Lake St. Louis Stake - PowerPoint Presentation

Lake St. Louis Stake Retirement Planning: Thoughts, Framework, Principles, Steps, Amounts, Vehicles, and VisionJune 22, 2018Bryan Sudweeks, Ph.D., CFA.From the Marriott School of Management’s“Personal Finance: Another Perspective” web site athttp://personalfinance.byu.edu 1

Abstract A prophet has counseled: “Plan your financial future early; then follow the plan.” Our goal is to help with that counsel (and perhaps scare you a bit into action). We start first with key thoughts on personal finance, then our learning framework. We then discuss the principles of a successful retirement, retirement planning steps and stages, determining how much you will need in retirement, selecting investment vehicles for saving and retirement and then creating your retirement vision, goals and plans and strategies. The key is to learn the lessons from our challenges that the Lord wants us to learn, and then to take the steps necessary to get going. I have added hyperlinks in this document to other tools and PowerPoints that may be helpful. 2

Objectives A. Understand some key thoughts on financeB. Understand a different learning frameworkC. Understand the principles for a successful retirementD. Understand retirement planning steps and stagesE. Determine how much you will needF. Understand how to select investment vehicles for retirementG. Share an examples of retirement vision, goals, plans and strategies, constraints and accountabilityH. Understand how to motivate yourself 3

Key Terminology Key terminology for this session:Asset classes: types of securities (baskets of similar assets)Examples: stocks, bonds, cash, international, T bills, gov’t bondsAsset allocation: how you invest in different asset classes (or how you invest in the different baskets) Examples: 50% stocks (40% large, 10% small), 50% bonds/cashInvestment vehicles: tax framework with tax advantages (shopping carts where you put your assets/groceries)Examples: Roth IRA, 401k, Roth 401k, Simple IRA, SEP IRAFinancial assets: publically traded assets (groceries) Examples: stocks, bonds, mutual funds, index funds, ETFsRetirement Planning Stages: Time periods in planningExamples: Accumulation (before), retirement, distribution (after) 4

5 steps to retirement planning, 1. Listen to a prophet who said: Plan for your financial future. As you move through life toward retirement and the decades which follow, we invite all . . . to plan frugally for the years following full-time employment. Be even more cautious . . .about “get-rich” schemes, mortgaging homes, or investing in uncertain ventures. Proceed cautiously so that the planning of a lifetime is not disrupted by one or a series of poor financial decisions. Plan your financial future early; then follow the plan. (italics added, Ezra Taft Benson, “To the Elderly in the Church,” Ensign, Nov. 1989, 4). A. Key Thoughts on Personal Finance

2. Personal finance is not separate from the gospel of Jesus Christ--it is part of the gospel of Jesus Christ It encompasses each of the four-fold missions of the church:To perfect the saints To preach the gospelTo redeem the dead (through service)To take care of the poor and needyThe gospel teaches us to plan for the future. “Let the solemnities of eternity rest on your minds” (D&C 43:34) Thoughts (continued) 6

Thoughts (continued) 3. If we feast upon the words of Christ they will tell us and show us all things we should do, including our finances Be humble. “Let him that is ignorant learn wisdom by humbling himself and calling upon the Lord” (D&C 136:32).Do your homework. “Study and learn, and become acquainted with all good books, and with languages, tongues, and people” (D&C 90:15).Listen to the Spirit. “Feast upon the words of Christ, for behold, the words of Christ will tell you all things that you should do” (2 Nephi 32:3). 7

Thoughts (continued) 4. Remember that “Life is Good”L1 Love the Lord and always put and pay Him firstI 5 Invest your money wisely, consistent with your riskF 8 Find happiness in your spouse, family and serviceE9 Enjoy the journey and give backI 7 Invest in yourself and family for Educ. & Miss.S 6 Save 20% of everything, with 15% for retirementG4 Get and stay out of debtO2 Organize yourself, know vision, goals & plans O 3 Operate on a budget and get very good at it D 10 Do good, be good, and get better 8

Thoughts (continued) 5. Avoid these investments:Precious metals – Historically poor returns - avoidMarket Timing - Essentially impossibleDerivatives – Very tough to make money – avoidHedge funds – Very expensive and volatileUnaudited/unregistered investments – License to take your moneyBorrow against home for investments – NEVER“Guaranteed” variable annuities and life insurance products – Huge fees and give up all the upside10% per month investments – No such thing9

