Preview. Retirement. Building a Comfortable Lifestyle for Tomorrow

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1 Mark Reynolds, CFP Mark Reynolds and Associates 123 Main Street, Suite 100 San Diego, CA Phone: Fax: Retirement Building a Comfortable Lifestyle for Tomorrow

2 Contents A Tale of Two Portfolios... 3 Determine Your Needs... 4 How Much Money Will You Need?....4 Retirement Age....4 Length of Retirement...4 Health-Care Needs....5 Inflation...5 Lifestyle...5 How Much Will You Need to Retire?....6 How Will You Get There?....8 Social Security...8 Continued Employment Earnings....8 Personal Savings and Investments...9 Invest Wisely Diversification...11 Asset Allocation Investment Objectives Time Frame...12 Risk Tolerance Sample Allocation for a Conservative Investor...14 Sample Allocation for an Aggressive Investor Dollar-Cost Averaging...14 Protect Your Nest Egg Start Saving Now...15 Rebalance Regularly Prepare for the Unexpected...16 Life Insurance How Whole Life Insurance Works Long-Term Care Strategy Figuring Out Your Net Cash Flow Figuring Out Your Net Worth What to Bring.... back cover This material was written and prepared by Broadridge Advisor Solutions. Copyright by Broadridge Investor Communication Solutions, Inc. All rights reserved. No part of this publication may be copied or distributed, transmitted, transcribed, stored in a retrieval system, transferred in any form or by any means electronic, mechanical, magnetic, manual, or otherwise or disclosed to third parties without the express written permission of Broadridge Advisor Solutions, Avenue of Science, Suite 200, San Diego, CA 92128, U.S.A. The information contained herein is not written or intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Broadridge assumes no responsibility for statements made in this publication including, but not limited to, typographical errors or omissions, or statements regarding legal, tax, securities, and financial matters. Qualified legal, tax, securities, and financial advisors should always be consulted before acting on any information concerning these fields. Retirement NGS

3 A Tale of Two Portfolios Two Different Scenarios Robert and Karen Both began saving for retirement in 1998 Each had a goal to retire in 2019 with $1 million Annual investments: $20,000 Robert and Karen took different approaches to investing for retirement. Robert thought the stock $400,000 market was for gamblers, so he decided to take a $200, % average annual return $0 safer approach and invested 60 percent of his portfolio in Treasury bonds, 30 percent in corporate bonds, and 10 percent in one-month CDs. Karen, on the other hand, was more comfortable with risk, Karen s Approach so she divided her portfolio into a mix of stocks (60%) and corporate bonds (40%). At the end of $20,000 annual investments: 60% stocks, 40% corporate bonds 2017, both were short of their goals, but Karen was $931,073 $1,000,000 Karen s balanced portfolio ahead of Robert by about $250,000. $800,000 grew to just over $930,000 by the end of She benefited Although some investors may try to avoid stocks, $600,000 like Robert, others may need to earn the higherpotential returns that are historically associated with growth investments to meet their goals. But as we ve seen, investing is unpredictable, and sometimes market events can deal investors a bad hand. Robert s Approach $20,000 annual investments: 60% Treasury bonds, 30% corporate bonds, 10% CDs $1,000,000 $800,000 $600,000 $400,000 Robert s portfolio grew slowly but steadily. On the verge of retirement, he was about $320,000 short of his $1 million goal. by having stock and bond investments. $200, % average annual return $ Source: Thomson Reuters, 2018, for the period 1/1/1998 to 12/31/2017. This hypothetical example is used for illustrative purposes only and does not reflect any specific investments. The example assumes that Robert s portfolio was invested 60% in Treasury bonds, 30% in corporate bonds, and 10% in one-month CDs. Treasury bonds are represented by the Citigroup Treasury 7 10 Year Index. The example also assumes that Karen s portfolio was invested 60% in stocks and 40% in corporate bonds. Stocks are represented by the Standard & Poor s 500 composite total return, which is generally considered representative of the U.S. stock market. Corporate bonds are represented by the Citigroup Corporate Bond Composite Index, which is generally considered representative of the U.S. corporate bond market. Treasury bonds are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. The FDIC currently insures CDs for up to $250,000 (per depositor, per federally insured institution). The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is no guarantee of future results. Actual results will vary. $682,683 Three Keys to Funding a Comfortable Retirement 1 Determine Your Needs 2 Invest Wisely 3 Protect Your Nest Egg Retirement V18N Broadridge Investor Communication Solutions, Inc. 3

