avoiding mistakes in planning for retirement

Kathleen Wyble Graham, First Vice- PresidentWells Fargo Advisors

Avoiding big mistakes when saving for retirement

Proper retirement planning is key

Maintain standard of living Generate retirement income to last your lifetime

Retirement planning

Know where you are. Determine where

you are going. Follow your plan.

Mistake #1 – Forgetting about inflation’s effects

Inflation’s powerful effects If prices rise 4% annually:

$1.00 82¢ 66¢ 44¢

Today Five yearsfrom now 10 years

from now 20 yearsfrom now

Source: Consumer Price Index

Relative worth

Mistake #1 – Forgetting about inflation’s effects

$

Years from now1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Purchasing power of $50,000Assuming 4% inflation

$

$

$

$

$

$

Mistake #2 – Not having a proper asset allocation

Asset allocation … Is the combination of asset classes in a portfolio and

their proportion to one another Requires building a balanced portfolio with

appropriate diversification across asset classes May help reduce the effects of market volatility Can help you take advantage of your return potential

Asset allocation does not eliminate fluctuating prices or uncertain returns.

Mistake #2 – Not having a proper asset allocation for your portfolio

Mistake #2 – Not having a proper asset allocation for your portfolio (cont.)

Past performance is no guarantee of future results. You cannot invest directly in an index.

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Mistake #2 – Not having a proper asset allocation for your portfolio (cont.)

Mistake #3 – Underestimating the effect of taxesThe benefits of tax deferral

Example is for illustrative purposes only and does not reflect the performance of any specific investment. Wells Fargo Advisors is not a legal or tax advisor.

Tax-deferred investment

Taxable investment

$

$645,100 value after taxes, assuming a 39.6% tax bracket and a lump sum distribution

$1,068,047

$561,202

$

$

Mistake #4 – Underestimating spending during retirement 38% of retirees report their actual expenses in retirement

are somewhat or much higher than expected.1

42% of those who experienced higher than expected expenses coped by reducing spending and the quality of life.1

32% of retirees indicate their current debt level is at least a minor problem in retirement.1

1. Source: Employee Benefit Research Institute retirement confidence survey, March 2016.

Mistake #5 – Having unrealistic investment expectationsMarket timing — The risk of missing major opportunitiesIbbotson Large Company Stock Index annualized returns, 1996-2015

Source: Morningstar. This hypothetical illustration is based on the Ibbotson® Large Company Stock Index with dividends reinvested over the 20-year period of 1996 through 2015. Past performance is no guarantee of future results. An index is not managed and is unavailable for direct investment.Returns and principal invested in stocks are not guaranteed. Holding a portfolio of securities for the long-term does not ensure a profitable outcome, and investing in securities always involves risk of loss.

Mistake #6 – Underestimating the time you will spend in retirementAmericans are living longer

Source: RP-2000 Mortality Table Projected to 2013

Life expectancy (years)

Mistake #7 – Mismanaging tax-deferred assets Tapping into your tax-deferred investments

at or before age 59½. Spending from your tax-deferred

investments first.

Mistake #8 – Failing to plan for unexpected health-care expenses Long-term care is the assistance

you receive when you cannot care for yourself and require help with the daily living activities.

The need for long-term care can result from: Accident Chronic illness Short-term disability Advancing age

Mistake #8 – Failing to plan for unexpected health-care expensesA growing problem

2015 CareScout Nationwide survey.This illustration assumes a private room and 4% annual increase in costs. Insurance products offered through affiliated nonbank insurance agencies.

Projected annual nursing-home costs (private room)

2015 2020 2025 2030 2035

The big mistakes

$

6. Underestimating time spent in retirement

4. Underestimatingspending during retirement

8. Unexpected health-care expenses

1. Forgetting inflation’s effects

3. Underestimating taxes

7. Mismanaging tax-deferred assets

5. Unrealistic investment expectations

2. Improper assetallocation

Retirement planning

You should identify: What you have What you need How to get there

The Envision® process

An Envision investment plan …Can help you work toward your financial goalsUses historical market data and statistical modelingIs flexible

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