Welcome everyone. We’re going to give it a few minutes here to allow people to join, but we’ll get started as soon as we possibly can. Still see people trickling in here.
I’m going to go ahead and uh link a few webinar materials in the chat for today that were also included in the 1-hour reminder email in the event that you’d like to participate in the exercise.
Still feel see a few trickling in here. We’ll give it another minute and then we’ll get started.
Again, thank you for joining. We’re just giving it a little bit of time here to allow people to join.
All
right. I think we could probably go ahead and get started. So, hello everyone. Thanks for joining today’s Alliant employee or excuse me for joining today’s uh webinar presentation uh presented by Alliant Retirement and Investment Services in partnership with Alliant Credit Union. We will have a live question and answer session at the end of today’s presentation. I also want to mention that the 1-hour reminder email for today’s event included links to the materials or resources that are referenced in this presentation today. And I encourage you to open those links to have the materials with you for today’s event. They will also be linked in the follow-up email that will go out after today’s event. And I’ll also include them in the Zoom chat here if you prefer to access them in that manner. Please submit your questions regarding today’s topic reinventing retirement or about Alliant Retirement and Investment Services in the chat or the Q&A. The presentation today is recorded and a link will be provided later by email for on demand viewing. Our speaker today is Michael Marx. Mike is a certified financial planner and has 30 years of experience in the industry. Mike is also passionate about helping individuals and families navigate an everchanging economic and financial landscape. He enjoys educating clients on investments, financial planning, and the impact that economic events can have on everyday life. Mike believes financial planning doesn’t have to be intimidating, and that some of the greatest value he provides comes from helping clients answer questions they might not have even thought to ask. Outside of work, Mike lives in Houston with his wife Amy and their boxer, Lily. He’s active in his church, volunteers with the local nonprofit, Sihope, enjoys sports like bach botchi, curling, softball, and loves to find ways to connect with and serve his community. Please make sure to adjust your volume to an appropriate level as settings vary by user. Now, let’s start our presentation on reinventing retirement.
Welcome everyone to today’s presentation. My name is Michael Marx. I’m one of the financial consultants with Alliant Retirement and Investment Services. I hope today’s information provides helpful context as you think through your retirement planning options. It’s also important to acknowledge that there is no single perfect retirement planning strategy. Every option comes with its own advantages and limitations and no one approach works for everyone. At Alliant Retirement and Investment Services, we understand that each family’s situation is unique. In this presentation, we’ll share key insights to help you make informed decisions about retirement. You’ll be seeing information about how to approach retirement planning step by step, including ways to save through your employer sponsored plan and strategies for finding additional dollars to contribute. We’ll also walk through how to estimate your cost of retirement, how social security may factor into your overall income, and why time can play such an important role in building long-term savings. Additionally, we’ll cover some investment basics, including different types of investments and the importance of diversification before finishing with practical steps you can take to get started.
Our team at Alliant Retirement and Investment Services is focused on helping you understand the ins and outs of investing, saving for retirement, and much more. Take a look at our website ais.allantiantcreditun.com
to see our list of weekly webinars, our podcast, Investsavvy, our blog, and other financial resources.
If questions arise about retirement planning, social security, retirement income rollovers, or investment planning, our team can help you evaluate those considerations within the context of your financial goals and circumstances.
Some brief housekeeping. This webinar is for educational purposes only and not a specific recommendation. Securities and advisory services offered through LPL Financial, a registered investment adviser and broker dealer. Products are not insured by FDIC, NCUA, or any government agency. Not a bank or credit union guarantee, not a bank or credit union deposits or obligations, and some may lose value.
Today, we’ll be covering the basics of retirement planning and investing. We’ll start with talking about features and benefits of 401k plans. Then we’ll talk about finding the money to save or to increase your current contribution. We’ll briefly cover some rules of thumb as to how much you should be paying for your retirement. Next, we’ll take a look at how social security benefits will factor into your retirement income. We’ll then spend some time on time. Time can play an important role in long-term retirement saving. though outcomes will depend on contributions, investment performance, taxes, fees, and personal circumstances. We’ll then move on to the basics of investing, the types of investments you have to choose from, and the importance of diversification in your investing strategy. Finally, it’ll be time to make your purchase by enrolling in your plan. The important thing to remember about retirement planning is that it is an ongoing process. And today is just the beginning. Reinventing retirement is about building a solid foundation, getting started with a plan that can help you get to where you want to be in the future.
Let’s go ahead and start with talking about the features and benefits of 401k plans.
I’m sure you will agree that most purchasing decisions are driven by a goal to get the best deal possible for yourself. So, what is the best retirement deal possible? What do you want to do in retirement? Retirement is going to mean something different for everybody here. In fact, a recent survey by CNBC found that the next generation of retirees, only 11% plan on not working in any capacity. For many people, the freedom to explore new challenges during retirement is the best deal possible.
