take action for retirement
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TRANSCRIPT
Taking Action Toward Your Retirement GoalsInvestor Seminar
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Neither UBS Financial Services Inc. nor any of its employees provide legal or tax advice. You should consult with their personal legal or tax advisor regarding your personal circumstances.
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It is important that you understand the ways in which we conduct business and the applicable laws and regulations that govern us. As a firm providing wealth management services to clients in the U.S., we are registered with the U.S. Securities and Exchange Commission (SEC) as an investment adviser and a broker-dealer, offering both investment advisory and brokerage services. Though there are similarities among these services, the investment advisory programs and brokerage accounts we offer are separate and distinct, differ in material ways and are governed by different laws and separate contracts.
It is important that you carefully read the agreements and disclosures that we provide to you about the products or services we offer. While we strive to ensure the nature of our services is clear in the materials we publish, if at any time you seek clarification on the nature of your accounts or the services you receive, please speak with your Financial Advisor.
For more information, please visit our website at www.ubs.com/workingwithus
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The Changing Retirement Landscape
Bush Cites Plan That Would Cut Social SecurityApril 29, 2005
Will Baby Boomers Go Bust?May 16,2005
“Health-care expenses are easily the largest underestimated cost in retirement.”
May 9, 2005
Am I Ready To Retire? July 24, 2006
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Do You Have Questions About Preparing for Retirement?
¨ Am I saving enough? Am I going to outlive my assets?
¨ What should I do with the assets in my employers plan?
¨ When should I take distributions from my retirement plan?
¨ Am I affected by estate tax issues? Should I be doing
something to protect my beneficiaries?
¨ Who can help me address my concerns and plan for my
needs?
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Planning for Retirement: A 4 Stage Process
ReceivingSavingManagin
gTransferrin
g
Accumulating Toward Savings Goals
Eligible to Withdraw Assets from Qualified Plans
Drawing your Income from Retirement Savings
Preparing to pass Retirement Assets to Beneficiaries
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Saving
¨ Am I saving enough?
¨ Will I have enough to retire?
¨ Am I going to outlive my assets?
Saving
AccumulatingToward Savings Goals
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What Do These Numbers Mean?
80 – 110
20 – 30
2 – 4
Saving
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How Much Income Will You Need?How do you picture yourself in retirement?
Saving
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Inflation Erodes Retirement SavingsAnnual Inflation for Retirement-Related Expenses
2.4% 2.5%
2.6%
3.2%
4.4% 4.6%
5.9%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
All items Eating out
Food Rent of primary residenc
e
Presc.drugs/
medical supplie
s
Funeral costs
Hospitalservices
Nursing
home/ adult
daycare
3.8%
Health care costs increased 8.7% in 2001 – an all-time high of 14% of GDP
Source: U.S. Bureau of Labor Statistics; 10-year average annual inflation through 12/31/03. Nursing home and hospital service reflect 7-year through 12/31/03.
Saving
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Source: Social Security Administration, Period Life Table, 2003 (updated July 2007)
Longer Life Means Longer RetirementFDR Signed the Social Security Act in 1935
Saving
Life Expectancy
2007
Men – 74½
Women – 80
Life Expectancy (at Birth)
Life Expectancy
1935
Men – 59
Women – 63
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1As of August 20072TV Guide, January 20083U.S. Bureau of Labor Statistics, November 20074National Automobile Dealers Association, May 20075U.S. Department of Housing & Urban Development, November 20076Trends in College Pricing 2007, The College Board’s Annual Survey of Colleges, 2007-2008
Item 1980Current
First-Class Stamp $0.15$0.411
TV Guide $0.40$2.992
Loaf of Bread $0.52$1.243
Average New Car $7,571$28,4514
Average New Home$64,600$298,5005
College Education$4,806$13,5896
(4-year public annual tuition and room and board)
Reasons to Save for RetirementThe impact of inflation on your money
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The Effects of Inflation on Retirement Income
Source: UBS Investment Research provided through UBS Securities LLC (2004)
The forecasts or other information in this slide regarding the likelihood that various investment and economic outcomes might occur are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. In reviewing this information, please note that the analysis does not take into account actual market conditions which may severely affect the outcome of your goals over the long term. Past performance is not a guarantee of future returns.
Anticipated Income Needed at Retirement In Current Dollars
Income Needed 20 Years Later at Annual Average Inflation Rate of 2.5%
$100,000
$164,000
Saving
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Will I Outlive My Assets?Probability of Assets Lasting for 25 Year Retirement(Portfolio Allocation: 60% stocks/40% bonds)
0%
20%
40%
60%
80%
100%
4% 5% 6% 7% 8%
Source: UBS Quantitative Research Team (2004) based on historical return data for large-cap stocks and long-term Treasury bonds (from 1926-2003.)The forecasts or other information in this slide regarding the likelihood that various investment and economic outcomes might occur are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. In reviewing this information, please note that the analysis does not take into account actual market conditions which may severely affect the outcome of your goals over the long term. Past performance is not a guarantee of future returns.
