United Way Retirees Association
Planning for Retirement in an Era
of Uncertainty!!
United Way Retirees Association
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Today’s Presenters
1. Ralph Gregory
UWRA Board Member,
Retired CEO, United Way of Westchester
and Putnam
2. George Wilkinson
UWRA Board Member,
Retired Senior Vice President, United Way of
America
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Poll Question - Audience
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Agenda*
1.
Are You Prepared?
2.
Key Findings from Polling United Way Retirees
3.
Goals for the Webinar Series
4.
Framing the Problem
5.
10 Ways to Prepare for Retirement
6.
Common Retirement Planning Mistakes
7.
How Much Do You Need to Retire
8.
Start Planning NOW
9.
Tips and Key Lessons Learned
10. Resources & Upcoming Webinars
11. Q and A Session
*Disclaimer: The sole purpose of this Webinar is to encourage lifelong
retirement planning; and is not a substitute for legal or financial
professional advice.
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Are You Prepared?
•By the end of 2010 roughly 2.3 million people were expected
to retire, according to the Social Security Administration.
•According to a 2010 survey by the Employee Benefit
Research Institute, 35 percent of Americans—up from 30
percent just a year earlier—felt financially ill-prepared for
retirement.
•Almost four in 10 Americans are not currently saving for
retirement*
•Many Americans Are Not Financially or Emotionally
Prepared for Retirement*
*2009 Charles Schwab Survey conducted by Kelton Research
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Key Findings that Surfaced from
Surveying UWRA Retirees
Wish I had…
•Taken better care of my health –a large issue affecting quality
of retirement
•Planned better – financially and emotionally
•Saved more money/started earlier
Major Concerns Expressed….
•Health insurance – primary or secondary health insurance is
becoming increasingly expensive
•Long Term Care – your retirement plan can be quickly
derailed if this extensive and expensive care is needed
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Poll Question - Retirement Planning
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Main Goals of Webinar Series
• Encourage and empower United Way staff to take
responsibility for planning for their retirement and
to view it as a lifelong effort
• Increase the number of United Way employees able
to provide for their income needs in retirement
• Help make the transition from work to retirement as
smooth as possible
• Convey some “Lessons Learned” – Do’s and
Don'ts based on the experiences of United Way
retirees
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Framing the Problem
•Frozen/disappearing pension plans and the subsequent increased
necessity of individuals to plan for their retirement
•401(k)s and 403(b)s are losing value
•Rising healthcare costs
•Longer life spans
•Uncertainly over Social Security and Medicare
•No system-wide retirement plan is available for United Way
employees
•Local United Ways vary considerably in relation to what they offer –
with smaller United Ways often providing no benefits at all
•Little best practice information is available from local United Ways
in the area of retirement planning
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Research Shows….
•Knowledge of retirement issues is positively related to
one’s attitude toward retirement
• Training and intervention programs designed to boost
financial knowledge improve financial preparedness by
triggering advance planning activities
•Only about 1/3 of workers receive educational materials
or seminars from an employer
•Only 52% of 403(b) plan sponsors (nonprofits) contribute
to employees’ accounts compared to 88% of 401 (k)
sponsors (for-profits)
•Many nonprofit organizations offer no retirement plans to
their employees
•Most retirement planning programs/practices are geared
to those aged 50 plus
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Top 10 Ways to Prepare for Retirement:
National Retirement Planning Coalition
1.
Select a target date for when you want to retire.
2.
Calculate how much money you need to accumulate by the time you want
to retire.
3.
Find out how to maximize your Social Security benefits.
4.
Take full advantage of tax-advantaged plans such as employer retirement
plans, individual retirement accounts and annuities.
5.
If your employer doesn’t have a pension or retirement plan, ask that one
be started; or start your own.
6.
Don’t touch your savings for anything but retirement.
7.
Diversify your assets and be sure to include guaranteed income for life.
8.
Ask questions. Get help. Seek the assistance of a professional financial
advisor.
9.
Start now, set goals.
