Copyright ©2016 RetirEd, LLC

Retirement Preparation Homework Workbook

1

Welcome to Your Grand

Commencement—Retirement

Most people spend twelve

years in primary school and, for

some, two to eight additional

years in post-high school

institutions preparing for a

productive and successful

forty-plus years in a working

career.

In contrast, the time spent

preparing for a productive

and successful retirement, a

lifestyle that could last as long

or longer than the all the years

you worked, is significantly less.

Retirement is no longer a predetermined destination. To successfully

achieve the ultimate retirement goal of lifetime financial

independence, participants must create and fund their retirement

lifestyle vision plus take educated steps to protect their plan from the

risks that threaten an early spend down of assets.

This homework workbook, the textbook Retirement Is Recess for Grown-

Ups, and if applicable, a retirement planning preparation tutor (financial

adviser) are essential tools to improve your retirement readiness level.

2

Workbook Instructions

Not everyone will need to complete all the homework covered in this

workbook. Some may have already completed specific assignments,

and others might find that their particular situation does not require a

certain project to be completed.

It is beneficial to complete applicable homework assignments over a

period of time rather than “cramming” in a haste to get them finished.

Remember, this is your multidecade retirement recess you are preparing

for. Thoroughness is the most important factor.

Finally, this workbook is designed to be utilized in conjunction with the

textbook Retirement Is Recess for Grown-Ups. It is recommended that

the participant read the book first and then complete applicable

homework assignments accordingly.

Good luck and best wishes for a healthy, prosperous retirement recess!

Retirement is Recess for Grown-ups, when

the bell rings will you be ready?

3

Homework Assignment-Completion List

Assignment Page Date Assigned Completed

Thinking Outside the Box Exercise 5

Retirement Life Planning Homework

Financial Fear Inventory 7

Life Expectancy Exercise 10

Retirement Perception Exercise 12

Movie Date 13

Retiring “To” and “From” Exercise 14

Visualization Exercise 15

Create You Vision -Retirement Lifestyle 16

Assess Your Play-Ability 17

Primary Residence Location 19

Retirement Financial Planning Homework

(RISK) Assessment 22

Hiring a Financial Adviser or Not 23

Assessing a Financial Adviser 24

Financial Inventory 25

Monthly Expense Exercise 32

Monthly Retirement Income Source(s) 41

Retirement Contribution Priority Plan 43

Retirement Income Distributions Order 45

4

Assignment Page Date Assigned Completed

Financial Planning Assumptions 47

Retirement Insurance Homework

Life Insurance Needs in Retirement 48

Medicare and Supplement Heath Ins. 52

Long-Term-Care Costs 53

Retirement Estate Homework

Asset Document Locator 54

Beneficiary Review Exercise 59

5

Exercise: Thinking Outside the Box

Planning for a “retirement” lifestyle lasting three to four decades requires

some creative, outside-the-box thinking concerning traditional

retirement lifestyle perceptions. Both lifestyle goals and the financial

means to fund them have been rapidly changing as the landscape of

retirement has been altered by age longevity and disappearing

retirement income benefits.

This exercise is designed to challenge your thinking about how we

traditionally tend to solve a problem.

Brain Warm-up Exercise

Connect all nine dots with four straight lines without lifting your pencil tip

from the paper.

Solution: Last page of this workbook

6

Financial Fear Inventory

As you have discovered in your reading, the two biggest fears

associated with retirement are running out of money before

running out of lifetime and

not being/remaining

relevant in your lifestyle

once retirement has begun.

Fortunately, engaging in

comprehensive financial

planning—including an

exercise to define and

create your retirement lifestyle plan—can greatly mitigate each

of these fears. Even so, it is useful to complete a fear inventory to

discover how fear can deter you from arriving at your financial

independence destination on time.

Completing a periodic financial-fear-inventory exercise can prove

very useful in discovering the root cause(s) of your fear, and more

importantly, it will help you realize how we all are empowered to

overcome our fears once we have the courage to face them.

Fear, financial or otherwise, most often is rooted in false beliefs.

When we examine why we tend to believe something to be true

or not, many times we

find that we are still

clinging to beliefs that

are way past their

expiration dates. In

other words, they may

have been applicable in the past, but not anymore. A perfect

example is found by examining beliefs about what our retirement

lifestyle will actually look like. Old retirement lifestyle beliefs

centered around being old, worn out, or obsolete. Who wants to

“I’ve lived through some

terrible things in my life, some

of which actually happened.”

Mark Twain

F.E.A.R. = False Evidence Appearing Real

7

work and save toward that end? Much of what you are reading in

the book Retirement Is Recess for Grown-Ups is about planning and

living an empowered, dynamic retirement lifestyle that is anything

but obsolete. Recess for grown-ups equates to being active,

creative, and engaging—not boring, restrictive, and dull.

