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Subheading Goes Here Headline

   

Terry  Harrell  

Regional  Vice  President,  Tax  Exempt  Markets          SecuriBes  and  Investment  advisory  services  offered  through  Voya  Financial  Advisors,  Inc.    (member  SIPC)  

   

Retirement  Wellness  

 

Retirement Wellness

Important Disclosures

§  For 403(b)(1) fixed or variable annuities, employee deferrals (including earnings) may generally be distributed only

upon your: attainment of age 59 ½, severance from employment, death, disability, or hardship. Note: Hardship withdrawals are limited to employee deferrals made after 12/31/88. Exceptions to the distribution rules: No Internal Revenue Code withdrawal restrictions apply to ‘88 cash value (employee deferrals {including earnings} as of 12/31/88) and employer contributions (including earnings). However, employer contributions made to an annuity contract issued after December 31, 2008, may not be paid or made available before a distributable event occurs. Such amounts may be distributed to a participant or if applicable, the beneficiary: upon the participant’s severance from employment or upon the occurrence of an event, such as after a fixed number of years, the attainment of a stated age, or disability. For 403(b)(7) custodial accounts, employee deferrals and employer contributions (including earnings) may only be distributed upon your: attainment of age 59 ½, severance from employment, death, disability or hardship. Note: Hardship withdrawals are limited to: employee deferrals and ‘88 cash value (earnings on employee deferrals and employer contributions (including earnings) as of 12/31/88).

§  Insurance products, annuities and funding agreements are issued by Voya Retirement Insurance and Annuity Company (“VRIAC”), Windsor, CT. VRIAC is solely responsible for meeting its obligations. Plan administrative services are provided by VRIAC or Voya Institutional Plan Services, LLC (“VIPS”). VIPS does not engage in the sale or solicitation of securities. All companies are members of the VoyaTM family of companies. Securities are distributed by Voya Financial Partners, LLC

§  This material is intended to provide accurate and reliable information on the subjects covered. It is general in nature and the strategies suggested may not be suitable for everyone. It is not intended to provide specific tax, legal or other professional advice. Clients should seek advice from their tax and legal advisors regarding their individual situation.

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Traditional Ideas About Retirement

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How Many Have Thought About….

§  Wal-Mart §  McDonalds §  Ryan’s Landscaping

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Source:    Wal-­‐Mart  and  McDonald’s  websites  

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Retirement Education – Important Statistics

§  48% of workers surveyed were “not too confident” or “not confident at all” that they will have enough money to enable them to have a comfortable retirement.

§  51% were not confident about having enough money to pay for medical expenses in retirement

§  64% are either just getting started or are still not contributing anything towards their retirement

§  Source: EBRI Retirement Confidence Survey, 2010

Retirement Education – Important Statistics

§  30% of employees have never calculated the amount they will need in retirement

§  45% have not calculated the amount needed to retire in more than 10 years

§  49% are “unsure, not confident or not confident at all” that their pension plan income will remain unchanged throughout retirement.

§  Almost half (47%) of employees expect their employer to help them better understand how to reach their retirement goals

Source: Voya Retirement Research Institute (3017054.G.S-1 (10/10)

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On-Track Retirement – Why should you care?

§  Employees who are “On-Track” to retire will potentially be in position to: –  Retire at their Normal Retirement Date –  Take advantage of early retirement incentive plans –  Maintain or exceed their current lifestyle during

retirement

§  Doing what’s right for employees may also help reduce your budget.

On-Track Retirement – A Win-Win Proposition

§  The Employee wins because –  An Educational Process deliberately designed to

enable employees to retire – on time – with dignity, honor and peace of mind

§  The School District wins because –  A systematic approach that helps to ensure

employees can afford to retire at “normal retirement age”, thus potentially reducing payroll expenses

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Example of Employment Costs – Retirement “Ready or Not”

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60

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80

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26 27 28 29 30 31 32 33 34 35

Thou

sand

s

Salary Years 26 - 30

Salary Years 31 - 35

Salary New Hires

Years  of  Service  

Why Do Employees Stay?

