For retirement plan participants Volume 20, Issue 1, 2016

mybmoretirement.com

Educated

Getting started: There’s no time like the present

When you’re just starting out, you may feel as if saving for retirement is the last thing on your

priority list. After all, you have plenty of time to accumulate the money you’ll need to create

a retirement paycheck once you stop working, right? However, saving now is especially

important, when any contributions you make to a retirement account have time to grow

and compound.

Of course, it isn’t always easy to set aside money for retirement when retirement is decades away and you have other demands on your paycheck, like rent and student loans. The good news is, your retirement plan makes it easy to use your paycheck today to fund your retirement paycheck in the future. Here’s how to get started.

• Put your saving on autopilot. When you contribute to your retirement plan, contributions

are automatically deducted from your paycheck before you have the chance to spend the

money first. And, if your plan has an auto-escalation feature, your contribution amount will

grow without you having to remember to take action.

• Say yes to the match. Your plan may provide money toward your retirement. Be sure you

understand what this contribution is and how to maximize the benefit. For example, let’s

say your plan matches 50 cents on the dollar for up to 6 percent of your salary and you

earn $35,000 a year. If you contribute enough to qualify for the full match ($2,100 per

year), your retirement savings would get a boost of $1,050 from the plan, bringing your

total contribution to $3,150. Start at age 25 and you’d have more than half a million dollars

($525,380) by age 65, assuming your account earns an average annual return of 6 percent.

• Don’t let stock market volatility dictate your investment strategy. Recent market ups

and downs have been unsettling, but don’t let that keep you on the sideline. Remember,

markets fluctuate. Your investments are for the long term and your investment strategy

should reflect that. Our Asset Allocation Planner can help you see if your mix of

investments is right for your age, feelings about risk and personal investment style.

So how much should you sock away? Many advisors say that workers should contribute 10

percent to 15 percent of their income to their retirement plan. The more you save today, the

easier it may be to create a retirement paycheck to support your lifestyle come retirement.

You work hard to earn the income that pays your everyday living expenses. Have you given any thought to how you

will pay these expenses in retirement? Where will your retirement paycheck come from? You may not realize that the

money you contribute to your retirement plan today will provide the retirement paycheck you’ll need when you retire.

As you’ll learn in this issue of Educated Investor, retirement income planning is as critical to your future as growing your

savings. That’s why we’ve provided specific tools and tips to help you understand how to determine your income needs

in retirement and map out a strategy for turning your savings into a retirement paycheck.

2Educated

Wherever you are. Wherever you are going.

Staying on track: Feeling sandwiched in? It starts with a dream — the dream of a time when you’re free to do whatever you want,

whenever you want. Yet, like many people today, you may be wondering how you’ll be able to

afford a comfortable retirement when you have so many current demands on your paycheck.

Welcome to the so-called “Sandwich Generation” — a period of time when the financial

demands of raising children and/or grandchildren and helping aging parents may be squeezing

your ability to save enough to create a retirement paycheck for your own future. How do you

navigate this often-challenging time between your mid 30s and late 50s without jeopardizing

your own financial future?

Consider the following tips:

1. Be proactive.

If this sounds like it may be your situation, start making plans today. Set up a plan to save for

college and talk to your children about what they can do to help share the cost. Educate

yourself about your parents’ finances, including how much they’re receiving in pension and

Social Security benefits, how much they have in savings, and how much they spend each

month for their mortgage or rent payments, utilities, insurance and other fixed expenses. This

may be a difficult conversation to have, but getting clarity around your parents’ situation now

can help ensure you’re able to provide help when they need it.

2. Set boundaries.

Don’t rule out the possibility that one or more of your adult children may need to move back

home at some point. Before that happens, be sure to discuss your expectations and set clear

boundaries around what you’re willing to do to help and what you expect your child to help

with in return.

3. Don’t dip into your retirement savings.

Avoid using retirement savings to help pay for the cost of your children’s college or graduate

school or your parents’ medical or care needs. If necessary, your kids can take out student

loans and work part-time. When it comes to your parents’ needs, use their assets first before

kicking in money of your own.

4. Put yourself first.

Whatever you do, don’t stop putting money away for retirement. The savings you set aside

today will help create the foundation for a financially secure retirement so that your children

won’t have to help you as you get older. You can get a quick snapshot of your retirement

savings progress with our online Savings Planner.