Let’s think about paying for your purchase. How many of you are currently contributing to your retirement savings plan? That’s great. The average US household saves $1,135 per month. Now, how many of you are ready to increase your contribution right now to help those retirement dreams become real? What keeps you from saving more? Well, that’s one of the things we’re going to talk about today. We’re going to look for ways to help you save more for your retirement and we’ll explore all the reasons why saving now is one of the best things you can do for your future.
You know, purchasing your retirement is not all that different from purchasing a car or a home or any other big ticket item. You do really well when you know what you’re looking for, when you have a goal, when you have the right tools, and when you have a plan to make it happen.
Because your retirement will be the largest purchase of your lifetime. It’s going to require a very special kind of payment plan. Your 401k is a key benefit offered by your employer, and it offers you one of the easiest ways to save for your retirement future. We’ll start off with an overview of the features and benefits that can help you get the best retirement deal for yourself. Automatic payroll contributions. The first valuable benefit is automatic payroll deductions. Your 401k plan allows you to save money each pay period up to the annual limit set by the IRS. And by the way, later in this presentation, we’ll talk about the new increased annual limits that went into effect this year. Your contribution is automatically deducted from your paycheck before you even see it and deposited into a separate trust account for your benefit. Out of sight, out of mind. What you don’t have, you won’t spend. You will also be following a great savings principle. Pay yourself first. You’re in control. The second valuable benefit is that you’re in control of your money. And what I mean by that is that it’s portable. Should you leave your company for any reason, you have the option to leave your vested account balance in your current plan, or you can take it with you. Your money can be rolled over into an IRA or your new employer’s 401k plan if offered. However, you need to know that there are strict rules when taking money out of your retirement plan. For instance, if you decide to take money out and spend it and you are under age 59 and a half, you’ll be subject to a 10% IRS penalty in addition to current income taxes. You’ll want to check with your plan administrator to make sure you understand all of your options. The third valuable benefit is pre-tax savings power. When you make a contribution to your 401k, federal and any state income taxes would have been due on this money or deferred until you take that money out. This means that 100% of your money goes to work for you right away. Participating in your 401k lowers your tax bill, too. Here’s how it works.
Today’s retirement shoppers are Amanda and Jake. each earn $25,000 per year and both save 6% of their pay, $1,500 each year for retirement. Amanda saves through her 401k, so her contribution goes directly into her pre-tax account. Jake saves on his own, so he cashes his paycheck and puts away after tax money in a savings account at his bank. By saving through her 401k, Amanda gets a better tax deal. She lowers her taxable income, which means she pays less tax. In this example, that translates into an annual tax savings of $225. Actually, she’s only out of pocket. $1,275 in order to save $1,500. That’s $1,500US 225 equals your 1275. Does everyone see how that works?
the payment plan. By saving through your 401k, you also benefit from tax deferred growth. As your retirement account grows, you pay no taxes on any earnings until you begin to withdraw your money. This powerful feature is known as tax deferred compounding. Investments with earnings that are tax deferred have the potential to grow faster when they are not being hit by taxes each year. Tax deferred compounding can give a significant boost to your retirement account balance. Let’s return to Amanda and Jake to see what happens to their money after it gets deposited in their accounts.
Here you see the growth on their account balances, each earning a hypothetical rate of return of 8% over a 40-year period. The big difference is that Jake is paying taxes on his earnings along the way and Amanda is deferring taxes until retirement. Now, here are two important questions for you to consider. Which balances do you think would potentially provide you with the most income during retirement? And which balance do you think would potentially last longer during retirement? Raise your hand if you voted for Amanda’s balance.
Let’s take a look at the difference tax deferred compounding can make in terms of Amanda’s retirement income. Assuming that upon retiring, both Amanda and Jake decide to divide up their account balance into 20 equal withdrawals. They plan to take one withdrawal each year over a 20-year period. Why 20? That’s because most people can expect to live another 20 years on average during retirement. As you can see from our hypothetical example, even after paying taxes on each withdrawal, Amanda has almost $2,600 more each year for pursuing her retirement dreams. Does everyone see how this works?
The important concept here is that if an employer match is available, contributing enough to receive the full match may help increase retirement savings subject to plan rules and your personal situation.
