensive. 63% of people who need long-term care for a chronic condition ended up reducing their savings by an average of 61% just to cover their bills.2 And lastly, what would you do if you outlived your money? It's important to make sure your savings are sufficient to provide income throughout your expected lifespan. According to the 2010 Social Security Trustees Report, the average 65-year old is expected to live between 17 and 20 additional years after he/she retires. 1Savings Needed for Health Expenses in Retirement: An Examination of Persons Ages 55 and 65 in 2009, http://www.ebri.org/publications/notes/index.cfm?fa=notesDisp&content_id=4291 (accessed 9/21/11) 2Beyond Dollars: The True Impact of Long Term Caring. Genworth Financial, 9/30/10.
- #5 So what can you do about the situation? One answer is your employer’s 457 deferred compensation plan. Because your employer realizes that a pension and Social Security may not provide enough income to live on when you retire, they’re offering our 457 deferred compensation plan, also referred to as “deferred comp”, to put you in control of when, where and how much money you invest toward your future. Better yet, it was created specifically for public sector employees like you. Sound complicated? It doesn’t have to be. It just starts with a plan and some help. You’ll deserve real assistance and convenient resources. That’s why your employer chose Nationwide, to administer your deferred comp plan. We’ve been helping public sector employees save for retirement for nearly 40 years, so we understand your commitment to your community and we’re equally committed to helping you prepare for your financial future. As a Nationwide plan participant, you’ll get support from retirement specialists who are ready to assist you each step of the way. You’ll also benefit from a variety of educational resources and planning tools designed to help you identify your goals and take steps to reach them. Plus easy online access to your account and our interactive resources will help you get the information you need, when you need it. The best part: None of this ends when you retire. We’re here for the long haul to help you even after your working years.
- #6 So now you know that your employer’s deferred comp plan is made just for you, created to serve public employees and their families and nobody else. It can help you bridge the gap between what you have and what you need in retirement. So what are the details? Here’s a plan primer…
- #7 Now that you know you need to save for retirement, you may say, “But I already have a savings account at a local bank.” Truth is, most savings accounts earn as little as a 1% rate of return. With such a low rate, your savings will not have much potential for long-term growth. This is because the higher the average rate of return, the more your investment benefits from something called compounding. Compounding, as you see here, is the process of continually adding earnings to the amount you contribute (principle) and then reinvesting those earnings to create even more earnings. To take advantage of compounding, you’ll want a plan (like your employer’s deferred comp plan) that offers access to investment options with potentially higher rates of return. No matter what your age, there’s no better time than now to invest in your future. Time is one of the most important factors in the potential success of your investments. This is because time and compounding work together to build momentum for your money. Think of it like a snowball rolling down a hill. The longer the hill, the bigger that snowball could potentially become. By starting early, you maximize the effects of time and compounding on your investments.
- #8 Keep in mind that investing involves risk, so there’s no guarantee you’ll reach your investment goals. In this example, Investor #1 invests $2,000 per year beginning at age 30 and then stops investing after 10 years, for a total contribution of $20,000. Although she’s no longer contributing to the account, she leaves her money in the account to grow for an additional 25 years. Investor #2 procrastinates and doesn’t start investing until age 40. He contributes $2,000 per year for a total of 25 years up until the day he retires, for a total contribution of $50,000. Although Investor #1 invested $30,000 less than Investor #2, she ended up with a much higher account balance at retirement. That’s because she gave her money 10 more years to grow. This illustration is a hypothetical compounding calculation assuming a 7% annual rate of return. It is not intended to serve as a projection or prediction of the investment results of any specific investment. Investments are not guaranteed. Depending on your underlying investments, your return may be higher or lower. Interest compounded annually based on beginning-year contributions. No taxes or fees are reflected in this example, which would lower the results displayed. Source: Nationwide Financial® (2012).
- #9 There are also tax advantages to contributing to deferred comp. The first advantage is pre-tax payroll deductions. That means that deferred comp allows you to defer money each pay period before it’s taxed. That means fewer tax dollars are paid on today’s income, making a smaller impact on your take-home pay. Basically, more money goes into your account than comes out of your paycheck.Here’s a hypothetical example of how pretax investing works: Say Mary sets aside $50 per pay for retirement and decides to invest it in a taxable account. After taxes, her $50 contribution is reduced to $37.50. After 25 years of investing, she receives an after-tax lump sum of $49,469. Jim contributes $50 per pay into his deferred comp plan. Because his contributions are pretax, his entire $50 goes into the account. His contributions and earnings grow tax-deferred for 25 years, and at retirement he receives an after-tax lump sum of $63,885.* *Chart assumptions: This hypothetical illustration assumes a 25% tax rate, $50 biweekly deferrals (for 25 years), and a 7% rate of return with reinvestment of income. The tax-deferred total does not reflect fees and expenses incurred under a particular investment. If these were taken into account, they would reduce the performance shown. This hypothetical information is not intended to predict or project the investment results of any specific investment. Investment return is not guaranteed and will vary based on your investments and market experience.