§  Not Financially Prepared –  Low-balance or no-balance 403(b)/457 Accounts –  Not convinced they can afford to retire –  May not have met with a professional financial adviser

§  Not Mentally Prepared –  Social Needs Tied to Employment –  Employees fear not being part of a team –  EE’s avoid making the big decision to leave

§  Status quo is easier than changing

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Employees Need A Gentle Nudge

Almost  30%  of  employees  have  never  calculated  the  amount  they  will  need  in  reBrement  

Source:  Voya  ReBrement  Research.com  

How Has Ohio State Teachers Retirement System (STRS) Changed the Retirement Benefit Calculation?

§  2.2% x High 5-Year Average salary starting on 7-1-2015

§  Retirement Triggers: –  Age 60 with 5 Years of Service

–  New Age and Service Requirement Phased in: §  8-1-2015 … 31 Years of Service at any age or Age 65 and 5

years of service §  By 8-1-2026… 35 Years of Service at Age 60; or §  Age 65 with 5 Years of Service

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Source:    STRS  of  OHIO  

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Hypothetical STRS Retirement Income Illustration – Future (August 8-1-2026)

Assume an Average Salary at Retirement of $50,000

Multiplied By

35 Years of Service

Times

2.2% Per Year of Service

Equals

$38,500 / Year Single Life Payout (77%)

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Source:  Ohio  State  Teachers  ReBrement  System.    Individual  Results  Will  Vary.  

Gap Analysis

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Additional Expenses After Retirement

Healthcare §  Pre-Retirement Cost – Often less than $1,000/

year to the employee

§  Post-Retirement Cost – Including Spouse –  5 available plans – select one of your choice –  Average cost is $1017/month or $12,204/Yr.

§  Paid by retiree

§  Where Will the Funds Come From?

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Source:  STRS  of  OHIO  2015  and  Ohio.com  

How Much Do You Need?

§  Should You Aim For 89%? §  Why? §  Gap Analysis Recommended for Custom Alternatives

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Educators Financial Analysis (EFA)

Current Age: 31 Current Annual Salary: $50,000 Anticipated Retirement Age: 60 Inflation Rate: 3% Assumed Rate of Return: 8% Monthly Retirement Income Desired: $3,708

For hypothetical illustration purposes only - not intended to imply the performance of any specific investment. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested.

Educators Financial Analysis (EFA)

Inflated Monthly Income Needed: $ 8,719

Monthly Income From STRS: $ 7,305

Gap in Monthly Income: $ 1,414

Amount Needed Per Pay To Fill The Gap: $ 166 For Hypothetical Purposes Only. Not intended to imply the specific performance of any investment

Source:    Voya  Educators  Analysis  

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Sample EFA

§  See EFA pdf

Paycheck Comparison

                                       Without  403(b)/457  

   1,923   GROSS  PAY            212   STRS                  0   403(b)/457  ________      1,711   TAXABLE            175   FEDERAL  TAX                52   STATE    TAX  (OH)                38   CITY  TAX  (2%)  ________      1,446   NET  PAY  

DIFFERENCE  For  HypotheVcal  Purposes  Only.    Not  Intended  

to  imply  the  specific  performance  of  any  investment.  

 

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With  403(b)/457  

       1,923                212                166        ______          1,545                149                    44                    38        ______          1,314          (132)  

 1,923          212          207  ______      1,504            143                43                38  _______      1,280      (166)  

Source:    IRS  PublicaBon  15,  Ohio  Dept.  of  TaxaBon.    Assumes  2%  City  Tax  

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What is the urgency?    

The  Cost  of  ProcrasVnaVng…  InvesVng  $50/month  earning  8%  annually  

Start  at  age  25   Start  at  age  35   Start  at  age  45  

At  age  60  $114,694  

At  age  60  

$47,551  At  age  60  $17,301  

This  hypotheBcal  example  does  not  reflect  the  performance  of  any  specific  product  nor  does  it  reflect  sales  charges,  fees,  taxes  or  other  expenses  that  may  be  required  for  some  investments.    SystemaBc  invesBng  does  not  ensure  a  profit  or  protect  against  loss.    You  should  consider  your  ability  to  invest  consistently  in  up  and  down  markets.      

