Get retirement ready. Schwab Moneywise Workshop Series Month Day, Year

Get retirement ready. Schwab Moneywise Workshop Series Month Day, Year

Debunking common assumptions Today we ll talk about Putting your plan together Managing your portfolio while you are waiting Taking the next step 2

What are your assumptions about retirement? A few common misconceptions: I ve heard I ll only need 70-80% of my preretirement income. I plan to keep working if I do not have enough. When I retire I ll be in a lower tax bracket. I ve built up a solid nest egg so interest and dividends will provide all I need in retirement. 3

Put your plan together. 4

Put your plan together Information to consider: Age now and when you want to retire Tolerance for risk Current income How much you have saved now and plan to save each year Estimated Social Security benefits Learn more at SSA.gov Estimated pension or other income Expected annual spending Review, adjust and manage your portfolio allocations 5

Your plan: Will your budget support your goals? What are your goals? What are your resources? Budget Income sources Income needs Match Goals sources to needs Do they match up? Goals When do you want to retire? Have you planned for the life you envision? Do you want to leave a legacy? 6

Will your resources support your budget? Consider these important factors Age: When do you want to retire? Income: What are your income sources and how much will they generate for you? Expenses: What expenses will you have in retirement? Savings: Have you saved enough to sustain your expenses throughout retirement? 7

Calculate your portfolio income requirements Estimated expenses Regular income sources = What your portfolio must provide Essential Housing Taxes Food and utilities Health Care and insurance Discretionary Travel and entertainment Gifts, hobbies, memberships Non-investment income Social Security Employment Rental income Pension Annuities Investment income Principal Capital gains Interest and dividends Lump sums 8

Joe s plan: Will he have enough? Find your retirement target Annual Income Sources Expenses Essential expenses $60,000 Discretionary expenses $20,000 Total first-year spending $80,000 Less Social Security income ($25,000) Less other non-portfolio income ($15,000) First year withdrawal amount $40,000 X25 Retirement portfolio target $1,000,000 These are hypothetical numbers shown for illustration purposes only. This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax professional. 9

Joe s plan: Will he have enough? Find your retirement target Assumptions: Portfolio accumulation of $1,000,000 Income $80,000 / year 3% inflation Social Security and other income unchanged Annual Income Sources Social Security $25,000 Other non-portfolio $15,000 Portfolio Initial Year 23 X 3% 4% $41,200 $42,436 $40,000 $81,200 $83,436 $80,000 These are hypothetical numbers shown for illustration purposes only. This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax professional. 10

Tips to get you on the right track Follow these helpful guidelines and start saving for retirement If you re starting to save in your 20s: If you re starting to save in your 30s: If you re starting to save in your 40s: If you re starting to save in your mid-40s or later: Target 10-15% of your income Resist cutting back on savings Target 15-25% of your income Track spending patterns Continue funding retirement accounts Target 25-35% of your income Cut back unnecessary expenses Maximize contributions to retirement accounts Target at least 35% of your income Maximize contributions to retirement accounts Adjust retirement goals The percentages used in the above examples assume you're just starting to save and you re planning to maintain your lifestyle over 30 years of retirement. 11

Your plan: Ideas to boost savings Save more aggressively Invest efficiently Spend less in retirement Delay retirement Contribute more to retirement plans Make annual savings adjustments If you get a bonus, raise or promotion, don t change your spending habits Make catch-up contributions Open additional retirement savings accounts 12

Dennis Getting ready for a long retirement Hear from real people via multi-media experience Get retirement ready

Manage Your portfolio. 14

Your portfolio: Common questions I m facing hard times, should I tap into my 401k? Given the market s moves, should I change my investment mix? My portfolio keeps losing money, can I retire as planned? As a retiree, how big of a cash cushion should I have? Can I count on dividends going forward? 15

Your portfolio: Models for nearing and in retirement Age 60-69 Age 70-79 Age 80+ Moderate Moderately Conservative Conservative 35% 5% 60% 50% 10% 40% 30% 20% 50% Return: (1970-2012) Return: (1970-2012) Return: (1970-2012) Average annual return: 9.6% Average annual return: 9.1% Average annual return: 8.0% Best year: 30.9% Best year: 27.0% Best year: 22.8% Worst year: -20.9% Worst year: -12.5% Worst year: -4.6% Long-Term Return Estimate: 5.1% Long-Term Return Estimate: 4.3% Long-Term Return Estimate: 3.5% Fixed Income Cash Investments Equity Source: Schwab Center for Financial Research with data provided by Morningstar, Inc. The return figures are the average, the maximum and the minimum annual returns of hypothetical asset allocation plans. The asset allocation plans are weighted averages of the performance of the indices used to represent each asset class in the plans and are rebalanced annually. The Conservative allocation is composed of 15% large-cap stocks, 5% international stocks, 50% bonds, and 30% cash. The Moderately Conservative allocation is composed of 25% large-cap stocks, 5% small-cap stocks, 10% international stocks, 50% bonds, and 10% cash. The Moderate allocation is composed of 35% largecap stocks, 10% small-cap stocks, 15% international stocks, 35% bonds and 5% cash. The indices representing each asset class in the asset allocation plan are S&P 500 Index (large-cap stocks); Russell 2000 Index (small-cap stocks); MSCI EAFE net of taxes (international stocks); Barclays U.S. Aggregate Bond Index (bonds); and Citigroup U.S. 3- month Treasury bills (cash. CRSP 6-8 was used for small-cap stocks prior to 1979, Ibbotson Intermediate-Term U.S. Government Bond Index was used for bonds prior to 1976, and Ibbotson U.S. 30-day Treasury bills was used prior to 1978. Results assume reinvestment of dividends and interest. Indices are unmanaged, do not incur fees or expenses and cannot be invested in directly. Past performance is no indication of future results. For more information on the methodology for the long-term return estimate calculations, see the Market Insight article Q&A: Estimating Long-Term Market Returns. 16

