charting a course to help your money last preview...pay in retirement, only 34 percent of today’s...

PreviewRetirement IncomeCharting a Course to Help Your Money Last

Contents

Retirement: Beginning a New Voyage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 How Do You Envision Retirement? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 What Happens When You Retire? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Five Action Items to Chart Your Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Size Up Current Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Length of Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Impact of Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Lifestyle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Primary Sources of Retirement Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 How Much Would You Need? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Choose a Distribution Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 How Long Would a Retirement Portfolio Last? . . . . . . . . . . . . . . . . . . . . . . . . 7 Estimate How Long Your Savings Might Last . . . . . . . . . . . . . . . . . . . . . . . . . 8 Identify What to Spend First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Main Distribution Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Understand Distribution Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Age 59½ Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Penalty-Free Early Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Required Minimum Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Develop an Investment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Asset Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Tax-Exempt Investing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Income-Producing Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Prepare for the Unexpected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Protect What You Have . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Paying for Long-Term Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Health-Care Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Estate Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Figuring Out Your Net Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Figuring Out Your Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19What to Bring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . back cover

Retirement IncomeNGS-066-07-000000

This material was written and prepared by Broadridge Advisor Solutions.

Copyright by Broadridge Investor Communication Solutions, Inc. All rights reserved. No part of this publication may be copied or distributed, transmitted, transcribed, stored in a retrieval system, transferred in any form or by any means—electronic, mechanical, magnetic, manual, or otherwise—or disclosed to third parties without the express written permission of Broadridge Advisor Solutions, 15050 Avenue of Science, Suite 200, San Diego, CA 92128, U.S.A.

The information contained herein is not written or intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

Broadridge assumes no responsibility for statements made in this publication including, but not limited to, typographical errors or omissions, or statements regarding legal, tax, securities, and financial matters. Qualified legal, tax, securities, and financial advisors should always be consulted before acting on any information concerning these fields.

Preview

Retirement: Beginning a New Voyage

Developing a steady retirement income stream involves making decisions in five key areas .

What Happens When You Retire? • Possible change in habits and attitudes about investing and spending money • Change of focus from accumulating assets to withdrawing assets • Importance of generating income and making the most of your hard-earned money

• Need to protect your income and assets

The rules are different! During retirement, when you focus on investing and living off the assets you have accumu lated, you are looking primarily for stability to generate a steady income stream . Market volatility is not your friend . Depending on how you have allocated your portfolio, a market downturn could negatively affect not only your portfolio but your retirement lifestyle as well . So during this stage of your life, you may want to consider different vehicles for your money .

1 Size Up Current Situation and Sources of Income

2 Choose a Distribution Method

3 Understand Distribution Rules

4 Develop an Investment Strategy

5 Prepare for the Unexpected

© 2019 Broadridge Investor Communication Solutions, Inc. 3

Five Action Items to Chart Your Course

How Do You Envision Retirement?

Do you have sufficient retirement savings to last throughout your retirement years and still enjoy the hobbies and plans you have envisioned? The quality of your lifestyle may depend a great deal on the financial decisions you make when you retire . Some of these decisions can be very complex and may involve some issues you haven’t even considered .

Retirement Income V19N1

Golf? Travel? Vacation home?

Many People Are UnpreparedOnly 17% of pre-retirees surveyed said they felt “very confident” that they will have enough money for retirement.

Source: Employee Benefit Research Institute, 2018

Preview

Size Up Current Situation

4 © 2019 Broadridge Investor Communication Solutions, Inc.

“Whether you are rich or poor, it’s nice to have money.”

— Unknown

To size up your current situation, you need to answer some questions:

• How do you intend to spend your retirement? • How will you support your desired lifestyle?

Length of RetirementLife expectancies are stretching considerably, and chances are good that you’ll

be spending a large portion of your life in retirement . It’s not unreasonable to expect that a healthy 65-year-old will spend 20 to 30 years in retirement . Thus, the way in which you structure multiple income sources, juggle distributions from your savings and retirement plans, and invest your funds will help determine whether you will have the money necessary to fund a long retirement .

Impact of InflationInflation is the rise in consumer prices over time — a factor you have battled

throughout your working years . In retirement, it may be a harder factor to deal with unless your retirement income keeps pace with or exceeds the effects of inflation .

With a hypothetical 4 percent annual rate of inflation, your money would be cut in half in 18 years . As a result, the purchasing power of a $1 million nest egg would be reduced to $460,000 over the course of a 20-year retirement .

Source: Society of Actuaries, 2019

Man

Woman

Chance of living to... Age 85 Age 90

Age 90

54% 35%

65% 46%

Chance of living to... Age 85

This is a hypothetical illustration . Actual results will vary .

