Prepare for Retirement with IRAs

Transcription

1 Prepare for Retirement with IRAs (Individual Retirement Annuities)

2 Welcome Setting retirement income goals IRAs Limits, deadlines and details Annuities, mutual funds Annual reviews Your partner Woodmen of the World You ve made an important decision by attending this seminar. You ve said that you care about your retirement and that you realize that now is always the right time to make sure you are prepared for retirement. Today we ll discuss setting saving goals for retirement income, and how traditional and Roth IRAs can help you meet your retirement income goals. We ll cover the fine annuity products available from Woodmen of the World. We ll also discuss how mutual funds through Woodmen Financial Services can help you. We ll talk about the value of annually reviewing your retirement saving plan so that you can make adjustments when necessary. And finally, I will introduce you to a partner you can trust to help you meet your retirement planning goals Woodmen of the World.

3 Retirement Income How much do I need? How much have I saved? Will Social Security be enough? The first question to consider is how much income you will need during retirement. You may need 60 to 100 percent of your final year s salary each year during retirement. Because of the degenerative effect inflation can have on your savings, you may need to save even more than that. Unless you come into a large inheritance or continue to work during retirement, you will need to start saving now. It s important to take stock of how much you have already saved. According to the 2006 Retirement Confidence Survey by EBRI, over half of all American workers have less than $25,000 saved for retirement. Calculate how much you may have saved in 401(k) plans, such as ones commonly offered by employers, any funds you have set aside in annuity products and how much you have invested. Once you know how much you have, you can assess whether what you have saved is sufficient or whether you need to save more. Another important factor to consider in your retirement saving plan is whether or not Social Security will provide enough income for you to enjoy the kind of retirement that you hope to. Chances are good that in many cases, Social Security alone will not be enough. Social Security is not intended to provide all of your income but rather, just a portion of your retirement income. Make sure that you save and review the quarterly statements mailed to you by the Social Security Administration. These statements will tell you how much you can expect to receive depending on your retirement age.

4 Saving How much can I set aside? Put it into an IRA Once you know how much income you will need during retirement, you can begin saving to accumulate that income. Looking at your monthly budget, figure out how much money you can set aside for retirement income. Once you know how much you can set aside, you can consider how you want to invest that money until you are ready to begin using it. One option is to contribute that money you are setting aside for retirement into an IRA.

5 IRAs Like a bucket Accounts and annuities Securities and annuities go inside Tax benefits Think of an IRA like a bucket that you can place different financial products into. An IRA can be an Individual Retirement Account or an Individual Retirement Annuity. You can purchase securities like stocks, bonds and mutual funds and put them into an Individual Retirement Account. Or, you can purchase annuities such as the fixed or variable ones offered by Woodmen of the World and put them inside of an Individual Retirement Annuity that you control. When you purchase an annuity for example, and put it into an IRA, your contributions towards your IRA enjoy certain tax benefits depending on whether you choose a Traditional or Roth IRA. Let s go over those benefits now.

6 Traditional IRAs Deductible contributions Earnings and gains taxed when distributed* *Woodmen of the World Representatives are not authorized to offer tax advice. For tax advice, consult your professional tax advisor. A Traditional IRA is a personal savings plan that gives you tax advantages for setting aside money for retirement. Contributions you make to a traditional IRA may be fully or partially deductible, depending on your circumstances. Generally, earnings and gains in your Traditional IRA are not taxed until distributed. There are some requirements that must be met in order to qualify to make contributions to a Traditional IRA: - You (or you and your spouse if you file your taxes jointly) must have taxable income during the year you make contributions - You must be under age 70½ by the end of the year in which you make contributions.

7 Roth IRAs Contributions not deductible Earnings and gains tax-free when distributed Unlike a traditional IRA, you cannot deduct contributions you make into a Roth IRA. However, if you meet the requirements, your earnings and gains are completely tax-free when distributed. Now, let s talk about some requirements which apply to both Traditional and Roth IRAs.

8 Requirements Taxable income Under age 70½ MAGI limits determine deductibility and eligibility To make contributions to a Traditional or Roth IRA, you must have taxable income and be less than age 70 and a half for the year during which you are making the contributions. In addition, modified adjusted gross income limits set by the IRS determine whether or not your contributions to a Traditional IRA are deductible and whether or not you are eligible to make contributions to a Roth IRA. In 2009 for example, a single filer had have a MAGI of $54,999 or less and joint filers had to have a MAGI of $88,999 or less to fully deduct contributions to a Traditional IRA. In 2009, a single filer had to have a MAGI of $105,000 or less and joint filers had to have a MAGI of $166,000 or less to make the full contribution allowed into a Roth IRA. For current MAGI limits, visit the IRS web site or talk with your professional tax advisor.

9 Eligible Income Earned income includes: Wages, salaries, tips Commissions Self employment income Must appear in Box 1 of Form W-2 For purposes of deductibility, income includes: Wages Salaries Tips Commissions Self employment income The key is that he income must appear in box 1 of form W-2 in order to qualify you to contribute to a Traditional IRA.

