[Chris Errgang]

Greetings!

My name is Chris Errgang. I'm an Employee Education Consultant with PNC, and today we're going to be talking about "Middle Career: Expanding Your Strategy". During the presentation, we will review five different sections, starting with prioritizing financial goals.

And we'll move on to Saving for College, Estate Planning for You and Your Household, Caring for Parents, and lastly Retirement Readiness. So, let's start our focus on Prioritizing Your Financial Goals.

So, as we move from our early careers to our mid careers, typically our financial goals will change as we are under this different period of our life. Listed here are some common financial goals that an individual in a mid-career may have.

First is paying off debt or paying down debt.

This can be from credit cards, student loans, and even a home mortgage. Next is increasing your retirement contributions and making sure you have an established emergency fund. And then last, maybe you're saving for a big-ticket item such as

investment properties, a larger home or renovations in additions to your current home or a new car. So, let's talk a little bit more in depth about each of these. Paying down, or paying off debt, is very common as

being the first item on many mid-career employees' to-do list. To do this, you want to compile all the debt related items on one document, whether it's a pen and paper or a computer spreadsheet, that will include the name of the creditor, the amount owed,

the interest rate you're paying, minimum monthly payment, and due date for each one of these. Once compiled, this will give you a kind of a big picture, high level, view of your current debts, so you can get started to deciding

which one to focus off paying first. The next step is to review your budget and start tracking your expenses. I know this sounds basic, but you may be surprised

where your money's going. You know, are you spending too much eating out? Do you spend too much on entertainment? What about those monthly subscriptions? The goal here is to find where you can reduce or even eliminate spending

and apply that freed up money to the existing debt that you have. A few popular strategies to help pay down or pay off debt. First, the Snowball Effect, which will focus on paying the smallest debt first and

applying that money to the next smallest debt. The Pro about the Snowball Effect, it can pay off debt pretty quickly, which can provide motivation onto the next debt. The Con to this is that you may not be tackling the debt with the highest interest rates, which could result

in paying more overall. Next is the Avalanche Method. This will focus on paying the highest interest rate first. You may pay less in debt overall, but it may take longer to pay off,

which can make it harder to stay motivated to continue on. And lastly, there is Debt Consolidation, which is finding a company to provide you a loan and combine all your debts to one longer debt and, ideally, at a lower interest rate.

Next, let's talk about increasing your retirement contributions for your future. So, I talk about this frequently. I'm a big fan of what we call the 1% method, and this is simply increasing your contribution to your retirement plan

1% every single year.

you're saving for retirement. The goal here is to try and get to 15% or even higher. But start with the 15% goal and be sure to include any company contributions as far as that 15%. So, perhaps, you're saving 10% and your company provides you through a match or a profit sharing of 5% contribution, you would be achieving that 15% goal. So, this is a method that I have used myself. I practice what I preach, and it really does work.

Okay, next on our list is talking about your Emergency Fund. Do you have one? And if you do, is it funded? Another best practice or a rule of thumb is to have three to six months of essential living expenses.

Those expenses including housing, food, phone, utility bills, transportation. If you need some help, finding how much that is PNC does have a calculator called the Safety Net

Calculator and that can help. Some tips to help when it comes to saving an Emergency Fund is open a separate account and have automatic deposits. The benefit of this is then you don't see the money in your account, and you don't have the urge to spend that money. Keeping it separated may make it a little bit harder to view but be sure you can still access the money quickly should you have an emergency that comes up. Stay positive about funding. It is important to have something to fall back on in case of an emergency. When should you use the emergency fund? What do you consider an emergency? You know, this is, this is a personal definition to it for everybody is going to be a little bit different. Some quick examples may be losing a job or needing to pay for an unexpected medical expense. So, some questions to ask yourself to help you decide if it's really an emergency. Is this a necessary expense? Will my life be significantly disrupted if I don't spend the money?

Does the expense need to be handled immediately? Was the expense unforeseen? You can define when the best time is to use your Emergency Fund. I will say that a vacation is probably not one of them. So, let's talk about saving for college now. Many mid-career individuals have children themselves or family members such as nieces and nephews that they are looking to the future. When it comes to saving for college, the cost of college has, well, it's grown faster than the pace of inflation. The chart allows you to see the total cost might be to send a child to college.

It does assume that college costs increase by 6% each year, which is in line with historical growth. The chart also breaks down the difference between private and public universities. The private university will be the lighter blue or the higher bar, and the dark blue will be public university or the lower bars. So, you can see, as you can see a newborn going to a private university could be as much as over $600,000 verse to a public university at $300,000, both being very expensive. So, add this to your budget, but don't forget about your other important items that we've already talked about.

Calculating how much you can afford to put away, just start at a small amount and let it build up over time. You can save for college, kind of use that 1% method for that, as well. Take advantage of online resources.

