1 Tax-smart ways to save and invest TIAA-CREF Financial Essentials
2 Today s agenda: 1. Finding funds for saving 2. Tax law provisions promoting saving 3. TIAA-CREF savings opportunities 4. TIAA-CREF can help you pursue your financial goals 5. Reasons to save with TIAA-CREF 6. Action steps to take
3 Finding Funds for Saving Saving for your financial goals Short term 1-3 years Intermediate term 3-10 Years Long term 10+ Years
4 Finding Funds for Saving Examine your financial situation Save more, save often! Make better spending choices Become more disciplined Look for ways to reduce debt Try to reduce entertainment and gift expenses FPO
5 Finding Funds for Saving Reduce your debt You must be disciplined! Pay off credit card balances with savings; then continue to deposit what you would have paid into a savings account every month Consolidate high-rate credit cards into lower-rate bank loans Shop for lowest-rate credit cards possible; be sure to read the fine print FPO
6 Finding Funds for Saving Effective withholding You should neither owe money, nor get a refund Why would a refund not be to your advantage? Money you overpaid the government could have been saved, earning money for you instead! Adjust the number of allowances to avoid having too much, or not enough tax withheld Neither TIAA-CREF nor its affiliates offer tax advice. Please consult your advisor.
7 Finding Funds for Saving 2013 Individual income tax rates single filers Taxable income over But not over Tax bracket $0 $8,925 10% $8,925 $36,250 15% $36,250 $87,850 25% $87,850 $183,250 28% $183,250 $398,350 33% $398,350 $400,000 35% $400, %
8 Finding Funds for Saving 2013 Individual income tax rates married filing jointly Taxable income over But not over Tax bracket $0 $17,850 10% $17,850 $72,500 15% $72,500 $146,400 25% $146,400 $223,050 28% $223,050 $398,350 33% $398,350 $450,000 35% $450, %
9 Tax Law Provisions Promoting Saving Make tax-deferred savings work for you Tax-deferred retirement plans 403(b) 457(b) 401(k)
10 Reaching Your Financial Goals Savings: After tax vs. tax deferred Sheila: $150/month in after-tax savings John: $200/month in tax-deferred savings $146,888 $112,471 $22,654 $24,490 $57,836 $68, Years 20 Years 30 Years Assumptions: Both people are in the 25% federal tax bracket and the effective annual rate of return is 6%, although your actual rate of return may be more or less than 6%. The chart does not reflect expenses, which, if shown, would result in lower returns. This is a hypothetical example and not intended to represent the performance of any specific investment nor does it take into account charges and expenses. It cannot be used to predict or project investment performance.
11 Looking for Opportunities in a Downturn Contributing more 2013 Limits for salary deferral retirement plans* $30,000 $25,000 $20,000 $15,000 $10,000 $5, (k), 403(b) and 457(b) plans $17, (k), 403(b) and 457(b) plans $23, (b) Plans Only $20,000** 403(b) Plans Only $25, 500** $0 Most employees Employees age 50 and over Employees with 15+ years of service Employees age 50 and over with 15+ years of service * Based upon your salary, you may contribute up to the maximum amount under each scenario represented by the different bars. ** You must be an employee of an eligible teaching institution, hospital, church, home health agency or health and welfare service agency to be eligible for these contribution limits.
12 TIAA-CREF Savings Opportunities Save more with a supplemental retirement plan Immediate Advantages Lower your current taxable income Future Advantages Power of compounding Power of tax deferral FPO
13 TIAA-CREF tax-deferred annuities: Supplemental Retirement Account (SRA) product advantages Immediate vesting No loads, surrender charges* or transaction fees Customized investment options Death benefits * Under the Internal Revenue Code, early withdrawals (before age 59½) may be subject to an additional 10% federal penalty. Other fees and expenses do apply to a continued investment in the fund and are described in the fund's current prospectus.
14 Saving for your future Keep in mind: Tax-Deferred Annuity (TDA) plans are designed for retirement and other long-term goals When you contribute to a TDA plan, your money must remain in the plan until you reach 59½ FPO
15 Filling the retirement savings gap with tax-deferred annuities Keep in mind: If you make a withdrawal before age 59 1/2, the money will be taxed as ordinary income and you may be subject to an additional federal 10% early withdrawal penalty If you choose to invest in the variable investment products, your money will be subject to the risks inherent in investing in securities, including the loss of principal FPO
16 Tax Law Provisions Promoting Savings Make an IRA contribution Traditional IRAs Roth IRAs Should I roll over?
17 Consider Taxes When Choosing Products Traditional and Roth IRAs great for additional retirement savings! Year IRA* 50+ Catch up 50+ Total Yearly 2013 $5,500 $1,000 $6,500 * After 2011, indexing may be in $500 increments, subject to inflation. IRA contribution limits rise for deductible and nondeductible Traditional and Roth IRAs. Eligibility to participate in a Roth IRA is subject to income limits.
