What’s the sign of a good retirement decision? Staying up enjoying retirement … not staying up worrying about it.
Your retirement success is driven by a series of good decisions. In planning for retirement, we all face similar questions. But each of our answers will be as unique as we are – based on where we are now and where we want to be later. Reaching those goals will require making a series of good decisions about what’s right for you in these key areas: Income. How will you create income for life? How much of your income should you guarantee? What about inflation? The more efficiently you answer these questions, the fewer resources you’ll need to dedicate to creating income. In turn, that will enable you to keep more of your money available to meet other goals. Liquidity. Will you have access to money as you need it? Over the 20 to 30-plus years your retirement will span, no doubt there will be unexpected challenges – and opportunities – along the way. You’ll need assets readily available to handle the unexpected and still maintain your lifestyle. Health Care. How will you manage medical costs? Thanks to medical advances, people are living longer than ever in history. But the longer we live, the more it may cost to maintain our health or provide for long term care. Plan now to ensure your lifestyle isn’t jeopardized by health care costs. Legacy. What legacy will you leave? For many, the thought of living well includes leaving behind a legacy of financial security. If this is important to you, you’ll also want to explore how to establish a sound estate plan.
It all starts with building a sound retirement plan.
Success of any kind rarely just happens – it’s created by people who take the time to imagine where they want to go and plan how to get there. The same is also true when it comes to creating a sound income plan. A sound plan has to not only address the kind of lifestyle you desire, but it has to be flexible enough to meet your changing needs and must work in both good markets and bad. Consider these five simple steps to establish your own comprehensive income plan. ENVISION the kind of retirement lifestyle you want ESTIMATE how much you’ll need to fund that lifestyle EVALUATE the resources you can tap for income EARMARK guaranteed income to cover your basic needs* ENSURE you’re doing as much as you can now to plan for later Guarantees are based on the claims-paying ability of the issuing company.
Step 1: ENVISION your goals What do you want to do when you retire? What are you looking forward to when you retire? Spending time with your family or hopping the globe? Finally being able to pursue special interests or opening a new business? Never working again or just choosing when and where you want to work? Go ahead. Give yourself permission to envision the lifestyle you really want. It’s the only way you’ll truly be motivated to take the steps necessary to get there.
Step 2: ESTIMATE your expenses Now it’s time to get practical. How much is it going to cost to live the life you want? Keep in mind that some expenses will likely go up in retirement – like health care, insurance and travel. Others may go down, possibly your housing and transportation costs. Of course, it all depends on the lifestyle you choose. But now’s the time to get a good handle on how much you’re likely to need. A good way to start is to estimate the cost of your basic needs, as well as your non-essential lifestyle needs. Basic needs. One way to estimate how much you’ll need for the basics in retirement is to consider how much you spend on the basics now. Take a look at some of the items you may need to estimate in each of these categories. Go through slide.
Discretionary expenses. On to the fun stuff. Imagine that your basic needs are covered. What else is important to you? Estimate what you’d like to have available each month for entertainment, travel, hobbies, or charitable interests. While it’s critical to budget for the basics, you’ll also want to plan for the things that will make your retirement more rewarding.
Step 3: EVALUATE your resources Next question … where is all that money going to come from? As this pie chart illustrates, about half of the income for today’s average retiree comes from Social Security and employer pension plans. The remaining amount comes from personal savings and earnings.
As you inventory your resources, try grouping them into these major categories: • Guaranteed income sources. There are only three sources of income guaranteed to continue for life: Social Security, an employer pension plan (if you’re fortunate enough to have one) and annuities. Annuity guarantees are based on the claims-paying ability of the issuing insurance company. • Part-time/one-time income. Don’t forget about rental income, part-time work or one-time asset sales. • Personal savings and investments. Under this category, is your 401(k) or any other employer-sponsored retirement plans, IRAs, bank savings, mutual funds, and individual securities you plan to use for retirement income.
Step 4: EARMARK guaranteed income for your basic needs Once you’ve itemized and grouped expenses and resources, you’re ready to match them up and identify any gaps. Your first priority? Make sure your basic needs will be covered by earmarking guaranteed income to pay for them. That leaves the income generated by your other savings to cover any basic needs gap, as well as your discretionary expenses. You can then match up any temporary income to fund short term or one-time expenses.
The greater the percentage of income that’s guaranteed, the less stress and more security you may have throughout retirement.