In an uncertain economy where financial independence may be difficult for all age groups,

families often lean on each other for support. With clear communication and planning, you can

navigate the financial challenges of meeting competing goals while still saving to create a

retirement paycheck for your own future.

Check it out

Your retirement plan is one of your best tools for building financial independence for the future. To learn more, take a look at our short online video, 7 Things You May Not Know About Your Company’s Retirement Plan.

3Educated

Wherever you are. Wherever you are going.

Nearing retirement: Planning your retirement paycheckWhen most people think about planning

for retirement, they typically have a target

amount in mind: “I want to save $500,000

by the time I turn 65.” The problem is,

unless you understand how your nest egg

will translate into a reliable monthly income

to meet your future expenses, how do you

know whether you’re saving enough?

That’s why the key to retirement readiness

is focusing on what you’ll need, rather than

what you’ll have.

Let’s talk lifestyle

A good place to start is by looking at your

current spending habits. We have a

Retirement Budget Estimate Worksheet that

can help you get started. As you consider

each item, identify which expenses are

likely to increase and which will decrease

or disappear come retirement.

For example, if you currently have a

mortgage, do you plan to pay it off before

retirement? Will you be paying college

tuition for your children when you stop

working? Calculate expenses you will no

longer have such as the costs associated

with commuting to work or buying

work-related clothing. Consider what costs

are likely to go up in retirement, such as

health care and insurance. Finally, consider

expenses that are discretionary but

important to your plans for retirement,

such as travel, entertainment and gifts to

loved ones and charities you may want to

support. The resulting budget should give

you a good sense of the income you’ll need

in the future.

Sources of regular income

The age at which you stop working will

also factor into how much income your

retirement savings will need to provide.

Most people are eligible to start taking

Social Security benefits as early as age

62 (your benefits will be reduced).

However, those benefits increase if you

wait until you reach full retirement age

(usually age 67) and rise even more if you

delay until age 70. In other words, the

longer you wait to take Social Security, the

less you may need to rely on your

retirement savings to meet your income

needs. To estimate your Social Security

benefits, go to the Social Security

Administration’s online benefits calculator.

Factor in your savings

If you find that your expected sources of

retirement income are not enough to cover

your projected expenses, consider one or

more of the following to help you boost the

size of your retirement paycheck.

• Maximize your retirement plan.

Contribute as much as you can to your

plan — at least as much as you need to

receive any possible matching

contributions, if offered.

• Play catch-up. If you’re age 50 or older,

you may be able to contribute an additional

catch-up amount ($6,000 in 2016) to your

plan each year until retirement.

• Step up your savings. If you’ve maxed

out of your retirement plan, supplement

your savings with a taxable IRA or a

regular investment account.

Determining a strategy for turning your

savings into a monthly paycheck in

retirement can be complicated. For this

reason, you may want to consult your

financial advisor for help in understanding

whether your retirement savings will

create the paycheck you need once you

stop working.

Check it out

Your future financial security is a work in progress. To learn more about navigating the changing financial terrain, take a look at our short online video, Top Three Ways to be a Savvy Investor.

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Check it out

The average lifetime cost for health insurance for a couple retiring in 2015 will be $266,589 according to HealthView Services. That estimate jumps to $463,849 for a 55-year-old couple retiring in 10 years.

Source: 2015 Retirement Health Care Costs Data Report, HealthView Services. www.hvsfinancial.com.

As you enter retirement, your savings become more than simply numbers on a statement;

they’re a crucial source of the retirement paycheck you’ll need to maintain your lifestyle.

To avoid depleting your savings too soon, you’ll want to carefully consider how much income

you take each year. To help you get started, here are four tips to safeguard your nest egg.

1. Set a sustainable withdrawal amount.

Many experts suggest withdrawing no more than 3 percent to 4 percent of your savings

so that your money has a good chance of lasting for 20 years or longer in retirement.

To see how long your money will last given different retirement scenarios, try our online

Depletion Calculator. Of course, you’ll want to adjust your withdrawal rate to reflect your

unique needs and circumstances.

