Susan & David Example

Transcription

1 Personal Retirement Analysis for Susan & David Example 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 Disclaimer 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 - B19 8 Asset Accounts (text) - C1 9 Account Summary Graph - C2 10 Taxable Account - C4 11 Equity and Other Accounts - C5 12 Tax-Free Account - C7 13 Tax-Deferred Account - C8 14 Retirement Account 1 - C10 15 Retirement Account 2 - C10a 16 Roth Indiv. 1 - C11 17 Roth Indiv. 2 - C11a 18 Inherited IRA Indiv. 1 - C12 19 Income Tax Calculation (text) - D1 20 Income Tax - Current Year - D3 21 Tax vs Income Graph - D4 22 Tax Summary - D6 23 Taxable Income Analysis - D7 24 Dividend, Capital Gain Sources - D7a 25 Federal Income Tax Worksheet - D8 26 Retirement Estimate Graph - F2 27 Retirement Capital Estimate - F3 28 Monte Carlo - F4 29 Net Worth - F6 30 Page 1

3 Disclaimer This report is intended to provide you with an analysis of your major financial goals. It is based on the data and assumptions you have provided or instructed us to make. Consequently, the outcome of the analysis will be dependent upon the accuracy of your data and reasonableness of your assumptions. Assumed rates of return may also either be assigned by your Adviser, or if utilizing Asset Allocation, be based on the historical returns of the benchmark indexes for the asset class. Please review all assumptions before reviewing the rest of the report to ensure the accuracy and reasonableness of the assumptions. Inaccurate or unreasonable assumptions may materially impact the results of the plan. It is important to note that actual results may differ due to any number of events. Some events are within your control, such as your spending habits, while other events, such as market performance, interest rates and tax policies, are not. To the extent that any of the referenced assets represent current account holdings there is no guarantee that these rates will be achieved. In addition, we have made no attempt to review your property and liability insurance policies (auto and homeowners, for example). We strongly recommend that in conjunction with this financial plan, you consult with your property and liability agent to review your current coverage to ensure it continues to be appropriate. In doing so, you may wish to review the dollar amount of your coverage, the deductibles, the liability coverage (including an umbrella policy), and the premium amounts. While assumptions are based on historical index data, past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Assumed rates of return are hypothetical which do not reflect the deduction of fees and charges inherent to investing in securities are not representative of any specific securities. Your results will vary. Growth assumptions for business assets and stock options are speculative and should be discussed and agreed upon by you and your financial advisor. Assumed rates of return and standard deviation assumptions used in the Monte Carlo analysis are based on historical asset class return data. LPL Financial does not provide tax or legal advice. The information contained in this report should be used for informational purposes only. The appropriate professionals should be consulted on all legal and accounting matters prior to or in conjunction with implementation of the plan. 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: Susan David Joint / CP Trust/Oth. Total Checking accounts, cash $12,200 $12,200 Savings accounts 3,500 3,500 Money Market accounts 31,603 31,603 Certificate of Deposit 20,000 20,000 Gov't bonds, T Bills, Funds 22,000 22,000 Muni bonds, funds 25,000 25,000 Annuities (fixed, variable) 30,000 30,000 Insurance Cash Value, Dividends 12,450 2,850 15,300 Total $42,450 $28,350 $88,803 $159,603 Equity (Investment) Accounts: Stocks 15,000 45,429 60,429 Mutual Funds 242,417 2,745 29, ,225 Other ventures, businesses 24,600 24,600 Total $257,417 $2,745 $99,092 $359,254 Retirement Accounts: 401(k) accounts 93,500 93, (b), SEP, Simple 77,300 77,300 Roth accounts 16,000 16,000 Inherited IRAs 12,200 12,200 Total $105,700 $93,300 $199,000 Personal Use Assets: Personal property 15,000 15,000 Jewelry, furs 2,500 2,500 Autos 12,000 19,600 31,600 Total $27,000 $2,500 $19,600 $49,100 Real Estate Assets: Residence 307, ,000 Real Estate, REIT 5,750 5,750 Rental real estate 200, ,000 Total $312,750 $200,000 $512,750 Total Assets $746,797 $126,895 $407,495 $1,281,187 A3 LIABILITIES Susan David Joint / CP Trust/Other Total Residence mortgage ($272,000) ($272,000) Credit Cards (6,640) (6,640) Life insurance loans (2,500) (2,500) Rental real estate (118,000) (118,000) Total Liabilities ($9,140) ($390,000) ($399,140) NET WORTH $737,657 $126,895 $17,495 $882,047 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 0.00% 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 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. Page 6

