Allen and Betty Abbett

Transcription

1 Personal Retirement Analysis for Allen and Betty Abbett Real Financial Planning, LLC A Registered Investment Advisor 303 Church Street Guilford, CT IMPORTANT: The illustrations or other information generated by this report regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.

2 Cash Flow Planning This financial analysis has been prepared with the objective of illustrating your present and future cash flows, integrated with your assets and income taxes. Cash Flow Planning Cash flow planning is designed to account for all sources of income and expense, and to illustrate the impact that any surpluses or shortages might have on the ability of your assets to last through your life expectancy. This method of planning is sometimes referred to as an "optimized" approach. What do we mean by "Optimized" planning? Cash Flow Each year your income sources are compared to your annual expenses. Any surplus of spendable income is automatically added to your savings and investments starting in the first year. If there is a shortage of spendable income, the amount needed to make up the shortage is withdrawn from your asset accounts. This approach is intended to reflect what would happen if you are managing your funds in an optimal manner. Assets Every year your savings and investment accounts will have potential interest, dividends, capital gains or appreciation. The cash flow analysis makes the assumption that, unless otherwise indicated, the entire rate of return is reinvested into the account. This approach optimizes the potential growth of each asset account. Taxes are not charged to the earnings on the account, but instead are added to your personal expenses. Taxes Since income and FICA (Social Security) taxes can represent a substantial part of your annual expenses, the "optimized" planning approach carefully computes your tax burden every year. The analysis uses the actual IRS tax rate tables including annual adjustments for "indexing" the rate breakpoints and standard deductions. For high income taxpayers, itemized deductions and exemptions are phased out. Separate tax treatment is provided for dividends, capital gains, alternate minimum tax, the taxable portion of social security income and other areas where special treatment is required. The result is that, instead of showing a "guesstimate" of your annual taxes, the analysis provides a more accurate yearly indication of future potential taxes.

3 Net Worth Statement ASSETS Ordinary Interest Accounts: Allen Betty Joint / CP Trust/Oth. Total Checking accounts, cash $2,200 $2,200 Savings accounts 3,500 3,500 Money Market accounts 300, ,228 Certificate of Deposit 20,000 20,000 Gov't bonds, T Bills, Funds 12,250 12,250 Bonds, Corp bond funds 10,000 10,000 Muni bonds, funds 25,000 25,000 Annuities (fixed, variable) 30,000 30,000 Insurance Cash Value, Dividends 15,300 15,300 Mortgages, notes 93,000 93,000 Total $55,300 $15,750 $440,428 $0 $511,478 Equity (Investment) Accounts: Stocks 23,500 45,429 68,929 Mutual Funds 33,610 2,745 29,063 65,418 Limited partnerships 1,053 1,053 Other ventures, businesses 19,500 19,500 Collectables 5,000 5,000 Total $57,110 $2,745 $100,045 $0 $159,900 Retirement Accounts: 401(k) accounts 27,300 27,300 Profit Share, Keogh, 457, other 32,000 32,000 Roth accounts 2,000 2,000 4,000 Total $34,000 $29,300 $0 $0 $63,300 Personal Use Assets: Personal property 15,000 15,000 Jewelry, furs 2,500 2,500 Autos 12,000 9,600 21,600 Total $27,000 $2,500 $9,600 $0 $39,100 Real Estate Assets: Residence 307, ,000 Real Estate, REIT 5,750 5,750 Total $312,750 $0 $0 $0 $312,750 Total Assets $486,160 $50,295 $550,073 $1,086,528 LIABILITIES Allen Betty Joint / CP Trust/Other Total Residence mortgage ($72,000) ($72,000) Auto loans (4,300) (4,300) Credit Cards (1,640) (2,250) (3,890) Life insurance loans (2,500) (2,500) Total Liabilities ($4,140) ($2,250) ($76,300) ($82,690) NET WORTH $482,020 $48,045 $473,773 $1,003,838 Note: Assets held in a Revocable Trust are included in the grantors assets.

