Allen & Betty Abbett. Personal Retirement Analysis. Sample Plan - TOTAL Cash-Flow-Based Planning

Transcription

1 Mar 29, 2018 Personal Retirement Analysis Allen & Betty Abbett John Smith Asset Advisors Example, LLC A Registered Investment Advisor 2430 NW Professional Drive Corvallis, OR 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 Table of Contents Cover 1 Introduction (text) 2 Cash Flow Planning (text) - A1 3 Net Worth - A3 4 Cash Flow Management (text) - B1 5 Cash Flow Needed vs Available Graph - B2 6 Cash Flow Illustration - B7 7 Allocation of Cash Flow - B25 8 Asset Accounts (text) - C1 9 Account Summary Graph - C2 10 Taxable Account - C4 11 Equity and Other Accounts - C5 12 Retirement Account Allen - C10 13 Retirement Account Betty - C10a 14 Roth Allen - C11 15 Roth Betty - C11a 16 Income Tax Calculation (text) - D1 17 Income Tax - Current Year - D3 18 Tax vs Income Graph - D4 19 Tax Summary - D6 20 Taxable Income Analysis - D7 21 Dividend, Capital Gain Sources - D7a 22 Federal Income Tax Worksheet - D8 23 Retirement Estimate Graph - F2 24 Retirement Capital Estimate - F3 25 Monte Carlo - F4 26 Monte Carlo Details (text) - F5 27 Standard Deviation (text) - F5a 28 What-If Graph - F12 29 Net Worth - F6 32 Page 1

3 Introduction Planning for your retirement years requires consideration of many variables. This report will help you visualize the potential future changes in your income and assets by projecting your needs and resources ahead on a year by year basis. Among the areas considered in the report are: Income required annually: Living expenses Insurance premiums Debt payments Saving and investment contributions Inflationary effects Income sources: Earned income Interest and dividends Social Security Pension and other retirement plans Other income (inheritances, gifts, stock options, etc.) Asset accounts: Taxable Tax-Deferred Tax-Free Equity or Other accounts Qualified plans (IRA, Profit sharing, etc.) Income taxes: Using actual tax rates Indexing of tax brackets and exemptions Alternate minimum tax State Tax estimates This report is not intended to predict what will actually happen, but is only an illustration based on the assumptions contained in the report. No guarantee of future performance is implied or intended and no specific investments or financial products are represented in the reports. Although this report should prove helpful in visualizing the possibilities for your financial future, you should keep in mind that your actual results will undoubtedly differ from those shown. Page 2

4 Cash Flow Planning A1 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. Page 3

5 Net Worth Statement ASSETS Ordinary Interest Accounts: Allen Betty Joint / CP Trust/Oth. Total Insurance Cash Value, Dividends $12,450 $2,850 $15,300 Total $12,450 $2,850 $15,300 Equity (Investment) Accounts: Mutual Funds 248, ,800 Total $248,800 $248,800 Retirement Accounts: 401(k) accounts 213, ,500 IRA accounts 54,000 54, (b), SEP, Simple 110, ,250 Roth accounts 62,500 72, ,300 Total $330,000 $183,050 $513,050 Personal Use Assets: Personal property 50,000 19,600 69,600 Total $50,000 $19,600 $69,600 Real Estate Assets: Residence 447, ,000 Rental real estate 200, ,000 Total $447,000 $200,000 $647,000 Total Assets $840,930 $185,900 $468,400 $1,495,230 A3 LIABILITIES Allen Betty Joint / CP Trust/Other Total Residence mortgage ($232,000) ($232,000) Credit Cards (6,640) (6,640) Life insurance loans (2,500) (2,500) Rental real estate (118,000) (118,000) Total Liabilities ($9,140) ($350,000) ($359,140) NET WORTH $831,790 $185,900 $118,400 $1,136,090 Note: Assets held in a Revocable Trust are included in the grantors assets. Page 4

6 Cash Flow Management B1 The management of your annual cash inflows and outflows is based on the following details. The various report pages will provide more specifics about the annual amounts and results. Cash Flow Surplus In any year when there is a cash flow surplus, this surplus will be reinvested into your savings and investment accounts divided as shown below: Before After age 65 age 65 Taxable accounts (savings, CD, money market) 20% 40% Equity and other (stocks, mutual funds, real estate, etc.) 80% 60% Tax-Free accounts (municipal bonds and funds) 0% 0% Tax-Deferred accounts (annuities, non deductible IRAs, etc.) 0% 0% Cash Flow Shortage If in any year the amount of expenses exceeds the spendable income available, the analysis will draw funds from your savings and investment accounts to make up the shortfall. These funds may result in a taxable event if money is taken from your equity and other accounts which have a cost basis less than the current market value, or if it is necessary to take money from your retirement accounts because all other accounts have been depleted. In case of a shortage, funds are drawn from accounts in the following order - taxable, equity and other, tax free, tax deferred, tax deductible retirement accounts, and finally Roth IRA accounts. In some cases assets may be periodically rebalanced between accounts. Interest and dividends Each year the interest and dividends earned is computed on the various accounts, and these amounts are automatically assumed to be reinvested into the account unless an option is elected to take the amounts in cash and added to your spendable cash flow. On the following reports, the cash option will be indicated by a cash distributions in the "Cash Withdrawal" column. Taxable accounts (savings, CD, money market) Equity and other (stocks, mutual funds, real estate, etc.) Tax-Free accounts (municipal bonds and funds) Tax-Deferred accounts (annuities, non deductible IRAs, etc.) Income Taxes The amount you are required to pay for income taxes can vary every year, depending on the sources and amount of your income, and the adjustments and deductions available. In the analysis we have estimated all the various income and deduction items to determine the taxable income each year, including consideration of ordinary taxable income, capital gains, AMT and other significant items. The taxes are computed using real IRS tax rate tables, including indexing of the tax breakpoints using an assumed index rate of 2.00% per year. The amount of federal and state income tax and FICA (Social Security) tax is added to your annual expenses each year. Page 5

