Mar 29, 2018 Personal Retirement Analysis Allen & Betty Abbett John Smith Asset Advisors Example, LLC A Registered Investment Advisor 2430 NW Professional Drive Corvallis, OR 97330 877-421-9815 www.moneytree.com 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.
Table of Contents Cover 1 Introduction (text) 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 - B25 8 Asset Accounts (text) - C1 9 Account Summary Graph - C2 10 Taxable Account - C4 11 Equity and Other Accounts - C5 12 Retirement Account Allen - C10 13 Retirement Account Betty - C10a 14 Roth Allen - C11 15 Roth Betty - C11a 16 Income Tax Calculation (text) - D1 17 Income Tax - Current Year - D3 18 Tax vs Income Graph - D4 19 Tax Summary - D6 20 Taxable Income Analysis - D7 21 Dividend, Capital Gain Sources - D7a 22 Federal Income Tax Worksheet - D8 23 Retirement Estimate Graph - F2 24 Retirement Capital Estimate - F3 25 Monte Carlo - F4 26 Monte Carlo Details (text) - F5 27 Standard Deviation (text) - F5a 28 What-If Graph - F12 29 Net Worth - F6 32 Page 1
Introduction Planning for your retirement years requires consideration of many variables. This report will help you visualize the potential future changes in your income and assets by projecting your needs and resources ahead on a year by year basis. Among the areas considered in the report are: Income required annually: Living expenses Insurance premiums Debt payments Saving and investment contributions Inflationary effects Income sources: Earned income Interest and dividends Social Security Pension and other retirement plans Other income (inheritances, gifts, stock options, etc.) Asset accounts: Taxable Tax-Deferred Tax-Free Equity or Other accounts Qualified plans (IRA, Profit sharing, etc.) Income taxes: Using actual tax rates Indexing of tax brackets and exemptions Alternate minimum tax State Tax estimates This report is not intended to predict what will actually happen, but is only an illustration based on the assumptions contained in the report. No guarantee of future performance is implied or intended and no specific investments or financial products are represented in the reports. Although this report should prove helpful in visualizing the possibilities for your financial future, you should keep in mind that your actual results will undoubtedly differ from those shown. Page 2
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
Net Worth Statement ASSETS Ordinary Interest Accounts: Allen Betty Joint / CP Trust/Oth. Total Insurance Cash Value, Dividends $12,450 $2,850 $15,300 Total $12,450 $2,850 $15,300 Equity (Investment) Accounts: Mutual Funds 248,800 248,800 Total $248,800 $248,800 Retirement Accounts: 401(k) accounts 213,500 213,500 IRA accounts 54,000 54,000 403(b), SEP, Simple 110,250 110,250 Roth accounts 62,500 72,800 135,300 Total $330,000 $183,050 $513,050 Personal Use Assets: Personal property 50,000 19,600 69,600 Total $50,000 $19,600 $69,600 Real Estate Assets: Residence 447,000 447,000 Rental real estate 200,000 200,000 Total $447,000 $200,000 $647,000 Total Assets $840,930 $185,900 $468,400 $1,495,230 A3 LIABILITIES Allen Betty Joint / CP Trust/Other Total Residence mortgage ($232,000) ($232,000) Credit Cards (6,640) (6,640) Life insurance loans (2,500) (2,500) Rental real estate (118,000) (118,000) Total Liabilities ($9,140) ($350,000) ($359,140) NET WORTH $831,790 $185,900 $118,400 $1,136,090 Note: Assets held in a Revocable Trust are included in the grantors assets. Page 4
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 2.00% 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
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 black outline 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
Cash Flow Illustration B7 Ages Scheduled Cash flow sources and Required Minimum Distributions Earned Income Retire/Roth Accounts * Investment Accounts * Pension/ SocSec Other Income Total Sources Less Living Expense & Taxes Surplus (Shortage) 1 2 3 4 5 6 7 8 53 51 $166,000 $6,628 $172,628 ($172,096) $532 54 52 169,750 7,051 176,801 (176,205) 596 55 53 183,041 7,483 190,524 (198,631) (8,107) 56 54 187,202 7,924 195,126 (246,333) (51,207) 57 55 191,456 8,414 199,870 (254,046) (54,176) 58 56 195,811 8,831 204,642 (222,250) (17,608) 59 57 200,264 11,631 211,895 (228,594) (16,699) 60 58 210,763 210,763 (288,808) (78,045) 61 59 215,572 10,262 225,834 (205,851) 19,983 62 60 220,494 10,758 231,252 (211,227) 20,025 63 61 225,528 15,312 240,840 (217,740) 23,100 64 62 230,679 11,780 242,459 (220,956) 21,503 65 R 63 101,459 12,306 113,765 (306,633) (192,868) 66 64 R 12,843 12,843 (188,359) (175,516) 67 65 37,203 13,391 50,593 (267,769) (217,176) 68 66 37,947 13,949 51,896 (238,487) (186,591) 69 67 69,544 14,519 84,063 (240,673) (156,610) 70 68 4,490 70,935 438,244 513,668 (251,126) 262,542 71 69 24,315 72,354 96,669 (188,725) (92,056) 72 70 51,365 73,801 125,166 (200,207) (75,041) 73 71 54,546 75,277 129,823 (206,986) (77,163) 74 72 57,917 76,782 134,699 (225,308) (90,609) 75 73 59,454 78,318 137,772 (213,606) (75,834) 76 74 59,543 79,884 139,427 (220,463) (81,036) 77 75 59,104 81,482 140,586 (227,608) (87,022) 78 76 58,112 83,111 141,223 (235,093) (93,870) 79 77 56,559 84,774 141,333 (242,857) (101,524) 80 78 54,071 86,469 140,540 (250,950) (110,410) 81 79 50,658 88,199 138,857 (210,834) (71,977) 82 80 49,066 89,962 139,028 (218,763) (79,735) 83 81 46,607 91,762 138,369 (227,001) (88,632) 84 82 43,478 93,597 137,075 (235,579) (98,504) 85 83 39,205 95,469 134,674 (244,515) (109,841) 86 84 33,295 97,378 130,673 (253,805) (123,132) 87 85 25,727 99,325 125,052 (263,507) (138,455) 88 86 16,139 101,313 117,452 (273,618) (156,166) 89 87 4,080 103,338 107,418 (251,556) (144,138) 90 L 88 105,406 105,406 (256,615) (151,209) 91 89 59,838 59,838 (235,847) (176,009) 92 90 61,034 61,034 (245,132) (184,098) 93 91 62,255 62,255 (254,826) (192,571) 94 92 63,501 63,501 (264,949) (201,448) 95 93 64,770 64,770 (275,522) (210,752) 96 94 66,066 66,066 (286,568) (220,502) 97 95 L 67,387 67,387 (298,109) (230,722) 98 96 B9 C10..C11a C4..C8 B10 B18, B18a B8 * Scheduled distributions, interest or dividends taken in cash or amounts taken to meet the IRS minimum distribution requirements. R = Retirement Age, L = Life Expectancy Page 7
Allocation of Cash Flow Surplus or (Shortage) B25 Ages Taxable % Amount Equity/Other Tax-Free Tax-Deferred Retirement Accounts Roth Accounts % Amount % Amount % Amount Amount Amount 1 2 3 4 5 6 7 8 9 53 51 20 $106 80 $426 54 52 20 119 80 477 55 53 na (8,107) na na na 56 54 na (51,207) na na na 57 55 na (45,122) na (9,054) na na 58 56 na (3,000) na (14,608) na na 59 57 na (3,000) na (13,699) na na 60 58 na (3,000) na (75,045) na na 61 59 20 3,997 80 15,987 62 60 20 4,005 80 16,020 63 61 20 4,620 80 18,480 64 62 20 4,301 80 17,203 65 63 na (29,898) na (162,970) na na 66 64 na na (175,516) na na 67 65 na na (114,748) na na (102,428) 68 66 na na na na (186,591) 69 67 na na na na (156,610) 70 68 40 105,017 60 157,525 71 69 na (92,056) na na na 72 70 na (14,821) na (60,220) na na 73 71 na na (77,163) na na 74 72 na na (45,619) na na (44,990) 75 73 na na na na (75,834) 76 74 na na na na (81,035) 77 75 na na na na (87,021) 78 76 na na na na (93,869) 79 77 na na na na (101,524) 80 78 na na na na (110,409) 81 79 na na na na (71,977) 82 80 na na na na (79,734) 83 81 na na na na (88,631) 84 82 na na na na (98,503) 85 83 na na na na (109,840) 86 84 na na na na (123,132) 87 85 na na na na (138,454) 88 86 na na na na (156,166) 89 87 na na na na (47,741) (96,396) 90 88 na na na na (151,208) 91 89 na na na na (176,009) 92 90 na na na na (184,097) 93 91 na na na na (192,570) 94 92 na na na na (201,448) 95 93 na na na na (210,752) 96 94 na na na na (220,501) 97 95 na na na na (230,721) 98 96 40 60 C4 C5 C7 C8 C10..C10e C11, C11a 10 Page 8
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
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
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 1 2 3 4 5 6 7 53 51 $83,800 $3,000 $106 1.65 $1,407 54 52 88,313 3,000 119 1.65 1,482 55 53 92,914 3,000 (8,107) 1.65 1,484 56 54 89,291 3,000 (51,207) 1.65 1,038 57 55 42,122 3,000 (45,122) 1.65 58 56 3,000 (3,000) 1.65 59 57 3,000 (3,000) 1.65 60 58 3,000 (3,000) 1.65 61 59 3,000 3,997 1.65 63 62 60 7,060 3,000 4,005 1.65 179 63 61 14,244 3,000 4,620 1.65 303 64 62 22,167 3,000 4,301 1.65 430 65 63 29,898 (29,898) 1.65 66 64 1.65 67 65 1.65 68 66 1.65 69 67 1.65 70 68 105,017 1.65 941 71 69 105,958 (92,056) 1.65 919 72 70 14,821 (14,821) 1.65 73 71 1.65 74 72 1.65 75 73 1.65 76 74 1.65 77 75 1.65 78 76 1.65 79 77 1.65 80 78 1.65 81 79 1.65 82 80 1.65 83 81 1.65 84 82 1.65 85 83 1.65 86 84 1.65 87 85 1.65 88 86 1.65 89 87 1.65 90 88 1.65 91 89 1.65 92 90 1.65 93 91 1.65 94 92 1.65 95 93 1.65 96 94 1.65 97 95 1.65 98 96 B25 $1,407 1,482 1,484 1,038 63 179 303 430 941 919 Page 11
