Transcript Slide 1

FRANCISCAN UNIVERSITY OF
STEUBENVILLE
403(B) PLAN
Your Retirement Matters Now.
IT’S YOUR RETIREMENT. DEFINE IT.
IT’S YOUR BENEFIT. GET IT.
YOUR MONEY, YOUR CHOICE.
INVESTMENT BASICS
FEATURES AND HIGHLIGHTS
Please keep in mind that investing involves market risk, including possible loss of
principal, and there is no guarantee that investment objectives will be achieved. Also,
assets withdrawn from a qualified plan may be subject to a 10% penalty tax if
withdrawn prior to age 59 ½ distribution and all may be subject to income tax.
It’s Your
Retirement.
Define It.
IDENTIFY YOUR
RETIREMENT DREAMS.
WILL SOCIAL SECURITY BE ENOUGH?
Ask the Social Security Administration …
Q
Should I count on Social Security for all my
retirement income?
A
No. Social Security was never meant to be the sole
source of income in retirement. It is often said that a
comfortable retirement is based on a "three-legged
stool" of Social Security, pensions and savings.
American workers should be saving for their
retirement on a personal basis and through
employer-sponsored or other retirement plans.
Source: Frequently Asked Questions, http://www.ssa.gov/qa.htm: 2008
EMPLOYER-SPONSORED
RETIREMENT PLAN
How does it work?
•
•
•
•
A convenient way to contribute
Potentially reduces current income taxes
Potential growth without current taxation
Or consider Roth 403(b) contributions
Now you understand …
1. Retirement means different things
2. Social Security was not designed to
completely fund retirement
3. How your retirement plan works
It’s Your
Benefit.
Get It.
REDUCE CURRENT
INCOME TAXES
Biweekly
pay
Annual
You
reduced income tax
contribute You invest
pay
savings
3%
$29
$22
$188
6%
$58
$43
$375
9%
$87
$65
$563
12%
$115
$87
$750
Example of pretax savings for someone making
$25,000 a year
Results rounded to the nearest dollar assuming a
25% marginal federal tax rate and biweekly pay
periods.
GROWTH POTENTIAL
WITHOUT CURRENT TAXATION
$200,000
Taxable Investment
Tax-deferred Investment
$150,000
$100,000
$57,581
$50,000
$46,960
$14,356
$15,822
$0
10 years
20 years
Totals shown reflect a $100 monthly
investment with an 8% annual return, 4%
annual wage inflation and a 25% federal tax
rate. From the taxable investments, taxes
are taken each month from deposits and
$158,981
annually upon gains. Taxes are taken on the
tax-deferred investment’s end balance. This
is a hypothetical compounding example and
$115,555
is not intended to predict or project
investment results of any specific
investment. Investment return is not
guaranteed and will vary depending upon
your investments and market experience. If
fees were reflected, the return would be
less.
Assets withdrawn from a qualified plan may
be subject to a 10% penalty tax if withdrawn
prior to age 59 ½ distribution, and all may
30 years
be subject to income tax.
OR CONSIDER ROTH
CONTRIBUTIONS —
Roth provides an option to pay taxes on contributions now
These examples are hypothetical
in nature and assume a 25% tax
bracket at distribution. They also
assume that the retirement
plan’s value earns an average
annual total return of 8%.
Investment return is not
guaranteed and will vary
depending upon the investments
and market experience.
A single contribution of $10,000
will be worth the same amount
in 20 years (discounting the
impact of inflation) if the tax
bracket remains the same.
However, if the future tax rate is
greater, the amount distributed
from the Roth account will be
greater than the post-tax amount
distributed from the traditional
401(k) account.
PROTECTION AND
PORTABILITY
Now you understand …
1. Pretax contributions
2. Growth potential without current
taxation
Your Money,
Your Choice.
FINDING MONEY TO INVEST.
Possible
additional
annual
investment
Spendable annual pay has been reduced by Social Security taxes at an assumed rate of 7.65%.
Now you understand …
You should consider contributing as
much as you can
Investment Basics
Please keep in mind that any investment involves risk and there is no
assurance that the investment objective of any fund will be achieved
CASH EQUIVALENTS,
BONDS AND STOCKS.
Stocks
Bonds
Cash
WHAT IS A MUTUAL FUND?
Benefits
• Professional management
• Lower cost than individual stocks and
bonds
• Multiple types to build portfolio
Potential downside of market timing
Hypothetical growth of $10,000 invested in the S&P 500
from January 1980–December 2006
$291,897
$170,471
$79,834
$42,378
Stayed in market
whole time
Missed 10 best
days
Missed 30 best
days
Missed 50 best
days
The hypothetical example assumes an investment that tracks the returns of the S&P 500 Index and includes dividend reinvestment. There is volatility in the market and a
sale at any point in time could result in a gain or loss. Your own investment experience will differ, including the possibility of losing money. You cannot invest directly in
the S&P. Stock values are more volatile than those of other securities. Source: FMR LLC, as of 12/31/06.
Features
and
Highlights
Eligibility – Elective Deferrals
• All employees of the University except
students and adjunct faculty
Eligibility – Employer Contribution
• All employees except student employees,
employees working less than 1,000 hours,
and adjunct faculty
Employer Contribution
Service
Institution
Employee
0-1 year
0%
5% (optional)
1-2 year
2.5%
5%
2-3 year
5%
5%
3-4 year
10%
5%
Vesting Schedule
Years of Service
Vested Percentage
Less than 2
0%
Greater than 2 but less than 3
20%
Greater than 3 but less than 4
40%
Greater than 4 but less than 5
70%
Greater than 5
100%
New Roth Contributions
•
•
Elective Roth Contributions to the Plan
would be made by an employee on an
after tax basis and qualified withdrawals
from the plan will not be taxed.
Making a Roth Contribution is entirely
elective and is subject to the annual
403(b) limits.
2009 Contribution Limits
• Elective Deferrals - $16,500
• Over 50 Catch Up - $5,500
• Qualified Institutional Catch Up - $3,000
for maximum of 5 years
Hardship Withdrawals
•
Under “immediate and heavy” financial need an
individual may make a hardship withdrawal from the
plan to satisfy the need where the individual lacks
other available resources.
The IRS defines immediate and heavy financial need
as:
•
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–
–
–
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Expenses incurred or necessary for medical care;
Purchase (excluding mortgage payments) of your principal
residence;
Payment of tuition and related educational fees for
dependents;
Need to prevent eviction or foreclosure;
Expenses for the repair of your principal residence that would
qualify for the casualty deduction.
Summary Plan Description
• A full SPD is available in the Human
Resource office for your review
Any Questions?