Workshop #2

RetirementBenjamin GroenFebruary 17, 2011SAE Financial Planning for Engineers Workshop Series

Planning for Retirement• No one will plans like you

• Average life expectancy was 74 for men and 80 for women in 1997 (and rising)

• Government programs are not certain

• Your spiritual development is dependent on your ability to plan for the future

Know Yourself• What are your plans?• What do you want to accomplish?• When do you want to retire?• What do you plan on doing?• TT 25, TT 6

The Options• Government• Social Security

• Employer• Pension• Retirement Plan (401k)

• Yourself• Retirement Vehicles

• Roth IRA, Traditional, Keogh, SEP, SIMPLE

Social SecuritySummary•Government pays you money when you are 67•www.ssa.gov/mystatement. Future of Social Security•Until 2015• Benefits can be paid solely from tax revenues until 2015

•Until 2025• From 2016-2025 SS will have to use the interest on the bonds

•Beyond 2037• From 2026-2037 the SS will have to redeem bonds• At current projections social security funds will be exhausted in 2037

(tax revenue still cover 76%• Don’t plan for much, but if it still is available, be thankful and use it—

you paid into it

Employer• Pension (Defined Benefit)• You receive a portion of your salary after working for a company

for xx years• “Golden Handcuffs”

• Retirement Plan (Defined Contribution)• Contributions to an investment vehicle (Cash, Stock Profit

Sharing, etc.)• Matching = “Free Money”• Vesting• 401K

• 16,500 Contribution Limit, Tax Deferred, Required distributions @ 59 ½, Early withdrawal penalty 10% (Exceptions)

Yourself

Traditional IRA• $5,000 Contribution Limit, Taxed on Withdrawal, Required distributions @

70 ½, Early withdrawal penalty 10% (Exceptions)

Roth IRA• $5,000 Contribution Limit, Taxed on contribution. Tax Eliminated Growth, No

required distributions @ 70½, No early withdrawal penalty of principal

Some extras: • Can contribute extra to IRA if over 50. • Participation is based on your income• You can contribute to as many IRAs as you want, as long as the total is not

more than 5000 per year, per person• There are other options (these are the most common)

Choosing Assets (Covered in Workshop 6)

• Bonds, Mutual Funds Stocks, Options, Precious Metals • Highest after tax returns• Principles of successful investing• Diversity• Asset Allocation

Investment Vehicle (IRA, Roth 401K)

Stocks

Bonds

Mutual

Funds

Start Today

How do I start?•Find out what you need•Make a plan

•Open a Roth IRA today and start saving!

Tools• Social Security Statement• Quicken• Fidelity• Personal finance.byu.edu• Teaching Tool 25• Teaching Tool 6• Lectures Retirement 1-5• Teachers

BACKUP SLIDES

Quicken

Quicken

Teaching Tool 25

Teaching Tool 6

Q&A• How much do we need? • What are the best options? • How vigorous do we need to be when starting at age 30? • How much does a couples mission cost and how should we

save for that? • Prices of funerals and how do we pass things along to our

children?• Wise ways to invest?