- #10 The second advantage is that your investments also grow tax-deferred, meaning you don’t pay taxes until you start making withdrawals – typically in retirement. And you may pay less in taxes on that money because you’ll be using it to supplement installments from Social Security and your employer’s pension. Any earnings you receive on top of your paycheck contributions are reinvested, so they also have the chance to grow tax-deferred, too. Your plan also offers you the opportunity to designate all or part of your contributions to your governmental deferred compensation plan as after-tax Roth 457 contributions. When you contribute to a Roth 457, you pay taxes on the portion of your salary that goes into the plan, but withdrawals of contributions and earnings can be tax-free during retirement if certain conditions are met.
- #11 So you know there’s a big advantage to contributing to deferred comp, but how much should you defer? It can be hard to wrap your mind around how your individual paycheck contributions really stack up toward your retirement goals. This chart shows examples of the connection between how much someone might defer out of each paycheck and possible account values over different periods of time. Everyone’s situation is unique, though, so it’s important to weigh all the variables carefully. <explain a chart example, choosing a sample deferral that best represents the group you’re speaking to>
- #12 To some, knowing how to invest in your plan may seem overwhelming, so let’s turn to investment basics. Once you learn a few terms and investing strategies, the choices will become clearer. If you’re already somewhat versed in the “language of investing”, consider this an important refresher.
- #13 At its most basic, investing involves putting your money to work for you with the hope of making more money. The success of an investment can be measured by the income it generates, the interest it bears, or its increase in value over time. Most investment collections – called portfolios – consist of three main asset classes – or categories – of investments: stocks, bonds and short-term investments. Each have unique features, risks and rewards. Stocks offer an investor an ownership position in a company’s assets and earnings. one unit of owner- ship is called a share. While stocks may expose investors to more short-term risk than bonds or short-term investments, they have also historically outperformed those investments over the long term. Stocks can be generally categorized by their market value or “capitalization”: large-cap stocks refer to companies with market values greater than $10 billion. mid-cap stocks refer to companies with market values between $2 and $10 billion. small-cap stocks refer to companies with market values under $2 billion. International stocks refer to companies that are located outside of the United States.
- #14 When you purchase a bond, you are basically giving a loan to an entity or corporation. In return, the bond issuer agrees to pay back the loan amount along with interest on a specified date. Bonds are generally more stable than stocks and provide a more steady flow of income, but they also typically provide a lower rate of return. One way to classify bonds is by their issuer:treasury bonds are issued by the U.S. government municipal bonds are issued by local governments corporate bonds are issued by corporations and generally offer higher returns in exchange for higher risk. Another way to classify bonds is by their ratings:Investment-grade bonds refer to bonds that have received high ratings from financial research experts such as Standard & Poor’s or Moody’s. High-yield bonds — also known as “junk bonds”— refer to bonds that have received lower ratings from financial research experts. Short-term investments are sometimes referred to as cash equivalents because they can be easily sold without affecting their value. While these short-term investments are generally less risky than stocks or bonds, their returns are also usually much lower. The most common types are: certificates of deposit (CDs) are savings certificates issued by banks in any denomination that offer a fixed interest rate payable at a specified maturity date. money-market accounts (MMAs) are deposit accounts offered by banks and offer many of the same features as a standard savings account treasury bills (t-bills) are money market securities issued by the U.S. federal government that pay a fixed interest rate and have maturity dates one year or less from the date of issue.
- #15 So what are mutual funds and how do they come into play? A mutual fund is a pre-mixed collection of investments that may include individual stocks or bonds. When you invest in a mutual fund, you’re essentially pooling your money with a number of other investors and paying a professional to manage the fund. And because a mutual fund buys and sells a large number of investment shares at a time, management costs are lower per investor than they would be if individual stocks and bonds were being bought by individuals. Changing market conditions can cause fluctuations in the value of a mutual fund. That’s why one of the best aspects of a mutual fund is diversification. By being a collection of investments where investors’ money is spread out, instead of just a single investment holding all the money, investors aren’t “putting all their eggs in one basket.” a loss in one investment is hopefully minimized by a gain in other investments, although it is never possible to eliminate all risk. So why should mutual funds matter to you? Because the core investment options available in your 457 deferred comp account are mutual funds and not individual stocks, bonds or short-term investments. For example, you may choose a large-cap mutual fund made up of investments in a handful of large, well-established companies.
