Category

Retirement Plan – Employees

Retirement IQ Test

If you’re participating in your company’s retirement plan, you understand the importance of saving now for your future. But, how savvy are you when it comes to knowing how much you should be saving for a comfortable retirement? Take this short quiz and find out!

1) In order to maintain living standards in retirement, what percent of annual income do financial professionals think people should save?

A.      About 3%

B.       About 6%

C.      About 9%

D.      About 12%

E.      About 15%

 

2) If an investor could set aside $50 each month for retirement, how much might that end up becoming 25 years from now, including interest if it grew at the historical stock market average?

A.      About $15,000

B.       About $30,000

C.      About $40,000

D.      About $50,000

E.     More than $60,000

 

3) Roughly how much do many financial professionals suggest people think about saving by the time they retire?

A.      About 2-3 times the amount of your last full year income

B.      About 4-5 times the amount of your last full year income

C.      About 6-7 times the amount of your last full year income

D.     About 8-9 times the amount of your last full year income

E.       About 10-12 times the amount of your last full year income

 

4) Which of the following do you think is the single biggest expense for most people in retirement?

A.      Housing

B.       Health care

C.      Taxes

D.      Food

E.       Discretionary expenses

 

5) About how much will a couple retiring at age 65 spend on out-of-pocket costs for health care over the course of retirement?

A.      $50,000

B.      $100,000

C.      $170,000

D.     $260,000

E.     $350,000

 

Answers:

  1. E. About 15%. 2. C. About $40,000¹. 3. E. About 10-12 times the amount of your last full year income. 4.  A. Housing². 5.  D. $260,000³.

 

How did you score? Is it time to increase your deferral percentage? Contact your Human Resources department for assistance.

 

This information is intended to be educational and is not tailored to the investment needs of any specific investor. Investing involves risk, including the risk of loss.
¹This hypothetical estimate assumes the individual or household sets aside $50 a month for 25 years. Rate of return is 7.0% annual interest which is compounded monthly. Estimated increases in retirement monthly income are in constant 2015 dollars. This estimate assumes the $50 deferral amount stays constant through the entire 25 year period and represents a nominal value. It is assumed that the participant took no loans or hardship withdrawals from these savings. All dollars shown are pretax dollars. Upon distribution, applicable federal, state, and local taxes are due. No federal, state, or local taxes; inflation; or account fees or expenses were considered. If they were, the estimated amount would be lower. Actual realized value may be significantly more or less than this illustration. ²Bureau of Labor Statistics, “The Experimental Consumer Price Index for Elderly Americans” ³Estimate based on a hypothetical couple retiring in 2016, 65-years-old, with average life expectancies of 85 for a male and 87 for a female. Estimates are calculated for “average” retirees, but may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Original Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care. Life expectancies based on research and analysis by Fidelity Investments Benefits Consulting group and data from the Society of Actuaries, 2014.
Distributions before the age of 59 ½ may be subject to an additional 10% early withdrawal penalty.

2017 Tax Saver’s Credit – Are You Eligible?

You may be eligible for a valuable incentive, which could reduce your federal income tax liability, for contributing to your company’s 401(k) or 403(b) plan. If you qualify, you may receive a Tax Saver’s Credit of up to $1,000 ($2,000 for married couples filing jointly) if you made eligible contributions to an employer sponsored retirement savings plan. The deduction is claimed in the form of a non-refundable tax credit, ranging from 10% to 50% of your annual contribution.

Remember, when you contribute a portion of each paycheck into the plan on a pre-tax basis, you are reducing the amount of your income subject to federal taxation. And, those assets grow tax-deferred until you receive a distribution. If you qualify for the Tax Saver’s Credit, you may even further reduce your taxes.

Your eligibility depends on your Adjusted Gross Income (AGI), your tax filing status, and your retirement contributions. To qualify for the credit, you must be age 18 or older and cannot be a full-time student or claimed as a dependent on someone else’s tax return.

Use this chart to calculate your credit for the tax year 2017. First, determine your AGI – your total income minus all qualified deductions. Then refer to the chart below to see how much you can claim as a tax credit if you qualify.

