Planning your retirement income

Transcription

1 Planning your retirement income Larry Rosenthal Voya Financial Advisor February 2015

2 Important information Securities and investment advisory services offered through Voya Financial Advisors, Inc. (Voya TM ), member SIPC. This presentation is intended to provide general information only and is not intended to provide specific investment advice or recommendations for any individual. Neither Voya Financial Advisors, Inc., nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, or tax advisor regarding your individual situation prior to making any investment decisions. Variable investments, of any kind, are not guaranteed and are subject to investment risk including the possible loss of principal. The investment return and principal value of the security will fluctuate so that when redeemed, it may be worth more or less than the original investment. In addition, there is no guarantee that any variable investment option will meet its stated objective Voya Services Company. All rights reserved. CN

3 Seminar agenda Uncertainties in retirement Sources of retirement income Creating a retirement income plan 3

4 Thinking about retirement can lead to some questions Will I be able to maintain my lifestyle? Will my income keep up with inflation? Will I be able to meet all my expenses? Can I retire now? Or should I wait? How should my assets be allocated? Will my money last? 4

5 Five uncertainties in retirement Longevity Withdrawal rate Sequence of returns Inflation Health care risk and Medicare 5

6 Longevity how long could your retirement last? If you re planning to retire at age 65, could your retirement be: 10 years? 20 years? 30 years? age 75 age 85 age 95 Today, there are over 70,000 Americans age 100 or older!* *U.S. Census,

7 Withdrawal rate How much can you safely withdraw from your portfolio each year? 10% 9% The more money you withdraw, the faster your assets will diminish Withdrawal Rate 8% 7% 6% 5% Portfolio Stocks 50% Bonds 40% Cash 10% 4% 94 3% Age IMPORTANT: Projections generated by Morningstar regarding the likelihood of various investment outcomes using the Ibbotson Wealth Forecasting Engine are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary over time and with each simulation. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index Morningstar. All Rights Reserved 7

8 When timing matters most Meet David White Hypothetical Account Value Sequence of returns 425, ,000 David has a $300,000 nest egg. Even when average annual returns are equal, the sequence of the returns can have a serious impact on a systematic income withdrawal plan. 375, , , , Years Scenario 1 Scenario 2 Scenario 3 This example is hypothetical and is for illustrative purposes only. It does not represent the actual performance of any particular investment nor does it reflect sales charges or other expenses that may apply. This example assumes a 6% average annual return on a $300,000 investment, with an annual withdrawal rate of 4%. 8

9 Inflation how it can reduce available funds Your money may lose purchasing power after inflation and taxes are considered Money market account 2.35% return* 1.50% inflation** 0.25% income tax*** = 0.60% real return *2013 market yield on U.S. Treasury securities at 10-year constant maturity, quoted on investment basis, Federal Reserve Board. **U.S. Bureau of Labor Statistics, 2013 Consumer Price Index for All Urban Consumers (CPI-U). ***Assumes a 25% tax bracket. Real return 9

10 Health care and long-term care costs can derail your plan Major medical coverage Deductibles and co-insurance Prescriptions Long-term illness Chronic conditions Assistance and caregiving $240,000 Source: Fidelity Investments, May

11 Get a handle on your sources of health care coverage Government programs Medicare Medicaid Other municipal, state or federal plans Work-related coverage Employer plans Retiree plans HSAs VEBAs Union plans Military and veteran benefits (Tricare) Supplemental private insurance Medigap policies Medicare Advantage or managed care plans Long-term care 11

12 First stop Medicare Eligibility begins at age 65 Integrated with Social Security No joint or family coverage Not free Provides catastrophic coverage and limited medical Timing is everything! Enroll within the 7-month window to avoid medical underwriting and possible higher premiums. 12

13 The spouse/partner coverage gap Medicare is for each individual You turn 65 in 2014 THREE-YEAR COVERAGE GAP Your spouse or partner turns 65 in

14 The not-so-easy ABCs of Medicare Traditional package Part A: hospital insurance Part B: medical insurance Part D: prescription drugs Combined package or Part C Medicare Advantage or managed care plan all-in-one plan that includes: Part A Part B often Part D, plus supplemental coverage Important Resources SHIP or SHINE counselors 14

15 Next stop supplemental coverage Health care benefits from where you worked Employer-subsidized retiree health care HSAs health savings accounts Veterans and military health insurance Union benefits VEBAs voluntary employee beneficiary associations A Medigap policy you purchase Sold by private companies Specific to your state You choose your plan, doctors, services Costs vary widely Important Resources Search for compare Medigap policies on Medicare.gov 15