$1,000,000

Today 5 years 10 years 15 years 20 years

$820,000

$680,000$560,000

$460,000

Assumes 4% inflation

Preview



Less Reliance on PensionsTraditional pensions are gradually becoming a thing of the past. Even so, it’s somewhat surprising that 32% of workers still expect a pension to play a significant role in their retirement income.


LifestyleThe retirement lifestyle you envision will also affect your savings and

investment style . For example, you may plan to travel extensively or maintain a membership at the local country club .

Considering these and other retirement expenses, such as rising health-care costs, you will probably need at least 70 to 80 percent of your pre-retirement income to live comfortably in retirement .

Primary Sources of Retirement Income

Personal savings and investments Social Security Continued employment earnings

Personal Savings and InvestmentsPersonal savings and investments will make up the bulk of retirement income

for many of today’s workers .

People often save for retirement using tax-deferred vehicles such as

employer-sponsored retirement plans and individual retirement accounts

(IRAs) . Annuities can also be used to provide supplementary retirement

income . Many individuals have also invested in taxable financial vehicles such

as stocks, bonds, cash alternatives, and mutual funds .

When you retire, you will be making decisions about whether to keep your

assets in these vehicles; whether to move them, consolidate them, or sell them;

and whether to utilize other investments .

The return and principal value of stocks, mutual funds, and bonds fluctuate

with changes in market conditions . Shares, when sold, may be worth more or

less than their original cost . Annuities are insurance-based contracts designed

for retirement purposes . Generally, annuities have fees and expenses, and

surrender charges may be assessed during the early years of the contract if the

annuity is surrendered . Withdrawals from tax-deferred plans prior to age 59½

may result in a 10 percent federal income tax penalty; distributions are taxed

as ordinary income .

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Preview



1. Annual income desired $ 75,000

2. Savings needed to provide desired income in retirement (line 1 x factor B) $1,115,813

3. Savings needed to provide desired income indefinitely (line 1 ÷ 0.03) $2,500,000

YouExample

Social SecurityThe Social Security benefit you receive is based on your highest 35 years

of career earnings and is affected by the age when you retire . If you claim Social Security at age 62, your benefit will be lower than if you wait until “full retirement age” (which ranges from 66 to 67, depending on birth year) or later .

If you’re married, you can receive a benefit based on your own earnings history or a spousal benefit based on your spouse’s work record . Generally, three conditions must be met for a spousal benefit: You must be age 62 or older, married to an eligible worker for at least one year, and your spouse must have filed for Social Security benefits . The maximum spousal benefit is equal to one-half of your spouse’s full retirement benefit if you claim it at full retirement age .

Continued Employment EarningsEven though 79 percent of workers plan to work for

pay in retirement, only 34 percent of today’s retirees have actually done so at some point during their retirement years . It’s possible that health issues or an unfavorable job market could force you to alter your employment situation unexpectedly .


Length of Factor Length of Factor Length of Factor Retirement B Retirement B Retirement B (years) (years) (years)

1 0.9709 11 9.2526 21 15.4150 2 1.9135 12 9.9540 22 15.9369 3 2.8286 13 10.6350 23 16.4436 4 3.7171 14 11.2961 24 16.9355 5 4.5797 15 11.9379 25 17.4131 6 5.4172 16 12.5611 26 17.8768 7 6.2303 17 13.1661 27 18.3270 8 7.0197 18 13.7535 28 18.7641 9 7.7861 19 14.3238 29 19.1885 10 8.5302 20 14.8775 30 19.6004

The hypothetical example shown

assumes a 20-year retirement . The

calculation assumes a 3% after-tax rate of return .

Factor B assumes a 3% after-tax

rate of return .

How Much Would You Need?

Plan to work (workers)

Actually worked (retirees)

79%

34%

Waning ConfidenceIn a recent poll, more than 65% of workers indicated that they are “not too” or “not at all” confident that Social Security and Medicare will continue to provide benefits that are at least equal to the benefits retirees receive today.


Preview

Choose a Distribution Method


Yield MattersEarning a hypothetical 2% annual rate of return, a $100,000 portfolio would be worth $148,595 in 20 years.

Earning a hypothetical 10% annual rate of return, the same $100,000 portfolio would be worth $672,750 in 20 years. This hypothetical example is used for illustrative purposes only. It does not take into consideration investment fees and expenses or taxes, which would reduce the performance described if they were included. Actual results will vary.

To make the most of your money, you will need to make decisions about where you should keep your funds, how to tap into these assets, how much you can afford to withdraw each year, as well as which assets you should spend first .

A sound distribution strategy can provide a much-needed game plan for

retirement spending . It can also help stretch the longevity of a portfolio over time .

How Long Would a Retirement Portfolio Last?