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 1 2 3 4 5 6 7 8 9 10 11 Apprec Total Annual Return Taxable Income C5 At Div CG Rate 53 51 $165,000 $6,000 $426 3.50 4.00 $12,642 $5,898 54 52 184,068 6,000 477 3.50 4.00 14,074 6,566 55 53 204,619 6,000 3.50 4.00 15,596 7,277 56 54 226,215 6,000 3.50 4.00 17,216 8,033 57 55 249,431 6,000 (9,054) 3.50 4.00 18,580 8,672 58 56 264,957 6,000 (14,608) 3.50 4.00 19,514 9,109 59 57 275,863 6,000 (13,699) 3.50 4.00 20,370 9,508 60 58 288,534 6,000 (75,045) 3.50 4.00 18,770 8,776 61 59 238,259 6,000 15,987 3.50 4.00 18,783 8,760 62 60 279,029 6,000 16,020 3.50 4.00 21,843 10,188 63 61 322,892 6,000 18,480 3.50 4.00 25,235 11,770 64 62 372,607 6,000 17,203 3.50 4.00 28,910 13,486 65 63 424,720 (162,970) 0.50 1.00 1.50 2.50 18,422 1,682 8,394 66 64 280,172 (175,516) 0.50 1.00 1.50 2.50 10,092 925 4,609 67 65 114,748 (114,748) 0.50 1.00 1.50 2.50 68 66 0.50 1.00 1.50 2.50 69 67 0.50 1.00 1.50 2.50 70 68 157,525 0.50 1.00 1.50 2.50 4,773 427 2,150 71 69 162,298 0.50 1.00 1.50 2.50 8,926 811 4,057 72 70 171,224 (60,220) 0.50 1.00 1.50 2.50 7,593 693 3,459 73 71 118,597 (77,163) 0.50 1.00 1.50 2.50 4,185 384 1,912 74 72 45,619 (45,619) 0.50 1.00 1.50 2.50 75 73 76 74 77 75 78 76 79 77 80 78 81 79 82 80 83 81 84 82 85 83 86 84 87 85 88 86 89 87 90 88 91 89 92 90 93 91 94 92 95 93 96 94 97 95 98 96 B25 Page 12
Retirement Accounts - Allen C10 Age Balance By Participant Contributions Withdrawals Rate of Return By Company Roth Plans Scheduled Required Min. Distr * For Spend Shortage 1 2 3 4 5 6 7 8 9 10 % Rate Annual Interest Gross ** Minimum Distribution 53 $267,500 $5,160 $3,440 7.00 $19,058 54 295,158 5,289 3,526 7.00 21,003 55 324,976 5,989 3,992 7.00 23,135 56 358,092 6,138 4,092 7.00 25,463 57 393,785 6,292 4,194 7.00 27,971 58 432,242 6,449 4,299 7.00 30,673 59 473,664 6,610 4,407 7.00 33,583 60 518,264 7,132 4,755 7.00 36,739 61 566,890 7,310 4,874 7.00 40,154 62 619,228 7,493 4,995 7.00 43,830 63 675,546 7,680 5,120 7.00 47,784 64 736,131 7,873 5,248 7.00 52,037 65 801,289 6.50 52,084 66 853,373 6.50 55,469 67 908,842 (102,428) 6.50 55,396 68 861,810 (186,591) 6.50 49,316 69 724,535 (156,610) 6.50 41,470 70 609,395 (4,490) 6.50 39,449 4,490 71 644,354 (24,315) 6.50 41,010 24,315 72 661,049 (25,822) 6.50 42,041 25,822 73 677,268 (27,420) 6.50 43,038 27,420 74 692,886 (29,113) (44,990) 6.50 42,376 29,113 75 661,159 (28,872) (75,834) 6.50 39,215 28,872 76 595,668 (27,076) (81,035) 6.50 34,835 27,076 77 522,392 (24,641) (87,021) 6.50 29,945 24,641 78 440,675 (21,708) (93,869) 6.50 24,493 21,708 79 349,591 (17,928) (101,524) 6.50 18,433 17,928 80 248,572 (13,293) (110,409) 6.50 11,714 13,293 81 136,584 (7,630) (71,977) 6.50 6,019 7,630 82 62,996 (3,684) (59,312) 6.50 3,684 83 6.50 84 6.50 85 6.50 86 6.50 87 6.50 88 6.50 89 6.50 90 6.50 91 6.50 92 6.50 93 6.50 94 6.50 95 6.50 96 6.50 97 6.50 98 * 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. B25 Page 13
Retirement Accounts - Betty C10a Age Balance By Participant Contributions Withdrawals Rate of Return By Company Roth Plans Scheduled Required Min. Distr * For Spend Shortage 1 2 3 4 5 6 7 8 9 10 % Rate Annual Interest Gross ** Minimum Distribution 51 $110,250 $4,320 $4,320 7.00 $8,052 52 126,942 4,406 4,406 7.00 9,227 53 144,982 4,495 4,495 7.00 10,497 54 164,468 4,584 4,584 7.00 11,868 55 185,505 4,676 4,676 7.00 13,348 56 208,205 4,770 4,770 7.00 14,944 57 232,688 4,865 4,865 7.00 16,665 58 259,083 4,962 4,962 7.00 18,520 59 287,528 5,062 5,062 7.00 20,519 60 318,170 5,163 5,163 7.00 22,672 61 351,168 5,266 5,266 7.00 24,990 62 386,690 5,371 5,371 7.00 27,484 63 424,917 5,479 5,479 6.50 28,013 64 463,888 6.50 30,153 65 494,041 6.50 32,113 66 526,154 6.50 34,200 67 560,354 6.50 36,423 68 596,777 6.50 38,791 69 635,568 6.50 41,312 70 676,880 (25,543) 6.50 43,080 25,543 71 694,417 (27,126) 6.50 44,163 27,126 72 711,454 (28,804) 6.50 45,210 28,804 73 727,860 (30,582) 6.50 46,212 30,582 74 743,490 (32,467) 6.50 47,161 32,467 75 758,184 (34,463) 6.50 48,044 34,463 76 771,765 (36,404) 6.50 48,857 36,404 77 784,218 (38,631) 6.50 49,587 38,631 78 795,174 (40,778) 6.50 50,222 40,778 79 804,618 (43,028) 6.50 50,755 43,028 80 812,345 (45,382) (20,422) 6.50 50,439 45,382 81 796,980 (46,607) (88,631) 6.50 46,946 46,607 82 708,688 (43,478) (98,503) 6.50 40,965 43,478 83 607,672 (39,205) (109,840) 6.50 34,145 39,205 84 492,772 (33,295) (123,132) 6.50 26,412 33,295 85 362,757 (25,727) (138,454) 6.50 17,682 25,727 86 216,258 (16,139) (156,166) 6.50 7,868 16,139 87 51,821 (4,080) (47,741) 6.50 4,080 88 6.50 89 6.50 90 6.50 91 6.50 92 6.50 93 6.50 94 6.50 95 6.50 96 * 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. B25 Page 14