Saving
Withdrawal Rate
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Retirement Savings
After-TaxTax-Deferred/Tax-
Free
PretaxTax-Deferred
After-Tax Taxable
Save and Diversify among 3 different tax baskets
Traditional IRAs
Employer Plans:
401(k) PS 403(b) SEP457 SIMPLE
Non-Deductible IRA
Roth IRAs/Roth 401(k)
Annuities
Non-Qualified Plans
StocksBondsMutual FundsTax Rates:Capital Gains Dividends
Saving
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Traditional and Roth IRA Limits
Year Under Age 50 Age 50+
2007 $4,000 $5,000
2008 and after, asadjusted for inflation
$5,000 $6,000
401(k), 403(b), 457(b) Contribution Limits
Year Under Age 50 Age 50+
2008 $15,500 $20,500
Are You Taking Advantage of Your IRA?Increased Limits over Age 50 Can Help You Catch Up!
Saving
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Have You Considered a Roth IRA?Added benefits if your MAGI is …
¨ Contributions always non-deductible (after-tax)
¨ Can withdraw contributions at any time—no tax/penalty
¨ Qualified distributions from Roth are tax-free vs. tax-deferred— For Owner and Beneficiaries
¨ No required minimum distributions (RMDs) at 70½
Saving
Single Filers* Joint Filers*
Less than $101,000
Less than $159,000
*Eligibility for Roth contributions phase out for modified adjusted gross income (MAGI) between $101,000 to $116,000 (single filing), $159,000 to $169,000 (joint filing) for 2008.
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The Power of 401(k) ContributionsHow much can a 50-year old accumulate in a 401(k) before retiring at age 58?
50-year old earning $75,000*
Annual Contribution
6% Rate of Return
8% Rate of Return
10% Rate of Return
$4,500 (6%) $53,527 $59,036 $65,270
$10,000 (13.3%) $118,949 $131,190 $145,044
Note: Starting at age 50, this hypothetical illustration assumes various contributions that are made at the end of each month and lasts for 9 years until retirement.
*This illustration is hypothetical and does not represent the performance of any specific investment or security
Saving
Max of $20,500
$243,846 $268,941 $297,341
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Saving: Action Steps
¨ “Crunch the numbers” to get a clear picture of where you are today and what you need to do for the future
¨ Establish a formal financial plan that includes your retirement goals:
Consider saving with all three tax baskets
Maximize contributions to retirement plans
Explore Roth IRA option
Implement the plan and review progress
Saving
AccumulatingTowards Savings Goals
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Receiving
¨ Should I roll the assets over from my employer plan into an IRA
¨ What are my options?
¨ What are some key issues I should know?
Receiving
Eligible to distribute employer plans
Receiving
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When Can You Move Your Employer Plan Assets to an IRA?
Consolidate
401(k)
403(b)
457(b)
ESOP
Profit Sharing
Company Plan
While still employedIn-service withdrawal
Changing jobs
Retiring
Rollover IRA
Traditional IRAorRoth IRA*
Lump Sum Pensions—Access, if available, is typically only allowed at retirement. (Possibilities depend on plan provisions)
* effective 2008 under the Pension Protection Act, eligible qualified plan distributions may be rolled directly into a Roth IRA. Income limits on conversions still apply until 2010.
Consolidate
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Why Consolidate Assets in IRA?Advantages of IRA Consolidation
Receiving
Direct Financial Advisor Relationship for Guidance
Greater Investment Flexibility and Choice
More Flexibility in making Beneficiary Designations
Access to Funds: Distributions and Withdrawals
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Do you own company stock in your plan? Are there circumstances where taking a plan distribution and not rolling over to an IRA makes good planning sense?
Receiving
Rollover to IRA
Qualified Plan
After-Tax Account
Traditional IRA
Mutual Funds
Cash
Company Stock
Distribute SharesNUA
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Net Unrealized Appreciation (NUA)—Example
*Assumes a 33% ordinary income tax rate and 15% capital gains tax rate. Tax rates reflect federal taxes; state taxes may also apply. There may be additional tax considerations. Neither UBS Financial Services Inc. nor its employees (including Financial Advisors) provide tax or legal advice. You should consult with your attorney and tax advisor regarding your personal circumstances.
$100,000 in company stock held in 401(k) account
Standard 401(k)Distribution
NUA Treatment onCompany Stock
Cash out $100,000 Distribute in-kind andsell shares
Ordinary income tax
33% tax rate
Capital gains tax
15% tax rate
$100,000 x .33 = $33,000 Cost Basis$10,000 x .33 = $3,300 Appreciation
$90,000 x .15 = $13,500
$67,000 $83,200
Total tax savings = $16,200
Take Distribution
Minus Taxes*
Equals FinalBalance
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IRA to Roth IRA Conversion
Traditional IRA
MAGI* under $100,000?