10 Ineligible Income Earnings and profits from property Interest and dividend income Pension or annuity income Deferred compensation Income from certain partnerships Generally, these types of income are not eligible: Earnings and profits from property Interest and dividend income Pension or annuity income Deferred compensation Income from certain partnerships Talk to your professional tax advisor or attorney to determine exactly which types of income are ineligible.

11 Contribution Deadlines Deadline to open or contribute to an IRA: April 15, 2010, for 2009 contribution April 15, 2011, for 2010 contribution Why wait? Advantage and opportunity Contributions to IRAs can be made until April 15 th of the following year. While this gives a nice cushion when end of the year activities and events can be time-consuming, there s no need to wait to contribute to an IRA. Why not consider starting today? Generally, the sooner you open an IRA and begin making contributions, the longer your money will have to grow and in theory, the better off you will be.

12 Contribution Limits 2009: $5,000 for single filers; $10,000 for joint filers : Indexed to inflation Individuals aged 50 and older may make an additional catch-up contribution after making their maximum annual contribution. Contribution limits are the same for both Traditional and Roth IRAs. In 2009, single people can contribution up to $5,000 and joint filers can contribute $10,000. In 2010 and 2011, contribution limits will be indexed to inflation. If you are over age 50, you may be able to make an additional catch-up contribution after making your maximum annual contribution. Refer to the IRS Web site, or talk with your tax professional to see if you are eligible for catch-up contributions.

13 Converting a Traditional IRA into a Roth IRA Generally, the amount you convert to a Roth IRA is subject to income tax Future earnings could be income tax-free For some people, converting a Traditional IRA to a Roth IRA is a great strategy. The idea is to convert the smaller amount (in the Traditional IRA) and pay the income tax now. Over time the Roth IRA will grow and you will have the larger amount, which will not be subject to income tax, at retirement. As we discussed earlier, you have to meet the requirements for a qualified distribution to get the earnings tax-free from your Roth IRA. To be eligible to convert to a Roth IRA, you must meet the IRS eligibility requirements: You must file as single or married filing jointly; and Your MAGI must be less than $100,000.

14 IRA Conversion in 2010 Starting in 2010, a taxpayer with a MAGI of $100,000 or more can convert their IRA to a Roth. For one year only, 2010, the income tax can be spread over 2 years (2011 & 2012). After 2010, the income included is reported in the tax year conversion is completed in. In May of 2006 President Bush signed a $70 billion tax cut provision that changed the eligibility rules for Roth IRA conversions. Starting in 2010, taxpayers with modified adjusted gross income of more than $100,000 will be allowed to convert a traditional IRA to a Roth IRA. This change applies for one year only and the income taxes due on conversions can be spread over two years. So the 2010 conversion amount may be included as taxable income in 2011 and helping to spread out the tax bite. Conversions in subsequent years are included in income during the tax year in which the conversion is completed. Removing the Roth IRA conversion cap however doesn't mean anyone can fund a Roth IRA, but it does mean that anyone can convert an existing IRA to a Roth IRA.

15 Fixed Annuities Pay a competitive interest rate 1 A minimum guaranteed interest rate for the life of your annuity No upfront fees or charges 2 Ability to set up a payment stream that you cannot outlive (not offered by banks) 1. Not guaranteed 2. Woodmen of the World surrender charges may apply to a withdrawal Now that we ve covered the basics about IRAs and their requirements, let s talk about two kinds of financial products that can be purchased to fund them. First, let s discuss annuities. Woodmen of the World offers both fixed and variable annuities. However, I d like to focus on fixed annuities. With Woodmen of the World fixed annuities, you will receive a competitive interest rate and a minimum guaranteed interest rate for the life of your annuity. You will not pay upfront fees or charges, although Woodmen of the World surrender charges may apply to a withdrawal. And you will have the ability to set up a payment stream that will last for the rest of your life. It s important to know that this life settlement option is something only life insurance organizations can offer; banks cannot offer this option.

16 Annuity Advantages Tax-deferral Minimum Guarantees Avoid Probate 1 Lifetime Income Safety and Security 1. If payable to a named beneficiary Let s consider some of the advantages of purchasing annuities: Tax-deferred earnings; Minimum guarantees; The ability to avoid probate, if distributions are paid to a named beneficiary; And the ability to set up a lifetime income; All of which can contribute to safety and security for yourself and loved ones.

17 Mutual Funds IRA funding option Potentially greater return Woodmen Financial Services* * Securities are offered and processed through Woodmen Financial Services, Inc., 1700 Farnam Street, Omaha, NE 68102, , member FINRA/SIPC, a wholly owned subsidiary of Woodmen of the World Life Insurance Society and/or Omaha Woodmen Life Insurance Society. Securities other than Woodmen Variable Annuity are issued by companies that are not affiliated with Woodmen of the World Life Insurance Society. Let s talk about one more option that you can use to fund a Traditional or Roth IRA. You could purchase a mutual fund through Woodmen Financial Services and possibly enjoy potentially greater return on your investment than you could with a fixed product that is not connected to the stock market. Mutual funds pool numerous stocks together to give you the opportunity to benefit from the Stock Market s potentially greater return while at the same time possibly minimizing your risk of loss by exposing you to a variety of stocks instead of just a few. Mutual funds to fit your risk and return preferences are available through Woodmen Financial Services.

