retirement
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What\'s the sign of a good decision?TRANSCRIPT
What’s the sign of a good decision?
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Retirement success is driven by a series of good decisions …
ACCESS
Will you have access to money as you need it?
HEALTH CARE
How will you defray your medical costs?
LEGACY
What will your family inherit?
The foundation of all these good decisions? A good plan.
How will you create income for life?
INCOME
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It all starts with building a sound retirement plan.
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5 steps for establishing your Plan
ENVISION your goals
Step 1
Step 2
ESTIMATE your expenses
Step 3
EVALUATE your resources
Step 4
EARMARK guaranteed income
ENSURE you are taking action
Step 5
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Planning step 1: ENVISION your goals
What do you want to do when you retire?
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Planning step 2: ESTIMATE your expenses
Just a few key categories to consider:
Food _____________Housing _____________Transportation _____________Health Care _____________Insurance _____________Personal Care _____________
Basic needs: Monthly estimate
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Planning step 2: ESTIMATE your expenses (cont.)
Discretionary expenses: Monthly estimate
Entertainment _____________Travel _____________Hobbies/Memberships _____________Charitable Interests _____________ ________Total Basic Needs &Discretionary Expenses _____________
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Planning step 3: EVALUATE your resources
Personal Savings: 40%
Pension: 21%
Social Security: 39%
Employee Benefit Research Group, EBRI Notes, June 2010. Based on 2008 data from the U.S. Census Bureau’s Annual March Current Population Survey.
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Planning step 3: EVALUATE your resources (cont.)
Group income sources:
Guaranteed income sources: social security pension plans annuities*
Part-timeincome: rental income part-time work or one-time asset sales
Personal savings and investments: 401(k) plans IRAs bank savings, mutual funds individual securities•Guarantees are based on the claims-paying ability
of the issuing insurance company.
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Guaranteed Income $________________
Basic Needs $________________
Income Gap $________________
Planning step 4: EARMARK guaranteed income
Earmark
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=
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Planning step 4: EARMARK guaranteed income (cont.)
Keep in mind:The more income you can guarantee … the less stress and more security,
you may have in retirement.
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Saving More May HelpAdditional investment each year: $5,000Hypothetical annual earnings: 7%
Planning step 5: ENSURE you’re taking action
Two ways:1 | Save more as soon as possible.
2 | Look for additional tax-deferred opportunities.*
after 10 yrs
$74,000
after 15 yrs
$135,000
This hypothetical illustration is not a projection of future values and does not represent the performance of any MassMutual product. It assumes a $5,000 investment at the beginning of each year to a tax-deferred investment. It does not include fees or charges and doesn’t include the impact of taxes if money was withdrawn. If it had, performance results would have been lower.
* Taxable withdrawals are subject to ordinary income tax and, if made prior to age 59 ½ , may be subject to a 10% federal income tax penalty. Annuities do not provide any additional tax advantage when used to fund a qualified plan. Investors should consider buying an annuity to fund a qualified plan for the annuity’s additional features, such as lifetime income payments and death benefit protection.
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Sign of a good decision about income
You stop working … but your paychecks keep coming.
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Income: When should you start collecting Social Security?
Collecting Social Security earlier can affect benefits each year — and over time.
Hypothetical Examples – Assumes $1,000 at a full retirement age of 66 and 3% annual increase for inflation.
First year:
Break even age:
By age 90 cumulative benefit:
Begin—Monthly Benefit: $750 reduced by 25%.
Starting at age 62
$9,000
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$406,970
Wait—Monthly Benefit: $1,000
receive full benefit.Starting at age 66
$12,000
81$437,511
Delay—Monthly Benefit: $1,320 increased by 32%.
Starting at age 70
$15,840
83$454,236
AGE 62 66 70
The break even age is the approximate age your cumulative benefits would have equaled the benefits you would have received if you started payments at age 62. Full retirement age varies by birth year. This example does not consider taxes or the effects of time value of money had you reinvested payments or used other sources of money to bridge the income gap until you started payments. Source: MassMutual and Social Security Administration, 2009
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Immediate
Turns a one-time purchase payment into a series of income payments
Income: How can you turn other savings into guaranteed income?
Use a portion of savings to purchase an annuity.
Deferred
Allows assets to grow tax-deferred before retirement; turns those assets into income payments at retirement*
Immediate Income Annuity Accumulation IncomeIncome
Deferred Annuity
*Taxable withdrawals are subject to income tax and, if made prior to age 59½, may be subject to a 10% federal income tax penalty. annuities do not provide any additional tax advantage when used to fund a qualified plan. Investors should consider buying an annuity to fund a qualified plan for the annuity’s additional features, such as lifetime income payments and death benefit protection.Guarantees are based on the claims-paying ability of the issuing company
Two types of annuities
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Withdrawing interest/dividends
Laddering fixed-income securities
Taking systematic withdrawals
Tapping into your home equity
Income: What other options do you have for generating income?
Non-guaranteed income-generating options:
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Income: How much can you withdraw each year?
Balance how much you withdraw with how much you earn.
1 | If you withdraw at this rate
2 | And choose this allocation strategy…
3 | Here’s the chance your income will continue for 25 years.
4% 85% 97% 96% 93% 90%
5% 34% 72% 81% 80% 78%
6% 4% 28% 54% 62% 64%
7% 0% 5% 28% 44% 50%
8% 0% 0% 12% 28% 38%
100%Bonds
75% B25% S
50% B50% S
25% B75% S
100%Stocks
Stocks are represented by the Standard & Poor’s 500R, which is an unmanaged group of securities and considered to be representative of the stock market in general. Bonds are represented by the five-year U.S. government bond, inflation by the Consumer Price Index and mutual fund expenses from Morningstar. Annual investment expenses were assumed tobe 0.88% for stock mutual funds and 0.74% for bond mutual funds. The inputs used by Morningstar are historical 1926-2009 figures. The data assumes reinvestment of income and does not account for taxes. An investment cannot be made directly in an index.
