am i on the right track for retirement? · request a “benefit illustration” from your icma-rc...

Am I on the Right Track for Retirement?

Date June 9, 2009

Presented by:Vernon H. Stockton , III

Retirement Plan Specialist

AC: 0506-755

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Retirement is Closer then You Think

• What does retirement mean to you?

• Will you be ready?� Average ICMA-RC public employee plans to retire at 59

• Easily be retired for 25 years or more

� You’ll need at least 75% – 89% of today’s income to maintain your lifestyle*

• It’s time to:� Set goals

� Design a financial plan

� Take advantage of all available retirement savings vehicles

* Source: Aon Consulting 2004 Analysis

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Setting Retirement Goals

• Key items to consider� What will be provided?

• Employer-sponsored Retirement Plans

� Deferred compensation (457)

� Defined contribution (401)

� Defined benefit (pension)

• Social Security

• Medical Insurance

• Roth IRA

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• When will you retire?

• Where will you live?

• What do you want to do?

• What’s your life expectancy?� Age 81 for men; Age 84 for women*

• What are the future financial conditions?� Inflation: Erosion of “purchasing power”

• How will you pay for health care and long-term care?

The “Successful Retirement”

* Source: Newsweek 2/14/05, “Portrait of an Aging Nation”

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• Employer-sponsored Plans� Defined Benefit Pension

• Specific annual retirement benefit from employer

� Defined contribution (401, 457)

• Benefits based on contributions from you and/or employer

� How much can you expect?

• Ask for a summary plan description

• Benefit estimate

Basic Retirement Income Sources

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• Social Security� Not all public employees are eligible

• May still qualify for portion of benefit

� Go to www.ssa.gov/planners/calculators.htm to calculate or call the Social Security Administration at their toll-free number (800) 772-1213 to request a Personal Earnings and Benefit Estimate Statement.

• Health Insurance� Does your employer continue eligibility after retirement?

� Medicare: Typically pays about 50% of health costs; no long-term care

• Will these income sources really be enough?

Basic Retirement Income Sources

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Will You Have Enough During Retirement?

• Actively design a realistic financial plan� Charting Your Course Worksheets

� Consider consolidating retirement assets

� What retirement savings vehicles are available to you?

• It’s never too early; It’s not too late

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Worksheets

• “Pension Plan Checklist”� What can you expect from your employer’s

retirement plan?

• “How Much Do You Need to Save?”� Determine how much current savings,

pension and other assets will provide for your retirement

� How much more will you need to save?

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Consolidate Retirement Accounts

• Organize your retirement accounts and make it easier to manage

• Transfer, or “rollover” assets from one eligible program to another

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Design Your Plan

• 457 Deferred Compensation� Contributions are made

pre-tax (Federal)

• Reduces current income taxes

� Earnings accumulate tax-deferred

• 401 Defined Contribution� You have a plan account to which contributions are

made by you and/or your employer

• Plan benefits based on the total amount in account

� Some contributions may be tax-deferred

� Earnings tax-deferred

What’s Available?

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Design Your Plan

• No Fee Vantagepoint IRA*� A tax-deferred savings account that allows you to build

retirement savings

� Earnings compound tax-deferred

� Two types: Roth IRA and Traditional IRA

• Retirement Health Savings Program � Accumulate assets – tax-free – to pay for medical expenses for

you, your spouse and/or your dependents in retirement

� Funds are withdrawn tax-free when used for qualified medical expenses

What’s Available?

* No Fee Vantagepoint IRA requires a Minimum balance of $1,500.

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Design Your Plan

• You make automatic contributions through payroll deduction

• You direct the investments of contributions and earnings

• Upon retirement, you set up a payout schedule� Remaining funds are still invested/earning

How it Works

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Design a Plan

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

0 5 10 15 20 25 30 35 40

End

ing

Bal

ance

Start at 25Start at 35Start at 45Start at 55

Account Balance at Age 65

Assumes bi-weekly contributions of $50and a compounded average annual return of 7%

1 See disclosures at the end of this presentation.

It’s never too Early

$267,074

$126,313

$54,758

$18,383

Number of Years

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Design a Plan

• Increase Contributions� Take advantage of retirement plan

• No Fee Vantagepoint IRA*

• Catch-up Provisions

It’s not too Late

* No Fee Vantagepoint IRA requires a minimum balance of $1,500.

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Design a Plan

• Allows you to contribute greater than the maximum limits� Tax-deductible

• Two types:� “Age 50” Catch-up Provision

� “Normal” Catch-up Provision

• Must follow very specific IRC guidelines� Catch-up limits

� Cannot use both types in same calendar year

� “Catch-up Provision Packet” for complete information and worksheets

It’s not too Late – Catch Up Provisions

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Why Participate?

• Tax Advantage

• Dollar-cost Averaging2

• Funds can accumulate quickly

• Effect of Increased Contributions


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Why Participate?Tax Advantage

Assumes you contribute $200 monthly, earn 7% and are in the 25% pre-retirement tax bracket.

Deferred Compensation: $200 per month saved for 300 months earning 7% annually = $162,014. Less lump-sum tax at 25% = $121,511.

Conventional Investments: $200 per month after tax at 25% = $150. $150 per month saved for 300 months, which provide earnings of 7% annually which are taxed at 25% = $92,737.

