developed by the National Association of Variable Annuities (NAVA) and the International Foundation for Retirement Education (InFRE) V.5 rev

Transcription

1 Managing Retirement Income Planning Worksheet developed by the National Association of Variable Annuities (NAVA) and the International Foundation for Retirement Education (InFRE) V.5 rev

2 Managing Retirement Income Planning Worksheet Step 1: Project Current Duration of Retirement Assets A) Personal data: Self Spouse Name: Address: Phone numbers: (w) (w) (h) (h) address: DOB: Profession: B) Please identify the following longevity and health risks that are of concern: Major Minor Not a Concern Prescription drug costs Health costs beyond insurance coverage Providing for long-term care costs Providing for a spouse if you die first Providing for you if spouse dies first Possibility that you or spouse will outlive assets Healthcare needs of parents/in-laws National Association of Variable Annuities and International Foundation for Retirement Education. All rights reserved. The retirement income worksheet contained herein is intended for individual use only. Students of the Retirement Income Management Course may reproduce copies of the worksheet for use with individual clients. This worksheet may not be distributed or sold without express permission by the National Association of Variable Annuities or the International Foundation for Retirement Education. Neither the National Association of Variable Annuities nor the International Foundation for Retirement Education is engaged in rendering financial, legal, investment, retirement planning or other professional advice. They cannot be held responsible for any opinion or advice resulting from the use of this material. If expert assistance is required, the services of a competent professional should be sought.

3 C) Why did they retire? Please rate in order of priority played. Social Security Switched to another career Had enough money Got tired of working/had enough Certain age Met age/years of service requirement Job situation changed Spouse stopped working Declining health of self or spouse Switched to part-time work Started receiving pension Other D) Please rate their top retirement goals from the What Color is Your Retirement? assessment in order of importance. Refer to Tab 7, Worksheets and Checklists, in the workbook. Self Rank Spouse Rank 2

4 E) Monthly Income Need Common Monthly Expenses Essential Expenses A) Current monthly Expenses Stage 1 # of years Stage 2 # of years Stage 3 # of years Housing (include property taxes) Utilities Health care (including medical insurance) Household (furnishings, equipment and supplies) Transportation Food at home Insurance (life and other personal) Debts Income taxes Total Essential Monthly Total Essential Annual Discretionary Spending Meals out Clothing Entertainment (recreation, books, etc.) Personal care (products and services) Professional services Charitable giving Gifts 3 Total Discretionary Monthly Total Discretionary Annual MONTHLY TOTALS ANNUAL TOTALS

5 F) Income Resources and Gaps Name: Essential Expenses Discretionary Spending Ages: M Year No.: F Date: Lifetime Resources: Pension ( ) ( ) Social Security Fixed Annuities Variable Annuities Veteran s Benefits Long-Term Bonds Rental Income SUBTOTAL Less: Less: Managed Resources: Employee Savings Plans ( ) ( ) Traditional IRA Roth IRA Brokerage Account Other Savings Life Insurance Cash Value Home Equity Employment Income Interest & Dividends SUBTOTAL Less: Less: 4 Gaps A. B.

6 Step 2: Identify and Manage Retirement Risks Which of the following risks are of special concern? Risk Client Spouse Indicate Action(s) to Take 1) Longevity Risks: a. outliving resources b. death of spouse More annuitized income Access home equity 2) Inflation Risks a. healthcare b. food Control expenses over time Secure income streams that are/can be protected from inflation c. home value d. college e. other 3) Health and Long-Term Care Risks a. expected and unexpected health and long-term care expenses b. loss of ability to live independently c. changing housing needs d. lack of available facilities or caregivers Review Medicare and other health insurance coverage Identify long-term care options Obtain long-term care insurance Identify housing options Identify potential care givers and facilities 4) Market Risks a. market volatility and asset allocation b. interest rate risk c. point in time Ladder fixed investments Ladder fixed annuity purchases Better diversify assets Rebalance assets Identify if objective is to die broke or leave legacy 5 Do Monte Carlo analysis/projection

7 Step 2: Identify and Manage Retirement Risks (continued) Which of the following risks are of special concern? Risk Client Spouse Indicate Action(s) to Take 5) Family Issues a. divorce of retiree or adult child b. disability or health issues of retiree or adult child c. unexpected death of retiree or adult child with dependents d. job loss of retiree or adult child e. care of grandchildren or other dependents f. elder care for retiree parents g. paying for college while in retirement Enter marital/family counseling Review disability/health policies Review/update will and beneficiary designations Identify adult/child care facilities Obtain long-term care insurance for parents File for financial aid 6) Business and Public Policy Risks a. employer bankruptcy b. employee benefits reduced or eliminated c. insurer solvency d. employment risk: physical e. employment risk: job availability f. lack of diversification: employer stock g. lack of diversification: annuity insurer h. changes in Social Security or Medicare i. income tax rate change j. tax bracket change after death of spouse k. estate tax rate change Build an emergency fund of one year s worth (or more) of health insurance premiums Closely follow employer s financial status while in retirement Have routine physical examinations; exercise regularly Take job skill training classes regularly, such as computer skills Diversify employer stock holdings into other stocks Use 1035 exchanges to diversify annuity holdings Conduct annual tax review Conduct annual estate plan review 6