8 Cash Flow Illustration B7 Ages Earned Income Scheduled Cash flow sources and Required Minimum Distributions Retire/Roth Accounts * Investment Accounts * Pension/ SocSec Other Income Total Sources Less Living Expense & Taxes Surplus (Shortage) $145,000 $763 $6,628 $152,391 ($141,204) $11, , , ,238 (146,103) 11, , ,301 (168,735) (3,434) , , ,373 (195,645) (16,272) , , ,425 (186,800) 2, ,742 1,030 10, ,942 (147,051) (43,109) ,524 1,095 9, ,918 (156,433) (50,515) ,164 31,829 9,775 42,768 (180,258) (137,490) ,238 32,466 10,262 43,965 (155,882) (111,917) ,317 59,179 82, ,960 (128,334) 14, ,402 60,363 84, ,169 (131,231) 14, ,592 61,570 86, ,544 (137,814) 19, ,194 62, , ,643 (123,937) 73, ,587 64,058 12, ,488 (151,267) (50,779) ,001 65,339 13, ,730 (160,900) (57,170) ,523 66,645 13, ,118 (168,815) (61,697) ,976 67,978 14, ,473 (173,912) (65,439) ,443 69, , ,025 (235,936) 99, ,046 70,724 99,770 (154,814) (55,044) ,587 72, ,726 (167,209) (64,483) ,291 73, ,873 (173,015) (67,142) ,980 75, ,034 (179,008) (69,974) ,742 76, ,296 (185,224) (72,928) ,578 78, ,664 (191,668) (76,004) ,490 79, ,138 (198,290) (79,152) ,356 81, ,597 (205,062) (82,465) ,279 82, ,144 (211,974) (85,830) ,079 84, ,601 (219,048) (89,447) ,907 86, ,120 (197,840) (64,720) ,752 87, ,689 (204,997) (68,308) ,417 89, ,113 (212,383) (72,270) ,058 47,335 99,393 (183,229) (83,836) ,388 48, ,669 (176,210) (74,541) ,638 49, ,885 (188,675) (84,790) B9 C10..C11a C4..C8 B10 B12, B12a B8 * Scheduled distributions, interest or dividends taken in cash or amounts taken to meet the IRS minimum distribution requirements. Page 7

9 Allocation of Cash Flow Surplus or (Shortage) B19 Ages Taxable % Amount Equity/Other Tax-Free Tax-Deferred Retirement Accounts Roth Accounts % Amount % Amount % Amount Amount Amount $2, $8, , , na (3,434) na na na na (16,272) na na na , na (38,276) na (4,833) na na na na (50,515) na na na na (137,490) na na na na (111,917) na na , , , , , , , , na (50,793) na (225) na na na na (57,113) na na na na (61,701) na na na na (65,443) na na , , na (40,155) na (14,900) na na na na (64,489) na na na na (67,148) na na na na (69,981) na na na na (72,935) na na na na (76,012) na na na na (79,160) na na na na (82,474) na na na na (85,839) na na na na (89,455) na na na na (64,730) na na na na (68,319) na na na na (72,280) na na na na (77,782) na (6,399) na na na na (74,541) na na na na (71,894) na (12,147) 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 $47,303 $2, $1, ,724 2, , ,219 (3,434) , ,063 (16,272) , , ,276 (38,276) , ,928 5, ,127 7, ,420 29, ,793 (50,793) , ,155 (40,155) B 19 $1,184 1,268 1,278 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 $350,004 $3,132 $8, $26,563 $266 $5, ,649 3,161 8, , , ,158 3, , , ,513 3, , , ,532 3,251 2, , , ,601 2,490 (4,833) , , ,866 2,522 (50,515) , , ,447 (137,490) , , ,359 (111,917) , , ,446 8, , , ,181 8, , , ,996 11, , , ,918 44, ,019 5,499 13, ,160 (225) ,182 6,030 15, ,117 (57,113) ,456 6,081 15, ,460 (61,701) ,065 5,849 14, ,824 (65,443) ,343 5,563 13, ,724 59, ,551 5,920 14, ,715 (14,900) ,790 6,466 16, ,605 (64,489) ,581 6,436 16, ,697 (67,148) ,939 6,162 15, ,488 (69,981) ,033 5,845 14, ,540 (72,935) ,838 5,479 13, ,443 (76,012) ,330 5,061 12, ,761 (79,160) ,485 4,588 11, ,086 (82,474) ,275 4,053 10, ,887 (85,839) ,672 3,452 8, ,720 (89,455) ,642 2,781 6, ,907 (64,730) ,092 2,187 5, ,269 (68,319) ,875 1,651 4, ,825 (72,280) ,237 1,046 2, ,782 (77,782) B19 Page 12