Step 5: ENSURE you’re doing everything you can now to plan for later If you’ve identified gaps you could work longer than you might have planned, or work part-time in retirement. You could also try to live on less. But as long as you have some time before you retire, there are several ways you can build more retirement resources now. 1 Save more as soon as possible. The longer your money has to grow, the more you may have to spend later. But it’s never too late to make a difference. 2 Look for additional tax-deferred savings opportunities. The fastest way to build your resources is to protect any earnings from the drain of annual taxes. So you’ll want to maximize the tax-deferred savings vehicles available to you. Make sure you’re contributing as much as possible to any tax-advantaged, employer-sponsored retirement savings plan available to you, as well as your IRA. Then consider deferred annuities, where your payments can keep compounding tax-deferred until you withdraw them. 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.
Sign of a good decision about income: You stop working. But your paychecks keep coming.
When should you start collecting Social Security? For the foreseeable future, Social Security is still likely to serve as the basis of guaranteed income for many retirees. So, it’s important that you consider how to maximize this lifetime benefit from the government. Many people simply don’t realize that when they take Social Security it affects how much they get – not just at age 62, but for the rest of their life. As the chart shows, you can increase your lifetime benefit by waiting until at least your “full retirement age” to collect. (This age ranges from 65 to 67, depending on the year you were born.) Each year you wait past that age can increase your Social Security checks even more. Let’s review the chart to compare not just the increase in annual benefits, but the build-up of cumulative benefits by age 90. This is an important consideration as you may spend 30 or more years in retirement.
How can you turn other savings into more guaranteed income? There is only one other way you can increase your guaranteed income. You can use a portion of your savings to purchase an annuity – the only financial vehicle you can purchase that can help you actually turn your savings into guaranteed income. Guarantees and lifetime income payments are based on the claims-paying ability of the issuing company. Different types of annuities to consider. There are two basic categories of annuities. Which type may be right for you depends on when you need income: • An income annuity, also known as a Single Premium Immediate Annuity (SPIA) or Fixed Income Annuity, turns a one-time purchase payment into a series of regular income payments. • A deferred annuity is a long-term investment designed for retirement. It allows your assets to accumulate tax-deferred now. Then, when you’re ready to retire, it can turn those assets into regular income payments. With either type of annuity, you can choose whether you want your guaranteed income to continue for a certain period of time or for the rest of your life. You can even choose to have your guaranteed income continue for your spouse if he or she outlives you. Guarantees and lifetime income payments are based on the claims-paying ability of the issuing company. There are fixed deferred annuities and variable deferred annuities. Your choice of fixed or variable annuities. A fixed annuity will guarantee you a fixed interest rate set by the annuity issuer and will generally include a death benefit that will get back at least what you put in (minus withdrawals). . A variable annuity will allow you to choose from underlying investments, including equity-based options which have historically offered the growth potential necessary to outpace inflation. They also typically include a death benefit that guarantees your beneficiaries will get back at least what you put in (minus withdrawals). Some variable annuities also offer guaranteed living benefits which can be added for an additional charge. Guarantees and lifetime payments are based on the claims-paying ability of the issuing company.
What other options do you have for generating income? Once you’ve bridged the gap between your basic needs and your guaranteed income, you can focus your attention on efficiently structuring regular income from your other resources – even though that income won’t be guaranteed. Are your assets saved in bank accounts, invested in retirement plans or tied up in your home equity? Regardless of where those assets are, there are a variety of ways to transform them into income when you retire. Some of the most common withdrawal strategies are highlighted on this slide. Which option, or combination of options, is right for you depends on a number of factors, like your desire for growth, your need for security and your preference for liquidity. Your financial professional can help you evaluate all your options and tailor a strategy that best addresses your objectives. May affect the security of your home; even if the value of your home decreases, the loan amount does not. A reverse mortgage can impact your ability to leave a legacy and reduce your choices during your lifetime. Using the equity in your home as collateral for a line of credit/loan or taking out a reverse mortgage Security of knowing when your income will “come due,” but not much opportunity for growth to outpace inflation. Purchasing a series of bonds with different maturity dates, thus staggering the return of your principal Continued opportunity for growth; access to other assets when needed, but no guarantees your income will last for life. Withdrawing a certain percentage from your account on a regular basis You need a substantial base to generate meaningful interest income and it may not outpace inflation over time. This strategy may not provide the same level of income as other strategies. Taking only the interest generated by bonds and/or the dividends from stocks Considerations Description
How much can I withdraw each year? Whichever withdrawal strategy you employ, you’ll need to temper your withdrawal rates. If you don’t, you risk running out of money long before you’ve run out of bills. Since most retirees don’t have the opportunity to “re-make” what they’ve earned over the years, you’ll need to preserve what you’ve accumulated. That starts with deciding what percentage of your assets you can afford to withdraw each year. Be sure to balance your withdrawal rate with your investment strategy. Invest too conservatively and chances are you won’t have enough growth to outpace even a low withdrawal rate over time. But opt for a balanced investment strategy and a low withdrawal rate, and you may have a much better chance of sustaining income for life. The table shows how the amount of withdrawal and various portfolio allocations can affect the chance of meeting income needs over a 25-year retirement. It is assumed that a person retires at year zero and withdraws an inflation-adjusted percentage of the initial portfolio each year beginning in year 1.