Some online tools that can help and calculate estimated costs. And another good idea is to encourage your child to be engaged during this process. Now, obviously, at an infant they're not going to be involved in the process, but one way as they get older, you can consider having them set aside some of their earned money. Whether that's birthday money from grandparents or if they maybe have a job to put a little bit about away to realize that they're saving for their future. Okay, so, when it comes to save money you have some options. So, 529 plans are going to be the most popular way to save. They're sponsored by a state agency or an institution of 529 plan allows you to save for your child.

College without paying tax on the earnings as long as the funds are withdrawn for paying for qualified, higher education expenses. Family and friends may also make contribution to your child's 529 account, as well.

Two types of 529 plans: education saving plans and prepared prepaid tuition plans. An education savings plan allows you to open an investment account to save for college tuition, mandatory fees, and room and board. The funds are generally to be used at a college or university in the United States, sometimes outside of the United States. Prepaid tuition plan allows you to purchase units or credits at participating colleges and universities for future tuition and mandatory fees at today's rate. Read the details of any 529 plans you're considering closely. Next is a Coverdell education savings account or an ESA is a trust account created in the United States government to assist families funding educational expenses for beneficiaries who must be under the age of 18 when the account is established. The age restriction maybe waived for any special needs beneficiaries. More than one ESA can be set up for a single beneficiary. The total maximum contribution per year for any single beneficiary is $2,000 and that is as of 2024.

One of the main differences between 529's and Coverdell, Coverdell can be educations starting at kindergarten, whereas 529's are for higher education. You also have Uniform Gifts to Minors Act or Uniform Transfers to Minors Acts, the acronyms that are UGMA and UTMA. These custodial accounts allow you to contribute money to a beneficiary under the age of 18.

The funds you contribute are transferred to that beneficiary when they reach the age of adulthood. Typically, anywhere between age 18 to 25, depending on your state, and the beneficiary can spend the money as they see fit.

These accounts allow you to contribute as much as you want annually, and the earnings are taxable.  Be aware that since there are no requirements that funds be spent on educational expenses, you cannot guarantee that your child will go to college.

And then Roth Individual Account, although Roth IRAs are typically more for retirement savings, they can also be used to save for college expenses. This chart here will show you a comparison between a $10,000 investment and a 529 plan with the same investment in a taxable account. It does assume an annual return of 6% and a 24% tax rate on the taxable account.

So, as you can see, overall, the 529 has a higher balance over the years. Some additional ways to save for college can include you know, U.S. savings bonds, mutual funds, whichever you determine are right for you. Remember, the most important thing is to start early so that the money has time to grow. Okay.

Estate planning. What is an estate plan and who should have one? An estate plan is a variety of documents that will provide details about your wishes due to permanent disability or death. And now who should have an estate plan? Everyone. It really doesn't matter what your situation is. A plan for your family and friends during unexpected event may help them navigate the situation and allow loved ones to alleviate any burden or confusion they may have on what to do. Many, many people assume a Will will cover

it all, but estate planning is more than just a Will. Keep in mind that a Will will serve their primary purpose in your estate plan after death. Some other legal documents to have in place that are effective while you are alive, and only while you are alive starting with Financial Power of Attorney,

Healthcare Power of Attorney, and a HIPAA waiver. Even if you have Health Care Power of Attorney, a HIPAA waiver will make sure your agent will have access to your medical records. When you have all your documents created and put together, you. have what's called an ICE (In Case of Emergency) Pack so that loved ones know where everything is. You've got the foundation of your estate plan built. Now, you'll just want to maintain it and keep updated. Most experts say, you know, review it every three to five years.

So, this list of events on this particular slide is just showing times to review, and they're basically life events.

All right. Section 4: Caring for Parents. So, when you think about it, sometimes the mid-career individual can find themselves like in a sandwich generation, taking care of their own young ones while also helping parents at the same time.

On average, the out-of-pocket cost for caregiving is a little over $7,200, and this is according to AARP. Here are some tips on how to manage when it becomes kind of a balancing act. Create your own financial plan first. Don't forget about saving for your own future.

What we talked about earlier. That includes everything we talked about, including saving for college and retirement and that emergency fund. Next, you want to decide on living arrangements in the future.

Now this may not be an easy conversation to have, but having a game plan may help make your future decisions much easier. Some things to consider would be, will your parents be staying in their current home?

And if so, will they need assistance as they get older? Maybe downsizing their homes or even moving in with family could be some other options to consider. Next, helping create an estate plan. If they do not already have one.

Be sure to know where those documents are located. Lastly, check in annually on these documents to see if the situation is the same or the situation has changed, and anything may need updated. Explore resources you have around you to help navigate caring for your parents. These are organizations and agencies that do that and I'm going to show them on the next slide too. Also, asking family members to help pitch in other family members to pitch in when needed. And lastly,some employers may offer pre-tax benefits for senior care and childcare. And again, here are some of these resources: acl.gov, Benefits.gov, for those who served our nation - Department of Veterans Affair (va.gov). You also have Medicare.gov and Medicaid.gov. And finally, our last section, which is Retirement Readiness.