14 Tax-Free Account C7 Ages Begin year Account Balance $25, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Annual Additions or Withdrawals Annual Deposit Cash Flow Surplus (short) Cash withdrawal Annual Interest % Rate Annual Interest (6,399) (74,541) (71,894) B $1, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Page 13

15 Tax-Deferred Account C8 Ages Begin Year Account Balance Annual Additions or Withdrawals Annual Deposit Cash Flow Surplus (short) Cash withdrawal Annual Interest $30, $2,175 $2, , ,333 4, , ,502 7, , ,683 9, , ,878 12, , ,086 15, , ,310 18, , ,550 22, , ,807 26, , ,083 30, , ,380 34, , ,697 39, ,484 4,169 43, ,653 4,419 48, ,072 4,684 52, ,756 4,965 57, ,721 5,263 62, ,984 5,579 68, ,563 5,914 74, ,477 6,269 80, ,746 6,645 87, ,391 7,043 94, ,434 7, , ,900 7, , ,814 8, , ,203 8, , ,095 9, , ,521 9, , ,512 10, , ,103 11, , ,329 11, , ,229 12, , ,843 13, , ,214 (12,147) 13,771 12, , , ,838 B19 % Rate Annual Interest Taxable Income Taxable Accrued Interest Page 14

16 Retirement Accounts - Susan 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 58 $93,500 $5,200 $3,900 $5, ,511 5,356 4,017 6, ,705 6,365 4,774 7, ,696 6,556 4,917 9, ,171 7,203 5,402 10, ,044 7,419 5,565 11, ,680 7,642 5,731 13, ,197 14, ,489 15, ,638 16, ,696 17, ,718 18, ,761 19, ,887 (12,750) 19,851 12, ,988 (13,476) 20,253 13, ,765 (14,242) 20,634 14, ,158 (15,049) 20,991 15, ,101 (15,900) 21,320 15, ,521 (16,796) 21,615 16, ,340 (17,658) 21,876 17, ,558 (18,648) 22,096 18, ,006 (19,590) 22,272 19, ,688 (20,572) 22,400 20, ,517 (21,593) 22,476 21, ,400 (22,655) 22,494 22, ,239 (23,757) 22,448 23, ,930 (24,899) 22,332 24, ,363 (25,903) 22,144 25, ,604 (26,922) 21,885 26, ,567 (27,953) 21,549 27, ,163 (28,989) 21,130 28, ,304 (30,025) 20,624 30, ,903 (30,781) 20,035 30, ,157 (31,496) 19,367 31, ,028 * 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. B19 Page 15

17 Retirement Accounts - David 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 60 $77,300 $3,300 $3, $5, ,162 3,399 3, , ,000 3,501 3, , ,883 3,606 3, , ,886 3,714 3, , , , , , , , , , , , , , ,624 (8,099) ,660 8, ,185 (8,601) ,003 8, ,587 (9,133) ,335 9, ,789 (9,697) ,653 9, ,745 (10,295) ,954 10, ,404 (10,927) ,234 10, ,710 (11,543) ,492 11, ,659 (12,249) ,723 12, ,133 (12,930) ,924 12, ,127 (13,643) ,093 13, ,577 (14,390) ,226 14, ,413 (15,170) ,317 15, ,560 (15,985) ,362 15, ,937 (16,835) ,356 16, ,459 (17,599) ,298 17, ,158 (18,380) ,185 18, ,963 (19,176) ,014 19, ,800 (19,984) ,779 19, ,595 (20,800) ,477 20, ,272 (21,427) ,108 21, ,953 (22,033) ,676 22, ,596 (22,607) ,177 22, ,165 (23,142) ,610 23, ,632 * 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. B19 Page 16