Roth Accounts - Allen C11 Age Begin Year Account Balance Annual Deposit Annual Additions or Withdrawals Roth 401(k) Cash Withdrawal RMD Cash Flow (shortage) % Rate 1 2 3 4 5 6 7 53 $62,500 $5,400 54 72,484 5,508 55 83,279 5,618 56 94,944 5,731 57 107,543 5,845 58 121,142 5,962 59 135,815 6,081 60 151,639 6,203 61 168,697 6,327 62 187,078 6,454 63 206,877 6,583 64 228,196 6,714 65 251,144 66 267,468 67 284,853 68 303,368 69 323,087 70 344,088 71 366,454 72 390,274 73 415,642 74 442,659 75 471,432 76 502,075 77 534,710 78 569,466 79 606,481 80 645,902 81 687,886 82 732,599 83 780,218 84 830,932 85 884,943 86 942,464 87 1,003,724 88 1,068,966 89 1,138,449 90 1,112,590 91 1,028,269 92 912,776 93 781,397 94 632,701 95 465,143 96 277,056 97 66,644 98 (96,396) (151,208) (176,009) (184,097) (192,570) (201,448) (210,752) (220,501) (66,644) B25 Annual Interest Annual Interest 7.00 $4,584 7.00 5,287 7.00 6,047 7.00 6,868 7.00 7,754 7.00 8,711 7.00 9,743 7.00 10,855 7.00 12,054 7.00 13,345 7.00 14,736 7.00 16,234 6.50 16,324 6.50 17,385 6.50 18,515 6.50 19,719 6.50 21,001 6.50 22,366 6.50 23,820 6.50 25,368 6.50 27,017 6.50 28,773 6.50 30,643 6.50 32,635 6.50 34,756 6.50 37,015 6.50 39,421 6.50 41,984 6.50 44,713 6.50 47,619 6.50 50,714 6.50 54,011 6.50 57,521 6.50 61,260 6.50 65,242 6.50 69,483 6.50 70,537 6.50 66,887 6.50 60,516 6.50 52,718 6.50 43,874 6.50 33,890 6.50 22,665 6.50 10,089 6.50 8 Page 15
Roth Accounts - Betty C11a Age Begin Year Account Balance Annual Deposit Annual Additions or Withdrawals Roth 401(k) Cash Withdrawal RMD Cash Flow (shortage) % Rate 1 2 3 4 5 6 7 51 $72,800 $5,400 52 83,505 5,508 53 95,072 5,618 54 107,563 5,731 55 121,045 5,845 56 135,590 5,962 57 151,274 6,081 58 168,180 6,203 59 186,396 6,327 60 206,016 6,454 61 227,141 6,583 62 249,879 6,714 63 274,345 6,849 64 299,272 65 318,725 66 339,442 67 361,506 68 385,004 69 410,029 70 436,681 71 465,065 72 495,294 73 527,488 74 561,775 75 598,290 76 637,179 77 678,596 78 722,705 79 769,681 80 819,710 81 872,991 82 929,735 83 990,168 84 1,054,529 85 1,123,073 86 1,196,073 87 1,273,818 88 1,356,616 89 1,444,796 90 1,538,708 91 1,638,724 92 1,745,241 93 1,858,682 94 1,979,496 95 2,108,163 96 2,075,223 (164,077) B25 Annual Interest Annual Interest 7.00 $5,305 7.00 6,059 7.00 6,873 7.00 7,751 7.00 8,700 7.00 9,722 7.00 10,825 7.00 12,013 7.00 13,293 7.00 14,671 7.00 16,155 7.00 17,752 6.50 18,078 6.50 19,453 6.50 20,717 6.50 22,064 6.50 23,498 6.50 25,025 6.50 26,652 6.50 28,384 6.50 30,229 6.50 32,194 6.50 34,287 6.50 36,515 6.50 38,889 6.50 41,417 6.50 44,109 6.50 46,976 6.50 50,029 6.50 53,281 6.50 56,744 6.50 60,433 6.50 64,361 6.50 68,544 6.50 73,000 6.50 77,745 6.50 82,798 6.50 88,180 6.50 93,912 6.50 100,016 6.50 106,517 6.50 113,441 6.50 120,814 6.50 128,667 6.50 131,137 8 Page 16
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 12% 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 filing jointly) Tax due... $50,000 Using 15% estimated rate -- Income Level -- Using 2018 tax rates. $50,000 ($24,000) $26,000 $6,000 Tax due... $2,739 - Standard deduction - Taxable - a $3,261 or 54% 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. Tax Cuts and Jobs Act of 2017 On December 22, 2017, the TCJA act was signed into law enacting substantial changes to the tax law. A majority of individual tax law changes are not permanent and are set to expire after 2025*. Marginal Tax Bracket percentages: Pre-tax Act 0.0% 15.0% 28.0% 31.0% 36.0% 39.6% EGTRRA 2001 2002 2003 2012 10.0% 15.0% 27.5% 30.5% 35.5% 39.1% JCWAA 10.0% 15.0% 27.5% 30.0% 35.0% 38.6% JGTRRA 10.0% 15.0% 25.0% 28.0% 33.0% 35.0% ATRA 10.0% 15.0% 25.0% 28.0% 33.0% 35.0% TCJA 2018 12.0% 22.0% 24.0% 32.0% 35.0% 37.0% Additional TCJA Changes The TCJA introduced numerous changes. The Child Tax Credit doubled to $2,000. Marriage penalty relief is eliminated for all but the top tax bracket. Personal exemptions are suspended. The standard deduction nearly doubled to $24,000/$12,000 (married filing jointly/single filer). A new $10,000/$5,000 limit is placed on the deduction for state and local taxes. Itemized deductions are no longer subject to phase-out for high-income taxpayers. New limits are placed on the deductibility of home mortgage and home equity loan interest. Rules for 529 college savings plan has been extended to allow use for K-12 education expenses. Self-employed taxpayers may be able to claim a new deduction of up to 20% of qualified business income. The Alternative Minimum Tax exclusion levels were increased to $109,400/$70,300 for 2018 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. * Sunset Provision Unless Congressional action is taken, a majority of the TCJA changes will expire after 2025, reverting to the rules in place under the previous tax act. The changes listed here may prove temporary unless Congress decides the changes will be made permanent, or other changes are made. Page 17
