Women and Investments Understanding the Thrift Savings Plan’s Role in Your Retirement Presented by: Tammy Flanagan Tammy@nitpinc.com Resources for YOU www.narfe.org Famous Wealthy Women Jacqueline Mars Granddaughter of Frank Mars $23.5 Billion Alice Walton Christy Walton Daughter of Sam Walton Daughter-InLaw of Sam Walton $35.6 Billion $39.2 Billion http://www.slate.com/articles/business/billion_to_one/2013/11/the_world_s_top_50_billionaires_a _demographic_breakdown.html and http://www.forbes.com/sites/clareoconnor/2013/09/16/insidethe-world-of-walmart-billionaire-alice-walton-americas-richest-art-collector/ Closing the Confidence Gap: Women and Investing Get in the game • Take FULL advantage of the TSP • Start early and save more Make “friends” with risk • Why are you playing it safe? • Understand the REAL risk Communicate • Knowledge breeds confidence • Ask questions until you understand Collaborate • Make financial decisions together • Be accountable http://www.forbes.com/sites/northwesternmutual/2014/05/07/closing-the-confidence-gap-women-and-investing/ More Americans Living to 90, U.S. Census Finds • More Americans are living to 90 and beyond, and by 2050 their ranks could reach almost 9 million, a new U.S. Census Bureau report finds. • In fact, the number of nonagenarians has nearly tripled -- from 720,000 in 1980 to 1.9 million in 2010, researchers found. • Most of them -- 74 percent -- are women. http://health.usnews.com/health-news/family-health/boomerhealth/articles/2011/11/17/more-americans-living-to-90-us-census-finds FERS Basic Retirement and FERS Supplement Your Federal Retirement Social Security Thrift Savings Plan Income Replacement 30+ Years of Service: 30 % or more Full Career (LEO): 34% or more Low Wages: 50%+ $200,000: $8,000 /year Medium Wages: 35 – 40% $500,000: $20,000/year High Wages: 25% or less $1,000,000: $40,000/year Top Sources of Retirement Income (36% of respondents were women out of 5,413) Respondents could choose up to 5 sources Active Participants only CSRS FERS Government Retirement (CSRS or FERS) 94% 58% TSP Account 72% 70% Pension plan or 401(k) from previous employer 6% 15% Social Security 23% 66% Income from continuing to work in retirement 18% 16% Mutual funds, stocks, bonds or other brokerage accounts 19% 13% Other personal savings 17% 13% IRA accounts 11% 12% Income from spouse (or other family members) 18% 9% Home equity 8% 6% http://www.frtib.gov/pdf/survey/participant/TSP-Survey-Results-2013.pdf Top Sources How to Invest for Retirement • Don’t Follow – People tend to buy high and sell low – What’s hot! – “Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet • Stick to Your Plan – Regular and automatic is best – The market is now reaching new highs – even after 2008 • Keep Costs Low – TSP = $.29 / $1,000 / year ($500 x $.29 = $145 / year) • Ignore Financial News – If you did nothing in 2008, you would be better off today – Doing nothing can make you look brilliant! Where Can I Learn More? What Do You Think of the Thrift Savings Plan?/ • The TSP is simple • The TSP is cheap • The TSP includes a special deal • Warning: Why some financial advisors hat the TSP Learn More, Fear Less • 88% of FERS employees contribute to the TSP • More than 25% contribute less than 5% • 36% of TSP is invested in the G Fund (May 2014) • Average FERS Account balance: • Traditional: $111,245 • Roth: $4,674 • 27% of TSP invested in the C Fund (May 2014) • Standard & Poors 500 Index • What’s In: • Michael Kors • Google • Under Armour • General Motors • What’s Out: • J.C. Penney • Sears • H.J. Heinz • Big Lots inc. • 10.27% annualized return over 25 years (1988 – 2013) • 10% of TSP invested in the S Fund (May 2014) • Dow Jones U.S. Completion Total Stock Market Index • Represents all U.S. publically traded stocks, excluding components of the S&P 500 • 4,500 companies • Index started 1987 – same year TSP started • S Fund added