ready to retire?! are you? you can be!. retirement sits best on a “three- legged stool
TRANSCRIPT
READY to RETIRE?!READY to RETIRE?!Are You?Are You?
You Can Be!You Can Be!
Retirement sits best on a “three-Retirement sits best on a “three-legged stool.legged stool.
The “Three-Legged” StoolThe “Three-Legged” Stool
Social SecuritySocial Security
Employer Pension PlanEmployer Pension Plan
Personal Financial PreparationPersonal Financial Preparation
Miscellaneous MusingsMiscellaneous Musings
The next several slides are a The next several slides are a compilation of Miscellaneous Musingscompilation of Miscellaneous Musings
At some point, regardless of your At some point, regardless of your age, you WILL begin to consider age, you WILL begin to consider retirementretirement
As you consider your future you will As you consider your future you will also have to begin to consider the also have to begin to consider the impact on current financesimpact on current finances
Worthwhile StatementsWorthwhile Statements
Earn all you can; Save all you can; Earn all you can; Save all you can; Give all you can.Give all you can. John Wesley John Wesley
Money is good to Enjoy, to Invest, Money is good to Enjoy, to Invest, and to Give.and to Give. Dave Ramsey Dave Ramsey
Key Ingredient in PreparationKey Ingredient in Preparation
Don’t live UP TO someone else’s Don’t live UP TO someone else’s standard of livingstandard of living
Live BELOW your own standardLive BELOW your own standard
Really?Really?
80% of Americans believe their 80% of Americans believe their standard of living will go UP at standard of living will go UP at retirementretirement
97% of retired Americans cannot 97% of retired Americans cannot write a $600 checkwrite a $600 check
Reverse MortgageReverse Mortgage
A Reverse Mortgage is not a A Reverse Mortgage is not a retirement planretirement plan
It is an abdication of personal It is an abdication of personal responsibility if it is part of your responsibility if it is part of your current plancurrent plan
Government came up with this as a Government came up with this as a means of reliefmeans of relief for cash strapped for cash strapped retireesretirees
Myth vs. TruthMyth vs. Truth
If I do a WILL I might dieIf I do a WILL I might die
You ARE going to die – so do it with a You ARE going to die – so do it with a willwill
First Leg of the Stool –First Leg of the Stool –GOVERNMENT’S CONTRIBUTIONGOVERNMENT’S CONTRIBUTION
Review Review YOUR SOCIAL SECURITY YOUR SOCIAL SECURITY STATEMENTSTATEMENT– Your earningsYour earnings– Your retirement benefits (age specific)Your retirement benefits (age specific)– Your disability benefitsYour disability benefits– Your age at retirement affects your Your age at retirement affects your
benefit paymentbenefit payment
Myth vs. TruthMyth vs. Truth
I heard that Social Security is almost I heard that Social Security is almost broke and I probably won’t get any broke and I probably won’t get any retirement benefitsretirement benefits
Solvent through 2041Solvent through 2041
Subsequently able to support 78% Subsequently able to support 78% just through current payments from just through current payments from payroll taxpayroll tax
Social Security is Socialism!Social Security is Socialism!
Social Security replaces earnings at…Social Security replaces earnings at…– 81%81% for low income workers for low income workers– 42%42% for high income workers for high income workers– 60%60% for average workers for average workers
Medicare is available at age Medicare is available at age 6565
True or FalseTrue or False
My Social Security payments are My Social Security payments are based on my last 5 years of earningsbased on my last 5 years of earnings– FalseFalse
Social Security payments are Social Security payments are affected by the money I earn while affected by the money I earn while drawing benefitsdrawing benefits– TrueTrue
What Can I Do?What Can I Do?
Take personal responsibility for SE Take personal responsibility for SE Tax payments (do you receive SE Tax Tax payments (do you receive SE Tax reimbursement)reimbursement)– Roll reimbursement into your salary (it’s Roll reimbursement into your salary (it’s
taxable anyway)taxable anyway)– Save for annual bills and SE taxSave for annual bills and SE tax– Make your quarterly paymentsMake your quarterly payments– Benefit: affects bonus, and raisesBenefit: affects bonus, and raises
What Can I Do?What Can I Do?