4 Cash Flow The bars in the above graph represent the amounts available from... Earned income (wages & self employment) Pension plans and Social Security Misc - (inheritances, sale of residence, investment account systematic withdrawal plans or interest/dividends taken in cash, scheduled retirement account distributions or required minimum distribution amounts.) The line illustrates the annual expenses including... Personal living expenses Life insurance and other premiums Mortgage and debt repayment Planned deposits to investments and retirement accounts Miscellaneous expense items Taxes If income from various sources exceeds expenses, the excess is reinvested in savings and investment accounts. If expenses are greater than income, it is assumed that funds required to meet such excess expenses will be drawn from savings and investment accounts to make up the shortage.

5 Cash Flow Illustration Ages Scheduled Cash flow sources and Required Minimum Distributions Earned Income Retire/Roth Accounts * Investment Accounts * Pension/ SocSec Other Income Total Sources Less Living Expense & Taxes Surplus (Shortage) $101,000 $1,500 $102,500 ($127,245) ($24,745) ,250 1, ,750 (131,767) (17,017) ,568 1, ,068 (132,869) (15,801) ,955 18, ,355 (142,618) (6,263) ,000 30,320 66,320 (122,968) (56,648) ,000 20,180 56,180 (128,698) (72,518) , ,041 (158,872) (32,831) , ,543 (163,351) (32,808) ,270 57, ,275 (194,473) (2,198) ,233 68, ,680 (179,006) 29, ,445 57, ,075 (190,616) 12, , ,917 (163,322) (12,405) ,000 34, , ,324 (140,783) 298, ,000 34,909 5,000 74,909 (129,775) (54,865) ,712 5,200 65,912 (122,506) (56,594) ,986 14,408 76,394 (125,768) (49,374) ,287 14,894 78,181 (116,743) (38,562) ,616 15,397 80,013 (159,871) (79,858) ,076 65,975 15,918 86,969 (123,089) (36,120) ,340 67,362 16,457 89,159 (127,056) (37,897) ,349 68,778 6,580 90,707 (134,468) (43,761) ,245 70,226 6,843 93,314 (138,729) (45,415) ,192 71,704 7,117 96,013 (143,154) (47,141) ,193 73,214 91,407 (145,609) (54,202) ,217 74,756 93,973 (153,294) (59,322) ,332 76,332 96,664 (159,600) (62,936) ,404 77,943 99,347 (166,162) (66,815) ,598 79, ,185 (163,840) (61,656) ,773 81, ,039 (148,146) (43,107) ,001 82, ,984 (152,396) (44,412) ,280 84, ,015 (156,788) (45,773) ,613 86, ,140 (161,327) (47,188) ,934 88, ,290 (166,074) (48,784) ,299 90, ,524 (171,169) (50,645) ,563 92, ,698 (176,604) (52,906) ,849 94, ,936 (182,420) (55,484) ,150 96, ,230 (188,429) (58,198) ,361 98, ,478 (194,611) (61,133) , , , ,264 (192,904) 101, ,526 65, ,874 (170,774) (67,899) * Scheduled distributions, interest or dividends taken in cash or amounts taken to meet the IRS minimum distribution requirements.