Filing Status/Adjusted Gross Income for 2017
Amount of Credit Joint Head of Household Single/Others
50% of amount deferred $0 to $37,000 $0 to $27,750 $0 to $18,500
20% of amount deferred $37,001 to $40,000 $27,751 to $30,000 $18,501 to $20,000
10% of amount deferred $40,001 to $62,000 $30,001 to $46,500 $20,001 to $31,000
Source: IRS Form 8880

 

For example:

  • A single employee whose AGI is $17,000 defers $2,000 to their retirement plan will qualify for a tax credit equal to 50% of their total contribution. That’s a tax savings of $1,000.
  • A married couple, filing jointly, with a combined AGI of $38,000 each contributes $1,000 to their respective company plans, for a total contribution of $2,000. They will receive a 20% credit reducing their tax bill by $400.

With the Tax Saver’s Credit, you may owe less in federal taxes the next time you file by contributing to your retirement plan today!

 

Distributions before the age of 59 ½ may be subject to an additional 10% early withdrawal penalty. Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through NFP Retirement, Inc. Kestra IS is not affiliated with NFP Retirement, Inc., a subsidiary of NFP.Source: Principal Financial Group

Rebalancing Your Portfolio

As a participant in the company’s retirement plan, you are already serious about saving for your future. Whether you are retiring in a few weeks or a few decades, you may need to protect your investment. A healthy way to do this is to rebalance your portfolio.

What is rebalancing?

Rebalancing is simply readjusting your portfolio back to the original asset location that took into account your risk tolerance and time horizon. Put another way, rebalancing forces you to adhere to your investment strategy.

You rebalance by selling assets that make up too much of your portfolio and use the proceeds to buy back those that now make up too little of your portfolio. The net effect is to “sell high and buy low.” Ultimately, regular rebalancing can increase the overall return of your portfolio over time.

EXAMPLE: 
Suppose you enrolled in the plan at the beginning of last year and allocated 40 percent of your portfolio to bond funds and 60 percent to equity funds.  Further suppose that when you go your year-end statement, it shows that 70 percent of your assets are in equity funds and 30 percent are in bond funds. 

To stay within your acceptable risk level (which is what you determined before entering into the plan), you should sell enough equity funds to bring that back to 60 percent of your assets and buy enough bond funds to bring them up to 40 percent of your assets.

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If you have questions about rebalancing your portfolio, please contact your retirement plan consultant, R|W Investment Management. Call (208) 297-5445 or [email protected].

 

 

 

Source: Principal Financial Group
ACR#207478 09/16
R|W Investment Management (“The Firm”) is a Registered Investment Adviser. This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where the Firm and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal. No advice may be rendered by the Firm unless a client service agreement is in place.

Key Dates as You Approach Retirement

At what age can retirement plan distributions begin? When can a person begin to receive Social Security? As you get closer to your retirement date you may start to wonder about your eligibility for certain withdrawals and programs you are entitled to receive. Refer to this timeline to remember important dates as you get closer to retirement.

  • 59 1/2: May withdraw money from qualified plans/IRAs without IRS penalty.1
  • 62: Earliest age to start Social Security.2
  • 65: Entitled to Medicare coverage.
  • 66-67: Social Security full retirement age.2
  • 70: Latest age to start Social Security.2
  • 70 1/2: Must start Required Minimum Distributions (RMDs).3

If you have any questions about your withdrawal options as you near retirement, please contact your retirement plan consultant.

¹If the retirement plan allows.
²Partial, full or late retirement age is based on the year you were born. See ssa.gov for details.
³If a participant in a qualified plan is still employed and not a greater than 5 percent owner, they are not required to start minimum distributions from that plan until they retire.
Distributions before the age of 59½ may be subject to an additional 10% early withdrawal penalty.
Distributions and withdrawals are subject to ordinary income taxes.
Source: Principal Financial Group
ACR#207478 09/16

 

 

How Long Will Your Money Last?

With all of the advanced education and strategy tools available, it is still often difficult for employees to understand the difference between what they can save for retirement and what is needed to retire. Sometimes, it is helpful to see what your account will actually provide over the course of your retirement. It can also help you set an achievable goal.

Savings Monthly Income for 10 years1 Monthly Income for 20 years1 Monthly Income for lifetime of individual and spouse2
$50,000 $493 $289 $174
$100,000 $986 $578 $349
$150,000 $1,479 $867 $523
$200,000 $1,972 $1,157 $698
$250,000 $2,465 $1,446 $872
$500,000 $4,930 $2,891 $1,745
$750,000 $7,395 $4,337 $2,617

Monthly income can be greatly influenced by the number of distribution years.  A shorter payout over 10 years will result in the highest monthly distribution amount, but the risk is if you live longer than 10 years in retirement, you may actually run out of money.  Perhaps the most important decision is to decide when you actually want the distributions to begin.  Deferring the beginning date of distributions from your account a few years can not only reduce the payout timeframe, but could allow an opportunity for additional asset growth depending on investment performance.