4 Determine Your Needs How Much Money Will You Need? The amount of money you will need to live comfortably throughout your retirement depends on a number of factors specific to your personal situation. 1. Retirement age 2. Length of retirement 3. Health-care needs 4. Inflation 5. Lifestyle Retirement Age Keep in mind that you can t Planned and actual retirement age always control the age when you Expected (workers) will retire. As this chart shows, Actual (retirees) 52% workers generally expect to retire later than they actually do. In fact, 39% half of today s retirees said they left 37% the workforce earlier than they had 23% Retired for Life Jeanne-Louise Calment, the oldest woman to have lived, died in 1997 in France at the age of 122! If Jeanne had retired at age 65, she would have spent nearly 60 years in retirement. How long will your retirement be? Source: Guinness World Records, 2018 planned. Consider the possibility that you might be unable to continue working because of poor health or changes at your company. Source: Employee Benefit Research Institute, 2017 (numbers don t add up to 100 due to rounding) Length of Retirement Before or older With recent advances in technology and medicine, life expectancies are stretching considerably. Chances are good that you ll be spending a large portion of your life in retirement. In fact, a healthy 65-year-old is likely to live another 20 to 30 years. Are you financially prepared to live to age 85 or 90 or longer? 9% 17% 9% 14% Chance of living to... Age 85 Age 90 Man 54% 35% Chance of living to... Age 85 Age 90 Woman 65% 46% Source: Society of Actuaries, Broadridge Investor Communication Solutions, Inc.

5 USA FIRST- CLASS Determine Your Needs Health-Care Needs In three out of the last four years, health-care costs have increased faster than the rate of general inflation. And fewer employers are offering health-care benefits to their retired workers. Premiums for employer-sponsored insurance family coverage have increased 19 percent since 2012 and 0.8% 0.7% 55 percent since Source: The Kaiser Family Foundation and Health Research and Educational Trust, 2017 Source: U.S. Bureau of Labor Statistics, 2018 Inflation Inflation is the rise in consumer prices over time. It is critical for your savings to Inflation Danger keep pace with or exceed inflation in order to avoid losing purchasing power as the Three decades from years go by. Consider how inflation could affect costs over the next decade. now, it could cost Basic cable TV Postage stamp 2.4% 2.9% $79 4.8% $126 monthly monthly % % Current Historical Potential Cost Cost Annual Inflation in 10 Years Health-care costs General inflation 2.1% 2.1% 1.6% much more to buy the items you need. For example, a $50 bag of groceries could cost $121 in 30 years, assuming a 3% average annual inflation rate. Automobile $35, % $57,895 Sources: Federal Communications Commission, 2016 (inflation rate from 2005 to 2015); U.S. Postal Service, 2017 (inflation rate from 1971 to 2018); Kelley Blue Book, 2017 (inflation rate from 1970 to 2017). Future costs are estimates and assume that historical inflation rates remain constant. Actual results will vary. Lifestyle The kind of retirement lifestyle you envision will have an impact on your savings needs. For example, you may plan to travel extensively, be involved in philanthropic endeavors, or maintain a membership at a local country club. Experts suggest that you will need at least 70 to 80 percent of your pre-retirement income to live comfortably in retirement Broadridge Investor Communication Solutions, Inc. 5

