Disclosure Notice
The presentation (The Road to Retirement,
‘Charted Course or Aimless Wander’) and
accompanying narrative was created by the
Arkansas Securities Department. It is intended
solely for educational purposes and cannot be
copied, distributed, or used in any manner
without the permission of the Arkansas Securities
Department.
‘Charted Course or Aimless Wander’
“I’m retired – goodbye tension, hello pension.”
“Retirement: World’s longest coffee break.”
“Retirement - when you stop living at work and
begin working at living.”
“Life begins at retirement.”
“The question isn’t at what age I want to retire but,
at what income.”
“Retirement: It’s nice to get out of the rat race, but
you have to learn to get along with less cheese.”
“The retirement challenge is how to spend time
without spending money.”
“Retirement is when the living is easy and the
payments are hard.”
87% - Workers Not Confident About Their Retirement
57% - Workers Reporting The Value Of Their Savings &
Investments Is Less Than $25,000
28% - Workers Saying They Have Less Than $1000
54% - Workers Who Haven’t Tried To Calculate How
Much They Will Need To Save For A
Comfortable Retirement
General information on the steps required to develop a ‘personal’
retirement plan, including:
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Establishing Basic Retirement Goals
Sources of Retirement Income
Retirement Income ‘Gaps’ and How to Close
Leveraging Your Personal Retirement Savings With TaxAdvantaged Resources
Price of ‘Procrastination’
Basic Investing – Your Investment ‘Profile’, Products, Principles
Implementing My Plan – Who Do I Work With and What Should I
Know?
Resources You Can Use For Assistance

Establish Goals
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Assess Current Situation
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Develop Objectives and Strategies
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Review and Update As Required
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Initial plans are designed to provide a ‘general’
assessment of needs and a ‘basic’ course of action
to achieve them.
Projections are estimates based on assumptions,
which may or may not be valid over the horizon of
the plan.
The nearer to retirement, the more precise the
plan.
‘My’ Retirement Age or Date.
But, you may need to be flexible!
Food, Utilities, Clothing, Home, Auto
Insurance – Home, Auto, Life, Healthcare
Children – College and/or Support
Mortgage / Credit Cards
Travel & Fun
Emergency Funds
Assumptions: No Mortgage; No Dependent Children;
Reduced Taxes; No Work-Related Expenses
$1 OF PURCHASING POWER
TODAY
$30,000 OF INCOME
TODAY
$1 OF PURCHASING POWER
TODAY
$30,000 OF INCOME
TODAY
Is the ‘Rate of Return’ on My Retirement Savings
Staying Ahead of Inflation?

Employee Pension

Social Security

Personal Savings
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Government program initiated in 1935
Qualifying – Requires at least 40 ‘credits;’ generally, 10 years in which
you had earnings subject to social security taxes – Benefit based on
highest 35 years of earnings
Benefit Ages –
‘Early’– Age 62 to ‘full’ retirement date (penalties apply)
‘Full’ – Birthday 1937 and earlier – Age 65
1938 to 1942 – Graded, Age 65, 2 mo. to 65, 10 mo.
1943 to 1954 – Age 66
1955 to 1959 – Graded, Age 66, 2 mo. to 66, 10 mo.
1960 + - Age 67

‘Delayed’ – ‘Full’ To Age 70 (additional benefits accrue)
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Social Security Benefit (2013) – ‘Average’ $1,261/mo. – ‘Maximum’
$2,533/mo.
Income Limits (2013) – Before ‘full’ benefit date, ‘earned income’ is
limited to $15,120 - For every $2 earned over the limit, $1 of benefit is
withheld - No limit at or after ‘full’ benefit date
Taxation of Benefits – File Federal Taxes as:
Individual - Income between $25,000 and $34,000 – Pay on up to 50%
Income more than $34,000 – Pay on up to 85%
Joint –

Income between $32,000 and $44,000 – Pay on up to 50%
Income more than $44,000 – Pay on up to 85%
Other Benefit Provisions:
Disability
Survivorship – Spouse and Minor Children
Disabled Adult Children
Concerns and Issues:


Social Security Trust Fund is Critically Underfunded – Projected
to be Depleted in 2033 – Medicare in 2024
Causes - Changing Demographics - Increasing Life Expectancies
– Lower ‘Worker’ to ‘Retiree’ Ratio

Fixing the Problem – Raise Taxes – Lower Benefits

Bottom Line - Significant Changes ‘Must’ Occur
AVERAGE PERSONAL
SAVINGS RATE


Past 10 Years = 3.61%
Range:
 Low = 1.86% (2005)
 High = 5.03% (2008)
HOUSEHOLD SAVINGS RATE
COMPARISON (2012)
AVERAGE NET WORTH BY
AGE GROUP
AVERAGE HOUSEHOLD DEBT
($96,173)
AVERAGE NET WORTH BY
AGE GROUP
AVERAGE HOUSEHOLD DEBT
PER INDEBTED
‘John’
Single - Age 45
Started With Current Employer - Age 35
Assumptions:
Planned Retirement Date - Age 65
Current Annual Salary - $35,000
Has Traditional Pension Plan
Inflation – 3%
Replacement Ratio – 85%
Planned Retirement Years – 25 (Age 90)
Savings $35,000 in Bank CD’s
Avg. Rate of Return – 3%
Not Currently Saving For Retirement
Projected Retirement Income Replacement Need:
$35,000 @ 3% inflation for 20 years X 85% =
Sources of Retirement Income:
Pension Plan – Estimated $2,200 per month, or
Social Security – Estimated $1,140 per month, or
$53,732 per year
$26,400 per year
$13,680 per year
$40,080 per year
($13,652) per year
Personal Savings - $35,000 @ 3% for 20 Years = $63,725
Years to Deplete @ 13,652 per year with a 3% rate of return = 5.1 years
25 (years in retirement) – 5.1 years (funded) = 19.9 years (income deficient)
Retirement Income ‘Gap:’
$13,652 X 19.9 years =
Projected Retirement Income Replacement Need:
$35,000 @ 3% inflation for 20 years X 85% =
Sources of Retirement Income:
Pension Plan – Estimated $2,200 per month, or
Social Security – Estimated $1,140 per month, or
$53,732 per year
$26,400 per year
$13,680 per year
$40,080 per year
($13,652) per year
Personal Savings - $35,000 @ 3% for 20 Years = $63,725
Years to Deplete @ 13,652 per year with a 3% rate of return = 5.1 years
25 (years in retirement) – 5.1 years (funded) = 19.9 years (income deficient)
Retirement Income ‘Gap:’
$13,652 X 19.9 years = $
271,675

Save More

Increase Rate of Return on Savings

Adjust Retirement Date

Consider Working In Retirement
What about our ‘example’ situation?
‘Gap’ = $271,675
Save More –
$381.59 (26 times per year) ($9,921.34 per year) @ 3% for 20 years =
$271,676
What about our ‘example’ situation?
‘Gap’ = $271,675
Save More –
$381.59 (26 times per year) ($9,921.34 per year) @ 3% for 20 years =
$271,676
Increase Rate of Return –
Total Savings Required = $341,300 ($13,652 X 25 years)
Rate of Return = 6% on all savings (including existing $35,000 )
$35,000 + $224.50 (26 times per year) ($5,837 per year) @ 6% for 20
years = $341,306
Payroll deducted retirement savings programs – 401k, 403b and 457b