The word “fear” can be viewed as an acronym—FEAR—False

Evidence Appearing Real. Ensure your perceptions are real.

Homework: Find a quiet time where

you won’t be interrupted for fifteen to

twenty minutes. Take a few deep

breaths and clear your mind. Ask

yourself each fear question out loud.

Write down your response to each

question. Do not judge your answers as

“good” or “bad,” “right” or “wrong.”

Also, don’t try to overthink your

responses.

What is my greatest financial fear?

When did I first become aware of this fear?

How is this fear affecting me today?

What is the lie I am telling myself as a result of this fear?

How do I perpetuate this lie in my daily life?

What can I do instead? List three action steps:

8

Financial-Fear Inventory—Example

What is my greatest financial fear?

That I won’t have enough money to retire on my terms.

When did I first become aware of this fear?

Watched someone I know not achieve his financial goals.

How is this fear affecting me today?

Freezes me up from taking any action. Keeps me from planning

for financial freedom.

What is the lie I am telling myself as a result of this fear?

It is not possible for me to achieve financial independence.

How do I perpetuate this lie in my daily life?

Procrastination. Too “busy” to complete financial planning.

What can I do instead?

Finish my homework. Find someone who will hold me

accountable for my actions. Change my outdated perceptions.

Complete a separate fear inventory for as many financial fears as

you presently have. It might be helpful to take a fear inventory

periodically or whenever you begin to feel yourself freezing up and

not taking action on a financial matter.

9

Retirement Life Planning

For those who are managing

to put money aside for their

“retirement years,” many

have no idea what their

retirement life might look like.

Unlike the generalization of

saving for a “rainy day,”

saving for a thirty-year-long

lifestyle extends over 10,950

days of both sunshine and rain. We must begin to think beyond the

science of financial data and awaken the desired future lifestyle

dreams that slumber within. Although the financial calculations

play a critical role and provide the discipline of ensuring that

money lasts as long as you do, equally important is the creative art

of envisioning what your ideal lifestyle looks, tastes, smells, sounds,

and feels like. After all, longevity trends say you are going to be

spending a lot of time somewhere. Why not design a plan to fit

your desires rather than settling for someone else’s default vision—

or worse, no vision at all?

It’s time to modernize our

definitions and outdated

perceptions of what the lifestyle

of retirement is versus what it

was. In the past, the idea of

retirement signaled the

beginning of the end. Today it

introduces the beginning of a

new and very active extended

lifetime. In the past, retirement

meant being permanently

resigned from a career. Today, an increasing number of people

10

are “re-hired” into new and dynamic careers and businesses, some

for pay and some for no pay. In the past, retirement implied elderly

and worn out. Today, thanks to longer life expectancies and a

higher quality of life, it signifies new and exciting chapters in the

continuing story of you.

It is vital to define as specifically as you can the lifestyle you are

envisioning and at what age you would like the recess bell to ring.

Once your retirement life vision is out of your head and written

down on paper, you are ready to create a financial plan to fund

and protect it.

Life-Expectancy Exercise

Go online to https://apps.goldensoncenter.uconn.edu/HLEC/ and

access the healthy life expectancy calculator developed by the

Goldenson Center at the University of

Connecticut. This is a very good free life-

expectancy calculator that is not affiliated

with any commercial site. Enter your

information by using the slide buttons and

request the results.

You will receive an estimate for healthy future years and unhealthy

years. You will also receive comments on your strong points and

areas you can improve to extend your life-expectancy projections.

Your predicted future healthy years: _____

Your predicted future unhealthy years: _____

11

List positive lifestyle traits contributing to extending your life-

expectancy years

_______________________________________________________________

_______________________________________________________________

List any suggested improvements:

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

Question: How old would you say you are if you didn’t know your

age? ____

Keep in mind that predicting life expectancy is not an exact

science until after the fact!

12

Retirement-Perception Exercise

Define what the word “retirement”

means to you. Create your own

synonyms for the word “retirement.”

Write down your answers. Examples

include: retirement = inspirement;

overtime on my terms; the best second

half of life; unsupervised playtime;

recreating and re-creating. Email your

“retirement” definitions to me at

jim@retirementrecess.com, and I will

share them with others who are also

completing this assignment.

What retirement means to me:

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

_______________________________________________________________

13

Movie Date

Make some popcorn and watch a

movie or two about lifestyles in

retirement. A couple of my favorites are

The Intern, Cocoon, On Golden Pond,

and About Schmidt. What do you like

and dislike about the retirement

lifestyles portrayed in these movies?

Write down your thoughts and feelings.

What movies did you watch?

Thoughts and comments:

14

Retiring “To” and “From” Exercise

Ask yourself what you are retiring from

and what you are retiring to. Do you

want to retire from something, like a job

environment you dislike or even hate?