6 Determine Your Needs How Much Will You Need to Retire? Use the following worksheet to determine how much money you will need in order to fund the retirement lifestyle you have envisioned. Use the factors on the facing page to complete the calculations. Example You 1. Expected retirement age Estimated length of retirement 25 Ahead of 3. Current annual income $ 75,000 $ the Game 4. Percentage of income desired in retirement 80 % % Only 41% of U.S. workers have tried to 5. Annual income desired in current dollars calculate how much (line 3 times line 4) $ 60,000 $ money they will need to retire comfortably. 6. Expected annual Social Security income in current dollars $ 16,000 $ Those who have 7. Expected annual pension plan income in current dollars $ 10,000 $ performed a retirementneeds calculation were twice as likely to be very confident about being able to live comfortably in retirement compared with those who haven t calculated how much they will need. Source: Employee Benefit Research Institute, Income needed from savings and investments in current dollars (line 5 minus lines 6 and 7) 9. Income needed from savings and investments in future dollars (line 8 times Factor A) 10. Amount you must save by retirement, in future dollars (line 9 times Factor B) 11. Amount you have saved already 12. What your savings might grow to by the time you retire (line 11 times Factor C) $ 34,000 $ 90,212 $ 1,570,874 $ 200,000 $ 932,200 $ $ $ $ $ 13. Amount you still need to save by the time you retire (line 10 minus line 12) $ 638,674 $ 14. Amount you need to save each year (line 13 times Factor D) $ 13,987 $ Broadridge Investor Communication Solutions, Inc. The hypothetical example shown assumes a 47-year-old who plans to retire at 67 and spend 25 years in retirement. It is used for illustrative purposes only and does not represent any specific investment. Even though this example uses a hypothetical 8% rate of return, remember that rates of return will vary over time, particularly for long-term investments. Actual results will vary. You should bear in mind that roughly calculating the cost of retirement is only a beginning. We recommend a more thorough cash-flow analysis considering all sources of income and expenses. 90

7 Determine Your Needs Expected Life Span Years Until Factor Factor Factor After Factor Retirement A C D Retirement B Assumptions: Factor A 5% inflation rate Factor B 3% real rate of return Factor C 8% return on investment Factor D 8% discount factor 2018 Broadridge Investor Communication Solutions, Inc. 7

8 How Will You Get There? Social Security won t provide enough income to live on, but it may help pay for some essentials. Of course, potential future changes to Social Security may reduce benefits. Sources of Retirement Income Social Security Continued employment earnings Personal savings and investments Social Security The Social Security benefit you receive is Year of birth Full retirement age % reduction at age 62 based on your highest % years of career earnings and 2 months 25.83% (the years in which you and 4 months 26.67% paid Social Security payroll taxes), as well and 6 months 27.50% as on the age when you and 8 months 28.33% claim benefits and 10 months 29.17% If you claim Social 1960 & later % To create your own personal account and view your Social Security Statement online, visit ssa.gov. Source: Social Security Administration, 2018 Deemed Filing Generally, if you re eligible for a spousal benefit and a worker benefit when you claim Social Security, you will be deemed to be filing for both and will receive the highest benefit for which you are eligible. You cannot change from a spousal benefit to a higher worker benefit later, unless you were born on or before January 1, 1954, and file a restricted application for the spousal benefit upon reaching full retirement age. No spousal or dependent benefits will be paid when the primary beneficiary suspends his or her benefit. Security at age 62, your benefit will be 25 to 30 percent lower than it would be if you waited until full retirement age (see table). For each year you delay benefits from full retirement age to age 70, you earn delayed retirement credits, which increases your benefit by about 8 percent each year. Married couples generally have additional claiming options, including spousal and survivor benefits. In 2018, the average monthly Social Security benefit for all retired workers is estimated to be $1,404. Continued Employment Earnings Although 79 percent of today s workers expect to work for pay in retirement, the reality is that only 29 percent of today s retirees have actually worked for pay at some time during their retirement years. If you base your retirement 79% income on working in retirement, keep in mind that about one-third of retirees had to stop working earlier in their careers than they had planned. Consider the possibility that you might have to stop working at an earlier age than expected as a result of health issues or loss of employment. Source: Employee Benefit Research Institute, Broadridge Investor Communication Solutions, Inc.