6 Asset Accounts Your assets are illustrated in this plan based on two major groups, Personal Accounts and Tax Deductible Retirement accounts. Within these groups, the assets are further divided as described below. Personal Accounts: Fully Taxable: These are savings and investments that earn interest or dividends which are fully taxable at ordinary income rates. Included in this category are savings accounts, certificates of deposit, money market funds and accounts, bonds, notes and mortgages, etc. Tax-Deferred: Some assets allow you to accumulate money without current taxation on interest or other returns. The most common are fixed or variable annuities issued by insurance companies. Any illustration of an annuity account is hypothetical, and does not represent any specific product or underlying investment accounts and is not intended to project or predict investment results. The variable nature of a variable annuity will affect not only the investment returns, but will also affect the cash value and death benefits of the annuity. The annuity could result in zero or negative return, depending on the performance of the underlying investments and the terms of the annuity contract. Tax-Free: Interest earned on certain bonds issued by federal, state or local municipalities are exempt from federal and in some cases state income tax. These are referred to as "tax exempt" securities and may be purchased individually or as muni bond investment trusts or mutual funds. Equity and Other: Assets which receive part or all of their return in the form of appreciation and qualify for special capital gains treatment on the profits would be included in this category. Such assets include: stocks, equity mutual funds, real estate, business interest, etc. Tax Deductible Retirement Accounts: This includes any account that is treated by the IRS as qualified for special tax-deferral or deduction. IRA 401(k) Keogh or SEP TSA SIMPLE 401(k) and SIMPLE IRA Profit Sharing Roth IRA accounts Roth 401(k) Individual Retirement Accounts. Corporate thrift or savings plans. Retirement plans for self employed individuals. Tax sheltered annuity plans for employees of 403(b) tax exempt organizations. Employer sponsored plans. Corporate plans for employee profit sharing. (Tax-free growth). Tax-free after-tax personal contributions, pre-tax company additions. These accounts generally allow for pre-tax contributions and tax deferred earnings. When funds are withdrawn from these accounts the entire amount is taxable at the ordinary tax rate. (Roth accounts use after tax contributions and tax free accumulation and withdrawal.) Not an Investment Offer: This is not an offer to sell or a solicitation of an offer to buy any security. Such offer would be accompanied by a prospectus or other offering materials. IMPORTANT: The projections or other information generated by Money Tree regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.

7 Account Summary Ages Taxable Equity Tax Tax Retirement accounts Roth IRAs Account & Other Free Deferred Allen Betty Allen Betty 4.35% 6.64% 5.70% 7.25% 5.50% 6.50% 3.38% 5.50% Begin. Year Account Totals $428,928 $137,149 $25,000 $30,000 $32,000 $27,300 $2,000 $2,000 $684, , ,497 26,425 32,174 35,605 33,153 11,507 11, , , ,695 27,931 34,505 39,480 39,546 21,434 21, , , ,799 29,523 37,006 43,643 46,520 31,799 32, , , ,871 31,205 39,688 48,112 54,119 42,620 44, , , ,973 32,983 42,564 52,908 62,390 53,916 56, , , ,177 34,863 45,649 58,052 71,384 65,708 70, , , ,556 36,850 48,957 63,566 81,155 78,016 84, , , ,188 38,950 52,506 69,474 91,762 90,862 99,095 1,009, , ,157 41,170 56,311 75, , , ,986 1,094, , ,858 49,638 66,529 82, , , ,217 1,204, , ,758 55,037 73,928 89, , , ,146 1,303, , ,512 58,174 79,286 97, , , ,485 1,396, , , , , , , , ,979 1,800, , , , , , , , ,697 1,864, , , , , , , , ,403 1,912, , , , , , , , ,698 1,971, , , , , , , , ,614 2,046, , , , , , , , ,185 2,084, , , , , , , , ,448 2,165, , , , , , , , ,440 2,249, , , , , , , , ,202 2,323, , , , , , , , ,776 2,400, , , , , , , , ,206 2,480, ,052, , , , , , ,540 2,556, ,060, , , , , , ,827 2,632, ,065, , , , , , ,120 2,707, ,067, , , , , , ,474 2,782, ,073, , , , , , ,948 2,866, ,100, , , , , , ,603 2,973, ,127, , , , , , ,504 3,084, ,154, , , , , , ,719 3,199, ,182, , , , , , ,321 3,318, ,210, , , , , , ,386 3,441, ,238, , , , , , ,995 3,569, ,265, , , , , , ,232 3,702, ,292, , , , , , ,187 3,838, ,317, , , , , , ,955 3,979, ,341, , , , , , ,635 4,124, ,945 1,456, , , , , , ,332 4,445, ,510, , , , , , ,158 4,610,773 Note: Rates shown above are for first year only. Refer to account reports for future year rates.