to TSP in 2001 • 6% of TSP invested in the I Fund (May 2014) • EAFE acronym stands for Europe, Australasia and Far East • 21 Developed markets excluding Canada Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, Israel, Australia, New Zealand, Singapore, Hong Kong, and Japan • 5% of TSP invested in the I F Fund (May 2014) • Barclays Capital U.S. Aggregate Bond Index, a broad index representing the U.S. bond market • Heavily invested in government bonds • G Fund buys a nonmarketable U.S. Treasury security • Those “in-the-know” tend to invest in actively managed bonds rather than index funds Not sure? G F C I S Lifecycle Fund 16% of TSP Invested in L Funds (May 2014) Allocation of L 2050 Fund G Fund F Fund S Fund I Fund 11% C Fund 4% 25% 18% 42% As of July 2014 Allocation of L Income Fund G Fund F Fund S Fund I Fund C Fund 3% 5% 12% 6% 74% Lifecycle Quiz • I should choose the fund closest to my a) Retirement Date b) Date of death c) Date I will begin to use the money Lifecycle Quiz • I should choose the fund closest to my a) Retirement Date b) Date of death c) Date I will begin to use the money Lifecycle Quiz • The best way to invest in Lifecycle Funds is to: a) Keep 50% in G and the rest in the L Income b) Choose one or two Lifecycle Funds that are appropriate for my retirement goals c) Diversify between all 10 TSP investment options Lifecycle Quiz • The best way to invest in Lifecycle Funds is to: a) Keep 50% in G and the rest in the L Income b) Choose one or two Lifecycle Funds that are appropriate for my retirement goals c) Diversify between all 10 TSP investment options Start Early and Don’t Stop Learn more at TSP4gov • • • • • • Is Roth TSP Right for Me? (Civilian) by TSP4gov Take 5 for Your Future The Cost of Taking a TSP Loan by TSP4gov Investing in Bonds by TSP4gov 10% Early Withdrawal Penalty Tax by TSP4gov Combine and Save: Transfer Into the TSP by TSP4gov • Contribution Allocations and Interfund Transfers by TSP4gov Plans for Withdrawing Money From TSP – Separated Participants http://www.frtib.gov/pdf/survey/participant/TSP-Survey-Results-2013.pdf Monthly Payments Balance: $500,000 Growth: 5% Dollar Amount • $3,000 / month – Run Out at age 78 • $2,000 / month – Balance at age 100: $209,484.99 Life Expectancy Monthly Age Balance $1,407.66 55 $508,224.49 $2,208.64 65 $557,817.99 $2,069.36 75 $572,237.19 $3,095.55 85 $539,728.21 $3,612.99 95 $347,388.27 $3,166.00 100 $212,558.69 How about an annuity? Features • • • • • • • $500,000 purchase Begin at 55 Single Life 2% Interest Rate Index Level Payment No Cash Refund 2.62% Interest Rate Index: $2,219 / mo. Payments Monthly Age Balance $1,980 55 $0 $1,980 65 $0 $1,980 75 $0 $1,980 85 $0 $1,980 95 $0 $1,980 100 $0 How about an annuity? Features • • • • • • $500,000 purchase Begin at 55 Single Life 2.62% Interest Rate Index Increasing Payment Cash Refund* Payments Monthly Age Balance* $1,305 55 $0 $1,753 65 $0 $2,356 75 $0 $3,166 85 $0 $4,256 95 $0 $4,933 100 $0 *If you die before the amount of your TSP balance used to purchase your annuity has been paid out, the remaining amount will be paid in a lump sum. http://www.washingtonpost.com/business/as-brokers-urgeira-rollovers-ex-workers-ditch-their-low-fee-federalretirement-plan/2014/08/14/53c68dd0-2239-11e4-958c268a320a60ce_story.html The pitches are persuasive. Workers who leave jobs with the federal government transferred $10 billion last year out of the Thrift Savings Plan. Forty-five percent of participants who left federal service in 2012 removed all of their funds from the plan and closed their accounts by the end of 2013. To investigate this exodus, the government expects to survey departing workers later this year. Plans for Transferring Money From TSP http://www.frtib.gov/pdf/survey/participant/TSP-Survey-Results-2013.pdf Reasons For Keeping Money in TSP http://www.frtib.gov/pdf/survey/participant/TSP-Survey-Results-2013.pdf Questions?