Realize that the IRS now discounts SE Realize that the IRS now discounts SE Tax in an attempt to account for the Tax in an attempt to account for the lack of ‘an employer match’lack of ‘an employer match’– On SE form total compensation is On SE form total compensation is
reduced by 7.65%reduced by 7.65%– On front of 1040 reduce Adjusted Gross On front of 1040 reduce Adjusted Gross
Income by ½ of SE taxIncome by ½ of SE tax
What Can I Do?What Can I Do?
Pay full SE TaxPay full SE Tax– It affects your future benefitsIt affects your future benefits– Pay on the total of:Pay on the total of:
SalarySalary
Housing allowanceHousing allowance
Parsonage + Utilities (don’t discount FMRV)Parsonage + Utilities (don’t discount FMRV)
SE tax reimbursementSE tax reimbursement
Schedule “C” incomeSchedule “C” income
Any other self-employed incomeAny other self-employed income
Cautions!Cautions!
Don’t rely on what “someone” tells Don’t rely on what “someone” tells you about Social Securityyou about Social Security
Do your own research and determine Do your own research and determine how your decisions affect your SS how your decisions affect your SS benefitsbenefits– www.socialsecurity.govwww.socialsecurity.gov– www.medicare.govwww.medicare.gov
Second Leg of the Stool – Second Leg of the Stool – EMPLOYERS’ CONTRIBUTIONEMPLOYERS’ CONTRIBUTION
The days of The days of DEFINED BENEFITDEFINED BENEFIT pensions are fadingpensions are fading
A growing number of employers are A growing number of employers are moving to moving to DEFINED CONTRIBUTIONDEFINED CONTRIBUTION pension planspension plans
Defined Benefit PensionDefined Benefit Pension
Employer bears the responsibility to Employer bears the responsibility to fund and supervisefund and supervise
Usually based on a fomulaUsually based on a fomula– Employees payEmployees pay– Years of serviceYears of service– Age at retirementAge at retirement– Etc.Etc.
Defined Contribution PensionDefined Contribution Pension
Employee bears the responsibility to Employee bears the responsibility to fund and supervisefund and supervise
Risk and reward are assumed by the Risk and reward are assumed by the employeeemployee– Employer may match in a prescribed Employer may match in a prescribed
manner (some dropping match)manner (some dropping match)– Employer may provide the programEmployer may provide the program– Employee must overseeEmployee must oversee
““Company” PensionCompany” Pension
50% of working people don’t have 50% of working people don’t have pensionpension
If this leg is “short” that throws If this leg is “short” that throws increased burden on the other twoincreased burden on the other two– Social SecuritySocial Security– Personal PreparationPersonal Preparation
Your Nazarene PensionYour Nazarene Pension
Is it Defined Benefit or Defined Is it Defined Benefit or Defined Contribution?Contribution?
Now – Defined ContributionNow – Defined Contribution
How much do they contribute?How much do they contribute?
How many of you are How many of you are “grandfathered” from the old Defined “grandfathered” from the old Defined Benefit program?Benefit program?
My Nazarene PensionMy Nazarene Pension
P&B APS source balance: $16,829P&B APS source balance: $16,829
Assumed Monthly Benefit: $104Assumed Monthly Benefit: $104
Basic Pension Plan: $287Basic Pension Plan: $287
Total Monthly Benefit: $391Total Monthly Benefit: $391
What will be my monthly check from What will be my monthly check from P&B?P&B?
$287$287
It is Your PensionIt is Your Pension
Become InterestedBecome Interested
Become EducatedBecome Educated
Become InvolvedBecome Involved
Become Ready for Become Ready for RetirementRetirement
Third Leg of the Stool –Third Leg of the Stool –MY PERSONAL CONTRIBUTIONMY PERSONAL CONTRIBUTION
The other two “legs” are important, The other two “legs” are important, but this one is criticalbut this one is critical– You have greatest control hereYou have greatest control here
Know where you are financially – Know where you are financially – Your Current Net WorthYour Current Net Worth– Assets minus LiabilitiesAssets minus Liabilities
Know where you want to go – Know where you want to go – What What You Will Need for RetirementYou Will Need for Retirement– The size of your “nest egg”The size of your “nest egg”
Know How Money WorksKnow How Money Works
Understand interest on Savings (Rule Understand interest on Savings (Rule of 72’s)of 72’s)
Understand interest on DebtUnderstand interest on Debt
Understand the impact of Debt on Understand the impact of Debt on IncomeIncome
Some Practical StepsSome Practical Steps
If you can’t afford it, don’t buy itIf you can’t afford it, don’t buy it
Be debt-free by the time you retireBe debt-free by the time you retire
Build tangible assetsBuild tangible assets
Don’t borrow money just because Don’t borrow money just because you canyou can
Be a Generous GiverBe a Generous Giver
Owning a HouseOwning a House
For most people their home is 60% of For most people their home is 60% of their Net Worththeir Net Worth
Do you have one?Do you have one?
