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: djohnston83@att.netdjohnston83@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