Download - Is Retirement Within Your Reach?
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Is Retirement Within Your
Reach?
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Is a retirement plan really necessary?
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Your Retirement GoalsWhat’s your choice?
Retire by age ?
Work part-time?
Travel?
Buy home in warmer climate?
Reduce lifestyle?
Maintain or increase current lifestyle?
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Which one will you be driving when you
retire?
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When do you plan to retire?
How much to save?
Age 35 Age 55
$1 $4
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How long will your
retirement last?
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What will retirement
cost?
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What are your sources of retirement
income?
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Sources of Retirement Income Company
Retirement/Pension Plans
Social Security
Individual savings
Tax deferred or taxable
Part time work
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How much have you currently set
aside for retirement?
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Estimating the Amount to Save
$ Retirement income goal
$ Social Security and Pension income
$ Additional income needed
$ Value of assets currently owned
$ Revised amount to save
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Retirement Calculators
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Social Security
Contribute for 40 quarters
Replacement rates between 59% and 24% depending on income earned
Collect full benefits at designated retirement age
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Full Retirement Age by Year of BirthYear of Birth Full Retirement Age
1937 & earlier 65 years1938 65 years, 2 months1939 65 years, 4 months1940 65 years, 6 months1941 65 years, 8 months1942 65 years, 10 months
1943 - 1954 66 years1955 66 years, 2 months1956 66 years, 4 months1957 66 years, 6 months1958 66 years, 8 months1959 66 years, 10 months1960 & after 67 years
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Check Social Security Records
SSA will automatically mail your statement of retirement, disability & survivor benefits 90 days before your birthday
Use “Requests for Earnings and Benefits Form” from Social Security office or
call1-800-772-1213 or consult web site
www.ssa.gov
Save IRS W-2 Forms
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Retirement Plans
Company Retirement Plans
Salary Reduction Retirement Plans
Individual Retirement Accounts (Traditional or Roth)
Plans for the self-employed
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Contributions with pre-tax dollars lowers taxable
income.
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Maximize benefits from your Retirement Plans
$ Begin contributions as soon as possible.
$ Make maximum contributionsallowed, if possible.
$ Choose investments that pay high earnings
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Saving in a Tax Deferred versus a Taxable Account
Years
10
20
30
40
Taxable Account
$ 24,420
$ 59,201
$108,740
$179,279
Tax Deferred
$ 26,414
$ 69,414
$139,679
$253,679
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Individual Retirement Accounts
Tax-deferred retirement program
Must have earned income or alimony
Contribute up to *: $4,000 in 2005-07
$5,000 in 2008*Amounts shown are for individuals. Amounts double for couples.
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Traditional Individual Retirement Accounts
Fully deductible from income taxes if no retirement plan at work.
OR May be partially or fully deductible based on Adjusted Gross Income.
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Deductible IRA Income Limits
Year
200520062007
Joint Return $70,000-$80,000$75,000-$85,000$80,000-$100,000
Individual Return
$50,000-$60,000$50,000-$60,000$50,000-$60,000
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Deductible IRA Contributions
Reduce taxable income
Report on 1040 tax form
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Traditional Non-deductible IRA Contributions
File IRS Form 8606 with Federal Tax return
Retain copy
permanently
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Investing in Investing in Traditional IRAsTraditional IRAs
Investing in Investing in Traditional IRAsTraditional IRAs
Check yearly maintenance fees.
As IRA grows in value see if fee can be removed.
10% penalty plus taxes on amount withdrawn before
age 59 1/2.
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Roth IRARoth IRARoth IRARoth IRAContributions made with after-tax dollarsNo mandatory age for withdrawals
No mandatory age limit for contributionsContributions (after-tax dollars) always available for withdrawal without penalty
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Roth IRA RulesRoth IRA RulesRoth IRA RulesRoth IRA RulesWithdrawals of earnings are not taxed if…
Account is 5 years old and You are at least 59 ½ or Earnings up to $10,000 are being
used for first time home purchase or
Higher education for self, family & grandchildren
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Roth IRA Contributions
Make contribution to Roth IRA until April 15 for previous year.
The 5 year waiting period for tax free withdrawal of earnings begins with the year of the first contribution.
Ordinary IRA funds converted to Roth IRA must remain at least 5 years or a 10% penalty will apply.
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Investing in IRAs
Don’t have $4,000 all at once? Consider making automatic monthly payments from checking account or payroll deduction.
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Contributions held in a custodial account
Accounts can be at any financial institution, bank, credit union,
mutual fund company, brokerage account.
Invest for high return.
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Timing IRA Contributions
Make contributions as early in year as possible
Can make previous year’s
contribution until April 15th, but
tell account custodian it is for the previous year
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IRAs - An Example of Return on Investment
Contributions made only between ages 22-30 (9 years)
$2,000 contributed each year
Total investment of $18,000
At an interest rate of 9% by age 65 will have $579,471
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IRAs - An Example of Return on Investment
Contributions made only between ages 31-65 (35 years)
$2,000 contributed each year
Total investment of $70,000
At an interest rate of 9%, by age 65 will have $470,249
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E. M. I. L. Y.Early money is like yeast, it helps your dough rise!
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IRA Direct Transfers –
transfer of IRA funds from one IRA custodian to another
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How to save $3,000 per
year
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Finding Money to Finding Money to SaveSave
One cup of coffee at $1.00/cup x 5 days x 50 weeks = $250/yr.
One soft drink at $1.00/each x 5 days x 50 weeks = $250/yr.
2 video rentals/week @ $3.00 each x 50 weeks = $300/yr.
One fast food meal/week @ $5.00 = $250/yr.
TOTAL SAVED = $1,050/year
Other ideas?
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Retirement Planning Has Changed!
$ More self-directed
$ No “guarantees”
$ Living longer
$ Portable plans
$ Inflation & taxation
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Think of retirement as a vacation -- take half as
much baggage and twice as much money!
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Is Retirement Within Your
Reach?