Thoughts (continued) Avoid digging your own investment pit:Auto and consumer debt – Avoid as it stops growthFree meal seminars – There is no free lunch Email/hot stock tips – If it’s that good, why share?Real estate flipping – High risk in tough asset classNothing down real estate – Extremely high riskReal estate telephone consultants – Why share?Timeshare real estate – Avoid at all costs!Internet solicitation – If that good why share?High trust relationships – Keep church separateAsset Repositioning – Never sell out of retirement (401k) assets to buy cash value life insurance 10

Thoughts (continued) 6. Sign up for, attend, and follow through on the Personal Finances for Self Reliance Course taught in your ward and stakeIt is, in my opinion, the best course and most likely course to change attitudes and behavior of any personal finance course availableIf you humbly take this course and do what they ask, it will make a significant differenceThis should be the first part of any retirement plan 11

Thoughts (continued) 7. Realize that wise retirement planning requires not a single decision, but multiple decisions (see 30 Key Decisions You Must Make for Retirement) that can be learned and answeredThese include questions regarding your overall vision, goals, and plans; your current budget and savings goals; investment planning, risk, asset allocation, and portfolio construction; as well as your vision, goals and plans for retirement, use of retirement vehicles, amounts needed to retire, etc.It requires a significant amount of work, but it is work that can be done and does not require a high level of education to accomplish12

B. A Different Learning Framework Our perspective is simple. It is:Personal, family, and individual financial management (or personal finance) is simply part of the gospel of Jesus ChristThis takes personal finance from being a question of money, to be a question of faith13

Our learning framework is unique We use the framework for learning used by David A. Bednar in his book “Increase in Learning” It is based on doctrines (why we do things), principles (what we should do), and application (how we do things). He calls it, “A flexible tool that can be used to enhance our . . . learning and can be a useful aid as we apply the principles of . . . inquiry and the pattern of asking, seeking, and knocking” (Increase in Learning, p. 157).Learning Framework(continued)14

Learning Framework (continued) His concern is how we act. He writes, Somehow we seem to be drawn to application as the primary way to ‘fix” things, to make life better. . . And far too often we emphasize application with the necessary understanding and divorced from the doctrinal content. . . Whatever the reasons, emphasizing the application to the exclusion of fundamental doctrines and principles does not produce spiritual power, protection, and direction. . . Appropriate applications are necessary but can never stand alone. What is needed is a balance among doctrines, principles and application. . . The answers always are in the doctrines and principles. And the doctrines and principles need to be in us (ibid. italics added, p. 170).15

Learning Framework (continued) It is a learning framework to find answersIt asks three critical questions that can lead us to better learning and life. For retirement, they are:1. Why should we learn and become better at personal finance (or retirement)? (this is a “why” or doctrine question)2. What are the principles on which how we learn and become better at personal finance (in retirement) are based? (this is a “what” or principles question)3. How do we learn about and become better at personal finance (for retirement)? (this is a “how” or application question) 16

Doctrines are the “why” questions—why are we doing this? 4 key “why’s” are: Spiritual: To bring us to ChristGod’s work and glory is to bring to pass the “immortality and eternal life of man” (Moses 1:39)If the only way we can have eternal life is through Jesus Christ (John 14:6), then the purpose of all mortal experience is to bring us to Christ Learning Framework (continued)17

Temporal: To become wiser stewards Joe J. Christensen said, “Our resources are a stewardship, not our possessions. I am confident that we will literally be called upon to make an accounting before God concerning how we have used them to bless lives “ (“Greed, Selfishness, and Overindulgence,” Ensign, May 1999).Learning Framework (continued)18

Family: To return with our families back to Heavenly Father’s presence“No other success can compensate for failure in the home” (David O. McKay, FHE Manual, 1968, p. iii). Concern for our spouse and family should be our greatest concern. We keep our priorities and time where they should be so we do not gain the riches of the world and lose our families in the process (Matt. 16:26)Learning Framework (continued)19

Individual: To prepare for and accomplish our divine missions We all have sacred missions to perform here on earth as part of our “divine nature and destiny” (Proclamation on the Family) Accomplishing our divine missions will take a significant amount of time, effort and material resourcesLearning Framework (continued)20

Learning Framework ( continued)Principles are the “what’s” on which your doctrines are based? There are specific principles for each of your “how’s” or things you need to do (i.e., principles of budgeting, principles of saving, etc.) However, there are overriding principles or “what’s” for all of what we do These “what’s” should be based on four key principles learned from the scriptures21

Learning Framework ( continued)Ownership: Everything we have is the Lord’sThe Psalmist wrote,The earth is the Lord’s, and the fullness thereof; the world, and they that dwell therein (Psalms 24:1).The Lord is the creator of the earth (Mosiah 2:21), the creator of men and all things (D&C 93:10), and the giver all we have and are (Mosiah 2:21) 22