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 Schedule C (self employment) Schedule D (net gain/loss) Schedule E (passive gain/loss) GROSS INCOME Gross $158,000 1,407 8,000 5,898 3,281 Taxable $158,000 1,407 8,000 5,898 3,281 $176,587 D3 B9 C4..C8 B9 C6 a D9 Adjustments: Retirement plan deposits - Allen Retirement plan deposits - Betty Self Employment FICA ADJUSTED GROSS INCOME 1,130 ($5,160) (4,320) (565) $166,542 C10-C10e D15 Itemized Deductions: Mortgage interest Charitable contributions Medical expenses State, Property & Other Tax Gross $9,955 4,000 4,000 21,543 Allowed $9,955 4,000 10,000 D10 TAXABLE INCOME Itemized deductions $23,955 or Standard deductions $24,000 TAX SUMMARY: Federal Income Tax $22,825 FICA (Social Security) & HI Tax 13,217 Other Taxes or (credits) (2,000) State Income Tax 14,143 TOTAL TAXES Your combined federal & state marginal tax bracket is 31.00 %. Your total taxes equal 28.93 % of your Adjusted Gross Income, and 33.80% of your Taxable income. *Dividend and Capital Gains taxed marginally at 15.00%. ($24,000) $142,542 $48,185 D11 Page 18
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 19
Tax Summary D6 Ages Federal Income Tax Federal Income Tax Amounts Additional AMT Tax Federal Credits Early distr. & other tax Total Fed. Income Tax 1 2 3 4 5 6 7 8 9 State Tax Additional State Tax or (credits) FICA and HI Tax 53 51 $22,826 ($2,000) $20,826 $14,503 ($360) $13,217 $48,186 54 52 23,576 (2,000) 21,576 14,938 (360) 13,514 49,668 55 53 26,288 26,288 16,180 (270) 14,541 56,739 56 54 27,018 27,018 16,615 (270) 14,870 58,233 57 55 27,914 27,914 17,116 (180) 15,309 60,159 58 56 28,437 28,437 17,461 (180) 15,551 61,269 59 57 29,419 29,419 18,024 (180) 15,903 63,166 60 58 34,469 34,469 20,809 (180) 16,718 71,816 61 59 31,447 31,447 19,217 (180) 17,098 67,582 62 60 32,673 32,673 19,838 (180) 17,487 69,819 63 61 34,873 34,873 20,851 (180) 18,194 73,738 64 62 35,278 35,278 21,159 (180) 18,291 74,548 65 63 9,421 9,421 14,683 (180) 8,419 32,343 66 64 6,603 (180) 6,423 67 65 13,145 13,145 14,073 (180) 27,038 68 66 29,520 29,520 18,250 (180) 47,590 69 67 29,581 29,581 15,640 (180) 45,041 70 68 40,843 40,843 22,587 (180) 2,428 65,678 71 69 2,457 (180) 2,277 72 70 3,708 3,708 4,934 (180) 8,462 73 71 4,613 4,613 5,308 (180) 9,741 74 72 13,085 13,085 9,447 (180) 22,352 75 73 18,950 18,950 11,943 (180) 30,713 76 74 19,995 19,995 12,424 (180) 32,239 77 75 21,092 21,092 12,929 (180) 33,841 78 76 22,278 22,278 13,461 (180) 35,559 79 77 23,488 23,488 14,015 (180) 37,323 80 78 24,757 24,757 14,597 (180) 39,174 81 79 15,602 15,602 10,836 (180) 26,258 82 80 16,207 16,207 11,397 (180) 27,424 83 81 16,818 16,818 11,982 (180) 28,620 84 82 17,452 17,452 12,595 (180) 29,867 85 83 18,110 18,110 13,237 (180) 31,167 86 84 18,776 18,776 13,907 (180) 32,503 87 85 19,487 19,487 14,611 (180) 33,918 88 86 20,225 20,225 15,349 (180) 35,394 89 87 4,512 (180) 4,332 90 88 189 (180) 9 91 89 201 (90) 111 92 90 207 (90) 117 93 91 212 (90) 122 94 92 218 (90) 128 95 93 223 (90) 134 96 94 229 (90) 139 97 95 235 (90) 145 98 96 D8 D12 D13, D14 D17 D17 D15 Total Taxes Note - it is assumed the Tax Cuts and Jobs Act (TCJA) sunsets after 2025. See Income Tax Calculations report for details. Page 20
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, 1250 1 2 3 4 5 6 7 8 9 10 11 12 53 51 $166,000 $7,305 ($6,764) $166,542 54 52 169,750 8,048 (6,415) 171,383 55 53 183,041 8,761 (6,623) 185,180 56 54 187,201 9,071 (6,264) 190,009 57 55 191,457 8,672 (5,891) 195,573 58 56 195,810 9,109 (5,505) 199,414 59 57 200,264 10,504 (5,105) 205,663 60 58 210,763 31,320 (5,470) 236,613 61 59 215,573 8,823 (5,473) 218,923 9,700 62 60 220,494 10,367 (5,033) 225,827 9,900 63 61 225,528 12,073 (4,575) 237,073 10,100 64 62 230,679 13,916 (4,099) 240,496 10,300 65 63 101,459 62,620 4,465 168,544 10,500 66 64 67,270 11,502 78,772 10,700 67 65 44,568 2,400 29,582 12,372 191,350 11,000 68 66 186,591 2,448 30,174 19,139 238,352 11,200 69 67 156,610 2,497 56,990 20,071 236,168 11,400 70 68 68,781 158,934 2,547 58,130 21,036 313,918 11,600 71 69 5,787 24,315 2,598 26,041 58,741 11,900 72 70 6,205 2,650 50,026 110,246 12,100 73 71 7,128 2,703 54,164 118,541 12,300 74 72 4,706 2,757 62,921 173,291 12,600 75 73 135,288 2,812 64,180 202,280 12,800 76 74 140,578 2,868 65,463 208,909 13,100 77 75 146,125 2,926 66,773 215,824 13,400 78 76 151,981 2,984 68,108 223,073 13,600 79 77 158,083 3,044 69,470 230,597 13,900 80 78 164,480 3,105 70,860 238,445 14,200 81 79 122,635 3,167 72,277 198,079 14,500 82 80 128,800 3,230 73,722 205,752 14,700 83 81 135,238 3,295 75,197 213,730 15,000 84 82 141,981 3,361 76,701 222,043 15,300 85 83 149,045 3,428 78,235 230,708 15,600 86 84 156,427 3,496 79,800 239,723 16,000 87 85 164,181 3,566 81,396 249,143 16,300 88 86 172,305 