retirement planning workshop for educators

RetirementPlanningWorkshopforEducators

RetirementPlanningWorkshopforEducators

OppenheimerFundsOppenheimerFunds

Opportunities for

TSA/403(b) Investors

Opportunities for

TSA/403(b) Investors

RE0000.575.0109January 15, 2009

Are you ready for retirement?…How about your 403(b)?

Are you ready for retirement?…How about your 403(b)?

RE0000.575.0109January 15, 2009

Today’s AgendaToday’s Agenda

• Final preparations for Retirement– Challenges and concerns– Sources of income– Alternate solutions

• Choices for your 403(b)– Making the most of your 403(b)– Choosing the right plan type for the long

haul

• Final preparations for Retirement– Challenges and concerns– Sources of income– Alternate solutions

• Choices for your 403(b)– Making the most of your 403(b)– Choosing the right plan type for the long

haul

RE0000.575.0109January 15, 2009

Source of data: National Center for Health Statistics, National Vital Statistics Report, 2005.

M 75 Yr.W 80 Yr.M 75 Yr.W 80 Yr.20052005

66.3 Yr.66.3 Yr.1950s1950s

Life ExpectancyLife Expectancy

A Longer Life = A Longer RetirementA Longer Life = A Longer Retirement

People Spend More Years

in Retirement

Your Financial Challenges

Understanding Your Financial Choices

Strategies for Investing

Next Steps

RE0000.575.0109January 15, 2009

Higher Medical CostsHigher Medical Costs

• As of 1997, elderly women spent approximately 26% of their income on healthcare, compared to 19% for men

• The average annual cost of nursing-home care was approximately $40,000

• Between 30% and 40% of all healthcare expenses were incurred during the last year of life

• As of 1997, elderly women spent approximately 26% of their income on healthcare, compared to 19% for men

• The average annual cost of nursing-home care was approximately $40,000

• Between 30% and 40% of all healthcare expenses were incurred during the last year of life

Note: Consumer Reports “What to expect from Medicaid”, October 1997




Next Steps

RE0000.575.0109January 15, 2009

Don’t Forget Inflation!Don’t Forget Inflation!

A $32,000 per yearstandard of living at an

annual inflation rate of 3%

A $32,000 per yearstandard of living at an

annual inflation rate of 3%

Today

$32,000$32,000

20 Years20 Years

$57,800$57,800Your Financial

Challenges



Next Steps

RE0000.575.0109January 15, 2009

XX

80% of Preretirement Salary

Years in Retirement

80% of Preretirement Salary

Years in Retirement

Amount Needed to Maintain Same LifestyleAmount Needed to Maintain Same Lifestyle

Retirement FormulaRetirement Formula

How Much Will You Need?How Much Will You Need?

XX

80% of $40,000) = $32,000

20 Years

80% of $40,000) = $32,000

20 Years

ExampleExample

$640,000$640,000




Next Steps

RE0000.575.0109January 15, 2009

403(b)403(b)

Teacher’s Pension

Teacher’s Pension

Where Will Your Retirement Income Come from?Where Will Your Retirement Income Come from?

IRAs & Personal Savings

IRAs & Personal Savings

Social SecuritySocial

Security




Next Steps

RE0000.575.0109January 15, 2009

ALL AMERICANS

Will Face Difficulties When They Attempt to

Retire

ALL AMERICANS

Will Face Difficulties When They Attempt to

Retire

$22,491$22,491 MAXIMUM Social Security Benefit in 2005MAXIMUM Social Security Benefit in 2005

Avg. Man$13,212Avg. Man$13,212

Avg. Woman$9,984Avg. Woman$9,984

Will You Be Able To Retire Comfortably?Will You Be Able To Retire Comfortably?

Source: Social Security Administration website




Next Steps

RE0000.575.0109January 15, 2009

Information on Social SecurityInformation on Social Security

Social Security Administration

1.800.772.1213

www.ssa.gov

Social Security Administration

1.800.772.1213

www.ssa.gov




Next Steps

RE0000.575.0109January 15, 2009

Where Will Your Retirement Income Come from?Where Will Your Retirement Income Come from?

= 40%= 40%Social SecuritySocial Security

403(b)403(b)

Teacher’s PensionTeacher’s Pension

IRAs & Personal SavingsIRAs & Personal Savings

= 60%= 60%




Next Steps

RE0000.575.0109January 15, 2009

Teachers Pension PlanTeachers Pension Plan

• Generally have multiple payout options:– Joint Life and Survivor Annuity– Single Life Annuity– In some instances, Cash Payout

• Probably the largest portion of your retirement cash flow. Payout is lower for joint life and survivor, but guarantees income through your spouse’s lifetime.