Several variables will affect how long a retirement portfolio might last:

its original value, future inflation, annual returns, the retiree’s risk tolerance and

time frame, and annual withdrawals .

The graph below compares two $500,000 portfolios to show how long half

a million dollars might last in retirement, assuming 4 percent and 8 percent

annual rates of return . Think of this in the context of how long you might live,

and you’ll see how important it can be to help make sure that your money lasts

throughout your lifetime .

You

$500,000

$400,000

$300,000

$200,000

$100,000

4%

8%

Start Year 5 Year 10 Year 15 Year 20

Assumptions:

$500,000 tax-deferred accounts

3% annual inflation rate

$50,000 inflation-adjusted annual withdrawals

1. Annual income desired in retirement* $

2. Expected annual Social Security income $

3. Expected annual pension plan income $

4. Expected annual income from retirement plans $

5. Expected annual income from other savings and investments $

6. Other anticipated annual income $

7. Total anticipated annual income (add lines 2 through 6) $

8. Annual income shortfall/surplus (subtract line 7 from line 1) $

Preliminary Income Worksheet

This hypothetical example is used for illustrative purposes only and does not reflect the performance of any specific investment . The example does not take into consideration any investment fees and expenses or the effect of taxes on distributions . Withdrawals from tax-deferred accounts are taxed as ordinary income and may be subject to an additional 10% federal income tax penalty if made prior to age 59½ . Rates of return will vary over time, particularly for long-term investments . Actual results will vary .

*Typically, at least 70% to 80% of pre-retirement income

Preview



Assumes a 3% annual increase in withdrawal amounts to compensate for inflation. These hypothetical examples are used for illustrative purposes only, do not represent the performance of any specific investments, and do not take taxes into account . Rates of return will vary over time, especially for long-term investments . Investments seeking to achieve higher rates of return generally involve greater risk . Actual results will vary .

These tables provide a rough estimate of how long different savings amounts might last in retirement (the years represent complete years before funds would be depleted sometime in the succeeding year) . A more comprehensive cash-flow analysis will take into consideration all sources of income and expenses .

Withdrawal DecisionsAn alternative to withdrawing a fixed dollar amount from your portfolio each year is to withdraw a fixed percentage of your total portfolio value each year, say 3% to 4%. This strategy may provide a way to avoid spending down your assets too quickly.

Consider adjusting your withdrawal rate depending on inflation and/or the performance of your portfolio in the previous year. If you experience a bear market in the early years of your retirement, your odds of running out of money could increase.

Estimate How Long Your Savings Might LastThe tables below show how long it would take to exhaust specific savings

amounts based on different initial withdrawal amounts (adjusted 3% annually for inflation) and hypothetical rates of return . They may help you make a rough estimate of how long your own savings might last .

Initial Annual Account Value

Withdrawals $250,000 $500,000 $750,000 $1,000,000

$ 25,000 10 years 23 years 36 years over 50 years

$ 50,000 5 years 10 years 16 years 23 years


$100,000 2 years 5 years 8 years 10 years

4% rate of return


Withdrawals $250,000 $500,000 $750,000 $1,000,000

$ 25,000 12 years 30 years over 50 years over 50 years




6% rate of return


Withdrawals $250,000 $500,000 $750,000 $1,000,000






Withdrawals $250,000 $500,000 $750,000 $1,000,000

$ 25,000 14 years over 50 years over 50 years over 50 years

$ 50,000 6 years 14 years 26 years over 50 years



8% rate of return

2% rate of return

4% rate of return

6% rate of return

8% rate of return

Preview


Identify What to Spend FirstThe method you select to take distributions from your portfolio may

help increase the longevity of your assets . This involves weighing the tax consequences, opportunity costs, and even emotional implications of liquidating each asset in your portfolio . Consider:

• Taxable before tax deferred? • Winners before losers? • Do you want to leave highly appreciated assets to heirs?

Main Distribution Methods

Before making any distribution decisions, evaluate the methods that may be available to you . Consider your age, liquidity and income needs, and tax situation .

You might decide to leave your money in your current retirement plan . Your retirement funds will continue to accumulate tax deferred until you begin withdrawals in retirement or transfer them to another plan . If you decide to work for another employer, you might be able to transfer the funds to the new employer’s plan, if the employer offers a retirement plan and allows a rollover .

If you elect a lump-sum distribution, you will receive the entire balance of your vested retirement account in one payment . This is a tempting option because it gives you immediate access to and control over your funds . The downside is that income taxes are due on the total amount of a cash distribution, and a large distribution could easily move you into a higher tax bracket .

