Transcript Slide 1

Diocese of Davenport
Employee Retirement Savings Plan
Today’s Agenda
•Why is it important to save for retirement?
•How does the Diocese of Davenport Employee Retirement
Savings Plan work?
•What kind of investments are available inside the Plan?
•How do you access your retirement account at TIAA-CREF?
Is Social Security enough?
•Social Security was never designed to be the sole funding source
of a worker’s retirement.
•Introduced in 1935 when average life expectancy was 61.7
years old.
•Didn’t start paying benefits until age 65-people were not
expected to live long enough to receive benefits!
•Social Security accounts for only 36.5% of a retirees income
Good news-we are living longer!
•A 63% chance that at least one member of a couple, aged 65
today, will live to celebrate his or her 90th birthday.
•A 36% chance that one member of that couple will live to be 95.
•To successfully fund your retirement, you will need to save
enough to support yourself for at least 20 years-are you on track
to retire successfully?
Don’t forget about inflation
•Just eating in retirement can cost two people over $200,000!
•$5 a meal, 3 meals a day, over 20 years.
•Add a modest 3% inflation rate, and the cost is nearly $300,000!
Why should you save for
retirement?
No one else is going to do it for
you!
Benefits of saving in the Diocese of Davenport
Employee Retirement Savings Plan
•Contributions to the plan are tax deferred-lower your income tax bill.
•Money in your account grows tax deferred-don’t pay taxes on it until you
withdraw the money at retirement.
•It’s easy! Contributions are withheld from your paycheck and submitted to the
plan on your behalf.
•You decide how to invest the money-broad range of investments available from
TIAA-CREF.
Enjoy the benefits of tax-deferred savings
You may also benefit from tax-deferred growth
How much should you save?
Diocese of Davenport
Employee Retirement Savings Plan Provisions
•Immediately eligible to make 401(k) contributions starting the January
1st or July 1st following your hire date.
•Example-Employee hired March 1, 2013 enters the plan July 1,
2013.
•Can contribute up to $17,500 of your pay to the plan on a pre-tax basis.
•Employees age 50 + can contribute an extra $5,500, for a total of
$23,000
•You can change the amount of your contribution anytime by contacting
your payroll processor.
Diocese of Davenport
Employee Retirement Savings Plan Provisions
•Eligibility for employer matching contributions:
•Age 21
•One Year of Service
•1,000 hours of service in 12 months for hourly workers
•Salaried workers credited with 45 hours of service for each
week worked
•Diocese will match 100% of the first 2% you contribute to the plan
•2% contribution=2% employer match
•1% contribution=1% employer match
•No contribution=no employer match
•Some locations may make additional discretionary contribution-see
your payroll processor for more information.
Diocese of Davenport
Employee Retirement Savings Plan Provisions
•Retirement accounts with previous employers can be rolled into
this plan. Some benefits of consolidating your retirement
accounts include:
•Everything is in one place-easier to get a clearer picture of
your retirement outlook.
•Fewer statements to keep track of and fewer websites to
access to manage accounts.
•Potential cost savings of having all investments together.
Diocese of Davenport
Employee Retirement Savings Plan Provisions
•Withdrawal Options
•Termination of employment
•Retirement
•Death
•Disability
•Financial Hardship-IRS Definition
•Purchase of a principal residence, or to prevent foreclosure
from principal residence.
•Medical expenses for self, spouse, or dependents.
•College tuition for self, spouse, or dependents.
•Burial or funeral expenses for parent, spouse, or dependent.
•Repair of damage to principal residence that qualifies for a
casualty deduction.
Diocese of Davenport
Employee Retirement Savings Plan Provisions
•Hardship Distribution (Continued)
•TAXABLE!
•If under age 59 ½, additional 10% penalty for early withdrawal
•Cannot make contributions to the plan for 6 months
•The best thing to do with your retirement account is to leave it alone!
Investing-The “Basics”
•Stocks (Equities)
•Bonds (Fixed Income)
•Money Market/Stable Value
What do you get when you buy a stock?
•Ownership in a company
•Typically more volatile than bonds
•Since 1926, the average large cap stock has returned 10%
What do you get when you buy a bond?
•You get an I.O.U
•You are essentially loaning money to a government or a
corporation
•Bond issuer agrees to pay a specified rate of interest during the
life of the bond and then to repay the face value of the bond when
it becomes due.
•Bonds are typically less risky and less volatile than stocks.
•Long-term US Treasury bonds have historically returned 5%.
What to do to avoid any and all risk?
What is your risk tolerance?
•To determine your risk tolerance, you need to answer a number
of questions:
•How old are you?
•How long do you have to save and when do you need the
money?
•How much money do you need to fund a successful
retirement?
•How much have you already saved?
Diversification
Diocese of Davenport
Employee Retirement Savings Plan
Investment Options
(Performance and Expenses as of 3/31/2013)
Diocese of Davenport
Employee Retirement Savings Plan
Stock (Equity) Options
CREF Equity Index Account
•Diversified portfolio selected to track the overall market for all
publicly traded stocks in the US.
•All US stocks-less than 1% international exposure.
CREF Stock Account
•Diversified portfolio of stocks, with both domestic and
international exposure.
•67% in US companies and 32% in international companies.
CREF Growth Account
•Invests primarily in large, well-known US companies that
present exceptional growth opportunity-think Apple, Google,
Microsoft, etc.
•93% in US companies and 5% in international companies.
CREF Global Equities Account
•This is a GLOBAL fund-invests in companies of all sizes, both
inside and outside of the US
•52% in US companies and 46% in international companies.
CREF Social Choice Account
•60% stocks/40% bonds
•70% US/30% International
•Only invests in companies who meet the fund manager’s
socially responsible criteria.
TIAA Real Estate Account
•Seeks favorable long-term returns through rental property and
appreciation of real estate.
•Currently holds 80% in real estate and 20% in short-term
instruments.
Diocese of Davenport
Employee Retirement Savings Plan
Bond (Fixed Income) Options
CREF Inflation-Linked Bond Account
•Seeks long-term rate of return that outpaces inflation.
•99% of this fund is invested in US Treasury inflation-indexed
bonds.
CREF Bond Market Account
•Mix of US Government and agency securities, corporate
bonds and mortgage-backed bonds.
•Can have international exposure as well, and up to 20% in
lower-quality bonds.
CREF Short-Term Bond Account
•80% of assets in short-term bonds, which means less
volatility than longer-term bonds.
•Remember risk VS reward!
CREF Money Market
• Cash-equivalent
•Non-existent rate of return
TIAA Traditional Annuity
• “Guaranteed” Investment, paying 3% return
•Withdrawal restrictions on this investment
•Cannot take a lump sum withdrawal
•Withdrawal paid out over ten-year period
TIAA Access Account-Lifecycle Funds
TIAA Access Account-Lifecycle Funds (Continued)
TIAA Access Lifecycle Funds
TIAA Access Lifecycle Funds
Accessing your account with TIAA-CREF
• Contact TIAA-CREF by calling (800) 842-2776
•Access your account online at www.tiaa-cref.org