18 Roth Accounts - Susan Age Begin Year Account Balance Annual Deposit Annual Additions or Withdrawals Roth 401(k) Cash Withdrawal Cash Flow (shortage) Annual Interest % Rate Annual Interest B19 C11 Page 17

19 Roth Accounts - David Age Begin Year Account Balance Annual Deposit Annual Additions or Withdrawals Roth 401(k) Cash Withdrawal Cash Flow (shortage) Annual Interest % Rate Annual Interest $16,000 $2, ,487 2, ,213 2, ,191 3, ,435 3, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,089 B $ , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,310 C11a Page 18

20 Inherited IRAs -Susan Age Balance Scheduled Withdrawals* Required Min. Distr* For spend shortage Rate of Return % rate Annual Interest C12 Gross** Minimum distribution $12,200 ($763) 59 12,144 (810) 60 12,036 (860) 61 11,870 (913) 62 11,639 (970) 63 11,335 (1,030) 64 10,951 (1,095) 65 10,477 (1,164) 66 9,903 (1,238) 67 9,218 (1,317) 68 8,410 (1,402) 69 7,466 (1,493) 70 6,372 (1,593) 71 5,109 (1,703) 72 3,656 (1,828) 73 1,987 (1,987) *RMDs based on oldest suvivor's age $707 $ , , , , , , , , , ,828 1,987 Page 19

21 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 15% 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 couple) Tax due... $50,000 Using 15% estimated rate -- Income Level -- Using 2015 tax rates. $50,000 $33,400 taxable $16,600 $7,500 Tax due... $4,088 - Exemption and standard deduction - a $3,413 or 46% 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. American Taxpayer Relief Act of 2012 On January 1, 2013, this act was signed into law extending tax cuts for individuals earning under $400,000/$450,000. It allowed the 2001 tax cuts to expire for anyone earning more than these amounts. Marginal Tax Bracket percentages: Pre-tax Act 0.0% 15.0% 28.0% 31.0% 36.0% 39.6% % 10.0% 15.0% 15.0% 27.5% 25.0% 30.5% 28.0% 35.5% 39.1% 10.0% 15.0% 27.5% 30.0% 35.0% 38.6% 33.0% 35.0% 10.0% 15.0% 25.0% 28.0% 33.0% 35.0% % 15.0% 25.0% 28.0% 33.0% 35.0% 39.6% Phaseout provisions: Itemized deductions and personal exemptions are currently phased out for high income taxpayers. The 2012 tax changes increase the phaseout limits and attach annual index adjustments. Other changes: The Child Tax Credit is kept at $1,000 through Marriage penalty relief and a broader 15% rate bracket for joint filers is now permanent. The standard deduction for married couples is kept at 200% of single rates. The Alternative Minimum Tax exclusion levels were increased to $78,750 for married and $50,600 for single filers for 2012 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. Page 20

22 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) Schedule E (passive gain/loss) Pension income & retirement distributions GROSS INCOME Gross $120,000 5,050 2,593 25,000 2,560 3, Taxable $120,000 1,450 2,593 25,000 2,560 3, $155,648 D3 B9 C4..C8 C6a B9 C6 a D9 B10 Adjustments: Retirement plan deposits - Susan Retirement plan deposits - David Self Employment FICA ADJUSTED GROSS INCOME 3,532 ($5,200) (3,300) (1,766) $145,382 C10-C10e D15 Itemized Deductions: Mortgage interest Charitable contributions Medical expenses Property taxes State taxes Gross $11,545 2,000 5,000 6,140 10,284 Allowed $11,545 2,000 6,140 10,284 D10 TAXABLE INCOME Itemized deductions $29,969 or Standard deductions $12,600 Personal exemptions ( 4 ) TAX SUMMARY: Federal Income Tax $15,925 FICA (Social Security) & HI Tax 12,712 Other Taxes or (credits) (200) State Income Tax 10,284 TOTAL TAXES Your combined federal & state marginal tax bracket is %. Your total taxes equal % of your Adjusted Gross Income, and 38.95% of your Taxable income. *Dividend and Capital Gains taxed marginally at 15.00%. ($29,969) ($16,000) $99,413 $38,722 D11 D7 Page 21