Some plans let you take distributions as systematic withdrawals . You can generally choose to receive the funds in three different ways: (1) a regular, fixed amount on a regular schedule, such as monthly or annually; (2) a specific percentage of the account value on an established schedule; or (3) the total account value in equal distributions over a specific period of time . If you choose a series of monthly payments (often referred to as a lifetime annuity), these payments can last for your lifetime or for the joint lives of you and your spouse (or selected beneficiary), depending on whether you choose a single-life annuity or a joint and survivor annuity . Distributions from tax-deferred retirement plans are taxed as ordinary income . Employers issuing a check in your name for a lump-sum distribution are required to withhold 20% toward federal income taxes, so you would receive only 80% of the total value . Early distributions from employer-sponsored retirement plans and traditional IRAs prior to age 59½ may be subject to a 10% federal income tax penalty .


Consider an IRA RolloverIf you elect to move your retirement plan assets to a traditional IRA, any earnings and future contributions you make (as long as you have earned income) will continue to accumulate tax deferred, and taxes are due only on distributions.

By electing a trustee-to-trustee transfer (direct rollover), you can avoid current taxes and penalties.

When converting qualified assets to a Roth IRA, you must pay income taxes on assets converted; taxes are owed in the tax year of the conversion.

Note: You can make only one tax-free IRA-to-IRA rollover in any 12-month period, regardless of how many IRAs you have. All IRAs — traditional, Roth, SEP, and SIMPLE — are treated as one IRA when applying the one-rollover-per-year rule. There is no limit, however, on the number of trustee-to-trustee transfers that can be made in a 12-month period.

Lifetime annuity

Stay put Lump-sum distribution

Systematic withdrawalsPreview

Understand Distribution Rules


Financial ConcernsAccording to a recent study, 28% of workers do not feel comfortable about having enough money for retirement expenses. Nearly half are not confident that they will have enough money to pay for medical expenses in retirement, and about 6 in 10 do not believe they will have enough money for long-term care expenses.


Penalty-Free Early Distributions

Here’s an example of how the substantially equal periodic payment exception

would work . If you decided to tap your funds at age 50, you may be able to do

so without penalty as long as you receive payments over a period of 9½ years —

until you turn 59½ . If you tapped your funds starting at age 56 or 58, you would

have to receive periodic payments over a period of at least five years (the rule is

five years or until age 59½, whichever occurs later) . The size of the payments

would be based on your life expectancy when you begin withdrawals .

20% Withholding RuleLump-sum cash distributions from certain defined-contribution plans

[including 401(k) and 403(b) plans] are subject to mandatory 20 percent federal

income tax withholding by employers . When you receive your check, it will be

only 80 percent of your vested interest in the account .

Account balance $500,000 20% withholding – $100,000 Your distribution $400,000

Age 59½ RuleIf you are younger than 59½ and receive a distribution from an employer-

sponsored retirement plan or an IRA, you may have to pay a 10 percent federal

income tax penalty in addition to ordinary income taxes . Most tax-deferred plans

have certain exceptions to this early-withdrawal penalty .* Certain criteria must be

met and other exceptions may apply .

IRAs allow additional exceptions to avoid the penalty: distributions used to pay

higher-education expenses or to purchase a first home ($10,000 lifetime limit), and

distributions that are part of a series of substantially equal periodic payments .

*Exceptions include distributions resulting from death, disability, or separation from service after age 55 (or before if you arrange a series of substantially equal periodic payments); and distributions that are used to pay qualified, unreimbursed medical expenses exceeding 10% of adjusted gross income . The age 55 exception does not apply to IRAs, annuity contracts, or modified endowment contracts; the exception for death does not apply to MECs .

9½-year payout period

5-year payout period

5-year payout period

Age 58Age 56Age 50

10%penaltyfor early

withdrawals

Preview

Understand Distribution Rules


Significance of the Required Beginning DateAssume an IRA owner was born on March 8, 1950. She would be 70 on March 8, 2020, and 70½ on September 8, 2020.

She needs to take an RMD for 2020 no later than April 1, 2021 (her required beginning date), based on her account balance on December 31, 2019. Then, for 2021 and each year thereafter, she must take a minimum distribution by December 31.

Stretch IRAIf you roll over retirement plan assets to an IRA, it’s possible to pass the IRA on to your heirs and significantly increase the long-term value of your legacy.

Required Minimum DistributionsYou must begin taking required minimum distributions (RMDs) from traditional

IRAs and most employer-sponsored retirement plans once you reach age 70½ . Generally, these annual distributions must be taken no later than December 31 . The required beginning date (latest date) for the f irst distribution is April 1 of the year following the year in which you turn 70½ . Failure to take the required minimum distribution could result in a 50 percent excess accumulation penalty on the amount that should have been withdrawn (plus taxes) .

