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February 20, 2020 FINANCIAL LITERACY SERIES PENSION & RETIREMENT: PLAN NOW TO SAFEGUARD YOUR FUTURE TIFFANY SMITH, CFA, CIPM INVESTMENT MANAGER, CFAL PUBLIC RELATIONS CHAIR, CFASB

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Page 1: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

February 20, 2020

FINANCIAL LITERACY SERIES

PENSION & RETIREMENT: PLAN NOW TO SAFEGUARD YOUR FUTURE

TIFFANY SMITH, CFA, CIPM

INVESTMENT MANAGER, CFAL

PUBLIC RELATIONS CHAIR, CFASB

Page 2: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

2

AGENDA

Where Do You Want to be at Retirement?

Top 5 Retirement Concerns

How Do I Get There?

Next Steps

Questions

www.cfasociety.org/bahamas

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3

WHERE DO YOU WANT TO BE AT RETIREMENT?

www.cfasociety.org/bahamas

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4www.cfasociety.org/bahamas

WHERE DO YOU WANT TO BE AT RETIREMENT?

Page 5: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

5www.cfasociety.org/bahamas

WHERE DO YOU WANT TO BE AT RETIREMENT?

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WHERE DO YOU WANT TO BE AT RETIREMENT?

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WHERE DO YOU WANT TO BE AT RETIREMENT?

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8www.cfasociety.org/bahamas

TOP 5 RETIREMENT CONCERNS

• Will I have enough money saved?

• Will I outlive my assets?

• How will I get income in retirement?

• Do I have too much debt?

• How will I pay for increased medical expenses?

Page 9: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

TOP 5 RETIREMENT CONCERNS

#1 - Will I have enough saved?

9www.cfasociety.org/bahamas

• It is estimated that you will need 70 – 80% of your pre-retirement income to maintain the same standard of

living. If you made $100,000 per year, you would need savings that could produce $70,000 - 80,000 per

year for roughly 20 years, or $1.4 - $1.6 million.

• A comfortable retirement will cost you 4 – 10 times what you paid for your home.

Page 10: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

CAN YOU RETIRE TODAY?

10www.cfasociety.org/bahamas

Years in retirementAnnual Income

$30,000 $40,000 $50,000 $75,000 $100,000

30 $612,032 $816,043 $1,020,054 $1,530,081 $2,040,108

25 $542,881 $723,842 $904,803 $1,357,204 $1,809,606

20 $463,057 $617,409 $771,761 $1,157,643 $1,543,523

15 $370,910 $494,546 $618,183 $927,274 $1,236,365

10 $264,538 $352,717 $440,897 $661,345 $881,793

5 $141,746 $188,995 $236,244 $354,366 $472,488

SAVINGS NEEDED TO RETIRE GIVEN A NUMBER OF YEARS IN RETIREMENT &

ANNUAL INCOME DESIRED (IN TODAY’S DOLLARS)

Page 11: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

TOP 5 RETIREMENT CONCERNS

#2 - Will I outlive my assets?

11

• Longevity risk is a major factor when planning for

your retirement.

• People are living longer due to medical advances

• Living until 90 = 25 years in retirement

• What to do?

o Save more

o Work longer

o Purchase an annuity

www.cfasociety.org/bahamas

Page 12: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

TOP 5 RETIREMENT CONCERNS

#3 – How will I get income in retirement?

12

• National Insurance

o National Insurance should only be considered a supplement in retirement

• Pension Plan

o Company Sponsored Pension Plan

o Individual Retirement Account

o Upon retirement, invest the proceeds and withdraw on a monthly/ quarterly basis.

• Other Investments

www.cfasociety.org/bahamas

Page 13: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

13

BUILDING YOUR RETIREMENT PLAN

A solid retirement plan is made up of several layers.

www.cfasociety.org/bahamas

A

C

E

D

Retirement Advisor

Pension Plan

National Insurance

Estate Plan (Insurance, Will, Trust)

Other Savings

B

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14

IMPORTANT QUESTIONS TO ASK ABOUT YOUR

PENSION PLAN

• Is the pension plan mandatory?

• Is it a defined benefit or defined contribution plan?

• If defined contribution, what is the contribution rate? (% of salary)

• How much does the company contribute? (% of salary)

• Can I contribution extra (voluntary contributions)?

• What is the plan invested in? Who makes the investment decisions?

