Guide to Pre-Retirement Planning...20 Retirement Readiness: Advantages of Your Retirement Plan...
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Guide to Pre-Retirement Planning ELEVATOR CONSTRUCTORS ANNUITY AND 401(k) RETIREMENT PLAN
Transcript of Guide to Pre-Retirement Planning...20 Retirement Readiness: Advantages of Your Retirement Plan...
Guide to Pre-Retirement PlanningELEVATOR CONSTRUCTORS ANNUITY AND 401(k) RETIREMENT PLAN
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Topics we will cover today
Common Pre-Retirement Questions
Getting Retirement Ready
Social Security
Value of Creating a Budget
Rethinking Asset Allocation
Potential Benefits of Consolidating
Understanding Your Withdrawal Options
MassMutual Information Resources
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Common Pre-retirement QuestionsC:RS-44094-01
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Common Pre-Retirement Questions
• Have I saved enough?- What kind of lifestyle do I want?
- What expenses do I need to consider?
• What about Social Security? - When do I get it?
- How do I get it?
- Who do I contact?
• How do I plan for future medical expenses?
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Common Pre-Retirement Questions
• Is my current investment strategy appropriate?
• Can I keep all/most of my retirement money together in one place?
• What do I do with my money when I retire?• What tools/services does MassMutual
provide to help me plan for retirement?
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Retirement ReadinessC:RS-44094-01
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Retirement Readiness: Financial Planning
• Your plan should account for your entire financial picture. It may include:
- Anticipated retirement lifestyle- Healthcare expenses- Retirement savings- College planning- Disability income insurance- Life insurance- Long-term care insurance- Estate and/or tax planning
• Decisions on these items may affect your plans for retirement
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Retirement Readiness: Retirement Reality?
An individual reaching age 65 today will likely live until age 84.0 (men) or 86.5 (women). About one out of every three 65-year-olds today will live past age 90, and about one out of seven will live past age 95.
Source: www.SSA.gov, April 2019.
DID YOU KNOW?
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• Pre-retiree population is growing and living longer• Research shows large numbers of pre-retirees are financially
under-prepared
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Retirement Formula Example
Retirement Readiness: How Much Will You Need?
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Hypothetical example for illustrative purposes only. Not intended to reflect the actual performance of any specific investment. Individual experience will likely vary.
X Years in Retirement
Amount NeededTo Maintain Same Lifestyle
$1,600,000(Or $6,666/month)
80% of $100,000 = $80,000
X 20 Years
80% of Pre-retirement Income
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Retirement Readiness: Retirement Income Sources
• Determine all income sources:- Annuity and 401(k) Retirement Plan
- Pension
- IRAs
- Personal savings
- Employment during retirement
- Social Security
- Other
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Understanding Social SecurityC:RS-44094-01
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Retirement Readiness: Social Security
As of January 2018 the estimated average Social Security benefit payable for all retired workers is $1,404 per month or $16,848 per year.
DID YOU KNOW?
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• When can I start receiving it?• How much can I expect?• When and how do I apply for it?
*Source: www.SSA.gov, January 2018
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Year of Birth Full Retirement Age
What is Full Retirement Age?
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Source: Social Security Administration, January 2019.
1937 or earlier 651938 65 & 2 months1939 65 & 4 months1940 65 & 6 months1941 65 & 8 months1942 65 & 10 months1943 – 1954 661955 66 & 2 months1956 66 & 4 months1957 66 & 6 months1958 66 & 8 months1959 66 & 10 months1960 or later 67
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How Your Benefit is Determined
• STEP 1 – SSA looks at your lifetime earnings• STEP 2 – Takes a monthly average of your 35 highest earnings• STEP 3 – Apply a formula to arrive at your basic benefit• STEP 4 – Result is benefit you would receive at full retirement age
To get an estimate visit: ssa.gov/benefits/retirement/estimator
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Source: Social Security Administration, January 2019.
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Consider Delaying Social Security
Example: Person born in 1965 earning $80,000 today:• Retire at age 62 = $2,108/month
• Retire at age 67 = $3,631/month (an extra $1,523 per month for life)
• Retire at age 70 = $4,970/month (an additional $1,339 more)
C:RS-44094-01Source: www.SSA.gov/estimator, April 2019. Benefit shown in future (inflated) dollars.
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How Do I Apply for Retirement Benefits?
