Investing for Retirement

1
Investing for Retirement

• Josephine Turner, Ph.D., CFP

2
Retirement Planning

• What are the trends?
• Living longer
• Retiring earlier
• What are the concerns?
• Health care costs
• Inflation
• Will Social Security be around?

3
Social Security

• Must earn a minimum of 40 quarters (10 years) in
  covered job
• Year at which full benefits are earned has
  changed based on age (65-67)
• If you retire early, if you retire late
• If you are divorced
• Get a copy of your estimated benefits now

4
How Much Money Will You Need?

• What will your retirement lifestyle be?
• What are you spending now?
• What will be the impact of inflation?
• How will your spending patterns change after
  retirement?
• Planning for large, irregular expenses in the
  future
• Pay off your debts before you invest

5
Reality Check

• How much income will you receive from your
  pension?
• How much will you have in other savings?
• How much will you receive from Social Security?
• Will you be the beneficiary of gifts or
  inheritances?
• Do you plan on continued employment?

6
How Will You Fund Your Dreams?

• Develop some strategies
• Retirement accounts at work
• Regular deductions from paycheck into mutual fund
  or brokerage account
• Individual Retirement Accounts (IRAs)
• Set aside any raises and tax refunds
• Take advantage of dollar-cost averaging

7
Investment Alternatives

• Low risk
• Savings accounts, CDs, money market accounts,
  Treasury securities, savings bonds, fixed-rate
  annuities
• Moderate risk
• Individual stocks, mutual funds, variable-rate
  annuities, corporate bonds, mortgage-backed bonds
• High risk
• Precious metals, commodities, collectibles

8
Risk and Reward

• There is no such thing as a risk free investment
• There is no such thing as a risk free investment
• There is no such thing as a risk free investment

9
Low Risk Investments

• Cash Investments
• Savings and money market accounts
• Certificates of Deposit (CDs)
• Money market mutual funds
• Treasury securities
• U.S. Savings bonds
• Fixed-rate annuities

10
Bonds (More Low-Risk Vehicles)

• U.S. Treasury bills, bonds and notes
• Municipal bonds
• Corporate bonds
• Bond mutual funds
• Mortgage-backed bonds
• Ginnie Maes, Fannie Maes, and Freddie Macs

11
Real Estate (as an Investment)

• Diversification factor
• Lack of knowledge factor
• Dirty-hands factor
• Hiring-people factor
• Liability factor
• Liquidity factor
• Consider REITs, Maes or Macs

12
Moderate Risk Investments

• Individual Stocks
• Utility stocks
• Blue chip stocks
• Growth stocks
• Mutual Funds
• Index funds
• Balanced funds
• International funds
• Variable-Rate Annuities

13
High Risk Investments

• Speculative stocks
• Commodities
• Gold precious metals
• Collectibles

14
Diversification Many Eggs, Many Baskets

• Spread your money around
• Choose assets in unrelated industries
• Buy more than one company in each industry
• Buy bonds of different maturities
• Take advantage of dollar-cost averaging
• Buy mutual funds

15
Mutual Funds Basics

• All mutual funds are not created equal
• load or no-load
• Does the investing philosophy of the fund match
  your goals?
• Spread your money among several funds
• Consider index funds which mimic the market

16
Do Your Homework First

• Bonds Standard Poors and Moodys
• www.standardandpoors.com
• Annuities Standard Poors, Moodys, A.M. Best
• www.moodys.com
• Stocks ValueLine, Standard Poors Stock Guide
• www.valueline.com
• Mutual Funds Morningstar
• www.morningstar.com

17
Purchasing Stock in Individual Companies

• Time factor
• Knowledge factor
• Every transaction comes with a cot
• Work with a discount broker
• Read, read, read
• Know when to hold em
• Just say no to day-trading

18
Controlling Taxes

• Individual Retirement Accounts (IRAs Roth IRAs)
• Keogh and simplified employee pension (SEP) plans
• 401(k), 403(b) and 457 plans
• Series EE Savings Bonds
• Annuities
• Tax-Exempt Investments (bonds)

19
Keeping Track

• Record every investment
• Keep your investment statements
• When was the investment acquired?
• What was it?
• How many shares did you buy
• What was the net purchase price?
• What date was it sold?
• What were the net proceeds?

20
What Can a Planner Do For You?

• Plot out your present position
• Establish goals and objectives and help you
  prioritize
• Make you aware of tax consequences
• Analyze information
• Help develop investment strategies
• Help implement and review plan

21
Choosing an Investment Advisor

• What professional training do they have?
• What professional organizations do they belong
  to?
• Ask about commissionsWho pays the freight?
• What services do they provide?
• Will they be the only one working on your plan?
• Make checks to the brokerage firm, not the agent
• Is your agent registered with the state
  Securities Division or U.S. Securities and
  Exchange?

22
Resources for Retirement and Investment
Information

• Request for Earnings and Benefit Statement
• Investing For Your Future (11-unit investing home
  study course
• www.investing.rutgers.edu
• Tables for keeping track of spending are
  available in stationary stores or Cooperative
  Extension Offices