What is the urgency?    Assume  you  want  $200,000  at  reVrement  (age  60)  Also  assume  you  can  earn  8%  annually  

Start  at  age  25   Start  at  age  35   Start  at  age  45  

$87.19    Per  

Month  

$210.30  Per  

Month  

 $577.97  Per  

Month  

This  hypotheBcal  example  does  not  reflect  the  performance  of  any  specific  product  nor  does  it  reflect  sales  charges,  fees,  taxes  or  other  expenses  that  may  be  required  for  some  investments.    SystemaBc  invesBng  does  not  ensure  a  profit  or  protect  against  loss.    You  should  consider  your  ability  to  invest  consistently  in  up  and  down  markets.      

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You’re 30 Today

Your Large Expenses Are: –  Student Loans –  House / Rent Payment –  Daycare for Children –  Car Loans

When You’re 45 Your Large Expenses Are:

–  House / Rent Payment –  Car Loans –  Retirement –  College

What If You Postpone Starting?

23 For agent/registered representative use only. Not for public distribution

§  Swap Coffee for Latte §  Dine In, Not Out 1 time a

month §  Increase Insurance

Deductible §  Rent Movies Instead of

Going to the Movie Theater

§  1 Less of Anything

Save $80 / Month Save $50 /Month Save $22 / Month

Save $20 / Month Save $20 / Month Estimated Potential Savings:

$192/Month

Potential Ways To Start Saving – Money Is Tight

24 For agent/registered representative use only. Not for public distribution

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403(b) §  Can accept pre-tax and Roth

contributions (post tax, no income limits)

§  $18,000 limit in 2015 §  $6,000 catch-up if age 50+ §  Loans available §  Subject to 10% IRS penalty for

early withdrawal

457 §  Generally pre-tax contributions

only §  $18,000 limit in 2015 §  $6,000 catch up if age 50+ §  Loans available §  Not subject to IRS 10% penalty

for early withdrawal §  Withdrawals limited to

Unforeseeable Emergency Rules

403(b) or 457?

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Traditional IRA - Attributes

§  Not Employer Sponsored, Individually Controlled, Generally Deducted on Form 1040, wide variety of investment products

§  $5,5000 Annual Contribution Limit for 2015 –  Catch-Up Contribution of $1,000 if Age 50 or older

§  Deductibility Based on Income Limits, and is phased out as follows: –  Single/Head of Household – $61,000 to $71,000 –  Joint Return (Active with Active Participant Spouse in Pension

Plan) - $98,000 to $118,000 –  Joint Return (Non-Active Pension Plan) – $183,000 to $193,000

§  No Loan Feature §  10% IRS Early Withdrawal Penalty Tax (Under Age 59 ½ ) §  Taxed as ordinary income in year of withdrawal

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PLOP – Partial Lump Sum Option Plan

§  What is PLOP? §  Lump sum payout at retirement §  PLOP range is 6 – 36 times the monthly Single Life

Annuity (SLA) as determined by STRS of Ohio §  Election of PLOP reduces STRS monthly pension

check

§  Why Consider PLOP? § Generates instant liquidity §  Fosters a sense of control §  Can be used to pay insurance costs during retirement § May provide an estate benefit

PLOP - Continued

§  How Does It Work? –  Assume SLA of $3,000 per month

§  PLOP range is $18,000 - $108,000 (6 to 36x)

§  *Cost of PLOP is $7.09/1,000/month x »  $7.09 x 108 (thousand) = $765.72 »  $3,000 - $765.72 = $2,234.28

§  Retiree is in control of $108,000 » Retiree receives $2,234.28/month from STRS

Source:    STRS  Ohio  2015  

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The Fork in the Road

Advantage of Using Financial Advisors

§  Dalbar Inc. is a company which studies investor behavior and analyzes investor market returns. The results of their research consistently show that the average investor earns below average returns.

§  For the twenty years ending 12/31/2014 the S&P 500 Index averaged 9.85% per year. A pretty attractive historical return. The average equity fund investor earned a market return of only 5.19%.*

§  Why is this? The  S&P  500  is  an  unmanaged  group  of  securiBes  considered  to  be  representaBve  of  the  stock  market  in  general.    Individuals  cannot  invest  in  an  index.  Past  performance  is  not  indicaBve  of  future  results.  *Source:  Dalbar  Inc.  

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Action Plan

§  Step 1 – Review Provider List §  Step 2 – Contact Provider of Your Choice §  Step 3 – Commit to Start Contributions ASAP

The Most Important Decision You Can Make is Not How Much to Contribute…

It’s Making the Decision to Start Today!

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Questions?

?

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