Do you want to retire to something new

and different? Maybe it’s a second

chance at a new career. How about

living in a different part of the country or

world, where the climate and lifestyle

are perceived as more suitable for you?

Climate is now second to affordability

on the short list as a primary reason to

relocate in retirement. Make a “from”

and “to” list to help provide clues as to

the lifestyle direction you imagine your

retirement journey might take.

I’m retiring from: I’m retiring to:

__________________________ _________________________

__________________________ _________________________

__________________________ __________________________

__________________________ __________________________

__________________________ __________________________

15

Visualization Exercise

Create or collect pictures from

magazines and the internet that

graphically illustrate what you want

your retirement recess to look like. Paste

them on a presentation board for

viewing or upload them to Pinterest.

Make sure every area of your life is

represented by this collage that

describes where you will live, play, work,

rest, grow, share, and just be.

Email your visual collage to

jim@retirementrecess.com. I will post it

on our web page “Retirement—You

Vision” so others can be inspired by your

visuals and create their own.

16

Create Your Lifestyle Vision Plan

As assigned in the book, go to

www.retirementrecess.com/retire-

ready-resource-center and request the

e-book - You Vision™. Complete the

exercise to discover your relevance in

seven facets of your retirement

lifestyle.

Self

Life Partner

Family and

Friends

Community

Explore

Avocation and

Vocation

Something Bigger

17

Retirement Transition Exercise

Assess Your Play-Ability

No matter which retirement transitional strategy you consider as

right for you—the “on/off” immediate or gradual “dimmer

switch”—it is important to assess

your play-ability prior to your

goal date.

I’ve never met a five-year-old

who didn’t know how to play

with vigor. Children instinctively

switch immediately from a state

of rest into play mode. As we

grow up, we devote more of

our attention and time to

working for a living and dealing

with the responsibilities of life and less time practicing our play skills

we learned as kids. Slowly our play abilities atrophy if they are not

exercised regularly.

Do you know any grown-ups who have difficulty switching

between work periods and playtime? You may notice this when

you begin a vacation or extended holiday. Those who have

forgotten how to play have difficulty switching from full-time career

to full-time retirement without a transition period. The honeymoon

phase of a careerless lifestyle can wear off after a short time and

turn to boredom, depression, and anxiety. Alcoholism and drug

addiction cases increase as drinks and drugs fill the void where

social and status aspects of employment once lived.

18

Pre-cess

If practical, plan and practice playtime (mini recess) for increasing

periods of time prior to your actual full-time retirement date. During

school years, this period was called “spring/fall break.” I call these

preretirement practice periods “pre-cess.” Practicing pre-cess

prior to retirement recess accomplishes two important goals:

1. Initially, you begin the process of conditioning yourself and the

people around you by switching back and forth between work

and play. This decompression step allows you time to develop

your sense of balance between playtime and work time.

2. You begin to build confidence that your job responsibilities will

actually allow you to break from your work routine for extended

periods of time without business falling apart while you are gone.

Being able to shift your work load (or delegate) is a skill that takes

time and practice for most people to master.

Pre-cess is great for building confidence

by getting a feel for how difficult or easy

it will be to move between your work

and play life in the future.

Schedule an extended trip to a pre-

cess place (playground) you have

never been to before. If a voice in your

head says there is no way you can be

gone from work even for a few days,

and you are within five years of your

retirement age goal, you need to

consider what things must happen

before you can complete this

assignment.

Comments about pre-cess experiences:

19

Advanced skill development: During a pre-cess time, try turning

your cell phone off for an entire day. If this is too big of a leap,

consider a four-hour respite from your “wired” life. No fair counting

sleeping hours as part of your four-hour period!

20

Choosing Your

Primary Residence

Location

As you create your

retirement-recess lifestyle,

deciding on your primary,

and in some cases

secondary, residence is an

important consideration.

Whether you choose a

traditional residence—with

or without maintenance

and upkeep—or live in a

home on wheels where

the view out your living

room window changes with location, where you choose to reside

says a lot about you. Still others choose to “age in place,” where

they already reside. Vacant kids’ bedrooms easily convert to gym,

yoga, and art studios.

Where you decide to live during your retirement years is usually

based on several factors I call “location attractors”:

• Climate/seasons

• Geographic proximity to people you visit

often

• Cost of living: general/medical/insurance

• Social settings and area amenities,

including medical

• Availability of support facilities

21

• Employment/business opportunities

• Familiarity of location

• Security

Based on the location attractors

discussed in your reading, where do

you want your primary residence to be

located during your retirement-recess

years?