3,638 83,023 258,966 16,600 89 87 51,821 3,710 58,143 113,674 16,900 90 88 3,785 15,006 18,791 17,300 91 89 3,860 3,424 7,284 8,800 92 90 3,937 3,743 7,680 9,000 93 91 4,016 4,068 8,084 9,150 94 92 4,097 4,400 8,497 9,350 95 93 4,178 4,903 9,081 9,550 96 94 4,262 5,489 9,751 9,700 97 95 4,347 6,087 10,434 9,900 98 96 Less * $24,000 $136,644 $5,898 24,480 140,337 6,566 24,970 152,933 7,277 25,469 156,507 8,033 25,978 160,923 26,498 163,807 9,109 27,028 168,131 10,504 27,568 177,725 31,320 39,192 161,271 8,760 39,604 166,136 10,188 40,391 174,813 40,457 176,253 13,486 43,061 54,046 60,937 60,672 7,400 58,995 76,787 62,274 164,878 58,708 166,060 64,874 11,098 60,281 58,662 33,972 59,308 40,190 59,123 96,862 59,923 129,556 61,000 134,810 62,129 140,295 63,313 146,160 64,558 152,140 65,865 158,380 68,507 115,072 71,723 119,329 75,106 123,624 78,662 128,081 82,403 132,705 86,337 137,385 90,477 142,366 94,833 147,534 103,361 113,611 115,363 120,981 126,890 133,107 139,716 146,698 154,045 1,336 8,672 4,048 11,770 102,428 44,568 4,490 226,346 51,365 5,512 54,546 6,743 102,907 4,706 D18 D7a C10a..C10e B18 B10 D16 D9 D10 D11 C6a * It is assumed the Tax Cuts and Jobs Act (TCJA) sunsets after 2025. ** Includes stock options, unrecaptured 1250 gain and other income items. Page 21
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 53 51 54 52 55 53 56 54 57 55 58 56 59 57 60 58 61 59 62 60 63 61 64 62 65 63 66 64 67 65 68 66 69 67 70 68 71 69 72 70 73 71 74 72 75 73 76 74 77 75 78 76 79 77 80 78 81 79 82 80 83 81 84 82 85 83 86 84 87 85 88 86 89 87 90 88 91 89 92 90 93 91 94 92 95 93 96 94 97 95 98 96 $1,407 1,482 1,484 1,038 1 2 3 4 5 6 7 8 9 10 11 63 179 303 430 941 919 $1,407 1,482 1,484 1,038 63 179 303 430 1,682 1,682 3,362 925 925 1,848 427 1,368 856 811 1,730 1,623 693 693 1,385 384 384 767 $5,898 $5,898 6,566 6,566 7,277 7,277 8,033 8,033 8,672 8,672 9,109 9,109 9,508 997 10,505 8,776 22,544 31,320 8,760 8,760 10,188 10,188 11,770 11,770 13,486 13,486 5,041 52,536 57,577 2,770 61,727 64,497 44,569 44,569 1,286 65,272 66,558 158,934 2,434 2,434 2,077 2,050 4,127 1,149 4,829 5,978 4,706 4,706 C4 C8 C5 C5 C5 C6 B21, C12, C24 C24 Page 22
Federal Income Tax Worksheet Ages Filing Status Taxable Ordinary Income Cap. Gain, Div. & 1250 12% 15% Marginal rate brackets indexed at 2.0 % 22% 24% 32% 35% 37% 25% 28% 33% 35% 39.6% 1 2 3 4 5 6 7 8 9 10 11 12 13 Max CG Rate Cap. Gain Div & 1250 Tax Ordinary Income Tax 53 51 Joint $136,644 $5,898 $19,050 $77,400 $165,000 $315,000 $400,000 $600,000 15% $885 $21,941 $22,826 54 52 Joint 140,337 6,566 19,431 78,948 168,300 321,300 408,000 612,000 15% 985 22,591 23,576 55 53 Joint 152,933 7,277 19,820 80,527 171,666 327,726 416,160 624,240 15% 1,092 25,196 26,288 56 54 Joint 156,507 8,033 20,216 82,137 175,099 334,281 424,483 636,725 15% 1,205 25,813 27,018 57 55 Joint 160,923 8,672 20,620 83,780 178,601 340,966 432,973 649,459 15% 1,301 26,613 27,914 58 56 Joint 163,807 9,109 21,033 85,456 182,173 347,785 441,632 662,448 15% 1,366 27,071 28,437 59 57 Joint 168,131 10,504 21,453 87,165 185,817 354,741 450,465 675,697 15% 1,576 27,843 29,419 60 58 Joint 177,725 31,320 21,882 88,908 189,533 361,836 459,474 689,211 15% 4,698 29,771 34,469 61 59 Joint 161,271 8,760 22,320 90,686 182,955 278,796 497,897 562,455 15% 1,314 30,133 31,447 62 60 Joint 166,136 10,188 22,767 92,500 186,614 284,372 507,855 573,704 15% 1,528 31,146 32,673 63 61 Joint 174,813 11,770 23,222 94,350 190,346 290,060 518,012 585,178 15% 1,766 33,107 34,873 64 62 Joint 176,253 13,486 23,686 96,237 194,153 295,861 528,372 596,882 15% 2,023 33,255 35,278 65 63 Joint 54,046 60,937 24,160 98,162 198,036 301,778 538,939 608,819 15% 2,523 6,899 9,421 66 64 Joint 7,400 24,643 100,125 201,997 307,814 549,718 67 65 Joint 76,787 44,568 25,136 102,128 206,037 313,970 560,713 633,416 15% 2,884 10,261 13,145 68 66 Joint 164,878 25,639 104,170 210,157 320,249 571,927 646,084 29,521 29,520 69 67 Joint 166,060 26,152 106,254 214,360 326,654 583,365 659,006 29,582 29,581 70 68 Joint 11,098 226,346 26,675 108,379 218,648 333,187 595,033 672,186 39,734 1,110 40,843 71 69 Joint 27,208 110,546 223,021 339,851 606,933 72 70 Joint 33,972 5,512 27,752 112,757 227,481 346,648 619,072 699,342 3,708 3,708 73 71 Joint 40,190 6,743 28,307 115,012 232,031 353,581 631,453 713,329 4,613 4,613 74 72 Joint 96,862 4,706 28,873 117,313 236,671 360,653 644,082 727,596 13,086 13,085 75 73 Joint 129,556 29,451 119,659 241,405 367,866 656,964 742,148 18,951 18,950 76 74 Joint 134,810 30,040 122,052 246,233 375,223 670,103 756,990 19,995 19,995 77 75 Joint 140,295 30,641 124,493 251,157 382,728 683,505 772,130 21,092 