23 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 22

24 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 $15,925 ($200) $15,725 $10,944 ($660) $12,712 $38, ,411 17,411 11,556 (660) 13,093 41, ,736 19,736 12,495 (660) 14,298 45, ,160 23,160 13,475 (495) 14,727 50, ,504 25,504 14,424 (495) 15,599 55, ,655 7,655 7,201 (495) 7,094 21, ,186 11,186 9,504 (330) 7,307 27, ,733 1,733 8,558 (330) 9, ,701 (330) 8, (330) (330) ,912 1,912 2,886 (330) 4, ,903 4,903 5,552 (330) 10, ,722 6,722 6,853 (330) 13, ,109 10,109 9,361 (330) 19, ,046 13,046 10,467 (330) 23, ,776 13,776 10,826 (330) 24, ,969 9,451 64,420 29,543 (330) 3,504 97, ,922 5,922 6,423 (330) 12, ,833 10,833 9,759 (330) 20, ,901 11,901 10,196 (330) 21, ,984 12,984 10,646 (330) 23, ,106 14,106 11,114 (330) 24, ,266 15,266 11,600 (330) 26, ,422 16,422 12,091 (330) 28, ,545 17,545 12,579 (330) 29, ,603 18,603 13,079 (330) 31, ,616 19,616 13,587 (330) 32, ,942 17,942 12,350 (330) 29, ,722 18,722 12,765 (330) 31, ,487 19,487 13,187 (330) 32, ,099 16,099 10,234 (165) 26, ,493 8,493 5,185 (165) 13, ,246 13,246 7,046 (165) 20, D8 D12 D13, D14 D17 D17 D15 Total Taxes Page 23

25 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, $145,000 $6,603 $763 ($6,985) $145,381 $16,000 $29,969 $94,259 $5, ,350 7, (6,717) 151,588 16,000 29,993 99,844 5, ,440 7, (11,740) 161,411 16,000 30, ,843 6, ,373 8, ,163 (7,804) 171,811 12,000 30, ,235 6, ,081 8, (7,988) 181,684 12,000 31, ,266 7, ,742 8,786 1,030 (1,853) 100,705 12,000 23,142 57,184 8, ,524 30,500 1,095 (1,406) 125,714 8,000 24,859 62,772 30, ,901 1,164 2,400 25,015 6, ,408 8,000 23,123 4,760 78, ,216 1,238 2,448 25,515 7, ,058 8,000 21,437 7,718 66, ,219 1,317 2,497 10,334 8,378 28,746 8,000 18,395 2, ,957 1,402 2,547 12,320 9,140 32,366 8,000 17, , ,803 9,592 2,598 21,324 9,927 51,244 8,000 17,304 18,900 7, ,441 10,194 2,650 33,943 10,741 77,969 8,000 17,080 38,838 14, ,104 23,587 2,703 47,295 11, ,270 8,000 32,227 50,969 14, ,430 25,001 2,757 53,194 12, ,835 8,000 34,434 57,052 34, ,992 26,523 2,812 54,258 19, ,805 8,000 35,216 65,446 37, ,106 25,976 2,868 55,344 20, ,445 8,000 35,225 66,677 39, ,347 27, ,945 2,926 56,450 21, ,228 5,931 52,596 55, , ,529 29,046 2,984 47, ,609 8,000 31,913 45,632 16, ,010 30,587 3,044 58, ,372 8,000 32,942 57,856 37, ,460 32,291 3,105 59, ,762 8,000 32,913 60,550 39, ,007 33,980 3,167 61, ,258 8,000 32,864 63,232 41, ,625 35,742 3,230 62, ,923 8,000 32,797 65,979 43, ,314 37,578 3,295 63, ,760 8,000 32,712 68,794 45, ,052 39,490 3,361 64, ,746 8,000 32,742 71,540 47, ,890 41,356 3,428 66, ,814 8,000 32,877 74,100 49, ,769 43,279 3,496 67, ,007 8,000 33,008 76,682 52, ,815 45,079 3,566 68, ,273 8,000 33,135 79,104 55, ,678 46,907 3,638 70, ,411 8,000 33,784 81,137 40, ,812 48,752 3,710 71, ,867 8,000 35,048 82,658 43, ,228 50,417 3,785 73, ,454 8,000 36,366 83,906 46, ,575 52,058 40, ,867 4,000 38,154 50,494 51, ,388 41,039 94,428 4,000 39,628 50, ,147 54,638 41, ,645 4,000 34,834 69, Less * D18 D7a C10a..C10e B12 B10 D17 D9 D6 D6 D11 C6a *Adjusted for 2012 Tax Act reintroducing phaseout provision. ** Includes stock options, unrecaptured 1250 gain and other income items.. Page 24