• Online at www.socialsecurity.gov
• Call 1-800-772-1213 (TTY 1-800-325-0778)
• Apply at your local Social Security office
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Creating a BudgetC:RS-44094-01
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Creating a Budget
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Changing Contribution and Investment Amounts
Maximizing your Annuity and 401(k) Retirement Plan is easy!!• Adjust your contributions by completing a form and returning it to your employer
• Modify your investments either online or by telephone
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RetireSMART Website: Contact MassMutual
massmutual.com/iuec 1-800-743-5274
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Retirement Readiness: Advantages of Your Retirement Plan
Catch-Up Contributions• If you are age 50 or more, at any time during the 2020 calendar year, you
can make an additional pre-tax contribution up to $6,500* above and beyond normal plan and legal limits**
• Future increases will be indexed for inflation
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* Legal limit is $19,500 for the 2020 calendar year.
** Not all plans offer the Catch-Up Contribution. Check your plan’s provisions to verify.
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Consolidate Retirement Savings to Simplify Your Finances
One retirement account simplifies…
• Log in information• Benefit statement• Point of contact• Investment portfolio• Retirement income• Beneficiary designations
Investors should consider the impacts of transfer fees, the loss of vested benefits, and/or surrender charges that may be imposed by their current plant when funds are rolled over.
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Asset AllocationC:RS-44094-01
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Annuity Asset Allocation
• The Board of Trustees works with Investment Advisors to allocate these dollars according to certain parameters:
- Your dollars are conservatively invested in order to protect the investment principal and maintain a steady stream of growth
- The overall goal of the Annuity investment allocation is to provide returns of 3-3.5% over inflation over the long term
- Based on the current market environment, the Annuity allocation is expected to generate a long term average rate of return of 5.8%
- There will be short-term volatility due to the portion that is invested in the stock market
- The asset allocation of the Annuity may be modified as market conditions or objectives change
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Asset allocation doesn’t protect against loss or ensure a profit, but can be a sound investment strategy.
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Annuity Asset Allocation
• Your asset allocation starts with the Annuity portion of your Retirement Plan account:
- Investment target of approximately 46% in stocks, 43% in bonds and 11% in strategies that invest in both
- Diversified stock mix includes:- Large cap, mid cap and small cap stocks- Domestic and international stocks- Growth and value stocks
- Diversified bond mix includes:- Investment grade bonds- High yield bonds- Treasury inflation protected securities (TIPS)- Domestic and international bonds
- Real Estate
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The Annuity Allocation
Investment Summary as of 12/31/2019
Trustees, ECA & 401(k)
The Annuity Allocation is invested approximately 46% in stocks, 43% in bonds and 11% in strategies that invest in both
Core Blend(Annuity) CPI + 3.5%
2019 16.51 5.63
1 Year 16.51 5.63
3 Years 7.68 5.61
5 Years 5.22 5.33
7 Years 5.58 5.13
10 Years 6.52 5.29
Core BlendAnnuity CPI + 3.5%
2018 -5.89 5.51
2017 13.86 5.68
2016 4.84 5.66
2015 -1.51 4.18
2014 4.29 4.18
2013 8.73 5.07
• The Annuity’s mid-single digit trailing returns are consistent with a period of low interest rates and modest inflation.
• Shorter term performance will fluctuate with broad stock market volatility and interest rate changes.
• The Annuity has achieved its long-term objective of protecting against inflation and providing incremental asset growth .
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401(k) Asset Allocation: Investment Mix Considerations
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• Diversification can help offset market volatility• Approaching retirement: Consider a more
conservative portfolio• For the 401(k) portion of your account, consider one
of the T. Rowe Price Target Retirement Funds• Don’t retire from investing
– Remember, you could spend more than 20 years in retirement
– Your needs may change over time – therefore you should review your retirement plan at least annually
Diversification does not assure a profit and does not protect against loss in a declining market.
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Professionally Managed - Target Date Funds
• Estimate the year of your retirement
• Select fund closest to your retirement year
• Invest 100% of savings in the fund
• Investment professionals manage the fund
T. Rowe Price Target Date Retirement Series
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A Target Date Fund may not achieve its objective and/or you could lose money on your investment in the fund. You may experience losses near, at, or after the target date. There is no guarantee of the fund’s principal value, including at the target date, or that the fund will provide adequate income at and through your retirement.
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How Target Date Funds Work
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Asset Allocation: Risk Profile Quiz
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If you are unsure of your current risk tolerance, try this quick and easy questionnaire.