18 TIAA-CREF Savings Opportunities Traditional IRA Provides a tax deduction for eligible investors who: Are eligible to deduct their contributions Believe they will be in the same or a lower tax bracket in retirement Are not eligible for a Roth IRA because their earnings are too high. FPO
19 TIAA-CREF Savings Opportunities Roth IRA Does not offer a tax deduction, but if held for five years, provides tax-free withdrawals: After age 59½ Up to $10,000 if used for a first-time home purchase In the event you become disabled, or die Consult with your tax advisor regarding your particular situation
20 TIAA-CREF Savings Opportunities Roth IRA (continued) For people who: Expect to be in same or higher income tax bracket in retirement Might need to withdraw their original contributions before qualifying for tax-free withdrawals Want to use their IRA for estate building Want to contribute past age 70½ Withdrawals of earnings are tax free if the distribution is made at least five years from the first of the year in which the Roth IRA was established and meets at least one of the following additional requirements: it is made after the taxpayer attains age 59½; it is used to cover first-time homebuyer expenses up to $10,000; the taxpayer becomes disabled; or the taxpayer dies. A federal 10% penalty as well as additional tax consequences may apply for IRA withdrawals made prior to age 59½. Consult with your own tax advisor regarding your particular situation.
21 TIAA-CREF Savings Opportunities Traditional to Roth IRA conversion Consider converting if: Your Traditional IRA has existed a short time You intend to pass these funds to your heirs You have other sources to pay tax on the converted amount You believe you are in a lower tax bracket now than you will be in at retirement, or at time of withdrawal FPO
22 TIAA-CREF Savings Opportunities Traditional to Roth IRA conversion (continued) May not be beneficial if: You will need the funds in a short time frame* The distribution may put you into a higher tax bracket You have no funds to pay tax on the converted amounts * Less than five years from date Roth IRA is established.
23 TIAA-CREF Savings Opportunities A new option: Roth 403(b) and Roth 457(b) Options* Contributions Voluntary employee elective deferrals After-tax dollars Contributions can be made instead of, or in addition to pretax contributions Plan contribution limits apply Contributions are counted towards the maximum employee deferral limit * Subject to employer availability.
24 TIAA-CREF Savings Opportunities Roth 403(b) and Roth 457(b) Options* Withdrawals Subject to same distribution rules as 403(b) and/or 457(b) plans** Contributions are not taxable Earnings are not taxable if qualified Assets subject to minimum distribution unless rolled over to a Roth IRA Minimum distribution payments not taxable if contributions made five years prior to date of distribution * Subject to employer availability. ** Taxable portion of withdrawals prior to age 59½ may be subject to 10% federal early withdrawal penalty.
25 TIAA-CREF Savings Opportunities Roth 403(b) and Roth 457(b) Options May be beneficial for those who*: Are younger and in a lower tax bracket Are not eligible to contribute to Roth IRA Have contributed the maximum to their Roth IRA and want to contribute more Are nearing retirement, have enough income and want tax-free assets for heirs Feel ordinary income tax and/or capital gains tax rates will rise in future Want tax diversification of assets * Level of potential benefit depends upon current and expected tax bracket assumptions. TIAA-CREF does not provide tax advice. Consult with your own advisors regarding your particular situation.
26 TIAA-CREF Savings Opportunities Which product should you choose? Consider each goal separately Match the product benefit to your needs How much will you be contributing? What are the tax advantages, if any? When will you need the money? FPO
27 TIAA-CREF Savings Opportunities Simplify your retirement Consolidate your assets!* Reducing the number of retirement accounts you own may reduce your overall expenses Make record keeping easier Check the terms of your existing investment. Certain surrender and other charges may apply Understand your asset allocation across all retirement assets * Before consolidating outside retirement assets, you may want to check with your employee benefits office on whether you can directly transfer those assets to your current retirement plan. In addition, before consolidating assets, carefully consider differences in features, costs, charges and expenses, services, company strength and other important aspects. There may also be surrender charges and tax consequences associated with the transfer. Indirect transfers may be subject to taxation and penalties. Consult with your own advisors regarding your particular situation.