Another way to extend your portfolio’s life span is to strategically decide which resources to withdraw first. Again, your financial professional can tailor your strategy, but in general, you may want to withdraw from your least tax-advantaged resources first: • Taxable investments – like mutual funds; • Tax-deferred plans – like your employer’s retirement savings accounts, IRAs and annuities; • Tax-free sources – like Roth IRAs. This ordering allows you to extend the time your tax advantaged assets can compound – which, in turn, can boost the income they can generate over time. Keep in mind, this is a general rule of thumb. Specific circumstances, such as a tax rate increase or wealth transfer goals that include highly appreciated taxable investments, are just two examples of things that may impact your decision. You should always consult with your tax advisor to help you determine what might be your most tax-efficient withdrawal strategy.
Sign of a good decision about liquidity: You feel more confident about the short term … and the long term.
Liquidity Will you have access to money when you need it? Think back over the last 30 years. Have there been any unexpected twists and turns? Times when you needed extra cash to cover an emergency or seize an opportunity? Now imagine the next 30 years. Chances are retirement, too, will have its share of surprises. While you can’t predict what will happen, you can prepare by having liquid assets readily available in your retirement plan. Here’s the irony: when you plan efficiently for liquidity, you can also invest more effectively for growth. Can you fund emergencies without jeopardizing your lifestyle? First things first. You need to make sure you have ready access to funds just in case you need them. And if you do need to take short term withdrawals, you need to be confident you won’t be jeopardizing your long term financial security. So how do you accomplish that? One way is to keep a small portion of your retirement assets in liquid investments, earmarked for emergency needs. That way you can withdraw your money if needed – without affecting your overall investment strategy.
Are your investments diversified for liquidity and growth? It used to be conventional wisdom that as you neared retirement, you needed to move your money into safe, conservative investments. But now that retirements can span three decades, that’s no longer the “safe” thing to do. If you don’t keep at least some of your assets invested for growth, your income won’t continue to outpace inflation. And if your buying power is weakened, you won’t be able to maintain the lifestyle you want. So here’s the new retirement reality. It’s critical that you continue to diversify your investments. Now’s the perfect time to work with your financial professional to review your allocation strategy and make sure you have a good mix of asset classes. Asset allocation and diversification do not assure a profit and do not protect against a loss in a declining market.
Do you have a diverse mix of products to provide liquidity, growth and guaranteed income? As you move into retirement, it’s not enough to diversify your investment mix. You also need to diversify your product mix. By introducing guaranteed product solutions to your retirement portfolio, you can take some level of risk off the table. These guaranteed products can be used to address specific needs. Annuities can guarantee lifetime income and life insurance can guarantee your legacy wishes, while other insurance products may be used to ensure your health care needs. Guarantees are based on the claims-paying ability of the issuing company. MassMutual has conducted research that shows a mix of guaranteed income and investments may yield the best retirement results by ensuring liquidity, as well as enhancing growth potential. Our research compared various allocation strategies under different market scenarios to see which one most efficiently provided a targeted income while also building liquid assets that could be withdrawn as needed. Our study found a strategy that demonstrated two of the best ways to enhance your income security and your growth potential are to: 1 | gradually add a new asset class, a fixed income annuity, to your retirement income plan; and 2 | gradually increase how much of your other assets are allocated to equities, as the chart above demonstrates. An income annuity immediately generates a stream of regular payments, guaranteed to continue for life. Since this strategy calls for increasing annuity benefits each year, you’ll be guaranteeing more and more of your retirement income as you age, thereby increasing your income security. As your guaranteed income builds, you can also reduce the amount you need to withdraw from your other investments each year. Since you won’t be depending on those investments for income, you may be more confident investing them more aggressively for long term growth potential or using them to purchase guaranteed products to meet other needs.