8 Income Tax - Current Year The following calculations give an idea of the amount of taxes you might pay based on the income and asset information provided. These amounts are approximations only and the actual tax amounts may be higher or lower than illustrated. INCOME: Salaries and wages Interest Dividends* Schedule C (self employment) Schedule D (net gain/loss) GROSS INCOME Adjustments: Retirement plan deposits - Betty Self Employment FICA ADJUSTED GROSS INCOME Gross $100,000 21, ,000 1, Taxable $100,000 18, ,000 1,411 $121,546 ($2,400) (71) $119,075 Itemized Deductions: Mortgage interest Charitable contributions Property taxes State taxes Misc Itemized deductions TAXABLE INCOME Gross $5, ,500 8,234 8,750 Allowed $5, ,500 8,234 6,368 Itemized deductions $24,719 or Standard deductions $12,200 Personal exemptions ( 4 ) TAX SUMMARY: Federal Income Tax $11,316 FICA (Social Security) & HI Tax 7,791 Other Taxes or (credits) (1,500) State Income Tax 8,234 TOTAL TAXES Your combined federal & state marginal tax bracket is %. Your total taxes equal % of your Adjusted Gross Income, and 32.81% of your Taxable income. *Dividend and Capital Gains taxed marginally at 15.00%. ($24,719) ($15,600) $78,756 $25,841

9 Tax Summary Ages Federal Income Tax Federal Income Tax Amounts Additional AMT Tax Federal Credits Early distr. & other tax Total Fed. Income Tax State Tax Additional State Tax or (credits) FICA and HI Tax $11,316 ($1,500) $9,816 $8,644 ($410) $7,791 $25, ,141 (900) 13,241 9,771 (410) 8,727 31, ,707 (800) 13,907 10,003 (410) 8,905 32, ,332 19,332 11,843 (660) 9,087 39, ,472 (1,000) 4,472 5,371 (660) 2,818 12, ,539 (1,000) 3,539 4,397 (495) 2,818 10, ,335 17,335 10,698 (495) 9,706 37, ,243 18,243 11,070 (495) 10,050 38, ,313 20,313 11,516 (330) 10,412 41, , ,159 16,182 (330) 10,792 59, ,467 2,208 39,675 17,994 (330) 11,190 68, ,592 24,592 13,265 (330) 11,419 48, ,431 6,431 5,692 (330) 2,677 14, ,653 5,653 5,264 (330) 2,677 13, ,155 3,155 3,675 (330) 6, ,053 3,053 3,668 (330) 6, ,052 3,052 3,733 (330) 6, ,854 2,854 3,672 (330) 6, ,019 4,019 4,514 (330) 8, ,151 4,151 4,681 (330) 8, ,266 6,266 6,159 (330) 12, ,384 6,384 6,327 (330) 12, ,499 6,499 6,499 (330) 12, ,332 5,332 5,813 (330) 10, ,525 6,525 7,820 (330) 14, ,651 7,651 8,329 (330) 15, ,816 8,816 8,862 (330) 17, ,472 9,472 9,008 (330) 18, ,059 9,059 8,443 (330) 17, ,783 9,783 8,752 (330) 18, ,529 10,529 9,070 (330) 19, ,299 11,299 9,398 (330) 20, , ,148 9,737 (330) 21, , ,201 10,098 (330) 22, , ,451 10,476 (330) 24, ,612 1,314 15,926 10,879 (330) 26, ,507 1,938 17,445 11,296 (330) 28, ,403 2,585 18,988 11,723 (330) 30, ,851 1,116 14,967 9,681 (330) 24, ,233 2,445 17,678 8,955 (165) 26, Total Taxes