The annual RMD will depend on your age, the value of your account(s), and your life expectancy . You can use the IRS Uniform Lifetime Table (or the Joint and Last Survivor Table, in certain situations) to calculate RMDs for your own situation . Of course, you can always take more than the minimum amount .

There are also special required minimum distribution rules for people who inherit an IRA . Spousal beneficiaries have more options than nonspouses .

Don’t Forget to Name BeneficiariesMany people don’t realize that the beneficiary designations on certain

contracts and accounts — IRAs, annuities, life insurance policies, and employer-sponsored retirement plans — take precedence over instructions in a will, so it is important to keep them up-to-date . If you neglect to name a beneficiary for your account, your beneficiary may be determined by federal or state law, or by the plan document that governs your accounts .

Any number of situations — marriage, divorce, the birth of a child or grandchild, the death of a spouse — could change the way you want your assets to be distributed . A common arrangement is to name your spouse as primary beneficiary and your children as contingent beneficiaries . This provides a line of succession in the event that your spouse predeceases you .

You can also name a trust or a charitable organization . However, if you name both an individual (such as your child) and a non-individual (such as a church) as beneficiaries of your account, your child might not be able to stretch the benefits over his or her lifetime . Your choice of beneficiaries can have important long-term consequences .

• Can change beneficiaries at any time

• Choose primary and contingent beneficiaries

• Keep paperwork in order

For help on extending your legacy, you may want to seek professional guidance .

Preview

Develop an Investment Strategy

When you retire, the rules of investing change . Developing an investment

strategy involves selecting a mix of assets that will provide stability, growth, and

reliable income; selecting appropriate investments in each class; and choosing

accounts and financial vehicles that will hold your funds and help reduce the risk

of outliving your principal .

Asset Allocation

Asset allocation involves strategically dividing a portfolio into different asset

classes — typically, stocks, bonds, and cash alternatives — to seek the highest

potential return for your risk profile . Diversifying your portfolio into different

asset classes — and even within asset classes — is important .

The graph below shows the volatility and historical performance of various

types of investments from 1994 through 2018 . Remember that past performance

is not a guarantee of future results .

Investing in Retirement To generate income, you may want to reevaluate your savings and investments

and make some changes to your holdings, such as shifting at least part of your

assets into vehicles that can produce income . Your goal is to achieve an income

stream while trying to grow the remaining assets over time .

Source: Thomson Reuters, 2019, for the period 1/1/1994 to 12/31/2018 . Stocks are represented by the S&P 500 composite total return . The S&P 500 is an unmanaged index that is generally considered representative of the U .S . stock market . Corporate bonds are represented by the Citigroup Corporate Bond Composite Index, an unmanaged index that is generally considered representative of the U .S . corporate bond market . T-bills are represented by the Citigroup 3-Month Treasury Bill Index . T-bills are generally considered representative of short-term cash alternatives and are backed by the full faith and credit of the U .S . government as to the timely payment of principal and interest . The returns shown do not reflect taxes, fees, brokerage commissions, or other expenses typically associated with investing . The performance of an unmanaged index is not indicative of the performance of any particular investment . Individuals cannot invest directly in an index . Actual results will vary .

Note: Asset allocation and diversification do not guarantee a profit or protect against investment loss . They are methods used to help manage investment risk .

Review Your Portfolio Once a YearOnce you have determined the appropriate asset allocation for your time frame, risk tolerance, and income needs, be sure to rebalance your portfolio at least once a year to ensure that your strategy remains on track. Periodic rebalancing can help you manage risk and maintain effective diversification.

Note: Rebalancing may be a taxable event.


40%

30%

20%

10%

0%

–10%

–20%

–30%

–40%

Stocks9.07% average annual return

Corporate bonds5.86% average annual return

T-bills2.46% average annual return

Historical investment performance: 1994–2018

1994 1998 2002 2006 2010 2014 2018

Preview



Tax-Exempt Investing

How do you decide whether tax-exempt investing is right for you? This chart compares the tax-exempt yield to its taxable counterpart . Generally, the higher your income, the more you can benefit from tax-advantaged investing .

Consider Your Tax SituationPeople in higher tax brackets may benefit from investing in Treasuries, municipal bond funds, and tax-free money market funds. These vehicles may help them avoid paying more taxes than they would otherwise.

Example You

2% 3% 4% 5%

Taxable equivalent yield

Tax-exempt yield

Federal income tax

bracket

10% 2.22% 3.33% 4.44% 5.56% 12% 2.27% 3.41% 4.55% 5.68% 22% 2.56% 3.85% 5.13% 6.41% 24% 2.63% 3.95% 5.26% 6.58% 32% 2.94% 4.41% 5.88% 7.35% 35% 3.08% 4.62% 6.15% 7.69% 37% 3.17% 4.76% 6.35% 7.94%

Calculating the Taxable Equivalent Yield

4

24

76

5.26

The chart and the hypothetical example are used for general illustrative purposes only and do not reflect the performance of any specific investments . Possible state taxes, capital gains taxes, and alternative minimum taxes are not considered . Actual results will vary .