26 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 $1,184 1,268 1,278 1, ,147 $266 $1,450 $2, ,563 2, ,600 3, ,403 3, ,284 3, , , , , , , ,523 5,499 6,390 5,499 6,030 6,030 6,030 6,081 6,081 6,081 5,849 5,849 5,849 5,563 5,563 5,563 5,920 6,448 5,920 6,466 6,466 6,466 6,436 6,436 6,436 6,162 6,162 6,162 5,845 5,845 5,845 5,479 5,479 5,479 5,061 5,061 5,061 4,588 4,588 4,588 4,053 4,053 4,053 3,452 3,452 3,452 2,781 2,781 2,781 2,187 2,187 2,187 1,651 1,651 1,651 1,046 1,046 1, ,147 $2,560 $2,560 2,877 2,877 3,111 3,111 3,365 3,365 3,653 3,653 3, ,414 3,854 22,166 26,020 3,166 71,695 74,861 2,631 61,237 63,868 2,916 2,916 3,196 3,196 3,517 3,517 8,552 8,552 9,044 9,044 8,730 19,539 28,269 8,351 22,943 31,294 7,895 26,087 33,982 9,287 50,693 59, ,945 9,597 9,597 9,211 21,928 31,139 8,783 24,354 33,137 8,287 27,031 35,318 7,719 29,948 37,667 7,071 33,121 40,192 6,339 36,538 42,877 5,514 40,272 45,786 4,590 44,275 48,865 3,558 48,695 52,253 2,837 35,468 38,305 2,009 39,501 41,510 1,073 44,064 45,137 50,866 50,866 C4 C8 C5 C5 C5 C6 B15, C12, C24 C24 Page 25