7 Cash Flow B2 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 black outline 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. Page 6

8 Cash Flow Illustration B7 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) $166,000 $6,628 $172,628 ($172,096) $ ,750 7, ,801 (176,205) ,041 7, ,524 (198,631) (8,107) ,202 7, ,126 (246,333) (51,207) ,456 8, ,870 (254,046) (54,176) ,811 8, ,642 (222,250) (17,608) ,264 11, ,895 (228,594) (16,699) , ,763 (288,808) (78,045) ,572 10, ,834 (205,851) 19, ,494 10, ,252 (211,227) 20, ,528 15, ,840 (217,740) 23, ,679 11, ,459 (220,956) 21, R ,459 12, ,765 (306,633) (192,868) R 12,843 12,843 (188,359) (175,516) ,203 13,391 50,593 (267,769) (217,176) ,947 13,949 51,896 (238,487) (186,591) ,544 14,519 84,063 (240,673) (156,610) ,490 70, , ,668 (251,126) 262, ,315 72,354 96,669 (188,725) (92,056) ,365 73, ,166 (200,207) (75,041) ,546 75, ,823 (206,986) (77,163) ,917 76, ,699 (225,308) (90,609) ,454 78, ,772 (213,606) (75,834) ,543 79, ,427 (220,463) (81,036) ,104 81, ,586 (227,608) (87,022) ,112 83, ,223 (235,093) (93,870) ,559 84, ,333 (242,857) (101,524) ,071 86, ,540 (250,950) (110,410) ,658 88, ,857 (210,834) (71,977) ,066 89, ,028 (218,763) (79,735) ,607 91, ,369 (227,001) (88,632) ,478 93, ,075 (235,579) (98,504) ,205 95, ,674 (244,515) (109,841) ,295 97, ,673 (253,805) (123,132) ,727 99, ,052 (263,507) (138,455) , , ,452 (273,618) (156,166) , , ,418 (251,556) (144,138) 90 L , ,406 (256,615) (151,209) ,838 59,838 (235,847) (176,009) ,034 61,034 (245,132) (184,098) ,255 62,255 (254,826) (192,571) ,501 63,501 (264,949) (201,448) ,770 64,770 (275,522) (210,752) ,066 66,066 (286,568) (220,502) L 67,387 67,387 (298,109) (230,722) B9 C10..C11a C4..C8 B10 B18, B18a B8 * Scheduled distributions, interest or dividends taken in cash or amounts taken to meet the IRS minimum distribution requirements. R = Retirement Age, L = Life Expectancy Page 7

9 Allocation of Cash Flow Surplus or (Shortage) B25 Ages Taxable % Amount Equity/Other Tax-Free Tax-Deferred Retirement Accounts Roth Accounts % Amount % Amount % Amount Amount Amount $ $ na (8,107) na na na na (51,207) na na na na (45,122) na (9,054) na na na (3,000) na (14,608) na na na (3,000) na (13,699) na na na (3,000) na (75,045) na na , , , , , , , , na (29,898) na (162,970) na na na na (175,516) na na na na (114,748) na na (102,428) na na na na (186,591) na na na na (156,610) , , na (92,056) na na na na (14,821) na (60,220) na na na na (77,163) na na na na (45,619) na na (44,990) na na na na (75,834) na na na na (81,035) na na na na (87,021) na na na na (93,869) na na na na (101,524) na na na na (110,409) na na na na (71,977) na na na na (79,734) na na na na (88,631) na na na na (98,503) na na na na (109,840) na na na na (123,132) na na na na (138,454) na na na na (156,166) na na na na (47,741) (96,396) na na na na (151,208) na na na na (176,009) na na na na (184,097) na na na na (192,570) na na na na (201,448) na na na na (210,752) na na na na (220,501) na na na na (230,721) C4 C5 C7 C8 C10..C10e C11, C11a 10 Page 8

