Form No. 4923-CA (0905)
JL Waite Financial GroupJL Waite Financial Group
Fewer than 30 or30 Years More Years
Age of Service of Service
50 1.1% 1.3%55 1.4% 1.6%**60 2.0% 2.2%**
61½ 2.2% 2.4%63 2.4% 2.4%
Retirement Benefit Factors*
Retirement FormulaYears of Service x State Factor = % of Highest One Year Income if at least 25 years of credited service
*Hire date after July 1, 1980. **With early retirement reductions.
Plan Example(2.4 Percent)
A member, age 63, retiring with 30 years of service and compensation of $70,000, would receive a retirement benefit computed : (.024 x 30 x $70,000) = $50,400 ÷ 12 = $4,200 per month. + longevity bonus*
*Estimate of retired teacher in CA.
Plan Member Spouse
Unmodified $4,425 $0100% $3,713 $3,71375% $3,885 $2,91450% $4,108 $2,054
CalSTRS Retirement Options
Based on… 63 yr old with 30 yrs of service and $70,000 salary
Income Gap
$70,000
BeginWorking
Retireat 63
28% Net Loss ofSpendable Income
$50,400Teacher Retirement
Income
Income Gap
$126,428*Income needed in 20 years
$70,000
BeginWorking
Retireat 63
*Assumes a 3% inflation factor
28% Net Loss ofSpendable income
$50,400Teacher Retirement
Income
Retirement ProgramEnacted by Congress
403(b)One of the most effectivefinancial planning tools
available today.
Why People Do NotParticipate in a 403(b)
Lack of Understanding.
Viewed As A CostRather Than A Benefit.
Belief That The Money Will Not Be Accessible.
Taxes and the Discounted Dollar
Gross ?— Taxes: 28% ?
Net $250
Taxes and the Discounted Dollar
Gross $347— Taxes: 28% $97
Net $250
Taxes and the Discounted Dollar
Over 20 years assuming a 6% rate of return, the accounts grew to…
Taxable $113,911Tax-Deferred $158,109
The Tax-Deferred account has over $44,000 more than the Taxable account, over a 38% increase.
A Special Feature ofthe 403(b) Program
LoansAccessible Prior to Retirement
Tax and Penalty Free*2% Net Interest Cost**
Five-Year Payback (Monthly)or, up to 30-year if primary residence
* Non-payment may result in a tax liability.** On Traditional Fixed Annuities.
Meet Your FinancialObjectives With a 403(b)
Pay Off DebtBuy Back Years of Service
Home PurchaseCollege Education
Pre-Tax ContributionEmergency Fund
Bridge The Retirement Gap
Bridging the Income Gap
BeginWorking
Retireat 63
$70,000
$50,400Teacher Retirement
Income
403(b)Income
Three Obstacles toFinancial Security
TAXES, INTEREST, and DEBT
How much of your money goes toward one, two, or all
three of these areas, hindering your progress to achieve
financial security?
