"financial steps to retiring" presented by:

“Financial Steps to Retiring”

Presented by:

Ryan J. Johnson, CFP®, AAMS® Associate Vice President – Investment Officer

CERTIFIED FINANCIAL PLANNER™

A.G. Edwards & Sons, Inc / Wachovia Securities LLC.(920) 468-9227

[email protected]/fc/ryan.johnson

mailto:[email protected]

Purpose of This Workshop

• Help define your financial objectives

• Discuss the different pension benefit options

• Discuss factors to consider when selecting your pension benefit

• Discuss factors to consider when selecting an accelerated benefit

• Explain benefits of a Rollover IRA

• Explain benefits of Roth IRA Conversion

• Discuss retirement planning strategies

• Assist in making smart financial decisions for your circumstances

Factors to Consider

• Financial goals

• Lifestyle

• Short- and long-term financial needs

Roadblocks to Retirement Security

• Inflation

•Taxes

•Procrastination

10

9

8

7

6

5

4

3

2

1

1940 1950 1960 1970 Today 2010

??SALESALE

$1$1

Inflation’s Effect on Your Dollar

Your Real Return Adjusted for Inflation and Taxes

$500- 350 inflation$150-170 taxes

-$20 return after taxes and inflation, or -.20%

$500- 350 inflation$150-170 taxes

-$20 return after taxes and inflation, or -.20%

$10,000 investmentX 5.0% interest

$500 per year

$10,000 investmentX 5.0% interest

$500 per year

Based on 3.5% inflation,28% federal, and 6% state income tax bracket. Figures are for illustrative purposes and are not intended to reflect actual performance.

Key Questions to Address

• How much income will I need?

• How much income can I expect from my pension?

• Which of the seven pension benefit options do I choose?

• If I retire before age 62 can I withdraw my social security benefit?

• Should I rollover my 403b/TSA plan into an IRA?

• How much income can I take from my IRA and which investments should I take it from?

First Steps

• Apply for retirement with your school board

• Contact WRS Employee Trust Funds (877) 533-5020

• WRS will help calculate your monthly benefit options (7)

• Calculate your out of pocket health insurance premiums

Factors to consider for your Pension Benefit

• Single or Married

• Retirement Income Need

• Financial Security/protection for heirs

• Age/Accelerated Benefit

• Assets

• Goals & Lifestyle

• Life Expectancy

Source: The Wall Street Journal

Average 65-Year-Old’s Life ExpectancyAverage 65-Year-Old’s Life Expectancy

Consider Your Life Expectancy

1009080706050403020100

%

5 years5 years

10 years10 years 15 years15 years 20 years20 years 25 years25 years

64

65

66

67

Age

1938 1939 1940 1941 1942 1943-1954

1955 1956 1957 1958 1959 1960or later

Year of Birth

65+

2 m

onth

s

65+

4 m

onth

s

65+

6 m

onth

s

65+

8 m

onth

s

66+

2 m

onth

s

66+

4 m

onth

s

66+

6 m

onth

s

66+

8 m

onth

s

65+

10 m

onth

s

66 66+

10 m

onth

s

67

The Age for Receiving Full Social Security Benefits Is Increasing

Review 403b and other Retirement Accounts

• Proper Asset Allocation

• Management/Performance

• Control Risk

• Rebalance Investments

• Hedge Inflation

• New Benefits

Rolling 403b/TSA Assets to your own IRA

Distribution

Income Taxes (assuming 33% federal tax bracket)*

Initial Cash Investment

Taking Your MoneyTaking Your Money Rolling OverRolling Over

$100,000

0

$100,000

$100,000

0

$100,000

When 55 or Older and Separating From ServiceWhen 55 or Older and Separating From Service

Year

*This example is for illustrative purposes only and does not reflect actual state and federal taxation of a lump sum distribution. The taxes shown are calculated based on a single tax filer with $150,000 in other income. Consult your tax advisor to discuss your specific situation.

Results do not reflect the eventual taxation due upon withdrawal or the effects of mandatory distributions beginning at age 70½. Assumes an 8% annual growth rate. This example is for illustrative purposes only and does not reflect the return on any particular investment.

Take Your Money and Pay Taxes

Defer Taxes by IRA Rollover

$

$100,000

(33,000)

67,000

$100,000

(33,000)

67,000 $$

Benefits of Rolling 403b Assets into a Traditional IRA

• Investments continue tax deferral

• Larger investment selection

• Living benefits

• More flexibility

• Withdrawals are flexible

• Create a legacy using IRA Stretch-Out

Rolling Assets Into a Roth IRA

• In 2008 Qualified Retirement Plan Assets (403b plans) may be directly (converted) rolled into a Roth IRA.

• Taxes due on converted amount.

• Future distributions may be tax-free.

• No required distribution at any age.

Planning for IRA/403b Stretch-Out

Planning for IRA/403b stretch-out is easier now because beneficiaries have more choices and decision-making time.

IRA or 403b With No Planning

Traditional IRA, 403b/TSA Distributions After Your Death

TIMEDeath of IRA owner

Stretch IRAIncomefor Many Years

Income and

Estate Taxes A

fter

-Ta

xR

emai

nd

er

Benefits of IRA/403b Stretch for Children

MaryAge 40

Your IRA/403bYour IRA/403b

Income distributions over 43.6-year life expectancy

JohnAge 45

SusanAge 50



IRA/403b Stretch-Out May Cross Generations

MaryAge 40

Your IRA/403bYour IRA/403b

Distributions over 43.6 year life expectancy

Mary’sChild(ren)

Mary Dies at Age 70

Distributions can continue for 13.6 years

IRA Stretch-Out — Tax Deferral Extended for Heirs

Benefits:

• IRA assets are distributed overlonger period of time

• Avoids large, lump-sumtaxable distributions

• Leverages the value forthe family

Good Reasons to Roll Over Retirement Plan Assets Into an IRA

• Stretch-out benefits are automatically available to your heirs after your death

• Spousal rollover (available after death) can extend IRA stretch-out even more

• Investment flexibility increases

• Withdrawal flexibility increases

An IRA at A.G. Edwards/Wachovia Securities LLC.

