Transcript Document

Retirement planning for women
How you might
save more and
spend it longer
Presenter Name
Presenter Function
Date
1
Seminar provided by ING Financial Advisers, LLC (member SIPC).
©2007 ING North America Insurance Corporation
C07-0122-004 3/07
The ING Difference…
to life planning
about financial realities
that take the whole picture into account
2
©2007 ING North America Insurance Corporation
What ground we’ll cover today
What unique investment
challenges do women face?
Am I saving as much as I could —
where I should?
How can I invest now so I can
potentially maintain my lifestyle later?
How should I spend later so
I won’t risk outliving my assets?
3
©2007 ING North America Insurance Corporation
Who will join us along the way
4
Sondra
Eileen
“I lost so much money
in the market…I just
stopped investing.
What should I do now?”
“I thought I was on
track, but then my
husband died 10 years
ago. Now what?”
©2007 ING North America Insurance Corporation
Donna
“I think I’m doing
the right things. But
I’m always willing
to learn more.”
What unique retirement planning
challenges do women face?
“Is preparing for
retirement really that
different for women?”
5
©2007 ING North America Insurance Corporation
The good news:
Women are taking greater charge of their finances.
6
They’re
earning more…
They’re controlling
more spending…
They’re making more
major purchases…
They’re starting
more businesses.
50% of
professional jobs
80% of
household spending
21% of home buyers
are single women.
55% of new
business start ups
U.S. Department
of Labor, 2005.
The Trendsight Group, 2005.
National Association
of Realtors, 2005.
SCORE, Partner
with SBA.gov, 2005.
©2007 ING North America Insurance Corporation
The not-so-good news:
Women are likely to receive less from other sources.
Women tend to earn
less than men…
So they receive less
from Social Security…
And are less likely
to get a pension…
Yet — they need their
money to last longer.
Average
65-year-old
man will live
to age 82.
Women get 81% for
every $1 men earn.
U.S. Department
of Labor, 2005.
7
Women average
26% less than men.
Income of The Aged
Chartbook, 2005 ssa.gov.
Only 28% of women
earn a pension.
AARP, 2006.
©2007 ING North America Insurance Corporation
Average 65-year-old
woman will live to
age 85.
Centers for Disease Control
and Prevention, cdc.gov, 2006.
The bottom line: you’ll need to
save more — and spend it longer
Social
Men
Security:
Pension:
$12,583
$12,000
Women
Social
Security:
$8,799
Pension:
$6,141
“Sources of Income for Older Persons in 2004,” Public Policy Institute, Data Digest, AARP, 2005.
8
©2007 ING North America Insurance Corporation
Am I saving as much I could —
and where I should?
“I can’t possibly save
any more for my future
expenses. It’s tough enough
just making ends meet for
today’s expenses.”
9
©2007 ING North America Insurance Corporation
Envision where you’d like to be.
You’ll be much more motivated to save.
10
©2007 ING North America Insurance Corporation
Take stock of where you are.
How much do you spend each
month?
How much debt have you
accumulated?
Do you have an emergency fund
to cover 3-6 months?
How much have you saved?
How much more could you save —
if you spent even a little less?
11
©2007 ING North America Insurance Corporation
Maximize contributions to your employersponsored retirement plan.
Sondra
Eileen
Decided she couldn’t save…
but still ended up paying
Uncle Sam nearly $200
more!
Paid herself first. Saved nearly
$200 on taxes. Plus got over
$150 more free from her
employer!
Taxable Income
401(k) contribution:
Catch-up contribution
Taxable income:
Federal income tax:
Employer match:
$4,166.67
-
0
0
= $4,166.67
$1,041.67
0
Taxable Income
$4,166.67
401(k) contribution:
Catch-up contribution
-
$416.67
$333.33
Reduced taxable income:= $3,416.67
Federal income tax:
$854.17
Employer match:
$166.67
For illustrative purposes only. Assumes 25% tax bracket, 10% 401(k) contribution, 1/12 of the $4,000 catch-up contribution and
50% employer match–up to 10%.
12
©2007 ING North America Insurance Corporation
See how even saving a little more now
adds up over time.
Both earn $50,000
but Donna decides
to save $125 more
a month.