Roth IRA
Tax-deferred Income
Recently retired with lower income?
Tax-free Income**
Receiving
*MAGI - modified adjusted gross income ** For all qualified distributions
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Roth IRA Rollover: A New Opportunity in 2008
Employer-Sponsored Plan
MAGI* under $100,000?
Roth IRA
Tax due on pre-tax contributions and earnings
Opportunity for tax-free distributions in the future**
Receiving
* MAGI – Modified adjusted gross income
** For all qualified distributions
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Receiving: Action Steps
¨ Discuss with your Financial Advisor, if applicable, the opportunities relating to:
Taking an in-service withdrawal from your qualified plan.
Consolidating your retirement assets in
an IRA
Utilizing Net Unrealized Appreciation for your company stock
Converting from a traditional to Roth IRA or rolling over a distribution from an employer-sponsored plan directly to a Roth IRA
Receiving
Eligible to Distribute from Qualified Plans
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Managing
¨ How can I take distributions without penalties?
¨ When am I required to begin taking distributions?
¨ How can I structure my investments to help provide the income I will need?
Managing
Taking income from IRA
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Managing—Taking Distributions from IRA
Managing
Taking Income from a Traditional IRA
Age
Pre 59½
Age
Over 59½
Age
70½ +
IRC 72(t) No more early withdrawal penalties
Required Minimum
Distributions
When can I… When do I have to…
Managing
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Providing Enough Income In Retirement
Individuals age 65+ with annual incomes of $50,000 or more
Managing
Investment Income
Earned Income
Pensions & Annuities
Social Security
Other
1.6%
40.9%22.9%
20.0%
14.6%
Source: Employee Benefit Research Institute (EBRI) estimates of the March 2007 Current Population Survey
Individuals may be responsible for over 60% of their retirement income
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Do My Savings Cover My Income Needs?
¨ How should I invest – asset placement? ¨ Which assets should I withdraw from first?¨ Am I being tax efficient with my capital gains and dividends?¨ How should I withdraw income? Do I have a plan in place? ¨ Am I taking on an appropriate level of risk for my desired
return?
Managing
Essential¨ Housing¨ Health Insurance¨ Food/Living
Expenses
Discretionary¨ Travel¨ Entertainment¨ Hobbies/Leisure
Sources of Income¨ Social Security¨ Pensions¨ Earned Income
¨ Personal Investments: Cash Flow
Tax Deductible
Tax-Deferred
After Tax
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Managing: Action Steps
¨ Work with your Financial Advisor to develop a comprehensive strategy for:
Providing an income stream designed to support your desired retirement lifestyle
Managing retirement assets to last during your expected lifetime
Ensuring you are set-up to take your required minimum distributions
Managing
Taking income from IRA
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Passing Wealth
¨ Am I affected by Estate tax issues?
¨ Should I be doing something to protect my beneficiaries?Transferring
retirement assets to beneficiaries
Transferring
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Beneficiary Designation—Advantages of a Stretch IRA What is the “Stretch IRA” Strategy?
IRA Owner
IRA Beneficiary
Beneficiary has ability to take minimum required distributions from inherited IRA over his/her own life expectancy
Transferring
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An Example of the Stretch IRAStrategy at Work
Transferring
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An Example of the Stretch IRA Strategy at Work$300,000 initial balance in IRA pays total distributions of over $2.1 million over 46 years*
* Asset growth is based on a 7% rate of return and assumes all generations receive their respective required minimum distributions as defined by the IRS on December 31 of each year distributions are required. This number assumes that each generation elected to take only the required minimum over the longest period allowed by current law. Should any recipient elect to take distributions greater than the minimum distribution or receive a lump sum at any point, this total would significantly change.
This illustration is hypothetical and not meant to represent the performance of any specific investment or security. Actual returns will vary and principal value will fluctuate. Individual results will vary.
Distributions are subject to income taxes. This illustration is based on current tax and regulations law (as of November 2005), which may change in the future.
Transferring
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Beneficiary Review DiscussionBeneficiary designations are more important than ever!
Make a beneficiary review part of your planning process: ¨ IRA accounts should have updated beneficiary designations on
file- you should review your beneficiary plan with your legal advisor
¨ Review your beneficiary form to ensure it has been completed correctly
Primary listed
Contingent listed
Multiple beneficiaries—designate shares
Copy of Beneficiary Form to FA, Attorney
Review annually/life event changes
Transferring
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TransferringTransferring: Action Steps
Preparing to transfer retirement assets to beneficiaries
Transferring ¨ Set up meeting with your Financial Advisor and legal advisor to discuss:
Reviewing your will
Beneficiary Review
Titling of assets
Life Insurance needs
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No Matter What Stage You’re In . . .
The choices you make today will affect the quality of your retirement and the size of your
estate.
ReceivingSavingManagin
gTransferrin
g
abUBS Financial Services Inc.