8 Step 3: Identify Distribution, Tax and Estate Issues and Opportunities A) Capital Gains Planning and Opportunities: Assets with Current Capital Gains Purch. Date Current Value Cost Basis Est. Gain Circle Marginal Tax Rate: 2006 Ordinary Income Tax Rate Single Taxable Income Joint Taxable Income Long-Term Capital Gain Rate 10 Up to 7,550 Up to 15, ,650 61, , , , , , , , , rate expires 12/31/ rate expires 12/31/2008. Long-term = more than one year B) RMD Information Client RMD Information Spouse a. Required beginning date (RBD): a. Required beginning date (RBD): b. Retirement accounts that require minimum distributions: 12/31/ balances b. Retirement accounts that require minimum distributions: 12/31/ balances TOTAL: TOTAL: c. RMD factor for current year: c. RMD factor for current year: 7 d. Required minimum distribution for this year (total dollars in (b) divided by RMD factor (c)) d. Required minimum distribution for this year (total dollars in (b) divided by RMD factor (c))

9 C) Opportunities for Reducing Estate Taxes: Yes No If you are married, are you taking full advantage of the marital deduction? Yes No Do you and your spouse each individually own enough assets for each of you to qualify for the applicable exclusion amounts, currently 1.5 million? Yes No Are both your estate plan and your spouse's plan designed to take advantage of each of your applicable exclusion amounts, currently 1.5 million? Yes No Are you making gifts to family members that take advantage of the annual gift tax exclusion, currently 11,000? Yes No Have you considered charitable trusts that could provide you with both estate and income tax benefits? Estate Planning Wishes Client Estate Planning Wishes Spouse Designated beneficiaries: Amount Designated beneficiaries: Amount Name Age Name Age Estate Planning Status: Estate Planning Status: Estimated current estate value: Estimated current estate value: Estate plan currently in place? Yes No Estate plan currently in place? Yes No Is there a need for charitable giving tools? Yes No Is there a need for charitable giving tools? Yes No Are your beneficiaries for life insurance, IRAs, bank accounts, etc. up to date? Yes No Are your beneficiaries for life insurance, IRAs, bank accounts, etc. up to date? Yes No Does your executor know where to find your estate plan documentation? Yes No Does your executor know where to find your estate plan documentation? Yes No 8

10 Taxation Estimate of Social Security Benefits Worksheet* 1. Add your AGI and tax-exempt interest income Enter half your annual Social Security benefits (if married filing jointly, enter half of your combined benefits) Enter total of lines 1 & If the total of line 3 is less than 25,000 and you are unmarried**, or less than 32,000 and you are married filing jointly, none of your Social Security benefits are taxable. If you are married, filing separately and live with your spouse, go to line If the total of line 3 is greater than the figures above, subtract 25,000 if you are unmarried** and 32,000 if you are married filing jointly and enter amount Divide line 4 by one-half and enter amount Enter the smaller of line 2 or line If the figure on line 3 is less than 34,000 and you are unmarried** or less than 44,000 and you are married filing jointly, the figure on line 6 is the Social Security benefits subject to taxation and stop here. Otherwise, go on to line Compare the figure on line 6 with 4,500 if you are unmarried** or 6,000 if you are married filing jointly and enter the smaller amount Take the figure on line 3 and subtract 34,000 if you are unmarried**, 44,000 if married filing jointly and nothing if you are married, filing separately and live with your spouse. Enter this amount Multiply line 8 by 0.85 and enter amount Enter the sum of figures on lines 7 and Multiply your annual Social Security Benefits (combined benefits if married filing jointly) by 0.85 and enter amount. 11. The smaller of the figures on lines 10 and 11 is the amount of your Social Security benefits subject to taxation. * The worksheet is for estimate purposes only. Consult a tax advisor for actual determination of Social Security benefits taxation. 9 ** Also includes head of household filing separately and living apart from spouse.

