What\'s the sign of a good retirement decision?

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Whether you are planning for retirement or planning in retirement it makes sense to know what you have and what you don\'t.

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What\'s the sign of a good retirement decision?

  1. 1. What’s the sign of a good retirement decision? RI-02028-00 INC5001 510
  2. 2. 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
  3. 3. It all starts with building a sound retirement plan.
  4. 4. 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
  5. 5. Planning step 1 : ENVISION your goals <ul><li>What do you want to do when you retire? </li></ul>
  6. 6. 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 ? ? ? ? ? ?
  7. 7. Planning step 2: ESTIMATE your expenses (cont.) Discretionary expenses: Monthly estimate Entertainment _____________ Travel _____________ Hobbies/Memberships _____________ Charitable Interests _____________ ________ Total Basic Needs & Discretionary Expenses _____________ ? ? ? ? ? ?
  8. 8. 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
  9. 9. 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>
  10. 10. Planning step 4: EARMARK guaranteed income Guaranteed Income $ ________________ Basic Needs $ ________________ Income Gap $ ________________ Earmark
  11. 11. 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.
  12. 12. 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
  13. 13. Sign of a good decision about income You stop working … but your paychecks keep coming.
  14. 14. 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
  15. 15. 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*
  16. 16. 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
  17. 17. Income: How much can I withdraw each year? <ul><li>Balance how much you withdraw with how much you earn. </li></ul>Stocks are represented by the Standard & Poor's 500 ® , 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. An investment cannot be made directly in an index. Average inflation: 3.1%. Annual investment expenses were assumed to be 0.97% for stock mutual funds and 0.79% for bond mutual funds. The inputs used by Morningstar are historical 1926–2008 figures. The data assumes reinvestment of income and does not account for taxes or transaction costs. 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. © 2009 Morningstar, Inc. 3/1/2009. All rights reserved. 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. 36% 26% 11% 0% 0% 8% 50% B 50% S 27% 52% 79% 95% 25% B 75% S 42% 60% 79% 92% 48% 5% 0% 7% 100% Stocks 75% B 25% S 100% Bonds 62% 28% 4% 6% 76% 71% 35% 5% 88% 97% 86% 4%
  18. 18. 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.
  19. 19. You feel more confident about the short term … and the long term. Sign of a good decision about liquidity
  20. 20. Liquidity: Can I fund emergencies and not jeopardize my lifestyle? <ul><li>Keep a portion of retirement assets liquid, earmarked for emergencies. </li></ul>
  21. 21. 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
  22. 22. 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
  23. 23. You feel prepared for the future … whatever it brings. Sign of a good decision about health care
  24. 24. 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
  25. 25. 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:
  26. 26. 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>
  27. 27. 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
  28. 28. What you really pass on to your family is peace of mind. Sign of a good decision about legacy
  29. 29. 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>
  30. 30. <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?
  31. 31. <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?
  32. 32. <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?
  33. 33. 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>
  34. 34. Working with those who can help you build your plan — and your confidence. Sign of a good decision about your retirement?
  35. 35. 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>
  36. 36. 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)
  37. 37. 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.
  38. 38. 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.
  39. 39. © 2009 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.

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