Location Attractor Location

#1

Location

#2

Location

#3

Comments

Climate/seasons

Proximity to family

& friends

Cost of living

Social and area

amenities(Medical)

Support facilities

Jobs/business

opportunities

Familiarity of

location

Personal security

Other:

Grade: A = Ideal B = Strong C = Neutral D = Not suitable

I= Incomplete—Need more information

22

Other considerations: Will you or do you maintain a primary

residence and a secondary home?

If yes, describe the location, amenities, services, attractions, and

activities of each residence location:

Retirement Financial Planning

Retirement Income Security Killers (RISK)

Assessment

Complete a Retirement Income

Security Killer (RISK) Profile

Assessment

The goal of this homework step is to

evaluate and identify financial,

economic, and personal core risks that

have a high probability of impacting

your financial health if and when they

do occur. A RISK mitigation plan of

action can then be developed to

manage each risk appropriately,

beginning with potential “high impact”

risks first. A RISK assessment

questionnaire is available for download

free at

www.retirementrecess.com/retire-

ready-resouce-center.

23

After completing the RISK assessment

previously assigned, create a RISK

mitigation plan of actions. A worksheet

is provided at the end of the RISK profile

assessment e-book available at

www.retirementrecess.com.

Hiring a Financial Adviser—or Not

Self-assess your abilities to be your own

financial adviser: strong/average/weak.

Three Ts In the past Currently 10 years from now 20 years from now

Time

(Focus)

Training

(Education)

Temperament

(Discipline)

24

If you rated yourself average or weak in any of the three “T”

categories, your next assignment is to locate a lifetime financial

adviser who scores “strong” in each “T” area.

Locating, Vetting, interviewing, and Hiring a

Lifetime Financial Adviser

Go to www.retirementrecess.com/retire-

ready-resource-center

and download the e-book Seven C

Financial Adviser Assessment.

25

Financial Inventory Exercise

The financial exercises that follow are traditionally requested by

financial advisers assisting you with your retirement financial

planning.

Because the information you complete is critically important to

financial-scenario (outcome) planning, accurate and complete

data is a must. I have provided worksheets for your convenience.

Financial Inventory

Assets /Liabilities/Income/Expenset Inventory

List current assets(savings, investments,

real estate) and debts or encumbrances

(credit cards, loans, mortgages). Obtain

estimates of retirement income sources

(Social Security, pensions, rents/royalties,

employment, and other income

sources). List any potential financial windfalls such as an

inheritance or the sale of a business interest or home, and also list

any liabilities you are anticipating in the future and during your

expected retirement years.

26

Confidential

Financial Data

Participant 1 Full Name: _________________Age: ____Relationship: _____

Participant 2 Full Name: _________________Age: ____Relationship: _____

27

Financial Assets

Cash Reserve

Accounts

Goal Participant

1

Participant

2

Joint Monthly

Additions

Checking

Savings

Savings

Other cash

account

Other cash

account

Totals

Taxable

Investment (Nonretirement

Accounts)

Goal Participant

1

Participant

2

Joint Monthly

Additions

Govt & Corp

Bonds

Individual

Stocks

Mutual Funds

Exchange

Traded Funds

Managed

Account

Other

Taxable

Totals

28

Tax-

Deferred/Tax-

Free Assets

Goal Participant

1

Participant

2

Joint Monthly

Additions

US Govt.

Savings Bonds

Municipal

Bonds

IRA

Retire

Roth IRA

Retire

Employer

Plan (401(k))

Retire

Employer

Plan (401(k))

Retire

Tax-Deferred

Annuities

Retire

Health

Savings

(HSA)

Retire

Deferred

Comp

Retire

Stock Options

Tax-Deferred

Annuities

Reverse

Mortgage

Retire

Other

Other

Totals

29

Real Estate and Nonfinancial Assets

Real Estate/

Other

Nonfinancial

Assets

Goal Participant

1

Participant

2

Joint Monthly

Additions

Autos

Other

Vehicles

Primary

Residence

Personal

Property

Second

Residence

Rental

Property

Business

Ownership

Other Asset

Other Asset

Totals

Comments:

30

Liabilities Current Balances

Liabilities Monthly

Payment

Participant

1

Participant

2

Joint Paid-in-

Full Date

Credit Card

Total

Vehicle Loans

Primary

Residence

Mortgage

Second

Residence

Mortgage

Rental

Property

Mortgage

Business

Ownership

Loans Owed

Retirement

Plan Loan

Student

Loan(s)

Other Debt

Other Debt

Total

Liabilities

31

Summary of Assets and Liabilities

Asset Category Participant

1

Participant

2

Joint Monthly

Additions

Cash Reserve

Accts

Taxable Accounts

Tax-Free/Tax-

Deferred Accts

Real Estate/Other

Nonfinancial

Total Assets

Liabilities

Net Worth Total Assets – Total

Liabilities

Financial Documents Checklist

The following is a list of common financial documents that should be

gathered to complete your retirement-planning activities:

Bank statements for all accts

Investment statements

Retirement accounts—

IRA/401(k)

List of all debts

Employer benefit summary

Pension plan

Social Security statements

Life/disability/long-term-care

insurance polices

Income tax return Med Insurance coverages

Will/power of attorney/medical directives

Trust

32

Monthly Retirement-Living-Expense Report

A critical part of your retirement financial

plan is identifying your actual or anticipated

cost-of-living expenses as accurately as

possible.

