Preparing for Retirement Are You Ready? Date 1

Where to Start? »Where will I live? »What will I do? »How much money will I need? »How much money do I have? »What are my likely health-related issues? 2

Budgeting A budget: What does it do? »Is a spending plan »Identifies where money goes »Can limit amounts spent on certain categories of expenses »Helps you reach financial goals 3

Budgeting Why budget? »Control »Organization »Opportunities »More Money 4

Expenses Categories of Expenses »Fixed »Variable 5

Expenses Fixed Expenses »Taxes »Mortgage or rent »Insurance »Automobiles 6

Expenses Variable Expenses »Food »Clothing »Furniture, appliances »Gas, oil »Entertainment »Medical care »Gifts »Vacation »Personal items 7

Income Categories of Income »Wages/salary »Income from self-employment »Pension, IRA distributions »Interest and dividends »Social Security 8

The Moment of Truth 9

Assets Assets include: »Cash »Stocks, bonds, mutual funds »Annuities and retirement plans »Home »Car, truck, boat »Furnishings, antiques, jewelry, coins, etc. 10

Liabilities Liabilities include: »Mortgage »Car and other loans »Credit card debt »Taxes due »Major unpaid bills »Other 11

Assets -Liabilities Net Worth 12

Net Worth Why calculate net worth? »Applying for a loan »Preparing a will »Determining insurance needs »Progressing toward financial goals 13

Full Retirement Age Year of BirthFull Retirement Age 1937 or earlier months months months months months months months months months months 1960 or later67 Source: Social Security Administration, 14

Reduction Factors at Age 62 Source: Social Security Administration, www.ssa.gov Reduction Factors Year of BirthTotal Percent Reduction 1937 or earlier – – – – – and later

Source: Social Security Administration, www.ssa.gov Benefit Increase Factors The Value of Waiting Year of Birth Yearly Rate of Increase % 1939 – % 1941 – % 1943 or later8.0% 16

Source: Social Security Administration, www.ssa.gov Income Tax Income Tax on Benefits Total IncomePortion Taxable Individual < $25,000None $25,000 - $34,00050% > $34,00085% Joint < $32,000None $32,000 - $44,00050% > $44,00085% 17

Social Security Benefits What to Bring to Apply for Social Security Benefits »Your Social Security card or proof of your Social Security number »Information about the home where you live, such as the mortgage, lease, and landlord's name »Tax return or W-2 forms, payroll slips, insurance policies, and other information about your income and the things you own »Proof of U.S. citizenship or eligible non-citizen status »Your checkbook or other papers that show your bank, credit union or financial institution account number so you can have your payments deposited directly into your account 18

Source: Social Security Administration, Just how much will you need in retirement? Your Current Income $_________ x 0.70 = Amount needed each year in retirement How Much Will You Need? 19

Item Average Cost Today Estimated Cost in 5 Years Estimated Cost in 10 Years House Cost in Florida $301,000$348,942$404,579 Recreational Vehicle (RV) $115,000$133,317$154, Day Caribbean Cruise $1,499$1,738$2,015 Round of Golf at Your Local Club $75$87$101 Don't Ignore Inflation Retired life will cost more in the future than it does today Source: BestPlaces.net, Kmotion research

»The average 65-year-old male can expect to live to 84 years old »The average 65-year-old female can expect to live to 86 years old Source: http://socialsecurity.gov/planners/lifeexpectancy.htm 21 Life Expectancy

Health Care Coverage Medicare »Eligibility: age 65 »Four Parts Medicare »Part A - Hospital Insurance »Part B - Medical Insurance »Part C - Medicare Advantage Plan »Part D - Prescription Drug Coverage 22

Retirement Timeline »At Age 50 The minimum age to begin making catch-up contributions, an extra amount that those over 50 can add to retirement plans and other accounts »At Age 59½ No more tax penalties on early withdrawals from retirement accounts, but leaving it in means more time where your money can potentially grow 1 »At Age 62 The minimum age to receive Social Security benefits, but delaying means a bigger monthly benefit »At Age 65 Eligible for Medicare »At Age 66 Eligible for full Social Security benefits if born between 1943 and 1954 »At Age 70½ Recommended age to start taking minimum withdrawals from most retirement accounts by this age; otherwise, you may be charged heavy tax penalties in the future 1 The 10% early withdrawal penalty does not apply to certain 457 plan withdrawals. Withdrawals may be subject to ordinary income tax. 23

Useful Resources 1 » - Informational articles and interactive tools » - Official Social Security website » - Official Medicare website » - Internal Revenue Service official site » - Plan Sponsor Council of America (retirement planning and calculation tools) 1 Great-West Financial® is not responsible for, nor does it endorse the content contained in, the additional websites provided. 24

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