28 TIAA-CREF Savings Opportunities IRAs for consolidating assets We accept: Taxable distributions from retirement plans such as 403(b), 457(b), and 401(k) Taxable distributions from any former employer s pension plan Spousal death benefits from TIAA-CREF- funded or other retirement plans Payments under a QDRO Rollovers from IRAs FPO
29 Savings Opportunities Paying for college can be less taxing 529 College Savings Plans and Coverdell Education Savings Accounts offer advantages Any earnings can accumulate federal income tax deferred Federal income tax-free qualified withdrawals on any earnings 529 plans may offer state income tax deduction on contributions, depending on state law* *Limitations apply. Dee the Disclosure Booklet of the applicable 529 state plan. Before investing in a Section 529 Plan, you should consider whether the state you reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state s plan. Consider the investment objectives, risks, charges and expenses before investing in any of the TIAA- CREF Tuition Financing, Inc. managed 529 College Savings Plans. Please call (888) for a Disclosure Booklet containing this and other information. Read it carefully. Investments in the plan are neither insured nor guaranteed and there is the risk of investment loss. Non-qualified withdrawals may be subject to federal and state taxes and the additional 10% federal tax. TIAA-CREF Tuition Financing, Inc., Program Manager
30 TIAA-CREF Savings Opportunities Mutual funds Low initial investment $2,000 IRA $2,500 non-retirement account Automatic investment plan $50 per month Easy access Redeem shares at any time Diversifies investments Low fees* * September 2012, based on Morningstar expense comparisons by category. This applies to our variable annuity and mutual fund expense ratios. Past performance is not a guarantee of future results. Investment return and principal value will fluctuate so an investor s share, when redeemed, will be worth more or less than the original cost.
31 Reaching Your Financial Goals Compare expenses $10,000 invested over 30 years earning a hypothetical rate of 6% $60,000 $50,000 $40,000 $30,000 $31,330 $36,497 $49,416 $20,000 $10,000 $0 2.00% 1.50% 0.50% $10,000 $10,000 $10,000 Higher Moderate Lower Expenses This chart assumes expenses are withdrawn from the account at year-end, based on year-end assets. It is presented for illustrative purposes only and does not reflect actual performance, deduction of taxes or predict future results of any TIAA-CREF account. Before committing money to an account, be sure to check its expenses. However, lower expenses do not mean higher returns. It is not intended to predict or project returns.
32 What Are My Investment Options? TIAA-CREF investment guidance Two Simple Choices to help assist you in developing an investment strategy: 1. One-Decision Strategy For investors who want TIAA-CREF to allocate their retirement investments 2. Build Your Own Portfolio Strategy For investors who want greater control and more investment choices FPO
33 What Are My Investment Options? 1. One-decision strategy Investments based on your retirement age No need to pick between stocks and bonds Automatic readjusting Simply choose the Vanguard Target Retirement Fund that fits your expected retirement date! Vanguard Target Retirement Funds share the risks associated with the types of securities held by each of the underlying funds in which they invest. In addition to the fees and expenses associated with the Target Retirement Funds, there is exposure to the fees and FPO expenses associated with the underlying mutual funds as well.
34 What Are My Investment Options? 2. Build your own portfolio strategy Complete the Risk Tolerance Questionnaire Select the investment choices and asset classes based on your risk profile Manage and control your accounts as you like Revisit the Risk Tolerance Questionnaire if you have life-changing events that may impact your risk comfort level
35 How Do I Put It All Together? What s the best asset allocation mix for you? Based on your risk tolerance, what category of investor are you?
36 How Do I Put It All Together? Allocating your portfolio Visit tiaa-cref.org/retirementadvisor * Input your responses to the questions We will provide you with a sample portfolio**? * The TIAA-CREF Retirement Advisor is a brokerage service provided by TIAA-CREF Individual & Institutional Services, LLC, a registered broker-dealer and member of FINRA. ** The sample portfolios are not created specifically for you and may not take into account your particular retirement goals or investment preferences. The ultimate allocation decision is up to you after you have considered investment information that pertains to your own personal circumstances.
37 Personalized financial and retirement review The cornerstone of our financial plan is the Personal Retirement Planning Report, where we answer three key questions: Will you have enough to retire? What s the optimal asset allocation? How much should you draw down each year across all your savings?
38 Take action Enroll now Determine your financial goals Put your cash flow to work Maximize your retirement savings plan Save more in a supplemental retirement plan, IRA or mutual fund Keep in mind that there are risks associated with investing in securities including loss of principal
39 TIAA-CREF is here for you tiaa-cref.org Life Insurance College savings and other priorities Brokerage Services Tax-advantaged saving Mutual Funds No-fee IRAs* * There is no account fee to own a TIAA-CREF IRA; however, brokerage transaction fees may apply. In addition, investors are subject to the underlying funds portfolio management fees and expenses. The products and services referenced above are offered by various entities within the TIAA-CREF organization.
40 Take the next step Call us at Visit us at
41 Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call , or go to tiaa-cref.org for a current prospectus that contains this and other information. Please read the prospectus carefully before investing. Please note: Neither TIAA-CREF nor its affiliates provide legal or tax advice. Please consult with your advisors. The tax information contained herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor. TIAA-CREF products may be subject to market and other risk factors. See the applicable product literature, or visit tiaa-cref.org for details. TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY. tiaa-cref.org 2013 Teachers Insurance and Annuity Association College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY C7673