Retirement Planning and Income Protection

Retirement Planning and Income Protection

Building and implementing your retirement plan

Contents

Designing your plan for retirement

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

Living in retirement

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

in retirement 21 Creating retirement cash flow

Your next steps

22 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 seeks growth, income protection, and flexibility

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

Living in retirement

? Meeting essential expenses with guaranteed sources of income,* including defined-benefit pensions and federal Social Security benefits

? 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

2

KEY RISKS

Improper asset allocation Aggressive

ChSohoort sTeerma mix of stocks, bonBdalsan,caednd cashGtrhowatht is approGprorwitah te for

your retirement investing goals.

Most Aggressive

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

Take into account your time horizon, financial situation, and toleraAngcgreesfsoivre market shiMfotsst. As tShhoisrt cTehrmart illustrCaotnesser,vaatlilvoecation mBaixlaenscewd ith more Gsrtoowcthk exposureGhroawvteh the potenAgtgiarelsfsoivre

both higher returns6%and larger losses. A1n0%overly conse5r%vative strategy can result in missing

out on the long-tIentr'lmStopckos tential of stocSkhso,rtwTerhmile an ovSheorrtlyTeramggressive strategy can mean

taking on undue risk duS3rh0ion%rtg volatIinlte'1l 5Sm%tocaksrkets.

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%

Gr1o8w%th5%with 3I5n%com4e2%

15% 10%

18% 5%

35% 40%

35% 42%

5% 2G1%rowth 25% 49%

5% 21% 25% 49%

A2g5g%ressive 15G%rowth60%

30%Most Aggressive

70%

25% 60%

15%

30% 70%

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

15.20% 11.13% 31.06% 17.65%

45.78%

60.79%

19.65%

21.38%

76.57% 23.45%

93.08%

109.55%

136.07%

162.89%

25.59%

27.31%

31.91%

36.12%

?0.04% 0.03%

?17.67% ?0.37%

?25.99% ?2.22%

?4.17% ?33.62%

?6.18% ?40.64%

?8.26% ?47.07%

?10.43%

?13.78%

?17.36%

?52.92%

?60.78%

?67.56%

Average Annual Return:

3.26%

Average Annual Return:

5.78%

Average Annual Return:

6.55%

Average Annual Return:

7.19%

Average Annual Return:

7.80%

Average Annual Return:

8.38%

Average Annual Return:

8.84%

Average Annual Return:

9.56%

Average Annual Return:

10.09%

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. intermediateterm bonds 1/1926?12/1975, Bloomberg 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.

RETIREMENT PLANNING AND INCOME PROTECTION

3

KEY RISKS

The impact of inflation

The decreasing buying power of the dollar should be a real concern for all preretirees and retirees.

Imagine how inflation might affect the buying power of your money over time and what that could mean for maintaining your lifestyle in retirement. Even a relatively low inflation rate could have a significant impact on your buying power.

With retirements spanning 20 years or more, you'll want to find a balance between growth and preservation.

HYPOTHETICAL EXAMPLE: INCREASING COSTS

Bread (white, per pound)

Eggs (Grade A, large, per dozen) $2.70

$0.96

$2.00

2004

2024

$1.37

2004

2024

Milk (whole, per gallon) $3.86

$3.37

2004

2024

Source: United States Department of Labor, Bureau of Labor Statistics, charts/consumer-price-index /consumer-price-index-average-price-data.htm (May 2024). For illustrative purposes only.

RETIREMENT PLANNING AND INCOME PROTECTION

4

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download