List all expenses in today’s values. Use

checking account and credit card

statements as resources, and list expenses

as “essential,” meaning “must have,” and

“nonessential,” meaning “could live without.”

A category may have a combination of

essential and nonessential expense amounts.

Complete only the categories where you

have actual or anticipated expenses.

33

Monthly

Household

Living Expense

Essential

Expense

Nonessential

Expense

Expense

End Date

Comment

Groceries

Personal Care

Home Supplies

Clothing

Dry Cleaning

Gifts

Housekeeping

Pet(s)

Charity

Hobbies

Self-Improvement

Subscriptions

Furnishings

Professional Care

Child/Adult Care

Other

Other

Total Household Living

Expenses

34

Notes and comments about household living expenses:

Monthly

Housing

Expenses

Essential

Expense

Nonessential

Expense

Date

Expense

Ends

Comment

Mortgage Rent

2nd Mortgage

2nd Home Mortgage

HOA Fees

Gas/Electric

Water

Trash Removal

Telephone/Cell

Cable

Internet

Home Services

Home Maint

Improvements

Property Taxes

Property Ins

Other:

Total Housing

Expenses

35

Monthly

Transportation

Essential

Expense

Nonessential

Expense

Date

Expense

Ends

Comment

Auto Pmt

Auto Pmt

Auto Pmt

Fuel Costs

Auto Upkeep

Registration Tax

Insurance Costs

Boat/Camper

Other

Other

Total Transport

Expenses

On average, how often do you replace a primary vehicle?

Notes and comments about transportation expenses:

36

Monthly

Medical

Care

Essential

Expense

Nonessential

Expense

Date

Expense

Ends

Comment

Health Ins Prem

Deductibles

Out-of-Pocket

Other Cost

Medicare Prem

Medicare Supp

Disability Ins

Group Life Ins

Private Life Ins

Dental Ins

Dental Expense

Vision Ins

Vision Expense

Long Term Care

Assisted Living

Home Health

Health Club

Other

Other

Total Medical

Care

37

Monthly

Entertainment

Essential

Expense

Nonessential

Expense

Date

Expense

Ends

Comment

Meals Out

Movies/Theater

Day Trips

Events

Ticket Expense

Recreation

Other

Other

Total

Entertainment

Notes and comments about entertainment:

38

Travel and

Vacations

Essential

Expense

Nonessential

Expense

Date

Expense

Ends

Comment

Airfare

Hotel/ Lodging

Meals

Entertainment

Tour Expense

Other

Other

Other

Total Travel

and Vacations

Notes and comments about travel and vacation expenses:

How many trips do/will you enjoy each year? ______________

39

Monthly Taxes* Current

Year

Previous

Year

Comment

Fed Income Tax

FICA

State Income tax

Local

Other

Total Taxes

. * Source: federal and state income tax returns

Do you have any extraordinary income tax expense items in the future?

If “yes,” explain:

Notes and comments about tax expenses:

40

Summary—All Estimated Monthly Expenses Reported in Today’s

Dollars

Total Household Expense

Total Transportation

Total Medical Care

Total Entertainment

Total Travel & Vacations

Total Taxes

Total Expenses

Questions you have about any expense category:

Expense

Category

Essential

Expenses

Nonessential

Expenses

Total Expenses

Total Housing Expenses

41

Expected Retirement-Income-Sources

Exercise

Instructions:

1. Review each retirement income source listed below and

identify income tax type when distributed:

(T)Taxable—Ordinary Income Tax

(TP)Tax-Preferenced—Capital Gains Tax

(TF)Tax-Free

2. Analyze timing of income sources and consider income tax

optimization (accelerating and/or deferring income to

balance income tax liability each year).

42

Expected Retirement-Income-Sources Exercise

Income

Source

Tax Participant

1

Monthly $

Participant 1

Age Income

Begins/Ends

Participant

2

Monthly $

Participant 2

Age Income

Begins/Ends

Retirement

Employment

T

Business

Income

T

Rents/

Royalties

T

Other Wages

T

Social Security

Vested

Pension

T

Other Ret

Income

Annuities

T*

Qualified IRA

and 401(k)

T

Tax-Free Roth

IRA

TF

Taxable

Retirement

Savings

T

Reverse

Mortgage

TF

Other Income

Total Income

Sources

* If annuity is annuitized (Income payments for life requested), distributions may include a return of

principal which is tax free.