Finding the money to save. Well, now that we’re sold on the benefits of a 401k plan, let’s take a look at coming up with the money to contribute. or better yet to increase your contribution. Let’s face it, there are a lot of obstacles to saving for retirement. Couples who work or single parents with young children know that child care can be expensive. Perhaps you’re saving for your teenager’s college expenses or planning a major purchase such as a new home or a car. Maybe you’re supporting an aging parent. Many people struggle just to make ends meet. It may seem impossible to find money to save for retirement,
but the truth is you can. With the right tools, you can discover a number of small savings that can really add up over time. One of the best things you can do for your finances is to track your daily spending. Find out where all your dollars are going. A video rental or lunch out may not seem to cost much, but the expenses add up over time. Keep a spending journal for several weeks and evaluate your spending habits. You might be surprised at what you discover. When you see how you’re spending your money each month, you can start to make a budget. A budget will help you define how much money you have available to spend in any one category each month.
Here’s a sample spending journal. It’s also on page five in your workbook. How many of these entries sound familiar? Keeping a spending journal is half the battle. Once you become aware of your little ways you spend money without thinking, you can begin to take action. Shopping without a list can result in buying more than you need. That daily coffee and bagel can add up to $15 a week or $60 a month that could be going toward your retirement savings. Look at how changing just a few spending habits can add up. Going without some of these items over the course of a month can add up to a substantial increase in your monthly contribution. And if you invest the money you saved for 25 years, you can see how you could potentially get a better retirement deal for yourself. Here are a few small saving ideas you could try. You may want to make a note of these and add a few of your own.
Start with a few small sacrifices. Leave the debit card at home. Maybe shop for clothes on sale. Take your lunch to work. Shop for groceries with coupons and a list. Avoid beverages at restaurants or water instead. Plus, in addition to the small nuggets you can find, there may be a few larger expenses you can trim. Think about your major financial expenses, your mortgage, credit cards, car insurance. There may be ways you could find to save on even one of them. Take a look at these examples. You might refinance your mortgage at a lower rate. Consider consolidating your credit card debt at the lowest rate available. Investigate a lower car insurance rate. Or if you’re in a market to buy a car, buy a used one. So, you see, the truth is you really can afford to save more for your retirement. To summarize, even a little extra a month can add up. The first step is to become aware of how you’re spending your hard-earned money by using a spending journal, making saving for the kind of retirement you want a priority, and living within a budget. Plus, you could try to find smarter ways to handle large expenses. Often there’s a less expensive way if you do a little investigating. Remember our great principle of saving? Pay yourself first. Well, it’s a good bit of advice. Take the money you’d normally spend on impulse items and have it deducted from your paycheck. Then you won’t have it to spend on unnecessary items. You can do it. Finding extra money doesn’t mean giving up everything, but it may mean becoming more aware of your finances and living within a budget. Now you know how it’s possible to save more. But you may be wondering, how much is enough? What is the price of my retirement? The price of your retirement.
With the many factors to consider, it can be overwhelming to try and figure the exact amount of money you’ll need for your future, especially when you’re trying to figure out how much you’ll need to save in addition to any social security or pension benefits you’re expecting. On pages six and seven of your workbook, you’ll find a general worksheet which will help guide you through the process of determining what you will need for retirement and how much you should be saving to get there. Make a goal to work through this calculation on your own at some point in the near future. It will help you clearly see the valuable role that your 401k can play in funding your retirement future. It’s also a good idea to file your worksheet away for reference and revisit the calculation annually as your personal circumstances change.
For now, here’s a simple rule of thumb that many financial adviserss use to help you determine a starting point. If you’re in your 20s, you may want to think about saving 7% of your salary as a starting point. If you’re you’re in your 30s, if you’re in your 40s, if you’re in your 50s, you may be able to save more or you may be unable to save this much. Regardless, the important thing is to start saving as much as you can right now. The best way to get started is to save through your 401k plan with convenient payroll deductions. You may want to make a note of these figures for use later when you fill out your enrollment form. Now, to further emphasize why it’s important to start saving as much as you can right now, let’s turn our attention to Social Security benefits.
Social Security.
How many people here think Social Security will take care of all of your retirement income needs? How many people here think Social Security will take care of at least half of your retirement income needs? Well, the truth is many people have a false sense of what Social Security is about. And that’s okay. One thing to keep in mind about reinventing retirement is that it’s about staying informed. After all, knowledge is retirement power.
Social Security is intended to provide only a minimum level of retirement income to go forward covering the basic necessities, food, shelter, and clothing. It was never intended to be your only source of retirement income. The rest will be up to you. Here’s a rough estimate of what a 35year-old and a 62y old today might expect in social security benefits based on current pay. People are living longer, healthier lives. In fact, it’s estimated that the number of people aged 65 and older were nearly double by the year 2030. Based on the 2025 trustees report, if no changes are made, the combined social security trust fund projection indicates reserves could be depleted in year 2034 with continuing income sufficient to pay only 81% of the scheduled benefits at the time.