9 How Will You Get There? Personal Savings and Investments The bulk of retirement income for many of today s workers will probably come from their personal savings and investments. People often save for retirement using tax-deferred vehicles such as employer-sponsored retirement plans and IRAs. Many individuals also invest in taxable financial vehicles such as stocks, bonds, cash alternatives, and mutual funds. Stock and mutual fund shares fluctuate with changes in market conditions. When redeemed, shares may be worth more or less than their original cost. Bond funds are subject to the interest-rate, inflation, and credit risks associated with the underlying bonds in the fund. As interest rates rise, bond prices typically fall, which can adversely affect a bond fund s performance. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest. Tax Deferral Can Help You Save Money $100,000 invested at 6% for 20 years would yield... When you contribute to a tax-deferred account, you might be able to contribute more without reducing your cash flow because of the current-year tax savings. And your savings may be able to accumulate faster over time because you have your full contribution working for you. You pay no current taxes until you withdraw the money (generally in retirement), and at that time you may be in a lower income tax bracket. This hypothetical example is used for comparison purposes only and does not represent any specific investments. Rates of return will vary over time, particularly for long-term investments. Actual results will vary. Lower maximum tax rates for capital gains and dividends, as well as the tax treatment of investment losses, could make the taxable investment return more favorable, reducing the difference in performance between the accounts shown. Investors should consider their investment time horizon, both current and anticipated, when making investment decisions. Employer-Sponsored Retirement Plans $243,956 Taxable (24% rate) Retirement plans sponsored by employers such as 401(k) and 403(b) plans offer a number of benefits. You can generally contribute a percentage of your salary using pre-tax funds, which reduces your current income tax liability and may enable you to contribute more each month. It s a good idea to contribute as much to your plan as you can afford, and especially enough to take advantage of a company match, if one is offered. Defined contribution plans are subject to federal contribution limits. In 2018, workers may contribute up to $18,500, and those who are 50 and older may save an additional $6,000 thanks to a catch-up provision. $267,742 Tax deferred (after taxes, 24%) 2018 Broadridge Investor Communication Solutions, Inc. 9

10 How Will You Get There? Stretch IRA If you transfer retirement plan assets to an IRA, it s possible to pass the IRA on to your heirs and significantly increase the long-term value of your legacy Broadridge Investor Communication Solutions, Inc. Individual Retirement Accounts IRAs may offer a broader range of investment options than employer-sponsored plans. Anyone under the age of 70½ who has earned income can contribute to a traditional IRA. Contributions are generally tax deductible, unless you participate in an employer-sponsored retirement plan and your income exceeds certain limits. Here s what you could save in taxes by making tax-deductible contributions. Contribution Current-year tax savings by tax bracket 12% 22% 24% 32% 35% 37% $5,500 $660 $1,210 $1,320 $1,760 $1,925 $2,035 $6,500 $780 $1,430 $1,560 $2,080 $2,275 $2,405 This hypothetical example is used for illustrative purposes only. The actual net savings in federal income taxes owed will vary. Note: Distributions from traditional IRAs are taxed as ordinary income. You must You are limited begin taking required minimum distributions (RMDs) from traditional IRAs each to one tax-free year once you reach age 70½. IRA-to-IRA rollover in a 12-month period, regardless of how many IRAs you have. The annual contribution limit to all IRAs combined traditional and Roth is $5,500 in 2018 ($6,500 for those 50 and older). Your contributions and any earnings accumulate tax deferred, although early withdrawals prior to age 59½ may be subject to a 10 percent federal income tax penalty. Roth IRAs differ from traditional IRAs in several ways: Funded with after-tax contributions (or assets converted from tax-deferred plans); qualified distributions are tax-free No age limit, but you must have earned income to contribute Eligibility to contribute phases out at higher income levels: $120,000 for single filers and $189,000 for married couples filing jointly in 2018 Contributions (not earnings or converted assets) can be withdrawn tax-free and penalty-free at any time, for any reason No required minimum distributions (if you re the original owner) Qualified Roth IRA distributions are not included in your taxable income and thus don t affect taxability of your Social Security benefits. Having an income source that is not taxable could be important if you re in a high income tax bracket in retirement or if tax rates increase in the future. To qualify for a tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet the five-year holding requirement and take place after age 59½, or result from the original owner s death, disability, or a qualifying first-time home purchase ($10,000 maximum).