21,092 78 76 Joint 146,160 31,254 126,983 256,181 390,382 697,176 787,573 22,279 22,278 79 77 Joint 152,140 31,879 129,523 261,304 398,190 711,119 803,324 23,489 23,488 80 78 Joint 158,380 32,516 132,113 266,530 406,154 725,341 819,391 24,758 24,757 81 79 Joint 115,072 33,167 134,755 271,861 414,277 739,848 835,779 15,602 15,602 82 80 Joint 119,329 33,830 137,450 277,298 422,562 754,645 852,494 16,208 16,207 83 81 Joint 123,624 34,506 140,199 282,844 431,013 769,738 869,544 16,818 16,818 84 82 Joint 128,081 35,197 143,003 288,501 439,634 785,133 886,935 17,452 17,452 85 83 Joint 132,705 35,900 145,863 294,271 448,426 800,836 904,674 18,111 18,110 86 84 Joint 137,385 36,619 148,781 300,156 457,395 816,852 922,767 18,777 18,776 87 85 Joint 142,366 37,351 151,756 306,160 466,543 833,189 941,223 19,487 19,487 88 86 Joint 147,534 38,098 154,791 312,283 475,874 849,853 960,047 20,225 20,225 89 87 Joint 38,860 157,887 318,528 485,391 866,850 90 88 Joint 39,637 161,045 324,899 495,099 884,187 91 89 Single 20,215 82,133 198,859 414,803 901,871 92 90 Single 20,619 83,776 202,837 423,099 919,908 93 91 Single 21,032 85,451 206,893 431,561 938,306 94 92 Single 21,452 87,160 211,031 440,193 957,073 95 93 Single 21,881 88,903 215,252 448,996 976,214 96 94 Single 22,319 90,681 219,557 457,976 995,738 97 95 Single 22,765 92,495 223,948 467,136 1,015,653 98 96 D7 D7 620,996 685,630 979,248 998,833 905,585 923,697 942,171 961,014 980,234 999,839 1,019,836 Note - it is assumed the Tax Cuts and Jobs Act (TCJA) sunsets after 2025. See Income Tax Calculations report for details. D8 Total Tax Page 23
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 24
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 1 2 3 4 5 6 7 8 53 51 $761,850 ($172,096) $166,000 $6,628 $532 $850,471 54 52 850,471 (176,205) 169,750 7,051 596 945,842 55 53 945,842 (198,631) 183,041 8,107 7,483 1,040,573 56 54 1,040,573 (246,333) 187,202 51,207 7,924 1,099,431 57 55 1,099,431 (254,046) 191,456 54,176 8,414 1,162,136 58 56 1,162,136 (222,250) 195,811 17,608 8,831 1,269,304 59 57 1,269,304 (228,594) 200,264 16,699 11,631 1,385,701 60 58 1,385,701 (288,808) 210,763 78,045 1,447,770 61 59 1,447,770 (205,851) 215,572 10,262 19,983 1,616,581 62 60 1,616,581 (211,227) 220,494 10,758 20,025 1,797,868 63 61 1,797,868 (217,740) 225,528 15,312 23,100 1,995,670 64 62 1,995,670 (220,956) 230,679 11,780 21,503 2,206,314 65 R 63 2,206,314 (306,633) 101,459 192,868 12,306 2,164,173 66 64 R 2,164,173 (188,359) 175,516 12,843 2,121,209 67 65 2,121,209 (267,769) 102,428 114,748 37,203 13,391 2,030,773 68 66 2,030,773 (238,487) 186,591 37,947 13,949 1,969,482 69 67 1,969,482 (240,673) 156,610 69,544 14,519 1,935,264 70 68 1,935,264 (251,126) 4,490 70,935 438,244 262,542 2,324,661 71 69 2,324,661 (188,725) 24,315 92,056 72,354 2,350,929 72 70 2,350,929 (200,207) 51,365 75,041 73,801 2,370,988 73 71 2,370,988 (206,986) 54,546 77,163 75,277 2,387,911 74 72 2,387,911 (225,308) 102,907 45,619 76,782 2,387,939 75 73 2,387,939 (213,606) 135,288 78,318 2,403,008 76 74 2,403,008 (220,463) 140,578 79,884 2,413,576 77 75 2,413,576 (227,608) 146,125 81,482 2,419,085 78 76 2,419,085 (235,093) 151,981 83,111 2,418,886 79 77 2,418,886 (242,857) 158,083 84,774 2,412,353 80 78 2,412,353 (250,950) 164,480 86,469 2,398,769 81 79 2,398,769 (210,834) 122,635 88,199 2,427,649 82 80 2,427,649 (218,763) 128,800 89,962 2,450,189 83 81 2,450,189 (227,001) 135,238 91,762 2,469,355 84 82 2,469,355 (235,579) 141,981 93,597 2,482,783 85 83 2,482,783 (244,515) 149,045 95,469 2,489,765 86 84 2,489,765 (253,805) 156,427 97,378 2,489,554 87 85 2,489,554 (263,507) 164,181 99,325 2,481,297 88 86 2,481,297 (273,618) 172,305 101,313 2,464,088 89 87 2,464,088 (251,556) 148,217 103,338 2,469,206 90 L 88 2,469,206 (256,615) 151,208 105,406 2,473,065 91 89 2,473,065 (235,847) 176,009 59,838 2,451,484 92 90 2,451,484 (245,132) 184,097 61,034 2,420,121 93 91 2,420,121 (254,826) 192,570 62,255 2,377,942 94 92 2,377,942 (264,949) 201,448 63,501 2,323,825 95 93 2,323,825 (275,522) 210,752 64,770 2,256,552 96 94 2,256,552 (286,568) 220,501 66,066 2,174,807 97 95 L 2,174,807 (298,109) 230,721 67,387 2,075,223 98 96 2,075,223 2,075,223 B8 B9 C10...C10e C4...C8 B10 B18, B18a R = Retirement Age, L = Life Expectancy **Investment and Retirement distributions include withdrawals from account totals to satisfy "Income needed" shortages from Cash Flow report. C3a Page 25