So because of of this full retirement age has gradually increased for later birth years and it’s age 67 for those born in 1960 or later. If you were born after 1937 this means that you don’t get your full benefit until later than you may have thought. Also, for those seeking early retirement at age 62, which is the earliest age you can start receiving benefits, face a continuing reduction in the percentage of social security benefits they can draw. You can refer later to the chart on page nine of your planning guide to get an idea of what you can expect. For now, let’s take a look at an example of a person who was born in 1960.
Let’s assume that the average annual pay for our child of the 60s is $35,000. Beginning at their full retirement age of 67, they can generally expect a monthly social security benefit of about $1,253.
Now, this replaces about 43% of what their monthly pay was before they retired. But like many people, our person would like to retire early. How would retiring at age
six monthly benefit of $1,253 would be reduced by another 33%. They will be giving up $414 per month. Another way of looking at this, by retiring earlier, their social security benefit will now only replace about 30% of what their monthly income was before they retire. Does everyone see this? So, if you think of the best retirement deal for you involves retiring early, this is some information you’d want to keep in mind.
For most of us who want to retire early, or even those of us who want to retire on time, the reality is this. We’ll need to save as early as we can and as much as we can through our 401k. When it comes to social security, reinventing retirement is about three things. Staying informed, make a note of the Social Security website. It’s the best way to stay up to date on what’s happening. They’ve got some interactive calculators to help you figure out what your benefit may be when you retire. Taking responsibility for your own financial security, and planning for retirement now, no matter what your age is. But why is starting to save as early as you can so important? Because it’s about time.
Many people feel that retirement is a long time away and that there’s plenty of time to get going on a serious savings plan. But don’t underestimate the power of time. Time greatly improves your chances of having enough money at retirement. The earlier you start saving, the better retirement deal you can get.
The rule of 72 is one of the easiest ways to find out what an impact time can have on your savings. It simply calculates the number of years it’ll take to double your money. Here’s how it works. Take the rate of return you expect to receive on your investment, divide it into 72. The result is the number of years it will take for your investment to double. This means that in nine years, a $5,000 investment earning a hypothetical rate of 8% would double in value to 10,000. The sooner you start saving, the more doubling period you will have in your remaining working career. Let’s see how our math is today. Can anyone tell me how long it will take for an investment earning a hypothetical rate of 6% to double? How about 12%? Does everyone see how this works?
Assuming a hypothetical annual investment return of 8%. We can use the rule of 72 to show how time affects the potential growth of an initial investment of $2,500. As you can see, starting early, in this case, age 22, get you the best retirement deal. Your investment doubles every 9 years. And by your full retirement age of 67, your money will have doubled five times. And now your initial investment of $2500 now equals 80,000. But if you wait until age 31, you miss out on one doubling period and your 2500 has only grown to 40,000 by age 67. And if you wait until age 40, you’ll miss out on two doubling periods and your $2500 has only grown to 20,000. The moral of the story is this. Waiting costs you real money. The longer you wait, the more money it costs you. Not only that, but there’s another thing to consider when thinking about time.
Inflation eats away at your money’s purchasing power and may not buy as much retirement in the future as it does today. After you retire, you’ll probably be living on a fixed income. Unfortunately, the cost of basic necessities will continue to rise. Here’s a chart that can help you reinvent retirement by keeping inflation in perspective.
Not only does inflation affect your buying power, it also has an impact on investment returns. Certain cash type investments may not always keep pace with inflation. Over the same time, inflation is average about 3%. That means that the real return on cash type investments, their return after adjusting for inflation is less than 1%.
So what can you do to help manage inflation? One thing you can do is consider increasing your contribution each year. In addition, you may also want to consider investments in your retirement savings account that have the potential to beat inflation. And speaking of investments, we’re now ready to take a look at investing basics. Investing basics.
Asset allocation is the process you go through in deciding how to divide up or allocate your investment dollars among the various types of investments called asset classes offered through your 401k plan. Now that you’re ready to invest in your retirement future, it’s important to get a feel for this process. Asset allocation can be an important factor in long-term investment outcomes. This guide will take you through the asset allocation process by introducing you to some of the common types of investments, educating you about the importance of diversification, making you aware of your feelings about risk, reviewing some of the general asset allocation models to help you visualize your own personal retirement strategy.
through your 401k plan. You’re creating an investment strategy to help you accomplish the financial goals you set for yourself in retirement. Your investment strategy will depend on many factors such as the number of years you have until you’ll need your money. Your ability to handle occasional and unpredictable changes in the value of your investments, also known as your risk tolerance, your current lifestyle and financial situation, the kind of lifestyle and experiences you wish to pursue during retirement. your life expectancy, your investment return objectives. The first step in choosing the right investment strategy for yourself is understanding the investment choices offered by your plan and the risks and growth potential connected with each.
