workshop ey w nc conference 06-18-14 final

Financial Planning Workshop

GBOPHB

Session objectives

Take the Know Your Numbers quiz

Consider your retirement goals and income needs through a 6-step process

Consider your investment strategy

Learn to use the tools and resources available to you

Know which steps to take next

Tools and resources

EY workshops and webinars

General Board Website

• www.gbophb.org

EY Website

• EY Financial Planning Center® (EYFPC)

Benefits Access

• www.benefitsaccess.org

Telephone counseling

• EY Financial Planner Line® (EYFPL)

General Board Call Center

• 1-800-851-2201

EY Financial Planner Line®

•No cost for participants in General Board Retirement Plans

•Objective and confidential

•Financial planning•Retirement

•401(k) /403(b)/investments

•Education

•Insurance

•Debt & spending

•Much, much more!

•How To get started:•Phone: 1.800.360.2539

•Monday - Friday, 9 a.m.- 8 p.m. Eastern

Action Step

• Site: http://gbophb.eyfpc.com

• Company code: gbophb

• Company program: gbophb

Action Step When Done

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□

□

□

□

Personal action plan

Action Step

• Create your own personal action plan throughout this presentation

Net Worth Statement

Cash Flow Statement

Where are You Today?

Net Worth = Assets ― Debts

Cash Flow = Income ― Expenses

Know Your Numbers

Planning “Number” Resource / Action

Net Worth and debt interest rates

Your REAL cash flow

Emergency fund need

Credit score

Credit report

Future value – retirement

Retirement time horizon & “Picture”

Asset allocation / approach

Retirement savings % / $

Estate planning documents

Presentation title

Know your numbers: Net Worth

• Prepare annually; develop a goal to increase Net Worth number each year

Net worth (assets – debts)

• Financial approach

• Psychological approach

• Cash Flow approach

Interest rates from high to low

• Monthly debt payments ÷ Monthly gross income

• < 36% is preferred by lender

• > 42% - potential signs of financial difficulty

Debt to income ratio

• Can deduct up to $2,500 in qualifying student loan interest per year

• Adjusted Gross Income limits apply

• MFJ: $130k - $160k Single: $65k - $80k

Student loan interest

deduction

Prepare an annual Net Worth statement

Assets

401(k) and IRAs $150,000

Bank account $20,000

CDs $10,000

Home $200,000

Car $20,000

Other assets $25,000

Total Assets $425,000

Debts

Credit card $5,000

Car loan $10,000

Mortgage $110,000

Total Debts $125,000

Net Worth $300,000

GoalsRetirement

Emergency

Fund

Action Step

• Visit “Calculating Your Net Worth” on the EYFPC.

Prepare a Cash Flow statementWays to control spending

Comparison shop before spending

• Use a price check app on your phone while at the store

Avoid impulsive spending opportunities

Use credit cards responsibly, or use cash, checks or debit cards to control spending

Monitor ATM withdrawals

Maintain a budget to understand where your money ‘belongs”

Record all expenditures (Notebook Method)

Personal Decisions — Finding Ways to Save

*Savings grown tax-deferred at 7% per year for 30 years and assumes no withdrawals; figures rounded to the nearest $100

ACTIVITY SAVINGS GROWTH*

Dine out one less time per month $45 / month $54,600

Spend less on dry cleaning $7.50 / week $39,400

Reduce new clothes purchases $400 / year $40,300

Skip gourmet coffee every other day $7 / week $36,800

Car wash every two weeks vs. each week $12 / month $14,600

Stream a movie vs. going to the theatre $11 / month $13,300

Total savings & investment growth $1,970 / year $199,000

Know your numbers:Maintain an emergency fund

Know your number: 6 months of necessary expenses

Know your numbers: Obtain your credit score

Know your numbers: Access a free credit report every 4 months

Funding Your Goals: Education

• Tuition

• Room and board

• Books and supplies

• Travel

• Other (telephone, extracurricular activities, etc.)

What are the costs involved?

• In-state / Out-of-state

• Private / Public

What type of school?

• 529 Plans

• Financial aid (grants, scholarships, student loans, work-study programs)

• Personal savings and investments

• Other loans

• Tax credits

What are your savings and education funding sources?

Presentation title

Action Step

• Call the EYFPL for an Education Funding Analysis & discussion

Retirement planning

1) What are your goals?

2) What will you need?

3) What will you have?

4) Is there a gap?

5) What should you do?

6) How can you stay on track?

The retirement planning process


• When will you retire?

• Where will you live?

• What will you do?