Income-Producing Vehicles Bonds

A bond is essentially a loan to a business or a government agency . The interest payments on a bond are usually fixed . When you invest in a bond, you can expect to receive regular, fixed income for as long as you hold the bond — unless the issuer defaults . At the end of the bond term, your principal is repaid in full .

Because bonds are sensitive to changes in interest rates, you may want to consider a bond ladder, which spreads out the bond maturity dates over time . Constructing a bond ladder may help build a more stable, predictable income stream from fixed-income investments .

5-year bond

4-year bond

3-year bond

2-year bond

1-year bond

Municipal bonds are free of federal income taxes and may be exempt from state and local income taxes for investors who live in the jurisdiction where the bond is issued . Note that in some states you will have to pay income taxes if you buy shares of a municipal bond fund that invests in bonds issued by other states . In addition, although some municipal bonds that are in the fund may not be subject to ordinary income taxes, they may be subject to the federal alternative minimum tax . If you sell a tax-exempt bond or bond fund at a profit, there are capital gains taxes to consider . Bond funds are subject to the same inflation, interest-rate, and credit risks associated with the underlying bonds . As interest rates rise, bond prices typically fall, which can adversely affect a bond fund’s performance . Treasuries are backed by the full faith and credit of the U .S . government as to the timely payment of principal and interest . The principal value will fluctuate with changes in market conditions . If not held to maturity, bonds may be worth more or less than their original cost .

Note: This formula is only one factor that should be considered when purchasing securities and is meant to be used only as a general guideline when calculating the taxable equivalent yields on municipal bonds and agency and Treasury securities . Rates of return will vary over time, especially for long-term investments .

1. Take the tax-exempt yield ___________% __________% 2. Your federal income tax rate ___________% __________%

3. Subtract your rate from 100% (1.00 – line 2) ___________% __________%

4. Taxable equivalent yield (line 1 ÷ line 3) ___________% __________%

Preview



As a result of the Patient Protection and Affordable Care Act, some high-income individuals may be subject to an additional 3.8% unearned income tax on net investment income. This tax applies only if their adjusted gross incomes exceed $200,000 (single filers) or $250,000 (married joint filers). Unearned income includes capital gains and dividends.

Income Mutual Funds Some mutual funds can be a fairly reliable source of current income . Income

funds invest primarily in a variety of high-quality corporate bonds, lower-grade

bonds, dividend-paying stocks, or a combination of these securities, depending

on the fund’s objectives . This can provide diversification, as well as flexibility to

customize a portfolio .

Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Dividend-Paying Stocks Some companies distribute part of their profits to stockholders in the form of

a dividend . Of course, it’s important to understand that dividends are paid at the

discretion of a company’s board of directors . Though dividends can increase,

there is no guarantee that a dividend will not be reduced or eliminated . A stock does not have to pay a dividend to generate income for an investor .

An investor can request a certain monthly income — say $500 — and shares

can be sold to provide that income stream . Using this strategy, you would be

responsible for taxes on any capital gains .

The return and principal value of stocks and mutual funds fluctuate with market conditions . Shares, when sold, may be worth more or less than their original cost . Qualified corporate dividends are taxed at the same rates as long-term capital gains: 0%, 15%, or 20%, based on taxable income .

Fixed Annuities A fixed annuity can provide a consistent income stream in retirement — either

for a set number of years or for life . Payouts can be structured to be paid on a

monthly, quarterly, semi-annual, or annual basis .

• Insurance-based contract• Competitive rate of return• Tax-deferred accumulation

• No federal contribution limits• No mandatory distributions• Option for guaranteed lifetime income

Generally, annuities have mortality and expense charges, account fees, investment management fees, and administrative fees . Surrender charges may be assessed during the early years of the contract if the contract is surrendered . Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty . Withdrawals of annuity earnings are taxed as ordinary income . The guarantees of fixed annuity contracts are contingent on the financial strength and claims-paying ability of the issuing insurance company .

Preview


What Kinds of Fixed Annuities Are Available?Deferred annuities are designed for long-term accumulation .

Typically, they are purchased during an individual’s working years to allow the funds to grow .

Immediate annuities provide current income . They are attractive to people who are retiring and want to reallocate their savings and investments and/or secure an immediate, regular income stream .

The earnings credited to a tax-deferred annuity are not taxed until they are withdrawn . Generally, annuities have contract limitations, fees, and sales charges, which may include mortality and expense charges, investment manage ment fees, administrative fees, and charges for optional benefits . Surrender charges may be assessed during the early years of the contract if the annuity is surrendered . Withdrawals of annuity earnings are taxed as ordinary income . In addition, withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty .