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Selecting A Risk-Based Fund - What Is Your Risk Tolerance?
Aggressive Approach85% Stocks
8% Bonds7% Cash
Moderate Approach60% Stocks27% Bonds13% Cash
Conservative Approach30% Stocks47% Bonds23% Cash
Hypothetical example of asset allocation percentages. Not a recommendation or representation of any particular investment. Asset allocation is the act of balancing risk and reward by apportioning a portfolio’s assets according to an individual’s financial goals, risk tolerance, and investment horizon. Diversification is a technique that mixes a wide variety of investments within a portfolio. Neither asset allocation nor diversification assure a profit and do not protect against loss in a declining market. There are risks involved with investing including possible loss of principal.
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Investment Options:
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Investment Options:
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Benefits of Rebalancing:
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• Market ups and downs can change your allocation over time• Rebalancing helps maintain your investment strategy based on
your original asset allocation• Your plan offers automatic rebalancing on a periodic basis
Conservative Results from a RebalancedPortfolio Stock Market Surge Portfolio
70% Cash/Bond30% Stock
35% Cash/Bond65% Stock
70% Cash/Bond30% Stock
Sample allocation data is for illustration purposes only.
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Perspective is Key in Times of Uncertainty
Stock market:
• Investing means fluctuations in price and potential gains or losses
• Positive annual returns in 42 of the last 50 years*
Consider staying invested during temporary declines
• Don’t eliminate the potential to recuperate losses
* Morningstar EnCorr, Stock market represented by S&P 500® Index
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History says: Look Long-termStocks often rebound following extreme market volatility.
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Value of staying the courseMarket volatility1 vs. stock returns over time2
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3,500
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S&P 500®
VIX
Inde
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1 http://www.cboe.com/products/vix-index-volatility/vix-options-and-futures/vix-index/vix-historical-data2 © 2020 Morningstar, Inc. All Rights Reserved. Morningstar API
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Remember the Basics of Investing
Review your goals and risk tolerance
• Use the online tools available to you
Diversify to spread your risk
Invest regularly and stay the course
• Consider dollar-cost averaging
Diversification does not assure a profit and does not protect against loss in a declining market.
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Details on Investments
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Risk Disclosures for Certain Asset Categories – Please note that your plan may not offer all of the investment options discussed below. If a retirement plan fully or partially terminates its investment in The Guaranteed Interest Account (GIA), SF
Guaranteed, Fixed Interest Account or SAGIC investment option, the plan receives the liquidation value of its investment, which may either be more or less than the book value of its investment. As a result of this adjustment, a participant’s account balance may be either increased or decreased if the plan fully or partially terminates the contract with MassMutual.
Money market investments are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although these investments seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market option.
Risks of investing in inflation-protected bond investments include credit risk and interest rate risk. Neither the bond investment nor its yield is guaranteed by the U.S. Government.
High yield bond investments are generally subject to greater market fluctuations and risk of loss of income and principal than lower yielding debt securities investments.
Investment option(s) that track a benchmark index are professionally managed investments. However, the benchmark index itself is unmanaged and does not incur fees or expenses and cannot be purchased directly for investment.
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Details on Investments
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Risk Disclosures for Certain Asset Categories – Please note that your plan may not offer all of the investment options discussed below. Investments in companies with small or mid market capitalization (“small caps” or “mid caps”) may be subject to
special risks given their characteristic narrow markets, limited financial resources, and less liquid stocks, all of which may cause price volatility.
International/global investing can involve special risks, such as political changes and currency fluctuations. These risks are heightened in emerging markets. You cannot transfer into international/global investment options if you have already made a purchase followed by a sale (redemption) involving the same investment within the last sixty days. In addition, you may not request a transfer into international/global investment options between 2:30 and 4 p.m. ET. Other trading restrictions may apply. Please see the investment’s prospectus for more details.
A significant percentage of the underlying investments in aggressive asset allocation portfolio options have a higher than average risk exposure. Investors should consider their risk tolerance carefully before choosing such a strategy.
An investment option with underlying investments (multi-investment options and any other offered proprietary or non-proprietary asset-allocation, lifestyle, lifecycle or custom blended options) may be subject to the expenses of those underlying investments in addition to those of the investment option itself.