- #16 You might’ve heard the phrase “risk vs. reward”. So what is it? Every investment has a risk level associated with it. That risk level also corresponds with the likelihood of a reward. This chart helps us better understand the components of the mutual funds you just heard about. The higher the risk vs. reward ratio, the greater the potential for growth, but at a higher risk of losing value. The lower the risk vs. reward ratio, the less the potential for return, but at a lower risk of losing value. Understanding your own tolerance for risk and how it relates to the economy can be a valuable perspective for any investor…
- #17 …That brings us to Investment Strategy. Now that you have an understanding of investment basics, it’s time to put everything together to form a strategy that will fit your personal goals.
- #18 We all know that economic downturns happen; that’s why many investors are looking for ways to reduce risk. Asset allocation is the strategy that your employer uses for your deferred comp plan to do just that. Simply put, asset allocation divides your money up across a variety of investment options to build a diversified portfolio suited to your investing style. Basically, asset allocation can take the diversification concept we just talked about to a higher level. Mutual funds are already collections of investments, and by using an asset allocation strategy for the mutual fund options you have, you’re able to add another layer of diversification. And maintaining a diversified portfolio can help smooth out the ups and downs of your investments — though diversification itself does not ensure profit or protect against loss. Here’s an example of giving your money some traction: ever been stuck in the snow or mud? With four-wheel drive, when one wheel slips, you have three more opportunities for traction. Asset allocation is like a vehicle with four-wheel drive. By spreading your money out among different funds, you potentially lessen the risk of losing all your money.
- #19 Although every investor’s needs are different, the idea is to find the right blend of potential risk and reward by mixing investments to suit your individual investing style — whether you are aggressive, conservative, or somewhere in between. Your primary goal might be to keep your risk low or maybe you just want to maximize possible reward. Maybe you’re concerned with how much time you have to save before you retire. Take a look at the profiles here to see what fund mix might make sense for your portfolio. All the fund types are color-coded according to the Risk vs. Reward chart we saw before, so you can see how risk and reward relate to aggressive, moderate and conservative profiles. For example: the aggressive profile has more international funds, the conservative profile has more bonds, and the other three profiles fall somewhere in between. A conservative profile is designed for an investor with a low risk tolerance and/or a short time horizon who is seeking stability. A moderately conservative profile is appropriate for slightly less risk-averse investor who seeks both modest investment value increases and income. A moderate profile best suits an investor who seeks relatively stable growth and a low level of income. A moderately aggressive profile is designed for an investor with a high tolerance for risk and a longer time horizon who also seeks above-average growth. An aggressive profile is appropriate for an investor whose main objective is high growth without providing current income, making these it unsuitable for older investors. This is the only new copy on this slide
- #20 Now it’s time to find yourself on the spectrum. Depending on your interest level and confidence in your retirement knowledge, you may consider a “hands-off” or “hands-on” approach — or something in the middle. Here are some of the options that may be available to you. A professionally managed account offered through Nationwide ProAccount® is an automatic option in which your investments are actively selected for you by a professional money manager based on information you provide about your goals, time horizon and risk tolerance. The fee for this service is up to 1% of your daily account balance. Target date funds are designed to invest for a specific date (usually when you will begin making withdrawals) and automatically adjust the mix to become more conservative as the date approaches. Investor profile funds build a portfolio designed to invest for a specific risk level from Conservative to aggressive mixes and rebalance periodically to maintain their risk level. You can also choose and manage your investments from a lineup available through your plan. Your plan may offer a Self-Directed option, too. This provides you with expanded investment options if you’re looking for a greater role in managing your account. You’ll need to review your account on a regular basis to make sure that your selections are still in line with your goals.
- #21 You’ll experience many changes throughout your life and career; so lastly let’s talk about staying active when it comes to maintaining your deferred comp account.
- #22 In times like these, you may be thinking about the rising cost of gas and/or your energy bills. But remember, it’s best pay yourself first — even if your deferred comp contribution is the same as the amount you put toward gourmet coffee every day. Also, it’s important to keep in mind that you can always change how much you contribute there’s nothing wrong with starting off slow and increasing your contribution when you get a pay raise or bonus. Still, there may be times when other financial matters take priority. That’s why you can start, stop or restart anytime you want. You can also reduce contribution amounts any time. Visit your plan website to enroll today or find out more about your options.
- #23 Small increases can make a big difference, too. This chart shows the effect that increasing per-pay deferrals by just $25 annually over 35 years can have on an account value. As you can see, if a 30-year-old invests $100 per biweekly pay, he could accumulate $372,338 by the age of 65. Not bad. But if that same 30-year-old increases his deferral by $25 per pay each year his account value could grow to $1,365,431.