Tax-advantaged savings - Contributions are made with pre-tax dollars
($1 of contribution reduces paycheck by less than $1)
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Tax-deferred growth – Gains or earnings ‘deferred’
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Contribution limits – $17,500, plus additional $5,500 if over age 50
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Some employers may make contributions or offer ‘matches’
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Investment options – Fixed income and mutual funds
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Distributions – 401k/403b – Age 59 ½ or, 55 & ‘separation from service’
457b – ‘separation from service’
In-Service Withdrawals – 401k/403b – Specified purposes, check w/plan
457b - Only for ‘extreme financial hardship’
What about our ‘example’ situation ?
Previous ‘after-tax’ contribution scenario Rate of Return = 6% on all savings (including existing $35,000)
$35,000 + $224.50 (26 times per year) ($5,837 per year) @ 6%
for 20 years = $341,306
What about our ‘example’ situation ?
Previous ‘after-tax’ contribution scenario Rate of Return = 6% on all savings (including existing $35,000)
$35,000 + $224.50 (26 times per year) ($5,837 per year) @ 6%
for 20 years = $341,306
Using ‘pre-tax’ contributions of $224.50 = net paycheck reduction
of $175.11 ($4,552.86 per year)
What’s Your Choices?
Accept retirement ‘as is’ – Develop a plan to adjust
Be ‘flexible’ on your retirement date
Consider a ‘post-retirement’ career
Start doing something's to ‘cushion’ the financial impact of less money in
retirement
What Can I Do?
Start reducing debt
Start thinking about unnecessary expenses
Start saving or save more
Utilize ‘tax-advantaged’ programs
Focus on ‘take-home pay’ reductions
‘Pay yourself first’ - Increase savings amount each year or with each
salary increase you get
Questions?
Some Questions to Consider:

How do I feel about taking ‘risk’ with my money?
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Do I understand the ‘risk / reward’ relationship?
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How well do I tolerate fluctuations in the value of my assets?
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What’s my time horizon?
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What’s my investing experience?
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Conservative investments/contributions ≠ objective
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‘Forced’ to look at higher risk/higher reward options
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‘Last Resort’:
 Adjust Retirement Date
 Work In Retirement
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All Investments Carry Some Level of Risk
Investments With Potentially Higher Returns Are Generally
Accompanied By Higher Risk Factors
Diversification – Investing In A Variety Of Assets To Minimize
Risk
Asset Allocation - Balancing Risk Versus Reward By Adjusting
The Percentage Of Each Asset In An Investment Portfolio
According To Goals, Risk Tolerance, And Time Horizon
Successful Investing Requires Periodic Monitoring And
Adjustments

Certificates of Deposit

Money Market Funds

Bonds – Government , Corporate
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Stocks – Preferred, Common
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Mutual Funds – Bond, Stock, Index, ‘Hybrid’

Options
Average Rate of Return - 1926 thru 2010

U.S. Small Company Stocks : +12.1%
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International Stocks: +10.1%
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U.S. Large Company Stocks: +9.9%
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Balanced Stock/Bond Portfolio: +8.3%
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Bonds: +5.5%
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Money Market: +3.6%
Inflation : 3%
Who Should I Work With and What Should I Know?

Work Only With Licensed / Registered Companies and Representatives

Be Informed About Your Investments – Stay In Charge of Your Money

Understand The ‘Fine Print’ – Terms, Fees, Ability and Cost to Access
Money

Never Sign Anything Until You Are Completely Sure

Demand Periodic Statements and Representative Reviews

Be On Guard For ‘Too Good To Be True’ Deals
Retirement Planning:
U.S. Department of Labor –
‘Taking The Mystery Out Of Retirement Planning’ www.dol.gov/ebsa/Publications/nearretirement.html
Sources of Retirement Income:
U.S. Social Security Administration Benefit Calculator - www.ssa.gov/planners/calculators.htm
Traditional ‘Pension Plan’ – See Your Employer
Leveraging Retirement Savings Dollars:
‘Tax-Advantaged Savings Programs – See Your Employer
Implementing My Plan:
Financial Industry National Regulatory Association (FINRA) –
Broker Check –
www.finra.org/Investors/ToolsCalculators/Broker Check
Questions?
“Would you tell me which way I ought to
go from here?” asked Alice.
“That depends a good deal on where you
want to get,” said the Cat.
d
“I really don’t care where” replied Alice.
“Then it doesn’t much matter which way
you go,” said the Cat.
‘If you don’t know where
you’re going, it doesn’t matter
which road you take.’
‘Charted Course or Aimless Wander’