Sign of a good decision about health care: You’ll feel prepared for the future … whatever it brings.
Assuming Medicare benefits remain at their current levels, a couple will need approximately $300,000 to $650,000 to cover their health care expenses in retirement. No wonder health care costs rank as one of retirees’ biggest financial concerns. But the sooner you plan for this cost, the better you’ll feel about your retirement security.
What will Medicare cover? One way to manage part of the costs of your retirement health care is to effectively utilize Medicare, the federal government’s health insurance plan primarily designed for those over age 65 and over. As long as you’ve entered the United States legally and have been here for at least five years, you’re eligible for Medicare. What’s covered under your Medicare plan depends on which of the Medicare “parts” you have.
Do you need Medigap insurance? Medicare – Part A, Part B or both – doesn’t cover the total cost of most medical services or supplies. Given that those out-of-pocket costs could severely affect your lifestyle, you may want to buy a Medigap insurance policy, offered by a number of health insurers. As its name implies, Medigap insurance policies are literally designed to help bridge the gap between your retiree health care costs and your Medicare benefits. One of the best times to buy a Medigap policy is during the “open enrollment period.” That period is generally within the first six months of turning age 65, although its definition differs by state. If you apply within open enrollment, there is no medical underwriting, which means you can’t be refused a policy, forced to wait for your coverage or even charged more because of any health problems. Although Medigap policies used to cover prescription drugs, no new Medigap policies can cover these costs. You may want to join a Medicare Prescription Drug Plan offered by private companies approved by Medicare.
Long term care expenses are one of the largest unfunded potential liabilities facing today’s retirees and soon-to-be retirees. These types of large expenses could have a significant impact on a retirement portfolio and your ability to create meaningful income for life. Long-term care insurance could potentially be a solution. Please consult an insurance agent who specializes in long-term care insurance for complete details prior to purchasing a policy.
Sign of a good decision about legacy: What you really pass on to your family – peace of mind.
So far we’ve been discussing retirement success in terms of what it means to your income. Now let’s explore what it means to your family. Wouldn’t you like to know that if something happened to you, your family would be taken care of? That they wouldn’t have to worry about making ends meet … or be forced to sell off assets to pay estate taxes … or sacrifice their own long term goals to meet short term expenses? That’s the kind of peace of mind you gain – and pass on – by integrating legacy planning into your retirement strategy. Here are the next series of good decisions that will drive your retirement success. How should you start planning for your legacy? One of the best ways to begin the legacy planning process is to inventory all your assets. Make a list of everything you own, including: • real estate/other types of property; • business interests; • employer-sponsored retirement plans; • bank accounts; • brokerage and mutual fund accounts; • Traditional, Roth and Rollover IRA accounts; and • insurance policies and annuities. Next to each asset, write down account numbers and other pertinent data. Locate any legal papers, like deeds and contracts. Then, place all this information in safekeeping for your heirs, possibly in a safety deposit box.
Do you need a will? Yes you do, and here’s why: A will is a legal document that directs the disposition of assets after your death. Without a will, you would be leaving all decisions concerning your assets to the discretion of the laws of the state having jurisdiction over your estate. This can be both emotionally and physically draining for your heirs.
Are your beneficiary designations updated? Not all assets are distributed by a Will. Whatever your Will says, certain types of assets are passed on to the beneficiary listed on the account, like employer-sponsored retirement plans, annuities and life insurance. So it’s critical to keep your beneficiary designations current. Imagine your youngest child not inheriting any of your 401(k) savings simply because you never added them as a beneficiary. Take the time now to check your designations and adjust as needed.
Do you have enough life insurance? Life insurance is one key asset that passes directly to your beneficiaries income tax-free, without the costly delays of probate. It insures your family has immediate access to cash when they need it most, so they’re not forced to liquidate other resources quickly to meet expenses, pay estate taxes or fund longer term goals. Planning for retirement is also an opportune time to review your insurance policies. Do you have enough financial protection? The right type of coverage? The right beneficiaries named? Your financial professional can help review your family’s financial obligations and make sure they are properly covered by life insurance.
