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Retirement Planning 101
Caroline Kruse: You're listening to Family Matters with Caroline and Jacquie. I'm Caroline.
Jacquie: And I'm Jacquie. You know, Caroline, you and I don't like to think about getting old but while we're concentrating on, "How are we going to pay for college?" we also need to be thinking about planning for retirement.
Caroline: That's right Jacquie, because it is never too early! And joining us with tips on how we can live in financial security and create retirement paychecks we can't outlive is Pamela Schutz. She is Genworth Financial's Executive Vice President of Retirement and Protection.
Pam, welcome to Family Matters.
Pamela Schutz: Thank you so much.
Caroline: So, why should women be concerned about planning for retirement?
Pamela: Well, Genworth has done a lot of research on women in particular and retirement and what it said to us is women are worried about Social Security. Will it be there when they retire? They're worried about independence, being able to take care of themselves as they get older, they're worried about outliving their money. And they're also worried about healthcare cost and taxes and inflation are eating away at their savings.
This combined with the changing landscape across the US of the shifting burden to the individual, the concern that Social Security won't be there, Medicare won't be there, employers not offering pension plans like they used to in the past, has created more concern and women having to think about taking care of themselves.
And women are unique. They live longer than men, so they're going to need more money in retirement; many times they earn less and that's really due to the fact that they leave the workforce to be caregivers to children and aging parents; and divorce and widowhood can disadvantage women and their [inaudible] and their accumulation of an asset for retirement.
Caroline: Pam, there seems to be so many things to think about when planning for retirement! What are some key issues?
Pamela: Well, the first thing is you've got to have a plan and you should have help, either through an advisor or through your employer and there are many other avenues that you can take. But what you should think about -- that's really a three-part thing to think about for retirement -- is when do you want to retire? And what income will you need in retirement? What's that paycheck going to look like? What money are you going to need for health care?
The second thing is what do you have in place today? What kind of pension have you got: 401k, savings, retiree health benefits? And then you say, "OK, this is the income I need, this is the money I need, this is what I've got in place today." And then what's the gap and how do you close that gap? What more do you need to save?
Caroline: Well, when should you start planning? I mentioned it's never too early but if you're at an older age is it too late?
Pamela: No, it's not too late. But let me talk about early because early is always better and it's really the value of compounded interest. So let me just give you an example. A dollar saved today -- in 30 years that money quadruples -- a dollar saved, and in five years that grows 20 percent to 30 percent. It grows, but clearly earlier is better because of that compounding.
For people that start early, they should max out their 401k and get the benefit of their company match. In terms of later, there are catch-up provisions from the IRS so you can put more money into your 401k to catch up if you haven't saved enough. You probably need to save more.
And then for folks that just haven't saved enough and aren't going to be able to save enough, they probably need to plan on working longer. What that means is they have to take care of themselves and be healthy. There's many people who have to live the workforce because their health won't let them work any more.
Jacquie: But what are some good resources to look into if you want more information because you want to start now?
Pamela: We think the best is work, the employer. Usually there are many, many resources at work and education about retirement planning. I would also recommend -- I have to -- Genworth.com. Aarp.org is a great resource. Genworth is the exclusive provider of long-term care insurance for that organization.
For women in particular there's a website, wiser.heinz.org, that particularly focuses on women and retirement. And then some of the big mutual fund companies like Fidelity and Vanguard, they have some great websites where you can just go on at your leisure and do the calculator for retirement income, which we think are great.
Caroline: Well Pam, what are some key milestones to consider when building your financial plan?
Pamela: Well, the first one really is when you get your first job and we certainly recommend maxing out our 401k and really looking into those benefits very closely because usually that's the time you do it and you don't look at it again. Then when you're changing jobs, make sure you don't make a mistake from a tax perspective, or cash out your 401k. Make sure you roll that over properly and get the proper advice.
The third one is your retirement day. When do you want to retire? And then how long do you plan to be in retirement. With women living longer it's not unusual to be in retirement for 30 years. So you need to plan for what kind of products and investments you're going to need. Let's say an annuity that provides guaranteed income for life. It's certainly one that can protect you for the full span of your retirement. Long-term care insurance can protect you against health care costs that could deplete your retirement savings.
So, those are the milestones and some little bit of advice on that.
Jacquie: And how much should you plan to save for retirement? I mean, are we talking hundreds of thousands of dollars?
Pamela: Well, there's a rule of thumb -- you really need financial advisor help on this -- but I'll give you a rule of thumb. It's that say you want $40,000 a year in retirement, you basically need about a million dollars to save. So you need to take four percent of whatever amount and that's the amount that you need in retirement.
Caroline: Well Pam, thank you so much for joining us with this really important information.
Jacquie: And if any of you want more information on retirement planning you can visit the Your Worth section at Familymattersradio.com website.
Thank you, Pam.
Pamela: Thank you so much.
Caroline: Your Worth has been brought to you by Genworth Financial. Visit them at Genworth.com.