10 Asset Accounts C1 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. Page 9

11 Account Summary C2 Allocation of Surplus Cash Flow In years when there is a surplus of spendable income, the surplus is reinvested into the asset accounts in the proportions shown below. Period 1 covers the years up to age 65. In years when there is a shortage of spendable income from earnings, pensions, social security, interest and dividends taken in cash, and miscellaneous income sources, the shortage is made up by withdrawals from asset and retirement accounts. It is assumed that funds are taken in the following order - from taxable, equity and other nonqualified, tax-free, tax-deferred and then qualified retirement accounts. Page 10

12 Taxable Account C4 Ages Begin Year Account Balance Annual Additions or Withdrawals Annual Cash Flow Surplus Deposit (short) Cash withdrawal % Rate Annual Interest $ Amount Taxable Income $83,800 $3,000 $ $1, ,313 3, , ,914 3,000 (8,107) , ,291 3,000 (51,207) , ,122 3,000 (45,122) ,000 (3,000) ,000 (3,000) ,000 (3,000) ,000 3, ,060 3,000 4, ,244 3,000 4, ,167 3,000 4, ,898 (29,898) , ,958 (92,056) ,821 (14,821) B25 $1,407 1,482 1,484 1, Page 11

13 Equity and Other Accounts Ages Begin Year Account Balance Annual Additions or Withdrawals Annual Deposit Cash Flow Surplus (Short) Cash Withdrawal Interest Annual Rate of Return Dividend Capital Gain Ordinary Rate Apprec Total Annual Return Taxable Income C5 At Div CG Rate $165,000 $6,000 $ $12,642 $5, ,068 6, ,074 6, ,619 6, ,596 7, ,215 6, ,216 8, ,431 6,000 (9,054) ,580 8, ,957 6,000 (14,608) ,514 9, ,863 6,000 (13,699) ,370 9, ,534 6,000 (75,045) ,770 8, ,259 6,000 15, ,783 8, ,029 6,000 16, ,843 10, ,892 6,000 18, ,235 11, ,607 6,000 17, ,910 13, ,720 (162,970) ,422 1,682 8, ,172 (175,516) , , ,748 (114,748) , , , , , , ,224 (60,220) , , ,597 (77,163) , , ,619 (45,619) B25 Page 12

14 Retirement Accounts - Allen C10 Age Balance By Participant Contributions Withdrawals Rate of Return By Company Roth Plans Scheduled Required Min. Distr * For Spend Shortage % Rate Annual Interest Gross ** Minimum Distribution 53 $267,500 $5,160 $3, $19, ,158 5,289 3, , ,976 5,989 3, , ,092 6,138 4, , ,785 6,292 4, , ,242 6,449 4, , ,664 6,610 4, , ,264 7,132 4, , ,890 7,310 4, , ,228 7,493 4, , ,546 7,680 5, , ,131 7,873 5, , , , , , ,842 (102,428) , ,810 (186,591) , ,535 (156,610) , ,395 (4,490) ,449 4, ,354 (24,315) ,010 24, ,049 (25,822) ,041 25, ,268 (27,420) ,038 27, ,886 (29,113) (44,990) ,376 29, ,159 (28,872) (75,834) ,215 28, ,668 (27,076) (81,035) ,835 27, ,392 (24,641) (87,021) ,945 24, ,675 (21,708) (93,869) ,493 21, ,591 (17,928) (101,524) ,433 17, ,572 (13,293) (110,409) ,714 13, ,584 (7,630) (71,977) ,019 7, ,996 (3,684) (59,312) , * Remaining Required Minimum Distribution after adjustment for scheduled withdrawals (columns 4) ** Gross Required Minimum Distributions - using either IRS uniform Life Table, or Joint Life Table. IRAs are not subject to delayed starting age. B25 Page 13

15 Retirement Accounts - Betty C10a Age Balance By Participant Contributions Withdrawals Rate of Return By Company Roth Plans Scheduled Required Min. Distr * For Spend Shortage % Rate Annual Interest Gross ** Minimum Distribution 51 $110,250 $4,320 $4, $8, ,942 4,406 4, , ,982 4,495 4, , ,468 4,584 4, , ,505 4,676 4, , ,205 4,770 4, , ,688 4,865 4, , ,083 4,962 4, , ,528 5,062 5, , ,170 5,163 5, , ,168 5,266 5, , ,690 5,371 5, , ,917 5,479 5, , , , , , , , , , , , , , ,880 (25,543) ,080 25, ,417 (27,126) ,163 27, ,454 (28,804) ,210 28, ,860 (30,582) ,212 30, ,490 (32,467) ,161 32, ,184 (34,463) ,044 34, ,765 (36,404) ,857 36, ,218 (38,631) ,587 38, ,174 (40,778) ,222 40, ,618 (43,028) ,755 43, ,345 (45,382) (20,422) ,439 45, ,980 (46,607) (88,631) ,946 46, ,688 (43,478) (98,503) ,965 43, ,672 (39,205) (109,840) ,145 39, ,772 (33,295) (123,132) ,412 33, ,757 (25,727) (138,454) ,682 25, ,258 (16,139) (156,166) ,868 16, ,821 (4,080) (47,741) , * Remaining Required Minimum Distribution after adjustment for scheduled withdrawals (columns 4) ** Gross Required Minimum Distributions - using either IRS uniform Life Table, or Joint Life Table. IRAs are not subject to delayed starting age. B25 Page 14