Action Item: Develop your “Picture of Retirement”

Age

65

Age

35

Age

90

30

years

25

years

TODAYHOW MANY

YEARS?

END

OF

RETIREMENT

BEGINNING

OF

RETIREMENT

HOW MANY

YEARS?

Know your numbers:Consider your retirement time horizon today

What will you do with your time?

Will you be employed?

Will you do volunteer work?

Will you take up a hobby?

What activities do you enjoy?

Will you join a club?

Do you plan to travel?

Where will you live in retirement?

A. Current home

B. If living in a parsonage, will you buy or rent a home?

C. Buy a home, in state or out of state

D. Rent a home, in state or out of state

F. Don’t know



• How long will you live?

• What income will you need each year?

• How will inflation impact your needs?

• Will you have any one-time expenses?


Estimating your spending during retirement

Today

FICA/SECA Taxes 15%

Savings 7%

Transportation/commute 8%

Income Taxes 15%

Housing 20%

Clothing 5%

Food 10%

Gifts/donations 10%

Entertainment 5%

Insurance 5%

Replacement Ratio 100%

Retirement

0%

0%

5%

10%

20%

5%

10%

10%

10%

10%

80%

Action Step

• Visit the “forms” section of the EYFPC to complete the cash flow statement worksheet to help determine your current and future spending

How will inflation affect you?

Years From Now 3% Inflation

0 $50,000

10 $67,200

20 $90,300

30 $121,400

40 $163,100

50 $219,200

60 $294,600

Note: Figures rounded to the nearest $100

4% Inflation

$50,000

$74,000

$109,600

$162,200

$240,000

$355,300

$526,000




• Social Security

• GBOPHB Benefits

• Personal Resources


Social SecurityWhen can you collect benefits?

BornAge For Full

Benefits

Reduced Benefit

At Age 62

Delayed

Retirement

Credits

Before 1938 65 80% 7% - 8%

1943-1954 66 75% 8%

1960 and Later 67 70% 8%

Note: For missing years add two-month increments to reach your age for full benefits

Know your numbers:Social Security statement

Action Step

• Visit www.ssa.gov to obtain your Social Security statement, review your earnings record, and run the Retirement Estimator

How do you benefit from the General Board Retirement Plans?

Features Benefits

Plan Types ►DB and DC components

Contributions ►100% church funded

Payment Options

►CRSP DB: Monthly benefit

►CRSP DC: Lump sum or cash installments

►MPP: As of 01/01/14, 65% must be annuitized

►Pre ‘82: Monthly benefit

Vesting ►100% immediate

Action Step

• Use Benefits Access to obtain a projection of your retirement benefits

How do you Benefit from the UMPIP?

Features Benefits

Matching Contribution ►Incentive to contribute

Pre-Tax Savings►Reduces current Federal & SECA taxes

►Helps you save more

Tax-Deferred

Compounding►Savings grow faster

Investment

Control/Responsibility►Self-directed or LifeStage

Payment Option ►Lump Sum or cash installments

Payroll Deduction ►Automatic savings

Action Step

• Contribute at least 1% of your pay to the UMPIP to receive a 1% match

How to benefit from the UMPIP over time

$1,200 Annual

Savings

$3,000 Annual

Savings

$4,800 Annual

Savings

Start Saving at

Age 55$16,800 $41,900 $67,100

Start Saving at

Age 45$46,800 $117,000 $187,200

Start Saving at

Age 35$100,600 $251,400 $402,200

Start Saving at

Age 25$196,900 $492,100 $787,400

Accumulated Savings at Age 65:

Assumes a 6% annual rate of return. Figures rounded to the nearest $100.

Lifestage Retirement Income

• Service that manages your distributions by turning your defined contribution accounts into monthly payments designed to last for your lifetime.

What is it?

• Yes, this service manages the investment aspect of your account. This combination aims to provide regular monthly income with adjustments for inflation.

Must you use LifeStage Investment Management Service?

• The payments vary each year based on the value of your Defined Contribution Account, age, investment performance and other factors in your LifeStage personal profile.

How are the payments determined

each year?

• You can you stop the service or take additional withdrawals from your account at any time.

• Can set aside a reserve amount for emergencies of up to 20% of the balance

What flexibility does it provide?

Action Step

• To learn more, visit www.gbophb.org/sri_funds/lsri.asp

http://www.gbophb.org/sri_funds/lsri.asp

Designated housing allowance exclusion

• When taking distributions from the CRSP or UMPIP, you may elect to have some or all of your withdrawals excluded from federal gross income as housing allowance exclusion

What is it?