• Defers 5% of her salary
for the next 15 years
• Defers 8% of her salary
for the next 15 years
• Increases her account by $59,910
• Increases her account by $95,856
nearly $36,000 more than Sondra!
The example mentioned above is hypothetical, for illustrative purposes only and not intended to project the performance of any specific
investment.Actual rates of return will vary over time. Dollar cost averaging/Systematic Investment plan does not ensure a profit nor
guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels.
13
©2007 ING North America Insurance Corporation
How should I invest now so I can
maintain my lifestyle later?
“I know I’m losing time.
But I’m afraid to lose
any more money.”
14
©2007 ING North America Insurance Corporation
Balance your desire for growth with your
stomach for risk.
Important Information: The model
portfolios shown are the product of a
Modern Portfolio Theory risk and
reward model. The model seeks to
correlate specified levels of risk to
investment allocation combinations that
produce the highest potential returns
consistent with an individual's tolerance
for risk. In other words, the model seeks
to identify portfolio mixes of asset
classes along the "Efficient Frontier"
between risk and potential reward. The
"Efficient Frontier" is a graph
representing possible sets of asset
class mixes that maximize expected
returns at each level of portfolio risk.
There is no one universally accepted
standard to determining the exact asset
class allocations that will sit on the
"Efficient Frontier." Other mathematical
models may vary in how they assess
and correlate risk and return factors
and, consequently, may produce
different allocations than those shown
here.
For illustrative purposes only. This example may not reflect your actual situation.
15
©2007 ING North America Insurance Corporation
Balance your desire for growth with your
stomach for risk.
Source: ChartSource, Standard & Poor's Financial Communications.
Stocks are represented by the S&P 500® Index, an unmanaged index generally considered
representative of the stock market. The return and principal value of investing in a stock mutual
fund or variable annuity funding option fluctuates with changes in market conditions. Stocks may
offer greater growth potential in comparison to bonds, but carry more risk.
Bonds are represented by long-term Treasuries (10+ years) and constructed from yields published
by the Federal Reserve. The principal value of a bond varies inversely to the rise and decline of
interest rates. Bonds typically offer a fixed rate of return, if held to maturity. However, bonds may
contain a call feature that may be exercised prior to maturity.
Cash is represented by the yield of 90-day Treasury bills and is a highly liquid security with a
known market value and maturity when acquired, of less than three months.
Past performance does not guarantee future results. An index is unmanaged. You cannot invest
directly in an index, and indices do not reflect the portfolio of any investment.
For illustrative purposes only. This example may not reflect your actual situation.
16
©2007 ING North America Insurance Corporation
Stick with your strategy —
even when the market gets rough.
Growth of $10,000 for the 10-year period from 12/31/96-12/29/06
$25,000
$22,440
$20,000
Gain
8.42%
Loss
$17,352
5.67%
$15,000
$13,980
4.8%
3.41%
$10,000
$11,536
1.44%
$9,629
-.38%
$5,000
Always
invested
Missed 5
best days
Missed 10
best days
Missed 15
best days
Missed 20
best days
This chart is for illustrative purposes only. Performance shown is index performance of the S&P 500®, and not illustrative of any
particular investments. Source: Commodity Systems, Inc.; via yahoo.com; Bloomberg, 2007. Past performance is historical and
cannot predict future results. There are risks of fluctuating prices and uncertainty with regard to rates of return and yield inherent in
investing. The S&P 500 is an unmanaged index of the common stock prices of 500 widely-held U.S. stocks. An investor cannot
invest directly in an index.
17
©2007 ING North America Insurance Corporation
See how earning even a little more
adds up over time.
Both earn $50,000
and defer 8% over
15 years
• Averages 6% returns per year
• Averages 8% returns per year
• Increases her account by $95,856
• Increases her account by $112,869
over $17,000 more than Eileen
The example mentioned above is hypothetical, for illustrative purposes only and not intended to project the performance of any specific
investment.Actual rates of return will vary over time. Dollar cost averaging/Systematic Investment plan does not ensure a profit nor
guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels.
18
©2007 ING North America Insurance Corporation
How should I spend later so I won’t
risk outliving my assets?