Learning Framework ( continued)Stewardship: We are stewards over all that the Lord has, is, or will share with usThe Lord said,Thou shalt be diligent in preserving what thou hast, that thou mayest be a wise steward; for it is the free gift of the Lord thy God, and thou art his steward (D&C 136:27).23

Learning Framework ( continued)Agency: The gift of “choice” is man’s most precious inheritancePresident David O. McKay wrote,Next to the bestowal of life itself, the right to direct that life is God’s greatest gift to man.… Freedom of choice is more to be treasured than any possession earth can give (italics added, Conference Report, Apr. 1950, p. 32).24

Learning Framework ( continued)Accountability: We are accountable for every choice we makeThe Lord stated,For it is required of the Lord, at the hand of every steward, to render an account of his stewardship, both in time and in eternity (D&C 72:3). 25

Learning Framework (continued)Elder Neal A. Maxwell put “things” into a correct perspective when he taught,The submission of one’s will is really the only uniquely personal thing we have to place on God’s altar. The many other things we “give,” brothers and sisters, are actually the things He has already given or loaned to us. However, when you and I finally submit ourselves, by letting our individual wills be swallowed up in God’s will, then we are really giving something to Him! It is the only possession which is truly ours to give! (italics added, “Swallowed Up in the Will of the Father,” Ensign, Nov. 1995, 22). 26

Learning Framework (continued) How do we apply these things (the “how’s”)?We must know application (the “how’s”) which is the way we create and accomplish what we needThere are two parts to applicationThere are the things we will do, or how we will accomplish what we need, i.e., live on a budget, stay out of debt, save for goals, etc.There is also the process by which we accomplish those “how’s” which we call the “creative process” We will discuss the process27

Learning Framework (continued) What is the creative process?The creative process is how to create it spirituallyVision. What is your vision for what you are trying to accomplish?Goals. What are your goals, which are tools to help keep focused on our vision? Tactical Plans. What are your tactical plans or strategies that will take you to your goals?Constraints. What behaviors or actions will keep you from achieving your vision and goals and how will you overcome them?Accountability. Who will you share those vision, goals, plans and constraints with? 28

Learning Framework (continued) Why is this framework important?1. This framework helps us ask the important questions about our finances, such as“What doctrines and principles (why am I doing this and what really should I be doing), if understood, would help me:“Change my behaviors toward retirement so I can save more?” “Learn the place of money in our lives?” “Better improve my financial management to live on a budget, spend less than I earn, and get and stay out of debt?”29

Learning Framework (continued) 2. This framework reminds us where the answers really areBednar reminds us, “What is needed is a balance among doctrines, principles and application. . . The answers always are in the doctrines and principles. (Italics added, Bednar, p. 170.)3. This framework allows us to lift our perspective which can help us gain greater motivationBy finding our higher purpose, we gain greater motivation to do the things that we need to do. “With increased vision comes increased motivation” (Ted R. Callister, Ensign, May 2013).30

Learning Framework (continued) 4. This framework encourages us to take the long-term perspective rather than a checklist approach Putting things in a proper perspective allows us to see that the purpose of personal finance is to help us become better people, parents, and citizens5. This framework changes our thinkingWhile principles and application keep us on the right track, understanding the doctrines and principles allows us to transform those hourly and daily mundane acts of obedience we must do in our finances into the majestic purposes that our Heavenly Father has planned for us31

C. Understand the Principlesfor a Successful Retirement There are six key principles for a successful retirement1. Know yourself, your vision, goals, plans budget and risk tolerance2. Understand the retirement vehicles available to you and choose and use them wisely3. Choose wisely the financial assets for those investment vehicles and invest wisely4. Know the retirement planning steps5. Develop a good retirement plan, write it carefully, and follow it closely 6. Start today 32

Principles of Retirement (continued)1. Know yourself, your vision, goals, budget and risk toleranceUnderstand your personal/family vision and goalsUnderstand your budget and save moreUnderstand your ability to tolerate riskUnderstand what kind of retirement you want33

Principles of Retirement (continued) 2. Understand the retirement vehicles available to you and use them wiselyUse tax-advantaged retirement vehicles to your advantage including:Government: Social Security retirement benefitsEmployer Qualified Plans: 401(k), Roth 401(k), 403(b), Roth 403(b), or 457 retirement plans for the employeeIndividual and Small Business Retirement Accounts: IRA’s (Roth/traditional), Keoghs, SEP’s and SIMPLE’s for the self-employed34

Principles of Retirement (continued) 3. Choose wisely the financial assets for those investment vehicles and invest wiselyChoose the financial assets which will earn the highest after-tax returns to reach your goalsFollow the principles of successful investingFollow the Priority of MoneyI recommend to invest low cost, tax efficiently and passively in good mutual/index funds/ETFs for your asset classes35