43

Prioritizing a Retirement Lifestyle Funding Strategy

(Preretirement)

The priority of retirement contributions you choose

during the retirement-asset-accumulation phase of

your planning is important for several reasons:

If you contribute solely to tax-deferred retirement

investments such as 401(k) and IRA accounts, as

many do, you may end up with a large income tax surprise as you distribute

these taxable funds during your retirement years to supplement other

income sources. Generating high levels of taxable income from tax-

deferred account distributions raises marginal tax costs and can trigger

other taxes such as the Medicare premium surcharge tax. Total income

during retirement also determines the percentage of Social Security

income that is included as taxable income.

Additionally, because qualified tax-deferred investments (401(k), IRA) also

have mandatory distribution requirements once the account owner

reaches age seventy and a half, large balances in these accounts can

force large taxable distributions. This is not to say that you shouldn’t fund

your qualified retirement accounts, but rather that you should be smart

about considering the benefits and costs, including taxes, for both the

accumulating and deaccumulating phases of your retirement planning.

Conversely, if taxable accumulation and bank accounts are the primary or

only source of retirement income supplementation, paying taxes along the

way rather than deferring taxes until later, when tax brackets may be lower,

can create a drag on accumulated account values and affect future

income distributions. Important income tax deductions and possible

employer matching contributions offered through employer-sponsored,

tax-deferred retirement accounts may also be missed.

44

Rather than investing too much in tax-deferred or taxable investments and

trying to minimize the resulting income tax issues in or near retirement, a

better approach is to create a plan to balance the benefits of tax-free, tax-

deferred, and taxable income by prioritizing contributions during the

accumulation phase of your retirement-planning life. Debt reduction

should also be prioritized with the ideal goal of having all debts eliminated

prior to or early in the retirement-income phase of your retirement cash flow

plan.

Based on goals and personal circumstances, priority can be given to how

you deploy that part of your working income reserved for your future

nonworking lifestyle. The ultimate goal is to accomplish the following:

• Maximize tax deductibility of working income—pay less tax

• Balance retirement account sources (taxable, tax-deferred, tax-free)

to optimize retirement distribution strategies later on as income is

distributed

• Meet estate planning goals for the future

• Create ample liquidity and flexibility for future unknowns

This exercise is often difficult to complete without the aid of an experienced

financial adviser who specializes in comprehensive retirement planning.

There is very little information available to the public about the topic of

prioritizing retirement source funding and debt reduction other than

general rules of thumb. A one-size-fits-all or rule-of-thumb general

recommendation on how to prioritize funding retirement sources and pay

down debt may not be appropriate for you and your situation. This is an

area of financial planning where professional, personalized assistance can

prove invaluable in providing the best long-term results.

45

Prioritizing the Order of Retirement

Income Distributions During

Retirement

Your retirement distribution order of liquidation will depend on several

factors:

The percentage allocation of available retirement financial

resources already invested in taxable, tax-deferred qualified

(retirement plans), tax-deferred nonqualified, and tax-free

accounts.

Your sources of noninvestment retirement income, including

when they begin and end: employment, Social Security, pension,

business, and rental.

Current investment percentages allocated in growth, income,

and cash objectives.

Your effective and marginal income tax rates based on current

and future income goals and current and future income tax

deductions and credits.

Your estate planning goals and charity bequests.

Your desire to match lifetime guaranteed income sources to

essential expenses.

46

Priority

1-2-3

Retirement Planning

Account Category

Current

Balance

Current

Distribution/

Payment

Goal

Distribution/

Payment

Comments

Cash Reserves—Emergency

Funds

Cash Reserves—Retirement

Income Supplement Fund

Cash Reserves—Other Short-

Term Goal

Credit Card—Accelerated

Payoff

Auto Loan—Accelerated

Payoff

Home Mortgage—Primary

Home Mortgage—Second,

Accelerated

Payoff

401(k) Loan, Accelerated

Payoff

Employer-Sponsored

Retirement Plan (401(k))

Deductible IRA

Nondeductible IRA

Roth IRA

Taxable IRA Conversion to

Tax-Free Roth

Taxable Retirement Account

Includes Stock Options

Tax-Deferred Retirement

Account

(Annuity—Deferred Comp)

Health Savings Account

(HSA)

Reverse Mortgage Line of

Credit

Other Retirement Account

Copyright © 2016

RetirED,LLC

47

Common Assumptions Used in Financial Planning for Retirement

Circle or highlight the financial planning

assumptions you are or will be using in your

retirement financial plan projections.