11 Invest Wisely Three Fundamental Strategies Diversification Asset allocation Dollar-cost averaging Diversification Diversification involves investing in different asset classes and investment vehicles in an attempt to limit exposure to losses in any one sector of the market. Single investment Diversified Lessons from Enron Nearly 60% of Enron employees 401(k) plan assets were invested in Enron company stock when it lost 98.8% of its $40,000 value in $200,000 $40,000 $40,000 $40,000 $40,000 Diversification does not guarantee a profit or protect against investment loss. It is a method used to help manage investment risk. Source: Employee Benefit Research Institute, 2002 Asset Allocation Asset allocation is a systematic approach to diversification that determines an efficient mix of assets for a given investor, based on his or her individual needs. It involves strategically dividing a portfolio into different asset classes typically, stocks, bonds, and cash alternatives to seek the highest potential return for the investor s risk profile. Asset allocation does not guarantee a profit or protect against investment loss in declining markets; it is a method used to help manage investment risk. There are three main considerations to bear in mind when developing your own asset allocation model: 1. Investment objectives 2. Time frame 3. Risk tolerance 2018 Broadridge Investor Communication Solutions, Inc. 11

12 Invest Wisely Investment Objectives What are you trying to achieve by investing? Protect what you have? Grow your assets? Generate income? Once you establish your investment objectives, you can determine the appropriate mix of assets for your investment portfolio. Time Frame The amount of time you have before you retire can have a tremendous impact on the investment categories you choose. That s because fluctuations in the financial markets can affect the value of your portfolio from one year to the next. The graph below shows the volatility and historical performance of various types of investments over the 25-year period from 1993 through Notice how the investment classes that have performed the best have also fluctuated the Stocks Can Also Have Negative Returns Investing in stocks over shorter periods could result in a loss and even a negative cumulative return. This occurred during the five-year period from 2000 through 2004, when the cumulative return of the S&P 500 was 10.98%. Source: Thomson Reuters, 2018, for the period 1/1/2000 to 12/31/2004 most widely from year to year. It s a powerful reminder of why it is important to keep your time frame in mind when developing your asset allocation model. Historical investment performance: % 30% 20% 10% 0% 10% 20% 30% 40% Stocks 9.69% average annual return Corporate bonds 6.45% average annual return T-bills 2.51% average annual return Source: Thomson Reuters, 2018, for the period 1/1/1993 to 12/31/2017. Stocks are represented by the S&P 500 composite total return. The S&P 500 is an unmanaged index that is generally considered representative of the U.S. stock market. Corporate bonds are represented by the Citigroup Corporate Bond Composite Index, which is generally considered representative of the U.S. corporate bond market. Treasury bills are represented by the Citigroup Three-Month Treasury Bill Index. T-bills are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. The returns shown do not reflect taxes, fees, brokerage commissions, or other expenses typically associated with investing. The performance of an unmanaged index is not indicative of the performance of any particular investment. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary Broadridge Investor Communication Solutions, Inc.