Generally speaking, most retirement plans offer these three general types of investments for you to choose from: stocks, bonds, and cash equivalents. Here’s a look at how they fall in terms of most risky to least risky. One thing to keep in mind about choosing your investments, the greater the risk, the greater the chance for a higher return over the long haul. With less risky investments, you should expect a lower return over time.
Stocks. The first type of investment we will look at is a stock investment. By investing in stocks, you’re actually buying shares of ownership in a corporation. Stocks have the highest potential growth over the long haul, but also carry a higher degree of risk. Their unpredictable movement up and down in value is called volatility. Historically, over long stretches of time, stocks have a greater rate of return than other types of investments. Bonds are actually loaning money to an organization such as a corporation or the government in exchange for interest payments. They’re also called fixed income investments. Bonds actually pay either fixed or variable interest rates. Principal may fluctuate up and down, sometimes widely, but ordinarily will not vary as much as stocks. Finally, stable assets or cash. By investing in stable assets, also called cash equivalents, your goal is to maintain a steady or stable principal value whose generally does not fluctuate. Examples include money markets, US treasury bills, and some investment contracts offered by insurance companies or banks.
Mutual funds make up the majority of investment options within most 401k plans. They can be made up of any mix of stocks, bonds, and stable assets.
Your money is pulled together with the money of other investors who have the same or mutual investment goal.
Each mutual fund has a team of professional managers who perform the day-to-day tasks involved in researching, buying, and selling the investments on behalf of of the fund.
Here’s some big picture perspective regarding the historical performance of our three investment types from January 2010 through December 2025. The S&P 500 delivered an average annual return of about 14.1%. Bonds delivered an average annual return of about 2.7%. Stable assets delivered an average annual return of about 1.4%. And also note that inflation has averaged about 2.58% a year. One important point to remember, past performance is absolutely no guarantee of future results. You’ll
see that disclaimer everywhere when talking about historical returns for any investment. But history does reflect the power of time. Keep in mind that investing for retirement is a long-term proposition. The longer you’re in the game, the chances are more likely that you can expect a higher return by taking greater risk.
Now, I’d like to spend some time talking about diversification. Diversification means spending your money amongst several different types of investments in order to balance out the risk. It’s a fancy word, but a simple idea. Generally speaking, if your dollars are invested in many types of investments and market conditions cause one of your investments to not do well, all of your money won’t be affected. Diversification can also help with another kind of risk. Inflation risk is the chance that your investments won’t grow enough over time to keep up with the rising cost of living. What can you do about inflation risk? Well, you may want to consider investments in your retirement savings account that have the potential to beat inflation, such as stocks and bonds. Mutual funds can help provide you with diversification. Let’s take stocks funds for example. Investors who choose to make regular 401k contributions to a stock fund increase their shares of ownership in a variety of companies that fit that fund’s objective. Money may be invested in several companies depending on a combination of factors such as the company’s size, earnings history, length of time it’s been in business, type of product or service, specific industry, and geographical location. Because the fund spreads its investments across a variety of companies, it could potentially lower the impact if one company does not perform well
of diversification in your investment strategy. How many of you enjoy a lifesaver now and then? Well, Clarence Crane invented lifesavers in the early 1900s. He manufactured only one flavor of lifesavers, peppermint. But in 1913, Crane was approached by Edward J. Noble. Noble suggested that offering different flavors of lifesavers would attract more customers. Now, Crane wasn’t interested in the concept, but agreed to sell Lifesavers business to Noble for $2,900.
Noble went on to develop a billiondoll business manufacturing
different flavored lifesavers. By diversifying his product, he appealed to more people and protected his business from the risk of one flavor losing popularity. Diversification works with investments, too. Spread the risk to help protect your potential rewards.
Now, what I’d like to do is to take a few minutes and have us get a general understanding of how we feel about risk. By considering how long you have to invest and determining how much risk you can handle, you begin to create your own personal investment strategy for your retirement future. In your asset allocation guide, you’ll find a brief questionnaire. Let’s all take a pen or pencil and work through this now.
done. Okay, let’s rate ourselves. Five to seven points. Conservative. You’re an investor who seeks stability and safety for your money. Now, remember, not having enough money when you retire is a big risk, too. Keep in mind, your time horizon and impact inflation can have on those investments.
8 to N points moderate. You want your money to grow but are more concerned about protecting it. You are cautious but may be willing to diversify to spread out some of your risk depending on your time horizon. 10 to 11 points moderate growth. You are an investor who likes to balance lower risk investments with higher risk investments. Evaluate your situation at least annually to make sure this balance contains the right mix of lower risk and higher risk investments appropriate for your situation. 12 to 13 points. Growth. You want to increase your savings and are somewhat comfortable writing the ups and downs of the stock market in exchange for the possibility of higher returns over the long term. Now, you may have more time on your side until you retire. 14 to 15 points aggressive growth. You want to maximize the long-term growth of your retirement savings. You are comfortable taking substantial investment risk in exchange for potentially higher returns. Evaluate your situation at least annually. Stay focused on your time horizon and modify your investment strategy as your situation changes.