For example, if you decide to work part-time rather than retire fully, you may need to

withdraw less from your savings until you stop working completely. Similarly, if your plans

include lots of travel early on, you may want to withdraw more in the early years of

retirement and slowly decrease your withdrawal rate as your life becomes less active.

You may also choose to adjust your withdrawal rate annually based on the performance

of your investments. That may mean withdrawing less when markets are rocky to reduce

the chance that you’ll deplete your savings too soon.

2. Create a cash cushion.

Experts recommend setting aside two to five years of living expenses in a highly liquid

account, such as a money market fund, and using this to pay recurring bills. That way, you

can avoid having to sell investments during a declining market, when prices are falling.

You’ll want to replenish this account when market conditions are favorable.

3. Pay attention to taxes.

You’ll also want to develop a strategy for withdrawing funds from your retirement savings

accounts to help minimize taxes and continue to enjoy the benefits of tax-deferred growth

on your investments. Of course, every tax situation is different, so you’ll want to consult your

financial and tax advisors to help determine the most appropriate withdrawal strategy for you.

4. Don’t forget mandatory withdrawals.

Once you reach age 70½, you are generally

required to start taking an annual required

minimum distribution (RMD) from your

retirement accounts or face a penalty imposed

by the Internal Revenue Service. For more

details, go to the IRS website or consult a tax

advisor. The start date of RMDs is April 1 of the

year following the year in which you turn 70½.

In the end, how you draw down your savings

can help ensure the retirement paycheck you

create lasts as long as you need it to.

Enjoying retirement: How to draw down retirement assets

5Educated

Wherever you are. Wherever you are going.

At BMO Retirement Services, we’re ready to help with any of your financial needs.

We invite your comments and suggestions for topics to include in future issues.Please write to: Educated Investor, 111 East Kilbourn Avenue, Suite 300, Milwaukee, WI 53202

Go to mybmoretirement.com to read Educated Investor online.

Educated Investor is published periodically by BMO Retirement Services and distributed free of charge as a service to our clients. Although carefully verified, data is not guaranteed as to accuracy or completeness. BMO Retirement Services and its affiliates cannot be held responsible for any direct or incidental loss incurred by applying any of the information in this publication. Consult your tax and financial advisor.

The term “Educated Investor” is used by BMO Retirement Services under a co-existence agreement with Precision Information, LLC (PI). The contents of this publication are not in any way connected to, affiliated with, related to, or endorsed by PI, or connected with PI’s rights related to its ownership of “Educated Investor” federal trademark and service mark registrations.

BMO Retirement Services was acquired by OneAmerica Retirement Services LLC on September 30, 2015 and is no longer a part of BMO Harris Bank N.A. or its affiliates.

For more information about OneAmerica or the acquisition, visit www.oneamerica.com/newsroom.

Access your retirement plan account online at mybmoretirement.com.• View your account balances and activity• View your personal rate of return• View investment performance and price information• Access tools and calculators• View account statements and request forms

Use the My BMO Retirement Line (automated telephone system) by calling 1-800-858-3829, option 1.• Receive your account balance• Receive investment performance and price information• Request account statements and forms

Speak to a BMO Retirement Services Specialist 24 hours a day by calling 1-800-858-3829, option 2.

Contact a BMO Distribution and Retirement Planning Specialist at 1-800-858-3829, option 1 for financial planning or rollover assistance.

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Wherever you are. Wherever you are going.

MacLean-Fogg Company, founded in 1925, has innovative product development and selected acquisitions. The business has grown into a worldwide enterprise with 32 global manufacturing facilities. MacLean-Fogg is comprised of two primary businesses, MacLean-Fogg Component Solutions (automotive) and MacLean Power Systems (electrical utilities). MacLean-Fogg is a privately held enterprise, corporate headquartered in Mundelein, IL, and is commonly called “The Farmhouse.”

MacLean-Fogg Company takes pride in the fact that we have a 97 percent retirement plan participation rate. Our partnership started with BMO Retirement Services in 2007 with $85 million in assets. Today, company sales have grown to $1 billion, 401(k) assets are $135 million and MacLean-Fogg has over 3,800 family members worldwide. BMO Retirement Services has continued to help us grow, so that our employees can save for their retirement future.

BMO Retirement Services partner: MacLean-Fogg Company

7Educated

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