16 Sources of your retirement income Social Security Employer-based Personal savings Earned income 16

17 A closer look at your retirement income sources Government Benefits Social Security Military pensions Employer Benefits Defined Benefit pensions Union pensions Personal Assets Retirement savings plans IRAs Stock options Taxable accounts Work Phase out Part-time New opportunities 17

18 Personal assets may be majority of your income Employer Plans 403(b) 401(k) Small business plans IRAs Traditional Roth Rollover Employee Benefits Company stock plans Stock options Taxable Accounts Brokerage and investment Real estate Savings and CDs 18

19 Most of your retirement income comes from personal resources and Social Security provides a safety net 15% 2% Earnings Pension 16% Social Security safety net Social Security Asset Income Other 50% 17% *Source: Social Security Administration, Office of Policy, Income of the Aged Chartbook, 2012, issued April Key sources of retirement income for households with incomes of more than $63,648 per year. This chart is for illustrative purposes only. Earned income may include wages, salaries, tips, and other taxable employee pay; union strike benefits; long-term disability benefits received prior to minimum retirement age; etc. 19

20 Five important numbers you ll need to know when planning for Social Security 1 Your Full Retirement Age or FRA 2 Your benefits estimates 3 Your personal replacement ratio 4 Payment reduction if claiming early 5 Increases if waiting to claim 20

21 Finding your Full Retirement Age (FRA) Rules changed effective in 2000 Your FRA is based on birth year FRA between 65 and 2 months and 67 Age to Receive Full Social Security Benefits Year of Birth* FRA Year of Birth* FRA 1937 or earlier and 2 months and 2 months and 4 months and 4 months and 6 months and 6 months and 8 months and 8 months and 10 months and 10 months 1960 and later *If you were born on January 1st of any year you should refer to the previous year. (If you were born on the 1st of the month, we figure your benefit (and your full retirement age) as if your birthday was in the previous month.) 21

22 Starting early reduces benefits 25% REDUCTION if FRA is 66 and you claim at 62 30% REDUCTION if FRA is 67 and you claim at 62 Claiming Social Security before FRA may be a necessity Income amount will be permanently reduced May need to tap more of your investment portfolio to cover expenses 22

23 Benefits of waiting to claim 70 You can maximize your Social Security benefit by waiting until age 70 to claim 8% ANNUAL INCREASE if birth year is 1943 or later Claiming Social Security after FRA may be a good option Income amount will be permanently increased May need to tap more of your investment portfolio in your first years of retirement 23

24 Your decisions lock in your income benefit An example: how different starting points change your monthly benefit Monthly benefit amount $1, $1, $1, $ $ $ $ $ Age you choose to start receiving benefits Social Security Administration, 2013 estimates. Assumes a benefit of $1,000 at a full retirement age of

25 Creating a retirement income plan Five steps for building a retirement income plan Request a one-on-one session today! 25

26 Five steps to building a retirement income plan 26

27 Retirement income planning Taxes Risk Analysis Education Life Insurance Employer Stock Retirement Income Estate Taxes Planning Social Life Security Insurance Health Risk care Analysis Pension Employer Stock Education Estate Planning Retirement Income Social Security Neither Voya Financial Advisors, Inc., nor its representatives offer Health tax or care legal advice. Pension Please consult with your tax and legal advisors regarding your individual situation. 27

28 Personal Financial Dashboard A free online planning tool is available through your workplace retirement plan website. Use it to: Set goals Create budgets Track spending Review investments And more You access it from the accordion file at the top of your home page Simply open the Organize Your $$$ message and follow the link to get started. 28

29 Personal Financial Dashboard You can link to other accounts so you always have a current view of your complete financial future Use it to view a snapshot in time Access educational information and view workshops specific to the types of information you provide This is your own private financial space your employer cannot see it, and there are no intrusive ads or s. The tool uses advanced security features to keep your information safe. 29

30 Questions? Set up your complimentary appointment with a Voya Financial Advisor today: 1. Larry Rosenthal (855) larry@makingmoneysense.com 2. Margaret Swinney (703) margaret@rosenthalwealthmanagement.com 3. Ryan Forbrich (703) ryan@rosenthalwealthmanagement.com Or, call a Voya Financial Advisors retirement consultant at

31 Schedule an appointment today If you would like to schedule an appointment today, please go to 31