16 Roth Accounts - Allen C11 Age Begin Year Account Balance Annual Deposit Annual Additions or Withdrawals Roth 401(k) Cash Withdrawal RMD Cash Flow (shortage) % Rate $62,500 $5, ,484 5, ,279 5, ,944 5, ,543 5, ,142 5, ,815 6, ,639 6, ,697 6, ,078 6, ,877 6, ,196 6, , , , , , , , , , , , , , , , , , , , , , , ,003, ,068, ,138, ,112, ,028, , , , , , , (96,396) (151,208) (176,009) (184,097) (192,570) (201,448) (210,752) (220,501) (66,644) B25 Annual Interest Annual Interest 7.00 $4, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Page 15

17 Roth Accounts - Betty C11a Age Begin Year Account Balance Annual Deposit Annual Additions or Withdrawals Roth 401(k) Cash Withdrawal RMD Cash Flow (shortage) % Rate $72,800 $5, ,505 5, ,072 5, ,563 5, ,045 5, ,590 5, ,274 6, ,180 6, ,396 6, ,016 6, ,141 6, ,879 6, ,345 6, , , , , , , , , , , , , , , , , , , , , ,054, ,123, ,196, ,273, ,356, ,444, ,538, ,638, ,745, ,858, ,979, ,108, ,075,223 (164,077) B25 Annual Interest Annual Interest 7.00 $5, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,137 8 Page 16

18 Income Tax Calculation Tax Rate Schedules: The tax calculations prepared in this report use the actual federal tax rate schedules as published by the IRS. In other words, the taxable income reported herein is taxed first at the 10% level, then 12% and so forth, based on the actual breakpoints provided by the IRS. A financial plan that is prepared using only a single estimated tax bracket to illustrate the amount of taxes due can substantially understate or overstate the actual real tax impact on the plan. D1 Comparison of estimated income tax rate versus actual tax bracket calculations (married filing jointly) Tax due... $50,000 Using 15% estimated rate -- Income Level -- Using 2018 tax rates. $50,000 ($24,000) $26,000 $6,000 Tax due... $2,739 - Standard deduction - Taxable - a $3,261 or 54% difference. Indexing of tax brackets: A further complication of the tax planning aspect is the fact that many of the numbers used in computing taxes are "indexed" each year to compensate for the effects of inflation. These include personal exemptions, standard deductions, marginal tax brackets and other items. Tax Cuts and Jobs Act of 2017 On December 22, 2017, the TCJA act was signed into law enacting substantial changes to the tax law. A majority of individual tax law changes are not permanent and are set to expire after 2025*. Marginal Tax Bracket percentages: Pre-tax Act 0.0% 15.0% 28.0% 31.0% 36.0% 39.6% EGTRRA % 15.0% 27.5% 30.5% 35.5% 39.1% JCWAA 10.0% 15.0% 27.5% 30.0% 35.0% 38.6% JGTRRA 10.0% 15.0% 25.0% 28.0% 33.0% 35.0% ATRA 10.0% 15.0% 25.0% 28.0% 33.0% 35.0% TCJA % 22.0% 24.0% 32.0% 35.0% 37.0% Additional TCJA Changes The TCJA introduced numerous changes. The Child Tax Credit doubled to $2,000. Marriage penalty relief is eliminated for all but the top tax bracket. Personal exemptions are suspended. The standard deduction nearly doubled to $24,000/$12,000 (married filing jointly/single filer). A new $10,000/$5,000 limit is placed on the deduction for state and local taxes. Itemized deductions are no longer subject to phase-out for high-income taxpayers. New limits are placed on the deductibility of home mortgage and home equity loan interest. Rules for 529 college savings plan has been extended to allow use for K-12 education expenses. Self-employed taxpayers may be able to claim a new deduction of up to 20% of qualified business income. The Alternative Minimum Tax exclusion levels were increased to $109,400/$70,300 for 2018 with annual indexing attached. Qualified dividends will continue to be taxed at long-term capital gains rates. Dividends and capital gains will now be taxed at a rate of 0%, 15% or 20% depending on the taxpayer's marginal bracket, with an additional 3.8 % Hospital Insurance tax on capital gains for anyone with an AGI over $200,000/$250,000. * Sunset Provision Unless Congressional action is taken, a majority of the TCJA changes will expire after 2025, reverting to the rules in place under the previous tax act. The changes listed here may prove temporary unless Congress decides the changes will be made permanent, or other changes are made. Page 17