Principles of Retirement (continued) 4. Know the Retirement Planning Steps1. Catch your vision and set goals and plans for what you want at retirement2. Estimate your current annual income needed3. Estimate your total retirement needs after inflation (i.e., the inflation-adjusted shortfall)4. Determine how much you have so far5. Determine the contribution or reduction to your retirement plans from your home6. Determine how much more you will need to save and start saving and investing todayRetirement Needs Worksheet (LT6) may be helpful 36

Principles of Retirement (continued) 5. Develop a good retirement plan, write it carefully, and follow it closelyCheck yourself regularly to make sure you are on trackMonitor performance, rebalance, and re-evaluate as needed6. Start today!The longer you wait to start, the more money you will needHave your money earning money to help you reach your retirement goals37

Principles of Retirement (continued)Principles Doctrines1. Know yourself, your goals and vision Identity2. Understand retirement vehicles Stewardship3. Choose assets wisely Stewardship4. Know the steps for retirement AgencyDevelop and follow your plan AgencyStart today Stewardship38

Principles of Retirement (continued)Changing mundane acts of obedience to holy acts of ConsecrationI am a child of God (identity) learning about key areas, steps and strategies of retirement (stewardship) so I can make wise decisions about my future (agency) which will allow me to save and invest appropriately (accountability) to accomplish my personal and family vision and goals39

D. Understand the Steps and Stages of Successful Retirement Planning Step 1. Know yourself and your goalsUnderstand your personal and family goalsKnow what you want out of lifeWrite down your personal and family goalsUnderstand what kind of retirement you wantDetermine the things you want to do in retirementDetermine the type of retirement you wantBe willing to work toward those goalsDetermine how much money you will need each year in retirement 40 40 Principles of Retirement (continued) Principles of Retirement (continued) Principles of Retirement (continued)

Steps and Stages (continued) Step 2. Understand the retirement investment vehicles available and how use them wiselyUnderstand and use tax-advantaged retirement vehicles to your advantage:Employer Qualified Plans: 401(k), Roth 401(k), 403(b), Roth 403(b), or 457 retirement plans for the employeeIndividual and Small Business Plans: IRA’s (Roth and traditional), Keoghs, SEP’s and SIMPLE’s for the self-employedGovernment Plans: Social Security 41

Steps and Stages (continued) Step 3. Choose wisely the financial assets for those vehicles and invest at a risk level you are comfortable withDetermine a risk level you are comfortable with and invest accordinglyChoose the financial assets which will earn the highest after-tax returns to reach your goals consistent with your tolerance for riskFollow the principles of successful investing Do not invest beyond your tolerance for risk (see the Risk Tolerance test from Monday’s class on Beginning Investing: 10 Steps to a Better Portfolio 42

Steps and Stages (continued) Step 4. Determine how much you will need at retirement 1. Estimate how much you need at retirement before-tax2. Estimate your income at retirement from Social Security and defined benefit plans3. Determine how much you have accumulated 4. Estimate total retirement needs after inflation5. Determine the contribution or reduction to your retirement plans from your home6. Determine how much you will need to save each month and start saving today (see LT 06 ) 43

Steps and Stages (continued) Step 5. Develop a good retirement plan, write it carefully, and follow it closelyLive on a budget and save a percentage of your income for retirement (Dave says 15%, I say 20%)Set goals as to the percent of your income you will save each month for retirement (and increase it!)Check yourself regularly to make sure you are on track with your savings goalsMonitor performance, rebalance, and re-evaluate your retirement portfolio as needed consistent with your level of risk 44

Steps and Stages (continued) Step 6. Start today!Be diligent in following your budget and setting aside money for retirementThe longer you wait to start saving for retirement each month, the more money you will need each month for the same amountInvest wisely and in the most advantageous retirement investment vehiclesHave your money earning money to help you reach your retirement goals 45

Steps and Stages (continued) There are three stages to retirement planning:Stage 1: AccumulationThis stage begins when you start work and is the time where you accumulate assets which you will later use for retirementYou need to develop a plan for this stage on how you will save money for retirement in the years before you retireYou should get on a budget and save a percent of your income each month (10% minimum and 20% recommended)But you must start now (or sooner) 46

Steps and Stages (continued) Accumulation strategies could include:Develop and live on a budget and save 15% for retirement, always getting the company match firstSave 20% of every dollar you earn, with 15% into the company 401k (or Roth 401k) before the match, 3% into the taxable account for retirement, and 2% into children’s mission and education fundsSave 15% of every dollar, with 10% into the Roth IRA for both you and your spouse (before the match), 3% into education IRAs for the children, and 2% into mission accounts for the childrenInvest in Roth accounts while you are young and when your tax rates are low 47