Monte Carlo Retirement Simulation Monte Carlo Simulations illustrate possible variations in growth and/or depletion of retirement capital under unpredictable future conditions. 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 $2,074,952 Percentage of results above zero* Minimum (worst case) result Average Monte Carlo result $2,535,320 Percentage with $ remaining at Allen's age 87 Maximum Monte Carlo result $0 $21,707,023 Percentage with $ remaining at Allen's age 92 Percentage with $ remaining at Allen's age 82 *Percent of times money is remaining at last life expectancy. 73% 89% 97% 100% F4 The bold line is the estimated retirement capital value over time using fixed rates. Current after tax rate of return is 6.52% in the original estimate and varies from 5.99% to 7.17%, with portfolio changes. 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 -2.51% and 15.67%). 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 $2,074,952 in assets remaining at last life expectancy. Monte Carlo simulation, using 10,000 trials of the same assets, income and expenses, resulted in a 73% probability of having funds remaining at last life expectancy, and an average amount of $2,535,320 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 26
Monte Carlo Details Financial analysis can help you evaluate your status in relationship to your financial goals and objectives. In preparing your financial analysis various assumptions were used, including income available, annual expenses, amount of money currently invested and rates of return on retirement assets. The analysis of potential funds available for use in retirement included an assumed "fixed" or "static" rate of return on each asset type - taxable, tax-free, tax-deferred, equity and retirement accounts. F5 Fixed or Static rates: Use of a fixed or static rate (where the initial rate used remains static throughout the analysis) can be helpful for visualizing potential future values to see how long your money might last, but may not reflect what happens in the real world of finance. Variable Rates: The Monte Carlo illustration applies a concept of variable rates of return on assets over time, in an attempt to illustrate what might happen in a situation where the returns on assets may be positive in some years and negative in other years. Since there is no way to predict either the positive or negative years or the amount of gain or loss that the assets might be exposed to, a Monte Carlo Simulation is used. This involves preparation of 10,000 separate projections of your financial future, where a rate of return is randomly selected every year in each of the 10,000 simulations. Standard Deviation: The term "standard deviation" refers to the extent of variability, or deviation, above or below the normal average that was used in the original illustration. This illustration uses a blended standard deviation rate based on the assumption that our portfolio will consist of various asset components. Assets like CD's, bonds and savings will be conservative and have a low variation in rate. Other assets like stocks, mutual funds, real estate, etc. will likely show a greater degree of variability in rate of return. It is also assumed that the mix of assets will change as your goals and time horizon changes. Original Result -vs.- Monte Carlo: The bold blue line in the Monte Carlo graph represents the amount of funds available using the fixed or static rates of return. This outcome is unlikely to be realized, because in reality the rates of return will vary each year. The Monte Carlo illustration shows additional lines representing the range of results using variable rates of return each year for each of the 10,000 Monte Carlo simulations. The Monte Carlo "tornado" chart makes it clear that there is a great range of potential outcomes that could be realized in the future. Monte Carlo Simulation Minimum, Average and Maximum Dollar Results Values above the Monte Carlo graph indicate the best, worst and average results at the end of 10,000 Monte Carlo simulations. These show the range of results (high and low), and the average of all Monte Carlo results. All values are based on results at the life expectancy of the last to die or the ages shown. Minimum Average Maximum This represents the lowest return of 10,000 simulations. In most cases at least some of these results will be zero (0), indicating that funds ran out prior to life expectancy. This is the average of all positive Monte Carlo simulations. The average may or may not be similar to the Original Retirement Capital Estimate. This result represents the highest accumulation of the 10,000 simulations. IMPORTANT: The projections or other information generated in the reports regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Each Monte Carlo Simulation is unique; results vary with each use over time. Page 27