The monthly incomes are hypothetical and not intended to project the performance of any specific investment or insurance product.

1 – Payment increases 2% annually to help offset effects of inflation. Illustrative amounts based on 3.5% interest rate.  Lifetime payments assume retirement age of 65.

Based on 5.5% annual yield compounded monthly. Investment option performance can dramatically affect these numbers. Inflation can also seriously affect the value of the withdrawals. Rate of return is hypothetical and does not represent any specific investment option or imply guaranteed results. Amounts shown do not reflect the impact of taxes on earnings, your actual return will vary depending on your investment option and your tax bracket.

2 – Lifetime payments assume start at age 65 over two lives, Joint and Survivor at 100% survivor benefit and 3% COLA. Analytics provided by MassMutual.

A Turbulent Start to 2016

The beginning of the year has been a volatile one for the markets, sparking fear amongst investors and serving as a harbinger of possible things to come (for the rest of the year). In fact, the volatility we have seen in January is not only normal, but long overdue. The third quarter pull back of 2015 was a return to a more normal market volatility, which we’ve witnessed since the 1920s, something that has generally been missing since the financial crisis over seven years ago.

As our third quarter Market Volatility chart (see below) showed, declines of at least 10 percent happen frequently, averaging once every 11 months. Year to date, while the S&P 500 has not yet eclipsed this, it has gotten close. From its last peak, however, it has declined beyond 10 percent.¹ Perhaps somewhat more worrying is that a market decline of at least 20 percent, which has occurred once every four years may be just around the corner. Because 20 percent represents a bear market (a market where the stock market declines over a period of time) investors’ concern has increased as the 2016 slide extends and grows longer.² The long recovery in the U.S., coupled with slowing economies, notably China, and divergent global monetary policies only add to the uncertainty. These alone have been the primary drivers of recent volatility. The table below provides some historical perspective into the size and frequency of U.S. stock market declines from 1928 to 2013.

Decline of at least… 10% 15% 20% 30% 50%
Frequency: 89 times 41 times 21 times 9 times 3 times
Average occurrence: Once every… 11 months 2 years 4 years 10 years 30 years

Tips to remember during turbulent times:

  • Review Your Portfolio. Know your investment mix and be sure you are invested in the appropriate asset classes (based on your risk tolerance and time horizon to retirement). Times like these reinforce the need to diversify (While diversification does not guarantee against loss of principal, it can help spread your risk among different asset classes and market segments.)
  • Check Your Contribution Rate. How much you contribute each month can directly impact how much you will have at retirement. Have you done a retirement needs calculation? Do you know how much you should be contributing each month to reach your goal? Are you increasing that amount each year or more often based on your income and age?
  • This will readjust your portfolio back to your original investment strategy attempting to “sell high and buy low”. Essentially, when you rebalance, you tend to sell some appreciated assets and purchase others with lower valuations. Regular rebalancing (as a rule of thumb, at least once a year) may increase the overall return of your portfolio over time.
  • Consult with a Professional. Don’t go it alone. Financial planning resources are available through our retirement plan consultant, R|W Investment Management. Call (208) 297-5445 or email [email protected]
¹Wall Street Journal
²RPAG
³Motleyfool.com. Obtained by analyzing daily data for the Dow Jones Industrial Average and S&P 500.
This material is not intended to replace the advice of a qualified attorney, tax adviser, investment professional or insurance agent. Past performance does not guarantee future results. . Rebalancing assets can have tax consequences.  If you sell assets in a taxable account you may have to pay tax on any gain resulting from the sale.  Please consult your tax advisor. S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. ACR#172463 02/16

Making the Most of Your Retirement Plan

Your company’s retirement plan is a smart way to save for a secure financial future. Below are a few helpful hints to help you reach your goals.

Dos Don’ts
Do participate today. Each day you wait is less money you will have at retirement. Don’t let emotion rule. Remember that the market fluctuates and that you are in this for the long term.
Do diversify* your investments. Consider your age and your tolerance to risk. Don’t “listen to your neighbor.” Consider the source of such investment advice.
Do contribute enough to receive the full benefits of the employer match (if offered). Don’t time the market. This is a dangerous game to play.
Do rebalance your investment allocation regularly. Don’t chase returns. It won’t get you any closer to where you need to be.

