Financial Plan & Analysis: Retirement Check-Up

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1 Financial Plan & Analysis: Retirement Check-Up for Client Name Client Address Client City, State ZIP Prepared by Steven Stanganelli, CFP, CRPC, AEP Clear View Wealth Advisors, LLC

2 Retirement Stress -Test Comparison Notes for SAMPLE GENERAL OBSERVATIONS: Steven J. Stanganelli, CFP, CRPC, AEP CERTIFIED FINANCIAL PLANNER Professional CHARTERED RETIREMENT PLANNING COUNSELOR NAPFA Registered Financial Advisor November 19, 2018 The retirement analysis has been based on your updated spending plan and projected capital project needs. Generally, you have enough resources to sustain your lifestyle goals under a range of investment allocation, tax, and inflation assumptions. Confidence Level for Probability of Success: 65% probability of funding 100% of all goals without future adjustments based on 5.6% average annual portfolio rate of return through age 93 (Money Guide Pro) 1, 2 88% probability of funding 100% of all goals without future adjustments based on 5.3% average annual portfolio rate of return through age 86 (Money Guide Pro) >95% probability of funding 100% of all goals without future adjustments based on 5.6% average annual portfolio rate of return through age 93 when using a Reverse Mortgage (Money Guide Pro) 75% probability of funding 100% of all goals based on potential 6.5% average annual portfolio rate of return through age 93 (Riskalyze) 87% probability of funding 100% of all goals based on potential 6.5% average annual portfolio rate of return through age 86 (Riskalyze) >95% probability of funding 100% of all goals based on potential 6.5% average annual portfolio rate of return through age 93 when using a Reverse Mortgage draw of $12,000/year (Riskalyze) 82% probability of funding 100% of all goals based on 5% average annual portfolio rate of return for 20 years from Social Security claiming through age 87 (RetireSoft Retirement Planner) 70% probability of funding 100% of all goals based on 5% average annual portfolio rate of return for 25 years from Social Security claiming through age 93 (RetireSoft Retirement Planner) 78% probability of funding 100% of all goals through age 93 (Flexible Retirement Planner) *Note 1: Most weight in this analysis is given to the Money Guide Pro results because it is more dynamic in modeling projected returns, inflation, Social Security strategies, and cash flow. *Note 2: The results are similar to results illustrated from the review of August 2017 (67% probability).

3 Overall Observations: Moderately confident probability to fund all goals and income needs without changes to expenses or including oil well revenue assuming moderate inflation and 5% to 6% average returns Higher inflation, higher taxes and lower investment returns reduces this probability No portfolio withdrawals projected prior to full retirement Inflation assumed to average 2.5% per year in base case Social Security benefit claimed at Full Retirement and estimated to start at $2,126/month up to $2,199/month Portfolio returns are expected to average 6% for a portfolio at 70% equity and 5% for a portfolio at 60% equity Expenses projected to include increasing healthcare (+$5,300/year), other property taxes ($1,000/year) and living expenses ($50,650/year) 2024 First Full Retirement Year Before-Tax Target Total Spending: $65,400 (2018 dollars plus 2.5%/year inflation) equals $74,000 in 2024 Maintain one year of after-tax expenses in cash or near-cash (i.e. money markets, short-term CDs, short-term ETFs like MINT) or approximately $56,000 Target Portfolio Annual Rate of Return: 5.35% to 6% Average (including 1.6% dividend & interest yield) Sustainable Average Portfolio Withdrawal Rate (after Social Security Claimed in 2024): 5.7% during initial year and dropping to 4.7%/yr. Sustainable Dollar Range for Portfolio Withdrawal: $3,250/month (adjust for 2.5% estimated inflation)