19 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 Schedule C (self employment) Schedule D (net gain/loss) Schedule E (passive gain/loss) GROSS INCOME Gross $158,000 1,407 8,000 5,898 3,281 Taxable $158,000 1,407 8,000 5,898 3,281 $176,587 D3 B9 C4..C8 B9 C6 a D9 Adjustments: Retirement plan deposits - Allen Retirement plan deposits - Betty Self Employment FICA ADJUSTED GROSS INCOME 1,130 ($5,160) (4,320) (565) $166,542 C10-C10e D15 Itemized Deductions: Mortgage interest Charitable contributions Medical expenses State, Property & Other Tax Gross $9,955 4,000 4,000 21,543 Allowed $9,955 4,000 10,000 D10 TAXABLE INCOME Itemized deductions $23,955 or Standard deductions $24,000 TAX SUMMARY: Federal Income Tax $22,825 FICA (Social Security) & HI Tax 13,217 Other Taxes or (credits) (2,000) State Income Tax 14,143 TOTAL TAXES Your combined federal & state marginal tax bracket is %. Your total taxes equal % of your Adjusted Gross Income, and 33.80% of your Taxable income. *Dividend and Capital Gains taxed marginally at 15.00%. ($24,000) $142,542 $48,185 D11 Page 18

20 Tax -vs- Income D4 Spendable income is defined here as your total sources of funds less the amount owed for taxes each year. Included in income sources are... Earned income (salaries & wages) Pension and Social Security income Interest and dividends taken in cash Other (misc. income, net proceeds from sale of residence, life insurance proceeds, etc.) Generally, income taxes will be highest during your earning years. In your later years as you start consuming your savings and investment accounts, the amount of income tax will gradually decrease as a percent of total income. There may be periods when the income tax is greater than the income sources. This usually occurs when you are drawing from capital accounts to meet your need for income. Page 19

21 Tax Summary D6 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 $22,826 ($2,000) $20,826 $14,503 ($360) $13,217 $48, ,576 (2,000) 21,576 14,938 (360) 13,514 49, ,288 26,288 16,180 (270) 14,541 56, ,018 27,018 16,615 (270) 14,870 58, ,914 27,914 17,116 (180) 15,309 60, ,437 28,437 17,461 (180) 15,551 61, ,419 29,419 18,024 (180) 15,903 63, ,469 34,469 20,809 (180) 16,718 71, ,447 31,447 19,217 (180) 17,098 67, ,673 32,673 19,838 (180) 17,487 69, ,873 34,873 20,851 (180) 18,194 73, ,278 35,278 21,159 (180) 18,291 74, ,421 9,421 14,683 (180) 8,419 32, ,603 (180) 6, ,145 13,145 14,073 (180) 27, ,520 29,520 18,250 (180) 47, ,581 29,581 15,640 (180) 45, ,843 40,843 22,587 (180) 2,428 65, ,457 (180) 2, ,708 3,708 4,934 (180) 8, ,613 4,613 5,308 (180) 9, ,085 13,085 9,447 (180) 22, ,950 18,950 11,943 (180) 30, ,995 19,995 12,424 (180) 32, ,092 21,092 12,929 (180) 33, ,278 22,278 13,461 (180) 35, ,488 23,488 14,015 (180) 37, ,757 24,757 14,597 (180) 39, ,602 15,602 10,836 (180) 26, ,207 16,207 11,397 (180) 27, ,818 16,818 11,982 (180) 28, ,452 17,452 12,595 (180) 29, ,110 18,110 13,237 (180) 31, ,776 18,776 13,907 (180) 32, ,487 19,487 14,611 (180) 33, ,225 20,225 15,349 (180) 35, ,512 (180) 4, (180) (90) (90) (90) (90) (90) (90) (90) D8 D12 D13, D14 D17 D17 D15 Total Taxes Note - it is assumed the Tax Cuts and Jobs Act (TCJA) sunsets after See Income Tax Calculations report for details. Page 20