10. Do a retirement plan and monitor your progress.
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Top Ways to Prepare for Retirement
(cont)
Missing from the previous list:
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Common Retirement Planning Mistakes
1. Procrastinating – retirement planning should be a lifelong pursuit
–
A general rule of thumb has been that the income one needs to
live comfortably in retirement is likely to be at least 80% of what
one is spending at the time of retirement -- although these
income needs can vary considerably from individual to individual
–
Having the needed level of income available upon retirement
means planning well in advance. Investments made earlier on in
life will have a longer time to grow and multiply.
2. Failure to Diversify
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Diversification helps weather market fluctuations (consider
assistance of a financial advisor – UWRA booklet provides tips)
–
Investment strategy (e.g.., conservative or higher risk) should
reflect where you are on the retirement planning continuum
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Common Retirement Planning Mistakes
(cont)
3. Not taking full advantage of retirement accounts that are
tax free
– If offered, make sure you contribute a sufficient amount
to your defined contribution plan to draw down the full
organization match, allowing you to take greater
advantage of tax benefits
– If your employer does not have a plan, start your own
IRA or another investment program
– Avoid cashing out or borrowing against your plan – let it
grow
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Common Retirement Planning Mistakes
(cont)
4. Retiring before you are financially prepared – postponing your retirement even a few
years can make a huge difference. A few key issues to consider:
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While the rule of thumb is to save 10% of your income for retirement , take the
time to match savings goals with your retirement goals.
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Try to enter retirement years debt free.
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Calculate how much you plan to withdraw from your retirement assets in your first
year of retirement and project it for a possible 25 to 30 year period. “The first
year of retirement sets the stage for how much you're taking in future years, and
it's a great indicator of the likelihood that your money is going to last longer than
you do” Greg McBride, senior financial analyst at Bankrate.com.
–
Health care can be an issue if you retire before you turn 65. You'll need to
bridge the gap between the end of your employer’s health coverage and the
beginning of Medicare coverage. Private health insurance can cost a hefty sum.
–
To receive full social security retirement benefits, you must be "normal retirement
age" (NRA) which varies from age 65 to age 67 by year of birth (checkout
www.UWRA.org for more info). Social security is one income source – not meant
to be a complete source of retirement income.
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Common Retirement Planning Mistakes
(cont)
5. Believing that planning ends when retirement begins -– Have a post-retirement plan in place before your retire (put it in
writing) and continue to revisit it. When considering post
retirement income needs, remember to consider inflation, taxes,
market volatility, rising health care costs and unanticipated
developments and crises.
– Keep generating income – review ways to extend retirement
income by working on a part-time basis and/or seeking
investment assistance of a financial advisor
– "Retirees need to plan as if they're going to live to age 95," says
McBride (senior financial analyst at Bankrate.com).
"They could have a 25- to 30-year period in retirement and they
need to preserve their buying power” and not withdraw funds
prematurely
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Common Retirement Planning Mistakes
(cont)
6. Not Having a Will or a Living Trust – the laws of the state -- not
you -- will determine what happens to your estate and your minor
children
•Other Considerations
– “Dignity Planning” - creating a power of attorney and writing
a living will or healthcare proxy. It covers financial and medical
decisions that might need to be made while someone is
disabled - helps the spouse of a disabled person considerably.
– Heritage Planning – Passing On Values with Your Valuables
(a method of conveying your values as well as your estate to
your heirs)
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Common Retirement Planning Mistakes
(cont)
7. Not planning for the psychological aspects of retirement* preparing for retirement is not just a financial function – Life
dimensions across the Spectrum include:
–Financial Security
–Health and Wellness
–Lifelong Learning and Work
–Civic Engagement
* These aspects of transitioning into retirement are to be
addressed in our 3rd Webinar
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How Much Do You Need to Retire –
Things to Consider
Build your own individualized plan. Some Considerations…
• Expense categories fluctuate depending on stage of life. Examples:
 Potentially Less income needs in retirement:
– mortgage may be paid off,
– can predict when you will finish paying for college/other support for
children
– No longer working so you will probably be spending less on clothes,
transportation & meals
Potentially More income needed in retirement:
– Home maintenance and property taxes
– Utility bills – rising costs of energy and you may be home more
– Home and car insurance are apt to increase
– Medical expenses including the cost of insurance and rising health care
costs
• The rate of inflation may also affect your income needs in retirement
Since the government began tracking inflation in 1913 , the average annual
increase has been 3.43% or a cumulative increase of about 1930%!!