“I’ve been so focused
on saving. I never gave
much thought to how I
would withdraw those
savings when I retire.
19
©2007 ING North America Insurance Corporation
Organize your resources into
different categories.
• Create an emergency fund that
could cover up to 6 months’ expenses.
• Separate remaining assets into
three categories:
- Short-term money to help cover
the necessities.
- Mid-term money to help cover
the niceties.
- Long-term money that might
grow and help replenish the
other categories.
20
©2007 ING North America Insurance Corporation
Have a steady stream of cash to
pay your basic expenses.
What goes in:
What it covers:
• Social Security
• Food
• Pension
• Housing
• Part-time income
• Utilities
• Rental income
• Taxes
• Health Care
• Insurance
“The Necessities”
21
©2007 ING North America Insurance Corporation
• Emergencies
Not enough to cover monthly necessities?
Turn a portion of your
savings into a stream of
regular income checks
that can be used for
essential expenses.
The
Necessities
Long-Term
Assets
22
©2007 ING North America Insurance Corporation
Once fixed expenses are covered,
fund discretionary expenses.
What goes in:
What it covers:
• Retirement plans
Money needed to help
replenish essentials
and pay for:
• Interest/dividends
• IRAs
• Travel
• Home equity
• Entertainment
• Employment income
• House/car repairs
• Bank savings/CDs
• Education
“The Niceties”
Bank certificates of deposit are FDIC insured up to applicable limits and offer a fixed rate of return. Variable annuity
returns/mutual fund yields and principal will fluctuate with market conditions.
23
©2007 ING North America Insurance Corporation
Stash some cash away for the long term.
What goes in:
What it covers:
• Long-term stock
investments
Money needed to help
replenish the resources
for your niceties and to
provide for:
• Long-term bond
investments
• Potential long-term
growth
• Any other type
of financial
investment
Long-Term Growth
24
©2007 ING North America Insurance Corporation
• Additional income
to compensate for
inflation hedge and
longevity protection
Shift your resources as necessary.
Possible
solution:
May need to convert
$170,000 of her
savings nest egg to
generate $1,000
more regular income
each month for the rest
of her life.*
Monthly shortfall:
• Monthly expenses of $2,500
• Monthly income of $1,500
This hypothetical illustration assumes a lump sum purchase of an immediate annuity using a fixed investment option; your income
payout amount is based on a single lifetime payout using the current unisex life expectancy tables. A single lifetime annuity payout
will provide you with an income that begins on your retirement date and continues for as long as you live.
25
©2007 ING North America Insurance Corporation
Don’t withdraw from your tax-deferred plans
too early or too late.
Your tax-deferred savings limit when how you take your money.
Type of Tax
26
When It Applies
How Much It May Be
Early Withdrawal
Penalty
Generally, if you withdraw
prior to age 591/2
10% of amount
withdrawn
Required Minimum
Distribution
Penalty
If you don’t withdraw at least
the Minimum Required
Distribution beginning at
the later of retirement or
April 1st of the year after you
turn age 701/2
50% of Minimum Required
Distribution not taken
©2007 ING North America Insurance Corporation
Don’t withdraw too much too fast.
Donna withdraws
10% each year…
Sondra withdraws
5% each year…
And runs out of
money in 11 years.
And it lasts
24 years.
65
65
70
70
75
75
80
80
85
85
90
Eileen withdraws
7% each year…
And runs out of
money in 16 years.
This chart assumes a retirement balance of $200,000, an average inflation rate of 3%, and an average fixed rate of return of 4%. This
chart is for illustrative purposes only and is not indicative of any investment. Past performance is no guarantee of future results.
27
©2007 ING North America Insurance Corporation
Don’t feel you have to go it alone.
A financial professional:
• Helps you evaluate your
entire financial situation
• Provides objective input
• Explains risks and options
• Offers choices personalized
to your situation
• Operates from experience
28
©2007 ING North America Insurance Corporation
Don’t wait any longer to move forward!
29
©2007 ING North America Insurance Corporation
How can we help you get started?
Consult a financial professional.
Read on the topic.
See your benefits manager.
Check the Internet.
Ask for our Create the Vision CD-ROM.
30
©2007 ING North America Insurance Corporation