11 Step 4: Identify Options for Addressing Gaps Check all that apply Essential Discretionary Reposition managed assets Postpone Social Security and pension Add additional lifetime income Spend less Work part-time Use home equity 10

12 Step 5: Convert Resources into Income Asset Allocation Worksheet Asset Class Asset Current Dollar Amount of Portfolio Amount to Reposition Desired Dollar Amount of Portfolio Cash 401(k)/457/403(b) IRAs Brokerage Account Subtotal Cash Fixed Income Pension Social Security 401(k)/457/403(b) IRAs Brokerage Account Subtotal Fixed Income Domestic Equities 401(k)/457/403(b) IRAs Brokerage Account International Equities 401(k)/457/403(b) IRAs Taxable investments Subtotal Equities Real Estate* Subtotal Real Estate TOTALS * Do not include home if you do not want to consider it as a potential source of retirement income Identify Client Risk Tolerance Current Allocation (Stocks/ Bonds/ Cash)* Conservative (20/50/30) Balanced (40/40/ 20) Growth (60/ 30/10) Aggressive (85/15/ 0) Desired Allocation (Stocks/Bonds/ Cash)* Conservative (20/50/30) Balanced (40/40/ 20) Growth (60/ 30/10) Aggressive (85/15/ 0) 11 * Asset allocation percentages are for illustrative purposes only, and are not held out or intended to be recommendations for actual retiree or other client portfolios. Please refer to your broker/dealer compliance department s guidelines and other internal resources for retiree asset allocation targets to use with your clients.

13 Income Allocation Worksheet Taxes O/C B/N Current Asset Value Amount Converted Post Conversion Asset Value Essential Income Gap A Discretionary Income Gap B Lifetime Sources: Pension Social Security Fixed Annuities _ Variable Annuities _ Veteran s Benefits _ Laddered Bonds _ Rental Income _ SUBTOTALS Managed Sources: Employee Savings Plans Traditional IRA Roth IRA Brokerage Account Other Savings Life Insurance Cash Value Home Equity Employment Income Interest & Dividends SUBTOTALS TOTALS Tax Key: O = Ordinary Income C = Capital Gains B = Both N = Non-taxable 1 2 Managed sources total income: + = Managed Income Managed Assets = 3 = 1

14 Conversion Trade-off Worksheet Read the statements and check the box next to the response that is most appropriate for you. A. I plan to use the money invested in my retirement accounts (401(k), 457, 403(b)) Here and there, whenever I wish. I want the freedom to change my income from year to year, depending on my needs and plans. To pay some of my daily living expenses but save some for extras. I need a certain amount of regular income from invested assets, but I want the freedom to splurge when I want to. To pay the bulk of my daily living expenses regularly. This will be a primary source of ongoing income for me. B. With my wealth, I plan to 1. Pass on as much as I can. I want to leave as much money and property as I can for my beneficiaries and/or charities. D. Having a guaranteed lifetime income is Not a high priority. I have more than enough resources for my needs. I m more interested in growing my wealth for my beneficiaries. Somewhat important, along with creating a legacy. I want a certain level of regular income. But I want to leave something for family members and charities as well. Essential. I want to know I have a regular paycheck no matter how long I live in retirement. Now add up your numbers! Use the space provided to write down the number next to the statements you selected Spend what I want and pass on the remainder. I want a certain level of guaranteed income but the flexibility to spend or pass on the rest. Spend it all during my lifetime. I want to use my money for my needs and wants in my golden years. My family and friends are okay financially. A. B. C. D. Add up your numbers to get your total score. Total Score C. When it comes to managing my investments, I want To have total control of my money. I ll be responsible for managing it throughout all of my retirement. Someone to provide me with some help. I still want some say in how my money is invested, but also want to have help managing my money. A financial company to guarantee me income for life. The company can worry about how to invest my money and make it last, not me. Now that you know your score, look below to find out which income distribution option on the following page might meet your needs. If your score is 4-6 If your score is 7-9 You may want to consider Systematic/Partial Withdrawal options from managed resources. You may want to consider combining Lifetime Income and Systematic/Partial Withdrawal options. If your score is You may want to consider Lifetime Income options. 13 Note: A more detailed analysis might suggest different strategies