Should you consider trusts? Trusts are not just for the wealthy. They can be extremely useful to anyone who wants to put conditions on how and when their assets will be distributed after their death. Trusts can also help you reduce your estate taxes and transfer assets outside of the public glare and delay of probate court. Some even provide greater protection of your assets from creditors and lawsuits. Now’s the time to consult with your legal and financial professionals to see whether trusts can help you accomplish your specific goals. How can you give more efficiently to the charities that mean the most to you? Another way to maximize what’s passed on in benefits while minimizing what’s paid out in taxes is to integrate charitable giving into your legacy planning. There are many gifting strategies to address different types of charitable goals. Ask your legal and financial professionals for more details on the most income tax-efficient and estate-planning friendly ways to gift or donate assets.
What’s the sign of a good retirement decision? Working with those who can help build your plan — and your confidence.
Some of the things we’ve discussed today can seem complicated, but with some guidance you too can make good decisions that meet your needs. Please feel free to set up an appointment today so we can discuss your situation. From there, I can help you tailor a plan that meets your objectives including: Income, liquidity, health care and legacy.
MassMutual is a good decision because when it’s time to execute your plan, you’ll need to choose solutions from a company with the financial strength to be there when you need them. Here are three reasons you can feel confident about choosing MassMutual. 1 | Long history of financial strength. As evidenced by our independent ratings, MassMutual is highly regarded for its financial strength. Our disciplined investment approach has kept us strongly positioned even in the most uncertain economic times. 2 | Ability to put customers first. Because MassMutual is a mutual insurance company, it is owned by its policyholders, not stockholders. That enables us to stay focused on the long term interests of our customers, not the potential short term interests of shareholders. 3 | Broad array of solutions. MassMutual offers a broad range of products to meet all your financial needs, including investment and retirement products that can provide guaranteed income for life. Whatever solutions are right for you, we look forward to working with you and your financial professional to help you make the good decisions that retirement success requires.
What\'s the sign of a good retirement decision?
What’s the sign of a good retirement decision? RI-02028-00 INC5001 510
Retirement success is driven by a series of good decisions … The foundation of all these good decisions? A good plan. LIQUIDITY 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? How will you create income for life? INCOME
It all starts with building a sound retirement plan.
5 steps for establishing your Plan * Guarantees are based on the claims-paying ability of the issuing company. 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
Planning step 1 : ENVISION your goals <ul><li>What do you want to do when you retire? </li></ul>
Planning step 2: ESTIMATE your expenses Just a few key categories to consider: Food _____________ Housing _____________ Transportation _____________ Health Care _____________ Insurance Premiums _____________ Personal Care _____________ Basic needs: Monthly estimate ? ? ? ? ? ?
Planning step 3: EVALUATE your resources <ul><li>Where will your retirement income come from? </li></ul><ul><li> </li></ul>Personal Savings: 40% Pension: 21% Social Security: 39% Social Security Bulletin, Vol. 68, No. 2, 2008 – composition of total retirement income – retired beneficiaries ages 64-66 in 2005. Guaranteed Income Sources
Planning step 3: EVALUATE your resources (cont.) <ul><li>Group income sources: </li></ul><ul><li>Annuity Guarantees are based on the claims-paying ability </li></ul><ul><li>of the issuing insurance company. </li></ul><ul><li>Guaranteed income sources: </li></ul><ul><li>social security </li></ul><ul><li>pension plans </li></ul><ul><li>annuities* </li></ul><ul><li>Part-time income: </li></ul><ul><li>rental income </li></ul><ul><li>part-time work </li></ul><ul><li>or one-time sales </li></ul><ul><li>Personal savings and investments: </li></ul><ul><li>401(k) plans </li></ul><ul><li>IRAs </li></ul><ul><li>bank savings, </li></ul><ul><li>mutual funds </li></ul><ul><li>individual securities </li></ul>
Planning step 4: EARMARK guaranteed income Guaranteed Income $ ________________ Basic Needs $ ________________ Income Gap $ ________________ Earmark
Planning step 4: EARMARK guaranteed income (cont.) <ul><li>Keep in mind: </li></ul><ul><ul><li>The more income you can guarantee* … </li></ul></ul>the less stress and more security, you may have in retirement. *Annuity Guarantees are based on the claims-paying ability of the issuing insurance company.
