COA 4131 1st Edition Lecture 30 Outline of Last Lecture I Esoteric Investments II Thinking of Retiring III Considerations for Retiring IV Negative of Retiring at the Wrong Time V What are the Best Options VI Age VII Medicare VIII Receiving Benefits while you Still Work IX Early Retirement X Retirement Age Considerations XI How your Social Security affects your Spouse Outline of Current Lecture I II Importance of Retirement Planning Common Pitfalls to Sound Retirement Planning III The Five Risks of Retirement IV Personality of People V Longevity Risk VI Healthcare Risk VII Estimating Retirement Needs and Developing a Plan Current Lecture A Importance of Retirement Planning a Greater life expectancy b Gender gap c Early retirement d Social security and pensions not stretching as long as they once did e Uncertainty f Anticipated retirement lifestyle needs B Common Pitfalls to Sound Retirement Planning a Do not start too late or save too little b Stay with one job c Estimate for more needs d Retirement savings and level of education i The more education you have the more money you save ii Inflation 1 Rising property taxes iii Weatherproof your retirement funds C The Five Risks of Retirement a Longevity b Healthcare c Inflation d Investment e Withdrawal D Personality of People a Planners i More than twice as likely to learn about savings in childhood 1 From parents or a part time job b Strugglers i Every time they get ahead something is going to pull them back ii Tend not to be savers because they believe it is going to go away c Deniers i Do not save because they do not think about it or the future ii The kids will take care of you or you do not think you will live to be that old so why bother to save d Impulsers i Very hard to save for the future ii Impulsive shoppers will buy immediately without thinking of any consequences iii Change jobs all of the time iv Usually 30 to 35 is when people settle 1 Marriage and jobs E Longevity Risk a Among top concerns for pre retirees worried they will outlive their money b Ways to manage i Work longer and retire later in life ii Reduce living expenses and save more 1 Retirement perks in restaurants movies ect iii Adjust your investment allocation to produce income during retirement 1 Annuity stocks bongs and renting out real estate are all ways to keep getting money F Healthcare Risk a Medicare i Designed to provide medical coverage for those on Social Security ii 65 and older iii Part D is added to Medicare to include prescription drug coverage b Manage healthcare risks i Review your family medical history ii Investigate costs of long term care facilities in your area iii Research long term care insurance policies iv Understand rules on Medicare Medicaid G Estimating Retirement Needs and Developing a Plan a Step 1 i Estimating net worth ii Start doing this 60 and up but should begin earlier iii Want to be debt free b Step 2 i Estimate how much money will be needed at retirement c Step 3 i Building and maintaining retirement income 1 Want to remain steady 2 The older you get the more careful you have to be in where you keep your money d Individual retirement accounts and homes as assets i IRA 1 Anyone can set up one do not have to be working 2 Self employed and homemakers can do this e Whole life insurance as an asset f Reduced expenses during retirement i No longer dry clean ii Entertainment expenses are cheaper g Increased expenses during retirement i Healthcare is always going to go up ii Leisure expenses is going to go up 1 More time more leisure 2 More money spent on recreation h Sources of retirement income i Can be difficult to think of what it is going to be like at age 65 when you are 40 ii Social security 1 Have to work for 10 years 2 Can be from different employers just needs to be the ten years 3 For every 1 00 that comes from Social Security 70 cents goes into a trust fund iii Public pension plans 1 Ex federal employees iv Employer sponsored retirement plans including 401k s v Typically social security supplements about 40 of a retiree s income vi This leaves the individual to come up with the other 60 1 Savings 2 Investments 3 Pensions 4 Annuities i Popularity of 401k s i Changing jobs ii Vesting iii Define contribution plan 1 Fixed at a certain level 2 Direct your investment in your plan 3 Return from investments and choosing well will reflect in your monthly payouts 4 More common now a days a Need to make sure you will make good choices not everyone does iv Defined benefit pension plan 1 More like a traditional plan 2 You work for so many years and you get a certain amount of money 3 You don t get to choose 4 Becoming less popular j Personal Retirement Plans i Individual retirement accounts IRAs ii Roth IRA s iii Educational IRA k Personal Retirement Plans i Simple IRA ii Simplified Employee Pension Plans SEPs 1 Mostly for self employed iii Keogh Plans 1 Tax deferred pension plans 2 Employed and self employed can do this 3 Part time or full time workers 4 Like an IRA but a little more complicated
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