SMART STRATEGIES FOR RETIREMENT: YOUR FINANCIAL QUESTIONS ANSWERED

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1 SMART STRATEGIES FOR RETIREMENT: YOUR FINANCIAL QUESTIONS ANSWERED ROGER PASCHKE HEARST CHIEF INVESTMENT OFFICER AUGUST 8, 2018 *The information being presented at this event is for general information, education and reference purposes only. It is not meant to provide, or take the place of, specific legal,tax or investment advice.

2 HEARST INVESTMENT TEAM Roger Paschke Chief Investment Officer Karen Alsup Officer & Managing Director, Institutional Investments Lilian Mei Director, Investment Research &Analysis Marta Matos Executive Assistant

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4 DID YOU KNOW? MOST PEOPLE RETIRE EARLIER THAN EXPECTED. Age of Retirement % % % % 83% retire for a variety of reasons before age % 70+ 1% Source: 2017 MFS Retirement Income Survey

5 MOST SURPRISING EXPENSES IN RETIREMENT (U.S. RETIREES) 29% 26% 23% 7% 7% 3% 3% 2% HEALTHCARE LEISURE BASIC LIVING COSTS HOUSING TAKING CARE OF FAMILY CHARITABLE DONATIONS OTHER DEBT Healthcare Costs in Retirement A 65-year-old couple retiring this year will need $275,000 to cover their healthcare costs in retirement. Source: 2017 MFS Retirement Income Survey

6 HEALTHCARE AFTER RETIREMENT: FACTS & FIGURES The average 65-year-old couple at the end of 2017 will spend approximately $275,000 to cover their healthcare costs in retirement. By 2040, that cost is expected to increase to $490,000. If you are retired, but not yet eligible for Medicare, your average cost is $13,000 per individual/per year. That does not include family coverage. Long-term care insurance can be very expensive, it is about $3,000 a year per couple. Medicare does NOT cover long-term care. The average nursing home cost is $76,000 a year/$209 per day. Medicare also does NOT cover: dental care, hearing aids, eye exams/glasses/contacts, footcare, acupuncture, care received outside of the U.S. and personal aids.

7 RETIREMENT: HOW MUCH DEBT DO RETIREES HOLD? 44% of U.S. retirees surveyed hold at least one form of debt. Carrying Debt Paid Off Before Retirement Mortgage 35% 58% Education 4% 84% Credit Card 25% 56% Medical 5% 69% Business 0% 100% 35% of U.S. retirees carry mortgage debt into retirement. 29% Carry UNDER $50,000 into retirement 71% Carry OVER $50,000 into retirement Source: 2017 MFS Retirement Income Survey

8 LEAVE YOUR RETIREMENT SAVINGS ALONE Did you know that loss aversion is a strong driver of behavior? Especially for younginvestors. Quarter-End Account Balance Declines by 5% (from $100,000 to$95,000) Do you 36% 42% 48% 22% 25% 22% 20% 19% 18% 10% 17% 12% 8% 2% 1% DO NOTHING SEEK ADVICE FROM A TRUSTED SOURCE ON WHAT ACTIONSTO TAKE REALLOCATE PLAN ASSETS TO DECREASE RISK EXPOSURE MAKE ADDITIONAL CONTRIBUTIONS TO RETIREMENT PLAN ACCOUNTS STOP MAKING CONTRIBUTIONS TO RETIREMENT PLAN ACCOUNTS Gen Y Gen X Boomer Source: 2017 MFS Retirement Income Survey

9 LEAVE YOUR RETIREMENT SAVINGS ALONE Quarter-End Account Balance Declines by 15% (from $100,000 to$85,000) Do you 19% 17% 25% 31% 39% 35% 27% 22% 24% 13% 18% 14% 10% 4% 2% DO NOTHING SEEK ADVICE FROM A TRUSTED SOURCE ON WHAT ACTIONSTO TAKE REALLOCATE PLAN ASSETS TO DECREASE RISK EXPOSURE MAKE ADDITIONAL CONTRIBUTIONS TO RETIREMENT PLAN ACCONTS STOP MAKING CONTRIBUTIONS TO RETIREMENT PLAN ACCOUNTS Gen Y Gen X Boomer Source: 2017 MFS Retirement Income Survey

10 WHICH INVESTMENT PRODUCTS ARE THE BEST SUITED FOR RETIREMENT NEEDS? 41% of retirees think that fixed income investments are best suited for retirement needs. 19% 8% 15% 20% 14% 15% 12% 8% 11% 17% 9% 13% 5% 3% TARGET DATE FUNDS EQUITY MUTUAL FUNDS INDIVIDUAL FIXED INCOME MUTUAL CASH ANNUITY INDIVIDUAL BONDS STOCKS FUNDS U.S. Participant U.S. Retiree Source: 2017 MFS Retirement Income Survey