• If I leave the company or retire, do I receive a lump sum payment?

www.cfasociety.org/bahamas

Page 15: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

15

IMPORTANT QUESTIONS TO ASK ABOUT YOUR

PENSION PLAN

• How long until I am fully vested?

• Vesting schedule: determines when you are eligible to receive the employer’s contribution.

# Years of Service Vesting %

0 - 1 0%

1 - 2 20%

2 - 3 40%

3 - 4 60%

4 - 5 80%

5+ 100%

www.cfasociety.org/bahamas

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16

PENSION PLAN PROVIDERS

• Encourage your employer to start a pension plan with a pension provider.

• Open an Individual Retirement Account

www.cfasociety.org/bahamas

Page 17: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

TOP 5 RETIREMENT CONCERNS

#3 – How will I get income in retirement?

OTHER INVESTMENTS

17www.cfasociety.org/bahamas

• Stocks

o Common stock

o Preferred stock

• Bonds

o Government bonds

o Corporate bonds

• Real Estate

o Vacant land

o Multi-family/ single-family

• Mutual funds

o Bond Funds

o Stock Funds

o Balanced Funds

o Money Market Funds

• Term deposits

• Savings accounts

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18

TOP 5 RETIREMENT CONCERNS

• Best scenario: mortgage, car loans, credit cards paid off by the time you retire

• Pay down the highest interest rate loans first

o Credit cards typically 18 – 22%

o Car/ consumer loans 6 – 15%

o Mortgages 4 – 7%

• Avoid borrowing against your retirement savings

Reducing debt reduces your expenses in retirement

www.cfasociety.org/bahamas

#4 – Do I have too much debt?

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TOP 5 RETIREMENT CONCERNS

19

• Once you have stopped working, you will typically have to pay for your own health insurance

• Some insurance companies do not allow new policies after a certain age

• Doctor visits may become more frequent

• A Fidelity Investments study in the US showed that the average 65-year old couple retiring in 2018 would need about $280,000 to cover medical expenses in retirement. ($133,000 for a man and $147,000 for a woman)

www.cfasociety.org/bahamas

#5 – How will I pay for increased medical expenses?

Page 20: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

TOP 5 RETIREMENT CONCERNS

#5 – How will I pay for increased medical expenses?

20

• Tips:

o If you have a medical condition that will likely continue into your

retirement, come up with a savings plan to cover these costs.

o If you have group medical insurance, inquire on whether the

policy is easily transferable to an individual plan upon retirement.

o Include medical expenses in your retirement number.

o Create an emergency fund, or saving account just to cover

medical expenses.

o Stay healthy

www.cfasociety.org/bahamas

Page 21: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

OTHER LARGE COSTS IN RETIREMENT

21

• Housing

• Utilities

• Travel

• Food

www.cfasociety.org/bahamas

Page 22: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

22

HOW DO I GET THERE?

“If you fail to plan, you are planning to fail.” ~ Benjamin Franklin

• Having a comfortable retirement requires planning in advance.

• It is recommended that you begin saving for retirement as soon as you receive your first paycheck (typically

age 21), however it is never too late.

• A lot of persons end up working longer or relying on family members due to failure to plan.

• Include retirement savings of 5 – 10% in your budget!

Make a Plan

www.cfasociety.org/bahamas

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23

HOW DO I GET THERE?

www.cfasociety.org/bahamas

https://www.statefarm.com/simple-insights/retirement/calculate-the-future-value-of-your-retirement-savings

Use a retirement calculator to determine how much you need to save per month to meet your retirement goals.

https://www.statefarm.com/simple-insights/retirement/calculate-the-future-value-of-your-retirement-savings
Page 24: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

NEXT STEPS

24

Determine where you want to be in retirement

Review your finances, create a budget

Make a plan to achieve your retirement goals

Enroll in your company sponsored pension plan/ start an Individual Retirement Account

www.cfasociety.org/bahamas

Stick to the plan! Be disciplined!

Page 25: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

25

DETERMINE THE QUALITY OF YOUR RETIREMENT

www.cfasociety.org/bahamas

OR

Page 26: FINANCIAL LITERACY SERIES · • It is estimated that you will need 70 –80% of your pre-retirement income to maintain the same standard of living. If you made $100,000 per year,

THANK YOU!

Questions?

26www.cfasociety.org/bahamas


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