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2. Shifting Gears Considerations and Strategies for Pre-Retirees

3. What’s ahead? Shifting Gears

4. Your retirement Savings Social Security Retirement income strategies Think about: Shifting Gears

5. Navigate the road ahead Shifting Gears 2 3 4 Longevity Inflation Healthcare costs Investment risks Public policy 5 1

6. Time To Shift Gears Shifting Gears Road bumps Longevity and Inflation Average life expectancy 78+ years 1 55 percent chance one spouse will live to 92 2 30 years of income = $1.5M without inflation! 3 Income needs may double in 30 years 4 1 Centers for Disease Control, Deaths, Preliminary Data for 2011. 2 For couple at age 65. 2012 IAM Basic Mortality table. 3 Assuming an 85 percent replacement ratio for a current salary of $40,000 over 30 years. Does not account for inflation or investment return. 4 Assuming inflation averages 2.5 percent a year. Amounts shown do not reflect the impact of taxes on pre-tax distributions. Individual taxpayer circumstances may vary. Examples are for illustrative purposes only.

7. Time To Shift Gears Shifting Gears Road bumps Healthcare costs Couple may need $207,000 for out-of-pocket healthcare costs 1 Additional costs for long-term care, assisted living Keep in mind Medicare eligibility at age 65 1 Savings needed for Medigap premiums, Medicare Part B and Part D premiums and out-of-pocket prescription drug expenses. Assumes median drug expenses and excludes long-term care. Employee Benefit Research Institute, October 2013, http://www.ebri.org/pdf/notespdf/ebri.notes.oct13.retsvgs1.pdf..

8. Time To Shift Gears Shifting Gears Road bumps Investment risks and Public policy No investment strategy, such as asset allocation or diversification, can guarantee a profit or protect against loss in periods of declining values. Individual taxpayer circumstances may vary. Examples are for illustrative purposes only. Ups and downs are inevitable Diversify investments to balance risk and return Changes to taxes and public programs are out of your control. Create a strategy for your personal situation.

9. Wants Needs Sources of income Plan Your Retirement

10. Travel? Volunteer? Start a business? Pursue a hobby? School? What are your retirement dreams? Plan Your Retirement

11. Mortgage or rent? Doctor and medical bills? Groceries and eating out? Insurance? Car payments? Entertainment? Credit card payments? What do you NEED in your retirement?

12. Plan Your Retirement SAVINGS RETIREMENT PLANS OTHER? SOCIAL SECURITY RENTAL PROPERTIES PENSIONS SOURCES OF INCOME

13. Shift savings strategy into high gear Plan Your Retirement Consolidate retirement accounts Multiple types of savings Save more

14. The impact of catch-up contributions Plan Your Retirement These examples are for illustrative purposes only. They assume a $100,000 starting balance, contributions made for eight years from age 57 to 65, and a 7 percent annual rate of return. The $24,000 contribution, including the IRS maximum contribution of $18,000 plus a catch-up contribution of $6,000, is for illustrative purposes. The IRS contribution limits are indexed and may be adjusted annually. The assumed rate of return is hypothetical and does not guarantee any future returns nor represent the return of any particular investment options. CATCH-UP CONTRIBUTIONS

15. Create or update your plan! Plan Your Retirement Make use of handbook Visit with me 1 on 1

16. Social Security Benefits Impact on income Timing Working while collecting Taxation of benefits Options for married couples

17. Sources of retirement income for average income earners to replace 85% – 100% of pre-retirement income. Time To Shift GearsSocial Security Benefits Impact of Social Security Employer-Sponsored Retirement Plan, Personal Savings and Other Sources Social Security Assumes 85 to 100 percent replacement ratio with 40 percent replacement from Social Security for worker earning $40,000 a year prior to retirement. 40% 45-60%

18. Highest monthly paycheck No penalty for employment Receive benefits later Receive benefits earlier Smallest monthly check Potential reduction penalty for employment Higher monthly check No penalty for employment No interim benefits Time To Shift GearsSocial Security Benefits When to retire? 66-67 YOUR AGE AND YOUR BENEFIT 7062 PROS AGE CONS Source: Social Security Administration, www.ssa.gov.