10 Retirement Estimate As inflation increases the amount of income needed for your standard of living, there is the potential need to draw increasing amounts out of savings, investments and retirement accounts. The graph shows how long your capital might last. The objective is to assure that your capital is properly managed so that it will last at least until your life expectancy. If the capital is depleted before your need for income has ceased, then you will become dependent on your pensions, Social Security, relatives or public sources. If there is capital remaining when your need for income stops then the remaining capital is available for your heirs. The line allows you to visualize the annual expenses as compared to your capital accounts. If the bars dip below the "0" level on the graph, it indicates that you have consumed all your savings, investment, and retirement accounts, and your spending requirements have caused a "deficit" spending situation - a need for funds where none exists.

11 Retirement Capital Estimate Ages * Begin. Yr. Account Totals Annual Expenses Incl. Tax Earned Income Income and Capital Distributions ** Retirement Acct Distr. ** Investment Acct Distr. Pensions/ Soc Sec Other Inc. & St. Opt. Annual Surplus Ending Year Account Totals $684,378 ($127,245) $101,000 $24,745 $1,500 $722, ,251 (131,767) 113,250 17,017 1, , ,693 (132,869) 115,568 15,800 1, , ,558 (142,618) 117,955 6,262 18, , ,622 (122,968) 36,000 56,648 30, , ,169 (128,698) 36,000 72,517 20, , ,549 (158,872) 126,041 32, , ,102 (163,351) 130,543 32,808 1,009, ,009,132 (194,473) 135,270 2,198 57,005 1,094, ,094,194 (179,006) 140,233 68,447 29,674 1,204, ,204,181 (190,616) 145,445 57,630 12,459 1,303, ,303,404 (163,322) 150,917 12,404 1,396, ,396,698 (140,783) 35,000 34, , ,541 1,800, ,800,320 (129,775) 35,000 54,865 34,909 5,000 1,864, ,864,313 (122,506) 56,594 60,712 5,200 1,912, ,912,481 (125,768) 49,374 61,986 14,408 1,971, ,971,811 (116,743) 38,562 63,287 14,894 2,046, ,046,576 (159,871) 79,857 64,616 15,397 2,084, ,084,214 (123,089) 5,076 36,119 65,975 15,918 2,165, ,165,097 (127,056) 5,340 37,897 67,362 16,457 2,249, ,249,511 (134,468) 15,349 43,761 68,778 6,580 2,323, ,323,526 (138,729) 16,245 45,415 70,226 6,843 2,400, ,400,319 (143,154) 17,192 47,140 71,704 7,117 2,480, ,480,011 (145,609) 18,193 54,202 73,214 2,556, ,556,377 (153,294) 19,217 59,321 74,756 2,632, ,632,244 (159,600) 20,332 62,936 76,332 2,707, ,707,826 (166,162) 21,404 66,815 77,943 2,782, ,782,864 (163,840) 22,598 61,655 79,587 2,866, ,866,552 (148,146) 23,773 43,107 81,266 2,973, ,973,350 (152,396) 25,001 44,412 82,983 3,084, ,084,147 (156,788) 26,280 45,772 84,735 3,199, ,199,081 (161,327) 27,613 47,187 86,527 3,318, ,318,304 (166,074) 28,934 48,783 88,356 3,441, ,441,917 (171,169) 30,299 50,645 90,225 3,569, ,569,873 (176,604) 31,563 52,906 92,135 3,702, ,702,138 (182,420) 32,849 55,483 94,087 3,838, ,838,633 (188,429) 34,150 58,198 96,080 3,979, ,979,467 (194,611) 35,361 61,132 98,117 4,124, ,124,778 (192,904) 36, , , ,359 4,445, ,445,821 (170,774) 37,526 67,899 65,348 4,610, ,610,776 4,610,773 *Note - 1 = Allen's life expectancy age. 2 = Betty's life expectancy age. **Investment and Retirement distributions include withdrawals from account totals to satisfy "Income needed" shortages from Cash Flow report.