• Check with your HR or Union Representative to find out the exact dollar amount of your benefit.

• Generally have multiple payout options:– Joint Life and Survivor Annuity– Single Life Annuity– In some instances, Cash Payout

• Probably the largest portion of your retirement cash flow. Payout is lower for joint life and survivor, but guarantees income through your spouse’s lifetime.

• Check with your HR or Union Representative to find out the exact dollar amount of your benefit.




Next Steps

RE0000.575.0109January 15, 2009

What if it’s not enough?What if it’s not enough?

• Increase savings levels• Lower lifestyle expectations for

retirement• Work longer• Consider partial or part-time

employment during retirement

• Increase savings levels• Lower lifestyle expectations for

retirement• Work longer• Consider partial or part-time

employment during retirement




Next Steps

RE0000.575.0109January 15, 2009

Preparing your 403(b) for Retirement Preparing your 403(b) for Retirement

• How will you use the money?– Source of retirement income– Buffer against outliving other sources of

income– Legacy for heirs– Discretionary funds for one-time

purchases– All of the above

• How will you use the money?– Source of retirement income– Buffer against outliving other sources of

income– Legacy for heirs– Discretionary funds for one-time

purchases– All of the above




Next Steps

RE0000.575.0109January 15, 2009

First Steps First Steps

• Determine how much of your 403(b) you’ll need for each of your goals.

• Establish an investment time-horizon and risk tolerance for each goal.

• Assign proportionate quantities of your 403(b) to each goal, and invest that portion accordingly.

• From time to time, review investment strategies and dollar allocations vis-à-vis each goal.

• Determine how much of your 403(b) you’ll need for each of your goals.

• Establish an investment time-horizon and risk tolerance for each goal.

• Assign proportionate quantities of your 403(b) to each goal, and invest that portion accordingly.

• From time to time, review investment strategies and dollar allocations vis-à-vis each goal.




Next Steps

RE0000.575.0109January 15, 2009

Considerations by Goal:Managing your 403(b) for retirement income

Considerations by Goal:Managing your 403(b) for retirement income• Choose a stable asset allocation of

cash and bond funds designed by your financial advisor to meet your goals

• Consider annuity options.– Joint Lifetime and Survivor annuities

offer smaller payouts but guarantee payout for your spouse’s lifetime as well as your own, a potentially valuable feature.

• Choose a stable asset allocation of cash and bond funds designed by your financial advisor to meet your goals

• Consider annuity options.– Joint Lifetime and Survivor annuities

offer smaller payouts but guarantee payout for your spouse’s lifetime as well as your own, a potentially valuable feature.




Next Steps

RE0000.575.0109January 15, 2009

• Possible expenditures

– A safety net

– Income to provide for a spouse’s well being

– Luxury purchasing power

– A source for charitable giving

• Evaluate potential time horizons for specific purchases.

• Consider keeping roughly a year’s worth of expected expenditures invested in cash equivalents; invest the remainder for the future.

• Possible expenditures

– A safety net

– Income to provide for a spouse’s well being

– Luxury purchasing power

– A source for charitable giving

• Evaluate potential time horizons for specific purchases.

• Consider keeping roughly a year’s worth of expected expenditures invested in cash equivalents; invest the remainder for the future.

Considerations by Goal:A Source of Discretionary IncomeConsiderations by Goal:A Source of Discretionary Income




Next Steps

RE0000.575.0109January 15, 2009

Considerations by Goal:Legacy for HeirsConsiderations by Goal:Legacy for Heirs

• Remember, only your beneficiary designation, not your will, determines who will receive the balance of your retirement assets.

• Some 403(b)s require that non-spouse beneficiaries take a taxable, lump-sum distribution – OppenheimerFunds does not.

• Consider investing these assets with a longer time horizon in mind.

• Remember, only your beneficiary designation, not your will, determines who will receive the balance of your retirement assets.

• Some 403(b)s require that non-spouse beneficiaries take a taxable, lump-sum distribution – OppenheimerFunds does not.

• Consider investing these assets with a longer time horizon in mind.