Remember, these are just some general guidelines to help you understand how you feel about risk. When making your investment selections, make sure you keep in mind all of the following. Your attitude toward risk, the amount of risk you can handle to get the returns you need, your time horizon, how long until you will need to start taking money out of your retirement plan, your investment goal, the amount of money you will need in order to pursue the lifestyle and experiences you wish for in retirement. Now, let’s take a look at page two of the asset allocation guide to help you choose your investment strategy. Find the asset allocation model that best matches your investor type and circle it. Now, remember, these are just general examples. You may wish to use your models as a starting point to further fine-tune your own individual investment mix.
Congratulations. You now have a solid understanding of retirement planning and investing basics. You’re ready to make your purchase. But first, let’s do a quick review of where we’re at. You know about the features and benefits of your 401k payment plan, which includes portability. You can take it with you. Automatic payroll deductions, pre-tax savings, tax deferred compounding. You have some great ideas for finding the money to save or increasing your contribution. You have a general idea of the cost of your retirement and how much you’ll need to start saving today. You have a better understanding of what
you can expect from social security. You know about the effects of time and inflation on your retirement planning. You understand your investment choices and the importance of diversification in your investment strategy. You have a general understanding about your feelings toward risk
enrolling in your plan.
When it comes time to determine your contribution, let’s just focus on a starting point. You can review our general rules of thumb. In your 20s, save 7% of your salary. In your 30s, save 10%. In your 40s, save 15%. In your 50s, save 20. If there’s a company match, consider contributing at least enough to receive the maximum your company’s offered. or consider starting with something conservative, say 5% of your current salary. If you’re already contributing, think about increasing your contribution today by 1 or 2%. As soon as you can, be sure to complete the worksheet guide on pages six and seven of the planning guide to get a more complete picture of your savings need.
You’ll also want to be aware of something else. In June of 2001, President Bush signed into law the Economic Growth and Tax Relief Reconciliation Act of 2001, which created a number of enhanced 401k Plan Savings Opportunities that went into effect in 2002. Relief is the acronym for restoring earnings to lift individuals and empower families. Consider these figures a goal worth striving for.
Also, 401k savers who will be age 50 or older by the end of the year are allowed to contribute an extra amount over and above the new annual limits. So, if you’re over age 50 and find yourself needing to play a little catchup with your retirement savings, here’s what it can mean for you for 2026. an extra 8,000. 2027, those future increments will reflect a cost of living adjustment. Now, for employees age 60 to 63, you can save even more. Now, these contribution limits shown on the slide are subject to the IRS rules and plan provisions.
If questions arise about retirement planning, social security, retirement income, rollovers, or investment planning, our team can help you evaluate those considerations within the context of your financial goals and circumstances. Thank you so much for attending. We’re a full-ervice investment firm. That means planning and investments. Our role is to provide you education and when appropriate discuss planning and investment considerations based on your individual circumstances and applicable standards of conduct. If you have any questions about how the concepts discussed today may relate to your situation, we’d be happy to continue the conversation and more importantly how this impacts your retirement goals.
All right, thank you. So, let’s go ahead and get started with our live Q&A session here. If you do have any questions for Mike about retirement options, Alliant Credit Union, or his role as a financial consultant, please submit them in the chat or the Q&A tabs. We did get a couple of questions to start here and we’ll go ahead and throw those at you here, Mike. Uh, first question we got, how at risk are our 401ks with all companies investing heavily in the AI buildout? That’s that’s a great question. That’s a pretty strong opening question, too, whomever asked that. Um, so
that’s a tough one. So, so let me kind of give you some context. The the short answer to your question is there is some risk to that. Uh the belief is so so I’ve heard some comparisons to the.com bubble. So I’ve been doing this over 30 years. So I was around in the ‘9s. Everybody was buying.com. We were talking about hey that’s not a great idea. We’re not so much saying that now. Um and and and let me give you the main difference between those two and I think this will help answer the question. I’ll give you some context for that. So back in the 90s uh it was a really low entry point, right? So these companies were just startups. There was no money. They didn’t have any money. So they were able to come in and that was driving the price which drove the bubble. What’s different now is the companies that are investing. It’s not all the companies but it’s the big companies right of your mag 7 of them are investing the huge amounts that we see all the time. The other two that really are but aren’t out of that mag seven are Apple and Tesla. And they’re still investing, but they’re still in they’re investing in different ways because their business model isn’t that same function as like a like an Amazon or a Meta or or something like that. Um, you know, or an Alphabet. So, with that said, so here’s the caution and and I think it’s a great question because there’s there’s two parts to this. This was a concern even earlier in the year. If you remember, if you’re watching the market, a