Planning step 5: ENSURE you’re taking action <ul><li>Two ways: </li></ul><ul><ul><li>1 | Save more as soon as possible. </li></ul></ul><ul><ul><li>2 | Look for additional tax-deferred opportunities. * </li></ul></ul>Saving More May Help Additional investment each year: $5,000 Hypothetical annual earnings: 7% 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. after 10 yrs $74,000 after 15 yrs $135,000
Sign of a good decision about income You stop working … but your paychecks keep coming.
Income: When should I start collecting Social Security? <ul><li>Collecting Social Security earlier can affect benefits each year — and over time. </li></ul>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 - $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
Income: How can I turn other savings into guaranteed income? <ul><li>Use a portion of savings to purchase an annuity. </li></ul>Fixed Income Annuity Accumulation Income Income Fixed Or Variable 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. Variable annuities do not provide any additional tax advantage when used to fund a qualified plan. Investors should consider buying a variable 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 Income Turns a one-time purchase payment into a series of income payments Deferred Allows assets to grow tax-deferred before retirement; turns those assets into income payments at retirement*
Income: What other options do I have for generating income? <ul><li>Non-guaranteed income-generating options: </li></ul>Withdrawing interest/dividends Laddering fixed-income securities Taking systematic withdrawals Tapping into your home equity
Income: Which resources should you withdraw from first? <ul><li>Strategic withdrawal decisions may extend your portfolio’s life span. </li></ul><ul><ul><li>Taxable investments – like mutual funds </li></ul></ul><ul><ul><li>Tax-deferred plans – like IRAs * </li></ul></ul><ul><ul><li>Tax-free sources – like Roth IRAs </li></ul></ul>*Taxable withdrawals are subject to income tax and, if made prior to age 59½, may be subject to a 10% federal income tax penalty. Variable annuities do not provide any additional tax advantage when used to fund a qualified plan. Investors should consider buying a variable annuity to fund a qualified plan for the annuity’s additional features, such as lifetime income payments and death benefit protection.
You feel more confident about the short term … and the long term. Sign of a good decision about liquidity
Liquidity: Can I fund emergencies and not jeopardize my lifestyle? <ul><li>Keep a portion of retirement assets liquid, earmarked for emergencies. </li></ul>
Liquidity: Enhancing Liquidity and Growth <ul><li>Used to be: </li></ul><ul><li>Conventional wisdom was to move into conservative investments as you neared retirement. </li></ul>But now: People spend 20-30 years in retirement, and need some growth to outpace inflation! Asset allocation and diversification do not assure a profit and do not protect against a loss in a declining market. Bonds Stocks
Liquidity: Do I have a diverse mix of products? <ul><li>The OLD view of retirement allocation </li></ul>The NEW view of retirement allocation Dividing investments among a conservative mix of stocks and bonds Regularly buying fixed income annuities to guarantee more income as you age, leaving you free to invest remaining assets more aggressively for growth potential Asset allocation and diversification do not assure a profit and do not protect against a loss in a declining market. The investment return and principal value of an investment will fluctuate with market conditions. Accumulation Units, when redeemed, may be worth more or less than their original cost. Guarantees are based on the claims-paying ability of the issuing company Historical study of retirement Income Account allocations Among Equities, Bonds and Fixed Income Annuities, January 1, 1980 through December 31, 2006, Released November 2007, MassMutual Financial Group. Performance from 2007 – 2009 are not reflected in the study. Bonds Stocks Guaranteed Solutions
You feel prepared for the future … whatever it brings. Sign of a good decision about health care
Health Care: How will you manage medical costs? <ul><li>A couple will need approximately $300,000 to $650,000 to cover health care costs in retirement. </li></ul>“ Savings Needed to Fund Health Insurance and Health Care Expenses in Retirement.” EBRI Issue Brief No. 317, May 2008 $300,000 $650,000
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 Generally available for a relatively low monthly premium (under $100 a month in 2009) Medicare Part A Medicare Part B <ul><li>Inpatient medical care (NOT custodial or long term care) in a hospital, skilled nursing facility or hospice </li></ul><ul><li>Home health care (in certain conditions) </li></ul><ul><li>Medically necessary doctor’s services and other outpatient care </li></ul><ul><li>Limited preventative services, like flu shots </li></ul>Medicare option: What it may cover: How much it may cost:
