Saving for Retirement

Saving for Retirement

The PICPAPennsylvania Institute of Certified Public Accountants (PICPA)

The PICPA is a professional association of more than 22,000 members working together to improve the CPA profession and serve the public interest.

Saving for Retirement

Evaluating Your GoalRetirement means different things to different people.

You must evaluate what will impact your retirement goals and what you hope your retirement will look like.

Saving for Retirement

Things to Consider• What do you want to do after you retire?• Where do you want to live?• Would you be able to stay in your existing home?• Will you want to move to a warmer climate?• Will you be alone, with a spouse, with other family?• Would you prefer a retirement community?

Saving for Retirement

Your Future PlansEstimates suggest that retirees will need 70% of their pre-retirement earnings to maintain their standard of living.

This can vary, depending on your retirement goals—travel, hobbies, starting your own business.

Saving for Retirement

Ballpark EstimateThere are resources to help you estimate your cost of living in retirement:• www.360financialliteracy.org’s retirement

calculator• www.AARP.org’s Money tab• www.choosetosave.org’s calculators

Saving for Retirement

Retirement Costs Can include:• Food and clothing• Housing and utilities• Transportation• Insurance• Recreation: travel, dining out, entertainment, hobbies• Health care costs: nursing homes, home health care

Saving for Retirement

What about Social Security?How much you receive depends on a few factors:• How much you’ve earned and how long you’ve worked• Date you start collecting benefits• Whether you work after retirement• Whether family members will collect benefits • Whether you receive certain other government benefits

Saving for Retirement

Get an EstimateThe best way to get an estimate of how much you’ll receive from Social Security is to ask!

Use www.ssa.gov’s Social Security Retirement Benefits Estimator.

Saving for Retirement

Ways to Save401(k) Accounts• Employer makes contributions to the plan on a pre-

tax basis• You can defer up to large portions of your salary• Earnings accrue tax deferred• Contribute the maximum even if your employer

doesn’t match it

Saving for Retirement

Ways to SaveRoth IRA• Investments accumulate tax-free• A withdrawal from a Roth IRA is not taxed if it is

made 5 years after the first contribution and is done after age 59 ½

• There are income limits

Saving for Retirement

Ways to SaveTraditional IRAs• Money invested grows tax-free until it is withdrawal• Heavy penalties if withdrawn before age 59 ½• Income and qualification restrictions apply

Saving for Retirement

Ways to SaveAnnuities• Tax deferred investment contract• Multiple payout options:– Lump sum, payment over a number of years, payment

over your lifetime• You have the freedom to decide how the money is paid out• Can invest as little or as much you want

Saving for Retirement

Planning Tips• Start early!• Invest for the long term• Don’t cash out your 401(k) when you change jobs—

it could be rolled into a new employer’s plan• Don’t borrow against your retirement plan unless

absolutely necessary

Saving for Retirement

Planning Tips• Supplement retirement accounts with mutual funds,

savings accounts, and other investments• Cut your current expenses• Delay retirement• Invest more aggressively—this will expose you to

higher volatility

Saving for Retirement

Questions?