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Details on Investments
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Risk Disclosures for Certain Asset Categories – Please note that your plan may not offer all of the investment options discussed below. Investments may reside in the specialty category due to 1) allowable investment flexibility that precludes
classification in standard asset categories and/or 2) investment concentration in a limited group of securities or industry sectors. Investments in this category may be more volatile than less-flexible and/or less-concentrated investments and may be appropriate as only a minor component in an investor's overall portfolio.
Investments that invest more of their assets in a single issuer or industry sector (such as company stock or sector investments) involve additional risks, including unit price fluctuations, because of the increased concentration of investments.
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Details on Investments
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Risk Disclosures for Certain Asset Categories – Please note that your plan may not offer all of the investment options discussed below.
• In target date strategies, the year in the strategy name refers to the approximate year investors in the strategy would plan to retire and likely would stop making new contributions to the strategy. Target date strategies follow their own asset allocation path (“glide path”) to progressively reduce equity exposure and become more conservative over time, reaching their most conservative allocation in their target date year. Investors may choose a date other than their presumed retirement date to be more conservative or aggressive depending on their own risk tolerance.
• Lifestyle strategies comprise options based upon investors’ risk tolerance (often determined by responses to a risk quiz). The specific options will depend upon what your plan has selected, but may include conservative, moderate conservative, moderate, aggressive,and ultra-aggressive. The asset allocation of lifestyle strategies does not follow a glide path, so will not automatically become more conservative over time.
• Blended strategies offer a combination of target date and lifestyle features, including following a glide path that becomes mostconservative in their target date year while allowing investors to select the strategy that coincides with their risk tolerance.
• Generally target date and blended strategies are designed to be held beyond the presumed retirement date to offer a continuing investment option for the investor in retirement. However, investors in any of these strategies should also consider their own personal risk tolerance, circumstances and financial situation to determine if they should consider moving to a lower risk strategy as they near retirement. Investments in these options are not guaranteed and you may experience losses, including losses near, at, or after the target date (if applicable). These strategies’ stated asset allocation may be subject to change. Additionally, there is no guarantee that the options will provide adequate income at and through retirement.
• A Target Date Fund may not achieve its objective and/or you could lose money on your investment in the fund. You may experience losses near, at, or after the target date. There is no guarantee of the fund’s principal value, including at the target date, or that the fund will provide adequate income at and through your retirement.
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Cost of Cashing Out
Hardship Withdrawal Rules
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As of January 1, 2019:
• A participant taking a hardship withdrawal will no longer have to suspend making 401(k) contributions for six months. You can continue to make 401(k) contributions.
• The 401(k) balance and the Old Annuity balance can be used to satisfy the hardship withdrawal. Previously, only 401(k) contributions could be used.
• You are subject to a 10% early withdrawal penalty if you take a hardship withdrawal.
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When can I receive a distribution of my Annuity Account?
“Old” Annuity Account Balance Prior to January 1, 2011 • When you are terminated from the industry and have not had any annuity hours in six
consecutive months
• When you retire (i.e., when you separate from service at age 55 or older and are receiving your pension from the NEI Pension Fund or Social Security Retirement benefits)
• If you become disabled (Social Security disability award)
• Upon your death
“New Annuity” (Contributions and Earnings Accumulated After January 1, 2011)• When you retire (i.e., when you separate from service at age 55 or older and are receiving
your pension from the NEI Pension Fund or Social Security Retirement benefits)
• If you become disabled (Social Security disability award)
• Upon your death C:RS-44094-01
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Cost of Cashing Out
Distribution Options: 401(k), Rollover and “Old” & “New” Annuity
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New Installment Payment Withdrawal Rules Effective July 1, 2019:
• Lump sums or partial lump sums are available for distribution and also installment payments.
• Participants will be able to take installment payments for a fixed dollar amount or a fixed installment period of time until their account is depleted or a new election is made. Prior to this amendment, participants were only permitted to take installment payments for no longer than 119 months and the monthly amount changed based on the division of the account balance and month in which the installment payment was made.
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Cost of Cashing Out
Distribution Options: 401(k), Rollover and “Old” & “New” Annuity
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New Installment Payment Withdrawal Rules Effective July 1, 2019:
• This new withdrawal option will also allow qualified beneficiaries (ie: spouses) to elect installment options as well. Prior to this amendment, the only withdrawal option for qualified beneficiaries was a single lump sum.
• Upon retirement*, installment payments can be made from all or a portion of your 401(k), Rollover and “Old” and “New” Annuity.