• Yes, it can be applied to both lump sum and monthly benefits received from MPP, CRSP-DB and pre 1982 plans

Can it be applied to annuity and lump sum distributions?

• Can elect to have no taxes withheld from annuity payments

How does it impact withholding?

Designated housing allowance –Excludable income

The amount excludible from gross income is the lesser of:

1• Amount officially designated as housing allowance by the

General Board

2

• Actual expenses for your primary residence, including:

• Mortgage principal and interest, utilities, taxes, insurance, maintenance and furnishings

3• Fair rental value of the home, including furnishings and cost of utilities

Designated housing allowance –Example

Amount officially designated as housing allowance by the General Board

$30,000

Amount spent for your primary residence

$24,000

Fair rental value of the home, including furnishings and cost of utilities

$28,000

• Amount excludable from gross income$24,000

Taxation of GBOPHB benefits

• Subject to ordinary income taxes

• 10% penalty may apply if under age 59 ½

• Mandatory withholding of 20%

• Accounts subject to Required Minimum Distributions at Age 70½

Lump sum and installments

• Subject to ordinary income taxes

• Optional withholding

Annuity distributions

Note: Taxation may differ if distributions are designated as a “housing allowance exclusion”

Personal resources

IRAsTaxable

accounts

Previous employer’s

retirement plans

Spouse/partner’s retirement assets

and pension

Equity in personal residence

IRAs: Eligibility and contributions

Traditional IRA Roth IRA

Ability to

Contribute

► Must have earned income

(non-working spouse is eligible to

contribute)

► Must have earned income

(non-working spouse is eligible to

contribute)

►2014 AGI Phase Out

►Single & HOH: $114,000 - $129,000

►MFJ: $181,000 - $191,000

Maximum

Contributions

►$5,500

►$1,000 catch-up for those age 50+

Contribution

Deductibility

► 2014 AGI Phase Out – You

►Single & HOH: $60,000 - $70,000

►MFJ: $96,000 - $116,000

► 2014 AGI Phase Out – Spouse

►MFJ: $181,000 - $191,000

►Not deductible

Taxation of

Distributions

►Ordinary income on before-tax

contributions and earnings

►10% penalty may apply if under

age 59 ½

►Tax-free qualified distributions

►Non-qualified distributions may

be subject to tax and/or penalty

• 40Years (until goal)

• 7%Annual Interest %

• $0Present Value

(current balance)

• $6,000Annual Payment

(savings)

• $1,281,657Future Value

• 35Years (until goal)

• 7%Annual Interest %

• $0Present Value

(current balance)

• $6,000Annual Payment

(savings)

• $887,481Future Value

Know your numbers: Use the Savings Calculator on the EYFPC or a future value app





• How do your goals and income sources compare?

4) Is there a gap?

Run a retirement report

Action Step

• Visit the EYFPC and/or call the EYFPL for a retirement funding analysis





4) Is there a gap?

• What can you do?

• What are you willing to do?






4) Is there a gap?


• Monitor and update your plan at least annually

6) How can you stay on track?

Closing the gap

Save more Work longer

Spend less in retirementUse an alternate asset

allocation

Combination

Investment planning

Know your numbers: Asset allocation asset class percentages

Foreign

Equity __%

Fixed

Income __%

Large Cap US

Equity __%

Mid/Small Cap

US Equity __%

Deciding your investment approach

Key

Decision Factors

Choose Your

Own Set of

Investments

Use the

Guidance of

an EY

Planner

Choose a

Balanced

Fund

Use

LIfeStage to

Manage Your

Portfolio

Time Required

Knowledge Required

Choose an Asset

Allocation

Reallocate Existing

Balances and Future

Contributions

Rebalance

Why is asset allocation important?Asset-class winners and losers

Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2014 Morningstar. All Rights Reserved.

Highest

return

Lowest

return

• Small stocks • Large stocks • International stocks • Long-term government bonds • Treasury bills • Diversified portfolio