Steps and Stages (continued) Stage 2: Retirement or AnnuitizationThis stage begins when you retireIt is your plan on how your assets will be distributed at retirementYour goal is to have sufficient assets for your lifetime to enable you and your spouse to live like you planned 48

Steps and Stages (continued) Retirement strategies might include:Calculate a minimum acceptable level of retirement income, and annuitize that amount (if you have sufficient assets). The process is to: a. Calculate your amounts from Social Security and any defined benefit plan(s)b. Determine your minimum amount needed to live comfortably, and c. Take a percentage of your assets at retirement (if sufficient) to purchase an immediate annuity to give you the minimum amount needed (b-a) to receive your minimum acceptable level of income 49

Steps and Stages (continued) Stage 3: Distribution/disposition/decumulationThis stage begins after you have retiredThis is your plan as to how best take distributions from your remaining retirement and taxable accounts to minimize taxes and maximize the availability of your assets 50

Steps and Stages (continued) Distribution strategies might include:Set up a framework where you will not outlive your assets. Recommendations include:Take out maximum distribution of 3.6% of total assets each year, or only take out maximum earnings from investments of previous yearDuring your later years which your income is less, i.e., during missions, transfer money from your tax-deferred to tax-eliminated accountsUse this time to move assets into Roth accounts with as little tax consequences as possible 51

E. Determine How Much Will You Need? Question 1: How much do you need annually?This will differ, depending on:How do you want to retire?Where will you be living?What is the standard of living there?How much debt do you owe?Is your house paid for? What are heating, cooling, taxes, repair and maintenance each year on your house?How many miles do you drive each year? How old is your car? How long will you keep it?How much do you expect for medical expenses?52

How Much Will You Need (continued) Once you determine your income needs, you can calculate how much you need. You need 9 estimates to determine how much you need: a. Before-tax desired retirement income and current debtb. Other sources of retirement income (Social Security, investment accounts, real estate, home)c. & f. Years till and in retirementd. & g. Expected return on your investments (both before and after retirement)e. & h. Estimated inflation rates (before & after) i . Tax rate in retirement 53

How Much Will You Need (continued) Retirement Planning Needs Spreadsheet (LT06)54

How Much Will You Need (continued) Bob is married and is 47. He expects to retire at age 67. He estimates he and his wife can live on $50,000 per year, and will have $24,000 per year from Social Security. His house is paid for, but he has not saved much for retirement. He expects to be in retirement for 25 years. He expects to earn 6% on his investments before retirement, and 5% after, with inflation staying at 2%. How much must they save each month to reach their goal?55

How Much Will You Need (continued) Retirement Planning Needs Spreadsheet (LT06)56

F . How Do You Select Investment Vehicles?What is the process of selecting investment vehicles?It is the process of understanding which types of investment vehicles will help you achieve your goals the fastestWhy should we learn it?Investment vehicles have different benefits, i.e., due to matching (free money), tax avoidance, tax deferral, or tax-efficient and wise investingThe wise use of correct investment vehicles will help you save more money to help you reach your financial goals faster 57

Selecting Investment Vehicles (continued) What is the difference between investment vehicles and financial or investment assets?The investment vehicle is the tax-law defined framework that has specific tax advantages, i.e., 401k, 403b, Individual Retirement Account (IRA), SEP IRA, Roth IRA, Roth 401k, etc.It is like the shopping cart in the grocery storeThe financial assets are the securities that are invested in by the vehicles, i.e., stocks, bonds, mutual funds, REITs, MMMFs, CDs, etc.It is like the groceries you put in your shopping cart 58

Selecting Investment Vehicles (continued) Select Investment Vehicles for 2018 (before catch-up) Tax- Tax- MaximumPlan deferred eliminated Amount For Employees of:401-k Y $18,500 Businesses w/plansRoth 401-k Y 18,500 Businesses w/plans403-b Y 18,500 Non-profit, tax-exemptRoth 403-b Y 18,500 Non-profit, tax-exempt 457 Y 18,500 State/municipalities SEP IRA Y 55,000 Small businesses SIMPLE IRA Y 12,500 Small businesses IRA Y 5,500 Individuals Roth IRA Y 5,500 Individuals Education IRA Y 2,000 Individual Education 529 Plans Y > 446,000 p.c. Individual Education 59