lot of these stock companies uh were investing in that and then the concern was is this driving the price up? Because when you’re building data centers, etc., instead of an expenditure, it becomes an asset on your book, right? So then your valuation start pushing a stock price up. So the question starts happening where people are like, hey, we’re in they’re investing these hundreds of billions of dollars for a future profit. are they really worth what they’re saying right now? How long will it take before we start seeing a return? And then you started seeing some of those sell-offs and that stock price come down because they’re looking at the valuation. Now, with that said, prior to that question, people were buying, you know, a lot of that and they were also buying the S&P. Well, if you look at the S&P 500, and for those of you who are not familiar with the S&P 500, at least how it’s structured, it’s the 500 largest US companies. So, in theory, you buy the S&P 500, you’re invested in 500 US companies. There’s a lot of diversification. We’ll go back to that lifesavers, right? There’s a lot of different flavors in there. But the reality of it is it’s weighted. It’s not equal weighted. So, the larger the company, the more impact it has. So, if you just look at the top five companies in the S&P right now, they account for about 30% of that movement. So, there’s already somewhat of a concentration. So you have two two things to consider and I would say the answer is somewhere in between. You’re going heavy in there for that run and they’ve seen that. We saw some of that pullback in the first part first quarter and then pretty much since March um or April you would see some of those runs and that’s where most of the market made their money and that’s where a lot of the big mag sevens were making their money as well. So to answer your question, there is a risk. If you avoid the risk altogether, you might miss out on that. And I think this is very different because if um if Google or Alphabet, so call it Google, if Alphabet, they’re investing all that money in there, right? But they’re still a very profitable company. When you look at Microsoft, when you look at Tesla, when you look at Apple, they’re still profitable companies. So that is the difference. If you are close to your retirement, then I would probably be more concerned about maybe concentrated positions and impact without protecting your downside. But that is a fundamental basis of all financial planning and that’s one of the reasons why you work with an adviser. Um, I hope that answers your question. Um, if not, just give me a call and and I can expand on that a little bit. Appreciate it, Mike. Um, next question we have here. Uh, can I roll over my traditional 401k tax deferred to a Roth before I am 59 12 years of age and I am no longer working for that employer? The uh the answer to thank you for that question. The answer to that is yes, you can. The question that you might not know needed to be asked, right, which is what I always say, uh, is should you? and and if you should it’s it’s how over how many years should that be done. One of the things that we do for the members here uh is part of our financial planning our wealth planning we look at Roth conversions as a part of that we look at the impact on your tax savings um currently in the future and its impact on something like Medicare as well. So, what I would say is if you haven’t, we could take a look at that. Go ahead and schedule some time and we’ll take a look at it and see how much over what time and what tax impact, good or bad, it could have on you and figured out if it’s actually even in your best interest to do something like that. But yes, you can.
Question we got here, um, how do I go about estimating the amount of income that I’ll actually need in retirement?
Oh, that’s actually a good way of going about it. It’s uh it’s the income gap. So, when most people do their planning, right, they always think about it. I need this number. I think most of the big firms do that. I need to hit a number. I need 1.46 million at retirement to have a comfortable retirement. I think Voya does it in Orange Money and things like that. Um the way you go about it from a very highle structure is that you would go through and you look at your expenses. So, we can help you with a budget worksheet if you need that. ARIRS has that. Um, and you would do two two numbers on there is what I always ask members. And this is one of those not huge homework. Take five to 10 minutes and do this. Run your expenditures. And even if you have that, still use the budget worksheet because there might be some things that you’ve forgotten about. So, it’s a good reminder to confirm. And then that second number that you would still put in that same thing is you would say, okay, when I retire, what do I expect that that expenditure to be or that that expense to be in today’s dollars? And for example, you’re working 40 hours or 50 hours depending on your field. Um, I might only spend $2,000 on travel because I just don’t take a whole lot of time off. But that is a goal for me in retirement. So that $2,000 now might be $10,000 when I retire or more. Right? So looking at those cash flows and then what you would do and this is part of I think it’s page six and seven in the worksheet on that. Um then you’ll look at at what your uh guaranteed income is like social security if you’re fortunate enough to have a pension if you have any annuities or anything like that. That’s all guaranteed income. And then whatever that shortfall is is then that’s called the income gap. And then you use the assets to generate income. Now, I will caution that as well as the risk tolerance questionnaire, I um when you’re doing these calculations and you’re using any type of calculator, I believe I actually wrote it down. It was slide 49 that says the S&P 500 from January 1st, 2010 to December 31st, 2025 average a little over 14% a year. So, if you’re looking at it, most people would say that’s what I want. that’s exactly what I need. But the cautionary tale to that and I thought it was interesting that those dates are chosen if