How to Get Out of Debt
Using Your 403b
Month 0Debts Balance Payment Rate Term
(1) Credit Card $ 2,200 $ 66/m 16.8% 45 months
(2) Credit Card 1,350 38/m 19.8% 46 months
(3) Auto #1 7,200 240/m 12.6% 36 months
(4) Auto #2 2,600 226/m 10.75% 12 months
$ 13,350 $572/m
Assets403(b): $3,500 + $50 per month
Month 1
(1) Credit Card $ 2,164 $ 66/m 16.8% 44 months
(2) Credit Card 1,332 40/m 19.8% 45 months
(3) Auto #1 7,035 240/m 12.6% 35 months
(5) 403(b) Loan 2,563 52/m 2% 60 months
Totals $ 13,094 $398/m
Assets403(b): $3,806 + $291 per month
Debts Balance Payment Rate Term
Month 4
(1) Credit Card $ 2,056 $ 66/m 16.8% 40 months
(3) Auto #1 6,531 240/m 12.6% 31 months
(4) Auto #2 0 0 0 0
(5) 403(b) Loan 3,727 79/m 2% 60 months
Totals $ 12,314 $385/m
Assets403(b): $4,751 + $308 per month
Debts Balance Payment Rate Term
Month 11
(2) Credit Card 0 0 0 0
(3) Auto #1 $ 5,293 $240/m 12.6% 24 months
(4) Auto #2 0 0 0 0
(5) 403(b) Loan 5,123 122/m 2% 60 months
Totals $ 10,416 $362/m
Assets403(b): $7,181 + $340 per month
Debts Balance Payment Rate Term
Month 19
(1) Credit Card 0 0 0 0
(2) Credit Card 0 0 0 0
(4) Auto #2 0 0 0 0
(5) 403(b) Loan $ 8,241 $231/m 2%
Totals $ 8,241 $231/m
Assets403(b): $10,378 + $522 per month
Debts Balance Payment Rate Term
Let’s Take a Look After 19 Months
Before
Total Debt 13,350
Payment 572
Average Interest 13.4%
Total 403(b) 3,500
Contribution 50
Let’s Take a Look After 19 Months
Before NowTotal Debt 13,350 8,241 [403(b)]
Payment 558 231
Average Interest 13.4% 2% [Net]
Total 403(b) 3,500 10,378
Contribution 50 522
Let’s Take a Look After 60 Months
Before
Total Debt 13,350
Payment 572
Average Interest 13.4%
Total 403(b) 3,500
Contribution 50
Add to Take-Home 0
Let’s Take a Look After 60 Months
Before NowTotal Debt 13,350 0
Payment 558 0
Average Interest 13.4% 0
Total 403(b) 3,500 36,003
Contribution 50 833
Add to Take-Home 0 24 + All Raises
How to Maximize Your Pension Benefits
Plan Member Spouse
Unmodified $4,425 $0100% $3,713 $3,71375% $3,885 $2,91450% $4,108 $2,054
CalSTRS Retirement Options
Most educators choose the 100% option. In this example, $3,713 would go to the member, and $3,713 would go to the spouse in the event of the member’s death
Plan Member Spouse
Unmodified $4,425 $0100% $3,713 $3,71375% $3,885 $2,91450% $4,108 $2,054
CalSTRS Retirement Options
With proper planning, you could choose a higher pension option.By choosing this higher option, your household will receive more than $150,000 in additional income over 25 years.
Plan Member Spouse
Unmodified $4,425 $0100% $3,713 $3,71375% $3,885 $2,91450% $4,108 $2,054
Spousal Loss of Income
The challenge with the member choosing the higher pension option is the spouse’s loss of income. In this example, $3,713 - $2,054 is $1,659 monthly loss of income. Solution: a $330,000 side fund could bridge this short fall. $330,000 invested at 6% yields $19,800 annually / 12 = $1,650 of monthly income for the surviving spouse.
Benefits of Pension Maximization
• Maximize your retirement income.• Provide continued income to your beneficiary.• Receive raises on higher pension options.• Maintain control over your retirement dollars instead of STRS having control.• Cash availability for other contingencies.• Provide a legacy to your estate
There have been two 40% losses in the stock market in the last 10 years…
CAN YOU AFFORD A THIRD?
$2.3 Trillion Lost in Retirement Savings Plans in 2008!
YOU have a choice of a safe and secure place to save for retirement that provide guarantees from loss of principal and earned interest.
How TCG can Assist YOU?
• Analyze and advise you on which CalSTRS option is best
for you.
• Validate if your investment portfolio allocation is
commensurate with your age and lifestyle?
• Implement a debt reduction strategy utilizing your 403b.
• Validate your retirement income needs, and implement a
proactive plan to reach your retirement goals.
• Review and analyze your need for a living will and trust
to create tax intelligent strategies to shelter your estate.
CalSTRS Loan Program3% Down (80/17)
•3% down payment – only 1% needs to be your funds the remaining can be gifted by a family member
•FREE float down to lower rate – if CalSTRS lowers rates during the 45 day lock period, you get the lower rate
•The 17% 2nd has a deferred for 5 years, this enables you to qualify for a larger home
Questions and SupportCall 661-979-0945 or 800-566-4047
Jim WaiteJL Waite Financial Group661-979-0945 (c) 589-5268 (f)[email protected]