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Slide 1 - NAGDCA


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									     Important Reminder!!!
Be sure to sign the “Sign-In/Sign-Out”
   sheet outside of the room when
  applying for Continuing Education
Credits for the following certifications.
 (Check the appropriate certification)
          Payout Counseling
Rick Rodgers, Innovest Portfolio Solutions
Charles Osborne, Iron Capitol Advisors
Mary Willett, Willett Consulting
Kandi Hicks Winters, State of Florida
Payout Counseling
           Free Dinner:
You will not be asked to buy anything.

            Kandi Winters
              State of Florida
     Bureau of Deferred Compensation
    Plan Sponsors Responsibilities
•   Service by vendors
•   Investment Policy Statement
•   Workshops for State Employees
•   Surveys
•   Website
•   State Publications
•   Limitations
Setting Expectations: Service by Vendors
Workshops for State Employees
Rollout Survey
Payee Annual Survey
Payout / Retirement Counseling

      The “Softer” Side

           Mary Willett
         Willett Consulting
     More than “Payouts”
• How do you know   • If you don’t know
  how much income     how (or how long)
  you need?           you will live?
Think About Your Retirement
        • What will you do?
        • Will you work or volunteer?
        • Where will you live?
        • How healthy will you be?
        • Will you have an active
        • Have you thought about how
          long your money needs to last?
           Retirement Goal
• To attain:
               Total Well-Being
What is Retirement Well-Being?

Today’s Retirement Counseling

     Focuses on Prosperity

              Retirement income
Planning for Well-Being

    Also includes:
  Health: Counseling Topics
How does health impact:
• Longevity or years money must last
• Activities and expenses in retirement
• Potential for employment in retirement
• Likelihood of long-term/nursing home care
            Health Planning
•   Recognize current health status
•   Understand family history
•   Take actions for healthy lifestyle
•   Monitor health factors
•   Estimate reasonable life expectancy
    Happiness: Counseling Topics
•   How lifestyle will change:
•   Activities and hobbies
•   Meaning and fulfillment
•   Social networks
•   Spouse / family
•   Location
       Happiness Planning
• Plan for activities beyond leisure
• Develop social networks outside of
• Identify retirement lifestyle and
• Discuss plans with spouse or partner
• Health and wellness fairs
• Retirement workshops and
• Newsletter articles
• Broadcast e-mails
• Web sites
Counseling for Prosperity

    Planning for happiness
  Understanding health issues
   Information needed to plan for
  Payout / Retirement Counseling

         The Cold Hard Truth

Chuck Osborne, CFA | Iron Capital Advisors
             Retirement Income
• When you retire, you stop
  working for money and
  your money goes to work
  for you. In other words,
  you must live off the
  income produced by your
  retirement portfolio.

• The question is, how
  much does your money
  need to make before you
  can retire?
             You’ve Retired!!

          Now what are you going
                 to do?

           Jane Smith is 65. Let’s
            help her through the
           decisions she’ll need to
              make about her
               Jane’s Situation
• Age : 65
• Husband: No longer married. (this keeps the illustration
  simple – of course if you are married you have to
  combine your retirement portfolio with your spouse’s and
  go through the same exercise together)
• Children: Married - On their own.
• House: Owns house but wishes to stay there so we will
  not consider home equity.
• Retirement Plan: $350,000 in her retirement plan
• Other Investment Accounts: $15,000 in an IRA
• Savings Account: $35,000
• Last Year’s Earned Income: $40,000
 Jane’s Retirement Income Need
• How much income does Jane need in

• Most experts estimate she will need anywhere
  from 60% - 100% of her pre-retirement earned
  income. For our illustration we will use 70%.

• $40,000 x 70% = $28,000
 Jane’s Retirement Income Sources

• Jane needs $28,000 a year to live on in

• Social Security will provide $12,228 a year.

• Her income shortfall is $15,772 a year.

• Jane needs her portfolio to produce an annual
  income of $15,772 to meet her needs.
  Jane’s Required Rate of Return
• Jane does not want to outlive her money, so she must get a
  rate of return on her portfolio that is sufficient to take care of
  her income shortfall.

• She needs $15,772 per year from her portfolio.

• Her portfolio = $350,000 + $15,000 + $35,000 = $400,000

• Her required rate of return = $15,772 / $400,000 = 0.04 or 4%

• But don’t forget inflation, Jane needs to add another 3 – 4%
  for long term inflation.

• Her total Required Rate of Return is 7%.
                                             Basi c Al l ocati on Anal ysi s                                  Zephyr A llocationA D V IS OR : Iron C apital A dvisors

                                                         Efficient Frontier

                          How to Invest
                                  Case: Allocat ion Case           Ret urn vs. Risk (St andard Deviat ion)

          13                                                                                                 Emerging Market s


                                                                             I nt ernat ional Equit y

          11                                                    US Equit y


          9                            I nt ernat ional Bonds

          8            US Bonds

               0   5              10                       15                         20                25                 30                                35
                                                       Ri s k (S ta n d a rd De vi a ti o n )

• How can Jane get a 7% rate of return on her portfolio?

• Jane must invest in a combination of assets that gives her the
  highest probability of achieving that return, with the least
  amount of risk possible.
    Tools to Help Within the Plan
•   Annuities
•   Longevity Insurance
•   Pay Out Funds
•   Target Date Funds
•   Hybrid Target Date Funds with Annuity
      Seeking Professional Help
•   Retirement is not the finish line, it is a starting line. As you can
    see this is when it starts getting complicated.

•   Most retirees will seek professional help. Here are a few things
    to keep in mind.
           1. How do they get paid? In our opinion, one should
               NEVER take advice from someone who makes a
               commission for selling you a product, or trading a
           2. What is their background? Have they ever had a job
               where they were judged by how well they made
               investment decisions, as opposed to being judged
               by how many clients they can acquire?
           3. Do they have a fiduciary relationship with their

•   Get these answers In Writing!!

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