18 Annual Review Savings Investments Insurance Review and adjust as needed with someone you can trust Once you have a plan that incorporates all of the elements we ve discussed today: setting a retirement income saving goal, investing your savings in ways such as through contributions to a Traditional or Roth IRA, you have a retirement preparation plan in place. As your life changes, so will your plan. In order to maintain its effectiveness you ll need to make sure it reflects all of your current circumstances. Having a partner someone you trust to help you review your plan annually is the last important step.

19 Woodmen of the World Founded in 1890 Community-based Member-owned Fraternal benefit society Woodmen of the World is that partner that you can trust to help set and regularly review your retirement planning and insurance needs. Founded in 1890, Woodmen of the World is one of the nation s leading fraternal benefit societies and is a community based, member-owned organization. We are owned and controlled by our members and we exist to serve them. We ve always had a simple, dual mission: to protect America s families from financial hardship and to provide opportunities for fraternalism and community involvement.

20 with you through LIFE A history of caring for others Member benefits Social activities Patriotic programs Volunteer opportunities Fraternal benefits are not contractual, are subject to change and have specific eligibility requirements. An individual becomes a member by joining our shared commitment to family, community and country and by purchasing a Woodmen of the World product. Youth program, summer and senior camps are not available in all areas. The Woodmen of the World Fraternal Division administers these benefits. Our members enjoy the opportunity to make new friends and to partner with others who are passionate about making a difference. Members interested in philanthropic activities can become part of our local volunteer networks by providing hands-on service to help meet the needs of people in their communities. Even members who are not able to be involved regularly appreciate being part of an organization that donates time and money to communities. Our members are also eligible for a variety of valuable benefits including: Catastrophic Illness Benefit Newborn Benefit Orphan s Care Benefit Youth program including Summer Camp

21 A History of Financial Strength Conservative investment philosophy Members interests come first More than $7.58 billion in assets* Over $34 billion life insurance inforce* *Figures are as of year-end We have a history of financial strength. We practice a conservative investment philosophy and always keep our members interest as our first priority. We exist to benefit our members and that includes being smart and safe with their money. Have copies of the most recent version of A History of Strength (form 4616) on hand at presentation.

22 Quality Products Insurance Annuities Mutual Funds 1 College Savings Plans 1 Other insurance products through alliance partners including Major Medical and Supplemental Health insurance. 2 1 Not all products are available in all states. Not all Representatives are licensed to sell all products. Securities are offered and processed through Woodmen Financial Services, Inc., 1700 Farnam Street, Omaha, NE 68102, , member FINRA/SIPC, a wholly owned subsidiary of Woodmen of the World Life Insurance Society and/or Omaha Woodmen Life Insurance Society. Securities other than Woodmen Variable Annuity are issued by companies that are not affiliated with Woodmen of the World Life Insurance Society and/or Omaha Woodmen Life Insurance Society. 2 Products are offered through Woodmen Insurance Agency, Inc., a wholly owned subsidiary of Woodmen of the World Life Insurance Society and/or Omaha Woodmen Life Insurance Society, and products are issued by carriers not affiliated with Woodmen of the World Life Insurance Society and/or Omaha Woodmen Life Insurance Society. I ve already talked about the valuable benefits our members enjoy access to. Now I d like to mention the quality products we offer. Woodmen of the World offers a variety of insurance and annuity products. Through our subsidiary, Woodmen Financial Services, you can purchase mutual funds and variable annuities. Woodmen Insurance Agency offers access to other insurance products, including Major Medical and Supplemental Health insurance, through our alliance partners. Whatever your financial goals are, we have the products and excellent service to help you meet your them.

23 Recap Retirement income goal Contributions to Traditional and Roth IRA can help achieve that goal Fund IRAs with annuities or mutual funds Review your plan regularly with a partner you trust To recap what we ve discussed today about preparing for retirement: the first step in preparing for retirement is to figure out how much income you will need in retirement and begin saving for that goal. One way to help save the retirement income you need is by opening a traditional or Roth IRA and making contributions towards it annually. IRAs can be funded with many financial products including annuities or mutual funds. Finally, you want to review your plan on an annual basis with a financial advisor or insurance representative whom you can trust. Woodmen of the World s long history of financial strength and concern for its members makes us an ideal candidate to be that trusted partner to help you prepare for retirement.

24 Questions? (Give some time for people to ask questions. Once questions begin, move to the next slide and make yourself available to set appointments and answer further questions.)

25 Take the Next Step! Set up an appointment today. Now that you ve heard about Woodmen of the World and Woodmen Financial Services and what we have to offer you, the next step is yours to take. I will be here to answer additional questions you have and to set up an appointment during which we can develop a personalized plan to help you achieve your unique financial goals. * Make sure you have an adequate supply of product brochures on hand. All product brochures can be ordered online through My Catalog on mywoodmen.org.