Annuities Can Provide Fixed, Variable, or Indexed ReturnsFixed annuities offer a fixed rate of return . Rates may be adjusted, but they

will never fall below a guaranteed minimum rate specified in the contract . Guarantees are contingent on the financial strength and claims-paying ability of the issuing insurance company .

Variable annuities offer variable returns . You can divide your premiums among a variety of investment “subaccounts” whose value will fluctuate with market conditions . Your return is based on the performance of the subaccounts you select . There are no guarantees with a variable annuity . Investors run the risk of losing accumu lated earnings and even principal .

The performance of an indexed annuity is tied to a market index such as the S&P 500 . When the index rises, so does the return on the annuity . But if the index tumbles, typically the worst the annuity can do is earn the contract’s minimum guaranteed rate of return . This minimum guarantee is contingent on holding the annuity until the end of the term .

The guarantees of indexed annuities may cover only a specific percentage of the initial investment; therefore, it is possible to lose money . Participation rates are set and limited by the insurance company . An 80% participation rate means that only 80% of the gain experienced by the index for that year would be credited to the contract owner . Some insurance companies reserve the right to change participation rates, cap rates, or other fees either annually or at the start of each contract term, which could affect the investment return . It is prudent to review how the contract handles these issues before deciding to invest .

Variable annuities are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

“I advice [sic] you to go on living solely to enrage those who are paying you annuities.”

— Voltaire


Preview

Payout over 20 years

3.5% return

$100,000 initial premium

$7,036 annual income ($586 per month)Only $2,036 taxable ($170 per month)

Prepare for the Unexpected

How Does an Immediate Annuity Work?An immediate annuity is an attractive financial vehicle when people retire .

It offers the option for a guaranteed lifetime income . The contract can last for the duration of two lives, providing payments while you and your spouse (or selected individual) are alive, and continuing payments to the surviving spouse (or selected individual) for the rest of his or her life .

Here’s a hypothetical example of how an immediate annuity might work .

Prepare for the Unexpected Protect What You Have

Paying for Long-Term CarePreparing financially for future long-term care is important . The cost of care

can be daunting . Today, the national average cost for a private room in a nursing home is $100,375 .1 Few people can afford to pay these costs out of pocket .

Long-term care insurance enables you to transfer a portion of the financial risk of long-term care costs to an insurance company . This option could help you preserve your independence and freedom of choice should you ever require long-term care . In addition, long-term care insurance may actually keep you out of a nursing home by providing benefits for alternative care, such as custodial care at home, in an assisted-living facility, or in a community setting .

Source: 1) 2018 Cost of Care Survey, Genworth Financial, Inc .

Did You Know?

People turning age 65 today have a nearly 70% chance of needing long-term care services at some point during their lifetimes.

Source: longtermcare.gov, 2018


This hypothetical example is used for illustrative purposes only and does not reflect the performance of any specific annuity . It does not consider the effects of sales charges or other expenses . Actual results will vary . The guarantees of fixed annuity contracts are contingent on the financial strength and claims-paying ability of the issuing insurance company . If the annuity owner (and/or selected beneficiary) dies before receiving all of the payments, the remaining payments would be paid to the named beneficiaries .

Long-term care needs

Health-care coverage

Estate conservation

Preview

Prepare for the Unexpected

Ongoing ConcernIf Medicare benefits remain at current levels, it’s estimated that a 65-year-old couple who retire today and live an average life expectancy may need about $296,000 to cover their health expenses in retirement.

Source: Employee Benefit Research Institute, 2018 (assumes they do not have employer-subsidized retiree health benefits)

Federal Estate TaxesThe Tax Cuts and Jobs Act nearly doubled the federal estate tax exclusion amount to $11.18 million in 2018 (indexed annually for inflation). In 2019, the exclusion reached $11.4 million. After 2025, the exclusion amount is scheduled to revert to its 2017 inflation-adjusted level.

Health-Care Costs Health-care costs have historically increased at a faster rate than general

inflation — and the trend may well continue . Paying for medical expenses has become one of the biggest financial worries that many retirees face . Retirees have several options for health coverage: Original Medicare, Medicare Supplement Insurance (Medigap), and Medicare Advantage plans .

Estate Conservation If you want to help protect your wealth and leave a legacy for your family,

you will want to develop an estate conservation strategy . Although taxes are one area of concern, the federal estate tax exclusion ($11 .4 million in 2019) exempts most estates from paying the federal estate tax . Even so, estates may be subject to probate costs, and many states also have their own inheritance or state estate taxes . Fortunately, there are a number of strategies that can help you preserve more of your assets for your heirs .