you go back 10 years prior. So that would be I had to write that down. January two January 1st, 2000 to December 31st, 2009. Right before that, I know we’re not live. I mean, we’re live, but we’re not in person. So, I usually have people take guesses on this, but I cover this in in in person. The average return for the S&P over that 10-year period was a negative 2.7% per year for 10 years. So, those cycles do happen. They’re not very common, but they do usually happen within a generation. It happened in the early 2000s. It happened in the 70s, and it happened in the 30s. So when you think about retirement from a 20 to 30year time frame, there is a chance that you can run a down cycle like that. So always be cautious in the numbers that you use when you forecast the return that will ultimately generate your income. That is one of the things we do um and is part of our wealth planning for the employees and the members and non-members is that we do what’s called a stress test. So, we look at the what happens if I retire at the wrong time because I know when I want to retire, but maybe the market or the economy didn’t get that memo. So, just a word of caution on that. But that’s that’s the general structure on how you generate your income. Great. It’s a great segue into the next question, which is the last question that’s been asked here. Uh, what percentage of the current Social Security amounts are you using for retirement planning? Is it 100% 81% or somewhere in between? So,
we use it as 100% of whatever the forecast is, whatever Social Security says yours will be. If you don’t if you don’t have an account with Social Security, you really should get your ID, get your login. Um, there are quick quick calculators in there that you can punch in some numbers, but if you actually have an account, they actually have all your reportable income and they can give you a pretty good idea what your forecast is. We still use it as 100. I personally use it as a 100% from for me. Um, I know some people have those concerns about social security and the potential 20 to 25% pay cut if it does run out. Um, so so let me give you the context of this because I think this is important. Um
um so so if anyone has a if anyone has family or is in politics, my apologies because this is kind of tongue and cheek, but an elected politician, right, an elected official, their first job is to get reelected and to keep their party in power, right, in office. So shoring up social security isn’t that difficult. And I know the big thing is, hey, you know, in less than 10 years, we’re going to be defunct. Well, that’s true. If nothing is done, but small things can be done to shore this up. Things like just changing the social security tax, not putting a cap on it. They could up it 1%. It would make a huge difference and most people wouldn’t even notice on their paycheck because it’s pre-taxed. Um, they could change the years, which they probably should, right? When when social security came out in uh like the early 30s, I think 34, 35, somewhere around there, the average life expectancy for a man was 59 years old and for a woman it was 63. So if you made it to 65 and you were good for you, but you know, you’re living on borrowed time at this point, you know, and I’m going to jokingly say this. One of my clients told me this like like I don’t buy green bananas at this point, right? So, so I want to know this stuff now. We’re now you’re living 20 to 30 years past that. So, do they need to start social security later? Probably. Are they going to push it all the way? Probably not. But, you know, they’re already doing it now to where full retirement age is age 67. Um, but I would tell you we could do a couple of things on our planning because this is very spec specific and very customizable. If there is a concern on your end, we can say what happens if there’s if I only get 80% of my social security. what happens from there. How does that impact my portfolio? That’s just part of the stress test. That would be one of the inputs that we could absolutely do with the stress test and see how that works for you. We’re kind of running up against time here. We did get one last quick question in here. So, I’ll let you quickly answer this before we wrap up. Uh, what are Michael’s fees to review a question, for example, like converting 401k to Roth and the pros and cons involved? Um, my fees are about $1,000 a question and then No, I’m just joking. Hey, so Aerys as a whole, we are cognizant of of costs, right? And we are that division of the credit union. We’re we’re the wealth management side. So there are as far as the conversions and things that’s that’s just something we do. There are a lot of different types of products that have no fees to it. Um, we do the traditional money management, right? Where there’s manage money or it’s a percentage of assets. We want to make sure that it is in your best interest. What I would say is always caution on the cheapest, right? I jokingly say this, but I very much mean this. If if if I had a major surgery, I wouldn’t go out and look for the cheapest doctor to perform that surgery. What I would tell you is our costs are often lower than most of the firms out there. We are certainly competitive. Um, but everything is very transparent in how we do things. Uh but you know at the end of the day if you’re saying hey look I want to lower cost and we can look at some things that just have some of the lower costs. I don’t know if they’re necessarily the best products but but you can compare that right um we’re pretty transparent on how we do things. Yes we are fiduciary. Great. We’re fiduciaries. I’m actually a CFP.
Thank you for addressing that. So it looks like that wraps up all the questions we have had asked today. So, this is going to conclude our Q&A session. If you do have any additional questions or would like to schedule some time with Mike, please reach out to him. We will include his contact information in the follow-up email. We hope everybody has a great day and thank you for participating today. Have a great one. Thank you so much. See you on future webinars. Take care. Bye now. Be safe.