Selecting Investment Vehicles (continued) What is the priority of money?1. Free moneyMatching money that is made available by your company to encourage participation in company retirement plans, i.e., 401k, Roth 403b, Keogh, etc.Money made available through tax benefits, i.e. 529 plan contributionsWhat are the risks?You must stay at the company a certain number of years to become fully vested, i.e., to be able to take full ownership of these funds, or use the funds for education expenses for 529 plans 60

Selecting Investment Vehicles (continued) 2. Tax-advantaged moneya. Elimination of all future taxesThis money can be used at retirement (or for education) without penalty and without taxes, i.e., a Roth IRA/410k/403b for retirement, and 529 Funds and Education IRA for educationIn addition, with the Roth, you can take the principle out without penalty at any timeWhat are the risks?You must be 59½ to receive earnings529 Funds, Education IRA, and EE/I bonds must be for qualified expenses to be tax-free 61

Selecting Investment Vehicles (continued) b. Tax-deferred moneyThis money has the ability to be invested before-tax, with principle and earnings taxed only at retirement (IRA, SEP IRA, etc.)What are the risks?You must be 59½ to take distributions. If you take the funds out before retirement, there is a 10% penalty and funds are taxed at your ordinary income tax rate for both federal and stateThis money converts long-term capital gains into short-term income for tax purposes 62

Selecting Investment Vehicles (continued) 3. Tax-efficient and wise investmentsThis is money that is invested tax-efficiently and wisely, consistent with the investment principles discussed earlierWhat are the risks?Earnings are taxed consistent with the assets invested inYou need to take into account the tax and transaction cost implications of whatever you invest in 63

Selecting Investment Vehicles (continued) How do you invest tax efficiently?1. Know the impact of taxes2. Look to Capital Gains—defer earnings and taxes to the future3. Minimize Turnover and Taxable Distributions4. Replace interest income with stock dividends5. Invest tax-free 64

Selecting Investment Vehicles (continued) How do you prioritize investment vehicle choice?Some investment vehicles are higher on the priority list than others, but they also have lower contribution amounts (i.e., $5,500 for the Roth in 2018 versus $18,500 for the 401k). What should you do?Use the highest priority money first, and then next highest, etc. until you have utilized all your available investment funds 65

Selecting Investment Vehicles (continued) Where should you put different types of financial assets?Retirement Accounts: 401k, IRA’s, 529 Funds, etc.Financial assets in which you trade activelyTaxable bonds, and high turnover fundsYou do not pay taxes until you take out fundsTaxable Accounts: investment portfoliosStocks and mutual funds with a buy and hold strategyTax-free bonds and tax-efficient index fundsYou pay taxes on fund distributions yearly 66

Final Cautions Final cautions on retirement planning:Do not go into debt to investThis includes taking equity out of your homeBeware of self-serving financial advisorsDon’t shift from a 401k and pay penalties to buy another asset (which is usually IUL insurance)Your retirement comes firstDon’t put your retirement at risk to help with your children’s educationListen to the SpiritIf it seems too good to be true, it probably is 67

G. Give an Example of a Retirement Vision and StrategiesIs it easy to come up with a retirement vision?No. It is difficult because we all have different visions, goals, and plansWhile it may be difficult to develop, it is something that we should think about to give us motivation to prepare more for retirement. It does not require a high degree of education; rather, it does require learning and thoughtFollowing are a few ideas from a hypothetical couple who have been through my classes and have thought through retirement and have planned accordingly

Vision and Strategies (continued) Vision ideas:We will serve 5 missions, the first at age 65. We will visit the grandkids every year and will serve where needed. We will likely stay where we are, and eventually downsizing our home (no new debt). With our goal to save, we will have a sufficient retirement portfolio to meet our needs for the rest of our lives and will not be a burden on our children.Our income will include Social Security, a defined benefit plan, and additional investment vehicles including traditional, Roth, and taxable accounts.

Vision and Strategies (continued) Goals ideas:Take a portion of our taxable assets and purchase an immediate annuity, which with Social Security and our defined benefit plan will be sufficient to give us a minimum level of income each year. Take social Security at 3 years beyond full retirement age (FRA), and my spouse at FRA. Defined benefit payments will be for joint and survivor 75%, so my spouse will have sufficient. Our home is paid for and we will have no debt. Our retirement portfolios will be 40% tax-deferred, 30% Roth, and 30% in taxable accounts to target taxes.

Vision and Strategies (continued) Plans and Strategies ideas:Accumulation Stage: Age 33-65 We will continue to save and invest 20% of all earnings, with 15% going into retirement consistent with our risk tolerance and according to our Investment Plan. 2% will go into our children’s education and mission accounts consistent with our Mission and Education Plans. The final 3% we will use to pay down the mortgage on our home with a goal is to have it paid off by 45. We will pay all tithes and offerings and rebalance our investment portfolio to asset allocation targets with appreciated securities.