13 Invest Wisely Risk Tolerance How much risk are you willing to take? Generally, the more potential for growth offered by an investment, the more risk it carries. This quiz will help you assess your own ability to withstand risk. Risk Tolerance Quiz Which of the following investments do you feel most comfortable with? a. Certificate of deposit b. High-grade corporate bond c. Growth stock Of the following stocks, which do you feel would most suit your needs? a. A conservative utility stock that pays high dividends but offers little chance On the Road to for long-term growth Retirement b. A blue chip stock that offers the potential for modest dividends and growth c. An aggressive small-company stock that pays no dividends but offers Because the markets great potential for long-term growth are unpredictable, it may be a good idea What have you traditionally considered most important from your investments? to invest more a. Safety aggressively b. c. Conservative growth Maximum growth during the early accumulation years when your You just made a $100,000 investment. The following amounts represent the portfolio would estimated best-case and worst-case scenarios after one year. Which range of possible outcomes would you prefer? have plenty of time to recover from best case worst case possible gain/loss market fluctuations a. $104,000 $96,000 $ 4,000 b. $108,000 $92,000 $ 8,000 and shift to a c. $112,000 $88,000 $12,000 more conservative strategy as retirement Which statement most closely resembles your feelings about risk? approaches and your time frame shrinks. a. I am not willing to take risks with my investments. b. I am willing to take limited risks with my investments. c. I am willing to take substantial risks with my investments. Scoring Give yourself: 10 points for every a answer 20 points for every b answer 30 points for every c answer You are a relatively low-risk investor. You are mostly concerned with the preservation of your capital and the potential for current income. You are not willing to risk your capital for greater potential returns You are generally conservative, but you recognize the need to consider growth-oriented alternatives. You may be willing to take modest risk to earn above-average, long-term returns You may be a relatively high-risk investor. You are mostly concerned with long-term appreciation, and you may be willing to take on more risk to earn greater long-term potential returns Broadridge Investor Communication Solutions, Inc. 13

14 Invest Wisely Keep Expectations in Check Nine years into a bull market following the Great Recession, investors were expecting stock returns of about 8% in Sample Allocation for a Conservative Investor Time frame: 20 years Primary goal: minimize volatility Sample Allocation for an Aggressive Investor Time frame: Bonds 20 years 15% Stocks Primary goal: 80% Cash pursue growth alternatives 5% Source: Kiplinger s Personal Finance, January 2018 Bonds 50% Cash alternatives 20% Stocks 30% Overestimating your portfolio s returns could cause you to save too little and not reach your goals. The difference between a 9% expected annual return on a $100,000 portfolio and a 6% actual average annual return would be $239,728 over 20 years. These hypothetical portfolios are shown for illustrative purposes only. They are examples, not recommendations. Investments offering the potential for higher rates of return also involve a higher degree of risk of principal. Dollar-Cost Averaging This strategy involves investing a set amount of money on an ongoing basis to accumulate funds over time. For example, an individual invests a specific dollar amount in the stock market at regular intervals say $100 each month. That $100 automatically buys more shares when prices are low and fewer shares when prices rise, resulting in an overall lower cost per share over time. Regular Market Shares Investment Price/Share Acquired Month 1 $100 $ Month 2 $ Month 3 $ Month 4 $ Month 5 $ Total $500 $ Average price per share: $5.20 ($26 5) Average cost per share: $4.65 ($ ) This hypothetical example is used for illustrative purposes only. Actual results will vary. Dollar-cost averaging involves continuous investing, regardless of fluctuating price levels. As a result, investors should consider their financial ability to continue investing during periods of low and high price levels. Dollar-cost averaging does not guarantee a profit or protect against a loss in declining markets Broadridge Investor Communication Solutions, Inc.