Next Steps

RE0000.575.0109January 15, 2009

Estate-Planning StrategiesEstate-Planning StrategiesHow to leave the most to your family…How to leave the most to your family…Stretch IRAs• New rules aid you in keeping more of your

IRA in your IRA to pass on to your heirs• The ability to stretch out an IRA has been

greatly enhanced• The oldest beneficiary on record at account holder’s

death may stretch out distributions over his/her own life expectancy

• Divide IRA into separate IRAs for multiple beneficiaries • Spouse may still roll over account and name new

beneficiaries

• What about a stretch 403(b)? • The IRS allows it, but many product providers don’t.• OppenheimerFunds supports stretch 403(b)s.

Stretch IRAs• New rules aid you in keeping more of your

IRA in your IRA to pass on to your heirs• The ability to stretch out an IRA has been

greatly enhanced• The oldest beneficiary on record at account holder’s

death may stretch out distributions over his/her own life expectancy

• Divide IRA into separate IRAs for multiple beneficiaries • Spouse may still roll over account and name new

beneficiaries

• What about a stretch 403(b)? • The IRS allows it, but many product providers don’t.• OppenheimerFunds supports stretch 403(b)s.




Next Steps

RE0000.575.0109January 15, 2009

Preparing your 403(b) for Retirement Preparing your 403(b) for Retirement

• At retirement, you can do the following with your 403(b) assets:

– Leave them in your 403(b) account– Roll them into an IRA– Take a cash distribution

• How do each of these options affect your ability to invest for your different needs?

• At retirement, you can do the following with your 403(b) assets:

– Leave them in your 403(b) account– Roll them into an IRA– Take a cash distribution

• How do each of these options affect your ability to invest for your different needs?




Next Steps

RE0000.575.0109January 15, 2009

Take Your Distribution in CashTake Your Distribution in Cash

DisadvantagesDisadvantages

• Federal taxes due

• Possibility of state and local taxes

• Potential for higher tax bracket

• Loss of tax-deferred earnings

• 10% premature distribution penalty (if under age 55)

• Federal taxes due

• Possibility of state and local taxes

• Potential for higher tax bracket

• Loss of tax-deferred earnings

• 10% premature distribution penalty (if under age 55)

AdvantagesAdvantages

• Immediate access to your money

• Immediate access to your money




Next Steps

Bottom line: Cash may be king, but you don’t want it in hand from your 403(b)

RE0000.575.0109January 15, 2009

CompareCompare

Amount of Distribution

31% Federal Income Tax

10% Penalty

Amount now available for investment

Amount of Distribution

31% Federal Income Tax

10% Penalty

Amount now available for investment

$200,000

($62,000)

($20,000)

$118,000

$200,000

($62,000)

($20,000)

$118,000

No RolloverCash Dist.

No RolloverCash Dist.

$200,000

$ 0

$ 0

$200,000

$200,000

$ 0

$ 0

$200,000

Direct IRARollover

Direct IRARollover




Next Steps

RE0000.575.0109January 15, 2009

• Bob’s lump sum distribution• Taxes on the entire

account at his highest marginal tax bracket at 38.6%

• $624,000 minus State & Local Taxes left for investment – no ongoing tax deferral

• Bob’s lump sum distribution• Taxes on the entire

account at his highest marginal tax bracket at 38.6%

• $624,000 minus State & Local Taxes left for investment – no ongoing tax deferral

Bob and Sue each Inherit $1Million Accounts at age 40!Bob and Sue each Inherit $1Million Accounts at age 40!

Here’s What Cash Can Mean for your BeneficiariesHere’s What Cash Can Mean for your Beneficiaries

The persons portrayed in this example are fictional. This material does not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted.

• Bob inherits from a 403(b) that forces a distribution

• Sue inherits hers from an IRA or OppenheimerFunds 403(b)

• Bob inherits from a 403(b) that forces a distribution

• Sue inherits hers from an IRA or OppenheimerFunds 403(b)

• Sue’s IRA• Sue’s first required minimum

distribution is based on her life expectancy: 43.6. 44year payout period!

• RMD = Account Value/Life Expectancy = 1,000,000/43.6 = $22,936

• The remainder continues to grow tax deferred

• Sue’s IRA• Sue’s first required minimum

distribution is based on her life expectancy: 43.6. 44year payout period!

• RMD = Account Value/Life Expectancy = 1,000,000/43.6 = $22,936

• The remainder continues to grow tax deferred

RE0000.575.0109January 15, 2009

• Assume that and both:

• Never spend any of this money

• Find a fixed investment returning 8% annually

• Pay 30% in taxes each year

• How much do they each have at the end of Sue’s 44 year payout period?