Your portfolio: Don t forget about inflation $60,000 $50,000 $40,000 Lost 26% of purchasing power $30,000 $20,000 $10,000 $0 Lost 44% of purchasing power after 10 years Nominal Purchasing Power Real Purchasing Power With 3% Inflation Real Purchasing Power With 6% Inflation 0 5 10 15 20 Year Lost 45% of purchasing power Lost 69% of purchasing power after 20 years Source: Schwab Center for Financial Research. The example assumes hypothetical inflation of 3% and 6% to explore how inflation may impact the purchasing power of a fixed $50,000 per year pension or annuity. Inflation is represented by the change in the Consumer Price Index for Al Urban Consumers (CPI-U). Historically, 3% is the average inflation from 1926-2012. 6.2% is the average inflation from 1970-1989. Past performance is no indication of future results. 17

Your portfolio: Importance of rebalancing Impact of market performance on initial 60% stocks, 40% bonds allocation Beginning Allocation (Balanced portfolio) Ending Allocation (No rebalancing) 40% 30% 70% January 2003 to October 2007 Too much risk before bear market 60% 60% 40% November 2007 to February 2009 Lost recovery potential before bull market Source: Schwab Center for Financial Research with data from Morningstar, Inc. The portfolio above is composed of 60% stocks and 40% bonds on 12/31/2002, and is not rebalanced through 10/31/2007. It is rebalanced to 60% stocks and 40% bonds on 10/31/07 and not rebalanced through 02/28/2009. Asset class allocations are derived from a weighted average of the total monthly returns of indices representing each asset class. The indices representing the asset classes are the S&P 500 Index (stocks) and the Barclays Capital U.S. Aggregate Bond Index (bonds). Returns assume reinvestment of dividends and interest. Indices are unmanaged, do not incur fees and expenses, and cannot be invested in directly. 18

Take the next step. 19

Your next steps Gather information and complete the Getting Retirement Ready worksheet Utilize the retirement calculator Check out all the retirement resources available online Check out your My Retirement Progress score 20

Complete the worksheet 21

Utilize the calculators Find the retirement calculators on your home page on schwab.com/workplace Calculators available for those individuals saving for retirement or retiring soon 22

Leverage the online resources available to you schwab.com/realliferetirement schwabsavingsfundamentals.com schwabmoneywise.com Access to electronic services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons. 23

Determine your retirement readiness Check out how you are doing Log on to schwab.com/workplace View account/overview Feature is designed to measure your progress toward preparing for retirement Calculations based on combination of inputs from your employer 24

We are here to help Go online to enroll, change contribution rate, access education, etc. www.schwab.com/workplace Talk to someone - contact your Schwab Advice Consultant 800-724-7526 Ask question or enroll in advice Review your quarterly statement 25

Important information Apple, the Apple logo, and iphone are trademarks of Apple Inc., registered in the U.S. and other countries. System availability and response times are subject to market conditions and mobile connection limitations. Android is a trademark of Google Inc. Use of this trademark is subject to Google Permissions. Amazon, Kindle, Kindle Fire, the Amazon Kindle logo, and the Kindle Fire logo are trademarks of Amazon.com, Inc. or its affiliates. The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc. The information in this presentation is for informational purposes only. It is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager., Inc. provides recordkeeping and related services with respect to retirement plans and has provided this communication to you as part of the recordkeeping services it provides to the Plan. The material contained herein is proprietary to, Inc. ("SRPS ) and for informational purposes only. None of the information constitutes a recommendation by SRPS. The information is not intended to provide tax, legal, or investment advice. SRPS does not guarantee the suitability or potential value of any particular investment or information source. Certain information presented herein may be subject to change. Neither the presentation nor any information or material contained in it may be copied, assigned, transferred, disclosed, or utilized without the express written approval of SRPS. Schwab Retirement Planner provides participants with a retirement savings and investment strategy, a major component of which is a discretionary investment management service furnished by Morningstar Associates, LLC, an independent registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Morningstar Associates is not affiliated with or an agent of, Inc., Charles Schwab & Co., Inc., a federally registered investment advisor, or their affiliates. There is no guarantee a participant's savings and investment strategy will provide adequate income at or through their retirement. Fees are charged for Schwab Retirement Planner, including its discretionary investment management service, based on the participant's account balance. Advice Consultants are not employees of Morningstar and act solely as facilitators to participants accessing the Morningstar service. My Retirement Progress percentage is calculated by, Inc. ("SRPS"), based on and using the data formulated by Morningstar Associates, LLC, an independent registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Morningstar Associates formulates and provides estimated monthly income projections in retirement using savings and investment data and assumptions which include, but are not limited to, current retirement plan balance and savings rate, projected date of and estimated years in retirement, and 100% post-tax replacement income. SRPS cannot alter or influence any of the calculations that Morningstar Associates provides. SRPS then uses the projections formulated by Morningstar Associates to express the potential gap in retirement savings as a percentage that is made available as part of the retirement plan record keeping and related services provided by SRPS. Morningstar Associates is not affiliated with or an agent of SRPS, Charles Schwab & Co., Inc., a federally registered investment advisor, or their affiliates.. To obtain more information about how the percentage is calculated or to provide additional information that can impact My Retirement Progress calculations visit schwab.com/workplace or call 800-724-7526. 2014, Inc. All rights reserved. (0214-0332) 26

Thank you.