Financial Planning Assumptions

Conservative Moderate Aggressive

Mortality Age Note: Assuming younger mortality ages

is considered more aggressive due to

heightened risk of underestimating your

actual mortality date, resulting in not having

enough money to fund the years beyond

your estimate.

95 or higher 85-95 85 or lower

Annual Inflation Percentage - Living Expenses

Annual Inflation Percentage - Medical

5% or higher

7–8%

3–4%

5–6%

2% or lower

3–4%

Investment Performance: (*)

Five-Year Average

Growth (Stocks) 5% or lower 6–7% 8% or

higher

Income (Bonds) 2% or lower 3–4% 5% or

higher

Cash (Money Market, Savings,

High Yield Savings )

1% or lower 1-2% 3% or

higher

Systematic Investment Withdrawal % 3% or lower 4% 5% or

higher

Tax Expense: Fed and State 30% or

higher 25%

20% or

lower

48

Life Insurance Needs-Assessment Worksheet “How much and what kind of life insurance do I really need?”

If joint, each participant completes a separate assessment worksheet

Participant Name:

Age

this

year:

Health: Excellent Good Poor

Smoker: Y N

Immediate Cash Expenses: Estimated

Amount

Comments:

Final Expenses (Uninsured Medical, Funeral, Probate, Misc.)

(Est. $5,000)

Final Year Federal and State Income Tax Estimate Reserve

Federal and State Estate Tax Estimate Reserve (Estates over

$10 million)

Other Immediate Cash Needs:

Total Immediate Cash Expenses

Debt Payoff: Credit Card(s)

Auto Loan(s)

Home Mortgage

Second Mortgage

Reverse Mortgage

Other Loans/Debts

Other Loans/Debts

Total Debt Payoff:

Lump Sum Bequests: Children/Grandchildren College Funding

Donations/Charity/Gifts

Buy/Sell Business

Other Bequests:

Other Bequests:

Total Lump Sum Bequests:

49

(1) Survivor(s) net monthly income need = In today’s dollars, adjusted gross household monthly expenses less

survivor income sources: continued survivor income, survivor Social Security benefits, survivor pension benefit,

inherited retirement/nonretirement assets, and other income-continuation sources.

(2) Determine how long you wish to have income replacement continue. Examples: For a certain period of

time. Until spouse receives survivor Social Security income. Until younger child is 18–21.

(3) Present value estimate calculation includes assumed values for annual investment return: (Assume %:_____)

and annual inflation amount: (Assume %:____). Assumed values are estimates for planning purposes and are

not guaranteed. Your actual results over time will vary from these estimates due to several variables.

Life-Insurance-Needs Exercise

Survivor(s) Income Needs

Decedent’s

Monthly

Gross Income

Before Death:

Survivor’s

Monthly Net

Amount

Needed

(1)

For How

Long? (2)

Lump Sum

Estimated

Amount (3)

Comments:

Example:

$8,000

$ 4,000

10 years

$ 480,000

Lump sum based on assumed annual

return of 3%. Annual inflation = 3%.

50

(1) Insurance Policy Type: TI = Term/Individual TG = Term/Group CVI = Cash Value/Individual CVG =

Cash Value/Group

(2) Ownership: P = Participant B = Beneficiary JT = Joint O = Other:_____________________________________

Life-Insurance-Needs Exercise

Existing Life Insurance Coverage Review (Participant Is Insured)

Insurance Company

Name

Type

(1)

Owner

(2)

Face

Amount

At Death

Term

Period

Date

of

Issue

Annual

Prem

Amt

Primary

Beneficiary

Contingent

Beneficiary

51

Life-Insurance-Needs Exercise

Survivor Asset Inventory

Asset Name Estimated

Value

Owner

(1)

Beneficiary Income

Producing?

Bank Account(s)

Taxable Investment Account(s)

Tax-Free Investment Account(s)

Tax-Deferred Nonqualified Investment(s)

(Annuity)

IRA(s) Traditional

P

IRA(s) Roth

P

Employer Qualified Retirement Plan(s)

P

Real Estate Primary Residence

Real Estate Other:

Business Interest(s)

Other Asset(s)

Other Asset(s)

Total Existing Assets

52

Medicare and Medicare Supplement Insurance

Go To:

www.retirementrecess.com/retire-ready-

resource-center

Review Medicare Essentials

If you are within six months of your sixty-fifth birthday and plan to use

Medicare, it is important to review the rules regarding your Medicare

eligibility and specific declines to avoid penalties and gaps in

coverage.

53

Long-Term-Care Costs

Create a financial plan to protect your

retirement income sources from uninsured

catastrophic medical expenses.

Go to: www.retirementrecess.com/retire-ready-resource-center

Review current expenses for long-term-care / home-health

care expenses.