4 Net Worth Comparison

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6 Income: Income per month Current (2018 to 2023) 2024 (retirement) MetLife $30,828/yr Social Security Disability $25,140/yr Social Security $0 $26,388/yr IRA Distributions $39,000/yr to $43,200/yr Annuity $3,840/yr Dividends $561/yr $500/yr Interest Income $94/yr $90/yr TOTAL $4,719/month or $56,623/year $5,818/month or $69,818/year Up to $6,168/month or $74,016/year The bulk of your income prior to retirement will continue to be from Social Security and MetLife disability benefits (not taxable). This will be supplemented by dividends and interest income. Royalty income from oil exploration and pumping activities on your property in Texas has not been included in the analysis. This royalty income has been as high as $50,000 in TY2014, as low as $0 in other years, and $8,973 as recently as TY2017 (Form 1040, Line 17). In 2024 your IRA withdrawals are expected to total approximately $39,000 to $43,000 which translates to a withdrawal rate of about 4.7%. You have three Social Security options outlined in the Social Security Timing Reports previously reviewed (dated 8/23/2017). The compromise position is the one labeled as First Alternate Social Security Strategy. File a standard application at age 66 years and 6 months (12/19/2023) and receive an estimated benefit of $2,126/month (or $25,512/year) up to $2,199/month (or $26,392/year). Lifestyle Spending: Your current lifestyle cash needs are estimated at about $65,400 per year in the Base Year of this plan (2018). Taxes: In 2017, you paid a total of $0 for federal taxes and $223 in Massachusetts state income taxes. This represented a combined effective tax rate of less than 1% based on all cash flow/income. Based on taxable income, your combined effective tax rate was 2.2%. In 2018, you are expected to have a similar income and tax profile. In 2024, as non-taxable disability income ends and regular Social Security benefits begin, you are expected to have a total income of approximately $69,900 comprised mostly of taxable portion of Social Security benefits and IRA distributions. Your projected combined tax liability is estimated at $9,872 or an effective rate of 14.1%.

7 Investment Risk: Based on the Riskalyze questionnaire you completed on 7/31/2018, your Risk Number has not significantly changed. Your current Risk Number is calculated as 62 out of 99. Personal Risk Number 62 Translation: Over any six-month period, you re comfortable risking negative 12.9% return (or about - $66,376). Current Portfolio Risk Number 56: Over any six-month period, your current portfolio has the risk of a negative 11.3% return (or about $57,000). Over any six-month period, your current portfolio has the potential of a positive 7.9% return (or a gain of about $40,200) with an upper limit of 19.1% (or $97,600). Investment Allocation: Your current and proposed investment allocation is approximately 64% equities. Based on your age and income needs, you ll need to maintain an adequate allocation to equities in retirement to counter inflation. You should target a minimum range for equities between 54% and 59% in retirement. Rule of Thumb Target: 115 minus age of younger spouse To mitigate market volatility risk, you may want to consider an allocation to no-load/low-cost fixed- or variable-annuities that provide downside protection and can be used as an alternative to bank CDs. Current: No material change in current investment allocation Target allocations are separate from cash reserve bucket one year of fixed overhead expenses.

8 Withdrawal Plan: Your projected IRA withdrawals needed to sustain your household cash flow needs in retirement are estimated between $39,000 and $43,200 per year. After you begin to receive Social Security benefits, you should reduce your portfolio withdrawals to $3,250/month or no more than 4.7% of your total portfolio balance as of the end of the year before.

9 Money Guide Pro: Guide to interpreting results Estimated Percent of Goals Funded: The percentage of listed goals that are funded Safety Margin (Value at End of Plan): Dollar amounts show amount of projected cash at end of plan after Monte Carlo simulations. The top dollar figure is in Current Dollars and the bottom number is in Future Dollars. Higher is better. Probability of Funding All Goals: This indicates probability of success based on the number of Monte Carlo simulations with a positive Safety Margin (or money left over at end of planning horizon). General Observations You generally may be able to fund 100% of goals with varying probabilities of success Probabilities of success increase as you increase your target equity allocation Probabilities of success increase with lower (actuarial) life expectancies Probabilities of success decrease with increased inflation

10 Base versus What If Scenarios Assumptions: Planning period/life expectancy set at 25% probability level for all scenarios to age 93 After-tax living expenses of $57,000/year+/- (includes supplemental healthcare-related costs) Inflation at 2.5% Continue prepaying mortgage by $75/month or $900/year Budget for $1,000 per year in property taxes related to oil well NOTE: Monte Carlo Results indicate the probability of funding all goals (needs and wants) listed above To increase probability of success and safety margin, consider the following recommendations reflected in the what if scenario above: Maintain investment allocation at or near 61% - 64% equity Reduce living expenses by $3,800/year (current dollars) or $316/month Reduce projected outlay for new car in 2020 from $20,000 to $14,400

11 Riskalyze Retirement Map Based on Long-Term Average Returns for market asset classes, 2.5% inflation and life expectancy through age 93 Monthly Withdrawal + Social Security = $39,000/year + $26,392/year = $65,392/year TOTAL HOUSEHOLD INCOME PROJECTED: $65,392 beginning at age 66 yrs, 6 mos Utilizing First Alternate Social Security Option claiming at age 66 yrs, 6 mos Estimated Lifestyle Needs: $65,392/year ($5,550/month) Discretionary Retirement Lifestyle Expenses: $50,650/year Healthcare Costs: $5,300/year Oil Well Taxes: $1,000/year Income Taxes (@ 13.5% effective): $8,828/year