Health Care: Do I need Medigap insurance? <ul><li>Medigap </li></ul><ul><ul><li>bridges the gap between retiree health care costs and Medicare benefits </li></ul></ul><ul><ul><li>best to apply during “open enrollment” </li></ul></ul><ul><ul><li>new policies don’t cover prescriptions </li></ul></ul>
Health Care: What about long term care? <ul><li>Long term care typically isn’t covered by traditional health insurance plans. </li></ul>1 Council of Economic Advisors. (February 17 th , 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 from of long term care before they die. 1
What you really pass on to your family is peace of mind. Sign of a good decision about legacy
Legacy: How should I start planning for my legacy? <ul><li>Take inventory of what you own: </li></ul><ul><ul><li>Real estate/other types of property </li></ul></ul><ul><ul><li>Business interests </li></ul></ul><ul><ul><li>Employer-sponsored retirement plans </li></ul></ul><ul><ul><li>Brokerage accounts </li></ul></ul><ul><ul><li>Mutual funds </li></ul></ul><ul><ul><li>Bank accounts </li></ul></ul><ul><ul><li>Traditional, Roth and Rollover IRAs </li></ul></ul><ul><ul><li>Insurance policies and annuities </li></ul></ul>
<ul><li>Will – legal document – directs disposition of your assets after your death </li></ul><ul><li>If no will, decisions concerning your assets are at the discretion of the laws of the state having jurisdiction. </li></ul>Legacy: Do you need a Will?
<ul><li>Not all assets pass by Will; some by beneficiary designation </li></ul><ul><li>Need to keep beneficiaries updated on those types of accounts, e.g.: </li></ul><ul><ul><li>Employers’ savings plans </li></ul></ul><ul><ul><li>Annuities </li></ul></ul><ul><ul><li>Life insurance </li></ul></ul>Legacy: Are my beneficiaries updated?
<ul><li>Passes directly to your beneficiaries income tax free, without the costly delays of probate </li></ul><ul><li>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 </li></ul>Legacy: Do I have enough life insurance?
Legacy: What else should I consider? <ul><li>Trusts </li></ul><ul><ul><li>Not just for the wealthy </li></ul></ul><ul><ul><li>Can help control how and when assets are distributed </li></ul></ul><ul><ul><li>Can also help reduce estate taxes </li></ul></ul><ul><li>Charitable Giving </li></ul><ul><ul><li>Factor into your legacy planning </li></ul></ul><ul><ul><li>Strategies for minimizing taxes so you can maximize contributions </li></ul></ul>
Working with those who can help you build your plan — and your confidence. Sign of a good decision about your retirement?
Next steps <ul><li>Set up an appointment today! </li></ul><ul><li>I can help you develop a strategy that addresses: </li></ul><ul><ul><ul><li>Income </li></ul></ul></ul><ul><ul><ul><li>Liquidity </li></ul></ul></ul><ul><ul><ul><li>Health Care </li></ul></ul></ul><ul><ul><ul><li>Legacy </li></ul></ul></ul>
Why is MassMutual a good decision? <ul><li>1 | Long history of financial strength. </li></ul><ul><li>2 | Ability to put customers first. </li></ul><ul><li>3 | Broad array of solutions. </li></ul>Financial strength ratings are for Massachusetts Mutual Life Insurance Company and its subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company, as of November 2, 2009 (ratings are subject to change). Consistent financial strength ratings Rating Agency Rating A.M. Best A++ Superior (top category of 15) Fitch Ratings AA+ Very strong (second category of 21) Moody’s Aa2 Excellent Investors Service (third category of 21) Standard & Poor’s AA+ Very strong (second category of 21)
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.
Principal Underwriters: MML Investors Services, Inc. MML Distributors, LLC Subsidiaries of: Massachusetts Mutual Life Insurance Company 1295 State Street Springfield, MA 01111-0001 The information contained in this communication is not written or intended as tax or legal advice. Neither MassMutual nor any of its employees or representatives is authorized to give tax or legal advice. The information provided herein may not be relied on for purposes of avoiding any federal tax penalties. Individuals are encouraged to seek tax or legal advice from an independent professional advisor. Annuity products are issued by Massachusetts Mutual Life Insurance Company and C.M. Life Insurance Company. C.M. Life Insurance Company, 100 Bright Meadow Boulevard, Enfield CT 06082 is non-admitted in New York and is a subsidiary of Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001.