54

Estate Document/Asset Location

In the event that you passed away without explaining where your important

documents and accounts were located, your survivor(s) would have the

added burden of locating these important financial items. Completing an

inventory and identifying the location of your estate records would greatly

reduce the stress created by searching for these important records on your

behalf.

Estate Document Locator Worksheet

Complete the estate document locator

worksheet. Important: Safeguard this and all

personal identification information and

confidential data from theft.

55

Confidential

Asset Document Locator Worksheet

Full Legal Name:

Date of Birth:

Social Security Number:

Institution/

Document

Source

Institution/

Document

Name

Account—

Password—

Policy

Number

Contact

Name

Contact #:

Document

Location

(Use Code

Listed

Below)

Bank/Credit Union

Safe Deposit Box

Will Document

Power of Attorney

Medical Directive

Bank/Credit Union

Account

Bank/Credit Union

Account

Investment Firm

Investment Firm

56

Institution/

Document

Source

Institution/

Document

Name

Account—

Password—

Policy

Number

Contact

Name

Contact #:

Document

Location

(Use Code

Listed

Below)

Employer Benefits:

Health Care Ins

Pension

Retirement Savings

Life Insurance

Stock Options

Deferred Comp

Vaca/Sick Leave

Life Insurance

Life Insurance

Credit Card*

Credit Card*

Credit Card*

Primary Mortgage

Residence Deed

2nd Mortgage

Reverse Mortgage

57

Institution/

Document

Source

Institution/

Document

Name

Account—

Password—

Policy

Number

Contact

Name

Contact #:

Document

Location

(Use Code

listed

below)

Other Mortgage

Auto Loan*

Auto Loan*

Auto Loan*

Other Loans*

Income Tax

Returns

Vehicle Title

Vehicle Title

Vehicle Title

Vehicle Title

Email Address:

User Name:

Email Address:

User Name:

Other:

Other:

Other:

Other:

58

Document Locator Code:

*Check for credit life insurance with each credit card and loan company.

Notes and comment about asset document location:

Location

Location

Code

Comment

House

Where:

A

Office:

Where:

B

Bank Name:

Safe Deposit Box #:

C

Computer:

User Name:

Password:

D

Cell phone:

Password:

E

Attorney:

Contact #

F

CPA/Tax Preparer:

Contact #:

G

Location:

H

Location:

I

Location:

J

Location:

K

Nonapplicable—I do not own X

59

Asset Beneficiary Review

Estate—Things to Do:

✓ Complete Estate-Beneficiary Exercise. Review your beneficiary

designations annually.

✓ Complete an asset location exercise. Update periodically.

✓ Create a written will, power of attorney (POA), advance medical

directive (AMD), also known as a medical power of attorney, and

living trust, if appropriate.

✓ Talk to your children/heirs, if applicable, about your legacy wishes.

✓ For estate and legal questions, consult an attorney familiar with

estate laws in your state of domicile.

60

Asset Beneficiary Review Name____________________

Asset (1)

Ow

ner (2

)

Prim

ary B

eneficiary (3)

Percen

tage

Relatio

n

to O

wn

er

Meth

od

of

Transfer

(4)

Co

ntin

gent

Ben

eficiary (5)

Percen

tage

Relatio

n to

O

wn

er

Meth

od

of

Transfer (4

)

EXAMPLE

IRA Tom

Barb

100

Spouse

Direct

Estate

100

Estate

Will

61

Instructions: Complete each column

(1) Assets you own

(2) Owner name and legal registration of each asset:

Individual (Ind.)/Joint Tenants (JT) /Joint Tenants with rights of survivorship (JTROS)/

Tenants in common (TC)/Trust (T) /Uniform transfer to minors (UTMA)/Other: Explain

(3) Primary Beneficiary/Percentage of distribution/Relationship to owner

(4) Method of asset transfer upon death of owner:

Direct Beneficiary Designation

Transfer on Death/Payable on Death (TOD /POD)

Assets Registration

Valid Will

Trust

Intestate—no valid written will

If a direct beneficiary is not named or the asset does not pass by registration such as joint tenants with rights of survivorship and a valid will is not available, the decedent’s estate is intestate and will pass by probate court order. Check your state of domicile for specific details.

(5) Contingent Beneficiary/Percentage of distribution/Relationship to owner

The contingency arises when the primary beneficiary predeceases the owner or for

some other reason cannot inherit the estate of the deceased.

Notes:

Disclaimer: This exercise is not intended to provide or represent legal advice. Estate laws can be complex, and

they vary depending on many factors. Participants are encouraged to seek out competent legal advice from an

attorney familiar with their personal situation and knowledgeable on estate issues for a specific state of

residence.

62

Solution

(3)

(4) (2)

Start (1)

Connect all dots with four lines without lifting the marker tip from the paper