27 Federal Income Tax Worksheet Ages Filing Status Taxable Ordinary Income Cap. Gain, Div. & 1250 Marginal rate brackets indexed at 0.0 % Max CG Rate Cap. Gain Div & 1250 Tax Ordinary Income Tax Joint $94,259 $5,153 $18,450 $74,900 $151,200 $230,450 $411,500 $464,850 15% $773 $15,152 $15, Joint 99,844 5,751 18,450 74, , , , ,850 15% ,548 17, Joint 108,843 6,252 18,450 74, , , , ,850 15% ,798 19, Joint 122,235 6,763 18,450 74, , , , ,850 15% 1,014 22,146 23, Joint 131,266 7,336 18,450 74, , , , ,850 15% 1,100 24,404 25, Joint 57,184 8,379 18,450 74, , , , ,850 7,655 7, Joint 62,772 30,083 18,450 74, , , , ,850 15% 2,693 8,493 11, Joint 4,760 78,525 18,450 74, , , , ,850 15% 1, , Joint 7,718 66,904 18,450 74, , , , , Joint 2,351 18,450 74, , , , Joint 137 6,403 18,450 74, , , , , Joint 18,900 7,040 18,450 74, , , , ,850 1,913 1, Joint 38,838 14,051 18,450 74, , , , ,850 4,903 4, Joint 50,969 14,024 18,450 74, , , , ,850 6,723 6, Joint 57,052 34,344 18,450 74, , , , ,850 15% 2,474 7,635 10, Joint 65,446 37,135 18,450 74, , , , ,850 15% 4,152 8,894 13, Joint 66,677 39,535 18,450 74, , , , ,850 15% 4,697 9,079 13, Joint 55, ,832 18,450 74, , , , ,850 15% 47,513 7,456 54, Joint 45,632 16,025 18,450 74, , , , ,850 5,922 5, Joint 57,856 37,564 18,450 74, , , , ,850 15% 3,078 7,756 10, Joint 60,550 39,287 18,450 74, , , , ,850 15% 3,741 8,160 11, Joint 63,232 41,151 18,450 74, , , , ,850 15% 4,422 8,562 12, Joint 65,979 43,133 18,450 74, , , , ,850 15% 5,132 8,974 14, Joint 68,794 45,239 18,450 74, , , , ,850 15% 5,870 9,397 15, Joint 71,540 47,450 18,450 74, , , , ,850 15% 6,614 9,809 16, Joint 74,100 49,822 18,450 74, , , , ,850 15% 7,353 10,193 17, Joint 76,682 52,300 18,450 74, , , , ,850 15% 7,845 10,758 18, Joint 79,104 55,017 18,450 74, , , , ,850 15% 8,253 11,363 19, Joint 81,137 40,472 18,450 74, , , , ,850 15% 6,071 11,872 17, Joint 82,658 43,141 18,450 74, , , , ,850 15% 6,471 12,252 18, Joint 83,906 46,162 18,450 74, , , , ,850 15% 6,924 12,564 19, Single 50,494 51,210 9,225 37,450 90, , , ,200 15% 7,682 8,417 16, Single 50,799 9,225 37,450 90, , , ,200 8,494 8, Single 69,811 9,225 37,450 90, , , ,200 13,247 13, D7 D7 464,850 D8 Total Tax Page 26

28 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 27

29 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 $651,307 ($141,204) $145,000 $763 $6,628 $11,187 $727, ,278 (146,103) 149, ,078 11, , ,769 (168,735) 164, , , ,749 (195,645) 169, ,272 9, , ,408 (186,800) 180, ,373 2,625 1,041, ,041,860 (147,051) 92,742 1,030 43,109 10,170 1,082, ,082,065 (156,433) 95,524 1,095 50,515 9,299 1,118, ,118,663 (180,258) 1, ,490 31,829 9,775 1,050, ,050,343 (155,882) 1, ,917 32,466 10,262 1,003, ,003,088 (128,334) 1,317 59,179 82,464 14,626 1,083, ,083,411 (131,231) 1,402 60,363 84,404 14,938 1,169, ,169,212 (137,814) 9,592 61,570 86,382 19,730 1,257, ,257,075 (123,937) 10,194 62, ,647 73,706 1,396, ,396,787 (151,267) 23,587 51,018 64,058 12,843 1,402, ,402,117 (160,900) 25,001 57,113 65,339 13,391 1,401, ,401,351 (168,815) 26,523 61,701 66,645 13,949 1,394, ,394,146 (173,912) 25,976 65,443 67,978 14,519 1,383, ,383,231 (235,936) 27,443 69, ,244 99,089 1,539, ,539,283 (154,814) 29,046 55,055 70,724 1,543, ,543,482 (167,209) 30,587 64,489 72,139 1,537, ,537,631 (173,015) 32,291 67,148 73,582 1,526, ,526,872 (179,008) 33,980 69,981 75,054 1,510, ,510,742 (185,224) 35,742 72,935 76,554 1,488, ,488,711 (191,668) 37,578 76,012 78,086 1,460, ,460,216 (198,290) 39,490 79,160 79,648 1,424, ,424,710 (205,062) 41,356 82,474 81,241 1,381, ,381,640 (211,974) 43,279 85,839 82,865 1,330, ,330,435 (219,048) 45,079 89,455 84,522 1,270, ,270,464 (197,840) 46,907 64,730 86,213 1,230, ,230,445 (204,997) 48,752 68,319 87,937 1,182, ,182,297 (212,383) 50,417 72,280 89,696 1,125, ,125,325 (183,229) 52,058 84,181 47,335 1,048, ,048,731 (176,210) 53,388 74,541 48, , ,209 (188,675) 54,638 84,041 49, , , ,587 B8 B9 C10...C10e C4...C8 B10 B12, B12a *Note - 1 = Susan's life expectancy age. 2 = David's life expectancy age. **Investment and Retirement distributions include withdrawals from account totals to satisfy "Income needed" shortages from Cash Flow report. C3a Page 28

