Retirement Planning and Income Protection

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Retirement Planning and Income Protection

Building and implementing your retirement plan

Contents

Designing your plan for retirement

02 Retirement is different today 03 Improper asset allocation 04 The impact of inflation 05 Market volatility 07 Rising health care costs 08 Outliving your savings

Saving for retirement

10 Begin saving for retirement early 11 Personal and workplace investments 12 Income protection and saving

for retirement

Transitioning to retirement

14 Essential and discretionary expense coverage

15 Diverse sources of income 16 Guaranteed sources of income

Living in retirement

18 Social Security benefits 19 Required minimum distributions 20 Income protection and living

in retirement 22 Creating retirement cash flow

Your next steps

23 Put your strategies to work

Designing your plan for retirement

What is your plan for retirement?

While this may seem like a straightforward question, the answers can be complicated. There are so many variables; some are known while others may be impossible to pin down.

No matter what stage you're in regarding your ideal retirement--w hether it's saving for, transitioning into, or living in retirement--y ou'll need to have a working understanding of several key risks as well as how they may impact your potential outcomes. Your awareness of these variables will help you implement your retirement and income protection plans.

Key Risks

Issues to consider no matter what stage of life you're in

Saving for retirement

? Developing a savings plan

? Building an asset allocation strategy

? Reviewing and rebalancing your portfolio regularly

Transitioning to retirement

? Relying on diverse sources of income

? Developing a plan that includes growth, guarantees, and flexibility

? Planning for essential and discretionary expenses, as well as unexpected expenses

Living in retirement

? Meeting essential expenses with guaranteed sources of income*

? Balancing growth potential with guarantees, flexibility, and volatility

? Planning for discretionary expenses

*Annuity guarantees are subject to the claims-paying ability of the issuing insurance company.

RETIREMENT PLANNING AND INCOME PROTECTION 1

KEY RISKS

Retirement is different today

Building your retirement roadmap involves many critical decisions. When should you start saving? How much should you save? How long will you work? How long will you live in retirement? What will you spend in retirement?

Today's retirement lifestyle is more active, more expensive, and will likely last longer. Your life has probably been nothing like your parents' life, and your retirement will presumably be different, too. People are living longer, which is why it's critical to consider the key risks you may face when you create your retirement plan.

PEOPLE ARE RETIRING EARLIER AND LIVING LONGER

77

79

81

82

84

Average retirement

length in 2010:

71 68

25 years

64

62

59

1930

1950

1970

1990

2010

Life Expectancy of a 65-Year-Old

Average Retirement Age

Sources: Centers for Disease Control and Prevention--National Center for Health Statistics, U.S. Census, Bureau of Labor Statistics, and Gallup, as of June 2015.

2 RETIREMENT PLANNING AND INCOME PROTECTION

KEY RISKS

Improper asset allocation Aggressive

ChSohoortsTeerma mix of stocks, bondBasla,ncaend d cash tGhroawtthis appropGrroiwatthe for

your retirement investing goals.

Most Aggressive

Take into account your time horizon, financial situation, and toleranAcgegrfeossrivme arket shiftMs.ost As tShhoisrt cTehrmart illustraCtoensse,rvaaltliovecation mBixaelasncwedith more stGorocwkthexposure haGrvoewtthhe potentiAaglgrfeosrsive

both higher returns6a%nd larger losses. An10o%verly conser5v%ative strategy can result in missing

out on the long-tIentr'lmStopckos tential of stockSsho,rtwTehrmile an ovSehrolryt Teargmgressive strategy can mean

taking on undue risk duSr3hi0no%rgt volatiIlnet'1lm5S%toacrkskets.

100% Short Term

50% Term Bonds 14%

U.S. Stocks

40% Bonds

35% U.S. Stocks

21% Int'l Stocks

25% 49% Bonds U.S. Stocks

25% Int'l Stocks

15% 60% Bonds U.S. Stocks

30% Int'l Stocks

70% U.S. Stocks

WHEN ALLOCATING YOUR PORTFOLIO, CONSIDER THE RETURN AND VOLATILITY TRADE-OFFS

Short-Term 100% 100%

6% Conserv3a0t%ive 50%

14%

M9o%de2r0a%te w5it0h%Inco21m%e

6% 30%

50% 14%

9% 20% 50% 21%

12% 15% Moderate 45% 28%

12% 15% 45% 28%

15% 10% Balanced

35% 40%

18% 5% Growth with

3I5n%com4e2%

15% 10%

18% 5%

35% 40%

35% 42%

5% 2G1%rowth 25% 49%

5% 21% 25% 49%

A2g5g%ressive 15G%rowth60%

25% 60%

15%

30%Most Aggressive

70%

30%

70%

Legend: n Short-Term n International Stocks n Domestic Stocks n Bonds

15.20% 11.13% 31.06% 17.65%

45.78% 19.65%

60.79% 21.38%

76.57% 23.45%

93.08% 25.59%

109.55% 27.31%

136.07% 31.91%

162.89% 36.12%

?0.04% 0.03%

?17.67% ? 0.37%

?2.22% ?25.99%

?4.17% ?33.62%

?6.18% ?40.64%

?8.26% ?47.07%

?10.43%

?13.78%

?17.36%

?52.92%

?60.78%

?67.56%

Legend: n Highest One-Year Return n Lowest One-Year Return n Highest Five-Year Return n Lowest Five-Year Return

Average Annual Return:

3.32%

Average Annual Return:

5.94%

Average Annual Return:

6.70%

Average Annual Return:

7.33%

Average Annual Return:

7.93%

Average Annual Return:

8.50%

Average Annual Return:

8.94%

Average Annual Return:

9.63%

Average Annual Return:

10.13%

Asset mix performance figures are based on the weighted average of annual return figures for certain benchmarks for each asset class represented. Historical returns and volatility of the stock, bond, and short-term asset classes are based on the historical performance data of various indexes from 1926 through the most recent year-end data available from Morningstar. Domestic stocks represented by IA SBBI US Large Stock TR USD 1/1926?1/1987, Dow Jones U.S. Total Market 2/1987?most recent year-end; foreign stock represented by IA SBBI US Large Stock TR USD 1/1926?12/1969, MSCI EAFE 1970?11/2000, MSCI ACWI Ex USA 12/2000?most recent year-end; bonds represented by U.S. intermediate-term bonds 1/1926?12/1975, Barclays U.S. Aggregate Bond 1/1976?most recent year-end; short-term represented by 30-day U.S. Treasury bills 1926?most recent year-end. It is not possible to invest directly in an index. Although past performance does not guarantee future results, it may be useful in comparing alternative investment strategies over the long term. Performance returns for actual investments will generally be reduced by fees and expenses not reflected in these investments' hypothetical illustrations. Indexes are unmanaged. Generally, among asset classes, stocks are more volatile than bonds or short-term instruments and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Although the bond market is also volatile, lower-quality debt securities, including leveraged loans, generally offer higher yields compared with investment-grade securities, but also involve greater risk of default or price changes. Foreign markets can be more volatile than U.S. markets due to increased risks of adverse issuer, political, market, or economic developments, all of which are magnified in emerging markets.

KEY RISKS 3

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