• Assume that and both:

• Never spend any of this money

• Find a fixed investment returning 8% annually

• Pay 30% in taxes each year

• How much do they each have at the end of Sue’s 44 year payout period?

What’s it all worth over time?What’s it all worth over time?

A Tale of Bob and SueA Tale of Bob and Sue

This example is not intended to represent any particular investment.

$6,861,151$6,861,151 $17,486,446$17,486,446

RE0000.575.0109January 15, 2009

AdvantagesAdvantages DisadvantagesDisadvantages

• Limited investment choices

• Distribution restrictions• Non-spouse

beneficiaries may be forced to take taxable lump-sum distributions

• Limited investment choices

• Distribution restrictions• Non-spouse

beneficiaries may be forced to take taxable lump-sum distributions

Keep Your Assets in Your Existing 403(b) PlanKeep Your Assets in Your Existing 403(b) Plan

• Comfort level• Loan privileges• Ability to defer RMDs

past age 70 ½, if still working

• Penalty-free distributions start at age 55

• Comfort level• Loan privileges• Ability to defer RMDs

past age 70 ½, if still working

• Penalty-free distributions start at age 55




Next Steps

Bottom line: OppenheimerFunds allows stretch 403(b)s and offers all IRA investment options to 403(b) owners

RE0000.575.0109January 15, 2009

Rolling Over to an IRARolling Over to an IRA

• 20% is not withheld for federal taxes

• Avoid current taxes and tax penalties and keep your money growing tax-deferred

• Enjoy maximum investment flexibility

• Ability to take 72(t) distributions

• Spouse can be named as beneficiary and inherit account without forfeiture of any payout benefits

• Ability to create a “Stretch IRA” for beneficiaries

• Ability to convert to Roth IRA

• 20% is not withheld for federal taxes

• Avoid current taxes and tax penalties and keep your money growing tax-deferred

• Enjoy maximum investment flexibility

• Ability to take 72(t) distributions

• Spouse can be named as beneficiary and inherit account without forfeiture of any payout benefits

• Ability to create a “Stretch IRA” for beneficiaries

• Ability to convert to Roth IRA

AdvantagesAdvantages

• No immediate access to cash without taxes and possibly penalty

• No penalty-free distributions at

age 55

• No immediate access to cash without taxes and possibly penalty

• No penalty-free distributions at

age 55

DisadvantagesDisadvantages




Next Steps

RE0000.575.0109January 15, 2009

Consider the Roth IRA for your RolloverConsider the Roth IRA for your Rollover

Unique Tax Benefits• Tax-deferred growth• Tax-free withdrawal of earnings and

gains• Can continue to make contributions

after age 70½• No mandatory distributions at

age 70½

Unique Tax Benefits• Tax-deferred growth• Tax-free withdrawal of earnings and

gains• Can continue to make contributions

after age 70½• No mandatory distributions at

age 70½




Next Steps

RE0000.575.0109January 15, 2009

Consider the Roth IRAConsider the Roth IRA

Powerful Estate-planning Tool• No age limit on contributions and no

mandatory distributions• Assets continue to grow tax-

deferred throughout your lifetime• Nonspouse beneficiaries can

spread distributions over their life expectancy

Powerful Estate-planning Tool• No age limit on contributions and no

mandatory distributions• Assets continue to grow tax-

deferred throughout your lifetime• Nonspouse beneficiaries can

spread distributions over their life expectancy




Next Steps

RE0000.575.0109January 15, 2009

Invest in a Diversified Portfolio Invest in a Diversified Portfolio

• Focus on asset allocation• Invest in mutual funds• Change your allocation as

circumstances warrant• Move money between the pools you’ve

established for each of your retirement goals depending on investment experience

• Focus on asset allocation• Invest in mutual funds• Change your allocation as

circumstances warrant• Move money between the pools you’ve

established for each of your retirement goals depending on investment experience




Next Steps

RE0000.575.0109January 15, 2009

Focus on Asset AllocationFocus on Asset Allocation

• Common stocks• Stock mutual funds

• Common stocks• Stock mutual funds

• Corporate bonds• Bond mutual funds• Treasury bonds

• Corporate bonds• Bond mutual funds• Treasury bonds

• Growth & income mutual funds

• Balanced mutual funds

• Growth & income mutual funds

• Balanced mutual funds

• Money market mutual funds• Certificates of deposit• Treasury bills

• Money market mutual funds• Certificates of deposit• Treasury bills

Major Asset ClassesMajor Asset Classes

Growth InvestmentsGrowth Investments Income InvestmentsIncome Investments

Growth & Income InvestmentsGrowth & Income Investments

Cash-equivalent InvestmentsCash-equivalent Investments




Next Steps

RE0000.575.0109January 15, 2009

Invest in Mutual FundsInvest in Mutual Funds

The Right Way to InvestThe Right Way to InvestOppenheimerFunds, Inc.OppenheimerFunds, Inc.