15 Protect Your Nest Egg Start Saving Now Starting to save now can pay off later. Here s an example comparing two investors: Jim, who started saving early, and Susan, who procrastinated. In years 1 through 5, Jim invested $5,000 annually in an account earning a 6 percent average annual return. After contributing $25,000 over five years, he stopped investing more but left his funds to continue accumulating. Susan waited five years, then began investing $5,000 annually in years 6 through 10; her account also earned a 6 percent average annual return. After 10 years, Jim and Susan each had invested a total of $25,000. But Contributions: $25,000 Contributions: $25,000 Earnings: $14,982 Earnings: $4,877 Total value: $39,982 Total value: $29,877 Assumes a 6% average annual return in both accounts. This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investments. Rates of return will vary over time, particularly for long-term invest ments. Investments offering the potential for higher rates of return also involve a higher degree of investment risk. Actual results will vary. the total value of their savings contributions plus earnings was significantly different. Jim accumulated about 30 percent more because he started investing early. Rebalance Regularly Jim Year Investment Value Rebalancing your portfolio can help ensure that your asset allocation stays true to your objectives, your time frame, and your risk tolerance. Typically, you want to examine your investment mix and performance at least once a year. You should also review your portfolio any time you have a major lifestyle change that might affect your objectives, such as when children are born or graduate from college, when your marital status changes, or when you change jobs. Changes in your investing outlook may also affect your investing strategy. By monitoring your portfolio to see how it performs during and after significant changes in the economy, you may want to consider adding, selling, or shifting assets to potentially enhance performance. Rebalancing the assets in your portfolio on a regular basis may help keep your assets in line with your investment strategy and risk tolerance. Note: Rebalancing may result in a taxable event. Susan Investment Value 1 $5,000 $ 5, ,000 10, ,000 16, ,000 23, ,000 29, ,669 $ 5,000 $ 5, ,569 5,000 10, ,583 5,000 16, ,719 5,000 23, ,982 5,000 29,877 Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. Ayn Rand, author 2018 Broadridge Investor Communication Solutions, Inc. 15

16 Protect Your Nest Egg Prepare for the Unexpected You ve worked hard to build your retirement savings. Don t let an unexpected tragedy rob you and your family of what you have rightfully earned. Life Insurance Life insurance can be used to help protect your retirement assets in a number of ways that are not always considered. It can help: Provide for loved ones in the event of an untimely death Fund unexpected expenses during the policy owner s lifetime Protect a business if an owner dies Preserve your estate for your heirs As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, Higher Chance of Widowhood About one-third of men who live to age 85 are widowers, and 71% of women who live to age 85 are widows. Source: U.S. Census Bureau, 2016 there may be surrender charges and income tax implications. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable. How Whole Life Insurance Works Whole life insurance provides financial protection for your family in the event of your death. When you purchase a whole life policy, you traditionally pay a fixed premium for as long as you live or for as long as you keep the policy in force. Part of your premium goes to the insurance company for the protection element of your policy; the other part builds cash value. You can access the cash value during your lifetime through withdrawals or loans. But remember, policy loans will reduce the cash value by the amount of any outstanding loan balance plus interest, and will reduce the policy s death benefit. Fixed premiums Death benefit You Insurance company Beneficiaries Broadridge Investor Communication Solutions, Inc. Cash value

17 Protect Your Nest Egg Long-Term Care Strategy Developing a long-term care strategy is another important part of protecting your retirement assets. Research indicates that 70 percent of 65-year-olds will need long-term care services and support at some point in their lives. Unfortunately, Medicare and most health insurance policies offer little relief for those who need this type of custodial care. The cost of long-term care can be daunting. Today, the national average cost for one year in a nursing home is $97,455 that s about $8,100 a month or Lack of $267 a day! Few retirees can afford to pay these costs out of pocket. Receiving Preparation care at home or in an assisted-living facility is also very expensive, and many About 27% of Americans surveyed people may not want to burden their families with the task of caregiving. said their households Sources: 2018 Field Guide, National Underwriter Company; 2017 Cost of Care Survey, were not saving any Genworth Financial, Inc. of their income for retirement, and 50% National average nursing home cost: $97,455 said they were not confident that they were saving enough. $140,416 New York $116,435 California $106,580 Florida $91,250 Ohio $72,635 Texas Source: 2017 Consumer Financial Literacy Survey, National Foundation for Credit Counseling Source: 2017 Cost of Care Survey, Genworth Financial, Inc. (national average costs for a private room in a nursing home) Three Keys to Funding a Comfortable Retirement 1 Determine Your Needs 2 Invest Wisely 3 Protect Your Nest Egg 2018 Broadridge Investor Communication Solutions, Inc. 17