12 Riskalyze Retirement Map Based on Long-Term Average Returns for market asset classes, 2.5% inflation and average life expectancy through age 86 Monthly Withdrawal + Social Security = $39,000/year + $26,392/year = $65,392/year TOTAL HOUSEHOLD INCOME PROJECTED: $65,392 beginning at age 66 yrs, 6 mos Utilizing First Alternate Social Security Option claiming at age 66 yrs, 6 mos Estimated Lifestyle Needs: $65,392/year ($5,550/month) Discretionary Retirement Lifestyle Expenses: $50,650/year Healthcare Costs: $5,300/year Oil Well Taxes: $1,000/year Income Taxes (@ 13.5% effective): $8,828/year

13 Riskalyze Retirement Map Based on Long-Term Average Returns for market asset classes, 3% inflation, long life expectancy through age 93 and utilizing a Reverse Mortgage to supplement cash flow Monthly Withdrawal + Social Security + Reverse Mortgage = $27,000/year + $26,392/year + $12,000/year TOTAL HOUSEHOLD INCOME PROJECTED: $65,392 beginning at age 66 yrs, 6 mos Utilizing First Alternate Social Security Option claiming at age 66 yrs, 6 mos Estimated Lifestyle Needs: $65,392/year ($5,550/month) Discretionary Retirement Lifestyle Expenses: $50,650/year Healthcare Costs: $5,300/year Oil Well Taxes: $1,000/year Income Taxes (@ 13.5% effective): $8,828/year

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15 Retirement Planner Test for SAMPLE - Through Average Life Expectancy (age 86) November 19, 2018 Assuming 5.1% Rate of Return and living on $65,392/year (Current Year 2018) Adjusted for 2.5% Inflation and SSI COLA of 2% Cone of Uncertatinty: Earliest potential age when you run out of funds assuming investment rate of return varies by 4% (investment return uncertainty) Pension includes Social Security benefit ($26,392/year) plus estimate payout of annuity

16 Retirement Planner Test for SAMPLE - Assuming Higher Rates of Return and SSI COLA Assuming 6% Rate of Return and living on $65,392/year (Current Need 2018) Adjusted for 2.5% Inflation and SSI COLA of 2.2% Cone of Uncertatinty: Earliest potential age when you run out of funds assuming investment rate of return varies by 4% (investment return uncertainty) Pension includes Social Security benefit ($26,392/year) plus estimate payout of Nationwide/Jefferson national annuity

17 RetireSoft Retirement Planner Investment Portfolio 750, ,353 Annual Savings 0% Annual Withdrawals (66,053) Additions (Subtractions) Portfolio Return 5% 34,907 Age CLIENT Retirement Income CLIENT s Social Security - 25, Other retirement income 1 3,840 3,840 Total Retirement Income (A) 3,840 29,352 Living Expenses Excluding Taxes 3% 63,997 65,597 Estimated Taxes 14% 5,896 9,245 Living Expenses Including Taxes (B) 69,893 74,842 Amount Needed from Portfolio (B - A) 66,053 45,490 Note: Other retirement income beginning in 2023 will be the annuity payout

18 Estimated Withdrawal Rates % 5.4% 5.1% 4.8% 4.7% 4.6% 4.6% 4.5% 4.4% OK Good Good Very Good Very Good Very Good Very Good Very Good Excellent Pivot Age Pivot age = first full year receiving Social Security benefits Projection method Annual withdrawal increases Portfolio returns & inflation Asset allocation Increase by inflation each year Monte Carlo simulation 60% Stocks / 40% Bonds Monte Carlo Simulation (2,000 Trials) Success Probability: 20 Years 82% 25 Years 70% 30 Years 59% 35 Years 52% 40 Years 47% Note: Success Probability is from date of retirement (base case = 66 ½ rounded to 67)

19 Assumptions for RetireSoft Retirement Planner Version 1 11/19/2018 Name CLIENT Birth date 5/15/1957 Spouse's name Spouse's birth date Retired? (Y or N) N Investment Portfolio 515,110 Assumed portfolio return 5.1% Preretirement savings Annual amount 15,840 Annual % increase 0.0% Social Security Monthly amount 2,126 Beginning at age 67 Spouse's Social Security Monthly amount 0 Beginning at age Living expenses in retirement excluding income taxes Annual amount 56,564 Annual % increase before retirement 2.5% Effective tax rate in retirement 14% Other fixed/recurring income 1 Which spouse? CLIENT Monthly amount 320 Beginning at age 66 Other fixed/recurring income 2 Which spouse? Monthly amount Beginning at age Other fixed/recurring income 3 Which spouse? Monthly amount Beginning at age Retirement age 66

20 Monte Carlo Simulator