Caroline Kruse: You're listening to Family Matters with Caroline and Jacquie. I'm Caroline.
Jacquie: And I'm Jacquie. You know, Caroline, you and I don't like to think about getting old but while we're concentrating on, "How are we going to pay for college?" we also need to be thinking about planning for retirement.
Caroline: That's right Jacquie, because it is never too early! And joining us with tips on how we can live in financial security and create retirement paychecks we can't outlive is Pamela Schutz. She is Genworth Financial's Executive Vice President of Retirement and Protection.
Pam, welcome to Family Matters.
Pamela Schutz: Thank you so much.
Caroline: So, why should women be concerned about planning for retirement?
Pamela: Well, Genworth has done a lot of research on women in particular and retirement and what it said to us is women are worried about Social Security. Will it be there when they retire? They're worried about independence, being able to take care of themselves as they get older, they're worried about outliving their money. And they're also worried about healthcare cost and taxes and inflation are eating away at their savings.
This combined with the changing landscape across the US of the shifting burden to the individual, the concern that Social Security won't be there, Medicare won't be there, employers not offering pension plans like they used to in the past, has created more concern and women having to think about taking care of themselves.
And women are unique. They live longer than men, so they're going to need more money in retirement; many times they earn less and that's really due to the fact that they leave the workforce to be caregivers to children and aging parents; and divorce and widowhood can disadvantage women and their [inaudible] and their accumulation of an asset for retirement.
Caroline: Pam, there seems to be so many things to think about when planning for retirement! What are some key issues?
Pamela: Well, the first thing is you've got to have a plan and you should have help, either through an advisor or through your employer and there are many other avenues that you can take. But what you should think about -- that's really a three-part thing to think about for retirement -- is when do you want to retire? And what income will you need in retirement? What's that paycheck going to look like? What money are you going to need for health care?
The second thing is what do you have in place today? What kind of pension have you got: 401k, savings, retiree health benefits? And then you say, "OK, this is the income I need, this is the money I need, this is what I've got in place today." And then what's the gap and how do you close that gap? What more do you need to save?
Caroline: Well, when should you start planning? I mentioned it's never too early but if you're at an older age is it too late?
Pamela: No, it's not too late. But let me talk about early because early is always better and it's really the value of compounded interest. So let me just give you an example. A dollar saved today -- in 30 years that money quadruples -- a dollar saved, and in five years that grows 20 percent to 30 percent. It grows, but clearly earlier is better because of that compounding.
For people that start early, they should max out their 401k and get the benefit of their company match. In terms of later, there are catch-up provisions from the IRS so you can put more money into your 401k to catch up if you haven't saved enough. You probably need to save more.
And then for folks that just haven't saved enough and aren't going to be able to save enough, they probably need to plan on working longer. What that means is they have to take care of themselves and be healthy. There's many people who have to live the workforce because their health won't let them work any more.
Jacquie: But what are some good resources to look into if you want more information because you want to start now?
Pamela: We think the best is work, the employer. Usually there are many, many resources at work and education about retirement planning. I would also recommend -- I have to -- Genworth.com. Aarp.org is a great resource. Genworth is the exclusive provider of long-term care insurance for that organization.
For women in particular there's a website, wiser.heinz.org, that particularly focuses on women and retirement. And then some of the big mutual fund companies like Fidelity and Vanguard, they have some great websites where you can just go on at your leisure and do the calculator for retirement income, which we think are great.
Caroline: Well Pam, what are some key milestones to consider when building your financial plan?
Pamela: Well, the first one really is when you get your first job and we certainly recommend maxing out our 401k and really looking into those benefits very closely because usually that's the time you do it and you don't look at it again. Then when you're changing jobs, make sure you don't make a mistake from a tax perspective, or cash out your 401k. Make sure you roll that over properly and get the proper advice.
The third one is your retirement day. When do you want to retire? And then how long do you plan to be in retirement. With women living longer it's not unusual to be in retirement for 30 years. So you need to plan for what kind of products and investments you're going to need. Let's say an annuity that provides guaranteed income for life. It's certainly one that can protect you for the full span of your retirement. Long-term care insurance can protect you against health care costs that could deplete your retirement savings.
So, those are the milestones and some little bit of advice on that.
Jacquie: And how much should you plan to save for retirement? I mean, are we talking hundreds of thousands of dollars?
Pamela: Well, there's a rule of thumb -- you really need financial advisor help on this -- but I'll give you a rule of thumb. It's that say you want $40,000 a year in retirement, you basically need about a million dollars to save. So you need to take four percent of whatever amount and that's the amount that you need in retirement.
Caroline: Well Pam, thank you so much for joining us with this really important information.
Jacquie: And if any of you want more information on retirement planning you can visit the Your Worth section at Familymattersradio.com website.
Thank you, Pam.
Pamela: Thank you so much.
Caroline: Your Worth has been brought to you by Genworth Financial. Visit them at Genworth.com.
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