18 Figuring Out Your Net Cash Flow How much discretionary income do you have available after your monthly obligations are met? Can you account for where the money goes? Some people are surprised at the amount they should be able to save and invest each month but don t. Analyze your cash flow for the current month. Because income and expenses can vary from month to month, you may wish to estimate your cash flow through all 12 months or take a 12-month average. Monthly Income Wages, salary, tips $ Alimony, child support $ Dividends from stocks, mutual funds, etc. $ Interest on savings accounts, bonds, CDs, etc. $ Social Security benefits $ Pensions $ Other income $ TOTAL MONTHLY INCOME $ Monthly Expenses Mortgage payment or rent $ Other transportation $ Vacation home mortgage $ Life insurance $ Automobile loan(s) $ Homeowners insurance $ Personal loans $ Automobile insurance $ Charge accounts $ Medical, dental, disability Federal income taxes $ insurance $ State income taxes $ Unreimbursed medical, FICA (Social Security) $ dental expenses $ Real estate taxes $ Entertainment/dining $ Other taxes $ Recreation/travel $ Utilities (electricity, heat, water, Club dues $ telephone, etc.) $ Hobbies $ Household repairs and Gifts $ maintenance $ Major home improvements Food $ and furnishings $ Clothing/laundry $ Professional services $ Education expenses $ Charitable contributions $ Child care $ Other expenses $ Automobile expenses (gas, repairs, etc.) $ TOTAL MONTHLY EXPENSES $ NET CASH FLOW Total monthly income $ Total monthly expenses $ Discretionary monthly income $ (Subtract your expenses from your income) How much of your discretionary monthly income are you investing or saving each month? $ Broadridge Investor Communication Solutions, Inc.

19 Figuring Out Your Net Worth How much are you worth? Just as corporations prepare a balance sheet to deter mine their current net worth, you may want to complete a personal balance sheet. Tangible Assets Residence $ U.S. government bonds Vacation home $ and agency securities $ Furnishings $ Municipal bonds $ Automobiles $ Corporate bonds $ Rental real estate $ Face amount certificates $ Art, jewelry, or Debt mutual funds $ other valuables $ Cash and Cash Alternatives Checking accounts $ Savings accounts $ Equity Assets Money market funds $ Qualified retirement funds $ Certificates of deposit $ Stocks $ Other cash reserve accounts $ Equity mutual funds $ TOTAL ASSETS $ Variable life insurance (Add tangible, equity, fixed (cash value) $ principal, debt assets, and cash) Variable annuities $ Limited partnerships $ Business interests $ Fixed-Principal Assets Fixed-interest annuities $ Life insurance (cash value) $ Other assets $ Debt Assets Liabilities Home mortgage $ Other mortgage $ Automobile loans $ Bank loans $ Personal loans $ Charge-account debt $ Other debts $ TOTAL LIABILITIES $ NET WORTH Total assets $ Total liabilities $ NET WORTH $ (Subtract your liabilities from your assets) Set a goal for yourself. What would you like your net worth to be in 5 years? What would you like it to be in 10 years? $ $ Broadridge Investor Communication Solutions, Inc. 19

20 What to Bring Please bring the following documents to your consultation: Your consultation is scheduled for: Date Time broker-dealer disclosure NGS