Preparing for your future. So, your employer plan, allows pre-tax contributions with tax deferred earnings. Some plans may also allow Roth contributions with tax free earnings. The difference between pre-tax and Roth is pre-tax contributions defer the earnings. You get the tax benefit now as it reduces your taxable income, and the money that you save will become taxable upon retirement, whereas the Roth contributions, you're prepaying your taxes up front.

The money and interest in earnings it makes over the years when you go to withdraw that is going to be tax free, provided the account's been opened five years and you're over 59 and a 1/2.

Retirement plans also have a wide range of investment choices, which gives you the ability to make sure your account is fully diversified. Okay, so when preparing for retirement, calculate what your needs maybe during the retirement years.

Most professional investment advisors try to aim at replacing 70% to 85% of your annual income. The reason for the reduction is that you won't have work related expenses anymore and potentially pay less in taxes since you're no longer working. And you're going be no longer saving for retirement. Use a retirement calculator that will help determine how long your retirement savings and income can last in the future.

Now when you do that, make sure you consider all streams of your income. Your current plan, retirement plan, may be if you had any other retirement plans, perhaps your old pension, certainly your social security, and any other personal accounts or maybe even part time work. So, pictured here is an example of a calculator that PNC provides on our website.

It's called the Retirement Calculator. This offers you a sense of how much you will need to live in those retirement years and how your current assets stack up with what you'll need to start for retirement. There's many other calculators out there as well, but this is kind of a good baseline where to start.

Let's look at some key retirement planning milestones. So, the first few we refer to as kind of the last chance to accumulate your wealth. So, at age of 50, that's when a participant becomes eligible to make catch-up contributions. The IRS changes this amount every single year. So, in 2024, that allows people to save an additional $7,500

The next is age 55. So, if you're currently not working, you may be able to access your money from your retirement plan without penalty. This is called the rule of 55, I do want to stress though that not all retirement plans allow this type of distribution.

Now once you hit age 59 and a 1/2, that's the age that anybody can take distributions from a retirement plan without penalty tax. Next, let's talk about the transitioning period.

This begins with age 62, which is the earliest you can start to collect Social Security. Now, beware, if you do this, there's a reduction in your benefit, if you claim it early. As it stands today, benefits typically increase by 8% each year you wait. Next milestone is age 65, I like to call this "Happy Medicare Day". Now, to get Medicare, you must typically you want to sign up three months before age 65.

And lastly is age 66/67, depending on when you were born, you'll hit your full Social Security Retirement age. You can keep working, but you can also collect 100% of your benefit.

The last two ages we talk about basically is referring to distributions. So, at age 70, this is your last call if you haven't started to collect Social Security. To do so at age 70, you max out your benefit, and it's maxed out at 132%.

There is no longer a benefit to delay payments. And then lastly is age 73, and that's the time to take your Required Minimum Distributions. We call them RMDs. You have until April 1st of the following year to take the first distribution until December 31st the next year to take the second. Now, that we've been talking about saving for retirement, let's not forget about once you have money in the plan, where you should invest your money. So, two approaches retirement plans have is active (hands-on) investing and passive (hands-off) investing. Active investing typically will require a little more time.

This is where you're doing the research, understanding the different mutual fund options available to you in your plan, deciding on your risk level in creating a portfolio of multiple funds that to be fully diversified.

And then throughout the years you would have to manage the risk level. Typically speaking, when you age and get older, you don't possibly want to take as much risk. Now passive (hands-off) investing is using an age-based target date funds, and these are the mutual funds with numbers attached to them.

Okay.

Target date funds are a one mutual fund option. They're intended to put all of your money into them, whether it be the age date target 20, 30, 40 or even up to 70. Some retirement plans have odd number of plans. Ultimately, if you want to know what which target date fund you should be in, figure out the year that you turn 65.

In which, whatever that year is match it up to the nearest target date fund. And then what that target date fund will do is based on how old you are and funds with the higher the number are going to be the riskier of the target date funds because you're further away from retirement. The target date fund will automatically diversify you into a variety of underlying investments.

And then over time, that target date fund will change the risk level. As you age and get older, it becomes more conservative. Alright, Section 7: the last section, just Final Thoughts, kind of a review of things we talked about. Prioritize your goals for the future. As your career grows, your goals should too. Review them and be sure they are on track with what you want now, as well as in the future.

Saving for college, higher education, there are many options out there. Be sure to always understand the ins and outs before you start making contributions. Estate planning. Remember the main thing with the estate planning is everyone needs one.

And then caring for parents and preparing for their future may not have been on your radar but it is best if everyone knows what the plan is. And lastly, preparing for retirement.

It can sound like a daunting task at times throughout the years, but it's very important to make retirement readiness a priority. Thank you for joining me.