19. Time To Shift GearsSocial Security Benefits Working while collecting 1 At FRA, your benefit amount is adjusted to accommodate for the earlier reduction. Source: Social Security Administration, www.socialsecurity.gov/hlp/isba/10/hlp-isba061-aet4.htm. AGE 2016 EMPLOYMENT INCOME LIMITS CONSIDERATIONS Under Full Retirement Age (FRA) $15,720 For every $2 you earn over the limit, $1 is withheld from your Social Security benefits until the month in which FRA is reached. In the year FRA is reached $41,880 For every $3 you earn over the limit, $1 is withheld from your Social Security befits until the month in which FRA is reached. At FRA or older 1 No limits on earningsNone

20. SINGLE Provisional Income Benefit Subject to Tax Under $25,0000% $25,000 – $34,000Up to 50% Over $34,000Up to 85% MARRIED FILING JOINTLY Provisional Income Benefit Subject to Tax Under $32,0000% $32,000 – $44,000Up to 50% Over $44,000Up to 85% Time To Shift GearsSocial Security Benefits Social Security and taxes Note: State and local taxes may differ. Source: SSA Publication No. 05-10035, September 2011, Your Benefits May Be Taxable, http://www.ssa.gov/pubs/10035.html.

21. Time To Shift GearsSocial Security Benefits Considerations for married couples When should each spouse claim? Personal benefit or spousal benefit? Will survivor’s benefit be enough? Other strategies? Source: SSA Publication No. 05-10035, September 2011, Family Benefits, http://www.ssa.gov/pubs/10035.html.

22. Social Security Benefits Additional strategy * Benefit will be reduced if not at Full Retirement Age. Both individuals must have filed for Social Security benefits. Source: Social Security Administration, http://www.socialsecurity.gov/retire2/applying6.htm#options.. SOCIAL SECURITY STRATEGY DEFINITION BENEFIT Claim Now, Claim More Later (Restricted Application) An individual at FRA may claim a Spousal Benefit, delay taking their own benefit * Can earn delayed credits to claim higher personal benefit at a later age, which may also help spouse receive greater survivor benefit

23. Time To Shift Gears Request an estimate Social Security Benefits WWW.SSA.GOV/ESTIMATOR

24. Chart your Social Security strategy Obtain your benefit estimate at www.ssa.gov/estimatorwww.ssa.gov/estimator Plan to apply for benefit three months prior to needing Social Security income Visit with me 1 on 1 Social Security Benefits

25. Shift From Savings Strategies to Retirement Income Strategies How to cover expenses? What to do with savings? Consider types of income Take action to create income

26. GUARANTEED INCOME Social Security Company pensions Annuities Any wages earned in retirement NEEDS Food Clothing Shelter Healthcare Transportation Income taxes COVER NEEDS VARIABLE INCOME SOURCES Retirement plans [401(k), 403(b), ESOP] and IRAs Personal savings (CDs, bank accounts, money market accounts) Investments (stocks, bonds, mutual funds, real estate) WANTS Hobbies/leisure Travel Entertainment Club memberships Gifts/charitable donations COVER WANTS Retirement Income

27. Keep savings in retirement plan Roll all or part to an IRA Consider other savings or investment options Cash out What to do with retirement plan savings? Retirement Income You should consider the differences in investment options, fees and expenses, and tax and legal implications (creditor protections and required minimum distributions) when evaluating your choices. An IRA, like a qualified employer- sponsored plan, will have associated fees and expenses, which will be different for each option available to you. You should consult with a tax professional about the tax implications of each option.

28. Simplicity Consolidation of multiple accounts Continued access to plan’s investment options and services No early withdrawal penalty after age 55, if separated from service at age 55 or older Allows you to defer tax burden of cash-out Benefits of the plan Retirement Income You should consider the differences in investment options, fees and expenses, and tax and legal implications (creditor protections and required minimum distributions) when evaluating your choices. An IRA, like a qualified employer- sponsored plan, will have associated fees and expenses, which will be different for each option available to you. You should consult with a tax professional about the tax implications of each option.