28.2

3.1

2.1

0.0

–3.3

–11.7

11.628.6 29.8 21.5 22.8 17.8 60.7 20.7 14.0 26.9 25.9

9.920.3 27.3 5.9 3.8 1.6 39.2 18.4 7.8 16.2 1.6

5.513.1 21.0 0.1 3.7 –6.3 28.7 11.9 7.1 15.8 –17.9

5.311.9 14.8 –3.6 –0.6 –13.3 26.2 10.9 5.7 13.0 –36.7

4.74.9 4.7 –9.1 –11.9 –15.7 1.4 8.5 4.9 4.8 –37.0

–5.2–7.3 –9.0 –14.0 –21.2 –22.1 1.0 1.2 3.0 1.2 –43.1

32.5

28.1

26.5

14.4

0.1

–14.9

31.3

15.1

13.0

10.1

8.2

0.1

18.2

17.9

16.0

11.1

3.3

0.1

45.1

32.4

23.3

17.9

0.0

–11.4

33.4

22.8

15.9

15.9

5.3

2.1

23.0

17.6

10.2

6.4

5.2

–0.9

37.6

34.5

31.7

24.2

11.6

5.6

8.1%

3.9

3.1

1.7

1.3

–7.8

20081998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009 2010 2011 2012 20131997199619951994

Small stocks Large stocks Government bonds Treasury bills

–60

–30

0

30

60

90

120

150%

1-yearHolding period

5-year 20-year 1-year 5-year 20-year 1-year 5-year 20-year 1-year 5-year 20-year

Compound

annual return:

12.3% 10.0%5.5% 3.5%

Past performance is no guarantee of future results. Each bar shows the range of compound annual returns for each asset class over the period 1926–2013. This is for

illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2014 Morningstar. All Rights Reserved.

1926–20135-year holding periods1-year holding periods

20-year holding periods

Reduction of risk over time

UMPIP investment options

Asset Class Fund Name Expense Ratio

Multi Asset Class

Multiple Asset Fund 0.67%

Balanced Social Values

Fund0.44%

Fixed Income (Bonds)

Stable Value Fund 0.36%

Inflation Protection Fund 0.44%

Fixed Income Fund 0.55%

Equities (Stock) – All Cap U.S. U.S. Equity Fund 0.71%

Equity (Stock) – Foreign International Equity Fund 0.83%

• Automatic rebalancing and reallocation

Provides customized investment fund allocation using the General Board investment options

• Ability to opt in and out for optional plans

Mandatory use for some plans, optional for others

• Free to active and inactive members

No cost to you

• Customized investment mix developed based on age, risk tolerance and eligibility for Social Security Benefits

A personal Investment Profile can be developed

LifeStage Investment Management Service

Action Step

• Visit gbophb.org to learn more and/or sign-up for LifeStage

Deciding your investment approach

Key

Decision Factors

Choose Your

Own Set of

Investments

Use the

Guidance of

an EY

Planner

Choose a

Balanced

Fund

Use

LIfeStage to

Manage Your

Portfolio

Time Required High Medium Low Low

Knowledge Required High Low Low Low

Choose an Asset

AllocationYou EY Fund Manager LifeStage

Reallocate Existing

Balances and Future

Contributions

You You You LifeStage

Rebalance You You Fund Manager LifeStage

Ensure your wishes are followed

• Financial & Healthcare

• Choose today who will make your financial and health decisions for you if incapacitated

Powers of Attorney

• Make your life sustaining wishes known to family and doctors

Living Will

• Opportunity to make key decisions – executor, guardian, distribution of personal assets

Will

• LOOK at the forms every 5 years

Beneficiary forms

• Organize your affairs – ease the burden on your survivors

Vital Records Organizer

Action Step

• Visit the estate planning section of the EYFPC to print and complete a Vital Records Organizer

Know Your Numbers

Planning “Number” Resource / Action

Net Worth and debt interest rates EYFPC: Calculating your net worth

Your REAL cash flow Notebook Method

Emergency fund need Necessary expenses x 6

Credit score CreditKarma.com

Credit report AnnualCreditReport.com

Future value – retirement fCalculate (iPhone) or other

Retirement time horizon, “Picture” and

pricetag

You

Asset allocation / approach You and/or EY financial planner

Retirement savings % / $ EY Retirement analysis report

Social Security projection

Estate planning documents EYFPC / Attorney / Computer

Presentation title

Tools and resources

EY workshops and webinars

General Board Website

• www.gbophb.org

EY Website

• EY Financial Planning Center® (EYFPC)

Benefits Access

• www.benefitsaccess.org

Telephone counseling

• EY Financial Planner Line® (EYFPL)

• 1-800-360-2539

General Board Call Center

• 1-800-851-2201

Personal action plan

Action Step When Done

Consider your retirement goals and

determine your income needsNext 10 days □

Determine your investor profile Next 14 days □

Develop and implement an appropriate

savings and investment planNext 30 days □

Call the EYFPL and visit the EYFPC As needed □

Monitor and update your plan At least annually □

Questions?

workshop ey w nc conference 06-18-14 final

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