22 Taxable Income Analysis D7 Ages Earned Income (including non-cash) Interest Qualified Dividend Plan Cap Gain Distribution Other Taxable Income** Pension Plans Taxable Social Security Exemptions Adjustments AGI (including cap gain) Item/Std Deductions Taxable Ordinary Income Net Capital Gain, Div, $166,000 $7,305 ($6,764) $166, ,750 8,048 (6,415) 171, ,041 8,761 (6,623) 185, ,201 9,071 (6,264) 190, ,457 8,672 (5,891) 195, ,810 9,109 (5,505) 199, ,264 10,504 (5,105) 205, ,763 31,320 (5,470) 236, ,573 8,823 (5,473) 218,923 9, ,494 10,367 (5,033) 225,827 9, ,528 12,073 (4,575) 237,073 10, ,679 13,916 (4,099) 240,496 10, ,459 62,620 4, ,544 10, ,270 11,502 78,772 10, ,568 2,400 29,582 12, ,350 11, ,591 2,448 30,174 19, ,352 11, ,610 2,497 56,990 20, ,168 11, , ,934 2,547 58,130 21, ,918 11, ,787 24,315 2,598 26,041 58,741 11, ,205 2,650 50, ,246 12, ,128 2,703 54, ,541 12, ,706 2,757 62, ,291 12, ,288 2,812 64, ,280 12, ,578 2,868 65, ,909 13, ,125 2,926 66, ,824 13, ,981 2,984 68, ,073 13, ,083 3,044 69, ,597 13, ,480 3,105 70, ,445 14, ,635 3,167 72, ,079 14, ,800 3,230 73, ,752 14, ,238 3,295 75, ,730 15, ,981 3,361 76, ,043 15, ,045 3,428 78, ,708 15, ,427 3,496 79, ,723 16, ,181 3,566 81, ,143 16, ,305 3,638 83, ,966 16, ,821 3,710 58, ,674 16, ,785 15,006 18,791 17, ,860 3,424 7,284 8, ,937 3,743 7,680 9, ,016 4,068 8,084 9, ,097 4,400 8,497 9, ,178 4,903 9,081 9, ,262 5,489 9,751 9, ,347 6,087 10,434 9, Less * $24,000 $136,644 $5,898 24, ,337 6,566 24, ,933 7,277 25, ,507 8,033 25, ,923 26, ,807 9,109 27, ,131 10,504 27, ,725 31,320 39, ,271 8,760 39, ,136 10,188 40, ,813 40, ,253 13,486 43,061 54,046 60,937 60,672 7,400 58,995 76,787 62, ,878 58, ,060 64,874 11,098 60,281 58,662 33,972 59,308 40,190 59,123 96,862 59, ,556 61, ,810 62, ,295 63, ,160 64, ,140 65, ,380 68, ,072 71, ,329 75, ,624 78, ,081 82, ,705 86, ,385 90, ,366 94, , , , , , , , , , ,045 1,336 8,672 4,048 11, ,428 44,568 4, ,346 51,365 5,512 54,546 6, ,907 4,706 D18 D7a C10a..C10e B18 B10 D16 D9 D10 D11 C6a * It is assumed the Tax Cuts and Jobs Act (TCJA) sunsets after ** Includes stock options, unrecaptured 1250 gain and other income items. Page 21

23 Interest, Dividend, Capital Gain Sources D7a Taxable Interest Capital Gain / Loss Ages Taxable Account Tax Deferred Account Equity Account Total Interest Dividends Equity CG Distr. Sale of Assets R/E Sale, Stock Opt. Add'l Gain/Loss Total CG/Loss 1250 Unrecaptured Gain $1,407 1,482 1,484 1, $1,407 1,482 1,484 1, ,682 1,682 3, , , ,730 1, , $5,898 $5,898 6,566 6,566 7,277 7,277 8,033 8,033 8,672 8,672 9,109 9,109 9, ,505 8,776 22,544 31,320 8,760 8,760 10,188 10,188 11,770 11,770 13,486 13,486 5,041 52,536 57,577 2,770 61,727 64,497 44,569 44,569 1,286 65,272 66, ,934 2,434 2,434 2,077 2,050 4,127 1,149 4,829 5,978 4,706 4,706 C4 C8 C5 C5 C5 C6 B21, C12, C24 C24 Page 22

24 Federal Income Tax Worksheet Ages Filing Status Taxable Ordinary Income Cap. Gain, Div. & % 15% Marginal rate brackets indexed at 2.0 % 22% 24% 32% 35% 37% 25% 28% 33% 35% 39.6% Max CG Rate Cap. Gain Div & 1250 Tax Ordinary Income Tax Joint $136,644 $5,898 $19,050 $77,400 $165,000 $315,000 $400,000 $600,000 15% $885 $21,941 $22, Joint 140,337 6,566 19,431 78, , , , ,000 15% ,591 23, Joint 152,933 7,277 19,820 80, , , , ,240 15% 1,092 25,196 26, Joint 156,507 8,033 20,216 82, , , , ,725 15% 1,205 25,813 27, Joint 160,923 8,672 20,620 83, , , , ,459 15% 1,301 26,613 27, Joint 163,807 9,109 21,033 85, , , , ,448 15% 1,366 27,071 28, Joint 168,131 10,504 21,453 87, , , , ,697 15% 1,576 27,843 29, Joint 177,725 31,320 21,882 88, , , , ,211 15% 4,698 29,771 34, Joint 161,271 8,760 22,320 90, , , , ,455 15% 1,314 30,133 31, Joint 166,136 10,188 22,767 92, , , , ,704 15% 1,528 31,146 32, Joint 174,813 11,770 23,222 94, , , , ,178 15% 1,766 33,107 34, Joint 176,253 13,486 23,686 96, , , , ,882 15% 2,023 33,255 35, Joint 54,046 60,937 24,160 98, , , , ,819 15% 2,523 6,899 9, Joint 7,400 24, , , , , Joint 76,787 44,568 25, , , , , ,416 15% 2,884 10,261 13, Joint 164,878 25, , , , , ,084 29,521 29, Joint 166,060 26, , , , , ,006 29,582 29, Joint 11, ,346 26, , , , , ,186 39,734 1,110 40, Joint 27, , , , , Joint 33,972 5,512 27, , , , , ,342 3,708 3, Joint 40,190 6,743 28, , , , , ,329 4,613 4, Joint 96,862 4,706 28, , , , , ,596 13,086 13, Joint 129,556 29, , , , , ,148 18,951 18, Joint 134,810 30, , , , , ,990 19,995 19, Joint 140,295 30, , , , , ,130 21,092 21, Joint 146,160 31, , , , , ,573 22,279 22, Joint 152,140 31, , , , , ,324 23,489 23, Joint 158,380 32, , , , , ,391 24,758 24, Joint 115,072 33, , , , , ,779 15,602 15, Joint 119,329 33, , , , , ,494 16,208 16, Joint 123,624 34, , , , , ,544 16,818 16, Joint 128,081 35, , , , , ,935 17,452 17, Joint 132,705 35, , , , , ,674 18,111 18, Joint 137,385 36, , , , , ,767 18,777 18, Joint 142,366 37, , , , , ,223 19,487 19, Joint 147,534 38, , , , , ,047 20,225 20, Joint 38, , , , , Joint 39, , , , , Single 20,215 82, , , , Single 20,619 83, , , , Single 21,032 85, , , , Single 21,452 87, , , , Single 21,881 88, , , , Single 22,319 90, , , , Single 22,765 92, , ,136 1,015, D7 D7 620, , , , , , , , , ,839 1,019,836 Note - it is assumed the Tax Cuts and Jobs Act (TCJA) sunsets after See Income Tax Calculations report for details. D8 Total Tax Page 23