Next Steps

RE0000.575.0109January 15, 2009

Benefits of OppenheimerFundsBenefits of OppenheimerFunds

• Helping investors enjoy retirement for over 40 years

• Manages assets in more than 6 million shareholders’ accounts

• Over 40 mutual funds to help achieve your financial goals

• Helping investors enjoy retirement for over 40 years

• Manages assets in more than 6 million shareholders’ accounts

• Over 40 mutual funds to help achieve your financial goals




Next Steps

RE0000.575.0109January 15, 2009

Benefits of OppenheimerFundsBenefits of OppenheimerFunds

• Latest technology provides secure, fast, easy online access to your accounts

• Toll-free access to helpful, knowledgeable representatives

• Latest technology provides secure, fast, easy online access to your accounts

• Toll-free access to helpful, knowledgeable representatives




Next Steps

RE0000.575.0109January 15, 2009

Why OppenheimerFunds?Why OppenheimerFunds?

• One low annual maintenance fee no matter how many funds you invest in

• A wide range of funds• Toll-free 24-hour access to account

information• Simplified statements after every

transaction• A separate year-end report with complete

tax information • Commitment to your financial well-being

• One low annual maintenance fee no matter how many funds you invest in

• A wide range of funds• Toll-free 24-hour access to account

information• Simplified statements after every

transaction• A separate year-end report with complete

tax information • Commitment to your financial well-being




Next Steps

RE0000.575.0109January 15, 2009

Making It EasyMaking It Easy

• Help establish new IRAs• Complete rollover paperwork• Assist with RMD calculations and

beneficiary designation concerns• Bottom line: Easiest way to roll into an

OppenheimerFunds IRA

• Help establish new IRAs• Complete rollover paperwork• Assist with RMD calculations and

beneficiary designation concerns• Bottom line: Easiest way to roll into an

OppenheimerFunds IRA

1-800-322-1017 ext 2111-800-322-1017 ext 211

Peter G LangelierHorizon Financial Peter G LangelierHorizon Financial Your Financial

Challenges



Next Steps

RE0000.575.0109January 15, 2009

Making It EasyMaking It Easy

• If you already have an OppenheimerFunds 403(b)….

– You’re all set!

• But consider:– Revisiting your investment allocations– Breaking your account into different investment

pools by goals– Reviewing and updating your beneficiary

information.• The Special Options Request form contains a special

section for stretch beneficiary designations

• If you already have an OppenheimerFunds 403(b)….

– You’re all set!

• But consider:– Revisiting your investment allocations– Breaking your account into different investment

pools by goals– Reviewing and updating your beneficiary

information.• The Special Options Request form contains a special

section for stretch beneficiary designations

1.800.835.73051.800.835.7305OppenheimerFunds 403(b)OppenheimerFunds 403(b)Your Financial

Challenges



Next Steps

RE0000.575.0109January 15, 2009

Thank You!Thank You!




Next Steps

Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.

This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation

Before investing in any of the Oppenheimer funds, investors should carefully consider a fund’s investment objectives, risks, charges and expenses. Fund prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting our website at www.oppenheimerfunds.com or calling us at 1.800.525.7048. Read prospectuses carefully before investing.

Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc.Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008©Copyright 2009 OppenheimerFunds Distributor, Inc. All rights reserved.

RE0000.575.0109 January 15, 2009

Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.

This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice, or for use to avoid penalties that may be imposed under U.S. federal tax laws. Contact your attorney or other advisor regarding your specific legal, investment or tax situation

Before investing in any of the Oppenheimer funds, investors should carefully consider a fund’s investment objectives, risks, charges and expenses. Fund prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting our website at www.oppenheimerfunds.com or calling us at 1.800.525.7048. Read prospectuses carefully before investing.

Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc.Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008©Copyright 2009 OppenheimerFunds Distributor, Inc. All rights reserved.

RE0000.575.0109 January 15, 2009

RE0000.575.0109January 15, 2009

retirement planning workshop for educators

Economy & Finance

financial challenges

financial choices strategies

steps re0000

financial advisor

retirement challenges

longer retirement

retirement work

retirement cash flow