Retirement Essentials Spring 2016

VALIC®

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News flashThe goal posts for retirement seem to be moving.

Did somebody take your future?In a recent study from AARP1, numbers show:

• Nearly half (44%) of Americans 50 and over are now planning to work part-time after they reach retirement age, and

• One-third are delaying the age at which they expect to retire

The Economic Policy Institute reported1 that there are:

• 57,000 men age 70-74, and • 69,000 women age 75 and up still working The Institute says these are people who would not still be working today if the Great Recession had not damaged their savings so badly.

The best course? Prevention.Okay, so what’s the good news?

The good news is, there are still things you can do to improve your financial fitness:

1. Save more if you can – in your employer-sponsored retirement plan, your emergency savings

2. Look at your budget. See if you can cut your expenses – cable/Internet, duplicated phone services, meals out … That helps cut down spending needs, and you can put the spending cuts into savings

3. Talk to a financial professional. Get help with projecting needs for the future. Plus financial planning, budgeting, details on savings plans, investing and more

Ask directionsThese steps are pretty basic. But whether you’re 25 or 55, the same basics apply. Spend less, save more if you can.

And here’s one other statistic:

• Only 7% of Millennials, 10% of Xers and 20% of Boomers are taking advantage of professional advice

• People who use a financial advisor and a financial plan, on average, have more than three times (357%) of the retirement assets of those who do neither2.

If you would like to find out more, you can use the calculators at VALIC.com to project total savings needed, how monthly changes would affect your paycheck, and more.

When it’s time for “retirement,” do you know where you’ll be?

“If you don’t know where you are going, you might wind up someplace else.” — Yogi Berra

1 ”Older workers head for retirement – and don’t retire.” www.Marketplace.org, 07/30/2015.2 Reproduced with permission from The Future of Retirement The power of planning, published in 2011 by

HSBC Insurance Holdings Limited, London.

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RETIREMENT ESSENTIALS

QUICKLINKS:

Front Page

Making Cents

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Dollars & Sense

By the Numbers

Penny Wise

Check out our informative videos on saving and goals at VALIC.com.

Making Cents

An income tax credit for home improvements?Yes! Certain energy-efficient home improvements can earn you a credit on your federal income tax. Let’s review some websites that let you know what qualifies and what doesn’t.

EnergyStar.gov Seia.org Energy.gov IRS.govIntroduced in 1992 by the U.S. Environmental Protection Agency, this site identifies and promotes energy-efficient products. Covers insulation, roofs, windows and doors, and heating, venting and air conditioning.

This site gives you the details on the Solar Investment Tax Credit. You can download a Fact Sheet that will get you started on harnessing the sun’s energy to power your home.

Additional information on the Solar Investment Tax Credit, plus other topics like geothermal heat pumps and solar water heating.

The IRS’s website presents information clearly and concisely. Use the easily navigable site to download forms, check on the status of your refund, pay taxes and find answers to practically any question about the federal tax process.

Before starting on any home improvement, check with your tax advisor to make sure you’re meeting all IRS requirements to qualify for the tax credit.

Money Talks

Extra Credit for Saving? IRS Saver’s Credit.If you make eligible contributions to your IRA or employer-sponsored retirement plan, you may be able to reduce your income tax by up to $1,000, or $2,000 if you’re married and file jointly.

Who is eligible?To qualify for a Saver’s Credit, you must make tax-deferred contributions to an employer-sponsored plan or IRA, and also:

1. Age 18 or older

2. Not a full-time student

3. Not claimed as a dependent on another person’s tax return

How much can I save?If you meet the qualifications above, and contribute as much as $2,000 ($4,000 if married filing jointly), you could qualify for a Saver’s Credit of up to 50% of your contributions — $1,000 ($2,000 if married filing jointly) subtracted directly from your income tax payment. This credit is in addition to other tax benefits which may result from the retirement plan contributions, and may be reduced if you have taken a distribution from the plan. Check out the table below for more details.

