1. Retirement 101 What’s My Number? 1 12/28/14

2. There’s a Problem with Planning for Retirement What will my expenses be? How long will I live? How much will I earn on my investments? What will happen with inflation? Things I don’t know I don’t know? There are just too many variables 2

3. Here’s a way forward The 4% Rule Generally speaking you can withdraw 4% of your assets* every year and have a good chance of making your money last your lifetime. *Note: your WRS Pension and Social Security are required to last your lifetime. This is not an absolute rule. There are scenarios when you should withdraw less or could withdraw more. 3

4. Let’s do some Math Retirement expenses = $60,000 a year (before taxes) 60,000 x 25 = $1,500,000 4

5. But Wait...It’s not that bad WRS Pension Social Security Personal Savings 5

6. WRS Pension The average WRS Pension is $25,000 a year (Your WRS statement should arrive in the mail around April every year) $60,000 - 25,000 Pension $35,000 Shortfall $875,000 (35,000 x 25) http://host.madison.com/news/local/govt-and-politics/wisconsin-retirement- system-q-a/article_652e3c38-4f8f-11e0-b116-001cc4c002e0.html 6

7. Social Security The average SS Benefit is $15,500 (Statements are sent out at age 25, 30, 35, etc. Otherwise you need to access your account at SSA.gov) $35,000 - 15,500 SS $19,500 Shortfall $487,500 (19,500 x 25) http://www.ssa.gov/news/press/basicfact.html Your WRS and SS Benefits are worth over $1,000,000 in savings! 7

8. Personal Savings $250,000 in a TSA (403b) or WDC (457) account $19,500 - 10,000 savings $ 9,500 Shortfall $237,500 (9,500 x 25) 8

9. We’re Getting There So what can you do now? You have a $9,500 income deficit. 9

10. Part-time Work $9,500 - 3,000 (pt work) $6,500 Shortfall $162,500 (6,500 x 25) $3,000 = $250 a month 10

11. Reduce Expenses Every $1,000 reduction in expenses means you can reduce your savings shortfall by $25,000. Example: You need to save $25,000 to support your iphone bill $6,500 - 1,000 expense reduction $5,500 11

12. So where are we at? Taxable Income Desired$60,000 WRS Pension- 25,000 Social Security- 15,500 Personal Savings (250,000 TSA) - 10,000 Part time Work ($250 a month) - 3,000 Reduce Expenses- 1,000 Deficit $5,500 Shortfall $137,500 (5,500 x 25) 12

13. 13 So, we have a deficit of $137,500 Further options Increase WRS and SS benefits by working longer Save more - $387,500 instead of $250,000 More part-time work Spend less

14. Conclusion So the basic framework to determine if you are on a reasonable path is: Desired Income - Actual Income Balance x 25 14

15. Pay Taxes* Later Pension TSA (403b) IRA 457 Pay Taxes** Now Roth TSA (403b) Roth IRA Roth 457 No Taxes*** HSA (Health Savings Acct.) 15 Savings Vehicles *Contributions are not taxed. Distributions are taxed as ordinary income. **Contributions are taxed. Distributions are not taxed. ***If used for certain medical expenses.

16. WDC (457) Similar to 403b Contributions can be taken out before age 59.5 (rules apply) Tax Sheltered Annuity (403b) $18,000 Max. Contribution Payroll Deduction/Optional WEA Trust (Catch-up options available) Choices Variety of Mutual Funds 16 IRA $5,500 Max Contribution Self-directed (Catch-up options available) Choices Mutual Funds, Stocks, etc. (Depends on Vendor) Pension 6.8% deducted from salary* 6.8% contributed by District* Payroll Deduction/Mandatory Vesting Requirements *determined by WRS, can vary year to year Choices Core Balanced Fund,Results averaged over 5 years Floor on payout Core/Variable Variable is not balanced, Results are not smoothed, No floor on payout Pay Income Taxes Later

17. WDC (Roth 457) Similar to Roth 403b Contributions cannot be taken out before age 59.5 Roth IRA $5,500 Max Contribution Self-directed (Catch-up options available) Choices Mutual Funds, Stocks, etc. (Depends on Vendor) Tax Sheltered Annuity (Roth 403b) $18,000 Max. Contribution Payroll Deduction/Optional WEA Trust (Catch-up options available) Choices Variety of Mutual Funds Pay Income Taxes Now 17

18. Choices Bank Account* *actually you have more choices but it involves more work HSA (Health Savings Account) $3,350 Max. Single Contribution* $6,650 Max. Family Contribution* *including District Contributions – 2015 Spending Limited to Health Expenses (Catch-up options available) No Income Taxes 18

19. Thank you Questions or Comments Jonathan Marin jonmarin@yahoo.com 19 Remember to consult a professional if you’re thinking of retiring. You can find 403b information at: http://www.weabenefits.com/ This presentation is also posted on www.tomahawkea.org You can find 457 information at: https://wisconsin.gwrs.com/login.do