$92,737

$121,511

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

ConventionalInvestments

DeferredCompensation


Conventional Investment Account

Total to Taxes TotalInvest Taken out Invested

$2,400 -$600 $1,800

Taxes taken out are based on the 25% tax bracket

Deferred Compensation Account

Total to Taxes TotalInvest Taken out Invested

$2,400 -$0 $2,400

(after taxes paid on

lump-sum distribution)

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Why Participate?

• Automatic payroll deduction� Consistent contribution

• Market goes up; market goes down� Buys more shares; buys less shares

� Over time, average cost of shares is reduced

Dollar Cost Averaging2


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Why Participate? Dollar Cost Averaging1, 2

Amount Price/ # ofMonth Invested Share Shares

Jan $600 $20 30Feb $600 $30 20Mar $600 $24 25Apr $600 $40 15

Total $2400 90

Average Share Price = $28.50

Average Cost Per Share Price = $26.67

Savings: $1.83 Per Share

Investing $2,400 Over A Four Month Period

Dollar Cost Averaging buys 90 shares

Average Market Price buys only 84.2 shares

1, 2 See disclosures at the end of this presentation.

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Why Participate?

5 Years $7,279

10 Years $16,160

15 Years $28,618

20 Years $46,090

25 Years $70,595

30 Years $104,965

40 Years $205,370

Funds Can Accumulate Quickly1

If $1,000 a year is Your account may havecontributed for: an accumulated value of:

Assumes a 7% rate of return on the investment.1 See disclosures at the end of this presentation.

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Why Participate?

Compounding – earn income from your original investment and earn income on the investment income .

Rate of Difference betweenInvestment Return Result Original Investment

Year 1 $1,000.00 7% $1,072.29 $72.29

Year 5 7% $1,417.62 $417.62

Year 10 7% $2,009.66 $1,009.66

Year 15 7% $ 2,848.94 $1,848.94

Year 20 7% $4,038.73 $3,038.73

Year 25 7% $5,725.41 $4,725.41

For example1, lets say you invest $1,000.00 in Year 1.

1 See disclosure at the end of this presentation.


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$0

$100,000

$200,000

$300,000

Why Participate?

$200 monthly contribution at 7% return 1

$72,000contributed

$161,194earnings

Total: $233,194



30 Years

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How We Can Help

• Series 7, 63 and 65

licensed

• Answer questions and help

fill out enrollment forms

• Retirement planning

worksheets and materials

• Location visits on a regular

basis or contact me directly

• Ongoing presentations

focusing on the basics

of investing

Local Representative

• Account inquiries

• Answer questions

• Resolve issues

• Transactions

• Address changes

• Other customer service-

related issues

• ICMA-RC Investor Services:

1-800-669-7400

�Automated services

24 hours a day,

7 days a week

� Investor Services

representative Monday -

Friday between 8:30am

and 9:00pm ET

Phone

• www.icmarc.org

• Check account balance

• Make transactions

• Fund information

• Additional helpful tools

and services

ICMA-RC Web site

• Mailed 10 business days

after quarter end

• Provides:

�Account summary

�Personalized

performance

�Account balance charts

�Fund information

Your Account Statement

Contact Info:Vernon H. Stockton ,III

Ret. Plan Specialist

(888) 803 - 2723

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Take Control of Your Future Today

1. Start Planning� Complete Worksheets

• Pension Plan

• How Much Do You Need to Save

� Online tools at www.icmarc.org

� Consider “rolling over” retirement assets to one account

� Request a “Benefit Illustration” from your ICMA-RC representative

2. Enroll or increase contributions in the program(s) that are right for you� Invest in funds based on your tolerance/understanding3


Next Steps

25

Important ICMA-RC Contacts

• Vernon H. Stockton, III, Retirement Plans Specialist(888) 803 -2723

• Investor Services1-800-669-7400

• www.icmarc.org

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Disclosures

1. For illustrative purposes only. Example does not reflect an actual account or specific investment. Actual results may be

higher or lower. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS.

2. Dollar cost averaging plan does not assure profit. Plan does not protect against loss in a declining market. Since the

plan involves continuous investment, regardless of fluctuating prices, investor must consider financial ability to invest

during low price levels.

3. Please consult both the current applicable prospectuses and MAKING SOUND INVESTMENT DECISIONS: A

Retirement Investment Guide carefully for a complete summary of all fees, expenses, charges, financial highlights,

investment objectives, risks and performance information. Investors should consider the Fund’s investment objectives,

risks, charges and expenses before investing or sending money. The prospectus contains this and other information

about the investment company. Please read the prospectus carefully before investing. ICMA-RC’s proposed fund line-

up is a commitment to administer these funds for the plan, not advice to the plan sponsor on the composition of the

plan’s fund line-up. ICMA-RC provides plan sponsors fund information to assist them in meeting their fiduciary

responsibility in managing the plan. The plan sponsor retains the obligation to prudently select and monitor the

investment funds it offers to plan participants. ICMA-RC may adjust fees commensurate with changes in revenue

from alternative funds selected by the plan sponsor from ICMA-RC’s mutual fund platform. Vantagepoint securities

are distributed by ICMA-RC Services LLC, a broker dealer affiliate of ICMA-RC, member NASD/SIPC. For a

current prospectus, contact ICMA-RC Services LLC, 777 North Capitol Street NE, Washington, DC 20002-4240.

1-800-669-7400.

am i on the right track for retirement? · request a “benefit illustration” from your icma-rc...

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