25 Retirement Estimate F2 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. Page 24

26 Retirement Capital Estimate F3 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 $761,850 ($172,096) $166,000 $6,628 $532 $850, ,471 (176,205) 169,750 7, , ,842 (198,631) 183,041 8,107 7,483 1,040, ,040,573 (246,333) 187,202 51,207 7,924 1,099, ,099,431 (254,046) 191,456 54,176 8,414 1,162, ,162,136 (222,250) 195,811 17,608 8,831 1,269, ,269,304 (228,594) 200,264 16,699 11,631 1,385, ,385,701 (288,808) 210,763 78,045 1,447, ,447,770 (205,851) 215,572 10,262 19,983 1,616, ,616,581 (211,227) 220,494 10,758 20,025 1,797, ,797,868 (217,740) 225,528 15,312 23,100 1,995, ,995,670 (220,956) 230,679 11,780 21,503 2,206, R 63 2,206,314 (306,633) 101, ,868 12,306 2,164, R 2,164,173 (188,359) 175,516 12,843 2,121, ,121,209 (267,769) 102, ,748 37,203 13,391 2,030, ,030,773 (238,487) 186,591 37,947 13,949 1,969, ,969,482 (240,673) 156,610 69,544 14,519 1,935, ,935,264 (251,126) 4,490 70, , ,542 2,324, ,324,661 (188,725) 24,315 92,056 72,354 2,350, ,350,929 (200,207) 51,365 75,041 73,801 2,370, ,370,988 (206,986) 54,546 77,163 75,277 2,387, ,387,911 (225,308) 102,907 45,619 76,782 2,387, ,387,939 (213,606) 135,288 78,318 2,403, ,403,008 (220,463) 140,578 79,884 2,413, ,413,576 (227,608) 146,125 81,482 2,419, ,419,085 (235,093) 151,981 83,111 2,418, ,418,886 (242,857) 158,083 84,774 2,412, ,412,353 (250,950) 164,480 86,469 2,398, ,398,769 (210,834) 122,635 88,199 2,427, ,427,649 (218,763) 128,800 89,962 2,450, ,450,189 (227,001) 135,238 91,762 2,469, ,469,355 (235,579) 141,981 93,597 2,482, ,482,783 (244,515) 149,045 95,469 2,489, ,489,765 (253,805) 156,427 97,378 2,489, ,489,554 (263,507) 164,181 99,325 2,481, ,481,297 (273,618) 172, ,313 2,464, ,464,088 (251,556) 148, ,338 2,469, L 88 2,469,206 (256,615) 151, ,406 2,473, ,473,065 (235,847) 176,009 59,838 2,451, ,451,484 (245,132) 184,097 61,034 2,420, ,420,121 (254,826) 192,570 62,255 2,377, ,377,942 (264,949) 201,448 63,501 2,323, ,323,825 (275,522) 210,752 64,770 2,256, ,256,552 (286,568) 220,501 66,066 2,174, L 2,174,807 (298,109) 230,721 67,387 2,075, ,075,223 2,075,223 B8 B9 C10...C10e C4...C8 B10 B18, B18a R = Retirement Age, L = Life Expectancy **Investment and Retirement distributions include withdrawals from account totals to satisfy "Income needed" shortages from Cash Flow report. C3a Page 25