15 Retirement Income Distribution Options Option Score How It Works Impact on Beneficiaries Pros and Cons Systematic/ Partial Withdrawal 4-6 Leave your retirement accounts invested and withdraw a fixed dollar amount or a fixed percentage on a regular basis (monthly, quarterly, semi-annually or annually). In addition to regular withdrawals, you can also withdraw any dollar amount whenever you wish. Your beneficiary may choose to withdraw the remaining balance all at once or continue to receive payments until the account balance is depleted. You can change how much you withdraw each year, and you have the flexibility to make big withdrawals for special needs. But since your income isn t guaranteed for life, you could run out of money before you die. If you re a spender, stay away from this option. Combining Lifetime/ Long-term Income with Systematic/ Partial Withdrawal 7-9 Convert a portion of your retirement accounts to an immediate annuity, to provide the desired amount of lifetime/longterm income (such as to cover your essential living expenses). Leave the remaining retirement assets invested and withdraw any additional amounts when needed or on a regular schedule. Your beneficiary may choose to withdraw the remaining balance from the systematic/partial withdrawal accounts or continue to receive payments until the account balance is depleted. Depending on the Payout Option chosen (see next page), your beneficiary may receive some income from your annuity. A certain amount of your income is guaranteed for life, while you retain control over the rest of your retirement account assets. You are choosing less certainty/more opportunity than total lifetime/long-term income but more certainty/less opportunity than systematic/ partial withdrawal. Lifetime/ Long-term Income Convert your retirement accounts to an immediate annuity by purchasing a fixed or variable immediate annuity. The amount of your income is determined by the Payout Option you choose (described on the next page), your age, your beneficiary s age, and current interest rates or expected market returns. You can guarantee your beneficiary(s) a certain amount of income for a certain time period or even for their lifetime. Alternatively, you can totally eliminate your beneficiaries from receiving any income at all, if you so choose. Your income is guaranteed for life. If you are a spender, this option will help keep you from overspending. You give up control over how much and when you can take withdrawals. You also limit or eliminate the amount of money you can pass on to your beneficiaries. With fixed lifetime/long-term income, you ll get a set dollar amount regularly; but inflation will make this money worth less and less in the future. With variable lifetime/longterm income, you have a better chance of maintaining your standard of living over time; but your income will vary from period to period. 14

16 Identify Your Appropriate Annuity Payout Option(s) To determine which annuity payout option might best meet your needs, read the descriptions below and check the box next to the one that is most appropriate for you. I want the most income I can get for as long as I live. No one else depends on me financially. When I die, whether it s in 20 days or 20 years, nothing will be left for any beneficiaries. You ve chosen a Single Life option. I also want to take Systematic/Partial Withdrawal payments. Yes No I want income for life with at least a certain number of payments. I know I ll have income for as long as I live. If I die before receiving all of my payments, my beneficiaries are guaranteed to receive the rest. You ve chosen a Life Annuity with Guaranteed Payments option. I also want to take Systematic/Partial Withdrawal payments. Yes No I want income for a certain number of years. Instead of lifetime/long-term income, I know I ll only receive payments for a set number of years. But if I die before I ve received all my payments, my beneficiaries are guaranteed to receive the rest. You ve chosen a Period Certain option. I also want to take Systematic/Partial Withdrawal payments. Yes No I want to receive income for number of years. I want income for as long as my beneficiary and I live. I know we will have guaranteed income as long as we live, even if one of us dies. But once we pass away, there will be nothing left for any other beneficiaries. You ve chosen a Joint and Survivor option. I also want to take Systematic/Partial Withdrawal payments. Yes No 15

17 Step 6: Maintain and Update the Plan Annual Review Step 1. Are Income Goals Being Met? Reminders: a. avoid converting capital gain assets into ordinary income b. use annuitized money to meet living expense needs; use non-annuitized money to meet living expense wants c. review the timing of investment, annuity and reverse mortgage cash flows Date Last Performed/ Checked for Client Date Last Performed/ Checked for Spouse 2. Are Assets Optimized? Reminders: a. Check how long retiree/spouse hope to work b. Check portfolio asset allocation; include bond assets like Social Security or pensions c. Liquidate taxable assets first d. Check SWP percentage e. Check required minimum distributions 3. Is There a Need for Additional Lifetime Income? Reminders: a. convert tax-sheltered assets into annuities b. use variable annuities or fixed annuities with a COLA feature c. wait to annuitize until at least age 70 d. SWP up to 4-5 of the non-annuitized portfolio e. avoid changing the overall portfolio asset allocation when you annuitize 4. Did or Might the Tax Situation Change? Reminders: a. capital gain income is more income tax-efficient than ordinary income, but capital gain assets carry estate tax advantages b. if retiree doesn t need the income now, delay Social Security until age 70 c. spend taxable or tax-sheltered money depending on the current year s income tax situation 16 d. forecast RMDs out several years, especially if there are large retirement balances in order to minimize potential taxability of Social Security.

18 Income Allocation Summary Current Asset Value Post Conversion Asset Value Essential Expenses Discretionary Spending Lifetime Sources: Pension Social Security Fixed Annuities _ Variable Annuities _ Veteran s Benefits _ Laddered Bonds _ Rental Income _ SUBTOTALS Managed Sources: Employee Savings Plans Traditional IRA Roth IRA Brokerage Account Other Savings Life Insurance Cash Value Home Equity Employment Income Interest & Dividends SUBTOTALS TOTALS 17