IMPORTANT: Projections generated by Morningstar regarding the likelihood of various investment outcomes 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. c 2010 Morningstar, Inc. March, 2010. All rights reserved.
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Income: Which resources should you withdraw from first?
Strategic withdrawal decisions may extend your portfolio’s life span.
Taxable investments – like mutual funds Tax-deferred plans – like IRAs*
Tax-free sources – like Roth IRAs
*Taxable withdrawals are subject to income tax and, if made prior to age 59½, may be subject to a 10% federal income tax penalty. Annuities do not provide any additional tax advantage when used to fund a qualified plan. Investors should consider buying an annuity to fund a qualified plan for the annuity’s additional features, such as lifetime income payments and death benefit protection.
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You feel more confident about the short term … and the long term.
Sign of a good decision about access to assets
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Access: Can you fund emergencies and not jeopardize your lifestyle?
Keep a portion of retirement assets
accessible, earmarked for emergencies.
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Access: Enhancing Access, Growth and Predictable Income
Used to be:Conventional wisdom was to move into conservative investments as you neared retirement.
But now:More people may spend 20-30 years in retirement, and need some growth to help outpace inflation!
Bonds
Stocks
Asset allocation and diversification do not assure a profit and do not protect against a loss in a declining market.
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Access: Do you have a diverse mix of products?
Guarantees are based on the claims-paying ability of the issuing company.
Stocks and bonds involve investment risks, including the possible loss of the principal amount invested. Diversification does not guarantee profit nor protect against loss.
The MassMutual Single Premium Immediate Annuity (SPIA) Synergy Study, August, 2010. This study is available on MassMutual.com.
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You feel prepared for the future … whatever it brings.
Sign of a good decision about health care
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Health Care: How will you manage medical costs?
A couple will need approximately $300,000 to $650,000 to cover health care costs in retirement.
“Savings Needed to Fund Health Insurance and Health Care Expenses in Retirement.” EBRI Issue Brief No. 317, May 2008
$300,000 $650,000
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Health Care: What will Medicare cover?
Source: http://www.medicare.gov
Generally available at no cost to couples who have paid Medicare taxes while working in the U.S.; even if you aren’t eligible for premium-free Part A coverage, may still be able to enroll and pay a premium
The standard Medicare Part B monthly premium will be $110.50 in 2010.
If your income is above $85,000 (single) or $170,000 (married couple), then your Medicare Part B premium may be higher than $110.50 per month.
Medicare Part A
Medicare Part B
• Inpatient medical care (NOT custodial or long term care) in a hospital, skilled nursing facility or hospice
• Home health care (in certain conditions)
• Medically necessary doctor’s services and other outpatient care
• Limited preventative services, like flu shots
Medicare option: What it may cover: How much it may cost:
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Health Care: Do you need Medigap insurance?
Medigap bridges the gap between retiree health care
costs and Medicare benefits best to apply during “open enrollment” new policies don’t cover prescriptions
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Health Care: What about long term care?
Long term care typically isn’t covered by traditional health insurance plans.
1 Council of Economic Advisors. (February 17th, 2007). Economic Report of the President.
Should you consider long term care insurance?
An estimated 70% of people who reach the age of 65 will need some form of long term care before they die.1
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What you really pass on to your family is peace of mind.
Sign of a good decision about legacy
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Legacy: How should you start planning for your legacy?
Take inventory of what you own: Real estate/other types of property Business interests Employer-sponsored retirement plans Brokerage accounts Mutual funds Bank accounts Traditional, Roth and Rollover IRAs Insurance policies and annuities
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A will is a legal document that directs disposition of your assets after your death
If no will, decisions concerning your assets are at the discretion of the laws of the state having jurisdiction.
Legacy: Do you need a Will?
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Not all assets pass by will; some by beneficiary designation
Need to keep beneficiaries updated on those types of accounts, e.g.:
Employers’ savings plans Annuities Life insurance
Legacy: Are your beneficiaries updated?
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Passes directly to your beneficiaries income tax free, without the costly delays of probate
Insures your family has access to cash when they need it most, so they don’t have to liquidate other assets to meet expenses or pay estate taxes
Legacy: Do you have enough life insurance?
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Legacy: What else should you consider?
Trusts Not just for the wealthy Can help control how and
when assets are distributed Can help reduce
estate taxes
Charitable Giving Factor into your legacy planning Strategies for minimizing taxes
so you can maximize contributions
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Working with those who can help you build your plan — and your confidence.
Sign of a good decision about your retirement?
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Next steps
Set up an appointment today!
I can help you develop a strategy that addresses: Income Access Health Care Legacy
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Variable annuities are sold by prospectus. Before purchasing a variable annuity contract, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity contract and its underlying investment choices. For this and other information, obtain the prospectuses for the variable annuity contract and its underlying investment choices from your registered representative. Please read the prospectuses carefully before investing or sending money.
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Principal Underwriters: MML Investors Services, LLC MML Distributors, LLC
Subsidiaries of:Massachusetts Mutual Life Insurance Company1295 State StreetSpringfield, MA 01111-0001
The information provided is not written or intended as specific tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
Annuity products are issued by Massachusetts Mutual Life Insurance Company and C.M. Life Insurance Company. C.M. Life Insurance Company, Enfield CT 06082. C.M. Life Insurance Company is a subsidiary of Massachusetts Mutual Life Insurance Company.
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© 2011 Massachusetts Mutual Life Insurance Company, Springfield, MA. All rights reserved. www.massmutual.com. MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual)
and its affiliated companies and sales representatives.