Vision and Strategies (continued) Plans and Strategies ideas: (continued)Retirement Stage Age 65 – 70. Upon retirement, we will take a portion of assets and purchase an immediate annuity, which with Social Security and defined benefit payments, will give a minimum level of retirement income each year. We will strive to save 5% during this period, although overall resources will be diminished due to helping to pay for our children’s education and missions. We will go on our first mission at age 65, and will use this as a time to convert traditional retirement accounts into Roth accounts.

Vision and Strategies (continued) Plans and Strategies ideas: (continued)Distribution Stage: Age 70 - 87Take social Security at 3 years beyond full retirement age, and my wife at full retirement age. Our work defined benefit payments will start at age 70, and will be for joint and survivor 75%. Our home is paid for and we will have no debt as we will pay cash for all vehicles and keep them a minimum of 10 years. We will continue to pay tithes and offerings with appreciated securities and will enjoy life to the fullest.

Vision and Strategies (continued) Constraints ideas:The following are the key risks to our retirement plans:Budget. We will continue to live on a budget and save for our individual and family vision and goalsSaving. We will continue to save 20% of gross income per year, with 15% going into retirement vehiclesLaziness. We will be exact in our budget and records.Health. We will always have sufficient health coverage, through both government and private coverageSin. We will guard against loss of the Spirit. We will continue serving, reading scriptures, attending the temple each week, spending time with our extended family and friends, and doing our home and visiting teaching, all to help us become more like the Savior

Vision and Strategies (continued) Accountability ideas::We will share our vision with these partners:Heavenly Father. We will share with Heavenly Father our plans daily and weekly in our weekly companionship stewardship prayerSpouse. We have worked together to put our vision, goals, and plans together and have completed our spiritual creation. Our goal is now the physical creations, to see this retirement plan come to passChildren. We will let our children know our retirement plans. We will help them with missions and education as planned. They know we will not sacrifice our retirement to help our children financially. They will know that our first priority is to my spouse and then children

H. Understand How to Motivate Yourself It is easier to understand what we should do to prepare for retirement—it is much harder to do it. Following are few ideas to help live the gospel and save for your children’s education and missions76

Live It (continued) 1. Understand doctrines and principlesElder Packer said: True doctrine, understood, changes attitudes and behavior. The study of the doctrines of the gospel will improve behavior quicker than a study of behavior will improve behavior (Boyd K. Packer, “Little Children,” Ensign, Nov. 1986, 16). 77

Live It (continued) The doctrine is that we have been commanded to live on a budget, save for a time of need, and take care of ourselves and our familiesLiving wisely and preparing are simply part of the gospel of Jesus ChristObeying is no longer a question of money, but a question of faith and dutyThese are not temporal commandments (D&C 29:35)78

Live it (continued) 2. Catch the visionA. Of who you areYou are a child of God with great potential (Gal. 3:26). As such, you can do what is necessary“No doctrine is more basic, no doctrine embraces a greater incentive to personal righteousness . . . as does the wondrous concept that man can be as his Maker” (Bruce R. McConkie, The Promised Messiah: The First Coming of Christ (Salt Lake City: Deseret Book, 1978), 133).79

Live it (continued) B. Of what you wantDo you know what you want?Have you written down your personal and family goals?How much do you want to save before you retire?Will you contribute to your children’s missions and education? If so, how much?How much will you need to save each month to do these things?80

Live it (continued)C . Of what you can do“With increased vision comes increased motivation” (Ted R. Callister, “The Power in the Priesthood in the Boy,” Ensign, May 2013).“Once a person is determined to help themselves, there is nothing that can stop them “ (Nelson Mandela).Whatever the mind of man can conceive, and believe, it can achieve (anonymous).81

Live it (continued) 3. Decide to decideMake the decisions now and commit to them!Decide now what you will and will not do to prepare for retirement, and then do it and be done with decision once and for allFollow a prophet who said to “decide to decide”Seek the Lord’s help in making these decisionsThere is no one who loves you moreCommit and follow through“Commit thy way unto the Lord; trust also in him; and he shall bring it to pass” (Psalms 37:5)82

Live it (continued) President Spencer W. Kimball said:We hope we can help our young men and young women to realize, even sooner than they do now, that they need to make certain decisions only once. . . . We can push some things away from us once and have done with them! We can make a single decision about certain things that we will incorporate in our lives and then make them ours—without having to brood and re-decide a hundred times what it is we will do and what we will not do. . . . My young brothers [and sisters], if you have not done so yet, decide to decide! (Spencer W. Kimball, “Boys Need Heroes Close By,” Ensign, May 1976, 45).83