27 Monte Carlo Retirement Simulation Monte Carlo Simulations illustrate possible variations in growth and/or depletion of retirement capital under unpredictable future conditions. Simulation introduces uncertainty by fluctuating annual rates of return on assets. The graph and related calculations do not presuppose or analyze any particular investment or investment strategy. This long-term hypothetical model is used to help show potential effects of market volatility and possible effects on your financial future. This is not a projection, but an illustration of uncertainty. The simulations begin in the current year and model potential asset level changes over time. Included are all capital assets, both tax advantaged and taxable, all expenses, including education funding if applicable, pension benefits and Social Security benefits. Observing results from these large number of simulations may offer insight into the shape, trends and potential range of future retirement plan outcomes under volatile market conditions. Results from 10,000 Monte Carlo Simulations: Original Retirement Capital estimate $2,074,952 Percentage of results above zero* Minimum (worst case) result Average Monte Carlo result $2,535,320 Percentage with $ remaining at Allen's age 87 Maximum Monte Carlo result $0 $21,707,023 Percentage with $ remaining at Allen's age 92 Percentage with $ remaining at Allen's age 82 *Percent of times money is remaining at last life expectancy. 73% 89% 97% 100% F4 The bold line is the estimated retirement capital value over time using fixed rates. Current after tax rate of return is 6.52% in the original estimate and varies from 5.99% to 7.17%, with portfolio changes. This simulation used a 4.25% standard deviation to create ten thousand sets of normally distributed random rates of return based on the annual rates of return in the original estimate (95% of the rates fall between -2.51% and 15.67%). A standard deviation rate of 2.00% was applied to the inflation rate used on personal expenses. The original capital estimate indicated a possibility of having $2,074,952 in assets remaining at last life expectancy. Monte Carlo simulation, using 10,000 trials of the same assets, income and expenses, resulted in a 73% probability of having funds remaining at last life expectancy, and an average amount of $2,535,320 remaining. The Monte Carlo illustration above points out the uncertainty of future retirement capital outcomes. It is important that you return regularly for a review of your goals and financial condition, in order to assure that appropriate periodic adjustments are made to your financial affairs. IMPORTANT: The projections or other information generated in this report regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment products or results and are not guarantees of future results. Results may vary with each report and over time. Results of this simulation are neither guarantees nor projections of future results. Information is for illustrative purposes only. Do not rely on this report to predict actual performance of any investment or investment strategy. Page 26

28 Monte Carlo Details Financial analysis can help you evaluate your status in relationship to your financial goals and objectives. In preparing your financial analysis various assumptions were used, including income available, annual expenses, amount of money currently invested and rates of return on retirement assets. The analysis of potential funds available for use in retirement included an assumed "fixed" or "static" rate of return on each asset type - taxable, tax-free, tax-deferred, equity and retirement accounts. F5 Fixed or Static rates: Use of a fixed or static rate (where the initial rate used remains static throughout the analysis) can be helpful for visualizing potential future values to see how long your money might last, but may not reflect what happens in the real world of finance. Variable Rates: The Monte Carlo illustration applies a concept of variable rates of return on assets over time, in an attempt to illustrate what might happen in a situation where the returns on assets may be positive in some years and negative in other years. Since there is no way to predict either the positive or negative years or the amount of gain or loss that the assets might be exposed to, a Monte Carlo Simulation is used. This involves preparation of 10,000 separate projections of your financial future, where a rate of return is randomly selected every year in each of the 10,000 simulations. Standard Deviation: The term "standard deviation" refers to the extent of variability, or deviation, above or below the normal average that was used in the original illustration. This illustration uses a blended standard deviation rate based on the assumption that our portfolio will consist of various asset components. Assets like CD's, bonds and savings will be conservative and have a low variation in rate. Other assets like stocks, mutual funds, real estate, etc. will likely show a greater degree of variability in rate of return. It is also assumed that the mix of assets will change as your goals and time horizon changes. Original Result -vs.- Monte Carlo: The bold blue line in the Monte Carlo graph represents the amount of funds available using the fixed or static rates of return. This outcome is unlikely to be realized, because in reality the rates of return will vary each year. The Monte Carlo illustration shows additional lines representing the range of results using variable rates of return each year for each of the 10,000 Monte Carlo simulations. The Monte Carlo "tornado" chart makes it clear that there is a great range of potential outcomes that could be realized in the future. Monte Carlo Simulation Minimum, Average and Maximum Dollar Results Values above the Monte Carlo graph indicate the best, worst and average results at the end of 10,000 Monte Carlo simulations. These show the range of results (high and low), and the average of all Monte Carlo results. All values are based on results at the life expectancy of the last to die or the ages shown. Minimum Average Maximum This represents the lowest return of 10,000 simulations. In most cases at least some of these results will be zero (0), indicating that funds ran out prior to life expectancy. This is the average of all positive Monte Carlo simulations. The average may or may not be similar to the Original Retirement Capital Estimate. This result represents the highest accumulation of the 10,000 simulations. IMPORTANT: The projections or other information generated in the reports regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Each Monte Carlo Simulation is unique; results vary with each use over time. Page 27