Can you afford one?Can you afford one?
Should you buy one now?Should you buy one now?
If you have never owned a home If you have never owned a home buying one after you retire may not buying one after you retire may not be the best optionbe the best option
Financial AdviceFinancial Advice
Everyone has opinions and adviceEveryone has opinions and advice
Filter “professional” advice carefullyFilter “professional” advice carefully
““Advisors” make their money by Advisors” make their money by selling productsselling products– Know what you NEEDKnow what you NEED– BUY only what you NEEDBUY only what you NEED
Investments FluctuateInvestments Fluctuate
““Do they ever!!!”Do they ever!!!”
Don’t panic!!!!Don’t panic!!!!
Realize…Realize…– Probably don’t need the money todayProbably don’t need the money today– Certainly don’t need it all todayCertainly don’t need it all today
Investing for RetirementInvesting for Retirement
Be debt free (mortgage excluded)Be debt free (mortgage excluded)
Invest 15% of gross earnings for Invest 15% of gross earnings for retirementretirement
Calculating for your retirement nest Calculating for your retirement nest egg (handout)egg (handout)
Calculating for RetirementCalculating for Retirement
Amount you wish to draw annuallyAmount you wish to draw annually
Divide by .08Divide by .08
Equals total nest egg neededEquals total nest egg needed
Multiply by “factor” providedMultiply by “factor” provided
Equals amount needed to save each Equals amount needed to save each monthmonth
Calculating for Retirement Calculating for Retirement (con.)(con.)
ExampleExample
Target Annual Income = $30,000Target Annual Income = $30,000
Divide by .08 = $375,000Divide by .08 = $375,000
Nest Egg times .001051 (40 yr old)Nest Egg times .001051 (40 yr old)
Need to save monthly = $394.12Need to save monthly = $394.12
Calculating for Retirement Calculating for Retirement (con.)(con.)
ExampleExample
Nest Egg times .001698 (45 yr old)Nest Egg times .001698 (45 yr old)
Need to save monthly = $636.75Need to save monthly = $636.75
Nest Egg times .000436 (30 yr old)Nest Egg times .000436 (30 yr old)
Need to save monthly = $163.50Need to save monthly = $163.50
Calculating for Retirement Calculating for Retirement (con.)(con.)
P&B is making a maximum of $1000 P&B is making a maximum of $1000 per year to your 403b, Defined per year to your 403b, Defined Contribution planContribution plan
Over 40 years @ 8% = $54,000Over 40 years @ 8% = $54,000
If you add $100/mon = $119,000If you add $100/mon = $119,000
If you add $200/mon = $183,000If you add $200/mon = $183,000
This is in today’s dollars without This is in today’s dollars without figuring an inflation factorfiguring an inflation factor
CONCLUSIONCONCLUSION
Get Ready to RetireGet Ready to Retire
AAssess where you are in your ssess where you are in your retirement planningretirement planning
BBegin to build a workable planegin to build a workable plan
CConsider all three legs of the “stool”onsider all three legs of the “stool”
DDecide on a retirement protocolecide on a retirement protocol
EExpect to enjoy retirementxpect to enjoy retirement
READY to RETIRE?READY to RETIRE?
YESYES
II
AM!AM!
If you want more Information or If you want more Information or InteractionInteraction
Feel free to contact me at:Feel free to contact me at: [email protected]@att.net
OrOr330.604.1270, cell330.604.1270, cell
330.491.0115, office330.491.0115, officeOrOr
Pastor Dave JohnstonPastor Dave Johnston82 Waterford Way82 Waterford Way
Tallmadge, OH 44278Tallmadge, OH 44278