11 TIMING THE MARKET MAY COST YOU % Performance (October 2008 through June 2011*) D: Maintained equity balance throughout period & continued contributing C: Maintained equity balance throughout period 64% 50% B: Dropped equity balance to 0% between October 2008 through March 2009, then reinvested A: Investors who dropped their equity balance to 0% between October 2008 through March % 25% INVESTOR A INVESTOR B INVESTOR C INVESTOR D Source: Recent Fidelity survey showing the actual performance of 401(k) plans for various investors

12 EXAMPLE: HOW FUNDS HAVE DONE IN THE S&P SINCE CRASH OF 2008 S&P fell to at the lowest pointon March 9, 2009 Ex: $10,000 on August 2008 $5,500 (-45%) on March 2009 $34,000 on July 2018 (annual compounded interest) $67,400 on July 2018 with $200/month contribution

13 HOW DO PARTICIPANTS PRIORITIZE FEES? What Will Keep U.S. Participants in Plan Upon Retirement? LOWER COST 49% ACCESS TO PRODUCTS THAT GENERATE GUARANTEED INCOME STREAMS 28% ACCESS TO MANY INVESTMENT OPTIONS, INCLUDING ANNUITIES 27% ACCESS TO ONE-ON-ONE ADVISING 17% EMPLOYER PROMOTION 16% DO NOT KNOW 22% Source: 2017 MFS Retirement Income Survey

14 SOCIAL SECURITY: HOW MUCH WILL I GET WHEN I RETIRE? Log on towww.ssa.gov. Create a my Social Security account. You will be able to access your latest Social Security statement, which gives you an estimate of your retirement benefits, based on work history. Your benefit is based on an average of quarterly earnings over a 35-year work life.

15 SOCIAL SECURITY: WHEN CAN I START RECEIVING? Year of Birth Full Retirement Age 1942 or earlier 65 years years years & 4-10 months 1960 or later 67 years

16 SOCIAL SECURITY: WHY SHOULD I WAIT? Your benefits will be different if you claim before or after full-retirement age. You can choose to claim Social Security retirement benefits as early as age 62, or as late as age 70. If you choose to start your Social Security benefits early, your monthly benefit will be permanently reduced. A rule of thumb is if you take your benefit at 62 years, you will receive on average 75% of your monthly full benefit. By waiting until you are 70, you will receive 132% of your full benefit. Every year that you can delay taking your Social Security benefit will earn you approximately an additional 8%.

17 SOCIAL SECURITY: EXAMPLE Fred is 61 yearsold. His average salary is$70,000. He has worked for 35 years. Standard life expectancy is 81 years. Percentage Change to Benefit $36,108/year Delayed Retirement Credit $19,716/year Actual Reduction 75% $26,856/year 100% 132% AGE 62 AGE 66 AGE 70

18 CAN YOU REALLY CATCH UP ON RETIREMENT SAVINGS?

19 CATCH-UP CONTRIBUTIONS: HOW DO THEY WORK? Starting at the age of 50, the IRS allows workers to make catch-up contributions to their 401(k) retirementaccounts. These are bonus contributionsabove the standard limits of $18,000. Catch-up contributions allow savers to contribute an additional $6,000 to a 401(k) up to $24,000 a year.

20 CATCH-UP CONTRIBUTIONS HOW CAN I MAXIMIZE SAVINGS? #1 Embark on a bold catch-up plan starting right now. #2 Find ways to save as much as you can. #3 Plan to retire later, which will allow more time to save and will delay taking Social Security.

21 10 TIPS TO PLAN FOR A COMFORTABLE RETIREMENT 1. Leave your retirementsavings alone 2. Keep saving & investing 3. Avoid investment decisions based on emotion or reactions to the market 4. Find low investmentfees 5. Maximize your Social Security payments; delay taking your benefit until age 70 to receive up to 32% more 6. Eliminate debt 7. Prepare an emergencyfund 8. Know your monthly expenses 9. Plan to livelonger 10. Expect the unexpected

22 SMART STRATEGIES FOR RETIREMENT: YOUR FINANCIAL QUESTIONS ANSWERED ROGER PASCHKE HEARST CHIEF INVESTMENT OFFICER AUGUST 8, 2018 *The information being presented at this event is for general information, education and reference purposes only. It is not meant to provide, or take the place of, specific legal,tax or investment advice.

23 STILL HAVE QUESTIONS? Visit hearst.com/hearstwealth Lilian Mei at