If structured properly, certain types of trusts can help shield assets from estate tax liability . An irrevocable life insurance trust (ILIT) could provide cash to help pay any estate taxes and other costs without subjecting the life insurance proceeds to federal estate taxes . An attorney drafts the trust document, the insured provides funds to the ILIT, and the trust uses the money to purchase a life insurance policy that is owned and controlled by the trust . When the insured dies, the insurance proceeds are paid to the trust and the trustee distributes the proceeds according to the terms of the trust . The proceeds are not taxed in the estate .

Once an ILIT is created, you cannot change the terms or the beneficiaries of the trust, and you must give up control of the insurance policy . The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased . As with most financial decisions, there are expenses and other considerations associated with the purchase of life insurance, such as mortality and expense charges and possible surrender penalties . Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable . The use of trusts involves a complex web of tax rules and regulations . Trusts incur up-front costs and often have ongoing administrative fees . You should consider consulting with your legal, tax, and estate planning professionals before implementing a trust strategy .


Source: U .S . Bureau of Labor Statistics, 2018

General inflation

Health-care costs

2.9%

3.9%

2.1% 2.1%

1.6%

0.7%

2015 2016 2017 2018

2.4% 2.2%

Preview

Figuring Out Your Net Cash Flow


Monthly Income Wages, salary, tips $

Alimony, child support $

Dividends from stocks, mutual funds, etc. $

Interest on savings accounts, bonds, CDs, etc. $

Social Security benefits $

Pensions $

Other income $

TOTAL MONTHLY INCOME $

Monthly Expenses Mortgage payment or rent $ Vacation home mortgage $ Automobile loan(s) $ Personal loans $ Charge accounts $ Federal income taxes $ State income taxes $ FICA (Social Security) $ Real estate taxes $ Other taxes $

Utilities (electricity, heat, water, telephone, etc.) $

Household repairs and maintenance $ Food $ Clothing/laundry $ Education expenses $ Child care $

Automobile expenses (gas, repairs, etc.) $

Other transportation $ Life insurance $ Homeowners insurance $ Automobile insurance $

Medical, dental, disability insurance $ Unreimbursed medical, dental expenses $ Entertainment/dining $ Recreation/travel $ Club dues $ Hobbies $ Gifts $

Major home improvements and furnishings $ Professional services $ Charitable contributions $ Other expenses $ TOTAL MONTHLY EXPENSES $

NET CASH FLOW

Total monthly income $

Total monthly expenses $

Discretionary monthly income $ (Subtract your expenses from your income)

How much discretionary income do you have available after your monthly

obligations are met? Can you account for where the money goes? Some people

are surprised at the amount they should be able to save and invest each month

but don’t . Analyze your cash flow for the current month . Because income and

expenses can vary from month to month, you may wish to estimate your cash

flow through all 12 months or take a 12-month average .

How much of your discretionary monthly income are you investing or saving each month? $ ____________________

Preview

Figuring Out Your Net Worth

© Broadridge Investor Communication Solutions, Inc. 19

How much are you worth? Just as corporations prepare a balance sheet to

deter mine their current net worth, you may want to complete a personal

balance sheet .

Set a goal for yourself.

What would you like your net worth to be in 5 years? $ _________________

What would you like it to be in 10 years? $ _________________

Tangible Assets

Residence $

Vacation home $

Furnishings $

Automobiles $

Rental real estate $

Art, jewelry, or other valuables $

Equity Assets

Qualified retirement funds $

Stocks $

Equity mutual funds $

Variable life insurance (cash value) $

Variable annuities $

Limited partnerships $

Business interests $

Liabilities

Home mortgage $

Other mortgage $

Automobile loans $

Bank loans $

Personal loans $

Charge-account debt $

Other debts $

TOTAL LIABILITIES $

NET WORTH

Total assets $

Total liabilities $

NET WORTH $ (Subtract your liabilities from your assets)

U.S. government bonds and agency securities $

Municipal bonds $

Corporate bonds $

Face amount certificates $

Debt mutual funds $

Fixed-Principal Assets

Fixed-interest annuities $

Life insurance (cash value) $

Other assets $

Cash and Cash Alternatives

Checking accounts $

Savings accounts $

Money market funds $

Certificates of deposit $

Other cash reserve accounts $

TOTAL ASSETS $ (Add tangible, equity, fixed principal, debt assets, and cash)

Debt Assets

Preview

NGS-066-07-000000

Your consultation is scheduled for:

_________________________________Date Time

What to BringPlease bring the following documents to your consultation:

1.

2.

3.

4.

5.

Preview

charting a course to help your money last preview...pay in retirement, only 34 percent of today’s...

Documents