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Financial Planning for Women November 11, 2009 Jean Lown Ph.D. & Diana Burk, M.S. student Slide 2 New Developments @ FPW Survey has been approved by USU IRB You will receive an email inviting you to respond Incentives: drawing for free consultation with Suzanne Dalebout at Polaris Financial Planning in SLC Thanks to Diana FPW newsletter has a new look FPW has a blog! http://fpwusu.blogspot.com/http://fpwusu.blogspot.com/ Find us on Facebook: Become a fan of FPW 2 Slide 3 Overview 3 Why you may need to invest more IRA overview Traditional vs. Roth Should you convert a traditional IRA or a workplace plan to a Roth? Slide 4 Life expectancy in the West U.S. Census Bureau, Steve Baker The Salt Lake Tribune August 3, 2006 A6 Calculate your longevity: Module 1B http://www.ces.purdue.edu/retirement/ Slide 5 Source: National Center for Health Statistics, Vital Statistics of the United States, Decennial Life Tables; Governors Office of Planning and Budget, Steve Baker/ The Salt Lake Tribune, August 3, 2006 A6 Slide 6 National Retirement Risk Index Center for Retirement Research @ Boston College NRRI measures % of households who are at risk of being unable to maintain pre- retirement level of living in retirement 2004 NRRI: 43% at risk After crash: households at risk rose to 51% 6 Slide 7 Health Expenses have risen faster than inflation for > 20 years Medicare will not cover all costs 2009 Medicare part B $96.40/mo. will continue to rise a women retiring at age 65 in 2009 will need $98,000 $242,000 in savings to cover health insurance premiums & out-of-pocket expenses in retirement for a 5050 chance of having enough money. $164,000$450,000 for a 90% chance Source: Employee Benefit Research Institute 7 Slide 8 Long Term Care Expenses Home health care aides $21/hour x 24 hours = $504/day x 365 = $183,960 Assisted living $37,572 annually 40% of todays seniors will spend time in nursing home $79,935 /yr. for private room $72,270 for semi-private The 2009 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs, October 2009. http://www.metlife.com/assets/cao/mmi/publications/studies/mmi-market- survey-nursing-home-assisted-living.pdf 8 Slide 9 Will you have enough $? to increase likelihood you wont outlive your $ to supplement Social Security & any workplace plan Contribute to an Individual Retirement Account 9 Slide 10 Investing in an IRA is the first step to reaching your retirement dreams! Slide 11 What is an IRA? an individual, tax-sheltered account for retirement not an investment, but an account to hold investments like a cookie jar or a candy wrapper 11 Slide 12 IRA Investments almost any investment, from CDs to stocks Good choice is a target date retirement mutual fund Recommendations at: http://www.usu.edu/fpw 12 Slide 13 Individual Retirement Accounts 13 Tax-advantaged investing account is not taxed while it is growing When $ is withdrawn in retirement Traditional IRA withdrawals are taxed R oth IRA withdrawals are tax-free Because you paid taxes before funding the Roth IRA Slide 14 Why Contribute? How long do you expect to live in retirement? Do you participate in an employer plan? Will you have enough money from Social Security & employer plan to last for 3+ decades in retirement? 14 Slide 15 Who Can Contribute? Any worker with earned income (no age limit) Spousal IRA for worker's non-earning spouse 15 Slide 16 How Much Can You Contribute? Up to $5000 annually Start with as little as $100 in Schwab index mutual fund $50/month in T. Rowe Price mutual funds Age 50 or older: $6000/year 16 Slide 17 Traditional IRA Individual account You or spouse must be earning taxable income Contributions are tax deductible Growth is taxed when you withdraw Required Minimum Distributions after 70 Slide 18 Roth IRA Eligibility to contribute in 2009 Earn