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How Much Do You Need to Retire – Make
Projections
•
Project Expenses/Income - You need to know what your retirement
expenses will be and how much retirement income you will need to cover
them. Two ways to do this include using a retirement calculator or
hiring a certified financial adviser.
 Income - distinguish between guaranteed sources of income, like
pensions, and those that fluctuate over time, like 401(k)s. Tip - make
sure the guaranteed income sources can cover your basic living
expenses, like home-maintenance costs, food, and medicine.
 Factoring in future health care costs is essential. According to a
recent University of Michigan Law School study, medical costs are a
major contributor to bankruptcy among older Americans. Tip – an
estate attorney or financial planner are good resources to help in this
area.
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Poll Question – Age Group
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Start Planning NOW – Some ideas by age
group*
•Age 20 to 29
Start your 401(k) or 403 (b) at work – contribute enough to
capture the full organization match if there is one
Consider starting a Roth IRA if you do not have a 401(k) or
403 (b). Or if you have those plans and can afford a Roth
IRA – do both
Start an emergency fund – to avoid going into debt for
emergencies or tapping your retirement fund
Make a living will.
* Based on USA Today Report by John Waggoner
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Start Planning NOW – Some ideas by age
group (cont)
•Age 30 to 39
Do not reduce your retirement savings while saving for
college expenses – make every effort to continue both –
you can finance college expenses but not retirement
income needs
Use your 401(k) or 403(b) to help you save. Big plus –
these plans let you save money before taxes.
Do not confuse life insurance with retirement savings. Life
insurance is needed to protect your family but it is not
viewed by many as an effective retirement savings vehicle.
Write your will or establish a living trust.
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Start Planning NOW – Some ideas by age
group (cont)
•Age 40 to 49
 Contribute the maximum to your 401(k) or 403(b)
 Emergency fund should equal two to three months of expenses
 Consider refinancing to make sure your mortgage will end when
you stop working
 Think about a Roth IRA or other alternatives for retirement
savings plans
 Purchase a long-term care insurance policy
 Update your living will and make sure someone has power of
attorney. Think about Heritage planning.
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Start Planning NOW – Some ideas by age
group (cont)
•Age 50 plus
If kids are out of college, consider reducing life insurance
coverage/premiums and increasing savings
Take advantage of the 401(k), 403(b) and IRA catch-up
opportunity, which will let you contribute more each year
Review your guaranteed sources of income. Start
projecting how much your savings will have to be tapped to
meet expenses and rework retirement planning goals if
necessary
Update your will or trust.
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A Few Tips…
1. Take better care of health – it is a huge issue affecting
quality of retirement
 Seven common sense but effective steps to increase
chances of remaining healthy:
1. Stop smoking
2. Monitor/control your blood pressure
3. Eat a healthy, balanced diet
4. Watch your weight
5. Monitor/control your cholesterol
6. Stay active – mentally and physically
7. Get an annual physical
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A Few Tips… (cont)
2. Retain a financial advisor you trust
 Get references and explore investment options
3. Long Term Care Insurance
 Buy when healthy enough to meet underwriting standards and at
a younger age when premiums are lower
4. Develop a plan and revisit it - rework retirement planning goals
as necessary
 Before retirement - do retirement reading – decide where and
how you would like to spend retirement years
 After you are retired 6-12 months, re-assess your financial
situation and adjust to maintain a sustainable life style.
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How Well You Retire Depends on How
Well You Plan Today….
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A Few Tips… (cont)
•Some tips to be explored more in our 3rd Webinar
5. Prepare in advance for continued involvement with
colleagues and friends to help bridge the change from full time
employment and high level of recognition to a new role
6. Think ahead about retirement involvements/how you will be
engaged (e.g., family activities, community & volunteer roles,
recreational activities, continuing education and travel) and
provide for them adequately in your retirement planning
7. Think ahead about how you want to prioritize your time - be
prepared for the “asks” – people and groups will want your time –
thinking ahead will help you know when to say “NO” to avoid
over commitment
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Key Lessons Learned
I.