• Investment flexibility

• Full accounting on one consolidated statement

• Dividend Reinvestment Program

• Systematic withdrawal

• Assistance with IRA reporting rules

• Notification of mandatory distribution obligations

• Professional Advice

Flexible Investment Choices at A.G. Edwards/Wachovia Securities LLC.

• Mutual Funds

• Variable Annuities

• Fixed Annuities

• Privately Managed Accounts

• Stocks, Bonds, CDs

Keys to Investing Success

• Clearly identify your objectives.

• Develop an investment plan.

• Select an appropriate asset allocation.

• Do not withdraw too much

• Regularly review your investmentprogress.

Capital Needed Capital Projected

A.G. EDWARDS & SONS, INC.

How Much Is Enough?

The previous table provides one of this report’s most graphic illustrations. Based on your investment allocation and your present saving habits, you will have a retirement income shortage. Based on the weighted average returns, the table below illustrates what amount of total capital is needed to provide you with income throughout your retirement.

Estimated capital needed for retirement $4,428,273Projected retirement capital $3,722,281Estimated shortage $705,991

Alternatives Available to Overcome Your Shortage

1. Reallocate your assets to provide more growth of your assets. — See the asset allocation section to determine if you are positioned properly.

2. Re-evaluate the goals you have set for yourself. Consider retiring later or demanding less income.

3. Continue to save more of your earnings to use toward your retirement goals.

Additional Contribution Needed to Meet Your GoalsBased on your investment return of 6.90%, our projections indicate you will need to save the following amounts from now until retirement in order to meet your retirement goals.

Shortage

Annual Investment $17,410Monthly Investment $1,372

$0 $1,000,000$2,000,000 $3,000,000 $4,000,000 $5,000,000

Hypothetical Wealth Accumulation GraphPrepared for Joe and Mary Kraemer

Designing a Plan to Fit Individual Needs

Retirement PlanningHypothetical Wealth Accumulation GraphPrepared for Joe and Mary Kraemer

PortfolioValue

This graph represents a hypothetical illustion of accumulation over the investment time horizon for the taxable and tax-deferred portfolios.

Past Performance is not a guarantee of future results.

Age

$5,000,000

$4,000,000

$3,000,000

$2,000,000

$1,000,000

$040 45 50 55 60 65 70 75 80 85

Taxable Tax-Deferred

A.G. EDWARDS & SONS, INC.

Growth Asset Allocation Benchmarks

Growth of capital primary goal High capital growth potential with commensurate greater capital risk

Large-Cap U.S. Stocks $10 Billion

$2 Billion Mid-Cap U.S. Stocks $10 Billion

Small-Cap U.S. Stocks $2 Billion

Foreign Developed-Country Stocks

< <

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> Large-Cap U.S. Stocks $10 Billion


Small-Cap U.S. Stocks $2 Billion


Foreign Emerging-Country Stocks

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>

Income and growth of capital have equal priority.

Balanced Asset Allocation Benchmarks

Growth of capital takesprecedence over income.

Cash Equivalents Short/Intermediate Investment-Grade Bonds Long Investment-Grade Bonds Speculative Bonds Real Estate Large-Cap U.S. Stocks $10 Billion$2 Billion Mid-Cap U.S. Stocks $10 BillionSmall-Cap U.S. Stocks $2 BillionForeign Developed-Country Stocks

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<<

>

Cash Equivalents

Short/Intermediate Investment-Grade Bonds

Long Investment-Grade Bonds

Speculative Bonds

Real Estate

Large-Cap U.S. Stocks $10 Billion



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Get Your Financial Picture Into Focus

• Distribution planning

• Financial planning

• Estate planning

• Trust services

Objective Financial Advice

Caring for your nest egg.

That’s what we do.

Building Relationships

Don’t let your nest egg get away from you.

Ryan J. Johnson, CFP®, AAMS®

Associate Vice President – Investment OfficerCERTIFIED FINANCIAL PLANNER™

A.G. Edwards & Sons, Inc. / Wachovia Securities LLC.959 Kepler Dr

Green Bay, WI 54311(920) 468-9227 or (800) 274-4270

[email protected]/fc/ryan.johnson

mailto:[email protected]

Seek the Advice of Tax and Legal Advisors

This presentation is designed to provide accurate and authoritative information regarding the subject matter covered. You should understand that A.G. Edwards is not engaged in rendering legal, accounting or tax-preparation services. If tax or legal advice is required, you should seek the services of an appropriate, competent professional.

A.G. Edwards’ view is that investment decisions should be based on investment merit, not solely on tax considerations. However, the effects of taxes are a critical factor in achieving a desired after-tax return on your investment. The information provided is based on internal and external sources that are considered reliable; however, the accuracy of the information is not guaranteed. You should direct specific questions on taxes as they relate to your situation to your tax advisor.

We remain fully invested in our clients.

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A.G. Edwards is a division of Wachovia Securities, LLC. Member SIPC.

A.G. Edwards has joined Wachovia Securities

Our new firm:

• Practices a client first philosophy

• Respects the FC/client relationship

• Listens to your needs

• Provides individualized advice

"financial steps to retiring" presented by:

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