- #24 Here are three more management tasks that can give your account a boost with very little effort: First is rebalancing. Just like musicians regularly tune their instruments, investors should frequently rebalance (or retune) their portfolio to keep it in harmony with their goals. Let’s say you intend to maintain an investment mix of 60% stocks, 30% bonds, and 10% short-term investments. Over time, market forces cause the various investments in your portfolio to gain or lose value, and these changes in value could cause your portfolio to get out of balance. To bring your investments back in tune, you need to rebalance your investment mix by selling off assets in one class and purchasing assets in another. Frequent rebalancing may help your account perform significantly better long term than an account that has not been rebalanced since it was first created. Another important task is combining accounts. If you’ve had more than one different employer in your life, you might have a couple of different retirement plans: a 457 here, a 401(k) there — maybe even an IRA or 403(b). You’re welcome to bring all of these retirement assets into your deferred comp plan. That way you can manage all of your investments in one account. One account means less hassle, one statement and less paperwork. It also means one point of contact. Also, if you’re nearing retirement and looking for ways to save more, you have two options to boost your contribution level and make up for lost time. The 50+ Catch-up option allows eligible participants over the age of 50 to save as much as $5,500 over the current annual maximum of $17,000 for a total of $22,500 this calendar year. The Special 457 Catch-up option allows eligible participants to contribute up to double the annual limit for three years prior to retirement to make up for the years that you may not have contributed the maximum. that means you could save as much as $34,000 per year. Some restrictions apply, so talk to me for more details.
- #25 Another task? Just staying in the plan, plain and simple. Did you know that you’re allowed to withdraw your money whenever you retire or separate from employment without paying any penalties — regardless of your age? With most other types of plans, you’ll pay a hefty 10% tax penalty for withdrawing money prior to age 59 1/2. That’s why it’s a smart idea to keep your money in your deferred comp plan until you need to withdraw it — typically in retirement. And when it comes to receiving income in retirement, make a plan. You might be surprised at how many choices you have when it comes to receiving income in retirement: • You can stay put if you are not ready or don’t need to take deferred comp account distributions right away; this allows your account to continue to grow. • You can take systematic withdrawals where your account value is divided up and given to you periodically until the money runs out or until you die, at which time your beneficiary receives the balance of the account. The chart here shows hypothetical account values and how much monthly income they could potentially provide based on a 20-year systematic payout. • You can take a partial lump-sum withdrawal where some of the deferred comp account value is given to you in cash and the remainder is structured as systematic payments. • Or you can take a lump-sum withdrawal. Keep in mind that a large lump-sum withdrawal may push you into a higher income tax bracket for the year in which the money is withdrawn. It’s a good idea to consult your tax advisor before selecting this or any other income option. <explain a chart example, choosing a sample deferral that best represents the group you’re speaking to>
- #26 Another important topic is beneficiaries. The choices you make now could help you provide for your family long after you’re gone. Remember to update your beneficiary designations as life changes occur to make sure the right people receive your assets. If beneficiaries aren’t carefully chosen or updated, your loved ones could experience lengthy delays through probate court. Per IRS regulations, Nationwide must distribute your account balance to the most recent beneficiaries on file. For example, if you get divorced, but your former spouse is still on file as your designated beneficiary when you pass away, he or she may receive your account balance. If you name a beneficiary that’s still a minor (under 21 years old) at the time of your death, and you do not designate a custodian for that minor beneficiary, a guardian may be appointed by the court to receive benefits on behalf of the minor. If you don’t want to name a custodian, please consult an attorney and make arrangements to limit payment delays and avoid unnecessary costs to your estate.
- #27 Once you’re fully participating in deferred compensation, use this checklist to keep your account up to date: Remember what matters. Planning for retirement means taking care of yourself, your life and your legacy. Being prepared is important in so many ways. Take advantage of the plan. The savings can’t start until you enroll. Talk to your Nationwide representative, your benefits advisor, or visit your plan website to get the ball rolling if you haven’t already Think about investment basics. Remember to be patient and let time help your money grow. Refresh your strategy. Review your asset allocation each year to make sure it’s still in line with your long- term financial goals. Stay up-to-date and active with your accounts. Combine any other retirement assets into the plan and increase your contribution each year, rebalance and update beneficiaries regularly, and visit your plan website and use the On Your Side Interactive retirement Planner SM Thank you for joining me today – please feel free ask any questions you may have or talk with me afterward about setting up some time to discuss specifics around deferred comp.