Live it (continued) 4. Do it willingly (because we have to)The prophet Joseph Smith, on his way to Carthage, knew that he would not return.  ”I am going like a lamb to the slaughter, but I am calm as a summer’s morning; I have a conscience void of offense towards God, and towards all men. . . . And it shall yet be said of me—he was murdered in cold blood (D&C 135:4).He brought his will in subjection to the will of Heavenly Father84

Live It (continued) Isn’t that a purpose of life, to bring our wills in line with the will of the Father?We will either “bend the knee” willingly of our own free will and choice, or we will be compelled to do it when He comes again (Mosiah 27:31)Either way, we will come to recognize ChristHow much better it is to do these things willingly because we have faith in Christ and are seeking to obey His commandments85

Live it (continued)5 . Share your goals with your children (and others)Let others know what you are doingEmbarrassment sometimes is more powerful than guilt in motivating us to accomplish moreShare your retirement and savings goals with family and friendsLet them know of your successes and failuresAs we let others know what we desire to accomplish, they can help us to accomplish our goals86

Live it (continued) 6. Remember the promised blessings:The Lord will stand by you (D&C 68:6)None shall stay you (D&C 1:5)The Savior will go with you and be in your midst (D&C 49:27)Nothing shall prevail against you (D&C 32:3)Power shall rest upon you (D&C 39:21)He will uphold you (D&C 93:51)You shall have greater treasures than the treasures of the earth (D&C 19:37-38)He will take care of your flocks (D&C 88:72)87

Summary A. Understand key thoughts:Listen to a prophet, “plan your financial future”Personal finance is part of the gospelWe must feast on the words of Christ and live worthy of the SpiritRemember that “Life is Good”Avoid these investmentsAttend the Personal Finances for Self-reliance class7. Wise retirement planning requires not a single decision, but multiple decisions that can be learned and answered 88

Summary (continued) B. Understand a different learning frameworkIt includes doctrines, principles and applicationDoctrines: Why are we doing these things?Principles: What should we be doing?Application: How should we be doing these thingsThe answers are always in the doctrines and princples 89

Summary (continued) C. Know the principles of retirement planning1. Know yourself, your goals and vision Identity2. Understand retirement vehicles Stewardship3. Choose assets wisely Stewardship4. Know the steps for retirement AgencyDevelop and follow your plan AgencyStart today StewardshipI am a child of God (identity) learning about key areas, steps and strategies of retirement (stewardship) so I can make wise decisions about my future (agency) which will allow me to save and invest appropriately (accountability) to accomplish my personal and family vision and goals 90

Summary (continued) D. Know the steps and stages of successful retirement planning1. Know yourself (your budget, goals)2. Understand the retirement vehicles available3. Choose wisely the assets for those vehicles4. Know the retirement planning steps5. Develop a good retirement plan and follow it6. Start todayStages of retirementAccumulation stage, retirement stage, and accumulation state 91

Summary (continued) E. Understand how much you will need to save for retirementIt is a function of how you plan to live at retirement and answers to 9 specific questions 92

Summary (continued) F. Understand how to select investment vehicles for saving and retirement1. Free moneyMatching money from your employer or from tax benefits2. Tax advantaged moneyA. Tax eliminated money (i.e., Roth vehicles)B. Tax deferred money (traditional IRA/401k)3. Tax efficient and wise investing 93

Summary (continued) G. Understand examples of retirement vision, goals, plans and strategies, constraints, and accountabilityThese take thought and learning, but they do not require an advanced degreeVisionGoalsPlans and StrategiesConstraintsAccountability 94

Summary (continued) H. Understand how to motivate yourself1. Learn doctrine2. Catch the visiona. Of who you areb. Of what you wantc. Of what you can do3. Decide to decide4. Do it willingly, because you want to5. Share your savings goals with your children6. Remember the promised blessings 95

Summary (continued) Elder M. Russell Ballard said: There are no shortcuts to financial security. There are no get-rich-quick schemes that work. Do not trust your money to others without a thorough evaluation of any proposed investment. Our people have lost far too much money by trusting their assets to others. In my judgment, we never will have balance in our lives unless our finances are securely under control (“Keeping Life’s Demands in Balance,” Ensign, May 1987, 13.)96

Appendix A. Key thoughts on financeB. A Different learning frameworkC. Principles of successful retirementD. Retirement planning steps and stagesE. How much you will needF. How do you select investment vehiclesG. Examples of retirement vision, goals, plans and strategies, constraints and accountability H . How do you motivate yourself 97