29. Investment choice and flexible access to retirement funds Consolidation of multiple retirement accounts No early withdrawal penalty after age 59 ½ Allows you to defer the tax burden of cash-out IRA considerations Retirement Income You should consider the differences in investment options, fees and expenses, and tax and legal implications (creditor protections and required minimum distributions) when evaluating your choices. An IRA, like a qualified employer- sponsored plan, will have associated fees and expenses, which will be different for each option available to you. You should consult with a tax professional about the tax implications of each option.

30. Annuities Bank products Mutual funds Other types of savings/ investment options Retirement Income You should consider the differences in investment options, fees and expenses, and tax and legal implications (creditor protections and required minimum distributions) when evaluating your choices. An IRA, like a qualified employer- sponsored plan, will have associated fees and expenses, which will be different for each option available to you. You should consult with a tax professional about the tax implications of each option.

31. Large tax burden There are other options Why not cash out? Retirement Income

32. Types of income Retirement Income GUARANTEED INCOMEVARIABLE INCOME  Products can supplement guaranteed income from Social Security, other sources  Predictable income over time – even a long period of time  Protection from market volatility  Investment options/choice not the focus  Also a supplement to guaranteed income sources  Variable instead of “guaranteed” because amounts may vary  Investment control and options  Flexibility in amounts you withdraw

33. Savings to income Retirement Income GUARANTEED INCOMEVARIABLE INCOME  Income annuities  Deferred annuities with guaranteed living benefits  Withdrawals from retirement accounts  Dividends  Interest  Deferred annuities without guaranteed living benefits

34. Income annuity (single premium immediate annuity) Deferred annuity with guaranteed living benefits Guaranteed income sources Retirement Income Guarantees are based on the claims-paying ability of the issuing insurance company.

35. Withdrawals from retirement accounts Dividends from income generating mutual funds Interest from bank products like CDs Deferred annuities without guaranteed living benefits Variable income sources Retirement Income

36. ANNUITIES BANK SOLUTIONS (FDIC Insured) MUTUAL FUNDS Maximize Savings PotentialHelp Reduce Volatility Optimize Income Potential * An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Q Next steps in creating income Retirement Income Variable annuitiesFixed annuities Income annuities Variable annuities with guaranteed living benefits Long-term certificates of deposit (CDs) Money market accounts Savings accounts CDs CD laddering Equity funds Equity focused target- date/risk funds Short-term fixed-income funds Money market funds* Fixed-income funds Short-term fixed-income funds

37. How will Mike create income? Retirement Income $250,000 in retirement plan savings After Social Security, needs $900/month ($10,800/year)

38. Multiple income options Keep $250,000 in plan or an IRA for variable withdrawals of $11,250 (4.5%) a year ($937.50/month) Strategy 1Strategy 2Strategy 3 Roll some portion to an IRA for variable withdrawals of 4 to 5% each year AND purchase an income annuity for guaranteed income AND take variable dividends from IRA mutual fund investments AND purchase certificates of deposit to collect variable interest Keep $175,000 in plan or an IRA for variable withdrawals of $7,000 (4%) a year ($583/month) AND use $75,000 to purchase an income annuity for guaranteed income of $5,057 a year ($409/month) * Retirement Income * Based on a 5.08 percent annuity rate of return. For illustrative purposes only. Past performance is not a guarantee of future results.

39. A closer look Retirement Income 1 Based on a 5.08 percent annuity rate of return. For illustrative purposes only. Past performance is not a guarantee of future results. 2 Based on 4 percent rate of withdrawal. For illustrative purposes only. 35% 65% 35 percent Fixed Income Annuity $75,000 investment $409 guaranteed monthly income 1 65 percent Investment Portfolio $175,000 investment $583 variable monthly income 2 Estimated monthly income: $992 Guaranteed income Variable income $992 $583 $0

40. Shift into a retirement income strategy Use your handbook to start your plan Call me to schedule a personal visit Retirement Income

41. What’s Next? Use worksheets in your handbook Consider increasing retirement plan contribution, consolidating retirement savings Get an estimate of Social Security benefits Think about options for retirement income Schedule a 1 on 1 meeting with me