30 Monte Carlo Monte Carlo Simulation illustrates possible variations in growth and/or depletion of retirement capital under unpredictable future conditions. The 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 $890,587 Percentage of results above zero* Minimum (worst case) result Average Monte Carlo result $980,159 Percentage with $ remaining at Susan's age 81 Maximum Monte Carlo result $0 $7,850,107 Percentage with $ remaining at Susan's age 86 Percentage with $ remaining at Susan's age 76 *Percent of times money is remaining at last age shown. 81% 98% 100% 100% F4 The bold line is the estimated retirement capital value over time using fixed rates. Annual rate of return of 6.58% in the original retirement estimate varied from 5.77% to 7.18% based on portfolio changes over time. 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 -2.73% and 15.68%). 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 $890,587 in assets remaining at last life expectancy. Monte Carlo simulation, using 10,000 trials of the same assets, income and expenses, resulted in a 81% probability of having funds remaining at last life expectancy, and an average amount of $980,159 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 29

31 Net Worth Report F6 Ages Savings and Investments Retirement and Roth Accounts Real Estate Market Value Autos & Personal Property Life Insur. Cash Values Total Asset Values Less Liabilities $452,307 $199,000 $507,000 $49,100 $15,300 $1,222,707 ($396,640) , , ,140 47,160 22,807 1,314,384 (376,559) , , ,483 45,346 30,315 1,411,913 (355,511) , , ,032 43,649 37,822 1,502,252 (333,449) , , ,793 42,061 45,329 1,585,590 (310,318) , , ,769 40,575 52,837 1,695,041 (286,062) , , ,964 39,184 60,344 1,752,557 (260,622) , , ,384 37,882 67,851 1,806,779 (233,934) , , ,031 36,662 70,566 1,751,602 (205,930) , , ,912 35,519 73,280 1,717,798 (176,538) , , ,030 34,448 75,995 1,811,884 (145,680) , , ,391 33,444 78,709 1,911,756 (113,938) , , ,999 32,503 81,424 2,014,000 (81,271) , , ,164 31,621 84,138 2,288,710 (324,056) , , ,687 30,793 86,852 2,311,449 (307,029) , , ,521 30,016 89,567 2,328,455 (289,083) , , ,671 29,287 92,281 2,339,386 (270,168) , , ,145 28,603 94,996 2,346,975 (250,232) , , ,298 27,961 97,710 2,236,252 (189,118) , , ,724 27, ,425 2,253,990 (174,165) , , ,379 26, ,139 2,261,940 (158,446) , , ,267 26, ,854 2,265,250 (141,924) , , ,392 25, ,568 2,263,460 (124,556) , , ,760 25, ,283 2,256,042 (106,300) , , ,375 24, ,997 2,242,433 (87,109) , , ,242 24, ,712 2,222,093 (66,937) , , ,367 24, ,426 2,194,471 (45,732) , , ,755 23, ,140 2,159,000 (23,443) , , ,410 23, ,855 2,115,051 (13) , , ,338 22, ,569 2,091, , , ,545 22, ,284 2,059, , , ,036 22,401 85,857 1,972, , , ,816 22,129 87,143 1,911, , , ,893 21,873 88,428 1,857, , , ,270 21,631 1,696,489 C3 C3 B15, C23 F7 B16 B18b Net Worth 8 $826, ,826 1,056,402 1,168,804 1,275,273 1,408,979 1,491,935 1,572,845 1,545,672 1,541,260 1,666,203 1,797,818 1,932,729 1,964,653 2,004,420 2,039,372 2,069,218 2,096,743 2,047,135 2,079,825 2,103,493 2,123,326 2,138,904 2,149,742 2,155,324 2,155,156 2,148,739 2,135,557 2,115,038 2,091,351 2,059,816 1,972,620 1,911,819 1,857,403 1,696,489 Page 30