Remember, you are in control of your retirement savings – so be pro-active!

If you have any questions or are unsure how to invest your money, contact your benefits department or call your retirement plan consultant, R|W Investment Management at 208-297-5445.

*Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.
Investments are not guaranteed and are subject to investment risk including the possible loss of principal.
The “Retirement Times” is published monthly by Retirement Plan Advisory Group’s Marketing team. This material is intended for informational purposes only and should not be construed as legal advice and is not intended to replace the advice of a qualified attorney, tax adviser, investment professional or insurance agent. (c) 2015. Retirement Plan Advisory Group. 401k-2011-19 ACR#148881 08/15

Four Tips to Follow in Turbulent Times

With the recent market volatility, it’s understandable for you to be concerned about your investments.

Volatile markets can make you wonder if you’re on track to meet your retirement goals. Don’t be discouraged and most of all, don’t panic. Instead, be proactive! Consider the following steps you should be taking in both up AND down markets:

1. Review Your Portfolio. Know your investment mix and be sure you are invested in the appropriate asset classes (based on your risk tolerance and time horizon to retirement). Times like these reinforce the need to diversify. (While diversification does not guarantee against loss of principal, it can help spread your risk among different asset classes and market segments.)

2. Check Your Contribution Rate. How much you contribute each month can directly impact how much you will have at retirement. Have you done a retirement needs calculation? Do you know how much you should be contributing each month to reach your goal? Are you increasing that amount each year or more often based on your income and age?

3. Rebalance. This will readjust your portfolio back to your original investment strategy attempting to “sell high and buy low”. Essentially, when you rebalance, you tend to sell some appreciated assets and purchase others with lower valuations. Regular rebalancing (as a rule of thumb, at least once a year) may increase the overall return of your portfolio over time.

4. Consult with a Professional. Don’t go it alone. Financial planning resources are available through our retirement plan consultant, R|W Investment Management. Call (208) 297-5445 or email [email protected]

Remember, staying invested in times of market turbulence will help you participate fully in potential market gains. While there is never any certainty in the market, it is worth noting that some of the sharpest market declines were followed by steep rebounds. History has taught us that volatility is to be expected. The implications surrounding the current turmoil should call on plan participants to focus on what they should otherwise be doing on a regular basis.

No More Excuses!

Saving for retirement can be intimidating, but it doesn’t have to be. Finding reasons not to contribute to your retirement plan will hurt you in the future.

Do any of these excuses sound familiar?

If You Think Then Consider
“I don’t make enough money.” Tax savings. Your contribution is taken out before taxes, so the amount you pay taxes on is lower.
“I’m too young to worry about it right now; time is on my side.” The magic of compounding. When you give your money more time to accumulate, the earnings on your investments—and the annual compounding of those earnings—can make a big difference in your final return.
“I’m too old, it’s too late.” It’s never too late. If you’re 50 years old or older, you can contribute a catch-up deferral of up to $6,000 for 2015. You still have time to put your money to work for you.
“Stocks, bonds it’s too confusing!” There is an easier way! Your plan may have the option to invest your money in a “pre-set” asset allocation or lifestyle model that takes into account your expected retirement date or age. It’s a “set it and forget it” approach and works well for the less sophisticated investor.
“I’ll still have my Social Security.” Don’t count on it. A dwindling workforce means fewer tax dollars down the road. In just a few years there will be two workers per every one retiree.
“I just don’t know how to get started.” Help is available. Understanding how to begin saving for retirement might be overwhelming, but it’s easier than you think. Contact Human Resources for an enrollment form or call our retirement plan consultant, R|W Investment Management at 208-297-5445 for more information.

Stop finding reasons not to contribute to your Retirement Plan.

 

For more information about how you can save for retirement, contact your plan advisor. The “Retirement Times” is published monthly by Retirement Plan Advisory Group’s Marketing team. This material is intended for informational purposes only and should not be construed as legal advice and is not intended to replace the advice of a qualified attorney, tax adviser, investment professional or insurance agent. (c) 2015. Retirement Plan Advisory Group. ACR#14537D 06/15

Save Early, Reach Your Goal

One of the biggest mistakes that you can make as an employee is to not contribute to your plan as soon as you are eligible to do so. The earlier you start contributing to your retirement plan, the more time compounding interest has to work on your behalf. Putting off contributions to the retirement savings plan today means increased contributions to reach the same goals tomorrow.

 Save Early, Reach Your Goal