* Retirement under the terms of the Plan is defined as: after Separation from Service, Age 55+, receiving a pension benefit or Social Security benefits if you are not vested under the NEI Pension Fund
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Understanding Your Options: Taking the Cash
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• After you separate from service which includes termination from employment, retirement, disability and death
• Upon a cash distribution, taxes apply and possibly a 10% early withdrawal excise tax penalty imposed by the I.R.S
• The 10% early withdrawal penalty does not apply to distributions for the following reasons:
– Separation from service during/after the year you reach age 55– Payments paid as equal payments over your life/life expectancy– Retirement due to disability– Payments made to Beneficiary participants – Payments made to alternate payee under a QDRO (Qualified Domestic Relations Order)
from a Divorce– In-service withdrawals at the age of 59 ½
This is not all-inclusive. For more information, call the Retirement Specialist Group. Consider consulting a tax advisor prior to distributions.
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High Price for Early Withdrawals
Understanding Your Options: Taking the Cash
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Hypothetical example assumes a flat 25% federal tax rate and a 5% state tax rate. Your tax rates may be higher or lower. Hypothetical example for illustrative purposes only. Not intended to reflect the actual performance of any specific investment.Individual experience will likely vary.
$50,000 Initial distribution- $12,500 Federal income tax (estimated)- $ 2,500 State income tax (estimated)$35,000 could be all you see of the original $50,000
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Understanding Your Options: Staying with the Annuity/401(k) Plan
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• Maintain control over your account
• Account balance continues to benefit from the tax-deferred growth opportunity until withdrawn
• Required Minimum Distribution at age 72
• Same investment options available to you as a retiree in the Plan
• Upon your retirement you may now request that your distribution be taken from a specific investment option in the 401(k) portion of your account (not pro-rata)
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Cost of Cashing Out
Understanding Your Options: Retiree Self-Directed Annuity Account
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NEW as of January 1, 2020:
• New! The Plan is giving Retirees the option to convert their Old and New Annuity Accounts to a Retiree Self-Directed Annuity Account.
• What is a Retiree Self-Directed Annuity Account?
• Currently, your Annuity Accounts are invested in investment vehicles selected by The Board of Trustees.
• Instead, you can choose how you want your Accounts invested in the Retiree Self-Directed Annuity Account by selecting investment options available to all participants contributing to the 401(k).
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Cost of Cashing Out
Understanding Your Options: Retiree Self-Directed Annuity Account
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Rules for converting your Annuity Accounts to a Retiree Self-Directed Annuity Account:
1. To be eligible to make this election, you must be receiving a pension benefit from the National Elevator Industry Pension Plan.
2. If you choose this option you must convert 100% of your Old and New Annuity Account balances to a Retiree Self-Directed Annuity Account.
3. Once you elect to convert your Annuity Accounts to a Retiree Self-Directed Annuity Account, you will not be permitted to reverse your election in the future.
Eligible participants should contact MassMutual at 1-800-743-5274 to make this election.
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Understanding Your Options: Traditional IRA Roll Over
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• Continue to receive tax-deferred treatment until withdrawn
• Control over your money
• Flexibility to make a different choice later
• Possible to choose investment options separate from your current retirement plan
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Cost of Cashing Out
Understanding Your Options: Required Minimum Distributions
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Deadline for Withdrawals:
• First Required Beginning Date (RBD):- April 1st of the calendar year after the year you reach age 72
• Subsequent Required Minimum Distributions (RMDs):- December 31st of each year
Penalty: 50% on the shortfall!
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Cost of Cashing Out
Understanding Your Options: Required Minimum Distributions
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Required Minimum Distributions (RMDs) are calculated based on three Life Expectancy Tables:
• Joint & Life Last Survivor Life Expectancy: Owner whose spouse is the sole beneficiary and more than 10 years younger
• Uniform Table (old MDIB Table)
• Single Life Expectancy Table
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MassMutual resources
• Participant Information center: 1-800-743-5274Customer Service Representatives available from 8 a.m. to 8 p.m., ET
• Participant Retirement Plan Website: www.massmutual.com/iuec
• Search for “RetireSmart” or “MassMutual” in your phone’s app store.
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© 2017 Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001. All rights reserved. www.massmutual.com.
RS8978 C:RS-44094-01
© 2019 Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001. All rights reserved. www.massmutual.com.