Theory of Chaos - Plan for the Unexpected!!
When considering post retirement income needs you need to remember to
consider inflation, taxes, market volatility, rising health care costs and
unanticipated developments and crises.
Examples of things that can derail your plans:
•
Turbulent economic times like we are experiencing now:

Weakness in the Housing and Job market

Uncertainties related to Social Security and Medicare

Extreme Market Volatility

Rising costs for groceries and other basic needs
•
Long Term Care - your retirement plan can be quickly derailed if this
extensive and expensive care is needed
•
Additional (unanticipated) dependents – e.g., elderly parents, adult
children hitting a rough spot
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Some Things to think about…
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A buffer - extra reserve fund money
for unexpected costs in a liquid
bearing account
2.
Buying that Long Term Care policy
3.
Diversify your portfolio with fixed
income investments
4.
Do not anticipate your home value
to rise
5.
Live within your means – now
6.
Factor in life changes (e.g., loss of
spouse, divorce)
7.
Take nothing for granted!!
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Key Lessons Learned (cont)
II. Understand completely the terms and conditions
of your organization’s retirement plan
•
Ask some key questions, and ask them regularly, perhaps once a year, to
make sure that you stay on track on the way to retirement.
1.
Does the organization match your contribution and, if so, by how much? Are
you automatically enrolled?
2.
How long does it take to be vested in the plan?
3.
What is the maximum annual contribution you can make? Will contributions
lower your taxable income and allow your investments, to grow tax-deferred?
4.
Can you select your own investments – do you have to pay any penalties to
change investment choices? If so, how much?
5.
Who are the organization’s fund managers and how have they performed in the
past?
6.
What are the conditions for borrowing or withdrawing from the account, if such
actions are allowed?
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Retirement Planning Resources
• Two UWRA booklets* – electronic version on UWRA
website (www.UWRA.org) and available in hard copy by
contacting the UWRA office:
1. It’s Never too Early or Too Late to Plan for your
Retirement
 helpful resources are listed in the back of this
publication and on the UWRA website
2. Choosing a Financial Advisor
* Booklets distributed in 2008 to over 1200 local United Ways for each
of their 20,000 employees and to all UWRA members. This
publication was made possible by a grant from the UWRA
endowment
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Retirement Planning Resources (cont)
• UWRA Website: www.UWRA.org
– List of helpful resources including Retirement Calculators
http://www.uwra.org/retirement-resources
– Links to Social Security information: http://www.ssa.gov. Such as:
 Retirement Benefits booklets: http://ssa.gov/pubs/10035.html.
 Retirement Planner: http://www.ssa.gov/retire2/
 Calculators: http://www.ssa.gov/planners/benefitcalculators.htm
 “Normal retirement age" (NRA)*: http://www.ssa.gov/oact/progdata/nra.html
– Following each Webinar – posted link for recorded version and
PowerPoint presentations
*To receive full social security retirement benefits you must be of normal retirement
age, which varies from age 65 to age 67, based on the year of your birth
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Retirement Planning Resources (cont)
•Coaching Service - UWRA is exploring the feasibility
of a retirement coaching program.
– A coaching service that would be offered, free of charge, to
United Way current and former employees to assist in navigating
the journey to retirement and beyond
– Coaches will be retired United Way colleagues that have
participated in a training program
– The objective is to provide general information and guidance in
response to individual questions and concerns. Assistance in
locating appropriate information and resources would also be
provided; The coaching service, if offered, is not intended to take
the place of a financial planner or a professional advisor
– This service is designed to assist individuals planning for
retirement or who are already retired. The service will be
available by phone and/or email.
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Poll Question – Coaching
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To Avoid This…Tune in for more….
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Upcoming Webinar Series
1. How United Ways Can Help – for CEOs & HR professionals
2. Transition into Retirement/Life in Retirement
3. Financial Planning
4. Estate Planning
5. Healthcare Options
6. Understanding Medicare
* FYI Archived Webinar by the Heritage Institute on The Elements of
Heritage Planning @ http://www.ustream.tv/recorded/13064292
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Thank You