Income Limits for 2016 Eligibility

Credit Percentage Married, Filing a Joint Return Head of Household Single or Married, Filing

Separately

50% Up to $37,000 Up to $27,750 Up to $18,500

20% $37,001 to $40,000 $27,751 to $30,000 $18,501 to $20,000

10% $40,001 to $61,500 $30,001 to $46,125 $20,001 to $30,750

0 $61,500 & more $46,125 & more $30,750 & more

To learn more about how to take advantage of the Saver’s Credit, contact your local VALIC financial advisor.

Use the VALIC Savings goals calculator to find out what it will take to reach your savings goal. VALIC.com > Financial Planning > Tools & calculators > Savings goals

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RETIREMENT ESSENTIALS

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By the Numbers

Healthcare needs and inflation don’t ask your age Sometimes age doesn’t matter. If you have a family history of certain diseases and conditions, you could be in a high-risk health category, no matter your age … and accidents, chronic illnesses and disabilities can occur at any age. That means the need for long-term care can happen at any time.

Rising healthcare and long-term care costs may make you want to consider purchasing long-term care insurance (LTC). It’s not the same as health insurance, but it often works in conjunction with private health insurance and Medicare.

Why consider LTC now? Because the median annual cost for long-term care is going up.

Consider this: This chart shows the median annual cost for long-term care in 2015 at different centers of care and the estimated average annual cost in 2020 at an assumed 3% inflation rate.

0

$20,000$40,000

$60,000$80,000

$100,000$120,000

AdultDay

Care

AssistedLiving

2015

Inflation estimated in 2020

Source: Cost of Long Term Care Survey, Genworth Financial, 2015.

$17,904

$20,756

$43,200

$50,081

$45,760

$53,048

$80,300

$93,090

$91,250

$105,784

HomeHealth

NursingHomeSemi

Private

NursingHome

Private

Median annual cost

Dollars & Sense

What are the benefits of working with a financial advisor?Some people thrive by taking on tasks themselves, whether mowing the lawn, changing the car’s oil or renovating a closet. What about managing their retirement plan? A survey of American workers has shown a number of benefits of working with a financial advisor.

Source: Franklin Templeton Investments 2015 Overview: The State of Retirement; Retirement Income Strategies and Expectations (RISE) Survey.

Of those who work with an advisor:

Are confident that their personal investments will provide

expected income in retirement

Are confident that their retirement plan will provide

expected income in retirement

Are likely to be saving for retirement

(vs. 54%)

Know how their medical expenses will be paid in retirement

77% 93% 77% 89%Retired by choice

83%

Penny Wise

Test your financial knowledge

1 Rebalancing your portfolio means:

A Making it 50% stocks and 50% bonds

B Making your allocations follow a bell curve

C Getting your percentage of stocks, bonds and cash back in line with your plan

2Why do you want to be “tax-efficient” with investments and income?

A To avoid having to file tax returns

B To avoid spending money on taxes that you could keep in your savings

C To transfer your money to the government in the most efficient way

3 Long-term care insurance can:

A Help you (or a senior relative) stay at home

B Cover an extended stay in a hospital

C Help pay for care in a nursing home when necessary

D All of the above

Answers: 1. C2. B3. D

RETIREMENT ESSENTIALS

VALIC®

Investment values will fluctuate and there is no assurance that the objective of any fund will be achieved.Income taxes on tax-deferred accounts are payable upon withdrawal. Federal restrictions and a 10% federal early withdrawal penalty may apply to withdrawals prior to age 59½.This information is general in nature and may be subject to change. All companies mentioned, their employees, financial professionals and other representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For advice concerning your individual circumstances, consult a professional attorney, tax advisor or accountant.

Securities and investment advisory services offered through VALIC Financial Advisors, Inc., member FINRA, SIPC and an SEC-registered investment advisor.Annuities issued by The Variable Annuity Life Insurance Company. Variable annuities distributed by its affiliate, AIG Capital Services, Inc., member FINRA.Copyright © The Variable Annuity Life Insurance Company. All rights reserved.

VC 20739 (04/2016) J98601 EE

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By the Numbers

Penny Wise